PSBank Annual Report 2012

About PSBank Journey with us.

Philippine Savings Bank (PSBank) first opened its doors to the public on September 26, 1960. Since then, we have been on a steady and meaningful journey towards becoming the country’s consumer bank of choice.

We have also been at the forefront of upholding good corporate governance principles, which started when we became the first publicly listed thrift bank in the Philippines in 1994. For the second time since 2009, we were recognized as one of the top-rated Publicly Listed Companies (PLCs) in the Corporate Governance (CG) Scorecard of the Institute of Corporate Directors (ICD). PSBank was the only savings bank from among the 23 Silver Awardees.

We cater mainly to the retail and consumer markets. We offer a wide range of products and services such as deposits, loans, treasury and trust.

We continue to reach out to more customers through our 220 branches and 532 in-branch and offsite ATMs as of end-2012. We also have a strong presence through PSBank Online, a secure 24/7 Internet channel that extends the PSBanking experience to users anywhere in the world.

PSBank belongs to GT Capital Holdings, Inc., the newly formed holding firm of the family of George S.K. Ty. GT Capital has diverse investments in established companies that are dominant in their respective markets. These include Metropolitan Bank and Trust Company, Federal Land, Toyota Motor Philippines Corp., Global Business Power Corp., and Philippine AXA Life Insurance, a joint venture with the AXA Group, one of the world’s largest life insurers.

For more information about PSBank, log on to www.psbank.com.ph

VISION

To be the country’s consumer and retail bank of choice.

MISSION

As an INSTITUTION: To conform to the highest standards of integrity, professionalism and teamwork.

Contents 2 4 6 8 14 17 18 20 22 26 35 36 38 42 44 46

Financial Highlights

49

Statement of Management’s Responsibility

50 52 146 156 163 164 172

Independent Auditor’s Report

Message from the Chairman President’s Report Operational Highlights Products Partners Channels Corporate Social Responsibility Risk Management Corporate Governance Audit Committee Report Board of Directors Senior Officers CFO’s Report Management’s Discussion and Analysis Supplementary Management Discussion

Audited Financial Statements PSBank Branches Offsite ATMs Billers Metrobank Group Shareholder Information

For our CLIENTS: To provide superior products and reliable, topquality services responsive to their banking needs.

For our EMPLOYEES: To place a premium on their growth, and nurture an environment of teamwork where outstanding performance is recognized.

For our SHAREHOLDERS: To enhance the value of their investments.

CORE VALUES

In realizing our mission and vision, we will be: PROACTIVE in serving our customers.

PERFORMANCE-driven and recognized, reinforced, and rewarded accordingly.

PROFESSIONAL to the highest standards and in all respects.

PEOPLE-ORIENTED in our dealings with our internal and external customers alike.

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PSBank ANNUAL REPORT 2012

Financial Highlights Total Loans & Receivables (in Php billion)

Total Assets (in Php billion) 116.15

2012

120.25

2011

2010

2011

2010

104.15

93.09

2009

74.64

2008

58.19

101.55

2011

2010

53.21

47.31

2009

2008

41.60

2008

87.52

77.39

61.68

Net Income (in Php million) 15.54

8.47

94.62

2012

2009

Capital Funds (in Php billion)

11.01

70.41

2012

Total Deposits (in Php billion)

15.06

2,302.28 2,028.76

1,808.12

11.61 1,240.01 940.15

2008

2009

2010

2011

2012

2008

2009

2010

2011

2012

Loans (in Php billion) Earnings Per Share (in Php) 9.58 8.44

Auto Loans 31.10 (45.65% )

7.53 5.16

Housing Loans 22.38 (32.85%)

3.98

Personal Loans 3.41 (5.01%)

2008

2009

PSBank ANNUAL REPORT 2012

2010

2011

2012

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Commercial Loans 11.23 (6.49%)

Statements Of Condition Years ended December 31

ASSETS Cash and Cash Equivalents Investments Loans and Receivables Investments in an Associate and a Joint Venture Property and Equipment Investment Properties Other Assets

LIABILITIES AND EQUITY LIABILITIES Deposit Liabilities Subordinated Notes and Bills Payable Other Liabilities

EQUITY Common Stock Capital Paid in Excess of Par Value Surplus Reserves and Surplus Net Unrealized Gains and Cumulative Translation Adjustment

2012

2011

2010

2009

2008

20,428,336,240 16,992,863,926 70,412,582,319

22,440,957,295 31,061,722,100 58,190,152,155

17,170,927,666 26,231,240,458 53,207,635,160

14,999,722,803 23,282,265,995 47,308,237,957

6,691,771,647 19,505,842,607 41,603,346,112

1,238,693,678 2,412,337,390 2,622,918,872 2,041,335,738 116,149,068,163

1,238,145,401 2,382,152,118 2,802,259,434 2,136,337,777 120,251,726,280

829,873,755 2,107,316,622 2,772,308,932 1,830,166,668 104,149,469,261

788,310,337 1,985,474,732 2,582,767,705 2,141,050,112 93,087,829,641

369,951,789 1,765,934,385 2,776,144,811 1,923,728,112 74,636,719,463

94,624,286,307 2,969,797,342 3,494,948,807 101,089,032,456

101,550,335,610 – 3,160,335,315 104,710,670,925

87,518,809,267 1,977,141,032 3,044,441,571 92,540,391,870

77,390,211,286 1,973,881,534 2,711,598,326 82,075,691,146

61,678,482,921 2,208,541,621 2,276,970,219 66,163,994,761

2,402,524,910 2,818,083,506 9,700,685,092

2,402,524,910 2,818,083,506 7,975,013,579

2,402,524,910 2,818,083,506 6,090,406,392

2,402,524,910 2,818,083,506 5,087,136,893

2,402,524,910 2,818,083,506 4,027,311,845

138,742,199 15,060,035,707 116,149,068,163

2,345,433,360 15,541,055,355 120,251,726,280

298,062,583 11,609,077,391 104,149,469,261

704,393,186 11,012,138,495 93,087,829,641

(775,195,559) 8,472,724,702 74,636,719,463

Statements Of Income Years ended December 31

2012 Interest Income Interest Expense Net Interest Income Net Service Fees and Commission Income Total Operating Income Other Expenses Share In Net Earnings of an Associate and a Joint Venture Provision for (Benefit from) Income Tax Net Income

2011

2010

2009

8,786,264,360 3,114,474,095 5,671,790,265

8,976,586,827 3,267,133,019 5,709,453,808

7,913,097,318 2,900,694,510 5,012,402,808

7,529,532,086 2,696,054,957 4,833,477,129

6,129,607,034 2,420,109,373 3,709,497,661

878,624,324 9,265,356,796 6,406,669,649

732,878,178 7,684,799,588 5,688,672,802

691,681,482 8,236,537,847 5,624,905,692

596,241,357 6,271,337,230 4,942,951,461

534,365,260 4,937,458,499 3,843,526,649

548,277 556,957,933

8,271,646 (24,360,250)

41,563,418 845,080,234

45,129,698 133,501,051

46,820,603 200,600,860

2,302,277,491

2,028,758,682

1,808,115,339

1,240,014,416

940,151,593

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PSBank ANNUAL REPORT 2012

Message from the Chairman We go places with you.

2012 was a remarkable year in many ways and one that proved the Philippines is truly going places.

More than a decade ago, many of us could not even fathom the idea that our country could reach the GDP growth level we currently enjoy. But in 2012, our economic growth was not only the second highest to China’s, but we were also seen poised to join the world’s 10 fastest-growing economies.

Our GDP expanded 6.6% in 2012 from a year earlier, exceeding many economists’ estimates. What was most notable is not in the numbers, but in the local and global backdrops amid which they were made.

This growth came in a non-election year and was the fastest expansion we had since 1988. It also came amid the confluence of adverse events in many parts of the developed world. The United States was on the verge of a “fiscal cliff.” Euro zone economies were grappling with lingering debt problems.

Economic activity slowed in emerging markets collectively called BRICS. Amid all these, Filipinos, one of the biggest consumers in Asia, were buying goods from chocolates to condos. Thanks to our consumer spending strength, we were able to withstand the external headwinds that hurt the rest of our more export-dependent neighboring economies like Singapore and South Korea, where growth slowed in 2012 as overseas demand eased.

Finally, we are getting our act together and the world is taking notice as we emerge from being a regional laggard. Increased government spending, reduced corruption and red tape, better fiscal management, monetary stability and a strong external position are making the much-awaited investment-grade credit rating a reality.

All roads seem to be taking us toward an economic destiny that had eluded us in the past. The Philippine peso rose by 6.36% in 2012 – the best performer among 25 emerging-market currencies tracked by Bloomberg. Since the second Aquino administration took over, the benchmark Philippine Stock Exchange Index had already reached record levels 38 times and our credit rating outlook has already been positively raised 11 times.

This is why major reforms, such as the PublicPrivate Partnership program, are taking time to gain traction. But we must not lose sight of the road.

As I travel around the country in my various capacities as Chairman of the Philippine Stock Exchange and PSBank, among other things, I can feel the frenetic economic activity in big and small cities. I see new businesses sprouting, roads and bridges being newly constructed, homes arising from growing prosperity, and demand for goods and services being created. The spirit of entrepreneurship and innovation is blossoming everywhere.

Filipinos, both here and abroad, are fueling our economic momentum. Those abroad sent home US$21.39 billion in 2012, an all-time high and 6.30% more than 2011 levels despite a weak global economy. At home, our business process outsourcing industry contributed US$13 billion in investment flows, making us the world’s top destination. These and other inflows are enlarging our economic pie, driving consumption, and reducing our dependence on commodities and exports than most emerging markets.

Whereas before, Filipinos were forced to go places to escape their sordid economic fate at home, nowadays many are simply going places to explore, dine, shop and enjoy the fruits of their hard work.

Today’s generation is increasingly more mobile, more connected and more financially savvy. As a consumer bank, we are rising to the new challenges and evolving demands of this new consumer.

Our accomplishments in 2012 position us well for 2013 and beyond. We have the focus, management team, dedication to the customer and quality of assets to go the distance in fulfilling our brand promise. I am very excited about the prospects for our mobile banking, which will take us to the next stage as a “bank of the future.”

Join us as we continue to GO PLACES with you.

Jose T. Pardo Chairman

We had a difficult and arduous climb to the top, and the impossible may take a little longer to achieve.

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PSBank ANNUAL REPORT 2012

.

President s Report We create value for you.

In many profound ways, 2012 was all about redefining relationships. As more Filipinos gain more mobility, socially and economically, they adapt to new technologies and embrace digital platforms.

For financial institutions, this means following customers wherever and whenever they choose to interact: whether walking into branches or an ATM, clicking their mouse or tapping on an app.

At PSBank, we believe mobility means much more than offering new delivery channels. It’s not just being anywhere and everywhere for customers.

Providing a seamless experience wherever and whenever you choose to bank — this is what a journey with PSBank is all about. Our mission is to make you feel that banking at any of our 220 branches and 532 ATMs should be every bit as engaging as banking in PSBank Online.

• Getting better: We remained one of the most profitable local banks even amidst the stiffening competition in the market and the continuous drop in interest rates. Our net income of Php2.30 billion, which was 13.48% higher than Php2.03 billion a year ago, enabled us to produce a Return on Average Equity of 15.05% while Return on Equity stood at 17.52%.

• Growing bigger: We continued to reach more customers and strengthen our brand presence. With the opening of 20 new branches and 27 new ATMs in 2012, PSBank now has the country’s ninth-largest branch network with 220 branches and the sixthbiggest ATM network with 532 onsite and offsite ATMs nationwide.

• Becoming stronger: We have kept an eye on our financial strength, particularly as we gear up for the upcoming deadline to meet Basel III requirements. Our capital adequacy ratios (CAR) remained strong, with core Tier 1 at 13.63% and total CAR at 17.14%.

This is why our focus in 2012 was all about efficiency.

We integrated our systems to enable us to gain and retain more customers, make faster loan decisions, raise our productivity and efficiency, and strengthen internal controls. We streamlined our workflows through technology in areas such as loan approvals.

This has also allowed us to moderate the growth in our operating expenses even with continuous investments in branches and ATMs. We also made sure that our operational structure would enable us to offer comprehensive solutions that serve our growing customer base. We have done this by redefining our branch banking strategy based on customer relationships. This way, the right products and solutions are offered based on each customer’s specific needs and circumstances.

While this was rolled out only in the latter half of 2012, we are already seeing marked improvements in the penetration of our loan and deposit products across various customer segments.

We also continued to diversify our funding base by relying less on interbank borrowings and more on longer-dated debt instruments. Our Tier 2 notes, which were issued in 2012, were oversubscribed as we again attained the highest possible credit rating in 2012.

For the second year in a row, The Asian Banker ranked PSBank among the strongest banks in the country. We were the only savings bank in its top ten. In the entire Asia-Pacific region, PSBank came in 197th out of 500 banks in the AB500 strength ranking for 2012.

Our customer-centric strategy and the initiatives we have underway will take us farther to strengthen and grow our business for the long haul.

Our skilled and solid team will embolden us to take more confident strides so that we can serve more customers and make a difference in more communities.

Going the distance is the foundation upon which we will continue to build our success. This is the fuel that will drive our passion to GO PLACES.

These efforts benefit both the customer and the Bank through seamless customer experience.

We also stayed true to our philosophy of balancing growth with stability and creating sustainable value for our shareholders. We did this by:

PSBank ANNUAL REPORT 2012

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Pascual M. Garcia III President

Operational Highlights We continue to grow for you.

We were able to sustain our growth in 2012 as we deepened our understanding of your banking needs and tailor-fitted the right solutions for you. Each of these business segments played an important role in creating the PSBanking experience and in preparing us for more solid growth ahead.

LARGE ENTERPRISE GROUP We further expanded our presence in the corporate sector through new lending relationships, participation in the secondary market and development of deal channels among foreign banking units in 2012. These led to a 20.83% increase in our loan portfolio to Php11.22 billion. We also marked our first foreign currency exposure with a large holding firm.

E-CHANNELS We continue to improve our PSBank Online facility to provide even greater 24/7 banking convenience.

PSBank ANNUAL REPORT 2012

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BRANCH BANKING We opened 20 branches and 27 ATMs as well as renovated eight branches in 2012. We launched the PSBank e-Credit which provides companies with a convenient and easy-to-use automated payroll service.

DIRECT SALES CHANNEL We further grew the average daily balances of our current and savings accounts. This was done through focused selling and a more effective sales management process. As a result, PSBank enjoyed higher productivity and additional deposits from new customers.

CUSTOMER SERVICE

INDIRECT SALES CHANNEL Our total consumer loans portfolio improved in 2012 with the help of our Indirect Sales Channel. Auto loans increased by 24.10%, well above the auto industry growth rate of 11% in 2012. Housing loans rose 18.68% through stronger partnerships with developers. We marked our first participation in an overseas expo through the Philippine Property Expo in Singapore held in November. In addition, we also took part in various local exhibits to build awareness for our housing loan products.

Our Customer Service Division-Business Center went fully operational in 2012.

It helped generate business leads and process loan applications sourced through phone inquiries, head office walk-ins, and electronic means such as the corporate website and email.

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PSBank ANNUAL REPORT 2012

Operational Highlights FINANCE We further strengthened our capital base by offering Php3 billion in 10-year unsecured subordinated debt or Tier 2 notes in 2012. The issuance was oversubscribed and rated PRS Aaa by the Philippine Rating Services Corporation in recognition of our solid franchise, strong ability to generate deposits, and sound asset quality. We also enhanced our credit systems to provide more information in all our loan documents and marketing materials.

TRUST

OPERATIONS

Our trust business generated a 75% increase in average annual assets under management to Php 2.56 billion in 2012 from year-ago levels. We also acquired a system to support the Personal Equity and Retirement Account (PERA) and obtained approval from the Bangko Sentral ng Pilipinas to engage in Unit Investment Trust Fund.

We raised productivity in our operations by enhancing our processes, which include coming up with more accurate cash forecasts for our ATMs to cut the cost of funds. Five backup sites were set up for critical functions in case of emergency. We also started greening our workplace by installing a new electrical system in the PSBank head office that cut our electricity consumption. We limited the use of plastics in our office building and encouraged the shift to environment-friendly materials.

PSBank ANNUAL REPORT 2012

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LOANS OPERATIONS We managed to maintain our asset quality in 2012 even with the double-digit growth in our loan portfolio. This was due to timely and appropriate collection strategies. We improved on our loan application process, allowing our branch personnel to continue delivering fast service. We also became the first thrift bank to enter into an agreement with the Land Registration Authority to open an extension office that will enable PSBank to receive, process, and issue certified true copies of certificates of titles to PSBank Home Loan clients.

INTERNAL AUDIT We completed our risk-based audit plan that covered assurance reviews of branches, sales desks, head office units and application systems. We were mandated to assist the Audit Committee to perform oversight functions on our partners. Internal auditors attended professional development seminars on model validation, Basel III, Foreign Account Tax Compliance, sampling methodology, corporate governance and the Anti-Money Laundering Act (AMLA).

RISK MANAGEMENT Based on updated macroeconomic data, we enhanced our stress testing models that significantly impact movements in the delinquency ratios of our auto loan business.

TREASURY In 2012, we secured an Interest Rate Swap license from the Bangko Sentral ng Pilipinas. This will provide us flexibility in managing risks in the event of sudden swings in interest rates. Our treasury business also recorded higher profits from the sale of investments, as well as generate higher levels of deposits.

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PSBank ANNUAL REPORT 2012

Operational Highlights

CREDIT ADMINISTRATION

We delivered fast and consistent credit decisions with the use of technology such as iPad tablets to serve processing requirements. We also made system enhancements for credit validation, property appraisal and loan evaluation.

INFORMATION TECHNOLOGY Improvements in our IT systems enabled us to provide you with more flexibility, ease and convenience. These allowed our branches and head office personnel to process transactions faster and cross-sell products more effectively in 2012. Our IT Division played a crucial role in implementing the following systems: Time Deposit System, e-Credit, Intranet Loan Application Processing System (ILAPS) access via iPad, and the Personal Equity and Retirement Account (PERA) module for Trust Systems.

PSBank ANNUAL REPORT 2012

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BUSINESS INFORMATION MANAGEMENT As the business analytics unit of the Bank, we get important insights that lead to faster and better business decisions. We facilitated our Internal Capital Adequacy Assessment Process (ICAAP), which allowed us to know the amount of capital we need to support asset growth in the face of changing economic and regulatory environments, both here and abroad.

MARKETING AND COMMUNICATIONS

HUMAN RESOURCES

To further make our PSBank Loans with Prime Rebate top of mind, we utilized TV and radio commercials, print advertisements and marketing collaterals in our branches. We likewise came out with a series of print advertisements for PSBank Debit MasterCard and Peso Time Deposit to support our deposit generation drive. Lastly, we provided marketing support to the introduction of our PSBank e-Credit for businesses.

We continued to produce new officers for branch and head office positions from our Staff Professional Enhancement and Development (SPEED) program, which is now on its ninth year. We also successfully concluded Collective Bargaining Agreement (CBA) negotiations with the PSBank Employees Union, yielding improvements in various incentives, allowances and subsidies for our personnel.

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PSBank ANNUAL REPORT 2012

Products We innovate for you.

We anticipate your evolving needs and requirements. In 2012, we launched several new campaigns to bring our products and services closer to your hearts and minds.

REWARD FOR EARLY BIRDS Borrowing from PSBank has its own reward – literally. Through PSBank Prime Rebate, you instantly get discounts whenever you make advance or excess payments on your PSBank Auto Loan, PSBank Home Loan and PSBank SME Term Loans.

As the country’s first loan rebate program, PSBank Prime Rebate rewards you by enabling you to pay your loans at a shorter time, get a discount from your loan or both, depending on how frequent you make early or excess payments. You can keep your borrowings at a minimum and finish paying your loans quickly, getting more value for your hard-earned money.

PSBank ANNUAL REPORT 2012

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YOUR SALARY, HASSLE-FREE

BEST BET ON TIME

No need to waste two days before payday to physically go to a PSBank branch to deposit staff salaries in their accounts.

Employers can now pay staff salaries more conveniently using PSBank e-Credit, the 24/7 online payroll crediting facility launched in June 2012.

As it is certified by VeriSign, sharing confidential information on PSBank e-Credit is safe and secure.

A safe and secure savings instrument, the PSBank Time Deposit makes hard-earned money work even harder by providing depositors higher interest rates compared to a regular savings account.

PSBank offers the best bet as it has been named one of the strongest Philippine savings banks in Asia Pacific by The Asian Banker since 2011. .

It does not require maintaining an average daily balance so employers can instead use the money to grow their businesses. Their employees can also enjoy the convenience of withdrawing their salary using their PSBank Debit MasterCard or PSBank Prepaid MasterCard from any of the 532 ATMs strategically located in malls, shopping centers and LRT/MRT stations nationwide.

A CARD FOR THE CONNECTED Download songs from iTunes, buy books and shop for other items at Amazon.com and from more than 35,000 online merchants, shop and dine in MasterCard establishments – one can do all these using only the PSBank Debit MasterCard. The product offers the same convenience of a credit card minus the debt. Payment for items is directly debited from the savings account linked with the debit card. For just 30 minutes or less, customers can get their PSBank Debit MasterCard through the hassle-free application process.

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PSBank ANNUAL REPORT 2012

Products and Services

DEPOSIT PRODUCTS

LOAN PRODUCTS

Savings Accounts PSBank Debit MasterCard PSBank ATM Savings PSBank Overseas Filipino Savings PSBank Regular Passbook PSBank Passbook with ATM

Consumer Loans PSBank Auto Loan with Prime Rebate PSBank Flexi Personal Loan with Prime Rebate PSBank Home Loan with Prime Rebate PSBank Home Credit Line PSBank Home Construction Loan

Checking Accounts (for Personal and Corporate) PSBank Regular Checking PSBank Premium Checking

Commercial Loans PSBank SME Business Credit Line PSBank Credit Line PSBank SME Term Loans with Prime Rebate Standby Credit Certification Domestic Bills Purchase Line

Peso Time Deposit Accounts PSBank Prime Time Deposit PSBank Peso Time Deposit PSBank 1, 2, and 3-Year Time Deposit Foreign Currency Accounts PSBank US Dollar Savings PSBank Dollar Time Deposit PSBank Premium US Dollar Time Deposit PSBank Euro Savings PSBank Euro Time Deposit

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Trust Products Investment Management Accounts Escrow Accounts Living Trust Accounts Others PSBank PSBank PSBank PSBank PSBank

Online Prepaid MasterCard e-Credit Bills Payment Collection Remittance Services

Partners

We expand our markets for you.

We continue to cover the consumer markets through our interests in motorcycle and automotive finance.

We partnered with two of Japan’s largest financial conglomerates to cater to niche segments in the domestic market.

Through Sumisho Motor Finance Corporation (SMFC), a joint venture between PSBank and Sumitomo Corporation of Japan, we offer motorcycle financing at easy and flexible terms.

financing and leasing services, as well as Toyota dealers through inventory stock financing.

With its growing partnership with motorcycle dealers, SMFC aims to build a strategic market position by catering to a wide range of motorcycle buyers.

TFSPH is 60%-owned by Toyota Financial Services Corporation, a wholly owned subsidiary of Toyota Motor Corporation. Metropolitan Bank and Trust Company holds a 15% shareholder stake while PSBank has a 25% interest.

It also offers attractive financing deals for motorcycle brands and models from renowned manufacturers such as Yamaha, Honda, Kawasaki and Suzuki.

The company is part of Toyota’s network of finance companies under Toyota Financial Services Corporation that operates in over 34 countries and serves over 10 million customers across the globe.

Toyota Financial Services Philippines Corporation (TFSPH) serves Toyota customers through

It supports Toyota sales in the Philippines in line with Toyota Motor Corporation’s global objectives.

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PSBank ANNUAL REPORT 2012

Channels We go to you.

We continued to invest in our service and delivery channels to provide you with the PSBanking experience.

FROM POINT TO POINT

From the Baclaran to the Balintawak LRT lines, from our Tuguegarao to Zamboanga branches, we are always there to cater to your banking needs.

As of end-2012, PSBank has the sixth-largest ATM network among Philippine banks, with a total of 532 ATMs nationwide. Of this total, 229 ATMs are found in PSBank branches while 303 are in offsite locations such as malls, supermarkets, leisure centers, hotels, hospitals and major transport hubs including MRT and LRT stations.

MANILA LRT/MRT LRT 1

While our ATMs address our customers’ need for convenience, accessibility and reliability, they also play a pivotal role in introducing PSBank to a wider market, especially those in hightraffic areas. Through our strategically located ATMs, we are able to build and strengthen our brand values.

LRT 2 MRT 3

To protect your interests, there’s a PSBank team dedicated 24/7 to monitor the accuracy and other concerns related to ATMs. (See page 158 for a listing of all our Offsite ATMs.)

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ON CYBERSPACE

Part of our long-term goal is to ensure that you gain easy access to your funds wherever you are so you can keep up with your fast-paced and busy lifestyle.

IN YOUR NEIGHBORHOOD

We continue to reach out to you by opening new branches in strategic areas. In 2012, PSBank’s network of 220 branches was the ninth largest among Philippine banks.

In 2012, we opened 20 more branches in key areas in Luzon and in the Visayas. We also plan to expand our branch network in major cities.

Through PSBank Online, our 24/7 banking facility, you continue to enjoy a variety of online banking services such as bills payment, viewing of account details and images of paid checks, fund transfers and checkbook reorders at the comfort of your own home or office.

20 IN 2O12

We opened 20 more PSBank branches in these locations: Taguig - Gen. Luna Malabon - Gov. Pascual Cavite - Gen. Trias Caloocan - Samson Road Valenzuela - Malanday Cebu - Gen. Maxilom Ave. Bulacan - Balagtas Marikina - Blue Wave Batangas - Bauan Alabang - Acacia

..

Rizal - Angono Davao - Digos Lucena - Enriquez Cavite - Imus Anabu Bacolod - Libertad Cavite - GMA IloIlo - Jaro Pangasinan - Urdaneta Taytay - Manila East Road Bulacan - San Jose Del Monte

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PSBank ANNUAL REPORT 2012

Corporate Social Responsibility We reach out for you.

We believe in going the extra mile, not just for our customers and shareholders, but also for the benefit of the less fortunate and the marginalized. By helping underprivileged children, recognizing outstanding public servants, and partnering with the non-profit sector, we believe we are making positive contributions to the community.

GOING PLACES WITH OPERATION SMILE. From being a former cleft palate patient, Chadleen Lacdo-o is now Operation Smile’s Singing Ambassador and was recently named the first grand winner of a major network’s nationwide singing talent search.

SMILE GOES A LONG WAY PSBank believes in the power of the smile – not just in customer service, but in transforming lives. Thus we actively supported Operation Smile’s mission of giving the gift of smile to at least 4,500 Filipino children and young adults nationwide in 2012, through simultaneous medical missions in various parts of the country.

Celebrating our 52nd anniversary in a more meaningful way, PSBank and our employees pooled our financial

PSBank ANNUAL REPORT 2012

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resources to fund the corrective surgeries of 43 children born with cleft lip, cleft palate and other facial deformities.

A donation of Php648,000 was turned over to the international children’s medical charity which marked its 30th anniversary in 2012. Of the total amount, PSBank donated PhP450,000 while our employees raised Php198,000 from individual pledges and salary deductions.

BEYOND BOOKS We continue our commitment to provide scholarships to deserving yet underprivileged students through various programs.

Since 2008, we have been extending scholarships to 40 elementary and high school students from the Association of Chinese-Filipino Schools in the Philippines (ACFSP) and 10 college students from the Chiang Kai Shek College. This is done under the PSBank Educational Assistance Program. In 2012, we increased the number of scholars to 51.

We also sustained our support to scholars under our Save It Forward (SIF) program. A total of 22 scholars have already graduated from elementary and high school since SIF started in 2009. The program continues to benefit 74 scholars from World Vision and Resources for the Blind.

Aside from our scholarship programs, we also sustained our annual financial assistance to three child-friendly organizations we support: World Vision, Resources for the Blind, and the Chosen Children Village Foundation. This would go a long way in taking care of children who are either special, abandoned or orphaned.

During the Christmas season, PSBankers also actively participated in a Share-A-Gift program where they shared toys, clothes and supplies to three charitable organizations: Concordia Children Services, which shelters abandoned and orphaned children

BEYOND THE CALL OF DUTY We remained a program partner in the annual Search for the Country’s Outstanding Police Officers in Service (COPS), which has already recognized 98 outstanding policemen and women since 2002.

Left: PSBank President Pascual M. Garcia III turns over a ceremonial check to Chiang Kai Shek College President Dr. Bee Ching U. Ong Kian Kok, under the PSBank Educational Assistance Program for underprivileged yet deserving college students. Right: PSBank President Pascual M. Garcia III and EVP Jose Vicente Alde flank the beneficiaries of the Bank’s annual donation: executives from World Vision, Resources for the Blind, and Chosen Children Village Foundation.

and provides support to urban poor or street children in the elementary and high school level; Asociacion de Damas Filipinas, which runs a temporary shelter and day care center for orphans; and Chosen Children Village, home to abandoned children who are mentally and/or physically challenged.

As our financial performance strengthens in the coming years, so will our commitment to sustaining our corporate social responsibility programs and reaching out to more underprivileged sectors of society.

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PSBank ANNUAL REPORT 2012

Risk Management

We look after the bank for you.

Responsibility for managing risks rests on every PSBank employee.

Our Board and senior management are actively involved in planning, approving, reviewing, and assessing risks through various committees.

The parameters they set govern all our risk-taking activities.

RISK MANAGEMENT STRUCTURE The Board of Directors takes the lead in all major initiatives. It approves broad risk management strategies and policies, and ensures that these are consistent with the Bank’s overall objectives.

The Risk Oversight Committee (ROC) is comprised of at least three members of the Board, including at least one independent director, and a chairperson who is a non-executive member. They possess expertise and knowledge of the Bank’s risk exposures, which enable them to develop appropriate strategies for preventing or minimizing the impact of losses.

The Board may also appoint non-Directors to the ROC as part of the Metrobank Group’s risk oversight measures. However, only Bank Directors shall be considered as voting members of the ROC. Nonvoting members are appointed in an advisory capacity.

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Overall responsibility for the Bank’s risk management process rests with the ROC. It formulates policies and strategies to identify, measure, manage and limit the Bank’s risks.

The ROC ensures that the system of limits approved by the Board remains effective. It also makes certain that limits are observed and that immediate corrective actions are taken whenever needed. The Risk Management Office (RMO), together with the President, various committees and management, support the ROC in the fulfillment of its duties and responsibilities.

RMO is independent from executive functions and business line responsibilities, operations and revenue-generating functions. It reports directly to the Board through the ROC.

The RMO supports the ROC in carrying out its responsibilities by: • Analyzing, communicating, implementing and maintaining the risk management policies approved by the ROC and the Board; • Spearheading the regular review of the Bank’s risk management policies and elevating recommendations that enhance the risk management process to the ROC and the Board, for their approval; and • Ensuring that the risks arising from the Bank’s activities are identified, measured, analyzed, reported and understood by risk takers, management, and the Board. It analyzes limit exceptions and recommends enhancements to the limit structure.

Risk Management is responsible for: • identifying the key risk exposures and assessing and measuring the extent of risk exposures of the bank and its trust operations; • monitoring the risk exposures and determining the corresponding capital requirement in accordance with the Basel capital adequacy framework and based on the Bank’s internal capital adequacy assessment on an ongoing basis; • monitoring and assessing decisions to accept particular risks whether these are consistent with Board-approved policies on risk tolerance and the effectiveness of the corresponding risk mitigation measures; and • reporting on a regular basis to Senior Management and the Board the results of assessment and monitoring.

VARIOUS TYPES OF RISK Credit Risk This is the risk where a counterparty fails to meet its contractual obligation. PSBank’s lending business follows credit policy guidelines set by the Board, ROC, and RMO. These guidelines serve as the Bank’s minimum standards for extending credit. Everyone engaged in the credit process are required to understand and adhere to these policies.

PSBank’s product manuals contain business plans and define the business parameters by which credit activity is to be performed.

Before extending a loan, the Bank observes a system of checks and balances, including the approval of at least two credit officers through the

Credit Committee (Crecom), Executive Committee (Excom), or the Board. The ROC reviews the Bank’s business strategies and ensures that revenuegenerating activities meet risk standards. PSBank holds regular audit across the organization. Its Board – through the Excom, Crecom, and ROC – ensures that all business segments follow sound credit policies and practices.

The Bank manages risk concentration by type of individual or group of borrowers, by geographical region, and by industry sector. It assesses the credit quality of financial assets using the Bangko Sentral ng Pilipinas’ (BSP) credit classifications. The Bank uses credit scoring models and decision systems for consumer loans and borrower risk rating for SME loans, as approved by the Board.

The Bank carries out stress testing analyses using Board-approved statistical models relating the default trends to macroeconomic indicators. In 2012, enhanced stress testing models and stress limits were implemented for consumer loans.

Market Risk This covers the areas of trading, interest rate, and liquidity risks. Trading market risk is the risk to earnings and capital arising from changes in the value of traded portfolios of financial instruments.

Interest rate risk arises from movements in interest rates. Liquidity risk is the inability to meet obligations when they fall due without incurring unacceptable losses.

The Bank’s market risk policies and implementing guidelines are regularly reviewed by the Assets & Liabilities Committee (ALCO), ROC and the Board to ensure that these are up-to-date and in line with changes in the economy, environment and regulations.

The ROC and the Board set the comprehensive market risk limit structure and define the parameters of market activities that the Bank can engage in. The Bank utilizes various measurement and monitoring tools to ensure risk-taking activities are managed within instituted market risk parameters.

Trading Market Risk PSBank’s trading portfolios are currently composed of peso and dollar-denominated sovereign debt securities that are marked-to-market daily.

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PSBank ANNUAL REPORT 2012

Risk Management PSBank uses Value-at-Risk (VaR) to measure the extent of market risk exposure arising from these portfolios. VaR is a statistical measure that calculates the maximum potential loss from a portfolio over a holding period, within a given confidence level. Our current VaR model is based on a historical simulation methodology with a one-day holding period and a 99% confidence level.

The Bank also performs back testing to validate the VaR model, and stress testing to determine the impact of extreme market movements on our portfolios. It has established position limits for its trading portfolios and closely monitors its daily profit and loss against loss triggers and stop-loss limits.

To a certain extent, the Bank also carries foreign exchange (FX) risk. It is the Bank’s policy to maintain exposures within approved position, stop loss, loss trigger, VAR limits and to remain within regulatory guidelines. The Bank also uses VaR to measure market risk arising from its FX exposure.

The Bank uses its BSP-approved Type 3 Derivative License for plain vanilla FX forwards to manage its FX risk against adverse exchange rate movements.

Structural Interest Rate Risk The interest rate sensitivity gap report measures interest rate risk by identifying gaps between repricing dates of assets and liabilities. The Bank’s sensitivity gap model calculates the effect of possible rate movements on its interest rate profile.

PSBank uses the sensitivity gap model to estimate its Earnings-At-Risk (EAR) should interest rates move against our interest rate profile. Our EAR limits are based on a percentage of PSBank’s projected earnings and capital for the year. We also perform stress-testing analysis to measure the impact of various scenarios based on interest rate volatility and shift in the yield curve.

The ALCO is responsible for managing PSBank’s structural interest rate exposure. Its goal is to achieve a desired overall interest rate profile while remaining flexible to interest rate movements and changes in economic conditions. RMO and ROC review and oversee its interest rate risks.

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Liquidity Risk In managing its liquidity position, the Bank ensures that it has more than adequate funds to meet its maturing obligations. PSBank uses the Maximum Cumulative Outflow (MCO) Model to measure liquidity risk arising from the mismatches of its assets and liabilities.

The Bank administers stress testing to assess its funding needs and strategies under different conditions. Stress testing enables the Bank to gauge its capacity to withstand both temporary and long-term liquidity disruptions.

The Liquidity Contingency Funding Plan (LCFP) helps the Bank anticipate how to manage a liquidity crisis under various stress scenarios.

Liquidity limits for normal and stress conditions cap the projected outflows on a cumulative and per tenor basis.

PSBank discourages dependence on Large Funds Providers (LFPs) and monitors the deposit funding concentrations so that it will not be vulnerable to a substantial drop in deposit level should there be an outflow of large deposits.

ALCO is responsible for managing the liquidity of PSBank while RMO and ROC review and oversee the Bank’s overall liquidity risk management.

Operational Risk Operational Risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. To mitigate these, PSBank constantly strives to maintain our strong “control culture,” prudent use of technology and effective internal control system, which are key factors towards continuous self-improvement under a “no-surprise” operating environment.

PSBank’s Board-approved bankwide organizational chart clearly establishes areas of management responsibility, accountability and reporting lines for all its senior officers. Operational risk management policies and frameworks are continuously reviewed and updated, subject to ROC and Board approvals to ensure that they remain relevant and effective.

The Bank’s products and operating manuals, policies and procedures spell out internal controls implemented by its business and operating support units. Its Internal Audit Group (IAG)

provides independent reasonable assurance on control adequacy and compliance with these manuals. PSBank continually identifies and assesses operational risks across the organization and develops controls to mitigate and manage them as part of continuing efforts to enhance its Operational Risk Management Framework.

To ensure that the Bank manages all operational risks adequately, specialized functions are engaged in risk management. These include its Information Technology, Information Security, Systems Quality Assurance, Financial Control, Legal, Compliance, Human Resources and Security Command. Its IAG regularly reports to the Board’s Audit Committee on the effectiveness of internal controls.

The Bank likewise has a Business Continuity Plan and a Disaster Recovery Program that are reviewed and tested annually on a per segment and bankwide basis to ensure their effectiveness in case of business disruptions, system failures and disasters.

Technology Risk Technology risk is the risk to earnings or capital arising from deficiencies in systems design, implementation, maintenance of systems or equipment and the failure to establish adequate security measures, contingency plans, testing and auditing standards.

To provide simpler, faster, more convenient and secured banking services to its growing clientele and to avail of an advanced management information system that enables the Bank to make fast and well-informed business decisions, it continually invests in Information Technology by venturing into core business process automations, key system enhancements, and information security solutions.

Given this heavily automated operating environment, PSBank makes sure that it continuously identifies and quantifies risks to the greatest extent possible and establishes controls to manage technology-associated risks through effective planning, proper implementation, periodic measurement and monitoring of performance.

Legal Risk Legal risk is the potential loss due to nonexistent, incomplete, incorrect, and unenforceable documentation that the Bank uses to protect and enforce its rights under contracts and obligations.

A legal review process, which its Legal Department performs, is the primary control mechanism for this type of risk to ensure that the Bank’s contracts and documentation adequately protects its interests and complies with applicable legal and regulatory requirements.

Regulatory Risk Regulatory Risk, also known as Compliance Risk, covers the potential loss from non-compliance with laws, rules and regulations, policies and procedures, and ethical standards.

PSBank recognizes that compliance risk can diminish its reputation, reduce its franchise value, limit its business opportunities, and reduce its potential for expansion. Thus, PSBank, guided by its Compliance Office, continuously promotes a culture of compliance.

Strategic Risk Strategic risk is the current and prospective impact on earnings or capital arising from adverse business decisions, improper resolution of conflicts, and slow response to industry changes.

Strategic risk can influence the Bank’s long-term goals, business strategies, and resources. Thus, the Bank utilizes both tangible and intangible resources to carry out its business strategies. These include communication channels, operating systems, delivery networks, and managerial capacities and capabilities.

Reputational Risk Reputational risk is the current and prospective impact on earnings or capital arising from negative public opinion. This affects PSBank’s ability to establish new relationships or services, or manage existing relationships. The risk may expose the Bank to litigation, financial loss, or a decline in customer base.

All employees are responsible for building PSBank’s reputation and exercising an abundance of caution when dealing with customers and communities.

For a complete discussion of PSBank’s capital details, please refer to the Supplementary Management Discussion and Notes to the Financial Statements on Financial Risk Management Policies and Objectives.

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PSBank ANNUAL REPORT 2012

Corporate Governance

We are stronger for you.

At PSBank, we have a strong commitment to excellence in corporate governance. We continually strive for high standards and pursue new approaches that ensure greater transparency and integrity in what we do.

OUR GOVERNANCE CULTURE

We see our compliance with applicable laws, rules and regulations as a minimum requirement.

Going beyond such minimum is the true essence of good corporate governance. We always aim to continually build up the trust and confidence of our stakeholders by running our business in a prudent and sound manner, being fair and transparent in all our dealings, providing reliable and better service in response to the ever-growing expectations of our customers, and working with integrity and accountability.

TRANSPARENCY AND OPEN COMMUNICATION

We abide by the disclosure policies of the Philippine Stock Exchange (PSE), the Securities and Exchange Commission (SEC), and the Bangko Sentral ng Pilipinas (BSP).

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We comply with these regulators’ requirements by submitting timely, complete and accurate reports. We also ensure that we are transparent to our shareholders by posting the latest public disclosures on the Investor Relations section of our website and in press releases. These include PSBank’s disclosures on financial performance updates, new products and services, dividend declarations, and other corporate developments. We also use feedback from our stakeholders to develop better policies, products and services.

The Finance Group, in coordination with other key departments, accommodates requests for information pertaining to the management of the Bank, stockholders rights or any other bankrelated issues.

2012 INITIATIVES COMPLIANCE RISK MANAGEMENT

In early 2012, we amended our Compliance Manual to reflect the system required under the BSP’s Revised Compliance Framework for Banks.

Before the year ended, we revisited the manual to streamline the processes among our line units, Compliance Office and Internal Audit Group.

These steps were made to refine our risk-based compliance approach for greater focus and give priority to areas posing higher business risks.

We also updated our Compliance Charter which establishes the fundamental principles of our compliance function as well as its authority, independence and responsibilities.

We likewise updated our Money Laundering & Terrorism Financing Prevention Program to align with the enactment of new laws and BSP policies in 2012 and their respective implementing rules and regulations, namely: • BSP Circular No. 706 on the Updated AntiMoney Laundering Rules and Regulations • Republic Act No. 10167 or An Act to Further Strengthen the Anti-Money Laundering Law, As Amended • Republic Act No. 10168 or An Act Defining the Crime of Financing of Terrorism GOOD GOVERNANCE

In response to BSP Guidelines in Strengthening Corporate Governance in BSP-Supervised Financial Institutions, we updated our Corporate Governance Manual in May and June 2012. The amendments sought to adopt international best practices that promote good corporate governance including principles issued by the Basel Committee on Banking Supervision. This updated manual is posted on our website, www. psbank.com.ph, and our intranet site InfoChannel for the guidance of all our stakeholders. In November 2012, we also updated the charters of our Corporate Governance Committee (CGC) and Related Party Transactions Committee (RPTC) which set the mandate, scope and responsibilities of these Board-level committees.

Recognizing the Board of Directors’ overall responsibility to entities that the Bank has significant ownership interests in, we established a framework to oversee the compliance and audit functions of Sumisho Motor Financing Corp. and Toyota Financial Services Phils., Inc. Our parent company, Metrobank, also performs a similar oversight function to ensure consistent adoption of corporate governance policies and systems.

In December 2012, we revised our Outsourcing Oversight Committee Charter that sets the policy direction in handling outsourcing arrangements. This is in compliance with the BSP Circular on Revised Outsourcing Framework for Banks. This charter also defines the senior management committee’s mandate, scope and responsibilities in overseeing the accreditation of service providers, performance monitoring, post implementation reviews and contract renewals.

In January 2013, we updated our outsourcing policies and procedures to align them with BSP’s risk-based approach. This is also in compliance with the Data Privacy Act of 2012 and with the Department of Labor and Employment’s Regulations on Contracting and Sub-Contracting Arrangements.

In end-December 2012, PSBank reported its public ownership at 22.77% to the PSE in compliance with the Amended Rule on the Minimum Public Ownership. Through this, the PSE aims to ensure that there is sufficient public participation in the ownership of corporations.

All these changes reflect our renewed vigor and commitment to continually strengthen our corporate governance practices for the benefit of our stakeholders.

CORPORATE GOVERNANCE MANUAL

PSBank’s Corporate Governance Manual embodies the principles, standards, rules, regulations and best practices of good corporate governance. It is accessible to all our stakeholders through the Bank’s corporate website and intranet facilities.

We created the RPTC in January 2012 to assist the Board of Directors in ensuring that transactions with related parties are done at arms-length and reviewed in terms of credit, operational and reputational risks.

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PSBank ANNUAL REPORT 2012

Corporate Governance COMPLIANCE AND EVALUATION SYSTEM

Our Chief Compliance Officer (CCO) reports to the Corporate Governance Committee (CGC) and the Board of Directors. Aside from monitoring and controlling compliance risk, our CCO also tracks the Bank’s adherence to the Corporate Governance Manual. Cases of non-compliance are reported to the Board Chairman who ensures due process and determines appropriate sanctions.

In January 2013, we reported our satisfactory compliance in the Annual Corporate Governance Certification submitted to the SEC and PSE. Every year, our Board, its directors and their respective oversight committees conduct selfrating exercises on their performance through scorecards to determine areas of improvement.

Results are reviewed by the CGC and reported to the Board.

CODE OF BUSINESS CONDUCT

Our Code of Conduct defines standards that PSBank officers and staff must follow in all their business dealings and relationships.

The Code includes the following provisions: • A discussion on the disciplinary process; • General policies to establish a professional working environment and secure a favorable reputation for the Bank; • Corrective measures for unacceptable behavior or failure to comply with the Bank’s rules, policies and procedures; and • Schedule of penalties for attendance and punctuality, attire requirements, conduct and behavior, dishonesty, health, safety and security, reporting of violations, and information security.

The Code also includes provisions on management of personal finances, conflict of interest, antisexual harassment, non-disclosure of information, and insider information.

CORPORATE GOVERNANCE SCORECARD

PSBank was recognized for the second time as one of the top-rated Publicly Listed Companies (PLCs) in the 2011 Corporate Governance Scorecard of the Institute of Corporate Directors (ICD). The Bank had an overall score of 93% and was the only savings bank among the 23 Silver Awardees. The first recognition was given in 2009.

The CG Scorecard is an annual exercise conducted

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by the ICD, in partnership with the SEC and PSE. It ranks PLCs according to policies and practices related to rights of shareholders, equitable treatment of shareholders, role of stakeholders in corporate governance, disclosure and transparency, and Board responsibilities.

In 2012, ICD introduced the ASEAN CG Scorecard questionnaire to PLCs for them to be more attuned to emerging regional and global practices. It aims to encourage corporations to adopt ASEAN benchmarks.

We also accomplished the annual PSE CG Guidelines Disclosure for PLCs. This represents PLCs’ self-assessment of their adherence to good corporate governance through the principles of transparency, efficiency and accountability, as embodied in the PSE CG Guidelines.

As part of its campaign for good corporate governance, PSE launched the PSE Bell Awards for Corporate Governance in December 2011, recognizing PLCs and Trading Participants that have outstanding corporate governance practices and regulatory compliance.

By actively participating in these endeavors and ensuring compliance with best industry practices, PSBank strongly supports the unified commitment of the country’s publicly listed community to promote good corporate governance.

BOARD OF DIRECTORS

The Board of Directors is committed to uphold corporate governance principles and standards.

It is accountable to the stakeholders in running the Bank in a prudent and sound manner.

The Board is primarily responsible for approving and overseeing the implementation of our strategic objectives, risk management strategy, corporate governance and corporate values. It is also responsible for monitoring the performance of senior management which manages the dayto-day affairs of the Bank.

Specifically, the Board is responsible for: • Approving and monitoring the implementation of our strategic objectives, operations and risk management policies, and the selection and performance of senior management;

BOARD-LEVEL COMMITTEES

BOARD OF DIRECTORS

Corporate Governance Committee

Trust Committee

Compliance

Trust

Executive Committee

Audit Committee Internal Audit

Nominations Committee

Risk Oversight Committee

Related Party Transactions

RMO Compensation / Remunerations Committee

Compliance PRESIDENT Managemanent Committees Credit Committee Assets and Liabilities Committee Investment Committee Anti-Money Laundering Committee Outsourcing Committee IT Steering Committee Emergency Committee Policy Committee Personnel Committee

• Conducting the affairs of the Bank with a high degree of integrity; • Defining policies and practices and ensuring that these are followed and periodically reviewed; • Constituting committees for greater efficiency and focus; • Utilizing information from internal and external audit, risk management and compliance; and • Defining an appropriate corporate governance framework.

BOARD COMPOSITION

There are nine directors in the PSBank Board who are all qualified business professionals with the required expertise and experience in directing our strategic path. They are elected by stockholders to vote during our Annual Stockholders’ Meeting.

We have consistently maintained the presence of independent directors who provide independent judgment, outside experience and objectivity.

Of the nine members of the Board, three are independent directors, including the Chairman of the Board. This is more than the required minimum number of independent directors.

The Chairman provides active leadership by ensuring that the Board and its different committees function effectively, including maintaining a relationship of trust among Board members.

All Business, Finance, Operations, Security, and other support groups

The Chairman also ensures that the Board follows a sound decision-making process.

Individual directors are tasked to observe the fit and proper rule. They are expected to conduct fair business dealings, avoid conflict of interest and observe confidentiality. They must act honestly, judiciously and in good faith, and uphold the best interests of the Bank and its stakeholders.

They must also devote time and attention to their duties and responsibilities and contribute to the Board’s decision-making process. They must exercise independent judgment and have a working knowledge of laws, rules and regulations applicable to the Bank.

ATTENDANCE IN MEETINGS

In 2012, PSBank’s Board had 12 regular meetings, in addition to the annual stockholders and organizational meetings. PSBank directors achieved a 97% attendance rate.

In addition to regular meetings, special Board meetings may be called by the Chairman, President, or any three directors. Directors are also required to attend regular committee meetings.

Committee memberships are assigned based on expertise and the requirements of each committee.

Independent directors are members of these Board Oversight committees: Audit, Risk Oversight,

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PSBank ANNUAL REPORT 2012

Corporate Governance Compensation and Remuneration, Nominations, Related Party Transactions, and Corporate Governance. Following BSP regulations, no member of the Executive Committee or the Trust Committee sits in the Audit Committee.

BOARD OF DIRECTORS

Regular Board Meeting Attendance, 2012 Meetings Attended

Jose T. Pardo *, Chairman Arthur V. Ty, Vice Chairman Samson C. Lim * David T. Go Amelia B. Cabal** Benedicto Jose R. Arcinas */*** Joaquin Aligguy Ma. Theresa G. Barretto Margaret Ty Cham Pascual M. Garcia III

12 11 11 12 3 8 12 12 12 12

No. of ASM Meetings

12 12 12 12 3 9 12 12 12 12

Y Y Y Y N/A Y Y Y Y Y

* Independent Director ** Term expired in April 2012 *** Appointed as Member in April 2012

The Bank’s remuneration policy for its directors indicates that the Chairman, Vice Chairman and each of the Directors receive reasonable per diems for attendance at any Board meeting. There is nothing in our by-laws that prevents any director from serving any other capacity and receiving compensation.

The Board has access to the Corporate Secretary who manages the flow of information to the Board prior to the meetings. All Directors are provided with documents on PSBank’s financial and operational performance, committee activities, regulatory developments, and items for their information and approval before actual Board meetings. The Board also reviews and approves all manuals to ensure that regulatory changes and best practices are included.

They also have access to a permanent compilation of documents related to past Board activities. They can readily seek clarification from management should they have concerns about the Bank or any of the items submitted for their consideration.

BOARD-LEVEL COMMITTEES

To increase efficiency and focus, eight Board-level committees were established, namely: REMUNERATION

PSBank provides the Board of Directors and officers with an industry-competitive compensation package to attract, motivate and retain highly qualified people. The salary scales of its officers are generally based on their positions and ranks. These are reviewed annually and adjusted as needed, based on performance. PSBank also grants fixed bonuses including a 13th-month pay, in accordance with law. The Board sees to it that this remuneration strategy is regularly reviewed. This ensures that the policy is commensurate with corporate and individual performance and benchmarked against PSBank’s industry peers and other market considerations while also maintaining internal equity.

Each director receives a monthly professional fee for attending Board and committee meetings. This is also in consideration of their valuable contributions in the formulation of the Bank’s overall strategy. The total per diem and transportation allowance paid to directors for their attendance in Board meetings for the period January to December 2012 was Php12.86 million.

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Executive Committee regularly reviews and approves credit proposals within its limits.

It recommends additional conditions and requirements on loan applications for Board approval. The Committee is composed of four Directors including the President and a credit representative from Metrobank.

Executive Committee

Meetings Attended

No. of Meetings

Arthur V. Ty, Chairman Pascual M. Garcia III Margaret Ty Cham Ma. Theresa G. Barretto Ma. Corazon Therese B. Nepomuceno *

3 3 3 3 3

3 3 3 3 3

Maris Lou S. Velicaria

3

3

Paul Roderick A. Ysmael, Secretary

3

3

Metrobank Representative PSBank Representative

*

Corazon Ma. Therese B. Nepomuceno was succeeded by Rosanna F. De Vera as Excom Member and Metrobank Representative on October 1, 2012.

Note: Excludes special routing of accounts

Audit Committee provides independent oversight of internal controls and financial reporting, risk management, ethical environment, compliance with laws and regulations, and the internal and external audit activities. The Committee is composed of three Directors, two of whom are independent, including the committee chairperson. These members have auditing, accounting or related financial management expertise or experience commensurate with the size, complexity of operations and risk profile of the Bank. The Committee meets monthly.

Audit Committee Jose T. Pardo, Chairman, Independent Director Samson C. Lim, Independent Director Amelia B. Cabal * David T. Go ** Joaquin Aligguy Emma B. Co, Secretary, Chief Audit Executive * **

Meetings Attended

13 13 4 2 13 13

No. of Meetings

13 13 4 2 13 13

Term expired in April 2012 Appointed as Member in April until June 2012

Related Party Transactions Committee assists the Board in ensuring that transactions with related parties are reviewed, appropriate restrictions are followed, and corporate resources are judiciously used. The Committee is composed of three Directors, two of whom are independent directors, including the committee chairperson. The Committee meets monthly.

Related Party Transactions Committee

Meetings Attended

Jose T. Pardo, Chairman, Independent Director 9 Samson C. Lim *, Independent Director 1 Benedicto Jose R. Arcinas **, Independent Director 6 Amelia B. Cabal * 2 Joaquin Aligguy ** 7 Emma B. Co, Chief Audit Executive 10 Jose Nazario R. Cruz† 2 Secretary, Chief Compliance Officer

Gilbert L. Nunag***

Secretary, Acting Chief Compliance Officer

7

* Term expired in April 2012 ** Appointed as Member in April 2012 *** Replaced Jose Nazario R. Cruz† in June 2012

No. of Meetings

10 2 8 2 8 10 2 7

Trust Committee is a special committee that reports directly to the Board and is primarily responsible for overseeing the fiduciary activities of the Bank.

The Committee is composed of five members: the President, the non-voting Trust Officer, two nonexecutive directors and an independent director. The Committee Chairperson should be a non-executive director. The Committee meets quarterly.

Meetings Attended

No. of Meetings

David T. Go, Chairman Ma. Theresa G. Barretto Pascual M. Garcia III Margaret Ty Cham * Benedicto Jose R. Arcinas **

4 4 4 2 2

4 4 4 2 2

Edmund A. Go, Adviser Stella A. Sampayan, Secretary, Trust Officer

4 4

4 4

Trust Committee

Independent Director

* **

Appointed as Member in April until June 2012 Appointed as Member in June 2012

Risk Oversight Committee is responsible for the development and oversight of the Bank and its trust unit’s risk management program.

The Committee is composed of four Directors, including the committee chairperson who is an independent director and two non-voting members appointed as advisors. The members possess a range of expertise and adequate knowledge of our risk exposures which is needed in preventing or minimizing losses.The Committee meets monthly.

Risk Oversight Committee Meetings Attended

No. of Meetings

Benedicto Jose R. Arcinas*

7

8

Pascual M. Garcia III David T. Go Amelia B. Cabal ** Margaret Ty Cham *** Joaquin Aligguy **** Bernardito M. Lapuz

11 9 3 1 6 8

11 11 3 2 6 11

Edmund A. Go, Adviser

9

11

Chairman, Independent Director

Metrobank Representative

* Appointed as Chairman in April 2012 ** Term expired in April 2012 *** Appointed as Member in April until June 2012 **** Appointed as Member in June 2012

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PSBank ANNUAL REPORT 2012

Corporate Governance Nominations Committee reviews and evaluates all nominees to the Board. The Committee is composed of three Directors, two of whom are independent, including the committee chairperson. The Nominations Committee is guided by its charter, as well as BSP guidelines for the qualification and disqualification of directors found in the Manual of Regulations for Banks. The Committee meets at least once a year.

Nominations Committee

Meetings Attended

Samson C. Lim, Chairman, Independent Director Jose T. Pardo, Independent Director Arthur V. Ty

No. of Meetings

1 1 1

1 1 1

Corporate Governance Committee assists the Board in fulfilling its corporate governance responsibilities. It ensures the Board’s effectiveness and adherence to corporate governance principles and guidelines. The Committee is composed of four Directors, two of whom are independent directors, including the committee chairperson. The Committee meets monthly.

Corporate Governance Committee Meetings Attended

Samson C. Lim, Chairman, Independent Director 11 Jose T. Pardo, Independent Director 11 David T. Go 11 Amelia B. Cabal * 3 Joaquin Aligguy ** 7 Margaret Ty Cham * 3 Jose Nazario R. Cruz† 3 Secretary, Chief Compliance Officer

Gilbert L. Nunag ***

Secretary, Acting Chief Compliance Officer

7

* Term expired in April 2012 ** Appointed as Member in April 2012 *** Replaced Jose Nazario R. Cruz† in June 2012

No. of Meetings

11 11 11 3 8 3 3 7

Compensation And Remuneration Committee establishes a formal and transparent procedure for developing a policy on executive remuneration.

The Committee is composed of three members of the Board, two of whom are independent directors, including the committee chairperson.

The head of the Bank’s Human Resources Group sits in the Committee as a resource person. The Committee meets at least once a year.

Compensation and Remuneration Committee

Meetings Attended

Jose T. Pardo, Chairman, Independent Director Benedicto Jose R. Arcinas, Independent Director Arthur V. Ty

2 2 2

No. of Meetings

2 2 2

Members of all the committees are appointed by the Board during the Annual Organizational Meeting held after the Annual Stockholders’ Meeting.

EXECUTIVE MANAGEMENT

The Board appoints the President who is responsible for managing and implementing the Bank’s business strategies and day-to-day operations. The President’s function within the organization is separate and distinct from the Chairman and Vice Chairman of the Board, which are non-executive positions.

Senior Management consists of a core group of individuals responsible for overseeing Bank operations. They support the President through their leadership of various management committees. They have the necessary skills to manage businesses under their supervision, as well as impose appropriate control over key individuals in these areas. They contribute to good governance by supervising line managers in specific business areas consistent with Boardapproved policies and procedures.

Guided by an organizational strategy, management decision-making is supported by financial and non-financial performance metrics.

This allows management to measure the efficiency and effectiveness of various operating groups.

Financial reports based on robust underlying accounting systems are regularly generated, analyzed and presented to Senior Management.

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SILVER AWARD. PSBank became the only savings bank recognized by the Institute of Corporate Directors (ICD) as a Silver awardee among 23 topscoring publicly listed companies in the 2011 Corporate Governance Scorecard.

AUDIT COMMITTEE

COMPLIANCE AND INTERNAL AUDIT

The Audit Committee is delegated with fiduciary functions to assist the Board in fulfilling its oversight responsibility to the stakeholders. This is in relation to the Bank’s financial reporting process, systems of internal controls and risk management, internal and external audit functions, and monitoring of compliance with Bank policies, applicable laws, rules, regulations, and Code of Conduct.

PSBank’s Compliance Program adopts a threepronged, risk-based approach to effectively manage its business risks and ensure compliance with pertinent banking laws, rules and regulations, codes of conduct, policies and standards of good practice.

The priority, focus and testing frequency depends on the pre-assessed risk level of a business unit.

In 2012, the AuditCom had 13 meetings where results of reviews on branches, head office units, systems and applications, investigations, and special audits were discussed. In compliance with SEC Circular No. 4, the AuditCom assessed its own performance using its charter as baseline.

The results of the assessment on the Committee’s effectiveness showed an overall rating of “Far Exceeds Expectation.”

With the support of the internal and external auditors, the Committee reviewed and approved the following: 1. 2013 Annual Risk-Based Internal Audit Plan; 2. Revised Internal Audit Risk-Based Planning Framework; 3. Revised Audit Committee and Internal Audit Charters; 4. Policy on Group Supervision on Internal Audit in compliance with BSP guidelines in Strengthening Corporate Governance in BSPSupervised Institutions; 5. 2012 year-end review conducted by external audit firm SGV and Co.

The three-pronged strategy is designed and structured to be operated by three groups with the following key roles, functions and processes: Unit Role Process 1st prong: Line Units. The first line of defense as the business risk owners and managers • Compliance with laws and regulations in the dayto-day operations and other activities • Conduct of departmental self-testing and certification of compliance by their auxiliary or deputy compliance officers 2nd prong: Compliance Office (CO). The second line of defense as the business risk overseers • Guidance, education, training, and line support • Independent compliance testing • Compliance issues elevation, reporting and resolution monitoring 3rd prong: Internal Audit Group (IAG). Third line of defense as the independent assurance provider • Regular/special audit and independent compliance validation • Audit reporting

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PSBank ANNUAL REPORT 2012

Corporate Governance The priority, focus and compliance testing frequency depends on the pre-assessed level of risk a unit is exposed to insofar as business risks relative to compliance with pertinent banking laws, rules and regulations, codes of conduct, sound policies and standards of good practice are concerned.

TRAINING AND EDUCATION

An important component of our corporate governance and compliance culture is an open communication process. Our officers and staff are continually trained in bank operations relative to our Compliance Program, and on critical rules and regulations.

Our Compliance Office addresses concerns through inter-office memos, e-mails, meetings, trainings and briefings, and other means of communication.

It also acts as an information center on the banking regulatory landscape. Specifically, it disseminates information on new regulatory issuances and changes. It also interprets, clarifies and explains, when needed, relevant laws and regulations including their applicability and impact. This is done through email advisories. An intranet library is also maintained to serve as a repository of all relevant banking and corporate laws, regulations, rules and standards issued by different regulatory authorities. It contains the Bank’s Compliance Program, Money Laundering & Terrorism Financing Prevention Program, Corporate Governance Manual, and compliance advisories.

To increase awareness among officers and staff on major and critical banking laws and regulations including the Anti-Money Laundering Act, our Compliance Office provides lectures and trainings to concerned personnel in close coordination with the Human Resources Group.

Compliance Training Programs: New Employees Orientation (NEO). A halfday basic seminar for all newly-hired officers and staff on the Bank’s compliance function, framework and programs. It is also designed to instill a compliance culture among them.

PSBank ANNUAL REPORT 2012

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Compliance Office Rollout Seminar (COROS).

This is conducted for concerned units or groups whenever there are new critical regulatory issuances and major updates imposed by the regulatory bodies.

Compliance Forum. This is conducted to update all compliance coordinators on any amendments and issues that need to be clarified. This forum is conducted by our Compliance Office annually or as the need arises.

Anti-Money Laundering & Combating Terrorism Financing (AML/CTF) is a tiered training course for the Bank’s officers and staff, depending on rank and responsibilities: 1. Anti-Money Laundering Act (AMLA) for NEO: This is a half-day basic seminar to equip all newly hired employees with the basics of AML/CTF. 2. Advanced AMLA for Supervisory Program for Enhancement and Educational Development (SPEED): This is a rigid, one-day advanced AMLA training module for those undergoing the SPEED program.

3. Enhanced AML Refresher Course: This aims to update Bank personnel on changes in the AMLA, Anti-Financing of Terrorism Act (AFTA), their Implementing Rules & Regulations (IRRs) and BSP circulars.

We also conducted three major AMLA-related training events in 2012 on top of our regular training courses: • A Bank-sponsored training on AMLA Amendments and Updated Anti-Money Laundering Rules and Regulations conducted by the Executive Director of the Anti-Money Laundering Council (AMLC) Secretariat; • A Chamber of Thrift Banks-sponsored training program on Anti-Money Laundering and Updates conducted by the Executive Director of the AMLC Secretariat and the BSP AntiMoney Laundering Specialist Group Head; and • AMLA Updates in the Bank’s Branch Banking Group’s Business Conference conducted by the Bank’s Chief Compliance Officer.

All these contributed to our continuing commitment to combat money laundering and terrorism financing.

Report of the Audit Committee to the Board of Directors For the year ended 31 December 2012 The Audit Committee provided assistance to the Board in fulfilling its oversight function on the Bank’s financial reporting and control; governance and risk management processes; and internal and external audit functions.

Management is responsible for the preparation, integrity, and fair presentation of the Bank’s financial statements prepared in accordance with Philippine Financial Reporting Standards.

In 2012, the Audit Committee composed of three members, two of whom are independent directors, performed the following in their monthly meetings: •

Discussed and approved both the Internal Audit Group (IAG) and Sycip Gorres and Velayo’s (SGV) overall scope and plans;

•

Reviewed and discussed the year-end financial statements with SGV, who are responsible for expressing an independent opinion on the audited financial statements and their conformity with Philippine Financial Reporting Standards;

•

Reviewed with IAG the results of its examinations and evaluations of internal control processes together with managements’ action plans and timetable for the implementation of recommendations to improve the operations of the branches and head office units including the information systems and security;

•

Evaluated the process in assessing the significant risks and related-risk mitigation efforts of the Bank;

•

Reviewed, approved, and endorsed to the Board the revised Audit Committee Charter which was ratified in September 2012;

•

Reviewed the IAG’s adequacy of resources, staff competencies, activities, and effectiveness;

•

Discussed and approved the result of the annual internal quality assessment of IAG’s conformance with the International Professional Practices Framework for Internal Auditing; and

•

Monitored and assessed the Bank’s compliance with applicable laws, rules, regulations, code of conduct as well as the adequacy and effectiveness of internal control system.

Based on the reviews and discussions undertaken and subject to the limitations on the roles and responsibilities provided for in the Audit Committee Charter, the Committee recommends that the audited financial statements be included in the Annual Report for the year ended 31 December 2012, for filing with the Securities and Exchange Commission and other regulatory bodies.

25 February 2013

JOSE T. PARDO Chairman

SAMSON C. LIM Member

JOAQUIN ALIGGUY Member

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PSBank ANNUAL REPORT 2012

Board of Directors JOSE T. PARDO

Chairman / Independent Director Chairman since 2003. Chairman, Philippine Stock Exchange; ECPay (Electronic Commerce Payment Network, Inc.); Bank of Commerce; Philippine Business Center, Inc.; Securities Clearing Corporation of the Philippines; Franchise Investment Holdings, Inc. Director, JG Summit Holdings, Inc. Director, ZNN Radio Veritas, National GRID Corporation of the Phils. Vice Chairman, EDSA People Power Commission - Office of the President. Former Secretary, Department of Finance and Department of Trade and Industry. Former Member of the Board of Governors, Asian Development Bank, International Monetary Fund and the World Bank.

Former Member, Monetary Board of the Bangko Sentral ng Pilipinas. First graduate of the Harvard-DLSU Advisory Program. BS Commerce-Accountancy and MBA, De La Salle University.

ADVISERS DR. GEORGE S.K. TY Senior Adviser

EDMUND A. GO Adviser

ARTHUR V. TY, Vice Chairman Vice Chairman since 2001. Chairman, Metropolitan Bank and Trust Company; GT Capital Holdings Inc.; GT Metro Foundation Inc.; Metropolitan Bank (China) Ltd.; and Ferum Cee Inc. Chairman/ President, Nove Ferum Holdings, Inc. Chairman/Director, Grand Titan Capital Holdings, Inc. and Global Treasure Holdings, Inc. Vice Chairman, Metrobank Foundation, Inc. and Great Mark Resources Corporation. Vice Chairman/ Director, First Metro Investment Corporation and Cathay International Resources Corp. President/ Director, Horizon Royale Holdings, Inc. and Philippine Securities Corporation. Director, Federal Land, Inc. BS Economics, University of California-Los Angeles.

MBA, Columbia University.

PSBank ANNUAL REPORT 2012

PASCUAL M. GARCIA III, Director/President Director/President since 2001. Adviser, Metrobank.

Director, Toyota Financial Services Philippines Corp. and Sumisho Motor Finance Corp. Trustee, Chamber of Thrift Banks. BS Commerce, Ateneo de Zamboanga.

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SAMSON C. LIM, Independent Director Director since 2008. President, Automatic Appliances Inc. and Blims Fine Furniture. Vice President, Philippine Chamber of Commerce and Industry.

Executive Director, Federation of Filipino-Chinese Chamber of Commerce and Industry. President, Canadian Tourism & Hospitality Institute. Chairman Emeritus, Philippine Franchise Association and Philippine Retailers Association. Chairman, Francorp Philippines. Founding President, Philippine Franchise Association. BS Liberal Arts, Cum Laude, Ateneo de Manila University. Masters in Business Economics, University of Asia and the Pacific. Top Management Program, Asian Institute of Management.

BENEDICTO JOSE R. ARCINAS

MA. THERESA G. BARRETTO

JOAQUIN ALIGGUY, Director

DAVID T. GO, Director Director since 2011. Director, Metropolitan Bank (China), Ltd.; Toyota Cubao, Inc.; and Lexus Manila, Inc.; Toyota Manila Bay, Inc. Chairman, Toyota Makati, Inc. and Toyota San Fernando, Inc. Trustee, Toyota Motor Philippines Savings & Loan Association.

President, Toyota Motor Philippines Foundation, Inc. Vice Chairman, Toyota Autoparts Philippines, Inc. Board Adviser/Treasurer, Toyota Financial Services Philippines Corp. SEVP/Treasurer/Director Toyota Motor Philippines Corp. President, Sumaco Manufacturing Corp. BA Economics and Political Science, New York University. Doctor of Philosophy in Internal Relations, New York University.

MARGARET TY CHAM, Director

~ POCHOLO V. DELA PENA,

Independent Director Director since 2012. Director, Arcinas Freres, Inc. BS Business Economics, University of the Philippines, Diliman. Master of Science in Management with distinction, Arthur D. Little Management Education Institute (now Hult International Business School).

Certificate Courses in Small Enterprise Management, Operations Research, Economics, Computer Programming, Harvard University.

Director Director since 2006. Director, Endel Enterprises and Rural Bank of Candelaria. BS Commerce, Assumption College. Curso de Estudios Hispanicos, La Universidad de Madrid in Spain.

Director since 2004. Director, Orix Metro Leasing Corp. and Federal Land Inc. President, Glam Holdings Corp. and Glamore Holdings Corp. Vice President, Great Mark Resources Inc., Global Treasure Holdings Inc., and Grand Titan Capital Holdings Inc. Corporate Sercretary, Metrobank Foundation. Vice President/Corporate Secretary, Norberto and Tytana Ty Foundation. Trustee/Vice President/Corporate Secretary, GT Metro Foundation. BS Humanities, De La Salle University.

Director since 2009. Corporate Secretary, Manila Doctors Hospital. Director, Asia Pacific Land (Nanjing) Ltd., and Aspac Land Development (Shanghai) Co. Ltd. Adviser, Metrobank Foundation.

Trustee, Angelo King Foundation. Director, Writers Union of the Phils. and Philippine Association of Chinese Studies. Consultant, Asiaticus Management Corporation. AB Philippine Literature, University of the Philippines.

Corporate Secretary Corporate Secretary since 2011. First Vice President, Metrobank. BS Commerce major in Accounting, University of Santo Tomas.

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PSBank ANNUAL REPORT 2012

Senior Officers

JOSE VICENTE L. ALDE Executive Vice President

PERFECTO RAMON Z. DIMAYUGA, JR. Senior Vice President

NOLI S. GOMEZ Senior Vice President

YOLANDA L. DELA PAZ Senior First Vice President

FRANCIS C. LLANERA First Vice President

ISMAEL S. REYES First Vice President

JOSE MARTIN A. VELASQUEZ First Vice President

LEAH M. ZAMORA First Vice President

MINDA L. CAYABYAB Vice President

EMMA B. CO Vice President

DAN JOSE D. DUPLITO Vice President

MARY MYLEEN M. MASANQUE Vice President

STELLA A. SAMPAYAN Vice President

MELISSA F. TONG Vice President

MARY JANE M. VALERO Vice President

MARIS LOU S. VELICARIA Vice President

PSBank ANNUAL REPORT 2012

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MA. PATRICIA L. CASTANEDA First Vice President

NORBERTO M. CORONEL III First Vice President

JOSE JESUS B. CUSTODIO First Vice President

NEIL C. ESTRELLADO First Vice President

ANDRE MANUEL L. ABELLANOSA Vice President

PATRICK P. ARCE Vice President

DONABEL S. ARCILLA Vice President

RAYE CLAUDINE Q. BARON Vice President

ABIGAIL P. MELICOR Vice President

ANTONIO JUDE MARTIN P. MONTINOLA Vice President

GILBERT L. NUNAG Vice President

EDEZA A. QUE Vice President

PABLITO C. VELORIA Vice President

MA. RITA ROSETTE R. VILLAMIN Vice President

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PSBank ANNUAL REPORT 2012

Senior Officers JOSE VICENTE L. ALDE

Executive Vice President Joined the Bank in October 2007.

Member, Assets and Liabilities, Credit, IT Steering and Personnel Committees. Former Vice President, Treasury at ABN AMRO Bank. Held various positions in treasury and branch banking in BA Savings Bank. Had stints in sales management at Johnson & Johnson and IT with World Health Organization. Bachelor in Computer Science with honors, University of the Philippines.

Masters in Business Management, Asian Institute of Management.

FRANCIS C. LLANERA

First Vice President Joined the Bank in December 2007. Head, Branch Banking Group. Member, Assets and Liabilities Committee. Former Credit Card Collections Head, Union Bank of the Philippines.

Formerly with American International Group’s Credit Risk Management. BS Commerce, University of Santo Tomas.

MINDA L. CAYABYAB

Vice President Joined the Bank in May 1998.

Head, Financial Accounting and Services Division. Former Senior Auditor, Isla Lipana & Co., Philippine member firm of PricewaterhouseCoopers. BS Business Administration, major in Accounting with honors, Pamantasan ng Lungsod ng Maynila. Certified Public Accountant.

STELLA A. SAMPAYAN

Vice President Joined the Bank in January 2009.

Head, Trust Division. Member, Trust Committee. Former Funds Business Head, ING Bank NVManila. Former Trust Department Head, American Express Bank.

BS Business Administration, major in Management of Financial Institutions, De La Salle University. Trust Operations and Investment Management course, Trust Institute Foundation of the Philippines. Member, Trust Officers Association of the Philippines.

PSBank ANNUAL REPORT 2012

PERFECTO RAMON Z. DIMAYUGA, JR.

NOLI S. GOMEZ

YOLANDA L. DELA PAZ

ISMAEL S. REYES

JOSE MARTIN A. VELASQUEZ

LEAH M. ZAMORA

DAN JOSE D. DUPLITO

MARY MYLEEN M. MASANQUE

Senior Vice President Joined the Bank in January 2006. Chief Finance Officer and Head, Finance Group. Member, Assets and Liabilities, IT Steering, Personnel, and Outsourcing Oversight Committees. Worked in the Treasury Departments of Bank of the Philippine Islands, DBS Bank Phils., Inc., Mindanao Development Bank, Citytrust Banking Corp. and Rizal Commercial Banking Corp.

AB in Economics, Ateneo de Manila University. MBA, University of the Philippines.

First Vice President Joined the Bank in September 2008. Head, Loan Operations Group. Member, Assets and Liabilities and Personnel Committees. Former Division Head of Market Management, iRemit Inc. Former Head and Operations Manager of the Funds Transfer Department, Bank of the Philippine Islands.

BS Economics, University of Santo Tomas.

EMMA B. CO

Vice President Joined the Bank in December 2001. Chief Audit Executive and Head, Internal Audit Group. Member, Anti-Money Laundering and Related Party Transactions Committees. Former Senior Manager For Audit, Mercator Group. Former IT Audit Officer, Union Bank of the Philippines. BS Commerce, major in Accounting, University of Santo Tomas. Bachelor of Laws, Lyceum of the Philippines. MS in Information Management, Ateneo de Manila University. Certified Public Accountant and lawyer.

MELISSA F. TONG

Vice President Joined the Bank in December 2010. Head, Business Development Division. Member, Assets and Liabilities Committee.

Former Unit Head for Cash Management Services and Head of Retail Sales and Marketing, BDO Unibank. Former Regional Head for Europe, iRemit. BA in Organizational Communication and BS in Commerce major in Marketing Management, De La Salle University.

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Senior Vice President Joined the Bank in October 2001. Head, Operations Group.

Member, Assets and Liabilities, Policy, Personnel, Outsourcing Oversight and Emergency Committees. Former Chief Risk Officer and Head of Systems and Methods, DBS Bank Phils. and Systems Management Officer, Bank of the Philippine Islands. BS Civil Engineering, Mapua Institute of Technology.

Licensed Civil Engineer with distinction.

First Vice President Joined the Bank in September 2004.

Head, Treasury Group. Member, Assets and Liabilities Committee.

Former Deputy Treasurer, First Metro Investment Corp. Former Senior Dealer, BPI Capital Corp.

BA Economics and BS Commerce major in Management of Financial Institutions and MBA, De La Salle University. Registered Fixed Income Salesman, Securities and Exchange Commission. Treasury Certified Professional, Ateneo-Bankers Association of the Philippines.

Vice President Joined the Bank in March 2005. Head, Information Security Department. Former Information Security Consultant, TIM Corporation and I-Sentry Security Services. BS Mechanical Engineering, University of the Philippines.

MARY JANE M. VALERO

Vice President Joined the Bank in August 2002. Head, Customer Service Division. Adjunct Professor, Enderun Colleges. Former Front Office Manager, Mandarin Oriental Hotel Manila. Former Duty Manager, Westin Philippine Plaza. BS Psychology and BA Guidance and Counseling, St. Scholastica’s College. MA in Industrial Psychology, University of Sto. Tomas

Senior First Vice President Joined the Bank in September 1983. Head, Specialized Lending Desk. Member, Credit Committee.

Former Supervisor, Equitable Computer Services and Officerin-Charge, Equitable Banking Corporation branch. Bachelor of Business Administration, major in Accounting, University of the East.

First Vice President Joined the Bank in April 2010.

Head, Business Information Management Services Division.

Member, Assets and Liabilities and IT Steering Committees.

Former Vice President for Financial Planning and Analysis, GE Money Bank Philippines.

BS Accounting, De La Salle University. Certified Public Accountant.

Vice President Joined the Bank in November 2011. Head, Collections and Remedial Management Division.

Former AVP and Head of Recovery Unit, BDO Unibank. Former Manager, AIG Credit Cards. AB Communication Arts, Miriam College.

MARIS LOU S. VELICARIA

Vice President Joined the Bank in December 2001. Head, Credit Administration Group. Member, Assets and Liabilities and Credit Committees.

Former Credit Officer for BPI Family Bank, Bank of Southeast Asia and Development Bank of Singapore. BA Philippine Studies (majors in Economics and Literature), University of the Philippines.

MA. PATRICIA ~ L. CASTANEDA

NORBERTO M. CORONEL III

JOSE JESUS B. CUSTODIO

NEIL C. ESTRELLADO

ANDRE MANUEL L. ABELLANOSA

PATRICK P. ARCE

DONABEL S. ARCILLA

RAYE CLAUDINE Q. BARON

ABIGAIL P. MELICOR

ANTONIO JUDE MARTIN P. MONTINOLA

First Vice President Joined the Bank in August 2005.

Head, Risk Management Office.

Member, Assets and Liabilities and Credit Committees. Former Market Risk Officer, BDO Private Bank. Former Corporate Finance Manager, TA Bank. Former Risk Management Officer, Bank of the Philippine Islands. BS Business Economics with honors, University of the Philippines.

Vice President Joined the Bank in February 2003. Head, Treasury Marketing and Currencies Division. Member, Assets and Liabilities Committee.

Former Senior Trader, BPI Capital Corporation. Former Chief Forex Dealer, DBS Forex Corp. BS Management, Colegio de San Juan de Letran. Registered Fixed Income Salesman, Securities and Exchange Commission. Treasury Certified Professional, AteneoBankers Association of the Philippines.

Vice President Joined the Bank in March 2006. Head, Indirect Mortgage Channel. Member, Assets and Liabilities Committee.

Chairperson, SPEED Committee.

Former Channel Head–Senior Manager for Personal Loans, Standard Chartered Bank.

Former Assistant Manager, AIG Credit Cards. BS Commerce major in Economics, University of Santo Tomas.

PABLITO C. VELORIA

Vice President Joined the Bank in September 2006. Head, General Services Division. Former Head of Consumer Credit Evaluation, Field Support, Credit Investigation, Housing Loan Evaluation, Share Finance Credit and Mortgage Credit Investigation, BPI Family Savings Bank. BS Civil Engineering, Adamson University.

First Vice President Joined the Bank in December 2007. Head, Large Enterprise Group. Member, Assets and Liabilities and Credit Committees.

Former FVP and Head of Equity Underwriting and Placements, Investment & Capital Corp. of the Philippines. Former AVP of Investment Banking Division, United Coconut Planters Bank.

BS Business Management, Ateneo de Manila University.

MBA, University of the Philippines.

Vice President Joined the Bank in June 2012.

Head, Direct Sales Channel.

Member, Assets and Liabilities Committee. Former AVP and Sales Director of Direct Sales Personal Loans (Public Loans) Division, Chinatrust Bank (Philippines). Former Channel Head and Senior Manager for Credit Cards and Personal Loans, Standard Chartered Bank.

BS Commerce major in Business Management in Entrepreneurship, De La Salle University.

Vice President Joined the Bank in March 2009.

Head, Electronic Channels Group.

Member, Assets and Liabilities and Emergency Committees.

Former Group Account Director, Harrison Communications Inc. – McCann-Erickson Philippines.

Former Business Unit Director, Arc Worldwide – CRM/Digital Agency of Leo Burnett. BS in Interdisciplinary Studies, Ateneo de Manila University.

First Vice President Joined the Bank in December 2001. Head, Indirect Sales Channel. Member, Assets and Liabilities Committee. Former Head of Auto Loans-Retail Sales, Citytrust Banking Corp. Former Fleet and Floorstock Department Head, BPI Family Savings Bank.

BS Business Management, Ateneo de Manila University.

Vice President Joined the Bank in June 2007. Head, Marketing and Communications Group. Member, Assets and Liabilities Committee.

Former Assistant Vice President in Marketing for CATS Motors, Inc. Former Senior Manager for Marketing for General Motors Philippines, Inc. Former Senior Manager for Advertising & Promotions, SM Supermalls.

Advertising, Miriam College.

GILBERT L. NUNAG

Vice President Joined the Bank in February 2008.

Chief Compliance Officer. Member, Anti-Money Laundering and Outsourcing Oversight Committees.

Former AVP and Compliance Officer, UCPB Savings Bank.

Former AVP & Compliance and Risk Management Division Head & Senior Manager and Controllership Head, UCPB Rural Bank. Former Audit Team In-Charge, SyCip Gorres Velayo & Co. BS Accountancy with honors, Ateneo de Cagayan (Xavier University). Certified Public Accountant.

First Vice President Joined the Bank in March 2002.

Head, Information Technology Division. Member, Outsourcing Oversight, IT Steering and Emergency Committees. Former Project Leader, Oversea-Chinese Banking Corp. Ltd. Former Lead IT Analyst, Development Bank of Singapore. Former Project Manager, DBS Philippines.

Former Systems Analyst, Bank of the Philippine Islands.

BS Mathematics, Ateneo de Manila University.

Vice President Joined the Bank in August 2009.

Head, Process Management Division. Member, Policy, Outsourcing Oversight and Emergency Committees. Former Senior Assistant Vice President for Project Management and Operations Control Department, AIG PhilAm Savings Bank Inc. BS Business Management, Ateneo de Manila University. MBA, University of the Philippines.

EDEZA A. QUE

Vice President Joined the Bank in October 2005. Credit Risk Manager, Risk Management Office.

Former Credit Risk Manager for Consumer Banking, Standard Chartered Bank. Former Risk Management Officer, American International Group Credit Card Co. BS Statistics with honors and MS in Statistics, University of the Philippines.

MA. RITA ROSETTE R. VILLAMIN

Vice President Joined the Bank in February 2003. Head, Human Resources Group. Member, Personnel and Retirement Committees. Former Senior Manager for Human Resources, SM Supermalls.

Training Manager, Litton Mills.

BS Hotel and Restaurant Management, University of Sto. Tomas.

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PSBank ANNUAL REPORT 2012

.

CFO s Report We do well for you.

Taking full advantage of higher than expected growth of the local economy, PSBank posted another year of gains for its shareholders and customers.

Consistent consumer demand fuelled PSBank’s financial results during this optimistic and yet challenging time.

PSBank ANNUAL REPORT 2012

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NET PROFIT CLIMB

We reported another record performance in 2012 as our earnings reached Php2.30 billion, 13.48% more than the Php2.03 billion recorded in 2011.

This increase was achieved primarily through the outstanding growth of our loans coupled with gains in our investment portfolio. Our bottom line allowed our Return on Average Equity to climb to 15.05% from 14.94%, previously.

Our Interest Income on Loans and Receivables climbed to Php7.08 billion, 9.41% better than the Php6.47 billion recorded in 2011. On the other hand, Interest Income from Investment Securities was lower at Php1.34 billion versus Php2.24 billion a year ago as we took profit from the sale of various government securities and ROPs under our Avaliable for Sale (AFS) portfolio. We realized trading income of Php2.57 billion in 2012, significantly higher than the Php927.70 million trading gains in 2011.

Meanwhile, our Interest Expense on deposits decreased by 8.31% to Php2.96 billion versus Php3.23 billion in 2011 as we strategically moderated the growth of our high-cost funds.

This was offset by funds generated from our Tier 2 issuance during the first quarter of 2012. Overall, we were able to maintain our Net Interest Income level at Php5.70 billion.

EXPANDED FOOTPRINT

We invested in 20 new branches and 27 more ATMs in 2012, bringing the yearend total to 220 branches and 532 ATMs. Even with this expansion, we were able to moderate our operating expenses, growing by only 4.56% to Php5.26 billion in 2012.

We ended the year with total assets of Php116.15 billion. Higher economic growth and improved market penetration contributed to the growth in our loan portfolio to Php70.41 billion, 21.00% better than previous year. Auto and mortgage loans led the way with increases of 24.10% and 18.68%, respectively.

To further strengthen our balance sheet we set aside Php1.14 billion in loan loss provision in 2012.

Our non-performing loans (NPL), net of fully provided loans, stood at Php2.02 billion. This translates to an NPL ratio of 3.68% which compares favorably with the average ratio for the thrift banking industry.

We reflected a lower deposit level versus the previous year at Php94.62 billion. Our FCDU deposits slid to Php9.15 billion in 2012 from Php11.50 billion in 2011 due to the strong peso. The peso closed at Php41.05 as of December 31, 2012 compared to a year-ago level of Php43.84, a 6.36% appreciation. In addition, some demand deposit accounts which were previously maintained for reserve compliance were shifted to other eligible reserve alternatives due to the implementation of the new BSP Circular No. 753.

Our capital remains one of the highest in the thrift bank industry at Php15.06 billion. In preparation for Basel III, we issued Php3.00 billion worth of unsecured subordinated debt or Tier 2 notes during the first quarter of 2012. This allowed us to shore

up our capital adequacy ratio (CAR) and end the year with 17.14%. The Tier 2 Notes were rated PRS Aaa by the Philippine Rating Services Corporation.

PRS Aaa is the highest rating and indicates that the obligations were of “high quality with minimal credit risk.�

VALUE CREATION

Mirroring the 33.00% increase in the Philippine Stock Exchange index in 2012, PSBank shares ended the year at Php100.00 per share, 22.00% higher than the same period in 2011.

In keeping with our commitment to enhance shareholder value, our Board of Directors approved an increase in the annual dividend rate to 30.00%.

This translates to Php3.00 per share in annual dividends from Php0.60 per share, previously. We were able to provide a total of Php432.45 million in dividends to our stockholders in 2012.

As in previous years, we have maintained our investment in Toyota Financial Services Philippines Corporation (TFSPC), one of the leading finance companies in the country. TFSPC was able to generate net income of Php49.26 million for PSBank in 2012, which represents our 25% share in the company. We have a 40% stake in Sumisho Motor Finance Corporation, which has been active in offering motorcycle financing through its 16 branches nationwide.

STEADFAST PRESENCE

We have made our presence known in the industry over the years through industry-leading technology and unparalleled customer service. We achieved this while keeping the strength of our balance sheet and increasing profitability.

We realize that our goals remain consistent with those of our stakeholders as they continue to thrive and achieve new goals. When they are GOING PLACES, we know that we are, too.

PERFECTO RAMON Z. DIMAYUGA, JR. Chief Finance Officer

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PSBank ANNUAL REPORT 2012

Management's Discussion and Analysis Capital Adequacy Ratio (CAR) 17.14%

17.42% 14.44%

2008

Return On Average Equity (ROAE)

2009

15.37%

2010

13.93%

2011

15.99% 12.47%

2012

BALANCE SHEET

2008

15.05% 14.94%

12.73%

2009

2010

2011

2012

Assets Our Total Assets as of 31 December 2012 amounted to Php116.15 billion as we strategically unloaded our investment securities and realized trading profits.

Year-on-year, Investment Properties decreased by 6.40% to Php2.62 billion from Php2.80 billion in 2011 due to the higher number of foreclosed mortgage properties we sold in 2012. Goodwill and Other Intangible Assets went down to Php231.74 million from Php255.18 million posted in 2011.

Loans and Receivables Our Loans and Receivables increased by 21.00% to Php70.41 billion as our top loan products posted record gains amid sustained economic growth and improved consumer confidence. Auto loans rose by 24.10% while Mortgage loans expanded by 18.68%.

Capital Capital was lower by 3.10% at Php15.06 billion from Php15.54 billion in 2011. With the sale of most of our AFS investments in 2012, our Unrealized Gains on AFS investments decreased by 91.41% to Php206.15 million.

Securities and Investments Held-to-Maturity investments rose by 10.14% to Php13.56 billion in December 2012 from Php12.31 billion in the previous year. As we realized gains from our government securities and ROP holdings, Available for Sale (AFS) investments dropped by 82.30% to Php3.31 billion from Php18.69 billion in 2011. On the other hand, Fair Value through Profit or Loss investments increased to Php120.75 million from Php54.79 million in 2011.

In February 2012, we issued Php3.00 billion worth of Unsecured Subordinated Debt or Tier 2 Notes which were rated PRS Aaa by the Philippine Rating Services Corporation (Philratings). PRS Aaa indicates that the Notes are of the highest quality with minimal risk and that our capacity to meet our financial commitment is extremely strong. The bonds were priced at 5.75% and will have a maturity of 10 years, callable after 5 years.

We currently have a 25.00% stake in Toyota Financial Services Philippines Corporation (TFSPC) and a 40.00% investment in Sumisho Motor Finance Corporation (SMFC). Together, these investments in an Associate and a Joint Venture increased by less than a percentage point to Php1.24 billion.

Our stake in TFSPC posted a 9.41% growth to Php572.50 million with the recognition of our share in the company’s profits in 2012. On the other hand, our investment in SMFC fell to Php666.19 million.

PSBank ANNUAL REPORT 2012

( 44 )

Deferred Tax Deferred Tax Assets (DTA) was lower by 11.24% at Php1.01 billion from Php1.14 billion as we did not recognize DTA on the allowance for credit losses amounting to Php332.40 million in 2012.

Deposit Liabilities Total Deposits went down by 6.82% to Php94.62 billion as we strategically reduced our high-cost funds. This drop was compensated by funds generated from our Tier 2 issuance during the first quarter of 2012. Demand deposit was lower by

Return On Average Assets (ROAA)

1.95% 1.83% 1.31%

2008

1.81%

1.48%

2009

2010

2011

2012

35.21% to Php7.40 billion while savings deposits grew by 6.17% to Php12.39 billion. Meanwhile, time deposits decreased by 4.62% to Php74.84 billion.

INCOME STATEMENT Net Income We ended 2012 with another record-high Net Income after Tax of Php2.30 billion, 13.48% higher than the year-ago level of Php2.03 billion. This was primarily brought about by outstanding growth in our loan portfolio and sustained gains in our investment portfolio.

Interest Income Net interest income was maintained at Php5.70 billion in end-2012. Interest income on Loans and Receivables rose to Php7.08 billion with the steady growth in our loan portfolio.

Interest income from Investment Securities was lower at Php1.34 billion due to the sale of various government securities and ROPs in our portfolio.

Interest income from deposit with the BSP was also lower at Php26.55 million as deposits maintained by banks with the BSP, in compliance with regulatory reserve requirements, were no longer eligible to earn interest starting April 2012. On the other hand, interest earned from Interbank Loans Receivable and Securities Purchased Under Resale Agreements rose by 77.23% to Php336.04 million while interest from deposits with other banks also increased to Php4.95 million.

Interest expense from various deposit products slid by 8.31% to Php2.96 billion versus the previous year’s Php3.23 billion on account of our lower deposit levels. We paid Php152.94 million in interest to our Tier 2 Noteholders in 2012.

Non-Interest Income Gains on securities trading was at Php2.57 billion which was 177.42% above the Php927.70 million in the same period last year. Foreign exchange gains increased to Php12.12 million while Miscellaneous income fell to Php142.95 million.

We reflected lower gains on the foreclosure of investment properties of Php16.99 million, or 83.49% lower compared to the 2011 level.

We incurred a loss on the sale of investment properties, chattel mortgage and property and equipment amounting to Php30.71 million in 2012.

To strengthen our balance sheet, we set aside a total of Php1.14 billion in provisions for credit losses as of end-December 2012. Other operating expenses rose to Php5.26 billion or by only 4.56% even with additional investments in branches and ATMs. As of December 2012, we had 220 branches and 532 ATMs.

( 45 )

PSBank ANNUAL REPORT 2012

Supplementary Management Discussion The capital-to-risk assets ratio of the Bank as reported to the BSP as of December 31, 2012 and 2011 are shown in the table below (in millions):

Tier 1 capital Tier 2 capital Gross qualifying capital Less: Required deductions Total qualifying capital

2012 P =12,346 3,652 15,998 1,264 P =14,734

2011 P =10,487 578 11,065 1,234 P = 9,831

Credit risk-weighted assets Market risk-weighted assets Operational risk-weighted assets Risk weighted-assets

P =71,920 356 13,673 P =85,949

P =58,642 100 11,842 P =70,584

13.63% 17.14%

13.93% 13.93%

Tier 1 capital ratio Total capital ratio

The regulatory qualifying capital of the Bank consists of Tier 1 (core) capital, which comprises paid-up common stock, additional paid-in capital, retained earnings including current year profit and cumulative foreign currency translation less required deductions such as unsecured credit accommodations to DOSRI, deferred income tax, and goodwill. Certain adjustments are made to PFRS-based results and reserves, as prescribed by the BSP. The other component of regulatory capital is Tier 2 (supplementary) capital, which includes unsecured subordinated debt and general loan loss provision.

The components of Tier 1 capital and deductions follow (in millions):

Tier 1 capital Paid-up common stock Additional paid-in capital Retained Earnings Cumulative foreign currency translation Sub-total Less deductions: Total outstanding unsecured credit accommodations both direct and indirect, to DOSRI, and unsecured loans, other credit accommodations and guarantees granted to subsidiaries and affiliates (net of specific provisions, if any) referred to in Circular No. 560 Deferred income tax (net of allowance for impairment, if any) Goodwill (net of allowance for impairment, if any) Total deductions from Tier 1 capital Total Tier 1 capital

PSBank ANNUAL REPORT 2012

( 46 )

2012 P = 2,403 2,818 8,686 (67) P =13,840

P =

167 1,297 30 1,494 P =12,346

2011 P = 2,403 2,818 6,880 (54) P =12,047

P =

118 1,412 30 1,560 P =10,487

The components of Tier 2 capital and deductions, as reported to BSP as of December 31, 2012 and 2011 consist of the following (in millions):

Tier 2 capital General loan loss provision Unsecured subordinated debts Total Tier 2 capital

2012

2011

P = 684 2,968 P =3,652

P = 5 78 P = 5 78

The Bank’s investments in equity of unconsolidated associate and joint venture securities were deducted 50% from Tier 1 and 50% from Tier 2. The components of the deductions follow (in millions):

Investments in equity of unconsolidated Subsidiary securities dealers/brokers, insurance companies, and non-financial allied undertakings, after deducting related goodwill

2012

2011

P =1,264

P =1,234

Risk weighted assets by type of exposure as of December 31, 2012 and 2011 consist of the following (in millions):

On-Balance Sheet Off-Balance Sheet Interest Rate Exposures Foreign Exchange Exposures Basic Indicator Total Capital Requirements

Credit Risk P =71,901 19 – – – P =71,920 P = 7,192

2012 Market Risk P = – – 235 121 – P =356 P = 36

Operational Risk P = – – – – 13,673 P =13,673 P = 1,367

On-Balance Sheet Off-Balance Sheet Interest Rate Exposures Foreign Exchange Exposures Basic Indicator Total Capital Requirements

Credit Risk P =58,623 19 – – – P =58,642 P = 5,864

2011 Market Risk P = – – 63 37 – P =100 P = 10

Operational Risk P = – – – – 11,842 P =11,842 P = 1,184

( 47 )

PSBank ANNUAL REPORT 2012

PSBank ANNUAL REPORT 2012

( 48 )

2011

Exposures, Including Other Assets Risk-Weighted On-Balance Sheet Assets Risk-Weighted Off-Balance Sheet Assets Credit Risk-Weighted Assets

Exposures, Net of Specific Provisions P =114,712

Exposures, Net of Specific Provisions P =113,116

Exposures Covered by CRM, Gross Exposures, of Materiality After Risk 0% Threshold Mitigation P =5,980 P =42,963 =108,732 P – – P = –

Exposures Covered by CRM, Gross Exposures, of Materiality After Risk 0% Threshold Mitigation P =4,594 P =108,522 P =26,876 – – P = – 75%

100%

50% P =4,667 2,334 – P =2,334

P =7,315 1,463 – P =1,463

100% P =1,478 P =49,492 1,108 49,492 – 19 P =1,108 P =49,511

75%

Risk Weights

P =7,878 P =1,771 P =61,427 3,939 1,328 61,427 – – 19 P =3,939 P =1,328 P =61,446

50%

20%

P =8,191 1,638 – P =1,638

20%

Risk Weights

Total

Total P =2,817 P =108,732 4,226 58,623 – 19 P =4,226 P = 58,642

150%

P =2,379 P =108,522 3,569 71,901 – 19 P =3,569 P = 71,920

150%

The Bank uses the Basic Indicator Approach in computing for the operational risk capital charge.

The Bank has no exposures to securitization structures. It uses the standardized approach to compute the market risk exposures for the Capital Adequacy Ratio. For each risk area (credit, market, operational, interest rate risk), the details of risk exposures and assessments are disclosed in Note 5 of the audited financial statements.

Third party credit assessments were based on the ratings by Standard & Poor’s, Moody’s, Fitch and PhilRatings on exposures to Sovereigns, MDBs, Banks, LGUs, Government Corporations and Corporates.

Risk-weighted on-balance sheet assets covered by credit risk mitigants were based on collateralized transactions as well as guarantees by the Philippine National Government (PNG) and those guarantors and exposures with highest credit rating.

Total Exposures, Including Other Assets Total Risk-Weighted On-Balance Sheet Assets Total Risk-Weighted Off-Balance Sheet Assets Total Credit Risk-Weighted Assets

Total Total Total Total

2012

The Bank’s total credit exposures broken down by type of exposures as follow (in millions):

Statement of Management's Responsibility SECURITIES AND EXCHANGE COMMISION SEC Building EDSA, Greenhills Mandaluyong City, Metro Manila The management of Philippine Savings Bank is responsible for the preparation and fair presentation of the financial statements as at December 31, 2012 and 2011 and for each of the three years in the period ended December 31, 2012, including the additional components attached therein, in accordance with Philippine Financial Reporting Standards. This responsibility includes designing and implementing internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies, and making accounting estimates that are reasonable in the circumstances.

The Board of Directors or Trustees reviews and approves the financial statements and submits the same to the stockholders.

Sycip, Gorres, Velayo & Co., the independent auditors, appointed by the stockholders for the period December 31, 2012 and 2011, respectively, has examined the consolidated financial statements of the company in accordance with Philippine Standards on Auditing, and in its report to the stockholders, has expressed its opinion on the fairness of presentation upon completion of such examination.

JOSE T. PARDO

PASCUAL M. GARCIA III

DIMAyUGA PERFECTO RAMON Z. DIMAy IMA UGA JR. IMAy

Chairman of the Board

President

Chief Finance Officer

SUBSCRIBED AND SWORN TO before me this as follow:

affiants exhibiting to me their passports

Name Jose T. Pardo Pascual M. Garcia Ill Perfecto Ramon Z. Dimayuga Jr.

Date of Issue 10/23/2012 /23/2012 09/29/2010 29/2010 09/15/2012 15/2012

Passport No. EB6622316 EB1058261 EB6350218

( 49 )

Place of Issue Manila Manila Manila

PSBank ANNUAL REPORT 2012

Independent Auditor’s Report The Stockholders and the Board of Directors Philippine Savings Bank Report on the Financial Statements We have audited the accompanying financial statements of Philippine Savings Bank, which comprise the statements of condition as at December 31, 2012 and 2011, and the statements of income, the statements of comprehensive income, the statements of changes in equity and the statements of cash flows for each of the three years in the period ended December 31, 2012, and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Philippine Financial Reporting Standards, 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.

Auditors’ Responsibility Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with Philippine Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

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

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of Philippine Savings Bank as at December 31, 2012 and 2011, and its financial performance and its cash flows for each of the three years in the period ended December 31, 2012 in accordance with Philippine Financial Reporting Standards.

PSBank ANNUAL REPORT 2012

( 50 )

Report on the Supplementary Information Required Under Revenue Regulations 19-2011 and 15-2010 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 Revenue Regulations 19-2011 and 15-2010 in Note 35 to the financial statements is presented for purposes of filing with the Bureau of Internal Revenue and is not a required part of the basic financial statements. Such information is the responsibility of the management of Philippine Savings Bank. The information has been subjected to the auditing procedures applied in our audit 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.

SyCIP GORRES VELAyO & CO.

Vicky Lee Salas Partner CPA Certificate No. 86838 SEC Accreditation No. 0115-AR-3 (Group A), February 14, 2013, valid until February 13, 2016 Tax Identification No. 129-434-735 BIR Accreditation No. 08-001998-53-2012, April 11, 2012, valid until April 10, 2015 PTR No. 3669690, January 2, 2013, Makati City February 26, 2013

( 51 )

PSBank ANNUAL REPORT 2012

Statements of Condition December 31 2012 ASSETS Cash and Other Cash Items (Note 16) Due from Bangko Sentral ng Pilipinas (Note 16) Due from Other Banks (Note 29) Interbank Loans Receivable and Securities Purchased Under Resale Agreements (Note 7) Fair Value Through Profit or Loss Investments (Note 8) Available-for-Sale Investments (Notes 8 and 16) Held-to-Maturity Investments (Note 8) Loans and Receivables (Notes 9 and 29) Investments in an Associate and a Joint Venture (Notes 10 and 29) Property and Equipment (Note 11) Investment Properties (Note 12) Deferred Tax Assets (Note 27) Goodwill and Intangible Assets (Note 13) Other Assets (Note 14)

LIABILITIES AND EQUITY Liabilities Deposit Liabilities (Notes 16 and 29) Demand Savings Time Subordinated Notes (Note 17) Treasurer’s, Cashier’s and Manager’s Checks Accrued Taxes, Interest and Other Expenses (Note 18) Other Liabilities (Note 19) Equity Common Stock (Note 21) Capital Paid in Excess of Par Value Surplus Reserves (Note 30) Surplus (Note 21) Net Unrealized Gain on Available-for-Sale Investments (Note 8) Cumulative Translation Adjustment

See accompanying Notes to Financial Statements.

PSBank ANNUAL REPORT 2012

( 52 )

2011

P =2,811,064,294 5,514,832,823 6,002,439,123

P =3,921,289,371 4,303,595,290 3,736,072,634

6,100,000,000

10,480,000,000

120,747,754 3,309,190,548 13,562,925,624 70,412,582,319

54,794,038 18,693,113,028 12,313,815,034 58,190,152,155

1,238,693,678 2,412,337,390 2,622,918,872 1,011,362,626 231,741,838 798,231,274 P =116,149,068,163

1,238,145,401 2,382,152,118 2,802,259,434 1,139,489,780 255,179,428 741,668,569 P =120,251,726,280

P =7,400,508,552 12,387,740,595 74,836,037,160 94,624,286,307 2,969,797,342 756,629,354

P =11,421,806,073 11,668,374,766 78,460,154,771 101,550,335,610 – 654,513,679

1,054,167,235 1,684,152,218 101,089,032,456

1,208,024,456 1,297,797,180 104,710,670,925

2,402,524,910 2,818,083,506 1,035,275,317 8,665,409,775

2,402,524,910 2,818,083,506 1,035,275,317 6,939,738,262

206,153,207 (67,411,008) 15,060,035,707 P =116,149,068,163

2,399,747,805 (54,314,445) 15,541,055,355 P =120,251,726,280

Statements of Income 2012 INTEREST INCOME ON Loans and receivables (Notes 9 and 29) Investment securities (Note 8) Interbank loans receivable and securities purchased under resale agreements (Note 7) Due from Bangko Sentral ng Pilipinas Due from other banks (Note 29) INTEREST EXPENSE ON Deposit liabilities (Notes 16 and 29) Subordinated notes (Note 17) Bills payable NET INTEREST INCOME Service fees and commission income (Note 22) Service fees and commission expense (Note 22) NET SERVICE FEES AND COMMISSION INCOME (Note 22) OTHER OPERATING INCOME (CHARGES) Trading and securities gains - net (Notes 8 and 29) Gain on foreclosure of investment properties (Note 12) Foreign exchange gain Gain on sale of property and equipment (Note 11) Gain (loss) on sale of investment properties (Note 12) Gain (loss) on sale of chattel mortgage properties (Note 14) Loss on foreclosure of chattel mortgage properties (Note 14) Miscellaneous (Notes 12 and 23) TOTAL OPERATING INCOME OTHER EXPENSES Compensation and fringe benefits (Notes 24 and 29) Provision for credit and impairment losses (Note 15) Taxes and licenses (Note 27) Occupancy and equipment-related costs (Note 25) Depreciation (Note 11) Security, messengerial and janitorial services Amortization of intangible assets (Note 13) Miscellaneous (Notes 12 and 26) INCOME BEFORE SHARE IN NET INCOME OF AN ASSOCIATE AND A JOINT VENTURE AND INCOME TAX SHARE IN NET INCOME OF AN ASSOCIATE AND A JOINT VENTURE (Notes 10 and 29) INCOME BEFORE INCOME TAX PROVISION FOR (BENEFIT FROM) INCOME TAX (Note 27) Current Deferred NET INCOME Basic/Diluted Earnings Per Share (Note 28)

Years Ended December 31 2010 2011

P =7,081,892,924 1,336,840,933

P =6,472,860,619 2,239,511,695

P =5,872,206,677 1,714,742,134

336,035,526 26,549,545 4,945,432 8,786,264,360

189,599,307 71,366,834 3,248,372 8,976,586,827

160,512,694 158,509,526 7,126,287 7,913,097,318

2,961,531,016 152,943,079 – 3,114,474,095 5,671,790,265 938,869,881 60,245,557

3,229,805,995 37,327,024 – 3,267,133,019 5,709,453,808 777,049,501 44,171,323

2,693,229,929 206,037,289 1,427,292 2,900,694,510 5,012,402,808 758,628,630 66,947,148

878,624,324

732,878,178

691,681,482

2,573,600,581 155,094,010 12,116,898 5,846,354 (15,069,256) (21,490,707)

927,695,530 208,751,141 562,092 3,289,138 (22,120,286) 47,222,682

(138,105,874) 142,950,201 2,714,942,207 9,265,356,796

(105,852,761) 182,920,066 1,242,467,602 7,684,799,588

(108,401,098) 108,949,822 2,532,453,557 8,236,537,847

1,937,511,684 1,144,720,862 836,834,289 552,790,599 489,770,896 234,655,918 57,238,221 1,153,147,180 6,406,669,649

1,899,698,062 656,088,921 764,185,382 485,277,052 428,078,287 193,923,812 53,124,292 1,208,296,994 5,688,672,802

1,740,616,046 912,282,236 777,135,211 424,277,820 352,038,108 163,935,978 41,692,711 1,212,927,582 5,624,905,692

2,858,687,147

1,996,126,786

2,611,632,155

548,277 2,859,235,424

8,271,646 2,004,398,432

41,563,418 2,653,195,573

469,577,763 (493,938,013) (24,360,250) P =2,028,758,682 P =8.44

363,472,740 481,607,494 845,080,234 P =1,808,115,339 P =7.53

428,830,779 128,127,154 556,957,933 P =2,302,277,491 P =9.58

2,229,490,724 224,362,420 15,054,607 2,366,740 15,239,154 45,391,188

See accompanying Notes to Financial Statements. ( 53 )

PSBank ANNUAL REPORT 2012

Statements of Comprehensive Income Years Ended December 31 2012 2011 NET INCOME

P =2,302,277,491

Other Comprehensive Income (Loss) Gain from sale of AFS investments taken to profit or loss (Note 8) Changes in fair values of AFS investments (Note 8) Cumulative translation adjustment

(2,578,092,037) 384,497,439 (13,096,563)

TOTAL COMPREHENSIVE INCOME, NET OF TAX See accompanying Notes to Financial Statements.

PSBank ANNUAL REPORT 2012

( 54 )

P =95,586,330

P =2,028,758,682

(937,165,140) 2,981,761,679 2,774,238 P =4,076,129,459

2010 P =1,808,115,339

(2,323,447,276) 1,858,769,489 58,347,184 P =1,401,784,736

( 55 )

PSBank ANNUAL REPORT 2012

Total

1,808,115,339 (180,811,534) (804,845,840) P =5,055,131,075

– 180,811,534 – P =1,035,275,317

–

– – – – =2,818,083,506 P =2,402,524,910 P

–

P =854,463,783

=2,818,083,506 P =2,402,524,910 P

P =4,232,673,110

2,774,238 – (P =54,314,445)

58,347,184 – – – – P =355,151,266 (P =57,088,683)

(464,677,787)

P =819,829,053 (P =115,435,867)

2,044,596,539 2,028,758,682 – – – (144,151,495) =6,939,738,262 P =2,399,747,805 P =1,035,275,317 P

– – – – =2,818,083,506 P =2,402,524,910 P

P =355,151,266 (P =57,088,683)

P =1,035,275,317

=2,818,083,506 P =2,402,524,910 P

P =5,055,131,075

– (804,845,840) P =11,609,077,391

1,401,784,736

P =11,012,138,495

4,076,129,459 (144,151,495) P =15,541,055,355

P =11,609,077,391

(2,193,594,598) (13,096,563) 95,586,330 – (576,605,978) – P =206,153,207 (P =15,060,035,707 =67,411,008) P

Cumulative Translation Adjustment

– – 2,302,277,491 – – (576,605,978) – – =1,035,275,317 P =8,665,409,775 P =2,402,524,910 P =2,818,083,506 P

Surplus Reserves (Note 30)

P =2,399,747,805 (P =15,541,055,355 =54,314,445) P

Capital Paid in Excess of Par Value

=6,939,738,262 =1,035,275,317 P =2,818,083,506 P P =2,402,524,910 P

See accompanying Notes to Financial Statements.

Balance at January 1, 2010 Total comprehensive income (loss) for the year Appropriation of surplus for trust business Cash dividends (Note 21) Balance at December 31, 2010

Balance at January 1, 2011 Total comprehensive income for the year Cash dividends (Note 21) Balance at December 31, 2011

Balance at January 1, 2012 Total comprehensive income (loss) for the year Cash dividends (Note 21) Balance at December 31, 2012

Common Stock (Note 21)

Net Unrealized Gain on Available-for-Sale Investments Surplus (Note 8) (Note 21)

Statements of Changes in Equity

Statements of Cash Flows Years Ended December 31 2012 2011 CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax Adjustments to reconcile income before income tax to net cash generated from (used in) operation: Realized gain on sale of available-for-sale investments (Note 8) Provision for credit and impairment losses (Note 15) Depreciation (Note 11) Gain (loss) on foreclosure of: Investment properties (Note 12) Chattel mortgage properties (Note 14) Amortization of: Intangible assets (Note 13) Debt issuance costs (Note 17) Loss (gain) on sale of: Chattel mortgage properties (Note 14) Investment properties (Note 12) Property and equipment (Note 11) Unrealized trading (gain) loss on fair value through profit or loss investments Accretion of premium (discount) on available-for-sale investments Share in net income of an associate and a joint venture (Note 10) Changes in operating assets and liabilities: Decrease (increase) in: Fair value through profit or loss investments Loans and receivables Other assets Increase (decrease) in: Deposit liabilities Accrued taxes, interests and other expenses Treasurer’s, cashier’s and manager’s checks Other liabilities Cash generated from (used in) operations Income taxes paid Net cash provided by (used in) operating activities CASH FLOWS FROM INVESTING ACTIVITIES Purchases of: Held-to-maturity investments Available-for-sale investments Other intangible assets (Note 13) Property and equipment (Note 11) Proceeds from sale of: Available-for-sale investments (Note 8) Chattel mortgage properties (Note 14) Investment properties (Note 12) Property and equipment (Note 11) Proceeds from redemption of held-to-maturity investments at maturity date Additional investment in a joint venture (Note 10) Net cash provided by (used in) investing activities (Forward)

PSBank ANNUAL REPORT 2012

( 56 )

P =2,859,235,424

P =2,004,398,432

2010

P =2,653,195,573

(2,578,092,037) 1,144,720,862 489,770,896

(937,165,140) 656,088,921 428,078,287

(2,323,447,276) 912,282,236 352,038,108

(155,094,010) 138,105,874

(208,751,141) 105,852,761

(224,362,420) 108,401,098

57,238,221 2,023,042

53,124,292 22,858,968

41,692,711 3,259,498

21,490,707 15,069,256 (5,846,354)

(47,222,682) 22,120,286 (3,289,138)

(45,391,188) (15,239,154) (2,366,740)

(13,400,988)

15,492,338

(2,910,809)

4,740,900

(548,277) (52,595,569) (14,585,502,549) 150,744,080 (6,929,295,807) (242,613,909) 102,115,675 385,717,812 (19,199,668,460) (495,830,780) (19,695,499,240)

(8,271,646)

793,423 (34,263,849) (41,563,418)

798,033,046 (620,889,068) (6,792,102,641) (8,004,900,540) 360,562,143 (227,469,061) 14,032,151,553 75,895,998 5,080,080 (1,041,246) 10,586,634,371 (479,395,569) 10,107,238,802

10,160,268,335 237,142,974 143,695,236 5,555,938 3,078,432,416 (226,340,247) 2,852,092,169

(2,310,836,826) (2,547,631,077) (33,800,631) (392,518,800)

(3,708,632,453) (4,384,256,019) (37,970,396,212) (52,592,425,773) (67,619,168) (84,904,411) (543,808,722) (396,765,121)

18,442,088,791 675,530,032 494,197,154 34,217,685

38,455,666,062 499,715,985 419,441,067 28,261,806

791,290,000 – 15,152,536,328

558,072,902 (400,000,000) (2,729,298,733)

56,547,892,402 592,678,122 432,950,999 26,802,180 – – 141,972,379

Years Ended December 31 2012 2011 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from: Subordinated notes (Note 17) Bills payable Settlements of: Subordinated notes (Note 17) Bills payable Dividends paid (Note 21) Net cash provided by (used in) financing activities Effect of exchange rate differences NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR Cash and other cash items (Note 16) Due from Bangko Sentral ng Pilipinas (Note 16) Due from other banks (Note 29) Interbank loans receivable and securities purchased under resale agreements (Note 7) CASH AND CASH EQUIVALENTS AT END OF YEAR Cash and other cash items (Note 16) Due from Bangko Sentral ng Pilipinas (Note 16) Due from other banks (Note 29) Interbank loans receivable and securities purchased under resale agreements (Note 7)

OPERATIONAL CASH FLOWS FROM INTEREST Interest paid Interest received

P =2,967,774,300 –

P = –

–

2010

P = – 6,327,836,992

– – (435,302,807) 2,532,471,493 (2,129,636)

(2,000,000,000) – (108,113,622) (2,108,113,622) 203,182

– (6,327,836,992) (840,883,714) (840,883,714) 18,024,029

(2,012,621,055)

5,270,029,629

2,171,204,863

3,921,289,371 4,303,595,290 3,736,072,634

3,163,939,540 2,899,592,073 7,520,836,053

2,632,884,729 4,937,990,387 1,528,847,687

10,480,000,000 22,440,957,295

3,586,560,000 17,170,927,666

5,900,000,000 14,999,722,803

2,811,064,294 5,514,832,823 6,002,439,123

3,921,289,371 4,303,595,290 3,736,072,634

3,163,939,540 2,899,592,073 7,520,836,053

6,100,000,000 P =20,428,336,240

10,480,000,000 P =22,440,957,295

3,586,560,000 P =17,170,927,666

P =3,139,648,844 7,762,993,426

P =3,253,002,555 6,127,281,588

P =2,886,830,726 5,958,598,006

See accompanying Notes to Financial Statements.

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Notes to Financial 1.

Corporate Information Philippine Savings Bank (the Bank) was incorporated in the Philippines primarily to engage in savings and mortgage banking. The Bank’s shares are listed in the Philippine Stock Exchange (PSE). The Bank offers a wide range of products and services such as deposit products, loans, treasury and trust functions that mainly serve the retail and consumer markets. On September 6, 1991, the Bank was authorized to perform trust functions.

As of December 31, 2012 and 2011, the Bank had 220 and 200 branches, respectively. In 2012, the Bank added 27 Automated Tellering Machines (ATMs) in Metro Manila and in provincial locations, bringing its total number of ATMs to 532 as of December 31, 2012 from 505 as of December 31, 2011.

The Bank’s original Certificate of Incorporation was issued by the Securities and Exchange Commission (SEC) on June 30, 1959. On March 28, 2006, the board of directors (BOD) of the Bank approved the amendment of Article IV of its Amended Articles of Incorporation to extend the corporate term of the Bank, which expired on June 30, 2009, for another 50 years or up to June 30, 2059. The Amended Articles of Incorporation were approved by the SEC on September 27, 2006.

As of December 31, 2012, the Bank is seventy-six percent (76.00%) owned by Metropolitan Bank & Trust Company (MBTC), its ultimate parent company.

The Bank’s principal place of business is located at PSBank Center, 777 Paseo de Roxas corner Sedeño Street, Makati City.

2. Significant Accounting Policies Basis of Preparation The accompanying financial statements have been prepared under the historical cost basis except for fair value through profit or loss (FVPL) investments and available-for-sale (AFS) investments that have been measured at fair value. All values are rounded to the nearest peso unless otherwise stated.

The accompanying financial statements of the Bank include the accounts maintained in the Regular Banking Unit (RBU) and Foreign Currency Deposit Unit (FCDU). The functional currency of the RBU and the FCDU is the Philippine Peso and United States Dollar (USD), respectively. For financial reporting purposes, FCDU accounts and foreign currencydenominated accounts in the RBU are translated into their equivalents in Philippine peso (see accounting policy on Foreign Currency Translation). The financial statements of these units are combined after eliminating inter-unit accounts.

Statement of Compliance The financial statements of the Bank have been prepared in compliance with Philippine Financial Reporting Standards (PFRS).

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Presentation of Financial Statements The Bank presents its statement of financial position in order of liquidity. An analysis regarding recovery of assets or settlement of liabilities within twelve (12) months after the statement of financial position date (current) and more than twelve (12) months after the statement of financial position date (non-current) is presented in Note 20.

Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position only when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liability simultaneously. Income and expenses are not offset in the statement of income unless required or permitted by any accounting standard or interpretation, and as specifically disclosed in the accounting policies of the Bank.

Changes in Accounting Policies and Disclosures The accounting policies adopted are consistent with those of the previous financial year except for the following amended Philippine Accounting Standards (PAS) and PFRS which were adopted as of January 1, 2012.

PFRS 7, Financial Instruments: Disclosures - Transfers of Financial Assets (Amendments) The amendments require additional disclosures about financial assets that have been transferred but not derecognized to enhance the understanding of the relationship between those assets that have not been derecognized and their associated liabilities. In addition, the amendments require disclosures about continuing involvement in derecognized assets to enable users of financial statements to evaluate the nature of, and risks associated with, the entity’s continuing involvement in those derecognized assets. As of December 31, 2012 and 2011, there were no financial assets that have been transferred but not derecognized.

Other amendments resulting from Improvements to PFRSs to the following standards did not have any impact on the accounting policies, financial position or performance of the Bank: PAS 12, Income Taxes (Amendment) - Deferred Taxes: Recovery of Underlying Assets This amendment to PAS 12 clarifies the determination of deferred tax on investment properties measured at fair value. The amendment introduces a rebuttable presumption that the carrying amount of investment property measured using the fair value model in PAS 40, Investment Property, will be recovered through sale and, accordingly, requires that any related deferred tax should be measured on a ‘sale’ basis. The presumption is rebutted if the investment property is depreciable and it is held within a business model whose objective is to consume substantially all of the economic benefits in the investment property over time (‘use’ basis), rather than through sale. Furthermore, the amendment introduces the requirement that deferred tax on non-depreciable assets measured using the revaluation model in PAS 16, Property, Plant and Equipment, shall always be measured on a sale basis of the asset.

Summary of Significant Accounting Policies Foreign Currency Translation The financial statements are presented in Philippine Peso, which is the Bank’s functional and presentation currency.

The books of accounts of the RBU are maintained in Philippine Peso, while those of the FCDU are maintained in USD.

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RBU As at reporting date, foreign currency monetary assets and liabilities of the RBU are translated in Philippine Peso based on the Philippine Dealing System (PDS) closing rate prevailing at end of the year, and foreign currency-denominated income and expenses, at the exchange rates as at the date of the transaction. Foreign exchange differences arising from restatements of foreign currency-denominated assets and liabilities in the RBU are credited to or charged against profit or loss in the year in which the rates change. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined.

FCDU As at the reporting date, the assets and liabilities of the FCDU are translated to the Bank’s presentation currency (the Philippine Peso) at the PDS closing rate prevailing at the statement of condition date, and its income and expenses are translated using the exchange rates as at the dates of the transaction. Exchange differences arising on translation to the presentation currency are taken to the statement of comprehensive income under ‘Cumulative translation adjustment’. Upon disposal of the FCDU, the deferred cumulative amount recognized in the statement of comprehensive income is recognized in the statement of income. The Bank adopted this policy when the Bangko Sentral ng Pilipinas (BSP) issued BSP Circular No. 601 on February 13, 2008. This Circular included a provision requiring Banks to use USD as the functional currency of its FCDU. Financial Instruments - Initial Recognition and Subsequent Measurement Date of recognition Purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace are recognized on the settlement date. Deposits, amounts due to banks and loans are recognized when cash is received by the Bank or advanced to the borrowers.

Initial recognition of financial instruments All financial instruments, including trading and investment securities and loans and receivables, are initially measured at fair value. Except for FVPL investments and liabilities, the initial measurement of financial instruments includes transaction costs. The Bank classifies its financial assets in the following categories: FVPL investments, AFS investments, held-tomaturity (HTM) investments, and loans and receivables. Financial liabilities are classified into liabilities at FVPL and other financial liabilities at amortized cost. The classification of financial instruments at initial recognition depends on their purpose and characteristics and the management’s intention in acquiring them. Management determines the classification of its investments at initial recognition and, where allowed and appropriate, re-evaluates such designation at every statement of condition date. As of December 31, 2012 and 2011, the Bank had no financial liabilities at FVPL. Determination of fair value The fair value for financial instruments traded in active markets at the statement of condition date is based on their quoted market price or dealer price quotations (bid price for long positions and ask price for short positions), without any deduction for transaction costs. When current bid and asking prices are not available, the price of the most recent transaction is used since it provides evidence of the current fair value as long as there has not been a significant change in economic circumstances since the time of the transaction.

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For all other financial instruments not traded in an active market, the fair value is determined by using appropriate valuation techniques. Valuation techniques include discounted cash flow method, comparison with similar instruments for which market observable prices exist, options pricing models, credit models and other relevant valuation models.

Certain financial instruments are recorded at fair value using valuation techniques in which current market transactions or observable market data are not available. Their fair value is determined using a valuation model that has been tested against prices or inputs to actual market transactions and using the Bank’s best estimate of the most appropriate model assumptions. Models are adjusted to reflect the spread for bid and ask prices to reflect costs to close out positions, credit and debit valuation adjustments, liquidity spread and limitations in the models. Also, profit or loss calculated when such financial instruments are first recorded (“Day 1 profit or loss”) is deferred and recognized only when the inputs become observable or on derecognition of the instrument.

‘Day 1’ profit or loss Where the transaction price in a non-active market is different from the fair value from other observable current market transactions in the same instrument or based on a valuation technique whose variables include only data from an observable market, the Bank recognizes the difference between the transaction price and fair value (a ‘Day 1 difference’) in the statement of income under ‘Trading and securities gains - net’, unless it qualifies for recognition as some other type of asset. In cases where the fair value used is made of data which is not observable, the difference between the transaction price and model value is only recognized in the statement of income when the inputs become observable or when the instrument is derecognized. For each transaction, the Bank determines the appropriate method of recognizing the ‘Day 1 difference’ amount.

Derivatives recorded at FVPL Derivative financial instruments are initially recorded at fair value on the date at which the derivative contract is entered into and are subsequently remeasured at fair value. Any gains or losses arising from changes in fair values of derivatives (except those accounted for as cash flow hedges) are taken directly to the statement of income and are included in ‘Trading and securities gain - net’. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative. As of December 31, 2012 and 2011, derivatives comprised Republic of the Philippines (ROP) paired warrants acquired to lower the risk weighted assets and improve the capital adequacy ratio of the Bank.

For purposes of hedge accounting, hedges, if any, are classified primarily as either: a) a hedge of the fair value of an asset, liability or a firm commitment (fair value hedge); or b) a hedge of the exposure variability in cash flows attributable to an asset or a liability or a forecasted transaction (cash flow hedge). Hedge accounting is applied to derivatives designated as hedging instruments in a fair value, cash flow, or net investment hedge provided certain criteria are met. In 2012 and 2011, the Bank did not apply hedge accounting treatment for its derivative transactions.

Financial assets or financial liabilities held-for-trading (HFT) Other financial assets or financial liabilities held for trading (classified as FVPL investments) are recorded in the statement of condition at fair value. Changes in fair value relating to the HFT positions are recognized in ‘Trading and securities gains - net’. Interest earned or incurred is recorded as interest income or expense, respectively, while dividend income is recorded in other operating income when the right to receive payment has been established.

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Included in this classification are debt securities which have been acquired principally for the purpose of selling in the near term.

Designated financial assets or financial liabilities at FVPL Designated financial assets or financial liabilities classified in this category are those that have been designated by management upon initial recognition. Management may only designate an instrument at FVPL upon recognition when the following criteria are met, and designation is determined on an instrument-by-instrument basis:   

the designation eliminates or significantly reduces the inconsistent treatment that would otherwise arise from measuring the assets or liabilities or recognizing gains or losses on them on a different basis.; the assets and liabilities are part of a group of financial assets, financial liabilities or both which are managed and their performance evaluated on a fair value basis, in accordance with a documented risk management or investment strategy.; the financial instrument contains one or more embedded derivatives which significantly modify the cash flow that would otherwise be required by the contract.

Designated financial assets and financial liabilities at FVPL are recorded in the statement of condition at fair value. Changes in fair value are recorded in ‘Trading and securities gains - net’.

Interest earned or incurred is recorded in interest income or interest expense using the effective interest rate (EIR), while any dividend income is recorded in other operating income according to the terms of the contract, or when the right of the payment has been established.

As of December 31, 2012 and 2011, the Bank had no designated financial assets or financial liabilities at FVPL. Embedded derivatives An embedded derivative is separated from the host contract and accounted for as a derivative if all of the following conditions are met:   

the economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics of the host contract; a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and the hybrid or combined instrument is not recognized at fair value through profit or loss.

The Bank assesses whether embedded derivatives are required to be separated from host contracts when the Bank first becomes a party to the contract. Subsequent reassessment is prohibited unless there is a change in the terms of the contract that significantly modifies the cash flows that otherwise would be required under the contract, in which case reassessment is required. The Bank determines whether a modification to the cash flows is significant by considering the extent to which the expected future cash flows associated with the embedded derivative and the host contract has changed, and whether the change is significant relative to the previously expected cash flow on the contract.

As of December 31, 2012 and 2011, the Bank does not have any embedded derivatives required to be separated from the host contract.

AFS investments AFS investments include equity and debt securities. Equity investments classified as AFS are those which are neither classified as HFT nor designated at FVPL. Debt securities in this category are intended to be held for an indefinite period of time and may be sold in response

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to needs for liquidity or in response to changes in market conditions. The Bank has not designated any loans and receivables as AFS. After initial measurement, AFS investments are subsequently measured at fair value. The effective yield component of AFS debt securities, as well as the impact of restatement on foreign currency-denominated AFS debt securities, is reported in other operating income. The unrealized gains and losses arising from the fair valuation of AFS investments are excluded, net of tax, from reported income and are reported as ‘Net unrealized gain (loss) on AFS investments’ in other comprehensive income (OCI).

When the security is disposed of, the cumulative gain or loss previously recognized in OCI is recognized as ‘Trading and securities gains - net’ in the statement of income. Where the Bank holds more than one investment in the same security, these are deemed to be disposed on a weighted average basis. Interest earned on holding AFS debt investments are reported as interest income using the EIR. Dividends earned on holding AFS equity investments are recognized in the statement of income as ‘Miscellaneous income’ when the right of the payment has been established. The losses arising from impairment of such investments are recognized as ‘Provision for credit and impairment losses’ in the statement of income and removed from the ‘Net unrealized gain (loss) on AFS investments’ in OCI. HTM investments HTM investments are quoted non-derivative financial assets with fixed or determinable payments and fixed maturities for which the Bank’s management has the positive intention and ability to hold until maturity. After initial measurement, HTM investments are subsequently measured at amortized cost using the EIR amortization method, less impairment in value.

Amortized cost is calculated by taking into account any discount or premium on acquisition and fees that are an integral part of the EIR. The amortization is included in ‘Interest income on investment securities’ in the statement of income. The losses arising from impairment of such investments are recognized in the statement of income under ‘Provision for credit and impairment losses’. The effects of restatement on foreign currency-denominated HTM investments are recognized in the statement of income.

If the Bank were to sell or reclassify more than an insignificant amount of HTM investments before maturity (other than in certain specific circumstances), the entire category would be tainted and would be reclassified as AFS. Furthermore, the Bank would be prohibited from classifying any financial asset as HTM investments during the following two years.

Amounts due from BSP and other banks, interbank loans receivable and securities purchased under resale agreements (SPURA), loans and receivables These are non-derivative financial assets with fixed or determinable payments and fixed maturities that are not quoted in an active market, other than:  Those that the Bank intends to sell immediately or in the near term and those that the Bank, upon initial recognition, designates as at FVPL.  Those that the Bank, upon initial recognition, designates as AFS.  Those for which the Bank may not recover substantially all of its initial investment, other than because of credit deterioration.

After initial measurement, ‘Due from BSP’, ‘Due from other banks’, ‘Interbank loans receivable and SPURA’ and ‘Loans and receivables’ are subsequently measured at amortized cost using the EIR amortization method, less allowance for credit losses. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees and costs that are an integral part of the EIR. The amortization is included in ‘Interest income’ in the statement of

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income. The losses arising from impairment are recognized in ‘Provision for credit and impairment losses’ in the statement of income.

Other financial liabilities carried at amortized cost This category represents issued financial instruments or their components, which are not designated at FVPL and comprises ‘Deposit liabilities’, ‘Subordinated notes’, ‘Treasurer’s, cashier’s and manager’s checks’, ‘Accrued interest payable’, ‘Accounts payable’, ‘Bills purchased-contra’, ‘Other credits’, ‘Due to BSP’, ‘Dividends payable’, ‘Due to Treasurer of the Philippines’ and ‘Deposits for keys-Safety deposit boxes (SDB)’, where the substance of the contractual arrangement results in the Bank having an obligation either to deliver cash or another financial asset to the holder, or to satisfy the obligation other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of own equity shares. After initial measurement, financial liabilities not qualified as and not designated as FVPL, are subsequently measured at amortized cost using the EIR. Amortized cost is calculated by taking into account any discount or premium on the issue and fees that are an integral part of the EIR. A compound financial instrument which contains both a liability and an equity component is separated at the issue date. A portion of the net proceeds of the instrument is allocated to the debt component on the date of issue based on its fair value (which is generally determined based on quoted market prices for similar debt instruments). The equity component being assigned the residual amount after deducting from the fair value of the instrument, as a whole, the amount separately determined for the debt component. The value of any derivative features (such as a call option) embedded in the compound financial instrument other than the equity component is included in the debt component.

Derecognition of Financial Assets and Liabilities Financial assets A financial asset (or, where applicable a part of a financial asset or part of a group of financial assets) is derecognized when:  the rights to receive cash flows from the asset have expired; or  the Bank has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either: (a) The Bank has transferred substantially all the risks and rewards of the asset, or (b) The Bank has neither transferred nor retained the risks and rewards of the asset but has transferred control over the asset.

Where the Bank has transferred its rights to receive cash flows from an asset or has entered into a ‘pass-through’ arrangement, and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control over the asset, the asset is recognized to the extent of the Bank’s continuing involvement in the asset. In this case, the Bank also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Bank has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of original carrying amount of the asset and the maximum amount of consideration that the Bank could be required to repay.

Financial liabilities A financial liability is derecognized when the obligation under the liability is discharged or cancelled or has expired. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are

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substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in the statement of income.

Repurchase and Reverse Repurchase Agreements Securities sold under agreements to repurchase at a specified future date (‘repos’) are not derecognized from the statement of condition as the Bank retains substantially all the risks and rewards of ownership. The corresponding cash received, including accrued interest, is recognized in the statement of condition as a loan to the Bank, reflecting the economic substance of such transaction.

Conversely, securities purchased under agreements to resell at a specified future date (‘reverse repos’) are not recognized in the statement of condition. The consideration paid, including accrued interest, is recognized in the statement of condition as SPURA, and is considered a loan to the counterparty. The difference between the purchase price and resale price is treated as interest income and is accrued over the life of the agreement using the EIR amortization method.

Offsetting Financial Instruments Financial assets and financial liabilities are offset and the net amount reported in the statement of condition if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the asset and settle the liability simultaneously. This is generally not the case with master netting agreements, and the related assets and liabilities are presented gross in the statement of condition.

Impairment of Financial Assets The Bank assesses at each statement of condition date whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that have occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated.

Evidence of impairment may include: indications that the borrower or a group of borrowers is experiencing significant financial difficulty; default or delinquency in interest or principal payments; the probability that they will enter bankruptcy or other financial reorganization; and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

Financial assets carried at amortized cost For financial assets carried at amortized cost, which includes loans and receivables, due from banks and HTM investments, the Bank first assesses individually at each statement of condition date whether objective evidence of impairment exists for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Bank determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses for impairment. Those characteristics are relevant to the estimation of future cash flows for groups of such assets by being indicative of the debtors’ ability to pay all amounts due according to the contractual terms of the assets being evaluated. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognized are not included in a collective

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assessment for impairment. Assets individually assessed for impairment for which no impairment loss was measured are also collectively assessed for impairment.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows (excluding future credit losses that have not been incurred).

The carrying amount of the asset is reduced through the use of an allowance account and the amount of loss is charged to the statement of income. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.

Loans and receivables, together with the associated allowance accounts, are written off when there is no realistic prospect of future recovery and all collateral have been realized. If, in a subsequent year, the amount of the estimated impairment loss decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is reduced by adjusting the allowance account. If a future write-off is later recovered, any amounts formerly charged are credited to ‘Provision for credit and impairment losses’ in the statement of income.

The present value of the estimated future cash flows is discounted at the financial asset’s original EIR. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current EIR, adjusted for the original credit risk premium. The calculation of the present value of the estimated future cash flows of a collateralized financial asset reflects the cash flows that may result from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable.

For the purpose of a collective evaluation of impairment, financial assets are grouped on the basis of such credit risk characteristics as industry and age of receivables.

Future cash flows in a group of financial assets that are collectively evaluated for impairment are estimated on the basis of historical loss experience for assets with credit risk characteristics similar to those in the group. Historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions that did not affect the period in which the historical loss experience is based and to remove the effects of conditions in the historical period that do not exist currently.

Estimates of changes in future cash flows reflect, and are directionally consistent with changes in related observable data from period to period (such as changes in unemployment rates, property prices, commodity prices, payment status, or other factors that are indicative of incurred losses in the group and their magnitude). The methodology and assumptions used for estimating future cash flows are reviewed regularly by the Bank to reduce any differences between loss estimates and actual loss experience.

The details of credit and impairment losses on financial assets carried at amortized cost are disclosed in Note 15.

Restructured loans Where possible, the Bank seeks to restructure loans rather than to take possession of collateral. This may involve extending the payment arrangements and the agreement on new loan conditions. Once the terms have been renegotiated, any impairment is measured using the original EIR as calculated before the modification of terms and the loan is no longer considered past due. Management continuously reviews restructured loans to ensure that all criteria are met and that future payments are likely to occur. The loans continue to be

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subjected to an individual or collective impairment assessment, calculated using the loan’s original EIR if the original loan has a fixed interest rate and the current repriced rate if the original loan is repriceable. The difference between the recorded value of the original loan and the present value of the restructured cash flows, discounted at the applicable interest rate, is recognized in ‘Provision for credit and impairment losses’ in the statement of income.

AFS investments For AFS investments, the Bank assesses at each statement of condition date whether there is objective evidence that a financial asset or group of financial assets is impaired.

In the case of debt instruments classified as AFS investments, the Bank assesses individually whether there is objective evidence of impairment based on the same criteria as financial assets carried at amortized cost. However, the amount recorded as impairment is the cumulative loss measured as the difference between the amortized cost and the current fair value, less any impairment loss on that investment previously recognized in the statement of income. Future interest income is based on the reduced carrying amount and is accrued using the rate of interest used to discount future cash flows for the purpose of measuring impairment loss. Such accrual is recorded as part of ‘Interest income’ in the statement of income. If, in a subsequent period, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognized, the impairment loss is reversed through the statement of income.

In the case of equity investments classified as AFS investments, objective evidence would also include a ‘significant’ or ‘prolonged’ decline in the fair value of the investments below its cost.

The Bank treats ‘significant’ generally as 20% and ‘prolonged’ generally as greater than twelve (12) months. Where there is evidence of impairment, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognized in the statement of income - is removed from equity and recognized in the statement of income. Impairment losses on equity investments are not reversed through the statement of income. Increases in fair value after impairment are recognized in the statement of comprehensive income.

Collateral valuation The Bank seeks to use collateral, where possible, to mitigate its risks on financial assets. The collateral comes in various forms such as cash, securities, letter of credits/guarantees, real estate, receivables and other non-financial assets and credit enhancements. The fair value of collateral is generally assessed, at a minimum, at inception. To the extent possible, the Bank uses active market data for valuing financial assets held as collateral. Other financial assets which do not have a readily determinable market value are valued using models. Non-financial collateral, such as real estate and chattel, is valued based on data provided by third parties such as independent appraisers.

Foreclosed collateral The Bank’s policy is to determine whether a foreclosed asset is best used for its internal operations or should be sold. Assets determined to be useful for the internal operations are transferred to their relevant asset category at the lower of the foreclosed value or the carrying value of the original secured asset. Assets that are determined better to be sold are immediately transferred to assets held for sale at their fair value at the foreclosure date in line with the Bank’s policy.

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Revenue Recognition Revenue is recognized to the extent that it is probable that future economic benefits will flow to the Bank and these benefits can be measured reliably. The Bank assesses its revenue arrangements against specific criteria in order to determine if it is acting as principal or agent.

The Bank concluded that it is acting as a principal in all of its revenue arrangements. The following specific recognition criteria must also be met before revenue is recognized: Interest income and expense For all financial instruments measured at amortized cost and interest-bearing financial assets classified as AFS and financial instruments designated at FVPL, interest income or expense is recorded using the EIR. EIR is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or financial liability. The calculation takes into account all contractual terms of the financial instrument (for example, prepayment options), includes any fees or incremental costs that are directly attributable to the instrument and are an integral part of the EIR, but not future credit losses.

The carrying amount of the financial asset or financial liability is adjusted if the Bank revises its estimates of payments or receipts. The adjusted carrying amount is calculated based on the original EIR and the change in carrying amount is recorded as ‘Interest income’ for financial assets and ‘Interest expense’ for financial liabilities.

Once the recorded value of a financial asset or group of similar financial assets has been reduced due to an impairment loss, interest income continues to be recognized using the original EIR used to discount future cash flows for the purpose of measuring the impairment loss.

Fee and commission income Fees earned for the provision of services over a period of time are accrued over that period.

These fees include fiduciary fees, credit-related fees and other service and management fees.

Trading gains (losses) Trading gain (loss) represents results arising from trading activities, including all gains and losses from changes in the fair values of financial assets held for trading.

Unrealized gains and losses comprise changes in the fair value of financial instruments for the period and from reversal of prior period’s unrealized gains and losses for financial instruments which were realized in the reporting period.

Realized gains and losses on disposals of financial instruments at FVPL are calculated using weighted average method. It represents the difference between an instrument’s initial carrying amount and disposal amount.

Dividends Dividend income is recognized when the Bank’s right to receive payment is established.

Income from sale of property and equipment, investment property and chattel mortgage properties Income from sale of properties is recognized upon completion of the earning process and the collectibility of the sales price is reasonably assured.

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Rental income Rental income arising from leased properties is accounted for on a straight-line basis over the lease terms of ongoing leases and is recorded in the statement of income under other operating income.

Expense Recognition Expenses are recognized when it is probable that a decrease in future economic benefit related to a decrease in an asset or an increase in liability has occurred and the decrease in economic benefits can be measured reliably. Revenues and expenses that relate to the same transaction or other event are recognized simultaneously.

Cash and Cash Equivalents For purposes of reporting cash flows, cash and cash equivalents include cash and other cash items, amounts due from BSP and other banks, and interbank loans receivable and SPURA that are convertible to known amounts of cash with original maturities of three months or less from the dates of placement and that are subject to insignificant risk of changes in value.

Business Combination and Goodwill Business combinations are accounted for using the acquisition method. This involves recognizing identifiable assets (including previously unrecognized intangible assets) and liabilities (including contingent liabilities and excluding future restructuring) of the acquired business at fair value. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognized as goodwill. If the cost of acquisition is less than the fair values of the identifiable net assets acquired, the discount on acquisition is recognized directly in the statement of income in the year of acquisition.

Goodwill is initially measured at cost being the excess of the acquisition cost over the share in the net fair value of the acquired identifiable assets, liabilities and contingent liabilities. The Bank’s goodwill arose from past purchases of branch business/offices from the Parent Company.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses.

For the purpose of impairment testing, goodwill acquired is, from the acquisition date, allocated to each of the cash-generating units (CGU) or group of CGUs that are expected to benefit from the synergies of the combination, irrespective of whether the acquired other assets or liabilities are assigned to those units.

Where goodwill forms part of a CGU and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the CGU retained.

Investment in an Associate Associates are entities over which the Bank has significant influence but not control, generally accompanying a shareholding of between 20.00% and 50.00% of the voting rights. The Bank’s investment in an associate represents its 25.00% interest in Toyota Financial Services Philippines Corp. (TFSPC), an entity not listed in the PSE. Investment in an associate is accounted for under the equity method of accounting.

The reporting period of TFSPC is a fiscal year ending March 31. However, TFSPC prepares financial statements for a 12-month period ending December 31 for the use of the Bank in applying the equity method. The length of the reporting period is the same from period to

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period. Where necessary, adjustments are made to bring the accounting policies in line with those of the Bank.

Investment in a Joint Venture Investment in a joint venture represents the Bank’s interest in a jointly controlled entity, whereby the venturers have a contractual arrangement that establishes joint control over the economic activities of Sumisho Motor Finance Corporation (SMFC), an entity not listed in the PSE. The Bank’s investment in a joint venture represents its 40.00% interest in SMFC. Investment in a joint venture is accounted for under the equity method of accounting.

The reporting period of SMFC is the calendar year ending December 31. Where necessary, adjustments are made to bring the accounting policies in line with those of the Bank.

Under the equity method, the investment in an associate and a joint venture is carried in the statement of condition at cost plus post-acquisition changes in the Bank’s share in the net assets of the associate and the joint venture. Goodwill relating to the associate and the joint venture is included in the carrying value of the investment and is not amortized. The Bank’s share in the associate’s and joint venture’s post-acquisition profits or losses is recognized in the statement of income, and its share of post-acquisition movements in the associate’s and joint venture’s other comprehensive income is recognized in the statement of comprehensive income. When the Bank’s share of losses in the associate and joint venture equals or exceeds its interest in the associate or joint venture, including any other unsecured receivables, the Bank does not recognize further losses, unless it has incurred obligations or made payments on behalf of the associate or joint venture. The Bank’s interest in the associate or joint venture is the carrying amount of the investment in the associate or joint venture under the equity method together with any long-term interests that form part of the Bank's net investment in the associate or joint venture. Profits and losses resulting from transactions between the Bank and the associate or joint venture are eliminated to the extent of the Bank’s interest in the associate or joint venture.

Property and Equipment Land is stated at cost less any impairment in value and depreciable properties, including building, furniture, fixtures and equipment, and leasehold improvements, are stated at cost less accumulated depreciation and any accumulated impairment losses. The initial cost of property and equipment consists of its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenditures incurred after the assets have been put into operation, such as repairs and maintenance, are normally charged against profit or loss in the year in which the costs are incurred. In situations where it can be clearly demonstrated that the expenditures have resulted in an increase in the future economic benefits expected to be obtained from the use of property and equipment beyond its originally assessed standard of performance, the expenditures are capitalized as additional cost of property and equipment.

Depreciation is calculated using the straight-line method to write down the cost of the property and equipment to their residual values over their estimated useful lives. Land is not depreciated. The estimated useful lives are as follows: Buildings Furniture, fixtures and equipment Leasehold improvements

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25-50 years 3-5 years depending on the type of assets 5 years or the term of the related leases, whichever is shorter

An item of property and equipment is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. 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 asset) is included in the statement of income in the year the asset is derecognized.

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

The asset’s residual values, useful lives and methods of depreciation are reviewed, and adjusted if appropriate, at each financial year-end to ensure that these are consistent with the expected pattern of economic benefits from the items of property and equipment.

Investment Properties Investment properties are measured initially at cost, including transaction costs. An investment property acquired through an exchange transaction is measured at the fair value of the asset acquired unless the fair value of such asset cannot be measured, in which case the investment property acquired is measured at the carrying amount of the asset given up.

Foreclosed properties are classified under investment properties from foreclosure date.

Expenditures incurred after the investment properties are recognized, such as repairs and maintenance costs, are normally charged to income in the period in which the costs are incurred.

Subsequent to initial recognition, investment properties are carried at cost less accumulated depreciation and impairment in value, except for land which is stated at cost less impairment in value. Depreciation is calculated using the straight-line method over the remaining useful lives from the time of acquisition of the investment properties.

The estimated useful life of building and condominium units ranges from 10 to 40 years.

Investment properties are derecognized when they have either been disposed of or when the investment property is permanently withdrawn from use and no future benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property are recognized in the statement of income in ‘Gain (loss) on sale of investment properties’ in the year of retirement or disposal.

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

Chattel Mortgage Properties Chattel mortgage properties comprise repossessed vehicles. Chattel mortgage properties are stated at cost less accumulated depreciation and impairment in value. Depreciation is calculated using the straight-line method over the remaining useful lives from the time of acquisition of the vehicles. The useful lives of chattel mortgage properties are estimated to be 5 years.

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Intangible Assets The Bank’sAssets intangible assets include branch licenses and computer software. An intangible Intangible asset is recognized only when the cost can be measured reliably and it is probable that the The Bank’s intangible assets include branch licenses and computer software.

An intangible expected future economic benefits that are attributable to it will flow to the Bank. asset is recognized only when the cost can be measured reliably and it is probable that the expected future economic benefits that are attributable to it will flow to the Bank.

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business is initial its fairrecognition value as at at thecost. dateThe of cost of Intangible separately arecombination measured on acquisition.

Following initial recognition, intangible assets are carried at cost less any intangible assets acquired in a business combination is its fair value as at the date of accumulatedFollowing amortization and any accumulated impairment generated acquisition. initial recognition, intangible assets arelosses. carriedInternally at cost less any intangible assets, excluding capitalized development costs, are not capitalized and expenditure accumulated amortization and any accumulated impairment losses. Internally generated is reflectedassets, in the excluding statementcapitalized of income in the year in which is incurred. intangible development costs, the are expenditure not capitalized and expenditure is reflected in the statement of income in the year in which the expenditure is incurred.

The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets withlives finiteoflives are amortized over the useful economic life and assessed for impairment The useful intangible assets are assessed to be either finite or indefinite.

Intangible whenever there is an indication that the intangible assets may be impaired.

The amortization assets with finite lives are amortized over the useful economic life and assessed for impairment period andthere the amortization method for intangible an intangible asset with finite useful life are reviewed whenever is an indication that the assets may beaimpaired.

The amortization at least at each financial year-end.

Changes in the expected useful life or the expected pattern period and the amortization method for an intangible asset with a finite useful life are reviewed of consumption of future economic benefits embodied in the asset is accounted for by at least at each financial year-end. Changes in the expected useful life or the expected pattern changing the amortization period orbenefits method,embodied as appropriate, they are treated asby changes of consumption of future economic in the and asset is accounted for in accounting estimates.

The amortization expense on intangible assets with finite lives is changing the amortization period or method, as appropriate, and they are treated as changes recognized in the statement of income under ‘Amortization of intangible assets’. in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in the statement of income under ‘Amortization of intangible assets’.

Intangible assets with indefinite useful lives are tested for impairment annually either individuallyassets or at the level. useful Such intangibles are not usefuleither life of an Intangible withCGU indefinite lives are tested foramortized. impairmentThe annually intangible asset with an indefinite life is reviewed annually to determine whether indefinite individually or at the CGU level. Such intangibles are not amortized. The useful life of an life assessment continues to be supportable.

If not, the change in the useful life assessment from intangible asset with an indefinite life is reviewed annually to determine whether indefinite life indefinite to finite is made on a prospective basis. assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is made on a prospective basis.

Gains or losses arising from the derecognition of an intangible asset are measured as the difference between thefrom net disposal proceeds of and carryingasset amount the assetasand Gains or losses arising the derecognition anthe intangible are of measured theare recognized in the statement of income when the asset is derecognized. difference between the net disposal proceeds and the carrying amount of the asset and are Branch licenses recognized in the statement of income when the asset is derecognized.

Branch licenses arise from the acquisition of branches from local banks and licenses to operate new branches BSP. licenses have indefinite useful livesand andlicenses are tested for Branch licensesfrom arisethe from theBranch acquisition of branches from local banks to operate impairment on an annual basis. new branches from the BSP. Branch licenses have indefinite useful lives and are tested for impairment on an annual basis.

Software costs Software costs are carried at cost less accumulated amortization and any impairment in value.

Given the costs history ofcarried rapid changes in technology, computer software Software are at cost less accumulated amortization and are anysusceptible impairmentto in value. technological obsolescence.

Therefore, it is likely that their useful life is short.

Software Given the history of rapid changes in technology, computer software are susceptible to costs are amortized obsolescence. on a straight-line basis over yearsthat but their maybe shorter depending on the period technological Therefore, it is5 likely useful life is short. Software costs over which the Bank expects to use the asset. are amortized on a straight-line basis over 5 years but maybe shorter depending on the period over which the Bank expects to use the asset.

Impairment of Nonfinancial Assets Property andofequipment, investment Impairment Nonfinancial Assets properties and chattel mortgage properties At each statement of condition date, properties the Bank assesses whether thereproperties is any indication that its Property and equipment, investment and chattel mortgage nonfinancial assets may be impaired.

When an indicator of impairment or when an At each statement of condition date, the Bank assesses whether there isexists any indication that its annual impairment testing for an asset is required, the Bank makes a formal estimate the nonfinancial assets may be impaired. When an indicator of impairment exists or whenofan recoverable amount.

An asset’s recoverable amount is the higher of an asset’s or CGU’s fair annual impairment testing for an asset is required, the Bank makes a formal estimate of the value less costs to sell and its value in use and is determined for an individual asset, unless the recoverable amount. An asset’s recoverable amount is the higher of an asset’s or CGU’s fair asset does not generate cash inflows that are largely independent of those from other assets value less costs to sell and its value in use and is determined for an individual asset, unless the or groups assets, in which thethat recoverable amount is assessed as part of the CGU to asset doesof not generate cashcase inflows are largely independent of those from other assets or groups of assets, in which case the recoverable amount is assessed as part of the CGU to

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which it belongs. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less cost to sell, an appropriate valuation model is used. These calculations are corroborated by valuation multiples and other available fair value indicators.

An impairment loss is charged to operation in the year in which it arises.

An assessment is made at each statement of condition date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Bank estimates the asset’s or CGU’s recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceeds the carrying amount that would have been determined, net of depreciation, had no impairment loss been previously recognized. Such reversal is recognized in the statement of income. After such reversal, the depreciation expense is adjusted in future years to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining life.

Goodwill Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

Impairment is determined for goodwill by assessing the recoverable amount of the CGU (or group of CGU) to which the goodwill relates. Where the recoverable amount of the CGU (or group of CGU) is less than the carrying amount of the CGU (or group of CGU) to which goodwill has been allocated, an impairment loss is recognized immediately in the statement of income. Impairment losses relating to goodwill cannot be reversed for subsequent increases in its recoverable amount in future periods. The Bank performs its annual impairment test of goodwill as at December 31 of each year.

Intangible assets Intangible assets with indefinite useful lives are tested for impairment annually as at December 31 of each year, either individually or at the CGU level, as appropriate.

Intangible assets with finite lives are assessed for impairment whenever there is an indication that the intangible asset may be impaired.

Investment in an associate and a joint venture After application of the equity method, the Bank determines whether it is necessary to recognize an impairment loss on the Bank’s investment in an associate and a joint venture. The Bank determines at each statement of condition date whether there is any objective evidence that the investment in an associate and a joint venture are impaired. If this is the case, the Bank calculates the amount of impairment as being the difference between the fair value of the investment in the associate and joint venture and the carrying amount and recognizes such amount in the statement of income.

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Leases The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement and requires an assessment at inception date of whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset. A reassessment is made after inception of the lease only if one of the following applies: (a) there is a change in contractual terms, other than a renewal or extension of the arrangement; (b) a renewal option is exercised or extension granted, unless that term of the renewal or extension was initially included in the lease term; (c) there is a change in the determination of whether fulfillment is dependent on a specified asset; or (d) there is a substantial change to the asset.

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

Bank as a lessee Leases where the lessor retains substantially all the risks and benefits of ownership of the assets are classified as operating leases. Operating lease payments are recognized as an expense in the statement of income on a straight-line basis over the lease term.

Bank as a lessor Leases where the Bank does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as rental income. Contingent rents are recognized as income in the period in which they are earned.

Retirement Cost The Bank has a funded, noncontributory defined benefit retirement plan, administered by trustees, covering their permanent employees.

The retirement cost of the Bank is determined using the projected unit credit method. Under this method, the current service cost is the present value of retirement benefits payable in the future with respect to services rendered in the current period.

The liability recognized in the statement of condition in respect of the defined benefit pension plan is the present value of the defined benefit obligation at the statement of condition date less the fair value of plan assets, together with adjustments for unrecognized actuarial gains or losses and past service costs. 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 on government bonds that have terms to maturity approximating the terms of the related retirement liability. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are credited to or charged against income when the net cumulative unrecognized actuarial gains and losses at the end of the previous period exceeded 10% of the higher of the defined benefit obligation and the fair value of plan assets at that date.

These excess gains or losses are recognized over the expected average remaining working lives of the employees participating in the plan.

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Past service costs, if any, are recognized immediately in income, unless the changes to the pension plan are conditional on the employees remaining in service for a specified period of time (the vesting period). In this case, the past-service costs are amortized on a straight-line basis over the vesting period.

The defined benefit asset or liability comprises the present value of the defined benefit obligation less past service costs not yet recognized less the fair value of plan assets out of which the obligations are to be settled directly, including actuarial gain and losses not yet recognized. The value of any asset is restricted to the sum of any actuarial losses and past service cost not yet recognized and the present value of any economic benefits available in the form of refunds from the plan or reductions in the future contributions to the plan.

Provisions Provisions are recognized when the Bank has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Bank expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the statement of income, net of any reimbursement. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as ‘Interest expense’.

Contingent Liabilities and Contingent Assets 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. Contingent assets are not recognized but are disclosed in the financial statements when an inflow of economic benefits is probable.

Debt Issue Costs Issuance, underwriting and other related expenses incurred in connection with the issuance of debt instruments are included in the measurement basis of the underlying debt instruments and are amortized as an adjustment to the interest on the underlying debt instruments using the EIR method.

Income Taxes Income tax on profit or loss for the year comprises current and deferred tax. Income tax is determined in accordance with Philippine tax law. Income tax is recognized in the statement of income, except to the extent that it relates to other comprehensive income items recognized directly in the statement of comprehensive income.

Current tax Current income tax is the expected tax payable on the taxable income for the period, using the tax rates enacted at the statement of condition date, together with adjustments to tax payable in respect to prior years.

Deferred tax Deferred income tax is provided, using the balance sheet liability method, on all temporary differences at the statement of condition date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

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Deferred tax liabilities are recognized for all taxable temporary differences, including asset revaluations. Deferred tax assets are recognized for all deductible temporary differences and carryforward of unused tax losses and tax credits from excess minimum corporate income tax (MCIT) over the regular corporate income tax (RCIT), to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and carryforward of unused tax losses and MCIT can be utilized.

The carrying amount of deferred tax assets is reviewed at each statement of condition date and reduced to the extent that it is no longer probable that sufficient future taxable profit will be available to allow all or part of the deferred tax assets to be utilized. Unrecognized deferred tax assets are reassessed at each statement of condition date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax assets to be recovered.

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

Deferred tax assets and liabilities are measured at the tax rates that are applicable to the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the statement of condition date.

Current income tax and deferred income tax relating to items recognized directly in OCI is also recognized in OCI and not in the statement of income.

Earnings Per Share Basic earnings per share (EPS) is computed by dividing net income for the year by the weighted average number of common shares issued and outstanding during the year, after giving retroactive effect to stock dividends declared, stock rights exercised and stock splits, if any, declared during the year. As of December 31, 2012 and 2011, there were no potential common shares with dilutive effect on the basic EPS of the Bank.

Dividends on Common Shares Dividends on common shares are recognized as a liability and deducted from equity when approved by the BOD of the Bank. Dividends for the year that are approved after the statement of condition date are dealt with as subsequent events.

Subsequent Events Post year-end events that provide additional information about the Bank’s position at the statement of condition 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.

Segment Reporting The Bank’s operating businesses are organized and managed separately according to the nature of the products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets. Financial information on business segments is presented in Note 6. The Bank’s assets generating revenues are all located in the Philippines (i.e., one geographical location). Therefore, geographical segment information is no longer presented.

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Fiduciary Activities Assets and income arising from fiduciary activities together with related undertakings to return Fiduciary Activities such assets to customers are excluded from the financial statements, where the Bank acts in a Assets and incomesuch arising from fiduciary activities together with related undertakings to return fiduciary capacity as nominee, trustee or agent. such assets to customers are excluded from the financial statements, where the Bank acts in a fiduciary such asyet nominee, trustee or agent.

Standardscapacity Issued but not Effective

Standards issued but not yet effective up to the date of issuance of the Bank’s financial Standards but below. not yet This Effective statementsIssued are listed listing consists of standards and interpretations issued, which Standards issued but not yet effective up to the of issuance of Bank the Bank’s financial the Bank reasonably expects to be applicable at date a future date. The intends to adopt statements are listed below.

This listing consists of standards and interpretations issued, which these standards when they become effective. Except as otherwise indicated, the Bank does the Bank reasonably expects to be applicable at a future date.

The Bank intends to adopt not expect the adoption of these new and amended PAS, PFRS and Philippine Interpretations these standards when theyon become effective.

Except as otherwise indicated, the Bank does to have significant impact its financial statements. not expect the adoption of these new and amended PAS, PFRS and Philippine Interpretations to have significant impact on its financial statements.

Effective 2013

PFRS 7, Financial Instruments: Disclosures - Offsetting Financial Assets and Financial Liabilities Effective 2013 These amendments require an entity to disclose information about rights of set-off and related PFRS 7, Financial Instruments: Disclosures - Offsetting Financial Assets Financial Liabilities arrangements (such as collateral agreements).

The new disclosures areand required for all These amendments require an entity to disclose information about rights of set-off and recognized financial instruments that are set off in accordance with PAS 32, Financial related arrangements (such as collateral The newto disclosures arefinancial required for all Instruments: Presentation.

These agreements). disclosures also apply recognized instruments recognized financial instruments that are set off in accordance with PAS 32, Financial that are subject to an enforceable master netting arrangement or ‘similar agreement’, Instruments: Presentation.

These disclosures also apply to recognized financial instruments irrespective of whether they are set-off in accordance with PAS 32. The amendments require that are subject to an enforceable master netting arrangement or ‘similar agreement’, entities to disclose, in a tabular format unless another format is more appropriate, the following irrespective of whetherinformation. they are set-off in20 accordance with PASfor 32.financial The amendments minimum quantitative This -is presented separately assets andrequire financial entities to disclose, in a tabular format unless another format is more appropriate, the following liabilities recognized at the end of the reporting period: minimum quantitative This is presented financial financial assets and financial a) The gross amountsinformation. of those recognized financial separately assets and for recognized liabilities; liabilities recognized at the end of the reporting period: a) amounts of those financial and recognized financial b) the Thegross amounts that are set offrecognized in accordance with assets the criteria in PAS 32 when determining a) liabilities; The gross amounts of thoseinrecognized financial assets and recognized financial liabilities; the net amounts presented the statement of condition; b) The amounts thatare areset setoff offin accordance with thecriteria criteriaininPAS PAS32 32when when determining b) that with c) the Theamounts net amounts presented ininaccordance the statement of the condition; the net amounts presented in the statement of condition; net amounts presented master in the statement of condition;or similar agreement d) determining The amountsthe subject to an enforceable netting arrangement c) the The net amounts presented the statement ofcondition; condition; c) presented ininthe thatnet areamounts not otherwise included instatement (b) above,of including: d) the The amountssubject subjectto toan anenforceable enforceable master nettingarrangement arrangement or similar agreement d) master netting similar i. amounts Amounts related to recognized financial instruments that do notor meet some or all of that are not otherwise included in (b) above, including: agreement that are not otherwise included in (b) above, including: the offsetting criteria in PAS 32; and Amounts related related to to recognized recognized financial instruments that do not not meet meet some or or all of amounts i.i.ii. Amounts financial instruments that do Amounts related to financial collateral (including cash collateral); and some the offsetting criteria in PAS 32; and of amount the offsetting criteria in the PASamounts 32; and in (d) from the amounts in (c) above. e) Theall net after deducting ii. Amounts Amounts related related to to financial financial collateral collateral (including (including cash cash collateral); collateral); and and ii. amounts e) The net amount after deducting the amounts in (d) from the amounts (c)above. above. e) net amounttoafter deducting theretrospectively amounts in (d)applied from the amounts inin(c) Thethe amendments PFRS 7 are to be and are effective for annual periods beginning on or after January 1, 2013. The amendments only affect disclosures and The PFRS 7 are to be retrospectively applied and are effective for annual haveamendments no impact ontothe Bank’s financial position or performance. periods beginning on or after January 1, 2013. The amendments only affect disclosures and have no on the Financial Bank’s financial position or performance.

PFRS 10,impact Consolidated Statements

PFRS 10 replaces the portion of PAS 27, Consolidated and Separate Financial Statements, that PFRS 10, Consolidated Financial Statementsfinancial statements. It also includes the issues addresses the accounting for consolidated PFRS 10 replaces the portion of PAS 27,Purpose Consolidated andPFRS Separate Financial Statements, that raised in SIC 12, Consolidation - Special Entities.

10 establishes a single control addresses the accounting for consolidated financial statements.

It also includes the issues model that applies to all entities including special purpose entities. The changes introduced by raised in will SIC require 12, Consolidation - Special Purpose Entities. judgment PFRS 10 establishes a single PFRS 10 management to exercise significant to determine whichcontrol entities model that applies to all entities including special purpose entities.

The changes introduced by are controlled, and therefore, are required to be consolidated by a parent, compared with the PFRS 10 will require management to exercise significant judgment to determine which entities requirements that were in PAS 27. The standard becomes effective for annual periods are controlled, therefore, required be does consolidated by a parent, compared the beginning on orand after Januaryare 1, 2013.

The to Bank not anticipate that the adoptionwith of this requirements that were in PAS 27.

The standard becomes effective for annual periods standard will have a significant impact on its financial position and performance. beginning on or after January 1, 2013. The Bank does not anticipate that the adoption of this standard will have a significant impact on its financial position and performance.

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PFRS 11, Joint Arrangements PFRS 11 replaces PAS 31, Interests in Joint Ventures, and SIC 13, Jointly Controlled Entities Non-Monetary Contributions by Venturers. PFRS 11 removes the option to account for jointly controlled entities using proportionate consolidation. Instead, jointly controlled entities that meet the definition of a joint venture must be accounted for using the equity method. The standard becomes effective for annual periods beginning on or after January 1, 2013. The application of this new standard will not impact the financial statements of the Bank as it already accounts for its investment in a joint venture using the equity method.

PFRS 12, Disclosure of Interests in Other Entities PFRS 12 includes all of the disclosures related to consolidated financial statements that were previously in PAS 27, as well as all the disclosures that were previously included in PAS 31 and PAS 28, Investments in Associates. These disclosures relate to an entity’s interests in subsidiaries, joint arrangements, associates and structured entities. A number of new disclosures are also required. The standard becomes effective for annual periods beginning on or after January 1, 2013. The adoption of PFRS 12 will only affect disclosures and has no impact on the Bank’s financial position or performance.

PFRS 13, Fair Value Measurement PFRS 13 establishes a single source of guidance under PFRS for all fair value measurements.

PFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under PFRS when fair value is required or permitted.

This standard should be applied prospectively as of the beginning of the annual period in which it is initially applied. Its disclosure requirements need not be applied in comparative information provided for periods before initial application of PFRS 13. The standard becomes effective for annual periods beginning on or after January 1, 2013. The Bank currently does not anticipate that the adoption of this standard may have a significant impact on its financial position and performance.

PAS 1, Presentation of Financial Statements - Presentation of Items of Other Comprehensive Income or OCI (Amendments) The amendments to PAS 1 change the grouping of items presented in OCI. Items that can be reclassified (or “recycled”) to profit or loss at a future point in time (for example, upon derecognition or settlement) will be presented separately from items that will never be recycled. The amendments only affect presentation and have no impact on the Bank’s financial position or performance. The amendments will be applied retrospectively and will result in the modification of the presentation of items of OCI. PAS 19, Employee Benefits (Revised) Amendments to PAS 19 range from fundamental changes such as removing the corridor mechanism and the concept of expected returns on plan assets to simple clarifications and rewording. The revised standard also requires new disclosures such as, among others, a sensitivity analysis for each significant actuarial assumption, information on asset-liability matching strategies, duration of the defined benefit obligation, and disaggregation of plan assets by nature and risk. The amendments become effective for annual periods beginning on or after January 1, 2013. Once effective, the Bank has to apply the amendments retroactively to the earliest period presented.

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The Bank reviewed its existing employee benefits and determined that the amended standard has significant impact on its accounting for retirement benefits. The Bank obtained the services of an external actuary to compute the potential impact to the financial statements upon adoption of the standard. The effects are detailed below:

Increase (decrease) in: Increase (decrease) in: Statement of Condition Statement of Condition Retirement liability Retirement liability Accumulated other comprehensive income Accumulated other comprehensive income Deferred tax assets Deferred tax assets Retained Earnings Retained Earnings Statement of Income Statement of Income Retirement expense Retirement expense Provision for income tax Provision for income tax Net income for the year Net income for the year

As at As at As at December 31, As at January 1, December 31, 2012 January 1, 2012 2012 2012 P =44,693,516 =17,795,943 P =44,693,516 P =17,795,943P (122,281,756) (134,140,044) (122,281,756) (134,140,044) 13,408,055 5,338,783 5,338,783 13,408,055 (90,996,295) (121,682,884) (90,996,295) (121,682,884) A

EA

A

EA

38,752,859 38,752,859 (1,782,197) (1,782,197) (36,970,662) (36,970,662)

PAS 27, Separate Financial Statements (as revised in 2011) As a consequence of the issuance of the new PFRS 10 and PFRS 12, what remains of PAS 27 is limited to accounting for subsidiaries, jointly controlled entities, and associates in the separate financial statements.

PAS 28, Investments in Associates and Joint Ventures (as revised in 2011) As a consequence of the issuance of the new PFRS 11 and PFRS 12, PAS 28 has been renamed PAS 28, Investments in Associates and Joint Ventures, and describes the application of the equity method to investments in joint ventures in addition to associates. The adoption of this standard will not have a significant impact on the Bank’s financial position and performance, as it already accounts for its investment in a joint venture using the equity method.

Philippine Interpretation IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine This interpretation applies to waste removal costs (“stripping costs”) that are incurred in surface mining activity during the production phase of the mine (“production stripping costs”).

The Bank expects that this interpretation will not have any impact on its financial position or performance.

Effective 2014 PAS 32, Financial Instruments: Presentation - Offsetting Financial Assets and Financial Liabilities (Amendments) The amendments clarify the meaning of “currently has a legally enforceable right to set-off” and also clarify the application of the PAS 32 offsetting criteria to settlement systems (such as central clearing house systems) which apply gross settlement mechanisms that are not simultaneous. The amendments only affect presentation and have no impact on the Bank’s financial position or performance. The amendments to PAS 32 are to be retrospectively applied for annual periods beginning on or after January 1, 2014.

Effective 2015 PFRS 9, Financial Instruments PFRS 9, as issued, reflects the first phase on the replacement of PAS 39 and applies to the classification and measurement of financial assets and liabilities as defined in PAS 39. Work on impairment of financial instruments and hedge accounting is still ongoing, with a view on

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PSBank ANNUAL REPORT 2012

replacing PAS 39 in its entirety. PFRS 9 requires all financial assets to be measured at fair value at initial recognition. A debt financial asset may, if the fair value option (FVO) is not invoked, be subsequently measured at amortized cost if it is held within a business model that has the objective to hold the assets to collect the contractual cash flows and its contractual terms give rise, on specified dates, to cash flows that are solely payments of principal and interest on the principal outstanding. All other debt instruments are subsequently measured at fair value through profit or loss. All equity financial assets are measured at fair value either through OCI or profit or loss. Equity financial assets held for trading must be measured at fair value through profit or loss. For FVO liabilities, the amount of change in the fair value of a liability that is attributable to changes in credit risk must be presented in OCI. The remainder of the change in fair value is presented in profit or loss, unless presentation of the fair value change in respect of the liability’s credit risk in OCI would create or enlarge an accounting mismatch in profit or loss. All other PAS 39 classification and measurement requirements for financial liabilities have been carried forward into PFRS 9, including the embedded derivative separation rules and the criteria for using the FVO. The adoption of the first phase of PFRS 9 will have an effect on the classification and measurement of the Bank’s financial assets, but will potentially have no impact on the classification and measurement of financial liabilities. PFRS 9 is effective for annual periods beginning on or after January 1, 2015.

Philippine Interpretation IFRIC 15, Agreements for the Construction of Real Estate This interpretation covers accounting for revenue and associated expenses by entities that undertake the construction of real estate directly or through subcontractors. The interpretation requires that revenue on construction of real estate be recognized only upon completion, except when such contract qualifies as a construction contract to be accounted for under PAS 11, Construction Contracts, or involves rendering of services in which case revenue is recognized based on stage of completion. Contracts involving provision of services with the construction materials and where the risks and rewards of ownership are transferred to the buyer on a continuous basis will also be accounted for based on stage of completion.

The SEC and the Financial Reporting Standards Council (FRSC) have deferred the effectivity of this interpretation until the final Revenue standard is issued by the International Accounting Standards Board (IASB) and an evaluation of the requirements of the final Revenue standard against the practices of the Philippine real estate industry is completed.

Annual Improvements to PFRSs (2009-2011 cycle) The Annual Improvements to PFRSs (2009-2011 cycle) contain non-urgent but necessary amendments to PFRSs. The amendments are effective for annual periods beginning on or after January 1, 2013 and are applied retrospectively. Earlier application is permitted. 

PFRS 1, First-time Adoption of PFRS, clarifies that upon adoption of PFRS, an entity that capitalized borrowing costs in accordance with its previous generally accepted accounting principles, may carry forward, without any adjustment, the amount previously capitalized in its opening statement of financial position at the date of transition. Subsequent to the adoption of PFRS, borrowing costs are recognized in accordance with PAS 23, Borrowing Costs. The amendment does not apply to the Bank as it is not a first-time adopter of PFRS.



PAS 1, Presentation of Financial Statements, clarifies the requirements for comparative information that are disclosed voluntarily and those that are mandatory due to retrospective application of an accounting policy, or retrospective restatement or reclassification of items in the financial statements. An entity must include comparative information in the related notes to the financial statements when it voluntarily provides comparative information beyond the minimum required comparative period. The

PSBank ANNUAL REPORT 2012

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additional comparative period does not need to contain a complete set of financial statements.

On the other hand, supporting notes for the third balance sheet (mandatory when there is a retrospective application of an accounting policy, or retrospective restatement or reclassification of items in the financial statements) are not required. The amendments only affect disclosures and have no impact on the Bank’s financial position or performance. 

PAS 16, Property, Plant and Equipment, clarifies that spare parts, stand-by equipment and servicing equipment should be recognized as property, plant and equipment when they meet the definition of property, plant and equipment and should be recognized as inventory if otherwise. The amendment will not have any significant impact on the Bank’s financial position or performance.



PAS 32, Financial Instruments: Presentation, clarifies that income taxes relating to distributions to equity holders and to transaction costs of an equity transaction are accounted for in accordance with PAS 12. The Bank expects that this amendment will not have any impact on its financial position or performance.



PAS 34, Interim Financial Reporting, clarifies that the total assets and liabilities for a particular reportable segment need to be disclosed only when the amounts are regularly provided to the chief operating decision maker and there has been a material change from the amount disclosed in the entity’s previous annual financial statements for that reportable segment. The amendment only affects disclosures and has no impact on the Bank’s financial position or performance.

3. Significant Accounting Judgments, Estimates and Assumptions The preparation of the financial statements in accordance with PFRS requires the management to make judgments, estimates and assumptions that affect the reported amount of revenues, expenses, assets and liabilities, and the accompanying disclosures, as well as the disclosure of contingent assets and contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets and liabilities affected in future periods. The effects of any change in judgments, estimates and assumptions are reflected in the financial statements as they become reasonably determinable.

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.

Judgments In the process of applying the Bank’s accounting policies, management has made the following judgments, which have the most significant effect on the amounts recognized in the financial statements: (a) Classification of operating leases Bank as lessor The Bank has entered into leases on its properties. The Bank has determined based on an evaluation of the terms and conditions of the arrangements (i.e., the lease does not transfer

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PSBank ANNUAL REPORT 2012

ownership of the asset to the lessee by the end of the lease term, the lessee has no option to purchaseofthe price that by is expected tothe be lease sufficiently lower thanhas theno fairoption value ownership theasset assetattoa the lessee the end of term, the lessee at the date the option is exercisable, and the lease term is not for the major part of the to purchase the asset at a price that is expected to be sufficiently lower than the fair value asset’s economic life), that it retains all the significant risks andfor rewards of ownership at the date the option is exercisable, and the lease term is not the major part of theof these properties which are leased out on operating leases. asset’s economic life), that it retains all the significant risks and rewards of ownership of Bank lessee which are leased out on operating leases. these as properties The Bank has entered into leases on the premises it uses for its operations. The Bank has Bank as lessee determined, on an terms and condition of the lease agreements, The Bank hasbased entered intoevaluation leases on of thethe premises it uses for its operations.

The Bank has that all significant risks and rewards of ownership of the properties it leases on operating determined, based on an evaluation the terms and condition of the lease agreements, lease are not transferable to the Bank. that all significant risks and rewards of ownership of the properties it leases on operating lease are not transferable to the Bank. (b) Fair value of financial instruments Where theoffair values instruments of financial assets and financial liabilities recorded on the statement (b) Fair value financial of condition cannot be from active are determined using variety of Where the fair values ofderived financial assets andmarkets, financialthey liabilities recorded on the a statement valuation techniques that include the use of mathematical models.

The input to these of condition cannot be derived from active markets, they are determined using a variety of models is techniques taken from that observable where possible, but whereThe thisinput is nottofeasible, valuation includemarkets the use of mathematical models. these a degree of judgment is required in establishing fair values.

These estimates may include models is taken from observable markets where possible, but where this is not feasible, a consideration of liquidity, volatility and correlation. degree of judgment is required in establishing fair values. These estimates may include consideration of liquidity, volatility and correlation. (c) Classification of HTM investments classification to HTM investment requires significant judgment. In making this (c) The Classification of HTM investments judgment, the Bank evaluates its intention andsignificant ability to hold such investments to maturity.

The classification to HTM investment requires judgment.

In making this If the Bank fails to keep these investments to maturity other than in certain specific judgment, the Bank evaluates its intention and ability to hold such investments to maturity. circumstances forkeep example, an insignificant amount tocertain maturity - it will be If the Bank fails- to theseselling investments to maturity other close than in specific required to reclassify the entire portfolio to AFS investments.

The investments would circumstances - for example, selling an insignificant amount close to maturity - it will be therefore be measured at fair value and not at amortized cost. required to reclassify the entire portfolio to AFS investments. The investments would therefore be measured at fair value and not at amortized cost. (d) Financial assets not quoted in an active market Bank assets classifies assets by evaluating, (d) The Financial notfinancial quoted in an active market among others, whether the asset is quoted or not in an active market.

Included in theamong evaluation on whether the a financial The Bank classifies financial assets by evaluating, others, asset isasset is quoted in an active market is the determination on whether quoted prices are readilyasset and is or not in an active market. Included in the evaluation on whether a financial regularly available, and whether those prices represent actual and regularly occurring quoted in an active market is the determination on whether quoted prices are readily and market transactions on whether an arm’s those lengthprices basis. represent actual and regularly occurring regularly available, and market transactions on an arm’s length basis. (e) Functional currency 21 requires management to use its judgment to determine the entity’s functional (e) PAS Functional currency currency such that it most faithfully thetoeconomic effects of thefunctional underlying PAS 21 requires management to use represents its judgment determine the entity’s transactions, events and conditions that are relevant to the entity.

In making this judgment, currency such that it most faithfully represents the economic effects of the underlying the Bank considers the following: transactions, events and conditions that are relevant to the entity. In making this judgment, the Bank considers the following: a) the currency that mainly influences sales prices for financial instruments and services will oftenthat be the currency in which prices for its financial instruments and a) (this the currency mainly influences salessales prices for financial instruments and services services are denominated and settled); (this will often be the currency in which sales prices for its financial instruments and b) the currency in which funds from financing activities are generated; and services are denominated and settled); c) the currency in which receipts from operating activities usually retained. b) funds from financing activities areare generated; and c) the currency in which receipts from operating activities are usually retained. (f) Change in use of assets 40 requires to use its judgment to determine whether a property (f) PAS Change in use of management assets qualifies as an investment property.

Bank has to developed criteria so ita can exercise its PAS 40 requires management to useThe its judgment determine whether property judgment consistently.

A property that is held to earn rentals or for capital appreciation qualifies as an investment property. The Bank has developed criteria so it can exercise itsor both and which generates cash flows largely independently of or thefor other assets held by the judgment consistently.

A property that is held to earn rentals capital appreciation or Bank are accounted for as investment properties.

On the other hand, a property thatbyis the both and which generates cash flows largely independently of the other assets held used the process ofproperties. providing services or forhand, administrative Bank for areoperations accounted or forinas investment On the other a propertypurposes that is used for operations or in the process of providing services or for administrative purposes

PSBank ANNUAL REPORT 2012

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and which do not directly generate cash flows as a stand-alone asset are accounted for as property and equipment.

The Bank assesses on an annual basis the accounting classification of its properties taking into consideration the current use of such properties.

Estimates and assumptions The key assumptions concerning the future and other key sources of estimation uncertainty at the statement of condition date, which have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next period, are described below.

The Bank based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances beyond the control of the Bank. Such changes are reflected in the assumptions when they occur. (a) Going concern The Bank’s management has made an assessment of its ability to continue as a going concern and is satisfied that it has the resources to continue in business for the foreseeable future. Furthermore, management is not aware of any material uncertainties that may cast significant doubt upon the Bank’s ability to continue as a going concern. Therefore, the financial statements continue to be prepared on the going concern basis. (b) Credit losses on loans and receivables The Bank reviews its loans and receivables at each statement of condition date to assess whether an impairment loss should be recorded in the statement of income. In particular, judgment made by management is required in the estimation of the amount and timing of future cash flows when determining the level of allowance required. Such estimates are based on assumptions about a number of factors and actual results may differ, at which event, the Bank adjusts the impairment loss and ensures that allowance for it remains adequate.

In addition to specific allowance against individually significant loans and receivables, the Bank also provides a collective impairment allowance against exposures which, although not specifically identified as requiring a specific allowance, have a greater risk of default than when originally granted. This collective allowance is based on changes in factors that are indicative of incurred losses, such as deterioration in payment status and underlying property prices, among others.

The carrying value of loans and receivables and allowance for credit losses on loans and receivables are disclosed in Notes 9 and 15, respectively. (c) Valuation of unquoted AFS equity investments The Bank’s investments in equity securities that do not have quoted market price in an active market and whose fair value cannot be reliably measured are carried at cost.

As of December 31, 2012 and 2011, the carrying amounts of unquoted equity securities =1.4 million (Note 8). amounted to P A

EA

(d) Impairment of quoted AFS equity investments The Bank treats AFS equity investments as impaired when there has been a significant or prolonged decline in the fair value below its cost or where other objective evidence of impairment exists. The determination of what is ‘significant’ or ‘prolonged’ requires

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PSBank ANNUAL REPORT 2012

judgment. The Bank treats ‘significant’ generally as 20% or more of the original cost of the judgment. treats ‘significant’ generally 20% or more of the original cost of the investment,The andBank ‘prolonged’, greater than twelve as (12) months.

In addition, the Bank investment, and ‘prolonged’, greater than twelve (12) months.

In addition, the Bank evaluates other factors, including normal volatility in share price for quoted equities. evaluates other factors, including normal volatility in share price for quoted equities.

The carrying values of the Bank’s AFS equity investments are disclosed in Note 8. carryingof values of the Bank’s (e) The Impairment nonfinancial assetsAFS equity investments are disclosed in Note 8. (e) Impairment of nonfinancial assets Property and equipment, investment properties and chattel mortgage properties Property equipment, investment and chattel mortgage properties The Bankand assesses impairment on its properties nonfinancial assets whenever events or changes in The Bank assesses impairment on its nonfinancial assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

The circumstances that the carrying amount of an asset may be recoverable. factors that theindicate Bank considers important which could trigger an not impairment review The factors the Bank considers important which could trigger an impairment review include that the following: include the following:  significant underperformance relative to expected historical or projected future  significant underperformance relative to expected historical or projected future operating results; operating results;  significant changes in the manner of use of the acquired assets or the strategy for  significant changes in the manner of use of the acquired assets or the strategy for overall business; and overall business; and  significant negative industry or economic trends.  significant negative industry or economic trends.

The Bank recognizes an impairment loss whenever the carrying amount of an asset The Bankits recognizes an amount. impairment loss wheneveramount the carrying amount using of an the asset exceeds recoverable The recoverable is computed fair value exceeds its recoverable amount.

The recoverable amount is computed using the fair value less costs to sell for property and equipment, investment properties and chattel mortgage less costs toRecoverable sell for property and equipment, investment properties mortgage properties. amounts are estimated for individual assetsand or, ifchattel it is not possible, properties.

Recoverable amounts are estimated for individual assets or, if it is not possible, for the CGU to which the asset belongs. for the CGU to which the asset belongs.

The carrying values of the Bank’s property and equipment, investment properties and The carrying values of the Bank’s property in and equipment, investment properties and chattel mortgage properties are disclosed Notes 11, 12 and 14 respectively. chattel mortgage properties are disclosed in Notes 11, 12 and 14 respectively.

Investment in an associate and a joint venture Investment in an associate and aonjoint venture The Bank assesses impairment its investment in an associate and a joint venture The Bank assesses impairment on its investment in an associate and a joint venture whenever events or changes in circumstances indicate that the carrying amount of said whenever events or changes in circumstances indicate that the carrying amount of said asset may not be recoverable. Among others, the factors that the Bank considers asset may not becould recoverable.

Among others,review the factors the Bankinconsiders important which trigger an impairment on itsthat investment an associate and a important which could trigger an impairment review on its investment in an associate and a joint venture include the following: joint venture include the following:    

Deteriorating or poor financial condition; Deteriorating poor and financial condition; Recurring netor losses; Recurring net losses; and Significant changes (i.e. technological, market, economic, or legal environment in which Significant changes technological, or legal environment the associate or joint(i.e. venture operatesmarket, with an economic, adverse effect on the associate in orwhich joint the associate or joint venture operates with an adverse effect on the associate or venture have taken place during the period, or will take place in the near future). joint venture have taken place during the period, or will take place in the near future).

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

The recoverable amount determined based on asset the asset’s value recoverable amount.

The recoverable amount is determined based on the asset’s value in use. As of December 31, 2012 and 2011, the carrying values of the Bank’s investment in an use.

As of December 31, 2012 and 2011, the carrying values of the Bank’s investment in an =1.2 billion (Note 10). associate and a joint venture amounted to P =1.2 billion (Note 10). associate and a joint venture amounted to P A

A

EA

EA

Goodwill Goodwill The Bank’s management conducts an annual review for any impairment in value of The Bank’sGoodwill management conducts reviewwhere for any impairment in value value of of the goodwill. is written downan forannual impairment the net present goodwill.

Goodwill is written down for impairment where the net present value of the forecasted future cash flows from the business is insufficient to support its carrying value. forecasted future cash flows from the business is insufficient to support its carrying The Bank used its weighted average cost of capital in discounting the expected cashvalue. flows The usedCGUs. its weighted average cost of capital in discounting the expected cash flows fromBank specific from specific CGUs.

PSBank ANNUAL REPORT 2012

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Future cash flows from the business are estimated based on the theoretical annual income of the CGUs. Average growth rate was derived from the average increase in annual income during the last five (5) years.

The recoverable amount of the CGU has been determined based on a value-in-use calculation using cash flow projections from financial budgets approved by senior management covering a five-year period. The pre-tax discount rate applied to cash flow projections is 4.43%.

Key assumptions in the value-in-use calculation of CGUs are most sensitive to the following assumptions: a.) interest margin; b.) discount rates; and c.) projected growth rates used to extrapolate cash flows beyond the budget period. =53.6 million As of December 31, 2012 and 2011, the Bank’s goodwill amounted to P (Note 13).

A

EA

Intangible assets The Bank’s management conducts an annual review for any impairment in value of its intangible assets. Intangible assets are written down for impairment where the recoverable amount is insufficient to support its carrying value. Intangible assets with finite useful lives are assessed for impairment in the same manner as other depreciable non-financial assets.

In the case of intangible assets with indefinite useful lives, at a minimum, these are subject to an annual impairment test and more frequently whenever there is an indication that said asset may be impaired. The carrying value of intangible assets is disclosed in Note 13. (f) Fair value of investment properties The fair values of the Bank’s investment properties have been derived on the basis of recent sales of similar properties in the same areas where the investment properties are located, and taking into account the economic conditions prevailing at the time the valuations were made.

The fair value of the Bank’s investment properties are disclosed in Note 12. (g) Present value of retirement obligation The cost of the defined benefit pension plan and other post-employment benefits is determined through an actuarial valuation. The actuarial valuation involves making assumptions about discount rates, expected rates of return on plan assets, future salary increases, mortality rates and future pension increases. Due to the long-term nature of this plan, such estimates are subject to significant uncertainty.

The expected rate of return on plan assets of 7.00% and 8.27% as of January 1, 2012 and 2011, respectively, was based on market prices prevailing on the date of the valuation, applicable to the period over which the obligation is to be settled. The assumed discount rates were determined using the market yields on Philippine government bonds with terms consistent with the expected employee benefit payout as of the statement of condition dates. Refer to Note 24 for the details of assumptions used in the actuarial valuation.

As of December 31, 2012 and 2011, the present value of the retirement obligation of the =1.2 billion and P =895.1 million, respectively (Note 24).

Bank amounted to P A

EA

A

EA

(h) Recognition of deferred tax assets Deferred tax assets are recognized for all unused tax losses to the extent that it is probable that future taxable profit will be available against which the losses can be utilized.

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PSBank ANNUAL REPORT 2012

Significant management judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and level of future taxable profits together with future tax planning strategies.

Estimates of future taxable income indicate that temporary differences will be realized in the future. As discussed in Note 27, net deferred tax assets as of December 31, 2012 and =1.0 billion and P =1.1 billion, respectively.

2011 amounted to P A

EA

A

EA

(i) Contingent liabilities The Bank is a defendant in legal actions arising from its normal business activities.

Management believes that the ultimate liability, if any, resulting from these cases will not have a material effect on the Bank’s financial statements (Note 31). (j) Estimated useful lives of property and equipment, investment properties, intangible assets and chattel mortgage properties The Bank estimates the useful lives of its property and equipment, investment properties, intangible assets and chattel mortgage properties. This estimate is reviewed periodically to ensure that the period of depreciation and amortization are consistent with the expected pattern of economic benefits from the items of property and equipment, investment properties, software cost and chattel mortgage properties. The estimated useful lives of property and equipment, investment properties, chattel mortgage properties and software cost are disclosed in Note 2. The carrying value of property and equipment, investment properties, intangible assets and chattel mortgage properties are disclosed in Notes 11, 12, 13 and 14, respectively.

4. Fair Value Measurement The following describes the methodologies and assumptions used to determine the fair values of financial instruments: Cash and other cash items, due from BSP, due from other banks, interbank loans receivable and SPURA, accounts receivable, accrued interest receivable, bills purchased, returned checks and other cash items (RCOCI), shortages, and petty cash fund - Carrying amounts approximate fair values due to the relatively short-term maturities of these assets.

Debt investments - Fair values are generally based on quoted market prices. If the market prices are not readily available, fair values are estimated using either values obtained from independent parties offering pricing services, or adjusted quoted market prices of comparable investments or using the discounted cash flow methodology, using rates currently available for debt on similar terms, credit risk and remaining maturities.

Quoted AFS equity investments - Fair values are based on quoted prices published in markets.

Unquoted AFS equity investments - Fair values could not be reliably determined due to the unpredictable nature of future cash flows and the lack of suitable methods of arriving at a reliable fair value. Hence, these investments are carried at cost less allowance for impairment losses.

Currently, there is no available market to sell these unquoted AFS equity investments. The Bank will hold on to these investments until management decides to sell them when there will be offers to buy out such investments or the appearance of an available market where the investments can be sold.

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Receivable from customers and other receivables except accounts receivable, accrued interest receivable, bills purchased and security deposits - Fair values are estimated using the discounted cash flow methodology, using the Bank’s current incremental lending rates for similar types of loans.

Subordinated notes and time deposits - Fair values are estimated using the discounted cash flow methodology using the Bank’s current incremental borrowing rates for similar borrowings with maturities consistent with those remaining for the liability being valued.

Demand deposits, savings deposits, treasurer’s, cashier’s and manager’s checks, accrued interest payable, accounts payable, bills purchased-contra, other credits, due to Treasurer of the Philippines, deposits for keys-SDB, payment orders payable and overages - Carrying amounts approximate fair values due to either the demand nature or the relatively short-term maturities of these liabilities.

Set out below is a comparison by class of carrying amounts and fair values of financial instruments that are carried in the financial statements (in thousands):

Financial Assets FVPL investments Financial Assets HFT - Government securities FVPL investments Derivatives - Republic of the Philippines HFT - (ROP) Government warrants securities AFS investments- Republic of the Derivatives Government debt securities Philippines (ROP) warrants Quoted equity securities AFSUnquoted investments equity securities Government HTM investments debt securities Treasury notes securities Quoted equity Government bonds Unquoted equity securities Cash and other cash items HTM Loans investments and receivables Treasury notes Loans and advances to banks Due frombonds BSP Government Due from other banks Cash and other cash items Interbank loans receivable and Loans and SPURA receivables Loans and advances to banks Receivables from customers DueConsumption from BSP loans estate loans DueReal from other banks Commercial loans Interbank Personalloans loans receivable and SPURA Bills discounted Other receivables Receivables from customers Accrued interest receivable Consumption loans Sales contract receivable RealUnquoted estate loans debt securities Commercial loans Accounts receivable Bills purchased Personal loans Other assets Bills discounted Security deposits RCOCI (Forward) Petty cash fund Shortages Total assets Financial Liabilities Other liabilities at amortized cost Deposit liabilities: Demand Savings Time Subordinated notes Treasurer’s, cashier’s and manager’s checks Accrued interest payable Accrued other expense payable Other liabilities

2012 2012 Carrying Value Fair Value Carrying

Value

Fair Value

P = 57,384 A

2011 2011 Carrying ValueCarrying Fair Value

Value

P = 57,384

EA

A

P =57,384 63,364

P =–

EA

A

P =57,384 63,364

3,304,768

A

P = –

54,794

54,794

18,688,690 54,794

3,005 1,418

12,118,8913,005 8,005,972 4,684,219 1,4184,307,843 2,811,064 3,921,289

9,593,865

EA

2,811,064

12,118,891

8,005,972

2,811,064

3,921,289

6,100,000

54,794

3,921,289

5,514,833 4,303,595 3,969,060 5,514,833 4,307,843 4,684,219 4,303,595 6,002,439 3,736,073 3,736,073 6,002,439 6,100,000

P = –

18,688,690 18,688,690 9,854,242 3,005 3,005 4,671,247 1,418 1,418

3,304,768

9,593,865 3,005 3,969,060 1,418 2,811,064

P =–

EA

3,304,768 63,364 3,304,768 63,36418,688,690 3,005 3,005 3,005 1,418 1,418 1,418

Fair Value

10,480,000

9,854,242 4,671,247 3,921,289

10,480,000

31,096,451 27,707,430 4,303,595 5,514,833 32,109,360 4,303,595 5,514,83325,057,065 22,393,012 18,861,918 19,057,761 3,736,073 22,384,657 6,002,439 3,736,073 6,002,439 11,221,605 11,247,181 9,286,994 9,760,721 3,409,304 5,088,084 3,241,315 5,242,766 10,480,000 6,100,000 10,480,000 10,707 6,100,000 11,425 11,425 11,470 661,246 31,096,451 351,938 22,384,657 1,164,134 11,221,605 51,547 60,275 3,409,304 11,425

A

95,619 17,644 300 97 P = 107,947,442 EA

P = 7,400,509 12,387,741 74,836,037 2,969,797 A

EA

756,629 185,178 805,265

661,246 870,76227,707,430 25,057,065 32,109,360 870,762 352,232 437,364 426,781 18,861,918 22,393,012 300,000 1,353,582 329,207 19,057,761 9,286,994 59,401 9,760,721 11,247,181 51,547 59,401 60,275 63,863 3,241,31563,863 5,242,766 5,088,084

11,425

105,914 17,644 300 97 P = 114,113,284 A

EA

P = 7,400,509 12,387,741 78,087,042 3,397,383 A

EA

87,417 20,181 300 54 P =111,800,783 A

EA

P =11,421,806 11,668,375 78,460,155 – A

EA

756,629( 87 ) 654,514 164,170 191,368 827,875 916,542

11,470

A

65,285 20,181 300 54 P =119,329,572

10,707

EA

P =11,421,806 11,668,375 80,298,947 – A

EA

654,514 PSBank ANNUAL REPORT 2012 191,368 916,542

Carrying Value

2012

Fair Value Other receivables P =661,246 Accrued interest receivable P =661,246 352,232 Sales contract receivable 351,938 1,353,582 Unquoted debt securities 1,164,134 51,547 Accounts receivable 51,547 60,275 Bills purchased 60,275 Other assets 105,914 Security deposits 95,619 17,644 RCOCI 17,644 300 Petty cash fund 300 97 Shortages 97 =114,113,284 Total assets P =107,947,442 P Financial Liabilities Other liabilities at amortized cost Deposit liabilities: P =7,400,509 Demand P =7,400,509 12,387,741 Savings 12,387,741 78,087,042 Time 74,836,037 3,397,383 Subordinated notes 2,969,797 Treasurer’s, cashier’s and manager’s 756,629 checks 756,629 164,170 Accrued interest payable 185,178 827,875 Accrued other expense payable 805,265 Other liabilities P =864,908 Accounts payable P =864,908 154,747 Other credits 154,747 61,578 Bills purchased-contra 61,578 176,673 Dividends payable 176,673 Due to the Treasurer of the 7,003 Philippines 7,003 926 Deposits for keys 926 1,992 Others* 1,992 =104,289,176 Total liabilities P =100,608,983 P

2011 Carrying Value P =870,762 437,364 300,000 59,401 63,863

P =870,762 426,781 329,207 59,401 63,863

87,417 20,181 300 54 P =111,800,783

65,285 20,181 300 54 P =119,329,572

P =11,421,806 11,668,375 78,460,155 –

P =11,421,806 11,668,375 80,298,947 –

654,514 191,368 916,542

654,514 191,368 916,542

P =753,599 96,345 65,166 35,370

P =753,599 96,345 65,166 35,370

7,004 982 1,269 P =104,272,495

7,004 982 1,269 P =106,111,287

* Others under financial liabilities comprise payment orders payable and overages.

PSBank ANNUAL REPORT 2012

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Fair Value

The following table shows financial instruments recognized at fair value (in thousands); analyzed among those whose fair value is based on:  Level 1 - quoted market prices in active markets for identical assets or liabilities; when fair Thevalues following tableequity showsand financial at fairtraded value (in thousands); of listed debt instruments securities, asrecognized well as publicly derivatives at the analyzed among those whose fair value is based on: reporting date are based on quoted market prices or binding dealer price quotations, without any deduction for transaction costs, the instruments are included within Level 1 of  the Level 1 - quoted market prices in active markets for identical assets or liabilities; when fair hierarchy. values of listed equity and debt securities, as well as publicly traded derivatives at the reporting date are basedinputs on quoted prices prices or binding dealer  Level 2 - those involving othermarket than quoted included in price Levelquotations, 1 that are without any deduction for transaction costs, the instruments are included within Level observable for the asset or liability, either directly (as prices) or indirectly (derived from1 of the hierarchy. prices); for all other financial instruments, fair value is determined using valuation 





techniques. Valuation techniques include net present value techniques, comparison to Level 2instruments - those involving inputs otherobservable than quoted prices included in Level 1 that are similar for which market prices exist and other revaluation models; observable for the asset or liability, either directly (as prices) or indirectly (derived from and prices); for all other financial instruments, fair value is determined using valuation techniques.

Valuation techniques present techniques, Level 3 - those with inputs for the include asset ornet liability thatvalue are not based oncomparison observable to market similar instruments for which market observable prices exist and other revaluation models; data (unobservable inputs); instruments included in Level 3 are those for which there are and currently no active market.

Level 3 - those with inputs for the asset or liability that1 are notLevel based Level Total market 20122 on observable data (unobservable inputs); instruments included in Level 3 are those for which there Total are Financial Assets Level 1 Level 2 currently no active market.

FVPL investments Financial Assets HFT - Government securities P = 57,384 P =– P = 57,384 FVPL investments Derivatives - ROP warrants – 63,364 63,364 Level 1 Level 2 Total P =57,384 P =57,384 P =– HFT - Government securities AFS investments Financial Assets 63,364 – 63,364 Derivatives - ROP warrants 945,160 3,304,768 Government securities 2,359,608 FVPL investments AFSQuoted investments equity securities P = 53,005 7,384 P =– P = 53,005 7,384 HFT - Government securities 3,304,768 2,359,608 945,160 Government Derivatives -securities ROP warrants – 63,364 63,364 3,0051 – Quoted equity securities AFS investments Level Level 2 Total 3,005 Government 2,359,608 945,160 3,304,768 Financial Assets securities 2011 Quoted equity securities 3,005 – 3,005 FVPL investments Level Level 2 P Derivatives - ROP warrants P =–1 P =54,794 =54,794 Total AFS investments Financial Assets Level 1 Level 2 Total Government 17,753,053 935,637 18,688,690 FVPL investments Financial Assets securities Quoted equity securities 3,005 – 3,005 P =54,794 FVPL investments P = – Derivatives - ROP warrants P =54,794 Derivatives ROP warrants P = – P = 5 4,794 P = 5 4,794 AFS investments AFS As ofinvestments December 31, 2012 and 2011, the Bank has no financial instruments carried 18,688,690 at fair value 17,753,053 Government securities 935,637 Government securities 17,753,053 935,637 18,688,690 which are measured based on Level 3.

There were no transfers made between each of the 3,005 3,005 Quoted equity securities – Quoted securities 3,005 – 3,005 three levelsequity in 2012 and 2011.

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

As of December 31, 2012 and 2011, the Bank has no financial instruments carried at fair value which are measured based on Level 3. There were no transfers made between each of the 5. Financial Risk Management Policies and Objectives three levels in 2012 and 2011.

The Bank has exposure to the following risks from its use of financial instruments: 5. Financial Credit Risk risk Management Policies and Objectives  Market risk Bank hasrisk exposure to the following risks from its use of financial instruments: TheLiquidity  Credit riskrisk management structure continues to be a top-down organization, with the Organization  Market BOD at therisk helm of all major initiatives.  Liquidity risk Organization risk management structure continues to be a top-down organization, with the BOD at the helm of all major initiatives.

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PSBank ANNUAL REPORT 2012

Discussed below are the relevant sections on roles and responsibilities from the Risk Oversight Committee (ROC) Charter: BOD The corporate powers of the Bank are vested in and are exercised by the BOD, who conducts its business and controls its property. The BOD approves broad risk management strategies and policies and ensures that risk management initiatives and activities are consistent with the Bank’s overall objectives. The BOD appoints the members of the ROC. ROC The ROC is composed of at least three members of the Board, including at least one (1) independent director, and a chairperson who is a non-executive member. Members of the ROC possess a range of expertise and adequate knowledge of the Bank’s risk exposures to be able to develop appropriate strategies for preventing losses and minimizing the impact of losses when they occur.

The BOD may also appoint non-Directors to the ROC as part of the Metrobank Group risk oversight measures. However, only Bank Directors shall be considered as voting members of the ROC. Non-voting members are appointed in an advisory capacity.

The ROC oversees the system of limits to discretionary authority that the BOD delegates to the management and ensures that the system remains effective, the limits are observed, and that immediate corrective actions are taken whenever limits are breached.

The ROC meets on a monthly basis and is supported by the Risk Management Office (RMO).

In the absence of the ROC Chairman, a non-executive Director shall preside. ROC resolutions, which require the concurrence of the majority of its voting members, are presented to the BOD for confirmation.

RMO The RMO, headed by the Chief Risk Officer, is a function that is independent from executive functions and business line responsibilities, operations and revenue-generating functions. It reports directly to the BOD, through the ROC. The RMO assists the ROC in carrying out its responsibilities by:  analyzing, communicating, implementing, and maintaining the Risk Management Policies approved by the ROC and the BOD;  spearheading the regular review of the Bank’s Risk Management Policy Manual and making or elevating recommendations that enhance the risk management process to the ROC and the BOD, for their approval; and  ensuring that the risks arising from the Bank’s activities are identified, measured, analyzed, reported to and understood by Risk Takers, Management, and the Board. The RMO analyzes limit exceptions and recommends enhancements to the limits structure.

The RMO does not assume risk-taking accountability nor does it have approving authority.

The RMO’s role is to act as liaison and to provide support to the BOD, ROC, the President, Management Committees, Risk Takers and other Support and Control Functions on risk-related matters.

PSBank ANNUAL REPORT 2012

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The Risk Management Function is responsible for:  identifying the key risk exposures and assessing and measuring the extent of risk exposures of the Bank and its trust operations  monitoring the risk exposures and determining the corresponding capital requirement in accordance with the Basel capital adequacy framework and based on the Bank’s internal capital adequacy assessment on an on-going basis  monitoring and assessing decisions to accept particular risks whether these are consistent with BOD-approved policies on risk tolerance and the effectiveness of the corresponding risk mitigation measures  reporting on a regular basis to Senior Management and the BOD the results of assessment and monitoring.

President The President is the Chief Executive Officer of the Bank and has the primary responsibility of carrying out the policies and objectives of the BOD. The President exercises the authorities delegated to him by the BOD and may recommend such policies and objectives he deems necessary for the continuing progress of the Bank.

Risk management The risk management framework aims to maintain a balance between the nature of the Bank’s businesses and the risk appetite of the BOD. Accordingly, policies and procedures are reviewed regularly and revised as the organization grows and as financial markets evolve. New policies or proposed changes in current policies are presented to the ROC and the BOD for approval. a. Credit risk and concentration of assets and liabilities and off-balance sheet items Credit risk is the risk that a counterparty will not settle its obligations in accordance with the agreed terms.

The Bank’s lending business follows credit policy guidelines set by the BOD, ROC and RMO. These policies serve as minimum standards for extending credit. The people engaged in the credit process are required to understand and adhere to these policies.

Product manuals are in place for all loans and deposit products that actually or potentially expose the Bank to all types of risks that may result in financial or reputational losses. They define the product and the risks associated with the product plus the corresponding riskmitigating controls. They embody the business plans and define the business parameters within which the product or activity is to be performed.

The system of checks around extension of credit includes approval by at least two credit approvers through the Credit Committee (CreCom), Executive Committee (ExCom) or BOD. The ROC reviews the business strategies and ensures that revenue-generating activities are consistent with the risk tolerance and standards of the Bank. The Internal Audit Group conducts regular audit across all functional units. The BOD, through the ExCom, CreCom and ROC, ensure that sound credit policies and practices are followed through all the business segments.

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PSBank ANNUAL REPORT 2012

Credit Approval Credit approval is the documented acceptance of credit risk in the credit proposal or application.

The Bank’s credit decision-making for consumer loans utilizes the recommendation of the credit scoring and is performed at the CreCom level appropriate to the size and risk of each transaction, in conformity with corporate policies and procedures in regulating credit risk activities. The Bank’s ExCom may approve deviations or exceptions, while the BOD approves material exceptions such as large exposures, loans to directors, officers, stockholders and other related interests (DOSRI), and loan restructuring.

Credit delegation limits are identified, tracked and reviewed at least annually by the Bank’s Senior Credit Officer together with the Credit Risk Manager.

Borrower Eligibility The Bank’s credit processing commences when a customer expresses his intention to borrow through a credit application. The Bank gathers data on the customer; ensures they are accurate, up-to-date and adequate to meet the minimum regulatory requirements and to render credit decision. These data are used for the intended purpose only and are managed in adherence to the customer information secrecy law.

The customer’s credit worthiness, repayment ability and cash flow are established before credit is extended. The Bank independently verifies critical data from the customer, ensuring compliance with Know Your Customer requirements under the anti-money laundering laws.

The Bank requires that customer income be derived from legitimate sources and supported with government-accepted statements of income, assets and liabilities.

The Bank ascertains whether the customer is legally capable of entering a credit contract and of providing a charge over any asset presented as collateral for a loan. Guarantors or sureties may be accepted, provided they are a relative, partner, and have financial interest in the transaction, and they pass all credit acceptance criteria applied to the borrower.

Loan Structure The Bank structures loans for its customers based on the customer’s capability to pay, the purpose of the loan, and for a collateralized loan, the collateral’s economic life and liquidation value over time.

The Bank establishes debt burden guidelines and minimum income requirements to assess the customer’s capacity to pay.

The Bank utilizes credit bureau data, both external and internal, to obtain information on a customer’s current commitments and credit history. These are sourced from the databases of the Banker’s Association of the Philippines and the Credit Management Association of the Philippines.

The Bank takes into account environmental and social issues when reviewing credit proposals of small businesses and commercial mortgage customers. The Bank ensures that all qualified securities pass through the BOD for approval. Assignments of securities are confirmed and insurance are properly secured.

PSBank ANNUAL REPORT 2012

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The Bank uses credit scoring models and decision systems for consumer loans as approved by The BOD. Bank uses creditrisk scoring decision consumer loans as approved by the Borrower ratingmodels model,and on the othersystems hand, is for available for SME loans, and the BOD. Borrower risk rating model, on the other hand, isof available SMEand loans, and supported with qualitative evaluation.

Regular monitoring all thesefor tools their supported with qualitative Regular monitoring of all these tools and their performance is carried out evaluation. to ensure that they remain effective. performance is carried out to ensure that they remain effective.

Initial loan limits are recommended by the CreCom and ExCom and approved by the BOD. InitialBank loanensures limits are recommended byare thewithin CreCom and ExCom and regulators. approved by the BOD. The that secured loans ceilings set by local Succeeding The Bank ensures that secured loans are within ceilings by local credit regulators.

Succeeding loan availments are based on account performance and set customer’s worthiness. loan availments basedrecommend on account to performance and customer’s credit worthiness.

The CreCom andare ExCom the BOD any credit exceptions that merit approval The CreCom recommend the BODrationale. any creditThe exceptions thatcredit meritapproval approvalat provided theyand areExCom supported by strongtobusiness Bank relays provided they Short are supported byService strong but business rationale.are The Bank approval at once through Messaging loan proceeds paid outrelays after credit documentations once through Short Messaging Service but loan proceeds are paid out after documentations are completed. are completed.

Credit Management Credit Management The Bank maintains credit records and documents on all borrowings and captures transaction The Bank maintains credit records andrisk documents on all borrowings and captures details in its loan systems.

The credit policies and system infrastructure ensuretransaction that loans details in its loan systems.

The risk policies and system infrastructure ensure that loans are monitored and managed at credit all times. are monitored and managed at all times.

The Bank’s Management Information System provides statistics that its business units need to The Bank’s Management System without providesnecessarily statistics that its business need to identify opportunities for Information improving rewards sacrificing risk. units Statistical identify for improving rewards without performance necessarily sacrificing risk. Statistical data on opportunities product, productivity, portfolio, profitability, and projection are made data on product, productivity, portfolio, profitability, performance and projection are made available regularly. available regularly.

The Bank conducts regular loan review through the ROC, with the support of the RMO. The The conducts regular loan review the ROC, and withcustomer the support of the RMO. The BankBank examines its exposures, credit riskthrough ratios, provisions segments.

The Bank’s Bank examines itsidentification exposures, credit risk ratios, provisions and customer segments.

The Bank’s unique customer and unique group identification methodology enables it to unique customer identification uniqueorgroup methodology enables it to aggregate credit exposures by and customer groupidentification of borrowers.

Aggregate exposures of at aggregate creditare exposures customer or group of borrowers. Aggregate exposures of at P =0.1 billion put on aby special monitoring. least =0.1 billion are put on a special monitoring. least P The ROC assesses the adequacy of provisions for credit losses regularly. The Bank’s The ROC assesses the adequacy of provisions for credit regularly.

Bank’s automated loan grading system enables the Bank to set losses up provision per The account.

The Bank automated loan grading system enables the and Bankreceivables, to set up provision account.

TheorBank also performs impairment analyses on loans whether per on an individual also performs impairment analyses loans and receivables, whether on an individual or collective basis, in accordance with on PFRS. collective basis, in accordance with PFRS. The Bank carries out stress testing analyses using Board-approved statistical models relating The default Bank carries stress testing analyses usingIn Board-approved models relating the trendsout to macroeconomic indicators.

2012, enhanced statistical stress testing models and the default to macroeconomic indicators.

In 2012, enhanced stress testing models and stress limitstrends were implemented for consumer loans. stress limits were implemented for consumer loans.

A

EA

A

EA

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PSBank ANNUAL REPORT 2012

Maximum Exposure to Credit Risk The tables below show the analysis of the maximum exposure to credit risk of the Bank’s financial instruments, excluding those where the carrying values as reflected in the statement of condition and related notes already represent the financial instrument’s maximum exposure to credit risk, after taking into account collateral held or other credit enhancements (in Maximum Exposure to Credit Risk thousands): The tables below show the analysis of the maximum exposure to credit risk of the Bank’s 2012 financial instruments, excluding those where the carrying2012 values as reflected in the statement Financial Effect of condition and related notes already represent the financial instrument’sFinancial maximum exposure Effect of Collateral Maximum to credit risk, after taking into account collateral held or other credit enhancements (in of Collateral Maximum or Credit Fair of Value Exposure of Exposure to Carrying Fair Value Carrying to or Credit thousands): Risk Risk Enhancement Credit Amount Enhancement Collateral Amount Collateral Credit Due other banks P = 834,246 P = 3,434,408 P =– = 834,246 Duefrom from other banks P =834,246 P =3,434,408 P =834,246 P =– P 2012 Securities Purchased Under Resale Securities Purchased Under Resale Financial Effect 4,745,893 4,107 4,745,893 Agreements 4,750,000 of Collateral Agreements 4,745,893 4,745,893 Maximum4,107 4,750,000 Receivables from customers or Credit to Exposure Carrying Fair Value of Consumption loans 31,096,451 46,932,047 58,485 31,037,966 Receivables from customers Enhancement Credit Risk Amount Collateral Real estate loans 22,384,656 49,957,205 – 22,384,656 Consumption loans 31,037,966 46,932,047 31,096,451 58,485 Due from other banks P = 8 34,246 P = 3 ,434,408 P = – P = 834,246 Commercial loans 4,317,443 4,312,835 1,951,693 2,365,750 Real estate loans 22,384,656 49,957,205 Securities Purchased Under Resale 22,384,656 – Other receivables: Agreements 4,750,000 4,107 Commercial 2,365,750 4,312,835 1,951,693 4,745,893 4,317,4434,745,893 Accrued loans interest Receivables from customers receivable 661,246 197,219 464,026 197,219 Other receivables: 46,932,047 58,485 31,037,966 Consumption loansreceivable 31,096,451 Sales contract 351,938 830,035 – 351,938197,219 Accrued interest receivable 22,384,656 197,219 661,246 464,026 Real estate loans 49,957,205 – 22,384,656 Total credit exposure P = 64,395,980 P = 110,409,642 P = 2,478,311 P = 61,917,668 Sales contract 830,035 1,951,693 Commercial loans receivable 4,317,443 – 2,365,750351,938 351,938 4,312,835 Other receivables: Total credit exposure P =61,917,668 =110,409,642 P =2,478,311 P =64,395,980 P A

EA

A

A

Accrued interest receivable Sales contract receivable Total credit exposure

A

EA

EA

A

EA

A

A

A

661,246 351,938 Carrying P = 64,395,980 Amount P =3,736,073

EA

EA

A

EA

A

2011 197,219 830,035 Value of P =Fair 110,409,642 Collateral P =3,184,860 2011 A

EA

EA

A

EA

EA

EA

A

A

EA

EA

464,026

Financial197,219 Effect 351,938 of Collateral Exposure to or Credit P = 2,478,311 P = 61,917,668 Financial Effect Credit Risk Enhancement of Collateral Maximum P P =3,163,905 =572,168 Maximum– 2011 A

EA

A

EA

Due from other banks or Credit Securities Purchased Under Resale Carrying Fair Value of Exposure to Financial Effect Agreements 10,480,000 15,083 Enhancement Credit Riskof10,464,917 Collateral Maximum Amount10,464,917 Collateral Receivables from customers Due from other banks P =572,168 P =3,163,905 P =3,184,860 P =3,736,073 Carrying Fair Value of Exposure to or Credit Consumption loans 25,057,065 38,785,872 256,488 24,800,577 Amount Collateral Credit Risk Enhancement Securities Purchased Under Resale 18,861,918 Real estate loans 44,068,476 – 18,861,918 Due from other banks P =36,561,656 ,736,073 =8,604,846 3,184,860 =3,743,375 3,163,90515,083 2,818,281 P =572,168 Agreements 10,464,917 Commercial loans 10,464,917P 10,480,000P Securities Purchased Under Resale Other receivables: Receivables from customers Agreements 10,480,000 10,464,917 15,083 10,464,917 Accrued interest Consumption loans 24,800,577 256,488 38,785,872 793,606 25,057,065 Receivables from customers receivable 870,762 77,156 77,156 Consumption loansreceivable 25,057,065 Real estate loans 18,861,918 –24,800,577 44,068,476 256,488– 18,861,91838,785,872 Sales contract 437,364 924,733 437,364 Real estate loans 18,861,918 – 18,861,918 Commercial loans 2,818,281 3,743,375 8,604,846P P =66,004,838 P =44,068,476 106,110,860 =7,972,457 P =58,032,381 Total 6,561,656 Commercial loans 6,561,656 8,604,846 3,743,375 2,818,281 Other receivables: Other receivables: Accrued receivable 77,156 793,606 77,156 Accrued interestCredit Collateral andinterest Other Enhancements870,762 receivable 870,762 793,606 77,156 contract receivable 437,364 924,733 437,364 TheSales amount and type of collateral required depends 77,156 on an assessment of the–credit risk of the Sales exposure contract receivable 437,364 924,733 – 437,364 Total credit P =58,032,381 P =7,972,457 P =106,110,860 P =66,004,838 counterparty.

Guidelines are implemented regarding acceptability of types ofP collateral and P =66,004,838 P =106,110,860 P =7,972,457 =58,032,381 Total A

EA

A

A

valuation parameters.

A

EA

A

EA

A

A

EA

EA

A

EA

A

EA

A

A

EA

EA

EA

EA

A

A

A

A

EA

EA

EA

A

EA

EA

Collateral and Other Credit Enhancements The main types of collaterals obtained are as follows: The amount and type of collateral required depends on an assessment of the credit risk of the - For Due from other banks: investment securities counterparty. Guidelines are implemented regarding acceptability of types of collateral and - For SPURA: investment securities valuation parameters.

- For commercial lending: mortgages over real estate properties, deposit accounts and securities The main types of collaterals obtained are as follows: - For consumer lending: mortgages over real estate and chattel - For Due from other banks: investment securities - For SPURA: investment securities Management monitors the market value of collateral, requests additional collateral in - For commercial lending: mortgages over real estate properties, deposit accounts accordance with the underlying agreement, and monitors the market value of collateral and securities obtained during its review of the adequacy of the allowance for credit and impairment losses.

- For consumer lending: mortgages over real estate and chattel Management monitors the market value of collateral, requests additional collateral in accordance with the underlying agreement, and monitors the market value of collateral obtained during its review of the adequacy of the allowance for credit and impairment losses.

PSBank ANNUAL REPORT 2012

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-

For Due from other banks: investment securities For SPURA: investment securities For commercial lending: mortgages over real estate properties, deposit accounts and securities For consumer lending: mortgages over real estate and chattel

Management monitors the market value of collateral, requests additional collateral in accordance with the underlying agreement, and monitors the market value of collateral obtained during its review of the adequacy of the allowance for credit and impairment losses.

It is the Bank’s policy to dispose of repossessed properties in an orderly fashion and proceeds are used to repay or reduce the outstanding claim. In general, the Bank does not occupy repossessed properties for business use.

The Bank holdspolicy collateral againstof loans and receivables in the form of real estateand andproceeds chattel It is the Bank’s to dispose repossessed properties in an orderly fashion mortgages, guarantees, and the other registered claim. securities over assets.

Estimates of fair value are are used to repay or reduce outstanding In general, the Bank does not occupy based on theproperties value of the at the time of borrowing and generally are repossessed forcollateral businessassessed use. updated every two years and when a loan is assessed to be impaired, whenever applicable.

Generally, collateral is not against held over loans and advancesintothe banks SPURA. The Bank The Bank holds collateral loans and receivables formexcept of realfor estate and chattel is not allowed to sell or re-pledge under SPURA in theEstimates absence of by are the mortgages, guarantees, and other collateral registeredheld securities over assets. ofdefault fair value counterparty.

Collateral is not held against securities, no suchare collateral based on the value of theusually collateral assessed at theinvestment time of borrowing andand generally was held every as of December 31, 2012 and 2011.is assessed to be impaired, whenever applicable. updated two years and when a loan Generally, collateral is not held over loans and advances to banks except for SPURA. The Bank Concentration of sell riskor is re-pledge managed by borrower, group of borrowers, by geographical is not allowed to collateral heldby under SPURA in the absence of default region by the and by industryCollateral sector. As of December 31,against 2012 and 2011, the maximum to counterparty. usually is not held investment securities, credit and noexposure such collateral =2012 2.0 billion and P =2.6 billion, respectively, before taking into account any borrower was held as ofamounted Decemberto 31,P and 2011. any collateral or other credit enhancement.

Concentration of risk is managed by borrower, by group of borrowers, by geographical region The distribution of the Bank’s assets before intomaximum account any collateral held and by industry sector.

As of financial December 31, 2012 andtaking 2011, the credit exposure to or other credit enhancements analyzed following geographical (in account P =2.0be billion and P =by 2.6the billion, respectively, beforeregions taking into any borrower amounted to can thousands): any collateral or other credit enhancement.

A

EA

A

EA

A

EA

A

EA

2012 into2012 The distribution of the Bank’s financial assets before taking account any collateral held or Banking Trading Trading Banking other credit enhancements can be analyzed by the following geographical regions (in Activities Others Total ActivitiesActivities OthersTotal Activities thousands): P = 24,738,136 P = 21,666,586 P = 53,009,720 P = 99,414,442 Luzon Luzon P = 99,414,442 P = 24,738,136 P = 53,009,720 P = 21,666,586 Visayas 155,257 366,367 4,573,036 5,094,660 Visayas 155,257 591,4032012 366,367 Mindanao 226,079 5,014,0034,573,036 5,831,485 5,094,660 Banking Trading591,403 25,119,472 22,624,356 62,596,7595,014,003 110,340,587 5,831,485 Mindanao 226,079 Activities Less allowance for credit and 25,119,472Activities 62,596,759Total110,340,587 22,624,356Others impairment losses 242,647 3,833,645 5,109,876 P = 21,033,584 4,738,136 P = 21,666,586 P = 53,009,720 P = 99,414,442 Luzon Less allowance for credit and Visayas 155,257 366,367 4,573,036 P = 24,085,888 P = 22,381,709 P =5 8,763,114 P = 15,094,660 05,230,711 Total impairment losses 1,033,584 591,403 242,647 Mindanao 226,079 5,014,0033,833,645 5,831,485 5,109,876 Total P =105,230,711 25,119,472 22,624,356 62,596,759 110,340,587 P =24,085,888 P =58,763,114 P =22,381,709 A

A

A

Less allowance for credit and impairment losses Total Luzon Visayas Mindanao

Luzon Less allowance for credit and Visayas impairment losses Luzon Mindanao Visayas Total Mindanao

EA

A

EA

A

EA

EA

EA

A

A

EA

A

EA

A

EA

A

EA

A

EA

EA

A

EA

A

2011 Banking Trading 1,033,584 242,647 3,833,645 5,109,876 Activities Activities Others Total P = 24,085,888 P = 22,381,709 P = 58,763,114 P = 105,230,711 2011 P =23,128,598 P =35,462,219 P =44,956,762 P =103,547,579 Banking 302,837 Trading 117,806 3,785,959 4,206,602 2011 195,097 4,103,031 Others 4,826,899 Total Activities Activities 528,771 Banking Trading 23,441,501 36,293,827 52,845,752 112,581,080 P = 103,547,579 =35,462,219 P P =23,128,598 P =44,956,762 Activities Activities Others Total 4,206,602 302,837 117,806 3,785,959 921,350 201,416 3,481,812 4,604,578 P =23,128,598 P =35,462,219 P =44,956,762 P =103,547,579 195,097 117,806 302,837 528,771 3,785,959 4,103,031 4,206,602 4,826,899 P =22,520,151 P =36,092,411 P =49,363,940 P =107,976,502 36,293,827 195,097 4,103,031 4,826,899 112,581,080 23,441,501 528,771 52,845,752 23,441,501 36,293,827 52,845,752 112,581,080 EA

A

A

EA

EA

A

A

EA

A

A

EA

A

A

EA

EA

EA

A

A

EA

A

A

EA

EA

A

EA

EA

A

EA

A

EA

EA

Less allowance for credit and Others include counterparties that are in real estate, public utilities, mining and quarrying, Less allowance for credit and impairment losses 4,604,578 201,416 921,350 3,481,812 services, agriculture personal3,481,812 activities. 4,604,578 impairment losses and other community, 921,350 social and 201,416 Total P = 107,976,502 P =36,092,411 P =22,520,151 P =49,363,940 Total P =22,520,151 P =36,092,411 P =49,363,940 P =107,976,502 A

EA

A

EA

A

EA

A

EA

Others include counterparties that are in real estate, public utilities, mining and quarrying, services, agriculture and other community, social and personal activities.

( 95 )

PSBank ANNUAL REPORT 2012

Additionally, the tables below show the distribution of the Bank’s financial assets and offbalance sheet items before taking into account any collateral or other credit enhancements analyzed by industry sector as of December 31, 2012 and 2011 (in thousands): 2012 2012 Loans and Loans and and Loans Loans Advances to Investment to Investment and Advances Receivables Banks* Securities** Others***

Total Total Banks* Securities** Others*** Receivables Real estate, renting and business Realactivities estate, renting and business P = 24,548,858 P =– P =– P =– P = 24,548,858 Other community, social and personal activities =24,548,858 P =– P =– P =24,548,858 P =– P – – 38,575 16,916,162 activities 16,877,587 Other community, social and personal Wholesale and retail trade 16,472,254 – – 2,058 16,474,312 activities storage and 16,916,162 – – 16,877,587 38,575 Transportation, communication 5,373,611 – – – 2,0585,373,611 Wholesale and retail trade 16,474,312 – – 16,472,254 Financial intermediaries 4,149,393 17,617,272 17,038,874 113,360 38,918,899 Transportation, storage and Public administration and defense communication 5,373,611 – – 5,373,611 – – – – 2,788,316 compulsory social security 2,788,316 Financialgas intermediaries 38,918,899 17,038,874 4,149,393 17,617,272 113,360 Electricity, and water 1,727,394 – – – 1,727,394 Manufacturing – – – 1,633,859 Public administration and defense 1,633,859 Hotel and restaurants 696,231 – – – 696,231 compulsory social security 2,788,316 – – 2,788,316 – 685,188 – – 54,000 Construction 631,188 Electricity, gas and water 1,727,394 – – 1,727,394 – Private households 238,975 – – – 238,975 Agricultural, hunting and forestry 72,952 – – – Manufacturing 1,633,859 – – 1,633,859 – 72,952 Mining 16,137696,231 – – – Hotel and andquarrying restaurants – – – 16,137 696,231 Others 249,693 – – – 249,693 Construction 685,188 – – 631,188 54,000 75,476,448 17,617,272 17,038,874 207,993 110,340,587 Private households 238,975 – – 238,975 – Less allowance for credit and impairment – – 5,109,876 losses Agricultural, hunting and forestry 5,063,866 72,952 72,952 – –46,010 – P = 70,412,582 16,137 P = 17,617,272 P = 16,992,864 P = 207,993 P = 105,230,711 Total Mining and quarrying 16,137 – – – A

EA

A

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

EA

A

EA

*Others Composed of due from BSP, due from other banks,249,693 interbank loans receivable–and SPURA. 249,693 – – ** Composed of FVPL investments, AFS investments and HTM investments.

110,340,587 17,038,874 17,617,272 75,476,448 207,993 *** Composed of financial assets classified under other assets (such as RCOCI, security deposits and shortages) and stand-by credit Lesslines. allowance for credit and

5,109,876 46,010 – 5,063,866 – =105,230,711 =16,992,864 P =17,617,272 P =70,412,582 P =207,993 P 2011 P

impairment losses Total

Loans andreceivable and SPURA. * Composed of due from BSP, due from other banks, interbank loans Loans andand HTM Advances to Investment ** Composed of FVPL investments, AFS investments investments.

Banks* Securities** *** Composed of financial assets classified Receivables under other assets (such as RCOCI, security depositsOthers*** and shortages) and Total stand-by credit lines.

Real estate, renting and business P =18,320,692 P =– P =– P =– P =18,320,692 activities 2011 Other community, social and personal activities 10,229,504 – – – 10,229,504 Loans and Wholesale and retail trade 5,146,388 – – 39,708 5,186,096 to Investment Loans and Advances Transportation, storage and Others*** Total Securities** Banks* Receivables communication 6,874,779 – – – 6,874,779 Real estate, renting and business Financial intermediaries 4,159,949 18,519,668 31,107,732 107,652 53,895,001 Public administration and defense P = – activities P =18,320,692 P = – P = – P =18,320,692 compulsory social security 2,892,688 – – – 2,892,688 Other community, social and personal Electricity, gas and water 1,845,266 – – – 1,845,266 – activities 10,229,504 – – – 10,229,504 Manufacturing 1,846,637 – – 1,846,637 Hotel and restaurants 918,691 – – Wholesale and retail trade – – 39,708 918,6915,186,096 – 5,146,388 Construction 916,910 – – 45,000 961,910 Transportation, storage and Private households 3,781,179 – – – 3,781,179 – c ommunication 6,874,779 – – 6,874,779 Agricultural, hunting and forestry 1,596,201 – – 4,364 1,600,565 Financial intermediaries 53,895,001 18,519,668 4,159,949 Mining and quarrying 42,340 – –31,107,732 –107,652 42,340 Others – – 8,236 4,185,732 Public administration and defense 4,177,496 62,748,720 18,519,668 31,107,732 204,960 112,581,080 – compulsory social security 2,892,688 – – 2,892,688 Less allowance for credit and impairment – Electricity, gas and water – – 1,845,266 losses 4,558,568 – 46,010 – 4,604,5781,845,266 – Manufacturing 1,846,637 – – 1,846,637 P =58,190,152 P =18,519,668 P =31,061,722 P =204,960 P =107,976,502 Total A

A

EA

A

EA

A

EA

EA

A

A

EA

EA

A

A

EA

EA

A

A

EA

EA

– and restaurants 918,691 – 918,691 loans receivable–and SPURA. *Hotel Composed of due from BSP, due from other banks, interbank ** Composed of FVPL investments, AFS investments and HTM investments.

45,000 Construction 961,910 – – 916,910 *** Composed of financial assets classified under other assets (such as RCOCI, security deposits and shortages) and credit – stand-by Private households 3,781,179 – – 3,781,179 lines.

Agricultural, hunting and forestry Mining and quarrying Others Less allowance for credit and impairment losses Total * ** ***

1,596,201 42,340 4,177,496 62,748,720

– – – 18,519,668

4,558,568 P =58,190,152

– P =18,519,668

– – – 31,107,732

4,364 – 8,236 204,960

1,600,565 42,340 4,185,732 112,581,080

– 4,604,578 46,010 =204,960 P =107,976,502 P =31,061,722 P

Composed of due from BSP, due from other banks, interbank loans receivable and SPURA. Composed of FVPL investments, AFS investments and HTM investments.

Composed of financial assets classified under other assets (such as RCOCI, security deposits and shortages) and stand-by credit lines.

PSBank ANNUAL REPORT 2012

( 96 )

Credit Quality Description of the loan grades for loans, receivables and stand-by credit lines: Interim Credit Rating System The Bank rates accounts on a scale of 1 to 10, with 1 being the best, based on the Boardapproved interim credit rating system which utilizes both the credit scoring results and BSP loan grading system.

Neither Past Due nor Individually Impaired The Bank classifies those accounts under current status having the following loan grades: High Grade (ICRS 1 - 4) 1 - Excellent This is considered as normal risk by the Bank. An excellent rating is given to a borrower who has the ability to meet credit obligation in full and is never delinquent.

2 - Strong This is also considered as normal risk by the Bank. Borrower has the ability to meet credit obligation in full, except that the borrower had history of 1-29 days delinquency at worst.

3 - Good This rating is given to a borrower who has the ability to meet credit obligation in full, except that the borrower had history of rating of Loans Especially Mentioned (ICRS=7) at worst.

4 - Satisfactory This rating is given to a borrower who has the ability to meet credit obligation in full, except that the borrower had history of rating of Substandard (ICRS=8) at worst.

Standard Grade (ICRS 5 - 7) 5 - Acceptable An acceptable rating is given to a borrower who meets present obligations, except that the borrower had history of Doubtful (ICRS=9) at worst.

6 - Watchlist This rating is given to a borrower who meets present obligations, except that the borrower had history of Loss (ICRS=10) at worst.

7 - Loan Especially Mentioned This rating is given to a borrower who has potential weaknesses which when left uncorrected, may affect the repayment of the loan and thus increase credit risk to the Bank.

Substandard Grade (ICRS 8) 8 - Substandard A substandard rating is given to a borrower whose loan or portion thereof involves a substantial and an unreasonable degree of risk to the Bank because of unfavorable record or unsatisfactory characteristics. These loans show possibility of future loss to the Bank unless given closer supervision and well-defined weaknesses that jeopardize the loan liquidation.

Past Due but Not Individually Impaired These are accounts which are classified as delinquent but are not subject to individual impairment as of statement of condition date.

( 97 )

PSBank ANNUAL REPORT 2012

9 - Doubtful This rating is given to a borrower whose loans have characteristics where collection and liquidation in full is highly improbable and in which substantial loss is probable.

10 - Loss This rating is given to a borrower whose loans or portions thereof are considered uncollectible or worthless and of such little value that their continuance as bankable assets is not warranted.

Unrated grade Other credit assets which cannot be classified as High, Standard or Sub-standard are tagged as Unrated.

Individually Impaired Accounts which are subject to individual impairment as of statement of condition date.

The tables below show the credit quality per class of financial assets under loans and receivables (in thousands)*: 2012

2012 Past Due Neither Neither Past DuePast nor Individually Impaired Impaired but not Past Due Due nor Individually not Standard Substandard Individually but Individually Substandard Individually Total Individually High Grade Grade Standard Grade Impaired Impaired Unrated

High Grade Grade Loans and advances to banks P =– P = 5,514,833 P =– Due and fromadvances BSP Loans to banks Due from – 6,002,439 P =– P =5,514,833 – Due fromother BSP banks Interbank loans receivable – 6,002,439 Due from other banks and SPURA – 6,100,000 – – 6,100,000 Interbank loans receivable and SPURA Receivables from customers Receivables from customers Consumption loans 27,101,653 16,690 707 16,690 Consumption loans Real estate loans 18,040,372 27,101,653 1,066,686 27,686 Commercial loans 10,226,651 442,208 140,223 18,040,372 1,066,686 Real estate loans Personal loansloans 3,282,125 10,226,651 68,076 110,154 442,208 Commercial Bills discounted – – 3,282,125 68,076 – Personal loans Other receivables – – Bills discounted Accrued interest receivable 289,938 254,234 857 Other Salesreceivables contract receivable 300,546 – – 289,938 – 254,234 – Accrued receivable Unquotedinterest debt instruments 1,164,134 300,546120 – 10 Accounts receivable 38,348 Sales contract receivable Bills purchased – 1,164,134 – – – Unquoted debt instruments Other assets receivable 38,348 120 Accounts Security deposits – – – – – Bills purchased RCOCI – – – Other assets Shortages – – – – – Security deposits P = 60,443,767 P = 19,465,286 P = 279,637 Total A

RCOCI Shortages Total

A

EA

EA

A

EA

– – – – P =60,443,767 P =19,465,286 A

EA

*Shown gross of allowance for credit and impairment losses

*Shown gross of allowance for credit and impairment losses

PSBank ANNUAL REPORT 2012

A

( 98 )

A

EA

Grade

P =– P =– –

EA

A

Unrated

P =– P =– –

EA

A

– – –

707 27,686 140,223 110,154 –

– –

– – – – –

10

– – P =279,637 A

EA

P =– – A

P =– – –

–

Total

P = 5,514,833 6,002,439 P =– P =5,514,833

EA

A

EA

– –

–

6,002,439 6,100,000

6,100,000

4,692,517 – 31,811,567 – 31,811,567 – 4,692,517 3,051,333 467,625 22,653,702 751,758 872,818 12,433,658 467,625 22,653,702 – 3,051,333 1,879,850 5,340,205 – 12,433,658 751,758 – 872,818 11,425 – 11,425 – 5,340,205 1,879,850 –

–

– – 857 – – – 61,578 –

95,619 – 17,644 97 – P = 174,938

Impaired

Impaired

EA

102,650 59,856

–

– 299,723 – –

– 61,578

– – – 95,619 P = 10,849,112

–

11,425

11,425

361,293 1,008,972 18,313 378,715 1,008,972 102,650 95,611 361,293 1,259,745 59,856 178,680 18,313516,881 378,715 – 95,61161,578 1,259,745 516,881 299,723 – 178,680 –95,619 61,578 – – – 17,644 – 97 – 95,619 – P = 1,994,340 P = 93,207,080

– 17,644 17,644 – – 97 97 – =1,994,340 P P =174,938 P =93,207,080 =10,849,112 P A

EA

A

EA

A

EA

2011

Past Due but not Individually Individually Past Due Impaired Impaired Unrated

Neither Past Due nor Individually Impaired 2011 Standard Substandard Grade Grade Neither Past Due nor Individually Impaired

High Grade

Loans and advances to banks Standard Substandard Due from BSP P = – P =4,303,595 High Grade Grade Grade Dueand from other to banks – 3,736,073 Loans advances banks Interbank loans receivable and SPURA – 10,480,000 P =– P =4,303,595 P =– Due from BSP Due from other – 3,736,073 – Receivables frombanks customers Interbank loans loans receivable Consumption 21,790,405 84,973 SPURA – 10,480,000 Realand estate loans 15,695,138 621,243– Receivables from customers Commercial loans 8,812,804 171,195 Consumption loans 21,790,405 84,973 4,312 Personal loans 3,054,385 55,606 Real estate loans 15,695,138 621,243 20,400 Bills discounted – – Commercial loans 8,812,804 171,195 124,955 Other receivables Personal loans 3,054,385 55,606 122,455 Bills discounted – Accrued interest receivable 776,451– 4,423– Other receivables Sales contract receivable 363,976 – Accrued interest receivable 776,451 4,423 1,226 Unquoted debt instruments 300,000 – Sales contract receivable 363,976 – – Accounts receivable 1,503– 171– Unquoted debt instruments 300,000 Bills purchased – – Accounts receivable 1,503 171 82 Other Billsassets purchased – – – Other assets deposits Security – – Security deposits – RCOCI –– –– RCOCI – Shortages –– –– Shortages – – – Total P =50,794,662 P =19,457,279 A

Total

EA

P =50,794,662

A

EA

A

P =19,457,279

*Shown gross of allowance for credit and impairment losses A

EA

A

EA

EA

– P =––

EA

P =273,430 A

P =– Unrated A

but not Individually P = – Impaired

– – P =–

EA

A

–

EA

P = –

P =4,303,595 Total – 3,736,073 – 10,480,000 P =4,303,595

P =– – A

Total

EA

A

EA

3,736,073

– 25,599,238 3,719,548 – –359,998 10,480,000 19,040,157 – –2,343,378 993,506 10,249,689 147,229 – 3,719,548 – 25,599,238 – 5,237,755 – 2,005,309 2,343,378 359,998 19,040,157 – 11,470 11,470 – 147,229 993,506 10,249,689

–

65,166

– –

–

4,312 20,400– 124,955– 122,455– ––

1,226– – –– – 82– ––

Individually P =– Impaired

2,005,309 11,470 –

–

78,041 – 78,974 – – 65,166 344,698 –

–

5,237,755

–

65,166

–304,096 11,470 1,164,237 78,041 18,313 461,263 78,974 304,096 1,164,237 95,611 395,611 – 18,313 461,263 344,69895,611 177,680395,611 524,134 –524,134 65,166 – 177,680

– 87,417 – 87,417 – 87,417 – – 87,417 20,181 – 20,181 – – 20,181 – – 20,181 54 – 54 – – 54 – 54 =1,949,204 P =81,376,040 =–8,728,647 P =172,818 P P =273,430 P P =172,818 A

EA

P =8,728,647 A

EA

P =1,949,204 A

EA

P =81,376,040 A

EA

*Shown gross of allowance for credit and impairment losses

External Ratings In ensuring quality investment portfolio, the Bank uses the credit risk rating based on the rating of Moody’s Investors Service (Moody’s rating) as follows: Credit Quality High grade Aaa Standard grade Ba1 Substandard grade Caa1

Aa1 Ba2 Caa2

Aa2 Ba3 Caa3

Aa3 B1 Ca

A1 B2 C

External Rating A2 A3 B3

Baa1

Baa2

Baa3

High grade - represents those investments which fall under any of the following grade: Aaa - fixed income obligations are judged to be of the highest quality, with the smallest degree of risk.

Aa1, Aa2, Aa3 - fixed income are judged to be of high quality and are subject to very low credit risk, but their susceptibility to long-term risks appears somewhat greater.

A1, A2, A3 - fixed income obligations are considered upper-medium grade and are subject to low credit risk, but have elements present that suggest a susceptibility to impairment over the long term.

Baa1, Baa2, Baa3 - fixed income obligations are subject to moderate credit risk. They are considered medium grade and as such protective elements may be lacking or may be characteristically unreliable.

Standard grade - represents those investments which fall under any of the following grade: Ba1, Ba2, Ba3 - obligations are judged to have speculative elements and are subject to substantial credit risk.

B1, B2, B3 - obligations are considered speculative and are subject to high credit risk.

( 99 )

PSBank ANNUAL REPORT 2012

Substandard grade - represents those investments which fall under any of the following grade: Substandard grade - represents those investments which fall under any of the following grade: Caa1, Caa2, Caa3 - are judged to be of poor standing and are subject to very high credit risk.

Caa1, Caa2, Caa3 - are judged belikely of poor standing anddefault, are subject veryprospect high credit Ca - are highly speculative andtoare in, or very near, with to some of risk.

Ca - are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest. recovery of principal and interest.

Substandard grade - represents those investments which fall under any of the following grade: C - are the lowest rated class of bonds and are typically in default, with little prospect for C - are the rated interest. class of bonds and are typically in default, with little prospect for recovery oflowest principal Caa1, Caa2, Caa3 - areorjudged to be of poor standing and are subject to very high credit risk. recovery of principal or interest.

Ca - are highly speculative and are likely in, or very near, default, with some prospect of The tablesofbelow show theinterest. credit quality per class of investment securities (in thousands)*: recovery principal and The tables below show the credit quality per class of investment securities (in thousands)*: 2012

C - are the lowest rated class of bonds and are typically 2012 in2012 default,Past with Duelittle prospect for Past Due Neither Past Due nor nor Individually Impaired not butDue recovery of principal or interest.

Neither Past Due Individually Impaired Past

butnot not but Individually Individually Individually Individually Impaired Impaired Total Individually Individually The tables below show the credit quality per class of investment securities thousands)*: Unrated Total Grade Unrated Impaired (in Grade Grade Impaired FVPL investments Impaired Grade Grade Impaired Total High Grade FVPL investments P =– P = 57,384 P =– P =– P =– P =– P = 57,384 HFT - Government Securities FVPL investments Derivatives - ROP warrants –P – =– P =7,384 57,384 HFT Government Securities =– 2012 P =– =– =57,384 = P =– P =63,364 5P 7,384 P =– – P =– –P P =– –P P =P –– P =63,364 5 HFT --Government Securities AFS investments Past Due Derivatives - ROP warrants – – 63,364 – – – – – –– 63,364 63,364 Derivatives - ROP warrants – 63,364 Government debt securities – 3,304,768 – – – – 3,304,768 Neither Past Due nor Individually Impaired but not AFS investments AFS investments 5,194 Quoted equity securities – – – – – 5,194 – – – – 3,304,768 Government debt securities – 3,304,768 3,304,768 – Government debt securities 3,304,768 Unquoted equity securities – – Substandard – – – Individually – – Individually 45,239 45,239 Standard Quoted equity securities – – – – – – 5,194 – 5,194 HTM investments Grade Grade Impaired Total Impaired 5,194 Quoted equity securities High Grade – Unrated 5,194 45,239 Unquoted equity securities – – – – – – – – – 45,239 – – – – 9,593,865 Treasury notes – 9,593,865 FVPL investments – HTM investments 45,239 Unquoted equity securities – – – – 45,239 Government bonds Securities 3,969,060 –– –– –– –– 3,969,060 P =– P = 57,384 P =– P =– P =– P =– P = 57,384 HFT - Government Treasury notes –– 9,593,865 9,593,865 HTM investments P =– P =3,969,060 16,988,441 P =– P =– P =– –– P = 50,433 = 13,969,060 7,038,874 Total Derivatives - bonds ROP warrants 63,364 63,364 –– –– –– P Government –– – 9,593,865 Treasury notes – – – 9,593,865 – AFS investments *Shown gross of allowance for credit and impairment P = – losses P = 16,988,441 P =– P =– P =– P = 50,433 P = 17,038,874 Total 3,969,060 Government bonds – 3,969,060 – –– – – –– 3,304,768 Government debt securities – – 3,304,768 *Shown gross of allowance for credit and impairment losses Quoted equity securities –P – – P –=– –P 5,194 5,194 P P =17,038,874 Total =– =– =– P =16,988,441 P =50,433 2011 45,239 Unquoted equity securities – – – – – 45,239 *Shown gross of allowance for credit and impairment losses Past Due HTM investments 2011 Neither Past Due nor Individually Impaired butDue not– Treasury notes – 9,593,865 – – – 9,593,865 Past Standard Substandard Individually Individually– – – 3,969,060 Government bonds – 3,969,060 Neither Past Due nor Individually Impaired but not– 2011 High Grade Grade Substandard Grade Unrated Impaired Impaired Total P =– P = 16,988,441 P =– P =– P =– P = 50,433 P = 17,038,874 Total Standard Individually Individually FVPL investments Past Due High Grade Grade Grade Unrated Impaired Impaired Total *Shown gross of allowance for credit and impairment losses Neither Past Due nor Individually Impaired Derivatives - ROP warrants P =– P =54,794 P =– P =– =not – P =– P =54,794 FVPL investments butP AFSDerivatives investments - ROP warrants P = – P =Standard 54,794 P =– P =– P =– P =– P =54,794 Individually Individually High Substandard 2011 – – 18,688,690 – – – 18,688,690 AFSGovernment investmentsdebt securities Impaired Unrated Total Impaired Grade Grade Grade Past Due Quoted equity securities – – – – – 5,194 5,194 Government debt securities – 18,688,690 – – – – 18,688,690 Neither Past Due nor but not FVPL investments Unquoted equity securities – – Individually Impaired – – – 45,239 45,239 Quoted equity securities – – – – – 5,194 5,194 HTM investments Standard Substandard Derivatives - ROP warrants P = – = – Individually P =45,239 54,794 = – Individually = – P =54,794 = – Unquoted equity securities –P – – P – P –P 45,239 Treasury notes – 8,005,972 – – – – 8,005,972 High Grade Grade Grade Unrated Impaired Impaired Total HTM investments AFS investments Government bonds – 4,307,843 – – – – 4,307,843 FVPL investments Treasury notes debt securities – 8,005,972 – – – – – –– 8,005,972 Government 18,688,690 – 18,688,690 – P =P P =34,307,843 1,057,299 P =P –– P =P –– P =P –– P =50,433 P =4,307,843 31,107,732 Total Derivatives - bonds ROP warrants =– P =54,794 =– =– =– P =–– P =54,794 Government –– Quoted equity securities 5,194 P – 5,194 – –P – – AFS investments *Shown gross of allowance for credit and impairment P =– losses =31,057,299 P =– P =– P =– P =50,433 =31,107,732 Total Unquoted equity securities 45,239 – Government debt securities – – 18,688,690 – – – – – – 18,688,690 45,239 – *Shown gross of allowance for credit and impairment losses Quoted equity securities – – – – – 5,194 5,194 HTM investments Unquoted equity securities – – – – – 45,239 45,239 Impairment Assessment Treasury notes – – 8,005,972 – – 8,005,972 – HTM investments Impairment Assessment Government bonds are recognized 4,307,843 4,307,843 –of a specific Impairment on the results (individual) and Treasury notes losses – – based 8,005,972 – – – – – – – collective 8,005,972 Total =presence 50,433 P = – P =4,307,843 31,107,732 = – is a P = – Impairment P =4,307,843 31,057,299 = – of Government bonds –P – P –when –P – collective Impairment areexposures. recognized based on the a specific (individual) and assessment losses of credit hasresults taken place there of P =– P =31,057,299 P =– P =– P =– P =50,433 P =31,107,732 Total Neither Past Due nor Individually Impaired Standard Substandard Substandard Standard Grade Substandard Grade Unrated Standard

High High Grade A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A A

EA EA

A

EA

A A

EA EA

A A

EA EA

A A

EA EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

A

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A

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EA

A

EA

assessment of credit exposures.

Impairment hasby taken place when athere is a presence of *Shown of allowance credit and impairment knowngross difficulties inforthe payments of losses obligation counterparties, significant credit rating A

EA

A

EA

*Shown gross of allowance for credit and impairment losses

A

EA

A

EA

A

EA

A

EA

A

EA

known difficulties in the payments of obligation by counterparties, a significant credit rating downgrade takes place, infringement of the original terms of the contract has happened or downgrade takes place, infringement of the original terms of the contract has happened or when there is inability to pay principal or interest overdue beyond a threshold (e.g.

90 days).

Impairment Assessment when there is inability to pay principal or interest overdue beyond a threshold (e.g.

90 days).

These and other factors, either singly or inontandem withof other factors, constituteand observable Impairment losses are recognized based the results a specific (individual) collective These and other factors, either singly orofinobjective tandem with otherof factors, constitute observable events or data that meet the definition evidence impairment. assessment of credit exposures. Impairment has taken place when there is a presence of events or data that meet the definition of objective evidence of impairment. known difficulties in the payments of obligation by counterparties, a significant credit rating Individually allowances downgrade assessed takes place, infringement of the original terms of the contract has happened or Individually assessed allowances The Bank determines allowances each significant loan or advance an when there is inabilitythe to pay principalappropriate or interest for overdue beyond a threshold (e.g. 90on days).

The Bank determines the allowances appropriate for each significant loan or advance on an individual basis.

Items considered when determining amounts of allowances include an These and other factors, either singly or in tandem with other factors, constitute observable individual basis.

Items considered when determining amounts of allowances an account’s age, payment timing of expected cash flowsinclude and realizable events or data that meetand thecollection definition history, of objective evidence of impairment. account’s age, payment and collection history, timing of expected cash flows and realizable value of collateral. value of collateral.

Individually assessed allowances The Bank determines the allowances appropriate for each significant loan or advance on an individual basis. Items considered when determining amounts of allowances include an account’s age, payment and collection history, timing of expected cash flows and realizable value of collateral.

PSBank ANNUAL REPORT 2012

( 100 )

The Bank sets criteria for specific loan impairment testing and uses the discounted cash flow The Bank sets to criteria for specific loan impairment testingsubjected and uses the discounted cash flow methodology compute for impairment loss. Accounts to specific impairment and methodology to compute for impairment loss.

Accounts subjected to specific impairment and that are found to be impaired shall be excluded from the collective impairment computation. that are found to be impaired shall be excluded from the collective impairment computation.

Collectively assessed allowances Collectively allowances Allowances assessed are assessed collectively for losses on commercial loans and advances that are not Allowances are assessed on commercial loansImpairment and advances thatare are not individually significant or collectively are found tofor belosses not individually impaired. losses individually significant or are found to be not individually impaired.

Impairment losses are estimated by taking into consideration the historical losses on the portfolio and the expected estimated byrecoveries taking intoonce consideration losses on the expected receipts and impaired. the Thehistorical Bank is responsible forportfolio decidingand thethe length of receipts and recoveries once impaired.

The Bank is responsible for deciding the length of is historical loss period which can extend for as long as five years. The impairment allowance historical loss period which can extend for as long as five years.

The impairment allowance is then reviewed by the Bank to ensure alignment with the Bank’s overall policy. then reviewed by the Bank to ensure alignment with the Bank’s overall policy.

The Bank uses the Net Flow Rate method to determine the credit loss rate of a particular The Bank uses the Net Flow Rate todata determine the credit and lossflow-back rate of a particular delinquency age bucket based onmethod historical of flow-through of loans across delinquency age bucket based on historical data of flow-through and flow-back ofas loans across specific delinquency age buckets. The method applies to consumer loans, as well salary and specific delinquency age buckets.

The method applies to consumer loans, as well as salary home equity loans granted to employees of the Bank. For commercial loans, the Bank usesand home equity loans of the the credit Bank. loss For rate commercial loans, the Bank uses Historical Loss Rategranted methodtoinemployees determining based on the actual historical Historical Loss Rate method in determining the credit loss rate based on the actual historical loss experienced by the Bank on each specific industry type. loss experienced by the Bank on each specific industry type.

Aging Analysis of Past Due but not Individually Impaired Loans per Class of Financial Aging AssetsAnalysis of Past Due but not Individually Impaired Loans per Class of Financial Assets Assets The succeeding tables show the total aggregate amount of gross past due but not individually The succeeding tables show theper total aggregatebucket. amountUnder of gross pastadue but not individually impaired loans and receivables delinquency PFRS, financial asset is past impaired loans and receivables per delinquency bucket.

Under PFRS, a financial asset due when the counterparty has failed to make a payment when contractually due (in is past due when the counterparty has failed to make a payment when contractually due (in thousands)*: thousands)*: 2012

2012 Pastbut Due not2012 Individually Past Due notbut Individually ImpairedImpaired Less than Past Due 31 to 61 to Over but not Individually Impaired Less than 31 to 61 to91 to 91 to 30 days 60 days 90 61 days 180 91 days days than to 90 days to 180 180 Less 31 to60 days Over 30 days days 180 days 30 days 60 days 90 days 180 days

Over

Total 180 days Loans and receivables Total Loans and receivables Receivables from customers Loans and receivables Receivables from customers P = 2,478,894 P = 954,556 P = 388,874 P = 297,618 P = 572,574 P = 4,692,516 Consumption Receivables fromloans customers Consumption loans P =2,478,894P P =954,556 =388,874 =297,618 =P Real estate loans 29,031 P 3,051,333 P = 22,133,861 ,478,894 = 9651,740 54,556 P = 3199,463 88,874P P = 237,238 97,618 P P = 572,574 =572,574 4 ,692,516 Consumption loans Commercial loans 662,896 42,345651,740 345 199,463 12,304 33,867 751,757 Real loans 2,133,861 651,740 37,238 29,031 Real estate estate loans 2,133,861 199,463 37,238 29,031 3,051,333 Personal loans 236,539 56,091 42,34540,363 87,037 1,459,821 1,879,851 Commercial loans 662,896 345 12,304 33,867 751,757 Commercial loans 662,896 42,345 345 12,304 33,867 Bills discounted – – 56,09140,363 – 40,363 – 11,425 1,459,821 11,425 Personal loans 236,539 56,091 87,037 1,459,821 1,879,851 Personal loans 236,539 87,037 Other Billsreceivables discounted – – – 11,425 11,425 Bills discounted – – – – – 11,425 Accrued interest Other receivables Other receivables receivable 39,252 15,526 7,534 5,358 34,979 102,649 Accrued interest Accrued interest receivable 29,954 39,252 15,526 7,534 5,358 34,979 Sales contract receivable 9,750 15,526 4,924 4,448 10,782 59,858 receivable 39,252 7,534 5,358 34,979 102,649 Sales receivable 29,954 9,750 4,924 4,448 10,782 Accounts receivable 16,950 2,016 9,750 4,924 796 1,666 278,295 299,723 Sales contract contract receivable 29,954 4,448 10,782 59,858 receivable 16,950 P = 5,598,346 P = 1,732,024 P = 642,299 P = 4796 45,669 = 21,666 ,430,774 P =278,295 10,849,112 TotalAccounts Accounts receivable 16,950 2,016 2,016 796 1,666 P 278,295 299,723 Total gross of allowance for impairment P =credit 5,598,346 P =1,732,024 =642,299 =445,669 =2,430,774 *Shown losses P = 5and ,598,346 P = 1,732,024 P = 642,299P P = 445,669 P P = 2,430,774 P P = 10,849,112 Total *Showngross gross allowance for impairment andlosses credit losses *Shown of of allowance for impairment and credit A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

Less than 30 days Less than 30 days

2011 Past Due but not Individually 2011 Impaired 2011 31 tobut not Individually 61 to 91 to Over Past Due Impaired 60 Past days 90 61 days 180 91 days 180 Over days 31 to Due but to Individually toImpaired not 60 days 90 days 180 days 180 days

Loans and receivables 31 to Less than 61 to 91 to Receivables from customers Loans and receivables P =1,737,305 =767,776 P =310,074 90 P = 288,620 180 days P =615,773 Consumption 60 days 30 daysP days Receivables fromloans customers Real loans 24,564 29,064 LoansConsumption andestate receivables P =1,587,629 1,737,305 P =555,780 767,776 P =3146,341 10,074 P =288,620 P =6 15,773 loans Commercial loans 123,872 13,189 7,635 2,007 526 Real estatefrom loans 555,780 146,341 24,564 29,064 Receivables customers 1,587,629 Personal loans 128,081 51,170 30,842 75,821 1,719,395 Commercial loans 123,872 13,189 7,635 2,007 P = 767,776 Consumption loans P =1,737,305 P =310,074 P =288,620526 Bills discounted – – – – 11,470 Personal loans 128,081 51,170 30,842 75,821 1,719,395 555,780 Real estate loans 1,587,629 146,341 24,564 Other Billsreceivables discounted – – – – 11,470 13,189 Commercial loans 123,872 7,635 2,007 Accrued interest Other receivables Personal loans 128,081 75,821 receivable 20,722 9,901 51,170 4,113 30,842 3,087 40,218 Accrued interest Sales contract receivable 58,752 7,701 – 3,626 Bills discounted – – 722 –8,173 receivable 20,722 9,901 4,113 3,087 40,218 Accounts receivable 55,871 3,927 1,927 2,304 280,669 Other receivables Sales contract receivable 58,752 7,701 3,626 722 8,173 =3,712,232 P =1,409,444 P =504,558 P =397,125 P =3,087 2,705,288 TotalAccrued Accountsinterest receivable 55,871 3,927 9,901 1,927 2,304 280,669 receivable P 20,722 4,113 *Shown gross contract of allowance for impairment P credit58,752 losses =and 3,712,232 P =1,409,444 7,701 P =504,558 P =397,125 P =2,705,288 Total Sales receivable 3,626 722 A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

A

EA

*Shown gross of allowance for impairment and credit55,871 losses Accounts receivable

Total

P =3,712,232

3,927 P =1,409,444

1,927 P =504,558

2,304 P =397,125

Total P =4,692,516 3,051,333 751,757 1,879,851 11,425 102,649 59,858 299,723 P =10,849,112

Total Total

Over P =3,719,548 180 days A

EA

P =2,343,378 3,719,548 147,229 2,343,378 2,005,309 147,229 P =615,773 11,470 2,005,309 29,064 11,470 A

Total

EA

526 1,719,395 78,041 78,974 11,470 78,041

344,698 78,974 P =8,728,647 344,698 40,218 P =8,728,647 8,173

280,669 P =2,705,288

P =3,719,548 2,343,378 147,229 2,005,309 11,470 78,041 78,974 344,698 P =8,728,647

*Shown gross of allowance for impairment and credit losses

( 101 )

PSBank ANNUAL REPORT 2012

b. Market risk Market risk management covers the areas of trading and interest rate risks. The Bank utilizes various measurement and monitoring tools to ensure that risk-taking activities are managed within instituted market risk parameters. The Bank revalues its trading portfolios on a daily basis and checks the revenue or loss generated by each portfolio in relation to their level of market risk.

The Bank’s risk policies and implementing guidelines are regularly reviewed by the Assets and Liabilities Committee (ALCO), ROC and BOD to ensure that these are up-to-date and in line with changes in the economy, environment and regulations. The ROC and the BOD set the comprehensive market risk limit structure and define the parameters of market activities that the Bank can engage in.

Market risk is the risk to earnings and capital arising from changes in the value of traded portfolios of financial instruments (trading market risk) and from movements in interest rates (interest rate risk). The Bank’s market risk originates primarily from holding peso and dollardenominated debt securities. The Bank utilizes Value-at-Risk (VaR) to measure and manage market risk exposure. VaR estimates the potential decline in the value of a portfolio, under normal market conditions, for a given confidence level over a specified holding period.

Trading activities The Bank’s trading portfolios are currently composed of peso and dollar-denominated sovereign debt securities that are marked-to-market daily. The Bank also uses VaR to measure the extent of market risk exposure arising from these portfolios.

VaR is a statistical measure that calculates the maximum potential loss from a portfolio over a holding period, within a given confidence level. The Bank’s current VaR model uses historical simulation for Peso and USD HFT portfolios with confidence level at 99% and a 1 day holding period. It utilizes a 260 days rolling data most recently observed daily percentage changes in price for each asset class in its portfolio.

VaR reports are prepared on a daily basis and submitted to Treasury and RMO. VaR is also reported to the ROC and BOD on a monthly basis. The President, ROC and BOD are advised of potential losses that exceed prudent levels or limits.

When there is a breach in VaR limits, Treasury is expected to close or reduce their position and bring it down within the limit unless approval from the President is obtained to retain the same.

All breaches are reported to the President for regularization. In addition to the regularization and approval of the President, breaches in VaR limits and special approvals are likewise reported to the ROC and BOD for their information and confirmation.

Back-testing is employed to verify the effectiveness of the VaR model. The Bank performs back-testing to validate the VaR model and stress testing to determine the impact of extreme market movements on the portfolios. Results of backtesting are reported to the ROC and BOD on a monthly basis. Stress testing is also conducted, based on historical maximum percentage daily movement and on an ad-hoc rate shock to estimate potential losses in a crisis situation.

The Bank has established position, VaR, stop loss limits and loss triggers, for its trading portfolios. Daily profit or losses of the trading portfolios are closely monitored against loss triggers and stop-loss limits.

PSBank ANNUAL REPORT 2012

( 102 )

Responsibility for managing the Bank’s trading market risk remains with the ROC. With the support of RMO, the ROC recommends to the BOD changes in market risk limits, approving authorities and other activities that need special consideration.

Discussed below are the limitations and assumptions applied by the Bank on its VaR methodology: a. VaR is a statistical estimate and thus, does not give the precise amount of loss; b. VaR is not designed to give the probability of bank failure, but only attempts to quantify losses that may arise from a bank’s exposure to market risk; c. Historical simulation does not involve any distributional assumptions, scenarios that are used in computing VaR are limited to those that occurred in the historical sample; and d. VaR systems are backward-looking. It attempts to forecast likely future losses using past data. As such, this assumes that past relationships will continue to hold in the future. Major shifts therefore (i.e. an unexpected collapse of the market) are not captured and may inflict losses much bigger than anything the VaR model may have calculated.

The Bank’s interest rate VaR follows (in thousands): As of of year-end year-end As year to to date date average average Year High High Low Low

20122012 P =– P =– 4,452 4,452 19,161 19,161 222 222 A

EA

2011 P =– 7,256 75,764 4 A

EA

2011 P = – 7,256 75,764 4

Non-trading activities Interest Rate Risk The Bank follows a prudent policy on managing its assets and liabilities to ensure that fluctuations in interest rates are kept within acceptable limits.

One method by which the Bank measures the sensitivity of its assets and liabilities to interest rate fluctuations is by way of “gap” analysis. This analysis provides the Bank with a static view of the maturity and repricing characteristics of the positions in its statement of condition. An interest rate gap report is prepared by classifying all assets and liabilities into various time period categories according to contracted maturities or anticipated repricing dates, whichever is earlier. Non maturing deposits are considered as non-interest rate sensitive liabilities; no loan pre-payments assumptions are used. The difference in the amount of assets and liabilities maturing or being repriced in any time period category would then give the Bank an indication of the extent to which it is exposed to the risk of potential changes in net interest income.

The interest rate sensitivity gap report measures interest rate risk by identifying gaps between the repricing dates of assets and liabilities. The Bank’s sensitivity gap model calculates the effect of possible rate movements on its interest rate profile.

The Bank uses sensitivity gap model to estimate Earnings-at-Risk (EaR) should interest rates move against its interest rate profile. The Bank’s EaR limits are based on a percentage of the Bank’s projected earnings for the year. The Bank also performs stress-testing analysis to measure the impact of extreme interest rate movements. The EAR and stress testing reports are prepared on a monthly basis.

( 103 )

PSBank ANNUAL REPORT 2012

The ALCO is responsible for managing the Bank’s structural interest rate exposure. The ALCO’s goal is to achieve a desired overall interest rate profile while remaining flexible to interest rate movements and changes in economic conditions. The RMO and ROC review and oversee the Bank’s interest rate risks.

The ALCO is responsible for managing the Bank’s structural interest rate exposure. The The tables below the sensitivity of netrate interest income equity flexible to reasonably ALCO’s goal is to demonstrate achieve a desired overall interest profile whileand remaining to possible changes in interest rates.

Net interest income sensitivity was calculated byreview assuming interest rate movements and changes in economic conditions. The RMO and ROC and interest shifts upon repricing of floating-rate financial instruments. Equity sensitivity was oversee rate the Bank’s interest rate risks. computed by calculating mark-to-market changes of AFS debt instruments, assuming a parallel shift in thedemonstrate yield curve. the sensitivity of net interest income and equity to reasonably The tables below possible changes in interest rates. Net interest income sensitivity was calculated by assuming 2012 2012 interest rate shifts upon repricing of floating-rate financial instruments.

Equity sensitivity was Sensitivity of Sensitivity Equity of Equity computed by calculating mark-to-market changes of AFS debt of Sensitivity Over Over instruments, assuming a Over Change in Sensitivity net interestof 0 up to 6 monthsOver 1 year to More than parallel shiftChange in the in yieldnet curve.

0 up to to 6 interest months 5 years1 year to basis points income 6 months 1 year 5 years More than Total Currency PHP Currency USD

PHP Currency USD

PHP USD Currency Currency PHP PHP USD

basis points

+10 +10

+10 Change in +10 basis points

-10 -10

+10 -10 +10 -10

USD

Currency PHP USD Currency PHP USD Currency Currency PHP PHP USD Currency USD PHP USD

-10 Change in -10 basis points

Change in +10 +10 basis points

Change in basis points -10 +10-10

+10 +10

+10

income

(31,999,914)

(85,865) of Sensitivity (31,999,914) net interest (85,865) income 31,999,914 85,865 (31,999,914) 31,999,914 (85,865) 85,865 Sensitivity of 31,999,914 net interest 85,865 income

Sensitivity of net interest (108,397,507) (4,403,609) income Sensitivity of

net interest income 108,397,507 (108,397,507) 4,403,609

(4,403,609) (108,397,507) (4,403,609)

(Amounts in 6 months toPesos) 1 year

5 years

2012 (Amounts in Pesos) (342,953) (229,024) Sensitivity of Equity(29,549,207) – – – Over Over

(5,263) 256,017

5 years

(30,126,447) 256,017

Total

(5,263) 6 months (342,953)1 year to(229,024) (29,549,207) 0 up to More than 256,017 to 1 year – 5 years – 6 months 5– years Total

(30,126,447) 256,017

(5,263) (29,549,207) 30,433,681 (30,126,447) (4,067) (342,953) 363,798 (229,024)201,262 256,017 – – – 256,017 2011 288,044 – – – Sensitivity of Equity Over Over (4,067) 363,798 201,262 30,433,681 30,994,674 0 up to 6 months2011 1 year to More than 288,044 – – – 288,044 6 months to 1 year 5 years Total Sensitivity5 years of Equity (Amounts in Pesos) Over Over 2011 0 up to 6 months 1 year to More than (51,964) –Sensitivity (961,740) (139,902,114) (140,915,818) of Equity – – 5 years 147,479,486 147,479,486 6 months to 1– year 5 years Over Over

30,994,674 288,044

(4,067) 363,798 (Amounts in Pesos) 288,044 –

201,262 –

30,433,681 –

0 up to 6(Amounts months in Pesos) 1 year to More than 6 months to 1 year 5 years 5 years (24,480) – 994,777 141,787,920 (Amounts in Pesos) (51,964) – – – –(961,740) 269,161,151 (51,964) –

–

– –

– (961,740)

30,994,674 288,044

Total 142,758,217

(139,902,114) 269,161,151 – 147,479,486 (139,902,114) (140,915,818)

–

147,479,486

147,479,486

994,777 –

141,787,920 – 269,161,151

269,161,151 269,161,151

Total (140,915,818) 147,479,486

The impact on the Bank’s equity excludes the impact on transactions affecting the statement Currency Currency of income.

(24,480) 108,397,507 – 994,777 141,787,920 142,758,217 PHP -10

PHP USD USD

-10

-10-10

108,397,507 4,403,609 4,403,609

(24,480) –

–

– –

–

142,758,217

269,161,151

Foreign Currency Risk Foreign currency is the risk ofexcludes an investment's value dueaffecting to an adverse The impact on therisk Bank’s equity the impact on changing transactions the statement movement in currency exchange rates.

It arises due to a mismatch in the Bank's foreign of income. currency assets and liabilities.

Foreign Currency Risk The Bank’s policy risk is toismaintain foreign currency exposure within the position, stop Foreign currency the risk of an investment's value changing dueapproved to an adverse loss, loss trigger, VAR limits and to remain within existing regulatory guidelines. compute movement in currency exchange rates. It arises due to a mismatch in the Bank's To foreign for VaR, the Bank uses Bloomberg’s historical simulation model for USD/PHP FX position, with currency assets and liabilities. confidence level at 99% and a 1 day holding period. The Bank’s VaR for its foreign exchange position forpolicy trading non-trading activities areexposure as followswithin (in thousands): The Bank’s is and to maintain foreign currency the approved position, stop loss, loss trigger, VAR limits and to remain within existing regulatory guidelines. To compute 2012 for VaR, the Bank uses Bloomberg’s historical simulation model for USD/PHP FX2011 position, with As of year-end P = 1,031 P =370 confidence level at 99% and a 1 day holding period. The Bank’s VaR for its foreign exchange 646 Year for to date Average 1,040 position trading and non-trading activities are as follows (in thousands): 1,775 High 1,952 Low 162012 2 2012 2011 2011 year-end As of year-end P = 1,031 P =370 P =1,031 P = 3 70 year to date average 646 Year Average 1,040 1,040 646 High 1,952 1,775 1,952 1,775 2 Low 16 16 2

PSBank ANNUAL REPORT 2012

( 104 )

A

EA

A

EA

A

EA

A

EA

The table below summarizes the Bank’s exposure to foreign exchange risk as of December 31, 2012 and 2011. Included in the table are the Bank’s assets and liabilities at carrying amounts (in thousands).: Assets Assets Cash Cash DueDue from other banks from other banks FVPL investments FVPL investments AFSAFS investments investments HTM investments HTM investments Other Assets Other Assets Total assets Total assets Liabilities Liabilities Deposit liabilities Deposit liabilities Savings deposits Savings deposits Time deposits Time deposits Accrued taxes, interest and other expenses Accrued taxes, interest and other expenses Other liabilities Other liabilities Total liabilities Total liabilities Net exposure Net exposure

c.

2012 2012

2011

$1,608 $1,608 135,692 135,692 2,941 2,941 3,028 3,028 79,636 79,636 1,904 1,904 224,809 224,809

$1,807 80,561 1,250 112,707 68,816 – 265,141

25,566 25,566 197,328 197,328 698 698 659 659 224,251 224,251 $558 $558

2011 $1,807 80,561 1,250 112,707 68,816 – 265,141

22,040 22,040 240,192 240,192 370 370 258 258 262,860 262,860 $2,281 $2,281

Liquidity Risk

The Bank’s policy on liquidity management emphasizes on three elements of liquidity, namely, cash flow management, ability to borrow in the interbank market, and maintenance of a stock of high quality liquid assets. These three approaches complement one another with greater weight being given to a particular approach, depending upon the circumstances. The Bank’s objective in liquidity management is to ensure that the Bank has sufficient liquidity to meet obligations under normal and adverse circumstances and is able to take advantage of lending and investment opportunities as they arise.

The main tool that the Bank uses for monitoring its liquidity is the Maximum Cumulative Outflow (MCO) reports, which is also called liquidity gap or maturity matching gap reports.

The MCO is a useful tool in measuring and analyzing the Bank’s cash flow projections and monitoring liquidity risks. The liquidity gap report shows the projected cash flows of assets and liabilities representing estimated funding sources and requirements under normal conditions, which also forms the basis for the Bank’s Contingency Funding Plan (CFP). The CFP projects the Bank’s funding position during both temporary and long-term liquidity changes to help evaluate the Bank’s funding needs and strategies under changing market conditions.

The Bank discourages dependence on large funds providers (LFPs) by capping the concentration of LFPs as a percentage of total deposits. This ensures that the Bank will not be vulnerable to a substantial drop in deposit level as a result of an outflow due to large depositors.

To mitigate potential liquidity problems caused by unexpected withdrawals of significant deposits, the Bank takes steps to cultivate good business relationships with clients and financial institutions, maintains high level of liquid assets, monitors the deposit funding concentrations and regularly updates the Liquidity Contingency Funding Plan.

( 105 )

PSBank ANNUAL REPORT 2012

Financial assets Analysis of equity and debt securities at FVPL and AFS investments into maturity groupings is based on the expected date on which these assets will be realized. For other assets, the analysis into maturity grouping is based on the remaining period from the end of the reporting period to the contractual maturity date or if earlier, the expected date the assets will be realized.

Financial liabilities The maturity grouping is based on the remaining period from the end of the reporting period to the contractual maturity date and does not consider the behavioral pattern of the creditors.

When the counterparty has a choice of when the amount is paid, the liability is allocated to the earliest period in which the Bank can be required to pay.

Analysis of Financial Assets and Liabilities by Remaining Maturities The tables below show the maturity profile of the Bank’s financial assets and liabilities based on contractual undiscounted repayment obligations (in millions):

On demand Financial Assets Financial Assets FVPL investments FVPL investments HFT - Government securities HFT - Government securities Derivatives - ROP warrants Derivatives AFS investments- ROP warrants securities AFSGovernment investments Quoted equitysecurities securities Government Unquoted equity securities Quoted equity securities HTM investments Unquoted equity securities Treasury notes HTM investments Government bonds Treasury notes Loans and receivables Loans and advances Government bondsto banks Due from BSP Loans and receivables Due from other banks Loans and advances to banks Interbank loans receivable Due and from BSP SPURA Due fromfrom other banks Receivables customers Interbank loans receivable Consumption loans Real loans andestate SPURA Commercial loans Receivables from customers Personal loans Consumption loans Bills discounted Realreceivables estate loans Other Commercial loans Accrued interest receivable Personal loansreceivable Sales contract Unquoted debt instruments Bills discounted Accounts receivable Other receivables Other assets Accrued interest receivable Security deposits Sales contract receivable RCOCI Unquoted debt instruments Accounts receivable Financial Liabilities Otherliabilities assets Deposit Security deposits Demand Savings RCOCI

On demand

2012 2012 Up toUp toOver 1 to 1 toOverOver 3 to 3 toOverOver 6 to 6Total withinwithin Beyond Over to Total Beyond 1 month 3 months 6 months 1 month 3 months 6 months12 months 12 months 1 year1 year 1 year 1 year

P = 57 =57 63 P A

P =– –

EA

– – – – – 5,515 6,002

A

63

EA

30 – –

– – –

2 –

– –

– –

6,1005,515

–

1,772 736,100 648 1,524 1,772 12

27 – 2 24 –

6,002

125 – 125 –

30 – –

– 12

2 –

– –

– –

– 25 4 2 24 –

–

EA

39 – –

543

– 12

– –

– –

– 79 27 31 72 –

–

=– – P – – 1,395 –

EA

A

EA

( 106 )

A

EA

A

EA

P =– –

P =57 63 A

673 – –

EA

688

499 133

5,515 6,002

A

695 688

EA

63

6,383 5 6,383 1

5 1

6,105

23,479 6,793

– –

5,515 6,002

22,784 6,105

6,100 5,515

– –

P = 57 =57 63 P

P =– –

5,710 5 5,710 1

673 – – 22,784 695

– –

5 1

23,479 6,793

5,515 6,100

221 39 – 252 225 221 –

2,124 39,384 143 6,100 22,689 – 935 11,576 1,869 3,813 2,124 39,384 12 –

41,508 22,832 6,100 12,511 5,682 41,508 12

135 252 4 225 37 – 10

1,009 935 44 1,869 67 12 517

–

6,002

143

EA

A

6,002

22,689 11,576 – 3,813 649 1218 –

22,832

12,511 1,009 5,682 693 1285 12 517

–

A

1,395 43

A

EA

– – – – – P =2,303

EA

A

A

EA

A

EA

A

P =7,401

757 12,388 185 62,653 805

– – – –

865 155 177 62

– – – P = 3,396 A

EA

=– – P – – –3,310

EA

– – –

1

– – – 865 = 21,260 155 P

2 – = 85,630 –P 177 – 62 – 7 – 1 – 2 – P =85,630 P =3,396 A

EA

A

A

EA

EA

P =7,401 757 12,388 185 79,490 805

16,837 – 4,423

757 185 7 805

– – –

P = 7,401 96 12,388 18 79,490 P =140,561 99,279 4,595

EA

=– – P – – 16,837 –

82,442 172

3,310 86

– – –

– – – 865 P = 2,303 –

EA

30 P = – 14 P = 7,401 P = – 66 – – 18 – 12,388 – 3,310 P =26,561 16,837 P =2,048 62,653 P =114,000 3,310 82,442 16,837 86 172 4,423

EA

865 – – –

– – –

– – – – – – – P =5,413

A

A

5,370 – 43

– – – P = 5,413

EA

1,009 8 135 – 1,009 14 30 66 96 5 44 2 4 – – 18 – 649 18 693 67P 1,218 P 1,285 P = 1,019 19 P = 2,048 37 P = 26,561 = 114,000 = 140,561 517 – 10 – 517

EA

– – –

A

39

–

EA

A

P = 57 63

P =– –

– –

–

–

=– – P – – 5,370 –

P =7,401 757 12,388 – 805 –

EA

– –

– –

=– – P – 185 52,578 –

A

499 133

194 543

5 P =– – – 1,395 P =1,019 1,395 43

EA

EA

479 – 479 –

79 27 8 31 2 72 19 –

1

A

A

39 – – 194

– –

4 P =– – – 5,370P =340 5,370 43

A

EA

P =– –

P =– –

7 – P = 7,401 P =– – 12,388 – 18 – 52,578P =104 P =23,050 19,789 52,578 – –

7 – P = 104 A

Other liabilities 52,578 19,789 Accounts payable – – – Subordinated notes – Other credits 155 – Treasurer’s, cashier’s and manager’s Dividends payable – 177 – checks Bills purchased - contra 62 757 – 185 Accrued payable – Due tointerest Treasurer of the – Accrued other expenses payable Philippines 7 805 – Deposit for keys 1 – Other liabilities – Others 2 – Accounts payable – P = 21,578 155P = 52,940 – Other credits 177 Dividends payable – – Bills purchased - contra 62 – Due to Treasurer of the Philippines 7 – Deposit for keys 1 – Others 2 P =52,940 P =21,578

PSBank ANNUAL REPORT 2012

A

108 4 – 35 – P = 340 1

EA

A

P =– –

P =– –

1 – 11 –

1 – 11 –

757 – 3 18 – P = 23,050 506

Time

EA

25 4 2 108 35 24 – –

506

Financial Liabilities Subordinated notes Deposit liabilities Treasurer’s, cashier’s and manager’s Demand checks Savings Accrued interest payable Time other expenses payable Accrued

A

27 – 2 24 –

73 757 648 31,524 – 12

A

P =– –

P =– –

TotalTotal

99,279

865 4,595 155 177 62 757

– – –

185

7 805 1 2 865 – = 106,890 155 –P A

– – – – – P =21,260

EA

177 62 7 1 2 P =106,890

2011 Over 3 to Over 6 to Total within 1 year 6 months 12 months

Up to Over 1 to 1 month 3 months

Beyond 1 year

Total Financial Assets FVPL investments P = – P = – P = – P = – P = – P = – P = – HFT - Government Securities P = – 2011 – 55 – – – – 55 Derivatives - ROP warrants 55 Up to Over 1 to Over 3 to Over 6 to Total within Beyond AFS investments On demand Total 37,465 43,727 Government securities –1 month 4563 months 19 6 months5,21212 months 575 1 year 6,262 1 year Financial Assets – – – – – 5 5 Quoted equity securities – FVPL investments – – – – – 1 1 Unquoted equitySecurities securities – HFT - Government P =– P =– P =– P =– P =– P =– P =– P =– HTM investments Derivatives - ROP warrants 55 – – – – 55 – 55 1,069 185 45 410 429 24,403 25,472 notes – AFSTreasury investments Government securities – 456 640 19 16 5,212 575 30 6,262 686 37,4651,025 43,727 1,711 – Government bonds – Quoted securities – – – – – – 5 5 Loans andequity receivables Unquoted equity securities – – – – – – 1 1 Loans and advances to banks HTM investments 4,305 1,271 – 540 – – Due from BSP 2,494 Treasury notes – 45 185 410 429 1,069 24,403 25,4724,305 – – – – – Due frombonds other banks Government – 3,736 640 16 – 30 686 3,736 1,025 1,7113,736 loans receivable Loans Interbank and receivables Loansand and SPURA advances to banks 10,484 – 10,484 – – – 10,484 – Due from BSP 2,494 – 1,271 540 – 4,305 – 4,305 Receivables from customers Due from other banks 3,736 – –1,869 – – 3,736 11,244 – 3,736 1,020 2,890 5,323 18,654 29,898 Consumption loans 142 Interbank loans receivable 5,970 932 24,485 30,455 Realand estate loans 15 10,484 401 SPURA – – –1,533 –3,089 10,484 – 10,484 2,934 642 452 604 1,092 10,204 13,138 Commercial 144 Receivables from loans customers 22 1,869 91 Personal loans Consumption loans 142 2,782 1,020 2,890 263 5,323 737 11,244 3,895 18,6544,872 29,8988,767 Real discounted estate loans 15 401 932 1,533 3,089 12 24,485 – – – – 5,970 – 30,455 12 Bills 12 Commercial loans 144 452 642 604 1,092 2,934 10,204 13,138 Other receivables Personal loans 2,782 22 91 55 263 737 236 – – 3,895 1,164 4,872 – 8,767 1,164 Accrued interest receivable 873 Bills discounted 12 – – – – 12 – 12 100 17 9 25 49 555 655 Sales contract receivable – Other receivables 115 – – 9 Unquoted debt receivable instruments – Accrued interest 873 236 55 – 106 – 1,164 – 310 1,164 425 518 – – 1 1 6 Accounts receivable 516 Sales contract receivable – 9 17 25 49 100 555 655 524 Unquoted – – – 106 9 115 310 425 Other assetsdebt instruments Accounts receivable 516 – – 1 1 518 6 524 20 2 3 6 9 67 87 Security deposits – Other assets 20 – – – – – 20 RCOCI 20 Security deposits – 3 2 6 9 20 67 87 P =52,589 P P =5,099 P =–13,768 P =11,590 P =–11,343 =122,052 P =20 174,641 P =10,789 RCOCI 20 – – 20 – Financial Liabilities P = 10,789 P =13,768 P = 5,099 P = 11,590 P =11,343 P = 52,589 P =122,052 P =174,641 Deposit liabilities Financial Liabilities P =11,422 P = – P = – P = – P = – P = – P =11,422 Demand P =11,422 Deposit liabilities – – – – P – P Savings Demand P = 11,422 11,668 P =– P =– P =– P =– = 11,422 11,668 P =– =11,42211,668 65,386 Savings 11,668 – –7,212 –1,261 – 1,957 11,668 –17,881 11,668 54,956 83,267 Time – Time – 54,956 7,2127,212 1,2611,261 1,957 1,957 65,386 88,476 17,88117,881 83,267 54,956 106,357 23,090 23,090 54,956 7,212 1,261 1,957 88,476 17,881 106,357 Treasurer’s, cashier’s and manager’s Treasurer’s, 655 – – – – – 655 checks cashier’s and manager’s 655 checks 655 – – – – 655 – 655 191 – 191 – – – 191 Accrued interest payable – Accrued interest payable – 191 – – – 191 – 191 – – – – – Accruedother other expenses payable 917 Accrued expenses payable 917 – – – – 917 917 – 917 917 Otherliabilities liabilities Other Accounts payable – – – 754 754 – 754 754 – 754 754 – – – – Accounts payable – Other credits 96 – – – – 96 – 96 96 96 – – – – – Other credits 96 Bills purchased - contra 65 – – – – 65 – 65 65 – – – – – 65 Bills purchased - contra 65 Due to Treasurer of the 7 – – – – – 7 DuePhilippines to Treasurer of the Philippines 7 7 – – – – 7 – 7 1 – – – – – 1 Deposit forkeys keys 1 Deposit for 1 – – – – 1 – 1 1 – – – – – 1 Others 1 Others 1 – – – – 1 – 1 P =91,163 P P =7,212 P P =55,147 P P =2,015 P =1,957 P P =17,881P P =109,044 P =24,832 =55,147 = 7,212 = 2,015 P =1,957 = 91,163 =17,881 =109,044 P =24,832P On demand

A

A

A

A

EA

A

A

EA

EA

EA

EA

EA

A

A

A

EA

A

EA

EA

A

EA

A

A

A

EA

EA

EA

A

EA

A

A

A

EA

EA

EA

A

EA

A

A

A

EA

EA

EA

A

A

A

A

EA

A

EA

A

EA

EA

EA

A

A

EA

EA

EA

A

A

EA

EA

EA

6. Segment Information The Bank’s operating segments are organized and managed separately according to the nature of services provided and the different markets served, with each segment representing a strategic business unit that offers different products and serves different markets. The Bank’s reportable segments are as follows: (a) Consumer Banking - principally provides consumer-type loans generated by the Home Office; (b) Corporate Banking - principally handles loans and other credit facilities for small and medium enterprises, corporate and institutional customers acquired in the Home Office; (c) Branch Banking - serves as the Bank’s main customer touch point which offers consumer and corporate banking products; and (d) Treasury - principally handles institutional deposit accounts, providing money market, trading and treasury services, as well as managing the Bank’s funding operations by use of government securities and placements and acceptances with other banks. ( 107 )

PSBank ANNUAL REPORT 2012

These segments are the bases on which the Bank reports its primary segment information.

The Bank evaluates performance on the basis of information about the components of the Bank that Chief Operating Decision Maker (CODM) uses to make decisions about operating matters. There are no other operating segments than those identified by the Bank as reportable segments. There were no inter-segment revenues and expenses included in the financial information. The Bank has no single customer with revenues from which is 10.00% or more of the Bank’s total revenue.

The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies. Primary segment information (by business segment) for the years ended December 31, 2012, 2011 and 2010 follows (in thousands): Consumer Banking

2012 Branch Banking2012

Corporate Banking

Treasury Total Operating Income Corporate Branch Consumer P = 1,599,764 P = 3 26,371 P = 5,901,286 P = 958,843 P = 8,786,264 Interest income Total Banking Banking Treasury Banking 64,531 733,643 – 938,870 Service fees and commissions 140,696 Operating Income Other operating income (loss) 38,143 (30,144) 121,225 2,585,718 2,714,942 Interest income P =8,786,264 P =326,371 P =5,901,286 =958,843 P =1,599,764360,758 Total operating income 1,778,603 6,756,154 3,544,561P 12,440,076 Non-cash expenses Service fees and commissions 938,870 – 64,531 733,643 140,696 P = 122,139 = 14,777 P = 3 51,396 = 1,459 P = 489,771 Depreciation Other operating income (loss) 2,714,942 2,585,718 (30,144) 121,225P 38,143P Provision for credit and impairment Total losses operating income 12,440,076 3,544,561 6,756,154 1,778,603 49,558360,758516,773 – 1,144,721 578,390 Non-cash expenses Amortization of intangible assets 22,890 4,212 29,539 597 57,238 Total non-cash expenses 723,419122,139 68,547 14,777 897,708 351,396 2,056 1,691,730 489,771 Depreciation 1,459 Interest expense – – 1,549,662 1,564,812 3,114,474 Provision for credit and impairment 4,141 47,076 – 60,245 Service fees and commissions expense 9,028 losses 1,144,721 – Subtotal 9,028578,390 4,141 49,558 1,596,738 516,773 1,564,812 3,174,719 Amortization of intangible 5971,937,512 57,238 Compensation and fringe benefits assets 320,941 22,890 82,213 4,212 1,522,602 29,539 11,756 Taxes and licenses expenses 122,060723,419 29,295 68,547477,227 897,708 208,252 Total non-cash 2,056836,8341,691,730 Occupancy and equipment-related Interest expense 3,114,474 – 1,549,662 1,564,812 – 6,153 510,473 – 552,791 costs 36,165 Service fees and commissions 60,245 – 4,141 47,076 9,028 Security, messengerial and janitorial expense Subtotal 1,564,812234,6563,174,719 1,596,738 568 services 41,270 9,028 4,418 4,141188,400 Miscellaneous 311,625320,941 34,083 82,213792,220 Compensation and fringe benefits 1,522,602 15,219 11,7561,153,1471,937,512 3,490,922 477,227 235,795 208,252 4,714,940 836,834 Subtotaland licenses 832,061 Taxes 122,060 156,162 29,295 Income before share in net income Occupancy and equipment-related of an associate and a joint venture costs 552,791 – 1,741,898 2,858,687 and income tax 214,095 36,165 131,908 6,153770,786 510,473 Share in netmessengerial income of an associate Security, and janitorial – – and a joint venture – services 568 548 234,656 188,400 41,270 548 4,418 Income before income tax 214,095 132,456 770,786 1,741,898 2,859,235 Miscellaneous 34,083 792,220 15,219556,9581,153,147 311,625 Provision for income tax Subtotal 4,714,940 235,795 156,162 3,490,922 832,061 P = 2,302,277 Net income A

EA

A

A

EA

EA

A

A

EA

EA

A

A

EA

EA

A

A

EA

EA

A

A

EA

EA

Income before share in net income of P = 23,916,405 P = 10,280,884 P = 46,723,289 P = 32,978,433 P = 113,899,011 Segment assets an associate and a joint and Investments in an associate and aventure joint venture tax 1,238,694 income 1,741,898 2,858,687 131,908 770,786 214,095 Deferred tax assets 1,011,363 Share in net income of an associate Total assets P = 116,149,068 and a joint venture 548 – 548 – – Segment liabilities P = 549,414 P = 143,154 P = 72,652,646 P = 27,743,818 P = 101,089,032 Income before income tax 2,859,235 132,456 770,786 1,741,898 214,095 Provision for income tax 556,958 Net income P =2,302,277 Segment assets =32,978,433 P =113,899,011 =10,280,884 P =46,723,289 P P =23,916,405 P Investments in an associate and a joint venture 1,238,694 Deferred tax assets 1,011,363 Total assets P =116,149,068 Segment liabilities =27,743,818 P P =143,154 P =72,652,646 P =101,089,032 P =549,414 A

EA

A

EA

A

EA

A

EA

A

A

A

PSBank ANNUAL REPORT 2012

EA

( 108 )

A

EA

A

EA

A

EA

A

EA

EA

EA

Consumer Banking

Corporate Banking

2011 Branch Banking

Treasury Operating Income Interest income P =381,437 P =5,626,918 P =1,454,536 P =1,513,696 Service fees and commissions – 43,730 623,395 109,924 Other operating income 17,625 259,971 922,369 42,503 Total operating income 442,792 6,510,284 2,376,905 1,666,123 Non-cash expenses Depreciation 14,509 298,033 1,602 113,934 Provision for credit and impairment losses 227,051 236,935 – 192,103 Amortization of intangible assets 3,709 28,014 472 20,929 Total non-cash expenses 2,074 245,269 562,982 326,966 Interest expense – 2,104,518 1,162,615 – Service fees and commissions expense – 2,486 35,437 6,248 Subtotal 2,486 2,139,955 1,162,615 6,248 Compensation and fringe benefits 81,488 1,463,329 12,925 341,956 Taxes and licenses 147,426 26,874 476,182 113,703 Occupancy and equipment-related costs 5,744 445,131 145 34,257 Security, messengerial and janitorial services 494 3,303 149,462 40,665 Miscellaneous 44,536 886,603 83,204 193,954 Subtotal 244,194 161,945 3,420,707 724,535 Income before share in net income of an associate and a joint venture and income tax 968,022 33,092 386,639 608,374 Share in net income of an associate and a joint venture – 8,272 – – Income before income tax 968,022 41,364 386,639 608,374 Benefit from income tax Net income Segment assets =49,320,383 =7,665,449 P =39,901,337 P P =20,986,922 P Investments in an associate and a joint venture Deferred tax assets Total assets Segment liabilities =31,947,852 P =116,192 P =72,141,350 P P =505,277

( 109 )

Total P =8,976,587 777,049 1,242,468 10,996,104 428,078 656,089 53,124 1,137,291 3,267,133 44,171 3,311,304 1,899,698 764,185 485,277 193,924 1,208,297 4,551,381 1,996,127 8,272 2,004,399 (24,360) P =2,028,759 P =117,874,091 1,238,145 1,139,490 P =120,251,726 P =104,710,671

PSBank ANNUAL REPORT 2012

Consumer Banking

Corporate Banking

2010 Branch Banking

Total Treasury Operating Income Interest income P =7,913,097 P =838,002 P =172,645 P =5,291,378 P =1,611,072 Service fees and commissions – 758,629 592,438 48,238 117,953 Other operating income 2,244,546 2,532,454 215,828 2,330 69,750 Total operating income 11,204,180 3,082,548 223,2132010 6,099,644 1,798,775 2010 Consumer Corporate Branch Non-cash expenses Consumer Corporate Branch Banking Banking Banking Treasury Total Banking 95,787Banking13,026 Banking Depreciation 893 Total 352,038 242,332Treasury Operating income Operating Provision for credit and impairmentP Interestincome income =1,611,072 P =172,645 P =5,291,378 P =838,002 P =7,913,097 Interest income P =1,611,072 =172,645 =5,291,378 P =838,002 P =7,913,097 Service fees and commissions 117,953 48,238 592,438219,799 – losses 912,282 –758,629 401,697P 290,786P Service fees and commissions 117,953 48,238 592,438 – 758,629 Other operating income 69,750 2,330 215,828 2,244,546 2,532,454 Amortization of intangible assets 41,693 212 17,178 2,330 3,297 215,828 21,006 Other operating income 69,750 2,244,546 2,532,454 Total operating income 1,798,775 223,213 6,099,644 3,082,548 11,204,180 Total non-cash expenses 1,105 1,306,013 483,137 418,020 Total operating income 1,798,775 223,213 6,099,644 3,082,548 11,204,180 403,751 Non-cash expenses Non-cash expenses Interest expense 2,900,695 1,996,974 – 242,332 – 13,026 Depreciation 95,787 893903,721352,038 Depreciation 893 352,038 Provision for and creditcommissions and impairment expense 95,787 10,409 13,026 4,257 242,332 52,281 Service fees – 66,947 Provision losses for credit and impairment 290,786 – Subtotal 903,721 912,282 2,967,642 2,049,255 4,257 219,799 10,409 401,697 losses 290,786 401,697 219,799 – 912,282 Amortization of intangible assets 17,178 3,297 21,006 212 41,693 Amortization of and intangible assets 17,178 3,29791,464 483,137 21,006 212 9,360 41,693 1,740,616 Compensation fringe benefits 1,291,192 1,105 348,600 418,020 Total non-cash expenses 403,751 1,306,013 Total non-cash expenses 403,751 418,020 483,137 1,105 1,306,013 Taxes and licenses 213,275 29,895 415,237 118,728 Interest expense – – 1,996,974 903,721 2,900,695 777,135 Interest fees expense – – 1,996,974 903,721 2,900,695 Service and commissions expense 10,409 4,257 52,281 – 66,947 Occupancy and equipment-related Service fees and commissions expense 10,409 4,257 52,281 – 66,947 Subtotal 10,409 4,257 2,049,255 903,721 2,967,642 costs 435 374,369 903,721 Subtotal 10,40942,090 4,257 7,3842,049,255 2,967,642 424,278 Compensation and fringe benefits 348,600 91,464 1,291,192 9,360 1,740,616 Security, messengerial and janitorial 348,600 Compensation and fringe benefits 91,464 1,291,192 9,360 1,740,616 Taxes and licenses 118,728 29,895 415,237 213,275 777,135 Taxes and licenses 118,72833,569 29,895 415,237126,852 213,275 777,135 163,936 services 526424,278 Occupancy and equipment-related costs 42,090 7,384 2,989 374,369 435 Occupancy and equipment-related 42,090347,919 7,384 435 19,198424,278 1,212,928 Security, messengerial and janitorialcosts Miscellaneous 796,959 48,852 374,369 Security, messengerial and janitorial services 33,569 526 Subtotal 242,794 163,936 3,004,609 180,584 126,852 890,906 2,989 services 33,569 2,989 126,852 526 163,9364,318,893 Miscellaneous 347,919 48,852 796,959 19,198 1,212,928 Income (loss) before in net income of Miscellaneous 347,919 48,852 796,959 19,198 1,212,928 Subtotal 890,906 180,584 3,004,609 242,794 4,318,893 Subtotal 180,584 3,004,609 242,794 4,318,893 an associate and a joint venture and890,906 Income (loss) before in net income of an Income (loss)tax before in net income associate and a joint venture andof an income 2,611,632 1,934,928 562,643 (379,648) 493,709 associate and a joint venture and income tax 493,709 (379,648) 562,643 1,934,928 2,611,632 Share in net income of an associate income 493,709 (379,648) 562,643 1,934,928 2,611,632 Share in nettax income of an associate and a and anetjoint venture 41,563 Share in venture income of an associate and a joint 41,563 joint before venture 41,563 2,653,195 Income before income tax Income income tax 2,653,195 Income before income tax 2,653,195 Provision forfor income tax 845,080 845,080 Provision income tax Provision for income tax 845,080 Net income P = 1,808,115=1,808,115 Net income Net income P =1,808,115P Segment assets P = 19,812,908 P = 7,861,455 P = 34,518,181 P = 40,421,690 P = 102,614,234 Segment assets P =40,421,690 P =102,614,234 P =34,518,181 P =7,861,455 P =19,812,908 Segment assets P =19,812,908 P =7,861,455 P =34,518,181 P =40,421,690 P =102,614,234 Investments in an and a joint Investments inassociate an associate Investments in an associate and a joint venture 829,874 and atax joint venture venture 829,874 Deferred assets 705,361 829,874 Deferred tax assets 705,361 705,361 Deferred Total assets tax assets P =104,149,469 Total assets P =104,149,469 Total assets P =104,149,469 Segment liabilities P =535,437 P =123,695 P =68,410,903 P =23,470,357 P =92,540,392 Segment liabilities P =535,437 =123,695 P =68,410,903 P =23,470,357 P =92,540,392 Segment liabilities P =23,470,357 P =68,410,903 P =92,540,392 P =123,695 P =535,437P

7. Interbank Loans Receivable and Securities Purchased Under Resale Agreements 7. Interbank Loans Receivable and Securities Purchased Under Resale Agreements This account consists of the following: This account consists of the following: Interbank loans receivable (Note Interbank loans receivable (Note 29) 29) Interbank loans receivable (Note 29) SPURA SPURA SPURA

2012 2011 2011 2012 2012 2011 P = 1,350,000,000 P =– P = – P = 1,350,000,000 P = 1,350,000,000 P =– 10,480,000,000 4,750,000,000 10,480,000,000 4,750,000,000 4,750,000,000 10,480,000,000 P = 6,100,000,000 P =10,480,000,000 P =10,480,000,000 P =6,100,000,000 P = 6,100,000,000 P =10,480,000,000

SPURA are lending to counterparties collateralized by government securities. The Bank is not SPURA are lending to counterparties collateralized by government securities. The Bank is not permitted to sell or repledge the related collateral in the absence of default by the permitted to sell or repledge the related collateral in the absence of default by the counterparty. counterparty.

Interest income on interbank loans receivable and SPURA are as follows: Interest income on interbank loans receivable and SPURA are as follows: Interbank loans receivable Interbank loans receivable Interbank loans receivable SPURA SPURA SPURA PSBank ANNUAL REPORT 2012

( 110 )

2012 2012 2012 P =74,202,957 P = 74,202,957 P = 74,202,957 261,832,569 261,832,569 261,832,569 = 336,035,526 P P =336,035,526 = 336,035,526 P

2010 2011 2011 2010 2011 2010 P =13,031,027 =11,425,626 11,425,626 P P =P =13,031,027 P =11,425,626 P =13,031,027 178,173,681 178,173,681 147,481,667147,481,667 178,173,681 147,481,667 P =P =160,512,694 P =160,512,694 =189,599,307 189,599,307 P P =189,599,307 P =160,512,694

8. Fair Value Through Profit or Loss, Available-for-Sale and Held-to-Maturity Investments FVPL investments consist of the following: HFTHFT securities securities ROP warrants ROP warrants

2011 2011 2012 2012 P = – P = 57,383,795 P = 57,383,795 P =– 54,794,038 63,363,959 63,363,959 54,794,038 P =54,794,038 P =120,747,754P = 120,747,754 =54,794,038 P

As of December 31, 2012 and 2011, the Bank has outstanding ROP paired warrants which give the Bank the option or right to exchange its holdings of ROP Global Bonds (Paired Bonds) into peso-denominated government securities upon occurrence of a pre-determined credit event.

Paired Bonds shall be risk weighted at 0.00%, provided that the 0.00% risk weight shall be applied only to the Bank’s holdings of Paired Bonds equivalent to not more than 50.00% of the total qualifying capital. Further, the Bank’s holdings of said warrants, booked in the FVPL category, are likewise exempted from capital charge for market risk as long as said instruments are paired with ROP Global Bonds up to a maximum of 50.00% of the total qualifying capital.

On August 19, 2009, the BSP approved the Bank’s application for Type 3 Limited User Authority for plain vanilla foreign exchange (FX) forwards, which is limited to outright buying or selling of FX forwards at a specific price and date in the future and do not include nondeliverable forwards. As of December 31, 2012 and 2011, the Bank has no outstanding forward buy and sell contracts.

AFS investments consist of the following: Government securities (Note 30) 30) Government securities (Note Equity securities: Equity securities: Quoted Quoted Unquoted Unquoted LessLess allowance for impairment losses allowance for impairment losses

2011 2011 2012 2012 P =18,688,690,188 P =3,304,767,708 = 3,304,767,708 P =18,688,690,188 P 5,194,005 5,194,005 5,194,005 5,194,005 45,239,00245,239,00245,239,002 45,239,002 18,739,123,195 3,355,200,715 18,739,123,195 3,355,200,715 46,010,167 46,010,167 46,010,167 46,010,167 P =18,693,113,028 P =3,309,190,548 = 3,309,190,548 P =18,693,113,028 P

Movements in the net unrealized gain (loss) on AFS investments follow: Balance at beginning of year Balance at beginning of year GainGain from salesale of AFS investments from of AFS investments takentaken to profit or loss to profit or loss Changes in fair values of AFS investments Changes in fair values of AFS investments Balance at end of year Balance at end of year

2011 2011 2012 2012 P =355,151,266 P =2,399,747,805 = 2,399,747,805 P =355,151,266 P (937,165,140) (2,578,092,037) (2,578,092,037) (937,165,140) 2,981,761,679 384,497,439 2,981,761,679 384,497,439 2,044,596,539 (2,193,594,598) 2,044,596,539 (2,193,594,598) P =2,399,747,805 P =206,153,207 = 206,153,207 P =2,399,747,805 P

In 2012, the Bank sold a significant portion of its government securities classified as AFS investments, resulting in net realized trading gain of P =2.6 billion. Realized trading gain on AFS investments amounts to P =0.9 billion and P =2.3 billion in 2011 and 2010, respectively.

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PSBank ANNUAL REPORT 2012

As of December 31, 2012 and 2011, there were no movements in the allowance for impairment losses on AFS quoted and unquoted equity securities amounting to P =2.2 million and P =43.8 million, respectively.

HTM investments consist of the following: 2012 2012 2011 2011 P =8,005,971,558 P =9,593,865,308 P = 9,593,865,308 P =8,005,971,558 4,307,843,476 3,969,060,316 3,969,060,316 4,307,843,476 P = 12,313,815,034 P = 13,562,925,624 P = 13,562,925,624 P =12,313,815,034

Treasury notes (Note 29) 29) Treasury notes (Note Government bonds Government bonds

As of December 31, 2012 and 2011, treasury notes (classified under HTM investments) with total face value of P =50.0 million are pledged by the Bank to MBTC to secure its payroll account with MBTC (Note 29).

Interest income on investment securities consists of: FVPL investments FVPL investments investments AFSAFS investments investments HTMHTM investments

2012 2012 =9,367,598 9,367,598 P =P 352,849,005 352,849,005 974,624,330 974,624,330 P = 1,336,840,933 P =1,336,840,933

2011 2011 2010 2010 P =18,227,678 =38,762,928 P =38,762,928 P =18,227,678 P 1,374,710,363 1,077,452,402 1,374,710,3631,077,452,402 846,573,654 598,526,804 846,573,654 598,526,804 P =2,239,511,695 =1,714,742,134 P =1,714,742,134 P =2,239,511,695P

Peso-denominated AFS investments bear nominal annual interest rates ranging from 0.00% to 9.13% in 2012, and 0.00% to 14.00% in 2011 and 2010 while foreign currency-denominated AFS investments bear nominal annual interest rates of 9.00% in 2012, and annual interest rates ranging from 6.38% to 9.50% in 2011 and from 6.50% to 10.63% in 2010.

Peso-denominated HTM investments bear nominal annual interest rates ranging from 6.38% to 18.25% in 2012, and 4.57% to 18.25% in 2011 and 2010, respectively, while foreign currencydenominated HTM investments bear nominal annual interest rates ranging from 5.00% to 10.63% in 2012, and 6.38% to 9.50% in 2011 and 2010.

Trading and securities gains - net on investment securities consist of: FVPL investments: FVPL investments: Realized Realized Unrealized Unrealized AFS investments

AFS investments

PSBank ANNUAL REPORT 2012

2012 2012 = 17,892,444) (P

(P =17,892,444) 13,400,988 13,400,988 (4,491,456) (4,491,456) 2,578,092,037 2,578,092,037 P = 2,573,600,581 P =2,573,600,581

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2011 2011

2010

2010

P =6,022,728 =93,163,129) (P =93,163,129) P =6,022,728 (P (15,492,338) (793,423) (793,423) (15,492,338) (9,469,610) (93,956,552) (93,956,552) (9,469,610) 937,165,140 2,323,447,276 2,323,447,276 937,165,140 P =927,695,530 P =2,229,490,724

P =927,695,530

P =2,229,490,724

9. Loans and Receivables This account consists of: Receivables fromfrom customers Receivables customers Consumption loans Consumption loans Real estate loans loans Real estate Commercial loans loans Commercial Personal loans Personal loans Bills discounted Bills discounted LessLess unearned discounts unearned discounts Other receivables Other receivables Unquoted debt instruments Unquoted debt instruments Accrued interest receivable (Note 29) Accrued interest receivable (Note 29) Accounts receivable (Note 29) Accounts receivable (Note 29) Sales contract receivables Sales contract receivables Bills purchased (Note 19) Bills purchased (Note 19) Less allowance for credit losses (Note 15) Less allowance for credit losses (Note 15)

2012 2012

2011

2011

P =36,215,778,334 P =31,162,678,656 = 36,215,778,334 P =31,162,678,656 P 22,653,701,646 19,040,156,924 22,653,701,646 19,040,156,924 12,433,658,145 10,249,689,344 12,433,658,145 10,249,689,344 5,549,553,963 5,603,418,276 5,603,418,276 5,549,553,963 11,425,095 11,469,846 11,469,846 11,425,095 76,864,117,183 66,067,413,046 76,864,117,183 66,067,413,046 4,613,560,459 5,929,104,358 4,613,560,459 5,929,104,358 72,250,556,724 60,138,308,688 72,250,556,724 60,138,308,688 1,259,744,265 395,610,552 1,259,744,265 395,610,552 1,008,972,301 1,164,237,425 1,008,972,301 1,164,237,425 516,881,444 524,134,234 516,881,444 524,134,234 378,715,272 461,262,705 378,715,272 461,262,705 61,578,434 65,166,130 61,578,434 65,166,130 75,476,448,440 62,748,719,734 62,748,719,734 75,476,448,440 5,063,866,121 4,558,567,579 5,063,866,121 4,558,567,579 P =70,412,582,319 P =58,190,152,155 = 70,412,582,319 P =58,190,152,155 P

Personal loans comprise deposit collateral loans, employee salary and consumer loan products such as Money card, multi-purpose loan and flexi-loan.

Unquoted debt instruments represent investments in convertible notes and private bonds. The convertible notes amounting to P =95.6 million are provided with 100% allowance for credit losses as of December 31, 2012 and 2011.

As of December 31, 2012, 2011 and 2010, 46.02%, 44.23% and 55.09%, respectively, of the total receivables from customers are subject to periodic interest repricing. Remaining receivables earned average annual fixed interest rates of 14.55%, 14.23% and 14.74% in 2012, 2011 and 2010, respectively.

On July 1, 2012, the Bank implemented enhancements to systems and loan documents in compliance with BSP circular No. 730 requiring banks to charge interest based on the outstanding balance at the start of the interest period and to indicate the effective interest rate and charges related to the loan in all documents and marketing materials. The implementation of the requirements of the BSP circular resulted in the decrease in the Bank’s unearned discounts from P =5.9 billion in 2011 to P =4.6 billion in 2012.

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PSBank ANNUAL REPORT 2012

Interest income on loans and receivables consists of: Interest income on loans and receivables consists of: 2010 2012 2012 2011 2011 2010 Receivables from customers Receivables from customers 2012 2011 2010 InterestConsumption income on loans and receivables consists of: P loans =3,056,755,626 3,056,755,626 =2,696,080,211 P =2,260,849,552 P =2,260,849,552 P =P Consumption loans P =2,696,080,211 Receivables from customers Real estate loans 1,960,362,055 1,766,540,597 1,649,959,185 1,649,959,185 Real estate loans loans 1,766,540,597 =1,960,362,055 3,056,755,626 P =2,696,080,211 P = 2,260,849,552 Consumption P 2011 2010 2012 Personal loans 1,023,481,594 982,080,383 926,817,250 Real estate loans 1,960,362,055 1,766,540,597 926,817,250 1,023,481,594 Personal loans 982,080,3831,649,959,185 Receivables fromloans customers Commercial 942,512,827 944,613,254 918,727,776 Personalloans loans 1,023,481,594 982,080,383 926,817,250 918,727,776 942,512,827 Commercial 944,613,254 Consumption loans P = 3,056,755,626 P =2,696,080,211 P =2,260,849,552 Bills discounted – 392,245 233,354 Commercial loans 942,512,827 944,613,254 918,727,776 233,354 – Bills discounted 392,245 1,766,540,597 1,649,959,185 Real estate loans 1,960,362,055 Other receivables Bills discounted – 392,245 233,354 Other receivables Personal loans 1,023,481,594 982,080,383 926,817,250 Sales contract receivables 38,028,857 50,485,179 65,388,714 Other receivables Commercial loans 942,512,827 944,613,254 65,388,714 38,028,857 Sales Unquoted contract receivables 50,485,179 918,727,776 debt instruments 60,751,965 32,668,750 50,230,846 Sales contract receivables 38,028,857 50,485,179 65,388,714 Bills discounted – 392,245 233,35450,230,846 60,751,965 Unquoted debt instruments 32,668,750 P = 7,081,892,924 P = 6,472,860,619 P = 5,872,206,677 Unquoted debt instruments 60,751,965 32,668,750 50,230,846 Other receivables P =5,872,206,677 P =P 7,081,892,924 P =6,472,860,619 = 7,081,892,924 P =6,472,860,619 P =5,872,206,677 Sales contract receivables

38,028,857

50,485,179

65,388,714

InterestUnquoted income accreted on impaired loans and receivables classified under real estate loans debt instruments 60,751,965 32,668,750 50,230,846 and commercial loans amounted to P =7,081,892,924 89.1 million, P =82.4 million and P =72.4 million 2012,loans 2011 Interest income accreted on impaired loans and receivables classified under real in estate =P P =6,472,860,619 P = 5,872,206,677 and 2010, respectively. and commercial loans amounted to P =89.1 million, P =82.4 million and P =72.4 million in 2012, 2011 and 2010, respectively.

Interest income accreted on impaired loans and receivables classified under real estate loans Interest income to P =76.8 million, =72.4 87.1 million million in and and commercial from loansrestructured amounted toloans P =89.1amounted million, P =82.4 million and P =P 2012, 2011 P = 101.2 million in 2012, 2011 and 2010, respectively.

Interest income from restructured loans amounted to P = 76.8 million, P = 87.1 million and and 2010, respectively.

P =101.2 million in 2012, 2011 and 2010, respectively.

Included in the loan portfolio are receivables purchased from a third party amounting to Interest income from restructured loans amounted to P =76.8 million, P =87.1 million and P =101.2 155.1 million and P =194.9 asreceivables ofrespectively.

December 31, 2012 from and 2011, respectively.

Included in the portfolio purchased a third party amounting to P = million in loan 2012, 2011million andare 2010, P =155.1 million and P =194.9 million as of December 31, 2012 and 2011, respectively.

BSP Reporting Included in the loan portfolio are receivables purchased from a third party amounting to The breakdown receivables from customers (gross unearned discounts) as to BSP Reporting P =155.1 million andofP =loans 194.9 and million as of December 31, 2012 and 2011,ofrespectively. secured and unsecured to type offrom security follows:(gross of unearned discounts) as to The breakdown of loansand andas receivables customers secured and unsecured and as to type of security follows: BSP Reporting 2012 % 2011 % TheSecured breakdown of loans and receivables from customers (gross of unearned discounts) as to by: 2012 % 2011 % securedChattel and unsecured and as to type of security follows: 2012 2011 % = 36,215,778,334 47.12 P =%31,162,678,656 47.17 P Secured by: 30.68 20,313,619,083 30.75 Real 23,585,975,405 SecuredChattel by:estate = 36,215,778,334 47.12 P =31,162,678,656 47.17 P Deposit hold-out 0.71 373,553,706 0.56 2012 % 47.12 2011 % P =547,854,897 36,215,778,334 P =31,162,678,656 Chattel 47.17 30.68 20,313,619,083 30.75 Real estate 23,585,975,405 0.64 433,867,651 0.66 Others 489,841,624 Secured by: Deposit hold-out 547,854,897 0.71 30.68 373,553,706 0.56 23,585,975,405 20,313,619,083 Real estate 30.75 60,839,450,260 79.15 79.14 = 36,215,778,334 47.12 P =52,283,719,096 31,162,678,656 47.17 Chattel P Others 489,841,624 0.64 433,867,651 0.66 547,854,897 373,553,706 Deposit 0.56 Unsecured 16,024,666,923 20.85 0.71 13,783,693,950 20.86 Realhold-out estate 23,585,975,405 30.68 20,313,619,083 30.75 79.15 52,283,719,096 79.14 60,839,450,260 489,841,624 433,867,651 Others P = 76,864,117,183 100.00 P = 66,067,413,046 100.00 0.64 0.66 0.71 373,553,706 0.56 Deposit hold-out 547,854,897 Unsecured 16,024,666,923 20.85 13,783,693,950 20.86 Others 489,841,624 0.64 433,867,651 0.66 60,839,450,260 52,283,719,096 79.14 P = 76,864,117,183 100.00 79.15 P =66,067,413,046 100.00 60,839,450,260 79.15 20.85 52,283,719,096 79.14 16,024,666,923 13,783,693,950 Unsecured 20.86 Details of NPLs follow: Unsecured 16,024,666,923 20.85 13,783,693,950 20.86 P =76,864,117,183 P =66,067,413,046 100.00 100.00 P = 76,864,117,183 100.00 P =66,067,413,046 100.00 Details of NPLs follow: 2012 2011 Unsecured P = 2,058,729,934 P = 2,194,686,739 2012 2011 Details of NPLs follow: Secured 2,451,434,743 Unsecured P = 2,058,729,934 P =2,074,887,566 2,194,686,739 2011 P =2,451,434,743 4,510,164,677 P =4,269,574,305 Secured 2,074,887,566 2012 2012 2011 P = 2,194,686,739 Unsecured P = 2,058,729,934 =2,058,729,934 4,510,164,677 P =P Unsecured P =P =4,269,574,305 2,194,686,739 2,074,887,566 Secured 2,451,434,743 Generally, NPLs refer to loans and receivables whose principal and/or 2,074,887,566 interest is unpaid for Secured 2,451,434,743 P = 4,269,574,305 P = 4,510,164,677 thirty (30)NPLs days refer or more after and due receivables date or afterwhose they have become past due in is accordance P =4,269,574,305 Generally, to loans principal and/or interest unpaid for with P = 4,510,164,677 existing BSP rules regulations.

Thisor shall apply loans payable in lump sum and loanswith thirty (30) days orand more after due date after theytohave become past due in accordance payable BSP in quarterly, semi-annual, orThis annual installments, in which case, the total outstanding existing rules and regulations. shall apply to loans payable in lump sum and loans Generally, NPLs refer to loans and receivables whose principal and/or interest is unpaid for balance thereof shall semi-annual, be considered nonperforming. payable in quarterly, or annual installments, in which case, the total outstanding thirty (30) days or more after due date or after they have become past due in accordance with balance shall considered This nonperforming. existing thereof BSP rules andberegulations. shall apply to loans payable in lump sum and loans payable in quarterly, semi-annual, or annual installments, in which case, the total outstanding balance thereof shall be considered nonperforming.

PSBank ANNUAL REPORT 2012

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In the case of loans and receivables that are payable in monthly installments, the total outstanding balance thereof shall be considered nonperforming when three (3) or more installments are in arrears.

In the case of loans and receivables that are payable in daily, weekly, or semi-monthly installments, the total outstanding balance thereof shall be considered nonperforming at the same time that they become past due in accordance with existing BSP regulations, i.e., the entire outstanding balance of the receivable shall be considered as past due when the total amount of arrearages reaches ten percent (10%) of the total receivable balance.

Loans and receivables are classified as nonperforming in accordance with BSP regulations, or when, in the opinion of management, collection of interest or principal is doubtful. Receivables are not reclassified as performing until interest and principal payments are brought current or the loans are restructured in accordance with existing BSP regulations, and future payments appear assured.

Restructured loans and receivables which do not meet the requirements to be treated as performing receivables shall also be considered as NPLs. Current banking regulations allow banks with no unbooked valuation reserves and capital adjustments to exclude from nonperforming classification loans classified as Loss in the latest examination of the BSP which are fully covered by allowance for credit and impairment losses, provided that interest on said receivables shall not be accrued.

The NPLs of the Bank not fully covered by allowance for credit losses follow: 2011 2012 2011 2012 = 4,510,164,677 P = 4,269,574,305 Total NPLs P P =4,269,574,305 Total NPLs P =4,510,164,677 NPLs covered by allowance for credit (2,544,987,776) NPLs fullyfully covered by allowance for credit losses (2,493,194,336) (2,544,987,776) losses (2,493,194,336) P =1,724,586,529 P =2,016,970,341 = 2,016,970,341 P =1,724,586,529 P Restructured loans as of December 31, 2012 and 2011 amounted to P =753.4 million and P =834.8 million, respectively. The Bank’s loan portfolio includes non-risk loans as defined under BSP regulations totaling P =6.6 billion and P =10.9 billion as of December 31, 2012 and 2011, respectively.

Loan concentration as to economic activity follows (gross of unearned discounts and allowance for credit losses): Real estate RealOther estate community, social and activities Other personal community, social and Wholesaleactivities and retail trade personal Public utilities Wholesale and retail trade Banks, insurance and other financial Public institutions utilities Manufacturing Banks, insurance and other Services institutions financial Mining and quarrying Manufacturing Agriculture Services Others

Mining and quarrying Agriculture Others

2012 % 201231.60 = 24,288,661,965 P

P =24,288,661,965

2011

%

2011 %P =19,114,414,763 28.93 P =19,114,414,763 31.60

23.98 18,783,403,490 28.43 18,434,613,322 17,718,170,061 22.42 18,783,403,490 18,434,613,32223.05 23.98 14,814,216,975 7.45 5,210,564,531 7.89 5,719,824,760

17,718,170,061 5,719,824,760 3,543,281,031

14,814,216,975 5,210,564,531 1,816,539,010 2.75

28.43 22.42 7.89

0.87 1,816,539,010 4.61 576,168,023 13,723,731 0.02 740,735,928 1.76 5,584,652 0.01 576,168,023 0.984,992,061,943 7.56 P =66,067,413,046 13,723,731 100.00 0.02 5,584,652 0.09 4,992,061,943 6.46 P =66,067,413,046 100.00

2.75 1.12 0.87 0.02 0.01 7.56 100.00

23.05 4.61 7.45

1,355,008,092 1.76 754,865,033 3,543,281,031 0.98 0.02 17,530,740 1,355,008,092 66,541,925 0.09 754,865,033 6.46 4,965,620,254 17,530,740 = 76,864,117,183 100.00 P

66,541,925 4,965,620,254 P =76,864,117,183

% 28.93

740,735,928

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1.12

PSBank ANNUAL REPORT 2012

Others relates to economic activities classified as electricity, gas and water, construction, health and social work, public administration and defense, extra-territorial organization and bodies, and education and fishing.

Thrift banks are not covered by the loan concentration limit of 30% prescribed by the BSP.

10. Investments in an Associate and a Joint Venture The composition of this account follows: Investment in an Investment inassociate an associate Investment in a in joint venture Investment a joint venture

2011 2012 2012 2011 P =523,249,436 P =572,504,682P P = 572,504,682 =523,249,436 714,895,965 666,188,996 714,895,965 666,188,996 P = 1,238,145,401 P = 1,238,693,678 = 1,238,693,678 P =1,238,145,401 P

Investment in an Associate The Banks owns 2,500,000 shares of TFSPC representing 25% ownership.

The following is the summarized financial information of TFSPC: Total assets Total assets Total liabilities Total liabilities NetNet assets assets Gross revenue for the yearyear Gross revenue for the NetNet income for the year income for the year

2011 2011 2012 2012 P = 21,211,441,318 P = 22,361,419,014 = 22,361,419,014 P =21,211,441,318 P 19,095,276,084 19,961,717,271 19,961,717,271 19,095,276,084 2,116,165,234 2,399,701,743 2,116,165,234 2,399,701,743 1,869,282,620 1,751,719,347 1,751,719,347 1,869,282,620 197,020,982 257,311,109257,311,109 197,020,982

Movement in this account follows: Acquisition cost Acquisitionequity cost in net income: Accumulated Accumulated equityof inyear net income: Balance at beginning Balance at beginning of year Share in net income Share in net income Balance at end of year Balance Carrying value at end of year Carrying value

PSBank ANNUAL REPORT 2012

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2011 2012 2012 2011 P =270,546,789 P =270,546,789 = 270,546,789 P =270,546,789 P 188,374,870 252,702,647 252,702,647 49,255,246 188,374,87064,327,777 49,255,246 252,702,647 301,957,893 64,327,777 301,957,893 P =523,249,436 P =572,504,682 252,702,647 = 572,504,682 P =523,249,436 P

Investment in a Joint Venture Investment in a Joint Venture The Bank owns 8,000,000 shares of SMFC representing 40% ownership.

The Bank owns 8,000,000 shares of SMFC representing 40% ownership.

The following is the summarized financial information of the Bank’s investment in SMFC: The following is the summarized financial information of the Bank’s investment in SMFC: Share in the venture’s statement of Share in the jointjoint venture’s statement of financial Share in the joint venture’s statement of financial condition: condition: financial condition: Current assets Current assets Current assets Non-current assets Non-current assets Non-current assets Non-current liabilities Non-current liabilities Non-current liabilities Equity Equity Equity Share in the venture’s statement of Share in the jointjoint venture’s statement of income: Share in the joint venture’s statement of income: Other income income: Other income Operating expenses Other income Operating expenses Loss before income tax Operating expenses Benefit (provision Lossfrom before income for) tax income tax Loss before income tax NetBenefit loss forfrom the year (provision for) income tax Benefit from (provision for) income tax Net loss for the year Net loss for the year

2012 2012 2012

2011 2011

2011

P = 618,231,241 =675,731,245 P =675,731,245 P =618,231,241P = 618,231,241 P =675,731,245 P 74,744,239 78,813,63078,813,630 74,744,239 74,744,239 78,813,630 (26,786,484) (39,648,910) (26,786,484)(39,648,910) (26,786,484) (39,648,910) = 666,188,996 P =714,895,965 P P = 714,895,965 P = 666,188,996 P = 666,188,996 P =714,895,965 61,388,288 119,897,898 P = 119,897,898 =61,388,288 (138,261,955) (166,977,116) P P = 119,897,898 P =61,388,288 (166,977,116) (76,873,667) (47,079,218)(138,261,955) (166,977,116) (138,261,955) 20,817,536 (47,079,218) (1,627,751)(76,873,667) (47,079,218) (76,873,667) (P =56,056,131) (1,627,751) (P =48,706,969) 20,817,536 20,817,536 (1,627,751) (P = 48,706,969) (P =56,056,131) = 48,706,969) (P =56,056,131) (P

The following is the summarized financial information of SMFC: The following is the summarized financial information of SMFC: Total current assets Total current assets Total current assets Non-current assets Non-current assets Non-current assets Non-current liabilities Non-current liabilities Non-current liabilities Total other income Total other income Total other income Operating expenses Operating expenses Operating expenses Benefit from (provision income Benefit from (provision for)for) income tax tax Benefit from (provision for) income tax

2012 2012 2011 2011 2011 2012 = 1,545,578,102 P =1,689,328,111 P P =1,689,328,111 P = 1,545,578,102 P = 1,545,578,102 P =1,689,328,111 186,860,597 197,034,076 186,860,597 197,034,076 197,034,076 186,860,597 (66,966,210) 99,122,27599,122,275 (66,966,210) (66,966,210) 99,122,275 299,744,744 153,470,719 299,744,744 153,470,719 299,744,744 153,470,719 (417,442,790) 345,654,887 345,654,887 (417,442,790) 345,654,887 (417,442,790) (4,069,377) 52,043,840 (4,069,377) 52,043,840 (4,069,377) 52,043,840

Movement in this account follows: Movement in this account follows: Acquisition Acquisition cost:cost: Acquisition cost: Balance at beginning of year Balance at beginning of year Balance at beginning of year Capital infusion Capital infusion Capital infusion Balance at the endend of year Balance at the of year Balance at the end of year Accumulated share in net Accumulated share inlosses: net losses: share in net losses: Accumulated Balance at beginning of year Balance at beginning of year Balance at beginning of year Share in net loss Share in net loss Share in net loss Balance at end of year Balance at end of year Balance at end of year Carrying value Carrying value Carrying value

2012 2012 2012

2011 2011

2011

P = 800,000,000 P =400,000,000 P =400,000,000 P =800,000,000 = 800,000,000 P =400,000,000 P – 400,000,000 –400,000,000 – 400,000,000 800,000,000 800,000,000 800,000,000800,000,000 800,000,000 800,000,000 (29,047,904) (85,104,035) (P = 85,104,035) (P =29,047,904) = 85,104,035) (P =29,047,904) (P (56,056,131) (48,706,969) (48,706,969) (56,056,131) (48,706,969) (56,056,131) (85,104,035) (133,811,004) (85,104,035) (133,811,004) (85,104,035) (133,811,004) P =714,895,965 P =666,188,996P P = 666,188,996 =714,895,965 = 666,188,996 P =714,895,965 P

In 2011, the Bank invested an additional P =400.0 million in SMFC in accordance with the In 2011, the Bank invested an additional P =400.0 million in SMFC in accordance with the provisions of the BSP approval issued on September 11, 2009, which allowed the Bank to invest provisions of the BSP approval issued on September 11, 2009, which allowed the Bank to invest up to 40% interest or P =800.0 million in SMFC. The Bank initially invested P =400.0 million in up to 40% interest or P =800.0 million in SMFC. The Bank initially invested P =400.0 million in SMFC in 2009.

SMFC in 2009.

The Bank has no share in any contingent liabilities or capital commitments of TFSPC and SMFC The Bank has no share in any contingent liabilities or capital commitments of TFSPC and SMFC as of December 31, 2012 and 2011. as of December 31, 2012 and 2011.

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PSBank ANNUAL REPORT 2012

11. Property and Equipment The composition of and movements in this account follow: 2012 2012 Furniture, Fixtures and Leasehold Furniture, Equipment Improvements Leasehold Total Fixtures and

11. Property and Equipment

Land Building Cost Land Building Improvements Equipment Total Balance at beginning of year P225,877,870 P1,617,049,093 P1,708,381,439 P413,719,109 P3,965,027,511 Cost Acquisitions 29,852,494 in this 64,407,646 198,636,527 99,622,133 392,518,800 The composition of and movements account follow: Disposals at beginning of year P – – (60,725,445) – (60,725,445) =225,877,870 Balance P =1,617,049,093 =413,719,109 P =1,708,381,439 P P =3,965,027,511 Balance at end of year 255,730,364 1,846,292,521 513,341,242 4,296,820,866 29,852,4941,681,456,739 Acquisitions 64,407,646 99,622,133 392,518,800 2012 198,636,527 Accumulated Depreciation Furniture, – Disposals – – (60,725,445) (60,725,445) Balance at beginning of year – 262,430,332 1,098,347,301 222,097,760 1,582,875,393 Leasehold Fixtures and 255,730,364 Balance at end of year 1,681,456,739 513,341,242 1,846,292,521 4,296,820,866 Depreciation – 28,550,857 241,797,066 63,614,274 333,962,197 Land Building Total Equipment Improvements Accumulated Depreciation Disposals – – (32,354,114) – (32,354,114) Cost Balance at end of year – 290,981,189 1,307,790,253 285,712,034 1,884,483,476 – Balance beginning 262,430,332 222,097,760 1,098,347,301 1,582,875,393 P1,617,049,093 P1,708,381,439 P413,719,109 P3,965,027,511 Balance at at beginning of yearof yearP225,877,870 Net Book Value P255,730,364 P538,502,268 P227,629,208 P2,412,337,390 198,636,527 99,622,133 392,518,800 Acquisitions 29,852,494 P1,390,475,550 – 64,407,646 Depreciation Disposals Disposals Balance at end of year Balance at end of year Accumulated Depreciation Net Book Value of year Balance at beginning

28,550,857 63,614,274 241,797,066 333,962,197 – (60,725,445) – (60,725,445) – – – (32,354,114) (32,354,114) 1,681,456,739 1,846,292,521 513,341,242 4,296,820,866 – 290,981,189 20111,307,790,253 285,712,034 1,884,483,476 Furniture, P =255,730,364 P =1,390,475,550 P =227,629,208 P =538,502,268 P =2,412,337,390 1,098,347,301 222,097,760 1,582,875,393 – 262,430,332 Fixtures and Leasehold

– 255,730,364

Depreciation – 28,550,857 241,797,066 63,614,274 333,962,197 Land Building Equipment Improvements Total – (32,354,114) Disposals – – (32,354,114) Cost 2011 Balance at at end of yearof year – 290,981,189 1,307,790,253 285,712,034 1,884,483,476 Balance beginning P =208,802,981 P =1,415,703,891 P =1,463,189,972 P = 288,314,516 P = 3,376,011,360 Net Book Value P255,730,364 P538,502,268 P227,629,208 P2,412,337,390 Furniture, Acquisitions 17,074,889 P1,390,475,550 105,912,788 295,416,452 125,404,593 543,808,722 Disposals – – (50,224,985) – (50,224,985) Leasehold Fixtures and Reclassification (Note 12) – – – 95,432,414 Land 95,432,414 Building 2011 Equipment Improvements Total Balance at end of year 225,877,870 1,617,049,093 1,708,381,439 413,719,109 3,965,027,511 Furniture, Cost Accumulated Depreciation Fixtures and Leasehold =208,802,981 Balance beginning P =1,415,703,891 P =288,314,516 P =1,463,189,972 P =3,376,011,360 Balance at at beginning of yearof year P – 194,158,581 899,508,042 175,028,115 1,268,694,738 Land Building Equipment Improvements Total Depreciation – 25,547,773 224,091,576 47,069,645 296,708,994 17,074,889 Acquisitions 105,912,788 125,404,593 295,416,452 543,808,722 Cost Disposals – – – (25,252,317) –P Disposals –(25,252,317) – (50,224,985) (50,224,985) Balance at beginning of year P =208,802,981 =1,415,703,891 P =1,463,189,972 P =288,314,516 P =3,376,011,360 Reclassification (Note 12) – 42,723,978 – – 42,723,978 Acquisitions 17,074,889 105,912,788 295,416,452 125,404,593 543,808,722 – Reclassification (Note 12) 95,432,414 – – 95,432,414 Balance – 262,430,332 1,098,347,301 222,097,760 1,582,875,393 Disposalsat end of year – – (50,224,985) – (50,224,985) 225,877,870 Balance at end of year 1,617,049,093 413,719,109 1,708,381,439 3,965,027,511 Book Value P = 225,877,870 P = 1,354,618,761 P = 610,034,138 P = 191,621,349 P = 2,382,152,118 Net Reclassification (Note 12) – 95,432,414 – – 95,432,414

Accumulated Balance at end of Depreciation year 225,877,870 1,617,049,093 1,708,381,439 413,719,109 3,965,027,511 – Balance at beginning 194,158,581 175,028,115 1,268,694,738 899,508,042 Depreciationof year Accumulated In 2011, the Bank reclassified units in the Bank’s premises that were previously leased out to Balance at beginning of year – 899,508,042 175,028,115 1,268,694,738 – 194,158,581 Depreciation 25,547,773 47,069,645 224,091,576 296,708,994 various parties but were occupied –by the Bank.

Depreciation 224,091,576 47,069,645 296,708,994 – 25,547,773 Disposals – – (25,252,317) (25,252,317) Disposals – – (25,252,317) – (25,252,317) – 42,723,978 Reclassification (Note 12) 42,723,978 – – 42,723,978 Reclassification (Note 12) – – – 42,723,978 Gain sale ofofproperty and equipment amounted to P =5.81,098,347,301 million, 222,097,760 P =3.3 million and P =2.4 million – 262,430,332 Balance end year 262,430,332 222,097,760 1,582,875,393 Balanceon at at end of year – 1,098,347,301 1,582,875,393 Book Value P =225,877,870 P =610,034,138 P =191,621,349 P =2,382,152,118 Net in 2012, 2011 and 2010, respectively.

P =225,877,870P=1,354,618,761 Net Book Value P =1,354,618,761 P =191,621,349 P =610,034,138 P =2,382,152,118

The details of depreciation statements of income follow: In 2011, the Bank reclassifiedunder units the in the Bank’s premises that were previously leased out to various parties but were occupied by the Bank.

2012 2011 2010 P = 296,708,994 P = 250,487,791 Property and equipment P333,962,197 Gain on sale of property and equipment amounted to P =5.8 million, P =3.3 million and P =2.4 million Investment properties (Note 12) 64,715,180 64,987,625 62,360,031 in 2012, 2011 and 2010, respectively.

Chattel mortgage properties (Note 14) 91,093,519 66,381,668 39,190,286 The details of depreciation under the statements of income follow: P =428,078,287 P =352,038,108 P489,770,896 2012

2011

2010

2011 carrying 2010 2012 As of December 31, 2012 and 2011, property and equipment of the Bank with gross P =296,708,994 P =250,487,791 Property and equipment P333,962,197 P =250,487,791 Property and equipment P =296,708,994 P =333,962,197 amounts of P =754.0 million and12) P =613.7 million, respectively, are fully depreciated but are still Investment properties (Note 64,715,180 64,987,625 62,360,031 62,360,031 Investment properties (Note 12) 64,987,625 64,715,180 being used.mortgage Chattel properties 39,190,286 Chattel(Note mortgage 14) properties (Note 14) 91,093,519 66,381,668 39,190,286 66,381,668 91,093,519 P = 428,078,287 P = 352,038,108 P489,770,896 P P = 352,038,108 P =428,078,287 =489,770,896

As of December 31, 2012 and 2011, property and equipment of the Bank with gross carrying amounts of P =754.0 million and P =613.7 million, respectively, are fully depreciated but are still being used.

PSBank ANNUAL REPORT 2012

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12. Investment Properties The composition of and movements in this account follow: 12. Investment Properties Land

2012 2012 Building Building Improvements

Total

TheCost composition of and movements in this account follow: Total Land Improvements CostBalance at beginning of year P = 1,679,990,492 P = 1,740,717,671 P = 3,420,708,163 2012 Additions (Note 32)of year 192,238,853 299,159,777 491,398,630 P =3,420,708,163 P =1,679,990,492 Balance at beginning P =1,740,717,671 Building Disposals (364,191,403) (288,313,298) (652,504,701) 491,398,630 192,238,853 Additions (Note 32) 299,159,777 Land Improvements Total Balance at end of year 1,508,037,942 1,751,564,150 3,259,602,092 (652,504,701) (364,191,403) Disposals (288,313,298) Cost Accumulated 3,259,602,092 1,508,037,942 Balance at end ofDepreciation year 1,751,564,150 Balance at of P = 1,679,990,492 P = 1,740,717,671 = 3,420,708,163 Balance at beginning beginning of year year – 372,695,812 P 372,695,812 Accumulated Depreciation Additions (Note 32)11) 192,238,853 299,159,777 491,398,630 Depreciation (Note – 64,715,180 64,715,180 372,695,812 – Balance at beginning of year 372,695,812 (652,504,701) Disposals (364,191,403) (288,313,298) Disposals – (42,244,050) (42,244,050) 64,715,180 – Depreciation (Note 11) 64,715,180 Balance at end of year 1,508,037,942 1,751,564,150 3,259,602,092 Balance at end of year – 395,166,942 395,166,942 (42,244,050) – Disposals (42,244,050) Accumulated Depreciation Allowance for Impairment 395,166,942 –– Balance at end of year of year 395,166,942 372,695,812 Balance at beginning 372,695,812 Losses Depreciation (Note 11)of year – 64,715,180 64,715,180 Allowance for Impairment Balance at beginning 217,342,500 28,410,417 245,752,917 Disposals – (42,244,050) (42,244,050) Losses Provisions for the year (Note 15) 38,695,339 58,062,263 96,757,602 Balance at end of year – 395,166,942 Disposals (97,566,837) (3,427,404) (100,994,241) 245,752,917 217,342,500 Balance at beginning of year 28,410,417 395,166,942 Allowance for Impairment Balancefor at end of year 158,471,002 83,045,276 96,757,602 38,695,339 Provisions the year (Note 15) 58,062,263 241,516,278 NetLosses Book Value P = 1,349,566,940 P = 1,273,351,932 P = 2,622,918,872 (100,994,241) (97,566,837) Disposals (3,427,404) 28,410,417 245,752,917 Balance at beginning of year 217,342,500 241,516,278 158,471,002 Balance at end of year 83,045,276 Provisions for the year (Note 15) 38,695,339 58,062,263 96,757,602 2011 P = 2,622,918,872 P =1,349,566,940 Net Disposals Book Value P = 1,273,351,932 (97,566,837) (3,427,404) (100,994,241)

Building Balance at end of year 158,471,002 83,045,276 241,516,278 Land Improvements Total Net Book Value P = 1,349,566,940 P = 1,273,351,932 P = 2,622,918,872 2011 Cost BuildingP Balance at beginning of year P =1,748,837,263 P =1,653,007,949 =3,401,845,212 Total Land Improvements 2011 Additions (Note 32) 218,381,596 381,801,210 600,182,806 CostDisposals Building (287,228,367) (198,659,074) (485,887,441) P =3,401,845,212 Land Improvements Total P =1,748,837,263 Balance at beginning of 11) year P =1,653,007,949 (95,432,414) Reclassification (Note – (95,432,414) Cost 600,182,806 218,381,596 Additions (Note 32) 381,801,2103,420,708,163 Balance at end of year 1,679,990,492 1,740,717,671 Balance at beginning of year P = 1,748,837,263 P = 1,653,007,949 P = 3,401,845,212 (485,887,441) (287,228,367) Disposals (198,659,074) Accumulated Depreciation Additions 32) 11) 218,381,596 381,801,210 600,182,806 Balance at(Note beginning of year =– P =376,002,088 P =376,002,088 (95,432,414) –P Reclassification (Note (95,432,414) Disposals (287,228,367) (198,659,074) (485,887,441) Depreciation (Note – 64,987,625 64,987,625 3,420,708,163 1,679,990,492 Balance at end of year11) 1,740,717,671 Reclassification (Note 11) – (95,432,414) (95,432,414) Disposals Depreciation – (25,569,923) (25,569,923) Accumulated Balance at end of year11) 1,679,990,492 1,740,717,671 3,420,708,163 Reclassification (Note – (42,723,978) (42,723,978) 376,002,088 – Balance at beginning of year 376,002,088 Accumulated Balance at endDepreciation of year – 372,695,812 372,695,812 64,987,625 – Depreciation (Note 11) 64,987,625P Balance at beginning of year P =– P =376,002,088 =376,002,088 for Impairment Allowance (25,569,923) – Disposals (25,569,923) 64,987,625 Depreciation – 64,987,625 Losses (Note 11) (42,723,978) – Reclassification (Note 11) (42,723,978) (25,569,923) Disposals – (25,569,923) Balance at beginning of year 226,489,697 27,044,495 253,534,192 372,695,812 – Balance at end of year 372,695,812 (42,723,978) Reclassification (Note – (42,723,978) Provisions for the year11) (Note 15) 4,791,406 6,183,484 10,974,890 Allowance for Impairment Balance at end of year – 372,695,812 372,695,812 Disposals (13,938,603) (4,817,562) (18,756,165) for Impairment Allowance Losses Balance at end of year 217,342,500 28,410,417 245,752,917 253,534,192 226,489,697 Balance at beginning of year 27,044,495 Book Value P =1,462,647,992 P =1,339,611,442 P =2,802,259,434 NetLosses Balancefor at beginning of year15) 226,489,697 27,044,495 253,534,192 10,974,890 4,791,406 Provisions the year (Note 6,183,484 Provisions for the year (Note 15) 4,791,406 6,183,484 10,974,890 (18,756,165) (13,938,603) Disposals (4,817,562) Depreciation losses on investment properties(18,756,165) amounted to Disposals and provision for impairment (13,938,603) (4,817,562) 245,752,917 217,342,500 Balance at end of year 28,410,417 P =62.4 million and P = 30.1 million, respectively, in 2010 (Notes 11 and 15).

Balance at end of year 217,342,500 28,410,417 245,752,917 P =2,802,259,434 P =1,462,647,992 Net Book Value P =1,339,611,442 P =1,462,647,992 P =1,339,611,442 P =2,802,259,434 Net Book Value

Depreciation and provision for impairment losses on investment properties amounted to P =62.4 million and P =30.1 million, respectively, in 2010 (Notes 11 and 15).

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PSBank ANNUAL REPORT 2012

The details of the net book value of investment properties follow: 2012

20122011

2011 estate properties acquired in RealReal estate properties acquired in settlement of loans = 2,426,330,294 P P =2,590,970,221P settlement of loans and receivables P =2,590,970,221 and receivables =2,426,330,294 Bank premises leased to third parties Bank premises leased to third parties andand held for 211,289,213 held for capital appreciation 196,588,578 211,289,213 capital appreciation 196,588,578 = 2,622,918,872 P P =2,802,259,434P P =2,802,259,434 =2,622,918,872

As of December 31, 2012 and 2011, the aggregate fair value of investment properties amounted to P =2.9 billion and P =3.0 billion, respectively.

Gain on foreclosure of investment properties amounted to P =155.1 million, P =208.8 million and P =224.4 million in 2012, 2011 and 2010, respectively.

Loss on sale of investment properties amounted to P =15.1 million in 2012 and P =22.1 million in 2011.

In 2010, the Bank realized gain on sale of investment properties amounted to P =15.2 million.

Rental income on investment properties included in miscellaneous income amounted to P =63.5 million, P =66.4 million and P =61.8 million in 2012, 2011 and 2010, respectively (Notes 23 and 25).

Operating expenses incurred in maintaining investment properties (included under amounted to P miscellaneous expense)amounted) =10.1 million, P =10.0 million and P =7.5 million in 2012, 2011 and 2010, respectively.

13. Goodwill and Intangible Assets This account consists of: 2012 P = 53,558,338

Goodwill Goodwill Intangible assets Intangible assets Software costs costs Software Branch Licenses Branch Licenses

147,059,763 31,123,737 178,183,500 P = 231,741,838

20122011 P =53,558,338 P =53,558,338

2011 P =53,558,338

174,097,353 147,059,763 174,097,353 27,523,737 31,123,737 27,523,737 201,621,090 178,183,500 201,621,090 =255,179,428 P =231,741,838 P =255,179,428 P

The movements of intangible assets follow:

Balance at beginning of year Balance at beginning of year Additions Additions Amortization Amortization Balance at end ofof year Balance at end year

PSBank ANNUAL REPORT 2012

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2012 2012 Branch Software Software CostsBranch Licenses Total Costs Total Licenses P =174,097,353 P =201,621,090 P =27,523,737 = 174,097,353 P = 27,523,737 P = 201,621,090 P 30,200,631 33,800,631 30,200,631 3,600,000 3,600,000 33,800,631 (57,238,221) (57,238,221) – (57,238,221) – (57,238,221) P =147,059,763 =178,183,500 =31,123,737 P = 147,059,763 P = 31,123,737P P = 178,183,500 P

Balance at beginning of year Additions Balance at beginning of year Additions Amortization Amortization Balance at end of year Balance at end of year

2011 Branch Software 2011 Total Licenses Costs Software Branch P =187,126,214 =24,123,737 P =163,002,477 Costs Licenses P Total 67,619,168 64,219,168 P =163,002,477 P =24,123,737 3,400,000 P =187,126,214 64,219,168 3,400,000 67,619,168 (53,124,292) – (53,124,292) (53,124,292) –P (53,124,292) P =201,621,090 =27,523,737 P =174,097,353 P =174,097,353

P =27,523,737

P =201,621,090

Amortization of software costs in 2010 amounted to P =41.7 million.

14. Other Assets This account consists of: Chattel mortgage properties - net- net Chattel mortgage properties Prepayments Prepayments Security deposits (Note 29) 29) Security deposits (Note Sundry debits Sundry debits Documentary stamps on hand Documentary stamps on hand Stationeries andand supplies on hand Stationeries supplies on hand RCOCI RCOCI Inter-office floatfloat items Inter-office items Creditable withholding tax tax Creditable withholding Deferred charges Deferred charges Others Others

2011 2012 2012 2011 =381,841,919 P =434,426,293 = 434,426,293 P =381,841,919 P P 129,955,43687,910,482 87,910,482 129,955,436 95,618,64287,416,908 87,416,908 95,618,642 43,600,933 6,323,099 6,323,099 43,600,933 22,306,73718,840,609 18,840,609 22,306,737 18,806,637 11,279,859 11,279,859 18,806,637 17,644,237 20,181,320 20,181,320 17,644,237 6,416,341 12,825,657 6,416,341 12,825,657 10,136,714 10,136,714 100,120,295 100,120,295 9,497,45317,863,642 17,863,642 9,497,453 3,412,535 3,474,095 3,474,095 3,412,535 =741,668,569 P =798,231,274 P = 798,231,274 P =741,668,569P

Prepayments represent prepaid insurance, prepaid rent, and other prepaid expenses.

The movements of chattel mortgage properties - net follow: CostCost Balance at beginning of year Balance at beginning of year Additions (Note 32) Additions (Note 32) Disposals Disposals Balance at the endend of year Balance at the of year Accumulated Depreciation Accumulated Depreciation Balance at beginning of year Balance at beginning of year Depreciation (Note 11) Depreciation (Note 11) Disposals Disposals Balance at the endend of year Balance at the of year Allowance for Impairment Losses Allowance for Impairment Losses Balance at beginning and end of year Balance at beginning and end of year Net Book Value Net Book Value

2012 2012

2011

2011

P =443,153,670P P =267,189,373 P = 443,153,670 =267,189,373 840,698,632 840,698,632 667,187,188667,187,188 (491,222,891) (780,630,820) (491,222,891) (780,630,820) 503,221,482 443,153,670 503,221,482 443,153,670 60,695,661 33,043,58133,043,581 60,695,661 91,093,519 66,381,66866,381,668 91,093,519 (38,729,588) (83,610,081) (83,610,081) (38,729,588) 68,179,099 68,179,099 60,695,66160,695,661 616,090 616,090 616,090 616,090 P =434,426,293 P =381,841,919 P = 434,426,293 P =381,841,919

Loss on foreclosure of chattel mortgage properties amounted to P =138.1 million, P =105.9 million and P =108.4 million in 2012, 2011 and 2010, respectively.

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PSBank ANNUAL REPORT 2012

Loss on sale of chattel mortgage properties for 2012 amounted to P =21.5 million while the Bank realized gain on sale of chattel mortgage properties amounting to P =47.2 million and P =45.4 million in 2011 and 2010, respectively.

15. Allowance for Credit and Impairment Losses Details of the provision for credit and impairment losses charged to current operations follow: Loans and receivables Investment properties (Note 12)

Loans and receivables Investment properties (Note 12)

PSBank ANNUAL REPORT 2012

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2012 2011 2010 P = 1,047,963,260 P =645,114,031 P =882,158,108 2011 10,974,890 30,124,128 96,757,602 2012 = 1,144,720,862 P =656,088,921P P =912,282,236 P =645,114,031 P =1,047,963,260

96,757,602 P =1,144,720,862

10,974,890 P =656,088,921

2010 P =882,158,108 30,124,128 P =912,282,236

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PSBank ANNUAL REPORT 2012

Gross amount of loans individually impaired, before deducting any individual impairment allowance

Balance at beginning of year Provisions for the year charged against profit or loss Reversal of allowance Amount written off Balance at end of year Individual impairment Collective impairment

Gross amount of loans individually impaired, before deducting any individual impairment allowance

Balance at beginning of year Provisions for the year charged against profit or loss Reversal of allowance Amount written off Balance at end of year Individual impairment Collective impairment

P =872,818

5,326 – – P =178,239 P =138,675 39,564 P =178,239

P =359,998

P =–

Personal P =2,236,199

P =–

P =993,506

P =–

193,635 230,398 – – – (470,157) P =962,695 P =1,996,440 P =591,700 P =– 370,995 1,996,440 P =962,695 P =1,996,440

Real Estate Commercial P =172,913 P =769,060

142,325 – (75,354) P =542,173 P =– 542,173 P =542,173

Consumption P =475,202

P =467,625

P =–

249,358 406,841 – – – (472,380) P =1,212,053 P =1,930,901 P =728,675 P =– 483,378 1,930,901 P =1,212,053 P =1,930,901

Receivables from Customers

90,806 – – P =269,045 P =211,487 57,558 P =269,045

172,943 – – P =715,116 P =– 715,116 P =715,116

Consumption Real Estate Commercial Personal P =542,173 P =178,239 P =962,695 P =1,996,440

Receivables from Customers

P =304,096

73,430 (47,690) – P =293,475 P =59,266 234,209 P =293,475

Accrued Interest Receivable P =267,735

2011

P =361,293

124,536 (70,285) – P =347,726 P =66,620 281,106 P =347,726

Accrued Interest Receivable P =293,475

2012

P =18,313

2,878 – – P =26,777 P =18,313 8,464 P =26,777

P =95,611

– – – P =95,611 P =95,611 – P =95,611

P =177,680

– (12,228) – P =464,733 P =177,680 287,053 P =464,733

P =18,313

– (4,103) – P =23,899 P =18,313 5,586 P =23,899

P =95,611

– – – P =95,611 P =95,611 – P =95,611

Other Receivables Sales Unquoted Accounts Contract Debt Receivable Receivable Investments P =476,961 P =28,002 P =95,611

P =178,680

601 – – P =465,334 P =178,680 286,654 P =465,334

Other Receivables Sales Unquoted Contract Accounts Debt Receivable Receivable Investments P =464,733 P =23,899 P =95,611

Changes in the allowance for credit losses on loans and receivables follow (in thousands):

645,114 (64,021) (545,511) P =4,558,568 P =1,081,245 3,477,323 P =4,558,568

P =1,949,204

P =–

Total P =4,522,986

P =1,994,340

1,047,963 (70,285) (472,380) P =5,063,866 P =1,299,386 3,764,480 P =5,063,866

Total P =4,558,568

– – – P =1,303 P =– 1,303 P =1,303

Bills Purchased P =1,303

P =–

– – – P =1,303 P =– 1,303 P =1,303

Bills Purchased P =1,303

16. Deposit Liabilities BSP Circular 753 which took effect on April 6, 2012, promulgated the unification of the statutory/legal and liquidity reserve requirement on non-FCDU deposit liabilities from 10.00% to 6.00%. Formerly, there was a separate reserve requirement percentage for liquidity and statutory reserves equivalent to 8.00% and 2.00%, respectively. Also, with the new regulations, only demand deposit accounts maintained by banks with the BSP are eligible for compliance with reserve requirements. This was tantamount to the exclusion of government securities and cash in vault as eligible reserves. As of December 31, 2012 and 2011, the Bank is in compliance with such regulations.

As of December 31, 2012 and 2011, the following assets were set aside as reserves for deposit liabilities: 2012 2011 2012 2011 P =5,135,068,254 P =3,842,089,880 P = 5,135,068,254 P =3,842,089,880 – 1,907,485,425 – 1,907,485,425 – 1,787,289,752 – 1,787,289,752 P =5,135,068,254 P =7,536,865,057 P = 5,135,068,254 P =7,536,865,057

DueDue from BSPBSP from Cash Cash AFSAFS investments investments

Interest expense on deposit liabilities consists of: 2012 2011 2010 2012 2011 2010 P = 111,147,863 P = 177,165,549 P = 145,109,361 P =145,109,361 P = 111,147,863 P =177,165,549 60,901,472 55,415,849 55,415,849 60,901,472 52,030,139 52,030,139 2,997,224,597 2,496,090,429 2,789,481,681 2,789,481,681 2,997,224,597 2,496,090,429 P =2,961,531,016 P =3,229,805,995 P =2,693,229,929 P =2,693,229,929 P = 2,961,531,016 P =3,229,805,995

Demand Demand Savings Savings Time Time

Peso-denominated deposit liabilities earn annual fixed interest rates ranging from 0.5% to 10.50% in 2012, 2011 and 2010, while foreign currency-denominated deposit liabilities earn annual fixed interest rates ranging from 0.25% to 6.00% in 2012 and from 0.5% to 8.75% in 2011 and 2010.

17. Subordinated Notes On February 20, 2012, the Bank issued P =3.0 billion in Unsecured Subordinated Notes with an interest rate of 5.75% due 2022 (the Notes). The BSP approved the issuance and sale of the Notes on December 29, 2011.

Among the significant terms and conditions of the issuance of the Notes are: a. Issue price at 100.00% of the face value of each Note; b. The Notes bear interest at the rate of 5.75% per annum from and including February 20, 2012 but excluding February 20, 2022. The interest shall be payable quarterly in arrears at the end of each interest period on every 20th of May, August, November and February of each year, commencing on February 20, 2012 until the maturity date;

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c. The Notes will constitute direct, unconditional and unsecured obligations of the Bank. The Notes will be subordinated in right of payment of principal and interest to all depositors and other creditors of the Issuer and will rank pari passu and without any preference among themselves, but in priority to the rights and claims of holders of all classes of equity securities of the Bank, including holders of preferred shares, if any; d. Subject to satisfaction of certain regulatory approval requirements, the Bank may redeem the Notes in whole and not only in part at a redemption price equal to 100% of the principal amount together with the accrued and unpaid interest upon at least thirty (30) days notice prior to call option date, which is the Banking Day immediately following the fifth anniversary of the issue date of the Notes or February 21, 2017.

As of December 31, 2012, the Bank is in compliance with the terms and conditions upon which the subordinated notes have been issued.

The movements in subordinated notes payable follow: Amortized costcost Amortized Amortization of debt issuance costs Amortization of debt issuance costs Settlement of subordinated notes Settlement of subordinated notes

2012 2011 2011 2012 P =2,967,774,300 P =1,977,141,032 = 2,967,774,300 P =1,977,141,032 P 22,858,968 2,023,042 2,023,042 22,858,968 – (2,000,000,000) – (2,000,000,000) P =2,969,797,342 P = – = 2,969,797,342 P =– P

On January 28, 2011, the Bank exercised the call option on its P =2.0 billion Subordinated notes previously issued in 2006.

18. Accrued Taxes, Interest and Other Expenses This account consists of: Accrued interest payable Accrued interest payable Accrued other taxes and and licenses payable Accrued other taxes licenses payable Accrued other expenses payable (Note 29) 29) Accrued other expenses payable (Note

2012 2011 2011 2012 P = 185,177,987 P = 191,368,152 P = 185,177,987 P =191,368,152 100,114,764 63,724,110 63,724,110 100,114,764 805,265,138 916,541,540 805,265,138 916,541,540 P =1,054,167,235 P =1,208,024,456 P = 1,054,167,235 P =1,208,024,456

Accrued other expenses payable consist of: Fringe benefits Fringe benefits Lease payable Lease payable Insurance Insurance Advertising Advertising Information technology Information technology Litigation Litigation Securities, messengerial and and janitorial Securities, messengerial janitorial Professional and and consultancy feesfees Professional consultancy Others Others

2011 2012 2012 2011 P = 386,378,574 P = 305,916,522 P = 305,916,522 P =386,378,574 136,201,285 131,673,251131,673,251 136,201,285 98,228,293 110,120,260110,120,260 98,228,293 104,159,202 98,050,242 104,159,202 98,050,242 67,599,410 67,599,410 131,816,802131,816,802 22,388,207 32,914,929 22,388,207 32,914,929 21,537,340 21,537,340 6,324,231 6,324,231 16,125,758 7,684,748 7,684,748 16,125,758 28,691,359 15,996,26515,996,265 28,691,359 P =916,541,540 P = 805,265,138 P = 805,265,138 P =916,541,540

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Fringe benefits include salaries and wages as well as medical, dental and hospitalization benefits.

Others include accruals for membership fees and dues, director’s fees, utilities and maintenance expenses.

19. Other Liabilities This account consists of: Accounts payable Accounts payable Net retirement liability (Note Net retirement liability (Note 24) 24) Dividends payable (Note 21) Dividends payable (Note 21) Other credits Other credits Withholding taxes payable Withholding taxes payable Bills purchased-contra (Note Bills purchased-contra (Note 9) 9) Sundry credits Sundry credits to the Treasurer of Philippines the Philippines DueDue to the Treasurer of the SSS, Medicare, ECP & HDMF premium SSS, Medicare, ECP & HDMF premium payable payable Miscellaneous Miscellaneous

2012 2011 2012 2011 P = 864,908,017 P = 753,599,153 P =864,908,017 P =753,599,153 212,362,135 171,991,637 171,991,637 212,362,135 176,673,172 35,370,001 176,673,172 35,370,001 154,747,270 96,345,442 96,345,442 154,747,270 72,767,194 72,767,194 64,115,051 64,115,051 61,578,434 61,578,434 65,166,130 65,166,130 48,310,639 48,310,639 32,678,044 32,678,044 7,002,855 7,002,855 7,004,003 7,004,003

6,437,114 6,142,476 6,437,114 79,365,388 6,142,476 65,385,243 79,365,388 65,385,243 P =1,684,152,218 P =1,297,797,180 P = 1,684,152,218 P =1,297,797,180

Accounts payable includes payable to suppliers and service providers, and loan payments and other charges received from customers in advance.

Other credits represent long-outstanding unclaimed balances from inactive and dormant accounts.

Miscellaneous liabilities include incentives for housing loan customers that are compliant with the payment terms amounting to P =51.3 million and P =46.2 million as of December 31, 2012 and 2011, respectively.

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20. Maturity Analysis of Assets and Liabilities The following table shows an analysis of assets and liabilities analyzed according to whether they are expected to be recovered or settled within one year and beyond one year from statement of condition date (in thousands): 2012 2012 Within Beyond Beyond Within One Year One Year Total One Year One Year

2011 2011 Within Within Beyond Beyond Total One YearOne year One Year One year Total

Total Financial Assets Financial Assets P =2,811,064 P =2,811,064 =2,811,064 – P =3,921,289 P =3,921,289 P P = – = 2,811,064 P =– P =P P =3,921,289 =– P =3,921,289 Cash and cash items P Cash andother other cash items Due from 5,514,833 – 5,514,833 4,303,595 – 4,303,595 5,514,833 5,514,833 – 4,303,595 4,303,595 – Due fromBSP BSP Due from banks 6,002,439 – 6,002,439 3,736,0733,736,073 – 3,736,073 6,002,439 6,002,439 – 3,736,073 – Due fromother other banks – 6,100,000 10,480,000 – 10,480,000 10,480,000 Interbank loans receivable and SPURA 6,100,000 6,100,000 – – 10,480,000 Interbank loans receivable and SPURA 6,100,000 FVPL investments 120,748 – 120,748 54,794 – 54,794 120,748161,418 54,794 120,748 – 54,794 – FVPL investments AFS investments - gross (Note 8) 547,785 2,807,416 3,355,201 18,577,705 18,739,123 3,355,201 547,785 2,807,416 161,418 18,577,705 AFS investments gross (Note 8) HTM investments 276,703 13,286,223 13,562,926 790,860 11,522,955 12,313,815 18,739,123 13,562,926 276,703 13,286,223 HTM 67,091,540 80,090,008 12,309,422 790,860 56,368,402 11,522,955 68,677,824 12,313,815 Loansinvestments and receivables - gross (Note 9) 12,998,468 80,090,00820,536 12,998,468 95,619 67,091,540 113,661 56,368,402 12,309,422 Other assets - gross* (Note 14) 18,042 87,417 107,953 68,677,824 Loans and receivables - gross (Note 9) 83,280,79895,619 117,670,880113,661 35,777,987 20,536 86,556,479 122,334,466 34,390,08218,042 107,953 87,417 Other assets - gross* (Note 14) Nonfinancial Assets 34,390,082 83,280,798 117,670,880 35,777,987 86,556,479 122,334,466 Investments in Assets an associate and a joint Nonfinancial venture P =– P = 1,238,694 P = 1,238,694 P =– P =1,238,145 P =1,238,145 Investments in an associate and a joint Property and equipment - gross (Note 11) – 4,296,821 4,296,821 – 3,965,028 3,965,028 1,238,694 – 1,238,694 1,238,145 1,238,145 – venture 3,259,602 – 3,420,708 3,420,708 Investment properties - gross (Note 12) – 3,259,602 Property and equipment - gross Deferred tax assets – 1,011,363 1,011,363 – 1,139,490 1,139,490 4,296,821 –244,207 4,296,821916,928 – 3,965,028 (Note 11) - gross** (Note 14) Other assets 672,721 613,376 276,135 889,511 3,965,028 3,259,602 – 3,259,602 3,420,708 – Investment properties - gross (Note 12) 672,721 10,050,687 10,723,408 613,376 10,039,506 10,652,882 3,420,708 1,011,363 – 1,011,363 1,139,490 1,139,490 – Deferred tax assets Less: Allowance for credit and 4,850,947 impairment losses 5,352,010916,928 672,721 244,207 889,511 276,135 613,376 Other assets - gross** (Note 14) Accumulated depreciation 10,723,408 672,721 10,050,687 10,652,882 613,376 10,039,506 (Notes 11for andcredit 12) 2,279,650 1,955,571 Less:Allowance and impairment Unearned discounts (Note 9) 4,613,560 5,929,104 5,352,010 4,850,947 losses 12,735,622 12,245,220 Accumulated depreciation (Notes 11 = 35,062,803 P = 93,331,485 P = 116,149,068 P =36,391,363 P =96,595,985 P =120,251,726 P 2,279,650 1,955,571 and 12) * Others assets under financial assets comprise petty cash fund, shortages, RCOCI and security deposits.

4,613,560 5,929,104 Unearned discounts (Note 9) ** Other assets under nonfinancial assets comprise inter-office float items, prepaid expenses, stationery and supplies on hand, sundry 12,245,220 12,735,622 debits, documentary stamps on hand, deferred charges, postages stamps, chattel mortgage properties, goodwill and intangible =116,149,068 P P =35,062,803 P =93,331,485 P =120,251,726 =96,595,985 P =36,391,363 P assets. * Others assets under financial assets comprise petty cash fund, shortages, RCOCI and security deposits.

2011 2012 ** Other assets under nonfinancial assets comprise inter-office float items, prepaid expenses, stationery and supplies on hand, sundry debits, Beyond Within Beyond Within documentary stamps on hand, deferred charges, postages stamps, chattel mortgage properties, goodwill and intangible assets.

One Year One Year Total One Year One Year Total Financial Liabilities 2012 2011 = 77,891,429 P = 16,732,858 P = 94,624,287 P =85,185,741 P =16,364,595 P =101,550,336 Deposit liabilities P Beyond Subordinated notes –Within 2,969,797 2,969,797 – Within – Beyond – Total One Year One Year Total One year One year Treasurer’s, cashier’s and manager’s checks Liabilities 756,629 – 756,629 654,514 – 654,514 Financial – 805,265 916,542 916,542 Accrued other expenses payable 805,265 P =94,624,287 P =77,891,429 P =16,732,858 P =101,550,336 P =85,185,741 P =–16,364,595 Deposit liabilities Accrued interestnotes payable 185,178 – 185,178 – 191,368 2,969,797191,368 – 2,969,797 – – – Subordinated Other liabilities Treasurer’s, cashier’s and manager’s – 864,908 753,598 – 753,598 Accounts payable 864,908 756,629 –154,747756,629 654,514 654,514 – checks – 96,345 96,345 Other credits – 154,747 805,265 – 61,578805,26565,166 916,542 916,542 – Accrued other expenses Bills purchased - contra payable 61,578 – – 65,166 185,178 –176,673185,17835,370 191,368 191,368 – Accrued interest payable Dividends payable 176,673 – – 35,370 7,003 – 7,004 7,004 Due liabilities to Treasurer of the Philippines – 7,003 Other Deposits forpayable keys 926 – 926864,908 982 753,598 – 864,908 – 753,598 –982 Accounts – 1,993154,747 1,269 – 1,269 Others*credits 1,993 – 154,747 96,345 – 96,345 Other 80,744,57961,578 19,864,405 100,608,984 87,804,550 65,166 16,467,944 104,272,494 61,578 – 65,166 – Bills purchased - contra Nonfinancial Liabilities 176,673 176,673 – 35,370 – 35,370 Dividends payable – 63,724 100,115 – 100,115 Accrued other taxes and licenses payable 63,724 – 70,702 7,003416,324 7,003 7,004 – 7,004 Due to Treasurer of the Philippines Other liabilities** 345,622 276,022 62,040 338,062 926 926 – 982 982 – Deposits for keys 409,346 70,702 480,048 376,137 62,040 438,177 1,993 – 1,269 1,269 – Others* P = 81,153,925 1,993 P = 19,935,107 P = 101,089,032 P =88,180,687 P =16,529,984 P =104,710,671

80,744,579 19,864,405 100,608,984 87,804,550 16,467,944 104,272,494 * Others under financial liabilities comprise payment orders payable and overages.

Nonfinancial Liabilities ** Other liabilities under nonfinancial liabilities comprise advance rentals on bank premises, sundry credits, withholding taxes, SSS, 63,724 63,724 liability, and miscellaneous – 100,115 – Accrued otherECP taxes and licenses Medicare, & HDMF premium payable payable, net retirement liabilities. 100,115 416,324 345,622 70,702 338,062 62,040 276,022 Other liabilities** 480,048 409,346 70,702 438,177 62,040 376,137 =101,089,032 P P =81,153,925 P =19,935,107 P =104,710,671 =88,180,687 P =16,529,984 P

* Others under financial liabilities comprise payment orders payable and overages. ** Other liabilities under nonfinancial liabilities comprise advance rentals on bank premises, sundry credits, withholding taxes, SSS, Medicare, ECP & HDMF premium payable, net retirement liability, and miscellaneous liabilities.

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21. Equity 21. Equity Issued Capital The Bank’s capital stock consists of: Issued Capital The Bank’s capital stock consists of: 21. Equity Authorized common stock - P = 10 par value

Authorized common stock - P =10 par

2012 2011 2012 2011 Amount Shares Amount Shares Shares Amount Shares Amount 2012 2011 = 4,250,000,000 425,000,000 P =4,250,000,000 425,000,000 P Shares Amount value Shares 425,000,000Amount P =4,250,000,000 425,000,000 P =4,250,000,000 = 4,250,000,000 425,000,000 P =4,250,000,000 425,000,000 P

Issued andCapital outstanding Issued Authorized common stock - P = 10 par value Issued and outstanding Balance at beginning and end of year The Bank’s capital stock consists of: and outstanding Issued = 2,402,524,910 240,252,491 P =2,402,524,910 (Note 28) Balance at beginning and end of year 240,252,491 P Balance at beginning and end of year (Note28) 28) 240,252,491 P =2,402,524,910 P =2,402,524,910 2012 2011P P = 2,402,524,910 240,252,491240,252,491 =2,402,524,910 (Note 240,252,491 Amount (PSE) on Shares Amount Shares The Bank became listed in the Philippine Stock Exchange October 10, 1994. = 4,250,000,000 425,000,000 P =4,250,000,000 Authorized common stock - P = 10 par value 425,000,000 P

The became listed in the Philippine Stock Exchange (PSE) on October 10, 1994. and outstanding IssuedBank Subsequently, SEC the increase in the capital stock of the Bank. The Balance at beginningthe and end of approved year P = 2,402,524,910 240,252,491 P =2,402,524,910 (Note 28) 240,252,491 summarized information on the Bank’s registration securities under the Securities Subsequently, the SEC approved the increase in theofcapital stock of the Bank.

The Regulation Code follows: summarized information on the Bank’s registration of securities under the Securities Regulation The Bank became listed in the Philippine Stock Exchange (PSE) on October 10, 1994.

Code follows: Date of SEC Approval Type Authorized Shares Par Value Subsequently, the SEC approved the increase in the capital stock of the Value Bank.

August 16, 1995 Common 300,000,000 P =10 The Date ofSEC SECApproval Approval Type Authorized Par Date of TypeShares Authorized Shares Par Value summarized information on the Bank’s registration of securities under the Securities Regulation October 8, 1997 Common 425,000,000 P = August 16,1995 1995 Common 300,000,000 P =10 10 August 16, Common 300,000,000 P =10 Code follows: October 8,8,1997 October 1997 Common 425,000,000 P =10 Common 425,000,000 P =10 As of December 31, 2012 and 2011, the total number of stockholders is 1,625 and 1,677, Date SEC Approval Type Authorized Value respectively.

As of of December 31, 2012 and 2011, the total numberShares of stockholders isPar 1,625 and 1,677, August 16, 1995 Common 300,000,000 P =10 respectively.

October 8,Paid 1997and Proposed Common 425,000,000 P =10 Dividends Details of the Bank’s dividend distributions as approved by the Bank’s BOD and the BSP follow: Dividends Paid and Proposed As of December 31, 2012 and 2011, the total number of stockholders is 1,625 and Details of the Bank’s Cash dividend distributions as approved by the Bank’s BOD and 1,677, the BSP follow: Dividends respectively.

Date of declaration Per share Total amount Date of BSP approval Record date Payment date

Cash January 19, 2010 0.15Dividends 36,037,874 March 8, 2010 March 31, 2010 April 16, 2010 Date of declaration Per share Total amount Date date Payment date February 19, 2010 2.75 660,694,350 April of 22,BSP 2010approval Record May 17, 2010 May 31, 2010 Dividends Paid and Proposed Cash Dividends January 19, 2010 March15,8,2010 2010 March 2010 April 16,3, 2010 May 17, 2010 0.15 36,037,874 June July 13,31, 2010 August 2010 Date BSP approval date Total amount Per share Date declaration February 19, 2010 2.75 660,694,350 April 22, May 17, the 201029, May 31, date 2010 Details of the Bank’s dividend distributions as2010 approved by Bank’s BOD and BSP follow: July 27,of 2010 0.15 36,037,874 September 6,of 2010 September 2010 Record October 14, 2010 the Payment May 17, 2010 June 15, 2010 July 13, 2010 August 3, 2010 March 8, 2010 October 14,19, 2010 0.15 36,037,874 November 15, 2010 December 8, 2010March December 23, 2010 April 16, 2010 36,037,874 0.15 January 2010 31, 2010 July 27, 2010 0.15 September 2010 September 29, 2010 April October 14, 2010 January 20, 2011 36,037,874 February 23,6,2011 March 18, 2011 2011 April 22, 2010 May 31, 2010 2.75 February 19, 2010 May 17,4,2010 Cash Dividends660,694,350 October 14, 2010 0.15 36,037,874 November December 8, 2010 December 23, 2010 April 4, 2011 May 13, 201115, 2010 August 4, 2011 August 19, 2011 June 15, 2010 August 3, 2010 36,037,874 0.15 May 17, 2010 Date of declaration Per share Total amount Date of BSP approval Record date Payment date July 13, 2010 January 2011 February 2011 March 18, 2011 April 4, 2011 August 1,20, 2011 0.15 36,037,874 August 16,23, 2011 September 8, 2011 September 23, 2011 January 19, 2010 0.15 36,037,874 March 2010 March 31, April 2010 September 6, 2010 October 14, 2010 0.15 36,037,874 July4,27, 2010 September 29,16, 2010 April 2011 May 13,8, 2011 August 4, 2010 2011 August 19, 2011 October 27, 2011 0.15 36,037,874 November 23, 2011 December 20, 2011 January 5, 2012 February 19,14, 2010 2.75 660,694,350 April 22,16, 2010 May 17,8,2010 May8, 31,23, 2010 November 15, 2010 August 1,24, 2011 0.15 August 2011 September 8,December 2011 September 23, 2011 December 23, 2010 36,037,874 0.15 October 2010 January 2012 36,037,874 February 09, 2012 March 2012 March 2012 2010 May 17, 0.15 36,037,874 June15, 15,2012 2010 July 13, 2010 August 3, 2010 October 27,20, 20112011 0.15 36,037,874 November 23, 2011 December 20, 2011March January 5, 2012 April 27,2010 2012 0.75 180,189,368 May June 7, 2012 June 25,2011 2012 February 23, 2011 April 4, 2011 36,037,874 0.15 January 18, July 27, 2012 2010 0.15 36,037,874 September 6,2012 2010 September 29,2012 2010 September October 2010 January 24, 2012 0.15 36,037,874 February March 8, 2012 March 23,14, 2012 July 23, 0.75 180,189,368 August 13,09, 2012 September 11, 26, 2012 August 19, 2011 May 13, 2011 8, 2010August 0.15 36,037,874 April 4, 2011 4, 2011 October 14, 2010 0.15 36,037,874 November 15, 2010 December December 23, 2010 April 27, 2012 May 15, 2012 June 7, 2012 June 25, 14, 2012 October 23, 2012 0.75 180,189,368 November 21, 2012 December 27, 2012 January 2013 August 16, 2011 September 23, 2011 January 20, 2011 0.15 36,037,874 February 2011 March 18, 2011 April8, 4, 2011 201126, 2012 0.15 36,037,874 August 1, 2011 July 23, 2012 0.75 180,189,368 August 13,23, 2012 September 11,September 2012 September April 4, 2011 0.15 36,037,874 May 13, 2011 August 4, 2011 August 19, 2011 November 23, 2011 January 5, 2012 October 23,27, 2012 0.75 180,189,368 November 21, 2012 December 27, 2012 January 14, 2013 0.15 36,037,874 October 2011 December 20, 2011 Augustcomputation 1, 2011 0.15 36,037,874 for August 16, 2011 declaration Septemberin Septemberwith 23, 2011SEC The of surplus available dividend accordance February 09, 2012 8, 2011 March 23, 2012 36,037,874 0.15 January 24, 2012 March 8, 2012 October 27, 2011 0.15 36,037,874 November 23, 2011 December 20, 2011 January 5, 2012 May 15, 2012 June 0.75 180,189,368 April computation 27, June 7, extent 2012 Memorandum Circular No. 11available issued in for December 2008 differs to a certain from the25, 2012 January 24,2012 2012 0.15 36,037,874 February 09, 2012 March 8, 2012 March 23, 2012 The of surplus dividend declaration in accordance with SEC August 13, 2012 September 26, 2012 180,189,368 0.75 July 23, 2012 September 11, 2012 April 27, 2012 0.75 180,189,368 May 15, 2012 June 7, 2012 June 25, 2012 computation following0.75 BSP11guidelines.

Memorandum No. issued in December differs a certain from the14, 2013 July 23, 2012 180,189,368 August 13,November 2012200821, September 11, 2012 September 2012 to January 180,189,368 October 23, 2012 Circular0.75 December 27, extent 201226, 2012 October 23, 2012 180,189,368 November 21, 2012 December 27, 2012 January 14, 2013 computation following0.75 BSP guidelines.

In compliance with BSP regulations, 10.00% of the Bank’s profit from trust business is The computation ofBSP surplus available for dividend accordance withsurplus SEC appropriated to surplus reserves.

This annual is in required until the In compliance with regulations, 10.00% ofappropriation the declaration Bank’s profit from trust business is Memorandum Circular No. 11 issued in December 2008 differs a certain extent from the reserves for trust business equals 20.00% of the Bank’s authorized capital stock. appropriated to surplus reserves.

This annual appropriation is to required until the surplus computation following BSPequals guidelines. reserves for trust business 20.00% of the Bank’s authorized capital stock.

A portion of the surplus corresponding to the accumulated net earnings of an associate and In portion compliance with BSP regulations, 10.00% ofaccumulated the Bank’s profit from trust business is and joint venture which amounted to P =302.0 in 2012 and P =252.7 million is not A of the surplus corresponding tomillion the net earnings ofin an2011 associate appropriated to surplus reserves. appropriation required until the available for dividend declaration.

The annual accumulated equity net earnings becomes available joint venture which amounted to P =This 302.0 million in 2012 and in P =is252.7 million in 2011surplus is not reserves for business equals 20.00% of the Bank’s authorized capital stock. for dividend declaration upon receipt cash dividends from available for trust dividend declaration.

Theofaccumulated equity inthe netinvestees. earnings becomes available for dividend declaration upon receipt of cash dividends from the investees.

A portion of the surplus corresponding to the accumulated net earnings of an associate and joint venture which amounted to P =302.0 million in 2012 and P =252.7 million in 2011 is not available for dividend declaration. The accumulated equity in net earnings becomes available for dividend declaration upon receipt of cash dividends from the investees.

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Capital Management The primary objectives of the Bank’s capital management are to ensure that the Bank complies with externally imposed capital requirements, as mandated by the BSP, and that the Bank maintains healthy capital ratios in order to support its business and maximize returns for its shareholders. The Bank considers its paid in capital and surplus as its capital.

The Bank manages its capital structure and makes adjustments in the light of changes in economic conditions and the risk characteristics of its activities. In order to maintain or adjust the capital structure, the Bank may adjust the amount of dividend payments to shareholders or issue capital securities. The major activities in this area include the following: 





On March 2, 2005, the Bank’s BOD approved an amendment to the Bank’s Dividend Policy which provides for an annual regular cash dividend of 6.00% of the par value of the total capital stock payable quarterly at the rate of 1.50% or P =0.15 per share payable not later than March 31, June 30, September 30 and December 31 of each year.

On February 29, 2012, the Bank’s BOD approved a further amendment to the Bank’s Dividend Policy to provide for an annual regular cash dividend of 30.00% of the par value of the total capital stock payable quarterly at the rate of 7.50% or P =0.75 per share payable not later than March 31, June 30, September 30 and December 31 of each year.

The Bank issued additional common shares for its qualified stockholders in 2008 and 2006 through stock rights offerings that raised P =2.0 billion and P =750.0 million in capital, respectively.

Regulatory Qualifying Capital Under existing BSP regulations, the determination of the Bank’s compliance with regulatory requirements and ratios is based on the amount of the Bank’s unimpaired capital (regulatory capital) as reported to the BSP. This is determined on the basis of regulatory accounting policies which differ from PFRS in some respects.

In addition, the risk-based capital ratio of a bank, expressed as a percentage of qualifying capital to risk-weighted assets, should not be less than 10.00% for both solo basis and consolidated basis . Qualifying capital and risk-weighted assets are computed based on BSP regulations. Risk-weighted assets consist of total assets less cash on hand, due from BSP, loans covered by hold-out on or assignment of deposits, loans or acceptances under letters of credit to the extent covered by margin deposits and other non-risk items determined by the Monetary Board of the BSP. On August 4, 2006, the BSP, under BSP Circular No. 538, issued the prescribed guidelines implementing the revised risk-based capital adequacy framework for the Philippine banking system to conform to Basel II capital adequacy framework. The new BSP guidelines took effect on July 1, 2007. Thereafter, banks were required to compute their Capital Adequacy Ratio (CAR) using these guidelines. As of December 31, 2012 and 2011, the Bank’s CAR under BSP Circular No. 538 is 17.14% and 13.93%, respectively.

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PSBank ANNUAL REPORT 2012

The CAR of the Bank as of December 31, 2012 and December 31, 2011 are shown in the table below.

The CAR of the Bank as of December 31, 2012 and December 31, 2011 are shown in the table below.

2012 2011 Tier 1 capital P = 13,840 P = 12,047 2012 2011 2012 2011 578 2 capital 3,651 TierTier 1 capital P = 13,840 P = 12,047 = 13,840 P =12,047 Tier 1 capital P TierGross 2 capital qualifying capital 17,491 3,651 12,625 578 578 Tier 2 capital 3,651 Gross qualifying Less requiredcapital deductions 2,758 2,794 17,491 12,625 Gross qualifying capital 17,491 12,625 LessTotal required deductions 2,758 P 2,794 qualifying capital P = 14,733 =2,794 9,831 Less required deductions 2,758 Total qualifying capital P =14,733 P =9,831 Totalweighted qualifyingassets capital =85,949 14,733 P =9,831 P =P P =70,584 RiskRisk weighted assets P =85,949 P =70,584 1 capital adequacy ratio 13.63% 13.93% TierTier 1 capital adequacy ratio 13.63% 13.93% Risk weighted assets P = 85,949 P =70,584 Capital adequacy ratio 17.14% 13.93% Capital adequacy ratio ratio 17.14% 13.93% Tier 1 capital adequacy 13.63% 13.93% Capital adequacy ratio 17.14% 13.93% Regulatory capital consists of Tier 1 capital, which comprises capital stock, surplus, surplus reserves, cumulative translation adjustment and net unrealized gainsstock, on AFS investments.

Regulatory capital consists of Tier 1 capital, which comprises capital surplus, surplus Certain adjustments are made to PFRS-based results and reserves, as prescribed by the BSP. reserves, cumulative translation adjustment and net unrealized gains on AFS investments.

The other component ofmade regulatory capital is Tier 2 capital, which isas comprised of by thethe Bank’s Certain adjustments are to PFRS-based results and reserves, prescribed BSP. subordinated notes.

Certain items are deducted from the regulatory Gross Qualifying Capital, The other component of regulatory capital is Tier 2 capital, which is comprised of the Bank’s such as but not limited to equity investments in financial undertakings, but excluding subordinated notes.

Certain items are deducted from theallied regulatory Gross Qualifying Capital, insurance companies (for solo basis); investments in debt capital instruments of excluding such as but not limited to equity investments in financial allied undertakings, but unconsolidated subsidiary banks (for solo basis); equity investments in subsidiary insurance companies (for solo basis); investments in debt capital instruments of insurance companies and subsidiary non-financial allied undertakings; and reciprocal investments in unconsolidated subsidiary banks (for solo basis); equity investments in subsidiary insurance equity of other banks/enterprises. companies and subsidiary non-financial allied undertakings; and reciprocal investments in

equity of other banks/enterprises.

Risk-weighted assets are determined by assigning defined risk weights to amounts of on balance sheet exposures to the credit equivalent amounts off-balance sheet of exposures.

Risk-weighted assets are and determined by assigning defined risk of weights to amounts on Certain items are deducted from risk-weighted assets, such as the excess of general loan loss balance sheet exposures and to the credit equivalent amounts of off-balance sheet exposures. provision overare thededucted amount permitted to be included in such Tier 2as capital.

Beginning January Certain items from risk-weighted assets, the excess of general loan1,loss 2014, under BSP Circular 781, the Bank’s subordinated note which is currently eligible as Tier provision over the amount permitted to be included in Tier 2 capital. Beginning January 1, 2 capital will no longer be eligible as a regulatory capital.

2014, under BSP Circular 781, the Bank’s subordinated note which is currently eligible as Tier 2 capital will no longer be eligible as a regulatory capital.

On January 15, 2013, BSP issued Circular No. 781 which states the implementing guidelines on the revised risk-based capital adequacy particularly onimplementing the minimumguidelines capital and On January 15, 2013, BSP issued Circular framework No. 781 which states the on disclosure requirements for the Philippine banking system in accordance with the Basel and III the revised risk-based capital adequacy framework particularly on the minimum capital standards. disclosure requirements for the Philippine banking system in accordance with the Basel III

standards.

These guidelines apply to all Universal Banks (UBs) and Commercial Banks (KBs), as well as their QBs. The risk-based capital of a bank, expressed Thesesubsidiary guidelinesbanks applyand to all Universal Banks (UBs) andratio Commercial Banks (KBs), as as awell as percentage of a qualifying capital to risk weighted assets, shall not be less than ten their subsidiary banks and QBs. The risk-based capital ratio of a bank, expressed aspercent a (10%) for both basis (head office plus branches) and consolidated basis (parent bank plus percentage of asolo qualifying capital to risk weighted assets, shall not be less than ten percent subsidiary financial allied undertakings, but excluding insurance companies).

Other minimum (10%) for both solo basis (head office plus branches) and consolidated basis (parent bank plus capital ratios include Common Equity Tier and Tier 2insurance capital ratios of 6% andOther 7.5%, minimum subsidiary financial allied undertakings, but1 excluding companies). respectively.

A capital conservation buffer of 2.5%, comprised of CET1 capital, shall likewise be capital ratios include Common Equity Tier 1 and Tier 2 capital ratios of 6% and 7.5%, imposed. respectively. A capital conservation buffer of 2.5%, comprised of CET1 capital, shall likewise be imposed.

The Bank is currently assessing the impact that this circular will have on the determination of the with regulatory requirements and ratios.

This circular will be effective The Bank’s Bank iscompliance currently assessing the impact that this circular will have on the determination of beginning on January 1, 2014. the Bank’s compliance with regulatory requirements and ratios. This circular will be effective

beginning on January 1, 2014.

The issuance of BSP Circular No. 639 covering the Internal Capital Adequacy Assessment Process (ICAAP) in 2009 supplements the BSP’s capitalAdequacy adequacyAssessment framework under The issuance of BSP Circular No. 639 covering therisk-based Internal Capital

Process (ICAAP) in 2009 supplements the BSP’s risk-based capital adequacy framework under

PSBank ANNUAL REPORT 2012

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Circular No. 538. In compliance with this new circular, the Metrobank Group has adopted and developed its ICAAP framework to ensure that appropriate level and quality of capital are maintained by the Group. Under this framework, the assessment of risks extends beyond the Pillar 1 set of credit, market and operational risks and onto other risks deemed material by the Group. The level and structure of capital are assessed and determined in light of the Group’s business environment, plans, performance, risks and budget; as well as regulatory directives.

The Bank follows the Group’s ICAAP framework and submits the result of its assessment to the Parent Company. The BSP requires submission of an ICAAP document every January 31 of each year.

Financial Performance The following basic ratios measure the financial performance of the Bank: Return on on average equity Return average equity Return average assets Return on on average assets interest margin averageearning earning assets assets Net Net interest margin ononaverage Liquidity Ratio Liquidity Ratio Debt-Equity Ratio Debt-Equity Ratio Asset-to-Equity Ratio Asset-to-Equity Ratio Interest Rate Coverage Ratio Interest Rate Coverage Ratio

2012 2012 15.05% 15.05% 1.95% 1.95% 5.19% 5.19% 43.21% 43.21% 6.71:1 6.71:1 7.71:1 7.71:1 1.92:1 1.92:1

2011 2011 2010 14.94% 15.99% 14.94% 1.81% 1.81% 1.83% 5.49% 5.49% 5.57% 41.27% 41.27% 39.28% 6.74:1 6.74:1 7.97:1 7.74:1 7.74:1 8.97:1 1.61:1 1.91:1

2010 15.99% 1.83% 5.57% 39.28% 7.97:1 8.97:1 1.91:1

1.61:1

22. Net Service Fees and Commission Income This account consists of: Service Fees andCommission CommissionIncome Income Service Fees and Deposit-relatedand andother other fees Deposit-related feesreceived received Credit-relatedfees feesand and commissions commissions Credit-related Trust fees Trust fees Service Fees and Commission Expense

Service Fees and Commission Expense Commissions Commissions Brokerage Brokerage Net Service Fees and Commission

Net Service IncomeFees and Commission Income

2012 2012

2011

2011

2010

2010

P = 428,578,828 =395,843,819 P =381,902,596 P =428,578,828 P P =395,843,819 P =381,902,596 369,748,426 499,327,319 499,327,319 373,311,437 373,311,437 369,748,426 7,894,245 10,963,734 10,963,734 7,894,2456,977,608 6,977,608 938,869,881 777,049,501 758,628,630

938,869,881

49,564,765 49,564,765 10,680,792 10,680,792 60,245,557

60,245,557

P = 878,624,324

P =878,624,324

777,049,501

758,628,630

33,574,487 54,734,353 33,574,48712,212,795 54,734,353 10,596,836 10,596,836 44,171,323 66,947,148 12,212,795

44,171,323

P =732,878,178

66,947,148

P =691,681,482

P =732,878,178

P =691,681,482

23. Miscellaneous Income This account consists of: (Notes 12 and 25) RentRent (Notes 12 and 25) Insurance commission income Insurance commission income Recovery of charged-off assets Recovery of charged-off assets Others

Others

2012 2011 2011 2010 2012 2010 = 65,555,333 P =68,638,888 P = 64,271,909 P P =68,638,888 P =65,555,333 P =64,271,909 27,612,017 8,619,990 20,158,376 8,619,990 27,612,017 20,158,376 8,599,654 1,148,627 29,240,811 8,599,654 29,240,811 97,061,534 23,370,910 1,148,627 20,542,040 97,061,534 20,542,040 P = 142,950,201 P =182,920,066 P =108,949,822 23,370,910

P =142,950,201

P =182,920,066

P =108,949,822

Rent income arises from the lease of properties and safety deposit boxes of the Bank.

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Others include income from renewal fees, checkbook charges, dividend income and other miscellaneous income.

24. Retirement Benefits The Bank has a funded, noncontributory defined benefit plan covering substantially all of its employees. The benefits are based on years of service and final compensation.

The retirement expense amount included in ‘Compensation and fringe benefits’ in the statements of income follows: Current service costcost Current service Interest costcost Interest Expected return on plan assets Expected return on plan assets Amortization of past service costcost Amortization of past service NetNet actuarial gaingain recognized during the the yearyear actuarial recognized during NetNet retirement expense retirement expense

2012 2011 2012 2011 P = 101,515,600 P = 79,717,354 P =79,717,354 P101,515,600 54,369,62254,369,622 72,208,877 72,208,877 (50,187,850) (46,000,472) (50,187,850) (46,000,472) 9,673,126 – – 9,673,126 – (1,778,133) – (1,778,133) P =115,370,498 P =104,147,626 P =104,147,626 P115,370,498

The amount of net retirement liability recognized in the statements of condition under ‘Other liabilities’ follow: Present value of defined benefit obligation Present value of defined benefit obligation FairFair value of plan assets (Note 29) 29) value of plan assets (Note Deficit Deficit Unrecognized pastpast service costcost Unrecognized service Unrecognized actuarial lossloss Unrecognized actuarial NetNet retirement liability retirement liability

2012 2011 2012 2011 P =1,157,210,900 P =895,110,600 P =895,110,600 P1,157,210,900 900,155,249 900,155,249 705,320,018705,320,018 257,055,651 257,055,651 189,790,582189,790,582 (33,734,074) – (33,734,074) – (10,959,442) (10,959,442) (17,798,945)(17,798,945) P =212,362,135 =171,991,637 P =171,991,637P P212,362,135

The movements in net retirement liability recognized in the statements of condition follow: Balance at beginning of year Balance at beginning of year Retirement expense Retirement expense Contributions Contributions Balance at end of year Balance at end of year

2012 2011 2012 2011 P =171,991,637 P =192,844,011 P =192,844,011 P171,991,637 115,370,498 115,370,498 104,147,626104,147,626 (75,000,000) (125,000,000) (125,000,000) (75,000,000) P = 212,362,135 =171,991,637 P =171,991,637P P212,362,135

Changes in the present value of the defined benefit obligation are as follows: Balance at beginning of year Balance at beginning of year Current service cost Current service cost Interest Interest costcost Past service Past service costcost Benefits paid Benefits paid Actuarial Actuarial lossloss Balance at end of year Balance at end of year

PSBank ANNUAL REPORT 2012

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2011 2012 2012 2011 P = 647,032,949 P895,110,600 P =895,110,600 P =647,032,949 79,717,354 79,717,354 101,515,600 101,515,600 72,208,877 72,208,877 54,369,62254,369,622 – 43,407,20043,407,200 – (60,289,378) (44,082,676) (60,289,378) (44,082,676) 140,234,096 123,097,256 123,097,256 140,234,096 P = 895,110,600 P1,157,210,900 P =1,157,210,900 P =895,110,600

Changes in the fair value of plan assets are as follows: Balance at beginning of year Balance at beginning of year Expected return on plan assets Expected return on plan assets Contributions Contributions Benefits paidpaid Benefits Actuarial gains Actuarial gains Balance at end of year Balance at end of year

2012 2011 2011 2012 P = 705,320,018 P = 556,233,035 P =556,233,035 P705,320,018 50,187,85050,187,850 46,000,47246,000,472 75,000,000 125,000,000 75,000,000 125,000,000 (60,289,378) (44,082,676) (60,289,378) (44,082,676) 129,936,759 129,936,759 22,169,187 22,169,187 P =900,155,249 P =705,320,018 P =705,320,018 P900,155,249

The actual return on plan assets amounted to P =180.1 million and P =68.1 million in 2012 and 2011, respectively.

The movements in the net unrecognized actuarial loss are as follows: Balance at beginning of year Balance at beginning of year Actuarial losses for the year - obligation Actuarial losses for the year - obligation Actuarial gains for the year - plan assets Actuarial gains for the year - plan assets Actuarial gains recognized Actuarial gains recognized Balance at end of year Balance at end of year

2012 2011 2012 2011 (P =17,798,945) P =102,044,097 = 17,798,945) P =102,044,097 (P (123,097,256) (140,234,096) (123,097,256) (140,234,096) 129,936,759 22,169,187 129,936,759 22,169,187 – (1,778,133) – (1,778,133) (P =10,959,442) (P =17,798,945) = 10,959,442) (P =17,798,945) (P

The Bank expects to contribute P =93.8 million to its noncontributory defined benefit plan in 2013.

The major categories of plan assets as a percentage of the fair value of total plan assets are as follows: Equity instruments Equity instruments Other assets Other assets

2012 95.63% 4.37%

2012 2011 95.63% 99.45% 4.37% 0.55%

2011 99.45% 0.55%

The following table shows the breakdown of fair value of the plan assets: Equity investments: Equity investments: Bank’s sharesshares Bank’s SMFCSMFC sharesshares Shares of other listed listed companies Shares of other companies Other assets: Other assets: Special deposit account Special deposit account Certificate of time (Note(Note 29) 29) Certificate of deposit time deposit Receivable from broker Receivable from broker Accrued interest receivable (Note(Note 29) 29) Accrued interest receivable

2012

2012

2011

2011

P =530,074,700 P =381,610,390 P530,074,700 P =381,610,390 200,000,000 200,000,000 200,000,000 200,000,000 130,722,350 130,722,350 118,157,890 118,157,890 – 12,000,00012,000,000 – 3,855,884 3,855,884 10,839,29910,839,299 16,500,96616,500,966 1,693,309 1,693,309 17,934 2,545 2,545 17,934 P = 705,320,018 P = 900,155,249 P =705,320,018 P900,155,249

The person exercising voting right for the foregoing equity instruments is currently a senior officer of the Bank (Note 29).

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The principal actuarial assumptions used in determining retirement liability as of January 1, 2012 and 2011 are shown below: Average remaining working life life Average remaining working Discount raterate Discount Expected raterate of return on assets Expected of return on assets Future salary increases Future salary increases

2012 9 6.30% 7.00% 8.00%

2012 2011 9 21 6.30% 11.16% 7.00% 8.27% 8.00% 9.00%

2011 21 11.16% 8.27% 9.00%

The overall expected rate of return on assets is determined based on market prices prevailing on the date of the valuation, applicable to the period over which the obligation is to be settled.

As of December 31, 2012, the discount rate used in determining retirement obligation is 5.45%.

This increased spread has resulted in higher yields-to-maturity and, accordingly, higher discount rates.

Information on the Bank’s retirement plan for the current and previous years follows: 2009 2008 2010 2009 2008 2012 2011 2010 2012 2011 P =512,298,428 P =647,032,949 P =354,045,351 P =1,157,210,900 P =895,110,600 Presentvalue value unfunded obligationP1,157,210,900 P =895,110,600 P =647,032,949 P =512,298,428 P =354,045,351 Present of of unfunded obligation (490,836,483) (556,233,035) (309,231,332) (900,155,249) (705,320,018) Fairvalue valueofof plan assets Fair plan assets (900,155,249) (705,320,018) (556,233,035) (490,836,483) (309,231,332) 90,799,914 257,055,651 189,790,582 189,790,582 90,799,914 21,461,94521,461,945 44,814,01944,814,019 Deficit 257,055,651 Deficit Experience adjustments on plan liabilities 116,418,256 (134,759,004) 21,694,823 (29,041,046) (54,151,522) (29,041,046) 21,694,823 (54,151,522) 116,418,256 (134,759,004) Experience adjustments on plan liabilities 22,169,187 40,259,961 131,631,692 (159,193,210) Experience adjustments on plan assets 131,631,692 40,259,961 (159,193,210) 129,936,759 22,169,187 Experience adjustments on plan assets 129,936,759

25. Leases The Bank leases the premises occupied by its branches for periods ranging from 1 to 20 years renewable under certain terms and conditions. Various lease contracts include escalation clauses, most of which bear an annual rent increase of 10.00%. Rentals charged against profit or loss under these lease contracts amounting to P =390.9 million in 2012, P =349.6 million in 2011 and P =293.2 million in 2010 are shown under ‘Occupancy and equipment-related costs’ in the statements of income.

Future minimum rentals payable under non-cancelable operating leases are as follows: Within oneone yearyear Within After oneone yearyear but but not not more thanthan fivefive years After more years More thanthan fivefive years More years

2012 2011 2012 2011 P =259,189,820 P =229,850,483 P = 259,189,820 P =229,850,483 705,255,989 705,255,989 564,167,767564,167,767 467,632,941 467,632,941 301,475,007301,475,007 P =1,432,078,750 P =1,095,493,257 P = 1,432,078,750 P =1,095,493,257

The Bank has also entered into commercial property leases on its surplus office space. These non-cancelable leases have remaining non-cancelable lease terms between 1 and 5 years. As of December 31, 2012 and 2011, there is no contingent rental income. Rent income of the Bank related to these property leases amounting to P =63.5 million in 2012, P =66.4 million in 2011 and P =61.8 million in 2010 are shown under ‘Miscellaneous income’ in the statements of income.

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Future minimum rentals receivable under non-cancelable operating leases are as follows: Future minimum rentals receivable under non-cancelable operating leases are as follows: 2012 2011 2012 2011 P =43,871,637 P =57,635,660 Within oneone yearyear = 43,871,637 P = 57,635,660 Within P 2012 2011 After oneone yearyear but but not not more thanthan five five years After more years 25,463,77525,463,775 52,150,432 52,150,432 = 43,871,637 P =57,635,660 Within one year P P =69,335,412 P =109,786,092 P =25,463,775 69,335,412 P =109,786,092 After one year but not more than five years 52,150,432 = 69,335,412 P =109,786,092 P 26. Miscellaneous Expenses 26. Miscellaneous Expenses This account consists of: This account consists of: Insurance Insurance Litigation Litigation Information Insurancetechnology Information technology Advertising Litigation Advertising Information technology Communications Communications Advertising Repairs and maintenance Repairs and maintenance Communications Transportation and traveling Transportation and traveling Repairs and maintenance Stationery and supplies Stationery and supplies Transportation and traveling fees Management and professional Management and professional fees Stationery and supplies Supervision and examinationfees fees Supervision and examination Management and professional fees Banking activities expenses Banking activities expenses Supervision andand examination fees Fines, penalties other charges Fines, penalties and expenses other charges Banking activities Donations and charitable contributions Donations and charitable contributions Fines, penalties and other Membership fees and duescharges Donations and charitable Membership fees and duescontributions Training and seminars Membership fees and dues Training andand seminars Rewards incentives Training and seminars Rewards and incentives Meeting allowance Rewards and incentives Entertainment, amusement and Meeting allowance Meeting allowance recreation (EAR) (Noteand 27) Entertainment, amusement Entertainment, amusement and Others recreation (EAR) (Note 27)27) recreation (EAR) (Note Others Others

2012 2011 2010 2012 2011 2010 P =245,939,520 P =243,985,774 P =195,235,643 = 245,939,520 P =243,985,774 P =195,235,643115,923,187 P 154,395,978 118,692,442 2012 2011 2010 154,395,978 118,692,442 115,923,187 141,565,324 181,330,604 141,207,719 P = 245,939,520 P = 243,985,774 P = 195,235,643 141,565,324 181,330,604 141,207,719 116,906,856 185,498,427 155,924,174 118,692,442 115,923,187 154,395,978 185,498,427 155,924,174 116,906,856 141,565,324 114,799,829 181,330,604 112,408,381141,207,719 112,408,381 111,515,834 111,515,834 114,799,829 155,924,174 116,906,856 84,755,492 185,498,427 79,863,439 79,863,439 70,140,35270,140,352 84,755,492 114,799,829 84,366,717 112,408,381 82,417,797111,515,834 82,417,797 75,311,632 75,311,632 84,366,717 84,755,492 55,293,344 79,863,439 55,293,344 61,626,045 111,403,081111,403,081 61,626,04570,140,352 82,417,797 75,311,632 84,366,717 37,795,726 37,795,726 34,366,528 34,366,52841,200,35441,200,354 61,626,045 111,403,081 55,293,344 28,141,769 17,652,078 17,652,078 31,925,841 31,925,841 34,366,528 28,141,76941,200,354 37,795,726 11,108,238 25,028,402 15,899,826 15,899,826 11,108,23817,652,07825,028,402 28,141,769 31,925,841 21,937,212 13,183,640 13,183,640 20,510,728 21,937,212 20,510,728 15,899,826 11,108,238 25,028,402 1,213,237 22,442,565 12,747,490 12,747,490 22,442,565 1,213,237 20,510,728 21,937,212 13,183,640 7,891,814 7,436,067 10,313,380 1,213,237 12,747,490 10,313,380 6,506,744 7,891,81422,442,565 4,406,740 15,957,749 7,436,067 7,891,814 10,313,380 4,406,740 6,506,7447,436,067 5,899,131 7,273,273 15,957,749 2,407,329 6,506,744 4,406,740 2,407,329 5,899,13115,957,749 2,343,859 2,729,876 7,273,273 2,351,637 5,899,131 2,407,329 2,351,637 2,343,859 7,273,273 2,729,876 2,351,637 2,343,859 2,729,876 1,866,721 1,759,511 3,617,682 22,732,526 70,990,702 22,225,790 1,866,721 1,759,511 3,617,682 3,617,682 1,759,511 1,866,721 = 1,153,147,180 P =1,208,296,994 P =1,212,927,582 P 22,225,790 70,990,702 22,732,526 22,732,526 70,990,702 22,225,790 P = 1,153,147,180 P =1,212,927,582 P =1,208,296,994 P = 1,153,147,180 P =1,208,296,994 P =1,212,927,582

Insurance expense includes premiums paid to the Philippine Deposit Insurance Corporation amounting to P =186.6 million, P =189.1 million and P =172.1 million in 2012, 2011 and 2010, respectively.

Insurance expense includes premiums paid to the Philippine Deposit Insurance Corporation amounting to P =186.6 million, P =189.1 million and P =172.1 million in 2012, 2011 and 2010, respectively.

Other expenses include sponsorship expenses, home free loan expenses, appraisal fees and notarial fees. It also include payments to union members amounting to P =8.9 million in 2012 and Other expenses include sponsorship expenses, home free loan expenses, appraisal fees and 2011, P =9.25 million in 2010, respectively, for the successful completion of the collective notarial fees. It also include payments to union members amounting to P =8.9 million in 2012 and bargaining agreement.

2011, P =9.25 million in 2010, respectively, for the successful completion of the collective bargaining agreement.

27. Income and Other Taxes 27. Income and Other Taxes Under Philippine tax laws, the Bank is subject to percentage and other taxes (presented as ‘Taxes and licenses’ the statements of income)percentage as well as income taxes.

Under Philippine Philippine taxin laws, Under tax laws, the the Bank Bank is is subject subject to to percentage and and other other taxes taxes (presented (presented as as ‘Taxes and licenses’ in the statements of income) as well as income taxes.

Percentage and Percentage and ‘Taxes and licenses’ in the statements of income) as well as income taxes.

Percentage and other taxes paid consist principally gross receipts tax (GRT) and other taxes paid consist principally of gross receiptsof tax (GRT) and documentary stamps taxes documentary stamps taxes (DST).

(DTS).

Percentage and other taxes paid consist principally of gross receipts tax (GRT) and documentary stamps taxes (DST).

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Income taxes include corporate income tax, discussed below, and final taxes paid at the rate of 20.00%, which is a final withholding tax on gross interest income from government securities, and other deposit substitutes.

The NIRC of 1997 also provides for rules on the imposition of a 2.00% MCIT on the gross income as of the end of the taxable year beginning on the fourth (4th) taxable year immediately following the taxable year in which the Company commenced its business operations. Any excess MCIT over the RCIT can be carried forward on an annual basis and credited against the RCIT for the three (3) immediately succeeding taxable years.

Starting July 1, 2008, the Optional Standard Deduction (OSD) equivalent to 40.00% of gross income may be claimed as an alternative deduction in computing for the RCIT. The Bank elected to claim itemized expense deductions instead of the OSD in computing for the RCIT in 2012 and 2011.

On March 15, 2011, the BIR issued RR No. 4-2011 which prescribes the attribution and allocation of expenses between FCDUs/EFCDUs or OBU and RBU, and further allocation within RBU based on different income earning activities. Pursuant to the regulations, the Bank made an allocation of its expenses in calculating income taxes due for RBU and FCDU. Current tax regulations also provide for the ceiling on the amount of EAR expense that can be claimed as a deduction against taxable income. Under the regulations, EAR expense allowed as a deductible expense for a service company is limited to the actual EAR paid or incurred but not to exceed 1.00% of net revenue.

FCDU offshore income (income from non-residents) is tax-exempt while gross onshore income (income from residents) is subject to 10.00% income tax. In addition, interest income on deposit placements with other FCDUs and offshore banking units (OBUs) is taxed at 7.50%.

Under current tax regulations, the income derived by the FCDU from foreign currency transactions with non-residents, OBUs, local commercial banks, including branches of foreign banks, is tax-exempt while interest income on foreign currency loans from residents other than OBUs or other depository banks under the expanded system is subject to 10.00% income tax.

Provision for (benefit from) income tax consists of: 2012 Current: Current: Final tax Final tax RCIT RCIT

2011

2011

2010

2010

P = 273,076,804 P =399,950,508 P =293,911,402 P =399,950,508 P =273,076,804 P =293,911,402 155,753,975 69,627,255 69,627,25569,561,338 69,561,338 155,753,975 428,830,779 469,577,763 363,472,740363,472,740 469,577,763 428,830,779 (493,938,013) 481,607,494 128,127,154 (493,938,013) 128,127,154 481,607,494 P = 556,957,933 (P =24,360,250) P =845,080,234

Deferred

Deferred

PSBank ANNUAL REPORT 2012

2012

P =556,957,933

( 136 )

(P =24,360,250)

P =845,080,234

Net deferred tax assets consist of: 2012 Deferred assets Deferred tax tax assets on: on: Allowance for and impairment Allowance for creditcredit and impairment losses losses Net pension liability Net pension liability on investment Accumulated depreciation Accumulated depreciation on properties investment properties Accrued rent Accrued rent Unamortized pension cost contribution Unamortized pension cost contribution Deferred tax liabilities on: Deferred tax liabilities on: Net unrealized gain on investment Net unrealized gain on investment properties Accretionproperties of interest on impaired loans Accretion of interest ongain impaired loans Unrealized foreign exchange Unrealized foreign exchange gain

2012

2011

2011

P =1,186,714,132 P =1,340,022,160 P = 1,186,714,13263,708,641 P =1,340,022,160 57,853,203 63,708,641 57,853,203 60,719,018 57,412,730 60,719,01840,875,999 57,412,73038,408,448 38,408,448 14,208,135 40,875,999 9,319,649 9,319,649 14,208,135 1,361,337,439 1,507,904,676 1,361,337,439 1,507,904,676 (237,838,315) (263,619,975) (237,838,315) (263,619,975) (106,635,388) (90,126,748) (90,126,748)(14,668,173) (106,635,388) (5,501,110) (5,501,110) (14,668,173) (349,974,813) (368,414,896) P =1,139,489,780 P =1,011,362,626 (349,974,813) (368,414,896) P = 1,011,362,626 P =1,139,489,780

As of December 31, 2012 and 2011, the Bank did not recognize deferred tax assets on allowance for credit losses amounting to P =332.4 million and P =102.7 million, respectively.

The reconciliation between the statutory income tax and effective income tax follows (in thousands): Statutory income tax Statutory income tax Tax Tax effect of: effect of: FCDUFCDU Income Income Tax-paid and tax-exempt income Tax-paid and tax-exempt income Nondeductible expenses Nondeductible expenses Changes in deferred income Changes in deferred income taxtax Effective income tax Effective income tax

2012 2012 P = 857,771 = 857,771 P

2010 2011 2011 2010 P = 601,320 P = 795,959 P =601,320 P =795,959

(76,620) (76,620) (867,555) (867,555) 328,863 328,863 314,499 314,499 = 556,958 P P =556,958

(56,710) (167,694) (167,694) (56,710) (466,573) (466,573) (621,778) (621,778) 408,139 168,141 408,139 168,141 (510,536) (510,536) 670,452 670,452 (P =24,360) =845,080 P (P =24,360)P =845,080

28. Earnings Per Share The following table presents information used to calculate basic EPS: income a. a.

NetNet income b.

Weighted average number b.Weighted average number of of common shares for basic EPS common shares for basic EPS c. Basic/Diluted EPS (a/b) c. Basic/Diluted EPS (a/b)

2012 2011 2011 2010 2012 2010 = =2,028,758,682 P =1,808,115,339 P P =2,302,277,491 2,302,277,491P P =2,028,758,682 P =1,808,115,339 240,252,491 240,252,491 P = 9.58

P =9.58

240,252,491 240,252,491 240,252,491 240,252,491 P =8.44 P =7.53

P =8.44

P =7.53

As of December 31, 2012 and 2011, there were no potential common shares with dilutive effect on the basic EPS of the Bank.

( 137 )

PSBank ANNUAL REPORT 2012

29. Related Party Transactions Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. The Bank’s related parties include:  key management personnel, close family members of key management personnel and entities which are controlled, significantly influenced by or for which significant voting power is held by key management personnel or their close family member,  significant investor or parent company,  joint venture, associate and post-employment benefit plan for the benefit of the Bank’s employees, and  affiliates or other related parties, which are associates, subsidiaries, and joint ventures of the parent company.

The Bank has several business relationships with related parties. Transactions with such parties are made in the ordinary course of business and on substantially same terms, including interest and collateral, as those prevailing at the time for comparable transactions with other parties. These transactions also did not involve more than the normal risk of collectability or present other unfavorable conditions.

Transactions with the Retirement Plan On December 20, 2012, the SEC issued Memorandum Circular No. 12 providing for guidelines on the disclosure of transactions with retirement benefit funds. Under said circular, a reporting entity shall disclose information about any transaction with a related party (retirement fund, in this case) and outstanding balances necessary for an understanding of the potential effect of the relationship on the financial statements.

Under PFRS, certain post-employment benefit plans are considered as related parties. The Bank has business relationships with its retirement plan pursuant to which it provides trust and management services to the said plan. The retirement plan of the employees of the Bank is being managed and maintained by the Trust and Investment Division of the Bank. The total carrying amount and fair value of the retirement fund as of December 31, 2012 amounted to P =900.2 million. The details of the assets of the fund as of December 31, 2012 and 2011 are disclosed in Note 24.

The following table shows the amount of outstanding balances of related party transactions of the Bank and SMFC with the retirement plan of the employees of the Bank as of December 31, 2012: Elements of Transaction

Elements of Transaction Statement of Statement of Related party Income Nature of Transaction Related party Nature of Transaction Statement of Conditionof ConditionIncome Statement Philippine Savings BankBank EquityEquity investment* P =530,074,700 Philippine Savings investment* P =530,074,700 Time deposits** 731,143 Time deposits** 731,143 Accrued interest income 158 P =158 P =158 Accrued interest income 158 Dividends earned 9,193,516 9,193,516 Dividends earned Gain on sale of equity securities 14,499,589 Gain on sale of equity Sumisho Motor Finance 14,499,589 securities Corporation Equity investment 200,000,000

Sumisho Motor Finance Equity investment Corporation *Includes fair value gains of P =287.6 million

**Represent 30-day time deposits and bear interests of 3.25%

* Includes fair value gains of P =287.6 million ** Represent 30-day time deposits and bear interests of 3.25%

PSBank ANNUAL REPORT 2012

( 138 )

200,000,000

The voting right over the investments in the Bank’s capital stocks is exercised by a member of the Retirement Committee as approved by all members of the Retirement Committee whom are senior officers of the Bank.

As of December 31, 2012, the Trust Division did not provide any allowance for impairment losses on investments managed for the Bank’s retirement fund.

Remunerations of Directors and Other Key Management Personnel Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of PSBank, directly or indirectly. The Bank considers the members of the Management Committee to constitute key management personnel for purposes of PAS 24.

Total remunerations of key management personnel (covering assistant vice presidents and up) included under ‘Compensation and fringe benefits’ in the statements of income are as follows: 2011 2012 2011 2012 P =176,843,592 P = 183,888,423 = 183,888,423 P =176,843,592 P 17,741,113 6,033,540 6,033,54017,741,113 P =194,584,705 P =189,921,963 P = 189,921,963 P =194,584,705

Short-term employee benefits Short-term employee benefits Post-employment pension benefits Post-employment pension benefits

Short-term employee benefits include salaries and other non-monetary benefits.

Remunerations given to directors which were approved by the Board Remuneration Committee amounted to P =12.9 million, P =11.3 million and P =12.0 million in 2012, 2011 and 2010, respectively.

The Bank also provides banking services to Directors and other key management personnel and persons connected to them.

Other Related Party Transactions Related party transactions of the Bank by category of related party are presented below.

Amounts of loans granted by the Bank to key management personnel and other related parties and their outstanding balances as of December 31, 2012 and 2011 follow (in thousands): Key Management Personnel

Other Related Parties

Other Related2011 Parties Key Management Personnel 2012 2011 2012 2011 2012 2011 2012 = 14,550 P =12,320 P = 548,687 P =595,634 Loans outstanding at January 1 P 5,614 1,700 2,100 Loans issuances 4,087 P = 12,320 P = 548,687 P = 595,634 P = 14,550 Loans outstanding at January 1 Loan repayments (2,410) (3,384) (49,060) (49,047) 5,614 1,700 P=548,687 2,100 4,087 Loans issuances Loans outstanding at December 31 P = 16,227 P =14,550 P = 501,327 (3,384) (49,060) (49,047) (2,410) Loan repayments P = 14,550 P = 501,327 P = 548,687 P = 16,227 Key Management Loans outstanding at December 31 Significant Investor 2012 2011

Other credit risk related transactions Allowance for loan losses Guarantees and commitments

=– P =– P Significant 5,526 1,400 2012 P = 5,526 P =1,400

Other credit risk related transactions Allowance for loan losses Guarantees and commitments

P =– 5,526 P =5,526

2012 P = 162 Investor – 2011P=162

P = – 1,400 P =1,400

Personnel 2011

Other Related Parties 2012 2011

Key Management P =145 P = 332,000 Personnel – – 2012 2011 P =145 P = 332,000 P =162 – P =162

P =145 – P =145

( 139 )

Other Related Parties 2011

P =303,195 – P =2012 303,195

P =332,000 – P =332,000

P =303,195 – P =303,195

PSBank ANNUAL REPORT 2012

As of December 31, 2012 and 2011, secured and unsecured loans with related parties follow (in thousands): As of December 31, 2012 and 2011, secured and unsecured loans with related parties follow (in Key Management Personnel Related Parties Key Management Personnel OtherOther Related Parties thousands): 20112011 2012 Receivables from customers* 2012 Receivables from customers* 2012 2011 2012 2011 =P –– P =– = P =431,603 =431,603 Secured P Secured – P=393,796 = P = 393,796 Key Management Personnel P Other Related Parties P 14,550 107,531 117,084 Unsecured 16,227 2011 2012 2011 Receivables from customers* 2012 Unsecured 14,550 16,227 117,084 = 16,227 P =14,550 P = 501,327107,531 P =548,687 Loans outstanding at December 31 P =– P =– P = 393,796 P =431,603 Secured P Loans outstanding at December *Related terms on receivables from customers follow: 31 P = 14,550 P = 16,227 P = 548,687 P = 501,327 14,550 107,531 117,084 Unsecured 16,227 a. Loans to key management personnel have terms ranging from 2 to 10 years as of December 31, 2012 and 2011. Loans granted bear

= 16,227 P =14,550 P = 501,327 P =548,687 Loans outstanding December 31 2011.

P interest ofreceivables 6.0% in 2012from and * Related terms onat customers follow: b. Loans to other related parties follow: have terms ranging from from 1 to 8 years as years of December 31, 2012 and 31, 2011.

Loans granted *Related terms on receivables from customers a. Loans togranted key management personnel have terms ranging 2 to 10 as of December 2012 and 2011. bear Loans granted bear ranging frompersonnel 6.0% to 11.5% in 2012, 9.0% to 11.5% in 2011 and 9.0% to 12% in 2010. a. Loans interest to key management interest of 6.0% in 2012 and 2011. have terms ranging from 2 to 10 years as of December 31, 2012 and 2011. Loans granted bear interest of 6.0% in 2012 and 2011. b. Loans granted to other related parties have terms ranging from 1 to 8 years as of December 31, 2012 and 2011. Loans granted b. Loans granted to other related parties have terms ranging from 1 to 8 years as of December 31, 2012 and 2011. Loans granted bear bear interest 6.0%toto11.5% 11.5% in 2012, 9.0% to 11.5% 2011 and 9.0% 12% in 2010.with aggregate fair values Collateral to ranging secured include real chattel deposits interest rangingfrom fromloans 6.0% in 2012, 9.0% to estate, 11.5% in 2011in and 9.0% toand 12% into 2010.

amounting to P =63.3 million and P =62.0 million, as of December 31, 2012 and 2011, respectively.

Collateral to secured loans include real estate, chattel and deposits with aggregate fair values amounting to P =63.3 million and P =62.0 million, as(classified of December 31, HTM 2012 investments) and 2011, respectively.

As of December 31, 2012 and 2011, treasury bills under with total face value of P =50.0 million are pledged by the Bank to MBTC to secure the Bank’s payroll As of December 31, 2012 and 2011, treasury billsand (classified under HTM investments) with total account with MBTC. As of December 31, 2012 2011, MBTC has assigned to the Bank, face value ofsecurities P =50.0 million pledged by the Bank to MBTC to secure Bank’s payroll government withare total face value of P = 3.0 billion to secure the the Bank’s deposits to account with MBTC. As of December 31, 2012 and 2011, MBTC has assigned to the Bank, MBTC. government securities with total face value of P =3.0 billion to secure the Bank’s deposits to MBTC. The following table shows the amount and outstanding balances of the other related party transactions included in the financial statements (in thousands): The following table shows the amount and outstanding balances of the other related party Investor Associate transactions included in theSignificant financial statements (in thousands):Joint Venture Other Related Parties

2012 2011 2012 2011 2012 2011 2012 2011 Statement of Condition Other SignificantP Investor Associate Other Related Parties = 834,246 =572,168 P =– P =– P = –Joint Venture P =– P =– P =– Due from other banks P 2012 2011 2012 2011 2012 2011 2012 2011 Joint Associate Significant – Interbank loans receivable* – – Investor – – – –Venture 500,000 of Condition Statement 2,498 – – 1,178 973 1,289 1,602 Accounts receivable 2,945 2012 2012 2011 2012 2011 2011 2012 = 834,246 P =572,168 P =– P =– P =– P =– P =– P =– Due frominterest other banks P Accrued receivable 201 – Interbank loans receivable* – – – – – – 500,000 Statement of Condition Investment in an associate and a 2,498 – 1,289 1,602 Accounts 2,945 jointreceivable venture – –P 572,505 523,249 666,189 714,896 –– P = P = – – P = –1,178 P =973 – P =– – =572,168 P =834,246 Due from other banks – Accruedexpense interest -receivable 201 7,645 Prepaid insurance – – – – – – 8,957 –– 500,000 –– –– –– –– – – Interbank receivable* Investment in loans anand associate and a – Property, plant equipment** 73,783 523,249 666,189 714,896 – joint venture – 2,945 – 572,505 Miscellaneous assets - security 1,289 973– – – 1,178 2,498 Accounts receivable 7,645 Prepaid expense - insurance – – – – – – 8,957 3,595 925 – deposit 3,945 201 Accrued interest receivable – – – – – – – Property, plant and equipment** 73,783 2,052 712,233 947,852 1,228,334 9,501,435 Deposit liabilities*** – 43 2,309 Miscellaneous - security Investment in an associate and a 12,549 – – – – 6,629 9,304 Accrued otherassets expense payable 67,599 3,595 925 –– deposit 3,945 Miscellaneous liabilities - security – 572,505 523,249 666,189 714,896 – joint venture 2,052 712,233 947,852 Deposit liabilities*** – 43 2,309 5,589 – – 2,068 2,068 1,228,334 696 9,501,435 695 deposit**** 6,100 8,957 – – security –amounting – –This is secured – – by a government –interest of 3.63%.

Prepaid expense -payable insurance *Accrued Represents 4-day interbank lending to an 67,599 affiliate and bears to – 12,549 – 6,629 9,304 other expense P =500.0 million.

Miscellaneous liabilities - security – – – – – – 73,783 Property, plant and equipment** ** Acquisition cost amounted to P = 74.5 million, net of discount and other incidental expenses.

5,589 – – 2,068 2,068 696 695 deposit**** 6,100

Related Parties 2011 P = –

– 1,602 – – 7,645 –

Deposit liabilitiesassets bear interest security ranging from 0.5% to 4.0% in 2012, 0.5% to 4.8% in 2011, and 0.5% to 3.5% in 2010.

Miscellaneous Represents 4-day interbank -lending to an affiliate and bears interest of 3.63%. This is secured by a government security amounting to Represents 3-month rental deposits which are refundable at the end of the term (1 to 5 years).

P =500.0 million.

925 – – 3,595 – – – 3,945 deposit ** Acquisition cost amounted to P =74.5 million, net of discount and other incidental expenses.

1,228,334 9,501,435 2,309 2,052 712,233 947,852 Deposit *** Depositliabilities*** liabilities bear interest ranging from Investor 0.5% to 4.0% in– 2012, 0.5% to43 4.8% in 2011, and 0.5% to 3.5% 2010.

Significant Associate Joint in Venture Other Related Parties **** Represents 3-month rental deposits which 2011 are refundable end12,549 of the2011 term (1 to2010 5 years).

2010 at the2012 2010– 2012 2010 9,304 – 2012 –2011 – 2011 6,629 67,599 Accrued other expense2012 payable Statement of Income = 37,282 P = 2,035 P = 4,057 P =– P =– P =– P =– P =– P =– P = 9,467 P = 8,475 P = 8,744 Interest income P Miscellaneous liabilities -Significant Investor Associate Joint Venture Other Related Parties 23,585 24,260 – – – 9,605 9,028 25,678 26,718 22,427 Rental income 22,481 2011 2010 2012 5,589 2011 2010 –(48,707) 2012 2011 2010 2012 2011 2010 2012 696 695 2,068 –9,577 2,068 6,100 security 64,328 65,707 (56,056) (24,143) – – – Share in net incomedeposit**** (loss) – – – 49,255 *** * ****

of Income Statement 4,988 6,362 Bank commission – – – – – – – – – 6,286 = 37,282 P = 2,035 P = 4,057 P =– – P =– – P =– – P =– – P =– – P =– – P = 9,467 P = 8,475 P = 8,744 Interest expense income P Interest – – 1,427 – – – 23,585 24,260 – bears interest – – 3.63%.

9,605 9,028 26,718 22,427 Rental income 22,481 lending * Represents affiliate and of is secured by a25,678 government 12,549to an 9,513 – – – – This9,577 – – – – security – amounting Information technology 4-day expense interbank 76,039 64,328 65,707 (48,707) (56,056) (24,143) – – – Share in net income (loss) – – – 49,255 25,332 22,920 Insurance expense – – – – – – – – – 28,268 P =500.0 million.

4,988 6,362 Bank commission – – – – – – – – – 6,286 Interest expense 1,427 – – – expenses.

– – – – – ** Acquisition cost amounted –to P =74.5–million, net of discount and other– incidental 12,549 9,513 – – – – – – – Information technology expense 76,039 *** Deposit liabilities bear interest ranging from 0.5% to ––4.0% in 2012, 0.5% to 4.8% in 2011,–– and 0.5% to28,268 3.5% in 2010.

25,332 22,920 Insurance expense – – – – – – –

to

Interest income earned and interest expense incurred from the above loans and deposit **** Represents 3-month rental deposits which are refundable at the end of the term (1 to 5 years). liabilities in 2012, 2011, and 2010 follow (in thousands): Interest income earned and interest expense incurred from the above loans and deposit Associate Venture Key Management Other Related Parties liabilities in 2012, 2011,2012 and 2010 follow (inJoint thousands): 2011 2010 2012 2011 2010 2012 2011 Joint 2010 2012 2011 2010 Venture P =–

2011 2010 2012 2012 Statement of Income =– P =– P =– P =– Interest income P Interest income =2,03521 P P =37,28221P =4,057 34,138 Interest expense 27 Rental income 22,481 23,585 24,260 Share in net income (loss) – – – Bank commission – – – Interest expense – 1,427 – Information technology expense 76,039 12,549 9,513 Insurance expense – – –

2011 P =– 24,154

PSBank ANNUAL REPORT 2012

=– P 27

Significant Investor P =–

Interest income Interest expense

P =–

21 2012 Associate

P =–

201121

( 140 )

34,138 24,154 2012 2010 Joint Venture

Associate P =– 26,522

2011

2010 P =– 26,522

P = 1,382 P = 1,073 P = 781 – – – Key Management 2012 2011 2010 P = 1,382 P = 1,073 P = 781 – – –

2010

2012

Other Related Parties

P = 54,338

P =59,626

P = 60,781

2012 P = 54,338 252,081

2011 P =59,626 326,190

2010 P = 60,781 220,924

252,081 2010 326,190 220,924 2011 Other Related Parties 2012

P = – P = – P =– P = – P = – P =– 9,577 9,028 – – 9,605 – 49,255 64,328 65,707 (48,707)(56,056) (24,143) – – – – – – – – – – – – – – – – – – – – – – – –

2011

2010

=8,475 P =8,744 P =9,467 P 25,678 26,718 22,427 – – – 6,362 6,286 4,988 – – – – – – 28,268 25,332 22,920

Significant Investor 2011 2010 2012 Statement of Income Interest income Rental income Share in net income (loss) Bank commission Interest expense Information technology expense Insurance expense

= 37,282 P 22,481 – – – 76,039 –

P = 2,035 23,585 – – – 12,549 –

P = 4,057 24,260 – – 1,427 9,513 –

2012 P =– – 49,255 – – – –

Associate 2011 P =– – 64,328 – – – –

2010 P =– – 65,707 – – – –

2012

Joint Venture 2011

P =– 9,605 (48,707) – – – –

P =– 9,577 (56,056) – – – –

2010 P =– 9,028 (24,143) – – – –

Other Related Parties 2012 2011 2010 P = 9,467 25,678 – 6,286 – – 28,268

P = 8,475 26,718 – 4,988 – – 25,332

P = 8,744 22,427 – 6,362 – – 22,920

Interest income earned and interest expense incurred from the above loans and deposit liabilities in 2012, 2011, and 2010 follow (in thousands): Associate Associate Interest income

Interest expense Interest income Interest expense

2012 =– P 27

2012 P =– 27

2011 P =– 21

2011 P = – 21

2010 P =– 21

2010 P = – 21

Joint Venture Other Related Parties Joint Venture KeyKey Management Parties Management Other Related 2011 2010 2012 2011 2010 2012 2011 2010 2010 2012 2011 2010 2012 2011 2010 2012 P =– P =– P = 1,382 P = 1,073 P = 781 P = 54,338 P =59,626 P = 60,781 2011 24,154 26,522 – – – 252,081 326,190 220,924 =59,626 P =60,781 =54,338 P =1,073 P =781 P P =1,382 P P = – P = – P =– – – 252,081 326,190 220,924 – 34,138 24,154 26,522 2012 P =– 34,138

For the years ended December 31, 2012 and 2011, HFT, AFS and HTM investments securities transactions with related parties include (in thousands):

Outright purchases Outright purchases Outright sales Outright sales

Other Related Parties Significant Investor Significant Investor Other Related Parties 2012 2011 2012 2011 2012 2011 2012 2011 P = 5,250,000 P = 6,156,011 P = 900,000 P = 10,293,840 P = 900,000 P =10,293,840 P = 5,250,000 P =6,156,011 3,650,000 6,116,819 1,530,800 1,530,800 3,658,320 3,658,320 3,650,000 6,116,819

Trading gains - net on outright sales to related parties amounted to P =633.0 million, P =430.6 million and P =588.8 million in 2012, 2011 and 2010, respectively.

Terms and Conditions of Transactions with Related Parties Except where indicated, outstanding balances at year-end are unsecured and settlement occurs in cash. Due from other banks carry an interest rate of 0.25% and 0.50% in 2012 and 0.23% to 0.44% in 2011. Accounts receivable are interest-free. Total guarantees extended to related parties amounted to P =5.5 million and P =1.4 million in 2012 and 2011, respectively. Other than previously mentioned, the Bank has not recorded any impairment on receivables relating to amounts owed by related parties. This assessment is undertaken each year by examining the financial position of the related party and the market in which the related party operates.

Regulatory reporting As required by BSP, the Bank discloses loan transactions with investees and with certain directors, officers, stockholders and related interests (DOSRI). Under the Bank's policy, these loans and other transactions are made substantially on the same terms as with other individuals and businesses of comparable risks. Existing banking regulations limit the amount of individual loans to DOSRI, 70.00% of which must be secured, to the total of their respective deposits and book value of their respective investments in the lending company within the Bank. In the aggregate, loans to DOSRI generally should not exceed total equity or 15.00% of total loan portfolio, whichever is lower.

BSP Circular No. 423 dated March 15, 2004 amended the definition of DOSRI accounts. The following table shows information relating to the loans, other credit accommodations and guarantees classified as DOSRI accounts under regulations existing prior to said circular and new DOSRI loans and other credit accommodations granted under said circular as of December 31, 2012 and 2011: 2011 2012 2012 2011 = 1,284,499,649 Total outstanding DOSRI accounts P =1,564,583,651 P Totalofoutstanding DOSRIgranted accounts P = 1,564,583,651 P =1,284,499,649 Percent DOSRI accounts under Percent ofexisting DOSRI prior accounts regulations to granted under regulations existing prior to BSP Circular 1.94% BSP Circular No. 423 to total loans 2.03% 423 DOSRI to totalaccounts loans 2.03% 1.94% PercentNo. of new granted under Percent of new DOSRI accounts – BSP Circular No. 423 to total loans granted – BSP Circular No. 423 to total Percentunder of unsecured DOSRI accounts to total – – 19.34% DOSRIloans accounts 18.64% Percent of unsecured DOSRI accounts to Percent of past due DOSRI accounts to total DOSRI accounts 18.64% 42.57% DOSRItotal accounts 31.88% 19.34% Percent of past due DOSRI accounts to to total Percent of nonperforming DOSRI accounts DOSRI accounts accounts 31.88% 42.57% total DOSRI 31.88%42.57% Percent of nonperforming DOSRI accounts ( 141 ) PSBank ANNUAL REPORT 2012 to total DOSRI accounts 31.88% 42.57%

As of December 31, 2012 and 2011, the Bank has no loans, other credit accommodations and guarantees, as well as availments of previously approved loans and committed credit lines not considered DOSRI accounts prior to the issuance of said circular but are allowed a transition period of two years from the effectivity of the said circular until said circular or said loan, other credit accommodations and guarantees become past due, or are extended, renewed or restructured, whichever comes later.

BSP Circular No. 560 was issued providing the rules and regulations that govern loans, other credit accommodations and guarantees granted to subsidiaries and affiliates of banks and quasi-banks. Under the said circular, the total outstanding exposures to each of the bank's subsidiaries and affiliates shall not exceed 10.00% of bank's net worth, the unsecured portion of which shall not exceed 5.00% of such net worth. Further, the total outstanding exposures to subsidiaries and affiliates shall not exceed 20.00% of the net worth of the lending bank.

On May 12, 2009, BSP issued Circular No. 654 allowing a separate individual limit of twenty-five (25.00%) of the net worth of the lending bank to loans of banks to their subsidiaries and affiliates engaged in energy and power generation. As of December 31, 2012 and 2011, the Bank is in compliance with these requirements.

Total interest income from DOSRI loans amounted to P =55.4 million, P =60.4 million and P =63.6 million in 2012, 2011 and 2010, respectively.

30. Trust Operations Securities and other resources held by the Bank in fiduciary or agency capacity for its customers are not included in the accompanying statements of condition since these are not assets of the Bank.

In connection with the trust functions of the Bank, government securities (classified under AFS investments) with face value of P =40.0 million as of December 31, 2012 and P =30.0 million as of December 31, 2011, are deposited with the BSP in compliance with trust regulations.

For 2012 and 2011, the Bank did not appropriate any surplus reserve resulting from the operations of the Bank’s Trust Department since it is still in a net loss position. No part of such surplus reserve shall at any time be paid out in dividends, but losses accruing in the course of its trust business may be charged against surplus.

31. Commitments and Contingent Liabilities In the normal course of the Bank's operations, there are various outstanding commitments and contingent liabilities such as guarantees and commitments to extend credit, which are not reflected in the accompanying financial statements. The Bank, however, does not anticipate significant losses as a result of these transactions.

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The following is a summary of the Bank’s commitments and contingent liabilities at their equivalent peso contractual amounts: Trust department accounts (Note 30) Trust department Stand-by credit lines accounts (Note 30) Stand-by credit lines received Late deposits/payments Late deposits/payments Items held for safekeeping received Items held for safekeeping Others Others

2011 2012 2012 P =1,122,081,012 P =1,293,415,295 2011 P = 1,293,415,295 94,632,544 P =1,122,081,012 97,307,821 94,632,544 61,753,601 97,307,821 68,471,099 61,753,601 68,471,099 363,447 303,772 303,772 363,447 15,704 17,869 17,869 15,704

Also, several suits and claims, in behalf or against the Bank in relation to its lending operations and labor-related cases are pending before the courts and quasi-judicial bodies. In the opinion of management, these suits and claims, if decided adversely, will not involve an amount having a material effect on the financial statements.

32. Non-cash Investing Activities The following is a summary of certain non-cash investing activities that relate to the analysis of the statements of cash flows: Additions to investment properties Additions to investment properties in settlement of loans in settlement of loans Additions to chattel mortgage Additions to chattel mortgage in in settlement of loans settlement of loans NetNet increases (decrease) increases (decrease)ininfair fair of AFS investment valuevalue of AFS investment Dividends declaredand andunpaid unpaid Dividends declared Cumulative translationadjustment adjustment Cumulative translation

2012

2012

2011

2011

2010

2010

P =699,737,231 P =491,398,630 P =600,182,806 P = 491,398,630 P =600,182,806 P =699,737,231 639,569,321 840,698,632 667,187,188 667,187,188 840,698,632 639,569,321 (2,193,594,598) 2,044,596,539 (464,677,787) (464,677,787) (2,193,594,598) 2,044,596,539 176,673,172 – – 176,673,172 35,370,001 35,370,001 (6,878,392) (6,006,080) (6,878,392) (6,006,080) (1,693,565) (1,693,565)

33. Subsequent Events On January 22, 2013, the BOD of the Bank declared a 7.50% regular cash dividend for the fourth quarter of 2012 amounting to P =180.19 million or P =0.75 per share. This was approved by the BSP on February 18, 2013.

34. Approval for the Release of the Financial Statements The accompanying comparative financial statements were reviewed and approved for release by the Bank’s Audit Committee and the BOD on February 26, 2013.

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35. Report on the Supplementary Information Required Under Revenue Regulations (RR) No. 19-2011 and 15-2010 Supplementary Information Under RR No. 19-2011 In addition to the required supplementary information under RR No. 15-2010, on December 9, 2011, the Bureau of Internal Revenue (BIR) issued RR No. 19-2011 which prescribes the new annual income tax forms that will be used for filing effective taxable year 2011.

Specifically, companies are required to disclose certain tax information in their respective notes to financial statements.

For the taxable year ended December 31, 2012, the Bank reported the following revenues and expenses for income tax purposes: Revenues Services/operations Services/operations Non-operating andand taxable other income: Non-operating taxable other income: Service charges, fees and commissions Service charges, fees and commissions Others Others

P =6,729,094,556 P =6,729,094,556 P =925,311,445 P =925,311,445 52,274,111 52,274,111 P =977,585,556 P =977,585,556

Expenses of services: CostCost of services: Compensation and fringe benefits Compensation and fringe benefits Others Others Itemized deductions: Itemized deductions: Compensation and fringe benefits Compensation and fringe benefits Rent Rent Depreciation Depreciation Communication, light and Communication, lightwater and water Security, messengerial and janitorial Security, messengerial and janitorial Information technology Information technology Repairs and maintenance Repairs and maintenance Transportation and travel Transportation and travel Management and professional fees fees Management and professional EAR EAR Others Others

P =1,267,068,650 P =1,267,068,650 3,150,343,866 3,150,343,866 P =4,417,412,516 P =4,417,412,516 P =529,143,050 P =529,143,050 357,461,558357,461,558 325,773,158 325,773,158 257,952,881 257,952,881 219,779,939219,779,939 132,017,304 132,017,304 78,496,364 78,496,364 63,660,738 63,660,738 37,795,726 37,795,726 1,866,721 1,866,721 766,140,239766,140,239 P =2,770,087,678 P =2,770,087,678

Supplementary Information Under RR No. 15-2010 On November 25, 2010, the BIR issued RR No. 15-2010 to amend certain provisions of RR No. 21-2002. The regulations provide that starting 2010, the notes to financial statements shall include information on taxes, duties and license fees paid or accrued during the taxable year.

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The Bank reported and/or paid the following types of taxes for the year: Taxes and Licenses As of December 31, 2012, taxes and licenses of the Bank consist of: Gross receipts tax tax Gross receipts Documentary stamps tax tax Documentary stamps Local taxes Local taxes RealReal property tax tax property Fringe benefit tax tax Fringe benefit Others Others

P =529,137,685 P =529,137,685 255,456,282255,456,282 28,373,329 28,373,329 14,081,915 14,081,915 6,146,503 6,146,503 3,638,575 3,638,575 P =836,834,289 P =836,834,289

Withholding Taxes Details of total remittances of withholding taxes as of December 31, 2012 are as follows: Withholding taxes on compensation Withholding taxes on compensation andand benefits benefits Expanded withholding taxes Expanded withholding taxes Final withholding taxes Final withholding taxes

P =348,337,186 P =348,337,186 66,119,347 66,119,347407,638,154 407,638,154 P =822,094,687 P =822,094,687

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Branches METRO MANILA

Las Piñas - Pamplona Alabang Zapote Rd., Pamplona 2 T: (02) 872-1865 / 875-3364 F: (02) 872-1533 laspinaspamplona@psbank.com.ph

CALOOCAN CITY Caloocan G/F, G. Raymundo Bldg.

314 EDSA Monumento T: (02) 361-2163 / 364-6549 F: (02) 364-6548 caloocan@psbank.com.ph

Las Piñas - Zapote G/F, Zapote Arcade Bldg. 2 Quirino Ave., Zapote T: (02) 822-5442 / 822-5736 laspinaszapote@psbank.com.ph

Caloocan - Samson Road G/F, Erlinda Go Bldg.

Samson Rd. cor. Torres St. T: (02) 376-9023 F: (02) 376-4961 caloocan-samsonrd@psbank.com.ph Camarin G/F, Zabarte Town Center 588 Camarin Rd. T: (02) 962-4865 / 962-4866 F: (02) 962-4864 camarin@psbank.com.ph Grace Park 647 Rizal Ave. Ext., 10th Ave. Grace Park T: (02) 362-7638 / 362-7639 F: (02) 362-7463 gracepark@psbank.com.ph Maypajo 132 A. Mabini St., Maypajo T: (02) 285-7012 / 287-2338 F: (02) 287-3048 maypajo@psbank.com.ph LAS PIÑAS CITY

MAKATI CITY Arnaiz Avenue 824 Ginbo Bldg., Arnaiz St. T: (02) 888-5488 / 888-5500 F: (02) 888-5499 arnaiz@psbank.com.ph Ayala Avenue G/F, Jaka I Bldg., Ayala Ave. T: (02) 867-1899 / 867-2799 F: (02) 867-1799 ayalaave@psbank.com.ph Chino Roces G/F, ENCM Bldg.

1099 Chino Roces Ave. cor. Mascardo St., Sta. Cruz T: (02) 899-3700 / 899-4500 F: (02) 899-4600 chinorocesave@psbank.com.ph Chino Roces Avenue Extension GEE Bldg.

2301 Chino Roces Ave. Ext. T: (02) 889-4625 / 889-3450 F: (02) 889-2617 edison@psbank.com.ph

BF Resort 1 Alice Crisostomo St. cor. BF Resort Drive BF Resort Village T: (02) 873-6941 / 873-9765 F: (02) 873-6787 bfresort@psbank.com.ph

Gil Puyat - N. Garcia Unit 101-A ITC Bldg.

Sen. Gil Puyat Ave. T: (02) 897-0425 / 897-0426 F: (02) 899-3764 tordesillas@psbank.com.ph

Las Piñas G/F, Fairland Bldg.

Alabang-Zapote Rd. cor. V. Guinto St., Pamplona T: (02) 871-2346 / 873-8651 F: (02) 873-8354 laspinas@psbank.com.ph

Gil Puyat - Tindalo G/F, Skyland Plaza Condominium Sen. Gil Puyat Ave. cor. Tindalo St. T: (02) 845-0008 / 845-0064 (02) 844-6002 F: (02) 845-0051 / 845-0065 gilpuyat@psbank.com.ph

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J.P. Rizal PSBank Bldg., J.P. Rizal cor. Legaspi Sts., Brgy. Valenzuela T: (02) 890-0794 / 896-8408 F: (02) 895-5847 jprizal@psbank.com.ph Legaspi - Palanca Doña Angela Garden Condominium 110 C. Palanca St., Legaspi Village T: (02) 814-0843 / 817-8801 F: (02) 893-3207 legaspipalanca@psbank.com.ph Legaspi - Salcedo 195 Casmer Bldg., Salcedo St. Legaspi Village T: (02) 830-0004 / 840-4283 F: (02) 830-0192 salcedo@psbank.com.ph Magallanes 1052 MPI Bldg., EDSA cor. Lapu-Lapu Ave. Magallanes Village T: (02) 851-2921 / 851-6027 F: (02) 851-0678 magallanesedsa@psbank.com.ph Main Office - Paseo de Roxas G/F, PSBank Center 777 Paseo de Roxas Ave. cor. Sedeño St. T: (02) 885-8239 / 885-8208 loc. 8637, 8640, 8642 F: (02) 845-0066 mob@psbank.com.ph Makati Avenue 690 Makati Ave. cor. Jupiter St. Bel-Air Village T: (02) 895-8882 / 896-0014 F: (02) 896-8993 makatiave@psbank.com.ph MALABON CITY Malabon 685 Rizal Ave. Ext., San Agustin St. T: (02) 283-7668 / 283-7669 F: (02) 283-7667 malabon@psbank.com.ph

Malabon - Governor Pascual Gov. Pascual cor. Maria Clara St. Acacia T: (02) 990-5585 / 990-5587 F: (02) 446-2511 malabon-govpascual@psbank.com.ph MANDALUYONG CITY Boni Avenue 641 CIFRA Bldg., Boni Ave. T: (02) 531-7702 / 531-8066 F: (02) 531-8141 boniave@psbank.com.ph EDSA Central G/F, Unit 111 EDSA Central Square 3rd St., Greenfield District T: (02) 637-2601 / 637-4005 F: (02) 637-1756 edsacentral@psbank.com.ph

Balic-Balic G. Tuazon cor. Calabash A Sts. Balic-Balic, Sampaloc T: (02) 712-0584 / 781-8184 F: (02) 781-2645 balic-balic@psbank.com.ph

Ongpin Ongpin Commercial Center Gonzalo St., Sta. Cruz T: (02) 733-6656 / 733-7393 F: (02) 733-7397 ongpin@psbank.com.ph

Blumentritt PSBank Bldg., 1680 Blumentritt cor. Oroquieta Sts., Sta. Cruz T: (02) 741-0801 / 741-3858 F: (02) 743-7327 blumentritt@psbank.com.ph

Paco G/F, Units 14 and 15 JCS Bldg.

1521 Paz St., Paco T: (02) 562-3513 / 562-9607 F: (02) 561-3661 paco@psbank.com.ph

Central Market 1633 Fugoso cor. M. Natividad Sts. Sta. Cruz T: (02) 733-8294 / 735-1181 F: (02) 733-8293 cmarket@psbank.com.ph

Padre Faura G/F, Padre Faura Wing Robinsons Place Manila Padre Faura St., Ermita T: (02) 523-0787 / 523-0794 F: (02) 523-0781 padrefaura@psbank.com.ph

Kalentong 55 Shaw Blvd., near cor. Kalentong St. T: (02) 531-8193 / 531-8293 F: (02) 531-9353 kalentong@psbank.com.ph

Downtown Center 628 Wellington Bldg.

Plaza Lorenzo Ruiz, Binondo T: (02) 243-3089 / 243-3090 (02) 243-3125 F: (02) 241-0301 downtown@psbank.com.ph

Mandaluyong - Wack Wack G/F, Unit 1-A Lee Gardens Condominium, Shaw Blvd.

T: (02) 451-1677 / 451-1788 F: (02) 451-1788 wackwack@psbank.com.ph

España Unit G España Tower 2203 España Blvd.

T: (02) 711-2075 / 711-2078 F: (02) 711-2076 espana@psbank.com.ph

MANILA Abad Santos 1939 Jose Abad Santos Ave., Tondo T: (02) 252-4242 / 252-4277 F: (02) 252-4244 abadsantos@psbank.com.ph Adriatico Midtown Level 1 Alfresco Space 282 Robinsons Place Manila M. Adriatico St., Ermita T: (02) 524-4410 / 559-8391 F: (02) 559-8246 adriatico@psbank.com.ph

Pateros G/F, Sanz Bldg., 506 M. Almeda St. San Roque, Pateros T: (02) 584-3904 / 584-3910 F: (02) 584-3908 pateros@psbank.com.ph Quezon Boulevard 358 Quezon Blvd., Quiapo T: (02) 736-7333 / 736-7334 F: (02) 733-6244 quezonblvd@psbank.com.ph

Harrison Plaza G/F, F8 Harrison Plaza Shopping Center, Mabini St., Malate T: (02) 524-4389 / 524-4394 F: (02) 524-4384 harrisonplaza@psbank.com.ph Jaboneros 467 Jaboneros cor. Ilang-Ilang Sts. Binondo T: (02) 242-8254 / 243-7330 F: (02) 242-8253 jaboneros@psbank.com.ph Legarda G/F, Legarda Place, Legarda St. Sampaloc T: (02) 734-6702 / 735-3285 F: (02) 733-6984 legarda@psbank.com.ph

Quiapo Palanca 202 Carlos Palanca cor. Villalobos Sts., Quiapo T: (02) 733-8401 to 03 F: (02) 733-3868 quiapo-palanca@psbank.com.ph Rizal Avenue 552-554 Rizal Ave., Sta. Cruz T: (02) 733-0233 / 733-3857 F: (02) 733-4075 rizalave@psbank.com.ph Soler Athena Tower, 1258 Soler cor. Benavidez Sts., Binondo T: (02) 241-3081 / 242-1048 F: (02) 241-3083 soler@psbank.com.ph

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Branches T.M. Kalaw G/F, Sunview Palace Condominium T.M. Kalaw Ave. cor. M.H. del Pilar St. Ermita T: (02) 247-0419 / 247-0438 F: (02) 247-1105 tmkalaw@psbank.com.ph Tabora 817-819 Tabora St., Divisoria T: (02) 241-8670 / 241-8672 (02) 247-1979 F: (02) 241-8678 tabora@psbank.com.ph

Marikina - Parang 76 B.G. Molina cor. E. Rodriguez Sts. Parang T: (02) 942-0013 / 942-0804 F: (02) 942-0617 parang@psbank.com.ph

U.N. Avenue G/F, Linsangan Admiralty Bldg.

1225 U.N. Ave., Paco T: (02) 588-0566 / 588-0571 F: (02) 588-0570 unavenue@psbank.com.ph

Marikina - Riverbanks A1-24 Riverbanks Arcade Riverbanks Center 84 A. Bonifacio Ave., Barangka T: (02) 948-5547 / 948-6168 F: (02) 948-5391 riverbanks@psbank.com.ph

Vito Cruz G/F, Burgundy Westbay Tower 820 Pablo Ocampo St., Malate T: (02) 302-0476 / 302-0744 F: (02) 302-0745 vitocruz@psbank.com.ph

Marikina - Sumulong G/F, Algers Bldg., Sumulong Highway cor. E. Jacinto St., Brgy. Sto. Niño T: (02) 661-9120 / 661-9124 F: (02) 661-9122 marikinasumulong@psbank.com.ph

Ylaya 999-1003 Ylaya St., Tondo T: (02) 245-6757 / 245-6758 F: (02) 245-5317 ylaya@psbank.com.ph

MUNTINLUPA CITY

MARIKINA CITY Marikina - Bluewave Bluewave Strip Mall Sumulong Highway cor. Fernando Ave., Marikina City T: (02) 234-1300 / 234-1302 F: (02) 234-1302 marikinabluewave@psbank.com.ph Marikina - Concepcion 20 Bayan-Bayanan Ave. Concepcion Uno T: (02) 942-2411 / 998-2836 F: (02) 942-2462 marikina@psbank.com.ph

PSBank ANNUAL REPORT 2012

Marikina - Marcos Highway Unit 12-13, M-R Complex Marcos Highway cor. Gil Fernando Ave. San Roque, Marikina City T: (02) 668-1018 / 668-1060 F: (02) 668-1059 marikinamarcoshway@psbank.com.ph

Alabang Estrellita Bldg., 236 Montillano St. Alabang T: (02) 842-1241 / 850-1279 F: (02) 850-0532 alabang@psbank.com.ph Alabang - Acacia Kingston Tower, Acacia Ave. Ayala Alabang T: (02) 586-4332 / 553-0918 F: (02) 850-0532 alabangacacia@psbank.com.ph Alabang - Madrigal Park G/F, Admiralty Bldg.

1101 Alabang - Zapote Rd. Madrigal Business Park Ayala Alabang T: (02) 869-0956 / 869-7158 F: (02) 869-0956 alabangmadrigal@psbank.com.ph

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Alabang - Zapote G/F, Sycamore Arcade Bldg.

Alabang - Zapote Rd., Alabang T: (02) 842-3760 / 842-5115 F: (02) 842-1566 alabangzapote@psbank.com.ph Muntinlupa DLA Bldg., Putatan T: (02) 862-0029 / 862-0552 F: (02) 862-0028 muntinlupa@psbank.com.ph NAVOTAS Navotas 873 M. Naval St., Sipac-Almacen T: (02) 283-6944 / 666-6638 F: (02) 283-6621 navotas@psbank.com.ph PARAÑAQUE CITY BF Homes 11 President Ave. cor. Elizalde St. BF Homes T: (02) 807-9866 / 807-9867 F: (02) 807-9378 bfhomes@psbank.com.ph Bicutan 40 Doña Soledad Ave. Better Living Subdivision T: (02) 776-2643 / 776-3009 F: (02) 776-6409 bicutan@psbank.com.ph Parañaque 8387 Dr. Alejo Santos Ave. Brgy. San Antonio T: (02) 825-1512 / 825-7314 F: (02) 829-7048 paranaque@psbank.com.ph Parañaque - La Huerta Quirino Ave. cor. M. Rodriguez St. La Huerta T: (02) 826-9650 / 826-9722 F: (02) 826-9648 lahuerta@psbank.com.ph

PASAY CITY Baclaran BAGVPI Trade Center F.B. Harrison cor. Ortigas Sts. T: (02) 851-0310 / 854-0673 F: (02) 851-4357 baclaran@psbank.com.ph Pasay Taft 2336 Taft Ave. cor. Villareal St. T: (02) 551-1598 / 831-4574 F: (02) 833-8875 pasaytaft@psbank.com.ph PASIG CITY Caniogan 1 C. Raymundo cor. Mercedes Ave. Caniogan T: (02) 642-8717 / 642-8767 F: (02) 642-8715 caniogan@psbank.com.ph Manggahan 454 Amang Rodriguez Ave. Manggahan T: (02) 748-3390 / 748-3398 F: (02) 748-3386 manggahan@psbank.com.ph Ortigas Unit 110 Parc Chateau Condominium Onyx cor. Sapphire and Garnet Rds. Ortigas Center T: (02) 633-6209 / 634-4319 F: (02) 634-4320 ortigas@psbank.com.ph Ortigas - San Miguel G/F, The Crescent Bldg.

21 San Miguel Ave., Ortigas Center T: (02) 634-1773 / 634-1870 F: (02) 634-1872 sanmiguel@psbank.com.ph Pasig - Mutya Mariposa Bldg., Caruncho cor. Suarez Ave. T: (02) 477-2942 / 641-7486 F: (02) 641-1122 mutya@psbank.com.ph

Pasig - Shaw 112 Shaw Blvd.

T: (02) 687-2537 / 687-6561 F: (02) 687-2564 shaw@psbank.com.ph

Commonwealth 2211 Aguirre Bldg., Commonwealth Ave. T: (02) 931-6934 / 932-2116 (02) 952-2062 F: (02) 952-2066 commonwealth@psbank.com.ph

Plaza Bonifacio A. Mabini cor. Alkalde Jose Sts. Kapasigan T: (02) 641-5335 / 642-3980 F: (02) 641-1941 plazabonifacio@psbank.com.ph

Congressional Avenue 45 Congressional Ave. Ext. T: (02) 920-8036 / 924-5102 F: (02) 924-5103 congressional@psbank.com.ph Del Monte 182-A Del Monte Ave., Brgy. St. Peter T: (02) 410-0900 / 410-7037 (02) 742-8727 F: (02) 415-3501 delmonte@psbank.com.ph

QUEZON CITY Acropolis The SPA Bldg.

80 E. Rodriguez Jr. Ave., Libis T: (02) 655-5578 / 655-5341 F: (02) 655-5320 libis@psbank.com.ph

E. Rodriguez Seneca Plaza Bldg.

1152 E. Rodriguez Sr. Ave., New Manila T: (02) 705-1110 / 724-3775 F: (02) 721-0701 erodriguez@psbank.com.ph

Amoranto N.S. Amoranto cor. Retiro Sts. T: (02) 712-1545 / 742-8736 F: (02) 412-5218 amoranto@psbank.com.ph Araneta Avenue 50 Landargun St. cor. Araneta Ave. T: (02) 716-1051 / 716-1052 F: (02) 716-1054 aranetaave@psbank.com.ph Araneta Center - New Frontier Space 19, New Frontier Cinema Theater Arcade, Gen. Roxas Ave. Araneta Center, Cubao T: (02) 912-6189 / 912-6843 F: (02) 912-7265 newfrontier@psbank.com.ph Balintawak 1238 GO SOC Bldg.

EDSA Balintawak T: (02) 362-8189 / 362-8191 F: (02) 362-8187 balintawak@psbank.com.ph Banawe PPSTA Bldg. 3, 245 Banawe St. T: (02) 742-2797 / 742-2805 F: (02) 742-2790 banawe@psbank.com.ph

Fairview 95 Commonwealth Ave. Brgy. Greater Fairview T: (02) 431-1534 / 939-7520 F: (02) 938-2141 fairview@psbank.com.ph Gilmore Heights 18 Granada cor. Castilla Sts. T: (02) 724-0210 / 724-0230 F: (02) 724-0255 gilmore@psbank.com.ph Kamias PHA Bldg., 14 Kamias Rd. T: (02) 925-8654 / 925-8746 F: (02) 925-8653 kamias@psbank.com.ph Katipunan G/F, Unit 103 Elizabeth Hall L1 B41 Katipunan Ave., Loyola Heights T: (02) 426-7118 / 929-0276 F: (02) 929-0275 katipunan@psbank.com.ph

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Branches Lagro L5 B2, Sacred Heart Village Quirino Highway, Lagro T: (02) 418-1048 / 930-1827 F: (02) 939-3184 lagro@psbank.com.ph

Tandang Sora Amina Bldg., Tierra Bella Subd.

Tandang Sora Ave. T: (02) 931-3276 / 932-3346 F: (02) 932-3212 tandangsora@psbank.com.ph

Mindanao Avenue Units A & B, L Bldg., 4 Mindanao cor. Congressional Ave. Brgy. Bahay Toro, Project 8 T: (02) 920-0576 / 920-0763 F: (02) 920-0478 mindanaoave@psbank.com.ph

Timog 58 Castro Bldg., Timog Ave. Brgy. Laging Handa T: (02) 374-3691 / 374-3692 F: (02) 373-7023 timog@psbank.com.ph

Novaliches 877 G/F, Gatmaitan Bldg.

Quirino Highway, Gulod T: (02) 419-0208 / 930-0488 (02) 936-3602 F: (02) 419-0209 psb-novaliches@psbank.com.ph P. Tuazon 247 P. Tuazon cor. 15th Ave., Cubao T: (02) 438-4686 / 911-1119 F: (02) 911-1181 ptuazon@psbank.com.ph P. Tuazon - 7th Avenue G/F, Universal Aquarius Bldg.

158 P. Tuazon cor. 7th Ave., Cubao T: (02) 995-7672 / 995-7674 F: (02) 995-7673 ptuazon7ave@psbank.com.ph Quezon Avenue 380 Jacinto Bldg., Quezon Ave. cor. Scout Reyes St. Brgy. Paligsahan T: (02) 799-2963 / 374-4255 F: (02) 374-4233 quezonave@psbank.com.ph

RIZAL Antipolo 75 Circumferential Rd. Brgy. San Roque, Antipolo City T: (02) 696-3588 / 696-3595 F: (02) 696-3617 antipolo@psbank.com.ph Antipolo - Masinag G/F, Tripolee Bldg.

Marcos Highway, Brgy. Mayamot Antipolo City T: (02) 470-3616 F: (02) 470-3132 antipolomasinag@psbank.com.ph Antipolo - M.L. Quezon World Citi Colleges Bldg.

M.L. Quezon St., Brgy. San Roque Antipolo City T: (02) 584-7768 / 584-7769 F: (02) 584-7772 antipolomlq@psbank.com.ph

Quezon City - Matalino 18 St. Thomas Square Bldg.

Matalino cor. Matatag Sts. Brgy. Central T: (02) 928-1945 / 928-2471 F: (02) 929-9587 matalino@psbank.com.ph Roosevelt 348 PSBank Bldg., Roosevelt Ave. San Francisco del Monte T: (02) 372-2132 / 414-5102 F: (02) 414-5097 roosevelt@psbank.com.ph

PSBank ANNUAL REPORT 2012

West Avenue 49 Graphic Sales Center Bldg.

West Ave. T: (02) 371-9395 / 411-0677 F: (02) 371-9396 westave@psbank.com.ph

Antipolo - Unciano G/F, Unciano Colleges & General Hospital, Circumferential Rd. Brgy. San Roque, Antipolo City T: (02) 570-8530 / 570-8533 F: (02) 570-8531 unciano@psbank.com.ph

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Cainta G/F, Ortigas Royale Condominium Ortigas Ave. Ext., Brgy. San Juan Cainta T: (02) 656-8284 / 656-8290 F: (02) 656-8295 cainta@psbank.com.ph Cainta - Felix Avenue Cainta Business Center Bldg.

Felix Ave. cor. Vista Verde Ext. Gate 2, Cainta T: (02) 646-7421 / 840-2710 F: (02) 641-1941 caintafelix@psbank.com.ph Rizal - Angono G/F, ARC One Bldg., Quezon Ave. Sunstrip, Angono, Rizal T: (02) 234-2150 angonorizal@psbank.com.ph Rizal - Montalban Imelda Nocon Bldg.

240 E. Rodriguez Highway Montalban, Rizal T: (02) 212-1576 / 212-1572 rizalmontalban@psbank.com.ph Taytay Ison Bldg., J.P. Rizal Ave. cor. Ison St., Brgy. Dolores, Taytay T: (02) 658-7264 / 660-4755 (02) 658-7251 F: (02) 660-4756 taytay@psbank.com.ph Taytay - Manila East Road Manila East Road cor. Ignacio St. Brgy. San Juan, Taytay T: (02) 994-1519 taytaymanilaeast@psbank.com.ph SAN JUAN CITY Boni Serrano - St. Ignatius PSMBFI Bldg., Boni Serrano Ave. cor. 1st and 2nd Sts., West Crame T: (02) 724-5352 / 727-1215 F: (02) 726-2930 boniserrano@psbank.com.ph

Greenhills 3 Missouri cor. Nevada Sts. Northeast Greenhills T: (02) 721-4491 / 722-7575 F: (02) 722-8045 greenhills@psbank.com.ph N. Domingo Joyce Apartelle, 128 N. Domingo St. T: (02) 726-2893 / 726-2896 F: (02) 726-2894 ndomingo@psbank.com.ph San Juan 5 F. Blumentritt cor. N. Domingo Sts. T: (02) 724-9468 / 725-7850 F: (02) 726-1090 sanjuan@psbank.com.ph Wilson 1 Barasoain cor. Wilson Sts. T: (02) 724-0306 / 724-0337 F: (02) 724-0329 wilson@psbank.com.ph TAGUIG CITY Bonifacio Global City G/F, Unit 1 Bonifacio Technology Center 31st cor. 2nd Sts., Bonifacio Global City T: (02) 815-9785 / 815-9796 F: (02) 815-9785 bonifacioglobalcity@psbank.com.ph

Balanga SHP Bldg. II, Don Manuel Banzon Ave. Balanga, Bataan T: (047) 237-9926 / 237-9928 (02) 246-8204 F: (047) 237-9927 balanga@psbank.com.ph

VALENZUELA CITY Valenzuela Arty Subdivision McArthur Highway cor. J.P. Rizal St., Karuhatan T: (02) 291-8435 / 432-8684 F: (02) 291-6464 valenzuela@psbank.com.ph Valenzuela - Malanday G/F, One Centrum Place 618 McArthur Highway, Malanday Valenzuela City T: (02) 945-5418 F: (02) 945-5419 valenzuela-malanday@psbank.com.ph Valenzuela - Paso de Blas 141 Paso de Blas St., Valenzuela T: (02) 277-1596 / 294-9124 F: (02) 432-1393 pasodeblas@psbank.com.ph

NORTH LUZON Alaminos Suki Market, F. Reinoso St., Poblacion Alaminos City, Pangasinan T: (075) 654-0305 / 654-0306 F: (075) 653-0304 alaminos@psbank.com.ph

Angeles Miranda Ext. cor. Sadie St. Global City - 4th Avenue San Nicolas, Angeles, Pampanga Shop 4, The Luxe Residences T: (045) 625-9445 / 888-9432 28th cor. 4th Ave., Bonifacio Global City F: (045) 625-9443 T: (02) 403-7619 / 403-9313 angeles@psbank.com.ph F: (02) 403-9315 globalcity@psbank.com.ph Angeles - Balibago G/F, Fields Plaza Condominium Taguig - General Luna McArthur Highway, Balibago G/F, Paulina Bldg.

Angeles, Pampanga 8 Gen. Luna Ave., Tuktukan T: (045) 624-6721 T: (02) 643-6677 / 643-6626 (02) 246-8420 F: (02) 643-6735 F: (045) 624-6720 taguig-genluna@psbank.com.ph angelesbalibago@psbank.com.ph Taguig - Kalayaan Shop 10, PhilPlans Corporate Center 1012 North Triangle Drive Bonifacio Global City T: (02) 403-1992 / 403-1993 F: (02) 403-1994 kalayaan@psbank.com.ph

Baguio 35 G. Perfecto St. Malcolm Square, Baguio City T: (074) 442-5260 / 442-8092 (074) 442-9483 F: (074) 442-8091 baguio@psbank.com.ph

Bulacan - Balagtas BAGS Bldg., McArthur Highway San Juan, Balagtas, Bulacan T: (044) 896-0287 / 892-1142 F: (044) 326-0102 bulacanbalagtas@psbank.com.ph Bulacan - Baliuag B.S. Aquino Ave. cor. Lopez Jaena St. Bagong Nayon, Baliuag, Bulacan T: (044) 766-1919 / 673-1644 F: (044) 766-1920 baliwag@psbank.com.ph Bulacan - Pulilan Do単a Remedios Trinidad Highway Pulilan, Bulacan T: (044) 326-0102 / 892-1508 (044) 892-1142 F: (044) 326-0102 pulilanbulacan@psbank.com.ph Bulacan - San Jose Del Monte G/F, FLB Bldg., Provincial Road Brgy. Tungkong Mangga San Jose Del Monte, Bulacan sanjosedelmonte@psbank.com.ph Cabanatuan 782-784 Century Enterprise Bldg.

Melencio cor. Paco Roman Sts. Cabanatuan City, Nueva Ecija T: (044) 463-8109 / 463-8110 (044) 464-1437 F: (044) 463-8111 cabanatuan@psbank.com.ph Camiling Arellano St., Poblacion Camiling, Tarlac T: (045) 934-0458 F: (045) 934-0336 camiling@psbank.com.ph Dagupan 43 Burgos St., Dagupan City Pangasinan T: (075) 515-8571 / 522-8573 F: (075) 522-8574 dagupan@psbank.com.ph

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Branches Isabela - Cauayan 135 Maharlika Highway, San Fermin Cauayan, Isabela T: (078) 652-1131 / 652-1214 (078) 897-1506 / 662-1317 F: (078) 652-1006 cauayan@psbank.com.ph La Union G/F, Nisce Bldg., Quezon Ave. San Fernando, La Union T: (072) 888-2173 F: (072) 888-3279 launion@psbank.com.ph Laoag F.R. Castro St., Laoag, Ilocos Norte T: (077) 770-3336 / 770-3692 (077) 771-6167 F: (077) 770-3692 laoag@psbank.com.ph Malolos Paseo del Congreso, Brgy. Liang Malolos, Bulacan T: (044) 666-2219 / 791-0439 F: (044) 791-0446 malolos@psbank.com.ph Malolos McArthur Units 2 to 4, Twins Plaza Complex McArthur Highway, Bulihan Malolos, Bulacan T: (044) 790-6279 / 791-9810 F: (044) 791-9811 malolosmcarthur@psbank.com.ph Meycauayan PSBank Bldg., McArthur Highway Calvario, Meycauayan, Bulacan T: (044) 228-3316 / 721-0665 F: (044) 935-2765 meycauayan@psbank.com.ph Olongapo KT Tower, L1147 Rizal Ave. cor. 18th St., East Bajac-Bajac Olongapo, Zambales T: (047) 224-6681 / 224-6689 F: (047) 224-6682 olongapo@psbank.com.ph Pangasinan - Urdaneta Poblacion, McArthur Highway Urdaneta City, Pangasinan urdaneta@psbank.com.ph

PSBank ANNUAL REPORT 2012

Paniqui Poblacion Norte, Paniqui, Tarlac T: (045) 931-0234 / 931-1539 F: (045) 931-0934 paniqui@psbank.com.ph San Fernando HPT Bldg., McArthur Highway Dolores, San Fernando, Pampanga T: (045) 963-5353 / 963-5354 F: (045) 961-3157 sanfernando@psbank.com.ph Santiago G/F, Insular Life Bldg.

Maharlika Highway, Brgy. Villasis Santiago, Isabela T: (078) 682-2013 / 682-3001 F: (078) 305-2120 / 682-3002 santiago@psbank.com.ph Sta. Maria Corazon de Jesus St., Poblacion Sta. Maria, Bulacan T: (044) 288-2543 / 893-0588 F: (044) 815-4764 stamaria@psbank.com.ph Tarlac PSBank Bldg., F. Ta単edo St., Tarlac T: (045) 982-3513 / 982-3669 F: (045) 982-3512 tarlac@psbank.com.ph Tarlac - Capas Sto. Domingo 1st, Capas , Tarlac T: (045) 615-0813 to 14 F: (045) 615-0815 capas@psbank.com.ph Tuguegarao GSM Bldg., Luna cor. Del Rosario Sts. Tuguegarao, Cagayan T: (078) 844-8613 / 844-8751 F: (078) 844-8621 tuguegarao@psbank.com.ph Vigan G/F, CAP Bldg., Florentino St. Vigan, Ilocos Sur T: (077) 632-0872 / 722-5100 F: (077) 632-0871 vigan@psbank.com.ph

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SOUTH LUZON Batangas P. Burgos St., Batangas City T: (043) 402-1520 / 402-8888 F: (043) 402-1521 batangas@psbank.com.ph Batangas - Bauan Kapitan Ponso St., cor. Ilagan St. Poblacion IV, Bauan, Batangas T: (043) 980-9599 / 980-0010 F: (043) 980-9599 batangas-bauan@psbank.com.ph Binakayan PSBank Bldg., Tirona Highway National Rd., Binakayan Kawit, Cavite T: (046) 434-1627 / 434-4221 F: (02) 529-8702 binakayan@psbank.com.ph Bi単an A. Bonifacio cor. Burgos Sts. Bi単an, Laguna T: (049) 411-3406 / 511-9413 F: (02) 520-8216 binan@psbank.com.ph Calamba G/F, Anderson Bldg. 1 National Highway, Parian Calamba Laguna T: (02) 420-8220 (049) 545-5978 F: (049) 545-5979 calamba@psbank.com.ph Candelaria Rizal Ave. cor. Argao St. Candelaria, Quezon T: (042) 585-8443 / 741-1263 F: (042) 585-8444 candelaria@psbank.com.ph Cavite - Bacoor Heritage Bldg.

Km. 16 Aguinaldo Highway Niog, Bacoor, Cavite T: (046) 481-7465 / 481-7645 bacoorcavite@psbank.com.ph

Cavite - GMA Governor Drive Gen. Mariano Alvarez, Cavite T: (046) 460-4659 / 460-4514 caviteGMA@psbank.com.ph

Laguna - Sta. Cruz A. Regidor St., Sta. Cruz, Laguna T: (049) 501-4933 / 501-4934 F: (049) 501-4932 stacruzlaguna@psbank.com.ph

Cavite - General Trias G/F, The Plaza, Florida Sun Estates Governor’s Drive, Brgy. Manggahan General Trias, Cavite T: (046) 424-1357 cavite-gentrias@psbank.com.ph

Legazpi G/F, Tower Bldg. II Landaco Business Park Legazpi, Albay T: (052) 480-0948 / 480-0950 F: (02) 429-1581 legazpicity@psbank.com.ph

Cavite - Imus Anabu Kingsway Commercial Complex 9040 E. Aguinaldo Highway Anabu, Imus, Cavite T: (046) 474-0133 / 474-0134 psb-imusanabu@psbank.com.ph Cavite - Molino G/F, Golden Oasys Bldg.

Molino 4, Bacoor, Cavite T: (046) 438-8389 / 438-8391 to 92 (02) 529-8860 F: (046) 438-8392 psb-molino@psbank.com.ph

Lucena - Enriquez G/F, AQC Bldg., Enriquez cor. San Fernando Sts., Brgy. 6 Lucena, Quezon T: (042) 797-0140 F: (042) 373-3597 psb-lucenaenriquez@psbank.com.ph Naga G/F, CAP Bldg., Dinaga St. cor. Panganiban Drive, Naga City Camarines Sur T: (054) 472-0452 / 811-5188 F: (02) 250-8099 naga@psbank.com.ph

Lemery Ilustre Ave. cor. J.P. Rizal St. Lemery, Batangas T: (043) 409-0350 F: (043) 411-1549 lemery@psbank.com.ph Lipa C.M. Recto Ave. cor. R. Soliman St. Lipa City, Batangas T: (043) 756-1711 / 756-2745 F: (043) 756-1813 lipa@psbank.com.ph

Cavite - Silang G/F, O.C. Bldg., M.H. Del Pilar cor. Kiamzon Sts., Silang, Cavite T: (046) 861-2145 / 865-2142 F: (046) 414-3427 cavitesilang@psbank.com.ph

Lipa - J.P. Laurel Highway Autoplex Bldg., J.P. Laurel Highway Sabang, Lipa City, Batangas T: (043) 784-6127 / 784-6129 F: (043) 784-6126 lipajplaurel@psbank.com.ph

Cavite - Tanza G/F, Annie’s Plaza A. Soriano Highway, Tanza, Cavite T: (046) 481-7437 / 481-7463 F: (02) 529-8972 psb-tanza@psbank.com.ph

Los Baños PSBank Bldg., Lopez Ave. Batong Malake, Los Baños, Laguna T: (02) 520-8305 (049) 536-2147 F: (049) 536-1271 losbanos@psbank.com.ph

Dasmariñas PSBank Bldg., E. Aguinaldo Highway cor. Mangubat St., Dasmariñas, Cavite T: (046) 416-0331 / 416-4476 F: (02) 529-6101 dasmarinas@psbank.com.ph Imus Nueno Ave., Imus, Cavite T: (046) 471-0095 / 571-0298 F: (02) 529-8743 imus@psbank.com.ph

Lucena Quezon Ave. cor. Evangelista St. Lucena, Quezon T: (02) 250-8246 (042) 710-3481 F: (042) 660-6342 lucena@psbank.com.ph

Pallocan West G/F, CS Rayos Bldg.

Pallocan West, Batangas City T: (043) 723-5780 / 723-7226 (02) 520-6141 F: (043) 723-2330 pallocanwest@psbank.com.ph Puerto Princesa 248 Rizal Ave., Puerto Princesa Palawan T: (048) 434-1512 / 434-1558 F: (048) 434-1559 puertoprincesa@psbank.com.ph San Pablo Rizal Ave., San Pablo, Laguna T: (049) 562-0853 (02) 520-6050 F: (049) 562-7610 sanpablo@psbank.com.ph San Pedro Casa Hacienda Commercial Center A. Mabini St., San Pedro, Laguna T: (02) 808-1185 / 847-8230 F: (02) 869-2266 sanpedro@psbank.com.ph Sta. Rosa Padi’s Point Bldg.

Tagaytay National Rd. Laguna Bel-Air, Brgy. Don Jose Sta. Rosa, Laguna T: (049) 541-0624 / 541-0747 F: (049) 541-0845 starosabalibago@psbank.com.ph

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Branches Tanauan J.P. Laurel Highway Tanauan City, Batangas T: (043) 778-1432 / 778-1532 F: (043) 778-1018 tanauan@psbank.com.ph

Bukidnon - Valencia G/F, Tamay Lang Arcade Alkuino cor. Manuel A. Roxas Sts. Poblacion, Valencia, Bukidnon T: (088) 315-0216 to 17 / 828-3388 F: (088) 315-0218 valencia@psbank.com.ph

VISAYAS - MINDANAO

Butuan J.C. Aquino cor. Ochua Ave. Butuan, Agusan del Norte T: (085) 225-9192 / 342-7042 F: (085) 225-9190 butuan@psbank.com.ph

Aklan - Kalibo 19 Martyrs cor. Pastrana Sts. Kalibo, Aklan T: (036) 262-8775 / 268-1511 F: (036) 500-7859 aklankalibo@psbank.com.ph Bacolod A. Yu Bldg., Locsin St. (between Gonzaga and Luzurriaga Sts.), Bacolod Negros Occidental T: (034) 435-0069 / 708-9080 F: (034) 435-0060 bacolod@psbank.com.ph

Cagayan de Oro BJS Bldg., Don Apolinar Velez cor. A. Mabini Sts., Cagayan de Oro Misamis Oriental T: (088) 857-4183 (08822) 725-184 F: (08822) 726-044 cdo@psbank.com.ph Cebu - Banilad G/F, Gaisano Country Mall Banilad, Cebu T: (032) 231-0948 / 416-2335 F: (032) 231-2966 banilad@psbank.com.ph

Bacolod - Libertad G/F, SAL Cement Bldg.

Libertad Ext., P. Hernaez cor. Magsaysay Sts., Bacolod City Negros Occidental Cebu - Capitol T: (034) 704-2371 / 704-2370 psb-bacolodlibertad@psbank.com.ph The Strip, Osme単a Blvd.

Capitol Site, Cebu T: (032) 254-7417 / 254-7583 Bacolod - North Drive F: (032) 412-8636 G/F, Riverside Pharmacy Bldg. cebucapitol@psbank.com.ph B.S. Aquino Drive, Bacolod Negros Occidental Cebu - Carbon T: (034) 435-5042 / 709-0155 Plaridel cor. Progreso Sts., Cebu F: (034) 435-5044 T: (032) 254-7712 / 416-0005 bacolodnorth@psbank.com.ph F: (032) 254-7711 carbon@psbank.com.ph Bukidnon - Malaybalay Fortich St., Malaybalay, Bukidnon Cebu - Colon T: (088) 314-0208 / 314-0209 Pelaez near Colon Sts., Cebu (088) 813-3190 T: (032) 255-7551 / 255-7621 F: (088) 314-0210 F: (032) 254-6483 malaybalay@psbank.com.ph colon@psbank.com.ph

PSBank ANNUAL REPORT 2012

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Cebu - Gen. Maxilom Avenue NEM Bldg., Gen. Maxilom Ave. cor. Rahmann St., Cebu T: (032) 402-9431 / 402-9430 F: (032) 402-9431 cebu-genmaxilom@psbank.com.ph Cebu - Jones Osme単a Blvd., cor. Sanciangko St. Cebu T: (032) 255-1483 / 255-1971 F: (032) 412-5450 jones@psbank.com.ph Cebu - Lapu-Lapu Gaisano Mactan Island Mall Lapu-Lapu, Cebu T: (032) 239-0897 / 238-2310 F: (032) 495-1425 lapulapu@psbank.com.ph Cebu - Mandaue A.C. Cortez N & N Cortes Arcade A.C. Cortes Ave. Mandaue, Cebu T: (032) 344-0581 / 344-0582 F: (032) 420-5714 mandaue@psbank.com.ph Cebu - Mandaue National Highway G/F, JTC Bldg., 212 National Highway Mandaue, Cebu T: (032) 328-0725 / 346-2249 (032) 346-5939 F: (032) 328-0725 mandauehway@psbank.com.ph Cebu - Taboan C. Padilla cor. T. Abella Sts. Taboan, Cebu T: (032) 261-1746 / 261-1747 F: (032) 418-2880 taboan@psbank.com.ph Cebu - Uptown G/F, Insular Life Cebu Business Centre Mindanao Ave. cor. Biliran Rd., Cebu T: (032) 266-1648 / 266-1651 F: (032) 417-1745 uptown@psbank.com.ph Davao - Bajada 88 Bldg., J.P. Laurel St. Bajada, Davao del Sur T: (082) 227-4771 / 300-6712 F: (082) 222-4013 bajada@psbank.com.ph

Davao - Digos G/F, Gaisano Grand Mall of Digos Quezon Ave., Digos City T: (082) 272-0325 F: (082) 222-4279 davaodigos@psbank.com.ph

General Santos Santiago Blvd. cor. Naranjita St. General Santos, South Cotabato T: (083) 552-3337 / 552-3547 F: (083) 553-6632 gensantos@psbank.com.ph

Davao - Madrazo PSBank Bldg., Quirino cor. Cayetano Bangoy Sts. (formerly Ponciano Reyes) Davao del Sur T: (082) 222-4280 / 222-5001 F: (082) 222-4279 madrazo@psbank.com.ph

Iloilo - Iznart 533 Iznart St., Iloilo City T: (033) 337-1218 / 508-9410 F: (033) 335-0938 iznart@psbank.com.ph

Davao - Matina G/F, Saito Bldg., McArthur Highway Matina, Davao T: (082) 295-2786 / 321-9764 F: (082) 295-2670 davaomatina@psbank.com.ph Davao - Monteverde 88 T. Monteverde Ave., Davao Davao del Sur T: (082) 221-0646 / 221-0647 F: (082) 221-0645 monteverde@psbank.com.ph Davao - Tagum PSBank Bldg., National Highway cor. Pioneer Ave., Tagum Davao del Norte T: (084) 400-1362 / 655-6339 F: (084) 400-1361 monteverde@psbank.com.ph Dipolog Lopez Skyroom, Rizal Ave. cor. C.P. Garcia St., Dipolog Zamboanga del Norte T: (065) 212-2927 / 212-9297 F: (065) 212-6980 dipolog@psbank.com.ph Dumaguete G/F, Hotel Palwa, Dr. V. Locsin St. Dumaguete, Negros Oriental T: (084) 226-1582 / 422-0159 F: (084) 442-0200 dumaguete@psbank.com.ph

Iloilo - Jaro E. Lopez cor. Jalandoni Sts. Jaro, Iloilo City T: (033) 503-2145 F: (033) 503-2147 iloilojaro@psbank.com.ph

Tacloban G/F, Tacloban Plaza Bldg.

Justice Romualdez St. Tacloban, Leyte T: (053) 325-3554 / 523-0887 F: (053) 325-3521 tacloban@psbank.com.ph

Iloilo - Quezon 23 C. Quezon St., Iloilo City T: (033) 336-8248 / 336-8249 F: (033) 508-9422 quezon@psbank.com.ph Mandaue - Subangdaku G/F, Units 101-102, KRC Bldg.

National Highway, Subangdaku Mandaue, Cebu T: (032) 345-3342 / 345-3343 F: (032) 345-3344 mandaue-subangku@psbank.com.ph Ormoc G/F, Units 1 and 2, Ormoc Centrum Aviles cor. San Pedro Sts. Ormoc, Leyte T: (053) 255-7554 / 255-7555 F: (053) 561-8415 ormoc@psbank.com.ph Ozamiz Rizal Ave. cor. Capistrano St. Ozamiz, Misamis Occidental T: (088) 521-3277 / 521-3477 F: (088) 521-3377 ozamiz@psbank.com.ph

Pagadian G/F, Mendoza Bldg., J.P. Rizal Ave. cor. B. Aquino St., Pagadian Zamboanga del Sur T: (062) 215-3580 / 215-3581 F: (062) 215-3582 pagadian@psbank.com.ph Roxas Arnaldo Blvd. cor. Datiles St. Roxas, Capiz T: (036) 520-6218 / 621-5265 F: (036) 621-1897 roxascity@psbank.com.ph

Tagbilaran Ideal Cinema Bldg., CPG Ave. Tagbilaran, Bohol T: (038) 411-4473 / 411-4523 F: (038) 501-7010 tagbilaran@psbank.com.ph Zamboanga Nu単ez Ave. Ext., Camino Nuevo Zamboanga del Sur T: (062) 991-7271 / 991-8125 F: (062) 991-8656 zamboanga@psbank.com.ph Zamboanga - Guiwan Maria Clara Lobregat National Highway, Guiwan Zamboanga City T: (062) 984-2108 F: (062) 984-1417 zamboangaguiwan@psbank.com.ph Zamboanga - Pilar G/F, Martha Bldg., Pilar St. Zamboanga City Zamboanga del Sur T: (062) 991-1078 F: (062) 955-0007 zamboangapilar@psbank.com.ph

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PSBank ANNUAL REPORT 2012

Offsite ATMs CONDOMINIUMS AND HOTELS ABC Hotel Don Juico Ave., Malabanias Angeles City EDSA Shangri-la Manila No. 1 Garden Way, Ortigas Center Mandaluyong City Makati Palace Hotel 5011 P. Burgos cor. Caceres Sts. Makati City Shangri-La Mactan Punta Engano Rd., Lapu-Lapu City

N.L. Villa Memorial Medical Center Felix Manalo St., Lipa City Batangas

SHOPPING MALLS

OFFICE AND COMMERCIAL SPACES

A-Venue Mall 7829 Makati Ave., Makati City

ABS-CBN ABS-CBN Broadcast Center Sgt. E.A. Esguerra Ave. cor. Mother Ignacia St., Quezon City Clarkview Square Don Juico cor. Narciso St. Malabanias, Angeles City Corinthian Hills G/F, Corinthian Hills, Ortigas Pasig City

Shoppes @ Victoria Victoria de Manila Victoria de Manila, Taft Ave. Malate, Manila Times Plaza U.N Ave. cor. Gen. Luna St., Manila Victoria Station G/F, EDSA, Kamuning, Quezon City Victoria Towers Timog Ave. cor. Panay Ave. Quezon City

Greenfield District IT Center II 88 United St. Greenfield Corporate Center Greenfield District, Mandaluyong City Kalayaan Offsite ATM PhilPlans Corporate Center 1012 North Triangle Drive Bonifacio Global City, Taguig City Rockwell Business Center Tower 1, Level 1, Unit No. WL-02 Rockwell Business Center Ortigas Ave., Brgy. Ugong Pasig City

HOSPITALS Calamba Doctors Hospital Old National Highway, Brgy. Parian Calamba City, Laguna

SSS Davao JP Laurel Ave., Bajada, Davao City

Calamba Medical Center Crossing, Calamba City, Laguna

Telus Bldg.

Araneta Center, Cubao, Quezon City

Cardinal Santos Medical Center 10 Wilson St., West Greenhills San Juan City

SCHOOLS AND UNIVERSITIES

Manila Doctors’ Hospital Doña Salustiana Medical Tower T.M. Kalaw St., Ermita, Manila Metro Lipa Medical Center J.P. Laurel Highway, Marauoy Lipa City, Batangas

PSBank ANNUAL REPORT 2012

Ateneo de Davao University Finster Hall, fronting Roxas and C.M. Recto Avenues, Jacinto Campus Davao City Colegio de San Juan de Letran Calamba Brgy. Bucal, Calamba Laguna

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168 Shopping Mall 1 & 2 Sta. Elena St., Binondo, Manila

Abreeza Mall 1 & 2 J.P. Laurel Ave., Bajada, Davao City Alabang Town Center Ayala Alabang, Muntinlupa City Ali Mall P. Tuazon Blvd., Araneta Center Quezon City Anne Ting Cafe 18 Magsaysay Drive Olongapo City Araneta Square Cor. Samson and Rizal Ave. Caloocan City Cartimar The International Shopping Center Taft Ave., Pasay City Cash & Carry South Super Highway cor. Emilia St. near Buendia Ave., Makati City Central Mall Biñan National Highway cor. Malvar St. Biñan, Laguna Citimall One Commonwealth Ave. Quezon City DCLA Plaza Ramon Magsaysay Ave., Davao City Eastwood Citywalk II Eastwood City, E. Rodriguez Jr. Ave. Bagumbayan, Quezon City Eastwood Cyber and Fashion Mall Eastwood City Cyberpark E. Rodriguez Jr. Ave., (C-5) Bagumbayan, Quezon City Elizabeth Mall Cor. Leon Kilat St. and N. Bacalso Ave., Cebu City

Eton Centris EDSA cor. Quezon Ave. Brgy. Pinyahan, Quezon City

Gaisano Metro Ayala Cebu Business Park Archbishop Reyes Ave., Cebu City

Metropoint Mall EDSA cor. Taft Ave. and Zamora St. Pasay City

Ever Gotesco Commonwealth 1 & 2 Don Mariano Marcos Ave. cor. Don Antonio Rd., Quezon City

Gaisano Metro Colon Colon cor. P. Lopez Sts. and Osme単a Blvd., Cebu City

Metro Town Mall McArthur Highway cor. Juan Luna St., Tarlac City

Ever Gotesco Manila 1958 C.M. Recto Ave., Manila

Gateway Mall Araneta Center, Cubao Quezon City

Molito Commercial Complex ANC Rd., Madrigal Business Park Alabang, Muntinlupa City

Glorietta 5 Glorietta 5, Ayala Center Makati City

Montalban Town Center E. Rodriguez Highway, Brgy. San Jose Rodriguez, Rizal

Fairview Center Mall Marcos Highway cor. Regalado St. Fairview, Quezon City

Greenbelt 3 Greenbelt 3, Ayala Center Makati City

NCCC Mall Davao McArthur Highway cor. MAA Rd. Matina, Davao City

Farmers Plaza Araneta Center, EDSA, Quezon City

Harbor Point Rizal Highway Subic Bay Freeport Zone

Newport City G/F, 100 Andrews Ave. Newport City, Cybertourism Zone Pasay City

Ever Gotesco Ortigas Ever Gotesco Ortigas Complex Ortigas Extension, Brgy. Sta. Lucia Pasig City

Festival Supermall Filinvest Corporate City, Alabang Muntinlupa City Fiesta Mall (Duty Free) Duty Free Philippines New Fiesta Mall, Ninoy Aquino Ave. Para単aque City Fiesta World Mall Brgy. Marauoy, Lipa City Batangas Gaisano Capital Tisa 126 F. Llamas St., Tisa, Labangon Cebu City

Isetann Cubao Aurora Tower, Araneta Center Cubao, Quezon City

Parkmall Ouano Ave. Mandaue Reclamation Area Cebu City

Isetann Recto C.M. Recto, Quiapo, Manila J Centre Mandaue 165 A.S. Fortuna St., Brgy. Bakilid Mandaue City, Cebu Landmark Makati Ayala Center, Makati Ave. Makati City

Pavilion Mall Level 2, Bldg. A, Pavilion Mall Km. 35 Brgy. San Antonio Bi単an, Laguna Robinsons Cybergate Cebu Don Gil Garcia St., Cebu City

Gaisano Grand Citimall Ilustre St., Davao City

Landmark Trinoma 1 & 2 EDSA cor. Mindanao Ave. Ext. Brgy. Pag-asa, Quezon City

Gaisano Grand Fiesta Mall Highway Tabunok Talisay City, Cebu

Lucky Chinatown - Cityplace Square Calle Felipe cor. La Chambre St. Brgy. 293, Zone 28, Binondo, Manila

Gaisano Grand Mall of Mactan cor. Basak - Agus Rd. Lapu-Lapu City, Cebu

Malabon Citisquare 1 & 2 C4 Rd. cor. Dagat-Dagatan Ave. Malabon City

Gaisano Grand Mall of Minglanilla Poblacion, Ward II, Minglanilla Cebu City

Market! Market!

Bonifacio Global City, Taguig City

Gaisano Mall of Davao J.P. Laurel Ave., Davao City

Paseo de Sta. Rosa Brgy. Don Jose, Paseo de Sta. Rosa Greenfield City, Sta. Rosa, Laguna

Robinsons Forum 30 EDSA cor. Pioneer St. Mandaluyong City Robinsons Galleria 1 & 2 EDSA cor. Ortigas Ave. Quezon City Robinsons Magnolia Aurora Blvd. cor. Do単a Hemady and N. Domingo Sts., Brgy. Kaunlaran New Manila, Quezon City

Marquee Mall Francisco G. Nepo Ave. Angeles City, Pampanga ( 157 )

PSBank ANNUAL REPORT 2012

Offsite ATMs Robinsons Metro East Marcos Highway, Brgy. Dela Paz Santolan, Pasig City Robinsons Nova Market 1 & 2 Brgy. Pasong Putik, Quirino Highway Novaliches, Quezon City Robinsons Place Angeles McArthur Highway, Balibago Angeles City, Pampanga

Rustans Cebu Ayala Ayala Center, Lahug, Cebu City

SM City Davao Quimpo Blvd., Davao City

SM Center Las Piñas Alabang Zapote Rd. Brgy. Talondos, Las Piñas City

SM City Fairview 1 & 2 Quirino Highway cor. Regalado Ave. and Belfast St., Greater Lagro Quezon City

SM Center Molino Brgy. Molino 4, Molino Rd. Bacoor, Cavite SM Center Muntinlupa 1 & 2 Km. 29 National Rd., Tunasan Muntinlupa City

Robinsons Place Cainta Ortigas Ave. Ext. Brgy. Sto. Domingo Cainta, Rizal

SM Center Pasig Frontera Verde, C5, Brgy. Ugong Pasig City

Robinsons Place Cebu Fuente Osmeña cor. Jones Ave. Cebu City Robinsons Place Dasmariñas Aguinaldo Highway cor. Governor’s Drive, Sitio Palapala Dasmariñas, Cavite Robinsons Place Imus E. Aguinaldo Highway Tanzang Luma Highway Imus, Cavite

SM Center Valenzuela McArthur Highway, Brgy. Karuhatan Valenzuela City SM City Bacoor Gen. Emilio Aguinaldo Highway cor. Tirona Highway, Brgy. Habay Bacoor, Cavite SM City Baliwag Doña Remedios Trinidad Highway Brgy. Pagala, Baliwag, Bulacan

Robinsons Place Manila 1 & 2 M. Adriatico cor. Pedro Gil Sts. Malate, Manila

SM City Batangas Pallocan West, Batangas City

Robinsons Place Otis Brgy. 831, Zone 90 Dr. P.M. Guanzon St., Paco, Manila

SM City Bicutan Doña Soledad Ave., Brgy. Don Bosco Parañaque City

Robinsons Place Sta. Rosa National Highway, Brgy. Tagapo Sta. Rosa City, Laguna

SM City Calamba Calamba National Highway Brgy. Real, Calamba City, Laguna

Robinsons Starmills Olongapo-Gapan Rd. Brgy. San Jose, San Fernando City Pampanga

SM City Cebu North Reclamation Area, Cebu City

Robinsons Town Mall Los Baños Batong Malake cor. Lopez Ave. Los Baños, Laguna Rockwell Power Plant Rockwell Information Center Rockwell Drive cor. Plaza Drive Makati City

PSBank ANNUAL REPORT 2012

SM City Clark M. A. Roxas Highway Clark Freeport Zone

SM City Lipa Ayala Highway, Brgy. Marauoy Lipa City, Batangas SM City Manila Concepcion St. cor. Arroceros and San Marcelino Sts., Manila SM City Marikina Marcos Highway cor. East Marikina Riverbanks Service Rd. Marikina Riverbanks, Calumpang Marikina City SM City Masinag Marcos Highway, Brgy. Mayamot Antipolo City SM City North EDSA & Annex Building North Ave. cor. EDSA Bagong Pag-asa, Dist.1 Quezon City SM City Novaliches Quirino Highway, San Bartolome Novaliches, Quezon City SM City Olongapo Magsaysay Drive cor. Gordon Ave. Pag-asa, Olongapo City SM City Pampanga 1 & 2 Brgy. San Jose, San Fernando Pampanga SM City Rosario Gen. Trias Drive, Brgy. Tejero Rosario, Cavite

SM City Consolacion Brgy. Lamac, Consolacion, Cebu

SM City San Lazaro Felix Huertas St. cor. Arsenio H. Lacson Ext. Sta. Cruz, Manila

SM City Dasmariñas Governor’s Drive, Brgy. Sampalok 1 Dasmariñas, Cavite

SM City San Pablo National Highway, Brgy. San Rafael San Pablo City, Laguna

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SM City Sta. Mesa Ramon Magsaysay Blvd. cor. Gregorio Araneta Ave. Brgy. Doña Imelda, Quezon City

St. Francis Square Doña Julia Vargas Ave. cor. Bank Drive, Ortigas Center Mandaluyong City

SM City Sta. Rosa Barrio Tagapo, Sta. Rosa, Laguna

Sta. Lucia East Grand Mall Marcos Highway cor. Felix Ave. Cainta, Rizal

SM City Sucat Carlos P. Garcia Ave. Ext. (C-5) cor. Dr. A. Santos Ave. Brgy. San Dionisio, Parañaque City

Waltermart Calamba Real Street, Brgy. Real Calamba City, Laguna Waltermart Calamba Makiling Brgy. Makiling, National Highway Calamba City, Laguna Waltermart Dasmariñas Gen. Emilio Aguinaldo Highway Dasmariñas, Cavite

Starmall Alabang South Superhighway, Alabang Muntinlupa City

Waltermart Gen. Trias Barrio Manggahan, Governor’s Drive Gen. Trias, Cavite

SM City Tarlac McArthur Highway, San Roque Tarlac City

Starmall Edsa EDSA cor. Shaw Blvd.

Mandaluyong City

SM City Taytay 1 & 2 Manila East Rd., Brgy. Dolores Taytay, Rizal

Starmall Las Piñas CV Starr Ave., Philamlife Village Pamplona, Las Piñas City

SM Lanang Premier 1 Laurel Ave., Brgy. San Antonio Agdao Dist., Davao City

Starmall Las Piñas Annex 2 Alabang-Zapote Rd. cor. Doña Manuela Ave. Pamplona III, Las Piñas City

SM Mall of Asia 1, 2 & 3 Mall of Asia Complex J.W. Diokno Blvd. cor. EDSA Bay City, Pasay City SM Marketmall Dasmariñas ATM Center, Lower G/F, Congressional Ave. Dasmariñas Bagong Bayan Dasmariñas, Cavite SM Megamall A & 3A 2/F and Covered Walk Bldg. A, SM Megamall, EDSA cor. Julia Vargas Ave., Ortigas Center Mandaluyong City SM Southmall Las Piñas Alabang-Zapote Rd., Las Piñas City Shangri-La Plaza Level 1 & 2, Annex EDSA cor. Shaw Blvd.

Mandaluyong City Shoppesville Greenhills Shopping Center Ortigas Ave., San Juan City Southgate Mall EDSA cor. Pasong Tamo Ext Makati City

Waltermart Guiguinto McArthur Highway, Brgy. Ilang-Ilang Guiguinto, Bulacan Waltermart Lotus Mall Nueño Ave., Imus, Cavite Waltermart North Edsa 8001A EDSA, Veterans Village Quezon City

Super Metro Mandaue Ibabao St., Estancia Mandaue City, Cebu Susano Complex Quirino Highway cor. Dumalay St. Novaliches (Bayan), Quezon City The Eastwood Mall Eastwood City Cyberpark 188 E. Rodriguez Jr. Ave. (C-5 Road) Bagumbayan, Quezon City

Waltermart Pampanga McArthur Highway, Brgy. San Agustin San Fernando, Pampanga Waltermart Plaridel Cagayan Valley Rd., Barrio Banga 1 Plaridel, Bulacan Waltermart Sta. Maria Provincial cor. By Pass Roads Brgy. Sta. Clara, Sta. Maria, Bulacan

The Market Place Shopping Mall Gen. Kalentong St. Mandaluyong City

Waltermart Sucat Brgy. San Isidro, Dr. A Santos Ave. Sucat, Parañaque City

Trinoma EDSA cor. North Avenue Quezon City

Waltermart Tanauan J.P. Laurel National Highway Brgy. Darasa, Tanauan City, Batangas

Victory Central Mall 716 Old Victory Compound Rizal Ave., Monumento Caloocan City

Wilcon City Center 121 Visayas Ave., Brgy. Bahay Toro Quezon City

Victory Pasay Mall Taft Ave. cor. Arnaiz St., Pasay City

( 159 )

Zabarte Town Center 1 & 2 588 Camarin Rd. cor. Zabarte Rd. North Caloocan City

PSBank ANNUAL REPORT 2012

Offsite ATMs SUPERMARKETS

S&R Membership Shopping Baclaran Bradco Ave., Aseana Business Park Brgy. Baclaran, Parañaque City

Barretto Minimart No. 2 Rizal St., Barrio Barreto Olongapo City, Zambales Colonnade Supermarket 82-90 Colon St., Cebu City Damosa Market Basket J.P. Laurel Ave., Lanang, Davao City Essel Supermarket McArthur Highway, Brgy. Telabastagan San Fernando City, Pampanga Farmers Market Arcade Araneta Center, Quezon City Puregold Angeles Miranda St., San Nicolas Angeles City, Pampanga

S&R Membership Shopping Congressional 30 Congressional Ave. Brgy. Ramon Magsaysay Bago Bantay, Quezon City Shopwise Antipolo M.L. Quezon cor. Circumferential Rd. Brgy. San Roque, Antipolo City Shopwise Commonwealth B17, Commonwealth Ave. Diliman, Quezon City Shopwise Cubao Araneta Center, Cubao Quezon City

Puregold Imus Puregold Bldg., Cuevas Mall Aguinaldo Highway, Imus, Cavite Puregold Paco Angel Linao St., Paco, Manila

Shopwise Makati Pasong Tamo cor. Vito Cruz Makati City Shopwise San Pedro National Highway, Brgy. Landayan Pacita, San Pedro, Laguna

Puregold Paso de Blas Paso de Blas, Valenzuela City

Shopwise Sucat Dr. A. Santos Ave. cor. Sorina Drive Sucat, Parañaque City

Puregold Jr. San Dionisio Berville Wet Market, Sucat Rd. Brgy. San Dionisio, Sucat Parañaque City

SM Hypermarket - Cubao G/F, EDSA cor. Main Ave. Quezon City

Rustans Katipunan No. 333 Katipunan Ave. Brgy. Loyola, Quezon City Rustans Mercedes Mercedes Ave., San Miguel Pasig City

SM HypermarketEast Service Road Sucat East Service Rd. South Super Highway Muntinlupa City

Rustans Supercenters, Inc. (Shopwise) E. Rodriguez Ave., Bagumbayan Libis, Quezon City

SM Hypermarket - Mandaluyong 121 Shaw Blvd. cor. Magalona St. Brgy. Bagong Silang Mandaluyong City

S&R Membership Shopping Alabang Westgate Dev’t., Filinvest Corp. City Alabang-Zapote Road, Alabang Muntinlupa City

SM Hypermarket - North Harbour G/F, Lot II, Manila Harbour Center Radial Rd. 10, Vitas Tondo, Manila

PSBank ANNUAL REPORT 2012

( 160 )

South Supermarket Lipa Lipa City, Batangas

South Supermarket Los Baños Los Baños, Laguna South Supermarket Malolos McArthur Highway, Malolos Bulacan South Supermarket Marikina Golden Valley Commercial Center 522 J.P. Rizal St., Brgy. Malanday Lamuan, Marikina City South Supermarket Sta. Rosa Tagaytay- Sta. Rosa Rd. Sto. Domingo, Sta. Rosa City Laguna South Supermarket Valenzuela McArthur Highway, Karuhatan Valenzuela City Super 8 Angeles Formerly Sto. Domingo Market cor. McArthur Highway and Sto. Rosario St., Brgy. Sto. Domingo Angeles City Super 8 Antipolo SPI, Lores Country Plaza Manuel L. Quezon Ext. Brgy. San Roque Antipolo City, Rizal Super 8 Baliwag (former Aliw Cinema Complex) Dr. Gonzales cor. Poblacion St. Baliwag, Bulacan Super 8 Biñan C. Morales Commercial Complex National Highway, San Antonio Biñan, Laguna Super 8 Caloocan Jackman 558-564 Rizal Ave. Ext. Caloocan City Super 8 Guadalupe G/F, Guadalupe Commercial Complex Brgy. Nuevo, Guadalupe, EDSA Makati City Super 8 Masinag Lenjul Commercial Complex Marcos cor. Sumulong Highways Brgy. Mayamot, Masinag Antipolo City

Super 8 Ortigas Extension 8005 Ortigas Ave. Ext. Brgy. Sta Lucia, Pasig City Super 8 San Pedro Laguna L3 A2, Old National Highway Brgy. San Antonio, San Pedro Laguna Super 8 Sta. Rosa Balibago Commercial Complex Balibago, Sta. Rosa, Laguna Ultimart Shopping Plaza Marcos Paulino St., San Pablo City Laguna

McKinley Hill Piazza Upper McKinley Rd. McKinley Town Center Fort Bonifacio, Taguig City

LRT 1 - Carriedo 1 & 2 Carriedo Station, Rizal Ave. cor. Carriedo St., Sta. Cruz, Manila LRT 1 - Central Station Central Station Mayor Antonio Villegas Rd. (Arroceros St.), Ermita, Manila

One Mango Avenue Gen. Maxilom Ave., Cebu City One World Square Upper McKinley Rd. McKinley Town Center Fort Bonifacio, Taguig City

LRT 1 - Doroteo Jose North & Southbound Doroteo Jose Station, Rizal Ave. cor. Doroteo Jose St., Sta. Cruz Manila

TRANSPORT STATIONS

THEME PARKS

Araneta Center Bus Station Supercenter Bldg., Times Plaza Ave. Araneta Center, Cubao, Quezon City

Enchanted Kingdom San Lorenzo South City of Santa Rosa, Laguna

Davao City Overland Transport Terminal Ecoland, Davao City

Manila Ocean Park Behind Quirino Grandstand Luneta, Manila

Davao International Airport Philippine-Japan Friendship Highway Diversion Rd., Davao City

Star City CCP, Roxas Blvd., Pasay City

LRT 1 - Abad Santos North & Southbound Abad Santos Station Rizal Ave. cor. Mt. Samat and Abad Santos Sts. Tondo, Manila

TOWN CENTERS Blue Wave Macapagal Macapagal, Metropolitan Park Complex Pres. Diosdado Macapagal Blvd. cor. EDSA Ext., Pasay City Blue Wave Marikina Sumulong Highway cor. G. Fernando Ave. Sto. Ni単o, Marikina City Fields Plaza Complex Fields Ave., Balibago, Angeles City Forbes Town Center Rizal Drive cor. West Crescent Park The Fort, Taguig City Harbour Square Pedro Bukaneg St., CCP Complex Manila

LRT 1 - EDSA Station North & Southbound EDSA Station, Taft Ave. cor. EDSA, Pasay City LRT 1 - Gil Puyat North & Southbound Gil Puyat Station, Taft cor. Gil Puyat Avenues, Pasay City LRT 1 - Libertad North & Southbound Libertad Station, Taft cor. Arnaiz Avenues and Libertad St. Pasay City LRT 1 - Monumento Northbound Rizal Ave. cor. EDSA and R. Dani St. Grace Park, Caloocan City

LRT 1 - Baclaran 1 & 2 Baclaran Station, Taft Ave. Ext. cor. Park Ave., Pasay City LRT 1 - Balintawak Balintawak Station, EDSA cor. NLEX (Balintawak Cloverleaf) Caloocan City LRT 1 - Bambang North & Southbound Bambang Station, Rizal Ave. cor. Bambang St., Sta. Cruz Manila

LRT 1 - Pedro Gil North & Southbound Pedro Gil Station, Taft Ave. cor. Pedro Gil, Ermita, Manila LRT 1 - Quirino Southbound Quirino Station, Taft cor. Pres. Quirino Avenues Malate, Manila LRT 1 - R. Papa North & Southbound R. Papa Station, Rizal Ave. cor. Ricardo Papa St., Tondo, Manila LRT 1 - Roosevelt Roosevelt Station, EDSA cor. Roosevelt and Congressional Rds. Bago Bantay, Quezon City

LRT 1 - Blumentritt North & Southbound Blumentritt Station Rizal Ave. cor. Blumentritt and New Antipolo Sts. Sampaloc, Manila

( 161 )

PSBank ANNUAL REPORT 2012

Offsite ATMs LRT 1 - Tayuman Northbound Tayuman Station, Rizal Ave. cor. Tayuman St., Sta. Cruz, Manila LRT 1 - U.N. Avenue North & Southbound U.N. Station, Taft cor. U.N. Avenues and Gen. Luna St., Ermita, Manila LRT 1 - Vito Cruz North & Southbound Vito Cruz Station, Taft Ave. cor P. Ocampo and Vito Cruz Sts. Malate, Manila LRT 2 - Anonas Anonas Station, Aurora Blvd. cor. Anonas St., Project 3 Quezon City

LRT 2 - Recto Recto Station, C.M. Recto Ave. cor. Evangelista and Oroquieta Sts. Sta. Cruz, Manila LRT 2 - Santolan Santolan Station, Marcos Highway near Santolan Rd., Brgy. Barangka Marikina City LRT 2 - V. Mapa V. Mapa Station Ramon Magsaysay Blvd. cor. V. Mapa and Sociego Sts. Sta. Mesa, Manila MACEA Walkway Phase 1 & 2 Washington SyCip Park Legaspi Village, Makati City

LRT 2 - Araneta Center Araneta Center Station Aurora Blvd., Cubao, Quezon City LRT 2 - Betty Go Belmonte Betty Go Belmonte Station Betty Go Belmonte St. cor. Aurora Blvd., New Manila Quezon City

MRT - Ayala Ayala Station, EDSA, Makati City MRT - Boni Avenue Boni Ave. Station, EDSA Mandaluyong City MRT - Cubao Cubao Station, EDSA, Quezon City

LRT 2 - Gilmore Gilmore Station, Aurora Blvd. cor. Gilmore St., New Manila Quezon City

MRT - Guadalupe North & Southbound Guadalupe Station, EDSA Makati City

LRT 2 - J. Ruiz J. Ruiz Station, Aurora Blvd. cor. J. Ruiz St., San Juan City

MRT - Kamuning Northbound GMA Kamuning Station, EDSA Quezon City

LRT 2 - Katipunan Katipunan Station, Aurora Blvd. cor. Katipunan Ave., Loyola Heights Quezon City

MRT - Magallanes North & Southbound Magallanes Station, EDSA Makati City

LRT 2 - Legarda Legarda Station, Legarda St. Sampaloc, Manila

MRT - Ortigas North & Southbound Ortigas Station, EDSA Ortigas Center Mandaluyong City

LRT 2 - Pureza Pureza Station Ramon Magsaysay Blvd. cor. Pureza St., Sta. Mesa, Manila

MRT - Quezon Avenue North & Southbound Quezon Ave. Station, EDSA Quezon City MRT - Santolan Northbound Santolan Station, EDSA Quezon City

PSBank ANNUAL REPORT 2012

( 162 )

MRT - Shaw A & B Shaw Blvd. Station, EDSA Mandaluyong City SM North Edsa Bus Hub North Ave. cor. EDSA Bagong Pag-asa, District 1 Quezon City South Station Filinvest Corporate City, Alabang Muntinlupa City Total Gas Station Balintawak EDSA, Brgy. Unang Sigaw Balintawak, Quezon City Total Gas Station Sta. Rosa Kilometer 40, Brgy. Malitlit Sta. Rosa, Laguna

Billers

LEGEND:

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ATM

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Online

Below are companies that accept payments through PSBank ATMs and PSBank Online, our 24/7 online facility.

UTILITIES First Peak Manila Water Maynilad Meralco Primewater Subicwater Veco TELECOMMUNICATIONS BayanTel Digitel Eastern Telecoms Globe Telecom Globe Lines / Innove PLDT PT & T / Greendot Smart GSM CREDIT CARDS Allied Bank / PNB Card Banco Filipino VISA Bankard / RCBC / JCB International BDO Credit Card Chinatrust VISA Card Citibank VISA / MasterCard Diners Card / Security Bank Credit Cards EastWest Card HSBC Cards Metrobank / PSBank Card Metrobank MasterCard Dollar Metrobank Unicard Metrobank VISA Dollar Metrobank VISA Peso Standard Chartered VISA / MasterCard Unionbank VISA Credit LOANS Chinatrust Salary Stretch Citibank Savings Loan Citifinancial Corporation CityState Savings Bank HSBC Personal Loan PSBank Loans Standard Chartered Loan Sumisho Motor Finance Corporation Toyota Financial Services Phils.

CABLE AND INTERNET Planet CATV SkyCable / HomeCable / ZPDee SmartBro

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INSURANCE AXA Philippines Fortune Care Great Life Financial Grepalife Paramount Life Fortune Life Pioneer Life, Inc. PNB Life Insurance, Inc. PruLife U.K. Insurance

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CLUB MEMBERSHIPS Alabang Country Club CDC Mimosa

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REAL ESTATE Federal Land IPM Realty Rockwell Residential

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SCHOOLS DBTC Inc. - Cebu La Salle Greenhills Miriam College University of San Jose

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TRAVEL AND TOLL FEES Cebu Pacific Easytrip e-Pass Skyway

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GOVERNMENT NSO Helpline Plus SSS - Farmers and Fishermen SSS - Non-working spouse SSS CONT. - OFW SSS CONT. - Self-employed SSS CONT. - Voluntary

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CHARITIES AND NON-PROFITS Bantay Bata FEBC Philippines Knowledge Channel Operation Smile Philippines PAFP / Family Physicians Piso Para sa Pasig Resources for the Blind World Vision

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OTHERS Directories Phils. Corporation First Metro Securities Brokerage Load.com.ph Manila Memorial

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( 163 )

PSBank ANNUAL REPORT 2012

Metrobank Group DOMESTIC SUBSIDIARIES AND AFFILIATES FIRST METRO INVESTMENT CORP. 45/F, GT Tower International Ayala Ave. cor. H.V. dela Costa St., Makati City Tel. No. (02) 858-7900 Roberto juanchito dispo President CHARTER PING AN INSURANCE CORP. G/F & 2/F, Skyland Plaza Sen. Gil Puyat Ave. cor. Tindalo St. Makati City Tel. No. (02) 844-7044 to 54 MELECIO C. MALLILLIN President FIRST METRO ASSET MANAGEMENT, INC. 18/F, PSBank Center, 777 Paseo de Roxas cor. Sede単o St., Makati City Tel. No. (02) 891-2860 to 65 AUGUSTO COSIO President FIRST METRO SECURITIES BROKERAGE CORPORATION 18/F, PSBank Center, 777 Paseo de Roxas cor. Sede単o St., Makati City Tel. No. (02) 859-0600 to 02 GONZALO G. ORDONEZ President GLOBAL BUSINESS POWER CORP. 22/F, GT Tower International 6813 Ayala Ave. cor. H.V. dela Costa St. Makati City Tel. No. (02) 818-5931 to 35 ARTHUR N. AGUILAR President PHILIPPINE AXA LIFE INSURANCE CORP. Phil. AXA Life Center, Sen. Gil Puyat Ave. cor. Tindalo St., Makati City Tel. No. (02) 885-0101 / 323-1292 SEVERINUS P.P. HERMANS President

METROBANK CARD CORPORATION Metrobank Card Corporation Center 6778 Ayala Ave., Makati City Tel. No. (02) 870-0900 RIKO ABDURRAHMAN President ORIX METRO LEASING & FINANCE CORPORATION 21/F, GT Tower International, Ayala Ave. cor. H.V. dela Costa St., Makati City Tel. No. (02) 858-8888 PROTACIO C. BANTAYAN, JR. President

PSBank ANNUAL REPORT 2012

( 164 )

PHILIPPINE SAVINGS BANK PSBank Center 777 Paseo de Roxas Ave. cor. Sede単o St., Makati City Tel. No. (02) 885-8208 PASCUAL M. GARCIA III President SUMISHO MOTOR FINANCE CORP. 12/F, PSBank Center 777 Paseo de Roxas Ave. cor. Sede単o St., Makati City Tel. No. 802-6888 ROLANDO A. RODRIGUEZ President SMBC METRO INVESTMENT CORP. 20/F, Rufino Pacific Tower 6784 Ayala Ave. cor. V. Rufino St. Makati City Tel. No. (02) 811-0845 to 52 YASUHIRO OASHI President TOYOTA CUBAO, INCORPORATED

926 Aurora Blvd., Cubao Quezon City Tel. No. (02) 981-6168 LEO J. FERRERIA President/General Manager TOYOTA FINANCIAL SERVICES PHILS. CORPORATION 32/F, GT Tower International Ayala Ave. cor. H.V. dela Costa St. Makati City Tel. No. (02) 858-8500 / 757-8500 MOTOTAKA SATO President TOYOTA MANILA BAY CORP. Metropolitan Park, Roxas Blvd. cor. EDSA Ext. Blvd., 2000 Pasay City Tel. No. (02) 581-6168 GO SASAKI President/General Manager TOYOTA MOTOR PHILS. CORP. 31/F, GT Tower International Ayala Ave. cor. H.V. dela Costa St. Makati City Tel. No. (02) 858-8200 MICHINOBU SUGATA President

PARTNERS OF METROBANK FEDERAL LAND, INC. 20/F, GT Tower International Ayala Ave., cor. H.V. dela Costa St. Makati City Tel. No. (02) 898-8599 ALFRED V. TY President MANILA DOCTORS HOSPITAL 667 United Nations Ave. Ermita, Manila Tel. No. (02) 524-3011 ~ ANICETO M. SOBREPENA President MANILA TYTANA COLLEGES Pres. Diosdado Macapagal Blvd.

Metropolitan Park, Pasay City Tel. No. (02) 859-0888 SERGIO CAO President METROBANK FOUNDATION, INC. 4/F, Metrobank Plaza Sen. Gil Puyat Ave., Makati City Tel. No. (02) 898-8000 ~ ANICETO M. SOBREPENA President

DIRECTORY OF INTERNATIONAL OFFICES ASIA PACIFIC Ma. Asuncion Charina C. Yap Region Head for Asia chary.yap@metrobank.com.ph mbsingapore@metrobank.com.ph 304 Orchard Road #03-30 Lucky Plaza Singapore 238863 Tel. No. (65) 6734-4648 (65) 6734-2748 Fax No. (65) 6734-734

CHINA Metropolitan Bank (China) Ltd. Lin Gui Xian President linguixian@metrobank.com.cn 35/F, Lianqiang Tower No. 289 Jiangdongzhong Road Jianye District 210019, Nanjing Tel. No. 86 (25) 6855-1888

MBCL - Nanjing Branch Zhu Zi Jia FVP/ General Manager G/F, Lianqiang Tower No. 289 Jiangdongzhong Road Jianye District 210019, Nanjing Tel. No. 86 (25) 6858-4422 MBCL - Shanghai Branch Dennis Suico General Manager dennis.suico@metrobank.com.ph 1/F, Metrobank Plaza 1152 West Yan’an Road Shanghai 200052 Tel. No. 86 (21) 6191-0799 / 6191-0777 Fax No. 86 (21) 6191-0022 / 6191-0711 MBCL - Shanghai Pudong Sub-Branch Zhu, Hin (Winny Zhu) AVP/ General Manager Unit 103, 1/F, Quanhua Information Plaza 455 Fushan Road, Pudong District Shanghai 200122 Tel. No. 86 (21) 6886-0008 ext no. 19 Fax No. 86 (21) 6886-0007 MBCL - Changzhou Branch Xuan Jianfang General Manager xuanjianfang@metrobank.com.cn No. 8, 58 Tongjiangzhong Road Xinbei District, Changzhou, Jiangsu Tel. No. (0519) 88061616 (0519) 88061617 (0519) 88061618 MBCL - Quanzhou Branch Jing Wu General Manager xuanjianfang@metrobank.com.cn 1-2/F, Finance Mansion No. 361 Fengze Street, Quanzhou Metrobank Beijing Representative Office Li Hong Chief Representative lihong@metrobank.com.cn 14/F, Rm 1410 Office Tower One Henderson Center 18 Jian Guo Men Nei Street Beijing 100005 Tel. No. 86 (10) 6518-3359 Fax No. 86 (10) 6518-3358

HONG KONG Metrobank Hong Kong Representative Office Alex C. Lim Managing Director Unit D, 15/F, United Centre Building 95 Queensway Road, Hong Kong, SAR Tel. No. (852) 2527-5019 Metro Remittance (Hong Kong) Ltd. Eric Cheung Managing Director eric.cheunghc@mbrchk.com Alfredo Valencia General Manager 2/F, Shops 2038-2039 United Centre Shopping Arcade 95 Queensway, Central Hong Kong, SAR Tel. No. (852) 2856-0980 Fax No. (852) 2856-3902 United Centre Office Julius Barcela JAM, Operations Officer 2/F, Shops 2038-2039 United Centre Shopping Arcade 95 Queensway Central Hong Kong, SAR Tel. No. (852) 2856-0980 Fax No. (852) 2856-3902

Shatin Branch Ma. Teresa A. Cruz Supervisor bel.lorenzo@mbrchk.com shatin@mbrchk.com Shop 104, Level 3, Shatin Lucky Plaza No. 1-15 Wang Pok Street, Shatin New Territories, Hong Kong, SAR Tel. No. (852) 2698-4809 Fax No. (852) 2698-4632 Tsuen Wan Branch Angelito A. Noguera Jr. Supervisor jojo.noguera@mbrchk.com tsuenwan@mbrchk.com Shop 305E, 3/F Nan Fung Centre, New Town Mall Nos. 264-298 Castle Park Road and Nos. 64-98 Sai Lau Kok Road Tsuen Wan, New Territories Hong Kong, SAR Tel. No. (852) 2498-6261 Fax No. (852) 2414-9102 Tseung Kwan O Perlita P. Ocba Supervisor tseungkwano@mbrchk.com Shop UG17 Maritime Bay Shopping Mall 18 Pui Shing Road, Tseung Kwan O New Territories, Hong Kong, SAR Tel No. (852) 2736-1311 / 2736-1566 Fax No. (852) 2736-1116

Worldwide House Branch Rolando V. Cobrado Manager, Operations Officer rolly.cobrado@mbrchk.com worldwide@mbrchk.com 2/F, Shop 201-206 Worldwide House Plaza No. 19 Des Voeux Road Central Hong Kong, SAR Tel. No. (852) 2877-9161 Fax No. (852) 2877-3569

JAPAN MB-Tokyo Kenichi Katakura General Manager k-katakura@metrobank.co.jp kenichi.katakura@metrobank.com.ph mbtokyo@metrobank.com.ph

Yuen Long Branch Arnold A. Dela Luna Supervisor arnold.delaluna@mbrchk.com yuenlong@mbrchk.com Flat 2, 1/F, Hung Fook Building No. 25-29 Tung Lok Street Yuen Long, New Territories Hong Kong, SAR Tel. No. (852) 2521-4965 / 2522-4593 Fax No. (852) 2442-0559

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Moriji Matsuda Adviser moriji.matsuda@metrobank.com.ph 1/F, Kandabashi Park Building 1-19-1 Kanda Nishi-cho Chiyoda-ku, Tokyo Tel. No. 03-5281-7281 Fax No. 03-5281-7282

PSBank ANNUAL REPORT 2012

Metrobank Group MB-Osaka Joseph Eric D. Pelaez Branch Head j-pelaez@metrobank.co.jp joseph.pelaez@metrobank.com.ph mbosaka@metrobank.co.jp mbosaka@metrobank.com.ph 1/F, Honmachi Central Building 4-2-5 Honmachi, Chou-ku, Osaka Japan 541-0053 Tel. No. 81 (6) 6252-1333 Fax No. 81 (6) 6252-2226

TAIWAN MB-Taipei George Tsai General Manager george.tsai@metrobank.com.tw 107 Chung Hsiao East Road Sec. 4 Taipei, Taiwan 10690 Tel. No. 886 (2) 2776-6355 Fax No. 886 (2) 2721-1497

AMERICAS KOREA MB-Seoul Hae Won Seok General Manager hae.seok@metrobank.com.ph mbseoul@metrobank.com.ph 2/F, Danam Building (formerly International Insurance Building) 120,5 - Ka, Namdaemun-Ro, Chung-ku Seoul, Korea 100-704 Tel. No. 82 (2) 779-2751 to 52 Fax No. 82 (2) 779-2750 MB-Pusan Mario Ramirez Head mbpusan@metrobank.com.ph 8/F, Samsung Fire & Marine Insurance Building, 1205-22 Choryang 1 Dong Dong-gu Pusan, Korea 601-011 Tel. No. 82 ( 51) 462-1091 to 93 Fax No. 82 (51) 462-109

SINGAPORE Metro Remittance Singapore Pte. Ltd. Ma. Asuncion Charina C. Yap General Manager chary.yap@metrobank.com.ph mbsingapore@metrobank.com.ph 304 Orchard Road, #03-30 Lucky Plaza Singapore 238863 Tel. No. (65) 6734-4648 / 6734-2748 Fax No. (65) 6734-7348

PSBank ANNUAL REPORT 2012

MB-New York Ivan S. Atmaja General Manager ivan.atmaja@metrobankny.com customerservice@metrobankny.com 10 East 53rd Street, New York New York 10022, U.S.A. Tel. No. 1 ( 212) 832-0855 ext. 228 1 (212) 909-3665 (Direct Line) Fax No. 1 (212) 223-0916 Metro Remittance Center, Inc. (U.S.A.) Flushing - Head Office Milagros S. Alegre General Manager mila.alegre@metroremitusa.com Juanita Rainbow Marketing Officer nitz.rainbow@metroremitusa.com mrciflushing@metroremitusa.com 41-60 Main Street, Suite 309 Flushing New York 11355, U.S.A. Tel. No. 1 (718) 463-7770 / 463-0777 Fax No. 1 (888) 281-3743 Metro Remittance Center, Inc. (U.S.A.) Woodside Branch Juanita Rainbow Marketing Officer nitz.rainbow@metroremitusa.com mrciwoodside@metroremitusa.com 69-11 C Roosevelt Avenue Woodside, New York 11377, U.S.A. Tel. No. 1 (718) 779-8519 to 20 Fax No. 1 (888) 302-9061

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Metro Remittance Center, Inc. (U.S.A.) Niles (Chicago) Branch Voltaire A. Gella Operations Officer voltaire.gella@metroremitusa.com voltaire.gella@metrobank.com.ph mrcichicago@metroremitusa.com 7315 West Dempster Street Niles, Illinois 60714, U.S.A. Tel. No. 1 (847) 965-2368 1 (847) 965-2415 Fax No. 1 (888) 493-1180 Metro Remittance (USA), Inc. Artesia Branch Achilles L. Bernal Officer-in-Charge achi.bernal@metroremitca.com unioncity@metroremitca.com 11700 South Street, Ste. 203 Artesia, California, USA 90701 Tel. No. (562) 376-4010 Fax No. (562) 372-4011 Metro Remittance (Canada), Inc. Vancouver Office Mabelle C. Sia Head mcsia@metroremittance.ca Vancouver@metroremittance.ca 4292 Fraser Street, Vancouver British Columbia, Canada V5V 4G2 Tel. No. 1 (604) 874-3373 Fax No. 1 (604) 874-3374 Metro Remittance (Canada), Inc. Toronto Office Edgar D. Mararac Head edgar.mararac@metroremittance.ca toronto@metroremittance.ca 1466 Bathurst Street, Suite 108-A Toronto, Ontario, Canada M5R 3S3 Tel. No. 1 (416) 532-9779 1 (416) 532-3223 Fax No. 1 (416) 534-4040 MB Remittance Center (Hawaii) Ltd. Kalihi (Honolulu) Office Ramon P. Nicdao General Manager mbremittance@mbrchawaii.com ramon.nicdao@mbrchawaii.com 2153 North King Street, Suite 100-A Honolulu, Hawaii 96819, U.S.A. Tel. No. 1 (808) 841-9889 to 90 Fax No. 1 (808) 841-9891

Waipahu (Extension Office) 94-766 Farrington Hwy, Waipahu Hawaii 96797, U.S.A. Metrobank (Bahamas) Ltd. John M. Lawrence Acting President/ Senior Officer john.lawrence@metrobankbahamas.com 2/F, New Providence Financial Center East Bay Street, P.O. Box CR-56766 Suite 700 Nassau, Bahamas Tel. No. 1 (242) 677-1925 Fax No. 1 (242) 394-2142

EUROPE Walter C. Lim Region Head for Europe walter.lim@metrobank.com.ph walterlim@etisalat.blackberry.com mbtcdxb@eim.ae Mobile No. (97150) 456-7916 Fax No. (9714) 220-6113 Metro Remittance (Italia) SpA - Rome Cherry Ragodon Officer-in-Charge mri-rome@metroremit.it mrit01-024@mail1.easynet.it Via Del Viminale 43, 00184 Rome, Italy Tel. No. 39 (06) 4891-3091 39 (06) 4891-3095 Fax No. 39 (06) 4898-9882 Metro Remittance (Italia) SpA - Milan Rodel C. Dimatulac General Manager rcdimatulac@metroremit.it mri-milan@metroremit.it mrit01-010@mail1.easynet.it Via Victor Hugo 2, 20123 Milan, Italy Tel. No. 39 (02) 8909-5225 39 (02) 8698-4316 Fax No. 39 (02) 8029-8624 Metro Remittance (Italia) SpA- MDO Extension Office Viale delle Medaglie d’Oro 123 00136 Rome Italy (opposite Philippine Embassy Rome) Tel. No. 39 (06) 3903-1085 Fax No. 39 (06) 3976-3483

Metro Remittance (UK) Ltd. Maria Victoria R. Rocha General Manager metrorem@btconnect.com mvrocha@metrorem.co.uk 1/F, 12 Kensington Church Street London W8 4EP, United Kingdom Tel. No. 44 (207) 368-4490 Fax No. 44 (207) 937-6140

MB Riyadh Desk Office Arab National Bank Arthur F. Acosta Marketing Officer Arab National Bank Building Mouraba Street, P.O. Box 56921 Riyadh 11564, KSA Mobile No. (9665) 06501955

MIDDLE EAST Allen D. Alcantara Region Head for the Middle East allen.alcantara@metrobank.com.ph G/F, Annex Building, Metrobank Plaza Sen. Gil Puyat Avenue Makati City 1200 c/o IOSG Tel. No. (02) 898-9886 Fax No. (02) 817-7288 MB Riyadh Desk Office Al-Rajhi Bank Adorlito Z. Rosel Marketing Officer mbdesk_riyadh@awalnet.net.sa lito.rosel@metrobank.com.ph adorlito.rosel@yahoo.com Al Malaz Center, Riyadh Al Batha Exchange & Remittance Center 2/F, Manila Plaza, Al Batha District P.O. Box 22022, Riyadh 11495, KSA Tel. No. (9661) 291-2652 / 405-0292 Fax No. (9661) 402-0722 MB Riyadh Desk Office Arab National Bank Ceferino J. Chua Marketing Officer cef.chua@metrobank.com.ph cefjchua@yahoo.com Arab National Bank Building Mouraba Street, P.O. Box 56921 Riyadh 11564, KSA Mobile No. (9665) 06527813

MB Al Khobar Desk Office Al-Rajhi Bank Chito Belarmino Martin Marketing Officer mbdesk_khobar@awalnet.net.sa mbdesk_khobar@metrobank.com.ph chito.martin@metrobank.com.ph Al Khobar Exchange & Remittance Center, 1st Street cross King Khaled Bin Abdulaziz Street Al Shamalia, P.O. Box 1391 Al Khobar 31952, KSA Tel. No. (9663) 897-7265 Fax No. (9663) 864-9758 MB Jeddah Desk Office Al-Rajhi Bank Ricardo B. Guiang Marketing Officer mbdesk_jeddah@awalnet.net.sa mbdesk_jeddah@metrobank.com.ph Jeddah Exchange & Remittance Center 2/F, Queen’s Building King Abdul Azziz Road Al Balad District, P.O. Box 605 Jeddah, KSA Tel. No. (9662) 642-7151 Fax No. (9662) 643-8542 MB Jubail Desk Office Bank Al Bilad (Enjaz) Raymundo D. Novela Marketing Officer raymundo.novela@metrobank.com.ph raymond.novela@yahoo.com Bank Al Bilad - Enjaz Jubail Branch 303, Jeddah Street Jubail, KSA Mobile No. (9665) 32262489

MB Riyadh Desk Office Bank Al Bilad Richard F. Gaffud Marketing Officer Enjaz Money Remittance Al Batha Branch 153 c/o Bank Al Bilad Head Office P.O. BOx 140 Riyadh Saudi Arabia 11411 Mobile No. (9665) 51826143

MB Qatar Desk Office Gulf Exchange Co. Daniel Mana-ay Marketing Officer mbtcqat@qatar.net.qa Flat 302, Building No. 3 A Kaisal Buidling, Musherieb Area Doha Qatar Tel. No. (974) 5576-1899 Fax No. (974) 44811584

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PSBank ANNUAL REPORT 2012

Metrobank Group MB Qatar Desk Office Al Dar For Exchange Rodelito P. Macasaet Marketing Officer rodmacph1@yahoo.com rodel.macasaet@metrobank.com.ph Al Dar for Exchange, P.O. Box 24451 Doha, Qatar Mobile No. (0917) 5779230 Tel. No. (974) 66169975 MB Dubai Desk Office Al Ansari Exchange Ryan O. Imperial Marketing Officer ryan.imperial@metrobank.com.ph ryan.imperial@gmail.com Flat No. 127 Centre Residence (beside Movenpick Hotel) Muraqqabat, Deira, Dubai, UAE Mobile No. (97150) 3620583 Fax No. (9714) 2206113 MB Dubai Desk Office UAE Exchange Centre Filip Ver B. Vicente Marketing Officer Flat No. 127 Centre Residence (beside Movenpick Hotel) Muraqqabat, Deira, Dubai, UAE Mobile No. (9715) 53350549 MB Abu Dhabi Desk Office UAE Exchange Centre Don Ryan V. Daya Marketing Officer Flat No. 1006, Hazza Building Electra St., Abu Dhabi, UAE Mobile No. (97156) 6244165

(97150) 2490520 MB Kuwait Desk Office Etemadco Exchange Carroll D. Ong, Jr. Marketing Officer carroll.ongjr@metrobank.com.ph mbtc.kuwait@gmail.com Etemadco Exchange Co. W.L.L G/F, Zaid Al Kazemi Building Mubarak Al Keabir Street Darwasa Abdulrazzak P.O. Box 20078, Safat, Kuwait Mobile No. (9656) 6029672

National Finance & Exchange Co. W.L.L. Albert T. Ballesteros Marketing Officer carroll.ongjr@metrobank.com.ph mbtc.kuwait@gmail.com National Finance & Exchange Co. W.L.L. 146 Al Khalifa Avenue, P.O. Box 360 Manama, Kingdom of Bahrain Tel. No. 00973-36141210 00973-17226061 loc. 114

REMITTANCE PARTNERS ASIA PACIFIC AUSTRALIA DTD Express 324-A Marrickville Road, Marickville NSW 2204, Australia Tel. No. 02 95605264 Fax No. 02 95605264 FOREX World (Australia) a.k.a.

I-NES Philippines Unit 6, 332 Hoxton Park Road Prestons NSW 2170, Australia Tel. No. 02 8777 0000 Fax No. 02 9826 7133 Salazar Kwarta Padala 16-A Young Street, Southport Gold Coast City, Queensland, Australia Transcash International PTY Ltd. Suite 117, 11/F, 420 Pitt Street Sydney NSW 2000, Australia Fax No. +61 921 12255

BRUNEI Afima Express Remittance Services G/F, Shop No. 1 & 2, DAR Takaful IBB2 Jalan, Pemancha BS8511 Bandar Seri Begawan Brunei Darussalam Tel. No. 673-861-6298 / 2239405

CAMBODIA Singapore Banking Corporation No. 68 Samdech Pan St. 51214 Phnom Penh Tel. No. (855) 23211211

PSBank ANNUAL REPORT 2012

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KOREA Korea Exchange Bank 181 2Ga, Ulchiro, Jung-gu C.P.O. Box 2924, Seoul 100-793, Korea Tel. No. 82-1544-3000

MALAYSIA CIMB Bank Berhad Head Office, Menara Bumiputra Commerce #11 Jalan Raja Laut 50350 Kuala Lumpur Tel. No. 1300 880 900 (06) 22956100 CIMB Islamic Bank 5/F, Bangunan CIMB Jalan Semantan Damansara Heights 50490 Kuala Lumpur Tel. No. 1300 880 900 +603 22956100 Fax No. +603 209309688

NEW ZEALAND LM Money Transfer 87 Caribbean Drive, Albany Northshore City, Auckland 0632 New Zealand Tel. No. 09 442 1119

PHILIPPINES ABS-CBN Easy Remit E-Money Plus G/F, ELJ, Communications Center Bldg.

9501 Eugenio Lopez Drive South Triangle, Quezon City Tel. No. +63 2 4152272 Asia United Bank Joy-Nostalg Center No. 17 ADB Avenue Ortigas Center, Pasig City Tel. No. +63 2 638-6888 +63 2 910-1725 to 35 BTI Courier Express, Inc. 1647 Taft Avenue, Malate, Manila Tel. No. +63 2 526-5373 +63 2 526-5374 Fax No. +63 2 303-6319

CITI Express Payment Philippines Corporation 18-D, San Marcelino St. Brgy. Plainview, Mandaluyong City Tel. No. +63 2 470-6306 Fax No. +63 2 303-6319 Czarina Foreign Exchange Unit 1412, Tower One & Exchange Plaza Ayala Avenue, Makati City Tel. No. +63 2 811-1875 / 811-1895 Fax No. +63 2 848-6508 Mabini Express Philippines, Inc. 105 Unit 9-C, H.V. Dela Costa Street Salcedo Village, Makati City Tel. No. +63 2 750-9498 to 99 Fax No. +63 2 7509502 New York Bay Remittance (Philippines) (NYBP) Unit 2102, 21/F Antel Global Corp. Center, J. Vargas cor. Meralco Avenues, Ortigas Center Pasig City Tel. No. +63 2 760-75935 Fax No. +63 2 714-8414 Pinoy Express Hatid Padala 2/F, Security Bank Building President’s Avenue, BF Homes Parañaque City Tel. No. +63 2 972-3620 Fax No. +63 2 772-3623 WeRQuick Inc. Unit 208, Cityland Condominium Herrera Street, San Lorenzo Village Makati City Tel. No. +63 2 727-3742 Fax No. +63 2 727-5564

SINGAPORE One Stop Remittance Center 304 Orchard Road #02-30/31 Lucky Plaza Singapore 238863 Tel. No. (656) 834-0071 / 834-0072 Fax No. (656) 834-0069

TAIWAN Ang Pinoy Bakeshop, Inc. Huan Feihei Trading Co. Ltd. 143 Cheien Kun 4th Road Yen Cheng District, Kaoshung Tel. No. (008867) 533-6183 / 532-4751

METREX Service Co. 2/F, #28 Chung Ping Road Chungli City, Taoyuan Century Taiwan City Tel. No. (886) (3) 427-2007 WCT Express Remittance Services 2/F, 500 Section & Chung Hsan Road Tantzu Taichang Hsien, Taiwan Tel. No. (008866) 4532-3546 (008866) 4532-4348

MIDDLE EAST BAHRAIN National Finance & Exchange Company P.O. Box 360 Manama, Bahrain Tel. No. -17225089 Fax No. -17226597 Zenj Exchange Co. P.O. Box 236 Manama, Bahrain Tel. No. (973) 224-352 Fax No. (973) 214-405

Al Moosa Exchange Co. W.L.L. Office 1, 2 and 3, G/F, Building #53 Ahmed Al-Jaber Street, Mubarakiya Soul Al-Dakli, P.O. Box 739, Kuwait Tel. No. (962) 224-68117 / 996106683 Fax No. (962) 2246-8117 Al Mulla International Exchange Co. P.O. Box 177, Safat, 13002 Kuwait Tel. No. (965) 243-1912 / 243-1913 Fax No. (965) 243-1904 Al Muzaini Exchange Co. K.S.C.C. Al Mubarakiya Saud Bin Abd Al Aziz Street P.O. Box 2154, Safat 13022, Kuwait Tel. No. (965) 888-818 ext. 283 Fax No. (965) 243-0701 Bahrain Exchange Co. P.O. Box 29149, Safat, 13152 Kuwait Tel. No. (965) 246-8729 / 246-0828 Fax No. (965) 240-1859 City International Exchange Co. W.L.L. Abdulla Dashti Building Abdullah Mubarak Street Safat, 13079 Kuwait Tel. No. (965) 244-8507 Fax No. (965) 240-7371

ISRAEL Worldcom Int’l Communications Group 107 Levinski Street, Tel Aviv, Israel

JORDAN Alawneh Exchange Al Hasan Industrial City Branch Al Ramtha, Jordan Tel. No. -7390151

Dollarco Exchange Co. Ltd. Sulaiman Abdullah Al Mansoor Building Al Shuhanda Street, Safat 13125 Mirqab, Kuwait Tel. No. (965) 245-4713 / 241-2767 Fax No. (965) 241-2788 Etemadco Exchange Co. W.L.L. G/F, Zaid Al Kazemi Building Mubarak Al Keabir Street Darwasa Abdulrazzak, Kuwait Tel. No. (965) 246-3116 to 17 Fax No. (965) 245-8328

Saudi Exchange Wasfi Ai-Tar Street Al Gardens Building, No. 87 Amman, Kingdom of Jordan Tel. No. (962) 656-60428 Fax No. (962) 655-60427

International Financial Line Co. W.L.L. Al Sharq Ahmed Al Jabber Street P.O Box 24171, Safat, Kuwait Fax No. (965) 246-7543

KUWAIT

National Exchange Company P.O. Box 11520, Dasma 15355, Kuwait Tel. No. (965) 2571-3557 / 2571-3447 Fax No. (965) 2573-6605

Al Fuad Exchange Co. Salim Al-Moubarak Road Al-Salmiyah, Kuwait Tel. No. (965) 224-76070 to 80 Fax No. (965) 2249-1309

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PSBank ANNUAL REPORT 2012

Metrobank Group National Money Exchange W.L.L. P.O. Box 29760, Safat 13158, Kuwait Tel. No. (965) 246-2680 Fax No. (965) 246-2681

Al Sadd Exchange P.O. Box 17127 Doha, Qatar Tel. No. (974) 432-3334 / 432-3337 Fax No. (974) 432-7774 to 75

UAE Exchange Center W.L.L. 1/F, Al Rabia Building Al Shuhda Street, Murghab P.O. Box 26155, Safat, 13122 Kuwait Fax No. -22458454

Al Zaman Exchange W.L.L. P.O. Box 23497 Next to Al Fardan Centre Buidling (beside Karwa Public Bus Station) Doha, Qatar Tel. No. -44440474 Fax No. -44324136

OMAN

Coriner International Services Souq Al Jabaor, Doha, Qatar Tel. No. +974 444411 872

Al Jadeed Exchange L.L.C. P.O. Box 3705 Postal Code 112 Ruwi, Sultanate of Oman Tel. No. (968) 245-21335 to 36 Fax No. (968) 245-21334

Gulf Exhange Co. P.O. Box 4847, Doha, Qatar Tel. No. (974) 438-3253 Fax No. (974) 438-3258

Asia Express Exchange P.O. Box 881 Postal Code 112 Ruwi, Sultanate of Oman Tel. No. (968) 781-727 Fax No. (968) 781-729 Majan Exchange L.L.C. P.O. Box 583 Postal Code 117 Muscat Governorate Sultanate of Oman Tel. No. (968) 2479-4017 to 18 Fax No. (968) 2479-4019 Oman & U.A.E. Exchange Centre & Co., L.L.C. P.O. Box 1116 Postal Code 113 Al Hamriya, Sultanate of Oman Tel. No. (968) 750-830 Fax No. (968) 750-908 Purshottam Kanji Exchange Co. L.L.C. P.O. Box 41, Muscat, Oman Tel. No. +968 24787257

QATAR Al Dar For Exchange Works P.O. Box 24451 Doha, Qatar Tel. No. (974) 455-0455 Fax No. (974) 455-0888 Al Fardan Exchange Company - Qatar P.O. Box 339 Doha, Qatar Tel. No. (974) 440-8234 Fax No. (974) 441-7468

PSBank ANNUAL REPORT 2012

Bank Al Bilad Bank Al Bilad - Head Office Alseteen Street, AlMalaz P.O. Box 140, Riyadh 11411 Tel. No. (9661) 479-8844 Fax No. (9661) 291-9874 National Commercial Bank - SWIFT King Abdulaziz Street P.O. Box 3555, Jeddah 21481 Tel. No. (9662) 646-4086 Fax No. (9662) 644-9474 Riyadh Bank P.O. Box 229, Riyadh 11411, KSA Tel. No. (9661) 411-3333 Fax No. (9661) 404-2707

UNITED ARAB EMIRATES

Habib Qatar International Exchange, Ltd. P.O. Box 1188, Doha, Qatar Tel. No. (974) 441-4329 Fax No. (974) 441-2639

Al Ahalia Money Exchange Bureau P.O. Box 2419, Hamdan Street Abu Dhabi Tel. No. (9712) 627-0004 Fax No. (9712) 626-8858

SAUDI ARABIA

Al Ansari Cash Express P.O. Box 325, Abu Dhabi

Abdul Aziz Abdullah Al-Zamil & Sons Exchange, Co. P.O. Box 83, King Saud Street cor. A. Al Khobar 31952 Tel. No. (9663) 899-0215 Fax No. (9663) 895-4423

Al Ansari Exchange P.O. Box 325, Abu Dhabi Tel. No. (9712) 622-7888 (9712) 622-5120 Fax No. (9712) 622-4421 (9712) 662-7204

Al Amoudi - Jeddah Al Hazzazi Building, Gabil Street Al Balad District (City Center), Jeddah Tel. No. +966 2 647 45515 Fax No. +966 2 647 7733 +966 2 648 4544

Al Falah Exchange P.O. Box 3692 Abu Dhabi Sheikh Zayed The Second Street Tel. No. (9712) 632-9888 Fax No. (9712) 634-6849

Al Rajhi Bank P.O. Box 22022, Riyadh 11495 Tel. No. (9661) 405-0292 / 460-1518 Arab National Bank Arab National Bank Building Mouraba Street, P.O. Box 56921 Riyadh 11564 Tel. No. (9661) 402-9000 ext. 7986 Fax No. (9661) 402-9000 ext. 4886

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Al Fardan Exchange - U.A.E. P.O. Box 498, Al Amin Tower Liwa Street, Abu Dhabi Tel. No. (9712) 622-3222 Fax No. (9712) 622-3331 Al Fuad Exchange - U.A.E. Shop #2 Building of Saif Al Otaiba Al Reqqa Street, Deira P.O. Box 16362, Dubai Tel. No. (9714) 221-1117 (9714) 272-7100 Fax No. (9714) 221-1440 (9714) 272-7077

Al Ghurair Exchange - U.A.E. P.O. Box 5530, 7/F Room 702 Al Masaoud Building, Al Maktoum Abu Dhabi Tel. No. (9714) 222-2955 Fax No. (9712) 227-0839 Al Ghurair International Exchange Al Ghurair Exchange LLP 7/F, Al Masood Building 702 near Clock Tower Deira P.O. Box 5530, Dubai Tel. No. (9714) 222-2955 Fax No. (9712) 227-0839 Al Jarwan Exchange P.O. Box 5504, Sharjah Tel. No. +971 (6) 5723746 Fax No. +971 (6) 5598999 Al Razouki International Exchange P.O. Box 12583, Naif Road Deira, Dubai Tel. No. (9714) 393-2331 (9714) 393-3909 Fax No. (9714) 393-9033 Al Rostamani International Exchange (Thomas Cook) Al Rostamani Building Mezzanine Floor (above First Gulf Bank), Bank Street Bur Dubai, Dubai, P.O. Box 10072 Tel. No. (9714) 609-8100 Fax No. (9714) 396-5386 ARY Forex (Speedremit) W1-210 Dubai Airport Free Zone P.O. Box 54597, Dubai Tel. No. (9714) 393-2331 (9714) 393-3909 Fax No. (9714) 393-9033 Central Exchange L.L.C. (now Sharaf Exchange L.L.C.) P.O. Box 29040, Dubai Tel. No. (9714) 355-4560 (9714) 302-5750 Fax No. (9714) 351-1101 Delma Exchange P.O. Box 129869, Abu Dhabi Economic Exchange P.O. Box 116496, Dubai Tel. No. 04-2717575 Fax No. 04-2738010 04-2723838

Emirates India International Exchange Room 202, 2/F, Kanoo Building near Al Manama Hypermarket P.O. Box 7190, Karama Tel. No. (9714) 223-2261 (9714) 223-2258 Fax No. (9714) 627-2184 to 85 Habib Exchange Co. Central Office, P.O. Box 2370 Hamdan Street, Abu Dhabi Tel. No. (9712) 627-2656

UAE Exchange Centre L.C.C. P.O. Box 170, Sheik Hamdan Street Abu Dhabi Tel. No. (9712) 632-2166 Fax No. (9712) 631-2030 Wallstreet Exchange 1103 Twin Towers, Baniyas Road P.O. Box 3014, Dubai Tel. No. (9714) 228-4889 Fax No. (9714) 228-6533 Xpress Money Services Ltd. P.O. Box 170, Sheik Hamdan Street Abu Dhabi Tel. No. (9712) 610-5560 Fax No. (9712) 632-0970

Hadi Express Exchange P.O. Box 28909, Dubai Tel. No. (9714) 353-7650 (9714) 353-4802 Fax No. (9714) 353-7660 Leela Megh Exchange Co. L.L.C. P.O. Box 6309, Deira, Dubai Tel. No. (9714) 354-0191 (9714) 226-4628 Fax No. (9714) 354-0193 (9714) 226-5487

AMERICA Continental Exchange Solutions a.k.a. RIA Financial Services 6565 Knott Avenue, Buena Park California Tel. No. +1 562 3452100

Lulu International Exchange Al Dhfrah Street, Al Muroor Al Shaikh Mohammad Bin Zayed Al Nehyan Building, P.O. Box 4059 Abu Dhabi Tel. No. (9712) 642-1800 Fax No. (9712) 642-2110

DMK Express Lot 6 Tract 217, #126-D Kayen Chando Dededo, Guam, 96929 Tel. No. (671) 637-7896

Orient Exchange Co., L.L.C. Al Souq Al Kabeer Street Murshid Bazar, P.O. Box 25557, Dubai Tel. No. (9714) 235-3795 Fax No. (9714) 235-3796 Redha Al Ansari Exchange Est. Al Falah Branch, P.O. Box 8828, Dubai Tel. No. (9714) 353-3090 / 353-0088 (9714) 353-2500 Fax No. (9714) 353-3664 / 353-4064 Smart Exchange Main Office Harib Tower Building Sheikh Rashid Bin Saeed Al Maktoum Street, P.O. Box 2911 Abu Dhabi Tel. No. (9712) 634-4699 Fax No. (9712) 632-3704

MoneyGram International Inc. 15/F, MoneyGram International 2828 N. Harwood, Dallas, Texas 75201 Tel. No. 1-800-MONEYGRAM (1-800-666-3947) Prahbu Group Inc. 37-15, 73rd Street, USA Jackson Heights New York, 11372 Tel. No. -7428 Fax No. -7448 Trans-fast Remittance L.L.C. 2/F, 110 Wall Street, New York New York 10005 Tel. No. 1-888-973-6383 Uniteller 218 Route 17, North Rochelle Park New Jersey 07662 Tel. No. 1-800-459-2486

Taymour & Abu Harb Exchange Co., L.L.C. Al Urobah Street, Al Ghowair P.O. Box 40124, Sharjah Tel. No. (9716) 553-3935 (9716) 553-3950 Fax No. (9716) 553-9388 ( 171 )

PSBank ANNUAL REPORT 2012

Metrobank Group PHILREM 1/F, 313 Brompton Road, London SW3 2DY, United Kingdom Tel. No. 0207 581 8100

Xoom Corporation (Xoom Global Money Transfer) Suite 300, 100 Bush Street San Francisco, California 94104 Tel. No. (415) 281-4231 (415) 503-7479 Fax No. (415) 777-8690

The Filipino Agency Remittance Ltd. Battle House, 1 East Barnet Road New Barnet Hertfordshire EN4 8RR, United Kingdom

EUROPE OTHERS

MA Transworld GmbH Springeltwiete 5 & 7, Hamburg 20095, Germany Tel. No. 040-3039 2286 Fax No. 040-3039 2078

Industrial Maintenance International Industrial Maintenance International Cite des Pins, Lots 3, 5 and 6 Les berges du Lac Tunis, Tunisia Tel. No. +216 71 967 800 Fax No. +216 71 967 802

Lagura Enterprises 1 Aston Court Bedford Row Dublin 2, Ireland Tel. No. (353) 1 6718393 Banco Populare Di Verona E Novara SGSP Piazza Nogara, Verona, Italy Tel. No. 045-867-5111 Sunro Change B.V. Damrak 17, 1012 LH Amsterdam, Netherlands Tel. No. 020-4270260 Fax No. 020-6265184 La Caixa (Caja De Ahorros) No. 6621-629, Avenida Diagonal Barcelona, Spain Tel. No. 34 (93) 404-7174 Fax No. 34 (93) 404-6168 United Europhil EP S.A.U. United Europhil, S.A. Direccion calle Alfonso XII, 58 Bajo 28014 Madrid, Spain Tel. No. 902 200 666 Coinstar Money Transfer 2/F, The Podium 1, Eversholt Street London NW1 2DN, United Kingdom Tel. No. 0800 015 6255 Fax No. +44 207 554 0781 Direct Money Transfer 2/F, Pinoy Supermarket 10th Hogarth Road Earls Court London SW5 0PT United Kingdom Tel. No. +44 (0) 207 341 7377 Fax No. +44 (0) 207 341 7371

PSBank ANNUAL REPORT 2012

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