country propels its economic activity.

These deposits become taxable when pre-terminated or

withdrawn before the original term of five years.

As to Deposit Size:

Demand Savings Time Total

P15,000 and below P 1,005,788.40 5,357,137.77 12,280.39 6,375,206.56
Over P15,000 up to P80,000 776,956.25 13,191,244.38 214,755.12 14,182,955.75
Over P80,000 up to P500,000 2,758,897.91 45,227,532.45 1,735,012.84 49,721,443.20
Over P500,000 0.00 127,967,612.05 3,521,966.97 131,489,579.02
Total P 4,541,642.56 191,743,526.65 5,484,015.32 201,769,184.53

Note: 13 Bills Payable

This account consists of borrowing from the following.

Year 2016 Year 2015
Land Bank of the Philippines P 4,760,000.00 4,675,000.00
Total P 4,760,000.00 4,675,000.00

The above borrowing is secured by clients promissory note together with the corresponding
collateral. Outstanding balance of asset pledged as collateral amounted to P5,600,000.00 as of
December 31, 2016. This account is being reduced thru payment of loan by the borrower wherein
the corresponding collateral is also retrieved by the bank/borrower.

Maturity period of this borrowing is less than one (1) year from the balance sheet date with an
interest rate of 5% per annum while its fair value is presented in the Note 4 of the Notes to
Financial Statements.

Interest expense arising from this borrowing amounted to P28,911.81 and P20,695.14 for the
years ended December 31,2016 and 2015 respectively.

Note 14: Accrued Interest, Taxes and Other Expenses Payable

This account represents the following:

Year 2016 Year 2015
Accrued Interest on Financial Liabilities P 171,678.67 185,495.20
Accrued Income Tax Payable 63,942.51 506,183.36
Accrued Other Expenses Payable 146,907.87 130,211.34
Accrued Other Taxes & Licenses Payable 178,472.97 126,614.30
Total P 561,002.02 948,504.20

Accrued Interest on Financial Liabilities represents accruals made by the bank on its deposit
liabilities. Accrued Income Tax Payable refers to the corporate tax payable incurred by the bank
during the taxable year after deducting the amount that had been accrued at the year-end.
Accrued Taxes and Licenses Payable represents Gross Receipt Tax for the month of
December 2016. On the other hand, Accrued Other Expenses Payablewere those expenses
incurred by the bank other than taxes and financial liabilities but not yet paid as at year end.
Accruals made by the bank at the end of the year will be debited/paid in the following year.
Movements of the account for the year 2016 are as follows:
Land Building Total
Cost
At January 1 P7,181,405.62 7,408,373.61 14,589,779.23
Additions 770,366,60 2,384,654.87 3,155,021.47
Disposal/Reclassification 0.00 (15,475.42) (15,475.42)
At December 31 P 7,951,772.22 9,777,553.06 17,729,325.28

Accumulated Depreciation/Allowance for Impairment

At January 1 P 0.00 2,536,015.30 2,536,015.30
Depreciation 0.00 795,731.61 795,731.61
Impairment Loss 40,000 0.00 40,000.00
Disposal/Adjustments 0.00 (15,475.42) (15,475.42)
At December 31 40,000 3,316,271.49 3,356,271.49
Net Book Value at
December 31 P 7,911,772.22 6,461,281.57 14,373,053.79

This account represents Real and Other Properties Acquired to conform to PFRS amounting to
p14,473,053.79 net of accumulated depreciation and allowance for impairment on ROPA-Building
in 2016 and P12,053.763.93 in 2015 represents foreclosed properties by the bank from its
delinquent borrowers in settlement of the unpaid loan obligations.

Note 10: Deferred Tax Assets

Year 2016 Year 2015
Balance as at January 1
Increase
4. Victoria, Tarlac (Victoria Branch): and
5. Mc Arthur Hi-way, Nancayasan, Urdaneta City (Urdaneta Branch)

The lease agreement contains lease terms of 5 years for Main Office, Rizal Branch and Victoria
Branch renewable for another period of 5 years at the option of the lessee and 10 years for
Talavera Branch with escalation clause of 10% every year. Urdaneta Branch has a term of 5
years with escalation clause of 5% every year. Lease agreement does not contain indicators that
the bank, in substance had entered into a finance lease. Thus, the bank had classified all its
lease agreement as operating lease where lease payments are charged to expenses evenly
recognized within the term of the lease. Rent expense arising from this transaction amounted to
P1,783,485.17 and P1,730,008.68 in 2016 and 2015 respectively. The significant accounting
policies relating to leases are discussed in Note 2 of the Notes to Financial Statements.

As of December 31, 2016, the Bank, as a lessee, has future minimum rentals payable under non-
cancellable operating lease on its offices as follows:

Year 2016 Year 2015

Within one (1) year)
After one (1) year P 1,763,343.14 2,055,331.00 but not more
than five (5) years 1,542,977.56 0.00
Total P 3,306,320.69 5,518,966.73

Note 22: Commitments and Contingencies

a) The bank is a plaintiff to various cases arising from the collection suits pending in courts
for claims against delinquent borrowers of the bank. The final decision of which cannot be
determined at present. Total amount of loans and receivables under litigation amounted
to P7,422,623.05 as of December 31, 2016. Though the amounts were recognized in the
assets caption, the result of the case would not materially affect the financial statements
of the bank.

b) The bank has no pending legal cases arising from its normal operation that will put the
bank as defendant as a result of violation of transactions against its clients/depositors.

c) The bank had no outstanding issuances of bank guarantee and other similar credit
instruments that will put the bank into obligation in case of non-compliance by the buyer.

d) The bank had outstanding inward bills for collection at the end of the year.

Note 23: Related Party Transactions

Parties are considered to be related if one party has the ability, directly or indirectly, to control the
other party or exercise significant influence over the other party in making financial and operating
decisions. Parties are also considered to be related if they are subject to common control or
common significant influence. Related parties may be individuals or corporate entities.

In the ordinary course of business, the bank has no outstanding credit accommodations to its
directors, officers, stockholders and related interests (DOSRI) as of December 31, 2016.

The remuneration of directors and key management personnel (included under Compensation
and Fringe Benefits in the Statement of Income) of the bank as of December 31, 2016 and 2015
are as follows:

Year 2016 Year 2015

P 4,145,790.21 2,055,331.00
Short-term benefits
Post-employed 694,200.00 0.00 benefits
P 4,839,990.21 2,055,331.00
Totals
Notes 24: Taxes

Under Philippine tax laws, the bank is subject to percentage and other taxes (presented as Taxes
and Licenses in the Statements of Income) as well as income taxes. Percentage and other taxes
paid consist primarily of gross receipts tax (GRT) and documentary stam tax (DST).

Income Taxes

Income taxes include the corporate income tax and final tax paid at the rate of 20% on gross
interest income from government securities and other deposit substitutes. These income taxes
are presented as Income Tax Expense in the Statement of Income.

Under Republic Act No. 9337, An Act Amending National Internal Revenue Code, provides that
the regular corporate income tax (RCIT) rate shall be 35% until January 1, 2009. Starting January
1, 2009, the RCIT shall be 30%. It also provides for the change in gross receipts tax (GRT) rate
from 7% to 5% which took effect on November 1, 2005. Starting November 1, 2005, interest
allowed as a deductible expense is reduced by an amount equivalent to 42% of interest income
subjected to final tax and shall be reduced to 33% effective January 1, 2009. A minimum
corporate income tax (MCIT) of 2% on modified gross income is computed and compared with
the RCIT. Any excess of the MCIT over the RCIT is deferred and can be used as tax credit
against future income tax liability for the next three (3) years from the year of inception.

Current tax regulations also provide for the ceiling on the amount of entertainment, amusement
and recreation (EAR) expense that can be claimed as a deduction against taxable income. Under
the regulations, EAR expense allowed as a deductible expense is limited to the actual EAR paid
or incurred but not to exceed 1% of the companys net revenue.

Reconciliation of statutory net income versus net income reported under Philippine Financial
Reporting Standards:

Net Income (Philippine GAAP) Year 2016 Year 2015

Reconciling Items P 3,121,468.00 1,523,541
Interest income subject
(1,496,506.16) (1,075,232.07)

493,847.03 354,826.58
(2,203,349.95) 0.00
P (84,341.08) 803,136.39

0.00 2,681,118.59
P (84,341.08) 3,484,254.98
30% 30%
P 0.00 1,045,276.49
P 237,674.49 261,644.68
P 237,674.49 1,045,276.49
166,344.78 334,95.93
7,387.20 204,157.20
P 63,942.51 506,183.36