Interim report
Page 1
1 Stock Code:2834 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Consolidated Financial Statements With Independent Auditors’ Review Report For the Three Months Ended March 31, 2025 and 2024 ADDRESS: NO. 30, Ta-Cheng Street, Taipei, Taiwan, R.O.C. TELEPHONE: 02-2559-7171 The independent auditors’ review report and the accompanying consolidated financial statements a re the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the English and Chinese language independent auditors’ review report and consolidated financial statements, the Chinese version shall prevail.
Page 2
2 Table of contents Contents Page 1. Cover Page 1 2. Table of Contents 2 3. Independent Auditors’ Review Report 3 4. Consolidated Balance Sheets 4 5. Consolidated Statements of Comprehensive Income 5 6. Consolidated Statements of Changes in Equity 6 7. Consolidated Statements of Cash Flows 7 8. Notes to the Consolidated Financial Statements (1) Company history 8 (2) Approval date and procedures of the consolidated financial statements 8 (3) New standards, amendments and interpretations adopted 8～11 (4) Summary of material accounting policies 12 (5) Significant accounting assumptions and judgments, and major sources of estimation uncertainty 13 (6) Explanation of significant accounts 13～110 (7) Related-party transactions 111～114 (8) Pledged assets 114～115 (9) Commitments and contingencies 115～116 (10) Losses from disasters 116 (11) Subsequent Events 116 (12) Others 117～125 (13) Other disclosures (a) Information on significant transactions 126 (b) Information on investees 127～131 (c) Information on investments in Mainland China 131～132 (d) Information of major shareholders 132 (14) Segment information 133～134 9. Segment information of Security Division 135〜136
Page 3
3 Independent Auditors’ Review Report To the Board of Directors of Taiwan Business Bank, Ltd.: Introduction We have reviewed the accompanying consolidated balance sheets of Taiwan Business Bank, Ltd. a nd subsidiaries as of March 31, 2025 and 2024, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the three months e nded March 31, 2025 a nd 2024, and notes to the consolidated financial statements, including a summary of significant accounting policies. Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Public Held Banks, the Regulations Governing the Preparation of Financial Reports by Securities Firms and International Accounting Standards (“ IASs” ) 34, “I nterim Financial Reporting” e ndorsed and issued into effect by the Financial Supervisory Commission of the Republic of China. Our responsibility is to express a conclusion on the consolidated financial statements based on our reviews. Scope of Review We conducted our reviews in accordance with the Standard on Review Engagements 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” of the Republic of China. A review of the consolidated financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with the Standards on Auditing of the Republic of China and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our reviews, nothing has come to our attention that causes us to believe that the accompanying consolidated financial statements do not present fairly, in all material respects, the consolidated financial position of Taiwan Business Bank, Ltd. and subsidiaries as of March 31, 2025 and 2024, and of its consolidated financial performance and its consolidated cash flows for the three months ended March 31, 2025 and 2024 in accordance with the Regulations Governing the Preparation of Financial Reports by Public Held Banks, the Regulations Governing the Preparation of Financial Reports by Securities Firms and International Accounting Standards (“ IASs” ) 34, “I nterim Financial Reporting” e ndorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.
Page 4
3-1 The engagement partners on the reviews resulting in this independent auditors’ review report are Lee, Feng-Hui and Tsai, Pei-Ju. KPMG Taipei, Taiwan (Republic of China) May 7, 2025 Notes to Readers The accompanying consolidated financial statements a re intended only to present the consolidated s tatement of financial position, financial performance and its cash flows in accordance with the accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to review such consolidated financial statements are those generally accepted and applied in the Republic of China. The independent auditors’ review report and the accompanying consolidated financial statements a re the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the English and Chinese language auditors’ report and consolidated financial statements, the Chinese version shall prevail.
Page 5
4 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Consolidated Balance Sheets March 31, 2025, December 31, 2024 and March 31, 2024 (Expressed in Thousands of New Taiwan Dollars) March 31, 2025 December 31, 2024 March 31, 2024 Assets Amount % Amount % Amount % 11000 Cash and cash equivalents (Notes 6(a) and 7) $ 25,766,457 1 35,663,893 2 34,259,767 2 11500 Due from the Central Bank and call loans to banks (Notes 6(b) and 7) 119,680,720 5 167,755,748 7 125,486,632 6 12000 Financial assets at fair value through profit or loss (Note 6(c)) 88,405,690 4 82,805,785 3 75,624,403 3 12100 Financial assets at fair value through other comprehensive income (Notes 6(g) and (q)) 193,980,833 8 185,020,961 8 205,508,903 9 12200 Investment in debt instruments at amortized cost (Note 6(h)) 217,383,699 9 230,242,408 9 248,181,592 11 12500 Securities purchased under resell agreements (Note 6(d)) 12,604,576 1 10,252,365 - 1,416,454 - 13000 Receivables (Note 6(e)) 14,078,347 1 13,180,282 1 13,175,890 1 13200 Current tax assets 374,560 - 356,852 - 353,060 - 13500 Discounts and loans, net (Notes 6(f) and 7) 1,645,328,235 70 1,619,036,334 68 1,491,622,754 67 15500 Other financial assets (Note 6(j)) 9,923 - 6,837 - 7,540 - 18500 Property and equipment, net (Note 6(k)) 13,852,503 1 13,883,808 1 13,962,620 1 18600 Right-of-use assets, net (Note 6(l)) 1,207,025 - 1,267,030 - 1,262,548 - 19000 Intangible assets, net 1,240,167 - 1,203,010 - 1,049,242 - 19300 Deferred tax assets (Note 6(z)) 1,841,813 - 1,900,656 - 1,823,363 - 19500 Other assets, net (Note 6(m)) 10,568,253 - 12,180,081 1 10,082,939 - Total assets $ 2,346,322,801 100 2,374,756,050 100 2,223,817,707 100 March 31, 2025 December 31, 2024 March 31, 2024 Liabilities and Equity Amount % Amount % Amount % Liabilities 21000 Deposits from the Central Bank and banks (Notes 6(n) and 7) $ 231,971,649 10 240,697,672 10 128,147,722 6 21500 Due to the Central Bank and banks (Note 6(o)) 1,697,843 - 1,443,506 - 1,510,922 - 22000 Financial liabilities at fair value through profit or loss (Notes 6(p) and (t)) 10,269,966 - 10,213,236 - 9,650,457 - 22500 Notes and bonds issued under repurchase agreement (Note 6(q)) 5,884,073 - 2,011,108 - 1,923,927 - 23000 Payables (Note 6(r)) 20,992,016 1 20,092,502 1 26,998,450 2 23200 Current tax liabilities 1,408,331 - 865,240 - 510,247 - 23500 Deposits and remittances (Notes 6(s) and 7) 1,877,755,536 81 1,903,841,852 81 1,868,427,697 84 24000 Bank notes payable (Note 6(t)) 53,210,000 2 53,460,000 2 53,460,000 3 25500 Other financial liabilities (Note 6(u)) 2,199,591 - 2,528,132 - 2,199,375 - 25600 Provisions (Note 6(v)) 2,399,313 - 2,384,421 - 2,601,533 - 26000 Lease liabilities (Note 6(w)) 1,238,831 - 1,307,295 - 1,285,776 - 29300 Deferred tax liabilities (Note 6(z)) 989,524 - 933,342 - 878,623 - 29500 Other liabilities (Note 6(x)) 2,384,711 - 3,543,962 - 2,789,395 - Total liabilities 2,212,401,384 94 2,243,322,268 94 2,100,384,124 95 Equity attributable to owners of parent 31101 Common stock (Note 6(y)) 91,679,828 4 91,679,828 4 82,224,061 4 31500 Capital Surplus (Note 6(y)) 816,129 - 816,129 - 815,900 - Retained earnings: 32001 Legal reserve (Note 6(y)) 23,647,983 1 23,647,983 1 20,028,865 1 32003 Special reserve (Note 6(y)) 185,128 - 185,128 - 3,954,803 - 32005 Unappropriated retained earnings (Note 6(y)) 17,900,951 1 14,767,272 1 14,958,535 - 32500 Other equity interest (Note 6(y)) (308,602) - 337,442 - 1,451,419 - Total equity 133,921,417 6 131,433,782 6 123,433,583 5 Total liabilities and equity $ 2,346,322,801 100 2,374,756,050 100 2,223,817,707 100 See accompanying notes to consolidated financial statements.
Page 6
5 (English Translation of Consolidated Financial Statements Originally Issued in Chinese) TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income For the three months ended March 31, 2025 and 2024 (Expressed in Thousands of New Taiwan Dollars, Except for Earnings Per Common Share) For the three months ended March 31, 2025 2024 Amount % Amount % 41000 Interest income (Notes 6(ad) and 7) $ 14,057,764 164 13,138,105 153 51000 Less: Interest expenses (Notes 6(ad) and 7) (9,213,056) (107) (8,621,578) (100) Net interest revenue 4,844,708 57 4,516,527 53 Net revenue other than interest 49100 Net service fee revenue (Notes 6(ae) and 13) 1,927,583 22 2,196,417 26 49200 Gain on financial assets or liabilities measured at fair value through profit or loss (Note 6(af)) 1,361,255 16 1,471,416 17 49310 Realized gain on financial assets at fair value through other comprehensive income (Note 6(ag)) 147,245 2 78,212 1 49450 Gain arising from derecognition of financial assets measured at amortized cost (Note 6(h)) 43 - 26 - 49600 Foreign exchange gain 144,950 2 116,744 1 49700 (Impairment loss on assets) reversal of impairment loss on assets (Note 6(ah)) 3,340 - (4,176) - 49800 Net other revenue other than interest income (Note 6(ai)) 57,658 - 119,390 1 49831 Net securities brokering revenue 102,903 1 116,006 1 Net revenue 8,589,685 100 8,610,562 100 58200 Bad debts expense, commitment and guarantee liability provision (Note 6(aj)) (788,289) (9) (1,202,952) (14) Operating expenses 58500 Employee benefits expenses (Note 6(ak)) (2,377,115) (28) (2,354,863) (27) 59000 Depreciation and amortization expense (Note 6(al)) (344,968) (4) (338,381) (4) 59500 Other general and administrative expense (Note 6(am)) (1,322,246) (15) (1,214,693) (14) Total operating expense (4,044,329) (47) (3,907,937) (45) 61001 Income from continuing operation before tax 3,757,067 44 3,499,673 41 61003 Less: Income tax expenses (Note 6(z)) 821,692 10 655,200 8 Net income 2,935,375 34 2,844,473 33 65000 Other comprehensive income: 65200 Components of other comprehensive income that will not be reclassified to profit or loss 65204 Revaluation gains (losses) on investments in equity instruments measured at fair value through other comprehensive income (1,577,365) (18) 938,945 11 65220 Less: Income tax related to components of other comprehensive income that will not be reclassified to profit or loss (Note 6(z)) - - - - Components of other comprehensive income that will not be reclassified to profit or loss (1,577,365) (18) 938,945 11 65300 Components of other comprehensive income that will be reclassified to profit or loss 65301 Exchange difference on translation 245,714 3 657,712 8 65308 (Losses) gains from investments in debt instruments measured at fair value through other comprehensive income 940,095 11 (996,545) (12) 65320 Less: Income tax related to components of other comprehensive income that will be reclassified to profit or loss (Note 6(z)) 56,184 1 133,287 2 Components of other comprehensive income that will be reclassified to profit or loss 1,129,625 13 (472,120) (6) 65000 Other comprehensive income (447,740) (5) 466,825 5 Total comprehensive income $ 2,487,635 29 3,311,298 38 Earnings per share (in NT dollar) (Note 6(ab)) Basic earnings per share (in NT dollar) $ 0.32 0.31 Diluted earnings per share (in NT dollar) $ 0.32 0.31 See accompanying notes to consolidated financial statements.
Page 7
6 (English Translation of Consolidated Financial Statements Originally Issued in Chinese) TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Consolidated Statements of Changes in Equity For the three months ended March 31, 2025 and 2024 (Expressed in Thousands of New Taiwan Dollars) Attributable to owners of parent Share capital Retained earnings Other equity interest Unrealized gains Common stock Capital surplus Legal reserve Special reserve Unappropriated retained earnings Total Exchange differences on translation of foreign financial statements (losses) on financial assets measured at fair value through other comprehensive income Total Balance at January 1, 2024 $ 82,224,061 815,900 20,028,865 3,954,803 12,114,062 36,097,730 (629,158) 1,613,752 120,122,285 Net income for the three months ended March 31, 2024 - - - - 2,844,473 2,844,473 - - 2,844,473 Other comprehensive income for the three months ended March 31, 2024 - - - - - - 526,170 (59,345) 466,825 Total comprehensive income for the three months ended March 31, 2024 - - - - 2,844,473 2,844,473 526,170 (59,345) 3,311,298 Balance at March 31, 2024 $ 82,224,061 815,900 20,028,865 3,954,803 14,958,535 38,942,203 (102,988) 1,554,407 123,433,583 Balance at January 1, 2025 $ 91,679,828 816,129 23,647,983 185,128 14,767,272 38,600,383 200,058 137,384 131,433,782 Net income for the three months ended March 31, 2025 - - - - 2,935,375 2,935,375 - - 2,935,375 Other comprehensive income for the three months ended March 31, 2025 - - - - - - 196,571 (644,311) (447,740) Total comprehensive income for the three months ended March 31, 2025 - - - - 2,935,375 2,935,375 196,571 (644,311) 2,487,635 Disposal of investments in equity instruments designated at fair value through other comprehensive income - - - - 198,304 198,304 - (198,304) - Balance at March 31, 2025 $ 91,679,828 816,129 23,647,983 185,128 17,900,951 41,734,062 396,629 (705,231) 133,921,417 See accompanying notes to consolidated financial statements.
Page 8
7 (English Translation of Consolidated Financial Statements Originally Issued in Chinese) TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Consolidated Statements of Cash Flows For the three months ended March 31, 2025 and 2024 (Expressed in Thousands of New Taiwan Dollars) For the three months ended March 31, 2025 2024 Cash flows from operating activities: Net income before tax $ 3,757,067 3,499,673 Adjustments: Income and expences items: Depreciation expense 235,672 254,225 Amortization expense 109,296 84,156 Provision for bad debt expense 779,607 1,206,039 Net losses on financial assets or liabilities at fair value through profit or loss 551,754 135,852 Interest expenses 9,213,056 8,621,578 Net gain arising from derecognition of financial assets measured at amortised cost (43) (26) Interest income (14,057,764) (13,138,105) Net change in provisions for guarantee liabilities 9,860 1,527 Net change in other provisions (979) (4,423) Loss on disposal of property and equipment 1,653 1,296 Impairment (reversal of impairment loss) loss on financial assets (3,340) 4,176 Other items 8 (4) Total adjustments to reconcile profit (loss) (3,161,220) (2,833,709) Changes in operating assets and liabilities: Changes in operating assets: Decrease (increase) in due from the central bank and call loans to banks 48,071,968 (5,554,406) Increase in financial assets at fair value through profit or loss (6,077,155) (2,404,366) (Increase) decrease in securities purchased under resell agreements (2,352,211) 5,694,031 Increase in receivables (1,013,711) (1,260,786) Increase in discounts and loans (27,082,196) (1,527,296) (Increase) decrease in other financial assets (5,717) 1,811 Decrease in other assets 1,537,275 1,374,731 Total changes in operating assets 13,078,253 (3,676,281) Changes in operating liabilities: Decrease in deposits from the central bank and banks (8,726,023) (35,014,834) (Decrease) increase in financial liabilities at fair value through profit or loss (17,773) 266,457 Increase in notes and bonds issued under repurchase agreement 3,872,965 137,212 (Decrease) increase in payable (413,744) 1,330,900 (Decrease) increase in deposits and remittances (26,086,316) 45,014,463 (Decrease) increase in other financial liabilities (328,541) 62,973 Increase (decrease) in provisions for employee benefits 5,700 (300,241) Total changes in operating liabilities (31,693,732) 11,496,930 Total changes in operating assets and liabilities (18,615,479) 7,820,649 Total adjustments (21,776,699) 4,986,940 Cash (outflow) inflow generated from operations (18,019,632) 8,486,613 Interest received 14,167,053 13,115,600 Interest paid (7,895,539) (7,291,830) Income taxes paid (237,608) (188,610) Net Cash flows (used in) from operating activities (11,985,726) 14,121,773 Cash flows from (used in) investing activities: Acquisition of financial assets at fair value through other comprehensive income (9,590,554) (16,153,913) Acquisition of financial assets at amortised cost (123,294,161) (150,988,716) Proceeds from repayments of financial assets at amortised cost 136,149,296 155,700,509 Acquisition of property and equipment (106,274) (82,733) Proceeds from disposal of property and equipment 21 52 Decrease in refundable deposits 320,241 89,016 Acquisition of intangible assets (136,009) (188,297) Net cash flows from (used in) investing activities 3,342,560 (11,624,082) Cash flows (used in) from financing activities: Increase in due to the central bank and banks 254,337 79,082 Repayments of bank notes payable (250,000) (390,000) (Decrease) increase in guarantee deposits received (1,111,117) 870,558 Payment of lease liabilities (123,161) (123,195) Decrease in other liabilities (48,134) (3,054,122) Net cash flows used in financing activities (1,278,075) (2,617,677) Effect of exchange rate changes on cash and cash equivalents 23,805 22,872 Net decrease in cash and cash equivalents (9,897,436) (97,114) Cash and cash equivalents at beginning of period 35,663,893 34,356,881 Cash and cash equivalents at end of period $ 25,766,457 34,259,767 See accompanying notes to consolidated financial statements.
Page 9
8 (English Translation of Consolidated Financial Statements Originally Issued in Chinese) TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements March 31, 2025 and 2024 (Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified) (1) Company history TAIWAN BUSINESS BANK, LTD. ( the “B ank” ) was formerly a general savings union known as “Taiwan Mutual Financing Bank” or “Tai-Shio Mutual Financing Bank” when it was established in 1915. After several mergers and acquisitions, it was renamed as Taiwan Business Bank, Ltd. in order to finance and provide banking assistance to small and medium-size businesses on July 1, 1976. The Bank’s major lines of business are the following: (a) As prescribed by the Banking Law, provides professional services tailored to the needs of small and medium-size businesses; (b) Trust and securities brokerage businesses as approved by the relevant authority; (c) International banking business; and (d) Other relevant businesses as authorized by the relevant authority in-charge. As of March 31, 2025, the Bank not only sets up the business dept., international dept., securities dept. and trust dept. under head office but also has 124 domestic branches, 1 offshore banking unit, 8 overseas branches, 1 oversea representative office and 16 securities brokerage locations. The Bank became listed on the Taiwan Stock Exchange on January 3, 1998. Under the ”S tatute for Privatization of State Enterprises” a nd upon the approval of Taiwan Province Government, the shares of the Bank owned by the provincial government were sold to the public. In line with privatization of the three other major Taiwan province government owned run commercial banks, the Bank had completed its own privatization on January 22, 1998. As of March 31, 2025, December 31 and March 31, 2024, the Bank and subsidiaries has 5,753, 5,740 and 5,693 employees, respectively. (2) Approval date and procedures of the consolidated financial statements: The consolidated financial statements were authorized for issuance by the board of directors on May 7, 2025. (3) New standards, amendments and interpretations adopted: (a) The impact of the IFRS Accounting Standards endorsed by the Financial Supervisory Commission, R.O.C. which have already been adopted. The Bank and subsidiaries has initially adopted the following new amendments, which do not have a significant impact on its consolidated financial statements, from January 1, 2025: ● Amendments to IAS21 “Lack of Exchangeability” (Continued)
Page 10
9 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (b) The impact of IFRS Accounting Standards endorsed by the FSC but not yet effective The Bank’s anticipated adoption of the new amendments beginning on January 1, 2026, are expected to have the following impacts: (i) Amendments to IFRS 9 and IFRS 7 “Amendments to the Classification and Measurement of Financial Instruments” r egarding the application guidance requirements for Section 4.1 of IFRS 9 and the related disclosure requirements of IFRS 7 For financial assets with contingent features that are not related directly to a change in basic lending risks or costs (e.g. where the cash flows change depending on whether the borrower meets an ESG target specified in the loan contract), the amendments introduce an additional test to assess the “s olely payments of principal and interest on the principal amount outstanding” c riterion. In accordance with the Q&A published by the FSC on February 26, 2025, the Bank and subsidiaries did not elect to early adopt the application guidance in Section 4.1 of the amendments on January 1, 2025. The Bank a nd subsidiaries i nvested in ESG-linked bonds and may need to change the classification due to the above amendments. The Bank a nd subsidiaries i s continually evaluating the impact of its initial adoption of the amendments on its consolidated financial statements. (c) The impact of IFRS Accounting Standards issued by IASB but not yet endorsed by the FSC The following new and amended standards, which may be relevant to the Bank a nd subsidiaries, have been issued by the International Accounting Standards Board (IASB), but have yet to be endorsed by the FSC Standards or Interpretations Content of amendment Effective date per IASB IFRS 18 “Presentation and Disclosure in Financial Statements” The new standard introduces three categories of income and expenses, two income statement subtotals and one single note on management performance measures. The three amendments, combined with enhanced guidance on how to disaggregate information, set the stage for better and more consistent information for users, and will affect all the entities. January 1, 2027 (Continued)
Page 11
10 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements Standards or Interpretations Content of amendment Effective date per IASB ● A more structured income statement: under current standards, companies use different formats to present their results, making it difficult for investors to compare financial performance across companies. The new standard promotes a more structured income statement, introducing a newly defined ‘o perating profit’ subtotal and a requirement for all income and expenses to be allocated between three new distinct categories based on a company’ s main business activities. ● Management performance measures (MPMs): the new standard introduces a definition for management performance measures, and requires companies to explain in a single note to the financial statements why the measure provides useful information, how it is calculated and reconcile it to an amount determined under IFRS Accounting Standards. ● Greater disaggregation of information: the new standard includes enhanced guidance on how companies group information in the financial statements. This includes guidance on whether information is included in the primary financial statements or is further disaggregated in the notes. (Continued)
Page 12
11 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements Standards or Interpretations Content of amendment Effective date per IASB Amendments to IFRS 9 and IFRS 7 “Amendments to the Classification and Measurement of Financial Instruments” regarding the application guidance requirements for Sections 3.1 and 3.3 of IFRS 9 and the related disclosure requirements of IFRS 7 The amendments set out: The company generally derecognises its trade payable on the settlement date. However, the amendments provide an exception for the derecognition of financial liabilities. The exception allows the company to derecognise its trade payable before the settlement date, potentially, when it uses an electronic payment system that meets all of the following criteria: ● no practical ability to withdraw, stop or cancel the payment instruction; ● no practical ability to access the cash to be used for settlement as a result of the payment instruction; and ● the settlement risk associated with the electronic payment system is insignificant. January 1, 2026 The Bank a nd subsidiaries i s evaluating the impact on its consolidated financial position and consolidated financial performance upon the initial adoption of the abovementioned standards or interpretations. The results thereof will be disclosed when the Bank and subsidiaries completes its evaluation. The Bank and subsidiaries does not expect the following other new and amended standards, which have yet to be endorsed by the FSC, to have a significant impact on its consolidated financial statements: ● Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets Between an Investor and Its Associate or Joint Venture” ● IFRS 17 “ Insurance Contracts” and amendments to IFRS 17 “ Insurance Contracts” ● IFRS 19 “Subsidiaries without Public Accountability: Disclosures” ● Annual Improvements to IFRS Accounting Standards—Volume 11 ● Amendments to IFRS 9 and IFRS 7 “Contracts Referencing Nature-dependent Electricity” (Continued)
Page 13
12 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (4) Summary of material accounting policies: (a) Statement of compliance These consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Public Held Banks, the Regulations Governing the preparation of Financial Reports by securities Firms (hereinafter referred to as "the Regulation"), and the preparation and guidelines of IAS 34 "Interim Financial Reporting" which are endorsed and issued into effect by FSC and do not include all of the information required by the Regulations and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations and SIC Interpretations endorsed and issued into effect by the Financial Supervisory Commission (hereinafter referred to IFRS Accounting Standards endorsed by the FSC) for a complete set of annual consolidated financial statements. Except as described below, the significant accounting policies adopted in the accompanying consolidated financial statements are the same as those in the consolidated financial statements for the year ended December 31, 2024. Please refer to Note 4 of the consolidated financial statements as of and for the year ended December 31, 2024 for the detail disclosures of significant accounting policies. (b) Basis of consolidation List of subsidiaries in the consolidated financial statements: Shareholding (Holding %) Established location Main business scope March 31, 2025 December 31, 2024 March 31, 2024 TBB International Leasing Co., Ltd. Taiwan Leasing business 100 100 100 Taiwan Business Bank International Leasing Co., Ltd. China Leasing business 100 100 100 TBB (Cambodia) Microfinance Institution Plc Cambodia Financial company 100 100 100 TBB Venture Capital Co., Ltd. Taiwan Investing business 100 100 100 TBB Consulting Co., Ltd. Taiwan Consulting business 100 100 100 (c) Income taxes The income tax expenses have been prepared and disclosed in accordance with paragraph B12 of IAS 34 “Interim Financial Reporting”. Income tax expenses for the period are best estimated by multiplying pre-tax income for the interim reporting period by the effective annual tax rate as forecasted by the management. Income tax expenses for the period and deferred income tax expenses are apportioned based on the proportion of expected income tax expenses for the year and deferred income tax expense. Temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases shall be m easured based on the tax rates that have been enacted or substantively enacted at the time of the asset or liability is recovered or settled, and be recognized directly in (Continued)
Page 14
13 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements equity or other comprehensive income as tax expense. (5) Significant accounting assumptions and judgments, and major sources of estimation uncertainty: The preparation of the consolidated financial statements in conformity with the Regulations and IFRS Accounting Standards (in accordance with IAS 34 "Interim Financial Reporting" and endorsed by the FSC) requires management to make judgments, and estimates about the future, including climate-related risks and opportunities, that affect the application of the accounting policies and the reported amount of assets, liabilities, income, and expenses. Actual results may differ from these estimates. Except for the following, the preparation of the consolidated interim financial statements, estimates and underlying assumptions are reviewed on an ongoing basis in conformity with the consolidated financial statements for the year ended December 31, 2024. For related information, please refer to note 5 of the consolidated financial statements for the year ended December 31, 2024. (6) Explanation of significant accounts: (a) Cash and cash equivalents March 31, 2025 December 31, 2024 March 31, 2024 Petty cash and revolving funds $ 11,086,345 16,244,131 11,447,920 Foreign currencies on hand 979,434 1,028,938 948,430 Checks for clearing 1,841,627 2,406,858 10,658,675 Due from other banks 11,859,051 15,983,966 11,204,742 Total $ 25,766,457 35,663,893 34,259,767 (b) Due from the Central Bank and call loans to banks March 31, 2025 December 31, 2024 March 31, 2024 Due from the Central Bank $ 77,498,983 117,075,985 87,227,234 Deposits transferred to Central Bank 41,423 49,318 46,924 Call loans to banks 42,140,314 50,630,445 38,212,474 Trust fund indemnity reserve deposited 140,000 120,000 120,000 Securities serving as trust fund indemnity reserve deposited (140,000) (120,000) (120,000) Total $ 119,680,720 167,755,748 125,486,632 As of March 31, 2025, December 31 and March 31, 2024, in accordance with the Banking Law and the Central Bank Law, the required reserve deposited by the Bank with the Central Bank amounted to $76,846,278, $116,625,097 and $86,719,753 of which $57,304,573, $58,351,432 and $53,014,664 respectively, were restricted and such restriction may only be lifted when the required reserve is adjusted to a lower amount. (Continued)
Page 15
14 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements As of March 31, 2025, December 31 a nd March 31, 2024, the Bank’ s subsidiaries and overseas branches, in compliance with the Central Bank’ s reserve requirement set by local authorities, deposited $326,346, $129,995 and $138,846 and in reserve, of which $70,441, $63,880 and $41,624 were restricted. Effective December 2000, in accordance with the amended “Regulations Governing the Audit and Adjustment of Deposit and Other Liability Reserves of Financial Institutions”, the Bank provides the required additional reserve on foreign currency deposits. As of March 31, 2025, December 31 and March 31, 2024, the required reserve with the Central Bank amounted to $326,359, $320,893 and $368,635 respectively, and its use was unrestricted. As of March 31, 2025, December 31 and March 31, 2024, deposits transferred to the Central Bank collected from the armed forces, prisons, and other treasury deposits were restricted. Effective January 20, 2001, in accordance with the requirement of the Central Bank of China, the Bank complies with Clause 34 of the Trust Law to treat the discretionary trust of investments in overseas marketable securities as a default loss reserve. As of March 31, 2025, December 31 and March 31, 2024, the Bank deposited marketable securities of $140,000, $120,000 and $120,000 as trust fund reserves. (c) Financial assets at fair value through profit or loss March 31, 2025 December 31, 2024 March 31, 2024 Financial assets at fair value through profit or loss, mandatorily measured at fair value : Derivative instruments not used for hedging: Foreign exchange forward contracts $ 6,873 10,004 4,039 Currency swap contracts 2,271,459 2,882,743 3,135,558 Foreign currency options-buy 9,559 11,352 9,916 Stock index futures 28,583 27,320 26,930 Interest rate swap 139,168 - 1,029 Non-derivative financial assets Commercial paper 84,104,039 78,181,124 70,134,417 Listed stocks 904,469 794,532 1,337,270 Unlisted stocks 528,305 493,166 407,177 Beneficiary certificates 213,235 205,544 368,067 Financial debentures 200,000 200,000 200,000 Total $ 88,405,690 82,805,785 75,624,403 (Continued)
Page 16
15 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements Derivative financial instruments are used for hedging foreign exchange risk and interest rate risk arising from operating, financing and investing activities. The Bank and subsidiaries held derivative financial instruments which did not apply to hedge accounting are as follows (reported as financial assets mandatorily measured at fair value through profit or loss and financial liabilities held for trading) March 31, 2025 December 31, 2024 March 31, 2024 Currency swaps contract $ 210,027,806 212,126,990 216,300,376 Interest rate swaps contract 22,023,757 12,985,786 12,735,781 Option contract - buy 1,726,660 1,229,438 2,272,355 Option contract - sell 1,726,660 1,229,438 2,272,355 Forward foreign exchange contract 1,725,009 1,472,936 1,707,896 (d) Securities purchased under resell agreements March 31, 2025 December 31, 2024 March 31, 2024 Securities under resell agreements $ 12,604,576 10,252,365 1,416,454 Face amount $ 12,644,800 10,287,300 1,420,000 Resell period 2025.04.01~2025.04.18 2025.01.06~2025.01.17 2024.04.02~2024.04.16 Range of resell interest rate 1.62%~1.64% 1.64%~1.65% 1.51%~1.52% Resell price $ 12,617,764 10,259,976 1,417,320 (Continued)
Page 17
16 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (e) Receivables, net March 31, 2025 December 31, 2024 March 31, 2024 Interest receivable $ 5,951,084 6,061,292 5,493,235 Acceptances receivable 988,340 1,245,377 875,634 Accrued income 656,046 384,262 589,835 Accounts receivable 1,182,703 1,211,887 2,156,067 Spot exchange receivable-foreign currencies 10,241 27,414 9,917 Refinancing guaranty deposits - - 2,174 Guaranteed proceeds receivable from refinacing - - 2,400 Credit cards accounts receivable 1,145,833 1,283,650 1,054,250 Receivable price of securities purchased for customers 1,305,379 499,128 182,810 Settlement price - - 445,137 Installment receivables and leases 2,557,380 2,268,953 2,048,645 Other receivables 419,809 331,349 438,276 Sub-total 14,216,815 13,313,312 13,298,380 Less: Allowance for bad debts (138,468) (133,030) (122,490) Total $ 14,078,347 13,180,282 13,175,890 The outstanding contract amount of financial assets that have been written off and still have recourse as of March 31, 2025, December 31 a nd March 31, 2024 w ere $86,615,226, $85,862,421 a nd $85,701,288 respectively. The change in allowance for bad debts was as follows: For the three months ended March 31, 2025 2024 Beginning balance $ 133,030 121,512 Provision (reversal) 4,692 (507) Foreign exchange 746 1,485 Ending balance $ 138,468 122,490 (Continued)
Page 18
17 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (f) Discounts and loans, net March 31, 2025 December 31, 2024 March 31, 2024 Import/export bills negotiated $ 140,442 220,924 98,260 Bills and notes discounted 686,218 634,680 335,505 Overdrafts - 19,228 15,856 Secured overdrafts 2,075,614 835,678 1,187,658 Short-term loans 186,882,522 180,131,363 163,138,471 Short-term secured loans 229,604,192 233,140,541 220,110,480 Margin loans receivable 3,867,494 4,072,823 3,287,335 Medium-term loans 219,422,516 219,030,813 205,754,889 Medium-term secured loans 329,848,492 329,201,296 321,503,883 Long-term loans 41,831,375 41,693,266 37,750,741 Long-term secured loans 651,870,771 630,763,210 557,010,243 Overdue loans 1,301,651 1,440,665 1,506,084 Sub-total 1,667,531,287 1,641,184,487 1,511,699,405 Less: Adjustment of discount and premium (272,251) (273,170) (279,676) Less: Allowance for bad debts (21,930,801) (21,874,983) (19,796,975) Total $ 1,645,328,235 1,619,036,334 1,491,622,754 The change in allowance for bad debts was as follows: For the three months ended March 31, 2025 2024 Beginning balance $ 21,874,983 19,602,842 Provision 776,650 1,212,480 Transfer out (7,390) (3,781) Write-off (1,702,205) (1,477,187) Write-off recovered 966,809 438,976 Foreign exchange 21,954 23,645 Ending balance $ 21,930,801 19,796,975 (Continued)
Page 19
18 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (g) Financial asset at fair value through other comprehensive income March 31, 2025 December 31, 2024 March 31, 2024 Investment in debt instruments measured at fair value through other comprehensive income： Government bonds $ 54,329,837 55,187,459 59,409,499 Corporate bonds 80,152,596 75,901,236 81,134,308 Financial debentures 35,772,040 35,671,677 37,470,827 Negotiable certificates of deposit 668,357 652,513 635,402 Subtotal 170,922,830 167,412,885 178,650,036 Investment in equity instruments measured at fair value through other comprehensive income： Listed stocks 14,550,079 10,012,278 20,802,700 Unlisted stocks 8,399,376 7,476,886 5,914,909 Real Estate Investment Trust 108,548 118,912 141,258 Subtotal 23,058,003 17,608,076 26,858,867 Total $ 193,980,833 185,020,961 205,508,903 (i) Investment in debt instruments measured at fair value through other comprehensive income The Bank and subsidiaries assessed that the above bond investments were held within a business model whose objective was achieved by both collecting contractual cash flows and selling financial assets. The bond investments have been classified as the financial asset measured at fair value through other comprehensive income. Some of the investment in debt instruments measured at fair value through other comprehensive income are used as resell condition. Please refer to Note 6 (q) for more details. (ii) Investment in equity instruments measured at fair value through other comprehensive income The Bank and subsidiaries designated the investments shown above as equity securities as at fair value through other comprehensive income because these equity securities represent those investments intending to hold for long-term for strategic purpose. The Bank and subsidiaries designated the investments shown above as equity instrument as at fair value through other comprehensive income; therefore, the Bank a nd subsidiaries recognized $147,190 and $78,150, respectively as dividend revenue for the three months ended March 31, 2025 and 2024. In which, the disposal equity instruments were recognized $27,992 and $0 as dividend revenue for the three months ended March 31, 2025 and 2024. (Continued)
Page 20
19 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements The Bank and subsidiaries sold the investments which were measured as at fair value through other comprehensive income due to assets allocation. The fair value of disposed investments are $1,490,225 and $0. And gains on disposal are $198,304 and $0 for the three months ended March 31, 2025 and 2024. Therefore, accumulated gains on disposal were transferred from other equity to retained earnings. (iii) Please refer to Note 6(ao) for the credit risk (including the impairment in debt instruments) and market risk information.) (iv) Reserve for provisional seizure by the court: March 31, 2025 December 31, 2024 March 31, 2024 Court provisional seizure $ 336,800 226,900 - (v) The changes in the allowance for credit losses attribute to the FVOCI were as follows: For the three months ended March 31, 2025 2024 Beginning balance $ 87,728 100,349 Provision (reversal) (6,861) 2,586 Foreign exchange 272 748 Ending balance $ 81,139 103,683 (h) Investment in debt instruments at amortized cost March 31, 2025 December 31, 2024 March 31, 2024 Certificates of deposit with the Central Bank $ 145,835,000 154,215,000 176,135,000 Government bonds 19,251,377 25,405,650 30,572,801 Corporate bonds 31,766,064 31,241,169 23,131,456 Financial debentures 20,537,470 19,384,065 18,357,527 Negotiable certificates of deposit 69,731 68,849 67,211 Subtotal 217,459,642 230,314,733 248,263,995 Less: Accumulated impairment (75,943) (72,325) (82,403) Total $ 217,383,699 230,242,408 248,181,592 The Bank and subsidiaries assessed that these financial assets were held to collect the contractual cash flows, which consisted solely of payments of principal and interest on principal amount outstanding. Therefore, these investments were classified as financial assets measured at amortized cost. (Continued)
Page 21
20 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (i) Please refer to Note 6(ao) for credit risk. (ii) The pledged assets provided by the above investment in debt instruments at amortized cost were shown follows: March 31, 2025 December 31, 2024 March 31, 2024 Reserve for provisional seizure by the court, international card payment reserve, trust claim reserve and operating guaranty funds $ 799,000 850,600 1,153,200 Overseas branches required reserve of overdraft guarantee 69,731 68,849 67,211 Daylight overdraft guarantee 2,000,000 2,000,000 2,000,000 Guarantee for borrowing US dollars 29,000,000 29,000,000 29,000,000 Guarantee for borrowing JPY dollars 200,000 200,000 200,000 Total $ 32,068,731 32,119,449 32,420,411 (iii) The changes in the allowance for credit losses attribute to investment in debt instruments at amortized cost were as follows: For the three months ended March 31, 2025 2024 Beginning balance $ 72,325 80,620 Provision 3,521 1,590 Foreign exchange 97 193 Ending balance $ 75,943 82,403 (iv) Disposal gain (loss) on disposal investment in assets at amortized cost： For the three months ended March 31, 2025 The carrying amount at the date of derecognition Gain (Loss) on disposal Corporate bonds $ 4,118 43 For the three months ended March 31, 2024 The carrying amount at the date of derecognition Gain (Loss) on disposal Corporate bonds $ 2,371 26 For the three months ended March 31, 2025 and 2024, it is due to the advanced redemption of the issuer. (Continued)
Page 22
21 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (i) Investments accounted for using equity method (i) Associates The Bank and subsidiaries had significant influence on Media Talk Consultants Co., Ltd. by investing 2 million dollars on December 22, 2021 and holding 20% equity on it. In addition, since Media Fund 1, which was planned to be raised, was not as well funded as expected and the accumulated losses of Media Talk Consultants Co., Ltd. had exceeded 70% of the paid-in capital at the end of 2022, it has ceased its operation with effect from May 1, 2023, after prudent assessment. (ii) Guarantee The Bank a nd subsidiaries d id not provide any investments accounted for using the equity method as collateral for its loans. (j) Other financial assets, net March 31, 2025 December 31, 2024 March 31, 2024 Overdue receivable $ 20,536 15,380 18,261 Less: Allowance for bad debts, overdue receivable (10,613) (8,543) (10,721) Total $ 9,923 6,837 7,540 The change in allowance for bad debts was as follows: For the three months ended March 31, 2025 2024 Beginning balance $ 8,543 11,490 Reversal (4,759) (4,905) Transfer in 7,390 3,781 Write-off (5,173) (3,959) Written-off recovered 4,612 4,314 Ending balance $ 10,613 10,721 (Continued)
Page 23
22 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (k) Property and equipment, net March 31, 2025 Cost Revaluation increment Accumulated depreciation Accumulated impairment Total Land $ 6,746,952 2,984,621 - 14,031 9,717,542 Buildings 8,258,775 31,184 5,237,630 14,754 3,037,575 Machinery and equipment 2,983,150 - 2,380,967 - 602,183 Transportation equipment 269,367 - 233,326 - 36,041 Miscellaneous equipment 707,345 - 577,009 - 130,336 Leasehold improvements 205,043 - 142,641 - 62,402 Construction in progress 3,636 - - - 3,636 Prepayment for equipment 262,788 - - - 262,788 Total $ 19,437,056 3,015,805 8,571,573 28,785 13,852,503 December 31, 2024 Cost Revaluation increment Accumulated depreciation Accumulated impairment Total Land $ 6,746,952 2,984,621 - 14,031 9,717,542 Buildings 8,241,481 31,184 5,185,589 14,754 3,072,322 Machinery and equipment 3,018,119 - 2,385,703 - 632,416 Transportation equipment 271,903 - 235,262 - 36,641 Miscellaneous equipment 708,017 - 574,736 - 133,281 Leasehold improvements 204,009 - 133,380 - 70,629 Construction in progress 1,812 - - - 1,812 Prepayment for equipment 219,165 - - - 219,165 Total $ 19,411,458 3,015,805 8,514,670 28,785 13,883,808 March 31, 2024 Cost Revaluation increment Accumulated depreciation Accumulated impairment Total Land $ 6,746,952 2,984,621 - 14,031 9,717,542 Buildings 8,174,482 31,184 5,027,242 14,754 3,163,670 Machinery and equipment 2,861,641 - 2,216,143 - 645,498 Transportation equipment 264,023 - 227,858 - 36,165 Miscellaneous equipment 669,183 - 564,484 - 104,699 Leasehold improvements 200,448 - 124,679 - 75,769 Construction in progress 32,385 - - - 32,385 Prepayment for equipment 186,892 - - - 186,892 Total $ 19,136,006 3,015,805 8,160,406 28,785 13,962,620 (Continued)
Page 24
23 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements Change of cost January 1, 2025 Increase Decrease Foreign Exchange March 31, 2025 Land $ 9,731,573 - - - 9,731,573 Buildings 8,272,665 17,294 - - 8,289,959 Machinery and equipment 3,018,119 25,370 61,611 1,272 2,983,150 Transportation equipment 271,903 2,340 5,041 165 269,367 Miscellaneous equipment 708,017 5,677 7,227 878 707,345 Leasehold improvements 204,009 - 812 1,846 205,043 Construction in progress 1,812 11,232 9,408 - 3,636 Prepayment for equipment 219,165 53,769 10,156 10 262,788 Total $ 22,427,263 115,682 94,255 4,171 22,452,861 January 1, 2024 Increase Decrease Foreign Exchange March 31, 2024 Land $ 9,731,573 - - - 9,731,573 Buildings 8,174,873 30,793 - - 8,205,666 Machinery and equipment 2,809,955 84,403 36,128 3,411 2,861,641 Transportation equipment 264,916 1,632 2,838 313 264,023 Miscellaneous equipment 671,418 6,382 9,714 1,097 669,183 Leasehold improvements 203,138 420 4,109 999 200,448 Construction in progress 61,737 233 29,585 - 32,385 Prepayment for equipment 220,805 18,333 52,486 240 186,892 Total $ 22,138,415 142,196 134,860 6,060 22,151,811 Change of depreciation January 1, 2025 Increase Decrease Foreign Exchange March 31, 2025 Buildings $ 5,185,589 52,041 - - 5,237,630 Machinery and equipment 2,385,703 54,180 60,030 1,114 2,380,967 Transportation equipment 235,262 2,911 4,986 139 233,326 Miscellaneous equipment 574,736 8,704 7,189 758 577,009 Leasehold improvements 133,380 8,258 812 1,815 142,641 Total $ 8,514,670 126,094 73,017 3,826 8,571,573 (Continued)
Page 25
24 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements January 1, 2024 Increase Decrease Foreign Exchange March 31, 2024 Buildings $ 4,979,561 47,681 - - 5,027,242 Machinery and equipment 2,170,544 78,661 34,986 1,924 2,216,143 Transportation equipment 227,359 3,048 2,790 241 227,858 Miscellaneous equipment 565,428 7,609 9,556 1,003 564,484 Leasehold improvements 119,859 8,242 4,109 687 124,679 Total $ 8,062,751 145,241 51,441 3,855 8,160,406 Accumulated impairment January 1, 2025 Increase Decrease Foreign Exchange March 31, 2025 Land $ 14,031 - - - 14,031 Buildings 14,754 - - - 14,754 Total $ 28,785 - - - 28,785 January 1, 2024 Increase Decrease Foreign Exchange March 31, 2024 Land $ 14,031 - - - 14,031 Buildings 14,754 - - - 14,754 Total $ 28,785 - - - 28,785 When the Bank a nd subsidiaries f irst adopted IFRSs, it elected to apply the revaluation amount calculated per the regulation of GAAP of R.O.C as the original cost on the transition date. As of March 31, 2025, the appreciation from revaluation of properties all amounted to $3,015,805. Reserve for land incremental tax all amounted to $878,623 ( Recognized under deferred tax liabilities). As of March 31, 2025, December 31 and March 31, 2024, land which was occupied amounted to $348, $5,496 and $5,496 thousands separately. Except for a portion of the land that had been negotiated with the occupant to collect the rent; the Bank intends to participate in land auction, urban renewal or by other appropriate means in due course. (l) Right-of-use assets The Bank a nd subsidiaries l eases many assets including buildings, machinery and transportation equipment. Information about leases on costs, depreciation and impairment for which the Bank and subsidiaries as a lessee is presented below: March 31, 2025 Cost Accumulated depreciation Accumulated impairment Total Buildings $ 2,131,408 982,388 - 1,149,020 Transportation equipment 98,549 47,082 - 51,467 Miscellaneous equipment 13,615 7,077 - 6,538 Total $ 2,243,572 1,036,547 - 1,207,025 (Continued)
Page 26
25 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements December 31, 2024 Cost Accumulated depreciation Accumulated impairment Total Buildings $ 2,122,455 901,041 - 1,221,414 Transportation equipment 92,796 53,951 - 38,845 Miscellaneous equipment 13,271 6,500 - 6,771 Total $ 2,228,522 961,492 - 1,267,030 March 31, 2024 Cost Accumulated depreciation Accumulated impairment Total Buildings $ 2,083,729 881,806 - 1,201,923 Machinery and equipment 26,178 26,174 - 4 Transportation equipment 92,388 39,739 - 52,649 Miscellaneous equipment 13,538 5,566 - 7,972 Total $ 2,215,833 953,285 - 1,262,548 Change of cost January 1, 2025 Increase Decrease Foreign Exchange March 31, 2025 Buildings $ 2,122,455 27,241 22,657 4,369 2,131,408 Transportation equipment 92,796 19,420 13,753 86 98,549 Miscellaneous equipment 13,271 521 177 - 13,615 Total $ 2,228,522 47,182 36,587 4,455 2,243,572 January 1, 2024 Increase Decrease Foreign Exchange March 31, 2024 Buildings $ 2,026,012 60,532 12,900 10,085 2,083,729 Machinery and equipment 26,178 - - - 26,178 Transportation equipment 80,397 15,773 3,963 181 92,388 Miscellaneous equipment 11,484 2,440 386 - 13,538 Total $ 2,144,071 78,745 17,249 10,266 2,215,833 Change of depreciation January 1, 2025 Increase Decrease Foreign Exchange March 31, 2025 Buildings $ 901,041 101,978 22,271 1,640 982,388 Transportation equipment 53,951 6,846 13,769 54 47,082 Miscellaneous equipment 6,500 754 177 - 7,077 Total $ 961,492 109,578 36,217 1,694 1,036,547 (Continued)
Page 27
26 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements January 1, 2024 Increase Decrease Foreign Exchange March 31, 2024 Buildings $ 791,158 101,700 12,498 1,446 881,806 Machinery and equipment 26,174 - - - 26,174 Transportation equipment 37,072 6,550 3,963 80 39,739 Miscellaneous equipment 5,218 734 386 - 5,566 Total $ 859,622 108,984 16,847 1,526 953,285 (m) Other assets, net March 31, 2025 December 31, 2024 March 31, 2024 Office supplies $ 29,911 29,855 29,481 Prepayments 4,295,114 5,143,289 4,339,386 Operating guarantee deposits and settlement fund 34,069 32,866 32,866 Guarantee deposits paid 2,499,188 2,819,429 2,318,781 Deferred assets 303 237 314 Temporary payments and suspense accounts 3,501,561 3,877,085 3,116,067 Proceeds of settlement and margin trading 11,425 100,889 69,612 Other assets 196,682 176,431 176,432 Total $ 10,568,253 12,180,081 10,082,939 (n) Deposits from the Central Bank and banks March 31, 2025 December 31, 2024 March 31, 2024 Deposits from the Central Bank $ 266,244 171,214 162,768 Due from the Central Bank 16,270,450 16,064,650 15,362,400 Deposits from banks 364,555 328,917 1,074,636 Call loans from banks 30,407,543 36,436,700 28,633,447 Overdrafts on banks 563,522 596,856 815,136 Deposits transferred from Chunghwa Post Co., Ltd. 184,099,335 187,099,335 82,099,335 Total $ 231,971,649 240,697,672 128,147,722 (Continued)
Page 28
27 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (o) Due to the Central Bank and banks March 31, 2025 Currency Interest Rate Maturity Date Original Amount NTD Amount Agricultural Bank of Taiwan TWD 1.750%~2.125% 2025.09.27 400,000 $ 400,000 Hua Nan Commercial Bank, Ltd TWD 1.865%~2.047% 2025.12.25 10,000 10,000 Mega International Commercial Bank TWD 1.750%~1.950% 2025.06.16 275,000 275,000 First Commercial Bank TWD 1.875% 2025.06.19 30,000 30,000 Taiwan Cooperative Bank TWD 1.875% 2025.11.08 200,000 200,000 Sunny Commercial Bank (OBU) USD 5.31%~5.61% 2025.07.08 14,800 491,433 Bank of Panshin (OBU) USD 5.96% 2026.03.24 500 16,603 Mega International Commercial Bank USD 6.70% 2026.03.28 500 16,603 First Commercial Bank (Shanghai) CNY 3.75% 2025.05.23 12,750 58,293 Bank SinoPac (Shanghai) CNY 3.65% 2025.03.15 29,500 134,874 Taiwan cooperative Bank (Suzhou) CNY 3.75% 2025.05.16 14,225 65,037 Total $ 1,697,843 Unused credit lines $ 2,166,495 (Continued)
Page 29
28 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements December 31, 2024 Currency Interest Rate Maturity Date Original Amount NTD Amount Agricultural Bank of Taiwan TWD 1.75%~1.95% 2025.09.27 400,000 $ 400,000 Mega International Commercial Bank TWD 1.75%~1.95% 2025.06.16 240,000 240,000 First Commercial Bank TWD 1.875% 2025.03.09~2025.05.15 200,000 200,000 Sunny Commercial Bank (OBU) USD 5.50%~5.80% 2025.07.08 16,100 527,839 First Commercial Bank (Shanghai) CNY 3.75% 2025.05.23 4,375 19,618 Bank SinoPac (Shanghai) CNY 3.65% 2025.03.15 9,500 42,598 Taiwan cooperative Bank (Suzhou)) CNY 3.75% 2025.05.16 3,000 13,452 Total $ 1,443,506 Unused credit lines $ 2,187,905 March 31, 2024 Currency Interest Rate Maturity Date Original Amount NTD Amount Agricultural Bank of Taiwan TWD 1.75% 2024.10.13 385,000 $ 385,000 Hua Nan Commercial Bank, Ltd TWD 1.865% 2025.01.02 60,000 60,000 Mega International Commercial Bank TWD 1.72%~1.75% 2024.06.11~2024.09.15 255,000 255,000 First Commercial Bank TWD 1.825% 2025.01.05 30,000 30,000 Bank of Kaohsiung (OBU) USD 7.13% 2026.06.10 1,400 44,807 Chang Hwa Commercial Bank, Ltd. USD 7.00% 2025.01.03~2025.03.29 2,000 64,010 Sunny Commercial Bank (OBU) USD 6.32%~6.62% 2024.07.05 20,000 640,100 Bank of Panshin USD 6.98% 2024.11.14 1,000 32,005 Total $ 1,510,922 Unused credit lines $ 1,342,341 (Continued)
Page 30
29 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (p) Financial liabilities at fair value through profit or loss March 31, 2025 December 31, 2024 March 31, 2024 Financial liabilities designated at fair value through profit or loss： Financial debentures $ 9,869,915 9,927,272 9,448,139 Financial liabilities held for trading： Derivative instruments not used for hedging Foreign exchange forward contracts 18,599 18,220 17,881 Currency swap contracts 267,109 256,384 174,507 Foreign currency option-sell 9,564 11,360 9,930 Interest rate contract 104,779 - - Total $ 10,269,966 10,213,236 9,650,457 Please refer to 6(t) for the information of financial liabilities designated at fair value through profit and loss. Please refer to 6(c) for the nominal amount of unsettled financial derivatives instrument contracts of March 31, 2025, December 31 and March 31, 2024. (Continued)
Page 31
30 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (q) Notes and bonds issued under repurchase agreement March 31, 2025 Assets Par value Selling Price (Recognized in securities sold under repurchase agreements) Designated repurchase amount Designated repurchase date Financial assets at fair value through other comprehensive income $ 6,362,611 5,884,073 5,925,669 2025/4/1~2026/1/13 December 31, 2024 Assets Par value Selling Price (Recognized in securities sold under repurchase agreements) Designated repurchase amount Designated repurchase date Financial assets at fair value through other comprehensive income $ 2,121,000 2,011,108 2,022,769 2025/1/2~2025/7/10 March 31, 2024 Assets Par value Selling Price (Recognized in securities sold under repurchase agreements) Designated repurchase amount Designated repurchase date Financial assets at fair value through other comprehensive income $ 2,052,892 1,923,927 1,929,790 2024/4/2~2025/1/23 (Continued)
Page 32
31 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (r) Payables March 31, 2025 December 31, 2024 March 31, 2024 Accrued interest $ 9,969,390 8,656,132 8,591,276 Accounts payable 2,522,036 2,619,710 11,150,299 Acceptances 1,009,510 1,261,717 904,366 Accrued expenses 4,385,374 4,233,683 3,592,983 Collection payable 786,169 1,699,210 877,531 Deposits received from securities borrowers 32,147 57,578 19,068 Guaranteed price deposits received from securities borrowers 35,317 74,701 42,064 Spot exchange payable, foreign currencies 11,596 27,110 14,402 Other payables 938,084 965,374 1,186,620 Prices payable of securities sold for customers 122,184 198,804 612,369 Settlement payable 1,172,908 291,302 - Other 7,301 7,181 7,472 Total $ 20,992,016 20,092,502 26,998,450 (s) Deposits and remittances March 31, 2025 December 31, 2024 March 31, 2024 Savings deposits $ 789,508,243 794,086,046 779,066,509 Time deposits 607,923,074 604,049,106 583,414,323 Demand deposits 459,228,220 473,683,397 480,455,471 Checking account deposits 20,871,338 31,275,032 25,123,667 Remittances 224,661 748,271 367,727 Total $ 1,877,755,536 1,903,841,852 1,868,427,697 (Continued)
Page 33
32 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (t) Bank notes payable Terms of Transactions Bond Issued Bonds Issue date Maturity date Interest Rate & repayment Type Amount March 31, 2025 December 31, 2024 March 31, 2024 2015-2B 08/31/2015 08/31/2025 The debentures bear an annual interest rate of 2.10%. Simple interest is accrued and paid annually. The principal will be repaid in full at maturity. Unsecured subordinated long-term financial debentures $ 300,000 300,000 300,000 2017-1B 03/28/2017 03/28/2025 The debentures bear an annual interest rate of 1.60%. Simple interest is accrued and paid annually. The principal will be repaid in full at maturity. 〞 - 250,000 250,000 2017-1C 03/28/2017 03/28/2027 The debentures bear an annual interest rate of 1.85%. Simple interest is accrued and paid annually. The principal will be repaid in full at maturity. 〞 3,360,000 3,360,000 3,360,000 2017-2 05/23/2017 05/23/2027 The debentures bear an annual interest rate of 1.85%. Simple interest is accrued and paid annually. The principal will be repaid in full at maturity. 〞 1,300,000 1,300,000 1,300,000 2018-2 08/20/2018 08/20/2028 The debentures bear an annual interest rate of 1.45%. Simple interest is accrued and paid annually. The principal will be repaid in full at maturity. 〞 5,450,000 5,450,000 5,450,000 2019-1A 03/21/2019 03/21/2026 The debentures bear an annual interest rate of 1.20%. Simple interest is accrued and paid annually. The principal will be repaid in full at maturity. 〞 1,000,000 1,000,000 1,000,000 2019-1B 03/21/2019 03/21/2029 The debentures bear an annual interest rate of 1.30%. Simple interest is accrued and paid annually. The principal will be repaid in full at maturity. 〞 4,800,000 4,800,000 4,800,000 2020-1 03/25/2020 03/25/2030 The debentures bear an annual interest rate of 0.80%. Simple interest is accrued and paid annually. The principal will be repaid in full at maturity. 〞 10,000,000 10,000,000 10,000,000 2020-2 08/13/2020 None The debentures bear an annual interest rate of 1.62%. Simple interest is accrued and paid annually. After calculating the early redeemable bond is in line with the capital adequacy ratio under the consent of the competent authority, the debentures are redeemable per face value plus accrued interest at the interest payment date after five years and a month from the issue date. Perpetual non- accumulated subordinated financial debentures 10,000,000 10,000,000 10,000,000 2021-1 11/17/2021 None The debentures bear an annual interest rate of 1.60%. Simple interest is accrued and paid annually. After calculating the early redeemable bond is in line with the capital adequacy ratio under the consent of the competent authority, the debentures are redeemable per face value plus accrued interest at the interest payment date after five years and a month from the issue date. 〞 8,000,000 8,000,000 8,000,000 2023-1 06/20/2023 06/20/2030 The debentures bear an annual interest rate of 2.10%. Simple interest is accrued and paid annually. The principal will be repaid in full at maturity. Unsecured subordinated long-term financial debentures 8,000,000 8,000,000 8,000,000 2023-2 09/27/2023 09/27/2025 The debentures bear an annual interest rate of 1.47%. Simple interest is accrued and paid annually. The principal will be repaid in full at maturity. Unsecured senior financial debentures 1,000,000 1,000,000 1,000,000 $ 53,210,000 53,460,000 53,460,000 (Continued)
Page 34
33 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements The Bank and subsidiaries issued $120,000 t housand and $180,000 t housand dollar-denominated debentures with call option that can be executed on strike price after five years from the issued date. Without executing call options during the periods of debentures, the principal will be repaid in full at maturity. In order to avoid interest risk, the Bank and subsidiaries buys interest rate swap contracts that are classified as financial assets at fair value through profit or loss. To eliminate the measurement or recognition inconsistency between IRSs and debentures, the Bank and subsidiaries classified the debentures into financial liabilities at fair value through profit or loss. In addition, the Bank and subsidiaries considers that the designated economic relationship is evaluated by the SLMM model method, if the amount of changes in the fair value of the corporate bonds attributable to changes in credit risk is listed in other com prehensive gains and losses, it will trigger or aggravate the accounting ratio of gains and losses. Therefore, the amount is reported in the profit and loss. The debentures are as follows: Terms of Transactions Bond Issued Bonds Issue date Maturity date Interest Rate & repayment Type Amount March 31, 2025 December 31, 2024 March 31, 2024 2017-3 10/27/2017 10/27/2047 The zero-coupon debentures with call options can be executed on strike price after five years from the issued date. Without executing call options during the periods of debentures, the principal will be repaid in full at maturity. Unsecured dollar- denominated senior financial debentures $ 3,984,600 3,934,200 3,840,600 2018-3 09/27/2018 09/27/2048 The zero-coupon debentures with call options can be executed on strike price after five years from the issued date. Without executing call options during the periods of debentures, the principal will be repaid in full at maturity. 〞 5,976,900 5,901,300 5,760,900 Valuation adjustment (91,585) 91,772 (153,361) $ 9,869,915 9,927,272 9,448,139 The increase (decrease) in fair value of the financial liabilities that are attributable to changes in credit risk are as follows: March 31, 2025 December 31, 2024 March 31, 2024 Fair value of corporate bonds $ 9,869,915 9,927,272 9,448,139 Fair value increase not attributable to changes in market conditions that give rise to market risk 699,446 695,984 286,253 Difference between the carrying value and the amount payable at the end of the contract term (91,585) 91,772 (153,361) (Continued)
Page 35
34 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (u) Other financial liabilities March 31, 2025 December 31, 2024 March 31, 2024 Cumulative earnings on appropriated loans fund $ 2,199,591 2,528,132 2,199,375 Cumulative earnings on appropriated loan fund is the project contract signed by National Development Fund, Executive Yuan, Small and Medium Enterprise Administration, Ministry of Economic Affairs, and the Bank. The Bank appropriates the fund to the companies which meet the conditions for loans. The fund is classified as principal account, interest yielding account, loaned account and un-loaned account. These accounts are used for transferring accounts and paying the deposit interests for each project contract. (v) Provisions March 31, 2025 December 31, 2024 March 31, 2024 Provision for guarantee liabilities $ 356,921 347,009 286,064 Provision for loan commitments 63,763 64,682 89,245 Indeterminate indemnity provisions 76,350 76,151 75,563 Provision for employee benefits 1,902,279 1,896,579 2,150,661 Total $ 2,399,313 2,384,421 2,601,533 Change of provision January 1, 2025 Increase Decrease Use Foreign exchange March 31, 2025 Provision for guarantee liabilities $ 347,009 9,860 - - 52 356,921 Provision for loan commitments 64,682 - 1,178 - 259 63,763 Indeterminate indemnity provisions 76,151 199 - - - 76,350 Provision for employee benefits 1,896,579 43,914 28,468 9,746 - 1,902,279 Total $ 2,384,421 53,973 29,646 9,746 311 2,399,313 January 1, 2024 Increase Decrease Use Foreign exchange March 31, 2024 Provision for guarantee liabilities $ 284,412 1,527 - - 125 286,064 Provision for loan commitments 92,689 - 4,614 - 1,170 89,245 Indeterminate indemnity provisions 75,372 191 - - - 75,563 Provision for employee benefits 2,450,902 47,728 341,315 6,654 - 2,150,661 Total $ 2,903,375 49,446 345,929 6,654 1,295 2,601,533 Please refer to Note 6(aa) for the information with regard to provision for employee benefits shown above. (Continued)
Page 36
35 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (w) Lease liabilities Lease liabilities as follows: March 31, 2025 December 31, 2024 March 31, 2024 Less than one year $ 432,676 431,412 403,161 More than one year $ 806,155 875,883 882,615 The amounts recognized in profit or loss were as follows: For the three months ended March 31, 2025 2024 Interest on lease liabilities $ 4,259 4,493 Expenses relating to short-term leases $ 5,566 5,385 Expenses relating to leases of low-value assets, excluding short-term leases of low-value assets $ 4,466 4,461 The amounts recognized in the statement of cash flows were as follows： For the three months ended March 31, 2025 2024 Total cash outflow for leases $ 133,193 133,041 (i) Real estate leases The Bank and subsidiaries leased buildings for its office space. Some leases include an option to renew the lease for an additional period of the same duration after the end of the contract term. Some leases provide for additional rent payments that are based on changes in local price indices. Some also require the Bank and subsidiaries to make payments that relate to the property taxes levied on the lessor and insurance payments made by the lessor; these amounts are generally determined monthly. (ii) Other leases The Bank and subsidiaries leased machinery and transportation equipment with lease terms of one to four years. In some cases, the Bank and subsidiaries has options to purchase the assets at the end of the contract term; in other cases, it guarantees the residual value of the leased assets at the end of the contract term. The Bank and subsidiaries has elected not to recognize right-of-use assets and lease liabilities for leases of low-value assets and short term. (Continued)
Page 37
36 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (x) Other liabilities March 31, 2025 December 31, 2024 March 31, 2024 Advance interest receipts $ 5,985 4,193 4,012 Unearned revenue 412,279 457,394 390,201 Other advance receipts 65,343 71,964 97,184 Guarantee deposits received 1,856,962 2,968,079 2,258,348 Others 44,142 42,332 39,650 Total $ 2,384,711 3,543,962 2,789,395 (y) Equity (i) Common stock As of March 31, 2025, December 31 and March 31, 2024, the Bank’s authorized capital were all $100,000,000, and the paid-in capital for common shares of the Bank were $91,679,828, $91,679,828 and $82,224,061, respectively, with a par value of $10 per share. The outstanding shares were 9,167,983, 9,167,983 and 8,222,406 thousand shares, respectively. Pursuant to the resolution approved by the regular stockholders’ meeting of the Bank on June 21, 2024, the Bank increased its capital from the retained earnings by $9,455,767 and issued 945,577 thousand shares. The capital increase has been approved by the Financial Supervisory Commission and came into effect on July 15, 2024. The base date of the capital increase was August 16, 2024. The Bank has completed the alteration of the registered capital amount on September 5, 2024. (ii) Capital surplus Sources and statement of the Bank's capital surplus were as follows: March 31, 2025 December 31, 2024 March 31, 2024 Additional paid-in capital $ 815,900 815,900 815,900 Donation from shareholders 229 229 - Total $ 816,129 816,129 815,900 According to the R.O.C. Company Act, capital surplus can only be used to offset a deficit, and only the realized capital surplus can be used to increase the common stock or be distributed as cash dividends based on the shareholder's initial number of shares. The aforementioned realized capital surplus includes capital surplus resulting from premium on issuance of capital stock and earnings from donated assets received. According to the Regulations Governing the Offering and Issuance of Securities by Securities Issuers, capital increases by transferring capital surplus in excess of par value should not exceed 10% of the total common stock outstanding. (Continued)
Page 38
37 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (iii) Earnings distribution and dividend policy Under the Bank’s Articles of Incorporation, earnings are used initially to pay for income taxes and restore cumulative losses, and 30% of the remaining earnings is set aside as legal reserve. Special reserve is appropriated from or reversed to earnings per other regulations. The accumulated retained earnings from prior periods are added back as part of the distributable dividends, 30 to 100% of the aggregated retained earnings are available to be distributed and will be resolved by the annual stockholders’ meeting according to the proposal submitted by the Board of Directors. In order to continuously expand scale and increase profitability, the Bank based on the future capital budget plan, adopts residual dividend policy and primarily distributes stock dividend to ensure the capital is sufficient. When there is surplus of capital, the remaining capital can be distributed by cash dividend. Cash dividend shall not be lower than 10% of the total dividend distributed. If the cash dividend distributed per share is lower than NTD$ 0.1, except for otherwise resolved by the shareholder’s meeting, it is not distributed. If there is any situation conforms to that is regulated in article 44 item 1 of the Banking Act of The Republic of China, the Bank is not allowed to distribute earnings by cash or purchase shares outstanding. The maximum cash earning distribution is not allowed to be over 15% of the total paid in capital unless the legal reserve reaches the total paid-in capital. In compliance with the Company Act, if the Company incurs no loss, under the consent of the shareholder’ s meeting, the Company is allowed to distribute new shares or cash dividends from legal reserve to the extent that the legal reserve issued is the surplus exceeding 25% of the paid in capital. Under the Ruling No. 1010012865 issued on April 6, 2012 by the FSC, special reserve is appropriated from retained earnings based on the equivalent amounts of the contra accounts in equity. This special reserve may not be distributed as dividends to stockholders until the balances of these contra accounts in equity are reversed. The Bank resolved the earning distribution for the earnings of 2024 and 2023 in the shareholders' meeting on April 16, 2025 and June 21, 2024, respectively. The dividends distributed were as follows: 2024 2023 Distribution rate (NT dollar) Amount Distribution rate (NT dollar) Amount Dividends to common shareholders Stock dividends $ 0.60 5,500,790 1.15 9,455,767 Cash dividends 0.20 1,833,597 0.20 1,644,481 Total $ 7,334,387 11,100,248 (Continued)
Page 39
38 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (iv) Other equity interest Unrealized gains from financial assets measured at fair value through other comprehensive income Exchange differences on translation of foreign financial statements Total January 1, 2025 $ 137,384 200,058 337,442 Share of other comprehensive income of associates and joint ventures accounted for using equity method 117 16,579 16,696 Investment in financial assets measured at fair value through other comprehensive income -Unrealized amount (644,373) - (644,373) -Realized amount (55) - (55) Foreign currency translation difference－Exchange difference - 179,992 179,992 Disposal of investments in equity instruments measured at fair value through other comprehensive income (198,304) - (198,304) March 31, 2025 $ (705,231) 396,629 (308,602) January 1, 2024 $ 1,613,752 (629,158) 984,594 Share of other comprehensive income of associates and joint ventures accounted for using equity method 117 14,595 14,712 Investment in financial assets measured at fair value through other comprehensive income -Unrealized amount (59,400) - (59,400) -Realized amount (62) - (62) Foreign currency translation difference－Exchange difference - 511,575 511,575 March 31, 2024 $ 1,554,407 (102,988) 1,451,419 (z) Income taxes (i) The income tax expenses were as follows: For the three months ended March 31, 2025 2024 Current tax expense Current period $ 762,996 633,521 Adjustment for prior period - (37,796) 762,996 595,725 Deferred tax expense Origination and reversal of temporary different 58,701 59,209 Changes in unrecognized deductible temporary different (5) 266 Income tax expenses $ 821,692 655,200 (Continued)
Page 40
39 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (ii) The income tax expenses (income) recognized under other comprehensive income were as follows: For the three months ended March 31, 2025 2024 Items that may be reclassified subsequently to profit or loss: Exchange differences on translation of foreign financial statements $ 49,143 131,542 Losses on debt instruments at fair value through other comprehensive income 7,041 1,745 Total $ 56,184 133,287 (iii) Uncertainty over income tax treatments For tax returns that have not yet been assessed, the Bank and subsidiaries has assessed relevant factors, including relevant IFRIC interpretations and historical experience, and believe that sufficient income tax liabilities have been estimated. (iv) The Bank’ s income tax returns through 2019 and 2021 have been assessed by the Tax Authority. (v) The income tax returns of the subsidiaries TBB Venture Capital Co., Ltd., TBB Consulting Co., Ltd., and TBB International Leasing Co., Ltd. have been assessed until 2022 by the Tax Authority. (vi) Global minimum top-up tax The Bank and subsidiaries has applied a temporary mandatory relief from deferred tax accounting for the impacts of the top-up tax and accounts for it as a current tax when it is incurred. Some of the overseas branches have enacted new legislation to implement the global minimum top-up tax, with Australia and Japan effective from January 1, 2024. Preliminary assessments indicate that various tax jurisdictions can pass the global minimum top-up tax safe harbor test, and it is expecetd that don't need to be subject to the top-up tax in relation to its operations. However, as of March 31, 2025, the Bank and subsidiaries has not yet obtained sufficient information to determine the quantitative impact and the taxpayer status brought about by Global minimum top-up tax. (Continued)
Page 41
40 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (aa) Provision for employee benefit As of March 31, 2025, December 31 and March 31, 2024, the balance of provision for employee benefit of the Bank and subsidiaries was as follows: March 31, 2025 December 31, 2024 March 31, 2024 Defined benefit plan $ 819,149 823,657 1,017,528 Employee deposits with favorable rate 1,083,130 1,072,922 1,133,133 $ 1,902,279 1,896,579 2,150,661 (i) Defined benefit plan In 2024, there is apparently no evidence of any material market volatility, material curtailment, reimbursement and settlement or other material one-time events. Therefore, the pension cost for the interim periods are assessed and discovered at the actuarial costs that were determined on December 31, 2024 and 2023 by the Bank and subsidiaries. The Bank and subsidiaries recognized the expenses amounting to $33,705 and $37,059 for the three months ended March 31, 2025 and 2024, respectively. (ii) Defined contribution plan The pension costs incurred from the contributions to the Bureau of the Labor Insurance, oversea branches, and local authorities responsible for the Bank’ s subsidiaries amounted to $53,763 and $49,286 for the three months ended March 31, 2025 and 2024, respectively. (iii) Employee deposit with favorable rate In 2024, there is apparently no evidence of any material market volatility, material curtailment, reimbursement and settlement or other material one-time events. Therefore, the interest cost for the interim periods are assessed and disclosed at the actuarial costs that were determined on December 31, 2024 and 2023 by the Bank and subsidiaries. The Bank a nd subsidiaries r ecognized expenses amounting to $65,701 a nd $65,640 for the three months ended March 31, 2025 and 2024, respectively. (Continued)
Page 42
41 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (ab) Earnings per share For the three months ended March 31, 2025 2024 Net income $ 2,935,375 2,844,473 Weighted average number of common stock shares outstanding (in thousands) (Note 1) 9,167,983 9,167,983 Basic earnings per share (in dollars) (Note 1) $ 0.32 0.31 Dilutive potential common shares (in thousands) (Note 1, 2) 14,498 14,013 Weighted average number of common shares outstanding for diluted earnings per share (in thousands) (Note 1) 9,182,481 9,181,996 Diluted earnings per share (in dollars) (Note 1) $ 0.32 0.31 Note 1: The earnings per share as of March 31, 2024 has applied retrospective adjustments. Note 2: The shares were calculated based on the stock price on the balance sheet date. (ac) Employees and directors' remuneration In accordance with the articles of incorporation the Bank should contribute 1% to 6% of the profit as employee compensation and less than 0.6% as directors' remuneration when there is profit for the year. However, if the Bank has accumulated deficits, the profit should be reserved to offset the deficit. For the three months ended March 31, 2025 and 2024, the estimated employee remuneration were $211,666 a nd $202,970, and the estimated directors' remuneration were $21,167 and $20,297, the estimates are based on pre-tax net profit for the period, before deducting employees and directors' remuneration, multiplied by the elaboration of the Bank's Articles of Association of employees and the directors remuneration ratio, and recognized as operating cost. If the board’s meeting decides to release stock dividends as employees' bonuses, the total number of employees bonus stocks to be issued shall be determined by the common stock closing price of the day before the meeting date. For the years ended December 31, 2024 and 2023, the employees' remuneration was accrued at $901,323 a nd $723,563 a nd the directors' remuneration was accrued at $90,132 a nd $79,237, respectively. The Bank remuneration has not yet benen actually paid in 2024. There is no difference with actual distribution for 2023 remuneration. The information is available at the Market Observation Post System website. (Continued)
Page 43
42 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (ad) Net interest revenue For the three months ended March 31, 2025 2024 Interest income: Loans $ 3,807,005 3,591,268 Secured loans 7,518,343 6,730,181 Bills negotiated 1,091 1,553 Bank overdrafts 8,842 6,262 Discounts 7,630 6,308 Time deposit from Central Bank 461,723 516,806 Due from the Central Bank 160,356 125,175 Call loans to banks 309,616 437,350 Bonds 1,452,578 1,450,428 International credit card 8,716 8,626 Overdue loans 72,823 40,327 Bills 66,578 34,396 Due from Banks 65,180 74,291 Others 117,283 115,134 Subtotal 14,057,764 13,138,105 Interest expense: Deposits 8,415,543 7,798,209 Deposits from banks 115 3,870 Call loans from banks 551,497 575,339 Financial debentures 197,867 200,965 Notes and bond issued under repurchase agreement 13,858 6,165 Others 34,176 37,030 Subtotal 9,213,056 8,621,578 Total $ 4,844,708 4,516,527 (Continued)
Page 44
43 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (ae) Net service fee revenue For the three months ended March 31, 2025 2024 Service fee income: Remittance service fee $ 15,708 16,219 Import bills negotiated service fee 11,038 8,809 Export bills negotiated service fee 2,181 2,263 Letter of credit service fee 1,406 1,327 Certification service fee 550 575 Acceptance service fee 709 584 Trust service fee 166,109 162,005 Guarantee service fee 96,936 73,277 Agency service fee 5,148 6,112 Interbank service fee 32,717 30,162 Card service fee 45,969 50,367 Commission revenue of insurance premium 1,111,824 949,040 Custodian service fee 55,853 48,661 Foreign currency service fee 19,468 18,770 Commission of futures 495 629 Loan service fee 438,672 850,443 Miscellaneous fees 50,821 98,006 Subtotal 2,055,604 2,317,249 Service fee expense: Foreign currency service fee 7,792 7,544 Interbank service fee 56,151 52,823 Trust service fee 869 996 Agency service fee 400 384 IC card service fee 34,508 30,595 Check clearing service fee 1,723 2,148 Remittance service fee 1,959 1,287 Custodian service fee 17,118 15,580 Call loans service fee 471 3,141 Miscellaneous fees 7,030 6,334 Subtotal 128,021 120,832 Total $ 1,927,583 2,196,417 (Continued)
Page 45
44 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (af) Gain (loss) on financial assets or liabilities measured at fair value through profit or loss For the three months ended March 31, 2025 2024 Valuation gains (losses): Financial debentures $ 72,677 (17,311) Listed stocks and emerging stocks (3,686) (15,066) Unlisted stocks 8,639 (34,298) Beneficiary certificates - 10,845 Private fund 2,091 (5,267) Commercial paper (6,085) (11,644) Derivative financial instruments (625,390) (63,111) Subtotal (551,754) (135,852) Disposal gains (losses): Listed stocks and emerging stocks (13,145) 46,580 Commercial paper (2,343) (841) Derivative financial instruments 1,569,961 1,303,792 Subtotal 1,554,473 1,349,531 Dividend revenue 407 94 Interest income 358,129 257,643 Total $ 1,361,255 1,471,416 (ag) Realized gain on financial assets at fair value through other comprehensive income For the three months ended March 31, 2025 2024 Gain on disposal of corporate bonds $ 55 62 Dividend revenue 147,190 78,150 Total $ 147,245 78,212 (Continued)
Page 46
45 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (ah) (Impairment losses on assets) reversal of impairment loss on assets For the three months ended March 31, 2025 2024 Investment in debt instrument measured at fair value through other comprehensive income $ 6,861 (2,586) Investment in debt instrument measured at amortized cost (3,521) (1,590) Total $ 3,340 (4,176) (ai) Net other revenue other than interest income For the three months ended March 31, 2025 2024 Rental revenue of operating assets $ 2,856 2,521 Loss on disposal and retirement of property and equipment (1,653) (1,296) Loss of account error (19) (7) Gold deposit book 1,725 350 Other operating expense (9,876) (6,829) Other miscellaneous income 64,625 124,651 Total $ 57,658 119,390 (aj) Bad debts expenses, commitment and guarantee liability provision For the three months ended March 31, 2025 2024 Discounted and loans $ 776,650 1,212,480 Call loans to banks 3,024 (1,029) Receivables and other financial assets (67) (5,412) Subtotal 779,607 1,206,039 Provisions for guarantee liabilities 9,860 1,527 Provisions for loan commitments (1,178) (4,614) Total $ 788,289 1,202,952 (Continued)
Page 47
46 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (ak) Employee benefits expenses For the three months ended March 31, 2025 2024 Salary expense $ 1,927,872 1,915,788 Labor and health insurance 146,582 139,628 Pension expense 87,327 86,133 Directors' remuneration 24,228 24,244 Other employee benefits 191,106 189,070 Total $ 2,377,115 2,354,863 (al) Depreciation and amortization expense For the three months ended March 31, 2025 2024 Depreciation Property and equipment $ 126,094 145,241 Right-of-use assets 109,578 108,984 Amortization Computer software 109,272 84,142 Other deferred charges 24 14 Total $ 344,968 338,381 (Continued)
Page 48
47 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (am) Other general and administrative expense For the three months ended March 31, 2025 2024 Compensation loss $ 36 3 Utilities fee 20,340 20,398 Postage and telecommunication fee 59,667 60,022 Transportation fee 6,666 7,223 Printing and advertisement fee 115,987 79,764 Repair and maintenance fee 91,376 86,287 Insurance fee 101,288 99,672 Professional service fee 56,972 50,585 Materials and supplies 43,601 25,396 Rental expenses 10,032 9,846 Duties and levies 611,600 566,339 Membership, donation and partaking 161,051 159,992 Storage, packing and processing fee 13,390 12,001 Cash transit fee 17,500 17,170 Others 12,740 19,995 Total $ 1,322,246 1,214,693 (an) Financial Instruments (i) Fair value information 1) General description Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The financial instruments are record as fair value when original recognizing, usually refer to the transaction price in many circumstances. Except some amortized cost financial instruments, the financial instruments are measured in fair value. A quoted market price in an active market provides the most reliable evidence of fair value. If financial instruments are without active market, the Bank and subsidiaries adopted the value technique, refer to Bloomberg, Reuters or the price at which the asset could be bought or sold in a current transaction between willing parties. (Continued)
Page 49
48 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements 2) The definition of fair value hierarchy a) Level 1 The input of this level is quoted prices in active markets for identical financial instruments. The active market is a market in which transactions for the homogenous assets or liabilities take place with sufficient frequency and volume to provide pricing information. The stock of listed company and the beneficiary certificates, government bonds and the derivative financial instruments with public quote inactive market processed by the Bank and subsidiaries belong to Level 1. b) Level 2 The input of this level is other than quoted market prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). The investments with lower trade volume such as government bonds, corporate bonds, financial debentures, convertible corporate bonds and derivative instruments, including financial debentures the Bank and subsidiaries issued are belong to Level 2. c) Level 3 The input is unobservable for the asset or liability in m arket or counterparty prices. Unobservable inputs like: Option pricing model using the historical volatility. Because the historical volatility cannot represent the future volatility expected value of whole market participants. The input parameter used to measure the fair value of this level is not based on data that can be obtained in the market but using a combination of complex market prices to estimate their values. The assets have been categorized as a Level 3, due to their fair market value cannot be directly calculated. The equity instruments with no active market which the Bank and subsidiaries invested are Level 3. (Continued)
Page 50
49 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements 3) Based on fair value measurement a) The fair value hierarchy of information The financial instruments which are record as fair value measure on an ongoing basis, the fair value hierarchy of information were as follows: March 31, 2025 Assets and Liabilities Total Level 1 Level 2 Level 3 Instruments measured at fair value on a recurring basis Non-derivative financial assets and liabilities: Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss, mandatorily measure at fair value Security Investments $ 1,432,774 904,469 - 528,305 Bond Investments 200,000 - 200,000 - Others 84,317,274 - 84,104,039 213,235 Financial assets at fair value through other comprehensive income Security Investments 22,949,455 14,550,079 - 8,399,376 Bond Investments 170,254,473 98,527,200 71,727,273 - Others 776,905 108,548 668,357 - Financial liabilities at fair value through profit or loss Financial liabilities designated at fair value through profit or loss 9,869,915 - 9,869,915 - Derivative financial assets and liabilities Assets: Financial assets at fair value through profit or loss $ 2,455,642 28,583 2,427,059 - Liabilities: Financial liabilities at fair value through profit or loss 400,051 - 400,051 - (Continued)
Page 51
50 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements December 31, 2024 Assets and Liabilities Total Level 1 Level 2 Level 3 Instruments measured at fair value on a recurring basis Non-derivative financial assets and liabilities: Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss, mandatorily measure at fair value Security Investments $ 1,287,698 794,532 - 493,166 Bond Investments 200,000 - 200,000 - Others 78,386,668 - 78,181,124 205,544 Financial assets at fair value through other comprehensive income Security Investments 17,489,164 10,012,278 - 7,476,886 Bond Investments 166,760,372 97,980,180 68,780,192 - Other 771,425 118,912 652,513 - Financial liabilities at fair value through profit or loss Financial liabilities designated at fair value through profit or loss 9,927,272 - 9,927,272 - Derivative financial assets and liabilities Assets: Financial assets at fair value through profit or loss $ 2,931,419 27,320 2,904,099 - Liabilities: Financial liabilities at fair value through profit or loss 285,964 - 285,964 - (Continued)
Page 52
51 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements March 31, 2024 Assets and Liabilities Total Level 1 Level 2 Level 3 Instruments measured at fair value on a recurring basis Non-derivative financial assets and liabilities: Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss, mandatorily measure at fair value Security Investments $ 1,744,447 1,337,270 - 407,177 Bond Investments 200,000 - 200,000 - Others 70,502,484 165,466 70,134,417 202,601 Financial assets at fair value through other comprehensive income Security Investments 26,717,609 20,802,700 - 5,914,909 Bond Investments 178,014,634 107,763,193 70,251,441 - Other 776,660 141,258 635,402 - Financial liabilities at fair value through profit or loss Financial liabilities designated at fair value through profit or loss 9,448,139 - 9,448,139 - Derivative financial assets and liabilities Assets: Financial assets at fair value through profit or loss $ 3,177,472 26,930 3,150,542 - Liabilities: Financial liabilities at fair value through profit or loss 202,318 - 202,318 - b) Valuation techniques used in estimating the fair values of financial instruments If the financial instruments have quoted price in an active market, the quoted price is regarded as its fair value. If the financial instruments of quoted price, which are from the Stock Exchange, Brokers, Pricing service agencies or Government institutions, are timely and frequently, and reflects the actual price, then the financial instruments have a quoted price in an active market. If the above conditions are not fulfilled, the market is inactive. (Continued)
Page 53
52 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements Except for the above financial instruments of quoted price in an active market, there is no quoted price in an active market for the financial asset, its fair value is estimated on the basis of the result of a valuation technique that refers to quoted prices considered the identical financial instrument with same characteristics and essential terms of transaction, Discounted-Cash-Flow model and other valuation techniques including the model using market information to be made of the calculation at the balance sheet date (e.g. Taipei Exchange reference yield curve, Reuters quoted the average commercial paper rate, the Taipei Financial industry call loan rate fixing TAIBOR). The financial asset's fair value is estimated on the basis of the result of a valuation technique, the Bank and subsidiaries adopted that refers to quoted prices provided by financial institutions. Ask (bid) is used to evaluate the selling (buying) position by the Bank and subsidiaries if the quoted price include ask and bid price. If there is not a quoted price for the financial asset, transaction price close to the balance sheet date is the fair value. Fair value of financial derivatives is the amount of cash to be paid or to be received by the Bank and subsidiaries, assuming that the contract will be terminated on the balance sheet date. The Bank and subsidiaries adopts mark-to-model prices which are usually adopted among the banking industry, such as Discounted-Cash-Flow model and Black-Scholes model. The Bank and subsidiaries adopts the price data from Reuters and Bloomberg to calculate the fair value of the holding position. The aforesaid price data is based upon the middle price and used consistently by the Bank. Furthermore, the fair value of the embedded financial derivatives is calculated based upon the quote from the counterparty, and separately calculated in accordance with the contracts. c) Adjustment for fair value i) The restraint of evaluation model and uncertain inputs The estimates of output-based value using the evaluation model, which may not reflect the Bank's all related factors. Therefore, the estimated value of the evaluation model will be appropriately adjusted according to the extra parameters such as model risk or liquidity risk. Information and price parameters used in the evaluation process after careful assessment, and appropriately adjusted according to the current market situation. ii) Credit risk value adjustment The Bank a nd subsidiaries c redit risk value adjustment of OTC transaction derivative instruments can be divided to Credit value adjustments (CVA) and debit value adjustments (DVA). To reflect the fair value of the counterparty or the default, and the Bank and subsidiaries may not be received or paid full market value of trading possibilities. (Continued)
Page 54
53 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements The Bank a nd subsidiaries w ould calculate credit valuation adjustment (CVA) by assessing probability of default (PD) and loss given default (LGD) of the counterparty before multiplying exposure at default (EAD) of the counterparty. On the contrary, debit valuation adjustment (DVA). The Bank a nd subsidiaries a ssesses the probability of default on the assumption of 60%, but at the risk of the nature and circumstances of available data, we may use other loss given default assumptions. d) Transfers between Level 1 and Level 2 There were no transfers between Level 1 and 2 for the three months ended March 31, 2025 and 2024. e) Changes in financial assets which were classified to Level 3 based on fair value measurement Changes of financial assets categorized in Level 3 : For the three months ended March 31, 2025 Valuation profit and loss Increase Decrease Name Beginning balance Recognized in profit or loss Recognized in other comprehensive income Purchase or issue Transfer into Level 3 Sale Disposition or Settlement Transfer out from Level 3 (Note) Ending balance Financial assets at fair value through profit or loss $ 698,710 7,330 - 35,500 - - - 741,540 Investments in equity instruments measured at fair value through other comprehensive income 7,476,886 - (329,068) 1,251,558 - - - 8,399,376 For the three months ended March 31, 2024 Valuation profit and loss Increase Decrease Name Beginning balance Recognized in profit or loss Recognized in other comprehensive income Purchase or issue Transfer into Level 3 Sale Disposition or Settlement Transfer out from Level 3 (Note) Ending balance Financial assets at fair value through profit or loss $ 630,754 (39,564) - 30,750 - - 12,162 609,778 Investments in equity instruments measured at fair value through other comprehensive income 5,825,636 - 89,273 - - - - 5,914,909 Note: The invested stock is registered in the emerging market. Therefore, the measurement of fair value was transferred out from Level 3. (Continued)
Page 55
54 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements f) Profit and loss information of Level 3 Current gain (loss) and other comprehensive income of holding assets are as follow: For the three months ended March 31, 2025 2024 Recognized on profit and loss (reported as unrealized gain (loss) from investments instruments measured at fair value through profit and loss) $ 7,330 (56,059) Recognized on other comprehensive income (reported as unrealized gain (loss) from investments instruments measured at fair value through other comprehensive income) (329,068) 89,273 g) Quantified information of the fair value measurement of significant unobservable inputs (Level 3) The Bank and subsidiaries financial instruments that use Level 3 inputs to measure fair value include financial assets at fair value through profit or loss and financial assets at fair value through other comprehensive income. Without active market quotation, the Bank and subsidiaries takes professional financial information vendors and widely used by market participants for evaluation or counterparty quotation as reference. The unobservable inputs are as follows : March 31, 2025 fair value valuation methods significant unobservable inputs range inter-relationship between significant unobservable inputs and fair value measurement Financial asset at fair value through profit or loss Private fund $ 213,235 assets approach liquidity discount 0.00%~10.00% The higher market liquidity discount, the lower fair value. Unlisted stocks 528,305 market approach liquidity discount 0.00%-40.40% The higher market liquidity discount, the lower fair value. Financial assets at fair value through other comprehensive income Unlisted stocks 8,399,376 market approach assets approach liquidity discount 15.83%-27.48% The higher market liquidity discount, the lower fair value. income approach sustainable growth rate 0.00%-1.53% The higher sustainable growth rate, the higher fair value. income approach cost of equity 11.20%-12.63% The higher rate of cost of equity, the lower fair value. (Continued)
Page 56
55 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements December 31, 2024 fair value valuation methods significant unobservable inputs range inter-relationship between significant unobservable inputs and fair value measurement Financial assets at fair value through profit or loss Private fund $ 205,544 assets approach liquidity discount 0.00%~10.00% The higher market liquidity discount, the lower fair value. Unlisted stocks 493,166 market approach liquidity discount 0.00%~40.40% The higher market liquidity discount, the lower fair value. Financial assets at fair value through other comprehensive income Unlisted stocks 7,476,886 market approach assets approach liquidity discount 0.00%-26.92% The higher market liquidity discount, the lower fair value. income approach sustainable growth rate 0.00%-1.53% The higher sustainable growth rate, the higher fair value. income approach cost of equity 11.14%-12.57% The higher rate of cost of equity, the lower fair value. March 31, 2024 fair value valuation methods significant unobservable inputs range inter-relationship between significant unobservable inputs and fair value measurement Financial assets at fair value through profit or loss Private fund $ 202,601 assets approach liquidity discount 0.00%~10.00% The higher market liquidity discount, the lower fair value. Unlisted stocks 407,177 market approach liquidity discount 0.00%~43.31% The higher market liquidity discount, the lower fair value. Financial assets at fair value through other comprehensive income Unlisted stocks 5,914,909 market approach assets approach liquidity discount 11.70%-29.69% The higher market liquidity discount, the lower fair value. income approach sustainable growth rate 0.00%-1.54% The higher sustainable growth rate, the higher fair value. income approach cost of equity 10.76%-12.40% The higher rate of cost of equity, the lower fair value. (Continued)
Page 57
56 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements h) Sensitivity analysis of reasonably possible alternative assumptions for fair value measurement in Level 3. Valuation techniques used by the Bank and subsidiaries for fair value measurements of financial instruments are appropriate. However, the use of different valuation models or inputs could lead to different outcomes of fair value measurements. The following are the impact on the other comprehensive income if using alternative assumptions and inputs: i) Assets approach/ Market approach The evaluation methods of Level 3 financial instruments of the Bank and subsidiaries are mainly based on the market approach or the assets approach. If the liquidity discount changes by 5% upwards or downwards, the impact on the other comprehensive income is as follows: the effects to the net income and other comprehensive income Favorable changes (-5%) Unfavorable changes (5%) March 31, 2025 Financial assets at fair value through profit or loss Unlisted stocks and private fund $ 39,991 (39,991) Financial assets at fair value through other comprehensive income Unlisted stocks 490,930 (490,930) the effects to the net income and other comprehensive income Favorable changes (-5%) Unfavorable changes (5%) December 31, 2024 Financial assets at fair value through profit or loss Unlisted stocks and private fund $ 42,442 (42,442) Financial assets at fair value through other comprehensive income Unlisted stocks 433,274 (433,274) (Continued)
Page 58
57 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements the effects to the net income and other comprehensive income Favorable changes (-5%) Unfavorable changes (5%) March 31, 2024 Financial assets at fair value through profit or loss Unlisted stocks and private fund $ 37,232 (37,232) Financial assets at fair value through other comprehensive income Unlisted stocks 345,318 (345,318) ii) Income approach Adopting the income approach to evaluate Level 3 financial instruments of the Bank a nd subsidiaries. The evaluation parameters are divided into sustainable growth rate and cost of equity capital. The effects of the two evaluation parameters on the other comprehensive profit and loss are as follows: 1. sustainable growth rate the effects to other comprehensive income Favorable changes (0.3%) Unfavorable changes (-0.3%) March 31, 2025 Financial assets at fair value through other comprehensive income Unlisted stocks $ 3,614 (3,446) the effects to other comprehensive income Favorable changes (0.3%) Unfavorable changes (-0.3%) December 31, 2024 Financial assets at fair value through other comprehensive income Unlisted stocks $ 3,699 (3,531) (Continued)
Page 59
58 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements the effects to other comprehensive income Favorable changes (0.3%) Unfavorable changes (-0.3%) March 31, 2024 Financial assets at fair value through other comprehensive income Unlisted stocks $ 3,107 (2,913) 2. cost of equity the effects to other comprehensive income Favorable changes (-3%) Unfavorable changes (3%) March 31, 2025 Financial assets at fair value through other comprehensive income Unlisted stocks $ 46,585 (24,556) the effects to other comprehensive income Favorable changes (-3%) Unfavorable changes (3%) December 31, 2024 Financial assets at fair value through other comprehensive income Unlisted stocks $ 74,568 (36,659) the effects to other comprehensive income Favorable changes (-3%) Unfavorable changes (3%) March 31, 2024 Financial assets at fair value through other comprehensive income Unlisted stocks $ 65,179 (31,597) (Continued)
Page 60
59 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements The favorable and unfavorable effects represent the changes in fair value, and fair value is based on a variety of unobservable inputs calculated using a valuation technique. The analysis above only reflects the effects of changes in a single input, and it does not include the interrelationships with another input. 4) Not based on fair value measurement a) Fair value information The following chart presents the financial instruments not based on fair value measurement of the Bank and subsidiaries. Except those items, others' fair value is reasonably approximate value, the Bank and subsidiaries does not disclosure their fair value. March 31, 2025 Book value Fair value Debt instruments measured at amortized cost $ 217,383,699 218,056,528 December 31, 2024 Book value Fair value Debt instruments measured at amortized cost $ 230,242,408 230,751,781 March 31, 2024 Book value Fair value Debt instruments measured at amortized cost $ 248,181,592 248,438,196 b) The fair value hierarchy of information March 31, 2025 Assets and Liabilities Total Quoted prices in active markets for identical assets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Debt instruments measured at amortized cost $ 218,056,528 47,162,055 170,894,473 - December 31, 2024 Assets and Liabilities Total Quoted prices in active markets for identical assets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Debt instruments measured at amortized cost $ 230,751,781 53,478,375 177,273,406 - March 31, 2024 Assets and Liabilities Total Quoted prices in active markets for identical assets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Debt instruments measured at amortized cost $ 248,438,196 47,683,823 200,754,373 - (Continued)
Page 61
60 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements c) Valuation techniques Methods and assumptions used by the Bank and subsidiaries for fair value evaluation of financial instruments were as follows: i) Cash and cash equivalents, due from Central Bank and call loans to banks, securities purchased under resell agreements, receivables, overdue receivables, exchange bills negotiated guarantee deposits paid, temporary payments and suspense accounts, proceeds of settlement and credit transaction, deposits from Central Bank and other banks, securities sold under repurchase agreements, payables, other financial liabilities, guarantee deposits received and temporary receipts and suspense accounts: since these instruments have short maturities, the book value is adopted as a reasonable basis in estimating the fair value. ii) Discounts and loans (including non-performing loans): the interest rate of bank loans, dependent on the benchmark interest rate which plus or minus the input value (i.e. motorized interest rate), said market rates, therefore, the book value of financial assets is equivalent to their fair value. Among the case of fixed interest rate, the estimated fair value of long-term loans using the discounted value of its expected cash flows, but this is minority, so the book value of financial assets is equivalent to their fair value. iii) Investment in debt instruments at amortized cost: the quoted price is regarded as its fair value. If there is no quoted price in an active market for the financial asset, its fair value is estimated on the basis of the result of a valuation technique. 1. Central Government Securities (NTD): using the comment of “Bonds a fair price for each of times” from Taipei Exchange. 2. Corporate bonds and bank debentures (NTD): the present value or fair price of Taipei Exchange determined using the future cash flow of yield curve discounting evaluation. iv) Deposits and remittance: to determine the fair value, considered Banking industry characteristics, the market interest rates (i.e. market price) is the fair value. And deposits are mostly due within one year, the carrying amounts is the fair value of reasonable basis. The fixed interest rate of long-term deposits should be estimated by the discounted value of its expected cash flows at fair value, and its maturity date no longer than three years, so its estimated fair value of the carrying amount is considered reasonable. v) Bank debentures payable: The bank debentures payable, issued by the Bank and subsidiaries, whose stated rate was equal the effective rate, using discounted cash flow projections to estimate the fair value, equivalent to its book value. (Continued)
Page 62
61 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (ao) Financial Risk Information (i) General description The goal of the financial risk management of the Bank is to effectively diversify, transfer and avoid risks by taking customer service, financial business operating target, overall risk tolerance and external limitation of laws into consideration and provide benefit to customers, shareholders and employees. The Bank's Financial Risk Management policy is to establish a risk management mechanism in terms of risk identification, risk measurement, risk monitoring, and risk control and to construct the overall risk management system. It i s to facilitate the business model with appropriate risk management and to control the rationality between risks and rewards under the premise of legal capital ratio in order to achieve operating targets and increase the value of the Bank for the shareholders. The scope covers the management of credit risk, market risk, operation risk, banking book interest rate risk, capital liquidity risk, and capital adequacy. (ii) Risk management organization structure 1) Risk Management Committee The chairperson of the Risk Management Committee is appointed by the president. The chairpersons include general manager, deputy general manager of the non-regulatory compliance in head office and department directors of head office (excluding the director of audit department in the Board). This Committee is set up for the purpose of establishing a sound risk management system, strengthening risk management and the implementation of the Bank's risk management and monitoring. The meeting will be held once a month in principle. The meeting can be held by the chairman of the Committee when it necessary. The duties are as follows: a) Conduct Analysis and response project when significant domestic and foreign economic, financial and industrial risk management occur. b) Risk management report of various risk exposure and agenda processing. c) The processing of examination of the risk management relevant policy of the Bank and limitations, management indices and the response project when the risk exceeds the limitations. d) Supervise the Bank and subsidiaries capital adequacy management. e) Conduct or supervise the issues that have to report to Risk Management Committee according to the regulations drawn by the competent authority at home and abroad. f) Conduct or supervise other risk management related issues. Risk Management Department is the assistant unit of the Risk Management Committee. The responsibility of the Risk Management Department is to execute preparing sittings agenda, convening sittings, agenda processing, taking meeting minutes and tracking resolution and regularly report the important resolution and various risk exposure to the board of (executive) directors. (Continued)
Page 63
62 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements 2) Assets and Liabilities Management Committee The chairperson of the Assets and Liabilities Management Committee is the general manager, and the members are formed by the vice assistant general manager and the department heads of deposit, loan, financial transaction, capital deployment and risk management units. The responsibility of the Assets and Liabilities Management Committee is to monitor and manage the banking book interest rate risk and capital liquidity risk and convenes meetings regularly, to approve the analyzing and measurement methods of the capital liquidity risk and banking book interest rate risk exposure, to examine the capital liquidity risk and banking book interest rate risk management policy as well as the relevant limitations and management indices, to receive interest rate risk and capital liquidity risk exposure reports and adjust the assets and liabilities interest rate duration structure and capital maturity structure. 3) Credit Examination Committee The convener of the Credit Examination Committee is the assistant general manager supervising Risk Management Center. The Committee in principle convenes weekly to examine the modification and establishment of the regulations (including main points, measures and procedures) for significant loans, foreign exchange and guarantee cases. 4) Overdue Loans Clearing Committee The convener of the Overdue Loans Clearing Committee is the supervising vice president. The convener holds meetings as needed to discuss measures on reducing non- performing loans and approaches to handle overdue loans. 5) Cyber Security Management Committee The Cyber Security Management Committee is convened by the supervising vice president who oversees the implementation and coordination of the Bank's cyber security policies. The committee holds meetings as needed to examine matters related to cyber security. (iii) Credit risk 1) Source and definition of credit risk Credit risk refers to the default risk resulted from the inability to fulfill the contract obligations due to deteriorating financial status of trade counterparties, pessimistic external economic situation or other factors. The primary source of the credit risk of the Bank is the loan business, such as loans of various terms, guarantees and letters of credit, loan commitments, etc., in addition, other sources of credit risk include call loans from banks, securities investments, derivative financial instrument transactions, etc. (Continued)
Page 64
63 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements 2) Credit risk management policy In order to control the credit risk to a tolerable scope, the Bank continuously conduct below operations: a) Fully understand the credit status and ratings of loan customers and trade counterparties as well as the purposes and payments of loans. b) Prudently evaluates the credit risk status of loan customers and trade counterparties and consider the adequacy of collaterals and guarantees to assess risk and profit. c) Establish credit rating mechanism for loan customers or apply the ratings from outside credit rating institutions as the reference for undertaking credit cases or interest rate determination. d) Modify relevant regulations to control the credit risk to a tolerable extent for the Bank. The credit risk management procedure and measurement methods of the Bank's major business are as follows: a) Credit Business (Including loan commitments and guarantees) The categorization and credit quality rating of credit assets are as follows: i) Categorization of credit assets The credit assets are classified into 5 categories. Except for normal credit assets which are classified as the first category, others are classified, based on the assurance status and the time overdue, as second category (need attention), third category (possible to recover), fourth category (difficult to retrieve) and the fifth category (unable to retrieve). In order to manage creditor's rights, the Bank established “Regulations Governing the Procedures to Evaluate Assets and Deal with Non-performing/Non-accrual Loans” , “R egulations Governing the Reconciliation of Non-performing/Non-accrual Loans” a nd its operating procedure “O perating procedure Governing the Collection of Non-performing/Non-accrual Loans” and “Code of Conduct to Deal With Non-Performing Loans” to serve as the guidelines for dealing with non-performing credit and overdue loans collection. (Continued)
Page 65
64 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements ii) Categorization of credit quality Based on historical default data, the Bank established internal credit rating model and completed internal rating system to serve as a reference to credit risk control. In order to develop an appropriate credit rating model for the Bank to evaluate the credit risk for corporate banking customers and private banking customers, it applied statistical methods, professional expert judgments and relevant customer information to fulfill the requirements. The Bank examined whether the internal credit rating model is in conformity with the actual scenario based on practical default data quarterly and adjusted all parameters to optimize the estimated results. b) Due from other banks and call loans to banks The Bank evaluates the credit status of counterparties before transaction and takes the rating information from domestic and foreign credit rating institutions into consideration to determine various credit risk facilities for the counterparties. c) Debt instrument investments and derivative financial instruments The Bank manages credit risk of debt instruments through credit rating data of external institutions, credit quality of bonds, geographic situations and counterparties’ risk so as to identify credit risk. The financial institutions which the Bank conducts derivative instruments are mostly investment quality and are controlled based on the trade amount (including loans at call). Counterparties which do not have credit rating or which are of low quality shall be examined individually. For counterparties which are general customers, the Bank controls the credit risk exposure based on the derivative instrument risk facilities and conditions approved by general credit procedures. 3) Determining the credit risk has increased significantly since initial recognition At each reporting date, the Bank and subsidiaries shall assess the change in the risk of a default occurring over the expected life of the various credit assets and financial assets to determine whether the credit risk has increased significantly since initial recognition. To make that assessment, the Bank and subsidiaries considers reasonable and supportable information (including forward-looking information) that is indicative of significant increases in credit risk since initial recognition. The main considerations include: a) credit assets i) The borrowers failed to pay the principal and interest overdue for more than 30 days, less than 90 days; (Continued)
Page 66
65 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements ii) When the Bank and subsidiaries conduct review or follow-up review of the relevant management procedures after loan, it knows that the financial report of the borrowers have been issued by the accountant and it has issued opinions of the significant doubt on the ability to continue as a going concern; iii) The deposits and assets of borrowers are compulsorily executed, besides, the deposits are compulsorily executed because of tax arrears. However, the borrowers that have enough deposit to bear the cost that assessed by the Bank and subsidiaries is except; iv) The bank knows (if it has received the notice from court) that the collaterals are compulsory executed by other banks; v) Borrowers were notified the refund by the Bank and did not conduct refund notice; vi) The letter of credit insurance fund notice due to the related company's overdue debt in other bank, the creditor to stop the delivery; vii) Because the borrowers have been involved in litigation and unfavorable judgments, their ability of credit performance is affected; viii) The customer is classified as an early warning account by the Bank or has bad credit that aware by others. b) Debt instrument investments i) The latest credit rating on the report date was non-investment grade and fell more than two levels than the original rating, or; ii) Investment target evaluation loss is up to 30% of investment cost. 4) The credit risk has not increased significantly or judged as low credit risk on the report date On each report date, the Bank and subsidiaries assessed that there was no significant increase in the risk of default for any credit asset during the expected duration of existence or a low credit risk. The amount of expected credit losses was not taken as the change of credit risk, if the credit risk of the credit asset was low on the report date, it also assumes that the credit risk of the credit asset has not increased significantly since the initial recognition. The credit assets with low credit risk refer to the low default risk and the borrower’ s ability to perform its contractual cash flow obligations in the near term. No significant increase in risk relates to the borrower. The absence of economic, operational, and adverse changes in financial conditions and other bad debt conditions did not affect their ability to fulfill their contractual cash flow obligations. Financial assets on investment-grade or not on investment-grade but the ratings are not significantly reduced are also considered to be low-risk areas. (Continued)
Page 67
66 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements 5) Definitions of default and credit-impaired financial assets A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of that financial asset have occurred. Evidence that a financial asset is credit- impaired not only the borrower defaults the loan more than 90 days, it also includes observable data as follows: a) Credit assets i) Significant financial difficulty of the issuer or the borrower; ii) A breach of contract, such as a default or past due event ; iii) The lender(s) of the borrower, for econom ic or contractual reasons relating to the borrower’ s financial difficulty, having granted to the borrower a concession(s) that the lender(s) would not otherwise consider; iv) It i s becoming probable that the borrower will enter bankruptcy or other financial reorganization; v) The disappearance of an active market for that financial asset because of financial difficulties; vi) The purchase or origination of a financial asset at a considerable amount of discount that reflects the incurred credit losses; b) Debt instrument investments i) Significant financial difficulty of the issuer; ii) The disappearance of an active market for that financial asset because of financial difficulties; iii) The purchase or origination of a financial asset at a considerable amount of discount that reflects the incurred credit losses. iv) Counterparty defaulting on agreement of other financial instruments (e.g. transactions settlement failure, a bank decide to execute early termination of transactions, or loans originated from derivatives settlement failure). 6) Write-off policy The integral part or the portion of the credit assets that needs to be written-off should first be approved during the board of directors’ meeting; particularly, the portion that is deemed uncollectible. The following are indicators that the financial assets are uncollectible: a) The borrowers fail to recover all or part of the debt due to dissolution, escape, settlement, bankruptcy or other reasons. (Continued)
Page 68
67 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements b) After the collateral and the assets of the principal and subordinate debtors have been priced low or deducted from the first-order mortgage, they cannot be repaid, the execution costs are close or may exceed the Bank’s reimbursable amount, and the implementation is not beneficial. c) The collateral and the property of the principal and subordinate debtors were auctioned off at no cost and were not bought by anyone, and there was no one have substantial benefits. d) Overdue loan and non-accrual loan have exceeded the liquidation period for two years. The Bank and subsidiaries, whose written-off claims may still have ongoing recourse, continues to follow laws and regulations to pursue the proceedings. 7) Modification of contractual cash flow of financial assets The Bank and subsidiaries may revise the contractual cash flow of the credit asset due to the borrower's financial difficulties in negotiating, increasing the recovery rate of the borrowers that have problems, or maintaining the customer relationship. The modification of the contractual terms of the credit asset may include extending the contract period, modifying the payment time of interest, and modifying agreement rate and so on. If the contractual cash flow modification of the credit asset is due to the financial difficulty of the borrower, it is deemed as an impairment of the financial asset. If the contractual cash flow modification is not due to the financial difficulties of the borrower, the existing or projected unfavorable changes in the operating, financial or economic conditions under the borrower's performance or the borrower's ability to make the borrower's ability to perform its debt obligations vary significantly. The cause of anomalies or other bad debts is supplemented by an assessment of whether the credit risk of financial assets has increased significantly. 8) Measuring the expected credit losses a) Adoption of methods and assumptions After considering the attributes of financial assets and credit assets and the adequacy of default experience, internal historical data or the information from external credit rating agency is used to estimate the Probability of default (PD), Loss given default (LGD), Exposure at default (EAD) and other credit risk components. (Continued)
Page 69
68 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements In order to assess the expected credit losses of credit assets, the Bank and subsidiaries is divided into the following combinations depending on the credit risk characteristics such as the identity of borrowers, products, and type of collateral: Government and public institution Financial institution (including banks, ticket companies, securities finance companies) The guarantee of the credit guarantee mechanism Large Enterprise Secured Corporate banking Non-secured The guarantee of the credit guarantee mechanism Medium and small enterprises Secured Non-secured Mortgage Microcredit Private banking Other-Secured Other-Non-secured The guarantee of the credit guarantee mechanism Entrepreneurship Secured Non-secured If the credit risk on a credit asset has not increased significantly since initial recognition or the credit asset has low credit risk at the reporting date, the Bank and subsidiaries shall measure the allowance for impairment using the 12-month expected credit losses; if the credit risk on a financial instrument has increased significantly or credit-impaired since initial recognition, the Bank and subsidiaries shall measure the allowance for impairment using the lifetime expected credit losses. In order to measure expected credit losses, the Bank and subsidiaries considers the default probability (Probability of default, "PD") of borrowers, and loss given default rate ("LGD") multiplying the exposure at default (“ EAD” ), taking into account the time value of money as well evaluate 12-month and lifetime loss. (Continued)
Page 70
69 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements Default probability is the default probability of the borrower (default and credit impairment of financial assets), and the loss given default rate is the rate of loss caused by default by the borrower. The default probability and default loss rate used in the impairment assessment of the credit business are based on internal historical information of each group, and adjusted based on current observable information and forward-looking general economic information. The Bank and subsidiaries measures the EAD based on the book value of loans at reporting date. When estimating the 12-month and lifetime expected credit losses of the loan commitments and financial guarantee contracts, the definition of the credit risk increasing significantly and the credit-impaired assets are based on the rules mentioned above. Additionally, in order to determine the EAD used to calculate expected credit loss of off-balance sheet items, the Bank and subsidiaries adopts the credit conversion factor (CCF) of standardized approach in credit risk which is legislated in the regulation of Proprietary Capital and Risk Capital of Banks. b) Consideration of forward-looking information The Bank and subsidiaries obtains forward-looking information which it takes into consideration when determining whether the credit risk of financial instruments has increased significantly since initial recognition and assessing the expected credit losses. The Bank and subsidiaries identified the relevant macroeconomic factors for credit risk of each portfolio by analyzing the historically data. These macroeconomic factors include Taiwan GDP (not seasonally adjusted), Taiwan's actual industrial production index, Taiwan's annual growth rate of retail sales, Taiwan's real sales price index, unemployment rate (seasonally adjusted), Cathay National Real Estate Index (national), Taiwan's real consumer price index (Not seasonally adjusted) and Taiwan's annual growth in retail sales or other factors. The various economic factors and their impacts on Probability of Default (“PD”) are different depending on the type of financial instruments. In order to determine the credit risk of investment in debt instruments at amortized cost and at fair value through other comprehensive income has increased significantly, the Bank and subsidiaries uses the changes of external ratings published by international credit rating agencies as the quantitative indicators, while the assessment of expected credit losses are calculated by using the external ratings, as well as PD and Loss Given Default (“LGD”), published by Moody’s. Since the international credit rating agencies have already considered the forward- looking information while evaluating the credit ratings, which the Bank and subsidiaries considered to be appropriate after its assessment, the credit ratings will be included in the Bank and subsidiaries assessment of related expected credit losses. (Continued)
Page 71
70 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements 9) Credit risk hedging or diminishing. a) Collaterals The Bank adopts a series of policies and procedures to mitigate credit risk and enhance credit risk tolerance. The method applied most is to request customers to provide collaterals. The Bank established collateral accreditation code of conduct in term of collateral management and total loan amount to regulate the scope of collaterals and the accreditation method and regularly inspects the collaterals. When the collaterals devaluate or the concern of devaluation occurs, the Bank shall increase collaterals or retrieve part of the loans to ensure the creditor’ s right is intact. b) Limit of credit risk and the control of credit risk concentration i) In order to avoid the situation that the credit risk of single custom er being too high, the credit limit of an individual, a related party or a related enterprise shall be in conformity with “Authorization method for subsection 3 of Article 33 of the Banking Act of the Republic of China” a nd the credit limit authorization steps are regulated in the Key Points of Credit Engagement Authorization and the Key Points of Credit Engagement Authorization for Overseas Branches of the Bank. ii) To enhance the risk concentration management, the Bank established regulations in terms of countries, financial institutions, industries and group enterprises. The relevant limits are reviewed and approved annually and the usage of the credit is monitored on a daily basis. In addition, the results are reported regularly. c) General agreement of net amount settlement The transactions of the Bank are mostly settled with gross amount. Part of the transactions agreed on net amount settlement. When a default occurs, the Bank terminates all the transactions with the counterparty and settles by net amount to further lower credit risk. d) Enhancement of other credit The assessment of credit business applies to credit 5P principles, credit risk is offset by dividing self-liquidating loan commitments as the main, and set the accounts to master the repayment of cash flow. Also, in terms of the credit agreement stipulates the offset. (i.e. all kinds of deposits, except prohibition of low or the party's agreement, the Bank can set off all the debts), thus to reduce the loan amount, shorter loan repayment period or are considered part or all of expiration of acceleration clauses. To strengthen the protection of creditor and reduce credit risk, using qualified and effective enhancement, such as the requirement of real property, personal property, demand deposits, time deposits, securities and the guarantee of financial institution or the credit guarantee mechanism approved by government. (e.g. R.O.C SMEG, Agricultural Credit Guarantee Fund, Overseas Credit Guarantee Fund) (Continued)
Page 72
71 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements 10) Information on the financial assets of the Bank and subsidiaries that has been credit derogated and the collateral for mitigating potential losses are as follows: March 31, 2025 Carrying amount Allowance impairment Exposure (measured at amortized cost) Value of collateral Impairment financial assets： Receivables Accounts receivables $ 182,574 22,404 109,361 131,765 Interest receivable 70,091 15,254 54,837 - Discounts and loans 20,842,103 5,224,718 15,617,385 24,209,651 Overdue receivable 20,536 9,998 10,538 - Total impairment financial assets $ 21,115,304 5,272,374 15,792,121 24,341,416 December 31, 2024 Carrying amount Allowance impairment Exposure (measured at amortized cost) Value of collateral Impairment financial assets： Receivables Accounts receivables $ 160,100 20,195 139,905 154,660 Interest receivable 53,196 12,036 41,160 - Discounts and loans 18,943,078 5,032,126 13,910,952 23,074,264 Overdue receivable 15,380 7,946 7,434 - Total impairment financial assets $ 19,171,754 5,072,303 14,099,451 23,228,924 March 31, 2024 Carrying amount Allowance impairment Exposure (measured at amortized cost) Value of collateral Impairment financial assets： Receivables Acceptances receivables $ 149,909 13,535 136,374 149,909 Accounts receivable factoring without recourse 1,064 1,064 - - Interest receivable 55,573 11,071 44,502 - Discounts and loans 18,864,876 4,346,534 14,518,342 22,662,423 Overdue receivable 18,261 10,134 8,127 - Total impairment financial assets $ 19,089,683 4,382,338 14,707,345 22,812,332 Note: The value of collateral is the real estate appraisal information and credit guarantee agency guarantee amount levied by the Bank and subsidiaries credit assets. (Continued)
Page 73
72 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements 11) Credit risk concentration The Bank and subsidiaries does not conduct significant transaction with single customer or single trade counterparty. The total amount of discounts and loans, overdue loans in terms of individual customer or individual trade counterparty is not significant. The information of credit risk concentration of the Bank’s discounts and loans and overdue loans are divided by industries, geographic areas and collaterals and listed as follows: a) By industry Distribution of discounts and loans, overdue loans based on industries. March 31, 2025 December 31, 2024 March 31, 2024 Industry Amount % Amount % Amount % Private business $ 992,240,986 %59.50 994,458,590 %60.59 935,047,678 %61.85 Public business 32,147,435 %1.93 23,659,672 %1.44 22,726,840 %1.50 Government institution 41,657,759 %2.50 43,788,000 %2.67 46,485,000 %3.08 Nonprofit organization 2,722,075 %0.16 2,672,117 %0.16 2,693,495 %0.18 Individual 481,727,777 %28.89 464,452,775 %28.30 396,827,135 %26.25 Foreign financial institution 11,364,920 %0.68 10,829,982 %0.66 8,571,631 %0.57 Foreign non-financial institution 103,881,546 %6.23 99,622,258 %6.07 97,452,337 %6.45 Foreign individual 1,788,789 %0.11 1,701,093 %0.11 1,895,289 %0.12 Total $ 1,667,531,287 %100.00 1,641,184,487 %100.00 1,511,699,405 %100.00 b) By geographic area Distribution of discounts and loans, overdue loans based on geographic area. March 31, 2025 December 31, 2024 March 31, 2024 Area Amount % Amount % Amount % Domestic $ 1,550,496,032 %92.98 1,529,031,154 %93.17 1,403,780,148 %92.86 Foreign 117,035,255 %7.02 112,153,333 %6.83 107,919,257 %7.14 Total $ 1,667,531,287 %100.00 1,641,184,487 %100.00 1,511,699,405 %100.00 c) By collateral Distribution of discounts and loans, overdue loans based on collateral. March 31, 2025 December 31, 2024 March 31, 2024 Collateral Amount % Amount % Amount % Unsecured $ 291,222,938 %17.46 290,659,153 %17.71 260,385,785 %17.22 Stocks 11,333,978 %0.68 11,434,500 %0.70 9,634,511 %0.64 Bonds 17,566,959 %1.05 17,754,711 %1.08 21,245,713 %1.41 Real estate 1,053,081,009 %63.15 1,031,845,127 %62.87 948,699,080 %62.76 Chattel 16,106,261 %0.97 16,679,073 %1.02 14,015,273 %0.93 Notes receivable 1,837,577 %0.11 2,357,604 %0.14 2,544,069 %0.17 Guarantees 266,024,727 %15.96 260,374,328 %15.87 246,201,984 %16.28 Others 10,357,838 %0.62 10,079,991 %0.61 8,972,990 %0.59 Total $ 1,667,531,287 %100.00 1,641,184,487 %100.00 1,511,699,405 %100.00 (Continued)
Page 74
73 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements Note: Secured credit are categorized in its respective item per the type of the collaterals. Non-secured credit (no collateral provided) is classified in unsecured. If the credit amount is higher than the accreditation value, the credit amount within the accreditation is classified in the respective item, the credit amount exceeds the accreditation value is classified in unsecured. The accreditation value is the value calculated per the accreditation regulations of the Bank and subsidiaries, not the discounted value of the signed contract. 12) Maximum credit risk exposure a) The maximum credit exposure of the assets in the consolidated financial statement is approximately the book value when not considering collaterals or other credit enhancement instruments. The maximum credit exposure off the consolidated balance sheet (when not considering collaterals or other credit enhancement instruments and not revocable) was as follows: Maximum credit risk exposure Off balance sheet items March 31, 2025 December 31, 2024 March 31, 2024 Issued and irrevocable loan commitments $ 101,333,098 82,622,791 110,082,197 Irrevocable credit card loan commitments 18,418,210 17,974,642 17,701,447 Letters of credit issued yet unused 9,421,012 8,268,607 9,573,184 Various guarantee proceeds 33,701,455 33,893,522 27,586,685 Total $ 162,873,775 142,759,562 164,943,513 The Management of the Bank and subsidiaries evaluated the credit risk exposure and believed that it is able to continuously control and minimize the off-balance sheet credit risk exposure due to its strict appraisal process and regular subsequent examination. (Continued)
Page 75
74 TAIWAN BUSINESS BANK, LTD. Notes to the Consolidated Financial Statements b) The credit quality analyses of the financial assets i) Credit quality analysis of discounts and loans, receivables, guarantee and commitments 12-month ECL Lifetime ECL－not impaired Lifetime ECL－ impaired March 31, 2025 Excellent Good Medium Acceptable Under standard No rating Subtotal Excellent Good Medium Acceptable Under standard No rating Subtotal High risk Allowance impairment Total Receivable Credit card $ 446,128 241,034 148,430 - 1,056 300,973 1,137,621 2,282 3,124 2,159 - 105 542 8,212 - 1,290 1,144,543 Acceptances receivable 277,306 472,249 158,279 - - 80,506 988,340 - - - - - - - - 9,883 978,457 Other receivables 684,946 3,404,225 505,877 64,505 27,541 4,481,408 9,168,502 1,697 3,617 3,516 1,110 2,587 29,922 42,449 252,665 127,295 9,336,321 Discounts and loans Private banking 250,039,316 162,813,416 57,254,237 2,657,470 1,236,411 4,680,277 478,681,127 88,922 141,065 364,310 65,790 173,717 7,876 841,680 3,993,759 6,159,168 477,357,398 Corporate banking 310,892,210 429,027,233 274,072,367 42,440,045 16,870,869 87,865,105 1,161,167,829 1,238,666 1,642,958 1,037,734 371,268 702,288 1,005,634 5,998,548 16,848,344 15,771,633 1,168,243,088 Other financial assets Overdue receivable - - - - - - - - - - - - - - 20,536 10,613 9,923 Total $ 562,339,906 595,958,157 332,139,190 45,162,020 18,135,877 97,408,269 1,651,143,419 1,331,567 1,790,764 1,407,719 438,168 878,697 1,043,974 6,890,889 21,115,304 22,079,882 1,657,069,730 Guarantee and commitments $ 28,180,273 21,207,057 9,789,763 142,208 265,509 102,829,891 162,414,701 155,876 81,783 7,374 85,931 769 695 332,428 126,646 420,684 162,453,091 12-month ECL Lifetime ECL－not impaired Lifetime ECL－ impaired December 31, 2024 Excellent Good Medium Acceptable Under standard No rating Subtotal Excellent Good Medium Acceptable Under standard No rating Subtotal High risk Allowance impairment Total Receivable Credit card $ 490,011 255,117 153,914 5 1,545 373,399 1,273,991 2,276 2,311 3,223 - 127 1,722 9,659 - 1,441 1,282,209 Acceptances receivable 544,890 508,851 148,854 3,541 - 39,241 1,245,377 - - - - - - - - 12,454 1,232,923 Other receivables 619,261 3,116,993 612,121 73,713 28,975 4,575,283 9,026,346 508 2,603 3,405 802 8,895 96,868 113,081 213,296 119,135 9,233,588 Discounts and loans Private banking 239,613,287 157,115,714 55,738,686 2,859,702 1,405,153 4,839,886 461,572,428 22,854 191,234 288,800 32,373 157,949 3,074 696,284 3,885,156 6,008,481 460,145,387 Corporate banking 305,590,576 428,717,976 268,220,823 48,161,526 17,209,210 86,877,154 1,154,777,265 262,024 913,207 883,441 348,776 1,631,473 1,156,511 5,195,432 15,057,922 15,866,502 1,159,164,117 Other financial assets Overdue receivable - - - - - - - - - - - - - - 15,380 8,543 6,837 Total $ 546,858,025 589,714,651 324,874,398 51,098,487 18,644,883 96,704,963 1,627,895,407 287,662 1,109,355 1,178,869 381,951 1,798,444 1,258,175 6,014,456 19,171,754 22,016,556 1,631,065,061 Guarantee and commitments $ 26,589,388 21,419,459 9,901,075 417,465 262,871 83,936,364 142,526,622 19,442 78,236 5,935 2,140 183 358 106,294 126,646 411,691 142,347,871 12-month ECL Lifetime ECL－not impaired Lifetime ECL－ impaired March 31, 2024 Excellent Good Medium Acceptable Under standard No rating Subtotal Excellent Good Medium Acceptable Under standard No rating Subtotal High risk Allowance impairment Total Receivable Credit card $ 389,457 216,507 165,177 (5) 2,454 273,629 1,047,219 919 2,785 2,940 - 350 37 7,031 - 990 1,053,260 Acceptances receivable 387,027 325,042 85,015 15,440 358 62,752 875,634 - - - - - - - - 8,756 866,878 Other receivables 542,904 2,912,406 527,497 83,222 27,763 5,169,650 9,263,442 492 3,719 5,103 2,671 3,554 91,935 107,474 206,542 112,744 9,464,714 Discounts and loans Private banking 166,567,579 146,519,883 70,705,927 3,266,713 1,043,211 5,820,183 393,923,496 13,311 125,924 365,533 115,008 163,336 22,493 805,605 3,993,323 5,016,366 393,706,058 Corporate banking 276,123,109 401,531,278 257,520,425 49,450,303 15,609,277 91,563,999 1,091,798,391 437,543 1,229,334 1,157,074 1,163,171 1,254,754 1,065,161 6,307,037 14,871,553 14,780,609 1,098,196,372 Other financial assets Overdue receivable - - - - - - - - - - - - - - 18,261 10,721 7,540 Total $ 444,010,076 551,505,116 329,004,041 52,815,673 16,683,063 102,890,213 1,496,908,182 452,265 1,361,762 1,530,650 1,280,850 1,421,994 1,179,626 7,227,147 19,089,679 19,930,186 1,503,294,822 Guarantee and commitments $ 27,789,595 14,068,169 8,782,013 2,408,048 269,600 111,163,093 164,480,518 78,716 237,266 3,317 3,030 6,900 28 329,257 133,738 375,309 164,568,204 (Continued)
Page 76
75 TAIWAN BUSINESS BANK, LTD. Notes to the Consolidated Financial Statements ii) Debt instruments 12-month ECL Lifetime ECL－not impaired Lifetime ECL－ impaired March 31, 2025 Investment Sub investment High risk No rating Subtotal Investment Sub investment High risk No rating Subtotal High risk Total Accumulated impairment(Note) Investment in debt instruments measured at fair value through other comprehensive income Overseas bonds $ 71,727,271 - - - 71,727,271 - - - - - - 71,727,271 21,715 NT bonds 98,527,202 - - - 98,527,202 - - - - - - 98,527,202 59,175 Negotiable certificates of deposit 668,357 - - - 668,357 - - - - - - 668,357 249 Investment in debt instruments at amortized cost Overseas bonds 25,098,447 - - - 25,098,447 - - - - - - 25,098,447 7,919 NT bonds and treasury bills 46,456,464 - - - 46,456,464 - - - - - - 46,456,464 31,598 Certificates of deposit with the Central Bank 145,835,000 - - - 145,835,000 - - - - - - 145,835,000 36,400 Negotiable certificates of deposit 69,731 - - - 69,731 - - - - - - 69,731 26 Total $ 388,382,472 - - - 388,382,472 - - - - - - 388,382,472 157,082 12-month ECL Lifetime ECL－not impaired Lifetime ECL－ impaired December 31, 2024 Investment Sub investment High risk No rating Subtotal Investment Sub investment High risk No rating Subtotal High risk Total Accumulated impairment(Note) Investment in debt instruments measured at fair value through other comprehensive income Overseas bonds $ 68,780,192 - - - 68,780,192 - - - - - - 68,780,192 20,900 NT bonds 97,980,180 - - - 97,980,180 - - - - - - 97,980,180 66,583 Negotiable certificates of deposit 652,513 - - - 652,513 - - - - - - 652,513 245 Investment in debt instruments at amortized cost Overseas bonds 27,143,649 - - - 27,143,649 - - - - - - 27,143,649 6,963 NT bonds and treasury bills 48,887,235 - - - 48,887,235 - - - - - - 48,887,235 26,844 Certificates of deposit with the Central Bank 154,215,000 - - - 154,215,000 - - - - - - 154,215,000 38,492 Negotiable certificates of deposit 68,849 - - - 68,849 - - - - - - 68,849 26 Total $ 397,727,618 - - - 397,727,618 - - - - - - 397,727,618 160,053 12-month ECL Lifetime ECL－not impaired Lifetime ECL－ impaired March 31, 2024 Investment Sub investment High risk No rating Subtotal Investment Sub investment High risk No rating Subtotal High risk Total Accumulated impairment(Note) Investment in debt instruments measured at fair value through other comprehensive income Overseas bonds $ 70,251,441 - - - 70,251,441 - - - - - - 70,251,441 20,333 NT bonds 107,763,193 - - - 107,763,193 - - - - - - 107,763,193 83,111 Negotiable certificates of deposit 635,402 - - - 635,402 - - - - - - 635,402 239 Investment in debt instruments at amortized cost Overseas bonds 27,539,578 - - - 27,539,578 - - - - - - 27,539,578 6,549 NT bonds and treasury bills 44,522,206 - - - 44,522,206 - - - - - - 44,522,206 23,814 Certificates of deposit with the Central Bank 176,135,000 - - - 176,135,000 - - - - - - 176,135,000 52,015 Negotiable certificates of deposit 67,211 - - - 67,211 - - - - - - 67,211 25 Total $ 426,914,031 - - - 426,914,031 - - - - - - 426,914,031 186,086 Note: The cumulative impairment of the bond which measured at fair value through other comprehensive profit or loss is recognized as other equity. (Continued)
Page 77
76 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements iii) The Maximum credit risk exposure for financial instruments are not subject to impairment regulations are as follows: March 31, 2025 Maximum credit risk exposure Collateral Enhancement of other credit Financial assets at fair value through profit or loss －Debt investments $ 200,000 - - －Commercial paper 84,104,039 - - －Listed stocks 904,469 - - －Unlisted stocks 528,305 - - －Beneficiary certificates 213,235 - - －Derivative instrument 2,455,642 1,087,073 604,695 December 31, 2024 Maximum credit risk exposure Collateral Enhancement of other credit Financial assets at fair value through profit or loss －Debt investments $ 200,000 - - －Commercial paper 78,181,124 - - －Listed stocks 794,532 - - －Unlisted stocks 493,166 - - －Beneficiary certificates 205,544 - - －Derivative instruments 2,931,419 2,074,252 612,147 March 31, 2024 Maximum credit risk exposure Collateral Enhancement of other credit Financial assets at fair value through profit or loss －Debit investments $ 200,000 - - －Commercial paper 70,134,417 - - －Listed stocks 1,337,270 - - －Unlisted stocks 407,177 - - －Beneficiary certificates 368,067 - - －Derivative instrument 3,177,472 739,643 1,561,184 (Continued)
Page 78
77 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements 13) Changes in the expected credit losses of the Bank and subsidiaries a) Receivables For the three months ended March 31, 2025 12-month ECL Lifetime ECL－not impaired Lifetime ECL－ impaired Impaired (IFRS9) Impairment difference of "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non- Performing and Non- Accrual Loans " Total Beginning balance $ 41,523 9,170 32,231 82,924 50,106 133,030 Changes in financial instruments that have been identified at the beginning of the period： －Transferred to 12-months ECL 322 (241) (81) - - - －Transferred to lifetime ECL (25) 108 (83) - - - －Transferred to the credit- impaired financial assets (20) (495) 515 - - - －The financial assets that have been derecognized (9,308) (78) (7,685) (17,071) - (17,071) New financial assets originated or purchased 15,686 128 12,057 27,871 - 27,871 Other changes (3,050) 396 704 (1,950) - (1,950) Impairment difference of "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-Performing and Non-Accrual Loans " - - - - (3,412) (3,412) Ending balance $ 45,128 8,988 37,658 91,774 46,694 138,468 (Continued)
Page 79
78 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the three months ended March 31, 2024 12-month ECL Lifetime ECL－not impaired Lifetime ECL－ impaired Impaired (IFRS9) Impairment difference of "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non- Performing and Non- Accrual Loans " Total Beginning balance $ 39,104 7,043 30,542 76,689 44,823 121,512 Changes in financial instruments that have been identified at the beginning of the period： －Transferred to 12-months ECL 164 (19) (145) - - - －Transferred to lifetime ECL (17) 29 (12) - - - －Transferred to the credit- impaired financial assets (11) (28) 39 - - - －The financial assets that have been derecognized (6,546) (17) (3,881) (10,444) - (10,444) New financial assets originated or purchased 16,200 118 3,938 20,256 - 20,256 Other changes (2,166) 350 (4,811) (6,627) - (6,627) Impairment difference of "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-Performing and Non-Accrual Loans " - - - - (2,207) (2,207) Ending balance $ 46,728 7,476 25,670 79,874 42,616 122,490 (Continued)
Page 80
79 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements b) Discounts and loans For the three months ended March 31, 2025 12-month ECL Lifetime ECL－not impaired Lifetime ECL－ impaired Impaired (IFRS9) Impairment difference of "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non- Performing and Non- Accrual Loans " Total Beginning balance $ 5,678,500 407,406 5,032,126 11,118,032 10,756,951 21,874,983 Changes in financial instruments that have been identified at the beginning of the period： －Transferred to 12-months ECL 43,023 (6,551) (36,472) - - - －Transferred to lifetime ECL (13,916) 21,511 (7,595) - - - －Transferred to the credit- impaired financial assets (11,828) (67,758) 79,586 - - - －The financial assets that have been derecognized (1,226,335) (8,665) (185,657) (1,420,657) - (1,420,657) New financial assets originated or purchased 1,262,658 3,409 80,587 1,346,654 - 1,346,654 Write-off - - (1,694,527) (1,694,527) - (1,694,527) Other changes (29,496) 155,392 1,956,670 2,082,566 - 2,082,566 Impairment difference of "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-Performing and Non-Accrual Loans " - - - - (258,218) (258,218) Ending balance $ 5,702,606 504,744 5,224,718 11,432,068 10,498,733 21,930,801 (Continued)
Page 81
80 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the three months ended March 31, 2024 12-month ECL Lifetime ECL－not impaired Lifetime ECL－ impaired Impaired (IFRS9) Impairment difference of "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non- Performing and Non- Accrual Loans " Total Beginning balance $ 5,120,615 317,996 4,196,783 9,635,394 9,967,448 19,602,842 Changes in financial instruments that have been identified at the beginning of the period： －Transferred to 12-months ECL 75,999 (7,025) (68,974) - - - －Transferred to lifetime ECL (9,467) 11,184 (1,717) - - - －Transferred to the credit- impaired financial assets (7,563) (6,159) 13,722 - - - －The financial assets that have been derecognized (1,177,249) (5,650) (222,804) (1,405,703) - (1,405,703) New financial assets originated or purchased 1,186,040 1,800 124,495 1,312,335 - 1,312,335 Write-off - - (1,206,679) (1,206,679) - (1,206,679) Other changes (62,664) 374,336 1,511,708 1,823,380 - 1,823,380 Impairment difference of "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-Performing and Non-Accrual Loans " - - - - (329,200) (329,200) Ending balance $ 5,125,711 686,482 4,346,534 10,158,727 9,638,248 19,796,975 (Continued)
Page 82
81 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements c) Other financial assets For the three months ended March 31, 2025 12-month ECL Lifetime ECL－not impaired Lifetime ECL－ impaired Impaired (IFRS9) Impairment difference of "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non- Performing and Non- Accrual Loans " Total Beginning balance $ - - 7,946 7,946 597 8,543 Changes in financial instruments that have been identified at the beginning of the period： －The financial assets that have been derecognized - - (4) (4) - (4) New financial assets originated or purchased - - 7,229 7,229 - 7,229 Write-off - - (5,173) (5,173) - (5,173) Impairment difference of "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-Performing and Non-Accrual Loans " - - - - 18 18 Ending balance $ - - 9,998 9,998 615 10,613 For the three months ended March 31, 2024 12-month ECL Lifetime ECL－not impaired Lifetime ECL－ impaired Impaired (IFRS9) Impairment difference of "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non- Performing and Non- Accrual Loans " Total Beginning balance $ - - 10,891 10,891 599 11,490 Changes in financial instruments that have been identified at the beginning of the period： －The financial assets that have been derecognized - - (3) (3) - (3) New financial assets originated or purchased - - 3,025 3,025 - 3,025 Write-off - - (3,959) (3,959) - (3,959) Other changes - - 180 180 - 180 Impairment difference of "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-Performing and Non-Accrual Loans " - - - - (12) (12) Ending balance $ - - 10,134 10,134 587 10,721 (Continued)
Page 83
82 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements d) Guarantee and commitments For the three months ended March 31, 2025 12-month ECL Lifetime ECL－not impaired Lifetime ECL－ impaired Impaired (IFRS9) Impairment difference of "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non- Performing and Non- Accrual Loans " Total Beginning balance $ 134,318 511 47,096 181,925 229,766 411,691 Changes in financial instruments that have been identified at the beginning of the period： －Transferred to lifetime ECL (393) 393 - - - - －The financial assets that have been derecognized (26,449) - - (26,449) - (26,449) New financial assets originated or purchased 26,988 73 - 27,061 - 27,061 Other changes (377) - - (377) - (377) Impairment difference of "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-Performing and Non-Accrual Loans" - - - - 8,758 8,758 Ending balance $ 134,087 977 47,096 182,160 238,524 420,684 For the three months ended March 31, 2024 12-month ECL Lifetime ECL－not impaired Lifetime ECL－ impaired Impaired (IFRS9) Impairment difference of "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non- Performing and Non- Accrual Loans " Total Beginning balance $ 159,248 1,117 42,703 203,068 174,033 377,101 Changes in financial instruments that have been identified at the beginning of the period： －Transfer to lifetime ECL (21) 21 - - - - －Transferred to the credit- impaired financial assets (15) - 15 - - - －The financial assets that have been derecognized (31,010) (143) (850) (32,003) - (32,003) New financial assets originated or purchased 30,240 104 - 30,344 - 30,344 Other changes (245) (498) 560 (183) - (183) Impairment difference of "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-Performing and Non-Accrual Loans" - - - - 50 50 Ending balance $ 158,197 601 42,428 201,226 174,083 375,309 (Continued)
Page 84
83 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements e) Debts investments For the three months ended March 31, 2025 12-month ECL Lifetime ECL －not impaired Lifetime ECL －impaired Total Beginning balance $ 160,053 - - 160,053 Additions 33,588 - - 33,588 Derecognition (33,404) - - (33,404) Other changes (3,155) - - (3,155) Ending balance $ 157,082 - - 157,082 For the three months ended March 31, 2024 12-month ECL Lifetime ECL －not impaired Lifetime ECL －impaired Total Beginning balance $ 180,969 - - 180,969 Additions 52,139 - - 52,139 Derecognition (48,020) - - (48,020) Other changes 998 - - 998 Ending balance $ 186,086 - - 186,086 14) Collateral management policy a) Collaterals are recognized under the account of other assets per the rules of “Regulations Governing the Preparation of Financial Reports by Public Banks”. b) Details were as follows: Collaterals refer to the collaterals provided by clients as guarantee which are undertaken through public auction when the debtor is not able to fulfill its obligation. The collaterals assumed are recognized using the prices undertaken per the rules of “Regulations Governing the Preparation of Financial Reports by Public Banks” and measured by the book value or the fair value deducted by cost of sale, whichever is lower, at the end of the period. Collaterals will be sold when they are available to be sold and the proceeds received will be used to reduce the book amount of collaterals. (Continued)
Page 85
84 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (iv) Liquidity risk 1) The origin and definition of liquidity risk Liquidity risk refers to the potential financial loss results from the inability to liquidate assets or obtain finance to fulfill the financial obligation which is going to mature with sufficient fund, such as early rescind of time deposits, the channels and terms to call loan from other bank are deteriorated due to the influence of specific markets and the default of loan customers worsen and it is harder for the Bank to receive payments and liquidate financial instruments. The abovementioned situations may diminish the source of cash for the Bank to undertake loan business, trades and investment activities. Under some extreme circumstances, the lack of liquidity may increase the potential possibility of reduction of the overall position of consolidated financial statement, sale of assets and inability to fulfill loan obligation. Liquidity risk is an inherent risk of bank operations and is influenced by specific or overall events in various markets. Those events include but not limited to: Credit event, merger or buyout, systematic strike and natural disaster. 2) The management policy, process and measurement of liquidity risk a) Policy i) In accordance with the target and limit for liquidity risk management approved by the board of directors and monitor all liquidity risk positions. ii) Established “Directions Governing the Capital Liquidity Risk Management of Taiwan Business Bank” and “Remarks Governing the Capital Liquidity Risk Management of Taiwan Business Bank” to serve as guidance to effectively control capital liquidity risk. iii) Overseas branches shall regulate the code of conduct for liquidity risk management based on business characteristics and the regulations of local authorities. After being approved by the general manager, the Risk Management Department will be in charge of monitoring liquidity risk. b) Process i) Finance Department is in charge of daily capital deployment to ensure that the capital is sufficient to cope with various demands for capital. ii) Risk Management Department is in charge of the identification, measurement, supervision and control of capital liquidity risk to establish a firm operation process and structure. iii) Risk Management Department reports the result of capital liquidity risk measurement to the Assets and Liabilities Management Committee on a monthly basis and reports the results of capital liquidity risk and pressure test to the board of directors quarterly. (Continued)
Page 86
85 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements c) Measurement i) Maturity gap: To place the inflows and outflows of capital into various time zones accordingly based on the remaining days to maturity and calculate the gap of capital of each time zone in order to measure the capital deficiency of each time zone. ii) Loan-deposit ratio: To calculate the deposits the Bank received which are used to conduct loan business. In other words, the percentage of the total loan amount accounts for the total deposit amount. iii) Capital concentration and stability: In order to prevent the Bank from over- relying on single trade counterparty, product or market, the Bank observes several aspects such as the changes in large time deposit customers, the percentage of demand deposits and the continuity of deposits. iv) Pressure test: Except for monitoring the capital demand under normal circumstances, the Bank conducts pressure test regularly in order to evaluate the capital liquidity under abnormal circumstances and ensure that the Bank is equipped with sufficient capital. 3) Financial assets possessed for managing liquidity risk and maturity analysis for non- derivative financial liability a) Financial assets possessed for managing liquidity risk The Bank and subsidiaries possesses cash and other high liquidity interest yielding assets to cope with payment obligations and potential emergent capital demands in the market. The assets possessed for managing liquidity risk include cash and cash equivalent, due from the Central Bank and call loans to banks, financial assets at fair value through profit or loss, discounts and loans, financial assets measured at fair value through other comprehensive income and investment in debt instruments at amortized cost. (Continued)
Page 87
86 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements b) Maturity analysis for non-derivative financial liabilities The table below shows the cash outflows from the non-derivative financial liabilities which are possessed by the Bank and subsidiaries based on the remaining days from the consolidated financial statement date to the contract maturity date. The amount disclosed is based on the cash flows of the contracts. March 31, 2025 0-30 days 31-90 days 91 days-1 year 1-5 years Over 5 years Total Major matured cash outflow $ 1,146,585,529 277,597,907 643,433,907 88,872,760 37,306,725 2,193,796,828 Deposits from the Central Bank and banks 630,799 - - - - 630,799 Overdrafts on banks 563,522 - - - - 563,522 Call loans from the Central Bank and banks 35,132,789 9,718,962 1,826,242 - - 46,677,993 Due to the Central Bank and banks 134,874 428,330 1,134,639 - - 1,697,843 Financial liabilities designated at fair value through profit or loss - - - - 9,869,915 9,869,915 Notes and bonds issued under repurchase agreement 1,442,795 4,366,629 74,649 - - 5,884,073 Interest payable 1,989,653 4,000,503 3,832,742 146,465 27 9,969,390 Deposits transferred from Chunghwa Post Co., Ltd. 5,000,000 15,000,000 146,099,335 18,000,000 - 184,099,335 Demand deposits 942,234,104 - - - - 942,234,104 Time deposits 159,172,963 244,015,199 487,784,277 44,321,386 2,946 935,296,771 Remittance 224,661 - - - - 224,661 Bank notes payable - - 2,300,000 24,910,000 26,000,000 53,210,000 Cumulative earnings on appropriated loan fund 750 1,500 74,750 831,170 1,291,421 2,199,591 Lease liabilities 58,619 66,784 307,273 663,739 142,416 1,238,831 December 31, 2024 0-30 days 31-90 days 91 days-1 year 1-5 years Over 5 years Total Major matured cash outflow $ 1,200,253,116 240,489,084 638,697,624 96,711,654 47,721,491 2,223,872,969 Deposits from the Central Bank and banks 500,131 - - - - 500,131 Overdrafts on banks 596,856 - - - - 596,856 Call loans from the Central Bank and banks 35,229,219 15,629,951 1,642,180 - - 52,501,350 Due to the Central Bank and banks - 142,598 1,300,908 - - 1,443,506 Financial liabilities designated at fair value through profit or loss - - - - 9,927,272 9,927,272 Notes and bonds issued under repurchase agreement 861,942 399,202 749,964 - - 2,011,108 Interest payable 1,402,758 2,256,680 4,858,961 137,701 32 8,656,132 Deposits transferred from Chunghwa Post Co., Ltd. 21,000,000 18,099,335 113,000,000 35,000,000 - 187,099,335 Demand deposits 977,409,931 - - - - 977,409,931 Time deposits 162,428,286 203,639,278 515,474,960 44,137,180 3,946 925,683,650 Remittance 748,271 - - - - 748,271 Bank notes payable - 250,000 1,300,000 15,910,000 36,000,000 53,460,000 Cumulative earnings on appropriated loan fund 4,501 3,250 79,250 804,000 1,637,131 2,528,132 Lease liabilities 71,221 68,790 291,401 722,773 153,110 1,307,295 (Continued)
Page 88
87 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements March 31, 2024 0-30 days 31-90 days 91 days-1 year 1-5 years Over 5 years Total Major matured cash outflow $ 1,154,222,593 208,461,535 603,929,368 61,630,724 46,750,614 2,074,994,834 Deposits from the Central Bank and banks 1,237,404 - - - - 1,237,404 Overdrafts on banks 815,136 - - - - 815,136 Call loans from the Central Bank and banks 35,513,127 7,202,520 1,280,200 - - 43,995,847 Due to the Central Bank and banks - 100,000 1,366,115 44,807 - 1,510,922 Financial liabilities designated at fair value through profit or loss - - - - 9,448,139 9,448,139 Notes and bonds issued under repurchase agreement 517,227 693,109 713,591 - - 1,923,927 Interest payable 1,968,177 3,102,719 3,408,591 111,766 23 8,591,276 Deposits transferred from Chunghwa Post Co., Ltd. 10,000,000 - 72,099,335 - - 82,099,335 Demand deposits 973,810,572 - - - - 973,810,572 Time deposits 129,942,810 197,295,542 524,437,013 42,568,301 5,732 894,249,398 Remittance 367,727 - - - - 367,727 Bank notes payable - - 250,000 17,210,000 36,000,000 53,460,000 Cumulative earnings on appropriated loan fund 2,250 4,750 82,420 981,580 1,128,375 2,199,375 Lease liabilities 48,163 62,895 292,103 714,270 168,345 1,285,776 4) Derivative financial liabilities maturity analysis a) Derivative financial instruments settled by net amount The derivative instruments of the Bank and subsidiaries whose possession are settled by net amount include foreign derivative instruments, such as non-delivery forward contracts and net-delivery foreign exchange option. After evaluation the Bank concluded that the maturity date is the basic element to comprehend all the derivative financial instruments listed in the consolidated financial statement. The amount disclosed is based on the cash flows of the contracts and thus part of the amount disclosed may not correspond to the amount disclosed in the consolidated financial statement. As of March 31, 2025, December 31 a nd March 31, 2024, maturity analysis for the derivative financial liabilities settled by net amount is as follows: March 31, 2025 0-30 days 31-90 days 91-180 days 181 days to 1 year Over 1 year Total Derivative financial liabilities at fair value through profit or loss －Foreign exchange derivative instrument $ - 1,220 327 2,120 - 3,667 －Interest rate derivative instrument - - - 506 72,305 72,811 Total $ - 1,220 327 2,626 72,305 76,478 (Continued)
Page 89
88 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements December 31, 2024 0-30 days 31-90 days 91-180 days 181 days to 1 year Over 1 year Total Derivative financial liabilities at fair value through profit or loss －Foreign exchange derivative instrument $ - 1,340 - 470 - 1,810 March 31, 2024 0-30 days 31-90 days 91-180 days 181 days to 1 year Over 1 year Total Derivative financial liabilities at fair value through profit or loss －Foreign exchange derivative instrument $ - 910 518 5 - 1,433 b) Derivative financial instruments settled by gross amount The derivative instruments of the Bank’ s possession settled by gross amount include the following: i) Foreign exchange derivative financial instrument: Foreign exchange options settled by gross amount, foreign exchange forward contracts and currency swap contracts. ii) Interest rate derivative financial instruments: interest rate swap contracts. The table below shows the derivative financial instruments of the Bank and subsidiaries whose possession are settled by gross amount based on the remaining days from the consolidated financial statement date to the contract maturity date. The amount disclosed is based on the cash flow of the contracts and thus part of the amount disclosed may not correspond to the amount disclosed in the consolidated financial statement. The maturity analysis for derivative financial liabilities settled by gross amount is as follows: March 31, 2025 0-30 days 31-90 days 91-180 days 181 days to 1 year Over 1 year Total Derivative financial instruments at fair value through profit or loss －Foreign exchange derivative instruments －Cash outflow $ 34,236,228 14,167,949 9,769,718 3,218,690 - 61,392,585 －Cash inflow 34,131,316 14,064,145 9,555,772 3,204,236 - 60,955,469 Total cash outflow 34,236,228 14,167,949 9,769,718 3,218,690 - 61,392,585 Total cash inflow 34,131,316 14,064,145 9,555,772 3,204,236 - 60,955,469 Net cash flow $ 104,912 103,804 213,946 14,454 - 437,116 (Continued)
Page 90
89 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements December 31, 2024 0-30 days 31-90 days 91-180 days 181 days to 1 year Over 1 year Total Derivative financial instruments at fair value through profit or loss －Foreign exchange derivative instruments －Cash outflow $ 40,045,263 13,620,759 6,163,409 5,708,876 - 65,538,307 －Cash inflow 39,427,193 13,508,692 5,944,896 5,382,052 - 64,262,833 Total cash outflow 40,045,263 13,620,759 6,163,409 5,708,876 - 65,538,307 Total cash inflow 39,427,193 13,508,692 5,944,896 5,382,052 - 64,262,833 Net cash flow $ 618,070 112,067 218,513 326,824 - 1,275,474 March 31, 2024 0-30 days 31-90 days 91-180 days 181 days to 1 year Over 1 year Total Derivative financial instruments at fair value through profit or loss －Foreign exchange derivative instruments －Cash outflow $ 39,441,357 18,471,409 3,224,469 12,248,859 - 73,386,094 －Cash inflow 39,216,141 18,170,355 3,174,644 11,932,322 - 72,493,462 Total cash outflow 39,441,357 18,471,409 3,224,469 12,248,859 - 73,386,094 Total cash inflow 39,216,141 18,170,355 3,174,644 11,932,322 - 72,493,462 Net cash flow $ 225,216 301,054 49,825 316,537 - 892,632 5) Maturity analysis of off-balance sheet items March 31, 2025 0-30 days 31-90 days 91-180 days 181 days to 1 year Over 1 year Total Issued and irrevocable loan commitments $ 1,609,366 21,138,250 842,513 3,916,086 73,826,883 101,333,098 Irrevocable credit card loan commitments 1,476 31,877 33,662 79,929 18,271,266 18,418,210 Letters of credit issued yet unused 2,409,572 5,423,484 743,872 682,683 161,401 9,421,012 Other guarantees 2,178,556 1,576,624 2,561,870 3,804,695 23,579,710 33,701,455 Total $ 6,198,970 28,170,235 4,181,917 8,483,393 115,839,260 162,873,775 (Continued)
Page 91
90 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements December 31, 2024 0-30 days 31-90 days 91-180 days 181 days to 1 year Over 1 year Total Issued and irrevocable loan commitments $ 137,495 939,928 23,097,633 4,678,031 53,769,704 82,622,791 Irrevocable credit card loan commitments 1,849 76,833 54,394 95,299 17,746,267 17,974,642 Letters of credit issued yet unused 2,259,408 4,773,597 881,706 200,717 153,179 8,268,607 Other guarantees 1,997,787 2,002,498 1,380,366 4,709,858 23,803,013 33,893,522 Total $ 4,396,539 7,792,856 25,414,099 9,683,905 95,472,163 142,759,562 March 31, 2024 0-30 days 31-90 days 91-180 days 181 days to 1 year Over 1 year Total Issued and irrevocable loan commitments $ 190,800 41,495,539 7,043,282 5,531,837 55,820,739 110,082,197 Irrevocable credit card loan commitments 3,420 417,085 316,887 262,385 16,701,670 17,701,447 Letters of credit issued yet unused 2,139,114 5,914,912 1,023,426 229,585 266,147 9,573,184 Other guarantees 2,510,505 1,877,621 1,322,921 3,086,095 18,789,543 27,586,685 Total $ 4,843,839 49,705,157 9,706,516 9,109,902 91,578,099 164,943,513 6) Maturity analysis of lease contract commitments The Bank and subsidiaries only has operating lease contract, operating lease commitment refers to, when the Bank and subsidiaries is the lessor and under the irrevocable operating lease conditions, the minimum total future rent payment. Below tables show the maturity analysis of the Bank and subsidiaries operating lease contract commitments: March 31, 2025 Below 1 year 1-5 years Over 5 years Total Operating lease income (lessor) $ 2,099 7,000 5,577 14,676 December 31, 2024 Below 1 year 1-5 years Over 5 years Total Operating lease income (lessor) $ 2,299 8,033 6,267 16,599 March 31, 2024 Below 1 year 1-5 years Over 5 years Total Operating lease income (lessor) $ 1,806 807 - 2,613 The capital expenditure commitment of the Bank and subsidiaries refers to the contract signed to obtain buildings and equipment. The maturity analysis of the capital expenditure commitment of the Bank and subsidiaries is as follows: March 31, 2025 Below 1 year 1-5 years Over 5 years Total Machinery and equipment $ 1,359,076 - - 1,359,076 Transportation equipment 2,640 - - 2,640 Miscellaneous equipment 6,306 - - 6,306 Total $ 1,368,022 - - 1,368,022 (Continued)
Page 92
91 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements December 31, 2024 Below 1 year 1-5 years Over 5 years Total Machinery and equipment $ 1,320,333 - - 1,320,333 Transportation equipment 5,542 - - 5,542 Miscellaneous equipment 6,924 - - 6,924 Total $ 1,332,799 - - 1,332,799 March 31, 2024 Below 1 year 1-5 years Over 5 years Total Machinery and equipment $ 2,565,110 - - 2,565,110 Transportation equipment 3,182 - - 3,182 Miscellaneous equipment 6,324 - - 6,324 Total $ 2,574,616 - - 2,574,616 (v) Market risk 1) Definition of market risk Market risk refers to the possible loss of the Bank’s business in or off the balance sheet results from the disadvantageous fluctuation in market price in terms of interest rates, stock prices, foreign exchange rates and commodity prices. 2) Policies and procedures of market risk management a) Strategy i) To carry out market risk management, achieve operation target and maintain healthy capital adequacy by following “D irections Governing the Market Risk Management of Taiwan Business Bank” and other relevant regulations. ii) Under the risk tolerance approved by the board of directors or board of executive directors, the Bank applies various risk control mechanism to effectively deploy and manage capital in order to maintain the market risk exposure within the tolerable extent and achieve earning target. b) Policies and procedures In order to establish the market risk management mechanism and ensure that the market risk is within the tolerable extent, the Bank set up directions governing the market risk management, remarks governing the limit of market risk and financial product valuation procedures as the primary management guidance. Other than what is stated above, the Bank also establish limit control mechanism in terms of trade positions, stop-limit, suspensions and lines of alert based on the operation notices and procedures of different financial instruments, including fix income instruments, equity securities, foreign exchange transaction and derivative financial instruments. (Continued)
Page 93
92 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements 3) Process for market risk management a) Risk identification In accordance with the rules of “D irections Governing the Market Risk Management of Taiwan Business Bank” , the Bank shall conduct appropriate market risk evaluation and document the process for later review before financial instruments are promoted. The content of evaluation includes risk factors identification, evaluation methods, cost-benefit analysis, market liquidity, risk strategy, adequacy of risk management mechanism and the influence on the Bank for undertaking market risk. b) Risk measurement i) Annually based on the business development of transaction units and submit to the board of directors or board of executive directors for approval. For the units which the positions and limits remain unchanged after evaluation, they can put the positions and limits into practice after receiving the approval from the general manager. ii) The risk measurements (or evaluations) of the financial instruments of the Bank are conducted through different information systems. For the market data and parameters of the models applied for evaluation, they shall be random inspected regularly to determine the rationality. c) Risk monitoring i) Valuation reports of various financial instruments are prepared regularly for executives to review and serve as the guidance for daily risk management operation. ii) All financial transactions are equipped with different regulations in terms of limit of loss and stop-limit. Provided that the valuation loss amount is over the limit, a stop-limit, suspension and subsequent risk control will be executed. d) Risk report Risk management department report current market risk management status of the Bank to directors, executive directors and executives to facilitate them to control the risk exposure status and adjust management procedures properly. (Continued)
Page 94
93 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements 4) Scope and method of market risk management a) Foreign exchange risk management i) Definition of foreign exchange risk management Foreign exchange risk refers to the potential profit or loss of the foreign currency financial instruments which results from the transition among fluctuating currencies. ii) Applicable scope All the financial instruments which apply to trading book position and banking book position and involve in foreign currencies. iii) Purpose for foreign exchange risk management To avoid loss of earnings or deterioration of financial status due to intensive fluctuation of foreign exchange and to increase capital deployment efficiency and business operation integrity. iv) Procedures of foreign exchange risk management 1. In order to control foreign exchange transaction risk, the Bank established trade position authorization standard for financial transaction operations, trade units and traders in current regulations. In addition, for non-commercial business foreign exchange operation, all trade units submit the required amounts of position annually based on operation status. Risk management department will evaluated the requirement and submit to the board of directors’ (executive directors) for approval. The demand will be executed after the board of directors approved. For the units which the positions remain unchanged after evaluation, they can put the positions into practice after receiving the approval from the general manager. 2. The trade units conduct various foreign financial product business, they shall fully understand the content of commodities, the risk tolerance and trade purpose. Trade units shall establish financial products trading strategies based on market status in the meeting every morning and submit the risk-benefit evaluation in the meeting minutes for the department heads to review. The trading shall follow the relevant authorization rules of the Bank and the stop-limit of all trade positions shall be executed reliably. (Continued)
Page 95
94 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements v) Process of foreign exchange risk management 1. Identification and measurement a. Risk Management department established risk factor chart based on different financial transactions to effectively identify risk factors and market risk resources. In addition, the financial transactions which the Bank and subsidiaries conducts deal with simple type financial products. For complex financial products, the Bank and subsidiaries conducts back-to-back hedge covering to effectively avoid market risk. b. Risk Management department uses Greeks to measure the influence level of exchange rate for held-for-trading spot exchange and exchange rate derivative and setup Greek's sensitivity allowance, according to the yearly demand of trade units, the state of utilization, and monitor the load of fluctuation of exchange rate in each acceptable range. c. Positions of the trading book shall be evaluated daily where the positions of the banking book shall be evaluated monthly. When there are public quotes for financial instruments, the quotes shall be the prior evaluation prices. If the financial instruments are evaluated by models, then they shall be evaluated by mathematic models prudently and the assumptions and parameters of the models shall be reviewed regularly. 2. Monitoring and report a. When the evaluation loss of non-commercial foreign exchange transactions is over the limit, the trade units shall execute a stop- limit per the regulations. If the loss amount reaches the suspension warning line or suspension limit of the financial transaction, risk management units shall report to the general manager. Provided that the loss amount reaches the annual suspension line, risk management department shall report to the board of directors or executive directors. b. Reports of operation results shall be prepared and submitted to the department heads for approval on a daily basis. (Continued)
Page 96
95 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements b) Equity security risk management i) Definition of equity security risk The market risks of the equity securities possessed by the Bank include the individual risk results from the market price fluctuation of individual equity security and the general market risk results from overall market price fluctuation. ii) Applicable scope Financial instruments similar to equity security in all trading books. iii) Purpose of equity security risk management To avoid loss of earnings or deterioration of financial status due to intensive fluctuation of equity securities and to increase capital deployment efficiency and business operation integrity. iv) Procedures of equity security risk management 1. All trade units submit the required amounts of position annually base on operation status. Risk management department will evaluate the requirement and submit to the board of directors or executive directors. The demand will be executed after approved by the board of directors. 2. The trade units shall predict the possible trend of domestic stock market based on the information of foreign and domestic security markets so as to set up the operation strategies and directions. The traders shall pay close attention to the market trend when the market opens so as to conduct security transactions and the operations as well as the meeting minutes shall be submitted to the department heads to review. v) Process of equity security risk management 1. Identification and measurement a. The risk management department apply Value at Risk models to measure the market risk of equity security investment. Furthermore, based on the trade units’ operation demand and the risk limit established by the Bank’ s risk tolerance, the risk management units effectively control the variation of risk factors under an acceptable extent. b. Trading book position shall be evaluated daily. When there is a public quote in the market, the quote shall be adopted as the prior evaluation price. If the transaction is in secondary market and the liquidity is high, the closing price can be adopted as the evaluation price. If the financial instruments are evaluated by models, then they shall be evaluated by mathematic models prudently and the assumptions and parameters of the models shall be reviewed regularly. (Continued)
Page 97
96 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements 2. Monitoring and report a. When the evaluation loss of equity security investment is over the limit, the trade units shall execute a stop-limit per regulations. If the loss amount reaches the suspension warning line or suspension limit of the financial transaction, risk management units shall report to the general manager. Provided that the loss amount reaches the annual suspension line, risk management department shall report to the board of directors or executive directors. b. Transaction reports shall be prepared and submitted to the department heads for approval on a daily basis. And the investment gains or losses shall report to the board of directors or executive directors regularly for future reference. c) Interest rate risk management i) Definition of interest rate risk Interest rate risk refers to the price decline of the Bank’s financial products which contain interest risk factors due to the disadvantageous changes in interest rate. ii) Applicable scope Financial instruments which contain interest rate factors in all trading books. iii) Purpose of interest rate risk management To avoid loss of earnings or deterioration of financial status due to intensive fluctuation of interest rate and to increase capital deployment efficiency and business operation integrity. iv) Procedures of interest rate risk management 1. In order to control interest rate risk, the Bank established trade position authorization standard for financial transaction operations, trade units and trade counterparties in current regulations. In addition, for the positions held for trading, all trade units submit the required amounts of position annually based on operation status. Risk management department will evaluate the requirement and submit to the board of directors or executive directors for approval. The demand will be executed after the board of directors approved. 2. The trade units shall consider safety, liquidity and profitability and gather market information to assess the potential risk and benefit. In additional, the trade units shall choose investment target prudently through analyzing the issuers’ credit, financial status, country risks and interest rate trends. (Continued)
Page 98
97 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements v) Process of interest rate risk management 1. Identification and measurement a. The risk management department establish risk factor charts base on different financial transaction to effectively identify risk factors and market risk resources. In addition, the financial transactions which the Bank conducts deal with simple type financial products. For complex financial products, the Bank conducts back-to-back hedge covering to effectively avoid market risk. b. Position of the trading book shall be evaluated daily. When there are public quotes for financial instruments, the quotes shall be the prior evaluation prices. If the financial instruments are evaluated by models, then they shall be evaluated by mathematic models prudently and the assumptions and parameters of the models shall be reviewed regularly. 2. Monitoring and report a. The risk management department apply DV01 to measure to what extent the trading book bond positions are influenced by the interest rate risk and set up interest rate sensitivity limit base on the requirements of the trade units and the risk tolerance of the Bank annually. b. The trade units shall prepare the income assessment tables of trade positions and traders for the department heads to review. In addition, when the evaluation loss of the position is over the limit, the trade units shall execute a stop-limit per the regulations. If the loss amount reaches the suspension warning line or suspension limit of the financial transaction, risk management department shall report to the general manager. Provided that the loss amount reaches the annual suspension line, risk management units shall report to the board of directors or executive directors. d) Concentration management i) The trade counterparties of the Bank are mostly financial institutions. To avoid the risk being over concentrated and enhance credit risk management, the Bank established financial institution credit risk limit based on the world ranking of Level 1 capital and credit ratings from The Banker. The trade units shall also pay attention to the changes of the credit status of individual financial institution as well as the changes of the national credit rating to conduct the transaction prudently. ii) For equity security investments, the Bank set up limits for single institution and single related party. (Continued)
Page 99
98 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements 5) Interest rate risk management of the banking book a) The definition and management purpose for the interest rate risk of the banking book i) The interest rate risk of the banking book refers to the negative effect towards the future net interest income or economic value of equity results from the fluctuation of interest rate. Net Interest Income (hereafter NII) is the total amount of interest revenue deducted by the total amount of interest expense; Economic Value of Equity (hereafter EVE) is the total discounted future cash inflow from assets deducted by the total discounted future cash outflow from liabilities. ii) The management purpose of the interest rate risk management of the banking book is to control the negative effect from the interest rate risk fluctuation towards NII or EVE within the approved limit extent. b) The process for the interest rate risk management of the banking book i) Identification and measurement When the Bank conducts interest rate related products, it identifies the reprising risk, yield curve risk, basis risk and option characteristic risk and measures the possible influence on the earnings and economic value results from interest rate fluctuation. ii) Monitoring and report The Bank established limits of the ratio between interest-rate-sensitivity assets and interest-rate-sensitivity liabilities, the effect to NII in 1 year when the market interest rate parallel changes 1 BP and the effect to EVE when the market interest rate changes in the six interest rate stress scenarios set by the Bank Association of the Republic of China (IRRBB) to control the banking book interest rate risk. The results of interest rate risk measurement are reported to the Assets and Liabilities Management Committee monthly and to the board of directors or executive directors quarterly. When the measurement result is over the limit, relevant units shall be convened to establish responding plan and the plan shall be submitted to the Assets and Liabilities Management Committee for discussion. After the plan is approved by the general manager, it shall be executed by the relevant business units and report to the board of directors or executive directors. (Continued)
Page 100
99 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements 6) Value at Risk a) Description of Value at Risk Value at Risk (VaR) is a statistical am ount used to evaluate the maximum possible loss of portfolio results from the changes of market risk factors within a certain period of time and a fixed confidence interval. b) Value at Risk models and assumptions In order to enhance the market risk control operation, the Bank established quantified indices of market risk for the equity security position of the trading book. Based on the historical information of the last 1 year and applies Historical Simulation Method (with the confidence interval being 99% and the duration of possession being 1 day), the Bank calculates and monitors the trend of Value at Risk. c) The limit of Value at Risk model Value at Risk is a tool to measure market risk under normal circumstance. The limits of the model are listed below: i) Value at Risk cannot reflect the losses result from other type of risks, such as credit risk and liquidity risk. ii) Value at Risk measures the possible loss of the position on hand at the end of the transaction day, but it cannot reflect the distribution of the part which actual loss exceeds Value at Risk. iii) Value at Risk model is based on historical data to evaluate the amount, and therefore it may not be able to predict the future changes of risk factors, especially for those exceptions result from significant market fluctuation. (Continued)
Page 101
100 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements 7) Foreign exchange risk disclosure and sensitivity analysis a) Foreign exchange risk exposure i) Significant net positions of foreign currencies (Market risk) Significant net positions of foreign currencies (Market risk) March 31, 2025 Currency Foreign currency amount (in thousands) NT$ amount USD $ 347,459 11,537,376 JPY 2,197,620 489,410 AUD 17,736 370,328 ZAR 82,358 148,409 CNY 19,268 88,093 Significant net positions of foreign currencies (Market risk) December 31, 2024 Currency Foreign currency amount (in thousands) NT$ amount USD $ 363,838 11,928,429 JPY 2,214,548 464,169 AUD 15,708 320,757 CNY 66,303 297,303 ZAR 64,162 111,899 Significant net positions of foreign currencies (Market risk) March 31, 2024 Currency Foreign currency amount (in thousands) NT$ amount USD $ 368,886 11,806,196 CNY 101,973 449,599 JPY 1,844,304 390,070 AUD 16,265 339,125 HKD 34,933 142,841 Note 1: Main foreign currencies are the top five foreign currencies ranked in NTD value. Note 2: Net foreign currency is the absolute value of the net positions of each foreign currency. (Continued)
Page 102
101 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements ii) Assets and liabilities of foreign currency March 31, 2025 Monetary financial assets Monetary financial liabilities Currency Foreign currency amount (in thousands) Spot rate NTD amount Foreign currency amount (in thousands) Spot rate NTD amount USD $ 14,119,274 33.2050 468,830,495 13,819,421 32.7850 453,069,731 AUD 5,756,862 20.8800 120,203,279 5,688,882 20.4200 116,166,970 CNY 8,105,360 4.5720 37,057,707 7,372,034 4.4840 33,056,199 JPY 152,796,326 0.2227 34,027,742 151,370,493 0.2096 31,727,255 HKD 6,978,411 4.2680 29,783,858 6,294,779 4.2220 26,576,557 EUR 229,357 35.9700 8,249,971 299,590 34.1400 10,228,003 ZAR 5,263,091 1.8020 9,484,090 6,434,227 1.7440 11,221,292 GBP 27,643 43.0500 1,190,031 24,862 41.1800 1,023,817 NZD 49,061 18.9600 930,197 42,052 18.5000 777,962 CAD 16,252 23.2100 377,209 16,014 22.8600 366,080 SGD 6,396 24.7700 158,429 12,623 24.1400 304,719 THB 191,356 0.9846 188,409 193,014 0.9846 190,042 Others (Note) - - 140,554 - - 141,699 Note: Consolidated disclosure is applied for other currencies not over $100,000. December 31, 2024 Monetary financial assets Monetary financial liabilities Currency Foreign currency amount (in thousands) Spot rate NTD amount Foreign currency amount (in thousands) Spot rate NTD amount USD $ 14,283,789 32.7850 468,294,030 13,819,421 32.7850 453,069,731 AUD 5,825,840 20.4200 118,963,653 5,688,882 20.4200 116,166,970 CNY 7,626,537 4.4840 34,197,393 7,371,945 4.4840 33,055,801 JPY 152,960,726 0.2096 32,060,568 151,370,493 0.2096 31,727,255 HKD 6,923,917 4.2220 29,232,778 6,294,779 4.2220 26,576,557 EUR 299,583 34.1400 10,227,764 299,590 34.1400 10,228,003 ZAR 6,435,608 1.7440 11,223,700 6,434,227 1.7440 11,221,292 GBP 24,948 41.1800 1,027,359 24,862 41.1800 1,023,817 NZD 42,106 18.5000 778,961 42,052 18.5000 777,962 CAD 16,029 22.8600 366,423 16,014 22.8600 366,080 SGD 12,582 24.1400 303,729 12,623 24.1400 304,719 THB 179,829 0.9637 173,301 179,037 0.9637 172,538 Others (Note) - - 126,472 - - 129,117 Note: Consolidated disclosure is applied for other currencies not over $100,000. (Continued)
Page 103
102 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements March 31, 2024 Monetary financial assets Monetary financial liabilities Currency Foreign currency amount (in thousands) Spot rate NTD amount Foreign currency amount (in thousands) Spot rate NTD amount USD $ 14,439,065 32.0050 462,122,288 14,010,569 32.0050 448,408,265 AUD 5,858,293 20.8500 122,145,409 5,737,788 20.8500 119,632,880 CNY 5,181,786 4.4090 22,846,495 4,958,751 4.4090 21,863,132 JPY 131,044,825 0.2115 27,715,980 129,997,956 0.2115 27,494,568 HKD 5,421,309 4.0890 22,167,733 4,856,192 4.0890 19,856,969 EUR 279,955 34.4900 9,655,648 279,858 34.4900 9,652,302 ZAR 4,828,942 1.6890 8,156,083 4,826,620 1.6890 8,152,161 GBP 45,771 40.4200 1,850,064 45,741 40.4200 1,848,851 NZD 31,051 19.1200 593,695 30,995 19.1200 592,624 CAD 14,848 23.6400 351,007 14,895 23.6400 352,118 SGD 13,569 23.7100 321,721 13,473 23.7100 319,445 CHF 3,560 35.4650 126,255 3,639 35.4650 129,057 SEK 41,933 2.9900 125,380 42,304 2.9900 126,489 THB 164,665 0.8812 145,103 168,620 0.8812 148,588 b) Foreign exchange risk sensitivity analysis (Change by 1%) Foreign exchange risk sensitivity analysis is the analysis that given other conditions remain the same, the influence on profit or loss and equity when each respective currency depreciate or appreciate by 1%. March 31, 2025 Depreciate by 1% Appreciate by 1% Currency Income Equity Income Equity USD $ (7,159) (75,914) 7,159 75,914 AUD 4,191 (33,597) (4,191) 33,597 HKD 3,338 (31,014) (3,338) 31,014 JPY 27 (3,526) (27) 3,526 GBP 6 - (6) - SGD 8 - (8) - ZAR (24) - 24 - SEK 6 - (6) - CHF 6 - (6) - CAD (9) - 9 - THB 16 - (16) - EUR (20) - 20 - NZD (53) - 53 - CNY (70,507) - 70,507 - Total $ (70,174) (144,051) 70,174 144,051 (Continued)
Page 104
103 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements December 31, 2024 Depreciate by 1% Appreciate by 1% Currency Income Equity Income Equity USD $ (3,581) (82,652) 3,581 82,652 AUD 4,119 (32,046) (4,119) 32,046 HKD 3,301 (29,741) (3,301) 29,741 JPY 51 (3,441) (51) 3,441 GBP (36) - 36 - SGD 6 - (6) - ZAR (25) - 25 - CHF 26 - (26) - CAD (3) - 3 - THB (8) - 8 - EUR 2 - (2) - NZD (21) - 21 - CNY (59,714) - 59,714 - Total $ (55,883) (147,880) 55,883 147,880 March 31, 2024 Depreciate by 1% Appreciate by 1% Currency Income Equity Income Equity USD $ 2,287 (75,147) (2,287) 75,147 AUD 4,128 (29,184) (4,128) 29,184 HKD 3,164 (25,639) (3,164) 25,639 JPY 1,047 (3,266) (1,047) 3,266 GBP (25) - 25 - SGD (27) - 27 - ZAR (41) - 41 - SEK 11 - (11) - CHF 28 - (28) - CAD 18 - (18) - THB 35 - (35) - EUR (45) - 45 - NZD (18) - 18 - CNY (57,425) - 57,425 - Total $ (46,863) (133,236) 46,863 133,236 (Continued)
Page 105
104 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements 8) Interest rate risk disclosure and sensitivity analysis a) Interest rate sensitivity analysis The assumption of interest rate sensitivity analysis is, under the circumstance that other conditions remain the same, the yield of the market increase or decrease by 1 basis point (1 bp). March 31, 2025 Interest rate increases by 1 bp Interest rate decreases by 1 bp Currency Income Equity Income Equity Trading book TWD $ (2,306) (1,443) 2,306 1,443 Banking book TWD - (78,010) - 78,010 USD - (31,525) - 31,525 EUR - (1,779) - 1,779 AUD - (126) - 126 HKD - (398) - 398 CNY - (1,189) - 1,189 ZAR - (76) - 76 Total $ (2,306) (114,546) 2,306 114,546 December 31, 2024 Interest rate increases by 1 bp Interest rate decreases by 1 bp Currency Income Equity Income Equity Trading book TWD $ (1,808) (1,563) 1,808 1,563 Banking book TWD - (79,763) - 79,763 USD - (28,514) - 28,514 EUR - (1,754) - 1,754 AUD - (129) - 129 HKD - (215) - 215 CNY - (964) - 964 ZAR - (83) - 83 Total $ (1,808) (112,985) 1,808 112,985 (Continued)
Page 106
105 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements March 31, 2024 Interest rate increases by 1 bp Interest rate decreases by 1 bp Currency Income Equity Income Equity Trading book TWD $ (1,134) (1,973) 1,134 1,973 Banking book TWD - (80,415) - 80,415 USD - (28,706) - 28,706 EUR - (1,931) - 1,931 AUD - (195) - 195 HKD - (289) - 289 CNY - (1,256) - 1,256 ZAR - (105) - 105 Total $ (1,134) (114,870) 1,134 114,870 b) Sensitivity analysis of expected net revenue/Sensitivity of equity in terms of interest rate fluctuation March 31, 2025 Effect on NII in 1 year Effect on EVE Scenario TWD USD TWD USD Interest rate increases by 100 bp 1,973,662 (23,652) (5,932,398) (135,166) Interest rate decreases by 100 bp (2,716,003) 19,155 14,133,638 121,745 December 31, 2024 Effect on NII in 1 year Effect on EVE Scenario TWD USD TWD USD Interest rate increases by 100 bp 1,732,841 (25,222) (5,345,546) (128,314) Interest rate decreases by 100 bp (2,529,293) 20,755 13,044,638 114,999 March 31, 2024 Effect on NII in 1 year Effect on EVE Scenario TWD USD TWD USD Interest rate increases by 100 bp 1,471,882 (27,313) (6,134,527) (134,799) Interest rate decreases by 100 bp (2,298,248) 26,203 14,327,150 120,946 (Continued)
Page 107
106 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements 9) Equity security risk disclosure and sensitivity analysis a) Equity security sensitivity analysis (Changes by 1%) The assumption of equity security sensitivity analysis is, under the circumstance that other conditions remain the same, the price of equity security increased or decreased by 1%. March 31, 2025 Change Currency Income Equity Equity security price increases by 1 % TWD 731 - Equity security price decreases by 1 % TWD (731) - March 31, 2024 Change Currency Income Equity Equity security price increases by 1 % TWD 8,048 - Equity security price decreases by 1 % TWD (8,048) - b) Value at Risk of equity security From April 1, 2024 to March 31, 2025 Value at Risk Average Maximum Minimum Equity security risk 8,145 28,200 - For the year ended December 31, 2024 Value at Risk Average Maximum Minimum Equity security risk 11,128 28,200 - From April 1, 2023 to March 31, 2024 Value at Risk Average Maximum Minimum Equity security risk 12,910 26,359 6,614 (vi) Transferred financial assets that are not fully derecognized The transactions, relating to transferred financial assets not qualifying for full derecognition, the Bank and subsidiaries conducts during daily operation mostly involve securities lending in accordance to repurchase agreements. Since the right to receive contractual cash flow has been transferred to others and the Bank and subsidiaries obligation to repurchase the transferred assets for a fixed price at a future date is recognized under liability, for these transactions, the Bank and subsidiaries cannot use, sell or pledge those transferred financial assets in availability period, the Bank and subsidiaries has interest rate risk and credit risk, the said transferred assets are not fully derecognized. As of March 31, 2025, December 31 and March 31, 2024, there were not any financial assets of the Bank that are not fully derecognized. (Continued)
Page 108
107 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (vii) Offsetting financial assets and financial liabilities The Bank and subsidiaries has an exercisable master netting arrangement or similar agreement in place with counterparties. When both parties reach a consensus regarding net settlement, the aforesaid exercisable master netting arrangement or similar agreement can be net settled by offsetting financial assets and financial liabilities. If not, the transaction can be settled at total amount. In the event of default involving one of the parties, the other party can have the transaction net settled. The following tables present the aforementioned offsetting financial assets and financial liabilities: March 31, 2025 Financial assets under offsetting or general agreement of net amount settlement or similar norm Gross amounts Gross amounts of financial liabilities offset Net amount of financial assets Amounts not set off in the balance sheet (d) Item of recognized financial assets (a) in the balance sheet (b) presented in the balance sheet (c)=(a)-(b) Financial instruments (Note) Cash collateral received Net amount (e)=(c)-(d) Derivative financial instruments $ 819,927 - 819,927 604,695 1,087,073 (871,841) March 31, 2025 Financial liabilities under offsetting or general agreement of net amount settlement or similar norm Gross amounts of recognized Gross amounts of financial assets offset in Net amount of financial liabilities Amounts not set off in the balance sheet (d) Item financial liabilities (a) the balance sheet (b) presented in the balance sheet (c)=(a)-(b) Financial instrument (Note) Cash collateral pledged Net amount (e)=(c)-(d) Derivative financial instruments $ 112,803 - 112,803 - 2,266,241 (2,153,438) December 31, 2024 Financial assets under offsetting or general agreement of net amount settlement or similar norm Gross amounts Gross amounts of financial liabilities offset Net amount of financial assets Amounts not set off in the balance sheet(d) Item of recognized financial assets (a) in the balance sheet (b) presented in the balance sheet (c)=(a)-(b) Financial instruments (Note) Cash collateral received Net amount (e)=(c)-(d) Derivative financial instruments $ 1,235,990 - 1,235,990 612,147 2,074,252 (1,450,409) December 31, 2024 Financial liabilities under offsetting or general agreement of net amount settlement or similar norm Gross amounts of recognized Gross amounts of financial assets offset in Net amount of financial liabilities Amounts not set off in the balance sheet(d) Item financial liabilities (a) the balance sheet (b) presented in the balance sheet (c)=(a)-(b) Financial instruments (Note) Cash collateral pledged Net amount (e)=(c)-(d) Derivative financial instruments $ 110,082 - 110,082 - 2,577,622 (2,467,540) March 31, 2024 Financial assets under offsetting or general agreement of net amount settlement or similar norm Gross amounts Gross amounts of financial liabilities offset Net amount of financial assets Amounts not set off in the balance sheet (d) Item of recognized financial assets (a) in the balance sheet (b) presented in the balance sheet (c)=(a)-(b) Financial instruments (Note) Cash collateral received Net amount (e)=(c)-(d) Derivative financial instruments $ 1,582,486 - 1,582,486 739,643 1,561,184 (718,341) (Continued)
Page 109
108 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements March 31, 2024 Financial liabilities under offsetting or general agreement of net amount settlement or similar norm Gross amounts of recognized Gross amounts of financial assets offset in Net amount of financial liabilities Amounts not set off in the balance sheet (d) Item financial liabilities (a) the balance sheet (b) presented in the balance sheet (c)=(a)-(b) Financial instruments (Note) Cash collateral pledged Net amount (e)=(c)-(d) Derivative financial instruments $ 86,264 - 86,264 - 2,089,366 (2,003,102) Note: Master netting arrangements and non-cash financial collaterals are included. (ap) Capital Management (i) The Bank takes business development and risk control into consideration and calculates capital adequacy per “R egulations Governing the Capital Adequacy Ratio and Capital Category of Banks” a nd “C alculation Methods and Forms of Proprietary Capital and Risk Capital of Banks”. The ratio between proprietary capital and risk capital shall rem ain above the regulated minimum ratio. (ii) In order to maintain adequate capital and reach a balance between risk control and business development, the Bank established “Directions Governing Capital Adequacy” as the guidance for controlling capital adequacy. The scope of the directions includes, except for the least capital requirements for credit risk, market risk and operation risk, significant risk such as banking book interest rate risk, liquidity risk and concentration risk. In addition, in order to link business strategies, capital and risk management, the Bank sets up capital management plan annually for the president’s approval and reports to Risk Management Committee and the board of directors quarterly about relevant risks and capital control status. (iii) The Bank identifies, measures, monitors and reports various risks based on the directions, notices and relevant rules of competent authority regarding credit risk, market risk, operation risk, interest rate risk of the banking book, and liquidity risk so as to be familiar with current business environment and monitors and adjusts capital adequacy effectively. (iv) To cope with the implementation of new Basel Accord, the Bank set up complete risk management system, risk management operation tracking procedures to provide the management with appropriate risk management information for making decisions. Therefore, the Bank is able to maintain adequate capital within the tolerable extent and to ensure the provision of proprietary capital of the Bank corresponds with the overall operating risk characteristics of the Bank. 1) Tier 1 capital a) Common stock equity: The item includes common stock deducted by treasury stock, goodwill and other intangible assets, deferred tax assets based on future profit status of the Bank, unrealized gain on financial assets measured at fair value through other comprehensive income, operating reserve and deficiency of allowance for bad debts, real estate retained earning increment arising from applying the fair value or the revaluation reserve as the deemed cost when first adopting IFRSs, and 25% of the major investment on financial related business. (Continued)
Page 110
109 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements b) Other Tier 1 capital: 25% of the perpetual non-accumulated subordinated financial debentures deducted by the major investment on financial related business. 2) Tier 2 capital The item includes perpetual accumulated subordinated financial debentures, long term subordinated debenture, real estate retained earning increment arising from applying the fair value or the revaluation reserve as the deemed cost when first adopting IFRSs, 45% of unrealized gain on financial assets measured at fair value through other comprehensive income, and 50% of the major investment on financial related business. (aq) Investing and financing activities not affecting current cash flow The Bank and subsidiaries investing and financing activities which did not affect the current cash flow for the three months ended March 31, 2025 and 2024 were carried out to acquire right-of-use assets under leases. Please refer to Note 6(l). Reconciliation of liabilities arising from financing activities were as follows: Non-cash changes January 1, 2025 Cash flows Foreign exchange rate movement Fair value changes Other changes March 31, 2025 Financial liabilities at fair value through profit or loss $ 9,927,272 - 126,000 (183,357) - 9,869,915 Bank notes payable 53,460,000 (250,000) - - - 53,210,000 Lease liabilities 1,307,295 (123,161) 3,196 - 51,501 1,238,831 Total liabilities from financing activities $ 64,694,567 (373,161) 129,196 (183,357) 51,501 64,318,746 Non-cash changes January 1, 2024 Cash flows Foreign exchange rate movement Fair value changes Other changes March 31, 2024 Financial liabilities at fair value through profit or loss $ 9,175,560 - 390,000 (117,421) - 9,448,139 Bank notes payable 53,850,000 (390,000) - - - 53,460,000 Lease liabilities 1,319,108 (123,195) 7,031 - 82,832 1,285,776 Total liabilities from financing activities $ 64,344,668 (513,195) 397,031 (117,421) 82,832 64,193,915 (Continued)
Page 111
110 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (ar) Structured entities that not included in consolidated financial reports (i) The table below presents the types of structured entities that the Bank and subsidiaries does not include in consolidated financial reports but in which they hold an interest: Types of structured entities Nature and purpose Interests held by the Bank and subsidiaries Private fund Investing in funds that cannot be freely traded on the open market Investing in units or limited partnership interests issued by these funds. Asset securitization product Investing in commercial real estate assets securitization products Investment in asset-backed securities issued by unconsolidated structured entities (ii) The scales of structures entities not included in consolidated financial reports were as follow: March 31, 2025 December 31, 2024 March 31, 2024 Private fund $ 213,235 205,544 202,601 Asset securitization product 1,463,022 480,013 524,294 Total $ 1,676,257 685,557 726,895 (iii) The carrying amounts of interests held by the Bank and subsidiaries in these structured entities were as follows: Assets held by the Bank and subsidiaries March 31, 2025 December 31, 2024 March 31, 2024 Financial assets at fair value through profit or loss $ 213,235 205,544 202,601 Financial assets at fair value through other comprehensive income 1,406,498 420,142 454,689 Investments in debt instruments at amortized cost 56,524 59,871 69,605 Total $ 1,676,257 685,557 726,895 The maximum amount of risk exposure to the Bank and subsidiaries endures to a loss incurred from special purpose entities that is not included in consolidated financial reports is the carrying amount of interests held by the Bank and subsidiaries. (iv) As of March 31, 2025, December 31 and March 31, 2024, the Bank and subsidiaries has not provided any financial support to its special purpose entities that is not included in consolidated financial reports. (Continued)
Page 112
111 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (7) Related-party transactions (a) Names and relationship with related parties The followings are entities that have had transactions with related party during the periods covered in the consolidated financial statements. Name of related party Relationship with the Bank and subsidiaries Bank of Taiwan Corporate director of the Bank Ministry of Finance, R.O.C Corporate director of the Bank National Development Fund, Executive Yuan Corporate director of the Bank Taiwan Business Bank Guild Corporate director of the Bank Small and Medium Enterprise Credit Guarantee Fund of Taiwan (Note) Substantive related parties TBB No. 1 Venture Capital Limited Partnership Substantive related parties Fubon Securities Co., Ltd. (Note) Substantive related parties Media Talk Consulting Co., Ltd. Associates Others Management and other related parties of the Bank Note : No longer a related party commencing from the third quarter of 2024, the amounts disclosed below reflect only the transactions that occurred during the period in which the entity was considered a related party. (b) Significant transactions with related parties (i) Due from banks March 31, 2025 Amount % Bank of Taiwan $ 141,919 1.20 December 31, 2024 Amount % Bank of Taiwan $ 157,342 0.98 March 31, 2024 Amount % Bank of Taiwan $ 455,294 4.06 Interest rates are the same as those with regular clients. (Continued)
Page 113
112 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (ii) Call loans to banks Interest Income Highest balance For the three months ended March 31, 2025 Annual interest rate Bank of Taiwan $ 1,331,660 378 1.200%~4.530% Interest income Highest balance For the three months ended March 31, 2024 Annual interest rate Bank of Taiwan $ 339,772 322 1.627%~1.934% Interest rates are the same as those with regular clients. (iii) Call loans from banks March 31, 2025 December 31, 2024 March 31, 2024 Bank of Taiwan $ 830,125 1,279,090 2,920,300 Interest Expense Highest balance For the three months ended March 31, 2025 Annual interest rate Bank of Taiwan $ 7,191,062 24,536 1.30%~4.93% Interest Expense Highest balance For the three months ended March 31, 2024 Annual interest rate Bank of Taiwan $ 13,481,342 32,502 0.68%~5.87% Interest rates are the same as those with regular clients. (iv) Deposits March 31, 2025 Amount % Others $ 1,487,897 0.08 (Continued)
Page 114
113 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements December 31, 2024 Amount % Others $ 1,557,190 0.08 March 31, 2024 Amount % Others $ 2,382,359 0.13 Interest rates are the same as those with regular clients. (v) Credit March 31, 2025 Number of Performing situations Transaction terms Category clients or name of related party Highest balance Ending balance Performing loan Non-performing Loans Collaterals are different to regular clients Employee consumer loans 16 6,601 6,272 6,272 - none none Self-use home mortgages loans 73 426,872 421,764 421,764 - real estate none Others Natural person 373,338 364,364 364,364 - real estate none December 31, 2024 Number of Performing situations Transaction terms Category clients or name of related party Highest balance Ending balance Performing loan Non-performing Loans Collaterals are different to regular clients Employee consumer loans 16 14,362 4,500 4,500 - none none Self-use home mortgages loans 70 593,976 383,471 383,471 - real estate none Others Natural person 595,978 391,026 391,026 - real estate none March 31, 2024 Number of Performing situations Transaction terms Category clients or name of related party Highest balance Ending balance Performing loan Non-performing Loans Collaterals are different to regular clients Employee consumer loans 39 14,362 13,666 13,666 - none none Self-use home mortgages loans 121 566,521 549,815 549,815 - real estate none Others Natural person 560,660 553,227 553,227 - real estate none (vi) Donation: For the three months ended March 31, 2025 2024 Small and Medium Enterprise Credit Guarantee Fund of Taiwan $ - 81,790 Taiwan Business Bank Guild 4,500 4,500 Total $ 4,500 86,290 (Continued)
Page 115
114 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (vii) Receivables from related parties March 31, 2025 December 31, 2024 March 31, 2024 National Development Fund, Excutive Yuan $ 692 707 - (viii) Guarantees: None. (ix) Service fees: None. (x) Rental revenue: None. (xi) Derivatives financial instrument transactions: None. (xii) Sales of Non–Performing Loans Transactions: None. (xiii) Unearned revenue: March 31, 2025 December 31, 2024 March 31, 2024 TBB No. 1 Venture Capital Limited Partnership $ 12,786 - 12,786 (xiv) Other revenue: For the three months ended March 31, 2025 2024 TBB No. 1 Venture Capital Limited Partnership $ 4,262 4,262 (c) Major management salary information For the three months ended March 31, 2025 2024 Salary and other short-term employee benefits $ 37,345 38,326 Post-employment benefits 702 813 Total $ 38,047 39,139 (8) Pledged assets: Please refer to notes 6(g) and 6(h) for more details. (Continued)
Page 116
115 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (9) Commitments and contingencies: (a) Significant commitments and contingencies were as follows: March 31, 2025 December 31, 2024 March 31, 2024 Marketable securities held for custody $ 5,000,085 5,185,261 7,702,665 Bills collected for others 36,298,809 38,732,548 38,993,780 Bills lent for others 41,138,282 39,588,139 42,433,518 Guarantees and letters of credit 43,122,467 42,162,129 37,159,869 Trust liabilities 312,900,336 299,620,745 226,283,845 Items held for custody 745,718 737,404 648,856 Registered government bonds for sale 67,745,400 71,430,200 77,457,900 Registered short-term bills for sale 4,080,307 4,425,334 3,362,915 Guarantee notes payable 32,335,800 32,277,500 32,358,950 (b) Unrecognized contractual commitments: As of March 31, 2025, December 31 a nd March 31, 2024, major constructions in progress and purchases amounted to $1,111,790, $1,143,904 a nd $1,042,034 r espectively, of which $854,490, $919,362 and $827,638 respectively, remained unpaid. (c) In 1996, the Bank’ s World Trade Center Branch was sued for handling a letter of credit export collection from Chin Seen Industrial Ltd., which allegedly used a forged export document and failed to ship the goods to the importer, the International Comagnie de Commercialization et d’ Invertissement (I.C.C.I.) of the Republic of Zaire, who suffered a loss thereon. In November 1998, I.C.C.I. initiated a case with the Court of Commerce of Brussels in Belgium, requesting the L/C opening bank (Banque Bruxelles Lambert, or BBL) and the Bank to jointly pay compensation of USD7,830, plus interest, losses, and expenses for the L/C. On August 31, 2005, the Court of Commerce of Brussels ordered the Bank has to compensate for the damage of USD7,674, plus interest to I.C.C.I. Disatisfied with the decision made by the court, the Bank has engaged a local attorney in Belgium to formally file an appeal. In February 2011, Court of Appeal in Brussels had made an intermediate adjudication wherein both I.C.C.I and the Bank were responsible for the offense. Furthermore, on November 16, 2011, the court ruled that the Bank should be responsible for 90% of the negligence proportion. In terms of the decision made by the court on the second instance, the Bank has filed an appeal on November 3, 2011, in which the court ruled against the Bank on February 6, 2013. Since the Bank and I.C.C.I could not reach an agreement on the exchange rate and the calculation of the compensation, I.C.C.I filed an appeal to the Court of Frankfurt in Germany in October 2016, demanding for the Bank's account in Germany to be seized, in which the Bank lodged the guaranty amount of EUR13,200 to the court to rescind the order for attachment. (Continued)
Page 117
116 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements In July 2017, I.C.C.I applied for compulsory execution to the guaranty amount, which was transferred to I.C.C.I. by the court. The Bank then filed a lawsuit objecting to the debt through the attorney, in which the case was dismissed by the Court of Frankfurt in November 2018 and remanded back for reconsideration in November 2019 after the Bank's appeal was granted by the High Court of Frankfurt. On March 16, 2019, I.C.C.I. has filed a statement of grounds for objection and requested the Frankfurt High Court to revoke its ruling, wherein the Bank has appointed a lawyer to act as an attorney in the Federal Supreme Court of Justice to defend its case, which is currently being tried by the Regional Court of Frankfurt. The Federal Supreme Court of Justice has denied the I.C.C.I interlocutory appeal on May 20, 2021. The Frankfurt District Court ruled in favor of the Bank in the first instance on August 23, 2023. Moreover, I.C.C.I. was ordered to pay the Bank the amount of EUR1,046, plus interest, on November 17, 2017. wherein it disagreed with the ruling and filed an appeal on September 25, 2023. The High Court of Frankfurt dismissed the appeal on July 11, 2024. Also, in October and November 2019, the Bank received subpoenas from the court of the Democratic Republic of Congo by a third person Star Marine, who demanded I.C.C.I to pay the damage of USD1,130, and held the Bank jointly liable. I.C.C.I, in turn, demanded the Bank to pay the amount of USD20,060, less its reimbursed amount, to make a security deposit of EUR$14,000. In light of the above matter, the Bank has engaged local attorneys to represent itself in the Court of Congo, who will merge the two cases as one. In April 2021, the Court of Congo demanded the Bank to pay the approximate amount of EUR20,060 to I.C.C.I., who will have to compensate Star Marine the damage amounting to USD1,130, as well as make a security deposit of EUR14,000 in the domestic bank in Congo. According to the statement of plaintiff and considering that I.C.C.I has already received the amount of EUR14,860, an addition provision for lawsuit amounting to $76,350 has been made in 2021. Please refer to Note 6(v) for more details. As of March 31, 2025, the Bank has accrued the compensation of $261,366 and EUR9,660. (10) Losses from disasters: None (11) Subsequent Events: None (Continued)
Page 118
117 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (12) Others: (a) Information on loan quality, concentration of credit extensions, interest rate-sensitivity, profitability and maturity analysis (i) Loan quality: Month/Year March 31, 2025 Items Non-performing loans (Note1) Total loans Non-performing loan ratio (Note2) Allowance for credit losses Coverage ratio (Note3) Corporate finance Secured Unsecured 1,412,266 467,910 800,229,605 395,547,857 0.18 % 0.12 % 10,452,200 5,319,433 740.10 % 1,136.85 % Residence mortgages(Note 4) 189,979 295,336,205 0.06 % 3,849,652 2,026.36 % Consumer Cash cards - - - % - - % Microcredit(Note 5) 4,550 402,682 1.13 % 8,005 175.93 % finance Others Secured 171,399 163,774,015 0.10 % 2,136,991 1,246.79 % (Note 6) Unsecured 10,564 12,240,923 0.09 % 164,520 1,557.36 % Total loan business 2,256,668 1,667,531,287 0.14 % 21,930,801 971.82 % Overdue receivables Total receivables Delinquency ratio Allowance for credit losses Coverage ratio Credit cards business 1,047 1,160,146 0.09 % 8,960 855.78 % Account receivable factoring-without recourse (Note 7) - - - % - - % Month/Year December 31, 2024 Items Non-performing loans (Note1) Total loans Non-performing loan ratio (Note2) Allowance for credit losses Coverage ratio (Note3) Corporate finance Secured Unsecured 2,099,371 336,268 791,779,808 395,200,885 0.27 % 0.09 % 10,498,619 5,367,883 500.08 % 1,596.31 % Residence mortgages(Note 4) 129,309 278,754,583 0.05 % 3,681,544 2,847.09 % Consumer Cash cards - - - % - - % Microcredit(Note 5) 4,694 402,305 1.17 % 7,758 165.27 % finance Others Secured 185,206 162,726,471 0.11 % 2,153,456 1,162.74 % (Note 6) Unsecured 11,190 12,320,435 0.09 % 165,723 1,480.99 % Total loan business 2,766,038 1,641,184,487 0.17 % 21,874,983 790.84 % Overdue receivables Total receivables Delinquency ratio Allowance for credit losses Coverage ratio Credit cards business 841 1,298,254 0.06 % 9,260 1,101.07 % Account receivable factoring-without recourse (Note 7) - - - % - - % (Continued)
Page 119
118 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements Month/Year March 31, 2024 Items Non-performing loans (Note1) Total loans Non-performing loan ratio (Note2) Allowance for credit losses Coverage ratio (Note3) Corporate finance Secured Unsecured 1,583,501 417,697 761,662,179 364,611,627 0.21 % 0.11 % 9,915,153 4,865,456 626.15 % 1,164.83 % Residence mortgages(Note 4) 151,265 219,813,195 0.07 % 2,853,676 1,886.54 % Consumer Cash cards - - - % - - % Microcredit(Note 5) 2,675 361,512 0.74 % 6,288 235.07 % finance Others Secured 194,136 151,798,110 0.13 % 1,972,548 1,016.07 % (Note 6) Unsecured 36,135 13,452,782 0.27 % 183,854 508.80 % Total loan business 2,385,409 1,511,699,405 0.16 % 19,796,975 829.92 % Overdue receivables Total receivables Delinquency ratio Allowance for credit losses Coverage ratio Credit cards business 805 1,071,794 0.08 % 10,994 1,365.71 % Account receivable factoring-without recourse (Note 7) - - - % - - % Note 1 Non-performing loans represent the amount of overdue loans as reported in accordance with the "Regulations on the Procedures for Banking Institutions to Evaluate Assets and Deal with Past Due/Non-performing Loans". The credit card overdue loans represent the amount of overdue loans as reported in accordance with Jin-Kuan-Yin-(4)-Zi No. 0944000378, dated July 6, 2005. Note 2 Non-performing loan ratio = Non-performing loans ÷ t otal loans; Credit card delinquency ratio = Overdue receivables÷ receivables Note 3 Coverage ratio for loans = allowance for credit losses ÷ n on-performing loans; Coverage ratio for credit card business = allowance for credit losses ÷ o verdue receivables. Note 4 For residential mortgage loans, a borrower provides his/her (or spouse’ s or minor child’ s) house as collateral in full and pledges it to the financial institution for the purpose of obtaining funds to purchase property and to construct or repair a house. Note 5 Microcredit loans are defined by Jin-Kuan-Yin-(4)-Zi No. 09440010950, dated December 19, 2005, and do not include credit cards or cash cards. Note 6 Others in consumer finance are secured and unsecured consumer loans other than residential mortgage loans, cash card loans, and microcredit loans, and do not include credit cards. Note 7 In accordance with Jin-Kuan-Yin-(5)-Zi No. 0945000494, dated July 19, 2005, the amounts of without-recourse factoring will be classified as overdue receivables within three months from the date that suppliers or insurance companies resolve not to compensate the loss. (Continued)
Page 120
119 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements Overdue loans and receivables exempted from reporting March 31, 2025 December 31, 2024 March 31, 2024 Loans may be exempted from reporting as a non-performing loan Receivables may be exempted from reporting as overdue receivables Loans may be exempted from reporting as a non-performing loan Receivables may be exempted from reporting as overdue receivables Loans may be exempted from reporting as a non-performing loan Receivables may be exempted from reporting as overdue receivables Pursuant to a contract under a debt negotiation plan (Note1) $ 86 424 95 463 142 631 Pursuant to a contract under a debt liquidation plan and a debt relief plan (Note 2) 79,274 12,842 79,064 13,300 71,802 16,108 Total $ 79,360 13,266 79,159 13,763 71,944 16,739 Note 1: In accordance with Jin-Kuan-Yin-(1)-Zi No. 09510001270, dated April 25, 2006, a bank is required to make supplemental disclosure of credit information which was approved under the debt coordination mechanism of unsecured consumer debts by the Bankers Association of the R.O.C. Note 2: In accordance with Jin-Kuan-Yin-(1)-Zi No. 09700318940, dated September 15, 2008 and Jin-Kuan-Yin-Fa-Zi No. 10500134790, dated September 20, 2016, a bank is required to make supplemental disclosure of credit information once debtors apply for pre-negotiation, pre-conciliation, relief and liquidation under the “C onsumer Debt Clearance Act.” (ii) Concentration of credit extensions March 31, 2025 Ranking Group enterprise Credit amount Credit amount to equity ratio (%) 1 A group. (Real estate for sale and rental with own or leased property) 23,141,847 %17.28 2 B company. (Railway transportation) 20,228,474 %15.10 3 C group. (Other holding) 14,547,887 %10.86 4 D group. (Steel rolling and extruding) 10,124,543 %7.56 5 E group. (Liquid crystal panel and components manufacturing) 7,437,879 %5.55 6 F group. (Computers manufacturing) 7,436,844 %5.55 7 G group. (Real estate development) 7,405,610 %5.53 8 H group. (Real estate development) 7,135,884 %5.33 9 I group. (Real estate development) 6,689,166 %4.99 10 J group. (Computers manufacturing) 6,508,180 %4.86 (Continued)
Page 121
120 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements December 31, 2024 Ranking Group enterprise Credit amount Credit amount to equity ratio (%) 1 A group. (Real estate for sale and rental with own or leased property) 22,774,375 %17.33 2 B company. (Railway transportation) 20,228,474 %15.39 3 C group. (Other holding) 14,640,993 %11.14 4 D group. (Steel rolling and extruding) 9,579,930 %7.29 5 E group. (Liquid crystal panel and components manufacturing) 8,398,427 %6.39 6 G group. (Real estate developmentg) 7,416,110 %5.64 7 F group. (Computers manufacturing) 7,292,812 %5.55 8 K group. (Real estate development) 7,027,987 %5.35 9 H group. (Real estate development) 6,987,484 %5.32 10 L group. (Financial leasing) 6,979,217 %5.31 March 31, 2024 Ranking Group enterprise Credit amount Credit amount to equity ratio (%) 1 B company. (Railway transportation) 20,248,040 %16.40 2 A group. (Real estate for sale and rental with own or leased property) 17,796,142 %14.42 3 C group. (Other holding) 11,657,986 %9.44 4 D group. (Steel rolling and extruding) 9,915,794 %8.03 5 G group. (Real estate development) 7,406,407 %6.00 6 E group. (Liquid crystal panel and components manufacturing) 7,072,757 %5.73 7 H group. (Real estate development) 6,874,923 %5.57 8 F group. (Computers manufacturing) 6,578,289 %5.33 9 K group. (Real estate development) 6,199,160 %5.02 10 L group. (Financial Leasing) 5,905,573 %4.78 Note 1 The top ten enterprise groups other than government or stated-owned enterprises are ranked according to their total outstanding credit amount. If the borrowers belong to an enterprise group, the aggregate credit balance of the enterprise should be calculated and disclosed as a code number for each such borrower together with an indication of the borrowers’ line of business. In addition, if the borrowers are enterprise groups, the enterprise group’s industry sector with the maximum exposure to credit risk in its main industry sector should be disclosed, along with the “c lass” o f the industry, in compliance with the Standard Industrial Classification System of the R.O.C. posted by the Directorate-General of Budget, Accounting and Statistics, Executive Yuan, R.O.C. (Continued)
Page 122
121 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements Note 2 Enterprise group is as defined in Article 6 of the “S upplementary Provisions to the Taiwan Stock Exchange Corporation Rules for Review of Securities Listings”. Note 3 Consists of loans (import/export bills negotiated, bills and notes discounted, overdrafts, short-term loans, short-term secured loans, margin loans receivable, medium-term loans, medium-term secured loans, long-term loans, long-term secured loans, overdue loans), exchange bills negotiated, accounts receivable factoring without recourse, bankers’ acceptance receivable, guarantees proceeds. Note 4 In the calculation of Credit amount to equity ratio, the domestic bank should be calculated in the net value of head office. The Foreign bank should be calculated in the net value of Taiwan branch. (iii) Interest rate-sensitivity information 1) Analysis of interest rate-sensitive assets and liabilities (New Taiwan dollars) Unit : % March 31, 2025 Item 1~90 days 91~180 days 181days~1year over 1 year total Interest rate-sensitive assets $ 1,702,392,006 66,167,307 30,645,260 142,992,635 1,942,197,208 Interest rate-sensitive liabilities 1,442,569,744 108,318,998 96,855,360 52,893,064 1,700,637,166 Interest rate sensitivity gap 259,822,262 (42,151,691) (66,210,100) 90,099,571 241,560,042 Net worth 133,921,417 Ratio of interest rate-sensitive assets to liabilities (%) 114.20 Ratio of interest rate-sensitive gap to net worth (%) 180.37 December 31, 2024 Item 1~90 days 91~180 days 181days~1year over 1 year total Interest rate-sensitive assets $ 1,710,951,247 37,165,355 42,802,710 146,534,932 1,937,454,244 Interest rate-sensitive liabilities 1,464,813,013 94,762,368 111,936,395 53,379,521 1,724,891,297 Interest rate sensitivity gap 246,138,234 (57,597,013) (69,133,685) 93,155,411 212,562,947 Net worth 131,433,782 Ratio of interest rate-sensitive assets to liabilities (%) 112.32 Ratio of interest rate-sensitive gap to net worth (%) 161.73 March 31, 2024 Item 1~90 days 91~180 days 181days~1year over 1 year total Interest rate-sensitive assets $ 1,561,766,007 55,181,568 50,982,951 145,369,783 1,813,300,309 Interest rate-sensitive liabilities 1,315,675,666 99,852,615 129,827,020 61,954,233 1,607,309,534 Interest rate sensitivity gap 246,090,341 (44,671,047) (78,844,069) 83,415,550 205,990,775 Net worth 123,433,583 Ratio of interest rate-sensitive assets to liabilities (%) 112.82 Ratio of interest rate-sensitive gap to net worth (%) 166.88 (Continued)
Page 123
122 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements Note 1 Listed amount refers to the Bank's amount of N.T. dollars and does not include contingent assets or liabilities. Note 2 Interest rate-sensitive assets and liabilities refer to revenues or costs of interest– yielding assets and interest–bearing liabilities, which are affected by interest rate fluctuations. Note 3 Interest rate-sensitivity gap = Interest rate-sensitive assets - Interest-rate-sensitive liabilities. Note 4 Ratio of interest rate-sensitive assets to liabilities=Interest rate-sensitive assets ÷ Interest rate-sensitive liabilities (New Taiwan dollars interest-rate-sensitive assets and New Taiwan dollars interest-rate-sensitive liabilities). 2) Analysis of the interest-sensitive assets and liabilities (US dollars) Unit : In Thousands of US Dollars, % March 31, 2025 Item 1~90 days 91~180 days 181days~1year over 1 year total Interest rate-sensitive assets $ 4,624,984 445,525 258,440 1,844,201 7,173,150 Interest rate-sensitive liabilities 7,823,789 2,207,013 1,399,483 - 11,430,285 Interest rate sensitivity gap (3,198,805) (1,761,488) (1,141,043) 1,844,201 (4,257,135) Net worth 4,033,170 Ratio of interest rate-sensitive assets to liabilities (%) 62.76 Ratio of interest rate-sensitive gap to net worth (%) (105.55) December 31, 2024 Item 1~90 days 91~180 days 181days~1year over 1 year total Interest rate-sensitive assets $ 4,299,171 368,321 171,449 1,976,057 6,814,998 Interest rate-sensitive liabilities 6,866,815 2,268,523 2,166,345 - 11,301,683 Interest rate sensitivity gap (2,567,644) (1,900,202) (1,994,896) 1,976,057 (4,486,685) Net worth 4,008,961 Ratio of interest rate-sensitive assets to liabilities (%) 60.30 Ratio of interest rate-sensitive gap to net worth (%) (111.92) March 31, 2024 Item 1~90 days 91~180 days 181days~1year over 1 year total Interest rate-sensitive assets $ 4,220,000 380,518 312,932 1,888,099 6,801,549 Interest rate-sensitive liabilities 7,817,313 1,286,727 2,063,119 - 11,167,159 Interest rate sensitivity gap (3,597,313) (906,209) (1,750,187) 1,888,099 (4,365,610) Net worth 3,856,697 Ratio of interest rate-sensitive assets to liabilities (%) 60.91 Ratio of interest rate-sensitive gap to net worth (%) (113.20) (Continued)
Page 124
123 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements Note 1 Listed amount refers to the Bank's amount of US dollars and does not include contingent assets or liabilities. Note 2 Interest rate-sensitive assets and interest rate-sensitive liabilities refer to the interest yielding assets and interest-bearing liabilities which the revenue and cost are affected by interest rate fluctuation. Note 3 Interest rate sensitivity gap = interest rate-sensitive assets-interest rate-sensitive liabilities. Note 4 Ratio of interest rate-sensitive assets to liabilities=Interest rate-sensitive assets÷ Interest rate-sensitive liabilities (US dollars interest-rate-sensitive assets and US dollars interest-rate-sensitive liabilities). (iv) Profitability Unit: % Item March 31, 2025 March 31, 2024 The ratio of return on Before income tax 0.16 0.16 assets After income tax 0.13 0.13 The ratio of return on Before income tax 2.83 2.87 equity After income tax 2.21 2.34 Net income ratio 34.17 33.03 Note 1 The ratio of return on assets = Income before (after) income tax expense ÷ a verage assets. Note 2 The ratio of return on equity = Income before (after) income tax expense ÷ a verage equity. Note 3 Net income ratio = Net income after income tax expense ÷ Net revenue. Note 4 Income before (after) income tax expense refers to income accumulated from January of the current year to the current period end. (v) Maturity analysis for assets and liabilities 1) Maturity analysis in New Taiwan dollars March 31, 2025 Amount during the maturity period from the balance sheet date to due date Total 0-10days 11-30days 31-90days 91-180days 181days-1year Over 1 year Major maturity capital inflow $ 2,033,114,463 212,731,889 136,538,816 179,945,920 219,105,558 172,404,821 1,112,387,459 Major maturity capital outflow 2,501,358,769 53,361,453 98,517,438 238,978,654 296,788,240 573,116,724 1,240,596,260 Gap (468,244,306) 159,370,436 38,021,378 (59,032,734) (77,682,682) (400,711,903) (128,208,801) (Continued)
Page 125
124 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements Note: Listed amounts are denominated in New Taiwan dollars of the Bank and subsidiaries, including loan commitments of credit agreement and estimates to outflow $474,716,880. December 31, 2024 Amount during the maturity period from the balance sheet date to due date Total 0-10days 11-30days 31-90days 91-180days 181days-1year Over 1 year Major maturity capital inflow $ 2,062,028,075 275,546,802 111,168,658 183,300,924 190,601,135 199,560,713 1,101,849,843 Major maturity capital outflow 2,500,180,857 54,039,652 141,896,057 224,242,889 254,965,444 553,220,800 1,271,816,015 Gap (438,152,782) 221,507,150 (30,727,399) (40,941,965) (64,364,309) (353,660,087) (169,966,172) Note: Listed amounts are denominated in New Taiwan dollars of the Bank and subsidiaries, including loan commitments of credit agreement and estimates to outflow $443,780,063. March 31, 2024 Amount during the maturity period from the balance sheet date to due date Total 0-10days 11-30days 31-90days 91-180days 181days-1year Over 1 year Major maturity capital inflow $ 1,938,114,156 202,115,163 165,069,768 179,932,546 189,673,849 171,268,836 1,030,053,994 Major maturity capital outflow 2,387,654,321 51,493,765 96,530,675 205,390,996 265,484,201 525,713,819 1,243,040,865 Gap (449,540,165) 150,621,398 68,539,093 (25,458,450) (75,810,352) (354,444,983) (212,986,871) Note: Listed amounts are denominated in New Taiwan dollars of the Bank and subsidiaries, including loan commitments of credit agreement and estimates to outflow $455,013,326. 2) Maturity analysis in US dollars Unit : In Thousands of US Dollars March 31, 2025 Amount during the maturity period from the balance sheet date to due date Total 0-30days 31-90days 91-180days 181days-1year Over 1 year Major maturity capital inflow $ 12,869,861 2,970,508 1,454,519 1,777,087 3,534,437 3,133,310 Major maturity capital outflow 13,415,677 3,906,576 3,043,307 2,747,912 1,915,461 1,802,421 Gap (545,816) (936,068) (1,588,788) (970,825) 1,618,976 1,330,889 Note: Listed amounts are denominated in US dollars of the Bank and subsidiaries, including loan commitments of credit agreement and estimates to outflow USD $517,323. (Continued)
Page 126
125 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements December 31, 2024 Amount during the maturity period from the balance sheet date to due date Total 0-30days 31-90days 91-180days 181days-1year Over 1 year Major maturity capital inflow $ 12,714,577 3,371,963 1,991,120 793,677 3,412,664 3,145,153 Major maturity capital outflow 13,348,668 3,312,719 2,700,650 2,700,382 2,789,305 1,845,612 Gap (634,091) 59,244 (709,530) (1,906,705) 623,359 1,299,541 Note: Listed amounts are denominated in US dollars of the Bank and subsidiaries, including loan commitments of credit agreement and estimates to outflow USD $586,992. March 31, 2024 Amount during the maturity period from the balance sheet date to due date Total 0-30days 31-90days 91-180days 181days-1year Over 1 year Major maturity capital inflow $ 12,729,060 3,267,402 2,180,508 1,382,409 2,978,961 2,919,780 Major maturity capital outflow 13,405,875 4,185,118 2,818,064 1,619,792 2,827,563 1,955,338 Gap (676,815) (917,716) (637,556) (237,383) 151,398 964,442 Note: Listed amounts are denominated in US dollars of the Bank and subsidiaries, including loan commitments of credit agreement and estimates to outflow USD $617,901. (Continued)
Page 127
126 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (13) Other disclosures: (a) Information on significant transactions: (i) Individual securities acquired or disposed of with accumulated amount exceeding the lower of NT$300 million or 10% of the capital stock: None. (ii) Acquisition of individual real estate with amount exceeding the lower of NT$300 million or 10% of the capital stock: None. (iii) Disposal of individual real estate with amount exceeding the lower of NT$300 million or 10% of the capital stock: None. (iv) Service charge discounts on transactions with related parties in an aggregate amount of NT$5 million or more: None. (v) Receivables from related parties with amounts exceeding the lower of NT$300 million or 10% of the capital stock: None. (vi) Information on NPL disposal transaction: None. (vii) Types of securitization instruments approved to be issued pursuant to financial assets securitization rules or real estate securitization rules and other relevant information: None. (viii) Business relationships and significant intercompany transactions: Transaction status for the three months ended March 31, 2025 No (Note 1) Trader Counterparty Relationship (Note 2) Account Amount Terms Percentage accounted for consolidated net revenue or total assets 0 Taiwan Business Bank, Ltd. TBB International Leasing Co., Ltd. 1 Deposits and remittances 24,100 No difference with non- related parties - % 1 TBB International Leasing Co., Ltd. Taiwan Business Bank, Ltd. 2 Right-of-use assets 2,620 No difference with non- related parties - % 1 TBB International Leasing Co., Ltd. Taiwan Business Bank, Ltd. 2 Lease liabilities 2,660 No difference with non- related parties - % 0 Taiwan Business Bank, Ltd. TBB International Leasing Co., Ltd. 1 Net revenue other than interest 227 No difference with non- related parties - % 0 Taiwan Business Bank, Ltd. TBB Venture Capital Co., Ltd. 1 Deposits and remittances 21,086 No difference with non- related parties - % 2 TBB Venture Capital Co., Ltd. Taiwan Business Bank, Ltd. 2 Right-of-use assets 275 No difference with non- related parties - % 2 TBB Venture Capital Co., Ltd. Taiwan Business Bank, Ltd. 2 Lease liabilities 282 No difference with non- related parties - % 0 Taiwan Business Bank, Ltd. TBB Venture Capital Co., Ltd. 1 Net revenue other than interest 45 No difference with non- related parties - % 0 Taiwan Business Bank, Ltd. Taiwan Business Bank International Leasing Co., Ltd. 1 Deposits and remittances 291 No difference with non- related parties - % 0 Taiwan Business Bank, Ltd. TBB Consulting Co., Ltd. 1 Deposits and remittances 105,654 No difference with non- related parties - % 0 Taiwan Business Bank, Ltd. TBB Consulting Co., Ltd. 1 Net revenue other than interest 249 No difference with non- related parties - % 3 TBB Consulting Co., Ltd. Taiwan Business Bank, Ltd. 2 Right-to-use assets 1,530 No difference with non- related parties - % 3 TBB Consulting Co., Ltd. Taiwan Business Bank, Ltd. 2 Lease liabilities 1,562 No difference with non- related parties - % 2 TBB Venture Capital Co., Ltd. TBB Consulting Co., Ltd. 3 Business expenses 7,839 No difference with non- related parties 0.09 % 2 TBB Venture Capital Co., Ltd. TBB Consulting Co., Ltd. 3 Accounts payable 29,308 No difference with non- related parties - % Note: 1. The meaning of the number is as follows. (1) Zero stands for the parent company (2) Subsidiaries are numbered in a sequence of Arabic numerals from 1 based on company category. 2. There are three kinds of relationships with counterparty (1) Parent company to subsidiary (2) Subsidiary to parent company (3) Between subsidiaries (ix) Other significant transactions that may have substantial influence upon the decisions made by financial report users: None. (Continued)
Page 128
127 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (b) Information on investees: (i) The following is the information on investees (excluding information on investees in Mainland China): (Unit : thousand shares) The cross holding of the Bank and its related parties Number of Total Name of investee Location Main business scope Shareholding ratio Book value Investment gain (loss) Number of shares proforma shares Number of shares Shareholding ratio Note TBB International Leasing Co., Ltd. Taiwan Leasing business 100.00 % 1,689,076 17,551 155,000 - 155,000 100.00 % Already written-off when preparing the consolidated financial statements TBB (Cambodia) Microfinance Institution Plc Cambodia SMEs and personal finance business 100.00 % 677,552 7,689 20 - 20 100.00 % 〞 TBB Venture Capital Co., Ltd. Taiwan Investing business 100.00 % 1,414,956 1,179 133,181 - 133,181 100.00 % 〞 TBB Consulting Co., Ltd. Taiwan Consulting business 100.00 % 109,019 3,236 5,000 - 5,000 100.00 % 〞 Media Talk Consulting Co., Ltd. Taiwan Investing cultural and creative business 20.00 % - - 200 - 200 20.00 % (ii) Loans to others: Actual Range of Nature The necessary reason for Allowance Guarantee Limited amount for Total limited NO. Creditor Debtor Interaction Account Related party Highest Amount Ending balance drawdown amount interest rate of the loan Dealing amount short-term loans for bad debts Name Value individual object amount for loan 1 TBB International Leasing Co., Ltd. Hsin Chuan Construction Co., Ltd. Financial receivables No 58,694 42,030 100,000 2%-10% 2 - To the lender for buying goods 420 None - 413,727 1,654,907 1 TBB International Leasing Co., Ltd. Xi Quan Restaurant Co., Ltd. Financial receivables No 98,827 94,326 100,000 2%-10% 2 - To the lender for buying goods 943 None - 413,727 1,654,907 1 TBB International Leasing Co., Ltd. Maw Shing Top Co., Ltd. Financial receivables No 5,512 3,006 15,000 2%-10% 2 - To the lender for buying goods 30 None - 413,727 1,654,907 1 TBB International Leasing Co., Ltd. Yu Ding Investment Co., Ltd. Financial receivables No 47,762 43,260 50,000 2%-10% 2 - To the lender for buying goods 433 None - 413,727 1,654,907 1 TBB International Leasing Co., Ltd. Chao-Chi Property Management Consulting Co., Ltd. Financial receivables No 8,477 - 20,000 2%-10% 2 - To the lender for buying goods - None - 413,727 1,654,907 1 TBB International Leasing Co., Ltd. Qing Rui Construction Co., Ltd. Financial receivables No 17,872 15,725 20,000 2%-10% 2 - To the lender for buying goods 157 None - 413,727 1,654,907 1 TBB International Leasing Co., Ltd. Li Cheng Construction Co., Ltd. Financial receivables No 15,071 12,114 18,000 2%-10% 2 - To the lender for buying goods 121 None - 413,727 1,654,907 1 TBB International Leasing Co., Ltd. 99 Bottles Co. Ltd. Financial receivables No 10,000 8,375 10,000 2%-10% 2 - To the lender for buying goods 84 None - 413,727 1,654,907 1 TBB International Leasing Co., Ltd. V-Optech Inc. Financial receivables No 9,731 9,189 10,000 2%-10% 2 - To the lender for buying goods 92 None - 413,727 1,654,907 1 TBB International Leasing Co., Ltd. Wen Ying International Logistics Co., Ltd. Financial receivables No 3,853 3,853 5,106 2%-10% 2 - To the lender for buying goods 39 None - 413,727 1,654,907 1 TBB International Leasing Co., Ltd. Shye Yao Steel Co., Ltd. Financial receivables No 30,000 25,110 30,000 2%-10% 2 - To the lender for buying goods 251 None - 413,727 1,654,907 (Continued)
Page 129
128 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements Actual Range of Nature The necessary reason for Allowance Guarantee Limited amount for Total limited NO. Creditor Debtor Interaction Account Related party Highest Amount Ending balance drawdown amount interest rate of the loan Dealing amount short-term loans for bad debts Name Value individual object amount for loan 1 TBB International Leasing Co., Ltd. Flagship Square Enterprise Co Ltd. Financial receivables No 25,000 23,858 25,000 2%-10% 2 - To the lender for buying goods 239 None - 413,727 1,654,907 1 TBB International Leasing Co., Ltd. Weineng Machinery Sheet Metal Co., Ltd. Financial receivables No 8,000 7,706 8,000 2%-10% 2 - To the lender for buying goods 77 None - 413,727 1,654,907 1 TBB International Leasing Co., Ltd. Liang-wei Tobacco&Liq uor Co., Ltd. Financial receivables No 10,000 9,191 10,000 2%-10% 2 - To the lender for buying goods 92 None - 413,727 1,654,907 1 TBB International Leasing Co., Ltd. Good Appetite Co., Ltd. Financial receivables No 8,000 8,000 16,000 2%-10% 2 - To the lender for buying goods 80 None - 413,727 1,654,907 1 TBB International Leasing Co., Ltd. Hung-Bo Food Co., Ltd. Financial receivables No 8,864 7,465 15,000 2%-10% 2 - To the lender for buying goods 75 None - 413,727 1,654,907 1 TBB International Leasing Co., Ltd. Yousing Enterprise Co Ltd. Financial receivables No 23,542 21,128 30,000 2%-10% 2 - To the lender for buying goods 211 None - 413,727 1,654,907 1 TBB International Leasing Co., Ltd. Yung Yuan Co., Ltd. Financial receivables No 5,080 3,062 12,000 2%-10% 2 - To the lender for buying goods 31 None - 413,727 1,654,907 1 TBB International Leasing Co., Ltd. Wisdom International Pet Science Co., Ltd. Financial receivables No 15,088 15,088 25,000 2%-10% 2 - To the lender for buying goods 151 None - 413,727 1,654,907 1 TBB International Leasing Co., Ltd. Mr. Mick Co., Ltd. Financial receivables No 5,754 4,840 8,000 2%-10% 2 - To the lender for buying goods 48 None - 413,727 1,654,907 1 TBB International Leasing Co., Ltd. Yong Da Long Construction Ltd. Financial receivables No 10,095 9,129 12,000 2%-10% 2 - To the lender for buying goods 91 None - 413,727 1,654,907 1 TBB International Leasing Co., Ltd. Beef Traden Co., Ltd. Financial receivables No 6,706 5,396 8,000 2%-10% 2 - To the lender for buying goods 54 None - 413,727 1,654,907 1 TBB International Leasing Co., Ltd. Chi Hong Co., Ltd. Financial receivables No 4,000 3,643 4,000 2%-10% 2 - To the lender for buying goods 36 None - 413,727 1,654,907 1 TBB International Leasing Co., Ltd. Master Builde Construction Co., Ltd. Financial receivables No 20,000 20,000 20,000 2%-10% 2 - To the lender for buying goods 200 None - 413,727 1,654,907 1 TBB International Leasing Co., Ltd. Kuan Lin Electrical Engineerin Co., Ltd. Financial receivables No 5,000 5,000 5,000 2%-10% 2 - To the lender for buying goods 50 None - 413,727 1,654,907 Note1: The meaning of the number is as follows. (1) Zero stands for issuer. (2) Investee companies are numbered in a sequence of Arabic numerals from 1 based on company category. Note2: The amount of loans is still valid up to now. Note3: The nature of the loan nature is as follows. (1) 1 stands for business relation. (2) 2 stands for the necessity for short-term loans. Note4: Limited amount for individual object：25% net worth of the latest TBB International Leasing Co., Ltd.'s audited financial statements. Note5: Total limited amount for loan： 100% net worth of the latest TBB International Leasing Co., Ltd.'s audited financial statements. (Continued)
Page 130
129 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (iii) Endorsements and guarantee for others: None (iv) Acquisition of securities: At the end of the period Company acquired Type and name of the security Relationship with the security issuer Account Number of shares Carrying amount Share proportion Market price Note TBB International Leasing Co., Ltd. Taiwan Business International Leasing Co., Ltd. Parent company Investment under equity method - 1,081,364 100.00 % 1,081,364 The transaction has been written off when preparing the consolidated financial statements. TBB International Leasing Co., Ltd. G12245、G12246 - Financial assets at fair value through profit or loss - 100,000 - % 100,000 Financial debentures TBB Venture Capital Co., Ltd. G12245 - Financial assets at fair value through profit or loss - 100,000 - % 100,000 〞 TBB Venture Capital Co., Ltd. Energenesis Biomedical Co., Ltd. - Financial assets at fair value through profit or loss 548 36,197 0.62 % 36,197 Listed Stocks TBB Venture Capital Co., Ltd. Lungteh Shipbuilding Co., Ltd. - Financial assets at fair value through profit or loss 479 54,136 0.42 % 54,136 〞 TBB Venture Capital Co., Ltd. Evergreen Aviation Technologies Corporation - Financial assets at fair value through profit or loss 13 1,275 - % 1,275 〞 TBB Venture Capital Co., Ltd. Tigerair Taiwan Co., Ltd. - Financial assets at fair value through profit or loss 356 32,251 0.08 % 32,251 〞 TBB Venture Capital Co., Ltd. Starlux Airlines Co., Ltd. - Financial assets at fair value through profit or loss 5,612 145,634 0.19 % 145,634 〞 TBB Venture Capital Co., Ltd. Eir Genix, Inc. - Financial assets at fair value through profit or loss 845 58,981 0.28 % 58,981 OTC Stocks TBB Venture Capital Co., Ltd. Chenfull Precision Co., Ltd - Financial assets at fair value through profit or loss 147 20,948 0.25 % 20,948 〞 TBB Venture Capital Co., Ltd. Handa Pharmaceuticals, Inc. - Financial assets at fair value through profit or loss 1,500 121,464 1.06 % 121,464 Emerging Stocks TBB Venture Capital Co., Ltd. Locus Cell Co., Ltd. - Financial assets at fair value through profit or loss 1,338 29,637 0.67 % 29,637 〞 TBB Venture Capital Co., Ltd. TFBS Bioscience, Inc. - Financial assets at fair value through profit or loss 260 7,319 0.74 % 7,319 〞 TBB Venture Capital Co., Ltd. Iovtec Co., Ltd. - Financial assets at fair value through profit or loss 556 51,388 2.61 % 51,388 〞 TBB Venture Capital Co., Ltd. MegaPro Biomedical Co., Ltd. - Financial assets at fair value through profit or loss 200 2,340 0.31 % 2,340 〞 TBB Venture Capital Co., Ltd. Annji Pharmaceutical Co., Ltd. - Financial assets at fair value through profit or loss 400 7,760 0.43 % 7,760 〞 TBB Venture Capital Co., Ltd. Ina Energy Corporation - Financial assets at fair value through profit or loss 2,179 87,470 0.98 % 87,470 〞 TBB Venture Capital Co., Ltd. Song Chuan Precision Co., Ltd - Financial assets at fair value through profit or loss 665 109,053 0.92 % 109,053 〞 TBB Venture Capital Co., Ltd. aetherAI Co., Ltd. - Financial assets at fair value through profit or loss 1,730 65,481 1.95 % 65,481 〞 TBB Venture Capital Co., Ltd. Techplasma Technology Co., Ltd - Financial assets at fair value through profit or loss 944 36,049 2.84 % 36,049 Unlisted Stocks TBB Venture Capital Co., Ltd. Hephas Energy Corporation Ltd. - Financial assets at fair value through profit or loss 979 73,447 2.96 % 73,447 〞 TBB Venture Capital Co., Ltd. Manford Machinery Co., Ltd - Financial assets at fair value through profit or loss 1,195 31,237 2.99 % 31,237 〞 (Continued)
Page 131
130 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements At the end of the period Company acquired Type and name of the security Relationship with the security issuer Account Number of shares Carrying amount Share proportion Market price Note TBB Venture Capital Co., Ltd. E-Fomula Technologies Inc. - Financial assets at fair value through profit or loss 760 19,000 2.84 % 19,000 Unlisted Stocks TBB Venture Capital Co., Ltd. Amazing Cool Technology Co., Ltd - Financial assets at fair value through profit or loss 390 9,602 2.02 % 9,602 〞 TBB Venture Capital Co., Ltd. Long-Shun Green Energy Technology Ltd - Financial assets at fair value through profit or loss 1,135 43,550 2.99 % 43,550 〞 TBB Venture Capital Co., Ltd. Toyo Automation Co., Ltd - Financial assets at fair value through profit or loss 289 32,826 0.95 % 32,826 〞 TBB Venture Capital Co., Ltd. Quants AI Inc. - Financial assets at fair value through profit or loss 1,600 11,168 8.89 % 11,168 〞 TBB Venture Capital Co., Ltd. Honley Auto. Parts Co., Ltd - Financial assets at fair value through profit or loss 7,000 119,000 5.75 % 119,000 〞 TBB Venture Capital Co., Ltd. Juncheng Technology Co., Ltd - Financial assets at fair value through profit or loss 600 12,702 1.53 % 12,702 〞 TBB Venture Capital Co., Ltd. Asia Hydrogen Energy Corporation - Financial assets at fair value through profit or loss 490 18,436 3.34 % 18,436 〞 TBB Venture Capital Co., Ltd. Eti Ca Battery Inc. - Financial assets at fair value through profit or loss 575 30,475 2.76 % 30,475 〞 TBB Venture Capital Co., Ltd. Yi Chuan Technology Co., Ltd - Financial assets at fair value through profit or loss 1,189 9,629 0.98 % 9,629 〞 TBB Venture Capital Co., Ltd. How Kan Entertainment Production Co., Ltd - Financial assets at fair value through profit or loss 580 19,000 2.87 % 19,000 〞 TBB Venture Capital Co., Ltd. Maxima Biotech Inc. - Financial assets at fair value through profit or loss 1,425 35,625 4.76 % 35,625 〞 TBB Venture Capital Co., Ltd. GoodLinker Co., Ltd. - Financial assets at fair value through profit or loss 100 3,000 2.86 % 3,000 〞 TBB Venture Capital Co., Ltd. Yiyi Pictures Co., Ltd. - Financial assets at fair value through profit or loss 85 2,992 2.94 % 2,992 〞 TBB Venture Capital Co., Ltd. Longwalk social enterprise, Co., Ltd. - Financial assets at fair value through profit or loss 120 780 12.77 % 780 〞 TBB Venture Capital Co., Ltd. Carpost Co., Ltd. - Financial assets at fair value through profit or loss 330 3,901 2.84 % 3,901 〞 TBB Venture Capital Co., Ltd. Rising FinTech Corp. - Financial assets at fair value through profit or loss 38 450 1.95 % 450 〞 TBB Venture Capital Co., Ltd. Unoscope Technology Inc. - Financial assets at fair value through profit or loss 90 660 0.96 % 660 〞 TBB Venture Capital Co., Ltd. Pinkoi Inc. - Financial assets at fair value through profit or loss 93 14,777 0.53 % 14,777 〞 TBB Venture Capital Co., Ltd. Taiwania Buffalo III Biotechnology Venture Capital LLP. - Financial assets at fair value through profit or loss - 69,825 4.57 % 69,825 Private Fund TBB Venture Capital Co., Ltd. Ju He Venture Capital LLP. - Financial assets at fair value through profit or loss - 30,747 2.46 % 30,747 〞 TBB Venture Capital Co., Ltd. TBB No.1 Venture Capital Limited Partnership - Financial assets at fair value through profit or loss - 11,959 1.12 % 11,959 〞 TBB Venture Capital Co., Ltd. Outstanding Capital Limited Partnership - Financial assets at fair value through profit or loss - 28,761 4.86 % 28,761 〞 TBB Venture Capital Co., Ltd. Jia Da International Development Co., Ltd. - Financial assets at fairvalue through other comprehensive income 2,919 30,624 8.52 % 30,624 Unlisted Stocks TBB Consulting Co., Ltd. Media Talk Consulting Co., Ltd Associates Investment under equity method 200 - 20.00 % - (Continued)
Page 132
131 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements At the end of the period Company acquired Type and name of the security Relationship with the security issuer Account Number of shares Carrying amount Share proportion Market price Note TBB Consulting Co., Ltd. TBB No.1 Venture Capital Limited Partnership - Financial assets at fair value through profit or loss - 1,196 0.11 % 1,196 Private Fund (v) Accumulative purchases or sales of the same investee companies amounting to over $300,000 or 10% of paid-in capital: None. (vi) Acquisition of real estate amounting to over $300,000 or 10% of paid-in capital: None. (vii) Disposition of real estate amounting to over $300,000 or 10% of paid-in capital: None. (viii) Discount of commissions and handling fees with related parties amounting to over $5,000: None. (ix) Receivables from related parties amounting to over $300,000 or 10% of paid-in capital: None. (x) Transactions of financial derivatives: None. (xi) Sale of non-performing loans information: None. (xii) Types of securitization instruments and related information approved by financial assets securitization rules or real estate securitization rules: None. (xiii) Other significant transactions that might have substantial influence over the decision making of the financial statement users: None. (c) Information on investments in Mainland China: (i) The names of investees in Mainland China, the main businesses and products, and other information: Name of investee Investment Accumulated amount transferred from Investment transferred out or recovered Accumulated amount transferred from The current profit or loss of Shares directly or indirectly Investment income for the period Ending carrying Accumulated inward remittance of earnings as company in Mainland China Major business Paid-in capital method (Note 1) Taiwan, beginning of the period Transferred out Recovered Taiwan, end of the period the investee (Note 2) possessed by the Bank (Notes 2 and 4) value of investment of the end of period Taiwan Business Bank, Ltd. Shanghai branch Banking business 3,910,537 (CNY800 million) (Operating capital) (3) 3,910,537 (CNY800 million) - - 3,910,537 (CNY800 million) - Shanghai branch of the Bank, not an investee company Note 4 4,748,364 None Taiwan Business Bank, Ltd. Wuhan branch Banking business 3,942,815 (CNY800 million) (Operating capital) (3) 3,942,815 (CNY800 million) - - 3,942,815 (CNY800 million) - Wuhan branch of the Bank, not an investee company Note 4 4,597,947 " Taiwan Business Bank International Leasing Co., Ltd. Leasing business 838,305 (CNY170 million) (Operating capital) (1) 838,305 (CNY170 million) - - 838,305 (CNY170 million) 9,099 (2)c 100% 9,099 (2)c 1,081,364 " Note 1: Investment method is divided into three categories and are listed as follows: (1) Directly invest in Mainland China. (2) Investment in Mainland China companies through a third region. (3) Others: establishment of oversea branches Note 2: The column of “Investment gains (losses)”: (1) If the company is still in the preparation process, and does not have any investment gain or loss, please specify. (2) The bases for recognition of investment income or loss have three methods, please specify. a. The audited financial reports that are issued by an international accounting firm which is connected to an accounting firm in Taiwan. b The audited financial reports that are issued by the Taiwan parent company’s designated accounting firm. c. Others (3) Please specify if information regarding current gains or losses of an investee is not retrievable. Note 3: The number is expressed in New Taiwan Dollars. Note 4: The operating result of Shanghai and Wuhan branch have been included in the Bank. (Continued)
Page 133
132 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (ii) Limitation on investment in Mainland China: Name of Company Accumulated outflow of investment from Taiwan to Mainland China, as of the end of period Investment amount authorized by Investment Commission, MOEA Upper limit on investment authorized by Investment Commission, MOEA Taiwan Business Bank, Ltd. (Note) 8,691,657 (CNY 1,770 million) 8,691,657 (CNY 1,770 million) 80,352,850 Note: The investment amount in China of the subsidiary TBB International Leasing Co., Ltd. is included. (d) Information of major shareholders: Shareholding Shareholder’s Name Shares Percentage Bank of Taiwan 1,486,465,695 %16.21 National Development Fund, Executive Yuan 537,855,378 %5.87 (Continued)
Page 134
133 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (14) Segment information: (a) General information The chief operating decision maker is the general manager of the Bank and subsidiaries who is in charge of all major projects' approval, budget review and performance measurement. In order to express operating activities legitimately, the reportable segments of the Bank are Bank segment, Securities segment, Trust segment, Insurance agency segment and Others. Securities segment, Trust segment, Insurance agency segment and Other segments don't meet the quantitative thresholds, therefore regarded as the same reporting segment. The main operations of the banking segment are engaged in the deposits, remittance and loans in New Taiwanese Dollars or foreign currencies, as well as securities investments. The major operating activities of securities segment are securities brokerage, financing, ancillary business of futures trading and providing clients a platform for securities investment. The trust segment mainly provides customers relevant financial services, including securities under writing, custodian bank service, new type trust business and specific trust funds investing in domestic or foreign securities. Insurance agency segment primarily provides life and property insurance products to clients. Other segments include all the business of subsidiaries, which main operations are leasing, financing, consulting, and venture capital. The profit or loss of the operating segments of the Bank and subsidiaries is measured by income from continuing operation before tax. The reported amount is consistent with the financial statements which were provided to the chief operating decision maker in order to use it as the base of resource allocation and performance measurement. (b) Segment information For the three months ended March 31, 2025 Banking Segment Securities, Trust, Insurance agent and Others Adjustment and Elimination Total Net interest revenue $ 4,753,918 90,790 - 4,844,708 Net revenue other than interest 2,427,226 1,355,245 (37,494) 3,744,977 Net revenue 7,181,144 1,446,035 (37,494) 8,589,685 Bad debt expense, commitment and guarantee liability provision (790,595) 2,306 - (788,289) Operating expenses (3,781,359) (270,809) 7,839 (4,044,329) Income from continuing operation before tax $ 2,609,190 1,177,532 (29,655) 3,757,067 Total assets $ 2,329,557,511 20,840,837 (4,075,547) 2,346,322,801 Total liabilities $ 2,199,503,398 13,082,930 (184,944) 2,212,401,384 (Continued)
Page 135
134 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the three months ended March 31, 2024 Banking Segment Securities, Trust, Insurance agent and Others Adjustment and Elimination Total Net interest revenue $ 4,434,052 82,475 - 4,516,527 Net revenue other than interest 2,924,302 1,152,749 16,984 4,094,035 Net revenue 7,358,354 1,235,224 16,984 8,610,562 Bad debt expense, commitment and guarantee liability provision (1,200,393) (2,559) - (1,202,952) Operating expenses (3,671,840) (243,203) 7,106 (3,907,937) Income from continuing operation before tax $ 2,486,121 989,462 24,090 3,499,673 Total assets $ 2,208,685,459 19,088,839 (3,956,591) 2,223,817,707 Total liabilities $ 2,088,856,673 11,847,211 (319,760) 2,100,384,124 (c) Significant client information: No single customer represents 10% or more of the Bank and subsidiaries operating revenue. Therefore, no disclosure of major customer information is required.
Page 136
135 (English Translation of Consolidated Financial Statements Originally Issued in Chinese.) Reviewed only, not audited in accordance with generally standards as of March 31, 2025 and 2024. TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Consolidated Balance Sheets of Security Division March 31, 2025, December 31, 2024 and March 31, 2024 (Expressed in Thousands of New Taiwan Dollars) March 31, 2025 December 31, 2024 March 31, 2024 Assets Amount ％ Amount ％ Amount ％ Current Assets： 113200 Current financial assets at fair value through other comprehensive income $ 1,993,231 19 1,098,288 11 200,741 2 114030 Margin loans receivable 3,828,819 35 4,032,095 38 3,254,462 33 114040 Refinancing margin - - - - 2,174 - 114050 Refinancing collateral receivable - - - - 2,400 - 114130 Accounts receivable 1,397,627 13 590,132 6 705,212 7 119000 Other current assets 17,190 - 108,446 1 76,524 1 Total current assets 7,236,867 67 5,828,961 56 4,241,513 43 Non-current Assets： 123200 Non-current financial assets at fair value through other comprehensive income 3,221,302 30 4,301,380 41 5,214,380 53 123300 Non-current financial assets at amortized cost 299,096 3 299,067 3 298,974 3 125000 Property and equipment, net 36,562 - 34,469 - 39,161 - 125800 Right-of-use assets, net 106 - 113 - 136 - 127000 Intangible assets 23,030 - 26,362 - 20,560 - 129000 Other non-current assets 34,764 - 33,613 - 33,561 1 Total non-current assets 3,614,860 33 4,695,004 44 5,606,772 57 Total assets $ 10,851,727 100 10,523,965 100 9,848,285 100 March 31, 2025 December 31, 2024 March 31, 2024 Liabilities and equity Amount % Amount % Amount % Current Liabilities： 214010 Liabilities for bonds with attached repurchase agreements $ 1,028,548 10 941,063 9 950,341 10 214040 Securities financing refundable deposits 32,147 - 57,578 1 19,068 - 214050 Deposits payable for securities financing 35,317 - 74,701 1 42,064 - 214130 Accounts payable 1,300,187 12 493,774 4 614,323 6 216000 Current lease liabilities 30 - 30 - 30 - 219000 Other current liabilities 52,247 - 157,519 1 117,909 1 Total current liabilities 2,448,476 22 1,724,665 16 1,743,735 17 229030 Guaranteed deposits received 20 - 20 - 20 - 226000 Non-current lease liabilities 77 - 84 - 107 - 229110 Inter-department accounts, credit 6,094,569 56 6,272,775 60 5,789,223 59 Total non-current liabilities 6,094,666 56 6,272,879 60 5,789,350 59 Total liabilities 8,543,142 78 7,997,544 76 7,533,085 76 Equity parent company 301110 Assigned working capital 2,200,000 20 2,200,000 21 2,200,000 22 304020 Special reserve 185,127 2 185,127 2 185,127 2 304040 Unappropriated retained earnings 53,837 1 287,922 3 67,915 1 305290 Other equity, other (130,379) (1) (146,628) (2) (137,842) (1) Total equity 2,308,585 22 2,526,421 24 2,315,200 24 Total liabilities and equity $ 10,851,727 100 10,523,965 100 9,848,285 100
Page 137
136 (English Translation of Consolidated Financial Statements Originally Issued in Chinese.) Reviewed only, not audited in accordance with auditing standards. TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income of Security Division For the three months ended March 31, 2025 and 2024 (Expressed in Thousands of New Taiwan Dollars) For the three months ended March 31, 2025 2024 Amount ％ Amount ％ Revenues： 401000 Brokerage handling fee revenue $ 113,773 69 128,125 75 401110 Handling fees from securities financing 148 - 157 - 421200 Interest revenue 48,443 30 42,958 25 424100 Future commission revenue 495 - 629 - 425300 Impairment loss (impairment gain and reversal of impairment loss) 842 1 1 - 428000 Other operating income 440 - 296 - 164,141 100 172,166 100 Expenses： 501000 Brokerage handling fee expenses 8,412 5 9,306 5 503000 Refinancing processing fee expenses 2 - 12 - 521200 Financial costs 2,191 1 1,597 1 528000 Other operating expenditure 207 - 239 - 530000 Operating expenses 84,779 52 80,243 47 602000 Other losses 14,713 9 12,854 7 110,304 67 104,251 60 Net income 53,837 33 67,915 40 805000 Other comprehensive income： 805615 Unrealized gains (losses) from investment in debt instruments measured at fair value through other comprehensive income 16,249 10 (26,035) (15) 805000 Other comprehensive income (net amount after tax) 16,249 10 (26,035) (15) Total comprehensive income $ 70,086 43 41,880 25