TBB - Interim / Quarterly Report 2020

Stock code：2834

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES

Consolidated Financial Statements

with Independent Auditors’ Review Report For the Nine Months Ended September 30, 2020 and 2019

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 are 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.

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	Contents	Page
Cover Page		1
Table of Contents		2
Independent Auditors' Review Report		3
Consolidated Balance Sheets		4
Consolidated Statements of Comprehensive Income		5
Consolidated Statements of Changes in Equity		6
Consolidated Statements of Cash Flows		7
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	9～10
4.	Summary of significant accounting policies	11～27
5.	Significant accounting assumptions and judgments, and major sources of	28
	estimation uncertainty
6.	Explanation of significant accounts	29～119
7.	Related-party transactions	120～123
8.	Pledged assets	123
9.	Significant commitments and contingencies	124～125
10.	Significant losses from disasters	125
11.	Significant subsequent events	125
12.	Others	126～134
13.	Other disclosures
	(A) Information on significant transactions	134～135
	(B) Information of investees	136～137
	(C) Information on investments in Mainland China	138
	(D) Information of major shareholders	138
14.	Segment information	139～141
Segment information of Security Division		142～143

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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. and subsidiaries as of September 30, 2020 and 2019, and the related consolidated statements of comprehensive income for the three months and nine months ended September 30, 2020 and 2019, as well as changes in equity and cash flows for the nine months ended September 30, 2020 and 2019, 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, “Interim Financial Reporting” endorsed 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 Statement of Auditing Standards 65, “ Review of Financial Information Performed by the Independent Auditor of the Entity” . 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 generally accepted auditing standards 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 September 30, 2020 and 2019, and of its consolidated financial performance for the three months and nine months ended September 30, 2020 and 2019, and its consolidated cash flows for the nine months ended September 30, 2020 and 2019 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 IASs 34, “Interim Financial Reporting” endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

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The engagement partners on the reviews resulting in this independent auditors’ review report are CHUNG, TAN TAN and CHEN, CHUN KUANG.

KPMG

Taipei, Taiwan (Republic of China) October 28, 2020

Notes to Readers

The accompanying consolidated financial statements are intended only to present the consolidated financial position, financial performance and 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.

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(English Translation of Consolidated Financial Statements Originally Issued in Chinese.) Reviewed only, not audited in accordance with generally accepted auditing standards as of September 30, 2020 and 2019

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES

Consolidated Balance Sheets

September 30, 2020, December 31, and September 30, 2019

(Expressed in Thousands of New Taiwan Dollars)

September 30, 2020 Assets Amount ％ 11000 Cash and cash equivalents (Notes 6(A) and 7) $ 32,329,346 2 11500 Due from the Central Bank and call loans to banks (Notes 6(B) and 7) 83,347,122 5 12000 Financial assets at fair value through profit or loss (Note 6(C)) 29,046,139 2 12100 Financial assets at fair value through other comprehensive income (Notes 6(G) and (P)) 114,714,511 7 12200 Investment in debt instruments at amortized cost (Note 6(H)) 230,816,898 13 12500 Securities purchased under resell agreements (Note 6(D)) 10,644,096 1 13000 Receivables (Note 6(E)) 41,556,291 2 13200 Current tax assets 122,855 - 13500 Discounts and loans, net (Notes 6(F) and 7) 1,184,757,119 66 15500 Other financial assets (Note 6(I)) 14,372 - 18500 Property and equipment, net (Note 6(J)) 14,489,846 1 18600 Right-of-use assets, net (Note 6(K)) 1,015,074 - 19000 Intangible assets, net 372,622 - 19300 Deferred tax assets (Note 6(Y)) 2,037,942 - 19500 Other assets, net (Note 6(L)) 10,023,917 1 Total assets $ 1,755,288,150 100	December 31, 2019 Amount ％ 31,395,561 2 125,431,516 7 26,972,786 1 102,597,144 6 263,056,842 15 13,399,113 1 27,736,905 2 810 - 1,132,462,936 65 19,928 - 14,498,237 1 1,051,559 - 352,376 - 1,624,651 - 5,552,450 - 1,746,152,814 100	September 30, 2019
		Amount ％ 39,012,963 2 100,601,682 6 17,469,396 1 95,215,148 6 268,170,790 16 6,045,080 - 22,966,211 1 64,866 - 1,130,914,106 66 19,241 - 14,483,886 1 851,289 - 342,676 - 1,509,051 - 6,897,721 1 1,704,564,106 100

Liabilities and equity Liabilities 21000 Deposits from the Central Bank and banks (Notes 6(M) and 7) 21500 Due to the Central Bank and banks (Note 6(N)) 22000 Financial liabilities at fair value through profit or loss (Notes 6(C)、(O) and (S)) 22500 Notes and bonds issued under repurchase agreement (Note 6(P)) 23000 Payables (Note 6(Q)) 23200 Current tax liabilities 23500 Deposits and remittances (Notes 6(R) and 7) 24000 Bank notes payable (Note 6(S)) 25500 Other financial liabilities (Note 6(T)) 25600 Provisions (Note 6(U)) 26000 Lease liabilities (Note 6(V)) 29300 Deferred tax liabilities (Note 6(Y)) 29500 Other liabilities (Note 6(W)) Total liabilities Equity attributable to owners of parent 31101 Common stock (Note 6(X)) 31500 Capital Surplus(Note 6(X)) Retained earnings: 32001 Legal reserve (Note 6(X)) 32003 Special reserve (Note 6(X)) 32005 Unappropriated retained earnings (Note 6(X)) 32500 Other equity interest (Note 6(X)) Total equity Total liabilities and equity	September 30, 2020 Amount % $ 114,740,534 7 17,058,790 1 8,961,099 1 3,028,033 - 51,605,359 3 1,500 - 1,388,929,286 79 59,250,000 3 5,908,558 - 3,158,910 - 991,305 - 895,743 - 3,402,899 - 1,657,932,016 94 74,885,834 4 815,900 - 14,332,452 1 185,128 - 3,654,369 1 3,482,451 - 97,356,134 6 $ 1,755,288,150 100	December 31, 2019		September 30, 2019
		Amount % 104,793,612 6 752,145 - 9,393,336 1 868,581 - 31,057,684 2 258,956 - 1,435,049,547 82 53,250,000 3 6,835,084 1 3,158,003 - 1,041,183 - 888,436 - 3,289,481 - 1,650,636,048 95 71,319,842 4 815,900 - 12,312,175 1 223,331 - 7,167,217 - 3,678,301 - 95,516,766 5 1,746,152,814 100		Amount % 129,927,954 8 920,400 - 9,626,114 1 1,274,971 - 37,414,866 2 550,964 - 1,362,641,641 80 53,250,000 3 7,740,626 1 3,211,233 - 826,510 - 892,114 - 2,022,688 - 1,610,300,081 95 71,319,842 4 815,900 - 12,312,175 1 223,331 - 5,797,695 - 3,795,082 - 94,264,025 5 1,704,564,106 100

See accompanying notes to consolidated financial statements.

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(English Translation of Consolidated Financial Statements Originally Issued in Chinese.) Reviewed only, not audited in accordance with generally accepted auditing standards.

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

For the three and nine months ended September 30, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Except for Earnings Per Common Share)

41000 Interest income (Notes 6(AC) and 7) 51000 Less：Interest expenses (Notes 6(AC) and 7) Net interest revenue Net revenue other than interest 49100 Net service fee revenue (Notes 6(AD) and 13) 49200 Gain on financial assets or liabilities measured at fair value through profit or loss (Note 6(AE)) 49310 Realized gain on financial assets at fair value through other comprehensive income (Note 6(AF)) 49450 Gain arising from derecognition of financial assets measured at amortized cost (Note 6(H)) 49600 Foreign exchange gain 49700 Reversal of impairment loss on assets (impairment loss on assets) (Note 6(AG)) 49800 Net other revenue other than interest income (Note 6(AH)) 49831 Net securities brokering revenue 49899 Other miscellaneous revenue (expense) (Note 6(AI)) Net revenue 58200 Bad debts expense, commitment and guarantee liability provision (Note 6(AJ)) Operating expense 58500 Employee benefits expenses (Notes 6(AK)) 59000 Depreciation and amortization expense (Notes 6(AL)) 59500 Other general and administrative expense (Note 6(AM)) Total operating expense 61001 Income from continuing operation before tax 61003 Less: Income tax expenses (Note 6(Y)) Net income 65000 Other comprehensive income： 65200 Components of other comprehensive income that will not be reclassified to profit or loss 65204 Revaluation (losses) gains on investments in equity instruments measured at fair value through other comprehensive income 65220 Less: Income tax related to components of other comprehensive income that will not be reclassified to profit or loss (Note 6(Y)) Components of other comprehensive income that will not be reclassified to profit or loss 65300 Components of other comprehensive income that will be reclassified to profit or loss 65301 Exchange difference on translation 65308 Gains (losses) from investments in debt instruments measured at fair value through other comprehensive income 65320 Less: Income tax related to components of other comprehensive income that will be reclassified to profit or loss (Note 6(Y)) Components of other comprehensive income that will be reclassified to profit or loss 65000 Other comprehensive income Total comprehensive income Earnings per share (in NT dollar) (Note 6 (AA)) Basic earnings per share (in NT dollar) Diluted earnings per share (in NT dollar)	For the three months e	nded September 30, 2019 Amount ％ 7,509,604 127 (3,124,971) (53) 4,384,633 74 923,053 16 247,707 4 270,790 5 185 - (6,740) - 776 - 19,251 - 54,445 1 - - 5,894,100 100 (252,290) (4) (2,008,440) (34) (248,411) (4) (939,257) (16) (3,196,108) (54) 2,445,702 42 436,356 8 2,009,346 34 (546,958) (9) - - (546,958) (9) 30,862 - (60,589) (1) 6,821 - (36,548) (1) (583,506) (10) 1,425,840 24 0.28	For the nine months e	nded September 30, 2019 Amount ％ 22,170,231 124 (9,383,143) (52) 12,787,088 72 2,780,736 15 1,144,305 6 574,104 3 494 - 260,241 1 (11,080) - 117,318 1 147,572 1 138,999 1 17,939,777 100 (1,927,996) (11) (6,151,055) (34) (714,365) (4) (2,630,221) (15) (9,495,641) (53) 6,516,140 36 1,106,245 6 5,409,895 30 550,461 3 - - 550,461 3 59,582 - 332,524 2 23,292 - 368,814 2 919,275 5 6,329,170 35 0.76
	2020 Amount ％ $ 5,915,176 103 (1,960,576) (34) 3,954,600 69 736,976 13 180,071 3 538,863 9 780 - 95,844 2 (5,843) - 109,270 2 105,642 2 - - 5,716,203 100 (1,271,791) (22) (1,983,480) (35) (257,915) (5) (874,439) (15) (3,115,834) (55) 1,328,578 23 123,784 2 1,204,794 21 (331,540) (6) - - (331,540) (6) (147,379) (2) 180,255 3 (25,668) - 58,544 1 (272,996) (5) $ 931,798 16 $ 0.16		2020 Amount ％ 19,122,309 117 (7,086,368) (44) 12,035,941 73 2,107,122 13 787,661 5 896,952 5 1,849 - 113,988 1 3,504 - 149,703 1 258,096 2 - - 16,354,816 100 (3,226,772) (20) (6,046,302) (37) (746,121) (5) (2,506,385) (15) (9,298,808) (57) 3,829,236 23 366,271 2 3,462,965 21 (710,251) (4) - - (710,251) (4) (472,121) (3) 898,055 5 (87,117) (1) 513,051 3 (197,200) (1) 3,265,765 20 0.46
	$ 0.16	0.28	0.46	0.76

See accompanying notes to consolidated financial statements.

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(English Translation of Consolidated Financial Statements Originally Issued in Chinese.) Reviewed only, not audited in accordance with generally accepted auditing standards.

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES

Consolidated Statements of Changes in Equity

For the nine months ended September 30, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars)

			Attributable to o	wners of parent		Other equity interest Exchange differences on Unrealized gains on financial assets measured at fair value translation of foreign financial statements through other comprehensive income (541,122) 3,447,786 - - 47,666 871,609 47,666 871,609 - - - - - - - - - - - (30,857) (493,456) 4,288,538 (862,866) 4,541,167 - - (377,697) 180,497 (377,697) 180,497 - - - - - - - - - 1,350 (1,240,563) 4,723,014	Total
Share Capital Common stock $ 63,938,802 - - - - - - 3,196,940 4,184,100 - $ 71,319,842 $ 71,319,842 - - - - - - 3,565,992 - $ 74,885,834	Capital Surplus - - - - - - - - 815,900 - 815,900 815,900 - - - - - - - - 815,900		Retained	earnings	Total 18,007,553 5,409,895 - 5,409,895 - - (1,918,164) (3,196,940) - 30,857 18,333,201 19,702,723 3,462,965 - 3,462,965 - - (1,426,397) (3,565,992) (1,350) 18,171,949
						Exchange differences on translation of foreign financial statements (541,122) - 47,666 47,666 - - - - - - (493,456) (862,866) - (377,697) (377,697) - - - - - (1,240,563)
		Legal reserve 10,020,013 - - - 2,292,162 - - - - - 12,312,175 12,312,175 - - - 2,020,277 - - - - 14,332,452	Special reserve 516,555 - - - - (293,224) - - - - 223,331 223,331 - - - - (38,203) - - - 185,128	Unappropriated retained earnings 7,470,985 5,409,895 - 5,409,895 (2,292,162) 293,224 (1,918,164) (3,196,940) - 30,857 5,797,695 7,167,217 3,462,965 - 3,462,965 (2,020,277) 38,203 (1,426,397) (3,565,992) (1,350) 3,654,369
							84,853,019 5,409,895 919,275
							6,329,170
							- - (1,918,164) - 5,000,000 -
							94,264,025
							95,516,766 3,462,965 (197,200)
							3,265,765
							- - (1,426,397) - -
							97,356,134

See accompanying notes to consolidated financial statements.

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(English Translation of Consolidated Financial Statements Originally Issued in Chinese.) Reviewed only, not audited in accordance with generally accepted auditing standards.

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the nine months ended September 30, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars)

Cash flows from operating activities: Net income before tax Adjustments： Income and expenses items: Depreciation expenses Amortization expenses Provision for bad debt expenses Net loss (gain) on financial assets or liabilities at fair value through profit or loss Interest expenses Net gain arising from derecognition of financial assets measured at amortized cost Interest income Net change in provisions for guarantee liabilities Net change in other provisions Loss on disposal of property and equipment Property and equipment transferred to expenses (Reversal of) impairment loss on financial assets Total adjustments to reconcile profit (loss) Changes in Operating Assets and Liabilities： Changes in Operating Assets： Decrease (increase)in due from the Central Bank and call loans to banks Increase in financial assets at fair value through profit or loss Decrease (increase) in securities purchased under resell agreements (Increase) decrease in receivables Increase in discounts and loans Decrease (increase) in other financial assets Increase in other assets Total changes in operating assets Changes in Operating Liabilities： Increase in deposits from the Central Bank and banks Decrease in financial liabilities at fair value through profit or loss Increase (decrease) in notes and bonds issued under repurchase agreement Increase (decrease) in payable (Decrease) increase in deposits and remittances (Decrease) increase in other financial liabilities Decrease in provisions for employee benefits Total Changes in Operating Liabilities Total Changes in Operating Assets and Liabilities Total adjustments Cash outflow generated from operations Interest received Interest paid Income tax paid Net cash flow (used in) generated from operating activities Cash flows from investing activities： Acquisition of financial assets at fair value through other comprehensive income Acquisition of financial assets at amortized cost Proceeds from disposal of financial assets at amortized cost Acquisition of property and equipment Proceeds from disposal of property and equipment Decrease in refundable deposits Acquisition of intangible assets Net cash flows generated from (used in) investing activities Cash flows from financing activities： Increase in due to the Central Bank and banks Proceeds from issuing bank notes payable Repayments of bank notes payable Increase in guarantee deposits received Payments of lease liabilities Decrease in other liabilities Cash dividends paid Proceeds from issuing shares Net cash flows generated from financing activities Effect of exchange rate changes on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalent at beginning of period Cash and cash equivalent at end of period	For the nine months ended September 30, 2020 2019 $ 3,829,236 6,516,140 639,056 621,759 107,065 92,606 3,222,708 1,976,890 257,352 (30,535) 7,086,368 9,383,143 (1,849) (494) (19,122,309) (22,170,231) (293) (8,145) 4,357 (42,646) 1,636 649 5,061 - (3,504) 11,080 (7,804,352) (10,165,924) 42,091,000 (13,620,169) (1,725,558) (9,041,568) 2,755,017 (3,658,562) (14,647,681) 22,486,857 (55,464,875) (57,756,851) 8,405 (2,650) (5,346,385) (1,596,554) (32,330,077) (63,189,497) 9,946,922 38,613,411 (1,037,385) (975,848) 2,159,452 (382,735) 20,400,747 (21,979,330) (46,120,261) 51,600,538 (926,526) 253,932 (2,979) (303,697) (15,580,030) 66,826,271 (47,910,107) 3,636,774 (55,714,459) (6,529,150) (51,885,223) (13,010) 19,907,106 21,867,856 (7,294,758) (8,883,514) (709,374) (1,226,461) (39,982,249) 11,744,871 (11,938,394) (21,182,454) (148,234,850) (6,696,563) 180,489,725 - (362,297) (525,677) 27 342 406,986 520 (98,886) (133,317) 20,262,311 (28,537,149) 16,306,645 328,412 20,000,000 5,800,000 (14,000,000) - 561,859 958,124 (321,564) (323,763) (448,606) (82,373) (1,426,397) (1,918,164) - 5,000,000 20,671,937 9,762,236 (18,214) 6,332 933,785 (7,023,710) 31,395,561 46,036,673 $ 32,329,346 39,012,963	For the nine months ended September 30, 2020 2019 $ 3,829,236 6,516,140 639,056 621,759 107,065 92,606 3,222,708 1,976,890 257,352 (30,535) 7,086,368 9,383,143 (1,849) (494) (19,122,309) (22,170,231) (293) (8,145) 4,357 (42,646) 1,636 649 5,061 - (3,504) 11,080 (7,804,352) (10,165,924) 42,091,000 (13,620,169) (1,725,558) (9,041,568) 2,755,017 (3,658,562) (14,647,681) 22,486,857 (55,464,875) (57,756,851) 8,405 (2,650) (5,346,385) (1,596,554) (32,330,077) (63,189,497) 9,946,922 38,613,411 (1,037,385) (975,848) 2,159,452 (382,735) 20,400,747 (21,979,330) (46,120,261) 51,600,538 (926,526) 253,932 (2,979) (303,697) (15,580,030) 66,826,271 (47,910,107) 3,636,774 (55,714,459) (6,529,150) (51,885,223) (13,010) 19,907,106 21,867,856 (7,294,758) (8,883,514) (709,374) (1,226,461) (39,982,249) 11,744,871 (11,938,394) (21,182,454) (148,234,850) (6,696,563) 180,489,725 - (362,297) (525,677) 27 342 406,986 520 (98,886) (133,317) 20,262,311 (28,537,149) 16,306,645 328,412 20,000,000 5,800,000 (14,000,000) - 561,859 958,124 (321,564) (323,763) (448,606) (82,373) (1,426,397) (1,918,164) - 5,000,000 20,671,937 9,762,236 (18,214) 6,332 933,785 (7,023,710) 31,395,561 46,036,673 $ 32,329,346 39,012,963
	2020 $ 3,829,236 639,056 107,065 3,222,708 257,352 7,086,368 (1,849) (19,122,309) (293) 4,357 1,636 5,061 (3,504) (7,804,352) 42,091,000 (1,725,558) 2,755,017 (14,647,681) (55,464,875) 8,405 (5,346,385) (32,330,077) 9,946,922 (1,037,385) 2,159,452 20,400,747 (46,120,261) (926,526) (2,979) (15,580,030) (47,910,107) (55,714,459) (51,885,223) 19,907,106 (7,294,758) (709,374) (39,982,249) (11,938,394) (148,234,850) 180,489,725 (362,297) 27 406,986 (98,886) 20,262,311 16,306,645 20,000,000 (14,000,000) 561,859 (321,564) (448,606) (1,426,397) - 20,671,937 (18,214) 933,785 31,395,561 $ 32,329,346
		(10,165,924)
		(13,620,169) (9,041,568) (3,658,562) 22,486,857 (57,756,851) (2,650) (1,596,554)
		(63,189,497)
		38,613,411 (975,848) (382,735) (21,979,330) 51,600,538 253,932 (303,697)
		66,826,271
		3,636,774
		(6,529,150)
		(13,010) 21,867,856 (8,883,514) (1,226,461)
		11,744,871
		(21,182,454) (6,696,563) - (525,677) 342 520 (133,317)
		(28,537,149)
		328,412 5,800,000 - 958,124 (323,763) (82,373) (1,918,164) 5,000,000
		9,762,236
		6,332 (7,023,710) 46,036,673
		39,012,963

See accompanying notes to consolidated financial statements.

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(English Translation of Consolidated Financial Statements Originally Issued in Chinese.) REVIEWED ONLY, NOT AUDITED IN ACCORDANCE WITH THE GENERALLY ACCEPTED AUDITING STANDARDS AS OF SEPTEMBER 30, 2020 AND 2019 TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements September 30, 2020 and 2019 (Expressed in Thousands of New Taiwan Dollars Unless Otherwise Specified)

1. Company history

TAIWAN BUSINESS BANK, LTD. (the “Bank”) 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 September 30, 2020, 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 ” Statute for Privatization of State Enterprises” and 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 September 30, 2020, December 31 and September 30, 2019, the Bank and subsidiaries has 5,422, 5,387 and 5,395 employees, respectively.

2. Approval date and procedures of the consolidated financial statements

The consolidated financial statements for the nine months ended September 30, 2020 and 2019 were authorized for issuance by the board of directors on October 28, 2020.

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TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

3. New standards, amendments and interpretations adopted

(a) The impact of the International Financial Reporting Standards (“IFRSs”) endorsed by the Financial Supervisory Commission, R.O.C. (“FSC”) which have already been adopted.

The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2020.

	Effective date
New, Revised or Amended Standards and Interpretations	per IASB
Amendments to IFRS 3 “Definition of a Business”	January 1, 2020
Amendments to IFRS 9, IAS39 and IFRS7 “Interest Rate Benchmark Reform”	January 1, 2020
Amendments to IAS 1 and IAS 8 “Definition of Material”	January 1, 2020
Amendments to IFRS 16 “Covid-19-Related Rent Concessions”	June 1, 2020

The Bank and subsidiaries assesses that the adoption of the above mentioned standards would not have any material impact on its consolidated financial statements.

(b) The impact of IFRS issued by the FSC but not yet effective

The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2021.

are effective for annual periods beginning on or after January 1, 2021.
	Effective date
New, Revised or Amended Standards and Interpretations	per IASB
Amendments to IFRS 4 “Extension of the Temporary Exemption from Applying	January 1, 2021
IFRS 9”

The Bank and subsidiaries assesses that the adoption of the above mentioned standards would not have any material impact on its consolidated financial statements.

As of the date, the following IFRSs that have been issued by the International Accounting Standards Board (IASB), but have yet to be endorsed by the FSC:

	Effective date
New, Revised or Amended Standards and Interpretations	per IASB
Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets Between	Effective date to
an Investor and Its Associate or Joint Venture”	be determined
	by IASB
IFRS 17 “Insurance Contracts”	January 1, 2023
Amendments to IAS 1 “Classification of Liabilities as Current or Non-current”	January 1, 2023
Amendments to IAS 16 “Property, Plant and Equipment－Proceeds before	January 1, 2022
Intended Use”
Amendments to IAS 37 “Onerous Contracts－Cost of Fulfilling a Contract”	January 1, 2022
Annual Improvements to IFRS Standards 2018-2020	January 1, 2022
Amendments to IFRS 3 “Reference to the Conceptual Framework”	January 1, 2022

～ 9 ～

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

New, Revised or Amended Standards and Interpretations Amendments to IFRS 17 “Insurance Contracts” Amendments to IFRS 9, IAS39, IFRS7, IFRS 4 and IFRS 16 “Interest Rate － Benchmark Reform Phase 2”

Effective date per IASB January 1, 2023 January 1, 2021

Those which may be relevant to the Group are set out below:

Issuance / Release
Dates
May 14, 2020

Standards or
Interpretations
Content of amendment
Annual Improvements to
IFRS Standards 2018-2020
●The amendments require a subsidiary that
elects to apply paragraph D16(a) of IFRS
1 First-time Adoption of International
Financial Reporting Standards to measure
the cumulative translation differences
using the amounts reported by the parent,
based on the parent's date of transition to
IFRSs.
●In determining whether to derecognize a
financial liability that has been modified
or exchanged, an entity assesses whether
the terms are substantially different in
accordance
with
IFRS
9
Financial
Instruments. The amendments clarify the
fees that an entity includes when assessing
whether the terms of a new or modified
financial
liability
are
substantially
different from the terms of the original
financial liability.
●The amendments remove the illustration
of payments from the lessor relating to
leasehold improvements of Illustrative
Example 13 accompanying IFRS 16
Leases
to
avoid
any
potential
for
confusion regarding the treatment of lease
incentives applying IFRS 16.

The Bank and subsidiaries is evaluating the impact of its initial adoption of the above mentioned standards or interpretations on its consolidated financial position and consolidated financial performance. The results thereof will be disclosed when the Bank and subsidiaries completes its evaluation.

～ 10 ～

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

4. Summary of significant 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 (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 endorsed by the FSC) for a complete set of the annual consolidated financial statements.

(B) Basis of preparation

(a) Basis of measurement

The consolidated financial statements have been prepared on a historical cost basis except for the following material items in the statement of financial position:

(1) Financial instruments measured at fair value through profit or loss are measured at fair value (including derivative instruments);
(2) Financial instrument measured at fair value through other comprehensive income; and
(3) The net defined benefit liability (asset) is recognized as fair value of plan assets, less present value of defined benefit obligation and the effect of the asset ceiling in Note 4(M).
(b) Consolidation of financial statement

The consolidation financial statements include the headquarter and all the domestic branches, foreign branches and subsidiaries. The internal transactions within the headquarter, the domestic branches and the foreign branches are offset when preparing the consolidated financial statement.

～ 11 ～

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

The functional currency of each entities is determined based on the primary economic environment in which the entities operate. The consolidated financial statements are presented in New Taiwan Dollar, which is the Bank’s functional currency. All financial information presented in New Taiwan Dollar has been rounded to the nearest thousand.

(C) Basis of consolidation

(a) Subsidiary

A subsidiary is an enterprise controlled by the Bank. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

Gains or losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance.

(b) Elimination of intra-group transaction

Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions are eliminated in preparing the consolidated financial statements. The unrealized profits arising from the transactions with the investments under the equity method are eliminated to the extent of the percentage of shares possessed by the bank over the investee. The unrealized losses are eliminated in the same way as the unrealized profit, but only under the circumstances that there are no evidences of impairment.

List of subsidiaries in the consolidated financial statements:

Taiwan Business Bank Insurance Agency Co., Ltd. Taiwan Business Bank Property Insurance Agency Co., Ltd. TBB International Leasing Co., Ltd. Taiwan Business Bank International Leasing Co., Ltd. TBB (Cambodia) Microfinance Institution Plc TBB Venture Capital Co., Ltd.	Established location	Main business scope Agent of personal insurance Agent of property insurance Leasing business Leasing business Financial company Investing business		Shareholding (Holding %)
			September 30, 2020 Note- Note- 100 100 100 100	December 31, 2019 September 30, 2019 100 100 100 100 100 100 100 100 100 100 100 100
	Taiwan Taiwan Taiwan China Cambodia Taiwan

～ 12 ～

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

Note: A resolution was passed during the board meeting held on December 19, 2018 for the merger of the Bank’s subsidiaries, Taiwan Business Bank Insurance Agency Co., Ltd. and Taiwan Business Bank Property Insurance Agency Co., Ltd., with January 2, 2020 as the effective date. The relevant statutory registration procedures have since been approved by the Ministry of Economic Affairs on February 25, 2020.

(D) Foreign currency

(a) Foreign currency transaction

Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies on the end of each subsequent reporting period (hereinafter referred to as the reporting date) are retranslated to the functional currency at the exchange rate of Bank of Taiwan at 10 AM. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured based on historical cost are translated using the exchange rate at the date of translation. Foreign currency differences arising on retranslation are recognized in profit or loss, except for the equity instruments measured at fair value through other comprehensive income which are recognized in other comprehensive income arising on the retranslation.

(b) Foreign operations

The income and expenses of foreign operations, excluding foreign operations in hyperinflationary economies, are translated to the Bank and subsidiaries' functional currency (not the currency under highly inflation economy) by the following procedures:

(1) Assets and liabilities are translated at the date of the statement of financial position;
(2) Profit and loss are translated at the average rate (unless the exchange rate of the period fluctuates intensively, then it applies the exchange rate on the trade date);
(3) Foreign currency differences are recognized in other comprehensive income.

All the translation differences arising from above procedures are presented in the foreign currency translation reserve in equity. The exchange difference from translating net investments in foreign operations is recognized in other comprehensive income. When a foreign operation is wholly or partially disposed, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal.

～ 13 ～

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

(E) Cash and cash equivalents

Cash and cash equivalent comprise cash on hand, petty cash, foreign currency on hand and cash in banks, but excludes those items which are designated for specific purposes or restricted by contracts and law.

(F) Financial Instruments

Receivables and debt securities issued are initially recognized when they are originated. All other financial assets and financial liabilities are initially recognized when the Bank and subsidiaries becomes a party to the contractual provisions of the instrument. A financial asset (unless it is a receivable without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at fair value through profit or loss (FVTPL), transaction costs that are directly attributable to its acquisition or issue. A receivable without a significant financing component is initially measured at the transaction price.

(a) Financial assets

All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis or a settlement date basis.

On initial recognition, a financial asset is classified as measured at: amortized cost; fair value through other comprehensive income (FVOCI) – debt investment; FVOCI – equity investment; or FVTPL. Financial assets are not reclassified subsequent to their initial recognition unless the Bank and subsidiaries changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the next reporting period following the change in the business model.

(1) Investment in debt instruments measured at amortized cost

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:

‧ it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
‧ its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

A financial asset measured at amortized cost is initial recognized at fair value, plus any directly attributable transaction costs. These costs are subsequently measured at initial recognition amount minus accumulated amortization which is calculated using the effective interest method. Interest income, foreign exchange gains and losses, as well as impairment loss, are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.

～ 14 ～

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

(2) Financial assets at fair value through other comprehensive income (FVOCI)

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL.

‧ it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and
‧ its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

On initial recognition of an equity investment that is not held for trading, the Bank and subsidiaries may irrevocably elect to present subsequent changes in the investment’s fair value in other comprehensive income. This election is made on an investment-by-investment basis.

Debt investments at FVOCI are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognized in profit or loss. Other net gains and losses are recognized in other comprehensive income. On derecognition, gains and losses accumulated in other comprehensive income are reclassified to profit or loss.

Equity investments at FVOCI are subsequently measured at fair value. Dividends are recognized as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognized in other comprehensive income and are never reclassified to profit or loss.

Dividend income is recognized in profit or loss on the date on which the Bank and subsidiaries’ right to receive payment is established.

(3) Financial assets at fair value through profit or loss (FVTPL)

All financial assets not classified as amortized cost or FVOCI described as above are measured at FVTPL, including derivate financial assets. On initial recognition, the Bank and subsidiaries may irrevocably designate a financial asset, which otherwise meets the requirements to be measured at amortized cost or at FVOCI, as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss.

～ 15 ～

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

(4) Discount and loans, net

Discount and loans are recorded as initial fair value including direct transaction cost, and the subsequent measurement recognizes interest income via effective interest rate method if there is not much difference then it can adopt straight line method and is booked as per amortized cost deducted by impairment loss. Interest accrual on discount and loans are suspended if either of the following occurs:

‧ Payment of principal or interest is very likely not to be redeemed as per contracts.
‧ Non-performing loans are categorized as overdue loans in six months after the settlement period ends.
(5) Impairment of financial assets

The Bank and subsidiaries recognize loss allowances for expected credit losses on financial assets measured at amortized cost, debt investments measured at FVOCI and loan commitments and financial guarantee contracts. Equity instrument investment does not need to recognize expected credit losses.

The Bank and subsidiaries measures loss allowances at an amount equal to lifetime expected credit loss (ECL), except for the following which are measured as 12month ECL:

‧ debt securities that are determined to have low credit risk at the reporting date; and
‧ other debt securities, receivables, loan commitments and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of financial instrument.

12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 months after the reporting date (or a shorter period if the expected life of the instruments is less than 12 months).

The maximum period considered when estimating ECLs is the maximum contractual period over which the Bank and subsidiaries is exposed to credit risk.

～ 16 ～

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

When determining whether the credit risk of financial asset has increased significantly since initial recognition and when estimating ECL, the Bank and subsidiaries considers reasonable and supportable information that is relevant and available (without undue cost or effort). This includes both quantitative and qualitative information and analysis, based on the Bank and subsidiaries’ historical experience, informed credit assessment and including forward-looking information.

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls. The difference between the cash flows due to the Bank and subsidiaries expect to receive. ECLs are discounted at the effective interest rate of the financial asset.

At each reporting date, the Bank and subsidiaries assesses whether financial assets carried at amortized cost, debt securities at FVOCI, loan commitments and contracts of financial guarantee are credit-impaired. A financial asset is “ credit-impaired” when one or move events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial asset is credit-impaired includes the following observable data:

‧ significant financial difficulty of the borrower or issuer;
‧ a breach of contract such as a default or being past due;
‧ the restructuring of a loan or advance by the borrowers on terms that the borrowers would not consider otherwise;
‧ it is probable that the borrower will enter bankruptcy or other financial reorganization;
‧ the disappearance of an active market for a security because of financial difficulties; or
‧ to purchase or initiate financial assets at a substantial discount that reflects the credit losses that have occurred.

Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets. For debt securities at FVOCI, the loss allowance is charged to profit or loss and is recognized in other comprehensive income instead of reducing the carrying amount of the asset.

～ 17 ～

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

In addition to estimate the allowance for bad debts and guarantee liability provisions as above, according to “ Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-Performing and Non-Accrual Loans ”, and considering the situation of their finance and the default of principal and interest payment, the credit assets are classified as below:

‧ 1% of the first class credit assets deducted by the amount of credit assets from the government.
‧ 2% of the second class credit assets.
‧ 10% of the third class credit assets.
‧ 50% of the fourth class credit assets.
‧ 100% of the fifth class credit assets.

The allowance for bad debts and guarantee liability provisions were assessed by the previously stated method shall not be less than the amount regulated by “ Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-Performing and Non-Accrual Loans.

Unrecoverable overdue loans and bad debts of the Bank and subsidiaries, which are not able to be recovered after the overdue collection process, are written-off after deducting the recoverable portion. Upon approval by the board of directors and notification to supervisors, the excess amount of written off loans over such allowance or reserve is reflected as a current loss.

(b) Financial liabilities

Financial liability measured at fair value through profit or loss, if one of the following conditions is met

(1) Financial liabilities held for trading

A financial liability is held for trading if it is acquired or incurred principally for the purpose of selling or repurchasing it in the near term; on initial recognition it is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking. A derivative, except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument, is classified as instrument held for trading as well.

～ 18 ～

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

(2) Financial liabilities designated at fair value through profit or loss

Financial liabilities falling under this category are measured at fair value at initial recognition. Attributable transaction costs are recognized in profit or loss as incurred. Subsequent changes are measured at fair value and recognized in profit or loss. While for financial liabilities designated at fair value through profit or loss, the changes in fair value generated from credit risk should be recognized under other comprehensive income, except for avoiding accounting mismatch that should be recognized in profit or loss.

The Bank and subsidiaries only reclassified all affected financial assets in accordance with the regulations when changing the business model of managing financial assets. These changes are expected to be extremely infrequent. In addition, the Bank and subsidiaries must not reclassify any financial assets and liabilities of equity instruments.

If the Bank and subsidiaries reclassify financial assets in accordance with the aforesaid circumstances, the reclassification shall be postponed from the reclassification date, and any previously recognized gains, losses (including impairment losses or reversal of impairment loss) or interest shall not be restated.

(d) Derecognition of financial assets and liabilities

The Bank and subsidiaries shall derecognize a financial asset when the contractual rights to the cash flows from the financial asset expire or when the Bank and subsidiaries transfer substantially all the risks and rewards of ownership of the financial assets. A financial liability should be removed from the balance sheet when, and only when, it is extinguished, that is, when the obligation specified in the contract is either discharged or cancelled or expires. If the bonds or stocks are taken as collateral, shall not be derecognized because the Bank and subsidiaries have retained substantially all the risks and rewards of ownership. This is also applicable when the Bank and subsidiaries conduct securitization transactions and still retain some of the risks.

(e) Financial instruments offsetting

A financial asset and a financial liability should be offset and the net amount reported when, and only when, an entity has a legally enforceable right to set off the amounts; and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.

～ 19 ～

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

(G) Impairment loss on non-financial assets

The recoverable amount for an individual asset or a cash-generating unit is the higher of its fair value less costs to sell or its value in use. If, and only if, the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset shall be reduced to its recoverable amount. That reduction is an impairment loss. An impairment loss shall be recognized immediately in profit or loss.

An impairment loss recognized in prior periods for an asset other than goodwill shall be reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. If this is the case, the carrying amount of the asset shall be increased to its recoverable amount, as a reversal of a previously recognized impairment loss.

(H) Property and Equipment

Items of property and equipment are measured at cost plus revaluation surplus and less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributed to the acquisition of the asset.

Subsequent expenditure is capitalized only when it is probable that the future economic benefits associated with the expenditure will flow to the Bank and subsidiaries. The carrying amount of those parts that are replaced is derecognized. Ongoing repairs and maintenance are expensed as incurred.

Land has an unlimited useful life and therefore is not depreciated. The estimated useful lives for the current and comparative years of significant items of property and equipment are as follows:

(a) Buildings 35-50 years (b) Equipment 3-8 years

The Bank and subsidiaries reviews and adjusts the residual value and the useful lives of assets at the end of each fiscal year. Whenever there is evidence indicating that the carrying amount is unable to be recovered due to environmental activities or changes, the Bank and subsidiaries evaluate the impairment loss of assets.

If the carrying amount is higher than the recoverable amount, the carrying amount is adjusted to the recoverable amount. The recoverable amount is the fair value or the use value deducted by the disposition expense.

The gain or loss on disposal is the difference between the carrying amount and net disposal proceeds, and gain or loss on disposal shall be recognized as net other revenue other than interest income of consolidated comprehensive income.

～ 20 ～

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

When purchasing machinery equipment and computer software, the education fee implied in the contract is not recognized as the cost of machinery equipment and is recognized as expense.

For the lease contracts which regulate the Bank and subsidiaries to restore the property to the original status, the Bank and subsidiaries reviews the terms of each contract and calculated the present value of the restoration expenses when signing the contracts. The decommissioning liability reserve is provided based on the calculation and the discount rate is determined based on the Bank’s policy.

(I) Lease

(a) Identifying a lease

At inception of a contract, the Bank and subsidiaries assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Bank and subsidiaries assesses whether:

the contract involves the use of an identified asset – this may be specified explicitly or implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified; and
the Bank and subsidiaries has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and
the Bank and subsidiaries has the right to direct the use of the asset throughout the period of use only if either:
(1) the Bank and subsidiaries has the right to direct how and for what purpose the asset is used throughout the period of use; or
(2) the relevant decisions about how and for what purpose the asset is used are predetermined and:
- the Bank and subsidiaries has the right to operate the asset throughout the period of use, without the supplier having the right to change those operating instructions; or
- the Bank and subsidiaries designed the asset in a way that predetermines how and for what purpose it will be used throughout the period of use.

～ 21 ～

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

(b) As a lessee

The Bank and subsidiaries recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be reliably determined, the Bank and subsidiaries incremental borrowing rate. Generally, the Bank and subsidiaries uses its incremental borrowing rate as the discount rate.

Lease payments included in the measurement of the lease liability comprise the following:

fixed payments, including in substance fixed payments;
variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;
amounts expected to be payable under a residual value guarantee; and
payments for purchase or termination options that are reasonably certain to be exercised.

The lease liability is measured at amortized cost using the effective interest method. It is remeasured when:

there is a change in future lease payments arising from the change in an index or rate; or
there is a change in the Bank and subsidiaries estimate of the amount expected to be payable under a residual value guarantee; or
there is a change in the lease term resulting from a change of its assessment on whether it will exercise an option to purchase the underlying asset, or

～ 22 ～

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

there is a change of its assessment on whether it will exercise an extension or termination option; or
there are any lease modifications

When the lease liability is remeasured, other than lease modifications, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or in profit and loss if the carrying amount of the right-of-use asset has been reduced to zero.

When the lease liability is remeasured to reflect the partial or full termination of the lease for lease modifications that decrease the scope of the lease, the Bank and subsidiaries accounts for the remeasurement of the lease liability by decreasing the carrying amount of the right-of-use asset to reflect the partial or full termination of the lease, and recognize in profit or loss any gain or loss relating to the partial or full termination of the lease.

The Bank and subsidiaries has elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less and leases of low-value assets. The Bank and subsidiaries recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

(c) As a lessor

When the Bank and subsidiaries acts as a lessor, it determines at lease commencement whether each lease is a finance lease or an operating lease. To classify each lease, the Bank and subsidiaries makes an overall assessment of whether the lease transfers to the lessee substantially all of the risks and rewards of ownership incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then the lease is an operating lease. As part of this assessment, the Bank and subsidiaries considers certain indicators such as whether the lease is for the major part of the economic life of the asset.

(J) Deferred assets

The costs of installation for utilities, including electricity and water, as well as security facilities, are capitalized and amortized equally over 5 years.

(K) Collaterals

The difference between the amount of claims and the Bank and subsidiaries received when creditors cannot meet obligations and the collaterals are auctioned off is recognized as bad debts expense. The amount that net realized value lower than book value is recognized as impairment loss. The selling price deducts the original book value of collateral assumed is recognized as gain or loss on sale of collateral assumed.

～ 23 ～

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

(L) Provisions

A provision is recognized if, as a result of a past event, the Bank and subsidiaries has a present legal or constructive obligation that can be estimated reliably, and it is probably that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the liability. Amortization of the discount is recognized as interest expense. Future operating loss cannot be recognized as liability reserve.

Contingent liability refers to the possible obligation results from past events. The existence of contingent liability can only be proved by whether one or more uncertain events which can not be controlled by the Bank and subsidiaries occurs or not. Contingent liability also refers to the current obligation results from a past event, but not likely to cause outflow of economic resource to redeem the obligation or the amount of the obligation cannot be measured reliably. The Bank and subsidiaries does not recognize contingent liability and disclose it per related regulations.

(M) Employee benefit

(a) Short term employee benefit

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.

(b) Retirement benefit

The pension provision of the Bank and subsidiaries includes defined contribution plan and defined benefit plan. For the personnel of foreign offices, the Bank provides pension fund per the regulations of the local authorities.

Defined contribution plan refers to the plan that the Bank and subsidiaries annually provide certain amount of money to funds to fulfill the obligation. The Bank and subsidiaries provide pension based on compulsory obligation, contracts or voluntary will to public or private managed pension funds. If certain pension fund fails to pay the employees the benefit which they deserve for the service they provided, the Bank and subsidiaries does not hold legal or constructive obligation to pay additional provision. The Bank and subsidiaries recognize the pension fund provided as current pension cost on accrual basis.

～ 24 ～

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

The Bank’ s net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. Any unrecognized past service costs and the fair value of any plan assets are deducted. The discount rate is the yield at the reporting date on government bonds that have maturity dates approximating the terms of the Bank’ s obligations and that are denominated in the same currency in which the benefits are expected to be paid.

The calculation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Bank, the recognized asset is limited to the total of the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. In order to calculate the present value of economic benefits, consideration is given to any minimum funding requirements that apply to any plan in the Bank and subsidiaries. An economic benefit is available to the Bank and subsidiaries if it is realizable during the life of the plan, or on settlement of the plan liabilities.

If the benefits of a plan are improved, the pension cost incurred from the portion of the increase benefit relating to past service by employees, is recognized immediately in profit or loss.

The remeasurements of defined benefit liability (asset) include:

(1) Actuarial gains and losses;
(2) Return on plan assets, excluding net interest on the net defined benefit liability (asset); and
(3) The effect of the asset ceiling, excluding net interest on the net defined benefit liability (asset).

The remeasurements of defined benefit liability (asset) are recognized as other comprehensive income with a corresponding debit or credit to retained earnings in the period in which they occur.

Gains or losses on the curtailment or settlement of a defined benefit plan are recognized when the curtailment or settlement occurs. The gain or loss on curtailment arises from any changes in the fair value of plan assets, any changes in the present value of the defined benefit obligation, and any related actuarial gains or losses and past service cost which had not previously been recognized.

～ 25 ～

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

The pension cost in the consolidated interim financial statements was calculated and disclosed on a year-to-date basis by using the actuarially determined pension cost rate at the end of the prior fiscal year, for the reporting period, the rate will be adjusted by material market volatility, material curtailment, reimbursement and settlement or other material one-time events.

(c) Deposits with favorable rate

The Bank and subsidiaries provides deposits with favorable rate to employees, which include current employee fix amount deposits with favorable rate and retired employee fix amount deposits with favorable rate. The rate difference between the favorable rate and the market rate belongs to the category of employee benefit.

According to article 28 of “Regulations Governing the Preparation of Financial Report by Public Banks”, the additional interests result from the difference between deposit with favorable rate and the deposits with market interest rate shall be calculated by actuary per the regulations related to defined benefit plan in IAS 19 . The parameters of actuarial assumptions shall follow the regulations of the competent authority.

In accordance with the regulation of “ Discussion of the employee benefit actuarial assumption related matter for adopting IAS 19 with respect to the additional interest of employee deposits with favorable rate” issued by the Banking Bureau, the difference between the actual payment and the estimated retirement benefit obligation is deemed as changes in accounting estimate and is recognized in profit or loss.

(d) Termination benefits

Termination benefits are recognized as an obligation when the Bank and subsidiaries is demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. The Bank and subsidiaries recognize liabilities when a formal irrevocable termination project is undertaken or when benefit is provided for encouraging voluntary resignation. If benefits are payable more than 12 months after the reporting period, then they are discounted to their present value.

(N) Income tax

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.

～ 26 ～

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

Temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases shall be measured 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 equity or other comprehensive income as tax expense.

(O) Revenue recognition

Interest is recognized according to interest method. Interest accrual is suspended from the date when the loan is reclassified to non-performing loan and only when the Bank and subsidiaries receive cash, the revenue is recognized.

The revenue of handling fee is recognized when cash collected or when the process of the profit are mostly completed. In addition, for the individual loan which does not belong to labor service and the handling fee is over 1% of the principal, the interest rate shall be adjusted from the original agreed interest rate to the effective interest rate. For the individual loan which does not belong to the service and the handling fee is less than 1% of the principal, the recognition of the revenue should be deferred and be recognized as revenue during the loan period.

(P) Earnings per share (EPS)

EPS is based on the weighted-average number of shares outstanding. In the event of capital increase through capitalization of retained earnings, capital surplus, or employee bonuses, EPS is retroactively adjusted based on the percentage of capital increase, regardless of the period when the incremental shares are outstanding.

The employee bonuses of the Bank and subsidiaries issued by stocks were dilutive potential common shares. If the potential common shares have a non-dilutive effect, the Bank and subsidiaries should only disclose the basic earnings per share. On the contrary, if the potential common shares have a dilutive effect, the Bank and subsidiaries should disclose both the basic and diluted earnings per share. In calculating the diluted earnings per share, it is based on the assumption that all dilutive potential common shares are outstanding, and therefore the net income and the shares outstanding shall be adjusted in accordance with the calculation.

(Q) Operating segments

Operating segment is the component of the Bank and subsidiaries that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the Bank and subsidiaries). The segment's operating results are reviewed regularly by the Bank’ s chief operating decision maker to make decisions pertaining to the allocation of resources to the segment and to assess the performance for which discrete financial information is available.

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TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

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 the IFRSs (in accordance with IAS 34 “ Interim Financial Reporting” and endorsed by the FSC) requires management to make judgments, estimates, and assumptions 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.

The management continues to monitor the accounting estimates and assumptions. The management recognizes any changes in accounting estimates during the period and the impact of those changes in accounting estimates in the following period.

Information about judgments made in applying accounting policies that have the most significant effects on the amounts recognized in the consolidated financial statements is as follows:

(A) Impairment losses on loans

The impairment of loans of the Bank and subsidiaries was evaluated by identifying the credit risk of those financial assets have significantly increased or not at the reporting date if the credit risk has not significant incurred, the 12-month expected credit loss should be adopted to evaluate, or the lifetime credit loss evaluation should be adopted.

To evaluate the expected credit losses for 12-month and lifetime, the Bank and subsidiaries considers the unfavorable changes of payment status or the economic conditions of the countries or areas related to the default loans. When analyzing expected cash flows, the estimates by the management are based on the pass losses experience from assets with similar credit risk characteristics. In order to reduce losses from the difference between estimated and actual amount, the Bank and subsidiaries has considered historical experience, current economic conditions and forward-looking information at the reporting date to determine the assumptions to be used in calculating the impairments and the select inputs.

(B) Retirement benefit

The present value of the retirement benefit obligation is the actuarial result based on several assumptions. Any change of the assumptions may influence the carrying amount of the retirement benefit obligation.

The assumptions applied to determine net pension cost (revenue) include the discount rate. The Bank and subsidiaries determine the appropriate discount rate at the end of each year and apply it to calculate the present value of the future cash outflows which are to be paid to the retirement benefit obligation. To determine the appropriate discount rate, the Bank and subsidiaries should consider the interest rate of high-quality corporate bonds and government bonds. The currency of the retirement benefit shall be the same as that of the high-quality corporate bond or government bonds and the duration till maturity date shall comply with the duration of the related pension obligation. Other significant assumptions of retirement benefit obligation are based on the current market situation.

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TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

6. Explanation of significant accounts

(A) Cash and cash equivalents

Petty cash and revolving funds Foreign currencies on hand Checks for clearing Due from other banks Total	September 30, 2020 $ 10,074,649 982,124 5,437,925 15,834,648 $ 32,329,346	December 31, 2019 10,059,297 899,964 2,663,951 17,772,349 31,395,561	September 30, 2019
			16,079,700 925,104 6,238,271 15,769,888
			39,012,963

(B) Due from the Central Bank and call loans to banks

Due from the Central Bank Deposits transferred to Central Bank Call loans to banks Trust fund indemnity reserve deposited Securities serving as trust fund indemnity reserve deposited Total	September 30, 2020 $ 44,803,417 28,499 38,515,206 90,000 (90,000) $ 83,347,122	December 31, 2019 65,301,416 105,769 60,024,331 80,000 (80,000) 125,431,516	September 30, 2019 53,952,652 143,638 46,505,392 80,000 (80,000) 100,601,682

As of September 30, 2020, December 31 and September 30, 2019, in accordance with the Banking Law and the Central Bank Law, the required reserve deposited by the Bank with the Central Bank amounted to $44,367,530, $64,836,250 and $53,781,838 of which $37,154,849, $38,174,500 and $38,414,327 respectively, were restricted and such restriction may only be lifted when the required reserve is adjusted to a lower amount. The Bank and subsidiaries cooperated with the Central Bank to undertake financing loans for small and medium enterprises that are affected by the severe and the special infectious pneumonia epidemic, and are guaranteed by the excess reserve in the deposit reserve of the Central Bank as required, $30,000,000, please refer to 6(N) for the information of due to the Central Bank and banks.

As of September 30, 2020 and December 31, 2019, the Bank’s subsidiaries and overseas branches, in compliance with the Central Bank’s reserve requirement set by local authorities, deposited $131,293 and $181,350 in reserve, of which $50,314 and $69,921 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 September 30, 2020, December 31 and September 30, 2019, the required reserve with the Central Bank amounted to $304,594, $283,816 and $170,814 respectively, and its use was unrestricted.

～ 29 ～

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

As of September 30, 2020, December 31 and September 30, 2019, 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 September 30, 2020, December 31 and September 30, 2019, the Bank deposited marketable securities of $90,000, $80,000 and $80,000 as trust fund reserves.

(C) Financial assets at fair value through profit or loss

Financial assets designated at fair value through profit or loss： Linked deposits Corporate bonds Financial assets at fair value through profit or loss, mandatorily measured at fair value : Derivative instruments not used for hedging: Foreign exchange forward contracts Currency swap contracts Foreign currency options-call Stock index futures Interest Rate Swap Non-derivative financial assets Commercial paper Listed stocks Unlisted stocks Beneficiary certificates Government bonds Convertible corporate bonds Financial debentures Total	September 30, 2020 $ - 115,748 29,057 713,174 5,169 72,658 40,537 25,705,947 60,119 235,710 220,610 - 299,112 1,548,298 $ 29,046,139	December 31, 2019 - 120,240 23,843 839,800 7,758 65,784 13,611 21,037,165 178,867 145,901 108,890 1,446,544 - 2,984,383 26,972,786	September 30, 2019
			501,403 710,034 27,121 784,921 9,357 61,930 17,005 10,618,195 189,000 56,680 47,000 558,421 - 3,888,329
			17,469,396

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)

～ 30 ～

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

Foreign exchange forward contracts Foreign exchange forward contracts Foreign exchange forward contracts Foreign exchange forward contracts Foreign exchange forward contracts Currency swap contracts Currency swap contracts Currency swap contracts Currency swap contracts Currency swap contracts Currency swap contracts Currency swap contracts Currency swap contracts Currency swap contracts Option contracts-call Option contracts-put Foreign exchange forward contracts Foreign exchange forward contracts Foreign exchange forward contracts Foreign exchange forward contracts Foreign exchange forward contracts Foreign exchange forward contracts Foreign exchange forward contracts Currency swap contracts Currency swap contracts Currency swap contracts Currency swap contracts Currency swap contracts Currency swap contracts Currency swap contracts Currency swap contracts Currency swap contracts Currency swap contracts Option contracts-call Option contracts-call Option contracts-call Option contracts-put Option contracts-put Option contracts-put		September 30, 2020 Currency Matured duration EUR 2020/12/1~2021/1/22 TWD 2020/10/5~2021/3/23 USD 2020/10/5~2020/12/31 SEK 2020/10/26~2020/12/14 AUD 2020/10/13~2020/12/31 AUD 2020/10/6~2021/3/16 CNY 2020/10/9~2021/9/17 EUR 2020/10/13~2020/12/28 JPY 2021/5/14~2021/6/11 NZD 2020/10/23~2020/11/25 TWD 2020/10/5~2021/9/23 USD 2020/10/1~2021/9/17 ZAR 2020/10/5~2020/12/9 SEK 2020/11/27 USD 2020/10/5~2021/10/1 USD 2020/10/5~2021/10/1 December 31, 2019 Currency Matured duration EUR 2020/3/3~2020/3/17 JPY 2020/1/6~2020/4/17 TWD 2020/1/3~2020/6/24 USD 2020/1/3~2020/3/30 SEK 2020/1/3 AUD 2020/3/9~2020/3/31 ZAR 2020/1/3~2020/2/20 AUD 2020/1/3~2020/3/12 CAD 2020/2/21 CNY 2020/1/2~2021/5/17 EUR 2020/1/22~2020/11/16 GBP 2020/1/9~2020/3/18 JPY 2020/1/6~2020/7/16 NZD 2020/1/21~2020/2/21 TWD 2020/1/2~2020/12/21 USD 2020/1/2~2021/5/17 ZAR 2020/1/6~2020/3/11 AUD 2020/2/14~2020/3/12 EUR 2020/1/13~2020/3/9 USD 2020/1/7~2020/10/13 AUD 2020/2/14~2020/3/12 EUR 2020/1/13~2020/3/9 USD 2020/1/7~2020/10/13
	Amount of contracts (in thousands) $ 1,600 977,739 66,576 17,606 21,859 64,260 3,387,843 65,300 29,338 31,000 40,868,537 4,542,160 2,054,209 15,000 42,400 42,400
	Amount of contracts (in thousands) $ 2,800 114,806 1,210,190 43,247 9,538 9,661 70,878 28,940 15,000 10,819,871 142,340 7,000 3,513,405 27,000 38,599,637 3,979,626 2,059,560 5,000 6,300 31,200 5,000 6,300 31,200

～ 31 ～

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

Foreign exchange forward contracts Foreign exchange forward contracts Foreign exchange forward contracts Currency swap contracts Currency swap contracts Currency swap contracts Currency swap contracts Currency swap contracts Currency swap contracts Currency swap contracts Currency swap contracts Currency swap contracts Currency swap contracts Option contracts-call Option contracts-call Option contracts-put Option contracts-put		September 30, 2019
	Amount of contracts (in thousands) $ 446,005 1,073,403 43,569 33,180 25,601 11,036,623 111,340 974 2,285,849 30,000 23,371,814 3,825,375 2,082,160 10,000 52,500 10,000 52,500	Currency Matured duration JPY 2019/10/16~2020/2/21 TWD 2019/10/2~2020/4/23 USD 2019/10/2~2019/12/27 AUD 2019/10/8~2019/12/20 CAD 2019/10/1~2019/12/24 CNY 2019/10/8~2021/5/17 EUR 2019/10/2~2020/9/25 CHF 2019/10/18 JPY 2019/10/16~2020/7/16 NZD 2019/10/21~2019/11/25 TWD 2019/10/1~2020/8/5 USD 2019/10/1~2021/5/17 ZAR 2019/10/1~2019/12/10 AUD 2019/10/8~2019/12/11 USD 2019/10/2~2020/9/15 AUD 2019/10/8~2019/12/11 USD 2019/10/2~2020/9/15

(D) Securities purchased under resell agreements

Securities under resell agreements Face amount Resell period Range of resell interest rate Resell price	September 30, 2020 $ 10,644,096 10,653,000 2020.10.05~2020.10.29 0.28%~0.30% $ 10,645,944	December 31, 2019 13,399,113 13,413,000 2020.1.2~2020.1.20 0.52%~0.57% 13,403,489	September 30, 2019
			6,045,080
			6,050,000
			2019.10.01~2019.10.15
			0.57%~0.60%
			6,046,304

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TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

(E) Receivables

Interest receivable Acceptances receivable Accrued incomes Accounts receivable Dividends receivable Accounts receivable factoring without recourse Spot exchange receivable-foreign currencies Refinancing guaranty deposits Guaranteed proceeds receivable from refinancing Credit cards accounts receivable Receivable price of securities purchased for customers Settlement price Installment receivables and leases Other receivables Sub-total Less: Allowance for bad debts Total	September 30, 2020 $ 2,611,727 1,008,483 65,554 1,080,218 400 1,821 34,338,618 3,743 4,159 1,082,134 186,503 - 725,521 590,969 41,699,850 (143,559) $ 41,556,291	December 31, 2019 3,432,360 919,550 60,308 1,072,490 - 19,089 19,401,208 6,058 5,776 1,297,722 148,588 178,136 1,041,801 305,409 27,888,495 (151,590) 27,736,905	September 30, 2019 3,649,834 1,303,682 123,997 1,239,831 350 720,717 8,028,033 - - 1,252,248 381,897 - 1,323,146 5,627,201 23,650,936 (684,725) 22,966,211

The outstanding contract amount of financial assets that have been written off and still have recourse as of September 30, 2020, December 31 and September 30, 2019 were $79,703,185, $78,926,674 and $78,772,869 respectively.

The change in allowance for bad debts was as follows:

Beginning balance Provision Write-off Foreign exchange Ending balance	For the nine months ended September 30, 2020 2019 $ 151,590 135,730 8,688 557,272 (15,693) (1,121) (1,026) (7,156) $ 143,559 684,725
	2020 $ 151,590 8,688 (15,693) (1,026) $ 143,559

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TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

(F) Discounts and loans, net

Import/export bills negotiated Bills and notes discounted Overdrafts Secured 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 Sub-total Less: Adjustment of discount and premium Less: Allowance for bad debts Total	September 30, 2020 $ 162,028 562,703 29,587 1,843,145 149,526,559 196,434,277 2,157,284 156,223,076 235,072,384 24,813,382 429,248,353 4,550,942 1,200,623,720 (250,609) (15,615,992) $ 1,184,757,119	December 31, 2019 159,033 1,055,795 30,564 2,750,654 150,304,834 207,869,262 2,230,213 155,727,045 175,918,159 21,723,867 425,203,483 3,117,841 1,146,090,750 (286,446) (13,341,368) 1,132,462,936	September 30, 2019 134,761 1,169,132 270,153 2,649,329 158,880,541 196,333,016 1,973,350 167,955,991 170,993,695 18,564,390 422,414,642 2,534,114 1,143,873,114 (307,752) (12,651,256) 1,130,914,106

The change in allowance for bad debts is as follows:

				For	the nine months	ended	September 30,
					2020		2019
Beginning balance				$	13,341,368		13,034,151
Provision					3,237,128		1,439,191
Transfer out					(14,440)		(19,594)
Write-off					(1,722,039)		(2,503,007)
Write-off recovered					790,135		696,326
Foreign exchange					(16,160)		4,189
Ending balance				$	15,615,992		12,651,256
Financial asset at fair value through other comprehensive income
		September	30, 2020	December 31, 2019		September 30, 2019
Investment in debt instruments
measured at fair value through
other comprehensive income：
Government bonds	$	39,045,730			42,299,233		40,634,041
Corporate bonds		40,182,320			35,288,346		33,448,922
Financial debentures		23,808,044			13,505,601		11,299,020
Negotiable certificates of deposit		-			150,031		155,086
Subtotal		103,036,094			91,243,211		85,537,069
Investment in equity instruments
measured at fair value through
other comprehensive income：
Listed stocks			7,184,189		7,149,992		5,391,656
Unlisted stocks			4,444,475		4,154,137		4,241,955
Real Estate Investment Trust			49,753		49,804		44,468
Subtotal		11,678,417			11,353,933		9,678,079
Total	$	114,714,511			102,597,144		95,215,148

(G) Financial asset at fair value through other comprehensive income

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TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

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 (P) for more details.

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 and subsidiaries recognized $330,299, $225,569, $511,208 and $408,485, respectively as dividend revenue for the three months and nine months ended September 30, 2020 and 2019. In which, the disposal equity instruments were recognized $103,124, $41,433, $117,041 and $58,330 as dividend revenue for the three months and nine months ended September 30, 2020 and 2019.

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 $2,369,270, $715,804, $2,610,237 and $1,176,068. And gains (loss) on disposal are $(2,351), $7,832, $(1,350) and $30,857 for the three months and nine months ended September 30, 2020 and 2019. Thus, accumulated gains on disposal were transferred from other equity to retained earnings.

Please refer to Note 6(AO) for the credit risk (including the impairment in debt instruments) and market risk information.
The Bank and subsidiaries assessed the impairment of financial assets measured at fair value through other comprehensive income as of September 30, 2020 and 2019. The changes in allowance for credit losses attribute to the financial assets were as follows:

Beginning balance Provision Foreign exchange Ending balance	For the nine months ended September 30,	For the nine months ended September 30,
	2020 $ 52,299 9,062 (232) $ 61,129	2019
		33,765 14,495 (4) 48,256

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TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

(H) Investment in debt instruments at amortized cost

Certificates of deposit with the Central Bank Government bonds Corporate bonds Financial debentures Negotiable certificates of deposit Subtotal Less:Accumulated impairment Total	September 30, 2020 $ 153,805,000 30,959,711 14,411,778 31,427,903 289,835 230,894,227 (77,329) $ 230,816,898		December 31, 2019 174,880,000 32,061,168 17,968,480 37,874,737 362,868 263,147,253 (90,411) 263,056,842	September 30, 2019 176,880,000 33,036,052 18,644,123 39,324,961 375,545 268,260,681 (89,891) 268,170,790

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.

Please refer to Note 6(AO) for credit risk.
The pledged assets provided by the above investment in debt instruments at amortized cost were shown follows:

Reserve for provisional seizure by the court, international card payment reserve, trust claim reserve and operating guaranty funds Overseas branches required reserve of overdraft guarantee Daylight overdraft guarantee (Certificates of deposit with the Central Bank) Guarantee for borrowing US dollars Guarantee for borrowing JPY dollars Total	September 30, 2020 $ 961,300 - 2,000,000 23,000,000 200,000 $ 26,161,300		December 31, 2019 1,183,000 62,979 2,000,000 23,000,000 200,000 26,445,979	September 30, 2019
				1,021,700 65,175 2,000,000 23,000,000 200,000
				26,286,875

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TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

The Bank and subsidiaries assessed the impairment of investment in debt instruments at amortized cost as of September 30, 2020 and 2019. The changes in allowance for credit losses attribute to these financial assets were as follows:

Beginning balance $ Reversal Foreign exchange Ending balance $	For the nine months ended September 30, 2020 2019 90,411 93,128 (12,566) (3,415) (516) 178 77,329 89,891
	2020 90,411 (12,566) (516) 77,329

Disposal gain(loss) on disposal investment in assets at amortized cost：

For the three months ended September 30, 2020	For the three months ended September 30, 2020	For the nine months ended September 30, 2020 The carrying amount at the date of derecognition Gain (Loss) on disposal 227,898 1,849 For the nine months ended September 30, 2019 The carrying amount at the date of derecognition Gain (Loss) on disposal 54,326 494
The carrying amount at the date of derecognition Gain (Loss) on disposal $ 93,399 780 For the three months ended September 30, 2019	Gain (Loss) on disposal
The carrying amount at the date of derecognition $ 20,820	Gain (Loss) on disposal	Gain (Loss) on disposal
	185	494

The Bank and subsidiaries derecognized investment in financial assets measured at amortized cost due to the advanced redemption of the issuer of the financial assets measured at amortized cost.

(I) Other financial assets

Overdue receivable Less: Allowance for bad debts, overdue receivable Total	September 30, 2020 $ 71,109 (56,737) $ 14,372	December 31, 2019 105,829 (85,901) 19,928	September 30, 2019 107,002 (87,761) 19,241

The change in allowance for bad debts was as follows:

Beginning balance Reversal Transfer in Write-off Written-off recovered Ending balance	For the nine months ended September 30, 2020 2019 $ 85,901 87,249 (17,289) (18,214) 14,440 19,594 (42,051) (16,486) 15,736 15,618 $ 56,737 87,761	For the nine months ended September 30, 2020 2019 $ 85,901 87,249 (17,289) (18,214) 14,440 19,594 (42,051) (16,486) 15,736 15,618 $ 56,737 87,761
	2020 $ 85,901 (17,289) 14,440 (42,051) 15,736 $ 56,737
		87,761

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TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

(J) Property and equipment, net

September 30, 2020	Cost $ 6,743,535 7,910,617 2,243,569 277,715 588,354 158,798 2,617 505,124 $ 18,430,329 Cost $ 6,737,960 7,862,521 2,336,544 279,967 582,107 151,713 16,346 120 405,727 $ 18,373,005 Cost $ 6,737,960 7,851,824 2,296,111 276,712 581,405 157,096 15,606 120 359,681 $ 18,276,515	Revaluation increment 2,986,161 31,184 - - - - - - 3,017,345 Revaluation increment 2,986,161 31,184 - - - - - - - 3,017,345 Revaluation increment 2,986,161 31,184 - - - - - - - 3,017,345	Accumulated depreciation - 4,356,879 1,754,427 237,438 503,412 76,887 - - 6,929,043 Accumulated depreciation - 4,213,708 1,840,547 240,449 493,441 75,183 - - - 6,863,328 Accumulated depreciation - 4,166,901 1,807,138 240,693 490,579 75,878 - - - 6,781,189	Accumulated impairment 14,031 14,754 - - - - - - 28,785 Accumulated impairment 14,031 14,754 - - - - - - - 28,785 Accumulated impairment 14,031 14,754 - - - - - - - 28,785	Total 9,715,665 3,570,168 489,142 40,277 84,942 81,911 2,617 505,124
Land Buildings Machinery and equipment Transportation equipment Miscellaneous equipment Leasehold improvements Construction in progress Prepayment for equipment Total December 31, 2019
					14,489,846
					Total 9,710,090 3,665,243 495,997 39,518 88,666 76,530 16,346 120 405,727
Land Buildings Machinery and equipment Transportation equipment Miscellaneous equipment Leasehold improvements Construction in progress Prepayment for real estate Prepayment for equipment Total September 30, 2019
					14,498,237
					Total 9,710,090 3,701,353 488,973 36,019 90,826 81,218 15,606 120 359,681
Land Buildings Machinery and equipment Transportation equipment Miscellaneous equipment Leasehold improvements Construction in progress Prepayment for real estate Prepayment for equipment Total
					14,483,886

Change of cost

Land Buildings Machinery and equipment Transportation equipment Miscellaneous equipment Leasehold improvements Construction in progress Prepayment for real estate Prepayment for equipment Total	January 1, 2020 $ 9,724,121 7,893,705 2,336,544 279,967 582,107 151,713 16,346 120 405,727 $ 21,390,350	Increase 5,575 48,096 134,440 11,187 26,109 27,832 15,787 5,455 146,429 420,910	Decrease - - 226,763 13,534 18,996 19,606 29,516 5,575 46,688 360,678	Foreign Exchange - - (652) 95 (866) (1,141) - - (344) (2,908)	September 30, 2020
					9,729,696 7,941,801 2,243,569 277,715 588,354 158,798 2,617 - 505,124
					21,447,674

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TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

Land Buildings Machinery and equipment Transportation equipment Miscellaneous equipment Leasehold improvements Construction in progress Prepayment for real estate Prepayment for equipment Total	January 1, 2019 $ 9,724,121 7,855,599 2,094,860 277,877 579,568 138,783 31,065 - 171,807 $ 20,873,680	Increase - 27,409 249,119 10,139 21,406 23,096 439 120 226,406 558,134	Decrease - - 48,503 12,107 20,006 5,941 15,898 - 38,221 140,676	Foreign Exchange - - 635 803 437 1,158 - - (311) 2,722	September 30, 2019 9,724,121 7,883,008 2,296,111 276,712 581,405 157,096 15,606 120 359,681
					21,293,860

Change of depreciation

Buildings Machinery and equipment Transportation equipment Miscellaneous equipment Leasehold improvements Total Buildings Machinery and equipment Transportation equipment Miscellaneous equipment Leasehold improvements Total	January 1, 2020 $ 4,213,708 1,840,547 240,449 493,441 75,183 $ 6,863,328 January 1, 2019 $ 4,027,738 1,739,374 242,753 492,179 55,180 $ 6,557,224	Increase 143,171 139,504 10,532 29,466 20,779 343,452 Increase 139,163 115,657 9,300 18,040 20,945 303,105	Decrease - 223,622 13,397 18,832 18,231 274,082 Decrease - 48,106 12,000 19,519 5,941 85,566	Foreign Exchange - (2,002) (146) (663) (844) (3,655) Foreign Exchange - 213 640 (121) 5,694 6,426	September 30, 2020 4,356,879 1,754,427 237,438 503,412 76,887
					6,929,043
					September 30, 2019 4,166,901 1,807,138 240,693 490,579 75,878
					6,781,189

Accumulated impairment

Land Buildings Total Land Buildings Total	January 1, 2020 $ 14,031 14,754 $ 28,785 January 1, 2019 $ 14,031 14,754 $ 28,785	Increase - - - Increase - - -	Decrease - - - Decrease - - -	Foreign Exchange - - - Foreign Exchange - - -	September 30, 2020 14,031 14,754
					28,785
					September 30, 2019 14,031 14,754
					28,785

When the Bank and subsidiaries first 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 September 30, 2020, December 31 and September 30, 2019, the appreciation from revaluation of properties all amounted to $3,017,345. Reserve for land incremental tax all amounted to $879,056 (Recognized under deferred tax liabilities).

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TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

As of September 30, 2020, December 31 and September 30, 2019, land which was illegally occupied all amounted to $5,496. Except for a portion of the land that was still under negotiation with the occupant; in addition, the Bank intends to participate in land auction, urban renewal or by other appropriate means in due course.

(K) Right-of-use assets, net

The Bank and subsidiaries leases 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:

September 30, 2020	Cost $ 1,407,039 63,552 67,457 6,682 $ 1,544,730 Cost $ 1,299,279 74,915 60,417 5,729 $ 1,440,340 Cost $ 1,040,628 74,889 60,491 5,295 $ 1,181,303	Accumulated depreciation 436,224 59,484 31,171 2,777 529,656 Accumulated depreciation 301,019 64,743 21,514 1,505 388,781 Accumulated depreciation 250,930 61,880 16,036 1,168 330,014	Accumulated impairment - - - - - Accumulated impairment - - - - - Accumulated impairment - - - - -	Total 970,815 4,068 36,286 3,905
Buildings Machinery and equipment Transportation equipment Miscellaneous equipment Total December 31, 2019
				1,015,074
				Total 998,260 10,172 38,903 4,224
Buildings Machinery and equipment Transportation equipment Miscellaneous equipment Total September 30, 2019
				1,051,559
				Total 789,698 13,009 44,455 4,127
Buildings Machinery and equipment Transportation equipment Miscellaneous equipment Total
				851,289

Change of cost

Buildings Machinery and equipment Transportation equipment Miscellaneous equipment Total Buildings Machinery and equipment Transportation equipment Miscellaneous equipment Total	January 1, 2020 $ 1,299,279 74,915 60,417 5,729 $ 1,440,340 January 1, 2019 $ 854,180 75,518 54,202 3,456 $ 987,356	Increase 259,778 2 13,859 1,145 274,784 Increase 216,358 68 6,947 1,967 225,340	Decrease 153,540 11,365 6,762 192 171,859 Decrease 41,693 697 660 128 43,178	Foreign Exchange 1,522 - (57) - 1,465 Foreign Exchange 11,783 - 2 - 11,785	September 30, 2020 1,407,039 63,552 67,457 6,682
					1,544,730
					September 30, 2019 1,040,628 74,889 60,491 5,295
					1,181,303

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TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

Change of depreciation

									Foreign		September 30,
		January	1,	2020	Increase		Decrease		Exchange		2020
	Buildings	$	301,019		284,913		149,350		(358)		436,224
	Machinery and equipment		64,743			6,106	11,365		-		59,484
	Transportation equipment		21,514			16,443	6,762			(24)	31,171
	Miscellaneous equipment			1,505		1,464	192		-		2,777
	Total	$	388,781		308,926		167,669		(382)		529,656
									Foreign		September 30,
		January	1,	2019	Increase		Decrease		Exchange		2019
	Buildings	$	-		291,525		40,395		(200)		250,930
	Machinery and equipment		53,451			9,126	697		-		61,880
	Transportation equipment		-			16,707	660			(11)	16,036
	Miscellaneous equipment		-			1,296	128		-		1,168
	Total	$	53,451		318,654		41,880		(211)		330,014
(L)	Other assets, net
				September		30, 2020	December		31, 2019 September 30, 2019
	Office supplies			$		28,921			28,531		28,397
	Prepayments				8,213,876				4,269,431		3,283,910
	Operating guarantee deposits and					28,319			30,066		30,817
	settlement fund
	Guarantee deposits paid					815,393			1,222,379		858,161
	Deferred assets					171			9		12
	Temporary payments and suspense				-			-			2,693,511
	accounts
	Proceeds of settlement and margin					937,237			2,034		2,913
	trading
	Total			$	10,023,917				5,552,450		6,897,721

(M) Deposits from the Central Bank and banks

Deposits from the Central Bank Due from the Central Bank Deposits from banks Call loans from banks Overdrafts on banks Deposits transferred from Chunghwa Post Co., Ltd. Total	September 30, 2020 $ 299,177 12,175,800 510,094 32,305,731 1,174,372 68,275,360 $ 114,740,534	December 31, 2019 175,101 10,796,400 93,229 24,197,994 1,118,477 68,412,411 104,793,612	September 30, 2019
			171,175 15,828,105 118,738 44,632,615 762,910 68,414,411
			129,927,954

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TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

(N) Due to the Central Bank and banks

	September 30, 2020	September 30, 2020
Currency TWD USD USD USD	Interest Rate Maturity Date 0.1% 2021.3.27 2.26% 2021.5.28 1.76% 2021.8.27 1.77% 2023.6.10 December 31, 2019		Original Amount NTD Amount 16,450,000 $16,450,000 3,000 86,970 6,000 173,940 12,000 347,880 $17,058,790 $14,265,960
				17,058,790
				14,265,960

Currency TWD TWD CNY USD USD	Interest Rate 0.86% 1.00% 4.99% 3.89%~3.91% 3.30%	Maturity Date 2020.1.30 2020.1.20 2020.6.22~2021.2.13 2021.5.28 2020.8.27	Original Amount NTD Amount 90,000 $ 90,000 500 500 7,417 31,855 15,000 449,850 6,000 179,940 $ 752,145 $ 1,170,105	NTD Amount

Chang Hwa Commercial Bank, Ltd. (Kunshan) First Commercial Bank (Xiamen) Taichung Commercial Bank Co., Ltd. (OBU) Sunny Commercial Bank (OBU) Agricultural Bank of Taiwan Hua Nan Commercial Bank, Ltd. Total Unused credit lines		September 30, 2019	September 30, 2019
	Currency CNY CNY USD USD TWD TWD	Interest Rate 4.99% 5.46% 4.14%~4.21% 3.56% 0.86% 1.00%	Maturity Date 2020.6.22~2021.2.13 2021.5.18 2020.5.28~2020.5.31 2020.8.27 2020.4.12 2019.11.7	Original Amount NTD Amount 9,250 $ 40,346 300 1,309 15,000 465,532 6,000 186,213 187,000 187,000 40,000 40,000 $ 920,400 $ 790,248

～ 42 ～

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

(O) Financial liabilities at fair value through profit or loss

Financial liabilities designated at fair value through profit or loss： Financial debentures Financial liabilities held for trading： Derivative instruments not used for hedging Foreign exchange forward contracts Currency swap contracts Foreign currency option-put Interest rate contract Total	September 30, 2020 $ 8,612,981 38,701 253,951 5,169 50,297 $ 8,961,099	December 31, 2019 8,949,182 13,364 395,909 7,763 27,118 9,393,336	September 30, 2019
			9,180,28 6,39 391,73 9,47 38,23
			9,626,11

Please refer to 6(S) 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 September 30, 2020, December 31 and September 30, 2019.

(P) Notes and bonds issued under repurchase agreement

Assets	September 30, 2020	September 30, 2020	September 30, 2020	September 30, 2020
	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	$ 2,995,941	3,028,033	3,034,761	Prior to August 24, 2023

Assets	December 31, 2019
	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	$ 784,600	868,581	869,623	Prior to May 8, 2020

～ 43 ～

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

Assets	September 30, 2019	September 30, 2019	September 30, 2019	September 30, 2019
	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	$ 1,245,496	1,274,971	1,276,847	Prior to March 10, 2020

(Q) Payables

Accrued interest Accounts payable Acceptances Accrued expenses Collection payable Deposits received from securities borrowers Guaranteed price deposits received from securities borrowers Accounts payable factoring Spot exchange payable, foreign currencies Other payables Prices payable of securities sold for customers Dividends payable Settlement proceeds Others Total	September 30, 2020 $ 2,415,089 6,471,955 1,017,854 2,299,752 2,989,298 82,863 90,159 1,821 34,317,574 1,712,478 146,084 - 35,860 24,572 $ 51,605,359	December 31, 2019 2,623,479 3,107,765 946,338 2,808,411 774,995 101,709 110,417 19,089 19,400,371 825,924 319,966 2,050 - 17,170 31,057,684	September 30, 2019
			2,682,836 7,227,765 1,319,887 2,431,674 2,002,387 87,693 95,661 189,899 8,028,585 12,958,835 26,021 - 351,370 12,253
			37,414,866

(R) Deposits and remittances

Savings deposits Time deposits Demand deposits Checking account deposits Remittances Total	September 30, 2020 $ 655,703,827 359,243,598 352,854,153 20,842,883 284,825 $ 1,388,929,286	December 31, 2019 642,739,224 405,886,922 361,341,496 24,775,707 306,198 1,435,049,547	September 30, 2019
			628,088,569 375,583,360 336,124,868 21,814,078 1,030,766
			1,362,641,641

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TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

(S) Bank notes payable

Bonds			Terms of Transactions		Bond Is	sued
	Issue date	Maturity date	Interest Rate & repayment	Type		Amount
2010-1P A 2010-1P B 2013-1 2013-2A 2013-2B 2015-1P 2015-2A 2015-2B 2016-1P 2016-2 2017-1A 2017-1B	09/23/2010 09/23/2010 03/25/2013 11/25/2013 11/25/2013 06/18/2015 08/31/2015 08/31/2015 09/20/2016 12/20/2016 03/28/2017 03/28/2017	None None 03/25/2020 11/25/2020 11/25/2020 None 08/31/2023 08/31/2025 None 12/20/2023 03/28/2024 03/28/2025	The debentures bear annual interest rate which is the Chunghwa post's board average interest rate for 1- year time deposit plus 1.34% for the ten years after the issue date. The interest rate will be the Chunghwa post's board interest rate for 1-year time deposit plus 2.34% from the eleventh year. The debentures are redeemable per face value plus accrued interest at the interest payment date after ten years from the issue date under the consent of the competent authority. The debentures bear an interest rate of 3.05% for the first ten years after the issue date. The interest rate will be 4.05% from the eleventh year. The debentures are redeemable per face value plus accrued interest at the interest payment date after ten years from the issue date under the consent of the competent authority. The debentures bear an annual interest rate of 1.68%. Simple interest is accrued and paid annually. The principal will be repaid in full at maturity. (A) The debentures bear annual interest rate, which is the index rate plus 0.52%. The index rate is the average offer of 90-days CP which is indicated in Reuter's page 6165 at 11 A.M Taipei time, 2 operation days prior to the interest commencement date. (B) Since January 1, 2015 according to various indicators of interest rate changes during the value date two business days before the pricing (FIXING) Bank of the Republic of China Business Association National Union RCAs website "Taipei fixing the financial sector call loan rate (TAIBOR)" three- month interest rate fixing. Simple interest rate is accrued four times a year and paid annually. The principal will be repaid in full at maturity. The debentures bear an annual interest rate of 1.92%. Simple interest is accrued and paid annually. The principal will be repaid in full at maturity. The debenture bear an annual interest rate of 3.9%. Simple interest is accrued and paid annually. The debentures are redeemable per face value plus accrued interest at interest payment date after five years from the issued date under the consent of the competent authority. The debentures bear an annual interest rate of 2.05%. Simple interest is accrued and paid annually. The principal will be repaid in full at maturity. 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. The debentures bear an annual interest rate of 3.2%. Simple interest is accrued and paid annually. The debentures are redeemable per face value plus accrued interest at interest payment date after five years and three months from the issued date under the consent of the competent authority The debentures bear an annual interest rate of 1.40%. Simple interest is accrued and paid annually. The principal will be repaid in full at maturity. The debentures bear an annual interest rate of 1.50%. Simple interest is accrued and paid annually. The principal will be repaid in full at maturity. 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.	Perpetual non- accumulated subordinated financial debentures 〞 Unsecured subordinated long-term financial debentures 〞〞 Perpetual non- accumulated subordinated financial debentures Unsecured subordinated long-term financial debentures 〞 Perpetual non- accumulated subordinated financial debentures Unsecured subordinated long-term financial debentures 〞〞	September 30, 2020 $ - - - 3,100,000 2,900,000 - 4,700,000 300,000 8,000,000 2,700,000 390,000 250,000	December 31, 2019 September 30, 2019 3,200,000 3,200,000 800,000 800,000 5,000,000 5,000,000 3,100,000 3,100,000 2,900,000 2,900,000 5,000,000 5,000,000 4,700,000 4,700,000 300,000 300,000 8,000,000 8,000,000 2,700,000 2,700,000 390,000 390,000 250,000 250,000

～ 45 ～

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

Bonds			Terms of Transactions		Bond I	ssued
	Issue date	Maturity date	Interest Rate & repayment	Type		Amount
2017-1C 2017-2 2018-1 2018-2 2019-1A 2019-1B 2020-1 2020-2	03/28/2017 05/23/2017 01/05/2018 08/20/2018 03/21/2019 03/21/2019 03/25/2020 08/13/2020	03/28/2027 05/23/2027 01/05/2021 08/20/2028 03/21/2026 03/21/2029 03/25/2030 None	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. 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. The debentures bear an annual interest rate of 0.7%. Simple interest is accrued and paid annually. The principal will be repaid in full at maturity. 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. 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. 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. The debentures bear an annual interest rate of 0.8%. Simple interest is accrued and paid annually. The principal will be repaid in full at maturity. 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 .	Unsecured subordinated long-term financial debentures 〞 Unsecured senior long- term financial debentures Unsecured subordinated long-term financial debentures 〞〞〞 Perpetual non- accumulated subordinated financial debentures	September 30, 2020 $ 3,360,000 1,300,000 1,000,000 5,450,000 1,000,000 4,800,000 10,000,000 10,000,000 $ 59,250,000	December 31, 2019 3,360,000 1,300,000 1,000,000 5,450,000 1,000,000 4,800,000 - - 53,250,000	September 30, 2019
							3,360,000 1,300,000 1,000,000 5,450,000 1,000,000 4,800,000 - -
							53,250,000

The Bank issued $120,000 thousand and $180,000 thousand 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 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 classified the debentures into financial liabilities at fair value through profit or loss. The debentures are as follows:

Bonds			Terms of Transactions		Bond I	ssued
	Issue date	Maturity date	Interest Rate & repayment	Type		Amount
2017-3 2018-3	10/27/2017 09/27/2018	10/27/2047 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. 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 〞 Valuation adjustment	September 30, 2020 $ 3,478,800 5,218,200 (84,019) $ 8,612,981	December 31, 2019 3,598,800 5,398,200 (47,818) 8,949,182	September 30, 2019
							3,724,260 5,586,390 (130,370)
							9,180,280

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TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

(T) Other financial liabilities

Cumulative earnings on appropriated loans fund Principals received on structured notes Total	September 30, 2020 $ 5,908,558 - $ 5,908,558	December 31, 2019 6,835,084 - 6,835,084	September 30, 2019
			7,240,626 500,000
			7,740,626

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.

(U) Provisions

Provision for guarantee liabilities Provision for loan commitments Provision for employee benefits Total	September 30, 2020 $ 200,539 35,793 2,922,578 $ 3,158,910	December 31, 2019 200,948 31,498 2,925,557 3,158,003	September 30, 2019
			207,277 31,062 2,972,894
			3,211,233

Change of provision

Provision for guarantee liabilities Provision for loan commitments Provision for employee benefits Total Provision for guarantee liabilities Provision for loan commitments Provision for employee benefits Total	January 1, 2020 $ 200,948 31,498 2,925,557 $ 3,158,003 January 1, 2019 $ 215,383 73,753 3,276,591 $ 3,565,727	Increase - 4,357 172,839 177,196 Increase - - 185,583 185,583	Decrease 293 - 137,611 137,904 Decrease 8,145 42,646 443,319 494,110	Use - - 38,207 38,207 Use - - 45,961 45,961	Foreign exchange (116) (62) - (178) Foreign exchange 39 (45) - (6)	September 30, 2020
						200,539 35,793 2,922,578
						3,158,910
						September 30, 2019
						207,277 31,062 2,972,894
						3,211,233

Please refer to Note 6(Z) for the information with regard to provision for employee benefits shown above.

(V) Lease liabilities

Lease liabilities as follows:

Less than one year More than one year	September 30, 2020 $ 304,806 $ 686,499	December 31, 2019 362,818 678,365	September 30, 2019
			326,516
			499,994

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TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

The amounts recognized in profit or loss were as follows:

For the three months ended September 30, 2020 2019 $ 4,149 (25,853) $ 1,038 2,949 $ 3,645 9,017	For the nine months ended September 30,	For the nine months ended September 30,
2020 $ 4,149 $ 1,038 $ 3,645	2020 12,363 6,184 11,598	2019
		10,976
		9,497
		12,630

The amounts recognized in the statement of cash flows were as follows：

Total cash outflow for leases	For the nine months ended September 30,	For the nine months ended September 30,
	2020 $ 351,709	2019
		356,866

(a) 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.

(b) 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.

～ 48 ～

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

(W) Other liabilities

Advance interest receipts Unearned revenue Other advance receipts Guarantee deposits received Temporary receipts and suspense accounts Others Total	September 30, 2020 $ 2,162 234,026 65,457 1,864,141 1,231,449 5,664 $ 3,402,899	December 31, 2019 5,231 178,283 84,080 1,302,117 1,711,940 7,830 3,289,481	September 30, 2019
			7,908 177,420 50,269 1,779,510 - 7,581
			2,022,688

(X) Equity

(a) Common stock

As of September 30, 2020, December 31 and September 30, 2019, the Bank’s authorized capital were $80,000,000 and the paid-in capital for common shares of the Bank were $74,885,834, $71,319,842 and $71,319,842, the face value of each share is NTD $10. The outstanding shares were 7,488,584, 7,131,985 and 7,131,985 thousand shares, respectively.

Pursuant to the resolution approved by the regular stockholders’ meeting of the Bank on May 29, 2020, the Bank increased its capital from the retained earnings by $3,565,992 and issued 356,599 thousand shares. The capital increase has been approved by Financial Supervisory Commission and came into effect on July 6, 2020. The record date of the capital increase is set on July 28, 2020.

Pursuant to the resolution approved by the regular stockholders’ meeting of the Bank on June 14, 2019, the Bank increased its capital from the retained earnings by $3,196,940 and issued 319,694 thousand shares. The capital increase has been approved by Financial Supervisory Commission and came into effect on July 25, 2019. The record date of the capital increase is set on August 20, 2019. The Bank has completed the alteration of the registered capital amount on September 9, 2019.

A resolution was passed during the regular shareholders’ meetings held on June 14, 2019 for the issuance of ordinary shares for cash within a year under private placement, with the number of shares issued to not exceed 1,000,000 thousand. Subsequently, a resolution was passed during the board meeting held on August 19, 2019 for the issuance of 418,410 thousand ordinary shares under private placement at $11.95 per share, amounting to $5,000,000, August 30, 2019 as the record date of cash capital increase. The relevant statutory registration procedures have been completed. The remaining quota of this private placement (581,590 thousand shares) was no longer processed by a resolution of the interim board of directors on April 22, 2020. The situation regarding the handling of privately placed ordinary shares was reported to the regular shareholders' meeting on May 29, 2020.

～ 49 ～

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

The aforementioned private placement of ordinary shares and the transfer of any subsequently issuance bonus shares would be subject to section 43-8 requirements under the Securities and Exchange Act. The Bank can only list these shares to be traded on the Taiwan Stock Exchange after a three-year period has elapsed from the delivery date of the private placement securities (November 1, 2019), and after applying for a public offering with the Financial Supervisory Commission.

(b) Capital surplus

Sources and statement of the Bank's capital surplus were as follows:

Additional paid-in capital	September 30, 2020 $ 815,900	December 31, 2019 815,900	September 30, 2019
			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.

(c) 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. Add accumulated retained earnings from previous years as distributable dividends and the amount of dividends is 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.

～ 50 ～

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

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 2019 and 2018 in the shareholder’s meeting on May 29, 2020 and June 14, 2019, respectively. The dividends distributed were as follows:

Dividends to common shareholders Stock dividends Cash dividends Total	2019 Distribution rate (NT dollar) Amount $ 0.50 3,565,992 0.20 1,426,397 $ 4,992,389	2018	2018
		Distribution rate (NT dollar) 0.50 0.30	Amount
			3,196,940 1,918,164
			5,115,104

(d) Other equity interest

January 1, 2020 Investment in debt instruments measured at fair value through other comprehensive income -Unrealized amount -Realized amount Foreign currency translation difference－Exchange difference Disposal of investments in equity instruments measured at fair value through other comprehensive income September 30, 2020	Unrealized gains from financial assets measured at fair value through other comprehensive income $ 4,541,167 566,241 (385,744) - 1,350 $ 4,723,014	Exchange differences on translation of foreign financial statements (862,866) - - (377,697) - (1,240,563)	Total 3,678,301 566,241 (385,744) (377,697) 1,350
			3,482,451

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TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

January 1, 2019 Investment in debt instruments measured at fair value through other comprehensive income -Unrealized amount -Realized amount Foreign currency translation difference－Exchange difference Disposal of investments in equity instruments measured at fair value through other comprehensive income September 30, 2019	Unrealized gains from financial assets measured at fair value through other comprehensive income $ 3,447,786 1,037,228 (165,619) - (30,857) $ 4,288,538	Exchange differences on translation of foreign financial statements (541,122) 47,666 - (493,456)	Total 2,906,664 1,037,228 (165,619) 47,666 (30,857) 3,795,082

(Y) Income taxes

(a) The income tax expenses were as follows:

For the three months ended September 30, 2020 2019 Current tax expense Current period $ 321,267 320,224 Adjustment for prior period - - Additional surtax on undistributed retained earnings - - 321,267 320,224 Deferred tax expense Reversal of temporary different (197,483) 116,132 Income tax expenses $ 123,784 436,356	For the nine months ended September 30,	For the nine months ended September 30,
	2020 739,794 (54,603) - 685,191 (318,920) 366,271	2019
		878,572 83,925 17,803
		980,300
		125,945
		1,106,245

(b) The income tax expenses (income) recognized under other comprehensive income were as follows:

For the three months ended September 30, 2020 2019 $ (29,476) 6,172 3,808 649 $ (25,668) 6,821	For the nine months ended September 30,	For the nine months ended September 30,
2020 $ (29,476) 3,808 $ (25,668)	2020 (94,424) 7,307 (87,117)	2019
		11,916 11,376
		23,292

(c) Uncertainty over income tax treatments

For tax returns that have not yet been assessed, the Bank and subsidiaries have assessed relevant factors, including relevant IFRIC interpretations and historical experience, and believe that sufficient income tax liabilities have been estimated.

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TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

(d) The Bank’s income tax returns through 2017 have been assessed by the Tax Authority.
(e) The income tax returns of the subsidiaries TBB Venture Capital Co., Ltd., and TBB International Leasing Co., Ltd. have been assessed until 2018 by the Tax Authority.

(Z) Provision for employee benefit

As of September 30, 2020, December 31 and September 30, 2019, the balance of provision for employee benefit of the Bank and subsidiaries were as follows:

Defined benefit plan Employee deposits with favorable rate	September 30, 2020 $ 1,993,418 929,160 $ 2,922,578	December 31, 2019 2,022,067 903,490 2,925,557	September 30, 2019
			2,077,993 894,901
			2,972,894

(a) Defined benefit plan

In 2019, 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, 2019 and 2018 by the Bank and subsidiaries.

The Bank and subsidiaries recognized the expenses amounting to $49,055, $53,454, $147,152 and $160,354 for the three months and nine months ended September 30, 2020 and 2019, respectively.

(b) 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 $35,522, $32,740, $106,764 and $99,150 for the three months and nine months ended September 30, 2020 and 2019, respectively.

In 2019, 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, 2019 and 2018 by the Bank and subsidiaries.

The Bank and subsidiaries recognized expenses amounting to $58,832, $55,902, $174,102 and $166,663 for the three months and nine months ended September 30, 2020 and 2019, respectively.

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TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

(AA) Earnings per share

For the three months ended September 30, 2020 2019 $ 1,204,794 2,009,346 7,488,584 7,100,750 $ 0.16 0.28 8,007 8,647 7,496,591 7,109,397 $ 0.16 0.28	For the nine months ended September 30,	For the nine months ended September 30,
2020 $ 1,204,794 7,488,584 $ 0.16 8,007 7,496,591 $ 0.16	2020 3,462,965 7,488,584 0.46 24,024 7,512,608 0.46	2019
		5,409,895
		7,100,750
		0.76
		27,934
		7,128,684
		0.76

Note 1: The earnings per share for the nine months ended September 30, 2019 has applied retrospective adjustments.

Note 2: The shares were calculated based on the stock price on the balance sheet date.

(AB) 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 and nine months ended September 30, 2020 and 2019, the estimated employee remuneration were $76,382, $105,000, $229,191 and $339,201, and the estimated directors' remuneration were $8,463, $15,251, $24,456 and $40,913, 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, 2019 and 2018, the employees' remuneration was accrued at $384,639 and $583,736 and the directors' remuneration was accrued at $50,456 and $58,374 respectively. There is no difference with actual distribution of 2019 and 2018 remuneration. The information is available at the Market Observation Post System website.

～ 54 ～

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

(AC) Net interest revenue

For the three months ended September 30, 2020 2019 $ 1,306,516 1,956,999 3,519,574 3,923,633 389 1,155 3,029 5,011 2,431 6,783 143,896 260,070 20,919 36,788 92,585 306,932 595,062 752,376 10,542 13,844 90,732 39,238 8,756 18,497 51,221 93,543 69,524 94,735 5,915,176 7,509,604 1,581,125 2,558,248 2,252 7 51,882 271,746 312,477 283,325 1,168 8,352 11,672 3,293 1,960,576 3,124,971 $ 3,954,600 4,384,633	For the nine months ended September 30,	For the nine months ended September 30,
2020 $ 1,306,516 3,519,574 389 3,029 2,431 143,896 20,919 92,585 595,062 10,542 90,732 8,756 51,221 69,524 5,915,176 1,581,125 2,252 51,882 312,477 1,168 11,672 1,960,576 $ 3,954,600	2020 4,450,934 10,925,175 1,874 9,606 12,559 559,184 77,466 492,251 1,949,488 34,140 187,726 34,435 178,406 209,065 19,122,309 5,816,971 4,934 331,323 893,269 3,989 35,882 7,086,368 12,035,941	2019
		5,815,218 11,598,732 4,683 15,545 29,380 757,875 106,073 775,336 2,210,049 40,934 103,068 72,429 363,237 277,672
		22,170,231
		7,676,336 193 826,928 825,178 12,955 41,553
		9,383,143
		12,787,088

～ 55 ～

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

(AD) Net service fee revenue

For the three months ended September 30, 2020 2019 $ 18,169 21,084 8,421 11,850 2,806 3,637 1,932 2,028 566 887 229 580 226,968 189,307 54,819 50,309 29,038 23,350 22,373 20,739 37,592 39,313 111,876 400,400 42,730 43,467 22,711 22,126 1,353 1,105 208,946 157,334 34,431 27,161 824,960 1,014,677 6,206 10,967 40,040 36,797 237 420 420 556 16,339 18,149 2,454 2,410 1,242 1,213 13,474 13,290 2,149 3,548 76 61 5,347 4,213 87,984 91,624 $ 736,976 923,053	For the nine months ended September 30,	For the nine months ended September 30,
2020 $ 18,169 8,421 2,806 1,932 566 229 226,968 54,819 29,038 22,373 37,592 111,876 42,730 22,711 1,353 208,946 34,431 824,960 6,206 40,040 237 420 16,339 2,454 1,242 13,474 2,149 76 5,347 87,984 $ 736,976	2020 52,702 26,555 8,698 6,017 1,507 822 551,031 160,857 77,983 65,479 85,535 481,329 126,494 68,631 4,122 561,639 90,621 2,370,022 22,420 117,692 813 1,193 48,134 7,306 3,696 40,516 5,649 1,048 14,433 262,900 2,107,122	2019
		63,169 39,356 12,019 6,545 1,762 1,374 453,065 160,266 69,702 55,910 97,180 1,291,087 124,963 73,496 3,994 489,638 98,118
		3,041,644
		29,163 104,181 1,422 1,636 53,419 7,396 3,632 38,385 8,708 244 12,722
		260,908
		2,780,736

～ 56 ～

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

(AE) Gain (loss) on financial assets or liabilities measured at fair value through profit or loss

Valuation gains (losses): Government bonds Corporate bonds Financial debentures Listed stocks Unlisted stocks Beneficiary certificates Private fund Commercial paper Derivative financial instruments Subtotal Disposal gains (losses): Government bonds Corporate bonds Financial debentures Listed stocks Beneficiary certificates Commercial paper Derivative financial instruments Subtotal Dividend revenue Interest income Total	For the three months ended September 30, 2020 2019 $ - 5,878 (1,385) (7,085) (247,523) (257,813) (13,443) 6,137 9,111 10,690 (10,768) (2,647) 200 (1,850) (1,756) (354) (41,005) (123,854) (306,569) (370,898) (362) 8,178 9,244 1,750 - 4,731 (7,376) (13,533) 27,087 3,969 (904) - 426,298 565,588 453,987 570,683 5,225 3,302 27,428 44,620 $ 180,071 247,707	For the nine months ended September 30,	For the nine months ended September 30,
	2020 $ - (1,385) (247,523) (13,443) 9,111 (10,768) 200 (1,756) (41,005) (306,569) (362) 9,244 - (7,376) 27,087 (904) 426,298 453,987 5,225 27,428 $ 180,071	2020 (5,051) 4,747 (261,198) (18,139) 20,933 5,991 (250) 851 (5,236) (257,352) 29,821 11,233 (5,425) (25,590) 16,896 (2,260) 918,235 942,910 5,318 96,785 787,661	2019
			6,762 (7,840) (267,583) 1,353 10,690 3,820 (3,000) (1,290) 287,623 30,535 16,448 1,648 18,894 2,772 700 - 951,372 991,834 3,302 118,634 1,144,305

(AF) Realized gain on financial assets at fair value through other comprehensive income

Gain on disposal of government bonds Gain on disposal of corporate bonds Gain (loss) on disposal of financial debentures Dividend revenue Total	For the three months ended September 30, 2020 2019 $ 165,002 44,409 3,000 1,106 40,562 (294) 330,299 225,569 $ 538,863 270,790	For the nine months ended September 30,	For the nine months ended September 30,
	2020 $ 165,002 3,000 40,562 330,299 $ 538,863	2020 341,558 3,624 40,562 511,208 896,952	2019
			163,572 2,341 (294) 408,485 574,104

(AG) (Impairment losses on assets) reversal of impairment loss on assets

Investment in debt instrument measured at fair value through other comprehensive income Investment in debt instrument measured at amortized cost Total	For the three months ended September 30, 2020 2019 $ (4,660) (2,926) (1,183) 3,702 $ (5,843) 776	For the nine months ended September 30,	For the nine months ended September 30,
	2020 $ (4,660) (1,183) $ (5,843)	2020 (9,062) 12,566 3,504	2019
			(14,495) 3,415 (11,080)

～ 57 ～

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

(AH) Net other revenue other than interest income

For the three months ended September 30, 2020 2019 $ 2,294 2,354 - (445) (1,179) (278) (49) (3) 1,583 906 (9,255) (3,364) 115,876 20,081 $ 109,270 19,251	For the nine months ended September 30,	For the nine months ended September 30,
2020 $ 2,294 - (1,179) (49) 1,583 (9,255) 115,876 $ 109,270	2020 7,084 (371) (1,636) (602) 3,725 (49,206) 190,709 149,703	2019
		7,174 (445) (649) (76) 1,431 (14,686) 124,569
		117,318

(AI) Other miscellaneous revenue

Overpaid business tax returned	For the three months ended September 30, 2020 2019 $ - -	For the nine months ended September 30, 2020 2019 - 138,999
	2020 $ -

(AJ) Bad debts expenses, commitment and guarantee liability provision

For the three months ended September 30, 2020 2019 $ 1,276,309 252,646 4,123 (11,571) 2 3 7,077 4,826 1,287,511 245,904 (3,060) 8,392 (12,660) (2,006) $ 1,271,791 252,290	For the nine months ended September 30,	For the nine months ended September 30,
2020 $ 1,276,309 4,123 2 7,077 1,287,511 (3,060) (12,660) $ 1,271,791	2020 3,237,128 (5,819) - (8,601) 3,222,708 (293) 4,357 3,226,772	2019
		1,439,191 (1,359) 1,897 539,058
		1,978,787 (8,145) (42,646)
		1,927,996

(AK) Employee benefits expenses

For the three months ended September 30, 2020 2019 $ 1,619,840 1,646,106 120,803 123,742 84,389 86,194 12,056 17,421 146,392 134,977 $ 1,983,480 2,008,440	For the nine months ended September 30,	For the nine months ended September 30,
2020 $ 1,619,840 120,803 84,389 12,056 146,392 $ 1,983,480	2020 4,914,370 365,251 253,350 35,182 478,149 6,046,302	2019
		5,016,259 372,334 259,504 47,424 455,534
		6,151,055

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TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

(AL) Depreciation and amortization expense

For the three months ended September 30, 2020 2019 $ 111,611 107,075 104,056 112,217 42,248 29,119 - - $ 257,915 248,411	For the nine months ended September 30,	For the nine months ended September 30,
2020 $ 111,611 104,056 42,248 - $ 257,915	2020 330,130 308,926 107,064 1 746,121	2019
		303,105 318,654 92,605 1
		714,365

(AM)Other general and administrative expense

For the three months ended September 30, 2020 2019 $ 20 32 29,289 31,343 58,194 52,404 7,114 14,082 42,609 32,929 75,772 70,255 84,993 83,473 53,508 62,154 25,050 46,893 6,775 10,053 291,784 342,570 145,628 142,052 16,072 9,577 19,118 22,686 18,513 18,754 $ 874,439 939,257	For the nine months ended September 30,	For the nine months ended September 30,
2020 $ 20 29,289 58,194 7,114 42,609 75,772 84,993 53,508 25,050 6,775 291,784 145,628 16,072 19,118 18,513 $ 874,439	2020 75 67,866 161,198 20,448 82,044 190,238 258,601 155,326 70,372 17,782 899,285 427,316 41,478 65,409 48,947 2,506,385	2019
		89 70,384 157,796 34,749 75,807 163,583 248,084 156,558 129,010 15,686 1,021,582 403,809 33,580 70,252 49,252
		2,630,221

(AN) Financial Instruments

(a) 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.

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TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

(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 market 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.

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TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

(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:

Assets and Liabilities		September	30, 2020
	Total $ 295,829 1,847,410 25,926,557 115,748 11,628,664 103,036,094 49,753 8,612,981 $ 860,595 348,118	Level 1 60,119 1,348,298 122,710 - 7,184,189 67,684,192 49,753 - 72,658 -	Level 2 Level 3 - 235,710 499,112 - 25,705,947 97,900 115,748 - - 4,444,475 35,351,902 - - - 8,612,981 - 787,937 - 348,118 -
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 Bond Investments Others Financial assets designated at fair value through profit or loss Financial assets at fair value through other comprehensive income Security Investments Bond Investments Others Financial liabilities at fair value through profit or loss Financial liabilities designated at fair value through profit or loss Derivative financial assets and liabilities
Assets: Financial assets at fair value through profit or loss Liabilities: Financial liabilities at fair value through profit or loss

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TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

Assets and Liabilities		December 31, 2019	December 31, 2019
	Total t $ 324,768 4,430,927 21,146,055 120,240 11,304,129 91,093,180 199,835 8,949,182 $ 950,796 444,154	Level 1 178,867 4,230,927 60,740 - 7,149,992 66,578,857 49,804 - 65,784 - September	Level 2 Level 3 - 145,901 200,000 - 21,037,165 48,150 120,240 - - 4,154,137 24,514,323 - 150,031 - 8,949,182 - 885,012 - 444,154 - 30, 2019
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 a fair value Security Investments Bond Investments Others Financial assets designated at fair value through profit or loss Financial assets at fair value through other comprehensive income Security Investments Bond Investments Other Financial liabilities at fair value through profit or loss Financial liabilities designated at fair value through profit or loss Derivative financial assets and liabilities
Assets: Financial assets at fair value through profit or loss Liabilities: Financial liabilities at fair value through profit or loss Assets and Liabilities
	Total t $ 245,680 4,446,750 10,665,195 1,211,437 9,633,611 85,537,069 44,468 9,180,280 $ 900,334 445,834	Level 1 189,000 4,246,750 - - 5,391,656 65,620,213 44,468 - 61,930 -	Level 2 Level 3 - 56,680 - 200,000 10,618,195 47,000 1,211,437 - - 4,241,955 19,916,856 - - - 9,180,280 - 838,404 - 445,834 -
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 a fair value Security Investments Bond Investments Others Financial assets designated at fair value through profit or loss Financial assets at fair value through other comprehensive income Security Investments Bond Investments Other Financial liabilities at fair value through profit or loss Financial liabilities designated at fair value through profit or loss Derivative financial assets and liabilities
Assets: Financial assets at fair value through profit or loss Liabilities: Financial liabilities at fair value through profit or loss

～ 62 ～

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

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.

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 markto-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.

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C. Adjustment for fair value
a. 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.

b. Credit risk value adjustment

The Bank and subsidiaries' credit 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.

The Bank and subsidiaries would 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 and subsidiaries assess 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 Level 2 for the nine months ended September 30, 2020 and 2019.

E. Changes in financial assets which were classified to Level 3 based on fair value measurement

Changes of financial assets categorized in Level 3 :

Name		For th	For th	e nine months en	ded September 30, 2020	ded September 30, 2020
	Beginning balance	Valuation profit and loss		Incr	ease	Decr	ease Transfer out from Level 3 Ending balance - 333,610 - 4,444,475
		Recognized in profit or loss	Recognized in other comprehensive income	Purchase or issue	Transfer into Level 3	Sale Disposition or Settlement
Financial assets at fair value through profit or loss Investments in equity instruments measured at fair value through other comprehensive income	$ 194,051 4,154,137	20,297 -	- 290,338	119,262 -	- -	- -

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TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

Name		For th	For th	e nine months en	ded September 30, 2019	ded September 30, 2019
	Beginning balance	Valuation profit and loss		Incr	ease	Decr	ease Transfer out from Level 3 Ending balance - 303,680 - 4,241,955
		Recognized in profit or loss	Recognized in other comprehensive income	Purchase or issue	Transfer into Level 3	Sale Disposition or Settlement
Financial assets at fair value through profit or loss Investments in equity instruments measured at fair value through other comprehensive income	$ 250,000 4,212,027	7,690 -	- 29,928	45,990 -	- -	- -

F. Profit and loss information of Level 3

Current gain (loss) and other comprehensive income of holding assets are as follow:

Recognized on profit and loss (reported as
unrealized gain (loss) from investments
instruments measured at fair value through profit
and loss)
Recognized on other comprehensive income
(reported as unrealized gain (loss) from
investments instruments measured at fair value
through other comprehensive income)
Recognized on profit and loss (reported as
unrealized gain (loss) from investments
instruments measured at fair value through profit
and loss)
Recognized on other comprehensive income
(reported as unrealized gain (loss) from
investments instruments measured at fair value
through other comprehensive income)

For the nine months ended September 30,

2020
2019
$ 20,297
7,690
290,338
29,928
For the three months ended September 30,

2020
2019
$ 8,924
8,840
224,882
(12,989)

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 take professional financial information vendors and widely used by market participants for evaluation or counterparty quotation as reference. The unobservable inputs are as follows :

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TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

		September 30, 2020
	valuation methods assets approach market approach market approach assets approach income approach	significant unobservable inputs liquidity discount liquidity discount liquidity discount sustainable growth rate cost of equity December 31, 2019	range inter-relationship between significant unobservable inputs and fair value measurement 5%~15% The higher market liquidity discount, the lower fair value. 15.42%~39.51% The higher market liquidity discount, the lower fair value. 3.98%~39.85%. -0.3%~1.88% 5.38%~14.59% The higher market liquidity discount, the lower fair value. The higher sustainable growth rate, the higher fair value. The higher rate of cost of equity, the lower fair value.
fair value $ 48,150 145,901 4,154,137	valuation methods assets approach market approach market approach assets approach income approach	significant unobservable inputs liquidity discount liquidity discount liquidity discount sustainable growth rate cost of equity September 30, 2019	range inter-relationship between significant unobservable inputs and fair value measurement 5%~15% The higher market liquidity discount, the lower fair value. 21.75%~22.82% The higher market liquidity discount, the lower fair value. 4.05%~39.97%. -0.3%~1.34% 5.61%~14.88% The higher market liquidity discount, the lower fair value. The higher sustainable growth rate, the higher fair value. The higher rate of cost of equity, the lower fair value.
fair value $ 47,000 56,680 4,241,955	valuation methods assets approach market approach market approach assets approach	significant unobservable inputs net assets liquidity discount liquidity discount	range inter-relationship between significant unobservable inputs and fair value measurement inapplicable The higher net assets, the higher fair value. 24.36%~27.07% The higher market liquidity discount, the lower fair value. 4.6%~40.40% The higher market liquidity discount, the lower fair value.

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TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

		September 30, 2019	range inter-relationship between significant unobservable inputs and fair value measurement -0.30%~1.37% 4.16%~12.07% The higher sustainable growth rate, the higher fair value. The higher rate of cost of equity, the lower fair value.
fair value	valuation methods income approach	significant unobservable inputs sustainable growth rate cost of equity

Financial assets at fair value through other comprehensive income

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 profit and loss if using different assumptions:

a. 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 profit and loss is as follows:

September 30, 2020 Financial assets at fair value through profit or loss Unlisted stocks and private fund Financial assets at fair value through other comprehensive income Unlisted stocks December 31, 2019 Financial assets at fair value through profit or loss Unlisted stocks and private fund Financial assets at fair value through other comprehensive income Unlisted stocks	the effects to other comprehensive income Favorable changes (-5%) Unfavorable changes (5%) $ 16,514 (16,514) 248,220 (248,255) the effects to other comprehensive income Favorable changes (-5%) Unfavorable changes (5%) $ 6,296 (6,296) 242,309 (242,309)

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TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

September 30, 2019 Financial assets at fair value through other comprehensive income Unlisted stocks	the effects to other comprehensive income Favorable changes (-5%) Unfavorable changes (5%) $ 247,230 (247,230)

b. Income approach

Adopting the income approach to evaluate Level 3 financial instruments of the Bank and 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

September 30, 2020 Financial assets at fair value through other comprehensive income Unlisted stocks December 31, 2019 Financial assets at fair value through other comprehensive income Unlisted stocks September 30, 2019 Financial assets at fair value through other comprehensive income Unlisted stocks	the effects to other comprehensive income Favorable changes (0.3%) Unfavorable changes (-0.3%) $ 6,493 (5,996) the effects to other comprehensive income Favorable changes (0.3%) Unfavorable changes (-0.3%) $ 5,154 (4,709) the effects to other comprehensive income Favorable changes (0.3%) Unfavorable changes (-0.3%) $ 8,372 (7,624)

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TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

2) cost of equity

September 30, 2020 Financial assets at fair value through other comprehensive income Unlisted stocks December 31, 2019 Financial assets at fair value through other comprehensive income Unlisted stocks September 30, 2019 Financial assets at fair value through other comprehensive income Unlisted stocks	the effects to other comprehensive income Favorable changes (-3%) Unfavorable changes (3%) $ 140,175 (52,293) the effects to other comprehensive income Favorable changes (-3%) Unfavorable changes (3%) $ 104,670 (43,331) the effects to other comprehensive income Favorable changes (-3%) Unfavorable changes (3%) $ 194,162 (63,651)

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.

Debt instruments measured at amortized cost	September	30, 2020
	Book value $ 230,816,898	Fair value
		232,781,610

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Debt instruments measured at amortized cost Debt instruments measured at amortized cost	December 31, 2019	December 31, 2019
	Book value $ 263,056,842 September	Fair value
		264,518,564 30, 2019
	Book value $ 268,170,790	Fair value
		269,505,383

B. The fair value hierarchy of information

Assets and Liabilities		September	30, 2020
	Total $ 232,781,610	Quoted prices in active markets for identical assets (Level 1) 45,294,454 December	Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) 187,487,156 - 31, 2019
Debt instruments measured at amortized cost Assets and Liabilities
	Total $ 264,518,564	Quoted prices in active markets for identical assets (Level 1) 49,044,285 September	Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) 215,474,279 - 30, 2019
Debt instruments measured at amortized cost Assets and Liabilities
	Total $ 269,505,383	Quoted prices in active markets for identical assets (Level 1) 50,583,764	Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) 218,921,619 -
Debt instruments measured at amortized cost

C. Valuation techniques

Methods and assumptions used by the Bank and subsidiaries for fair value evaluation of financial instruments were as follows:

a. 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.
b. 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.

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c. 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.
d. 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.
e. 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.

(AO) Financial Risk Information

(a) 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 is 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.

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(b) 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 nonregulatory 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.

(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.

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TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

(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.

(c) 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.

(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.

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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:

a. 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” , “ Regulations Governing the Reconciliation of Nonperforming/Non-accrual Loans” and its operating procedure “ Operating 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.

b. 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.

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TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

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 consider 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

a. The borrowers failed to pay the principal and interest overdue for more than 30 days, less than 90 days;
b. 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;
c. 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 are except;

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  - d. The bank knows (if it has received the notice from court) that the collaterals are compulsory executed by other banks;

  - e. Borrowers were notified the refund by the Bank and did not conduct refund notice;

  - f. The letter of credit insurance fund notice due to the related company's overdue debt in other bank, the creditor to stop the delivery;

  - g. Because the borrowers have been involved in litigation and unfavorable judgments, their ability of credit performance is affected;

  - h. The customer is classified as an early warning account by the Bank or has bad credit that aware by others.

B. Debt instrument investments
- a. The latest credit rating on the report date was non-investment grade and fell more than two levels than the original rating, or;
- b. 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 investmentgrade but the ratings are not significantly reduced are also considered to be low-risk areas.

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(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
a. Significant financial difficulty of the issuer or the borrower;
b. A breach of contract, such as a default or past due event ;
c. The lender(s) of the borrower, for economic 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;
d. It is becoming probable that the borrower will enter bankruptcy or other financial reorganization;
e. The disappearance of an active market for that financial asset because of financial difficulties;
f. The purchase or origination of a financial asset at a considerable amount of discount that reflects the incurred credit losses;
B. Debt instrument investments
a. Significant financial difficulty of the issuer;
b. The disappearance of an active market for that financial asset because of financial difficulties;
c. The purchase or origination of a financial asset at a considerable amount of discount that reflects the incurred credit losses.
d. 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).

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TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

(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.
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.

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(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.

In order to assess the expected credit losses of credit assets, the Bank and subsidiaries are divided into the following combinations depending on the credit risk characteristics such as the identity of borrowers, products, and type of collateral:

Corporate banking	Government and public institution	Government and public institution
	Financial institution (including banks, ticket companies, securities finance companies)
	Large Enterprise	The guarantee of the credit guarantee mechanism
		Secured
		Non-secured
	Medium and small enterprises	The guarantee of the credit guarantee mechanism
		Secured
		Non-secured
Private banking	Mortgage
	Microcredit
	Other-Secured
	Other-Non-secured
Entrepreneurship	The guarantee of the credit guarantee mechanism
	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 12month 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.

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TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

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.

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.

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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.

(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
a. In order to avoid the situation that the credit risk of single customer 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” and 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.
b. 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.

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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)

(10)Information on the financial assets of the Bank and subsidiaries that have been credit derogated and the collateral for mitigating potential losses are as follows:

September 30, 2020 Impairment financial assets： Receivables Accounts receivables Interest receivable Discounts and loans Overdue receivable Total impairment financial assets December 31, 2019 Impairment financial assets： Receivables Accounts receivables Interest receivable Discounts and loans Overdue receivable Total impairment financial assets	Carrying amount $ 38,466 29,217 25,288,806 71,109 $ 25,427,598 Carrying amount $ 64,187 38,762 19,403,047 105,829 $ 19,611,825	Allowance impairment 25,366 6,580 5,207,427 24,021 5,263,394 Allowance impairment 57,390 10,123 5,722,768 53,947 5,844,228	Exposure (measured at amortized cost) 13,100 22,637 20,081,379 47,088 20,164,204 Exposure (measured at amortized cost) 6,797 28,639 13,680,279 51,882 13,767,597	Value of collateral
				36,436 - 27,346,818 -
				27,383,254
				Value of collateral
				41,632 - 20,769,101 -
				20,810,733

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September 30, 2019 Impairment financial assets： Receivables Acceptances receivables Accounts receivable factoring without recourse Other receivables Interest receivable Discounts and loans Overdue receivable Total impairment financial assets	Carrying amount $ 45,654 527,604 2,160 55,590 18,386,644 107,002 $ 19,124,654	Allowance impairment 33,608 527,604 592 30,368 5,386,478 54,217 6,032,867	Exposure (measured at amortized cost) 12,046 - 1,568 25,222 13,000,166 52,785 13,091,787	Value of collateral
				- - - - 21,775,208 -
				21,775,208

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.

(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.

Industry	September 30,	2020 % % 62.82 % 0.57 % 5.20 % 0.24 % 24.95 % 0.32 % 5.79 % 0.11 % 100.00	December 31,	2019 % % 60.98 % - % 6.61 % 0.26 % 25.65 % 0.35 % 5.80 % 0.35 % 100.00	September 30,	2019
	Amount $ 754,297,752 6,810,005 62,438,853 2,876,437 299,505,651 3,839,191 69,492,681 1,363,150 $ 1,200,623,720		Amount 698,913,482 4 75,701,806 2,984,867 293,998,770 3,992,809 66,451,574 4,047,438 1,146,090,750		Amount 698,450,632 2,290,000 82,731,468 2,920,844 294,913,754 4,752,340 56,473,556 1,340,520 1,143,873,114	% % 61.06 % 0.20 % 7.23 % 0.26 % 25.77 % 0.42 % 4.94 % 0.12 % 100.00
Private business Public business Government institution Nonprofit organization Individual Foreign financial institution Foreign non-financial institution Foreign individual Total

B. By geographic area

Distribution of discounts and loans, overdue loans based on geographic area.

Area	September 30,	2020 % % 93.78 % 6.22 % 100.00	December 31,	2019 % % 93.50 % 6.50 % 100.00	September 30,	2019
	Amount $ 1,125,928,698 74,695,022 $ 1,200,623,720		Amount 1,071,598,929 74,491,821 1,146,090,750		Amount 1,081,306,698 62,566,416 1,143,873,114	% % 94.53 % 5.47 % 100.00
Domestic Foreign Total

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C. By collateral

Distribution of discounts and loans, overdue loans based on collateral.

Collateral	September 30,	2020 % % 19.65 % 0.71 % 1.58 % 61.56 % 1.55 % 0.28 % 13.90 % 0.77 % 100.00	December 31,	2019 % % 21.17 % 0.73 % 1.69 % 62.96 % 1.57 % 0.35 % 10.54 % 0.99 % 100.00	September 30,	2019
	Amount $ 235,961,445 8,507,493 18,985,669 739,113,855 18,589,480 3,397,751 166,809,568 9,258,459 $ 1,200,623,720		Amount 242,592,802 8,425,118 19,411,907 721,629,891 17,950,096 3,962,549 120,774,302 11,344,085 1,146,090,750		Amount 261,384,293 8,745,717 18,013,977 705,763,328 18,477,946 3,622,082 116,689,574 11,176,197 1,143,873,114	% % 22.85 % 0.76 % 1.57 % 61.70 % 1.62 % 0.32 % 10.20 % 0.98 % 100.00
Unsecured Stocks Bonds Real estate Chattel Notes receivable Guarantees Others Total

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:

Off balance sheet items Issued and irrevocable loan commitments Irrevocable credit card loan commitments Letters of credit issued yet unused Various guarantee proceeds Total	Maximum credit risk exposure	Maximum credit risk exposure	Maximum credit risk exposure
	September 30, 2020 $ 64,821,028 20,226,316 6,695,361 18,857,000 $ 110,599,705	December 31, 2019 55,259,927 20,072,907 7,156,747 18,400,367 100,889,948	September 30, 2019 51,365,759 20,234,071 7,095,693 19,041,788
			97,737,311

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.

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B. The credit quality analyses of the financial assets
a. Credit quality analysis of discounts and loans, receivables, guarantee and commitments

September 30, 2020	12-month ECL	12-month ECL	12-month ECL	12-month ECL	12-month ECL	12-month ECL	12-month ECL		Lifetime ECL－not impaired	Lifetime ECL－not impaired	Lifetime ECL－not impaired	Lifetime ECL－not impaired	Lifetime ECL－not impaired	Lifetime ECL－not impaired	Lifetime ECL－ impaired
	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	$ 424,606	132,702	203,457	22,325	2,000	292,933	1,078,023	470	1,169	1,920	155	143	254	4,111	-	2,838	1,079,296
Acceptances receivable	273,907	395,602	195,674	10,347	3,763	129,190	1,008,483	-	-	-	-	-	-	-	-	10,085	998,398
Accounts receivable factoring	-	-	-	-	-	1,821	1,821	-	-	-	-	-	-	-	-	18	1,803
Other receivables	191,164	1,097,341	436,450	31,559	10,523	2,814,830	4,581,867	2,955	18,911	16,561	8,223	19,389	46,597	112,636	67,683	130,618	4,631,568
Discounts and loans
Private banking	113,768,036	99,220,816	64,924,688	5,422,591	945,929	9,912,182	294,194,242	19,750	121,478	190,135	50,970	69,546	931	452,810	6,221,751	3,782,037	297,086,766
Corporate banking	157,060,585	290,343,831	223,099,030	31,153,266	9,896,615	123,938,710	835,492,037	2,477,752	13,398,107	12,384,265	7,338,541	6,901,645	2,695,515	45,195,825	19,067,055	11,833,955	887,920,962
Other financial assets
Overdue receivable	-	-	-	-	-	-	-	-	-	-	-	-	-	-	71,109	56,737	14,372
Total	$ 271,718,298	391,190,292	288,859,299	36,640,088	10,858,830	137,089,666	1,136,356,473	2,500,927	13,539,665	12,592,881	7,397,889	6,990,723	2,743,297	45,765,382	25,427,598	15,816,288	1,191,733,165
Guarantee and commitments	$ 24,496,653	13,529,498	4,243,657	785,582	391,138	66,463,175	109,909,703	60,620	36,313	46,579	14	30,397	470,630	644,553	45,449	236,332	110,363,373

December 31, 2019	12-month ECL								Lifetime ECL－not impaired						Lifetime ECL－ impaired
	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	$ 565,022	133,458	233,637	31,938	3,428	321,592	1,289,075	1,965	1,826	3,426	807	389	234	8,647	-	3,341	1,294,381
Acceptances receivable	196,869	496,036	105,120	32,197	-	89,328	919,550	-	-	-	-	-	-	-	-	9,195	910,355
Accounts receivable factoring	-	-	-	-	-	19,089	19,089	-	-	-	-	-	-	-	-	191	18,898
Other receivables	274,150	1,428,023	311,286	43,556	6,867	3,274,831	5,338,713	310	969	5,485	500	2,655	2,943	12,862	102,949	138,863	5,315,661
Discounts and loans
Private banking	114,510,252	100,852,540	68,662,021	4,831,469	1,126,572	2,982,316	292,965,170	42,853	229,741	276,231	61,477	133,295	112	743,709	4,337,330	3,469,485	294,576,724
Corporate banking	172,479,816	260,682,892	218,425,945	36,941,972	4,249,047	133,618,335	826,398,007	402,500	36,161	3,443,874	191,431	2,457,788	49,063	6,580,817	15,065,717	9,871,883	838,172,658
Other financial assets
Overdue receivable	-	-	-	-	-	-	-	-	-	-	-	-	-	-	105,829	85,901	19,928
Total	$ 288,026,109	363,592,949	287,738,009	41,881,132	5,385,914	140,305,491	1,126,929,604	447,628	268,697	3,729,016	254,215	2,594,127	52,352	7,346,035	19,611,825	13,578,859	1,140,308,605
Guarantee and commitments	$ 29,738,327	9,577,042	3,310,453	878,885	50,764	57,139,021	100,694,492	68,030	38,417	523	33	148	1,422	108,573	86,883	232,446	100,657,502

September 30, 2019	12-month ECL								Lifetime ECL－not impaired						Lifetime ECL－ impaired
	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	$ 555,030	133,708	239,965	33,215	4,363	275,917	1,242,198	1,862	1,377	5,058	735	594	424	10,050	-	3,394	1,248,854
Acceptances receivable	515,752	692,003	71,778	7,884	-	16,265	1,303,682	-	-	-	-	-	-	-	-	13,037	1,290,645
Accounts receivable factoring	-	-	-	-	-	193,113	193,113	-	-	-	-	-	-	-	527,604	528,667	192,050
Other receivables	271,270	1,697,045	339,804	44,414	5,442	8,861,499	11,219,474	439	1,354	1,847	1,044	1,851	10,701	17,236	103,404	139,627	11,200,487
Discounts and loans
Private banking	113,876,064	99,433,859	67,553,846	4,977,512	1,295,474	3,576,638	290,713,393	40,726	149,326	285,057	86,224	110,481	1,966	673,780	4,867,099	3,276,577	292,977,695
Corporate banking	174,602,699	249,816,750	226,161,617	34,703,552	2,675,977	143,485,453	831,446,048	369,225	185,018	557,974	445,815	991,176	104,041	2,653,249	13,519,545	9,374,679	838,244,163
Other financial assets
Overdue receivable	-	-	-	-	-	-	-	-	-	-	-	-	-	-	107,002	87,761	19,241
Total	$ 289,820,815	351,773,365	294,367,010	39,766,577	3,981,256	156,408,885	1,136,117,908	412,252	337,075	849,936	533,818	1,104,102	117,132	3,354,315	19,124,654	13,423,742	1,145,173,135
Guarantee and commitments	$ 29,875,697	8,979,647	3,533,160	1,209,419	36,469	53,270,136	96,904,528	747,836	50,625	361	64	-	2,448	801,334	31,449	238,339	97,498,972

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b. Debt instruments

September 30, 2020	12-month ECL	12-month ECL	12-month ECL	12-month ECL	12-month ECL	Lifetime ECL－not impaired	Lifetime ECL－not impaired	Lifetime ECL－not impaired	Lifetime ECL－not impaired	Lifetime ECL－not impaired	Lifetime ECL－ impaired
	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	$ 35,351,902	-	-	-	35,351,902	-	-	-	-	-	-	35,351,902	11,184
NT bonds	67,684,192	-	-	-	67,684,192	-	-	-	-	-	-	67,684,192	49,945
Investment in debt instruments at amortized cost
Overseas bonds	33,027,426	-	-	-	33,027,426	-	-	-	-	-	-	33,027,426	13,222
NT bonds	43,771,966	-	-	-	43,771,966	-	-	-	-	-	-	43,771,966	18,596
Certificates of deposit with the Central Bank	153,805,000	-	-	-	153,805,000	-	-	-	-	-	-	153,805,000	45,421
Negotiable certificates of deposit	289,835	-	-	-	289,835	-	-	-	-	-	-	289,835	90
Total	$ 333,930,321	-	-	-	333,930,321	-	-	-	-	-	-	333,930,321	138,458

Note：The cumulative impairment of the bond which measured at fair value through other comprehensive profit or loss is recognized as other equity.

December 31, 2019	12-month ECL	12-month ECL	12-month ECL			Lifetime ECL－not impaired	Lifetime ECL－not impaired	Lifetime ECL－not impaired	Lifetime ECL－not impaired	Lifetime ECL－not impaired	Lifetime ECL－ impaired
	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	$ 24,664,354	-	-	-	24,664,354	-	-	-	-	-	-	24,664,354	6,045
NT bonds	66,578,857	-	-	-	66,578,857	-	-	-	-	-	-	66,578,857	46,254
Investment in debt instruments at amortized cost
Overseas bonds	39,453,717	299,924	-	-	39,753,641	-	-	-	-	-	-	39,753,641	15,963
NT bonds	48,150,744	-	-	-	48,150,744	-	-	-	-	-	-	48,150,744	22,691
Certificates of deposit with the Central Bank	174,880,000	-	-	-	174,880,000	-	-	-	-	-	-	174,880,000	51,645
Negotiable certificates of deposit	362,868	-	-	-	362,868	-	-	-	-	-	-	362,868	112
Total	$ 354,090,540	299,924	-	-	354,390,464	-	-	-	-	-	-	354,390,464	142,710

Note：The cumulative impairment of the bond which measured at fair value through other comprehensive profit or loss is recognized as other equity.

September 30, 2019	12-month ECL	12-month ECL	12-month ECL			Lifetime ECL－not impaired	Lifetime ECL－not impaired	Lifetime ECL－not impaired	Lifetime ECL－not impaired	Lifetime ECL－not impaired	Lifetime ECL－ impaired
	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	$ 19,916,856	-	-	-	19,916,856	-	-	-	-	-	-	19,916,856	5,832
NT bonds	65,620,213	-	-	-	65,620,213	-	-	-	-	-	-	65,620,213	42,424
Investment in debt instruments at amortized cost
Overseas bonds	41,320,022	-	-	-	41,320,022	-	-	-	-	-	-	41,320,022	16,612
NT bonds	49,685,114	-	-	-	49,685,114	-	-	-	-	-	-	49,685,114	23,349
Certificates of deposit with the Central Bank	176,880,000	-	-	-	176,880,000	-	-	-	-	-	-	176,880,000	49,814
Negotiable certificates of deposit	375,545	-	-	-	375,545	-	-	-	-	-	-	375,545	116
Total	$ 353,797,750	-	-	-	353,797,750	-	-	-	-	-	-	353,797,750	138,147

Note：The cumulative impairment of the bond which measured at fair value through other comprehensive profit or loss is recognized as other equity.

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C. The Maximum credit risk exposure for financial instruments are not subject to impairment regulations are as follows:

September 30, 2020 Financial assets at fair value through profit or loss －Debt investments －Commercial paper －Listed stocks －Unlisted stocks －Beneficiary certificates －Derivative instruments December 31, 2019 Financial assets at fair value through profit or loss －Debt investments －Commercial paper －Listed stocks －Unlisted stocks －Beneficiary certificates －Derivative instruments September 30, 2019 Financial assets at fair value through profit or loss －Linked deposits －Debt investments －Commercial paper －Listed stocks －Unlisted stocks －Beneficiary certificates －Derivative instruments	Maximum credit risk exposure $ 1,963,158 25,705,947 60,119 235,710 220,610 860,595 Maximum credit risk exposure $ 4,551,167 21,037,165 178,867 145,901 108,890 950,796 Maximum credit risk exposure $ 501,403 5,156,784 10,618,195 189,000 56,680 47,000 900,334	Collateral Enhancement of other credit - - - - - - - - - - 1,183,778 470,287 Collateral Enhancement of other credit - - - - - - - - - - 484,712 468,795 Collateral Enhancement of other credit - - - - - - - - - - - - 1,066,311 498,787

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(13) Changes in the expected credit losses of the Bank and subsidiaries

A. Receivables

	For	the nine months	ended September 30, 2020	ended September 30, 2020	Total
12-month ECL $ 42,858 152 (102) (20) (5,570) 17,020 - (6,593) - $ 47,745	Lifetime ECL－not impaired 1,456 (68) 112 (91) (259) 526 - 6,448 - 8,124	Lifetime ECL－ impaired 67,513 (84) (10) 111 (5,492) 3,343 (14,985) (18,450) - 31,946	Impaired (IFRS9) 111,827 - - - (11,321) 20,889 (14,985) (18,595) - 87,815	Impairment difference of "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non- Performing and Non- Accrual Loans" 39,763 15,981 55,744
					151,590 - - - (11,321) 20,889 (14,985) (18,595) 15,981
					143,559

For the nine months ended September 30, 2019

Beginning balance Changes in financial instruments that have been identified at the beginning of the period：－Transferred to 12-months ECL －Transferred to lifetime ECL －Transferred to the credit- impaired financial assets －The financial assets that have been derecognized New financial assets originated or purchased Write-off Other changes Impairment difference of "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-Performing and Non-Accrual Loans " Ending balance	12-month ECL $ 38,464 140 (6) (21) (9,066) 43,980 - 5 - $ 73,496	Lifetime ECL－not impaired 12,808 (51) 25 (65) (97) 76 - (5,553) - 7,143	Lifetime ECL－ impaired 41,204 (89) (19) 86 (4,181) 553,642 (1,121) 2,650 - 592,172	Impaired (IFRS9) 92,476 - - - (13,344) 597,698 (1,121) (2,898) - 672,811	Impairment difference of "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non- Performing and Non- Accrual Loans" 43,254 (31,340) 11,914	Total
						135,730 - - - (13,344) 597,698 (1,121) (2,898) (31,340)
						684,725

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B. Discounts and loans

	For	the nine months	ended September 30, 2020	ended September 30, 2020	Total
12-month ECL $ 2,197,066 103,869 (75,019) (16,948) (1,037,417) 1,686,614 - 210,089 - $ 3,068,254	Lifetime ECL－not impaired 197,473 (39,779) 76,275 (22,686) (25,437) 307,359 - 2,846,196 - 3,339,401 For	Lifetime ECL－ impaired 5,722,768 (64,090) (1,256) 39,634 (1,088,229) 395,420 (1,697,570) 1,900,750 - 5,207,427 the nine months	Impaired (IFRS9) Impairment difference of "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non- Performing and Non- Accrual Loans" 8,117,307 5,224,061 - - - (2,151,083) 2,389,393 (1,697,570) 4,957,035 - (1,223,151) 11,615,082 4,000,910 ended September 30, 2019
					13,341,368 - - - (2,151,083) 2,389,393 (1,697,570) 4,957,035 (1,223,151)
					15,615,992
					Total
	Lifetime ECL－not impaired 66,416 (11,968) 7,895 (15,399) (17,162) 6,538 - 109,573 - 145,893	Lifetime ECL－ impaired 4,659,004 (54,207) (3,645) 29,211 (762,985) 353,453 (364,190) 1,529,837 - 5,386,478	Impaired (IFRS9) 7,499,797 - - - (2,073,792) 1,547,713 (364,190) 1,103,666 - 7,713,194	Impairment difference of "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non- Performing and Non- Accrual Loans" 5,534,354 (596,292) 4,938,062
					13,034,151 - - - (2,073,792) 1,547,713 (364,190) 1,103,666 (596,292)
					12,651,256

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C. Other financial assets

	For	the nine months	ended September 30, 2020	ended September 30, 2020	Total
12-month ECL $ - - - - - - $ -	Lifetime ECL－not impaired - - - - - - - For	Lifetime ECL－ impaired 53,947 (8) 13,127 (41,584) (1,461) - 24,021 the nine months	Impaired (IFRS9) Impairment difference of "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non- Performing and Non- Accrual Loans" 53,947 31,954 (8) 13,127 (41,584) (1,461) - 762 24,021 32,716 ended September 30, 2019
					85,901 (8) 13,127 (41,584) (1,461) 762
					56,737
					Total
	Lifetime ECL－not impaired - - - - - -	Lifetime ECL－ impaired 54,231 (10) 16,482 (16,486) - 54,217	Impaired (IFRS9) 54,231 (10) 16,482 (16,486) - 54,217	Impairment difference of "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non- Performing and Non- Accrual Loans" 33,018 526 33,544
					87,249 (10) 16,482 (16,486) 526
					87,761

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D. Guarantee and commitments

	For	the nine months	ended September 30, 2020	ended September 30, 2020	Total
12-month ECL $ 59,045 55 (550) (2) (18,669) 33,160 10,066 - $ 83,105	Lifetime ECL－not impaired 338 (55) 550 - (135) 411 278 - 1,387 For	Lifetime ECL－ impaired 17,220 - - 2 (14,134) 1,809 360 - 5,257 the nine months	Impaired (IFRS9) Impairment difference of "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non- Performing and Non- Accrual Loans" 76,603 155,843 - - - (32,938) 35,380 10,704 - (9,260) 89,749 146,583 ended September 30, 2019
					232,446 - - - (32,938) 35,380 10,704 (9,260)
					236,332
					Total
	Lifetime ECL－not impaired 418 1,164 (28) (169) 2 (273) - 1,114	Lifetime ECL－ impaired 28,523 - 36 (26,684) 3,871 2,866 - 8,612	Impaired (IFRS9) 135,082 - - (70,419) 27,013 (23,048) - 68,628	Impairment difference of "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non- Performing and Non- Accrual Loans" 154,054 15,657 169,711
					289,136 - - (70,419) 27,013 (23,048) 15,657
					238,339

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E. Debts investments

For the nine months ended September 30,	For the nine months ended September 30,	For the nine months ended September 30,	2020 Total
12-month ECL Lifetime ECL －not impaired Lifetime ECL －impaired $ 142,710 - - 56,860 - - (44,359) - - (16,753) - - $ 138,458 - - For the nine months ended September 30,
			142,710 56,860 (44,359) (16,753) 138,458 2019 Total
	Lifetime ECL －not impaired - - - - -	Lifetime ECL －impaired - - - - -
			126,893 60,121 (47,927) (940) 138,147

(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.

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(d) 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
- a. In accordance with the target and limit for liquidity risk management approved by the board of directors and monitor all liquidity risk positions.
- b. 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.
- c. 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
- a. Finance Department is in charge of daily capital deployment to ensure that the capital is sufficient to cope with various demands for capital.
- b. 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.

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  - c. 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.

C. Measurement
- a. 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.
- b. 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.
- c. Capital concentration and stability: In order to prevent the Bank from overrelying 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.
- d. 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 nonderivative 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.

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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.

Major matured cash outflow Deposits from the Central Bank and banks Overdrafts on banks Call loans from the Central Bank and banks Due to the Central Bank and banks Financial liabilities designated at fair value through profit or loss Notes and bonds issued under repurchase agreement Interest payable Deposits transferred from Chunghwa Post Co., Ltd. Demand deposits Time deposits Remittance Bank notes payable Cumulative earnings on appropriated loan fund Lease liabilities Major matured cash outflow Deposits from the Central Bank and banks Overdrafts on banks Call loans from the Central Bank and banks Due to the Central Bank and banks Financial liabilities designated at fair value through profit or loss Notes and bonds issued under repurchase agreement Interest payable Deposits transferred from Chunghwa Post Co., Ltd. Demand deposits Time deposits Remittance Bank notes payable Cumulative earnings on appropriated loan fund Lease liabilities			September 30, 2020	September 30, 2020
	0-30 days $ 898,573,217 809,271 1,174,372 32,220,938 - - 1,103,062 471,329 11,130,000 759,873,219 91,482,131 284,825 - 4,000 20,070	31-90 days 202,983,891 - - 6,856,360 - - 1,439,721 952,416 20,672,210 - 167,003,197 - 6,000,000 9,000 50,987	91 days-1 year 1-5 years 394,589,962 66,312,551 - - - - 5,404,233 - 16,710,910 347,880 - - 68,869 416,381 928,201 63,137 36,473,150 - - - 333,674,180 36,610,096 - - 1,000,000 26,340,000 96,670 1,993,660 233,749 541,397 December 31, 2019		Over 5 years Total 38,474,955 1,600,934,576 - 809,271 - 1,174,372 - 44,481,531 - 17,058,790 8,612,981 8,612,981 - 3,028,033 6 2,415,089 - 68,275,360 - 759,873,219 1,638 628,771,242 - 284,825 25,910,000 59,250,000 3,805,228 5,908,558 145,102 991,305
	0-30 days $ 904,142,429 268,330 1,118,477 24,703,175 90,500 - 60,390 449,550 11,200,000 755,384,107 110,515,249 306,198 - 2,500 43,953	31-90 days 193,155,772 - - 8,444,072 - - 172,381 803,258 24,312,411 - 154,358,207 - 5,000,000 - 65,443	91 days-1 year 423,123,774 - - 1,847,147 186,740 - 635,810 1,291,095 32,900,000 - 370,847,890 - 15,000,000 161,670 253,422	1-5 years 63,934,641 - - - 474,905 - - 79,568 - - 43,619,659 - 16,790,000 2,412,080 558,429	Over 5 years Total 29,806,197 1,614,162,813 - 268,330 - 1,118,477 - 34,994,394 - 752,145 8,949,182 8,949,182 - 868,581 8 2,623,479 - 68,412,411 - 755,384,107 18,237 679,359,242 - 306,198 16,460,000 53,250,000 4,258,834 6,835,084 119,936 1,041,183

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TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

Major matured cash outflow Deposits from the Central Bank and banks Overdrafts on banks Call loans from the Central Bank and banks Due to the Central Bank and banks Financial liabilities designated at fair value through profit or loss Notes and bonds issued under repurchase agreement Interest payable Deposits transferred from Chunghwa Post Co., Ltd. Demand deposits Time deposits Remittance Bank notes payable Cumulative earnings on appropriated loan fund Other miscellaneous financial liabilities Lease liabilities			September 30, 2019	September 30, 2019
	0-30 days $ 877,163,378 289,913 762,910 48,912,889 170,000 - 82,794 509,724 7,474,210 713,976,985 103,425,468 1,030,766 - 11,750 500,000 15,969	31-90 days 184,318,373 - - 9,983,213 57,000 - 1,149,028 961,815 20,880,000 - 151,228,128 - - 5,670 - 53,519	91 days-1 year 408,181,941 - - 1,564,618 186,213 - 43,149 1,135,952 40,060,201 - 350,821,529 - 14,000,000 113,250 - 257,029	1-5 years 77,613,550 - - - 507,187 9,180,280 - 75,335 - - 42,140,093 - 22,790,000 2,489,010 - 431,645	Over 5 years Total 21,167,976 1,568,445,218 - 289,913 - 762,910 - 60,460,720 - 920,400 - 9,180,280 - 1,274,971 10 2,682,836 - 68,414,411 - 713,976,985 18,672 647,633,890 - 1,030,766 16,460,000 53,250,000 4,620,946 7,240,626 - 500,000 68,348 826,510

(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 nondelivery 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 September 30, 2019, the Bank and subsidiaries had no derivative financial instruments settled by net amount. As of September 30, 2020 and December 31, 2019, maturity analysis for the derivative financial liabilities settled by net amount are as follows:

		September	30, 2020
0-30 days $ 5	31-90 days 420	91-180 days 181 days to 1 year - - December 31, 2019		Over 1 year -	Total
					425

0-30 days $ -	31-90 days -	91-180 days -	181 days to 1 year 560	Over 1 year -	Total
					560

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TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

B. Derivative financial instruments settled by gross amount

The derivative instruments of the Bank’s possession settled by gross amount include the following:

a. Foreign exchange derivative financial instrument: Foreign exchange options settled by gross amount, foreign exchange forward contracts and currency swap contracts.
b. 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:

September 30, 2020 Derivative financial instruments at fair value through profit or loss Foreign exchange derivative instruments Cash outflow Cash inflow Interest rate derivative instrument Cash outflow Cash inflow Total cash outflow Total cash inflow Net cash flow December 31, 2019 Derivative financial instruments at fair value through profit or loss Foreign exchange derivative instruments Cash outflow Cash inflow Interest rate derivative instrument Cash outflow Cash inflow Total cash outflow Total cash inflow Net cash flow	0-30 days $ 25,714,916 25,850,625 13,804 836 25,728,720 25,851,461 $ (122,741) 0-30 days $ 54,733,698 55,106,820 - 6,336 54,733,698 55,113,156 $ (379,458)	31-90 days 13,605,857 13,883,942 1,206 1,067 13,607,063 13,885,009 (277,946) 31-90 days 32,548,928 32,263,313 15,820 3,951 32,564,748 32,267,264 297,484	91-180 days 14,385,388 14,724,301 8,115 8,425 14,393,503 14,732,726 (339,223) 91-180 days 71,226,616 70,476,718 22,689 26,496 71,249,305 70,503,214 746,091	181 days to 1 year 7,411,907 7,563,463 23,202 13,607 7,435,109 7,577,070 (141,961) 181 days to 1 year 56,264,496 56,270,898 35,707 38,679 56,300,203 56,309,577 (9,374)	Over 1 year 27,200 28,990 20,110 18,523 47,310 47,513 (203) Over 1 year 1,799,400 1,802,371 52,623 44,908 1,852,023 1,847,279 4,744	Total 61,145,268 62,051,321 66,437 42,458 61,211,705 62,093,779 (882,074) Total 216,573,138 215,920,120 126,839 120,370 216,699,977 216,040,490 659,487

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September 30, 2019 Derivative financial instruments at fair value through profit or loss Foreign exchange derivative instruments Cash outflow Cash inflow Interest rate derivative instrument Cash outflow Cash inflow Total cash outflow Total cash inflow Net cash flow	0-30 days $ 49,861,588 49,703,508 - - 49,861,588 49,703,508 $ 158,080	31-90 days 32,045,606 32,054,274 1,193 999 32,046,799 32,055,273 (8,474)	91-180 days 15,054,748 14,584,525 1,193 1,804 15,055,941 14,586,329 469,612	181 days to 1 year 113,621,984 111,600,929 2,386 3,022 113,624,370 111,603,951 2,020,419	Over 1 year 1,862,130 - 17,947 16,734 1,880,077 16,734 1,863,343	Total 212,446,056 207,943,236 22,719 22,559
						212,468,775
						207,965,795
						4,502,980

(5) Maturity analysis of off-balance sheet items

The table below shows the maturity analysis of the off-balance sheet items of the Bank based on the remaining days from the consolidated financial statement date to the contract maturity date. For the financial guarantee contracts issued, the maximum amount of the guarantee is listed in the earliest time zone that the guarantee may be executed. 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.

31-90 days	91-180 days	181 days to 1 year	Total 64,821,028 20,226,316 6,695,361 18,857,000
368,206 308,996 4,233,810 1,700,724 6,611,736 31-90 days	1,095,052 431,905 728,398 1,001,458 3,256,813 91-180 days	9,462,245 1,176,708 132,071 2,588,477 13,359,501 181 days to 1 year
			110,599,705
			Total 55,259,927 20,072,907 7,156,747 18,400,367
470,300 8,850 3,904,555 2,595,282 6,978,987 31-90 days	240,778 244,874 668,520 1,160,466 2,314,638 91-180 days	4,151,688 1,383,874 218,697 1,590,609 7,344,868 181 days to 1 year
			100,889,948
			Total 51,365,759 20,234,071 7,095,693 19,041,788
2,006,317 12,920 3,703,239 2,419,549 8,142,025	811,449 19,269 673,756 1,070,162 2,574,636	3,609,378 815,295 175,522 1,510,923 6,111,118
			97,737,311

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(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 or lessee 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:

September 30, 2020 Operating lease income (lessor) December 31, 2019 Operating lease income (lessor) September 30, 2019 Operating lease income (lessor)	Below 1 year $ 849 Below 1 year $ 2,270 Below 1 year $ 803	1-5 years 96 1-5 years 449 1-5 years 564	Over 5 years Total - 945 Over 5 years Total - 2,719 Over 5 years Total - 1,367

The capital expenditure commitment of the Bank refers to the contract signed to obtain buildings and equipment. The maturity analysis of the capital expenditure commitment of the Bank is as follows:

September 30, 2020 Machinery and equipment Right-of-use assets Transportation equipment Miscellaneous equipment Total December 31, 2019 Machinery and equipment Right-of-use assets Transportation equipment Miscellaneous equipment Total September 30, 2019 Machinery and equipment Right-of-use assets Transportation equipment Miscellaneous equipment Total	Below 1 year $ 908,283 2,521 2,504 1,950 $ 915,258 Below 1 year $ 1,226,830 7,358 130 8,899 $ 1,243,217 Below 1 year $ 1,369,341 10,083 1,350 1,910 $ 1,382,684	1-5 years - 993 - - 993 1-5 years - 5,435 - - 5,435 1-5 years - 3,626 - - 3,626	Over 5 years - - - - - Over 5 years - - - - - Over 5 years - - - - -	Total
				908,283 3,514 2,504 1,950
				916,251
				Total
				1,226,830 12,793 130 8,899
				1,248,652
				Total
				1,369,341 13,709 1,350 1,910
				1,386,310

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(e) 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
- a. To carry out market risk management, achieve operation target and maintain healthy capital adequacy by following “Directions Governing the Market Risk Management of Taiwan Business Bank” and other relevant regulations.
- b. 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.

(3) Process for market risk management
A. Risk identification

In accordance with the rules of “ Directions 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.

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B. Risk measurement
a. 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.
b. 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
a. Valuation reports of various financial instruments are prepared regularly for executives to review and serve as the guidance for daily risk management operation.
b. 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.

(4) Scope and method of market risk management
A. Foreign exchange risk management
- a. 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.

b. Applicable scope

All the financial instruments which apply to trading book position and banking book position and involve in foreign currencies.

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c. 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.

d. 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.
e. 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.

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     - 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 stoplimit 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.

B. Equity security risk management
a. 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.

b. Applicable scope

Financial instruments similar to equity security in all trading books.

c. 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.

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d. 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.
e. 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.
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.

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  - 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
a. 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.

b. Applicable scope

Financial instruments which contain interest rate factors in all trading books.

c. 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.

d. 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.

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e. 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
a. 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.

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  - b. For equity security investments, the Bank set up limits for single institution and single related party.

(5) Interest rate risk management of the banking book
A. The definition and management purpose for the interest rate risk of the banking book
- a. 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.
- b. 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
- a. 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.

b. 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 parallel changes 200 BP 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.

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(6) Value at Risk
A. Description of Value at Risk

Value at Risk (VaR) is a statistical amount 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:

a. Value at Risk cannot reflect the losses result from other type of risks, such as credit risk and liquidity risk.
b. 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.
c. 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.

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(7) Foreign exchange risk disclosure and sensitivity analysis
A. Foreign exchange risk exposure
- a. Significant net positions of foreign currencies (Market risk)

Significant net positions of foreign currencies (Market risk)	Significant net positions of foreign currencies (Market risk)
September 30, 2020
Currency USD JPY CNY AUD SEK	Foreign currency amount (in thousands) NT$ amount $ 442,918 12,840,193 2,121,908 582,252 132,288 562,753 13,473 278,824 18,803 60,922

Significant net positions of foreign currencies (Market risk) December 31, 2019

Currency USD JPY EUR AUD ZAR	Foreign currency amount (in thousands) NT$ amount $ 411,606 12,344,064 4,142,819 1,143,832 10,906 366,878 16,808 353,220 70,508 149,477

Significant net positions of foreign currencies (Market risk) September 30, 2019

Currency USD CNY JPY AUD EUR	Foreign currency amount (in thousands) NT$ amount $ 461,946 14,336,725 167,436 730,306 2,347,722 675,440 28,198 591,769 14,002 474,626

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.

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b. Assets and liabilities of foreign currency

	September 30, 2020
Currency	Monetary financial assets Foreign currency amount (in thousands) Spot rate NTD amount $ 13,061,742 28.9900 378,659,901 4,591,113 20.6950 95,013,084 16,215,155 4.2540 68,979,269 5,611,793 3.7400 20,988,106 60,730,478 0.2744 16,664,443 285,187 34.0600 9,713,469 4,450,574 1.7120 7,619,383 64,299 19.1600 1,231,969 45,884 37.3100 1,711,932 22,282 21.6700 482,851 74,345 3.2400 240,878 5,065 21.2000 107,378 - - 77,866 Non-monetary financial assets 4,233 28.9900 122,715	Monetary financial liabilities
		Foreign currency amount (in thousands) Spot rate NTD amount 12,494,758 28.9900 362,223,034 4,519,267 20.6950 93,526,231 16,018,947 4.2540 68,144,601 5,211,469 3.7400 19,490,894 59,410,658 0.2744 16,302,285 285,479 34.0600 9,723,415 4,448,552 1.7120 7,615,921 64,394 19.1600 1,233,789 45,991 37.3100 1,715,924 22,272 21.6700 482,634 74,854 3.2400 242,527 6,668 21.2000 141,362 - - 79,533 Non-monetary financial liabilities
USD AUD CNY HKD JPY EUR ZAR NZD GBP CAD SEK SGD Others (Note) USD
		- - -

Note：Consolidated disclosure is applied for other currencies not over $100,000.

	December 31, 2019
	Monetary financial assets	Monetary financial liabilities
Currency		Foreign currency amount (in thousands) Spot rate NTD amount 14,424,396 29.9900 432,587,636 4,146,043 21.0150 87,129,094 36,306,922 4.2950 155,938,230 5,791,786 3.8510 22,304,168 52,141,895 0.2761 14,396,377 394,201 33.6400 13,260,922 4,443,233 2.1200 9,419,654 58,414 20.2000 1,179,963 30,488 39.3800 1,200,617 32,075 22.9800 737,084 35,768 3.2200 115,173 6,156 22.2600 137,033 176,909 1.0081 178,342 4,030 30.9750 124,829 - - - Non-monetary financial liabilities
USD AUD CNY HKD JPY EUR ZAR NZD GBP CAD SEK SGD THB CHF Others (Note) USD
		- - -

Note：Consolidated disclosure is applied for other currencies not over $100,000.

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	September 30, 2019	September 30, 2019	September 30, 2019
	Monetary financial assets		NTD amount 438,975,143 87,734,362 156,694,395 25,630,786 15,411,916 11,520,845 8,807,402 1,262,909 924,611 1,617,922 - 211,393 174,335	Monetary financial liabilities
Currency	Foreign currency amount (in thousands) $ 14,144,291 4,180,574 35,925,074 6,475,037 53,569,400 339,878 4,280,633 64,627 24,232 69,147 - 6,764 -	Spot rate 31.0355 20.9862 4.3617 3.9584 0.2877 33.8970 2.0575 19.5415 38.1566 23.3983 - 31.2527 -		Foreign currency amount (in thousands) 13,568,719 4,114,163 35,711,794 6,118,443 52,169,569 338,407 4,283,663 62,612 24,219 69,514 5,861 7,830 -	Spot rate NTD amount 31.0355 421,111,979 20.9862 86,340,648 4.3617 155,764,132 3.9584 24,219,245 0.2877 15,009,185 33.8970 11,470,982 2.0575 8,813,637 19.5415 1,223,532 38.1566 924,115 23.3983 1,626,509 22.4651 131,668 31.2527 244,709 - 83,205
USD AUD CNY HKD JPY EUR ZAR NZD GBP CAD SGD CHF Others (Note)

Note：Consolidated disclosure is applied for other currencies not over $100,000.

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%.

	September 30, 2020 by 1% Appreciate by 1% Equity Income Equity (55,126) (37,476) 55,126 (19,010) (7,210) 19,010 (17,290) (2,975) 17,290 (3,598) (5,476) 3,598 - (20) - - (340) - - 36 - - (17) - - (24) - - 5 - - 7 - - (140) - - (11) - - 2,920 - (95,024) (50,721) 95,024	September 30, 2020 by 1% Appreciate by 1% Equity Income Equity (55,126) (37,476) 55,126 (19,010) (7,210) 19,010 (17,290) (2,975) 17,290 (3,598) (5,476) 3,598 - (20) - - (340) - - 36 - - (17) - - (24) - - 5 - - 7 - - (140) - - (11) - - 2,920 - (95,024) (50,721) 95,024	September 30, 2020 by 1% Appreciate by 1% Equity Income Equity (55,126) (37,476) 55,126 (19,010) (7,210) 19,010 (17,290) (2,975) 17,290 (3,598) (5,476) 3,598 - (20) - - (340) - - 36 - - (17) - - (24) - - 5 - - 7 - - (140) - - (11) - - 2,920 - (95,024) (50,721) 95,024
Depreciate	by 1% Equity (55,126) (19,010) (17,290) (3,598) - - - - - - - - - - (95,024)
Income $ 37,476 7,210 2,975 5,476 20 340 (36) 17 24 (5) (7) 140 11 (2,920) $ 50,721		Income (37,476) (7,210) (2,975) (5,476) (20) (340) 36 (17) (24) 5 7 (140) (11) 2,920 (50,721)
			95,024

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		December 31, 2019	December 31, 2019	December 31, 2019
Depreciate		by 1% Appreciate by 1% Equity Income Equity (55,313) 1,676 55,313 (18,231) (7,410) 18,231 (17,543) (2,979) 17,543 (3,766) (5,572) 3,766 - (125) - - (20) - - (7) - - 10 - - (626) - - (42) - - (42) - - 119 - - 8 - - 2,189 - (94,853) (12,821) 94,853 September 30, 2019	Appreciate by 1%
Income $ (1,676) 7,410 2,979 5,572 125 20 7 (10) 626 42 42 (119) (8) (2,189) $ 12,821				Equity 55,313 18,231 17,543 3,766 - - - - - - - - - -
				94,853

	Depreciate	by 1% Equity (56,752) (17,773) (17,217) (4,103) - - - - - - - - - - (95,845)	Appreciate by 1%
			Income (12,409) (7,344) (3,003) (5,696) (126) (343) (12) 36 (333) (50) (103) (18) 406 2,128 (26,867)	Equity 56,752 17,773 17,217 4,103 - - - - - - - - - -
				95,845

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(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).

September 30, 2020	September 30, 2020	September 30, 2020
Interest rate increases by 1 bp Interest rate decreases by 1 bp Income Equity Income Equity $ (197) (3,341) 197 3,341 - (68,863) - 68,863 - (12,450) - 12,450 - (673) - 673 - (47) - 47 - (2,603) - 2,603 - (265) - 265 $ (197) (88,242) 197 88,242 December 31, 2019	Interest rate decreases by 1 bp
Income $ (197) - - - - - - $ (197)		Equity 3,341 68,863 12,450 673 47 2,603 265
		88,242

	Interest rate decreases by 1 bp
		Equity 5,211 49,215 13,057 647 78 1,423 80
		69,711

	Interest rate decreases by 1 bp
	Income 520 - (42) - - - - 478	Equity 5,434 51,124 11,905 519 91 609 82
		69,764

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B. Sensitivity analysis of expected net revenue/Sensitivity of equity in terms of interest rate fluctuation

Scenario Interest rate increases by 100 bp Interest rate decreases by 100 bp Scenario Interest rate increases by 100 bp Interest rate decreases by 100 bp Scenario Interest rate increases by 100 bp Interest rate decreases by 100 bp		September 30, 2020 in 1 year Effect on EVE USD TWD USD (26,139) (1,876,690) (56,586) 4,265 2,158,036 33,435 December 31, 2019 in 1 year Effect on EVE USD TWD USD (21,189) (2,668,734) (59,485) 8,698 4,298,253 65,845 September 30, 2019 in 1 year Effect on EVE USD TWD USD (19,874) (3,378,514) (56,841) 9,421 3,251,996 63,083
	Effect on NII
	TWD 3,492,705 (4,750,482)
	Effect on NII
	TWD 3,000,869 (5,575,295)
	Effect on NII	in 1 year USD (19,874) 9,421
	TWD 2,950,329 (5,387,257)

(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%.

Change Equity security price increases by 1 % Equity security price decreases by 1 % Change Equity security price increases by 1 % Equity security price decreases by 1 % Change Equity security price increases by 1 % Equity security price decreases by 1 %	Currency USD USD Currency TWD USD TWD USD Currency TWD TWD		September 30, 2020
			Income Equity 42 - (42) - December 31, 2019

			Income Equity 1,789 - 20 - (1,789) - (20) - September 30, 2019

			Income Equity 1,457 - (1,457) -

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B. Value at Risk of equity security

Value at Risk	From October 1, 2019 to September 30,2020	From October 1, 2019 to September 30,2020	From October 1, 2019 to September 30,2020
	Average	Maximum	Minimum
Equity security risk	5,769	15,917	1,668

Value at Risk	For the year ended December 31, 2019
	Average	Maximum	Minimum
Equity security risk	3,255	7,623	94

Value at Risk	From October 1, 2018 to September 30, 2019
	Average	Maximum	Minimum
Equity security risk	2,969	7,623	94

(f) Transferred financial assets that are not fully derecognized

The transactions, relating to transferred financial assets not qualifying for full derecognition, the Bank and subsidiaries conduct 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 have interest rate risk and credit risk, the said transferred assets are not fully derecognized.

As of September 30, 2020, December 31 and September 30, 2019, there were not any financial assets of the Bank that are not fully derecognized.

(g) Offsetting financial assets and financial liabilities

The Bank and subsidiaries have 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:

		September 30, 2020 offsetting or general agreement of net amount settlement or similar norm Gross amounts of financial liabilities offset Net amount of financial assets Amounts not set off in the balance sheet(d) in the balance sheet (b) presented in the balance sheet (c)=(a)-(b) Financial instruments (Note) Cash collateral received Net amount (e)=(c)-(d) - 416,210 470,287 1,183,778 (1,237,855)	September 30, 2020 offsetting or general agreement of net amount settlement or similar norm Gross amounts of financial liabilities offset Net amount of financial assets Amounts not set off in the balance sheet(d) in the balance sheet (b) presented in the balance sheet (c)=(a)-(b) Financial instruments (Note) Cash collateral received Net amount (e)=(c)-(d) - 416,210 470,287 1,183,778 (1,237,855)	September 30, 2020 offsetting or general agreement of net amount settlement or similar norm Gross amounts of financial liabilities offset Net amount of financial assets Amounts not set off in the balance sheet(d) in the balance sheet (b) presented in the balance sheet (c)=(a)-(b) Financial instruments (Note) Cash collateral received Net amount (e)=(c)-(d) - 416,210 470,287 1,183,778 (1,237,855)
Financial assets under
Item	Gross amounts of recognized financial assets (a)	Gross amounts of financial liabilities offset in the balance sheet (b)	Net amount of financial assets presented in the balance sheet (c)=(a)-(b)
				Financial instruments (Note)
Derivative financial instruments	$ 416,210	-	416,210	470,287

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September 30, 2020	September 30, 2020	September 30, 2020	September 30, 2020	September 30, 2020
Financial liabilities under offsetting or general agreement of
Item	Gross amounts of recognized financial liabilities (a)	Gross amounts of financial assets offset in the balance sheet (b)	Net amount of financial liabilities presented in the balance sheet (c)=(a)-(b)
				Financial instruments (Note)
Derivative financial instruments	$ 164,648			-
Financial assets under
Item	Gross amounts of recognized financial assets (a)	Gross amounts of financial liabilities offset in the balance sheet (b)	Net amount of financial assets presented in the balance sheet (c)=(a)-(b)
				Financial instruments (Note)
Derivative financial instruments	$ 370,369			468,795
Financial liabilities under offsetting or general agreement of
Item	Gross amounts of recognized financial liabilities (a)	Gross amounts of financial assets offset in the balance sheet (b)	Net amount of financial liabilities presented in the balance sheet (c)=(a)-(b)
				Financial instruments (Note)
Derivative financial instruments	$ 131,733			-
Financial assets under
Item	Gross amounts of recognized financial assets (a)	Gross amounts of financial liabilities offset in the balance sheet (b)	Net amount of financial assets presented in the balance sheet (c)=(a)-(b)
				Financial instruments (Note)
Derivative financial instruments	$ 389,428			498,787
Financial liabilities under offsetting or general agreement of
Item	Gross amounts of recognized financial liabilities (a)	Gross amounts of financial assets offset in the balance sheet (b)	Net amount of financial liabilities presented in the balance sheet (c)=(a)-(b)
				Financial instruments (Note)
Derivative financial instruments	$ 131,753	-	131,753	-

Note：Master netting arrangements and non-cash financial collaterals are included.

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(AP) Capital Management

(a) The Bank takes business development and risk control into consideration and calculates capital adequacy per “Regulations Governing the Capital Adequacy Ratio and Capital Category of Banks” and “Calculation Methods and Forms of Proprietary Capital and Risk Capital of Banks” . The ratio between proprietary capital and risk capital shall remain above the regulated minimum ratio.
(b) 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.
(c) 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.
(d) 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.
B. Other Tier 1 capital: 25% of the perpetual non-accumulated subordinated financial debentures deducted by the major investment on financial related business.

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TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

(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's investing and financing activities which did not affect the current cash flow for the nine months ended September 30, 2020 and 2019 were carried out to acquire right-of-use assets under leases. Please refer to Note 6(K).

Reconciliation of liabilities arising from financing activities were as follows:

Non-cash changes Foreign exchange rate movement Fair value changes Other changes (300,000) (36,201) - - - - (3,097) - 287,146 (303,097) (36,201) 287,146 Non-cash changes Foreign exchange rate movement Fair value changes Other changes 90,150 (34,479) - - - - - - 248,907 90,150 (34,479) 248,907	Non-cash changes Foreign exchange rate movement Fair value changes Other changes (300,000) (36,201) - - - - (3,097) - 287,146 (303,097) (36,201) 287,146 Non-cash changes Foreign exchange rate movement Fair value changes Other changes 90,150 (34,479) - - - - - - 248,907 90,150 (34,479) 248,907	September 30, 2020
		8,612,981 59,250,000 991,305
		68,854,286
		September 30, 2019
Foreign exchange rate movement 90,150 - - 90,150	Fair value changes (34,479) - - (34,479)
		9,218,512 53,250,000 826,510
		63,295,022

(AR) Structured entities that not included in consolidated financial reports

(a) The table below presents the types of structured entities that the Bank and subsidiaries do 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 Investing in funds that cannot be freely traded on the open market Investing in units or limited partnership interests issued by these funds.
Private fund

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Types of structured entities	Nature and purpose Interests held by the Bank and subsidiaries Investing in commercial real estate assets securitization products Investment in asset-backed securities issued by unconsolidated structured entities
Asset securitization product

(b) The scales of structures entities not included in consolidated financial reports were as follow:

Private fund Asset securitization product Total	September 30, 2020 $ 97,900 1,006,751 $ 1,104,651	December 31, 2019 48,150 1,530,429 1,578,579	September 30, 2019
			47,000 1,727,739
			1,774,739

Assets held by the Bank and subsidiaries	September 30, 2020 $ 97,900 513,234 493,517 $ 1,104,651	December 31, 2019 48,150 784,228 746,201 1,578,579	September 30, 2019
Financial assets at fair value through profit or loss Financial assets at fair value through other comprehensive income Investments in debt instruments at amortized cost Total			47,000 888,994 838,745
			1,774,739

The maximum amount of risk exposure to the Bank and subsidiaries endure to a loss incurred from special purpose entities that are not included in consolidated financial reports is the carrying amount of interests held by the Bank and subsidiaries.

(d) As of September 30, 2020, December 31 and September 30, 2019, the Bank and subsidiaries has not provided any financial support to its special purpose entities that are not included in consolidated financial reports.

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7. RELATED-PARTY TRANSACTIONS

(A) Names of related parties and relationship

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 Land Bank of Taiwan Corporate director of the Bank Taiwan Business Bank Guild Corporate director of the Bank Others Management and other related parties of the Bank

(B) Significant related party transactions
(a) Due from banks

Bank of Taiwan Land Bank of Taiwan Total Bank of Taiwan Land Bank of Taiwan Total Bank of Taiwan Land Bank of Taiwan Total	September 30, 2020	September 30, 2020
	Amount % $ 169,900 1.07 5,265 0.03 $ 175,165 1.10 December 31, 2019	%
		1.07 0.03
		1.10
		%
		1.17 0.03
		1.20

Interest rates are the same as those with regular clients.

(b) Deposits from banks

Land Bank of Taiwan Land Bank of Taiwan Land Bank of Taiwan	September 30, 2020	September 30, 2020
	Amount % $ 1,939 0.38 December 31, 2019	%
		0.38
		%
		1.94

Interest rates are the same as those with regular clients.

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(c) Call loans to banks

Bank of Taiwan Land Bank of Taiwan Total Bank of Taiwan Land Bank of Taiwan Total Bank of Taiwan Land Bank of Taiwan Total	September 30, 2020 December 31, 2019 September 30, 2019 $ - 429,500 109,813 - - 931,065 $ - 429,500 1,040,878 Interest Income Highest balance For the three months ended September 30, 2020 For the nine months ended September 30, 2020 Annual interest rate $ 1,759,283 781 3,731 0.19%-3.12% 4,026,868 1,246 1,500 0.15%-2.55% $ 5,786,151 2,027 5,231 Interest income Highest balance For the three months ended September 30, 2019 For the nine months ended September 30, 2019 Annual interest rate $ 7,686,125 3,716 6,840 0.174%-3.403% 4,687,359 7,298 7,903 1.4%~3.1% $ 12,373,484 11,014 14,743	September 30, 2019
		109,813 931,065
		1,040,878

Interest rates are the same as those with regular clients.

(d) Call loans from banks

Bank of Taiwan Land Bank of Taiwan Total Bank of Taiwan Land Bank of Taiwan Total	September 30, 2020 December 31, 2019 September 30, 2019 $ 3,086,490 1,157,025 1,143,783 42,540 1,214,735 1,311,228 $ 3,129,030 2,371,760 2,455,011 Interest Expense Highest balance For the three months ended September 30, 2020 For the nine months ended September 30, 2020 Annual interest rate $ 5,446,280 2,336 3,187 0.12%-3.35% 4,512,609 181 2,074 0.1%-6% $ 9,958,889 2,517 5,261	September 30, 2019
		1,143,783 1,311,228
		2,455,011

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Bank of Taiwan Land Bank of Taiwan Total	Highest balance $ 11,245,807 8,855,576 $ 20,101,383		Interest Expense For the three months ended September 30, 2019 For the nine months ended September 30, 2019 Annual interest rate 7,856 15,345 0.07%-3.2% 10,480 18,242 0.15%-3.25% 18,336 33,587
			For the three months ended September 30, 2019 7,856 10,480 18,336

Interest rates are the same as those with regular clients.

(e) Deposits

Others Others Others	September 30, 2020	September 30, 2020
	Amount % $ 1,202,860 0.09 December 31, 2019	%
		0.09
		%
		0.07

Interest rates are the same as those with regular clients.

(f) Credit

September 30, 2020	September 30, 2020	September 30, 2020	September 30, 2020	September 30, 2020	September 30, 2020	September 30, 2020	September 30, 2020
Category	Number of clients or name of relatedparty	Highest balance	Ending balance	Performing situations		Collaterals	Transaction terms are different to regular clients
				Performing loan	Non-performing Loans
Employee consumer loans	29	13,111	11,162	11,162	-	none	none
Self-use home mortgages loans	102	443,328	385,144	385,144	-	real estate	none
Others	Natural person	414,219	403,943	403,943	-	real estate	none

Decembe				r 31, 2019
Category	Number of clients or name of relatedparty	Highest balance	Ending balance	Performing situations		Collaterals	Transaction terms are different to regular clients
				Performing loan	Non-performing Loans
Employee consumer loans	149	438,488	404,626	404,626	-	none/real estate	none
Self-use home mortgages loans	113	501,692	461,965	461,965	-	real estate	none
Others	Natural person	18,810	16,849	16,849	-	real estate	none

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September 30, 2019	September 30, 2019	September 30, 2019	September 30, 2019	September 30, 2019	September 30, 2019	September 30, 2019	September 30, 2019
Category	Number of clients or name of relatedparty	Highest balance	Ending balance	Performing situations		Collaterals	Transaction terms are different to regular clients
				Performing loan	Non-performing Loans
Employee consumer loans	142	438,488	418,335	418,335	-	none/real estate	none
Self-use home mortgages loans	109	475,176	442,279	442,279	-	real estate	none
Others	Natural person	19,620	17,630	17,630	-	real estate	none

(g) Donation:

For the three months ended September 30, 2020 2019 $ - -	For the nine months ended September 30, 2020 2019 2,500 2,500	For the nine months ended September 30, 2020 2019 2,500 2,500
2020 $ -	2020 2,500
		2,500

(h) Guarantees: None.
(i) Service fees: None.
(j) Rental revenue: None.
(k) Derivatives financial instrument transactions: None.
(l) Sales of Non–Performing Loans Transactions: None.
(C) Major management salary information

Salary and other short-term employee benefits Post-employment benefits Total	For the three months ended September 30, 2020 2019 $ 24,131 31,964 691 756 $ 24,822 32,720	For the nine months ended September 30, 2020 2019 70,589 91,771 1,962 2,267 72,551 94,038
	2020 $ 24,131 691 $ 24,822	2020 70,589 1,962 72,551

8. Pledged assets : Please refer to notes 6(H) for more details.

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9. Significant commitments and contingencies

(A) Significant commitments and contingencies were as follows:

Marketable securities held for custody Bills collected for others Bills lent for others Guarantees and letters of credit Collaterals received Trust liabilities Travelers’ check in custody for sale Items held for custody Registered government bonds for sale Registered short-term bills for sale Guarantee notes payable	September 30, 2020 $ 10,613,634 37,909,566 32,216,353 25,552,361 426 168,766,406 - 1,093,873 62,356,200 2,073,248 26,211,310	December 31, 2019 September 30, 2019 12,065,026 12,522,385 44,164,781 44,601,608 30,006,439 29,159,694 25,557,114 26,137,481 426 426 167,127,065 169,361,026 50,163 50,509 3,995,489 3,715,347 66,587,300 67,805,900 1,584,150 2,029,687 26,383,110 26,221,700

(B) Unrecognized contractual commitments:

As of September 30, 2020, December 31 and September 30, 2019, major constructions in progress and purchases amounted to $1,071,144, $1,097,821 and $1,061,150 respectively, of which $543,116, $546,673 and $652,755 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 Co., 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, suffered a loss thereon. In November 1998, I.C.C.I. initiated a case with the Court of Commerce of Brussels in Belgium, requested the L/C opening bank (Banque Bruxelles Lambert, or BBL) and the Bank to jointly pay compensation of USD$7,830 thousand plus interest, losses, and expenses for the L/C. On August 31, 2005, the Court of Commerce of Brussels rendered its judgment which the Bank has to make compensation of USD$7,674 thousand plus interest to I.C.C.I.. 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 which I.C.C.I and the Bank are both responsible for the offense. Furthermore, on November 16, 2011, the judgment of the court indicated that the Bank should be responsible for 90% of the negligence proportion. In terms of the judgment of the court of the second instance, the Bank has filed an appeal on November 3, 2011. On February 6, 2013, the court overruled the Bank’ s appeal and the Bank lost the case. In October 2016, I.C.C.I initiated a case with the Court of Frankfurt in Germany, applied for seizing the Bank account in Germany, and the Bank lodged guaranty money of EUR $13,200 thousand to the court to rescind the order for attachment.

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In July 2017, I.C.C.I applied for compulsory execution to the guaranty money, the court has transferred the guaranty money to I.C.C.I. The Bank then filed a lawsuit objecting to the debt through the attorney. The case was dismissed by the Court of Frankfurt in November 2018, and remanded back to trial court in November 2019 after the Bank's appeal was granted by the High Court of Frankfurt. I.C.C.I. has filed a statement of grounds for objection to the German Federal Court on March 16, 2019. And request to revoke the "Return of the Judgment of the Frankfurt High Court". The German Federal Court requires the Bank to file a defense against I.C.C.I. of objections before July 16, 2019. The Bank has appointed a lawyer to act as an attorney in the German Federal Court and raised a pleading. 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 USD$1,130 thousand in compensation and held the Bank as jointly liable, and by I.C.C.I, which demanded the Bank to pay USD$20,060 thousand less its reimbursed amount to make a security deposit of EUR$14,000 thousand. The Bank has engaged local attorneys to represent itself in court. The Court of Congo will merge the two cases for court, and the court session is undetermined. As of September 30, 2020, the Bank has accrued the compensation of $183,923 and EUR$8,000 thousand.

(D) Among the private equity fund contracts signed by the Bank and subsidiaries, the maximum amount of committed investment that has not been invested is:

New Taiwan Dollar	September 30, 2020 $ -	December 31, 2019 50,000	September 30, 2019
			50,000

Note: The committed investment amount that has not been invested does not include the portion of the notified transaction that has not yet been delivered.

10. Significant losses from disasters: None.

11. Significant subsequent events: None.

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12. Others

(A) Information on loan quality, concentration of credit extensions, interest rate-sensitivity, profitability and maturity analysis
(a) Loan quality:

Items	Month/Year	Month/Year	September 30, 2020	September 30, 2020	September 30, 2020	September 30, 2020	September 30, 2020
			Non-performing loans	Total loans	Non-performing loan ratio	Allowance for credit losses	Coverage ratio
Corporate finance	Secured		3,177,325	592,349,407	0.54 %	7,458,573	234.74 %
	Unsecured		649,396	317,542,632	0.20 %	4,437,712	683.36 %
Consumer finance	Residence mortgages(Note 4)		414,945	140,352,790	0.30 %	1,763,720	425.05 %
	Cash cards		-	8	- %	-	- %
	Microcredit(Note 5)		17,481	534,251	3.27 %	18,276	104.55 %
	Others (Note 6)	Secured	681,218	140,377,644	0.49 %	1,780,808	261.42 %
		Unsecured	59,837	9,466,988	0.63 %	156,903	262.22 %
total loan busine	ss		5,000,202	1,200,623,720	0.42 %	15,615,992	312.31 %
			Overdue receivables	Total receivables	Delinquency ratio	Allowance for credit losses	Coverage ratio
Credit cards bus	iness		1,789	1,117,464	0.16 %	23,796	1,330.13 %
Account receiva (Note 7)	ble factoring-without recourse		-	1,821	- %	18	- %

Items	Month/Year		December 31, 2019
			Non-performing loans	Total loans	Non-performing loan ratio	Allowance for credit losses	Coverage ratio
Corporate finance	Secured		1,796,696	541,634,128	0.33 %	6,116,645	340.44 %
	Unsecured		765,400	316,615,157	0.24 %	3,901,681	509.76 %
Consumer finance	Residence mortgages(Note 4)		339,607	144,607,596	0.23 %	1,630,514	480.12 %
	Cash cards		-	13	- %	-	- %
	Microcredit(Note 5)		18,908	656,886	2.88 %	18,524	97.97 %
	Others (Note 6)	Secured	656,766	134,365,005	0.49 %	1,542,832	234.91 %
		Unsecured	50,301	8,211,965	0.61 %	131,172	260.77 %
total loan busine	ss		3,627,678	1,146,090,750	0.32 %	13,341,368	367.77 %
			Overdue receivables	Total receivables	Delinquency ratio	Allowance for credit losses	Coverage ratio
Credit cards bus	iness		2,557	1,336,358	0.19 %	25,851	1,010.99 %
Account receiva (Note 7)	ble factoring-without recourse		-	19,089	- %	191	- %

Items	Month/Year		September 30, 2019
			Non-performing loans	Total loans	Non-performing loan ratio	Allowance for credit losses	Coverage ratio
Corporate finance	Secured		1,624,169	518,033,805	0.31 %	5,655,166	348.19 %
	Unsecured		642,424	329,585,037	0.19 %	3,837,135	597.29 %
Consumer finance	Residence mortgages(Note 4)		331,192	150,353,057	0.22 %	1,565,362	472.64 %
	Cash cards		-	14	- %	-	- %
	Microcredit(Note 5)		15,380	722,697	2.13 %	15,998	104.02 %
	Others (Note 6)	Secured	764,976	136,555,321	0.56 %	1,452,582	189.89 %
		Unsecured	45,643	8,623,183	0.53 %	125,013	273.89 %
total loan busine	ss		3,423,784	1,143,873,114	0.30 %	12,651,256	369.51 %
			Overdue receivables	Total receivables	Delinquency ratio	Allowance for credit losses	Coverage ratio
Credit cards bus	iness		1,894	1,291,500	0.15 %	26,271	1,387.06 %
Account receiva (Note 7)	ble factoring-without recourse		-	720,717	- %	54,691	- %

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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÷ total loans; Credit card delinquency ratio = Overdue receivables÷ receivables
Note 3 Coverage ratio for loans = allowance for credit losses ÷ non-performing loans; Coverage ratio for credit card business = allowance for credit losses ÷ overdue 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.

Overdue loans and receivables exempted from reporting

September 30, 2020	September 30, 2020	December 31, 2019	December 31, 2019	September 30, 2019	September 30, 2019
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 928 67,988 68,916	Receivables may be exempted from reporting as overdue receivables
	2,311 31,229 33,540	833 66,053 66,886	2,906 33,173 36,079		3,228 34,130
					37,358

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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 “Consumer Debt Clearance Act.”
(b) Concentration of credit extensions

September 30, 2020	September 30, 2020	September 30, 2020	September 30, 2020
Ranking	Group enterprise	Credit amount	Credit amount to equity ratio (%)
1	A company. (Railway transportation)	25,098,474	% 25.78
2	B group. (Other holding)	9,506,800	% 9.76
3	C group. (Steel rolling and extruding)	9,419,122	% 9.67
4	D group. (Real estate development)	8,226,492	% 8.45
5	E group. (Real estate for sale and rental with own or leased property)	7,226,211	% 7.42
6	F group. (Air transportation)	6,347,890	% 6.52
7	G group. (Computers manufacturing)	6,339,425	% 6.51
8	H group. (Real estate development)	6,290,279	% 6.46
9	I group. (Real estate development)	5,196,282	% 5.34
10	J group. (Liquid crystal panel and components manufacturing)	4,870,500	% 5.00

December 31, 2019	December 31, 2019	December 31, 2019	December 31, 2019
Ranking	Group enterprise	Credit amount	Credit amount to equity ratio (%)
1	A company. (Railway transportation)	26,912,468	% 28.18
2	C group. (Steel rolling and extruding)	9,036,247	% 9.46
3	D group. (Real estate development)	8,752,192	% 9.16
4	B group. (Other holding)	7,897,098	% 8.27
5	E group. (Real estate for sale and rental with own or leased property)	6,865,922	% 7.19
6	F group. (Air transportation)	6,370,151	% 6.67
7	G group. (Computers manufacturing)	6,158,068	% 6.45
8	H group. (Real estate development)	5,576,407	% 5.84
9	K group. (Chemical raw materials manufacturing)	4,843,526	% 5.07
10	I group. (Real estate development)	4,775,225	% 5.00

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September 30, 2019	September 30, 2019	September 30, 2019	September 30, 2019
Ranking	Group enterprise	Credit amount	Credit amount to equity ratio (%)
1	A company. (Railway transportation)	26,910,888	% 28.55
2	C group. (Steel rolling and extruding)	9,301,434	% 9.87
3	D group. (Real estate development)	8,594,692	% 9.12
4	B group. (Other holding)	7,254,925	% 7.70
5	G group. (Computer manufacturing)	6,844,418	% 7.26
6	E group. (Real estate for sale and rental with own or leased property)	6,709,922	% 7.12
7	F group. (Air transportation)	6,304,614	% 6.69
8	J group. (Liquid crystal panel and components manufacturing)	5,324,111	% 5.65
9	K group. (Chemical raw materials manufacturing)	4,923,179	% 5.22
10	L group. (Real estate for sale and rental with own or leased property)	4,085,150	% 4.33

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 “class” of 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.
Note 2 Enterprise group is as defined in Article 6 of the “Supplementary 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.

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(c) Interest rate-sensitivity information
(1) Analysis of interest rate-sensitive assets and liabilities (New Taiwan dollars)

Unit : %	Unit : %	Unit : %	Unit : %	Unit : %	Unit : %
September 30, 2020
Item	1~90 days	91~180 days	181days~1year	over 1 year	total
Interest rate-sensitive assets	$ 1,239,472,623	26,376,626	17,500,133	122,104,461	1,405,453,843
Interest rate-sensitive liabilities	1,074,534,234	63,976,771	84,946,242	58,354,290	1,281,811,537
Interest rate sensitivity gap	164,938,389	(37,600,145)	(67,446,109)	63,750,171	123,642,306
Net worth					97,356,134
Ratio of interest rate-sensitive assets to liabilities(%)					109.65
Ratio of interest rate-sensitivegapto net worth(%)					127.00

December 31, 2019
Item	1~90 days	91~180 days	181days~1year	over 1 year	total
Interest rate-sensitive assets	$ 1,173,468,027	48,183,340	32,004,069	127,788,145	1,381,443,581
Interest rate-sensitive liabilities	1,083,476,198	86,252,494	111,628,016	38,899,834	1,320,256,542
Interest rate sensitivity gap	89,991,829	(38,069,154)	(79,623,947)	88,888,311	61,187,039
Net worth					95,516,766
Ratio of interest rate-sensitive assets to liabilities(%)					104.63
Ratio of interest rate-sensitivegapto net worth(%)					64.06

September 30, 2019
Item	1~90 days	91~180 days	181days~1year	over 1 year	total
Interest rate-sensitive assets	$ 1,141,476,898	20,338,409	51,709,949	138,409,961	1,351,935,217
Interest rate-sensitive liabilities	1,052,118,296	63,687,545	114,508,082	43,065,059	1,273,378,982
Interest rate sensitivity gap	89,358,602	(43,349,136)	(62,798,133)	95,344,902	78,556,235
Net worth					94,264,025
Ratio of interest rate-sensitive assets to liabilities(%)					106.17
Ratio of interest rate-sensitivegapto net worth(%)					83.34

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-ratesensitive liabilities.
Note 4 Ratio of interest rate-sensitive assets to liabilities=Interest rate-sensitive assets÷ Interest rate-sensitive liabilities (New Taiwan dollars interest-ratesensitive assets and New Taiwan dollars interest-rate-sensitive liabilities).

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(2) Analysis of the interest-sensitive assets and liabilities (US dollars)

Unit : In Thousands of US Dollars, %

Unit : In Thousands of US Dollars, %	Unit : In Thousands of US Dollars, %	Unit : In Thousands of US Dollars, %	Unit : In Thousands of US Dollars, %	Unit : In Thousands of US Dollars, %	Unit : In Thousands of US Dollars, %
September 30, 2020
Item	1~90 days	91~180 days	181days~1year	over 1 year	total
Interest rate-sensitive assets	$ 4,607,591	497,507	165,671	566,021	5,836,790
Interest rate-sensitive liabilities	5,998,395	1,083,584	590,256	-	7,672,235
Interest rate sensitivity gap	(1,390,804)	(586,077)	(424,585)	566,021	(1,835,445)
Net worth					3,358,266
Ratio of interest rate-sensitive assets to liabilities(%)					76.08
Ratio of interest rate-sensitivegapto net worth(%)					(54.65)

December 31, 2019	December 31, 2019	December 31, 2019	December 31, 2019	December 31, 2019	December 31, 2019
Item	1~90 days	91~180 days	181days~1year	over 1 year	total
Interest rate-sensitive assets	$ 4,947,261	485,765	388,815	634,245	6,456,086
Interest rate-sensitive liabilities	4,908,555	740,209	949,016	-	6,597,780
Interest rate sensitivity gap	38,706	(254,444)	(560,201)	634,245	(141,694)
Net worth					3,184,954
Ratio of interest rate-sensitive assets to liabilities(%)					97.85
Ratio of interest rate-sensitivegapto net worth(%)					(4.45)

September 30, 2019
Item	1~90 days	91~180 days	181days~1year	over 1 year	total
Interest rate-sensitive assets	$ 4,688,625	501,016	236,720	689,816	6,116,177
Interest rate-sensitive liabilities	4,868,960	730,476	857,050	-	6,456,486
Interest rate sensitivity gap	(180,335)	(229,460)	(620,330)	689,816	(340,309)
Net worth					3,037,297
Ratio of interest rate-sensitive assets to liabilities(%)					94.73
Ratio of interest rate-sensitivegapto net worth(%)					(11.20)

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 ratesensitive 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).

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(d) Profitability

Unit: %	Unit: %	Unit: %	Unit: %
Item		September 30, 2020	September 30, 2019
The ratio of return on assets	Before income tax	0.22	0.39
	After income tax	0.20	0.33
The ratio of return on equity	Before income tax	3.97	7.28
	After income tax	3.59	6.04
Net income ratio		21.17	30.16

Note 1 The ratio of return on assets = Income before (after) income tax expense÷ average assets.
Note 2 The ratio of return on equity = Income before (after) income tax expense ÷ average 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.
(e) Maturity analysis for assets and liabilities
(1) Maturity analysis in New Taiwan dollars

		September 30, 2020	September 30, 2020	September 30, 2020	September 30, 2020	September 30, 2020	September 30, 2020
	Total	Amount during the maturity period from the balance sheet date to due date
		0-10days	11-30days	31-90days	91-180days	181days-1year	Over 1 year
Major maturity capital inflow	$ 1,512,608,228	122,035,232	170,164,801	163,923,171	171,689,572	118,615,059	766,180,393
Major maturity capital outflow	1,898,902,133	67,171,104	94,787,103	226,270,236	244,739,809	303,988,993	961,944,888
Gap	(386,293,905)	54,864,128	75,377,698	(62,347,065)	(73,050,237)	(185,373,934)	(195,764,495)

Note: Listed amounts are denominated in New Taiwan dollars of the Bank and subsidiaries, including loan commitments of credit agreement and estimates to outflow $377,084,720.

		December 31, 2019	December 31, 2019	December 31, 2019	December 31, 2019	December 31, 2019	December 31, 2019
	Total	Amount during the maturity period from the balance sheet date to due date
		0-10days	11-30days	31-90days	91-180days	181days-1year	Over 1 year
Major maturity capital inflow	$ 1,501,890,612	179,367,254	151,213,247	134,502,252	184,976,030	129,089,921	722,741,908
Major maturity capital outflow	1,874,702,427	55,886,586	112,153,255	218,860,212	230,190,070	355,711,629	901,900,675
Gap	(372,811,815)	123,480,668	39,059,992	(84,357,960)	(45,214,040)	(226,621,708)	(179,158,767)

Note: Listed amounts are denominated in New Taiwan dollars of the Bank and subsidiaries, including loan commitments of credit agreement and estimates to outflow $364,510,276.

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		September 30, 2019	September 30, 2019	September 30, 2019	September 30, 2019	September 30, 2019	September 30, 2019
	Total	Amount during the maturity period from the balance sheet date to due date
		0-10days	11-30days	31-90days	91-180days	181days-1year	Over 1 year
Major maturity capital inflow	$ 1,464,876,700	145,127,427	134,005,254	160,860,921	165,455,358	129,425,069	730,002,671
Major maturity capital outflow	1,819,806,308	60,540,858	97,776,090	204,488,856	229,548,333	344,532,130	882,920,041
Gap	(354,929,608)	84,586,569	36,229,164	(43,627,935)	(64,092,975)	(215,107,061)	(152,917,370

Note: Listed amounts are denominated in New Taiwan dollars of the Bank and subsidiaries, including loan commitments of credit agreement and estimates to outflow $351,617,589.

(2) Maturity analysis in US dollars

Unit : In Thousands of US Dollars

		September 30, 2020	September 30, 2020	September 30, 2020	September 30, 2020	September 30, 2020
	Total	Amount during the maturity period from the balance sheet date to due date
		0-30days	31-90days	91-180days	181days-1year	Over 1 year
Major maturity capital inflow	$ 13,414,813	3,737,627	3,344,522	1,571,353	1,402,456	3,358,855
Major maturity capital outflow	14,056,192	3,894,051	3,546,158	1,882,646	1,252,301	3,481,036
Gap	(641,379)	(156,424)	(201,636)	(311,293)	150,155	(122,181)

Note: Listed amounts are denominated in US dollars of the Bank and subsidiaries, including loan commitments of credit agreement and estimates to outflow US $849,604.

		December 31, 2019	December 31, 2019	December 31, 2019	December 31, 2019	December 31, 2019
	Total	Amount during the maturity period from the balance sheet date to due date
		0-30days	31-90days	91-180days	181days-1year	Over 1 year
Major maturity capital inflow	$ 15,355,895	3,358,162	2,608,973	3,107,881	2,619,737	3,661,142
Major maturity capital outflow	16,092,017	3,851,126	2,573,777	3,475,166	3,026,241	3,165,707
Gap	(736,122)	(492,964)	35,196	(367,285)	(406,504)	495,435

Note: Listed amounts are denominated in US dollars of the Bank and subsidiaries, including loan commitments of credit agreement and estimates to outflow US $948,394.

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		September 30, 2019	September 30, 2019	September 30, 2019	September 30, 2019	September 30, 2019
	Total	Amount during the maturity period from the balance sheet date to due date
		0-30days	31-90days	91-180days	181days-1year	Over 1 year
Major maturity capital inflow	$ 14,545,544	2,790,132	2,289,139	1,510,412	4,343,444	3,612,417
Major maturity capital outflow	15,330,653	3,580,977	2,461,812	1,518,808	4,746,513	3,022,543
Gap	(785,109)	(790,845)	(172,673)	(8,396)	(403,069)	589,874

Note: Listed amounts are denominated in US dollars of the Bank and subsidiaries, including loan commitments of credit agreement and estimates to outflow US $1,006,285.

(B) Merger of Taiwan Business Bank Insurance Agency Co., Ltd. and Taiwan Business Bank Property Insurance Agency Co., Ltd.

As of January 2, 2020, the Bank merged its wholly owned subsidiaries, Taiwan Business Bank Insurance Agency Co., Ltd. and Taiwan Business Bank Property Insurance Agency Co., Ltd. without consideration involved. The increase in assets arising from the merger will be used for the Bank’s future operation and no major assets have been planned to be disposed of.

In addition, the operating results of Taiwan Business Bank Insurance Agency Co., Ltd. and Taiwan Business Bank Property Insurance Agency Co., Ltd. have been consolidated in the Bank’s income statement for the nine months ended September 30, 2019.

13. Other disclosures

(A) Information on significant transactions:

(a) Cumulative purchase or sale of the same investee’s capital stock up to $300,000 or 10% of paid-in capital: None.
(b) Acquisition of real estate amounting to over $300,000 or 10% of paid-in capital: None.
(c) Disposal of real estate amounting to over $300,000 or 10% of paid-in capital: None.
(d) Discount of commissions fees with related parties amounting to over $5,000: None.
(e) Receivables from related parties amounting to over $300,000 or 10% of paid-in capital: None.
(f) Sale of non-performing loans information: None.

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(g) Types of securitization instruments and related information approved by financial assets securitization rules or real estate securitization rules: None.
(h) Business relationship and significant transactions with the subsidiaries:

No (Note 1)	Trader	Counterparty	Relationship (Note 2)	Transaction status for the nine months ended September 30, 2020	Transaction status for the nine months ended September 30, 2020	Transaction status for the nine months ended September 30, 2020	Transaction status for the nine months ended September 30, 2020
				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	122,262	No difference with non-related parties	0.01 %
1	TBB International Leasing Co., Ltd.	Taiwan Business Bank, Ltd.	2	Right-to-use assets	1,753	No difference with non-related parties	- %
1	TBB International Leasing Co., Ltd.	Taiwan Business Bank, Ltd.	2	Lease liabilities	1,766	No difference with non-related parties	- %
0	Taiwan Business Bank, Ltd.	TBB International Leasing Co., Ltd.	1	Net revenue other than interest	519	No difference with non-related parties	- %
0	Taiwan Business Bank, Ltd.	TBB Venture Capital Co., Ltd.	1	Deposits and remittances	203,847	No difference with non-related parties	0.01 %
2	TBB Venture Capital Co., Ltd.	Taiwan Business Bank, Ltd.	2	Right-to-use assets	967	No difference with non-related parties	- %
2	TBB Venture Capital Co., Ltd.	Taiwan Business Bank, Ltd.	2	Lease liabilities	981	No difference with non-related parties	- %
0	Taiwan Business Bank, Ltd.	TBB Venture Capital Co., Ltd.	1	Net revenue other than interest	266	No difference with non-related parties	- %
0	Taiwan Business Bank, Ltd.	Taiwan Business Bank International Leasing Co., Ltd.	1	Deposits and remittances	94,279	No difference with non-related parties	0.01 %

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

(i) Other significant transactions that might have influence over the decision-making process of the financial statements users: None.

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(B) Information of investees:

(a) The following is the information on investees (excluding investment in mainland China):

(Unit : thousand shares)

Name of investee	Location	Main business scope	Shareholding ratio	Book value	Investment gain (loss)	The cross holding of the	The cross holding of the	Bank and its related parties	Bank and its related parties	Note
						Number of shares	Number of proforma shares	Total
								Number of shares	Shareholding ratio
TBB International Leasing Co., Ltd.	Taiwan	Leasing business	100.00 %	1,392,169	33,510	150,000	-	150,000	100.00 %	Already written-off when preparing the consolidated financial statements
TBB (Cambodia) Microfinance Institution Plc	Cambodia	SMEs and personal finance business	100.00 %	560,349	24,565	20	-	20	100.00 %	〞
TBB Venture Capital Co., Ltd.	Taiwan	Investing business	100.00 %	601,754	5,321	60,000	-	60,000	100.00 %	〞

(b) Loans to others:

NO.	Creditor	Debtor	Interaction Account	Related party	Highest Amount	Ending balance	Actual drawdown amount	Range of interest rate	Nature of the loan	Dealing amount	The necessary reason for short-term loans	Allowance for bad debts	Guarantee	Guarantee	Limited amount for individual object	Total limited amount for loan
													Name	Value
1	TBB International Leasing Co.,Ltd.	Chao- Yang Internatio- nal Co., Ltd	Financial receivables	No	30,000	22,651	30,000	2%-10%	2	-	To the lender for buying goods	638	None	-	341,257	1,365,030
1	TBB International Leasing Co.,Ltd.	Hsin Chuan Construc- tion Co., Ltd	Financial receivables	No	100,000	79,357	100,000	2%-10%	2	-	To the lender for buying goods	2,108	None	-	341,257	1,365,030
1	TBB International Leasing Co.,Ltd.	Sian Shang Frozen Food Co.,Ltd	Financial receivables	No	31,815	23,882	55,000	2%-10%	2	-	To the lender for buying goods	674	None	-	341,257	1,365,030
1	TBB International Leasing Co.,Ltd.	ANLI LINES CORP.	Financial receivables	No	11,793	10,106	12,000	2%-10%	2	-	To the lender for buying goods	274	None	-	341,257	1,365,030

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.

(c) Endorsements and guarantee for others: None

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TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

(d) Acquisition of securities:

Company acquired	Type and name of the security	Relationship with the security issuer	Account	At the end of the period	At the end of the period	At the end of the period	At the end of the period	Note
				Number of shares	Carrying amount	Share proportion (Note 2)	Market price (Note 1)
Taiwan Business Bank International Leasing Co., Ltd.	Unlisted	The investee under the equity method of the subsidiary TBB International Leasing Co.,Ltd.	Investment under equity method	-	843,670	100.00 %	843,670	The transaction has been written off when preparing the consolidated financial statements.

Note 1: Listed companies apply the market price to calculate the net worth of the shares possessed. Unlisted companies apply the proportion of shares calculate the net worth of the shares possessed. The net worth of preferred stock is calculated based on the liquidation price plus dividends in arrears.

Note 2: The proportion of shares the preferred stock is calculated based on the shares the Bank possessed divided by the shares issued.

(e) Accumulative purchases or sales of the same investee companies amounting to over $300,000 or 10% of paid-in capital: None.
(f) Acquisition of real estate amounting to over $300,000 or 10% of paid-in capital: None.
(g) Disposition of real estate amounting to over $300,000 or 10% of paid-in capital: None.
(h) Discount of commissions and handling fees with related parties amounting to over $5,000: None.
(i) Receivables from related parties amounting to over $300,000 or 10% of paid-in capital: None.
(j) Transactions of financial derivatives: None.
(k) Sale of non-performing loans information: None.
(l) Types of securitization instruments and related information approved by financial assets securitization rules or real estate securitization rules: None.
(m) Other significant transactions that might have substantial influence over the decision making of the financial statement users: None.

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(C) Information on investments in Mainland China：
(a) Name and major business item of the investee in China：

Name of investee company in Mainland China	Major business	Paid-in capital	Investment method (Note 1)	Accumulated amount transferred from Taiwan, beginning of the period	Investment transferred out or recovered	Investment transferred out or recovered	Accumulated amount transferred from Taiwan, end of the period	The current profit or loss of the investee (Note 2)	Shares directly or indirectly possessed by the Bank	Investment income for the period (Notes 2 and 4)	Ending carring value of investment	Accumulated inward remittance of earnings as of the end of period
					Transferred out	Recovered
Taiwan Business Bank , Ltd. Shanghai branch	Banking business	3,910,537 (CNY800 million) (Operating capital)	( c )	3,910,537 (CNY800 million)	-	-	3,910,537 (CNY800 million)	-	Shanghai branch of the Bank, not an investee company	Note 4	4,031,484	None
Taiwan Business Bank , Ltd. Wuhan branch	Banking business	3,942,815 (CNY800 million) (Operating capital)	( c )	3,942,815 (CNY800 million)	-	-	3,942,815 (CNY800 million)	-	Wuhan branch of the Bank, not an investee company	Note 4	3,848,935	"
Taiwan Business Bank International Leasing Co., Ltd.	Leasing business	838,305 (CNY170 million) (Operating capital)	( a )	838,305 (CNY170 million)	-	-	838,305 (CNY170 million)	12,884 2(c)	100%	12,884 2(c)	843,670	"

Note 1:Investment method is divided into three categories and are listed as follows:

(a) Directly invest in Mainland China.
(b) Investment in Mainland China companies through a third region.
(c) Others: establishment of oversea branches

Note 2:The column of “Investment gains (losses)”:

If the company is still in the preparation process, and does not have any investment gain or loss, please specify.
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
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.

(b) Limit of investment in 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)	58,413,680

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	1,214,173,562	% 16.21
National Development Fund, Executive Yuan	439,330,543	% 5.87

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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 (It was subsidiary, Taiwan Business Bank Insurance Agency Co., Ltd. and Taiwan Business Property Insurance Agency Co., Ltd., in 2019.) primarily provides life and property insurance products to clients. Other segments include all the business of subsidiaries, which main operations are leasing, financing, 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 September 30, 2020 Net interest revenue Net revenue other than interest Net revenue Bad debt expense, commitment and guarantee liability provision Operating expenses Income from continuing operation before tax	Bank Segment $ 3,887,959 1,659,563 5,547,522 (1,268,999) (2,969,853) $ 1,308,670	Securities, Trust, Insurance agent and Others 66,632 109,719 176,351 (2,792) (146,235) 27,324	Adjustment and Elimination 9 (7,679) (7,670) - 254 (7,416)	Total 3,954,600 1,761,603 5,716,203 (1,271,791) (3,115,834) 1,328,578

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TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

For the three months ended September 30, 2019 Net interest revenue Net revenue other than interest Net revenue Bad debt expense, commitment and guarantee liability provision Operating expenses Income from continuing operation before tax For the nine months ended September 30, 2020 Net interest revenue Net revenue other than interest Net revenue Bad debt expense, commitment and guarantee liability provision Operating expenses Income from continuing operation before tax Total assets Total liabilities For the nine months ended September 30, 2019 Net interest revenue Net revenue other than interest Net revenue Bad debt expense, commitment and guarantee liability provision Operating expenses Income from continuing operation before tax Total assets Total liabilities	Bank Segment $ 4,298,804 1,418,932 5,717,736 (246,622) (3,055,668) $ 2,415,446 Banking Segment $ 11,817,455 3,762,582 15,580,037 (3,239,616) (8,890,829) $ 3,449,592 $ 1,742,155,790 $ 1,647,461,660 Banking Segment $ 12,536,505 4,670,191 17,206,696 (1,912,918) (9,083,476) $ 6,210,302 $ 1,688,814,237 $ 1,597,056,636	Securities, Trust, Insurance agent and Others 85,797 193,440 279,237 (5,668) (141,294) 132,275 Securities, Trust, Insurance agent and Others 218,459 620,481 838,940 12,844 (408,744) 443,040 16,109,805 10,893,529 Securities, Trust, Insurance agent and Others 250,478 783,178 1,033,656 (15,078) (414,726) 603,852 19,061,606 13,977,043	Adjustment and Elimination 32 (102,905) (102,873) - 854 (102,019) Adjustment and Elimination 27 (64,188) (64,161) - 765 (63,396) (2,977,445) (423,173) Adjustment and Elimination 105 (300,680) (300,575) - 2,561 (298,014) (3,311,737) (733,598)	Total 4,384,633 1,509,467 5,894,100 (252,290) (3,196,108) 2,445,702 Total 12,035,941 4,318,875 16,354,816 (3,226,772) (9,298,808) 3,829,236 1,755,288,150 1,657,932,016 Total 12,787,088 5,152,689 17,939,777 (1,927,996) (9,495,641) 6,516,140 1,704,564,106 1,610,300,081

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TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

No single customer represents 10% or more of the Bank and subsidiaries' operating revenue. Therefore, no disclosure of major customer information is required.

～ 141 ～

(English Translation of Financial Statements Originally Issued in Chinese.) Reviewed only, not audited in accordance with generally accepted auditing standards as of September 30, 2020 and 2019.

TAIWAN BUSINESS BANK, LTD.

Balance Sheets of Security Division

September 30, 2020, December 31, 2019 and September 30, 2019

(Expressed in Thousands of New Taiwan Dollars)

Assets Current Assets： 113200 Current financial assets at fair value through other comprehensive income 114030 Margin loans receivable 114040 Refinancing margin 114050 Refinancing collateral receivable 114130 Accounts receivable 119000 Other current assets Total current assets Non-current Assets： 123200 Non-current financial assets at fair value through other comprehensive income 123300 Non-current financial assets at amortized cost 125000 Property and equipment, net 125800 Right-of-use assets, net 127000 Intangible assets 129000 Other non-current assets Total non-current assets Total assets		September 30, 2020 Amount ％ 305,991 3 2,135,711 21 3,743 - 4,159 - 249,357 3 947,778 9 3,646,739 36 6,231,756 61 328,769 3 10,984 - - - 7,009 - 29,018 - 6,607,536 64 $ 10,254,275 100	December 31, 2019 Amount ％ 1,304,312 11 2,207,911 18 5,312 - 5,776 - 415,208 3 12,513 - 3,951,032 32 8,098,184 65 328,705 3 6,007 - 331 - 2,736 - 30,764 - 8,466,727 68 12,417,759 100	September 30, 2019
				Amount ％ 1,606,406 12 1,953,600 15 - - - - 469,715 4 14,152 - 4,043,873 31 8,395,662 66 328,693 3 5,848 - 472 - 1,881 - 31,509 - 8,764,065 69 12,807,938 100

Liabilities and equity Current Liabilities： 214010 Liabilities for bonds with attached repurchase agreements 214040 Securities financing refundable deposits 214050 Deposits payable for securities financing 214130 Accounts payable 216000 Current lease liabilities 219000 Other current liabilities Total current liabilities 229030 Guaranteed deposits received 226000 Non-current lease liabilities 229110 Inter-department accounts, credit Total non-current liabilities Total liabilities 301110 Assigned working capital 304020 Special reserve 304040 Unappropriated retained earnings 305290 Other equity, other Total equity Total liabilities and equity	September 30, 2020 Amount % $ 1,858,997 17 82,863 1 90,159 1 182,763 2 125 - 975,454 10 3,190,361 31 20 - - - 4,296,336 42 4,296,356 42 7,486,717 73 2,200,000 21 185,127 2 208,626 2 173,805 2 2,767,558 27 $ 10,254,275 100	December 31, 2019		September 30, 2019
		Amount % 868,581 7 101,709 1 110,417 1 320,480 3 271 - 43,506 - 1,444,964 12 20 - 67 - 8,402,678 68 8,402,765 68 9,847,729 80 2,200,000 18 185,127 1 103,319 1 81,584 - 2,570,030 20 12,417,759 100		Amount % 867,665 6 87,693 1 95,661 1 378,288 3 345 - 35,753 - 1,465,405 11 20 - 135 - 8,806,804 69 8,806,959 69 10,272,364 80 2,200,000 17 185,127 1 72,756 1 77,691 1 2,535,574 20 12,807,938 100

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(English Translation of Financial Statements Originally Issued in Chinese.) Reviewed only, not audited in accordance with generally accepted auditing standards.

TAIWAN BUSINESS BANK, LTD.

Statements of Comprehensive Income of Security Division

For the three and nine months ended September 30, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars)

For the three months e 2020 Amount ％ Revenues： 401000 Brokerage handling fee revenue $ 115,410 67 401110 Handling fees from securities financing 343 - 410000 Gains on sale of operating securities - - 421200 Interest revenue 40,223 24 421750 Realized gains on financial assets measured at fair value through other comprehensive income - bonds 13,666 8 424100 Future commission revenue 1,353 1 425300 Impairment loss (impairment gain and reversal of impairment loss) 617 - 428000 Other operating income 156 - 171,768 100 Expenses： 501000 Brokerage handling fee expenses 7,556 4 503000 Refinancing processing fee expenses 43 - 521200 Financial costs 760 1 528000 Other operating expenditure 231 - 530000 Operating expenses 72,690 42 602000 Other (gains) and losses 159 - 81,439 47 Net income 90,329 53 805000 Other comprehensive income： 805615 Unrealized gains from investment in debt instruments measured at fair value through other comprehensive income 4,523 3 805699 Add: Income tax related to components of other comprehensive income - - 805000 Other comprehensive income (net amount after tax) 4,523 3 Total comprehensive income $ 94,852 56	For the three months e	nded September 30,		For the nine months e	nded September 30,
		2019		2020 Amount ％ 281,655 64 877 - - - 123,501 28 25,785 6 4,122 1 1,524 1 241 - 437,705 100 18,054 4 161 - 2,733 1 716 - 202,803 46 4,612 1 229,079 52 208,626 48 92,221 21 - - 92,221 21 300,847 69	2019
					Amount ％ 161,414 53 679 - 567 - 138,493 45 736 - 3,994 1 921 1 215 - 307,019 100 10,521 3 55 - 4,339 1 837 - 177,209 58 41,302 14 234,263 76 72,756 24 24,913 8 - - 24,913 8 97,669 32

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AI assistant

TBB — Interim / Quarterly Report 2020

52201_rns_2020-12-31_dd4d6f3b-fda7-4beb-add4-73b9bf710083.pdf

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES

Consolidated Financial Statements

Table of Contents

Independent Auditors’ Review Report

Introduction

Scope of Review

Conclusion

KPMG

Notes to Readers

(English Translation of Consolidated Financial Statements Originally Issued in Chinese.) Reviewed only, not audited in accordance with generally accepted auditing standards as of September 30, 2020 and 2019

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES

Consolidated Balance Sheets

September 30, 2020, December 31, and September 30, 2019

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

For the three and nine months ended September 30, 2020 and 2019

(English Translation of Consolidated Financial Statements Originally Issued in Chinese.) Reviewed only, not audited in accordance with generally accepted auditing standards.

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES

Consolidated Statements of Changes in Equity

For the nine months ended September 30, 2020 and 2019

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the nine months ended September 30, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars)

1. Company history

2. Approval date and procedures of the consolidated financial statements

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

3. New standards, amendments and interpretations adopted

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

4. Summary of significant accounting policies

(A) Statement of compliance

(B) Basis of preparation

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

(C) Basis of consolidation

(a) Subsidiary

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

(D) Foreign currency

(b) Foreign operations

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

(E) Cash and cash equivalents

(F) Financial Instruments

(a) Financial assets

(1) Investment in debt instruments measured at amortized cost

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

(b) Financial liabilities

(e) Financial instruments offsetting

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

(G) Impairment loss on non-financial assets

(H) Property and Equipment

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

(I) Lease

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

(b) As a lessee

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

(c) As a lessor

(J) Deferred assets

(K) Collaterals

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

(L) Provisions

(M) Employee benefit

(a) Short term employee benefit

(b) Retirement benefit

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

(c) Deposits with favorable rate

(d) Termination benefits

(N) Income tax

(O) Revenue recognition

(P) Earnings per share (EPS)

(Q) Operating segments

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONT'D)

5. Significant accounting assumptions and judgments, and major sources of estimation uncertainty

(A) Impairment losses on loans

(B) Retirement benefit

6. Explanation of significant accounts

TBB Interim / Quarterly Report 2020