T.C.C.B. — Audit Report / Information 2020

Dec 30, 2020

Taichung Commercial Bank Co., Ltd. and Subsidiaries

Consolidated Financial Statements for the Years Ended December 31, 2020 and 2019 and Independent Auditors’ Report

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders Taichung Commercial Bank Co., Ltd.

Opinion

We have audited the accompanying consolidated financial statements of Taichung Commercial Bank Co., Ltd. (the “Bank”) and its subsidiaries (collectively referred to as the “Group”), which comprise the consolidated balance sheets as of December 31, 2020 and 2019, and the consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended, and the notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2020 and 2019, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Public Banks, Regulations Governing the Preparation of Financial Reports by Securities Firms, and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued into by the Financial Supervisory Commission (FSC) of the Republic of China.

Basis for Opinion

We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with The Norm of Professional Ethics for Certified Public Accountant of the Republic of China, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements for the year ended December 31, 2020. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

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The following were the descriptions of the key audit matters in the audit of the consolidated financial statements of the Group for the year ended December 31, 2020:

Expected Credit Losses of Notes Discounted and Loans, Net

As described in Notes 13 and 32 to the consolidated financial statements, notes discounted and loans amounted to $456,541,322 thousand which accounted for 62% of total assets at December 31, 2020 and the expected credit losses of the notes discounted and loans amounted to $298,742 thousand which accounted for 3% of total net revenue for the year ended December 31, 2020. Due to the large amount, such accounts have a significant effect on the consolidated financial statements of the Group. In addition, the measurement of expected credit losses of notes discounted and loans involved various financial factors, such as probability of default and loss given default, which required compliance with relevant laws and regulations. Therefore, the expected credit loss of notes discounted and loans was identified as a key audit matter.

The relevant accounting policies, estimates, assumptions and other information are referred to in Notes 4, 5, 13 and 32 to the consolidated financial statements.

The main audit procedures performed for the expected credit losses of notes discounted and loans were as follows:

• We understood and tested the internal controls for the expected credit losses of notes discounted and loans of the Group.

• We selected samples from schedule of expected credit losses of notes discounted and loans assessed by the Group, and evaluated the value of collateral and feasibility of the expected credit losses.

• We understood and tested the key parameters (such as probability of default and loss given default) for the expected credit losses of notes discounted and loans assessed by the Group to evaluate the reasonableness of expected credit losses in accordance with the current experience and economic situation in the Republic of China.

• We checked the Group’s compliance with relevant regulations issued by authorities on assessment of the expected credit losses.

Other Matter

We have also audited the parent company only financial statements of the Bank as of and for the years ended December 31, 2020 and 2019 on which we have issued an unmodified opinion.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

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 Banks, Regulations Governing the Preparation of Financial Reports by Securities Firms, and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), SIC Interpretations (SIC) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

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In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance, including the audit committee, are responsible for overseeing the Group’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the auditing standards generally accepted in the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with the auditing standards generally accepted in the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

1. Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

2. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.

3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

4. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Group to cease to continue as a going concern.

5. Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

6. Obtain sufficient and appropriate audit evidence regarding the financial information of entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision, and performance of the group audit. We remain solely responsible for our audit opinion.

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We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements for the year ended December 31, 2020 and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partners on the audits resulting in this independent auditors’ report are Wen-Yea Shyu and Kwan-Chung Lai.

Deloitte & Touche Taipei, Taiwan Republic of China February 25, 2021

Notice to Readers

The accompanying consolidated financial statements are intended only to present the consolidated financial position, financial performance and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit such consolidated financial statements are those generally applied in the Republic of China.

For the convenience of readers, the independent auditors’ report and the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language independent auditors’ report and consolidated financial statements shall prevail.

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TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2020 AND 2019

(In Thousands of New Taiwan Dollars)

ASSETS CASH AND CASH EQUIVALENTS (Notes 4 and 6) DUE FROM THE CENTRAL BANK AND CALL LOANS TO OTHER BANKS (Notes 4, 7 and 37) FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (Notes 4 and 8) FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME (Notes 4 and 9) INVESTMENTS IN DEBT INSTRUMENTS AT AMORTIZED COST (Notes 4, 10 and 37) SECURITIES PURCHASED UNDER RESALE AGREEMENTS (Notes 4 and 11) RECEIVABLES, NET (Notes 4, 12 and 37) CURRENT TAX ASSETS (Notes 4 and 33) NOTES DISCOUNTED AND LOANS, NET (Notes 4, 13 and 36) INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD, NET (Notes 4 and 14) RESTRICTED ASSETS, NET (Notes 4, 15 and 37) OTHER FINANCIAL ASSETS, NET (Notes 4 and 16) PROPERTIES AND EQUIPMENT, NET (Notes 4 and 17) RIGHT-OF-USE ASSETS, NET (Notes 4 and 18) INVESTMENT PROPERTIES, NET (Notes 4 and 19) INTANGIBLE ASSETS, NET (Notes 4 and 20) DEFERRED TAX ASSETS (Notes 4 and 33) OTHER ASSETS (Notes 4, 21 and 37) TOTAL LIABILITIES AND EQUITY DUE TO THE CENTRAL BANK AND OTHER BANKS (Note 22) FUNDS BORROWED FROM CENTRAL BANK AND OTHER BANKS (Notes 23 and 37) FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS (Notes 4 and 8) SECURITIES SOLD UNDER REPURCHASE AGREEMENTS (Notes 4 and 24) PAYABLES (Notes 4, 25 and 36) CURRENT TAX LIABILITIES (Notes 4 and 33) DEPOSITS AND REMITTANCES (Notes 26 and 36) BANK DEBENTURES (Notes 27 and 36) OTHER FINANCIAL LIABILITIES (Note 28) PROVISIONS (Notes 4 and 29) LEASE LIABILITIES (Notes 4 and 18) DEFERRED TAX LIABILITIES (Notes 4 and 33) OTHER LIABILITIES (Note 30) Total liabilities EQUITY ATTRIBUTABLE TO OWNERS OF THE BANK (Note 31) Ordinary shares Capital surplus Retained earnings Legal reserve Special reserve Unappropriated earnings Other equity Total equity attributable to owners of the Bank Total equity TOTAL		2020 Amount % $ 11,709,619 2 40,371,218 5 30,867,825 4 41,009,840 6 112,624,454 15 12,773,121 2 13,483,664 2 3,279 - 456,541,322 62 163,148 - 439,283 - 2,246 - 12,332,669 2 978,218 - 18,014 - 213,470 - 795,104 - 2,443,527 - $ 736,770,021 100 $ 7,037,338 1 8,510,652 1 785,819 - 2,300,077 - 7,349,384 1 162,112 - 636,589,468 87 11,500,000 2 1,695,813 - 1,424,492 - 1,006,781 - 111,021 - 975,311 - 679,448,268 92 41,516,943 6 803,606 - 9,469,859 1 150,243 - 4,077,345 1 1,303,757 - 57,321,753 8 57,321,753 8 $ 736,770,021 100		2019
				Amount % $ 11,359,548 2 33,876,974 5 24,375,536 4 31,599,331 5 108,124,373 16 10,256,716 1 12,819,623 2 3,279 - 435,398,334 64 156,788 - 419,393 - 2,246 - 10,683,621 1 880,406 - 18,103 - 153,125 - 807,040 - 1,754,486 - $ 682,688,922 100 $ 6,527,060 1 6,092,040 1 233,803 - 10,369,025 2 5,988,117 1 385,113 - 583,321,957 85 14,000,000 2 1,174,083 - 1,383,470 - 895,285 - 111,021 - 898,742 - 631,379,716 92 37,088,349 6 726,981 - 8,188,237 1 150,243 - 4,302,204 1 853,192 - 51,309,206 8 51,309,206 8 $ 682,688,922 100

The accompanying notes are an integral part of the consolidated financial statements.

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TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

INTEREST REVENUE (Notes 4, 32 and 36) INTEREST EXPENSE (Notes 32 and 36) NET INTEREST NET INCOME AND LOSS OTHER THAN INTEREST Service fee income, net (Notes 4, 32 and 36) (Losses) gains on financial assets and liabilities at fair value through profit or loss (Note 32) Realized gains on financial assets at fair value through other comprehensive income (Notes 4 and 32) Foreign exchange gains, net (Note 4) Reversal of (impairment losses) on assets (Notes 4, 9, 10 and 32) Share of loss of associates for using the equity method (Notes 4 and 14) Other non-interest gains, net (Notes 4, 29 and 32) TOTAL NET REVENUE BAD-DEBT EXPENSES AND PROVISION FOR LOSSES ON COMMITMENTS AND GUARANTEES (Notes 4, 12, 13, 29 and 32)		2020 Amount % $ 12,129,429 104 (3,850,336) (33) 8,279,093 71 2,905,903 25 (26,390) - 171,098 1 311,605 3 (8,068) - (3,294) - 13,795 - 11,643,742 100 (519,032) (4)		2019 Amount % $ 13,433,777 111 (5,083,247) (42) 8,350,530 69 2,913,315 24 463,584 4 51,834 - 238,528 2 6,451 - (3,002) - 74,388 1 12,095,628 100 (615,474) (5)	Percentage Increase (Decrease)
					% (10) (24) (1) - (106) 230 31 (225) 10 (81) (4) (16) (Continued)

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TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

OPERATING EXPENSES Employee benefits expenses (Notes 4, 29 and 32) Depreciation and amortization expenses (Notes 4 and 32) Other selling and administrative expenses (Notes 32 and 36) Total operating expenses PROFIT BEFORE INCOME TAX FROM CONTINUING OPERATIONS INCOME TAX EXPENSE (Notes 4 and 33) NET PROFIT FOR THE YEAR OTHER COMPREHENSIVE INCOME Items that will not be reclassified subsequently to profit or loss: Remeasurement of defined benefit plans (Notes 4 and 29) Unrealized gains on investments in equity instruments at fair value through other comprehensive income (Note 4) Share of the other comprehensive income of associates accounted for using the equity method Income tax relating to items that will not be reclassified subsequently to profit or loss (Notes 4 and 33) Items that will not be reclassified subsequently to profit or loss, net of income tax		2020 Amount % $ (3,970,323) (34) (490,795) (4) (1,905,162) (17) (6,366,280) (55) 4,758,430 41 (732,897) (7) 4,025,533 34 (34,806) - 230,633 2 9,654 - 819 - 206,300 2		2019 Amount % $ (3,833,009) (32) (480,979) (4) (1,959,181) (16) (6,273,169) (52) 5,206,985 43 (887,102) (7) 4,319,883 36 (147,657) (1) 293,320 2 6,367 - 11,805 - 163,835 1	Percentage Increase (Decrease)
					% 4 2 (3) 1 (9) (17) (7) (76) (21) 52 (93) 26 (Continued)

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TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

Items that may be reclassified subsequently to profit or loss: Exchange differences on the translation of financial statements of foreign operations (Note 4) Unrealized gain on investments in debt instruments designated as at fair value through other comprehensive income Income tax relating to items that may be reclassified subsequently to profit or (loss) (Notes 4 and 33) Items that may be reclassified subsequently to profit or (loss), net of income tax Other comprehensive income for the year, net of income tax TOTAL COMPREHENSIVE INCOME FOR THE YEAR EARNINGS PER SHARE (Note 34) Basic Diluted		2020 Amount % $ (24,794) - 264,206 2 3,151 - 242,563 2 448,863 4 $ 4,474,396 38 $ 1.03 $ 1.03		2019 Amount % $ (57,989) - 50,117 - (3,151) - (11,023) - 152,812 1 $ 4,472,695 37 $ 1.11 $ 1.11	Percentage Increase (Decrease)
					% (57) 427 200 2,301 194 -

The accompanying notes are an integral part of the consolidated financial statements.

(Concluded)

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TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (In Thousands of New Taiwan Dollars)

BALANCE AT JANUARY 1, 2019 Appropriation of 2018 earnings Legal reserve Special reserve Cash dividends Share dividends Net profit for the year ended December 31, 2019 Other comprehensive (loss) income for the year ended December 31, 2019, net of income tax Total comprehensive income (loss) for the year ended December 31, 2019 Disposals of investments in equity instruments designated as at fair value through other comprehensive income BALANCE AT DECEMBER 31, 2019 Appropriation of 2019 earnings Legal reserve Cash dividends Share dividends Net profit for the year ended December 31, 2020 Other comprehensive (loss) income for the year ended December 31, 2020, net of income tax Total comprehensive income (loss) for the year ended December 31, 2020 Issuance of ordinary shares for cash (Note 31) Issuance of ordinary shares under employee share options (Note 35) Disposals of investments in equity instruments designated as at fair value through other comprehensive income BALANCE AT DECEMBER 31, 2020		Equity Attributable to Owners of the Bank	Other Equity Exchange Differences on Translation of Financial Statements of Unrealized Gains (Losses) on Financial Assets at Fair Value Through Other Foreign Comprehensive Operations Income $ (38,327) $ 690,897 - - - - - - - - - - (57,989) 328,690 (57,989) 328,690 - (70,079) (96,316) 949,508 - - - - - - - - (24,794) 501,418 (24,794) 501,418 - - - - - (26,059) $ (121,110) $ 1,424,867	Total Equity $ 47,823,653 - - (987,142) - 4,319,883 152,812 4,472,695 - 51,309,206 - (1,038,474) - 4,025,533 448,863 4,474,396 2,550,000 26,625 - $ 57,321,753
	Capital Stock Ordinary Shares Capital Surplus $ 35,255,084 $ 726,981 - - - - - - 1,833,265 - - - - - - - - - 37,088,349 726,981 - - - - 1,928,594 - - - - - - - 2,500,000 50,000 - 26,625 - - $ 41,516,943 $ 803,606	Retained Earnings Unappropriated Legal Reserve Special Reserve Earnings $ 6,985,726 $ 110,159 $ 4,093,133 1,202,511 - (1,202,511) - 40,084 (40,084) - - (987,142) - - (1,833,265) - - 4,319,883 - - (117,889) - - 4,201,994 - - 70,079 8,188,237 150,243 4,302,204 1,281,622 - (1,281,622) - - (1,038,474) - - (1,928,594) - - 4,025,533 - - (27,761) - - 3,997,772 - - - - - - - - 26,059 $ 9,469,859 $ 150,243 $ 4,077,345

The accompanying notes are an integral part of the consolidated financial statements.

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TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax Adjustments for: Depreciation expense Amortization expense Provision for bad debts expense, commitments and guarantees liabilities Loss (gain) on financial assets and liabilities at fair value through profit or loss (Gain) loss on disposal of properties and equipment Interest expense Interest revenue Dividend income Net changes in provision for gains (losses) on others Compensation cost of employee share options Share of loss of associates Gains on disposal of investments in debt instruments at fair value through other comprehensive income (Reversal of) impairment losses on financial assets Unrealized loss on foreign currency exchange Gain on lease suspension Total adjustment Net changes in operating assets and liabilities Due from the Central Bank and call loans to other banks Financial assets at fair value through profit or loss Receivables Notes discounted and loans Other financial assets Other assets Due to the Central Bank and other banks Financial liabilities at fair value through profit or loss Securities sold under repurchase agreements Payables Deposits and remittances Other financial liabilities Provision for employee benefits Other liabilities Changes in operating assets and liabilities Cash generated from operations Interest received Dividends received Interest paid Income tax paid Net cash generated from operating activities	2020 $ 4,758,430 432,361 58,434 519,032 26,390 (8) 3,850,336 (12,129,429) (87,920) 446 26,625 3,294 (83,178) 8,068 1,280,144 (1,184) (6,096,589) (1,452,847) (5,670,776) (977,517) (21,387,413) 740 (114,402) 510,278 (295,887) (8,068,948) 1,498,838 53,267,511 107,246 (79,296) 91,485 17,429,012 16,090,853 12,496,942 87,920 (3,974,263) (939,992) 23,761,460	2019 $ 5,206,985 429,038 51,941 615,474 (463,584) 325 5,083,247 (13,433,777) (44,228) (12,000) - 3,002 (7,606) (6,451) 531,607 (1,130) (7,254,142) 132,740 3,272,451 (214,100) 16,703,241 837 (23,899) 3,148,308 (779,460) 464,558 (6,177,109) (4,645,701) (2,127) (158,109) (42,306) 11,679,324 9,632,167 13,791,954 44,228 (5,172,785) (902,609) 17,392,955 (Continued)

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TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM INVESTING ACTIVITIES Purchase of financial assets at fair value through other comprehensive income Proceeds from disposal of financial assets at fair value through other comprehensive income Purchase of financial assets at amortized cost Proceeds from repayments of financial assets at amortized cost Payments for properties and equipment Proceeds from disposal of properties and equipment Increase in refundable deposits Payments for intangible assets Payments for investment properties Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Borrowings from Central Bank and other banks Proceeds from commercial papers issued Repayments of bank debentures (Refund of) proceeds from guarantee deposits received Repayments of principal portion of lease liabilities Cash dividends distributed Proceeds from issuance of ordinary shares Net cash generated from (used in) financing activities EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH AND CASH EQUIVALENTS HELD IN FOREIGN CURRENCIES NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR	2020 $ (15,491,073) 6,502,875 (793,961,984) 787,997,560 (1,871,092) 779 (526,986) (105,285) - (17,455,206) 2,418,612 414,484 (2,500,000) (14,916) (203,293) (1,038,474) 2,550,000 1,626,413 (24,794) 7,907,873 38,341,346 $ 46,249,219	2019 $ (7,224,112) 4,817,690 (753,231,971) 744,915,247 (1,443,289) 1,691 (25,894) (41,350) (15,000) (12,246,988) 596,521 175,403 (6,000,000) 13,629 (198,107) (987,142) - (6,399,696) (57,989) (1,311,718) 39,653,064 $ 38,341,346 (Continued)

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TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (In Thousands of New Taiwan Dollars)

RECONCILIATIONS OF THE AMOUNTS IN THE CONSOLIDATED STATEMENTS OF CASH FLOWS WITH THE EQUIVALENT ITEMS REPORTED IN THE CONSOLIDATED BALANCE SHEETS AT DECEMBER 31, 2020 AND 2019 Cash and cash equivalents in the consolidated balance sheets Due from the central bank and call loans to other banks in accordance with cash and cash equivalents under IAS 7 “Statement of Cash Flows” Securities purchased under resale agreements in accordance with cash and cash equivalents under IAS 7 “Statement of Cash Flows” Cash and cash equivalents at the end of the year		**December 31 **	**December 31 **
		2020 $ 11,709,619 21,766,479 12,773,121 $ 46,249,219	2019 $ 11,359,548 16,725,082 10,256,716 $ 38,341,346

The accompanying notes are an integral part of the consolidated financial statements. (Concluded)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

1. GENERAL INFORMATION

Taichung Commercial Bank Co., Ltd. (the “Bank”), formerly known as Taichung District Association Saving Co., Ltd. (Taichung District Association) was established on September 27, 1952 by the Taiwan Provincial Government. It was incorporated in April 1953 and started operation in August of the same year. In July of 1975, the Banking Law was revised and implemented. On January 1, 1978, the Taichung District Association Saving Co., Ltd. (Taichung District Association) was restructured into Taichung SME Bank Co., Ltd. (Taichung SME Bank) and its shares were listed on May 15, 1984.

In line with the national financial policy to provide public and social financial services and support the economic construction as well as the development of industrial and commercial, Taichung SME Bank was renamed as Taichung Commercial Bank Co., Ltd. in December 1998. As of December 31, 2020, the Bank had a business department, a trust department, a foreign exchange transaction department, 81 domestic branches, a Malaysia Labuan branch and an offshore banking unit (OBU). The operations of the Bank consist of planning, managing, operating a trust business and overseas financial business. These operations are regulated under the Bank Law of the Republic of China (“ROC”).

At the time of the establishment, the amount of capital invested by the Bank was $500 thousand. In order to improve the capital structure and cooperate with the government decree, the Bank has successively applied for increase and decrease of capital. As of December 31, 2020, the Bank’s capital amount was $41,516,943 thousand.

The consolidated financial statements are presented in the Bank’s functional currency, the New Taiwan dollar.

2. APPROVAL OF FINANCIAL STATEMENTS

The consolidated financial statements were approved by the Bank’s board of directors on February 25, 2021.

3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS

• a. Initial application of the amendments to the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) (collectively, the “IFRSs”) endorsed and issued into effect by the Financial Supervisory Commission (FSC)

Except for the following, the initial application of the amendments to the IFRSs endorsed and issued into effect by the FSC did not have any material impact on the Group’s accounting policies:

1) Amendments to IFRS 3 “Definition of a Business”

The Group applies the amendments to IFRS 3 to transactions that occur on or after January 1, 2020. The amendments clarify that to be considered a business, an acquired set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. To determine whether an acquired process is substantive, different criteria apply, depending on whether there are outputs at the acquisition date. In addition, the

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amendments introduce an optional concentration test that permits a simplified assessment of whether or not an acquired set of activities and assets is a business.

• 2) Amendments to IAS 1 and IAS 8 “Definition of Material”

The Group adopted the amendments starting from January 1, 2020. The threshold of materiality that could influence users has been changed to “could reasonably be expected to influence”. Accordingly, disclosures in the consolidated financial statements do not include immaterial information that may obscure material information.

• 3) Amendment to IFRS 16 “Covid-19-related Rent Concessions”

The Group elected to apply the practical expedient provided in the amendment to IFRS 16 with respect to rent concessions negotiated with the lessor as a direct consequence of the COVID-19. The related accounting policies are stated in Note 4. Prior to the application of the amendment, the Group shall determine whether or not the abovementioned rent concessions need to be accounted for as lease modifications.

The Group applied the amendment from January 1, 2020. Because the abovementioned rent concessions affect only in 2020, retrospective application of the amendment has no impact on the retained earnings as of January 1, 2020.

• b. The IFRSs endorsed by the FSC for application starting from 2021

New IFRSs Amendments to IFRS 4 “Extension of the Temporary Exemption from Applying IFRS 9” Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 “Interest Rate Benchmark Reform - Phase 2”	Effective Date Announced by IASB
	Effective immediately upon promulgation by the IASB January 1, 2021

The initial application in 2021 of the above-listed IFRSs endorsed by the FSC is not expected to have material impact on the Group’s accounting policies.

• c. New IFRSs in issue but not yet endorsed and issued into effect by the FSC

Effective Date New IFRSs Announced by IASB (Note 1) “Annual Improvements to IFRS Standards 2018-2020” January 1, 2022 (Note 2) Amendments to IFRS 3 “Reference to the Conceptual Framework” January 1, 2022 (Note 3) Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets To be determined by IASB between an Investor and its Associate or Joint Venture” IFRS 17 “Insurance Contracts” January 1, 2023 Amendments to IFRS 17 January 1, 2023 Amendments to IAS 1 “Classification of Liabilities as Current or January 1, 2023 Non-current” Amendments to IAS 1 “Disclosure of Accounting Policies” January 1, 2023 (Note 6) Amendments to IAS 8 “Definition of Accounting Estimates” January 1, 2023 (Note 7) Amendments to IAS 16 “Property, Plant and Equipment - Proceeds January 1, 2022 (Note 4) before Intended Use” Amendments to IAS 37 “Onerous Contracts - Cost of Fulfilling a January 1, 2022 (Note 5) Contract”

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• Note 1: Unless stated otherwise, the above New IFRSs are effective for annual reporting periods beginning on or after their respective effective dates.

• Note 2: The amendments to IFRS 9 will be applied prospectively to modifications and exchanges of financial liabilities that occur on or after the annual reporting periods beginning on or after January 1, 2022. The amendments to IAS 41 “Agriculture” will be applied prospectively to the fair value measurements on or after the annual reporting periods beginning on or after January 1, 2022. The amendments to IFRS 1 “First-time Adoptions of IFRSs” will be applied retrospectively for annual reporting periods beginning on or after January 1, 2022.

• Note 3: The amendments are applicable to business combinations for which the acquisition date is on or after the beginning of the annual reporting period beginning on or after January 1, 2022.

• Note 4: The amendments are applicable to property, plant and equipment that are brought to the location and condition necessary for them to be capable of operating in the manner intended by management on or after January 1, 2021.

• Note 5: The amendments are applicable to contracts for which the entity has not yet fulfilled all its obligations on January 1, 2022.

• Note 6: The amendments will be applied prospectively for annual reporting periods beginning on or after January 1, 2023.

• Note 7: The amendments are applicable to changes in accounting estimates and changes in accounting policies that occur on or after the beginning of the annual reporting period beginning on or after January 1, 2023.

Amendments to IAS 1 “Disclosure of Accounting Policies”

The amendments specify that the Group should refer to the definition of material to determine its material accounting policy information to be disclosed. Accounting policy information is material if it can reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements. The amendments also clarify that:

• Accounting policy information that relates to immaterial transactions, other events or conditions is immaterial and need not be disclosed;

• The Group may consider the accounting policy information as material because of the nature of the related transactions, other events or conditions, even if the amounts are immaterial; and

• Not all accounting policy information relating to material transactions, other events or conditions is itself material.

The amendments also illustrate that accounting policy information is likely to be considered as material to the financial statements if that information relates to material transactions, other events or conditions and:

• 1) The Group changed its accounting policy during the reporting period and this change resulted in a material change to the information in the financial statements;

• 2) The Group chose the accounting policy from options permitted by the standards;

• 3) The accounting policy was developed in accordance with IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors” in the absence of an IFRS that specifically applies;

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• 4) The accounting policy relates to an area for which the Group is required to make significant judgements or assumptions in applying an accounting policy, and the Group discloses those judgements or assumptions; or

• 5) The accounting is complex and users of the financial statements would otherwise not understand those material transactions, other events or conditions.

Except for the above impact, as of the date the consolidated financial statements were authorized for issue, the Group is continuously assessing the possible impact that the application of other standards and interpretations will have on the Group’s financial position and financial performance and will disclose the relevant impact when the assessment is completed.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

• a. Statement of compliance

The consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Public Banks, Regulations Governing the Preparation of Financial Reports by Securities Firms and IFRSs as endorsed and issued into effect by the FSC.

• b. Basis of preparation

The consolidated financial statements have been prepared on the historical cost basis except for financial instruments which are measured at fair value and net defined benefit liabilities which are measured at the present value of the defined benefit obligation less the fair value of plan assets.

The fair value measurements, which are grouped into Levels 1 to 3 based on the degree to which the fair value measurement inputs are observable and based on the significance of the inputs to the fair value measurement in its entirety, are described as follows:

• 1) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;

• 2) Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for an asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and

• 3) Level 3 inputs are unobservable inputs for an asset or liability.

• c. Classification of current and non-current assets and liabilities

Accounts included in the Group’s consolidated financial statements are not classified as current or non-current but are stated in the order of their liquidity. Refer to Note 40 for the maturity analysis of assets and liabilities.

• d. Basis of consolidation

• 1) Principles for preparing consolidated financial statements

The consolidated financial statements incorporate the financial statements of the Bank and the entities controlled by the Bank (i.e. its subsidiaries).

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the Group.

All intra-group transactions, balances, income and expenses are eliminated in full upon consolidation.

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• 2) Subsidiaries included in the consolidated financial statements

The subsidiaries included in the consolidated financial statements are as follows:

Main Business and Investment Company Subsidiary Products Taichung Commercial Taichung Bank Insurance Brokers Co. Insurance broker industry Bank Co., Ltd. Taichung Bank Leasing Corporation Limited Leasing business Taichung Commercial Bank Securities Co., Ltd. Securities industry Taichung Bank Leasing Corporation Limited TCCBL Co., Ltd. Financial leasing and investment business TCCBL Co., Ltd. Taichung Bank Financial Leasing (Suzhou) Co., Ltd. Financial leasing business Taichung Commercial Bank Securities Co., Ltd. Taichung Bank Venture Capital Co., Ltd. Venture capital business	Percentage of Equity Held
	December 31
	2020 2019 100 100 100 100 100 100 100 100 100 100 100 -

Note: Taichung Bank Securities Co., Ltd. was newly established by a resolution of the board of directors of Taichung Bank Securities Co on June 12, 2020. Taichung Bank Venture Capital Co., Ltd. with the reinvestment amount is $210,000 thousand.

• 3) Subsidiaries not included in the consolidated financial statements: None.

• e. Foreign currencies

In preparing the Group’s consolidated financial statements, transactions in currencies other than the Group’s functional currency (i.e. foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions.

At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Exchange differences on monetary items arising from settlement or translation are recognized in profit or loss in the period in which they arise.

Non-monetary items measured at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Exchange differences arising from the retranslation of non-monetary items are included in profit or loss for the period except for exchange differences arising from the retranslation of non-monetary items in respect of which gains and losses are recognized directly in other comprehensive income; in which cases, the exchange differences are also recognized directly in other comprehensive income.

Non-monetary item denominated in a foreign currency and measured at historical cost is stated at the reporting currency as originally translated from the foreign currency.

For the purpose of presenting consolidated financial statements, the functional currencies of the Bank and the group entities are translated into the presentation currency, the New Taiwan dollar, as follows: Assets and liabilities are translated at the exchange rates prevailing at the end of the reporting period; and income and expense items are translated at the average exchange rates for the period. The resulting currency translation differences are recognized in other comprehensive income.

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f. Cash and cash equivalents

Cash and cash equivalents include cash on hand, demand deposits, time deposits that can be readily terminated without the deduction of principal, and highly liquid investments that are readily convertible to a known amount of cash and which are subject to an insignificant risk of changes in value. For the consolidated statements of cash flows, cash and cash equivalents include cash and cash equivalents on the consolidated balance sheets, due from the Central Bank and call loans to other banks and securities purchased under resale agreements that are in conformity with the definition of cash and cash equivalents in IAS 7 “Statement of Cash Flows”, as endorsed and issued into effect by the FSC.

• g. Bonds purchased under resell/notes issued under repurchase agreements

A bond purchased under resell/a note issued under repurchase agreements is considered as a financing transaction if the risk and reward are attributed to the dealer. When a bond is purchased under a resale agreement, its purchase price is listed as “bonds purchased under resale agreements”, an asset account. For a note issued under repurchase agreement, the selling price is listed as “notes issued under repurchase agreements”, a liability account. The difference between purchase (sale) price under the agreement and actual sale (purchase) price is recorded as interest income (expense).

• h. Investments in associates

An associate is an entity over which the Group has significant influence and which is neither a subsidiary nor an interest in a joint venture.

The Group uses the equity method to account for its investments in associates.

Under the equity method, investments in an associate are initially recognized at cost and adjusted thereafter to recognize the Group’s share of the profit or loss and other comprehensive income of the associate. The Group also recognizes the changes in the Group’s share of the equity of associates attributable to the Group.

The entire carrying amount of an investment is tested for impairment as a single asset by comparing its recoverable amount with its carrying amount. Any impairment loss recognized is not allocated to any asset, including goodwill that forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized to the extent that the recoverable amount of the investment subsequently increases.

When an entity in the Group transacts with its associate, profits and losses resulting from the transactions with the associate are recognized in the Group’s consolidated financial statements only to the extent that interests in the associate are not related to the Group.

• i. Property and equipment

Property and equipment are measured at cost less accumulated depreciation and accumulated impairment loss.

Depreciation of property and equipment is recognized using the straight-line method. Each significant part is depreciated separately. The estimated useful lives, residual values and depreciation methods are reviewed at the end of each reporting period, with the effects of any changes in the estimates accounted for on a prospective basis.

On derecognition of an item of property, plant and equipment, the difference between the sales proceeds and the carrying amount of the asset is recognized in profit or loss.

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j. Investment properties

Investment properties are properties held to earn rentals and/or for capital appreciation (including property under construction for such purposes). Investment properties also include land held for a currently undetermined future use.

Investment properties are initially measured at cost, including transaction costs. Subsequent to initial recognition, investment properties are measured at cost less accumulated depreciation and accumulated impairment loss. Depreciation is recognized using the straight-line method.

On derecognition of an investment property, the difference between the net disposal proceeds and the carrying amount of the asset is included in profit or loss.

k. Intangible assets

• 1) Intangible assets acquired separately

Intangible assets with finite useful lives that are acquired separately are initially measured at cost and subsequently measured at cost less accumulated amortization and accumulated impairment loss. Amortization is recognized on a straight-line basis. The estimated useful lives, residual values, and amortization methods are reviewed at the end of each reporting period, with the effect of any changes in the estimates accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are measured at cost less accumulated impairment loss.

• 2) Derecognition of intangible assets

On derecognition of an intangible asset, the difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss.

• l. Impairment of property, plant and equipment, right-of-use asset, intangible assets other than goodwill

At the end of each reporting period, the Group reviews the carrying amounts of its property, plant and equipment, right-of-use asset and intangible assets, excluding goodwill, to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to the individual cash-generating units; otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually and whenever there is an indication that the assets may be impaired.

The recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount, with the resulting impairment loss recognized in profit or loss.

When an impairment loss is subsequently reversed, the carrying amount of the corresponding asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amount that would have been determined had no impairment loss been recognized on the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized in profit or loss.

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m. Financial instruments

Financial assets and financial liabilities are recognized when the Group becomes a party to the contractual provisions of the instruments.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issuance of financial assets and financial liabilities (other than financial assets and financial liabilities at FVTPL) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at FVTPL are recognized immediately in profit or loss.

1) Financial assets

All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

a) Measurement categories

Financial assets are classified into the following categories: Financial assets at FVTPL, financial assets at amortized cost and investments in debt instruments and equity instruments at FVTOCI.

• i. Financial assets at FVTPL

Financial assets are classified as at FVTPL when such a financial asset is mandatorily classified as at FVTPL. Financial assets mandatorily classified as at FVTPL include investments in equity instruments which are not designated as at FVTOCI and debt instruments that do not meet the amortized cost criteria or the FVTOCI criteria.

Financial assets at FVTPL are subsequently measured at fair value, and any dividends, interest earned and remeasurement gains or losses on such financial assets are recognized in gains on financial assets and liabilities at fair value through profit or loss. Fair value is determined in the manner described in Note 39.

ii. Financial assets at amortized cost

Financial assets that meet the following conditions are subsequently measured at amortized cost:

• i) The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and

• ii) The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Subsequent to initial recognition, financial assets at amortized cost, including cash and cash equivalents, due from the central bank and call loans to other banks, securities purchased under resale agreements, notes discounted and loans, trade receivables at amortized cost, other financial assets and refundable deposits, are measured at amortized cost, which equals the gross carrying amount determined using the effective interest method less any impairment loss. Exchange differences are recognized in profit or loss.

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Interest income is calculated by applying the effective interest rate to the gross carrying amount of such a financial asset, except for:

• i) Purchased or originated credit-impaired financial assets, for which interest income is calculated by applying the credit-adjusted effective interest rate to the amortized cost of such financial assets; and

• ii) Financial assets that are not credit-impaired on purchase or origination but have subsequently become credit-impaired, for which interest income is calculated by applying the effective interest rate to the amortized cost of such financial assets in subsequent reporting periods.

A financial asset is credit impaired when one or more of the following events have occurred:

• i) Significant financial difficulty of the issuer or the borrower;

• ii) Breach of contract, such as a default;

• iii) It is becoming probable that the borrower will enter bankruptcy or undergo a financial reorganization; or

• iv) The disappearance of an active market for that financial asset because of financial difficulties.

• iii. Investments in debt instruments at FVTOCI

Debt instruments that meet the following conditions are subsequently measured at FVTOCI:

• i) The debt instrument is held within a business model whose objective is achieved by both the collecting of contractual cash flows and the selling of such financial assets; and

• ii) The contractual terms of the debt instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Investments in debt instruments at FVTOCI are subsequently measured at fair value. Changes in the carrying amounts of these debt instruments relating to changes in foreign currency exchange rates, interest income calculated using the effective interest method and impairment losses or reversals are recognized in profit or loss. Other changes in the carrying amount of these debt instruments are recognized in other comprehensive income and will be reclassified to profit or loss when the investment is disposed of.

• iv. Investments in equity instruments at FVTOCI

On initial recognition, the Group may make an irrevocable election to designate investments in equity instruments as at FVTOCI. Designation as at FVTOCI is not permitted if the equity investment is held for trading or if it is contingent consideration recognized by an acquirer in a business combination.

Investments in equity instruments at FVTOCI are subsequently measured at fair value with gains and losses arising from changes in fair value recognized in other comprehensive income and accumulated in other equity. The cumulative gain or loss will not be reclassified to profit or loss on disposal of the equity investments; instead, it will be transferred to retained earnings.

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Dividends on these investments in equity instruments are recognized in profit or loss when the Group’s right to receive the dividends is established, unless the dividends clearly represent a recovery of part of the cost of the investment.

b) Impairment of financial assets

The Group recognizes a loss allowance for expected credit losses on financial assets at amortized cost (including trade receivables), investments in debt instruments that are measured at FVTOCI.

The Group always recognizes lifetime expected credit losses (ECLs) for notes discounted and loans, trade receivables and lease receivables. For all other financial instruments, the Group recognizes lifetime ECLs when there has been a significant increase in credit risk since initial recognition. If, on the other hand, the credit risk on a financial instrument has not increased significantly since initial recognition, the Group measures the loss allowance for that financial instrument at an amount equal to 12-month ECLs.

Expected credit losses reflect the weighted average of credit losses with the respective risks of default occurring as the weights. Lifetime ECLs represent the expected credit losses that will result from all possible default events over the expected life of a financial instrument. In contrast, 12-month ECLs represent the portion of lifetime ECLs that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date.

For internal credit risk management purposes, the Group determines that the following situations indicate that a financial asset is in default (without taking into account any collateral held by the Group):

• i. Internal or external information show that the debtor is unlikely to pay its creditors.

• ii. When a financial asset is more than 90 days past due unless the Group has reasonable and corroborative information to support a more lagged default criterion.

According to the Regulations, the Group determines the allowance for credit losses by evaluating the recoverability of the outstanding balances of various loans at the balance sheet date. The allowances for doubtful accounts are determined based on management’s evaluation of the collectability of individual accounts, the borrowers’/clients’ financial condition and payment history. Such doubtful accounts are categorized into: Normal loans, need attention, less likely to be collectible in full, difficult to collect, and uncollectible accounts; and the allowance should be provided at 1%, 2%, 10%, 50%, and 100%, respectively, of the loan amount to meet the minimum requirement for each category. Under the rule No. 10010006830 issued by the Banking Bureau of the FSC, additional allowance for doubtful accounts should be provided at 1% of the total loans. Under the rule No. 10300329440 issued by the Banking Bureau of the FSC, allowance for doubtful accounts should be provided at 1.5% or more of the loans for real estate.

The Group recognizes an impairment gain or loss in profit or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account, except for investments in debt instruments that are measured at FVTOCI, for which the loss allowance is recognized in other comprehensive income and does not reduce the carrying amount of such a financial asset.

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• c) Derecognition of financial assets

The Group derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.

On derecognition of a financial asset at amortized cost in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss. On derecognition of an investment in a debt instrument at FVTOCI, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss which had been recognized in other comprehensive income is recognized in profit or loss. However, on derecognition of an investment in an equity instrument at FVTOCI, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss, and the cumulative gain or loss which had been recognized in other comprehensive income is transferred directly to retained earnings, without recycling through profit or loss.

2) Equity instruments

Debt and equity instruments issued by a group entity are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Equity instruments issued by a group entity are recognized at the proceeds received, net of direct issue costs.

3) Financial liabilities

• a) Subsequent measurement

Except the following situations, all financial liabilities are measured at amortized cost using the effective interest method:

• i. Financial liabilities at FVTPL

Financial liabilities are classified as at FVTPL when such financial liabilities are held for trading or designated as at FVTPL.

Financial liabilities at fair value through profit or loss are stated at fair value, and any dividends, interest earned and remeasurement gains or losses on such financial assets are recognized in gains on financial assets and liabilities at fair value through profit or loss. Fair value is determined in the manner described in Note 39.

• ii. Financial guarantee contracts

Financial guarantee contracts issued by the Group, if not designated as at FVTPL, are subsequently measured at the higher of:

• i) The amount of the loss allowance reflecting expected credit losses; and

• ii) The amount initially recognized less, where appropriate, the cumulative amount of income recognized in accordance with the revenue recognition policies.

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b) Derecognition of financial liabilities

The difference between the carrying amount of a financial liability derecognized and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss.

4) Derivative financial instruments

The Group enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign exchange rate risks, including foreign exchange forward contracts, cross-currency swap contracts, cross-currency option contracts, interest structured instrument contracts, non-deliverable forward contracts and asset swap contracts.

Derivatives are initially recognized at fair value at the date on which the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in profit or loss immediately unless the derivative is designated and effective as a hedging instrument; in which event, the timing of the recognition in profit or loss depends on the nature of the hedging relationship. When the fair value of a derivative financial instrument is positive, the derivative is recognized as a financial asset; when the fair value of a derivative financial instrument is negative, the derivative is recognized as a financial liability.

Derivatives embedded in hybrid contracts that contain financial asset hosts that is within the scope of IFRS 9 are not separated; instead, the classification is determined in accordance with the entire hybrid contract. Derivatives embedded in non-derivative host contracts that are not financial assets that is within the scope of IFRS 9 (e.g., financial liabilities) are treated as separate derivatives when they meet the definition of a derivative; their risks and characteristics are not closely related to those of the host contracts; and the host contracts are not measured at FVTPL.

n. Provisions (excluding amounts in provision for employee benefits)

Provisions are measured at the best estimate of the discounted cash flows of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation.

o. Revenue recognition

The Group identifies contracts with customers, allocates the transaction price to the performance obligations and recognizes revenue when performance obligations are satisfied.

1) Interest income

Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably.

2) Service fee and commissions income

The Group identifies contracts with customers, allocates the transaction price to the performance obligations and recognizes revenue when performance obligations are satisfied. Service fee income and expenses are recognized when loans or other services are provided. If the contract between the labor service and the collection of consideration is within one year, the major financial components of the contract will not be adjusted.

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3) Dividend income

Dividend income from investments is recognized when a shareholder’s right to receive payment has been established and provided that it is probable that the economic benefits will flow to the Group and that the amount of income can be measured reliably.

p. Leases

At the inception of a contract, the Group assesses whether the contract is, or contains, a lease.

1) The Group as lessor

Leases are classified as finance leases whenever the terms of a lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Lease payments (less any lease incentives payable) from operating leases are recognized as income on a straight-line basis over the terms of the relevant leases. Initial direct costs incurred in obtaining operating leases are added to the carrying amounts of the underlying assets and recognized as expenses on a straight-line basis over the lease terms.

When a lease includes both land and building elements, the Group assesses the classification of each element separately as a finance or an operating lease based on the assessment as to whether substantially all the risks and rewards incidental to ownership of each element have been transferred to the lessee. The lease payments are allocated between the land and the building elements in proportion to the relative fair values of the leasehold interests in the land element and building element of the lease at the inception of a contract. If the allocation of the lease payments can be made reliably, each element is accounted for separately in accordance with its lease classification. When the lease payments cannot be allocated reliably between the land and building elements, the entire lease is generally classified as a finance lease unless it is clear that both elements are operating leases; in which case, the entire lease is classified as an operating lease.

2) The Group as lessee

The Group recognizes right-of-use assets and lease liabilities for all leases at the commencement date of a lease, except for short-term leases and low-value asset leases accounted for applying a recognition exemption where lease payments are recognized as expenses on a straight-line basis over the lease terms.

Right-of-use assets are initially measured at cost, which comprises the initial measurement of lease liabilities adjusted for lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs needed to restore the underlying assets, and less any lease incentives received. Right-of-use assets are subsequently measured at cost less accumulated depreciation and impairment losses and adjusted for any remeasurement of the lease liabilities. Right-of-use assets are presented on a separate line in the Group’s consolidated financial statements.

Right-of-use assets are depreciated using the straight-line method from the commencement dates to the earlier of the end of the useful lives of the right-of-use assets or the end of the lease terms.

Lease liabilities are initially measured at the present value of the lease payments, which comprise fixed payments, in-substance fixed payments, variable lease payments which depend on an index or a rate. The lease payments are discounted using the interest rate implicit in a lease, if that rate can be readily determined. If that rate cannot be readily determined, the Group uses the lessee’s incremental borrowing rate.

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Subsequently, lease liabilities are measured at amortized cost using the effective interest method, with interest expense recognized over the lease terms. When there is a change in a lease term or a change in future lease payments resulting from a change in an index or a rate used to determine those payments, the Group remeasures the lease liabilities with a corresponding adjustment to the right-of-use-assets. However, if the carrying amount of the right-of-use assets is reduced to zero, any remaining amount of the remeasurement is recognized in profit or loss. Lease liabilities are presented on a separate line on the consolidated balance sheets.

Variable lease payments that do not depend on an index or a rate are recognized as expenses in the periods in which they are incurred.

The Group negotiates with the lessor for rent concessions as a direct consequence of the Covid-19 to change the lease payments originally due by June 30, 2021, that results in the revised consideration for the lease less than the consideration for the lease immediately preceding the change. There is no substantive change to other terms and conditions. The Group elects to apply the practical expedient to these rent concessions and, therefore, does not assess whether the rent concessions are lease modifications. Instead, the Group recognizes the reduction in lease payment in profit or loss as other non-interest gains, net in the period in which the events or conditions that trigger the concession occur, and makes a corresponding adjustment to the lease liability.

• q. Employee benefits

• 1) Short-term employee benefits

Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related services.

• 2) Retirement benefits

Payments to defined contribution retirement benefit plans are recognized as expenses when employees have rendered services entitling them to the contributions.

Defined benefit costs (including service cost, net interest and remeasurement) under defined benefit retirement benefit plans are determined using the projected unit credit method. Service cost and net interest on the net defined benefit liabilities are recognized as employee benefits expense in the period in which they occur. Remeasurement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling and the return on plan assets (excluding interest), is recognized in other comprehensive income in the period in which it occurs. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss.

Net defined benefit liabilities represent the actual deficit in the Group’s defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any refunds from the plans or reductions in future contributions to the plans.

• 3) Employee benefit - employees’ preferential deposits

The Group has granted a preferential interest rate to its current employees and retired employees for their deposits within a prescribed amount. The preferential interest rate in excess of market interest rate is considered employee benefits.

Under Article 30 of the “Regulations Governing the Preparation of Financial Reports by Public Bank”, if the Bank’s preferential deposit interest rate for an employee as stated in the employment contract exceeds the market interest rate, the excess will be subject to IAS 19 “Employee Benefits” upon the employee’s retirement. The actuarial valuation assumptions and parameters are based on the guidelines announced by authority.

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• 4) Other long-term employee benefits

Other long-term employee benefits are accounted for in the same way as the accounting required for defined benefit plans except that remeasurement is recognized in profit or loss.

r. Share-based payment arrangements

Employee share options granted to employees

The fair value at the grant date of the employee share options is expensed on a straight-line basis over the vesting period, based on the Group’s best estimates of the number of shares or options that are expected to ultimately vest, with a corresponding increase in capital surplus - employee share options. The expense is recognized in full at the grant date if the grants are vested immediately. The grant date of issued ordinary shares for cash which are reserved for employees is the date on which the board of directors approves the transaction.

At the end of each reporting period, the Group revises its estimate of the number of employee share options that are expected to vest. The impact of the revision of the original estimates is recognized in profit or loss such that the cumulative expenses reflect the revised estimate, with a corresponding adjustment to capital surplus - employee share options.

• s. Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

• 1) Current tax

Income tax payable (recoverable) is based on taxable profit (loss) for the year determined according to the applicable tax laws of each tax jurisdiction.

According to the Income Tax Law, an additional tax on unappropriated earnings is provided for as income tax in the year the shareholders approve to retain earnings.

Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.

• 2) Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities and the corresponding tax bases used in the computation of taxable profit.

Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences and unused loss carryforwards to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

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The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the assets to be recovered. A previously unrecognized deferred tax asset is also reviewed at the end of each reporting period and recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liabilities are settled or the assets are realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

3) Current and deferred taxes for the year

Current and deferred taxes are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity; in which case, the current and deferred taxes are also recognized in other comprehensive income or directly in equity, respectively.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group’s accounting policies, the Group’s management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates.

The Group considers the economic implications of the COVID-19 when making its critical accounting estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised if the revisions affect only that period or in the period of the revisions and future periods if the revisions affect both current and future periods.

Key Sources of Estimation Uncertainty

Estimated impairment of financial assets

The provision for impairment of loans, notes discounted, trade receivables, investments in debt instruments, and financial guarantee contracts is based on assumptions about risk of default and expected loss rates. The Group uses judgment in making these assumptions and in selecting the inputs to the impairment calculation, based on the Group’s historical experience, existing market conditions as well as forward looking estimates as of the end of each reporting period. For details of the key assumptions and inputs used, see Notes 39 and 40. Where the actual future cash inflows are less than expected, a material impairment loss may arise.

6. CASH AND CASH EQUIVALENTS

Cash on hand Checks for clearing Due from banks		December 31	December 31
		2020 $ 4,414,344 1,249,821 6,045,454 $ 11,709,619	2019 $ 4,553,235 1,007,649 5,798,664 $ 11,359,548

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• a. The loss allowance was measured at an amount equal to 12-month ECLs per historical experience and forward-looking information; there was no loss allowance on cash and cash equivalents as of December 31, 2020 and 2019.

• b. Reconciliations of cash and cash equivalents between the consolidated statements of cash flows and the consolidated balance sheets as of December 31, 2020 and 2019 are shown in the consolidated statements of cash flows.

• c. The amount of time deposits due from other banks as the operating deposit of Taichung Commercial Bank Securities Co., Ltd. was $200,000 thousand on December 31, 2020 and 2019, which were transferred to the refundable deposits. Refer to Note 21.

7. DUE FROM THE CENTRAL BANK AND CALL LOANS TO OTHER BANKS

Deposit reserves Deposit reserves for checking accounts Deposit reserves for demand accounts Inter-bank clearing account Deposit reserves for foreign currency deposits Call loans to banks Deposit reserves for trust compensation		**December 31 **	**December 31 **
		2020 $ 19,301,038 18,458,399 2,017,397 73,057 461,327 60,000 $ 40,371,218	2019 $ 14,879,013 16,997,138 1,512,809 60,000 368,014 60,000 $ 33,876,974

• a. The loss allowance was measured at an amount equal to 12-month ECLs per historical experience and forward-looking information; there was no loss allowance on due from the Central Bank and call loans to other banks as of December 31, 2020 and 2019.

• b. The monthly depository reserves to be deposited in the Central Bank of the Republic of China are calculated by applying the legally required reserve ratio to the monthly average balance of the reserve accounts. These reserve accounts can be used at any time but the demand accounts can only be used for monthly deposit reserve adjustments. In addition, the Group deposited reserves in the amount of $5,000,000 thousand for demand accounts on deposits paid to other securities lender project from Central Bank on December 31, 2020. Refer to Note 37.

• c. The Group deposited the reserves for trust compensation on government bonds measured at amortized cost on December 31, 2020 and 2019, with a nominal amount of $60,000 thousand. Refer to Note 37.

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8. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

Financial assets at FVTPL Commercial papers Domestic listed shares and emerging market shares Domestic unlisted shares Foreign listed shares PEM group policy assets Beneficiary certificates Corporate bonds Asset swap contracts Cross-currency swap contracts Foreign exchange forward contracts Cross-currency option contracts Non-deliverable forward contracts Interest rate-linked structured instrument Financial liabilities at FVTPL Cross-currency swap contracts Foreign exchange forward contracts Cross-currency option contracts Non-deliverable forward contracts Interest rate-linked structured instrument		December 31	December 31
		2020 $ 24,872,947 862,462 7,508 88,533 799,269 363,744 203,112 3,048,884 96,053 168,822 354,336 - 2,155 $ 30,867,825 $ 369,085 66,415 348,164 - 2,155 $ 785,819	2019 $ 20,074,138 724,544 - - 1,029,839 360,119 89,816 1,812,530 71,394 82,809 125,545 4,802 - $ 24,375,536 $ 88,092 27,168 113,590 4,953 - $ 233,803

• a. The Group engages in exchange rate related derivative financial contracts, mainly to provide customers and the Group with hedging instruments for foreign exchange positions arising from transactions such as import/export and currency exchange, to avoid the risks arising from the business and to flatten the demand for foreign exchange funds arising from non-transactional operations.

• b. The nominal principal amounts of outstanding derivative contracts as of December 31, 2020 and 2019 were as follows:

Asset swap contracts Cross-currency swap contracts Foreign exchange forward contracts Cross-currency option contracts Non-deliverable forward contracts Interest rate-linked structured instrument contracts	December 31	December 31
	2020	2019 Contract Amounts Interest Rate Range $ 1,811,600 0.90%-1.35% 3,916,766 - 5,500,507 - 12,750,872 - 183,000 - - -
	Contract Amounts Interest Rate Range $ 3,039,300 0.90%-3.50% 9,459,647 - 7,224,302 - 23,537,713 - - - 109,938 5.25%-6.20%

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9. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

Investments in equity instruments at FVTOCI Investments in debt instruments at FVTOCI		December 31	December 31
		2020 $ 3,176,107 37,833,733 $ 41,009,840	2019 $ 1,598,987 30,000,344 $ 31,599,331

a. Investments in equity instruments at FVTOCI

Domestic listed shares Domestic unlisted shares Foreign listed shares		**December 31 **	**December 31 **
		2020 $ 2,113,147 751,556 311,404 $ 3,176,107	2019 $ 651,358 664,957 282,672 $ 1,598,987

These investments in equity instruments are held for medium to long-term strategic purposes. Accordingly, the management elected to designate these investments in equity instruments as at FVTOCI as they believe that recognizing short-term fluctuations in these investments’ fair value in profit or loss would not be consistent with the Group’s strategy of holding these investments for long-term purposes.

Dividend income of $87,920 thousand and $44,228 thousand was recognized in profit or loss for the years ended December 31, 2020 and 2019, respectively. Those were related to investments held as of December 31, 2020 and 2019, respectively.

b. Investments in debt instruments at FVTOCI

Corporate bonds Government bonds Foreign bonds Bank debentures		December 31	December 31
		2020 $ 26,959,132 5,379,466 3,486,270 2,008,865 $ 37,833,733	2019 $ 21,503,613 5,997,423 799,314 1,699,994 $ 30,000,344

Foreign bonds denominated in foreign currencies were as follows:

USD CNY AUD	December 31
	2020 2019 $ 50,000 $ 26,000 445,000 - 6,000 -

• 1) The Group recognized impairment loss of $5,318 thousand and gain on reversal of impairment loss of $113 thousand in 2020 and 2019, respectively, after assessing the expected credit losses of the investments in debt instruments at FVTOCI.

• 31 -

• 2) Refer to Note 40 for information relating to their credit risk management and impairment.

10. INVESTMENTS IN DEBT INSTRUMENTS AT AMORTIZED COST

Foreign bonds Government bonds NCDs issued by the CBC Corporate bonds Credit certificate Less: Allowance for impairment loss Less: Withdrawal of reserves for trust compensation and refundable deposits		**December 31 **	**December 31 **
		2020 $ 24,794,803 12,654,717 64,970,000 11,159,474 - 113,578,994 (34,140) (920,400) $ 112,624,454	2019 $ 23,806,064 14,246,649 59,535,000 11,413,931 9,291 109,010,935 (41,662) (844,900) $ 108,124,373

• a. The foreign bonds denominated in foreign currencies were as follows:

USD CNY AUD ZAR	**December 31 **
	2020 2019 $ 661,159 $ 638,859 890,000 550,000 66,000 61,000 490,000 450,000

• b. As of December 31, 2020 and 2019, the government bonds and the foreign bonds at amortized cost amounted to $1,200,000 thousand and $1,123,960 thousand (US$40,000 thousand), $2,000,000 thousand and $8,850,000 thousand (US$295,000 thousand), respectively, which had been sold under repurchase agreements. Refer to Note 41 for information relating to their carrying amount.

• c. The Group recognized impairment loss of $2,750 thousand and gain on reversal of impairment loss of $6,338 thousand in 2020 and 2019, respectively, after assessing the expected credit losses of the investments in debt instruments at amortized cost.

• d. Refer to Note 40 for information relating to their credit risk management and impairment.

11. SECURITIES PURCHASED UNDER RESALE AGREEMENTS

Securities purchased under resale agreements in the amounts of $12,773,121 thousand and $10,256,716 thousand as of December 31, 2020 and 2019 would be subsequently resold for $12,774,072 thousand and $10,258,145 thousand, respectively, with interest rate ranging from 0.21% to 0.25% and 0.54% to 0.56%, respectively.

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12. RECEIVABLES, NET

Notes receivable Receivables on credit cards Accounts receivable factored without recourse Acceptances Interest receivables Receivables on foreign currency settlement Lease receivables Assignment receivables Receivables on securities settlement Other receivables Less: Unrealized interest income Less: Allowance for doubtful accounts		December 31	December 31
		2020 $ 4,694,417 742,251 154,805 443,447 1,049,138 1,082,521 3,461,743 991,861 1,324,586 584,053 14,528,822 (722,637) (322,521) $ 13,483,664	2019 $ 4,586,001 785,636 649,997 505,650 1,216,731 870,200 3,358,947 756,458 686,758 356,327 13,772,705 (658,785) (294,297) $ 12,819,623

• a. Movements in the total carrying amount of receivables for the years ended December 31, 2020 and 2019 were as follows:

2020

	**12-month ECLs **	**12-month ECLs **		Lifetime ECL	Credit- impaired Financial Assets	Credit- impaired Financial Assets		Total
Balance at January 1, 2020 Transfers to lifetime ECL Transfers to credit-impaired financial assets Transfers to 12-month ECLs New receivables purchased or originated Write-offs Derecognition Foreign exchange differences and other changes Balance at December 31,2020		$ 62,904,165 (168,938) (60,834) 8,573 17,811,257 - (7,174,494) 111,100 $ 73,430,829		$ 557,317 169,381 (135,950) (8,352) 27,469 (430) (237,307) (692) $ 371,436		$ 315,071 (443) 196,784 (221) 35,974 (133,345) (128,195) 27,793 $ 313,418		$ 63,776,553 - - - 17,874,700 (133,775) (7,539,996) 138,201 $ 74,115,683

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2019

	**12-month ECLs **	**12-month ECLs **		Lifetime ECL	Credit- impaired Financial Assets	Credit- impaired Financial Assets		Total
Balance at January 1, 2019 Transfers to lifetime ECL Transfers to credit-impaired financial assets Transfers to 12-month ECLs New receivables purchased or originated Write-offs Derecognition Foreign exchange differences and other changes Balance at December 31,2019		$ 59,094,832 (477,280) (73,185) 22,944 11,259,104 - (6,473,610) (448,640) $ 62,904,165		$ 226,460 483,005 (35,874) (9,661) 6,425 (20,242) (95,016) 2,220 $ 557,317		$ 314,656 (5,725) 109,059 (13,283) 133,797 (175,884) (71,408) 23,859 $ 315,071		$ 59,635,948 - - - 11,399,326 (196,126) (6,640,033) (422,561) $ 63,776,553

The abovementioned carrying amounts of receivables include due from the banks, due from the Central Bank and call loans to other banks, securities purchased under resale agreements, notes receivable, receivables on credit cards, accounts receivable factored without recourse, acceptances, interest receivables, lease receivables, assignment receivables, receivables on sale of securities, receivables on securities settlement, other receivables, other financial assets, net (including delinquent receivables not arising from loans) and refundable deposits.

• b. Movements in the allowance for doubtful accounts of receivables for the years ended December 31, 2020 and 2019 were as follows:

2020

		12-month ECLs	Lifetime ECL	Lifetime ECL		Credit- impaired Financial Assets	Impairment Loss Assessed under IFRS 9	Impairment Loss Assessed under IFRS 9	Difference of Impairment Loss under Regulations	Difference of Impairment Loss under Regulations		Total
Balance at January 1, 2020 Reconciliation arising from financial instruments recognized at the beginning of the year: Transfers to lifetime ECL Transfers to credit-impaired financial assets Transfers to 12-month ECLs Derecognition of financial assets in current period New financial assets purchased or originated Difference of impairment loss under regulations Write-offs Recovery of written-offs Foreign exchange differences and other changes Balance at December 31,2020		$ 95,880 (1,842) (505) 1,290 (65,036) 71,065 - - - (9,540) $ 91,312		$ 11,625 2,120 (2,511) (1,115) (4,856) 1,947 - (430) - 2,419 $ 9,199		$ 165,224 (278) 3,016 (175) (38,360) 17,365 - (47,750) - 75,269 $ 174,311		$ 272,729 - - - (108,252) 90,377 - (48,180) - 68,148 $ 274,822		$ 23,828 - - - - - 94,872 (85,595) 16,115 - $ 49,220		$ 296,557 - - - (108,252) 90,377 94,872 (133,775) 16,115 68,148 $ 324,042

• 34 -

2019

		12-month ECLs	Lifetime ECL	Lifetime ECL		Credit- impaired Financial Assets	Impairment Loss Assessed under IFRS 9	Impairment Loss Assessed under IFRS 9	Difference of Impairment Loss under Regulations	Difference of Impairment Loss under Regulations		Total
Balance at January 1, 2019 Reconciliation arising from financial instruments recognized at the beginning of the year: Transfers to lifetime ECL Transfers to credit-impaired financial assets Transfers to 12-month ECLs Derecognition of financial assets in current period New financial assets purchased or originated Difference of impairment loss under regulations Write-offs Recovery of written-offs Foreign exchange differences and other changes Balance at December 31,2019		$ 87,567 (6,905) (641) 6,542 (71,437) 84,315 - - - (3,561) $ 95,880		$ 5,695 7,332 (819) (1,335) (2,039) 776 - (20,242) - 22,257 $ 11,625		$ 151,315 (427) 1,460 (5,207) 2,892 80,009 - (117,213) - 52,395 $ 165,224		$ 244,577 - - - (70,584) 165,100 - (137,455) - 71,091 $ 272,729		$ 57,500 - - - - - 8,507 (58,671) 16,492 - $ 23,828		$ 302,077 - - - (70,584) 165,100 8,507 (196,126) 16,492 71,091 $ 296,557

The allowance for doubtful accounts of the abovementioned receivables includes allowances for delinquent receivables not arising from loans, refer to Note 16.

c. Refer to Note 37 for information relating to notes receivable as a guarantee for interbank financing.

13. NOTES DISCOUNTED AND LOANS, NET

Bills negotiated Overdrafts Secured overdrafts Accounts receivable financing Securities margin loans receivables Short-term unsecured loans Short-term secured loans Medium-term unsecured loans Medium-term secured loans Long-term unsecured loans Long-term secured loans Delinquent loans Add: Adjustment of premium or discount Less: Allowance for doubtful accounts		December 31	December 31
		2020 $ 293,388 1,310 30,988 51,149 1,099,366 39,175,727 101,315,539 54,480,676 110,808,195 6,842,847 147,939,346 814,242 462,852,773 23,940 (6,335,391) $ 456,541,322	2019 $ 393,291 1,404 38,166 51,595 929,368 39,586,875 100,653,393 49,151,361 103,127,599 5,210,470 141,838,997 963,045 441,945,564 26,487 (6,573,717) $ 435,398,334

• 35 -

• a. As of December 31, 2020 and 2019, the delinquent loans on which interest ceased to accrue amounted to $805,311 thousand and $949,601 thousand, respectively. The unrecognized interest revenues on these loans were $18,132 thousand and $22,534 thousand for the years ended December 31, 2020 and 2019, respectively.

• b. There was no credit loan written off without a lawsuit for the years ended December 31, 2020 and 2019.

• c. Movements in the total carrying amount of notes discounted and loans for the years ended December 31, 2020 and 2019 were as follows:

2020

	**12-month ECLs **	**12-month ECLs **		Lifetime ECL	Credit- impaired Financial Assets	Credit- impaired Financial Assets		Total
Balance at January 1, 2020 Transfers to lifetime ECL Transfers to credit-impaired financial assets Transfers to 12-month ECLs New notes discounted and loans purchased or originated Write-offs Derecognition Foreign exchange differences and other changes Balance at December 31,2020		$ 415,543,744 (6,082,112) (691,922) 3,710,454 242,052,505 (86,432) (200,050,154) (14,787,455) $ 439,608,628		$ 16,873,865 6,325,653 (1,670,809) (3,688,229) 2,407,137 (119,711) (5,008,302) (262,136) $ 14,857,468		$ 9,554,442 (243,541) 2,362,731 (22,225) 412,670 (882,681) (2,839,452) 68,673 $ 8,410,617		$ 441,972,051 - - - 244,872,312 (1,088,824) (207,897,908) (14,980,918) $ 462,876,713

2019

	**12-month ECLs **	**12-month ECLs **		Lifetime ECL	Credit- impaired Financial Assets	Credit- impaired Financial Assets		Total
Balance at January 1, 2019 Transfers to lifetime ECL Transfers to credit-impaired financial assets Transfers to 12-month ECLs New notes discounted and loans purchased or originated Write-offs Derecognition Foreign exchange differences and other changes Balance at December 31,2019		$ 435,868,501 (7,768,850) (3,018,334) 2,487,600 217,508,394 (41,246) (210,078,061) (19,414,260) $ 415,543,744		$ 15,341,731 7,849,116 (1,694,994) (2,417,603) 2,752,410 (366,663) (4,281,192) (308,940) $ 16,873,865		$ 7,916,421 (80,266) 4,713,328 (69,997) 593,167 (927,477) (2,954,801) 364,067 $ 9,554,442		$ 459,126,653 - - - 220,853,971 (1,335,386) (217,314,054) (19,359,133) $ 441,972,051

• 36 -

• d. Movements in the allowance for doubtful accounts of notes discounted and loans for the years ended December 31, 2020 and 2019 were as follows:

2020

		12-month ECLs	Lifetime ECL	Lifetime ECL		Credit- impaired Financial Assets	Impairment Loss Assessed under IFRS 9	Impairment Loss Assessed under IFRS 9	Difference of Impairment Loss under Regulations	Difference of Impairment Loss under Regulations		Total
Balance at January 1, 2020 Reconciliation arising from financial instruments recognized at the beginning of the year: Transfers to lifetime ECL Transfers to credit-impaired financial assets Transfers to 12-month ECLs Derecognition of financial assets in current period New financial assets purchased or originated Difference of impairment loss under regulations Write-offs Recovery of written-offs Foreign exchange differences and other changes Balance at December 31,2020		$ 1,776,628 (13,847) (4,145) 148,413 (1,028,000) 1,120,880 - (245) - (274,379) $ 1,725,305		$ 852,354 183,729 (91,716) (145,767) (207,309) 160,030 - (20,452) - 194,957 $ 925,826		$ 2,468,257 (169,882) 95,861 (2,646) (621,706) 199,554 - (432,530) - 319,247 $ 1,856,155		$ 5,097,239 - - - (1,857,015) 1,480,464 - (453,227) - 239,825 $ 4,507,286		$ 1,476,478 - - - - - 381,150 (635,597) 606,074 - $ 1,828,105		$ 6,573,717 - - - (1,857,015) 1,480,464 381,150 (1,088,824) 606,074 239,825 $ 6,335,391

2019

		12-month ECLs	Lifetime ECL	Lifetime ECL		Credit- impaired Financial Assets	Impairment Loss Assessed under IFRS 9	Impairment Loss Assessed under IFRS 9	Difference of Impairment Loss under Regulations	Difference of Impairment Loss under Regulations		Total
Balance at January 1, 2019 Reconciliation arising from financial instruments recognized at the beginning of the year: Transfers to lifetime ECL Transfers to credit-impaired financial assets Transfers to 12-month ECLs Derecognition of financial assets in current period New financial assets purchased or originated Difference of impairment loss under regulations Write-offs Recovery of written-offs Foreign exchange differences and other changes Balance at December 31,2019		$ 1,768,334 (20,881) (8,619) 133,519 (1,053,833) 1,127,791 - (118) - (169,565) $ 1,776,628		$ 661,840 31,563 (99,038) (128,814) (155,288) 112,374 - (50,704) - 480,421 $ 852,354		$ 2,035,208 (10,682) 107,657 (4,705) (632,674) 192,290 - (370,099) - 1,151,262 $ 2,468,257		$ 4,465,382 - - - (1,841,795) 1,432,455 - (420,921) - 1,462,118 $ 5,097,239		$ 2,066,719 - - - - - (559,801) (914,465) 884,025 - $ 1,476,478		$ 6,532,101 - - - (1,841,795) 1,432,455 (559,801) (1,335,386) 884,025 1,462,118 $ 6,573,717

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14. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD, NET

The following table shows the Group’s proportion of ownership and voting right of associates at the end of the reporting date:

Associates that are not individually material Taichung Bank Securities Investment Trust Co., Ltd.		December 31	December 31	December 31
		2020 Amount Proportion of Ownership (%) $ 163,148 38.46		2019
				Amount Proportion of Ownership (%) $ 156,788 38.46

The share of profit (loss) of the investments in associates accounted for using the equity method was as follows:

Investee Company Taichung Bank Securities Investment Trust Co., Ltd.	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2020 $ (3,294)	2019 $ (3,002)

Investment was accounted for using the equity method and the share of profit (loss) of the investment was calculated based on financial statements which have been audited.

The Group is the single largest shareholder of Taichung Bank Securities Investment Trust Co., Ltd. with 38.46% interest in the investee, in which the remaining interest is held by several other shareholders. The Group considered the absolute size of its holding, and the relative size and dispersion of the other shareholdings in Taichung Bank Securities Investment Trust Co., Ltd. and concluded that it does not have control over Taichung Bank Securities Investment Trust Co., Ltd. The management of the Group considered the Group as exercising significant influence over Taichung Bank Securities Investment Trust Co., Ltd. and, therefore, classified Taichung Bank Securities Investment Trust Co., Ltd. as associate of the Group.

15. RESTRICTED ASSETS, NET

Restricted assets - cash in banks Payments pending settlement		**December 31 **	**December 31 **
		2020 $ 436,106 3,177 $ 439,283	2019 $ 419,388 5 $ 419,393

Refer to Note 37 for information relating to the restricted assets - cash in banks, which are used as collateral for financing to other banks.

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16. OTHER FINANCIAL ASSETS, NET

Other delinquent receivables, net Other delinquent receivables, net were as follows: Delinquent receivables not arising from loans Less: Allowance for doubtful accounts (Note 12)		December	31
		2020 $ 2,246 December	2019 $ 2,246 31
		2020 $ 3,767 (1,521) $ 2,246	2019 $ 4,506 (2,260) $ 2,246

17. PROPERTIES AND EQUIPMENT, NET

Cost Balance, beginning of year Additions Disposals Reclassifications Exchange differences, net Balance, end of year Accumulated depreciation Balance, beginning of year Additions Disposals Exchange differences, net Balance, end of year Impairment Balance, beginning of year Balance, end of year Balance, end of year, net Cost Balance, beginning of year Additions Disposals Reclassifications Exchange differences, net Balance, end of year Accumulated depreciation Balance, beginning of year Additions Disposals Reclassifications Exchange differences, net Balance, end of year Impairment Balance, beginning of year Balance, end of year Balance, end of year, net			**For the Year **	Ended December 31, 2020	Ended December 31, 2020
		Land $ 7,847,588 - - - - 7,847,588 - - - - - 77,000 77,000 $ 7,770,588	Building and Structures Transportation Equipment $ 2,101,530 $ 54,053 - 5,187 - (126 ) - - - (13) 2,101,530 59,101 1,191,481 29,932 40,005 6,267 - (126 ) - 2 1,231,486 36,075 - - - - $ 870,044 $ 23,026 **For the Year **	Miscellaneous Equipment Lease Improvement $ 1,900,254 $ 7,799 135,391 1,176 (25,585 ) - - - (564) - 2,009,496 8,975 1,453,794 1,632 168,109 1,369 (24,814 ) - (148) - 1,596,941 3,001 - - - - $ 412,555 $ 5,974 Ended December 31, 2019		Construction in Progress $ 1,526,236 1,729,338 - (5,092 ) - 3,250,482 - - - - - - - $ 3,250,482	Total $ 13,437,460 1,871,092 (25,711 ) (5,092 ) (577) 15,277,172 2,676,839 215,750 (24,940 ) (146) 2,867,503 77,000 77,000 $ 12,332,669
		Land $ 7,843,120 - - 4,468 - 7,847,588 - - - - - - 77,000 77,000 $ 7,770,588	Building and Structures Transportation Equipment $ 2,086,402 $ 48,195 8,525 11,496 - (5,579 ) 6,603 - - (59) 2,101,530 54,053 1,145,069 29,111 39,809 5,740 - (4,901 ) 6,603 - - (18) 1,191,481 29,932 - - - - $ 910,049 $ 24,121	Miscellaneous Equipment $ 1,830,060 98,520 (28,075 ) 1,297 (1,548) 1,900,254 1,314,540 167,942 (27,623 ) - (1,065) 1,453,794 - - $ 446,460	Lease Improvement $ 6,938 547 (5,586 ) 5,900 - 7,799 5,061 1,271 (4,700 ) - - 1,632 - - $ 6,167	Construction in Progress $ 202,835 1,324,201 - (800 ) - 1,526,236 - - - - - - - - $ 1,526,236	Total $ 12,017,550 1,443,289 (39,240 ) 17,468 (1,607) 13,437,460 2,493,781 214,762 (37,224 ) 6,603 (1,083) 2,676,839 77,000 77,000 $ 10,683,621

• 39 -

The above items of property and equipment are depreciated on a straight-line basis over their estimated useful lives as follows:

Building and structures Building 30 to 60 years Renovation 10 to 29 years Transportation equipment 2 to 5 years Miscellaneous equipment 1 to 15 years Lease improvements 2 to 5 years

18. LEASE ARRANGEMENTS

• a. Right-of-use assets

Carrying amount Land and buildings Transportation equipment Additions to right-of-use assets Depreciation charge for right-of-use assets Land and buildings Transportation equipment		**December 31 **	**December 31 **
	2020 $ 789,200 189,018 $ 978,218 For the Year Ended		2019 $ 800,549 79,857 $ 880,406 December 31
		2020 $ 367,498 $ 132,754 83,768 $ 216,522	2019 $ 322,926 $ 137,980 76,207 $ 214,187

Except for the aforementioned addition and recognized depreciation, the Group did not have significant sublease or impairment of right-of-use assets during the years ended December 31, 2020 and 2019.

• b. Lease liabilities

Carrying amount Range of discount rates for lease liabilities was as follows: Land Buildings Transportation equipment		December 31
		2020 2019 $ 1,006,781 $ 895,285 **December 31 **
		2020 2019 1.01%-4.14% 1.01%-4.14% 1.01%-5.95% 1.01%-5.95% 1.01%-5.96% 1.01%-5.96%

• 40 -

• c. Material lease-in activities and terms

The Group leases domestic offices, ATM sites and business cars with lease terms of 1 to 15 years. The lease contract specifies that lease payments will be adjusted on the basis of changes in market rental rates. The Group does not have bargain purchase options to acquire the leasehold land and buildings at the end of the lease terms.

• d. Other lease information

Lease arrangements under operating leases for the leasing out of freehold properties are set out in Note 19.

Expenses relating to short-term leases Expenses relating to low-value asset leases Total cash outflow for leases	For the Year Ended	For the Year Ended	December 31
		2020 $ 2,837 $ 7,797 $ (249,236)	2019 $ 5,346 $ 3,910 $ (241,476)

The Group’s leases of certain office equipment qualify as short-term leases and leases of certain computer equipment qualify as low-value asset leases. The Group has elected to apply the recognition exemption and thus, did not recognize right-of-use assets and lease liabilities for these leases.

19. INVESTMENT PROPERTIES, NET

Cost Balance, beginning of year Balance, end of year Accumulated depreciation Balance, beginning of year Additions Balance, end of year Balance, end of year, net		For the Year Ended December 31, 2020	For the Year Ended December 31, 2020
		Land $ 15,801 15,801 - - - $ 15,801	Structures Investment Properties Under Construction $ 5,972 $ - 5,972 - 3,670 - 89 - 3,759 - $ 2,213 $ -	Total $ 21,773 21,773 3,670 89 3,759 $ 18,014

• 41 -

Cost Balance, beginning of year Additions Reclassified as finance leases Reclassifications Balance, end of year Accumulated depreciation Balance, beginning of year Additions Reclassifications Balance, end of year Balance, end of year, net		For the Year Ended December 31, 2019	For the Year Ended December 31, 2019
		Land $ 20,269 - - (4,468) 15,801 - - - - $ 15,801	Structures Investment Properties Under Construction $ 12,575 $ 86,290 - 15,000 - (101,290) (6,603) - 5,972 - 10,184 - 89 - (6,603) - 3,670 - $ 2,302 $ -	Total $ 119,134 15,000 (101,290) (11,071) 21,773 10,184 89 (6,603) 3,670 $ 18,103

• a. The investment properties are depreciated using the straight-line method over their estimated useful lives as follows:

Building and structures Building 60 years Renovation 10 to 25 years

• b. The Group leased out its investment properties under construction in 2019. The lease payments from investment properties under construction were recorded as lease receivables under finance lease whenever the terms of a lease transfer substantially all the risks and rewards to the lessee.

• c. The fair values of the investment properties of the Group on December 31, 2020 and 2019 were $53,579 thousand and $53,847 thousand, respectively. The fair value was not evaluated by independent qualified professional valuers. The valuation was arrived at by reference to the market evidence of transaction price for similar properties, and the fair value was measured by using Level 3 inputs.

• d. The abovementioned investment properties were leased out for 5 years. The lessees do not have bargain purchase options to acquire the investment properties at the expiry of the lease periods.

• e. The maturity analysis of lease payments receivable under operating leases of investment properties as of December 31, 2020 and 2019 is as follows:

Year 1

	December 31,	December 31,
	2020 $ 864	2019 $ 646

• 42 -

20. INTANGIBLE ASSETS, NET

Business rights Computer software		December 31	December 31
		2020 $ 28,000 185,470 $ 213,470	2019 $ 28,000 125,125 $ 153,125

• a. Business rights of the Group arose from the transfer of Fengxing Securities Co., Ltd., which was classified as intangible assets with indefinite useful lives and not subject to amortization. As of December 31, 2020, there was no impairment loss of the business rights.

• b. Movements of intangible assets were as follows:

Balance, beginning of year Additions Amortization Reclassifications Exchange differences, net Balance, end of year	For the Year Ended	For the Year Ended	December 31
		2020 $ 153,125 105,285 (58,434) 13,049 445 $ 213,470	2019 $ 163,172 41,350 (51,941) 610 (66) $ 153,125

Computer software is amortized on a straight-line basis over its estimated useful life as follows:

Computer software 1-5 years

21. OTHER ASSETS, NET

Refundable deposits Prepayments Credit transaction Receipts under payment for shares underwriting Others		December 31	December 31
		2020 $ 2,198,459 136,226 - 107,826 1,016 $ 2,443,527	2019 $ 1,595,973 138,477 15,014 - 5,022 $ 1,754,486

As of December 31, 2020 and 2019, the time deposits and government bonds at amortized cost in the amounts of $1,060,400 thousand and $984,900 thousand, respectively, were pledged as collateral to the district court for litigation related to the overdraft of the U.S. dollar clearing account and the guarantee deposits of business operations. These amounts were stated as refundable deposits. Refer to Note 37.

• 43 -

22. DUE TO THE CENTRAL BANK AND OTHER BANKS

Call loans from banks Due to Chunghwa Post Co., Ltd. Due to banks		December 31	December 31
		2020 $ 6,411,231 326,094 300,013 $ 7,037,338	2019 $ 6,200,860 326,187 13 $ 6,527,060

23. FUNDS BORROWED FROM CENTRAL BANK AND OTHER BANKS

Funds borrowed from central bank Funds borrowed from other banks Funds borrowed from central banks (%) Funds borrowed from other banks (%)		December 31	December 31
		2020 $ 2,167,280 6,343,372 $ 8,510,652 0.10 0.95-5.23	2019 $ - 6,092,040 $ 6,092,040 - 1.00-5.44

Refer to Note 37 for information relating to collateral provided for funds borrowed from central bank and other banks.

24. SECURITIES SOLD UNDER REPURCHASE AGREEMENTS

Government bonds Foreign bonds		December 31	December 31
		2020 $ 1,203,592 1,096,485 $ 2,300,077	2019 $ 2,002,755 8,366,270 $ 10,369,025

The details of repurchase price and interest rate at the end of the period were as follows:

Government bonds Foreign bonds Government bonds Foreign bonds		December 31	December 31
		2020 $ 1,203,981 1,097,527 $ 2,301,508 0.20%-0.21% 0.38%	2019 $ 2,003,566 8,415,535 $ 10,419,101 0.50%-0.54% 2.18%-2.45%

• 44 -

The foreign bonds denominated in foreign currencies were as follows:

USD	December 31
	2020 2019 $ 39,022 $ 278,876

25. PAYABLES

Accrued expenses Accounts payable for delivery Notes and checks in clearing Foreign currency settlement payable Acceptances Interest payable Collections payable Factored accounts payable Other payables		December 31	December 31
		2020 $ 1,653,548 1,526,955 1,249,821 1,083,053 455,797 327,521 144,075 105,876 802,738 $ 7,349,384	2019 $ 1,550,678 716,756 1,007,649 870,282 514,383 465,092 38,414 49,615 775,248 $ 5,988,117

26. DEPOSITS AND REMITTANCES

Checking Demand Demand savings Time Time savings Remittances		December 31	December 31
		2020 $ 8,826,292 171,324,169 150,643,016 150,519,288 155,188,149 88,554 $ 636,589,468	2019 $ 8,067,443 138,021,835 134,211,159 143,834,144 159,025,088 162,288 $ 583,321,957

27. BANK DEBENTURES

Subordinated financial debenture		December 31	December 31
		2020 $ 11,500,000	2019 $ 14,000,000

• a. The Bank issued first subordinated financial debenture on November 13, 2012, which was approved under ruling reference No. 10100305900 issued by the Banking Bureau of the FSC on September 24, 2012. Details of the subordinated financial debenture’s issuance are summarized as follows:

• 1) Total approved principal: $3,000,000 thousand.

• 2) Principal issued: $3,000,000 thousand.

• 45 -

• 3) Denomination: $1,000 thousand, issued at par.

• 4) Period: 7 years with maturities on November 13, 2019.

• 5) Nominal interest rate: Fixed interest rate, 2.1%.

• 6) Repayment: The subordinated financial debenture will be paid on the maturity date.

• 7) The interest will be paid semi-annually from the issuance date.

• b. The Bank issued first subordinated financial debenture and second subordinated financial debenture on June 25, 2013 and December 16, 2013, respectively, which were approved under ruling reference No. 10200089330 issued by the Banking Bureau of the FSC on April 8, 2013. Details of the financial subordinated debenture’s issuance are summarized as follows:

• 1) Total approved principal: $6,000,000 thousand.

• 2) Principal issued:

  • a) Debenture I on 2013: $2,500,000 thousand.

  • b) Debenture II on 2013: $3,000,000 thousand.

• 3) Denomination:

  • a) Debenture I on 2013: $500 thousand, issued at par.

  • b) Debenture II on 2013: $500 thousand, issued at par.

• 4) Period:

  • a) Debenture I on 2013: 7 years with maturities on June 25, 2020.

  • b) Debenture II on 2013: 6 years with maturities on December 16, 2019.

• 5) Nominal interest rate:

  • a) Debenture I on 2013: Fixed interest rate, 2.1%.

  • b) Debenture II on 2013: Fixed interest rate, 2.1%.

• 6) Repayment: The subordinated financial debenture will be paid on the maturity date.

• 7) The interest will be paid semi-annually from the issuance date.

• c. The Bank issued first subordinated financial debenture on December 28, 2015, which was approved under ruling reference No. 10400200460 issued by the Banking Bureau of the FSC on August 26, 2015. Details of the subordinated financial debenture’s issuance are summarized as follows:

• 1) Total approved principal: $1,500,000 thousand.

• 2) Principal issued: $1,500,000 thousand.

• 3) Denomination: $10,000 thousand, issued at par.

• 4) Period: No due date.

• 5) Nominal interest rate: According to the interest rate of one-year time savings deposit of Chunghwa Post Co., Ltd., plus 3.08%.

• 46 -

• 6) Repayment: To be executed according to the issuance.

• 7) The interest will be paid annually from the issuance date.

• d. The Bank issued first no due date non-cumulative subordinated financial debenture, second no due date non-cumulative subordinated financial debenture, third no due date non-cumulative subordinated financial debenture and first no due date non-cumulative subordinated financial debenture on March 28, 2017, May 18, 2017, August 28, 2017 and December 28, 2016, respectively, which were approved under ruling reference No. 10500210950 issued by the Banking Bureau of the FSC on September 2, 2016. Details of the subordinated financial debenture’s issuance are summarized as follows:

• 1) Total approved principal: $3,500,000 thousand.

• 2) Principal issued:

  • a) Debenture I on 2016: $1,500,000 thousand.

  • b) Debenture I on 2017: $1,000,000 thousand.

  • c) Debenture II on 2017: $500,000 thousand.

  • d) Debenture III on 2017: $500,000 thousand.

• 3) Denomination:

  • a) Debenture I on 2016: $10,000 thousand, issued at par.

  • b) Debenture I on 2017: $10,000 thousand, issued at par.

  • c) Debenture II on 2017: $10,000 thousand, issued at par.

  • d) Debenture III on 2017: $10,000 thousand, issued at par.

• 4) Period: No due date.

• 5) Nominal interest rate: According to the interest rate of one-year time savings deposit of Chunghwa Post Co., Ltd., plus 3.08%.

• 6) Repayment: To be executed according to the issuance.

• 7) The interest will be paid annually from the issuance date.

• e. The Bank issued first no due date non-cumulative subordinated financial debenture, fourth no due date non-cumulative subordinated financial debenture and fifth no due date non-cumulative subordinated financial debenture on April 25 2018, December 5, 2017 and December 27, 2017, respectively, which were approved under ruling reference No. 10600229120 issued by the Banking Bureau of the FSC on September 22, 2017. Details of the subordinated financial debenture’s issuance are summarized as follows:

• 1) Total approved principal: $5,000,000 thousand.

• 2) Principal issued:

  • a) Debenture IV on 2017: $1,350,000 thousand. b) Debenture V on 2017: $2,650,000 thousand. c) Debenture I on 2018: $1,000,000 thousand.

• 3) Denomination:

  • a) Debenture IV on 2017: $10,000 thousand, issued at par. b) Debenture V on 2017: $10,000 thousand, issued at par. c) Debenture I on 2018: $10,000 thousand, issued at par.

• 47 -

• 4) Period: No due date.

• 5) Nominal interest rate: According to the interest rate of one-year time savings deposit of Chunghwa Post Co., Ltd., plus 3.08%.

• 6) Repayment: To be executed according to the issuance.

• 7) The interest will be paid annually from the issuance date.

• f. The Bank issued second no due date non-cumulative subordinated financial debenture on December 18, 2018, which was approved under ruling reference No. 10702156550 issued by the Banking Bureau of the FSC on August 23, 2018. Details of the subordinated financial debenture issuance is summarized as follows:

• 1) Total approved principal: $1,500,000 thousand.

• 2) Principal issued: $1,500,000 thousand.

• 3) Denomination: $10,000 thousand, issued at par.

• 4) Period: No due date.

• 5) Nominal interest rate: According to the interest rate of one-year time savings deposit of Chunghwa Post Co., Ltd., plus 3.08%.

• 6) Repayment: To be executed according to the issuance.

• 7) The interest will be paid annually from the issuance date.

28. OTHER FINANCIAL LIABILITIES

Commercial papers payable Structured commodity principal		**December 31 **	**December 31 **
		2020 $ 1,588,567 107,246 $ 1,695,813	2019 $ 1,174,083 - $ 1,174,083

29. PROVISIONS

Provision for employee benefits Provision for losses on guarantees Other provision Provision for loan commitments Provision for outstanding loss		December 31	December 31
		2020 $ 1,089,282 235,963 13,097 72,060 14,090 $ 1,424,492	2019 $ 1,133,772 174,463 11,878 63,357 - $ 1,383,470

• 48 -

a. Details of provision for employee benefits were as follows:

Benefit plans Preferential interest on employees’ deposits Other long-term employee benefit liabilities		December 31	December 31
		2020 $ 913,854 139,406 36,022 $ 1,089,282	2019 $ 972,820 131,433 29,519 $ 1,133,772

1) Defined contribution plans

The Group adopted a pension plan under the Labor Pension Act (LPA), which is a state-managed defined contribution plan. Under the LPA, an entity makes monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages.

The amounts of contributions paid by the Group in accordance with the defined contribution plan and recognized in the consolidated statements of comprehensive income were $101,385 thousand and $98,904 thousand for the years ended December 31, 2020 and 2019, respectively.

2) Defined benefit plans

The defined benefit plan adopted of the Bank in accordance with the Labor Standards Law is operated by the government of the ROC. Pension benefits are calculated on the basis of the length of service and average monthly salaries of the six months before retirement. The Bank contributes amounts equal to 10% of total monthly salaries and wages to a pension fund administered by the pension fund monitoring committee. Pension contributions are deposited in the Bank of Taiwan in the committee’s name. Before the end of each year, the Bank assesses the balance in the pension fund. If the amount of the balance in the pension fund is inadequate to pay retirement benefits for employees who conform to retirement requirements in the next year, the Bank is required to fund the difference in one appropriation that should be made before the end of March of the next year. The pension fund is managed by the Bureau of Labor Funds, Ministry of Labor (the “Bureau”); the Bank has no right to influence the investment policy and strategy.

The amounts included in the consolidated balance sheets in respect of the Bank’s defined benefit plans were as follows:

Present value of defined benefit obligation Fair value of plan assets Deficit Net defined benefit liabilities		December 31	December 31
		2020 $ 1,763,272 (849,418) 913,854 $ 913,854	2019 $ 1,817,070 (844,250) 972,820 $ 972,820

• 49 -

Movements in net defined benefit liabilities were as follows:

Present Value of the Defined Benefit Obligation Fair Value of the Plan Assets Balance at January 1, 2019 $ 1,719,860 $ (719,393) Service cost Current service cost 14,250 - Net interest expense (income) 19,348 (10,365) Recognized in profit or loss 33,598 (10,365) Remeasurement Return on plan assets (excluding amounts included in net interest) - (21,788) Actuarial loss - changes in financial assumptions 73,096 - Actuarial loss - experience adjustments 68,402 - Recognized in other comprehensive income 141,498 (21,788) Contributions from the employer - (151,850) Benefits paid (59,146) 59,146 Company paid (18,740) - Balance at December 31, 2019 1,817,070 (844,250) Service cost Current service cost 9,810 - Net interest expense (income) 13,628 (6,810) Recognized in profit or loss 23,438 (6,810) Remeasurement Return on plan assets (excluding amounts included in net interest) - (24,070) Actuarial loss - changes in financial assumptions 45,236 - Actuarial gain - experience adjustments (7,301) - Recognized in other comprehensive income 37,935 (24,070) Contributions from the employer - (75,278) Benefits paid (100,990) 100,990 Company paid (14,181) - Balance at December 31, 2020 $ 1,763,272 $ (849,418)

Net Defined Benefit Liabilities $ 1,000,467 14,250 8,983 23,233 (21,788) 73,096 68,402 119,710 (151,850) - (18,740) 972,820 9,810 6,818 16,628 (24,070) 45,236 (7,301) 13,865 (75,278) - (14,181) $ 913,854

An analysis by function of the amounts recognized in profit or loss in respect of the defined benefit plans in accordance with the pension cost rate for the years ended December 31, 2020 and 2019 is as follows:

Operating expenses	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2020 $ 16,628	2019 $ 23,233

• 50 -

Through the defined benefit plans under the Labor Standards Law, the Bank is exposed to the following risks:

• a) Investment risk: The plan assets are invested in domestic and foreign equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of the Bureau or under the mandated management. However, in accordance with relevant regulations, the return generated by plan assets should not be below the interest rate for a 2-year time deposit with local banks.

• b) Interest risk: A decrease in the government or corporate bond interest rate will increase the present value of the defined benefit obligation; however, this will be partially offset by an increase in the return on the plan’s debt investments.

• c) Salary risk: The present value of the defined benefit obligation is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the present value of the defined benefit obligation.

The actuarial valuations of the present value of the defined benefit obligation were carried out by qualified actuaries. The significant assumptions used for the purposes of the actuarial valuations were as follows:

Discount rate(s) Expected rate(s) of salary increase	December 31
	2020 2019 0.50% 0.75% 1.50% 1.50%

If possible reasonable change in each of the significant actuarial assumptions will occur and all other assumptions will remain constant, the present value of the defined benefit obligation would increase (decrease) as follows:

Discount rate(s) 0.25% increase 0.25% decrease Expected rate(s) of salary increase 0.25% increase 0.25% decrease		December	31
		2020 $ (45,236) $ 46,826 $ 45,550 $ (44,235)	2019 $ (49,168) $ 50,983 $ 49,708 $ (48,188)

The sensitivity analysis presented above may not be representative of the actual change in the present value of the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

Expected contributions to the plan for the next year Average duration of the defined benefit obligation		**December 31 **	**December 31 **
		2020 $ 65,395 10.4 years	2019 $ 127,438 11 years

• 51 -

• 3) Preferential interest on employees’ deposits plan

The Bank had revised the interest rate of the employees’ savings deposit since December 21, 2014, in accordance with the regulations of the Financial Management Law No. 10110000850 and the Regulations Governing the Preparation of Financial Reports by Public Banks, and the preferential interest on employee’s deposit liabilities were carried out by qualified actuaries.

The amounts included in the consolidated balance sheets in respect of the preferential interest on employee’s deposit plan were as follows:

Present value of the preferential interest on deposits Fair value of plan assets Deficit Provision for preferential interest on deposits		December 31	December 31
		2020 $ 139,406 - 139,406 $ 139,406	2019 $ 131,433 - 131,433 $ 131,433

Movements in preferential interest on employees’ deposits obligation were as follows:

	Present Value
	of the
	Preferential			Net Preferential
	Interest on			Interest on
	Employees’			Employees’
	Deposits	Fair Value of		Deposits
	Obligation	the Plan Assets		Liabilities
Balance at January 1, 2019	$ 120,769	$	-	$ 120,769
Service cost
Current service cost	6,700		-	6,700
Net interest expense	4,286		-	4,286
Recognized in profit or loss	10,986		-	10,986
Remeasurement
Actuarial loss - changes in
demographic assumptions	6,770		-	6,770
Actuarial loss - experience adjustments	21,177		-	21,177
Recognized in other comprehensive
income	27,947		-	27,947
Company paid	(28,269)		-	(28,269)
Balance at December 31, 2019	131,433		-	131,433
Service cost
Current service cost	11,407		-	11,407
Net interest expense	4,692		-	4,692
Recognized in profit or loss	16,099		-	16,099
Remeasurement
Actuarial loss - experience adjustments	20,941		-	20,941
Recognized in other comprehensive
income	20,941		-	20,941
Company paid	(29,067)		-	(29,067)
Balance at December 31, 2020	$ 139,406	$	-	$ 139,406

• 52 -

An analysis by function of the amounts recognized in profit or loss in respect of the preferential interest on employees’ deposits plan was as follows:

Operating expenses	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2020 $ 16,099	2019 $ 10,986

The actuarial valuations of the present value of preferential interest on employees’ deposits obligation were carried out by qualified actuaries. The significant assumptions used for the purposes of the actuarial valuations were as follows:

Discount rate(s) Expected return on employees’ deposits Excess interest rate Preferential deposit withdrawal rate	December 31
	2020 2019 4.00% 4.00% 2.00% 2.00% 2.00% 2.00% 3.50% 3.50%

If possible reasonable change in each of the significant actuarial assumptions will occur and all other assumptions will remain constant, the present value of preferential interest on employees’ deposits obligation would increase (decrease) as follows:

Discount rate(s) 0.25% increase 0.25% decrease Preferential deposit withdrawal rate 0.25% increase 0.25% decrease		December	31
		2020 $ (3,381) $ 3,529 $ 3,647 $ (3,799)	2019 $ (3,202) $ 3,343 $ 3,454 $ (3,599)

The sensitivity analysis presented above may not be representative of the actual change in the present value of preferential interest on employees’ deposits obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

Expected contributions to the plan for the next year Average duration of preferential interest on employees’ deposits obligation		**December **	**31 **
		2020 $ - 10.3 years	2019 $ - 10.4 years

• 4) Other long-term employee benefit liabilities

Other long-term employee benefits of the Bank of the Group are long-term disability benefits. If the employee does not encounter any casualty due to occupational disaster or accidental death, the Bank will pay the pension according to the seniority.

• 53 -

The amounts of interest expense recognized by the Group in the consolidated statements of comprehensive income for long-term employee benefits in 2020 and 2019 were $6,503 thousand and $6,531 thousand, respectively. As of December 31, 2020 and 2019, other long-term employee benefit liabilities were $36,022 thousand and $29,519 thousand, respectively.

b. Movements of the provision for losses on guarantees were as follows:

2020

		12-month ECLs		Lifetime ECL		Credit- impaired Financial Assets	Impairment Loss Assessed under IFRS 9	Impairment Loss Assessed under IFRS 9	Difference of Impairment Loss under Regulations	Difference of Impairment Loss under Regulations		Total
Balance at January 1, 2020 Reconciliation arising from financial instruments recognized at the beginning of the year: Transfers to lifetime ECL Transfers to credit-impaired financial assets Transfers to 12-month ECLs Derecognition of financial assets in current period New financial assets purchased or originated Difference of impairment loss under regulations Write-offs Recovery of written-offs Foreign exchange differences and other changes Balance at December 31, 2020		$ 109,720 (5) (6) 3,815 (78,990) 141,620 - - - (7,196) $ 168,958		$ 1,778 3,399 - (736) (1,042) 3,975 - - - (2,575) $ 4,799		$ 58,621 (3,394) 6 (3,079) (15,768) - - - - (31) $ 36,355		$ 170,119 - - - (95,800) 145,595 - - - (9,802) $ 210,112		$ 4,344 - - - - - 21,507 - - - $ 25,851		$ 174,463 - - - (95,800) 145,595 21,507 - - (9,802) $ 235,963

• 54 -

2019

		12-month ECLs		Lifetime ECL		Credit- impaired Financial Assets	Impairment Loss Assessed under IFRS 9	Impairment Loss Assessed under IFRS 9	Difference of Impairment Loss under Regulations	Difference of Impairment Loss under Regulations		Total
Balance at January 1, 2019 Reconciliation arising from financial instruments recognized at the beginning of the year: Transfers to lifetime ECL Transfers to credit-impaired financial assets Transfers to 12-month ECLs Derecognition of financial assets in current period New financial assets purchased or originated Difference of impairment loss under regulations Write-offs Recovery of written-offs Foreign exchange differences and other changes Balance at December 31, 2019		$ 121,061 (3) (434) 11,027 (86,834) 80,868 - - - (15,965) $ 109,720		$ 1,751 3 - (292) (1,458) 1,720 - - - 54 $ 1,778		$ 55,221 - 434 (10,735) (7,647) 4,221 - - - 17,127 $ 58,621		$ 178,033 - - - (95,939) 86,809 - - - 1,216 $ 170,119		$ 11,815 - - - - - (7,471) - - - $ 4,344		$ 189,848 - - - (95,939) 86,809 (7,471) - - 1,216 $ 174,463

In 2020 and 2019, a provision was recognized for bad-debt expense, commitments and guarantees.

• 55 -

• c. Movements of the other provision were as follows:

2020

		12-month ECLs		Lifetime ECL		Credit- impaired Financial Assets	Impairment Loss Assessed under IFRS 9	Impairment Loss Assessed under IFRS 9	Difference of Impairment Loss under Regulations	Difference of Impairment Loss under Regulations		Total
Balance at January 1, 2020 Reconciliation arising from financial instruments recognized at the beginning of the year: Transfers to lifetime ECL Transfers to credit-impaired financial assets Transfers to 12-month ECLs Derecognition of financial assets in current period New financial assets purchased or originated Difference of impairment loss under regulations Write-offs Recovery of written-offs Foreign exchange differences and other changes Balance at December 31, 2020		$ 9,638 - - - (9,638) 9,157 - - - - $ 9,157		$ - - - - - 3,263 - - - - $ 3,263		$ 7 - - - (7) - - - - - $ -		$ 9,645 - - - (9,645) 12,420 - - - - $ 12,420		$ 2,233 - - - - - (1,556) - - - $ 677		$ 11,878 - - - (9,645) 12,420 (1,556) - - - $ 13,097

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2019

		12-month ECLs		Lifetime ECL		Credit- impaired Financial Assets	Impairment Loss Assessed under IFRS 9	Impairment Loss Assessed under IFRS 9	Difference of Impairment Loss under Regulations	Difference of Impairment Loss under Regulations		Total
Balance at January 1, 2019 Reconciliation arising from financial instruments recognized at the beginning of the year: Transfers to lifetime ECL Transfers to credit-impaired financial assets Transfers to 12-month ECLs Derecognition of financial assets in current period New financial assets purchased or originated Difference of impairment loss under regulations Write-offs Recovery of written-offs Foreign exchange differences and other changes Balance at December 31, 2019		$ 12,108 - - - (12,073) 9,628 - - - (25) $ 9,638		$ - - - - - - - - - - $ -		$ - - - - 7 - - - - $ 7		$ 12,108 - - - (12,073) 9,635 - - - (25) $ 9,645		$ 11,825 - - - - - (9,592) - - - $ 2,233		$ 23,933 - - - (12,073) 9,635 (9,592) - - (25) $ 11,878

In 2020 and 2019, a provision was recognized for bad debts expense, commitments and guarantees.

• 57 -

• d. Movements of the loan commitments were as follows:

2020

		12-month ECLs		Lifetime ECL		Credit- impaired Financial Assets	Impairment Loss Assessed under IFRS 9	Impairment Loss Assessed under IFRS 9	Difference of Impairment Loss under Regulations	Difference of Impairment Loss under Regulations		Total
Balance at January 1, 2020 Reconciliation arising from financial instruments recognized at the beginning of the year: Transfers to lifetime ECL Transfers to credit-impaired financial assets Transfers to 12-month ECLs Derecognition of financial assets in current period New financial assets purchased or originated Difference of impairment loss under regulations Write-offs Recovery of written-offs Foreign exchange differences and other changes Balance at December 31, 2020		$ 48,760 (5,991) (3) 1,685 (8,260) 24,551 - - - (1,774) $ 58,968		$ 1,848 5,353 (8) (1,685) (141) 1,298 - - - 540 $ 7,205		$ 4,025 638 11 - (4,025) 1,917 - - - (11) $ 2,555		$ 54,633 - - - (12,426) 27,766 - - - (1,245) $ 68,728		$ 8,724 - - - - - (5,392) - - - $ 3,332		$ 63,357 - - - (12,426) 27,766 (5,392) - - (1,245) $ 72,060

• 58 -

2019

		12-month ECLs		Lifetime ECL		Credit- impaired Financial Assets	Impairment Loss Assessed under IFRS 9	Impairment Loss Assessed under IFRS 9	Difference of Impairment Loss under Regulations	Difference of Impairment Loss under Regulations		Total
Balance at January 1, 2019 Reconciliation arising from financial instruments recognized at the beginning of the year: Transfers to lifetime ECL Transfers to credit-impaired financial assets Transfers to 12-month ECLs Derecognition of financial assets in current period New financial assets purchased or originated Difference of impairment loss under regulations Write-offs Recovery of written-offs Foreign exchange differences and other changes Balance at December 31, 2019		$ 39,745 (4) (4) 1,177 (9,439) 21,880 - - - (4,595) $ 48,760		$ 2,040 4 (4,032) (1,177) (791) 1,041 - - - 4,763 $ 1,848		$ - - 4,036 - - - - - - (11) $ 4,025		$ 41,785 - - - (10,230) 22,921 - - - 157 $ 54,633		$ 22,024 - - - - - (13,300) - - - $ 8,724		$ 63,809 - - - (10,230) 22,921 (13,300) - - 157 $ 63,357

In 2020 and 2019, a provision was recognized for bad debt expense, commitments and guarantees.

• e. Please refer to Note 38 for the amount of $14,090 thousand for the outstanding compensation provision of the Bank in 2020.

30. OTHER LIABILITIES

Guarantee deposits received Advance receipts Credit transactions Others		December 31	December 31
		2020 $ 567,148 318,649 3,604 85,910 $ 975,311	2019 $ 582,064 241,703 - 74,975 $ 898,742

• 59 -

31. EQUITY

• a. Share capital

Ordinary shares

Number of shares authorized (in thousands) Shares authorized Number of shares issued and fully paid (in thousands) Shares issued		**December 31 **	**December 31 **
		2020 6,150,000 $ 61,500,000 4,151,694 $ 41,516,943	2019 4,320,000 $ 43,200,000 3,708,835 $ 37,088,349

Ordinary shares issued have a par value of $10, carry one vote per share and carry the right to receive dividends.

As of January 1, 2019, the Bank had issued ordinary shares totaling $35,255,084 thousand, divided into 3,525,508 thousand ordinary shares at par value of $10 per share. In September 2019, the Bank transferred $1,833,265 thousand of unappropriated earnings to ordinary shares, consisting of 183,327 thousand ordinary shares at par value of $10 per share. As of December 31, 2019, the Bank had increased the number of ordinary shares to $37,088,349 thousand, consisting of 3,708,835 thousand ordinary shares at par value of $10 per share.

In September 2020, the Bank transferred $1,928,594 thousand of unappropriated earnings to ordinary shares, consisting of 192,859 thousand ordinary shares at par value of $10 per share. In July 2020, the board of directors of the Bank resolved to issue 250,000 thousand ordinary shares with a par value of $10, for a consideration of $10.2 per share issued at premium. On October 13, 2020, the above transaction was approved under ruling reference No. 1090359541 issued by the Banking Bureau of the FSC and the subscription base date was determined as at December 17, 2020. As of December 31, 2020, the Bank had increased ordinary shares to $41,516,943 thousand, divided into 4,151,694 thousand ordinary shares at $10 par value per share.

b. Capital surplus

May be used to offset a deficit, distributed as cash dividends, or transferred to share capital* Issuance of ordinary shares May be used to offset a deficit only Issuance of ordinary shares - employee share options Expired employee share options Share of changes in capital surplus of associates Conversion of bank debentures’ components		**December 31 **	**December 31 **
		2020 $ 713,633 58,664 6,767 16,813 7,729 $ 803,606	2019 $ 663,633 32,124 6,682 16,813 7,729 $ 726,981

• Such capital surplus may be used to offset a deficit; in addition, when the Bank has no deficit, such capital surplus may be distributed as cash dividends or transferred to share capital (limited to a certain percentage of the Bank’s capital surplus and to once a year).

• 60 -

• c. Appropriation of earnings and dividend policy

Under the Bank’s dividend policy as set forth in the Articles, where the Bank made a profit in a fiscal year, the profit shall be first utilized for paying taxes, offsetting losses of previous years, setting aside as a legal reserve of 30% of the remaining profit, setting aside or reversing a special reserve in accordance with the laws and regulations, and then any remaining profit together with any undistributed retained earnings shall be used by the Bank’s board of directors as the basis for proposing a distribution plan, which should be resolved in the shareholders’ meeting for the distribution of dividends and bonuses to shareholders. For the policies on the distribution of employees’ compensation and remuneration of directors, refer to employees’ compensation and remuneration of directors in Note 32.

The appropriation of earnings mentioned above shall be retained by the board of directors in accordance with the changing operating environment, operation and investment needs. When dividends are declared, cash dividends must be at least 10% of total dividends declared.

An appropriation of earnings to a legal reserve shall be made until the legal reserve equals the Bank’s paid-in capital. The legal reserve may be used to offset deficits. If the Bank has no deficit and the legal reserve has exceeded 25% of the Bank’s paid-in capital, the excess may be transferred to capital or distributed in cash.

In addition, the Banking Law limits the appropriation of cash dividends to 15% of the Bank’s paid-in capital. But when the legal reserve equals the Bank’s paid-in capital, this 15% limit may be waived. If the ratio of own capital to risk assets does not meet the standards set by the competent authority, the appropriation of earnings in cash or other assets should be subject to the restrictions or prohibitions of the relevant regulations.

Under related regulations, a special reserve is appropriated from the balance of the retained earnings at an amount from the net income and unappropriated earnings that is equal to the debit balance of accounts in the shareholders’ equity section. Afterward, if there is any reversal of the decrease in shareholders’ equity, the Bank is allowed to appropriate retained earnings from the reversed amount.

According to Order No. 1010012865 issued by the FSC, Order No. 1010047490 issued by the FSC and International Financial Reporting Standards and “Q&A on the application of the reference to the special reserve following adoption of IFRSs”, retained earnings should be appropriated to or reversed from a special reserve by the Bank. Afterward, if there is any reversal of the decrease in other shareholders’ equity, the Bank is allowed to appropriating retained earnings from the reversal amount. According to Order No. 10510001510 issued by the FSC, a special reserve should be appropriated between 0.5% and 1% of net income after tax when banks appropriate earnings of 2016 through 2018. After that, under No. 10802714560 issued by the FSC, the Bank no longer use special reserve to protect the right of its employee in response to the developments of financial technology since 2019. From the fiscal year of 2019, the Bank can reverse the amount of expenditure of employees’ transfer arising from financial technology development within the amount of the abovementioned special reserve from 2016 to 2018.

The appropriations of earnings for 2019 and 2018 had been approved in the shareholders’ meetings of the Bank on June 30, 2020 and June 28, 2019, respectively, as follows:

Legal reserve Special reserve Cash dividends Share dividends	Appropriation of Earnings 2019 2018 $ 1,281,622 $ 1,202,511 - 40,084 1,038,474 987,142 1,928,594 1,833,265	Dividends Per Share (NT$)
		2019 2018 $ - $ - - - 0.28 0.28 0.52 0.52

• 61 -

The appropriations of earnings for 2020 which had been proposed by the Bank’s board of directors on February 25, 2021 were as follows:

	Appropriation	Dividends Per	Dividends Per
	of Earnings	Share	(NT$)
Legal reserve	$ 1,207,149	$	-
Cash dividends	996,407		0.24
Share dividends	1,868,262		0.45

The appropriations of earnings for 2020 are subject to the resolution of the shareholders’ meeting to be held on May 28, 2021.

d. Other equity items

Exchange Differences on Translation of the Financial Statements of Foreign Operations Unrealized Gain on Financial Assets at FVTOCI Balance at January 1, 2020 $ (96,316) $ 949,508 Recognized for the period Unrealized gains Equity instruments - 230,633 Debt instruments - 258,888 Net remeasurement of loss allowance - debt instruments - 5,318 Share from associates accounted for using the equity method - 9,570 Cumulative unrealized gain of equity instruments transferred to retained earnings due to disposal - (26,059) Cumulative translation adjustment Exchange differences for current period (24,794) - Income tax related to other comprehensive income - (2,991) Balance at December 31, 2020 $ (121,110) $ 1,424,867 Balance at January 1, 2019 $ (38,327) $ 690,897 Recognized for the period Unrealized gains Equity instruments - 293,320 Debt instruments - 50,230 Net remeasurement of loss allowance - debt instruments - (113) Share from associates accounted for using the equity method - 6,130

Total $ 853,192 230,633 258,888 5,318 9,570 (26,059) (24,794) (2,991) $ 1,303,757 $ 652,570 293,320 50,230 (113) 6,130 (Continued)

• 62 -

Exchange Differences on Translation of the Financial Statements of Foreign Operations Unrealized Gain on Financial Assets at FVTOCI Cumulative unrealized gain of equity instruments transferred to retained earnings due to disposal $ - $ (70,079) Cumulative translation adjustment Exchange differences for current period (57,989) - Income tax related to other comprehensive income - (20,877) Balance at December 31, 2019 $ (96,316) $ 949,508

Total $ (70,079) (57,989) (20,877) $ 853,192 (Concluded)

32. NET PROFIT FROM CONTINUING OPERATIONS

Net profit from continuing operations was attributable to:

• a. Net interest

Interest revenue Notes discounted and loans Due from banks and call loans to the other banks Investment in securities Installment plan Rental Revolving interests of credit cards Securities purchased under resale agreements Accounts receivable factoring without recourse Others Interest expense Deposits Financial debentures Funds borrowed from the Central Bank and other banks Due to the Central Bank and other banks Securities sold under repurchase agreements Structured instruments Lease liabilities Others	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2020 $ 9,918,006 94,839 1,501,954 282,384 250,214 37,443 36,409 7,683 497 12,129,429 (3,030,849) (497,196) (178,613) (3,801) (79,062) (6,696) (35,308) (18,811) (3,850,336) $ 8,279,093	2019 $ 11,046,706 139,651 1,589,724 292,379 257,257 41,679 58,872 6,536 973 13,433,777 (3,950,966) (643,380) (207,985) (4,908) (240,500) (98) (34,113) (1,297) (5,083,247) $ 8,350,530

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b. Service fee income, net

Service fee income Brokering Trust business Loans Guarantee Others Service fee expense Commission Cross-bank transactions Others	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2020 $ 1,040,643 1,068,056 565,057 154,934 316,764 3,145,454 (76,213) (37,004) (126,334) (239,551) $ 2,905,903	2019 $ 1,292,348 901,283 466,542 152,298 339,599 3,152,070 (93,237) (35,904) (109,614) (238,755) $ 2,913,315

The Group provides custody, trust, investment management and consultancy services to third parties, so the Group’s activities involve the planning, management and trading decisions of financial instruments. For the trust funds or investment portfolios that are managed and used on behalf of the trustee, the independent accounting reports and preparation of financial statements for internal management purposes are not included in the Group’s consolidated financial statements.

c. Gain on financial assets and liabilities at fair value through profit or loss

Realized profit or loss Commercial papers Shares Beneficiary certificates Derivative financial instruments Corporate bonds Valuation Commercial papers Shares Beneficiary certificates PEM Group policy assets Open-end funds and money market tools Derivative financial instruments Corporate bonds	For the Year Ended	For the Year Ended	December 31
		2020 $ 85,066 131,664 (20,609) 72,852 906 269,879 (11,436) 50,578 56,859 (202,381) 103 (191,420) 1,428 (296,269) $ (26,390)	2019 $ 132,342 329,528 (5,215) 9,206 - 465,861 (1,507) (142,706) 30,547 51,349 (109) 60,149 - (2,277) $ 463,584

• 64 -

• 1) For the years ended December 31, 2020 and 2019, realized profit or loss of gain on financial assets and liabilities at fair value through profit or loss included disposal profit amounted to $129,405 thousand and $278,312 thousand, dividend income amounted to $27,474 thousand and $37,158 thousand and interest revenue amounted to $113,000 thousand and $150,391 thousand, respectively.

• 2) Net income from exchange rate commodities includes realized and unrealized gains and losses on exchange forward contracts, cross-currency options and cross-currency swaps. The translation gains or losses included net income from exchange rate commodities when significant assets and liabilities denominated in foreign currencies classified as at FVTPL are not designated for hedging relationship.

• d. Realized gains on financial assets at fair value through other comprehensive income

Dividend income Gain on disposal of bonds	**For the Year Ended **	**For the Year Ended **	**December 31 **
		2020 $ 87,920 83,178 $ 171,098	2019 $ 44,228 7,606 $ 51,834

• e. Reversal of (impairment losses) on financial assets

Investments in debt instruments at FVTOCI Financial assets at amortized cost	**For the Year Ended December 31 **	**For the Year Ended December 31 **	**For the Year Ended December 31 **
		2020 $ (5,318) (2,750) $ (8,068)	2019 $ 113 6,338 $ 6,451

f. Other non-interest gains (losses), net

Gains (losses) on disposal of properties and equipment Others	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2020 $ 8 13,787 $ 13,795	2019 $ (325) 74,713 $ 74,388

• g. Bad-debt expenses and provision for losses on commitments and guarantees

Bad debts on receivables Bad debts on notes discounted and loans (Reversal of) losses on guarantees Loan commitments Others	For the Year Ended	For the Year Ended	December 31
		2020 $ 147,059 298,742 61,500 10,367 1,364 $ 519,032	2019 $ 121,547 509,127 (15,226) 26 - $ 615,474

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h. Employee benefits expenses

Salaries Labor and health insurance Pension expense Other employee expenses	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2020 $ 3,385,315 237,088 118,013 229,907 $ 3,970,323	2019 $ 3,273,703 209,356 122,137 227,813 $ 3,833,009

i. Employees’ compensation and remuneration of directors

According to the Articles of Incorporation of the Bank, the Bank accrues employees’ compensation and remuneration of directors at rates of 0.5%-3% and no higher than 2.5%, respectively, of net profit before income tax, employees’ compensation and remuneration of directors. The employees’ compensation and the remuneration of directors for the years ended December 31, 2020 and 2019, which were approved by the Bank’s board of directors on February 25, 2021 and February 25, 2020, respectively, were as follows:

Accrual rate

Employees’ compensation Remuneration of directors Amount Employees’ compensation Remuneration of directors	**For the Year Ended December 31 **	**For the Year Ended December 31 **	**For the Year Ended December 31 **
	2020 2019 0.75% 0.75% 2.01% 1.50% For the Year Ended December 31
		2020 $ 35,975 $ 96,195	2019 $ 38,880 $ 77,759

If there will be a change in the amounts after the annual consolidated financial statements are authorized for issue, the differences will be recorded as a change in the accounting estimate.

There was no difference between the actual amounts of employee’s compensation and remuneration of directors paid and the amounts recognized in the consolidated financial statements for the years ended December 31, 2019 and 2018.

Information on the employees’ compensation and remuneration of directors resolved by the Bank’s board of directors in 2021 and 2020 is available at the Market Observation Post System website of the Taiwan Stock Exchange.

• 66 -

j. Depreciation and amortization expenses

Properties and equipment Investment properties Right-of-use assets Intangible assets	For the Year Ended	For the Year Ended	December 31
		2020 $ 215,750 89 216,522 58,434 $ 490,795	2019 $ 214,762 89 214,187 51,941 $ 480,979

k. Other selling and administrative expenses

Taxes Professional service Advertisement Insurance Entertainment Donation Postage Others	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2020 $ 652,932 203,419 83,052 167,953 76,820 147,508 70,880 502,598 $ 1,905,162	2019 $ 707,259 177,037 106,571 180,763 89,990 132,934 65,736 498,891 $ 1,959,181

33. INCOME TAXES RELATING TO CONTINUING OPERATIONS

a. Income tax recognized in profit or loss

Major components of income tax expense were as follows:

Current tax In respect of the current period Income tax on unappropriated earnings Adjustments for prior periods Deferred tax In respect of the current period Income tax expense recognized in profit or loss	For the Year Ended	For the Year Ended	December 31
		2020 $ 714,197 1,169 1,625 15,906 $ 732,897	2019 $ 902,934 1,507 (832) (16,507) $ 887,102

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A reconciliation of accounting profit and income tax expense was as follows:

b. c.	Profit before tax from continuing operations Income tax expense calculated at the statutory rate Non-deductible expenses in determining taxable income Tax-exempt income Income tax on unappropriated earnings Loss carryforwards Adjustments for prior years’ tax Unrecognized deductible temporary differences Effect of different tax rates of group entities operating in other jurisdictions Income tax expense recognized in profit or loss Income tax recognized in other comprehensive income Deferred tax In respect of the current period Fair value changes of financial assets at FVTOCI Remeasurement of defined benefit plans Total income tax expense recognized in other comprehensive income Current tax assets and liabilities Current tax assets Tax refund receivable Current tax liabilities Income tax payable	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2020 2019 $ 4,758,430 $ 5,206,985 $ 951,686 $ 1,041,397 3,806 6,164 (229,516) (166,805) 1,169 1,507 - 1,684 1,625 (832) 3,641 290 486 3,697 $ 732,897 $ 887,102 For the Year Ended December 31
			2020 $ (2,991) 6,961 $ 3,970 **December **	2019 $ (20,877) 29,531 $ 8,654 **31 **
			2020 $ 3,279 $ 162,112	2019 $ 3,279 $ 385,113

• 68 -

d. Deferred tax assets and liabilities

The movements of deferred tax assets and deferred tax liabilities were as follows:

For the year ended December 31, 2020

					Recognized in	Recognized in	Recognized in
						Other
	Opening		Recognized in		Comprehensive
	Balance		Profit or Loss			Income		Closing Balance
Deferred tax assets
Temporary differences
Property, plant and equipment	$	3,644	$	-	$		-	$	3,644
Unrealized losses on structure
notes payment		213,491		40,476			-		253,967
Defined benefit obligations		226,754		(15,858)		6,961			217,857
Allowance for doubtful accounts		383,804		(55,765)			-		328,039
Others		(20,653)		15,241		(2,991)			(8,403)
	$	807,040	$	(15,906)	$	3,970		$	795,104
Deferred tax liabilities
Temporary differences
Provision for land value
increment tax	$	111,021	$	-	$		-	$	111,021
For the year ended December 31,	2019
					Recognized in
						Other
	Opening		Recognized in		Comprehensive
	Balance		Profit or Loss			Income		Closing Balance
Deferred tax assets
Temporary differences
Property, plant and equipment	$	3,644	$	-	$		-	$	3,644
Unrealized losses on structure
notes payment		223,761		(10,270)			-		213,491
Defined benefit obligations		228,845		(31,622)		29,531			226,754
Allowance for doubtful accounts		332,641		51,163			-		383,804
Others		(7,012)		7,236		(20,877)			(20,653)
	$	781,879	$	16,507	$	8,654		$	807,040
Deferred tax liabilities
Temporary differences
Provision for land value
increment tax	$	111,021	$	-	$		-	$	111,021

• 69 -

• e. Unused loss carryforwards and deductible temporary differences for which no deferred tax assets have been recognized in the consolidated balance sheets

Loss carryforwards Expiry in 2029 Deductible temporary differences Share of subsidiaries Allowance for doubtful accounts Unrealized evaluation loss	For the Year Ended	For the Year Ended	December 31
		2020 $ - $ 6,428 189,306 18,491 $ 214,225	2019 $ 8,418 $ 5,628 143,188 6,568 $ 155,384

f. Income tax assessments

The income tax returns of Taichung Commercial Bank Co., Ltd., Taichung Bank Insurance Brokers Co., Taichung Bank Leasing Corporation Limited, and Taichung Commercial Bank Securities Co., Ltd. through 2018 have been assessed and approved by the tax authorities.

34. EARNINGS PER SHARE

Basic earnings per share Diluted earnings per share	Unit: NT$ Per Share For the Year Ended December 31	Unit: NT$ Per Share For the Year Ended December 31	Unit: NT$ Per Share For the Year Ended December 31
		2020 $ 1.03 $ 1.03	2019 $ 1.11 $ 1.11

The weighted average number of shares outstanding used for the earnings per share computation was adjusted retroactively for the issuance of bonus shares. The basic and diluted earnings per share adjusted retrospectively for the year ended December 31, 2019 were as follows:

	Unit:	NT$ Per Share
	Before	After
	Retrospective	Retrospective
	Adjustment	Adjustment
Basic earnings per share	$ 1.16	$ 1.11
Diluted earnings per share	$ 1.16	$ 1.11

The earnings and weighted average number of ordinary shares outstanding used in the computation of earnings per share were as follows:

Net profit for the period

Earnings used in the computation of basic earnings per share Earnings used in the computation of diluted earnings per share	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2020 $ 4,025,533 $ 4,025,533	2019 $ 4,319,883 $ 4,319,883

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The weighted average number of ordinary shares outstanding (in thousands of shares) was as follows:

Weighted average number of ordinary shares used in the computation of basic earnings per share Effect of potentially dilutive ordinary shares Employees’ compensation or bonuses issued to employees Weighted average number of ordinary shares used in the computation of diluted earnings per share	For the Year Ended	For the Year Ended	December 31
		2020 3,911,940 3,801 3,915,741	2019 3,901,694 4,052 3,905,746

If the Group offered to settle the compensation or bonuses paid to employees in cash or shares, the Group assumed that the entire amount of the compensation or bonuses will be settled in shares, and the resulting potential shares were included in the weighted average number of shares outstanding used in the computation of diluted earnings per share, as the effect is dilutive. Such dilutive effect of the potential shares is included in the computation of diluted earnings per share until the number of shares to be distributed to employees is resolved in the following year.

35. SHARE-BASED PAYMENT ARRANGEMENTS

According to the Company Act, the Bank remains 15% of shares as provision for subscription by qualified employees when there is issuance of ordinary shares for cash. On October 19, qualified employees were granted 37,500 thousand options. Each option entitles the holder with the right to subscribe for one ordinary share of the Bank. The options were granted at an exercise price of $10.2.

Information on employee share options was as follows:

Balance at January 1 Options granted Options exercised Options expired Balance at December 31 Options exercisable, end of the year Weighted-average fair value of options granted ($)	For the Year Ended December 31, 2020
	Number of Options (In Thousands of Units) Weighted- average Exercise Price ($) - $ - 37,500 10.2 (37,380) 10.2 (120) 10.2 - - $ 0.71

• 71 -

Options granted by Taichung Commercial Bank Co., Ltd. in October 2020 are priced using the Black-Scholes pricing model, and the inputs to the model are as follows:

Grant-date share price $10.8 Exercise price $10.2 Volatility 19.98% Duration 54 days Dividend yield 0% Risk-free interest rate 0.05%

Compensation costs recognized were $26,625 thousand for the year ended December 31, 2020.

36. RELATED-PARTY TRANSACTIONS

Related Party

Relationship with the Group

China Man-Made Fiber Corporation Hsu Tian Investment Co., Ltd.

Parent company of the Bank Legal director of the Bank Legal directors of the Bank Natural director of the Bank Independent directors of the Bank

Pan Asia Chemical Co., Ltd. and Ho Yang Management Consultant Co., Ltd. (Note 3)

Kuei-Fong Wang (Note 2)

Hsin-Chang Tsai, Li-Woon Lim, Pi-Ta Chen, Chien-An Shin (Note 2) Jin-Yi Lee (Note 3)

Independent director of the Bank Legal representatives of the Bank’s director

Hsin-Ching Chang, Wei-Liang Lin, Ming-Hsiung Huang, Te-Wei Chia, Siou-Huei Ye (Note 1), Shih-Yi Chiang, Li-Tzu Lai (Note 2)

Legal representatives of the Bank’s director

Lai-Hsing Tsai, Chien-Hui Huang, Ming-Shan Chuang (Note 3)

24 persons including the Chairman and general manager’s spouse

24 persons including the Chairman and general manager’s The spouses and second-degree relatives, spouse etc. of the Bank’s chairman and general managers 40 persons including the director of the Board’s spouse The spouses and children of the Bank’s directors 6 persons including Yi-Yuan Tung Key management personnel 18 persons including associate general manager’s spouse The spouses and children of the Bank’s associate general managers 105 persons including Hung-Lung Tsai Managers of the Bank 11 persons including Kuei-Hsien Wang The spouses and children of the parent company’s chairman and general managers Taichung Bank Securities Investment Trust Co., Ltd. Associate accounted for using the equity method China Fiber Investment Co., Ltd. Related party in substance Pan Asia Investment Co., Ltd. Related party in substance Taichung Commercial Bank Cultural and Educational Related party in substance Foundation, Taichung Commercial Bank Workers’ Welfare Commission Deh Hsing Investment Co., Ltd. Related party in substance Iolite Company Limited Related party in substance Hammock (Hong Kong) Company Limited Related party in substance Hebei Hanoshi Contact Lens Co., Ltd. Related party in substance

(Continued)

• 72 -

Relationship with the Group

Related Party

Chou Chin Industrial Co., Ltd.	Related party in substance
Chou Chang Co., Ltd.	Related party in substance
Pan Feng Enterprise Co., Ltd.	Related party in substance
Greenworld Food Co., Ltd.	Related party in substance
Nan Chung Petrochemical Corporation	Related party in substance
Je Mi Fang Corporation	Related party in substance
Rai Chia Investment Co., Ltd.	Related party in substance
Xiang Fong Development Co., Ltd.	Related party in substance
Reliance Securities Co., Ltd.	Related party in substance
Sheen Ren Knitting Factory Co., Ltd.	Related party in substance
Ta Fa Investment Co., Ltd.	Related party in substance
Tai Yi Investment Co., Ltd.	Related party in substance
Formosa Imperial Wineseller Corp.	Related party in substance
Tou Ming Industry Limited Company	Related party in substance
Jin Bang Ge Industrial Company Limited.	Related party in substance
Ta Yi Development Co., Ltd.	Related party in substance
Yu Hui Limited	Related party in substance
Formosawine Vintners Corporation	Related party in substance
Bomi International Co., Ltd.	Related party in substance
Shanghai Bomi Food Co., Ltd.	Related party in substance
Noble House Global Limited	Related party in substance
Noble House Glory Corporation	Related party in substance
Wang Wanjin Culture and Education Foundation	Related party in substance
Chaoqing Investment Co., Ltd.	Related party in substance
Sheng Yuan Ze Investment Limited Company	Related party in substance
Pan Hsu Investment Co., Ltd.	Related party in substance
Precious Wealth International Limited	Related party in substance
Storm Model Management Co., Ltd.	Related party in substance
Bonwell Praise Co., Ltd.	Related party in substance
Chen Teng Public Relations (Shanghai) Company	Related party in substance
Shanghai Bomi Consulting management Limited Company	Related party in substance
Shuo-Jung Co., Ltd.	Related party in substance
Fengteng Co., Ltd.	Related party in substance
Shanghai Nianjia Culture Communication Co., Ltd.	Related party in substance
		(Concluded)

• Note 1: Chin-Yuan Lai, who was the legal representative of Hsu Tian Investment Co., Ltd. and the legal director of the Bank, resigned on June 26, 2018. Hsu Tian Investment Co., Ltd. reassigned the position of legal representative to Siou-Huei Ye on May 28, 2019.

• Note 2: 12 directors out of 24 directors (including 4 independent directors), were elected at the shareholders’ meeting of the Bank on June 30, 2020. The followings were respectively elected as directors: Kuei-Fong Wang and Ming-Hsiung Huang (legal representative of Hsu Tian Investment Co., Ltd), Wei-Liang Lin (legal representative of Hsu Tian Investment Co., Ltd), Te-Wei Chia (legal representative of Hsu Tian Investment Co., Ltd), Shih-Yi Chiang (legal representative of Hsu Tian Investment Co., Ltd), Hsin-Ching Chang (legal representative of Hsu Tian Investment Co., Ltd), Siou-Huei Ye (legal representative of Hsu Tian Investment Co., Ltd), Li-Tzu Lai (legal representative of Hsu Tian Investment Co., Ltd), Hsin-Chang Tsai (independent directors of the Bank), Li-Woon Lim (independent directors of the Bank), Chien-An Shin (independent directors of the Bank) and Pi-Ta Chen (independent directors of the Bank).

Note 3: Resigned after the shareholders’ meeting of the Bank on June 30, 2020.

• 73 -

Significant transactions between the Group and related party are as follows

a. Loans

For the year ended December 31, 2020

Balance, Numbers/ Name Highest Balance End of the Year Employees’ consumption loans 13 $ 5,529 $ 3,897 Loans on mortgage 40 237,517 156,316 Other loans Lee OO 2,552 2,414 Chang OO 4,500 4,500 Liu OO 1,911 1,774 Tsai OO 5,000 5,000 Lin OO 504 412 Chiu OO 1,500 1,500 Fang OO 25,932 4,616 Lin OO 18,800 17,600 Tsai OO 380 248 Liang OO 886 767 Ye OO 33,000 11,000 Huang OO 1,570 1,435 Chiu OO 3,238 2,935 Hsu OO 2,200 2,200

Compliance The Difference Between Related and Performing Loans Overdue Loans Interest Revenue Collaterals Non-related Party $ 3,897 $ - $ 53 Credit loans None 156,316 - 1,645 Real estate None 2,414 - 35 Real estate None 4,500 - 67 Real estate None 1,774 - 24 Real estate None 5,000 - - Real estate None 412 - - Real estate None 1,500 - 11 Real estate None 4,616 - 35 Real estate None 17,600 - 297 Real estate None 248 - 6 Real estate None 767 - 11 Real estate None 11,000 - 153 Real estate None 1,435 - 23 Real estate None 2,935 - 40 Real estate None 2,200 - 5 Real estate None

For the year ended December 31, 2019

Balance, Numbers/ Name Highest Balance End of the Year Employees’ consumption loans 11 $ 4,772 $ 3,223 Loans on mortgage 37 187,417 115,535 Other loans Lee OO 2,685 2,552 Chen OO 4,000 - Liu OO 2,044 1,911 Yang OO 846 - Chung OO 12,230 - Fang OO 4,432 1,916 Lin OO 38,000 18,800 Liang OO 1,002 886 Ye OO 33,000 11,000 Huang OO 1,701 1,570 Chiu OO 3,534 3,238 Tsai OO 1,529 - Chen OO 1,600 -

Compliance The Difference Between Related and Performing Loans Overdue Loans Interest Revenue Collaterals Non-related Party $ 3,223 $ - $ 67 Credit loans None 115,535 - 1,585 Real estate None 2,552 - 41 Real estate None - - 17 Real estate None 1,911 - 29 Real estate None - - 4 Real estate None - - 154 Real estate None 1,916 - 34 Real estate None 18,800 - 354 Real estate None 886 - 14 Real estate None 11,000 - 166 Real estate None 1,570 - 27 Real estate None 3,238 - 49 Real estate None - - 29 Real estate None - - 5 Real estate None

According to Articles 32 and 33 of the Banking Law, credit loans cannot be made to related party except loans to government and consumers; secured loans to related party shall be provided with adequate collateral, and the terms of credits to related party should be similar to those for third parties.

• 74 -

b. Deposits

Taichung Bank Securities Investment Trust Co., Ltd. Taichung Commercial Bank Workers’ Welfare Commission China Man-Made Fiber Corporation Taichung Commercial Bank Cultural and Educational Foundation Formosa Imperial Wineseller Corp. Greenworld Food Co., Ltd. Pan Asia Chemical Corporation Pan Feng Enterprise Co., Ltd. Chou Chin Industrial Co., Ltd. Chou Chang Co., Ltd. Shuo-Jung Co., Ltd. Je Mi Fang Corporation Yu Hui Limited Hsu Tian Investment Co., Ltd. Reliance Securities Co., Ltd. Pan Hsu Investment Co., Ltd. Pan Asia Investment Co., Ltd. Deh Hsing Investment Co., Ltd. Others Taichung Bank Securities Investment Trust Co., Ltd. Taichung Commercial Bank Workers’ Welfare Commission China Man-Made Fiber Corporation Taichung Commercial Bank Cultural and Educational Foundation Formosa Imperial Wineseller Corp Greenworld Food Co., Ltd. Pan Asia Chemical Corporation Pan Feng Enterprise Co., Ltd. Chou Chin Industrial Co., Ltd. Chou Chang Co., Ltd. Je Mi Fang Corporation Yu Hui Limited Hsu Tian Investment Co., Ltd.	For the Year Ended December 31, 2020
	Ending Balance Interest Ratio Interest Expense $ 166,905 0.00-1.05 $ 1,130 140,183 0.01-4.80 7,151 83,721 0.01-0.05 27 8,202 0.01-0.84 72 733 0.04 - 4,259 0.04 1 113,890 0.01-0.04 7 260 0.04 - 11,639 0.01-0.04 2 84 0.01 - 17,748 0.01 - 20,051 0.04-0.81 42 4 0.01 - 41,153 0.01-0.05 1 13,748 0.04-0.55 96 4 0.01 - 6 0.01 - 6,834 0.04 3 347,616 0.00-4.80 3,851 $ 977,040 $ 12,383 For the Year Ended December 31, 2019
	Ending Balance Interest Ratio Interest Expense $ 176,452 0.00-1.05 $ 1,280 139,771 0.01-5.09 7,258 67,328 0.01-0.48 45 8,223 0.01-1.09 88 206 0.08 1 3,897 0.08 1 38,487 0.01-0.08 14 248 0.08 - 5,639 0.01-0.08 2 4,728 0.01 - 14,799 0.08 12 4 0.01 - 46,712 0.01-0.48 13 (Continued)

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Reliance Securities Co., Ltd. Pan Hsu Investment Co., Ltd. Pan Asia Investment Co., Ltd. Deh Hsing Investment Co., Ltd. Others	For the Year Ended December 31, 2019	For the Year Ended December 31, 2019
	Ending Balance Interest Ratio $ 13,652 0.08-0.80 3 0.01 6 0.01 6,830 0.08 321,852 0.00-5.09 $ 848,837	Interest Expense $ 104 - - 1 4,180 $ 12,999 (Concluded)

The interest rates did not significantly differ from those with ordinary customers except for the interest rates on the Bank’s employee deposits at 4.80% and 5.09% as of December 31, 2020 and 2019, respectively.

c. Financial debentures

The Bank issued, first no due date non-cumulative subordinated financial debenture on 2015, first no due date non-cumulative subordinated financial debenture on 2016, first no due date non-cumulative subordinated financial debenture, second no due date non-cumulative subordinated financial debenture, third no due date non-cumulative subordinated financial debenture, fourth no due date non-cumulative subordinated financial debenture and fifth no due date non-cumulative subordinated financial debenture on 2017, first no due date non-cumulative subordinated financial debenture and second no due date non-cumulative subordinated financial debenture on 2018, and entrusted Concord Securities Co., Ltd. and KGI Securities Co., Ltd. as financial advisors for the issuance and collection of bonds.

As of December 31, 2020, the related party subscribed for the financial debentures issued by the Bank through underwriting brokers as follows::

Counterparty	Subscription	Period
Hsu Tian Investment Co.,	$ 4,000,000	First no due date non-cumulative subordinated financial
Ltd.		debenture on 2015, first no due date non-cumulative
		subordinated financial debenture on 2016, first no
		due date non-cumulative subordinated financial
		debenture and fifth no due date non-cumulative
		subordinated financial debenture on 2017, first no
		due date non-cumulative subordinated financial
		debenture, second no due date non-cumulative
		subordinated financial debenture on 2018
Others	3,750,000	First no due date non-cumulative subordinated financial
		debenture on 2015, first no due date non-cumulative
		subordinated financial debenture on 2016, first no
		due date non-cumulative subordinated financial
		debenture, second no due date non-cumulative
		subordinated financial debenture, third no due date
		non-cumulative subordinated financial debenture,
		fourth no due date non-cumulative subordinated
		financial debenture, fifth no due date non-cumulative
		subordinated financial debenture on 2017, first no
		due date non-cumulative subordinated financial
		debenture and second no due date non-cumulative
		subordinated financial debenture on 2018

• 76 -

The interest payables on the financial debentures of the above-mentioned related parties were $47,108 thousand and $50,136 thousand on December 31, 2020 and 2019, respectively. The interest expenses were $318,702 thousand and $320,872 thousand in 2020 and 2019, respectively.

• d. Service fee income

Taichung Bank Securities Investment Trust Co., Ltd.	For the Year Ended	For the Year Ended	December 31
		2020 $ 590	2019 $ 889

The above amounts are for the promotion and channel revenue, etc. The price of transactions with its related party is similar to those of the non-related party.

• e. Other expenses

Greenworld Food Co., Ltd. Je Mi Fang Corporation Pan Feng Enterprise Co., Ltd.	For the Year Ended	For the Year Ended	December 31
		2020 $ 1,292 1,472 161 $ 2,925	2019 $ 1,092 372 399 $ 1,863

The above amounts are other business expenses. The price of transactions with its related party is similar to those of the non-related party.

• f. Compensation of directors and key management personnel

For the years ended December 31, 2020 and 2019, the amounts of compensation of directors and key management personnel were as follows:

Short-term benefits Post-employee benefits Other long-term benefits	For the Year Ended	For the Year Ended	December 31
		2020 $ 235,316 1,346 600 $ 237,262	2019 $ 215,757 1,282 13 $ 217,052

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37. PLEDGED ASSETS

Call loans to other banks - time deposits Restricted assets - cash in banks Notes receivable Investments in debt instruments at amortized cost - government bonds Deposit reserves for demand accounts		December 31	December 31
		2020 $ 200,000 436,106 2,426,158 920,400 5,000,000 $ 8,982,664	2019 $ 200,000 419,388 2,889,030 844,900 - $ 4,353,318

Government bonds were pledged to district courts for litigation, the collateral for the overdraft of the clearing account and the compensation reserve for the securities firm and the trust business. The details were as follows:

Guarantee to district court for litigation Collateral for overdraft of clearing account Reserve of trust compensation		**December 31 **	**December 31 **
		2020 $ 360,400 500,000 60,000 $ 920,400	2019 $ 284,900 500,000 60,000 $ 844,900

38. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

In addition to those disclosed in Notes 8, 11 and 24, significant commitments and contingencies of the Group as of December 31, 2020 and 2019 were as follows:

a. Significant commitments

Loan commitments (excluding credit card) Loan commitments - credit card Guarantee receivables Trust liabilities Letters of credit Lease contract commitment	**December 31 **
	2020 2019 $ 143,630,068 $ 139,176,198 12,799,065 11,743,903 22,879,091 16,485,312 65,050,103 67,330,687 3,430,243 3,318,935 2,121,644 1,240,804

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• b. According to Article 17 of the Implementation Rules of Trust Law, the Bank should disclose its balance sheet of trust account and its asset items, which were as follows:

Trust Account Balance Sheet December 31, 2020

Trust Assets Amount Trust Liabilities Cash in banks $ 4,689,969 Securities under custody Short-term investments 53,842,003 payable Structured finance instruments 1,406,286 Trust capital Real estate Net income Land 2,056,768 Deferred carryover amounts Buildings 136,691 Securities under custody 2,918,386 Trust assets $ 65,050,103 Trust liabilities Trust Account Asset Items December 31, 2020 Item Cash in banks Short-term investments Structured finance instruments Real estate Land Buildings Securities under custody Trust Account Income Statement Year Ended December 31, 2020 Trust income Interest revenue Trust expense Management fee Tax Income before income tax Income tax expense Net income

Amount $ 2,918,386 62,131,717 1,569,531 (1,569,531) $ 65,050,103 Amount $ 4,689,969 53,842,003 1,406,286 2,056,768 136,691 2,918,386 $ 65,050,103 Amount $ 2,641,698 (1,072,146) (21) 1,569,531 - $ 1,569,531

• 79 -

Trust Account Balance Sheet December 31, 2019

Trust Assets Cash in banks Short-term investments Structured finance instruments Real estate Land Buildings Securities under custody Trust assets Item Cash in banks Short-term investments Structured finance instruments Real estate Land Buildings Securities under custody	Amount Trust Liabilities $ 3,588,759 Securities under custody 54,341,837 payable 2,041,602 Trust capital Net income 1,350,853 Deferred carryover amounts 123,079 5,884,557 $ 67,330,687 Trust liabilities Trust Account Asset Items December 31, 2019	Amount $ 5,884,557 61,446,130 2,047,880 (2,047,880)
		$ 67,330,687
		Amount $ 3,588,759 54,341,837 2,041,602 1,350,853 123,079 5,884,557 $ 67,330,687

Trust Account Income Statement Year Ended December 31, 2019

Trust income Interest revenue Dividend income Trust expense Management fee Tax Income before income tax Income tax expense Net income	Amount $ 2,921,019 27,138 (900,164) (113) 2,047,880 - $ 2,047,880

c. Maturity analysis of lease commitments and capital expenditures

The lease contract commitments of the Group include operating leases and finance leases.

Operating lease commitment is the minimum lease payment when the Group is lessee or lessor with non-cancellation condition. The lease contract commitments of the operating leases are referred to in Note 19.

• 80 -

The finance lease commitments refer to the total lease investment of the lessor under the finance lease conditions and the present value of the minimum lease payments receivable.

Capital expenditure commitments represent contractual commitments for the acquisition of capital expenditures on construction and equipment.

Considering the expansion of business scale and the increasing number of employees in the future, the Group held a tender for the construction project of head office through an online open bidding process on February 11, 2019. Dacin Construction Co., Ltd. and Earthpower Co., Ltd. won the bidding, both parties entered into a joint venture agreement worth $11,160,000 thousand on March 29, 2019, and started construction on April 27, 2019. In addition, the Group entered into a contract of planning, design and supervision worth $480,492 thousand with YSL architects & associates.

Maturity analysis of lease commitments and capital expenditures is summarized as follows:

Financing lease income

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 onwards		December 31	December 31
		2020 $ 2,259,461 785,605 219,267 13,030 13,030 171,350 $ 3,461,743	2019 $ 2,836,102 288,642 19,172 13,300 13,300 188,431 $ 3,358,947

Present value of financing lease income

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 onwards		December 31	December 31
		2020 $ 2,006,629 712,027 188,214 3,457 3,805 93,881 $ 3,008,013	2019 $ 2,551,965 261,072 8,545 3,026 3,343 97,593 $ 2,925,544

Capital expenditure commitment

Year 1 Year 2 Year 3 Year 4 Year 5		December 31	December 31
		2020 $ 3,949,454 3,309,926 1,236,643 14,394 - $ 8,510,417	2019 $ 823,970 4,580,756 3,510,676 1,233,408 71,971 $ 10,220,781

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• d. The Bank and Pihsiang Energy Technology Co., Ltd. returned the consumer consignment litigation. The first instance of Taichung District Court issued a civil judgment of the 2018 Resuit No. 598 that the Bank lost the case on February 4, 2020. The return to the lawsuit (i.e., Pihsiang Energy Technology) is $100 million, and the interest is calculated at 5% of the annual interest rate from April 10, 2018 to the settlement date. The litigation costs shall be borne by the defendant (i.e., the Bank) Burden, the appointed lawyer assessed that the content of the original judgment should be contradictory and unprovoked. Therefore, the Bank filed an appeal on February 27, 2020, and is now in the High Court Taichung Branch's 2020 renewed trial No. 78. According to the civil judgment result of the 2018 repetition word No. 598 on February 4, 2020, the Bank has prepared in advance the outstanding indemnities (statutory fruits and litigation costs) of the open litigation (statutory fruits and litigation costs) of $14,090 thousand which accounted for the interest expenses of $13,644 thousand, and other business and management expenses - litigation fees of $446 thousand in 2020.

39. FINANCIAL INSTRUMENTS

• a. Fair value of financial instruments not measured at fair value

Except as detailed in the following table, the carrying amounts of financial instruments recognized in the consolidated financial statements approximate their fair values or that the fair values cannot be reasonably measured. Therefore, those were not disclosed in this note.

• 1) Fair value hierarchy

December 31, 2020

Carrying Amount Financial assets Investments in debt instruments at amortized cost $ 113,544,854 Financial liabilities Financial liabilities at amortized cost Bank debentures 11,500,000 December 31, 2019 Carrying Amount Financial assets Investments in debt instruments at amortized cost $ 108,969,273 Financial liabilities Financial liabilities at amortized cost Bank debentures 14,000,000	FairValue
	Level 1 Level 2 Level 3 Total $ 89,450,493 $ 25,317,446 $ - $ 114,767,939 - 11,663,699 - 11,663,699 FairValue
	Level 1 Level 2 Level 3 Total $ 85,512,551 $ 24,092,164 $ - $ 109,604,715 - 14,014,140 - 14,014,140

• 2) Valuation techniques and inputs applied for Level 2 fair value measurement

Financial Instruments Valuation Techniques and Inputs

Non-derivatives

The market transaction price in the non-active market is taken as the fair value.

• 82 -

• b. Fair value of financial instruments measured at fair value on a recurring basis

1) Fair value hierarchy

Financial assets at FVTPL Derivative financial assets Commercial papers Domestic listed shares and emerging market shares Foreign listed shares Domestic unlisted shares Beneficiary certificates Domestic corporate bonds Others Financial assets at FVTOCI Investments in equity instruments Domestic unlisted shares Domestic listed shares Foreign listed shares Investments in debt instruments Domestic corporate bonds Domestic government bonds Foreign bonds Bank debentures Financial liabilities at FVTPL Derivative financial liabilities			December 31, 2020	December 31, 2020
		Total $ 3,670,250 24,872,947 862,462 88,533 7,508 363,744 203,112 799,269 $ 30,867,825 $ 751,556 2,113,147 311,404 26,959,132 5,379,466 3,486,270 2,008,865 $ 41,009,840 $ 785,819	Level 1 $ - 24,872,947 794,600 88,533 - 363,744 203,112 - $ 26,322,936 $ - 2,113,147 311,404 26,959,132 5,379,466 - 2,008,865 $ 36,772,014 $ -	Level 2 $ 3,670,250 - 67,862 - - - - 799,269 $ 4,537,381 $ - - - - - 3,486,270 - $ 3,486,270 $ 785,819	Level 3 $ - - - - 7,508 - - - $ 7,508 $ 751,556 - - - - - - $ 751,556 $ -

Reconciliation of Level 3 fair value measurements of financial instruments:

Item	Beginning Balance	Valuation Gains (Losses)	Increase	Increase	Decrease	Decrease	Ending Balance
			Buy or Issue	Transfer in	Sell, **Disposal **	Transfer Out
Financial assets at FVTPL Unlisted shares	$ -	$ 8	$45,000	$ -	$ -	$37,500	$ 7,508
Item	Beginning Balance	Valuation Gains (Losses)	Increase		Decrease		Ending Balance
			Buy or Issue	Transfer in	Sell, Disposal	Transfer Out
Financial assets at FVTOCI Unlisted shares	$664,957	$86,599	$ -	$ -	$ -	$ -	$751,556

Financial assets at FVTPL Derivative financial assets Commercial papers Domestic listed shares and emerging market shares Beneficiary certificates Domestic corporate bonds Others			December 31, 2019	December 31, 2019
		Total $ 2,097,080 20,074,138 724,544 360,119 89,816 1,029,839 $ 24,375,536	Level 1 $ - 20,074,138 688,208 360,119 89,816 - $ 21,212,281	Level 2 $ 2,097,080 - 36,336 - - 1,029,839 $ 3,163,255	Level 3 $ - - - - - - $ - (Continued)

• 83 -

Financial assets at FVTOCI Investments in equity instruments Domestic unlisted shares Domestic listed shares Foreign listed shares Investments in debt instruments Domestic corporate bonds Domestic government bonds Foreign bonds Bank debentures Financial liabilities at FVTPL Derivative financial liabilities			December 31, 2019	December 31, 2019
		Total $ 664,957 651,358 282,672 21,503,613 5,997,423 799,314 1,699,994 $ 31,599,331 $ 233,803	Level 1 $ - 651,358 282,672 21,503,613 5,997,423 - 1,699,994 $ 30,135,060 $ -	Level 2 $ - - - - - 799,314 - $ 799,314 $ 233,803	Level 3 $ 664,957 - - - - - - $ 664,957 $ - (Concluded)

Reconciliation of Level 3 fair value measurements of financial instruments:

Item	Beginning Balance	Valuation Gains (Losses)	Increase	Increase	Decrease	Decrease	Ending Balance
			Buy or Issue	Transfer in	Sell, Disposal	Transfer Out
Financial assets at FVTOCI Unlisted shares	$510,523	$154,434	$ -	$ -	$ -	$ -	$664,957

There were no transfers between Levels 1 and 2 in the current and prior period.

• 2) Valuation techniques and inputs applied for Level 2 fair value measurement

Financial Instruments Non-derivatives Derivatives Option contracts Cross-currency swap contracts, Foreign exchange forward contracts Asset swap contract

Valuation Techniques and Inputs

The market transaction price in the non-active market is taken as the fair value. Valuation model: The execution price, maturity date, market volatility, interest rate and exchange rate set by the contract are used as valuation parameters. The model with closed-form solution is then used for valuation. Discounted cash flow: Future cash flows are estimated based on observable forward exchange rates at the end of the reporting period and forward rates of contracts, discounted at a rate that reflects the credit risk of various counterparties. The closing price for convertible corporate bond minus bond value. The pure bond value is discounted by the cash flow provided by the convertible corporate bond in accordance with Taiwan Bills Index Rate (TAIBIR).

Structured finance instruments Interest rate-linked The counterparty quotes. structured instruments

• 84 -

• 3) The quantitative information on fair value of significant unobservable input (Level 3)

The quantitative information on unobservable inputs of the financial instruments classified as Level 3, and held by the Group on December 31, 2020 and 2019, were as follows:

Items	Fair value on December 31, 2020	Fair value on December 31, 2019	Valuation Techniques	Significant Unobservable Input	Range (Weighted- average)	Relationship Between Inputs and Fair Value
Financial assets at fair value through profit or loss Domestic unlisted shares Financial assets at fair value through other comprehensive income Domestic unlisted shares	$ 7,508 751,556	$ - 664,957	Seller’s quote (Monte Carlo Simulation Method) Seller’s quote (Monte Carlo Simulation Method)	Volatility rate Minority equity volatility rate Volatility rate	31.00% 43.03% 24.37%-24.97%	The lower the volatility rate, the higher the fair value The lower the minority equity volatility rate, the higher the fair value The lower the volatility rate, the higher the fair value

• 4) The assessment of Level 3 fair value

The Group assessed fair value in accordance with valuation report provided by independent company, and compiled the valuation results into a quarterly report presented to the board of directors.

• 5) Sensitivity analysis of Level 3 fair value if reasonable possible alternative assumptions may be used.

The Group uses market multiple approach to estimate the volatility rate of quantitative information on its significant unobservable input. The sensitivity analysis based on category of assets is as follows:

Risk Factor Liquidity discount ratio Categories of financial instruments Financial assets Financial assets at FVTPL Financial assets at amortized cost (Note 1) Financial assets at FVTOCI Equity instruments Debt instruments	Sensitivity Rate Impact 10% $ (16,463) December 31
	2020 2019 $ 30,867,825 $ 24,375,536 650,143,386 613,853,180 3,176,107 1,598,987 37,833,733 30,000,344 (Continued)

• c. Categories of financial instruments

• 85 -

Financial liabilities Financial liabilities at FVTPL Financial liabilities at amortized cost (Note 2)	**December 31 **
	2020 2019 $ 785,819 $ 233,803 675,549,880 628,054,346 (Concluded)

• Note 1: The balances include financial assets at amortized cost, which comprise cash and cash equivalents, due from the Central Bank and call loans to other banks, investments in debt instruments at amortized cost, securities purchased under resale agreements, receivables, notes discounted and loans, restricted assets, refundable deposits, and other financial assets.

• Note 2: The balances include financial liabilities at amortized cost, which comprise due to the Central Bank and other banks, funds borrowed from Central Bank and other banks, securities sold under repurchase agreements, payables, deposits and remittances, bank debentures, other financial liabilities, and guarantee deposits received.

40. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

Overview

The financial risk management objectives of the Group is to achieve the goal of balancing risk tolerance, business objectives and external legal restrictions. These risks include market risks (including interest rate, exchange rate, equity securities and product price) and liquidity risks of on and off-balance sheet business.

The Group has formulated a relevant risk management policy, which has been approved by the board of directors to effectively identify, measure, monitor and control credit risk, market risk and liquidity risk.

Risk Management Organizational Structure

The board of directors is the highest decision-making unit for the Group’s corporate risk management and assumes the ultimate responsibility for risk management. The Group has a risk management committee and a risk management department, which grants risk authority and confers responsibilities on the relevant departments to ensure the smooth operation of risk management. The responsibilities of the committee are as follows:

• a. Consideration of the risk management programme.

• b. Consideration and review of risk limits.

• c. Consideration of the bill on institutionalization of risk management.

• d. Report to the board of directors regularly.

Members of the risk management committee set up various risk management measurement indicators according to the nature of their business and the scope of their duties, and the risk management department should report to the risk management committee to provide a reference for senior decision-making.

• 86 -

1) Market risk

• a) The source and definition of market risk

Market risks refer to the loss due to the changes in market price, such as the changes of the market interest rate, the exchange rate, the share price and the product price.

b) Market risk management policy

The objective of the Group market risk management is to develop a sound and effective market risk management mechanism that is consistent with the size, nature and complexity of the Group’s business to ensure that the risks borne by the Group can be properly managed and market risks are effectively identified, measured, monitored and controlled, and strike a balance between the level of risk tolerance and the expected level of compensation.

• c) Market risk management process

i. Identification and measurement

The relevant market risks should be assessed through appropriate procedures to consider whether the risk is within an acceptable risk range before new products, business activities, processes and systems are rolled out or operated. The relevant units should use the methods of business analysis or product analysis to identify the sources of market risks, define the market risk factors of each financial commodity and make appropriate specifications.

Market risk measurement can use a variety of effective measures to properly measure risk, including but not limited to the following methods: Statistical basis of measures, sensitivity analysis and situational analysis. The risk management department should measure the risk of the site on a daily basis and conduct regular stress tests to measure the amount of abnormal losses that may occur under the current or historical extremes.

ii. Monitoring and reporting

The risk management department should report to the risk management committee and the board of directors regularly on the implementation of the Group’s market risk management, including the Group’s market risk allocation, risk level, profit and loss status, quota usage and compliance with relevant market risk management regulations and suggestions. The authorities also set up relevant limit management, stop loss mechanism, overrun treatment and exception management methods to effectively monitor market risks. In the event of an overrun or exception, it should be notified immediately to facilitate the immediate response.

• d) Interest rate risk

i. Definition of interest rate risk

Interest rate risk refers to the change in interest rate, which causes the Group to bear the risk of changes in the fair value of the interest rate risk or the loss of surplus liquidity. The main sources of risk include deposits and interest rate-related securities.

• 87 -

• ii. Measurement methods and management procedures

The Group monitors the interest rate risk system, sets the scope of the indicators to regularly monitor and report the results to the asset and liability management committee, the risk management committee and the board of directors, and adjusts according to the overall operating conditions of the Group. In addition, the Group measures the interest rate risk by DV01, assuming that the interest rate curve has a parallel shift of 100 basis points, the degree of impact on earnings and equity is used to control the interest rate risk.

e) Exchange rate risk

• i. Definition of exchange rate risk

Exchange rate risk is the gain or loss resulting from the conversion of two different currencies at different times. The Group’s exchange rate risk is mainly due to the changes in spot and forward foreign exchange rates of the business operations. Since the foreign exchange transactions are mostly based on the principle of flattening the customer’s position for the day, the exchange rate risk is relatively small.

• ii. Measurement methods and management procedures

The Group adopts the quota management mechanism for the exchange rate risk system, sets the business quota and overnight limit for each currency, controls the maximum net foreign exchange position that can be held by all levels of personnel, and sets the maximum transaction amount according to the counterparty, and monitors it regularly. The results will be reported to the risk management committee and the board of directors for discussion.

In addition, the Group assesses the degree of impact on earnings and equity under the hypothetical scenarios when the USD/NTD, CNY/NTD, and AUD/NTD separately appreciates/depreciates by 3%, in order to control exchange rate risk.

• f) Equity securities price risk

• i. Definition of equity securities price risk

The market risk of the Group’s equity securities is the individual risk arising from changes in the market price of individual equity securities and the general market risk arising from changes in the overall market price. The main risks include listed shares and beneficiary certificates.

• ii. Measurement methods and management procedures

The Group adopts a quota management mechanism for the equity securities price risk, ensuring that all levels are traded within the authorized amount, and sets up relevant mechanisms for stop loss control, and regularly reports the monitoring results to the risk management committee and the board of directors for discussion.

In addition, the Group assesses the degree of impact on earnings and equity under the hypothetical scenarios when the price of equity securities rises/falls by 15% in order to control the risk of equity securities.

• 88 -

g) Market risk sensitivity analysis

Interest risk

The Group assumed that when other factors remain unchanged, if the yield curve increased/decreased by 100 basis points, the income before income tax of the Group as of December 31, 2020 and 2019 would have increased/decreased by $876,160 thousand and $759,373 thousand, respectively, and other equity would have decreased/increased by $1,796,491 thousand and $2,039,615 thousand, respectively.

Exchange rate risk

The Group assumed that when other factors remain unchanged, if the exchange rate of USD/NTD, CNY/NTD, and AUD/NTD appreciated/depreciated by 3%, the income before income tax as of December 31, 2020 and 2019 would have decreased/increased by $3,336 thousand and increased/decreased by $20,939 thousand, respectively, and other equity would have increased/decreased by $125,310 thousand and $48,665 thousand, respectively.

Equity securities price risk

The Group assumed that when other factors remain unchanged, if the price of equity securities increased/decreased by 15%, the income before income tax as of December 31, 2020 and 2019 would have increased/decreased by $198,337 thousand and $162,699 thousand, respectively, and other equity would have increased/decreased by $476,416 thousand and $239,848 thousand, respectively.

The summary of sensitivity analysis was as follows:

	December 31, 2020
Main Risk	Range of Change	Influence Amount
		Other Equity	Income
Interest risk	Interest rate curve rises 100BPS Interest rate curve falls 100BPS	$ (1,796,491) 1,796,491	$ 876,160 (876,160)
Exchange rate risk	USD/NTD, CNY/NTD, AUD/NTD increase by 3% USD/NTD, CNY/NTD, AUD/NTD decrease by3%	125,310 (125,310)	(3,336) 3,336
Equity securities price risk	Equity securities prices rise by 15% Equity securities prices fall by 15%	476,416 (476,416)	198,337 (198,337)

	December 31, 2019
Main Risk	Range of Change	Influence Amount
		Other Equity	Income
Interest risk	Interest rate curve rises 100BPS Interest rate curve falls 100BPS	$ (2,039,615) 2,039,615	$ 759,373 (759,373)
Exchange rate risk	USD/NTD, CNY/NTD, AUD/NTD increase by 3% USD/NTD, CNY/NTD, AUD/NTD decrease by3%	48,665 (48,665)	20,939 (20,939)
Equity securities price risk	Equity securities prices rise by 15% Equity securities prices fall by 15%	239,848 (239,848)	162,699 (162,699)

• 89 -

2) Credit risk

• a) The source and definition of credit risk

Credit risk refers to the risk that the counterparty will default on its contractual obligations resulting in financial loss to the Group. Credit risk exists in both on and off-balance sheet items. The on-balance sheet exposures to credit risks are mainly from notes discounted and loans, the credit card business, due from other banks and call loans to other banks, acceptances, investments in debt instruments and derivatives. The off-balance sheet exposures to credit risks are mainly from financial guarantees, letter of credits and loan commitments.

b) Credit risk management policy

Before launching new products or businesses, the Group ensures compliance with all applicable rules and regulations and identifies relevant credit risks. On December 31, 2020, the ratio of loans with collateral to the total amount of loans was approximately 78%. The ratio of financing guarantees to commercial letters of collateral held was approximately 33%, and the collateral required for loans, loan commitments or guarantees is usually in the forms of cash, inventories, liquid securities or other asset in circulation. If the customers default, the Group will execute its rights on collateral in accordance with the terms of contracts.

• c) Credit risk management program

The measurement and management of credit risks from the Group’s main businesses were as follows:

• i. Loan’s business (including loan commitments and guarantees)

• i) Determination that credit risk has increased significantly since the initial recognition.

The Group assesses the change in the probability of default of loans during the lifetime on each reporting date to determine if the credit risk has increased significantly since the initial recognition. In order to make this assessment, the Group’s considerations show the reasonable and supportable information that the credit risk has increased significantly since the initial recognition (including forward-looking information). The main considerations include:

Quantitative indicators

• Changes in external credit ratings of Taiwan Corporate Credit Rating Index (TCRI)

The TCRI rating of the listed cabinet company corresponding to the external rating has been reduced from the investment grade to the non-investment grade, that is, the credit risk has significantly increased since the initial recognition.

• Information on overdue status

When the contract amount is overdue for more than one month, it is determined that the credit risk of the financial asset has increased significantly since the initial recognition.

• 90 -

Qualitative indicators

• Unfavorable changes in the current or projected operating, financial or economic conditions that are expected to result in significant changes in the ability of the debtor to perform debt obligations.

• Significant changes in actual or expected results of the debtor’s operations.

• The credit risk of other financial instruments from the same debtor has increased significantly.

• ii) Definition of default and credit-impaired financial assets

The definition of financial asset default is the same as that of financial asset credit impairment. If one or more of the following conditions are met, the Group determines that the financial asset has defaulted and becomes credit impaired:

Quantitative indicators

• Changes in external TCRI credit ratings

The TCRI rating of the listed cabinet company is default grade, which means that the credit has been deducted since the initial recognition.

• Information on overdue status

When the contract amount is overdue for more than three months, it is determined that the credit of the financial asset has been impaired since the initial recognition.

Qualitative indicators

If there is evidence that the borrower will not be able to pay the contract, or that the borrower has significant financial difficulties, such as:

• The debtor has gone bankrupt or may have called for bankruptcy or financial restructuring.

• Other debt instrument contracts of the debtor have defaulted.

• Due to the economic or contractual reasons associated with the debtor’s financial difficulties, the debtor’s creditors give the borrower an unconfirmed concession and report the overdue loan.

The aforementioned default and credit impairment definitions are used to consolidate all financial assets held by the Group and are consistent with the definitions used for the internal credit risk management purposes of the financial assets, and are also applied to the relevant impairment assessment model.

• 91 -

iii) Measurement of expected credit losses

In order to assess the expected credit losses, the Group divides the credit assets into the following combinations according to the credit risk characteristics such as the use of borrowing, industrial nature, collateral type and borrowing status.

Product Portfolio Corporate loans - secured Corporate loans Corporate loans - unsecured House mortgage Consumer loans - secured Consumer loans - unsecured Consumer loans Credit loans Debit card Credit card

The Group evaluates loss allowance of financial assets, which credit risk does not significantly increase after initial recognition based on 12-month expected credit losses. The Group evaluates loss allowance of financial assets, which credit risk significantly increases after initial recognition based on lifetime expected credit losses.

In order to evaluate expected credit losses, the Group takes into consideration the debtor’s probability of default (PD) within the next 12 months, which includes the loss given default (LGD), the results are then multiplied by the exposure at default (EAD), while also considering the effect of time value of money to calculate the expected credit losses during the duration of 12 months.

PD is the default percentage of a borrower. LGD is the loss ratio once a borrower default. The Group applied PD and LGD to evaluate loan business impairment based on each portfolio’s historical information calculated internally (i.e. credit loss experience), and adjusted historical data based on current observable information and forward-looking macroeconomic information calculated by using direct estimation method.

The Group evaluates the loan default risk by using direct estimation method. The Group calculates 12-month and lifetime ECLs of financing commitments based on direct estimation method. The Group uses credit conversion factor to calculate the portion of financing commitments expected to be used in 12 months after the record date and the credit duration to calculate the default exposure amount of ECLs.

Consideration of forward-looking estimation

In estimating the expected credit losses, the Group uses forward-looking economic factors that affect credit risk and expected credit losses to consider forward-looking information. Forward-looking information is based on the Taiwan National Development Council’s regular promulgation of the “Benefit Strategy Signal” of Taiwan’s overall prosperity as indicators, which are divided into boom expansion period, contraction period and flat period. The Group evaluates the economic situation to adjust the default probability every quarter, and then incorporates it into the overall expected credit loss assessment.

ii. Debt instrument investments

The Group considers the historical default loss rate provided by the external rating agencies and the current financial status of the debtor to calculate 12-month and lifetime ECLs of financing commitments in debt instrument investments.

• 92 -

The securities held by the Group recognize the impairment loss according to the lifetime ECLs of financing commitments. The credit quality of the Group’s securities was as follows:

• i) The determination that the credit risk has increased significantly since the initial recognition

The Group assesses the change in the probability of default of debt instrument investments during the lifetime on each reporting date to determine if the credit risk has increased significantly since the initial recognition. In order to make this assessment, the Group’s considerations show the reasonable and supportable information that the credit risk has increased significantly since the initial recognition. The main considerations include:

Quantitative indicators

• At the time of initial recognition, the issuer’s credit rating is above the investment grade, but at the financial reporting date, the issuer’s credit rating is reduced to a non-investment grade.

• For debt instrument investments on the initial recognition date, the issuer’s credit rating is below the non-investment grade and the credit rating on the reporting date has not changed.

• When the issuer’s credit rating is a non-investment grade, the reported daily credit rating is reduced to a certain extent.

Qualitative indicators

• The credit rating of the issuer indicates that its credit risk has increased significantly.

• The fair value of the debt instrument investments has significantly and adversely changed on the reporting date.

• ii) Definition of default and credit-impaired financial assets

If the debt instrument investment meets one or more of the following conditions, it determines that the financial asset has defaulted and becomes credit impaired.

Quantitative indicators

• Debt instrument investments, such as bonds, have become credit impaired since they were purchased.

• The default rate for credit rating of the issuer or debt instrument investments will be adjusted on the reporting date.

Qualitative indicators

• The issuer modifies the issue conditions of the debt instrument investments due to financial difficulties or fails to pay the principal or interest according to the conditions of the issue.

• 93 -

• The issuer or the guarantee institution has ceased operations or has applied for reorganization, bankruptcy, dissolution, and sale of major assets that have a significant impact on the company’s continued operations.

Measurement of expected credit losses

• In order to evaluate expected credit losses, the Group takes into consideration the debtor’s probability of default (PD) within the next 12 months, which includes the loss given default (LGD), the results are then multiplied by the exposure at default (EAD), while also considering the effect of time value of money to calculate the expected credit losses during the duration of 12 months.

• Comparing the risk of default on the debt instrument with the default risk at the time of initial recognition, and considering the reasonable and corroborative information for a significant increase in credit risk since the initial recognition, to determine whether the financial instrument’s credit risk has increased significantly since the initial recognition.

  • Those who meet the normal credit risk status will estimate the expected loss amount based on the one-year probability of default (PD).

  • Those who meet the significant increase in credit risk status must consider the duration of the assets and calculate the probability of default (PD) for each duration. If the cash flow of the contract in the future period (i.e., the default exposure amount of each period) can be assessed, the cash flow method is used to assess the expected amount of credit loss, and if the cash flow of each period cannot be assessed, the current risk calculation method is used.

  • Those who meet the abnormal credit risk status are considered to be 100%, and will not consider the probability of default in each duration. Only consider the relevant recoverable amount and evaluate the overall expected credit loss amount.

  • Debt instrument investments’ probability of default is the value released by external credit rating agencies, which implies the possibility of future market fluctuations.

• d) Credit risk hedging or mitigation policies

i. Collaterals

The Group implements a series of policies and measures to reduce credit risks when granting of credit. One of the commonly used methods is to require borrowers to provide collaterals. To enforce the rights to collaterals, the Group manages and assesses the collaterals according to the procedures adopted in determining the scope of collateralization and valuation of collaterals.

The main types of collateral for granting credit are as follows:

• i) Real estate.

• ii) Chattels and rights of pledge.

iii) Guarantee from external agency.

• 94 -

To enhance guarantee of transaction risk, the Group’s demand for collaterals depends on the nature of derivative transactions as follows:

• i) Guarantee of amount invested: Asking different ratio of guarantee based on the credit rating scale of clients.

• ii) Guarantee of high-risk transactions: Asking for collaterals when option contracts are under resale agreement.

• iii) Performance bond (loss on investment position): Asking for collaterals when loss on investment position exceeds the limit of approved market value.

The Group closely observed the value of pledged financial assets and evaluated which financial assets had been impaired in order to recognize allowance for impairment. Credit-impaired financial assets and their pledged values which eliminate potential loss, are as follows:

December 31, 2020

Financial assets that were impaired Notes discounted and loans Receivables Guarantees and letters of credit Debt instruments Others Total financial assets that were impaired December 31, 2019 Financial assets that were impaired Notes discounted and loans Receivables Guarantees and letters of credit Debt instruments Others Total financial assets that were impaired

Total Book Value Allowance for Impairment Loss Total Value of Exposure Fair Value of Collateral $ 8,410,617 $ (1,856,155) $ 6,554,462 $ 6,554,462 313,418 (174,311) 139,107 135,350 93,398 (36,355) 57,043 38,599 7,668 (7,668) - - 42,651 (2,555) 40,096 - $ 8,867,752 $ (2,077,044) $ 6,790,708 $ 6,728,411 Total Book Value Allowance for Impairment Loss Total Value of Exposure Fair Value of Collateral $ 9,554,442 $ (2,468,257) $ 7,086,185 $ 7,086,185 315,071 (165,224) 149,847 76,067 182,882 (58,628) 124,254 88,672 17,477 (17,477) - - 11,000 (4,025) 6,975 6,975 $ 10,080,872 $ (2,713,611) $ 7,367,261 $ 7,257,899

• 95 -

ii. Credit risk concentration limits and control

To avoid the concentration of credit risks, the Group has included credit limits for the same person (entity) and for the same related-party corporation (group) based on the credit risk arising from loans, securities investment and derivatives transactions.

Meanwhile, for trading and banking book investments, the Group has set a ratio, which is the credit limit of a single issuer in proportion to the total securities position. The Group has also included credit limits for a single counterparty and a single group.

In addition, to manage the concentration risk of the financial assets, the Group has set credit limits by industry, conglomerate, country and transactions collateralized by shares, and integrated within one system to supervise the concentration of credit risk in these categories. The Group monitors concentration of each asset and controls various types of credit risk concentration in a single transaction involving counterparties, groups, related-party corporations, industries and nations.

iii. Other credit enhancements

To reduce its credit risks, the Group stipulates in its credit contracts the term for offsetting which clearly stated that the Group reserves the right to offset the borrowers’ debt against their deposits in the Group.

e) Maximum exposure to credit risk

The maximum exposures of assets on the consolidated balance sheets to credit risks without consideration of guarantees or other credit enforcement instruments approximate the assets’ carrying amounts. The maximum exposures of off-balance sheet items to credit risks without consideration of guarantees or other credit enforcement instrument were as follows:

Irrevocable loan commitments Credit card commitments Guarantee receivables Letters of credit	**December 31 **
	2020 2019 $ 9,034,662 $ 7,152,089 12,799,065 11,743,903 22,879,091 16,485,312 3,430,243 3,318,935

The management of the Group believes their abilities to minimize the credit risk exposures of the off-balance sheet items are mainly attributed to their rigorous evaluation of extended credit and the periodic reviews of these credits.

• 96 -

• f) Credit risk concentration of the Group

When the counterparty of financial product transactions is concentrated on one person, or when there are several counterparties but they are mostly engaged in similar economic activities and have similar economic characteristics, causing their abilities to fulfill contract obligations to be similarly affected by economic or other situations, credit risk concentration is deemed to have occurred. The characteristics of significant credit risk concentration include the nature of the debtor’s activities. The Group’s transactions are not concentrated on a single customer or counterparty but spread among counterparties with similar industry types and operating regions. The contract amounts of significant credit risk concentration was as follows:

Counterparty Private enterprise Natural person Government agencies Others Credit Risk Profile by Group or Industry Natural person Manufacturing Commercial Real estate and leasing Construction industry Servicing Finance and insurance Transportation warehousing and information communication Others Credit Risk Profile by Region Domestic Asia North America Others		**December 31 **	**December 31 **
		2020 2019 $ 258,337,959 $ 248,612,635 233,179,736 217,305,317 2,000,000 - 2,115,584 2,626,646 $ 495,633,279 $ 468,544,598 December 31
		2020 2019 $ 233,179,736 $ 217,305,317 79,457,394 84,278,234 55,547,537 54,445,987 64,886,449 60,316,865 18,197,580 14,458,438 11,949,359 11,490,230 16,104,068 10,820,858 8,304,507 8,000,869 8,006,649 7,427,800 $ 495,633,279 $ 468,544,598 **December 31 **
		2020 $ 464,495,184 18,134,544 9,234,010 3,769,541 $ 495,633,279	2019 $ 434,606,494 18,224,815 11,519,422 4,193,867 $ 468,544,598

• 97 -

Credit Risk Profile by Collateral Unsecured Secured Real estate Letter of bank guarantee Chattel Debenture Notes receivable Stocks Others		**December 31 **	**December 31 **
		2020 $ 73,988,829 373,358,179 17,302,660 6,075,503 15,051,165 1,656,269 4,634,756 3,565,918 $ 495,633,279	2019 $ 73,956,256 352,931,718 15,598,868 5,755,471 12,696,708 1,582,648 2,872,996 3,149,933 $ 468,544,598

• g) Write-off policy

If one of the following events have occurred, overdue loans and delinquent receivables should have the estimated recoverable amount deducted and should then be written off as bad debts:

• The debtor may not recover all or part of the obligatory claim due to dissolution, disappearance, settlement, bankruptcy or other reasons.

• The appraisal value of collateral and asset of the main and subordinate debtors are very low, or the compensation is not available after deducting the amount of the first mortgage, or it is not beneficial that execution fee is close to or may exceed the Bank’s reimbursable amount.

• The collateral and the assets of the main and subordinate debtors are auctioned off at multiple auctions, of which the Bank did not receive any benefit.

• Overdue loans and delinquent receivables which have been overdue for more than 2 years have been collected but not yet received.

• The minimum payable amount of credit card which is overdue for six months that should be written off in three months.

• h) Information of credit quality

• i. Notes discounted, loans and receivables

December 31, 2020

Product category Corporate loans Consumer loans Others Total book value Allowance for doubtful accounts Difference of impairment loss under regulations			Notes Discounted and Loans	Notes Discounted and Loans	Notes Discounted and Loans
	Stage 1 12-month ECLs $ 222,080,175 217,504,666 23,787 439,608,628 (1,725,305 ) - $ 437,883,323		Stage 2 Lifetime ECL $ 2,875,763 11,981,206 499 14,857,468 (925,826 ) - $ 13,931,642		Difference of Impairment Loss Stage 3 under Lifetime ECL Regulations $ 5,459,606 $ - 2,951,357 - (346) - 8,410,617 - (1,856,155 ) - - (1,828,105) $ 6,554,462 $ (1,828,105)	Total $ 230,415,544 232,437,229 23,940 462,876,713 (4,507,286 ) (1,828,105) $ 456,541,322

• 98 -

Product category Corporate loans Consumer loans Others Total book value Allowance for doubtful accounts Difference of impairment loss under regulations					Receivables
	Stage 1 12-month ECLs $ 9,499,476 2,164,465 61,766,888 73,430,829 (91,312 ) - $ 73,339,517		Stage 2 Lifetime ECL $ 347,443 23,982 11 371,436 (9,199 ) - $ 362,237		Difference of Impairment Loss Stage 3 under Lifetime ECL Regulations $ 224,116 $ - 37,115 - 52,187 - 313,418 - (174,311 ) - - (49,220) $ 139,107 $ (49,220)	Total $ 10,071,035 2,225,562 61,819,086 74,115,683 (274,822 ) (49,220) $ 73,791,641

Product category Corporate loans Consumer loans Total book value Allowance for doubtful accounts Difference of impairment loss under regulations Product category Consumer loans Total book value Allowance for doubtful accounts Difference of impairment loss under regulations			Irrevocable Loan Commitments	Irrevocable Loan Commitments	Irrevocable Loan Commitments
	Stage 1 12-month ECLs $ 7,906,111 1,040,000 8,946,111 (54,238 ) - $ 8,891,873		Difference of Impairment Loss Stage 2 Stage 3 under Lifetime ECL Lifetime ECL Regulations $ 45,900 $ 42,651 $ - - - - 45,900 42,651 - (5,349 ) (2,555 ) - - - (2,536) $ 40,551 $ 40,096 $ (2,536) Credit Card Commitments			Total $ 7,994,662 1,040,000 9,034,662 (62,142 ) (2,536) $ 8,969,984
			Stage 2 Lifetime ECL $ 73,057 73,057 (1,856 ) - $ 71,201		Difference of Impairment Loss Stage 3 under Lifetime ECL Regulations $ - $ - - - - - - (796) $ - $ (796)	Total $ 12,799,065 12,799,065 (6,586 ) (796) $ 12,791,683

Product category Corporate loans Total book value Allowance for doubtful accounts Difference of impairment loss under regulations			Guarantee Receivables	Guarantee Receivables	Guarantee Receivables
	Stage 1 12-month ECLs $ 22,707,521 22,707,521 (168,958 ) - $ 22,538,563		Stage 2 Lifetime ECL $ 78,172 78,172 (4,799 ) - $ 73,373		Difference of Impairment Loss Stage 3 under Lifetime ECL Regulations $ 93,398 $ - 93,398 - (36,355 ) - - (25,851) $ 57,043 $ (25,851)	Total $ 22,879,091 22,879,091 (210,112 ) (25,851) $ 22,643,128

• 99 -

Letters of Credit

Product category Corporate loans Total book value Allowance for doubtful accounts Difference of impairment loss under regulations	Stage 1 12-month ECLs $ 3,360,243 3,360,243 (9,157 ) - $ 3,351,086	Stage 2 Lifetime ECL $ 70,000 70,000 (3,263 ) - $ 66,737	Difference of Impairment Loss Stage 3 under Lifetime ECL Regulations $ - $ - - - - - - (677) $ - $ (677)	Total $ 3,430,243 3,430,243 (12,420 ) (677) $ 3,417,146

December 31, 2019

Notes Discounted and Loans

Product category Corporate loans Consumer loans Others Total book value Allowance for doubtful accounts Difference of impairment loss under regulations Product category Corporate loans Consumer loans Others Total book value Allowance for doubtful accounts Difference of impairment loss under regulations	Stage 1 12-month ECLs $ 216,003,227 199,516,196 24,321 415,543,744 (1,776,628 ) - $ 413,767,116		Stage 2 Lifetime ECL $ 3,305,915 13,565,815 2,135 16,873,865 (852,354 ) - $ 16,021,511		Difference of Impairment Loss Stage 3 under Lifetime ECL Regulations $ 6,117,319 $ - 3,437,092 - 31 - 9,554,442 - (2,468,257 ) - - (1,476,478) $ 7,086,185 $ (1,476,478) Receivables	Total $ 225,426,461 216,519,103 26,487 441,972,051 (5,097,239 ) (1,476,478) $ 435,398,334
			Stage 2 Lifetime ECL $ 526,388 30,693 236 557,317 (11,625 ) - $ 545,692		Difference of Impairment Loss Stage 3 under Lifetime ECL Regulations $ 230,201 $ - 33,988 - 50,882 - 315,071 - (165,224 ) - - (23,828) $ 149,847 $ (23,828)	Total $ 11,453,415 938,093 51,385,045 63,776,553 (272,729 ) (23,828) $ 63,479,996

• 100 -

Product category Corporate loans Consumer loans Total book value Allowance for doubtful accounts Difference of impairment loss under regulations		Irrevocable Loan Commitments	Irrevocable Loan Commitments
	Stage 1 12-month ECLs $ 7,015,489 125,600 7,141,089 (44,515 ) - $ 7,096,574	Stage 2 Lifetime ECL $ - - - - - $ -	Difference of Impairment Loss Stage 3 under Lifetime ECL Regulations $ 11,000 $ - - - 11,000 - (4,025 ) - - (5,435) $ 6,975 $ (5,435)	Total $ 7,026,489 125,600 7,152,089 (48,540 ) (5,435) $ 7,098,114

Product category Consumer loans Total book value Allowance for doubtful accounts Difference of impairment loss under regulations			Credit Card Commitments	Credit Card Commitments	Credit Card Commitments
	Stage 1 12-month ECLs $ 11,670,034 11,670,034 (4,245 ) - $ 11,665,789		Stage 2 Lifetime ECL $ 73,869 73,869 (1,848 ) - $ 72,021		Difference of Impairment Loss Stage 3 under Lifetime ECL Regulations $ - $ - - - - - - (3,289) $ - $ (3,289)	Total $ 11,743,903 11,743,903 (6,093 ) (3,289) $ 11,734,521

Product category Corporate loans Total book value Allowance for doubtful accounts Difference of impairment loss under regulations Product category Corporate loans Total book value Allowance for doubtful accounts Difference of impairment loss under regulations			Guarantee Receivables	Guarantee Receivables
	Stage 1 12-month ECLs $ 16,287,614 16,287,614 (109,720 ) - $ 16,177,894		Stage 2 Lifetime ECL $ 14,864 14,864 (1,778 ) - $ 13,086		Total $ 16,485,312 16,485,312 (170,119 ) (4,344) $ 16,310,849
			Stage 2 Lifetime ECL $ - - - - $ -	Difference of Impairment Loss Stage 3 under Lifetime ECL Regulations $ 48 $ - 48 - (7 ) - - (2,233) $ 41 $ (2,233)	Total $ 3,318,935 3,318,935 (9,645 ) (2,233) $ 3,307,057

• 101 -

ii. Debt instrument investments

December 31, 2020

Product category (Note) Investment grade bond Non-investment grade bond Total book value Allowance for impairment Difference of impairment loss under regulations Product category (Note) Investment grade bond Non-investment grade bond Others (NCDs issued by the CBC) Total book value Allowance for impairment Difference of impairment loss under regulations			**Financial Assets **	**Financial Assets **	**at FVTOCI **
	Stage 1 Stage 2 Stage 3 12-month ECLs Lifetime ECL Lifetime ECL Total $ 37,854,441 $ - $ - $ 37,854,441 - - - - 37,854,441 - - 37,854,441 (20,708 ) - - (20,708 ) - - - - $ 37,833,733 $ - $ - $ 37,833,733 Investments in Debt Instruments at Amortized Cost
			Stage 2 Lifetime ECL $ - - - - - - $ -		Stage 3 Lifetime ECL $ - 7,668 - 7,668 (7,668 ) - $ -	Total $ 48,601,326 7,668 64,970,000 113,578,994 (34,140 ) - $ 113,544,854

Note: The bond rating is based on the original credit rating of Moody’s, Fitch (Fitch), Standard & Poor’s (S&P) and China Credit Rating.

The breakdown below shows the Group’s investments in debt instruments classified as financial assets at FVTOCI and financial assets at amortized cost:

December 31, 2020

		Financial Assets
	Financial Assets	at Amortized
	at FVTOCI	Cost
Total book value	$ 37,437,409	$ 113,578,994
Loss allowance	(20,708)	(34,140)
Amortized cost	37,416,701	113,544,854
Fair value adjustment	417,032	-
	$ 37,833,733	$ 113,544,854

• 102 -

The Group’s current credit risk rating mechanism and the total book value of the investments in debt instruments of each credit rating are as follows:

Credit Rating	Definition	Recognition Basis	Expected Credit Loss	Total Book Value At December 31, 2020	Total Book Value At December 31, 2020
				Financial Assets at FVTOCI	Financial Assets at Amortized Cost
Normal (Stage 1) Abnormal (Stage 2) Default (Stage 3) Write offs	The debtor has a low credit risk and is fully capable of paying off contractual cash flows. Credit risk has increased significantly since the initial recognition. There is evidence that the credit is impaired. There is evidence that the debtor is facing serious financial difficulties and the Bank cannot reasonably expect to recover the debt.	12-month expected credit losses Lifetime expected credit losses (no credit impaired) Lifetime expected credit losses (credit impaired) Write-off	0.00%-0.44% 100%	$ 37,437,409 - - -	$ 113,571,326 - 7,668 -

With respect to the Group’s investments in debt instruments at FVTOCI and at amortized cost, information on the changes in their loss allowance summarized by credit risk rating is as follows:

Financial assets at FVTOCI Balance, January 1, 2020 Change credit rating Normal turned to abnormal Abnormal turned to default Default turned to write off Purchase of new debt instruments Dispose Model/risk parameter change Exchange rate and other changes Loss allowance, December 31, 2020	Credit Rating
	Normal (12-Month Expected Credit Losses) Abnormal (Lifetime ECL and Not Credit Impaired) Default (Lifetime ECL and Credit Impaired) $ 15,405 $ - $ - - - - - - - - - - 8,900 - - (4,556) - - - - - 959 - - $ 20,708 $ - $ - (Continued)

• 103 -

Financial assets at amortized cost Balance, January 1, 2020 Change credit rating Normal turned to abnormal Abnormal turned to default Default turned to write off Purchase of new debt instruments Dispose Model/risk parameter change Exchange rate and other changes Loss allowance, December 31, 2020 December 31, 2019	Credit Rating
	Normal (12-Month Expected Credit Losses) Abnormal (Lifetime ECL and Not Credit Impaired) Default (Lifetime ECL and Credit Impaired) $ 24,185 $ - $ 17,477 - - - - - - - - - 1,777 - - (2,178) - (9,136) - - - 2,688 - (673) $ 26,472 $ - $ 7,668 (Concluded)

Product category (Note) Investment grade bond Non-investment grade bond Total book value Allowance for impairment Difference of impairment loss under regulations Product category (Note) Investment grade bond Non-investment grade bond Others (NCDs issued by the CBC) Total book value Allowance for impairment Difference of impairment loss under regulations			**Financial Assets **	**Financial Assets **	**at FVTOCI **
	Stage 1 Stage 2 Stage 3 12-month ECLs Lifetime ECL Lifetime ECL Total $ 30,015,749 $ - $ - $ 30,015,749 - - - - 30,015,749 - - 30,015,749 (15,405 ) - - (15,405 ) - - - - $ 30,000,344 $ - $ - $ 30,000,344 Investments in Debt Instruments at Amortized Cost
			Stage 2 Lifetime ECL $ - - - - - - $ -		Stage 3 Lifetime ECL $ - 17,477 - 17,477 (17,477 ) - $ -	Total $ 49,458,458 17,477 59,535,000 109,010,935 (41,662 ) - $ 108,969,273

Note: The bond rating is based on the original credit rating of Moody’s, Fitch (Fitch), Standard & Poor’s (S&P) and China Credit Rating.

• 104 -

The breakdown below shows the Group’s investments in debt instruments classified as financial assets at FVTOCI and financial assets at amortized cost:

December 31, 2019

		Financial Assets
	Financial Assets	at Amortized
	at FVTOCI	Cost
Total book value	$ 29,857,621	$ 109,010,935
Loss allowance	(15,405)	(41,662)
Amortized cost	29,842,216	108,969,273
Fair value adjustment	158,128	-
	$ 30,000,344	$ 108,969,273

The Group’s current credit risk rating mechanism and the total book value of the investments in debt instruments of each credit rating are as follows:

Credit Rating	Definition	Recognition Basis	Expected Credit Loss	Total Book Value At December 31, 2020	Total Book Value At December 31, 2020
				Financial Assets at FVTOCI	Financial Assets at Amortized Cost
Normal (Stage 1) Abnormal (Stage 2) Default (Stage 3) Write offs	The debtor has a low credit risk and is fully capable of paying off contractual cash flows. Credit risk has increased significantly since the initial recognition. There is evidence that the credit is impaired. There is evidence that the debtor is facing serious financial difficulties and the Bank cannot reasonably expect to recover the debt.	12-month expected credit losses Lifetime expected credit losses (no credit impaired) Lifetime expected credit losses (credit impaired) Write-off	0.00%-0.45% 100%	$ 29,857,621 - - -	$ 108,993,458 - 17,477 -

• 105 -

With respect to the Group’s investments in debt instruments at FVTOCI and at amortized cost, information on the changes in their loss allowance summarized by credit risk rating is as follows:

Financial assets at FVTOCI Balance, January 1, 2019 Change credit rating Normal turned to abnormal Abnormal turned to default Default turned to write off Purchase of new debt instruments Dispose Model/risk parameter change Exchange rate and other changes Loss allowance, December 31, 2019 Financial assets at amortized cost Balance, January 1, 2019 Change credit rating Normal turned to abnormal Abnormal turned to default Default turned to write off Purchase of new debt instruments Dispose Model/risk parameter change Exchange rate and other changes Loss allowance, December 31, 2019	Credit Rating
	Normal (12-Month Expected Credit Losses) Abnormal (Lifetime ECL and Not Credit Impaired) Default (Lifetime ECL and Credit Impaired) $ 15,525 $ - $ - - - - - - - - - - 2,910 - - (2,142) - - - - - (888) - - $ 15,405 $ - $ - Credit Rating
	Normal (12-Month Expected Credit Losses) Abnormal (Lifetime ECL and Not Credit Impaired) Default (Lifetime ECL and Credit Impaired) $ 30,685 $ - $ 74,444 - - - - - - - - - 2,017 - - (800) - (56,967) - - - (7,717) - - $ 24,185 $ - $ 17,477

3) Liquidity risk

a) The source and definition of liquidity risk:

Liquidity risk refers to the potential loss resulting from the shortage of funds in acquiring assets or repaying debts on maturity, such as the cash outflow arising from the depositors’ withdrawal of deposits, loan drawdown, other interests, expenses, or off-balance sheet transactions. To ensure sufficient capital liquidity, measures that can be taken include enough cash buffer in stock or readily realizable marketable securities, allocation of the period, absorbing deposits or financial borrowings, etc.

• 106 -

b) The Group’s liquidity risk policies

The Group establishes a strategy based on the conservatism principle to diversify the source and duration of funds, participates in the fund’s lending market and maintains strong relationship with fund providers to ensure the stability and reliability of funding sources.

The Group formulates relevant standards including risk identification, measurement, monitoring and reporting in order to control and grasp the potential adverse effects, regularly performs stress tests and analyzes the crisis situation to mitigate impact of excessive capital flows, establishes a limit monitoring mechanism, and sets management indicators such as liquidity ratios, cash flow gaps, etc.

The Group’s liquidity risk management unit is the Asset and Liability Management Committee (hereinafter referred to as the “Committee”). The Committee must adopt necessary monitoring steps to maintain adequate liquidity and ensure that certain committees should regularly report to the board of directors for effective management of liquidity risks.

Maturity analysis of non-derivative financial liabilities

The Group disclosed the analysis of cash outflows from non-derivative financial liabilities by the residual maturities as of the balance sheet date. The amounts used in the maturity analyses of derivative financial liabilities are based on contractual cash flows, so some of these amounts may not correspond to the amounts shown on the consolidated balance sheets.

December 31, 2020	0-30 Days	31-90 Days	91-180 Days	181 Days - 1 **Year **	Over 1 Year	Total
Due to the Central Bank and other banks Funds borrowed from Central Bank and other banks Securities sold under repurchase agreements Payables Deposits and remittances Bank debentures Lease liabilities Other items of cash outflow on maturity	$ 6,349,048 1,539,096 500,808 5,001,989 45,141,230 - 23,102 1,240,211	$ 520,616 2,216,952 1,800,700 1,109,106 72,625,586 - 45,988 430,793	$ 730 1,356,893 - 200,384 74,402,845 - 67,624 110,947	$ 166,944 1,369,444 - 458,730 159,652,783 64,553 132,372 158,947	$ - 2,028,267 - 273,148 285,008,498 11,500,000 863,279 322,063	$ 7,037,338 8,510,652 2,301,508 7,043,357 636,830,942 11,564,553 1,132,365 2,262,961
December 31, 2019	0-30 Days	31-90 Days	91-180 Days	181 Days - 1 **Year **	Over 1 Year	Total
Due to the Central Bank and other banks Funds borrowed from Central Bank and other banks Securities sold under repurchase agreements Payables Deposits and remittances Bank debentures Lease liabilities Other items of cash outflow on maturity	$ 4,760,161 1,259,401 6,870,766 4,235,819 44,994,675 - 18,694 1,170,015	$ 1,599,224 2,162,174 3,548,335 440,279 65,647,490 - 37,439 177,790	$ 730 1,118,150 - 175,081 74,775,933 2,501,005 56,058 74,584	$ 166,945 1,429,534 - 402,401 150,359,693 68,701 88,458 114,448	$ - 122,781 - 328,930 247,880,067 11,500,000 817,249 219,310	$ 6,527,060 6,092,040 10,419,101 5,582,510 583,657,858 14,069,706 1,017,898 1,756,147

Maturity analysis of derivative financial liabilities

• a) Derivative instruments settled at net amounts

Derivative instruments settled at net amounts include:

Foreign exchange derivative instruments: Foreign exchange forward contracts and cross-currency option contracts.

• 107 -

The Group assesses the maturity dates of derivative contracts to understand the basic elements of all derivative financial instruments shown on the consolidated balance sheets. The amounts used in the consolidated balance sheets are based on contractual cash flows. Therefore, some amounts may not correspond to the amounts shown on the consolidated balance sheets. The maturity analysis of derivative financial liabilities was as follows:

December 31, 2020	0-30 Days	31-90 Days	91-180 Days	181 Days - **1 Year **	Over 1 Year	Total
Derivative financial liabilities at FVTPL Foreign currencyderivatives	$24,773	$44,804	$43,391	$69,429	$ -	$182,397
Total	$24,773	$44,804	$43,391	$69,429	$ -	$182,397
December 31, 2019	0-30 Days	31-90 Days	91-180 Days	181 Days - **1 Year **	Over 1 Year	Total
Derivative financial liabilities at FVTPL Foreign currencyderivatives	$8,052	$26,392	$25,784	$26,322	$ -	$86,550
Total	$8,052	$26,392	$25,784	$26,322	$ -	$86,550

b) Derivative instruments settled at gross amounts

Derivative instruments settled at gross amounts include:

Foreign exchange derivatives instruments: Foreign exchange forward contracts and cross-currency swap contracts.

The Group disclosed the analysis of derivative instruments to be settled at gross amount by the residual maturities as of the balance sheet date. The Group assesses the maturity dates of derivative contracts to understand the basic elements of all derivative financial instruments shown in the balance sheets. The amounts used in the maturity analyses of derivative financial liabilities are based on contractual cash flows, so some of these amounts may not correspond to the amounts shown on the consolidated balance sheets. The maturity analysis of derivative financial liabilities settled at gross amounts was as follows:

December 31, 2020	0-30 Days	31-90 Days	91-180 Days	181 Days - 1 **Year **	Over 1 Year	Total
Derivative financial liabilities at FVTPL Foreign currency derivatives Outflows Inflows	$ 2,614,662 2,594,219	$ 3,270,267 3,212,438	$ 2,811,080 2,682,555	$ 3,880,455 3,698,415	$ - -	$ 12,576,464 12,187,627
Total outflows Total inflows	2,614,662 2,594,219	3,270,267 3,212,438	2,811,080 2,682,555	3,880,455 3,698,415	- -	12,576,464 12,187,627
Net flows	$ (20,443)	$ (57,829)	$ (128,525)	$ (182,040)	$ -	$ (388,837)
December 31, 2019	0-30 Days	31-90 Days	91-180 Days	181 Days - **1 Year **	Over 1 Year	Total
Derivative financial liabilities at FVTPL Foreign currency derivatives Outflows Inflows	$ 1,104,025 1,087,564	$ 1,907,146 1,876,039	$ 2,013,035 1,974,123	$ 929,481 904,147	$ - -	$ 5,953,687 5,841,873
Total outflows Total inflows	1,104,025 1,087,564	1,907,146 1,876,039	2,013,035 1,974,123	929,481 904,147	- -	5,953,687 5,841,873
Net flows	$ (16,461)	$ (31,107)	$ (38,912)	$ (25,334)	$ -	$ (111,814)

• 108 -

• 4) Maturity analysis of off-balance-sheet items

The following table shows the Group’s maturity analysis of off-balance sheet items based on the residual maturities from the consolidated balance sheets. For the financial guarantee contract issued, the maximum amount of guarantee is included in the earliest period that may be required to perform the guarantee. The amounts in the table below were prepared on contractual cash flow basis; therefore, some disclosed amounts would not match with the consolidated balance sheets.

December 31, 2020	0-30 Days	31-90 Days	91-180 Days	181 Days - 1 **Year **	Over 1 Year	Total
Loan commitments Letters of credit Guarantee receivables Lease contract commitment	$ 7,704,768 979,316 6,861,342 1,814,198	$ 19,126,700 2,071,735 5,126,641 222,188	$ 29,632,011 347,453 705,627 10,582	$ 62,958,367 31,739 2,513,448 64,393	$ 37,007,287 - 7,672,033 10,283	$ 156,429,133 3,430,243 22,879,091 2,121,644
Total	$ 17,359,624	$ 26,547,264	$ 30,695,673	$ 65,567,947	$ 44,689,603	$184,860,111
December 31, 2019	0-30 Days	31-90 Days	91-180 Days	181 Days - 1 **Year **	Over 1 Year	Total
Loan commitments Letters of credit Guarantee receivables Lease contract commitment	$ 10,197,687 985,636 2,095,901 963,551	$ 17,979,600 1,955,514 5,829,509 252,675	$ 27,233,146 276,456 1,215,728 7,727	$ 64,306,327 101,329 1,878,103 16,851	$ 31,203,341 - 5,466,071 -	$ 150,920,101 3,318,935 16,485,312 1,240,804
Total	$ 14,242,775	$ 26,017,298	$ 28,733,057	$ 66,302,610	$ 36,669,412	$171,965,152

• 5) Cash flow and fair value risk of interest rate fluctuation

The floating-rate assets/liabilities held by the Group may be exposed to risks of future cash inflow/outflow. Since the risk is considered substantial, it is therefore hedged by the Group.

41. TRANSFERS OF FINANCIAL ASSETS

The Transferred Financial Assets That Do Not Qualify for Derecognition

Most of the transferred financial assets of the Group that are not derecognized in their entirety are securities sold under repurchase agreements. According to these transactions, the right of receiving cash flows from the transferred financial assets would be transferred to other entities and the associated liabilities of the Group’s obligation to repurchase the transferred financial assets at a fixed price in the future would be recognized. As the Group is restricted to use, sell or pledge the transferred financial assets throughout the term of transaction, and is still exposed to interest rate risks and credit risks on these instruments, the transferred financial assets are not derecognized in their entirety. The details of financial assets that were not derecognized in their entirety and the associated financial liabilities were as follows:

	December 31, 2020	December 31, 2020	December 31, 2020
Category of Financial Assets	Carrying Amount of Transferred Financial Assets	Carrying Amount of Associated Financial Liabilities	Fair Value of Transferred Financial Assets	Fair Value of Associated Financial Liabilities	Fair Value of Net Position
Investments in debt instruments at amortized cost Securities sold under repurchase agreements	$2,342,355	$2,300,077	$2,392,483	$2,300,077	$ 92,406
	December 31, 2019
Category of Financial Assets	Carrying Amount of Transferred Financial Assets	Carrying Amount of Associated Financial Liabilities	Fair Value of Transferred Financial Assets	Fair Value of Associated Financial Liabilities	Fair Value of Net Position
Investments in debt instruments at amortized cost Securities sold under repurchase agreements	$11,011,466	$10,369,025	$11,123,977	$10,369,025	$ 754,952

• 109 -

42. OFFSETTING OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES

The Group did not hold financial instruments covered by Section 42 of the IAS 32 “Financial Instruments: Presentation” endorsed by the Financial Supervisory Commission; thus, it made an offset of financial assets and liabilities and reported the net amount in the consolidated balance sheets.

The Group engages in transactions on the following financial assets and liabilities that are not subject to balance sheet offsetting based on IAS 32 but are under master netting arrangements or similar agreements. These agreements allow both the Group and its counterparties to opt for the net settlement of financial assets and financial liabilities. If one party defaults, the other party may choose net settlement.

The netting information of financial assets and financial liabilities is set out below:

December 31, 2020

Gross Amounts Gross Amounts of Recognized Financial Liabilities Net Amounts of Financial Assets Presented in Financial Assets of Recognized Financial Assets Offset in the Balance Sheets the Balance Sheets Securities purchased under resale agreements $ 12,773,121 $ - $ 12,773,121 Gross Amounts of Recognized Gross Amounts of Recognized Financial Assets Offset Net Amounts of Financial Liabilities Presented in Financial Liabilities Financial Liabilities in the Balance Sheets the Balance Sheets Securities sold under repurchase agreements$ 2,300,077 $ - $ 2,300,077 December 31, 2019	Related Amounts Not Offset in the Balance Sheets Financial Instruments Cash Collateral Received $ 12,773,121 $ - Related Amounts Not Offset in the Balance Sheets Financial Instruments Cash Collateral Pledged $ 2,300,077 $ -	Net Amount $ -
		Net Amount $ -

Gross Amounts Gross Amounts of Recognized Financial Liabilities Net Amounts of Financial Assets Presented in Financial Assets of Recognized Financial Assets Offset in the Balance Sheets the Balance Sheets Securities purchased under resale agreements $ 10,256,716 $ - $ 10,256,716 Gross Amounts of Recognized Gross Amounts of Recognized Financial Assets Offset Net Amounts of Financial Liabilities Presented in Financial Liabilities Financial Liabilities in the Balance Sheets the Balance Sheets Securities sold under repurchase agreements$ 10,369,025 $ - $ 10,369,025	Related Amounts Not Offset in the Balance Sheets Financial Instruments Cash Collateral Received $ 10,256,716 $ - Related Amounts Not Offset in the Balance Sheets Financial Instruments Cash Collateral Pledged $ 10,369,025 $ -	Net Amount $ -
		Net Amount $ -

• 110 -

43. INFORMATION ABOUT THE BANK

a. Asset quality

Category	Items	Items			December 31, 2020					December 31, 2019
			Non-performing Loan (Note 1)	Total Loan	NPL Ratio (Note 2)	Allowance For Loan Losses	Coverage Ratio (Note 3)	Non-performing Loan (Note 1)	Total Loan	NPL Ratio (Note 2)	Allowance For Loan Losses	Coverage Ratio (Note 3)
Corporate loans	Secured		$ 452,737	$153,180,159	0.30%	$ 1,532,063	338.40%	$ 596,122	$146,760,794	0.41%	$ 1,560,901	261.84%
	Unsecured		96,665	77,217,829	0.13%	2,597,748	2,687.37%	156,327	78,622,829	0.20%	3,005,494	1,922.57%
Consumer loans	Mortgage(Note 4)		55,380	57,329,436	0.10%	905,827	1,635.66%	164,457	55,404,669	0.30%	863,083	524.81%
	Cash card		-	10	-	1	-	-	30	-	3	-
	Microcredit(Note 5)		456	893,160	0.05%	82,028	17,988.60%	2,676	840,780	0.32%	86,721	3,240.70%
	Other (Note 6)	Secured	361,301	150,343,195	0.24%	831,404	230.11%	428,694	144,347,108	0.30%	692,342	161.50%
		Unsecured	16,001	22,789,618	0.07%	385,922	2,411.86%	34,021	15,039,986	0.23%	364,775	1,072.21%
Loans			982,540	461,753,407	0.21%	6,334,993	644.76%	1,382,297	441,016,196	0.31%	6,573,319	475.54%
Category		Items			December 31, 2020					December 31, 2019
			Overdue Receivable	Accounts Receivable	Delinquency Ratio	Allowance for Credit Losses	Coverage Ratio	Overdue Receivable	Accounts Receivable	Delinquency Ratio	Allowance for Credit Losses	Coverage Ratio
Credit card			$ 3,192	$ 742,507	0.43%	$ 27,906	874.25%	$ 2,568	$ 786,214	0.33%	$ 22,982	894.94%
Accounts rec	eivable without reco	urse(Note 7)	-	154,805	-	5,805	-	-	649,997	-	10,538	-

• 111 -

Non-reportable overdue loans and receivables

	December 31, 2020	December 31, 2020	December 31, 2019	December 31, 2019
	Non-Reportable NPL Balance	Non-reportable Overdue Receivable Balance	Non-Reportable NPL Balance	Non-reportable Overdue Receivable Balance
Non-reportable amount upon performance of debt negotiationprogram(Note 8)	$ 1,568	$ 820	$ 2,114	$ 1,100
Amount received from performance of debt negotiationprogram(Note9)	8,303	19,280	9,635	17,396
Total	9,871	20,100	11,749	18,496

• Note 1: The amount recognized as non-performing loans (NPL) is in compliance with the “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-performing/Non-accrual Loans”. Non-performing credit loans represent the amounts of non-performing loans reported to the FSC, as required by the FSC in its letter dated July 6, 2005 (Ref. No. 0944000378).

• Note 2: Non-performing loan ratio = Non-performing loans ÷ Outstanding loan balance; Non-performing credit loan ratio = Non-performing loans ÷ Accounts receivable balance.

• Note 3: Allowance for doubtful accounts ratio = Allowance for doubtful accounts in loans ÷ Overdue loans; Allowance for doubtful accounts ratio of credit card = Allowance for doubtful accounts in credit cards ÷ Overdue loans.

• Note 4: Home mortgage refers to financing obtained to buy, build, or fix houses owned by the borrowers’ spouse or children, with the house used as loan collateral.

• Note 5: Microcredit is covered by the FSC pronouncement dated December 19, 2005 (Ref No. 09440010950) and is excluded from credit card and cash card loans.

• Note 6: “Others” under consumer loans refers to secured or unsecured loans other than mortgage loans, cash cards, microcredit, and credit cards.

• Note 7: As required by the FSC in its letter dated July 19, 2005 (Ref No. 094000494), a provision for bad debts is recognized once no compensation is made by a factor or insurance company for accounts receivable factored without recourse.

• Note 8: Accounts under “loans not required to be classified as NPL upon performance of a debt negotiation program” and “accounts receivable not required to be classified as overdue receivable upon debt negotiation program” were processed according the FSC pronouncement dated April 25, 2006 (Ref No. 09510001270).

• Note 9: Accounts under “loans not required to be classified as NPL upon performance of a debt discharge program and rehabilitation program” and “accounts receivable not required to be classified as overdue receivable upon debt discharge program and rehabilitation program” were processed according the FSC pronouncement dated September 15, 2008 (Ref No. 09700318940).

• 112 -

b. Concentration of credit extensions

(In Thousands of New Taiwan Dollars, %)

Year	December 31, 2020
Top 10 Rank (Note 1)	Group (Note 2)	Total Credit (Note 3)	Percentage of Net Worth (%)
1	Group A 016700real estate development activities	$ 4,673,280	8.15
2	Group B 016700real estate development activities	2,453,570	4.28
3	Group C 016811 real estate activities for sale and rental with own or leasedproperty	2,448,265	4.27
4	Group D 012411 smeltingand refiningof iron and steel	2,349,850	4.10
5	Group E 016700 real estate development activities	2,257,493	3.94
6	Group F 016700 real estate development activities	1,839,582	3.21
7	Group G 010892 manufacture of macaroni, noodles, couscous and similar farinaceousproducts	1,833,471	3.20
8	Group H 012630bare Printed circuit boards manufacturing	1,761,013	3.07
9	Group I 014612wholesale of brick,sand,cement andproducts	1,608,781	2.81
10	Group J 013822 hazardous industrialwaste treatment	1,370,909	2.39

• 113 -

**Year **	December 31, 2019
Top 10 Rank (Note 1)	Group (Note 2)	Total Credit (Note 3)	Percentage of Net Worth (%)
1	Group G 010892 manufacture of macaroni, noodles, couscous and similar farinaceousproducts	$ 2,665,813	5.20
2	Group A 016700 real estate development activities	2,525,418	4.92
3	Group E 016700 real estate development activities	2,503,343	4.88
4	Group B 016700 real estate development activities	2,390,690	4.66
5	Group C 016811 real estate activities for sale and rental with own or leasedproperty	2,375,429	4.63
6	Group D 012411 smeltingand refiningof iron and steel	2,283,081	4.45
7	Group F 016700 real estate development activities	2,115,000	4.12
8	Group K 015500 accommodation	2,085,229	4.06
9	Group L 012699 manufacture of other electronic parts and components not elsewhere classified	1,799,897	3.51
10	Group I 014612wholesale of brick,sand,cement andproducts	1,550,001	3.02

• Note 1: The ranking is arranged in descending order of the outstanding loan balance, excluding all the government entities and nation-owned enterprises. If the borrower is a member company of a group, then the disclosed amount will be the total granted loan amount for that entire group. (i.e., Group A real estate development activities).

• Note 2: According to Article 6 of the “Supplementary Provisions to the Stock Exchange Corporation Criteria for the Review of Securities Listings”, Group refers to the entity that has a controlling or subordinate relationship with the counterparty that obtained loans from the Bank.

• Note 3: Credit balance means the sum of all the loans (including import bill negotiated, discounted export bills negotiated, overdrafts, short-term secured and unsecured loans, securities margin loan receivables, medium-term secured and unsecured loans, long-term secured and unsecured loans and delinquent receivables), exchange bills negotiated, accounts receivable factored without recourse, acceptances receivable, and guarantees issued.

• 114 -

c. Interest rate sensitivity information

Interest Rate Sensitivity December 31, 2020

(In Thousands of New Taiwan Dollars, %)

Items	1 to 90 Days	91 to 180 Days	181 Days to **One Year **	Over One Year	Total
Interest-sensitive assets	$494,400,748	$11,473,341	$12,395,589	$89,911,813	$608,181,491
Interest-sensitive liabilities	141,248,259	332,636,992	104,373,534	7,963,232	586,222,017
Interest sensitivity gap	353,152,489	(321,163,651)	(91,977,945)	81,948,581	21,959,474
Net equity					57,321,753
Ratio of interest-sensitive assets to liabilities					103.75%
Ratio of interest sensitivity gapto net equity					38.31%

December 31, 2019

(In Thousands of New Taiwan Dollars, %)	(In Thousands of New Taiwan Dollars, %)	(In Thousands of New Taiwan Dollars, %)	(In Thousands of New Taiwan Dollars, %)	(In Thousands of New Taiwan Dollars, %)	(In Thousands of New Taiwan Dollars, %)
Items	1 to 90 Days	91 to 180 Days	181 Days to One Year	Over One Year	Total
Interest-sensitive assets	$463,217,920	$ 7,445,473	$ 9,154,304	$86,858,937	$566,676,634
Interest-sensitive liabilities	145,583,754	290,922,949	99,916,922	5,351,959	541,775,584
Interest sensitivity gap	317,634,166	(283,477,476)	(90,762,618)	81,506,978	24,901,050
Net equity					51,309,206
Ratio of interest-sensitive assets to liabilities					104.60%
Ratio of interest sensitivity gapto net equity					48.53%

• Note 1: The above amounts included only the New Taiwan dollar amounts held by the head office and branches of the Bank (i.e., excluding foreign currency).

• Note 2: Interest rate-sensitive assets and liabilities mean the revenues or costs of interest-earning assets and interest-bearing liabilities affected by interest rate changes.

• Note 3: Interest rate sensitivity gap = Interest rate-sensitive assets - Interest rate-sensitive liabilities.

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

Interest Rate Sensitivity December 31, 2020 (In Thousands of U.S. Dollars, %)	Interest Rate Sensitivity December 31, 2020 (In Thousands of U.S. Dollars, %)	Interest Rate Sensitivity December 31, 2020 (In Thousands of U.S. Dollars, %)	Interest Rate Sensitivity December 31, 2020 (In Thousands of U.S. Dollars, %)	Interest Rate Sensitivity December 31, 2020 (In Thousands of U.S. Dollars, %)	Interest Rate Sensitivity December 31, 2020 (In Thousands of U.S. Dollars, %)
Items	1 to 90 Days	91 to 180 Days	181 Days to **One Year **	Over One Year	Total
Interest-sensitive assets	$1,301,782	$ 251,958	$ 97,215	$ 346,387	$1,997,342
Interest-sensitive liabilities	446,709	1,232,085	310,522	-	1,989,316
Interest sensitivity gap	855,073	(980,127)	(213,307)	346,387	8,026
Net equity					2,039,993
Ratio of interest-sensitive assets to liabilities					100.40%
Ratio of interest sensitivity gapto net equity					0.39%

• 115 -

December 31, 2019

(In Thousands of U.S. Dollars, %)

Items	1 to 90 Days	91 to 180 Days	181 Days to One Year	Over One Year	Total
Interest-sensitive assets	$1,210,594	$ 231,333	$ 26,028	$ 436,459	$1,904,414
Interest-sensitive liabilities	781,756	909,543	216,067	-	1,907,366
Interest sensitivity gap	428,838	(678,210)	(190,039)	436,459	(2,952)
Net equity					1,710,307
Ratio of interest-sensitive assets to liabilities					99.85%
Ratio of interest sensitivity gapto net equity					(0.17%)

• Note 1: The above amounts included only the U.S. dollar amounts held by the head office, domestic branches, OBU and overseas branches of the Bank and excluded contingent assets and contingent liabilities.

• Note 2: Interest rate-sensitive assets and liabilities mean the revenues or costs of interest-earning assets and interest-bearing liabilities affected by interest rate changes.

• Note 3: Interest rate sensitivity gap = Interest rate-sensitive assets - Interest rate-sensitive liabilities.

• Note 4: Ratio of interest rate-sensitive assets to liabilities = Interest rate-sensitive assets ÷ Interest rate-sensitive liabilities (in U.S. dollars)

• d. Profitability

Unit: %

	Items	December 31, 2020	December 31, 2019
Return on total assets	Pretax	0.67	0.75
	After tax	0.57	0.64
Return on net equity	Pretax	8.59	10.22
	After tax	7.41	8.72
Profit margin		37.52	38.88

• Note 1: Return on total assets = Income before (after) income tax ÷ Average total assets

• Note 2: Return on equity = Income before (after) income tax ÷ Average equity

• Note 3: Net income ratio = Income after income tax ÷ Total net revenues

• Note 4: Income before (after) income tax represents income for the years ended December 31, 2020 and 2019.

• e. Maturity analysis of assets and liabilities

Maturity Analysis of Assets and Liabilities December 31, 2020

(In Thousands of New Taiwan Dollars)

	Total		Period	Remaining until D	ue Date and Amo	unt Due
		0-10 Days	11-30 Days	31-90 Days	91-180 Days	181 Days - **1 Year **	Over 1 Year
Major capital inflow on maturity	$660,315,443	$ 91,325,237	$ 54,943,741	$ 32,175,308	$ 53,461,993	$105,310,358	$323,098,806
Major capital outflow on maturity	782,299,588	27,709,161	30,881,366	82,879,363	103,396,608	188,375,958	349,057,132
Gap	(121,984,145)	63,616,076	24,062,375	(50,704,055)	(49,934,615)	(83,065,600)	(25,958,326)

• 116 -

December 31, 2019

(In Thousands of New Taiwan Dollars)

	Total		**Period **	Remaining until D	ue Date and Amo	unt Due
		0-10 Days	11-30 Days	31-90 Days	91-180 Days	181 Days - **1 Year **	Over 1 Year
Major capital inflow on maturity	$609,292,349	$ 85,555,035	$ 43,772,344	$ 29,767,509	$ 51,719,298	$ 97,885,687	$300,592,476
Major capital outflow on maturity	726,163,310	24,967,880	30,412,825	72,406,095	98,591,847	192,988,476	306,796,187
Gap	(116,870,961)	60,587,155	13,359,519	(42,638,586)	(46,872,549)	(95,102,789)	(6,203,711)

Note: The above amounts included only the New Taiwan dollar amounts held by the head office and domestic branches of the Bank (excluding foreign currency).

Maturity Analysis of Assets and Liabilities December 31, 2020

(In Thousands of U.S. Dollars)

	Total		Remaining Period to Maturity	Remaining Period to Maturity	Remaining Period to Maturity
		0-30 Days	31-90 Days	91-180 Days	181 Days - **1 Year **	Over 1 Year
Majorcapital inflow on maturity	$2,453,883	$ 324,701	$ 263,584	$ 348,501	$ 333,487	$1,183,610
Majorcapital outflow on maturity	3,092,693	437,764	787,792	584,280	986,987	295,870
Gap	(638,810)	(113,063)	(524,208)	(235,779 )	(653,500)	887,740

December 31, 2019

(In Thousands of U.S. Dollars)

	Total		Remaining Period to Maturity	Remaining Period to Maturity	Remaining Period to Maturity
		0-30 Days	31-90 Days	91-180 Days	181 Days - **1 Year **	Over 1 Year
Major capitalinflow on maturity	$2,159,517	$ 287,818	$ 258,938	$ 239,853	$ 141,120	$1,231,788
Majorcapital outflow on maturity	2,795,533	559,115	765,666	551,532	752,039	167,181
Gap	(636,016)	(271,297)	(506,728)	(311,679)	(610,919)	1,064,607

• Note 1: The above amounts included only the U.S. dollar amounts held by the head office, domestic branches, OBU and overseas branches of the Bank and excluded contingent assets and contingent liabilities.

• Note 2: When the OBU’s assets account for 10% of total assets of the Bank, the Bank should provide complimentary disclosed information.

44. CAPITAL MANAGEMENT

• a. The purpose of capital management is to meet the criteria set by administration which is the basic goal of the Group’s capital management. The calculation method of the relevant qualified eligible capital and legal capital should be handled in accordance with the regulations of the competent authority.

To maintain the ratio of eligible capital to risk-weighted assets above the target level, the capital management structure of the Group should be properly planned depending on the conditions of capital market, the characteristics of various capital instruments, the efficiency of capital utilization and the impact of operational performance.

• b. The Group follows the relevant regulations of the competent authority and the internal operating procedures of the Bank, to regularly disclose relevant information on capital adequacy and report to the competent authority on a quarterly basis.

Self-owned capital of the Bank is divided into Tier 1 capital and Tier 2 capital according to principles of capital adequacy management.

• 117 -

• 1) The term “Net Tier 1 Capital” shall mean the aggregate amount of net common Equity Tier 1 and net additional Tier 1 Capital.

• a) The common equity Tier 1 capital consists of the common shares and additional paid-in capital in excess of par - common shares, the capital collected in advance, the capital reserves, the statutory surplus reserves, the special reserves, the accumulated profit or loss, the non-controlling interests and other items of interest.

• b) Additional Tier 1 capital consists of non-cumulative perpetual preferred shares and its capital share premium, the non-cumulative perpetual subordinated debts, the non-cumulative perpetual preferred shares and its capital share premium, and the non-cumulative perpetual subordinated debts which are issued by banks’ subsidiaries, and are not directly or indirectly held by banks.

• 2) Tier 2 capital

The Tier 2 capital consists of cumulative perpetual preferred shares and its capital share premium, the cumulative perpetual subordinated debts, the convertible subordinated debts, the long-term subordinated debts, the non-perpetual preferred shares and its capital share premium, when applying International Financial Reporting Standards in real estate and using the fair value method or the re-estimated value method as the deemed cost for the first time, the difference in amount between the deemed cost and the book value recognized in retained earnings, the 45% of unrealized gains on changes in the fair value of investment properties using the fair value method, as well as the 45% of unrealized gains on available-for-sale financial assets, the operational reserves and loan-loss provisions and the cumulative perpetual preferred shares and its capital share premium, the cumulative perpetual subordinated debts, the convertible subordinated debts, the long-term subordinated debts, and the non-perpetual preferred shares and its capital share premiums, which are issued by banks’ subsidiaries, and are not directly or indirectly held by banks.

c. Capital adequacy ratio (CAR)

(Unit: In Thousands of New Taiwan Dollars, %)

Items	Year	Year	December 31, 2020	December 31, 2019
Eligible capital	Common equity		$56,213,035	$50,574,005
	Other Tier 1 capital		11,459,213	11,424,239
	Tier 2 capital		5,546,094	5,572,418
	Eligible capital		73,218,342	67,570,662
Risk-weighted assets	Credit risk	Standardized approach	485,553,191	455,727,824
		Internal ratings-based approach	-	-
		Securitization	-	-
	Operational risk	Basic indicator approach	22,082,050	21,789,238
		Standardized approach/alternative standardized approach	-	-
		Advanced measurement approach	-	-
	Market risk	Standardized approach	9,782,200	8,165,000
		Internal model approach	-	-
	Risk-weighted assets		517,417,441	485,682,062
Capital adequacyratio(%)			14.15%	13.91%
Ratio of common equityto risk-weighted assets(%)			10.86%	10.41%
Ratio of Tier 1 capital to risk-weighted assets(%)			13.08%	12.77%
Leverage ratio(%)			8.75%	8.69%

• 118 -

• Note 1: Eligible capital and risk-weighted assets are calculated under the “Regulations Governing the Capital Adequacy Ratio of Banks” and “Explanation of Methods for Calculating the Eligible Capital and Risk-Weighted Assets of Banks”.

• Note 2: Annual financial statements should include capital adequacy ratio of the current and prior year. Semi-annual financial statements in addition to exposing the current and prior year’s financial status, should also include the capital adequacy ratio at the end of prior year.

Note 3: Formulas used were as follows:

• 1) Eligible capital = Common equity + Other Tier 1 capital + Tier 2 capital.

• 2) Risk-weighted assets = Risk-weighted asset for credit risk + Capital requirements for operational risk and market risk x 12.5.

• 3) Capital adequacy ratio = Eligible capital ÷ Risk-weighted assets.

• 4) Ratio of the common equity to risk-weighted assets = Common equity ÷ Risk-weighted assets.

• 5) Ratio of Tier 1 capital to risk-weighted assets = (Common equity + Other Tier 1 capital) ÷ Risk-weighted assets.

• 6) Leverage ratio = Tier 1 capital ÷ Exposure measurement.

• Note 4: Exempt from disclosure in the preparation of the first and third quarters of the financial reports.

45. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

Details of significant assets and liabilities denominated in foreign currencies were as follows:

Financial assets in foreign currencies Cash and cash equivalents Due from the Central Bank and call loans to other banks Financial assets at fair value through profit or loss Financial assets at fair value through other comprehensive income Notes discounted and loans Receivables Financial assets at amortized cost Other assets Financial liabilities in foreign currencies Due to the Central Bank and other banks Funds borrowed from Central Bank and other banks Deposits and remittances Financial liabilities at fair value through profit or loss

December 31, 2020

USD CNY JPY AUD EUR Others Total $ 3,859,375 $ 487,676 $ 369,085 $ 135,056 $ 137,767 $ 496,070 $ 5,485,029 73,057 86,340 - - - 374,987 534,384 1,189,924 - - - 3,509 90,688 1,284,121 1,736,382 1,928,804 - 132,488 - - 3,797,674 31,203,325 1,112,690 413,612 81,659 1,176,027 1,017,500 35,004,813 805,151 2,967,309 209,852 14,156 445,269 68,749 4,510,486 18,565,402 3,842,754 - 1,428,655 - 941,953 24,778,764 495,580 86,340 - - - 1 581,921 702,478 - 408,753 - - - 1,111,231 - 2,222,528 - - - - 2,222,528 54,085,876 4,231,763 635,885 2,261,598 563,925 2,236,821 64,015,868 304,098 36,706 - - 3,780 2,154 346,738 (Continued)

• 119 -

Other financial liabilities Payables Lease liabilities Securities sold under repurchased agreements Provisions Other liabilities New Taiwan dollars exchange rate Financial assets in foreign currencies Cash and cash equivalents Due from the Central Bank and call loans to other banks Financial assets at fair value through profit or loss Financial assets at fair value through other comprehensive income Notes discounted and loans Receivables Financial assets at amortized cost Other assets Financial liabilities in foreign currencies Due to the Central Bank and other banks Funds borrowed from Central Bank and other banks Deposits and remittances Financial liabilities at fair value through profit or loss Payables Lease liabilities Securities sold under repurchased agreements Provisions Other liabilities New Taiwan dollars exchange rate	December 31, 2020
	USD CNY JPY AUD EUR Others Total $ - $ - $ - $ - $ - $ 107,246 $ 107,246 1,093,982 193,025 198,722 162,732 61,890 59,780 1,770,131 - 41,981 - - - 5,529 47,510 1,096,485 - - - - - 1,096,485 21,174 - - - - - 21,174 109,079 7,932 234 - 8,518 - 125,763 28.10 4.32 0.27 21.65 34.55 (Concluded) December 31, 2019
	USD CNY JPY AUD EUR Others Total $ 1,989,452 $ 1,132,113 $ 1,020,819 $ 369,682 $ 111,721 $ 389,871 $ 5,013,658 60,000 94,754 - 273,260 - - 428,014 1,183,605 14,669 - 210 - - 1,198,484 1,081,986 - - - - - 1,081,986 34,318,741 877,054 369,279 78,956 414,949 848,924 36,907,903 1,526,730 3,283,336 161,925 39,577 109,455 70,775 5,191,798 19,180,305 2,368,093 - 1,282,208 - 959,972 23,790,578 121,236 86,140 - - - - 207,376 1,490,060 - - - 100,860 9,940 1,600,860 114,000 2,502,533 - - - - 2,616,533 47,488,086 3,128,176 678,269 2,278,560 539,523 1,838,341 55,950,955 104,773 - - 300 65 - 105,138 797,132 200,782 111,876 8,857 126,869 116,283 1,361,799 - 48,951 - - - 7,726 56,677 8,366,270 - - - - - 8,366,270 28,552 - - - - - 28,552 73,580 9,505 1,803 - 3,343 - 88,231 30.00 4.31 0.28 21.02 33.62

46. CASH FLOW INFORMATION

Changes in Liabilities Arising from Financing Activities

For the year ended December 31, 2020

Funds borrowed from Central Bank and other banks Commercial papers Guarantee deposits received Bank debentures Lease liabilities	Opening Balance $ 6,092,040 1,174,083 582,064 14,000,000 895,285 $ 22,743,472	Cash Inflows (Outflows) $ 2,418,612 414,484 (14,916 ) (2,500,000 ) (203,293) $ 114,887		Non-cash Changes New Leases End of Lease Term $ - $ - - - - - - - 367,498 (52,709) $ 367,498 $ (52,709)	Closing Balance $ 8,510,652 1,588,567 567,148 11,500,000 1,006,781
				New Leases $ - - - - 367,498 $ 367,498
					$ 23,173,148

• 120 -

For the year ended December 31, 2019

Funds borrowed from Central Bank and other banks Commercial papers Guarantee deposit received Bank debentures Lease liabilities	Opening Balance $ 5,495,519 998,680 568,435 20,000,000 1,039,866 $ 28,102,500	Cash Inflows (Outflows) $ 596,521 175,403 13,629 (6,000,000 ) (198,107) $ (5,412,554)		Non-cash Changes New Leases End of Lease Term $ - $ - - - - - - - 322,926 (269,400) $ 322,926 $ (269,400)	Closing Balance $ 6,092,040 1,174,083 582,064 14,000,000 895,285
				New Leases $ - - - - 322,926 $ 322,926
					$ 22,743,472

47. OTHER SIGNIFICANT EVENT

Due to the impact of the COVID-19 pandemic, future economic and financial development are uncertain. The Group strengthened its management towards the provision of loans, monitored and assessed financial information (including net revenue, expected impairment loss, operating expenses and capital adequacy ratio, etc.) by applying stress testing under additional pressure. Based on the information available as of the balance sheet date, the epidemic did not have significant influence on the Group’s ability to continue as a going concern, asset impairment and financing risk.

48. OPERATING SEGMENT FINANCIAL INFORMATION

Information reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance focuses on the types of goods or services delivered or provided. The Group’s reportable segments are as follows:

Northern area Central area Southern area OBU Overseas branch Head office and others

a. Segment revenues and results

The analysis of the Group’s revenue and results from continuing operations by reportable segment is as follows:

For the year ended December 31, 2020 Interest revenue Interest expense Net revenue Net income and loss other than interest Service fee income Gain on financial instruments Others Provision for bad debts expense, commitments and guarantee liabilities Operating expenses Income (loss) before income tax	Northern Area $ 3,189,983 (1,435,971) 1,754,012 486,272 16,526 14,912 (399,504 ) (807,104) $ 1,065,114	Central Area $ 4,614,512 (1,384,983) 3,229,529 839,754 53,201 23,231 (45,289 ) (1,459,005) $ 2,641,421	Southern Area $ 2,837,530 (913,793) 1,923,737 536,540 21,316 19,490 10,680 (1,004,667) $ 1,507,096	OBU $ 1,489,165 (742,619) 746,546 95,460 107,264 (33,078 ) (15,302 ) (38,396) $ 862,494	Overseas Branch $ 78,408 (21,988) 56,420 8,306 - 15,673 (12,054 ) (27,649) $ 40,696	Head Office and Others Adjustment and Write-off Total $ 2,455,061 $ (2,535,230 ) $ 12,129,429 (1,886,212) 2,535,230 (3,850,336) 568,849 - 8,279,093 939,571 - 2,905,903 (64,961 ) - 133,346 360,486 (75,314 ) 325,400 (57,563 ) (519,032 ) (3,104,773) 75,314 (6,366,280) $ (1,358,391) $ - $ 4,758,430 (Continued)

• 121 -

For the year ended December 31, 2019 Interest revenue Interest expense Net revenue Net income and loss other than interest Service fee income Gain on financial instruments Others Provision for bad debts expense, commitments and guarantee liabilities Operating expenses Income (loss) before income tax	Northern Area $ 3,515,081 (1,664,235) 1,850,846 453,415 26,422 13,661 (686,193 ) (846,131) $ 812,020	Central Area $ 5,177,962 (1,535,001) 3,642,961 820,649 46,435 28,812 (180,314 ) (1,558,845) $ 2,799,698	Southern Area $ 3,131,905 (1,034,086) 2,097,819 531,960 14,816 26,972 (381,850 ) (1,052,138) $ 1,237,579	OBU $ 1,961,867 (1,317,893) 643,974 99,767 52,811 (13,705 ) (161,912 ) (36,910) $ 584,025	Overseas Branch $ 59,514 (23,805) 35,709 6,504 - 19,302 (22,645 ) (27,466) $ 11,404	Head Office and Others Adjustment and Write-off $ 2,425,966 $ (2,838,518 ) (2,346,745) 2,838,518 79,221 - 1,001,020 - 378,383 - 313,229 (75,355 ) 817,440 - (2,827,034) 75,355 $ (237,741) $ -	Total $ 13,433,777 (5,083,247) 8,350,530 2,913,315 518,867 312,916 (615,474 ) (6,273,169) $ 5,206,985

(Concluded)

This measure is provided to the chief operating decision maker for resources allocation and measurement of segment performance.

b. Segment assets

Segment Assets Northern area Central area Southern area OBU Overseas branch Head office and others		December 31	December 31
		2020 $ 139,108,081 196,947,682 99,754,054 56,666,372 2,615,256 241,678,576 $ 736,770,021	2019 $ 131,547,637 190,521,187 97,703,639 55,115,671 1,696,811 206,103,977 $ 682,688,922

c. Revenue from major products and services

The Group is mainly involved in the business of earning interest revenue; therefore, no product or service information is available.

d. Geographical information

Location Taiwan Asia America	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2020 $ 11,422,810 218,244 2,688 $ 11,643,742	2019 $ 11,825,672 258,904 11,052 $ 12,095,628

e. Information about major customers

The interest revenue of the Group from any single customer does not exceed 10% of the total interest revenue; therefore, information on major customers is not available.

• 122 -

49. ADDITIONAL DISCLOSURES

• a. Information about significant transactions and investees:

Disclosures of relevant information in accordance with Article 18 of Regulations Governing the Preparation of Financial Reports by Public Banks are as follows:

No.	Item	Note
1	Marketable securities acquired and disposed of at costs or prices of at least NT$300million or 10%of thepaid-in capital.	None
2	Acquisition of individual real estate at costs of at least NT$300 million or 10%of thepaid-in capital.	None
3	Disposal of individual real estate at prices of at least NT$300 million or 10%of thepaid-in capital.	None
4	Allowance of service fees to Related party amounting to at least NT$5 million.	None
5	Receivables from Related party amounting to at least NT$300 million or 10%of thepaid-in capital.	None
6	Sale of nonperformingloans.	None
7	Financial asset securitization and real estate securitization.	None
8	Other significant transactions which may affect the decisions of users of financial reports.	None

b. The related information of the Group’s investees (Note):

No.	Item	Note
1	Related information andproportionate share in investees.	Table 1
2	Financing provided.	Table 2
3	Endorsement/guaranteeprovided.	Table3
4	Marketable securities held.	Table 4
5	Marketable securities acquired and disposed of at costs or prices of at least NT$300 million or 10% of thepaid-in capital	None
6	Derivative transactions.	Note8
7	Other significant transactions which may affect the decisions of users of financial reports.	None

Note: Subsidiaries are exempt from disclosure if they belong to the financial, insurance, and securities industries, and the main business items of business registration include fund loans to others, endorsements, and trading of securities.

• c. Investment in mainland China: Table 5 (attached).

• d. Business relationships and significant transactions between the parent company and subsidiaries: Table 6 (attached).

• e. Information of major shareholders: List all shareholders with ownership of 5% or greater showing the name of the shareholder, the number of shares owned, and percentage of ownership of each shareholder (Table 7).

• 123 -

TABLE 1

TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

THE RELATED INFORMATION AND PROPORTIONATE SHARE IN INVESTEES FOR THE YEAR ENDED DECEMBER 31, 2020

(In Thousands of New Taiwan Dollars)

Investor Company	Investee Company (Note 1)	Location	Main Businesses and Products	Percentage of Ownership	Carrying Value	Investment Gain (Loss)	Proportionate Share of the Bank (Note	Proportionate Share of the Bank (Note	and Its Affiliates in Investees 1)	and Its Affiliates in Investees 1)	Note
							Shares (In Thousands)	Pro Forma Shares (Note 2)	Total
									Shares (In Thousands)	Percentage of Ownership
Taichung Commercial Bank Co., Ltd. Taichung Bank Leasing Corporation Limited TCCBL Co., Ltd. (B.V.I.) Taichung Commercial Bank Securities Co., Ltd.	Taichung Bank Insurance Brokers Co. Taichung Bank Securities Investment Trust Co., Ltd. Taichung Commercial Bank Securities Co., Ltd. Taichung Bank Leasing Corporation Limited TCCBL Co., Ltd. (B.V.I.) Taichung Bank Financial Leasing (Suzhou) Co., Ltd. Taichung Bank Venture Capital Co., Ltd.	Taichung City Taipei City Taichung City Taipei City British Virgin Islands Suzhou Taipei City	Insurance broker industry Securities investment trust industry Securities industry Leasing business Financial leasing and investment business Financial leasing business Venture capital business	100.00 38.46 100.00 100.00 100.00 100.00 100.00	$ 1,831,053 163,148 1,514,812 1,931,004 781,046 736,562 214,732	$ 256,747 (3,294) 128,246 27,868 (3,996) 8,726 4,732	128,600 19,783 140,429 196,463 30,000 - 21,000	- - - - - - -	128,600 19,783 140,429 196,463 30,000 - 21,000	100.00 63.41 100.00 100.00 100.00 100.00 100.00

Note 1: Shares or pro forma shares held by the Bank, directors, supervisors, president, vice president and affiliates have all been included in accordance with the Company Act.

• Note 2: a. Pro forma shares are shares assumed to be obtained through buying equity-based securities or entering into equity-linked derivative contracts for purposes defined in Article 74 of the Banking Law. b. Equity-based securities, such as convertible bonds and warrants, are covered by Article 11 of “Securities and Exchange Law Enforcement Rules.”

c. Derivative contracts, such as share options, are those conforming to the definition of derivatives in International Financial Reporting Standard 9.

Note 3: This table of “information of investees’ names, locations, etc.” can only be seen in the second and fourth quarter’s financial statements.

• 124 -

TABLE 2

TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

FINANCING PROVIDED TO OTHERS FOR THE YEAR ENDED DECEMBER 31, 2020 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

No. (Note 1)	Lender	Borrower	Financial Statements Accounts (Note 2)	Related Party	Highest Balance for the period (Note 3)	Ending Balance (Note 8)	Actual Amount Borrowed	Interest Rate (%)	Nature of Financing (Note 4)	Business Transaction Amount (Note 5)	Reasons for Short-term Financing (Note 6)	Allowance for Impairment Loss	**Collateral **	**Collateral **	Financing Limit for Each Borrower (Note 7)	Aggregate Financing Limit (Note 7)	Note
													Item	Value
1	Taichung Bank Leasing Corporation Limited	Yuan Li Engineering Inc. Kuang Ming Shipping Corp. Wisdom International industrial Co., Ltd. Pao Hung Construction industrial Co., Ltd. Wan Ku Fu Co., Ltd Da Fang Skill Color Marketing Consulting Co., Ltd. Qiyi Integrated Marketing Co., Ltd TCCBL Co., Ltd. (B.V.I.)	Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables	Not related Not related Not related Not related Not related Not related Not related Related	$ 16,298 42,150 75,177 114,260 128,263 180,000 180,000 9,804	$ - - - - 121,829 178,152 176,081 9,390	$ - - - - 95,224 178,152 176,081 9,390	4-10 4-10 3.5-10 4-10 4-10 4-10 4-10 -	Necessary for short-term financing Necessary for short-term financing Necessary for short-term financing Necessary for short-term financing Necessary for short-term financing Necessary for short-term financing Necessary for short-term financing Necessary for short-term financing	$ - - - - - - - -	Business turnover Business turnover Business turnover Business turnover Business turnover Business turnover Business turnover Business turnover	$ - - - - 952 1,782 1,761 94	None Margin None Real estate Real estate Real estate Real estate None	$ - 20,000 - 64,244 111,829 180,000 372,093 -	$ 193,100 193,100 193,100 193,100 193,100 193,100 193,100 193,100	$ 772,402 772,402 772,402 772,402 772,402 772,402 772,402 772,402	Note 9 Note 9 Note 9 Note 9 Note 9 Note 9 Note 9 Note 9
2	TCCBL Co., Ltd. (B.V.I.)	Cross Border Profits Limited	Other receivables	Not related	23,262	5,395	5,395	4-10	Necessary for short-term financing	-	Business turnover	26	Margin	2,810	78,105	312,418	Note 10
3	Taichung Bank Financial Leasing (Suzhou) Co., Ltd.	Zhangjiajie Zhongjun Real Estate Co., Ltd	Entrusted Loan	Not related	14,276	-	-	9.6	Necessary for short-term financing	-	Capital investment plan expenditure	-	Real estate	232,729	294,625	294,625	Note 11

Note 1: The description of the number column is as follows:

a. Issuer: 0.

• b. The invested company is numbered sequentially by the Arabic number 1 according to the company.

Note 2: Items such as accounts receivable, corporate receivables, shareholder transactions, prepayments, provisional payments, etc., which are provided by financing are required to be filled in this field.

Note 3: The annual fund is provided to others to the highest balance.

Note 4: Nature of financing should be filled with business contracts or those who have short-term financing.

Note 5: Nature of the loan of the business contracts should be filled with the amount of business transactions. The amount of business transactions refers to the amount of business transactions between the company that lends the funds and the target of last year’s loan.

Note 6: Nature of the loan required for short-term financing should specify the reasons for the loans and the use of funds for the loan, such as repayment of loans, purchase of equipment, business turnover, etc.

Note 7: The company shall fill in the borrowing limit and total limit for individual objects according to the operating procedures and explains the calculation method of the total limit in the column Note.

Note 8: If the board of directors of the public offering company according to Article 14 (1) of the Public Offering Company’s Financing and Endorsement Guarantee Processing Guidelines will make a resolution, the amount of the resolution of the board of directors shall be included in the announcement balance to disclose its risk; however, if the funds are repaid, the balance after repayment should be disclosed to reflect the adjustment of risk. If the public offering company authorizes the chairman of the board to allocate or repay the loan in a certain amount and within one year according to the resolution of the board of directors in accordance with Article 14(2) of the handling criteria, the fund’s loan and the amount approved by the board of directors shall be the declared balance. Although the funds will be repaid afterwards, the consideration may still be re-loaned. Therefore, the fund loan and the amount approved by the board of directors should still be used as the announced balance.

Note 9: Taichung Bank Leasing Corporation Limited should not exceed 10% of its own net value for a single enterprise. The total amount of financing provided to others is limited to 40% of the net value of Taichung Bank Leasing Corporation Limited

Note 10: TCCBL Co., Ltd. (B.V.I.) should not exceed 10% of its own net value for a single enterprise. The total amount of financing provided to others is limited to 40% of the net value of TCCBL Co., Ltd. (B.V.I.).

Note 11: Taichung Bank Financial Leasing (Suzhou) Co., Ltd. should not exceed 40% of its own net value for a single enterprise. The total amount of financing provided to others is limited to 40% of the net value of Taichung Bank Financial Leasing (Suzhou) Co., Ltd.

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TABLE 3

TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

ENDORSEMENTS/GUARANTEES PROVIDED FOR THE YEAR ENDED DECEMBER 31, 2020 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

No.	Endorser/Guarantor	Endorsee/Guarantee	Endorsee/Guarantee	Limit on Endorsement/ Guarantee Given on Behalf of Each Party (Note 1)	Maximum Amount Endorsed/ Guaranteed During the Period (Note 2)	Outstanding Endorsement/ Guarantee at the End of the Period	Actual Borrowing Amount	Amount Endorsed/ Guaranteed by Collateral	Ratio of Accumulated Endorsement/ Guarantee to Net Equity in Latest Financial Statements (%)	Aggregate Endorsement/ Guarantee Limit (Note 1)	Endorsement/ Guarantee Given by Parent on Behalf of Subsidiaries (Note 3)	Endorsement/ Guarantee Given by Subsidiaries on Behalf of Parent (Note 3)	Endorsement/ Guarantee Given on Behalf of Companies in Mainland China (Note 3)
		Name	Relationship
1	Taichung Bank Leasing Corporation Limited	TCCBL Co., Ltd. (B.V.I.)	Direct shareholding of 100% of subsidiary	$ 11,586,024	$ 942,289	$ 632,228	$ -	$ -	32.74	$ 19,310,040	-	-	-
2	Taichung Bank Leasing Corporation Limited	Taichung Bank Financial Leasing (Suzhou) Co., Ltd.	Indirect shareholding of 100% of subsidiary	11,586,024	2,124,584	2,050,765	1,705,122	-	106.21	19,310,040	-	-	Y

Note 1: According to Taichung Bank Leasing Corporation Limited’s “Operating Procedures to Fund Endorsement and Guarantee”, the endorsement limit to single company cannot surpass six times of Taichung Bank Leasing Corporation Limited’s audited net worth. The endorsement limits to all subsidiaries cannot surpass 10 times of Taichung Bank Leasing Corporation Limited’s audited net worth.

Note 2:

The maximum balance guaranteed for endorsement of others during the year.

Note 3:

It is a guarantor of the listed parent company to the endorsement of the subsidiary, the subsidiary company's endorsement to the listed parent company and the endorsement of the mainland area must be filled with Y.

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TABLE 4

TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

MARKETABLE SECURITIES HELD FOR THE YEAR ENDED DECEMBER 31, 2020 (In Thousands of New Taiwan Dollars or Shares)

Name of Holding Company	Type and Name of Marketable Securities	Relationship	Financial Statements Account		December 31, 2020	December 31, 2020		Note
				Number of Shares	Carrying Amount (Note)	Percentage of Ownership (%)	Market Value or Net Asset Value (Note)
Taichung Commercial Bank Co., Ltd. Taichung Bank Leasing Corporation Limited TCCBL Co., Ltd. (B.V.I.) Taichung Bank Securities Co., Ltd.	Domestic unlisted shares Taichung Bank Leasing Corporation Limited Taichung Bank Insurance Brokers Co., Ltd. Taichung Bank Securities Co., Ltd. Taichung Bank Securities Investment Trust Co., Ltd. Foreign unlisted shares TCCBL Co., Ltd. (B.V.I.) Foreign unlisted shares Taichung Bank Financial Leasing (Suzhou) Co., Ltd. Domestic unlisted shares Taichung Bank Venture Capital Co., Ltd.	Subsidiary Subsidiary Subsidiary Association Sub-subsidiary Sub-subsidiary Sub-subsidiary	Investment accounted for using the equity method Investment accounted for using the equity method Investment accounted for using the equity method Investment accounted for using the equity method Investment accounted for using the equity method Investment accounted for using the equity method Investment accounted for using the equity method	196,463 128,600 140,429 12,000 30,000 - 21,000	$ 1,931,004 1,831,053 1,514,812 163,148 781,046 736,562 214,732	100 100 100 38 100 100 100	$ 1,931,004 1,831,053 1,514,812 163,148 781,046 736,562 214,732

Note: The financial industry, the insurance industry and the securities industry are exempt from disclosure.

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TABLE 5

TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

INVESTMENT IN MAINLAND CHINA FOR THE YEAR ENDED DECEMBER 31, 2020 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Investee Company Name	Main Businesses and Products	Main Businesses and Products	Total Amount of Paid-in Capital	Total Amount of Paid-in Capital	Investment Type	Accumulated Outflow of Investment from Taiwan as of January 1, 2020	Investment Flows	Investment Flows	Accumulated Outflow of Investment from Taiwan as of December 31, 2020	% Ownership of Direct or Indirect Investment	Investment Gain	Carrying Value as of December 31, 2020	Accumulated Inward Remittance of Earnings as of December 31, 2020
							Outflow	Inflow
Taichung Bank Financial Leasing (Suzhou) Co., Ltd.	Financial leasing business		$ 893,373 (CNY 186,329 thousand)		Investment in mainland China companies through an existing company established in a third region.	$ 893,373 (CNY 186,329 thousand)	$ -	$ -	$ 893,373 (CNY 186,329 thousand)	100	$ 8,726 (CNY 2,045 thousand)	$ 736,562 (CNY 170,619 thousand)	$ -
Accumulated Investment in Mainland China as of December 31, 2020		Investment Amount Approved by the Investment Commission, MOEA		Maximum Investment Allowable (Note 2)
$893,373		$893,373		$1,158,602

Note 1: Recognition of investment gains and losses based on the financial statements audited by the parent company’s accountant.

Note 2: Based on the Investment Commission’s “Regulation on the Examination of Investment or Technical Cooperation in Mainland China”, investments are limited to the regulation of Taichung Bank Leasing Corporation Limited’s calculation.

Note 3: Foreign currency involved translation into the New Taiwan dollar at the spot rate and average exchange rate on the date of the financial statements (CNY1=NT$4.32, CNY1=NT$4.27).

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TABLE 6

TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

BUSINESS RELATIONSHIPS AND SIGNIFICANT TRANSACTIONS BETWEEN THE PARENT COMPANY AND SUBSIDIARIES FOR THE YEAR ENDED DECEMBER 31, 2020

(In Thousands of New Taiwan Dollars)

No. (Note 1)	Transaction Company	Counterparty	Transaction Flow (Note 2)		Description of Transactions	Description of Transactions
				Financial Statement Account	Amount (Note 3)	Trading Terms	Transaction Amount/Total Consolidated Net Revenue or Total Consolidated Assets (%) (Note 4)
0	December 31, 2020 Taichung Commercial Bank Co., Ltd.	Taichung Insurance Brokers Co. Taichung Insurance Brokers Co. Taichung Insurance Brokers Co. Taichung Commercial Bank Securities Co., Ltd. Taichung Commercial Bank Securities Co., Ltd. Taichung Bank Leasing Corporation Limited. Taichung Bank Venture Capital Co., Ltd.	a a a a a a a	Deposits and remittances Service fee income Receivables Deposits and remittances Feedback fund Deposits and remittances Deposits and remittances	$ 1,330,849 200,000 16,663 106,957 30,130 57,503 188,268	The terms for the transactions between the company and related parties are similar to those for unrelated parties. The terms for the transactions between the company and related parties are similar to those for unrelated parties. The terms for the transactions between the company and related parties are similar to those for unrelated parties. The terms for the transactions between the company and related parties are similar to those for unrelated parties. The terms for the transactions between the company and related parties are similar to those for unrelated parties. The terms for the transactions between the company and related parties are similar to those for unrelated parties. The terms for the transactions between the company and related parties are similar to those for unrelated parties.	- 2 - - - - -
1	Taichung Commercial Bank Securities Co., Ltd.	Taichung Commercial Bank Co., Ltd. Taichung Commercial Bank Co., Ltd.	b b	Right-of-use assets Lease liabilities	20,143 20,326	The terms for the transactions between the company and related parties are similar to those for unrelated parties. The terms for the transactions between the company and related parties are similar to those for unrelated parties.	- -
							(Continued)

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(Concluded)

• Note 1: The parent company and subsidiaries are numbered as follows:

• a. Parent company: 0.

• b. Subsidiaries are numbered sequentially from 1.

Note 2: Transaction flows are as follows:

• a. From parent company to subsidiary,

• b. From subsidiary to parent company, and

• c. Between subsidiaries.

Note 3: Have been eliminated on consolidation.

• Note 4: Percentage to the consolidated total assets is calculated by dividing the amount of a particular asset or liability account by the consolidated total assets as of December 31, 2020 and 2019. Percentage to the consolidated total revenues is calculated by dividing the amount of a particular revenue or cost or expense account by the consolidated total operating revenues for the years ended December 31, 2020 and 2019.

• Note 5: Referring to transactions exceeding $10,000 thousand.

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TABLE 7

TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

INFORMATION OF MAJOR SHAREHOLDERS DECEMBER 31, 2020

Name of Major Shareholder	Shares	Shares
	Number of Shares	Percentage of Ownership (%)
China Man-Made Fiber Corporation Pan Asia Chemical Corporation	913,492,857 234,255,531	22.00 5.64

• Note 1: According to Article 25 of the Banking Act of the Republic of China, the same person or same related party who individually, jointly or collectively acquires more than 5% of a bank’s outstanding voting shares shall report such fact to the authorities within 10 days from the date of acquisition.

• Note 2: If the shares of the major shareholders in the above table are held by trustees, the shareholdings should be separately disclosed by the trust accounts opened by the trustee. As for shareholders' handling of insider shareholding declarations with more than 10% of their shares in accordance with the Securities Exchange Act, their shareholdings include their own shareholdings plus those shares held under trust accounts with the right to utilize the trust assets, etc. For more information on insider shareholding declarations, please refer to the market observation post system website of the TWSE.

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