T.C.C.B. - Interim / Quarterly Report 2020

Taichung Commercial Bank Co., Ltd. and Subsidiaries

Consolidated Financial Statements for the Six Months Ended June 30, 2020 and 2019 and Independent Auditors’ Review Report

INDEPENDENT AUDITORS’ REVIEW REPORT

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

Introduction

We have reviewed 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 June 30, 2020 and 2019, the consolidated statements of comprehensive income for the three months ended June 30, 2020 and 2019 and for the six months ended June 30, 2020 and 2019, changes in equity and cash flows for the six months then ended, and the notes to the consolidated financial statements, including a summary of significant accounting policies. Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Public Banks, Regulations Governing the Preparation of Financial Reports by Securities Firms, and International Accounting Standard 34 “Interim Financial Reporting” endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China. Our responsibility is to express a conclusion on the consolidated financial statements based on our reviews.

Scope of Review

We conducted our reviews in accordance with Statement of Auditing Standards No. 65 “Review of Financial Information Performed by the Independent Auditor of the Entity”. A review of consolidated financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our reviews, nothing has come to our attention that caused us to believe that the accompanying consolidated financial statements do not present fairly, in all material respects, the consolidated financial position of the Group as of June 30, 2020 and 2019, its consolidated financial performance for the three months ended June 30, 2020 and 2019, and its consolidated financial performance and its consolidated cash flows for the six months ended June 30, 2020 and 2019 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 Accounting Standard 34 “Interim Financial Reporting” endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

Other Matter

We have also audited the parent company only financial statements of the Bank as of and for the six months ended June 30, 2020 and 2019 on which we have issued an unmodified opinion.

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

Deloitte & Touche Taipei, Taiwan Republic of China

August 6, 2020

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 review such consolidated financial statements are those generally applied in the Republic of China.

For the convenience of readers, the independent auditors’ review 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’ review report and consolidated financial statements shall prevail.

TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands of New Taiwan Dollars)

ASSETS CASH AND CASH EQUIVALENTS (Note 6) DUE FROM THE CENTRAL BANK AND CALL LOANS TO OTHER BANKS (Notes 7 and 36) FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (Note 8) FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME (Note 9) INVESTMENTS IN DEBT INSTRUMENTS AT AMORTIZED COST (Notes 10 and 36) SECURITIES PURCHASED UNDER RESELL AGREEMENTS (Note 11) RECEIVABLES, NET (Notes 12 and 36) CURRENT TAX ASSETS (Note 4) NOTES DISCOUNTED AND LOANS, NET (Notes 13 and 35) INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD, NET (Note 14) RESTRICTED ASSETS, NET (Notes 15 and 36) OTHER FINANCIAL ASSETS, NET (Note 16) PROPERTIES AND EQUIPMENT, NET (Note 17) RIGHT-OF-USE ASSETS, NET (Note 18) INVESTMENT PROPERTIES, NET (Note 19) INTANGIBLE ASSETS, NET (Note 20) DEFERRED TAX ASSETS (Note 4) OTHER ASSETS (Notes 21 and 36) 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 36) FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS (Note 8) SECURITIES SOLD UNDER REPURCHASE AGREEMENTS (Note 24) PAYABLES (Notes 25 and 35) CURRENT TAX LIABILITIES (Note 4) DEPOSITS AND REMITTANCES (Notes 26 and 35) BANK DEBENTURES (Notes 27 and 35) OTHER FINANCIAL LIABILITIES (Note 28) PROVISIONS (Notes 4 and 29) LEASE LIABILITIES (Note 18) DEFERRED TAX LIABILITIES (Note 4) OTHER LIABILITIES (Note 30) Total liabilities EQUITY ATTRIBUTABLE TO OWNERS OF THE BANK (Note 31) Ordinary shares Reserve for capitalization Capital surplus Retained earnings Legal reserve Special reserve Unappropriated earnings Other equity Total equity attributable to owners of the Bank Total equity TOTAL		June 30, 2020 (Reviewed) Amount % $ 14,593,320 2 33,651,818 5 23,479,709 3 38,196,785 5 110,638,662 16 13,181,595 2 15,826,672 2 3,312 - 447,794,081 63 162,287 - 505,425 - 72,246 - 11,985,074 2 811,897 - 18,058 - 166,835 - 811,406 - 2,026,695 - $ 713,925,877 100 $ 5,926,107 1 5,785,227 1 296,298 - 6,660,862 1 11,572,464 2 312,911 - 614,692,107 86 11,500,000 2 1,554,608 - 1,358,631 - 832,072 - 111,021 - 929,753 - 661,532,061 93 37,088,349 5 1,928,594 - 726,981 - 9,469,859 2 150,243 - 1,893,756 - 1,136,034 - 52,393,816 7 52,393,816 7 $ 713,925,877 100		December 31, 2019 (Audited) 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		June 30, 2019 (Reviewed)
						Amount % $ 16,132,682 2 30,827,763 5 27,072,396 4 28,970,441 4 102,441,802 15 14,234,539 2 11,939,220 2 100 - 435,603,676 64 154,239 - 409,726 - 429 - 9,438,837 2 913,331 - 112,405 - 154,637 - 832,043 - 1,810,727 - $ 681,048,993 100 $ 4,557,185 1 6,099,042 1 166,942 - 9,934,170 2 11,098,377 2 408,890 - 574,767,238 84 20,000,000 3 1,191,230 - 1,407,970 - 921,471 - 111,049 - 1,072,201 - 631,735,765 93 35,255,084 5 1,833,265 - 726,981 - 8,188,237 1 150,243 - 2,206,684 1 952,734 - 49,313,228 7 49,313,228 7 $ 681,048,993 100

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

TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share) (Reviewed, Not Audited)

INTEREST REVENUE (Notes 32 and 35) INTEREST EXPENSE (Notes 32 and 35) NET INTEREST NET INCOME AND LOSS OTHER THAN INTEREST Service fee income, net (Notes 32 and 35) Gains (losses) 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 (Note 32) Foreign exchange (losses) gains, net Reversal of (impairment losses) on financial assets (Notes 9, 10 and 32) Share of gains (losses) of associates accounted for using the equity method (Note 14) Other non-interest gains, net (Notes 29 and 32) TOTAL NET REVENUE BAD-DEBT EXPENSES AND PROVISION FOR LOSSES ON COMMITMENTS AND GUARANTEES (Notes 12, 13, 29 and 32) OPERATING EXPENSES Employee benefits expenses (Note 32) Depreciation and amortization expenses (Note 32) Other selling and administrative expenses (Notes 32 and 35) Total operating expenses PROFIT BEFORE INCOME TAX FROM CONTINUING OPERATIONS INCOME TAX EXPENSE (Notes 4 and 33) NET PROFIT FOR THE PERIOD		For the Three Months Ended June 30	For the Three Months Ended June 30	For the Three Months Ended June 30		For the Six Months	For the Six Months	Ended June 30
		2020		2019		2020		2019
		Amount % $ 2,986,787 112 (983,945) (37) 2,002,842 75 605,025 22 71,114 3 19,880 1 (27,772 ) (1 ) (4,656 ) - 246 - 12,087 - 2,678,766 100 (1,296) - (999,720 ) (37 ) (118,629 ) (5 ) (463,347) (17) (1,581,696) (59) 1,095,774 41 (134,626) (5) 961,148 36		Amount % $ 3,398,140 114 (1,310,642) (44) 2,087,498 70 693,016 23 122,012 4 665 - 59,287 2 (207 ) - (153 ) - 28,675 1 2,990,793 100 (213,877) (7) (873,345 ) (30 ) (122,340 ) (4 ) (479,584) (16) (1,475,269) (50) 1,301,647 43 (211,959) (7) 1,089,688 36		Amount % $ 6,276,781 115 (2,151,146) (39) 4,125,635 76 1,356,929 25 (61,815 ) (1 ) 34,111 - (11,050 ) - (7,121 ) - (1,671 ) - 11,586 - 5,446,604 100 (179,817) (3) (1,910,883 ) (35 ) (237,636 ) (4 ) (907,683) (17) (3,056,202) (56) 2,210,585 41 (369,747) (7) 1,840,838 34		Amount % $ 6,781,001 112 (2,610,257) (43) 4,170,744 69 1,429,705 23 298,276 5 893 - 123,753 2 6,111 - (420 ) - 40,699 1 6,069,761 100 (365,476) (6) (1,886,721 ) (31 ) (243,159 ) (4 ) (1,061,096) (17) (3,190,976) (52) 2,513,309 42 (406,835) (7) 2,106,474 35 (Continued)

TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share) (Reviewed, Not Audited)

OTHER COMPREHENSIVE INCOME (LOSS) Items that will not be reclassified subsequently to profit or loss: Unrealized gains on investments in equity instruments at fair value through other comprehensive income Share of the other comprehensive income of associates accounted for using the equity method Income tax (expense) benefit 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 Items that may be reclassified subsequently to profit or loss: Exchange differences on the translation of financial statements of foreign operations Unrealized gain (loss) on investments in debt instruments designated as at fair value through other comprehensive income Items that may be reclassified subsequently to profit or loss, net of income tax Other comprehensive income for the period, net of income tax TOTAL COMPREHENSIVE INCOME FOR THE PERIOD EARNINGS PER SHARE (Note 34) Basic Diluted		For the Three Months Ended June 30	For the Three Months Ended June 30	For the Three Months Ended June 30		For the Six Months	For the Six Months	Ended June 30
		2020		2019		2020		2019
		Amount % $ 313,771 12 8,495 - (6,508) - 315,758 12 (23,040 ) (1 ) 28,507 1 5,467 - 321,225 12 $ 1,282,373 48 $ 0.25 $ 0.25		Amount % $ 50,290 2 790 - (5,475) - 45,605 2 (8,543 ) - (17,735) (1) (26,278) (1) 19,327 1 $ 1,109,015 37 $ 0.28 $ 0.28		Amount % $ 101,084 2 7,170 - 3,774 - 112,028 2 (13,311 ) - 183,529 3 170,218 3 282,246 5 $ 2,123,084 39 $ 0.47 $ 0.47		Amount % $ 288,093 4 1,236 - (13,459) - 275,870 4 (1,758 ) - 96,131 2 94,373 2 370,243 6 $ 2,476,717 41 $ 0.54 $ 0.54

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

(Concluded)

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

BALANCE AT JANUARY 1, 2019 Appropriation of 2018 earnings Legal reserve Special reserve Cash dividends Share dividends Net profit for the six months ended June 30, 2019 Other comprehensive (loss) income for the six months ended June 30, 2019, net of income tax Total comprehensive income (loss) for the six months ended June 30, 2019 Disposals of investments in equity instruments designated as at fair value through other comprehensive income BALANCE AT JUNE 30, 2019 BALANCE AT JANUARY 1, 2020 Appropriation of 2019 earnings Legal reserve Cash dividends Share dividends Net profit for the six months ended June 30, 2020 Other comprehensive (loss) income for the six months ended June 30, 2020, net of income tax Total comprehensive income (loss) for the six months ended June 30, 2020 Disposals of investments in equity instruments designated as at fair value through other comprehensive income BALANCE AT JUNE 30, 2020	Equity Attributable to Owners of the Bank	Equity Attributable to Owners of the Bank	Other Equity Exchange Differences on the Translation of Financial Statements of Unrealized Gains (Losses) on Financial Assets at Fair Value Through Other Foreign Operations Comprehensive Income $ (38,327) $ 690,897 - - - - - - - - - - (1,758) 372,001 (1,758) 372,001 - (70,079) $ (40,085) $ 992,819 $ (96,316) $ 949,508 - - - - - - - - (13,311) 295,557 (13,311) 295,557 - 596 $ (109,627) $ 1,245,661	Total Equity $ 47,823,653 - - (987,142) - 2,106,474 370,243 2,476,717 - $ 49,313,228 $ 51,309,206 - (1,038,474) - 1,840,838 282,246 2,123,084 - $ 52,393,816
	Capital Stock Ordinary Shares Reserve for Capitalization Capital Surplus $ 35,255,084 $ - $ 726,981 - - - - - - - - - - 1,833,265 - - - - - - - - - - - - - $ 35,255,084 $ 1,833,265 $ 726,981 $ 37,088,349 $ - $ 726,981 - - - - - - - 1,928,594 - - - - - - - - - - - - - $ 37,088,349 $ 1,928,594 $ 726,981	Retained Earnings Legal Reserve Special Reserve Unappropriated Earnings $ 6,985,726 $ 110,159 $ 4,093,133 1,202,511 - (1,202,511) - 40,084 (40,084) - - (987,142) - - (1,833,265) - - 2,106,474 - - - - - 2,106,474 - - 70,079 $ 8,188,237 $ 150,243 $ 2,206,684 $ 8,188,237 $ 150,243 $ 4,302,204 1,281,622 - (1,281,622) - - (1,038,474) - - (1,928,594) - - 1,840,838 - - - - - 1,840,838 - - (596) $ 9,469,859 $ 150,243 $ 1,893,756

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

TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax Adjustments for: Depreciation expenses Amortization expenses Bad-debt expenses and provision for losses on commitments and guarantees Loss (gain) on financial assets and liabilities at fair value through profit or loss Gain on disposal of properties and equipment Interest expense Interest revenue Dividend income Provision for losses on others 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 (gain) 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		For the Six Months Ended June 30	For the Six Months Ended June 30
		2020 $ 2,210,585 209,312 28,324 179,817 61,815 (45) 2,151,146 (6,276,781) (9,926) (1,183) 1,671 (24,185) 7,121 726,167 (1,061) (2,947,808) (612,326) 1,681,915 (3,157,987) (12,493,123) (69,318) (91,051) (600,953) (785,408) (3,708,163) 4,328,500 31,370,150 126,021 (33,402) 40,346 15,995,201 15,257,978 6,477,848 9,926	2019 $ 2,513,309 217,336 25,823 365,476 (298,276) (1,018) 2,610,257 (6,781,001) (893) (5,000) 420 - (6,111) (263,700) (245) (4,136,932) 116,800 410,283 691,257 16,667,184 2,638 (17,114) 1,178,433 (846,321) 29,703 (2,456,248) (13,200,420) 72 6,507 101,334 2,684,108 1,060,485 6,930,391 893 (Continued)

TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

Interest paid Income tax paid Net cash generated from operating activities 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 sale 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 (Repayment of funds) 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 Net cash (used in) generated from financing activities EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH AND CASH EQUIVALENTS HELD IN FOREIGN CURRENCIES NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD		For the Six Months Ended June 30	For the Six Months Ended June 30
		2020 $ (1,933,773) (442,574) 19,369,405 (9,023,684) 2,676,232 (393,776,134) 390,388,420 (1,409,971) 435 (193,603) (39,882) - (11,378,187) (306,813) 254,504 (2,500,000) (9,335) (95,094) (2,656,738) (13,311) 5,321,169 38,341,346 $ 43,662,515	2019 $ (2,297,538) (442,474) 5,251,757 - 323,127 (367,106,862) 365,363,002 (100,135) 1,691 (72,273) (17,245) (3,500) (1,612,195) 603,523 190,351 - 43,448 (101,038) 736,284 (1,758) 4,374,088 39,653,064 $ 44,027,152 (Continued)

TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

RECONCILIATIONS OF THE AMOUNTS IN THE CONSOLIDATED STATEMENTS OF CASH FLOWS WITH THE EQUIVALENT ITEMS REPORTED IN THE CONSOLIDATED BALANCE SHEETS AT JUNE 30, 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 resell agreements in accordance with cash and cash equivalents under IAS 7 “Statement of Cash Flows” Cash and cash equivalents at the end of the period		June 30	June 30
		2020 $ 14,593,320 15,887,600 13,181,595 $ 43,662,515	2019 $ 16,132,682 13,659,931 14,234,539 $ 44,027,152

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

(Concluded)

TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise) (Reviewed, Not Audited)

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 June 30, 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 June 30, 2020, the Bank’s capital amount was $37,088,349 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 August 6, 2020.

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 Regulations Governing the Preparation of Financial Reports by Public Banks, Regulations Governing the Preparation of Financial Reports by Securities firms and 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 require that for an entity 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 judge whether the acquired process is substantive, there will be different judgement requirements depending on whether there is output on the acquisition date. In addition, the 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 for materiality influencing users has been changed to “could reasonably be expected to influence” and, therefore, the disclosures in the consolidated financial report have been adjusted and immaterial information that may obscure material information has been deleted.

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. Related accounting policies are stated in Note 4. Before the application of the amendment, the Group was required to determine whether the abovementioned rent concessions are lease modifications and thus have to be accounted for as lease modifications.

The Group applied the amendment from January 1, 2020. Retrospective application of the amendment has no impact on the retained earnings as of January 1, 2020.

b. 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 4 “Extension of the Temporary Exemption from Effective immediately upon Applying IFRS 9” promulgation by the IASB 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 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”

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 are 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” are 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” are 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 first annual reporting period beginning on or after January 1, 2022.
11-
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.

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 IAS 34 “Interim Financial Reporting” as endorsed and issued into effect by the FSC. Disclosure information included in the interim consolidated financial statements is less than those required in a complete set of annual financial statements.

b. Basis of preparation

The consolidated financial statements have been prepared on the historical cost basis except for financial instruments that 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 the 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 39 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.

2) Subsidiaries included in the consolidated financial statements

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

Investor Company Subsidiary Main Business and Products Taichung Commercial Bank Co., Ltd. Taichung Bank Insurance Brokers Co. Insurance broker industry 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	Percentage of Equity Held (%)
	June 30, 2020 December 31, 2019 June 30, 2019 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100

Investor Company
Subsidiary
Main Business and
Products

Taichung Commercial Bank
Co., Ltd.
Taichung Bank Insurance Brokers
Co.
Insurance broker industry
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

Percentage of Equity Held (%)

June 30, 2020
December 31,
2019
June 30, 2019
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100

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

e. Other significant accounting policies

Except for the following, please refer to the consolidated financial statements for the year ended December 31, 2019.

1) Employee benefits

Retirement benefits

Pension cost for an interim period is calculated on a year-to-date basis by using the actuarially determined pension cost rate at the end of the prior financial year, adjusted for significant market fluctuations since that time and for significant plan amendments, settlements, or other significant one-off events.

Other long term employee benefits

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

2) Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax. Interim period income taxes are assessed on an annual basis and calculated by applying to an interim period’s pre-tax income the tax rate that would be applicable to expected total annual earnings.

3) Lease

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. There is no substantive change to other terms and conditions. The Group elects to apply the practical expedient to, 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 in the period in which the events or conditions that trigger the concession occurs, and makes a corresponding adjustment to the lease liability.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

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.

The same critical accounting judgements and key sources of estimation uncertainty have been followed in these consolidated financial statements as were applied in the preparation of the Group’s consolidated financial statements for the year ended December 31, 2019. Please refer to Note 5 to the consolidated financial statements as of December 31, 2019 for the details of critical accounting judgements and key sources of estimation uncertainty.

6. CASH AND CASH EQUIVALENTS

Cash on hand Checks for clearing Due from banks	June 30, 2020 $ 4,319,964 1,021,122 9,252,234 $ 14,593,320	December 31, 2019 $ 4,553,235 1,007,649 5,798,664 $ 11,359,548	June 30, 2019 $ 4,173,566 5,285,586 6,673,530 $ 16,132,682

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 June 30, 2020, December 31, 2019 and June 30, 2019.
b. Reconciliations of cash and cash equivalents between the consolidated statements of cash flows and the consolidated balance sheets as of June 30, 2020 and 2019 are shown in the consolidated statements of cash flows. Reconciliations as of December 31, 2019 are stated below:

Reconciliations of the amounts in the consolidated statements of cash flows with the
equivalent items reported in the consolidated balance sheets at December 31,
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 resell 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,
2019
$ 11,359,548
16,725,082

10,256,716
$ 38,341,346

c. The amount of time deposits due from other banks as the operating deposit of Taichung Commercial Bank Securities Co., Ltd. both amounted to $200,000 thousand on June 30, 2020, December 31, 2019 and June 30, 2019, which were transferred to the refundable deposits. Refer to Note 21.
14-

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	June 30, 2020 $ 13,807,126 17,470,824 1,510,724 70,800 732,344 60,000 $ 33,651,818	December 31, 2019 $ 14,879,013 16,997,138 1,512,809 60,000 368,014 60,000 $ 33,876,974	June 30, 2019 $ 10,655,161 17,017,414 1,498,568 62,120 1,534,500 60,000 $ 30,827,763

a. The loss allowance are 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 June 30, 2020, December 31, 2019 and June 30, 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 June 30, 2020. Refer to Note 36.
c. The Group deposited the reserves for trust compensation on government bonds measured at amortized cost on June 30, 2020, December 31, 2019 and June 30, 2019, both with a nominal amount of $60,000 thousand. Refer to Note 36.

8. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

Financial assets at FVTPL Commercial paper Domestic listed shares and emerging market shares PEM group policy assets Beneficiary certificate 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 contracts	June 30, 2020 $ 19,291,845 653,699 823,053 253,725 100,567 2,012,545 106,012 52,870 184,584 160 649 $ 23,479,709	December 31, 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	June 30, 2019 $ 23,218,728 596,217 1,063,513 77,842 60,465 1,794,113 69,525 79,602 110,968 1,420 3 $ 27,072,396 (Continued)

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 contracts	June 30, 2020 $ 101,019 21,581 173,049 - 649 $ 296,298	December 31, 2019 $ 88,092 27,168 113,590 4,953 - $ 233,803	June 30, 2019 $ 35,649 33,005 96,394 1,891 3 $ 166,942 (Concluded)

a. The Group engages in exchange rate related derivative financial contracts, mainly to provide customers 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. As of June 30, 2020, December 31, 2019 and June 30, 2019, the outstanding cross-currency swap contracts were as follows:

June 30, 2020 Contract Amounts (In Thousands) Maturity Date Sell CNY 511,457 2020/09/04-2021/06/30 HKD 204,137 2020/09/14-2021/06/07 USD 9,137 2020/07/08-2021/05/07 EUR 28,500 2020/07/03-2020/07/20 JPY 6,352,144 2020/07/01-2020/08/03 TWD 629,117 2020/08/07-2021/06/18 Buy CNY 35,059 2020/08/24-2021/05/07 NZD 9,224 2020/07/16-2020/07/20 AUD 10,908 2020/07/01-2020/07/16 CAD 3,528 2020/07/10 USD 189,457 2020/07/01-2021/06/30 GBP 4,000 2020/07/08 HKD 1,940 2020/08/04 TWD 118,015 2020/07/08	December 31, 2019 Contract Amounts (In Thousands) Maturity Date Sell CNY 310,034 2020/01/13-2020/09/18 HKD 223,175 2020/05/26-2020/06/12 USD 20,152 2020/01/03-2020/12/10 GBP 4,500 2020/01/06 EUR 4,600 2020/01/06 NZD 3,000 2020/01/03 ZAR 206,055 2020/01/10-2020/03/10 TWD 335,433 2020/03/06-2020/09/11 Buy CNY 30,388 2020/02/11-2020/12/10 NZD 7,500 2020/01/03 ZAR 174,963 2020/01/03-2020/03/10 AUD 8,445 2020/01/06 CAD 3,376 2020/01/06-2020/05/26 USD 96,741 2020/01/03-2020/09/18 JPY 486,180 2020/01/06	June 30, 2019
		Contract Amounts (In Thousands) Maturity Date Sell CNY 20,661 2019/10/22-2020/01/13 HKD 242,930 2019/07/02-2020/09/11 USD 38,159 2019/07/05-2020/02/26 JPY12,961,095 2019/07/03-2019/07/29 EUR 47,900 2019/07/01-2020/07/08 NZD 4,000 2019/07/03 TWD 304,744 2019/07/03-2020/06/11 Buy CNY 175,208 2019/07/05-2020/02/26 NZD 12,000 2019/07/03-2019/07/24 ZAR 187,735 2019/07/05-2019/07/24 AUD 22,000 2019/07/05-2019/07/29 CAD 6,000 2019/07/18 USD 181,060 2019/07/01-2020/06/11 GBP 10,000 2019/07/03 SEK 4,248 2019/07/08

c. As of June 30, 2020, December 31, 2019 and June 30, 2019, the outstanding foreign exchange forward contracts were as follows (including non-deliverable forward contracts):

Contract Amounts Currency Expiration Date (In Thousands)

June 30, 2020

Sell forward exchange USD/NTD 2020/07/01-2021/06/29 USD68,590/NTD2,051,766 Sell forward exchange EUR/NTD 2020/08/03-2020/12/21 EUR1,340/NTD44,537 Sell forward exchange CNY/NTD 2020/12/23-2020/12/24 CNY1,330/NTD5,601 Sell forward exchange JPY/NTD 2020/07/15-2021/05/17 JPY115,000/NTD32,429 Sell forward exchange HKD/NTD 2020/09/04-2020/09/28 HKD1,915/NTD7,430 Buy forward exchange NTD/USD 2020/07/08-2021/01/26 NTD243,574/USD8,200 Buy forward exchange USD/EUR 2020/07/28-2021/03/31 USD12,543/EUR11,300 Buy forward exchange USD/GBP 2020/09/01 USD1,228/GBP1,000 Buy forward exchange USD/JPY 2020/07/10-2020/12/24 USD53,150/JPY5,695,776 Buy forward exchange USD/AUD 2020/08/21-2020/12/21 USD5,912/AUD9,000 (Continued)

Contract Amounts Currency Expiration Date (In Thousands)

Buy forward exchange JPY/USD Buy forward exchange EUR/USD Buy forward exchange GBP/USD Buy forward exchange GBP/JPY 2020/09/14 Buy forward exchange CNY/USD December 31, 2019

GBP4,000/JPY540,560

Sell forward exchange USD/NTD 2020/01/02-2020/12/09 USD52,017/NTD1,587,474 Sell forward exchange EUR/NTD 2020/01/03-2020/03/27 EUR1,840/NTD62,316 Sell forward exchange CNY/NTD 2020/02/10-2020/12/24 CNY5,370/NTD23,208 Sell forward exchange JPY/NTD 2020/01/09-2020/11/19 JPY198,000/NTD55,703 Sell forward exchange AUD/NTD 2020/04/23-2020/09/30 AUD1,550/NTD32,371 Sell forward exchange HKD/NTD 2020/02/14-2020/04/01 HKD2,731/NTD10,603 Buy forward exchange NTD/USD 2020/01/17-2020/06/11 NTD422,335/USD14,000 Buy forward exchange JPY/GBP 2020/01/15-2020/02/27 JPY829,400/GBP6,000 Buy forward exchange USD/CNY 2020/01/10-2020/04/14 USD29,850/CNY208,618 Buy forward exchange USD/EUR 2020/01/16-2020/07/02 USD13,386/EUR12,000 Buy forward exchange USD/GBP 2020/02/18-2020/07/02 USD11,786/GBP9,200 Buy forward exchange USD/NZD 2020/03/06 USD1,302/NZD2,000 Buy forward exchange CNY/USD 2020/01/10-2020/12/10 CNY55,696/USD7,904 Buy forward exchange EUR/USD 2020/01/17 EUR1,000/USD1,145 Buy forward exchange GBP/USD 2020/01/13-2020/03/27 GBP7,500/USD9,902 Buy forward exchange JPY/USD 2020/01/07-2020/04/17 JPY2,277,230/USD21,000 Buy forward exchange EUR/JPY 2020/03/09 EUR600/JPY72,444 Buy forward exchange USD/ZAR 2020/02/14-2020/03/19 USD9,000/ZAR133,478 Buy forward exchange USD/AUD 2020/03/30-2020/06/12 USD3,474/AUD5,000 June 30, 2019 Sell forward exchange USD/NTD 2019/07/01-2020/06/12 USD52,848/NTD1,627,698 Sell forward exchange EUR/NTD 2019/07/08-2019/10/30 EUR1,823/NTD64,202 Sell forward exchange CNY/NTD 2019/07/24-2019/12/02 CNY4,789/NTD21,564 Sell forward exchange JPY/NTD 2019/07/22-2020/04/01 JPY251,000/NTD69,459 Sell forward exchange AUD/NTD 2019/07/01 AUD150/NTD3,237 Buy forward exchange NTD/USD 2019/07/05-2019/12/19 NTD452,375/USD14,600 Buy forward exchange NTD/EUR 2019/08/09 NTD982/EUR28 Buy forward exchange USD/CNY 2019/09/09-2019/12/27 USD3,700/CNY25,576 Buy forward exchange USD/EUR 2019/07/10-2019/12/27 USD20,332/EUR17,850 Buy forward exchange USD/GBP 2019/08/14-2019/12/27 USD3,674/GBP2,900 Buy forward exchange USD/JPY 2019/08/06-2019/12/23 USD68,000/JPY7,385,438 Buy forward exchange AUD/USD 2019/07/23-2019/10/25 AUD6,000/USD4,231 Buy forward exchange CAD/USD 2019/07/18 CAD1,383/USD1,050 Buy forward exchange CNY/USD 2019/07/05-2020/04/21 CNY156,555/USD22,832 Buy forward exchange EUR/USD 2019/07/17-2020/09/17 EUR2,000/USD2,293 Buy forward exchange GBP/USD 2019/07/08-2019/09/11 GBP5,750/USD7,493 Buy forward exchange NZD/USD 2019/07/05 NZD4,000/USD2,699 Buy forward exchange EUR/JPY 2019/08/16 EUR1,000/JPY122,450 Buy forward exchange GBP/JPY 2019/07/19 GBP7,000/JPY1,018,650

(Concluded)

17-
d. As of June 30, 2020, December 31, 2019 and June 30, 2019, the outstanding asset swap contracts of the Group amounted to $2,015,800 thousand, $1,811,600 thousand and $1,793,600 thousand, respectively, with interest rate ranges from 0.90% to 3.50%, 0.90% to 1.35% and 0.90% to 1.35%, respectively.
e. As of June 30, 2020, December 31, 2019 and June 30, 2019, the outstanding cross-currency option contracts of the Group amounted to $23,081,302 thousand (US$782,417 thousand), $12,375,872 thousand (US$412,529 thousand) and $11,470,776 thousand (US$369,310 thousand), respectively.
f. As of June 30, 2020, December 31, 2019 and June 30, 2019, the interest rate-linked structured instrument contracts of the Group amounted to $126,021 thousand, $0 thousand and $15,393 thousand, respectively, with interest rates of 6.20% to 6.75%, 0% and 6.50%, respectively.

9. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

Investments in equity instruments at FVTOCI Investments in debt instruments at FVTOCI a. Investments in equity instruments at FVTOCI Domestic listed shares Domestic unlisted shares Foreign listed shares	June 30, 2020 $ 2,739,106 35,457,679 $ 38,196,785 June 30, 2020 $ 1,742,884 717,190 279,032 $ 2,739,106	December 31, 2019 $ 1,598,987 30,000,344 $ 31,599,331 December 31, 2019 $ 651,358 664,957 282,672 $ 1,598,987	June 30, 2019 $ 1,556,661 27,413,780 $ 28,970,441 June 30, 2019 $ 614,674 679,549 262,438 $ 1,556,661

These investments in equity instruments are not 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.

Dividends income of $9,746 thousand, $665 thousand, $9,926 thousand and $893 thousand were recognized in profit or loss for the three months ended June 30, 2020 and 2019 and for the six months ended June 30, 2020 and 2019, respectively. Those were related to investments held at June 30, 2020 and 2019, respectively.

b. Investments in debt instruments at FVTOCI

Corporate bonds Government bonds Foreign bonds Bank debentures	June 30, 2020 $ 26,806,213 5,849,890 797,951 2,003,625 $ 35,457,679	December 31, 2019 $ 21,503,613 5,997,423 799,314 1,699,994 $ 30,000,344	June 30, 2019 $ 20,563,127 6,027,331 823,322 - $ 27,413,780

18-
1) The Group recognized the impairment loss of $2,898 thousand, gain on reversal of impairment loss of $164 thousand, impairment loss of $4,064 thousand and gain on reversal of impairment loss $336 thousand for the three months ended June 30, 2020 and 2019 and for the six months ended June 30, 2020 and 2019, respectively, after assessing the expected credit losses of the investments in debt instruments at FVTOCI.
2) Refer to Note 39 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	June 30, 2020 $ 26,331,915 12,695,944 61,305,000 11,261,674 9,136 111,603,669 (44,307) (920,700) $ 110,638,662	December 31, 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	June 30, 2019 $ 21,976,773 14,327,257 55,600,000 11,416,236 9,620 103,329,886 (43,084) (845,000) $ 102,441,802

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

		December 31,
	June 30, 2020	2019	June 30, 2019
USD	$ 697,159	$ 638,859	$ 610,859
CNY	850,000	550,000	230,000
AUD	61,000	61,000	61,000
ZAR	570,000	450,000	270,000

b. As of June 30, 2020, December 31, 2019 and June 30, 2019, the government bonds and the foreign bonds at amortized cost amounted to $1,200,000 thousand and $5,793,800 thousand (US$196,400 thousand), $2,000,000 thousand and $8,850,000 thousand (US$295,000 thousand) and $700,000 thousand and $9,951,624 thousand (US$320,400 thousand), respectively, which had been sold under repurchase agreements. Refer to Note 40 for information relating to their carrying amount.
c. The Group recognized the impairment loss of $1,758 thousand, $371 thousand, $3,057 thousand and gain on reversal of impairment loss of $5,775 thousand for the three months ended June 30, 2020 and 2019 and for the six months ended June 30, 2020 and 2019, respectively, after assessing the expected credit losses of the investments in debt instruments at amortized cost.
d. Refer to Note 39 for information relating to their credit risk management and impairment.
19-

11. SECURITIES PURCHASED UNDER RESELL AGREEMENTS

Securities purchased amounted to $13,181,595 thousand, $10,256,716 thousand and $14,234,539 thousand under repurchase agreements as of June 30, 2020, December 31, 2019 and June 30, 2019, would subsequently be sold for $13,182,732 thousand, $10,258,145 thousand and $14,236,973 thousand, respectively, with interest rate ranges from 0.29% to 0.32%, 0.54% to 0.56% and 0.57% to 0.64%, respectively.

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 sale of securities Receivables on securities settlement Other receivables Less: Unrealized interest income Less: Allowance for doubtful accounts	June 30, 2020 $ 4,117,007 656,901 191,318 571,154 1,122,759 4,464,571 3,110,208 847,876 36,479 1,230,618 384,093 16,732,984 (596,803) (309,509) $ 15,826,672	December 31, 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	June 30, 2019 $ 4,002,734 763,816 145,227 568,627 1,293,451 748,884 2,993,559 1,376,103 17,095 522,946 383,068 12,815,510 (536,031) (340,259) $ 11,939,220

a. Movements in the total carrying amount of receivables for the six months ended June 30, 2020 and 2019 were as follows:

For the six months ended June 30, 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 June 30,2020		$ 62,904,165 (73,241) (29,944) 6,729 10,983,513 - (4,660,583) (255,893) $ 68,874,746		$ 557,317 73,928 (81,304) (6,636) 3,716 (415) (55,340) (12,045) $ 479,221		$ 315,071 (687) 111,248 (93) 31,333 (48,833) (81,456) 15,907 $ 342,490		$ 63,776,553 - - - 11,018,562 (49,248) (4,797,379) (252,031) $ 69,696,457

For the six months ended June 30, 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 June 30,2019		$ 59,094,832 (145,962) (27,250) 20,740 10,144,026 - (4,532,348) (237,847) $ 64,316,191		$ 226,460 146,923 (18,475) (7,609) 5,613 - (53,274) 4,690 $ 304,328		$ 314,656 (961) 45,725 (13,131) 61,254 (92,663) (31,870) 8,055 $ 291,065		$ 59,635,948 - - - 10,210,893 (92,663) (4,617,492) (225,102) $ 64,911,584

The above-mentioned carrying amount of receivables include due from the banks, due from the Central Bank and call loans to other banks, securities purchased under resell 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 six months ended June 30, 2020 and 2019 were as follows:

For the six months ended June 30, 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 period: 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 June 30,2020		$ 95,880 (1,207) (260) 1,135 (48,436) 38,033 - - - (3,160) $ 81,985		$ 11,625 1,694 (1,492) (1,063) (1,742) 645 - (415) - 1,000 $ 10,252		$ 165,224 (487) 1,752 (72) (2,211) 10,509 - (18,062) - 18,830 $ 175,483		$ 272,729 - - - (52,389) 49,187 - (18,477) - 16,670 $ 267,720		$ 23,828 - - - - - 42,816 (30,771) 7,494 - $ 43,367		$ 296,557 - - - (52,389) 49,187 42,816 (49,248) 7,494 16,670 $ 311,087

For the six months ended June 30, 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 period: 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 June 30,2019		$ 87,567 (713) (88) 6,460 (46,877) 51,692 - - - (1,194) $ 96,847		$ 5,695 1,143 (712) (1,346) (1,297) 614 - - - 1,867 $ 5,964		$ 151,315 (430) 800 (5,114) 1,339 60,522 - (83,022) - 19,696 $ 145,106		$ 244,577 - - - (46,835) 112,828 - (83,022) - 20,369 $ 247,917		$ 57,500 - - - - - 38,234 (9,641) 8,525 - $ 94,618		$ 302,077 - - - (46,835) 112,828 38,234 (92,663) 8,525 20,369 $ 342,535

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

c. Refer to Note 36 for information relating to note 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	June 30, 2020 $ 131,702 356 30,358 77,037 850,667 41,331,715 103,105,349 51,490,556 107,750,323 5,738,981 142,498,349 1,262,845 454,268,238 20,369 (6,494,526) $ 447,794,081	December 31, 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	June 30, 2019 $ 160,598 1,200 29,704 40,870 1,095,548 40,085,377 99,203,973 48,221,290 104,255,613 4,744,428 143,118,939 1,255,835 442,213,375 33,284 (6,642,983) $ 435,603,676

22-
a. As of June 30, 2020, December 31, 2019 and June 30, 2019, the delinquent loans on which interest ceased to accrue amounted to $1,247,371 thousand, $949,601 thousand and $1,237,822 thousand, respectively. The unrecognized interest receivable on these loans were $14,451 thousand, $22,534 thousand and $16,214 thousand as of June 30, 2020, December 31, 2019 and June 30, 2019, respectively.
b. There was no credit loan written off without a lawsuit for the six months ended June 30, 2020 and 2019.
c. Movements in the total carrying amount of notes discounted and loans for the six months ended June 30, 2020 and 2019 were as follows:

For the six months ended June 30, 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 atJune30,2020		$ 415,543,744 (5,622,330) (749,224) 1,814,096 146,265,598 - (119,663,023) (11,815,575) $ 425,773,286		$ 16,873,865 5,906,039 (1,571,696) (1,797,062) 1,936,111 (1,834) (3,183,521) (39,353) $ 18,122,549		$ 9,554,442 (283,709) 2,320,920 (17,034) 338,066 (487,805) (1,261,346) 229,238 $ 10,392,772		$ 441,972,051 - - - 148,539,775 (489,639) (124,107,890) (11,625,690) $ 454,288,607

For the six months ended June 30, 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 atJune30,2019		$ 435,868,501 (6,209,213) (956,502) 1,781,011 133,521,873 - (130,062,534) (16,990,878) $ 416,952,258		$ 15,341,731 6,244,443 (1,640,397) (1,707,212) 1,919,813 (155,848) (2,508,780) (636,885) $ 16,856,865		$ 7,916,421 (35,230) 2,596,899 (73,799) 1,074,542 (583,408) (2,151,683) (306,206) $ 8,437,536		$ 459,126,653 - - - 136,516,228 (739,256) (134,722,997) (17,933,969) $ 442,246,659

23-
d. Movements in the allowance for doubtful accounts of notes discounted and loans for the six months ended June 30, 2020 and 2019 were as follows:

For the six months ended June 30, 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 period: 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 June 30,2020		$ 1,776,628 (11,988) (2,268) 63,630 (740,326) 816,779 - - - (191,569) $ 1,710,886		$ 852,354 185,838 (100,853) (61,776) (132,104) 201,899 - (550) - 189,063 $ 1,133,871		$ 2,468,257 (173,850) 103,121 (1,854) (270,428) 210,989 - (180,957) - 203,962 $ 2,359,240		$ 5,097,239 - - - (1,142,858) 1,229,667 - (181,507) - 201,456 $ 5,203,997		$ 1,476,478 - - - - - (190,889) (308,132) 313,072 - $ 1,290,529		$ 6,573,717 - - - (1,142,858) 1,229,667 (190,889) (489,639) 313,072 201,456 $ 6,494,526

For the six months ended June 30, 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 period: 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 June 30,2019		$ 1,768,334 (17,958) (2,432) 112,034 (794,642) 823,755 - - - (70,524) $ 1,818,567		$ 661,840 20,817 (105,100) (106,758) (103,297) 107,011 - (29,061) - 364,551 $ 810,003		$ 2,035,208 (2,859) 107,532 (5,276) (487,019) 582,369 - (235,909) - 482,368 $ 2,476,414		$ 4,465,382 - - - (1,384,958) 1,513,135 - (264,970) - 776,395 $ 5,104,984		$ 2,066,719 - - - - - (580,879) (474,286) 526,445 - $ 1,537,999		$ 6,532,101 - - - (1,384,958) 1,513,135 (580,879) (739,256) 526,445 776,395 $ 6,642,983

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:

June 30, 2020 December 31, 2019 June 30, 2019 Amount Proportion of Ownership (%) Amount Proportion of Ownership (%) Amount Proportion of Ownership (%) Associates that are not individually material Taichung Bank Securities Investment Trust Co., Ltd. $ 162,287 38.46 $ 156,788 38.46 $ 154,239 38.46 The share of profit (loss) of the investments in associates accounted for using the equity method was as follows: For the Three Months Ended June 30 For the Six Months Ended June 30 Investee Company 2020 2019 2020 2019 Taichung Bank Securities Investment Trust Co., Ltd. $ 246 $ (153) $ (1,671) $ (420)	June 30, 2020 December 31, 2019 June 30, 2019 Amount Proportion of Ownership (%) Amount Proportion of Ownership (%) Amount Proportion of Ownership (%) Associates that are not individually material Taichung Bank Securities Investment Trust Co., Ltd. $ 162,287 38.46 $ 156,788 38.46 $ 154,239 38.46 The share of profit (loss) of the investments in associates accounted for using the equity method was as follows: For the Three Months Ended June 30 For the Six Months Ended June 30 Investee Company 2020 2019 2020 2019 Taichung Bank Securities Investment Trust Co., Ltd. $ 246 $ (153) $ (1,671) $ (420)	June 30, 2020 December 31, 2019 June 30, 2019 Amount Proportion of Ownership (%) Amount Proportion of Ownership (%) Amount Proportion of Ownership (%) Associates that are not individually material Taichung Bank Securities Investment Trust Co., Ltd. $ 162,287 38.46 $ 156,788 38.46 $ 154,239 38.46 The share of profit (loss) of the investments in associates accounted for using the equity method was as follows: For the Three Months Ended June 30 For the Six Months Ended June 30 Investee Company 2020 2019 2020 2019 Taichung Bank Securities Investment Trust Co., Ltd. $ 246 $ (153) $ (1,671) $ (420)		June 30, 2019	June 30, 2019
		2020 $ (1,671)			2019 $ (420)

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

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 reviewed.

15. RESTRICTED ASSETS, NET

		December 31,
	June 30, 2020	2019	June 30, 2019
Restricted assets - cash in banks	$ 474,880	$ 419,388	$ 409,418
Pending settlement payments	30,545	5	308
	$ 505,425	$ 419,393	$ 409,726

Refer to Note 36 for information relating to the restricted assets - cash in banks, which are used as collateral for financing to other banks.

16. OTHER FINANCIAL ASSETS, NET

			December	December	31,
	June	30, 2020		2019		June	30, 2019
Other delinquent receivables, net	$	2,246	$	2,246		$	429
Time deposits with original maturities of more
than 3 months		70,000			-		-
	$	72,246	$	2,246		$	429

The interest rates were 0.82%-1.02% of time deposits with original maturities of more than 3 months on June 30, 2020.

Other delinquent receivables, net were as follows:

Delinquent receivables not arising from loans Less: Allowance for doubtful accounts (Note 12)

		December 31,	December 31,
June	30, 2020		2019	June	30, 2019
$	3,824	$	4,506	$	2,705
	(1,578)		(2,260)		(2,276)
$	2,246	$	2,246	$	429

17. PROPERTIES AND EQUIPMENT, NET

Cost Balance, January 1, 2020 Additions Disposals Exchange influence Balance, June 30, 2020 Accumulated depreciation Balance, January 1, 2020 Additions Disposals Exchange influence Balance, June 30, 2020 Impairment Balance, January 1, 2020 Balance, June 30, 2020 Balance, June 30, 2020 Cost Balance, January 1, 2019 Additions Disposals Reclassifications Exchange influence Balance, June 30, 2019 Accumulated depreciation Balance, January 1, 2019 Additions Disposals Exchange influence Balance, June 30, 2019 Impairment Balance, January 1, 2019 Balance, June 30, 2019 Balance, June 30, 2019			For the Six M	onths Ended June	30, 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 - 407 - (57 ) - (50) 2,101,530 54,353 1,191,481 29,932 20,008 3,183 - (57 ) - (19) 1,211,489 33,039 - - - - $ 890,041 $ 21,314 For the Six M	Miscellaneous Equipment $ 1,900,254 58,021 (8,081 ) (1,316) 1,948,878 1,453,794 83,866 (7,691 ) (948) 1,529,021 - - $ 419,857 onths Ended June	Lease Improvement $ 7,799 98 - - 7,897 1,632 672 - - 2,304 - - $ 5,593 30, 2019	Construction in Progress $ 1,526,236 1,351,445 - - 2,877,681 - - - - - - - $ 2,877,681	Total $ 13,437,460 1,409,971 (8,138 ) (1,366) 14,837,927 2,676,839 107,729 (7,748 ) (967) 2,775,853 77,000 77,000 $ 11,985,074
		Land $ 7,843,120 - - - - 7,843,120 - - - - - 77,000 77,000 $ 7,766,120	Building and Structures Transportation Equipment $ 2,086,402 $ 48,195 - 8,519 - (5,367 ) - - - 20 2,086,402 51,367 1,145,069 29,111 19,895 2,668 - (4,700 ) - 1 1,164,964 27,080 - - - - $ 921,438 $ 24,287	Miscellaneous Equipment $ 1,830,060 35,732 (7,153 ) 927 492 1,860,058 1,314,540 84,575 (7,147 ) 221 1,392,189 - - $ 467,869	Lease Improvement $ 6,938 - - - - 6,938 5,061 673 - - 5,734 - - $ 1,204	Construction in Progress $ 202,835 55,884 - (800 ) - 257,919 - - - - - - - $ 257,919	Total $ 12,017,550 100,135 (12,520 ) 127 512 12,105,804 2,493,781 107,811 (11,847 ) 222 2,589,967 77,000 77,000 $ 9,438,837

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

June 30, 2020 December 31, 2019 June 30, 2019 $ 759,434 $ 800,549 $ 842,887 52,463 79,857 70,444 $ 811,897 $ 880,406 $ 913,331 For the Three Months Ended June 30 For the Six Months Ended June 30 2020 2019 2020 2019 $ 60,022 $ 153,010 $ 82,591 $ 164,420 $ 32,500 $ 35,917 $ 66,953 $ 69,096 17,742 20,042 34,585 40,384 $ 50,242 $ 55,959 $ 101,538 $ 109,480	June 30, 2020 December 31, 2019 June 30, 2019 $ 759,434 $ 800,549 $ 842,887 52,463 79,857 70,444 $ 811,897 $ 880,406 $ 913,331 For the Three Months Ended June 30 For the Six Months Ended June 30 2020 2019 2020 2019 $ 60,022 $ 153,010 $ 82,591 $ 164,420 $ 32,500 $ 35,917 $ 66,953 $ 69,096 17,742 20,042 34,585 40,384 $ 50,242 $ 55,959 $ 101,538 $ 109,480	June 30, 2020 December 31, 2019 June 30, 2019 $ 759,434 $ 800,549 $ 842,887 52,463 79,857 70,444 $ 811,897 $ 880,406 $ 913,331 For the Three Months Ended June 30 For the Six Months Ended June 30 2020 2019 2020 2019 $ 60,022 $ 153,010 $ 82,591 $ 164,420 $ 32,500 $ 35,917 $ 66,953 $ 69,096 17,742 20,042 34,585 40,384 $ 50,242 $ 55,959 $ 101,538 $ 109,480	June 30, 2020 December 31, 2019 June 30, 2019 $ 759,434 $ 800,549 $ 842,887 52,463 79,857 70,444 $ 811,897 $ 880,406 $ 913,331 For the Three Months Ended June 30 For the Six Months Ended June 30 2020 2019 2020 2019 $ 60,022 $ 153,010 $ 82,591 $ 164,420 $ 32,500 $ 35,917 $ 66,953 $ 69,096 17,742 20,042 34,585 40,384 $ 50,242 $ 55,959 $ 101,538 $ 109,480
	$

2020 $ 60,022 $ 32,500 17,742 $ 50,242		2020 $ 82,591 $ 66,953 34,585 $ 101,538	2019 $ 164,420 $ 69,096 40,384 $ 109,480

Except for the aforementioned addition and recognized depreciation, the Group did not have significant sublease or impairment of right-of-use assets during the six months ended June 30, 2020 and 2019.

b. Lease liabilities

		December 31,
	June 30, 2020	2019	June 30, 2019
Carrying amounts	$ 832,072	$ 895,285	$ 921,471
Range of discount rate for lease liabilities was as follows:
		December 31,
	June 30, 2020	2019	June 30, 2019
Land	1.01%-4.14%	1.01%-4.14%	1.01%-4.14%
Buildings	1.01%-5.95%	1.01%-5.95%	1.01%-5.95%
Transportation equipment	1.01%-5.96%	1.01%-5.96%	1.01%-5.96%

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 Three Months Ended June 30 2020 2019 $ 692 $ 1,388 $ 2,035 $ 832 $ (58,784) $ (61,410)	For the Three Months Ended June 30 2020 2019 $ 692 $ 1,388 $ 2,035 $ 832 $ (58,784) $ (61,410)		For the Six Months Ended June 30	For the Six Months Ended June 30
		2020 $ 692 $ 2,035 $ (58,784)		2020 $ 1,540 $ 3,773 $ (116,645)	2019 $ 2,573 $ 2,303 $ (123,032)

The Group leases certain office equipment under leases which qualify as short-term leases and certain computer equipment under leases which 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, January 1, 2020 Balance, June 30, 2020 Accumulated depreciation Balance, January 1, 2020 Additions Balance, June 30, 2020 Balance, June 30, 2020		For the Six Months Ended June 30, 2020
		Land Structures Investment Properties Under Construction $ 15,801 $ 5,972 $ - 15,801 5,972 - - 3,670 - - 45 - - 3,715 - $ 15,801 $ 2,257 $ -	Total $ 21,773 21,773 3,670 45 3,715 $ 18,058

Cost Balance, January 1, 2019 Additions Balance, June 30, 2019 Accumulated depreciation Balance, January 1, 2019 Additions Balance, June 30, 2019 Balance, June 30, 2019		For the Six Months Ended June 30, 2019	For the Six Months Ended June 30, 2019	For the Six Months Ended June 30, 2019
		Land $ 20,269 - 20,269 - - - $ 20,269	Structures Investment Properties Under Construction $ 12,575 $ 86,290 - 3,500 12,575 89,790 10,184 - 45 - 10,229 - $ 2,346 $ 89,790	Total $ 119,134 3,500 122,634 10,184 45 10,229 $ 112,405

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 fair values of the investment properties of the Group on December 31, 2019 and 2018 were $53,847 thousand and $149,412 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. There was no significant change in the fair value of June 30, 2020 and 2019 compared to December 31, 2019 and 2018.
c. 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.
d. The maturity analysis of lease payments receivable under operating leases of investment properties as of June 30, 2020, December 31, 2019 and June 30, 2019 was as follows:

				December 31,	December 31,
		June	30, 2020		2019	June	30, 2019
Year	1	$	214	$	646	$	864
Year	2		-		-		216
		$	214	$	646	$	1,080

20. INTANGIBLE ASSETS, NET

			December 31,	December 31,
	June 30, 2020			2019	June 30, 2019
Business right	$	28,000	$	28,000	$	28,000
Computer software		138,835		125,125		126,637
	$	166,835	$	153,125	$	154,637

a. Business right of the Group arose from the transfer of Fengxing Securities Co., Ltd., with indefinite useful lives and no amortization. As of June 30, 2020, no impairment loss of the business right should be charged.
b. Movements of intangible assets were as follows:

Balance, January 1 Additions Amortization Reclassifications Exchange influence Balance, June 30		For the Six Months Ended June 30	For the Six Months Ended June 30
		2020 $ 153,125 39,882 (28,324) 2,213 (61) $ 166,835	2019 $ 163,172 17,245 (25,823) - 43 $ 154,637

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

Computer software			1-5 years
OTHER ASSETS, NET
		December 31,
	June 30, 2020	2019	June 30, 2019
Refundable deposits	$ 1,865,376	$ 1,595,973	$ 1,642,452
Prepayments	160,369	138,477	147,014
Credit transaction	-	15,014	-
Others	950	5,022	21,261
	$ 2,026,695	$ 1,754,486	$ 1,810,727

21. OTHER ASSETS, NET

As of June 30, 2020, December 31, 2019 and June 30, 2019, the time deposits and government bonds at amortized cost which amounted to $1,060,700 thousand, $984,900 thousand and $985,000 thousand, respectively, were pledged to the district court for litigation, as collateral for the overdraft of the US dollar clearing account and the provision of guarantee deposit for business operations, which were stated as refundable deposits. Refer to Note 36.

22. DUE TO THE CENTRAL BANK AND OTHER BANKS

		December 31,
	June 30, 2020	2019	June 30, 2019
Call loans from banks	$ 5,300,000	$ 6,200,860	$ 4,053,000
Due to Chunghwa Post Co., Ltd.	326,094	326,187	503,276
Due to banks	300,013	13	909
	$ 5,926,107	$ 6,527,060	$ 4,557,185

23. FUNDS BORROWED FROM CENTRAL BANK AND OTHER BANKS

			December 31,	December 31,
	June 30, 2020			2019	June 30, 2019
Funds borrowed from central banks	$	460,830	$	-	$	-
Funds borrowed from other banks		5,324,397		6,092,040		6,099,042
	$	5,785,227	$	6,092,040	$	6,099,042
Funds borrowed from central banks (%)		0.10		-		-
Funds borrowed from other banks (%)		1.00-5.23		1.00-5.44		1.00-5.44

Refer to Note 36 for information relating to collateral of funds borrowed from other banks.

24. SECURITIES SOLD UNDER REPURCHASE AGREEMENTS

Government bonds Foreign bonds	June 30, 2020 $ 1,204,345 5,456,517 $ 6,660,862	December 31, 2019 $ 2,002,755 8,366,270 $ 10,369,025	June 30, 2019 $ 701,500 9,232,670 $ 9,934,170

The post-year repurchase price and rate were as follows:

Government bonds Foreign bonds Government bonds Foreign bonds	June 30, 2020 $ 1,204,853 5,472,026 $ 6,676,879 0.29%-0.33% 0.58%-1.48%	December 31, 2019 $ 2,003,566 8,415,535 $ 10,419,101 0.50%-0.54% 2.18%-2.45%	June 30, 2019 $ 701,684 9,294,228 $ 9,995,912 0.47%-0.52% 2.73%-2.78%

The foreign bonds denominated in foreign currencies were as follows:

USD 25. PAYABLES Foreign currency settlement payable Accrued expenses Accounts payable for delivery Cash dividends payable Notes and checks in clearing Interest payable Acceptances Collections payable Factored accounts payable Securities settlement payable Other payables 26. DEPOSITS AND REMITTANCES Checking Demand Demand savings Time Time savings Remittances 27. BANK DEBENTURES Subordinated financial debenture	June 30, 2020 $ 184,967 June 30, 2020 $ 4,465,945 1,269,707 1,044,690 1,038,474 1,021,122 682,465 572,159 500,976 41,230 1,169 934,527 $ 11,572,464 June 30, 2020 $ 6,561,123 150,406,222 137,972,243 163,512,780 156,203,649 36,090 $ 614,692,107 June 30, 2020 $ 11,500,000	December 31, 2019 $ 278,876 December 31, 2019 $ 870,282 1,550,678 716,756 - 1,007,649 465,092 514,383 38,414 49,615 - 775,248 $ 5,988,117 December 31, 2019 $ 8,067,443 138,021,835 134,211,159 143,834,144 159,025,088 162,288 $ 583,321,957 December 31, 2019 $ 14,000,000	June 30, 2019 $ 297,253 June 30, 2019 $ 748,284 1,376,220 574,420 987,142 5,285,586 867,349 570,935 33,159 33,311 14,069 607,902 $ 11,098,377 June 30, 2019 $ 8,328,890 132,889,418 127,926,461 144,015,602 161,560,678 46,189 $ 574,767,238 June 30, 2019 $ 20,000,000

32-
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. Detail of the subordinated financial debenture issuance is summarized as follows:
1) Total approved principal: $3,000,000 thousand.
2) Principal issued: $3,000,000 thousand.
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 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. Detail 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.
33-
3) Denomination: $10,000 thousand, issued at par.
4) Period: No due date.
5) Nominal interest rate: According to the one-year time savings deposit interest rate 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.
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 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 one-year time savings deposit interest rate 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 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.
34-
- 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.
4) Period: No due date.
5) Nominal interest rate: According to the one-year time savings deposit interest rate 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. Detail 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 one-year time savings deposit interest rate 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

		December 31,
	June 30, 2020	2019	June 30, 2019
Commercial paper payable	$ 1,428,587	$ 1,174,083	$ 1,189,031
Structured commodity principal	126,021	-	2,199
	$ 1,554,608	$ 1,174,083	$ 1,191,230

29. PROVISIONS

		December 31,
	June 30, 2020	2019	June 30, 2019
Provision for employee benefits	$ 1,100,370	$ 1,133,772	$ 1,150,731
Provision for losses on guarantees	188,463	174,463	183,426
Provision for accidental losses	10,657	11,878	18,959
Provision for loan commitments	59,141	63,357	54,854
	$ 1,358,631	$ 1,383,470	$ 1,407,970

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

			December 31,	December 31,
	June 30, 2020			2019	June 30, 2019
Benefit plans	$	934,713	$	972,820	$ 1,003,011
Preferential interest on employees’ deposits		133,780		131,433	122,912
Other long-term employee benefit liabilities		31,877		29,519	24,808
	$ 1,100,370		$	1,133,772	$ 1,150,731

1) Defined contribution plans

The Group adopted a pension plan under the Labor Pension Act (the “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 amount paid by the Group for the three months ended June 30, 2020 and 2019 and for the six months ended June 30, 2020 and 2019 in accordance with the defined contribution plan had been recognized in the consolidated statements of comprehensive income as total amounts of $25,156 thousand, $24,572 and $49,503 thousand and $48,785 thousand, respectively.

2) Defined benefit plans

The defined benefit plan adopted by the Bank of the Group 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.

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 six months ended June 30, 2020 and 2019 was as follows:

Operating expenses	For the Three Months Ended June 30 2020 2019 $ 4,167 $ 5,753	For the Three Months Ended June 30 2020 2019 $ 4,167 $ 5,753		For the Six Months Ended June 30	For the Six Months Ended June 30
		2020 $ 4,167		2020 $ 8,288	2019 $ 11,731

3) Preferential interest on employees’ deposits plan

The Group 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.

For the three months ended June 30, 2020 and 2019 and for the six months ended June 30, 2020 and 2019, the expenses under preferential interest on employees’ deposits plan recognized in the consolidated statements of comprehensive income amounted to $1,174 thousand, $1,071 thousand, $2,347 thousand and $2,142 thousand, respectively.

4) Other long-term employee benefit liabilities

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

For the three months ended June 30, 2020 and 2019 and for the six months ended June 30, 2020 and 2019, the Group recognized total expenses related to the long-term employee benefits in the consolidated statements of comprehensive income were $1,179 thousand, $910 thousand, $2,358 thousand and $1,820 thousand, respectively.

37-
b. Movements in provision for losses on guarantees were as follows:

For the six months ended June 30, 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 period: 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 June 30,2020		$ 109,720 - (157) 4,104 (64,082) 81,840 - - - (8,138) $ 123,287		$ 1,778 3,653 - (768) (1,010) 2,071 - - - (2,487) $ 3,237		$ 58,621 (3,653) 157 (3,336) (10,696) 570 - - - 5,638 $ 47,301		$ 170,119 - - - (75,788) 84,481 - - - (4,987) $ 173,825		$ 4,344 - - - - - 10,294 - - - $ 14,638		$ 174,463 - - - (75,788) 84,481 10,294 - - (4,987) $ 188,463

For the six months ended June 30, 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 period: 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 June 30,2019		$ 121,061 (324) (9) 11,160 (74,230) 68,027 - - - (11,808) $ 113,877		$ 1,751 324 - (426) (1,325) 279 - - - 4,460 $ 5,063		$ 55,221 - 9 (10,734) (3,652) - - - - 2,129 $ 42,973		$ 178,033 - - - (79,207) 68,306 - - - (5,219) $ 161,913		$ 11,815 - - - - - 9,698 - - - $ 21,513		$ 189,848 - - - (79,207) 68,306 9,698 - - (5,219) $ 183,426

For the six months ended June 30, 2020 and 2019, the provisions were comprised of bad-debt expenses and provision for losses on commitments and guarantees.

38-
c. Movements in provision for losses on accidental were as follows:

For the six months ended June 30, 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 period: 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 June 30,2020		$ 9,638 - - - (9,460) 7,778 - - - (104) $ 7,852		$ - - - - - 556 - - - - $ 556		$ 7 - - - (7) - - - - - $ -		$ 9,645 - - - (9,467) 8,334 - - - (104) $ 8,408		$ 2,233 - - - - - 16 - - - $ 2,249		$ 11,878 - - - (9,467) 8,334 16 - - (104) $ 10,657

For the six months ended June 30, 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 period: 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 June 30,2019		$ 12,108 - - - (11,526) 9,340 - - - (162) $ 9,760		$ - - - - - 2,241 - - - - $ 2,241		$ - - - - - 7 - - - - $ 7		$ 12,108 - - - (11,526) 11,588 - - - (162) $ 12,008		$ 11,825 - - - - - (4,874) - - - $ 6,951		$ 23,933 - - - (11,526) 11,588 (4,874) - - (162) $ 18,959

For the six months ended June 30, 2020 and 2019, the provisions were comprised of net income and loss other than interest.

39-
d. Movements in loan commitments were as follows:

For the six months ended June 30, 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 period: 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 June 30,2020		$ 48,760 (10) (2) 1,691 (1,016) 13,568 - - - (9,050) $ 53,941		$ 1,848 10 (6) (1,691) (137) 1,178 - - - 999 $ 2,201		$ 4,025 - 8 - (4,025) - - - - (8) $ -		$ 54,633 - - - (5,178) 14,746 - - - (8,059) $ 56,142		$ 8,724 - - - - - (5,725) - - - $ 2,999		$ 63,357 - - - (5,178) 14,746 (5,725) - - (8,059) $ 59,141

For the six months ended June 30, 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 period: 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 June 30,2019		$ 39,745 (8) (3) 1,168 (32,479) 25,180 - - - 9,323 $ 42,926		$ 2,040 8 (10) (1,168) (781) 932 - - - 755 $ 1,776		$ - - 13 - - - - - - (13) $ -		$ 41,785 - - - (33,260) 26,112 - - - 10,065 $ 44,702		$ 22,024 - - - - - (11,872) - - - $ 10,152		$ 63,809 - - - (33,260) 26,112 (11,872) - - 10,065 $ 54,854

For the six months ended June 30, 2020 and 2019, the provisions were comprised of bad-debt expenses and provision for losses on commitments and guarantees.

30. OTHER LIABILITIES

		December 31,
	June 30, 2020	2019	June 30, 2019
Guarantee deposits received	$ 572,729	$ 582,064	$ 611,883
Advance receipts	276,729	241,703	361,680
Credit transactions	7,356	-	883
Others	72,939	74,975	97,755
	$ 929,753	$ 898,742	$1,072,201

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 Reserve for capitalization	June 30, 2020 4,320,000 $ 43,200,000 3,708,835 $ 37,088,349 1,928,594 $ 39,016,943	December 31, 2019 4,320,000 $ 43,200,000 3,708,835 $ 37,088,349 - $ 37,088,349	June 30, 2019 4,320,000 $ 43,200,000 3,525,508 $ 35,255,084 1,833,265 $ 37,088,349

Ordinary shares issued at a $10 par value per share. Each share has one voting right and the right to receive dividends.

As of June 30, 2019, the Bank had issued ordinary shares totaling $35,255,084 thousand, divided into 3,525,508 thousand ordinary shares at $10 par value per share.

In September 2019, the Bank transferred $1,833,265 thousand of unappropriated earnings to ordinary shares, divided into 183,327 thousand ordinary shares at $10 par value per share. As of June 30, 2020, the Bank had increased ordinary shares to $37,088,349 thousand, divided into 3,708,835 thousand ordinary shares at $10 par value per share.

As of June 30, 2020, the Bank’s shareholders’ meeting resolved to issue ordinary shares with $1,928,594 thousand of unappropriated earnings, which was temporarily accounted under reserve for capitalization until the change of registration has been completed.

b. Capital surplus

		December 31,
	June 30, 2020	2019	June 30, 2019
May be used to offset a deficit, distributed as
cash dividends, or transferred to share
capital*
Issuance of ordinary shares	$ 663,633	$ 663,633	$ 663,633
May be used to offset a deficit only
Issuance of ordinary shares - employee share
options	32,124	32,124	32,124
Expired employee share options	6,682	6,682	6,682
Share of changes in capital surplus of
associates	16,813	16,813	16,813
Conversion of bank debentures components	7,729	7,729	7,729
	$ 726,981	$ 726,981	$ 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).

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, operating 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 risky assets does not meet the standards set by the business authority, the appropriation of earnings in cash or other properties should be subject to the restrictions or prohibitions of the relevant provisions of the business authority.

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 appropriating retained earnings from the reversal 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 Public Bank no longer to use special reserve to protect the right of bank 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 through 2016 to 2018.

The appropriations of earnings for 2019 and 2018 had been approved in the shareholder’s meeting 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

d. Other equity items

Exchange Differences on Translating the Financial Statements of Foreign Operations Balance at January 1, 2020 $ (96,316) Recognized for the period Unrealized gains Equity instruments - Debt instruments - Net remeasurement of loss allowance - debt instruments - Share from associates accounted for using the equity method - Cumulative unrealized loss of equity instruments transferred to retained earnings due to disposal - Cumulative translation adjustment Exchange differences for current period (13,311) Income tax related to other comprehensive income - Balance at June 30, 2020 $ (109,627)	Unrealized Gain on Financial Assets at FVTOCI $ 949,508 101,084 179,465 4,064 7,170 596 - 3,774 $ 1,245,661	Total $ 853,192 101,084 179,465 4,064 7,170 596 (13,311) 3,774 $ 1,136,034 (Continued)

Exchange Differences on Translating the Financial Statements of Foreign Operations Balance at January 1, 2019 $ (38,327) Recognized for the period Unrealized gains Equity instruments - Debt instruments - Net remeasurement of loss allowance - debt instruments - Share from associates accounted for using the equity method - Cumulative unrealized gain of equity instruments transferred to retained earnings due to disposal - Cumulative translation adjustment Exchange differences for current period (1,758) Income tax related to other comprehensive income - Balance at June 30, 2019 $ (40,085)	Unrealized Gain on Financial Assets at FVTOCI $ 690,897 288,093 96,467 (336) 1,236 (70,079) - (13,459) $ 992,819	Total $ 652,570 288,093 96,467 (336) 1,236 (70,079) (1,758) (13,459) $ 952,734 (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 resell agreements Accounts receivable factoring without recourse Others		For the Three Months Ended June 30 2020 2019 $ 2,447,909 $ 2,798,079 20,968 39,514 372,098 398,953 67,808 73,484 58,221 63,132 9,098 10,037 8,444 13,562 2,174 1,302 67 77 2,986,787 3,398,140		For the Six Months Ended June 30	For the Six Months Ended June 30
		2020 $ 2,447,909 20,968 372,098 67,808 58,221 9,098 8,444 2,174 67 2,986,787		2020 $ 5,140,149 52,950 785,548 137,168 115,003 18,812 22,355 4,577 219 6,276,781	2019 $ 5,603,253 70,241 789,435 139,577 128,045 20,956 25,948 2,939 607 6,781,001 (Continued)

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 Three Months Ended June 30 2020 2019 $ (772,956) $ (1,006,115) (130,853) (163,209) (40,223) (58,636) (720) (1,377) (28,775) (73,709) (2,016) (35) (8,041) (7,248) (361) (313) (983,945) (1,310,642) $ 2,002,842 $ 2,087,498		For the Six Months Ended June 30	For the Six Months Ended June 30
		2020 $ (772,956) (130,853) (40,223) (720) (28,775) (2,016) (8,041) (361) (983,945) $ 2,002,842		2020 $ (1,693,768) (262,643) (98,780) (1,613) (75,020) (2,306) (16,238) (778) (2,151,146) $ 4,125,635	2019 $ (2,004,383) (324,621) (122,552) (2,599) (138,547) (71) (17,118) (366) (2,610,257) $ 4,170,744 (Concluded)

b. Service fee income, net

Service fee income Brokering Trust business Loans Guarantee Others Service fee expense Commission Cross-bank transactions Others		For the Three Months Ended June 30 2020 2019 $ 198,497 $ 303,260 212,264 221,842 139,360 106,653 36,816 35,293 72,894 85,146 659,831 752,194 (16,511) (27,035) (8,702) (8,977) (29,593) (23,166) (54,806) (59,178) $ 605,025 $ 693,016		For the Six Months Ended June 30	For the Six Months Ended June 30
		2020 $ 198,497 212,264 139,360 36,816 72,894 659,831 (16,511) (8,702) (29,593) (54,806) $ 605,025		2020 $ 513,519 464,660 279,766 72,326 146,019 1,476,290 (45,343) (17,479) (56,539) (119,361) $ 1,356,929	2019 $ 692,462 405,356 220,447 72,538 168,622 1,559,425 (63,062) (17,734) (48,924) (129,720) $ 1,429,705

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.

45-
c. Gain on financial assets and liabilities at fair value through profit or loss

Realized profit and loss Commercial papers Shares Beneficiary certificates Derivative financial instruments Corporate bonds Valuation Commercial papers Shares Beneficiary certificates PEM Group policy assets Derivative financial instruments Corporate bonds	For the Three Months Ended June 30 2020 2019 $ 21,669 $ 32,047 35,322 106,328 1,285 4,517 118,437 (83,350) - - 176,713 59,542 (7,162) 1,907 84,858 (69,617) 54,705 (4,248) (171,033) 31,667 (67,360) 102,761 393 - (105,599) 62,470 $ 71,114 $ 122,012	For the Three Months Ended June 30 2020 2019 $ 21,669 $ 32,047 35,322 106,328 1,285 4,517 118,437 (83,350) - - 176,713 59,542 (7,162) 1,907 84,858 (69,617) 54,705 (4,248) (171,033) 31,667 (67,360) 102,761 393 - (105,599) 62,470 $ 71,114 $ 122,012		For the Six Months Ended June 30	For the Six Months Ended June 30
		2020 $ 21,669 35,322 1,285 118,437 - 176,713 (7,162) 84,858 54,705 (171,033) (67,360) 393 (105,599) $ 71,114		2020 $ 50,873 2,059 (46,482) 106,666 906 114,022 (7,993) (2,014) 17,948 (191,894) 7,744 372 (175,837) $ (61,815)	2019 $ 66,173 269,801 (4,732) (48,769) - 282,473 (3,316) (135,330) 10,932 49,061 94,456 - 15,803 $ 298,276

1) For the six months ended June 30, 2020 and 2019, realized profit and loss of gain on financial assets and liabilities at fair value through profit or loss include disposal profit amounted to $39,163 thousand and $204,703 thousand, dividend income amounted to $14,593 thousand and $2,473 thousand and interest revenue amounted to $60,266 thousand and $75,297 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 swap. 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, which 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 Three Months Ended June 30 2020 2019 $ 9,746 $ 665 10,134 - $ 19,880 $ 665	For the Three Months Ended June 30 2020 2019 $ 9,746 $ 665 10,134 - $ 19,880 $ 665		For the Six Months Ended June 30	For the Six Months Ended June 30
		2020 $ 9,746 10,134 $ 19,880		2020 $ 9,926 24,185 $ 34,111	2019 $ 893 - $ 893

e. Reversal of (impairment losses) on financial assets

Investments in debt instruments at FVTOCI Financial assets at amortized cost Other non-interest gains (losses), Gains on disposal of properties and equipment Other provisions Others	For the Three Months Ended June 30 2020 2019 $ (2,898) $ 164 (1,758) (371) $ (4,656) $ (207) net For the Three Months Ended June 30 2020 2019 $ 48 $ 1,025 3,683 5,000 8,356 22,650 $ 12,087 $ 28,675	For the Three Months Ended June 30 2020 2019 $ (2,898) $ 164 (1,758) (371) $ (4,656) $ (207) net For the Three Months Ended June 30 2020 2019 $ 48 $ 1,025 3,683 5,000 8,356 22,650 $ 12,087 $ 28,675		For the Six Months Ended June 30	For the Six Months Ended June 30
				2020 2019 $ (4,064) $ 336 (3,057) 5,775 $ (7,121) $ 6,111 For the Six Months Ended June 30
		2020 $ 48 3,683 8,356 $ 12,087		2020 $ 45 1,183 10,358 $ 11,586	2019 $ 1,018 5,000 34,681 $ 40,699

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

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

Bad-debt for receivables (Reversal of) bad-debt for notes discounted and loans (Reversal of) provision for losses on guarantees (Reversal of) loan commitments	For the Three Months Ended June 30 2020 2019 $ 17,427 $ 34,012 (36,262) 206,056 14,000 (17,000) 6,131 (9,191) $ 1,296 $ 213,877	For the Three Months Ended June 30 2020 2019 $ 17,427 $ 34,012 (36,262) 206,056 14,000 (17,000) 6,131 (9,191) $ 1,296 $ 213,877		For the Six Months Ended June 30	For the Six Months Ended June 30
		2020 $ 17,427 (36,262) 14,000 6,131 $ 1,296		2020 $ 58,406 111,189 14,000 (3,778) $ 179,817	2019 $ 67,430 313,737 (6,500) (9,191) $ 365,476

h. Employee benefits expenses

Salaries Labor and health insurance Pension expense Other employee expenses		For the Three Months Ended June 30 2020 2019 $ 866,269 $ 739,039 51,363 48,263 29,323 30,325 52,765 55,718 $ 999,720 $ 873,345		For the Six Months Ended June 30	For the Six Months Ended June 30
		2020 $ 866,269 51,363 29,323 52,765 $ 999,720		2020 $ 1,623,112 116,321 57,791 113,659 $ 1,910,883	2019 $ 1,603,702 108,168 60,516 114,335 $ 1,886,721

47-
i. Employees’ compensation and remuneration of directors

According to the Articles of Incorporation of the Bank, the Bank accrued employees’ compensation and remuneration of directors at rates of 0.5%-3% and no higher than 1.5%, respectively, of net profit before income tax, employees’ compensation and remuneration of directors. For the three months ended June 30, 2020 and 2019 and for the six months ended June 30, 2020 and 2019, the employees’ compensation and the remuneration of directors were as follows:

Accrual rate

Employees’ compensation Remuneration of directors	For the Three Months Ended June 30 2020 2019 1.30% 0.70% 1.25% 1.40%	For the Six Months Ended June 30
		2020 2019 1.05% 0.70% 1.50% 1.40%

Amount

Employees’ compensation Remuneration of directors	For the Three Months Ended June 30 2020 2019 $ 14,492 $ 7,521 $ 13,931 $ 16,251	For the Three Months Ended June 30 2020 2019 $ 14,492 $ 7,521 $ 13,931 $ 16,251		For the Six Months Ended June 30	For the Six Months Ended June 30
		2020 $ 14,492 $ 13,931		2020 $ 23,415 $ 33,431	2019 $ 15,013 $ 32,502

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

The appropriations of employees’ compensation and remuneration of directors for 2019 and 2018 that were resolved by the Bank’s board of directors on February 25, 2020 and March 14, 2019, respectively, are as shown below:

Employees’ compensation Remuneration of directors		Cash
		2019 $ 38,880 $ 77,759	2018 $ 33,198 $ 71,138

There is 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 2020 and 2019 is available at the Market Observation Post System website of the Taiwan Stock Exchange.

j. Depreciation and amortization expenses

Properties and equipment Investment properties Right-of-use assets Intangible assets	For the Three Months Ended June 30 2020 2019 $ 53,983 $ 53,493 22 22 50,242 55,959 14,382 12,866 $ 118,629 $ 122,340	For the Three Months Ended June 30 2020 2019 $ 53,983 $ 53,493 22 22 50,242 55,959 14,382 12,866 $ 118,629 $ 122,340		For the Six Months Ended June 30	For the Six Months Ended June 30
		2020 $ 53,983 22 50,242 14,382 $ 118,629		2020 $ 107,729 45 101,538 28,324 $ 237,636	2019 $ 107,811 45 109,480 25,823 $ 243,159

k. Other selling and administrative expenses

Taxes Professional service Advertisement Insurance Entertainment Donation Postage Others		For the Three Months Ended June 30 2020 2019 $ 155,872 $ 176,584 60,906 40,017 34,244 84,660 40,353 46,738 13,903 15,189 36,167 30,152 16,709 16,223 105,193 70,021 $ 463,347 $ 479,584		For the Six Months Ended June 30	For the Six Months Ended June 30
		2020 $ 155,872 60,906 34,244 40,353 13,903 36,167 16,709 105,193 $ 463,347		2020 $ 334,774 96,171 64,031 81,919 25,889 58,167 32,014 214,718 $ 907,683	2019 $ 361,435 88,444 137,617 94,858 51,571 66,834 31,967 228,370 $ 1,061,096

33. INCOME TAXES RELATING TO CONTINUING OPERATIONS

a. 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 Three Months Ended June 30 2020 2019 $ 143,696 $ 265,613 1,169 1,507 (3,031) (747) (7,208) (54,414) $ 134,626 $ 211,959	For the Three Months Ended June 30 2020 2019 $ 143,696 $ 265,613 1,169 1,507 (3,031) (747) (7,208) (54,414) $ 134,626 $ 211,959		For the Six Months Ended June 30	For the Six Months Ended June 30
		2020 $ 143,696 1,169 (3,031) (7,208) $ 134,626		2020 $ 372,201 1,169 (3,031) (592) $ 369,747	2019 $ 469,481 1,507 (558) (63,595) $ 406,835

b. Income tax recognized in other comprehensive income

Deferred tax In respect of the current period Fair value changes of financial assets at FVTOCI Total income tax expense (benefit) recognized in other comprehensive income	For the Three Months Ended June 30 2020 2019 $ 6,508 $ 5,475 $ 6,508 $ 5,475	For the Three Months Ended June 30 2020 2019 $ 6,508 $ 5,475 $ 6,508 $ 5,475		For the Six Months Ended June 30	For the Six Months Ended June 30
		2020 $ 6,508 $ 6,508		2020 $ (3,774) $ (3,774)	2019 $ 13,459 $ 13,459

c. Income tax assessments

The income tax returns of Taichung Commercial Bank Co., Ltd. through 2018 have been assessed by the tax authorities, while the income tax returns of Taichung Bank Insurance Brokers Co., Taichung Bank Leasing Corporation Limited, and Taichung Commercial Bank Securities Co., Ltd. through 2017 have been assessed and approved by the tax authorities.

34. EARNINGS PER SHARE

Unit: NT$ Per Share

Basic earnings per share Diluted earnings per share	For the Three Months Ended June 30 2020 2019 $ 0.25 $ 0.28 $ 0.25 $ 0.28	For the Three Months Ended June 30 2020 2019 $ 0.25 $ 0.28 $ 0.25 $ 0.28	For the Six Months Ended June 30	For the Six Months Ended June 30	For the Six Months Ended June 30
		2020 $ 0.25 $ 0.25		2020 $ 0.47 $ 0.47	2019 $ 0.54 $ 0.54

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 six months ended June 30, 2019 are as follows:

	Unit:	NT$ Per Share
	Before	After
	Retrospective	Retrospective
	Adjustment	Adjustment
Basic earnings per share	$ 0.57	$ 0.54
Diluted earnings per share	$ 0.57	$ 0.54

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 Three Months Ended June 30 2020 2019 $ 961,148 $ 1,089,688 $ 961,148 $ 1,089,688		For the Six Months Ended June 30	For the Six Months Ended June 30
		2020 $ 961,148 $ 961,148		2020 $ 1,840,838 $ 1,840,838	2019 $ 2,106,474 $ 2,106,474

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 Three Months Ended June 30 2020 2019 3,901,694 3,901,694 2,010 1,263 3,903,704 3,902,957	For the Three Months Ended June 30 2020 2019 3,901,694 3,901,694 2,010 1,263 3,903,704 3,902,957		For the Six Months Ended June 30	For the Six Months Ended June 30
		2020 3,901,694 2,010 3,903,704		2020 3,901,694 2,986 3,904,680	2019 3,901,694 2,562 3,904,256

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. RELATED-PARTY TRANSACTIONS

Related Party

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

Hsin-Chang Tsai, Li-Woon Lim, Pi-Ta Chen, Chien-An Shin

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

26 persons including the Chairman’s spouse

53 persons including the director of the Board’s spouse

6 persons including Yi-Yuan Tung 24 persons including associate general manager’s spouse

112 persons including Hung-Lung Tsai 11 persons including Kuei-Hsien Wang

Taichung Bank Securities Investment Trust Co., Ltd.

China Fiber Investment Co., Ltd. Pan Asia Investment Co., Ltd. Taichung Commercial Bank Cultural and Educational Foundation, Taichung Commercial Bank Workers’ Welfare Commission Deh Hsing Investment Co., Ltd. Iolite Company Limited Hammock (Hong Kong) Company Limited Hebei Hanoshi Contact Lens Co., Ltd. Chou Chin Industrial Co., Ltd. Chou Chang Co., Ltd. Pan Feng Enterprise Co., Ltd. Greenworld Food Co., Ltd. Nan Chung Petrochemical Corporation Je Mi Fang Corporation Rai Chia Investment Co., Ltd. Xiang Fong Development Co., Ltd. Reliance Securities Co., Ltd. Sheen Ren Knitting Factory Co., Ltd. Ta Fa Investment Co., Ltd. Tai Yi Investment Co., Ltd. Formosa Imperial Wineseller Corp. Tou Ming Industry Limited Company Jin Bang Ge Industrial Company Limited. Ta Yi Development Co., Ltd. Yu Hui Limited Formosawine Vintners Corporation Bomi International Co., Ltd. Shanghai Bomi Food Co., Ltd.

Relationship with the Group

Parent company of the Bank Key management personnel Legal entity as director of the Bank (Note 2) Independent directors of the Bank (Note 2)

Representative of the Bank’s legal entity as director (Note 2)

The Chairman and general manager’s spouse and second-degree relatives, etc. Director of the board’s spouse and children of the Bank

Key management personnel Associate general manager’s spouse and children of the Bank

Manager of the Bank Representative and general manager of the parent company of the Bank’s spouse and children Associates accounted for using the equity method Related parties in substance Related parties in substance Related parties in substance

Related parties in substance Related parties in substance Related parties in substance Related parties in substance Related parties in substance Related parties in substance Related parties in substance Related parties in substance Related parties in substance Related parties in substance Related parties in substance Related parties in substance Related parties in substance Related parties in substance Related parties in substance Related parties in substance Related parties in substance Related parties in substance Related parties in substance Related parties in substance Related parties in substance Related parties in substance Related parties in substance Related parties in substance

(Continued)

Relationship with the Group

Related Party

Noble House Global Limited Related parties in substance Noble House Glory Corporation Related parties in substance Wang Wanjin Culture and Education Foundation Related parties in substance Chaoqing Investment Co., Ltd. Related parties in substance Sheng Yuan Ze Investment Limited Company Related parties in substance Pan Hsu Investment Co., Ltd. Related parties in substance Precious Wealth International Limited Related parties in substance Storm Model Management Co., Ltd. Related parties in substance Bonwell Praise Co., Ltd. Related parties in substance Chen Teng Public Relations (Shanghai) Company Related parties in substance Shanghai Bomi Consulting management Limited Company Related parties in substance Shuo-Jung Co., Ltd. Related parties in substance Fengteng Co., Ltd. Related parties in substance Shanghai Nianjia Culture Communication Co., Ltd. Related parties in substance

(Concluded)

Note 1: Chin-Yuan Lai, who was the legal representative of Hsu Tian Investment Co., Ltd., the legal director of the Bank, resigned on June 26, 2018. Hsu Tian Investment Co., Ltd. reassigned the 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).

Significant transactions between the Group and related parties:

a. Loans

For the six months ended June 30, 2020

Balance,
Numbers/
Name
Highest
Balance
End of the
Period
Employees
consumption loans
10
$ 3,223
$ 2,597
Loans on mortgage
34
156,748
114,020
Other loans
Lee OO
2,552
2,484
Liu OO
1,911
1,843
Lin OO
504
458
Fang OO
4,916
1,416
Lin OO
18,800
18,200
Tsai OO
380
314
Liang OO
886
827
Ye OO
11,000
11,000
Huang OO
1,570
1,503
Chiu OO
3,238
3,088

Compliance
The
Difference
Between
Related and
Performing
Loans
Overdue
Loans
Interest
Revenue
Collaterals
Non-related
Party
$ 2,597
$ -
$ 26
Credit loans
None
114,020
-
812
Real estate
None
2,484
-
19
Real estate
None
1,843
-
13
Real estate
None
458
-
-
Real estate
None
1,416
-
19
Real estate
None
18,200
-
161
Real estate
None
314
-
3
Real estate
None
827
-
6
Real estate
None
11,000
-
79
Real estate
None
1,503
-
12
Real estate
None
3,088
-
22
Real estate
None

For the six months ended June 30, 2019

Balance,
Numbers/
Name
Highest
Balance
End of the
Period
Employees
consumption loans
9
$ 3,582
$ 3,065
Loans on mortgage
28
134,572
105,103
Other loans
Lee OO
2,685
2,619
Chen OO
4,000
-
Liu OO
2,044
1,978
Yang OO
846
-
Zhong OO
12,230
11,853
Fang OO
2,216
2,216
Lin OO
19,000
19,000
Liang OO
1,002
944
Ye OO
11,000
11,000
Huang OO
1,701
1,635
Chiu OO
3,534
3,387
Tsai OO
1,529
1,485

Compliance
The
Difference
Between
Related and
Performing
Loans
Overdue
Loans
Interest
Revenue
Collaterals
Non-related
Party
$ 3,065
$ -
$ 31
Credit loans
None
105,103
-
693
Real estate
None
2,619
-
21
Real estate
None
-
-
17
Real estate
None
1,978
-
15
Real estate
None
-
-
4
Real estate
None
11,853
-
95
Real estate
None
2,216
-
15
Real estate
None
19,000
-
169
Real estate
None
944
-
7
Real estate
None
11,000
-
82
Real estate
None
1,635
-
14
Real estate
None
3,387
-
25
Real estate
None
1,485
-
15
Real estate
None

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

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. Je Mi Fang Corporation Yu Hui Limited Hsu Tian Investment Co., Ltd. Pan Asia Investment Co., Ltd. Pan Hsu Investment Co., Ltd. Reliance Securities Co., Ltd. Shuo-Jung Co., Ltd. Deh Hsing Investment Co., Ltd. Others	For the Six Months Ended June 30, 2020	For the Six Months Ended June 30, 2020
	Ending Balance Interest Ratio $ 164,119 0.00-1.05 148,150 0.01-4.80 91,311 0.01-0.05 8,262 0.01-0.84 610 0.04 2,436 0.04 18,486 0.01-0.04 272 0.04 5,078 0.01-0.04 1,228 0.01 16,410 0.04 4 0.01 571 0.01-0.04 6 0.01 3 0.01 13,704 0.04-0.80 15,244 0.01 6,833 0.04 338,674 0.00-4.80 $ 831,401	Interest Expense $ 618 3,629 14 39 - 1 4 - 1 - 5 - - - - 52 - 2 2,005 $ 6,370

Taichung Bank Securities Investment Trust Co., Ltd. Taichung Commercial Bank Workers’ Welfare Commission China Man-Made Fiber Corporation Reliance Securities Co., Ltd. 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. Pan Hsu Investment Co., Ltd. Je Mi Fang Corporation Yu Hui Limited Hsu Tian Investment Co., Ltd. Ho Yang Management Consultant Co., Ltd. Others	For the Six Months Ended June 30, 2019	For the Six Months Ended June 30, 2019
	Ending Balance Interest Ratio $ 176,597 0.00-1.05 141,088 0.05-5.09 52,808 0.05-0.48 13,600 0.08-0.80 8,275 0.00-1.09 997 0.08 1,076 0.08 19,282 0.01-0.08 159 0.08 16,679 0.01-0.08 479 0.01 1 0.01 14,570 0.08 4 0.01 104 0.01-0.48 35,248 0.01 264,458 0.00-5.09 $ 745,425	Interest Expense $ 616 3,679 24 52 44 1 1 5 - 1 - - 6 - 13 1 1,879 $ 6,322

The interest rates do not significantly differ from those with ordinary customers except for the interest rates on the Bank’s employee deposits at 4.80%, 5.09% and 5.09% as of June 30, 2020, December 31, 2019 and June 30, 2019, respectively.

c. Financial debenture

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, respectively, and entrusted Concord Securities Co., Ltd. and KGI Securities Co., Ltd. as financial advisor for the issuance and collection of bonds.

As of June 30, 2020, the related parties subscribed for the financial debentures issued by the Bank through underwriting brokers were 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

The interest payables on the financial debentures of the above-mentioned related parties were $210,122 thousand, $50,136 thousand and $209,244 thousand on June 30, 2020, December 31, 2019 and June 30, 2019, respectively. The interest expenses were $79,993 thousand, $79,997 thousand, $159,986 thousand and $159,117 thousand for the three months ended June 30, 2020 and 2019, and for the six months ended June 30, 2020 and 2019, respectively.

d. Service fee income

Taichung Bank Securities Investment Trust Co., Ltd.	For the Three Months Ended June 30 2020 2019 $ 142 $ 219	For the Three Months Ended June 30 2020 2019 $ 142 $ 219		For the Six Months Ended June 30	For the Six Months Ended June 30
		2020 $ 142		2020 $ 296	2019 $ 457

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

e. Other expenses

Greenworld Food Co., Ltd. Je Mi Fang Corporation Pan Feng Enterprise Co., Ltd.	For the Three Months Ended June 30 2020 2019 $ 383 $ 403 1,450 102 31 116 $ 1,864 $ 621	For the Three Months Ended June 30 2020 2019 $ 383 $ 403 1,450 102 31 116 $ 1,864 $ 621		For the Six Months Ended June 30	For the Six Months Ended June 30
		2020 $ 383 1,450 31 $ 1,864		2020 $ 552 1,472 81 $ 2,105	2019 $ 495 198 276 $ 969

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

f. Compensation of directors and key management personnel

For the for the three months ended June 30, 2020 and 2019, and for the six months ended June 30, 2020 and 2019, compensation of directors and key management personnel were as follows:

Short-term benefits Post-employee benefits Other long-term benefits	For the Three Months Ended June 30 2020 2019 $ 48,995 $ 45,181 335 309 5 3 $ 49,335 $ 45,493	For the Three Months Ended June 30 2020 2019 $ 48,995 $ 45,181 335 309 5 3 $ 49,335 $ 45,493		For the Six Months Ended June 30	For the Six Months Ended June 30
		2020 $ 48,995 335 5 $ 49,335		2020 $ 118,879 662 9 $ 119,550	2019 $ 115,120 620 6 $ 115,746

36. PLEDGED ASSETS

			December 31,	December 31,
	June 30, 2020			2019	June 30, 2019
Call loans to other banks - time deposits	$	200,000	$	200,000	$	200,000
Restricted assets - cash in banks		474,880		419,388		409,418
Notes receivable		2,322,121		2,889,030		2,516,652
Investments in debt instrument at amortized cost -
government bonds		920,700		844,900		845,000
Deposit reserves for demand accounts		5,000,000		-		-
	$	8,917,701	$	4,353,318	$	3,971,070

Call loans to other banks - time deposits were the provision of operation deposit. Restricted assets - cash in banks and notes receivable were the guarantee for financing to other banks. 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:

		December 31,
	June 30, 2020	2019	June 30, 2019
Guarantee to district courts for litigation	$ 360,700	$ 284,900	$ 285,000
Collateral for overdraft of clearing account	500,000	500,000	500,000
Reserve of trust compensation	60,000	60,000	60,000
	$ 920,700	$ 844,900	$ 845,000

37. 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 June 30, 2020, December 31, 2019 and June 30, 2019 were as follows:

a. Significant commitments

		December 31,
	June 30, 2020	2019	June 30, 2019
Loan commitments (excluding credit card)	$ 142,235,973	$ 139,176,198	$ 146,413,557
Loan commitments - credit card	12,475,261	11,743,903	11,131,218
Guarantee receivable	18,409,380	16,485,312	16,789,016
Trust liabilities	65,399,771	67,330,687	67,081,975
Letters of credit	2,866,245	3,318,935	3,411,629
Lease contract commitment	1,202,818	1,240,804	1,976,548

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 June 30, 2020

Trust Assets Cash in banks Short-term investments Structured finance instruments Real estate Land Buildings Securities under custody Trust assets	Amount Trust Liabilities $ 4,228,688 Securities under custody 52,312,717 payable 1,603,867 Trust capital Net income 1,564,307 Deferred carry-over amounts 133,940 5,556,252 $ 65,399,771 Trust liabilities	Amount $ 5,556,252 59,843,519 897,910 (897,910)
		$ 65,399,771

Trust Account Asset Items June 30, 2020

Item Cash in banks Short-term investments Structured finance instruments Real estate Land Buildings Securities under custody	Amount $ 4,228,688 52,312,717 1,603,867 1,564,307 133,940 5,556,252 $ 65,399,771

Trust Account Income Statement Six Months Ended June 30, 2020

Trust income Interest revenue Trust expense Management fee Tax Income before income tax Income tax expense Net income	Amount $ 1,362,452 ( 464,542) - 897,910 - $ 897,910

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	Amount Trust Liabilities $ 3,588,759 Securities under custody 54,341,837 payable 2,041,602 Trust capital Net income 1,350,853 Deferred carry-over amounts 123,079 5,884,557 $ 67,330,687 Trust liabilities	Amount $ 5,884,557 61,446,130 2,047,880 (2,047,880)
		$ 67,330,687

Trust Account Asset Items December 31, 2019

Item Cash in banks Short-term investments Structured finance instruments Real estate Land Buildings Securities under custody	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

Amount

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

Trust Account Balance Sheet June 30, 2019

Trust Assets Cash in banks Short-term investments Structured finance instruments Real estate Land Buildings Securities under custody Trust assets	Amount Trust Liabilities $ 3,077,051 Securities under custody 53,462,422 payable 2,407,536 Trust capital Net income 1,385,153 Deferred carry-over amounts 123,750 6,626,063 $ 67,081,975 Trust liabilities	Amount $ 6,626,063 60,455,912 1,044,075 (1,044,075) $ 67,081,975

Trust Account Asset Items June 30, 2019

Item Cash in banks Short-term investments Structured finance instruments Real estate Land Buildings Securities under custody Trust Account Income Statement For the Six Months Ended June 30, 2019 Trust income Interest revenue Trust expense Management fee Tax Income before income tax Income tax expense Net income	Amount $ 3,077,051 53,462,422 2,407,536 1,385,153 123,750 6,626,063 $ 67,081,975 Amount $ 1,448,751 (404,676) - 1,044,075 - $ 1,044,075

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-cancelling condition. The lease contract commitments of the operating leases are referred to in Note 19.

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 was summarized as follows:

Financing lease income

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 onwards Present value of financing lease income Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 onwards Capital expenditure commitment Year 1 Year 2 Year 3 Year 4 Year 5	June 30, 2020 $ 2,041,275 799,798 64,925 13,030 13,030 178,150 $ 3,110,208 June 30, 2020 $ 1,824,830 735,914 53,468 3,296 3,627 96,109 $ 2,717,244 June 30, 2020 $ 453,360 3,939,572 3,261,877 1,236,643 14,394 $ 8,905,846	December 31, 2019 $ 2,836,102 288,642 19,172 13,300 13,300 188,431 $ 3,358,947 December 31, 2019 $ 2,551,965 261,072 8,545 3,026 100,936 - $ 2,925,544 December 31, 2019 $ 823,970 4,580,756 3,510,676 1,233,408 71,971 $ 10,220,781	June 30, 2019 $ 2,031,873 825,301 136,385 - - - $ 2,993,559 June 30, 2019 $ 1,803,367 765,771 130,576 - - - $ 2,699,714 June 30, 2019 $ 1,416,404 1,875,341 4,170,612 3,600,383 282,169 $ 11,344,909

38. 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

June 30, 2020

Carrying Amount Financial assets Investments in debt instrument at amortized cost $ 111,559,362 Financial liabilities Financial liabilities at amortized cost Bank debentures 11,500,000 December 31, 2019 Carrying Amount Financial assets Investments in debt instrument at amortized cost $ 108,969,273 Financial liabilities Financial liabilities at amortized cost Bank debentures 14,000,000 June 30, 2019 Carrying Amount Financial assets Investments in debt instrument at amortized cost $ 103,286,802 Financial liabilities Financial liabilities at amortized cost Bank debentures 20,000,000	FairValue
	Level 1 Level 2 Level 3 Total $ 85,775,959 $ 26,860,605 $ - $ 112,636,564 - 11,663,367 - 11,663,367 FairValue
	Level 1 Level 2 Level 3 Total $ 85,512,551 $ 24,092,164 $ - $ 109,604,715 - 14,014,140 - 14,014,140 FairValue
	Level 1 Level 2 Level 3 Total $ 81,675,146 $ 22,188,744 $ - $ 103,863,890 - 20,056,903 - 20,056,903

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.

63-
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 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			June 30, 2020	June 30, 2020
		Total $ 2,356,820 19,291,845 653,699 253,725 100,567 823,053 $ 23,479,709 $ 717,190 1,742,884 279,032 26,806,213 5,849,890 797,951 2,003,625 $ 38,196,785 $ 296,298	Level 1 $ - 19,291,845 632,982 253,725 100,567 - $ 20,279,119 $ - 1,742,884 279,032 26,806,213 5,849,890 - 2,003,625 $ 36,681,644 $ -	Level 2 $ 2,356,820 - 20,717 - - 823,053 $ 3,200,590 $ - - - - - 797,951 - $ 797,951 $ 296,298	Level 3 $ - - - - - - $ - $ 717,190 - - - - - - $ 717,190 $ -

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	$664,957	$52,233	$ -	$ -	$ -	$ -	$717,190

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)

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	Increase	Decrease	Decrease	Decrease		Ending Balance
				Buy or Issue	Transfer in		Sell, Disposal		Transfer Out
Financial assets at FVTPL Unlisted shares	$510,523	$154,434		$ -	$ -		$ -		$ -		$664,957
Financial assets at FVTPL						June 30, 2019
			Total $ 2,055,631 23,218,728 596,217 77,842 60,465 1,063,513 $ 27,072,396 $ 679,549 614,674 262,438 20,563,127 6,027,331 823,322 $ 28,970,441 $ 166,942			Level 1 $ - 23,218,728 577,752 77,842 60,465 - $ 23,934,787 $ - 614,674 262,438 20,563,127 6,027,331 - $ 27,467,570 $ -		Level 2 $ 2,055,631 - 18,465 - - 1,063,513 $ 3,137,609 $ - - - - - 823,322 $ 823,322 $ 166,942		Level 3 $ - - - - - - $ - $ 679,549 - - - - - $ 679,549 $ -

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	$510,523	$169,026	$ -	$ -	$ -	$ -	$679,549

There were no transfers between Levels 1 and 2 for the six months ended June 30, 2020 and 2019.

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

Structured Finance Instruments
Interest rate-linked
structured instruments 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 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 contract forward rates, discounted at a rate that
reflects the credit risk of various counterparties.
Convertible corporate bond closing price on the day minus bond
value. The pure bond value is discounted by the cash flow
provided by the convertible corporate bonds in accordance with
Taiwan Bills Index Rate (TAIBIR).

The counterparty quotes.

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

The quantitative information on unobservable inputs of the financial instruments classified in Level 3, and held by the Group on June 30, 2020, December 31, 2019 and June 30, 2019, were as follows:

Items	Fair value on June 30, 2020	Fair value on December 31, 2019	Fair value on June 30, 2019	Valuation Techniques	Significant Unobservable Input	Range (Weighted- average)	Relationship Between Inputs and Fair Value
Financial assets at fair value through other comprehensive income Domestic unlisted shares	$ 717,190	$ 664,957	$ 679,549	Seller’s quote (Monte Carlo Simulation Method)	Volatility rate	24.74%-24.97%	The lower the volatility rate, the higher the fair value

4) The assessment of fair value in Level 3

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

66-
5) Sensitivity analysis of Level 3 fair value if reasonable possible alternative assumptions may be used.

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

Risk Factor
Sensitivity Rate
Impact
Liquidity discount ratio
10%
$ (15,683)
Categories of financial instruments
June 30, 2020
December 31,
2019
June 30, 2019
Financial assets
Financial assets at FVTPL
$ 23,479,709 $ 24,375,536 $ 27,072,396
Financial assets at amortized cost (Note 1)
638,129,195 613,853,180 613,232,289
Financial assets at FVTOCI
Equity instruments
2,739,106
1,598,987
1,556,661
Debt instruments
35,457,679
30,000,344
27,413,780
Financial liabilities
Financial liabilities at FVTPL
296,298
233,803
166,942
Financial liabilities at amortized cost (Note 2) 658,264,104 628,054,346 628,259,125

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, investment in debt instrument at amortized cost, securities purchased under resell 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.

39. 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, product price and the product price risks) and liquidity risks of on and offbalance 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.

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 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 in the current extremes 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 location, 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 the surplus. The main sources of risk include deposits and interest-related securities.

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 moves 100BP in parallel, the degree of impact on earnings and equity controls 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 spot and forward foreign exchange of the business. 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 in the hypothetical scenarios when the USD/NTD, CNY/NTD, and JPY/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 in the hypothetical scenarios when the price of equity securities rises/falls by 15% in order to control the risk of equity securities.

g) Market risk sensitivity analysis

Interest risk

The Group assumed that when other change factors remain unchanged, if the yield curve increased/decreased by 100 basis points, the income before income tax of the Group as of June 30, 2020, December 31, 2019 and June 30, 2019 would have increased/decreased by $667,544 thousand, $759,373 thousand and $724,761 thousand, respectively. The other equity would have decreased/increased by $2,274,832 thousand, $2,039,615 thousand and $2,207,740 thousand, respectively.

Exchange rate risk

The Group assumed that when other change factors remain unchanged, if the exchange rate of USD/NTD, CNY/NTD, and JPY/NTD appreciated/depreciated by 3%, the income before income tax as of June 30, 2020, December 31, 2019 and June 30, 2019 would have decreased/increased $7,506 thousand, $9,170 thousand and increased/decreased $36,565 thousand, respectively. The other equity would have increased/decreased by $45,185 thousand, $48,527 thousand and $59,104 thousand, respectively.

Equity securities price risk

The Group assumed that when other change factors remain unchanged, if the price of equity securities increased/decreased by 15%, the income before income tax as of June 30, 2020, December 31, 2019 and June 30, 2019 would have increased/decreased by $136,114 thousand, $162,699 thousand and $101,109 thousand, respectively. The other equity would have increased/decreased by $410,866 thousand, $239,848 thousand and $233,499 thousand, respectively.

The summary of sensitivity analysis was as follows:

	June 30, 2020
Main Risk	Range of Change	Influence Amount
		Other Equity	Income
Interest risk	Interest rate curve rises 100BPS Interest rate curve falls 100BPS	$ (2,274,832) 2,274,832	$ 667,544 (667,544)
Exchange rate risk	USD/NTD, CNY/NTD, JPY/NTD increase by 3% respectively USD/NTD, CNY/NTD, JPY/NTD decrease by 3%respectively	45,185 (45,185)	(7,506) 7,506
Equity securities price risk	Equity securities prices rise by 15% Equity securities prices fall by 15%	410,866 (410,866)	136,114 (136,114)

	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, JPY/NTD increase by 3% respectively USD/NTD, CNY/NTD, JPY/NTD decrease by 3%respectively	48,527 (48,527)	(9,170) 9,170
Equity securities price risk	Equity securities prices rise by 15% Equity securities prices fall by 15%	239,848 (239,848)	162,699 (162,699)

	June 30, 2019
Main Risk	Range of Change	Influence Amount
		Other Equity	Income
Interest risk	Interest rate curve rises 100BPS Interest rate curve falls 100BPS	$ (2,207,740) 2,207,740	$ 724,761 (724,761)
Exchange rate risk	USD/NTD, CNY/NTD, JPY/NTD increase by 3% respectively USD/NTD, CNY/NTD, JPY/NTD decrease by3% respectively	59,104 (59,104)	36,565 (36,565)
Equity securities price risk	Equity securities prices rise by 15% Equity securities prices fall by 15%	233,499 (233,499)	101,109 (101,109)

2) Credit risk

a) Defining 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 ad loans, the credit card business, due from other banks and call loans to other banks, acceptance, investment in debt instrument 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 June 30, 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 holdings was approximately 41%, and the collateral required for loans, loan commitments or guarantees is usually in the forms of cash, inventories, liquid securities or other property 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. Loans business (including loan commitment 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 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.

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 impairment 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 company 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.

iii) Measurement of expected credit losses

In order to assess the expected credit losses, the combined company 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 months 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 packet direct estimation method.

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

Consideration of forward-looking estimation

In considering 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 investment

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 commitment in debt instrument investment.

The securities held by the Group recognize the expected credit losses according to the expected credit losses during the lifetime ECLs of financing commitment. The credit quality of the Group’s judgment securities was as follows:

i) The determination since the initial recognition of the credit risk has increased significantly.

The Group assesses the change in the probability of default of debt instrument investment 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 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 day 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 investment is significantly and adversely changed on the reporting date.
ii) Definition of default and credit impairment financial assets

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

Quantitative indicators

Debt instrument investment is the credit impairment bond when it is purchased.
The default rate for credit rating of the issuer or debt instrument investment will be adjusted on the reporting day.

Qualitative indicators

The issuer modifies the issue conditions of the debt instrument investment due to financial difficulties or fails to pay the principal or interest according to the conditions of the issue.
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.
75-

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 dated 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 asset project 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, and the current risk calculation method is used it.
- 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 investment 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 polices 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.

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 depends on the credit rating scale of clients.
ii) Guarantee of high-risk transactions: Asking for collaterals when option contracts are under resell 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 its pledged values which eliminate potential loss, are as follows:

June 30, 2020

Financial assets that were impaired Notes discounted and loans Receivables Guarantees and letters of credit Debt instrument 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 instrument Others Total financial assets that were impaired	Total Book Value $ 10,392,772 342,490 145,190 17,187 $ 10,897,639 Total Book Value $ 9,554,442 315,071 182,882 17,477 11,000 $ 10,080,872	Allowance for Impairment Loss Total Value of Exposure $ (2,359,240) $ 8,033,532 (175,483) 167,007 (47,301) 97,889 (17,187) - $ (2,599,211) $ 8,298,428 Allowance for Impairment Loss Total Value of Exposure $ (2,468,257) $ 7,086,185 (165,224) 149,847 (58,628) 124,254 (17,477) - (4,025) 6,975 $ (2,713,611) $ 7,367,261	Fair Value of Collateral $ 8,033,532 103,480 55,640 - $ 8,192,652 Fair Value of Collateral $ 7,086,185 76,067 88,672 - 6,975 $ 7,257,899

June 30, 2019

Financial assets that were impaired Notes discounted and loans Receivables Guarantees and letters of credit Debt instrument Total financial assets that were impaired	Total Book Value $ 8,437,536 291,065 110,568 18,095 $ 8,857,264	Allowance for Impairment Loss Total Value of Exposure $ (2,476,414) $ 5,961,122 (145,106) 145,959 (42,980) 67,588 (18,095) - $ (2,682,595) $ 6,174,669	Fair Value of Collateral $ 5,961,122 84,529 3,613 -
			$ 6,049,264

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 relation to the total security 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:

			December 31,	December 31,
	June 30, 2020			2019	June 30, 2019
Irrevocable loan commitments	$	8,015,975	$	7,152,089	$	5,793,498
Credit card commitments		12,475,261		11,743,903		11,131,218
Guarantee receivables		18,409,380		16,485,312		16,789,016
Letters of credit		2,866,245		3,318,935		3,411,629

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.

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 Regions Domestic Asia North America Others	June 30, 2020 $ 255,364,698 223,102,014 1,000,000 2,212,612 $ 481,679,324 June 30, 2020 $ 223,102,014 84,657,671 56,324,586 63,930,534 15,081,460 10,842,695 11,427,780 8,465,136 7,847,448 $ 481,679,324 June 30, 2020 $ 448,263,711 18,251,470 11,169,767 3,994,376 $ 481,679,324	December 31, 2019 $ 248,612,635 217,305,317 - 2,626,646 $ 468,544,598 December 31, 2019 $ 217,305,317 84,278,234 54,445,987 60,316,865 14,458,438 11,490,230 10,820,858 8,000,869 7,427,800 $ 468,544,598 December 31, 2019 $ 434,606,494 18,224,815 11,519,422 4,193,867 $ 468,544,598	June 30, 2019 $ 247,169,498 218,953,828 - 2,314,375
			$ 468,437,701
			June 30, 2019 $ 218,953,828 85,721,123 58,139,173 54,196,719 14,271,311 12,132,442 12,508,712 7,254,826 5,259,567
			$ 468,437,701
			June 30, 2019 $ 433,927,499 17,794,372 12,225,630 4,490,200
			$ 468,437,701

Credit Risk Profile by Collaterals Unsecured Secured Real estate Letter of bank guarantee Chattel Debenture Notes receivable Stocks Others	June 30, 2020 $ 75,172,681 363,053,144 16,991,166 5,961,748 13,310,195 1,473,820 2,648,345 3,068,225 $ 481,679,324	December 31, 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	June 30, 2019 $ 74,309,685 352,313,730 16,578,843 5,842,570 11,875,279 1,529,232 2,756,825 3,231,537
			$ 468,437,701

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 debt:

The debtor may not recover all or part of the obligatory claim due to dissolution, escape, settlement, bankruptcy or other reasons.
The appraisal of collateral and properties 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 properties of the main and subordinate debtors are auctioned off at multiple auctions and the Bank did not bear the 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

June 30, 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 $ 220,017,078 205,737,141 19,067 425,773,286 (1,710,886 ) - $ 424,062,400		Stage 2 Lifetime ECL $ 4,668,552 13,452,485 1,512 18,122,549 (1,133,871 ) - $ 16,988,678		Difference of Impairment Loss Stage 3 under Lifetime ECL Regulations $ 7,137,809 $ - 3,255,173 - (210) - 10,392,772 - (2,359,240 ) - - (1,290,529) $ 8,033,532 $ (1,290,529)	Total $ 231,823,439 222,444,799 20,369 454,288,607 (5,203,997 ) (1,290,529) $ 447,794,081

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 $ 8,785,372 1,924,793 58,164,581 68,874,746 (81,985 ) - $ 68,792,761		Stage 2 Lifetime ECL $ 454,818 24,388 15 479,221 (10,252 ) - $ 468,969		Difference of Impairment Loss Stage 3 under Lifetime ECL Regulations $ 255,794 $ - 35,780 - 50,916 - 342,490 - (175,483 ) - - (43,367) $ 167,007 $ (43,367)	Total $ 9,495,984 1,984,961 58,215,512 69,696,457 (267,720 ) (43,367) $ 69,385,370

	Irrevocable Loan Commitments	Irrevocable Loan Commitments
Stage 1 12-month ECLs $ 7,890,375 125,600 8,015,975 (49,018 ) - $ 7,966,957	Difference of Impairment Loss Stage 2 Stage 3 under Lifetime ECL Lifetime ECL Regulations $ - $ - $ - - - - - - - - - - - - (741) $ - $ - $ (741) Credit Card Commitments		Total $ 7,890,375 125,600 8,015,975 (49,018 ) (741) $ 7,966,216

	Difference of Impairment Loss Stage 2 Stage 3 under Lifetime ECL Lifetime ECL Regulations $ 82,119 $ - $ - 82,119 - (2,201 ) - - - - (2,258) $ 79,918 $ - $ (2,258) Guarantee Receivables		Total $ 12,475,261 12,475,261 (7,124 ) (2,258) $ 12,465,879

	Stage 2 Lifetime ECL $ 54,334 54,334 (3,237 ) - $ 51,097	Difference of Impairment Loss Stage 3 under Lifetime ECL Regulations $ 145,190 $ - 145,190 - (47,301 ) - - (14,638) $ 97,889 $ (14,638)	Total $ 18,409,380 18,409,380 (173,825 ) (14,638) $ 18,220,917

Product category Corporate loans Total book value Allowance for doubtful accounts Difference of impairment loss under regulations				Letters of Credit	Letters of Credit
	Stage 1 12-month ECLs $ 2,854,351 2,854,351 (7,852 ) - $ 2,846,499		Stage 2 Lifetime ECL $ 11,894 11,894 (556 ) - $ 11,338		Difference of Impairment Loss Stage 3 under Lifetime ECL Regulations $ - $ - - - - - - (2,249) $ - $ (2,249)	Total $ 2,866,245 2,866,245 (8,408 ) (2,249) $ 2,855,588

December 31, 2019

	Notes Discounted and Loans	Notes Discounted and Loans
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

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	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

Credit Card Commitments

Difference of Impairment Loss Stage 2 Stage 3 under Lifetime ECL Lifetime ECL Regulations $ 73,869 $ - $ - 73,869 - - (1,848 ) - - - - (3,289) $ 72,021 $ - $ (3,289) Guarantee Receivables	Difference of Impairment Loss Stage 2 Stage 3 under Lifetime ECL Lifetime ECL Regulations $ 73,869 $ - $ - 73,869 - - (1,848 ) - - - - (3,289) $ 72,021 $ - $ (3,289) Guarantee Receivables	Total $ 11,743,903 11,743,903 (6,093 ) (3,289) $ 11,734,521

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

June 30, 2019

	Notes Discounted and Loans	Notes Discounted and Loans
Stage 1 12-month ECLs $ 216,353,138 200,568,465 30,655 416,952,258 (1,818,567 ) - $ 415,133,691	Stage 2 Lifetime ECL $ 2,893,652 13,960,681 2,532 16,856,865 (810,003 ) - $ 16,046,862	Difference of Impairment Loss Stage 3 under Lifetime ECL Regulations $ 5,797,165 $ - 2,640,274 - 97 - 8,437,536 - (2,476,414 ) - - (1,537,999) $ 5,961,122 $ (1,537,999) Receivables	Total $ 225,043,955 217,169,420 33,284 442,246,659 (5,104,984 ) (1,537,999) $ 435,603,676

	Difference of Impairment Loss Stage 2 Stage 3 under Lifetime ECL Lifetime ECL Regulations $ 268,709 $ 202,620 $ - 35,584 36,571 - 35 51,874 - 304,328 291,065 - (5,964 ) (145,106 ) - - - (94,618) $ 298,364 $ 145,959 $ (94,618) Irrevocable Loan Commitments		Total $ 10,590,568 1,489,844 52,831,172 64,911,584 (247,917 ) (94,618) $ 64,569,049

	Difference of Impairment Loss Stage 2 Stage 3 under Lifetime ECL Lifetime ECL Regulations $ - $ - $ - - - - - - - - - - - - (6,716) $ - $ - $ (6,716) Credit Card Commitments		Total $ 5,614,598 178,900 5,793,498 (38,756 ) (6,716) $ 5,748,026

	Stage 2 Lifetime ECL $ 65,529 65,529 (1,775 ) - $ 63,754	Difference of Impairment Loss Stage 3 under Lifetime ECL Regulations $ - $ - - - - - - (3,436) $ - $ (3,436)	Total $ 11,131,218 11,131,218 (5,946 ) (3,436) $ 11,121,836

Guarantee Receivables

Stage 2 Lifetime ECL $ 62,916 62,916 (5,063 ) - $ 57,853		Total $ 16,789,016 16,789,016 (161,913 ) (21,513) $ 16,605,590

Stage 2 Lifetime ECL $ 49,012 49,012 (2,241 ) - $ 46,771	Difference of Impairment Loss Stage 3 under Lifetime ECL Regulations $ 49 $ - 49 - (7 ) - - (6,951) $ 42 $ (6,951)	Total $ 3,411,629 3,411,629 (12,008 ) (6,951) $ 3,392,670

ii. Debt instrument investments

June 30, 2020

	Financial Assets	at FVTOCI
Stage 1 Stage 2 Stage 3 12-month ECLs Lifetime ECL Lifetime ECL Total $ 35,477,144 $ - $ - $ 35,477,144 - - - - 35,477,144 - - 35,477,144 (19,465 ) - - (19,465 ) - - - - $ 35,457,679 $ - $ - $ 35,457,679 Investments in Debt Instruments at Amortized Cost
	Stage 2 Lifetime ECL $ - - - - - - $ -	Stage 3 Lifetime ECL $ - 17,187 - 17,187 (17,187 ) - $ -	Total $ 50,281,482 17,187 61,305,000 111,603,669 (44,307 ) - $ 111,559,362

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:

June 30, 2020

		Financial Assets
	Financial Assets	at Amortized
	at FVTOCI	Cost
Total book value	$ 35,139,547	$ 111,603,669
Loss allowance	(19,465)	(44,307)
Amortized cost	35,120,082	111,559,362
Fair value adjustment	337,597	-
	$ 35,457,679	$ 111,559,362

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	Total Book Value
				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%-0.74% 100%	$ 35,139,547 - - -	$ 111,586,482 - 17,187 -

With respect to the Group’s investments in debt instruments at FVTOCI and at amortized cost, information on the changes in its 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 new debt instruments
Dispose
Model/risk parameter change
Exchange rate and other changes
Loss allowance, June 30, 2020
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 new debt instruments
Dispose
Model/risk parameter change
Exchange rate and other changes
Loss allowance, June 30, 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)
$ 15,405
$ -
$ -
-
-
-
-
-
-
-
-
-
3,340
-
-
(209)
-
-
-
-
-

929

-

-
$ 19,465
$ -
$ -
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
-
-
-
-
-
-
-
-
-
1,523
-
-
(919)
-
-
-
-
-

2,331

-

(290)
$ 27,120
$ -
$ 17,187

Product category (Note) Investment grade bond Non-investment grade bond Total book value Allowance for impairment Difference of impairment loss under regulations			Financial Assets	Financial Assets	at FVTOCI
	Stage 1 12-month ECLs $ 30,015,749 - 30,015,749 (15,405 ) - $ 30,000,344		Stage 2 Lifetime ECL $ - - - - - $ -		Stage 3 Lifetime ECL $ - - - - - $ -	Total $ 30,015,749 - 30,015,749 (15,405 ) - $ 30,000,344

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	Investments in Debt Instruments at Amortized Cost	Investments in Debt Instruments at Amortized Cost	Investments in Debt Instruments at Amortized Cost	Investments in Debt Instruments at Amortized Cost	Investments in Debt Instruments at Amortized Cost	Investments in Debt Instruments at Amortized Cost
	Stage 1 12-month ECLs $ 49,458,458 - 59,535,000 108,993,458 (24,185 ) - $ 108,969,273		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.

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	Total Book Value
				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 -

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

Financial assets at FVTOCI
Balance, January 1, 2019
Changes in credit rating of debt
instruments recognized in the
beginning of the year
Normal turned to abnormal
Abnormal turned to default
Default turned to write off
Purchase of new debt instruments
Disposal
Model/risk parameter change
Exchange rate and other changes
Loss allowance, December 31,
2019
Financial assets at amortized cost
Balance, January 1, 2019
Changes in credit rating of debt
instruments recognized in the
beginning of the year
Normal turned to abnormal
Abnormal turned to default
Default turned to write off
Purchase of new debt instruments
Disposal
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

June 30, 2019

	Financial Assets	at FVTOCI
Stage 1 Stage 2 Stage 3 12-month ECLs Lifetime ECL Lifetime ECL Total $ 27,428,971 $ - $ - $ 27,428,971 - - - - 27,428,971 - - 27,428,971 (15,191 ) - - (15,191 ) - - - - $ 27,413,780 $ - $ - $ 27,413,780 Investments in Debt Instruments at Amortized Cost
	Stage 2 Lifetime ECL $ - - - - - - $ -	Stage 3 Lifetime ECL $ - 18,095 - 18,095 (18,095 ) - $ -	Total $ 47,711,791 18,095 55,600,000 103,329,886 (43,084 ) - $ 103,286,802

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:

June 30, 2019

		Financial Assets
	Financial Assets	at Amortized
	at FVTOCI	Cost
Total book value	$ 27,224,615	$ 103,329,886
Loss allowance	(15,191)	(43,084)
Amortized cost	27,209,424	103,286,802
Fair value adjustment	204,356	-
	$ 27,413,780	$ 103,286,802

The current credit risk rating mechanism of the Group 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	Total Book Value
				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%-0.46% 100%	$ 27,224,615 - - -	$ 103,311,791 - 18,095 -

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

Financial assets at FVTOCI Balance, January 1, 2019 Changes in credit rating of debt instruments recognized in the beginning of the year Normal turned to abnormal Abnormal turned to default Default turned to write off Purchase of new debt instruments Disposal Model/risk parameter change Exchange rate and other changes Loss allowance, June 30, 2019	Credit Rating
	Normal (12-Month Expected credit Losses) Abnormal (Lifetime ECL and not Credit Impaired) Default (Lifetime ECL and Credit Impaired) $ 15,525 $ - $ - - - - - - - - - - - - - (158) - - - - - (176) - - $ 15,191 $ - $ -

Financial assets at amortized cost Balance, January 1, 2019 Changes in credit rating of debt instruments recognized in the beginning of the year Normal turned to abnormal Abnormal turned to default Default turned to write off Purchase of new debt instruments Disposal Model/risk parameter change Exchange rate and other changes Loss allowance, June 30, 2019	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 - - - - - - - - - 1,084 - - (503) - (56,349) - - - (6,277) - - $ 24,989 $ - $ 18,095

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 financing borrowing, etc.

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.

June 30, 2020	0-30 Days	31-90 Days	91-180 Days	181 Days - 1 Year	Over 1 Year	Total
Due to 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	$ 5,600,750 1,191,711 3,867,910 7,900,149 58,945,579 - 17,873 1,062,245	$ 1,828 2,387,861 2,808,969 338,066 68,309,092 17,467 28,742 538,261	$ 164,379 375,744 - 1,383,770 101,906,620 121,557 42,875 45,779	$ 159,150 1,430,274 - 789,829 132,488,919 63,291 82,694 132,319	$ - 399,637 - 507,605 253,388,841 11,603,784 779,469 348,733	$ 5,926,107 5,785,227 6,676,879 10,919,419 615,039,051 11,806,099 951,653 2,127,337

December 31, 2019	0-30 Days	31-90 Days	91-180 Days	181 Days - 1 Year	Over 1 Year	Total
Due to 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

June 30, 2019	0-30 Days	31-90 Days	91-180 Days	181 Days - 1 Year	Over 1 Year	Total
Due to 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	$ 3,961,100 1,546,567 7,365,488 7,440,281 53,470,466 103,500 19,101 937,830	$ 167,473 2,244,158 2,630,424 344,368 67,292,373 17,411 27,808 411,154	$ 269,369 1,082,507 - 1,360,418 94,421,805 6,130,232 41,689 46,596	$ 159,243 1,061,625 - 856,619 121,682,424 2,565,566 102,205 145,351	$ - 164,185 - 315,725 238,364,427 11,500,000 850,470 262,182	$ 4,557,185 6,099,042 9,995,912 10,317,411 575,231,495 20,316,709 1,041,273 1,803,113

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

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 consolidated balance sheets. The maturity analysis of derivative financial liabilities was as follows:

June 30, 2020	0-30 Days	31-90 Days	91-180 Days	181 Days - 1 Year	Over 1 Year	Total
Derivative financial liabilities at FVTPL Foreign currencyderivative	$18,547	$30,511	$31,111	$43,336	$ -	$123,505
Total	$18,547	$30,511	$31,111	$43,336	$ -	$123,505

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 currencyderivative	$8,052	$26,392	$25,784	$26,322	$ -	$86,550
Total	$8,052	$26,392	$25,784	$26,322	$ -	$86,550

June 30, 2019	0-30 Days	31-90 Days	91-180 Days	181 Days - 1 Year	Over 1 Year	Total
Derivative financial liabilities at FVTPL Foreign currencyderivative	$5,111	$17,836	$35,852	$11,106	$ -	$69,905
Total	$5,111	$17,836	$35,852	$11,106	$ -	$69,905

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:

June 30, 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 derivative Outflows Inflows	$ 2,309,302 2,293,756	$ 2,799,796 2,752,726	$ 2,171,161 2,153,740	$ 2,116,463 2,076,746	$ - -	$ 9,396,722 9,276,968
Total outflows Total inflows	2,309,302 2,293,756	2,799,796 2,752,726	2,171,161 2,153,740	2,116,463 2,076,746	- -	9,396,722 9,276,968
Net flows	$ (15,546)	$ (47,070)	$ (17,421)	$ (39,717)	$ -	$ (119,754)

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 derivative 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)

June 30, 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 derivative Outflows Inflows	$ 6,994,434 6,971,925	$ 3,301,571 3,274,464	$ 791,850 783,755	$ 673,653 666,880	$ - -	$ 11,761,508 11,697,024
Total outflows Total inflows	6,994,434 6,971,925	3,301,571 3,274,464	791,850 783,755	673,653 666,880	- -	11,761,508 11,697,024
Net flows	$ (22,509)	$ (27,107)	$ (8,095)	$ (6,773)	$ -	$ (64,484)

94-
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.

June 30, 2020	0-30 Days	31-90 Days	91-180 Days	181 Days - 1 Year	Over 1 Year	Total
Loan commitment Letters of credit Guarantee receivables Lease contract commitment	$ 8,360,051 610,457 5,606,907 1,018,380	$ 21,337,245 2,039,886 5,090,203 127,344	$ 29,828,318 182,295 954,296 24,773	$ 61,975,099 33,607 1,827,292 32,321	$ 33,210,521 - 4,930,682 -	$ 154,711,234 2,866,245 18,409,380 1,202,818
Total	$ 15,595,795	$ 28,594,678	$ 30,989,682	$ 63,868,319	$ 38,141,203	$177,189,677

December 31, 2019	0-30 Days	31-90 Days	91-180 Days	181 Days - 1 Year	Over 1 Year	Total
Loan commitment 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

June 30, 2019	0-30 Days	31-90 Days	91-180 Days	181 Days - 1 Year	Over 1 Year	Total
Loan commitment Letters of credit Guarantee receivables Lease contract commitment	$ 16,574,406 1,165,904 5,028,753 1,591,146	$ 17,310,037 2,163,072 3,157,938 201,289	$ 31,426,924 77,435 910,507 95,637	$ 61,615,169 5,218 2,310,888 88,476	$ 30,618,239 - 5,380,930 -	$ 157,544,775 3,411,629 16,789,016 1,976,548
Total	$ 24,360,209	$ 22,832,336	$ 32,510,503	$ 64,019,751	$ 35,999,169	$179,721,968

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.

40. 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 on cash flow of 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:

		June 30, 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	$7,046,039	$6,660,862	$7,304,521	$6,660,862	$ 643,659

	December 31, 2019	December 31, 2019	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

		June 30, 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	$10,695,154	$9,934,170	$10,812,396	$9,934,170	$ 878,226

41. OFFSETTING 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:

June 30, 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 resell agreements$ 13,181,595 $ - $ 13,181,595 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$ 6,660,862 $ - $ 6,660,862	Related Amounts Not Offset in the Balance Sheets Financial Instruments Cash Collateral Received $ 13,181,595 $ - Related Amounts Not Offset in the Balance Sheets Financial Instruments Cash Collateral Pledged $ 6,660,862 $ -	Net Amount $ -
		Net Amount $ -

December 31, 2019

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 resell 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 June 30, 2019	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 $ -

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 resell agreements$ 14,234,539 $ - $ 14,234,539 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$ 9,934,170 $ - $ 9,934,170	Related Amounts Not Offset in the Balance Sheets Financial Instruments Cash Collateral Received $ 14,234,539 $ - Related Amounts Not Offset in the Balance Sheets Financial Instruments Cash Collateral Pledged $ 9,934,170 -	Net Amount $ -
		Net Amount $ -

42. INFORMATION ABOUT THE BANK

a. Asset quality

Category	Items	Items			June 30, 2020					June 30, 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		$ 985,607	$151,192,094	0.65%	$ 1,551,256	157.39%	$ 632,431	$145,432,641	0.43%	$ 1,454,435	229.98%
	Unsecured		388,701	80,621,435	0.48%	3,040,576	782.24%	202,574	78,541,374	0.26%	3,241,400	1,600.11%
Consumer loans	Mortgage(Note 4)		121,431	55,147,883	0.22%	842,313	693.66%	247,294	56,064,912	0.44%	849,539	343.53%
	Cash card		-	21	-	2	-	-	36	-	4	-
	Microcredit(Note 5)		2,182	855,108	0.26%	82,497	3,780.80%	5,147	842,835	0.61%	88,596	1,721.31%
	Other (Note 6)	Secured	440,934	147,912,890	0.30%	594,250	134.77%	514,115	146,161,944	0.35%	676,224	131.53%
		Unsecured	63,959	17,688,140	0.36%	383,234	599.19%	43,930	14,074,085	0.31%	332,387	756.63%
Loans			2,002,814	453,417,571	0.44%	6,494,128	324.25%	1,645,491	441,117,827	0.37%	6,642,585	403.68%

Category		Items			June 30, 2020					June 30, 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			$ 2,419	$ 657,215	0.37%	$ 23,811	984.33%	$ 4,287	$ 765,410	0.56%	$ 24,981	582.72%
Accounts rec	eivable without reco	urse(Note 7)	-	191,318	-	5,982	-	-	145,227	-	12,227	-

Non-reportable overdue loans and receivables

	June 30, 2020	June 30, 2020	June 30, 2019	June 30, 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)	$ 1,820	$ 993	$ 2,531	$ 1,240
Amount received from performance of debt negotiationprogram(Note9)	8,340	19,131	9,590	17,463
Total	10,160	20,124	12,121	18,703

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: Micro credit 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, micro credit, and credit cards.
Note 7: As required by the FSC in its letter dated July 19, 2005 (Ref No. 094000494), provision for bad-debt 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).
99 -

b. Concentration of credit extensions

(In Thousands of New Taiwan Dollars, %)

Year	June 30, 2020
Top 10 Rank (Note 1)	Group (Note 2)	Total Credit (Note 3)	Percentage of Net Worth (%)
1	Group A 016811 real estate activities for sale and rental with own or leasedproperty	$ 2,522,606	4.81
2	Group B 012411 smeltingand refiningof iron and steel	2,449,043	4.67
3	Group C 016700 real estate development activities	2,421,260	4.62
4	Group D 010892 manufacture of macaroni, noodles, couscous and similar farinaceousproducts	2,398,773	4.58
5	Group E 016700real estate development activities	2,296,279	4.38
6	Group F 016700real estate development activities	2,274,166	4.34
7	Group G 015500accommodation	2,085,229	3.98
8	Group H 012699 manufacture of other electronic parts and components not elsewhere classified	1,613,312	3.08
9	Group I 016700real estate development activities	1,520,525	2.90
10	Group J 014612 wholesale of brick,sand,cement andproducts	1,500,392	2.86

100 -

Year	June 30, 2019
Top 10 Rank (Note 1)	Group (Note 2)	Total Credit (Note 3)	Percentage of Net Worth (%)
1	Group F 016700real estate development activities	$ 2,532,549	5.14
2	Group A 016811 real estate activities for sale and rental with own or leasedproperty	2,417,714	4.90
3	Group K 010892 manufacture of macaroni, noodles, couscous and similar farinaceousproducts	2,364,017	4.79
4	Group G 015500accommodation	2,120,654	4.30
5	Group I 016700real estate development activities	2,115,695	4.29
6	Group E 016700real estate development activities	2,112,226	4.28
7	Group B 012411 smeltingand refiningof iron and steel	2,104,013	4.27
8	Group J 014612 wholesale of brick,sand,cement andproducts	1,310,296	2.66
9	Group L 016700 real estate development activities	1,231,449	2.50
10	Group M 014620 Chemical materials and itsproducts wholesale	1,224,083	2.48

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 activities for sale and rental with own or leased property).
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.
c. Interest rate sensitivity information

Interest Rate Sensitivity June 30, 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	$472,250,948	$ 7,496,459	$12,074,688	$95,014,119	$586,836,214
Interest-sensitive liabilities	146,230,925	331,051,844	79,267,744	5,234,078	561,784,591
Interest sensitivity gap	326,020,023	(323,555,385)	(67,193,056)	89,780,041	25,051,623
Net equity					52,393,816
Ratio of interest-sensitive assets to liabilities					104.46%
Ratio of interest sensitivity gapto net equity					47.81%

101 -

June 30, 2019

(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	$469,393,987	$ 7,644,078	$ 9,874,922	$78,577,503	$565,490,490
Interest-sensitive liabilities	157,133,020	303,345,055	69,321,022	4,950,055	534,749,152
Interest sensitivity gap	312,260,967	(295,700,977)	(59,446,100)	73,627,448	30,741,338
Net equity					49,313,228
Ratio of interest-sensitive assets to liabilities					105.75%
Ratio of interest sensitivity gapto net equity					62.34%

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 June 30, 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	$1,471,026	$ 230,681	$ 50,199	$ 364,457	$2,116,363
Interest-sensitive liabilities	821,065	1,027,934	303,516	-	2,152,515
Interest sensitivity gap	649,961	(797,253)	(253,317)	364,457	(36,152)
Net equity					1,776,062
Ratio of interest-sensitive assets to liabilities					98.32%
Ratio of interest sensitivity gapto net equity					(2.04%)

June 30, 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	$1,180,790	$ 225,373	$ 3,784	$ 477,737	$1,887,684
Interest-sensitive liabilities	749,816	773,207	359,940	-	1,882,963
Interest sensitivity gap	430,974	(547,834)	(356,156)	477,737	4,721
Net equity					1,587,676
Ratio of interest-sensitive assets to liabilities					100.25%
Ratio of interest sensitivity gapto net equity					0.30%

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.
102 -

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	June 30, 2020	June 30, 2019
Return on total assets	Pretax	0.31	0.36
	After tax	0.27	0.31
Return on net equity	Pretax	4.19	5.04
	After tax	3.55	4.34
Profit margin		36.81	37.96

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 one month ended June 30, 2020 and 2019.
e. Maturity analysis of assets and liabilities

Maturity Analysis of Assets and Liabilities June 30, 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
Main capital inflow on maturity	$630,789,538	$ 71,786,098	$ 58,626,473	$ 38,436,881	$ 49,045,051	$ 99,596,561	$313,298,474
Main capital outflow on maturity	746,517,217	28,913,832	36,732,722	77,158,296	130,341,071	160,605,677	312,765,619
Gap	(115,727,679)	42,872,266	21,893,751	(38,721,415)	(81,296,020)	(61,009,116)	532,855

June 30, 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
Main capital inflow on maturity	$606,434,138	$ 93,373,463	$ 41,860,255	$ 34,213,885	$ 50,924,302	$ 95,021,012	$291,041,221
Main capital outflow on maturity	725,312,373	31,085,378	33,633,656	76,237,084	124,435,530	163,902,819	296,017,906
Gap	(118,878,235)	62,288,085	8,226,599	(42,023,199)	(73,511,228)	(68,881,807)	(4,976,685)

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 June 30, 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
Main capital inflow on maturity	$ 2,523,321	$ 521,339	$ 315,042	$ 211,715	$ 219,244	$ 1,255,981
Main capital outflow on maturity	3,182,275	770,493	752,658	541,351	878,049	239,724
Gap	(658,954)	(249,154)	(437,616)	(329,636)	(658,805)	1,016,257

103 -

June 30, 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
Maincapitalinflow on maturity	$ 2,200,220	$ 405,666	$ 258,236	$ 213,994	$ 111,501	$ 1,210,823
Main capital outflow on maturity	2,856,056	616,057	696,246	497,217	903,189	143,347
Gap	(655,836)	(210,391)	(438,010)	(283,223)	(791,688)	1,067,476

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.

43. 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 provisions 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.

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 the 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.
104 -

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, %)

Year Items	Year Items	Year Items	June 30, 2020	December 31, 2019	June 30, 2019
Eligible capital	Common equity		$51,482,701	$50,574,005	$48,541,738
	Other Tier 1 capital		11,459,429	11,424,239	11,424,607
	Tier 2 capital		5,047,973	5,572,418	5,545,297
	Eligible capital		67,990,103	67,570,662	65,511,642
Risk-weighted assets	Credit risk	Standardized approach	472,717,624	455,727,824	451,934,351
		Internal ratings-based approach	-	-	-
		Securitization	-	-	-
	Operational risk	Basic indicator approach	21,789,238	21,789,238	20,815,488
		Standardized approach/ alternative standardized approach	-	-	-
		Advanced measurement approach	-	-	-
	Market risk	Standardized approach	6,401,163	8,165,000	7,755,525
		Internal model approach	-	-	-
	Risk-weighted assets		500,908,025	485,682,062	480,505,364
Capital adequacyratio(%)			13.57%	13.91%	13.63%
Ratio of common equityto risk-weighted assets(%)			10.28%	10.41%	10.10%
Ratio of Tier 1 capital to risk-weighted assets(%)			12.57%	12.77%	12.48%
Leverage ratio(%)			8.42%	8.69%	8.42%

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.
105 -
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.

44. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

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

June 30, 2020

USD
CNY
JPY
AUD
EUR
Others
Total
$ 6,514,069 $ 1,038,071 $ 451,592 $ 119,240 $ 167,792 $ 423,679 $ 8,714,443
70,800
91,784
-
445,060
-
195,500
803,144
1,031,392
14,396
-
-
3,952
649
1,050,389
1,076,983
-
-
-
-
-
1,076,983

33,640,869
1,031,509
360,555
76,288
1,114,530
762,355
36,986,106
2,494,210
2,613,508
2,590,148
6,017
162,094
56,710
7,922,687
20,564,552
3,548,058
-
1,233,921
-
968,687
26,315,218
234,742
83,440
-
-
-
97
318,279
14,750
2,118,956
-
-
-
-
2,133,706
58,042,426
3,396,265
665,870
2,212,499
597,414
1,741,964
66,656,438
158,895
-
-
-
4,284
649
163,828
-
-
-
-
-
126,021
126,021
3,046,790
106,833
1,295,131
68,959
150,091
10,575
4,678,379
-
43,593
-
-
-
5,978
49,571
5,456,517
-
-
-
-
-
5,456,517
21,315
-
-
-
-
-
21,315
79,704
11,003
907
-
7,092
-
98,706
29.50
4.17
0.27
20.23
33.11

106 -

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

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
Other financial liabilities
Payables
Lease liabilities
Securities sold under
repurchased agreements
Lease liabilities
Provisions
New Taiwan dollars
exchange rate

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
June 30, 2019

USD
CNY
JPY
AUD
EUR
Others
Total
$ 2,165,263 $ 897,111 $ 1,419,306 $ 118,180 $ 1,033,676 $ 389,888 $ 6,023,424
372,720
474,705
-
551,287
-
197,908
1,596,620
1,161,561
-
-
-
-
3
1,161,564
1,085,760
-
-
-
-
-
1,085,760

35,507,318
1,187,592
442,905
136
406,012
941,373
38,485,336
1,392,078
2,657,564
263,206
10,352
193,234
23,410
4,539,844
18,998,518
1,039,577
-
1,329,254
-
593,623
21,960,972
166,552
-
-
-
-
-
166,552
1,525,620
-
-
-
-
27,380
1,553,000
226,738
2,313,304
-
-
-
-
2,540,042
47,728,167
3,659,596
606,152
2,348,399
520,430
1,805,928
56,668,672
90,332
-
-
-
177
3
90,512
-
-
-
-
-
2,199
2,199
919,702
199,465
118,157
93,781
59,940
57,165
1,448,210
-
55,805
-
-
-
8,696
64,501
9,232,670
-
-
-
-
-
9,232,670
31,094
-
-
-
-
-
31,094
52,234
12,040
18,241
-
394
-
82,909
31.06
4.52
0.29
21.79
35.37

107 -

45. CASH FLOW INFORMATION

Changes in Liabilities Arising from Financing Activities

For the six months ended June 30, 2020

Funds borrowed from Central Bank and other banks Commercial papers Bank debentures Guarantee deposit received Lease liabilities	Opening Balance $ 6,092,040 1,174,083 14,000,000 582,064 895,285 $ 22,743,472	Cash Inflows (Outflows) $ (306,813 ) 254,504 (2,500,000 ) (9,335 ) (95,094) $ (2,656,738)		Non-cash Changes New Leases Lease Term End $ - $ - - - - - - - 82,591 (50,710) $ 82,591 $ (50,710)	Closing Balance $ 5,785,227 1,428,587 11,500,000 572,729 832,072
				New Leases $ - - - - 82,591 $ 82,591
					$ 20,118,615

For the six months ended June 30, 2019

Funds borrowed from Central Bank and other banks Commercial papers Guarantee deposit received Lease liabilities	Opening Balance $ 5,495,519 998,680 568,435 1,039,866 $ 8,102,500	Cash Inflows (Outflows) $ 603,523 190,351 43,448 (101,038) $ 736,284		Non-cash Changes New Leases Lease Term End $ - $ - - - - - 164,420 (181,777) $ 164,420 $ (181,777)	Closing Balance $ 6,099,042 1,189,031 611,883 921,471
				New Leases $ - - - 164,420 $ 164,420
					$ 8,821,427

46. 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 loan, and 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.

47. 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

108 -

a. Segment revenues and results

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

For the six months ended June 30, 2020 Interest revenue Interest expense Net revenue Net income and loss other than interest Service fee income Gain on financial instrument Others Bad-debt expenses and provision for losses on commitments and guarantees Operating expenses Income before income tax For the six months ended June 30, 2019 Interest revenue Interest expense Net revenue Net income and loss other than interest Service fee income Gain on financial instrument Others Bad-debt expenses and provision for losses on commitments and guarantees Operating expenses Income before income tax	Northern Area $ 1,634,347 (762,785) 871,562 215,575 10,690 7,682 (449,887 ) (394,542) $ 261,080 $ 1,807,725 (866,480) 941,245 219,552 16,722 6,480 (393,088 ) (417,934) $ 372,977	Central Area $ 2,393,669 (742,099) 1,651,570 404,769 29,859 12,445 (109,521 ) (722,356) $ 1,266,766 $ 2,596,396 (771,081) 1,825,315 393,482 22,160 14,998 (189,640 ) (764,005) $ 1,302,310	Southern Area $ 1,470,753 (489,037) 981,716 236,509 11,641 10,713 14,382 (494,019) $ 760,942 $ 1,567,475 (514,668) 1,052,807 237,206 7,969 13,489 (748,340 ) (509,324) $ 53,807	OBU $ 863,010 (477,015) 385,995 50,113 12,502 (563 ) (41,537 ) - $ 406,510 $ 1,033,075 (715,320) 317,755 49,679 22,938 (19,988 ) (11,289 ) - $ 359,095	Overseas Branch $ 41,550 (13,420) 28,130 5,007 - 7,508 (7,906 ) (14,460) $ 18,279 $ 17,076 (7,645) 9,431 4,879 - 10,559 (14,220 ) (13,091) $ (2,442 )	Head Office and Others Adjustment and Write-off $ 1,198,742 $ (1,325,290 ) (992,080) 1,325,290 206,662 - 444,956 - (101,188 ) - 396 (37,645 ) 414,652 - (1,468,470) 37,645 $ (502,992) $ - $ 1,203,526 $ (1,444,272 ) (1,179,335) 1,444,272 24,191 - 524,907 - 235,071 - 176,614 (37,700 ) 991,101 - (1,524,322) 37,700 $ 427,562 $ -	Total $ 6,276,781 (2,151,146) 4,125,635 1,356,929 (36,496 ) 536 (179,817 ) (3,056,202) $ 2,210,585 $ 6,781,001 (2,610,257) 4,170,744 1,429,705 304,860 164,452 (365,476 ) (3,190,976) $ 2,513,309

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	June 30, 2020 $ 133,789,042 194,599,893 99,613,171 57,058,896 2,442,264 226,422,611 $ 713,925,877	December 31, 2019 $ 131,547,637 190,521,187 97,703,639 55,115,671 1,696,811 206,103,977 $ 682,688,922	June 30, 2019 $ 132,113,507 195,920,062 98,993,946 55,504,481 1,432,690 197,084,307
			$ 681,048,993

c. Revenue from major products and services

The main business of the Group is interest revenue; therefore, no product or service information is available.

109 -

d. Geographical information

Location Taiwan Asia America		For the Six Months Ended June 30	For the Six Months Ended June 30
		2020 $ 5,346,236 98,286 2,082 $ 5,446,604	2019 $ 5,951,302 110,652 7,807 $ 6,069,761

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.

48. 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$300 million 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 parties amounting to at least NT$5 million.	None
5	Receivables from related parties 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$300million or 10%of thepaid-in capital	None
6	Derivative transactions.	Note 8
7	Other significant transactions which may affect the decisions of users of financial reports.	None

110 -

Note: Not required to disclose if the investee is either a bank, insurance company or security company.

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)
111 -

TABLE 1

TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

THE RELATED INFORMATION AND PROPORTIONATE SHARE IN INVESTEES FOR THE SIX MONTHS ENDED JUNE 30, 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)
							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 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 City Taipei City Taichung City Taipei City British Virgin Islands Suzhou	Insurance broker industry Securities investment trust industry Securities industry Leasing business Financial leasing and investment business Financial leasing business	100.00 38.46 100.00 100.00 100.00 100.00	$ 1,627,051 162,287 1,418,186 1,892,568 761,616 706,624	$ 116,542 (1,671) 15,371 11,725 (1,133) 3,403	128,600 19,783 140,429 196,463 30,000 -	- - - - - -	128,600 19,783 140,429 196,463 30,000 -	100.00 63.41 100.00 100.00 100.00 100.00

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.

112 -

TABLE 2

TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

FINANCING PROVIDED TO OTHERS FOR THE SIX MONTHS ENDED JUNE 30, 2020 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

No. (Note 1)	Lender	Borrower	Financial Statements Account (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 Mei Construction Inc. Wan Ku Fu Co., Ltd.	Other receivables Other receivables Other receivables Other receivables Other receivables	Not related Not related Not related Not related Not related	$ 16,298 42,150 75,177 114,260 115,070	$ - - 25,177 110,780 107,535	$ - - 25,177 110,780 47,535	4-10 4-10 3.5-10 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	$ - - - - -	Business turnover Business turnover Business turnover Business turnover Business turnover	$ - - 252 1,108 475	None Margin None Real estate Real estate	$ - 20,000 - 100,194 70,984	$ 189,257 189,257 189,257 189,257 189,257	$ 757,027 757,027 757,027 757,027 757,027	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	14,160	14,160	4-10	Necessary for short-term financing	-	Business turnover	112	Margin	2,950	76,162	304,646	Note 10
3	Taichung Bank Financial Leasing (Suzhou) Co., Ltd.	Zhangjiajie Zhongjun Real Estate Co., Ltd.	Entrusted loan	Not related	14,276	10,513	10,513	9.6	Necessary for short-term financing	-	Capital investment plan expenditure	158	Real estate	224,913	282,650	282,650	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.

113 -

TABLE 3

TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

ENDORSEMENTS/GUARANTEES PROVIDED FOR THE SIX MONTHS ENDED JUNE 30, 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	$ 11,355,408	$ 942,289	$ 495,261	$ 14,750	$ -	26.17	$ 18,925,680	-	-	-
2	Taichung Bank Leasing Corporation Limited	Taichung Bank Financial Leasing (Suzhou) Co., Ltd.	Indirect shareholding of 100% of subsidiary	11,355,408	2,051,585	2,051,585	1,306,144	-	108.40	18,925,680	-	-	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.

114 -

TABLE 4

TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

MARKETABLE SECURITIES HELD JUNE 30, 2020

(In Thousands of New Taiwan Dollars or Shares)

Name of Holding Company	Type and Name of Marketable Securities	Relationship	Financial Statements Account		June 30,	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.)	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.	Subsidiary Subsidiary Subsidiary Association 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	196,463 128,600 140,429 12,000 30,000 -	$ 1,892,568 1,627,051 1,418,186 162,287 761,616 706,624	100 100 100 38 100 100	$ 1,892,568 1,627,051 1,418,186 162,287 761,616 706,624

Note: The financial industry, the insurance industry and the securities industry are exempt from disclosure.

115 -

TABLE 5

TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

INVESTMENT IN MAINLAND CHINA FOR THE SIX MONTHS ENDED JUNE 30, 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 June 30, 2020	% Ownership of Direct or Indirect Investment	Investment Gain	Carrying Value as of June 30, 2020	Accumulated Inward Remittance of Earnings as of June 30, 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	$ 3,403 (CNY 799 thousand)	$ 706,624 (CNY 169,373 thousand)	$ -

Accumulated Investment in Mainland China as of June 30, 2020		Investment Amount Approved by the Investment Commission, MOEA		Maximum Investment Allowable (Note 2)
$893,373		$893,373		$1,135,541

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$4.17, CNY1=NT$4.26).

116 -

TABLE 6

TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

BUSINESS RELATIONSHIPS AND SIGNIFICANT TRANSACTIONS BETWEEN THE PARENT COMPANY AND SUBSIDIARIES FOR THE SIX MONTHS ENDED JUNE 30, 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	June 30, 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 Commercial Bank Securities Co., Ltd. Taichung Commercial Bank Securities Co., Ltd. Taichung Bank Leasing Corporation Limited	a a a a a a a a	Deposits and remittances Service fee income Receivables Right-of-use assets Lease liabilities Deposits and remittances General and administrative Deposits and remittances	$ 1,113,796 100,002 16,667 21,665 21,807 44,301 14,150 88,820	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. The terms for the transactions between the company and related parties are similar to those for unrelated parties.	- 2 - - - - - -
							(Continued)

117 -

(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 June 30, 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 six months ended June 30, 2020 and 2019.
Note 5: Referring to transactions exceeding $10,000 thousand.
118 -

TABLE 7

TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

INFORMATION OF MAJOR SHAREHOLDERS JUNE 30, 2020

Name of Major Shareholder	Shares	Shares
	Number of Shares	Percentage of Ownership (%)
China Man-Made Fiber Corporation Pan Asia Chemical Corporation	826,726,262 212,466,081	22.29 5.73

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.
119 -

AI assistant

T.C.C.B. — Interim / Quarterly Report 2020

52197_rns_2020-12-30_4f427e07-5912-4519-8a73-cfb124e85e80.pdf

Taichung Commercial Bank Co., Ltd. and Subsidiaries

INDEPENDENT AUDITORS’ REVIEW REPORT

Introduction

Scope of Review

Conclusion

Other Matter

Notice to Readers

TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands of New Taiwan Dollars)

TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

1. GENERAL INFORMATION

2. APPROVAL OF FINANCIAL STATEMENTS

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

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

e. Other significant accounting policies

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

6. CASH AND CASH EQUIVALENTS

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

8. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

Contract Amounts Currency Expiration Date (In Thousands)

9. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

10. INVESTMENTS IN DEBT INSTRUMENTS AT AMORTIZED COST

11. SECURITIES PURCHASED UNDER RESELL AGREEMENTS

12. RECEIVABLES, NET

For the six months ended June 30, 2019

For the six months ended June 30, 2019

13. NOTES DISCOUNTED AND LOANS, NET

14. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD, NET

15. RESTRICTED ASSETS, NET

16. OTHER FINANCIAL ASSETS, NET

17. PROPERTIES AND EQUIPMENT, NET

18. LEASE ARRANGEMENTS

b. Lease liabilities

c. Material lease-in activities and terms

d. Other lease information

19. INVESTMENT PROPERTIES, NET

20. INTANGIBLE ASSETS, NET

21. OTHER ASSETS, NET

22. DUE TO THE CENTRAL BANK AND OTHER BANKS

23. FUNDS BORROWED FROM CENTRAL BANK AND OTHER BANKS

24. SECURITIES SOLD UNDER REPURCHASE AGREEMENTS

28. OTHER FINANCIAL LIABILITIES

29. PROVISIONS

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

1) Defined contribution plans

2) Defined benefit plans

For the six months ended June 30, 2020

30. OTHER LIABILITIES

31. EQUITY

Ordinary shares

b. Capital surplus

c. Appropriation of earnings and dividend policy

d. Other equity items

32. NET PROFIT FROM CONTINUING OPERATIONS

e. Reversal of (impairment losses) on financial assets

Accrual rate

j. Depreciation and amortization expenses

33. INCOME TAXES RELATING TO CONTINUING OPERATIONS

b. Income tax recognized in other comprehensive income

c. Income tax assessments

34. EARNINGS PER SHARE

Net profit for the period

35. RELATED-PARTY TRANSACTIONS

Related Party

Relationship with the Group

For the six months ended June 30, 2019

c. Financial debenture

T.C.C.B. Interim / Quarterly Report 2020