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

Taichung Commercial Bank Co., Ltd. and Subsidiaries

Consolidated Financial Statements for the Nine Months Ended September 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 September 30, 2020 and 2019, the related consolidated statements of comprehensive income for the three months ended September 30, 2020 and 2019 and for the nine months ended September 30, 2020 and 2019, the consolidated statements of changes in equity and cash flows for the nine months then ended, and the related 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 September 30, 2020 and 2019, its consolidated financial performance for the three months ended September 30, 2020 and 2019, and its consolidated financial performance and its consolidated cash flows for the nine months ended September 30, 2020 and 2019 in accordance with the Regulations Governing the Preparation of Financial Reports by Public 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.

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 November 5, 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 Capital surplus Retained earnings Legal reserve Special reserve Unappropriated earnings Other equity Total equity attributable to owners of the Bank Total equity TOTAL		September 30, 2020 (Reviewed) Amount % $ 11,880,929 2 33,525,924 5 25,367,651 3 38,955,524 5 112,351,823 16 12,217,335 2 11,552,013 2 3,363 - 450,373,747 63 165,101 - 949,768 - 4,746 - 12,237,584 2 1,037,456 - 18,036 - 190,345 - 870,696 - 2,129,018 - $ 713,831,059 100 $ 7,026,107 1 7,738,085 1 473,634 - 3,224,876 - 7,885,296 1 73,096 - 617,160,528 87 11,500,000 2 1,685,164 - 1,368,104 - 1,062,110 - 111,021 - 885,599 - 660,193,620 92 39,016,943 6 726,981 - 9,469,859 1 150,243 - 3,016,377 1 1,257,036 - 53,637,439 8 53,637,439 8 $ 713,831,059 100		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		September 30, 2019 (Reviewed)
						Amount % $ 11,190,168 2 30,689,801 4 25,341,825 4 29,361,895 4 106,230,844 15 12,902,163 2 17,757,109 3 65 - 434,922,590 64 151,758 - 450,879 - 429 - 10,582,847 2 901,255 - 111,415 - 148,828 - 884,135 - 1,957,485 - $ 683,585,491 100 $ 6,151,791 1 6,092,248 1 196,137 - 8,524,672 2 12,495,478 2 273,000 - 574,924,445 84 20,000,000 3 1,338,770 - 1,385,084 - 912,723 - 111,047 - 892,200 - 633,297,595 93 37,088,349 5 726,981 - 8,188,237 1 150,243 - 3,238,523 1 895,563 - 50,287,896 7 50,287,896 7 $ 683,585,491 100

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) (Losses) gains on financial assets and liabilities at fair value through profit or loss (Note 32) Realized gains on financial assets at fair value through other comprehensive income (Note 32) Foreign exchange gains, net Reversal of (impairment losses) on financial assets (Notes 9, 10 and 32) Share of loss of associates accounted for using the equity method (Note 14) Other non-interest gains, net (Notes 29 and 32) TOTAL NET REVENUE PROVISION FOR BAD DEBTS EXPENSE, 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 September 30	For the Three Months Ended September 30	For the Three Months Ended September 30		For the Nine Months	Ended September 30	Ended September 30
		2020		2019		2020		2019
		Amount % $ 2,912,789 95 (887,936) (29) 2,024,853 66 777,941 25 (178 ) - 113,652 4 150,110 5 448 - (839 ) - 2,687 - 3,068,674 100 (218,794) (7) (998,710 ) (33 ) (121,645 ) (4 ) (467,039) (15) (1,587,394) (52) 1,262,486 41 (166,285) (5) 1,096,201 36		Amount % $ 3,368,883 111 (1,289,523) (42) 2,079,360 69 757,648 25 21,605 1 50,789 2 108,402 3 1,626 - (1,429 ) - 13,448 - 3,031,449 100 (161,982) (6) (962,063 ) (32 ) (119,575 ) (4 ) (563,198) (18) (1,644,836) (54) 1,224,631 40 (192,792) (6) 1,031,839 34		Amount % $ 9,189,570 108 (3,039,082) (36) 6,150,488 72 2,134,870 25 (61,993 ) (1 ) 147,763 2 139,060 2 (6,673 ) - (2,510 ) - 14,273 - 8,515,278 100 (398,611) (5) (2,909,593 ) (34 ) (359,281 ) (4 ) (1,374,722) (16) (4,643,596) (54) 3,473,071 41 (536,032) (6) 2,937,039 35		Amount % $ 10,149,884 112 (3,899,780) (43) 6,250,104 69 2,187,353 24 319,881 3 51,682 1 232,155 2 7,737 - (1,849 ) - 54,147 1 9,101,210 100 (527,458) (6) (2,848,784 ) (31 ) (362,734 ) (4 ) (1,624,294) (18) (4,835,812) (53) 3,737,940 41 (599,627) (6) 3,138,313 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)

For the Three Months Ended September 30	For the Three Months Ended September 30	For the Nine Months	Ended September 30
2020	2019	2020	2019
Amount % $ 40,197 1 3,653 - (3,848) - 40,002 1 827 - 106,593 4 107,420 4 147,422 5 $ 1,243,623 41 $ 0.28 $ 0.28	Amount % $ (43,947 ) (2 ) (1,052 ) - (1,125) - (46,124) (2) (30,057 ) (1 ) 19,010 1 (11,047) - (57,171) (2) $ 974,668 32 $ 0.26 $ 0.26	Amount % $ 141,281 2 10,823 - (74) - 152,030 2 (12,484 ) - 290,122 3 277,638 3 429,668 5 $ 3,366,707 40 $ 0.75 $ 0.75	Amount % $ 244,146 2 184 - (14,584) - 229,746 2 (31,815 ) - 115,141 1 83,326 1 313,072 3 $ 3,451,385 38 $ 0.80 $ 0.80




$	$	$	$

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

(Concluded)

TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

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

BALANCE AT JANUARY 1, 2019 Appropriation of 2018 earnings Legal reserve Special reserve Cash dividends Share dividends Net profit for the nine months ended September 30, 2019 Other comprehensive (loss) income for the nine months ended September 30, 2019, net of income tax Total comprehensive income (loss) for the nine months ended September 30, 2019 Disposals of investments in equity instruments designated as at fair value through other comprehensive income BALANCE AT SEPTEMBER 30, 2019 BALANCE AT JANUARY 1, 2020 Appropriation of 2019 earnings Legal reserve Cash dividends Share dividends Net profit for the nine months ended September 30, 2020 Other comprehensive (loss) income for the nine months ended September 30, 2020, net of income tax Total comprehensive income (loss) for the nine months ended September 30, 2020 Disposal of investments in equity instruments designated as at fair value through other comprehensive income BALANCE AT SEPTEMBER 30, 2020		Equity Attributable to Owners of the Bank	Other Equity Exchange Differences on Translating of Financial Statements of Unrealized Gains (Losses) on Financial Assets at Fair Value Through Other Foreign Comprehensive Operations Income $ (38,327) $ 690,897 - - - - - - - - - - (31,815) 344,887 (31,815) 344,887 - (70,079) $ (70,142) $ 965,705 $ (96,316) $ 949,508 - - - - - - - - (12,484) 442,152 (12,484) 442,152 - (25,824) $ (108,800) $ 1,365,836	Total Equity $ 47,823,653 - - (987,142) - 3,138,313 313,072 3,451,385 - $ 50,287,896 $ 51,309,206 - (1,038,474) - 2,937,039 429,668 3,366,707 - $ 53,637,439
	Capital Stock Ordinary Shares Capital Surplus $ 35,255,084 $ 726,981 - - - - - - 1,833,265 - - - - - - - - - $ 37,088,349 $ 726,981 $ 37,088,349 $ 726,981 - - - - 1,928,594 - - - - - - - - - $ 39,016,943 $ 726,981	Retained Earnings Unappropriated Legal Reserve Special Reserve Earnings $ 6,985,726 $ 110,159 $ 4,093,133 1,202,511 - (1,202,511) - 40,084 (40,084) - - (987,142) - - (1,833,265) - - 3,138,313 - - - - - 3,138,313 - - 70,079 $ 8,188,237 $ 150,243 $ 3,238,523 $ 8,188,237 $ 150,243 $ 4,302,204 1,281,622 - (1,281,622) - - (1,038,474) - - (1,928,594) - - 2,937,039 - - - - - 2,937,039 - - 25,824 $ 9,469,859 $ 150,243 $ 3,016,377

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 Provision for bad debts expense, commitments and guarantees liabilities 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 Net changes in 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) loss 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 (used in) operations Interest received Dividends received		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2020 $ 3,473,071 315,657 43,624 398,611 61,993 (280) 3,039,082 (9,189,570) (87,920) (1,165) 2,510 (59,843) 6,673 944,804 (1,139) (4,526,963) (1,101,237) (206,205) 928,629 (15,214,651) (1,782) (600,421) 499,047 (608,072) (7,144,149) 1,651,818 33,838,571 126,614 (42,990) (4,346) 12,120,826 11,066,934 9,583,687 87,920	2019 $ 3,737,940 324,003 38,731 527,458 (319,881) (85) 3,899,780 (10,149,884) (44,076) (5,000) 1,849 (7,606) (7,737) (105,710) 52 (5,848,106) 195,255 2,162,459 (5,253,562) 17,199,467 3,318 (155,985) 2,773,039 (817,126) (1,379,795) (260,726) (13,043,213) (2,127) (2,862) (55,926) 1,362,216 (747,950) 10,476,702 44,076 (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 Borrowings from Central Bank and other banks Proceeds from commercial papers issued Repayments of bank debentures (Refund of) proceeds from guarantee deposits received Repayments of principal portion of lease liabilities Cash dividends distributed Net cash used in financing activities EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH AND CASH EQUIVALENTS HELD IN FOREIGN CURRENCIES NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2020 $ (2,793,721) (911,863) 17,032,957 (12,844,657) 5,873,738 (589,161,984) 583,827,560 (1,717,304) 765 (237,079) (72,842) - (14,331,803) 1,646,045 384,467 (2,500,000) (8,797) (142,198) (1,038,474) (1,658,957) (12,484) 1,029,713 38,341,346 $ 39,371,059	2019 $ (3,494,366) (824,340) 5,454,122 (3,445,663) 3,342,690 (565,166,871) 559,417,547 (1,294,370) 1,691 (121,413) (24,343) (7,000) (7,297,732) 596,729 340,090 - 20,707 (151,294) (891,116) (84,884) (31,815) (1,960,309) 39,653,064 $ 37,692,755 (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 SEPTEMBER 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		September 30	September 30
		2020 $ 11,880,929 15,272,795 12,217,335 $ 39,371,059	2019 $ 11,190,168 13,600,424 12,902,163 $ 37,692,755

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 NINE MONTHS ENDED SEPTEMBER 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 September 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 September 30, 2020, the Bank’s capital amount was $39,016,943 thousand.

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

2. APPROVAL OF FINANCIAL STATEMENTS

The consolidated financial statements were approved by the Bank’s board of directors on November 5, 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 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,

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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

New IFRSs “Annual Improvements to IFRS Standards 2018-2020” Amendments to IFRS 3 “Reference to the Conceptual Framework” Amendments to IFRS 4 “Extension of the Temporary Exemption from Applying IFRS 9” Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 “Interest Rate Benchmark Reform - Phase 2” Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between An Investor and Its Associate or Joint Venture” IFRS 17 “Insurance Contracts” Amendments to IFRS 17 Amendments to IAS 1 “Classification of Liabilities as Current or Non-current” Amendments to IAS 16 “Property, Plant and Equipment - Proceeds before Intended Use” Amendments to IAS 37 “Onerous Contracts - Cost of Fulfilling a Contract”	Effective Date Announced by IASB (Note 1)
	January 1, 2022 (Note 2) January 1, 2022 (Note 3) Effective immediately upon promulgation by the IASB January 1, 2021 To be determined by IASB January 1, 2023 January 1, 2023 January 1, 2023 January 1, 2022 (Note 4) January 1, 2022 (Note 5)

New IFRSs
“Annual Improvements to IFRS Standards 2018-2020”

Amendments to IFRS 3 “Reference to the Conceptual Framework”

Amendments to IFRS 4 “Extension of the Temporary Exemption from
Applying IFRS 9”

Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
“Interest Rate Benchmark Reform - Phase 2”

Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets
between An Investor and Its Associate or Joint Venture”

IFRS 17 “Insurance Contracts”

Amendments to IFRS 17

Amendments to IAS 1 “Classification of Liabilities as Current or
Non-current”

Amendments to IAS 16 “Property, Plant and Equipment - Proceeds
before Intended Use”

Amendments to IAS 37 “Onerous Contracts - Cost of Fulfilling a
Contract”

Effective Date
Announced by IASB (Note 1)

January 1, 2022 (Note 2)
January 1, 2022 (Note 3)
Effective immediately upon
promulgation by the IASB
January 1, 2021
To be determined by IASB
January 1, 2023
January 1, 2023
January 1, 2023
January 1, 2022 (Note 4)
January 1, 2022 (Note 5)

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

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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 are 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 (%)
	September 30, 2020 December 31, 2019 September 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 (%)

September 30,
2020
December 31,
2019
September 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.

13 -

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

September 30, 2020 Cash on hand $ 4,490,870 Checks for clearing 2,220,161 Due from banks 5,169,898 $ 11,880,929	December 31, 2019 September 30, 2019 $ 4,553,235 $ 4,062,108 1,007,649 1,754,990 5,798,664 5,373,070 $ 11,359,548 $ 11,190,168

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 September 30, 2020, December 31, 2019 and September 30, 2019.
b. Reconciliations of cash and cash equivalents between the consolidated statements of cash flows and the consolidated balance sheets as of September 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

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

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

September 30, 2020 Deposit reserves Deposit reserves for checking accounts $ 12,425,261 Deposit reserves for demand accounts 18,108,129 Inter-bank clearing account 1,998,913 Deposit reserves for foreign currency deposits 75,309 Call loans to banks 858,312 Deposit reserves for trust compensation 60,000 $ 33,525,924	December 31, 2019 September 30, 2019 $ 14,879,013 $ 7,397,538 16,997,138 16,933,699 1,512,809 4,503,887 60,000 62,060 368,014 1,732,617 60,000 60,000 $ 33,876,974 $ 30,689,801

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

8. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

	September 30,	December 31,	September 30,
	2020	2019	2019
Financial assets at FVTPL
Commercial papers	$ 20,399,973	$ 20,074,138	$ 21,422,552
Domestic listed shares and emerging market
shares	690,571	724,544	616,693
Domestic unlisted shares	37,500	-	-
PEM group policy assets	801,209	1,029,839	1,052,479
Beneficiary certificates	287,577	360,119	149,700
Corporate bonds	141,161	89,816	68,295
Asset swap contracts	2,546,402	1,812,530	1,804,105
Cross-currency swap contracts	121,237	71,394	29,695
			(Continued)

15 -

September 30,
2020
Foreign exchange forward contracts
$ 89,109
Cross-currency option contracts
252,283
Non-deliverable forward contracts
-
Interest rate-linked structured instrument
contracts

629

$ 25,367,651

Financial liabilities at FVTPL
Cross-currency swap contracts
$ 185,297
Foreign exchange forward contracts
34,173
Cross-currency option contracts
252,435
Non-deliverable forward contracts
1,100
Interest rate-linked structured instrument
contracts

629

$ 473,634

December 31,
2019
September 30,
2019
$ 82,809 $ 19,982

125,545
167,311

4,802
11,013

-

-
$ 24,375,536
$ 25,341,825
$ 88,092 $ 23,458

27,168
6,981

113,590
154,061

4,953
11,637

-

-
$ 233,803
$ 196,137

(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 September 30, 2020, December 31, 2019 and September 30, 2019, the outstanding cross-currency swap contracts were as follows:

September 30, 2020 Contract Amounts (In Thousands) Maturity Date Sell CNY 749,279 2020/10/21-2021/09/23 HKD 291,075 2020/10/30-2021/09/14 USD 8,314 2020/10/13-2021/09/29 GBP 2,000 2020/10/15 EUR 28,000 2020/10/06-2020/10/23 JPY 5,108,423 2020/10/07-2020/12/28 TWD 800,437 2021/03/04-2021/09/10 Buy AUD 19,102 2020/10/07-2020/10/19 CAD 3,119 2020/10/15 CNY 30,769 2020/10/13-2021/09/29 GBP 4,000 2020/10/13 NZD 8,000 2020/10/19 USD 228,456 2020/10/06-2021/09/23 TWD 117,207 2020/10/13	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	September 30, 2019
		Contract Amounts (In Thousands) Maturity Date Sell CNY 20,661 2019/10/22-2020/01/13 HKD 228,663 2019/10/04-2019/10/31 USD 41,297 2019/10/01-2020/09/02 JPY 3,352,644 2019/10/03-2019/12/16 EUR 350 2019/10/09 GBP 1,000 2019/10/01 TWD 365,620 2019/11/29-2020/09/11 Buy CNY 34,228 2019/10/22-2020/09/02 NZD 7,500 2019/10/31 ZAR 29,947 2019/10/04-2019/10/08 AUD 26,000 2019/10/01-2019/10/15 CAD 2,500 2019/10/23 USD 74,988 2019/10/01-2020/09/11 JPY 1,291,262 2019/10/03 SEK 3,756 2019/10/09

16 -
c. As of September 30, 2020, December 31, 2019 and September 30, 2019, the outstanding foreign exchange forward contracts were as follows (including non-deliverable forward contracts):

			Contract Amounts
	Currency	Expiration Date	(In Thousands)
September 30, 2020
Sell forward exchange	USD/NTD	2020/10/05-2021/09/30	USD102,396/NTD3,019,555
Sell forward exchange	EUR/NTD	2020/12/21	EUR1,000/NTD33,050
Sell forward exchange	CNY/NTD	2020/12/23-2021/02/19	CNY2,025/NTD8,540
Sell forward exchange	JPY/NTD	2020/11/19-2021/07/21	JPY336,850/NTD93,117
Buy forward exchange	NTD/USD	2020/10/13-2021/01/26	NTD214,072/USD7,250
Buy forward exchange	NTD/EUR	2020/11/13-2021/02/17	NTD20,581/EUR600
Buy forward exchange	NTD/CNY	2020/12/29	NTD13,568/CNY3,200
Buy forward exchange	USD/EUR	2020/11/04-2021/08/19	USD23,569/EUR20,500
Buy forward exchange	USD/GBP	2021/01/06-2021/03/29	USD4,304/GBP3,400
Buy forward exchange	USD/JPY	2020/10/05-2021/09/17	USD57,320/JPY6,095,960
Buy forward exchange	USD/AUD	2020/10/28-2020/12/21	USD666/AUD1,000
Buy forward exchange	EUR/USD	2020/10/05-2021/03/25	EUR12,500/USD14,788
Buy forward exchange	GBP/USD	2020/12/05-2021/03/09	GBP2,400/USD3,102
Buy forward exchange	JPY/USD	2020/10/08-2021/03/11	JPY1,377,170/USD13,000
Buy forward exchange	CNY/USD	2020/10/13-2021/09/29	CNY120,921/USD17,621
Buy forward exchange	AUD/USD	2020/12/08-2021/02/05	AUD2,300/USD1,670
Buy forward exchange	GBP/JPY	2020/12/14	GBP500/JPY68,180
December 31, 2019
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
			(Continued)

17 -

			Contract Amounts
	Currency	Expiration Date	(In Thousands)
September 30, 2019
Sell forward exchange	USD/NTD	2019/10/01-2020/09/11	USD43,809/NTD1,356,695
Sell forward exchange	EUR/NTD	2019/10/01-2020/03/25	EUR1,730/NTD59,397
Sell forward exchange	CNY/NTD	2019/10/15-2020/02/10	CNY 6,789/NTD30,349
Sell forward exchange	JPY/NTD	2019/11/06-2020/07/15	JPY205,000/NTD57,234
Buy forward exchange	NTD/USD	2019/10/25-2020/01/17	NTD 443,037/USD14,300
Buy forward exchange	USD/CNY	2019/10/14-2020/04/14	USD10,210/CNY71,776
Buy forward exchange	USD/EUR	2019/10/15-2020/03/06	USD5,847/EUR5,200
Buy forward exchange	USD/GBP	2019/11/29-2020/06/15	USD4,112/GBP3,300
Buy forward exchange	USD/JPY	2019/10/15-2020/03/26	USD17,730/JPY1,901,451
Buy forward exchange	CNY/USD	2019/10/14-2020/09/02	CNY265,902/USD37,563
Buy forward exchange	EUR/USD	2019/10/02-2020/03/03	EUR1,600/USD1,805
Buy forward exchange	EUR/JPY	2020/02/14	EUR1,000/JPY118,020
Buy forward exchange	JPY/USD	2019/10/25-2019/12/30	JPY1,286,700/USD12,000
			(Concluded)

d. As of September 30, 2020, December 31, 2019 and September 30, 2019, the outstanding asset swap contracts of the Group amounted to $2,541,300 thousand, $1,811,600 thousand and $1,803,300 thousand, respectively, with interest rates ranging from 0.90% to 3.50%, 0.90% to 1.35% and 0.90% to 1.35%, respectively.
e. As of September 30, 2020, December 31, 2019 and September 30, 2019, the outstanding cross-currency option contracts of the Group amounted to $26,335,046 thousand (US$909,202 thousand), $12,375,872 thousand (US$412,529 thousand) and $16,197,256 thousand (US$521,987 thousand), respectively.
f. As of September 30, 2020, the interest rate-linked structured instrument contracts of the Group amounted to $126,614 thousand, with interest rates ranging from 6.20% to 6.75%.

9. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

September 30, 2020 Investments in equity instruments at FVTOCI $ 2,740,101 Investments in debt instruments at FVTOCI 36,215,423 $ 38,955,524 a. Investments in equity instruments at FVTOCI September 30, 2020 Domestic listed shares $ 1,663,402 Domestic unlisted shares 778,983 Foreign listed shares 297,716 $ 2,740,101	December 31, 2019 September 30, 2019 $ 1,598,987 $ 1,528,928 30,000,344 27,832,967 $ 31,599,331 $ 29,361,895 December 31, 2019 September 30, 2019 $ 651,358 $ 622,654 664,957 638,241 282,672 268,033 $ 1,598,987 $ 1,528,928

18 -

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 $77,994 thousand, $43,183 thousand, $87,920 thousand and $44,076 thousand were recognized in profit or loss for the three months ended September 30, 2020 and 2019 and for the nine months ended September 30, 2020 and 2019, respectively. Those were related to investments held as of September 30, 2020 and 2019, respectively.

b. Investments in debt instruments at FVTOCI

September 30, 2020 Corporate bonds $ 26,228,004 Government bonds 5,581,002 Foreign bonds 2,399,499 Bank debentures 2,006,918 $ 36,215,423	December 31, 2019 September 30, 2019 $ 21,503,613 $ 19,884,483 5,997,423 5,923,897 799,314 824,587 1,699,994 1,200,000 $ 30,000,344 $ 27,832,967

1) The Group recognized gains on reversal of impairment loss of $15 thousand, $937 thousand, an impairment loss of $4,049 thousand and a gain on reversal of impairment loss of $1,273 thousand for the three months ended September 30, 2020 and 2019 and for the nine months ended September 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	September 30, 2020 $ 25,400,717 12,675,397 64,070,000 11,160,571 - 113,306,685 (34,462) (920,400) $ 112,351,823	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	September 30, 2019 $ 23,106,425 14,286,996 58,300,000 11,415,084 9,610 107,118,115 (42,371) (844,900) $ 106,230,844

19 -
a. The foreign bonds denominated in foreign currencies were as follows:

	September 30,	December 31,	September 30,
	2020	2019	2019
USD	$ 670,159	$ 638,859	$ 613,859
CNY	890,000	550,000	420,000
AUD	66,000	61,000	61,000
ZAR	490,000	450,000	450,000

b. As of September 30, 2020, December 31, 2019 and September 30, 2019, the government bonds and the foreign bonds at amortized cost amounted to $1,200,000 thousand and $2,039,136 thousand (US$70,400 thousand), $2,000,000 thousand and $8,850,000 thousand (US$295,000 thousand), and $700,000 thousand and $8,297,422 thousand (US$267,400 thousand), respectively, which had been sold under repurchase agreements. Refer to Note 40 for information relating to their carrying amounts.
c. The Group recognized gains on reversal of impairment loss of $433 thousand, $689 thousand, impairment loss of $2,624 thousand and a gain on reversal of impairment loss of $6,464 thousand for the three months ended September 30, 2020 and 2019 and for the nine months ended September 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.

11. SECURITIES PURCHASED UNDER RESELL AGREEMENTS

Securities purchased amounted to $12,217,335 thousand, $10,256,716 thousand and $12,902,163 thousand under repurchase agreements as of September 30, 2020, December 31, 2019 and September 30, 2019, were subsequently sold for $12,218,539 thousand, $10,258,145 thousand and $12,904,404 thousand, respectively, with interest rates ranging from 0.28% to 0.29%, 0.54% to 0.56% and 0.57% to 0.60%, respectively.

12. RECEIVABLES, NET

September 30,
2020
Notes receivable
$ 4,316,484
Receivables on credit cards
698,905
Accounts receivable factored without recourse
145,957
Acceptances
531,439
Interest receivables
976,801
Receivables on foreign currency settlement
631,765
Lease receivables
3,259,716
Assignment receivables
753,985
Receivables on sale of securities
65,309
Receivables on securities settlement
620,060
Receivables on interbank settlement
23,682
Other receivables

467,767

12,491,870
Less: Unrealized interest income
(654,369)
Less: Allowance for doubtful accounts

(285,488)

$ 11,552,013

December 31,
2019
September 30,
2019
$ 4,586,001 $ 4,239,598

785,636
734,288

649,997
287,367

505,650
747,901

1,216,731
1,181,192

870,200
1,177,944

3,358,947
3,131,338

756,458
1,288,137

-
-

686,758
655,891

38,917
4,559,585

317,410

605,758

13,772,705
18,608,999

(658,785)
(527,007)

(294,297)

(324,883)
$ 12,819,623
$ 17,757,109

20 -
a. Movements in the total carrying amount of receivables for the nine months ended September 30, 2020 and 2019 were as follows:

For the nine months ended September 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 atSeptember30,2020		$ 62,904,165 (133,702) (53,837) 7,341 6,227,712 - (5,262,172) (228,217) $ 63,461,290		$ 557,317 134,222 (138,401) (7,178) 3,572 (423) (301,110) (6,015) $ 241,984		$ 315,071 (520) 192,238 (163) 31,978 (118,704) (99,967) 10,526 $ 330,459		$ 63,776,553 - - - 6,263,262 (119,127) (5,663,249) (223,706) $ 64,033,733

For the nine months ended September 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 September 30,2019		$ 59,094,832 (331,782) (35,089) 22,501 14,115,579 - (5,743,897) (361,715) $ 66,760,429		$ 226,460 332,430 (36,598) (9,298) 5,088 - (56,240) 9,130 $ 470,972		$ 314,656 (648) 71,687 (13,203) 128,313 (136,216) (45,660) 12,269 $ 331,198		$ 59,635,948 - - - 14,248,980 (136,216) (5,845,797) (340,316) $ 67,562,599

The abovementioned carrying amounts of receivables include due from the banks, due from the Central Bank and call loans to other banks, securities purchased under 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.

21 -
b. Movements in the allowance for doubtful accounts of receivables for the nine months ended September 30, 2020 and 2019 were as follows:

For the nine months ended September 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 September 30,2020		$ 95,880 (1,304) (494) 1,205 (51,082) 51,785 - - - (11,402) $ 84,588		$ 11,625 1,673 (2,633) (1,077) (7,169) 565 - (423) - 2,026 $ 4,587		$ 165,224 (369) 3,127 (128) (32,660) 10,973 - (43,701) - 60,944 $ 163,410		$ 272,729 - - - (90,911) 63,323 - (44,124) - 51,568 $ 252,585		$ 23,828 - - - - - 74,353 (75,003) 11,267 - $ 34,445		$ 296,557 - - - (90,911) 63,323 74,353 (119,127) 11,267 51,568 $ 287,030

For the nine months ended September 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 September 30,2019		$ 87,567 (4,145) (88) 6,480 (60,751) 72,080 - - - (2,721) $ 98,422		$ 5,695 4,273 (1,024) (1,329) (1,665) 566 - - - 3,426 $ 9,942		$ 151,315 (128) 1,112 (5,151) (5,185) 75,954 - (91,179) - 26,643 $ 153,381		$ 244,577 - - - (67,601) 148,600 - (91,179) - 27,348 $ 261,745		$ 57,500 - - - - - 39,886 (45,037) 12,385 - $ 64,734		$ 302,077 - - - (67,601) 148,600 39,886 (136,216) 12,385 27,348 $ 326,479

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

c. Refer to Note 36 for information relating to notes receivable as a guarantee for interbank financing.

22 -

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	September 30, 2020 $ 345,783 687 26,088 68,038 1,016,352 40,193,932 100,501,803 54,560,597 107,069,733 6,115,636 145,820,721 1,430,715 457,150,085 20,802 (6,797,140) $ 450,373,747	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	September 30, 2019 $ 333,211 793 28,756 54,461 1,028,919 41,160,530 98,988,167 48,063,853 102,519,482 5,004,730 143,133,615 1,395,234 441,711,751 32,508 (6,821,669) $ 434,922,590

a. As of September 30, 2020, December 31, 2019 and September 30, 2019, the delinquent loans on which interest ceased to accrue amounted to $1,412,429 thousand, $949,601 thousand and $1,376,137 thousand, respectively. The unrecognized interest receivables on these loans were $24,229 thousand, $22,534 thousand and $26,640 thousand as of September 30, 2020, December 31, 2019 and September 30, 2019, respectively.
b. There was no credit loan written off without a lawsuit for the nine months ended September 30, 2020 and 2019.
c. Movements in the total carrying amount of notes discounted and loans for the nine months ended September 30, 2020 and 2019 were as follows:

For the nine months ended September 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 at September 30,2020		$ 415,543,744 (6,404,508) (693,022) 2,517,913 196,572,970 - (162,537,506) (13,867,947) $ 431,131,644		$ 16,873,865 6,637,971 (1,603,415) (2,504,873) 1,228,874 (1,834) (4,281,055) (223,413) $ 16,126,120		$ 9,554,442 (233,463) 2,296,437 (13,040) 375,746 (487,805) (1,587,289) 8,095 $ 9,913,123		$ 441,972,051 - - - 198,177,590 (489,639) (168,405,850) (14,083,265) $ 457,170,887

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For the nine months ended September 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 at September 30,2019		$ 435,868,501 (10,180,736) (616,514) 2,262,939 178,273,134 - (173,399,114) (17,202,813) $ 415,005,397		$ 15,341,731 10,261,471 (1,731,195) (2,196,373) 1,759,577 (198,049) (3,633,922) (407,959) $ 19,195,281		$ 7,916,421 (80,735) 2,347,709 (66,566) 308,028 (729,634) (2,672,512) 520,870 $ 7,543,581		$ 459,126,653 - - - 180,340,739 (927,683) (179,705,548) (17,089,902) $ 441,744,259

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

For the nine months ended September 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 September 30,2020		$ 1,776,628 (12,240) (3,922) 86,512 (895,004) 995,266 - - - (213,417) $ 1,733,823		$ 852,354 181,222 (100,426) (85,274) (179,080) 47,658 - (550) - 196,530 $ 912,434		$ 2,468,257 (168,982) 104,348 (1,238) (328,379) 204,012 - (180,957) - 210,897 $ 2,307,958		$ 5,097,239 - - - (1,402,463) 1,246,936 - (181,507) - 194,010 $ 4,954,215		$ 1,476,478 - - - - - 200,755 (308,132) 473,824 - $ 1,842,925		$ 6,573,717 - - - (1,402,463) 1,246,936 200,755 (489,639) 473,824 194,010 $ 6,797,140

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For the nine months ended September 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 September 30,2019		$ 1,768,334 (22,856) (1,741) 128,225 (934,020) 1,011,273 - - - (112,447) $ 1,836,768		$ 661,840 33,511 (107,941) (123,774) (132,260) 68,606 - (38,573) - 550,589 $ 911,998		$ 2,035,208 (10,655) 109,682 (4,451) (580,978) 112,477 - (342,711) - 787,518 $ 2,106,090		$ 4,465,382 - - - (1,647,258) 1,192,356 - (381,284) - 1,225,660 $ 4,854,856		$ 2,066,719 - - - - - (298,262) (546,399) 744,755 - $ 1,966,813		$ 6,532,101 - - - (1,647,258) 1,192,356 (298,262) (927,683) 744,755 1,225,660 $ 6,821,669

14. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD, NET

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

Associates that are not individually material Taichung Bank Securities Investment Trust Co., Ltd.		September 30, 2020		December 31, 2019		September 30, 2019
		Amount Proportion of Ownership (%) $ 165,101 38.46		Amount Proportion of Ownership (%) $ 156,788 38.46		Amount Proportion of Ownership (%) $ 151,758 38.46

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

Investee Company Taichung Bank Securities Investment Trust Co., Ltd.	For the Three Months Ended September 30 2020 2019 $ (839) $ (1,429)	For the Three Months Ended September 30 2020 2019 $ (839) $ (1,429)	For the Nine Months Ended September 30	For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2020 $ (839)		2020 $ (2,510)	2019 $ (1,849)

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.

25 -

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

15. RESTRICTED ASSETS, NET

	September 30,	December	31,	September 30,
	2020	2019		2019
Restricted assets - cash in banks	$ 422,893	$ 419,388		$ 450,725
Receipts under payment for shares underwriting	524,861		-	-
Payments pending settlement	2,014		5	154
	$ 949,768	$ 419,393		$ 450,879

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

	September 30,	September 30,	December	December	31,	September	September	30,
		2020		2019			2019
Other delinquent receivables, net	$	2,246	$	2,246		$	429
Time deposits with original maturities of more
than 3 months		2,500			-			-
	$	4,746	$	2,246		$	429

The interest rate of time deposits with original maturities of more than 3 months was 0.82% on September 30, 2020.

Other delinquent receivables, net were as follows:

	September 30,	September 30,	December 31,	December 31,	September 30,	September 30,
		2020		2019		2019
Delinquent receivables not arising from loans	$	3,788	$	4,506	$	2,025
Less: Allowance for doubtful accounts (Note 12)		(1,542)		(2,260)		(1,596)
	$	2,246	$	2,246	$	429

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17. PROPERTIES AND EQUIPMENT, NET

Cost Balance, January 1, 2020 Additions Disposals Exchange differences, net Balance, September 30, 2020 Accumulated depreciation Balance, January 1, 2020 Additions Disposals Exchange differences, net Balance, September 30, 2020 Impairment Balance, January 1, 2020 Balance, September 30, 2020 Balance, September 30, 2020 Cost Balance, January 1, 2019 Additions Disposals Reclassifications Exchange differences, net Balance, September 30, 2019 Accumulated depreciation Balance, January 1, 2019 Additions Disposals Exchange differences, net Balance, September 30, 2019 Impairment Balance, January 1, 2019 Balance, September 30, 2019 Balance, September 30, 2019			For the Nine Mo	nths Ended September 30, 2020	nths Ended September 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 - 530 - (126 ) - (28) 2,101,530 54,429 1,191,481 29,932 30,007 4,704 - (126 ) - (8) 1,221,488 34,502 - - - - $ 880,042 $ 19,927 For the Nine Mo	Miscellaneous Equipment Lease Improvement $ 1,900,254 $ 7,799 104,981 318 (19,002 ) - (771) - 1,985,462 8,117 1,453,794 1,632 126,771 1,009 (18,517 ) - (426) - 1,561,622 2,641 - - - - $ 423,840 $ 5,476 nths Ended September 30, 2019		Construction in Progress $ 1,526,236 1,611,475 - - 3,137,711 - - - - - - - $ 3,137,711	Total $ 13,437,460 1,717,304 (19,128 ) (799) 15,134,837 2,676,839 162,491 (18,643 ) (434) 2,820,253 77,000 77,000 $ 12,237,584
		Land $ 7,843,120 - - 4,468 - 7,847,588 - - - - - - 77,000 77,000 $ 7,770,588	Building and Structures Transportation Equipment $ 2,086,402 $ 48,195 - 8,721 - (5,454 ) 6,603 - - (37) 2,093,005 51,425 1,145,069 29,111 29,842 4,187 - (4,787 ) 6,603 - - (13) 1,181,514 28,498 - - - - $ 911,491 $ 22,927	Miscellaneous Equipment $ 1,830,060 52,561 (11,093 ) 927 (950) 1,871,505 1,314,540 126,143 (11,040 ) - (792) 1,428,851 - - $ 442,654	Lease Improvement $ 6,938 876 (5,488 ) - - 2,326 5,061 927 (4,602 ) - - 1,386 - - $ 940	Construction in Progress $ 202,835 1,232,212 - (800 ) - 1,434,247 - - - - - - - - $ 1,434,247	Total $ 12,017,550 1,294,370 (22,035 ) 11,198 (987) 13,300,096 2,493,781 161,099 (20,429 ) 6,603 (805) 2,640,249 77,000 77,000 $ 10,582,847

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

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18. LEASE ARRANGEMENTS

a. Right-of-use assets

Carrying amounts Land and buildings Transportation equipment Additions to right-of-use assets Depreciation charge for right-of-use assets Land and buildings Transportation equipment	September 30, 2020 December 31, 2019 September 30, 2019 $ 818,940 $ 800,549 $ 810,583 218,516 79,857 90,672 $ 1,037,456 $ 880,406 $ 901,255 For the Three Months Ended September 30 For the Nine Months Ended September 30 2020 2019 2020 2019 $ 279,734 $ 100,192 $ 362,325 $ 264,612 $ 32,897 $ 34,900 $ 99,850 $ 103,996 18,664 18,457 53,249 58,841 $ 51,561 $ 53,357 $ 153,099 $ 162,837	September 30, 2020 December 31, 2019 September 30, 2019 $ 818,940 $ 800,549 $ 810,583 218,516 79,857 90,672 $ 1,037,456 $ 880,406 $ 901,255 For the Three Months Ended September 30 For the Nine Months Ended September 30 2020 2019 2020 2019 $ 279,734 $ 100,192 $ 362,325 $ 264,612 $ 32,897 $ 34,900 $ 99,850 $ 103,996 18,664 18,457 53,249 58,841 $ 51,561 $ 53,357 $ 153,099 $ 162,837	September 30, 2020 December 31, 2019 September 30, 2019 $ 818,940 $ 800,549 $ 810,583 218,516 79,857 90,672 $ 1,037,456 $ 880,406 $ 901,255 For the Three Months Ended September 30 For the Nine Months Ended September 30 2020 2019 2020 2019 $ 279,734 $ 100,192 $ 362,325 $ 264,612 $ 32,897 $ 34,900 $ 99,850 $ 103,996 18,664 18,457 53,249 58,841 $ 51,561 $ 53,357 $ 153,099 $ 162,837	September 30, 2020 December 31, 2019 September 30, 2019 $ 818,940 $ 800,549 $ 810,583 218,516 79,857 90,672 $ 1,037,456 $ 880,406 $ 901,255 For the Three Months Ended September 30 For the Nine Months Ended September 30 2020 2019 2020 2019 $ 279,734 $ 100,192 $ 362,325 $ 264,612 $ 32,897 $ 34,900 $ 99,850 $ 103,996 18,664 18,457 53,249 58,841 $ 51,561 $ 53,357 $ 153,099 $ 162,837	September 30, 2020 December 31, 2019 September 30, 2019 $ 818,940 $ 800,549 $ 810,583 218,516 79,857 90,672 $ 1,037,456 $ 880,406 $ 901,255 For the Three Months Ended September 30 For the Nine Months Ended September 30 2020 2019 2020 2019 $ 279,734 $ 100,192 $ 362,325 $ 264,612 $ 32,897 $ 34,900 $ 99,850 $ 103,996 18,664 18,457 53,249 58,841 $ 51,561 $ 53,357 $ 153,099 $ 162,837
		2020 $ 279,734 $ 32,897 18,664 $ 51,561		2020 $ 362,325 $ 99,850 53,249 $ 153,099	2019 $ 264,612 $ 103,996 58,841 $ 162,837

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

b. Lease liabilities

	September 30,	December 31,	September 30,
	2020	2019	2019
Carrying amounts	$ 1,062,110	$ 895,285	$ 912,723
Range of discount rate for lease liabilities was as follows:
	September 30,	December 31,	September 30,
	2020	2019	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.

28 -

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 September 30 2020 2019 $ 705 $ 1,337 $ 1,888 $ 777 $ (58,901) $ (60,858)	For the Three Months Ended September 30 2020 2019 $ 705 $ 1,337 $ 1,888 $ 777 $ (58,901) $ (60,858)	For the Nine Months Ended September 30	For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2020 $ 705 $ 1,888 $ (58,901)		2020 $ 2,245 $ 5,661 $ (175,546)	2019 $ 3,910 $ 3,080 $ (183,890)

The Group leases certain office equipment which qualify as short-term leases and certain computer equipment 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, September 30, 2020 Accumulated depreciation Balance, January 1, 2020 Additions Balance, September 30, 2020 Balance, September 30, 2020		For the Nine Months Ended September 30, 2020	For the Nine Months Ended September 30, 2020
		Land Structures Investment Properties Under Construction $ 15,801 $ 5,972 $ - 15,801 5,972 - - 3,670 - - 67 - - 3,737 - $ 15,801 $ 2,235 $ -	Total $ 21,773 21,773 3,670 67 3,737 $ 18,036

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Cost Balance, January 1, 2019 Additions Reclassifications Balance, September 30, 2019 Accumulated depreciation Balance, January 1, 2019 Additions Reclassifications Balance, September 30, 2019 Balance, September 30, 2019		For the Nine Months Ended September 30, 2019	For the Nine Months Ended September 30, 2019	For the Nine Months Ended September 30, 2019
		Land $ 20,269 - (4,468) 15,801 - - - - $ 15,801	Structures Investment Properties Under Construction $ 12,575 $ 86,290 - 7,000 (6,603) - 5,972 93,290 10,184 - 67 - (6,603) - 3,648 - $ 2,324 $ 93,290	Total $ 119,134 7,000 (11,071) 115,063 10,184 67 (6,603) 3,648 $ 111,415

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 as of September 30, 2020 and 2019 compared to that of 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 September 30, 2020, December 31, 2019 and September 30, 2019 is as follows:

		September	30,	December 31,	December 31,	September 30,	September 30,
		2020			2019		2019
Year	1	$	-	$	646	$	864

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20. INTANGIBLE ASSETS, NET

	September 30,	September 30,	December 31,	December 31,	September 30,	September 30,
		2020		2019		2019
Business rights	$	28,000	$	28,000	$	28,000
Computer software		162,345		125,125		120,828
	$	190,345	$	153,125	$	148,828

a. Business rights of the Group arose from the transfer of Fengxing Securities Co., Ltd., which was classified as intangible assets with indefinite useful lives and not subject to amortization. As of September 30, 2020, there was no impairment loss of the business rights.
b. Movements of intangible assets were as follows:

Balance, January 1 Additions Amortization Reclassifications Exchange differences, net Balance, September 30		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2020 $ 153,125 72,842 (43,624) 8,093 (91) $ 190,345	2019 $ 163,172 24,343 (38,731) - 44 $ 148,828

Computer software is amortized on a straight-line basis over its estimated useful life as follows: Computer software 1-5 years

21. OTHER ASSETS, NET

	September 30,	December 31,	September 30,
	2020	2019	2019
Refundable deposits	$ 1,908,552	$ 1,595,973	$ 1,691,492
Prepayments	219,054	138,477	216,125
Credit transaction	-	15,014	-
Others	1,412	5,022	49,868
	$ 2,129,018	$ 1,754,486	$ 1,957,485

As of September 30, 2020, December 31, 2019 and September 30, 2019, the time deposits and government bonds at amortized cost amounted to $1,060,400 thousand, $984,900 thousand and $984,900 thousand, respectively, were pledged as collateral to the district court for litigation related to the overdraft of the U.S. dollar clearing account and the guarantee deposits of business operations. These amounts were stated as refundable deposits. Refer to Note 36.

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22. DUE TO THE CENTRAL BANK AND OTHER BANKS

	September 30,	December 31,	September 30,
	2020	2019	2019
Call loans from banks	$ 6,400,000	$ 6,200,860	$ 5,720,600
Due to Chunghwa Post Co., Ltd.	326,094	326,187	431,177
Due to banks	300,013	13	14
	$ 7,026,107	$ 6,527,060	$ 6,151,791

23. FUNDS BORROWED FROM CENTRAL BANK AND OTHER BANKS

	September 30,	December 31,	December 31,	September 30,	September 30,
	2020		2019		2019
Funds borrowed from central bank	$ 1,749,180	$	-	$	-
Funds borrowed from other banks	5,988,905		6,092,040		6,092,248
	$ 7,738,085	$	6,092,040	$	6,092,248
Funds borrowed from central banks (%)	0.10		-		-
Funds borrowed from other banks (%)	1.00-5.31		1.00-5.44		1.00-5.44

Refer to Note 36 for information relating to collateral provided for funds borrowed from central bank and other banks.

24. SECURITIES SOLD UNDER REPURCHASE AGREEMENTS

September 30, 2020 Government bonds $ 1,203,055 Foreign bonds 2,021,821 $ 3,224,876	December 31, 2019 September 30, 2019 $ 2,002,755 $ 701,131 8,366,270 7,823,541 $ 10,369,025 $ 8,524,672

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

September 30, 2020 Government bonds $ 1,203,395 Foreign bonds 2,022,949 $ 3,226,344 Government bonds 0.25%-0.26% Foreign bonds 0.34%-0.35%	December 31, 2019 September 30, 2019 $ 2,003,566 $ 701,531 8,415,535 7,868,157 $ 10,419,101 $ 8,569,688 0.50%-0.54% 0.50%-0.51% 2.18%-2.45% 2.32%-2.65%

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The foreign bonds denominated in foreign currencies were as follows:

USD 25. PAYABLES Notes and checks in clearing Accrued expenses Collections payable Accounts payable for delivery Interest payable Foreign currency settlement payable Acceptances Factored accounts payable Interbank settlement payable Cash dividends payable Securities settlement payable Other payables 26. DEPOSITS AND REMITTANCES Checking Demand Demand savings Time Time savings Remittances 27. BANK DEBENTURES Subordinated financial debenture	September 30, 2020 $ 69,802 September 30, 2020 $ 2,220,161 1,482,315 785,644 747,159 710,453 631,905 533,420 111,594 37,091 - - 625,554 $ 7,885,296 September 30, 2020 $ 6,637,778 158,222,906 140,396,488 157,124,241 154,746,175 32,940 $ 617,160,528 September 30, 2020 $ 11,500,000	December 31, 2019 $ 278,876 December 31, 2019 $ 1,007,649 1,550,678 38,414 716,756 465,092 870,282 514,383 49,615 25,235 - - 750,013 $ 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	September 30, 2019 $ 252,128 September 30, 2019 $ 1,754,990 1,587,107 512,230 548,371 960,044 1,176,375 749,530 30,653 4,364,148 96,026 4,325 711,679 $ 12,495,478 September 30, 2019 $ 6,505,252 135,599,108 130,136,644 139,579,368 162,888,695 215,378 $ 574,924,445 September 30, 2019 $ 20,000,000

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a. The Bank issued first subordinated financial debenture on November 13, 2012, which was approved under ruling reference No. 10100305900 issued by the Banking Bureau of the FSC on September 24, 2012. Details of the subordinated financial debenture’s issuance are summarized as follows:
1) Total approved principal: $3,000,000 thousand.
2) Principal issued: $3,000,000 thousand.
3) Denomination: $1,000 thousand, issued at par.
4) Period: 7 years with maturities on November 13, 2019.
5) Nominal interest rate: Fixed interest rate, 2.1%.
6) Repayment: The subordinated financial debenture will be paid on the maturity date.
7) The interest will be paid semi-annually from the issuance date.
b. The Bank issued first subordinated financial debenture and second subordinated financial debenture on June 25, 2013 and December 16, 2013, respectively, which were approved under ruling reference No. 10200089330 issued by the Banking Bureau of the FSC on April 8, 2013. Details of the financial subordinated debenture’s issuance are summarized as follows:
1) Total approved principal: $6,000,000 thousand.
2) Principal issued:
- a) Debenture I on 2013: $2,500,000 thousand.
- b) Debenture II on 2013: $3,000,000 thousand.
3) Denomination:
- a) Debenture I on 2013: $500 thousand, issued at par.
- b) Debenture II on 2013: $500 thousand, issued at par.

4) Period:

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

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

5) Nominal interest rate:
- a) Debenture I on 2013: Fixed interest rate, 2.1%.
- b) Debenture II on 2013: Fixed interest rate, 2.1%.
6) Repayment: The subordinated financial debenture will be paid on the maturity date.
7) The interest will be paid semi-annually from the issuance date.
c. The Bank issued first subordinated financial debenture on December 28, 2015, which was approved under ruling reference No. 10400200460 issued by the Banking Bureau of the FSC on August 26, 2015. Details of the subordinated financial debenture’s issuance are summarized as follows:
1) Total approved principal: $1,500,000 thousand.
2) Principal issued: $1,500,000 thousand.
34 -
3) Denomination: $10,000 thousand, issued at par.
4) Period: No due date.
5) Nominal interest rate: According to the interest rate of one-year time savings deposit of Chunghwa Post Co., Ltd., plus 3.08%.
6) Repayment: To be executed according to the issuance.
7) The interest will be paid annually from the issuance date.
d. The Bank issued first no due date non-cumulative subordinated financial debenture, second no due date non-cumulative subordinated financial debenture, third no due date non-cumulative subordinated financial debenture and first no due date non-cumulative subordinated financial debenture on March 28, 2017, May 18, 2017, August 28, 2017 and December 28, 2016, respectively, which were approved under ruling reference No. 10500210950 issued by the Banking Bureau of the FSC on September 2, 2016. Details of the subordinated financial debenture’s issuance are summarized as follows:
1) Total approved principal: $3,500,000 thousand.
2) Principal issued:
- a) Debenture I on 2016: $1,500,000 thousand.
- b) Debenture I on 2017: $1,000,000 thousand.
- c) Debenture II on 2017: $500,000 thousand.
- d) Debenture III on 2017: $500,000 thousand.
3) Denomination:
- a) Debenture I on 2016: $10,000 thousand, issued at par.
- b) Debenture I on 2017: $10,000 thousand, issued at par.
- c) Debenture II on 2017: $10,000 thousand, issued at par.
- d) Debenture III on 2017: $10,000 thousand, issued at par.
4) Period: No due date.
5) Nominal interest rate: According to the interest rate of one-year time savings deposit of Chunghwa Post Co., Ltd., plus 3.08%.
6) Repayment: To be executed according to the issuance.
7) The interest will be paid annually from the issuance date.
e. The Bank issued first no due date non-cumulative subordinated financial debenture, fourth no due date non-cumulative subordinated financial debenture and fifth no due date non-cumulative subordinated financial debenture on April 25 2018, December 5, 2017 and December 27, 2017, respectively, which were approved under ruling reference No. 10600229120 issued by the Banking Bureau of the FSC on September 22, 2017. Details of the subordinated financial debenture’s issuance are summarized as follows:
1) Total approved principal: $5,000,000 thousand.
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2) Principal issued:
- a) Debenture IV on 2017: $1,350,000 thousand. b) Debenture V on 2017: $2,650,000 thousand.
- c) Debenture I on 2018: $1,000,000 thousand.
3) Denomination:
- a) Debenture IV on 2017: $10,000 thousand, issued at par. b) Debenture V on 2017: $10,000 thousand, issued at par. c) Debenture I on 2018: $10,000 thousand, issued at par.
4) Period: No due date.
5) Nominal interest rate: According to the interest rate of one-year time savings deposit of Chunghwa Post Co., Ltd., plus 3.08%.
6) Repayment: To be executed according to the issuance.
7) The interest will be paid annually from the issuance date.
f. The Bank issued second no due date non-cumulative subordinated financial debenture on December 18, 2018, which was approved under ruling reference No. 10702156550 issued by the Banking Bureau of the FSC on August 23, 2018. Details of the subordinated financial debenture issuance is summarized as follows:
1) Total approved principal: $1,500,000 thousand.
2) Principal issued: $1,500,000 thousand.
3) Denomination: $10,000 thousand, issued at par.
4) Period: No due date.
5) Nominal interest rate: According to the interest rate of one-year time savings deposit of Chunghwa Post Co., Ltd., plus 3.08%.
6) Repayment: To be executed according to the issuance.
7) The interest will be paid annually from the issuance date.

28. OTHER FINANCIAL LIABILITIES

	September 30,	December 31,	September 30,
	2020	2019	2019
Commercial papers payable	$ 1,558,550	$ 1,174,083	$ 1,338,770
Structured commodity principal	126,614	-	-
	$ 1,685,164	$ 1,174,083	$ 1,338,770

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29. PROVISIONS

	September 30,	September 30,	December 31,	December 31,	September 30,	September 30,
		2020		2019		2019
Provision for employee benefits	$	1,090,782	$	1,133,772	$	1,141,362
Provision for losses on guarantees		199,963		174,463		168,419
Provision for accidental losses		10,634		11,878		18,957
Provision for loan commitments		66,725		63,357		56,346
	$	1,368,104	$	1,383,470	$	1,385,084
a. Details of provision for employee benefits were	as follows:
	September 30,		December 31,		September 30,
		2020		2019		2019
Benefit plans	$	922,773	$	972,820	$	991,661
Preferential interest on employees’ deposits		134,953		131,433		123,982
Other long-term employee benefit liabilities		33,056		29,519		25,719
	$	1,090,782	$	1,133,772	$	1,141,362

1) Defined contribution plans

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

The amount appropriated by the Group in accordance with the defined contribution plan had been recognized in the consolidated statements of comprehensive income for the three months ended September 30, 2020 and 2019 and for the nine months ended September 30, 2020 and 2019 in the amounts of $25,399 thousand, $24,599 thousand, $74,902 thousand and $73,384 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.

37 -

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 nine months ended September 30, 2020 and 2019 is as follows:

Operating expenses	For the Three Months Ended September 30 2020 2019 $ 4,167 $ 5,752	For the Three Months Ended September 30 2020 2019 $ 4,167 $ 5,752	For the Nine Months Ended September 30	For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2020 $ 4,167		2020 $ 12,455	2019 $ 17,483

3) Preferential interest on employees’ deposit plans

The Group has 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. The estimation of preferential interest on employee’s deposit liabilities was carried out by qualified actuaries.

For the three months ended September 30, 2020 and 2019 and for the nine months ended September 30, 2020 and 2019, the related expenses under preferential interest on employees’ deposits plan recognized in the consolidated statements of comprehensive income amounted to $1,173 thousand, $1,071 thousand, $3,520 thousand and $3,213 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 September 30, 2020 and 2019 and for the nine months ended September 30, 2020 and 2019, the Bank recognized $1,179 thousand, $911 thousand, $3,537 thousand and $2,731 thousand of total expenses related to the long-term employee benefits in the consolidated statements of comprehensive income, respectively.

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

For the nine months ended September 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 September 30,2020		$ 109,720 (54) (6) 7,402 (72,856) 110,532 - - - (11,786) $ 142,952		$ 1,778 54 - (768) (1,010) 2,164 - - - 725 $ 2,943		$ 58,621 - 6 (6,634) (15,608) - - - - (496) $ 35,889		$ 170,119 - - - (89,474) 112,696 - - - (11,557) $ 181,784		$ 4,344 - - - - - 13,835 - - - $ 18,179		$ 174,463 - - - (89,474) 112,696 13,835 - - (11,557) $ 199,963

For the nine months ended September 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 September 30,2019		$ 121,061 (32) (157) 11,035 (83,108) 70,256 - - - (13,350) $ 105,705		$ 1,751 32 - (300) (1,450) 5,970 - - - 503 $ 6,506		$ 55,221 - 157 (10,735) (3,652) 927 - - - 5,342 $ 47,260		$ 178,033 - - - (88,210) 77,153 - - - (7,505) $ 159,471		$ 11,815 - - - - - (2,867) - - - $ 8,948		$ 189,848 - - - (88,210) 77,153 (2,867) - - (7,505) $ 168,419

For the nine months ended September 30, 2020 and 2019, a provision was recognized for bad debts expense, commitments and guarantee liabilities.

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c. Movements of the provision for losses on accidental were as follows:

For the nine months ended September 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 September 30,2020		$ 9,638 - - - (9,638) 9,182 - - - - $ 9,182		$ - - - - - - - - - - $ -		$ 7 - - - (7) - - - - - $ -		$ 9,645 - - - (9,645) 9,182 - - - - $ 9,182		$ 2,233 - - - - - (781) - - - $ 1,452		$ 11,878 - - - (9,645) 9,182 (781) - - - $ 10,634

For the nine months ended September 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 September 30,2019		$ 12,108 - - - (11,973) 8,206 - - - (98) $ 8,243		$ - - - - - 1,154 - - - - $ 1,154		$ - - - - - 7 - - - - $ 7		$ 12,108 - - - (11,973) 9,367 - - - (98) $ 9,404		$ 11,825 - - - - - (2,272) - - - $ 9,553		$ 23,933 - - - (11,973) 9,367 (2,272) - - (98) $ 18,957

For the nine months ended September 30, 2020 and 2019, a provision was recognized for net income and loss other than interest.

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d. Movements of the loan commitments were as follows:

For the nine months ended September 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 September 30,2020		$ 48,760 (4) (2) 1,689 (3,375) 16,822 - - - (5,916) $ 57,974		$ 1,848 4 (7) (1,689) (137) 956 - - - 464 $ 1,439		$ 4,025 - 9 - (4,025) 1,672 - - - (9) $ 1,672		$ 54,633 - - - (7,537) 19,450 - - - (5,461) $ 61,085		$ 8,724 - - - - - (3,084) - - - $ 5,640		$ 63,357 - - - (7,537) 19,450 (3,084) - - (5,461) $ 66,725

For the nine months ended September 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 September 30,2019		$ 61,769 (5) (3) 1,171 (34,466) 28,020 - - - (1,477) $ 55,009		$ 2,040 5 (9) (1,171) (785) 754 - - - 503 $ 1,337		$ - - 12 - - - - - - (12) $ -		$ 63,809 - - - (35,251) 28,774 - - - (986) $ 56,346		$ - - - - - - - - - - $ -		$ 63,809 - - - (35,251) 28,774 - - - (986) $ 56,346

For the nine months ended September 30, 2020 and 2019, a provision was recognized for bad debts expense, commitments and guarantee liabilities.

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30. OTHER LIABILITIES

September 30, 2020 Guarantee deposits received $ 573,267 Advance receipts 225,372 Credit transactions 2,720 Others 84,240 $ 885,599 EQUITY a. Share capital Ordinary shares September 30, 2020 Number of shares authorized (in thousands) 6,150,000 Shares authorized $ 61,500,000 Number of shares issued and fully paid (in thousands) 3,901,694 Shares issued $ 39,016,943	December 31, 2019 September 30, 2019 $ 582,064 $ 589,142 238,650 210,542 - 557 78,028 91,959 $ 898,742 $ 892,200 December 31, 2019 September 30, 2019 4,320,000 4,320,000 $ 43,200,000 $ 43,200,000 3,708,835 3,708,835 $ 37,088,349 $ 37,088,349

31. EQUITY

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

As of January 1, 2019, the Bank had issued ordinary shares totaling $35,255,084 thousand, divided into 3,525,508 thousand ordinary shares at par value of $10 per share.

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

In September 2020, the Bank transferred $1,928,594 thousand of unappropriated earnings to ordinary shares, consisting of 192,859 thousand ordinary shares at par value of $10 per share. As of September 30, 2020, the Bank had increased ordinary shares to $39,016,943 thousand, consisting of 3,901,694 thousand ordinary shares at par value of $10 per share. In July 2020, the board of directors of the Bank resolved to issue 250,000 thousand ordinary shares with a par value of $10, for a consideration of $10.2 per share issued at premium. On October 13, 2020, the above transaction was approved under ruling reference No. 1090359541 issued by the Banking Bureau of the FSC.

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b. Capital surplus

	September 30,	December 31,	September 30,
	2020	2019	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, operation and investment needs. When dividends are declared, cash dividends must be at least 10% of total dividends declared.

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

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

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

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

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

Appropriation of Earnings 2019 2018 Legal reserve $ 1,281,622 $ 1,202,511 Special reserve - 40,084 Cash dividends 1,038,474 987,142 Share dividends 1,928,594 1,833,265 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 gain of equity instruments transferred to retained earnings due to disposal - Cumulative translation adjustment Exchange differences for current period (12,484) Income tax related to other comprehensive income - Balance at September 30, 2020 $ (108,800)		Dividends Per Share (NT$)	Dividends Per Share (NT$)
		2019 $ - - 0.28 0.52 Unrealized Gain on Financial Assets at FVTOCI $ 949,508 141,281 286,073 4,049 10,823 (25,824) - (74) $ 1,365,836	2018 $ - - 0.28 0.52 Total $ 853,192 141,281 286,073 4,049 10,823 (25,824) (12,484) (74) $ 1,257,036 (Continued)

d. Other equity items

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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 (31,815) Income tax related to other comprehensive income - Balance at September 30, 2019 $ (70,142)	Unrealized Gain on Financial Assets at FVTOCI $ 690,897 244,146 116,414 (1,273) 184 (70,079) - (14,584) $ 965,705	Total $ 652,570 244,146 116,414 (1,273) 184 (70,079) (31,815) (14,584) $ 895,563 (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 September 30 2020 2019 $ 2,378,977 $ 2,747,648 20,890 38,777 363,293 403,709 68,018 76,870 63,251 71,546 8,929 10,375 7,519 18,308 1,820 1,613 92 37 2,912,789 3,368,883		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2020 $ 2,378,977 20,890 363,293 68,018 63,251 8,929 7,519 1,820 92 2,912,789		2020 $ 7,519,126 73,840 1,148,841 205,186 178,254 27,741 29,874 6,397 311 9,189,570	2019 $ 8,350,901 109,018 1,193,144 216,447 199,591 31,331 44,256 4,552 644 10,149,884 (Continued)

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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 September 30 2020 2019 $ (715,911) $ (1,006,776) (117,971) (165,002) (35,302) (50,331) (1,094) (1,352) (4,117) (57,068) (2,066) (27) (9,204) (8,488) (2,271) (479) (887,936) (1,289,523) $ 2,024,853 $ 2,079,360		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2020 $ (715,911) (117,971) (35,302) (1,094) (4,117) (2,066) (9,204) (2,271) (887,936) $ 2,024,853		2020 $ (2,409,679) (380,614) (134,082) (2,707) (79,137) (4,372) (25,442) (3,049) (3,039,082) $ 6,150,488	2019 $ (3,011,159) (489,623) (172,883) (3,951) (195,615) (98) (25,606) (845) (3,899,780) $ 6,250,104 (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 September 30 2020 2019 $ 301,261 $ 317,767 299,058 265,391 131,492 116,964 34,711 37,301 78,791 85,862 845,313 823,285 (26,404) (27,987) (9,543) (9,075) (31,425) (28,575) (67,372) (65,637) $ 777,941 $ 757,648		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2020 $ 301,261 299,058 131,492 34,711 78,791 845,313 (26,404) (9,543) (31,425) (67,372) $ 777,941		2020 $ 814,780 763,718 411,258 107,037 224,810 2,321,603 (71,747) (27,022) (87,964) (186,733) $ 2,134,870	2019 $ 1,010,229 670,747 337,411 109,839 254,484 2,382,710 (91,049) (26,809) (77,499) (195,357) $ 2,187,353

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.

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

Realized profit or loss Commercial papers Shares Beneficiary certificates Derivative financial instruments Corporate bonds Valuation Commercial papers Shares Beneficiary certificates PEM Group policy assets Derivative financial instruments Corporate bonds	For the Three Months Ended September 30 2020 2019 $ 17,126 $ 33,664 65,199 54,049 10,483 3,278 (50,684) 8,531 - - 42,124 99,522 348 1,566 3,828 (26,415) 12,388 1,295 (6,917) (10,007) (52,282) (44,356) 333 - (42,302) (77,917) $ (178) $ 21,605	For the Three Months Ended September 30 2020 2019 $ 17,126 $ 33,664 65,199 54,049 10,483 3,278 (50,684) 8,531 - - 42,124 99,522 348 1,566 3,828 (26,415) 12,388 1,295 (6,917) (10,007) (52,282) (44,356) 333 - (42,302) (77,917) $ (178) $ 21,605	For the Nine Months Ended September 30	For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2020 $ 17,126 65,199 10,483 (50,684) - 42,124 348 3,828 12,388 (6,917) (52,282) 333 (42,302) $ (178)		2020 $ 67,999 67,258 (35,999) 55,982 906 156,146 (7,645) 1,814 30,336 (198,811) (44,538) 705 (218,139) $ (61,993)	2019 $ 99,837 323,850 (1,454) (40,238) - 381,995 (1,750) (161,745) 12,227 39,054 50,100 - (62,114) $ 319,881

1) For the nine months ended September 30, 2020 and 2019, realized profit or loss of gain on financial assets and liabilities at fair value through profit or loss included disposal profit amounted to $45,468 thousand and $231,712 thousand, dividend income amounted to $26,616 thousand and $36,783 thousand and interest revenue amounted to $84,062 thousand and $113,500 thousand, respectively.
2) Net income from exchange rate commodities includes realized and unrealized gains and losses on exchange forward contracts, cross-currency options and cross-currency swaps. The translation gains or losses included net income from exchange rate commodities when significant assets and liabilities denominated in foreign currencies classified as at FVTPL are not designated for hedging relationship.
d. Realized gains on financial assets at fair value through other comprehensive income

Dividend income Gain on disposal of bonds	For the Three Months Ended September 30 2020 2019 $ 77,994 $ 43,183 35,658 7,606 $ 113,652 $ 50,789	For the Three Months Ended September 30 2020 2019 $ 77,994 $ 43,183 35,658 7,606 $ 113,652 $ 50,789	For the Nine Months Ended September 30	For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2020 $ 77,994 35,658 $ 113,652		2020 $ 87,920 59,843 $ 147,763	2019 $ 44,076 7,606 $ 51,682

47 -

e. Reversal of (impairment losses) on financial assets

For the Three Months Ended September 30 2020 2019 Investments in debt instruments at FVTOCI $ 15 $ 937 Financial assets at amortized cost 433 689 $ 448 $ 1,626 Other non-interest gains (losses), net For the Three Months Ended September 30 2020 2019 Gains (losses) on disposal of properties and equipment $ 235 $ (933) Other provisions (18) - Others 2,470 14,381 $ 2,687 $ 13,448 Provision for bad debts expense, commitments and guarantee liabilities For the Three Months Ended September 30 2020 2019 Bad debts on receivables $ 41,875 $ 26,725 (Reversal of) bad debts on notes discounted and loans 157,366 148,745 (Reversal of) losses on guarantees 11,500 (15,000) (Reversal of) loan commitments 8,053 1,512 $ 218,794 $ 161,982 Employee benefits expenses For the Three Months Ended September 30 2020 2019 Salaries $ 866,715 $ 833,170 Labor and health insurance 51,318 48,852 Pension expense 29,566 30,351 Other employee expenses 51,111 49,690 $ 998,710 $ 962,063		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2020 2019 $ (4,049) $ 1,273 (2,624) 6,464 $ (6,673) $ 7,737 For the Nine Months Ended September 30
		2020 2019 $ 280 $ 85 1,165 5,000 12,828 49,062 $ 14,273 $ 54,147 For the Nine Months Ended September 30
		2020 2019 $ 100,281 $ 94,155 268,555 462,482 25,500 (21,500) 4,275 (7,679) $ 398,611 $ 527,458 For the Nine Months Ended September 30
		2020 $ 2,489,827 167,639 87,357 164,770 $ 2,909,593	2019 $ 2,436,872 157,020 90,867 164,025 $ 2,848,784

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

g. Provision for bad debts expense, commitments and guarantee liabilities

h. Employee benefits expenses

48 -
i. Employees’ compensation and remuneration of directors

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

Accrual rate

Employees’ compensation Remuneration of directors	For the Three Months Ended September 30 2020 2019 0.75% 0.62% 1.50% 1.34%	For the Nine Months Ended September 30
		2020 2019 0.94% 0.61% 1.50% 1.31%

Amount

Employees’ compensation Remuneration of directors	For the Three Months Ended September 30 2020 2019 $ 9,469 $ 7,537 $ 18,954 $ 16,251	For the Three Months Ended September 30 2020 2019 $ 9,469 $ 7,537 $ 18,954 $ 16,251	For the Nine Months Ended September 30	For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2020 $ 9,469 $ 18,954		2020 $ 32,884 $ 52,385	2019 $ 22,550 $ 48,753

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

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

Information on the employees’ compensation and remuneration of directors resolved by the Bank’s board of directors in 2020 and 2019 is available at the Market Observation Post System website of the Taiwan Stock Exchange.

49 -

j. Depreciation and amortization expenses

Properties and equipment Investment properties Right-of-use assets Intangible assets	For the Three Months Ended September 30 2020 2019 $ 54,762 $ 53,288 22 22 51,561 53,357 15,300 12,908 $ 121,645 $ 119,575	For the Three Months Ended September 30 2020 2019 $ 54,762 $ 53,288 22 22 51,561 53,357 15,300 12,908 $ 121,645 $ 119,575	For the Nine Months Ended September 30	For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2020 $ 54,762 22 51,561 15,300 $ 121,645		2020 $ 162,491 67 153,099 43,624 $ 359,281	2019 $ 161,099 67 162,837 38,731 $ 362,734

k. Other selling and administrative expenses

Taxes Professional service Advertisement Insurance Entertainment Donation Postage Others		For the Three Months Ended September 30 2020 2019 $ 163,055 $ 178,904 34,349 45,155 31,554 26,361 37,933 42,029 20,676 47,569 38,956 35,708 16,830 16,489 123,686 170,983 $ 467,039 $ 563,198		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2020 $ 163,055 34,349 31,554 37,933 20,676 38,956 16,830 123,686 $ 467,039		2020 $ 497,829 130,520 95,585 119,852 46,565 97,123 48,844 338,404 $ 1,374,722	2019 $ 540,339 133,599 163,978 136,887 99,140 102,542 48,456 399,353 $ 1,624,294

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 September 30 2020 2019 $ 229,510 $ 246,472 - - (87) (461) (63,138) (53,219) $ 166,285 $ 192,792	For the Three Months Ended September 30 2020 2019 $ 229,510 $ 246,472 - - (87) (461) (63,138) (53,219) $ 166,285 $ 192,792	For the Nine Months Ended September 30	For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2020 $ 229,510 - (87) (63,138) $ 166,285		2020 $ 601,711 1,169 (3,118) (63,730) $ 536,032	2019 $ 715,593 1,507 (1,019) (116,814) $ 599,627

50 -

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 recognized in other comprehensive income	For the Three Months Ended September 30 2020 2019 $ 3,848 $ 1,125 $ 3,848 $ 1,125	For the Three Months Ended September 30 2020 2019 $ 3,848 $ 1,125 $ 3,848 $ 1,125	For the Nine Months Ended September 30	For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2020 $ 3,848 $ 3,848		2020 $ 74 $ 74	2019 $ 14,584 $ 14,584

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

Basic earnings per share Diluted earnings per share	For the Three Months Ended September 30 2020 2019 $ 0.28 $ 0.26 $ 0.28 $ 0.26	For the Three Months Ended September 30 2020 2019 $ 0.28 $ 0.26 $ 0.28 $ 0.26	Unit: NT$ Per Share For the Nine Months Ended September 30	Unit: NT$ Per Share For the Nine Months Ended September 30	Unit: NT$ Per Share For the Nine Months Ended September 30
		2020 $ 0.28 $ 0.28		2020 $ 0.75 $ 0.75	2019 $ 0.80 $ 0.80

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 nine months ended September 30, 2019 were as follows:

	Unit:	NT$ Per Share
	Before	After
	Retrospective	Retrospective
	Adjustment	Adjustment
Basic earnings per share	$ 0.85	$ 0.80
Diluted earnings per share	$ 0.85	$ 0.80

51 -

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 September 30 2020 2019 $ 1,096,201 $ 1,031,839 $ 1,096,201 $ 1,031,839		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2020 $ 1,096,201 $ 1,096,201		2020 $ 2,937,039 $ 2,937,039	2019 $ 3,138,313 $ 3,138,313

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 September 30 2020 2019 3,901,694 3,901,694 3,073 2,002 3,904,767 3,903,696	For the Three Months Ended September 30 2020 2019 3,901,694 3,901,694 3,073 2,002 3,904,767 3,903,696	For the Nine Months Ended September 30	For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2020 3,901,694 3,073 3,904,767		2020 3,901,694 3,722 3,905,416	2019 3,901,694 2,863 3,904,557

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.

52 -

35. RELATED-PARTY TRANSACTIONS

Related Party

China Man-Made Fiber Corporation Hsu Tian Investment Co., Ltd. Pan Asia Chemical Co., Ltd. and Ho Yang Management Consultant Co., Ltd. (Note 3)

Kuei-Fong Wang (Note 2)

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

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

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

24 persons including the Chairman and general manager’s spouse

41 persons including the director of the Board’s spouse

6 persons including Yi-Yuan Tung

18 persons including associate general manager’s spouse

111 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.

Relationship with the Group

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

Legal director of the Bank Independent directors of the Bank

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

Legal representatives of the Bank’s director

The spouses and second-degree relatives, etc. of the Bank’s chairman and general managers

The spouses and children of the Bank’s directors

Key management personnel The spouses and children of the Bank’s associate general managers Managers of the Bank The spouses and children of the parent company’s chairman and general managers Associate accounted for using the equity method

Related party in substance Related party in substance Related party in substance

Related party in substance Related party in substance Related party in substance Related party in substance Related party in substance Related party in substance Related party in substance Related party in substance Related party in substance Related party in substance Related party in substance Related party in substance Related party in substance Related party in substance Related party in substance Related party in substance Related party in substance Related party in substance Related party in substance

(Continued)

53 -

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

Relationship with the Group

Related party in substance
Related party in substance
Related party in substance
Related party in substance
Related party in substance
Related party in substance
Related party in substance
Related party in substance
Related party in substance
Related party in substance
Related party in substance
Related party in substance
Related party in substance
Related party in substance
Related party in substance
Related party in substance
Related party in substance
Related party in substance
Related party in substance
(Concluded)

Note 1: Chin-Yuan Lai, who was the legal representative of Hsu Tian Investment Co., Ltd. and the legal director of the Bank, resigned on June 26, 2018. Hsu Tian Investment Co., Ltd. reassigned the position of legal representative to Siou-Huei Ye on May 28, 2019.
Note 2: 12 directors out of 24 directors (including 4 independent directors), were elected at the shareholders’ meeting of the Bank on June 30, 2020. The followings were respectively elected as directors: Kuei-Fong Wang and Ming-Hsiung Huang (legal representative of Hsu Tian Investment Co., Ltd), Wei-Liang Lin (legal representative of Hsu Tian Investment Co., Ltd), Te-Wei Chia (legal representative of Hsu Tian Investment Co., Ltd), Shih-Yi Chiang (legal representative of Hsu Tian Investment Co., Ltd), Hsin-Ching Chang (legal representative of Hsu Tian Investment Co., Ltd), Siou-Huei Ye (legal representative of Hsu Tian Investment Co., Ltd), Li-Tzu Lai (legal representative of Hsu Tian Investment Co., Ltd), Hsin-Chang Tsai (independent directors of the Bank), Li-Woon Lim (independent directors of the Bank), Chien-An Shin (independent directors of the Bank) and Pi-Ta Chen (independent directors of the Bank).
Note 3: Resigned after the shareholders’ meeting of the Bank on June 30, 2020.
54 -

Significant transactions between the Group and related party are as follows

a. Loans

For the nine months ended September 30, 2020

Balance,
Numbers/
Name
Highest
Balance
End of the
Period
Employees’
consumption loans
12
$ 4,029
$ 3,067
Loans on mortgage
35
180,915
125,027
Other loans
Lee OO
2,552
2,449
Liu OO
1,911
1,809
Lin OO
504
435
Fang OO
21,732
11,816
Lin OO
18,800
17,900
Tsai OO
380
281
Liang OO
886
797
Ye OO
11,000
11,000
Huang OO
1,570
1,469
Chiu OO
3,238
3,012

Compliance
The
Difference
Between
Related and
Performing
Loans
Overdue
Loans
Interest
Revenue
Collaterals
Non-related
Party
$ 3,067
$ -
$ 39
Credit loans
None
125,027
-
1,149
Real estate
None
2,449
-
27
Real estate
None
1,809
-
19
Real estate
None
435
-
-
Real estate
None
11,816
-
29
Real estate
None
17,900
-
229
Real estate
None
281
-
4
Real estate
None
797
-
8
Real estate
None
11,000
-
113
Real estate
None
1,469
-
17
Real estate
None
3,012
-
31
Real estate
None

For the nine months ended September 30, 2019

Balance,
Numbers/
Name
Highest
Balance
End of the
Period
Employees’
consumption loans
10
$ 4,182
$ 3,009
Loans on mortgage
33
153,369
114,748
Other loans
Lee OO
2,685
2,585
Chen OO
4,000
-
Liu OO
2,044
1,944
Yang OO
846
-
Zhong OO
12,230
11,663
Fang OO
4,432
1,916
Lin OO
19,000
19,000
Liang OO
1,002
915
Ye OO
11,000
11,000
Huang OO
1,701
1,603
Chiu OO
3,534
3,312
Tsai OO
1,529
1,463
Chen OO
1,600
-

Compliance
The
Difference
Between
Related and
Performing
Loans
Overdue
Loans
Interest
Revenue
Collaterals
Non-related
Party
$ 3,009
$ -
$ 44
Credit loans
None
114,748
-
1,114
Real estate
None
2,585
-
31
Real estate
None
-
-
17
Real estate
None
1,944
-
22
Real estate
None
-
-
4
Real estate
None
11,663
-
141
Real estate
None
1,916
-
25
Real estate
None
19,000
-
254
Real estate
None
915
-
10
Real estate
None
11,000
124
Real estate
None
1,603
-
21
Real estate
None
3,312
-
37
Real estate
None
1,463
-
22
Real estate
None
-
-
5
Real estate
None

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

55 -

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

Taichung Bank Securities Investment Trust
Co., Ltd.

Taichung Commercial Bank Workers’
Welfare Commission
China Man-Made Fiber Corporation
Taichung Commercial Bank Cultural and
Educational Foundation
Formosa Imperial Wineseller Corp
Greenworld Food Co., Ltd.
Pan Asia Chemical Corporation
Pan Feng Enterprise Co., Ltd.
Chou Chin Industrial Co., Ltd.
Chou Chang Co., Ltd.
Je Mi Fang Corporation
Yu Hui Limited
Hsu Tian Investment Co., Ltd.

For the Nine Months Ended September 30, 2020

Ending Balance Interest Ratio
Interest
Expense
$ 165,492
0.00-1.05
$ 886
144,687
0.01-4.80
5,450
127,662
0.01-0.05
20
8,285
0.01-0.84
55
659
0.04
-
6,557
0.04
1
22,843
0.01-0.04
5
198
0.04
-
28,990
0.01-0.04
1
4,784
0.01
-
20,020
0.04-0.81
9
4
0.01
-
37,905
0.01-0.04
1
6
0.01
-
4
0.01
-
13,730
0.04-0.55
78
15,401
0.01
-
6,833
0.04
3

315,388
0.00-4.80

2,900
$ 919,448
$ 9,409
For the Nine Months Ended September 30, 2019

Ending Balance Interest Ratio
Interest
Expense
$ 176,782
0.00-1.05
$ 942
139,048
0.01-5.09
5,492
125,549
0.01-0.48
35
8,302
0.01-1.09
66
290
0.08
1
5,244
0.08
1
84,908
0.01-0.08
8
268
0.08
-
21,529
0.01-0.08
1
4,728
0.01
-
14,621
0.08
9
4
0.01
-
27,613
0.01-0.48
13
(Continued)

56 -

Reliance Securities Co., Ltd. Pan Hsu Investment Co., Ltd. Pan Asia Investment Co., Ltd. Others	For the Nine Months Ended September 30, 2019	For the Nine Months Ended September 30, 2019
	Ending Balance Interest Ratio $ 13,626 0.08-0.80 2 0.01 6 0.01 300,780 0.00-5.09 $ 923,300	Interest Expense $ 78 - - 3,050 $ 9,696 (Concluded)

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

c. Financial debentures

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

As of September 30, 2020, the Related party 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

57 -

The interest payables on the financial debentures of the abovementioned related parties amounted to $193,399 thousand, $50,136 thousand and $194,073 thousand as of September 30, 2020, December 31, 2019 and September 30, 2019, respectively. The interest expenses amounted to $79,588 thousand, $80,877 thousand, $239,574 thousand and $239,994 thousand for the three months ended September 30, 2020 and 2019, and for the nine months ended September 30, 2020 and 2019, respectively

d. Service fee income

Taichung Bank Securities Investment Trust Co., Ltd.	For the Three Months Ended September 30 2020 2019 $ 129 $ 233	For the Three Months Ended September 30 2020 2019 $ 129 $ 233	For the Nine Months Ended September 30	For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2020 $ 129		2020 $ 425	2019 $ 690

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

e. Other expenses

Greenworld Food Co., Ltd. Je Mi Fang Corporation Pan Feng Enterprise Co., Ltd.	For the Three Months Ended September 30 2020 2019 $ 349 $ 144 - - 80 72 $ 429 $ 216	For the Three Months Ended September 30 2020 2019 $ 349 $ 144 - - 80 72 $ 429 $ 216	For the Nine Months Ended September 30	For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2020 $ 349 - 80 $ 429		2020 $ 901 1,472 161 $ 2,534	2019 $ 639 198 348 $ 1,185

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

f. Compensation of directors and key management personnel

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

Short-term benefits Post-employee benefits Other long-term benefits	For the Three Months Ended September 30 2020 2019 $ 54,337 $ 44,270 349 331 390 4 $ 55,076 $ 44,605	For the Three Months Ended September 30 2020 2019 $ 54,337 $ 44,270 349 331 390 4 $ 55,076 $ 44,605	For the Nine Months Ended September 30	For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2020 $ 54,337 349 390 $ 55,076		2020 $ 173,216 1,011 399 $ 174,626	2019 $ 159,390 951 10 $ 160,351

58 -

36. PLEDGED ASSETS

	September 30,	September 30,	December 31,	December 31,	September 30,	September 30,
		2020		2019		2019
Call loans to other banks - time deposits	$	200,000	$	200,000	$	200,000
Restricted assets - cash in banks		422,893		419,388		450,725
Notes receivable		2,327,677		2,889,030		2,808,169
Investments in debt instruments at amortized cost
- government bonds		920,400		844,900		844,900
Deposit reserves for demand accounts		5,000,000		-		-
	$	8,870,970	$	4,353,318	$	4,303,794

Call loans to other banks - time deposits were the provision for operational deposits. Restricted assets - cash in banks and notes receivable were the guarantee for financing to other banks. Government bonds were pledged as collateral to the district court for litigation related to the overdraft of the clearing account and the compensation reserve for the securities firm and the trust business. The details were as follows:

	September 30,	December 31,	September 30,
	2020	2019	2019
Guarantee to district court for litigation	$ 360,400	$ 284,900	$ 284,900
Collateral for overdraft of clearing account	500,000	500,000	500,000
Reserve of trust compensation	60,000	60,000	60,000
	$ 920,400	$ 844,900	$ 844,900

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 September 30, 2020, December 31, 2019 and September 30, 2019 were as follows:

a. Significant commitments

	September 30,	December 31,	September 30,
	2020	2019	2019
Loan commitments (excluding credit card)	$ 142,279,682	$ 139,176,198	$ 137,607,453
Loan commitments - credit card	12,670,498	11,743,903	11,421,509
Guarantee receivables	19,536,341	16,485,312	15,910,781
Trust liabilities	64,713,932	67,330,687	65,982,983
Letters of credit	3,301,684	3,318,935	2,798,914
Lease contract commitment	2,125,587	1,240,804	1,564,685

59 -
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 September 30, 2020

Trust Assets
Amount
Trust Liabilities
Cash in banks
$ 4,586,339 Securities under custody
Short-term investments
52,894,870 payable

Structured finance instruments
1,316,282 Trust capital
Real estate
Net income
Land
1,641,939 Deferred carryover amounts

Buildings
133,940
Securities under custody

4,140,562
Trust assets
$ 64,713,932
Trust liabilities

Trust Account Asset Items
September 30, 2020
Item
Cash in banks

Short-term investments
Structured finance instruments
Real estate
Land
Buildings
Securities under custody

Trust Account Income Statement
Nine Months Ended September 30, 2020

Trust income
Interest revenue

Trust expense
Management fee
Tax

Income before income tax
Income tax expense

Net income

Amount
$ 4,140,562
60,573,370
1,228,699

(1,228,699)
$ 64,713,932
Amount
$ 4,586,339
52,894,870
1,316,282
1,641,939
133,940
4,140,562
$ 64,713,932
Amount
$ 1,996,340
(767,641)

-
1,228,699

-
$ 1,228,699

60 -

Trust Account Balance Sheet December 31, 2019

Trust Assets
Amount
Trust Liabilities
Cash in banks
$ 3,588,759 Securities under custody
Short-term investments
54,341,837 payable

Structured finance instruments
2,041,602 Trust capital
Real estate
Net income
Land
1,350,853 Deferred carryover amounts

Buildings
123,079
Securities under custody

5,884,557
Trust assets
$ 67,330,687
Trust liabilities

Trust Account Asset Items
December 31, 2019
Item
Cash in banks

Short-term investments
Structured finance instruments
Real estate
Land
Buildings
Securities under custody

Trust Account Income Statement
Year Ended December 31, 2019
Trust income
Interest revenue

Dividend income
Trust expense
Management fee
Tax

Income before income tax
Income tax expense

Net income

Amount
$ 5,884,557
61,446,130
2,047,880

(2,047,880)
$ 67,330,687
Amount
$ 3,588,759
54,341,837
2,041,602
1,350,853
123,079
5,884,557
$ 67,330,687
Amount
$ 2,921,019
27,138
(900,164)

(113)
2,047,880

-
$ 2,047,880

61 -

Trust Account Balance Sheet September 30, 2019

Trust Assets
Amount
Trust Liabilities
Cash in banks
$ 2,472,062 Securities under custody
Short-term investments
53,689,711 payable

Structured finance instruments
2,104,155 Trust capital
Real estate
Net income
Land
1,350,013 Deferred carryover amounts

Buildings
123,750
Securities under custody

6,243,292
Trust assets
$ 65,982,983
Trust liabilities

Trust Account Asset Items
September 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 Nine Months Ended September 30, 2019
Trust income
Interest revenue

Trust expense
Management fee
Tax

Income before income tax
Income tax expense

Net income

Amount
$ 6,243,292
59,739,691
1,509,997

(1,509,997)
$ 65,982,983
Amount
$ 2,472,062
53,689,711
2,104,155
1,350,013
123,750
6,243,292
$ 65,982,983
Amount
$ 2,179,870
(669,873)

-
1,509,997

-
$ 1,509,997

c. Maturity analysis of lease commitments and capital expenditures

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

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

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.

62 -

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

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

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

Financing lease income

September 30,
2020

Year 1
$ 2,135,237

Year 2
724,972
Year 3
198,697
Year 4
13,030
Year 5
13,030
Year 6 onwards

174,750

$ 3,259,716

Present value of financing lease income
September 30,
2020

Year 1
$ 1,901,142

Year 2
661,091
Year 3
165,460
Year 4
3,376
Year 5
3,715
Year 6 onwards

95,009

$ 2,829,793

Capital expenditure commitment
September 30,
2020

Year 1
$ 203,194
Year 2
3,987,621
Year 3
3,213,827
Year 4
1,236,643
Year 5

-

$ 8,641,285

December 31,
2019
September 30,
2019
$ 2,836,102
$ 2,708,872
288,642
408,556
19,172
13,910
13,300
-
13,300
-
188,431

-
$ 3,358,947
$ 3,131,338
December 31,
2019
September 30,
2019
$ 2,551,965
$ 2,444,239
261,072
392,837
8,545
13,673
3,026
-
3,343
-
97,593

-
$ 2,925,544
$ 2,850,749
December 31,
2019
September 30,
2019
$ 823,970 $ 158,407

4,580,756
773,553

3,510,676
4,648,066

1,233,408
3,443,366

71,971

1,290,985
$ 10,220,781
$ 10,314,377

63 -

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

September 30, 2020

Carrying Amount Financial assets Investments in debt instruments at amortized cost $ 113,272,223 Financial liabilities Financial liabilities at amortized cost Bank debentures 11,500,000 December 31, 2019 Carrying Amount Financial assets Investments in debt instruments at amortized cost $ 108,969,273 Financial liabilities Financial liabilities at amortized cost Bank debentures 14,000,000 September 30, 2019 Carrying Amount Financial assets Investments in debt instruments at amortized cost $ 107,075,744 Financial liabilities Financial liabilities at amortized cost Bank debentures 20,000,000	FairValue
	Level 1 Level 2 Level 3 Total $ 88,457,336 $ 25,903,097 $ - $ 114,360,433 - 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 $ 84,362,277 $ 23,367,295 $ - $ 107,729,572 - 20,034,365 - 20,034,365

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.

64 -
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 Domestic unlisted shares Beneficiary certificates Domestic corporate bonds Others Financial assets at FVTOCI Investments in equity instruments Domestic unlisted shares Domestic listed shares Foreign listed shares Investments in debt instruments Domestic corporate bonds Domestic government bonds Foreign bonds Bank debentures Financial liabilities at FVTPL Derivative financial liabilities			September 30, 2020	September 30, 2020
		Total $ 3,009,660 20,399,973 690,571 37,500 287,577 141,161 801,209 $ 25,367,651 $ 778,983 1,663,402 297,716 26,228,004 5,581,002 2,399,499 2,006,918 $ 38,955,524 $ 473,634	Level 1 $ - 20,399,973 660,730 - 287,577 141,161 - $ 21,489,441 $ - 1,663,402 297,716 26,228,004 5,581,002 - 2,006,918 $ 35,777,042 $ -	Level 2 $ 3,009,660 - 29,841 - - - 801,209 $ 3,840,710 $ - - - - - 2,399,499 - $ 2,399,499 $ 473,634	Level 3 $ - - - 37,500 - - - $ 37,500 $ 778,983 - - - - - - $ 778,983 $ -

Reconciliation of Level 3 fair value measurements of financial instruments:

Item	Beginning Balance	Valuation Gains (Losses)	Increase Buy or Issue Transfer in	Increase Buy or Issue Transfer in	Increase Buy or Issue Transfer in	Decrease	Decrease	Decrease	Ending Balance
				Transfer in		Sell, Disposal		Transfer Out
Financial assets at FVTPL Unlisted shares	$ -	$ -	$37,500	$ -		$ -		$ -	$37,500

Item	Beginning Balance	Valuation Gains (Losses)	Increase Buy or Issue Transfer in			Decrease			Ending Balance
				Transfer in		Sell, Disposal		Transfer Out
Financial assets at FVTOCI Unlisted shares	$664,957	$114,026	$ -	$ -		$ -		$ -	$778,983
Financial assets at FVTPL					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)

65 -

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						September 30, 2019
			Total $ 2,032,106 21,422,552 616,693 149,700 68,295 1,052,479 $ 25,341,825 $ 638,241 622,654 268,033 19,884,483 5,923,897 824,587 1,200,000 $ 29,361,895 $ 196,137			Level 1 $ - 21,422,552 581,494 149,700 68,295 - $ 22,222,041 $ - 622,654 268,033 19,884,483 5,923,897 - 1,200,000 $ 27,899,067 $ -		Level 2 $ 2,032,106 - 35,199 - - 1,052,479 $ 3,119,784 $ - - - - - 824,587 - $ 824,587 $ 196,137		Level 3 $ - - - - - - $ - $ 638,241 - - - - - - $ 638,241 $ -

66 -

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	$127,718	$ -	$ -	$ -	$ -	$638,241

There were no transfers between Levels 1 and 2 for the nine months ended September 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-form
solution is then used for valuation.
Discounted cash flow: Future cash flows are estimated based on
observable forward exchange rates at the end of the reporting
period and forward rates of contracts, discounted at a rate that
reflects the credit risk of various counterparties.
The closing price for convertible corporate bond minus bond
value. The pure bond value is discounted by the cash flow
provided by the convertible corporate bond in accordance with
Taiwan Bills Index Rate (TAIBIR).

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 as Level 3, and held by the Group on September 30, 2020, December 31, 2019 and September 30, 2019, were as follows:

Items	Fair value on September 30, 2020	Fair value on December 31, 2019	Fair value on September 30, 2019	Valuation Techniques	Significant Unobservable Input	Range (Weighted- average)	Relationship Between Inputs and Fair Value
Financial assets at fair value through profit or loss Domestic unlisted shares Financial assets at fair value through other comprehensive income Domestic unlisted shares	$ 37,500 778,983	$ - 664,957	$ - 638,241	Seller’s quote (Monte Carlo Simulation Method) Seller’s quote (Monte Carlo Simulation Method)	Volatility rate Volatility rate	27% 24.78%-25.19%	The lower the volatility rate, the higher the fair value The lower the volatility rate, the higher the fair value

67 -
4) The assessment of Level 3 fair value

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

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

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

Risk Factor		Sensitivity Rate	Impact
Liquidity discount ratio		10%	$ (18,245)
Categories of financial instruments
	September 30,	December 31,	September 30,
	2020	2019	2019
Financial assets
Financial assets at FVTPL	$ 25,367,651	$ 24,375,536	$ 25,341,825
Financial assets at amortized cost (Note 1)	634,764,837	613,853,180	615,835,475
Financial assets at FVTOCI
Equity instruments	2,740,101	1,598,987	1,528,928
Debt instruments	36,215,423	30,000,344	27,832,967
Financial liabilities
Financial liabilities at FVTPL	473,634	233,803	196,137
Financial liabilities at amortized cost (Note 2)	656,793,323	628,054,346	630,116,546

c. Categories of financial instruments
Note 1: The balances include financial assets at amortized cost, which comprise cash and cash equivalents, due from the Central Bank and call loans to other banks, investments in debt instruments at amortized cost, securities purchased under 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 and product price) and liquidity risks of on and off-balance sheet business.

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

68 -

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 of measures, sensitivity analysis and situational analysis. The risk management department should measure the risk of the site on a daily basis and conduct regular stress tests to measure the amount of abnormal losses that may occur under the current or historical extremes.

69 -

ii. Monitoring and reporting

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

d) Interest rate risk
i. Definition of interest rate risk

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

ii. Measurement methods and management procedures

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

e) Exchange rate risk
i. Definition of exchange rate risk

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

ii. Measurement methods and management procedures

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

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

70 -

f) Equity securities price risk

i. Definition of equity securities price risk

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

ii. Measurement methods and management procedures

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

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

g) Market risk sensitivity analysis

Interest risk

The Group assumed that when other factors remain unchanged, if the yield curve increased/decreased by 100 basis points, the income before income tax of the Group as of September 30, 2020, December 31, 2019 and September 30, 2019 would have increased/decreased by $632,419 thousand, $759,373 thousand and $690,789 thousand, respectively, and other equity would have decreased/increased by $2,191,464 thousand, $2,039,615 thousand and $2,124,595 thousand, respectively.

Exchange rate risk

The Group assumed that when other factors remain unchanged, if the exchange rate of USD/NTD, CNY/NTD, and AUD/NTD appreciated/depreciated by 3%, the income before income tax as of September 30, 2020, December 31, 2019 and September 30, 2019 would have increased/decreased by $3,605 thousand, $20,939 thousand and $34,465 thousand, respectively, and other equity would have increased/decreased by $94,078 thousand, $48,665 thousand and $49,312 thousand, respectively.

Equity securities price risk

The Group assumed that when other factors remain unchanged, if the price of equity securities increased/decreased by 15%, the income before income tax as of September 30, 2020, December 31, 2019 and September 30, 2019 would have increased/decreased by $152,347 thousand, $162,699 thousand and $114,959 thousand, respectively, and other equity would have increased/decreased by $411,015 thousand, $239,848 thousand and $229,339 thousand, respectively.

71 -

The summary of sensitivity analysis was as follows:

	September 30, 2020
Main Risk	Range of Change	Influence Amount
		Other Equity	Income
Interest risk	Interest rate curve rises 100BPS Interest rate curve falls 100BPS	$ (2,191,464) 2,191,464	$ 632,419 (632,419)
Exchange rate risk	USD/NTD, CNY/NTD, AUD/NTD increase by 3% USD/NTD, CNY/NTD, AUD/NTD decrease by 3%	94,078 (94,807)	3,605 (3,605)
Equity securities price risk	Equity securities prices rise by 15% Equity securities prices fall by 15%	411,015 (411,015)	152,347 (152,347)

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

	September 30, 2019
Main Risk	Range of Change	Influence Amount
		Other Equity	Income
Interest risk	Interest rate curve rises 100BPS Interest rate curve falls 100BPS	$ (2,124,595) 2,124,595	$ 690,789 (690,789)
Exchange rate risk	USD/NTD, CNY/NTD, AUD/NTD increase by 3% USD/NTD, CNY/NTD, AUD/NTD decrease by3%	49,312 (49,312)	34,465 (34,465)
Equity securities price risk	Equity securities prices rise by 15% Equity securities prices fall by 15%	229,339 (229,339)	114,959 (114,959)

72 -

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 and loans, the credit card business, due from other banks and call loans to other banks, acceptances, investments in debt instruments and derivatives. The off-balance sheet exposures to credit risks are mainly from financial guarantees, letter of credits and loan commitments.

b) Credit risk management policy

Before launching new products or businesses, the Group ensures compliance with all applicable rules and regulations and identifies relevant credit risks. On September 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 held was approximately 36%, and the collateral required for loans, loan commitments or guarantees is usually in the forms of cash, inventories, liquid securities or other asset in circulation. If the customers default, the Group will execute its rights on collateral in accordance with the terms of contracts.

c) Credit risk management program

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

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

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

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

Quantitative indicators

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

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

Information on overdue status

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

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Qualitative indicators

Unfavorable changes in the current or projected operating, financial or economic conditions that are expected to result in significant changes in the ability of the debtor to perform debt obligations.
Significant changes in actual or expected results of the debtor’s operations.
The credit risk of other financial instruments from the same debtor has increased significantly.
ii) Definition of default and credit-impaired financial assets

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

Quantitative indicators

Changes in external TCRI credit ratings

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

Information on overdue status

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

Qualitative indicators

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

The debtor has gone bankrupt or may have called for bankruptcy or financial restructuring.
Other debt instrument contracts of the debtor have defaulted.
Due to the economic or contractual reasons associated with the debtor’s financial difficulties, the debtor’s creditors give the borrower an unconfirmed concession and report the overdue loan.

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

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iii) Measurement of expected credit losses

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

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

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

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

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

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

Consideration of forward-looking estimation

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

ii. Debt instrument investments

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

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

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

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

Quantitative indicators

At the time of initial recognition, the issuer’s credit rating is above the investment grade, but at the financial reporting date, the issuer’s credit rating is reduced to a non-investment grade.
For debt instrument investments on the initial recognition date, the issuer’s credit rating is below the non-investment grade and the credit rating on the reporting date has not changed.
When the issuer’s credit rating is a non-investment grade, the reported daily credit rating is reduced to a certain extent.

Qualitative indicators

The credit rating of the issuer indicates that its credit risk has increased significantly.
The fair value of the debt instrument investments has significantly and adversely changed on the reporting date.
ii) Definition of default and credit-impaired financial assets

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

Quantitative indicators

Debt instrument investments, such as bonds, have become credit impaired since they were purchased.
The default rate for credit rating of the issuer or debt instrument investments will be adjusted on the reporting date.

Qualitative indicators

The issuer modifies the issue conditions of the debt instrument investments due to financial difficulties or fails to pay the principal or interest according to the conditions of the issue.
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The issuer or the guarantee institution has ceased operations or has applied for reorganization, bankruptcy, dissolution, and sale of major assets that have a significant impact on the company’s continued operations.

Measurement of expected credit losses

In order to evaluate expected credit losses, the Group takes into consideration the debtor’s probability of default (PD) within the next 12 months, which includes the loss given default (LGD), the results are then multiplied by the exposure at default (EAD), while also considering the effect of time value of money to calculate the expected credit losses during the duration of 12 months.
Comparing the risk of default on the debt instrument with the default risk at the time of initial recognition, and considering the reasonable and corroborative information for a significant increase in credit risk since the initial recognition, to determine whether the financial instrument’s credit risk has increased significantly since the initial recognition.
Those who meet the normal credit risk status will estimate the expected loss amount based on the one-year probability of default (PD).
Those who meet the significant increase in credit risk status must consider the duration of the assets and calculate the probability of default (PD) for each duration. If the cash flow of the contract in the future period (i.e., the default exposure amount of each period) can be assessed, the cash flow method is used to assess the expected amount of credit loss, and if the cash flow of each period cannot be assessed, the current risk calculation method is used.
Those who meet the abnormal credit risk status are considered to be 100%, and will not consider the probability of default in each duration. Only consider the relevant recoverable amount and evaluate the overall expected credit loss amount.
Debt instrument investments’ probability of default is the value released by external credit rating agencies, which implies the possibility of future market fluctuations.

d) Credit risk hedging or mitigation policies

i. Collaterals

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

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

i) Real estate.
ii) Chattels and rights of pledge.

iii) Guarantee from external agency.

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

i) Guarantee of amount invested: Asking different ratio of guarantee based on the credit rating scale of clients.
ii) Guarantee of high-risk transactions: Asking for collaterals when option contracts are under 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 their pledged values which eliminate potential loss, are as follows:

September 30, 2020

Financial assets that were impaired Notes discounted and loans Receivables Guarantees and letters of credit Debt instruments Others Total financial assets that were impaired December 31, 2019 Financial assets that were impaired Notes discounted and loans Receivables Guarantees and letters of credit Debt instruments Others Total financial assets that were impaired	Total Book Value $ 9,913,123 330,459 92,708 7,904 27,930 $ 10,372,124 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 $ (2,307,958) $ 7,605,165 (163,410) 167,049 (35,889) 56,819 (7,904) - (1,672) 26,258 $ (2,516,833) $ 7,855,291 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 $ 7,605,165 135,222 38,599 - - $ 7,778,986 Fair Value of Collateral $ 7,086,185 76,067 88,672 - 6,975 $ 7,257,899

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September 30, 2019

Financial assets that were impaired Notes discounted and loans Receivables Guarantees and letters of credit Debt instruments Total financial assets that were impaired	Total Book Value Allowance for Impairment Loss Total Value of Exposure Fair Value of Collateral $ 7,543,581 $ (2,106,090) $ 5,437,491 $ 5,437,491 331,198 (153,381) 177,817 99,599 141,550 (47,267) 94,283 30,294 18,078 (18,078) - - $ 8,034,407 $ (2,324,816) $ 5,709,591 $ 5,567,384

ii. Credit risk concentration limits and control

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

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

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

iii. Other credit enhancements

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

e) Maximum exposure to credit risk

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

	September 30,	September 30,	December 31,	December 31,	September 30,	September 30,
		2020		2019		2019
Irrevocable loan commitments	$	9,106,381	$	7,152,089	$	5,856,399
Credit card commitments		12,670,498		11,743,903		11,421,509
Guarantee receivables		19,536,341		16,485,312		15,910,781
Letters of credit		3,301,684		3,318,935		2,798,914

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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	September 30, 2020 $ 255,884,008 226,906,651 1,000,000 2,059,878 $ 485,850,537 September 30, 2020 $ 226,906,651 82,354,489 55,043,242 63,440,783 15,814,774 11,553,895 14,986,604 8,333,372 7,416,727 $ 485,850,537 September 30, 2020 $ 453,079,953 17,973,909 10,967,316 3,829,359 $ 485,850,537	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	September 30, 2019 $ 246,526,919 218,918,145 - 2,175,590 $ 467,620,654 September 30, 2019 $ 218,918,145 84,754,491 57,587,856 55,742,097 14,537,388 11,829,719 11,739,688 7,357,182 5,154,088 $ 467,620,654 September 30, 2019 $ 434,062,882 17,834,607 11,725,231 3,997,934 $ 467,620,654

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Credit Risk Profile by Collaterals Unsecured Secured Real estate Letter of bank guarantee Chattel Debenture Notes receivable Stocks Others	September 30, 2020 $ 75,212,507 365,589,699 17,190,574 5,893,695 13,324,198 1,574,156 3,983,325 3,082,383 $ 485,850,537	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	September 30, 2019 $ 74,633,068 351,042,460 16,107,078 5,824,077 12,148,591 1,631,336 2,769,765 3,464,279 $ 467,620,654

g) Write-off policy

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

The debtor may not recover all or part of the obligatory claim due to dissolution, disappearance, settlement, bankruptcy or other reasons.
The appraisal value of collateral and asset of the main and subordinate debtors are very low, or the compensation is not available after deducting the amount of the first mortgage, or it is not beneficial that execution fee is close to or may exceed the Bank’s reimbursable amount.
The collateral and the assets of the main and subordinate debtors are auctioned off at multiple auctions, of which the Bank did not receive any benefit.
Overdue loans and delinquent receivables which have been overdue for more than 2 years have been collected but not yet received.
The minimum payable amount of credit card which is overdue for six months that should be written off in three months.
h) Information of credit quality
i. Notes discounted, loans and receivables

September 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 $ 221,078,281 210,033,768 19,595 431,131,644 (1,733,823 ) - $ 429,397,821		Stage 2 Lifetime ECL $ 3,133,570 12,991,195 1,355 16,126,120 (912,434 ) - $ 15,213,686		Difference of Impairment Loss Stage 3 under Lifetime ECL Regulations $ 6,731,177 $ - 3,182,094 - (148) - 9,913,123 (2,307,958 ) - - (1,842,925) $ 7,605,165 $ (1,842,925)	Total $ 230,943,028 226,207,057 20,802 457,170,887 (4,954,215 ) (1,842,925) $ 450,373,747

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Product category Corporate loans Consumer loans Others Total book value Allowance for doubtful accounts Difference of impairment loss under regulations					Receivables
	Stage 1 12-month ECLs $ 9,437,296 1,410,340 52,613,654 63,461,290 (84,588 ) - $ 63,376,702		Stage 2 Lifetime ECL $ 219,814 22,138 32 241,984 (4,587 ) - $ 237,397		Difference of Impairment Loss Stage 3 under Lifetime ECL Regulations $ 246,483 $ - 32,970 - 51,006 - 330,459 - (163,410 ) - - (34,445) $ 167,049 $ (34,445)	Total $ 9,903,593 1,465,448 52,664,692 64,033,733 (252,585 ) (34,445) $ 63,746,703

	Irrevocable Loan Commitments	Irrevocable Loan Commitments
Stage 1 12-month ECLs $ 7,912,851 1,165,600 9,078,451 (53,279 ) - $ 9,025,172	Difference of Impairment Loss Stage 2 Stage 3 under Lifetime ECL Lifetime ECL Regulations $ - $ 27,930 $ - - - - - 27,930 - - (1,672 ) - - - (4,392) $ - $ 26,258 $ (4,392) Credit Card Commitments		Total $ 7,940,781 1,165,600 9,106,381 (54,951 ) (4,392) $ 9,047,038

	Difference of Impairment Loss Stage 2 Stage 3 under Lifetime ECL Lifetime ECL Regulations $ 60,088 $ - $ - 60,088 - - (1,439 ) - - - - (1,248) $ 58,649 $ - $ (1,248) Guarantee Receivables		Total $ 12,670,498 12,670,498 (6,134 ) (1,248) $ 12,663,116

	Stage 2 Lifetime ECL $ 56,279 56,279 (2,943 ) - $ 53,336	Difference of Impairment Loss Stage 3 under Lifetime ECL Regulations $ 92,708 $ - 92,708 - (35,889 ) - - (18,179) $ - $ (18,179)	Total $ 19,536,341 19,536,341 (181,784 ) (18,179) $ 19,336,378

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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 $ 3,301,684 3,301,684 (9,182 ) - $ 3,292,502		Stage 2 Lifetime ECL $ - - - - $ -		Difference of Impairment Loss Stage 3 under Lifetime ECL Regulations $ - $ - - - - - - (1,452) $ - $ (1,452)	Total $ 3,301,684 3,301,684 (9,182 ) (1,452) $ 3,291,050

December 31, 2019

Notes Discounted and Loans

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

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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

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September 30, 2019

Notes Discounted and Loans

Stage 2 Lifetime ECL $ 4,962,878 14,230,065 2,338 19,195,281 (911,998 ) - $ 18,283,283	Difference of Impairment Loss Stage 3 under Lifetime ECL Regulations $ 4,601,759 $ - 2,941,860 - (38) - 7,543,581 - (2,106,090 ) - - (1,966,813) $ 5,437,491 $ (1,966,813) Receivables	Total $ 223,528,808 218,182,943 32,508 441,744,259 (4,854,856 ) (1,966,813) $ 434,922,590

Difference of Impairment Loss Stage 2 Stage 3 under Lifetime ECL Lifetime ECL Regulations $ 434,073 $ 243,131 $ - 36,856 37,137 - 43 50,930 - 470,972 331,198 - (9,942 ) (153,381 ) - - - (64,734) $ 461,030 $ 177,817 $ (64,734) Irrevocable Loan Commitments		Total $ 11,052,200 1,483,935 55,026,464 67,562,599 (261,745 ) (64,734) $ 67,236,120

Difference of Impairment Loss Stage 2 Stage 3 under Lifetime ECL Lifetime ECL Regulations $ - $ - $ - - - - - - - - - - - - - $ - $ - $ - Credit Card Commitments		Total $ 5,704,799 151,600 5,856,399 (46,964 ) - $ 5,809,435

Stage 2 Lifetime ECL $ 47,684 47,684 (1,337 ) - $ 46,347	Difference of Impairment Loss Stage 3 under Lifetime ECL Regulations $ - $ - - - - - - - $ - $ -	Total $ 11,421,509 11,421,509 (9,382 ) - $ 11,412,127

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Guarantee Receivables

Stage 2 Lifetime ECL $ 80,875 80,875 (6,506 ) - $ 74,369		Total $ 15,910,781 15,910,781 (159,471 ) (8,948) $ 15,742,362

Stage 2 Lifetime ECL $ 25,253 25,253 (1,154 ) - $ 24,099	Difference of Impairment Loss Stage 3 under Lifetime ECL Regulations $ 49 $ - 49 - (7 ) - - (9,553) $ 42 $ (9,553)	Total $ 2,798,914 2,798,914 (9,404 ) (9,553) $ 2,779,957

ii. Debt instrument investments

September 30, 2020

	Financial Assets	at FVTOCI
Stage 1 Stage 2 Stage 3 12-month ECLs Lifetime ECL Lifetime ECL Total $ 36,234,868 $ - $ - $ 36,234,868 - - - - 36,234,868 - - 36,234,868 (19,445 ) - - (19,445 ) - - - - $ 36,215,423 $ - $ - $ 36,215,423 Investments in Debt Instruments at Amortized Cost
	Stage 2 Lifetime ECL $ - - - - - - $ -	Stage 3 Lifetime ECL $ - 7,904 - 7,904 (7,904 ) - $ -	Total $ 49,228,781 7,904 64,070,000 113,306,685 (34,462 ) - $ 113,272,223

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.

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

September 30, 2020

September 30, 2020
		Financial Assets
	Financial Assets	at Amortized
	at FVTOCI	Cost
Total book value	$ 35,790,659	$ 113,306,685
Loss allowance	(19,445)	(34,462)
Amortized cost	35,771,214	113,272,223
Fair value adjustment	444,209	-
	$ 36,215,423	$ 113,272,223

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%	$ 35,790,659 - - -	$ 113,298,781 - 7,904 -

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

Financial assets at FVTOCI Balance, January 1, 2020 Change in credit rating Normal turned to abnormal Abnormal turned to default Default turned to write off Purchase of new debt instruments Dispose Model/risk parameter change Exchange rate and other changes Loss allowance, September 30, 2020	Credit Rating
	Normal (12-Month Expected credit Losses) Abnormal (Lifetime ECL and not Credit Impaired) Default (Lifetime ECL and Credit Impaired) $ 15,405 $ - $ - - - - - - - - - - 7,840 - - (4,247) - - - - - 447 - - $ 19,445 $ - $ -

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Financial assets at amortized cost Balance, January 1, 2020 Change credit rating Normal turned to abnormal Abnormal turned to default Default turned to write off Purchase of new debt instruments Dispose Model/risk parameter change Exchange rate and other changes Loss allowance, September 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) $ 24,185 $ - $ 17,477 - - - - - - - - - 1,665 - - (2,068) - (9,136) - - - 2,776 - (437) $ 26,558 $ - $ 7,904

	Financial Assets	at FVTOCI
Stage 1 Stage 2 Stage 3 12-month ECLs Lifetime ECL Lifetime ECL Total $ 30,015,749 $ - $ - $ 30,015,749 - - - - 30,015,749 - - 30,015,749 (15,405 ) - - (15,405 ) - - - - $ 30,000,344 $ - $ - $ 30,000,344 Investments in Debt Instruments at Amortized Cost
	Stage 2 Lifetime ECL $ - - - - - - $ -	Stage 3 Lifetime ECL $ - 17,477 - 17,477 (17,477 ) - $ -	Total $ 49,458,458 17,477 59,535,000 109,010,935 (41,662 ) - $ 108,969,273

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

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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 -

89 -

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

Credit Rating

Normal
(12-Month
Expected credit
Losses)
Abnormal
(Lifetime ECL
and not Credit
Impaired)
Default
(Lifetime ECL
and Credit
Impaired)
$ 15,525
$ -
$ -
-
-
-
-
-
-
-
-
-

2,910
-
-
(2,142)
-
-
-
-
-

(888)

-

-
$ 15,405
$ -
$ -
Credit Rating

Normal
(12-Month
Expected credit
Losses)
Abnormal
(Lifetime ECL
and not Credit
Impaired)
Default
(Lifetime ECL
and Credit
Impaired)
$ 30,685
$ -
$ 74,444
-
-
-
-
-
-
-
-
-

2,017
-
-
(800)
-
(56,967)
-
-

(7,717)

-

-
$ 24,185
$ -
$ 17,477

90 -

September 30, 2019

	Financial Assets	at FVTOCI
Stage 1 Stage 2 Stage 3 12-month ECLs Lifetime ECL Lifetime ECL Total $ 27,847,221 $ - $ - $ 27,847,221 - - - - 27,847,221 - - 27,847,221 (14,254 ) - - (14,254 ) - - - - $ 27,832,967 $ - $ - $ 27,832,967 Investments in Debt Instruments at Amortized Cost
	Stage 2 Lifetime ECL $ - - - - - - $ -	Stage 3 Lifetime ECL $ - 18,078 - 18,078 (18,078 ) - $ -	Total $ 48,800,037 18,078 58,300,000 107,118,115 (42,371 ) - $ 107,075,744

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:

September 30, 2019

		Financial Assets
	Financial Assets	at Amortized
	at FVTOCI	Cost
Total book value	$ 27,622,918	$ 107,118,115
Loss allowance	(14,254)	(42,371)
Amortized cost	27,608,664	107,075,744
Fair value adjustment	224,303	-
	$ 27,832,967	$ 107,075,744

91 -

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%-0.45% 100%	$ 27,622,918 - - -	$ 107,100,037 - 18,078 -

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

Financial assets at FVTOCI Balance, January 1, 2019 Change credit rating Normal turned to abnormal Abnormal turned to default Default turned to write off Purchase of new debt instruments Dispose Model/risk parameter change Exchange rate and other changes Loss allowance, September 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 $ - $ - - - - - - - - - - 1,161 - - (1,558) - - - - - (874) - - $ 14,254 $ - $ -

92 -

Financial assets at amortized cost Balance, January 1, 2019 Change credit rating Normal turned to abnormal Abnormal turned to default Default turned to write off Purchase of new debt instruments Dispose Model/risk parameter change Exchange rate and other changes Loss allowance, September 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 - - - - - - - - - 1,207 - - (667) - (56,366) - - - (6,932) - - $ 24,293 $ - $ 18,078

3) Liquidity risk
a) The source and definition of liquidity risk:

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

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.

93 -

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.

September 30, 2020	0-30 Days	31-90 Days	91-180 Days	181 Days - 1 Year	Over 1 Year	Total
Due to the Central Bank and other banks Funds borrowed from Central Bank and other banks Securities sold under repurchase agreements Payables Deposits and remittances Bank debentures Lease liabilities Other items of cash outflow on maturity	$ 6,700,013 1,208,449 702,741 5,003,607 57,012,820 - 23,116 1,140,003	$ 164,379 1,475,651 2,523,603 507,507 85,867,500 273,547 46,205 570,790	$ 158,420 1,432,340 - 1,074,504 76,781,998 - 68,465 53,807	$ 3,295 1,982,178 - 268,689 134,837,808 26,324 133,509 165,975	$ - 1,639,467 - 342,569 263,048,951 11,500,000 925,466 327,856	$ 7,026,107 7,738,085 3,226,344 7,196,876 617,549,077 11,799,871 1,196,761 2,258,431

December 31, 2019	0-30 Days	31-90 Days	91-180 Days	181 Days - 1 Year	Over 1 Year	Total
Due to the Central Bank and other banks Funds borrowed from Central Bank and other banks Securities sold under repurchase agreements Payables Deposits and remittances Bank debentures Lease liabilities Other items of cash outflow on maturity	$ 4,760,161 1,259,401 6,870,766 4,235,819 44,994,675 - 18,694 1,170,015	$ 1,599,224 2,162,174 3,548,335 440,279 65,647,490 - 37,439 177,790	$ 730 1,118,150 - 175,081 74,775,933 2,501,005 56,058 74,584	$ 166,945 1,429,534 - 402,401 150,359,693 68,701 88,458 114,448	$ - 122,781 - 328,930 247,880,067 11,500,000 817,249 219,310	$ 6,527,060 6,092,040 10,419,101 5,582,510 583,657,858 14,069,706 1,017,898 1,756,147

September 30, 2019	0-30 Days	31-90 Days	91-180 Days	181 Days - 1 Year	Over 1 Year	Total
Due to the Central Bank and other banks Funds borrowed from Central Bank and other banks Securities sold under repurchase agreements Payables Deposits and remittances Bank debentures Lease liabilities Other items of cash outflow on maturity	$ 5,822,201 1,831,935 5,109,911 9,255,818 54,678,499 - 18,662 1,196,199	$ 167,782 1,571,315 3,459,777 567,070 78,242,160 6,329,496 38,691 312,236	$ 158,512 669,565 - 1,184,885 71,471,559 - 59,793 57,841	$ 3,296 1,848,126 - 243,014 128,628,130 2,528,016 109,058 143,429	$ - 171,307 - 341,672 242,449,604 11,500,000 813,200 218,207	$ 6,151,791 6,092,248 8,569,688 11,592,459 575,469,952 20,357,512 1,039,404 1,927,912

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 amounts shown on the consolidated balance sheets. The maturity analysis of derivative financial liabilities is as follows:

September 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 currencyderivatives	$8,600	$39,220	$58,272	$71,061	$ -	$177,153
Total	$8,600	$39,220	$58,272	$71,061	$ -	$177,153

94 -

December 31, 2019	0-30 Days	31-90 Days	91-180 Days	181 Days - 1 Year	Over 1 Year	Total
Derivative financial liabilities at FVTPL Foreign currencyderivatives	$8,052	$26,392	$25,784	$26,322	$ -	$86,550
Total	$8,052	$26,392	$25,784	$26,322	$ -	$86,550

September 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 currencyderivatives	$13,901	$36,390	$21,249	$24,559	$ -	$ 96,099
Total	$13,901	$36,390	$21,249	$24,559	$ -	$ 96,099

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:

September 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 derivatives Outflows Inflows	$ 3,417,614 3,368,291	$ 703,498 691,043	$ 1,888,508 1,861,221	$ 4,912,127 4,795,026	$ - -	$ 10,921,747 10,715,581
Total outflows Total inflows	3,417,614 3,368,291	703,498 691,043	1,888,508 1,861,221	4,912,127 4,795,026	- -	10,921,747 10,715,581
Net flows	$ (49,323)	$ (12,455)	$ (27,287)	$ (117,101)	$ -	$ (206,166)

December 31, 2019	0-30 Days	31-90 Days	91-180 Days	181 Days - 1 Year	Over 1 Year	Total
Derivative financial liabilities at FVTPL Foreign currency derivatives Outflows Inflows	$ 1,104,025 1,087,564	$ 1,907,146 1,876,039	$ 2,013,035 1,974,123	$ 929,481 904,147	$ - -	$ 5,953,687 5,841,873
Total outflows Total inflows	1,104,025 1,087,564	1,907,146 1,876,039	2,013,035 1,974,123	929,481 904,147	- -	5,953,687 5,841,873
Net flows	$ (16,461)	$ (31,107)	$ (38,912)	$ (25,334)	$ -	$ (111,814)

September 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 derivatives Outflows Inflows	$ 2,438,338 2,425,652	$ 1,622,527 1,606,751	$ 766,941 758,754	$ 455,274 450,880	$ - -	$ 5,283,080 5,242,037
Total outflows Total inflows	2,438,338 2,425,652	1,622,527 1,606,751	766,941 758,754	455,274 450,880	- -	5,283,080 5,242,037
Net flows	$ (12,686)	$ (15,776)	$ (8,187)	$ (4,394)	$ -	$ (41,043)

95 -
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.

September 30, 2020	0-30 Days	31-90 Days	91-180 Days	181 Days - 1 Year	Over 1 Year	Total
Loan commitments Letters of credit Guarantee receivables Lease contract commitment	$ 8,230,094 870,656 4,859,090 1,691,511	$ 21,941,967 2,246,173 6,464,450 399,997	$ 26,870,445 117,813 881,101 -	$ 64,407,440 67,042 1,903,381 34,079	$ 33,500,234 - 5,428,319 -	$ 154,950,180 3,301,684 19,536,341 2,125,587
Total	$ 15,651,351	$ 31,052,587	$ 27,869,359	$ 66,411,942	$ 38,928,553	$179,913,792

December 31, 2019	0-30 Days	31-90 Days	91-180 Days	181 Days - 1 Year	Over 1 Year	Total
Loan commitments Letters of credit Guarantee receivables Lease contract commitment	$ 10,197,687 985,636 2,095,901 963,551	$ 17,979,600 1,955,514 5,829,509 252,675	$ 27,233,146 276,456 1,215,728 7,727	$ 64,306,327 101,329 1,878,103 16,851	$ 31,203,341 - 5,466,071 -	$ 150,920,101 3,318,935 16,485,312 1,240,804
Total	$ 14,242,775	$ 26,017,298	$ 28,733,057	$ 66,302,610	$ 36,669,412	$171,965,152

September 30, 2019	0-30 Days	31-90 Days	91-180 Days	181 Days - 1 Year	Over 1 Year	Total
Loan commitments Letters of credit Guarantee receivables Lease contract commitment	$ 8,073,581 1,050,091 4,648,964 1,228,857	$ 21,892,670 1,566,980 2,971,127 206,891	$ 27,922,207 68,548 1,116,753 125,177	$ 61,211,929 113,295 2,285,829 3,760	$ 29,928,575 - 4,888,108 -	$ 149,028,962 2,798,914 15,910,781 1,564,685
Total	$ 15,001,493	$ 26,637,668	$ 29,232,685	$ 63,614,813	$ 34,816,683	$169,303,342

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

	September 30, 2020	September 30, 2020	September 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	$3,264,349	$3,224,876	$3,372,773	$3,224,876	$ 147,897

96 -

	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

	September 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	$9,107,803	$8,524,672	$9,235,593	$8,524,672	$ 710,921

41. OFFSETTING OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES

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

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

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

September 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$ 12,217,335 $ - $ 12,217,335 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$ 3,224,876 $ - $ 3,224,876	Related Amounts Not Offset in the Balance Sheets Financial Instruments Cash Collateral Received $ 12,217,335 $ - Related Amounts Not Offset in the Balance Sheets Financial Instruments Cash Collateral Pledged $ 3,224,876 $ -	Net Amount $ -
		Net Amount $ -

97 -

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 September 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$ 12,902,163 $ - $ 12,902,163 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$ 8,524,672 $ - $ 8,524,672	Related Amounts Not Offset in the Balance Sheets Financial Instruments Cash Collateral Received $ 12,902,163 $ - Related Amounts Not Offset in the Balance Sheets Financial Instruments Cash Collateral Pledged $ 8,524,672 $ -	Net Amount $ -
		Net Amount $ -

98 -

42. INFORMATION ABOUT THE BANK

a. Asset quality

Category	Items	Items			September 30, 2020					September 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		$ 616,594	$151,318,128	0.41%	$ 1,522,466	246.92%	$ 617,860	$144,321,916	0.43%	$ 1,443,315	233.60%
	Unsecured		403,927	79,613,169	0.51%	2,955,542	731.70%	150,986	79,160,530	0.19%	2,903,530	1,923.05%
Consumer loans	Mortgage(Note 4)		134,915	56,162,112	0.24%	894,928	663.33%	331,300	55,674,766	0.60%	894,300	269.94%
	Cash card		-	18	-	2	-	-	33	-	5	-
	Microcredit(Note 5)		2,197	851,481	0.26%	82,107	3,737.23%	4,366	828,334	0.53%	86,226	1,974.94%
	Other (Note 6)	Secured	362,018	146,939,750	0.25%	934,540	258.15%	576,295	145,900,374	0.39%	1,143,124	198.36%
		Unsecured	58,981	21,249,074	0.28%	407,157	690.32%	61,643	14,796,879	0.42%	350,771	569.04%
Loans			1,578,632	456,133,732	0.35%	6,796,742	430.55%	1,742,450	440,682,832	0.40%	6,821,271	391.48%

Category		Items			September 30, 2020					September 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			$ 2,216	$ 699,182	0.32%	$ 25,054	1,130.60%	$ 3,156	$ 735,202	0.43%	$ 23,416	741.95%
Accounts rec	eivable without reco	urse(Note 7)	-	145,957	-	5,914	-	-	287,366	-	7,221	-

99 -

Non-reportable overdue loans and receivables

	September 30, 2020	September 30, 2020	September 30, 2019	September 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)	$ 1,697	$ 884	$ 2,275	$ 1,158
Amount received from performance of debt negotiationprogram(Note9)	8,026	18,852	10,150	17,063
Total	9,723	19,736	12,425	18,221

Note 1: The amount recognized as non-performing loans (NPL) is in compliance with the “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-performing/Non-accrual Loans”. Non-performing credit loans represent the amounts of non-performing loans reported to the FSC, as required by the FSC in its letter dated July 6, 2005 (Ref. No. 0944000378).
Note 2: Non-performing loan ratio = Non-performing loans ÷ Outstanding loan balance; Non-performing credit loan ratio = Non-performing loans ÷ Accounts receivable balance.
Note 3: Allowance for doubtful accounts ratio = Allowance for doubtful accounts in loans ÷ Overdue loans; Allowance for doubtful accounts ratio of credit card = Allowance for doubtful accounts in credit cards ÷ Overdue loans.
Note 4: Home mortgage refers to financing obtained to buy, build, or fix houses owned by the borrowers’ spouse or children, with the house used as loan collateral.
Note 5: Microcredit is covered by the FSC pronouncement dated December 19, 2005 (Ref No. 09440010950) and is excluded from credit card and cash card loans.
Note 6: “Others” under consumer loans refers to secured or unsecured loans other than mortgage loans, cash cards, microcredit, and credit cards.
Note 7: As required by the FSC in its letter dated July 19, 2005 (Ref No. 094000494), a provision for bad debts is recognized once no compensation is made by a factor or insurance company for accounts receivable factored without recourse.
Note 8: Accounts under “loans not required to be classified as NPL upon performance of a debt negotiation program” and “accounts receivable not required to be classified as overdue receivable upon debt negotiation program” were processed according the FSC pronouncement dated April 25, 2006 (Ref No. 09510001270).
Note 9: Accounts under “loans not required to be classified as NPL upon performance of a debt discharge program and rehabilitation program” and “accounts receivable not required to be classified as overdue receivable upon debt discharge program and rehabilitation program” were processed according the FSC pronouncement dated September 15, 2008 (Ref No. 09700318940).
100 -

b. Concentration of credit extensions

(In Thousands of New Taiwan Dollars, %)

Year	September 30, 2020
Top 10 Rank (Note 1)	Group (Note 2)	Total Credit (Note 3)	Percentage of Net Worth (%)
1	Group A 016700real estate development activities	$ 4,527,227	8.44
2	Group B 016811 real estate activities for sale and rental with own or leasedproperty	2,494,650	4.65
3	Group C 010892 manufacture of macaroni, noodles, couscous and similar farinaceousproducts	2,485,776	4.63
4	Group D 016700real estate development activities	2,446,000	4.56
5	Group E 012411 smeltingand refiningof iron and steel	2,321,020	4.33
6	Group F 016700real estate development activities	2,257,493	4.21
7	Group G 015500accommodation	2,085,229	3.89
8	Group H 016700real estate development activities	1,937,777	3.61
9	Group I 012699 manufacture of other electronic parts and components not elsewhere classified	1,762,563	3.29
10	Group J 013822 hazardous industrial waste treatment	1,371,591	2.56

101 -

Year	September 30, 2019
Top 10 Rank (Note 1)	Group (Note 2)	Total Credit (Note 3)	Percentage of Net Worth (%)
1	Group C 010892 manufacture of macaroni, noodles, couscous and similar farinaceousproducts	$ 2,647,438	5.26
2	Group F 016700 real estate development activities	2,593,442	5.16
3	Group B 016811 real estate activities for sale and rental with own or leasedproperty	2,405,714	4.78
4	Group D 016700real estate development activities	2,259,000	4.49
5	Group K 016499other financial intermediation	2,191,302	4.36
6	Group A 016700real estate development activities	2,169,322	4.31
7	Group G 015500 accommodation	2,116,561	4.21
8	Group H 016700 real estate development activities	2,114,472	4.20
9	Group L 012413 smeltingand refiningof iron and steel	1,331,715	2.65
10	Group M 014612 wholesale of chemical materials and relatedproducts	1,277,351	2.54

Note 1: The ranking is arranged in descending order of the outstanding loan balance, excluding all the government entities and nation-owned enterprises. If the borrower is a member company of a group, then the disclosed amount will be the total granted loan amount for that entire group. (i.e., Group A real estate development activities).
Note 2: According to Article 6 of the “Supplementary Provisions to the Stock Exchange Corporation Criteria for the Review of Securities Listings”, Group refers to the entity that has a controlling or subordinate relationship with the counterparty that obtained loans from the Bank.
Note 3: Credit balance means the sum of all the loans (including import bill negotiated, discounted export bills negotiated, overdrafts, short-term secured and unsecured loans, securities margin loan receivables, medium-term secured and unsecured loans, long-term secured and unsecured loans and delinquent receivables), exchange bills negotiated, accounts receivable factored without recourse, acceptances receivable, and guarantees issued.
c. Interest rate sensitivity information

Interest Rate Sensitivity September 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	$476,826,981	$ 6,888,166	$16,697,247	$92,423,790	$592,836,184
Interest-sensitive liabilities	170,617,022	308,510,557	83,448,089	6,124,566	568,700,234
Interest sensitivity gap	306,209,959	(301,622,391)	(66,750,842)	86,299,224	24,135,950
Net equity					53,637,439
Ratio of interest-sensitive assets to liabilities					104.24%
Ratio of interest sensitivity gapto net equity					45.00%

102 -

September 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	$466,045,293	$ 7,418,239	$10,456,863	$81,637,771	$565,558,166
Interest-sensitive liabilities	172,068,489	278,562,647	81,409,549	5,453,423	537,494,108
Interest sensitivity gap	293,976,804	(271,144,408)	(70,952,686)	76,184,348	28,064,058
Net equity					50,287,896
Ratio of interest-sensitive assets to liabilities					105.22%
Ratio of interest sensitivity gapto net equity					55.81%

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 September 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	$1,249,488	$ 286,685	$ 106,622	$ 332,981	$1,975,776
Interest-sensitive liabilities	604,700	1,139,739	272,447	-	2,016,886
Interest sensitivity gap	644,788	(853,054)	(165,825)	332,981	(41,110)
Net equity					1,851,802
Ratio of interest-sensitive assets to liabilities					97.96%
Ratio of interest sensitivity gapto net equity					(2.22%)

September 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	$1,141,276	$ 295,726	$ 20,036	$ 453,582	$1,910,620
Interest-sensitive liabilities	736,989	816,048	321,384	-	1,874,421
Interest sensitivity gap	404,287	(520,322)	(301,348)	453,582	36,199
Net equity					1,620,622
Ratio of interest-sensitive assets to liabilities					101.93%
Ratio of interest sensitivity gapto net equity					2.23%

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.
103 -
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	September 30, 2020	September 30, 2019
Return on total assets	Pretax	0.49	0.54
	After tax	0.43	0.46
Return on net equity	Pretax	6.49	7.42
	After tax	5.60	6.40
Profit margin		37.52	37.71

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 nine months ended September 30, 2020 and 2019.
e. Maturity analysis of assets and liabilities

Maturity Analysis of Assets and Liabilities September 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
Major capital inflow on maturity	$638,644,207	$ 72,593,092	$ 59,952,728	$ 34,824,292	$ 49,897,434	$103,259,151	$318,117,510
Major capital outflow on maturity	759,105,962	28,899,317	40,443,421	95,276,487	106,138,944	164,673,802	323,673,991
Gap	(120,461,755)	43,693,775	19,509,307	(60,452,195)	(56,241,510)	(61,414,651)	(5,556,481)

September 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
Major capital inflow on maturity	$608,455,447	$ 87,417,103	$ 43,328,947	$ 33,966,025	$ 46,458,098	$103,067,897	$294,217,377
Major capital outflow on maturity	726,079,684	35,403,935	35,304,748	91,183,561	94,957,640	168,979,234	300,250,566
Gap	(117,624,237)	52,013,168	8,024,199	(57,217,536)	(48,499,542)	(65,911,337)	(6,033,189)

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 September 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
Majorcapital inflow on maturity	$ 2,399,418	$ 399,036	$ 238,005	$ 241,381	$ 314,630	$ 1,206,366
Majorcapital outflow on maturity	3,031,726	515,529	762,724	559,752	919,787	273,934
Gap	(632,308)	(116,493)	(524,719 )	(318,371)	(605,157)	932,432

104 -

September 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
Major capitalinflow on maturity	$ 2,135,066	$ 330,989	$ 260,696	$ 239,607	$ 110,211	$ 1,193,290
Majorcapital outflow on maturity	2,684,953	621,008	667,260	414,905	813,116	168,664
Gap	(549,887)	(290,019 )	(406,291)	(175,298)	(702,905)	1,024,626

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 regulations of the competent authority.

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

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

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

1) The term “Net Tier 1 Capital” shall mean the aggregate amount of net common Equity Tier 1 and net additional Tier 1 Capital.
a) The common equity Tier 1 capital consists of the common shares and additional paid-in capital in excess of par - common shares, the capital collected in advance, the capital reserves, the statutory surplus reserves, the special reserves, the accumulated profit or loss, the non-controlling interests and other items of interest.
b) Additional Tier 1 capital consists of non-cumulative perpetual preferred shares and its capital share premium, the non-cumulative perpetual subordinated debts, the non-cumulative perpetual preferred shares and its capital share premium, and the non-cumulative perpetual subordinated debts which are issued by banks’ subsidiaries, and are not directly or indirectly held by banks.
105 -

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.

44. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

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

September 30, 2020

USD
CNY
JPY
AUD
EUR
Others
Total
$ 2,623,952 $ 1,125,747 $ 400,317 $ 97,943 $ 187,393 $ 330,636 $ 4,765,988
75,309
233,750
-
206,100
-
418,462
933,621
1,076,054
2,497
-
-
3,984
629
1,083,164
1,468,509
1,103,569
-
125,137
-
-
2,697,215

33,126,642
1,035,010
400,431
77,288
1,116,346
1,086,655
36,842,372
1,064,221
2,722,156
256,451
2,898
51,287
29,946
4,126,959
19,403,813
3,783,751
-
1,360,074
-
836,646
25,384,284
269,820
-
-
-
-
-
269,820
-
2,556,599
-
-
-
-
2,556,599
56,335,926
3,547,870
690,984
2,230,370
548,533
1,779,318
65,133,001
226,033
-
-
-
4,278
629
230,940
-
-
-
-
-
126,614
126,614
560,469
141,659
185,977
2,411
91,727
14,189
996,432
-
43,212
-
-
-
6,167
49,379
2,021,821
-
-
-
-
-
2,021,821
22,377
-
-
-
-
-
22,377
74,891
8,277
1,816
-
6,880
-
91,864
28.97
4.25
0.27
20.61
33.96

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
Payables
Lease liabilities
Securities sold under
repurchased agreements
Provisions
Other liabilities
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
September 30, 2019

USD
CNY
JPY
AUD
EUR
Others
Total
$ 2,099,907 $ 804,585 $ 561,684 $ 109,430 $ 352,207 $ 400,815 $ 4,328,628
93,090
121,772
-
638,975
-
40,840
894,677
1,192,114
25,539
-
210
-
-
1,217,863
1,092,620
-
-
-
-
-
1,092,620

36,497,186
971,918
525,647
131
203,345
898,214
39,096,441
1,751,724
2,962,863
471,709
5,881
156,707
70,688
5,419,572
19,067,939
1,826,046
-
1,277,983
-
918,594
23,090,562
201,230
86,980
-
-
-
-
288,210
620,600
-
-
-
-
-
620,600
155,150
2,473,407
-
-
-
-
2,628,557
49,899,090
3,336,332
589,299
2,402,301
560,782
1,688,143
58,475,947
148,980
-
-
299
170
-
149,449
1,024,954
167,327
589,265
174,123
163,042
10,897
2,129,608
-
51,530
-
-
-
8,291
59,821
7,823,541
-
-
-
-
-
7,823,541
32,576
-
-
-
-
-
32,576
89,705
10,716
223
-
3,226
-
103,870
31.03
4.35
0.29
20.95
33.94

107 -

45. CASH FLOW INFORMATION

Changes in Liabilities Arising from Financing Activities

For the nine months ended September 30, 2020

Funds borrowed from Central Bank and other banks Commercial papers Bank debentures Guarantee deposits received Lease liabilities	Opening Balance $ 6,092,040 1,174,083 14,000,000 582,064 895,285 $ 22,743,472	Cash Inflows (Outflows) $ 1,646,045 384,467 (2,500,000 ) (8,797 ) (142,198) $ (620,483)		Non-cash Changes New Leases End of Lease Term $ - $ - - - - - - - 362,325 (53,302) $ 362,325 $ (53,302)	Closing Balance $ 7,738,085 1,558,550 11,500,000 573,267 1,062,110
				New Leases $ - - - - 362,325 $ 362,325
					$ 22,432,012

For the nine months ended September 30, 2019

Funds borrowed from Central Bank and other banks Commercial papers Guarantee deposits received Lease liabilities	Opening Balance $ 5,495,519 998,680 568,435 1,039,866 $ 8,102,500	Cash Inflows (Outflows) $ 596,729 340,090 20,707 (151,294) $ 806,232		Non-cash Changes New Leases End of Lease Term $ - $ - - - - - 264,612 (240,461) $ 264,612 $ (240,461)	Closing Balance $ 6,092,248 1,338,770 589,142 912,723
				New Leases $ - - - 264,612 $ 264,612
					$ 8,932,883

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 loans, monitored and assessed financial information (including net revenue, expected impairment loss, operating expenses and capital adequacy ratio, etc.) by applying stress testing under additional pressure. Based on the information available as of the balance sheet date, the epidemic did not have significant influence on the Group’s ability to continue as a going concern, asset impairment and financing risk.

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 is as follows:

For the nine months ended September 30, 2020 Interest revenue Interest expense Net revenue Net income and loss other than interest Service fee income Gain on financial instruments Others Provision for bad debts expense, commitments and guarantee liabilities Operating expenses Income (loss) before income tax For the nine months ended September 30, 2019 Interest revenue Interest expense Net revenue Net income and loss other than interest Service fee income Gain on financial instruments Others Provision for bad debts expense, commitments and guarantee liabilities Operating expenses Income (loss) before income tax	Northern Area $ 2,413,410 (1,109,397) 1,304,013 343,339 14,336 10,933 (323,378 ) (597,749) $ 751,494 $ 2,670,790 (1,273,352) 1,397,438 329,070 23,110 10,294 (571,290 ) (631,643) $ 556,979	Central Area $ 3,506,123 (1,068,466) 2,437,657 613,147 44,079 17,506 (1,823 ) (1,083,810) $ 2,026,756 $ 3,890,722 (1,154,437) 2,736,285 619,266 33,606 22,190 (169,105 ) (1,159,314) $ 2,082,928	Southern Area $ 2,158,542 (704,777) 1,453,765 377,156 16,051 14,805 35,094 (742,301) $ 1,154,570 $ 2,348,937 (773,456) 1,575,481 387,350 11,793 20,554 (517,324 ) (777,624) $ 700,230	OBU $ 1,194,020 (617,645) 576,375 79,555 50,660 (21,095 ) (18,789 ) - $ 666,706 $ 1,537,199 (1,046,425) 490,774 77,289 17,910 (8,441 ) (10,759 ) - $ 566,773	Overseas Branch $ 60,734 (17,922) 42,812 5,155 - 12,874 (10,485 ) (21,439) $ 28,917 $ 34,319 (15,823) 18,496 4,926 - 14,997 (15,262 ) (21,575) $ 1,582	Head Office and Others Adjustment and Write-off $ 1,801,785 $ (1,945,044 ) (1,465,919) 1,945,044 335,866 - 716,518 - (48,539 ) - 174,790 (56,480 ) (79,230 ) - (2,254,777) 56,480 $ (1,155,372) $ - $ 1,809,021 $ (2,141,104 ) (1,777,391) 2,141,104 31,630 - 769,452 - 291,032 - 283,230 (56,522 ) 756,282 - (2,302,178) 56,522 $ (170,552 ) $ -	Total $ 9,189,570 (3,039,082) 6,150,488 2,134,870 76,587 153,333 (398,611 ) (4,643,596) $ 3,473,071 $ 10,149,884 (3,899,780) 6,250,104 2,187,353 377,451 286,302 (527,458 ) (4,835,812) $ 3,737,940

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	September 30, 2020 $ 137,674,315 194,164,981 99,666,764 58,188,426 2,481,167 221,655,406 $ 713,831,059	December 31, 2019 $ 131,547,637 190,521,187 97,703,639 55,115,671 1,696,811 206,103,977 $ 682,688,922	September 30, 2019 $ 133,244,168 198,311,021 96,886,632 54,675,212 1,329,620 199,138,838 $ 683,585,491

c. Revenue from major products and services

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

109 -

d. Geographical information

Location Taiwan Asia America		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2020 $ 8,359,392 153,469 2,417 $ 8,515,278	2019 $ 8,901,052 189,784 10,374 $ 9,101,210

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 party amounting to at least NT$5 million.	None
5	Receivables from Related party amounting to at least NT$300 million or 10% of thepaid-in capital.	None
6	Sale of nonperformingloans.	None
7	Financial asset securitization and real estate securitization.	None
8	Other significant transactions which may affect the decisions of users of financial reports.	None

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

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

110 -

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

c. Investment in mainland China: Table 4 (attached).
d. Business relationships and significant transactions between the parent company and subsidiaries: Table 5 (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 6).
111 -

TABLE 1

TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

FINANCING PROVIDED TO OTHERS FOR THE NINE MONTHS ENDED SEPTEMBER 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. Da Fang Skill Color Marketing Consultant Co., Ltd. Qiyi Intergrated Marketing Co., Ltd. TCCBL Co., Ltd	Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables	Not related Not related Not related Not related Not related Not related Not related Related	$ 16,298 42,150 75,177 114,260 128,263 180,000 180,000 9,804	$ - - - 69,748 125,704 180,000 180,000 9,680	$ - - - 69,748 43,704 - 100,000 9,680	4-10 4-10 3.5-10 4-10 4-10 4-10 4-10 -	Necessary for short-term financing Necessary for short-term financing Necessary for short-term financing Necessary for short-term financing Necessary for short-term financing Necessary for short-term financing Necessary for short-term financing Necessary for short-term financing	$ - - - - - - - -	Business turnover Business turnover Business turnover Business turnover Business turnover Business turnover Business turnover Business turnover	$ - - - 697 437 - 1000 97	None Margin None Real estate Real estate Real estate Real estate None	$ - 20,000 - 78,942 111,829 180,000 372,093 -	$ 190,579 190,579 190,579 190,579 190,579 190,579 190,579 190,579	$ 762,316 762,316 762,316 762,316 762,316 762,316 762,316 762,316	Note 9 Note 9 Note 9 Note 9 Note 9 Note 9 Note 9 Note 9
2	TCCBL Co., Ltd. (B.V.I.)	Cross Border Profits Limited	Other receivables	Not related	23,262	8,342	8,342	4-10	Necessary for short-term financing	-	Business turnover	54	Margin	2,897	76,758	307,032	Note 10
3	Taichung Bank Financial Leasing (Suzhou) Co., Ltd.	Zhangjiajie Zhongjun Real Estate Co., Ltd.	Entrusted loan	Not related	14,276	7,523	7,523	9.6	Necessary for short-term financing	-	Capital investment plan expenditure	113	Real estate	229,118	288,806	288,806	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.

112 -

TABLE 2

TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

ENDORSEMENTS/GUARANTEES PROVIDED FOR THE NINE MONTHS ENDED SEPTEMBER 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	$ 11,434,740	$ 942,289	$ 651,713	$ -	$ -	34.20	$ 19,057,900	-	-	-
2	Taichung Bank Leasing Corporation Limited	Taichung Bank Financial Leasing (Suzhou) Co., Ltd.	Indirect shareholding of 100% of subsidiary	11,434,740	2,124,584	2,098,690	1,704,700	-	110.12	19,057,900	-	-	Y

Note 1: According to Taichung Bank Leasing Corporation Limited’s “Operating Procedures to Fund Endorsement and Guarantee”, the endorsement limit to single company cannot surpass six times of Taichung Bank Leasing Corporation Limited’s audited net worth. The endorsement limits to all subsidiaries cannot surpass 10 times of Taichung Bank Leasing Corporation Limited’s audited net worth.

Note 2:

The maximum balance guaranteed for endorsement of others during the year.

Note 3: It is a guarantor of the listed parent company to the endorsement of the subsidiary, the subsidiary company's endorsement to the listed parent company and the endorsement of the mainland area must be filled with Y.

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TABLE 3

TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

MARKETABLE SECURITIES HELD SEPTEMBER 30, 2020

(In Thousands of New Taiwan Dollars or Shares)

Name of Holding Company	Type and Name of Marketable Securities	Relationship	Financial Statements Account		September 30, 2020	September 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 -	$ 1,905,790 1,728,894 1,437,447 165,101 767,581 722,015	100 100 100 38 100 100	$ 1,905,790 1,728,894 1,437,447 165,101 767,581 722,015

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

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TABLE 4

TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

INVESTMENT IN MAINLAND CHINA FOR THE NINE MONTHS ENDED SEPTEMBER 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 September 30, 2020	% Ownership of Direct or Indirect Investment	Investment Gain	Carrying Value as of September 30, 2020	Accumulated Inward Remittance of Earnings as of September 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	$ 5,580 (CNY 1,312 thousand)	$ 722,015 (CNY 169,886 thousand)	$ -

Accumulated Investment in Mainland China as of September 30, 2020		Investment Amount Approved by the Investment Commission, MOEA		Maximum Investment Allowable (Note 2)
$893,373		$893,373		$1,143,474

Note 1: Recognition of investment gains and losses based on the financial statements reviewed 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$4.25, CNY1=NT$4.25).

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TABLE 5

TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

BUSINESS RELATIONSHIPS AND SIGNIFICANT TRANSACTIONS BETWEEN THE PARENT COMPANY AND SUBSIDIARIES FOR THE NINE MONTHS ENDED SEPTEMBER 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	September 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 Bank Leasing Corporation Limited.	a a a a a a	Deposits and remittances Service fee income Receivables Deposits and remittances Feedback fund Deposits and remittances	$ 1,280,404 150,003 16,667 400,427 21,990 155,394	The terms for the transactions between the company and related parties are similar to those for unrelated parties. The terms for the transactions between the company and related parties are similar to those for unrelated parties. The terms for the transactions between the company and related parties are similar to those for unrelated parties. The terms for the transactions between the company and related parties are similar to those for unrelated parties. The terms for the transactions between the company and related parties are similar to those for unrelated parties. The terms for the transactions between the company and related parties are similar to those for unrelated parties.	- 2 - - - -
1	Taichung Commercial Bank Securities Co., Ltd.	Taichung Commercial Bank Co., Ltd. Taichung Commercial Bank Co., Ltd.	b b	Right-of-use assets Lease liabilities	20,904 21,067	The terms for the transactions between the company and related parties are similar to those for unrelated parties. The terms for the transactions between the company and related parties are similar to those for unrelated parties.	- -
							(Continued)

116 -
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 September 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 nine months ended September 30, 2020 and 2019.
Note 5: Referring to transactions exceeding $10,000 thousand.

(Concluded)

117 -

TABLE 6

TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

INFORMATION OF MAJOR SHAREHOLDERS SEPTEMBER 30, 2020

Name of Major Shareholder	Shares	Shares
	Number of Shares	Percentage of Ownership (%)
China Man-Made Fiber Corporation Pan Asia Chemical Corporation	869,716,027 223,514,317	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.
118 -

AI assistant

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

52197_rns_2020-12-30_8395bf09-320b-401a-8211-a6268d724bac.pdf

Taichung Commercial Bank Co., Ltd. and Subsidiaries

INDEPENDENT AUDITORS’ REVIEW REPORT

Introduction

Scope of Review

Conclusion

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

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

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

e. Other significant accounting policies

1) Employee benefits

Retirement benefits

- Other long term employee benefits

3) Lease

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

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

13. NOTES DISCOUNTED AND LOANS, NET

For the nine months ended September 30, 2019

For the nine months ended September 30, 2019

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

a. Right-of-use assets

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

4) Period:

28. OTHER FINANCIAL LIABILITIES

29. PROVISIONS

1) Defined contribution plans

2) Defined benefit plans

3) Preferential interest on employees’ deposit plans

30. OTHER LIABILITIES

31. EQUITY

b. Capital surplus

32. NET PROFIT FROM CONTINUING OPERATIONS

e. Reversal of (impairment losses) on financial assets

Accrual rate

Amount

j. Depreciation and amortization expenses

33. INCOME TAXES RELATING TO CONTINUING OPERATIONS

c. Income tax assessments

34. EARNINGS PER SHARE

Net profit for the period

35. RELATED-PARTY TRANSACTIONS

Related Party

Relationship with the Group

a. Loans

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