TOWNCALL RURAL BANK, INC.

G/F Towncall Building, Maharlika Highway, Cabanatuan City

NOTES TO FINANCIAL STATEMENTS

As of December 31,2016

Note 1: Corporate Organization/Information

The Towncall Rural Bank, Inc. was registered with the Securities and Exchange Commission
(SEC) on November 6, 1997 with Registration No. A1997-20695. Consequently, on November 28,
1997, the bank was authorized by the Bangko Sentral ng Pilipinas (BSP) to engage in rural
banking business, thus the bank opened its doors to public on December 8, 1997.
The Banks registered head office address is located at G/F Towncall Bldg., Maharlika Highway,
Cabanatuan City, Nueva Ecija. The Bank has 5 branches located at the municipalities of:
Branch
1.) Guimba, Nueva Ecija
2.) Talavera, Nueva Ecija
3.) Rizal, Nueva Ecija
4.) Victoria, Tarlac
5.) Urdaneta, Pangasinan

The banks products and services are traditional deposits such as: savings deposit, certificate of
time deposits, special savings deposits and demand deposits. The bank also offers various types
of loans such as commercial and agricultural loans.

The financial statements of the bank were approved and authorized for issue by the Board of
Directors on March 15, 2017.

Status of Operation

The bank is in the development stage, expanding its operation through additional capital infusion.
The financial statements were prepared on a going concern basis. The going concern basis
assumes that the bank will continue in operation for the foreseeable future and will be able to
realize its assets and discharge its liabilities and commitments in the normal course of business.

Note 2 : Summary of Significant Accounting Policies

The accounting and reporting policies of TOWNCALL RURAL BANK, INC. conform with the
generally accepted accounting principles in the Philippines (Philippine GAAP) and with
accounting and reporting guidelines prescribed by the Bangko Sentral ng Pilipinas Manual of
Rules and Regulations. The bank also adopts the Philippine Financial Reporting Standards (PFRS)
and Philippine Accounting Standards (PAS) in preparing its financial statements. However, in
cases of conflicts between the BSP regulation and the PFRS/PAS, the BSP regulation prevails.

Basis of Measurement in the Preparation of Financial Statements

The financial statements of the bank are carried at historical costs net of any accumulated
depreciation/amortization and impairment losses, except for those items specifically provided to be
carried at fair value under PAS 39.

Statement of Compliance with PFRS

The financial statements of the bank have been prepared in compliance with Philippine Financial
Reporting Standards (PFRS).

Page 9 of 42

AFS 2016 _ Towncall Rural Bank, Inc.

TOWNCALL RURAL BANK, INC.

G/F Towncall Building, Maharlika Highway, Cabanatuan City

SCHEDULE OF PFRS AND PAS

As of December 31,2016

STANDARDS Adopted, Not Adopted

or Not Applicable
Philippine Financial Reporting Standards (PFRSs)

PFRS 1 First-time Adoption of Philippine Financial Reporting Standards Adopted

PFRS 2 Share-based Payments Not Applicable
PFRS 3 Business Combinations Not Applicable
PFRS 4 Insurance Contracts Not Applicable
PFRS 5 Non-current Assets Held for Sale and Discontinued Operations Adopted
PFRS 6 Exploration for and Evaluation of Mineral Resources Not Applicable
PFRS 7 Financial Instruments: Disclosures Adopted
PFRS 8 Operating Segments Not Applicable

Philippine Accounting Standards (PASs)

PAS 1 Presentation of Financial Statements Adopted

PAS 7 Cash Flow Statements Adopted
PAS 8 Accounting Policies, Changes in Accounting Estimates and Errors Adopted
PAS 10 Events after the Balance Sheet Date Adopted
PAS11 Construction Contracts Not Applicable
PAS 12 Income Taxes Adopted
PAS 16 Property, Plant and Equipment Adopted
PAS 17 Leases Adopted
PAS 18 Revenue Adopted
PAS 19 Employee Benefits Adopted
PAS 20 Accounting for Government Grants and Disclosure of Government Not Applicable
Assistance
PAS 21 The Effects of Changes in Foreign Exchange Rates Not Applicable
PAS 23 Borrowing Costs Adopted
PAS 24 Related Party Disclosures Adopted
PAS 26 Accounting and Reporting by Retirement Benefit Plans Adopted
PAS 27 Consolidated and Separate Financial Statements Not Applicable
PAS 28 Investments in Associates Not Applicable
PAS 29 Financial Reporting in Hyperinflationary Economies Not Applicable
PAS 30 Disclosures in the Financial Statements of Banks and Similar Adopted
Financial Institutions
PAS 31 Interests in Joint Venture Not Applicable
PAS 32 Financial Instruments: Presentation Adopted
PAS 33 Earnings per Share Adopted
PAS 34 Interim Financial Reporting Adopted
PAS 36 Impairment of Assets Adopted
PAS 37 Provisions, Contingent Liabilities and Contingent Assets Adopted
PAS 38 Intangible Assets Adopted
PAS 39 Financial Instruments: Recognition and Measurements Adopted
PAS 40 Investment Property Adopted
PAS 41 Agriculture Not Applicable

Page 8 of 42

AFS 2016 _ Towncall Rural Bank, Inc.

Below are the specific accounting policies and procedures adopted by the bank

PAS 1 Presentation of Financial Statements. The objective of the standard is to prescribe the
basis for presentation of general purpose financial statements of previous periods and with
the financial statements of other entities. To achieve this objective, the standard sets out
overall requirements for the presentation of financial statements, guidelines for their
structure and minimum requirements for their content. The recognition, measurement and
disclosure of specific transactions and other events are dealt with in other standards and
interpretations.

PAS 7 Cash Flow Statements. The objective of the standard is to require the provision of
information about the historical changes in cash and cash equivalents of an entity by means
of cash flow statement which classifies cash flow during the period from operating, investing
and financing activities.

PAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. The objective of
the standard is to prescribe the criteria for selecting and changing accounting policies,
together with the accounting treatment and disclosure of changes in accounting policies,
changes in accounting estimates and correction of errors. Tine standard is intended to
enhance the relevance and reliability of an entitys financial statements and the comparability
of those financial statements over time and with the financial statements of other entities.

PAS 10 Events After the Balance Sheet Date. The objective of the standard is to prescribe
when an entity should adjust its financial statements for events after the balance sheet date;
and the disclosures that an entity should give about the date when the financial statements
were authorized for issue and about events after the balance sheet date.

PAS 12 Income Taxes. The objective of the standard is to prescribe the accounting treatment
for income taxes. The major issue in this standard is on how to account for the current and
future tax consequence of: (a) the future recovery (settlement) of the carrying amount of
assets (liabilities) that are recognized in an entitys balance sheet; and (b) transactions and
other events of the current period that are recognized in an entitys financial statements.

PAS 16 Property, Plant & Equipment. This standard prescribes the accounting treatment
for property, plant and equipment so that users of the financial statements can discern
information about the entitys investment in its plant, property & equipment and the changes
in such investment. This standard provides the accounting for the recognition of assets, the
determination of their carrying amounts and the depreciation charges and impairment
losses to be recognized in relation to them.

PAS 17 Leases. Under this standard, an entity shall adopt the accounting for leases for
lessors and lessees including appropriate disclosures thereon. This standard requires an
entity to classify its lease contract whether an operating lease or finance lease. Proper
accounting treatment for operating and finance lease shall be governed under this standard.

PAS 18 Revenue. This standard provides the guidelines in determining when to recognize
revenue. Revenue is recognized when it is probable that future economic benefits will flow to
the entity and these benefits can be measured reliably. This standard identifies the
circumstances in which these criteria will be met and, therefore, revenue will be recognized.
It also provides practical guidelines on the application of these criteria.

PAS 19 Employee Benefits. The objective of this standard is to prescribe the accounting
and disclosure for employee benefits. The standard requires an entity to recognize: (a) a
liability when an employee has provided services in exchange for employee benefits to be
paid in the future; and (b) an expense when the entity consumes the economic benefit
arising from services provided by an employee in exchange for employee benefits.

PAS 23 Borrowing Costs. The objective of this Standard is to prescribe the accounting
treatment for borrowing cost. This standard generally requires the immediate expensing of
borrowing cost. However, the Standard permits, as an allowed alternative treatment, the
capitalization of borrowing costs that are directly attributable to the acquisition, construction
or production of a qualifying asset.

Page 10 of 42

AFS 2016 _ Towncall Rural Bank, Inc.

 4,675,000.00
4,675,000.00

Accrued Expenses and Other Liabilities

Carrying Values P 3,214,965.94 3,208,991.02
Fair Values 3,214,965.94 3,208,991.02
Since the fair values of financial assets and financial liabilities are not readily measurable due to lack of
available and/or published quotations, the fair values of the financial assets and financial liabilities are
simply measured through the yearly provisions of credit losses and periodic impairment testing.

Note 5 : Cash and Cash Equivalents

This account consists of following:

Due from Bangko Sentral ng Pilipinas represents the balance of the deposit account maintained against
deposit liabilities. This is the accumulated total required reserves paid by the bank against its deposit
liabilities.

Year 2016 Year 2015

Cash on Hand P 3,845,216.41 3,217,542.97

Checks and Other Cash Items 0.00 0.00
Due from Bangko Sentral ng Pilipinas 7,678,733.30 7,721,961.61
Due from Other Banks 119,726,686.15 91,298,840.67
Total P 131,250,635.86 102,238,345.25
The Due from Other Banks account consists of deposits to various depository banks which are used for
the banks operations. The breakdown of which are as follows:
Year 2016 Year 2015
Name of Bank
Amount % Amount %

Land Bank of the Philippines P 173,966.52 0.15% 128,999.24 0.14%

Rizal Commercial Banking Corp. 22,564,611.10 18.85% 22,045,156.97 24.15%
Banco de Oro 995,763.16 0.83% 1,000,299.64 1.10%
China Bank 3,074,798.50 2.57% 3,294,726.28 3.61%
China Bank Saving 3,436,895.22 2.87% 12,082,894.80 13.23%
Union Bank 116,582.96 0.10% 240,835.62 0.26%
Planters Bank 0.00 0.00% 2,584,999.11 2.83%
PBCom 5,073,472.22 4.24% 9,161,924.74 10.04%
Cabanatuan City Rural Bank 334,766.00 0.28% 325,381.72 0.36%
Security Bank 0.00 0.00% 0.00 0.00%

Bank of Commerce 27,319,905.36 22.82% 10,086,883.25 11.05%

Producers Bank 4,198,465.08 3.51% 1,764,941.69 1.93%
Philippine National Bank Savings 22,232,780.17 18.57% 0.00 0.00%
Philippine National Bank 671,930.54 0.56% 665,570.67 0.73%
Eastwest Bank 18,783,288.84 15.69% 17,205,106.87 18.84%

Maybank 10,749,460.48 8.98% 10,711,120.07 11.73%

Totals P 119,726,686.15 100.00% 91,298,840.67 88.27%

As of December 31, 2016, the banks SBL was registered at P18,413,950.00 and as per BSP Manual of
Regulations Sec X303, banks are exempted on the ceiling of single borrowers limit (SBL) of 25% on
deposit/investment placements to government banks, however excess of SBL on private banks are being
considered if the accounts are used for check clearing in connection with its business operations and as per
BSP Circular No. 734, Loans and other credit accommodations as well as deposits and usual guarantees b

Page 27 of 42

AFS 2016 _ Towncall Rural Bank, Inc.

Bills Payable P 4,760,000.00
Carrying 4,760,000.00
Values Fair
Values