Bank SinoPac and Subsidiaries

Consolidated Financial Statements for the Nine Months Ended September 30, 2017 and 2016 and Independent Auditors’ Review Report INDEPENDENT AUDITORS’ REVIEW REPORT

The Board of Directors and Stockholders Bank SinoPac

We have reviewed the accompanying consolidated balance sheets of Bank SinoPac and its subsidiaries (collectively referred to as the Group) as of September 30, 2017 and 2016, and the related consolidated statements of comprehensive income for the three months ended September 30, 2017 and 2016, nine months ended September 30, 2017 and 2016, as well as the consolidated statements of changes in equity and cash flows for the nine months ended September 30, 2017 and 2016. These consolidated financial statements are the responsibility of the Group’s management. Our responsibility is to issue a report on these consolidated financial statements based on our reviews.

We conducted our reviews in accordance with Statement of Auditing Standards No. 36 “Review of Financial Statements” issued by the Auditing Standards Committee of the Accounting Research and Development Foundation of the Republic of China. A review consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the Republic of China, the objective of which is the expression of an opinion regarding the consolidated financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with the Regulations Governing the Preparation of Financial Reports by Public Banks, the guidelines issued by the authority, and International Accounting Standard 34 “Interim Financial Reporting” endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

Deloitte & Touche Taipei, Taiwan Republic of China

November 10, 2017

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.

- 1 - BANK SINOPAC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (In Thousands of New Taiwan Dollars)

September 30, 2017 December 31, 2016 September 30, 2016 (Reviewed) (Audited) (Reviewed) ASSETS Amount % Amount % Amount %

CASH AND CASH EQUIVALENTS, NET (Notes 4 and 6) $ 20,267,223 1 $ 22,298,826 2 $ 16,854,767 1

DUE FROM THE CENTRAL BANK AND CALL LOANS TO OTHER BANKS, NET (Note 7) 91,786,055 6 142,406,843 9 136,587,344 9

FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (Notes 3, 4, 8 and 42) 64,513,122 5 59,381,207 4 47,041,541 3

SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL (Notes 4 and 10) 14,910,677 1 7,861,758 1 25,076,230 2

RECEIVABLES, NET (Notes 4, 5, 11, 42 and 43) 45,992,255 3 35,623,216 2 34,946,371 2

CURRENT TAX ASSETS (Notes 4, 30 and 42) 1,367,463 - 1,392,885 - 1,369,538 -

DISCOUNTS AND LOANS, NET (Notes 4, 5, 12, 42 and 43) 883,034,247 61 889,037,662 59 868,895,167 60

AVAILABLE-FOR-SALE FINANCIAL ASSETS, NET (Notes 4, 13, 14, 42, 43 and 48) 247,922,469 17 238,315,525 16 233,170,298 16

HELD-TO-MATURITY FINANCIAL ASSETS (Notes 4, 14, 43 and 48) 59,826,321 4 78,132,231 5 67,945,107 5

INVESTMENT ACCOUNTED FOR USING THE EQUITY METHOD (Notes 4 and 15) - - 54,579 - 48,493 -

OTHER FINANCIAL ASSETS, NET (Notes 4, 16, 42 and 43) 9,272,995 1 13,847,727 1 13,611,799 1

PROPERTY AND EQUIPMENT, NET (Notes 4, 17, 18 and 42) 9,024,282 1 9,134,981 1 9,388,429 1

INVESTMENT PROPERTY, NET (Notes 4, 17 and 18) 1,219,667 - 1,247,127 - 1,121,521 -

INTANGIBLE ASSETS, NET (Notes 4, 5, 17, 19 and 42) 1,280,455 - 1,887,792 - 1,901,432 -

DEFERRED TAX ASSETS (Notes 3, 4 and 30) 1,674,175 - 2,550,769 - 2,556,202 -

OTHER ASSETS, NET (Notes 4, 20 and 42) 5,444,516 - 2,480,195 - 1,770,935 -

TOTAL $ 1,457,535,922 100 $ 1,505,653,323 100 $ 1,462,285,174 100

LIABILITIES AND EQUITY

DEPOSITS FROM THE CENTRAL BANK AND BANKS (Notes 21 and 42) $ 31,626,425 2 $ 29,854,651 2 $ 39,597,583 3

FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS (Notes 3, 8 and 42) 19,150,165 2 21,084,744 2 12,113,957 1

DERIVATIVE FINANCIAL LIABILITIES FOR HEDGING (Notes 4, 9 and 12) - - 19,705 - 45,302 -

SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE (Notes 4, 8, 10, 13, 14, 22 and 42) 28,665,181 2 1,836,801 - 6,323,103 -

PAYABLES (Notes 23, 28, 38 and 42) 14,294,124 1 16,884,370 1 15,122,059 1

CURRENT TAX LIABILITIES (Notes 4, 30 and 42) 377,731 - 564,967 - 375,449 -

DEPOSITS AND REMITTANCES (Notes 24 and 42) 1,173,734,726 81 1,255,712,491 83 1,212,347,892 83

BANK DEBENTURES (Notes 4, 25 and 42) 45,568,658 3 41,779,336 3 40,359,161 3

OTHER FINANCIAL LIABILITIES (Notes 26 and 42) 13,214,033 1 12,369,859 1 11,348,499 1

PROVISIONS (Notes 3, 4, 27 and 28) 2,641,227 - 2,849,446 - 2,887,617 -

DEFERRED TAX LIABILITIES (Notes 4 and 30) 743,137 - 960,723 - 1,003,948 -

OTHER LIABILITIES (Notes 29 and 42) 3,849,886 - 2,014,325 - 1,586,932 -

Total liabilities 1,333,865,293 92 1,385,931,418 92 1,343,111,502 92

EQUITY Share capital Common shares 86,061,159 6 83,954,571 5 83,954,571 6 Capital surplus Additional paid-in capital in excess of par 4,001,872 - 4,001,872 - 4,001,872 - Capital surplus from business combination 8,076,524 1 8,076,524 1 8,076,524 1 Others 69,244 - 69,244 - 69,244 - Total capital surplus 12,147,640 1 12,147,640 1 12,147,640 1 Retained earnings Legal reserve 18,712,695 1 16,656,395 1 16,656,395 1 Special reserve 457,565 - 266,120 - 266,120 - Unappropriated earnings 6,057,067 - 6,854,333 1 5,425,961 - Total retained earnings 25,227,327 1 23,776,848 2 22,348,476 1 Other equity 234,503 - (157,154) - 722,985 -

Total equity 123,670,629 8 119,721,905 8 119,173,672 8

TOTAL $ 1,457,535,922 100 $ 1,505,653,323 100 $ 1,462,285,174 100

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

- 2 - BANK SINOPAC 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 Nine Months Ended September 30 2017 2016 2017 2016 Amount % Amount % Amount % Amount %

INTEREST REVENUE $ 6,311,280 122 $ 6,165,519 110 $ 18,967,750 108 $ 18,606,122 106

INTEREST EXPENSE 2,646,583 51 2,391,503 43 7,848,938 45 7,526,779 43

NET INTEREST (Notes 4, 32 and 42) 3,664,697 71 3,774,016 67 11,118,812 63 11,079,343 63

NET REVENUES OTHER THAN INTEREST (Note 4) Commission and fee revenues, net (Notes 33 and 42) 1,315,851 25 1,278,369 23 3,938,690 23 4,439,690 25 Gains on financial assets and liabilities at fair value through profit or loss (Notes 34 and 42) 511,464 10 382,489 7 1,881,667 11 1,462,848 8 Realized gains on available-for-sale financial assets (Note 35) 3,448 - 4,378 - 7,591 - 2,582 - Foreign exchange gains, net 241,454 5 98,809 2 1,025,426 6 249,154 2 Reversal of impairment on assets (Notes 5 and 36) 95,474 2 64,788 1 37,795 - 79,883 1 Share of gains (losses) of associates (Note 15) 2 - (829 ) - (3,197 ) - 851 - Loss on disposal of subsidiary (Note 50) (657,901 ) (13 ) - - (657,901 ) (4 ) - - Other noninterest net revenues (Notes 37 and 42) 18,299 - 24,214 - 219,454 1 185,375 1

Total net revenues other than interest 1,528,091 29 1,852,218 33 6,449,525 37 6,420,383 37

TOTAL NET REVENUES 5,192,788 100 5,626,234 100 17,568,337 100 17,499,726 100

ALLOWANCE FOR DOUBTFUL ACCOUNTS AND GUARANTEES (Notes 4, 6, 7, 11, 12, 16 and 20) 140,802 3 532,514 10 343,641 2 467,044 2

OPERATING EXPENSES Employee benefits (Notes 4, 28 and 38) 1,925,154 37 1,989,877 35 6,211,113 35 6,259,991 36 Depreciation and amortization (Notes 4 and 39) 169,501 3 186,866 3 518,806 3 553,866 3 Others (Notes 40 and 42) 1,233,537 24 1,266,516 23 3,518,799 20 3,828,164 22

Total operating expenses 3,328,192 64 3,443,259 61 10,248,718 58 10,642,021 61

INCOME BEFORE INCOME TAX 1,723,794 33 1,650,461 29 6,975,978 40 6,390,661 37

INCOME TAX EXPENSE (Notes 4 and 30) 140,399 3 252,139 4 918,911 5 964,700 6

NET INCOME 1,583,395 30 1,398,322 25 6,057,067 35 5,425,961 31 (Continued)

- 3 - BANK SINOPAC 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 Nine Months Ended September 30 2017 2016 2017 2016 Amount % Amount % Amount % Amount %

OTHER COMPREHENSIVE INCOME (LOSS) Items that will not be reclassified subsequently to profit or loss Changes in the fair value attributable to changes in credit risk of financial liabilities designated as at fair value through profit or loss $ (16,510 ) - $ - - $ (6,621 ) - $ - - Items that may be reclassified subsequently to profit or loss Exchange differences on translating foreign operations 432,305 8 (542,156 ) (10 ) (643,980 ) (4 ) (997,698 ) (6 ) Unrealized gains on available-for-sale financial assets 159,925 3 52,513 1 936,921 5 468,234 3 Income tax relating to items that may be reclassified subsequently to profit or loss (Notes 4 and 30) (72,390 ) (1 ) 91,933 2 105,337 1 159,201 1 Items that may be reclassified subsequently to profit or loss 519,840 10 (397,710 ) (7 ) 398,278 2 (370,263 ) (2 )

Other comprehensive income for the year, net of income tax 503,330 10 (397,710 ) (7 ) 391,657 2 (370,263 ) (2 )

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD $ 2,086,725 40 $ 1,000,612 18 $ 6,448,724 37 $ 5,055,698 29

EARNINGS PER SHARE (Note 41) Basic $0.18 $0.16 $0.70 $0.64

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

- 4 - BANK SINOPAC AND SUBSIDIARIES

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

Other Equity Changes in the Fair Value Attributable to Changes in the Credit Risk of Financial Exchange Unrealized Gain Liabilities Differences on (Loss) on Designated as at Translating Available-for- Fair Value Retained Earnings (Notes 4 and 31) Foreign sale Financial Through Profit Common Shares Capital Surplus Unappropriated Operations Assets or Loss (Note 31) (Notes 4 and 31) Legal Reserve Special Reserve Earnings Total (Notes 4 and 31) (Notes 4 and 31) (Notes 4 and 31) Total Total Equity

BALANCE AT JANUARY 1, 2016 $ 74,463,604 $ 10,480,973 $ 13,903,936 $ 266,120 $ 8,910,093 $ 23,080,149 $ 1,027,235 $ 66,013 $ - $ 1,093,248 $ 109,117,974

Appropriation and distribution of retained earnings generated in 2015 Legal reserve - - 2,752,459 - (2,752,459) ------Stock dividends - common stock 6,157,634 - - - (6,157,634) (6,157,634) - - - - -

Net profit for the nine months ended September 30, 2016 - - - - 5,425,961 5,425,961 - - - - 5,425,961

Other comprehensive (loss) income for the nine months ended September 30, 2016, net of income tax ------(828,090) 457,827 - (370,263) (370,263)

Total comprehensive (loss) income for the nine months ended September 30, 2016 - - - - 5,425,961 5,425,961 (828,090) 457,827 - (370,263) 5,055,698

Issue of common shares for cash 3,333,333 1,666,667 ------5,000,000

BALANCE AT SEPTEMBER 30, 2016 $ 83,954,571 $ 12,147,640 $ 16,656,395 $ 266,120 $ 5,425,961 $ 22,348,476 $ 199,145 $ 523,840 $ - $ 722,985 $ 119,173,672

BALANCE AT JANUARY 1, 2017 $ 83,954,571 $ 12,147,640 $ 16,656,395 $ 266,120 $ 6,854,333 $ 23,776,848 $ 651,532 $ (808,686) $ - $ (157,154) $ 119,721,905

Appropriation and distribution of retained earnings generated in 2016 Legal reserve - - 2,056,300 - (2,056,300) ------Special reserve - - - 191,445 (191,445) ------Cash dividends - common stock - - - - (2,500,000) (2,500,000) - - - - (2,500,000) Stock dividends - common stock 2,106,588 - - - (2,106,588) (2,106,588) - - - - -

Net profit for the nine months ended September 30, 2017 - - - - 6,057,067 6,057,067 - - - - 6,057,067

Other comprehensive (loss) income for the nine months ended September 30, 2017, net of income tax ------(534,504) 932,782 (6,621) 391,657 391,657

Total comprehensive (loss) income for the nine months ended September 30, 2017 - - - - 6,057,067 6,057,067 (534,504) 932,782 (6,621) 391,657 6,448,724

BALANCE AT SEPTEMBER 30, 2017 $ 86,061,159 $ 12,147,640 $ 18,712,695 $ 457,565 $ 6,057,067 $ 25,227,327 $ 117,028 $ 124,096 $ (6,621) $ 234,503 $ 123,670,629

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

- 5 - BANK SINOPAC AND SUBSIDIARIES

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

For the Nine Months Ended September 30 2017 2016

CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax $ 6,975,978 $ 6,390,661 Adjustments for: Depreciation expenses 344,977 368,092 Amortization expenses 173,829 185,774 Allowance for doubtful accounts 905,563 940,007 Interest expenses 7,848,938 7,526,779 Interest revenues (18,967,750) (18,606,122) Dividend revenues (96,584) (111,702) Net change in provisions for guarantee liabilities (3,776) 745 Net change in other provisions (1,257) (5,069) Share of losses (gains) of associates 3,197 (851) (Gains) losses on disposal or retirement of property and equipment (22,858) 4,148 Gains on disposal of investments (3,556) (672) Reversal of impairment loss on financial assets (37,795) (79,883) Losses on disposal of subsidiary 657,901 - Changes in operating assets and liabilities Decrease (increase) in due from the Central Bank and call loans to other banks 11,548,531 (11,256,476) (Increase) decrease in financial assets at fair value through profit or loss (4,396,931) 20,322,197 (Increase) decrease in receivables (6,928,869) 42,985,731 (Increase) decrease in discounts and loans (15,226,791) 4,619,781 Increase (decrease) in deposits from the Central Bank and banks 1,827,364 (21,732,375) Decrease in financial liabilities at fair value through profit or loss (3,298,239) (14,940,562) Decrease in payables (1,211,945) (396,715) (Decrease) increase in deposits and remittances (56,411,498) 53,422,503 Decrease in provisions for employee benefits (81,792) (121,795) Net cash (used in) generated from operations (76,403,363) 69,514,196 Interest received 19,726,498 19,405,862 Dividend received 96,258 107,789 Interest paid (7,834,142) (7,840,269) Income tax paid (936,910) (680,819)

Net cash (used in) generated from operating activities (65,351,659) 80,506,759

CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of available-for-sale financial assets (1,473,797,992) (1,538,497,001) Proceeds from disposal of available-for-sale financial assets 1,461,097,165 1,498,488,194 Acquisition of non-active market debt instruments - (6,045,714) Proceeds from repayments of non-active market debt instruments 4,885,276 2,053,516 (Continued)

- 6 - BANK SINOPAC AND SUBSIDIARIES

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

For the Nine Months Ended September 30 2017 2016

Acquisition of held-to-maturity financial assets $ (12,799,886) $ (8,688,669) Proceeds from repayments of held-to-maturity financial assets 29,411,006 9,294,573 Acquisition of unquoted equity instruments (6,623) (7,390) Proceeds from disposal of unquoted equity instruments 94 21,336 Acquisition of investment using the equity method - (11,020) Disposal of subsidiary 4,852,307 - Acquisition of property and equipment (323,497) (334,019) Proceeds from disposal of property and equipment 25,085 - (Increase) decrease in guarantee deposits (2,657,312) 2,669,580 Acquisition of intangible assets (46,648) (65,498) Acquisition of investment properties (5,108) (7,300) (Increase) decrease in other financial assets (2,800,579) 3,706,971 Increase in other assets (406,852) (202,412)

Net cash generate from (used in) investing activities 7,426,436 (37,624,853)

CASH FLOWS FROM FINANCING ACTIVITIES Bank debentures issued 5,990,000 2,530,000 Repayment of bank debentures on maturity (2,200,000) (5,600,000) Increase in securities sold under agreements to repurchase 26,828,380 1,148,921 Increase in the financial liabilities specified as fair value through profit or loss 1,371,114 - Increase (decrease) in other financial liabilities 2,122,954 (2,606,142) Increase (decrease) in other liabilities 830,063 (233,242) Distribution of cash dividends (2,500,000) - Proceeds from issue of common shares - 5,000,000

Net cash generated from financing activities 32,442,511 239,537

EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH HELD IN FOREIGN CURRENCIES (325,632) 650,785

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (25,808,344) 43,772,228

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD 122,557,609 73,041,268

CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD $ 96,749,265 $ 116,813,496 (Continued)

- 7 - BANK SINOPAC AND SUBSIDIARIES

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

Reconciliation of the amounts in the consolidated statements of cash flows with the equivalent items reported in the consolidated balance sheets as of September 30, 2017 and 2016:

September 30 2017 2016

Cash and cash equivalents in consolidated balance sheets $ 20,267,223 $ 16,854,767 Due from the Central Bank and call loans to other banks reclassified as cash and cash equivalents under IAS 7 “Statements of Cash Flow” 61,571,365 74,882,499 Securities purchased under agreement to resell reclassified as cash and cash equivalents under IAS 7 “Statements of Cash Flow” 14,910,677 25,076,230 Cash and cash equivalents in consolidated statements of cash flows $ 96,749,265 $ 116,813,496

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

- 8 - BANK SINOPAC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise) (Reviewed, Not Audited)

1. ORGANIZATION

August 8, 1991 Bank SinoPac (the Bank) obtained government approval to incorporate.

January 28, 1992 The Bank started operations.

May 9, 2002 The Bank swap shares with SinoPac Securities Corporation and SinoPac Securities Co., Ltd. (the SPS) to establish SinoPac Financial Holdings Company Limited (the SPH), a financial holding company, resulting in the Bank becoming an unlisted wholly owned subsidiary of SPH, the ultimate parent company of SPH.

December 26, 2005 SPH finished the merger with International Bank of Taipei Co., Ltd. (IBT), through a 100% share swap.

May 8, 2006 The boards of directors of IBT resolved to transfer credit card business and related assets and liabilities to SinoPac Card Services Co., Ltd. (SinoPac Card). The transaction has been approved by the authorities on June 22, 2006 and the assets have been transferred at the book value of $5,171,080 on August 4, 2006.

November 13, 2006 The preliminary effective date of the share swap and merger. The Bank acquired the assets and liabilities of IBT through a share swap at ratio of 1.175 shares of the Bank to swap for 1 share of IBT.

June 1, 2009 The Bank’s cash merger with SinoPac Card took effect, with this merger amounting to $3,873,675. Under this merger, the Bank was the surviving entity.

November 1, 2015 The Bank assumed all of the assets and liabilities of the Ho Chi Minh City Branch of Far East National Bank and renamed this branch Bank SinoPac, Ho Chi Minh City Branch. The transaction price was US$28,540 thousand.

The Bank’s ultimate parent and controller is SinoPac Holdings, which holds 100% common shares of the Bank.

The functional currency of the Bank is the New Taiwan dollar. The financial statements are presented in New Taiwan dollars.

For the information of consolidated entities, please refer to Note 4.

2. APPROVAL OF FINANCIAL STATEMENTS

The consolidated financial statements were approved by the board of directors on November 10, 2017.

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

a. Initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Public Banks and the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) (collectively referred to as IFRSs) endorsed and issued into effect by the Financial Supervisory Commission (FSC)

Except for the following, whenever applied, the initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Public Banks and the IFRSs endorsed and issued into effect by the FSC would not have any material impact on the Group’s accounting policies:

Amendments to the Regulations Governing the Preparation of Financial Reports by Public Banks

The amendments include additions of several accounting items and requirements for disclosures of impairment of non-financial assets as a consequence of the IFRSs endorsed and issued into effect by the FSC. In addition, as a result of the post implementation review of IFRSs in Taiwan, the amendments also include emphasis on certain recognition and measurement considerations and add requirements for disclosures of related party transactions and goodwill.

The amendments stipulate that other companies or institutions of which the chairman of the board of directors or president serves as the chairman of the board of directors or the president, or is the spouse or second immediate family of the chairman of the board of directors or president of the Group are deemed to have a substantive related party relationship, unless it can be demonstrated that no control, joint control, or significant influence exists.

The amendments also require additional disclosure if there is a significant difference between the actual operation after business combination and the expected benefit on acquisition date.

When the amendments are applied retrospectively from January 1, 2017, the disclosures of related party transactions and impairment of goodwill are enhanced. Refer to Note 19 and Note 42 for related disclosures.

b. The Regulations Governing the Preparation of Financial Reports by Public Banks and the IFRSs endorsed by the FSC for application starting from 2018

Effective Date New IFRSs Announced by IASB (Note 1)

Annual Improvements to IFRSs 2014-2016 Cycle Note 2 Amendment to IFRS 2 “Classification and Measurement of January 1, 2018 Share-based Payment Transactions” Amendment to IFRS 4 “Applied to IFRS 9 Financial Instruments January 1, 2018 under IFRS 4 “Insurance Contracts” IFRS 9 “Financial Instruments” January 1, 2018 Amendments to IFRS 9 and IFRS 7 “Mandatory Effective Date of January 1, 2018 IFRS 9 and Transition Disclosures” IFRS 15 “Revenue from Contracts with Customers” January 1, 2018 Amendments to IFRS 15 “Clarifications to IFRS 15 Revenue from January 1, 2018 Contracts with Customers” Amendment to IAS 7 “Disclosure Initiative” January 1, 2017 Amendments to IAS 12 “Recognition of Deferred Tax Assets for January 1, 2017 Unrealized Losses” Amendments to IAS 40 “Transfers of Investment Property” January 1, 2018 IFRIC 22 “Foreign Currency Transactions and Advance January 1, 2018 Consideration”

- 10 -

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

Note 2: The amendment to IFRS 12 is retrospectively applied for annual periods beginning on or after January 1, 2017; the amendment to IAS 28 is retrospectively applied for annual periods beginning on or after January 1, 2018.

1) IFRS 9 “Financial Instruments”

Recognition, measurement and impairment of financial assets

With regards to financial assets, all recognized financial assets that are within the scope of IAS 39 “Financial Instruments: Recognition and Measurement” are subsequently measured at amortized cost or fair value. Under IFRS 9, the requirement for the classification of financial assets is stated below.

For the Group’s debt instruments that have contractual cash flows that are solely payments of principal and interest on the principal amount outstanding, their classification and measurement are as follows:

a) For debt instruments, if they are held within a business model whose objective is to collect the contractual cash flows, the financial assets are measured at amortized cost and are assessed for impairment continuously with impairment loss recognized in profit or loss, if any. Interest revenue is recognized in profit or loss by using the effective interest method;

b) For debt instruments, if they are held within a business model whose objective is achieved by both the collecting of contractual cash flows and the selling of financial assets, the financial assets are measured at fair value through other comprehensive income (FVTOCI) and are assessed for impairment. Interest revenue is recognized in profit or loss by using the effective interest method, and other gain or loss shall be recognized in other comprehensive income, except for impairment gains or losses and foreign exchange gains and losses. When the debt instruments are derecognized or reclassified, the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss.

Except for the above, all other financial assets are measured at fair value through profit or loss. However, the Group may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognized in profit or loss. No subsequent impairment assessment is required, and the cumulative gain or loss previously recognized in other comprehensive income cannot be reclassified from equity to profit or loss.

The Group analyzed the facts and circumstances of its financial assets that exist at September 30, 2017 and performed a preliminary assessment of the impact of IFRS 9 on the classification and measurement of financial assets. Under IFRS 9:

a) Listed shares, emerging market shares, and unlisted shares classified as available-for-sale will be classified as at fair value through profit or loss or designated as at fair value through other comprehensive income and the fair value gains or losses accumulated in other equity will be transferred directly to retained earnings instead of being reclassified to profit or loss on disposal. Besides, unlisted shares measured at cost will be measured at fair value instead;

b) Mutual funds classified as available-for-sale will be classified as at fair value through profit or loss because the contractual cash flows are not solely payments of principal and interest on the principal outstanding and they are not equity instruments;

- 11 - c) Debt investments classified as held-to-maturity financial assets or debt investments with no active market and measured at amortized cost will be classified as measured at amortized cost under IFRS 9 because on initial recognition, the contractual cash flows that are solely payments of principal and interest on the principal outstanding and these investments are held within a business model whose objective is to collect the contractual cash flows/will be classified as at fair value through other comprehensive income under IFRS 9, because on initial recognition, the contractual cash flows that are solely payments of principal and interest on the principal outstanding and these investments are held within a business model whose objective is achieved both by collecting the contractual cash flows and selling the financial assets/will be classified as at fair value through profit or loss, because on initial recognition, the contractual cash flows that are solely payments of principal and interest on the principal outstanding, but the objective of the Group’s business model is not to collect the contractual cash flows neither is achieved both by collecting the contractual cash flows and selling the financial assets/will be classified as at fair value through profit or loss, because on initial recognition, the contractual cash flows that are not solely payments of principal and interest on the principal outstanding.

IFRS 9 requires impairment loss on financial assets to be recognized by using the “Expected Credit Losses Model”. The loss allowance is required for financial assets measured at amortized cost, investments in debt instruments measured at FVTOCI, lease receivables, contract assets arising from IFRS 15 “Revenue from Contracts with Customers”, certain written loan commitments and financial guarantee contracts. A loss allowance for the 12-month expected credit losses is required for a financial asset if its credit risk has not increased significantly since initial recognition. A loss allowance for full lifetime expected credit losses is required for a financial asset if its credit risk has increased significantly since initial recognition and is not low. However, a loss allowance for full lifetime expected credit losses is required for trade receivables that do not constitute a financing transaction.

For purchased or originated credit-impaired financial assets, the Group takes into account the expected credit losses on initial recognition in calculating the credit-adjusted effective interest rate. Subsequently, any changes in expected losses are recognized as a loss allowance with a corresponding gain or loss recognized in profit or loss.

In relation to the debt instrument investments and the financial guarantee contracts, the Group will assess whether there has been a significant increase in the credit risk to determine whether to recognize 12-month or lifetime expected credit losses. In general, the Group anticipates that the application of the expected credit loss model of IFRS 9 will result in earlier recognition of credit losses for financial assets.

The Group elects not to restate prior periods when applying the requirements for the recognition, measurement and impairment of financial assets under IFRS 9 with the cumulative effect of the initial application recognized at the date of initial application and will provide the disclosures related to the classification and the adjustment information upon initial application of IFRS 9. Furthermore, the Group will provide disclosure of the differences in amounts if the Group continued to apply the existing accounting treatments in 2018.

Hedge accounting

The main changes in hedge accounting amended the application requirements for hedge accounting to better reflect the entity’s risk management activities. Compared with IAS 39, the main changes include: (1) enhancing types of transactions eligible for hedge accounting, specifically broadening the risks eligible for hedge accounting of non-financial items; (2) changing the way hedging derivative instruments are accounted for to reduce profit or loss volatility; and (3) replacing retrospective effectiveness assessment with the principle of economic relationship between the hedging instrument and the hedged item.

- 12 -

2) Amendments to IAS 12 “Recognition of Deferred Tax Assets for Unrealized Losses”

The amendment clarifies that the difference between the carrying amount of the debt instrument measured at fair value and its tax base gives rise to a temporary difference, even though there are unrealized losses on that asset, irrespective of whether the Group expects to recover the carrying amount of the debt instrument by sale or by holding it and collecting contractual cash flows.

In addition, in determining whether to recognize a deferred tax asset, the Group should assess a deductible temporary difference in combination with all of its other deductible temporary differences, unless the tax law restricts the utilization of losses to deduction against income of a specific type, in which case, a deductible temporary difference is assessed in combination only with other deductible temporary differences of the appropriate type. The amendment also stipulates that, when determining whether to recognize a deferred tax asset, the estimate of probable future taxable profit may include some of the Group’s assets for more than their carrying amount if there is sufficient evidence that it is probable that the Group will achieve this, and that the estimate for future taxable profit should exclude tax deductions resulting from the reversal of deductible temporary differences.

In assessing deferred tax asset, the Group currently assumes it will recover the asset at its carrying amount when estimating probable future taxable profit; the amendment will be applied retrospectively in 2018.

Except for the above impact, as of the date the consolidated financial statements were authorized for issue, the Group is continuously assessing the possible impact that the application of other standards and interpretations will have on the Group’s financial position and financial performance, and will disclose the relevant impact when the assessment is completed. c. New IFRSs in issue but not yet endorsed and issued into effect by the FSC

Effective Date New IFRSs Announced by IASB (Note)

Amendments to IFRS 9 “Prepayment Features with Negative January 1, 2019 Compensation” Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets To be determined by IASB between an Investor and its Associate or Joint Venture” IFRS 16 “Leases” January 1, 2019 IFRS 17 “Insurance Contracts” January 1, 2021 Amendments to IAS 28 “Long-term Interests in Associates and Joint January 1, 2019 Ventures” IFRIC 23 “Uncertainty Over Income Tax Treatments” January 1, 2019

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

IFRS 16 “Leases”

IFRS 16 sets out the accounting standards for leases that will supersede IAS 17 and a number of related interpretations.

- 13 - Under IFRS 16, if the Group is a lessee, it shall recognize right-of-use assets and lease liabilities for all leases on the consolidated balance sheets except for low-value and short-term leases. The Group may elect to apply the accounting method similar to the accounting for operating lease under IAS 17 to the low-value and short-term leases. On the consolidated statements of comprehensive income, the Group should present the depreciation expense charged on the right-of-use asset separately from interest expense accrued on the lease liability; interest is computed by using effective interest method. On the consolidated statements of cash flows, cash payments for the principal portion of the lease liability are classified within financing activities; cash payments for interest portion are classified within operating activities.

The application of IFRS 16 is not expected to have a material impact on the accounting of the Group as lessor.

When IFRS 16 becomes effective, the Group may elect to apply this Standard either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of the initial application of this Standard recognized at the date of initial application.

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

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Statement of Compliance

The consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Public Banks, the guidelines issued by the authority, and IAS 34 “Interim Financial Reporting” as endorsed and issued into effect by the FSC. Disclosure information included in the consolidated financial statements is less than the disclosure information required in a complete set of annual financial statements.

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 properties and equipment that are chosen the deemed cost as exemptions by IFRS 1 through the Regulations Governing the Preparation of Financial Reports by Public Banks on the IFRS transition date. Historical cost is generally based on the fair value of the consideration given in exchange for assets.

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

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

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

c. Level 3 inputs are unobservable inputs for the asset or liability.

- 14 - Classification of Current and Non-current Assets and Liabilities

Since the operating cycle in the Banking industry cannot be reasonably identified, the accounts included in the Group’s consolidated financial statements were not classified as current or noncurrent. Nevertheless, accounts were properly categorized in accordance with the nature of each account and sequenced by their liquidity. Please refer to Note 46 for the maturity analysis of assets and liabilities.

Basis of Consolidation

The consolidated financial statements incorporate the financial statements of the Bank and the entities controlled by the Bank (i.e., its subsidiaries). Control is achieved when the Bank has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

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

All intra-group transactions, balances, income and expenses are eliminated in full upon consolidation related information please refer to Table 5.

The consolidated entities were as follows:

% of Ownership September 30, December 31, September 30, Investor Investee Main Business 2017 2016 2016 Remark

Bank SinoPac SinoPac Bancorp Holding company - 100 100 Note 1 SinoPac Capital Limited (H.K.) Credit and investment service 100 100 100 SinoPac Life Insurance Agent Co., Life insurance agent 100 100 100 Note 3 Ltd. SinoPac Property Insurance Agent Property insurance agent 100 100 100 Note 3 Co., Ltd. Bank SinoPac (China) Ltd. Commercial bank 100 100 100 SinoPac Bancorp Far East National Bank Commercial bank - 100 100 Note 1 SinoPac Capital Limited SinoPac Capital (B.V.I.) Ltd. Financial advisory 100 100 100 Note 2 (H.K.) SinoPac Insurance Brokers Ltd. Insurance brokerage 100 100 100 Note 2 SinoPac Capital (B.V.I.) RSP Information Service Company General trading and internet 100 100 100 Note 2 Ltd. Limited service

Note 1: The board of directors of Bank SinoPac approved to sell 100% equity of SinoPac Bancorp on July 8, 2016. The case was approved by FSC on July 6, 2017, and the settlement was completed on July 14, 2017 (US time). Relevant information please refer to Note 50.

Note 2: To adjust the investment structure of the Group, the board of directors of Bank SinoPac approved the purchase of 100% shares of SinoPac Insurance Brokers Ltd., a subsidiary of SinoPac Capital Limited (H.K.). The board of Bank SinoPac also resolved to transfer 100% shares of RSP Information Service Company Limited, a subsidiary of SinoPac Capital (B.V.I.) Ltd., to SinoPac Venture Capital Co., Ltd. Upon completion of the transfer, SinoPac Capital (B.V.I.) Ltd. will be under the liquidation process. The Bank obtained 100% equity of SinoPac Insurance Broker Ltd., on November 1, 2017.

Note 3: Under legal permission, a bank may also operate within the insurance industry. The board of directors of the Bank has planned to apply for the qualification to operate as an insurance agency and for the rights to merge, through 100% shareholdings, SinoPac Life Insurance Agent Co., Ltd. and SinoPac Property Insurance Agent Co., Ltd., which are both subsidiaries of the Bank. After the merger, the Bank will be the surviving company, and the two subsidiaries will be liquidated, and hence the Bank can achieve the integration of resources, reduced operating costs and improved operational efficiency.

- 15 - Other Significant Accounting Policies

Please refer to the Group’s consolidated financial statements for the year ended December 31, 2016 for the significant accounting policies, except for those described below.

a. Retirement benefits

The pension cost of the period adopts the pension cost rate valuated through actuarial valuation based on the beginning to the end of the previous period. Adjustments might be applied due to significant market volatility, significant reduce or pay off, or other significant events occurred after the end of the period.

b. Income tax

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.

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

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

Please refer to the Group’s consolidated financial statements for the year ended December 31, 2016 for the critical accounting judgments and key sources of estimation uncertainty.

6. CASH AND CASH EQUIVALENTS, NET

September 30, December 31, September 30, 2017 2016 2016

Cash on hand $ 6,600,645 $ 7,314,208 $ 7,080,888 Due from other banks 12,551,958 10,075,062 7,917,255 Notes and checks for clearing 1,117,734 4,911,764 1,857,313 20,270,337 22,301,034 16,855,456 Less: Allowance for credit losses 3,114 2,208 689

$ 20,267,223 $ 22,298,826 $ 16,854,767

Under the Guidelines on the Management of Country Risk by Banking Financial Institutions issued by the China Banking Regulatory Commission for countries or regions with low risks, Bank SinoPac (China) recognized the country risk provision at 0.5% of the due from other banks and call loans to other banks (Note 7).

- 16 - Cash and cash equivalents as of September 30, 2017, December 31, 2016 and September 30, 2016 as shown in the consolidated statements of cash flows can be reconciled to the related items in the consolidated balance sheets as follows:

September 30, December 31, September 30, 2017 2016 2016

Cash and cash equivalents in consolidated balance sheets $ 20,267,223 $ 22,298,826 $ 16,854,767 Due from the Central Bank and call loans to other banks that meet the definition of cash and cash equivalents under IAS 7 “Statement of Cash Flows” 61,571,365 92,397,025 74,882,499 Securities purchased under agreements to resell that meet the definition of cash and cash equivalents under IAS 7 “Statement of Cash Flows” 14,910,677 7,861,758 25,076,230

Cash and cash equivalents in consolidated statements of cash flows $ 96,749,265 $ 122,557,609 $ 116,813,496

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

September 30, December 31, September 30, 2017 2016 2016

Call loans to banks $ 52,859,381 $ 97,544,068 $ 94,343,264 Trade finance advance - interbank 2,679,688 807,157 390,906 Deposit reserve - checking accounts 7,839,494 12,626,490 8,553,328 Due from the Central Bank - interbank settlement funds 1,500,574 808,385 800,474 Deposit reserve - demand accounts 26,155,098 26,135,051 25,921,029 Deposit reserve - foreign currencies 760,765 749,172 899,854 Due from the U.S. Federal Reserve Bank - 3,743,471 5,678,489 91,795,000 142,413,794 136,587,344 Less: Allowance for credit losses 8,945 6,951 -

$ 91,786,055 $ 142,406,843 $ 136,587,344

Under a directive issued by the Central Bank of the ROC, New Taiwan dollar (NTD) - denominated deposit reserves are determined monthly at prescribed rates based on average balances of customers’ NTD-denominated deposits. Deposit reserve - demand account should not be used, except for adjusting the deposit reserve account monthly. In addition, the foreign-currency deposit reserves are determined at prescribed rates based on the balances of foreign-currency deposits. These reserves can be withdrawn momentarily anytime at no interest.

Under the relevant provisions issued by the People’s Bank of China, Bank SinoPac (China) showed deposit reserves in proportion on the basis of deposit and margin account balances at the end of the months.

- 17 - 8. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

September 30, December 31, September 30, 2017 2016 2016

Held-for-trading financial assets Government bonds $ 28,152,252 $ 24,571,176 $ 24,319,930 Bank debentures 10,675,232 6,661,872 5,848,540 Corporate bonds 5,006,152 3,801,988 3,477,520 Stocks 1,671,850 - 32,303 Currency swap contracts and hybrid FX swap structured instruments 14,020,522 17,459,261 7,287,440 Interest rate swap contracts 1,777,807 2,107,594 1,943,338 Forward contracts 442,079 1,637,559 469,586 Cross-currency swap contract 207,295 1,043,981 747,359 Others 1,284,287 643,082 673,774 Adjustment for change in value of held-for-trading financial assets 379,612 (634,895) 72,608 63,617,088 57,291,618 44,872,398 Financial assets designated as at fair value through profit or loss Convertible bonds 891,806 2,086,097 2,167,327 Adjustment for change in value of financial assets designated as at fair value through profit or loss 4,228 3,492 1,816 896,034 2,089,589 2,169,143

$ 64,513,122 $ 59,381,207 $ 47,041,541

Held-for-trading financial liabilities Securities purchased under agreements to resell - short sales $ 647,298 $ - $ - Currency swap contracts and hybrid FX swap structured instruments 14,070,924 16,630,499 8,739,904 Interest rate swap contracts 1,801,317 1,738,297 2,212,066 Forward contracts 489,936 843,605 382,910 Cross-currency swap contracts 205,137 1,533,483 476,499 Others 557,716 338,860 302,578 Adjustment for change in value of held-for-trading financial liabilities 102 - - 17,772,430 21,084,744 12,113,957 Financial liabilities designated as at fair value through profit or loss Bank debentures 1,364,031 - - Adjustment for change in value of financial liabilities designated as at fair value through profit or loss 13,704 - - 1,377,735 - -

$ 19,150,165 $ 21,084,744 $ 12,113,957

a. The Group designated hybrid instruments and eliminating accounting inconsistencies as financial assets and liabilities at FVTPL.

b. As of September 30, 2017 and 2016, the par value of FVTPL had been under agreements to repurchase was $17,732,397 and $3,950,000 (December 31, 2016: None).

- 18 - c. Information on financial liabilities designated as at fair value through profit or loss was as follows:

September 30, 2017

Difference between carrying amounts and the amounts due on maturity Fair value $ 1,377,735 Amounts due on maturity 1,699,830

$ (322,095)

Changes in Fair Value Attributable to Changes in Credit Risk

Change in amount in the period For the three months ended September 30, 2017 $ (16,510) For the nine months ended September 30, 2017 $ (6,621) Accumulated amount of change As of September 30, 2017 $ (6,621)

The change in fair value attributable to changes in credit risk recognized as other comprehensive income was calculated as the difference between the total change in fair value of bank debentures and the change in fair value due to the change in market risk factors. The change in fair value due to market risk factors was calculated using benchmark interest yield curves as at the end of the reporting period holding the credit risk margin constant and interest rates swap volatility surface. The fair value of bank debentures was estimated by discounting future cash flows using quoted benchmark interest yield curves as at the end of the reporting period and by obtaining credit default swap spread of the company with similar credit rating to estimate the credit risk margin.

On May 19, 2017, the Bank issued unsecured senior bank debentures amounting to US$45,000 thousand with a 30-year maturity and 0% interest rate. In accordance with the terms of the bank debentures, the Bank may either redeem the bonds at an agreed-upon price after five years from the issue date, or make bond repayments on the maturity date. d. The Group engages in derivative transactions mainly to accommodate customers’ needs and manage its own exposure positions. Outstanding derivative contracts (nominal) on September 30, 2017, December 31, 2016 and September 30, 2016 are shown as follows:

Contract Amount September 30, December 31, September 30, 2017 2016 2016

Currency swap contracts and hybrid FX swap structured instruments $ 2,013,163,634 $ 1,224,259,120 $ 1,141,280,302 Interest rate swap contracts 589,183,155 586,152,899 558,538,720 Forward contracts Long position 30,663,935 45,502,557 35,343,782 Short position 27,659,302 38,699,309 38,048,496 (Continued)

- 19 -

Contract Amount September 30, December 31, September 30, 2017 2016 2016

Option contracts Long position $ 17,482,706 $ 13,683,162 $ 16,333,710 Short position 19,144,291 14,427,294 15,238,746 Cross-currency swap contracts 16,105,763 34,721,283 35,034,310 Futures contracts 10,865,002 7,063,591 5,633,701 Assets swap contracts 891,806 2,086,097 2,167,327 Equity-linked swap contracts 407,902 145,477 354,027 Commodity-linked swap contracts 114,808 195,703 90,705 Interest rate lock commitments - - 9,411 (Concluded)

9. DERIVATIVE FINANCIAL INSTRUMENTS FOR HEDGING

The Group’s management had established related risk management policy.

September 30, December 31, September 30, 2017 2016 2016

Derivative financial liabilities under hedge accounting

Fair value hedge - interest rate swap $ - $ 19,705 $ 45,302

The fair value risk on the interest of the fixed rate loans may fluctuate as market rates change. The Group used interest rate swap contracts as fair value hedging instruments.

For the nine months ended September 30, 2017

Adjustments for Change in Value of Adjustments Hedging Notional Derivative for Change in Hedged Item Fair Value Instrument Amount Financial Value of Instruments Hedged Items under Hedge Accounting Fixed rate loans Interest rate swap $ - $ - $ 4,529 $ (4,529)

December 31, 2016

Notional Hedged Item Hedging Instruments Fair Value Amount Fixed rate loans Interest rate swap $ 1,212,403 $ (19,705)

- 20 - For the nine months ended September 30, 2016

Adjustments for Change in Value of Adjustments Hedging Notional Derivative for Change in Hedged Item Fair Value Instrument Amount Financial Value of Instruments Hedged Items under Hedge Accounting Fixed rate loans Interest rate swap $ 1,185,505 $ (45,302) $ (5,094) $ 5,094

10. SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL

September 30, December 31, September 30, 2017 2016 2016

Commercial paper $ 10,909,209 $ 7,860,258 $ 24,997,790 Bank debentures 2,352,165 - - Government bonds 1,380,132 - - Negotiable certificates of deposit 269,171 1,500 78,440

$ 14,910,677 $ 7,861,758 $ 25,076,230

Agreed-upon resell amount $ 14,914,976 $ 7,864,224 $ 25,082,611

Expiry November 2017 March 2017 November 2016

Securities purchased under agreements to resell are not underlying for agreements to repurchase.

11. RECEIVABLES, NET

September 30, December 31, September 30, 2017 2016 2016

Credit card receivable $ 15,108,660 $ 15,282,263 $ 16,226,306 Accounts receivable - factoring 9,767,821 10,083,797 6,885,163 Accounts receivable - forfaiting 8,677,334 3,729,891 2,901,585 Accounts receivable - disposal of subsidiary (Note50) 4,096,793 - - Interest and revenue receivables 3,445,095 3,879,882 3,368,671 Accounts and notes receivables 2,249,613 543,266 3,208,567 Acceptances 1,316,541 1,519,471 1,694,606 Accounts receivable - sale of securities 848,323 - 135,402 Trust administration fee revenue receivable 760,775 695,533 675,144 Others 518,428 874,265 766,738 46,789,383 36,608,368 35,862,182 Less: Allowance for credit losses 796,956 985,103 915,761 Less: Premium or discount on receivables 172 49 50

Net amount $ 45,992,255 $ 35,623,216 $ 34,946,371

- 21 - The Group assessed the collectability of receivables to determine the allowance. Movements in the allowance of receivables were shown as follows:

For the Nine Months Ended September 30 2017 2016

Balance, January 1 $ 985,103 $ 1,675,963 Provision (reversal of provision) 261,736 (521,114) Write-off (424,881) (212,679) Effect of exchange rate changes (25,002) (26,409)

Balance, September 30 $ 796,956 $ 915,761

Please refer to Note 46 for the analysis of receivable impairment loss. The recovery of receivables write-off as deduction of provision for the nine months ended September 30, 2017 and 2016 were $169,225 and $165,359, respectively.

12. DISCOUNTS AND LOANS, NET

September 30, December 31, September 30, 2017 2016 2016

Export negotiation $ 595,629 $ 436,738 $ 543,880 Overdrafts - 1,257 4,017 Secured overdrafts 150,345 202,059 204,017 Accounts receivable - financing 1,380,354 1,466,859 1,390,779 Short-term loans 158,313,626 155,029,120 150,623,931 Secured short-term loans 92,660,659 92,268,460 89,607,750 Medium-term loans 149,547,654 128,479,065 119,148,656 Secured medium-term loans 62,229,360 84,639,738 86,939,392 Long-term loans 4,525,858 4,726,818 4,202,027 Secured long-term loans 424,017,190 432,945,859 426,652,751 Nonperforming loans transferred from loans 2,339,490 2,437,092 2,157,802 895,760,165 902,633,065 881,475,002 Less: Allowance for credit losses 12,430,489 13,290,421 12,320,564 Less: Premium or discount on discounts and loans 295,429 324,687 304,573 Add: Adjustment of hedge valuation - 19,705 45,302

Net amount $ 883,034,247 $ 889,037,662 $ 868,895,167

Please refer to Note 46 for the analysis of impairment loss on discounts and loans, and Note 43 for information relating to discounts and loans pledged as security.

- 22 - The Group assessed the collectability of discounts and loans to determine the required allowance. Movements in the allowance of discounts and loans were shown as follows:

For the Nine Months Ended September 30 2017 2016

Balance, January 1 $ 13,290,421 $ 12,439,007 Provision 631,928 1,364,261 Write-off (618,023) (1,444,337) Recovery of written-off credits 66,657 93,985 Reclassification (7,207) - Disposal of subsidiaries (767,457) - Effect of exchange rate changes (165,830) (132,352)

Balance, September 30 $ 12,430,489 $ 12,320,564

The Group received loans previous written-off $389,902 and $304,698 for the nine months ended September 30, 2017 and 2016, respectively, which recognized as a deduction on provision expenses.

As of July 2016, bounced checks had occurred to Ting Sing Group, the loan account of the Bank. The related events are under investigation. The total amount of the loan and the related costs of litigation due to Ting Sing Group is $415,344. The Bank had recognized allowance for doubtful accounts and wrote off the loan account as of September 26, 2016.

13. AVAILABLE-FOR-SALE FINANCIAL ASSETS, NET

September 30, December 31, September 30, 2017 2016 2016

Certificates of deposits $ 99,161,873 $ 100,826,951 $ 113,115,557 Bank debentures 58,253,495 59,469,880 52,334,289 Commercial paper 62,685,616 45,484,581 32,895,410 Corporate bonds 23,303,347 26,994,869 28,691,691 Others 4,382,290 6,418,929 5,652,110 247,786,621 239,195,210 232,689,057 Adjustments for change in value of available-for-sale financial assets 162,018 (765,843) 575,159 Less: Accumulated impairments 26,170 113,842 93,918

Net amount $ 247,922,469 $ 238,315,525 $ 233,170,298

As of September 30, 2017 and 2016, the par value of available-for-sale financial assets under agreements to repurchase were $783,666 and $10,000, respectively (December 31, 2016: None).

Please refer to Note 43 for information relating to available-for-sale financial assets pledged as security.

- 23 - 14. HELD-TO-MATURITY FINANCIAL ASSETS

September 30, December 31, September 30, 2017 2016 2016

Government bonds $ 33,175,269 $ 43,423,335 $ 40,983,144 Certificates of deposit 26,199,984 31,664,984 23,851,844 Others 451,068 3,043,912 3,110,119

$ 59,826,321 $ 78,132,231 $ 67,945,107

As of September 30, 2017, December 31, 2016 and September 30, 2016, the par value of held-to-maturity financial assets under agreements to repurchase were $11,048,000, $1,864,200 and $2,359,200, respectively.

A change of intention makes the Bank to reclassify available-for-sale financial assets (government bonds $8,410,928 and corporate bonds $1,753,088) into held-to-maturity financial assets on September 25, 2013. Please refer to Note 48 for the related information.

Please refer to Note 43 for information relating to held-to-maturity financial assets pledged as security.

15. INVESTMENT ACCOUNTED FOR USING THE EQUITY METHOD

September 30, December 31, September 30, 2017 2016 2016

DBL Partners III-A, L.P. $ - $ 54,579 $ 48,493

Principal Proportion of Ownership and Voting Rights Nature of Place of September 30, December 31, September 30, Name of Associate Activities Business 2017 2016 2016

DBL Partners III-A, L.P. Venture capital USA -/- 44%/- 44%/-

To conform with the provision of the local community act - Community Reinvestment Act, Far East National Bank invested in the DBL Partners III-A, L.P. venture capital. As of December 31, 2016 and September 30, 2016, Far East National Bank has invested a total of US$1,871 thousand and US$1,675 thousand, respectively and obtained 44% of the ownership in the Company. This investment is recognized using the equity method. As of July 14, 2017, the above investment was derecognised with the settlement of SinoPac Bancorp.

Investments accounted for the equity method and the share of profit or loss and other comprehensive income of those investments were calculated based on the financial statements that have not been reviewed. Management believes that the financial statements of these investees had not been reviewed, there would have been no significant effect on the consolidated financial statements.

- 24 - The associate’s financial information is summarized as follows:

For the Three Months Ended For the Nine Months Ended September 30 September 30 2017 2016 2017 2016

The Group’s share of: Net profit (loss) from continuing operations $ 2 $ (829) $ (3,197) $ 851 Other comprehensive income - - - -

$ 2 $ (829) $ (3,197) $ 851

16. OTHER FINANCIAL ASSETS, NET

September 30, December 31, September 30, 2017 2016 2016

Unquoted equity instruments Unlisted equity investments $ 376,995 $ 1,014,540 $ 990,999 Beneficial certificates - 188,935 204,524 Debt investments without active market Certificates of deposits 1,366,757 6,458,477 5,657,935 Purchase of the PEM Group’s instruments 4,275,645 4,537,383 4,407,787 Time deposits not belong to cash and cash equivalent 3,786,961 1,877,039 2,692,449 Call loans to security corporations 909,354 - - Excess margin of futures and options 488,848 298,301 303,114 Nonperforming receivables transferred from other than loans 105,895 104,673 103,178 Cash surrender value of managers’ life insurance - 1,467,654 1,416,515 Others 57,588 76,511 42,073 11,368,043 16,023,513 15,818,574 Less: Allowance for credit loss 97,617 97,403 94,508 Less: Accumulated impairment 1,997,431 2,078,383 2,112,267

Net amount $ 9,272,995 $ 13,847,727 $ 13,611,799

Above time deposits not belong to cash and cash equivalent included over three months, no advanced termination or pledged time deposits.

Please refer to Note 43 for information relating to other financial assets pledged as security.

The Bank was delegated by professional investors to sell the PEM Group’s investment products amounting to US$146,000 thousand through private placement. A U.S. Federal Court appointed a receiver for all assets that belonged to, were being managed by, or were in the possession of or control of the PEM Group. To protect the client’s interests, the Bank bought back the products at the price of the initial payment net of the distribution and redemption costs. On December 24, 2010, the Bank’s board of directors resolved to abide by a court’s appointment of a PEM Group receiver to take the PEM Group’s insurance policies at the price of approximately US$40.4 million, and the Bank thus recognized impairment losses of US$11,152 thousand. On March 7, 2011, the receiver transferred a portion of the insurance policies to a trustee established jointly by certain banks to hold insurance policies. And the Bank had submitted to the authorities the results of this policy transfer. As of September 30, 2017, a reserve of US$65,896 thousand (NT$1,997,431) had been set aside to cover the accumulated impairment losses.

- 25 - The Group assessed the collectability of other financial assets to determine the required allowance. Movements in the allowance of other financial assets were shown as follows:

For the Nine Months Ended September 30 2017 2016

Balance, January 1 $ 97,403 $ 6,270 Provision 9,441 99,587 Write-off (8,951) (11,211) Effect of exchange rate changes (276) (138)

Balance, September 30 $ 97,617 $ 94,508

17. PROPERTY AND EQUIPMENT, NET

The movements of property and equipment for the nine months ended September 30, 2017 and 2016 are summarized as follows:

For the Nine Months Ended September 30, 2017 Prepayments for Equipment Machinery and and Computer Transportation Other Leasehold Construction in Land Buildings Equipment Equipment Equipment Improvements Progress Total

Cost

Balance, January 1 $ 5,553,142 $ 5,099,055 $ 1,909,236 $ 5,264 $ 1,494,699 $ 1,704,626 $ 131,396 $ 15,897,418 Addition - 17,903 91,667 - 46,409 43,811 123,707 323,497 Deduction - - 31,230 - 18,056 18,999 - 68,285 Deduction - disposal of subsidiaries 31,967 17,538 46,376 3,783 138,952 119,379 - 357,995 Reclassifications 9,002 47,045 6,308 - 3,353 4,389 (97,047 ) (26,950 ) Effect of exchange rate changes (1,960 ) (1,077 ) (18,792 ) (318 ) (10,821 ) (16,593 ) (1,393 ) (50,954 ) Balance, September 30 5,528,217 5,145,388 1,910,813 1,163 1,376,632 1,597,855 156,663 15,716,731

Accumulated depreciation

Balance, January 1 - 2,756,474 1,458,030 5,264 1,163,344 1,379,325 - 6,762,437 Depreciation - 87,370 115,562 - 58,158 71,365 - 332,455 Deduction - - 30,428 - 17,499 18,131 - 66,058 Deduction - disposal of subsidiaries - 12,331 45,522 3,783 125,403 115,011 - 302,050 Reclassifications - (2,198 ) - - 8,163 - - 5,965 Effect of exchange rate changes - (1,230 ) (14,369 ) (318 ) (8,989 ) (15,394 ) - (40,300 ) Balance, September 30 - 2,828,085 1,483,273 1,163 1,077,774 1,302,154 - 6,692,449

Net amount

Balance, September 30 $ 5,528,217 $ 2,317,303 $ 427,540 $ - $ 298,858 $ 295,701 $ 156,663 $ 9,024,282

For the Nine Months Ended September 30, 2016 Prepayments for Equipment Machinery and and Computer Transportation Other Leasehold Construction in Land Buildings Equipment Equipment Equipment Improvements Progress Total

Cost

Balance, January 1 $ 5,658,457 $ 5,145,237 $ 1,894,602 $ 5,391 $ 1,450,620 $ 1,837,114 $ 155,885 $ 16,147,306 Addition - 18,337 119,517 - 52,952 30,201 113,012 334,019 Deduction - - 102,943 - 32,374 27,161 - 162,478 Reclassifications 34,860 55,294 4,313 - 25,482 14,204 (161,184 ) (27,031 ) Effect of exchange rate changes (2,959 ) (4,326 ) (14,452 ) (277 ) (9,459 ) (21,566 ) (549 ) (53,588 ) Balance, September 30 5,690,358 5,214,542 1,901,037 5,114 1,487,221 1,832,792 107,164 16,238,228

Accumulated depreciation

Balance, January 1 - 2,675,499 1,435,094 5,391 1,142,817 1,418,381 - 6,677,182 Depreciation - 93,294 120,463 - 56,822 83,984 - 354,563 Deduction - - 101,199 - 31,185 25,945 - 158,329 Reclassifications - 19,810 - - - - - 19,810 Effect of exchange rate changes - (2,604 ) (12,678 ) (277 ) (8,346 ) (19,522 ) - (43,427 ) Balance, September 30 - 2,785,999 1,441,680 5,114 1,160,108 1,456,898 - 6,849,799

Net amount

Balance, September 30 $ 5,690,358 $ 2,428,543 $ 459,357 $ - $ 327,113 $ 375,894 $ 107,164 $ 9,388,429

- 26 -

Reclassifications were mainly (a) from prepayments for equipment and construction in progress to buildings, machinery and computer equipment, other equipment, leasehold improvements, and computer software (listed under intangible assets); and (b) from investment property to land and buildings.

The above property and equipment were depreciated at the following estimated useful lives:

Items Years

Buildings 2-60 years Machinery and computer equipment 3-15 years Transportation equipment 5 years Other equipment 3-15 years Leasehold improvements 19 months - 15 years

There are no property and equipment pledged as security.

18. INVESTMENT PROPERTY, NET

The movements of investment property are summarized as follow:

For the Nine Months Ended September 30, 2017 Land Buildings Total

Cost

Balance, January 1 $ 864,435 $ 761,491 $ 1,625,926 Addition - 5,108 5,108 Deduction - - - Reclassifications (9,002) (17,009) (26,011) Balance, September 30 855,433 749,590 1,605,023

Accumulated depreciation

Balance, January 1 - 378,799 378,799 Depreciation - 12,522 12,522 Deduction - - - Reclassifications - (5,965) (5,965) Balance, September 30 - 385,356 385,356

Net amount

Balance, September 30 $ 855,433 $ 364,234 $ 1,219,667

For the Nine Months Ended September 30, 2016 Land Buildings Total

Cost

Balance, January 1 $ 797,236 $ 753,339 $ 1,550,575 Addition - 7,300 7,300 Deduction - - - Reclassifications (34,860) (32,625) (67,485) Balance, September 30 762,376 728,014 1,490,390 (Continued)

- 27 -

For the Nine Months Ended September 30, 2016 Land Buildings Total

Accumulated depreciation

Balance, January 1 $ - $ 367,290 $ 367,290 Depreciation - 13,529 13,529 Deduction - - - Reclassifications - (19,810) (19,810) Balance, September 30 - 361,009 361,009

Accumulated impairment

Balance, January 1 - 7,860 7,860 Addition - - - Deduction - - - Balance, September 30 - 7,860 7,860

Net amount

Balance, September 30 $ 762,376 $ 359,145 $ 1,121,521 (Concluded)

The above investment property were depreciated at the following estimated useful lives:

Category Useful Lives

Buildings 8-60 years

Buildings were property held for earning rentals and/or for capital appreciation. For the transfer of these buildings from property and equipment, their book value was calculated on the basis of their area. If the Group entirely owned a building, the calculation of book value was based on the entire area of the building; if the Group used only a certain section of a building, the only area of that section was used for the calculation.

The fair values of properties used mainly or partially for investment property as of September 30, 2017, December 31, 2016 and September 30, 2016 were $16,289,007, $16,839,581 and $16,755,721, respectively. The fair values, which were based on an internal valuation report instead of an assessment by an independent professional appraiser, were unobservable inputs (Level 3).

There are no investment property pledged as security.

19. INTANGIBLE ASSETS, NET

September 30, 2017 Accumulated Carrying Items Original Cost Amortization Amount

Goodwill $ 876,717 $ - $ 876,717 Computer software 1,148,899 745,161 403,738

$ 2,025,616 $ 745,161 $ 1,280,455

- 28 -

December 31, 2016 Accumulated Carrying Items Original Cost Amortization Amount

Goodwill $ 1,397,281 $ - $ 1,397,281 Computer software 1,323,183 832,672 490,511

$ 2,720,464 $ 832,672 $ 1,887,792

September 30, 2016 Accumulated Carrying Items Original Cost Amortization Amount

Goodwill $ 1,382,488 $ - $ 1,382,488 Computer software 1,359,238 840,294 518,944

$ 2,741,726 $ 840,294 $ 1,901,432

Movements in the Group’s intangible assets are shown as follows:

For the Nine Months Ended September 30 2017 2016

Costs

Balance, January 1 $ 2,720,464 $ 2,639,993 Addition 46,648 65,498 Deduction 172,096 21,074 Deduction - disposal of subsidiaries 580,242 - Reclassifications 52,961 94,431 Effect of exchange rate changes (42,119) (37,122) Balance, September 30 2,025,616 2,741,726

Accumulated amortization

Balance, January 1 832,672 681,760 Amortization 173,829 185,774 Deduction 172,096 21,074 Deduction - disposal of subsidiaries 81,032 - Effect of exchange rate changes (8,212) (6,166) Balance, September 30 745,161 840,294

Net amount $ 1,280,455 $ 1,901,432

The above intangible assets were amortized on a straight-line basis over the following estimated useful lives:

Item Years

Computer software 3-10 years

- 29 - Goodwill includes referred to (1) $876,717, resulted from the Bank’s cash merger with SinoPac Card Services, and this merger was treated as a reorganized of SPH, and (2) the Bank’s acquisition of Far East National Bank (FENB) through SinoPac Bancorp on August 15, 1997, which was accounted for using the purchase method. The assets and liabilities of FENB were revalued to estimate its fair market value as of the date of acquisition. The purchase price in excess of the fair market value of the net tangible assets acquired was US$16,123 thousand, which was recorded as goodwill. The Bank takes impairment review of goodwill annually or more frequently if events or changes in circumstance indicate goodwill impairment.

In assessing whether goodwill is impaired, the Group considers the credit card department as a cash generating unit and estimates the recoverable amount by its value in use. The Bank uses the department’s or investee’s actual profitability in making key assumption to predict future cash flows and thus calculates its value in use. Under a going-concern assumption, the Bank predicted the net cash flows generated from the investee’s operating activities in the next 5 years and estimated salvage value and used the Bank’s weighted average cost of capital to calculate the value in use.

The credit card department’s goodwill of the Group was $876,717 as of September 30, 2017, December 31, 2016 and September 30, 2016. The recent assessment day for the impairment test on goodwill were on October 31, 2016 and 2015. The actual net income for the nine months ended September 30, 2017, for the year ended December 31, 2016 and for the nine months ended September 30, 2016 were $92,007, $66,386 and $42,240, respectively. The expected net income for year 2017 and 2016 assessed by the impairment test on goodwill would be $21,075 and $101,431, respectively. The recoverable amount was expected to be higher than the book value. Therefore, the Group found no objective evidence that goodwill had been impaired as of September 30, 2017, December 31, 2016 and September 30, 2016.

The goodwill of the Bank’s acquisition of Far East National Bank (FENB) through SinoPac Bancorp was $16,123 as of December 31, 2016 and September 30, 2016. The board of director resolved the transaction of disposal of 100% equity of Bancorp on July 8, 2016 and completed the transaction on July 14, 2017. The total transaction amount was US$351,551 higher than the book value, therefore, the Group found no objective evidence that goodwill had been impaired.

20. OTHER ASSETS, NET

September 30, December 31, September 30, 2017 2016 2016

Guarantee deposits $ 4,522,585 $ 1,865,273 $ 1,114,428 Temporary payment and suspense accounts 421,208 229,609 254,981 Prepayment 408,166 337,815 353,205 Others 99,879 55,362 55,877 5,451,838 2,488,059 1,778,491 Less: Allowance for reduction of inventory to market - gold 308 864 3 Less: Allowance for credit losses 7,014 7,000 7,553

$ 5,444,516 $ 2,480,195 $ 1,770,935

- 30 - 21. DEPOSITS FROM THE CENTRAL BANK AND OTHER BANKS

September 30, December 31, September 30, 2017 2016 2016

Call loans from banks $ 30,066,669 $ 23,638,701 $ 35,840,332 Redeposits from Chunghwa Post 1,378,176 5,375,769 3,529,208 Due to banks 181,580 840,181 228,043

$ 31,626,425 $ 29,854,651 $ 39,597,583

22. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

September 30, December 31, September 30, 2017 2016 2016

Government bonds $ 27,899,992 $ 1,836,801 $ 6,323,103 Bank debentures 765,189 - -

$ 28,665,181 $ 1,836,801 $ 6,323,103

Agreed-upon repurchase price $ 28,690,533 $ 1,837,005 $ 6,323,165

Maturity date December 2017 March 2017 December 2016

23. PAYABLES

September 30, December 31, September 30, 2017 2016 2016

Accrued expenses $ 2,583,008 $ 2,633,422 $ 2,554,144 Accounts payable - factoring 2,443,807 2,357,885 2,546,506 Accounts payable 1,809,836 469,518 715,566 Interest payables 1,670,561 1,655,087 1,515,519 Dividends payables to SPH 1,435,025 1,435,025 1,435,025 Acceptance payables 1,316,541 1,519,471 1,694,606 Notes and checks in clearing 1,117,734 5,506,556 2,233,164 Receipts under custody payables 581,629 108,476 1,105,671 Others 1,335,983 1,198,930 1,321,858

$ 14,294,124 $ 16,884,370 $ 15,122,059

The Bank had signed a business-university collaboration contract with National Chung Hsing University in July 2012, to donate for the construction of Food Safety & Agricultural Chemicals and Machinery Research Building. With a budget not more than $300,000, the Bank had obtained the construction permit and signed the contract with building contractor in November 2016. The contract price is $250,998 and will be paid with previously estimated accrued expenses of $295,000. The balance of the accrued expenses was $196,521 as of September 30, 2017.

- 31 - 24. DEPOSITS AND REMITTANCES

September 30, December 31, September 30, 2017 2016 2016

Checking $ 13,449,675 $ 20,611,046 $ 18,309,394 Demand 249,708,234 261,720,569 264,475,051 Savings - demand 277,338,007 281,385,723 275,263,204 Time deposits 352,647,374 386,194,289 361,125,123 Negotiable certificates of deposit 27,951,200 38,656,787 28,593,766 Savings - time 251,799,431 265,365,856 263,593,535 Inward remittances 711,051 1,643,782 946,598 Outward remittances 129,754 134,439 41,221

$ 1,173,734,726 $ 1,255,712,491 $ 1,212,347,892

25. BANK DEBENTURES

To raise capital for its financial operation and increase its capital adequacy ratio, the Bank obtained approval from FSC to issue bank debentures, as follows:

September 30, December 31, September 30, 2017 2016 2016 Maturity Date Rates

Second subordinated bank $ - $ 2,199,995 $ 2,199,992 2009.06.23-2017.06.23 Fixed interest rate of 2.9%, debentures issued in 2009 (B) Principal is repayable on maturity date. interest is paid annually. First subordinated bank 3,099,952 3,099,770 3,099,706 2010.12.09-2017.12.09 Fixed interest rate of 1.8%, debentures issued in 2010 (A) Principal is repayable on maturity date. interest is paid annually. First subordinated bank 2,899,956 2,899,790 2,899,732 2010.12.09-2017.12.09 Index rate plus 0.35%. debentures issued in 2010 (B) Principal is repayable on maturity date. Interest rate is reset quarterly since the issuance date and paid annually. First subordinated bank 999,955 999,881 999,857 2011.03.11-2018.03.11 Fixed interest rate of 1.92%, debentures issued in 2011 Principal is repayable on maturity date. interest is paid annually. Second subordinated bank 3,799,736 3,799,513 3,799,440 2011.08.18-2018.08.18 Fixed interest rate of 1.95%, debentures issued in 2011 (A) Principal is repayable on maturity date. interest is paid annually. Second subordinated bank 2,999,350 2,999,230 2,999,191 2011.08.18-2021.08.18 Fixed interest rate of 2.18%, debentures issued in 2011 (B) Principal is repayable on maturity date. interest is paid annually. Third subordinated bank 3,199,708 3,199,516 3,199,449 2011.11.04-2018.11.04 Fixed interest rate of 1.85%, debentures issued in 2011 Principal is repayable on maturity date. interest is paid annually. First subordinated bank 4,699,280 4,699,009 4,698,921 2012.09.18-2019.09.18 Fixed interest rate of 1.53%, debentures issued in 2012 (A) Principal is repayable on maturity date. interest is paid annually. First subordinated bank 1,299,645 1,299,593 1,299,577 2012.09.18-2022.09.18 Fixed interest rate of 1.65%, debentures issued in 2012 (B) Principal is repayable on maturity date. interest is paid annually. First subordinated bank 1,499,706 1,499,561 1,499,513 2013.09.27-2019.03.27 Fixed interest rate of 1.80%, debentures issued in 2013 Principal is repayable on maturity date. interest is paid annually. Second subordinated bank 1,999,558 1,999,376 1,999,313 2013.12.23-2019.06.23 Fixed interest rate of 1.75%, debentures issued in 2013 Principal is repayable on maturity date. interest is paid annually. First subordinated bank 1,999,500 1,999,316 1,999,256 2014.03.20-2019.09.20 Fixed interest rate of 1.70%, debentures issued in 2014 Principal is repayable on maturity date interest is paid annually Second subordinated bank 2,499,313 2,499,089 2,499,016 2014.06.23-2019.12.23 Fixed interest rate of 1.65%, debentures issued in 2014 Principal is repayable on maturity date. interest is paid annually. Third subordinated bank 1,879,368 1,879,184 1,879,124 2014.09.30-2020.03.30 Fixed interest rate of 1.75%, debentures issued in 2014 (A) Principal is repayable on maturity date. interest is paid annually. Third subordinated bank 699,635 699,599 699,587 2014.09.30-2024.09.30 Fixed interest rate of 2.05%, debentures issued in 2014 (B) Principal is repayable on maturity date. interest is paid annually. First subordinated bank 749,712 749,640 749,617 2015.07.22, no maturity date (Note 1) Fixed interest rate of 3.90% debentures issued in 2015 (Note 4) Second subordinated bank 459,815 459,770 459,756 2015.09.08, no maturity date (Note 2) Fixed interest rate of 3.90% debentures issued in 2015 (Note 4) Third subordinated bank 709,700 709,634 709,610 2015.11.05, no maturity date (Note 2) Fixed interest rate of 3.90% debentures issued in 2015 (Note 4) Fourth subordinated bank 139,936 139,923 139,918 2015.12.15, no maturity date (Note 2) Fixed interest rate of 3.90% debentures issued in 2015 (Note 4) First subordinated bank 1,499,365 1,499,235 1,499,194 2016.02.23, no maturity date (Note 2) Fixed interest rate of 3.90% debentures issued in 2016 (Note 4) Second subordinated bank 1,029,518 1,029,422 1,029,392 2016.03.30, no maturity date (Note 2) Fixed interest rate of 3.90% debentures issued in 2016 (Note 4) Third subordinated bank 1,419,225 1,419,290 - 2016.12.23-2023.12.23 Fixed interest rate of 1.50%, debentures issued in 2016 Principal is repayable on maturity date interest is paid annually. (Continued)

- 32 -

September 30, December 31, September 30, 2017 2016 2016 Maturity Date Rates

First subordinated bank $ 149,858 $ - $ - 2017.02.24-2024.02.24 Fixed interest rate of 1.60%, debentures issued in 2017 (A) Principal is repayable on maturity date interest is paid annually. First subordinated bank 2,098,931 - - 2017.02.24-2027.02.24 Fixed interest rate of 1.90%, debentures issued in 2017 (B) Principal is repayable on maturity date interest is paid annually. Third subordinated bank 199,870 - - 2017.06.28-2024.06.28 Fixed interest rate of 1.70%, debentures issued in 2017 (A) Principal is repayable on maturity date interest is paid annually. Third subordinated bank 539,652 - - 2017.06.28-2027.06.28 Fixed interest rate of 1.95%, debentures issued in 2017 (B) Principal is repayable on maturity date interest is paid annually. Fourth subordinated bank 2,998,414 - - 2017.06.28, no maturity date (Note 3) Fixed interest rate of 4.00% debentures issued in 2017 (Note 4)

$ 45,568,658 $ 41,779,336 $ 40,359,161 (Concluded)

Note 1: The bond has neither a maturity date nor fixed callable date. The Bank has the right to call or buy back the bond from the market after five years of its issuance if one of the conditions listed below is met, and bank debenture issuance has been approved by regulatory authorities.

a. The Bank’s ratio of regulatory capital to risk-weighted assets will still meet the minimum requirement prescribed in Article 5 of Section 1 of the Regulations Governing the Capital Adequacy and Capital Category of Banks after bond repayment.

b. The Bank replaces the bond with another capital market instrument that offers interest equal to or higher than that on the bond that has been called.

Note 2: The bond has neither a maturity date nor fixed callable date. The Bank has the right to call or buy back the bond from the market after five years of its issuance if both of the conditions listed below are met, and bank debenture issuance has been approved by regulatory authorities.

a. The Bank’s ratio of regulatory capital to risk-weighted assets still meets the minimum requirement prescribed in Article 5 of Section 1 of the Regulations Governing the Capital Adequacy and Capital Category of Banks after bond repayment.

b. The Bank replaces the bond with another capital instrument that offers interest equal to or higher than that on the bond that has been called.

Note 3: The bond has neither a maturity date nor fixed callable date. The Bank has the right to call or buy back the bond from the market after five and half years of its issuance if one of the conditions listed below are met, and bank debenture issuance has been approved by regulatory authorities.

a. The Bank’s ratio of regulatory capital to risk-weighted assets still meets the minimum requirement prescribed in Article 5 of Section 1 of the Regulations Governing the Capital Adequacy and Capital Category of Banks after bond repayment.

b. The Bank replaces the bond with another capital instrument that offers interest equal to or higher than that on the bond that has been called.

Note 4: Interest payment amount on the bond will be based on the Bank’s calculation. Calculation of the interest starts on the issuance date, accrues on the basis of actual days, and is payable annually. The Bank is not obligated to pay interest when the Bank has no profit from the prior year and does not distribute any dividends (both cash and stock dividends). However, this does not apply when accumulated undistributed earnings less the proceeds on unamortized nonperforming loans losses is larger than the interest payment amount while the condition for interest payment has not been modified. Interest payments that were not issued due to the reason described previously shall not be accumulated nor deferred. If the Bank’s regulatory capital to risk-weighted assets ratio does not meet the minimum requirement prescribed in Article 5, Section 1 of the Regulations Governing the Capital Adequacy and Capital Category of Banks on an interest payment date, the

- 33 - bond shall defer interest payments. Accrued interest on the bond shall be deferred till the next interest payment date that conforms to the condition of an interest payment date described above. Deferred interest does not incur additional interest.

26. OTHER FINANCIAL LIABILITIES

September 30, December 31, September 30, 2017 2016 2016

Principal of structured products $ 13,059,732 $ 11,396,686 $ 10,400,739 Payments collected for share subscriptions 153,961 4,187 6,281 Leases payable 340 397 416 Federal Home Loan Banks Fund - 968,589 941,063

$ 13,214,033 $ 12,369,859 $ 11,348,499

27. PROVISIONS

September 30, December 31, September 30, 2017 2016 2016

Provision for employee benefits $ 2,357,430 $ 2,439,222 $ 2,458,873 Provision for guarantee liabilities 199,707 313,748 333,111 Provision for decommissioning liabilities 84,090 96,476 95,633

$ 2,641,227 $ 2,849,446 $ 2,887,617

28. PROVISIONS FOR EMPLOYEE BENEFITS

September 30, December 31, September 30, 2017 2016 2016

Recognized in consolidated balance sheets (listed in account payables and provision) Defined contribution plans $ 32,497 $ 34,065 $ 34,033 Defined benefit plans 2,084,289 2,161,946 2,188,132 Preferential interest on employees’ deposits 265,722 241,914 236,394 Deferred annual leave and retirement benefit 7,419 35,362 34,347

$ 2,389,927 $ 2,473,287 $ 2,492,906

The pension expenses related to defined benefit plans and preferential interest on employee’s deposits plan are recognized according to the results of actuarial valuation on December 31, 2016 and 2015:

For the Nine Months Ended September 30 2017 2016

Operating expenses $ 156,672 $ 115,963

- 34 - 29. OTHER LIABILITIES

September 30, December 31, September 30, 2017 2016 2016

Guarantee deposits received $ 1,913,782 $ 1,034,132 $ 276,696 Deferred revenue 1,163,678 91,154 108,061 Temporary receipt and suspense accounts 589,153 661,485 1,035,313 Advance receipts 142,429 100,504 126,698 Others 40,844 127,050 40,164

$ 3,849,886 $ 2,014,325 $ 1,586,932

30. INCOME TAX

Under Article 49 of the Financial Holding Company Act and related directives issued by the Ministry of Finance, a financial holding company and its domestic subsidiaries that held over 90% of shares issued by the financial holding company for 12 months within the same tax year may choose to adopt the linked-tax system for income tax filings. Thus, SPH adopted the linked-tax system for income tax and unappropriated earnings tax filings with its qualified subsidiaries since 2003.

a. Income tax recognized in profit or loss

The major components of tax expense were as follows:

For the Three Months Ended For the Nine Months Ended September 30 September 30 2017 2016 2017 2016

Current tax Current period $ 262,401 $ 207,452 $ 806,854 $ 846,087 Adjustments for prior years (17) - 7,839 48,449 Others 262,384 207,452 814,693 894,536 Deferred tax Temporary difference (121,985) 44,687 104,218 70,164

Income tax expenses recognized in profit or loss $ 140,399 $ 252,139 $ 918,911 $ 964,700

- 35 - b. Income tax recognized in other comprehensive income

For the Three Months Ended For the Nine Months Ended September 30 September 30 2017 2016 2017 2016

Deferred tax

Recognized in other comprehensive income Exchange difference on translating foreign operations $ (73,492) $ 92,166 $ 109,476 $ 169,608 Unrealized loss on available-for-sale financial assets 1,102 (233) (4,139) (10,407)

Income tax recognized in other comprehensive income $ (72,390) $ 91,933 $ 105,337 $ 159,201 c. The information on the Integrated Income Tax System was as follows:

September 30, December 31, September 30, 2017 2016 2016

Balances of the imputation tax credit account (ICA)

The Bank $ 207 $ 403 $ 192 SinoPac Life Insurance Agent Co., Ltd. 18,017 298,061 17,857 SinoPac Property Insurance Agent Co., Ltd. 357 6,112 310

Creditable Tax Ratio for Distribution of Earnings 2016 2015 (Actual)

The Bank Cash dividends 4.26% - Stock dividends 4.56% 2.71% SinoPac Life Insurance Agent Co., Ltd. 20.48% 20.48% SinoPac Property Insurance Agent Co., Ltd. 20.48% 20.48%

Under the Income Tax Act, for the distribution of earnings generated after 1998, the imputation credits allocated to ROC resident shareholders of the Bank was calculated based on the creditable ratio as of the date of dividend distribution.

As of September 30, 2017, the unappropriated earnings generated before 1997 was $8,758, which was recorded as capital surplus resulting from a merger. d. The Bank’s tax returns through 2012 had been assessed by the tax authorities. The tax returns of SinoPac Life Insurance Agent Co., Ltd. and SinoPac Property Insurance Agent Co., Ltd. had been assessed by the tax authorities through 2015.

- 36 - 31. EQUITY

Common Shares

The Bank’s authorized capital is $100,000,000. And the Bank issued 10,000,000 thousand common shares with each par value of NT$10.

To increase the Bank’s Tier 1 capital and to meet capital demand for expanded operations, the Bank’s board of directors approved on February 26, 2016 the private placement of 333,333 thousand common shares - with par value of NT$10 - at NT$15 per share, for a total placement amount of NT$5 billion, and set March 31, 2016 as the record date. The above transaction was approved by authorities.

On June 24, 2016, the Bank’s board of directors, on behalf of the shareholders’ meeting, resolved to issue 615,763 thousand common shares with earnings reallocated as capital at a par value of NT$10 each, increasing the share capital issued and fully paid to $83,954,571. The above transaction was approved by the authorities and the record date of earnings capitalization was August 16, 2016.

On June 23, 2017, the Bank’s board of directors, on behalf of the shareholders’ meeting, resolved to issue 210,659 thousand common shares with earnings reallocated as capital at a par value of NT$10 each, increasing the share capital issued and fully paid to $86,061,159. The above transaction was approved by the authorities and the record date of earnings capitalization was September 13, 2017.

Capital Surplus

The premium from shares issued in excess of par (share premium from issuance of common stock, conversion of bonds and treasury stock transactions) and donations may be used to offset a deficit; in addition, when the Group has no deficit, the capital surplus may be distributed as cash dividends or transferred to capital (limited to a certain percentage of the Bank’s paid-in capital and once a year).

On July 25, 2014, the board of directors of the parent company of the Bank, SPH, approved a capital increase and retained 10% of shares for subscription by the Bank’s employees. The Bank’s capital surplus - employee share options, which was determined on the basis of the grant-date fair value of the employee share options, was $67,511 in 2014.

- 37 - Other Equity Items

Changes in the Fair Value Attributable to Changes in the Credit Risk of Exchange Unrealized Financial Differences Gain or Loss Liabilities Arising on on Designated as Translating Available-for- at Fair Value Foreign sale Financial Through Operations Assets Profit or Loss Total

Balance January 1, 2017 $ 651,532 $ (808,686) $ - $ (157,154) Exchange differences Exchange differences arising on translating foreign operations (1,124,631) - - (1,124,631) Cumulative exchange differences reclassified to profit or loss on disposal of foreign operations 480,651 - - 480,651 Income tax 109,476 - - 109,476 Available-for-sale financial assets Unrealized gain or loss on revaluation - 939,650 - 939,650 Cumulative gain or loss reclassified to profit or loss on sale of available-for-sale financial assets - 1,623 - 1,623 Unrealized gain or loss reclassified to profit or loss of available-for-sale financial assets on disposal of foreign operations - (4,352) - (4,352) Related income tax - (4,139) - (4,139) Changes in the fair value attributable to changes in the credit risk of financial liabilities designated as at fair value through profit or loss Change in amount - - (6,621) (6,621)

Balance September 30, 2017 $ 117,028 $ 124,096 $ (6,621) $ 234,503

Balance January 1, 2016 $ 1,027,235 $ 66,013 $ - $ 1,093,248 Exchange differences Exchange differences arising on translating foreign operations (997,698) - - (997,698) Income tax 169,608 - - 169,608 Available-for-sale financial assets Unrealized gain or loss on revaluation - 460,143 - 460,143 Cumulative gain or loss reclassified to profit or loss on sale of available-for-sale financial assets - 8,091 - 8,091 Related income tax - (10,407) - (10,407)

Balance September 30, 2016 $ 199,145 $ 523,840 $ - $ 722,985

- 38 -

Earnings Distribution and Dividend Policy

The Bank’s Articles of Incorporation provide that annual net income should be appropriated after it has: a. Deducted any deficit of prior years; b. Paid all outstanding taxes; c. Set aside 30% of remaining earnings as legal reserve; d. Set aside any special reserve or retained earnings allocated at its option; e. Allocated shareholders’ dividends.

The Banking Act provides that, before the balance of the reserve reaches the aggregate par value of the outstanding capital stock, above allocation should not exceed 15% of the aggregate par value of the outstanding capital stock of the Bank.

The Bank meets well financial position as standard and setting aside legal reserve under Company Act is not limited to the restriction.

To comply with the Bank’s globalization strategy, strengthen its market position, integrate its diversified business operation and be a major local bank, the Bank has adopted the “Balanced Dividend Policy”.

Under this policy, dividends available for distribution are determined by referring to its capital adequacy ratio (CAR). Cash dividends may be declared if the Bank’s CAR is above 10% and stock dividends may be declared if the CAR is equal to or less than 10%. However, the Bank may make discretionary cash distribution even if the CAR is below 10%, if approved at the shareholders’ meeting, for the purpose of maintaining the cash dividends at a certain level in any given year.

Cash dividends and cash bonus are paid after the approval of the shareholders, while the distribution of stock dividends requires the additional approval of the authorities.

Based on the May 2015 amendments to the Company Act, the recipients of dividends and bonuses are limited to shareholders and do not include employees. The Bank’s board of directors resolved, the amendment of the Bank’s Articles of Incorporation of the policy of the recipients of dividends and bonuses and set up the policy of the remuneration to directors and supervisors on December 25, 2015. Under an authorization to exercise the rights and functions of shareholders meetings, the board approved this proposal. For the employee benefit expenses, please see Note 38.

Under the Company Act, legal reserve shall be appropriated until it has reached the Company’s paid-in capital. This reserve may be used to offset a deficit. When 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 Act provides that, before the balance of the reserve reaches the aggregate par value of the outstanding capital stock, allocation should not exceed 15% of the aggregate par value of the outstanding capital stock of the Bank.

Under Article 50-2 of the Banking Act revised on December 30, 2008, when legal reserve meet the total capital reserve or well financial position and setting aside legal reserve under Company Act is not limited to the restriction of setting aside 30% of remaining earnings as legal reserve, and the appropriation of the remainder and retained earnings from previous year was limited to 15% of total capital reserve when legal reserve has not meet the total capital reserve. The requirements for financial positions of banks to be established in accordance with this Act revised on April 30, 2012 shall be as prescribed by the FSC, Executive Yuan, ROC.

- 39 - According to FSC Order No. 1010012865 and the rule of “Questions and Answers on Special Reserves Appropriated Following the Adoption of IFRSs”, of amount of equal to the net debit balance of shareholders’ other equity items shall be transferred from unappropriated earnings to a special reserve before any appropriation of earnings generated.

Under Order No. 10510001510 issued by the FSC on May 25, 2016, before dispatching the net income of 2016 through 2018, the Public Bank shall reserve 0.5% to 1% of net income as special reserve. From the fiscal year of 2017, the Bank can reverse the amount of expenditure of employees’ transfer arising from financial technology development within the amount of the abovementioned special reserve.

Under the Financial Holding Company Act, the board of directors is empowered to execute the authority of the shareholders’ meeting, which is under no jurisdiction in the related regulations in the Company Act.

On June 24, 2016, the board of directors (on behalf of the shareholder’s meeting) exercised the power and authority of the shareholders’ meeting and approved the appropriation of the 2015 earnings. The appropriations, including dividends per share, were as follows:

Appropriation Dividends Per of Earnings Share (NT$)

Legal reserve $ 2,752,459 Share dividends 6,157,634 $ 0.79150077

The appropriations of earnings and earnings per share for 2016 will be resolved by the Bank’s board of directors under an authorization to exercise the rights and functions of shareholders meetings on June 23, 2017. The appropriations and dividends per share were as follows:

Appropriation Dividends Per of Earnings Share (NT$)

Legal reserve $ 2,056,300 Special reserve 191,445 Share dividends 2,106,588 $ 0.25091991 Cash dividends 2,500,000 0.29778009

In accordance with FSC Guideline No. 09900146911, cash dividends and bonus to shareholders for 2009 amounting to $1,435,025 shall not be remitted to the parent company until the land transferred to SPL from the Bank is disposed and the gain is realized.

32. INTEREST REVENUE, NET

For the Three Months Ended For the Nine Months Ended September 30 September 30 2017 2016 2017 2016

Interest income Loans $ 4,575,761 $ 4,575,835 $ 13,892,614 $ 13,813,980 Available-for-sale financial assets 869,488 804,192 2,542,457 2,163,769 Due from the Central Bank and call loans to other banks 424,360 323,720 1,181,672 898,109 Credit card 143,294 153,476 429,699 470,130 (Continued)

- 40 -

For the Three Months Ended For the Nine Months Ended September 30 September 30 2017 2016 2017 2016

Held-to-maturity financial assets $ 129,700 $ 161,849 $ 438,704 $ 503,223 Accounts receivable - forfaiting 43,717 29,482 99,589 417,316 Others 124,960 116,965 383,015 339,595 6,311,280 6,165,519 18,967,750 18,606,122 Interest expense Deposits 2,081,867 2,018,535 6,276,449 6,351,829 Bank debentures 242,343 208,294 677,620 653,883 Deposits from banks 117,982 58,326 401,586 208,032 Interest expense of structured products 116,881 91,799 354,729 263,871 Others 87,510 14,549 138,554 49,164 2,646,583 2,391,503 7,848,938 7,526,779

$ 3,664,697 $ 3,774,016 $ 11,118,812 $ 11,079,343 (Concluded)

33. COMMISSION AND FEE REVENUE, NET

For the Three Months Ended For the Nine Months Ended September 30 September 30 2017 2016 2017 2016

Commissions and fees revenue Insurance services $ 449,742 $ 565,712 $ 1,492,860 $ 2,190,537 Trust and related services 476,712 343,438 1,266,187 975,722 Credit card services 270,663 282,637 818,557 891,651 Loan services 163,383 156,236 477,646 551,441 Others 209,333 213,542 639,468 671,669 1,569,833 1,561,565 4,694,718 5,281,020 Commissions and fees expense Credit card services 115,897 131,838 333,581 407,694 Interbank services 38,589 36,423 113,586 106,687 Trust services 20,007 18,905 57,539 49,043 Foreign exchange transaction 11,596 12,587 39,153 39,262 Insurance services 13,083 23,412 38,291 66,032 Others 54,810 60,031 173,878 172,612 253,982 283,196 756,028 841,330

$ 1,315,851 $ 1,278,369 $ 3,938,690 $ 4,439,690

- 41 - 34. GAINS OR LOSSES ON FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS

For the Three Months Ended For the Nine Months Ended September 30 September 30 2017 2016 2017 2016

Realized gain (loss) on financial assets and liabilities at fair value through profit or loss Non-derivative financial instruments Government bonds $ 186,428 $ 176,346 $ 350,238 $ 604,069 Bank debentures 85,034 41,761 199,535 116,131 Corporate bonds 19,092 15,033 49,756 53,914 Convertible bonds 7,900 13,822 36,472 40,254 Others 8,121 8,896 15,495 46,385 Derivative financial instruments Currency swap contracts and hybrid FX swap structured instruments 421,080 441,089 1,086,314 1,081,525 Forward contracts 74,095 (33,994) 374,850 (87,308) Option contracts 30,487 56,374 80,545 751,028 Future contracts (1,121) 18,588 3,159 (137,901) Cross-currency swap contracts (61,130) (2,961) (168,829) 776 Interest rate swap contracts (127,932) (30,110) (176,023) (26,117) Others 1,396 6,199 4,518 12,681 643,450 711,043 1,856,030 2,455,437 Unrealized gain (loss) on financial assets and liabilities at fair value through profit or loss Non-derivative financial instruments Government bonds (101,890) (109,986) 868,911 (258,029) Bank debentures 29,078 23,136 63,827 31,202 Stocks 60,963 3,293 60,963 (11,621) Others 2,508 19,659 18,836 78,433 Derivative financial instruments Currency swap contracts and hybrid FX swap structured instruments (139,056) (188,092) 136,860 (336,341) Option contracts (15,238) (40,083) 57,470 (440,903) Futures contracts (31,212) (10,232) (18,440) 93,501 Interest rate swap contracts 105,236 5,817 (359,883) (39,453) Forward contracts (83,000) (25,610) (809,601) (89,308) Others 40,625 (6,456) 6,694 (20,070) (131,986) (328,554) 25,637 (992,589)

$ 511,464 $ 382,489 $ 1,881,667 $ 1,462,848

Disposal gain or loss including in realized gain or loss on financial assets and liabilities at fair value through profit or loss were $396,013, $575,611, $1,165,026 and $2,022,133 for the three months ended September 30, 2017 and 2016 and for the nine months ended September 30, 2017 and 2016, respectively. Related interest revenues and dividend incomes were $247,437, $135,432, $691,004 and $433,304 for the three months ended September 30, 2017 and 2016 and for the nine months ended September 30, 2017 and 2016, respectively.

- 42 -

35. REALIZED GAINS (LOSSES) ON AVAILABLE-FOR-SALE FINANCIAL ASSETS

For the Three Months Ended For the Nine Months Ended September 30 September 30 2017 2016 2017 2016

Dividends $ (25) $ 1,268 $ 4,035 $ 1,910 Gains (losses) on disposal of bank debentures 1,820 961 1,820 (114) Gains on disposal of corporate bonds 1,654 2,259 1,654 2,269 Gains (losses) on disposal of beneficiary certificates (1) 15 91 (1,358) Others - (125) (9) (125)

$ 3,448 $ 4,378 $ 7,591 $ 2,582

36. REVERSAL OF IMPAIRMENT LOSS ON ASSETS

For the Three Months Ended For the Nine Months Ended September 30 September 30 2017 2016 2017 2016

Reversal of impairment (losses) on available for sale financial assets $ 90,415 $ 1,152 $ 83,849 $ (95,754) Reversal of impairment (losses) on other financial assets 5,059 63,636 (46,054) 175,637

$ 95,474 $ 64,788 $ 37,795 $ 79,883

The fully recorded impairment of available for sale financial assets - corporate bonds on June 30, 2016 was due on September 2017 and reconciled to other receivables. The Bank reversed the recorded available for sale financial assets impairment $90,374 and recorded it all to allowance for doubtful account.

37. OTHER NONINTEREST NET REVENUES

For the Three Months Ended For the Nine Months Ended September 30 September 30 2017 2016 2017 2016

Net gains on unquoted equity instruments $ 579 $ 18,747 $ 86,687 $ 108,732 Rental income 21,330 21,720 63,964 64,671 Gains (losses) on disposal of property and equipment 1,512 - 25,002 (5) Operating assets rental income 7,084 7,234 21,218 21,755 Life insurance cash surrender revenue 1,184 9,744 19,192 30,049 Provision of complaint for money management (11,324) - (11,384) - Others (2,066) (33,231) 14,775 (39,827)

$ 18,299 $ 24,214 $ 219,454 $ 185,375

- 43 -

38. EMPLOYEE BENEFITS EXPENSE

For the Three Months Ended For the Nine Months Ended September 30 September 30 2017 2016 2017 2016

Salaries and wages $ 1,052,639 $ 1,179,750 $ 3,331,229 $ 3,574,471 Bonus 503,136 456,839 1,757,862 1,602,523 Labor insurance and national health insurance 96,571 109,503 342,106 365,027 Pension costs 87,979 84,976 282,890 266,703 Others 184,829 158,809 497,026 451,267

$ 1,925,154 $ 1,989,877 $ 6,211,113 $ 6,259,991

Under the Company Act as amended in May 2015, the Bank’s Articles of Incorporation should stipulate a fixed amount or ratio of annual profit to be distributed as employees’ compensation. To comply with this requirement, the Bank’s board of directors proposed in board meeting on December 25, 2015 to amend the Bank’s Articles of Incorporation. The board approved this proposal in the same meeting under an authorization to exercise the rights and functions of the shareholders’ meeting.

The Bank’s Articles of Incorporation provide that the Bank allocate from annual profit more than 0.5% as employees’ compensation and not more than 1% as remuneration to directors and supervisors. But if there are accumulated losses, the Bank should make up the losses firstly.

The employees’ compensation and the remuneration to directors and supervisors recognized were estimated on the basis of the Bank’s Articles of Incorporation and past experience. The Bank accrued employees’ compensation of $34,022 and $29,932 and supervisors of $17,174 and $16,409 for the nine months ended September 30, 2017 and 2016, respectively.

Material differences between these estimates and the amounts proposed by the board of directors on or before the annual financial statements are authorized for issue are adjusted in the year the bonus and compensation are recognized. If there is a change in the proposed amounts after the annual financial statements are authorized for issue, the differences are recorded as a change in accounting estimate.

The board of directors proposed $42,662 as employees’ compensation and $16,492 as remuneration to directors and supervisors on January 20 and February 24, 2017, respectively. These amounts were the same as those recognized in the financial statements. The Banks has reported the remuneration of employees, directors and supervisors on the shareholders meeting (on behalf of the shareholder meeting) on June 23, 2017.

The board of directors resolved to appropriate $56,000 as employees’ compensation and $24,000 as remuneration to directors and supervisors on January 29 and March 16, 2016, respectively. These amounts were the same as those recognized in the financial statements. This resolution has been reported to the Bank’s board of directors, reaching the resolution on behalf of the shareholders’ meeting on June 24, 2016.

The information on the proposed and approved employees’ compensation and the remuneration to directors and supervisors is available on the Market Observation Post System (M.O.P.S.) website of the Taiwan Stock Exchange.

- 44 - 39. DEPRECIATION AND AMORTIZATION EXPENSE

For the Three Months Ended For the Nine Months Ended September 30 September 30 2017 2016 2017 2016

Depreciation expense Buildings $ 32,813 $ 35,187 $ 99,892 $ 106,823 Computers and machinery equipment 37,376 40,838 115,562 120,463 Other equipment 19,118 19,561 58,158 56,822 Leasehold improvements 23,773 27,029 71,365 83,984 113,080 122,615 344,977 368,092 Amortization expense 56,421 64,251 173,829 185,774

$ 169,501 $ 186,866 $ 518,806 $ 553,866

40. OTHER OPERATING EXPENSES

For the Three Months Ended For the Nine Months Ended September 30 September 30 2017 2016 2017 2016

Taxation and fees $ 284,942 $ 301,166 $ 851,179 $ 926,382 Rent 181,994 192,348 586,664 582,378 Professional advisory 138,397 159,212 423,099 489,709 Marketing 120,212 148,785 335,852 439,987 Location fee 98,137 107,876 277,816 300,139 Automated equipment 72,920 82,734 224,217 243,745 Insurance 70,682 72,346 216,510 236,500 Communications expense 60,814 74,931 193,472 232,417 Donation 118,289 38,520 184,857 120,592 Others 87,150 88,598 225,133 256,315

$ 1,233,537 $ 1,266,516 $ 3,518,799 $ 3,828,164

41. EARNINGS PER SHARE

Basic earnings per share is calculated by gain or loss on the Bank’s shareholders divide by the weighted-average number of common shares outstanding.

The numerators and denominators used in computing earnings per shares (EPS) are summarized as follows:

For the Three Months Ended For the Nine Months Ended September 30 September 30 2017 2016 2017 2016

Basic EPS $ 0.18 $ 0.16 $ 0.70 $ 0.64

- 45 - The weighted-average number of common shares outstanding in the computation of Basic EPS are as follow:

Net income

For the Three Months Ended For the Nine Months Ended September 30 September 30 2017 2016 2017 2016

Net income for calculating Basic EPS $ 1,583,395 $ 1,398,322 $ 6,057,067 $ 5,425,961

Shares in thousands

For the Three Months Ended For the Nine Months Ended September 30 September 30 2017 2016 2017 2016

The weighted-average number of common shares outstanding in the computation of Basic EPS 8,606,116 8,606,116 8,606,116 8,484,996

42. RELATED-PARTY TRANSACTIONS

In addition to the disclosed in other notes to the financial statements, relationships with the Group and significant transactions, as well as the Bank and related party are summarized as follows:

a. Related parties and their relationships with the Group

Name Relationship with the Bank

SinoPac Financial Holdings Company Limited (SPH) Parent company of the Bank SinoPac Securities Corporation (SinoPac Securities) Subsidiary of SPH SinoPac Call Center Co., Ltd. (SinoPac Call Center) Subsidiary of SPH SinoPac Leasing Corporation (SPL) Subsidiary of SPH SinoPac Securities Investment Trust Co., Ltd. (SinoPac Subsidiary of SPH Securities Investment Trust) SinoPac Futures Corporation (SinoPac Futures) Subsidiary of SinoPac Securities SinoPac Securities (Asia) Ltd. Affiliate of SinoPac Securities Grand Capital International Limited (Grand Capital) Subsidiary of SPL SinoPac International Leasing Corp. (SPIL) Subsidiary of SPL SinoPac Leasing (Tianjin) Limited (SPLT) Subsidiary of SPL YFY Inc. Affiliate of SPH’s corporate director YFY International BVI Corp. (YFY International) Affiliate of SPH’s corporate director Shin Foong Specialty and Applied Materials Co., Ltd. (Shin Affiliate of SPH’s corporate director Foong) Taiwan Futures Exchange (TAIFEX) Affiliate of SinoPac Securities’ chairman Pegatron Corporation (Pegatron) Affiliate of SPH’s corporate director Yong Yu Investment Company Limited (Yong Yu) Affiliate of SPH’s corporate director Foongtone Technology Co., Ltd. (Foongtone Technology) Affiliate of SPH’s corporate director YFY Packaging Inc. (YFY Packaging) Affiliate of SPH’s corporate director YFY Cayman Co., Ltd. (YFY Cayman) Affiliate of SPH’s corporate director (Continued)

- 46 -

Name Relationship with the Bank

Yuen Foong Shop Co., Ltd. (Yuen Foong Shop) Affiliate of SPH’s corporate director Taipei Fubon Commercial Bank Co., Ltd (Taipei Fubon Affiliate of SPL’s corporate director Bank) Yung An Leasing Corporation (Yung An Leasing) Affiliate of first-degree kin of the Bank SinoPac's director Boardtek Electronics Corporation (Boardtek Electronics) Affiliate of second-degree in-laws of the Bank SinoPac's director Taipei Foreign Exchange Inc. (Taipei Foreign Exchange) Affiliate of the key management personnel of SPH Financial Information Services Co., Ltd. (Financial Affiliate of the key management Information) personnel of SPH Nang Kuang Pharmaceutical Co., Ltd. (Nang Kuang) Affiliate of Bank SinoPac managers’ spouse Mechema Chemicals International Corp. (Mechema) Affiliate of Bank SinoPac managers’ spouse (before June 2017) Cheng Da Industrial Co., Ltd. (Cheng Da) Affiliate of Bank SinoPac managers’ spouse Chailease Auto Service Co., Ltd. (Chailease Auto Service) Affiliate of Bank SinoPac managers’ spouse Wafer Works Corporation (Wafer Works) Affiliate of Bank SinoPac managers’ spouse President Futures Co., Ltd. (President Futures) Affiliate of Bank SinoPac managers’ spouse Carnival Industrial Corporation (Carnival Industrial) Affiliate of Bank SinoPac managers’ spouse Kim Great Co., Ltd. (Kim Great) Affiliate of second-degree kin of the Bank SinoPac’s manager Bolin Company Ltd. (Bolin Company) Affiliate of third-degree kin of the Bank SinoPac’s manager International Rice Noodle Corp. Affiliate of third-degree kin of the Bank SinoPac’s manager Hsin Hsin Construction Affiliate of third-degree kin of the Bank SinoPac’s manager Quanta Storage Inc. (Quanta Storage) Affiliate of third-degree kin of the Bank SinoPac’s manager Champion Building Materials Co., Ltd. (Champion Building Affiliate of third-degree kin of the Bank Materials) SinoPac’s manager Nanya Technology Corporation (Nanya Technology) Affiliate of third-degree kin of the Bank SinoPac’s manager Nan Chyan Aluminum Co., Ltd. (Nan Chyan Aluminum) Affiliate of third-degree kin of the Bank SinoPac’s manager Well Shine Biotechnology Development Co., Ltd. (Well Affiliate of second-degree in-laws of the Shine Bio) Bank SinoPac’s manager Cold Stone Creamery Taiwan Ltd. (Cold Stone Creamery) Affiliate of second-degree in-laws of the Bank SinoPac’s manager Kung Sing Engineering Corporation (Kung Sing Affiliate of second-degree in-laws of the Engineering) Bank SinoPac’s manager Great Wheel Technology Co., Ltd. (Great Wheel Affiliate of second-degree in-laws of the Technology) Bank SinoPac’s manager (Continued)

- 47 -

Name Relationship with the Bank

Evercast Precision Industry Corporation (Evercast Precision) Affiliate of first-degree kin of the Bank SinoPac’s Lending committee member Greatwell Enterprise Co., Ltd. Affiliate of third-degree kin of the Bank SinoPac’s Lending committee member Ho, Show Chung Related party Hydis Technologies Co., Ltd. Related party Foundation of Fire Fighting Development Related party Hoss Venture Inc. (Hoss Venture) Related party Jelyte Infodata Inc. (Jelyte Infodata) Related party Chunghwa Post Co., Ltd. (Chunghwa Post) Related party SYSTEX Corporation (SYSTEX) Related party 3S Silicon Tech, Inc. (3S Silicon) Related party MiCareo Taiwan Co., Ltd. (MiCareo) Related party Mega Financial Holding Company Ltd. (Maga Holdings) Related party Yuen Foong Yu Biotech Co., Ltd. Related party Others The Group’s directors, supervisors, managers and their relatives, department chiefs, investments accounted for using the equity method and their subsidiaries, and investees of SPH’s other subsidiaries, etc. (Concluded) b. Significant transactions with related parties

1) Cash and cash equivalents

September 30, December 31, September 30, 2017 2016 2016

Due from other bank Chunghwa Post $ 3,237 $ - $ -

- 48 - 2) Derivative financial instruments

September 30, 2017 Contract (Notional) Contract Valuation Amount Period Gains or Losses Account Balance

Currency swap contracts Taipei Fubon Bank $ 5,607,681 2016.11.11- $ 122,162 Financial assets at fair value $ 122,162 2018.4.13 through profit or loss Taipei Fubon Bank 11,821,598 2017.1.11- (260,531 ) Financial liabilities at fair 260,531 2018.6.20 value through profit or loss Yong Yu 166,715 2017.9.27- (544 ) Financial liabilities at fair 544 2017.10.30 value through profit or loss Interest rate swap contracts Taipei Fubon Bank 5,758,067 2013.6.21- 33,973 Financial assets at fair value 33,973 2022.3.29 through profit or loss Taipei Fubon Bank 7,928,067 2013.3.7- (61,494 ) Financial liabilities at fair 61,494 2022.6.20 value through profit or loss SinoPac Securities 1,200,000 2014.4.22- 1,846 Financial assets at fair value 11,741 2020.8.26 through profit or loss SinoPac Securities 1,400,000 2012.10.16- (657 ) Financial liabilities at fair 4,782 2020.9.1 value through profit or loss Asset exchange contracts SinoPac Securities 15,000 2015.12.23- (4 ) Financial assets at fair value 1 2017.12.22 through profit or loss Forward contracts YFY International 227,338 2017.2.8- 12,273 Financial assets at fair value 12,273 2018.3.1 through profit or loss YFY International 1,060,913 2017.9.8- (20,558 ) Financial liabilities at fair 20,558 2017.10.18 value through profit or loss

December 31, 2016 Contract (Notional) Contract Amount Period Account Balance

Interest rate swap contracts SinoPac Securities $ 1,700,000 2012.4.12- Financial assets at fair value $ 11,779 2020.1.20 through profit or loss SinoPac Securities 2,400,000 2012.5.18- Financial liabilities at fair 5,375 2020.9.1 value through profit or loss Asset exchange contracts SinoPac Securities 15,000 2015.12.23- Financial assets at fair value 4 2017.12.22 through profit or loss Forward contracts YFY Cayman 6,709,091 2016.11.10- Financial liabilities at fair 133,664 2017.12.12 value through profit or loss YFY International 887,873 2016.11.10- Financial liabilities at fair 21,962 2017.9.12 value through profit or loss

September 30, 2016 Contract (Notional) Contract Valuation Amount Period Gains or Losses Account Balance

Interest rate swap contracts SinoPac Securities $ 3,200,000 2011.10.27- $ (3,026 ) Financial assets at fair value $ 22,620 2020.8.26 through profit or loss SinoPac Securities 3,400,000 2011.10.26- 1,446 Financial liabilities at fair 12,625 2020.9.1 value through profit or loss Asset exchange contracts SinoPac Securities 15,000 2015.12.23- (6 ) Financial assets at fair value 6 2017.12.22 through profit or loss Forward contracts YFY Cayman 5,175,850 2016.7.12- 17,581 Financial assets at fair value 17,581 2016.12.12 through profit or loss

- 49 - 3) Receivables and payables

September 30, December 31, September 30, 2017 2016 2016

Receivables $ 8,598 $ 3,374 $ 7,900 Payables $ 52,123 $ 55,989 $ 49,026 Cash dividends payable to SPH $ 1,435,025 $ 1,435,025 $ 1,435,025

4) Current tax assets and liabilities

September 30, December 31, September 30, 2017 2016 2016

Receivables from adopting the linked-tax system $ 1,273,672 $ 1,273,425 $ 1,273,425 Payables from adopting the linked-tax system $ 304,745 $ 313,463 $ 184,592

- 50 - 5) Loans

For the Nine Months Ended September 30, 2017 Ending Highest Interest/ Interest Balance Balance Fee Rates (%) Revenue

Loans $ 8,156,845 $ 9,241,182 0-16.13 $ 96,637

September 30, 2017 Is the Transaction Account Volume Category Highest Ending at Arm’s or Name of Normal Overdue Type of Collaterals Balance Balance Length Related Party Commercial Term Employees’ consumer 536 $ 217,204 $ 176,338 V - None Yes loans Household mortgage 1,444 7,966,685 7,357,946 V - Real estate Yes loans Others: Boardtek 400,000 400,000 V - Real estate Yes Electronics Quanta Storage 242,758 - V - None, Note 1 Yes SPL 50,000 50,000 V - Real estate Yes Champion Building 45,600 - V - None, Note 1 Yes Materials Cold Stone 44,500 - V - None, Note 1 Yes Creamery Evercast Precision 41,074 39,547 V - Real estate Yes Kung Sing 31,977 15,407 V - None, Note 1 Yes Engineering Hoss Venture 30,000 30,000 V - Real estate Yes Bolin Company 28,800 27,000 V - Real estate Yes Kim Great 21,507 20,476 V - Real estate Yes Carnival Industrial 20,000 - V - None, Note 1 Yes Jelyte Infodata 18,624 17,346 V - Real estate Yes Well Shine Bio 15,000 - V - Real estate Yes Greatwell 8,200 8,200 V - Real estate Yes Enterprise Co., Ltd. International Rice 403 298 V - Vehicle Yes Noodle Corp. Cheng Da 33 - V - Vehicle Yes Others 58,817 14,287 V - Vehicle certificate of Yes deposits, real estate and securities Others subtotal 1,057,293 622,561 Total 9,241,182 8,156,845

- 51 -

For the Year Ended December 31, 2016 Ending Interest/ Balance Highest Balance Fee Rates (%)

Loans $ 8,154,513 $ 16,899,786 0-16.14

December 31, 2016 Is the Transaction Account Volume Category Highest Ending at Arm’s or Name of Normal Overdue Type of Collaterals Balance Balance Length Related Party Commercial Term Employees’ consumer 507 $ 185,846 $ 150,801 V - None Yes loans Household mortgage 1,473 7,983,078 7,436,428 V - Real estate Yes loans Others: Pegatron 4,681,751 - V - None, Note 1 Yes SPL 1,402,000 - V - Real estate and ships Yes SPIL 741,536 - V - Receivables and Yes machinery equipments SPLT 404,237 - V - None, Note 3 Yes Boardtek 400,000 400,000 V - Real estate Yes Electronics Grand Capital 336,864 - V - None, Note 3 Yes SinoPac Securities 202,000 - V - Real estate Yes Yung An Leasing 176,500 - V - Real estate Yes Mechema 100,000 - V - None, Note 1 Yes Evercast Precision 52,578 26,074 V - Real estate Yes Hoss Venture 30,000 30,000 V - Real estate Yes Bolin Company 30,000 28,800 V - Real estate Yes Kim Great 22,850 21,507 V - Real estate Yes Nang Kuang 20,781 - V - Real estate and Yes machinery equipment Jelyte Infodata 20,000 18,624 V - Real estate Yes Well Shine Bio 16,507 15,000 V - Real estate Yes 3S Silicon 5,000 5,000 V - None, Note 2 Yes Great Wheel 2,000 - V - Real estate Yes Technology International Rice 480 403 V - Vehicle Yes Noodle Corp. Cheng Da 233 33 V - Vehicle Yes Hsin Hsin 169 - V - Vehicle Yes Construction Others 85,376 21,843 V - Vehicle and Yes certificate of deposits Others subtotal 8,730,862 567,284 Total 16,899,786 8,154,513

- 52 -

For the Nine Months Ended September 30, 2016 Ending Highest Interest/ Interest Balance Balance Fee Rates (%) Revenue

Loans $ 9,749,607 $ 16,485,117 0-16.14 $ 138,842

September 30, 2016 Is the Transaction Account Volume Category Highest Ending at Arm’s or Name of Normal Overdue Type of Collaterals Balance Balance Length Related Party Commercial Term Employees’ consumer 470 $ 152,691 $ 135,609 V - None Yes loans Household mortgage 1,406 7,351,106 6,977,491 V - Real estate Yes loans Others: Pegatron 4,681,751 - V - None, Note 1 Yes SPL 1,402,000 1,388,000 V - Real estate and ships Yes SPIL 741,536 - V - Receivables and Yes machinery equipment SPLT 404,237 - V - None, Note 3 Yes Boardtek 400,000 400,000 V - Real estate Yes Electronics Nanya Technology 356,000 356,000 V - Real estate and Yes machinery equipment Grand Capital 336,864 - V - None, Note 3 Yes Yung An Leasing 176,500 172,000 V - Real estate Yes SinoPac Securities 155,000 155,000 V - Real estate Yes Mechema 100,000 - V - None, Note 1 Yes Hoss Venture 30,000 30,000 V - Real estate Yes Bolin Company 30,000 29,900 V - Real estate Yes Kim Great 22,850 21,847 V - Real estate Yes Nang Kuang 20,781 19,080 V - Real estate and Yes machinery equipment Jelyte Infodata 20,000 18,877 V - Real estate Yes Well Shine Bio 16,507 16,285 V - Real estate Yes Nan Chyan 15,500 15,500 V - Real estate Yes Aluminum 3S Silicon 5,000 5,000 V - None, Note 2 Yes International Rice 480 442 V - Vehicle Yes Noodle Corp. Cheng Da 233 83 V - Vehicle Yes Hsin Hsin 169 - V - Vehicle Yes Construction Others 65,912 8,493 V - Vehicles and Yes certificates of deposit Others subtotal 8,981,320 2,636,507 Total 16,485,117 9,749,607

Note 1: It’s non-related party at the Bank at the loan’s sign date.

Note 2: Not related party as stated in Financial Holding Company Act Article 44, The Banking Act of The Republic of China Article 32 and 33.

Note 3: Loans from foreign non-banking subsidiaries.

Note 4: Debtor of related party loans are all normal credit ranking. The Bank estimated the provision of doubtful debt periodically in accordance with the guidelines issued by the authority and IFRSs.

- 53 - 6) Guarantees

September 30, 2017

Highest Ending Related Party Balance in Provision Rates Type of Collaterals Note Balance Current Year Kung Sing Engineering $ 39,027 $ 39,027 $ - 1.00% None, Note Quanta Storage 16,484 7,085 - 0.45% None, Note Wafer Works 101,003 6,533 - 0.75% Certificates of deposit MiCareo 15,910 - - 1.25% Certificates of deposit SinoPac Securities 2,000 - - 0.30% Certificates of deposit

December 31, 2016

Highest Ending Related Party Balance in Provision Rates Type of Collaterals Note Balance Current Year Wafer Works $ 101,003 $ 101,003 $ - 0.75% Certificates of deposit SinoPac Securities 2,000 2,000 - 0.30% Certificates of deposit and real estate

September 30, 2016

Highest Ending Related Party Balance in Provision Rates Type of Collaterals Note Balance Current Year Wafer Works $ 101,003 $ 101,003 $ - 0.75% Certificates of deposit SinoPac Securities 2,000 2,000 - 0.30% Certificates of deposit and real estate

Note: It is non-related party at the Bank at the loan’s sign date.

7) Available for sale financial assets

September 30, December 31, September 30, 2017 2016 2016

Beneficial certificates Others $ 2,102 $ 137,900 $ 139,803

8) Other financial assets

September 30, December 31, September 30, 2017 2016 2016

Unquoted equity instruments Financial Information $ 91,000 $ 91,000 $ 91,000 TAIFEX 21,490 21,490 21,490 Taipei Foreign Exchange 6,800 6,800 6,800 Call loans to security corporations SinoPac Securities 909,354 - - Excess margin of futures and options SinoPac Securities (Asia) Ltd. 87,270 46,635 99,034 SinoPac Futures 322,460 208,728 153,462

The Bank had interest revenue from call loans to securities corporations for the three months ended September 30, 2017 and 2016 and for the nine months ended September 30, 2017 and 2016 in the amount of $642, $212, $2,799 and $2,240, respectively.

- 54 - The Bank had interest revenue from excess margin of futures and options for the nine months ended September 30, 2017 and 2016 in the amount of $94 and $54, respectively.

9) Property and equipment

For the nine months ended September 30, 2017, the Bank purchased machinery and computer equipment from its related parties for a total of $6,173, recognized under property and equipment.

The Bank leased other equipment from SPL with financial leasing, due to the date, as of September 30, 2017, December 31, 2016 and September 30, 2016, the carrying amount were $345, $398 and $416.

10) Intangible assets

For the nine months ended September 30, 2017 and 2016, the Bank purchased computer software from its related parties in the amount of $692 and $210, recognized under intangible assets.

11) Other assets

September 30, December 31, September 30, 2017 2016 2016

Guarantee deposits SPL $ 6,040 $ 6,894 $ 6,894 Others 540 540 540

The Bank signed an agreement with Foongtone Technology for the purchase of a debit card with a second-generation chip. The Bank paid Foongtone Technology $17,687 and $34,216 for the nine months ended September 30, 2017 and 2016, which were recorded as prepayments (other assets) on the Bank’s acquisition of the debit cards or as other operating expenses on the issuance of the debit cards to bank clients.

12) Notes and bonds transaction

For the Nine Months Ended September 30, 2017 Purchase of Notes and Sell of Notes Bonds and Bonds

Taipei Fubon Bank $ 10,871,906 $ 10,876,021 SinoPac Securities 951,471 328,871 YFY Packaging 249,958 249,973 SPL 149,980 149,987 Systex 149,954 149,993 YFY Inc. 119,683 119,691

- 55 -

For the Nine Months Ended September 30, 2016 Purchase of Notes and Sell of Notes Bonds and Bonds

SinoPac Securities $ 514,961 $ - SPL 462,332 414,387 Chailease Auto Service 49,989 49,999

13) Deposits from the Central Bank and other banks

2017

For the Nine Months Ended September 30 September 30 Interest Rates Interest Ending Balance (%) Expense

Chunghwa Post $ 1,516,323 0.001-1.13 $ 22,778 Taipei Fubon Bank 259,350 0.6-2.6 996 Mega Holdings - - 382

14) Securities sold under agreements to repurchase

2017

Interest Expense September 30 For the Three For the Nine Carrying Months Ended Months Ended Face Amount Amount September 30 September 30

Ho, Show Chung $ - $ - $ 64 $ 360

2016

December 31 Carrying Face Amount Amount

Ho, Show Chung $ 195,200 $ 197,691

Interest Expense September 30 For the Three For the Nine Carrying Months Ended Months Ended Face Amount Amount September 30 September 30

Ho, Show Chung $ 195,200 $ 197,558 $ 182 $ 618 SinoPac Securities - - - 1

- 56 - 15) Deposits

2017

For the Nine Months Ended September 30 Interest Rates Interest Ending Balance (%) Expense

$ 30,622,742 0-13 $ 212,987

Interest Rate Ending Balance (%)

SinoPac Securities $ 5,968,741 0-3 SinoPac Securities (Asia) Ltd. 1,663,958 0-2.5 Hydis Technologies Co., Ltd. 1,544,744 0.2-1.6 SPH 1,060,689 0-3.3 Shin Foong 999,528 0.07-1.11 Others 19,385,082 0-13

$ 30,622,742

2016

December 31 Interest Rate Ending Balance (%)

SinoPac Securities $ 3,684,738 0-5.2 President Futures 1,725,254 0.07-1.82 Hydis Technologies Co., Ltd. 1,627,369 0.1-1.65 Pegatron 1,003,205 0.07-0.1 SPL 950,665 0.01-2.893 Others 18,921,999 0-13

$ 27,913,230

2016

For the Nine Months Ended September 30 Interest Rates Interest Ending Balance (%) Expense

$ 25,689,518 0-13 $ 176,196

Interest Rate Ending Balance (%)

SinoPac Securities $ 3,725,307 0-1.19 Pegatron 2,597,335 0.05-0.07 Hydis Technologies Co., Ltd. 1,576,714 0.05-1.1 Foundations of Fire Fighting Development 764,306 0-1.15 Shin Foong 615,437 0.07-1.19 Others 16,410,419 0-13

$ 25,689,518

- 57 - 16) Bank debentures

The Bank issued bank debentures for the nine months ended September 30, 2017 and 2016 underwritten by SinoPac Securities and paid $2,070 and $1,265 commission fee (listed in discount of bank debentures).

The Bank paid for the interest of bank debenture for the nine months ended September 30, 2017 in the amount of $12,384.

Third subordinated bank debentures issued in 2015 by the Bank were subscribed by related parties for a total amount of $630,000. There is no difference as of the last interest payment date.

17) Other financial liabilities

As of September 30, 2017, December 31, 2016 and September 30, 2016, the lease payable of SPL was $340, $397 and $416.

18) Other liabilities

September 30, December 31, September 30, 2017 2016 2016

Guarantee deposits received $ 11,822 $ 12,078 $ 12,078 Advance receipts 1 4 1

19) Revenues and expenses

For the Nine Months Ended September 30 2017 2016

Commissions and fee revenues $ 61,132 $ 35,561 Commissions and fee expenses 153,740 215,872 Gain on unquoted equity instruments 40,830 42,994 Gain on financial assets and liabilities at fair value through profit or loss, net 16 - Realized gains (losses) on available for sale financial assets 703 (83) Other revenues 6,162 5,939 Other operating expense (Note) 230,209 255,381

Note: Other operating expenses are mainly for professional advisory charges and marketing expenses. The Bank entered into professional advisory contracts with SinoPac Call Center, and the professional advisory charges and other operating expenses paid for the three months ended September 30, 2017 and 2016 and for the nine months ended September 30, 2017 and 2016 were $40,128, $43,838, $123,372 and $132,903, respectively.

- 58 - 20) Operating lease

a) The Group as a lessee

Other Operating Expense For the Three Months For the Nine Months Ended September 30 Ended September 30 Lease Payment Lessor 2017 2016 2017 2016 Term Frequency

SPL $ 30,894 $ 32,357 $ 93,886 $ 97,508 February 2020 Rentals paid monthly Others 459 450 1,378 1,350 January 2021 Rentals paid quarterly/ monthly

b) The Bank as a lessor

Rental Income For the Nine Months Ended September 30 Lessee 2017 2016 Lease Term Receiving Frequency

SinoPac Securities $ 19,410 $ 19,882 December 2021 Rentals received monthly SinoPac Securities 10,751 10,852 December 2022 Rentals received Investment Trust monthly SPL 4,696 4,521 July 2021 Rentals received monthly Yuen Foong Shop 3,240 2,520 May 2019 Rentals received monthly Yuen Foong Yu 2,525 2,525 October 2020 Rentals received Biotech Co., Ltd. monthly SinoPac Call Center 2,560 2,390 April 2020 Rentals received monthly Others 4,804 4,804 July 2021 Rentals received monthly

Transactions between the Bank and the related parties are at arm’s length commercial terms except for the preferential interest rates offered to employees for savings and loans up to prescribed limits.

Under the Banking Act, except for government and consumer loans, credit extended by the Bank to any related party should be fully secured, and the credit terms for related parties should be similar to those for unrelated parties.

For transactions between related parties with SinoPac Bancorp and its subsidiaries, SinoPac Capital Limited and its subsidiaries, SPLIA, SPPIA and Bank SinoPac (China) the terms are similar to those transacted with unrelated parties.

- 59 - c. Compensation of directors, supervisors and management personnel

For the Nine Months Ended September 30 2017 2016

Short-term employee benefits $ 84,165 $ 79,704 Post-employment benefits 28,751 11,968

$ 112,916 $ 91,672

The management personnel are composed of general manager, vice general manager and other employee whose job grade is higher than the former.

43. PLEDGED OR MORTGAGED ASSETS

In addition to those disclosed in other notes, pledged or restricted assets of the Group are summarized as follows:

September 30, December 31, September 30, Restricted Assets Object 2017 2016 2016 Purposes

Accounts receivable Expired government $ 1,600 $ - $ - Note 1 bonds Discounts and loans Loans 2,000,214 15,271,652 14,266,778 Note 2 Available-for-sale financial assets Government bonds - 2,300 2,500 Note 1 Held-to-maturity financial assets Certificates of deposits 18,000,000 8,000,000 8,156,844 Note 3 Held-to-maturity financial assets Agency bonds and U.S. - 1,373,326 1,439,992 Note 4 municipal bonds Held-to-maturity financial assets Government bonds 1,529,300 2,901,988 2,806,753 Note 5 Other financial assets Certificates of deposits 1,976,095 2,015,199 1,878,356 Note 6

Note 1: Pledged to court as collaterals for filing provisional seizure.

Note 2: Pledged with the Federal Reserve Bank and the Federal Home Loan Bank under the discount window program.

Note 3: Pledged in accordance with requirements of the California Department of Financial Institutions, with the Central Bank for foreign-exchange transactions, intraday overdraft, the Mega Bank for USD foreign-exchange settlement and with Taiwan Bank for New Taiwan dollars settlement.

Note 4: Pledged with the Federal Home Loan Bank, guarantee of foreign-exchange transaction and guarantee of the Federal Reserve Bank loan.

Note 5: Guarantees of dealing and underwriting business, a trust reserve fund, guarantees of bills financial service, reserve for payment of VISA international card, pledged to court as collaterals for filing provisional seizure and disposition, Hong Kong branch’s clearing system of real-time gross settlement and mortgage of derivative instrument outstanding.

Note 6: Pledged in accordance with requirements of the California Department of Financial Institutions, and with intraday overdraft of settlement banks.

- 60 - 44. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

a. In addition to those disclosed in other notes, significant unrecognized commitments of the Group as of September 30, 2017, December 31, 2016 and September 30, 2016 were as follows:

September 30, December 31, September 30, 2017 2016 2016

Trust assets $ 250,299,258 $ 248,341,364 $ 252,571,125 Securities under custody 144,987,096 140,775,729 132,782,913 Agent for government bonds 33,806,000 59,912,300 57,306,300 Guarantee notes payable 21,213,495 12,441,399 12,391,300 Receipts under custody 35,948,407 35,607,224 36,357,943 Agent for marketable securities under custody 4,818,430 7,144,187 5,019,666 Appointment of investment 4,104,416 6,341,751 6,763,234 Goods under custody 1,119,241 1,213,259 1,081,385 Travelers’ checks consigned-in 203,984 256,904 268,912 Investment commitment - 213,535 213,619 Others 5,993 6,565 7,150

As of September 30, 2017, in addition to abovementioned unrecognized commitments, the Bank and SinoPac Securities had applied for tax concessions to Ministry of Finance regarding their technical support service expenditure relating to the financial transaction system, and had jointly signed to the system manufacturer the letter of indemnity of which the total compensation is not more than US$1,300 thousands to obtain the proxy of the manufacturer thereof to apply for foresaid tax concession. The compensation distributable to the Bank is US$867 thousands and to the SinoPac Securities is US$433 thousands.

In response to the development of technology, the Bank signed an enterprises and industry cooperation and donation agreement of budget amount 120,000 with National Cheng Kung University. The donation will be used to build an research center for developing AI depth of learning and big data application about FinTech. The cooperation agreement was signed on August 7, 2017, and is valid retrospectively form July 1, 2017. Except for the two parties agreeing to extend the maturity date, the agreement is valid from July 1, 2017 to September 30, 2020. As of September 30, 2017, the Bank recognized operating expense in the amount of $94,000 and relative payable in the amount of $86,000.

b. The Group entered into contracts to buy computer equipment and office equipment for $675,669 of which $426,192 had been paid as of September 30, 2017. The above contract price of $285,372 was for Bank SinoPac (China) to buy the property and equipment for operation, which was approved by the board of directors on April 24, 2015.

c. Contingencies

1) The Securities and Futures Investors Protection Center (SFIPC) filed a lawsuit against the Bank and SinoPac Leasing Corporation’s (SPL) subsidiary, Grand Capital, on the ground that Procomp Informatics Ltd. (Procomp) deposited US$10,000 thousand in the Bank’s Shisung Branch (formally Sungshan Branch) and placed a restriction on the use of this deposit as a condition for a short-term loan to Addie International Limited granted by SPL and for allegedly helping Yeh, Sue-Fei and Procomp do irregular trading but, at the same time, Procomp used the restricted deposit for fictitious sale transactions. Later, when problems on Procomp’s account arose, the Bank and Grand Cathay demanded compensation, which was taken from Procomp’s account, resulting in damage to Procomp. The Bank was suspected of misleading investors by concealing the restricted status of Procomp’s deposit and window dressing Procomp’s financial statements. On behalf of investors, the SFIPC filed a lawsuit against the Bank, SPL and all other parties related to Procomp for $4,207,212. Both the court of the first instance and the second instance ruled in favor of the Bank and SinoPac Leasing. However, the SFIPC decided to file an appeal on January 20, 2016. The

- 61 - Supreme Court reversed the declared judgment on July 26, 2017 and remanded the case to Taiwan High Court. The case is still under process.

2) The SFIPC filed a lawsuit against the Bank on the ground that the Bank’s Tunpei Branch provided National Aerospace Fasteners Corporation (NAFC) with its accounts receivable factoring services. NAFC recorded this significant-amount loan transaction as an accounts receivable financing to window-dress its financial position in order to attract investments. The SFIPC filed a lawsuit against the Bank and other parties and demanded a compensation of approximately $543,233; the court of the first instance ruled in favor of the Bank. However, the SFIPC decided to file an appeal for the second instance and stated to reduce the amount of compensation to $293,940 on November 13, 2015; Taiwan High Court ruled in favor of the Bank on December 13, 2016. Nevertheless, the SFIPC filed another appeal to the Supreme Court on January 6, 2017. This case was still under process.

45. HIERARCHY AND FAIR VALUE INFORMATION OF FINANCIAL INSTRUMENTS

a. The definition of the hierarchy:

1) Level one

Level 1 financial instruments are traded in active market and have the identical price for the same financial instruments. “Active market” should fit the following characteristics:

a) All financial instruments in the market are homogeneous;

b) Willing buyers and sellers exist in the market all the time;

c) The public can access the price information easily.

2) Level two

The products categorized in this level have the prices that can be inferred from either direct or indirect observable inputs other than the active market’s prices. Examples of these inputs are:

a) Quoted prices from the similar products in the active market. This means the fair value can be derived from the current trading prices of similar products. It is also noted that whether they are similar products should be judged by the characteristics and trading rules. The fair value valuation in this circumstance may make some adjustment due to time lags, trading rule’s differences, related parties’ prices, and the correlation of price between itself and the similar instruments.

b) Quoted prices for identical or similar financial instruments in inactive markets.

c) When marking-to-model, the input of model in this level should be observable (such as interest rates, yield curves and volatilities). The observable inputs mean that they can be attained from market and can reflect the expectation of market participants.

d) Inputs which can be derived from other observable prices or whose correlation can be verified through other observable market data.

3) Level three

The fair prices of the products in this level are based on the inputs other than the direct market data. For example, historical volatility used in valuing options is an unobservable input, because it cannot represent the entire market participants’ expectation for future volatility.

- 62 - b. Financial instrument measured at fair value

1) Hierarchy information of fair value of financial instruments

September 30, 2017 Financial Instruments Measured at Fair Value Total Level 1 Level 2 Level 3 Measured on a recurring basis

Non-derivative financial instruments

Assets

Financial assets at fair value through profit or loss Held-for-trading financial assets Stocks $ 1,732,813 $ 1,732,813 $ - $ - Bonds 44,184,297 38,469,083 5,715,214 - Others 959,101 181,785 777,316 - Financial assets designated as at fair value through profit or loss 896,034 - 896,034 - Available-for-sale financial assets Stocks 65,583 - - 65,583 Bonds 86,000,907 43,525,111 42,475,796 - Certificates of deposits and others 161,855,979 2,549,398 159,306,581 -

Liabilities

Financial liabilities at fair value through profit or loss Held-for-trading financial liabilities 647,400 647,400 - - Financial liabilities designed as at fair value through profit or loss 1,377,735 - 1,377,735 -

Derivative financial instruments

Assets

Financial assets at fair value through profit or loss Held-for-trading financial assets 16,740,877 92,750 15,568,232 1,079,895

Liabilities

Financial liabilities at fair value through profit or loss Held-for-trading financial liabilities 17,125,030 126,087 15,892,023 1,106,920

- 63 -

December 31, 2016 Financial Instruments Measured at Fair Value Total Level 1 Level 2 Level 3 Measured on a recurring basis

Non-derivative financial instruments

Assets

Financial assets at fair value through profit or loss Held-for-trading financial assets Stocks $ 344,543 $ 282,330 $ 62,213 $ - Bonds 34,378,461 30,080,421 3,916,837 381,203 Financial assets designated as at fair value through profit or loss 2,089,589 - 2,089,589 - Available-for-sale financial assets Stocks 81,219 - - 81,219 Bonds 91,782,845 44,460,570 47,322,275 - Certificates of deposits and others 146,451,461 - 146,451,461 -

Derivative financial instruments

Assets

Financial assets at fair value through profit or loss Held-for-trading financial assets 22,568,614 46,047 20,851,713 1,670,854

Liabilities

Financial liabilities at fair value through profit or loss Held-for-trading financial liabilities 21,084,744 40,366 19,375,352 1,669,026 Derivative financial liabilities for hedging 19,705 - 19,705 -

September 30, 2016 Financial Instruments Measured at Fair Value Total Level 1 Level 2 Level 3 Measured on a recurring basis

Non-derivative financial instruments

Assets

Financial assets at fair value through profit or loss Held-for-trading financial assets Stocks $ 359,541 $ 335,044 $ 24,497 $ - Bonds 33,705,048 29,333,525 4,259,230 112,293 Financial assets designated at fair value through profit or loss 2,169,143 - 2,169,143 - Available-for-sale financial assets Stocks 87,191 - - 87,191 Bonds 86,927,253 33,881,382 53,045,871 - Certificates of deposits and others 146,155,854 - 146,155,854 -

Derivative financial instruments

Assets

Financial assets at fair value through profit or loss Held-for-trading financial assets 10,807,809 14,213 9,298,366 1,495,230

Liabilities

Financial liabilities at fair value through profit or loss Held-for-trading financial liabilities 12,113,957 8,405 10,611,966 1,493,586 Derivative financial liabilities for hedging 45,302 - 45,302 -

2) Fair value measurement technique

Financial instruments at fair value through profit or loss, available-for-sale financial assets and derivative financial instruments for hedging with quoted price in an active market are using market price as fair value; financial instruments above with no quoted price in an active market are estimated by valuation methods. The estimation and assumption of valuation method the Group used is the same as market participants’. The Group can obtain this information.

- 64 - The basis of fair value estimation used by the Group is shown as follows:

The fair value of forward contract, interest rate swap contracts and currency swap contracts is measured by the discounted cash flow method; the fair value of option is measured by Black & Scholes Model.

Fair values of forward contracts are estimated on the basis of the foreign exchange rates provided by Reuters. Structured product is measured by opponents’ price based on match basis. This method diminished market risk to zero. Fair value of interest rate swap contracts and cross currency swap contracts are estimated on the basis of market quotation provided by Reuters.

Fair value are determined as follows: (a) listed stocks and Taipei Exchange stocks - closing prices as of the balance sheet date; (b) beneficial certificates (open-end funds), net asset values as of the balance sheet date; (c) bonds - period-end reference prices published by the Taipei Exchange; (d) bank debentures issued overseas and the overseas bonds-period-end reference prices published by Bloomberg, calculated through an internal model or provided by a counter-party.

The Bank assessed the active level of market and the adequacy of fair value of emerging stocks and measured the investments at fair value.

3) Credit risk valuation adjustment is set out below:

Credit risk valuation consists of credit valuation adjustment and debit valuation adjustment.

Credit valuation adjustment adopts for derivative contracts trading in other than exchange market, over-the-counter, and reflects the non-performance risk of counter party on fair value.

Debit valuation adjustment adopts for derivative contracts trading in other than exchange market, over-the-counter, and reflects the non-performance risk of the Group on fair value.

The Group calculated debit and credit valuation adjustment based on models with inputs of Probability of Default (PD) and Loss Given Default (LGD) multiplying Exposure at Default (EAD).

The Group calculated EAD based on mark-to-market fair value of OTC derivative instruments.

The Group takes 60% as the PD of counter parties, and subject to change under the risk nature and data feasibility.

The Group take credit risk valuation adjustment into valuation of the fair value of financial instruments, thus reflect the credit quality of counter parties and the Group.

4) Transfer between Level 1 and Level 2

For the nine months ended September 30, 2017, the Group transferred part of the NTD corporate bonds and foreign bank debentures from Level 1 to Level 2 because the Group determined these investments were not in an active market.

For the nine months ended September 30, 2016, the Group transferred part of the NTD government bonds, NTD corporate bonds from Level 1 to Level 2 because the Group determined these investments were not in an active market.

- 65 - 5) Reconciliation of Level 3 items of financial instruments

a) Reconciliation of Level 3 items of financial assets

For the Nine Months Ended September 30, 2017 Gains (Losses) on Valuation Increase Decrease Effects of Beginning Other Items Purchase/ Transfer to Transfer Out of Changes in Ending Balance Balance Profit and Loss Comprehensive Disposed/Sold Issued Level 3 Level 3 Exchange Rate Income Non-derivative financial instruments

Financial assets at fair value through profit or loss Held-for-trading financial assets $ 381,203 $ (4,409 ) $ - $ 636,548 $ - $ - $ 990,898 $ (22,444 ) $ - Available-for-sale financial assets 81,219 - (15,636 ) - - - - - 65,583

Derivative financial instruments

Financial assets at fair value through profit or loss Held-for-trading financial assets 1,670,854 (590,959 ) ------1,079,895

Note: For the nine months ended September 30, 2017, items transferring out Level 3 are because the price can be attained from the securities market.

For the Nine Months Ended September 30, 2016 Gains (Losses) on Valuation Increase Decrease Effects of Beginning Other Items Purchase/ Transfer to Transfer Out of Changes in Ending Balance Balance Profit and Loss Comprehensive Disposed/Sold Issued Level 3 Level 3 Exchange Rate Income Non-derivative financial instruments

Financial assets at fair value through profit or loss Held-for-trading financial assets $ - $ 56 $ - $ 112,237 $ - $ - $ - $ - $ 112,293 Available-for-sale financial assets 114,554 (93,918 ) (27,363 ) - 93,918 - - - 87,191

Derivative financial instruments

Financial assets at fair value through profit or loss Held-for-trading financial assets 4,282,685 (2,779,139 ) - - - 7,889 - (427 ) 1,495,230

Note: For the nine months ended September 30, 2016, items transferring to Level 3 are lack of observable price (due to the inactive transaction in the securities market).

For the nine months ended September 30, 2017 and 2016, the losses on valuation included in net loss with assets still held were $547,523 and $1,228,971, respectively.

For the nine months ended September 30, 2017 and 2016, the gains and losses on valuation included in other comprehensive income with assets still held were loss $15,636 and gain $7,990, respectively.

b) Reconciliation of Level 3 items of financial liabilities

For the Nine Months Ended September 30, 2017 Valuation Increase Decrease Effects of Beginning Gain/Loss Items Purchase/ Transfer to Transfer Out of Changes in Ending Balance Balance Reflected on Disposed/Sold Issued Level 3 Level 3 Exchange Rate Profit or Loss Derivative financial instruments

Financial liabilities at fair value through profit or loss Held-for-trading financial liabilities $ 1,669,026 $ (562,106 ) $ - $ - $ - $ - $ - $ 1,106,920

For the Nine Months Ended September 30, 2016 Valuation Increase Decrease Effects of Beginning Gain/Loss Items Purchase/ Transfer to Transfer Out of Changes in Ending Balance Balance Reflected on Disposed/Sold Issued Level 3 Level 3 Exchange Rate Profit or Loss Derivative financial instruments

Financial liabilities at fair value through profit or loss Held-for-trading financial liabilities $ 4,280,052 $ (2,321,362 ) $ - $ - $ 441,234 $ - $ (23,870 ) $ 1,493,586

For the nine months ended September 30, 2017 and 2016, the gains on valuation results included in net income from liabilities still held were $519,650 and $1,133,755, respectively.

- 66 - 6) Quantitative information about the significant unobservable inputs (Level 3) used in the fair value measurement

Quantitative information about the significant unobservable inputs is set out below:

September 30, 2017

Significant Interval Financial Instruments Financial Financial Valuation Techniques Unobservable (Weighted- Measured at Fair Value Assets Liabilities Inputs average) Derivative financial instruments

Financial instruments at fair value through profit or loss Held-for-trading financial instruments Hybrid FX swap structured $ 1,002,650 $ 1,001,627 Sellers’ quote (Note 1) - instruments Others 77,245 105,293 Sellers’ quote (Note 1) -

$ 1,079,895 $ 1,106,920

Non-derivative financial instruments

Available-for-sale financial instruments Emerging stocks $ 65,583 $ - Market value with liquidity Discount factor of 0%-20% valuation discount liquidity

December 31, 2016

Significant Interval Financial Instruments Financial Financial Valuation Techniques Unobservable (Weighted- Measured at Fair Value Assets Liabilities Inputs average) Derivative financial instruments

Financial instruments at fair value through profit or loss Held-for-trading financial instruments Hybrid FX swap structured $ 1,553,936 $ 1,551,792 Sellers’ quote (Note 1) - instruments Others 116,918 117,234 Sellers’ quote (Note 1) -

$ 1,670,854 $ 1,669,026

Non-derivative financial instruments

Financial instruments at fair value through profit or loss Held-for-trading financial instruments Bonds $ 381,203 $ - Self-built pricing model The probabilities - (Note 2) (IRR Model) of issuer to buy back in the next time to buy back. Available-for-sale financial instruments Emerging stocks $ 81,219 $ - Market value with liquidity Discount factor of 0%-20% valuation discount liquidity

- 67 - September 30, 2016

Significant Interval Financial Instruments Financial Financial Valuation Techniques Unobservable (Weighted- Measured at Fair Value Assets Liabilities Inputs average) Derivative financial instruments

Financial instruments at fair value through profit or loss Held-for-trading financial instruments Hybrid FX swap structured $ 1,388,440 $ 1,386,521 Sellers’ quote (Note 1) - instruments Others 106,790 107,065 Sellers’ quote (Note 1) -

$ 1,495,230 $ 1,493,586

Non-derivative financial instruments

Financial instruments at fair value through profit or loss Held-for-trading financial instruments Bonds $ 112,293 $ - Sellers’ quote - Available-for-sale financial instruments Emerging stocks $ 87,191 $ - Market value with liquidity Discount factor of 0%-20% valuation discount liquidity

Note 1: As pairs of back-to-back transaction, consequences of significant unobservable inputs and fair values are not fully captured in practice. Therefore, both inputs are not disclosed by the Bank.

Note 2: The IRR Model is an evaluation of the zero-coupon redeemable bond. Based on the assumption that the issuer will buy back the bond on the next buyback day, the IRR is calculated on the basis of the cumulative factor from the beginning of the year to the evaluation day in order to estimate the price of zero-coupon redeemable bonds.

7) Valuation processes for fair value measurements categorized within Level 3

The Group assess fair values according to the quote by counter parties, related assessment are compiled as risk-control reports and inform the manager by month and report to the board of directors by quarter. c. Financial instruments not carried at fair value

1) Fair value information of financial instruments

Financial instruments not carried at fair value excluding the table below are reasonably close to their fair value, therefore no additional disclosure, for example: Cash and cash equivalents, due from the Central Bank and other banks, securities purchased under agreements to resell, receivables, discounts and loans, some other financial assets, deposits from the Central Bank and other banks, securities sold under agreements to repurchased, payables, deposits and remittances and other financial liabilities.

September 30, 2017 Carrying Items Amount Fair Value

Held-to-maturity financial assets $ 59,826,321 $ 60,101,359 Debt investments without active market 1,366,757 1,369,189 Bank debentures 45,568,658 46,207,298

- 68 -

December 31, 2016 Carrying Items Amount Fair Value

Held-to-maturity financial assets $ 78,132,231 $ 78,319,837 Debt investments without active market 6,458,477 6,408,997 Bank debentures 41,779,336 42,479,009

September 30, 2016 Carrying Items Amount Fair Value

Held-to-maturity financial assets $ 67,945,107 $ 68,525,168 Debt investments without active market 5,657,935 5,645,263 Bank debentures 40,359,161 41,260,656

2) Hierarchy information of fair value of financial instruments

September 30, 2017 Assets and Liabilities Item Total Level 1 Level 2 Level 3 Held-to-maturity financial assets $ 60,101,359 $ 24,398,199 $ 35,703,160 $ - Debt investments without active market 1,369,189 - 1,369,189 - Bank debentures 46,207,298 4,757,166 33,784,232 7,665,900

December 31, 2016 Assets and Liabilities Item Total Level 1 Level 2 Level 3 Held-to-maturity financial assets $ 78,319,837 $ 33,950,124 $ 44,369,713 $ - Debt investments without active market 6,408,997 - 6,247,566 161,431 Bank debentures 42,479,009 1,419,997 36,423,112 4,635,900

September 30, 2016 Assets and Liabilities Item Total Level 1 Level 2 Level 3 Held-to-maturity financial assets $ 68,525,168 $ 25,767,439 $ 42,600,885 $ 156,844 Debt investments without active market 5,645,263 - 5,645,263 - Bank debentures 41,260,656 - 36,624,756 4,635,900

3) Methods and assumptions applied in estimating the fair values of financial instruments not carried at fair value are as follows:

a) The carrying amounts of financial instruments such as cash and cash equivalents, due from the Central Bank and other banks, securities purchased under agreements to resell, receivables, some of other financial assets, deposits from the Central Bank and other banks, securities sold under agreements to repurchased, payables and other financial liabilities approximate their fair value because of the short maturity or the similarity of the carrying amount and future price.

b) Discounts and loans (including nonperforming loans): The Group usually uses base rate (floating rate) as loan rate because it can reflect market rate. Thus, using its carrying amount to consider the probability of repossession and estimate its fair value is reasonable. Long-term loans with fixed rate should estimate its fair value by its discounted value of expected cash flow. Because this kind of loans is not significant in this item, using its carrying amount to consider the probability of repossession and estimate its fair value should be reasonable.

- 69 -

c) Held-to-maturity financial assets: Held-to-maturity financial assets with quoted price in an active market are using market price as fair value; held-to-maturity financial assets with no quoted price in an active market are estimated by valuation methods or opponent’s price.

d) Debt investments without active market: Discounted cash flows from debt investments with no quoted price in an active market is estimated by using discount rate plus credit premium.

e) Deposits and remittances: Considering banking industry’s characteristic, since deposits have one year maturity and measured by market rate (market value), using carrying value to assess fair value is reasonable. For deposits with three years maturity are measured by discounted cash flow, using carrying value to assess fair value is reasonable.

f) Bank debentures: Bank debentures with quoted price in an active market are using market price as fair value; bank debentures with no quoted price in an active market are estimated by valuation methods or quotes from counterparties.

g) Investment accounted for using the equity method and unquoted equity investments: The fair value of unquoted equity investments cannot be reliably measured because it has no quoted price in an active market, the variability interval of fair value measurements is significant or the probability of the estimations in the variability interval cannot be reasonably assessed. Hence, the fair value is not disclosed.

46. FINANCIAL RISK MANAGEMENT

a. Overview

The Group documents the risk management policies, including overall operating strategies and risks control philosophy. The Group’s overall risk management policies are to minimize the possibility of potential unfavorable factors. The board of directors approves the documentation of overall risk management policies and specific risk management policies; including credit risk, liquidity risk, market risk, operational risk, derivative instruments transactions and managements. The board of directors reviews the policies regularly, and reviews the operation to make sure the Group’s policies are executed properly.

b. Risk management framework

The board of directors is the top risk supervisor of the Group. The board not only reviewed risk management policies and rules but also authorized management to be in charge of daily risk management work. The Bank has set up a risk management committee to be responsible for the services above; the Bank has also set up a credit committee to review the policies and supervise the abnormal cases. The credit committee also helps the board of directors approve cases over general manager’s authority under the board’s authorization.

The board of directors authorized the Group’s management to supervise risk management activities, evaluate the performance and confirm every risk management agent having essential code of ethic and professional skills. Internal audit is responsible for the periodic review of risk management and the control environment, then reports the results directly to the board of directors.

The Bank has set up a risk management department to control risk management policies, establish rules, plan and set up risk management system. The risk management department executes these policies based on the board’s approval, then reports the results and performance reviews to the authority or the board.

- 70 - c. Credit risk

1) Sources and definitions of credit risk

Credit risk is the risk of financial loss if a customer or counterparty fails to meet an obligation under a contract. It arises principally from lending, trade finance, treasury, and credit derivatives. The issuer’s credit risk should be considered as part of the market risk when the investment target is securities in an active market.

2) Policies and strategies

The Group established policies based on operating goals and strategies, business plans and risk management goals authorized by the board of directors. These policies were established to lower potential financial losses, minimize risks and rewards to raise the performance and protect shareholders’ equity through appropriate managing policies and procedures based on risk-diversification principle.

The Group’s risk strategy is to strengthen the credit risk management framework, establish complete credit verification system and procedure, develop and use efficient and scientific credit risk managing instruments to identify, measure, manage and supervise credit risks. These strategies transparentize, systematize, specialize and formalize credit risk management to manage loans, nonperforming assets and every kind of assets’ credit risk.

The Group has set up policies of main risks as prime direction based on legislations and operational goals. These policies include risk appetite, management goals, organization structure of responsibility and accountability, measurement, evaluation, supervision and report procedure of risks. These policies are established to reach the purposes of consistency and centralized management and are put into practice in corporate government.

Credit risk management procedures and measurements are as follows:

a) Loan business (includes loan commitment and guarantee)

Loan business classification and qualities are shown as follows:

i. Classification

Under the “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Nonperforming/Nonaccrual Loans” (the Regulations) issued by the Banking Bureau, the Bank evaluates credit losses on the basis of the estimated collectability. In accordance with the Regulations, credit assets are classified as normal assets, assets that require special mentioned, assets with substandard, assets with doubtful collectability, and assets on which there is loss.

FENB evaluates credit losses on the basis of the estimated collectability. Credit assets are classified as pass, and rest of assets were evaluate by mortgages and overdue period then classified as assets that require special mentioned, assets with substandard, assets with doubtful collectability.

Bank SinoPac (China) Ltd. strictly follows the “Guidance for the Risk-Based Loan Categorization” established by the China Banking Regulatory Commission. It divides its loans into five categories based on a debtor’s ability to repay the full principal and interest on time. The five categories are normal, special mention, substandard, doubtful, and loss. The last three categories are considered nonperforming loans.

- 71 - ii. Credit quality level

The Group sets up credit quality level (ex. internal credit risk assessment model, credit assessment rules) based on business characteristic and scale to manage risks.

In order to measure clients’ credit risks, the Group established credit risk assessment model for corporate banking, personal banking and consumer banking through statistic methods, professional judgment and clients’ information. Every model should be reviewed regularly to examine whether the calculations match to the actual conditions or not, then the Bank will adjust parameters to optimize the results.

For personal banking and consumer banking customers, every case will be reviewed individually to assess default risks except that micro-credit and credit card business should be assessed by internal credit assessment model.

The Group’s customers’ credit qualities are classified as excellent, good, acceptable, weak and no ratings. Customers’ credit quality should be evaluated annually to make sure the valuation results are accurate.

b) Debt investment and derivative financial instruments

The Group manages and identifies credit risks of debt investment through credit ratings by outsiders, credit qualities of the debt, regional conditions and counterparties’ risks.

The Group carry out derivative instrument transactions with counterparties in financial industry which are almost above the investment level. The Bank would control credit risks based on counterparties’ credit lines; counterparties with no credit ratings or at non-investment level should be reviewed individually. Normal customers’ credit exposure positions should be controlled by approved derivative instrument credit line and condition based on normal credit procedure.

The Group classifies credit qualities of debt investment and derivative financial instruments as excellent, good, acceptable, weak, and no ratings.

3) Credit risk hedge or mitigation policies

a) Collateral

For credit exposures and collaterals requirements, the Group has set up several standards such as disposal of collateral, acceptance of real estate disposal, real estate appraisal and credit policies for every commodity to regulate collaterals’ categories, appraisals, procedures, deduction percentages, loan rate, loan-to-value and maturity, control, management and disposal to confirm these standards can mitigate credit risks and maintain creditor’s right.

To maintain collateral’s effectiveness, the Group supervises and manage it based on after-loan management and review policies examines through examining the usage, custody and maintenance of collaterals regularly and irregularly to avoid selling, leasing, pledging, moving and disposing collaterals without authorization. Once the case is due and willing to extend the contract, it should be seen as a new case and the collateral should be revalued.

- 72 - b) Credit risk limits and credit risk concentration control

The Group manages credit line and concentration of all credit assets through appropriate information managing system to gather information, credit exposure centralized conditions and large credit exposure of every credit assets combination, including national risk, large credit exposure, credit line of single corporation, group and industry. For cases approaching credit line, the Group should report to related management and make control strategies; for cases over credit line, the Group should enhance authorization level based on credit review authority.

c) Agreement of net settlement

The Group often makes gross settlement on transactions, sign net settlement contract with other counterparties or cancel every transactions and make net settlement when default occurs to mitigate credit risk.

4) The maximum credit exposure of the financial instruments held by the Bank, FENB and Bank SinoPac (China) Ltd.

Maximum credit exposures of assets on balance sheet (excluding collaterals and other credit enhancement instruments) are almost equivalent to its carrying value. The maximum credit exposures (excluding collaterals, other credit enhancement instruments and undrawn maximum exposure) off balance sheet are shown as follows:

The Maximum Credit Exposure Off-Balance Sheet Items September 30, December 31, September 30, 2017 2016 2016 Undrawn credit card commitments $ 154,277,518 $ 155,991,496 $ 155,758,834 Undrawn loan commitments 19,409,078 24,451,379 25,372,684 Guarantees 17,318,788 17,632,022 18,095,478 Standby letter of credit 3,313,388 3,400,256 3,584,346

The Bank, FENB and Bank SinoPac (China) Ltd. adopt a strict evaluate procedure and review the result regularly to control and minimize off-balance sheet credit risk exposures continuously.

The payment of this kind credit business and financial instruments may not be fully paid before the maturity, therefore the contract amount is not deemed as the amount of future cash outflow. In other words, the future cash demand is lower than contract amount. If the credit limit is out and collaterals or other collaterals lose their value, the amount of credit risk is equal to the contract amount which is the possible maximum loss.

5) Credit risk concentration of the Group

When financial instruments transactions concentrated on counter-party, which engaged in similar business activities, had similar economic characteristics and abilities to execute contracts, the credit risk concentration arises.

- 73 - Credit risk concentrations can arise in the Group’s assets, liabilities or off-balance sheet items through the execution or processing of transactions (either product or service) or through a combination of exposures across these broad categories. It includes credit, loan and deposits, call loan to banks, investment, receivables and derivatives. The Group maintains a diversified portfolio to limit its exposure to any one geographic region, country or individual creditor and monitor its exposures continually. The Group’s most significant concentrations of credit risk are summarized by industry, region and collateral as follows: a) By industry

September 30, 2017 December 31, 2016 September 30, 2016 Industries Amount % Amount % Amount % Private enterprise $ 393,283,811 43.91 $ 395,405,806 43.81 $ 387,651,102 43.98 Public enterprise 23,453,594 2.62 36,361,707 4.03 38,967,560 4.42 Government sponsored enterprise and business 4,407,334 0.49 2,645,726 0.29 627,376 0.07 Nonprofit organization 133,953 0.01 100,739 0.01 122,053 0.01 Private 447,006,253 49.90 451,835,349 50.06 443,419,736 50.31 Financial institutions 27,475,220 3.07 16,283,738 1.80 10,687,175 1.21 Total $ 895,760,165 100.00 $ 902,633,065 100.00 $ 881,475,002 100.00 b) By region

September 30, 2017 December 31, 2016 September 30, 2016 Regions Amount % Amount % Amount % Domestic $ 760,401,216 84.89 $ 765,839,171 84.85 $ 752,229,627 85.34 Asia 75,882,973 8.47 57,432,161 6.36 55,190,493 6.26 North America 35,913,655 4.01 60,111,705 6.66 58,029,191 6.58 Others 23,562,321 2.63 19,250,028 2.13 16,025,691 1.82 Total $ 895,760,165 100.00 $ 902,633,065 100.00 $ 881,475,002 100.00 c) By collateral

September 30, 2017 December 31, 2016 September 30, 2016 Collaterals Amount % Amount % Amount % Credit $ 308,445,791 34.43 $ 289,511,761 32.07 $ 273,603,114 31.04 Secured Stocks 3,891,561 0.43 4,573,408 0.51 3,296,595 0.37 Bonds 10,892,108 1.22 7,949,048 0.88 8,350,822 0.95 Real estate 526,141,139 58.74 548,207,398 60.73 541,021,094 61.38 Movable collaterals 21,025,541 2.35 25,351,966 2.81 23,522,275 2.67 Guarantees 10,300,556 1.15 7,084,490 0.79 9,287,833 1.05 Others 15,063,469 1.68 19,954,994 2.21 22,393,269 2.54 Total $ 895,760,165 100.00 $ 902,633,065 100.00 $ 881,475,002 100.00

- 74 -

6) Credit quality and impairment assessment

Some financial assets such as cash and cash equivalents, due from Central Bank and call loan to banks, financial asset at fair value through profit or loss, and securities purchased under agreements to resell are regarded as very low credit risk owing to the good credit rating of counterparties.

Except for the abovementioned financial assets, other financial assets’ analyses are summarized as follows:

a) Discounts, loans and receivables

Neither Overdue Nor Impaired Loss Recognized (D) With No Overdue But Not Impaired Total With Objective Net Total September 30, 2017 Objective Excellent Good Acceptable Weak No Ratings Subtotal (A) Yet Impaired (B) Amount (C) (A)+(B)+(C) Evidence of (A)+(B)+(C)-(D) Evidence of Impairment Impairment Receivables Accounts receivable - forfaiting $ 2,848,139 $ 755,068 $ 2,098,675 $ 92,625 $ 2,847,712 $ 8,642,219 $ - $ 35,115 $ 8,677,334 $ 35,115 $ 145,100 $ 8,497,119 Credit card receivables 6,220,546 2,169,415 5,150,547 143,449 308,500 13,992,457 96,106 1,020,097 15,108,660 110,408 109,805 14,888,447 Accounts receivable - factoring 1,490,353 2,286,519 4,497,973 238,353 624,015 9,137,213 630,608 - 9,767,821 - 116,752 9,651,069 Others 3,588,280 787,765 1,509,365 758,060 6,276,507 12,919,977 20,631 294,960 13,235,568 258,848 20,928 12,955,792 Discounts and loans 214,124,438 150,834,196 452,679,895 60,467,959 4,984,481 883,090,969 7,851,052 4,818,144 895,760,165 1,230,908 11,199,581 883,329,676 Other financial asset Call loans to security corporations - 909,354 - - - 909,354 - - 909,354 - - 909,354 Nonperforming receivables transferred other than loan ------105,895 105,895 92,225 - 13,670

Neither Overdue Nor Impaired Loss Recognized (D) With No Overdue But Not Impaired Total With Objective Net Total December 31, 2016 Objective Excellent Good Acceptable Weak No Ratings Subtotal (A) Yet Impaired (B) Amount (C) (A)+(B)+(C) Evidence of (A)+(B)+(C)-(D) Evidence of Impairment Impairment Receivables Accounts receivable - forfaiting $ 2,093,111 $ 663,571 $ 913,305 $ - $ 22,502 $ 3,692,489 $ - $ 37,402 $ 3,729,891 $ 37,402 $ 63,271 $ 3,629,218 Credit card receivables 7,279,558 2,466,738 3,826,723 259,690 262,337 14,095,046 106,750 1,080,467 15,282,263 117,458 103,680 15,061,125 Accounts receivable - factoring 1,806,069 2,306,293 3,712,602 286,779 907,867 9,019,610 1,059,228 4,959 10,083,797 1,099 114,255 9,968,443 Others 2,866,931 385,060 1,866,679 180,072 1,613,144 6,911,886 27,993 572,538 7,512,417 526,137 21,801 6,964,479 Discounts and loans 242,700,558 157,889,055 428,402,297 53,283,719 5,206,856 887,482,485 9,403,282 5,747,298 902,633,065 1,513,580 11,776,841 889,342,644 Other financial asset Nonperforming receivables transferred other than loan ------104,673 104,673 91,024 - 13,649

Neither Overdue Nor Impaired Loss Recognized (D) With No Overdue But Not Impaired Total With Objective Net Total September 30, 2016 Objective Excellent Good Acceptable Weak No Ratings Subtotal (A) Yet Impaired (B) Amount (C) (A)+(B)+(C) Evidence of (A)+(B)+(C)-(D) Evidence of Impairment Impairment Receivables Accounts receivable - forfaiting $ 1,463,182 $ 355,964 $ 917,623 $ - $ 128,474 $ 2,865,243 $ - $ 36,342 $ 2,901,585 $ 36,342 $ 39,966 $ 2,825,277 Credit card receivables 7,749,651 2,660,893 3,924,691 269,469 400,675 15,005,379 128,393 1,092,534 16,226,306 121,611 98,954 16,005,741 Accounts receivable - factoring 1,341,802 826,685 3,327,363 255,396 681,830 6,433,076 452,087 - 6,885,163 - 68,332 6,816,831 Others 2,716,714 1,229,140 1,848,464 175,863 3,219,813 9,189,994 28,643 630,491 9,849,128 526,158 24,398 9,298,572 Discounts and loans 242,397,615 153,988,348 413,579,454 49,533,640 5,220,145 864,719,202 10,821,190 5,934,610 881,475,002 1,365,110 10,955,454 869,154,438 Other financial asset Nonperforming receivables transferred other thang loan ------103,178 103,178 88,405 - 14,773

- 75 - b) Credit analysis by customer type for discounts and loans neither overdue nor impaired are as follows:

Neither Overdue Nor Impaired September 30, 2017 Excellent Good Acceptable Weak No Ratings Total Consumer banking Mortgage $ 100,274,917 $ 53,983,925 $ 84,161,920 $ 10,018,420 $ - $ 248,439,182 Cash card - - - 8 10 18 Micro credit 6,953,977 4,293,639 5,251,087 140,429 40,531 16,679,663 Others 84,460,475 36,517,269 40,720,288 5,235,181 4,781,014 171,714,227 Corporate banking

Secured 235,064 3,393,384 132,199,771 21,166,667 - 156,994,886 Unsecured 22,200,005 52,645,979 190,346,829 23,907,254 162,926 289,262,993 Total $ 214,124,438 $ 150,834,196 $ 452,679,895 $ 60,467,959 $ 4,984,481 $ 883,090,969

Neither Overdue Nor Impaired December 31, 2016 Excellent Good Acceptable Weak No Ratings Total Consumer banking Mortgage $ 114,521,338 $ 57,718,370 $ 76,386,520 $ 7,395,623 $ - $ 256,021,851 Cash card - - 11 - 16 27 Micro credit 5,889,358 4,016,732 3,859,738 67,401 46,449 13,879,678 Others 84,877,531 38,770,706 38,256,379 4,227,678 4,933,356 171,065,650 Corporate banking

Secured 531,819 4,377,803 149,595,907 19,510,777 - 174,016,306 Unsecured 36,880,512 53,005,444 160,303,742 22,082,240 227,035 272,498,973 Total $ 242,700,558 $ 157,889,055 $ 428,402,297 $ 53,283,719 $ 5,206,856 $ 887,482,485

Neither Overdue Nor Impaired September 30, 2016 Excellent Good Acceptable Weak No Ratings Total Consumer banking Mortgage $ 116,724,836 $ 55,545,817 $ 70,690,902 $ 6,605,725 $ - $ 249,567,280 Micro credit 5,301,167 3,992,862 3,701,887 57,427 48,398 13,101,741 Others 84,214,534 37,016,293 38,450,792 3,725,529 4,939,554 168,346,702 Corporate banking Secured 413,613 5,189,377 153,763,416 17,104,652 - 176,471,058 Unsecured 35,743,465 52,243,999 146,972,457 22,040,307 232,193 257,232,421 Total $ 242,397,615 $ 153,988,348 $ 413,579,454 $ 49,533,640 $ 5,220,145 $ 864,719,202

- 76 - c) Credit analysis for marketable securities

Neither Overdue Nor Impaired Overdue But Not Impaired Total Loss Recognized Net Total September 30, 2017 Excellent Good Acceptable Weak No Ratings Subtotal (A) Yet Impaired (B) Amount (C) (A)+(B)+(C) (D) (A)+(B)+(C)-(D) Available-for-sale financial assets Investment in bonds $ 186,102,786 $ 49,822,896 $ 10,299,104 $ - $ 1,626,010 $ 247,850,796 $ - $ - $ 247,850,796 $ - $ 247,850,796 Investment in stocks and beneficial certificates - - - - 67,686 67,686 - 30,157 97,843 26,170 71,673 Held-to-maturity financial assets Investment in bonds 59,826,321 - - - - 59,826,321 - - 59,826,321 - 59,826,321 Other financial assets Investment in stocks - - 81,499 - 295,496 376,995 - - 376,995 - 376,995 Investment in bonds 1,366,757 - - - - 1,366,757 - - 1,366,757 - 1,366,757 Others (Note) 2,964,871 228,358 593,732 - - 3,786,961 - 4,275,645 8,062,606 1,997,431 6,065,175

Neither Overdue Nor Impaired Overdue But Not Impaired Total Loss Recognized Net Total December 31, 2016 Excellent Good Acceptable Weak No Ratings Subtotal (A) Yet Impaired (B) Amount (C) (A)+(B)+(C) (D) (A)+(B)+(C)-(D) Available-for-sale financial assets Investment in bonds $ 177,191,908 $ 54,151,187 $ 5,240,577 $ - $ 1,501,607 $ 238,085,279 $ - $ 92,688 $ 238,177,967 $ 92,688 $ 238,085,279 Investment in stocks and beneficial certificates - - - - 219,120 219,120 - 32,280 251,400 21,154 230,246 Held-to-maturity financial assets Investment in bonds 78,132,231 - - - - 78,132,231 - - 78,132,231 - 78,132,231 Other financial assets Investment in stocks 635,221 - 81,499 - 297,820 1,014,540 - - 1,014,540 - 1,014,540 Investment in bonds 6,458,477 - - - - 6,458,477 - - 6,458,477 - 6,458,477 Others (Note) 1,853,768 - 23,271 - 188,935 2,065,974 - 4,537,383 6,603,357 2,078,383 4,524,974

Neither Overdue Nor Impaired Overdue But Not Impaired Total Loss Recognized Net Total September 30, 2016 Excellent Good Acceptable Weak No Ratings Subtotal (A) Yet Impaired (B) Amount (C) (A)+(B)+(C) (D) (A)+(B)+(C)-(D) Available-for-sale financial assets Investment in bonds $ 187,714,659 $ 34,391,534 $ 9,106,257 $ - $ 1,720,977 $ 232,933,427 $ - $ 93,918 $ 233,027,345 $ 93,918 $ 232,933,427 Investment in stocks and beneficial certificates - - - - 236,871 236,871 - - 236,871 - 236,871 Held-to-maturity financial assets Investment in bonds 67,945,107 - - - - 67,945,107 - - 67,945,107 - 67,945,107 Other financial assets Investment in stocks 612,112 - 81,499 - 297,388 990,999 - - 990,999 - 990,999 Investment in bonds 5,657,935 - - - - 5,657,935 - - 5,657,935 - 5,657,935 Others (Note) 1,878,356 814,093 - - 204,524 2,896,973 - 4,407,787 7,304,760 2,112,267 5,192,493

Note: Other financial assets include unquoted beneficial certificates, time deposits not belong to cash and cash equivalent and purchase of PEM instruments.

- 77 - 7) Aging analysis for overdue but unimpaired financial assets

Delayed performance of certain procedures by borrowers and other administrative reasons could result in financial assets becoming overdue without being impaired. According to the Group’s internal risk management policies, financial assets overdue within 90 days are not considered impaired (accounts receivable - factoring without advancement will also not be considered impaired) unless other evidences show otherwise.

Aging analysis for overdue but unimpaired financial assets is as follows:

September 30, 2017 Overdue by Overdue by Overdue by Items Less Than One to Three More Than Total One Month Months Three Months Accounts receivables Credit card receivable $ 62,231 $ 33,875 $ - $ 96,106 Accounts receivable - factoring 398,113 6,770 225,725 630,608 Others 17,591 3,040 - 20,631 Discounts and loans Mortgage 4,021,136 228,390 - 4,249,526 Micro credit 350,631 28,203 - 378,834 Corporate banking 4,584 24,894 35,678 65,156 Others 2,920,557 236,979 - 3,157,536

December 31, 2016 Overdue by Overdue by Overdue by Items Less Than One to Three More Than Total One Month Months Three Months Accounts receivables Credit card receivable $ 66,229 $ 40,521 $ - $ 106,750 Accounts receivable - factoring 809,752 21,327 228,149 1,059,228 Others 25,225 2,768 - 27,993 Discounts and loans Mortgage 4,161,183 195,667 - 4,356,850 Micro credit 466,822 31,510 - 498,332 Corporate banking 1,559,872 57,470 - 1,617,342 Others 2,743,951 186,807 - 2,930,758

September 30, 2016 Overdue by Overdue by Overdue by Items Less Than One to Three More Than Total One Month Months Three Months Accounts receivables Credit card receivable $ 88,220 $ 40,173 $ - $ 128,393 Accounts receivable - factoring 217,298 8,098 226,691 452,087 Others 25,911 2,732 - 28,643 Discounts and loans Mortgage 4,894,749 189,056 - 5,083,805 Micro credit 673,782 35,221 - 709,003 Corporate banking 1,243,110 209,343 - 1,452,453 Others 3,478,871 97,058 - 3,575,929

- 78 - 8) Analysis of financial assets impairment

Analysis of the impairment of bond investments is summarized in Note 46 c,6),c).

Analysis of the impairment of discounts, loans and receivables is summarized as follows:

Discounts and Loans Allowance for Credit Losses Items September 30, December 31, September 30, September 30, December 31, September 30, 2017 2016 2016 2017 2016 2016 With objective Individually assessed $ 704,568 $ 1,283,563 $ 1,644,376 $ 135,054 $ 167,484 $ 175,451 evidence of Collectively assessed 4,113,576 4,463,735 4,290,234 1,095,854 1,346,096 1,189,659 impairment With no objective evidence of Collectively assessed 890,942,021 896,885,767 875,540,392 11,199,581 11,776,841 10,955,454 impairment

Receivables Allowance for Credit Losses Items September 30, December 31, September 30, September 30, December 31, September 30, 2017 2016 2016 2017 2016 2016 With objective Individually assessed $ 324,528 $ 602,363 $ 656,915 $ 292,165 $ 561,349 $ 559,877 evidence of impairment Collectively assessed 1,131,539 1,197,676 1,205,630 204,431 211,771 212,639 (Note 2) With no objective evidence of Collectively assessed 45,439,211 34,913,002 34,102,815 392,585 303,007 231,650 impairment

Note 1: The loans and receivables exclude the amount of the allowance for credit losses and adjustments for discount (premium).

Note 2: Nonperforming receivables transferred other than loan is included.

9) Management policies of collaterals assumed

Collaterals assumed are classified as other assets. According to regulations, the Bank should dispose of collaterals within four years and FENB, within five years. There are no assumed collaterals of the Group as of September 30, 2017 and December 31, 2016, respectively. The Bank assumed real estate as collaterals as of September 30, 2016.

10) Disclosures prepared in conformity with the Regulations Governing the Preparation of Financial Reports by Public Banks

a) Overdue loans and receivables

Date September 30, 2017 Nonperforming Loan Loss NPL Ratio Coverage Ratio Items Loan (NPL) Total Loans Reserves (Note 2) (Note 3) (Note 1) (LLR) Secured $ 1,078,143 $ 153,823,772 0.70% $ 2,069,221 191.92% Corporate loan Unsecured 744,267 279,981,205 0.27% 3,964,833 532.72% Mortgage (Note 4) 561,833 253,266,375 0.22% 3,864,868 687.90% Cash card 28 9,060 0.31% 13,982 49,935.71 % Consumer loan Micro credit (Note 5) 56,066 17,478,700 0.32% 203,470 362.91 % Secured Others (Note 6) 469,583 175,351,494 0.27% 2,098,163 446.81% Unsecured Total 2,909,920 879,910,606 0.33% 12,214,537 419.76% Overdue Accounts Delinquency Allowance for Coverage Ratio Receivables Receivables Ratio Credit Losses Credit card 53,860 15,108,660 0.36% 220,213 408.86% Accounts receivable - factoring with no recourse 4,726 9,857,967 0.05% 206,882 4,377.53% (Notes 7 and 8)

- 79 -

Date September 30, 2016 Nonperforming Loan Loss NPL Ratio Coverage Ratio Items Loan (NPL) Total Loans Reserves (Note 2) (Note 3) (Note 1) (LLR) Secured $ 1,060,494 $ 155,799,041 0.68% $ 2,048,730 193.19% Corporate loan Unsecured 982,750 253,501,670 0.39% 3,907,699 397.63% Mortgage (Note 4) 360,834 253,644,623 0.14% 3,430,082 950.60% Cash card 63 11,597 0.54% 14,133 22,433.33% Consumer loan Micro credit (Note 5) 52,249 14,245,859 0.37% 185,966 355.92% Secured Others (Note 6) 404,191 172,344,057 0.23% 1,843,634 456.13% Unsecured Total 2,860,581 849,546,847 0.34% 11,430,244 399.58% Overdue Accounts Delinquency Allowance for Coverage Ratio Receivables Receivables Ratio Credit Losses Credit card 51,489 16,226,306 0.32% 220,565 428.37% Accounts receivable - factoring with no recourse - 6,972,446 - 156,277 - (Notes 7 and 8)

Note 1: For loan business: Overdue loans represent the amounts of overdue loans reported in accordance with “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Nonperforming/Non-accrual Loans”.

For credit card business: Overdue receivables are regulated by the Banking Bureau letter dated July 6, 2005 (Ref. No. 0944000378).

Note 2: For loan business: NPL ratio = NPL/Total loans.

For credit card business: Delinquency ratio = Overdue receivables/Accounts receivables.

Note 3: For loan business: Coverage ratio = LLR/NPL.

For credit card business: Coverage ratio = Allowance for credit losses/Overdue receivables.

Note 4: Household mortgage loan is a financing to be used by a borrower to buy, build, or fix a dwelling, and the dwelling owned by the borrower, spouse, or children is used to fully secure the loan.

Note 5: Micro credit loan is regulated by the Banking Bureau letter dated December 19, 2005 (Ref. No. 09440010950) and is not credit and debit cards’ micro credit loan.

Note 6: Others in consumer loans refers to secured or unsecured loans excluding mortgage, cash card, micro credit, and credit cards.

Note 7: For accounts receivable - factoring with no recourse, as required by the Banking Bureau letter dated July 19, 2005 (Ref. No. 0945000494), which is equal to dated August 24, 2009 (Ref. 09850003180), and allowance for bad debts is recognized once no compensation is made from factoring or insurance within three months.

Note 8: Part of nonperforming receivables transferred from other than loans was included.

- 80 - b) Excluded NPLs and excluded overdue receivables

Date September 30, 2017 September 30, 2016 Excluded Excluded Excluded Excluded Items Overdue Overdue NPL NPL Receivables Receivables As a result of debt negotiation and loan agreement (Note 1) $ 2,450 $ 97,414 $ 3,165 $ 129,770 As a result of consumer debt clearance (Note 2) 8,123 725,273 6,768 733,531 Total $ 10,573 $ 822,687 $ 9,933 $ 863,301

Note 1: The disclosure of excluded NPLs and excluded overdue receivables resulting from debt negotiations and loan agreement is based on the Banking Bureau letter dated April 25, 2006 (Ref. No. 09510001270).

Note 2: The disclosure of excluded NPLs, pre-mediation and excluded overdue receivables resulting from consumer debt clearance is based on the Banking Bureau’s letter dated September 15, 2008 (Ref. No. 09700318940) and September 20, 2016 (Ref. No. 10500134790). c) Concentration of credit extensions

Year September 30, 2017 Total Credit Percentage Rank Industry Category (Note 2) Consists of of Net (Note 1) Loans (Note 3) Worth (%) 1 A Group (manufacture of computers) $ 7,642,429 6.18 2 B Group (rolling and extruding of iron and steel) 5,865,289 4.74 3 C Group (manufacture of liquid crystal panel and 5,572,813 4.51 components) 4 D Group (manufacture of computers) 4,927,908 3.98 5 E Group (mechanics, telecommunications and 4,285,035 3.46 electricity facilities installation) 6 F Group (ocean transportation) 4,278,753 3.46 7 G Group (wired telecommunications activities) 3,743,055 3.03 8 H Group (financial leasing) 3,485,856 2.82 9 I Group (foreign government) 3,031,179 2.45 10 J Group (real estate development activities) 2,879,728 2.33

- 81 -

Year September 30, 2016 Total Credit Percentage Rank Industry Category (Note 2) Consists of of Net (Note 1) Loans (Note 3) Worth (%) 1 A Group (manufacture of computers) $ 7,103,737 5.96 2 B Group (manufacture of liquid crystal panel and 4,571,962 3.84 components) 3 C Group (manufacture of computers) 4,390,478 3.68 4 D Group (manufacture of monitors and terminal 4,243,059 3.56 equipments) 5 E Group (mechanics, telecommunications and 4,166,593 3.50 electricity facilities installation) 6 F Group (wired telecommunications activities) 3,933,720 3.30 7 G Group (manufacture of computers) 3,739,335 3.14 8 H Group (ocean transportation) 3,444,134 2.89 9 I Group (financial leasing) 2,446,766 2.05 10 J Group (real estate development activities) 2,068,280 1.74

Note 1: Ranking of top 10 groups (excluding government or state - owned utilities) whose total credit consists of loans.

Note 2: Groups were those as defined in Articles 6 of the Supplementary Provision to the Taiwan Stock Exchange Corporation’s Rules for Review of Securities Listings Law.

Note 3: Total credit is the sum of all loans (including import and export bills negotiated, discounts, overdrafts, short-term loans, short-term secured loans, marginal receivables, medium-term loans, medium-term secured loans, long-term loans, long-term secured loans, and nonperforming loans), exchange bills negotiated, accounts receivable factored without recourse, acceptances receivable, and guarantee deposit issued. d. Liquidity risk management

1) Definition of liquidity risk

Liquidity is the Bank’s ability to provide sufficient funding for asset growth and matured liabilities. Liquidity risk means the risk banks cannot obtain sufficient fund with reasonable cost and correct timing, and then suffer losses on earnings or capital.

The measures of enhancing cash liquidity are holding sufficient cash and highly liquid able securities, adjusting maturities differences, savings absorption or arranging borrowings, etc.

a) Strategies

The Bank established a sound liquidity risk managing system based on business’ scale and characteristic, assets and liabilities’ structure, funding strategies and diversity of funding sources to ensure it would have sufficient funding for obligations in normal or worst scenario.

b) Risk measurement

The Bank uses quantitative analysis to manage liquidity risk. Cash flow deficit and liquidity management goals are used as measure instruments to report monthly the analysis results to the assets and liabilities managing committee.

- 82 - Stress testing is done to ensure the Bank would have sufficient funding for asset growth and matured liabilities despite any internal operating problems or adverse changes in the financial environment.

c) Risk monitoring

The Bank established a liquidity deficit limit and an early warning system to detect liquidity risk and take appropriate action at the right time.

The Bank has formed a crisis management team to handle any liquidity crisis. The general manager is the team convener, and the managers of the financial obligation department and the risk management department are the team members. The general manager can also assign the managers of related departments to join the team, depending on the situation. Members’ rights and responsibilities are listed in “Bank SinoPac’s Liquidity Risk Emergency Response Rule”.

2) Maturity analysis of financial liabilities held to manage liquidity risk

a) Maturity analysis of non-derivative financial liabilities

Cash outflow analyses of non-derivative financial liabilities of the Bank, FENB and Bank SinoPac (China) are summarized in the following tables. The amounts are provided on a contract cash flow basis so some of the amounts will not match the amounts in the consolidated balance sheets.

The Bank

September 30, 2017 0-30 Days 31-90 Days 91-180 Days 181 Days to 1 Year Over 1 Year Total Deposits from the Central Bank and other banks $ 19,005,782 $ 9,282,769 $ 715,031 $ 690,068 $ - $ 29,693,650 Financial liabilities at fair value through profit or loss 647,400 - - - 1,699,830 2,347,230 Securities sold under agreements to repurchase 23,590,565 5,099,968 - - - 28,690,533 Payables 4,652,856 685,298 2,564,020 110,049 2,000,824 10,013,047 Deposits and remittances 668,662,420 165,543,376 129,784,361 175,684,119 25,986,094 1,165,660,370 Bank debentures 86,959 6,192,575 121,306 5,307,107 37,035,544 48,743,491

December 31, 2016 0-30 Days 31-90 Days 91-180 Days 181 Days to 1 Year Over 1 Year Total Deposits from the Central Bank and other banks $ 16,999,389 $ 11,107,723 $ 625,306 $ 552,490 $ - $ 29,284,908 Securities sold under agreements to repurchase 1,645,378 191,627 - - - 1,837,005 Payables 8,317,337 754,671 344,964 146,243 2,352,810 11,916,025 Deposits and remittances 681,522,389 207,780,438 122,454,028 185,838,434 22,466,311 1,220,061,600 Bank debentures 71,279 157,801 119,959 8,672,064 35,367,528 44,388,631

September 30, 2016 0-30 Days 31-90 Days 91-180 Days 181 Days to 1 Year Over 1 Year Total Deposits from the Central Bank and other banks $ 28,122,272 $ 9,992,679 $ 213,482 $ 733,153 $ - $ 39,061,586 Securities sold under agreements to repurchase 6,096,364 - 226,801 - - 6,323,165 Payables 5,187,638 910,724 2,137,830 101,569 2,017,655 10,355,416 Deposits and remittances 678,092,230 143,198,142 144,749,939 188,823,366 22,787,961 1,177,651,638 Bank debentures 83,531 114,307 146,519 2,652,636 40,020,338 43,017,331

FENB

(In Thousands of U.S. Dollars)

181 Days to December 31, 2016 0-30 Days 31-90 Days 91-180 Days Over 1 Year Total 1 Year Deposits from the Central Bank and other banks $ 1,869 $ - $ - $ - $ - $ 1,869 Payables 22,721 1 1 - - 22,723 Deposits and remittances 560,433 109,588 85,385 96,012 51,424 902,842 Federal Home Loan Banks Fund 24 48 73 145 30,108 30,398

- 83 -

(In Thousands of U.S. Dollars)

181 Days to September 30, 2016 0-30 Days 31-90 Days 91-180 Days Over 1 Year Total 1 Year Deposits from the Central Bank and other banks $ 1,397 $ - $ - $ - $ - $ 1,397 Payables 15,063 - - - - 15,063 Deposits and remittances 600,314 60,010 126,567 127,898 57,350 972,139 Federal Home Loan Banks Fund 24 48 73 145 30,180 30,470

Bank SinoPac (China)

(In Thousands of U.S. Dollars)

181 Days to September 30, 2017 0-30 Days 31-90 Days 91-180 Days Over 1 Year Total 1 Year Deposits from the Central Bank and other banks $ 93,620 $ 35,379 $ 15,392 $ - $ - $ 144,391 Payables 4,569 936 1,625 32 - 7,162 Deposits and remittances 153,601 131,315 101,036 41,741 43,833 471,526

(In Thousands of U.S. Dollars)

181 Days to December 31, 2016 0-30 Days 31-90 Days 91-180 Days Over 1 Year Total 1 Year Deposits from the Central Bank and other banks $ 35,126 $ 10,038 $ - $ - $ - $ 45,164 Payables 5,909 2,554 13 5 - 8,481 Deposits and remittances 168,413 187,221 23,884 23,876 13,862 417,256

(In Thousands of U.S. Dollars)

181 Days to September 30, 2016 0-30 Days 31-90 Days 91-180 Days Over 1 Year Total 1 Year Deposits from the Central Bank and other banks $ - $ 20,000 $ 45,000 $ - $ - $ 65,000 Payables 4,454 3,646 88 4 - 8,192 Deposits and remittances 114,333 167,383 61,283 17,277 1,033 361,309 b) Maturity analysis of derivative financial liabilities

A hedging derivative financial instrument is managed within the contract period and it is disclosed as undiscounted cash flow based on its maturity. The Bank, FENB and Bank SinoPac (China) use derivative financial liabilities at fair value through profit or loss mainly to accommodate customers’ needs and manage their own exposure positions, and disclosed at fair value based on shortest period.

The Bank

181 Days to 1 September 30, 2017 0-30 Days 31-90 Days 91-180 Days Over 1 Year Total Year Financial liabilities at fair value through profit or loss $ 17,115,908 $ - $ - $ - $ - $ 17,115,908

181 Days to 1 December 31, 2016 0-30 Days 31-90 Days 91-180 Days Over 1 Year Total Year Financial liabilities at fair value through profit or loss $ 21,084,744 $ - $ - $ - $ - $ 21,084,744

181 Days to 1 September 30, 2016 0-30 Days 31-90 Days 91-180 Days Over 1 Year Total Year Financial liabilities at fair value through profit or loss $ 12,113,957 $ - $ - $ - $ - $ 12,113,957

- 84 - FENB

(In Thousands of U.S. Dollars)

181 Days to December 31, 2016 0-30 Days 31-90 Days 91-180 Days Over 1 Year Total 1 Year Derivatives financial liabilities - hedging Derivative interest rate instrument $ 742 $ 119 $ 164 $ 350 $ 1,411 $ 2,786

(In Thousands of U.S. Dollars)

181 Days to September 30, 2016 0-30 Days 31-90 Days 91-180 Days Over 1 Year Total 1 Year Derivatives financial liabilities - hedging Derivative interest rate instrument $ 566 $ 116 $ 170 $ 343 $ 1,590 $ 2,785

Bank SinoPac (China)

(In Thousands of U.S. Dollars)

181 Days to September 30, 2016 0-30 Days 31-90 Days 91-180 Days Over 1 Year Total 1 Year Financial liabilities at fair value through profit or loss $ 301 $ - $ - $ - $ - $ 301

3) Maturity analysis of off-balance sheet items

Maturity analysis of off-balance sheet items are summarized in the following tables. Financial guarantee contracts of the Bank that assume full amount are available or require to execute at the earliest time. The amounts are provided on a contract cash flow basis so some of the amounts will not match the amounts in the consolidated balance sheets.

181 Days to 1 September 30, 2017 0-30 Days 31-90 Days 91-180 Days Over 1 Year Total Year Undrawn loan commitments $ 501,152 $ 57,017 $ 996,146 $ 2,433,582 $ 15,421,181 $ 19,409,078 Guarantees 1,642,951 3,041,635 2,044,681 1,924,312 6,785,111 15,438,690 Standby letter of credit 723,533 1,963,839 534,396 - - 3,221,768

181 Days to 1 December 31, 2016 0-30 Days 31-90 Days 91-180 Days Over 1 Year Total Year Undrawn loan commitments $ 106,876 $ 606,862 $ 1,160,387 $ 4,096,209 $ 12,642,628 $ 18,612,962 Guarantees 2,757,620 1,870,727 5,282,837 2,556,058 3,107,905 15,575,147 Standby letter of credit 1,072,102 2,032,863 140,272 59,602 - 3,304,839

181 Days to 1 September 30, 2016 0-30 Days 31-90 Days 91-180 Days Over 1 Year Total Year Undrawn loan commitments $ 26,617 $ 1,290,218 $ 864,321 $ 2,693,642 $ 13,908,702 $ 18,783,500 Guarantees 1,837,821 3,688,810 1,870,105 6,474,751 2,768,029 16,639,516 Standby letter of credit 839,438 2,540,389 195,391 - - 3,575,218

- 85 - 4) Maturity analysis of operating lease commitments

Operating lease commitment is the minimum lease payment when the Group is lessee or lessor with non-cancelling condition.

Maturity analysis of operating lease commitments is summarized as follows:

Less than September 30, 2017 1-5 Years Over 5 Years Total 1 Year Operating lease commitments Operating lease expense (lessee) $ 506,603 $ 940,617 $ 65,071 $ 1,512,291 Operating lease income (lessor) 78,847 146,415 89 225,351 Financial lease expense total amount (lessee) 97 284 - 381 Financial lease expense present value (lessee) 80 260 - 340

Less than December 31, 2016 1-5 Years Over 5 Years Total 1 Year Operating lease commitments Operating lease expense (lessee) $ 623,567 $ 959,457 $ 82,178 $ 1,665,202 Operating lease income (lessor) 76,382 144,501 - 220,883 Financial lease expense total amount (lessee) 97 357 - 454 Financial lease expense present value (lessee) 76 321 - 397

Less than September 30, 2016 1-5 Years Over 5 Years Total 1 Year Operating lease commitments Operating lease expense (lessee) $ 562,212 $ 979,458 $ 96,121 $ 1,637,791 Operating lease income (lessor) 70,179 103,354 1,478 175,011 Financial lease expense total amount (lessee) 97 381 - 478 Financial lease expense present value (lessee) 76 340 - 416

5) Disclosures prepared in conformity with the Regulations Governing the Preparation of Financial Reports by Public Banks

a) Maturity analysis of assets and liabilities of the Bank (New Taiwan dollars)

September 30, 2017 181 Days to 1 Total 0-10 Days 11-30 Days 31-90 Days 91-180 Days Over 1 Year Year Main capital inflow on maturity $ 1,272,433,745 $ 121,528,787 $ 217,140,149 $ 205,441,629 $ 107,373,039 $ 75,101,638 $ 545,848,503 Main capital outflow on maturity 1,648,060,385 80,436,052 132,653,693 271,301,969 234,896,045 351,550,644 577,221,982 Gap (375,626,640 ) 41,092,735 84,486,456 (65,860,340 ) (127,523,006 ) (276,449,006 ) (31,373,479 )

September 30, 2016 181 Days to 1 Total 0-10 Days 11-30 Days 31-90 Days 91-180 Days Over 1 Year Year Main capital inflow on maturity $ 1,298,085,134 $ 129,121,273 $ 230,610,118 $ 197,358,491 $ 133,839,833 $ 119,983,463 $ 487,171,956 Main capital outflow on maturity 1,653,017,691 103,743,490 143,083,159 278,046,625 259,623,590 331,117,669 537,403,158 Gap (354,932,557 ) 25,377,783 87,526,959 (80,688,134 ) (125,783,757 ) (211,134,206 ) (50,231,202 )

Note: The amounts shown in this table are the Bank’s position denominated in NTD.

- 86 - b) Maturity analysis of assets and liabilities of the Bank (U.S. dollars)

(In Thousands of U.S. Dollars)

September 30, 2017 181 Days to Total 0-30 Days 31-90 Days 91-180 Days Over 1 Year 1 Year Main capital inflow on maturity $ 45,230,315 $ 11,894,026 $ 11,179,659 $ 11,346,904 $ 7,407,709 $ 3,402,017 Main capital outflow on maturity 45,763,200 10,578,975 12,138,644 12,695,049 7,481,927 2,868,605 Gap (532,885) 1,315,051 (958,985) (1,348,145) (74,218) 533,412

(In Thousands of U.S. Dollars)

September 30, 2016 181 Days to Total 0-30 Days 31-90 Days 91-180 Days Over 1 Year 1 Year Main capital inflow on maturity $ 28,632,372 $ 9,266,198 $ 7,808,473 $ 5,349,844 $ 3,192,271 $ 3,015,586 Main capital outflow on maturity 29,207,819 8,248,455 8,508,620 5,660,288 4,130,410 2,660,046 Gap (575,447) 1,017,743 (700,147) (310,444) (938,139) 355,540

Note: The amounts shown in this table are the Bank’s position denominated in USD. e. Market risk

1) Definition of market risk

Market risk arises from market changes (such as those referring to interest rates, exchange rates, equity securities and commodity prices) which may cause the fluctuation of a financial instrument’s fair value or future cash flow. The Bank’s net revenue and investment portfolio value may fluctuate when risk factors above change.

The main market risks the Bank should overcome pertain to interest rate, exchange rate and equity securities. Interest rate risks primarily refer to bonds and interest rate related derivative instruments such as fixed rate and floating rate interest rate swaps and bond options; the exchange rate risk refers to foreign currency investments the Bank holds such as exchange rate related derivative instruments and foreign currency bonds; equity securities risk includes listed stocks and equity related derivative financial instruments.

2) Management strategies and procedures

To follow the “Market Risk Management Rule” and other regulations, the Bank established standards for risk identification, measurement, supervision and reporting to set up appropriate risk management framework for every kind of market risk.

In accordance with the risk management limit approved by the board of directors, the Bank supervises every loss limit and position at risk such as interest rate, exchange rate, equity security, spot trading and forward contract, option, future, swap, and related sensitivity information derived from spot trading to confirm that market risk exposure is accepted to the Bank.

The Bank separates its transactions into hedge and non-hedge on the basis of trading purposes. For hedge transactions, the Bank should measure hedge relations, risk management goals and hedge strategies. The Bank should also perform hedge testing for hedging effectiveness.

- 87 -

3) Organization and framework

The board of directors is the top supervision and decision making level of the Bank; it determines every risk management procedure and limit on the basis of its operating strategy and the business environment.

The Bank also set up a risk management department headed by a general manager to establish risk managing principles, regulate risk managing policies, and plan and set up a risk management system.

Following the internal control and segregation of duties principles, the Bank had certain related functions with market risk exposures transformed into three independent departments: Trading, risk control and settlement departments, usually called front office, middle office and back office. Nevertheless the risk management department remains in charge of market risk control, i.e., it is responsible for identifying measuring, controlling and reporting market risk.

4) Market risk control procedure

a) Identification and measurement

Risk measurement includes exposures changes in the market of interest rates, exchange rates, and equity securities, which affect spot trading and forward exchange, option, futures, and swap transactions or related combined transactions derived from spot trading. The Bank set up appropriate market risk limits based on commodity category, characteristic and complexity. The limits are the nominal exposure limit, the risk factor sensitivity limit of options as measured by Delta/Vega/DV01 and the loss control limit. These limits are calculated by the risk control department through measurements (such as those of the Black & Scholes Model) provided by financial data and company information providers (e.g. Murex and Bloomberg) based on market prices.

b) Supervision and reporting

The Bank’s market risk management department prepares risk management reports such as those on daily market valuations, value at risk and risk limits. If the risk is over the limit, the department should report this situation to the transaction department and appropriate managers in the risk management department. The department should also collect and organize bank market risk exposure information, risk value, risk limit rules, and information on situations in which limits are exceeded, analyze security investments, and submit regularly to the board of directors reports on the collected information and security investment analysis.

5) Trading book risk management policies

a) Definitions

The trading book is an accounting book of the financial instruments and physical commodities held for trading or hedged by the Bank. Held-for-trading position refers to revenues earned from practical or impractical trading differences. Positions that should not be recorded in the trading book are recorded in the banking book.

b) Strategies

The Bank earns revenues from trading spreads or fixed arbitrage debt and equity instruments are held for short periods of time, purchased with the intention of profiting from short-term price changes through properly control short-term fluctuation of market risk factors (interest rate, exchange rate and stock price). It executes hedge transactions as needed.

- 88 -

c) Policies and procedures

The Bank carries out “Market Risk Management Policy” to control market risk.

Under the above policy, traders may autonomously operate and manage positions within the range of authorized limits and the approved trading strategy. The market risk management department supervises trading positions (including limit, liquidity, the ability to establish hedge positions and investment portfolio risk) based on market information and evaluates market information quality, acquirability, liquidity and scale which are calculated into the pricing model.

d) Assessment policies

The Bank assesses financial instruments once a day on the basis of information obtained from independent sources if market prices are acquirable. If the Bank assesses financial instruments using a pricing model, it should be careful in making mathematical calculations and should review the pricing model’s assumptions and parameters regularly.

e) Measurements

i. The risk valuation and calculation methods are described in Note 46 e, 10).

ii. The calculation of the nominal exposure amount and the risk factor sensitivity value Delta/Vega/DV01 is done through the trading systems.

iii. The Bank makes stress tests using a light scenario (change in interest rate ± 100 bp, change in securities ± 15% and change in exchange rate ± 3%) and serious scenario (change in interest rate ± 200 bp, change in securities ± 30% and change in exchange rate ± 6%) and reports the stress test results to the board of directors.

6) Trading book interest rate risk management

a) Definitions

Interest rate risk refers to a decrease in earnings and value of financial instruments due to adverse interest rate fluctuations. Major instruments with interest rate risk include securities and derivative instruments.

b) Procedures

The Bank has a trading limit and a stop-loss limit (which should be applied to trading instrument by the dealing room and dealers) based on management strategy and market conditions; limits have been approved by the board of directors.

c) Measurements

i. The risk valuation assumptions and calculation methods are described in Note 46 e, 10).

ii. DV01 is used daily to measure the impact of interest rate changes on investment portfolios.

- 89 - 7) Trading book exchange rate risk management

a) Definitions

Exchange rate risk refers to the incurrence of loss from the exchange of currencies in different timing. The Bank’s major financial instruments exposed to exchange rate risk spot contract, forward contracts, and FX option.

b) Policies and procedures

To control the exchange rate risk, the Bank sets trading limit and stop-loss limit and requires the dealing room, dealers, etc., to observe these limits.

c) Measurements

i. The risk valuation assumptions and calculation methods are described in Note 46 e, 10).

ii. Exposure positions are measured daily for the impact of exchange rate changes on investment portfolio value.

8) Trading book equity risk management

a) Definitions

Market risk of equity securities includes individual risk which arises from volatility of market price on individual equity securities and general market risk which arises from volatility of overall market price.

b) Procedures

To control equity risk, the Bank sets investment position limits and stop-loss limits. The limits are approved by the board of directors. Within the limit of authority, The Bank sets investment position limits and stop-loss limits for each dealer.

c) Measurements

i. The risk valuation assumptions and calculation methods are described in Note 46 e, 10).

ii. Exposure positions are measured daily to measure the impact of equity risk on investment portfolio value due from equity risk.

9) Banking book interest rate risk management

Banking book interest rate risk refers to the decrease in the value of the banking book portfolio due to unfavorable interest rate changes. The banking book interest rate risk is not related to the interest rate position shown in the trading book.

Through managing the banking book interest rate risk, the Bank can measure and manage the risk to earnings and financial position caused by interest rate fluctuations.

a) Strategies

To reduce the negative effect of interest rate changes on of net interest revenue and economic value, the Bank adjusts positions within certain limits for better performance. It reviews the interest rate sensitivity regularly to create maximum profit and manage interest rate risk.

- 90 - b) Risk measurement

Risk measurement refers to the interest rate risk of assets, liabilities, and off-balance-sheet positions. The Bank periodically reports interest rate sensitivity positions and measures the impact of interest rate fluctuations on interest rate-sensitive assets and net interest revenue.

c) Risk monitoring

The asset and liability management committee examines and monitors exposure to interest rate risk on the basis of the measurement provided by the risk management sector.

If the risk exposure condition exceeds the limit or target value, the risk management sector should investigate how this condition arose and notify the executive division accordingly. The executive division coordinates with relevant divisions to find solutions to problems. The asset and liability management committee will evaluate solutions for effectiveness. If evaluation results are positive, the relevant division will apply the solutions.

10) Market risk measurement technique

Value at Risk (VaR)

The Bank uses the Risk Manager system and stress testing to measure its investment portfolio risk and uses several hypotheses about market conditions to measure market risk and expected maximum loss of holding positions. The Bank’s board of directors has set a VaR limit. The VaR is controlled daily by the market risk management sector and is a widely used risk measure of the risk of loss on a specific portfolio of financial assets. VaR is the statistical estimate of the potential loss of holding positions due to unfavorable market conditions. For the Bank, VaR refers to a fall in value of its holding position in a day, with a 99% confidence level. The Bank uses VaR and the Monte Carlo simulation method to derive quantitative measures for the market risks of the holding positions under normal conditions. The calculated result is used to test and monitor the validity of parameters and hypotheses periodically. However, the use of the VaR cannot prevent loss caused by huge unfavorable changes in market conditions.

The Bank considers the expected maximum loss, target profit, and operating strategy in setting the VaR, which is proposed by the market risk management sector and approved by the board of directors.

The Bank’s trading book VaR overview.

For the Nine Months Ended September 30, 2017

Average Maximum Minimum Exchange rate risk 9,937 23,804 3,470 Interest rate risk 132,180 188,006 63,850 Equity risk 14,845 18,650 10,519 Total VaR 135,405 193,484 68,804

Note 1: Estimated VaR: Time frame = 1 day, confidence level = 99%, decay factor = 0.94.

Note 2: Historical data period: 2017.01.03 - 2017.09.30

For the Nine Months Ended September 30, 2016

Average Maximum Minimum Exchange rate risk 17,863 63,419 7,362 Interest rate risk 82,839 113,528 53,198 Equity risk 1,990 5,968 817 Total VaR 85,467 123,119 55,392

- 91 -

Note 1: Estimated VaR: Time frame = 1 day, confidence level = 99%, decay factor = 0.94.

Note 2: Historical data period: 2016.01.04 - 2016.09.30

11) Exchange rate risks

Exchange rate risks of holding net positions in material foreign currencies are shown as below:

September 30, 2017 Foreign Currency Converted to (In Thousands) Exchange Rate NTD

Financial assets

Monetary items USD $ 10,205,214 30.31179 $ 309,338,293 CNY 19,065,872 4.56134 86,965,923 Nonmonetary items USD 77,506 30.31179 2,349,352

Financial liabilities

Monetary items USD 10,970,816 30.31179 332,545,071 CNY 17,597,906 4.56134 80,270,033

December 31, 2016 Foreign Currency Converted to (In Thousands) Exchange Rate NTD

Financial assets

Monetary items USD $ 9,214,162 32.28629 $ 297,491,108 CNY 16,685,453 4.63442 77,327,399 Nonmonetary items USD 120,438 32.28629 3,888,496

Financial liabilities

Monetary items USD 10,677,847 32.28629 344,748,065 CNY 15,914,676 4.63442 73,755,293

- 92 -

September 30, 2016 Foreign Currency Converted to (In Thousands) Exchange Rate NTD

Financial assets

Monetary items USD $ 9,204,062 31.36879 $ 288,720,298 CNY 14,444,661 4.69589 67,830,539 Nonmonetary items USD 118,026 31.36879 3,702,333

Financial liabilities

Monetary items USD 10,572,450 31.36879 331,644,964 CNY 13,722,480 4.69589 64,439,257

12) Compliance with the Regulations Governing the Preparation of Financial Reports by Public Banks

a) Interest rate sensitivity information (New Taiwan dollars)

September 30, 2017

181 Days to Items 1 to 90 Days 91 to 180 Days Over 1 Year Total 1 Year Interest rate-sensitive assets $ 876,887,597 $ 16,831,681 $ 41,718,731 $ 85,189,084 $ 1,020,627,093 Interest rate-sensitive liabilities 313,393,882 449,082,665 84,502,634 45,839,362 892,818,543 Interest rate-sensitive gap 563,493,715 (432,250,984 ) (42,783,903 ) 39,349,722 127,808,550 Net worth 123,272,182 Ratio of interest rate-sensitive assets to liabilities (%) 114.32% Ratio of interest rate-sensitive gap to net worth (%) 103.68%

September 30, 2016

181 Days to Items 1 to 90 Days 91 to 180 Days Over 1 Year Total 1 Year Interest rate-sensitive assets $ 862,106,241 $ 31,444,247 $ 55,588,883 $ 98,696,958 $ 1,047,836,329 Interest rate-sensitive liabilities 294,558,609 460,200,172 95,124,285 51,382,486 901,265,552 Interest rate-sensitive gap 567,547,632 (428,755,925 ) (39,535,402 ) 47,314,472 146,570,777 Net worth 118,493,748 Ratio of interest rate-sensitive assets to liabilities (%) 116.26% Ratio of interest rate-sensitive gap to net worth (%) 123.69%

Note 1: The above amounts include only New Taiwan dollars held by the Bank, and exclude 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 are 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).

- 93 - b) Interest rate sensitivity information (U.S. dollars)

September 30, 2017 (In Thousands of U.S. Dollars)

181 Days to Items 1 to 90 Days 91 to 180 Days Over 1 Year Total 1 Year Interest rate-sensitive assets $ 6,311,712 $ 293,491 $ 339,468 $ 1,272,463 $ 8,217,134 Interest rate-sensitive liabilities 3,910,168 4,569,096 668,487 11,529 9,159,280 Interest rate-sensitive gap 2,401,544 (4,275,605 ) (329,019 ) 1,260,934 (942,146 ) Net worth 10,439 Ratio of interest rate-sensitive assets to liabilities (%) 89.71% Ratio of interest rate-sensitive gap to net worth (%) (9,025.25% )

September 30, 2016 (In Thousands of U.S. Dollars)

181 Days to Items 1 to 90 Days 91 to 180 Days Over 1 Year Total 1 Year Interest rate-sensitive assets $ 5,506,327 $ 360,146 $ 239,105 $ 608,635 $ 6,714,213 Interest rate-sensitive liabilities 2,976,151 4,711,709 597,190 11,020 8,296,070 Interest rate-sensitive gap 2,530,176 (4,351,563 ) (358,085 ) 597,615 (1,581,857 ) Net worth 16,611 Ratio of interest rate-sensitive assets to liabilities (%) 80.93% Ratio of interest rate-sensitive gap to net worth (%) (9,522.95% )

Note 1: The above amounts include only USD held by the Bank and exclude contingent assets and contingent liabilities.

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

Note 3: Interest rate-sensitive 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 USD).

13) Transfers of financial assets

The transferred financial assets of the Group that do not qualify for derecognition in the daily operation are mainly securities sold under agreements to repurchase.

The transaction transfers the contractual rights to receive the cash flows of the financial assets but the Group retains the liabilities to repurchase the transferred financial assets at fixed price in the future period.

The Group cannot use, sell, or pledge these transferred financial assets within the validity period of the transaction. However, the Group still bear the interest rate risk and credit risk thus, the Group do not derecognize it.

- 94 - The analysis of financial assets and related liabilities that did not completely meet the derecognizing condition is shown in the following table:

September 30, 2017 Transferred Related Transferred Related Category of Financial Asset Financial Financial Financial Financial Net Position - Assets - Book Liabilities - Assets - Fair Liabilities - Fair Value Value Book Value Value Fair Value Financial assets at fair value through profit or loss Transactions under agreements to repurchase $ 16,530,529 $ 17,031,822 $ 16,530,529 $ 17,031,822 $ (501,293) Available for sale financial assets Transactions under agreements to repurchase 786,047 765,188 786,047 765,188 20,859 Held-to-maturity financial assets Transactions under agreements to repurchase 11,329,667 10,770,000 11,403,007 10,770,000 633,007

December 31, 2016 Transferred Related Transferred Related Category of Financial Asset Financial Financial Financial Financial Net Position - Assets - Book Liabilities - Assets - Fair Liabilities - Fair Value Value Book Value Value Fair Value Held-to-maturity financial assets Transactions under agreements to repurchase $ 1,331,772 $ 1,300,000 $ 1,332,995 $ 1,300,000 $ 32,995

September 30, 2016 Transferred Related Transferred Related Category of Financial Asset Financial Financial Financial Financial Net Position - Assets - Book Liabilities - Assets - Fair Liabilities - Fair Value Value Book Value Value Fair Value Financial assets at fair value through profit or loss Transactions under agreements to repurchase $ 3,846,228 $ 3,851,062 $ 3,846,228 $ 3,851,062 $ (4,834) Available for sale financial assets Transactions under agreements to repurchase 10,014 10,000 10,014 10,000 14 Held-to-maturity financial assets Transactions under agreements to repurchase 2,135,104 2,135,000 2,139,620 2,135,000 4,620

14) 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 balance sheet.

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 one may choose net settlement.

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

September 30, 2017

Netted Financial Liabilities Related Amount Not Netted on Recognized Recognized on Recognized the Balance Sheet Financial the Balance Financial Financial Assets - Gross Sheet - Gross Assets - Net Instruments Cash Received Financial Assets Amount Amount Amount (Note) as Collaterals Net Amount

Derivative instruments $ 15,660,784 $ - $ 15,660,784 $ 11,925,231 $ 1,399,992 $ 2,335,561 Securities purchased under agreements to resell 14,910,677 - 14,910,677 14,908,444 - 2,233

$ 30,571,461 $ - $ 30,571,461 $ 26,833,675 $ 1,399,992 $ 2,337,794

Netted Financial Assets Related Amount Not Netted on Recognized Recognized on Recognized the Balance Sheet Financial the Balance Financial Cash Financial Liabilities - Sheet - Gross Liabilities - Net Financial Collaterals Liabilities Gross Amount Amount Amount Instruments Pledged Net Amount

Derivative instruments $ 17,029,115 $ - $ 17,029,115 $ 12,217,723 $ 1,869,262 $ 2,942,130 Securities sold under agreements to repurchase 28,665,181 - 28,665,181 28,048,387 86,776 530,018

$ 45,694,296 $ - $ 45,694,296 $ 40,266,110 $ 1,956,038 $ 3,472,148

Note: Including netting settlement agreements and non-cash financial collaterals.

December 31, 2016

Netted Financial Liabilities Related Amount Not Netted on Recognized Recognized on Recognized the Balance Sheet Financial the Balance Financial Financial Assets - Gross Sheet - Gross Assets - Net Instruments Cash Received Financial Assets Amount Amount Amount (Note) as Collaterals Net Amount

Derivative instruments $ 20,909,348 $ - $ 20,909,348 $ 13,216,187 $ 819,461 $ 6,873,700 Securities purchased under agreements to resell 7,861,758 - 7,861,758 7,861,683 - 75

$ 28,771,106 $ - $ 28,771,106 $ 21,077,870 $ 819,461 $ 6,873,775

Netted Financial Assets Related Amount Not Netted on Recognized Recognized on Recognized the Balance Sheet Financial the Balance Financial Cash Financial Liabilities - Sheet - Gross Liabilities - Net Financial Collaterals Liabilities Gross Amount Amount Amount Instruments Pledged Net Amount

Derivative instruments $ 21,074,690 $ - $ 21,074,690 $ 14,528,240 $ 741,206 $ 5,805,244 Securities sold under agreements to repurchase 1,836,801 - 1,836,801 1,835,972 - 829

$ 22,911,491 $ - $ 22,911,491 $ 16,364,212 $ 741,206 $ 5,806,073

- 96 - Note: Including netting settlement agreements and non-cash financial collaterals.

September 30, 2016

Netted Financial Liabilities Related Amount Not Netted on Recognized Recognized on Recognized the Balance Sheet Financial the Balance Financial Financial Assets - Gross Sheet - Gross Assets - Net Instruments Cash Received Financial Assets Amount Amount Amount (Note) as Collaterals Net Amount

Derivative instruments $ 9,313,130 $ - $ 9,313,130 $ 6,004,298 $ 84,251 $ 3,224,581 Securities purchased under agreements to resell 25,076,230 - 25,076,230 25,069,114 - 7,116

$ 34,389,360 $ - $ 34,389,360 $ 31,073,412 $ 84,251 $ 3,231,697

Netted Financial Assets Related Amount Not Netted on Recognized Recognized on Recognized the Balance Sheet Financial the Balance Financial Cash Financial Liabilities - Sheet - Gross Liabilities - Net Financial Collaterals Liabilities Gross Amount Amount Amount Instruments Pledged Net Amount

Derivative instruments $ 12,111,661 $ - $ 12,111,661 $ 7,161,038 $ 612,286 $ 4,338,337 Securities sold under agreements to repurchase 6,323,103 - 6,323,103 6,317,831 - 5,272

$ 18,434,764 $ - $ 18,434,764 $ 13,478,869 $ 612,286 $ 4,343,609

Note: Including netting settlement agreements and non-cash financial collaterals.

47. CAPITAL MANAGEMENT

a. Overview

The Group’s capital management goals are as follows:

As a basic target, the Group’s eligible capital should be sufficient to meet their operation need, and higher than minimum requirements of the capital adequacy ratio. Eligible capital and legal capital are calculated under the regulations announced by the authority.

The Group should have adequacy capital to bear the risks, measure capital demand according to risk combination and risk characteristics, fulfill the optimization of resource and capital allocation by risk management.

b. Capital management procedure

The Group’s capital adequacy ratio should meet the regulations announced by the authority. Also, the Group should maintain capital adequacy ratio by considering the Group’s business scale, major operating strategy, risk condition, eligible capital structure, and future capital increase plan, etc. The Group reported to the authority regularly. Overseas subsidiaries’ capital management is in accordance with local regulations.

The Group’s capital maintenance is in accordance with “Regulations Governing the Capital Adequacy and Capital Category of Banks”, etc., and is managed by the Group’s risk management and accounting divisions.

- 97 - 48. RECLASSIFICATION

Financial assets have been reclassified on September 25, 2013. The fair value on the reclassification day were as follows:

Before After Reclassification Reclassification

Available-for-sale securities $ 10,164,016 $ - Held-to-maturity securities - 10,164,016

$ 10,164,016 $ 10,164,016

The effective interest rate of reclassified financial assets on the reclassification day was between 0.9795% and 2.0696%, and the estimated recoverable cash flow was $10,879,405.

The book value and fair value of financial assets reclassified:

September 30, December 31, September 30, 2017 2016 2016

Held-to-maturity securities

Book value $ 2,156,504 $ 9,624,005 $ 9,933,514 Fair value 2,241,494 9,718,072 10,095,279

The gains or losses recorded for the reclassified financial assets (excluding those that had been derecognized) for the nine months ended September 30, 2017 and 2016 and the pro forma gains or losses assuming no reclassifications had been made were as follows:

For the Nine Months Ended September 30 2017 2016

Held-to-maturity securities

Recognition in profit (included in interest revenue) $ 51,039 $ 83,465 Assumed equity adjustment without such reclassification 106,302 180,287

49. CROSS-SELLING INFORMATION

For the nine months ended September 30, 2017 and 2016, the Bank charged SinoPac Securities for $1,644 and $1,635, respectively, as marketing and opening accounts. The rental fee the Bank charged SinoPac Securities for the nine months ended September 30, 2017 and 2016 were $2,390 and $2,463, respectively.

The rental fee the Bank paid to SinoPac Securities were $463 and $518 for the nine months ended September 30, 2017 and 2016. The Bank paid to SinoPac Securities $3,787 and $4,310 for the nine months ended September 30, 2017 and 2016 for bonus as part of the cross-selling agreement.

For other transactions between SPH and its subsidiaries, please refer to Note 42 and Table 5.

- 98 - 50. DISPOSAL OF SUBSIDIARY

The board of director of the Bank has resolved to sell 100% equity of SinoPac Bancorp on July 8, 2016. The case was approved by FSC on July 6, 2017, and the settlement was completed on July 14, 2017 (US time). The transaction price is US$351,551 thousand, and the buyer will pay 10% of the transaction price by issuing 926,192 shares of stock, and pay US$100,000 thousand according to the schedule of the contract (no later than one year after the settlement date). According to the stock purchase agreement, the buyer reserve 10% of the transaction price (US$35,155 thousand) as compensation in the event of the Bank breaching the contract. The buyer will repay the amount plus interest within three years after the settlement date, and the Bank will recognize the gains in the future. The Bank recognized the loss of disposition of subsidiary amounting to $657,901 in July 2017.

a. Consideration of the transaction

SinoPac Bancorp USD NTD

Cash $ 181,241 $ 5,513,519 Listed stock in USA 35,155 1,069,452 Receivables (Note 11) Deferred consideration 100,000 3,042,094 Holdback 35,155 1,069,452

$ 351,551 $ 10,694,517

b. The analysis of assets and liabilities loss of control

SinoPac Bancorp USD NTD

Assets Loans $ 682,149 $ 20,751,609 Other assets 494,757 15,050,992 Liabilities Deposits (812,061) (24,703,653) Other liabilities (45,439) (1,382,308)

Disposal of net assets $ 319,406 $ 9,716,640

c. Loss of disposition of subsidiary recognized on settlement date

SinoPac Bancorp NTD

Consideration received $ 10,694,517 Disposal of net assets (9,716,640) Holdback (1,069,452) Disposal expense (133,201) Assets held for sale (Note 1) 43,174 Unrealized gain reclassified to profit or loss of available-for-sale financial assets on disposal of foreign operations 4,352 Due to loss of control over net asset of subsidiary cumulative exchange difference reclassified to profit or loss (480,651)

Loss of disposition of subsidiary recognized on settlement date $ (657,901)

- 99 -

d. Cash generated from disposal of subsidiary

SinoPac Bancorp NTD

Cash and cash equivalents received as consideration $ 5,513,519 Less: Disposal of cash and cash equivalents 544,968 Disposal expense paid in 2017 116,244

$ 4,852,307

Note 1: According to the stock purchase agreement, the Bank obtained the right to dispose of the designated real estate of the SinoPac Bancorp’s subsidiary, Far East National Bank, within one year. Furthermore the Bank listed out the assets held for sale (under other assets) and has started processing related auction matters. The bank found no objective evidence that the assets had been impaired.

Note 2: Foreign-currency amounts were converted to New Taiwan Dollar at the exchange rate of the settlement date or the expense incurred date.

51. PROFITABILITY

Items September 30, 2017 September 30, 2016 Before income tax 0.47% 0.44% Return on total assets After income tax 0.41% 0.37% Before income tax 5.73% 5.60% Return on net worth After income tax 4.98% 4.75% Profit margin 34.48% 31.01%

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

Note 2: Return on net worth = Income before (after) income tax/Average net worth.

Note 3: Profit margin = Income after income tax/Total net revenues.

Note 4: Income before (after) income tax represents income for the nine months ended September 30, 2017 and 2016.

- 100 - 52. ADDITIONAL DISCLOSURES

a. Disclosures prepared in conformity with the Regulations Governing the Preparation of Financial Reports by Public Banks 18:

No. Item Explanation 1 Acquired and disposed of investment at costs or prices of at least NT$300 million or Table 1 10% of the issued capital 2 Acquisition of individual real estates at costs of at least NT$300 million or 10% of None the issued capital 3 Disposal of individual real estates at prices of at least NT$300 million or 10% of the None issued capital 4 Allowance for service fee to related parties amounting to at least NT$5 million None 5 Receivables from related parties amounting to at least NT$300 million or 10% of the Table 2 issued capital 6 Trading information - sale of nonperforming loans Table 4 7 Financial asset securitization None 8 Related parties transaction Table 5 9 Other significant transactions which may affect the decisions of financial report None users

b. Information related to subsidiary:

No. Item Explanation 1 Financing provided None (Note) 2 Endorsements/guarantees provided None (Note) 3 Marketable securities held Table 3 (Note) 4 Acquisition and disposal of marketable securities at costs or prices of at least None NT$300 million or 10% of the issued capital 5 Derivative transactions of the subsidiary None 6 Acquisition of individual real estates at costs of at least NT$300 million or 10% of None the issued capital 7 Disposal of individual real estates at prices of at least NT$300 million or 10% of the None issued capital 8 Allowance for service fee to related parties amounting to at least NT$5 million None 9 Receivables from related parties amounting to at least NT$300 million or 10% of the None issued capital 10 Trading information - sale of nonperforming loans None 11 Financial asset securitization None 12 Related parties transaction Table 5 13 Other significant transactions which may affect the decisions of financial report None users

Note: Subsidiaries which belong to financial, insurance, securities industries and its main business registration include financing provided, endorsements/guarantees provided, acquisition and disposal of marketable securities do not need to disclose above information.

c. The related information and proportionate share in investees: None.

d. Information on investment in Mainland China: Table 6.

- 101 - 53. OPERATING SEGMENT INFORMATION

Based on chief of decision maker’s resource allocation and department performance review, the Bank has divided the business segments based on the services and products provided, excluding subsidiary accounted under the equity method.

The accounting standards and policies apply to all of the business segments in accordance to IFRS 8 “Operating Segments”, the Bank’s operating segments for the nine months ended September 30, 2017 and 2016 are without change. The Bank reports the following.

Domestic branches: Provides service and products through 127 branches and Banking Division of the Head Office.

Financial transaction: Provide investment and bonds transaction services through financial operation units.

Oversea branches: Provides service and products for oversea customers through oversea branches.

Other business segments: Includes consumer finance, automobile loan and services of the United States subsidiary (the Bank disposed the equity of SinoPac Bancorp on July 2017, relevant information please refer to Note 50), SinoPac Capital Limited (HK.) - the Bank’s subsidiary and Bank SinoPac (China) Ltd. - the Bank’s subsidiary, were not identified to disclose as on individual segment.

The Group’s reporting segments revenue and operating result are shown in the following table.

- 102 - Segment revenues and results

(In Thousands of New Taiwan Dollars)

For the Nine Months Ended September 30, 2017 Financial Non-operating Domestic Branches Oversea Branches Others Operating Segments Total Transaction Segments Net interest $ 7,771,283 $ (481,167) $ 1,360,502 $ 1,689,055 10,339,673 $ 779,139 $ 11,118,812 Interest revenue 11,121,456 (60,799) 2,362,114 2,178,861 15,601,632 3,366,118 18,967,750 Revenue amount segments 2,166,290 (103,989) (382,407) (200,423) 1,479,471 (1,479,471) - Interest expense 5,516,463 316,379 619,205 289,383 6,741,430 1,107,508 7,848,938 Commission and fee revenues, net 3,123,554 (16,027) 203,565 537,743 3,848,835 89,855 3,938,690 Others 369,754 1,812,260 351,851 276,460 2,810,325 (299,490) 2,510,835 Income (loss) Net revenue 11,264,591 1,315,066 1,915,918 2,503,258 16,998,833 569,504 17,568,337 Allowance for (reversal of) doubtful accounts and guarantees 171,232 - 311,843 (80,790) 402,285 (58,644) 343,641 Operating expense 7,268,055 273,650 808,950 1,771,293 10,121,948 126,770 10,248,718 Income before income tax 3,825,304 1,041,416 795,125 812,755 6,474,600 501,378 6,975,978 Income tax expense (475,066) (136,554) (121,048) (83,462) (816,130) (102,781) (918,911) Net income 3,350,238 904,862 674,077 729,293 5,658,470 398,597 6,057,067

For the Nine Months Ended September 30, 2016 Financial Non-operating Domestic Branches Oversea Branches Others Operating Segments Total Transaction Segments Net interest $ 7,677,590 $ (295,303) $ 1,336,574 $ 1,852,336 $ 10,571,197 $ 508,146 $ 11,079,343 Interest revenue 11,167,825 16,733 2,297,059 2,375,818 15,857,435 2,748,687 18,606,122 Revenue amount segments 2,179,465 (72,200) (385,993) (244,518) 1,476,754 (1,476,754) - Interest expense 5,669,700 239,836 574,492 278,964 6,762,992 763,787 7,526,779 Commission and fee revenues, net 3,496,023 (28,303) 280,880 575,685 4,324,285 115,405 4,439,690 Others 283,033 930,719 57,962 (39,344) 1,232,370 748,323 1,980,693 Income (loss) Net revenue 11,456,646 607,113 1,675,416 2,388,677 16,127,852 1,371,874 17,499,726 Allowance for (reversal of) doubtful accounts and guarantees 1,331,524 (37,118) (482,364) (303,525) 508,517 (41,473) 467,044 Operating expense 7,322,801 271,972 858,059 2,168,175 10,621,007 21,014 10,642,021 Income before income tax 2,802,321 372,259 1,299,721 524,027 4,998,328 1,392,333 6,390,661 Income tax expense (435,330) (57,788) (201,895) (60,393) (755,406) (209,294) (964,700) Net income 2,366,991 314,471 1,097,826 463,634 4,242,922 1,183,039 5,425,961

- 103 - TABLE 1

BANK SINOPAC AND SUBSIDIARIES

ACQUIRED AND DISPOSED OF INVESTMENT AT COST OR PRICES OF AT LEAST NT$300 MILLION OR 10% OF THE ISSUED CAPITAL FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 (In Thousands of New Taiwan Dollars or Shares)

Beginning Balance Acquisition Disposal Ending Balance Type and Name of Company Name Account Counterparty Nature of Relationship Carrying Gain (Loss) on Marketable Securities Units Amount Units Amount Units Amount Units Amount Value Disposal

Bank SinoPac SinoPac Bancorp Equity investments - equity Cathay General Subsidiary of the Company 67 $ 9,946,933 - $ (230,293) 67 $ 10,694,517 $ 9,716,640 $ (657,901) - $ - method Bancorp (Note 1) (Note 2)

Note 1: Included investments accounted for the equity method and the share of profit or loss and other comprehensive income of those investments.

Note 2: Loss on sale of investments’ calculating, please refer to Note 50,c.

- 104 - TABLE 2

BANK SINOPAC AND SUBSIDIARIES

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$300 MILLION OR 10% OF THE ISSUED CAPITAL SEPTEMBER 30, 2017 (In Thousands of New Taiwan Dollars)

Overdue Amounts Received Turnover Allowance for Company Name Related Party Relationship Ending Balance in Subsequent Rate Amount Action Taken Bad Debts Period

Bank SinoPac SinoPac Financial Holdings Company Limited The parent company of the Bank $ 1,262,066 - $ - - $ - $ - (Note)

Note: Most of receivables resulted from the use of the linked-tax system (recognized in current tax assets) and related parties.

- 105 - TABLE 3

BANK SINOPAC AND SUBSIDIARIES

MARKETABLE SECURITIES HELD SEPTEMBER 30, 2017 (In Thousands of New Taiwan Dollars or Shares)

September 30, 2017 Carrying Fair Value or Name of Holding Company Type and Name of Marketable Securities Relationship Financial Statements Account Shares/Units/ Percentage of Note Amount Net Asset Value Face Amount Ownership (Note 1) (Note 1)

SinoPac Capital Limited (H.K.) Stock MeiTa Industrial Co., Ltd. - Unquoted equity investments 212 $ 12,904 0.49 $ 12,904 Note 2

Fund SinoPac China IPO Fund - Available-for-sale financial assets 47 2,102 - 2,102 Note 3 China Enterprise Capital Limited - Available-for-sale financial assets 0.02 3,987 - 3,987 Note 3

SinoPac Property Insurance Agent Co., Ltd. Bond Government bond 88-3 - Held-to-maturity financial assets 600 605 - 636 Pledge

SinoPac Life Insurance Agent Co., Ltd. Bond Government bond 88-3 - Held-to-maturity financial assets 600 605 - 636 Pledge

Note 1: Foreign-currency amounts were translated to New Taiwan dollars at the exchange rate as of the balance sheet date.

Note 2: Fair values or net asset values were based on the carrying amounts.

Note 3: Fair values were based on the closing prices of the underlying assets of the beneficial certificates as of September 30, 2017.

- 106 - TABLE 4

BANK SINOPAC AND SUBSIDIARIES

TRADING INFORMATION - SALE OF NONPERFORMING LOANS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 (In Thousands of New Taiwan Dollars)

Carrying Amount Selling Price Gain or (Loss) on Date Counter-parties Loans Attachment Relation (Note) (Note) Disposal

Bank SinoPac April 4, 2017 South Debt Trading Joint Stock Company Syndicated loan $ - $ 89,357 $ 89,357 - None

Note: Carrying amount is original credit amount net of doubtful account.

- 107 - TABLE 5

BANK SINOPAC AND SUBSIDIARIES

RELATED PARTIES TRANSACTIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 (In Thousands of New Taiwan Dollars)

Description of Transactions Nature of Percentage of No. Transaction Company Counterparty Relationship Transaction Transaction Consolidated (Note 1) Financial Statements Account (Note 2) Amount Item Revenue/Assets (Note 3)

0 Bank SinoPac SinoPac Capital (H.K.) Limited a Deposits and remittances $ 711,317 Note 4 0.05 SinoPac Capital (B.V.I.) Ltd. a Deposits and remittances 47,122 Note 4 - RSP Information Service Company Limited a Deposits and remittances 16,387 Note 4 - SinoPac Insurance Brokers Ltd. a Deposits and remittances 56,932 Note 4 - SinoPac Insurance Brokers Ltd. a Fee revenues, net (fee revenue) 11,423 Note 4 0.07 SinoPac Life Insurance Agency a Receivables, net 107,000 Note 4 0.01 SinoPac Life Insurance Agency a Deposits and remittances 754,205 Note 4 0.05 SinoPac Life Insurance Agency a Fee revenues, net (fee revenue) 354,636 Note 4 2.02 SinoPac Life Insurance Agency a Other noninterest net revenues 7,819 Note 4 0.04 SinoPac Property Insurance Agent Co., Ltd. a Deposits and remittances 14,324 Note 4 - SinoPac Property Insurance Agent Co., Ltd. a Fee revenues, net (fee revenue) 9,350 Note 4 0.05 SinoPac Property Insurance Agent Co., Ltd. a Other noninterest net revenues 1,506 Note 4 0.01 Bank SinoPac (China) Ltd. a Due from the Central Bank and call loans to other banks, net 2,353,379 Note 4 0.16 Bank SinoPac (China) Ltd. a Receivables, net 116,281 Note 4 0.01 Bank SinoPac (China) Ltd. a Interest revenue 21,363 Note 4 0.12

1 SinoPac Capital (H.K.) Limited Bank SinoPac b Cash and cash equivalents, net 711,317 Note 4 0.05

2 SinoPac Capital (B.V.I.) Ltd. Bank SinoPac b Cash and cash equivalents, net 47,122 Note 4 -

3 RSP Information Service Company Limited Bank SinoPac b Cash and cash equivalents, net 16,387 Note 4 -

4 SinoPac Insurance Brokers Ltd. Bank SinoPac b Cash and cash equivalents, net 18,130 Note 4 - Bank SinoPac b Other financial assets, net 38,802 Note 4 - Bank SinoPac b Fee revenues, net (fee expenses) 11,423 Note 4 0.07

5 SinoPac Life Insurance Agency Bank SinoPac b Cash and cash equivalents, net 754,205 Note 4 0.05 Bank SinoPac b Payables 107,000 Note 4 0.01 Bank SinoPac b Fee revenues, net (fee expenses) 354,636 Note 4 2.02 Bank SinoPac b Other operating expenses 7,819 Note 4 0.04

6 SinoPac Property Insurance Agent Co., Ltd. Bank SinoPac b Cash and cash equivalents, net 14,324 Note 4 - Bank SinoPac b Fee revenues, net (fee expenses) 9,350 Note 4 0.05 Bank SinoPac b Other operating expenses 1,506 Note 4 0.01

(Continued)

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Description of Transactions Nature of Percentage of No. Transaction Company Counterparty Relationship Transaction Transaction Consolidated (Note 1) Financial Statements Account (Note 2) Amount Item Revenue/Assets (Note 3)

7 Bank SinoPac (China) Ltd. Bank SinoPac b Deposits from the Central Bank and banks $ 2,353,379 Note 4 0.16 Bank SinoPac b Payables 116,281 Note 4 0.01 Bank SinoPac b Interest expense 21,363 Note 4 0.12

Note 1: Transactions between parent company and subsidiaries should be distinguished as follows:

a. Parent company: 0. b. Subsidiaries are numbered in sequence from 1.

Note 2: Types of transactions with related parties were classified as follows:

a. Parent company to subsidiaries. b. Subsidiaries to parent company. c-1. Subsidiaries A to B. c-2. Subsidiaries B to A.

Types of transactions with related parties classified as category a and category c-1, in the trading relationship and material intercompany transactions between parent company and subsidiaries above, are XBRL reporting items which are based on the Taiwan Stock Exchange letter (Ref. No. 1030005380).

Note 3: In the computation of percentage of consolidated revenue/assets, if the amount is the ending balance of assets or liabilities, the accounts percentage will be calculated by dividing the consolidated assets or liabilities; if the amount is the amount of income or expense, the accounts percentage will be cumulated by dividing the consolidated revenues in the same period.

Note 4: For the transactions between the Bank and related parties, the terms are similar to those transacted with unrelated parties.

(Concluded)

- 109 - TABLE 6

BANK SINOPAC AND SUBSIDIARIES

INFORMATION ON INVESTMENT IN MAINLAND CHINA FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 (In Thousands of New Taiwan Dollars)

Investment Flows Accumulated Accumulated Outflow of Outflow of Earnings Equity in the Accumulated Main Total Amount Investment Percentage Investment (Losses) of Earnings Carrying Value Inward Investee Company Businesses of Paid-in Method of Investment from Taiwan of from Taiwan Outflow Inflow Investee (Losses) (Notes 2 and 3) Remittance of and Products Capital as of Ownership as of (Notes 2 and 3) (Notes 2 and 3) Earnings September 30, January 1, 2017 2017

Bank SinoPac (China) Commercial $ 9,817,107 Investment in Mainland China $ 9,817,107 $ - $ - $ 9,817,107 $ 182,106 100 $ 182,106 $ 9,996,825 $ - Ltd. Bank directly

Accumulated Investment in Mainland Investment Amounts Authorized by Limit on Investment China as of September 30, 2017 Investment Commission, MOEA

$9,817,107 $9,817,107 $74,202,377

Note 1: The accumulated investment amounts in Mainland China as of September 30, 2017 are US$323,871 thousand and had been authorized by the Investment Commission, MOEA are US$323,871 thousand.

Note 2: Earnings of investee, equity in the earnings and carrying value for the nine months ended September 30, 2017 have been reviewed by independent certified public accountants.

Note 3: Foreign currencies are translated to N.T. dollars with current rate of the date of balance sheet, only the gains or losses investments are translated with current period average rate.

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