ABOUT THE COVER Bank of Commerce’s current trajectory is hinged on a single philosophy: Superior Service. Through the years, the Bank has grown and evolved, undergoing both internal and external transformations. Yet, through it all, one thing remains unchanged: our commitment to serving you, our valued customers. We pride ourselves in putting your welfare first, keeping in mind what matters most to you. Your family. Your business. Your community. Your future. Among our valued clients who can attest to the Bank’s commitment to service are (from top to bottom): UP Diliman Professor Nathalie Verceles; Rex Book Store, Inc. Chairman and President Atty. Dominador Buhain; EEI Corporation President and CEO Roberto Jose Castillo; The Coffee Bean and Tea Leaf Finance Director Edelfonso Narvaez; Baliwag Group of Companies President, CEO and General Manager Joselito Tengco; Drysdale Marketing Owners Noel Bayonito and Maila Bayonito; MEC Property Management, Inc. President and JADDAX International, Inc. Vice President Maggie Chavez Saribong; AXN Tyre Medic Center Owner Susan Lim; FLAX Inc. President and CEO Akira Nakata; and Karldan Trading Owner Armina San Jose. We are honored to have been part of their journey and confident that our partnership will achieve even greater heights of success in the future. We are Bank of Commerce. We think CUSTOMERS. 2015 annual report | bank of commerce TABLE OF CONTENTS 02 Company Profile 04 Vision, Mission, and Service Promise 06 Economic Forecast 08 Report from the Chairman and President & CEO 11 Client Testimonials 15 Products and Services 17 Financial Highlights 18 Operational Highlights 24 Corporate Social Responsibility 26 Corporate Governance 29 Table of Organization 30 Board of Directors 35 Senior Executive Team 38 Management Committees 40 Risk Management 47 Capital Management 50 Consumer Protection 52 Internal Audit Division Report 54 Statement of Management’s Responsibility for Financial Statements 55 Audited Financial Statements 56 Report of Independent Auditors 58 Statements of Financial Position 60 Statements of Income 61 Statements of Comprehensive Income 62 Statements of Changes in Equity 64 Statements of Cash Flows 66 Notes to the Financial Statements 157 Senior Officers 160 Branch / ATM Directory 1 ABOUT US COMPANY PROFILE Bank of Commerce is one of the country’s progressive of the oldest and leading banks in the United States, and a commercial banks and is licensed by the Bangko Sentral ng local investment group acquired ComBank in 1988 and was Pilipinas (BSP). The Bank has been in operation since 1963 then renamed Boston Bank of the Philippines. and traces its origins to the Overseas Bank of Manila with headquarters in Binondo, Manila. In November 1991, the Bank changed its official name to Bank of Commerce. The buyout of the majority interest The Bank has since then evolved through different phases of the First National Bank of Boston was completed in of growth. In 1980, Overseas Bank of Manila changed its 1993, placing Bank of Commerce under complete Filipino name to Commercial Bank of Manila. The following year, ownership. As part of its growth plans, Bank of Commerce the Government Service Insurance System (GSIS) acquired acquired Pan Asia Bank and purchased selected assets the Commercial Bank of Manila and used “ComBank” as and liabilities of Trader’s Royal Bank in 2001. These the Bank’s short name. In 1984, ComBank acquired takeovers significantly increased the Bank’s presence Royal Savings Bank. The First National Bank of Boston, one in the banking industry. 2 2015 annual report | bank of commerce San Miguel Properties, Inc., a subsidiary of San Miguel banking solutions and a complete range of products and Corporation (SMC), and San Miguel Corporation Retirement services in deposit, commercial loans, credit card services, Fund, the registered retirement plan of SMC group employees, consumer banking, corporate banking, treasury, asset emerged as substantial shareholders of Bank of Commerce management, trust, and investment. In terms of service in 2008. The new majority ownership reinforced capital, reach, the Bank relaunched the Retail and Corporate Internet bolstered reserves, improved risk management systems, Banking facilities with enhanced features to encourage and placed dynamic individuals at the helm, resulting in consumers and corporate clients to transact regular banking strengthened banking operations, systems, and services. services such as bills payment, fund transfers, card loading, and other services via the internet banking platform. On January 16, 2013, the Securities and Exchange Commission (SEC) approved the extension of the corporate The Bank has a network of 128 branches and 265 automated life of Bank of Commerce for another fifty (50) years from teller machines (ATMs) strategically located nationwide. December 13, 2013. Bank of Commerce provides innovative 3 4 2015 annual report | bank of commerce ABOUT US VISION, MISSION, AND SERVICE PROMISE VISION To be the bank of choice for the business community, delivering total banking experience characterized by friendly and outstanding service with the desire to provide a better quality of life for all. MISSION Our business is professional banking. We commit to serve our clients with the highest standards of integrity and quality. We strongly believe in our human resources and dedicate ourselves to their continuous development. We will create value for our stakeholders by being among the top banks in the industry. In so doing, we contribute to nation building. We are Bank of Commerce. SERVICE PROMISE With integrity and financial stability, we commit to deliver superior service to you, our discerning customers. Through competent and warm professionals who understand, anticipate, and fulfill your needs with a sense of urgency in a safe and guest-friendly environment, we promise you a meaningful banking experience. 5 ECONOMIC FORECAST POISED FOR GROWTH The world continues to see a stronger, more aggressive Philippine economy that remains steadfast in its pursuit of accelerated growth. The country’s impressive performance in 2015 is a strong testament to its firm commitment to achieving excellence in all sectors of the economy, building a solid foundation for sustained growth momentum in 2016 and beyond. The Philippines achieved an average full-year GDP growth With sound fundamentals and ongoing structural changes of 5.8%. The robust growth exhibited during the last quarter that are designed to increase the country’s resiliency amidst of 2015 reflects the country’s steady progression toward a external shocks, the Philippines heads toward a brighter higher growth path and affirms its position as one of Asia’s 2016 and gears up to provide a stronger economy and a fastest-growing economies. positive business outlook. Taking a cue from the satisfactory performance the country has displayed in 2015, the This impressive GDP growth was driven by higher National Economic and Development Authority (NEDA) consumer spending, which grew by 6.2%, and the strong expects our GDP to grow between 6.8% and 7.8% in 2016. performance of the construction sector, posting a 20.6% International credit-rating agency Standard & Poor’s, the increase compared to 2014’s 6.3%. Government spending Asian Development Bank (ADB), and the International jumped by 9.4% against 1.7% last year, while public and Monetary Fund (IMF) are likewise confident that the solid private investments posted a 13.6% increase compared to macroeconomic fundamentals that have been put in place 5.4% in 2014. The business process outsourcing (BPO) by the Aquino administration will bring an average full-year industry and the services sector contributed to the growth of above 6%. economy by growing 6.7% versus 5.9% in 2014. A record- low inflation rate of 1.4% also complemented our steady While still in the early stages of sustained economic GDP growth. growth, the Philippines is expected to remain one of the best- performing countries in Asia, focused on improving and The country’s performance has no doubt earned the stabilizing its fiscal position. The Bangko Sentral ng Pilipinas confidence of major international credit rating agencies. (BSP) has set the inflation rate target between 2% and 4% Fitch Ratings upgraded its investment rating on the and the Peso exchange rate to average between PHP42 and Philippines to BBB Positive from BBB Stable in 2014, while PHP45 in 2016. The government has also set its sights on Japan Credit Rating Agency and National Information and ramping up public infrastructure spending, aiming to spend Credit also affirmed an upgrade in their sovereign ratings. PHP766.5 billion or 5% of the target GDP to sustain the country’s growth momentum. Budget deficit target for next Such remarkable growth proves how the domestic economy year is set at PHP284 billion or 2% of the target GDP. continues to benefit from successful governance and economic reforms that translate to sustained investment As the Philippines aims for higher growth in 2016, and consumption growths. The upward economic trajectory strengthening each sector of the economy, as well as the also helps the nation curb the impacts of weather-related socioeconomic resiliency of each individual and community disasters, global economic slowdown, the elections, and has never been more important. NEDA has underscored the other external factors. need to diversify products and markets in the agriculture, industry, and services sectors, as well as to design more Amidst such challenges and uncertainties, the resiliency projects that support infrastructure development, exhibited by the country has merited enough optimism to improve the transport and logistics system, and harness place it among the world’s fast emerging markets. Currently, human capital by way of higher-value jobs. In fortifying the the Philippines’ economic ranking in the Index of Economic socioeconomic resiliency of Filipinos, 2016 should bring in Freedom has jumped to 70th from 76th in 2014. The World more opportunities to introduce risk mitigation measures, Economic Forum likewise moved the Philippines to the 47th disaster preparedness, social protection, and social insurance spot from 52nd in its Global Competitiveness Index.