Annual Report 2018

PARTNER RURAL BANK (COTABATO), INC.

DISCLOSURE REQUIREMENTS INTHE ANNUAL REPORT

(Per Circular No. 956, series of 2017.)

The purpose of instituting the amendments in Cir. No. 956, s. 2017 is to ensure that the required disclosure requirements are included in the annual reports that are submitted to the Bangko Sentral ng Pilipinas (BSP). The objective, as explained, does not only promote disclosure but also instill transparency of financial institutions and banks to the public in general, and their customers. The financial information of the bank will be shared to the public, most especially the depositors, in knowing, or at least in being briefed, on the conditions, practices and practices of the bank.

As an initial salvo, it has to be emphasized that it is the Board of Directors of the Partner Rural Bankwhohave the overall responsibilitiesin ensuring that the annual reports of the bankabide by the minimum requirement regarding the items that are to be disclosed.

The bank’s annual report shall include discussions and/ or analyses of the following information, as is currently being done in compliance with the BSP Cir. No. 956, s.2017.

Corporate Policy.

Brief description of the bank’s vision and mission statements.

The bank’s vision and mission statements were upgraded and adopted at the beginning of 2018to reflect the changes in the environment, the saving and credit markets, and the socio – political conditions of the country as a whole. Having a new “Vision and Mission” workshop has been taken upin order to upgrade and change the old vision and mission which were adopted way back in 2012 - and after more than five (5) years.It was revised in order to respond to the changes in the financial and banking industries such as electronic banking, on – line banking, mobile banking, digital banking, and all those technology – dependent versions of banking. The 2018 – 2023 V&M aremeant to work and be functional to the people and their needs. The new V&M are the following:

Vision: To be a premier bank and dominant market leader that provides competitive, innovative and diversified banking products and services for countryside progress.

Mission:Partner Rural Bank, a preferred financial provider, is committed to deliver convenient,

creative and advanced technologies to all its customers, clients and stakeholders branch-wide.

Partner Rural Bank retains its focus and concentration to Food production and food security by sustained support to farmer – cultivators, agricultural producers, agri – business and commercial business sectors, including Market vendors/ stall holders. Pushing for rice – productivity of tenant – tillers are still within the rural credit concerns of Partner Rural Bank. However, the upgrading into the electronic and highly computerized banking system, banking products and services, and financial technologies have gone into the banks’ crucial stage of changes and thereby penetrated the banking industry, and Partner Rural Bank itself since 2014. The improving financial technologies explain the tendency of the bank towards innovations in banking products and services. With the innovations, it is also viewed that the bank can transform into a dominant position in the industry, at least within the area or region of the bank in Mindanao/ or Southern Philippines.

With the possible changes and developments in the banking industry, the bank envisaged more developments to come these coming years. The new V&M reflected the possible changes and transformations due to changes in society, the changes in the economy as a whole, and the banking industry responses financial policies, entry of banking technologies and new approaches,.

Partner Rural Bank’s brand that differentiates it from other banks.

Partner Rural Bank, Inc. which used to be named the Rural Bank of Pigcawayan (North Cotabato), Inc. has been known since its initial start – up years of some 40 years ago as an agricultural – focused bank.It got heavily involved into the Marcos - driven Masagana – 99 Supervised Credit Program of the Central Bank from its first year in 1978 until the closure and collapse of the program in 1984. From then on, the bulk of its loan portfolio and loan products are in agriculture and to support the needs and requirements of the agricultural sector, particularly the palay farming sector in Cotabato. Its focus on supporting the credit needs, saving mobilization, generation of deposits, and other requirements of the farmers and their farming households, particularly those engaged in paddy - rice production, have led to its special feature and characteristics. Partner Rural Bank, Inc. due to the concentration in the production support to dominantly rice farmers, has not been involved or engaged in “micro – credits”, or microfinance of the Grameen Bank/ Dr. Yunus type, nor to so many cases of rural bank focused on “salary loans” to public school teacher and private and governmentemployeesincluding those in the LGUs. It has been the view of the bank in its early years, during the 1980’s that the bank has been set - up in order to provide credits to those who needed them most, rather than to those who already have resources and own – funds to rely on. Compared to other banks with practically unlimited resources during its initial years of operations, the bank has limited capital and assets which definitely it could not put to waste. It was at that early stage when the bank was branded and described as the small bank for the impoverished and subsistence – dependent farmers,or the rural bank that supports changes in the agrarian social system, and yet gives emphasis to its long – term survival and viability. Lately, with its introduction of e – banking with its installation of ATM 24/7 units, it is increasingly getting popularized as a rural bank that is open any time of the day, and any day of the week, providing access and availability of funds to the public. It is now known to be one among few rural banks with such facilities and technologies that are open for the rural folks and communities, and even without the financial support from foreign donors and large – scale commercial investors from nowhere. The people of Cotabato, or probably even in Central Mindanao, look at the Partner Rural Bank as a small rural bank that rose out of a small town in Cotabato, and managed and supervised by people from the region of Cotabato, and not by outsiders.

Business model of the bank.

The introduction and adoption of electronic/ digitalized banking changed the traditional business model absorbed during the olden days of small – farmer lending approach based on an agri – based retail and direct lending. The traditional agricultural lending mainly to farmers, cultivators, and producers and which has been the virtually single source of income of the bank has been combined with non – agricultural and non - interest income sources such as service fees and charges from ATM’s, from the payment system, from fund transfers, remittances, and the likes. Retail loans moreover have moved to Micro/ Small and Medium enterprises (MSME) as a non – agricultural loan source of revenues – but still on a very limited scale.

The local and provincial economy has changed substantially with the flourishing of the OFW and remittances as an equally major source of funds of rural and farming households. With the large inflow of funds annually from OFW remittances, penetrating even the almost isolated, far – flung villages in the Cotabato provinces, the movement of domestic funds and monies could be tracked down from the remittances abroad, and then out to the local markets for consumptions, constructions, purchases, and investments. Partner Rural Bank, Inc. has to remodel itself, if it is to be relevant to the workings of the rural and provincial economies. Partner Rural Bank, Inc. did a tracking of the flow of cash and funds, and tried to undertake changes, within its financial capability, and adjust to the changing realities of the rural financial conditions. Hence, these rural economic changes that evolved over the past two (2) decades led to the bank’s adoption of the dual emphasis of its operation: First, maintaining the rural and agricultural focus to farmers through its agricultural loans and commercial/ market vendor loans; and Second, the other, getting into the e - banking, digital banking products, ATM investments, computerized and IT approaches – and yet still respond to the needs of the rural poor, the subsistence farmers, and the agrarian reform beneficiaries.

Major source of loan funds are still the saving accounts, but could be backed up by retail funds generated through rediscounting from the Land Bank, the primary government – owned financial institution, and even BSP – DLC. Rediscounting could still be very costly, and hence, in the business model of the bank, saving mobilization is still the main source of cheaper funds that can increase loans further. The bank’s limited number of branches, that is 8 branches, are still focused on the marketing, selling, promotion and solicitations of the bank’s and services. Their performances are calculated in terms of the loans generated, saving and deposit mobilized, and income generated, all in relation to all the targets. All the branches are supervised and checked through the bank’s BBRASSO – that is, the “Bank Branches Review, Administration, Support and Supplies Office. BBRASSO keeps watching and checking all the branches, and sees to it that the set targets, the set performances, and the revenues generated, are all there until the end – of – day.

Financial summary/ Financial Highlights.

Two (2) years comparative view of profit, capital, performance and balance sheet data/ financial ratios covering 2017 and 2018 could give good insights about the bank. Partner Rural Bank, Inc. does not have subsidiaries, but has five (5) branches and two (2)OBO/Extensions offices. Bank’s total assets by end of 2018 is ₱253.0 m. Deposits have reached ₱188.0 million pesos. Net income by end of 2018 was ₱5.2 million.

Partner Rural Bank, Inc. – Financial Summary / Financial Highlights
	Consolidated
Minimum Required Data:	2018	2017
Profitability:
Total Net interest income -	₱ 20,675,954.00	₱ 18,505,505.00
Total Non – interest income -	16,083,911.00	13,561,004.00
Total Non – interest expenses -	29,097,161.00	27,434,921.00
Pre – provision profit -	-	-
Allowance for Credit losses -	2,924,017.00	2,165,241.00
Net Income -	₱5,268,115.00	₱ 3,007,164.00
Selected Balance Sheet data:
Liquid Assets -	235,861,120.00	230,361,498.00
Gross Loans -	142,324,439.00	148,863,753.00
Total Assets -	253,024,822.00	243,054,304.00
Deposits -	188,413,919 .00	158,069,758.00
Total Equity -	62,595,089.00	55,831,003.00
Selected Ratios:
Return on Equity -	8.89%	5.59%
Return on Assets -	2.12%	1.36%
Capital Adequacy Ratio -	25.97%	22.96%

3.Financial condition and result of operations.

The president’s and management reports presented during the Annual stockholders’ meeting held on the 12^th day of January, 2019 at the Rural Bank’s Head Office building at Pigcawayan municipality, Cotabato. These are herewith attached. The reports already contain the financial highlights of the two previous years of 2017 and 2018.

Review of the bank’s operations and results, including the significantchanges during 2018.

Despite difficulties met during 2018, the total resources of the bank increased by 4.10%. That is, from ₱243.0 m. as of Dec. 31, 2017 to ₱253.0 m. by year ending Dec. 31, 2018. (Exhibit A). This increase in assets is not much compared to the asset increase last year compared to 2018 due to the decreases on earning assets and the lowering of the loan portfolio. The earning asset decreased by 3.9% from ₱ 186.0 m. in 2017 to only ₱ 179.0 m. by end of 2018. This decrease in earning assets was mainly due to the drop in the total loan portfolio.

Highlight of major activities.

By year 2018, the total number of operating units are five (5) branches and two (2) branch-lites, formerly referred to as Extension Offices. The two (2) EO’s were converted to branch-lite units of the Pigcawayan Main Branch, and the Mlang Branch. The lending and saving – related operations of the two unitswere maximized.

Loan decrease hit ₱6.0 m. from ₱146.0 m. in 2017 to ₱139.0 m. by end of 2018. Although the target Loan per plan/ targets should have reached ₱209.0 m loans for the year 2018, and ended up ₱ 70.0 m. short or lesser. The forcibly induced aggressiveness on the loan side still missed its target volume. More marketing efforts however have to be done since higher competition from other financial institutions are being felt. Credit cooperatives are also engaged, not in coop - member assistance, but in lending to the public in general, that is, lending even to non – members. To correct the results of the previous years’ lower income and poor financial returns, Partner Rural Bank has gone more intense and aggressive in its marketing drives for larger loan portfolio, and also saving by promoting the ATM/ Banc Net links.

Major strategic initiatives.

The rise of new technologies in banking and finance that would seem to reduce the physical mode of banking and the payment system has been noticed and viewed by the bank’s management. There is also the on – going and gradual popularity of web – based electronic banking. Along the same lines, the rise of cryptocurrencies as a novel type, new schemes, of asset and payment system have to be watched out critically by the bank’s IT unit and top management in order to see or anticipate what such things could do to the banking industry. In the meantime however, as a strategic initiative, the bank should insistently undertake R&D, consult technically capable individuals who could provide ideas to the bank, and do experimentations in those related changes. One of those could be the PayPal, Interbank transactions, novel payment systems. One benefit that these could do as the bank experiments them is to be advanced into these technologies.

The current changes and improvements in the banking industry will also impact the bank’s Organizational structure. Some possible changes could be anticipated in the coming years. Compared to the present organizational set – up of Partner Rural Bank, more attention could be provided in areas and growth possibilities such as in Business Banking and added Commercial Lending due to the rise in volume of commercial transactions and exchanges. The expansion of Credit Card use could also be viewed as an important component now with connections with Euro Pay, Master Card, and Visa Card (EMV). The bank may need to organize its own Investment Banking organizational team, one that relates to “private banking” or in “wealth management”. Along with the above also would be the need to possibly expand Merchant Services, Mortgage Lending, and with Treasury and Cash Management, and eventually strengthen the organization for Online & Mobile Banking, and Retail Operations. The probabilities and chances in the near future are numerous. The strategic initiatives will not only be too widespread and too challenging. They can also be too mind – boggling for a small rural bank with limited personnel that can be mobilized.

Challenges, opportunities and responses during 2018.

That the bank was able to enter into the network of bankers, and within BancNet, is a valuable opportunity for the Partner Rural Bank, Inc. The Partner Rural Bank in the first place was able to take on the shift from the DOS based Microbanker CASA to the UN – FAO / GTZ - owned and managed Windows Version of Microbanker in 2010 – 2012. The shift to the UN - supported computerization project for Food and Agricultural finance institution was also a substantial gain and opportunity – without which, the bank’s link with the BancNet network could have been difficult. The online and centralized system of the Microbanker Windows version gave those opportunities, yet also the challenges, such as the centralized CASA system, the integrated system for Loan, saving, GL, and reporting module. The available ATM module of the program drove the tie – up with Banc Net and the required switch with Core Ware. Further upgrading was done during 2017- 2018. Currently, the bank is already EMV designed, where others with different bank software have met technical difficulties, or if not, were able to shift to EMV but at very costly software and technical requirements. With the changes and adjustments done easily and in very convenient manners, the Partner Rural Bank, Inc. has become an early rural banking member of the Philippine Payment Management Inc. (PPMI), while at the same time maintaining its membership with the BSP – run PhilPaSS. These were all opportunities, and yet challenges, that started during 2018, and to continue for the years to come.

Risk Management framework(Attachment 01 – Partner Rural Bank, Inc. Risk Management Framework - Risk Appetite);

a.Over-all risk management culture and philosophy.

It is then from the framework of the above considerations of risks that the bank has internalized an over – all risk management culture and philosophy. Partner Rural Bank, Inc. has been noted for the past 40 years of its existence and operation as a very conservative rural financial institution. It has, as an institution and as a business organization, adopted the philosophy that if something is doubtful even in a minute sense, then it could not be true and thrust – worthy. Any semblance of wrong – ness makes any financial transaction un – true. In all spheres and aspects of the organization, of its operation, the bank and its management team adopt the above view – point, orientation and culture.

Risk appetite.

Per BSP statements in MORB, the bank’s Risk Appetite, on the other hand, should be clearly understood by the members of the Board of Directors of the bank itself, senior management, employees, shareholders and stakeholders, the public and the BSP itself, as the regulator. As defined, the risk appetite has to be contained in a statement made to present “the individual and aggregate level and types of risks” that the Partner Rural Bank is willing to assume in order to achieve its business objectives and considering its current capacities in managing those risks.

As Risk management is simply a practice of systematically selecting cost - effective approaches for minimizing the effect of threat to the bank. All risks can never be fully avoided or mitigated simply because of financial and practical limitations. Therefore, all banks have to accept some level of residual risks. Somehow, they have to have some appetites also for the risks.

The bank recognizes the following risks in terms of criticalness or importance, or lined – up in terms of vital importance or dangers to the bank’s operations:

*Degree of importance*		Incidences/ instances of bases of risks.	Appetite/s
1st	Credit risks	Changes in the perceived abilities of borrowers to re-pay their borrowings and loan obligations.	Could take risks up to 15% past due ratio.
2^nd	Financial risks	Poor quality of information on finance policies, lending types and portfolio, liquidity, Asset/Liability management, Capital adequacy, Investment decisions, External fund sources.	Current asset up to 20% of total Deposit accts. Capital adequacy up to 12%. Loan Loss provision < 10% of total loans, etc.
3^rd	Operational risks	High costs due to mistakes/ errors in transactions, failures to meet regulatory requirements leading to penalties, poor collection of re- payments, poor remedial measures, Slow relief policies/ programs.	Up to 10% of total expenses net of taxes.
4^th	Performance risks	Poor monitoring of Manager and employee performance, capabilities, unimplemented circulations of key staff, Poor internal auditing, unmanaged/ inactive Audit/ Compliance Committee. Poor recruitment policies, Defective salaries/ compensation schemes.	Up to 10% of total operating expenses or around P2.4 m.
5^th	Market risks	Notable changes in socio – economic factors affecting financial products and services.	Subject to surveys and economic studies.
6^th	Risks on plans and strategies.	Inability to increase Capital, low income generated, Extensive fund dependencies, Lack of growth, Low ROE/ ROI, V&M undone, diverted. Key result areas of plan undone, person responsible resigned/ diverted.	Up to possible decline of 5% to total asset, low capital increase by 2%, decrease in ROE/ ROI by 10%.

What the above table means are the possible declines due to risks experienced. The bank may take one of the risks and assume to receive or experience the possible impacts of the risks without causing destruction and decline in the operations as they can be easily absorbed and corrected.

Risk Management Policy.

The appropriate strategies to manage risks include the following:

Transferring the risk to another party;
Avoiding the risks;
Reducing the negative effects of the risks;
Accepting some or all of the consequences of a particular risk.

These risk policy considerations have to be made clear to all concerned, such as the directors, managers, heads of offices, Officers, and members of the bank’s various committees, and the internal auditors. The policy consideration and formulation are assumed to be under the president’s responsibility with the approval of the Board of Directors in a resolution. The policy covers, per BSP proposal, the following items:

Limits and guidelines governing risk – taking including actions when risk – limits are violated, and the need to notify the board of directors and implement sanctions for excessive risk – taking.

The delineated responsibilities in managing risks are on:

Preventable risks.

Internal risks, arising from within the bank that are controllable and must to be eliminated or avoided. Examples are the risks from employees’ and managers’ unauthorized, illegal, unethical, incorrect, or inappropriate actions and the risks from breakdowns in routine operational processes. Preventable risksare bettercontrolled through active prevention, such as, monitoring operational processes and guiding staff and officers’ behaviors and decisions toward desired values and norms.

Strategy risks.

The bank can voluntarily accept specific risks in order to generate desired results and returns from the strategy. The bank assumes credit risk, for example, when it lends money to all its borrowers; some firms or companies take on risks through their research and development activities. Strategy risks are quite different from preventable risks because they are not inherently undesirable. A strategy with high expected returns generally requires the bank to take on significant risks, and managing those risks is a key driver in capturing the potential gains. It is like a good “gambling” stake.

External risks.

Some risks come out of occurrences outside the bank and beyond the bank’s own influence or control. These could be natural, social, and political disasters, or major economic events such as depressions, recessions, or downturns. External risks require an approach related to business continuity plans. Management need to focus on identifying and mitigating their impact on the bank.

The initial step in the bank’s move to create an effective risk-management system is to understand the qualitative distinctions among the types of risks that Partner Rural Bank faces.Field researches and studies show that risks fall into these three categories, as mentioned above.

System for measuring risks as expressed above in the risk table. The steady formulas and standard ratios can be adopted as an initial approach in measuring risks or the allowed risks that could be part of the bank’s risk appetite.

Checking and balance systems – could be a system that considers weighing in or ways of eliminating excessive risks against the standard practices.

Risk – data aggregation/ accumulation, and reporting of risks. Per aggregation capabilities, the principles involved are:

Accuracy and integrity.

In terms of actual steps and procedures in confronting the risks that crop up and confronts the bank, the following steps and guidelines have to be adopted and conveyed to the crucial doers at the bank operation.

Identify, characterize, and assess threats of risks.

Assess the vulnerability of critical assets to specific threats.
Determine the risk (i.e. the expected consequences of types of attacks on specific assets).
Identify ways to reduce those risks.
Prioritize risk reduction measures based on a given strategy.

Risk Communication.

Partner Rural Bank promotes and enforces Open Communication with regards risk issues, including risk strategies within the whole bank organization presently composed of five (5) branches, (3) branch – lites, IT center, Head Office, ACC and Crecom offices with around seventy (70) employees, and twenty (20) security guards employed by an agency. Partner Rural Bank considers the Reporting and the risk – communication policies to be:

Accurate in conveying the aggregated risk data and information where reports are also reconciled and validated.
Comprehensive so that reports and communication cover all material risks within the bank’s organization.

Clear and useful. Reports should communicate information that are clear and exact, and in concise manner. The reports need to be easily understood, and comprehensive enough, and written even in local languages such as Ilonggo, Kinaray - a, or Ilocano.

Risk communication is a complex cross – disciplinary, and normally, academic field. Problems for risk communicators involve the need to reach the desired audience. That is, tomake the risks themselves to be comprehensible and related to other risks of the Partner Rural Bank, that is, how to provide respect to the bank employees and offices their values related to the risk, and how to predict their responses to the communication and the information granted to them. A main purpose of risk communication is to improve collective and individual decision - making. Risk communication is somewhat related to crisis communication.

Creation of Chief Risk Officer role.

While the creation of the job of a Risk Officer (CRO) is desirable, it may not be necessary at this point in time due to the banks’s operational size, intensity of its businesses, and the scales and types of risks presently confronting the Partner Rural Bank. This could be part of the considerations in the near future to which the bank has to address itself more intensely with the type of risks it will be confronting.

In creating a unit with the Chief Risk Officer as the head, it is like putting up “facilitators” to keep on reviewing the risks confronting the bank’s operation as well as its future. The “risk” however with the “risk facilitators” is the danger of implanting and inserting them within the line of the banking organization that will make them entrenched and might not see the risks by themselves. Preventing this is the responsibility of the bank’s supposedly “senior risk officer” – meaning the CEO, who is supposed to set the tone for the Partner Rural Bank’s Risk Culture. Nonetheless, the Partner Rural Bank would need to set – up a risk management unit that may require “sunk in “ risk experts who will be tasked to continuously monitor and influence the Bank’s risk profile, that is, by working side by side with the line managers whose activities are generating new ideas, innovation, and risks—and, if all goes well, profits and revenues.

Risk Leadership.

Managing risk is different from managing the Partner Rural Bank strategy and development agenda. Management of risk is concentrated on the negative aspects of the operations such as threats and failures, rather than on the opportunities and possibility of successes that go with regular management. Focusing on risks and countering the possibilities that risks may destroy the plans and run counter to the idea of achievements and acceptable results which most leadership - orientedpersons try to foster when implementing the bank’s strategy. Moreover, mitigating risk typically involves dispersing resources and diversifying investments, just the opposite of the intense focus and concentrating assets of successful strategies. Directors and top managers may find it queer and questionable to embark on processes that will identify the risks that can weaken the strategies that they helped to formulate. This could be the basis why there would be a need for the separate functions of handling the strategies, as against those who are tasked to identify and manage the risks.

Most failed companies, and not only the failed banks, have relegated their risk management to compliance functions, according to Harvard Business School studies. The risk managers have limited access to senior management and the Boards of Directors. Furthermore, executives can tend to simply ignore the risk managers’ warnings. By contrast, sample surviving banks during financial crises survived the banking and financial crisis with their strong internal risk-management functions and leadership teams that understood and managed the companies’ various risk exposures. Risk management is not spontaneous, and could run counter to many individual and organizational biases and prejudices. Active and cost-effective risk management requires people and managers who can think systematically about the several classification of risks so that they can implement appropriate processes for each type of risks.

Bank – wide risk governance structure and risk – management process.

Furthermore, Partner Rural Bank, Inc. has developed and adopted an appropriate Risk Management system covering 10 steps of implementation and execution. First, what is the bank’s definition of “risk management”? Risk management is the “coordinated activities to direct the bank regarding risks. For the bank, Risk management includes risk assessment, risk treatment, risk acceptance and risk communication. Related to this, the bank approved and adopted a ten (10) point steps starting with risk – identification down to guide management and managers in controlling risks. These steps are:

1^st step –	Risk identification –	Finding, listing and characterizing elements of risks.
	Risk perception –	Viewing risks by management and stakeholders based on a set of values, cultures, concerns, also, issues, and past experiences.
2^nd step –	Risk acceptance –	Decision to accept a risk based on risk criteria.
	Risk criteria –	Terms of reference by which the significance of risk is assessed.
3^rd step –	Risk estimation –	A process used to assign values to the probability and consequence of a risk.
4^th step –	Risk assessment –	An over – all process of risk analysis and risk evaluation, which includes:
	a. Risk analysis –	Use of information to identify sources and estimate/ calculate the risks.
	b.Risk evaluation-	Process of comparing the estimated risk against given criteria to determine the significance of the risk, or its insignificance.
5^th step –	Risk avoidance –	A decision not to be involved in, or action to withdraw from a risky situation.
6^th step –	Risk mitigation –	Trying to limit or reduce any negative consequence of a particular even that generated the risks when complete risk reduction is not possible at all.
7^th step –	Risk treatment -	A process of selecting and implementing measures to modify the risks.
	a. then, Residual risk	Determining the remaining risks after risk treatment that cannot be dispensed.
	b. and, Risk retention	Accepting the burden of losing, or even benefiting gains, from a particular risk.
8^th step –	Risk reduction –	Actions taken to lessen the probability, the negative consequences, or both, associated with a risk that is already present.
	a. or, Risk transfer –	Sharing with another party the burden of loss or benefit.
	b. or, Risk controls –	Actions implementing risk management decisions. Risk control can involve monitoring, re-evaluation again, and compliance with decisions arrived at previously.
	c.or, Risk optimization -	Minimizing the negative and maximize the positive consequences and effects.
9^th step –	Risk Communication -	Information exchanges or sharing within the bank, offices, policy makers, management, and stakeholders.
10^th step –	Risk financing –	Providing funds to meet the cost of implementing risk treatments, corrections, and reductions of risks.

(Please see Attachment 02.)

These ten (10) steps are regularly sent to all the branch managers and heads of Branch-lite units in order to agitate them regularly viz. the risks that frequently and regularly jolt and shake the branches, especially in connection with lending and credits. These ten (10) steps articulates and reminds the loan officers, managers, and heads of branch-lite units of the risks they confront all the time.

Anti – Money Laundering and Terrorist Financing Prevention (AML/ TFP) governance and culture.

Partner Rural Bank, Inc. in compliance with BSP Cir. No. 706, s. 2011 and Cir.950, s. 2017, has established its own Anti – Money Laundering and Terrorist Financing Prevention Policies, Procedures and Controls. The 18 page guidelines containing the varied aspects of implementing the AML/ TFP policiies, procedures and controls, are regularly voice out and articulated to the staff, especially the newly hired and employed staff who need to be briefed and oriented in the rules and guidelines.(Please see Attachment 03, on the Partner Rural Bank, Inc. AML and TFP Policies, Procedures and Controls.)

A few items are however noted and further explained here.

Branches establishes, maintains, and secure the proper recording of the identities of clients through its Customer Information sheets both for individuals and association/ organizational/ corporate/ cooperative accounts. The data generated in the CIS are transferred into the bank’s data bases through the CID. Updates are also introduced through the same system of the bank’s and branches data base.

Classification of the clients/ customer/ individuals are done through Client Risk Profiling (CRP) by categorizing them into either Low, Normal and High Risk. These categorization are constantly reviewed and evaluated.

Lastly here, Senior management and/ or the branch managers conduct the approval if the transactions with identified customers with shady status and classified as high risk could either commence or continue business relationship/ transactions with the bank. This will have to be reported confidentially to top management.

All other items and specifics covered by the AML/TFP policies, practices, controls and mechanisms are contained in the manual.

Corporate Governance.

The bank’s corporate governance principles and policies have been adopted per Board Res. No. 2012 – 68. It is heavily influenced by the framework and corporate culture of the bank itself and the banking group, i.e., the rural banking sector, as applicable. Firstly, why “corporate governance”? International experiences show that the practices of large and global firms and corporations, specially their economic roles and the way they generate their businesses and pay taxes can either strengthen or weakendomestic economies. Second, and In the case of Partner Rural Bank, Inc., below are the minimum information that it can share with regards its practices viz. corporate governance.(Please see Attachment 04, Corporate Governance adopted by the bank. per Board Res. No. 2012 – 68).

Overall corporate governance structure and practice. Its structure and the practices that have evolved considering certain elements or features consistent with the bank’s self – development and adoptions. The elements or the features here are as follows:

On separation of powers where:

- Ownership of the corporation belongs to shareholders.

- Governance of the corporation is the responsibility of the board of directors.

- Management is delegated tothe Chief Executive Officer and the managers.

Effective Board of Directors where:

Directors exercise powers with carefulness, diligence and competence.
Also, the directors aside from being competent, should good attendance to meetings, very participatory, and show preparedness in topics and subject – matters related to their responsibilities.
Directors and the board itself act with autonomy and independence.
Directors show loyalty and commitment to the bank.

iii. Democratic corporate boardroom where:

Responsibility is conferred with freedom.
Participation ensured.
Decision – making is open and considered to be shared - responsibility.
Maintain a system of accountability which starts with the board.

Corporate governance within the bank will only be a hear – say if the above elements and features of the set – up corporate governance system are not properly adopted. At best, corporate governance could only be a theory, manually focused, but never truly adopted, seriously applied, and consistently copied.

Selection process for the board and senior management.

Members of the Board of Directors areelected during the annual stockholders’ meeting. The primary consideration in choosing a stockholder to be elected as a director is the persons’ academic and personal background, and experiences.Another critical point is how and what the candidate – directors can contribute to certain policy requirements and issues of the bank. Their qualifications are as follows:

Minimum of 25 – 40 years old.
Fit and proper with integrity, physical/ mental fitness, competence, relevant educational and

financial literacy and training, diligence, knowledge and experiences related to banking

business.

In all the above issues regarding the selection and choices for the Board and the Senior management, the members of the Nomination and Selection committee, and the Corporate Governance committee, all collectively evaluate, analyze, discuss, and decide on the final selection. It is worthwhile to share however the fact that identifying, inviting, convincing, discussing, elaborating, and finally getting someone fit and proper to the role of being either a director, officer, and even manager, etc. are not that easy and convenient for Partner Rural Bank, Inc. The availability of what may be considered fit and capable in handling and shouldering the responsibilities of a board, or specific committee, or even managerial positions in itself ares difficult. The availability is few and rare in between. It takes time, efforts and a lot of convincing to be able to bring in worthy and capable individuals, as we now have them. We, or the designated individuals who will be assigned to gather information and convince suitable individuals, devote a lot of time and effort in the identification and selection process. In Cotabato, and probably here in Central Mindanao, the availability of fit and proper candidates are limited unlike in Metro Manila, Cebu, or probably in Iloilo, Cagayan de Oro, or probably also in Davao city and General Santos city.

Board’s over-all responsibility.

The board of directors, as a body, has full responsibilities within the corporate organization of Partner Rural Bank, as they have been chosen and elected by the stockholders and investors to be part of the responsible body. Specifically, the responsibilities of the board itself would be the following.

Responsible for and in behalf of the Partner Rural Bank, Inc.
Oversee the performance of the bank, the performance of the CEO and Senior management.

iii. Ensure the timely and accurate reports on Partner Rural Bank corporate performance.

Provide strategic guidance to the bank and keep an eye on the future to have the available

resources for its long – term position and objectives.

It may be then stated that the progress, prosperity and the future of the bank rest on the Board of Directors and their capability to view and steer the bank as it moves on in achieving its short – term objectives, and its long – term strategic goals.

Description of the role and contribution of the executive, non-executive and independent directors.

The role and contribution of the executive directors of Partner Rural Bank are to design, develop and implement strategic plans for the organization in a manner that is both cost and time-efficient. The executive director position is a leadership role for the bank and often fulfills a motivational role in addition to an office-based work. It includes managing company assets, optimizing financial operations, providing leadership to all staff, establishing business goals, advising the board of directors on banking and organizational activities, overseeing and streamlining daily operations, and improving staff qualities through the Human resource unit. Hence, in the case of the Partner Rural Bank, the CEO handles procurement/ purchasing unit, the Human resource unit/ personnel, and the Information technology unit and data center. The COO on the other hand handles the Lending and credit operations, the Credit Committee, and supervises and monitors the operations of the branches and extension units even on a day – to- day operations.

For a non-executive directors, typically do not engage in the day – to – day management of the banking organization but are involved in policy - making and planning activities and exercises. A non-executivedirector's responsibilities include the monitoring of the executive directors and acting in the interest of the company stakeholders. They should satisfy themselves that the bank’s financial information are accurate and that financial controls and systems of risk management are robust and defensible.

The Independent directors act as guidesof the Partner Rural Bank. Their roles broadly include improving corporate credibility and governance standards functioning as a watchdog, and playing a vital role in risk management. Independent directors play active roles in various committees set up by the board of directors to ensure good governance.

Major role and contribution of the chairman of the board.

Specifically, and within the Board of Directors as has been described, what then would be the role and expected contribution of the chairman of the board, meaning, what precisely would be being a chairman of that board described above?

The chairman of the board is distinct and separate from the President/ CEO in order to

promote a vital balance of powers within the organization.

The chairman ensuresthat the board meetings are conducted in accordance with the by-

laws of thebank.

iii. The chairman is also expected to supervise the preparation of the meeting’s agenda and other topics and issues that need to be covered during the meeting to see that the needed decisions and resolutions are formulated.

The chairman of the board also maintains qualitative and timely communication and information between the BOD and the management.

In addition, based on the Corporate Governance principles, the Chairperson could also dwell on the following expectations and needed outputs:

Provide leadership to the Board itself, and the directors.
Ensure effective BOD functions, including trust and good relationships with the other BOD

members.

Ensure that BOD decisions are based on right information.
Ensure sound decision – making processes that encourages and promotes critical discussion

where dissenting views, objections, and debates can be expressed.

Present Board composition(as of June 30, 2019) and to includethe following information:

Names	Type of director	Stockholder represented
Alberto C. Arellano	Independent director	None
Rizal A. Saligumba	Independent director	None
Eduardo M. de Castro	Independent director	None
Dr. Nick L. Aduana	Ordinary director	Solo/self
Annali D. Mana-ay	Ordinary director	Solo/self
Ma. Amy B. Cruz	Ordinary director	Solo/self
E. A. Demigillo, Jr.	Ordinary director	Solo/self

BOD - Directors qualifications and Number of Years Served.

Names	Qualification	Experiences	Age	Nationality	No. of Years Served
Dr. Nick L. Aduana	BS Commerce/ Accting., MMBA, Doctorate degreeand author of accounting books & on taxation.	SGV & Co., Dept. of Budget & Management, ARMM, Faculty – Notre Dame, Dean, Southern Christian College.(SCC).	56	Filipino	6
Alberto C. Arellano	BS Agricultural Enginering (BSAE), and IT expertise. Dept Head of IT at USM, Kabacan.	University Professor, Computer Sales consultant, and IT Expertise/ consultant.	63	Filipino	4
Rizal A. Saligumba	BS Agriculture, GTZ, Agrarian Reform, DAR.	Agricultural Credit Technician, Rural Bank of Pigcawayan; Agricultural Credit Staff, GTZ, Dept. of Agrarian Reform (DAR).	62	Filipino	6
Ed M. de Castro	BS Accountant. Commercial Bank Manager, Loan/ SME Lending, USAID/ADB consultant. UP – ISSI.	ADB Project - Indonesia, USAID MABS. Bank Manager/ Loan manager. UP – ISSI Trainer, speaker, resource person.	60	Filipino	1
Annali D. Mana-ay	BSC Accounting.	Bank Bookkeeper, Head Office supervisor, Currently Bank Treasurer.	59	Filipina	4
Ma. Amy B. Cruz	BS Commerce/ Accounting	National Food Authority (NFA), Region 12, Cotabato, President, Partner Rural Bank.	64	Filipina	18
E. A. Demigillo, Jr.	AB Philosophy, MA Philo. Social Science, MA in Business Economics Univ. of Asia – Pacific.	UPDiliman Faculty, Rural Bank manager, GTZ Project Manager, ADB 2x Project Manager / Head @ Timor Leste, Indonesia,.Banda Aceh, North Sumatra.	67	Filipino	28

List of committees, memberships and functions.

Committees	Head/s	Members
1. Executive & Administrative Committee.	E.A.Demigillo, Jr.	Mrs. Annali D. Mana – ay Ma. Amy B. Cruz
2. Credit Committee.	Ma. Amy B. Cruz	Mrs. Annali Mana – ay Mr. Elmer C. Lomugdang Cesar Venzon (Replacement in the absence of Mrs. Cruz.)Ma. Amy B. Cruz (on – leave)
3. Risk Management/ Asset-Liability Management Committee.	Ma. Amy B. Cruz	Dr. Nick L. Aduana Mrs. Annali D. Mana – ay Rizal A. Saligumba
4. Audit & Compliance Committee.	Mr. Nick L. Aduana	Eduardo M. de Castro Rizal Saligumba
5. Corporate Governance Committee	E.A.Demigillo, Jr.	Ma. Amy B. Cruz Rizal Saligumba
6. Human Resource Management and Development Committee.	Ma. Amy B. Cruz	Mrs. Annali D. Man a – ay Dr. Nick l. Aduana
7. Information Technology Steering Committee.	Alberto C. Arellano	Maximo A. Orac Elmer C. Caigoy
8. Security Committee.	E.A.Demigillo, Jr.	All branch managers.

(Note: Above has been adopted this current year 2018.

Directors’ attendance at BOD and committee meetings (Covering year 2018 only).

Names	BOD Meetings	Exec/Admin Committee	Credit Committee	Audit& Com-plianceComm.	Corporate Governance Committee	Information Technology
1. E.A.Demigillo, Jr.	15	-	-	-		-
2. Ma. Amy B. Cruz	7	-	9	-	-
3. Nick L. Aduana	10	-	-	-		-
4. Annali D. Mana – ay	15	-	18	-	-	-
5. Rizal A. Saliggumba	11	-	-	-	-	-
6. Eduardo N. de Castro	13	-	-	-	-
7. Alberto C. Arellano	10	-	-	-	-	-
No. of meeting held during 2018 -	15		18	-	-	-

(Please see Attach. No. 05 regarding the Directors’ attendance atBoard and Committee meetings.)

Changes in the BOD.

At the beginning of the year 2018, during Annual stockholders’ meeting, the stockholders present voted the following:

Regular Directors.	Independent Directors.
Dr. Nick L. Aduana	Eduardo De Castro
Ma. Amy B. Cruz,	Rizal A. Saligumba
Annali D. Mana -ay	Alberto Arellano
Eugenio A. Demigillo, Jr.

At that meeting at Pigcawayan H.O, Mr. Ariel Potian was elected and chosen as a Director on 2017, Being a resident of Davao City however, he was continuously absent and unavailable due to busy schedules and trips outside Davao city. He eventually resigned, and for quite a time, the number of directors were kept at only six (6) with no available replacement of one. On January 12, 2018, Mr. Eduardo de Castro was elected as the new independent director.A replacement independent director,a former consultant of an ADB Project in a microfinance project in Indonesia, and a Credit program expert who worked with the Mindanao Access to Banking Services (MABS), a USAID Project jointly with the Rural Bankers Association of the Phils. (RBAP). Mr. Eduardo de Castro has been made to join a number of committees, and assists in the re – organization studies of the bank.

List of Executive officers/ Senior management.

Name/s	Position	Relevant Qualifications/ Experience	Age	Nation- ality
E. A. Demigillo, Jr.	President/ Chief Executive Officer	10 years Faculty member at UP Diliman, QC. 10 years as Gen.Manager of Pigcawayan Rural Bank from. 1980 – 1990. 10 years Consultant / Project manager of GTZ (GmbH). 1991 – 2000. Asian Development Bank (ADB) Consultant/ Project manager at East Timor (UN-TAET), Banda Aceh, and in Jakarta. (Tsunami /rehabilitation project). From 2001 until 2008. JICA, Japanese aid agency – Agricultural Credit system consultant (2008 – 2010). Then, 10 years Back to rural banking on 2009 – 2018, at present.	67	Filipino
Ma. Amy B. Cruz	Vice – Pres./ Chief Operations Officer	CPA. College teacher at Notre Dame Cotabato. Worked at the NFA, then to private businesses, e.g. rice production, hardware / construction materials trading, Banking, lending.	64	Filipino
Annali C. Mana - ay	Treasurer/ Director	Former Junior teller, Teller, Bookkeeper, Head Office bookkeeper, Treasurer/ Director of Rural Bank of Pigcawayan, Inc. later named Partner Rural Bank, Inc.	59	Filipino
Maximo Orac	Information Tech (IT) Head	Bookkeeper of bank branches, General Bookkeeper, Head of Bank Branching unit (BBRASSO), Project: ATM, Head of IT Operations.	46	Filipino
Rodolfo A. Espina, Jr.	Compliance Officer	Bookkeeper, Rang-ay Rural Bank (La Union), Branch Manager for 6 years, Al Fardan Exchange (Dubai), Compliance Officer, Partner Rural Bank. SME Rice retailing and Livelihood projects.	50	Filipino
Elmer C, Lomugdang	Administration Head/ BBRASSO coordinator	Logging enterprise, Private SME business, Farming, Furniture maker, Employee/ Later Administrative officer, and corporate secretary, Partner Rural Bank, Inc.	48	Filipino

Performance Assessment Program.

Partner Rural Bank, Inc has developed a Performance Assessment Program entitled “Assessing the Quality of Corporate Governance”. This was in compliance with the BSP Memorandum No. M – 2012 – 02 dated 11 Jan., 2013 per MB Res. No. 2145 dated 20 Dec., 2012. The purpose was to come up with a framework for assessing the quality of corporate governance of the bank. The stated principles embracing the guidelines are the following:

Proportionality of the approaches to governance on the assets and size of the bank;
Fair - share in practice to shareholders. All transactions of the bank must ensure that no party is disadvantaged, especially depositors, minority shareholders and other creditors.

iii. Responsibility of the directors, that is, the board of directors are all responsible to the status of financial conditions, operating results, current and potential research.

In the same Performance Assessment Program, four (4) factors are being considered as critical in the evaluation process, and these are:

Governance landscape, that considers the corporate/ organizational structure, defined

relationships between groups, and reporting lines from BOD to staff.

Fitness and propriety of the Board of Directors and management,

iii. Risk governance, meaning, the duty of the Board of directors in identifying and

understanding the type of risks that may affect the bank; and the

Controls and practiced Independent oversight, which covers the availability of internal control and independent oversight bodies such as compliance, internal audit, risk management, and external audits.

Based on what could be determined in the four (4) factors stated above, they could be scored from either 1 -5, with 1 applied to the lowest factor, and 5 for the highest factor. Partner Rural Bank could then be subjected to the performance scoring viz. Corporate governance. The bank could be scored from:

Strong – 5,

Satisfactory – 4,

Less than Satisfactory – 3,

Deficient – 2,

Critically deficient – 1.

In this scale of the scoring system, the highest score for all would be 25, and the lowest would be 5 in all.(Please refer to Attachment 06: Assessing the Quality of Corporate Governance,for more detailed information on the assessment scheme)

Orientation and Education Program.

An Orientation program is normally given by Partner Rural Bank, Inc. to an accepted new staff or a trainee who is in need of a basic and initial information about the bank itself, its history, accomplishments over the past 40 years, and to what the banks is now at present. The trainee is subjected to the orientation program continuously for a month. The rest of the two months of training are already actual work or tasking to the part of the bank where they have applied.The orientation program is a presentation to the trainee of the superficial presentation of tasks they are interested in handling.

The training program, on the other hand, are the usual upgrading of know – how, theories, core concepts, and are related to the jobs of the employees selection. The trainings are all formatted with Power Point Presentations (PPP). Admittedly, the training provided to new, and even older staff, are inadequate and insufficient. The bank has not yet formed a Training Department or a unit since even a Human Resource unit has not been formed yet. (Please see Attached o7, the list of training materials, topics, subjects, etc. provided to the employees.)

Retirement and Succession Policy.

Retirement Program. Partner Rural Bank, Inc. maintains an off – book Retirement and Separation Fund which contains the amount calculated by the Zalamea firm as the funding valuation of the bank’sretirement plan. The constant updating of the Funding Valuation is to check the previous funding scheme and to adjust contributions due to deviations from the actuarial assumptions arising from the actual investment yield, mortality gains and losses, employee turnover and benefit forfeitures.

The funding under the Retirement plan is regularly done by management to determine the recommended contribution to the Retirement and Separation Fund. The fund is deposited with the Land Bank Trust Department under the set committee composed of the representatives of the Employees, the BOD/ the bank, and top management. The signatories of the thrust funds in case payments have to be made are the representative of the Employees and the representative of the bank.

Noteworthy also is the policy adopted by the bank wherein the retirement age is 55, and not 60. This is to allow the employees to be able to go into businesses, or economic activities, at an earlier age rather than go into retirement at the age of 60 or above already. In this case, they can use their retirement funds in most useful endeavors at still relatively younger age.

Succession Policy. Partner Rural Bank, Inc. has its own Succession Plan/ and Program. This succession plan/ program contains the methods and processes to be used in identifying and upgrading the persons/ employees with potential and possibilities of handling key banking positions.

(Please refer toAttachment 8.a.)

There are specified areas of concern related to the establishment and setting – up the succession plan/ program, and these are:

Building a succession plan that is aligned and linked with a talent development scheme and the future leadership and management requirements of the bank, and thereby generating the 2^nd, 3^rd, or 4th generations of bank leaders, and preventing the under – qualifies from moving into leadership and key management due to lack of others that are definitely capable and qualified to handle the bank’s ever increasing interests and growth.

Developing strong succession plans that identify and nurture the succeeding generation of banking leadership through Mentoring, Training, and Challenging.

Other details and specifics are available at the completely attached document on the succession plan. It is equally noted that the succession plan need to be formally discuss among the key employees so that the plan could be part of their future plans and life – dreams as well. The succession plan should be discussed with the employees every year.

Remuneration policy.

For Executive, and non – executive directors.

Sec. 30 of the Phil. Corporation code states that in cases of Compensation of Directors, and in the absence of any provision in the by – laws of the bank that fixes the compensation for the directors, the Directors shall not receive any compensation as directors, except for reasonable per diems to cover their costs in attending the meetings, conferences, and other occasions. In no case shall the sum - total yearly compensation of directors, as such directors, shall exceed ten (10%) percent of the net income before income tax of the bank during the preceding year. This provision in the Phil. Corporation codehas been adopted by the bank for purposes of convenience and consistency with the adopted laws and regulations governing domestic corporations.

For senior Management.

In the case of Senior management, their compensation, if on a full – time bases, would be equivalent to their deserving salary rates as employees, and comparable to rates paid by companies and/ or banks which have hired the same kind, type, and credentials of Senior managers, as well as with the same set of capabilities, capacities, and outputs and achievements. Furthermore, the total assets of the model bank/ or rural bank from where the pay – rates and practices could serve as the model or sample will have to be congruent with that of Partner Rural Bank, Inc.

The bank also maintains an Employee Compensation Structure that covers the basic monthly salary payments only. It starts with the base pay equivalent to the minimum wage, and builds up to the level of managers. These compensation rates are changed from time to time when the government through the DOLE upgrades the minimum pays. (Please see Attachment No. 8.b.)

o.Policies and procedures on related party transactions.

A contract of the bank with its own directors and/ or officers, and/ or its managers, is voidable, invalid, and could be annulled, cancelled and negated, and all at the option of the bank, unless all of the following conditions are present, or made:

That the vote of the pointed director was not necessary to constitute a quorum of the meeting
That the vote of the director was not necessary to have the contract approved;

iii. That the contract was fair and reasonable under the circumstances; and

That in case of an officer, the contract has been previously authorized by the Board of

directors.

These conditions that has been adopted by Partner Rural Bank, Inc. simply follow the provision in Sec. 32 of the Philippine Corporation Code. Lastly, it points out that any of the first two conditions above are absent, in the case of a contract with the director, such contract may be ratified by the vote of the stockholders representing at least two – thirds (2/3) of the outstanding capital stock or of at least two – thirds (2/3) of the members in a meeting called for the said purpose. The law further provides that the full disclosure of the adverse interest of the directors involved is made at such meeting. Lastly, the contract has to be fair and reasonable under the circumstances.

Self – Assessment Function.

The Internal Audit Unit has its Internal Audit Head and Two (2) Internal Audit Assistants. These three (3) Internal Auditors meet regularly as defined within the approved Audit Plan. The Compliance unit has its Compliance officer. The Internal Audit and Compliance Units will report to the Audit and Compliance Committee(ACC) regularly.

To effectively discharge its responsibilities, the IAU and CCO are authorized to:

Enter all areas of Partner RB and have full, free, and unrestricted access to bank’s functions, systems, documents, records, property, and personnel of the bank considered necessary for the performance of its functions.
Have full, free, and unrestricted access to ACC and President.
Obtain the necessary assistance from personnel of Partner RB where it performs audit and compliance assignments.

The Board of Directors shall ultimately be responsible for ensuring that senior management establishes and maintains an adequate, effective and efficient internal control frameworkand compliance of the bank to current policies, guidelines, rules and regulations issued by regulatory bodies such as BSP, PDIC, AMLC, SEC, BIR, DOLE and other Agencies commensurate with the size, risk profile and complexity of operations of the bank. The board of directors shall also ensure that the internal audit and compliance functions have an appropriate stature and authority within the bank and is provided with adequate resources to enable it to effectively carry out its assignments.

Dividend Policy.

Applications for payment of dividends are submitted to the BSP for approval every end of the year and prior to the conduct of the Annual stockholders meeting conducted every 2^nd Saturdays of the years as stipulated at the bank’s articles of incorporation. This practice has become a tradition of the bank due to the pressures for funds and financial needs of practically all the shareholders every end and beginning of the year. These dividends have been interpreted by the shareholders as gifts to them as soon as the bank shows positive earnings and results of operations by end of the year. The dividends could also be considered, especially by the elderly stockholders, as funds for the year to assist them in the provision of their medical needs and requirements.

Corporate Social responsibility.

That Partner Rural Bank, Inc. by nature of their banking business has been providing financial assistance, production loans, credits to the down - trodden, to the small market vendors and stall holders, it may then be concluded that the bank, without formalizing the social tasks and assistance to their lower - class customers has been shouldering its corporate social responsibilities – without having to formalize it. A more formal and more announced engagements in social responsibilities might be needed.

Consumer Protection Practices.

Partner Rural Bank, Inc. has its own Consumer Protection Program. On the bases of the bulk of requirements of the Financial Consumers Protection and in connection with BSP Cir. No. 857 dated 21 Nov. 2014, the following are contained and connected to the bank’s program.

Financial Consumer Protection Framework.
Product manuals and terms and conditions of the specific bank products.

iii. Consumer Protection Risk Management system manual. (CPRMS).

Consumer Protection Compliance Program (CPCP).
Consumer Protection Policies and Procedures (CPPP).
Consumer Protection Audit Program (CPAP).

vii. Consumer Protection Training Program (CPTP).

While the whole effort of the bank is not yet completed, and hence the results and outputs are also incomplete yet, efforts however has been instituted wherein the process of absorbing the consumer protection schemes with the adoption of the consumer protection framework where every next efforts will flow. Attached however is the bank’s program which has already been submitted to the BSP. (Please see Attachment 9. )

Corporate information.

Present organizational structure.

Below is the list of names and position of key officers.(Also, please refer to Attachment10.a).

There are not much officers of the Partner Rural Bank (Cotabato), Inc. , being a small organization with obvious lower size in terms of assets and capital. The bank’s corporation kept on supporting its relatively small body. Below are the names of the key officers and their respective position.

	*Name/s*	*Position of key officers.*
1	Dr. Nick L. Aduana	Chairman of the Board of directors.
2	Eugenio A. Demigillo, Jr.	President and Chief Executive officer.
3	Ma. Amy B. Cruz	Vice – President and Chief Operating officer.
4	Annali D. Mana - ay	Treasurer/ Director.
5	Rodolfo Espina	Compliance Officer
6	Elmer C. Lomugdang	Corporate Secretary and Head of Administration.
7	Joy Lyn M. Castillon	Internal Audit Head
8	Maximo Orac	Information Technology Head

List of major stockholders, nationality, pro – rata holdings, voting status.

These are only 15 major shareholders of the bank, and the rest are minority holders who purchased or were provided with common shares as they were invited to be independent directors in compliance with BSP requirements and adjustments responsive to corporate governance framework.

	*Name of stockholders*	*Nationality/ies*	*Voting status*
1	Eugenio A. Demigillo, Jr.	Filipino	Common
2	Ma. Amy Bulaclac - Cruz	Filipino	Common
3	Aniceta R. Vinluan	Filipino	Common
4	Eufrocina D. Buenaflor (RIP)	Filipino	Common
5	Juliet Ballano – Guilloreza	Filipino	Common
6	Annali D. Mana – ay	Filipino	Common
7	Raymundo B. Franco (RIP)	Filipino	Common
8	Ma. Boanuette Th. D. Ramos	Filipino	Common
9	Shaila Bulaclac – Ballano	Filipino	Common
10	Herminio D. Defenio (RIP)	Filipino	Common
11	Exaltacion D. Defenio	Filipino	Common
12	Lilibeth D. Burgos - Ardina	Filipino	Common
13	Junette L. Trinidad	Filipino	Common
14	Teresita Cadut – Salomon	Filipino	Common
15	Aida E. Valladares	Filipino	Common
16	Rizal A. Saligumba	Filipino	Common
17	Maximo A. Orac	Filipino
18	Ariel H. Potian	Filipino	Common
19	Dr. Nick L. Aduana	Filipino	Common
20	J. Angelica L. Demigillo	Filipino	Common
21	Eduardo N. de Castro	Filipino	Common
22	Alberto C. Arellano	Filipino	Common

Most small shares issued were provided as qualifying shares to be elected or chosen as either independent directors or as representatives of the minority common shares during the annual stockholders meeting and as regular directors.

List and description of products and services offered.

Current products of the bank are the following:

PARTNER RURAL BANK PRODUCTS: LOANS, SAVING SERVICES & FACILITIES, AND PAYMENT SERVICES AND SYSTEMS
Agricultural Loans	Crop Production: Rice (Irrigated paddy), Corn (Requires large planting areas), sugar, cassava (Limited).
	Fruit Production: Banana, pineapple, mango, coconut – copra, cacao/ chocolate, coffee.
	Other Production : Coconuts, palm – oil, rubber, commercial vegetable produce.
	Livestocks: Hog raising, hog fattening, cattle raising, and poultry raising & development
	Purchase of Farm machineries
	Farm mechanization
Commercial Loans	Ordinary/ Regular business loans
	Micro, Small and Medium Enterprise Loans ( M S M E ).
	Market Vendor & Stallholder Loans and/ or Money shop loans on Daily collections.
	Other Commercial Loans, E.g. Dormitories, boarding houses, resorts, restaurants.
	Card Loans for Retired teachers, other Retirees, SSS/ GSIS retirees.
	Salary Loans through Financing Plans for Officers and employees (FPOE),
Saving Services and Facilities	Passbook Saving with or without ATM use.
	ATM Facilites and use.
	Long – term and tax – free Special PARTNER Optimum Saving time deposit.
	Short – term Special PARTNER Optimum Saving with tax on interest.
	Certificate of Time Deposits (CTD)
	Checking Accounts with Passbook
	Checking Accounts without Passbook
Payment Services and Systems.	Money transfer and Remittance service
	Payment systems to various services (Electricity, H2O, pre – paid cell phones tru ATM)
	Payment of Shopping deals and purchases through ATM debit cards.
	Loading of cellphones through ATM.
	Account Balance inquiries.

Bank website. The bank’s Website is:partnerbank/com.ph

List of banking units:

	*Branches and offices.*	*Addresses*
1	Head office -	2^nd Floor, Partner Rural Bank Bldg., J.P. Laurel St., Pobl. 2, Pigcawayan, Cotabato.
2	Pigcawayan Main branch -	Ground Floor, Partner Rural Bank Bldg., J.P. Laurel St., Pobl. 2, Pigcawayan, Cotabato.
3	Kabacan Branch -	J.P. Rizal Ave., National Highway cor. Mapanao St. Exit, Poblacion, Kabacan, Cotabato.
4	Mlang Branch -	J.P. Rizal St., Poblacion A., M’lang, Cotabato.
5	Tacurong Branch -	Door No. 3, Astillero Bldg., Andres Bonifacio St., Poblacion, Tacurong City, Sultan Kudarat.
6	Surallah Branch -	Villanueva Bldg., 677 Kamia St., Poblacion, Surallah, South Cotabato.
7	Alamada Branch lite -	J.P. Laurel St., Brgy. Kitakubong, Alamada, Cotabato.
8	Kidapawan Branch lite -	Sorongon Bldg., Dayao St., Kidapawan City.
9	Lambayong Branch lite -	Florzen Bldg., National Highway, Poblacion, Lambayong, Sultan Kudarat

Audited Financial statements (AFS).(Attachment 11).

External audit done by Erlinda V. Mission, CPA, MBA, DM from Marin Village, General Santos Cityaccredited with the Bangko Sentral ng Pilipinas.

Compliance with Appendix 63-c of the MORB-Disclosures in the Annual Reports and Published Statement of Condition.

A: Capital Structure and Capital Adequacy;(Attachment 12).

Tier 1 capital and a breakdown of its Components;

Paid up Common Stock	₱33,096,000.00
Paid-up perpetual and non-cumulative preferred stock	4,000,000.00
Retained Earnings	25,499,088.50
Total Tier 1 Capital	₱62,595,088.50

Tier 2 capital and a breakdown of its components :

General Loan Loss Provision -₱1,390670.38

Deduction from Tier 1 (50%) and Tier 2 (50%) capital - None
Total qualifying capital - ₱63,985,758.88
Capital requirements for credit risk - ₱204,146,371.25
Capital requirements for market risk - ₱00
Capital requirements for operational risk - ₱42,250,661.56
Total and Tier 1 capital adequacy ratio on both solo and consolidated bases -25.97%

END -

Annual Report 2018

Vision

Mission

About Us

Products & Services

Support

Contact Us