Planters Bank is suffering from financial failure and almost went bankruptcy before China Bank Saving

acquired it.
On January 6, 2014, Planters' book value was reduced by Php 336.6 million to just Php 582.4 million as
of December 31, 2012 as a result of a restatement of the bank's financial statements.

Planters Bank's audited equity of Php 3.597 billion as of December 31, 2012 was reduced by prior period
adjustments totaling Php 3.015 billion to:
1. recognize, in full, the provision for impairment losses on Non-Performing Assets (NPAs);
2. reverse the deferred charges on NPAs sold; and
3. charge the loss on litigation against current operations.

In 2012, the board of Planters approved a program to dispose the bank's non-performing assets. The
NPA disposal program involved the following:

1. True Sale of NPAs to Philippine Asset Growth Two, Inc. (PAGTI);

2. Discounted Sale of NPAs to the General Public;
3. Planned Sale of Government Securities pledged with PDIC
PAGTI

On November 28, 2012, Planters entered into an Asset Sale and Purchase Agreement (ASPA) with
PAGTI, an SPV Asset Management Company (SPV-AMC) .The PAGTI SPV was set up to invest,
manage, and acquire non-performing assets of banks and other financial institutions.

PAGTI acquired investment properties and non-performing loans(NPL) with a carrying value of Php 2.542
billion from Planters for only Php 1.10 billion, resulting in a realized loss of Php 1.44 billion for Planters.
Under a Monetary Board Resolution No. 2172 dated December 26, 2012, the BSP allowed Planters to
defer and amortize the loss on the sale of the NPAs, beginning in 2013. However, the Monetary Board
reduced the deferral period to only 5 years instead of the usual ten years.

Discounted Sales of NPAs to the General Public

Planters pursued the special sale of its non-performing investment properties. As of September 30,
Planters disposed of Php 906.67 million of its investment properties, exceeding the planned sale of Php
456.49 million. The bank realized a loss of Php 465.38 million on these investment properties.

The bank, however, was not able to dispose of Php 745.04 million worth of NPLs that consisted mostly of
loans under litigation which will take years to resolve. As a result, the bank no longer plans to pursue its
NPL disposal program.

Planned Sale of Government Securities Pledged with PDIC

On December 5, 2012, the bank secured the consent of the PDIC for the early settlement of the Php 1.27
billion in Financial Assistance granted in 2002. This transaction was expected to generate trading gains
of Php 0.88 billion. In 2013, the bank disposed of the government securities pledged with PDIC, realizing
a gain of Php 912.36 million, which was used to offset the allowance for impairment losses on the NPA
Disposal Program and the allowance for credit and impairment losses from the discounted sale to the
general public.

Further Losses Ahead

The bank still maintains Php 745.04 million of non-performing loans that it cannot seem to sell even at a
planned 30% to 50% discount. The losses the bank will realize on these NPLs are therefore much
greater because the value of these loans is much closer to zero.

Planters has consistently been considered distressed as shown in the chart below. In fact, it has
consistently ranked as one of the Top Distressed Philippine Banks.
Planters continuously incur losses that made the banks return on equity (ROE) decreased.
Its Capital Adequacy Ratios have fallen way below BSP's recommended minimum to very critical levels.

Had the bank remained independent, it certainly would have failed, if not in 2013 or by 2015 at the latest.
Its failure would have marked on of the biggest bank failures in recent history. Its failure would have
dwarfed that of any recent bank failure by a factor of almost three times. The chart below shows recent
bank closures and the Planters would have been if its closed.

Planters's acquisition by China Bank will bolster the bank's stability now that it is subsidiary of a much
stronger bank. The acquisition will also result in a much needed infusion of at least Php 1.3 billion in
additional equity in order to bring its capital adequacy ratios to a minimum of 10%. Planters has
nevertheless been rescued from the brink of death.