Rural Bank of Mandaue, Inc.

A. Del Rosario Avenue, Centro, Mandaue City

Reply to Schedule 1

1. Rural Bank of Mandaue, Inc., has granted the Loan Account of

JESSICA R. LAGAPA in lump sum term or in other words UID, the interest was
deducted during the release of the loan due to the fact at the time of the
application of the loan, the husband of Jessica R. Lagapa and her son were
applying for overseas employment as seamen.

Please take note further that the Bank has two options in releasing the
loan. One option is LUMP SUM or UID. And other option is DIMINISHING or
monthly amortization of principal and interest. The Bank will apply the option
which is comfortable and convenient with the borrower.

In this case, Lagapa has opened a Savings Account with the Bank, and
said deposit will be withdrawn on due date of her loan and apply as partial or full
payment.

Last June 13, 2018, the borrower has paid the principal amount of
P100,000.00 and attached herewith Xerox of Official Receipt as Annex “A”.

2. Yes it is true that the borrower is engaged in apartment or house rental

and coffee shop. However, the borrower is comfortable in lump sum process in
repayment compare to monthly amortization of the principal and of interest. The
Borrower would not want that he will be bounded with the monthly amortization in
cases of default.

Please take notice that the Bank has two (2) options in releasing Loan,
Lump sum and Monthly
Amortization.

On April 2018, the borrower has made a partial payment of P20,000.00

and attached herewith photocopy of Official Receipt No as Annex “B”.

3. The source of payment of said loan is Salary, the borrower would prefer
to pay the said loan in lump sum basis. The borrower would not like to be tied
with the monthly amortization schedule. Further, the borrower would like to make
a deposit with the bank and apply the said amount to his loan on maturity date.

4. The original purpose of the loan is buy and sell of eggs. Upon
verification by the Manager, buy and sell of eggs was no longer in operation
instead of room renting as their monthly income generation.

Based on records, said loan account is extended on monthly basis. The

borrower has paid the bank in the amount of P7,000.00 monthly. This loan is an
old loan account . The Bank did not change the very purpose of the loan because
said loan is not a renewal loan. It is an extended loan. As we have discussed
during our exit conference, the bank emphasized the big difference between
extension and renewal. The former has no new application but new promissory
note while the latter, both application form and promissory note is new.

Further, the Bank has exerted its effort to encourage said borrower to fully
paid the loan and re apply at the lower interest rate of 12 percent annum.
Currently, the interest rate of the said loan is nineteen percent per annum (1.25%
per month.)

5. Celso Bontuyan has two loans consist of Agricultural (AL) and Other
Purpose (OP) in one (1) Real Estate Mortgage. This is an old loan and extended
loan. As per record, the said loan is extended for 30 days and sometimes 60
days .

6. Same reason as to No. 5.

7. Imelda A. Sanchez is an old and frequent borrower of the Bank. Based

on bank”s Record, she is used to pay the loan in a lump sum basis even she
engaged in carenderia and commercial rental.

Reply to Schedule 2.

No. 1. The Manager did the visitation but was not written in the Client Call
Report Form. The Borrower and the Manager have a constant communication
with each other.

No. 2. Same reason with No. 1.

No. 3 Same reason with No. 1.

No.4 Same reason with No. 1

No.5 Same reason with No. 1

 No. 6. Same reason with No. 1

No. 7. Same reason with No. 1

No. 8. Same reason with No. 1

No. 9 Same reason with No. 1

N0. 10 Same reason with No. 1

The Board will revisit the policy as to visitasition/follow up of the utilization

of the proceeds of the loan of each borrower granted. The Manager as Loan
Appraiser is directed to put into writing what transpired during his visitation with
the borrowers in the Client Call Report. The appraiser will conduct the visitation
as follows:

1. 30 days from release of Loan;

2. 90 days from relaese of loan; and

3. Quarterly Basis

Reply to Schedule 3

No. 1. It is an old and extended loan.

No. 2. Same reason with No. 1.

No. 3. Same reason with No. 1.

No. 4. Same reason with No. 1.

No. 5. Same reason with No. 1.

No. 6. The Borrower cannot provide any proof of income such as Bank
Statement as basis for conducting the Cash Flow Analysis. What the bank did, is
based on other Document which is Purchase Order issued by the City of Cebu.
Once you are issued a Purchase Order, it is served as a Contract between the
caterer and the LGU. Lately, the said borrower was granted by the City of Cebu
to cater fire victims in the amount of 4 Million Pesos to be complied with in a
staggered basis. Based on interviews not only to the applicant herself but other
caterers, in catering services, caterer can attain a net income of 60% of the
amount catered. But the Bank applied 40% not 60% as basis in attaining the net
income of catering services.

No. 7. Same reason with No. 1.

 No. 8. The Manager/Appraiser conducted the Cash Flow Analysis but was
not transferred to the Cash Flow Analysis Form. The same is true to Credit
Proposal.

Reply to Schedule 4

No. 1. Based on record, the daughter of the borrower, Mam Morales

always visited on the bank and pay the past due amount of P20,000 to P30,000
per visitation. Recently, we received communication that Morales suffered a
stroke.

The Manager/Appraiser is directed to send letters to the said borrower for

appropriate legal action.

No. 2. The borrower has communicated with the Manager that the former
is waiting for the buyer pay the agreed mount of the subject property. Since the
Contract of Sale was not materialized, the Manager is directed to personally visit
the borrower with demand letter for appropriate legal action.

No. 3. The Manager has personally visited the house of the borrower to
tender a demand letter but the person resided therein refused to receive and told
us Mam Alix is not around.

Thus, the Manager will recommend the matter to our legal counsel for
appropriate legal action.

No. 4. The said borrower cannot be located in her last known address.

Thus, the Manager will recommend the matter to our legal Counsel for
appropriate action.

No.5. The said borrower cannot be located to her last known address. The
Manager is recently communicating with her Co-maker in the person of Estrella
T. Dumon.

No. 6. Last communication with the Manager, the borrower was in

Mindanao attending burial with her relative.

No. 7. The borrower cannot be located in her address in Banawa Cebu.

The Manager will contact her brother. Her co-maker GIL BULAN to discuss the
matter.

No. 8. Last May 2018, the borrower visited the bank and request for the
computation of the Past Loan account . The Manager will visit in person within
this month.
 No. 9. The said loan is fully paid last July ____2018. Attached herewith is
a photocopy of Official Receipt serve as Annex “C”.

No. 10. The Manager will communicate with our previous Loan Specialist
(Beverly B. Gonzaga) regarding the loan account of Masepequeña. In order to
rectify the residence address of the borrower. In the application the address is
vague not specific.

No. 11. The said account became past due because the borrower’s
daughter was hospitalized.

No. 12. The said borrower was died already. Said loan was covered by
Insurance. (Philippine Prudential.). Last October 2017, we had an agreement
with the Philippine Prudential who is now under Receivership, to off set the loan
amount of Virgilio Suson because Philippine Prudential has a deposit in the
Bank.

No. 13. The said Borrower has no contact Number. It is an old and
extended loan. We will send a letter within this week.

No. 14. As communicated by her daughter that the said borrower was
already died. Her daughter which is a doctor by profession will be the one to
settle the loan.

We will send a letter within this week.

Reply to Schedule 5

No. 1. It is an old and extended loan. Based on record, said borrower

extended his loan for 30 days or sometimes 60 days. The Manager and the
Borrower have constant communication. Constant Extension of his loan does not
mean that the borrower wants his loan account became past due. Last Friday,
the Manager communicated the borrower and the latter promised he will sign all
documents and he will appear personally before the Manager in times of
extension.

Thus, the Bank is appealing to the examiner to upgrade the Loan

Classification from Substandard to Pass considering the history of his payments
to the Bank.

Attached herewith are photo copies of Official Receipts and serves as

Annexes _______.

No. 2. It is an old and extended loan. Based on record, the borrower has
made payments to the Bank every month in the amount of P7,000.00. The
Manager and the Borrower have constant communication. Every month the
borrower visited the bank on or before her due date of said loan. Constant
extension of her loan does not mean that the borrower wants her loan became
past due.

Thus, the Bank is asking to the examiner to upgrade the Loan

Classification from Substandard to pass considering the history of her payments
to the Bank.

Attached here are photo copies of Official Receipt_______________.

No. 3. Same reason with No. 2.

Attached herewith are photo copies of Official

Receipt__________________.

No. 4. Same reason with No. 2.

Attached herewith are photocopies of Official Receipt No.____.

No. 5. Same reason with No. 2

No. 6. Due to the fact, that the borrower incurred past due, the Bank
agrees to the classification as classified by the examiner. But the borrower
promised the Bank that she will settle the loan by September 2018.

No. 7. Same reason with no. 2.

Attached herewith are photocopies of Official Receipt No.___________.

No. 8. Based on files, there was a cash flow analysis conducted by the
Manager but was not transferred to the Cash Flow Analysis Form.

Thus, the Bank is asking for the examiner to upgrade the Loan
Classification from Especially Mentioned to Pass considering there was a
substantial compliance in conducting cash flow analysis.

Attached herewith is a photo copy of cash flow analysis and serve as

Annex __________.

No. 9. Based on record, said loan account, he Bank has provided

Allowance for Probable Losses (ACL) on June 29, 2018.

Attached herewith are photocopy of Debit Ticket and serve as Annex

________.

Downgraded based on aging of missed payments:

 The following borrowers mentioned are all provided allowance for
probable losses (ACL) on June 29, 2018.

Attached herewith is photo copy of Debit Ticket and serve as Annex

_______>

Reply to Schedule 6.

No. 1. Mr. Adroito E. Pangapalan, our Consultant, conducted a site

inspection the subject property and talked to the relatives of Antonio Dionson
regarding the status of the property. Three days after the inspection, a relative of
Antonio Dionson visited the Bank and ask the price to repurchase the subject
property. Right now, the bank is in the process to fix the amount. The Bank is
willing to dispose the subject property on As Is Basis., meaning the buyer will the
one who will shoulder all the expenses for the transfer of the property. The Bank
will just issue or execute a necessary documents relative to the transfer, such as
Deed of Absolute Sale, Special Power of Attorney, etc.

No. 2. The said property is in the process of transfer in the name of the
Bank. The Bank has paid already the capital gains tax and surcharges with the
BIR. Right now, we waiting for the result of our request for the re assessment of
improvement situated in the subject property with the Mandaue City Assessor’s
Office.

Attached herewith is a photocopy of Request Letter and serves as Annex

______.

Reply to Schedule 7.

Nos. 1 to 9. The bank has not paid the current real property taxes due to
the fact that the bank will disposed the subject properties on AS IS BASIS. In this
scheme, the buyer will be one to shoulder the transfer expenses incurred. The
Bank will just issue or execute documents necessary for the transfer in favor to
the buyer.

Reply to Schedule 8

No. 1. As a procedure before granting loan, the Manager/Appraiser will

conduct an interview with the borrower. The former will require the borrower to
submit the requirements and then fill up the application letter. The
Manager/Appraiser will evaluate and assess all documents submitted by the
borrower. Once all the requirements are complete, the Manager/Appraiser will
recommend the said application for another interview with the President, at the
same time member of the Credit Committee.

Based on files, there was a credit proposal made by the

Manager/Appraiser but was no transfer to the Credit Proposal Form. Thus, there
was a substantial compliance compare to no credit proposal at all.

If the borrower cannot furnish or submit bank statement, in house

statement, audited financial statement, or other documents, as per advice by the
previous examiner that we have to narrate it in the Credit Proposal based on our
interviews.

Please take notice that not all borrowers can furnish documents as proof
of income but can be established through interviews.

No. 2. Same reason with No. 1.

Further, in No. 1 and No. 2, said borrowers are known to the Bank and it is
backed up with Real Estate Mortgage.

Reply to Schedule 9

No. 1. There was a cash flow analysis made by the Manager/Appraiser

but was not transfer to the Cash Flow Analysis Form. The same is true as to the
Credit Proposal..

No. 2. Same reason with No. 1.

No. 3. Same reason with No. 1.

Reply to Schedule 10

Nos. 1, 2, 3, 4, 5, & 7, there particular appraisal reports were not included

on the loan files. All appraisal reports specifically for collateralized loans are filed
separately. It is filed in a folder in an alphabetical order for easy to look upon.

Attached herewith are photo copies Appraisal Report and serve as

Annexes ________ respectively.

No. 6. The said appraisal report was submitted to the examiner during the
exit conference.

Reply to Schedule 11

Nos. 1 to 11, said matter will be addressed to our IT Provider. The Bank
has communicated the matter to our IT Provider for appropriate action.