A MESSAGE FROM THE PRESIDENT

Dear Stakeholders,

Allow me to extend my warm-hearted gratitude to all the Stockholders for their determined and
persistent support and for giving the management their vote of confidence, to the members of the
Board of Directors for their generosity in sharing their expertise and time, especially, Independent
Director and Chairman of the Audit Committee Director Ruel Romarate and Independent Director and
Chairman of the Credit Committee Director Dr. Elaine R. Teleron and to the Officers and Staff of
Community Rural Bank of Medellin (Cebu), Inc. (CRBMI) for their insistence and dedication to overcome
the challenges that the bank encountered in 2019 with the singular purpose of making the Bank achieve
a profitable operation.

2019 was a great year for the CRBMI, since at the start of the year 2019, the Bank started to generate
net income in its operations due to the strategic and budget planning crafted by the Board of Directors
and it was monitored and implemented in accordance of its provision. The Bank has been constantly
maintaining its monthly net income until the year 2019 ended.

Joint BSP and PDIC Examiners came towards the end of the second quarter and noted the improvements
in the Bank operations as well as the remaining weak areas which the Bank needs to work on. The 2019
examination covered the second to the fourth quarters of 2018 and the first and to the second quarters
of 2019, the cut-off period ending 30 June 2019.

Despite the exceptions noted by the Examiners due to lack of credit policies, however, the improvement
of the Bank’s operations was acknowledged by them. In fact, the result of the examination was
encouraging and found satisfactory, as proven by the Report of Examination (ROE), the Bank got an
increase in CAMELS Rating from 1 to 3 overall. The C-A-M-E-L-S rating is all about the overall assessment
of the Bank which specifies the following:
C - Capital of the Bank.
A - Asset Quality/Credit Risk.
M - Management.
E - Earnings
L - Liquidity/Liquidity Risk
S - Sensitivity to Market Risk, Operational Risk, Compliance Risk, Strategic Risk, Reputational Risk, and Legal Risk

The collective insight and recommendations of BSP and PDIC had afforded the Bank a fresh perspective
from which to anchor its governance and risk management.

The stockholders had also given the Bank all the support that it needs. Due to the SEC approval of the
P50 million Bank’s Increase of the Authorized Capital Stock in the last month of the fourth quarter of
2018, the Bank’s Paid-Up Capital increased to P46.086 million with remaining P3.9 million of
Subscription Receivable of major stockholders from the members of Ancajas Ramos Family. The infusion
of fresh capital enabled the Bank to extend more loans, thereby; increasing the Bank’s Loan Portfolio by
31% and made the bank have investments in other banks enjoying higher interest yield.
The Bank introduced changes in its Organizational Structure and vacant positions were filled up to
enhance internal control and efficiency. Within the year 2019, the Loans Bookkeeper System was also
installed and is still undergoing parallel testing.

The Bank was able to accomplish much of its plans, the various items in the direction for 2019. Below is
the status update:

1. Conduct of Strategic Planning for 2019-2023-

The Bank was able to conduct the activity as scheduled. The Board has approved the 5- year
Strategic Plan for 2019-2023 on January 05, 2019, including the Bank’s new Vision and Mission.

Vision:

CRBM is a catalyst in promoting rural development, providing competitive edge in the delivery
of banking services, and partnering for the advancement of farmers, fisher folk, countryside
entrepreneurs and related clients.

Mission:

 To promote comprehensive rural development with the end in view of attaining a more
equitable distribution of opportunities, income, and wealth; and

 To increase productivity through provision of credit as a key to raising the quality of life for
all.

2. Improvement of Account Management, skills upgrading, and filling up vacant positions.

Since the positions of the Chairman, President and Manager were held by one person, thus the
Bank was able to select Director Aurora A. Ramos as Chairman. Director Josephine Ann A. Ramos
remained as President, Independent Director Ruel Z. Romarate was elected as Chairman of
Audit Committee, Independent Director Dr. Elaine R. Teleron was elected as Chairman of Credit
Committee and the incumbent Compliance Officer was appointed to Bank Manager. The
positions of Compliance Officer and Internal Auditor were held by one person, as per
recommendation by the BSP and PDIC Examiners, thus the Internal Auditor at the same time
was appointed to serve as Compliance Officer. The Credit Investigator and Appraiser as well as
the Loan Collector were appointed to serve as Account Officers. Trainings and skills upgrading
were conducted through various seminars attended in Cebu City enhanced competence and
commitment to the tasks.

3. Crafting and approval of New Credit Policies Incorporated in the Existing Credit Policy Manual.

However, the lacking credit policies which were noted by the BSP & PDIC Examiners were
already complied, since Independent Director Ruel Z. Romarate helped craft the new credit
policies which the members of the Board of Directors eventually approved.
 4. Automation of processes, increase efficiency, improve internal control, audit and compliance.

The Savings and Time Deposits and Loans systems are now in place and showed potential for
reliability and better efficiency. The Bank achieved huge improvements in the integrity and
reliability of its financial reports.

Results of Operation:

Table 1: Comparative Performance 2019 vs. 2018 [Performance Monitoring (PM)]

2019 2018 Variance %

Income Accounts
Interest Income 6.442 4.834 1.608 33
Non-Interest Income 2.555 2.107 .448 21
Total Income 8.997 6.941 2.056 30

Expense Accounts
Interest Expense .854 .715 0.139 19
Compensation/FB 3.564 4.605 [1.041] [23]
Taxes and Licenses .541 .534 .007 1
Depreciation Expenses .226 .585 [.359] [61]
Other Administrative Expenses 3.059 2.228 .831 37
ACL 1.256 2.532 [1.276] [50]
Total Expenses (before adjmt) 9.500 11.199 [1.699] [15]
Less: Recoveries on Financial
Assets (Recoveries on
Charged-Off Assets) 1.867 -0- 1.867 -0-
Total Expenses (after adjmt.) 7.633 11.199 [3.566] [ 32]
Net Income 1.364 [4.258] 5.622 [132]

The result of operation showed a net income of P1.364 million, which is 132% above the P4.258M
net loss of 2018. The growth of income was largely the result of the Recoveries on Financial Assets
(Recoveries on Charged-Off Assets) and increases in the interest income collected from loans and
interest from investments due to increases in the loan portfolio and deposits in other banks.

Income for 2019 was derived mainly from the core business of the Bank, interest income from loans
and deposits. Gross income increased by P2.056M or 30% to P8.997M from P6.941M in 2018; this
despite the increase in the volume of loan releases which saw the Interest Income rise by P1.608M or
33% increase to P6.442M from P4.834M; while Non-Interest Income rose by P.448M or 21% to P2.555M
from P2.107M the previous year.

The Total Expenses before adjustment decreased by P1.699M or 15% to P9.500M down from
P11.199M the previous year. However, after the adjustment or recoveries on charged-off assets of
P1.867M, it was decreased by P3.566M or 32% to P7.633M, down from P11.199M, the previous year.
The Interest Expenses increased by 19% to P.854M from P.715M as a result of increased Deposit Liability
from P32.701M in 2018 to P40.113M in 2019.
 Table 2: Asset Growth [PM]:
Particular 2019 2018 Variance %
Total Assets 69.405 61.374 8.031 13
Cash/DFOB 28.136 31.800 [3.664] [12]
Net Loan Portfolio 28.662 19.769 8.893 45
Deposit Liability 40.113 32.701 7.412 23
Other Liability .918 .896 .022 3

The bank’s Total Assets grew by P8.031M or 13% to P69.405M from P61.374M. Cash comprises 41%
of the total assets. As of year-end, Cash and DF0B amounted to P28.136M, P3.664M or 12% lower than
2018 figure of P31.800M. The 12% decreased in Cash and DFOB as of year- end was a result of the
transfer of funds or deposit to Due From BSP to comply with the legal reserve requirement and the
releases of loans which saw the net loan portfolio rise by P8.893M or 45% increase to P28.662M from
P19.769M.

The bank’s Net Loan Portfolio posted an increase by P8.893M or 45% to close at P28.662M from
P19.769M for the same period last year. The growth in the loan portfolio was funded by the significant
improvements in the loan collection and fresh deposits.

Deposits Liabilities outstanding posted a growth of 23% or P7.412M which brought the outstanding
amount to P40.113M from P32.701M in 2018. Other Liabilities amounted to P.918M from P.896M.

The bank had made significant steps in improving its commitment to its customers and communities
through the delivery of quality service. This was achieved through the full backing and support of the
Board. The bank had succeeded in forging partnerships with our customers by providing timely and
affordable financial packages of products and services. Our portfolio showed expansion for the small
enterprise and agri-business borrowers like piggery and poultry, including the other loans miscellaneous
for individual consumptions.

We have seen the increased confidence of our staff through the improvements in our turnaround
time and in providing our customers financing options that are tailored fit to their individual needs.
These factors resulted to increased customer satisfaction which will surely result to higher client
retention and would become our built in marketing advantage. We have acquired this advantage when
we transferred the function of account management from Loan Collection Officer to Account Officer and
Branch Manager which proved to be very crucial in improving account servicing and collection. We have
received positive and encouraging feedback from satisfied borrowers.

Our remedial management initiatives also resulted to better collection of past due accounts and
brought improvements in the bank’s loan portfolio quality. This has resulted to better efficiency as we
avoided additional cost of legal fees due to non-filing of collection cases. We have also succeeded in
improving the skills of our people through training, on the job coaching and mentoring.

Our optimism and confidence for the years ahead are based on the many strategic improvements
achieved in 2019.
The Bank has made considerable improvements in its deposit operations and internal control in 2019,
since the Bank is compliant in relation to the following findings and directives of the PDIC:

1. That the Bank has done and submitted to PDIC the status reports and supporting documents on
the regularization/correction of examination findings which the latter evaluated as substantially
compliant.

2. That the Bank has done and submitted to PDIC the duly approved board resolutions on the
actions taken to address the PDIC examination findings which the latter evaluated as compliant,
since the Board Resolutions are in order according to PDIC Board.

3. That the Bank has done and submitted to PDIC the notarized Deed of Undertaking (DOU) to
address the examination findings, signed by the Bank’s President, as duly authorized in the
aforementioned Board Resolution which the PDIC evaluated as compliant where the DOU is in
order while the commitment/actions taken to address the PDIC findings indicated therein are
acceptable according to the PDIC Board.

4. That the Board had approved and submitted to PDIC the proof of designation/appointment
papers of Lilio Noynay and Mr. Renan A. Ortega duly acknowledged by them in relation to the
Organizational Structure in Deposit Operations and Internal Controls.

5. That the Bank has already submitted to PDIC the interest accrual report and audit plan for 2020
which the latter evaluated as substantially compliant and acceptable. This is in relation to the
Deposit Management System.

6. That the Bank has done and submitted to PDIC the updating of accounts of the client
identification process in compliance with the minimum information and documentary
requirement which the PDIC evaluated as substantially compliant.

7. That the Bank has done and submitted to PDIC the duly board-approved audit plan which
includes review of deposit-related transaction and deposit management system which the latter
evaluated as substantially compliant where the audit plan is acceptable according to the PDIC
Board.

8. That the Bank has done and submitted to PDIC the documentary proof of documents in sending
notification letters on the action taken for dormant accounts and the audit program. These
include the review of transactions involving dormant accounts and the inclusion in the audit
scope the confirmation of deposit balances of closed accounts which PDIC Board evaluated as
substantially compliant. This is in relation to the Accounts Management.

9. That the Bank has done and submitted to PDIC the proof of designation of the Cashier as joint
custodian of manual subsidiary ledgers in relation in record keeping and administration.

10. That the Bank is already compliant with the PDIC Regulatory issuances RI 2015-01 regarding the
Computerized Records of Bank Deposits and PDIC Bulletin No. 2018 dated 4 July 2018. The Bank
already submitted the Deposit Account View (DAV) for ERA, student savers and tax-exempt
savings accounts indicating the prescribed deposit type descriptions which the PDIC Board
evaluated as compliant.
 11. That the Bank has done and submitted to PDIC the duly – board approved policy on the
safekeeping of collaterals which the PDIC Board evaluated as compliant.

However, there are areas where the Bank needs to improve some more to better prepare for the
challenges confronting the industry in 2020 and beyond.

1. The results of operations showed a significant level of effectiveness in allocating the resources
to optimize yield, but there is much to be desired in as far as efficiency is concerned.

2. The Bank has to work harder in order to sustain the improved reliability of its financial reporting.
We have to improve on the review and supervision to generate timely and accurate reports and
avoid being penalized.

3. Another area where we need to improve some more is in our compliance to applicable laws and
regulatory requirements. The Compliance Officer and Internal Auditor is newly elected where
the Compliance Risk Based Program, Audit Risk Based Program, Compliance Stress Testing were
already complied and submitted to PDIC and BSP.

4. The bank’s Strategic Plan for 2019-2023 was crafted. The Annual Budget for the bank has also
been prepared and disseminated to Bank personnel.

5. The Bank has been compliant with the new level of capital requirement.

6. Among those policies in the Bank’s Operation Manual that the bank reviewed and revised were
the policies in the Credit Policy Manual where the new credit policy has been crafted and
approved by the board. After considering the opinion and ideas from the members of the board
of directors in order to remain competitive, the board decided to concentrate in the granting of
secured loans offering lower rates and minimized the granting of unsecured loans.

7. It is very important that the bank has to improve and maintain its net income monthly moving
forward that would result maintaining Bank’s CAMELS rating of 3, and work on increasing it to
exit the PCA status.

8. The performance measures of the staff, including that of the Board and its committees are now
in place. This will enable the staff to remain focused on the customer without sacrificing the
sustainability of the bank.

9. The bank has made great improvement in its risk management as well as the risk governance
framework, through the talents, expertise and experiences generously shared by Independent
Director and Audit Committee Chairman Director Ruel Z. Romarate and Independent Director
and Chairman of the Credit Committee Director Dr. Elaine R. Teleron.

JOSEPHINE ANN A. RAMOS

PRESIDENT
11 FEBRUARY 2020