Government negotiators travelled to Mindanao on Friday to try to secure the release of the remaining villagers from the armed hostage-takers, believed to be former members of a militia known as the "Perez group".
Seventeen children and an elderly woman were released hours after the initial kidnapping.
Negotiations resumed early on Friday in three remote hilltop huts in the southern Philippine hinterland, surrounded by hundreds of security forces.
Jaime Milla, a police chief, said the hostage-takers in the Agusan del Sur province were former militiamen who had been dismissed and turned to banditry and extortion, targeting mining and logging companies in the area.
Two brothers among the armed group were wanted for murder.
One of them, Joebert Perez, told reporters on Friday that the charges against him were fabricated, and he blamed a rival clan for the killings.
Local authorities said the abductions were linked to clan wars among the local indigenous tribes.
"In my analysis ... the hostage-taking was only for making human shields," Santiago Cane, the provincial vice-governor, said. "They want the standing warrant of arrest issued against them revoked."
Clan wars, known locally as "rido", are common in communities in southern Philippines.