Annual Report

2020
The Bank of Iwate, Ltd.
Annual Report 2020

Top Message
1. Management Policy
Since its establishment in May 1932, The Bank of Iwate, Ltd. (the “Bank”) has been maintaining its two basic
positions of contributing to the development of the regional community and ensuring financial soundness of the
Bank under all circumstances as its fundamental mission objectives.
When the business environment surrounding the Bank changed drastically due to the impact of the Great East
Japan Earthquake which occurred in March 2011, we came up with the new long-term vision for the next 10 yearsof “demonstrating a dominant presence as a driving force in the region, while establishing our position as a top
quality bank,” along with the medium-term management plan formulated in April 2013. As such, it allows us totransform ourselves from a backstage player to a proactive driving force demonstrating our dominant presence,
while at the same time, strive to establish the No.1 position in terms of quality by improving and reinforcing ourintangibles, including our customer service capabilities.
Long-term Vision (April 2013 to March 2023)“Demonstrating a dominant presence as a driving force in the region, while establishing our position
as a top quality bank”
1st stage “”

2nd stage “– Reconstruction and Creation,
toward a Prosperous Future –April 2013”

– The Innovation –March 2016 April 2016

March 2019 April 2019

3rd stage “”– To the Next –Present

March 2023

2. Overview of the Medium-term Management Plan
(1) Overview of the Medium-term Management Plan
In April 2019, after the accomplishment of our long-term vision, we launched our new medium-term management
plan “Iwagin Frontier Plan – To the Next” (the “Plan”) as a preparation period toward the future. “To the Next”
embodies our desire of paving a path for the next generation of the regional community and the Bank throughvarious initiatives to solve issues facing the region.
The theme of the Plan is “pursuing CSV to build a future with the region.” CSV stands for “Creating Shared
Value,” and represents the creation of common values. This is the notion that, by making efforts to address social
needs and issues, social values are created, and at the same time, economic values are created. In other words, as
the Bank’s CSV, it means “by making efforts to strengthen our relationships with customers, confronting issues
facing our region head-on, and endeavoring to resolve them, we can enhance social and economic values for both
the region and the Bank.” Under the Plan, we will fulfill our ideal of “co-prosperity” with the region by giving
shape to this theme.
The Plan covers the four years from April 2019 to March 2023. For the first two years of the Plan, we have been
moving ahead with BPR and reorganization of our branches as part of the management structure reinforcement
project which began under the previous medium-term management plan, the transformation of the Bank’s earnings
structure including reviewing the sales structure together with the rebuilding of the system, as well as promoting thecreation of new business domains and digital strategies to revitalize the regional economy ahead of schedule. The
latter two years of the Plan have been designated as the period to respond to various possible changes in theenvironment as well as reaping full-fledged profits and results generated from the measures which were carried out
in the first two years of the Plan, such as the transformation of the earnings structure and the creation of new
business domains.

― 1 ―Medium-term Management Plan: April 2019 to March 2023

Iwagin Frontier Plan

– To the Next –Theme: Pursuing CSV to build a future with the region
Four basic policies“Ingenuity and enthusiasm” Provision of high-quality added value to realize regional andcustomer growth“Structural reform” Improved operational efficiency through promotion of BPR and optimizationof resource allocation“Flexible and unwavering” Establishment of market operation/risk management/revenue
management frameworks that can respond flexibly to changes in the environment“Oneself × The future” Fostering of an organizational culture in which each person can proactively
tackle issues using his or her knowledge and actions

Timeline

The first 2 years

Transformation of the earnings structure
Rebuilding of the system

The latter 2 years

The measures bring aboutfull-fledged results

Proactive investments in new businesses,
digital fields, etc.
March 2021

March 2023

(2) Progress of the Medium-term Management Plan
The Plan has set the four principal target indicators, including the profitability indicator of “consolidated net
income,” the efficiency indicator of “OHR,” the management soundness indicator of “consolidated capital ratio,”and the challenging indicator of “Business succession/M&A support recipients” to proactively address and solve
issues facing the region and realize CSV.
In FY2019, the first year of the Plan, while we failed to achieve the targeted consolidated net income due toreporting impairment losses on our shareholdings as a result of the decline in share prices at the fiscal year-end, wewere able to achieve our targets for OHR, the consolidated capital ratio, and business succession/M&A support
recipients.
Indicator
Consolidated net income

FY2019targets

FY2022(final year of the Plan)
targets

FY2019results¥4.0 billion¥3.7 billion¥5.0 billion

81.4%

76.8%

70% levels

Consolidated capital ratio

Lower 12% levels

12.1%

Over 10%

Business succession/
M&A support recipients

600

618

2,400
*Accumulated total plan
periodOHR― 2 ―3. Issues to be addressed
We believe the first two years are especially crucial in the timeline of the Plan, and we are strengthening initiatives
in the following areas in particular to reap profits and results in the latter two years of the Plan generated from themeasures carried out in the first two years.
(1) Transformation of the earnings structure and rebuilding of the system
Since October 2017, the Bank, under the Management Structure Reinforcement Project, has been carrying out
initiatives to strengthen its management structure, namely BPR for our Head Office and business branches andreorganization of the branches. The BPR for our Head Office and business branches consists of streamlining and reallocating its personnel, according to each business operation. As for the reorganization of its branches, 20
designated branches will be consolidated or downsized, using the branch-within-a-branch format during the project
period (from October 2017 to March 2023). The project has also been promoting cost structure reforms.
The project, including BPR, branch reorganization and cost structure reforms, is designed to generate a numberof sales staff by improving operational efficiency and productivity, thereby increasing contact points with ourcustomers and reinforcing profitability, while at the same time optimizing the cost structure in order to build amanagement structure that will support the region under any circumstances going forward. This project is the main
pillar of the Plan, and is intended to prevent a further decline in revenues expected as a result of the continuing lowinterest-rate environment by strengthening the Bank’s sales capabilities through securing a number of sales staff,
while ensuring the targeted profits in the final year of the Plan by reviewing the cost structure.

“Management Structure Reinforcement”• Consolidated net income ¥5.0 billion (Target for the final year of the Plan)“Proactive” • Securing sales staff • Reinforcement of sales structure“Reactive” • Cost reductions • Streamlining the organization

Management Structure Reinforcement Project“Head Office BPR” • Review of business processes ⇒ Improved productivity/Review of theorganization and functions“Business Branch BPR” • Reduction of clerical work, increased efficiency and versatility,
and upgrading skills“Branch reorganization” • Consolidation of bases using the branch-within-a-branch format/
Review of branch functions“Cost structure reforms” • Optimization of cost scale/Improved operational efficiency(2) Proactive initiatives into new businesses, digital fields, etc.
In terms of the creation of new business domains to revitalize the region, in April 2020, we established the whollyowned, Iwagin consulting Co., Ltd., to provide business succession support services, including business succession
measures and M&A support, as well as management support services, including support in formulating businessstrategies and management plans and the referral of core personnel; and the wholly-owned, manorda Iwate Co., Ltd.
to provide regional trading company services that will contribute to regional revitalization in cooperation with
regional business owners and local governments, in addition to services to support sales channel expansion andbranding of our customers.
Iwagin consulting aims to strengthen and upgrade its financial intermediation functions by consolidating theGroup’s consulting functions and developing dedicated talent. It will provide meticulous consulting services
including business succession measures, measures to secure necessary manpower, human resources and labormeasures, and the formulation of management plans, to address the various management issues facing our corporate
customers.

― 3 ―manorda Iwate aims to encourage regional revitalization and the creation of industries by entering new businessdomains and establish a sustainable business model, while at the same time enhance the sustainability of theregional communities by engaging in social impact businesses that are linked to the SDGs and CSV measures. For
the time being, we will work to revitalize the primary sector, Iwate prefecture’s key industry, disseminate
information on the prefecture’s traditional industries, develop regionally branded products in collaboration withlocal designers and creators, and promote the development and creation of thriving communities.
Furthermore, our lifestyles are changing as seen for example in the widespread use of smartphones and theinflux of different industries harnessing digital technologies into the finance sector, heralding an age where
customers seek quicker and more convenient financial services. The Bank has also taken such changes in theenvironment into consideration and has pressed forward with services that offer customer-oriented interface (contact
points) and channels as well as highly-satisfying services in line with diverse lifestyles and tastes, to win overcustomers who tend not to visit the Bank in person, in addition to our existing customers.
(3) Developing a structure in which every employee can play an active role
In terms of human resources development, we consider training and retention of our young employees who willlead the future of the Bank as an essential task. We have adopted training measures to promptly make our young
employees work-ready, as well as promoting initiatives to improve retention through the enhancement ofengagement. Also, in light of the increasing diversification of services, we are considering career design seminars
for specialists to fill the need for talent equipped with profound expertise and know-how to provide such services as
life-planning, consulting, and FinTech to our customers.
As part of efforts to develop an environment in which every employee can play an active role, we started the
flextime system from April 2020 to improve productivity, reduce working hours and support “work-life balance,”
including the time for child-rearing, nursing and receiving medical treatment, through the independent and efficient
allocation of working hours by the employees themselves. Also, from the standpoint of effecting change in thecorporate culture such as going paperless and encouraging cross-divisional communication, we are in the midst of
adopting a free-address office where employees don’t have a fixed space at work.
(4) Responses to the increasing impact of the novel coronavirus disease (COVID-19)
The Bank has been monitoring the business conditions of our corporate customers who have been affected by the
spread of COVID-19. The impact of COVID-19 on the business of our corporate customers has become
increasingly severe, with the decline in consumption and inbound demand from visitors to Japan due to selfquarantine and suspension of imports of raw materials and other supplies from overseas. This impact extends not
only to the restaurant and tourism industries, but also a wide range of industries.
Given that the pressing issue for our corporate customers who have been impacted by COVID-19 is cash flow,
i.e. to secure the necessary working capital for the time being, the Bank’s highest priority right now is to provide
them financing support. Specifically, in addition to providing special financing which is substantially interest-free
and unsecured, we have established a special lending system from our own funds to respond to our customers’ wide
range of financing needs, as well as waiving fees on the modification of loan terms, necessitated by the impact of
COVID-19.
We have also established a cross-divisional Regional Support Team to provide comprehensive support, including
the maintenance and recovery of sales channels in addition to financing, as well as holding free online consultation
sessions regarding Employment Adjustment Subsidies for corporate customers who have been forced to cut backbusiness activities and have concerns over maintaining the employment of their employees under the COVID-19
pandemic.

Sachio Taguchi, President― 4 ―Analysis of the Financial Position and Business Performance of the Bank(on a consolidated basis)

Financial Position
Principal Accounts
Deposits (including negotiable certificate of deposit) and Asset Under Management
Deposits (including negotiable certificate of deposit) at the fiscal year-end decreased by ¥16.2 billion from theprevious fiscal year-end to ¥3,201.3 billion (US$29,416.4 million). This was attributable to a decrease in publicdeposits and deposits by corporate clients, despite an increase in deposits by individuals.
The fiscal year-end balance of assets under management posted a decrease of ¥14.5 billion from the previous fiscal
year-end to ¥319.2 billion (US$2,933.0 million), due to a decrease in investment trusts, despite increases in insurancesand public bonds.
Loans
The fiscal year-end balance of loans increased by ¥20.0 billion from the previous fiscal year-end to ¥1,815.0 billion(US$16,678.2 million). This was attributable to increases in loans to SMEs and individuals, despite a decrease inloans to local governments.
Securities
The value of total securities decreased by ¥18.9 billion from the previous fiscal year-end to ¥1,200.1 billion(US$11,028.0 million). This was attributable to a decrease in national government bonds, investment trusts, andothers under management.
Cash Flow Analysis
Net cash used in operating activities was a net outflow of ¥19.8 billion (US$182.7 million) in the current fiscal year,
while net cash of ¥73.0 billion was used in the previous fiscal year. This was due to an increase in loans, as well as adecrease in net cash resulting from a decrease in deposits, etc. in both the previous and current fiscal years.
Net cash used in investing activities was a net outflow of ¥1.2 billion (US$10.6 million), while net cash of ¥70.5
billion was provided in the previous fiscal year. This was due to the proceeds from sale and redemption of securities
exceeding the acquisition of securities in the previous fiscal year, while the proceeds from sale and redemption of
securities fell below the acquisition of securities in the current fiscal year.
Net cash used in financing activities was a net outflow of ¥2.5 billion (US$23.1 million) in the current fiscal year,
while net cash of ¥12.8 billion was used in the previous fiscal year. This was due to the payment of cash dividends
in addition to the redemption of “convertible bond-type bonds with stock acquisition rights due 2018 payable in euro
and U.S. dollars” in the previous fiscal year, and acquisition of treasury stock in the current fiscal year.
As a result of the above, the fiscal year-end balance of cash and cash equivalents decreased by ¥23.5 billion from theprevious fiscal year-end to ¥369.8 billion (US$3,397.9 million).
Business Performance
Earnings
Total income decreased by ¥3.2 billion from the previous fiscal year to ¥45.3 billion (US$416.5 million). This was
mainly attributable to a decrease in interest income including interest and dividends on securities as well as a decreasein other income including gain on sale of stocks and other securities.
Total expenses decreased by ¥2.2 billion from the previous fiscal year to ¥40.1 billion (US$368.4 million). This was
mainly due to a decrease in provision of allowance for doubtful accounts, despite an increase in other expenses suchas loss on devaluation of stocks and other securities, as a result of the sharp decline in share prices at the fiscal yearend due to the impact of COVID-19.
As a result, income before income taxes decreased by ¥1.0 billion from the previous fiscal year to ¥5.2 billion(US$48.1 million). Net income attributable to owners of parent decreased by ¥0.4 billion from the previous fiscal
year to ¥3.8 billion (US$34.8 million).
Capital Ratio
The capital ratio declined 0.14 percentage points from the previous fiscal year-end to 12.10% on a consolidated
capital adequacy basis and by 0.12 percentage points from the previous fiscal year-end to 11.75% on a nonconsolidated capital adequacy basis, as a result of an increase in risk assets mainly due to an increase in outstandingloans to SMEs, etc.
― 5 ―Corporate Governance■ Basic approachEver since its establishment, the management of the Bank has been based on the fundamental mission objectivesof contributing to the development of the regional community and ensuring the financial soundness of the Bank
under all circumstances. Even in today’s rapidly changing business environment, in order to fulfill the duties
expected of us as the leading bank in our region, by all stakeholders including our business partners andshareholders, we take complete responsibility for our management decisions and aim to establish the highest
standard of corporate governance that includes improved management transparency and strengthened oversightfunctions.
■ Corporate governance structure
The Bank, pursuant to the resolution on the partial amendments to the Articles of Incorporation at the General
Meeting of Shareholders held on June 22, 2018, transitioned to a company with Audit & Supervisory Committee.
By transitioning to a company with Audit & Supervisory Committee, the Bank shall strive to further improve its
corporate value through the enhancement of its corporate governance system by installing an Audit &Supervisory Committee, over half of whose members are Outside Directors, and strengthening oversightfunctions through the voting rights on the Board of Directors and the right to voice opinions on executive
appointments and dismissals held by the Directors serving as Audit & Supervisory Committee Members.
■ Board of Directors
The Board of Directors comprises a total of fourteen Directors, including ten Directors who are not serving as
Audit & Supervisory Committee Members, three of whom are Outside Directors, and four Directors serving as
Audit & Supervisory Committee Members, three of whom are Outside Directors. Outside Directors currently
account for 42.8% of the Board of Directors. Additionally, two female Outside Directors have been appointed.
■ Audit & Supervisory Committee
Directors serving as Audit & Supervisory Committee Members hold voting rights on the Board of Directors andare delegated certain business execution responsibilities, in addition to the auditing authority. The Audit &Supervisory Committee collaborates closely with the internal audit division and the Accounting Auditors tomaintain and enhance audit quality, as well as conducts effective and efficient audits by appointing Standing
Audit & Supervisory Committee Members and assigning support staff.
■ Executive Committee and Compliance Committee
The Bank has established the Executive Committee and the Compliance Committee as mechanisms that discussand decide the matters referred by the Board of Directors. The Bank is planning to reinforce its organization
with a greater emphasis on compliance by having the Compliance Committee, rather than the Executive
Committee, discuss important matters relating to compliance.
■ Nomination and Compensation Advisory Committee
The Nomination and Compensation Advisory Committee has been established as an advisory body to the Boardof Directors to improve the transparency and objectivity regarding decisions on the nomination andcompensation of Directors. The Bank stipulates that the Nomination and Compensation Advisory Committee
comprises a total of five members, including two Representative Directors and three Outside Directors (Directors
who are not serving as Audit & Supervisory Committee Members), so that the majority is made up of Outside
Directors, and that an Outside Director serves as chairman.

― 6 ―■ Enrichment of information disclosure activities
In compliance with relevant laws and regulations, the Bank strives to disclose accurate management information
in a timely manner and to enrich the content of the information that it discloses so that valuable information canbe viewed in a timely manner via the Bank’s website.
The Bank also actively makes efforts on investor relations to earn the confidence of business partners and themarket and corporate responsibility aimed at customers of the community.

[Corporate governance structure]
General Meeting of Shareholders
Appointment/dismissal

Nomination andCompensation
Advisory
Committee

Involvement
and advice

Board of Directors

Directors not serving as
Audit & Supervisory
Committee Members

Reports

Audit andoversight

Appointment/dismissal

Appointment/dismissal

Reports
Audit & Supervisory Committee

Reports

Directors serving as Audit &Supervisory Committee Members

Coordination

References and reports
on important items

Instructions
and orders

Coordination
Reports
Coordination

ALM Committee
Credit Risk Committee
Operational Risk Committee

Compliance Committee

Executive Committee

Customer Interest Protection Committee

Accounting
Auditors

Audit Division

Visiting audit andmonitoring

Business branches, Head Office, subsidiaries, etc.

― 7 ―・Board of Directors (As of July 1, 2020)
Chairman

Masahiro
Takahashi

Senior Managing Director

Motomu SatoManaging Director

Kensei Ishikawa

Managing Director

Shinji Niisato

Director (Outside Director)

AtsushiTakahashi

Director (Outside Director)

Fumio Ube

Director (Outside Director)

AtsushiMiyanoyaDirector serving as an Audit &Supervisory Committee
MemberDirector serving as an Audit &Supervisory Committee
Member (Outside Director)
Managing Executive Officer /General Manager of Sendai
OfficeExecutive Officer / General
Manager of Kitakami Branchand Kitakami Ekimae Branch
Executive Officer / General
Manager of Financial Markets
Division

President

Yuji Chiba
Etsuko Sugawara

Managing Director (General
Manager of General
Planning Division)
Managing Director (General
Manager of Personnel
Division)

Director serving as an Audit& Supervisory Committee
Member (Outside Director)
Director serving as an Audit& Supervisory Committee
Member (Outside Director)

Sachio Taguchi
Yasushi Sasaki
Yasutaka Kakiki

Shinobu Obara
Masakazu
Watanabe

Katsuhiro
Kawamura

Executive Officer / General
Manager of Tokyo Office

Toru Iwayama

Satoshi Ito

Executive Officer / General
Manager of Head Office

Shinei Kishi

ShinichiMatsumotoExecutive Officer / General
Manager of Audit Division

Shuichi Fujisawa― 8 ―・Organization (As of July 1, 2019)

General Meeting of Shareholders

Senior Managing Directors
Executive Officers

Nomination and Compensation
Advisory Committee
Board of Directors
Audit & Supervisory Committee
Executive
Committee

ChairmanPresident

Managing Directors

General Planning Division
Profit Management OfficePublic Relations and CSR Office
Tokyo Liaison Office
General Affairs Division
Personnel Division
Human Resources Development OfficePublic Affairs and Regional Revitalization Office

Corporate Strategy Division
Retail Strategy Division
Direct Banking Center
Credit Card Center
Customer Response Center
Head Office

Local Office

Iwagin Jigyo Souzou Capital
Co.,Ltd.

Iwagin Business Service Co.,Ltd.

Iwagin Lease Data Co., Ltd.

Iwagin DC Card Co., Ltd.

Iwagin Credit Service Co.,Ltd.

Iwagin consulting Co., Ltd.

manorda Iwate Co., Ltd.

― 9 ―CS Promotion OfficeMorioka Loan Plaza
Financial Markets DivisionInternational Business OfficeSendai Office

Hachinohe Office
Corporate Financial Support Office

Loan Supervision Division
Personal Loan Center

Local Office

Branches

Tokyo OfficeBusiness Management Division
Financial Products Management Office
Operations Concentration Center
Systems Division
Risk Management Division
Compliance Office
General Secretariat

Audit Division

Affiliate

Subsidiaries

・The Bank of Iwate Group

Iwagin Business
Service Co., Ltd.
1-2-3 Chuo Dori,Morioka City, Iwate
Prefecture

10Administrative
work of theBank

September 4, 1979

100%

Voting RightsofSubsidiaries,
etc. Other than
Said
Subsidiaries,
etc.
0%

Iwagin Lease Data
Co., Ltd.
1-5-31 Nakanohashi
Dori, Morioka City,
Iwate Prefecture

30

Computerizedaccounting
services,
leasing

April 1, 1972

100%

0%

Iwagin DC Card Co.,Ltd.
1-2-14 Nakanohashi
Dori, Morioka City,
Iwate Prefecture20

Credit cards
and consumer
loans

August 1, 1989

100%

0%

Iwagin Credit Service
Co., Ltd.
14-10-301 Morioka
Ekimae Dori, Morioka
City, Iwate Prefecture20

Credit cards
and consumer
loans

August 1, 1989

100%

0%

Iwagin consulting Co.,Ltd.
1-2-3 Chuo Dori,Morioka City, Iwate
Prefecture100

April 1, 2020

100%

0%

manorda Iwate Co.,Ltd.
1-2-3 Chuo Dori,Morioka City, Iwate
Prefecture70

April 1, 2020

100%

0%

Iwagin Jigyo Souzou
Capital Co., Ltd.
1-2-3 Chuo Dori,Morioka City, Iwate
Prefecture

50

Business
succession
support,Management
support,Personnel
consulting
Sales channel
expansion
support,
Regional
revitalization
supportInvestment
fundmanagement

April 1, 2015

40%

0%

Name/Address

Capital(Millions ofyen)

Main Business― 10 ―

Date of
Establishment

The
Bank’sVotingRightsEfforts towards SDGs
■ Iwagin Group SDGs Declaration
The Bank supports the objectives of the Sustainable Development Goals (SDGs) to be achieved by global society
for a more sustainable future and established the “Iwagin Group SDGs Declaration” in September 2019 to further
contribute to the achievement of the SDGs.
The Bank strives to realize a sustainable regional community by engaging in initiatives to solve regional
issues through its banking activities as part of its Corporate Social Responsibility (CSR) and Creating Shared
Value (CSV) activities, as well as rolling out corporate activities that give due consideration to society and theenvironment. These efforts by the Bank align with the basic philosophy “leaving no one behind” of the SDGs
which aims to realize a society that is sustainable, diverse, and inclusive.
The Bank considers the SDGs to be one of the ultimate goals beyond its CSR, CSV, and ESG efforts (processes)
and is committed to making group-wide efforts for the realization of a sustainable regional community.
*ESG: ESG, taking the first letters of Environment, Social and Governance, is a concept that stresses the importanceof corporate responses to environmental, social and governance issues in the sustainable growth of a company.
Iwagin Group SDGs Declaration
The Iwagin Group, under its management philosophy of contributing to the development of the regional
community and ensuring financial soundness under all circumstances, will make proactive efforts to solve thesocial and environmental issues facing the region towards achieving a sustainable future and contribute to theachievement of the Sustainable Development Goals (SDGs) adopted by the United Nations.
■ Flow Chart of Efforts toward SDGs
Our fundamental mission objectives of contributing to the development of the regional community and ensuring
financial soundness under all circumstances will serve as the cornerstone of all our activities as we strive tocontribute to the achievement of the SDGs through our CSR, CSV, and ESG efforts.
Fundamental Mission Objectives“Contribute to the development of the regional community”“Ensure financial soundness under all circumstances”
Processes

CSR

Contribute to regional revitalization through banking services and roll out corporate activities
that give due consideration to regional society and the environment

CSV

Create shared value by solving regional issues through banking services

ESG

Decision-making regarding investments and financing, and corporate activities that focus
on the perspectives of the environment, society, and governance

Goals■ Priority Themes“Prosperous Life”
We will contribute to realizing a sustainable regional community by solving issues facing regional society
through the provision of various financial services and products.
“Abundant Nature”
We will contribute to the preservation and improvement of the region’s rich natural environment through efforts
to promote use of renewable energy by utilizing regional resources and nature conservation activities.
“Healthy Mind”
We will foster the “minds” of future generations and contribute to improving the people’s financial literacy
through financial education activities and efforts to support culture and sports.
“Governance”
We will strive to enhance the transparency of our management while making efforts to provide an environment inwhich every employee can play an active role.
― 11 ―

■ Initiatives for the Priority Themes
Prosperous Life
Supporting our corporate customers in solving issues through an understanding of business feasibility“Understanding business feasibility” refers to the support provided to improve the corporate value of ourcorporate customers, upon fully understanding their business, challenges, and growth potential. By raising thecorporate value of our corporate customers, we will raise the general level of the industries of the regional
economy, the aggregate of our corporate customers.
Business succession/M&A support
Many of the business operators in the region are facing generation
changes and business succession and M&As have become pressing but
familiar management issues. We are facilitating the businesssuccession and M&As of our corporate customers while at the sametime supporting the development of the next generation of business
managers.

Iwagin Next-generation Management School
Entrepreneurship and start-up support
Iwate Prefecture has seen both a decrease in the number of businessestablishments and employees and an increase in the outflow ofcollege graduates to other prefectures. We are proactively supporting
initiatives for entrepreneurs, start-ups, and the development of new
businesses that will create local jobs and revitalize the regional
economy.

Liaison-I R&D Commercialization Development Fund
Initiatives for regional revitalization
Under the partnership agreement for regional revitalization with the local governments in Iwate Prefecture, wehave been making every effort to cooperate with each other to create virtuous cycles of regional “work” and“people,” and revitalize the “towns” that support these movements.

Abundant Nature
Initiatives to popularize the use of renewable energy
Since the Great East Japan Earthquake, the use of renewable energy as clean energy has become increasingly
important. We are supporting the popularization and the expanded use of renewable energy utilizing abundantnatural resources in Iwate Prefecture which has an area second only to Hokkaido.

Supporting smart agriculture (basil
cultivation) utilizing IoT technology andgeothermally-heated water(In Hachimantai City)― 12 ―

Initiative to protect the natural environment of the region and enhance the regional brandWe have a “Lacquer Forest Building Partnership Agreement” with
Ninohe City, acquiring and managing the Bank’s own lacquer forest in
Ninohe, as a partner company. Ninohe is a major producing area oflacquer and produces 70% of lacquer in Japan. The Bank supports the“securing the stable supply of lacquer trees” and the “maintenance andthe enhancement of the regional brand.”Additionally, we plant lacquer trees with local junior high school
students and provide opportunities for experiencing the abundance of
nature and culture of the region.
Healthy Mind
Financial education activities
The Bank is visiting the local elementary schools with the local hero character, “Tetsujin (Iron Hero), Ganriser”
and conducting “visiting lectures on money basics,” as well as airing mini-programs on financial education onTV.
We are also conducting financial education activities suited to each age group such as accepting workplace
visits by the local junior high school students, visiting high school students to conduct financial education
classes, and providing endowed lectures at universities.

Promotion of sports
Through the co-sponsorship of professional sports teams in Iwate Prefecture, we are proactively promoting sports
for the young people of the region by inviting local children to the games, in addition to hosting competitions.
The Bank of Iwate Red Brick Building
We have opened to the public the Bank’s former head office main building on Nakanohashi Dori in Morioka City
as “The Bank of Iwate Red Brick Building” from July 2016. Visitors can view the architectural style of the Meiji
era as well as the various historical displays. The Bank of Iwate Red Brick Building is also used for concerts andexhibitions and is contributing to the creation of a thriving regional community.

― 13 ―Governance
Promoting women’s active participation
We are making efforts to provide a better working environment in which every employee can play an activerole. Among these efforts, we are striving to promote women’s active participation by providing a comfortableworkplace for women through the holding of various training workshops for female employees and offering
return-to-work support through seminars to support employees on childcare leave.
We are also proactively supporting the promotion of women to managerial positions and their careeradvancement, and we have received the “Eruboshi” (the highest 3rd grade) certification under the Act on
Promotion of Women’s Participation and Advancement in the Workplace.

Seminar to support employees onchildcare leave
Supporting the balance of work and childrearing
To support employees to balance their work and childrearing, the Bank has established and operates childcare
services within its premises in cooperation with Iwate University. This childcare center has been named“Ganchan Sukusuku Nursery” after “Ganchan,” the character symbolizing both Iwate University and the Bank.
The Bank has also been certified a “Platinum Kurumin” operator by the Ministry of Health, Labour andWelfare, in recognition for “the ratio of the total number of employees taking childcare leave to the number ofmale employees whose spouses had given birth” and the “ratio of female employees taking childcare leave.”

Iwate University/The Bank of
Iwate Nursery School“Ganchan Sukusuku Nursery”(In-house nursery school)
Transparency of management
In an effort to enhance the transparency of management and to strengthen the supervisory functions of the Boardof Directors, the Bank transitioned to a company with Audit & Supervisory Committee in June 2018 and has
been making efforts to further reinforce its governance. As of March 31, 2020, the ratio of Outside Directors to
the total number of Directors of the Board was 42.8% and two female Outside Directors had been appointed.

― 14 ―

Consolidated Balance Sheets
The Bank of Iwate, Ltd. and its consolidated subsidiaries
Years ended 31 March 2020 and 2019ASSETSCash and due from banks (Notes 3 and 6)
Monetary claims bought (Note 6)
Money held in trust (Notes 5 and 6)
Securities (Notes 4, 6, 8 and 15)
Loans and bills discounted (Notes 6, 7, 9 and 27)
Foreign exchange assets
Premises and equipment (Notes 11 and 23)
Intangible assets (Notes 12 and 23)
Net defined benefit asset (Note 16)
Deferred tax assets (Note 17)
Customers’ liabilities for acceptances and guarantees (Note 15)
Other assets (Notes 6, 8 and 10)
Allowance for doubtful accounts (Note 6)
Total assets
LIABILITIES AND NET ASSETS
Liabilities:
Deposits (Notes 6, 8 and 13)
Call money and bills sold (Note 6)
Payables under securities lending transactions (Notes 6 and 8)
Borrowed money (Notes 6 and 8)
Foreign exchange liabilities
Accrued bonuses for directors and corporate auditors
Net defined benefit liability (Note 16)
Retirement benefits for directors and corporate auditors
Provision for losses on reimbursement of dormant deposits
Provision for contingent losses
Deferred tax liabilities (Note 17)
Acceptances and guarantees (Note 15)
Other liabilities (Notes 6, 14 and 23)
Total liabilities
Net assets (Note 18):
Common stock:
Authorized — 49,450 thousand shares as at 31 March 2020 and 2019
Issued and outstanding —18,498 thousand shares as at 31 March 2020 and
2019
Capital surplus
Retained earnings
Treasury stock, at cost
Total shareholders’ equity
Net unrealized holding gains on available-for-sale securities (Note 4)
Net unrealized losses on hedging derivatives (Note 6)
Remeasurements of defined benefit plans (Note 16)
Total accumulated other comprehensive income
Stock acquisition rights (Note 19)
Total net assets
Total liabilities and net assets

Millions of yen
2020
2019
¥370,821¥394,250
4,840
5,631
10,75012,7751,200,178
1,219,001
1,815,084
1,795,100
3,934
2,159
16,826
16,972
1,465
1,039
3,698
4,523
493
422
5,359
7,829
64,05062,629(11,960)(12,910)¥3,485,538¥3,509,420

Thousands of
U.S. dollars(Note 1)2020
$3,407,342
44,473
98,77811,028,007
16,678,159
36,148
154,608
13,461
33,9804,530
49,242588,532(109,896)$32,027,364¥3,201,384$29,416,374

56,553
4
25
2,484
25
420
228
2,355
5,359
29,245
3,298,082¥3,217,522
2,220
6,514
42,404
0
25
2,134
19
392
249
8,160
7,829
21,0083,308,476

12,09012,090111,091

5,667
156,688(3,906)
170,539
23,084(4,103)(2,289)16,692
225
187,456

5,667
154,162(2,946)
168,973
37,030(3,940)(1,328)31,762
209
200,944

52,072
1,439,751(35,891)
1,567,023
212,111(37,701)(21,033)
153,377
2,067
1,722,467¥3,485,538¥3,509,420$32,027,364

2020

2019

U.S. dollars
2020¥10,644.27¥11,204.81

－
－

Yen
Per share data:
Net assets (Note 25)

See accompanying notes.

― 15 ―－－

519,64536
230
22,825
230
3,859
2,095
21,63949,242
268,72230,304,897$97.81

Consolidated Statements of Income
The Bank of Iwate, Ltd. and its consolidated subsidiaries
Years ended 31 March 2020 and 2019
Thousands of
U.S. dollars(Note 1)Millions of yen
Income:Interest income:Interest on loans and discounts
Interest and dividends on securities
Other interest income
Fees and commissions
Other operating income (Note 20)
Other income (Note 22)
Total income
Expenses:
Interest expenses:
Interest on deposits
Interest on borrowings
Other interest expenses
Fees and commissions
Other operating expenses (Note 20)
General and administrative expenses (Note 21)
Other expenses (Note 22)
Total expenses

2020

2019

2020

¥17,277
12,528
43
8,544
4,623
2,311

¥17,634
13,097
49
8,504
4,243
5,019

$158,752
115,115395
78,50842,47921,23545,32648,546

416,484

424
91
550
3,304
5,385
26,215
4,127

440
237
562
3,245
5,219
27,089
5,501

3,896
836
5,054
30,35949,481
240,880
37,92240,09642,293

368,428

Income before income taxes
Provision for income taxes (Note 17)
Current
Deferred

5,230

6,253

48,056

965
481

2,391
(325)

8,867
4,419

1,446

2,066

13,286

Net income

3,784

4,187

34,770Net income attributable to owners of parent¥3,784¥4,187$34,770Yen
Per share data:
Net income (Note 25)
Diluted net income (Note 25)
Cash dividends applicable to the year (Note 28)

See accompanying notes.

― 16 ―

U.S. dollars

2020

2019

¥212.50211.8670.00¥233.72
225.15
70.00

2020
$1.95
1.95
0.64

Consolidated Statements of Comprehensive Income
The Bank of Iwate, Ltd. and its consolidated subsidiaries
Years ended 31 March 2020 and 2019

Millions of yen
2020
Net income
Other comprehensive losses (Note 24):
Net unrealized holding losses on available-for-sale securities
Net unrealized losses on hedging derivatives (Note 6)
Remeasurements of defined benefit plans (Note 16)
Total other comprehensive losses

Thousands of
U.S. dollars(Note 1)

2019

2020

¥3,784¥4,187$34,770(13,946)
(163)
(961)

(4,666)
(582)
(161)

(128,145)(1,498)(8,830)(15,070)(5,409)(138,473)

Comprehensive losses¥(11,286)¥(1,222)$(103,703)

Total comprehensive losses
Attributable to:
Owners of parent¥(11,286)¥(1,222)$(103,703)(11,286)(1,222)(103,703)

See accompanying notes.

― 17 ―

Consolidated Statements of Changes in Net Assets
The Bank of Iwate, Ltd. and its consolidated subsidiaries
Years ended 31 March 2020 and 2019

Millions of yen
Shareholders’ equity

Accumulated other comprehensive income
Net unrealized

Common stock

CapitalRetained

Treasury

surplusearnings

stock, at costTotalholding

shareholders’losses onequityavailable-for-salelossessecurities

BALANCE, 1 April 2018
Change during the year
Cash dividends
Net income attributable toowners of parent
Acquisition of treasury stock
Disposal of treasury stock
Net changes in items other thanstockholders’ equity during theyear
Total change during the year
BALANCE, 1 April 2019
Change during the year
Cash dividends
Net income attributable toowners of parent
Acquisition of treasury stock
Disposal of treasury stock
Net changes in items other thanstockholders’ equity during theyear
Total change during the year
BALANCE, 31 March 2020

Net unrealized
on hedging
derivatives

Total
Remeasurements

accumulated

Stock

Total

of definedotheracquisition

net assets

benefit planscomprehensive

rightslosses¥12,090¥5,667¥151,236¥ (2,989)¥166,004¥41,696¥ (3,358)¥ (1,167)¥37,171¥203¥203,378－－(1,254)－(1,254)

－

－

－

－

－

(1,254)

－
－
－

－
－
－

4,187
－
(7)

－
(4)
47

4,187
(4)
40

－
－
－

－
－
－

－
－
－

－
－
－

－
－
－

4,187
(4)
40

－

－

－

－

－

(4,666)

(582)

(161)

(5,409)6(5,403)－12,090

－
5,667

2,926
154,16243(2,946)

2,969
168,973(4,666)37,030(582)(3,940)(161)(1,328)(5,409)31,7626
209(2,434)200,944－－(1,254)－(1,254)

－

－

－

－

－

(1,254)

3,784

3,784

－

－

－
－

－
－

－

－
(987)

(4)

27

－
－
¥12,090－－¥5,667－2,526¥156,688－(960)¥ (3,906)

3,784

－

－

－

－

－

－
－

－
－

－
－

－
－

(987)

23

－
－

－
1,566
¥170,539(13,946)

(163)

(961)

(15,070)

16(15,054)(13,946)¥23,084(163)¥ (4,103)(961)¥ (2,289)(15,070)¥16,692

16¥225(13,488)¥187,456

(987)

23

Thousands of U.S. dollars (Note 1)
Shareholders’ equity

Accumulated other comprehensive income
Net unrealized

Common stock

CapitalRetained

Treasury

surplusearnings

stock, at costTotalholding

shareholders’losses onequityavailable-for-salelossessecurities

BALANCE, 1 April 2019
Change during the year

$111,091

Net unrealized
on hedging
derivatives

Total
Remeasurements

accumulatedof definedotherbenefit planscomprehensive

StockacquisitionrightsTotal
net assets

losses$52,072 $1,416,540 $ (27,070)$1,552,633$340,255$ (36,203)$ (12,203)$291,849$1,920$1,846,402

Cash dividends
Net income attributable to－－(11,523)－(11,523)

－

－

－

－

－

(11,523)owners of parent
Acquisition of treasury stock
Disposal of treasury stock
Net changes in items other thanstockholders’ equity during the

－
－
－

－
－
－

34,770－(36)－(9,069)248

34,770(9,069)
212

－
－
－

－
－
－

－
－
－

－
－
－

－
－
－

34,770(9,069)
212

－
－
－
－
23,211(8,821)$52,072 $1,439,751 $ (35,891)－(128,144)(1,498)(8,830)(138,472)

147(138,325)

14,390$1,567,023(128,144)(1,498)(8,830)(138,472)

147$212,111$ (37,701)$ (21,033)$153,377$2,067(123,935)$1,722,467

year
Total change during the year
BALANCE, 31 March 2020－－
$111,091

See accompanying notes.

― 18 ―

Consolidated Statements of Cash Flows
The Bank of Iwate, Ltd. and its consolidated subsidiaries
Years ended 31 March 2020 and 2019

Thousands of
U.S. dollars(Note 1)
2020

Millions of yen
2020
2019
Cash flows from operating activities:
Income before income taxes
Adjustments to reconcile income before income taxes to net cash used in operating activities:
Depreciation
Impairment losses
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for contingent losses
Increase (decrease) in accrued bonuses for directors and corporate auditors(Increase) decrease in net defined benefit asset
Increase (decrease) in net defined benefit liability
Increase (decrease) in retirement benefits for directors and corporate auditors
Increase (decrease) in provision for losses on reimbursement of dormant deposits
Interest income
Interest expenses
Investment securities (gains) losses, net(Increase) decrease in money held in trust
Foreign exchange (gains) losses, net(Gains) losses on disposal of premises and equipment
Net (increase) decrease in loans and bills discounted
Net increase (decrease) in deposits
Net increase (decrease) in negotiable certificates of deposit
Net increase (decrease) in borrowed money
Net (increase) decrease in due from banks, excluding the Bank of Japan
Net (increase) decrease in call loans and others
Net increase (decrease) in call money and others
Net increase (decrease) in payables under securities lending transactions
Net (increase) decrease in foreign exchange assets
Net increase (decrease) in foreign exchange liabilities
Interest received
Interest paid
Other, net
Sub-total
Income taxes paid
Income taxes refunded
Net cash used in operating activities
Cash flows from investing activities:
Acquisition of securities
Proceeds from sale of securities
Proceeds from redemption of securities
Increase in money held in trust
Decrease in money held in trust
Acquisition of premises and equipment
Proceeds from sale of premises and equipment
Payment for retirement of premises and equipment
Acquisition of intangible assets
Payment for asset retirement obligations
Net cash provided by (used in) investing activities¥5,230¥6,253$48,056

1,690
78
(950)
(21)
(0)
(199)
(7)
5
29
(29,848)
1,065
296
189
286
13
(19,984)
11,732(27,870)
14,148(110)791(2,220)(6,514)(1,775)
4
30,738(1,132)
6,518(17,818)(2,082)
14(19,886)

1,940
76
3,648
23
(1)
3
(24)
0
(60)
(30,780)
1,239(3,045)182(807)
1(42,441)(123,098)
60,50028,802(449)(1,354)
(118)
2,380
339
(7)
31,558(1,371)(2,626)(69,237)(3,740)20(72,957)

15,529717(8,729)(193)(0)(1,829)(64)46266(274,262)
9,786
2,720
1,737
2,628
119
(183,626)
107,801(256,087)
130,001(1,011)
7,268(20,399)(59,855)(16,310)37
282,441(10,402)59,892(163,723)(19,131)129(182,725)(657,477)
44,801
611,708(660,301)
30,230707,011(5,000)(6,041,321)
411,660
5,620,766－

1,816(1,237)
143
(88)
(784)
(38)
(1,156)― 19 ―－(1,156)
58
(21)
(220)
(63)
70,538－

16,687(11,366)
1,314
(809)
(7,204)(349)(10,622)

Consolidated Statements of Cash Flows (Continued)
The Bank of Iwate, Ltd. and its consolidated subsidiaries
Years ended 31 March 2020 and 2019

Millions of yen
2020
2019
Cash flows from financing activities:
Redemption ofsubordinated bonds and corporate bonds with stock acquisition rights
Repayments of lease obligations
Cash dividends paid
Payment for acquisition of treasury stock
Proceeds from sale of treasury stock
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year (Note 3)

See accompanying notes.

― 20 ―

Thousands of
U.S. dollars(Note 1)
2020

－
(275)
(1,254)(987)
0(2,516)(11,054)(485)(1,254)(4)
0(12,797)－(2,527)(11,523)(9,069)0(23,119)19(23,539)
393,331¥369,792

20(15,196)408,527¥393,331

175(216,291)
3,614,178$3,397,887

Notes to Consolidated Financial Statements
The Bank of Iwate, Ltd. and its consolidated subsidiaries
Years ended 31 March 2020 and 2019
1. BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements of The Bank of Iwate, Ltd. (the “Bank”) and its consolidated subsidiaries havebeen prepared in accordance with the provisions set forth in the Financial Instruments and Exchange Act of Japan, its related
accounting regulations and the Banking Law of Japan, and in conformity with accounting principles generally accepted in Japan(“Japanese GAAP”), which are different in certain respects as to application and disclosure requirements to International Financial
Reporting Standards.
The accompanying consolidated financial statements have been restructured and translated into English (with some expanded
descriptions) from the consolidated financial statements of the Bank prepared in accordance with Japanese GAAP and filed with theappropriate Local Finance Bureau of the Ministry of Finance as required by the Financial Instruments and Exchange Law. Some
supplementary information included in the statutory Japanese language consolidated financial statements, but not necessarily required
for fair presentation, is not presented in the accompanying consolidated financial statements.
The translation of the Japanese yen amounts into U.S. dollars is included solely for the convenience of readers, using the prevailingexchange rate as at 31 March 2020, which was ¥108.83 to U.S. $1. The convenience translations should not be construed as
representations that the Japanese yen amounts have been, could have been, or could in the future be converted into U.S. dollars at thisor any other rate of exchange.

2. SIGNIFICANT ACCOUNTING POLICIESReporting entity
The consolidated financial statements include the accounts of the Bank and its significant subsidiaries. Japanese GAAP on
consolidated financial statements requires the consolidation of all significant investees that are controlled through substantial
ownership of majority voting rights or existence of certain conditions. All significant intercompany transactions and account balances
are eliminated.
A non-consolidated subsidiary is excluded from the scope of consolidation because in terms of its total assets, ordinary income, net
income or loss (amount corresponding to equity), retained earnings (amount corresponding to equity) and accumulated othercomprehensive income or loss (amount corresponding to equity), it has minor impact on the consolidated financial statements even if
it is excluded from the scope of consolidation.
Investments in affiliates over which the Bank has the ability to exercise significant influence in terms of operating and financial
policies of the investees are accounted for by the equity method.
There are no investments in affiliates that are accounted for by the equity method.
A non-consolidated subsidiary and investments in affiliates that are not accounted for by the equity method are excluded from thescope of the equity method because in terms of their net income or loss (amount corresponding to equity), retained earnings (amountcorresponding to equity) and accumulated other comprehensive income or loss (amount corresponding to equity), they have minor
impact on the consolidated financial statements even if they are excluded from the scope of the equity method.
Trading account securities and other securities― 21 ―

Securities are classified as follows based on the purpose: (a) securities held for trading purposes (“trading account securities”), (b)debt securities intended to be held to maturity (“held-to-maturity debt securities”), (c) equity securities issued by unconsolidated
subsidiaries and affiliated companies, and (d) all other securities that are not classified in any of the above categories (“available-forsale securities”).
(a) Trading account securities — National government bonds held for trading purpose are presented as trading account securities.
Trading account securities are stated at fair value (cost of securities sold is calculated using the moving-average method). Gains andlosses realized on disposal and unrealized gains and losses from market value fluctuations are recognized as gains or losses in the
period of the change.
(b) Held-to-maturity debt securities are carried at amortized cost (straight-line method) using the moving-average method.
(c) Equity securities issued by subsidiaries and affiliated companies, which are not consolidated or accounted for by the equity method,
are carried at cost using the moving-average method.
(d) Available-for-sale securities with available fair values are primarily carried at the period-end market prices (cost of securities soldis calculated using the moving-average method).
Securities for which it is extremely difficult to determine the fair value are stated at the moving-average cost.
Net unrealized holding gains (losses) on these securities, net of applicable income taxes, are reported in a separate component of net
assets.
Available-for-sale securities with available fair values are written down when a significant decline in fair value below the cost of suchsecurities is deemed to be other than temporary. The amount written down is accounted for as an impairment loss.

Money held in trust
Securities invested as part of trust assets in independently managed money trusts that invest primarily in securities are stated at fairvalue.

Derivatives and hedge accounting
The Bank employs forward exchange contracts, currency swaps and interest rate swaps to meet customers’ needs and mitigate interest
rate risks and foreign exchange risks. Derivative financial instruments are stated at fair value.
If derivative financial instruments are used as hedges and meet certain hedging criteria, the Bank defers recognition of gains or losses
resulting from changes in fair value of the derivative financial instruments until the related losses or gains on the hedged items arerecognized (deferral method).
Transactions to hedge against interest rate risks affecting the financial assets and liabilities of the Bank are accounted for using deferredhedge accounting in accordance with the provisions of “Treatment of Accounting and Auditing of Application of AccountingStandards for Financial Instruments in the Banking Industry” (Japanese Institute of Certified Public Accountants (“JICPA”) Industry
Audit Committee Report No. 24, 13 February 2002).
Regarding the effectiveness of a hedge, a hedge that is intended to offset the effects of market fluctuations is assessed on a group-bygroup comparison of hedged items and hedging instruments. Both hedged items, including deposits and loans, and hedging instruments,
including interest rate swaps, are classified into groups by the remaining maturity period. The effectiveness of a cash flow hedge isassessed on the basis of the correlation between the base interest rate index of the hedged cash flow and that of the hedging instrument.
As for the hedging transactions against currency exchange risks arising from assets and liabilities in foreign currencies, the Bank

― 22 ―

applies deferred hedge accounting in accordance with the provisions of “Treatment of Accounting and Auditing Concerning
Accounting for Foreign Currency Transactions in the Banking Industry” (JICPA Industry Audit Committee Report No. 25, 29 July
2002). The Bank assesses the effectiveness of currency swap and foreign exchange swap transactions executed for offsetting the risksof changes in currency exchange rates by verifying that there exist foreign currency positions of the hedging instruments corresponding
to the foreign currency monetary claims and debts to be hedged.
Certain interest rate swaps that qualify for hedge accounting and meet specific matching criteria are not remeasured at fair values, but
the differential to be paid or received under the swap contracts is recognized as interest expense or income (exceptional method).
Depreciation and amortization methods(1)

Premises and equipment (excluding leased assets)

Premises and equipment are stated at cost less accumulated depreciation. The Bank depreciates its premises and equipment under the
declining-balance method over their estimated useful lives. Depreciation of buildings acquired on and after 1 April 1998 (excluding
installed facilities) and installed facilities and structures acquired on and after 1 April 2016 by the Bank is computed under the straightline method. Estimated useful lives are as follows:
Buildings: 3-30 years
Equipment and furniture: 2-20 years
Consolidated subsidiaries depreciate their premises and equipment primarily under the declining-balance method over their estimateduseful lives.
(2)

Intangible assets (excluding leased assets)

The Bank and its consolidated subsidiaries (the “Group”) amortize the intangible assets under the straight-line method over theirestimated useful lives. Costs of computer software developed or obtained for internal use are amortized using the straight-line method
over estimated useful lives of 5 years.
(3)

Leased assets

Depreciation and amortization of leased assets pertaining to finance lease transactions other than those that transfer the ownership ofthe leased assets to the Group, which are included in “Premises and equipment” and “Intangible assets,” are computed under thestraight-line method. The lease term is equal to the useful life and there is no residual value except where residual value guarantees
are stipulated in lease contracts.
Depreciation of leased assets that transfer the ownership to the Group is computed by the same method used for owned assets.

― 23 ―

Allowance for doubtful accounts
The reserve for loans to borrowers that are classified as normal and requiring attention is primarily calculated based on the amountof expected loss during the one-year period or the three-year period subsequent to the balance sheet date. The amount of expected
loss is calculated based on the average loan loss ratio derived from the actual loan loss during the past one year or the past three
years with necessary amendments such as future prospects.
The reserve for loans to borrowers that are classified as legally bankrupt or substantially bankrupt is calculated by deducting theestimated disposal value of collateral and the amount deemed collectible from guarantees from the book value.
The Bank also provides specific reserves for potentially bankrupt borrowers for an amount deemed necessary based on the loanbalance, less expected collection from disposal of collateral, guarantees and repayment on uncovered portion of the loan from historicalexperiences.
The above-mentioned allowance for doubtful accounts is made on the basis of the results of a strict assessment of the quality of all
the Bank’s loan assets, using its internally established rules for self-assessment.
The allowance for doubtful accounts recorded in consolidated subsidiaries is calculated as follows:
General reserves are provided at an amount deemed necessary considering the historical ratio of loan losses. Specific reserves for
doubtful borrowers are provided at an amount expected to be uncollectable, considering collectability on an individual basis.

Accrued bonuses for directors and corporate auditors
Accrued bonuses for directors and corporate auditors are provided in the amount of the estimated bonuses that are attributable to eachfiscal year.

Retirement benefits for directors and corporate auditors
Retirement benefits for directors and corporate auditors are provided for the future payments of directors’ and corporate auditors’
retirement benefits incurred up to the end of the fiscal year based on the approved internal rule.

Provision for losses on reimbursement of dormant deposits
Provision for losses on reimbursement of dormant deposits that were recorded as profit is provided for the future reimbursement basedon the historical reimbursement experience.

Provision for contingent losses
Provision for contingent losses is provided for estimated future payments related to a risk-share agreement with public credit guarantee
associations for the Bank’s loans guaranteed by the associations. The provision is calculated by expected loss ratios based on historical
foreclosure experiences by the category of the borrowers.

Accounting for retirement benefits
Upon the calculation of projected benefit obligation, the estimated amount of all retirement benefits to be paid at future retirement
dates is allocated using the benefit formula. The Bank has also set up retirement benefit trusts.
Actuarial differences are amortized as income or expenses commencing from the following year under the straight-line method over
10 years, which is determined as the amortization period within a range of estimated remaining service years of the eligible employees― 24 ―

at the time the actuarial differences occur.
The consolidated subsidiaries adopt a simplified method, as allowed for small companies, which is to record retirement benefits
liabilities for an amount assuming all employees would retire at the end of the fiscal year on a voluntary basis.

Income taxes
Income taxes consist of corporation, enterprise and inhabitant taxes. The provision for income taxes is computed based on the pretax
income of the Bank and each of its consolidated subsidiaries with certain adjustments required for tax purposes.
Deferred tax assets and liabilities are recorded based on the temporary differences between the financial statements and tax bases ofassets and liabilities. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and theamounts used for income tax purposes.

Foreign currency translation
Assets and liabilities denominated in foreign currencies are translated into Japanese yen at the exchange rate prevailing at the end ofeach year.

Appropriations of retained earnings
Under the Companies Law of Japan, the appropriation of retained earnings with respect to a given financial period is made byresolution of the shareholders at a general meeting held subsequent to the close of the financial period. The accounts for that period,
therefore, do not reflect such appropriations. See Note 28.

Amounts per share
Net income per share of common stock is computed based on the weighted average number of shares outstanding, excluding treasury
stock, during each year. Diluted net income per share reflects the potential dilution that could occur if stock options to issue common
stock were exercised. Cash dividends per share represent the amounts applicable to the respective years and consist of interim
dividends for the current year and year-end dividends declared after the end of the year.

Consumption taxes
National and local consumption taxes are accounted for with the tax exclusion method.

― 25 ―

Accounting standards that have not been applicable yet“Revised Accounting Standards for Revenue Recognition” (Accounting Standards Board of Japan (“ASBJ”) Statement No. 29, 31
March, 2020)“Revised Implementation Guidance on Accounting Standard for Revenue Recognition” (ASBJ Guidance No. 30, 31 March, 2020)(1) Overview
These are comprehensive standards on revenue recognition. Revenue will be recognized based on the following 5 steps.
Step1: Identify contracts with customers.
Step2: Identify the performance obligations in the contract.
Step3: Determine the transaction price.
Step4: Allocate the transaction price to the performance obligations in the contract.
Step5: Recognize revenue when (or as) the entity satisfies a performance obligation.
(2) Application date
The Group will apply these accounting standards from the beginning of the fiscal year ending 31 March 2022.
(3) Effects of the application of the standards
The Group is currently assessing the effects of these standards.

“Accounting Standard for Fair Value Measurement” (ASBJ Statement No. 30, 4 July, 2019)“Implementation Guidance on Accounting Standard for Fair Value Measurement” (ASBJ Guidance No. 31, 4 July, 2019)“Revised Accounting Standard for Financial Instruments” (ASBJ Statement No. 10, 4 July, 2019)“Revised Implementation Guidance on Disclosures about Fair Value of Financial Instruments” (ASBJ Guidance No. 19, 31 March,
2020)(1) Overview
In order to improve the comparability with provisions of international accounting standards, “Accounting Standard for Fair Value
Measurement” and “Implementation Guidance on Accounting Standard for Fair Value Measurement” (hereafter, “AccountingStandards for Fair Value Measurement, etc.”) have been developed, and guidances, etc. regarding fair value measurement were
established. The Accounting Standards for Fair Value Measurement, etc. are applied to the fair value of the following item.
- Financial instruments defined in “Revised Accounting Standard for Financial Instruments”
In addition, “Implementation Guidance on Disclosures about Fair Value of Financial Instruments” was revised, and note items were
established including the breakdown by level of fair value of financial instruments.
(2) Application date
The Group will apply these accounting standards and guidances from the beginning of the fiscal year ending 31 March 2022.
(3) Effects of the application of the standards
The Group is currently assessing the effects of these standards.

― 26 ―

“Revised Accounting Standard for Accounting Policy Disclosures, Accounting Changes and Error Corrections” (ASBJ Statement
No. 24, 31 March, 2020)(1) Overview
The objective of the standard is to disclose an overview of accounting principles and procedures adopted when provisions of therelated accounting standards are not clearly defined.
(2) Application date
The Group will apply the accounting standard from the end of the fiscal year ending 31 March 2021.

“Accounting Standard for Disclosure of Accounting Estimates” (ASBJ Statement No. 31, 31 March, 2020)(1) Overview
The objective of the standard is to disclose information valuable for the users of the financial statements regarding accounting
estimates for items that have risks of significantly affecting the financial statements of the following year, among those used in
preparation of the current year financial statements.
(2) Application date
The Group will apply the accounting standard from the end of the fiscal year ending 31 March 2021.

Additional information
The effects of novel coronavirus disease (COVID-19) are extensive, and it is very difficult to estimate how COVID-19 will spreadfurther or when it will be contained in the future. Significant accounting estimates affected by COVID-19 and assumptions that theGroup used for the accounting estimates are as follows:
Allowance for doubtful accounts
We have prepared estimates for allowance for doubtful accounts based on the assumption that the economic effects of COVID-19
will last approximately one year and the credit risk of the Bank’s loans may be affected to a certain degree, but there is no
significant effect on the consolidated financial statements for the year ended 31 March 2020. However, if there is a change in thecircumstance of COVID-19 or its effects on the economic environment, there is a possibility that additional losses may be incurredin the consolidated financial statements for the following fiscal year and onwards.

― 27 ―

3. NOTES TO CONSOLIDATED STATEMENTS OF CASH FLOWSCash and cash equivalents
In preparing the consolidated statements of cash flows, cash and due from the Bank of Japan are considered to be cash and cash
equivalents. As at 31 March 2020 and 2019, the reconciliation of cash and cash equivalents in the consolidated statements of cash
flows with cash and due from banks in the consolidated balance sheets was as follows:
Thousands of U.S.
dollars
2020$3,407,342(9,455)$3,397,887

Millions of yen
2020
2019
¥370,821¥394,250(1,029)(919)¥369,792¥393,331

Cash and due from banks
Less: Deposits in banks other than the Bank of Japan
Cash and cash equivalents

4. SECURITIESSecurities held by the Group as at 31 March 2020 and 2019 consisted of the following:
Millions of yen
2020
2019
¥210,187¥239,026
375,118
342,427
318,719
300,691
36,35144,848259,803
292,009¥1,200,178¥1,219,001

National government bonds
Local government bonds
Corporate bonds
Corporate stocks
Other securities

Thousands of
U.S. dollars
2020$1,931,333
3,446,825
2,928,595
334,017
2,387,237$11,028,007

The securities placed under unsecured lending agreements, which borrowers have the right to sell or pledge in the amount of ¥59,100
million ($543,049 thousand) and ¥22,100 million as at 31 March 2020 and 2019, respectively, were included in national government
bonds.

A. The following tables summarize acquisition costs, book values and fair values of securities with available fair values as at 31 March
2020 and 2019:(a) Held-to-maturity debt securities
Millions of yen
As at 31 March 2020:

Book value¥25,412Fair value¥29,231

Difference¥3,819Gain¥3,819As at 31 March 2019:¥26,261¥30,726¥4,465¥4,465As at 31 March 2020:

Book value$233,502

Fair value$268,593

Loss
¥ －
¥ －

Thousands of U.S. dollars― 28 ―

Difference$35,091Gain$35,091Loss$ －(b) Available-for-sale securities
Securities below include negotiable certificates of deposit classified as cash and due from banks.
Millions of yen
Acquisition cost
As at 31 March 2020:
Corporate stocks
Bonds
Other
As at 31 March 2019:
Corporate stocks
Bonds
Other

Book value

Difference

Gain

Loss

¥20,122860,713250,811¥35,132
881,761
247,859¥15,01021,048(2,952)¥16,091
22,203
4,494¥(1,081)(1,155)(7,446)¥1,131,646¥1,164,752¥33,106¥42,788¥(9,682)¥22,760
831,211
278,389¥43,602859,883
281,794¥20,842
28,672
3,405¥22,015
28,760
6,668¥(1,173)(88)(3,263)¥1,132,360¥1,185,279¥52,919¥57,443¥(4,524)

Thousands of U.S. dollars
Acquisition cost
As at 31 March 2020:
Corporate stocks
Bonds
Other

Book value

Difference

Gain

Loss

$184,894
7,908,784
2,304,613$322,815
8,102,187
2,277,488$137,921
193,403(27,125)$147,854
204,015
41,294$(9,933)(10,612)(68,419)$10,398,291$10,702,490$304,199$393,163$(88,964)

B. There were no sales of held-to-maturity debt securities for the years ended 31 March 2020 and 2019.
Total sales of available-for-sale securities in the years ended 31 March 2020 and 2019 amounted to ¥44,801 million ($411,660
thousand) and ¥30,229 million, respectively. The related gains and losses amounted to ¥2,142 million ($19,682 thousand) and ¥485
million ($4,456 thousand), respectively, in 2020, and ¥4,508 million and ¥206 million, respectively, in 2019.

C. Available-for-sale securities written down for the year ended 31 March 2020 and 2019 amounted to ¥883 million ($8,114 thousand)and ¥27 million, respectively.

D. Net unrealized holding gains on available-for-sale securities on the consolidated balance sheets as at 31 March 2020 and 2019consisted of the following:Thousands of
U.S. dollars

Millions of yen
2020

2019

2020

Net unrealized holding gains before deferred tax on:
Available-for-sale securities (Note)
Deferred tax liabilities
Net unrealized holding gains before interests adjustment
Amount equivalent to non-controlling interests¥33,082(9,998)23,084－¥52,895(15,865)
37,030－$303,979(91,868)
212,111－

Net unrealized holding gains on available-for-sale securities¥23,084¥37,030$212,111

Note: The amounts of ¥(24) million ($(221) thousand) and ¥(24) million, which are net unrealized holding losses before deferred tax
on available-for-sale securities that are component assets of investment limited partnerships classified as securities for which it isextremely difficult to determine the fair values, were included in the balance as at 31 March 2020 and 2019, respectively.

― 29 ―

E. Equity securities issued by unconsolidated subsidiaries and affiliated companies are as follows:
Thousands of
U.S. dollars

Millions of yen
2020
SharesInvestments

2019

¥20
1,123

2020
¥20
860

$184
10,3195. MONEY HELD IN TRUST
Money held in trust as at 31 March 2020 and 2019 consisted of the following:Thousands of
U.S. dollars

Millions of yen
Money held in trust for trading purposes:
Carrying amount
Realized losses included in earnings

2020

2019

2020

¥10,750(2)¥12,775－$98,778(18)

6. FINANCIAL INSTRUMENTS(1) Overview
a. Policy for financial instruments
The Group provides financial services, mainly focusing on banking businesses such as deposit taking, grant of loans, trading of
securities and investment in securities, as well as financial services including lease operation and credit card operation.
For its main operations, the Group raises funds through deposits, call money, etc. and applies them to loans receivable and investingin securities. Therefore, the financial assets and liabilities of the Group tend to be affected by interest rate fluctuations, and are exposed
to risks stemming from changes in financial market environments (interest rate risks and price fluctuation risks), as well as to risks
arising from fund shortage.
The Group manages those risks using the Asset Liability Management (ALM) method in order to appropriately control the balance
between revenues and risks in consideration of the status of the financial assets and liabilities, trend of financial markets, policies forfund management and investment policies. The Group uses derivatives for the purpose of reducing risks, but not for speculative
purposes.

b. Types of financial instruments and related risks
The financial assets of the Bank consist mainly of loans for domestic enterprises and individuals and investment securities.
Loans are exposed to credit risks stemming from defaults of borrowers. The largest industrial category of loans as of the current fiscal
year end was individuals, followed by local governments, financial industries and insurance industries, real estate industries andleasing industries, and loans are mostly distributed in each industry.
Securities are fundamentally constituted of bonds, stocks and investment trusts, which are held for investing purposes, held-to-maturity
purposes and maintaining business relationships, while trading account securities are held for trading purposes. These are exposed tocredit risks of issuers, interest rate risks and risks stemming from fluctuation of market prices.
Liabilities, such as deposits, corporate bonds and call money, are exposed to risks arising from fluctuation of interest rates stemmingfrom mismatch between interests or periods of assets and liabilities. In addition, these are exposed to risks of fund shortage where the
Bank fails to control cash receipts and disbursement due to unexpected fund outflow and suffers losses from imposed unusual high― 30 ―

interest rates, as well as market liquidity risks where the Bank fails to raise funds owing to market shrinkage and is obliged to enter
into unusual unfavorable transactions.
Regarding derivative transactions, the Bank enters into interest rate swap contracts in terms of the ALM control and applies hedge
accounting to them as hedging instruments for interest rate risks on loans and bonds as hedged items. The Bank evaluates theeffectiveness of the hedge based on accumulated fluctuation of cash flows of hedging instruments and hedged items for the periods
beginning from the implementation of the hedging to the date of the evaluation and analysis on them.
Furthermore, there are interest rate swap contracts (hedging instruments) and loans and bonds (hedged items), which are treated underthe exceptional method.

c. Monitoring of credit risks
In accordance with the internal policies of the Bank for managing credit risks arising from loans, each related division monitors credit
worthiness of its customers periodically and due dates and outstanding balances by individual customer. In addition, the Bank ismaking efforts to identify and mitigate risks of bad debts from customers who are having financial difficulties.
The results of the above monitoring are regularly reported to the board of directors, and the results of monitoring internal rating, loan
portfolios and quantification of credit risks are reported to the credit risk committee on a quarterly basis. The Audit Division strictly
reviews the results to ensure the monitoring procedures function properly.
Credit risks of issuers of securities and counterparty risks of derivative transactions are controlled through periodic reviews on credit
information and fair value of securities by the Financial Markets Division.

d. Monitoring of market risks(Interest rate risks)
The risks arising from fluctuations in interest rates are controlled using the ALM at the ALM committee, with reference to thediscussion at the fund management meeting and interest rate analysis group, through monitoring and analysis of the execution of the
ALM and the discussion of future actions. Concretely, the results of the above monitoring are reported on a monthly basis to the ALM
committee using gap analysis or interest rate sensitivity analysis such as BPV and VaR. Derivative instruments such as interest rate
swap contracts to hedge interest rate risks are used in terms of the ALM.
(Foreign currency exchange risks)Foreign currency swap contracts and foreign currency exchange swap contracts are used in order to control the foreign currency
exchange risks.
(Price fluctuation risks)
In accordance with the internal policies of the Bank on managing market related risks, the risks arising from fluctuation of market
price of investment securities are controlled through a daily VaR based on certain holding periods and confidence interval byconfirming whether the quantities of its risk fall under a certain portion of equity capital or not. Upper limits on losses on an
aggregation or a realization basis are defined to control them on a daily basis. These results are reported by the Risk Management
Division to the management on a daily basis.
Investments in securities at the Financial Markets Division are executed in accordance with the invested items and investing guidelines
prescribed in the market business operation standards, the marketing risk management standards and the primary polices on investing,and controlled through continuous monitoring. The information related to the market environment and the investment status is reported― 31 ―

to the management on a regular basis.
(Derivative transactions)
In conducting derivative transactions, each division responsible for the execution of transactions, and evaluation of efficiency of thehedging and related administration is clearly identified, following the hedge transaction guidelines, the market business operation
standards and the market risk management standards, with setting up segregation of duties and checking systems.
(Information on volume of market risk)
The Bank employs the variance-covariance method (confidence interval of 99%, observation period of 1 year) in calculating VaR ofdeposits, loans receivable and securities (investments in bond, investments in stock, shares held for policy reasons, investments intrust). The holding period used as a parameter for the calculation is set as 6 months for deposits, loans receivable and shares held forpolicy reasons, and 3 months for investments in stock and investments in trust.
The volume of market risk, which is supposed to be estimated losses, at the end of the year ended 31 March 2020 was ¥25,392 million($233,318 thousand).
For securities, the Bank periodically verifies the effectiveness of risk measurement by a back-testing protocol that compares thevolume under VaR with the amount of actual gains or losses or hypothetical gains or losses on a fixed portfolio. As a result ofconducting the back-testing protocol, the Group supposes the method undertaken to provide a reliable indicator of the market risks.
The method of variance and covariance that the Bank uses to measure the volume under VaR assumes that changes in the market
follow a normal distribution. Accordingly, under conditions subject to changes in the market exceeding the assumption, risks may beunderestimated.

e. Monitoring of liquidity risks
The Bank adequately manages its liquidity risks based on various internal quantitative standards prescribed in liquidity risks
management regulations, monitoring their liquidity positions on a daily basis with minimum fund reserve established twice a year.

f. Supplementary explanation of the estimated fair value of financial instruments
The fair value of financial instruments is based on their quoted market price, if available. When there is no quoted market priceavailable, the fair value is reasonably estimated. Since various assumptions and factors are reflected in estimating the fair value,
different assumptions and factors could result in different fair values.

― 32 ―

(2) Fair value of financial instruments
The carrying amounts and the estimated fair value of financial instruments as at 31 March 2020 and 2019 were as follows.
Millions of yen

Thousands of U.S. dollars
2019

2020

Assets:Cash and due from banks
Monetary claims bought
Money held in trust
Securities
Held-to-maturity debt securities
Available-for-sale securities
Loans and bills discounted
Allowance for doubtful accounts
Liabilities:
Deposits
Call money and bills soldPayables under securities lendingtransactions
Borrowed money
Derivative transactions:
Derivative instruments not
qualifying for hedge accounting
Derivative instruments qualifying
for hedge accounting

Carrying
amounts

Fair value

Carrying
amounts¥370,821
4,682
10,750¥370,821
4,689
10,75022,264
1,164,752
1,815,084(11,444)2020

Fair value

Carrying
amounts

Fair value¥394,250
5,446
12,775¥394,250
5,458
12,775$3,407,342
43,021
98,778$3,407,342
43,086
98,77826,075
1,164,752

22,262
1,185,279
1,795,100(12,442)

26,715
1,185,279

204,576
10,702,490
16,678,159(105,155)

239,594
10,702,490

1,803,640

1,804,838

1,782,658

1,787,916

16,573,004

16,584,012

3,201,384－

3,201,455－

3,217,522
2,220

3,217,605
2,220

29,416,374－

29,417,027－－
56,553－56,5536,514
42,404

6,514
42,404－
519,645－519,645

(100)

(100)

(154)

(154)

(919)

(919)

(5,895)(9,751)(5,661)(9,429)(54,167)(89,598)(Note 1) Methods to determine the estimated fair value of financial instruments
a. Cash and due from banks
All cash and due from banks are short-term in nature, and therefore their carrying amounts approximate the fair value.
b. Monetary claims bought
As for monetary claims bought whose terms are less than one year, their carrying amounts are supposed to approximate the fair value,
while the fair value of long-term claims is based on either quoted market prices or prices provided by the financial institutions making
markets.
c. Money held in trust
For the securities invested as part of trust assets in independently managed money trusts that invest primarily in securities, the fairvalue of the equity securities is determined using quoted market prices and the fair value of debt securities is determined using either
quoted market prices or prices provided by the financial institutions that the Group has been dealing with.
d. Held-to-maturity debt securities and available-for-sale securities
The fair values of held-to-maturity debt securities and available-for-sale securities are based on either quoted market prices or prices
provided by the financial institutions making markets in these bonds, etc. The fair values of investments in trust are based on published
net asset value. Private placement bonds are based on the discounted present value, which is calculated by discounting the estimatedfuture cash flows arising from the financial assets.

― 33 ―

e. Loans and bills discounted
Carrying amounts of loans and bills discounted with floating rates, which indicate the short-term market interest rates, are supposed
to approximate the fair value as long as the credit status of the borrower has not largely changed. The fair value of loans and bills
discounted with fixed rates is based on the present value of the total of principal and interest discounted by the interest rate to be
applied if similar new loans were entered into, by the types, self-assessment and the terms of loans and bills discounted. As for loans
and bills with short-term settlement (within a year), their carrying amounts are supposed to approximate the fair value.
The estimated uncollectable amount of loans to borrowers that are classified as legally bankrupt, substantially bankrupt and potentiallybankrupt is based on the estimated disposal value of collateral and the amount deemed collectible from guarantees, and therefore theircarrying amounts after deduction of allowance for doubtful accounts at the closing date are supposed to approximate the fair value.
Carrying amounts of loans and bills discounted with no specified repayment dates settled, due to some characteristics such as theoutstanding balance not exceeding the value of collateral, are supposed to approximate the fair value, given the estimated repayment
period, interest rates and other conditions.
f. Deposits
The fair value of deposits at notice is based on the payment amount that would be required to pay at the end of the year.
The fair value of time deposits is based on the present value of the total of principal and interest discounted by an interest rate to be
applied if similar new deposits were entered into. As to time deposits with short-term maturities, their carrying amounts approximate
the fair value.
g. Call money and bills sold, and payables under securities lending transactions
Call money and bills sold, and payables under securities lending transactions are short-term in nature, and therefore their carrying
amounts approximate the fair value.
h. Borrowed money
The fair value of borrowed money is based on the present value discounted by an interest rate to be applied if a similar new borrowing
is entered into. As to borrowed money with short-term maturity, its carrying amount approximates the fair value.
i. Derivative transactions
Please refer to the following section of the notes to Derivatives.

(Note 2) The following table summarizes book values of securities for which it is extremely difficult to determine the fair values as at
31 March 2020 and 2019:
Thousands of
U.S. dollars

Millions of yen
Available-for-sale securities
Monetary claims bought

2020

2019

2020

¥13,162158¥11,460
185$120,941
1,452― 34 ―

(Note 3) Expected collections of assets and payments of liabilities with maturities as at 31 March 2020 and 2019 were as follows:
Millions of yen
2020
Within one
year

One to three
years

Three tofive years

Five toseven years

Seven toten years

Over tenyears

Due from banks (*1)
Monetary claims bought
Securities
Held-to-maturity debt securities
Mainly consists of the following:
National bonds
Corporate bonds
Available-for-sale securities
Mainly consists of the following:
National bonds
Local government bonds
Corporate bonds
Loans and bills discounted¥344,497
1,533

¥－
－

¥－
－

¥－
－

¥－
－

¥－
3,307

301

－

－

1,987

－

19,976－
301
179,797－－
159,274－－
169,371

1,987－
146,037－－
326,468

19,976－
108,490

60,48822,027
47,832
274,046

14,3505,612
91,010379,200

10,34030,046
77,378368,590

9,170
85,562
16,729144,320

38,485
195,200
58,645
122,275

55,391
36,671
14,106
330,648

Deposits
Call money and bills soldPayables under securities lendingtransactions
Borrowed money (*2)

3,094,585－－

99,740
－
－

5,948
－
－

1,071
－
－

40
－
－

－
－
－

1,306

3

12

12

18

55

Millions of yen
2019Within one
year

One to three
years

Three tofive years

Five toseven years

Seven toten years

Over tenyears

Due from banks (*1)
Monetary claims bought
Securities
Held-to-maturity debt securities
Mainly consists of the following:
National bonds
Corporate bonds
Available-for-sale securities
Mainly consists of the following:
National bonds
Local government bonds
Corporate bonds
Loans and bills discounted¥368,095
1,447

¥－
－

¥－
－

¥－
－

¥－
－

¥－
4,184

－

303

－

－

1,985

19,974－－
162,484－
303
250,840－－
148,928－－
125,411

1,985－
330,666

19,974－78,97455,527
6,456
60,060305,30269,55528,31997,645366,643

9,471
7,087
70,323332,910

10,51969,337
9,905
166,804

24,550210,834
45,423
126,61447,445
20,394
8,698
302,053

Deposits
Call money and bills soldPayables under securities lendingtransactions
Borrowed money (*2)

3,102,389
2,220
6,514

107,608
－
－

6,261
－
－

1,225
－
－

39
－
－

－
－
－

1,861

－

9

12

18

61

― 35 ―

Thousands of U.S. dollars
2020
Within one
year

One tothree years

Three tofive years

Five toseven years

Seven toten years

Over tenyears

Due from banks(*1)
Monetary claims bought
Securities
Held-to-maturity debt securities
Mainly consists of the following:
National bonds
Corporate bonds
Available-for-sale securities
Mainly consists of the following:
National bonds
Local government bonds
Corporate bonds
Loans and bills discounted$3,165,460
14,086

$－
－

$－
－

$－
－

$－
－

$－
30,387

2,766

－

－

18,258－

183,552－
2,766
1,652,090－－
1,463,512－－
1,556,290

18,258－
1,341,882－－
2,999,798

183,552－
996,876555,803202,398
439,5112,518,111

131,857
51,567836,258
3,484,333

95,011
276,082
710,999
3,386,842

84,260786,199
153,717
1,326,105

353,625
1,793,623
538,868
1,123,541

508,967
336,956
129,615
3,038,206

Deposits
Call money and bills soldPayables under securities lendingtransactions
Borrowed money (*2)

28,435,036－－

916,475－－

54,654
－
－

9,841
－
－

368
－
－

－
－

12,000

28

110

110

165

505

Notes: *1. Due from banks that does not have maturity is included in the “within one year” column.
*2. Borrowed money is stated for the interest-bearing borrowed money.

Derivatives
As stated in significant accounting policies, the Bank deals in interest rate swaps, currency swaps, and forward exchange contracts.
a. Derivative instruments not qualifying for hedge accounting
Notional amounts, fair values and unrealized gains (losses) for the years ended 31 March 2020 and 2019 were as follows:(Currency-related transactions)
Millions of yen
2020

Thousands of U.S. dollars
2019

Unrealized
Notional

Forward foreign exchange:
Sell
Buy

Notes:

gains

2020
Unrealized

Notional

gains

Unrealized
Notional

gains

amounts Fair value (losses)

amounts Fair value (losses)

amounts Fair value (losses)¥17,458
16¥21,539
1,987$160,415
147

¥82
0

¥82
0

¥(160)
21¥(160)
21

$753
0

$753
0

1. Transactions in the above table are revalued at fair value. Unrealized gains (losses) are included in the consolidated
statements of income.
2. The fair value of forward foreign exchange is based on the discounted present value.

― 36 ―(Credit derivative transactions)
Millions of yen

Thousands of U.S. dollars

2020

2019

Notional

Over

Fair

amounts

one year

value

Sell

¥1,000¥1,000¥(182)

Buy

－

－

－

Unrealized

2020
Unrealized

Notional

Over

Fair

amounts

one yearvalue¥(182)¥1,000¥1,000

¥(15)

－

－

－

－

gains
(losses)

Unrealized

Notional

Over

Fair

amounts

one year

value

¥(15)

$9,189$9,189$(1,672)$(1,672)

－

－

－

－

－

gains
(losses)

gains(losses)

Creditdefaultswap:

Notes:

1. Transactions in the above table are revalued at fair value. Unrealized gains (losses) are included in the consolidated
statements of income.
2. The fair value of credit default swap is based on the prices provided by the financial institutions.
3. “Sell” transaction represents undertaking of credit risk.

(Earthquake derivatives)
Millions of yen

Thousands of U.S. dollars

2020

2019

2020

Unrealized
Notional

gains

amounts Fair value (losses)

Earthquake derivatives:
Sell
Buy

¥2,335
2,335

¥(30)
30

Unrealized
Notional

－
－

gains

amounts Fair value (losses)¥1,740
1,740

¥(23)
23

Unrealized
Notional

－
－

gains

amounts Fair value (losses)$21,455
21,455$(276)
276－－

Note: For transactions in the above table, acquisition costs are regarded as fair value as it is extremely difficult to determine the fairappraised value.

b. Derivative instruments qualifying for hedge accounting
Notional amounts and fair values for the years ended 31 March 2020 and 2019 were as follows:(Interest-related transactions)
Millions of yen
2020
Notional
amounts
Interest rate swap:
Receive floating / Pay fixed rate
(Deferral method)
Receive floating / Pay fixed rate
(Exceptional method)

Thousands of U.S. dollars
2019

Fair value

Notional
amounts

2020
Fair value

Notional
amounts

Fair value¥38,973¥(5,894)¥39,944¥(5,661)$358,109$(54,157)

22,239(3,857)

22,335(3,768)204,346(35,441)― 37 ―

7. LOANS AND BILLS DISCOUNTED
Loans and bills discounted as at 31 March 2020 and 2019 consisted of the following:Thousands of
U.S. dollars

Millions of yen
Bills discounted
Loans on notes
Loans on deeds
Overdrafts

2020

2019

2020

¥2,59751,906
1,564,845
195,736¥4,06755,922
1,541,274
193,837$23,863
476,946
14,378,802
1,798,548¥1,815,084¥1,795,100$16,678,159

Bills discounted are accounted for as financial transactions in accordance with JICPA Industry Audit Committee Report No. 24. The
Group has rights to sell or pledge commercial bills discounted without restrictions. The total face value as at 31 March 2020 and 2019was ¥2,597 million ($23,863 thousand) and ¥4,067 million, respectively.
The Group is required to disclose loans to customers who meet specific criteria in accordance with the Banking Law. Doubtful loans
as at 31 March 2020 and 2019 consisted of the following:Thousands of
U.S. dollars

Millions of yen
2020
Loans to borrowers under bankruptcy proceedings
Past due loans
Loans past due three months or more
Restructured loans, including loans to borrowers financiallyassisted by the Bank

¥947
33,6061

2019¥3,45530,5934

2020$8,702308,794
9

4,683

7,371

43,030¥39,237¥41,423$360,535

8. PLEDGED ASSETS
As at 31 March 2020, deposits of ¥50,168 million ($460,976 thousand) and borrowed money of ¥56,106 million ($515,538 thousand)were secured by a pledge of securities in the amount of ¥125,923 million ($1,157,061 thousand) and guarantee money deposits in theamount of ¥71 million ($652 thousand). As at 31 March 2019, deposits of ¥46,412 million, payables under securities lendingtransactions of ¥6,514 million and borrowed money of ¥42,176 million were secured by a pledge of securities in the amount of¥129,146 million and guarantee money deposits in the amount of ¥100 million. In addition to the above-mentioned assets pledged ascollateral, the Group provided other assets in the amount of ¥35,003 million ($321,630 thousand) and ¥35,003 million as collateral
for transactions such as exchange settlement transactions as at 31 March 2020 and 2019, respectively.
Other assets include cash collateral paid for financial instruments, guarantee deposits and lease deposits in the amount of ¥9,790
million ($89,957 thousand) and ¥9,453 million, ¥89 million ($818 thousand) and ¥89 million, and ¥166 million ($1,525 thousand)and ¥167 million as at 31 March 2020 and 2019, respectively.

9. COMMITMENT LINE AGREEMENTS
Commitment line agreements are agreements to lend to customers a prescribed amount when they apply for borrowing, unlessviolation of the condition of the agreement exists. The amount of unused commitment line related to such agreements as at 31 March
2020 and 2019 amounted to ¥686,008 million ($6,303,482 thousand) and ¥710,596 million, respectively. The amount of commitmentline agreements, having a condition that the original agreement period was less than one year or unconditionally cancelable at any
time, was ¥650,439 million ($5,976,652 thousand) and ¥675,858 million as at 31 March 2020 and 2019, respectively. The amount of― 38 ―

unused commitment line does not necessarily affect the future cash flows of the Group because most of such agreements were
terminated without being used. The majority of these agreements contain provisions that stipulate that the Group may refuse to makeloans or may decrease the commitment line when there are certain changes in financial conditions, security for the loans or otherreasons. When entering into loan agreements with the customers, the Group requests pledges of collateral in the form of premises or
securities if necessary. After entering into loan agreements, the Bank periodically checks the financial condition of the customers
based on its internal rules and performs certain actions relating to the security of the loans if necessary.

10. OTHER ASSETS
Other assets as at 31 March 2020 and 2019 consisted of the following:Thousands of
U.S. dollars

Millions of yen
2020
Accrued income
Other

2019

2020

¥3,00561,045¥3,432
59,197$27,612560,920¥64,050¥62,629$588,532

11. PREMISES AND EQUIPMENT
Premises and equipment as at 31 March 2020 and 2019 consisted of the following:Thousands of
U.S. dollars

Millions of yen
2020

2019

2020

Land
Buildings
Equipment
Leased assets
Other¥8,78635,142
8,285
80
1,354

¥8,86235,229
8,288
1,278
1,064

$80,731
322,907
76,128735
12,442

Accumulated depreciation

53,64736,82154,72137,749492,943
338,335¥16,826¥16,972$154,608

To conform with the Companies Law of Japan, deferred gains on sale of real estate in the amount of ¥805 million ($7,397 thousand)and ¥922 million as at 31 March 2020 and 2019, respectively, were deducted from the acquisition cost of premises and equipment.

12. INTANGIBLE ASSETS
Intangible assets as at 31 March 2020 and 2019 consisted of the following:Thousands of
U.S. dollars

Millions of yen
2020
SoftwareLeased assets
Other― 39 ―

20192020¥1,287
76
102

¥909
111
19

$11,826698
937¥1,465¥1,039$13,46113. DEPOSITS
Deposits as at 31 March 2020 and 2019 consisted of the following:
Millions of yen
Current deposits
Ordinary deposits
Deposits at noticeTime deposits
Other deposits
Negotiable certificates of deposit

Thousands of
U.S. dollars

2020

2019

2020

¥45,702
1,834,753
1,880
1,005,353
77,720235,976¥52,090
1,775,199
1,493
1,048,702
76,192
263,846$419,939
16,858,890
17,275
9,237,830
714,141
2,168,299¥3,201,384¥3,217,522$29,416,374

14. OTHER LIABILITIESOther liabilities as at 31 March 2020 and 2019 consisted of the following:Thousands of
U.S. dollars

Millions of yen
2020
Accrued income taxes
Accrued expenses
Unearned income
Lease obligations
Other

2019

2020

¥91
2,047
647
1,494
24,966

¥548
2,370
487
1,884
15,719$836
18,8095,945
13,728229,404¥29,245¥21,008$268,722

15. CONTINGENT LIABILITIES, ACCEPTANCES AND GUARANTEESAll contingent liabilities including letters of credit, acceptances and guarantees are reflected in acceptances and guarantees. As a contra
account, customers’ liabilities for acceptances and guarantees are shown on the asset side, which represent the Group’s right ofindemnity from customers.
The amount of guarantee obligation for privately placed bonds (Financial Instruments and Exchange Law, Article 2, Paragraph 3), outof bonds included in securities, stands at ¥8,338 million ($76,615 thousand) in 2020 compared with ¥3,521 million in 2019.

16. EMPLOYEES’ SEVERANCE AND RETIREMENT BENEFITSThe Group has adopted funded and unfunded defined benefit plans to prepare for the employees’ retirement benefits. In addition, asof 1 April 2016, the Bank transferred part of the defined benefit plans (excluding the portion for vested pensioners in a waiting period
and current pensioners) to defined contribution plans.
Under the defined benefit pension plan, which is a funded plan, employees receive lump-sum payments or pensions based on salaries
and service periods and a cash balance plan has been introduced. Each participant has a hypothetical individual account with theamount equivalent to the reserve as resource of pension for each participant. In hypothetical individual accounts, interest credits basedon trends in market interest rates and benefit credits based on the salary level are accumulated. Also, the Bank has set up retirement
benefit trusts related to the defined benefit pension plan.
Under the lump-sum retirement benefit plan (this unfunded plan has become a funded plan as a result of setting up retirement benefit
trusts.), predetermined points based on years of service and ability-based grade / job title are given to each participant annually, andemployees receive lump-sum payments, which are calculated by multiplying the unit price of points to the accumulated points at the― 40 ―

time of retirement, as retirement benefits.
The consolidated subsidiary adopts the simplified method in calculating net defined benefit liability and retirement benefit expenses.

Defined benefit plans(i) Change in projected benefit obligation
Thousands of
U.S. dollars

Millions of yen
2020

2019

2020

Balance at the beginning of the year
Service costs (including the amount of employee contributions)Interest costs
Actuarial differences
Retirement benefits paid

¥25,364692
108
117(1,149)¥25,514679
108
180(1,117)$233,061
6,359
992
1,075
(10,558)

Balance at the end of the year

¥25,132¥25,364$230,929

Note: Since the consolidated subsidiaries, which adopt the simplified method, are insignificant, the net defined benefit liability,
retirement benefit expenses and retirement benefits paid are included in the above accounts. All retirement benefit expenses areincluded in service costs.

(ii) Change in plan assets
Millions of yen
2020

2019

Thousands of
U.S. dollars
2020

Balance at the beginning of the year
Expected return on plan assets
Actuarial differences
Employer contributions
Employee contributions
Retirement benefits paid

¥27,753694(1,475)
113
52
(791)

¥28,113
703
(459)
113
52
(769)

$255,012
6,377(13,553)
1,038
478(7,268)

Balance at the end of the year

¥26,346¥27,753$242,084(iii) Reconciliation from projected benefit obligation and plan assets to net defined benefit liability (asset)
Thousands of
U.S. dollars

Millions of yen
2020

2019

2020

Funded projected benefit obligation
Plan assets¥24,800(26,346)¥25,044(27,753)$227,878(242,084)

Unfunded projected benefit obligation(1,546)332(2,709)320(14,206)
3,051

Net liability (asset) recognized in consolidated balance
sheets¥(1,214)¥(2,389)$(11,155)

Net defined benefit liability
Net defined benefit asset

2,484(3,698)2,134(4,523)

22,825(33,980)

Net liability (asset) recognized in consolidated balance
sheets¥(1,214)¥(2,389)$(11,155)

Note: The table above includes the plans to which the simplified method is applied.

― 41 ―

(iv) Retirement benefit expenses and their breakdown
Millions of yen
2020
2019

Thousands of
U.S. dollars
2020

Service costs (excluding the amount of employee contributions)Interest costs
Expected return on plan assets
Amortization of actuarial differences

¥640
108
(694)
210

¥627
108
(703)
408

$5,881
992(6,377)
1,929

Retirement benefit expenses

¥264

¥440

$2,425

Note: The retirement benefit expenses of the consolidated subsidiaries adopting the simplified method are included in service costs.

(v) Remeasurements of defined benefit plans on other comprehensive income
The component of items recognized in remeasurements of defined benefit plans (pretax) on other comprehensive income was asfollows:
Thousands of
U.S. dollars

Millions of yen
2020

2019

2020

Actuarial differences¥(1,382)¥(231)$(12,699)

Total¥(1,382)¥(231)$(12,699)(vi) Remeasurements of defined benefit plans on accumulated other comprehensive income
The component of items recognized in remeasurements of defined benefit plans (pretax) on accumulated other comprehensive income
was as follows:
Millions of yen

Thousands of
U.S. dollars

2020

2019

Unrecognized actuarial differences¥ (3,289)¥ (1,908)

2020$(30,221)

Total¥ (3,289)¥ (1,908)$(30,221)(vii) Plan assets(a) Percentage by major category of plan assets was as follows:
2020

2019

Bonds
Equities
General accountCash and deposits

26%
15%
14%
45%

57%
16%
15%
12%

Total

100%

100%

Retirement benefit trusts set up for defined benefit pension plans accounted for 20% and 19% of total plan assets for the years
ended 31 March 2020 and 2019, respectively. In addition, retirement benefit trusts set up for the lump-sum retirement benefit
plans accounted for 24% and 23% of total plan assets for the years ended 31 March 2020 and 2019, respectively.
(b) Determination procedure of long-term expected rate of return on plan assets
In determining a long-term expected rate of return on plan assets, the Bank considers the current and projected asset allocations,as well as a current and future long-term expected rate of return for various categories of the plan assets.

― 42 ―

(viii) Basis for calculation of actuarial assumptions
The basis for calculation of actuarial assumptions (presented as a weighted-average rate for discount rate and long-term expected
rate of return on plan asset) for the years ended 31 March 2020 and 2019 was as follows:
2020
Discount rateLong-term expected rate of return on plan assets
Expected salary increase rate in defined benefit plans
Expected salary increase rate in lump-sum retirement
benefit plans

2019
0.4%
2.5%
3.9%

0.4%
2.5%
3.9%

7.4%

7.4%

The contribution made by the Bank to defined contribution plans was ¥125 million ($1,149 thousand) and ¥126 million for the years
ended 31 March 2020 and 2019, respectively.

17. INCOME TAXESThe Group is subject to a number of taxes based on income such as corporation, inhabitant and enterprise taxes, which, in the aggregate,
indicated a statutory tax rate in Japan of approximately 30.4% and 30.4% for the years ended 31 March 2020 and 2019, respectively.
Significant components of the Group’s deferred tax assets and liabilities as at 31 March 2020 and 2019 were as follows:

Thousands of U.S.
dollars

Millions of yen
2020

2019

2020

Deferred tax assets:
Allowance for doubtful accounts
Net defined benefit liability
Accumulated depreciation
Securities
Deferred hedge
Other¥3,327
3,136
1,142
375
1,792
1,159

¥3,581
2,825
1,130
482
1,721
1,330

$30,571
28,816
10,493
3,446
16,466
10,649Subtotal
Valuation allowance (*)

10,931(2,287)

11,069(2,428)100,441(21,014)

8,644

8,641

79,427(10,100)(405)(1)(15,966)(412)(1)(92,805)(3,722)(9)

Total deferred tax assets
Deferred tax liabilities:
Net unrealized holding gains on available-for-sale securities
Deferred gains on sale of real estate
Other
Total deferred tax liabilities
Net deferred tax liabilities(10,506)(16,379)(96,536)¥ (1,862)¥ (7,738)$(17,109)

Note (*): Valuation allowance decreased by ¥141 million ($1,296 thousand) in the year ended 31 March 2020. The main reason ofthis decrease is the recognition of tax deductible expenses incurred by sales of securities against a portion of valuation
allowance related to the securities for which impairment loss was recognized in the past fiscal year.

― 43 ―

The following summarizes the significant difference between the statutory tax rate and the Bank’s effective tax rate for the years
ended 31 March 2020 and 2019.
2020
Statutory tax rate

2019

30.4%

30.4%

Non-deductible expenses

0.5

0.4

Non-taxable income

(1.8)

(1.5)

Per capita inhabitant taxes

0.7

0.7

Valuation allowance

(2.5)

3.0

Other, net

0.3

0.0

27.6%

33.0%

Effective tax rate

18. NET ASSETS
Under the Companies Law and the Banking Law of Japan, the following is provided: the entire amount of the issue price of shares isrequired to be accounted for as capital, although a company may, by a resolution of its board of directors, account for an amount notexceeding one-half of the issue price of the new shares as additional paid-in capital, which is included in capital surplus.
The Companies Law and the Banking Law provide that an amount equal to at least 20% of cash dividends and other cash
appropriations shall be appropriated and set aside as a legal earnings reserve until the total amount of legal earnings reserve andadditional paid-in capital equals 100% of common stock. The legal earnings reserve and additional paid-in capital may be used toeliminate or reduce a deficit by a resolution of the shareholders’ meeting or may be capitalized by a resolution of the board of directors.
On condition that the total amount of legal earnings reserve and additional paid-in capital remains equal to or exceeds 100% ofcommon stock, they are available for distribution by the resolution of the shareholders’ meeting. Legal earnings reserve is included
in retained earnings in the accompanying financial statements.
The maximum amount that the Bank can distribute as dividends is calculated based on the non-consolidated financial statements of
the Bank in accordance with the Companies Law.
The number of treasury stock held by the Group was 908 thousand shares and 583 thousand shares as at 31 March 2020 and 2019,respectively.

19. STOCK OPTIONS
1. Share-based compensation expenses accounted for as general and administrative expenses
The balance of stock acquisition rights granted for the stock option program was ¥225 million ($2,067 thousand) and ¥209 million as
at 31 March 2020 and 2019, respectively.
Share-based compensation expenses accounted for as general and administrative expenses for the years ended 31 March 2020 and2019 amounted to ¥39 million ($358 thousand) and ¥45 million, respectively.

― 44 ―

2. Details of stock options, volume and activity(a) Details of stock options
2013 Stock OptionPlan2014 Stock OptionPlan2015 Stock OptionPlan2016 Stock Option
Plan

Directors of the Bank:
9
Common stock:
13,400 shares

Directors of the Bank:
9
Common stock:
10,400 shares

Directors of the Bank:
9
Common stock: 9,100
sharesDirectors of the Bank:
9
Common stock:
12,100 shares

24 July 2013
Not applicableNot applicable
From 25 July 2013 to
24 July 2043

24 July 2014
Not applicableNot applicable
From 25 July 2014 to
24 July 2044

23 July 2015
Not applicableNot applicable
From 24 July 2015 to
23 July 2045

25 July 2016
Not applicableNot applicable
From 26 July 2016 to
25 July 2046

2017 Stock OptionPlan2018 Stock OptionPlan2019 Stock Option
Plan

Directors of the Bank:
9
Common stock:
11,100 shares

Directors of the Bank:
7
Common stock:
10,200 shares

Directors of the Bank:
7
Common stock:
14,500 shares

26 July 2017
Not applicableNot applicable
From 27 July 2017 to
Exercise period
26 July 2047
Note: Reported in terms of shares of stock.

25 July 2018
Not applicableNot applicable
From 26 July 2018 to
25 July 2048

25 July 2019
Not applicableNot applicable
From 26 July 2019 to
25 July 2049

Title and number ofgrantees
Number of stock
options by type ofsharesGrant dateCondition for vesting
Requisite service period
Exercise period

Title and number ofgrantees
Number of stock
options by type ofsharesGrant dateCondition for vesting
Requisite service period(b) Volume and activity
The following describes volume and activity that existed during the year ended 31 March 2020. The number of stock options isreported in terms of shares of stock.
(i) Number of stock options
2013 Stock Option Plan

2014 Stock Option Plan

2015 Stock Option Plan

2016 Stock Option Plan

Before vesting (shares):
As at 31 March 2019
GrantedForfeited
VestedOutstanding

7,000
－
－
－
7,000

6,400
－
－
400
6,000

5,700
－
－
300
5,400

9,600
－
－
1,600
8,000

After vesting (shares):
As at 31 March 2019
VestedExercised
Forfeited
Outstanding

－
－
－
－
－

－
400
400
－
－

－
300
300
－
－

－
1,600
1,600
－
－

― 45 ―

2017 Stock Option Plan

2018 Stock Option Plan

2019 Stock Option Plan

As at 31 March 2019
GrantedForfeited
VestedOutstanding

8,900
－
－
1,400
7,500

10,200
－
－
1,600
8,600

－
14,500－－14,500After vesting (shares):
As at 31 March 2019
VestedExercised
Forfeited
Outstanding

－
－
1,400
1,400
－
－

－
－
1,600
1,600
－
－

－
－
－
－
－
－

2013 Stock Option

2014 Stock Option

Before vesting (shares):(ii) Price information
Exercise price
Average exercise price
Fair value at the grant¥1 ($0.01)¥－ ($－)¥4,119 ($37.85)
2017 Stock Option

Exercise price
Average exercise price
Fair value at the grant¥1 ($0.01)¥2,912 ($26.76)¥4,437 ($40.77)
2018 Stock Option¥1 ($0.01)¥2,912 ($26.76)¥4,178 ($38.39)¥1 ($0.01)¥2,912 ($26.76)¥4,439 ($40.79)

2015 Stock Option

2016 Stock Option¥1 ($0.01)¥2,912 ($26.76)¥5,287 ($48.58)¥1 ($0.01)¥2,912 ($26.76)¥4,032 ($37.05)

2019 Stock Option¥1 ($0.01)¥－ ($－)¥2,693 ($24.75)

3. Valuation method for fair value of stock options
The valuation methods for fair value of stock options granted in the year ended 31 March 2020 were as follows:(a) Valuation method: Black-Scholes formula(b) Major basic numerical values and valuation method
2019 Stock Option Plan
Stock price volatility (*1)
Expected years to expiration (*2)
Expected dividends (*3)
Risk-free interest rate (*4)

31.5%
0.6 years¥70 ($0.64) per share(0.19)%

Notes:*1. Stock price volatility was calculated based on the actual stock prices from 10 December 2018 to 15 July 2019.
*2. As a rational estimation was difficult due to the insufficient amount of historical data, expected years to expiration were
set up by the estimated average remaining service period.
*3. Expected dividends are determined based on actual dividends for the year ended 31 March 2019.
*4. Risk-free interest rate is Japanese government bond yield corresponding to the expected years to expiration.
4. Estimation method for the vested number of stock options
Since it is difficult to make a reasonable estimate on future forfeited stock options, the actual number of forfeited stock options isreflected in the estimation.

― 46 ―

20. OTHER OPERATING INCOME AND EXPENSES
Other operating income and expenses for the years ended 31 March 2020 and 2019 consisted of the following:Thousands of
U.S. dollars

Millions of yen
2020
Other operating income:Gain on trading account securities transactions
Gain on sale of bonds
Other

2019

2020

¥0
423
4,200

¥1
282
3,960

$0
3,887
38,592¥4,623¥4,243$42,479

Thousands of
U.S. dollars

Millions of yen
2020
Other operating expenses:
Loss on sale of foreign bills of exchange
Loss on sales of bonds
Loss on redemption of bonds
Loss on financial instruments
Other

2019

2020

¥384
9
1,062
168
3,762

¥486
79
1,229
14
3,411

$3,528
83
9,758
1,544
34,568¥5,385¥5,219$49,481

21. GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses for the years ended 31 March 2020 and 2019 consisted of the following:Thousands of
U.S. dollars

Millions of yen
2020
Salaries and allowances
Fringe benefits and welfare
Retirement benefit expenses
Depreciation for premises and equipment
Rental expenses
Taxes other than income taxes
Deposit insurance premium
Business outsourcing expenses
Other expenses

2019

2020

¥11,222
2,909
389
1,655
790
1,455
959
2,683
4,153

¥11,558
3,043
565
1,900
797
1,458
989
2,687
4,092

$103,115
26,7303,574
15,207
7,259
13,3698,812
24,65338,161¥26,215¥27,089$240,880

22. OTHER INCOME AND EXPENSES
Other income and expenses for the years ended 31 March 2020 and 2019 consisted of the following:Thousands of
U.S. dollars

Millions of yen
2020
Other income:Gain on sale of stocks and other securities
Gain on disposal of premises and equipment
Other― 47 ―

20192020¥1,72081
510¥4,22625
768$15,804745
4,686¥2,311¥5,019$21,235

Thousands of
U.S. dollars

Millions of yen
2020
Other expenses:
Provision of allowance for doubtful accounts
Loss on disposal of premises and equipment
Loss on devaluation of stocks and other securities
Loss on sales of stocks and other securities
Impairment losses
Loss on money held in trust
Loss on transfer of receivables
Other

2019

2020

¥ 2,028
94
892
476
78
203
14
342

¥ 4,550
26
29
127
76
203
135
355

$18,635
864
8,196
4,374
717
1,865
129
3,142

¥4,127¥5,501$37,922

23. LEASE TRANSACTIONS
A. Finance leases(a) As lessee(1) Finance leases that transfer the ownership(i) Details of leased assets
Premises and equipment:
Not applicable
Intangible assets:
Mainly consist of software for the branch operating system(ii) Depreciation and amortization methods of leased assets
Depreciation and amortization methods of leased assets are described in Note 2. Depreciation and amortization methods, (3) Leased
assets.
(2) Finance leases other than those that transfer the ownership(i) Details of leased assets
Premises and equipment:
Mainly consist of equipment for the branch operating system
Intangible assets:
Mainly consists of software for the branch operating system(ii) Depreciation and amortization methods of leased assets
Depreciation and amortization methods of leased assets are described in Note 2. Depreciation and amortization methods, (3) Leased
assets.
(3) Current portion of lease obligations and lease obligations (excluding current portion) as at 31 March 2020 and 2019 consisted of
the following:
Millions of yen
2020
Current portion of lease obligations
Lease obligations (excluding current portion)

2019

Thousands of
U.S. dollars

Average interest
rate (%)

2020

2020

¥507
987

¥764
1,120

$4,6599,069¥1,494¥1,884$13,728

Note: The average interest rate represents the weighted-average rate applicable to the year-end balance.

― 48 ―

2.56%
2.45%

The aggregate annual maturities of lease obligations were summarized as follows:Year ending 31 March
2021
2022
2023
2024
2025 and thereafterYear ending 31 MarchMillions ofyen

Thousands of
U.S. dollars

2020

2020

¥507
371
267
194
155

$4,659
3,409
2,453
1,783
1,424

Millions of
yen
2019

2020
2021
2022
2023
2024 and thereafter

¥764
404
291
199
226

B. Operating leases(a) As lessee
There were no future lease payments under non-cancelable operating leases as at 31 March 2020 and 2019.

(b) As lessor
Future lease receivables under non-cancelable operating leases as at 31 March 2020 were ¥285 million ($2,619 thousand) including¥28 million ($257 thousand) due within one year.
Future lease receivables under non-cancelable operating leases as at 31 March 2019 were ¥298 million including ¥32 million due
within one year.

― 49 ―

24. COMPREHENSIVE INCOME
Reclassification adjustments and tax effect amounts of other comprehensive income (losses) for the years ended 31 March 2020 and2019 were as follows:
Thousands of U.S.
dollars

Millions of yen
2020
Net unrealized holding losses on available-for-sale securities:
Amount for the year
Reclassification adjustment

2019

2020

¥(18,547)(1,266)¥(2,108)(4,429)$(170,422)(11,633)

Amount before tax effectTax effect amount(19,813)
5,867(6,537)
1,871(182,055)
53,910Net unrealized holding losses on available-for-salesecurities(13,946)(4,666)(128,145)

(775)
541

(1,380)545(7,121)
4,971

Amount before tax effectTax effect amount

(234)
71

(835)
253

(2,150)652

Net unrealized losses on hedging derivatives

Net unrealized losses on hedging derivatives:
Amount for the year
Reclassification adjustment

(163)

(582)

(1,498)Remeasurements of defined benefit plans:
Amount for the year
Reclassification adjustment(1,592)
210

(639)
408

(14,628)
1,929

Amount before tax effectTax effect amount(1,382)
421

(231)
70

(12,699)
3,869

Remeasurements of defined benefit plans
Total other comprehensive losses

(961)

(161)

(8,830)¥ (15,070)¥ (5,409)$(138,473)

25. PER SHARE DATA
Amounts per share as at 31 March 2020 and 2019 and for the years then ended were as follows:Yen
Net assets per share
Net income per share
Diluted net income per share― 50 ―

U.S. dollars

2020

2019

¥10,644.27
212.50211.86¥11,204.81
233.72225.152020$97.81
1.95
1.95

Amounts per share were calculated based on the following:Thousands of
U.S. dollars

Millions of yen or
thousands of shares
Net assets per share:
Total net assets
Amount to be deducted from total net assets
Stock acquisition rights
Net assets at the end of the fiscal year attributed to common stock
Number of shares of common stock at the end of the fiscal year
used in computing net assets per share attributed to common
stock

2020

2019

2020

¥187,456
225
225
187,231¥200,944
209
209
200,735$1,722,467
2,067
2,067
1,720,400

17,59017,915

Net income per share:
Net income attributable to owners of parent
Net income attributable to owners of parent attributed to common
stock
Average number of shares of common stock during the year

3,784

4,187

34,7703,784
17,8094,187
17,913

34,770

Diluted net income per share:
Number of increased common stock used in computing diluted net
income per share
Convertible bond-type bonds with stock acquisition rights
Compensation-type stock option

54
－
54

682
635
47

26. SEGMENT INFORMATION(1) Reportable segment information
a. Description of reportable segments
The Group’s reportable segments are those components of the Group for which separate financial information is available andwhose operating results are regularly reviewed by the board of directors to decide on the allocation of resources and assess businessperformance.
The principal business of the Group is financial services primarily focused on domestic commercial banking business. The Group
has two reportable segments — “Commercial banking business” and “Leasing business” — classified by type of financial services.
“Commercial banking business” consists of deposits, loans, securities investment and foreign exchange operations.
“Leasing business” consists of leasing and computer processing contracted business.

― 51 ―

b. Methods of measurement for the amounts of income, profit (loss), assets, liabilities and other items for each reportablesegment
The accounting policies of each reportable segment are consistent with those disclosed in Note 2, “SIGNIFICANTACCOUNTING POLICIES.”
Segment profit is adjusted with ordinary profit. Ordinary profit is profit derived from regular business activities, including wages,
dividends and interest.
Intersegment income is based on the prevailing market price.

c. Information about income, profit (loss), assets, liabilities and other items for each reportable segment
2020
Millions of yen
Reportable Segment
Commercial
Banking
Ordinary income:
Income from externalcustomers¥39,942

Total¥4,206¥44,148

OthersTotal¥1,096

Adjustments

Consolidated¥－¥45,244¥45,244

222

462

684

445

1,129

(1,129)－¥40,164¥4,668¥44,832¥1,541¥46,373¥(1,129)¥45,244

Intersegment income
Total

Leasing

Segment profit

5,152

3

5,155

328

5,483

(163)

5,320

Segment assets

3,485,151

12,7083,497,859

9,705

3,507,564(22,026)

3,485,538

Segment liabilities

3,301,246

8,683

3,309,929

4,065

3,313,994(15,912)3,298,082

Depreciation

1,642

47

1,689

1

1,690

－

1,690

Interest income

29,994

029,99450

30,044(196)

29,848Interest expense

1,064

35

1,099

2

1,101

(36)

1,065

Provision for income taxes
Increase in premises andequipment and intangible
assets

1,350

13

1,363

83

1,446

－

1,446

2,178

15

2,193

－

2,193

(108)

2,085

Other items:

Notes 1. Ordinary income is stated instead of net sales of non-banking industries.
2. “Others” are business segments not included in the reportable segments, and include the credit card and credit guarantee
businesses.
3. “Adjustments” are as follows.
(1) The adjustments for segment profit were primarily elimination of intersegment transactions.
(2) The adjustments for segment assets were primarily elimination of intersegment transactions and adjustments fornet defined benefit assets.
(3) The adjustments for segment liabilities were primarily elimination of intersegment transactions and adjustments
for net defined benefit liability.
(4) The adjustments for interest income were primarily elimination of intersegment transactions.
(5)

The adjustments for increase in premises and equipment and intangible assets were primarily elimination ofintersegment transactions.

4. Segment profit is adjusted with ordinary profit in the consolidated statements of income.

― 52 ―

2019
Millions of yen
Reportable Segment
Commercial
Banking
Ordinary income:
Income from externalcustomers¥43,423

Total¥3,997¥47,420

OthersTotal¥1,100Adjustments

Consolidated¥－¥48,520¥48,520

289

332

621

413

1,034

(1,034)－¥43,712¥4,329¥48,041¥1,513¥49,554¥(1,034)¥48,520

Intersegment income
Total

Leasing

6,421

(151)

6,270

294

6,564

(235)

6,329

Segment assets

3,507,704

12,026

3,519,730

9,793

3,529,523(20,103)3,509,420

Segment liabilities

3,311,196

7,987

3,319,183

4,246

3,323,429(14,953)

3,308,476

Depreciation

1,886

53

1,939

1

1,940

－

1,940

Interest income

30,990030,99054

31,044(264)

30,780Interest expense

1,237

31

1,268

2

1,270

(31)

1,239

Provision for income taxes
Increase in premises andequipment and intangible
assets

1,874

55

1,929

137

2,066

－

2,066

1,530

－

1,530

－

1,530

10

1,540

Segment profit (loss)

Other items:

Notes 1. Ordinary income is stated instead of net sales of non-banking industries.
2. “Others” are business segments not included in the reportable segments, and include the credit card and credit
guarantee businesses.
3. “Adjustments” are as follows.
(1) The adjustments for segment profit (loss) were primarily elimination of intersegment transactions.
(2) The adjustments for segment assets were primarily elimination of intersegment transactions and adjustments fornet defined benefit assets.
(3) The adjustments for segment liabilities were primarily elimination of intersegment transactions and adjustments
for net defined benefit liability.
(4) The adjustments for interest income were primarily elimination of intersegment transactions.
4. Segment profit (loss) is adjusted with ordinary profit in the consolidated statements of income.

― 53 ―

2020
Thousands of U.S. dollars
Reportable Segment

Ordinary income:
Income from externalcustomers

Commercial
Banking

Leasing

Total

OthersTotal$367,013$38,647$405,660$10,071$415,731

Consolidated$－$415,731

2,040

4,245

6,285

4,089

10,374(10,374)－$369,053$42,892$411,945$14,160$426,105$(10,374)$415,731

Intersegment income
Total

Adjustments

Segment profit

47,34027

47,3673,014

50,381(1,498)48,883

Segment assets

32,023,808

116,769

32,140,577

89,17632,229,753(202,389)

32,027,364

Segment liabilities

30,333,970

79,78530,413,755

37,35230,451,107(146,210)

30,304,897

Depreciation

15,088432

15,520915,529－15,529Interest income

275,6040275,604459

276,063(1,801)

274,262Interest expense

9,777

322

10,09918

10,117

(331)

9,786

Provision for income taxes
Increase in premises andequipment and intangible
assets12,405

119

12,524762

13,286－

13,28620,013138

20,151－

20,151(993)

19,158Other items:(2) Other segment-related informationa. Information by service
Information by service for the years ended 31 March 2020 and 2019 was as follows:
2020
Millions of yen

Ordinary income from external customers

Banking

Securities
investment

Other

Total

¥17,280¥14,670¥13,294¥45,244

2019
Millions of yen

Ordinary income from external customers

Banking

Securities
investment

Other

Total

¥17,624¥17,605¥13,291¥48,520

2020
Thousands of U.S. dollars

Ordinary income from external customers

Banking

Securities
investment

Other

Total

$158,780$134,797$122,154$415,731

Note: Ordinary income is stated instead of net sales of non-banking industries.

― 54 ―

b. Information by geographic regioni. Ordinary income
Information on ordinary income from domestic customers for the years ended 31 March 2020 and 2019 was omitted, because theamount of ordinary income from domestic customers was more than 90% of consolidated ordinary income.
ii. Premises and equipment
Information on premises and equipment for the years ended 31 March 2020 and 2019 was omitted, because there were no premises
and equipment located abroad.

c. Major customers’ segment information
Segment information on major customers was not shown for the years ended 31 March 2020 and 2019, since no customer accounted
for more than 10% of ordinary income to customers in the consolidated statements of income.

d. Information on impairment of fixed assets for each reportable segment
2020
Millions of yen
Reportable Segment
Commercial
Banking
Impairment losses

Leasing

¥78

Total

¥－

Others

¥78

Total

¥－

¥78

2019
Millions of yen
Reportable Segment
Commercial
Banking
Impairment losses

Leasing

¥76

Total

¥－

Others

¥76

Total

¥－

¥76

2020
Thousands of U.S. dollars
Reportable Segment
Commercial
Banking
Impairment losses

Leasing

$717

$－

Total
$717

Others

Total

$－

$717

e. Segment information on amortization of goodwill and its remaining balance
There is no information to be reported on amortization of goodwill and its remaining balance for the years ended 31 March 2020 and2019.

f. Information on gain on negative goodwill for each reportable segment
There is no information to be reported on gain on negative goodwill for the years ended 31 March 2020 and 2019.

― 55 ―

27. RELATED PARTY TRANSACTIONS(1) Related party transactions
a. Transactions between the Bank and related parties
Transactions with executive officers of the Bank and major shareholders (limited to individual) and others
For the year ended 31 March 2020
Category

Corporate/
Individual name

Executive officer
and close family Mizuhiko Yoshidamembers

Business

Voting rights(%)

Relation to therelated party

Type of transaction

Amount oftransaction

Account

Balance as at 31
March 2020

Corporate Directorand Audit &Supervisory
Committee
Member of theBank－

Creditor

Term loan－

Loans and bills
discounted¥19 million($175 thousand)Business

Voting rights(%)

Relation to therelated party

Type of transaction

Amount oftransaction

Account

Balance as at 31
March 2019

Corporate Directorand Audit &Supervisory
Committee
Member of theBank－

Creditor

Term loan－

Loans and bills
discounted¥21 million

For the year ended 31 March 2019
Category

Corporate/
Individual name

Executive officer
and close family Mizuhiko Yoshidamembers

Note: Terms and conditions of the transaction are determined on an arm’s length basis.

b. Transactions between the Bank’s consolidated subsidiaries and related parties
There is no significant transaction to be disclosed between the Bank’s consolidated subsidiaries and related parties for the years
ended 31 March 2020 and 2019.

(2) Notes to the Bank’s parent company and significant affiliates
There is no information to be reported on the notes to the Bank’s parent company and significant affiliates for the years ended 31
March 2020 and 2019.

28. SUBSEQUENT EVENTS
Cash dividends
On 23 June 2020, the shareholders of the Bank authorized the following appropriations of retained earnings as at 31 March 2020:
Millions of yen
Cash dividends (¥35 ($0.32) per share for year end)

¥616

― 56 ―

Thousands of
U.S. dollars$5,660

― 57 ―

― 58 ―

― 59 ―

The Bank of Iwate, Ltd.

2-3, Chuodori 1-chome, Morioka, Iwate 020-8688, Japan
Phone: +81-19-623-1111
URL: https://www.iwatebank.co.jp/

General Planning Division
Public Relations and CSR Office2-3, Chuodori 1-chome, Morioka, Iwate 020-8688, Japan
Phone: +81-19-623-1111 Fax: +81-19-652-7571
SWIFT: BAIWJPJT