Annual Securities Report“Yukashoken Hokokusho”(Excerpt)
For the fiscal years ended March 31, 2023 and 2022

FIDEA Holdings Co. Ltd.
and Subsidiaries

FIDEA Holdings Co. Ltd. and Subsidiaries
Consolidated Balance Sheets
March 31, 2023 and 2022

Millions of yen
2023
2022
Assets:Cash and due from banks (Notes 12, 22 and 26)
Monetary claims bought (Note 26)
Trading account securities (Notes 5 and 26)
Money held in trust (Note 26)
Securities (Notes 5, 6, 8, 12, 14 and 26)
Loans and bills discounted (Notes 7, 8, 12, 25 and 26)
Foreign exchange assets (Note 8)
Lease receivables and investments in leases
Tangible fixed assets (Notes 4 and 9):
Buildings
Land
Lease assets
Construction in progress
Other tangible fixed assets
Intangible fixed assets:
Software
Goodwill
Other intangible fixed assets
Defined benefit asset (Note 13)
Deferred tax assets (Notes 4 and 23)
Customers’ liabilities for acceptances and guarantees(Notes 8 and 25)
Other assets (Notes 8 and 12)
Allowance for loan losses (Notes 4 and 26)
Total assets¥

316,923
4,016
606
57,981
660,141
1,892,149
1,529
6,250

¥

725,949
3,811
589
51,717680,385
1,712,140
1,963
5,091

Thousands of
U.S. dollars(Note 1)2023$

2,373,243
30,073
4,537
434,184
4,943,395
14,169,155
11,44946,802

11,901
7,246
11
1
2,156

12,951
8,290
21
2,254

89,11954,26082
7
16,144

1,708
14
137
1,299
4,346

2,090
44
145
1,081
2,662

12,790
104
1,025
9,727
32,54419,065

17,958142,766

46,203(13,841)

49,641(13,593)345,986(103,646)¥ 3,019,852¥ 3,265,199$ 22,613,838(Continued)
1

FIDEA Holdings Co. Ltd. and Subsidiaries
Consolidated Balance Sheets
March 31, 2023 and 2022

Millions of yen
2023
2022
Liabilities:
Deposits (Note 26)
Negotiable certificates of deposit (Note 26)
Payables under securities lending transactions(Notes 12 and 26)
Borrowed money (Notes 11, 12 and 26)
Foreign exchange liabilities
Provision for bonuses for directors and other officers
Defined benefit liability (Note 13)
Provision for reimbursement of deposits
Provision for contingent loss
Deferred tax liabilities (Notes 4, 6 and 23)
Deferred tax liabilities for land revaluation (Note 10)
Acceptances and guarantees
Other liabilities (Note 11)

Thousands of
U.S. dollars(Note 1)2023

¥ 2,663,710
63,680¥ 2,656,962
54,867$ 19,946,907
476,860

41,651

52,825

311,899

116,000
44
42
750
58
386
12
385
19,06523,441

343,800
58
45
645
126
459
2,040
416
17,95825,758868,653
329
314
5,616
434
2,890
89
2,883
142,766
175,535

2,929,230

3,155,965

21,935,225

18,00018,161
57,858(105)
93,91418,00023,55055,942(24)
97,468

134,791
135,996433,263(786)
703,264(4,458)
(206)
850
412
(3,402)
109

10,317
(203)
914
421
11,449314(33,383)(1,542)
6,365
3,085(25,475)
816

Total net assets

90,621

109,233

678,605

Total liabilities and net assets¥ 3,019,852¥ 3,265,199$ 22,613,838

Total liabilities
Net assets (Note 15):
Common stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity
Accumulated other comprehensive income:Unrealized gain (loss) on available-for-sale securities (Note 6)
Deferred loss on hedges
Revaluation reserve for land (Note 10)
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Non-controlling interests

See notes to consolidated financial statements.

(Concluded)2

FIDEA Holdings Co. Ltd. and Subsidiaries
Consolidated Statements of Income
Years Ended March 31, 2023 and 2022
Thousands of
U.S. dollars(Note 1)
2023

Millions of yen
2023
2022
Income (Note 17):
Interest income:Interest on loans and discounts
Interest and dividends on securities
Other
Fees and commissions
Other operating income
Other income¥

Total income

17,85914,282
223
8,628
7,539
2,903

¥

18,45011,366
688
8,500
7,641
4,452

$

133,735
106,949
1,669
64,60956,454
21,73851,437

51,100385,180

116
168
0
156
3,365
13,80324,253
1,800
3,244

139
42
0
(18)
3,457
9,842
25,702
2,116
4,187

868
1,258
0
1,168
25,198103,362
181,615
13,47924,292

Total expenses

46,90845,471

351,265

Income before income taxes

4,528

5,628

33,907

997
249

1,579
517

7,465
1,864

1,247

2,097

9,338

3,281

3,531

24,569

15

25

112

Expenses:
Interest expenses:
Interest on deposits
Interest on payables under securities lending transactions
Interest on borrowings and rediscounts
Other
Fees and commissions
Other operating expenses
General and administrative expenses (Note 18)
Provision of allowance for loan losses (Note 4)
Other expenses (Notes 4, 19 and 20)

Income taxes (Note 23):
Current
Deferred
Total income taxes
Net income
Net income attributable to non-controlling interests
Net income attributable to owners of parent

¥

3,266

¥

3,506

Yen
Per share of common stock (Note 28):
Basic net income
Diluted net income
Cash dividends applicable to the year¥

179.1975.00$

24,457

U.S. dollars¥

190.15148.5975.00$

1.34180.5616

Notes (1) Effective October 1, 2021, the Company implemented the stock consolidation, whereby 10 shares of its common stock and preferred stockclass B were consolidated to one share. The information on per share, attributable to common stock shareholders shown above, arecalculated on the assumption that the stock consolidation had been implemented at the beginning of the year ended March 31, 2022.
(2) Diluted net income for the year ended March 31, 2023 is not shown since there are no dilutive shares as a result of acquisition andcancellation of preferred stock class B based on the resolution at the Board of Directors’ meeting held on February 24, 2023.

See notes to consolidated financial statements.
3

FIDEA Holdings Co. Ltd. and Subsidiaries
Consolidated Statements of Comprehensive Income
Years Ended March 31, 2023 and 2022

Millions of yen
2023
2022
Net income¥

Other comprehensive income (Note 21):
Unrealized gain (loss) on available-for-sale securities
Deferred gain (loss) on hedges
Remeasurements of defined benefit plans
Total other comprehensive income

3,281

¥

(14,776)(2)(9)(14,788)

3,531

Thousands of
U.S. dollars(Note 1)
2023$

(7,943 )184
267(7,491 )

24,569(110,648)(14)(67)(110,738)

Comprehensive income¥(11,506)¥(3,959)$(86,161)

Total comprehensive income attributable to:
Owners of parent
Non-controlling interests¥(11,521)
14¥(3,981)
21$(86,273)
104

See notes to consolidated financial statements.

4

FIDEA Holdings Co. Ltd. and Subsidiaries
Consolidated Statements of Changes in Net Assets
Years Ended March 31, 2023 and 2022
Millions of yen
Shareholders’ equity

Balance as of April 1, 2021

Commonstock

CapitalsurplusRetainedearnings

Treasury
stock

¥

¥

¥

¥

Cumulative effects of changes inaccounting policies
Restated balance

18,00053,56496
53,66029,19718,000Cash dividends
Net income attributable to owners of parent
Acquisition of treasury stock
Sale of treasury stock
Cancellation of treasury stockReversal of revaluation reserve for land
Net changes of items other thanshareholders’ equity(1,310)3,506(0)(5,647)

Balance as of March 31, 2022

18,000(6)¥ 100,756(6)

96
100,852

55,942(1,414)3,266

0(5,418)¥18,255

Deferred loss
on hedges¥

18,255(387 )

18,161¥

57,858

¥

¥

1,000

154

¥

154

19,023¥293¥ 120,073

293

96
120,169

19,023(1,310)3,506(5,665)0
86(7,938)

184

(86 )

267

(7,573)21(7,552)

10,317

(203)

914

421

11,449314

109,233(5,553)54
5,418(1,414)
3,266(5,553)55-(1,414)
3,266(5,553)
55
-

28
64

28
64
(14,775)

¥

1,000

Total
net assets

97,46864

18,000¥Noncontrollinginterests

(24)

28

¥

(387)

Accumulated other comprehensive income
Total
Remeasureaccumulated
ments ofother
Revaluation
definedcomprehensive
reserve for land benefit plansincome(1,310)3,506(5,665)086(5,665)
0
5,647

86

23,550Cash dividends
Net income attributable to owners of parent
Acquisition of treasury stock
Sale of treasury stock
Cancellation of treasury stock
Change due to purchase of treasury stock ofconsolidated subsidiaries
Reversal of revaluation reserve for land
Net changes of items other thanshareholders’ equity
Balance as of March 31, 2023

29,197

Total
shareholders’equityUnrealized
gain (loss) on
available-forsale
securities

(105)

¥

93,914¥(4,458)

(2)
¥

(206)

(64 )
¥

850

(9)
¥

412

(14,851)¥(3,402)

(205)
¥

109

(15,057)¥

90,621Thousands of U.S. dollars (Note 1)
Shareholders’ equity

Balance as of March 31, 2022

Commonstock$ 134,791

Cash dividends
Net income attributable to owners of parent
Acquisition of treasury stock
Sale of treasury stock
Cancellation of treasury stock
Change due to acquisition of treasury stockof consolidated subsidiaries
Reversal of revaluation reserve for land
Net changes of items other thanshareholders’ equity
Balance as of March 31, 2023

Capitalsurplus$ 176,351

Retainedearnings$ 418,915

Total
shareholders’equity$ 729,878(41,583)
404
40,572(10,588)
24,457(41,583)411-(10,588)
24,457(41,583)
411
-

209
479

209
479

0
(40,572)
209
479$ 135,996$ 433,263

Accumulated other comprehensive income
Total
Remeasureaccumulated
Revaluation
ments ofother
reserve fordefinedcomprehensive
land
benefit plansincome
$
6,844
$
3,152
$ 85,734

Treasury
stock
$
(179)

(10,588)
24,457$ 134,791

Unrealized
gain (loss) on
available-forsale
securities$ 77,257$(786)$ 703,264

Deferred loss
on hedges$(1,520)(110,641)(14)$ (33,383) $(1,542)

See notes to consolidated financial statements.
5

(479)
$

6,365

$

(67)

(111,210)

3,085$ (25,475)

Noncontrollinginterests
$
2,351

$

Total
net assets$ 817,979(1,535)(112,752)

816$ 678,605

FIDEA Holdings Co. Ltd. and Subsidiaries
Consolidated Statements of Cash Flows
Years Ended March 31, 2023 and 2022

Operating activities:
Income before income taxes
Adjustments for:
Income taxes—paidDepreciation and amortization
Loss on impairment—fixed assets
Amortization of goodwill
Change in allowance for loan losses
Change in provision for bonuses for directors and other officers
Change in defined benefit asset
Change in defined benefit liability
Change in provision for reimbursement of deposits
Change in provision for contingent loss
Interest income
Interest expenses
Loss on securities—net
Gain on money held in trust—net
Foreign exchange gain—net
Loss on sale and disposal of fixed assets—net
Loss on reduction of fixed assets
Subsidy income
Net change in loans and bills discounted
Net change in deposits
Net change in negotiable certificates of deposit
Net change in trading account securities
Net change in borrowed money, excluding subordinatedborrowings
Net change in due from banks, excluding due from Bank of Japan
Net change in call loans and bills bought
Net change in payables under securities lending transactions
Net change in foreign exchange assets
Net change in foreign exchange liabilities
Net change in lease receivables and investments in leases
Interest received
Interest paid
Other—net
Total adjustments
Net cash provided by (used in) operating activities —(Forward)

Millions of yen
2023
2022

Thousands of
U.S. dollars(Note 1)
2023

¥

$

4,528

¥

5,628

33,907(2,628)
1,920
480
29
247
(2)
(197)
42
(68)
(73)
(32,365)
441
4,946
(338)
(7)
533
(180,009)
6,747
8,812
(16)

(1,849)
1,925
659
29
44
15
(37)
60
(112)
16
(30,504)
164
2,019
(297)
(9)
284
3
(3)
19,08463,606(2,285)(36)(19,679)
14,377
3,594
217
1,849
(14)
(1,475)
314
(509)
(546)
(242,361)
3,302
37,037(2,531)(52)
3,991(1,347,978)50,52465,987(119)(227,800)(1,828)(204)(11,173)433(14)(1,158)32,386(382)(7,820)(409,067)

20,100(27)(35)(23,174)
(358)
42
(842)
30,785(211)
1,218
80,274(1,705,855)(13,688)(1,527)(83,667)
3,242
(104)
(8,671)
242,519(2,860)(58,559)(3,063,254)

85,902$(3,029,347)¥(404,539 )¥(Continued)

6

FIDEA Holdings Co. Ltd. and Subsidiaries
Consolidated Statements of Cash Flows
Years Ended March 31, 2023 and 2022
Thousands of
U.S. dollars(Note 1)
2023

Millions of yen
2023
2022
Net cash provided by (used in) operating activities —(Forward)
Investing activities:
Purchase of securities
Proceeds from sale of securities
Proceeds from maturity of securities
Increase in money held in trust
Decrease in money held in trust
Purchase of tangible fixed assets
Proceeds from sale of tangible fixed assets
Purchase of intangible fixed assets
Proceeds from sale of intangible fixed assets
Subsidy income
Net cash provided by investing activities
Financing activities:
Repayment of lease obligations
Dividends paid
Purchase of treasury stock
Proceeds from sale of treasury stock
Purchase of treasury stock of subsidiaries
Net cash used in financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of year
Cash and cash equivalents at the end of year (Note 22)¥ (404,539)¥

85,902$(3,029,347)(504,010)
317,768
193,459(7,000)
981
(616)
662
(331)
913

(478,619)
410,524
108,551(4,000)105(1,384)
46
(528)
0
3
34,700(3,774,224)
2,379,571
1,448,697(52,418)
7,346(4,612)
4,957(2,478)6,836(80)(1,411)(5,553)
0(191)(7,235)(47)(1,308)(5,665)0(7,021)(599)(10,566)(41,583)0(1,430)(54,178)7(410,854)
722,891¥ 312,037

9
113,590609,301¥ 722,891

52(3,076,636)
5,413,291$ 2,336,655

See notes to consolidated financial statements.

(Concluded)

7

FIDEA Holdings Co. Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
Years Ended March 31, 2023 and 2022
1. Basis of Presentation
FIDEA Holdings Co. Ltd. (the “Company”) is a holding company and conducts its operations through its
subsidiaries and affiliates. The Company was established as a joint holding company between The Shonai Bank,
Ltd. (“Shonai”) and The Hokuto Bank, Ltd. (“Hokuto”) on October 1, 2009 by way of a transfer of shares.
The accompanying consolidated financial statements have been prepared in accordance with the provisions set
forth in the Japanese Financial Instruments and Exchange Act and its related accounting regulations, the Ordinancefor the Enforcement of the Banking Act of Japan (the “Banking Act”) and the Companies Act of Japan (the“Companies Act”), and in conformity with accounting principles generally accepted in Japan, which are different
in certain respects as to application and disclosure requirements of International Financial Reporting Standards.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been madeto the consolidated financial statements issued domestically in order to present them in a form which is morefamiliar to readers outside Japan.
In preparing the accompanying consolidated financial statements, Japanese yen amounts are presented in millionsof yen by rounding down figures to the nearest million. As a result, the totals in yen in the accompanying
consolidated financial statements do not necessarily agree with the sums of the individual amounts.
The translation of yen amounts into U.S. dollar amounts is included solely for the convenience of readers outside
Japan and has been made at ¥133.54 = U.S.$1.00, the exchange rate prevailing on March 31, 2023. This translation
should not be construed as a representation that yen can be converted into U.S. dollars at the above or any otherrate.
2. Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its 6 subsidiaries (collectively the“Group”) as of March 31, 2023 and 2022.
Under the control of influence concept, those companies in which the Company, directly or indirectly, is able toexercise control over operations are fully consolidated. The Company has 4 unconsolidated subsidiaries as ofMarch 31, 2023 and 2022.
All significant intercompany accounts and transactions have been eliminated in consolidation. All material
unrealized profit included in assets resulting from transactions within the Group is eliminated.
The excess of the acquisition cost over the underlying equity in the net assets of the consolidated subsidiaries
measured at fair value at their respective dates of acquisition is presented as “goodwill” and is amortized by thestraight-line method over a period of five years. Insignificant amounts of goodwill are fully charged to income in
the fiscal year when it is incurred.
The balance sheet dates of all 6 subsidiaries are March 31.
Those companies over which the Company has the ability to exercise significant influence, but does not control
are accounted for using the equity method. However, the Company has no affiliates to be accounted for using theequity method.

8

3. Significant Accounting Policies(1) Trading account securities
Trading account securities are stated at fair value as of the balance sheet date, and cost of trading accountsecurities sold is determined principally using the moving-average method.
(2) Securities
Non-trading securities are classified into two categories: held-to-maturity debt securities and available-forsale securities. Held-to-maturity debt securities are carried at amortized cost being determined by the movingaverage method. Available-for-sale securities are stated at fair value. Cost of sale of these available-for-salesecurities is principally determined using the moving-average method. Equity securities without market prices
are stated at cost determined by the moving-average method.
Unrealized gain or loss on available-for-sale securities is recorded under net assets, net of income taxes.
(3) Securities held in money trusts
Securities that are part of trust assets in independently managed money trusts with the primary purpose to
manage securities are stated at fair value as of the balance sheet date.
(4) Derivatives
Derivatives are stated at fair value.
(5) Tangible fixed assets
Depreciation of tangible fixed assets of the Group, except for lease assets, is calculated by the straight-line
method. The principal useful lives are as follows:
Buildings
Others5 to 50 years
4 to 20 years

The Group leases automated teller machines, etc. under finance lease arrangements as a lessee.
Lease assets under finance lease arrangements which do not transfer ownership of the lease assets to the lessee
are depreciated over the respective lease contract periods using the straight-line method with salvage values
defined in the lease contracts, otherwise with no residual value.
(6) Intangible fixed assets
Intangible fixed assets, except for lease assets, are amortized by the straight-line method. Amortization of thecost of software intended for internal use is calculated by the straight-line method based on a useful life
(principally five years) determined by the Group.
(7) Allowance for loan losses
Allowance for loan losses is provided by the consolidated banking subsidiaries and other major consolidated
subsidiaries in accordance with the prescribed standards.
(i) For claims on borrowers who have declared bankruptcy or have commenced special liquidation
proceedings or similar legal proceedings (the “bankrupt borrowers”), or borrowers who are not legallyor formally insolvent but are regarded as substantially in the same situation (the “virtually bankrupt
borrowers”), an allowance is generally provided based on the carrying amount of the claims, after thewrite-off stated below, net of the expected amount recoverable from collateral and guarantees.
For collateralized and guaranteed claims on the bankrupt borrowers or virtually bankrupt borrowers of
Hokuto and its certain consolidated subsidiaries, the amount of claims exceeding the estimated value ofcollateral and guarantees is deemed to be uncollectible and is charged off against the total amount ofoutstanding claims. These write-offs amounted to ¥13,148 million ($98,457 thousand) and ¥13,007
million for the years ended March 31, 2023 and 2022, respectively.
(ii) For claims on borrowers who are not currently bankrupt but are likely to become bankrupt (the“potentially bankrupt borrowers”), an allowance is provided at the amount deemed necessary based on
the overall solvency assessment of the borrowers and the amount of the claims, net of the expectedamount recoverable from collateral and guarantees (hereinafter the “unsecured amount”). In particular,

9a. For the unsecured amount, an allowance is provided based on the expected loan loss over the next
three years. The expected loan loss amount is determined based on the loan loss ratio, which isestimated by taking the average of historical loan loss ratio over a certain period of time based on theirpast loan loss experience over three years, with necessary adjustments such as future projections.
b. Of claims on above borrowers, as to claims on borrowers with certain amounts or more of theunsecured amount, the allowance estimated based on the expected loan loss as described in thepreceding paragraph is individually reviewed if the allowance is sufficient. Then as necessary, acollectible amount reasonably estimated based on the borrower’s financial status is deducted from theunsecured amount to provide the amount of the allowance.
(iii) For claims on borrowers with restructured loans, etc., an allowance is provided based on the expectedloan loss over the next three years. The expected loan loss amount is determined based on the loan loss
ratio, which is estimated by taking the average of historical loan loss ratio over a certain period of time
based on their past loan loss experience over three years, with necessary adjustments such as future
projections.
(iv) For other claims, an allowance is provided based on the expected loan loss over the next one year. The
expected loan loss amount is determined based on the loan loss ratio, which is estimated by taking the
average of historical loan loss ratio over a certain period of time based on their past loan loss experience
over one year, with necessary adjustments such as future projections.
(v) Allowances for loan losses of other consolidated subsidiaries are provided based on the historical loan
loss ratio.
All claims are assessed for the quality by the Asset Assessment Department with the cooperation by operating
offices in accordance with the Standards for Asset Self-Assessment, and then the assessment results areaudited by the Asset Audit Department which is independent from the Asset Assessment Department.
(8) Provision for bonuses for directors and other officers
Provision for bonuses for directors and other officers is provided for the payment of bonuses to directors andother officers at an estimated amount attributed to the current fiscal year.
(9) Provision for reimbursement of deposits
Provision for reimbursement of deposits is provided at an estimated amount of the future payments to be madefor reimbursement claims on deposits which were derecognized and credited from liability to income.
(10) Provision for contingent loss
Provision for contingent loss is provided at an estimated amount of the future payments to be made for a(11) Retirement benefits
The benefit formula method is used as a method of attributing expected retirement benefits to each period in
calculating retirement benefit obligation.
Past service costs are amortized by the straight-line method over a certain period (five years) within the
average remaining years of service of the eligible employees when such past service costs occur.
Actuarial gains and losses are amortized from the year following the year in which the gains and losses occur
by the straight-line method over a certain period of 10 to 13 years within the average remaining years ofservice of the eligible employees when such actuarial gains and losses occur.
Certain consolidated subsidiaries adopt the simplified method in calculating defined benefit liability andretirement benefit expenses. Under this method, the severance payment amount required at the fiscal yearend for voluntary termination is deemed as retirement benefit obligations.
(12) Recognition of significant revenue and expenses
Major performance obligations in major businesses related to revenue from contracts with customers of theCompany and its consolidated subsidiaries are providing services through deposits and loans operations,foreign exchange operations, securities-related operations, agency operations, custody/safe deposits
operations and other.
10

As to fees and commissions from ATM services, direct debit services (deposits and loans operations),
domestic and overseas remittance services (foreign exchange operations), underwriting public and corporate
bonds (securities-related operations) and sale of investment trusts and insurances (agency operations), a
performance obligation is satisfied and the revenue is recognized at a point in time when a transaction
occurs or a related service is provided. As to fees and commissions from services, such as safe-deposit box
fees (custody/safe deposit operations), for which a performance obligation is satisfied over the period inwhich the related service is provided, the revenue is recognized over the relevant period.
(13) Foreign currency translation
The assets and liabilities denominated in foreign currencies of the consolidated subsidiaries are translated into
Japanese yen at the exchange rates in effect at the balance sheet date.
For the translation difference of debt securities out of available-for-sale securities denominated in foreign
currencies, the translation difference related to changes in fair value is recognized as unrealized gain or loss
and other differences are recognized as foreign exchange gain or loss under other operating income or
expenses.
(14) Hedge accounting
Interest rate risk hedging
With respect to the hedge accounting for the interest rate risk arising from financial assets and liabilities of
the consolidated banking subsidiaries, the Group applies deferral hedge accounting, under which gain or loss
on derivatives are deferred until maturity of the hedged transactions, as stipulated in the Japanese Institute ofCertified Public Accountants (“JICPA”) Industry Committee Practical Guideline No. 24 (March 17, 2022).
With respect to hedging transactions to offset fluctuations of the market price, the effectiveness of hedging
transactions is assessed by specifying the hedged items such as deposits and loans and bills discounted andhedging instruments such as interest rate swaps after grouping these items by definite remaining maturity.
With respect to hedging transactions to offset fluctuations of market price of fixed-rate debt securities
classified as available-for-sale securities, hedged items are identified by each type of debt securities andinterest rate swaps are designated as hedging instruments. Since significant conditions concerning hedged
items and hedging instruments are substantially identical, the hedge is deemed highly effective and theassessment for the effectiveness is omitted. With respect to hedging transactions to fix cash flows, theeffectiveness of hedging is assessed by verifying the correlation of interest floating factors of hedged items
and hedging instruments.
Foreign exchange risk hedging
With respect to the hedge accounting for the foreign exchange risk arising from financial assets and liabilities
denominated in foreign currencies of the consolidated banking subsidiaries, the Group applies deferral hedge
accounting, under which gain or loss on derivatives are deferred until maturity of the hedged transactions, as
stipulated in the JICPA Industry Committee Practical Guideline No. 25 (October 8, 2020). Hedge effectivenessis assessed by comparing the amount of monetary assets and liabilities denominated in foreign currencies as
underlying hedged items with the corresponding foreign-currency amount of the respective hedging
instruments such as currency swaps and foreign exchange swaps entered into in order to hedge foreignexchange risk associated with monetary assets and liabilities denominated in foreign currencies.
In addition, in order to hedge foreign exchange risk of available-for-sale securities denominated in foreign
currencies except for debt securities, the fair value hedge is applied as portfolio hedging on the condition thatliabilities of spot and forward foreign exchange contracts exceeding the acquisition costs of the foreign
currency denominated securities on a basis of foreign currency exist, designating the issues of foreign currency
denominated securities to be hedged in advance.
Equity price fluctuation risk hedging
With respect to hedge accounting for the equity price fluctuation risk arising from equity securities out ofavailable-for-sale securities held by the consolidated banking subsidiaries, the Group applies deferral hedge
accounting for equity forward contracts and others as hedging instruments.
Hedge effectiveness is assessed by periodically comparing the aggregate amounts of price fluctuations orchanges in cash flows of underlying hedged items with those of corresponding hedging instruments, inprinciple, for the period from the beginning of the hedge and the point in time of evaluating hedge
effectiveness. However, if the material conditions of the hedged item and the hedging instrument are consistentand it is obvious that the hedge is highly effective, the assessment for the effectiveness is omitted.
11

(15) Cash and cash equivalents
In preparing the consolidated statements of cash flows, of cash and due from banks in the consolidated balance
sheets, cash and due from Bank of Japan (“BoJ”) are considered to be cash and cash equivalents.
(16) Accounting treatments and procedures applied in cases where relevant accounting standards areunclear(i) Regarding gain or loss on cancellation or redemption of investment trusts, when an aggregate amount on
investment trusts as a whole including interim distributions is a gain, the gain is recognized as interestand dividends on securities under interest income, and when it is a loss, the loss is recognized as loss onredemption of bonds under other operating expenses.
(ii) Expenses for the restricted stock compensation for the Company’s directors (excluding outside directors
and members of the Auditing Committee) and executive officers and the consolidated banking
subsidiaries’ directors (excluding outside directors and members of the Auditing Committee, etc.) and
executive officers are measured at fair value of the Company’s share on the grant date. The expenses arerecognized as personnel expenses (general and administrative expenses) over the eligible service period.
(17) Changes in accounting policies(Application of Implementation Guidance on Accounting Standard for Fair Value Measurement)
Effective from the beginning of the year ended March 31, 2023, the Group has applied the “Implementation
Guidance on Accounting Standard for Fair Value Measurement” (ASBJ Guidance No. 31, June 17, 2021,
hereinafter, the “Implementation Guidance”). In accordance with the transitional treatment prescribed inparagraph 27-2 of the Implementation Guidance, the Group has applied this new accounting policy
prospectively. There is no impact on the consolidated financial statements from the changes.
For the footnote on investment trusts in Note “26. Financial Instruments and Related Disclosures, (3) Fairvalue hierarchy of financial instruments,” information for the year ended March 31, 2022 is not disclosed inaccordance with paragraph 27-3 of the Implementation Guidance.
In the aforementioned footnote, “Foreign securities” were previously included in “Other” under “Securities”
as of March 31, 2022. In order to specifically classify financial instruments, “Foreign securities” areseparately presented as of March 31, 2023.
4. Significant Accounting Estimates
The following summarizes items that are recognized in the current fiscal year’s consolidated financial
statements based on the accounting estimates and such estimates may give significant impacts on the
consolidated financial statements in the following fiscal year.
(1) Allowance for loan losses(i) Amount recognized in the consolidated financial statements in the current fiscal year
Thousands of
U.S. dollars
2023

Millions of yen
2023
2022
Allowance for loan losses¥

13,841¥

13,593$

103,646(ii) Information that contributes to an understanding of the nature of significant accounting estimates for theidentified items
a. Estimation method
It is described in Note “3. Significant Accounting Policies, (7) Allowance for loan losses.”b. Major assumptions
For estimating the allowance, it is particularly important to determine the borrower classification.
Major assumptions used for determining the borrower classification are “outlook for future
performance of borrowers,” which the Company assesses by each individual borrower based on theevaluation of each borrower’s ability to earn income, after comprehensively evaluating the qualitativeand quantitative information collected, including each borrower’s management performance, financial
status, lending terms, repayment status, and formulation and progress of a management improvement
plan.

12

In addition, the COVID-19 situation may have a certain impact, mainly on the credit risk of loans andbills discounted. While assuming the economic impact of the COVID-19 situation would continue overa few years or so in certain companies, etc., the Company determines the allowance for loan losses
based on assumptions that the economic activities would be improving by economic stimulus measurestaken by the government and local governments and supports from financial institutions, in addition to
the classification change of COVID-19 under the Act on the Prevention of Infectious Diseases andMedical Care for Patients with Infectious Diseases.
c. Impact on the consolidated financial statements in the following fiscal year
Since the major assumptions: “outlook for future performance of borrowers” involve uncertainty, there
is a risk to have a significant impact on determining the borrower classification if any changes occur inthe status of borrowers or the future economic environment including the impact of the COVID-19
situation. When the borrower classification changes, there is a possibility that the allowance for loan
losses in the consolidated financial statements in the following fiscal year may increase or decrease.
Although the Company estimates the impact of the COVID-19 situation by taking all possible events
into account based on information available as of March 31, 2023, there is a high degree of uncertainty
in the assumptions used in the estimate under the current economic environment. If the status of the
COVID-19 situation, its duration, and the impact on the economy and other factors would change, theamounts of allowance for loan losses in the consolidated financial statements of the following year may
increase or decrease.
(2) Deferred tax assets(i) Amount recognized in the consolidated financial statements in the current fiscal year
Thousands of
U.S. dollars

Millions of yen
2023
Deferred tax assets¥

Deferred tax liabilities

2022

4,346
12

¥

2,662
2,040

2023
$

32,54489(ii) Information that contributes to an understanding of the nature of significant accounting estimates for theidentified items
a. Estimation method
A deferred tax asset is an asset allowed to recognize to the extent that the taxable income will be reduced,
thereby the tax burden will be reduced, for the fiscal period when the tax loss carryforward and thetemporary differences, which are the differences between the carrying amount of an asset or liability inthe consolidated balance sheet and its tax base, are reversed. Accordingly, deferred tax assets arerecognized at the amount expected to be recovered based on the assessment of recoverability of theassets to reduce future tax burden. In addition, the Company reviews the future recoverability of theassets every fiscal year.
In particular, the Company estimates deferred tax assets using the scheduling of temporary differences
for the future reasonable estimable period of five years based on the estimates of taxable income before
deductible or taxable temporary differences for the estimable period. For the preparation of thescheduling, it is especially important to project a future deductible temporary difference for anindividual allowance for loan losses; thus, the Company prepares the scheduling after a detailed
analysis of timing and compliance with requirements for the use of tax loss carryforward for anindividual allowance for loan losses over certain amounts.
b. Major assumptions
For determining the recoverability of deferred tax assets, it is particularly important to estimate futuretaxable income.

13

Future taxable income is estimated based on the Group’s profit plan, which is established by taking
into account past performance, prevailing market yields and the future economic environment including
the impact of the COVID-19 situation. The major assumptions used for the establishment of the plan
are: “outlook for revenue growth through enhancing the Group’s ability to support customers” and“outlook for reducing general and administrative expenses such as personnel expenses through cost
structure reforms,” which are projected based on the Group’s basic policy of “deepening customer
support and strengthening the Group’s management foundation.” Considering the uncertainty ofachieving the profit plan, the Company determines the recoverability of deferred tax assets with acertain stress scenario to the plan.
c. Impact on the consolidated financial statements in the following fiscal year
Although the Company determines the recoverability of deferred tax assets at every fiscal year-end, themajor assumptions: “outlook for revenue growth through enhancing the Group’s ability to support
customers” and “outlook for reducing general and administrative expenses such as personnel expenses
through cost structure reforms” involve high uncertainty. When the future economic environment
including the impact of the COVID-19 situation changes, the estimates of future taxable income basedon the profit plan may change, and it may result in a risk of having a significant impact on therecoverability of deferred tax assets. When the Company determines that a part or all of the deferred
tax assets recognized in the last fiscal year cannot be recovered since estimated future taxable income
may be insufficient to offset the future deductible temporary differences, the deferred tax assets will bereversed and the same amount will be recognized as income tax-deferred.
(3) Impairment of fixed assets(i) Amount included in “Other expenses” in the consolidated financial statements in the current fiscal year
Thousands of
U.S. dollars
Millions of yen
2023
Impairment loss

¥

480

2022
¥

659

2023
$

3,594

(ii) Information that contributes to an understanding of the nature of significant accounting estimates for theidentified items
a. Estimation method
It is described in Note “20. Impairment Loss.”b. Major assumptions
It is necessary to estimate the future cash flows, used for the purposes of measuring the value in use
and determining the recognition of impairment loss, based on reasonable and explainable assumptions
and predictions reflecting unique circumstances of an entity. These future cash flows are estimatedbased on the profit plan with a certain stress scenario, for determining the recoverability of deferred
tax assets as stated in aforementioned “(2) Deferred tax assets.”
c. Impact on the consolidated financial statements in the following fiscal year
The major assumptions used to establish the profit plan as stated in aforementioned “(2) Deferred tax
assets” involve high uncertainty. When the future economic environment including the impact of the
COVID-19 situation changes, the estimates of future cash flows based on the profit plan may change,
and it may result in a risk of having significant impact on determining the recognition of impairment
loss and measuring the value in use. When the estimates of future cash flows decrease, it may become
necessary to recognize additional impairment loss.

14

5. Securities
Gain and loss from revaluation of trading account securities included in the consolidated statements of income was¥(3) million ($(22) thousand) and ¥0 million for the years ended March 31, 2023 and 2022, respectively.
Securities at March 31, 2023 and 2022 consisted of the following:
Millions of yen
Acquisition
cost

Carrying
amountMarch 31, 2023
Securities whose carrying amount exceeds theiracquisition cost:
Held-to-maturity debt securities
Available-for-sale securities:
Equity securities
Debt securities:
Japanese government bonds
Municipal bonds
Corporate bonds
Other
Subtotal
Securities whose carrying amount does not exceed
their acquisition cost:
Held-to-maturity debt securities
Available-for-sale securities:
Equity securities
Debt securities:
Japanese government bonds
Municipal bonds
Corporate bonds
Other
Subtotal
Total

¥

-

¥
¥

-

¥

-

10,056109,343
15,733
46,611
46,99968,924¥ 188,324

4,927
107,783
15,54546,033
46,20462,217¥ 174,928

¥

¥

5,129
1,560
187
577
794
6,706
13,396

¥

-

¥

-

¥

-

4,383
300,071
87,716
137,838
74,516
163,127¥ 467,582¥ 655,906¥

4,642
307,129
89,343
141,21476,571
173,096¥ 484,867¥ 659,796

¥

¥

¥

15

Unrealized
gain (loss)(258)(7,057)(1,626)(3,376)(2,054)(9,969)¥ (17,285)¥ (3,889)

Millions of yen
Acquisition
cost

Carrying
amountMarch 31, 2022
Securities whose carrying amount exceeds theiracquisition cost:
Held-to-maturity debt securities
Available-for-sale securities:
Equity securities
Debt securities:
Japanese government bonds
Municipal bonds
Corporate bonds
Other
Subtotal
Securities whose carrying amount does not exceed
their acquisition cost:
Held-to-maturity debt securities
Available-for-sale securities:
Equity securities
Debt securities:
Japanese government bonds
Municipal bonds
Corporate bonds
Other
Subtotal
Total

¥

-

¥
¥

-

¥

-

11,956
194,891
39,724
103,61151,554133,418¥ 340,266

6,027
190,331
38,969100,876
50,485
120,604¥ 316,964

¥

¥

5,928
4,559
754
2,735
1,068
12,81323,302

¥

-

¥

-

¥

-

4,309
264,83167,803
122,664
74,36367,427¥ 336,568¥ 676,834¥

4,626
268,245
68,854
124,163
75,22872,152¥ 345,024¥ 661,988¥(317)(3,414)(1,050)(1,499)(864)(4,724)(8,456)
14,845¥¥

Thousands of U.S. dollars
Acquisition
cost

Carrying
amountMarch 31, 2023
Securities whose carrying amount exceeds theiracquisition cost:
Held-to-maturity debt securities
Available-for-sale securities:
Equity securities
Debt securities:
Japanese government bonds
Municipal bonds
Corporate bonds
Other
Subtotal
Securities whose carrying amount does not exceed
their acquisition cost:
Held-to-maturity debt securities
Available-for-sale securities:
Equity securities
Debt securities:
Japanese government bonds
Municipal bonds
Corporate bonds
Other
Subtotal
Total

Unrealized
gain (loss)$

75,303818,803
117,814349,041
351,946
516,129$ 1,410,244$

36,895807,121
116,407344,713345,993465,905$ 1,309,929$ 38,407
11,681
1,400
4,320
5,945
50,217$ 100,314

$

-

$

-

$

32,821
2,247,049
656,851
1,032,185
558,005
1,221,559$ 3,501,437$ 4,911,681$

34,7612,299,902
669,035
1,057,465
573,393
1,296,210$ 3,630,874$ 4,940,811

$

$

$

-

¥
¥

-

$

16

Unrealized
gain (loss)

$

-

-

(1,932)(52,845)(12,176)(25,280)(15,381)(74,651)$ (129,436)$ (29,122)As of March 31, 2023 and 2022, ¥500 million ($3,744 thousand) and ¥371 million of capital investment inunconsolidated subsidiaries were included in the balance of securities, respectively.

Available-for-sale securities sold for the years ended March 31, 2023 and 2022 were as follows:
Sales proceeds¥
21,437104,120
69,442
34,122
556
188,562¥ 314,119

Millions of yen
Realized gain
¥
1,885
1,670
454
1,165
50
1,468
¥
5,024

Realized loss
¥
991
1,074
815
258
8,119
¥ 10,185

March 31, 2022
Equity securities
Debt securities:
Japanese government bonds
Municipal bonds
Corporate bonds
Other
Total

Sales proceeds¥
20,994
143,204
129,687
12,934582
249,190¥ 413,389

Millions of yen
Realized gain
¥
2,953
324
239
83
1
3,340
¥
6,618

Realized loss
¥
1,309
807
804
1
2
6,516
¥
8,633

March 31, 2023
Equity securities
Debt securities:
Japanese government bonds
Municipal bonds
Corporate bonds
Other
Total

Thousands of U.S. dollars
Sales proceeds
Realized gain
Realized loss
$ 160,528$
14,115$
7,420
779,691
12,505
8,042
520,008
3,399
6,103
255,518
8,723
1,932
4,163
374
1,412,026
10,99260,798$ 2,352,246$
37,621$ 76,269

March 31, 2023
Equity securities
Debt securities:
Japanese government bonds
Municipal bonds
Corporate bonds
Other
Total

Write-down of securities
Non-trading securities, with the exception of equity securities without market prices or investments in partnerships,
whose fair value significantly declined compared with their acquisition cost and is not considered to be able torecover their acquisition cost, are written down to their respective fair value which is recorded as the carrying
amount on the consolidation balance sheet. The related loss on revaluation is charged to income for the year.
For the year ended March 31, 2023, ¥34 million ($254 thousand) of available-for sale securities were written down.
Of which, equity securities were ¥34 million ($254 thousand). For the year ended March 31, 2022, no availablefor sale securities were written down.
The criteria for determining whether the fair value is “significantly declined” are as follows:(1) If the fair value as of the balance sheet date declines 50% or more compared to the acquisition cost, thedifference is recognized as write-down of securities.
(2) If the fair value as of the balance sheet date declines by 30% or more but less than 50% compared to theacquisition cost, write-down of securities is recognized for the securities which meets criteria of the Group after
considering the financial condition of the issuer and past trend of the market value for a certain period.

17

6. Unrealized Gain (Loss) on Available-for-Sale Securities
Unrealized gain (loss) on available-for-sale securities at March 31, 2023 and 2022 consisted of the following:
Millions of yen
2023
2022
Unrealized gain (loss):
Available-for-sale securities
Deferred tax liabilities
Unrealized gain (loss) on available-for-sale securities
before adjustments by equity interest:
Non-controlling interests
Unrealized gain (loss) on available-for-sale securities¥¥(3,889)(554)(4,444)(13)(4,458)¥¥

Thousands of
U.S. dollars
2023

14,845(4,514)$ (29,122)(4,148)

10,331(14)
10,317(33,278)(97)$ (33,383)

7. Bills Discounted
Bills discounted are accounted for as financial transactions rather than as purchased bills in accordance with JICPA
Industry Committee Practical Guideline No. 24 (March 17, 2022). The Group has the right to sell or pledge(repledge) such bills without any restrictions. These include commercial bills discounted and foreign bills bought
etc. The total face value of such financial transactions at March 31, 2023 and 2022 amounted to ¥2,499 million($18,713 thousand) and ¥2,414 million, respectively.
Contracts for overdraft facilities and loan commitments are contracts under which the Group lends money tocustomers up to their prescribed limits at the customers’ request as long as there are no violations of any of theconditions in the contracts. The aggregate unutilized balances within the limits of these contracts totaled ¥298,319
million ($2,233,929 thousand) and ¥294,339 million at March 31, 2023 and 2022, respectively, including thecontracts whose contractual periods were either less than one year or revocable at any time, in the amount of¥280,781 million ($2,102,598 thousand) and ¥280,057 million, respectively.
Since many of these commitments expire without being fully utilized, the unutilized amounts do not necessarily
represent future cash commitments of the consolidated subsidiaries. Most of these contracts include provisions
which stipulate that the consolidated subsidiaries can reject customers’ requests or decrease the contract limits foran appropriate reason, such as a change in financial situation and preservation of claims. At the inception of thecontracts, they obtain collateral in the form of real estate, securities, and so forth, if deemed necessary. Subsequently,
they, based on its internal rules, perform periodic reviews of the customers’ business results and may take necessary
measures such as reconsidering the terms and conditions of the contracts and/or requiring additional collateral or
guarantees.
8. Claims to Be Disclosed Under the Financial Revitalization Act and the Banking Act
Claims to be disclosed under the Act on Emergency Measures for the Revitalization of the Financial Functions (the“Financial Revitalization Act”) are included in: corporate bonds (limited to those principal and interest are fully or partially secured and issued under
private placements as permitted in Article 2, paragraph 3 of the Financial Instruments and Exchange Act)
under “Securities,”
 “Loans and bills discounted,”
 “Foreign exchange assets,”
 Accrued interest and suspense payments under “Other assets,”
 “Customers’ liabilities for acceptances and guarantees” and securities when such securities are lending (limited to those under loan for use contracts or lease contracts).

18

The following table summarizes claims to be disclosed under the Financial Revitalization Act and the Baking Act.
Thousands of
U.S. dollars
2023

Millions of yen
2023
2022
Claims against bankrupt or quasi-bankrupt
obligors
Doubtful claims
Claims past due for three months or more
Restructured claims
Total¥ 8,683
27,189891¥ 36,764¥

8,615
23,896
1,441¥ 33,953$ 65,021
203,601
6,672$ 275,303

Claims against bankrupt or quasi-bankrupt obligors present loans to obligors in bankruptcy procedures, includingcommencement of bankruptcy proceedings, reorganization proceedings and rehabilitation proceedings, and otherrelevant claims.
Doubtful claims present loans, other than claims against bankrupt or quasi-bankrupt obligors, for which the obligors
have not yet entered into bankruptcy, but their financial conditions and business performance have deteriorated,
and therefore, it is highly probable that the principal and interest cannot be collected in accordance with contracts.
Claims past due for three months or more represent loans on which the payment of principal and/or interest has notbeen received for three months or more from the day after the due date, and which are not classified as “claims
against bankrupt or quasi-bankrupt obligors” or “doubtful claims.”
Restructured claims are loans which have been restructured to facilitate or support the reconstruction of obligors
who are experiencing financial difficulties, with the intention of ensuring the recovery of the loans by providing
more flexible repayment terms for the obligors (such as reducing the rate of interest, suspending the payment ofprincipal/interest, forgiving debt, etc.) and loans which are not classified in any of the above categories.
The amounts of claims are before deducting allowance for loan losses.
9. Tangible Fixed Assets
At March 31, 2023 and 2022, accumulated depreciation of tangible fixed assets was ¥29,179 million ($218,503
thousand) and ¥29,347 million, respectively.
The amounts of advanced depreciation by reduction of carrying amount of assets as of and for the years ended
March 31, 2023 and 2022 were as follows:
Thousands ofMillions of yen
U.S. dollars
2023
2022
2023
Balance as of the fiscal year-end
Amount applicable for the year

¥

957
-

¥

1,010
-

$

7,166
-

10. Revaluation of Land
In accordance with the “Act on Revaluation of Land” (Act No. 34 of March 31, 1998), land used for business
operations of Shonai was revalued as of the date indicated below. The excess of revaluation to carrying amount at
the time of revaluation, net of income taxes corresponding to the excess which are recognized as “Deferred tax
liabilities for land revaluation,” is stated as “Revaluation reserve for land” under net assets.
Date of revaluation: September 30, 1999
The method of revaluation of asset set forth in Article 3, paragraph 3 of the “Act on Revaluation of Land”:
Fair values are determined based on the land price registered in the book of taxation on land stipulated in Article
2-3 of the “Order for Enforcement of Act on Revaluation of Land” (the “Ordinance”) (Cabinet Order No. 119 ofMarch 31, 1998), with price adjustments by shape and time and the appraisal value by an independent real estateappraiser as provided by Article 2-5 of the Ordinance.
The difference between the total fair value of land used for business operations revalued pursuant to Article 10 of
the “Act on Revaluation of Land” and carrying amount after revaluation of the relevant land at March 31, 2023
and 2022 was ¥858 million ($6,425 thousand) and ¥1,169 million, respectively.
1911. Borrowed Money and Lease Obligations
Borrowed money and lease obligations at March 31, 2023 and 2022 were as follows:
Millions of yen
2022
2023
Borrowed money

Thousands of
U.S. dollars
2023

Averageinterest rate(%)

¥ 116,000¥343,800$ 868,653

0.00

Current portion of lease obligations

90

23

673

1.32

Lease obligations, less current
portion

292

27

2,186

1.47

Maturity
May 2023
throughJun. 2026
Apr. 2024
throughFeb. 2030

Notes: (1) Average interest rate is calculated based on the interests and the balances as of the balance sheet date by the weighted
average method.
(2) Of lease obligations, sublease obligations are accounted for at the amount equivalent to interest portion included in totallease payments. Thus, such obligations are excluded from calculating the average interest rate of lease obligations.
(3) Annual maturities of borrowed money and lease obligations within five years at March 31, 2023 are as follows:
Millions of yen

Due in one year
or less

Borrowed money
Lease obligations¥ 106,20090

Due after one
year through twoyears

Due after two
years throughthree years

Due after three
years throughfour years

Due after four
years throughfive years

¥

¥

¥

¥

82

4,900
78

4,900
74

43

Thousands of U.S. dollars

Due in one year
or less

Borrowed money
Lease obligations$ 795,267
673

Due after one
year through twoyears

Due after two
years throughthree years

Due after three
years throughfour years

Due after four
years throughfive years

$

$

$

$

614

36,693584

36,693554

Note: Lease obligations are included in “Other liabilities” in the accompanying consolidated balance sheet.

12. Assets Pledged
Assets pledged as collateral at March 31, 2023 and 2022 consisted of the following:
Millions of yen
Securities

Thousands of
U.S. dollars

2023

2022

2023

¥ 157,783¥ 157,238$ 1,181,541-

239,959-¥ 157,783¥ 397,197$ 1,181,541

Loans and bills discounted
Total

The liabilities secured by the above pledged assets at March 31, 2023 and 2022 consisted of the following:Thousands ofMillions of yen
U.S. dollars
Payables under securities lending transactions

2023

2022

¥ 41,651¥ 52,825

116,000

343,800

Borrowed money

20

2023
$

311,899
868,653322

In addition to the pledged assets listed above, the following assets are pledged as collateral of domestic exchangetransactions or as margins on futures contracts at March 31, 2023 and 2022:
Thousands of
U.S. dollars
2023

Millions of yen
2023
2022
Securities¥ 99,397¥ 159,533

8

8

59

32,00035,078239,628

Cash and due from banks
Other assets$

744,323

Note: Other assets include guarantee deposits in the amount of ¥294 million ($2,201 thousand) and ¥366 million at March 31, 2023
and 2022, respectively.

13. Retirement Benefit Plans
The Company and its consolidated banking subsidiaries have a defined contribution plan as well as a corporate
pension plan and a lump-sum payment plan, as defined benefit plans. In addition, additional retirement allowance
may be paid to employees when they retire. Further, a retirement benefit trust is established for the lump-sum
payment plan of consolidated banking subsidiaries of the Company.
On April 1, 2020, the Company and its consolidated banking subsidiaries unified the comprehensive retirement
plan and adopted the point system under which certain points are given based on the functional classes and titles
and employees are entitled to lump-sum payments based on the accumulated points at the time of the termination
multiplied by unit price by point.
Certain consolidated subsidiaries other than the consolidated banking subsidiaries have lump-sum payment plans
as defined benefit pension plans, and adopt the simplified method in calculating defined benefit liability andretirement benefit expenses.
Defined benefit pension plans(1) Reconciliation between retirement benefit obligations at beginning of year and end of year
Thousands ofMillions of yen
U.S. dollars
2023
Retirement benefit obligations at beginning of year
Service costs
Interest costs
Actuarial gains and losses arising during year
Retirement benefits paid¥

Retirement benefit obligations at end of year¥

11,264
393
27
(390)
(913)
10,3812022¥¥

11,788
394
14
(119)
(813)
11,2642023$$

84,3492,942
202(2,920)(6,836)
77,737(2) Reconciliation between plan assets at beginning of year and end of year
Millions of yen
2023
Plan assets at beginning of year
Expected return on plan assets
Actuarial gains and losses
Contribution from employer
Retirement benefits paid¥

Plan assets at end of year¥

Note: Retirement benefit trust is included in plan assets.

21

11,700
175
(268)
92
(769)
10,930Thousands of
U.S. dollars

2022
¥

¥

11,908
178
230
94
(711)
11,7002023$$

87,6141,310(2,006)688(5,758)81,848

(3) Reconciliation between retirement benefit obligations and plan assets at end of year and defined benefit
liability and defined benefit asset on the consolidated balance sheets
Thousands of
U.S. dollars

Millions of yen
2023
Funded retirement benefit obligation
Plan assets
Unfunded retirement benefit obligation
Net balance of liability and asset recorded on the
consolidated balance sheets

2022

¥

10,159(10,930)
(770)
221

¥

11,043(11,700)
(657)
221

$

76,074(81,848)(5,766)
1,654

¥

(549)

¥

(436)

$

(4,111)Thousands of
U.S. dollars

Millions of yen
Defined benefit liability
Defined benefit asset
Net balance of liability and asset recorded on the
consolidated balance sheets

2023

¥

750
(1,299)¥645(1,081)$

5,616(9,727)

¥

(549)

¥

(436)

$

(4,111)

Note: Retirement benefit trust is included in plan assets.

(4) Retirement benefit expenses and components thereofService costs
Interest costs
Expected return on plan assets
Amortization of actuarial gains and losses
Amortization of past service costs
Other
Retirement benefit expenses on defined benefit
plans

Millions of yen
2023
2022
¥
393
¥
394
27
14
(175)
(178)
53
206
(217)
(217)
12
18

Thousands of
U.S. dollars
2023
$
2,942
202
(1,310)396(1,624)
134

¥

$

100

¥

232

748

Note: Retirement benefit expenses of the consolidated subsidiaries adopting the simplified method are collectively included in“Service costs.”(5) Components of items recorded in remeasurements of defined benefit plans in other comprehensive income,before tax, are as follows:
Thousands ofMillions of yen
U.S. dollars
2022
2023
2023
Past service costs
¥
(217)
¥
(217)
$
(1,624)
Actuarial gains and losses
556
1,310
175
¥
(41)
¥
339
$
(307)
Total
(6) Components of items recorded in remeasurements of defined benefit plans in accumulated othercomprehensive income, before tax, are as follows:
Thousands ofMillions of yen
U.S. dollars
2023
2022
2023
Unrecognized past service costs
¥
(435)
¥
(652)
$
(3,257)
Unrecognized actuarial gains and losses
38(1,025)
(137)
¥
(572)
¥
(614)
$
(4,283)Total
22

(7) Components of plan assets(i) Percentages to total plan by major category are as follows:
2023
34.6%
26.8
3.5
0.0
6.7
28.4
100.0%

Debt securities
Equity securities
Cash and deposits
Call loans
General account
Other
Total

2022
35.6%
26.5
4.7
0.0
6.2
27.0
100.0%

Note: 36.8% and 37.8% of the total plan assets consisted of the retirement benefit trust established for the lump-sum
payment plan as of March 31, 2023 and 2022, respectively.

(ii) Determination of expected long-term rate of plan assets
The expected long-term rate of return on plan assets is determined considering current and expecteddistribution of plan assets and current and expected long-term rate of return derived from various
components of plan assets.
(8) Actuarial assumptions at end of year
2023
0.31% - 0.63%
1.50%
2.10% - 2.40%

Discount rate
Expected long-term rate of return on plan assets
Expected rate of salary increase2022
0.16% - 0.38%
1.50%
2.20% - 2.30%

Defined contribution pension plans
The amounts to be contributed to the defined contribution pension plans of the Company and its consolidated
subsidiaries were ¥157 million ($1,175 thousand) and ¥165 million as of March 31, 2023 and 2022, respectively.
14. Contingent Liabilities
Guarantee liabilities for corporate bonds acquired through private offering (as defined in Article 2-3 of the Financial
Instruments and Exchange Act) among those classified as corporate bonds in “Securities” amounted to ¥31,603
million ($236,655 thousand) and ¥25,969 million at March 31, 2023 and 2022, respectively.
15. Shareholders’ Equity
Japanese banks are required to comply with the Banking Act and the Companies Act. The Companies Act stipulates
that neither additional paid-in capital nor the legal reserve is available for dividends, but that both may be used toreduce or eliminate a deficit. Under the Banking Act, an amount which is at least equal to 20% of the aggregate
amount of cash dividends and certain appropriations of retained earnings associated with cash outlays applicableto each fiscal period is to be appropriated to the legal reserve until the aggregate amount of the legal reserve andthe capital surplus account equals 100% of the amount of share capital. The Companies Act also provides that if
the aggregate amount of additional paid-in capital and the legal reserve exceeds 100% of the amount of sharecapital, the excess may be distributed to the shareholders either as a return of capital or as dividends subject to theapproval of the shareholders.
The maximum amount which the bank can distribute as dividends is calculated based on the non-consolidated
financial statements of the bank and in accordance with the Companies Act.

23

Movements in common stock, preferred stock and treasury stock during the years ended March 31, 2023 and 2022
are summarized as follows:
Number of shares (in thousands)
Increase
Decrease March 31, 2023
Ref.
April 1, 2022
Issued shares:
Common stock
18,142
18,142Preferred stock class B
1,250
1,250
Total
19,392
1,250
18,142
Treasury stock:
Common stock
17
107
42
81
(2), (3)Preferred stock class B
1,250
1,250
Total
17
1,357
1,292
81
Notes: (1) Decrease in number of issued shares of preferred stock class B is due to 1,250 thousand shares of cancellation of treasury
stock.
(2) Increase in number of treasury stock of common stock is due to 100 thousand shares of market purchase and 7 thousand
shares of request for purchase of less than one unit.
(3) Decrease in number of treasury stock of common stock is due to 42 thousand shares of sale as the restricted stockcompensation and 0 thousand shares of request for sale of less than one unit.
(4) Increase in number of treasury stock of preferred stock class B is due to 1,250 thousand shares of acquisition based on
the resolution at the Board of Directors’ meeting held on February 24, 2023. Decrease of 1,250 thousand shares is due tocancellation.

Number of shares (in thousands)
Increase
Decrease March 31, 2022
April 1, 2021
Issued shares:
Common stock
Preferred stock class B
Total
Treasury stock:
Common stock
Preferred stock class B
Total

Ref.

181,42125,000206,421-

163,279
23,750187,029

18,142
1,250
19,392(1), (2)31
31

15
12,50012,51529
12,50012,5291717(1), (4), (5)Notes: (1) Effective October 1, 2021, the Company implemented the stock consolidation, whereby 10 shares of its common stock
and preferred stock class B were consolidated to one share.
(2) Decrease in number of issued shares of common stock is due to the stock consolidation.
(3) Decrease in number of issued shares of preferred stock class B is due to 12,500 thousand shares of cancellation and
11,250 thousand shares of the stock consolidation.
(4) Increase in number of treasury stock of common stock is due to 2 thousand shares of purchase and 12 thousand shares ofrequest for purchase of less than one unit.
(5) Decrease in number of treasury stock of common stock is due to 28 thousand shares of the stock consolidation and 0
thousand shares of request for sale of less than one unit.
(6) Increase in number of treasury stock of preferred stock class B is due to 12,500 thousand shares of acquisition based on
the resolution at the Board of Directors’ meeting held on September 28, 2021. Decrease of 12,500 thousand shares is due
to cancellation.

16. Stock Compensation
The Company has introduced the restricted stock compensation plan for directors (excluding outside directors andmembers of the Auditing Committee) and executive officers of the Company (collectively, the “Directors, etc. of
the Company”) and the directors (excluding outside directors and members of the Auditing Committee, etc.) and
executive officers of the Company’s banking subsidiaries (collectively, the “Directors, etc. of the Company’sbanking subsidiaries”). Based on the resolution at the Company’s Board of Directors’ meeting held on July 21,
2022, the Company’s shares are sold as the restricted stock compensation and the detail information is as follows:24

(1) Amount and account name of the restricted stock compensation
Millions of yen

Thousands of
U.S. dollars

2023
Personnel expenses(General and administrative expenses)

¥

41

$

307

(2) Outline of the restricted stock compensation
Granted in July 2022
Director of the Company: two (Note1)
Executive officer of the Company: seven
Grantee (allottee)
Director of the Company’s banking subsidiaries: 12 (Note 2)
Executive officer of the Company’s banking subsidiaries: 12
Class and number of shares
Common stock of the Company: 42,600 shares
Date of grant
July 21, 2022
The period from the date of ordinary general meetings of shareholders of theCompany and the Company’s banking subsidiaries held in 2022 to the date of
Eligible service period
ordinary general meetings of shareholders of the Company and the Company’sbanking subsidiaries scheduled to be held in 2023.
The period from August 10, 2022, the date of sale of the Company’s shares, toRestriction period
the date of an ordinary general meeting of shareholders scheduled to be held in
2023.
The Company shall lift the restriction on transfer of all allotted shares held byan allottee as of the expiration of the restriction period on the condition that theallottee continues to be the Directors, etc. of the Company or the Company’sbanking subsidiaries from the commencement date of the restriction period tothe date of the first ordinary general meeting of shareholders of the Company(if the allottee is the Directors, etc. of the Company’s banking subsidiaries, thedate of the first ordinary general meeting of shareholders of the applicablebanking subsidiary). However, if the allottee resigns from any position of the
Directors, etc. of the Company or the Company’s banking subsidiaries, forgood reasons approved by the Compensation Committee of the Company (ifthe allottee is the Directors, etc. of the Company’s banking subsidiaries, theBoard of Director of the applicable banking subsidiary), by the day before thefirst ordinary general meeting of shareholders of the Company (if the allottee is
Conditions for lifting
the Directors, etc. of the Company’s banking subsidiaries, the day before thefirst ordinary general meeting of shareholders of the applicable banking
subsidiary) after the commencement date of the restriction period, the transfer
restriction of the allotted shares shall be lifted, as of the time immediately
following the resignation, with respect to the allotted shares determined asfollows: the number of months from July 2022 to the month including the dayon which the allottee resigns from the position of the Directors, etc. of theCompany or the Company’s banking subsidiaries, divided by 12, multiplied by
the number of the allotted shares held by the allottee as of such time (anyfraction less than one share resulting from the calculation shall be roundeddown).
Fair value on the grant date

¥1,289 ($9.652)

Notes: (1) Outside Directors and members of the Auditing Committee are excluded.
(2) Outside Directors and members of the Auditing Committee, etc. are excluded.

25

(3) Changes in the number of the restricted stock
sharesMarch 31, 2022 - outstanding
Granted
42,600Acquired for free (Note)
LiftedMarch 31, 2023 - outstanding
42,600Note: If an allottee resigns from any position of the Directors, etc. of the Company or the Company’s banking subsidiaries, from thecommencement date of the restriction period to the day before the first ordinary general meeting of shareholders of theCompany (if an allottee is the Directors, etc. of the Company’s banking subsidiaries, the day before the first ordinary general
meeting of shareholders of the applicable banking subsidiary), the Company shall acquire allotted shares for free at the timeof resignation, unless there is any good reason approved by the Compensation Committee (if the allottee is the Directors, etc.
of the Company’s banking subsidiaries, the Board of Directors of the applicable banking subsidiary).
Furthermore, if there are any allotted shares not lifted, in accordance with provisions in the aforementioned conditions forlifting, at the time that restriction period is expired (the “time of expiration”), the Company shall acquire such shares for free
immediately after the time of expiration.

(4) Method to estimate fair value on the grant dateIn order to avoid arbitrariness, the Company estimates the fair value to be the closing price of the Company’scommon stock on the Tokyo Stock Exchange on the business day immediately preceding the date of resolution by
the Board of Directors’ meeting in connection with the grant of the restricted stock.
17. Revenue Recognition(1) Information on disaggregated revenue from contracts with customers
Millions of yen
2022
2023
Fees and commissions:
Deposits and loans operations
Foreign exchange operations
Securities-related operations
Agency operations
Custody/safe deposits operations
Other operations
Total
Other ordinary income
Ordinary income from contracts with customers
Ordinary income other than above (Note 1)

¥

1,911
1,382
68
3,441
59
1,242
¥ 8,105
1,902¥ 10,008
41,403

Ordinary income (Note 2)¥

51,411

¥

1,712
1,541
75
3,215
61
1,152
¥ 7,759
2,595¥ 10,355
40,738¥ 51,094

Thousands of
U.S. dollars
2023$ 14,310
10,348509
25,767441
9,300$ 60,693
14,242$ 74,943
310,041$ 384,985

Notes: (1) It mainly consists of transactions related to financial instruments included in the scope of ASBJ Statement No. 10“Accounting Standard for Financial Instruments,” lease transactions included in the scope of ASBJ Statement No. 13“Accounting Standard for Lease Transactions” and fees and commissions received on origination or acquisition offinancial instruments.
(2) “Ordinary income” is defined as income less certain special income included in the accompanying consolidated statements
of income.

(2) Information on basis of revenue from contracts with customers
Information on basis of revenue from contracts with customers is omitted since it is described in Note “3.
Significant Accounting Policies, (12) Recognition of significant revenue and expenses.”26

18. General and Administrative Expenses
General and administrative expenses for the years ended March 31, 2023 and 2022 included the following:
Millions of yen
2022
2023
¥ 10,718¥ 11,089
257
398
2,596
2,792

Salaries and allowances
Retirement benefit expenses
Outsourcing expenses

Thousands of
U.S. dollars
2023$ 80,260
1,924
19,43919. Other Expenses
Other expenses for the years ended March 31, 2023 and 2022 included the following:
Millions of yen
2022
2023
¥ 1,400¥ 2,232

Loss on sale of equity securities, etc.

Thousands of
U.S. dollars
2023$ 10,483

20. Impairment Loss
For the years ended March 31, 2023 and 2022, with regard to assets from which cash flows declined due todecrease in income from operating activities, idle properties and assets which were determined to be sold, theCompany recognized the impairment loss by writing off the carrying amount of each asset to its respective
recoverable amount.
March 31, 2023
Main use

Description

Impairment loss
Thousands ofMillions of yen
U.S. dollars

Category

Area

Business assets

Within Akita
Prefecture

Banking office –four locations

Land andbuildings

Business assets

Within Yamagata
Prefecture

Banking office –two locations

Land andbuildings

119

891

Corporate assets

Within Yamagata
Prefecture

Corporate assets –three locations

Land andbuildings

205

1,535

Idle assets

Within Yamagata
Prefecture

Idle assets –one location

Buildings

7

52

¥

147

Total

¥

March 31, 2022

Impairment loss

Category

Area

Main use

Description

Business assets

Within Yamagata
Prefecture

Banking office –eight locations

Land andbuildings

Business assets

Within Akita
Prefecture

Banking office –four locations

Land andbuildings

Business assets

Within Fukushima
Prefecture

Banking office –one location

Land

Total

480

$

$

1,100

3,594

Millions of yen
¥

398
233
26

¥

659

Banking offices of consolidated subsidiaries in the banking business are grouped by office which is the minimum
unit for management accounting purposes. Certain banking office group which operates in cooperation isconsidered as one unit, and banking offices located in the same building are also considered as one unit. For idle
assets and assets held for sale, each asset is considered as the minimum unit. Head office, administrative centersand others are considered as corporate assets since they contribute to generate future cash flows of multiple assets
or asset groups.
The Company and consolidated subsidiaries in other than the banking business are grouped by entity as a general
rule.
27

The recoverable amount of relevant asset group is measured at net selling price and calculated by deducting
estimated costs to sell from the amount which properly reflects the fair market value such as real estate appraisal
value or roadside land prices.
21. Other Comprehensive Income
Reclassification adjustments and income tax effect for each component of other comprehensive income for theyears ended March 31, 2023 and 2022 were as follows:
Thousands ofMillions of yen
U.S. dollars
2022
2023
2023
Unrealized gain (loss) on available-for-salesecurities:
Gain (loss) arising during the year
¥ (23,664)¥ (13,425)$ (177,205)
Reclassification adjustments
4,929
2,022
36,910
Before income tax effect(18,735)(11,403)(140,295)
Income tax effect
3,959
3,460
29,646
Unrealized gain (loss) on available-forsale securities(14,776)(7,943)(110,648)
Deferred gain (loss) on hedges:
Adjustments arising during the year
(3)
264
(22)
Reclassification adjustments
Before income tax effect
(3)
264
(22)
Income tax effect1(80)
7
Deferred gain (loss) on hedges
(2)
184
(14)
Remeasurements of defined benefit plans:
Adjustments arising during the year
121
349
906
Reclassification adjustments
(163)
(10)
(1,220)
Before income tax effect
(41)
339
(307)
Income tax effect
32
(72)
239
Remeasurements of defined benefit plans
(9)
267
(67)
Total other comprehensive income¥(7,491)$ (110,738)¥ (14,788)
22. Cash and Cash Equivalents
A reconciliation of cash and due from banks in the accompanying consolidated balance sheets to cash and cash
equivalents in the accompanying consolidated statements of cash flows at March 31, 2023 and 2022 is summarized
as follows:
Thousands ofMillions of yen
U.S. dollars
2023

2022

2023

Cash and due from banks
Due from banks (excluding due from BoJ)¥

316,923(4,886)¥ 725,949(3,057)$2,373,243(36,588)

Cash and cash equivalents¥

312,037¥ 722,891$2,336,655

28

23. Income Taxes
The tax effect of temporary differences which gave rise to significant portions of the deferred tax assets andliabilities at March 31, 2023 and 2022 consisted of the following:

Millions of yen
2023
2022
Deferred tax assets:
Allowance for loan losses
Unrealized gain (loss) on available-for-salesecurities
Defined benefit liability
Depreciation
Tax loss carryforwards
Write-down of securities
Other

¥

7,407

¥

1,750
1,612
616
503
171
1,256
13,319(7,546)Gross deferred tax assets
Valuation allowance

7,529

Thousands of
U.S. dollars
2023
$

1,699
606
756
138
1,318
12,048(6,159)55,466
13,104
12,071
4,612
3,766
1,280
9,405
99,737(56,507)

Total deferred tax assets

¥

5,772

¥

5,889

$

43,223

Deferred tax liabilities:
Unrealized gain (loss) on available-for-salesecurities
Other
Total deferred tax liabilities

¥

(554)
(884)
(1,439)¥(4,514)(753)(5,267)$(4,148)(6,619)(10,775)

Net deferred tax assets (liabilities)

¥

4,333

¥

621

$

32,447

Reconciliation of the statutory tax rate to the effective tax rate for the years ended March 31, 2023 and 2022 isshown as below.
2023
2022
Normal effective statutory tax rate
30.58%
30.58%
Non-deductible expenses such as entertainment expenses
0.46
0.26
Non-taxable income such as dividend income(15.14)(11.15)Per capita inhabitant tax
1.03
0.87
Valuation allowance(7.61)
4.56
Consolidation adjustments
16.52
10.54
1.70
1.59
Other
27.54%
37.25%
Actual effective tax rate29

24. Segment Information(1) Segment information
The Group has a single segment of banking business. Accordingly, segment information by reportable segment
is omitted.
(2) Related information
Information by service

March 31, 2023
Ordinary income from external customers

March 31, 2022
Ordinary income from external customers

March 31, 2023
Ordinary income from external customers

Lending¥ 18,014

Millions of yen
Securities
investment
Other¥ 19,573¥ 13,824

Total¥ 51,411

Lending¥ 18,587

Millions of yen
Securities
investment
Other¥ 17,985¥ 14,521

Total¥ 51,094

Lending$ 134,895

Thousands of U.S. dollars
Securities
investment
Other$ 146,570$ 103,519

Total$ 384,985

Note: “Ordinary income” is defined as income less certain special income included in the accompanying consolidated
statements of income.

Geographic information(i) Ordinary income
Information about ordinary income by geographic area for the years ended March 31, 2023 and 2022 isomitted as ordinary income from external customers in Japan was more than 90% of ordinary income inthe consolidated statements of income.
(ii) Tangible fixed assets
Information about tangible fixed assets by geographic area as of March 31, 2023 and 2022 is omitted astangible fixed assets in Japan was more than 90% of “Tangible fixed assets” in the consolidated balance
sheets.
Information by major customer
Information by major customer for the years ended March 31, 2023 and 2022 is omitted since there was no
single external customer accounting for 10% or more of the consolidated ordinary income.

30

25. Related Party Transactions
Transactions between the Company’s consolidated subsidiaries and their directors and major shareholders as ofMarch 31, 2023 and 2022 and for the years then ended are as follows:
2023
Type

Companies,
etc. whose
voting rights
are owned by
the director(including thedirector oftheconsolidated
subsidiaries)
or his/her
relatives

Address

Akita Kubota
Co., Ltd.
Note (1)

Akita city,
Akita Pref.

¥60

Agricultural
machines
distributor

0.0% directly
heldLending¥136 million($1,018
thousand)

Loans andbills
discounted

Akita city,
Akita Pref.

¥40

Car
distributor

0.0% directly
heldLending¥965 million($7,226
thousand)

Loans andbills
discounted¥1,380
million($10,333
thousand)Akita city,
Akita Pref.

¥36

Rental andlease ofvehicles

0.0% directly
heldLending¥540 million($4,043
thousand)

Loans andbills
discounted¥540 million($4,043
thousand)Akita city,
Akita Pref.

¥20

Amusement-

Lending¥40 million($299
thousand)

Loans andbills
discounted¥40 million($299
thousand)Lending¥776 million($5,810thousand)

Loans andbills
discounted¥671 million($5,024
thousand)Guarantee forliabilities¥247 million($1,849
thousand)Customers’
liabilities for
acceptancesandguarantees¥311 million($2,328
thousand)

Netz Toyota
Akita Co.,
Ltd.
Note (2)Toyota Renta
Lease Akita
Co., Ltd.
Note (2)ROYAL
CENTURY
GOLF CLUB
Note (3)OkuyamaBoring Co.,
Ltd.
Note (4)Business

Ownershipsof votingrights (%)

Transaction
type

Transaction
amountAccount

Balance at
March 31,2023
¥116 million($868
thousand)

Name

Capital(Millions ofyen)

Yokote city,
Akita Pref.

¥400.0% directly
held

Name

Address

Capital(Millions ofyen)

Business

Ownershipsof votingrights (%)

Transaction
type

Transaction
amountAccount

Balance at
March 31,
2022

Akita Kubota
Co., Ltd.
Note (1)

Akita city,
Akita Pref.

¥60

Agricultural
machines
distributor

0.0% directly
heldLending¥195 million

Loans andbills
discounted¥156 million

Akita city,
Akita Pref.

¥40

Car
distributor

0.0% directly
heldLending¥1,029millionLoans andbills
discounted¥1,380
millionAkita city,
Akita Pref.

¥36

Rental andlease ofvehicles

0.0% directly
heldLending¥540 million

Loans andbills
discounted¥540 million

Lending¥1,029millionLoans andbills
discounted¥1,085
million¥245 million

Customers’
liabilities for
acceptancesandguarantees¥293 million

Construction

2022
Type

Companies,
etc. whose
voting rights
are owned by
the director(including thedirector oftheconsolidated
subsidiaries)
or his/her
relatives

Notes:

Netz Toyota
Akita Co.,
Ltd.
Note (2)Toyota Renta
Lease Akita
Co., Ltd.
Note (2)OkuyamaBoring Co.,
Ltd.
Note (4)

Yokote city,
Akita Pref.

¥400.0% directly
heldConstruction

Guarantee forliabilities(1) Akita Kubota Co., Ltd. is a subsidiary of Ishii Shoji Co., Ltd. Tadanari Ishii, who is a director of Hokuto which is a significant consolidated subsidiary of theCompany, and his relatives own the majority of voting rights of Ishii Shoji Co., Ltd.
(2) Tadanari Ishii, who is a director of Hokuto which is a significant consolidated subsidiary of the Company, his relatives and Ishii Shoji Co., Ltd. own the majorityof voting rights of Netz Toyota Akita Co., Ltd. Toyota Renta Lease Akita Co., Ltd. is a subsidiary of Netz Toyota Akita Co., Ltd.
(3) Tadanari Ishii, who is a director of Hokuto which is a significant consolidated subsidiary of the Company, and his relatives own the majority of voting rights of
ROYAL CENTURY GOLF CLUB.
(4) Kazuhiko Okuyama, a director and audit & supervisory board member of Hokuto which is a significant consolidated subsidiary of the Company, and his relatives
own the majority of voting rights of Okuyama Boring Co., Ltd.
(5) The transactions are with Hokuto, which is a significant consolidated subsidiary of the Company, and the trading conditions and policies are the same as those of
the transactions with general parties.
(6) The transaction amount is shown by the average balance.

There is no other related party transaction to be disclosed for the years ended March 31, 2023 and 2022.

31

26. Financial Instruments and Related Disclosures(1) Status of Financial Instruments(i) Policy on financial instruments
The Group is engaged in financial information services centering on banking business such as deposittaking and lending services for domestic corporate and individual customers and management of
securities such as debt and equity securities and investment trusts. The Group accepts risk as long as it
remains financially healthy and intends to improve its earning power in order to continue to conduct
these services.
The Group holds financial assets and liabilities exposed to the fluctuation risk of interest rates.
Accordingly, the Group conducts asset and liability management (ALM) and enters into derivativetransactions, if necessary, in order to avoid adverse effect by the interest-rate fluctuation.
(ii) Contents of financial instruments and their risks
Financial assets held by the Group mainly consist of loans and bills discounted to domestic corporate
and individual customers, which are exposed to credit risk arising from customers’ nonperformance ofcontractual obligations. In addition, securities, principally consisting of equity securities, debt securities,
investment trusts and investments in partnerships, are held for the purposes of net investment andstrategic investment. These financial assets are exposed to credit risk of issuers and fluctuation risk ofinterest rates and market prices.
Major financial liabilities, consisting of deposits and negotiable certificates of deposit, are principally
deposits accepted from domestic corporate and individual customers. They require attentions to liquidity
risk arising from concentrated cancellation of deposits, but most of those deposits are from individual
customers and accordingly, the risk is dispersed to small accounts. The liquidity risk is also controlled
by limiting the ratio of large deposit accounts to a certain level.
Derivative contracts which the Group enters into consist of interest rate swaps employed as part of ALM
and futures of debt securities held as available-for-sale securities, options, etc. These derivatives are notentered into for speculative purpose but mainly for hedging purposes.
(iii) Risk management system for financial instruments
The Group has established the “Basic Policy on Risk Management” and various risk control rules and asystem to conduct the risk management as follows:a. Credit risk management:
In accordance with the “Credit Policy” and “Credit Risk Management Rule,” for loans and bills
discounted, a credit control system has been established and maintained, including credit review by
individual contract, credit limit control, credit information control, internal ratings, retrospective
control including self-assessment, establishment of guaranty and security, countermeasures for problem
accounts, credit concentration risk management, etc. These credit controls are performed by the loan
departments in addition to each operating office, being reported to and discussed at the management
meetings on a regular basis. Furthermore, the status of credit control is examined by the internal audit
department.
b. Market risk management:
For market transactions, front office, middle office and back office, each of which is independent ofothers, are mutually controlled.
Interest rate risk management:
The Group manages the fluctuation risk of interest rates by ALM. In accordance with the “Market Risk
Management Rule,” the Group measures the exposure of interest rate risk, monitoring by gap analysis
and sensitivity analysis on a regular basis, and the monitoring results are reported to the management
meetings on a regular basis. In addition, the future countermeasures based on the analysis of current
status are discussed.
Foreign exchange risk management:
The Group manages foreign exchange risk, in accordance with the “Market Risk Management Rule,”by establishing total positions and loss limits or entering into hedging activities.
Price fluctuation risk management:
The Group manages price fluctuation risk in accordance with “Market Risk Management Rule.” Risk
exposures to securities are monitored for usage against the pre-set limit by the Risk Control Department32

on a daily basis based on Value at Risk (VaR) and other risk indexes such as 10BVP and reported to the
management meetings.
Derivative transactions:With respect to derivative transactions, the Group segregates the duties of the departments responsible
for execution of transactions, verification of hedge effectiveness, and operation administration andconducts transactions under the management and control based on the handling rules.
Quantitative information about market risk:
Financial instruments not for trading purposes
The Group identifies and manages the market risk volume using VaR on a daily basis (monthly basiswith regard to interest rate risk volume of deposits, loans and bills discounted, etc.), since the Groupholds many financial instruments whose fair value fluctuates on a daily basis and such fluctuation
amount is greater than other risk categories. The market risk volume of the Group is controlled as thetotal amounts of market risk volume of Shonai and Hokuto which are the subsidiaries.
Market risk volume of the banking business of the Group at March 31, 2023 and 2022 and for the years
then ended was as follows:
Billions of yen
2023
As of thefiscal yearend
Average
Maximum
Minimum
Due from banks, loans andbills discounted and others
¥ 0.0
¥ 0.0
¥ 0.0
¥ 0.0
Securities:
31.8
38.1
27.1
37.8
Debt securities
11.6
19.4
6.8
19.2
Equity securities
3.9
4.9
2.4
3.1
Other
23.0
29.7
19.1
29.7
Billions of yen
2022

Due from banks, loans andbills discounted and others
Securities:
Debt securities
Equity securities
Other

Average

Maximum

Minimum

As of thefiscal yearend

¥

¥

¥

¥

0.0
27.1
6.3
4.9
21.1

0.0
29.9
7.3
6.8
22.6

0.0
26.0
5.6
4.1
19.9

0.0
27.9
6.9
6.6
22.2

Millions of U.S. dollars
2023

AverageDue from banks, loans andbills discounted and others
Securities:
Debt securities
Equity securities
Other

$

0.0
238.1
86.8
29.2
172.2

33

Maximum
$ 0.0
285.3
145.2
36.6
222.4

Minimum
$ 0.0
202.9
50.9
17.9
143.0

As of thefiscal yearend
$ 0.0
283.0
143.7
23.2
222.4

(*1) VaR is measured in principle using the variance/co-variance method.
(*2) Holding period is assumed to be 60 business days for higher market liquidity financial instruments such as
Japanese government bonds, municipal bonds, listed equity securities (excluding strategic investments), etc., 250
business days for cross-holding shares of listed equity securities, and 125 or 250 business days for less market
liquidity financial instruments, due from banks, loans and bills discounted, etc.
(*3) 99 % is used for confidence interval, and 250 business days are used as extraction period of market data to measure
volatility.
(*4) The total amount does not agree with the sum of the individual amounts since correlation between the risk factorsof debt securities and equity securities is taken into account.
(*5) The current interest rate risk volume of deposits, loans and bills discounted, etc., represents decreasing interest
rate risk, not increasing interest rate risk. The increasing interest rate risk is managed as internal control. Therefore,
the interest rate risk volume of due from banks, loans and bills discounted and others is considered to be zero.

Within the Group, each banking subsidiary implements backtests comparing the VaR of one day holding
period measured by the model and the actual loss, in order to verify the accuracy of the measurement
model of the market risk volume concerning the VaR of securities.
The measurement model currently in use is deemed to capture the market risk on the reasonably
accurate basis. However, the Group will take conservative actions as necessary when VaR is expected
to increase due to an increase in volatility.
In implementing the risk management using the VaR, the following particular points are paid attentionto:(a) Quantitative information such as VaR of market risk is determined based on the statisticalassumptions and may result in a different value depending on the different assumptions andcalculation methods.
(b) Quantitative information such as VaR of market risk is a statistical value calculated based on theassumptions and not intended to estimate the maximum loss amount. Profit or loss is assumed to
exceed VaR on the frequency corresponding to the confidence interval.
(c) Future market conditions may differ significantly from the past.
Financial instruments for trading purposes are excluded from the scope of disclosure, since theoutstanding balance at any banking subsidiary is very insignificant and the materiality of effect on the
management is quite limited.
c. Liquidity risk management:
The Group sets limits on liquidity risk management and reports to the management meetings,
monitoring the results on a daily basis in accordance with the “Liquidity Risk Management Rule.”(iv) Supplementary explanation about fair value of financial instruments
As certain assumptions are used in calculating the fair value of financial instruments, the result of suchcalculation may vary if different assumptions are used.
(2) Fair value of financial instruments
The carrying amount, the fair value and their difference as of March 31, 2023 and 2022 were as follows. Note that
equity securities without market prices or investments in partnerships are not included in the following table (SeeNote 1 below). In addition, the disclosure of carrying amount, fair value and difference is omitted for cash and duefrom banks, monetary claims bought, foreign exchange assets and liabilities and payables under securities lendingtransactions since their fair value approximates their carrying amount due to short maturities.

34

March 31, 2023
Trading account securities:
Trading securities
Money held in trust
Securities (*1):
Available-for-sale securities
Loans and bills discounted:
Allowance for loan losses (*2)

Carrying amount¥

606
57,981Millions of yen
Fair value¥

606
57,981

Difference¥-

655,663-

Assets, total

655,663
1,892,149(13,400)
1,878,749¥2,593,001

1,898,241¥ 2,612,493

19,492
19,492

Deposits
Negotiable certificates of deposit
Borrowed money
Liabilities, total¥ 2,663,710
63,680116,000¥ 2,843,390¥2,663,712
63,680115,956¥ 2,843,349

¥

¥

¥

¥

Derivative transactions (*3):
To which hedge accounting is not applied
To which hedge accounting is applied
Derivative transactions, total

March 31, 2022
Trading account securities:
Trading securities
Money held in trust
Securities:
Available-for-sale securities
Loans and bills discounted:
Allowance for loan losses (*2)

¥

[337]
236
[100]

Carrying amount¥589
51,717

¥

[337]
236
[100]

¥
¥

¥

Millions of yen
Fair value¥

589
51,717

1
(43)
(41)
-

Difference¥-

676,477-

Assets, total

676,477
1,712,140(13,185)
1,698,955¥ 2,427,739

1,723,414¥ 2,452,199

24,45924,459Deposits
Negotiable certificates of deposit
Borrowed money
Liabilities, total¥ 2,656,962
54,867
343,800¥ 3,055,630¥ 2,656,971
54,867343,789¥ 3,055,627

¥

¥

¥

¥

Derivative transactions (*3):
To which hedge accounting is not applied
To which hedge accounting is applied
Derivative transactions, total¥

35[3,342]183[3,158]¥[3,342]183[3,158]

¥

¥

¥

8
(10)
(2)
-

Thousands of U.S. dollars
Carrying amount
Fair value
Difference

March 31, 2023
Trading account securities:
Trading securities
Money held in trust
Securities (*1):
Available-for-sale securities
Loans and bills discounted:
Allowance for loan losses (*2)

$

4,537
434,184$

4,537
434,184$-

4,909,862-

Assets, total

4,909,862
14,169,155(100,344)
14,068,810$19,417,410

14,214,774$19,563,374

145,963
145,963

Deposits
Negotiable certificates of deposit
Borrowed money
Liabilities, total$19,946,907
476,860
868,653$21,292,421$19,946,922
476,860
868,324$21,292,114

$

$

$

$

Derivative transactions (*3):
To which hedge accounting is not applied
To which hedge accounting is applied
Derivative transactions, total$[2,523]
1,767
[748]

$

[2,523]
1,767
[748]

$

$

$

7
(322)
(307)
-

(*1) Securities include investment trusts whose net asset value is deemed as fair value by applying the treatment prescribed inparagraph 24-3 of the “Implementation Guidance on Accounting Standard for Fair Value Measurement” (ASBJ Guidance No.
31, June 17, 2021). There are no investment trusts whose net asset value is deemed as fair value by applying the treatmentprescribed in paragraph 24-9.
(*2) General and specific allowances for loan losses corresponding to loans and bills discounted are deducted.
(*3) Assets and liabilities arising from derivative transactions are presented in net amounts, and net liabilities are shown in squareparentheses.

(Note 1) For equity securities without market prices and investments in partnerships, their carrying amount is asfollows. These financial instruments are not included in “Available-for-sale securities” of the fair value informationof financial instruments.
Thousands ofMillions of yen
U.S. dollars
2023
2022
2023
Unlisted equity securities (*1) (*2)
¥ 1,618¥ 1,434$ 12,116
Investments in partnerships (*3)
2,859
2,473
21,409(*1) The fair value of unlisted equity securities is not disclosed in accordance with paragraph 5 of the “Implementation Guidance on
Disclosures about Fair Value of Financial Instruments” (ASBJ Guidance No. 19, March 31, 2020).
(*2) The Company recognized write-down of unlisted equity securities in an amount of ¥16 million ($119 thousand) and ¥4 million
for the years ended March 31, 2023 and 2022, respectively.
(*3) The fair value of investments in partnerships is not disclosed in accordance with paragraph 24-16 of the “Implementation
Guidance on Accounting Standard for Fair Value Measurement” (ASBJ Guidance No. 31, June 17, 2021).

36

(Note 2) Repayment schedule of monetary receivables and securities with contractual maturities subsequent toMarch 31, 2023
Millions of yen
Due after one

Due after three

Due after fiveDue after sevenDue in one

year throughyears throughyears throughyears throughMarch 31, 2023

year or lessthree years

five years

seven years

ten years

Due from banks (*1)

¥ 283,589¥¥¥

Monetary claims bought

4,016

-

43,112

88,873--¥Due after ten
years

-

¥

-

Securities:
Available-for-sale securities withmaturity:

105,470

62,996

121,411

163,308

Japanese government bonds

8,000

6,000

1,000

3,000

41,25045,000

Municipal bonds

16,43538,04632,551

26,83632,55640,277

Corporate bonds

8,729

18,69014,958

10,142

250

69,985

Other

9,948

26,13656,96023,01647,355

8,045

476,426

318,476

276,684

188,223

180,950

367,156¥ 807,145¥ 407,349¥ 382,154¥ 251,219¥ 302,362¥ 530,465

Due after one

Due after three

Due after fiveDue after sevenDue in one

year throughyears throughyears throughyears throughDue after ten

March 31, 2023

year or lessthree years

five years

seven years

ten years

years

Due from banks (*1)$2,123,625

$

$

$

Loans and bills discounted (*2)
Total

Thousands of U.S. dollars

Monetary claims bought

-

-

-

$

-

$

-

30,073

-

-

-

-

-

322,839

665,515

789,800

471,738

909,173

1,222,914

Securities:
Available-for-sale securities withmaturity:
Japanese government bonds

59,90744,9307,488

22,465308,896336,977

Municipal bonds

123,071284,903

243,754

200,958

243,792

301,610

Corporate bonds

65,366

139,958

112,01175,9471,872

524,075

Other

74,494

195,716

426,538

172,352

354,61260,244Loans and bills discounted (*2)

3,567,665

2,384,873

2,071,918

1,409,487

1,355,024

2,749,408

Total$ 6,044,218$ 3,050,389$2,861,719$1,881,226$2,264,205$ 3,972,330(*1) Due from banks without maturity is shown under “Due in one year or less.”(*2) Loans and bills discounted as of March 31, 2023 do not include ¥32,957 million ($246,794 thousand) of receivables such as those due frombankrupt, virtually bankrupt or potentially bankrupt borrowers since these are not certain when they can be collected or redeemed, and ¥51,274
million ($383,959 thousand) of receivables without maturity.

37

(Note 3) Repayment schedule of bonds payable, borrowed money and other interest-bearing liabilities subsequent
to March 31, 2023
Millions of yen
Due after

Due after

Due after one

three years

Due after fiveseven years

Due in one

year throughthrough five

years throughthrough ten

March 31, 2023

year or lessthree years

years

seven years

years

Deposits (*)¥ 2,371,283¥

Negotiable certificates of deposit

86,792

63,680

¥

6,109

-

¥

-

Due after ten
years

¥

-

¥

-

-

-

-

-

Payables under securities lendingtransactions

41,651

-

-

-

-

-

Borrowed money

106,200

4,900

4,900

-

-

-

Total

¥ 2,582,815¥

91,692¥

11,009

¥

-

¥

-

¥

-

Thousands of U.S. dollars
Due after

Due after

Due after one

three years

Due after fiveseven years

Due in one

year throughthrough five

years throughthrough ten

Due after ten

March 31, 2023

year or lessthree years

years

seven years

years

years

Deposits (*)$17,757,098$

Negotiable certificates of deposit

649,932$

45,746

$

-

$

-

$

-

476,860

-

-

-

-

-

311,899

-

-

-

-

-

Payables under securities lendingtransactions
Borrowed money
Total

795,267$19,341,133

36,693$686,625

36,693$82,439

$

-

$

-

$

-

(*) Demand deposits are shown under “Due in one year or less” of deposits.

(3) Fair value hierarchy of financial instruments
The Group classifies the fair value of financial instruments into three categories depending on whether inputs fora fair value measurement are observable or significant.
Level 1 fair value:
Fair value measured by using quoted prices in active markets as observable inputs
for assets or liabilities subject to a fair value measurement
Level 2 fair value:
Fair value measured by using observable inputs other than those for Level 1
Level 3 fair value:
Fair value measured by using unobservable inputs
When multiple inputs of different categories are used in measuring fair value, the Group classifies the fair value
into a category to which the lowest priority is assigned.

38

(i) Financial instruments measured at fair value in the consolidated balance sheets
Millions of yen
Fair value
March 31, 2023
Level 1
Level 2
Level 3
Money held in trust¥¥ 57,981¥
Securities:
Trading securities:
Japanese government bonds, Municipal bonds
606
Available-for-sale securities:
Japanese government bonds, Municipal bonds
103,450
184,449
Corporate bonds
89,853
31,662Equity securities
14,439Foreign securities
1,154
56,452
Investment trusts
21,509148,652
Derivative transactions:Interest rate related
433
Currency related
358
Equity securities related
20
Assets, total¥ 140,553¥ 538,808¥ 31,662
Derivative transactions:Interest rate related
Currency related
Liabilities, total

March 31, 2022
Money held in trust
Securities:
Trading securities:
Japanese government bonds, Municipal bonds
Available-for-sale securities:
Japanese government bonds, Municipal bonds
Corporate bonds
Equity securities
Foreign securities
Derivative transactions:Interest rate related
Currency related
Equity securities related
Assets, total
Derivative transactions:
Currency related
Liabilities, total

¥

-

¥
-

¥

-

¥

134
779
913

¥

-

606
287,899
121,516
14,43957,606
170,161433
358
20¥ 711,024
¥

¥

-

¥

Millions of yen
Fair value
Level 2
Level 3
¥ 47,089¥-

Level 1¥-

Total
¥ 57,981

134
779
913

Total
¥ 47,089

10

579

-

589

102,510231,293
99,848-333,804
125,918
16,26576,20916,26519,19326,070--¥ 137,979

81
46
102
¥ 436,056¥ 26,070

81
46102¥ 600,107

¥
¥

¥
¥

¥
¥

¥
¥

57,015
-

39

-

3,388
3,388

-

3,388
3,388

March 31, 2023
Money held in trust
Securities:
Trading securities:
Japanese government bonds, Municipal bonds
Available-for-sale securities
Japanese government bonds, Municipal bonds
Corporate bonds
Equity securities
Foreign securities
Investment trusts
Derivative transactions:Interest rate related
Currency related
Equity securities related
Assets, total

Level 1$

Derivative transactions:Interest rate related
Currency related
Liabilities, total-

Thousands of U.S. dollars
Fair value
Level 2
Level 3$ 434,184 $-Total$ 434,184

-

4,537

-

4,537

774,674
108,124
8,641
161,067

1,381,226
672,854422,734
1,113,164

237,097-

2,155,900
909,959
108,124
431,376
1,274,232$1,052,516

3,242
2,680
149
$4,034,806$ 237,097

3,242
2,680
149
$5,324,427

$

$

$

$

-

$

1,003
5,833
6,836

$

$

-

1,003
5,833
6,836

$

(*1) The above table as of March 31, 2022 does not include investment trusts, etc., for which the transitional treatment prescribed inparagraph 26 of the “Implementation Guidance on Accounting Standard for Fair Value Measurement” (ASBJ Guidance No. 31,
July 4, 2019) are applied. The amount of the investment trusts, etc. in the consolidated balance sheet is ¥128,907 million as ofMarch 31, 2022.
(*2) In the above table as of March 31, 2023, securities do not include investment trusts whose net asset value is deemed as fair value
by applying the treatments prescribed in paragraph 24-3 and paragraph 24-9 of the “Implementation Guidance on AccountingStandard for Fair Value Measurement” (ASBJ Guidance No. 31, June 17, 2021).
The carrying amount of investment trusts for which the treatment prescribed in paragraph 24-3 is applied is ¥4,040 million($30,253 thousand).
There are no investment trusts for which the treatment prescribed in paragraph 24-9 is applied.
(*3) Reconciliation of investment trusts for which the treatment prescribed in paragraph 24-3 are applied from beginning balance toending balance for the ended March 31, 2023
Millions of yen
2023

Beginning of the
year
¥

4,000

Income or other comprehensive
income (“OCI”) recognized for thecurrent fiscal year

Income¥OCI (a)-¥40

Purchase, saleand redemption,
net
¥

-

Net asset value
deemed as fair
value
¥

4,040

Net asset value
not deemed asfair value¥-

End of the year
¥

4,040

Valuation gain
(loss) (b)¥-Thousands of U.S. dollars
2023

Beginning of theyear$

29,953

Income or other comprehensive
income (“OCI”) recognized for thecurrent fiscal year

Income$OCI (a)-$299

Purchase, saleand redemption,
net
$

-

Net asset value
deemed as fairvalue$

30,253

Net asset value
not deemed asfair value$-

End of the year$

30,253

Valuation gain
(loss) (b)
$

-

(a)

The amount is included in “Unrealized gain (loss) on available-for-sale securities” of “Other comprehensive income” in(b)

It presents valuation gain (loss) of investment trusts held at the consolidated balance sheet date, out of income recognized

the consolidated statement of comprehensive income.
for the current fiscal year.

40

(*4) Breakdown of restrictions on cancellation or repurchase at the consolidated balance sheet dateMillions of yen

Major restrictions on cancellation or repurchaseFor cancellation, a minimum of one month’s prior notice is required.

Thousands of U.S. dollars

Carrying amount
4,040

¥

$

30,253(ii) Financial instruments other than those measured at fair value in the consolidated balance sheets
Millions of yen
Fair value
March 31, 2023
Level 1
Level 2
Level 3
Total
Loans and bills discounted¥¥¥ 1,898,241¥ 1,898,241
Assets, total¥¥¥ 1,898,241¥ 1,898,241
Deposits
Negotiable certificates of deposit
Borrowed money
Liabilities, total

March 31, 2022
Loans and bills discounted
Assets, total
Deposits
Negotiable certificates of deposit
Borrowed money
Liabilities, total

March 31, 2023
Loans and bills discounted
Assets, total
Deposits
Negotiable certificates of deposit
Borrowed money
Liabilities, total¥-¥ 2,663,712
63,680115,956¥ 2,843,349-¥ 2,663,712
63,680115,956¥ 2,843,349¥¥-

Millions of yen
Fair value
Level 2
Level 3¥
¥ 1,723,414¥¥ 1,723,414

Total¥ 1,723,414¥ 1,723,414¥-¥ 2,656,971
54,867343,789¥ 3,055,627-¥ 2,656,971
54,867343,789¥ 3,055,627$$-

Thousands of U.S. dollars
Fair value
Level 2
Level 3$
$ 14,214,774$$ 14,214,774

Total$ 14,214,774$ 14,214,774$-$ 19,946,922
476,860
868,324$ 21,292,114$ 19,946,922
476,860
868,324$ 21,292,114¥

Level 1¥

Level 1

$

¥

¥

¥

¥

$

$

-

(Note 1) Explanation of valuation techniques and inputs used for fair value measurement
AssetsMoney held in trust
For financial instruments that are invested as trust assets in an independently managed money trust with the primary
purpose of managing securities, the fair value is determined using the price at the exchange or the price presented
by the financial institutions with which they are transacted. The fair value is classified into Level 3 when the impact
from unobservable inputs is significant, otherwise it is classified into Level 2.
Trading securities and available-for-sale securities
Trading securities and available-for-sale securities for which unadjusted quoted prices in active markets areavailable are classified into Level 1 fair value. Such securities mainly include listed equity securities and Japanese
government bonds.
Even if available quoted prices are used, securities are classified into Level 2 when the relevant markets are notactive. Such securities mainly include municipal bonds and corporate bonds.
41

When quoted prices are not available, the fair value is measured by using valuation techniques such as the present
value technique discounting future cash flows. The Group makes maximum use of observable inputs in thevaluations. Inputs include TIBOR, government bond yield, conditional prepayment rates, credit spreads,
probability of default, loss given default and others. When significant unobservable inputs are used, the fair value
is classified into Level 3.
For investment trusts without transaction prices in the market, the net asset value is used as the fair value when
there are no restrictions that are significant enough for market participants to require consideration for risk on
cancellation or repurchase. They are classified into Level 2 fair value.
The footnote on securities by holding purposes is described in Note “5. Securities.”
Loans and bills discounted
For the loans and bills discounted with short remaining terms (within one year), the carrying amount is used as thefair value since the fair value approximates the carrying amount. For the loans and bills discounted without
predetermined maturity because of characteristics such as the loans and bills discounted being limited within theamount of the pledged assets, the carrying amount is used as the fair value since the fair value is deemed toapproximate the carrying amount considering the expected repayment term and interest rate conditions.
The fair value of loans and bills discounted with fixed interest rates, categorized by the type, internal rating andterm to maturity, is calculated by discounting the total of principal and interest using credit spreads by credit rating
and market interest rate.
The fair value of the loans and bills discounted with floating interest rates, categorized by the internal rating andterm to maturity, is calculated by discounting the total of principal and interest, basically until the interest maturity
date, using credit spreads by credit rating and market interest rate. Credit spreads are calculated by remaining term
based on accumulated default rate by credit rating and loss rate.
For loans and bills discounted due from bankrupt, virtually bankrupt or potentially bankrupt borrowers, loan losses
are estimated based on factors such as the expected amount to be collected from collaterals and guarantees. Since
the fair value of these items approximates the carrying amount net of the recorded amount of allowance for loan
losses, such carrying amount is used as the fair value.
The fair value is classified into Level 3 when the impact from unobservable inputs is significant, otherwise it isclassified into Level 2.
Liabilities
Deposits and Negotiable certificates of deposit
For demand deposits, the amount payable on demand as of the balance sheet date (i.e., the carrying amount) is usedas the fair value. The fair value of time deposit is measured at the present value calculated by discounting future
cash flows, grouping by certain maturity length. The discount rate used is the interest rate that would be applied to
newly accepted deposits. For deposits whose remaining term is short (within one year), the carrying amount is usedas the fair value since the fair value approximates the carrying amount. The said fair value is classified into Level
2.
Borrowed money
The fair value of borrowed money is measured by discounting the aggregate amount of principal and interest,
categorized by the term to maturity, at market rates. For borrowed money whose remaining term is short (within
one year), the carrying amount is used as the fair value since the fair value approximates the carrying amount.
The said fair value is classified into Level 2.

42Derivative transactions
For derivative transactions, the fair value measured by using unadjusted quoted prices in active markets is classified
into Level 1, which includes those of bond futures and interest rate futures. However, the Group’s derivativetransactions are mostly over-the-counter (“OTC”) transactions for which quoted prices are not available. Thus, thefair value is measured by using valuation techniques such as option pricing models or the present discounted value
technique, depending on the type of transactions or the term to maturity. Major inputs used for the valuation
techniques are interest rates, foreign exchange rates, volatilities and other. Adjustments are made to prices basedon the credit risks of counterparties and the Group’s banks. When unobservable inputs are not used or the impact
is not significant, the fair value is classified into Level 2, and such transactions include interest rate swaps andforeign exchange forward contracts. When significant unobservable inputs are used, the fair value is classified into
Level 3.
(Note 2) Information on Level 3 fair value, of financial instruments measured at fair value in the consolidatedbalance sheets(1) Quantitative information on significant unobservable inputs
Significant
Valuation
unobservable
March 31, 2023
techniques
inputsSecurities:
Available-for-sale securities:
Corporate bonds
Probability ofdefault
Private placement bonds
Present value
Loan recovery
rate

Private placement bonds

0.06% - 100.00%

1.78%

0.00%- 24.10%

23.76%

Range of inputs

Weightedaverage of
inputs

0.04% - 100.00%

2.20%

0.00%- 33.50%

29.63%

Significant
unobservable
inputsValuationtechniques

March 31, 2022
Securities:
Available-for-sale securities:
Corporate bonds

Range of inputs

Weightedaverage of
inputs

Probability ofdefault
Loan recovery
rate

Present value(2) Reconciliation from beginning balance to ending balance and valuation gain or loss recognized for the years
ended March 31, 2023 and 2022
Millions of yen

March 31, 2023

Beginning of
the year

Income or othercomprehensive income(“OCI”) recognized for thecurrent fiscal year
IncomeOCI (*1)

Purchase,sale, issuance
Reclassiand
fication tosettlement, net Level 3 (*2)

Reclassification fromLevel 3 (*3)

End of theyear

Valuation gain
(loss)(*5)

Securities:
Available-for-salesecurities:
Corporate bonds
Private placement
bonds

¥

25,969

¥

-

¥

58

¥ 5,633

43

¥

-

¥

-

¥

31,662¥-

Millions of yen

March 31, 2022

Beginning of
the year

Income or othercomprehensive income(“OCI”) recognized for thecurrent fiscal year
Income (*4)

OCI (*1)

Purchase,sale, issuance
Reclassiand
fication tosettlement, net Level 3 (*2)

Reclassification fromLevel 3 (*3)

End of theyear

Valuation gain
(loss)(*5)

Securities:
Available-for-salesecurities:
Corporate bonds
Private placement
bonds

¥

20,445

¥

1

¥

100

¥ 5,524

¥

-

¥

-

¥

26,070¥-Thousands of U.S. dollars

March 31, 2023

Beginning of
the year

Income or othercomprehensive income(“OCI”) recognized for thecurrent fiscal year
IncomeOCI (*1)

Purchase,sale, issuance
Reclassiand
fication tosettlement, net Level 3 (*2)

Reclassification fromLevel 3 (*3)

End of theyear

Valuation gain
(loss)(*5)

Securities:
Available-for-salesecurities:
Corporate bonds
Private placementbonds$ 194,466

$

-

$

434

$ 42,182

$

-

$

-

$ 237,097$-(*1) The amount is included in “Unrealized gain (loss) on available-for-sale securities” of “Other comprehensive income” in the
consolidated statements of comprehensive income.
(*2) It presents the reclassification from Level 2 fair value to Level 3 fair value. None for the years ended March 31, 2023 and 2022.
(*3) It presents the reclassification from Level 3 fair value to Level 2 fair value. None for the years ended March 31,2023 and 2022.
(*4) The amount is included in “Other operating income” in the consolidated statement of income for the year ended March 31, 2022.
(*5) It presents valuation gain (loss) of financial assets or liabilities held at the consolidated balance sheet date, out of income
recognized for the current fiscal year.

(3) Fair value valuation procedures
Each division in charge performs a fair value measurement in accordance with the policies and procedures preparedby the risk management division of the Group. The measured fair value is verified by the independent valuation
division for the reasonableness of inputs and valuation techniques used for the measurement and appropriatenessof the level categories of the fair value. The verification result is reported to the risk management division every
period, and thus, the Group ensures the appropriateness of the policies and procedures of the fair value
measurement.
The fair value is measured using a valuation model that most appropriately reflects the nature, characteristics andrisk of each asset. In case where quoted prices obtained from third parties are used, the Group verifies thereasonableness of the prices by confirming the valuation techniques and inputs used and by applying appropriate
methods including comparison with the market prices of similar financial instruments.
(4) The impact on the fair value in case where any changes made to significant unobservable inputs
The significant unobservable inputs used in measuring the fair value of corporate bonds are probability of default
and recovery ratio. Significant increase (decrease) in probability of default results in significant decline (rise) in
the fair value, and significant increase (decrease) in recovery ratio. results in significant rise (decline) in the fairvalue. In general, changes in assumptions used for probability of default have reverse effects on assumptions used
for recovery ratio.

44

27. Derivatives
Derivative transactions to which hedge accounting is not appliedWith respect to derivatives to which hedge accounting is not applied, contract amount or notional principal, fairvalue and related valuation gain or loss by transaction type at the balance sheet date and calculation method of thefair value were as follows. Note that contract amounts do not represent the market risk exposure associated withthe derivative transactions.
Interest rate related derivatives
Interest rate related derivatives at March 31, 2023 were as follows:
Millions of yen
Contract amount
Total

March 31, 2023

Over one year

Fair value

Valuation gain
(loss)¥¥¥¥OTC transactions:Interest rate swaps:
Receive floating / Pay fix

¥

4,500

¥ 4,500

Total

83
83

83
83

Thousands of U.S. dollars
Contract amountMarch 31, 2023

Total

Over one year

$ 33,697$ 33,697

Fair value

Valuation gain
(loss)$$$$OTC transactions:Interest rate swaps:
Receive floating / Pay fix
Total

621
621

621
621

Note: Above transactions are stated at the fair value, and the related valuation gain (loss) are reported in the consolidated statements
of income.

There was no interest rate related derivative at March 31, 2022.
Currency related derivatives
Currency related derivatives at March 31, 2023 and 2022 were as follows:
Millions of yen
Contract amountMarch 31, 2023
OTC transactions:
Forward foreign exchange contracts:
Sold
Bought
Total

Total

Over one year

¥ 58,027
2,112

¥

-

Fair value

¥
¥

(462)
41
(420)

Valuation gain
(loss)

¥
¥

(462)
41
(420)

Millions of yen
Contract amountMarch 31, 2022
OTC transactions:
Forward foreign exchange contracts:
Sold
Bought
Total

Total

Over one year

¥ 64,219
4,964

45

¥

-

Fair value

Valuation gain
(loss)¥ (3,368)26¥ (3,342)¥ (3,368)26¥ (3,342)

Thousands of U.S. dollars
Contract amount
Total

March 31, 2023
OTC transactions:
Forward foreign exchange contracts:
Sold
Bought
Total

Over one year

$ 434,528
15,815$-

Fair value

Valuation gain
(loss)$ (3,459)307$ (3,145)$ (3,459)307$ (3,145)

Note: Above transactions are stated at the fair value, and the related valuation gain (loss) are reported in the consolidated statements
of income.

Derivative transactions to which hedge accounting is appliedWith respect to derivatives to which hedge accounting is applied, contract amount or notional principal and fairvalue at the balance sheet date by transaction type and hedge accounting method and calculation method of the fairvalue were as follows. Note that contract amounts do not represent the market risk exposure associated with thederivative transactions.
Interest rate related derivatives
Interest rate related derivatives at March 31, 2023 and 2022 were as follows:
March 31, 2023

Millions of yen
Contract amount

Hedge accounting
methodDeferral hedge
accounting

Transaction typeInterest rate
swaps:
Receive floating/ Pay fix

Major hedged item
Available-for-sale securities(Japanese government bonds)

¥

Total

Over one year

42,750¥ 42,750

Total
March 31, 2022

Fair value

¥
¥

216
216

Millions of yen
Contract amount

Hedge accounting
methodDeferral hedge
accounting

Transaction typeInterest rate
swaps:
Receive floating/ Pay fix

Major hedged item
Available-for-sale securities(Japanese government bonds)

¥

Total

Over one year

6,500

¥ 6,500

Total
March 31, 2023

Fair value

¥
¥

81
81

Thousands of U.S. dollars
Contract amount

Hedge accounting
methodDeferral hedge
accounting

Transaction typeInterest rate
swaps:
Receive floating/ Pay fix

Major hedged item
Available-for-sale securities(Japanese government bonds)

Total

Total

Over one year

$ 320,128$320,128

Fair value

$
$

1,617
1,617

Note: In principle, the deferred hedge accounting is applied in accordance with the JICPA Industry Committee Practical Guideline
No. 24 (March 17, 2022).

46

Equity securities related derivatives
Equity securities related derivatives at March 31, 2023 and 2022 were as follows:
March 31, 2023

Millions of yen
Contract amount

Hedge accounting
methodDeferral hedge
accounting

Transaction type
Equity forward
contracts:
Sold
BoughtMajor hedged item
Available-for-sale securities(Equity securities)

¥

Total

Over one year

1,607
-

¥

-

Fair value

¥

20
20

¥

Total
March 31, 2022

Millions of yen
Contract amount

Hedge accounting
methodDeferral hedge
accounting

Transaction type
Equity forward
contracts:
Sold
BoughtMajor hedged item
Available-for-sale securities(Equity securities)

¥

Total

Over one year

1,599
-

¥

-

Fair value

¥

102
102

¥

Total
March 31, 2023

Thousands of U.S. dollars
Contract amount

Hedge accounting
methodDeferral hedge
accounting

Transaction type
Equity forward
contracts:
Sold
BoughtMajor hedged item
Available-for-sale securities(Equity securities)

$

Total

Over one year

12,033-$-

Fair value

$
$

Total

149
149

Note: In principle, the deferred hedge accounting is applied in accordance with the JICPA Industry Committee Practical Guideline
No. 24 (March 17, 2022).

28. Amounts per Share
Amounts per share at March 31, 2023 and 2022 and for the years then ended are summarized as follows:Yen
Net assets
Net income:
Basic
Diluted¥2023
5,011.71¥

179.19-2022
5,732.01
190.15148.59$U.S. dollars
2023
37.5296
1.3418-Notes: (1) Effective October 1, 2021, the Company implemented the stock consolidation, whereby 10 shares of its common stock
and preferred stock class B were consolidated to one share. Net assets per share, basic net income per share and diluted
net income per share are calculated on the assumption that the stock consolidation had been implemented at the
beginning of the year ended March 31, 2022.
(2) Diluted net income for the year ended March 31, 2023 is not shown since there are no dilutive shares as a result of
acquisition and cancellation of preferred stock class B based on the resolution at the Board of Directors’ meeting held on
February 24, 2023.

47

(3) Net income per share—basic and net income per share—diluted for the years ended March 31, 2023 and 2022 were
calculated based on the following information:
Thousands ofMillions of yen
U.S. dollars
2023
Net income attributable to owners of parent —basic:
Amounts not attributed to common stock shareholders
O/W, dividends for preferred stock based on the resolution at theBoard of Directors’ meeting
O/W, interim dividends for preferred stock
Net income attributable to common stock owners of parent
Average outstanding number of shares of common stock(Unit: thousand shares)

¥

¥

3,266
29
29
3,237

¥

¥

18,064

Net income attributable to owners of parent —diluted:
Adjustments to net income attributable to owners of parent
O/W, dividends for preferred stock class B
Increase in number of shares of common stock (Unit: thousand shares)
O/W, preferred stock class B

¥

-

2022
3,506
57
28
28
3,448

$

$

2023
24,457217
217
24,23918,134

¥

57
57
5,461
5,461

$

(3) Net assets per share at March 31, 2023 and 2022 were calculated based on the following information:
Thousands ofMillions of yen
U.S. dollars
Total net assets
Amounts deducted from total net assets:
O/W, payment for preferred stock
O/W, dividends for preferred stock
O/W, non-controlling interests
Net assets attributable to common stock as of March 31, 2023 and2022
Number of shares of common stock as of March 31, 2023 and 2022
used to calculate net assets per share (Unit: thousand shares)

29. Subsequent Events
None to report.

48

¥

¥

2023
90,621
109
109

2022
¥ 109,233
5,343
5,000
28
314

2023
$ 678,605
816
816

90,512¥ 103,889$ 677,789

18,06018,124-

30. Non-Consolidated Financial Statements of Shonai Bank and Hokuto Bank as of March 31, 2023 and 2022
and for the Years Then Ended
The Shonai Bank, Ltd.
Non-Consolidated Balance Sheets
March 31, 2023 and 2022
Millions of yen
2023
2022
Assets:Cash and due from banks
Monetary claims bought
Trading account securities
Money held in trust
Securities
Loans and bills discounted
Foreign exchange assets
Tangible fixed assets:
Buildings
Land
Lease assets
Other tangible fixed assets
Intangible fixed assets:
Software
Other intangible fixed assets
Prepaid pension cost
Deferred tax assets
Customers’ liabilities for acceptances and guarantees
Other assets
Allowance for loan losses¥

Total assets

148,972
1,611
414
27,860331,912948,205
798¥

426,778
1,599
426
25,654343,309854,611
1,000

Thousands of
U.S. dollars
2023$

1,115,560
12,063
3,100
208,626
2,485,487
7,100,531
5,975

7,598
4,421
8
989

8,286
4,877
12
956

56,896
33,106
59
7,406

515
65
182
1,439
5,843
16,231(7,021)

687
65
42
5,697
17,348(7,059)

3,856
486
1,362
10,77543,754
121,544(52,576)¥ 1,490,048¥ 1,684,296$ 11,158,064(Continued)

49

The Shonai Bank, Ltd.
Non-Consolidated Balance Sheets
March 31, 2023 and 2022
Millions of yen
2023
2022
Liabilities:
Deposits
Negotiable certificates of deposit
Payables under securities lending transactions
Borrowed money
Foreign exchange liabilities
Provision for bonuses for directors and other officers
Provision for retirement benefits
Provision for reimbursement of deposits
Provision for contingent loss
Deferred tax liabilities
Deferred tax liabilities for land revaluation
Acceptances and guarantees
Other liabilities

Thousands of
U.S. dollars
2023¥ 1,306,463
47,304
14,976
48,500
24
15
148
14
227
385
5,843
7,565

¥ 1,297,919
42,64749,315
213,200
18
18
147
32
272
1,835
416
5,697
8,313

$ 9,783,308
354,230
112,146
363,187
179
112
1,108
104
1,699
2,883
43,75456,6491,431,467

1,619,836

10,719,387

8,500
20,30827,471
56,280
1,276
174
850
2,301

8,500
20,30826,45555,263
8,281
914
9,196

63,651
152,074
205,713421,446
9,555
1,302
6,365
17,230Total net assets

58,58164,460438,677

Total liabilities and net assets¥ 1,490,048¥ 1,684,296$ 11,158,064

Total liabilities
Net assets:
Common stock
Capital surplus
Retained earnings
Total shareholders’ equity
Unrealized gain on available-for-sale securities
Deferred gain on hedges
Revaluation reserve for land
Total valuation and translation adjustments(Concluded)
50

The Shonai Bank, Ltd.
Non-Consolidated Statements of Income
Years Ended March 31, 2023 and 2022
Millions of yen
2023
2022
Income:Interest income:Interest on loans and discounts
Interest and dividends on securities
Other
Fees and commissions
Other operating income
Other income¥

Total income

9,001
7,548
100
3,888
2,148
1,691

¥

9,406
5,708
407
3,894
1,710
2,805

Thousands of
U.S. dollars
2023$

67,40356,522748
29,11416,085
12,662

24,37923,933

182,559

82
1
158
0
111
(0)
2,315
5,869
11,434
2,550

91
2
27
0
(2)
2,347
2,633
12,303
3,612

614
7
1,183
0
831
(0)
17,33543,94985,622
19,095

Total expenses

22,52321,016

168,661

Income before income taxes

1,855

2,916

13,890

Income taxes:
Current
Deferred

534
(309)

1,025
334

3,998
(2,313)

224

1,359

1,677

Expenses:
Interest expenses:
Interest on deposits
Interest on negotiable certificates of deposit
Interest on payables under securities lending transactions
Interest on borrowings and rediscounts
Interest on interest rate swaps
Other
Fees and commissions
Other operating expenses
General and administrative expenses
Other expenses

Total income taxes
Net income

¥

51

1,630

¥

1,557

$

12,206

The Hokuto Bank, Ltd.
Non-Consolidated Balance Sheets
March 31, 2023 and 2022

Assets:Cash and due from banks
Monetary claims bought
Trading account securities
Money held in trust
Securities
Loans and bills discounted
Foreign exchange assets
Tangible fixed assets:
Buildings
Land
Lease assets
Construction in progress
Other tangible fixed assets
Intangible fixed assets:
Software
Other intangible fixed assets
Prepaid pension cost
Deferred tax assets
Customers’ liabilities for acceptances and guarantees
Other assets
Allowance for loan losses

Millions of yen
2023
2022

Thousands of
U.S. dollars
2023

167,309967
191
30,121
328,120959,900
731

298,597
941
163
26,062336,979
872,628962$ 1,252,875
7,241
1,430
225,557
2,457,091
7,188,108
5,474

3,980
5,608
14
1
996

4,325
5,955
21
1,169

29,803
41,994
104
7
7,458

1,020
61
521
2,694
13,237
26,109(5,246)

1,212
62
464
2,288
12,27729,019(4,927)

7,638
456
3,901
20,17399,123
195,514(39,284)¥ 1,536,343¥ 1,588,204$ 11,504,740¥

Total assets¥(Continued)
52

The Hokuto Bank, Ltd.
Non-Consolidated Balance Sheets
March 31, 2023 and 2022
Millions of yen
2023
2022
Liabilities:
Deposits
Negotiable certificates of deposit
Payables under securities lending transactions
Borrowed money
Foreign exchange liabilities
Provision for bonuses for directors and other officers
Provision for retirement benefits
Provision for reimbursement of deposits
Provision for contingent loss
Deferred tax liabilities for land revaluation
Acceptances and guarantees
Other liabilities

Thousands of
U.S. dollars
2023¥ 1,362,004
16,375
26,67567,500
20
19
290
44
159
774
13,237
11,362¥ 1,364,255
12,2193,509
130,600
40
14
274
93
187
797
12,277
13,520$10,199,221
122,622
199,752
505,466
149
142
2,171
329
1,190
5,796
99,12385,083

1,498,464

1,537,788

11,221,087

12,50012,50017,392
42,392(5,748)(380)
1,615(4,512)

12,50014,352
20,09546,948
2,020
(203)
1,650
3,468

93,604
93,604130,238
317,447(43,043)(2,845)
12,093(33,787)

Total net assets

37,87950,416283,652

Total liabilities and net assets¥ 1,536,343¥ 1,588,204$11,504,740

Total liabilities
Net assets:
Common stock
Capital surplus
Retained earnings
Total shareholders’ equity
Unrealized gain (loss) on available-for-sale securities
Deferred loss on hedges
Revaluation reserve for land
Total valuation and translation adjustments(Concluded)
53

The Hokuto Bank, Ltd.
Non-Consolidated Statements of Income
Years Ended March 31, 2023 and 2022

Income:Interest income:Interest on loans and discounts
Interest and dividends on securities
Other
Fees and commissions
Other operating income
Other income

Millions of yen
2023
2022

Thousands of
U.S. dollars
2023

¥

$

Total income

8,919
6,731
121
4,264
1,127
1,306

¥

9,113
5,655
280
4,111
1,264
1,736

66,78850,404906
31,9308,439
9,779

22,471

22,161

168,271

30
1
10
0
58
(15)
1,468
4,882
11,520
2,125

44
1
14
0
3
(21)
1,536
3,890
12,017
2,855

224
7
74
0
434
(112)
10,99236,55886,266
15,912

Total expenses

20,082

20,343

150,381

Income before income taxes

2,389

1,818

17,889

292
533

378
26

2,186
3,991

825

405

6,177

Expenses:
Interest expenses:
Interest on deposits
Interest on negotiable certificates of deposit
Interest on payables under securities lending transactions
Interest on borrowings and rediscounts
Interest on interest rate swaps
Other
Fees and commissions
Other operating expenses
General and administrative expenses
Other expenses

Income taxes:
Current
Deferred
Total income taxes
Net income

¥

54

1,563

¥

1,413

$

11,704