PROFILE
Aichi Bank is a regional bank whose business base is Aichi Prefecture, the central prefecture of theTokai region, one of the country’s three main industrial areas. Since its establishment in 1910, theBank has worked to meet the diverse needs of customers in the region, based on its corporate missionof contributing to the prosperity of the community via a thorough commitment to sound management
and business growth.
Aichi Bank has a domestic service network comprising 106 branches, and also engages ininternational operations. The Bank’s head office is located in Nagoya, Aichi Prefecture, Japan’s fourthlargest prefecture by population, and an area that combines a beautiful natural environment with a richhistorical and cultural heritage.
As of March 31, 2017, the Bank had total assets of ¥3,109,996 million (US$27,720 million) on aconsolidated basis, and deposits amounting to ¥2,703,993 million (US$24,101 million). Its capital ratio,
calculated according to standards for banks operating only in Japan, stood at 11.94%.

FINANCIAL HIGHLIGHTS

Years ended March 31, 2017 and 2016
Millions of Yen

Consolidated

2017

Thousands of U.S. Dollars
2017

2016

49,553$445,948$441,688

2016

For the year:

Total income¥50,031¥

Total expenses

42,47040,892

378,554364,488

Profit before income taxes

7,561

8,660

67,394

77,190

Profit attributable to owners of parent

5,067

5,257

45,16446,858¥2,703,993¥ 2,661,691$24,101,907$23,724,850

Loans and bills discounted

1,733,008

1,679,941

15,447,080

14,974,070

Investment securities

1,140,769

1,147,715

10,168,187

10,230,100

Total assets

3,109,996

3,003,317

27,720,795

26,769,917

225,475

226,6702,009,760

2,020,411

At year-end:
Deposits

Total net assets

Note: The U.S. dollar amounts represent translation of Japanese yen at the rate of ¥112.19 = US$1.00 on March 31, 2017.

MESSAGE FROM THE MANAGEMENTBusiness and Financial Conditions

Looking back at Japan’s economy during the year ended
March 31, 2017, in the first half of the year, exports andproduction were sluggish due to slowdown in the global
economy among other factors. Later, however, strong
corporate earnings were posted, particularly among
export-reliant companies, amid ongoing yen depreciation
against the backdrop of a feeling of hope regarding the
economic policies of the new U.S. administration thattook office in January, and monetary easing policies of
the Bank of Japan. Overall, Japan has maintained a
Shinichi Koide, Chairman & Katsuyuki Yazawa, President
moderate track of economic recovery.
The local economy of our business base, which iscentered in Aichi Prefecture, continues to expand moderately, particularly for the automobile industry, one of
the major local industries, with production, exports and capital expenditure all on the rise.
Looking forward, the economic outlook does contain elements of concern, not only with respect tothe deepening labor shortage caused by labor demand increasingly outweighing supply but also due toother factors such as the political situations in Europe and the U. S. and an escalation of geopolitical risk.
Nevertheless, the growing levels of capital investment and the improvement in the employment and income
environment are expected to underpin economic activity.
In the financial sector, the Bank of Japan, despite revising the achievement period for the 2% year-onyear increase in the consumer price index to around fiscal year 2018, adopted a new policy frameworkof “Quantitative and Qualitative Monetary Easing with Yield Curve Control” in September 2016 and isdemonstrating a strong commitment to achieving continued economic recovery.
The Nikkei Stock Average showed instability in the first half of the fiscal year, dropping below the
15,000 point mark for the first time in 20 months, reflecting the uncertainty toward the global economy inresponse to the U.K.’s decision to leave the EU. During the second half of the fiscal year, the increasingly
pronounced trend of yen depreciation against the U.S. dollar in foreign currency exchange under the new
U.S. administration has caused stocks to rise mostly for export-dependent companies, and the Nikkei Stock
Average closed on March 31 at 18,909 points, a year-on-year rise of 2,150 points.
The Bank has been proceeding with the three-year “Tenth Medium-Term Management Plan,” which tookeffect in April 2016. We are undertaking various initiatives under the plan, in which we describe what we aim
to be in ten years as “The leading bank in Aichi that puts serious effort into regional procurement and regional
operation, and contributes to the development of regional communities and the betterment of our customer’s
lives.”

Earnings

Our business results on a consolidated basis for the year ended March 31, 2017 are as follows.
Total income increased ¥478 million year on year to ¥50,031 million (US$445 million) mainly due to theincrease in other income, which principally resulted from an increase in gains on sales of equity securities.
Total expenses increased ¥1,578 million year on year to ¥42,470 million (US$378 million) mainly due tothe increase in other expenses, which principally resulted from an increase in losses on sales of bonds andothers. As a result, profit attributable to owners of parent decreased ¥190 million year on year to ¥5,067
million (US$45 million).
By segment, ordinary income of the banking segment increased ¥552 million year on year to ¥43,449
million (US$387 million) and its segment profit decreased ¥484 million to ¥7,323 million (US$65 million).
Ordinary income of the leasing segment increased ¥838 million year on year to ¥6,270 million (US$55
million), and its segment profit increased ¥129 million to ¥368 million (US$3 million).

Cash Flows

For the year ended March 31, 2017, net cash provided by operating activities increased ¥85,636 million
year on year to ¥54,254 million (US$483 million). This was mainly attributable to increases in security
deposits received related to securities lending transactions and deposits. Net cash provided by investing
activities increased ¥7,582 million to ¥5,403 million (US$48 million). This is mainly attributable to maturities of
securities. Net cash used in financing activities amounted to ¥868 million (US$7 million), a decrease in cashused of ¥71 million. This is mainly due to dividends paid.
As a result, cash and cash equivalents at the end of the year stood at ¥162,789 million (US$1,451 million),
an increase of ¥58,789 million from the previous year-end.

Medium-term Strategy

In our tenth medium-term management plan we describe what we aim to be in ten years as “The leadingbank in Aichi that puts serious effort into regional procurement and regional operation, and contributes to thedevelopment of regional communities and the betterment of our customer’s lives.”
Contributing to the development of regional communities has been a major theme for us, with efforts suchas increasing staff at sales branches by primarily establishing the new business structure, started in Octoberof last year, and streamlining head office organizations, which has led to increased opportunities to visit ourcustomers in small and medium sized enterprises.

Shinichi Koide
Chairman

Katsuyuki Yazawa
President

BOARD OF DIRECTORS AND CORPORATE AUDITORS
Chairman

Directors

Directors

Shinichi Koide

Wataru Ota

Audit and Supervisory Committee Members

Hiroyasu Matsuno

Shigemasa Yoshida*1

President

Nobuhiko Kuratomi

Akira Katsuragawa*3

Katsuyuki Yazawa

Teruyuki Ariga

Hiroshi Okamoto*3
Akio Hayashi*3

Managing Directors

Ichio Miwa*2

Eiji Miyachi

Toshiyasu Hayashi*3

Masato Kobayashi
Yoshihiro Ito
Yukinori Ito
Tomoyuki Takahashi*1‌Standing Audit and Supervisory Committee
Member*2‌Non-Standing Audit and Supervisory Committee
Member*3‌Outside Audit and Supervisory Committee
MemberCORPORATE DIRECTORY
Service Network
Head Office(Securities & Foreign Business Department)
14-12, Sakae 3-chome, Naka-ku, Nagoya 460-8678
Telephone: 81-52-251-3211
SWIFT: AICHJPJN
Facsimile: 81-52-262-5793

Domestic Branches

Gifu (3)Tokyo (1)Head Office
Shizuoka (1)Aichi (98)
Mie (2)
Osaka (1)Total 106 Domestic Branches
Consolidated Companies
Aigin Business Service Co., Ltd.
Aigin DC Card Co., Ltd.
Aigin Lease Co., Ltd.
Aigin Computer Service Co., Ltd.

The Aichi Bank, Ltd.
Consolidated Financial Statements
March 31, 2017 and 2016

KPMG AZSA LLC© 2017 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public
Accountants Law and a member firm of the KPMG network of independent member firms affiliated with KPMGInternational Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

The Aichi Bank, Ltd. and Subsidiaries
Consolidated Balance Sheets
March 31, 2017 and 2016

Millions of yen
2017
2016
Assets:Cash and due from banks(Note 3)¥
164,668 ¥ 104,722
Call loans and bills purchased(Note 3)
3,487
2,753
Trading securities (Notes 3 and 4)
20
Investment securities(Notes 3, 4 and 8)
1,140,769
1,147,715
Reserve for possible losses oninvestments
(17)
(11)
Loans and bills discounted(Notes 3, 5, 15 and 20)
1,733,008
1,679,941
Foreign exchange (Note 6)
1,497
2,717
Other assets
25,92024,565
Tangible fixed assets (Note 7)
35,46835,219Intangible fixed assets
572
173
Employee retirement benefit asset(Note 11)
3,117
3,002
Deferred tax assets (Note 17)
148
179
Customers’ liabilities for acceptancesand guarantees (Note 12)
9,356
11,174
Allowance for possible loan losses(8,020)(8,835)
Total assets¥ 3,109,996¥ 3,003,317

Thousands of U.S. dollars
2017
2016

$

1,467,760

933,434

31,081
178

24,538-

10,168,187

10,230,100

(151)

(98)

15,447,080
13,343231,036
316,142
5,098

14,974,070
24,217
218,958
313,922
1,542

27,783
1,319

26,758
1,595

83,394(71,485)

99,598(78,750)$ 27,720,795$ 26,769,917

The accompanying notes are an integral part of these consolidated financial statements.

-2-$

The Aichi Bank, Ltd. and Subsidiaries
Consolidated Balance Sheets (Continued)
March 31, 2017 and 2016
Millions of yen
2017
2016
Liabilities:
Deposits (Notes 3 and 9)¥ 2,703,993
Negotiable certificates of deposit(Note 3 and 9)
4,100
Security deposits received related tosecurities lending transactions(Notes 3 and 8)
83,042
Borrowings (Notes 3 and 10)
29,975
Foreign exchange (Note 6)
519
Other liabilities (Note 10)26,918Reserve for employee bonuses
648
Reserve for bonuses to directors
46
Employee retirement benefit
1,094
liability (Note 11)
Reserve for executive retirement
benefits
7
Reserve for reimbursement ofdeposits
105
Reserve for contingencies
1,323
Deferred tax liabilities (Note 17)
18,648Deferred tax liabilities forrevaluation (Note 7)
4,740
Acceptances and guarantees(Note 12)9,356
Total liabilities
2,884,520
Net assets (Note 13):
Common stock
Capital surplus
Retained earnings
Less treasury stock, at cost
Total shareholders’ equity
Accumulated other comprehensive
incomeStock acquisition rights
Non-controlling interests
Total net assets
Total liabilities and net assets

Thousands of U.S. dollars
2017
2016

¥ 2,661,691$

24,101,907$

23,724,850-

36,545-37,574
18,915706
17,114652
47740,190
267,180
4,626
239,9325,775
410

334,913
168,597
6,292
152,544
5,811
418

1,353

9,751

12,059

4

62

35

104
1,848
20,716935
11,792
166,218926
16,472
184,651

4,742

42,24942,267

11,174
2,776,646

83,39425,711,025

99,59824,749,496

18,00013,883130,155(768)
161,270

18,00013,883125,966(787)
157,063

160,442
123,745
1,160,130(6,845)
1,437,472

160,442
123,745
1,122,791(7,014)
1,399,973

60,027228
3,949
225,475¥ 3,109,996

65,604
194
3,806
226,670¥ 3,003,317

535,047
2,032
35,1992,009,760
27,720,795

584,757
1,729
33,9242,020,411
26,769,917$

The accompanying notes are an integral part of these consolidated financial statements.

-3-$

The Aichi Bank, Ltd. and Subsidiaries
Consolidated Statements of Income
For the Years Ended March 31, 2017 and 2016

Income:Interest and dividend income:Interest on loans and bills discounted andpurchased¥
Interest on and dividends from securities
Other interest and dividend income
Total interest and dividend income
Fees and commissions
Other operating income (Note 4)
Other income (Notes 4 and 11)
Total income (Note 19)
Expenses:
Interest expense:
Interest on deposits
Interest on borrowings
Other interest expense
Total interest expense
Fees and commissions
Other operating expenses (Note 4)
General and administrative expenses(Notes 14 and 18)
Impairment loss on fixed assets (Note 2(k))
Other expenses (Notes 4 and 5)
Total expenses (Note 19)
Profit before income taxes
Income taxes (Note 17)
ProfitProfit attributable to noncontrolling interests
Profit attributable to owners ofparent¥Millions of yen
2017
2016

Thousands of U.S. dollars
2017
2016

18,11912,80096
31,015
12,716
1,501
4,797
50,031

19,791
12,64997
32,538
11,982
1,555
3,475
49,553$ 161,502
114,092855
276,450
113,343
13,37942,757445,948

1,240
29
11
1,282
8,228
3,936

1,569
38
23
1,630
7,640
1,901

11,052258
98
11,42773,33935,083

13,985338
205
14,52868,098
16,94427,05451
1,918
42,4707,561

26,818230
2,671
40,892
8,660

241,144454
17,095378,554
67,394

239,040
2,050
23,807364,488
77,190

2,337
5,223

3,283
5,376

20,83046,55429,262
47,918

156

118

1,390

1,051

5,067

¥

¥

5,257

$

Yen
Earnings per share:
Basic
DilutedCash dividends¥

467.37465.6490.00¥

45,164

176,406
112,746864
290,025
106,800
13,86030,974
441,688$

46,858

U.S. dollars
484.99483.31
80.00

$

4.16
4.15
0.80

The accompanying notes are an integral part of these consolidated financial statements.

-4-

$

$

4.32
4.30
0.71

The Aichi Bank, Ltd. and Subsidiaries
Consolidated Statements of Comprehensive Income
For the Years Ended March 31, 2017 and 2016

Millions of yen
2017
2016
ProfitOther comprehensive income (Note 21):
Unrealized gains on available-for-salesecurities
Land revaluation increment
Retirement benefit adjustment
Total other comprehensive income
Comprehensive income
Comprehensive income attributable to:
Owners of parent
Non-controlling interests
Total comprehensive income

¥

5,223

¥

(5,658)71(5,586)
(362)

¥
¥

(506)
144
(362)

Thousands of U.S. dollars
2017
2016

¥

5,376

¥

(10,667)
241(3,689)(14,116)(8,739)(50,432)
632(49,790)$ (3,226)(95,079)
2,148(32,881)(125,822)$ (77,894)(8,843)104(8,739)$$ (78,821)
926$ (77,894)

¥
¥

$

$

46,554(4,510)1,283(3,226)

The accompanying notes are an integral part of these consolidated financial statements.

-5-$47,918

The Aichi Bank, Ltd. and Subsidiaries
Consolidated Statements of Changes in Net Assets
For the Years Ended March 31, 2017 and 2016
Shareholders’ equity
Number ofshares ofcommon stock
issuedBalance at April 1, 2015
Profit attributable to owners of parent
Cash dividends
Reversal of land revaluation increment
Treasury stock acquired, net
Transfer to capital surplus from retained
earnings
Net changes in items other thanshareholders’ equity
Balance at March 31, 2016
Profit attributable to owners of parent
Cash dividends
Reversal of land revaluation increment
Treasury stock acquired, net
Transfer to capital surplus from retained
earnings
Net changes in items other thanshareholders’ equity

10,943,240-

Balance at March 31, 2017

10,943,240

Commonstock¥

18,000-Capitalsurplus¥Retainedearnings

13,883 ¥(1)

Total
shareholders’equityTreasurystock

121,529
5,257
(921)
102
-

¥

(774)
(12)

¥

152,639
5,257
(921)
102
(14)

Millions of yen
Accumulated other comprehensive income
Net unrealizedLand
Retirement
Total accumulated
gains onrevaluationotherbenefitavailable-for-saleincrement
comprehensive
adjustment
securities (Note 4)(Note 7)(Note 11)
incomeStockacquisitionrights

Noncontrollinginterests¥¥¥

69,806
-

¥

8,246
-

¥

1,756
-

¥

79,808
-

148
-

3,704
-

Total
net assets¥

236,300
5,257
(921)
102
(14)

-

-

1

(1)

-

-

-

-

-

-

-

-

-

10,943,240-

18,000-13,883(14)

125,966
5,067
(867)
3
-

(787)
18

157,063
5,067
(867)
3
3

(10,653)
59,152
-

139
8,385
-

(3,689)(1,933)-(14,203)65,604
-

46
194
-

102
3,806
-

(14,054)
226,670
5,067
(867)
3
3

-

-

14

(14)

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

(5,645)(3)

71(5,577)33

142(5,401)¥

18,000¥13,883¥130,155

¥

(768)

¥

161,270¥

53,506

¥

8,381

¥

(1,861)¥60,027

¥

228

¥

3,949

¥

225,475$

15,652-$

711,364
-

$

1,319
-

$

33,015-$2,106,248
46,858(8,209)909(124)

Thousands of U.S. dollars
Balance at April 1, 2015
Profit attributable to owners of parent
Cash dividends
Reversal of land revaluation increment
Treasury stock acquired, net
Transfer to capital surplus from retained
earnings
Net changes in items other thanshareholders’ equity
Balance at March 31, 2016
Profit attributable to owners of parent
Cash dividends
Reversal of land revaluation increment
Treasury stock acquired, net
Transfer to capital surplus from retained
earnings
Net changes in items other thanshareholders’ equity$ 160,442-

Balance at March 31, 2017

$ 160,442$

123,745 $(8)

1,083,242
46,858(8,209)909-$(6,899)(106)$

1,360,540
46,858(8,209)
909
(124)

$

622,212-$73,500
-

-

8

(8)

-

-

-

-

-

-

-

-

-

160,442-

123,745(124)

1,122,791
45,164(7,727)26-(7,014)160

1,399,973
45,164(7,727)26
26(94,954)527,248-

1,238
74,739-(32,881)(17,229)-(126,597)
584,757
-

410
1,729
-

909
33,924-(125,269)
2,020,411
45,164(7,727)
26
26

-

124

(124)

-

-

-

-

-

-

-

-

-

-

-

-

-

-

(50,316)

(26)

632

(49,710)

294

1,265

(48,141)$

123,745$

1,160,130$(6,845)$

1,437,472

The accompanying notes are an integral part of these consolidated financial statements.

-6-$476,923$

74,703$(16,587)$

535,047

$

2,032

$

35,199$2,009,760

The Aichi Bank, Ltd. and Subsidiaries
Consolidated Statements of Cash Flows
For the Years Ended March 31, 2017 and 2016
Millions of yen
2017
2016
Cash flows from operating activities:
Profit before income taxes
Adjustments for:
Depreciation
Impairment loss on fixed assets
Gain on refund from retirement benefit trusts
Decrease in allowance for possible loan losses
Interest and dividend income
Interest expense(Increase) decrease in trading securities
Increase in loans and bills discounted
Increase in call loans and bills purchased
Increase in deposits
Increase in negotiable certificates of deposit
Increase (decrease) in security deposits received
related to securities lending transactions
Increase in borrowings(excluding subordinated borrowings)
Gain on securities transactions(Gain) loss on foreign currency transactions(Decrease) increase in reserve for contingencies
Interest and dividend income received
Interest expense paid
Other, net
Subtotal
Income taxes paid
Net cash provided by (used in) operating
activities

¥

7,561

¥

8,660

Thousands of U.S. dollars
2017
2016

$

67,394$

77,190

1,306
51
(815)
(31,015)1,282(20)(53,067)(734)
42,301
4,100

1,456
230
(856)
(1,797)(32,538)
1,630
77(24,783)(581)
23,283-

11,640454(7,264)(276,450)
11,427(178)(473,010)(6,542)
377,047
36,545

12,9772,050(7,629)(16,017)(290,025)
14,528686(220,902)(5,178)207,531-45,468(37,511)405,276(334,352)

11,060
(912)
(183)
(524)
32,122(1,590)(237)
56,152(1,897)

1,260
(764)
3,890
259
33,632(1,784)(3,190)(29,426)(1,955)98,582(8,129)(1,631)(4,670)286,317(14,172)(2,112)500,508(16,908)

11,230(6,809)34,673
2,308
299,777(15,901)(28,433)(262,287)(17,425)

54,254(31,382)

483,590(279,721)(247,778)
255,099(1,544)
109
(482)
-

(329,188)
328,891(1,913)
94
(26)
(36)

(2,208,556)
2,273,812(13,762)971(4,296)-(2,934,200)
2,931,553(17,051)
837
(231)
(320)

5,403

(2,178)48,159(19,413)

(867)
(1)
(868)

(921)
(18)
(940)

(7,727)(8)(7,736)(8,209)(160)(8,378)Net increase (decrease) in cash and cash equivalents

58,789(34,501)

524,012(307,522)

Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year (Note 2(b))

104,000
162,789

138,501
104,000

926,998$ 1,451,011

1,234,521$
926,998

Cash flows from investing activities:
Purchases of securities
Proceeds from sales and maturities of securities
Purchases of tangible fixed assets
Proceeds from sales of tangible fixed assets
Purchases of intangible fixed assets
Payment for asset retirement obligations
Net cash provided by (used in) investing
activities
Cash flows from financing activities:
Dividends paid
Other, net
Net cash used in financing activities¥¥

The accompanying notes are an integral part of these consolidated financial statements.

-7-

The Aichi Bank, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2017 and 2016

1. Basis of Presenting Consolidated Financial Statements
The consolidated financial statements of The Aichi Bank, Ltd. (the “Bank”) and its subsidiaries(collectively the “Group”) have been prepared in accordance with the provisions set forth in the Japanese
Financial Instruments and Exchange Act of Japan and its related accounting regulations and in conformity
with accounting principles generally accepted in Japan (“Japanese GAAP”), which are different in certain
respects as to the application and disclosure requirements from International Financial Reporting Standards.
The accompanying consolidated financial statements have been reformatted and translated into English
with some expanded descriptions from the consolidated financial statements of the Bank prepared inaccordance with Japanese GAAP and filed with the appropriate Local Finance Bureau of the Ministry of
Finance as required by the Financial Instruments and Exchange Act. Certain supplementary information
included in the statutory Japanese language consolidated financial statements is not presented in theaccompanying consolidated financial statements.
The translation of the Japanese yen amounts into U.S. dollar amounts is included solely for the convenienceof readers outside Japan, using the prevailing exchange rate at March 31, 2017, which was ¥112.19 to U.S.
$1.00. This translation should not be construed as a representation that the Japanese yen amounts havebeen, could have been or could in the future be converted into U.S. dollars at this or any other rate ofexchange.
The Japanese yen amounts in the accompanying consolidated financial statements are expressed in millions
of Japanese yen and have been rounded down. U.S. dollar amounts in the accompanying consolidated
financial statements are expressed in thousands of U.S. dollars and also have been rounded down. As aresult, total amounts expressed in both Japanese yen and U.S. dollars appearing in the consolidated financial
statements and the notes thereto may not be equal to the sum of the individual amounts.

2. Summary of Significant Accounting Policies(a) Principles of consolidation
The consolidated financial statements include the accounts of the Bank and all of its subsidiaries, which
are engaged primarily in providing a wide range of financial services. At both March 31, 2017 and 2016,
the Bank had four subsidiaries but no affiliates. All intercompany transactions and accounts have been
eliminated.
(b) Cash and cash equivalents
For the purpose of the consolidated statements of cash flows, cash and cash equivalents consisted of cash
and due from the Bank of Japan as follows:
Millions of yen
2017
2016
Cash and due from banks
Less due from banks other thanBank of Japan
Cash and cash equivalents

Thousands of U.S. dollars
2017
2016

¥

164,668¥

104,722$

1,467,760$

933,434¥(1,878)
162,789¥(722)
104,000$(16,739)
1,451,011$(6,435)926,998-8-

(c) Trading securities
Trading securities are stated at fair value at the end of the fiscal year. Related gains and losses, both
realized and unrealized, are included in the consolidated statements of income. Accrued interest on
trading securities is included in “Other assets.”(d) Investment securities
Debt securities for which the Group has both the intent and the ability to hold to maturity are classified as
held-to-maturity debt securities and are stated at amortized cost determined by the moving average method.
In principle, available-for-sale securities are carried at the fair value as of the balance sheet date. Net
unrealized gain and loss on these securities, net of tax, are reported as a component of accumulated othercomprehensive income in net assets. Available-for-sale securities for which the fair value is extremely
difficult to determine are stated at moving average cost. The carrying value of individual investment
securities is reduced, if necessary, through a write-down when a decline in value is deemed other than
temporary. Gain and loss on the disposal of investment securities are computed principally using themoving average method. Accrued interest on securities is included in “Other assets.”(e) Derivative financial instruments
Derivative financial instruments are recorded at fair value if hedge accounting is not applied, and gain andloss on the derivatives are recognized in the consolidated statements of income.
(f) Reserve for possible losses on investments
Pursuant to the internal rules of the Bank, a reserve for possible losses on investments is provided in an
amount necessary to absorb future losses after considering the financial positions of the issuers of the
securities. A provision of reserve for possible losses on investments is included in “Other expenses” andamounted to ¥6 million ($53 thousand) and none for the years ended March 31, 2017 and 2016, respectively.
(g) Loans and bills discounted and allowance for possible loan losses
Loans and bills discounted are stated at the amount of unpaid principal. Unearned interest and discounts
are recorded as liabilities and recognized as income over the term of the loan or bill.
An allowance for possible loan losses of the Bank is provided to cover future credit losses in accordancewith internal rules for self-assessment of asset quality. Loans written off are charged either to anallowance for possible loan losses and/or current income. Recoveries on loans that have been written off
are recorded as other income. The allowance for possible loan losses is made based on the Bank’s internal
rules in accordance with Report No. 4 of the Ad Hoc Committee for Audits of Banks, “Practical Guideline
for Audits of Write-off of Bad Loans and Allowance for Doubtful Loans of Banks and Similar Financial
Institutions,” issued by the Japanese Institute of Certified Public Accountants (“JICPA”). For loans toborrowers that are legally or substantially bankrupt, an allowance is provided based on the amount of theclaims, net of amounts expected to be collected through the disposal of collateral or the execution ofguarantees. For loans to borrowers who are likely to become bankrupt, an allowance is provided basedon an overall solvency assessment, net of amounts expected to be collected through the disposal ofcollateral or the execution of guarantees. For loans to borrowers not mentioned above, an allowance isprovided based on the historical loss experience of the Bank for a certain past period. All claims areassessed by the Bank’s operating divisions based on the Bank’s internal rules for self-assessment of asset
quality.
The inspection division, which is independent from the operating divisions, conducts
examinations of these assessments.
An allowance for possible loan losses of the subsidiaries is made for the aggregate amount of estimatedcredit loss based on an individual financial review of doubtful or troubled receivables and a general reservebased on historical loss experience for other receivables.

-9-(h) Tangible fixed assets and depreciation (except for leases)
Tangible fixed assets of the Bank are stated at cost, less accumulated depreciation. Depreciation isprincipally computed using the declining balance method over the estimated useful life of the asset.
Buildings, excluding facilities attached thereto, acquired on or after April 1, 1998 and facilities attached tobuildings and structures acquired on or after April 1, 2016 are, however, depreciated using the straight-line
method. The useful lives of tangible fixed assets range from 8 to 50 years for buildings and from 3 to 20
years for other fixed assets.
Tangible fixed assets of the subsidiaries are depreciated principally by the straight-line method over theestimated useful life of the asset.
(i) Intangible fixed assets and amortization (except for leases)
Intangible fixed assets are amortized using the straight-line method. Costs of computer softwaredeveloped or obtained for internal use are deferred and amortized by the straight-line method principallyover the estimated useful life of five years as determined by the Bank and its subsidiaries.
(j) Leases
All finance lease transactions are accounted for in a manner similar to that used for ordinary sale andpurchase transactions.
(Accounting for leases as lessee)
The Group, as lessee, capitalizes leased assets used under finance leases, except for certain immaterial or
short-term finance leases which are accounted for as operating leases as permitted under the accounting
standard for leases. Depreciation of the leased assets capitalized in finance lease transactions arecomputed by the straight-line method over the lease term, which is used as the useful life, and with theassumption of no residual value.
(Accounting for leases as lessor)
In accordance with the relevant accounting standards for leases, a certain subsidiary engaged primarily inleasing operations as a lessor recognizes “investments in leased assets” for finance leases that do nottransfer ownership of the leased assets to the lessee in a manner similar to the accounting treatment forordinary sales transactions. The “investment in leased assets” account is presented as other assets in theaccompanying consolidated balance sheets. The amount equivalent to total interest is allocated over thelease term using the effective interest method, and lease income from lease payments and related costs, netof imputed interest, are recognized when the lease payments are received.
(k) Impairment loss on fixed assets
Fixed assets are reviewed for impairment whenever events or changes in circumstances indicate that thecarrying value of an asset may not be recoverable. If the carrying value of an asset or a group of assets
exceeds the sum of the undiscounted future cash flows expected to result from the continued use andeventual disposal of the asset or group of assets, impairment loss is recognized in the income statement by
reducing the carrying value of the impaired asset or group of assets to the recoverable amount, measured
as the higher of net selling price or value in use. Fixed assets include intangible assets as well as land,buildings and other forms of property and are grouped at the lowest level for which there are cash flows
identifiably different from those of other groups of assets. To recognize and measure an impairment loss,
fixed assets are grouped into cash-generating units such as operating business branches, other than idle orunused property. Recoverable amounts of the assets are based on value in use, calculated using thediscounted future cash flows at interest rates principally of 9.5% and 8.0% for the years ended March 31,2017 and 2016, respectively, or net selling prices based primarily on appraisal valuations, net of theestimated costs of disposal.
For the years ended March 31, 2017 and 2016, the Group recognized impairment loss, which is included
in “Impairment loss on fixed assets,” in the accompanying consolidated statements of income as follows:- 10 -

Millions of yen
2017
Buildings andOtherstructuresproperties

Land
Operating assets:
Aichi Prefecture
Other
Idle assets:
Aichi Prefecture
Other
Total

¥

0
5
1
7

¥

¥

¥

33
1
116
18
169

$

$

0
44
8
62

Land
Operating assets:
Aichi Prefecture
Other
Idle assets:
Aichi Prefecture
Other
Total

$

0
44

¥

¥

-

¥

¥

¥

¥

26
22
1
10
61

¥

¥

0
0

294
8

1,033
160
$ 1,506- 11 -

$

$

303
80
0
392

$

$

-

¥

¥

$

231
196
8
89
543

$

$

0
0

5
1
51

60
23
117
29
230

Total
$

$

Thousands of U.S. dollars
2016
Buildings andOtherstructuresproperties
$

34
9

Total

Thousands of U.S. dollars
2017
Buildings andOtherstructuresproperties

Land
Operating assets:
Aichi Prefecture
Other
Idle assets:
Aichi Prefecture
Other
Total

¥

34
9

Millions of yen
2016
Buildings andOtherstructuresproperties

Land
Operating assets:
Aichi Prefecture
Other
Idle assets:
Aichi Prefecture
Other
Total

¥

Total

303
80
44
8
454

Total
$

$

534
205
1,042
258
2,050

(l) Foreign currency translation
Assets and liabilities denominated in foreign currencies are generally translated into Japanese yen at theexchange rate prevailing at the balance sheet date. Income and expenses are translated at the exchange
rate in effect at the transaction date. Gain and loss resulting from foreign currency translation are includedin the consolidated statements of income.
(m) Reserve for employee bonuses
A reserve for employee bonuses is provided based on the estimated amounts of future payments attributable
to the respective fiscal year.
(n) Reserve for bonuses to directors
A reserve for bonuses to directors and audit and supervisory board members is provided for future bonus
payments to directors and audit and supervisory board members that reflect an amount estimated to haveaccrued as of the consolidated balance sheet date.
(o) Employee retirement benefits
Employees who terminate their service with the Group are entitled to retirement benefits generally
determined with reference to the basic salary at the time of termination, years of service and conditions
under which the termination occurs.
The Group recognizes retirement benefits, including pension costs and related liabilities, based principallyon the actuarial present value of the retirement benefit obligation using an actuarial appraisal approach andthe value of pension plan assets available for benefits at the fiscal year-end.
In determining retirement benefit obligation, the benefit formula method is used for attributing expected
retirement benefits to the period up to the end of the respective fiscal year. Actuarial differences arisingfrom changes in the projected benefit obligation or value of pension plan assets resulting from outcomes
which are different from those assumed and from changes in the assumptions themselves are amortized ona straight-line basis principally over 13 to 14 years, a period within the average remaining years of serviceof the employees at the time when the differences arise, from the fiscal year after the year the differences
arise.
(p) Reserve for executive retirement benefits
A reserve for executive retirement benefits is provided for payment of retirement benefits to directors, audit
and supervisory board members and other executive officers in the amount deemed to have accrued at theconsolidated balance sheet date according to the internal rules of the Group.
(q) Reserve for reimbursement of deposits
A reserve for reimbursement of deposits is provided for possible losses on the future claims of withdrawal
based on historical reimbursement experience. A provision of reserve for reimbursement of deposits was
included in “Other expenses” and amounted to ¥88 million ($784 thousand) and ¥65 million ($579
thousand) for the years ended March 31, 2017 and 2016, respectively.
(r) Reserve for contingencies
A provision of reserve for contingencies included in “Other expenses” is made in an amount deemednecessary to cover possible losses resulting from the default of loans under a responsibility-sharing systemwith Credit Guarantee Corporation based primarily on historical default rates. For the years ended March
31, 2017 and 2016, the provision was recorded in the amount of none and ¥259 million ($2,308 thousand),
respectively.

- 12 -

(s) Stock options
The Group has applied ASBJ Statement No. 8, “Accounting Standard for Stock Options,” and its related
guidance. This standard and guidance are applicable to stock options granted on or after May 1, 2006.
This standard requires companies to measure the cost of employee stock options based on the fair value atthe grant date and recognize compensation expense over the vesting period as consideration for the goods
or services received from the employees. The standard also requires companies to account for stock
options granted to non-employees based on the fair values of either the stock options or goods or services
received from the non-employees. In the balance sheets, stock options are presented as stock acquisitionrights, a separate component of net assets, until exercised. The standard covers equity-settled, share-based
payment transactions, but does not cover cash-settled, share-based payment transactions. In addition, thestandard allows unlisted companies to measure options at their intrinsic value if the fair value cannot be
reliably estimated.
(t) Income taxes
Income taxes are accounted for using the asset-liability method. Deferred tax assets and liabilities arerecognized for the future tax consequences attributable to differences between the carrying values ofexisting assets and liabilities and their respective tax bases and operating loss carryforwards. Deferred
tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income inthe years in which those temporary differences are expected to reverse. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in the period that includes the enactment date.
(u) Appropriation of retained earnings
Cash dividends are recorded in the fiscal year when a proposed appropriation of retained earnings isapproved by the shareholders.
(v) Per share data
Earnings per share is computed by dividing profit attributable to owners of parent by the weighted average
number of shares of common stock outstanding during the respective year.
Diluted earnings per share is computed to reflect the potential dilution that could occur if securities were
exercised or converted into common stock, assuming the full exercise of the outstanding stock options.
Cash dividends per share shown in the accompanying consolidated statements of income represent
dividends declared by the Bank as applicable to the respective year.
(w) Change in accounting policy(Application of Practical Solution on a Change in Depreciation Method due to Tax Reform 2016)
Following the revision to the Corporation Tax Act of Japan, the Bank has applied the “Practical Solution
on a Change in Depreciation Method due to Tax Reform 2016” (Accounting Standards Board of Japan(“ASBJ”) Practical Issues Task Force No. 32, issued on June 17, 2016) from the fiscal year ended March
31, 2017 and changed the depreciation method for facilities attached to buildings and structures acquiredon or after April 1, 2016 from the declining balance method to the straight-line method. The effect of thischange on profit before income taxes for the fiscal year ended March 31, 2017 was insignificant.
(x) Additional information(Application of Implementation Guidance on Recoverability of Deferred Tax Assets)
The Group has applied the “Implementation Guidance on Recoverability of Deferred Tax Assets” (ASBJ
Guidance No. 26, issued on March 28, 2016) from the fiscal year ended March 31, 2017.

- 13 -

3. Financial Instruments(a) Qualitative information on financial instrumentsi) Policies for financial instruments
The Group procures funds by accepting deposits from clients and utilizes the funds for financial
investments in the bond and stock markets and for making loans to corporate and individual clients.
The Group enters into derivative transactions in order to avoid the risk of foreign currency fluctuations on
customers’ funds as well as to conduct foreign financing transactions and to avoid the risk of rising interest
rates for the Bank. From an overall risk management standpoint, the Bank uses derivative instruments ashedging instruments in order to avoid the market risk to which financial assets and liabilities are exposed.
ii) Details of financial instruments and related risks
Financial assets of the Group consist mainly of loans to corporate and individual clients and are exposed tointerest rate risk and credit risk resulting from any deterioration in the financial condition of thecounterparty.
Investment securities comprise mainly debt and equity securities. The Group holds debt securities
classified as held-for-sale, available-for-sale or held-to-maturity and equity securities to pursue capital gainor to maintain relationships with corporate clients. These securities are exposed to the credit risk of theissuers, interest rate risk, market risk and foreign currency risk. Deposits consist of demand deposits andtime deposits. The maturities of time deposits are within five years.
Asset-liability management techniques are employed to manage financial assets and liabilities sensitive tointerest rate fluctuations.
iii) Risk management for financial instruments
Credit risk management
The Bank manages credit risk by conducting strict credit examinations on respective debtors.
Additionally, the Bank analyzes the risk by credit rating and industry in chronological order anddiversifies the risk of its portfolios in the entirety.
The Group manages credit risk under the Credit Supervision Section, examining and assessing financial
circumstances, industry trends, purposes of loans and repayment plans of respective debtors.
Assessments are conducted to evaluate the credit standing of prospective debtors before entering into atransaction, for credit management after execution, as a self-assessment on a regular basis and at any
time when a relevant event occurs. By the self-assessment, assets are classified by the degree of risk
based on the debtor’s classification and the existence of any collateral or guarantees. The results ofthe self-assessments are examined by the Self-Assessment Verification Section and are reported to the
management.
As to the credit portfolios in the entirety, the level of concentration in the industry and large transactions
are monitored by the Credit Management Section on a regular basis in order to construct portfolios thatavoid concentration risk. The Credit Management Section periodically reports the results tomanagement.
Moreover, an internal credit rating system has been introduced that classifies debtors according tocreditworthiness. The Bank uses the credit rating for screening and credit management of debtors aswell as monitoring the credit portfolio.
As credit risk is quantified, the Bank is able to manage the credit risk more effectively.

- 14 -

Market risk management
The Compliance and Risk Control Department of the Bank monitors market risk. The department
quantifies the risk whenever possible and performs stress tests and simulation analyses to analyze thepossible effects of changes in market variables such as interest rates, stock prices and exchange rates
on the amount of market risk the Bank is exposed to and on the profit and loss of the Bank.
The results of the analyses are regularly reported to the Board of Directors, the Risk Management
Committee and other relevant parties. The Risk Management Committee and other relevant parties
confirm that the level of risk is sufficiently limited considering the equity of the Bank and review thepolicies for controlling market risk.
Interest rate risk and stock price risk are significant risks for the Group. Major financial instruments
which are exposed to interest rate risk are “Loans and bills discounted,” debt securities classified asavailable-for-sale securities under “Investment securities” and “Deposits.” Financial instruments which
are exposed to stock price risk are equity securities classified as available-for-sale securities in“Investment securities.” The Group uses Value at Risk (“VaR”) calculated based on the financial
assets and liabilities categorized into “integrated market risk,” “debt securities,” “investment trust andother securities,” “equity securities held for investment” and “strategically held equity securities” toperform quantitative analysis and manage interest rate and stock price fluctuation risks. VaR was
calculated using the historical simulation method with the assumption of a holding period of 125
business days, a 99% confidence interval and an observation period of 5 years for the year ended March
31, 2016, and of a holding period of 125 business days, a 99% confidence interval and an observation
period of 10 years for the year ended March 31, 2017.
The total market risk exposure of the Group as estimated loss amounted to ¥37,190 million ($331,491
thousand) and ¥18,022 million ($160,638 thousand) as of March 31, 2017 and 2016, respectively. In
calculating VaR as of March 31, 2017, VaR amounts for interest rate risk associated with the banking
account and price fluctuation risk associated with the investment trust and other securities andfluctuation risk associated with the equity securities held for investment were summed with that for
price fluctuation risk associated with strategically held equity securities. In calculating VaR as ofMarch 31, 2016, VaR amounts for interest rate risk associated with the banking account and pricefluctuation risk associated with the equity securities held for investment were summed with that for
price fluctuation risk associated with strategically held equity securities.
The Group ensures the reliability and accuracy of the measurement model by performing back-testing,that is, comparing VaR amounts measured using the model with actual amounts of profit and loss.
However, VaR reflects market risk exposures statistically calculated under certain probabilities basedon historical market volatility; therefore, it may not be able to accurately reflect the risks when themarket environment changes extraordinarily.
iv) Supplemental information on fair value of financial instruments
Fair values of financial instruments are estimated based on quoted market prices or based on reasonably
calculated prices if quoted market prices are not available. Certain assumptions are used to calculate suchprices. Therefore, prices may be different under different assumptions.

- 15 -

(b) Fair value of financial instruments
The following is a summary of the carrying values and fair values of financial instruments at March 31,2017 and 2016.

Financial assets:
Cash and due from banks
Call loans and bills purchased
Trading securities
Investment securities:
Available-for-sale securities (*1)
Loans and bills discounted:
Loans and bills discounted
Allowance for possible loan losses (*2)
Loans and bills discounted, net
Total assets
Financial liabilities:
Deposits
Negotiable certificates of deposit
Security deposits received related tosecurities lending transactions
Borrowings
Total liabilities
Derivative transactions (*3):
Not qualifying for hedge accounting
Total derivative transactions

Carrying value

Millions of yen
2017
Fair value

¥

¥

¥
¥

164,668
3,487
20

-

1,138,631-

1,733,008(7,329)1,725,679
3,032,486

1,751,889
3,058,696

26,20926,2092,703,993
4,100¥

83,042
29,9752,821,111

¥
¥

(229)
(229)

¥

¥

1,138,631¥¥

104,722
2,753-

2,704,873
4,100

¥
¥

879
-

¥

83,04230,0132,822,029

¥

38
917

¥
¥

(229)
(229)

¥
¥

-

2016
Fair value

Carrying value
Financial assets:
Cash and due from banks
Call loans and bills purchased
Trading securities
Investment securities:
Available-for-sale securities (*1)
Loans and bills discounted:
Loans and bills discounted
Allowance for possible loan losses (*2)
Loans and bills discounted, net
Total assets
Financial liabilities:
Deposits
Security deposits received related tosecurities lending transactions
Borrowings
Total liabilities
Derivative transactions (*3):
Not qualifying for hedge accounting
Total derivative transactions

164,668
3,487
20

Difference¥

1,145,397

104,722
2,753-

Difference¥

1,145,397-¥

1,679,941(8,118)
1,671,822
2,924,695¥

1,700,258
2,953,131¥

28,43528,435¥2,661,691¥

2,662,602

¥

910

¥

37,574
18,9152,718,181¥

37,574
18,9572,719,134

¥

42
953

¥
¥

960
960

¥
¥

960
960

¥
¥

-

- 16 -

Thousands of U.S. dollars
2017
Carrying value
Fair value
Difference
Financial assets:
Cash and due from banks
Call loans and bills purchased
Trading securities
Investment securities:
Available-for-sale securities (*1)
Loans and bills discounted:
Loans and bills discounted
Allowance for possible loan losses (*2)
Loans and bills discounted, net
Total assets
Financial liabilities:
Deposits
Negotiable certificates of deposit
Security deposits received related tosecurities lending transactions
Borrowings
Total liabilities
Derivative transactions (*3):
Not qualifying for hedge accounting
Total derivative transactions$

1,467,760
31,081
178

$
$

$

-

10,149,130-

15,447,080(65,326)
15,381,754
27,029,913

15,615,375
27,263,535

233,612233,612

24,101,907
36,545$740,190
267,180
25,145,832$$(2,041)(2,041)$$

10,149,130$$

933,434
24,538-$

24,109,751
36,545

$

7,834
-

$

740,190
267,519
25,154,015

$

338
8,173

$
$

(2,041)(2,041)

$
$

-

2016
Fair value

Carrying value
Financial assets:
Cash and due from banks
Call loans and bills purchased
Trading securities
Investment securities:
Available-for-sale securities (*1)
Loans and bills discounted:
Loans and bills discounted
Allowance for possible loan losses (*2)
Loans and bills discounted, net
Total assets
Financial liabilities:
Deposits
Security deposits received related tosecurities lending transactions
Borrowings
Total liabilities
Derivative transactions (*3):
Not qualifying for hedge accounting
Total derivative transactions

1,467,760
31,081
178$

10,209,439

Difference

933,434
24,538-$-

10,209,439-$

14,974,070(72,359)
14,901,702
26,069,123$

15,155,165
26,322,586$

253,453
253,453$

23,724,850$

23,732,970

$

8,111

$

334,913
168,597
24,228,371$

334,913
168,972
24,236,866

$

374
8,494

$
$

8,556
8,556

$
$

8,556
8,556

$
$

-

Notes:(*1) The following securities were excluded from the above tables because their fair values were extremely
difficult to determine.
Millions of yen
2017
2016
Unlisted stocks*
Other nonmarketablesecurities

Thousands of U.S. dollars
2017
2016

¥

1,643

¥

1,852

$

14,644$

16,507

¥

494
2,138

¥

465
2,318

$

4,403
19,056$

4,144
20,661- 17 -

* For the years ended March 31, 2017 and 2016, loss on the write-down of these securities was recognizedin the amount of ¥8 million ($71 thousand) and ¥2 million ($17 thousand), respectively.
(*2) Allowance for possible loan losses on ordinary and specific claims corresponding to loans and bills
discounted is deducted.
(*3) Derivative transactions recorded in other assets and liabilities are presented in a lump sum on a net basis.
A net liability position is shown in parenthesis.

Methods for calculating the fair value of financial instruments were as follows:
Financial assets:● Cash and due from banks – The fair value of due from banks without maturities approximates the
carrying value. As for those with maturities, the present value calculated by discounting the amount
categorized based on the remaining term to maturity as of the consolidated balance sheet date at therisk free rate is used as the fair value. As for those with maturities up to one year as of theconsolidated balance sheet date, the carrying value is used as the fair value after it is confirmed thatthe fair value approximates the carrying value.
● Call loans and bills purchased – The present value calculated by discounting the amount categorizedbased on the remaining term to maturity as of the consolidated balance sheet date at the risk free rateis used as the fair value of call loans and bills purchased. As for those with maturities up to one
year as of the consolidated balance sheet date, the carrying value is used as the fair value after it isconfirmed that the fair value approximates the carrying value.
● Trading securities – The fair value of trading securities such as debt securities held for dealing
operations is based on the quoted market price or the price obtained from the counterparty financial
institution.
● Investment securities – The fair value of equity securities is based on the quoted market price. The
fair value of debt securities is based on the quoted market price or the price obtained from thecounterparty financial institution. The fair value of investment trust funds is based on the constantvalue.
The fair value of private placement bonds guaranteed by the Bank is calculated by discounting thefuture cash flows at the risk free rate to which the consideration (risk premium) to cover uncertainty
inherent in cash flows (credit risk and others), which is calculated based on the amount expected tobe collected according to the internal credit rating and the existence of collateral or guarantees, isadded. As for transactions with maturities up to one year as of the consolidated balance sheet date,the carrying value is used as the fair value after it is confirmed that the fair value approximates the
carrying value. Additional information on securities classified by holding purpose is presented in
Note 4, “Trading Securities and Investment Securities.”● Loans and bills discounted – The fair value of loans and bills discounted to corporate clients is
calculated by discounting the future cash flows at the risk free rate to which the consideration (riskpremium) to cover uncertainty inherent in cash flows (credit risk and others), which is calculated
based on the amount expected to be collected according to the internal credit rating and the existenceof collateral or guarantees, is added. The fair value of those to individual clients is calculated as
the total of principal and interest discounted by the rate assumed when a similar loan is executed.
As for transactions whose due date is within one year as of the consolidated balance sheet date, thecarrying value is used as the fair value after it is confirmed that the fair value approximates the
carrying value.
As for loans to borrowers that are legally or substantially bankrupt and those who are likely to
become bankrupt, the estimated loan losses are calculated based on the present value of the estimatedfuture cash flows or the amount expected to be collected due to collateral or guarantees. As a result,the fair value approximates the carrying value as of the consolidated balance sheet date minus theallowance for possible loan losses.

- 18 -

Financial liabilities:● Deposits and negotiable certificates of deposit – The fair value of demand deposits is deemed as theamount that would be paid if demanded by the clients as of the consolidated balance sheet date (thecarrying value). The fair value of time deposits is the present value calculated by discounting future
cash flows of the amount categorized based on a certain period. The discount rate is the rate thatwould apply when a new deposit is accepted. As for those with maturities up to one year as of theconsolidated balance sheet date, the carrying value is used as the fair value after it is confirmed thatthe fair value approximates the carrying value.
● Security deposits received related to securities lending transactions and borrowings – The present
value calculated by discounting the amount categorized based on the remaining term to maturity asof the consolidated balance sheet date at the risk free rate is used as the fair value. As fortransactions with maturities up to one year as of the consolidated balance sheet date, the carrying
value is used as the fair value after it is confirmed that the fair value approximates the carrying value.
Derivative transactions:
Information on fair value of derivative transactions is presented in Note 16, “Derivative Financial
Instruments.”- 19 -

(c) Redemption schedule for financial instruments with maturities
The redemption schedule for financial instruments with maturities at March 31, 2017 was as follows:

Due after
1 yearthrough
3 years

Due in 1 year
or less
Financial assets:
Due from banks
Call loans and bills purchased
Investment securities:
Available-for-sale securities:
Japanese government
bonds
Local government bonds
Corporate bonds
Foreign bonds
Other
Total investment securities
Loans and bills discounted (*1)
Financial liabilities:
Deposits (*2)
Negotiable certificates ofdepositSecurity deposits received
related to securities lendingtransactions
Borrowings¥

128,319
3,487¥

39,80018,908105,238
9,143
4,051
177,141
294,626
603,574¥

2,399,338

¥

¥

$

¥
¥

296,109¥-¥

123,100
32,64488,39325,48639,262308,887
229,656
538,544

¥

8,545

¥

Due after
7 years
through
10 years
-

¥

6,539
28,7338,879
44,152
129,824
173,977¥-¥

Due after
10 years
-

¥

-

¥

2,000
19,63911,154
110,310
143,103
154,026
297,130¥

26,5007,205
33,705
330,342364,048

¥

-

¥

-

4,100

-

-

-

-

-

83,042
23,8552,510,336

3,950
300,059

2,170
10,715

-

-

-

¥

¥

¥

¥

Thousands of U.S. dollars
2017
Due after
Due after
3 years
5 years
throughthrough
5 years
7 years

Due after
1 yearthrough
3 years$

354,755
168,535
938,033
81,495
36,108
1,578,937
2,626,134
5,379,926

568,678
251,903
976,726
191,416
247,856
2,236,589
3,174,454$ 5,411,052

1,097,245
290,970
787,886
227,168
349,959
2,753,248
2,047,027$ 4,800,285

58,285
256,110
79,142
393,546
1,157,179$ 1,550,735

17,826
175,051
99,420983,242
1,275,541
1,372,903$ 2,648,453

236,206
64,221
300,427
2,944,487$ 3,244,923$ 21,386,380$ 2,639,352

$

$

$

$

36,545

-

-

-

-

-

740,190
212,630$ 22,375,755

35,208$ 2,674,561

19,342
95,507

-

-

-

$

-

76,165

$

$

-

-

$

Due after
10 years$- 20 --

Due after
7 years
through
10 years¥

1,143,765
31,081$
Financial liabilities:
Deposits (*2)
Negotiable certificates ofdepositSecurity deposits received
related to securities lendingtransactions
Borrowings-

63,80028,261
109,579
21,47527,807250,923
356,142
607,066

Due in 1 year
or less
Financial assets:
Due from banks
Call loans and bills purchased
Investment securities:
Available-for-sale securities:
Japanese government
bonds
Local government bonds
Corporate bonds
Foreign bonds
Other
Total investment securities
Loans and bills discounted (*1)

Millions of yen
2017
Due after
Due after
3 years
5 years
throughthrough
5 years
7 years

$

-

-

$

$

-

-

Notes:(*1) At March 31, 2017, the total amount of loans which were not expected to be recovered, including claims toborrowers that were legally or substantially bankrupt and to those who were likely to become bankrupt,
amounted to ¥36,965 million ($329,485 thousand). Loans without due dates in the amount of ¥201,424 million($1,795,382 thousand) were excluded.
(*2) Demand deposits were included in “Due in 1 year or less.”

4. Trading Securities and Investment Securities
At March 31, 2017, trading securities consisted of Japanese government bonds only.
carrying value of trading securities at March 31, 2016.

There was no

At March 31, 2017 and 2016, investment securities consisted of the following:

Millions of yen
2017
2016
Japanese government bonds
Local government bonds
Bonds and debentures
Equity securities
Other

¥

264,875
108,396356,602125,217285,677¥ 1,140,769¥¥

Thousands of U.S. dollars
2017
2016

266,501
111,059
409,205
121,847
239,103
1,147,715$ 2,360,950
966,182
3,178,554
1,116,115
2,546,367$ 10,168,187$ 2,375,443
989,918
3,647,428
1,086,077
2,131,232$ 10,230,100

At March 31, 2017 and 2016, investment securities included Japanese government bonds of ¥2,110 million($18,807 thousand) and ¥7,447 million ($66,378 thousand), respectively, as loans without collateral(securities lending transactions).
At March 31, 2017 and 2016, liabilities for guarantees on corporate bonds included in “Investment
securities,” which were issued by private placement (Article 2, Paragraph 3 of the Financial Instruments
and Exchange Act), amounted to ¥15,068 million ($134,307 thousand) and ¥12,777 million ($113,887
thousand), respectively.
Securities are classified as trading, held-to-maturity or available-for-sale. The classification determines
the respective accounting method that should be used to account for these securities, as stipulated by theaccounting standard for financial instruments. At March 31, 2017 and 2016, the carrying values of trading
securities and the related valuation differences included in the consolidated statements of income were as
follows:
Millions of yen
2017
Carryingvalue
Tradingsecurities¥

20

Valuationdifference¥

Thousands of U.S. dollars
2017
2016

2016

0

Carrying
value
¥

-

Valuationdifference¥

Carrying
value

-

$

178

Valuationdifference$0

Carrying
value$

The Group did not have any held-to-maturity debt securities as of March 31, 2017 and 2016.

- 21 -

Valuationdifference

-

$

-

At March 31, 2017 and 2016, gross unrealized gains and losses for available-for-sale securities with fairvalue were as follows:

Cost
Available-for-sale securities with fair value:
Japanese government bonds¥
Local government bonds
Bonds and debentures
Equity securities
Other¥

259,664
106,297351,141
57,990287,705
1,062,800

Cost
Available-for-sale securities with fair value:
Japanese government bonds¥
Local government bonds
Bonds and debentures
Equity securities
Other¥

258,223
108,116
401,497
60,995
232,334
1,061,166

Cost
Available-for-sale securities with fair value:
Japanese government bonds$ 2,314,502
Local government bonds
947,473
Bonds and debentures
3,129,877
Equity securities
516,890
Other2,564,444$ 9,473,215

Cost
Available-for-sale securities with fair value:
Japanese government bonds$ 2,301,657
Local government bonds
963,686
Bonds and debentures
3,578,723
Equity securities
543,675
Other
2,070,897$ 9,458,650- 22 -

Millions of yen
2017
Gross
Gross
unrealized
unrealized
gains
losses
¥

¥

5,756
2,176
5,562
66,377
5,100
84,973

¥

¥

(545)
(77)
(101)
(794)
(7,622)(9,142)

Fair andcarrying
value¥

264,875
108,396356,602123,574
285,182¥ 1,138,631

Millions of yen
2016
Gross
Gross
unrealized
unrealized
gains
losses
¥

¥

8,277
2,942
7,830
61,4438,059
88,553

¥

¥

(0)
(122)
(2,444)(1,756)(4,323)Thousands of U.S. dollars
2017
Gross
Gross
unrealized
unrealized
gains
losses$51,305
19,39549,576591,648
45,458$ 757,402$(4,857)(686)(900)(7,077)(67,938)$ (81,486)

Thousands of U.S. dollars
2016
Gross
Gross
unrealized
unrealized
gains
losses$73,776
26,223
69,792547,669
71,833$ 789,312$(0)(1,087)(21,784)(15,652)$ (38,532)

Fair andcarrying
value¥

266,501
111,059
409,205
119,994
238,637¥ 1,145,397

Fair andcarryingvalue$ 2,360,950
966,182
3,178,554
1,101,470
2,541,955$ 10,149,130

Fair andcarryingvalue$ 2,375,443
989,918
3,647,428
1,069,560
2,127,079$ 10,209,439

During the years ended March 31, 2017 and 2016, the Group recorded losses on the write-down ofavailable-for-sale securities with fair value due to other than temporary decline in value as follows:
Millions of yen
2017
2016
Equity securities
Corporate bonds

¥

-

¥

Thousands of U.S. dollars
2017
2016
55
3

$

-

$

490
26

The Group recognizes the write-down of available-for-sale securities with fair value in the case of a decline
in value by 50% or more below cost or an other than temporary decline ranging from 30% to 50% below
cost.
At March 31, 2017 and 2016, net unrealized gains on available-for-sale securities, net of applicable income
taxes and non-controlling interests, recorded as a component of accumulated other comprehensive income
in net assets on the consolidated balance sheets were as follows:

Millions of yen
2017
2016
Unrealized gains
Less applicable income taxes
Less non-controlling interests portion
Net unrealized gains¥¥

75,830(22,268)(55)
53,506¥

Thousands of U.S. dollars
2017
2016

84,230(25,009)(67)¥ 59,152$

675,906(198,484)(490)$ 476,923$$

750,779(222,916)(597)
527,248

During the years ended March 31, 2017 and 2016, the Group sold available-for-sale securities and recorded
gains and losses on the consolidated statements of income as follows:
Millions of yen
2017
2016
Gains on sales of:Equity securities
Bonds and others¥¥

Losses on sales of:Equity securities
Bonds and others

¥
¥

3,858
1,495
5,353

¥

838
3,593
4,432

¥

¥

¥

Thousands of U.S. dollars
2017
2016

2,157
1,481
3,638

$

987
1,828
2,815

$

$

$

34,38813,32547,713$

7,469
32,02639,504$$$

19,226
13,20032,427
8,797
16,29325,091

5. Loans and Bills Discounted
At March 31, 2017 and 2016, loans and bills discounted consisted of the following:
Millions of yen
2017
2016
Bills discounted
Loans on bills
Loans on deeds
Overdrafts¥

24,09349,494
1,455,604
203,816¥ 1,733,008¥¥

25,71453,651
1,402,379
198,195
1,679,941

Thousands of U.S. dollars
2017
2016
$

214,751
441,162
12,974,454
1,816,703$ 15,447,080$$

229,200
478,215
12,500,035
1,766,601
14,974,070

Bills discounted are accounted for as financial transactions in accordance with the JICPA Industry Audit
Committee Report No. 24 issued on February 13, 2002, “Treatment of Accounting and Auditing
Concerning Application of Accounting Standard for Financial Instruments in Banking Industry.” The- 23 -

Group has the right to sell or pledge (repledge) bankers’ acceptances, commercial bills, documentary bills
and foreign bills of exchange purchased without restrictions. The total face value of these bills amounted
to ¥24,138 million ($215,152 thousand) and ¥25,800 million ($229,967 thousand) at March 31, 2017 and2016, respectively.
Claims to borrowers in bankruptcy and past due loans amounted to ¥36,964 million ($329,476 thousand)and ¥49,244 million ($438,933 thousand) at March 31, 2017 and 2016, respectively, and are included in“Loans and bills discounted.” Loans are generally placed on non-accrual status when there is substantial
doubt about the ultimate collectability of either principal or interest because the principal or interest is pastdue for a considerable period or for other reasons. Claims to borrowers in bankruptcy represent nonaccrual loans after charge-off to legally bankrupt borrowers as defined in Article 96, Paragraph 1,
Subparagraph 3 and 4 of the Order for Enforcement of the Corporation Tax Act of Japan. Past due loans
are non-accrual loans other than claims to borrowers in bankruptcy and loans for which interest payments
are deferred in order to assist the financial recovery of borrowers in financial difficulties.
At March 31, 2017 and 2016, delinquent loans for which the payment of principal or interest wascontractually past due three months or more, excluding non-accrual loans, amounted to ¥543 million($4,840 thousand) and ¥892 million ($7,950 thousand), respectively.
For borrowers in financial difficulties, the Bank may support their financial recovery or restructuring byrestructuring the terms and conditions of their loans such as by a reduction or exemption of the original
interest rate, extension of interest payments and/or principal repayments or debt forgiveness. At March
31, 2017 and 2016, restructured loans for which the Bank had restructured the terms and conditions in favorof borrowers in financial difficulties, excluding “claims to borrowers in bankruptcy,” “past due loans” and“delinquent loans contractually past due three months or more” described above, amounted to ¥5,177
million ($46,144 thousand) and ¥6,016 million ($53,623 thousand), respectively.
Total non-performing assets before charge-offs of claims deemed uncollectible, consisting of “claims toborrowers in bankruptcy,” “past due loans,” “delinquent loans contractually past due three months or more”
and “restructured loans,” aggregated ¥42,685 million ($380,470 thousand) and ¥56,154 million ($500,525
thousand) at March 31, 2017 and 2016, respectively.
A provision of allowance for possible loan losses in the amount of none and ¥126 million ($1,123 thousand)for the years ended March 31, 2017 and 2016, respectively, is included in “Other expenses” in theaccompanying consolidated statements of income.

- 24 -

6. Foreign Exchange
At March 31, 2017 and 2016, foreign exchange consisted of the following:

Assets:Due from banks
Foreign bills of exchange purchased
Foreign bills of exchange receivable¥¥

Millions of yen
2017
2016

Thousands of U.S. dollars
2017
2016

982
45
469
1,497

$

¥

¥

2,165
86
466
2,717

Millions of yen
2017
2016
Liabilities:
Foreign bills of exchange sold
Foreign bills of exchange payable

¥
¥

463
55
519

¥
¥

$

8,753
401
4,180
13,343$$

19,297766
4,153
24,217

Thousands of U.S. dollars
2017
2016

503
202
706

$
$

4,126
490
4,626

$
$

4,483
1,800
6,292

7. Tangible Fixed Assets
At March 31, 2017 and 2016, tangible fixed assets consisted of the following:
Millions of yen
2017
2016
Land
Buildings and structures
Construction in progress
Other tangible fixed assets
Tangible fixed assets¥¥

23,300
8,620
1
3,547
35,468¥¥23,249
8,428
34
3,507
35,219Thousands of U.S. dollars
2017
2016
$

$

207,683
76,8338
31,616
316,142$$

207,228
75,122
303
31,259313,922

Accumulated depreciation of tangible fixed assets at March 31, 2017 and 2016 was ¥23,322 million($207,879 thousand) and ¥22,931 million ($204,394 thousand), respectively.
As permitted by the accounting principles and practices generally accepted in Japan, deferred capital gains
on sales of real property are deducted from the original acquisition cost of property newly acquired for
replacement purposes in the same line of business as the property sold. At both March 31, 2017 and 2016,
the amount of ¥2,286 million ($20,376 thousand) of deferred capital gains was directly reduced from theacquisition cost of land.
The Bank elected the one-time revaluation of land used for the banking business effective on March 31,
1998, reflecting appropriate adjustments for land shape and other factors based on the appraisal values
issued by the Japanese National Tax Agency under the Act on Revaluation of Land. According to the Act,the amount equivalent to the tax effect on the excess of the reassessed values over the original book value
is stated as “Deferred tax liabilities for revaluation,” and the rest of the excess, net of the tax effect, isdisclosed as “Land revaluation increment” and included in a component of accumulated othercomprehensive income in net assets on the consolidated balance sheets. At March 31, 2017 and 2016, thedifferences in the carrying values of land used for the banking business after reassessment over the market
values amounted to ¥1,114 million ($9,929 thousand) and ¥2,868 million ($25,563 thousand), respectively.

- 25 -

8. Pledged Assets
At March 31, 2017 and 2016, investment securities totaling ¥145,822 million ($1,299,777 thousand) and¥100,759 million ($898,110 thousand), respectively, were pledged as collateral for “Security deposits
received related to securities lending transactions” of ¥83,042 million ($740,190 thousand) and ¥37,574
million ($334,913 thousand) and for “Borrowings” of ¥21,300 million ($189,856 thousand) and ¥12,200
million ($108,744 thousand), respectively.
At March 31, 2017 and 2016, investment securities totaling ¥24,929 million ($222,203 thousand) and¥25,254 million ($225,100 thousand), respectively, were pledged as collateral for the settlement of
exchange and other transactions.

9. Deposits and Negotiable Certificates of Deposit
At March 31, 2017 and 2016, deposits consisted of the following:
Millions of yen
2017
2016
Demand deposits
Time deposits
Other
Deposits
Negotiable certificates of deposit¥ 1,465,667
1,207,227
31,0982,703,993
4,100¥ 2,708,093¥ 1,373,221
1,257,601
30,8692,661,691¥ 2,661,691

Thousands of U.S. dollars
2017
2016
$ 13,064,150
10,760,557
277,190
24,101,907
36,545$ 24,138,452$ 12,240,137
11,209,564
275,149
23,724,850$ 23,724,850

10. Borrowings and Lease Obligations
At March 31, 2017 and 2016, borrowings, which consisted of the borrowings from other financial
institutions, amounted to ¥29,975 million ($267,180 thousand) and ¥18,915 million ($168,597 thousand),
respectively. At March 31, 2017, the annual maturities of borrowings due through February 2022 at an
average interest rate of 0.08% per annum were as follows:Year ending March 31,

Thousands of
U.S. dollars

Millions of yen

2018
2019
2020
2021
2022

¥

¥

23,855
2,140
1,810
1,430
740
29,975$$

212,630
19,074
16,133
12,746
6,595
267,180

At March 31, 2017 and 2016, other liabilities included lease obligations of ¥10 million ($89 thousand) and¥13 million ($115 thousand), respectively.

11. Employee Retirement Benefits
The Group has corporate pension fund plans and lump-sum retirement benefit plans as defined benefit plansthat cover substantially all employees. Furthermore, retirement benefit trusts are set up to cover lumpsum retirement benefit plans. At March 31, 2017 and 2016, employee retirement benefits consisted of thefollowing:- 26 -

(Defined benefit plans)(a) Movement in retirement benefit obligations:
Millions of yen
2017
2016
Retirement benefit obligations at beginning of year ¥Service cost
Interest cost
Actuarial differences
Retirement benefits paid
Retirement benefit obligations at end of year¥

22,632 ¥786
73
291(1,257)22,525 ¥Thousands of U.S. dollars
2017
2016

20,289 $
668
249
2,624
(1,199)22,632 $201,729 $
7,005
650
2,593
(11,204)
200,775 $

180,844
5,954
2,219
23,388(10,687)
201,729(b) Movement in plan assets:
Millions of yen
2017
2016
Plan assets at beginning of year
Expected return on plan assets
Actuarial differences
Contribution paid by the employer
Refund of equity securities from retirement
benefit trusts
Retirement benefits paid
Plan assets at end of year¥¥

24,281
620
220
301

¥

(874)
24,548 ¥Thousands of U.S. dollars
2017
2016

31,141 $ 216,427
613
5,526
(1,661)
1,960
357
2,682
(5,245)(924)
24,281 $$277,573
5,463(14,805)
3,182(7,790)218,807 $(46,751)(8,236)
216,427(c) Reconciliation from retirement benefit obligations and plan assets to employee retirement benefit asset or
liability recorded on the consolidated balance sheet:
Millions of yen
2017
2016
Funded retirement benefit obligations
Plan assets¥

Unfunded retirement benefit obligations
Net balance of (asset) liability for retirement
benefits recorded on the consolidatedbalance sheet at end of year
Employee retirement benefit liability
Employee retirement benefit asset
Net balance of (asset) liability for retirement
benefits recorded on the consolidatedbalance sheet at end of year

- 27 -¥

22,525(24,548)(2,023)-¥Thousands of U.S. dollars
2017
2016

22,632 $ 200,775 $ 201,729(24,281)(218,807)(216,427)(1,648)(18,031)(14,689)-(2,023)(1,648)(18,031)(14,689)

1,094(3,117)1,353(3,002)

9,751(27,783)

12,059(26,758)(1,648) $(18,031) $(14,689)(2,023)¥

(d) Net periodic retirement benefit expenses and their breakdown:
Millions of yen
2017
2016
Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial differences
Gain on refund from retirement benefit trusts *Other
Net periodic retirement benefit expenses
under defined benefit plans

Thousands of U.S. dollars
2017
2016

¥

786
73
(620)
174
43

¥

668 $
249
(613)
(224)
(856)
37

7,005 $
650
(5,526)
1,550
383

5,954
2,219
(5,463)(1,996)(7,629)
329

¥

457

¥

(739) $

4,073

(6,587)$

Note: * Gain on refund from retirement benefit trusts of ¥856 million ($7,629 thousand) for the year ended March 31,
2016 was included in “Other income.”(e) Retirement benefit adjustment in other comprehensive income, before tax effects:
Millions of yen
2017
2016
Actuarial differences
Total

¥
¥

103
103

¥
¥

Thousands of U.S. dollars
2017
2016

(5,367) $(5,367) $

918
918

$
$

(47,838)(47,838)(f) Retirement benefit adjustment in accumulated other comprehensive income, before tax effects:
Millions of yen
2017
2016
Actuarial differences yet to be recognized
Total

¥
¥

(2,678) ¥(2,678) ¥Thousands of U.S. dollars
2017
2016

(2,781) $(2,781) $(23,870) $(23,870) $(24,788)(24,788)(g) Plan assetsi) Plan assets comprise:

Debt securities
Equity securities
Cash and deposits
General account
Other
Total

2017

2016

38.9%
39.3
7.8
13.3
0.7
100.0%

43.7%
36.8
5.3
13.5
0.7
100.0%

Note: At March 31, 2017 and 2016, 36.4% and 34.9% of plan assets consisted of retirement benefit trusts that are set
up for corporate pension plans and lump-sum retirement benefit plans, respectively.

ii) Determination of expected long-term rate of plan assets
The expected long-term rate of return on plan assets is determined by considering the current and future
portfolios of plan assets and the current and expected long-term rates of return generated from various
components of the plan assets.

- 28 -

(h) Actuarial assumptions at end of year:

Discount rate for corporate pension plans
Discount rate for lump-sum retirement benefit plans
Expected long-term rate of return on plan assets

2017

2016

0.3%
0.2%
3.0%

0.3%
0.2%
3.0%

12. Acceptances and Guarantees
The Bank provides guarantees for liabilities of certain customers for payments on the customers’ loans
from other financial institutions. A contra account, “Customers’ liabilities for acceptances and guarantees,”is classified as an asset in the consolidated balance sheets, indicating the Bank’s right of indemnity fromthese customers.

13. Net Assets
At March 31, 2017 and 2016, the authorized number of shares of common stock without par value was 30
million, and the number of shares of common stock issued was 10,943,240 shares. At March 31, 2017and 2016, the number of shares of treasury stock held by the Group was 102,855 and 100,916 shares,
respectively.
At March 31, 2017 and 2016, capital surplus consisted principally of additional paid-in capital. Included
in retained earnings was the legal earnings reserve of the Bank in the amount of ¥5,392 million ($48,061
thousand) at both March 31, 2017 and 2016. The Japanese Banking Act provides that an amountequivalent to at least 20% of the cash payments as appropriations of retained earnings shall be appropriatedas the legal earnings reserve until the total amount of additional paid-in capital and such reserve equals thecommon stock. The legal earnings reserve is not available for distributions as dividends, but may be used
to reduce a deficit or may be transferred to common stock by proper action of the Board of Directors and/or
the shareholders.
In November 2016, the Board of Directors of the Bank resolved to pay interim dividends of ¥433 million($3,859 thousand) at ¥40 per share ($0.35 per share). The shareholders of the Bank approved thefollowing appropriation of retained earnings at the annual shareholders meeting on June 23, 2017.
Thousands of
U.S. dollars

Millions of yen
Cash dividends, ¥50 per share ($0.44 per share)- 29 -

¥

542

$

4,831

14. Stock Options(a) Stock option expenses
The Bank recorded stock option expenses of ¥47 million ($418 thousand) and ¥48 million ($427 thousand)in “General and administrative expenses” for the years ended March 31, 2017 and 2016, respectively.
(b) Outline of stock options and size of and changes in stock optionsi) Outline of stock options:

Position and numberof grantees

2012
stock options

2013
stock options

2014
stock options

2015
stock options

2016
stock options

13 directors of
the Bank(excluding
outsidedirectors)

13 directors of
the Bank(excluding
outsidedirectors)

13 directors of
the Bank(excluding
outsidedirectors)

13 directors of
the Bank(excluding
outsidedirectors)

13 directors of the
Bank (excluding
directors who are
Audit andSupervisory
Committee Members
and outside directors)

Number of options
granted*13,000 commonshares of theBank
Grant dateJuly 20, 2012
Conditions for vestingNot defined
Requisite service
periodNot defined
Exercise period
July 21, 2012
toJuly 20, 2042

12,200common sharesof the Bank
July 19, 2013
Not defined

9,100 commonshares of the
Bank
July 25, 2014
Not defined

7,100 commonshares of the
Bank
July 24, 2015
Not defined

10,600 commonshares of the
Bank
July 22, 2016
Not definedNot defined
July 20, 2013
toJuly 19, 2043

Not defined
July 26, 2014
toJuly 25, 2044

Not defined
July 25, 2015
toJuly 24, 2045

Not defined
July 23, 2016
toJuly 22, 2046

Note: * Calculated in terms of the number of shares.

ii) Size of and changes in stock options:
The following describes the size of and changes in stock options that existed during the years ended March
31, 2017 and 2016. The number of stock options is calculated in terms of the number of shares.

- 30 -

a) Number of stock options
2012
stock options

2013
stock options

2014
stock options

-

-

-

(7,100 shares)-

Forfeited
VestedOutstanding at March 31, 2017
Vested:Outstanding at April 1, 2015 13,000 shares
VestedExercised(400 shares)
Forfeited
Outstanding at March 31, 2016 12,600 shares
Vested----(10,600 shares)-

12,200 shares
12,200 shares-

9,100 shares
9,100 shares---

12,200 shares

9,100 shares

7,100 shares

10,600shares

2012
stock options

2013
stock options

2014
stock options

2015
stock options

2016
stock options¥1($0.00)¥5,193($46.28)¥3,645($32.48)¥1($0.00)¥1($0.00)¥1($0.00)¥1($0.00)

-

-

-

-

¥4,556($40.60)¥4,959($44.20)¥6,811($60.70)¥4,466($39.80)

Non-vested:
Outstanding at April 1, 2015
GrantedForfeited
VestedOutstanding at March 31, 2016
GrantedExercised(3,700 shares)
Forfeited
Outstanding at March 31, 2017
8,900 shares2015
stock options

2016
stock options--

7,100 shares

10,600shares7,100 shares
7,100 shares-

10,600shares--b) Price information(per share)
Exercise price
Average stock price at exercise
Fair value at grant dateiii) Valuation technique to estimate fair value of stock options granted for the years ended March 31, 2017and 2016:(1) 2015 stock options:a) Valuation technique used: Black-Scholes modelb) Major assumptions and estimation method
2015 stock options
Expected volatility (*1)
Expected life (*2)
Expected dividends (*3)
Risk free interest rate (*4)

30.435%2.0 years¥80 ($0.71) per share
0.000%

Notes: (*1) Expected volatility is calculated based on the actual stock prices during the period from July 2013 to July
2015, which corresponds to the expected life of the options.
(*2) Expected life is estimated based on the difference between the average term of office of directors who
retired during the past 10 years and the average term of office of existing directors in office.
(*3) Expected dividends are the actual dividends for the year ended March 31, 2015.
(*4) Risk free interest rate is a Japanese government bond yield which corresponds to the expected life.

- 31 -

(2) 2016 stock options:a) Valuation technique used: Black-Scholes modelb) Major assumptions and estimation method
2016 stock options
Expected volatility (*1)
Expected life (*2)
Expected dividends (*3)
Risk free interest rate (*4)

36.579%2.2 years¥80 ($0.71) per share(0.342)%

Notes: (*1) Expected volatility is calculated based on the actual stock prices during the period from May 2014 to July
2016, which corresponds to the expected life of the options.
(*2) Expected life is estimated based on the difference between the average term of office of directors who
retired during the past 10 years and the average term of office of existing directors in office.
(*3) Expected dividends are the actual dividends for the year ended March 31, 2016.
(*4) Risk free interest rate is a Japanese government bond yield which corresponds to the expected life.

iv) Method of estimating number of stock options vested
Basically, only the actual number of forfeited stock options is reflected because it is difficult to rationallyestimate the number of stock options to be forfeited in the future.

- 32 -

15. Commitments(a) Loan commitments
Contracts related to overdraft facilities and loan commitment lines are agreements that allow customers to
overdraw or borrow up to prescribed limits unless there is violation of any condition in the contract. At
March 31, 2017 and 2016, the unused amounts within the limits of these contracts, which originally expire
within one year or are revocable by the Bank at any time without any conditions, aggregated ¥595,114
million ($5,304,519 thousand) and ¥597,553 million ($5,326,259 thousand), respectively.
Since many of these commitments expire without being drawn down, the unused amount does notnecessarily represent a future cash flow. In addition, most of these contracts have conditions that theGroup can refuse customer applications or decrease the contract limits for appropriate reasons such aschanges in the financial situation or deterioration in creditworthiness of the customer. At the executionof the contract, the Bank obtains real estate, securities, etc., as collateral if considered necessary.
Subsequently, the Bank performs periodic reviews of the customer’s business performance in accordancewith the Bank’s internal rules and takes necessary measures such as modifying the terms and conditions of
the contracts and/or requiring additional collateral and/or guarantees if necessary.
(b) Lease commitments
The Group has entered into various lease agreements as a lessee principally for land for office space.
These leases are generally cancelable with a few months advance notice and are accounted for as operatingleases. The Group has also entered into non-cancelable operating lease agreements. The future
minimum lease payments under these non-cancellable operating leases as of March 31, 2017 and 2016 wereas follows:
Millions of yen
2017
2016
Due within one year
Due after one year

¥
¥

101
1,170
1,272

¥
¥

102
1,154
1,257

Thousands of U.S. dollars
2017
2016
$
$

900
10,428
11,337$$909
10,286
11,204

In addition, a subsidiary engaged in the leasing business as a lessor has entered into various long-term, noncancelable lease agreements with third parties that were categorized as finance leases. Information
concerning future minimum lease payments to be received as of March 31, 2017 and 2016 for financeleases which do not transfer ownership of the leased assets to the lessee was as follows:
Millions of yen
2017
2016
Total future minimum lease payments
to be received¥
Estimated residual value of leased
assets
Imputed interest

13,579726(408)- 33 -¥

Thousands of U.S. dollars
2017
2016

12,488$ 121,035

697
(538)

6,471
(3,636)$111,311
6,212(4,795)

The aggregate annual maturities of future minimum lease payments to be received as of March 31, 2017
were as follows:Year ending March 31,

Thousands of
U.S. dollars

Millions of yen

2018
2019
2020
2021
2022
2023 and thereafter

¥

¥

3,746
3,110
2,461
1,817
1,096
1,345
13,579$$33,38927,72021,936
16,195
9,769
11,988121,035

As permitted by the accounting standard for lease transactions with respect to finance leases entered into
before April 1, 2008, the appropriate carrying value, net of accumulated depreciation, of the underlying
assets at March 31, 2008 is recognized as the value of the investment in the leased assets, and the total
amount equivalent to interest income on these transactions is allocated over the lease term using thestraight-line method, instead of the effective interest method, as the principal method of the accounting
standard. As a result, profit before income taxes for the years ended March 31, 2017 and 2016 were ¥5
million ($44 thousand) and ¥6 million ($53 thousand) more, respectively, than the amounts that would havebeen recorded under the effective interest method based on lease payments receivable.

- 34 -

16. Derivative Financial Instruments
Derivative financial instruments, other than those to which hedge accounting was applied, which weretraded on the over-the-counter market and stated at fair value and whose valuation gains and losses arerecognized in the consolidated statements of income, as of March 31, 2017 and 2016 are summarized asfollows:
Millions of yen
Notional principal orcontract amounts
Over one
Total
year
Fair value*

Valuation
gains (losses)

Currency swap:
At March 31, 2017
At March 31, 2016

¥

5,623

¥

-

¥

(25)

¥

(25)

Foreign exchange forward contracts:
At March 31, 2017
At March 31, 2016¥

42,49034,604

¥

-

¥

(229)
986

¥

(229)
986

Thousands of U.S. dollars
Notional principal orcontract amounts
Over one
Total
year
Fair value*

Valuation
gains (losses)

Currency swap:
At March 31, 2017
At March 31, 2016$

50,120

$

-

$

(222)

$

(222)

Foreign exchange forward contracts:
At March 31, 2017
At March 31, 2016$

378,732
308,441$-$(2,041)8,788$(2,041)8,788

Note: * Fair value was based on the discounted cash flow method.

There were no outstanding derivative financial instruments to which hedge accounting was applied as ofMarch 31, 2017 and 2016.

- 35 -

17. Income Taxes
Income taxes for the years ended March 31, 2017 and 2016 consisted of the following:
Millions of yen
2017
2016
Income taxes:
Current
Deferred
Total income taxes

¥
¥

1,665
671
2,337

¥
¥

Thousands of U.S. dollars
2017
2016

1,795
1,488
3,283

$
$

14,8405,980
20,830$$15,99913,26329,262The tax effects of temporary differences that gave rise to a significant portion of deferred tax assets andliabilities at March 31, 2017 and 2016 were as follows:
Millions of yen
2017
2016
Deferred tax assets:
Allowance for possible loan losses¥
Employee retirement benefit asset
Employee retirement benefit liability
Investment securities
Other
SubtotalLess valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Employee retirement benefit asset
Unrealized gains on available-for-salesecurities
Gains on transfer of investment
securities to trusts for retirement
benefit plans
Deferred gains on sale of property
and other
Total deferred tax liabilities
Net deferred tax liabilities¥

Thousands of U.S. dollars
2017
2016

1,796 ¥
1,554
1,499
2,971
7,822
(2,297)
5,524

2,286 $
39
1,634
1,512
3,169
8,642
(2,208)6,434

16,00813,851
13,361
26,481
69,721(20,474)
49,237

$

(187)

-

(1,666)-(22,268)(25,009)(198,484)(222,916)(1,356)(1,755)(12,086)(15,643)(211)(24,025)(18,500) ¥(205)(26,971)(20,536) $(1,880)(214,145)(164,898)(1,827)(240,404)(183,046)$

20,376347
14,564
13,47728,24677,030(19,680)
57,349At March 31, 2017 and 2016, deferred tax assets and liabilities reported on the accompanying consolidatedbalance sheets were as follows:
Millions of yen
2017
2016
Deferred tax assets
Deferred tax liabilities¥

148
18,648¥179
20,716

Thousands of U.S. dollars
2017
2016
$

1,319
166,218$

1,595
184,651

In assessing the realizability of deferred tax assets, management of the Group considers whether some
portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets
is dependent upon the generation of future taxable income during the periods in which those temporary
differences become deductible. At March 31, 2017 and 2016, a valuation allowance was provided toreduce deferred tax assets to the extent that the management believed that the deferred tax assets were notrealizable.

- 36 -

A reconciliation of the Japanese statutory tax rate and the effective income tax rate on pre-tax income
reflected in the accompanying consolidated statements of income for the year ended March 31, 2016 was
as follows:
2016
Japanese statutory income tax rate
Increase (decrease) due to:Permanently non-deductible expenses
Tax exempt income
Change in valuation allowance
Change in tax rate
Other
Effective income tax rate

32.82%
4.26(1.93)
0.03
1.76
0.97
37.91%A reconciliation between the Japanese statutory tax rate and the effective income tax rate on pre-tax income
reflected in the accompanying consolidated statements of income for the year ended March 31, 2017 was
not disclosed because the difference between the Japanese statutory tax rate and the effective income tax
rate was less than 5% of the Japanese statutory tax rate.

18. General and administrative expenses
General and administrative expenses for the years ended March 31, 2017 and 2016 included following
items:
Millions of yen
2017
2016
General and administrative expenses:
Salaries and allowances
Net periodic retirement benefit
expenses
Rental expenses for land, buildings
and machinery¥

12,532¥

12,649Thousands of U.S. dollars
2017
2016
$

111,703$112,746

457

116

4,073

1,033

2,960

2,882

26,38325,688- 37 -

19. Segment Information(a) General information about reportable segments
The Group defines a reportable segment as a component of the Group for which discrete financial
information is available and whose operating results are regularly reviewed by the Board of Directors tomake decisions about resources to be allocated to the segment and assess its performance.
The Group engages in a wide range of financial services to customers primarily in the areas of banking andleasing. The reportable segments of the Group, therefore, are based on operating segments as follows:“Banking”• Deposits and loans• Foreign exchange transactions• Over-the-counter sales of investment trusts and life insurance products• Securities business“Leasing”• Leasing business(b) Accounting treatment for reportable segment profit, segment assets, segment liabilities and othermaterial items
The accounting treatment for reportable segment information follows the accounting principles used in the
consolidated financial statements as described in Note 2, “Summary of Significant Accounting Policies.”
The segment profit is based on ordinary income, which is defined as “Total income” less certain special
income included in “Other income” in the accompanying consolidated statements of income, andintersegment income is accounted for based on prices in ordinary transactions with independent third
parties.

- 38 -

(c) Information about reportable segment profit, segment assets, segment liabilities and other material
items
Segment information as of and for the year ended March 31, 2017 was as follows:
Millions of yen
2017
Reportable segment
Banking
Ordinary income:External customers
Intersegment
Total ordinary income¥

Segment profit (*3)
Segment assets
Segment liabilities
Other material items:
Depreciation
Interest and dividend
incomeInterest expense
Provision of allowancefor possible loan
lossesLoss on write-down ofsecurities
Increase in tangible
fixed assets andintangible fixed assets

Leasing

43,147302
43,449¥7,323
3,093,554
2,878,006
¥

1,187

Total

5,898
371
6,270

¥

368
21,34015,984¥

101

Other (*1)

49,045673
49,719¥7,691
3,114,894
2,893,991
¥

1,288

986
357
1,343

Total
¥

140
5,484
913
¥

18

50,031
1,031
51,062

Reconciliation(*2)

Consolidated

¥

¥

7,832
3,120,379
2,894,904¥

1,306(1,031)(1,031)(184)(10,382)(10,383)¥-

50,03150,031
7,648
3,109,996
2,884,520

¥

1,306

31,1741,305

955

31,1841,361

44
331,228
1,365

(212)
(83)

31,015
1,282

(7)

(18)

(25)

18

(7)

(0)

(7)

8

-

8

-

8

-

8

2,004

-

2,004

50

2,055

-

2,055

Thousands of U.S. dollars
2017
Reportable segment
Banking
Ordinary income:External customers
Intersegment
Total ordinary income$

Segment profit (*3)
Segment assets
Segment liabilities
Other material items:
Depreciation
Interest and dividend
incomeInterest expense
Provision of allowancefor possible loan
lossesLoss on write-down ofsecurities
Increase in tangible
fixed assets andintangible fixed assets

Leasing

384,588
2,691
387,280$

65,273
27,574,240
25,652,963$

10,580Total

52,571
3,306
55,887$3,280
190,213
142,472$

900

Other (*1)

437,160
5,998
443,167$

68,553
27,764,453
25,795,445$

11,4808,788
3,182
11,970

Total
$

1,247
48,881
8,137
$

160

445,9489,189
455,138

Reconciliation(*2)

Consolidated$$

69,81027,813,343
25,803,583$

11,640(9,189)(9,189)(1,640)(92,539)(92,548)$-445,948445,948
68,17027,720,795
25,711,025$

11,640277,867
11,63280
490

277,957
12,131392
26

278,349
12,166(1,889)(739)

276,450
11,427

(62)

(160)

(222)

160

(62)

(0)

(62)

71

-

71

-

71

-

71

17,862-

17,862445

18,317-18,317

Notes:(*1) The “Other” business segment in the table above represents operating segments not included in the reportable segments andincludes credit card business, administrative outsourcing business and information technology management operations.
(*2) Reconciliation represents the eliminations of intersegment transactions.
(*3) Segment profit is reconciled to ordinary profit, which represents ordinary income less ordinary expenses. Ordinary expenses
represent “Total expenses” of ¥42,470 million ($378,554 thousand) less certain special expenses of ¥86 million ($766
thousand) included in “Other expenses” in the accompanying consolidated statements of income. Therefore, consolidated
segment profit, which shows ordinary profit of ¥7,648 million ($68,170 thousand), is reconciled to “Profit before income taxes”
of ¥7,561 million ($67,394 thousand) through the deduction of certain special expenses, net.

- 39 -

Segment information as of and for the year ended March 31, 2016 was as follows:
Millions of yen
2016
Reportable segment
Banking
Ordinary income (*1):
External customers
Intersegment
Total ordinary income¥

Segment profit (*4)
Segment assets
Segment liabilities
Other material items:
Depreciation
Interest and dividend
incomeInterest expense
Provision of allowancefor possible loan
lossesLoss on write-down ofsecurities
Increase in tangible
fixed assets andintangible fixed assets

Leasing

42,587309
42,896¥

7,807
2,988,280
2,771,412
¥

1,284

Total

5,088
343
5,431

¥

238
18,024
12,930¥128

Other (*2)

47,675652
48,328¥8,045
3,006,304
2,784,342
¥

1,412

1,020
589
1,609

Total
¥

247
5,782
1,075
¥

43

48,695
1,241
49,937

Reconciliation(*3)

Consolidated

¥

¥

8,293
3,012,087
2,785,418¥

1,456(1,241)(1,241)(182)(8,769)(8,771)¥-

48,695
48,6958,111
3,003,317
2,776,646

¥

1,456

32,687
1,655

11
57

32,6991,712

54
432,753
1,716

(214)
(86)

32,538
1,630

77

44

121

5

126

(0)

126

61

-

61

-

61

-

61

1,895

16

1,911

44

1,956

-

1,956

Thousands of U.S. dollars
2016
Reportable segment
Banking
Ordinary income (*1):
External customers
Intersegment
Total ordinary income$

Segment profit (*4)
Segment assets
Segment liabilities
Other material items:
Depreciation
Interest and dividend
incomeInterest expense
Provision of allowancefor possible loan
lossesLoss on write-down ofsecurities
Increase in tangible
fixed assets andintangible fixed assets

379,597
2,754
382,351

Leasing$

69,587
26,635,885
24,702,843$

11,444

Total

45,351
3,057
48,408$2,121
160,656
115,250$

1,140

Other (*2)

424,948
5,811
430,769$

71,70826,796,541
24,818,094$

12,5859,091
5,250
14,341

Total
$

2,201
51,537
9,581
$

383

434,040
11,061
445,110

Reconciliation(*3)

Consolidated$$

73,91926,848,088
24,827,685$

12,977(11,061)(11,061)(1,622)(78,162)(78,179)$-

434,040
434,040
72,296
26,769,917
24,749,496$

12,977

291,353
14,751

98
508

291,460
15,259481
35291,942
15,295(1,907)(766)

290,025
14,528

686

392

1,078

44

1,123

(0)

1,123

543

-

543

-

543

-

543

16,890142

17,033392

17,434-

17,434

Notes:(*1) Ordinary income represents “Total income” less certain special income included in “Other income” in the accompanying
consolidated statements of income. “Total income” of ¥49,553 million ($441,688 thousand) in the accompanying
consolidated statement of income is derived from ordinary income of ¥48,695 million ($434,040 thousand) through the additionof certain special income of ¥857 million ($7,638 thousand).
(*2) The “Other” business segment in the table above represents operating segments not included in the reportable segments andincludes credit card business, administrative outsourcing business and information technology management operations.
(*3) Reconciliation represents the eliminations of intersegment transactions.
(*4) Segment profit is reconciled to ordinary profit, which represents ordinary income less ordinary expenses. Ordinary expenses
represent “Total expenses” of ¥40,892 million ($364,488 thousand) less certain special expenses of ¥307 million ($2,736
thousand) included in “Other expenses” in the accompanying consolidated statements of income. Therefore, consolidated
segment profit, which shows ordinary profit of ¥8,111 million ($72,296 thousand), is reconciled to “Profit before income taxes”
of ¥8,660 million ($77,190 thousand) through the addition/deduction of certain special income/ (expenses), net.

- 40 -

(d) Other informationi) Information by service
Millions of yen
ServiceSecurity
investments

Loans
Ordinary income from external customers:
For the year ended March 31, 2017
For the year ended March 31, 2016¥

18,20919,803¥

Leasing

18,214
16,349

¥

Other

5,898
5,088

¥

Total

7,708
7,454

¥

50,031
48,695

Thousands of U.S. dollars
ServiceSecurity
investments

Loans
Ordinary income from external customers:
For the year ended March 31, 2017
For the year ended March 31, 2016$

162,305
176,513$

Leasing

162,349
145,726$

Other

52,57145,351$

Total

68,704
66,440$445,948
434,040ii) Information by geographical area for the years ended March 31, 2017 and 2016 is omitted since income
in Japan accounted for more than 90% of the consolidated ordinary income and all tangible fixed assets
were located in Japan.
iii) Information by major customer for the years ended March 31, 2017 and 2016 is omitted since there wasno single external customer accounting for 10% or more of the consolidated ordinary income.
(e) Information about impairment loss on fixed assets by reportable segment
Millions of yen
Reportable segment
Banking
Leasing
Total
Impairment loss:
For the year ended March 31, 2017
For the year ended March 31, 2016

¥

51
229

¥

-

¥

51
229

Other
¥

Total
0

¥

Thousands of U.S. dollars
Reportable segment
Banking
Leasing
Total
Other
Impairment loss:
For the year ended March 31, 2017
For the year ended March 31, 2016

$

454
2,041

$

- 41 -

-

$

454
2,041

$

51
230

Total
0

$

454
2,050

20. Transactions with Related Parties
Significant transactions with parties related to the Group for the years ended March 31, 2017 and 2016
were as follows:(a) Transactions with relatives of the Bank’s directors:

Name

Business

Transaction amounts
Thousandsof U.S.
Millions of yen
dollars

Descriptionof theBank’stransaction

Account

BalancesThousands
Millionsof U.S.
of yendollars

For the year ended March 31, 2017:
ChiekoHayashiRealestateleasingbusiness

Loan(Average balance
during period)¥ 19(Interest income)
¥ 0

$ 169

(Average balance
during period)¥ 19(Interest income)
¥ 0

$ 169

$

Loans andbills
discounted

¥

19

$

169

Loans andbills
discounted

¥

19

$

169

0

For the year ended March 31, 2016:
ChiekoHayashiRealestateleasingbusiness

Loan

$

0

Note: Terms and conditions of the loans are determined in the same manner as loans under general lending transactions
with third parties.

(b) Transactions with corporate pension plans for employees

NameBusiness

Transaction amounts
Thousandsof U.S.
Millions of yen
dollars

Descriptionof theBank’stransaction

Account

BalancesThousands
Millionsof U.S.
of yendollars

For the year ended March 31, 2017:
No applicable transactions occurred during the year ended March 31, 2017.
For the year ended March 31, 2016:Retirement Corporate
benefitpensiontrustsplan

Partialrefund ofpensionassets¥ 5,245- 42 -$ 46,751---

21. Comprehensive Income
Amounts reclassified to profit (loss) in the current period that were recognized in other comprehensive
income in the current or previous periods and the tax effects for each component of other comprehensive
income for the years ended March 31, 2017 and 2016 were as follows:
Millions of yen
2017
2016
Net unrealized gains on available-for-salesecurities:
Decrease during the year
Reclassification adjustments
Pre-tax amountTax effect amountNet unrealized gains on available-for-salesecurities, net of tax
Land revaluation increment:
Increase (decrease) during the year
Reclassification adjustments
Pre-tax amountTax effect amountLand revaluation increment, net of tax
Retirement benefit adjustment:
Decrease during the year
Reclassification adjustments
Pre-tax amountTax effect amount
Retirement benefit adjustment, net of tax
Total other comprehensive income¥¥- 43 -(4,728)(3,670)(8,399)2,741(15,078) $(2,263)(17,342)6,674(42,142) $ (134,397)(32,712)(20,171)(74,864)(154,577)
24,431
59,488(5,658)(10,667)(50,432)(95,079)

-

241
241

-

2,148
2,148

(70)
174
103
(31)
71
(5,586)¥

Thousands of U.S. dollars
2017
2016

¥

(4,333)(1,033)(5,367)
1,677(3,689)(14,116) $(623)(38,621)1,550(9,207)918(47,838)(276)
14,947632(32,881)(49,790) $ (125,822)

The Aichi Bank, Ltd. and Subsidiaries
Consolidated Balance Sheets
March 31, 2017 and 2016

Millions of yen
2017
2016
Assets:Cash and due from banks(Note 3)¥
164,668 ¥ 104,722
Call loans and bills purchased(Note 3)
3,487
2,753
Trading securities (Notes 3 and 4)
20
Investment securities(Notes 3, 4 and 8)
1,140,769
1,147,715
Reserve for possible losses oninvestments
(17)
(11)
Loans and bills discounted(Notes 3, 5, 15 and 20)
1,733,008
1,679,941
Foreign exchange (Note 6)
1,497
2,717
Other assets
25,92024,565
Tangible fixed assets (Note 7)
35,46835,219Intangible fixed assets
572
173
Employee retirement benefit asset(Note 11)
3,117
3,002
Deferred tax assets (Note 17)
148
179
Customers’ liabilities for acceptancesand guarantees (Note 12)
9,356
11,174
Allowance for possible loan losses(8,020)(8,835)
Total assets¥ 3,109,996¥ 3,003,317

Thousands of U.S. dollars
2017
2016

$

1,467,760

933,434

31,081
178

24,538-

10,168,187

10,230,100

(151)

(98)

15,447,080
13,343231,036
316,142
5,098

14,974,070
24,217
218,958
313,922
1,542

27,783
1,319

26,758
1,595

83,394(71,485)

99,598(78,750)$ 27,720,795$ 26,769,917

The accompanying notes are an integral part of these consolidated financial statements.

-2-$

The Aichi Bank, Ltd. and Subsidiaries
Consolidated Balance Sheets (Continued)
March 31, 2017 and 2016
Millions of yen
2017
2016
Liabilities:
Deposits (Notes 3 and 9)¥ 2,703,993
Negotiable certificates of deposit(Note 3 and 9)
4,100
Security deposits received related tosecurities lending transactions(Notes 3 and 8)
83,042
Borrowings (Notes 3 and 10)
29,975
Foreign exchange (Note 6)
519
Other liabilities (Note 10)26,918Reserve for employee bonuses
648
Reserve for bonuses to directors
46
Employee retirement benefit
1,094
liability (Note 11)
Reserve for executive retirement
benefits
7
Reserve for reimbursement ofdeposits
105
Reserve for contingencies
1,323
Deferred tax liabilities (Note 17)
18,648Deferred tax liabilities forrevaluation (Note 7)
4,740
Acceptances and guarantees(Note 12)9,356
Total liabilities
2,884,520
Net assets (Note 13):
Common stock
Capital surplus
Retained earnings
Less treasury stock, at cost
Total shareholders’ equity
Accumulated other comprehensive
incomeStock acquisition rights
Non-controlling interests
Total net assets
Total liabilities and net assets

Thousands of U.S. dollars
2017
2016

¥ 2,661,691$

24,101,907$

23,724,850-

36,545-37,574
18,915706
17,114652
47740,190
267,180
4,626
239,9325,775
410

334,913
168,597
6,292
152,544
5,811
418

1,353

9,751

12,059

4

62

35

104
1,848
20,716935
11,792
166,218926
16,472
184,651

4,742

42,24942,267

11,174
2,776,646

83,39425,711,025

99,59824,749,496

18,00013,883130,155(768)
161,270

18,00013,883125,966(787)
157,063

160,442
123,745
1,160,130(6,845)
1,437,472

160,442
123,745
1,122,791(7,014)
1,399,973

60,027228
3,949
225,475¥ 3,109,996

65,604
194
3,806
226,670¥ 3,003,317

535,047
2,032
35,1992,009,760
27,720,795

584,757
1,729
33,9242,020,411
26,769,917$

The accompanying notes are an integral part of these consolidated financial statements.

-3-$

The Aichi Bank, Ltd. and Subsidiaries
Consolidated Statements of Income
For the Years Ended March 31, 2017 and 2016

Income:Interest and dividend income:Interest on loans and bills discounted andpurchased¥
Interest on and dividends from securities
Other interest and dividend income
Total interest and dividend income
Fees and commissions
Other operating income (Note 4)
Other income (Notes 4 and 11)
Total income (Note 19)
Expenses:
Interest expense:
Interest on deposits
Interest on borrowings
Other interest expense
Total interest expense
Fees and commissions
Other operating expenses (Note 4)
General and administrative expenses(Notes 14 and 18)
Impairment loss on fixed assets (Note 2(k))
Other expenses (Notes 4 and 5)
Total expenses (Note 19)
Profit before income taxes
Income taxes (Note 17)
ProfitProfit attributable tonon-controlling interests
Profit attributable to owners ofparent¥Millions of yen
2017
2016

Thousands of U.S. dollars
2017
2016

18,11912,80096
31,015
12,716
1,501
4,797
50,031

19,791
12,64997
32,538
11,982
1,555
3,475
49,553$ 161,502
114,092855
276,450
113,343
13,37942,757445,948

1,240
29
11
1,282
8,228
3,936

1,569
38
23
1,630
7,640
1,901

11,052258
98
11,42773,33935,083

13,985338
205
14,52868,098
16,94427,05451
1,918
42,4707,561

26,818230
2,671
40,892
8,660

241,144454
17,095378,554
67,394

239,040
2,050
23,807364,488
77,190

2,337
5,223

3,283
5,376

20,83046,55429,262
47,918

156

118

1,390

1,051

5,067

¥

¥

5,257

$

Yen
Earnings per share:
Basic
DilutedCash dividends¥

467.37465.6490.00¥

45,164

176,406
112,746864
290,025
106,800
13,86030,974
441,688$

46,858

U.S. dollars
484.99483.31
80.00

$

4.16
4.15
0.80

The accompanying notes are an integral part of these consolidated financial statements.

-4-

$

$

4.32
4.30
0.71

The Aichi Bank, Ltd. and Subsidiaries
Consolidated Statements of Comprehensive Income
For the Years Ended March 31, 2017 and 2016

Millions of yen
2017
2016
ProfitOther comprehensive income (Note 21):
Unrealized gains on available-for-salesecurities
Land revaluation increment
Retirement benefit adjustment
Total other comprehensive income
Comprehensive income
Comprehensive income attributable to:
Owners of parent
Non-controlling interests
Total comprehensive income

¥

5,223

¥

¥

(5,658)71(5,586)(362)(10,667)
241(3,689)(14,116)¥ (8,739)(50,432)
632(49,790)$ (3,226)(95,079)
2,148(32,881)(125,822)$ (77,894)¥$$ (78,821)
926$ (77,894)

¥
¥

(506)
144
(362)

¥

5,376

Thousands of U.S. dollars
2017
2016

(8,843)104(8,739)$$46,554(4,510)1,283(3,226)

The accompanying notes are an integral part of these consolidated financial statements.

-5-$47,918

The Aichi Bank, Ltd. and Subsidiaries
Consolidated Statements of Changes in Net Assets
For the Years Ended March 31, 2017 and 2016
Shareholders’ equity
Number ofshares ofcommon stock
issuedBalance at April 1, 2015
Profit attributable to owners of parent
Cash dividends
Reversal of land revaluation increment
Treasury stock acquired, net
Transfer to capital surplus from retained
earnings
Net changes in items other thanshareholders’ equity
Balance at March 31, 2016
Profit attributable to owners of parent
Cash dividends
Reversal of land revaluation increment
Treasury stock acquired, net
Transfer to capital surplus from retained
earnings
Net changes in items other thanshareholders’ equity

10,943,240-

Balance at March 31, 2017

10,943,240

Commonstock¥

18,000-Capitalsurplus¥Retainedearnings

13,883 ¥(1)

Total
shareholders’equityTreasurystock

121,529
5,257
(921)
102
-

¥

(774)
(12)

¥

152,639
5,257
(921)
102
(14)

Millions of yen
Accumulated other comprehensive income
Net unrealizedLand
Retirement
Total accumulated
gains onrevaluation
benefitotheravailable-for-saleincrement
adjustment
comprehensive
securities (Note 4)(Note 7)(Note 11)
incomeStockacquisitionrights¥¥69,806
-

¥

8,246
-

¥

1,756
-

¥

79,808-148-

Noncontrollinginterests
¥

3,704
-

Total
net assets¥

236,300
5,257
(921)
102
(14)

-

-

1

(1)

-

-

-

-

-

-

-

-

-

10,943,240-

18,000-13,883(14)

125,966
5,067
(867)
3
-

(787)
18

157,063
5,067
(867)
3
3

(10,653)
59,152
-

139
8,385
-

(3,689)(1,933)-(14,203)65,604
-

46
194
-

102
3,806
-

(14,054)
226,670
5,067
(867)
3
3

-

-

14

(14)

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

(5,645)(3)

71(5,577)33

142(5,401)¥

18,000¥13,883¥130,155

¥

(768)

¥

161,270¥

53,506

¥

8,381

¥

(1,861)¥60,027

¥

228

¥

3,949

¥

225,475$

15,652-$

711,364
-

$

1,319
-

$

33,015-$2,106,248
46,858(8,209)909(124)

Thousands of U.S. dollars
Balance at April 1, 2015
Profit attributable to owners of parent
Cash dividends
Reversal of land revaluation increment
Treasury stock acquired, net
Transfer to capital surplus from retained
earnings
Net changes in items other thanshareholders’ equity
Balance at March 31, 2016
Profit attributable to owners of parent
Cash dividends
Reversal of land revaluation increment
Treasury stock acquired, net
Transfer to capital surplus from retained
earnings
Net changes in items other thanshareholders’ equity$ 160,442-

Balance at March 31, 2017

$ 160,442$

123,745 $(8)

1,083,242
46,858(8,209)909-$(6,899)(106)$

1,360,540
46,858(8,209)
909
(124)

$

622,212-$73,500
-

-

8

(8)

-

-

-

-

-

-

-

-

-

160,442-

123,745(124)

1,122,791
45,164(7,727)26-(7,014)160

1,399,973
45,164(7,727)26
26(94,954)527,248-

1,238
74,739-(32,881)(17,229)-(126,597)
584,757
-

410
1,729
-

909
33,924-(125,269)
2,020,411
45,164(7,727)
26
26

-

124

(124)

-

-

-

-

-

-

-

-

-

-

-

-

-

-

(50,316)

(26)

632

(49,710)

294

1,265

(48,141)$

123,745$

1,160,130$(6,845)$

1,437,472

The accompanying notes are an integral part of these consolidated financial statements.

-6-$476,923$

74,703$(16,587)$

535,047

$

2,032

$

35,199$2,009,760

The Aichi Bank, Ltd. and Subsidiaries
Consolidated Statements of Cash Flows
For the Years Ended March 31, 2017 and 2016
Millions of yen
2017
2016
Cash flows from operating activities:
Profit before income taxes
Adjustments for:
Depreciation
Impairment loss on fixed assets
Gain on refund from retirement benefit trusts
Decrease in allowance for possible loan losses
Interest and dividend income
Interest expense(Increase) decrease in trading securities
Increase in loans and bills discounted
Increase in call loans and bills purchased
Increase in deposits
Increase in negotiable certificates of deposit
Increase (decrease) in security deposits received
related to securities lending transactions
Increase in borrowings(excluding subordinated borrowings)
Gain on securities transactions(Gain) loss on foreign currency transactions(Decrease) increase in reserve for contingencies
Interest and dividend income received
Interest expense paid
Other, net
Subtotal
Income taxes paid
Net cash provided by (used in) operating
activities

¥

7,561

¥

8,660

Thousands of U.S. dollars
2017
2016

$

67,394$

77,190

1,306
51
(815)
(31,015)1,282(20)(53,067)(734)
42,301
4,100

1,456
230
(856)
(1,797)(32,538)
1,630
77(24,783)(581)
23,283-

11,640454(7,264)(276,450)
11,427(178)(473,010)(6,542)
377,047
36,545

12,9772,050(7,629)(16,017)(290,025)
14,528686(220,902)(5,178)207,531-45,468(37,511)405,276(334,352)

11,060
(912)
(183)
(524)
32,122(1,590)(237)
56,152(1,897)

1,260
(764)
3,890
259
33,632(1,784)(3,190)(29,426)(1,955)98,582(8,129)(1,631)(4,670)286,317(14,172)(2,112)500,508(16,908)

11,230(6,809)34,673
2,308
299,777(15,901)(28,433)(262,287)(17,425)

54,254(31,382)

483,590(279,721)(247,778)
255,099(1,544)
109
(482)
-

(329,188)
328,891(1,913)
94
(26)
(36)

(2,208,556)
2,273,812(13,762)971(4,296)-(2,934,200)
2,931,553(17,051)
837
(231)
(320)

5,403

(2,178)48,159(19,413)

(867)
(1)
(868)

(921)
(18)
(940)

(7,727)(8)(7,736)(8,209)(160)(8,378)Net increase (decrease) in cash and cash equivalents

58,789(34,501)

524,012(307,522)

Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year (Note 2(b))

104,000
162,789

138,501
104,000

926,998$ 1,451,011

1,234,521$ 926,998

Cash flows from investing activities:
Purchases of securities
Proceeds from sales and maturities of securities
Purchases of tangible fixed assets
Proceeds from sales of tangible fixed assets
Purchases of intangible fixed assets
Payment for asset retirement obligations
Net cash provided by (used in) investing
activities
Cash flows from financing activities:
Dividends paid
Other, net
Net cash used in financing activities¥¥

The accompanying notes are an integral part of these consolidated financial statements.

-7-

The Aichi Bank, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2017 and 2016

1. Basis of Presenting Consolidated Financial Statements
The consolidated financial statements of The Aichi Bank, Ltd. (the “Bank”) and its subsidiaries(collectively the “Group”) have been prepared in accordance with the provisions set forth in the Japanese
Financial Instruments and Exchange Act of Japan and its related accounting regulations and in conformity
with accounting principles generally accepted in Japan (“Japanese GAAP”), which are different in certain
respects as to the application and disclosure requirements from International Financial ReportingStandards. The accompanying consolidated financial statements have been reformatted and translated
into English with some expanded descriptions from the consolidated financial statements of the Bank
prepared in accordance with Japanese GAAP and filed with the appropriate Local Finance Bureau of the
Ministry of Finance as required by the Financial Instruments and Exchange Act. Certain supplementary
information included in the statutory Japanese language consolidated financial statements is not presented
in the accompanying consolidated financial statements.
The translation of the Japanese yen amounts into U.S. dollar amounts is included solely for theconvenience of readers outside Japan, using the prevailing exchange rate at March 31, 2017, which was¥112.19 to U.S. $1.00. This translation should not be construed as a representation that the Japanese
yen amounts have been, could have been or could in the future be converted into U.S. dollars at this or
any other rate of exchange.
The Japanese yen amounts in the accompanying consolidated financial statements are expressed inmillions of Japanese yen and have been rounded down. U.S. dollar amounts in the accompanying
consolidated financial statements are expressed in thousands of U.S. dollars and also have been rounded
down. As a result, total amounts expressed in both Japanese yen and U.S. dollars appearing in the
consolidated financial statements and the notes thereto may not be equal to the sum of the individual
amounts.

2. Summary of Significant Accounting Policies(a) Principles of consolidation
The consolidated financial statements include the accounts of the Bank and all of its subsidiaries, which
are engaged primarily in providing a wide range of financial services. At both March 31, 2017 and 2016,
the Bank had four subsidiaries but no affiliates. All intercompany transactions and accounts have been
eliminated.
(b) Cash and cash equivalents
For the purpose of the consolidated statements of cash flows, cash and cash equivalents consisted of cash
and due from the Bank of Japan as follows:
Millions of yen
2017
2016
Cash and due from banks
Less due from banks other thanBank of Japan
Cash and cash equivalents

Thousands of U.S. dollars
2017
2016

¥

164,668¥

104,722$

1,467,760$

933,434¥(1,878)
162,789¥(722)
104,000$(16,739)
1,451,011$(6,435)926,998-8-

(c) Trading securities
Trading securities are stated at fair value at the end of the fiscal year. Related gains and losses, both
realized and unrealized, are included in the consolidated statements of income. Accrued interest on
trading securities is included in “Other assets.”(d) Investment securities
Debt securities for which the Group has both the intent and the ability to hold to maturity are classified as
held-to-maturity debt securities and are stated at amortized cost determined by the moving averagemethod. In principle, available-for-sale securities are carried at the fair value as of the balance sheet
date. Net unrealized gain and loss on these securities, net of tax, are reported as a component ofaccumulated other comprehensive income in net assets. Available-for-sale securities for which the fairvalue is extremely difficult to determine are stated at moving average cost. The carrying value ofindividual investment securities is reduced, if necessary, through a write-down when a decline in value isdeemed other than temporary. Gain and loss on the disposal of investment securities are computed
principally using the moving average method. Accrued interest on securities is included in “Other
assets.”(e) Derivative financial instruments
Derivative financial instruments are recorded at fair value if hedge accounting is not applied, and gain
and loss on the derivatives are recognized in the consolidated statements of income.
(f) Reserve for possible losses on investments
Pursuant to the internal rules of the Bank, a reserve for possible losses on investments is provided in an
amount necessary to absorb future losses after considering the financial positions of the issuers of the
securities. A provision of reserve for possible losses on investments is included in “Other expenses” andamounted to ¥6 million ($53 thousand) and none for the years ended March 31, 2017 and 2016,
respectively.
(g) Loans and bills discounted and allowance for possible loan losses
Loans and bills discounted are stated at the amount of unpaid principal. Unearned interest and discounts
are recorded as liabilities and recognized as income over the term of the loan or bill.
An allowance for possible loan losses of the Bank is provided to cover future credit losses in accordancewith internal rules for self-assessment of asset quality. Loans written off are charged either to anallowance for possible loan losses and/or current income. Recoveries on loans that have been written
off are recorded as other income. The allowance for possible loan losses is made based on the Bank’s
internal rules in accordance with Report No. 4 of the Ad Hoc Committee for Audits of Banks, “Practical
Guideline for Audits of Write-off of Bad Loans and Allowance for Doubtful Loans of Banks and Similar
Financial Institutions,” issued by the Japanese Institute of Certified Public Accountants (“JICPA”). For
loans to borrowers that are legally or substantially bankrupt, an allowance is provided based on theamount of the claims, net of amounts expected to be collected through the disposal of collateral or the
execution of guarantees. For loans to borrowers who are likely to become bankrupt, an allowance isprovided based on an overall solvency assessment, net of amounts expected to be collected through thedisposal of collateral or the execution of guarantees. For loans to borrowers not mentioned above, anallowance is provided based on the historical loss experience of the Bank for a certain past period. All
claims are assessed by the Bank’s operating divisions based on the Bank’s internal rules for
self-assessment of asset quality. The inspection division, which is independent from the operating
divisions, conducts examinations of these assessments.
An allowance for possible loan losses of the subsidiaries is made for the aggregate amount of estimatedcredit loss based on an individual financial review of doubtful or troubled receivables and a generalreserve based on historical loss experience for other receivables.

-9-(h) Tangible fixed assets and depreciation (except for leases)
Tangible fixed assets of the Bank are stated at cost, less accumulated depreciation. Depreciation isprincipally computed using the declining balance method over the estimated useful life of the asset.
Buildings, excluding facilities attached thereto, acquired on or after April 1, 1998 and facilities attached
to buildings and structures acquired on or after April 1, 2016 are, however, depreciated using thestraight-line method. The useful lives of tangible fixed assets range from 8 to 50 years for buildings andfrom 3 to 20 years for other fixed assets.
Tangible fixed assets of the subsidiaries are depreciated principally by the straight-line method over theestimated useful life of the asset.
(i) Intangible fixed assets and amortization (except for leases)
Intangible fixed assets are amortized using the straight-line method. Costs of computer softwaredeveloped or obtained for internal use are deferred and amortized by the straight-line method principallyover the estimated useful life of five years as determined by the Bank and its subsidiaries.
(j) Leases
All finance lease transactions are accounted for in a manner similar to that used for ordinary sale andpurchase transactions.
(Accounting for leases as lessee)
The Group, as lessee, capitalizes leased assets used under finance leases, except for certain immaterial or
short-term finance leases which are accounted for as operating leases as permitted under the accounting
standard for leases. Depreciation of the leased assets capitalized in finance lease transactions arecomputed by the straight-line method over the lease term, which is used as the useful life, and with theassumption of no residual value.
(Accounting for leases as lessor)
In accordance with the relevant accounting standards for leases, a certain subsidiary engaged primarily inleasing operations as a lessor recognizes “investments in leased assets” for finance leases that do nottransfer ownership of the leased assets to the lessee in a manner similar to the accounting treatment forordinary sales transactions. The “investment in leased assets” account is presented as other assets in theaccompanying consolidated balance sheets. The amount equivalent to total interest is allocated over thelease term using the effective interest method, and lease income from lease payments and related costs,
net of imputed interest, are recognized when the lease payments are received.
(k) Impairment loss on fixed assets
Fixed assets are reviewed for impairment whenever events or changes in circumstances indicate that thecarrying value of an asset may not be recoverable. If the carrying value of an asset or a group of assets
exceeds the sum of the undiscounted future cash flows expected to result from the continued use andeventual disposal of the asset or group of assets, impairment loss is recognized in the income statement
by reducing the carrying value of the impaired asset or group of assets to the recoverable amount,measured as the higher of net selling price or value in use. Fixed assets include intangible assets as wellas land, buildings and other forms of property and are grouped at the lowest level for which there are cash
flows identifiably different from those of other groups of assets. To recognize and measure an
impairment loss, fixed assets are grouped into cash-generating units such as operating business branches,other than idle or unused property. Recoverable amounts of the assets are based on value in use,
calculated using the discounted future cash flows at interest rates principally of 9.5% and 8.0% for theyears ended March 31, 2017 and 2016, respectively, or net selling prices based primarily on appraisal
valuations, net of the estimated costs of disposal.
For the years ended March 31, 2017 and 2016, the Group recognized impairment loss, which is included
in “Impairment loss on fixed assets,” in the accompanying consolidated statements of income as follows:- 10 -

Millions of yen
2017
Buildings andOtherstructuresproperties

Land
Operating assets:
Aichi Prefecture
Other
Idle assets:
Aichi Prefecture
Other
Total

¥

0
5
1
7

¥

¥

¥

33
1
116
18
169

$

$

0
44
8
62

$

¥

-

¥

¥

¥

¥

26
22
1
10
61

¥

¥

0
0

$

$

303
80
0
392

$

$

-

294
8

1,033
160
$ 1,506- 11 -

$

$

231
196
8
89
543

$

$

0
0

34
9
5
1
51

Total
¥

¥

60
23
117
29
230

Total
$

$

Thousands of U.S. dollars
2016
Buildings andOtherstructuresproperties

Land
Operating assets:
Aichi Prefecture
Other
Idle assets:
Aichi Prefecture
Other
Total

0
44

¥

Thousands of U.S. dollars
2017
Buildings andOtherstructuresproperties

Land
Operating assets:
Aichi Prefecture
Other
Idle assets:
Aichi Prefecture
Other
Total

¥

34
9

Millions of yen
2016
Buildings andOtherstructuresproperties

Land
Operating assets:
Aichi Prefecture
Other
Idle assets:
Aichi Prefecture
Other
Total

¥

Total

303
80
44
8
454

Total
$

$

534
205
1,042
258
2,050

(l) Foreign currency translation
Assets and liabilities denominated in foreign currencies are generally translated into Japanese yen at theexchange rate prevailing at the balance sheet date. Income and expenses are translated at the exchange
rate in effect at the transaction date. Gain and loss resulting from foreign currency translation are
included in the consolidated statements of income.
(m) Reserve for employee bonuses
A reserve for employee bonuses is provided based on the estimated amounts of future payments
attributable to the respective fiscal year.
(n) Reserve for bonuses to directors
A reserve for bonuses to directors and audit and supervisory board members is provided for future bonus
payments to directors and audit and supervisory board members that reflect an amount estimated to haveaccrued as of the consolidated balance sheet date.
(o) Employee retirement benefits
Employees who terminate their service with the Group are entitled to retirement benefits generally
determined with reference to the basic salary at the time of termination, years of service and conditions
under which the termination occurs.
The Group recognizes retirement benefits, including pension costs and related liabilities, based
principally on the actuarial present value of the retirement benefit obligation using an actuarial appraisal
approach and the value of pension plan assets available for benefits at the fiscal year-end.
In determining retirement benefit obligation, the benefit formula method is used for attributing expected
retirement benefits to the period up to the end of the respective fiscal year. Actuarial differences arisingfrom changes in the projected benefit obligation or value of pension plan assets resulting from outcomes
which are different from those assumed and from changes in the assumptions themselves are amortizedon a straight-line basis principally over 13 to 14 years, a period within the average remaining years ofservice of the employees at the time when the differences arise, from the fiscal year after the year thedifferences arise.
(p) Reserve for executive retirement benefits
A reserve for executive retirement benefits is provided for payment of retirement benefits to directors,
audit and supervisory board members and other executive officers in the amount deemed to have accruedat the consolidated balance sheet date according to the internal rules of the Group.
(q) Reserve for reimbursement of deposits
A reserve for reimbursement of deposits is provided for possible losses on the future claims of withdrawal
based on historical reimbursement experience. A provision of reserve for reimbursement of deposits
was included in “Other expenses” and amounted to ¥88 million ($784 thousand) and ¥65 million ($579
thousand) for the years ended March 31, 2017 and 2016, respectively.
(r) Reserve for contingencies
A provision of reserve for contingencies included in “Other expenses” is made in an amount deemednecessary to cover possible losses resulting from the default of loans under a responsibility-sharing
system with Credit Guarantee Corporation based primarily on historical default rates. For the years
ended March 31, 2017 and 2016, the provision was recorded in the amount of none and ¥259 million($2,308 thousand), respectively.

- 12 -

(s) Stock options
The Group has applied ASBJ Statement No. 8, “Accounting Standard for Stock Options,” and its related
guidance. This standard and guidance are applicable to stock options granted on or after May 1, 2006.
This standard requires companies to measure the cost of employee stock options based on the fair value atthe grant date and recognize compensation expense over the vesting period as consideration for the goods
or services received from the employees. The standard also requires companies to account for stock
options granted to non-employees based on the fair values of either the stock options or goods or services
received from the non-employees. In the balance sheets, stock options are presented as stock acquisitionrights, a separate component of net assets, until exercised. The standard covers equity-settled,share-based payment transactions, but does not cover cash-settled, share-based payment transactions. In
addition, the standard allows unlisted companies to measure options at their intrinsic value if the fairvalue cannot be reliably estimated.
(t) Income taxes
Income taxes are accounted for using the asset-liability method. Deferred tax assets and liabilities arerecognized for the future tax consequences attributable to differences between the carrying values ofexisting assets and liabilities and their respective tax bases and operating loss carryforwards. Deferred
tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income inthe years in which those temporary differences are expected to reverse. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in the period that includes the enactment date.
(u) Appropriation of retained earnings
Cash dividends are recorded in the fiscal year when a proposed appropriation of retained earnings isapproved by the shareholders.
(v) Per share data
Earnings per share is computed by dividing profit attributable to owners of parent by the weighted
average number of shares of common stock outstanding during the respective year.
Diluted earnings per share is computed to reflect the potential dilution that could occur if securities were
exercised or converted into common stock, assuming the full exercise of the outstanding stock options.
Cash dividends per share shown in the accompanying consolidated statements of income represent
dividends declared by the Bank as applicable to the respective year.
(w) Change in accounting policy(Application of Practical Solution on a Change in Depreciation Method due to Tax Reform 2016)
Following the revision to the Corporation Tax Act of Japan, the Bank has applied the “Practical Solution
on a Change in Depreciation Method due to Tax Reform 2016” (Accounting Standards Board of Japan(“ASBJ”) Practical Issues Task Force No. 32, issued on June 17, 2016) from the fiscal year ended March
31, 2017 and changed the depreciation method for facilities attached to buildings and structures acquiredon or after April 1, 2016 from the declining balance method to the straight-line method. The effect of
this change on profit before income taxes for the fiscal year ended March 31, 2017 was insignificant.
(x) Additional information(Application of Implementation Guidance on Recoverability of Deferred Tax Assets)
The Group has applied the “Implementation Guidance on Recoverability of Deferred Tax Assets” (ASBJ
Guidance No. 26, issued on March 28, 2016) from the fiscal year ended March 31, 2017.

- 13 -

3. Financial Instruments(a) Qualitative information on financial instrumentsi) Policies for financial instruments
The Group procures funds by accepting deposits from clients and utilizes the funds for financial
investments in the bond and stock markets and for making loans to corporate and individual clients.
The Group enters into derivative transactions in order to avoid the risk of foreign currency fluctuations on
customers’ funds as well as to conduct foreign financing transactions and to avoid the risk of risinginterest rates for the Bank. From an overall risk management standpoint, the Bank uses derivative
instruments as hedging instruments in order to avoid the market risk to which financial assets andliabilities are exposed.
ii) Details of financial instruments and related risks
Financial assets of the Group consist mainly of loans to corporate and individual clients and are exposed
to interest rate risk and credit risk resulting from any deterioration in the financial condition of thecounterparty.
Investment securities comprise mainly debt and equity securities. The Group holds debt securities
classified as held-for-sale, available-for-sale or held-to-maturity and equity securities to pursue capitalgain or to maintain relationships with corporate clients. These securities are exposed to the credit risk of
the issuers, interest rate risk, market risk and foreign currency risk. Deposits consist of demand deposits
and time deposits. The maturities of time deposits are within five years.
Asset-liability management techniques are employed to manage financial assets and liabilities sensitive tointerest rate fluctuations.
iii)Risk management for financial instruments
Credit risk management
The Bank manages credit risk by conducting strict credit examinations on respective debtors.
Additionally, the Bank analyzes the risk by credit rating and industry in chronological order anddiversifies the risk of its portfolios in the entirety.
The Group manages credit risk under the Credit Supervision Section, examining and assessing
financial circumstances, industry trends, purposes of loans and repayment plans of respective debtors.
Assessments are conducted to evaluate the credit standing of prospective debtors before entering intoa transaction, for credit management after execution, as a self-assessment on a regular basis and at
any time when a relevant event occurs. By the self-assessment, assets are classified by the degree ofrisk based on the debtor’s classification and the existence of any collateral or guarantees. The resultsof the self-assessments are examined by the Self-Assessment Verification Section and are reported tothe management.
As to the credit portfolios in the entirety, the level of concentration in the industry and largetransactions are monitored by the Credit Management Section on a regular basis in order to constructportfolios that avoid concentration risk. The Credit Management Section periodically reports theresults to management.
Moreover, an internal credit rating system has been introduced that classifies debtors according tocreditworthiness. The Bank uses the credit rating for screening and credit management of debtors aswell as monitoring the credit portfolio.
As credit risk is quantified, the Bank is able to manage the credit risk more effectively.

- 14 -

Market risk management
The Compliance and Risk Control Department of the Bank monitors market risk. The department
quantifies the risk whenever possible and performs stress tests and simulation analyses to analyze thepossible effects of changes in market variables such as interest rates, stock prices and exchange rates
on the amount of market risk the Bank is exposed to and on the profit and loss of the Bank.
The results of the analyses are regularly reported to the Board of Directors, the Risk Management
Committee and other relevant parties. The Risk Management Committee and other relevant parties
confirm that the level of risk is sufficiently limited considering the equity of the Bank and review thepolicies for controlling market risk.
Interest rate risk and stock price risk are significant risks for the Group. Major financial instruments
which are exposed to interest rate risk are “Loans and bills discounted,” debt securities classified asavailable-for-sale securities under “Investment securities” and “Deposits.” Financial instruments
which are exposed to stock price risk are equity securities classified as available-for-sale securities in“Investment securities.” The Group uses Value at Risk (“VaR”) calculated based on the financial
assets and liabilities categorized into “integrated market risk,” “debt securities,” “investment trust andother securities,” “equity securities held for investment” and “strategically held equity securities” toperform quantitative analysis and manage interest rate and stock price fluctuation risks. VaR was
calculated using the historical simulation method with the assumption of a holding period of 125
business days, a 99% confidence interval and an observation period of 5 years for the year ended
March 31, 2016, and of a holding period of 125 business days, a 99% confidence interval and an
observation period of 10 years for the year ended March 31, 2017.
The total market risk exposure of the Group as estimated loss amounted to ¥37,190 million ($331,491
thousand) and ¥18,022 million ($160,638 thousand) as of March 31, 2017 and 2016, respectively. In
calculating VaR as of March 31, 2017, VaR amounts for interest rate risk associated with the banking
account and price fluctuation risk associated with the investment trust and other securities andfluctuation risk associated with the equity securities held for investment were summed with that for
price fluctuation risk associated with strategically held equity securities. In calculating VaR as ofMarch 31, 2016, VaR amounts for interest rate risk associated with the banking account and pricefluctuation risk associated with the equity securities held for investment were summed with that for
price fluctuation risk associated with strategically held equity securities.
The Group ensures the reliability and accuracy of the measurement model by performing back-testing,that is, comparing VaR amounts measured using the model with actual amounts of profit and loss.
However, VaR reflects market risk exposures statistically calculated under certain probabilities basedon historical market volatility; therefore, it may not be able to accurately reflect the risks when themarket environment changes extraordinarily.
iv) Supplemental information on fair value of financial instruments
Fair values of financial instruments are estimated based on quoted market prices or based on reasonably
calculated prices if quoted market prices are not available. Certain assumptions are used to calculate
such prices. Therefore, prices may be different under different assumptions.

- 15 -

(b) Fair value of financial instruments
The following is a summary of the carrying values and fair values of financial instruments at March 31,2017 and 2016.

Financial assets:
Cash and due from banks
Call loans and bills purchased
Trading securities
Investment securities:
Available-for-sale securities (*1)
Loans and bills discounted:
Loans and bills discounted
Allowance for possible loan losses (*2)
Loans and bills discounted, net
Total assets
Financial liabilities:
Deposits
Negotiable certificates of deposit
Security deposits received related tosecurities lending transactions
Borrowings
Total liabilities
Derivative transactions (*3):
Not qualifying for hedge accounting
Total derivative transactions

Carrying value

Millions of yen
2017
Fair value

¥

¥

¥
¥

164,668
3,487
20

-

1,138,631-

1,733,008(7,329)1,725,679
3,032,486

1,751,889
3,058,696

26,20926,2092,703,993
4,100¥

83,042
29,9752,821,111

¥
¥

(229)
(229)

¥

¥

1,138,631¥¥

104,722
2,753-

2,704,873
4,100

¥
¥

879
-

¥

83,04230,0132,822,029

¥

38
917

¥
¥

(229)
(229)

¥
¥

-

2016
Fair value

Carrying value
Financial assets:
Cash and due from banks
Call loans and bills purchased
Trading securities
Investment securities:
Available-for-sale securities (*1)
Loans and bills discounted:
Loans and bills discounted
Allowance for possible loan losses (*2)
Loans and bills discounted, net
Total assets
Financial liabilities:
Deposits
Security deposits received related tosecurities lending transactions
Borrowings
Total liabilities
Derivative transactions (*3):
Not qualifying for hedge accounting
Total derivative transactions

164,668
3,487
20

Difference¥

1,145,397

104,722
2,753-

Difference¥

1,145,397-¥

1,679,941(8,118)
1,671,822
2,924,695¥

1,700,258
2,953,131¥

28,43528,435¥2,661,691¥

2,662,602

¥

910

¥

37,574
18,9152,718,181¥

37,574
18,9572,719,134

¥

42
953

¥
¥

960
960

¥
¥

960
960

¥
¥

-

- 16 -

Thousands of U.S. dollars
2017
Carrying value
Fair value
Difference
Financial assets:
Cash and due from banks
Call loans and bills purchased
Trading securities
Investment securities:
Available-for-sale securities (*1)
Loans and bills discounted:
Loans and bills discounted
Allowance for possible loan losses (*2)
Loans and bills discounted, net
Total assets
Financial liabilities:
Deposits
Negotiable certificates of deposit
Security deposits received related tosecurities lending transactions
Borrowings
Total liabilities
Derivative transactions (*3):
Not qualifying for hedge accounting
Total derivative transactions$

1,467,760
31,081
178$

10,149,130
15,447,080(65,326)
15,381,754
27,029,913$$

24,101,907
36,545$740,190
267,180
25,145,832$$(2,041)(2,041)$

933,434
24,538-$-

10,149,130$$-

15,615,375
27,263,535

233,612233,612$

24,109,751
36,545

$

7,834
-

$

740,190
267,519
25,154,015

$

338
8,173

$
$

(2,041)(2,041)

$
$

-

2016
Fair value

Carrying value
Financial assets:
Cash and due from banks
Call loans and bills purchased
Trading securities
Investment securities:
Available-for-sale securities (*1)
Loans and bills discounted:
Loans and bills discounted
Allowance for possible loan losses (*2)
Loans and bills discounted, net
Total assets
Financial liabilities:
Deposits
Security deposits received related tosecurities lending transactions
Borrowings
Total liabilities
Derivative transactions (*3):
Not qualifying for hedge accounting
Total derivative transactions

1,467,760
31,081
178$

10,209,439

Difference

933,434
24,538-$

10,209,439-$

14,974,070(72,359)
14,901,702
26,069,123$

15,155,165
26,322,586$

253,453
253,453$

23,724,850$

23,732,970

$

8,111

$

334,913
168,597
24,228,371$

334,913
168,972
24,236,866

$

374
8,494

$
$

8,556
8,556

$
$

8,556
8,556

$
$

-

Notes:(*1) The following securities were excluded from the above tables because their fair values were extremely
difficult to determine.
Millions of yen
2017
2016
Unlisted stocks*
Other nonmarketablesecurities

Thousands of U.S. dollars
2017
2016

¥

1,643

¥

1,852

$

14,644$

16,507

¥

494
2,138

¥

465
2,318

$

4,403
19,056$

4,144
20,661- 17 -

* For the years ended March 31, 2017 and 2016, loss on the write-down of these securities wasrecognized in the amount of ¥8 million ($71 thousand) and ¥2 million ($17 thousand), respectively.
(*2) Allowance for possible loan losses on ordinary and specific claims corresponding to loans and bills
discounted is deducted.
(*3) Derivative transactions recorded in other assets and liabilities are presented in a lump sum on a net basis.
A net liability position is shown in parenthesis.

Methods for calculating the fair value of financial instruments were as follows:
Financial assets:● Cash and due from banks – The fair value of due from banks without maturities approximates the
carrying value. As for those with maturities, the present value calculated by discounting theamount categorized based on the remaining term to maturity as of the consolidated balance sheet
date at the risk free rate is used as the fair value. As for those with maturities up to one year as of
the consolidated balance sheet date, the carrying value is used as the fair value after it is confirmedthat the fair value approximates the carrying value.
● Call loans and bills purchased – The present value calculated by discounting the amount
categorized based on the remaining term to maturity as of the consolidated balance sheet date at therisk free rate is used as the fair value of call loans and bills purchased. As for those withmaturities up to one year as of the consolidated balance sheet date, the carrying value is used as thefair value after it is confirmed that the fair value approximates the carrying value.
● Trading securities – The fair value of trading securities such as debt securities held for dealing
operations is based on the quoted market price or the price obtained from the counterparty financial
institution.
● Investment securities – The fair value of equity securities is based on the quoted market price.
The fair value of debt securities is based on the quoted market price or the price obtained from thecounterparty financial institution. The fair value of investment trust funds is based on the constantvalue.
The fair value of private placement bonds guaranteed by the Bank is calculated by discounting thefuture cash flows at the risk free rate to which the consideration (risk premium) to cover
uncertainty inherent in cash flows (credit risk and others), which is calculated based on the amount
expected to be collected according to the internal credit rating and the existence of collateral or
guarantees, is added. As for transactions with maturities up to one year as of the consolidatedbalance sheet date, the carrying value is used as the fair value after it is confirmed that the fairvalue approximates the carrying value. Additional information on securities classified by holding
purpose is presented in Note 4, “Trading Securities and Investment Securities.”● Loans and bills discounted – The fair value of loans and bills discounted to corporate clients is
calculated by discounting the future cash flows at the risk free rate to which the consideration (riskpremium) to cover uncertainty inherent in cash flows (credit risk and others), which is calculated
based on the amount expected to be collected according to the internal credit rating and theexistence of collateral or guarantees, is added. The fair value of those to individual clients is
calculated as the total of principal and interest discounted by the rate assumed when a similar loan
is executed.
As for transactions whose due date is within one year as of the consolidated balance sheet date, thecarrying value is used as the fair value after it is confirmed that the fair value approximates the
carrying value.
As for loans to borrowers that are legally or substantially bankrupt and those who are likely to
become bankrupt, the estimated loan losses are calculated based on the present value of theestimated future cash flows or the amount expected to be collected due to collateral or guarantees.
As a result, the fair value approximates the carrying value as of the consolidated balance sheet dateminus the allowance for possible loan losses.

- 18 -

Financial liabilities:● Deposits and negotiable certificates of deposit – The fair value of demand deposits is deemed as theamount that would be paid if demanded by the clients as of the consolidated balance sheet date (thecarrying value). The fair value of time deposits is the present value calculated by discounting
future cash flows of the amount categorized based on a certain period. The discount rate is therate that would apply when a new deposit is accepted. As for those with maturities up to one year
as of the consolidated balance sheet date, the carrying value is used as the fair value after it isconfirmed that the fair value approximates the carrying value.
● Security deposits received related to securities lending transactions and borrowings – The present
value calculated by discounting the amount categorized based on the remaining term to maturity asof the consolidated balance sheet date at the risk free rate is used as the fair value. As fortransactions with maturities up to one year as of the consolidated balance sheet date, the carrying
value is used as the fair value after it is confirmed that the fair value approximates the carrying
value.
Derivative transactions:
Information on fair value of derivative transactions is presented in Note 16, “Derivative Financial
Instruments.”- 19 -

(c) Redemption schedule for financial instruments with maturities
The redemption schedule for financial instruments with maturities at March 31, 2017 was as follows:

Due after
1 yearthrough
3 years

Due in 1 year
or less
Financial assets:
Due from banks
Call loans and bills purchased
Investment securities:
Available-for-sale securities:
Japanese government
bonds
Local government bonds
Corporate bonds
Foreign bonds
Other
Total investment securities
Loans and bills discounted (*1)
Financial liabilities:
Deposits (*2)
Negotiable certificates ofdepositSecurity deposits received
related to securities lendingtransactions
Borrowings¥

128,319
3,487¥

39,80018,908105,238
9,143
4,051
177,141
294,626
603,574¥

2,399,338

¥

¥

$

¥
¥

296,109¥-¥

123,100
32,64488,39325,48639,262308,887
229,656
538,544

¥

8,545

¥

Due after
7 years
through
10 years
-

¥

6,539
28,7338,879
44,152
129,824
173,977¥-¥

Due after
10 years
-

¥

-

¥

2,000
19,63911,154
110,310
143,103
154,026
297,130¥

26,5007,205
33,705
330,342364,048

¥

-

¥

-

4,100

-

-

-

-

-

83,042
23,8552,510,336

3,950
300,059

2,170
10,715

-

-

-

¥

¥

¥

¥

Thousands of U.S. dollars
2017
Due after
Due after
3 years
5 years
throughthrough
5 years
7 years

Due after
1 yearthrough
3 years-

354,755
168,535
938,033
81,495
36,108
1,578,937
2,626,134
5,379,926

568,678
251,903
976,726
191,416
247,856
2,236,589
3,174,454$ 5,411,052

1,097,245
290,970
787,886
227,168
349,959
2,753,248
2,047,027$ 4,800,285

58,285
256,110
79,142
393,546
1,157,179$ 1,550,735

17,826
175,051
99,420983,242
1,275,541
1,372,903$ 2,648,453$

236,206
64,221
300,427
2,944,487
3,244,923$ 21,386,380$ 2,639,352

$

$

$

$

-

36,545

-

-

-

-

-

740,190
212,630$ 22,375,755

35,208$ 2,674,561

19,342
95,507

-

-

-

$

-

76,165

$

$

-

-

$

Due after
10 years$- 20 -$

Due after
7 years
through
10 years¥

1,143,765
31,081$
Financial liabilities:
Deposits (*2)
Negotiable certificates ofdepositSecurity deposits received
related to securities lendingtransactions
Borrowings-

63,80028,261
109,579
21,47527,807250,923
356,142
607,066

Due in 1 year
or less
Financial assets:
Due from banks
Call loans and bills purchased
Investment securities:
Available-for-sale securities:
Japanese government
bonds
Local government bonds
Corporate bonds
Foreign bonds
Other
Total investment securities
Loans and bills discounted (*1)

Millions of yen
2017
Due after
Due after
3 years
5 years
throughthrough
5 years
7 years

$

-

-

$

$

-

Notes:(*1) At March 31, 2017, the total amount of loans which were not expected to be recovered, including claims toborrowers that were legally or substantially bankrupt and to those who were likely to become bankrupt,
amounted to ¥36,965 million ($329,485 thousand). Loans without due dates in the amount of ¥201,424
million ($1,795,382 thousand) were excluded.
(*2) Demand deposits were included in “Due in 1 year or less.”

4. Trading Securities and Investment Securities
At March 31, 2017, trading securities consisted of Japanese government bonds only.
carrying value of trading securities at March 31, 2016.

There was no

At March 31, 2017 and 2016, investment securities consisted of the following:

Millions of yen
2017
2016
Japanese government bonds
Local government bonds
Bonds and debentures
Equity securities
Other

¥

264,875
108,396356,602125,217285,677¥ 1,140,769¥¥

Thousands of U.S. dollars
2017
2016

266,501
111,059
409,205
121,847
239,103
1,147,715$ 2,360,950
966,182
3,178,554
1,116,115
2,546,367$ 10,168,187$ 2,375,443
989,918
3,647,428
1,086,077
2,131,232$ 10,230,100

At March 31, 2017 and 2016, investment securities included Japanese government bonds of ¥2,110
million ($18,807 thousand) and ¥7,447 million ($66,378 thousand), respectively, as loans without
collateral (securities lending transactions).
At March 31, 2017 and 2016, liabilities for guarantees on corporate bonds included in “Investment
securities,” which were issued by private placement (Article 2, Paragraph 3 of the Financial Instruments
and Exchange Act), amounted to ¥15,068 million ($134,307 thousand) and ¥12,777 million ($113,887
thousand), respectively.
Securities are classified as trading, held-to-maturity or available-for-sale. The classification determines
the respective accounting method that should be used to account for these securities, as stipulated by theaccounting standard for financial instruments. At March 31, 2017 and 2016, the carrying values of
trading securities and the related valuation differences included in the consolidated statements of income
were as follows:
Millions of yen
2017
Carryingvalue
Tradingsecurities¥

20

Valuationdifference¥

Thousands of U.S. dollars
2017
2016

2016

0

Carrying
value
¥

-

Valuationdifference

Carrying
value

-

¥

$

178

Valuationdifference$0

Carrying
value$

Valuationdifference-

The Group did not have any held-to-maturity debt securities as of March 31, 2017 and 2016.

- 21 -$-

At March 31, 2017 and 2016, gross unrealized gains and losses for available-for-sale securities with fairvalue were as follows:

Cost
Available-for-sale securities with fair value:
Japanese government bonds¥
Local government bonds
Bonds and debentures
Equity securities
Other¥

259,664
106,297351,141
57,990287,705
1,062,800

Cost
Available-for-sale securities with fair value:
Japanese government bonds¥
Local government bonds
Bonds and debentures
Equity securities
Other¥

258,223
108,116
401,497
60,995
232,334
1,061,166

Cost
Available-for-sale securities with fair value:
Japanese government bonds$ 2,314,502
Local government bonds
947,473
Bonds and debentures
3,129,877
Equity securities
516,890
Other2,564,444$ 9,473,215

Cost
Available-for-sale securities with fair value:
Japanese government bonds$ 2,301,657
Local government bonds
963,686
Bonds and debentures
3,578,723
Equity securities
543,675
Other
2,070,897$ 9,458,650- 22 -

Millions of yen
2017
Gross
Gross
unrealized
unrealized
gains
losses
¥

¥

5,756
2,176
5,562
66,377
5,100
84,973

¥

¥

(545)
(77)
(101)
(794)
(7,622)(9,142)

Fair andcarrying
value¥

264,875
108,396356,602123,574
285,182¥ 1,138,631

Millions of yen
2016
Gross
Gross
unrealized
unrealized
gains
losses
¥

¥

8,277
2,942
7,830
61,4438,059
88,553

¥

¥

(0)
(122)
(2,444)(1,756)(4,323)Thousands of U.S. dollars
2017
Gross
Gross
unrealized
unrealized
gains
losses$51,305
19,39549,576591,648
45,458$ 757,402$(4,857)(686)(900)(7,077)(67,938)$ (81,486)

Thousands of U.S. dollars
2016
Gross
Gross
unrealized
unrealized
gains
losses$73,776
26,223
69,792547,669
71,833$ 789,312$(0)(1,087)(21,784)(15,652)$ (38,532)

Fair andcarrying
value¥

266,501
111,059
409,205
119,994
238,637¥ 1,145,397

Fair andcarryingvalue$ 2,360,950
966,182
3,178,554
1,101,470
2,541,955$ 10,149,130

Fair andcarryingvalue$ 2,375,443
989,918
3,647,428
1,069,560
2,127,079$ 10,209,439

During the years ended March 31, 2017 and 2016, the Group recorded losses on the write-down ofavailable-for-sale securities with fair value due to other than temporary decline in value as follows:
Millions of yen
2017
2016
Equity securities
Corporate bonds

¥

-

¥

Thousands of U.S. dollars
2017
2016
55
3

$

-

$

490
26

The Group recognizes the write-down of available-for-sale securities with fair value in the case of adecline in value by 50% or more below cost or an other than temporary decline ranging from 30% to 50%
below cost.
At March 31, 2017 and 2016, net unrealized gains on available-for-sale securities, net of applicable
income taxes and non-controlling interests, recorded as a component of accumulated othercomprehensive income in net assets on the consolidated balance sheets were as follows:

Millions of yen
2017
2016
Unrealized gains
Less applicable income taxes
Less non-controlling interests portion
Net unrealized gains¥¥

75,830(22,268)(55)
53,506¥

Thousands of U.S. dollars
2017
2016

84,230(25,009)(67)¥ 59,152$

675,906(198,484)(490)$ 476,923$$

750,779(222,916)(597)
527,248

During the years ended March 31, 2017 and 2016, the Group sold available-for-sale securities andrecorded gains and losses on the consolidated statements of income as follows:
Millions of yen
2017
2016
Gains on sales of:Equity securities
Bonds and others¥¥

Losses on sales of:Equity securities
Bonds and others

¥
¥

3,858
1,495
5,353

¥

838
3,593
4,432

¥

¥

¥

Thousands of U.S. dollars
2017
2016

2,157
1,481
3,638

$

987
1,828
2,815

$

$

$

34,38813,32547,713$

7,469
32,02639,504$$$

19,226
13,20032,427
8,797
16,29325,091

5. Loans and Bills Discounted
At March 31, 2017 and 2016, loans and bills discounted consisted of the following:
Millions of yen
2017
2016
Bills discounted
Loans on bills
Loans on deeds
Overdrafts¥

24,09349,494
1,455,604
203,816¥ 1,733,008¥¥

25,71453,651
1,402,379
198,195
1,679,941

Thousands of U.S. dollars
2017
2016
$

214,751
441,162
12,974,454
1,816,703$ 15,447,080$$

229,200
478,215
12,500,035
1,766,601
14,974,070

Bills discounted are accounted for as financial transactions in accordance with the JICPA Industry Audit
Committee Report No. 24 issued on February 13, 2002, “Treatment of Accounting and Auditing
Concerning Application of Accounting Standard for Financial Instruments in Banking Industry.” The- 23 -

Group has the right to sell or pledge (repledge) bankers’ acceptances, commercial bills, documentary bills
and foreign bills of exchange purchased without restrictions. The total face value of these bills
amounted to ¥24,138 million ($215,152 thousand) and ¥25,800 million ($229,967 thousand) at March 31,2017 and 2016, respectively.
Claims to borrowers in bankruptcy and past due loans amounted to ¥36,964 million ($329,476 thousand)and ¥49,244 million ($438,933 thousand) at March 31, 2017 and 2016, respectively, and are included in“Loans and bills discounted.” Loans are generally placed on non-accrual status when there is substantial
doubt about the ultimate collectability of either principal or interest because the principal or interest is
past due for a considerable period or for other reasons. Claims to borrowers in bankruptcy represent
non-accrual loans after charge-off to legally bankrupt borrowers as defined in Article 96, Paragraph 1,
Subparagraph 3 and 4 of the Order for Enforcement of the Corporation Tax Act of Japan. Past due loans
are non-accrual loans other than claims to borrowers in bankruptcy and loans for which interest payments
are deferred in order to assist the financial recovery of borrowers in financial difficulties.
At March 31, 2017 and 2016, delinquent loans for which the payment of principal or interest wascontractually past due three months or more, excluding non-accrual loans, amounted to ¥543 million($4,840 thousand) and ¥892 million ($7,950 thousand), respectively.
For borrowers in financial difficulties, the Bank may support their financial recovery or restructuring byrestructuring the terms and conditions of their loans such as by a reduction or exemption of the original
interest rate, extension of interest payments and/or principal repayments or debt forgiveness. At March
31, 2017 and 2016, restructured loans for which the Bank had restructured the terms and conditions infavor of borrowers in financial difficulties, excluding “claims to borrowers in bankruptcy,” “past dueloans” and “delinquent loans contractually past due three months or more” described above, amounted to¥5,177 million ($46,144 thousand) and ¥6,016 million ($53,623 thousand), respectively.
Total non-performing assets before charge-offs of claims deemed uncollectible, consisting of “claims toborrowers in bankruptcy,” “past due loans,” “delinquent loans contractually past due three months ormore” and “restructured loans,” aggregated ¥42,685 million ($380,470 thousand) and ¥56,154 million($500,525 thousand) at March 31, 2017 and 2016, respectively.
A provision of allowance for possible loan losses in the amount of none and ¥126 million ($1,123
thousand) for the years ended March 31, 2017 and 2016, respectively, is included in “Other expenses” inthe accompanying consolidated statements of income.

- 24 -

6. Foreign Exchange
At March 31, 2017 and 2016, foreign exchange consisted of the following:

Assets:Due from banks
Foreign bills of exchange purchased
Foreign bills of exchange receivable¥¥

Millions of yen
2017
2016

Thousands of U.S. dollars
2017
2016

982
45
469
1,497

$

¥

¥

2,165
86
466
2,717

Millions of yen
2017
2016
Liabilities:
Foreign bills of exchange sold
Foreign bills of exchange payable

¥
¥

463
55
519

¥
¥

$

8,753
401
4,180
13,343$$

19,297766
4,153
24,217

Thousands of U.S. dollars
2017
2016

503
202
706

$
$

4,126
490
4,626

$
$

4,483
1,800
6,292

7. Tangible Fixed Assets
At March 31, 2017 and 2016, tangible fixed assets consisted of the following:
Millions of yen
2017
2016
Land
Buildings and structures
Construction in progress
Other tangible fixed assets
Tangible fixed assets¥¥

23,300
8,620
1
3,547
35,468¥¥23,249
8,428
34
3,507
35,219Thousands of U.S. dollars
2017
2016
$

$

207,683
76,8338
31,616
316,142$$

207,228
75,122
303
31,259313,922

Accumulated depreciation of tangible fixed assets at March 31, 2017 and 2016 was ¥23,322 million($207,879 thousand) and ¥22,931 million ($204,394 thousand), respectively.
As permitted by the accounting principles and practices generally accepted in Japan, deferred capitalgains on sales of real property are deducted from the original acquisition cost of property newly acquired
for replacement purposes in the same line of business as the property sold. At both March 31, 2017 and2016, the amount of ¥2,286 million ($20,376 thousand) of deferred capital gains was directly reduced
from the acquisition cost of land.
The Bank elected the one-time revaluation of land used for the banking business effective on March 31,
1998, reflecting appropriate adjustments for land shape and other factors based on the appraisal values
issued by the Japanese National Tax Agency under the Act on Revaluation of Land. According to theAct, the amount equivalent to the tax effect on the excess of the reassessed values over the original bookvalue is stated as “Deferred tax liabilities for revaluation,” and the rest of the excess, net of the tax effect,
is disclosed as “Land revaluation increment” and included in a component of accumulated othercomprehensive income in net assets on the consolidated balance sheets. At March 31, 2017 and 2016,
the differences in the carrying values of land used for the banking business after reassessment over themarket values amounted to ¥1,114 million ($9,929 thousand) and ¥2,868 million ($25,563 thousand),
respectively.

- 25 -

8. Pledged Assets
At March 31, 2017 and 2016, investment securities totaling ¥145,822 million ($1,299,777 thousand) and¥100,759 million ($898,110 thousand), respectively, were pledged as collateral for “Security deposits
received related to securities lending transactions” of ¥83,042 million ($740,190 thousand) and ¥37,574
million ($334,913 thousand) and for “Borrowings” of ¥21,300 million ($189,856 thousand) and ¥12,200
million ($108,744 thousand), respectively.
At March 31, 2017 and 2016, investment securities totaling ¥24,929 million ($222,203 thousand) and¥25,254 million ($225,100 thousand), respectively, were pledged as collateral for the settlement of
exchange and other transactions.

9. Deposits and Negotiable Certificates of Deposit
At March 31, 2017 and 2016, deposits consisted of the following:
Millions of yen
2017
2016
Demand deposits
Time deposits
Other
Deposits
Negotiable certificates of deposit¥ 1,465,667
1,207,227
31,0982,703,993
4,100¥ 2,708,093¥ 1,373,221
1,257,601
30,8692,661,691¥ 2,661,691

Thousands of U.S. dollars
2017
2016
$ 13,064,150
10,760,557
277,190
24,101,907
36,545$ 24,138,452$ 12,240,137
11,209,564
275,149
23,724,850$ 23,724,850

10. Borrowings and Lease Obligations
At March 31, 2017 and 2016, borrowings, which consisted of the borrowings from other financial
institutions, amounted to ¥29,975 million ($267,180 thousand) and ¥18,915 million ($168,597 thousand),
respectively. At March 31, 2017, the annual maturities of borrowings due through February 2022 at an
average interest rate of 0.08% per annum were as follows:Year ending March 31,

Thousands of
U.S. dollars

Millions of yen

2018
2019
2020
2021
2022

¥

¥

23,855
2,140
1,810
1,430
740
29,975$$

212,630
19,074
16,133
12,746
6,595
267,180

At March 31, 2017 and 2016, other liabilities included lease obligations of ¥10 million ($89 thousand)and ¥13 million ($115 thousand), respectively.

11. Employee Retirement Benefits
The Group has corporate pension fund plans and lump-sum retirement benefit plans as defined benefit
plans that cover substantially all employees. Furthermore, retirement benefit trusts are set up to cover
lump-sum retirement benefit plans. At March 31, 2017 and 2016, employee retirement benefits
consisted of the following:- 26 -

(Defined benefit plans)(a) Movement in retirement benefit obligations:
Millions of yen
2017
2016
Retirement benefit obligations at beginning of year ¥Service cost
Interest cost
Actuarial differences
Retirement benefits paid
Retirement benefit obligations at end of year¥

22,632 ¥786
73
291(1,257)22,525 ¥Thousands of U.S. dollars
2017
2016

20,289 $
668
249
2,624
(1,199)22,632 $201,729 $
7,005
650
2,593
(11,204)
200,775 $

180,844
5,954
2,219
23,388(10,687)
201,729(b) Movement in plan assets:
Millions of yen
2017
2016
Plan assets at beginning of year
Expected return on plan assets
Actuarial differences
Contribution paid by the employer
Refund of equity securities from retirement
benefit trusts
Retirement benefits paid
Plan assets at end of year¥¥

24,281
620
220
301

¥

(874)
24,548 ¥Thousands of U.S. dollars
2017
2016

31,141 $ 216,427
613
5,526
(1,661)
1,960
357
2,682
(5,245)(924)
24,281 $$277,573
5,463(14,805)
3,182(7,790)218,807 $(46,751)(8,236)
216,427(c) Reconciliation from retirement benefit obligations and plan assets to employee retirement benefit asset or
liability recorded on the consolidated balance sheet:
Millions of yen
2017
2016
Funded retirement benefit obligations
Plan assets¥

Unfunded retirement benefit obligations
Net balance of (asset) liability for retirement
benefits recorded on the consolidatedbalance sheet at end of year
Employee retirement benefit liability
Employee retirement benefit asset
Net balance of (asset) liability for retirement
benefits recorded on the consolidatedbalance sheet at end of year

- 27 -¥

22,525(24,548)(2,023)-¥Thousands of U.S. dollars
2017
2016

22,632 $ 200,775 $ 201,729(24,281)(218,807)(216,427)(1,648)(18,031)(14,689)-(2,023)(1,648)(18,031)(14,689)

1,094(3,117)1,353(3,002)

9,751(27,783)

12,059(26,758)(1,648) $(18,031) $(14,689)(2,023)¥

(d) Net periodic retirement benefit expenses and their breakdown:
Millions of yen
2017
2016
Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial differences
Gain on refund from retirement benefit trusts *Other
Net periodic retirement benefit expenses
under defined benefit plans

Thousands of U.S. dollars
2017
2016

¥

786
73
(620)
174
43

¥

668 $
249
(613)
(224)
(856)
37

7,005 $
650
(5,526)
1,550
383

5,954
2,219
(5,463)(1,996)(7,629)
329

¥

457

¥

(739) $

4,073

(6,587)$

Note: * Gain on refund from retirement benefit trusts of ¥856 million ($7,629 thousand) for the year ended March 31,
2016 was included in “Other income.”(e) Retirement benefit adjustment in other comprehensive income, before tax effects:
Millions of yen
2017
2016
Actuarial differences
Total

¥
¥

103
103

¥
¥

Thousands of U.S. dollars
2017
2016

(5,367) $(5,367) $

918
918

$
$

(47,838)(47,838)(f) Retirement benefit adjustment in accumulated other comprehensive income, before tax effects:
Millions of yen
2017
2016
Actuarial differences yet to be recognized
Total

¥
¥

(2,678)(2,678)¥¥

Thousands of U.S. dollars
2017
2016

(2,781) $(2,781) $(23,870) $(23,870) $(24,788)(24,788)(g) Plan assetsi) Plan assets comprise:

Debt securities
Equity securities
Cash and deposits
General account
Other
Total

2017

2016

38.9%
39.3
7.8
13.3
0.7
100.0%

43.7%
36.8
5.3
13.5
0.7
100.0%

Note: At March 31, 2017 and 2016, 36.4% and 34.9% of plan assets consisted of retirement benefit trusts that are
set up for corporate pension plans and lump-sum retirement benefit plans, respectively.

ii) Determination of expected long-term rate of plan assets
The expected long-term rate of return on plan assets is determined by considering the current and future
portfolios of plan assets and the current and expected long-term rates of return generated from various
components of the plan assets.

- 28 -

(h) Actuarial assumptions at end of year:

Discount rate for corporate pension plans
Discount rate for lump-sum retirement benefit plans
Expected long-term rate of return on plan assets

2017

2016

0.3%
0.2%
3.0%

0.3%
0.2%
3.0%

12. Acceptances and Guarantees
The Bank provides guarantees for liabilities of certain customers for payments on the customers’ loans
from other financial institutions. A contra account, “Customers’ liabilities for acceptances andguarantees,” is classified as an asset in the consolidated balance sheets, indicating the Bank’s right ofindemnity from these customers.

13. Net Assets
At March 31, 2017 and 2016, the authorized number of shares of common stock without par value was 30
million, and the number of shares of common stock issued was 10,943,240 shares. At March 31, 2017and 2016, the number of shares of treasury stock held by the Group was 102,855 and 100,916 shares,
respectively.
At March 31, 2017 and 2016, capital surplus consisted principally of additional paid-in capital.
Included in retained earnings was the legal earnings reserve of the Bank in the amount of ¥5,392 million($48,061 thousand) at both March 31, 2017 and 2016. The Japanese Banking Act provides that an
amount equivalent to at least 20% of the cash payments as appropriations of retained earnings shall beappropriated as the legal earnings reserve until the total amount of additional paid-in capital and suchreserve equals the common stock. The legal earnings reserve is not available for distributions as
dividends, but may be used to reduce a deficit or may be transferred to common stock by proper action of
the Board of Directors and/or the shareholders.
In November 2016, the Board of Directors of the Bank resolved to pay interim dividends of ¥433 million($3,859 thousand) at ¥40 per share ($0.35 per share). The shareholders of the Bank approved thefollowing appropriation of retained earnings at the annual shareholders meeting on June 23, 2017.
Thousands of
U.S. dollars

Millions of yen
Cash dividends, ¥50 per share ($0.44 per share)- 29 -

¥

542

$

4,831

14. Stock Options(a) Stock option expenses
The Bank recorded stock option expenses of ¥47 million ($418 thousand) and ¥48 million ($427
thousand) in “General and administrative expenses” for the years ended March 31, 2017 and 2016,
respectively.
(b) Outline of stock options and size of and changes in stock optionsi) Outline of stock options:2012
stock options

2013
stock options

2014
stock options

2015
stock options

2016
stock options

13 directors of
the Bank(excluding
outsidedirectors)

13 directors of
the Bank(excluding
outsidedirectors)

13 directors of
the Bank(excluding
outsidedirectors)

13 directors of
the Bank(excluding
outsidedirectors)

13 directors of the
Bank (excluding
directors who are
Audit andSupervisory
Committee Members
and outside directors)

13,000 commonshares of theBank
Grant dateJuly 20, 2012
Conditions for vestingNot defined
Requisite service
periodNot defined
Exercise period
July 21, 2012
toJuly 20, 2042

12,200common sharesof the Bank
July 19, 2013
Not defined

9,100 commonshares of the
Bank
July 25, 2014
Not defined

7,100 commonshares of the
Bank
July 24, 2015
Not defined

10,600 commonshares of the
Bank
July 22, 2016
Not definedNot defined
July 20, 2013
toJuly 19, 2043

Not defined
July 26, 2014
toJuly 25, 2044

Not defined
July 25, 2015
toJuly 24, 2045

Not defined
July 23, 2016
toJuly 22, 2046

Position and numberof grantees

Number of options
granted*Note: * Calculated in terms of the number of shares.

ii) Size of and changes in stock options:
The following describes the size of and changes in stock options that existed during the years ended
March 31, 2017 and 2016. The number of stock options is calculated in terms of the number of shares.

- 30 -

a) Number of stock options
2012
stock options

2013
stock options

2014
stock options

2015
stock options--

7,100 shares(7,100 shares)-

12,200 shares
12,200 shares
12,200 shares

9,100 shares
9,100 shares
9,100 shares

7,100 shares
7,100 shares
7,100 shares2012
stock options

2013
stock options

2014
stock options

2015
stock options

2016
stock options¥1($0.00)¥5,193($46.28)¥3,645($32.48)¥1($0.00)¥1($0.00)¥1($0.00)¥1($0.00)

-

-

-

-

¥4,556($40.60)¥4,959($44.20)¥6,811($60.70)¥4,466($39.80)

Non-vested:
Outstanding at April 1, 2015
GrantedForfeited
VestedOutstanding at March 31, 2016
GrantedForfeited
VestedOutstanding at March 31, 2017
Vested:Outstanding at April 1, 2015
13,000 shares
VestedExercised(400 shares)
Forfeited
Outstanding at March 31, 2016 12,600 shares
VestedExercised(3,700 shares)
Forfeited
Outstanding at March 31, 2017 8,900 shares2016
stock options
10,600 shares(10,600 shares)
10,600 shares
10,600 sharesb) Price information(per share)
Exercise price
Average stock price at exercise
Fair value at grant dateiii) Valuation technique to estimate fair value of stock options granted for the years ended March 31,2017 and 2016:(1) 2015 stock options:a) Valuation technique used: Black-Scholes modelb) Major assumptions and estimation method
2015 stock options
Expected volatility (*1)
Expected life (*2)
Expected dividends (*3)
Risk free interest rate (*4)

30.435%2.0 years¥80 ($0.71) per share
0.000%

Notes: (*1) Expected volatility is calculated based on the actual stock prices during the period from July 2013 toJuly 2015, which corresponds to the expected life of the options.
(*2) Expected life is estimated based on the difference between the average term of office of directors who
retired during the past 10 years and the average term of office of existing directors in office.
(*3) Expected dividends are the actual dividends for the year ended March 31, 2015.
(*4) Risk free interest rate is a Japanese government bond yield which corresponds to the expected life.

- 31 -

(2) 2016 stock options:a) Valuation technique used: Black-Scholes modelb) Major assumptions and estimation method
2016 stock options
Expected volatility (*1)
Expected life (*2)
Expected dividends (*3)
Risk free interest rate (*4)

36.579%2.2 years¥80 ($0.71) per share(0.342)%

Notes: (*1) Expected volatility is calculated based on the actual stock prices during the period from May 2014 to
July 2016, which corresponds to the expected life of the options.
(*2) Expected life is estimated based on the difference between the average term of office of directors who
retired during the past 10 years and the average term of office of existing directors in office.
(*3) Expected dividends are the actual dividends for the year ended March 31, 2016.
(*4) Risk free interest rate is a Japanese government bond yield which corresponds to the expected life.

iv) Method of estimating number of stock options vested
Basically, only the actual number of forfeited stock options is reflected because it is difficult to rationallyestimate the number of stock options to be forfeited in the future.

- 32 -

15. Commitments(a) Loan commitments
Contracts related to overdraft facilities and loan commitment lines are agreements that allow customers to
overdraw or borrow up to prescribed limits unless there is violation of any condition in the contract. At
March 31, 2017 and 2016, the unused amounts within the limits of these contracts, which originally
expire within one year or are revocable by the Bank at any time without any conditions, aggregated¥595,114 million ($5,304,519 thousand) and ¥597,553 million ($5,326,259 thousand), respectively.
Since many of these commitments expire without being drawn down, the unused amount does notnecessarily represent a future cash flow. In addition, most of these contracts have conditions that theGroup can refuse customer applications or decrease the contract limits for appropriate reasons such aschanges in the financial situation or deterioration in creditworthiness of the customer. At the executionof the contract, the Bank obtains real estate, securities, etc., as collateral if considered necessary.
Subsequently, the Bank performs periodic reviews of the customer’s business performance in accordancewith the Bank’s internal rules and takes necessary measures such as modifying the terms and conditionsof the contracts and/or requiring additional collateral and/or guarantees if necessary.
(b) Lease commitments
The Group has entered into various lease agreements as a lessee principally for land for office space.
These leases are generally cancelable with a few months advance notice and are accounted for as
operating leases. The Group has also entered into non-cancelable operating lease agreements. The
future minimum lease payments under these non-cancellable operating leases as of March 31, 2017 and2016 were as follows:
Millions of yen
2017
2016
Due within one year
Due after one year

¥
¥

101
1,170
1,272

¥
¥

102
1,154
1,257

Thousands of U.S. dollars
2017
2016
$
$

900
10,428
11,337$$909
10,286
11,204

In addition, a subsidiary engaged in the leasing business as a lessor has entered into various long-term,
non-cancelable lease agreements with third parties that were categorized as finance leases. Information
concerning future minimum lease payments to be received as of March 31, 2017 and 2016 for financeleases which do not transfer ownership of the leased assets to the lessee was as follows:
Millions of yen
2017
2016
Total future minimum lease payments
to be received
Estimated residual value of leased
assets
Imputed interest¥

13,579726(408)- 33 -¥

Thousands of U.S. dollars
2017
2016

12,488$ 121,035

697
(538)

6,471
(3,636)$111,311
6,212(4,795)

The aggregate annual maturities of future minimum lease payments to be received as of March 31, 2017
were as follows:Year ending March 31,

Thousands of
U.S. dollars

Millions of yen

2018
2019
2020
2021
2022
2023 and thereafter

¥

¥

3,746
3,110
2,461
1,817
1,096
1,345
13,579$$33,38927,72021,936
16,195
9,769
11,988121,035

As permitted by the accounting standard for lease transactions with respect to finance leases entered into
before April 1, 2008, the appropriate carrying value, net of accumulated depreciation, of the underlying
assets at March 31, 2008 is recognized as the value of the investment in the leased assets, and the total
amount equivalent to interest income on these transactions is allocated over the lease term using thestraight-line method, instead of the effective interest method, as the principal method of the accounting
standard. As a result, profit before income taxes for the years ended March 31, 2017 and 2016 were ¥5
million ($44 thousand) and ¥6 million ($53 thousand) more, respectively, than the amounts that would
have been recorded under the effective interest method based on lease payments receivable.

- 34 -

16. Derivative Financial Instruments
Derivative financial instruments, other than those to which hedge accounting was applied, which weretraded on the over-the-counter market and stated at fair value and whose valuation gains and losses arerecognized in the consolidated statements of income, as of March 31, 2017 and 2016 are summarized asfollows:
Millions of yen
Notional principal orcontract amounts
Over oneFair value*
Total
year

Valuation
gains (losses)

Currency swap:
At March 31, 2017
At March 31, 2016

¥

5,623

¥

-

¥

(25)

¥

(25)

Foreign exchange forward contracts:
At March 31, 2017
At March 31, 2016¥

42,49034,604

¥

-

¥

(229)
986

¥

(229)
986

Thousands of U.S. dollars
Notional principal orcontract amounts
Over oneFair value*
Total
year

Valuation
gains (losses)

Currency swap:
At March 31, 2017
At March 31, 2016$

50,120

$

-

$

(222)

$

(222)

Foreign exchange forward contracts:
At March 31, 2017
At March 31, 2016$

378,732
308,441$-$(2,041)8,788$(2,041)8,788

Note: * Fair value was based on the discounted cash flow method.

There were no outstanding derivative financial instruments to which hedge accounting was applied as ofMarch 31, 2017 and 2016.

- 35 -

17. Income Taxes
Income taxes for the years ended March 31, 2017 and 2016 consisted of the following:
Millions of yen
2017
2016
Income taxes:
Current
Deferred
Total income taxes

¥
¥

1,665
671
2,337

¥
¥

Thousands of U.S. dollars
2017
2016

1,795
1,488
3,283

$
$

14,8405,980
20,830$$15,99913,26329,262The tax effects of temporary differences that gave rise to a significant portion of deferred tax assets andliabilities at March 31, 2017 and 2016 were as follows:
Millions of yen
2017
2016
Deferred tax assets:
Allowance for possible loan losses¥
Employee retirement benefit asset
Employee retirement benefit liability
Investment securities
Other
SubtotalLess valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Employee retirement benefit asset
Unrealized gains on available-for-salesecurities
Gains on transfer of investment
securities to trusts for retirement
benefit plans
Deferred gains on sale of property
and other
Total deferred tax liabilities
Net deferred tax liabilities¥

Thousands of U.S. dollars
2017
2016

1,796 ¥
1,554
1,499
2,971
7,822
(2,297)
5,524

2,286 $
39
1,634
1,512
3,169
8,642
(2,208)6,434

16,00813,851
13,361
26,481
69,721(20,474)
49,237

$

(187)

-

(1,666)-(22,268)(25,009)(198,484)(222,916)(1,356)(1,755)(12,086)(15,643)(211)(24,025)(18,500) ¥(205)(26,971)(20,536) $(1,880)(214,145)(164,898)(1,827)(240,404)(183,046)$

20,376347
14,564
13,47728,24677,030(19,680)
57,349At March 31, 2017 and 2016, deferred tax assets and liabilities reported on the accompanying
consolidated balance sheets were as follows:
Millions of yen
2017
2016
Deferred tax assets
Deferred tax liabilities¥

148
18,648¥179
20,716

Thousands of U.S. dollars
2017
2016
$

1,319
166,218$

1,595
184,651

In assessing the realizability of deferred tax assets, management of the Group considers whether some
portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the periods in which those
temporary differences become deductible. At March 31, 2017 and 2016, a valuation allowance wasprovided to reduce deferred tax assets to the extent that the management believed that the deferred tax
assets were not realizable.

- 36 -

A reconciliation of the Japanese statutory tax rate and the effective income tax rate on pre-tax income
reflected in the accompanying consolidated statements of income for the year ended March 31, 2016 was
as follows:
2016
Japanese statutory income tax rate
Increase (decrease) due to:Permanently non-deductible expenses
Tax exempt income
Change in valuation allowance
Change in tax rate
Other
Effective income tax rate

32.82%
4.26(1.93)
0.03
1.76
0.97
37.91%A reconciliation between the Japanese statutory tax rate and the effective income tax rate on pre-tax
income reflected in the accompanying consolidated statements of income for the year ended March 31,2017 was not disclosed because the difference between the Japanese statutory tax rate and the effective
income tax rate was less than 5% of the Japanese statutory tax rate.

18. General and administrative expenses
General and administrative expenses for the years ended March 31, 2017 and 2016 included following
items:
Millions of yen
2017
2016
General and administrative expenses:
Salaries and allowances
Net periodic retirement benefit
expenses
Rental expenses for land, buildings
and machinery¥

12,532¥

12,649Thousands of U.S. dollars
2017
2016
$

111,703$112,746

457

116

4,073

1,033

2,960

2,882

26,38325,688- 37 -

19. Segment Information(a) General information about reportable segments
The Group defines a reportable segment as a component of the Group for which discrete financial
information is available and whose operating results are regularly reviewed by the Board of Directors tomake decisions about resources to be allocated to the segment and assess its performance.
The Group engages in a wide range of financial services to customers primarily in the areas of banking
and leasing. The reportable segments of the Group, therefore, are based on operating segments asfollows:“Banking”
 Deposits and loans
 Foreign exchange transactions
 Over-the-counter sales of investment trusts and life insurance products Securities business“Leasing”
 Leasing business(b) Accounting treatment for reportable segment profit, segment assets, segment liabilities and othermaterial items
The accounting treatment for reportable segment information follows the accounting principles used in
the consolidated financial statements as described in Note 2, “Summary of Significant Accounting
Policies.” The segment profit is based on ordinary income, which is defined as “Total income” lesscertain special income included in “Other income” in the accompanying consolidated statements ofincome, and intersegment income is accounted for based on prices in ordinary transactions withindependent third parties.

- 38 -

(c) Information about reportable segment profit, segment assets, segment liabilities and other material
items
Segment information as of and for the year ended March 31, 2017 was as follows:
Millions of yen
2017
Reportable segment
Banking
Ordinary income:External customers
Intersegment
Total ordinary income¥

Segment profit (*3)
Segment assets
Segment liabilities
Other material items:
Depreciation
Interest and dividend
incomeInterest expense
Provision of allowancefor possible loan
lossesLoss on write-down ofsecurities
Increase in tangible
fixed assets andintangible fixed assets

Leasing

43,147302
43,449¥7,323
3,093,554
2,878,006
¥

1,187

Total

5,898
371
6,270

¥

368
21,34015,984¥

101

Other (*1)

49,045673
49,719¥7,691
3,114,894
2,893,991
¥

1,288

986
357
1,343

¥

140
5,484
913
¥

18

Reconciliation
(*2)

Total

50,031 ¥
1,031
51,062
7,832
3,120,379
2,894,904¥(1,031)(1,031)

Consolidated¥(184)(10,382)(10,383)

1,306 ¥-

50,03150,031
7,648
3,109,996
2,884,520

¥

1,306

31,1741,305

955

31,1841,361

44
331,228
1,365

(212)
(83)

31,015
1,282

(7)

(18)

(25)

18

(7)

(0)

(7)

8

-

8

-

8

-

8

2,004

-

2,004

50

2,055

-

2,055

Thousands of U.S. dollars
2017
Reportable segment
Banking
Ordinary income:External customers
Intersegment
Total ordinary income$

Segment profit (*3)
Segment assets
Segment liabilities
Other material items:
Depreciation
Interest and dividend
incomeInterest expense
Provision of allowancefor possible loan
lossesLoss on write-down ofsecurities
Increase in tangible
fixed assets andintangible fixed assets

Leasing

384,588
2,691
387,280$

65,273
27,574,240
25,652,963$

10,580Total

52,571
3,306
55,887$3,280
190,213
142,472$

900

Other (*1)

437,160
5,998
443,167$

68,553
27,764,453
25,795,445$

11,4808,788
3,182
11,970

Total
$

1,247
48,881
8,137
$

160

445,9489,189
455,138

Reconciliation(*2)

Consolidated$$

69,81027,813,343
25,803,583$

11,640(9,189)(9,189)(1,640)(92,539)(92,548)$-445,948445,948
68,17027,720,795
25,711,025$

11,640277,867
11,63280
490

277,957
12,131392
26

278,349
12,166(1,889)(739)

276,450
11,427

(62)

(160)

(222)

160

(62)

(0)

(62)

71

-

71

-

71

-

71

17,862-

17,862445

18,317-18,317

Notes:(*1) The “Other” business segment in the table above represents operating segments not included in the reportable segments andincludes credit card business, administrative outsourcing business and information technology management operations.
(*2) Reconciliation represents the eliminations of intersegment transactions.
(*3) Segment profit is reconciled to ordinary profit, which represents ordinary income less ordinary expenses. Ordinary expenses
represent “Total expenses” of ¥42,470 million ($378,554 thousand) less certain special expenses of ¥86 million ($766
thousand) included in “Other expenses” in the accompanying consolidated statements of income. Therefore, consolidated
segment profit, which shows ordinary profit of ¥7,648 million ($68,170 thousand), is reconciled to “Profit before income
taxes” of ¥7,561 million ($67,394 thousand) through the deduction of certain special expenses, net.

- 39 -

Segment information as of and for the year ended March 31, 2016 was as follows:
Millions of yen
2016
Reportable segment
Banking
Ordinary income (*1):
External customers
Intersegment
Total ordinary income¥

Segment profit (*4)
Segment assets
Segment liabilities
Other material items:
Depreciation
Interest and dividend
incomeInterest expense
Provision of allowancefor possible loan
lossesLoss on write-down ofsecurities
Increase in tangible
fixed assets andintangible fixed assets

Leasing

42,587309
42,896¥

7,807
2,988,280
2,771,412
¥

1,284

Total

5,088
343
5,431

¥

238
18,024
12,930¥128

Other (*2)

47,675652
48,328¥8,045
3,006,304
2,784,342
¥

1,412

1,020
589
1,609

¥

247
5,782
1,075
¥

43

Reconciliation
(*3)

Total

48,695 ¥
1,241
49,9378,293
3,012,087
2,785,418¥(1,241)(1,241)

Consolidated¥(182)(8,769)(8,771)

1,456 ¥-

48,695
48,6958,111
3,003,317
2,776,646

¥

1,456

32,687
1,655

11
57

32,6991,712

54
432,753
1,716

(214)
(86)

32,538
1,630

77

44

121

5

126

(0)

126

61

-

61

-

61

-

61

1,895

16

1,911

44

1,956

-

1,956

Thousands of U.S. dollars
2016
Reportable segment
Banking
Ordinary income (*1):
External customers
Intersegment
Total ordinary income$

Segment profit (*4)
Segment assets
Segment liabilities
Other material items:
Depreciation
Interest and dividend
incomeInterest expense
Provision of allowancefor possible loan
lossesLoss on write-down ofsecurities
Increase in tangible
fixed assets andintangible fixed assets

379,597
2,754
382,351

Leasing$

69,587
26,635,885
24,702,843$

11,444

Total

45,351
3,057
48,408$2,121
160,656
115,250$

1,140

Other (*2)

424,948
5,811
430,769$

71,70826,796,541
24,818,094$

12,5859,091
5,250
14,341

Total
$

2,201
51,537
9,581
$

383

434,040
11,061
445,110

Reconciliation(*3)

Consolidated$$

73,91926,848,088
24,827,685$

12,977(11,061)(11,061)(1,622)(78,162)(78,179)$-

434,040
434,040
72,296
26,769,917
24,749,496$

12,977

291,353
14,751

98
508

291,460
15,259481
35291,942
15,295(1,907)(766)

290,025
14,528

686

392

1,078

44

1,123

(0)

1,123

543

-

543

-

543

-

543

16,890142

17,033392

17,434-

17,434

Notes:(*1) Ordinary income represents “Total income” less certain special income included in “Other income” in the accompanying
consolidated statements of income. “Total income” of ¥49,553 million ($441,688 thousand) in the accompanying
consolidated statement of income is derived from ordinary income of ¥48,695 million ($434,040 thousand) through theaddition of certain special income of ¥857 million ($7,638 thousand).
(*2) The “Other” business segment in the table above represents operating segments not included in the reportable segments andincludes credit card business, administrative outsourcing business and information technology management operations.
(*3) Reconciliation represents the eliminations of intersegment transactions.
(*4) Segment profit is reconciled to ordinary profit, which represents ordinary income less ordinary expenses. Ordinary expenses
represent “Total expenses” of ¥40,892 million ($364,488 thousand) less certain special expenses of ¥307 million ($2,736
thousand) included in “Other expenses” in the accompanying consolidated statements of income. Therefore, consolidated
segment profit, which shows ordinary profit of ¥8,111 million ($72,296 thousand), is reconciled to “Profit before income
taxes” of ¥8,660 million ($77,190 thousand) through the addition/deduction of certain special income/ (expenses), net.

- 40 -

(d) Other informationi) Information by service
Millions of yen
ServiceSecurity
investments

Loans
Ordinary income from external customers:
For the year ended March 31, 2017
For the year ended March 31, 2016¥

18,20919,803¥

Leasing

18,214
16,349

¥

Other

5,898
5,088

¥

Total

7,708
7,454

¥

50,031
48,695

Thousands of U.S. dollars
ServiceSecurity
investments

Loans
Ordinary income from external customers:
For the year ended March 31, 2017
For the year ended March 31, 2016$

162,305
176,513$

Leasing

162,349
145,726$

Other

52,57145,351$

Total

68,704
66,440$445,948
434,040ii) Information by geographical area for the years ended March 31, 2017 and 2016 is omitted since income
in Japan accounted for more than 90% of the consolidated ordinary income and all tangible fixed assets
were located in Japan.
iii)Information by major customer for the years ended March 31, 2017 and 2016 is omitted since there wasno single external customer accounting for 10% or more of the consolidated ordinary income.
(e) Information about impairment loss on fixed assets by reportable segment
Millions of yen
Reportable segment
Banking
Leasing
Total
Impairment loss:
For the year ended March 31, 2017
For the year ended March 31, 2016

¥

51
229

¥

-

¥

51
229

Other
¥

Total
0

¥

Thousands of U.S. dollars
Reportable segment
Other
Banking
Leasing
Total
Impairment loss:
For the year ended March 31, 2017
For the year ended March 31, 2016

$

454
2,041

$

- 41 -

-

$

454
2,041

$

51
230

Total
0

$

454
2,050

20. Transactions with Related Parties
Significant transactions with parties related to the Group for the years ended March 31, 2017 and 2016
were as follows:(a) Transactions with relatives of the Bank’s directors:

Name

Business

Descriptionof theBank’stransaction

Transaction amounts
Thousandsof U.S.
Millions of yen
dollars

Account

BalancesThousands
Millionsof U.S.
of yendollars

For the year ended March 31, 2017:
ChiekoHayashiRealestateleasingbusiness

Loan(Average balance
during period)¥ 19(Interest income)
¥
0

$ 169

(Average balance
during period)¥ 19(Interest income)
¥
0

$ 169

$

Loans andbills
discounted

¥

19

$

169

Loans andbills
discounted

¥

19

$

169

0

For the year ended March 31, 2016:
ChiekoHayashiRealestateleasingbusiness

Loan

$

0

Note: Terms and conditions of the loans are determined in the same manner as loans under general lending transactions
with third parties.

(b) Transactions with corporate pension plans for employees

NameBusiness

Descriptionof theBank’stransaction

Transaction amounts
Thousandsof U.S.
dollars
Millions of yen

Account

BalancesThousands
Millionsof U.S.
dollarsof yenFor the year ended March 31, 2017:
No applicable transactions occurred during the year ended March 31, 2017.
For the year ended March 31, 2016:Retirement Corporate
benefitpensiontrustsplan

Partialrefund ofpensionassets¥5,245- 42 -$ 46,751---

21. Comprehensive Income
Amounts reclassified to profit (loss) in the current period that were recognized in other comprehensive
income in the current or previous periods and the tax effects for each component of other comprehensive
income for the years ended March 31, 2017 and 2016 were as follows:
Millions of yen
2017
2016
Net unrealized gains on available-for-salesecurities:
Decrease during the year
Reclassification adjustments
Pre-tax amountTax effect amountNet unrealized gains on available-for-salesecurities, net of tax
Land revaluation increment:
Increase (decrease) during the year
Reclassification adjustments
Pre-tax amountTax effect amountLand revaluation increment, net of tax
Retirement benefit adjustment:
Decrease during the year
Reclassification adjustments
Pre-tax amountTax effect amount
Retirement benefit adjustment, net of tax
Total other comprehensive income¥¥- 43 -(4,728)(3,670)(8,399)2,741(15,078) $(2,263)(17,342)6,674(42,142) $ (134,397)(32,712)(20,171)(74,864)(154,577)
24,431
59,488(5,658)(10,667)(50,432)(95,079)

-

241
241

-

2,148
2,148

(70)
174
103
(31)
71
(5,586)¥

Thousands of U.S. dollars
2017
2016

¥

(4,333)(1,033)(5,367)
1,677(3,689)(14,116) $(623)(38,621)1,550(9,207)918(47,838)(276)
14,947632(32,881)(49,790) $ (125,822)