Mebuki Financial Group, Inc.

Annual Report
Year Ended March 31, 2021

Annual Report 2021

2021

Corporate
History (AsStatementof April 1, 2021) of Income (Unaudited)
Non-Consolidated
Contents
Year Ended March 31, 2021

November 2015

Group Philosophy of Mebuki Financial Group
Together with local communities, we will continue to build a more prosperous
future by providing high-quality comprehensive financial services.
The ingenuity of the entire Group will be combined to contribute to sustainable growth in communities.
We will build a better future together with local communities, seeking solutions to challenges that affectthese communities by providing high-quality, comprehensive financial services.

The Japanese word mebuki, or “green shoots,” conveys an image of new leaves budding

The Ashikaga Bank, Ltd.

Notice Regarding the Basic
Agreement Concerning a Business
Integration through a Share
Exchange of The Joyo Bank, Ltd.
and Ashikaga Holdings Co., Ltd.

Group Philosophy of Mebuki Financial Group........1
Thousands ofDevelopments of Mebuki Financial Group..............3
Millions of Yen

U.S. Dollars

2021
2020
2021
Performanceof Mebuki Financial
Group................5

INCOME:Interest income:Value Creation Process of Mebuki Financial Group....7
Notice Regarding Definitive
Interest on loans and bills discounted �����������������������������������������������������������������
¥47,171¥47,945$426,121
Agreement Concerning the
A Message19,602
from the Management.........................9Interest and dividends on securities ��������������������������������������������������������������������
20,596
177,081Business Integration of The Joyo
April 2016
Interest on call loans and bills bought �����������������������������������������������������������������
(2)
13
(23)
Bank, Ltd. and Ashikaga Holdings
Management and Financial Strategies.................13
Interest on deposits with banks ��������������������������������������������������������������������������
896
356
8,098
Co., Ltd. through a ShareOther interest income ����������������������������������������������������������������������������������������
628
Strengths of Mebuki69Financial Group104
in Main Area of Business....17
Exchange
Trust Fees ��������������������������������������������������������������������������������������������������������������
10
5
91
Fees and commissions��������������������������������������������������������������������������������������������
21,235
21,670191,827
Initiatives
for
Value
Creation.................................19
Approval of stock exchange
Other operating income�������������������������������������������������������������������������������������������
1,517
927
13,710agreementat the ordinary general
Create GrowthBusiness Models
With Local Regions.
...19
Other
income���������������������������������������������������������������������������������������������������������
8,757
4,655
79,112June 2016
meeting of shareholders of The
Total income Joyo������������������������������������������������������������������������������������������������
96,275
896,645
Bank, Ltd. and Ashikaga
Structural99,258
Reform for Enhanced
Productivity.
....27EXPENSES:
Holdings Co., Ltd.
Interest expenses:
Developing Human Resources for Value Creation....29
Interest on deposits�������������������������������������������������������������������������������������������
462
1,605
4,178
Establishmentof the Mebuki
SDGs Initiatives...................................................31
OctoberInterest
2016on negotiable certificates of deposit ��������������������������������������������������������
32
51
297
Financial Group, Inc.
Interest on call money and bills sold �������������������������������������������������������������������
18
332
163
Response to Climate ChangeInterest on payables
under repurchaseagreements���������������������������������������������
140
1,648
1,270
Acquired
all sharesof Mebuki...........33(Initiatives for
TCFD Recommendations).
Interest on payables
underCo.,
securities
transactions
414
1,325
3,743
Lease
Ltd. lending(formerly
known�����������������������������������
asApril 2017
Interest on borrowedmoney�������������������������������������������������������������������������������
218
135
1,973
The Joyo Lease Co., Ltd.) from The
Contributions to Communities.............................35
Interest on interest
swap������������������������������������������������������������������������������������
225
1,042
2,039
Joyo Bank, Ltd.
Measures Against
Other interest expenses �������������������������������������������������������������������������������������
917 the Spread
626 of COVID-19.........36
8,292
Fees and commissions
payments����������������������������������������������������������������������������
7,043
7,515
63,629Acquired all shares of Mebuki
Governance3,304
of Mebuki Financial
Group...............37
Other operating expenses���������������������������������������������������������������������������������������
1,285
29,850
Securities
Co., Ltd. (formerly known
October
2017
General and administrative
expenses
49,15951,078444,080
as TheJoyo �����������������������������������������������������������������������
Securities Co., Ltd.)
Corporate Governance.....................................37
Provision of allowance
for loan
9,427
4,652
85,160from
Thelosses
Joyo����������������������������������������������������������������������
Bank, Ltd.
List of Directors.............................................43
Other expenses �����������������������������������������������������������������������������������������������������
4,442
8,892
40,134
Total expenses���������������������������������������������������������������������������������������������
75,80880,194
684,807
OpenedThe Ashikaga Bank, Ltd.
December 2017
Interview
with Outside
Directors.....................45
INCOME BEFORE INCOME
TAXES ��������������������������������������������������������������������������������
23,45016,081
211,838
Bangkok
Representative Office
INCOME TAXES:
Risk Management System................................47
Opened The Joyo Bank, Ltd. Hanoi
Current ������������������������������������������������������������������������������������������������������������������
7,294
4,341
65,891March 2018
Representative Office
Initiatives (1,508)
for Compliance..................................49
Deferred�����������������������������������������������������������������������������������������������������������������
495(13,626)
Total income taxes ���������������������������������������������������������������������������������������
5,785
4,836
52,266
Internal ¥17,664
Audit....................................................50
Acquired all shares of Mebuki
NET INCOME ���������������������������������������������������������������������������������������������������������������
¥11,245$159,572

October 2020

on tree branches. This word is used in the Group’s name to express its approach of drawing
on the knowledge and creativity of each of its companies to create fresh ideas andnew value. The name Mebuki expresses our wish to create new energy and value
in local communities and pursue sustainable growth along with these communities.

April 2021

Credit Guarantee Co., Ltd. (formerly
known as The Ashikaga Credit
Guarantee Co., Ltd.) from The
Ashikaga Bank, Ltd.

Acquired all shares of Joyo Credit
Co., Ltd. from The Joyo Bank, Ltd.,and all shares of Ashigin Card Co.,
Ltd. from The Ashikaga Bank, Ltd.
Both companies merge and change
the surviving company’s tradename to Mebuki Card Co., Ltd.

Group Structure and Corporate Data...................51
Organization........................................................52
Stock Information................................................52
Financial Data................................................ 53-92

Disclaimer regarding forward-looking statements
This Annual Report contains certain forward-looking statements, including estimates, forecasts, targets and plans.
Such forward-looking statements are based on the information available and the assumptions deemed reasonable
by management at the time of publication of the Annual Report, and do not represent any guarantee bymanagement of future performance. We are under no obligation, and disclaim any obligation, to update or alter ourforward-looking statements, whether as a result of new information, future events or otherwise.
Details on ESG information are available on our website: https://www.mebuki-fg.co.jp/eng/esg/esg.html
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Mebuki Financial Group, Inc.

AnnualReport2021
AnnualReport2021

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Developments of Mebuki Financial GroupJoyo Bank and Ashikaga Bank of Mebuki Financial Group (“the Group”), with their core markets in
Ibaraki and Tochigi Prefectures, have been meeting the needs of the times and growing together
with their customers and the region. In October 2016, Joyo Bank and Ashikaga Holdings enteredinto a business integration, and with the subsequent consolidation of Mebuki Lease, Mebuki
Securities, Mebuki Credit Guarantee, and Mebuki Card, the Group has grown into a structure
capable of meeting the diverse needs of its customers more than ever before. The Company willcontinue to forge ahead in order to solve regional problems and to realize the region’ssustainable growth as well as the improvement of the Company’s corporate value.

2019

2016

Commenced handling of Mebuki SDGs private placement bonds

2020

Established Mebuki Financial Group

Completed the system integration of Joyo Bank andAshikaga Bank
Invested in fund to help recovery efforts in areas affectedby typhoons in 2019
Mebuki Credit Guarantee became a directly and whollyowned subsidiary

Hosted the Mebuki Business Award
Set up the Mebuki Regional Revitalization Fund

2007

2021

Established Joyo Securities (currently Mebuki Securities)

1995

2011

Established Joyo Industrial Research Institute incommemoration of the Bank’s 60th anniversary

Launched Joyo’s reconstruction project“Kizuna (bond)” in hopes of the regional
recovery and growth after the Great East
Japan Earthquake

1996

Opened Shanghai Representative Office

1935

Establishment of Joyo Bank throughthe merger of the Tokiwa Bank and
the Goju Bank

1974

Establishment of
Joyo Lease(currently Mebuki
Lease)

Mebuki Lease and Mebuki Securities became
directly and wholly-owned subsidiaries

Opened Representative Office Registered in Singapore

Established the “sound management,
collaboration, and partnership with thehome region” philosophy

2014

Opened New York Representative Office
Launched “PLUS+” Project for the
Collaborative Creation of the Region’s
Future2006

Started operating new
branches in areas along
the new Tsukuba Express
line
Opened Joyo Tsukuba
Building in 2008

2015

Initiated study sessions andseminars for development ofregional comprehensive
strategies

JOYO BANKJoyo Credit and Ashigin Card became
directly and wholly-owned
subsidiaries, and were subsequently
merged to establish Mebuki Card

2017

2012

1999

Developments of Mebuki Financial Group

Developments of Mebuki Financial Group

2016

2018

2019

2021

Commenced handlingof private placement
bonds with donation
schemes to “support
future dreams”

Joyo Industrial ResearchInstitute started offering
personnel placement
services
Opened Hanoi
Representative Office

Set up the Tsukuba
Exceed Fund

Established Joyo Capital Partners

2017

2019

2021

Commenced handling of private placement
bonds with donation schemes to “support
the future of children”
Opened Bangkok Representative OfficeStarted offering personnel placement services
Started offering trust services

Established Wing Capital Partners

Mebuki Financial GroupASHIKAGA BANK

1985

1967

Relocated the head office to
Utsunomiya city in Tochigi Prefecture

1897

Opened Hong Kong
Representative OfficeSigned agreements with 9
local governments as part ofits efforts under theComprehensive Strategy for
Overcoming Population
Decline and Vitalizing Local
Economy (as of July 2021)

Established Ashigin
Research Institute

2008
2003

Decision made by Japanese
government to designate Ashikaga
Bank a bank under special crisis
management

Opened its first branch in Kiryu town,
Yamada county, Gunma Prefecture

2015

2009

Established “Corporate Philosophy”
in commemoration of its 90th
anniversary
Established the Ashigin International
Exchange Foundation

Established Ashikaga
Holdings
Special crisis management
designation lifted2013

Ashikaga Holdings listed on the firstsection of the Tokyo Stock Exchange

1895

Established in Ashikaga town, Ashikaga
county, Tochigi Prefecture
1985
Holding of Tsukuba EXPO
1982
Opening of Tohoku Shinkansen
1974
Completion of Tohoku Expressway within Tochigi Prefecture2020
Spread of COVID-19

2011
Great East Japan Earthquake
2005
Opening of the Tsukuba Express

2019
Suffered extensive damage by Typhoon Hagibis and other disasters

Financial and economic developments
and history of the prefectures
1985
2005
Plaza Accord
Full implementation of pay-off system in Japan
1929
Start of the Great Depression
2008
1991
Collapse of bubble economy
Global financial crisis following Lehman Brothers’ bankruptcy
1945
End of the Pacific War
2010
1997
European debt crisis
Japanese version of “Big Bang”
1964
financial reforms
Tokyo Olympic Games
Asian currency crisis

3

Mebuki Financial Group, Inc.

2016
BOJ’s introduction ofnegative interest rate policy

Annual Report 2021

4

Performance of Mebuki Financial GroupESG Highlights (Bank Total)

Mebuki FG (Consolidated)
Consolidated net income (Billion yen)
43.0

SocialConsolidated ROE (%)

Capital adequacy ratio (%)

46.3
36.3

36.4

FY2018FY2019FY2020FY2017

10.38

5.1

4.9

FY2017

Performance of Mebuki Financial Group

Performance of Mebuki Financial Group

Financial Highlights

FY20184.0

3.8

FY2019FY2020

9.94

10.87

10.95

Number of business succession and
M&A consultation cases

FY2017FY2018FY20193,929

FY2020cases

Number of business matches

2,041

P19

cases

P19

(FY2020)(Cumulative since the business integration in October 2016)

Issuance of private placement
bonds with donation scheme

Percentage of women inassistant manager positions or higher

Bank Total**Joyo Bank + Ashikaga Bank

Gross business profit (Billion yen)

Ordinary expenses /OHR (Billion yen/%)
OHR

180.7

185.6

186.3

Ordinary expenses

180.1
62.8

61.5

61.7

61.1

113.5

114.1

115.0

110.1

813

Issue
cases amount

68.7

billion yen

P35

Donation amount approx. 138 million yen(Cumulative total since the commencement of handling the bonds in FY2016)

30.0

%

P30

(As of March 31, 2021)

Environment
FY2017FY2018FY2019FY2020Core net business income (Billion yen)
82.1
73.6

73.3

FY2017FY2018FY2019FY2020Net income (Billion yen)

76.2

Balance of investments andloans for renewable energy

60.0
46.8
35.8

42.1

208.1

billion yen

CO2 emission
reduction ratio
P34(As of March 31, 2021)

FY2017FY2018FY2019FY2020FY2017FY2018FY2019FY2020Governance

25.0

P33

(Compared with FY2013)

External evaluation

P38

%

P30

Board of Directors
Average balance of loans (Billion yen)
10,366.0

10,698.5

11,339.8

Average balance of deposits (Billion yen)

11,599.7
13,662.5

14,082.4

14,408.8

15,543.7

12

members

FY20175FY2018

Mebuki Financial Group, Inc.

FY2019FY2020FY2017FY2018FY2019FY20205 outside directors(including 1 female
outside director)“Platinum Kurumin” certification
was granted as a company thatprovides superior support forchildcare to its employees basedon the Act to Advance Measures
to Support Next-Generation
Child-Rearing

Recognized as an outstandingorganization under the 2021
Certified Health & Productivity
Management Outstanding
Organizations Recognition
Program (large enterprise
category)

Annual Report 2021

6

Value Creation Process of Mebuki Financial Group
Value Creation Process

Value Creation Process

Based on the corporate philosophy of the Group, Mebuki Financial Group will provide high-quality, comprehensive financial services by taking advantage of its wide-area network, solid customer baseand other strengths, while contributing to the sustainable growth of local communities through improving the Group’s corporate value and creating value for stakeholders.

Provide comprehensive financial services to create value for stakeholders

Capital and management platform

Group Philosophy

Together with local communities, we will continue to build a more
prosperous future by providing high-quality, comprehensive financial
services.

Our vision

Building the region’s future as a comprehensive financial
services group

Human and intellectual
capitalSystem capable of providing

Value Provided
Communities and Customers

 roviding support to solve issues throughP
consultingProviding financial infrastructure andrevitalization of regional economy
Regional contribution and environmental
conservation activities
Providing secure and convenient financial
servicescomprehensive financial
services
Diverse human resources
Shared platform

Meet diversifying needs of customers by organically combining

Financial capitalgroup functions, including banking, leasing, securities, IT and

Sufficient capital
P15

Shareholders

think tanks.

Sound assets

Input andutilize

Stable funding

The Second Medium-Term Group Business Plan
(1) Create Growth BusinessSocial capital

Models With Local Regions
P19

Wide-area networks based in
Ibaraki and Tochigi Prefectures

P14(2) Structural Reform for(3) Developing Human

Enhanced Productivity
P27

Resources for Value

Solid main area of business
P17.18Providingcomprehensive
financialservices

Corporate value improvement
Stable and sustained shareholder returns
Promoting engagement

Employees

Promotion of diversity
Providing a pleasant working environment

Management indicators

Creation
P29(The Second Medium-Term Group Business Plan) P14
Consolidated ROE

5.0% or more

Net income

approx. ¥47 billion

Core OHR

Approx. 60%

Contributing to achievement of SDGs
Corporate Governance
P37

7Social Issues

Population decline
and agingExternal
environment

Diversifying customer needs
and customer contact points

Mebuki Financial Group, Inc.

Asset building andasset succession

Corporate growth andbusiness succession

Structural issues incommunities

Risk Management

Compliance

P47

P49

Digitalization

Prolonged low interest rates
in Japan and overseas

Diversity andinclusion

Response to climatechange and environmental
conservation

Natural disasters resulting
from climate change

P31

Compliance

Companies of non-financial sectors
entering into financial services

Cyber attacks andinformation leakage risks

Annual Report 2021

8

Be fearless of change and embrace one
transformation after another in order tocreate a better future for the region

The latter, unpredictable problems, refers to factors
such as natural disasters resulting from climate change
and the threat of infectious diseases like COVID-19.
Unlike the aforementioned structural problems, it is
impossible to predict when they will occur and what
the scale of the damage will be, and there is a dangerof tremendous damange occurring in a short period oftime.
The environment surrounding us is comprised ofchanges due to structural problems, which werealready taking place pre-COVID-19, and changes due
to unpredictable problems, which have compounded
the pre-existing structural problems and include natural
disasters and the COVID-19 pandemic itself.
Combined, all these problems bring instability to thepotential for business continuity and the realization ofsafe and secure living.

Among these immense changes, the prefectures of
Ibaraki and Tochigi, which form the main area of
business of the Group’s business operations, boast
strong transportation networks and a high level ofpotential as important areas of mass consumption thatare part of the Tokyo metropolitan area. Their industrial
structures are also balanced. We believe that the valueof our existence lies in approaching the concerns andtroubles of customers and the managerial issues facedby business operators, endeavoring to solve these
problems in a speedy fashion, and thereby contributing
to the economic development of the region, and all by
providing comprehensive financial services.

A Message from the Management

A Message from the Management

A Message from the Management

Providing optimal solutions to external environment issues based on Group unity

RitsuoSasajima,
President

Kazuyuki
Shimizu,
Executive Vice
President

Tackling regional issues and translating the solutions into the development of the regional economy is our reason for existence
The long-lasting spread of COVID-19 has exerted an
unprecedented impact on the local society/economy,
and brought huge changes to the ways people conduct
their lives.
When considering the issues to tackle and themeasures to deploy, we believe that it is important todivide the problems that exist in the environment thatsurrounds us into two categories: structural problems
and unpredictable problems.
The former, structural problems, refers to factors
such as population decline and a drop in the working
population, which are occurring in conjunction with the9

Mebuki Financial Group, Inc.

falling birthrate and aging populace. Specifically, Japanis facing the “2025 problem,” whereby one in four
citizens will be aged 75 years or over in the year 2025.
As the number of elderly rises, decline in cognitive
function will bring various problems to the surface.
Furthermore, to respond to the fall in the working
population, the tasks will be to implement work-stylereforms and raise productivity, and there are also
concerns about people and companies becoming
overconcentrated in large cities as they go in search of
better markets for their services and products.

As a regional financial institution, we have been doing
our best to help business operators that have been
impacted by the COVID-19 pandemic with their cash
flow and to provide advice to individual customers onsuch matters as altering the terms of their homemortgage loans.
For customers that are business operators, we arefocusing on providing business support that looks
ahead to the so-called with corona and after corona
periods. Specifically, we are endeavoring to assist
customers in accomplishing various managerial tasks
such as opening up new sales channels, rebuilding
their supply chains, and consulting with them aboutbusiness strategy, business succession, etc. And tohelp customers address personnel shortages, we are
introducing them to and matching them with talentthrough Group companies or business alliancepartners.
Furthermore, to assist them in making the switch todigital, a trend that has been rapidly gathering paceamid the pandemic, we have been cooperating with

branches, head office divisions, affiliates, and external
partners, etc. to strengthen the support for digitalizationthat we offer.
For individual customers, we have been expanding
non-face-to-face services that allow procedures to becompleted online, and in March this year made abanking app available. This app enables customers touse bank services at any time and wherever they are.
The number of users of the app is rising steadily, andgoing forward we intend to continue working on
expanding the functions with the aim of making the app
even more convenient.
Furthermore, various problems that are the result of
decline in cognitive function have already begun tooccur around us on a frequent basis. With thechallenge being how to respond to these problems, we
are working to develop services that reflect insightsfrom gerontology, and to provide financial products andservices that meet the needs of customers in an aging
society.

Implementation of Medium-Term Business Plan progressing smoothly, with target reduction in expenses achieved two years early
In our Medium-Term Business Plan, we declared threebasic strategies: Create Growth Business Models With
Local Regions, Structural Reform for Enhanced
Productivity, and Developing Human Resources for
Value Creation.

With the first, Create Growth Business Models With
Local Regions, we are proactively deploying resourcesin growth areas such as a consulting and IT, andworking to enhance the consulting function. We arecooperating with Group companies and external

Annual Report 2021

10

Although the level of our consulting services has
improved, we cannot afford to be satisfied with thecurrent situation. No matter how much we say we’re“doing well,” that’s nothing more than self-satisfaction.
We can only say that we’ve produced results when acorporate customer’s earnings improve or when an
individual customer achieves their goals and objectives.
With the second, Structural Reform for Enhanced
Productivity, we have used the integration of the coresystems of Joyo Bank and Ashikaga Bank as anopportunity to reorganize the Group’s administrativeand IT systems departments. We have also reorganizedGroup companies and centralized Group operations

within a single organization. And in response toderegulation, we have newly established a dedicatedinvestment subsidiary under each of our subsidiarybanks. Furthermore, the optimization of our branch
network is proceeding at an even faster pace than we
had planned.
As a result of these structural reforms, we havemanaged to reach our goal for reducing expenses two
years earlier than the originally targeted FY2022, butwith the aim of achieving additional productivity
improvements, we intend to further streamline businessadministration by employing digital technology.
With the third, Developing Human Resources for
Value Creation, we are working to develop personnel
with specialist knowledge and knowhow who are able
to provide high-level consulting services, i.e. identify
the needs of customers and the issues they are facing
through dialog with them. In the growth fields ofconsulting and IT, in particular, developing/securing
more expert talent is an urgent task.
And to adapt to the diversifying needs of customers
and the changes in society, it is also essential for eachand every employee to take on challenges. But justsaying “Take on challenges” is unlikely to lead them totake action. So to encourage employees to embracechallenge, we are establishing training programs andworkplace support structures to that end. We are alsoplanning to explore possible changes to our personnel
system to reward challenge. Furthermore, to ensurethat diverse human resources feel that their work is
worthwhile and to enable them to continue working inways that match their lifestyles, we will also be
implementing measures for promoting diversity andinclusion.

Working for decarbonization and contributing to the achievement of SDGs
Ibaraki Prefecture and Tochigi Prefecture, the areas
where we do the majority of our business, arewitnessing environmental changes and are beset byvarious societal issues as a result. For example,
business succession is becoming difficult due to ashortage of successors, the population is becoming
dominated by the elderly, digitalization is progressing,
the lifestyles of individuals are changing, and natural
disasters are becoming more serious as aconsequence of climate change.
As a regional financial institution, we have conductedbusiness that is rooted in this region for many years,

11

Mebuki Financial Group, Inc.

and this remains the case today. This is whatsustainable management is all about, and we believethat the reason that our business has continued until
now is that our efforts have been accepted bycustomers, and that we have always worked withcustomers to address such societal issues.
With awareness of the SDGs heightening worldwide,
we have established an SDGs Committee, and havereorganized the actions we are taking by mapping ourbusiness activities against the 17 SDGs. Going forward,
we will be contributing to the attainment of the SDGs
through our business activities. For example, we will be

endeavoring to fulfill consulting functions suited to thelife stages of business operators, taking measures tomeet the needs of an aging society, and endeavoring
to revitalize the region.
In addition, we will be properly fulfilling our role as acorporate citizen through community service,environment conservation activities, and the promotionof diversity. We also intend to provide support in theform of consulting to enable customers in the region toparticipate independently in SDGs-related initiatives.
Abnormal weather phenomena caused by climatechange are resulting in increasing numbers of natural
disasters bringing great destruction, and the region inwhich we do business has also seen major flood
damage due to typhoons and torrential rainstorms.
In response, we have announced our endorsementof the TCFD recommendations, and declared a goal for
cutting our CO2 emissions, which are the cause ofclimate change, by 2030. Everyone in the Group is now
working to achieve this goal. And in addition toproactively supporting the promotion of renewableenergy, we have decided, in principle, to not invest inor lend money for new coal-fired power station
projects. In ways like this, we will be contributing todecarbonization by appropriately investing/lending inspecific sectors that could have a major impact on theenvironment and society.

A Message from the Management

A Message from the Managementbusiness partners to help corporate customers growand to resolve their issues, support individual
customers with asset building and investment, andmeet the need for smooth asset succession by thenext generation.

Aiming to build the region’s future as a comprehensive financial services group, and refusing to fear change as we make one transformation after anotherAll companies, not just ourselves, are only surviving
because they are providing products, services, andfunctions that are either essential or useful to thepeople of the world.
We need to think about what we can offer that will beof use to people in the coming era. We must take a
fresh look at our business from that perspective. And if
we insist on sticking rigidly to “finance,” we will not beable to meet the needs of society.
Our deep customer base, which we have built up by
earning trust and confidence over many years, is an
irreplaceable asset and huge source of strength for us.

Going forward, we will refuse to fear change as we
make one transformation after another with an eye tobecoming a corporate group that is needed by ourcustomers in the region and the greater regional
community.
We, at Mebuki Financial Group, will make continuouschanges and put our utmost effort into serving as a“Comprehensive Financial Services Group Building theRegion’s Future” and bringing about a prosperous
future for local customers, shareholders, employees,
and all our other stakeholders. We, therefore, ask foryour continued patronage in the future as well.

July 2021

Ritsuo Sasajima, President
Kazuyuki Shimizu, Executive Vice President

Annual Report 2021

12

Management and Financial Strategies┃ Progress of Implementation of the Second Medium-Term Group Business PlanIn FY2020, amid a harsh external environment marked
by the COVID-19 pandemic, we worked proactively toenhance the consulting function and bring about
structural reforms, and as result, core net businessincome*, an indicator of the profitability of our main
business, increased by 3.3 billion yen compared with theprevious fiscal year to 69.4 billion yen. In the first half, thespread of COVID-19 forced us to refrain from making
visits to customers, and net fees and commissions* fell
year on year. However, as a result of supporting
customers with their cash flow and offering appropriate
consulting services, on a full-year basis we were able toperform better than the previous year. And thanks toprogress with structural reforms, expenses* plunged 4.8
billion yen year on year, meaning that we achieved our
expense reduction target two years ahead of schedule.

However, with there still being no end to the pandemic
in sight, we booked credit related costs* of 22.4 billion
yen, a figure 3.3 billion yen higher than the previous
year’s as we made provisions of a preventive nature.
Furthermore, with gains/losses related to stocks*
primarily from strategic shareholdings exceeding theprevious year’s figure by 9.6 billion yen on the back of aresurgence in Japanese stock prices, ordinary profit*
stood at 55.9 billion yen, marking a rise of 3.9 billion yen
from the previous year.
As a result, consolidated net income attributable toowners of the parent of Mebuki Financial Groupamounted to 36.4 billion yen, higher than the results forthe previous year.

Under the Second Medium-Term Group Business Planfor the three years from April 2019 to March 2022, ourGroup has been taking various measures based on its
basic strategies, namely “Create growth businessmodels with local regions,” “Structural reforms forenhanced productivity” and “Develop human resources
for value creation.”
We have positioned the three-year period of theSecond Medium-Term Group Business Plan as a period
for “producing solid results and upshifting for the next

V ision

Building the region’s future as a comprehensive financial services group
growth business models with
1 Create
P19
local regions

Year-on-year change in ordinary profit

Enhance consulting services
Proactively utilize and invest in IT(Bank Total)

B asic S t rat egies
Gains/losses on
securities*1+4�9Factors
causingdecreasein incomeExpenses (-)-4�8Ordinary profit
55.9(+3.9 year on year)
Other
non-recurrent
gains/losses-1�1*3Credit related
costs (-)
+3�3

Difference ofSecurity margins
interests-0�2
betweendeposits and loans-0�2Credit related costs +Gains and losses on sale of securities etc�(+0�5 year on year)
FY2020Fees from Corporate customers

Customer assets under custody commissions(Bank total)(Bank total + Mebuki Securities)

FY2019FY2020FY20182.9
FY2019Mebuki Financial Group, Inc.

Support for employee skill improvement

Work-style reforms
Work-life balance

System capable of providing
comprehensive financial services

Full utilization of the synergies
from the business integration

Revenue fromconsulting services

Enhance productivity
Reduce costs

Structural reforms(Operations/Organization)

2019

2020

14.9

3.7
FY20202021

FY2022 and beyond

Three-year plan
Systemintegration
Plan

115.0

110.0

Shift inManagement
Resources
Resulting via
Structural
Reforms

Mebuki
Securities

FY2018FY2019FY2020

FY2022and beyond

Management
Objectives(Results for FY2020)

People(Staff)“Invested” area 200 people (consulting services/ IT planning, etc.)“Saved” area 1,000 people (administrative systems/head office functions, etc.)

170 people (two-year cumulative total)
770 people (two-year cumulative total)

Things ranch investment
B
Improve efficiency of approx. 20% of existing branches(review of functions, etc.)

115 sites(two-year cumulative total)(over 30%)
5.1 billion yen*2(Investment
amount)Money(Expenses)

 ost reduction by structural reform
C¥5.0 billion or more per year*1*1 Expenses in or after FY2022 - Expenses in FY2018 (excluding system integration costs)

Management Objectives (FY2021)(FY2021)

13

Review of channels and networks
Review of personnel structure

Progress of plan implementation

110.1

FY2018

Solid customer base(Billion yen)

114.1

1.9

Support for digitalization
Responding to a cashless society

Expenses(Bank total)(Billion yen)
14.6

Core system integration
Administrative systems unification

P29 Higher employee satisfaction

Investment for growth
Create a new business model

2018

13.8

Support for asset building
Asset management

Integrate core system inJanuary 2020

FY20199.4

Enhancement of convenience and simplicity
BPR promotion

Positioning of the Second Medium-Term Group Business Plan

*1 Gains/losses on cancellation of investment trusts + Gains/losses on bond transactions + Gains/losses related to stocks*2 Diminishment of 0.6 billion yen of the previous year’s gains on yen currency asset swaps, and decrease of 0.5 billion yen in profit from interest/currency swaps to customers*3 Including (-)1.3 billion yen of costs related to liability for retirement benefits

9.6

Expansion of business support menu

3 Develop human resources for value creation

Net trading
income-1�1*2

Core net business income (excluding gains/losses on cancellation of investment trusts)(+3�3 year on year)(Billion yen)
9.5

(Business matching/business succession, etc.)

P27

The Group’s strengths

Level of profit

Ordinary profit
52.0

Main Measuresreform for enhanced productivity
2 Structural
Building shared platformNet fees andcommissions+0�1(Profit of customer services)

Factors
causing
increasein incomestage of growth.” Under the plan, we are implementing
structural reforms, such as optimizing our branch
networks and reorganizing division functions, startingwith the integration of the core systems in January
2020. We have also deployed a two year cumulative
total of 170 people to consulting services and the IT
field. We will be putting all our efforts into resolving
issues faced by our customers in the region, which arebecoming increasingly diverse, and will create businessmodels that grow with local communities.

Outline of the Second Medium-Term Group Business Plan

* Bank total (Core net business income excludes gains/losses on cancellation of investment trusts)(Billion yen)Management and Financial Strategies

Management and Financial Strategies┃ Results for FY2020

Consolidated ROE

5.0% or more

Net income attributable to owners of the parent Approx. ¥47 billion
Core OHR (Bank total)

approx. 60%(excluding system integration expenses)*2 Expenses in FY2020 - Expenses in
FY2018 (excluding system
integration costs)(Results for FY2020)
3.8%
36.4 billion yen
59.6%

Annual Report 2021

14

┃ Reduction of Strategic Shareholdings

Taking into account our operating environment, market
conditions, etc. at the present time, and based on a setof predictable assumptions, we expect net income
attributable to owners of the parent for FY2021 toincrease 1.5 billion yen to 38.0 billion yen compared tothe previous year. We will immediately announce forecast
revisions if the COVID-19 situation changes and revisions
are required.

Underlying assumptions

Forecast (Mebuki FG consolidated)

We expect COVID-19 to gradually resolve as progress ismade with vaccination, and economic activity will also
begin to recover.
However, we expect certain sectors to continue toface tough circumstances, and we have conservatively
estimated credit related costs at 20.0 billion yen (down
2.4 billion yen year on year).

(Billion yen)

Forecast for(Year-onFY2021
year change)

Ordinary profit

55.0

+0.8

Net income attributable to owners of the parent

38.0

+1.5

Forecast (Bank total)(Billion yen)

Forecast for FY2021

Ordinary profit

53.0

Net income

36.5(Credit related costs)(Approx. 20.0)┃ Shareholder Returns and Capital Policy
We will target a total return ratio of 30% or more while
taking into account both the maintenance of solid capitallevels for our future growth and the appropriate
distribution of profits to our shareholders. We willcontinue to consider the total return ratio including thedividend level in light of market trend and business
forecast.
We maintained stable dividends and paid out 11 yen
per share in FY2020 (the same level as the previousyear). We plan to maintain stable dividends and pay out
11 yen per share in FY2021 (the same level as theprevious year), and acquired our own shares in a flexible
manner in May 2021, making the total return ratio
expected to reach about 70.0%, well above the target of30%.
Consolidated capital adequacy ratio of Mebuki
Financial Group as of March 31, 2021 decreased by
0.08 percentage point year on year to 10.87%.
Ashikaga Bank started to calculate each risk-weighted
asset according to foundation internal rating-based
approach (FIRB) from the end of March 2020 in its
efforts to better control credit-related risk.

Dividends andShareholder Returns

Consolidated capital adequacy ratio

Total return ratio
Payout ratio(Billion yen)
46.2%
35.3%

Share repurchase
Dividends

70.0%

34.9%

(%)

31.8%

10.95%

34.9%

10.87%

9.94%

The subsidiary banks that hold strategic shareholdings
are making efforts to reduce the balance of strategic
shareholdings, taking into consideration the risk
reduction and capital efficiency based on its economic
rationality. We have been holding sufficient dialogues
with the issuing companies upon sales of such shares.

12.8

12.7

12.0

FY2019FY2020

FY2021 (scheduled)

¥11.0

¥11.0

¥11.0

FY2019FY2020

FY2021 (scheduled)

Dividends per share

15

Mebuki Financial Group, Inc.

The amount of reduction in FY2020 was approx. 14.8
billion yen (Bank total, based on acquisition cost), andinvolved shares from 20 issuers. The resulting balance ofstrategic shareholdings (listed companies) was 92.0
billion yen as of March 31, 2020. The ratio of the balanceof strategic shareholdings to consolidated capitaldecreased from 13.7% to 11.8%.

Assessing the rationality of holding individual stock by the Board of Directors, etc.
Our basic policy for strategic shareholdings is based on
medium- to long-term economic rationality on the basisof risk and returns and future outlook in order to securesustainable growth, increase corporate value of theGroup and issuing companies over the medium- to longterm, and build stable business relationships with thosecompanies.
The economic rationality of strategic shareholdings is
examined from the viewpoint of profitability,
creditworthiness, regional characteristics (relevancy toprincipal base of operations), improvement of business
relationship, etc., using their overall business RORA (*)
based on our ROE target.
As of March 31, 2021, the Board of Directors
confirmed every strategic shareholding to be meaningful
pursuant to the basic policy to secure a sustainablegrowth, increase corporate value of the Group andissuing companies over the medium- to long-term, andbuild stable business relationships with thosecompanies. Regarding the profitability, we confirmedthat their overall business RORA combining all listedcompanies of strategic shareholdings exceeded thetarget value.
*RORA = (Net interest margin on loans and deposits – Expenses (including credit related costs)+ Fees and Commissions + Dividends) ÷ Risk-weighted Assets (Loans and Stocks)

Strategic shareholdings(Bank total, listed companies only, based on acquisition cost)(Billion yen)
221

119.1

As of March 31,
2019

Our Group has endeavored to improve soundness andtransparency of the management and ensure timely andeasy-to-understand information disclosure and provisionin order to earn trust from and improve our Group’s
reputation among all stakeholders including customers,
shareholders and community residents.

End of FY2021

-17
204

106.8

As of March 31,
2020

-20
184

92.0

End of FY2021

Investor relations sessions
IR sessions for individual investors

As of March 31,
2020

No. of share issues

Since the second half of FY2019, we have held fewer
investor relations sessions due to the impact of the
spread of COVID-19, but we have enhanced information
disclosure by other means, including through online
videoconferencing tools and the distribution of video
content. We will continue to ensure impartial and fair
information disclosure and promote constructive
dialogue with shareholders and investors

FY2018

As of March 31,
2019Book-value balance┃ Dialogue with Shareholders and Investors

14.5
3.9

Management and Financial Strategies

Management and Financial Strategies┃ Forecast for FY2021

IR sessions for institutional investors and analysts in Japan(including exclusive interviews)
IR sessions for overseas institutional investors and analysts(including exclusive interviews)
Total

8 times,
845 participants
79 times,
418 companies
3 times,
19 companies
90 times,
1,282 people(companies)

FY2019(Cancelled)
68 times,
454 companies
2 times,
12 companies
70 times,
466 companies

FY2020Distribution of
explanatory video
58 times,
260 companies
8 times, 8 companies
66 times,
268 companies

Annual Report 2021

16

Strengths of Mebuki Financial Group in Main Area of Business

Mebuki Financial Group’s primary areas of business are Ibaraki Prefecture and Tochigi Prefecture, adjacent to the Tokyo
metropolitan area, and have been a high concentration area of manufacturers. We also expect future economic
benefits, with the further development of the transportation network and high attractiveness as to where to set up
factories. Additionally, agricultural output also ranks top in the country, backed by the mass consumption in the Tokyo
metropolitan area, and both have balanced industrial structures.

┃ Branch networks(As of March 31, 2021)

Strengths of Mebuki Financial Group in Main Area of Business

Strengths of Mebuki Financial Group in Main Area of Business┃Market Environment and Scale of Ibaraki Prefecture and Tochigi Prefecture

MiyagiPrefecture(1 office)(Joyo Bank + Ashikaga Bank)

328 offices
Overseas: 6 offices
Domestic:(Representative Offices)

Connecting expressways developed wide-area networks
Kan-Etsu
Expressway

TohokuExpressway

Kita-Kanto Expressway

Joban
Expressway

Fukushima
Prefecture(11 offices)

Gunma
Prefecture(14 offices)

Port of Ibaraki

Tochigi
Prefecture(110 offices)

SaitamaPrefecture(20 offices)
Ibaraki Airport

Tokyo Prefecture(8 offices)

Ken-O
Expressway

 ochigi
T
Prefecture

2nd

1st

1st

2nd

2nd

7th

Chiba
Prefecture(7 offices)

Overseas Representative Offices

Hanoi

Total area of new factory locations
Ibaraki
Kita-Kanto Expressway fully opened
Prefecture

IbarakiPrefecture(156 offices)

1st

1st

1st

2nd

1st

New York

Hong Kong
Bangkok
Singapore

Osaka
Prefecture(1 office)2nd

Shanghai

3rd

3rd

3rd

13th

10th
17th

Mebuki Financial Group’s share in Ibaraki Prefecture and Tochigi Prefecture*

18th

20th

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

*The above ranks are those of total area of new factory locations (each year) among the 47 prefectures based on the “Survey of Factory Location Trends” by the Ministry of Economy, Trade and Industry.

Potential in the main area of businessEconomic data

Tochigi Prefecture

2.89 million people 11th

1.95 million people 19th

Nominal prefectural gross product*1

13.8 trillion yen 11th

9.1 trillion yen 15th

Prefectural income per capita*1

3.30 million yen

Number of business establishments*2
Manufactured goods shipped*3
Agricultural output*4

118 thousand establishments 13th
12.2 trillion yen
450.8 billion yen*1 “Prefectural Accounts” by the Cabinet Office*2 “2016 Economic Census for Business Frame” by Statistics Bureau, Ministry of Internal Affairs and Communications*3 “Census of Manufactures” by Ibaraki Prefecture and Tochigi Prefecture*4 “2018 Agricultural Production Income Statistics” by the Ministry of Agriculture, Forestry and Fisheries

17

Mebuki Financial Group, Inc.

7th

7th
3rd

3.41 million yen

Loans50.4 %

Ibaraki Prefecture

Population*1

Other banks,
credit unions,credit associations,and others

3rd

Mebuki
FinancialGroup

Other banks,
credit unions,credit associations,and others

49.6 % (including Japan Post Bank)
63.1 %

Deposits

Mebuki
FinancialGroup

36.9 %* The Company calculated the shares based on data from Kinyu Journal, Special Issue, December 2020.

Main Transactions

88 thousand establishments 19th
9.2 trillion yen 12th
287.1 billion yen

9thMain bankPayroll and pension deposits

Home mortgage loans

Number of customers

Number of customers

Number of customers

Approx. 32,200

Approx. 1,740,000

Approx. 225,600

Annual Report 2021

18

Initiatives for Value Creation

A wide range of support measures utilizing the wide-area network mainly in Ibaraki and Tochigi prefectures are
implemented based on the Group’s strong customer base, which is a strength of both Joyo Bank and Ashikaga Bank.
Under the Second Medium-Term Group Business Plan, which was launched in April 2019, we support the growth andproblem resolution of customers by leveraging the Group’s strengths through the enhancement of consulting services
and IT services/data utilization, while at the same time we utilize the resources held by the Group to cultivate andexpand our business areas, thereby creating a business model that grows with customers and local communities.

Enhancement of consulting function
Various management issues have become apparent to customers as a result of the declining birthrate and aging
population, advancement of digitization, and the COVID-19 pandemic. We are working to resolve them throughconsulting.

Eliciting management issues and needs
Cash flow

Reconsidering supply chains

Disaster prevention measures

Dominant products and an

Business succession

Eliminating labor shortages

increase in product sales

Measures for digitalization

Measures to meet SDGs

Business Support
Diverse financing by utilizing loans, funds, and others
Support for business succession and M&A by utilizing network
Number of business succession consultation cases Number of M&A consultation cases
2,703 cases
1,226 cases(FY2020, bank total)

Introducing sales channels and suppliers through business matching
Number of business matches Number of successful cases
2,041 cases
401 cases(Cumulative total since October 2016, bank total)

 upporting the development of BCP plans andS
proposing insurance with special BCP provisions
Consulting on SDGs

Mebuki Business Award
Joyo Bank and Ashikaga Bank jointly host the “Mebuki
Business Award,” in which entries for innovative andcreative business plans in the region are invited and anaward is presented to selected plans.
Support is provided to help make the award-winningplans take off as businesses, such as providing financial
assistance by utilizing funds, in addition to making
technical proposals and assisting in expanding sales.

Support for sales channel and market expansion
Various business conferences
Mebuki Financial Group Manufacturing Business Forum 2020
We hosted business conferences with panel exhibits onhighly recommended technology by participants and“technical proposals.”
Panel exhibits: 232 companies; support for making“technical proposals”: 222 companies; and reserved
business negotiations: 373 cases

Business conferences based on the needs of individual companies
We hold business conferences whenever necessary tomatch buyers and clients with potential suppliers andcontractors who satisfy their needs.

Information provision
Various seminars
Online Seminar for Utilizing Subsidies (co-sponsored by Mebuki FG)
We explained the points online when applying for various
subsidies, including the Business Restructuring Subsidy.
Participants: 350 companies

Providing one-stop financial services by cooperating with group companies
Providing comprehensive financial services
Strengthening our group collaboration and providing high-quality financial services to meet diversifying customer needs
Number of Mebuki Lease customers / Balance of lease installment receivables
Balance of lease and installment of receivables (Billion yen)
Number of Customers (Number)

Support for digitalization
The Group is promptly working on various digitalization activities thathave been accelerated by the COVID-19 pandemic. We haveestablished a structure that enables us to also respond to the highly
specialized areathat is digital, and are proposingdigitization that leads tosolutions in line with our customers’ management strategies. P26

Discovering regional industries andsupporting the creation of new businesses

Mebuki Food Exhibition (online business conferences)
We held online business conferences to exhibit products
and have business meetings on personal computers or
smartphones.
Online exhibitors: 97 companies
Online business negotiations: 805 cases

Providing support to solve issues through consulting
We provide various solutions for issues, such as reexamining supply
chains in the COVID-19 pandemic, expanding sales channels, andconsulting on issues related to BCP and SDGs.
Along with the aging of management executives, an increasing
number of companies are having business succession issues.
Therefore, the respective head offices and branches of Joyo Bank
and Ashikaga Bank, as well as external specialized institutions,collaborate with each other to think through problems together withcustomers in order to facilitate business and asset succession, andprovide them with assistance in ways to resolve their issues.
We respond to meet diverse financing needs of customers, andprovide smooth financing by utilizing not only loans,but funds andother means as well.

Support for start-up and new businesses
Initiatives for Value Creation

Initiatives for Value Creation┃ Create Growth Business Models With Local Regions

 roviding solutions by IT specialized staff andPbusiness partners

8,995
8,146
90.1

98.2

9,282
104.0

9,577

Contracts and balance of customer assets under custody of Mebuki Securities

22,248

Balance (Billion yen)Contracts (Number)

19,599343.4

16,692

102.9
13,557168.4

14,615
272.8

282.0

204.3

Support for Securing Personnel
Deepening our dialogues with our customers, we are sharing their
management issues, providing appropriate personnel placement andmatching services to solve their personnel problems, and supporting
the review of their personnel systems. Additionally, we are working tooffer management issue solutions by utilizing personnel who want toutilize their skills at regional companies as a side job.

19

Mebuki Financial Group, Inc.

 ersonnel placement through the group companies
Pand business partners
Information gathering on personnel-related Cases of successful personnel
needs (cumulative)
placement (cumulative)
1,802 companies
179 companies 240 cases

As of March 31,
2018

As of March 31,
2019

As of March 31,
2020

End of FY2021

As of March 31, As of March 31, As of March 31, As of March 31, End of FY2021
2017
2018
2019
2020

(As of March 31, 2021, bank total)

Annual Report 2021

20

The Group co-hosted events such as Manufacturers’Business Meeting in Bangkok, Ho Chi Minh and Shanghai.

Mebuki Financial Group’s Overseas Business Support Activities
The Group offers various overseas business support services including foreign currency exchange, overseas remittances, loans andstandby credit in local currencies, and the provision of information obtained from local partner banks and government agencies.
In addition to six overseas representative offices of the Group (four offices of Joyo Bank and two offices of Ashikaga Bank, as ofMarch 2021), we offer a wide variety of support services through business alliances with local financial institutions and government
agencies in Asia and North America.

Shanghai Representative Office, Joyo Bank
AddressPhone

New York Representative Office, Joyo Bank

Room 1901, Shanghai International Trade
Centre, 2201 Yan An Road (West),
Shanghai 200336
P. R. China+86-21-6209-0258

AddressPhone

712 Fifth Avenue, 8th Floor
New York, NY 10019
U. S. A.
+1-347-686-8420

Hanoi Representative Office, Joyo Bank
AddressPhone

5th Floor, Sun Red River,
23 Phan Chu Trinh Street,
Hoan Kiem District,Hanoi
Vietnam+84-24-3218-1668

Bangkok Representative Office, Ashikaga Bank
AddressPhone

689, Bhiraj Tower at EmQuartier,27th Floor, Room No.2714, Sukhumvit Road,
Klongton-nua, Wattana, Bangkok 10110
Thailand+66-2-261-2852

Representative Office Registered in Singapore, Joyo Bank
AddressPhone

63 Market Street, #11-03
Bank of Singapore Centre,
Singapore 048942+65-6225-6543

Country/region

Major alliance partners

East Asia

Bank of China (China)
China
Bank of Communications (China)
TaiwanCTBC Bank (Taiwan)
Kasikorn Bank

Thailand

Address

Phone

Suite 1601, 16th Floor,
Tower2, The Gateway,
Harbour City, Kowloon,
Hong Kong+852-2251-9475

South East Asia/South Asia

Hong Kong Representative Office, Ashikaga Bank

Bangkok Bank
Bank Negara Indonesia
Indonesia
Bank CIMB Niaga
Vietin Bank
Vietnam

Vietcombank
Foreign Investment Agency of Vietnam
BDO Unibank

Philippines
Metrobank
India
Central America

21

Mebuki Financial Group, Inc.

State Bank of India
Banamex

MexicoGovernment of Aguascalientes,
Government of Jalisco, etc.

Joyo
Bank

Ashikaga
Bank

Business overview of alliance partners
Provision of information regarding China;
provision of various financial services including establishment of accounts
Provision of information regarding Taiwan;
provision of various financial services including establishment of accounts
Provision of information regarding Thailand;
provision of various financial services including establishment of accounts

Provision of information regarding Indonesia;
provision of various financial services including establishment of accounts
Provision of information regarding Vietnam;
provision of various financial services including establishment of accounts
Cooperation in hosting seminars relevant to Vietnam; various support
for business expansion to Vietnam; provision of investment-related information
Provision of information regarding Philippines;
provision of various financial services including establishment of accounts
Provision of information regarding India;
provision of various financial services including establishment of accounts
Provision of information regarding Mexico;
provision of various financial services including establishment of accounts
Provision of local market information;
provision of investment-related information regarding Mexico

Annual Report 2021

22

Measures to meet the needs of an aging society

Changes in the social situation, called “the 100-year life”, have diversified and intensified customers’ worries andLooking ahead to the imminent arrival of an aged society, we have proactively expanded our financial services toconcerns. We provide consideratesupport tailored to their life events.

respond to financial transaction problems and other diverse needs by utilizing knowledge on gerontology. This action

Initiatives for Value Creation

Initiatives for Value Creation

Supporting asset building and asset succession

aims at creating communities in which people can continue to live their lives in comfort.

Asset building and asset succession

Asset management

We have established a system capable of meeting the diverse needs of customers. The entire Group, including
branches, head offices, and group companies, has supported customers’ asset building, asset management, andsmooth asset succession to the next generation. Specifically, we began the dedicated inheritance consulting service
on Saturdays and Sundays and dedicated specialized staff in offices to address the general troubles of the elderly.

Holiday Wealth Salon

Respond carefully and politely to matters frompreparations for inter vivos inheritance to support
after inheritance has occurred
Inheritance consulting service on Saturdays and Sundays
Provide peace of mind with appointment-onlysystem and dedicated consultation booths(private rooms)
Families can reserve consultations at theirconvenience.
Specialized staff supports customers in aneasy-to-understand and careful manner.

Supporting transactions by family members
or other agents
 tilizing agent cards and passbook apps
U
Offering guarantee and voluntary guardianship services
Family contact registration system

Providing guarantor and voluntary guardian services

Smileful Partner

Specialized staff for the elderly respond totroubles of customers and their families
Respond to current and future troubles
Address a decline in cognitive function
Support smooth asset succession to the next
generation
Cultivate measures to prevent financial crimes

Utilizing real estate andling of reverse mortgage housing loans andHleasebacks

Provision of services using trusts
Guardianship support trust
Family trust

Asset succession
Provision of services using trusts
Balance of customer assets under custody (Bank total + Mebuki Securities)(Billion yen)

Balance of customer assets under custody
Contracts of customer assets under custody

Number of customers of accumulation services (Bank total)(Number)(Number)

172,213385,887
157,272

379,325

Testamentary preparation support services

Measures taken to respond to an aging society

As of March 31,
2020

End of FY2021

Started asset management consultation
available online
We started asset management consultation available
online to increase dialogue time with our customers
safely during the COVID-19 pandemic and enhance

As of March 31,
2019

As of March 31,
2020

End of FY2021<Collaborating with external institutions><Establishment of internal organizations>

Collaboration with each municipality andregional comprehensive support center

Placement of specialized staff for theelderly (Smileful Partner)

Implementing watching over the elderly and others
Development activities for community residents,
Created a special page on our website
Introduction of the daily life independence support
programIntroduction of “Smile Navigation,” acustomer proposal tool

convenience for them.

Providing watching service in collaboration
with a security company(Note) Individual customers with specific transactions are eligible.

23

Provision of gift function using insurance
products

2,025.5
1,879.9

As of March 31,
2019

Setup of dedicated inheritance consulting
service (on Saturdays and Sundays)

Asset succession planning service

149,374

375,0622,038.3

 estamentary trustTTestamentary substitute trust

Mebuki Financial Group, Inc.

Expansion of training and education
systems
 etting qualified as a dementia supporterGPlacement of care-fitters at branches
Expansion of training and lectures regarding
provoding services to the elderly

Measures to prevent damages fromfraudulent phone calls

Annual Report 2021

24

Utilizing external knowledge, we have developed initiatives for enhancing convenience for customers and the Group’s

Introduce business management support services available online (WEB)productivity, and upgrading sales activities.

We introduced “Big Advance” handling business

Through these tools, we provide opportunities for newmatching services via the internet and “Busikul,” a new

business resolving management issues without

consulting tool providing various materials for businessconstraints on time or location.

Enhancing convenience for customers and streamlining our administrative work

matching to respond to customers’ management issues.

Started digital banking services

Started branch visit reservation service

We signed a strategic business partnership in the digitalapp for individual customers of Joyo Bank and Ashikaga“Branch Visit Reservation Service” online enables us toprocessing time by employees. We aim to avoid

field with Resona Holdings, Inc. Sharing knowledge andBank. We will continue to add functions and the like withshorten waiting and processing time for customers. It

congestion, which is an issue in the COVID-19

expertise with each other, we jointly researched new

a sense of “portable bank” with you regardless of time or

notifies us of the date and time of the customers’ visit

pandemic, and to ensure that many customers can use

digital banking services and developed a new banking

place.

and the purpose of their visit in advance. It results inour branches in a comfortable and safe manner.

Banking App Users (Bank total)

decreasing the waiting time for customers and the

New banking app released
 rdinary deposit balance inquiry, deposit andOwithdrawal inquiry, and graph display
Transfer (24 hours a day, 365 days a year)
Deposit and withdrawal of time deposit /saving-type time depositDeposit and withdrawal notice and nonwithdrawal notice using push notification
functionSearch for branches and ATMs using GPS
function
Opening, deposit and payment of foreign
currency ordinary deposit accountsO pening of saving-type time deposit accounts
Joyo Banking
App

Ashikaga
Bank App

Initiatives for Value Creation

Initiatives for Value Creation

IT services and data utilization

Scheduled to add functions
sequentially

233,378

Introduce self-counter terminal
Procedures for new applications for ordinary deposits
and changes in notifications such as address can becompleted on tablet terminals in branches. Thiseliminates the need to fill out application forms, leading
to enhance convenience for customers and our
productivity. Simplified and speedy administrative
processes and reducing administrative errors resulted in

March 24
(Service started)the ehancement of productivity by our employees.
End of March

End of April

End of May

End of June

Digital contract services

Expansion of services for unsecured loans available online (WEB)We are working on expanding a line of products that

insurance are available online at present. Approx. 90%

enable us to complete the entire loan process, fromof automobile loans and educational loans have been

application to contract, online. Automobile loans, card

applied for online.

Card loans
Educational loans

153.8

166.6

65.3
8.6
37.3

9.3
41.2

Web (Number)

17,425

171.0

61.8
9.0

Web contracts
more than 90%

15,093

1,664

5,498
10,22015,761

42.9

42.5

50.3

57.1

FY2018FY2019FY2020

Mebuki Financial Group, Inc.

processes by eliminating paperwork for making a

December 2021. We will enhance the convenience forcontract.

FY2019<Examples of collaborating with external institutions>employees by encouraging them to take IT-related

We held online seminars to support digitization andnational examinations and to get qualifications such as

free consulting for participants in cooperation with the“IT Coordinator”. We are also developing high-quality

IT Coordinator Association, a non-profit organization.

services through sharing know-how and cooperating inWe supported consulting and introducing apps

consultation by collaborating with external institutions.

through business partnerships with Digital Serve Co.
Ltd. and other external IT companies.

for customers’ digitization by collaborating with

4,079
FY2018We are working to improve the IT knowledge of regular

Additionally, we continue to provide optimal solutions

9,595(*) Bank total

25

Face-to-face

14,29965.6

related to business loans and home mortgage loans in

Reinforcing the organization for supporting digitalization
Number of automobile and educational loan applications (*)

Free loans (Billion yen)
Automobile loans

customers and simplify and accelerate the administrative

Support customers’ digitalizationloans, educational loans, free loans, and some medical
Unsecured loans (Average balance) (*)

We are scheduled to introduce digital contract services

FY2020branches, head offices, affiliated companies, externalbusiness partners, and others.

Annual Report 2021

26

Reorganization of business processing and IT division

In January 2020, we completed the core system integration between Joyo Bank and Ashikaga bank and reorganized
IT system and business administration division. We are also optimizing our branch networks and investing management
resources in growth fields such as consulting and IT, thereby enhancing our consulting function.

Reorganization of System Departments

In June 2020, we established the System Management
Department, which engages in the control of planningand management operations concerning systemdevelopment, in order to strengthen IT governance andimprove organizational efficiency of system operations.

Control of total number of staff
Achievements in
FY2019 and FY2020

3-Year Plan (April 2019 through March 2022)(2 years cumulative)

Unification and rationalization of businessprocessing and IT division
Consolidation of head office functions andsubsidiary functions and streamlining
operations
BPR and digitization of branch office
operations
Optimizing branch networks

Enhancement of consulting function
Strengthening IT planning and IT consulting
Strengthening securities investment,
structured finance, and committing staff to
new fields

PurposeFreed up
Freed up
-1,000 people-770 people(Business processing and IT division -300 people)(Branch office network -300 people)

 nification/Integration of Business
U
Administration and Concentration
Section
Unification/Integration of IT Division
 eorganization of group companies
R

Invested

Invested+200 people

Accelerate Digital
Transformation/Efficiency byassessing changes inexternal environment+170 people(consulting field +140 people)

Strengthen IT governance andimprove organizational efficiency

Mebuki Financial Group
Corporate Planning Department
Corporate Management Department
Regional Revitalization Department
System Management Department (new)Audit Department

System related department(Mebuki Financial Group and subsidiary banks)
Approx. 150 people in total
Joyo Banksystemdepartment

Ashikaga Banksystemdepartment

Integrate planning and management
functions concerning systemdevelopment

Initiatives for Value Creation

Initiatives for Value Creation┃ Structural Reform for Enhanced Productivity

Reorganization of Business Administration Department

In April 2021, we established the Business Management
Department to lead to standardize, share and unify thebusiness procedures aiming to improve customer
service and efficiency in the entire Group. We also unified
business process planning and managing functions in
Joyo Bank and Ashikaga Bank as Business
Administration Departments and have operated them in
an integrated manner.
		Cost reduction and optimization of
Purpose allocation of human resources bystandardization of business procedures
Mebuki Financial Group
Corporate Planning Department
Corporate Management Department
Regional Revitalization Department
Business Management Department (new)System Management Department
Audit Department

Based on the group management
policy, business administration is
integrated.
Joyo Bank(Business
Administration Div.)

Ashikaga Bank
(Business
Administration Div.)

Integrated operations by the Business Administration and IT System Departments in
Mebuki Financial Group (Build a highly responsive management base)

Restructuring organization of subsidiaries

Change in total number of staff
As of the end of FY2020, the number of total staff

number of regular employees at both banks decreased

decreased by 600 people from the start of the Secondby 300 people to 6,200 people from the end of March

Medium-Term Business Plan as a result of improving

2019. We achieved the target figure in the plan one year

productivity and operational efficiency. Of them, theearly in FY2020.

In the credit guarantee and credit card businesses, weconsolidated overlapping operations within the Group
into a single organization, making them directly-owned
subsidiaries. In response to deregulation, we have newly
established a dedicated investment subsidiary undereach of our subsidiary banks.
As a comprehensive financial services group, we will
increase the profit contribution of consolidated
subsidiaries other than banks.

Mebuki Financial(organization since April 2021)
Group

As of March 31, 2021
-600 people(Compared with the end of March 2019)10,5006,500
regularemployees

10,2506,400
regularemployees

9,900

Less than
9,700

6,200
regularemployees

6,200
regularemployees

Joyo Bank

Ashikaga Bank

Joyo Computer
Service

Ashigin Research Institute

Joyo Credit Guarantee
Joyo Industrial Research Institute

Mebuki Lease

Wing CapitalPartners(established in February 2021)

Joyo Equipment Management
As of March
31, 2019

As of March
31, 2020

End of
FY2021

As of March
31, 2022(forecast)

As of March
31, 2022(Medium-term plan)

Joyo CapitalPartners

Mebuki
Securities

Mebuki Credit
Guarantee

Mebuki Card

Change of tradenamein October 2020

Merger and change of
tradename in April 2021

Reorganization of overlapping subsidiaries
Investing management resources in thegrowth fields such as consulting anddigital(established in January 2021)

Established dedicated investment subsidiaries
By utilizing the deregulation enabling wholly
owned investments in operatingcompanies, we will deeply involve ourselvesin supporting customers worrying about ashortage of successors and businessdifficulties

27

Mebuki Financial Group, Inc.

Annual Report 2021

28

Promotion of diversity and inclusion measures

We are conducting training to improve the skills of each regular employee in order to meet the diverse needs ofIn order to grow together with our local communities, we are also striving to establish a working environment in whichcustomers and the local communities through the utilization of IT and digital technology. We are also striving todiverse people feel job satisfaction and can continue to work in the long term regardless of changes in their lifestyles.

enhance our employees’ knowledge and skills through having them acquire various qualifications in response to a
growing demand for comprehensive consulting services among corporate customers.

Training specialized human resources
We are aiming to increase human resources with advanced skills and encourage the utilization of the Group’s IT and
data, while at the same time providing our customers with tools and expertise developed internally by the Group.

Training human resources capable of utilizing
IT and digital technologies

Acquisition of Expertise and Qualifications

We are reinforcing our support for the regular employees

various qualifications, such as financial planner, small

to raise their skill levels and training specialized humanand mid-size enterprise management consultant andresources through seminars by external lecturers on the

securities analyst.

We are providing support for employees to acquire

Promotion of active participation of women

We are proactively promoting capable and motivatedwomen employees to assistant manager positions or
higher. We are working on supporting career formations
based on lifestyles, such as providing careerdevelopment training and using employee benefit
programs.

Initiatives for Value Creation

Initiatives for Value Creation┃ Developing Human Resources for Value Creation

Percentage of women in assistant manager positions or higher

30.0%
28.9%
27.9%

Expanding recurrent education

We have enriched and firmly established recurrent
education by providing training based on thorougheducation and training programs to expand the scope ofwork and move up. We also provide financial support tohighly motivated regular employees when they aim toacquire university graduation qualifications.

As of March
31, 2019

As of March
31, 2020

End of (Bank Total)
FY2021

utilization of IT-related knowledge and information related

Providing a pleasant working environment

to IT and digital technologies.

Specific Initiatives

Encouragement to acquire IT Passportqualifications (national examination) and IT
Coordinator qualifications (recommended by
the Ministry of Economy, Trade and Industry)
Dispatching trainees externally and within thebank, mainly in the consulting and IT fields
Implementation of training on “businessevaluation” and “business succession and
M&A” aiming at strengthening the ability todiscern and resolve issues
Establishment of various training sessions suchas the “Consulting Services Reinforcement
Workshop”
Developing specialists in management field
through “Next generation leaders program” toimprove the ability to judge situations and makepolicy decisions

We are establishing systems and working environmentsthat allow employees to work in line with their life stages,
such as raising children or nursing care of family, as wellas according to their lifestyles.

Specific Initiatives

Introducing web correspondence courses toacquire qualification of 1st-grade Certified
Skilled Professionals of Financial Planning andhosting Holiday Seminars
Providing partial subsidy for schooling expenses
for specialist schools to employees to acquire
qualifications, such as small and mid-size
enterprise management consultant andsecurities analyst

Highly qualified professionals (as of March 31, 2021, bank total)
Qualification name
Small and mid-size enterprisemanagement consultant
1st-grade Certified Skilled Professionals of
Financial Planning
1st-grade Financial Service Proficiency
Skill Test

Number
48

Seminars for employees returning to the workplace from childcare leave

Flexible work system
For all employees excluding senior manager or higher,
the bank has introduced a flexible working system which
doesn’t fix working hours per day and admits employees
to schedule their own start and leave time.

Work-interval system
We have obligated all employees to have a continuous
11 hour or more break between the end of one workday
and the start of the next from the viewpoint of preventing
health problems caused by long working hours.

Shortened work hour system (for childcare and nursing care)
The employees can shorten their scheduled working
hours on a daily basis if they wish, to support day-to-day
childcare and nursing care.

Seminars for employees returning to the workplace from childcare leave
We provide opportunities to reduce anxiety aboutbalancing work and parenting, and to raise employees’
motivation to help them return to work smoothly.

301
61

External evaluation“Platinum Kurumin” certification was
granted as a company that provides
superior support for childcare to its
employees based on the Act toAdvance Measures to Support NextGeneration Child-Rearing

Personnel exchange and joint training

We hold human resource exchange seminars andholiday lectures to realize early synergies in businessintegration, fuse corporate culture, and deepen mutual
understanding. (We postponed them in the COVID-19
pandemic.)
The two banks have jointly continued to hold Mebuki
Women’s Class to accelerate the promotion of active
participation of women and foster future female
leaders. A total of 16 people from both banks
participated in FY 2020. We will continue to hold thisclass in FY2021.

29

Mebuki Financial Group, Inc.

Recognized as an outstandingorganization under the 2021 CertifiedHealth & Productivity Management
Outstanding Organizations Recognition
Program (large enterprise category)

Mebuki Women’s Class

Annual Report 2021

30

SDGs Initiatives

Initiatives for achievement of SDGs
Major initiatives through the Group’s business

Discovering and creating new business(Business Award)

Initiatives for climate change and environment conservation

Identifying management issues andproviding solutions for regional companies

Initiatives for promoting renewable energy
business(Business succession, SDGs consulting, etc.)

We proactively support our clients’ efforts toward
the realization of a carbonfree society by providing
financial support for
renewable energy
businesses.
P34

To support the efforts to solve management issues,
we provide optimal solutions through consulting.

▲

For the development of the regional economy, we
invite people in the community to offer innovativeand creative business plans, for which we provide
support toward
P20
commercialization andgrowth.
P20

P39).
SDGs Initiatives

SDGs Initiatives

Mebuki Financial Group will continue to proactively promote initiatives for communities’ sustainable growth (achievement of SDGs) under the leadership of the SDGs Committee (P19

Initiatives to reduce greenhouse gas emissions
Setting a reduction goal of CO2 emissions, the entire
Group strives to reduce CO2 emissions throughmeasures such as establishing environment-friendly
branches and integrating
the mail carrying system
between offices andbranches.
P33
Fuel-efficient business cars

Business Award ceremony

Initiatives to revitalize the regional economy(Various business conferences)

By making the most of the Group’s wide-area
network, Joyo Bank and Ashikaga Bank jointly holdvarious business conferences related to agriculture,
food and manufacturing to help develop a market
and expand economic
exchange through businessmatching, etc. amongclients.
P20

Initiatives based on the knowledge on gerontology(Asset management, asset succession, etc.)

Toward the realization of the communities where theelderly can continuously live in comfort, we are
expanding our services utilizing the knowledge on
gerontology.

P24

Supporting the growth and enhanced
productivity of regional companies
We provide support for appropriate personnel
placement as well as for review of personnel
systems to solve issues. In addition, we offer
management issue solutions utilizing personnel
working side jobs.

Subsidies and donations to environment
conservation groups, etc.
To support environment conservation activities, we
continue to offer subsidies and donations toorganizations and groups
working on environment
conservation.
P34

Environment conservation activities(Tree planting, saving paper resources by promoting online passbook, etc.)

In addition to tree-planting activities and promotionof environmental education, we make efforts toconserve the environment
through reduced paper use
by promoting oursmartphone app and online
passbook. P34

Kindergartners releasing juvenile fish

Initiatives for diversity

P19

Contributing to communities through private
placement bonds with donation scheme
A portion of the commission received when issuing
private placement bonds for customers is used for
donating goods to schools
or organizations engaged
in initiatives for SDGs of thecustomer’s choice.
P35

Kindergartners playing with donated toys

Promotion of diversity

Initiatives for LGBT communities

In addition to promoting active participation of women in the entire
Group, we are establishing systems
and working environments that allow
employees to work in line with theirlife stages, such as raising children or
nursing care of family, as well as
according to their lifestyles.
P30

We offer home mortgage loans and house renovationloans, accepting same-sex partners as spouses. We
include same-sex partners as loan recipients in thecases of joint liability or combining income at the timeof borrowing, as we aim for a society where people
can live by their own values, with their sexual
orientation and gender identity being respected.

(active participation of women, work-style reforms, etc.)“Mebuki Women’s Class”

Policy for SDGs Initiatives for FY2021
1. W
 e will contribute to revitalize the regional economy byachieving a positive growth cycle of the regional economy
through financial and consulting functions.
We will further accelerate initiatives
for revitalization of the regional
economy and job creation throughour support for solving the issuesof our clients and communities.

31

Mebuki Financial Group, Inc.

Additionally, we will implement
initiatives toward the realization of
a community where our customers
are able to continuously live in
comfort, including gerontology andenhanced financial literacy.

2. We will develop initiatives for climate change and environment
conservation based on our support for TCFD.
We will provide financial services contributing
to environment conservation as well as
consulting services including BCP measures,
analyzing climate change risks, while striving
to reduce environmental burden.

Additionally, we will formulate aroadmap toward achievement of CO2
emission reduction target by fiscal
2030.

3. We will develop initiatives for diversity.
By nurturing corporate culturethat utilizes and develops
diverse human resources andby promoting capable andmotivated human resources
regardless of age and gender,

we will create a working
environment for all employees
and officers, including younger
and senior generations, to workwith motivation.

Annual Report 2021

32

Positioning the response to climate change as a key issue on management strategy, the Group declared support for
the TCFD Recommendations and established the SDGs Committee chaired by the President and Director. We willcontinue to implement proactive initiatives toward sustainable growth (achievement of SDGs) under the committee’s
centralized control over formulation of initiative policy, planning and progress.

Governance
Establishment of the SDGs Committee chaired by the
President and Director enabled us to put in place thesystem by centralizing control over formulation of
initiative policy, planning and progress.

Plans to address social issues including climatechange are formulated, while their progress is reported
at the SDGs Committee, which is held regularly. The
deliberations of the SDGs Committee are reported at theBoard of Directors meetings as well.

Under the Group’s philosophy, “Together with local
communities, we will continue to build a more
prosperous future by providing high-quality,
comprehensive financial services,” the Company
implements initiatives for issues concerning the regional
economy, communities, and environment through ourbusiness.
Perceiving measures for climate change andenvironment conservation as one of the key
management issues, we will work on reducing
environmental burden through providing comprehensive
financial services and conducting business activities.
We, as a community-based financial institution, will also
make efforts to realize sustainable communities, involving
the whole community, through consulting services
concerning climate change risks of our customers.

Furthermore, to clarify our stance for initiatives
concerning investments and loans for particular sectorsthat are considered greatly influential to the environment
including climate change and to society such as coalfired power generation, deforestation, palm oil plantation
development, cluster munitions manufacturing, humanrights violations, and forced labor, we have set the“Environmentally and Socially Friendly Investments andLoans Policy” and strive to control such investments andloans. P34
We will further accelerate our initiatives toward thecommunities’ sustainable growth including climatechange and environment conservation, while seeking toanalyze several scenarios about risks and opportunities
of climate change.

Risk Management
With a recognition that climate change risks could cause
great impact on the Group’s business operations,strategies, and financial plans, we will make efforts toestablish a system where those risks are manageable
within an integrated risk management framework.

We have set the target for CO2 emission reduction fordomestic offices to “reduce by 30% or more by FY2030
compared with FY2013 (*1).

We have achieved a 25.0% reduction of CO2
emissions in FY2020 (*2), compared with FY2013.

*1 In FY2021, we start formulating a roadmap toward achievement of CO2 emission reduction target for FY 2030.
*2 Total CO2 emissions of Scope 1 + Scope 2 of Joyo Bank + Ashikaga Bank, calculated based on the reporting standards stipulated in the Energy Efficiency Act.

33

Mebuki Financial Group, Inc.

1. Coal-fired power generation businessIn principle, we will not engage in investments and loans
for newly established coal-fired power plants.
(However, exceptions may be considered after taking
into account background or characteristics of eachproject such as overall power generation efficiency,
impacts on environment and local communities, etc.,
based on international guidelines.)

Investment decisions for deforestation operations will bemade after careful consideration of the status ofacquisition of international certifications by FSC or PEFC,
environmental considerations, and conflicts with local
communities.

CO2 emissions of the Group(Unit: Tons of CO2)

23,331

2013

25.0% reduction
compared with
FY2013

-6.5%

-7.0%

21,803

21,68820142015-13.3%
20,2332016-16.6%
19,4642017-20.6%-22.8% -25.0%

18,521

17,999 17,501

2018

2019

2020

[Target] 30% ormore reduction
compared with FY2013-30.0%
16,331

3. Palm oil plantation development business

Investment decisions for palm oil plantation development
will be made after careful consideration of the status ofacquisition of international certifications by RSPO,
environmental considerations, and conflicts with local
communities.

4. Cluster munitions manufacturing businessIn view of the inhumane nature of cluster munitions, we
prohibit investments and loans for businesses that
manufacture cluster munitions, regardless of the use of
the funds.

5. Human rights violations, forced labor, etc.
We prohibit investments and loans for businesses that
violate the principles of international human rights
standards such as child labor and forced labor.

Major initiatives for environment conservation
Initiatives for promoting renewable energy businessWe proactively support our customers seeking therealization of a carbon-free society by providing financial
support for renewable energy business projects such as
solar power generation, biomass power generation, andwind power generation.

Balance of investments and loans related to renewable energy (Joyo Bank + Ashikaga Bank)

Loans

195.7 billion yen

Solar power

175.7 billion yen

Others (biomass power, wind power, etc.)

20.0 billion yen

Investments

12.3 billion yen

Total investment and loan balance

208.1 billion yen

Subsidies for environment conservation groups, etc.
Utilizing the mechanism of charitable trust, we grant
subsidies to organizations and groups working on
environment conservation.

Indicators and Targets

Establishment of environment-friendly branchesS witching to energy-saving air-conditioning
Switching to LED bulbs at branches
Installing solar power generation system
at new branches
Switching to fuel-efficient business cars
Integrating the mail carrying system
between offices and branches

Concerning investments and loans to particular sectors that could cause great impact on the environment and society,we will appropriately act based on the “Environmentally and Socially Friendly Investments and Loans Policy.”

2. Deforestation business

Strategies

Strengthening initiatives to reducegreenhouse gas emissions
We will strengthen our initiatives for
reduction of CO2 emissions at the group-widelevel, setting the reduction target of “30% ormore of CO2 emissions at domestic offices
by FY2030 compared with FY2013.”

Environmentally and Socially Friendly Investments and Loans Policy
SDGs Initiatives

SDGs Initiatives┃ Response to Climate Change (Initiatives for TCFD Recommendations)

Subsidies through charitable trust (Cumulative total)

In addition, Ashikaga Bank supports the Nikko Cedar
Avenue Ownership System, working on beautification
activities, including participation in the cleanup at the
Avenue.

Number of bonds

Amount of subsidies

Number of cedar trees owned

1,484

159.99 million yen

80

Environment conservation activities

Support for the 21st Century Financial Behavior Principles

We have conducted tree-planting and other activities inorder to pass our communities’ beautiful and soundforests on to the next generation.
We are also making efforts to protect limited natural
resources by promoting the use of smartphone apps
and online passbooks in efforts to save paper.

Supporting the 21st Century
Financial Behavior Principles, which
was adopted in December 2011 inorder for financial institutions in thebanking, securities, and insurance
industries to work together on
expanding environmental financeinitiatives, we make efforts toward
the formation of a sustainable
society.

2030

Annual Report 2021

34

Contribution to Communities

Donation through private placement bonds with donation scheme
A portion of the commission received when issuing
private placement bonds for customers is used for
donating goods to schools, organizations engaged ininitiatives for SDGs, or healthcare institutions of thecustomer’s choice.
To date, we have made donations of more than ¥130
million.

Issuance of private placement bonds with donation scheme (Cumulative total)

813

Issue amount (Billion yen)
Number of bonds

622

68.7

478
52.6
310

40.8

27.6

FY2017FY2018FY2019FY2020

Examples of donation recipients
Nurseries and schools
Healthcare institutions
Local professional sports teams
Tochigi Prefecture and Ibaraki Prefecture(as operating expenses for the National
Athletic Meet)
Local governments
Incorporated non-profit organizations(organizations engaged in initiatives for
SDGs, etc.)

Support for children’s independence
We conduct lessons on finance to teach the importanceof money and the role of banks to the next generation.
We also provide financial education seminars intended
for high school and college students for understanding
the mechanism of the monetary economy and specificfinancial operations.

Measures Against the Spread of COVID-19┃ Smooth financing for communities and business support during the COVID-19 pandemic

Measures Against the Spread of COVID-19

Contributions to Communities

The spread of COVID-19 caused unrest throughout society, bringing great changes to our customers’ daily lives andmanagement environment.
Mebuki Financial Group has been making an all-out effort to deal with the needs of our customers impacted by the
prolonged COVID-19 pandemic. We will continue to work on solving our customers’ diversified challenges, while
expanding our area of business and improving the quality of our services with measures including smooth financing,support for digitalization, and an enforced consulting function.

Cash flow support by smooth financing
We provide proactive support by utilizing the“accompanied support type special credit guarantee
program” introduced by the national government, as wellas our own loans among others.

Providing services using digitalization
In addition to our financial services, we support
companies’ efforts for digitalization.
Introducing banking apps
Offering web-enabled procedure for loans
Introducing web-based management support services
Reducing waiting and processing time at branches
through visit reservation service
Holding a variety of online seminars

Support to solve issues utilizing consulting function
Support for corporate customers

The specialists at headquarters and the staff at branches
work together to identify and assess the customers’issues related to the COVID-19 pandemic, making
all-out effort to provide support to customers taking on
issues.
Fully utilizing the Group’s comprehensive financial
service function, we provide consultation for businessmatching, business succession, and others to reduce
customers’ numerous worries.

Major digitalization support for customers

Holding online seminars to support digitalization
Consulting and support for introduction anddevelopment of apps through business partnerships
Direct support for customers’ digitalization andstreamlining of operations by our IT specialists

Employees’ efforts to contribute to communities
We provide support to community activities throughvolunteer activities including environment conservation
activities, cleanup in the communities, participation in
events such as festivals, and collection of recyclable
resources.

Online seminar

Support for individual customers

We provide consultation to customers having trouble
paying back loans including home mortgage loans due
to reduced income under the influence COVID-19.
We provide not only suggestions for asset
management but a wide range of consulting services forlife-planning such as inheritance, asset succession, andreal estate, while increasing contact points withcustomers during the COVID-19 pandemic, using online
seminars and online interviews among others.

Cooperation for vaccination
Cleanup volunteer activities

Donations
When communities suffer serious damage due to natural
disasters, we make relief donations to local governments
to help support the relief of those affected by thedisasters and the recovery and reconstruction of theaffected areas.
When the area was struck by Typhoon Hagibis in
2019, we made donations to Ibaraki, Tochigi, and35

Mebuki Financial Group, Inc.

Fukushima prefectural governments. During the
COVID-19 pandemic, in order to support medical
professionals who are responding at the forefront while
facing risk of infection, we made donations collectedfrom executives and employees to Ibaraki and Tochigi
prefectures as support money for medical institutions.

Providing a vaccination venue

To support vaccination for community residents, wework together with Ibaraki Prefecture and municipalities
in the prefecture. For example, we offered, as a
vaccination venue, the clubhouse at Joyo Bank Hirasu
Sports Ground to Mito City free of charge, which served
as one of its mass vaccination venues.

Workplace vaccination and introduction of special leave
To ensure the safety of employees and their family
members as well as to assure the safety of customers,
we implemented workplace vaccination for employees
seeking to get vaccinated. In addition, special leave wasintroduced so that employees can take leave for
vaccination and post-vaccination side effects.

Vaccination venue provided by the Group

Annual Report 2021

36

Governance of Mebuki Financial Group
Details of the Company’s organizations

Basic approach to corporate governance(Board of Directors)

A commitment to management characterized byresponsibility, and sound, appropriate business
operations will earn greater trust for the Group from all
stakeholders - customers, shareholders, local
communities and employees - and boost corporate
value. By following the approaches listed below, we areworking to strengthen and improve corporate
governance.

 e respect shareholders’ rights and ensure equality.
WWe consider the benefits of stakeholders, including
shareholders, and cooperate appropriately withstakeholders.
We disclose company information appropriately andensure transparency.
We ensure the effectiveness of a transparent, fair,
prompt and decisive decision-making function andsupervisory function of the Board of Directors on
business operation by utilizing independent outside
directors.
We work to communicate with shareholders
constructively about the continuous growth andimprovement of medium-to-long term corporate values.

Corporate governance structureof the Board of Directors in which the Group’s
knowledge and expertise are concentrated, while
ensuring the transparent and fair decision-making
function and the solid audit and supervisory function
through the appointment of multiple outside directors.

The Company has adopted a company with an Audit
and Supervisory Committee as a corporate governancesystem, which allows us to realize prompt and decisivedecision-making and business execution by entrusting
many of the decision-making authorities relevant tobusiness execution to directors as constituent members(Mebuki Financial Group’s corporate governance structure)
General Meeting of Shareholders

Audit and Supervisory
Committee Office

Management
Meeting

ALM/Risk Management
Committee

Compliance
Committee

Directly-owned
subsidiaries

SDGs
Committee

Cooperate

Group Strategy
Committee

Joyo Bank

Audit

Appoint/Dismiss

Audit

Internal Audit
Section(Audit Department)

System Management Regional Revitalization
Department
Department

Audit

Report/Request consultation

Ashikaga Bank Mebuki Lease Mebuki Securities Mebuki Credit Mebuki Card

Guarantee(Company with Audit and (Company with Audit andSupervisory Committee) Supervisory Committee) (Company with Auditors) (Company with Auditors) (Company with Auditors) (Company with Auditors)
Guide/Manage/
Guide/Manage/
Supervise
Supervise
Report/Report/Request consultation Request consultation

The Board of Directors decides basic corporate policies
and important business matters and supervises theexecution of duties by directors. We aim to realize
prompt and decisive decision-making and businessexecution by entrusting most decision-making
authorities relevant to business execution to directors asconstituent members of the Board of Directors in which
our Group’s knowledge and expertise are concentrated,while ensuring a transparent and fair decision-making
function and a solid supervisory function through theappointment of multiple outside directors that haveexperience as corporate managers, lawyers, andacademic experts.
The Board of Directors meets monthly in principle.

Board of Directors
5 outside directors(including 1 female
outside director)

12
members(Audit and Supervisory Committee)
The Audit and Supervisory Committee audits theexecution of duties by directors and determines thedetails of proposals related to the appointment,
dismissal, and non-reappointment of accounting
auditors to be submitted to the General Meeting of
Shareholders.
The Audit and Supervisory Committee meets monthly
in principle.

Audit and Supervisory Committee
3
3 outsideoutside directors
directors

5
5
members
members(Corporate Governance Committee)

Cooperate

Guide/Manage/Supervise

Indirectly-owned
subsidiaries

Audit and Supervisory
Committee

Board of Directors

Corporate Planning Corporate Management Business Management
Department
Department
Department

37

Appoint/Dismiss

Consult/
ReportAccounting Auditor

Mebuki Financial Group

Appoint/Dismiss

Corporate GovernanceCommittee

Governance of Mebuki Financial Group

Governance of Mebuki Financial Group┃ Corporate Governance

We have established the Corporate GovernanceCommittee as an advisory board to the Board of
Directors to ensure the objectivity and transparency ofmatters regarding the compensation for and theappointment of directors. Matters regarding thenomination of director candidates and the compensation
for directors are decided by the Board of Directors upondeliberation by the Corporate Governance Committee.
The Corporate Governance Committee is chaired byan outside director, and the majority of its members arealso outside directors including the outside directors ofsubsidiary banks. In FY2020, the meetings of the
Corporate Governance Committee were held six times.

Corporate Governance Committee
5
5 outsideoutside directors
directors

9
9members
members
1
1 outsideoutside director
directorofof Joyo
Joyo Bank
Bank andand1
1 outsideoutside director
directorofof Ashikaga
Ashikaga BankBank

[Main matters for deliberation]
Audit

Compensation and bonuses for directors
Evaluation of the effectiveness of the Board of Directors
Status of dialogue with shareholders
Election of director candidates, etc.

5 subsidiaries

Mebuki Financial Group, Inc.

2 subsidiaries

Annual Report 2021

38

Governance of Mebuki Financial GroupWe have established the Management Meeting, the
ALM/Risk Management Committee, the Compliance
Committee and the SDGs Committee as bodies todiscuss and decide important matters regarding
business execution based on the decisions made by the

Board of Directors. Each decision-making body reports
the status of deliberation and decisions regarding
business execution to the Board of Directors, and issupervised by the Board of Directors.

Decision-Making
BodiesOverview

Management
Meeting

The Management Meeting is responsible formaking decisions on business execution to theextent of the authorities delegated by the Board of
Directors, as well as discussion on importantmatters regarding business execution.

All 5 Executive Directors
Both Executive Officers, a total of 7 members

ALM/RiskManagement
Committee

The ALM/Risk Management Committee is
responsible for making decisions on businessexecution relevant to group risk management and
ALM to the extent of the authorities delegated by
the Board of Directors and for considering anddiscussing important matters on businessexecution.

All 5 Executive Directors
Both Executive Officers
General Manager, Corporate Planning Department
General Manager, Corporate Management Department
General Manager, Basel Unit, Corporate Management
Department, a total of 10 members

Compliance
Committee

The Compliance Committee is responsible formaking decisions on business execution regarding
compliance to the extent of the authorities
delegated by the Board of Directors, andconsidering and discussing important mattersrelevant to the practice of compliance.

All 5 Executive Directors
Both Executive Officers
General Manager, Corporate Planning Department
General Manager, Corporate Management Department
General Manager, Audit Department, a total of 10
members

SDGs
Committee

The SDGs Committee is responsible for making decisions
on business execution regarding promotion of sustainability
to the extent of the authorities delegated by the Board of
Directors, and considering and discussing importantmatters relevant to the promotion of sustainability. The
SDGs Committee meets semi-annually and as needed.

All 5 Executive Directors
Both Executive Officers
General Manager, Corporate Planning Department
General Manager, Corporate Management Department
General Manager, Regional Revitalization Department
Department, a total of 10 members

Composition

Evaluation of the effectiveness of the Board of Directors

The Board of Directors of the Company conducts analysis and evaluation of its effectiveness as a whole each year, in order toutilize the results of such evaluation to improve the operations of the Board of Directors, by confirming the opinions of eachdirector on such matters as the composition and operation of the Board of Directors.

<Evaluation method>

Regarding the FY2019 evaluation, opinions were exchangedon the evaluation method and the contents of thequestionnaire at the executive session comprising all outside
directors of the Company and its subsidiary banks, as was
the case in the previous fiscal year.
Based on this discussion, questionnaires on thecomposition and operations of the Board of Directors andother matters were distributed to all directors, and replies<Evaluation results>

The Board of Directors of the Company has confirmed that
directors with diverse knowledge and experience have been
elected and the composition is well balanced; all directors,
upon sharing the roles and responsibilities of the Board of
Directors, have successfully fulfilled both decision-making
and supervising functions while taking advantage of theperspective of independent outside directors; and thus theeffectiveness of the Board of Directors as a whole has beenmostly assured.

and comments were obtained. With regard to the results ofthe evaluations based on these replies and comments, theBoard of Directors of the Company, upon deliberation by the
Corporate Governance Committee (with outside directors
accounting for the majority of its members), finalized anddetermined the results of analysis and evaluation of theeffectiveness of the Board of Directors as a whole.

The initiatives for enhancing the quality of discussions
resulted in continued improvements in the issues identified by
the previous evaluation, specifically in “Improvement of the
discussions by the Board of Directors” and “Utilization of theperspectives of independent outside directors”. However,based on each director’s assessment and opinions, werecognized that it is necessary to continue working towardfurther improvement.

<Future Measures>

The following matters were recognized as issues that weneed to continuously address in aiming for the sustainablegrowth of the Group and the further improvement of its
corporate value in the medium- to long-term. By
implementing the necessary responses to these issues, ourGroup will strive to enhance the effectiveness of its corporate
governance structure.

1. “Improvement of the discussions by the
Board of Directors”

Mebuki Financial Group, Inc.

(Directors)
The Board of Directors selects candidates for directors
who satisfy the selection criteria for directors based on
the deliberation at the Corporate GovernanceCommittee.

(Outside Directors)

2. “Utilization of the perspectives of
independent outside directors”

Selection criteria for candidates for outside directors

The Board of Directors selects candidates for outside
directors who meet the following selection criteria, in
addition to meeting the legal requisites for outside
directors. Two or more of such outside directors shall be
the persons who fulfill the independence standards foroutside directors of the Company.

(1) Shall be an appropriate person to supervise themanagement who has a wealth of experience as acorporate manager; is assuming a post as a legal,
accounting or financial expert or has equivalentknowledge and experience.
(2) Shall have personality and insight appropriate for an
outside director(3) Shall be able to secure time necessary to execute duties
as a director with integrity(4) Shall have no health- or business-related issues that may
prevent them from executing duties as an outside director.

Reasons for being selected as an outside director, concurrent positions and other statuses for each outside
director are as follows. The Group registered all of the five directors with the Tokyo Stock Exchange as
independent directors who do not have conflicts of interest with general shareholders.
Name

Reasons for selection

Hiromichi
Ono

Mr. Hiromichi Ono has accumulated a broad range of insight andabundant experience as a manager of a major food company. He
has been appointed as an Outside Director in the expectation that
he may provide appropriate guidance and advice for the overallbusiness operation of the Company by utilizing his insight andexperience as a corporate manager.

Outside Audit & Supervisory Board
Member, Tokyo Gas Co., Ltd.

YoshimiShu

Ms. Yoshimi Shu has accumulated abundant work experience aswell as experience and achievements as a senior manager at a
global financial institution. She also has insight and experience invarious aspects towards the development corporate leaders. She
has been appointed as an Outside Director in the expectation that
she may provide appropriate guidance and advice for the overallbusiness operation of the Company from a professional perspective.

Deputy President & Representative
Director, Core Value Management, Co.,
Ltd.

SatoruKawamata

Mr. Satoru Kawamata has accumulated abundant insight andexperience as a corporate manager and conducted his duties
appropriately as Outside Director (Audit and Supervisory Committee
Member) of The Joyo Bank, Ltd. from June 2018 to June 2020. He
has been appointed as an Outside Director who is an Audit andSupervisory Committee Member in the expectation that he may utilize
his insight and experience corporate manager to provide appropriate
guidance and advice in relation to the overall business managementof the Company.

—

Toru
Nagasawa

Mr. Toru Nagasawa has specialized knowledge and experience incorporate legal affairs as an attorney. He has been appointed as an
Outside Director who is an Audit and Supervisory Committee
Member in the expectation that he may provide appropriate
guidance and advice from a specialist’s perspective, especially
corporate legal affairs in relation to the overall business managementof the Company.

Representative Attorney, Nagasawa Law
Offices
Outside Director, Toho Holdings Co., Ltd.
Outside Corporate Auditor, Lancers, Inc.

Takashi
Shimizu

Mr. Takashi Shimizu has academic experience as well as specialized
knowledge and extensive experience in accounting. He has been
appointed as an Outside Director who is an Audit and Supervisory
Committee Member in the expectation that he may provide
appropriate guidance and advice from a specialist’s perspective,
especially accounting in relation to the overall business managementof the Company.

Professor, Graduate School of
Accountancy, Waseda University

 nhancement of discussions regarding managementEstrategy and providing value to stakeholders
Expression of opinion by directors beyond the boundary of
their duties

Improvement of information provision to outside directors
and facilitation of communication among outside directors
Enhancement of discussions at the Corporate GovernanceCommittee

39

Appointment of Directors
Governance of Mebuki Financial Group(Decision-Making Bodies)

Concurrent positions and other statuses

Annual Report 2021

40

(Policy for Determining Directors’ Compensation)

Under the Corporate Governance Policy set by the Board of Directors, the director’s compensation amount isdetermined separately for “directors (excluding Audit and Supervisory Committee Members)” and “directors (who are
Audit and Supervisory Committee Members)” as follows.
[Directors (excluding Audit and Supervisory
Committee Members)]
The compensation for directors (excluding Audit andSupervisory Committee Members) is determined
appropriately in consideration to their transparency,
fairness, objectivity and incentives toward improving
results by enhancing the linkage of compensation with
the Group’s performance and shareholders’ benefits.
The amount for each director (excluding Audit andSupervisory Committee Members) is determined by
the Board of Directors within the maximum amount ofcompensation per year resolved at the General
Meeting of the Shareholders, while ensuring theobjectivity and transparency after deliberation regarding
their adequacy and validity in the Corporate
Governance Committee.

[Directors (who are Audit and Supervisory
Committee Members)]
The compensation for directors (who are Audit andSupervisory Committee Members) is determined
without the factor of incentive to ensure thetransparency of their duties as auditor and supervisor.
The amount for each director (the Audit andSupervisory Committee Member) is determinedthrough discussion among all Audit Committee
Members and within the maximum amount ofcompensation per year resolved at the General
Meeting of the Shareholders.
The Company resolved the maximum amount ofcompensation for directors (excluding Audit andSupervisory Committee Members) at ¥200 million peryear (the number of eligible directors: 7 persons) and for
Audit and Supervisory Committee Members at ¥80
million per year (the number of eligible directors: 5
persons), at the Ordinary General Meeting of the
Shareholders held on June 28, 2016.

(Compensation System for Each Director)

41

Mebuki Financial Group, Inc.

(Procedure for Determining Directors’ Compensation)
In order to ensure the objectivity and transparency of
directors’ compensation, the compensation for directors(excluding Audit and Supervisory Committee Members)
is determined by the Board of Directors, and thecompensation for directors (who are Audit andSupervisory Committee Members) is determined by the
Audit and Supervisory Committee upon deliberation by
the Corporate Governance Committee.
Regarding determining the details of compensation foreach director, the Corporate Governance Committee
shall deliberate including the confirmation of the integrity
with the above policy and the related regulations.
Therefore, the Board of Directors shall in general respect
their proposals and judge them to be in line with policy.

The decision of the specific amount for each director
is delegated to Ritsuo Sasajima, the Representative
Director and President, by resolution of the Board of
Directors. This authority is the decision regarding specificamount of bonuses distributed to each director. The
reason for the delegation is that he is in a position tojudge the degree of contribution to the performance byeach director from a company-wide perspective.
Regarding this decision, the Corporate GovernanceCommittee shall deliberate including the confirmation of
the integrity with the above policy and the validity.
Therefore, the Board of Directors shall in general respect
his proposal and judge it to be in line with policy.

Matters discussed by the Corporate Governance Committee and the Board of Directors indetermining directors’ compensation (FY2020)
April 2020 Matter regarding total amount of directors’ bonuses
May 2020 Matters regarding individual distribution of directors’ bonuses and monthly compensation for directors

The compensation comprises 86% of monthly
compensation, 7% of bonus and 7% of restricted
stock compensation plan
(Case in which the standard amount of bonuses ispaid)(b) Details of each compensation
 onthly compensation
M
The basic amount of monthly compensation isdetermined by the director’s position.
Bonuses
The basic amount of bonuses is determined inaccordance with the director’s position and the total
amount of bonus payment is determined within amaximum amount which fluctuates each year in therange of 0% to 150% according to consolidated
profit level (indicator based on ROE). The amount foreach executive director is determined based on thebasic amount for the director’s position, which isadjusted according to the degree of contribution tobusiness performance by each executive director.
The indicator based on ROE has been adopted as aperformance indicator in order to give stronger
incentives to the directors to improve the Group’s
corporate value.
Restricted stock compensation plan
From FY2020, the Company introduced a new
restricted stock compensation plan to provide an
incentive to executive directors of the Company inorder to achieve sustainable improvement of theCompany’s corporate value and to allow them to[Directors (who are Audit and Supervisory Committee Members)]
The compensation for directors (who are Audit andSupervisory Committee Members) is comprised only ofa monthly compensation, which is a basic
compensation, and the amount is determined separately
for full time and part time directors.

(Corporate Governance Committee)[Executive Directors](a) Composition of compensation
The compensation for executive directors among thedirectors (excluding Audit and Supervisory Committee
Members) comprises a monthly compensation as abasic compensation, bonuses as a performancelinked compensation and a restricted stockcompensation plan as a non-monetary compensation.

[Outside Directors]
The compensation for outside directors (excluding Audit
and Supervisory Committee Members) is comprised onlyof a monthly compensation, which is a basic
compensation, and the amount is determined by the
director’s position.

Governance of Mebuki Financial Group

Governance of Mebuki Financial Group

Compensation for Directors

September 2020 Mater regarding the determination method of directors’ bonuses(Board of Directors)
 ay 2020 Matters regarding directors’ bonuses and revision of directors’ compensation regulation (introduction of a restrictedMstock compensation plan)J une 2020 Matters regarding determining monthly compensation amount, and provision of monetary compensation claims anddisposition of treasury shares for the restricted stock

share more values with our shareholders. Under thePlan, the Company’s Directors (excluding Audit andSupervisory Committee members; the “Eligible
Directors”) shall make payments in kind as
contributed assets using all of the monetarycompensation claims provided to them by theCompany and receive the issuance or disposal of
the Company’s common shares and the Company
and each of the Eligible Directors shall enter into a
restricted stock allocation agreement.
The compensation to be paid to the Eligible
Directors for the granting of restricted stock ismonetary compensation claims and the total amountof such claims is set at 20 million yen or less per
year within the amount of compensation for theCompany’s Directors (excluding Audit andSupervisory Committee Members), and the total
number of common shares newly issued by theCompany is set at 200 thousand shares or less per
year, as resolved at the Ordinary General Meeting of
the Shareholders held on June 24, 2020. The
allocation of payment to each Eligible Director isdetermined by the director’s position.

Annual Report 2021

42

Director(Outside Directors)
Outside Director
Hiromichi Ono
April 1979
March 2004
June 2007
June 2011
June 2017
June 2019
June 2020
June 2021

President and Director
Ritsuo Sasajima

Executive Vice President and Director
Kazuyuki Shimizu

June 2011

April 2012

Executive Officer and General
Manager, Corporate Planning Division,
The Joyo Bank, Ltd.
June 2013 Managing Director, The Joyo Bank,
Ltd.
October 2016 Director, in charge of Corporate
Planning, the Company
June 2017 Senior Managing Director, The Joyo
Bank, Ltd.
June 2018 President, the Company (current
position)
President, The Joyo Bank, Ltd.
(current position)

Executive Officer, The Ashikaga Bank,
Ltd.
April 2014
Executive Officer, Ashikaga Holdings Co.,
Ltd.
Executive Officer, The Ashikaga Bank,
Ltd.
April 2015
Managing Executive Officer, The
Ashikaga Bank, Ltd.
June 2016 Managing Director, The Ashikaga
Bank, Ltd.
October 2016 Director, the Company
June 2018 Senior Managing Director, The
Ashikaga Bank, Ltd.
June 2019 Executive Officer, the Company
June 2020 Executive Vice President, theCompany (current position)
President, The Ashikaga Bank, Ltd.
(current position)

Director
Yoshihiro Naito

Director
Tetsuya Akino
June 2016

Executive Officer and General
Manager, Personnel Division, The
Joyo Bank, Ltd.
October 2016 General Manager, Corporate
Management Department, theCompany
June 2017 General Manager, Corporate Planning
Department, the Company
Executive Officer and General
Manager, Corporate Planning Division,
The Joyo Bank, Ltd.
June 2018 Director, in charge of Corporate
Planning, the Company (current
position)Managing Director, The Joyo Bank,
Ltd.
June 2020 Director, Managing Executive Officer,
The Joyo Bank, Ltd. (current position)

April 2016
June 2019
June 2020

Executive Officer, The Ashikaga Bank,Ltd.
Managing Director, The Ashikaga
Bank, Ltd.
Director in charge of Corporate
Management, Risk Management andInformation Security, the Company(current position)
Director, Managing Executive Officer,
The Ashikaga Bank, Ltd. (current
position)

Outside Director
Yoshimi Shu

Joined Ajinomoto Co., Inc.
General Manager, Finance Department, Ajinomoto Co., Inc.
Corporate Executive Officer, Ajinomoto Co., Inc.
Member of the Board & Corporate Vice President in charge offinance and procurement, Ajinomoto Co., Inc.
Retired from the position as Member of the Board & Corporate
Vice President, Ajinomoto Co., Inc.
Outside Director, the Company (current position)
Outside Audit & Supervisory Board Member, Tokyo Gas Co., Ltd.
Outside Director, Tokyo Gas Co., Ltd. (current position)

Outside Director (Audit andSupervisory Committee Member)

Satoru Kawamata

June 2016

Executive Officer and General
Manager, Corporate Planning Division,
The Joyo Bank, Ltd.
October 2016 General Manager, Corporate Planning
Department, the Company
June 2017 Executive Officer and General
Manager, Business Promotion Division,
The Joyo Bank, Ltd.
June 2018 Managing Executive Officer andGeneral Manager, Business Promotion
Division, The Joyo Bank, Ltd.
Director (part-time), The Ashikaga
Bank, Ltd.
June 2020 Director, Managing Executive Officer,
The Joyo Bank, Ltd. (current position)
June 2021 Director, the Company (current
position)

Mebuki Financial Group, Inc.

Eiji MurashimaJune 2010

Executive Officer and General
Manager, Business Administration
Division, The Joyo Bank, Ltd.
June 2011 Executive Officer and General
Manager, Business Promotion
Division, The Joyo Bank, Ltd.
June 2012 Managing Executive Officer and Vice
Director-General of Business
Headquarters, The Joyo Bank, Ltd.
June 2013 Managing Director, The Joyo Bank, Ltd.
October 2016 Director in charge of Corporate
Management (Basel), the Company
June 2018 Senior Managing Director, The Joyo
Bank, Ltd.
June 2020 Retired from the position as Senior
Managing Director, The Joyo Bank, Ltd.
Director (Audit and Supervisory
Committee Member), the Company(current position)
Auditor, Mebuki Securities Co., Ltd.
(current position)
April 2021 Corporate Auditor, Mebuki Card Co.,
Ltd. (current position)

Takashi Shimizu

April 1984
April 1995

Registered as an attorney
Nagasawa Law Office (Currently, Nagasawa Law
Offices) opened, Representative Attorney (current
position)
October 2014 Outside Corporate Auditor, Lancers, Inc. (current position)
June 2015 Outside Director, Toho Holdings Co., Ltd. (current
position)
June 2016 Outside Director, Ashikaga Holdings Co., Ltd.
October 2016 Outside Director (Audit and Supervisory
Committee Member), the Company (current
position)

Joined Hitachi, Ltd.
Deputy Head, Hitachi Works, Hitachi, Ltd.
Head, Power and Electricity Group, Hitachi Works,
Hitachi, Ltd.
June 1999 Director, Head, Power and Electricity Group,
Hitachi Works, Hitachi, Ltd.
June 2001 Representative Director and President, Hitachi Life, Ltd.
June 2009 Advisor, Hitachi Life, Ltd.
June 2011 Honorary Advisor, Hitachi Life, Ltd.
March 2013 Retired from position as Honorary Advisor, Hitachi Life Ltd.
June 2018 Outside Director (Audit and Supervisory
Committee Member), The Joyo Bank, Ltd.
June 2020 Outside Director (Audit and Supervisory
Committee Member), the Company (current
position)

April 1995
April 1997

Lecturer, School of Commerce, Waseda University
Associate Professor, School of Commerce,
Waseda University
September 2000 Received Ph.D. in Commerce (Waseda University)
April 2002
Professor, School of Commerce, Waseda
University
August 2002 Visiting Researcher, University of California,
Berkeley (until August 2003)
April 2005
Professor, Graduate School of Accountancy, Waseda
University (current position)
October 2016 Outside Director (Audit and Supervisory
Committee Member), the Company (current
position)(List of Directors of subsidiaries)
Ashikaga Bank
(Outside Directors)

Directors

Chairman and Director

Kazuyoshi Terakado

Outside Director (Audit andSupervisory Committee Member)

Naoki Goto

Chairman and Director

Masanao Matsushita

Outside Director (Audit andSupervisory Committee Member)

Shoji Fukui

President and Director

Ritsuo Sasajima

Outside Director (Audit andSupervisory Committee Member)

Zenichiro Ishibashi

President and Director

Kazuyuki Shimizu

Outside Director (Audit andSupervisory Committee Member)

Seiichi Suzuki

Director and Senior Managing
Executive Officer

Hidebumi Nishino

Outside Director (Audit andSupervisory Committee Member)

Tomoko Ogura

Director and Senior Managing
Executive Officer

Eisuke Suzuki

Outside Director (Audit andSupervisory Committee Member)

Yoshikatsu Sugiyama

Director and Managing
Executive Officer

Hitoshi Takenouchi

Director and Managing
Executive Officer

Yoshihiro Naito

Director and Managing
Executive Officer

Tetsuya Akino

Director and Managing
Executive Officer

Hideto Usui

Director and Managing
Executive Officer

Yuji Gorai

Director and Managing
Executive Officer

Hiroyuki Kimura

Director and Managing
Executive Officer

Kiyoshi Nozaki

Director and Managing
Executive Officer

Koichi Yamakawa

Director (part-time)

Takahiro Morikawa

Director (part-time)

Toshihiko Ono

Yoshihiko Yoshihara

Director (Audit and Supervisory
Committee Member)

Akihiko Kuwako

Director (Audit and Supervisory
Committee Member)

Director (Audit and Supervisory
Committee Member)

Outside Director (Audit andSupervisory Committee Member)

Toru Nagasawa

April 1968
June 1995
April 1999

Directors

Director
Kiyoshi Nozaki

August 2000 Joined JP Morgan Securities Japan Co., Ltd.
June 2006 Head of Tokyo Control Room, Compliance Department, JP
Morgan Securities Japan Co., Ltd.
May 2012
Managing Director, JP Morgan Securities Japan Co., Ltd.
October 2012 Head of Japan Controls & Oversight Department, JP Morgan
Securities Japan Co., Ltd.
January 2014 Retired from JP Morgan Securities Japan Co., Ltd.
February 2014 Joined Core Value Management, Co., Ltd.
November 2016 Deputy President & Representative Director, Core ValueManagement, Co., Ltd. (current position)
June 2019 Outside Director, the Company (current position)

Outside Director (Audit andSupervisory Committee Member)

Joyo Bank

43

Governance of Mebuki Financial Group

Governance of Mebuki Financial Group

List of Directors(Outside Directors)

Director (Audit and Supervisory
Committee Member)

Kunihiro Ono

June 2010

Executive Officer, General Manager, New
Accounting System Transition Promotion
Division, The Ashikaga Bank, Ltd.
October 2011 Executive Officer, The Ashikaga Bank,
Ltd.
June 2012 Director, The Ashikaga Bank, Ltd.
June 2013 Director, Ashikaga Holdings Co., Ltd.
June 2016 Retired from the position as Director,
The Ashikaga Bank, Ltd.
October 2016 Director (Audit and Supervisory
Committee Member), the Company(current position)
June 2017 Corporate Auditor, Mebuki Lease Co.,
Ltd. (current position)
October 2020 Corporate Auditor, Mebuki Credit
Guarantee Co., Ltd. (current position)

Mebuki Lease
Director

Mebuki Securities
Director

Mebuki Credit Guarantee

Mebuki Card

Director

Director

Masaru Seki

President and Director

Fuminori Nakajima

President and Director

Kiyoshi Kato

President and Director

Mitsugu Hoshino

Senior Managing
Director

Yoshiaki Kosugi

Senior Managing
Director

Hiroshi Mori

Senior Managing
Director

Hiroyuki Sakurai

Senior Managing
Director

Takashi Hirano

Senior Managing
Director

Jun Ajima

Senior Managing
Director

Toshihisa Onizawa

Senior Managing
Director

Hiroo Shimada

Managing Director

Koji Kazama

Managing Director

Hiroo Sugaya

Managing Director

Hiroshi Sagara

Director

Jun Hikichi

Managing Director

Teruo Yamaguchi

Director

Katsuhiro Noda

President and Director

Corporate Auditor

Corporate Auditor

Corporate Auditor

Yasuhiro Katada

Corporate Auditor

Hiroshi Matsumoto

Corporate Auditor(part time)

Kunihiro Ono

Corporate Auditor(part time)

Eiji Murashima

Corporate Auditor
Corporate Auditor(part time)

Kunihiro Ono

Corporate Auditor(part time)

Hiroshi Matsumoto

Corporate Auditor
Corporate Auditor(part time)

Eiji Murashima

Annual Report 2021

44

A1

The Company has adopted the structure of a company with an audit and supervisory committee as its corporate
governance system in order to enhance its corporate governance. We asked our outside directors about the
management challenges the Company is facing, their evaluation of the Group’s corporate governance practices, andthe roles they hope to play by utilizing their own experience.

Q&A

Q u e s t i o n s

Q1

Our external environment has been drasticallychanging recently due to factors such as thedeclining birthrate and aging population,
advancement of digitalization, and the prolonged
COVID-19 pandemic. Looking back over the
past year, how do you evaluate the Group’s
responses to the external environment (or risks),
management issues, and its governance?

What are your expectations and requests
for the Group for the future? What role can

Q2

you play as an outside director byharnessing your experience?

A1

Outside Director
Hiromichi Ono

During the past year, the Group worked hard toaddress its challenges and achieved certain
results. Specifically, the Group quickly improved
efficiency to respond to the shrinking market
due to the declining birthrate and aging
population; enhanced customer services byapplying new business models such as
information and expertise sharing; andpromoted digital transformation. In spite ofmany restrictions, the Group efficiently
addressed the challenges including the
expansion of the scope of business asmentioned above. It is no exaggeration to saythat the Group did everything that they shouldhave done over the past year.
I have carefully observed how the Board of
Directors maintains its governance while they
are promoting various business. I reviewed theagenda and the details of the items on it froman outside standpoint, and confirmed thateverything was openly discussed, appreciating
the transparency again.

A1

Outside Director
Yoshimi Shu

45

Mebuki Financial Group, Inc.

Outside Director (Audit andSupervisory Committee Member)
Satoru Kawamata

I appreciate the fact that the issues recognized
during the previous fiscal year have been
resolved earlier than we planned. The Group
promptly introduced innovations to provide
value to customers. These innovations include
promotion of reorganization and digitalization,
provision of consulting services, and support for
TCFD Recommendations.
When the Group was addressing thechallenges, they promptly replied to comments
and questions from outside directors. In
addition, they proactively disclosed informationthat was difficult to be noticed outside theCompany. In most cases, decision-making was
made through mutual trust after discussion in atense atmosphere (in the good sense), and ahigh level of governance was maintained.

A2

It is essential that the Group plants seeds for
growth looking to the future because sticking
only to the existing business may lead to credit
costs. I expect the Group to capture any
possible business opportunities on theassumption of coexistence and co-prosperity
with local communities. Close-following support
that helps facilitate the growth of local
companies is required in addition to contribution
to local communities.
Since I have engaged in financial affairs at a
manufacturing company and received services
from financial institutions, I have a high level ofunderstanding of customers’ reaction tofinancial institutions and the viewpoint ofinvestors. By using experiences gained throughduties of investor relations and SDGs, I intend
to contribute to the initiatives with which theGroup creates new business that expands
traditional banking.

Outside Director (Audit andSupervisory Committee Member)
Toru Nagasawa

A1

A2
In the future, the Group’s challenges will be how they
contribute to customers and local communities bydemonstrating their presence. To do this, the Groupneeds to make the most of their strengths such as
the solid customer base built through the trust fromlocal communities as well as broad and diverse
information accumulated through the network theGroup developed. The Group is faced with the needto redefine the meaning of the existence of banking.
In such an environment, the Group should use theirstrengths and resources to provide additional values
to their customers by offering expertise on
customers’ management as well as sharing
information and personnel while recognizing theimportance of the existing business. In particular, it
would be important to work together with customers
to help them address challenges related to businesssuccession and digital transformation.
To achieve this, I intend to involve myself inbusiness revitalization as a lawyer by using mydiverse experience of serving as an outside director
in different regions and different industries.

A1

Outside Director (Audit andSupervisory Committee Member)
Takashi Shimizu

A2

The Group should further expand the consulting
business in the future, and this would be what
the local communities expect. In addition, theGroup needs to play the roles of investor andcapitalist in the true sense of the word whilelooking ahead to the future. The Group should
discover the right companies for a new era andpromote the business that helps their future
growth more proactively than ever before while
supporting local small and medium companies.
I think this is the goal of the consulting businessthat the Group should pursue. To achieve this,
all the staff need to accumulate their expertise.
In addition, the Group will be required to focus
on human resource development and facilitate
the use of artificial intelligence.
I intend to propose ideas from the standpointof the economy of the Group’s main area of
business because I was born and raised in
Ibaraki. Using experience as a corporate
manager, I share my opinions to improve theGroup’s corporate value on the assumption oftransparency and fairness.

I have provided candid opinions on thetransformation in accordance with what financial
business is required to be in current and future
times as an outside director and from many
points of view. This includes the deployment ofproblem-solving financial service business. As aresult, I believe that close two-way
communication has been made between theexecutives and outside directors.
Rather than just reporting, the executives
always listened to outside directors’ opinions,and in many cases, they promptly implemented
directional corrections and new measures we
proposed. In addition, they quickly investigatedand checked on the matters queried orquestioned during the meetings and answered
us in a timely manner. I was impressed by theirsincere response. Overall, I believe transparent
and fair governance was maintained for the past
year.

A2

A2

Going forward, a new style of financial services
in local areas needs to be created. I expect theGroup to enhance consulting services they arefocusing on, and at the same time, improve theGroup’s capabilities so that they can provide
new services that corporate and individual
customers need, and are useful to and liked bythem.
I oversee the Group to ensure that they
continue to make efforts to be what the Groupdesires to be, steadily and effectively. I havebeen engaged in the cultivation of candidates
for management. In the Group, I havecommunicated the importance of corporate
philosophy to women leaders at “Mebuki
Women’s Class.” The Group is expected tocreate a working environment where people canexperience the pleasure of being involved in thecreation of a new financial institution. I intend tocontinue to support those initiatives.

As the external environment changes, traditional
values do, too. Under such conditions, I haveproposed different ideas that could help theGroup play the role of a financial institution
rooted in the local community. I highly
appreciate the Group achieved an increase inordinary profit for the past year through efforts
such as enhancement of consulting services,
despite the tough times when face-to-face sales
were limited. This achievement was owing to
the fact that the Group sincerely interacted withlocal small and medium companies by putting
themselves in the position of those companies.
This also helps differentiate the Group from IT
companies aiming to enter the financial industry.
Unexpected events may occur when theGroup is working on the Medium-Term Group
Business Plan and making efforts to be what it
desires to be. In such a circumstance, a strong
governance structure will help the Group work
together to address challenges. At the sametime, transparency and fairness allow us to gaincustomers’ trust. I continue to oversee theGroup from the aforementioned aspects.

The regional economy is exhausted, but at thesame time, some companies are responding to
new demand emerging due to the COVID-19
pandemic.
The Group needs to help the companies inneed get through the present situation as wellas provide the companies responding to new
demand with offers with which they cancontinue stable management after the
COVID-19 pandemic. This is the new way of
consulting services that I have been proposing
since the last year.
I believe the Board of Directors of the Group
have sincerely worked to address thosechallenges. They have always responded to theoutside directors’ opinions earnestly at themeetings of the Board of Directors. Even when
what is asked or suggested is out of the norm
for the financial industry, they answer thequestions, discuss measures, and provide
opportunities for further discussion. Their
willingness to strive for improvement has
impressed me very favorably.

Governance of Mebuki Financial Group

Governance of Mebuki Financial GroupInterview with Outside Directors

A2

Today’s economic environment is rapidlychanging. In such a situation, the Group needs
to create flexible plans and steadily respond toevents as they occur. If a company sticks too
closely to the original plan, the company
sometimes loses the right direction and fails toachieve the plan. At worst, wrongdoing occurs.
This has been shown by many cases of othercompanies.
My studies proved that the most powerfulstrategy to survive the ever-changing
environment is as follows: Set a numericaltarget, and at the same time, continuously makeforecasts by looking a little further into the
future. Then, to appropriately fill the gap
between the plan and the forecast, develop thebest action plan flexibly and implement it. While
keeping this in mind, I intend to proactively
involve myself in management to contribute to
the regional economy.

Annual Report 2021

46

The Group aims to enhance the risk management system by positioning it as an important management task from theperspective of the maintenance and improvement of sound corporate management.

Risk management system
The Group undertakes its risk management based on the Basic
Rules on Group Risk Management determined by the Board of
Directors of the Company.
In order to perform the matters set forth in the Basic Rules
on Group Risk Management, the Company has established the
ALM/Risk Management Committee, which makes decisions onimportant business execution regarding the Group’s risk
management and performs analysis, assessment andimprovement of the matters relevant to the risk management of
the overall Group. The said committee ensures corporate
management emphasizing the risk and return relationship
Board of Directors

Validate appropriatenessand effectiveness ofrisk management system

Audit and Supervisory Committee

ALM/Risk Management Committee
Integrated risk management section(Corporate Management Department)

Type of risk

Strategic Risk

Credit Risk

Market Risk

Decide on important business execution
Analysis, assessment and deliberation on matters for improvement

Operational Risk
Corporate Management
Department

Corporate Management Department

Audit

Capturing, measurement, assessment, and reportingof risk as a group

Liquidity Risk

Internal audit section (Audit Department)

Mebuki Financial Groupthrough consideration and discussion focused on closer
coordination between risk management and profit management
while controlling risks appropriately, and facilitates prompt andefficient decision-making by management.
Furthermore, we have organized the integrated risk
management section responsible for the supervision andintegrated management of various risks, and at the same time,
established the framework under which the audit section
independent from business execution sections performs internal
auditing and validates the appropriateness and effectiveness of
the respective risk management status.

System Management
Department

System Management
Department

Corporate Planning
Department

Instruct (establishment of risk management system) Mebuki Financial Group’ s Audit Division

conducts internal audits as well as auditsof companies within the Group.

Report/Consult (risk status, response policies)

Ashikaga Bank

Board of Directors
Important meeting bodies for risk management<Joyo Bank>(1) ALM Committee(2) Risk Management
Committee<Ashikaga Bank>(1) Management Meeting(2) ALM Meeting(3) Credit Portfolio Meeting

Audit and Supervisory Committee

Integrated risk management section(Risk Management Department)

Mebuki Lease

Mebuki Securities

Mebuki Credit
Guarantee

Mebuki Card

Board ofDirectors

Corporate Auditors

Type of risk

Strategic Risk

Type of risk

Credit Risk

Market Risk

Liquidity Risk

Sections in charge of respective risk categories
Branches, head offices and group companies(Integrated risk management)
The Group undertakes “integrated risk management” whichquantitatively measures various types of risk including credit risk
and market risk, using statistical methods, such as VaR (value
at risk), in order to individually manage increasingly diversified
and complicated types of risk relevant to financial services, andat the same time, to comprehensively capture said risks. We
aim at maintaining an appropriate level of our capital reserves
by comparing and contrasting the total amount of risk with ourfinancial soundness (our capital reserves).
Specifically, we allocate capital to each type of risk (credit
risk, interest rate risk, price fluctuation risk and operational risk)in advance to the extent of our capital reserves and monitor
whether the amount of each risk quantified (risk capital used)
stays within the extent of allocated capital. Upon the allocationof capital, we secure a risk buffer to cover losses larger thanthose expected in the statistical methods or risks unable to be
captured by the statistical methods. We confirm the sufficiencyof our capital reserves, including the capital to cover the
aforementioned risks, by performing stress tests by which we
capture the impact on our capital reserves under assumed

47

Audit

Integrated risk
management section

Mebuki Financial Group, Inc.

Operational Risk

Strategic Risk, Credit Risk,
Market Risk, Liquidity Risk,
Operational Risk
Sections in charge of respective risk categories

Audit

Internal audit section

Joyo Bank

scenarios such as a sudden economic downturn. Furthermore,
we confirm the reasonableness and effectiveness of thestatistical methods through back tests in which the risk amountcalculated by VaR (value at risk) is compared with actual profit
or loss.

(Credit risk management)
Credit risk refers to the risk of incurring losses as a result ofcustomers becoming unable to pay the principal and interest ofloans as promised primarily due to the deterioration of theirfinancial conditions.
Recognizing credit risk as a material risk in our business
operations, the Group aims to enhance the management
system to prevent the emergence of new non-performing loans
and to improve asset soundness.
Credit risk management system
The Group has established the Group Guidelines for Credit Risk
Management, which set forth, as our basic policy of credit risk
management, the appropriate management of credit risk on
individual loans and the management of the credit portfolio
focusing on risk diversification.

The section in charge of credit risk management, which isorganizationally and functionally independent from the businesspromotion sections, is responsible for the planning andoperational management of the internal credit rating system,
self-assessment systems, write-offs and provisions to thereserve for loan losses, as well as for the monitoring of loan
assets as the specialized organization for the comprehensive
supervision and management of the credit portfolio.
Management of credit risk on individual loans
We separate the credit-screening sections of companies within
the Group from the business promotion sections to ensure
strict screening while also focusing on credit management
during repayment to prevent the status of a claim fromdeteriorating.
Internal credit ratings
We categorize our customers into 12-grade rating levels byadding qualitative assessment to the data on their financial
condition and cash flow status. In addition to serving as thebasis for self-assessment systems, internal credit ratings areused across the full range of credit risk management, including
the capturing of credit risk exposure, the setting of lending rates
and the allocation of lending authority.
Asset self-assessment systems
Companies within the Group strictly implement asset selfassessment systems based on common standards and provide
appropriate reserves or write down problem loans based onsuch assessment. In addition, the reasonableness of suchassessment is validated and audited by the sections in chargeof validation and auditing, respectively, and is also subject toexternal audits by accounting auditors.
Quantification of credit risk
The quantification of credit risk refers to the statistical
forecasting of future losses (amount of credit risk) that can be
expected due to bankruptcies or the deterioration of financial
conditions of customers. The Group calculates the amount ofcredit risk for each customer based on “internal credit ratings”
with collateral and other factors taken into account.
Credit portfolio management
We capture loan assets in their entirety as a single portfolio andconduct credit risk management from a macro perspective.
Based on the quantification of credit risk, we carry out periodic
monitoring such as whether the credit risk is concentrated in
specific sectors or corporate groups, and analysis andevaluation of credit situations by rating and region, or based oncomposition by industry.

(Market risk management)
Market risk refers to the risk of incurring losses due to changes
in the value of financial assets and liabilities of the Group
caused by fluctuation in interest rates, foreign exchange rates,and stock prices.
Our subsidiaries are engaged in investment activities basedon their understanding of risk supported by sufficient advanceresearch and analysis of market transactions.
For the appropriate control of market risk, we also perform
and report to the ALM/Risk Management Committee of theCompany held periodically the quantitative management andmeasurement under the ALM (asset and liability management)
framework to take action according to the situation.

(Liquidity risk management)
Liquidity risk refers to the risk of incurring losses primarily due
to difficulty in securing necessary funds caused by an
unexpected outflow of funds or similar events, or a sharp rise infunding costs.
The Group has established the Group Liquidity Risk
Management Rules to set up the framework under which actionplans according to respective situations ranging from a normal
state to urgent cases are defined to promptly respond thereto.
Specifically, under cash flow management in a normal
situation, we manage indicators such as the trend of deposit/
loan balances and funding limits in addition to primary indicators(funding gap and liquid asset balance) to avoid an increase of
liquidity risk. Furthermore, we define and perform periodical
drills for action plans upon a liquidity crisis to enhance theeffectiveness in a crisis.

Governance of Mebuki Financial Group

Governance of Mebuki Financial Group┃ Risk Management System(Operational risk management)
Operational risk refers to the risk of incurring losses caused byinappropriateness in the Group’s business processes, activities
of directors and employees or system operations, or by external
events. The Group classifies and manages such risk according
to the following six categories: administrative risk, system risk,
compliance (legal) risk, personnel management risk, tangible
asset risk, and reputational risk.
Furthermore, the Group designates the sections responsible
for each of the aforementioned six categories, and also has thecomprehensive risk management section manage overall
operational risk.
Administrative risk
Administrative risk refers to the risk of incurring losses due to
directors, employees or external contractors neglecting precise
administration, causing incidents, or committing acts of fraud.
In the Group, the sections responsible for administrative risk
and the comprehensive risk management section responsible
for operational risk gather information on and analyze thecauses of administrative incidents occurring inside or outside
the Group to establish or revise administrative rules or enhancethe efficiency of administrative processes through theinformation system based on the results of such analysis. In
addition, the Group has the internal audit section validate theeffectiveness of the risk management system to establish theframework to detect or prevent administrative incidents.
System risk
System risk is the risk of incurring losses primarily due to thefailure of computer systems, erroneous computer operation, or
inappropriate computer use.
The Group has taken necessary measures to ensure thesafety and reliability of computer systems including failure
response exercises aiming to establish the framework for earlyrecovery from system failure, in addition to sufficient advance
testing upon the development or operation of systems, thecontinuous monitoring of operational status and duplexing
facilities.
Compliance (legal) risk, personnel management risk, tangible
asset risk and reputational risk
We also identify and assess risk through methods in line withrisk characteristics and take appropriate actions for: compliance(legal) risk, the risk of incurring losses mainly due to an illegal
act committed by directors and employees; personnel
management risk, the risk of incurring losses mainly due to an
act in violation of laws, regulations or agreements relevant toemployment, health or safety; tangible asset risk, the risk of
incurring losses due to damage to tangible assets caused bydisasters or defective management of buildings; andreputational risk, the risk of incurring losses due to thedeterioration of credit worthiness mainly attributable to
reputational damage caused by inappropriate actions taken by
the Group or the circulation of unfounded rumors.

Crisis management and business continuity
management
We have established the framework for the continuity or earlyrecovery of important business operations including therepayment of deposits, fund transfer and remittance uponfacing a crisis such as a natural disaster, system failure or
pandemic, as well as limiting human and physical damage tothe minimum extent possible.
Upon the occurrence of a crisis, we will establish emergency
response headquarters at the Company and directly-owned
subsidiaries to respond to such emergencies in cooperation
with each other. Furthermore, we continuously perform crisis
management exercises and review the business continuity plan
to enhance the effectiveness thereof upon facing a crisis.
Annual Report 2021

48

Measures for anti-money laundering, etc.

Mebuki Financial Group

Board of Directors

Audit and Supervisory Committee

Compliance Committee

Corporate Planning Department

Corporate Management Department

Regional Revitalization Department

System Management Department

Audit Department

Guide/Manage/Supervise
Consult/Report

Joyo Bank

Ashikaga Bank

Mebuki Lease

Mebuki Securities

Board of Directors

Mebuki Credit
Guarantee

Mebuki Card

Board ofDirectors

Corporate Auditors

Audit and Supervisory Committee

Key bodies in compliance<Joyo Bank>
Compliance Committee<Ashikaga Bank>
Compliance Meeting

Managing sections<Joyo Bank>
Corporate Risk Management Division<Ashikaga Bank>
Compliance Management Division

Key bodies in compliance
Compliance Committee

Group company management<Joyo Bank>
Corporate Planning Division<Ashikaga Bank>Management Planning Division

Supervise
Head Office and branches
Officer and staff in change ofmanagement and compliance

SuperviseGroup companies

Managing section<Mebuki Lease / Mebuki Credit Guarantee / Mebuki Card>
General Affairs Division<Mebuki Securities>
Administrative Compliance Division
Supervise
Head Office and business units/branches
Officer and staff in change ofmanagement and compliance

The Company has established a management system aimed at group-wide comprehensive management whichenables the Group to perform business operations under the appropriate compliance framework. We aim to enhance
the compliance framework by positioning compliance as one of the most material management tasks.

Organization and structure
We have established the Basic Rules on Group
Compliance as the Group’s highest standards forcompliance, and thereunder, other relevant rules andregulations systematically.
The Compliance Committee established within the
Company is responsible for decisions on compliancerelated important business execution of the Company
and the Group, and for analysis, assessment anddeliberation on matters for improvement relevant togroup-wide compliance.
Furthermore, we put compliance into practice through,among other factors, the establishment of the Legal andCompliance Group of the Corporate Management
Department as the managing and supervising section in
charge of group-wide compliance, the designation of theofficer responsible for the Corporate Management
Department, and the assignment of compliance staff ateach management organization within the Group.
Important matters regarding compliance at directlyowned subsidiaries are consulted on and reported to the
Corporate Management Department, which is
responsible for the guidance, management andsupervision thereof, pursuant to the Rules forManagement of Companies within the Group.

Compliance program
The Group establishes a compliance program as theaction plan to realize compliance. The companies within
the Group establish a program based on the Basic
Policy on Group Compliance Program developed
annually by the Company.
The status of the compliance program performed bycompanies within the Group is reported to and validated
by the Compliance Committee quarterly, and is also

49

Mebuki Financial Group, Inc.

subject to the annual overall assessment which isreflected in the next year’s program.
The status of the compliance program performed bycompanies within the Group is reported to and validated
by the Compliance Committee quarterly, and is also
subject to the annual overall assessment which isreflected in the next year’s program.

The Group acknowledges anti-money laundering andcombating the financing of terrorism (hereinafter “AML/
CFT”) as an important responsibility and one of theimportant management tasks based on calls made by
the international communities. Thus, we formulated the“Anti-Money Laundering and Combating Financing ofTerrorism Policy” to take measures for AML/CFT.
To ensure the effective implementation of AML/CFT forthe companies within the Group, we appoint the director
in charge of Corporate Management Department as theGroup head AML/CFT officer. In addition, each of theGovernance of Mebuki Financial Group

Governance of Mebuki Financial Group┃ Initiatives for Compliancecompanies within the Group appoints, among thedirectors, the head AML/CFT officer who is in charge ofrisk management of AML/CFT.
The companies within the Group formulate “AML/CFT
Programs” as an annual plan to enhance the risk
management of AML/CFT, based on the “Group’s Basic
Policy for Anti-Money Laundering” formulated by theCompany for each fiscal year. We verify the effectivenessand status of implementation of the programs toenhance the management system.

Severing connections with antisocial forces
The Group has established the basic policy against antisocial forces to stand firmly against and sever any connections
with antisocial forces which threaten the order and safety of civil society and hinder sound economic andsocial development.
Regarding severing connections with antisocial forces
Mebuki Financial Group, Inc. and its group companies will take the following initiatives to sever all connections with
antisocial forces.
1. We will respond to antisocial forces as an organization with a strong recognition of our social responsibility.
2. We will maintain close relationships with the police, the Center for Removal of Criminal Organizations and external
expert organizations including lawyers.
3. We will sever all connections with antisocial forces, including any transactions therewith.
4. We will decisively reject any and all unreasonable demands from antisocial forces and take legal action from both
civil and criminal perspectives.
5. We will never provide any funding or benefits to antisocial forces.

Our customer protection management system (Measures for Customer Protection)
Our Group has established the “Group Management
Policy for Customer Protection” to organize and ensure
the appropriate management system for customer
protection from the perspective of the protection andimprovement of convenience for all existing and future
customers of the Group, as well as for facilitating
finance.
Joyo Bank and Ashikaga Bank have established asupervising section in charge of consultation, complaints
and other communication from customers, and havealso entered into a basic contract for the implementationof dispute resolution procedures with the Japanese
Bankers Association, the designated dispute resolution
organization under the Banking Act, and with the Trust
Companies Association of Japan, the designateddispute resolution organization under the Trust BusinessAct and the Act on Engagement in Trust Business by
Financial Institutions, to utilize the financial ADR systemfor dispute resolution with customers through the
involvement of third parties.
The Company has defined the Declaration on Personal
Information Protection and various regulations withregard to handling of personal information, individual
numbers and specific personal information received from
customers (“Personal Information, etc.”) and thereby
takes proper measures for security control of Personal
Information, etc. The Company, Joyo Bank andAshikaga Bank have also set up customer inquiry
windows for consultation and complaints regarding
Personal Information, etc. in their custody. In addition,
they are members of the All Banks Personal Data
Protection Council, an authorized organization for theprotection of personal information under the Act on theProtection of Personal Information. The Council also
accepts complaints, and provides consultation on thehandling of Personal Information, etc.

┃ Internal Audit
The Company has established an audit department as
the section in charge of internal audits under the Boardof Directors, independent of the business execution andrisk management departments.
The audit department supervises internal audit
functions across the Group. In order to ensure theappropriateness of the Group’s business operations andthe health of assets, the audit department inspects theappropriateness and effectiveness of the internal audit
system by conducting internal audits on subsidiary banks
and the companies within the Group in accordance withthe “Internal Audit Rules” and the “Group’s Audit Plans”
defined by the Board of Directors.
The audit results are reported to the Audit andSupervisory Committee and the Representative Director

monthly, and to the Board of Directors every threemonths. In order to conduct appropriate audits, theGroup is making efforts to strengthen the cooperation
among the Audit and Supervisory Committee (including
corporate auditors of companies within the Group), theInternal Audit Section of the Company, and theaccounting auditor through close exchanges of views.
The Group strives to further improve its audit methods
by conducting risk-based audits in accordance with theinternational standards of internal audit (of IIA), improving
the expertise of auditors by encouraging them to acquirea national qualification of internal audit, and undergoing
quality assessment of audit by external institutions.

Annual Report 2021

50

Group Structure and Corporate Data
Group Structure (as of March 31, 2021)

Organization (as of June 24, 2021)

Group Structure and Corporate Data

(Holding company)

General Meeting of Shareholders
Accounting Auditors
Mebuki Financial Group, Inc.
Address

7-2, Yaesu 2-chome, Chuo-ku, Tokyo

Head Officeaddress(Mito Head Office) 5-5, Minami-machi 2-chome,
Mito, Ibaraki Prefecture(Utsunomiya Head Office) 1-25, Sakura 4-chome,
Utsunomiya, Tochigi Prefecture

Paid in capital

117.4 billion yen

Establishment

April 1, 2008 (Change of tradename: October 1, 2016)

Stock exchange listing Tokyo Stock Exchange

Compliance Committee(Directly owned subsidiary)

The Joyo Bank, Ltd.

The Ashikaga Bank, Ltd.

Founded July 30, 1935
Head Office 5-5, Minami-machi 2-chome, Mito, Ibaraki Prefecture
Paid in capital 85.1 billion yen
Network Domestic: 185 offices(153 branches, 32 sub-branches)
Overseas: 4 Representative Offices(Shanghai, Singapore, New York, Hanoi)
Number of 3,267
employees*
Credit ratings A+ (R&I)
A3 (Moody’s)

Founded October 1, 1895
Head Office 1-25, Sakura 4-chome, Utsunomiya, Tochigi Prefecture
Paid in capital 135 billion yen
Network Domestic: 143 offices(107 branches, 36 sub-branches)
Overseas: 2 Representative Offices(Hong Kong, Bangkok)
Number of 2,698
employees*
Credit ratings A+ (R&I)

Consult/
ReportBoard of Directors
Audit and Supervisory Committee

Management Meeting ALM/Risk Management Committee

Founded September 25, 1974
Head Office 4-12, Minami-machi 3-chome, Mito, Ibaraki Prefecture
Paid in capital 100 million yen
Network 11 offices(Head Office, 10 branches)
Number of 66
employees

Founded November 30, 2007
Head Office 4-12, Minami-machi 3-chome, Mito, Ibaraki Prefecture
Paid in capital 3 billion yen
Network 7 offices(Head Office, 3 branches, 3 resident offices)
Number of 66
employees(Audit)Audit Department
Oversight GroupOperational Audit Group(Regional revitalization)

Corporate Management
Department

Business Management
Department

System Management
Department

Regional Revitalization
Department

Management GroupManagement Group

Planning GroupIT Digital Strategy GroupAccounting Group
Executive Secretariat GroupTokyo OfficePublic Relations Office

Risk Management Group
Compliance and Legal Group
Personnel Group
General Affairs Group
Basel Unit

Regional Revitalization Group

Stock Information (as of March 31, 2021)
Capital and number of issued shares
Common stock

117,495,550,000 yen

Number of issued stock

1,179,055,218 sharesof which, common stock

1,179,055,218 shares

Name

Mebuki Securities Co., Ltd.

SDGs Committee(System management)

Major shareholders
Mebuki Financial Group

Mebuki Lease Co., Ltd.

Audit and Supervisory Committee Office(Corporate management) (Business management)

Corporate Planning
Department

A (R&I)

Cooperate

Group Strategy Committee(Business plan)

Number of employees 169
Credit ratings

Corporate GovernanceCommittee

Nomura Securities Co., Ltd.
The Master Trust Bank of Japan, Ltd. (Trust Account)
Custody Bank of Japan, Ltd. (Trust Account)
Nippon Life Insurance Company
Sompo Japan Insurance Inc.
STATE STREET BANK AND TRUST COMPANY 505223
Sumitomo Life Insurance Company
The Dai-ichi Life Insurance Company, Limited
Custody Bank of Japan, Ltd. (Trust Account 9)
MUFG Bank, Ltd.
Total

Joyo Bank
Number of Shareholding ratio toshares held the total number of(thousand shares) issued stock (%)

106,816
69,164
44,67734,48728,32523,026
21,65919,948
19,11817,780385,005

9.20
5.96
3.85
2.97
2.44
1.98
1.86
1.71
1.64
1.53
33.19

Name

Mebuki Financial Group, Inc.

Number of Shareholding ratio toshares held the total number of(thousand shares) issued stock (%)

722,910100.00Ashikaga Bank
Name

Mebuki Financial Group, Inc.

Number of Shareholding ratio toshares held the total number of(thousand shares) issued stock (%)

1,340,520

100.00

Mebuki Credit Guarantee Co., Ltd.
Founded December 21, 1978
Head Office 1-25, Sakura 4-chome, Utsunomiya, Tochigi Prefecture
Paid in capital 50 million yen
Network Two offices (Head Office and Mito Office)Number of 23
employees*Number of employees excludes employees seconded.
On April 1, 2021, Mebuki Financial Group acquired all shares of Joyo Credit Co., Ltd. and Ashigin Card Co., Ltd. Both companies merged and changed thesurviving company’s trade name to Mebuki Card Co., Ltd., which became a wholly owned subsidiary of the Group.

51

Mebuki Financial Group, Inc.

Annual Report 2021

52

Financial Data

Consolidated Balance Sheet
March 31, 2021

Consolidated Statement of Income

Mebuki Financial Group, Inc. and Consolidated Subsidiaries

Year Ended March 31, 2021

Millions of Yen
2021
2020

¥ 1,935,324
18,754
11,84915,632
1
4,076,146
11,342,541
16,15067,710218,875
109,693
19,316
17,814
1,920
23,029(69,658)(292)¥17,804,808$ 58,046,574
61,517105,233
112,245
17,79639,144,020
105,134,386
86,670606,6232,040,238
970,303
163,756
281,750
11,463237,944(740,678)(81)$206,279,759

LIABILITIES AND EQUITY
LIABILITIES:
Deposits (Notes 11 and 23)������������������������������������������������������������������������������������� ¥16,223,652
Negotiable certificates of deposit (Note 23)���������������������������������������������������������������
291,417
952,917
Call money and bills sold (Note 23)��������������������������������������������������������������������������
Payables under repurchase agreements (Note 11)����������������������������������������������������
130,255
620,749
Payables under securities lending transactions (Notes 11 and 23)�����������������������������
Trading liabilities�����������������������������������������������������������������������������������������������������
1,024
Borrowed money (Notes 11, 12, and 23)������������������������������������������������������������������
3,394,050
905
Foreign exchanges��������������������������������������������������������������������������������������������������
Bonds (Note 13)�����������������������������������������������������������������������������������������������������
—Due to trust account�����������������������������������������������������������������������������������������������
2,307
142,277
Other liabilities��������������������������������������������������������������������������������������������������������
Provision for bonuses for directors���������������������������������������������������������������������������
255
249
Liability for retirement benefits (Note 14)������������������������������������������������������������������
Provision for retirement benefits for directors������������������������������������������������������������
25
Provision for reimbursement of deposits�������������������������������������������������������������������
2,460
Provision for contingent losses��������������������������������������������������������������������������������
1,994
Provision for point card certificates��������������������������������������������������������������������������
466
Provision for losses on interest repayments��������������������������������������������������������������
11
Reserves under special laws������������������������������������������������������������������������������������
2
Deferred tax liabilities (Note 21)�������������������������������������������������������������������������������
35,403
Deferred tax liabilities for land revaluation (Note 8)����������������������������������������������������
8,626
Negative goodwill����������������������������������������������������������������������������������������������������
869
Acceptances and guarantees (Note 10)��������������������������������������������������������������������
26,340Total liabilities��������������������������������������������������������������������������������������������������� 21,836,262¥14,756,658
283,131
110,745
129,195
215,548
1,770
1,252,801
1,941
5,000
1,573
115,621
237
8,724
37
2,874
2,141
452
12
2
1,365
8,680
1,027
23,02916,922,573$146,555,130
2,632,501
8,608,107
1,176,651
5,607,493
9,255
30,659,893
8,178—
20,841
1,285,256
2,311
2,255
227
22,22318,0174,217
100
23319,81277,928
7,851
237,944
197,256,214

117,495
148,549248
547,270(5,970)1,061,387
1,341,745
1,463
5,157,916(52,267)

69,821(1,068)13,485(7,597)74,641
882,235¥17,804,808

1,337,073
3,507
121,930
50,7901,513,301
9,023,545$206,279,759

See notes to consolidated financial statements.

53

Thousands of
U.S. Dollars(Note 1)
2021

ASSETSCash and due from banks (Notes 3 and 23)�������������������������������������������������������������� ¥ 6,425,755
Call loans and bills bought (Note 23)������������������������������������������������������������������������
6,809
Monetary claims bought (Note 23)���������������������������������������������������������������������������
11,64912,425
Trading assets (Notes 4 and 23)������������������������������������������������������������������������������
Money held in trust (Note 5)������������������������������������������������������������������������������������
1,970
4,333,243
Securities (Notes 4, 10, 11, and 23)������������������������������������������������������������������������
Loans and bills discounted (Notes 7, 11, 23, and 27)����������������������������������������������� 11,638,376
Foreign exchanges (Note 7)�������������������������������������������������������������������������������������
9,594
67,153
Lease receivables and investments in lease (Note 22)�����������������������������������������������
Other assets (Notes 11 and 24)�������������������������������������������������������������������������������
225,854
107,412
Tangible fixed assets (Note 8)����������������������������������������������������������������������������������
Intangible fixed assets (Note 9)��������������������������������������������������������������������������������
18,127
Asset for retirement benefits (Note 14)���������������������������������������������������������������������
31,189
1,269
Deferred tax assets (Note 21)����������������������������������������������������������������������������������
Customers’ liabilities for acceptances and guarantees (Note 10)��������������������������������
26,340Allowance for loan losses����������������������������������������������������������������������������������������
(81,993)
Allowance for investment losses������������������������������������������������������������������������������
(9)
TOTAL�������������������������������������������������������������������������������������������������������������� ¥22,835,169

EQUITY (Notes 15 and 16):
Common stock�������������������������������������������������������������������������������������������������������
117,495
Capital surplus�������������������������������������������������������������������������������������������������������
148,531
Stock acquisition rights�������������������������������������������������������������������������������������������
161
Retained earnings���������������������������������������������������������������������������������������������������
570,981
Treasury stock��������������������������������������������������������������������������������������������������������
(5,785)
Accumulated other comprehensive income:�������������������������������������������������������������
Unrealized gains on available-for-sale securities (Note 6)�������������������������������������
148,013
388
Deferred gains (losses) on derivatives under hedge accounting (Note 24)��������������
Land revaluation surplus (Note 8)�����������������������������������������������������������������������
13,497
Defined retirement benefit plans (Note 14)����������������������������������������������������������
5,622
Total accumulated other comprehensive income��������������������������������������������
167,522
Total equity���������������������������������������������������������������������������������������������
998,906
TOTAL������������������������������������������������������������������������������������������������������������������������� ¥22,835,169

Mebuki Financial Group, Inc.

Mebuki Financial Group, Inc. and Consolidated Subsidiaries

Millions of Yen
2021
2020

INCOME:Interest income:Interest on loans and discounts��������������������������������������������������������������������������
Interest and dividends on securities��������������������������������������������������������������������
Interest on call loans and bills bought�����������������������������������������������������������������
Interest on deposits with banks��������������������������������������������������������������������������
Other interest income����������������������������������������������������������������������������������������
Trust fees���������������������������������������������������������������������������������������������������������������
Fees and commissions��������������������������������������������������������������������������������������������
Trading income������������������������������������������������������������������������������������������������������
Other operating income�������������������������������������������������������������������������������������������
Other income (Note 18)�������������������������������������������������������������������������������������������
Total income������������������������������������������������������������������������������������������������
EXPENSES:Interest expenses:
Interest on deposits�������������������������������������������������������������������������������������������
Interest on negotiable certificates of deposit��������������������������������������������������������
Interest on call money and bills sold�������������������������������������������������������������������
Interest on payables under repurchase agreements���������������������������������������������
Interest on payables under securities lending transactions�����������������������������������
Interest on borrowing and rediscounts����������������������������������������������������������������
Interest on bonds����������������������������������������������������������������������������������������������
Other interest expenses�������������������������������������������������������������������������������������
Fees and commissions��������������������������������������������������������������������������������������������
Other operating expenses����������������������������������������������������������������������������������������
General and administrative expenses (Note 19)��������������������������������������������������������
Provision of allowance for loan losses����������������������������������������������������������������������
Other expenses (Note 20)����������������������������������������������������������������������������������������
Total expenses���������������������������������������������������������������������������������������������
INCOME BEFORE INCOME TAXES���������������������������������������������������������������������������������
INCOME TAXES (Note 21):
Current������������������������������������������������������������������������������������������������������������������
Deferred�����������������������������������������������������������������������������������������������������������������
Total income taxes���������������������������������������������������������������������������������������NET INCOME���������������������������������������������������������������������������������������������������������������NET INCOME ATTRIBUTABLE TO OWNERS OF THE PARENT�������������������������������������������

Thousands of
U.S. Dollars(Note 1)
2021

¥108,277
45,864
16
1,558
426
38
52,833
4,252
2,254
59,347
274,870¥112,331
52,674
113
682
490
52
53,244
3,840
7,384
51,987
282,801$  978,118
414,312149
14,0823,850
351
477,269
38,414
20,363536,1102,483,019

1,600
40
(36)
166
445
1,414
18
2,325
14,1797,322
115,763
19,11660,314
222,670
52,199

5,361
68
956
2,026
1,364
2,213
132
4,325
14,7197,178
119,630
9,555
63,696231,227
51,573

14,457
365
(333)
1,503
4,024
12,780171
21,006
128,089
66,143
1,045,745
172,684
544,844
2,011,481
471,538

21,527(5,806)
15,72036,478¥ 36,478

17,264(2,061)
15,20336,370¥ 36,370

194,464(52,453)
142,010
329,528$  329,528

Yen

PER SHARE OF COMMON STOCK (Note 17):
Basic EPS��������������������������������������������������������������������������������������������������������������
Diluted EPS������������������������������������������������������������������������������������������������������������Cash dividends applicable to the year (Note 15)��������������������������������������������������������

¥31.45
31.43
11.00

U.S. Dollars¥31.14
31.12
11.00

$0.28
0.28
0.10

See notes to consolidated financial statements.

Consolidated Statement of Comprehensive Income
Year Ended March 31, 2021

Mebuki Financial Group, Inc. and Consolidated Subsidiaries

Millions of Yen
2021
2020

NET INCOME
OTHER COMPREHENSIVE INCOME (LOSS) (Note 25):
Unrealized gains (losses)on available-for-sale securities��������������������������������������������
Deferred gains (losses)on derivatives under hedge accounting�����������������������������������
Land revaluation surplus�����������������������������������������������������������������������������������������
Defined retirement benefit plans�����������������������������������������������������������������������������
Total other comprehensive gain (loss)����������������������������������������������������������������������COMPREHENSIVE INCOME(LOSS)���������������������������������������������������������������������������������
TOTAL COMPREHENSIVE INCOME(LOSS) ATTRIBUTABLE TO:
Owners of the parent����������������������������������������������������������������������������������������������

Thousands of
U.S. Dollars(Note 1)2021

¥ 36,478¥ 36,370$ 329,528

78,192
1,457—
13,21992,869¥129,347(53,220)(801)
0(2,831)(56,853)¥(20,483)

706,344
13,163—
119,418
838,925$1,168,453¥129,347¥(20,483)$1,168,453

See notes to consolidated financial statements.

Annual Report 2021

54

Consolidated Statement of Changes in Equity
Year Ended March 31, 2021

Consolidated Statement of Cash Flows

Mebuki Financial Group, Inc. and Consolidated Subsidiaries

Year Ended March 31, 2021

Mebuki Financial Group, Inc. and Consolidated Subsidiaries

Millions of Yen

BALANCE, APRIL 1, 2019�������������������������Cash dividends�����������������������������������
Net income attributable to owners of
the parent����������������������������������������
Decrease due to change in scope of
consideration�����������������������������������
Purchase of treasury stock������������������
Disposal of treasury stock�������������������
Reversal of land revaluation surplus�����
Net changes during the fiscal year�������
Total changes during the fiscal year����������
BALANCE, MARCH 31, 2020��������������������

Stock
Acquisition
RightsCommonStock(Note 14)

CapitalSurplus¥117,495¥148,545¥233

Retained
Earnings¥523,792(12,904)

TreasuryStock¥(2,026)

Accumulated Other Comprehensive Income
Unrealized Deferred Gains
Gains (Losses) (Losses) on
DefinedLand
on Available- Derivatives
under Hedge Revaluation Retirement
for-Sale
Benefit Plans
Surplus
Accounting
Securities¥123,042¥  (267)¥13,497¥(4,765)

Total¥131,507

36,370(56,865)(56,865)¥ 74,641(4,000)60
11(56,849)(37,311)¥882,235

Total

Total
Equity11¥117,495

4¥148,549

15
15
¥248

23,477¥547,270¥919,547(12,904)
36,370(4,000)
56

4

Total
Equity(3,944)¥(5,970)(53,220)(53,220)¥ 69,821

(801)
(801)
¥(1,068)(11)(11)¥13,485(2,831)(2,831)¥(7,597)

Millions of Yen

BALANCE, APRIL 1, 2020�������������������������Cash dividends�����������������������������������
Net income attributable to owners of
the parent����������������������������������������
Decrease due to change in scope of
consideration�����������������������������������
Purchase of treasury stock������������������
Disposal of treasury stock�������������������
Reversal of land revaluation surplus�����
Net changes during the fiscal year�������
Total changes during the fiscal year����������
BALANCE, MARCH 31, 2021��������������������

CommonStock(Note 14)

CapitalSurplus¥117,495¥148,549

Stock
Acquisition
Rights¥248

Retained
Earnings¥547,270(12,755)

TreasuryStock¥(5,970)

Accumulated Other Comprehensive Income
Unrealized Deferred Gains
Gains (Losses) (Losses) on
DefinedLand
on Available- Derivatives
under Hedge Revaluation Retirement
for-Sale
Benefit Plans
Surplus
Accounting
Securities¥ 69,821¥(1,068)¥13,485¥(7,597)¥ 74,641

36,47836,478(0)92,88092,880¥167,522

(0)
(0)
166
(11)
92,794
116,671¥998,906

Total

Total
Equity

(0)
185

(18)
(11)

¥117,495(18)¥148,531

(86)
(86)
¥161

23,710¥570,981¥882,235(12,755)

184¥(5,785)

78,192
78,192¥148,013

1,457
1,457
¥  38811
11¥13,497

13,21913,219¥ 5,622

Thousands of U.S. Dollar

CommonStock(Note 14)BALANCE, APRIL 1, 2020������������������������� $1,061,387
Cash dividends�����������������������������������
Net income attributable to owners of
the parent����������������������������������������
Decrease due to change in scope of
consideration�����������������������������������
Purchase of treasury stock������������������
Disposal of treasury stock�������������������
Reversal of land revaluation surplus�����
Net changes during the fiscal year�������
Total changes during the fiscal year����������
BALANCE, MARCH 31, 2021�������������������� $1,061,387

CapitalSurplus$1,341,914

Stock
Acquisition
Rights$2,247

Accumulated Other Comprehensive Income
Unrealized Deferred Gains
Gains (Losses) (Losses) on
DefinedLand
on Available- Derivatives
under Hedge Revaluation Retirement
for-Sale
Benefit Plans
Surplus
Accounting
Securities

Retained
Earnings

TreasuryStock$4,943,725(115,228)$(53,936) $ 630,729$(9,656)$121,822$(68,628) $ 674,268

329,528

(3)
1,672

(170)
$1,341,745

(108)
(783)
(783)
214,191$1,463 $5,157,916

52,199¥ 51,573$(14,023)
9,544
1,562
(158)
12,334(283)
18(1,697)(3,524)
(12)
(414)
(147)
14
(1)
(156,143)
5,975
6,588
0
(37,917)
346
3,207
(746)
(295,835)
1,466,994
8,286
2,171,248
16,01012,144
843,231405,201
6,555(1,035)556(5,000)734
158,380(7,785)
4,984
4,609,195¥4,661,394(16,197)
8,608
1,112
(158)
(3,521)283(46)(2,596)(1,821)
(20)
(379)
186
45
(4)
(166,292)
16,447
7,929
—
7,598
493
(1,833)705(220,057)
382,769973
199,723
15,583(5,061)(72,632)
13,395(9,641)
1,304(5,056)—
1,006
168,513(17,285)456
304,531¥ 356,104(126,680)
86,224
14,114(1,428)111,424(2,562)
165(15,333)(31,840)(111)(3,742)(1,331)129(13)(1,410,511)
53,97559,5183(342,527)
3,132
28,971(6,742)(2,672,405)
13,251,981
74,852
19,613,811
144,627
109,7097,617,272
3,660,356
59,220(9,358)5,031(45,167)
6,632
1,430,721(70,326)
45,027
41,636,817$42,108,355¥

471,538$7,969,605(115,228)
329,528(1)(170)

OPERATING ACTIVITIES:
Income before income taxes������������������������������������������������������������������������������������������������
Adjustments for:
Income taxes paid�������������������������������������������������������������������������������������������������������
Depreciation and amortization�����������������������������������������������������������������������������������������
Impairment loss����������������������������������������������������������������������������������������������������������
Amortization of negative goodwill�������������������������������������������������������������������������������������
Increase (decrease) in allowance for loan losses�������������������������������������������������������������������
Increase (decrease) in allowance for investment loss�������������������������������������������������������������
Increase (decrease) in provision for bonuses for directors��������������������������������������������������������
Increase in asset for retirement benefits����������������������������������������������������������������������������
Decrease in liability for retirement benefits�������������������������������������������������������������������������
Decrease in provision for retirement benefits for directors�������������������������������������������������������
Decrease in provision for reimbursement of deposits�������������������������������������������������������������
Increase (decrease)in provision for contingent losses�������������������������������������������������������������
Increase in provision for point card certificates���������������������������������������������������������������������
Decrease in provision for interest repayments����������������������������������������������������������������������
Gains on fund management�������������������������������������������������������������������������������������������
Financing expenses�����������������������������������������������������������������������������������������������������
Losses related to securities��������������������������������������������������������������������������������������������
Losses on money held in trust����������������������������������������������������������������������������������������
Foreign exchange losses (gains)��������������������������������������������������������������������������������������
Losses on disposal of fixed assets������������������������������������������������������������������������������������
Net decrease (increase) in trading assets���������������������������������������������������������������������������
Net increase (decrease) in trading liabilities�������������������������������������������������������������������������
Net increase in loans and bills discounted��������������������������������������������������������������������������
Net increase in deposits������������������������������������������������������������������������������������������������
Net increase in negotiable certificates of deposit������������������������������������������������������������������
Net increase in borrowed money (excluding subordinated borrowings)����������������������������������������
Net decrease in due from banks (excluding cash equivalents)���������������������������������������������������
Net decrease (increase) in call loans���������������������������������������������������������������������������������
Net increase (decrease) in call money�������������������������������������������������������������������������������
Net increase in payables under securities lending transactions�������������������������������������������������
Net decrease (increase) in foreign exchanges - assets�����������������������������������������������������������
Net increase (decrease) in foreign exchanges - liabilities���������������������������������������������������������
Net decrease (increase) in lease receivables and investments in lease����������������������������������������
Decrease in straight bonds - issuance and redemption�����������������������������������������������������������
Net increase in due to trust account���������������������������������������������������������������������������������
Proceeds from fund management������������������������������������������������������������������������������������
Payments for finance���������������������������������������������������������������������������������������������������
Other-net�����������������������������������������������������������������������������������������������������������������
Total adjustments�������������������������������������������������������������������������������������������������������
Net cash provided by operating activities���������������������������������������������������������������������������������

Millions of Yen
2021
2020

Thousands of
U.S. Dollars(Note 1)
2021

706,344
1,669
706,344$(52,267) $1,337,073

13,163
13,163$ 3,507108
108$121,930

119,418
119,418$ 50,790

839,033
839,033$1,513,301

(1)
(3)
1,502
(108)
838,249
1,053,939$9,023,545

See notes to consolidated financial statements.

55

Mebuki Financial Group, Inc.

Annual Report 2021

56

Notes to Consolidated Financial Statements
Year Ended March 31, 2021

Millions of Yen
2021
2020
INVESTING ACTIVITIES:
Purchases of securities�������������������������������������������������������������������������������������������������
Proceeds from sales of securities�������������������������������������������������������������������������������������
Proceeds from redemption of securities�����������������������������������������������������������������������������
Increase in money held in trust���������������������������������������������������������������������������������������
Decrease in money held in trust��������������������������������������������������������������������������������������
Purchases of tangible fixed assets�����������������������������������������������������������������������������������
Proceeds from sales of tangible fixed assets�����������������������������������������������������������������������
Purchases of intangible fixed assets���������������������������������������������������������������������������������
Other-net�����������������������������������������������������������������������������������������������������������������
Net cash provided by (used in) investing activities�����������������������������������������������������������������
FINANCING ACTIVITIES:
Repayments of subordinated borrowings����������������������������������������������������������������������������
Redemption of bonds with warrants attached����������������������������������������������������������������������
Purchase of treasury stocks�������������������������������������������������������������������������������������������
Proceeds from sales of treasury stocks������������������������������������������������������������������������������Cash dividends paid�����������������������������������������������������������������������������������������������������
Net cash used in financing activities���������������������������������������������������������������������������������
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS�������������������������������������NET INCREASE IN CASH AND CASH EQUIVALENTS���������������������������������������������������������������������
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR����������������������������������������������������������������
CASH AND CASH EQUIVALENTS, END OF YEAR (Note 3)��������������������������������������������������������������
NONCASH INVESTING AND FINANCING ACTIVITY:
Not applicable.
See notes to consolidated financial statements.

57

Mebuki Financial Group, Inc.

Thousands of
U.S. Dollars(Note 1)2021¥(1,104,133)
486,668
514,238(2,002)—(3,857)429(3,571)(161)(112,389)¥ (815,535)
483,205
493,125—
23,174(3,519)160(4,365)(151)
176,093$ (9,974,110)
4,396,282
4,645,334(18,085)—(34,844)
3,883(32,261)(1,460)(1,015,260)(30,000)—(0)
152(12,755)(42,603)22
4,506,424
1,916,659¥ 6,423,084—(33,297)(4,000)55(12,904)(50,146)(19)
482,0311,434,627¥1,916,659(271,003)
—
(5)
1,377
(115,228)(384,859)
203
40,708,440
17,314,000$58,022,440

Mebuki Financial Group, Inc. and Consolidated Subsidiaries

1. BASIS OF PRESENTATION
The accompanying consolidated financial statements of Mebuki Financial Group,
Inc. (the “Company”) and its consolidated subsidiaries (together, the “Group”)
have been prepared in accordance with the provisions set forth in the Japanese
Financial Instruments and Exchange Act and its related accounting regulations, inaccordance with the Enforcement Regulation for the Banking Act, and in accordance with accounting principles generally accepted in Japan (“Japanese
GAAP”), which are different in certain respects as to the application and disclosure requirements of International Financial Reporting Standards.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to the consolidated financial statements issued domestically in order to present them in a form which is morefamiliar to readers outside Japan. In addition, certain reclassifications have been
made in the 2020 consolidated financial statements to conform to the classifications used in 2021.
The consolidated financial statements are stated in Japanese yen, the currency of the country in which the Company is incorporated and operates. The
translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been made at the rateof ¥110.70 to $1, the approximate rate of exchange at March 31, 2021. Suchtranslations should not be construed as representations that the Japanese yenamounts could be converted into U.S. dollars at that or any other rate.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa. Consolidation — The consolidated financial statements as of March 31,
2021, include the accounts of the Company and its 14 significant subsidiaries.
The Joyo Business service Co., Ltd. was excluded from the scope of consolidation due to dissolution on September 30, 2020, and completion of liquidation
on March 10, 2021.
The Joyo Capital Partners Co., Ltd. was included in the scope of consolidation since The Joyo Bank, Ltd. (a wholly owned subsidiary of the Company) acquired all shares of Ibaraki Create Co., Ltd. and changed its trade name to The
Joyo Capital Partners Co., Ltd. on January 1, 2021.
Wing Capital Partners, Ltd. was included in the scope of consolidation since
The Ashikaga Bank, Ltd. (a wholly owned subsidiary of the Company) establishedthe wholly owned subsidiary on February 1, 2021.
The Company acquired all shares of Ashikaga Credit Guarantee Co., Ltd.
from Ashikaga Bank through a dividend in kind and changed the subsidiary’s
trade name to Mebuki Credit Guarantee Co., Ltd. on October 1, 2020.
Under the control and influence concepts, those companies in which theCompany, directly or indirectly, is able to exercise control over operations are fully consolidated.
All consolidated subsidiaries have a fiscal year ending on March 31, whichis the same as the fiscal year of the Company.
The consolidated financial statements as of March 31, 2021, do not include
the accounts of seven subsidiaries because the total assets, total income, net income, retained earnings, and accumulated other comprehensive income of thoseentities would not have had a material effect on the consolidated financial statements.
Investments in unconsolidated subsidiaries and associated companies werestated at cost. If the equity method of accounting had been applied to the investments in these companies, the effect on the accompanying consolidated financial
statements would not be material.
The consolidated financial statements as of March 31, 2021, do not apply
to the equity method of accounting of seven unconsolidated subsidiaries andseven associated companies because the net income, retained earnings, and accumulated other comprehensive income of those entities would not have had amaterial effect on the consolidated financial statements.
All significant intercompany balances and transactions have been eliminatedon consolidation. All material unrealized profit included in assets resulting fromtransactions within the Group is also eliminated.

Negative goodwill represents the difference between the cost of an acquisition and the fair value of the net assets of the acquired subsidiary at the date ofacquisition. Negative goodwill incurred before March 31, 2010, is amortized using the straight-line method over 20 years.
b. Business Combinations — Business combinations are accounted for using
the purchase method. Acquisition-related costs, such as advisory fees or professional fees, are accounted for as expenses in the periods in which the costs are
incurred. If the initial accounting for a business combination is incomplete by theend of the reporting period in which the business combination occurs, an acquirer shall report in its financial statements provisional amounts for the items forwhich the accounting is incomplete. During the measurement period, which shallnot exceed one year from the acquisition, the acquirer shall retrospectively adjust
the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition
date and that would have affected the measurement of the amounts recognized
as of that date. Such adjustments shall be recognized as if the accounting for thebusiness combination had been completed at the acquisition date. The acquirer
recognizes any bargain purchase gain in profit or loss immediately on the acquisition date after reassessing and confirming that all of the assets acquired and allof the liabilities assumed have been identified after a review of the procedures
used in the purchase price allocation. A parent’s ownership interest in a subsidiary might change if the parent purchases or sells ownership interests in its subsidiary. The carrying amount of noncontrolling interest is adjusted to reflect thechange in the parent’s ownership interest in its subsidiary, while the parent retains its controlling interest in its subsidiary. Any difference between the fair value of the consideration received or paid and the amount by which thenoncontrolling interest is adjusted is accounted for as capital surplus as long as
the parent retains control over its subsidiary.
c. Trading Assets and Trading Liabilities — Transactions for “trading purposes” (seeking to capture gains arising from short-term changes in interest rates,
currency exchange rates, market prices of securities, and other market-related
indices or from arbitrage between markets) are valued at market or fair value,and have been included in trading assets and trading liabilities on a trade-datebasis. Gains or losses on such trading transactions are reflected as trading income or trading expenses in the consolidated statement of income.
Among the trading assets and liabilities, securities and monetary claims arecarried at market value as of the consolidated balance sheet date. Derivatives,
including swaps, futures, and options, are valued assuming settlement on the
consolidated balance sheet date.
Trading income or trading expenses include interest received or paid during
the fiscal year. The year-on-year valuation differences of securities and monetaryclaims are also recorded in the above-mentioned accounts. As for the derivatives, assuming that the settlement will be made in cash, the year-on-year valuation differences are also recorded in the above-mentioned accounts.
d. Securities — Securities are classified and accounted for, depending on management’s intent, as follows:(1) Held-to-maturity debt securities, which are expected to be held to maturity
with the positive intent and ability to hold to maturity, are stated at amortizedcost using the straight-line method.
(2) Investments in unconsolidated subsidiaries that are not accounted for by
the equity method are stated at cost determined by the moving-average method.
(3) Available-for-sale securities are stated at fair value with unrealized gains
and losses, net of applicable taxes, reported in a separate component of equity. Securities whose fair values cannot be reliably determined are stated atcost determined by the moving-average cost method.
For other-than-temporary declines in fair value, securities are reduced to
net realizable value by a charge to income.

Annual Report 2021

58

e. Tangible Fixed Assets — Tangible fixed assets (except for leased assets) arestated at cost, less accumulated depreciation. Depreciation of tangible fixed assets owned by the consolidated banking subsidiaries is computed by the straightline method.
The range of useful lives is from 3 to 50 years for buildings and from 3 to
20 years for other tangible fixed assets.
Depreciation of tangible fixed assets owned by other subsidiaries is mainlycomputed by the declining-balance method in estimated useful lives.
Depreciation of leased assets from finance lease transactions that do notdeem to transfer ownership of the leased property to the lessee is computed using the straight-line method over the respective lease periods. The residual valueof leased assets is determined using the guaranteed residual value indicated on
the lease contracts where provided; otherwise, they have a nil residual value.
f. Intangible Fixed Assets — Amortization of intangible fixed assets is computed by the straight-line method. The cost of computer software obtained for internal use is amortized principally using the straight-line method over the estimateduseful lives of mainly five years.
g. Long-Lived Assets — The Group reviews its long-lived assets for impairment
whenever events or changes in circumstances indicate the carrying amount of anasset or asset group may not be recoverable. An impairment loss is recognized if
the carrying amount of an asset or asset group exceeds the sum of the undiscounted future cash flows expected to result from the continued use and eventual disposition of the asset or asset group. The impairment loss would bemeasured as the amount by which the carrying amount of the asset exceeds its
recoverable amount, which is the higher of the discounted cash flows from thecontinued use and eventual disposition of the asset or the net selling price at disposition.
h. Allowance for Loan Losses — The consolidated banking subsidiaries haveprovided an allowance for loan losses, which is determined based on management’s judgment and assessment of future losses based on the write-offs andprovisions standards. These systems reflect past experience of credit losses;
possible credit losses; business and economic conditions; the character, quality,and performance of the portfolio; value of collateral or guarantees; and otherpertinent indicators.
The quality of all loans performed by the business offices is reviewed by thecredit-related divisions in the headquarters, and then independently examined by
the Internal Audit division based on the self-assessment of asset quality standards.
The classification of borrowers (six categories: normal borrowers, borrowers
requiring caution excluding borrowers requiring monitoring, borrowers requiring
monitoring, potentially bankrupt, substantially bankrupt, legally bankrupt) are determined in accordance with self-assessment standards prescribed by the Groupto evaluate the credit losses on loans.
For claims on borrowers that have entered into bankruptcy, special liquidation proceedings, or similar legal proceedings (“legal bankruptcy”), or borrowersthat are not legally or formally insolvent, but are regarded as substantially in thesame situation (“virtual bankruptcy”), an allowance is provided based on theamount of claims, after the write-offs as stated below, net of the expectedamount of recoveries from collateral and guarantees.
For claims on borrowers that are not currently bankrupt, but are likely to become bankrupt in the future (“possible bankruptcy”), an allowance is provided in
the amount deemed necessary based on an overall solvency assessment of theclaims, net of the expected amount of recoveries from collateral and guarantees.
For claims on borrowers whose loans are classified as “restructured loans”
over a certain amount, for which future cash flows from the collection of principal
and interest are reasonably estimated, an allowance is provided for the difference
between the present value of expected future cash flows discounted at the contracted interest rate and the carrying value of the claims based on the discounted
cash flow method.

59

Mebuki Financial Group, Inc.

For other claims, an allowance is provided, mainly based on expected loan
losses for the next three years for claims requiring special caution (“requiring
monitoring”) in whole or in part among claims against borrowers requiring caution in future management, such as borrowers with unreasonable loan terms,
borrowers with questionable performance, borrowers with weak or unstable business conditions, or borrowers with unfavorable financial conditions (“requiringcaution”), and expected loan losses for the next one year for claims against borrowers other than requiring monitoring and claims against borrowers with goodbusiness conditions and no particular financial problems (“normal”). Expectedloan losses are computed using the average historical loan loss ratio of the past
one year to three years. Where necessary, the expected loan losses are modified
for possible future scenarios.
For collateralized or guaranteed claims of borrowers who are in “virtual
bankruptcy” or “legal bankruptcy,” the amount exceeding the estimated value ofcollateral or guarantees has been deducted as deemed uncollectible directly fromthose claims. As of March 31, 2021 and 2020, the deducted amounts were¥29,627 million ($267,639 thousand) and ¥34,329 million, respectively.
Other consolidated subsidiaries determine allowances for loan losses thatare provided for general claims at an amount based on the actual historical rateof loan losses and for specific claims (from potentially bankrupt customers andother.) at an estimate of the amounts deemed uncollectible based on the respective assessments.

p. Provision for Losses on Interest Repayments — Certain consolidated subsidiaries provide a provision for losses on interest repayments in an amountdeemed necessary based on estimated amounts to be repaid, taking into accounthistorical records of interest repayments on the portion of loans whose interest
rates exceeded the maximum interest rate stipulated by the Interest Limitation
Law.

i. Allowance for Investment Losses — Allowance for investment losses is provided at the amount deemed necessary to cover estimated possible losses oncertain type of nonmarketable investments.

t. Leases — As a lessor, finance leases that are not deemed to transfer ownership of the leased property to the lessee are recognized as investments in leases.
Income and expenses are recognized when lease receivables are collected
as for finance lease transactions that do not transfer ownership of the property.
As for finance lease transactions that do not transfer ownership of theleased property and which commenced prior to April 1, 2008, in line with thestipulations of Article 81 of the Guidance on Accounting Standard for Lease
Transactions the ASBJ Guidance No. 16, March 25, 2011), book value (after deduction of accumulated depreciation) of lease assets included in tangible fixed
assets and intangible assets as of the previous consolidated balance sheet date(March 31, 2008) was recorded as the initial balance of “Lease receivables andinvestments in lease.”j. Provision for Bonuses for Directors — Provision for bonuses for directors(including executive officers) is provided in the amount of the estimated bonuses
that are attributable to each fiscal year.
k. Retirement Benefits for Employees — The Group accounts for the liability
for retirement benefits based on the projected benefit obligations and the fair value of plan assets at the consolidated balance sheet date. The projected benefit
obligations are attributed to periods on a benefit formula basis. Actuarial gains
and losses and past service costs that are yet to be recognized in profit or loss
are recognized within equity (accumulated other comprehensive income) after
adjusting for tax effects and are recognized in profit or loss from the next year of
incurrence and the year of incurrence, respectively, by the straight-line method
over a period (mainly 10 years) no longer than the expected average remaining
service period of the employees.
l. Provision for Retirement Benefits for Directors — Provision for retirement
benefits for directors, which is provided for payments of retirement benefits to directors, is recorded in the amount deemed accrued at the fiscal year end datebased on the estimated amount of benefits.
m. Provision for Reimbursement of Deposits — Provision for reimbursementof deposits, which were derecognized as liabilities under certain conditions, isprovided for possible losses on future claims and is calculated based on the historical reimbursement experience.
n. Provision for Contingent Losses — Provision for contingent losses is provided for possible loan losses guaranteed by the credit guarantee corporations in
an amount deemed necessary based on estimated losses in the future, calculated using historical default rates after exclusion of contingent losses covered byother reserves.
o. Provision for Point Card Certificates — Provision for point card certificates,
which is provided for the future use of points granted to customers under credit
card points program, is calculated by converting the outstanding points into amonetary amount and rationally estimating and recognizing the amount that will
be redeemed in the future.

q. Reserves under Special Laws — Reserves under special laws is provided
for contingent liabilities incurred by an accident in relation to the sales and purchase or other transactions of securities, which is amounted to ¥2 million ($23
thousand) and ¥2 million as of March 31, 2021 and 2020, pursuant to Article
46-5-1 of the Financial Instruments and Exchange Act and Article 175 of the related cabinet order.
r. Stock Options — Compensation expense for employee stock options is recognized based on the fair value at the date of grant and over the vesting period
as consideration for receiving goods or services. In the consolidated balance
sheet, the stock option is presented as a stock acquisition right as a separate
component of equity until exercised.
s. Stock Issuance Costs — Stock issuance costs are charged to income as incurred.

u. Income Taxes — The provision for income taxes is computed based on thepretax income included in the consolidated statement of income. The asset andliability approach is used to recognize deferred tax assets and liabilities for the
expected future tax consequences of temporary differences between the carrying
amounts and the tax bases of assets and liabilities. Deferred taxes are measured
by applying currently enacted income tax rates to the temporary differences.
The Group files a tax return under the consolidated taxation system, whichallows companies to base tax payments on the combined profits or losses of theparent company and its wholly owned subsidiaries.
Pursuant to the transitional treatment of the paragraph 3 of “Practical Solution on the Treatment of Tax Effect Accounting for the Transition from the Consolidated Taxation System to the Group Tax Sharing System” (ASBJ Practical
Issues Task Force (PITF) No. 39, March 31, 2020), which is prescribed after the
institution of the “Act on Partial Revision of the Income Tax Act” (Act No. 8 of2020) which is the law revising the nonconsolidated tax system, the Group records the amounts of deferred tax assets and deferred tax liabilities on the related items in accordance with the provisions of the previous tax law, not applying
44 of “Partial Amendments to Accounting Standard for Tax Effect Accounting”(ASBJ Statement No. 28, February 16, 2018).
v. Translation of Foreign Currencies — Assets and liabilities denominated inforeign currencies are translated at exchange rates prevailing as of the consolidated balance sheet date.

w. Derivatives and Hedging Activities — Derivative financial instruments areclassified and accounted for as follows: (a) all derivatives, except those enteredinto for hedging purposes, are recognized as either assets or liabilities and measured at fair value, with gains or losses on derivative transactions recognized in
the consolidated statement of income, or (b) for derivatives used for hedging purposes, if the derivatives qualify for hedge accounting because of high correlationand effectiveness between the hedging instruments and the hedged items, gains
or losses on the derivatives are deferred until maturity of the hedged transactions(deferral hedge accounting).
The consolidated banking subsidiaries apply deferral hedge accounting
based on the rules of the Japanese Institute of Certified Public Accountants(“JICPA”) Industry Audit Committee Report No. 24, “Accounting and Auditing
Treatments on the Application of Accounting Standards for Financial Instrumentsin the Banking Industry,” for interest rate derivatives to manage interest rate risk
from various financial assets and liabilities, as a whole. Under these rules, the effectiveness of a fair value hedge is assessed by an identified group of hedge deposits, loans, and similar instruments and by a corresponding group of hedging
instruments, such as interest rate swaps in the same maturity category. Also,
under these rules, the effectiveness of cash flow hedges is assessed based on
the correlation between a base interest rate index of the hedged cash flow andthat of the hedging instrument.
The consolidated banking subsidiaries apply deferral hedge accounting
based on the rules of the JICPA Industry Audit Committee Report No. 25, “Accounting and Auditing Treatments for Foreign Currency Transactions in the Banking Industry,” to currency swaps and funding swaps used for the purpose ofcurrency exchange. Under the deferral hedge accounting, hedged items are
identified by grouping the foreign currency-denominated financial assets and liabilities by currencies and designating derivative transactions, such as currency
swap transactions and foreign exchange swaps, as hedging instruments. Effectiveness of derivative transactions, such as currency swap transactions and foreign exchange swap transactions, is reviewed by comparing the total foreign
currency position of the hedged items and the hedging instrument by currency.
One consolidated banking subsidiary applies individual deferral hedge accounting to offset the price fluctuation of the strategic shares that are classified
under available-for-sale securities, using stock forward contracts as hedged
items. The hedge effectiveness of derivative transactions is reviewed by comparing the changes in value of the hedged item and hedging instruments.
The consolidated banking subsidiaries apply individual deferral hedge accounting and exceptional accrual method for interest rate swap to some assets
and liabilities.
x. Cash and Cash Equivalents — Cash and cash equivalents in the consolidated statements of cash flows represent cash and due from banks in the consolidated balance sheets, excluding deposits with banks other than the Bank ofJapan, of the consolidated banking subsidiaries and exclude the time deposits of
the Company and the other consolidated subsidiaries.
y. Consumption Taxes — Consumption tax is excluded from transactions reported by the Group. However, nondeductible consumption tax on tangible fixed
assets is charged to income as incurred.
z. Per Share Information — Basic net income per share (EPS) of common
stocks is computed by dividing net income attributable to common shareholders
by the weighted-average number of shares of common stock outstanding for theperiod, retroactively adjusted for stock splits.
Diluted EPS reflects the potential dilution that could occur if securities were
exercised or converted into common stock. Diluted EPS of common stock assumes full conversion of the outstanding convertible notes and bonds at the beginning of the year (or at the time of issuance) with an applicable adjustment for
related interest expense, net of tax, and full exercise of outstanding warrants.

Annual Report 2021

60

Cash dividends per share presented in the accompanying consolidated
statement of income are dividends applicable to the respective years, including
dividends to be paid after the end of the year.
Significant Accounting Estimates
Accounting estimates recorded in the consolidated financial statements for thecurrent fiscal year that may have a material impact on the consolidated financial
statements for the following fiscal year are as follows:
Allowance for loan losses(i) Amount recorded in the consolidated financial statements for the current fiscal
year
Allowance for loan losses ¥81,993 million ($740,678)(ii) Information of the consolidated financial statements with regard to the accounting estimates(a) Calculating method
As calculation method is stated on “h. Allowance for loan losses” in NOTE
“2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,” the classificationof borrowers (six categories: normal borrowers, borrowers requiring caution
excluding borrowers requiring monitoring, borrowers requiring monitoring,potentially bankrupt, substantially bankrupt, legally bankrupt) are determined in accordance with self-assessment standards prescribed by theGroup to prepare for credit losses on loans. In determining the classificationof borrowers, the Group considers the projections for changes in the performance of the borrowers that are expected to be affected by COVID-19
spread and other factors. Allowance for loan losses is estimated in accordance with the credit risk by estimating the expected loss amount based on
the actual historical rate of loan losses for each classification of the borrowers determined as above.
(b) Significant assumptions
The classification of borrowers is determined by comprehensively considering various information such as the borrower’s past financial condition, therepayment history, the future forecasts, and other qualitative information of
the borrowers.
Since the future forecast information includes the impact of COVID-19
and can be significantly affected by changes in the external environment,
the Group evaluates the information based on certain assumptions basedon certain assumptions. Furthermore, the impact of COVID-19 is expected
to continue even after the end of the current fiscal year.
(c) Impact on the consolidated financial statements for the following fiscal year:
The assumptions used in determining the classification of borrowers are
uncertain, and changes in the situation of COVID-19 spread and the external environment that may affect the borrower’s future performance could
increase or decrease the amount of loss and have a material impact on the
consolidated financial statements.

61

Mebuki Financial Group, Inc.

New Accounting Pronouncements
Accounting Standards for Fair Value Measurement“Accounting Standard for Fair Value Measurement” (ASBJ Statement No. 30,
July 4, 2019)“Implementation Guidance on Accounting Standard for Fair Value Measurement” (ASBJ Guidance No. 31, July 4, 2019)“Accounting Standard for Financial Instruments” (ASBJ Statement No. 10(revised 2019), July 4, 2019)“Implementation Guidance on Disclosures about Fair Value of Financial Instruments” (ASBJ Statement No. 19 (2019 revised), March 31, 2020)(i) Overview
To improve the comparability with international accounting standards, “Accounting Standard for Fair Value Measurement” and “Implementation Guidance on Accounting Standard for Fair Value” (together, Accounting Standards
for Fair Value Measurement) were developed and provide the guidance on fairvalue measurement. The accounting standards for fair value measurement
are applied to the fair value of the followings.
• Financial instruments under “Accounting Standard for Financial Instruments”
In addition, “Implementation Guidance on Disclosures about Fair Valueof Financial Instruments” was revised and guidance for the breakdown bylevel of the fair value hierarchy of financial instruments has been introduced.
(ii) Scheduled date of application
The Group will apply these accounting standards from the beginning of the
fiscal year ending March 31, 2022.
(iii) Effects of application
The effect of applying these accounting standards is currently being examined.
Change to Presentation of Financial Information
The company has initially applied ASBJ Guidance No, 31 “Accounting Standard
for Disclosure of Accounting Estimates” (March 31,2020) to the consolidated financial statements as of the end and for the current fiscal year and included
notes regarding significant accounting estimates in the consolidated financial
statements. However, notes in the consolidated financial statements for the previous fiscal year have not been applied in compliance with paragraph 11, proviso
of transitional provisions.

3. CASH AND CASH EQUIVALENTS
The reconciliation of “Cash and cash equivalents” in the consolidated statementsof cash flows and “Cash and due from banks” in the consolidated balance sheets
as of March 31, 2021 and 2020, was as follows:
Thousands of
U.S. Dollars
2021

Millions of Yen
2021
2020

Cash and due from banks������������������� ¥6,425,755 ¥1,935,324
Deposits with banks of the consolidatedbanking subsidiaries other than the
Bank of Japan�����������������������������������
(2,671)(18,664)
Cash and cash equivalents����������������� ¥6,423,084 ¥1,916,659$58,046,574(24,133)$58,022,440

4. TRADING SECURITIES AND SECURITIESThe amounts shown in the following tables include “Securities,” trading securities in “Trading assets,” and trust beneficiary right in “Monetary claims bought,”
as described in the consolidated balance sheet.
Valuation differences recognized as income and expenses as of March 31,
2021 and 2020, were as follows:
Thousands of
U.S. Dollars
2021

Millions of Yen
2021
2020

Trading securities��������������������������������

¥(8)

March 31, 2021

Thousands of
U.S. Dollars
2021

Millions of Yen
2021
2020

Japanese national government bonds���� ¥ 656,315 ¥ 585,117
Japanese local government bonds������ 1,027,789
944,224
Japanese corporate bonds�����������������
826,572
830,102
Japanese corporate stocks�����������������
269,909230,183
Other securities��������������������������������� 1,552,657 1,486,518
Total������������������������������������������������� ¥4,333,243 ¥4,076,146$ 5,928,775
9,284,454
7,466,775
2,438,207
14,025,809$39,144,020

The cost and aggregate fair value of available-for-sale securities andheld-to-maturity securities as of March 31, 2021 and 2020, were as follows:

March 31, 2021

Cost

Cost

Securities classified as:
Available-for-sale:���������������� ¥3,783,049 ¥163,035
Equity securities��������������� 139,131 99,299
Debt securities:���������������� 2,185,373 12,019
Japanese national
government bonds����� 504,654
3,921Japanese local
government bonds����� 940,366
3,616Japanese corporate
bonds������������������������ 740,353
4,481
Others:���������������������������� 1,458,544 51,717
Foreign bonds������������� 807,357 32,639
Others������������������������ 651,186 19,077
Held-to-maturity:������������������ 164,851
1,251Japanese national
government bonds����������
77,871
240
Japanese local
government bonds����������
499
0Japanese corporate
bonds����������������������������
86,479
1,011

$(78)

¥(14)

Securities as of March 31, 2021 and 2020, consisted of the following:

Millions of Yen
Unrealized Unrealized
Gains
LossesSecurities classified as:
Available-for-sale:���������������� ¥3,936,277 ¥229,723
Equity securities��������������� 126,326 142,514
Debt securities:���������������� 2,354,930
7,906Japanese national
government bonds����� 599,043
1,670Japanese local
government bonds����� 1,024,117
3,444Japanese corporate
bonds������������������������ 731,770
2,791
Others:���������������������������� 1,455,020 79,302
Foreign bonds������������� 923,848 40,812
Others������������������������ 531,172 38,489
Held-to-maturity:������������������ 153,263
963
Japanese national
government bonds����������
58,841
3
Japanese local
government bonds����������
599
0Japanese corporate
bonds����������������������������
93,822959

March 31, 2020

Fair Value¥18,944 ¥4,147,056
3,032
265,8075,424 2,357,413
3,239

597,473373

1,027,189

1,811
10,487
5,130
5,357
150

732,749
1,523,835
959,530
564,304
154,076

958,835

—

600

140

94,640Millions of Yen
Unrealized Unrealized
Gains
Losses

Cost

Fair Value¥63,862 ¥3,882,222
12,372226,057
2,799 2,194,593
1,328

507,246258

943,724

1,212
48,6908,304
40,38673743,622
1,461,571
831,693
629,878
166,028—

78,1110499

73

87,417

Thousands of U.S. Dollars
Unrealized Unrealized
Gains
LossesFair Value

Securities classified as:
Available-for-sale:���������������� $35,558,063 $2,075,187
Equity securities��������������� 1,141,156 1,287,397
Debt securities:���������������� 21,273,087
71,421
Japanese national
government bonds����� 5,411,411
15,087
Japanese local
government bonds����� 9,251,286
31,118Japanese corporate
bonds������������������������ 6,610,390
25,216
Others:���������������������������� 13,143,820 716,369
Foreign bonds������������� 8,345,511 368,674
Others������������������������ 4,798,309 347,695
Held-to-maturity:������������������ 1,384,494
8,705Japanese national
government bonds����������
531,539
32
Japanese local
government bonds����������
5,420
2
Japanese corporate
bonds����������������������������
847,534
8,670$171,136 $37,462,114
27,3972,401,156
48,997 21,295,511
29,263

5,397,236

3,370

9,279,034

16,364
94,741
46,343
48,3981,363

6,619,241
13,765,447
8,667,842
5,097,605
1,391,835

90

531,481

—

5,422

1,273

854,932

Annual Report 2021

62

Information for available-for-sale securities, which were sold during theyears ended March 31, 2021 and 2020, is as follows:

March 31, 2021

Millions of Yen
Realized
Realized
Proceeds
Gains
LossesAvailable-for-sale:
Equity securities������������������������������������� ¥ 24,696
Debt securities:�������������������������������������� 133,905
Japanese national government bonds���� 115,242
Japanese local government bonds������ 16,685
1,977Japanese corporate bonds������������������
Others:�������������������������������������������������� 265,981
Foreign bonds������������������������������������ 43,832
Others����������������������������������������������� 222,148
Total���������������������������������������������������������� ¥424,582

March 31, 2020¥   464
2,024
2,012
12
—
16,9391,821
15,117¥19,429

Millions of Yen
Realized
Realized
Proceeds
Gains
LossesAvailable-for-sale:
Equity securities������������������������������������� ¥ 20,482
Debt securities:�������������������������������������� 107,668
Japanese national government bonds���� 50,815
Japanese local government bonds������ 56,180
Japanese corporate bonds������������������
672
Others:�������������������������������������������������� 302,089
Foreign bonds������������������������������������ 82,318
Others����������������������������������������������� 219,770
Total���������������������������������������������������������� ¥430,240

March 31, 2021

¥13,763
19
12
3
4
8,958
229
8,728
¥22,741¥ 9,799
268
230
35
3
11,9522,821
9,131¥22,021¥ 1,215
851
797
53
—
21,1090
21,109¥23,176

Thousands of U.S. Dollars
Realized
Realized
Proceeds
Gains
LossesAvailable-for-sale:
Equity securities������������������������������������� $ 223,091
Debt securities:�������������������������������������� 1,209,621
Japanese national government bonds���� 1,041,030
Japanese local government bonds������ 150,726
Japanese corporate bonds������������������
17,865
Others:�������������������������������������������������� 2,402,721
Foreign bonds������������������������������������ 395,961
Others����������������������������������������������� 2,006,760
Total���������������������������������������������������������� $3,835,433$124,330
180
114
27
38
80,925
2,073
78,852$205,434$ 4,200
18,291
18,177
114—
153,022
16,457
136,566$175,513

Marketable available-for-sale securities, whose fair value significantly declined in comparison with the acquisition cost and whose fair value is not considered likely to recover to their acquisition cost, are written down and recognized
as impairment losses.
The impairment losses on marketable available-for-sale securities for theyears ended March 31, 2021 and 2020, were ¥6,253 million ($56,488 thousand) and ¥1,573 million, respectively.
Pursuant to “Practical Guidelines for Accounting for Financial Instruments”(JICPA Accounting Committee Report No. 14, April 14, 2015), the criteria for determining whether the fair value is “significantly declined” defined that securities
whose fair value has declined by 30% or more of the acquisition cost are
deemed to be impaired.
As of March 31, 2021 and 2020, securities included equity investments inunconsolidated subsidiaries and associated companies of ¥9 million ($84 thousand) and ¥9 million and capital subscriptions of ¥3,417 million ($30,876 thousand) and ¥3,070 million, respectively.

63

Mebuki Financial Group, Inc.

5. MONEY HELD IN TRUST
Money held in trust for trading purposes as of March 31, 2021 and 2020,
consisted of the following:
Millions of Yen
2021
2020

Amounts recorded in the consolidatedbalance sheets���������������������������������
Valuation gain (loss) included in the
consolidated statements of income����

Thousands of
U.S. Dollars
2021¥1,970¥1$17,796

(32)

—

(295)

6. UNREALIZED GAINS ON AVAILABLE-FOR-SALE SECURITIES
Unrealized gains on available-for-sale securities as of March 31, 2021 and2020, consisted of the following:
Millions of Yen
2021
2020

Unrealized gains:������������������������������� ¥211,592
Available-for-sale securities
211,592
Deferred tax liabilities:
63,578
Unrealized gains on available-for-salesecurities before adjustments byownership share������������������������������� 148,013
Noncontrolling interests����������������������
—Unrealized gains on available-for-salesecurities����������������������������������������� ¥148,013

Thousands of
U.S. Dollars
2021¥99,391
99,391
29,569$1,911,407
1,911,407
574,334

69,821—

1,337,073—¥69,821$1,337,073

As of March 31, 2021 and 2020, the total unrealized gains include an unrealized gain of ¥814 million ($7,357 thousand) and ¥218 million, respectively,
on available-for-sale securities contained in certain fund.

7. LOANS AND BILLS DISCOUNTED
The following loans were included in loans and bills discounted as of March 31,
2021 and 2020:
Millions of Yen
2021
2020

Loans to borrowers
in legal bankruptcy��������������������������� ¥  1,666
Past due loans
150,600
Loans past due for three months
or more��������������������������������������������
110
Restructured loans�����������������������������
27,382
Total������������������������������������������������� ¥179,759

Thousands of
U.S. Dollars
2021¥  2,279
138,147$   15,050
1,360,435

391
27,586¥168,405

1,002
247,359$1,623,846

The amounts above are stated before the deduction of the allowance forloan losses.
“Loans to borrowers in legal bankruptcy” are nonaccrual loans, which arehighly probable to become unrecoverable. Specific conditions for inclusion in thiscategory are as follows:(i) Borrowers have made application for procedures under the Corporate Reorganization Act, Civil Rehabilitation Act, Bankruptcy Act, liquidation under theCompanies Act of Japan (the “Companies Act”), or liquidation under other legal provisions.
(ii) Clearance of promissory notes or bills issued by the borrower is suspended.
“Past due loans” are loans on which accrued interest income is not recognized, excluding “loans to borrowers in legal bankruptcy” and loans on which interest payments are deferred in order to support the borrowers’ recovery fromfinancial difficulties.

“Loans past due for three months or more” include accruing loans for whichprincipal or interest is past due three months or more.
“Restructured loans” are loans to borrowers in financial difficulty to whom
the Group has provided financial support through modification of the lending
terms to be more favorable to the borrower, including reduction of interest rates,
suspension of repayment of principal and interest, and debt forgiveness.
Contracts of overdraft facilities and loan commitment limits are contracts
under which the consolidated banking subsidiaries and certain consolidated subsidiaries lend to customers up to the prescribed limits in response to customer
applications for loans as long as there is no violation of any condition in the contracts. As of March 31, 2021 and 2020, the amounts of unused commitments
were ¥2,969,415 million ($26,823,987 thousand) and ¥2,900,178 million, respectively. As of March 31, 2021 and 2020, the amounts of unused commitments whose remaining contract terms were within one year were ¥1,935,453
million ($17,483,770 thousand) and ¥1,983,104 million, respectively.
As many of these commitments expire without being drawn down, the unused amount does not necessarily represent a future cash requirement. Most ofthese contracts have conditions, whereby the consolidated banking subsidiaries
and certain consolidated subsidiaries can refuse customer applications for loans
or decrease the contract limits for certain reason (e.g., changes in financial situation and deterioration in customers’ creditworthiness). At the inception of thecontracts, the consolidated banking subsidiaries and certain consolidated subsidiaries obtain real estate, securities, or other assets as collateral if considered tobe necessary. Subsequently, the consolidated banking subsidiaries and certain
consolidated subsidiaries perform periodic reviews of the customers’ businessresults based on the internal rules and take necessary measures to reconsider
conditions in the contracts and/or require additional collateral and guarantees.
Discounting bills are treated as secured lending transactions. As of March
31, 2021 and 2020, consolidated banking subsidiaries have the right to sell or
repledge bills discounted and foreign exchange bills bought and their total facevalue was ¥25,158 million ($227,270 thousand) and ¥36,056 million, respectively.

8. TANGIBLE FIXED ASSETS

Under the “Law of Land Revaluation,” one banking subsidiary elected a
onetime revaluation of its own-use land to a value based on real estate appraisal
information as of March 31, 1998. The resulting revaluation reserve for land represents unrealized appreciation of land and is stated, net of income taxes, as acomponent of equity. There was no effect on the consolidated statement of income. Continuous readjustment is not permitted, unless the land value subsequently declines significantly such that the amount of the decline in value should
be removed from the revaluation reserve for land account and related deferred
tax liabilities. As of March 31, 2021 and 2020, the carrying amount of the land
after the above onetime revaluation exceeded the market value by ¥23,355 million ($210,981 thousand) and ¥24,041 million, respectively.

9. INTANGIBLE FIXED ASSETS
Intangible fixed assets as of March 31, 2021 and 2020, consisted of the following:
Millions of Yen
2021
2020

Software�������������������������������������������� ¥14,705
3,422
Other������������������������������������������������
Total������������������������������������������������� ¥18,127¥15,706
3,609¥19,316

Thousands of
U.S. Dollars
2021$132,841
30,916$163,756

10. CUSTOMERS’ LIABILITIES FOR ACCEPTANCES AND
GUARANTEESAll contingent liabilities arising from acceptances and guarantees are reflected in
acceptances and guarantees in the consolidated balance sheet. As a contra account, customers’ liabilities for acceptances and guarantees are presented asassets, representing the consolidated banking subsidiaries’ and certain consolidated subsidiaries’ rights of indemnity from the applicants.
Guarantee obligations for private placement bonds included in “Securities”(provided in accordance with the Article 2-3 of the “Financial Instruments andExchange Act”) as of March 31, 2021 and 2020, were ¥181,095 million($1,635,910 thousand) and ¥175,576 million, respectively.

Tangible fixed assets as of March 31, 2021 and 2020, consisted of the following:
Millions of Yen
2021
2020

Buildings������������������������������������������� ¥ 37,717
Land������������������������������������������������� 55,442
Leased assets������������������������������������
43
Construction in progress���������������������
511
Other������������������������������������������������ 13,697
Total������������������������������������������������� ¥107,412¥ 39,302
58,044
11
632
11,702¥109,693

Thousands of
U.S. Dollars
2021$340,715
500,836
395
4,618
123,740$970,303

The accumulated depreciation of tangible fixed assets as of March 31,
2021 and 2020, amounted to ¥126,085 million ($1,138,981 thousand) and¥125,697 million, respectively.
Under certain conditions, such as exchanges of fixed assets of similar kinds
and sales and purchases resulting from expropriation, Japanese tax laws permit
companies to defer the profit arising from such transactions by reducing the costof the assets acquired or by providing a special reserve in the equity section. Asof March 31, 2021 and 2020, such deferred profit amounted to ¥9,955 million($89,931 thousand) and ¥10,047 million, respectively. Newly recognizedamounts for the years ended March 31, 2021 and 2020, were ¥0 million ($0thousand) and ¥30 million, respectively.

11. ASSETS PLEDGED AS COLLATERAL
Assets pledged as collateral and the related liabilities as of March 31, 2021 and2020, were as follows:
Millions of Yen
2021
2020

Assets pledged as collateral:
Securities�������������������������������������� ¥2,521,026 ¥1,666,746
Loans and bills discounted������������� 2,474,394
119,578
Total��������������������������������������������� ¥4,995,420 ¥1,786,324
Related liabilities to above assets:
Deposits��������������������������������������� ¥ 198,809 ¥ 101,168
Payables under repurchaseagreements��������������������������������� 130,255
129,195
Payables under securities lendingtransactions��������������������������������� 620,749
215,548
Borrowed money��������������������������� 3,387,158 1,215,433

Thousands of
U.S. Dollars
2021$22,773,497
22,352,256$45,125,753$ 1,795,935
1,176,651
5,607,493
30,597,640

Additionally, securities amounting to ¥5,436 million ($49,114 thousand)and ¥5,470 million as of March 31, 2021 and 2020, respectively, were pledged
as collateral for settlements of exchange or as substitute securities for margins
on futures transactions.

Annual Report 202164

14. RETIREMENT AND PENSION PLANS

Moreover, other assets included the following:
Millions of Yen
2021
2020

Deposits for central counterparty�������� ¥94,710
Cash collateral paid for financial
9,155
instruments��������������������������������������Cash collateral paid for transactions
involving public funds�����������������������
2,063
Guarantee deposits����������������������������
1,759

Thousands of
U.S. Dollars
2021¥94,918$855,562

3,737

82,701

2,065
1,984

18,637
15,894

12. BORROWED MONEY
Borrowed money as of March 31, 2021 and 2020, consisted of the following:
Millions of Yen
2021
2020

Borrowed money of which theweighted-average annual interest
rates were 0.00%, due from April
2021 to June 2035�������������������������� ¥3,394,050 ¥1,252,801

Thousands of
U.S. Dollars
2021$30,659,893

Annual maturities of borrowed money as of March 31, 2021, for the next
five years were as follows:Year Ending March 31

Millions of Yen

Thousands of
U.S. Dollars

2022������������������������������������������������
2023������������������������������������������������
2024������������������������������������������������
2025������������������������������������������������
2026������������������������������������������������

¥3,195,212
81,34086,76330,329240$28,863,708
734,779
783,774
273,982
2,173

Borrowed money included borrowings from the Bank of Japan and other financial institutions. In addition, borrowed money included subordinated borrowings totaling ¥0 million ($0 thousand) as of March 31, 2021 and ¥30,000 million
as of March 31, 2020.

13. BONDS
Bonds of the following were redeemed on May 22, 2020.
Millions of Yen
2021
2020

Unsecured straight bonds issued by
Joyo, date of issue May 24, 2000, due
May 22, 2020, 2.64% interest�����������
Total�������������������������������������������������

¥—¥—¥5,000¥5,000Thousands of
U.S. Dollars
2021

$—
$—

(1) Outline of the adopted retirement benefit plans
The Company’s banking subsidiary, The Joyo Bank, Ltd. (“Joyo”), and its consolidated subsidiaries have adopted defined employees’ retirement benefit plans,i.e., the employees’ welfare pension fund supplemented by the employees’ public
pension system and lump-sum retirement benefits.
In addition, extra benefits that are excluded from the projected benefit obligation in employees’ retirement benefits accounting may be paid on a case-bycase basis. Joyo has established an employees’ retirement benefit trust.
The Company’s banking subsidiary, Ashikaga Bank, Ltd. (“Ashikaga”), andits consolidated subsidiaries have adopted funded and unfunded defined benefit
plans, as well as defined contribution plans to provide for the employees’ retirement benefits. All of the retirement benefit plans are managed in an integrated
manner through retirement benefit points that are determined based on years ofservice and capabilities of employees, as well as employee performance evaluation. The determined points are then allocated to each plan.
The defined benefit pension plans (funded plans) have introduced pension
plans similar to cash balance plan-type pension plans. Under the plan, each participant will set up a virtual individual account where pension or lump-sum payments will be made based on the accumulated retirement benefit points
allocated. A retirement benefit trust is established for this defined benefit pension
plan.
Under the lump-sum retirement benefit plans (unfunded plans that have become funded plans due to the establishment of a retirement benefit trust), lumpsum payments are made based on the accumulated retirement benefit points
allocated. In some cases, premium severance payments may be made to employees in conjunction with the employees’ retirement and other.
Under the defined contribution plans, the contribution amount is decided
based on the accumulated retirement benefit points allocated.
The Company’s consolidated subsidiaries are members of the defined benefit pension funds under the multiemployer plans, and as the amount of plan assets corresponding to the contribution of each subsidiary may be reasonably
calculated, such information is included in the notes to defined benefit plans.
Regarding the lump-sum retirement benefit plans adopted by certain consolidated subsidiaries, liability for retirement benefits and retirement benefit expenses are calculated by the simplified method.
(2) Defined benefit plans(a) The changes in defined benefit obligation for the years ended March 31, 2021
and 2020, were as follows:
Millions of Yen
2021
2020

Balance at beginning of year��������������� ¥120,372 ¥122,177
Current service cost�����������������������
3,649
3,778
Interest cost����������������������������������
432
374
Actuarial losses�����������������������������
2,775
261
Benefits paid���������������������������������
(6,301)(6,258)Others������������������������������������������
117
38
Balance at end of year����������������������� ¥121,046 ¥120,372

Thousands of
U.S. Dollars
2021$1,087,374
32,971
3,907
25,071(56,926)
1,064$1,093,462(b) The changes in plan assets for the years ended March 31, 2021 and 2020,
were as follows:
Millions of Yen
2021
2020

Balance at beginning of year��������������� ¥130,723 ¥132,585
2,527
2,572
Expected return on plan assets�������
Actuarial gains������������������������������ 20,158(4,361)
Contributions from the employer�����
3,435
3,551
(3,713)(3,661)
Benefits paid���������������������������������
Others������������������������������������������
36
38
Balance at end of year����������������������� ¥153,167 ¥130,723(c) The changes in liabilities for retirement benefits adopting the simplified method for the years ended March 31, 2021 and 2020, were as follows:
Millions of Yen
2021
2020

Balance at beginning of year���������������
Retirement benefit expense������������
Benefits paid���������������������������������
Contribution to the defined benefit
pension plan��������������������������������
Other��������������������������������������������
Balance at end of year�����������������������

¥1,261
326
(121)
(204)
(80)
¥1,181¥1,286
345
(143)
(233)
6
¥1,261Thousands of
U.S. Dollars
2021$11,396
2,954(1,099)(1,847)(730)$10,674(d) Reconciliation between the liabilities recorded in the consolidated balance
sheets and the balances of defined benefit obligation and plan assets was asfollows:
Millions of Yen
2021
2020

Funded defined benefit obligation������� ¥ 124,735 ¥ 125,261
Plan assets���������������������������������������� (156,858) (135,613)
Total������������������������������������������������� (32,122) (10,351)
Unfunded defined benefit obligation����
1,181
1,261
Net asset arising from defined benefit
obligation����������������������������������������� ¥ (30,940) ¥  (9,090)
Millions of Yen
2021
2020

Liability for retirement benefits������������ ¥   249 ¥ 8,724
Asset for retirement benefits��������������� (31,189) (17,814)
Net asset arising from defined benefit
obligation����������������������������������������� ¥(30,940) ¥ (9,090)

Thousands of
U.S. Dollars
2021$1,126,790(1,416,966)(290,176)
10,674$ (279,502)
Thousands of
U.S. Dollars
2021$   2,255(281,750)$(279,495)*Figures above include retirement and benefit plans calculated by the simplified method.

Actuarial losses (gains)����������������������� (18,994)
Total������������������������������������������������� ¥(18,994)

4,069¥4,069Thousands of
U.S. Dollars
2021(171,583)$(171,583)(g) Amounts recognized in accumulated other comprehensive income (before income tax effect) in respect of defined retirement benefit plans as of March
31, 2021 and 2020, were as follows:

Unrecognized actuarial losses (gains)����
Total�������������������������������������������������

Millions of Yen
2021
2020

Thousands of
U.S. Dollars
2021(8,077)¥(8,077)(72,969)$(72,969)

4,246¥4,246(h) Plan assets
a. Components of plan assets
Plan assets as of March 31, 2021 and 2020, consisted of the following:
Debt investments�������������������������������������������������������
Equity investments�����������������������������������������������������
General accounts�������������������������������������������������������
Others�����������������������������������������������������������������������
Total�������������������������������������������������������������������������

2021

2020

43.6%
41.5%
9.5%
5.4%
100.0%

47.5%
34.3%
10.8%
7.4%
100.0%* As of March 31, 2021 and 2020, total plan assets that were set up on corporate pension
plans include a retirement benefit trust of 33.5% and 17.2%, respectively.

b. Method of determining the expected rate of return on plan assets
The expected rate of return on plan assets is determined considering the longterm rates of return, which are expected currently and in the future from the various components of the plan assets.
(i) Assumptions used for the years ended March 31, 2021 and 2020, were set
forth as follows:
2021

2020

Discount rate������������������������������������������� 0.20% — 0.50% 0.20% — 0.50%
Expected rate of return on plan assets�������
2.50% 2.50%
Expected rate of increase in salary������������ 4.49% — 9.00% 4.54% — 9.00%(3) Defined contribution plans
The amounts of the required contribution to the defined contribution plans of certain consolidated subsidiaries were ¥702 million ($6,347 thousand) and ¥725
million as of March 31, 2021 and 2020, respectively.

(e) The components of net periodic benefit costs for the years ended March 31,
2021 and 2020, were as follows:

Service cost���������������������������������������
Interest cost��������������������������������������
Expected return on plan assets�����������
Recognized actuarial losses����������������
Retirement benefit expense calculatedby the simplified method�������������������
Others�����������������������������������������������
Net periodic benefit costs�������������������

Mebuki Financial Group, Inc.

$1,180,884
22,830
182,099
31,033(33,543)
328$1,383,631

Millions of Yen
2021
2020

*Figures above exclude retirement and benefit plans calculated by the simplified method.

*Figures above exclude retirement and benefit plans calculated by the simplified method.

65

Thousands of
U.S. Dollars
2021(f) Amounts recognized in other comprehensive income (before income tax effect)
in respect of defined retirement benefit plans for the years ended March 31,
2021 and 2020, were as follows:

Millions of Yen
2021
2020

Thousands of
U.S. Dollars
2021¥ 3,649432(2,527)
1,611¥ 3,778374(2,572)554$ 32,971
3,907(22,830)
14,555326(14)¥ 3,478345(14)¥ 2,465

2,954
(132)
$ 31,424

Annual Report 2021

66

15. EQUITY
Japanese companies are subject to the Companies Act. The significant provisions in the Companies Act that affect financial and accounting matters are summarized below:
a. Dividends
Under the Companies Act, companies can pay dividends at any time during the
fiscal year in addition to the year-end dividend upon resolution at the shareholders’ meeting. Additionally, for companies that meet certain criteria, including (1) having a Board of Directors, (2) having independent auditors, (3) having
an Audit & Supervisory Board, and (4) the term of service of the directors beingprescribed as one year rather than the normal two-year term by its articles ofincorporation, the Board of Directors may declare dividends (except for dividends in kind) at any time during the fiscal year if the company has prescribedso in its articles of incorporation. With respect to the third condition above, theBoard of Directors of companies with (a) board committees (namely, appointment committee, compensation committee, and audit committee) or (b) an audit and supervisory committee (as implemented under the Companies Act
effective May 1, 2015) may also declare dividends at any time because suchcompanies, by nature, meet the criteria under the Companies Act. The Company is organized as a company with an audit and supervisory committee. The
Company meets all the above criteria and, accordingly, the Board of Directors
may declare dividends (except for dividends in kind) at any time during the fiscal year.
The Companies Act permits companies to distribute dividends in kind(noncash assets) to shareholders subject to certain limitations and additional
requirements.
Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if the articles of incorporation of the company sostipulate. The Companies Act provides certain limitations on the amounts available for dividends or the purchase of treasury stock. The limitation is definedas the amount available for distribution to the shareholders, but the amount ofequity after dividends must be maintained at no less than ¥3 million.

b. Increases/Decreases and Transfer of Common Stock, Reserve, andSurplus
The Companies Act requires that an amount equal to 10% of dividends must
be appropriated as a legal reserve (a component of retained earnings) or as
additional paid-in capital (a component of capital surplus) depending on theequity account that was charged upon the payment of such dividends until theaggregate amount of the legal reserve and additional paid-in capital equals
25% of capital stock. Under the Companies Act, the total amount of additional
paid-in capital and legal reserve may be reversed without limitation. The Companies Act also provides that capital stock, legal reserve, additional paid-in
capital, other capital surplus, and retained earnings can be transferred among
the accounts within equity under certain conditions upon resolution of theshareholders.
c. Treasury Stock and Treasury Stock Acquisition Rights
The Companies Act also provides for companies to purchase treasury stockand dispose of such treasury stock by resolution of the Board of Directors. The
amount of treasury stock purchased cannot exceed the amount available for
distribution to the shareholders, which is determined by a specific formula. Under the Companies Act, stock acquisition rights are presented as a separate
component of equity. The Companies Act also provides that companies canpurchase both treasury stock acquisition rights and treasury stock. Such treasury stock acquisition rights are presented as a separate component of equity
or deducted directly from stock acquisition rights.

(2) Cash Dividends Per Share
Cash dividends per share for the years ended March 31, 2021 and 2020, were as follows:Year ended March 31, 2021
Dividends paid in the fiscal year ended March 31, 2021

Cash dividends approved at the Board of Directors’ meeting held on May 13, 2020:

Common stock

Cash dividends approved at the Board of Directors’ meeting held on Nov. 9, 2020:

Common stock

Total Amount(Millions of Yen/Thousands of
U.S. Dollars)¥6,376($57,599)
Total Amount(Millions of Yen/Thousands of
U.S. Dollars)¥6,379($57,629)

Per Share Amount(Yen /U.S. Dollars) Dividend Record Date

¥5.50($0.05)Mar. 31, 2020

Jun. 2, 2020

Per Share Amount(Yen /U.S. Dollars) Dividend Record Date

¥5.50($0.05)

Effective Date

Sep. 30, 2020

Effective Date

Dec. 2, 2020

Dividends to be paid after March 31, 2021

Cash dividends approved at the Board of Directors’ meeting held on May 12, 2021:

Common stock

Total Amount(Millions of Yen/Thousands of
U.S. Dollars)¥6,379($57,629)

Per Share Amount(Yen /U.S. Dollars) Dividend Record Date

¥5.50($0.05)Mar. 31, 2021

Effective Date

Jun. 2, 2021

Year ended March 31, 2020:
Dividends paid in the fiscal year ended March 31, 2020
Cash dividends approved at the Board of Directors’ meeting held on May 13, 2019:

Common stock
Cash dividends approved at the Board of Directors’ meeting held on Nov. 11, 2019:

Common stock

Total Amount(Millions of Yen)

¥6,451
Total Amount(Millions of Yen)

¥6,452Per Share Amount(Yen)
Dividend Record Date

¥5.50*

Mar. 31, 2019

Per Share Amount(Yen)
Dividend Record Date

¥5.50

Effective Date

Jun. 4, 2019

Sep. 30, 2019

Effective Date

Dec. 3, 2019

*Of the per share amount above, ¥1.00 is the amount of a commemorative dividend for the business integration.

Dividends to be paid after March 31, 2020
Cash dividends approved at the Board of Directors’ meeting held on May 13, 2020:

Common stock

Total Amount(Millions of Yen)

¥6,376Per Share Amount(Yen)
Dividend Record Date

¥5.50

Mar. 31, 2020

Effective Date

Jun. 2, 2020

(1) Capital Stock Changes during the YearThe changes in the number and class of issued stock and treasury stock for the year ended March 31, 2021, were as follows:

As of April 1, 2020

Issued stock:
Common stock
Total
Treasury stock:
Common stock
Total

Shares in Thousands
Changes During the Year
Increase
Decrease

1,179,055
1,179,055—

19,74519,74511*
11

As of March 31, 2021

—
—

—
1

1,179,055
1,179,055

612*
612

2

19,143
19,143*1 The number of shares of treasury stock increased by 2 thousand shares due to purchases of shares less than the trading unit and by 8 thousand shares due to acquisitions of restricted stocks
without charge.
*2 The number of shares of treasury stock decreased by 1 thousand shares due to sales to shareholders in response to their demand to buy additional shares up to the trading unit, by 312 thousand shares due to the disposal of the Company’s own shares as restricted stocks, and by 298 thousand shares due to exercise of the stock acquisition rights.

The changes in the number and class of issued stock and treasury stock for the year ended March 31, 2020, were as follows:

As of April 1, 2019

Issued stock:
Common stock
Total
Treasury stock:
Common stock
Total

Shares in Thousands
Changes During the Year
Increase
Decrease

1,179,055
1,179,055

—
—

5,971
5,971

13,939*13,939As of March 31, 2020——
1

1,179,055
1,179,055

165*
165

2

19,74519,745*1 The number of shares of treasury stock increased by 13,937 thousand shares due to purchase of the Company’s own shares and by 2 thousand shares due to purchases of shares less than
the trading unit.
*2 The number of shares of treasury stock decreased by 2 thousand shares due to sales to shareholders in response to their demand to buy additional shares up to the trading unit and by 163
thousand shares due to exercise of the stock acquisition rights.

67

Mebuki Financial Group, Inc.

Annual Report 2021

68

16. STOCK OPTIONSThe stock option activity was as follows:

The Company’s stock option plans grant options to directors and others to purchase certain shares of the Company’s common stock in the respective exercise periods.
The Company recorded stock option expenses in “General and administrative expenses” of ¥75 million for the fiscal years ended March 31, 2020.
The stock options outstanding as of March 31, 2021, were as follows:
Stock Options

Mebuki Financial Group, Inc.
1st Series of Stock
Acquisition Rights*1
Mebuki Financial Group, Inc.
2nd Series of Stock
Acquisition Rights*1
Mebuki Financial Group, Inc.
3rd Series of Stock
Acquisition Rights*1
Mebuki Financial Group, Inc.
5th Series of Stock
Acquisition Rights*1
Mebuki Financial Group, Inc.
7th Series of Stock
Acquisition Rights*1
Mebuki Financial Group, Inc.
9th Series of Stock
Acquisition Rights*1
Mebuki Financial Group, Inc.
11th Series of Stock
Acquisition Rights*1
Mebuki Financial Group, Inc.
12th Series of Stock
Acquisition Rights*1
Mebuki Financial Group, Inc.
13th Series of Stock
Acquisition Rights
Mebuki Financial Group, Inc.
14th Series of Stock
Acquisition Rights
Mebuki Financial Group, Inc.
15th Series of Stock
Acquisition Rights
Mebuki Financial Group, Inc.
16th Series of Stock
Acquisition Rights
Mebuki Financial Group, Inc.
17th Series of Stock
Acquisition Rights
Mebuki Financial Group, Inc.
18th Series of Stock
Acquisition Rights
Mebuki Financial Group, Inc.
19th Series of Stock
Acquisition Rights
Mebuki Financial Group, Inc.
20th Series of Stock
Acquisition Rights

Number of Options
Granted (Shares)

Date of Grant

ExercisePrice

10 directors of Joyo*2

16,833

August 24, 2009*3¥1

From October 1, 2016,
to August 24, 2039

10 directors of Joyo*2

23,634

July 21, 2010*3¥1

From October 1, 2016,
to July 21, 2040

10 directors of Joyo*2

43,430July 20, 2011*3¥1

From October 1, 2016,
to July 20, 2041

10 directors of Joyo*2

42,024

July 19, 2012*3¥1

From October 1, 2016,
to July 19, 2042

10 directors of Joyo*2

39,241

July 18, 2013*3¥1

From October 1, 2016,
to July 18, 2043

10 directors of Joyo*2

40,656

July 18, 2014*3¥1

From October 1, 2016,
to July 18, 2044

10 directors of Joyo*2

40,041

July 17, 2015*3¥1

From October 1, 2016,
to July 17, 2045

13 executive officers of Joyo*2

22,830July 17, 2015*3¥1

From October 1, 2016,
to July 17, 2045

29 directors of
the Company, Joyo and Ashikaga

142,176

December 6, 2016

¥1

From December 7, 2016,
to December 6, 2046

Persons Granted

Exercise Period

16 executive officers of Joyo

63,910December 6, 2016

¥1

From December 7, 2016,
to December 6, 2046

29 directors of
the Company, Joyo and Ashikaga

135,990

August 9, 2017

¥1

From August 10, 2017,
to August 9, 2047

16 executive officers of Joyo

62,024

August 9, 2017

¥1

From August 10, 2017,
to August 9, 2047

24 directors of
the Company, Joyo and Ashikaga

127,508

August 14, 2018¥1

From August 15, 2018,
to August 14, 2048

34 executive officers of Joyo and Ashikaga

147,282

August 14, 2018¥1

From August 15, 2018,
to August 14, 2048

23 executive officers of Joyo and Ashikaga

201,104

August 20, 2019¥1

From August 21, 2019,
to August 20, 2049

29 executive officers of Joyo and Ashikaga

193,295

August 20, 2019¥1

From August 21, 2019,
to August 20, 2049

Mebuki FG
1st

Mebuki FG
2nd

Mebuki FG
3rd

Mebuki FG
5thYear ended March 31, 2021
Non-vested (shares):
April 1, 2020 — Outstanding
GrantedCanceled
VestedMarch 31, 2021 — Outstanding

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

Vested (shares):
April 1, 2020 — Outstanding
VestedExercised
Canceled
March 31, 2021 — Outstanding

6,733
—
—
—
6,733

9,453
—
—
—
9,453

14,040———14,04013,586———
13,586

Exercise price(Yen/US Dollars)
Average stock price at exercise(Yen/US Dollars)
Fair value price at grant date
(Yen/US Dollars)

¥1
$0.01
—
—
¥417
$3.77

¥1
$0.01
—
—
¥297
$2.68

¥1
$0.01
—
—
¥300
$2.71

¥1
$0.01
—
—
¥310
$2.80

Mebuki FG
7th

Mebuki FG
9th

Mebuki FG
11th

Mebuki FG
12thYear ended March 31, 2021
Non-vested (shares):
April 1, 2020 — Outstanding
GrantedCanceled
VestedMarch 31, 2021 — Outstanding

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

Vested (shares):
April 1, 2020 — Outstanding
VestedExercised
Canceled
March 31, 2021 — Outstanding

16,802—
4,336—
12,466

17,408—
4,492—
12,916

16,099—3,302—
12,797

7,134
—
4,756
—
2,378

Exercise price(Yen/US Dollars)
Average stock price at exercise(Yen/US Dollars)
Fair value price at grant date
(Yen/US Dollars)

¥1
$0.01
¥246
$2.22
¥518
$4.68

¥1
$0.01
¥246
$2.22
¥500
$4.52

¥1
$0.01
¥246
$2.22
¥680
$6.14

¥1
$0.01
¥246
$2.22
¥708
$6.40

*1 As a result of the share exchange conducted between the Company and Joyo on October 1, 2016, stock acquisition rights of the Company were allotted to the holders of stock acquisitionrights of Joyo based on the share exchange ratio.
*2 The number is initially granted by Joyo.
*3 The date is initially granted by Joyo.

69

Mebuki Financial Group, Inc.

Annual Report 2021

70

Mebuki FG
13thYear Ended March 31, 2021
Non-vested (shares):
April 1, 2020 — Outstanding
GrantedCanceled
VestedMarch 31, 2020 — Outstanding
Vested (shares):
April 1, 2020 — Outstanding
VestedExercised
Canceled
March 31, 2021 — Outstanding
Exercise price(Yen/US Dollars)
Average stock price at exercise(Yen/US Dollars)
Fair value price at grant date
(Yen/US Dollars)

Mebuki FG
14th

—
—
—
—
—

58,255—25,250—33,005
¥1
$0.01
¥246
$2.22
¥345
$3.12
Mebuki FG
17th

Mebuki FG
15th

—
—
—
—
—

23,100—11,550—11,550
¥1
$0.01
¥246
$2.22
¥374
$3.38
Mebuki FG
18th

Mebuki FG
16th

—
—
—
—
—

—
—
—
—
—

73,162—
34,865—38,29731,012—
11,814—19,198

¥1
$0.01
¥246
$2.22
¥360
$3.25
Mebuki FG
19th

¥1
$0.01
¥246
$2.22
¥390
$3.52
Mebuki FG
20thYear Ended March 31, 2021
Non-vested (shares):
April 1, 2020 — Outstanding
GrantedCanceled
VestedMarch 31, 2021 — Outstanding

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

Vested (shares):
April 1, 2020 — Outstanding
VestedExercised
Canceled
March 31, 2021 — Outstanding

105,844—
40,095—65,74990,189—31,443—58,746201,104—
70,727—130,377

193,295—
55,850—137,445

¥1
$0.01
¥246
$2. 22
¥319
$2.88

¥1
$0.01
¥240
$2.17
¥348
$3.14

¥1
$0.01
¥246
$2.22
¥179
$1.62

¥1
$0.01
¥240
$2.17
¥206
$1.86

Exercise price(Yen/US Dollars)
Average stock price at exercise(Yen/US Dollars)
Fair value price at grant date
(Yen/US Dollars)

The Method Used to Estimate the Number of Stock Options Expected to Vest
Since it is difficult to rationally estimate the number of unexercised options in the future, a method of only reflecting actual unexercised options is adopted.

71

Mebuki Financial Group, Inc.

17. PER SHARE OF COMMON STOCK

18. OTHER INCOME(1) EPS
Reconciliation of the differences between basic and diluted EPS for the years
ended March 31, 2021 and 2020, was as follows:

Other income for the years ended March 31, 2021 and 2020, consisted of thefollowing:

Millions of Thousands ofYen
SharesNet Income
WeightedAttributable
Averageto Owners of
Sharesthe Parent

Year Ended March 31, 2021
Basic EPS —Net income available
to common shareholders�������
Effect of dilutive securities:
Warrants��������������������������������
Diluted EPS —Net income
for computation���������������������
Year Ended March 31, 2020
Basic EPS —Net income available
to common shareholders�������
Effect of dilutive securities
Warrants�������������������������������
Diluted EPS —Net income
for computation���������������������Yen

Millions of Yen
2021
2020

U.S. Dollars

EPS¥36,478

1,159,757¥31.45

$0.28

—

642

—

—

¥36,478

1,160,400¥31.43$0.28

Gain on sales of stock andother securities�������������������������������� ¥21,905
2,435
Recoveries of write-off of claims���������
Gain on disposal of fixed assets����������
144
Other������������������������������������������������ 34,862
Total������������������������������������������������� ¥59,347¥16,970
2,178
64
32,773¥51,987

1,167,915¥31.14—760—¥36,370

1,168,675¥31.12

General and administrative expenses for the years ended March 31, 2021 and2020, consisted of the following:

Salaries and allowances��������������������� ¥ 51,971
Periodic benefit costs�������������������������
4,062
Other������������������������������������������������ 59,730
Total�������������������������������������������������� ¥115,763

2021

Total equity per share������������������������� ¥861.05

2020

U.S. Dollars
2021¥760.78$7.78

Total equity per share as of March 31, 2021 and 2020, is calculated based on
the following:
Millions of Yen
2021
2020

Total equity���������������������������������������� ¥998,906
Deductions from total equity���������������
161
Total equity attributable
to common shareholders������������������ ¥998,744

Thousands of
U.S. Dollars
2021¥882,235
248$9,023,545
1,463¥881,986$9,022,082$ 469,477
36,700539,568$1,045,745

Other expenses for the years ended March 31, 2021 and 2020, consisted of thefollowing:
Millions of Yen
2021
2020

Loss on sales of stocks and othersecurities����������������������������������������� ¥12,107
Write-off of loans������������������������������
5,291
1,562
Impairment on fixed assets*���������������
Loss on disposal of fixed assets����������
490
Other������������������������������������������������ 40,862
Total�������������������������������������������������� ¥60,314

1,159,309¥15,998
11,612
1,112
557
34,414¥63,696

Thousands of
U.S. Dollars
2021$109,370
47,803
14,114
4,434
369,124$544,844* Impairment losses on long-lived assets were recognized mainly on the properties of theBank’s branches in the Tochigi and Ibaraki prefectures, whose operations were discontinued because the Company believed the investment would not be recoverable. The components of impairment losses on fixed assets for the years ended March 31, 2021 and 2020,
were as follows:

Number of Shares in Thousands
2021
2020

Number of shares of common stock used incomputing total equity pershare at year-end�������������������������������������������������� 1,159,911¥ 53,197
3,067
63,365¥119,630

Thousands of
U.S. Dollars
2021

20. OTHER EXPENSES(2) Total equity per share
Total equity per share as of March 31, 2021 and 2020, was as follows:Yen$197,884
21,997
1,302
314,927$536,110

19. GENERAL AND ADMINISTRATIVE EXPENSES

Millions of Yen
2021
2020

¥36,370

Thousands of
U.S. Dollars
2021

Thousands of
U.S. Dollars

Millions of Yen

2021
Buildings��������������������������������������������������������
Land��������������������������������������������������������������
Equipment������������������������������������������������������
Telephone subscription rights��������������������������
Leasehold improvements���������������������������������
Guarantee and lease deposits��������������������������

¥689
540
147
130
34
19

2020
¥316
706
42
—
45
—

2021
$6,233
4,879
1,335
1,179
308
180

Annual Report 2021

72

21. INCOME TAXES

23. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURESThe Group is subject to Japanese national and local income taxes which, in theaggregate, resulted in a normal effective statutory tax rate of 30.62% for theyears ended March 31, 2021 and 2020.
The tax effects of significant temporary differences and tax loss carryforwards, which result in deferred tax assets and liabilities, as of March 31, 2021
and 2020, were as follows:(1) Group Policies for Financial Instruments
The Group provides comprehensive financial services, such as lease and securities centering on banking. As the central business operation of the Group, theconsolidated banking subsidiaries raise funds by deposits as its basic function asa bank; the consolidated banking subsidiaries also procure funds by call moneytransactions from short-term markets to maintain an adequate degree of liquidity. The consolidated banking subsidiaries manage those funds through lending tocorporate customers and individuals, such as housing loans; investing in securities, mainly bonds; and investing in money markets.
The Group utilizes Asset Liability Management (ALM) to avoid unfavorable
floating interest rate fluctuation of the financial assets and liabilities it holds. As apart of ALM, the Group has entered into derivative transactions.

Millions of Yen
2021
2020

Deferred tax assets:
Allowance for loan losses��������������� ¥ 31,416
Write-offs of securities�������������������
8,652

Thousands of
U.S. Dollars
2021¥ 28,912$ 283,802

12,583
11,351
1,899
1,666
802

78,15844,876
17,034
14,6497,529

Liability for retirement benefits�������
4,967
Provision for employee bonuses�����
1,885
Tax loss carryforwards�������������������
1,621
833
Depreciation����������������������������������
Provision for reimbursement ofdeposits��������������������������������������
748
874
Other�������������������������������������������� 10,642
10,635
Subtotal deferred tax assets������� 60,767
68,726
Less valuation allowance���������������� (13,328) (17,782)
Total deferred tax assets����������� 47,439
50,943
Deferred tax liabilities:——
Unrealized gains on availablefor-sale securities������������������������ (70,365) (39,266)(4,467)(4,467)Retirement benefit trust�����������������
Other��������������������������������������������
(6,739)(6,654)
Total deferred tax liabilities�������� (81,573) (50,388)
Net deferred tax assets(liabilities)�������� ¥(34,134) ¥    554

6,75896,136548,942(120,405)
428,538—(635,643)(40,358)(60,885)(736,886)$(308,348)

Since the difference between the legally effective tax rate and the actual effective tax rate after applying tax effect accounting is equal to or less than 5% of
the legally effective tax rate, a reconciliation between the normal effective statutory tax rate and the actual effective tax rate reflected in the accompanying consolidated statements of income for the years ended March 31, 2021 and 2020,
is omitted.

22. LEASES
Future minimum payments under noncancelable operating leases as of March
31, 2021 and 2020, were as follows:
LesseeMillions of Yen
2021
2020

Due within one year������������������������
Due after one year��������������������������
Total����������������������������������������������

¥108
91
¥200

¥145
141
¥287

Thousands of
U.S. Dollars
2021

$ 984
830
$1,814

LessorMillions of Yen
2021
2020

Due within one year������������������������
Due after one year��������������������������
Total����������������������������������������������

73

Mebuki Financial Group, Inc.

¥2
2
¥5

¥2
2
¥5

Thousands of
U.S. Dollars
2021

$22
26
$48

(2) Nature and Extent of Risks Arising from Financial Instruments
The Group’s financial assets are mainly loans made by the consolidated banking
subsidiaries to domestic corporations and individuals in Japan, which are exposed not only to interest rate fluctuation risks but also to customers’ credit risks.
Securities and investment securities, such as bonds, stocks, and investment
trusts, are possessed to trade, to hold to maturity dates to generate stable interest income, and to promote business relationships with the issuers. These securities are exposed to the issuers’ credit risks, interest rate fluctuation risks, andmarket price fluctuation risks.
The Group’s main financial liabilities are deposits received by the consolidated banking subsidiaries, which are exposed to interest rate fluctuation risks
and liquidity risks. Borrowed money and bonds are exposed to the risks that theGroup may not be able to repay them on their maturity dates if, under certain circumstances, the Group is not able to access a capital market.
The consolidated banking subsidiaries utilize derivative transactions tohedge the customers’ interest and currency risks and to control the interest rate
fluctuation risks in ALM. Derivatives transactions are utilized to hedge interest
rate fluctuation risks, foreign currency exchange rate fluctuation risks, and market price fluctuation risks on the Group’s financial assets and liabilities. Derivatives mainly include interest rate swaps, currency swaps, and bond futures andare exposed to the interest rate fluctuation risks, market price fluctuation risks,
foreign currency exchange rate fluctuation risks, and credit risks.
Hedge accounting is applied to certain derivatives.
In hedge transactions against foreign currency fluctuation risks, mainly currency swaps and foreign exchange swaps, the effectiveness of hedging is determined by confirming that the amount of the hedging instruments is generally
consistent with that of the hedged items. Regarding an exceptional accounting
treatment in interest rate swaps, post testing is conducted to confirm that requirements for the treatment are satisfied.
Derivatives transactions to which hedge accounting is not applied are exposed to interest rate fluctuation risks, foreign currency exchange rate fluctuation
risks, price fluctuation risks, and credit risks.
(3) Risk Management for Financial Instruments(a) Integrated Risk Management
The Group conducts integrated risk management to holistically control risks fromvarious financial assets and liabilities and risks related to the banking business.
More specifically, the periodically quantified risks of the Group are controlled so
as to not exceed Tier 1 capital allocated by each risk category. The bank assesses unquantifiable risks using stress tests and other measures.

(b) Credit Risk Management
The Group has enacted “Group Guidelines for Credit Risk Management,” which
provides for basic policies comprising appropriate credit exposure management
on individual and portfolio bases. The portfolio-based credit exposure management involves diversification of risks.
Credit risk management divisions have been segregated from the divisions
under business headquarters to achieve rigorous credit review and conduct monitoring of borrowers’ financial condition to prevent deterioration of loans.
In the self-assessments that evaluate the quality of assets, the Group designs and operates controls over self-assessment of the quality of assets whichis performed in multiple steps. The assessment of the quality of assets performedby the business offices is reviewed by the credit-related divisions in the headquarters, and then independently examined by the Internal Audit division.
As for credit risks of the issuers of securities and the counterparties of derivatives transactions, global markets and market operation divisions monitor
credit information and market prices and give the issuers and counterparties
credit ratings, as well as carrying out assessments of the issuers and counterparties as general borrowers.
(c) Market Risk Management① Market Risk Management Measures
The Group manages market risks by ALM. Risk management policies and procedures are prescribed in relevant ALM rules and manuals, and these policies, decided in ALM/Risk Management Committee and so forth, are closely monitored
and regularly discussed.
② Market Risk Quantitative information(i) Banking Accounta. Interest Rate Risk
The Group adopts the variance-covariance method as the measurement method(a holding period of six months, a confidence interval of 99%, and an observation
period of one year) for calculating Value at Risk (VaR) related to interest rate riskof loans and bills discounted, domestic bonds, deposits, borrowed money, corporate bonds, and derivatives, such as interest rate swaps. The Group uses the historical simulation method (a holding period of six months, a confidence interval of
99%, and an observation period of five years) for the calculation of VaR related tointerest rate risk of foreign bonds, trust beneficiary right, market fund transaction, and derivatives like interest rate swaps and currency swaps.
As of March 31, 2021 and 2020, the Group’s VaR related to interest raterisks, which is a simple sum of its consolidated banking subsidiaries’ VaR, were¥74,521 million ($673,184 thousand) and ¥73,266 million, respectively.
b. Price Fluctuation Risk
The Group adopts the historical simulation method (a holding period of six
months, a confidence interval of 99%, and an observation period of five years)
for calculating VaR related to price fluctuation risk of listed equities and investment trust.
As of March 31, 2021 and 2020, the Group’s VaR related to price fluctuation risk, which is a simple sum of its consolidated banking subsidiaries’ VaR,
were ¥149,801 million ($1,353,218 thousand) and ¥103,979 million, respectively. Correlation between interest rate risk and price fluctuation risk has notbeen considered.

(iii) Validity of VaR
The Group performs back testing to compare VaR calculated by its internal measurement model with the actual profit and loss to confirm whether the model
captures market risks with sufficient accuracy. However, there could be cases inwhich VaR cannot capture risks under sudden and dramatic changes in market
conditions beyond normal circumstances since VaR is statistically calculated
based on historical market fluctuation.
(d) Liquidity Risk Management
Under “Group Liquidity Risk Management Rules,” the Group conducts financing
activities after fully analyzing its cash flows and strives to maintain the diversity
and stability of funding sources, while paying continuous attention to the consolidated balance sheet structure, lines of credit provided to the Group, collateralmanagement, and costs to maintain the liquidity.
(4) Supplementary Explanation on Fair Values of Financial Instruments
The fair values of financial instruments are based on their market prices and, incases where market prices are not readily available, reasonably calculated prices. Such prices have been calculated using certain assumptions and may differ if
calculated based on different assumptions.
(5) Fair Values of Financial Instruments(a) Fair value of financial instruments
Millions of Yen
March 31, 2021

Carrying
AmountUnrealized
Fair Value Gains/Losses(1) Cash and due from banks����������������������� ¥ 6,425,755 ¥ 6,425,755(2) Securities:���������������������������������������������
Held-to-maturity securities����������������������
153,263
154,076
Available-for-sale securities��������������������� 4,147,034 4,147,034(3) Loans and bills discounted���������������������� 11,638,376
Allowance for loan losses*1���������������������
(76,632)
Net���������������������������������������������������� 11,561,744 11,649,315
Total assets������������������������������������������������ ¥22,287,797 ¥22,376,181(1) Deposits������������������������������������������������ ¥16,223,652 ¥16,223,944(2) Negotiable certificates of deposit�������������
291,417
291,426(3) Call money and bills sold������������������������
952,917
952,917(4) Payables under securities lendingtransactions�������������������������������������������
620,749
620,749(5) Borrowed money������������������������������������ 3,394,050 3,394,045
Total liabilities��������������������������������������������� ¥21,482,787 ¥21,483,083
Derivative instruments*2 :Hedge accounting is not applied�������������� ¥   2,318 ¥     2,318
Hedge accounting is applied��������������������
(6,708)(6,708)
Total derivative instruments������������������������� ¥    (4,390) ¥    (4,390)

¥—
812
—

87,571¥88,384¥(291)(8)——
5¥(295)¥——¥—(ii) Trading Account
The Group adopts the historical simulation method (a holding period of 10 days,
a confidence interval of 99%, and an observation period of five years) for calculating VaR related to trading securities; trading purpose foreign exchange transactions; and trading purpose derivatives, such as forward transactions and option
transactions. As of March 31, 2021 and 2020, the Group’s VaR related to trading account, which is simple sum of its consolidated banking subsidiaries’ VaR,
were ¥9 million ($86 thousand) and ¥11 million, respectively.

Annual Report 2021

74

Millions of Yen
March 31, 2020

Carrying
AmountUnrealized
Fair Value Gains/Losses(1) Cash and due from banks����������������������� ¥ 1,935,324 ¥ 1,935,324(2) Securities:
Held-to-maturity securities����������������������
164,851
166,028
Available-for-sale securities��������������������� 3,881,842 3,881,842(3) Loans and bills discounted���������������������� 11,342,541
Allowance for loan losses*1���������������������
(64,324)
Net���������������������������������������������������� 11,278,216 11,390,121
Total assets������������������������������������������������ ¥17,260,234 ¥17,373,317(1) Deposits������������������������������������������������ ¥14,756,658 ¥14,757,116(2) Negotiable certificates of deposit�������������
283,131
283,162(3) Payables under securities lendingtransactions�������������������������������������������
215,548
215,548(4) Borrowed money������������������������������������ 1,252,801 1,252,888
Total liabilities��������������������������������������������� ¥16,508,139 ¥16,508,715
Derivative instruments*2 :Hedge accounting is not applied�������������� ¥     2,423 ¥     2,423
Hedge accounting is applied��������������������
665
665
Total derivative instruments������������������������� ¥     3,088 ¥     3,088

March 31, 2021

¥—
1,177
—

111,904¥113,082¥(457)(30)—(87)¥(575)¥——¥—Thousands of U.S. Dollars
Carrying
Unrealized
AmountFair Value Gains/Losses(1) Cash and due from banks����������������������� $ 58,046,574 $ 58,046,574(2) Securities:���������������������������������������������
Held-to-maturity securities���������������������� 1,384,494 1,391,835
Available-for-sale securities��������������������� 37,461,916 37,461,916(3) Loans and bills discounted���������������������� 105,134,386
Allowance for loan losses*1���������������������
(692,252)
Net���������������������������������������������������� 104,442,133 105,233,206
Total assets������������������������������������������������ $201,335,117 $202,133,531(1) Deposits������������������������������������������������ $146,555,130 $146,557,763(2) Negotiable certificates of deposit������������� 2,632,501 2,632,581(3) Call money and bills sold������������������������ 8,608,107 8,608,107(4) Payables under securities lendingtransactions������������������������������������������� 5,607,493 5,607,493(5) Borrowed money������������������������������������ 30,659,893 30,659,848
Total liabilities��������������������������������������������� $194,063,125 $194,065,792
Derivative instruments*2 :Hedge accounting is not applied�������������� $    20,941$20,941
Hedge accounting is applied��������������������
(60,605)(60,605)
Total derivative instruments������������������������� $    (39,664) $    (39,664)

$—
7,342
—

791,073$798,414
(80)
—
—
46
$(2,668)
$—
—
$—

Assets(1) Cash and due from banks
The fair values of these items approximate the carrying amount, which are
deemed to be the fair value.
(2) Securities
The fair values of marketable equity securities are measured at the quoted market price of the stock exchange for equity instruments. Fair values of bonds aremeasured at the market price or the quoted price obtained from financial institutions. Fair values of investment trusts are measured at the quoted price.
The fair values of private placement bonds are determined by discounting
future cash flows. The discount rates used in the calculation were calculated
based on the bankruptcy probability by credit rating and the coverage ratio of
each claim.
The Group treats market prices as fair values for floating-rate Japanese
Government Bonds and securitized products.

Mebuki Financial Group, Inc.

Liabilities(1) Deposits
The fair values of demand deposits are recognized as the payment at the date of
the consolidated balance sheet. The fair values of time deposits are determinedby discounting the contractual cash flows grouped by the remaining duration at
the rates that would be applied for similar new contracts.
(2) Negotiable certificates of deposit
Refer to (1) Deposits.

$(2,633)*1 Allowances for loan losses relevant to loans and bills discounted have been deducted.
*2 Derivative instruments recorded as trading assets, trading liabilities, other assets, andother liabilities include derivative transactions. Derivative instruments are presented as
net of assets and liabilities associated with derivative transactions.

75(3) Loans and bills discounted
The carrying amounts of loans and bills discounted with floating-interest rates
approximate fair value as long as customers’ credit risks have not changed significantly after lending because the market rates are promptly reflected in the
floating-interest rates.
The fair values of loans and bills discounted with fixed-interest rates are determined by discounting the principal and interest amount with the interest rateused for new loans for each category of loan calculated based on the bankruptcy
probability by credit rating and the coverage ratio of each claim, internal credit
rating, and loan period. The carrying amounts of loans and bills discounted withmaturity less than one year approximate fair value because of their short maturities.
For loans to obligors classified as “legal bankruptcy,” “virtual bankruptcy,”and “possible bankruptcy,” an allowance is provided based on the discounted
cash flow method or based on amounts expected to be collected through thedisposal of collateral or execution of guarantees. The carrying value, net of theallowance as of the consolidated balance sheet date, is a reasonable estimate of
the fair values of those loans.
The carrying amounts of loans and bills discounted that do not have fixedmaturities due to loan characteristics, such as limited loan amounts within thevalue of pledged assets, approximate fair value due to their expected repayment
periods and interest rate conditions.

(3) Call money and bills sold
The carrying amounts of call money and bills sold approximate fair value because
they have maturities of one year or less.
(4) Payables under securities-lending transactions
Refer to (3) Call money and bills sold.

March 31, 2021

Due from banks�������������������������������������������������
Securities:
Held-to-maturity securities�����������������������������
Japanese national government bonds���������
Japanese local government bonds�������������
Japanese corporate bonds�������������������������
Available-for-sale securities
with contractual maturities����������������������������
Japanese national government bonds���������
Japanese local government bonds�������������
Japanese corporate bonds�������������������������
Foreign currency bonds�����������������������������
Other��������������������������������������������������������
Loans and bills discounted*1�������������������������������
Total�����������������������������������������������������������������

March 31, 2020

Due from banks�������������������������������������������������
Securities:
Held-to-maturity securities�����������������������������
Japanese national government bonds���������
Japanese local government bonds�������������
Japanese corporate bonds�������������������������
Available-for-sale securities
with contractual maturities����������������������������
Japanese national government bonds���������
Japanese local government bonds�������������
Japanese corporate bonds�������������������������
Foreign currency bonds�����������������������������
Other��������������������������������������������������������
Loans and bills discounted*2�������������������������������
Total�����������������������������������������������������������������

March 31, 2021

(5) Borrowed Money
The fair value of borrowed money is discounted at the rate that would be applied
for similar new contracts. The carrying amount of borrowed money with maturityof one year or less approximates fair value because of its short maturity period.
Derivatives
See “Note 24. DERIVATIVES.”(b) Carrying amount of financial instruments whose fair value cannot be reliably
determined
Millions of Yen
2021
2020

Equity securities without readily
available market price*1*2��������������� ¥ 4,101
Investments in partnerships*3���������� 27,988
Beneficial interests in trust��������������
855
Total���������������������������������������������� ¥32,945(6) Maturity Analysis for Financial Assets and Liabilities with Contractual Maturities¥ 4,126
24,427898¥29,452

Thousands of
U.S. Dollars
2021$ 37,053
252,8297,728$297,610*1 Equity securities without readily available market prices are out of the scope of the fairvalue disclosure because their fair values cannot be reliably determined.
*2 During the years ended March 31, 2021 and 2020, impairment losses on equity securities without readily available market price of ¥1 million ($18 thousand) and ¥192 million,
respectively, were recognized.
*3 Investments in partnerships, the assets of which comprise equity securities without readily
available market price, are out of the scope of the fair value disclosure.

Due from banks�������������������������������������������������
Securities:
Held-to-maturity securities�����������������������������
Japanese national government bonds���������
Japanese local government bonds�������������
Japanese corporate bonds�������������������������
Available-for-sale securities
with contractual maturities����������������������������
Japanese national government bonds���������
Japanese local government bonds�������������
Japanese corporate bonds�������������������������
Foreign currency bonds�����������������������������
Other��������������������������������������������������������
Loans and bills discounted*1�������������������������������
Total�����������������������������������������������������������������

Due in 1 Yearor Less

Due after 1 Yearthrough 3 Years

Millions of Yen
Due after 3 Years
Due after 5 Years
through 5 Years
through 7 Years

Due after 7 Years
through 10 Years

Due after 10 Years¥6,255,160

¥—

¥—

¥—

¥—

¥—

23,411——
23,411

42,837—300
42,53722,425—300
22,125

4,546
—
—
4,546

50,20950,000
—
209

1,000
—
—
1,000

232,387
55,00072,644
66,52433,624
4,593
2,716,174¥9,227,134

562,166
25,000272,091
141,671
93,38930,014
1,831,213¥2,436,217

539,141
35,000257,164
94,83588,752
63,388
1,522,769¥2,084,336

600,128—225,084
28,580247,732
98,731
990,737¥1,595,412

682,068
41,150156,571
30,926
279,797
173,623
1,064,918¥1,797,196

1,044,538
422,800
34,496362,680
171,786
52,773
3,091,878¥4,137,416

Due in 1 Yearor Less

Due after 1 Yearthrough 3 Years

Millions of Yen
Due after 3 Years
Due after 5 Years
through 5 Years
through 7 Years

Due after 7 Years
through 10 Years

Due after 10 Years¥1,780,991

¥—

¥—

¥—

¥—

¥—

39,72518,00050
21,67538,375—150
38,225

22,581—300
22,281

4,044
—
—
4,044

50,26250,000
—
262

—
—
—
—

372,066
159,500
84,165
110,809
11,8695,722
2,836,747¥5,029,531

513,382
80,000188,087
166,455
65,914
12,925
1,777,555¥2,329,312

587,481
35,000289,42186,646108,279
68,133
1,434,690¥2,044,753

330,813—
165,571
35,200114,086
15,955935,533¥1,270,390

723,590
41,150202,947
33,068335,992
110,432
1,019,385¥1,793,238

663,268
176,300
5,033
301,032
160,095
20,8052,997,509¥3,660,777

Due in 1 Yearor Less

Due after 1 Yearthrough 3 Years

Thousands of U.S. Dollars
Due after 3 Years
Due after 5 Years
through 5 Years
through 7 Years

Due after 7 Years
through 10 Years

Due after 10 Years$56,505,511

$—

$—

$—

$—

$—

211,490——
211,490

386,972—2,710
384,262

202,581—2,710
199,871

41,067——41,067453,564
451,671
—
1,893

9,033
—
—
9,033

2,099,252
496,838
656,230
600,946
303,746
41,491
24,536,359$83,352,611

5,078,285
225,8362,457,915
1,279,774
843,625
271,135
16,542,131$22,007,388

4,870,294
316,170
2,323,077
856,691
801,740
572,615
13,755,822$18,828,697

5,421,217—
2,033,287
258,178
2,237,870
891,882
8,949,755$14,412,039

6,161,417
371,725
1,414,377
279,368
2,527,529
1,568,418
9,619,858$16,234,839

9,435,759
3,819,332
311,626
3,276,248
1,551,824
476,730
27,930,248$37,375,040*1 As of March 31, 2021, loans and bills discounted with no contractual maturities amounting to ¥268,417 million ($2,424,727 thousand) and loans and bills discounted whose cash flow cannot
be estimated, such as “legal bankruptcy,” “virtual bankruptcy,” and “possible bankruptcy” loans, amounting to ¥152,266 million ($1,375,485 thousand) are not included.
*2 As of March 31, 2020, loans and bills discounted with no contractual maturities amounting to ¥200,693 million and loans and bills discounted whose cash flow cannot be estimated, such as“legal bankruptcy,” “virtual bankruptcy,” and “possible bankruptcy” loans, amounting to ¥140,426 million are not included.

Annual Report 2021

76

Due in 1 Yearor Less

Due after 1 Yearthrough 3 Years

Deposits * �������������������������������������������������������� ¥15,241,415
Negotiable certificates of deposit������������������������
291,117
Call money and bills sold������������������������������������
952,917620,749
Payables under securities lending transactions����
Borrowed money������������������������������������������������
3,195,212
Total����������������������������������������������������������������� ¥20,301,412¥ 848,914
300——
168,103¥1,017,318

Due in 1 Yearor Less

Due after 1 Yearthrough 3 Years

Deposits *1�������������������������������������������������������� ¥13,749,903
Negotiable certificates of deposit������������������������
283,131—
Call money and bills sold������������������������������������
Payables under securities lending transactions����
215,548
1,022,102
Borrowed money������������������������������������������������
Total����������������������������������������������������������������� ¥15,270,685¥855,999———
143,922¥999,922

March 31, 2021
1

March 31, 2020

¥109,939———
30,570¥140,510

Due after 7 Years
through 10 Years¥1,230———149¥1,380¥22,153———
5¥22,158

Millions of Yen
Due after 3 Years
Due after 5 Years
through 5 Years
through 7 Years¥130,080———
86,721¥216,801

Due after 7 Years
through 10 Years¥2,184———55¥2,239Due in 1 Yearor Less

Due after 1 Yearthrough 3 Years

Thousands of U.S. Dollars
Due after 3 Years
Due after 5 Years
through 5 Years
through 7 Years

Deposits *1�������������������������������������������������������� $137,682,161
Negotiable certificates of deposit������������������������
2,629,791
Call money and bills sold������������������������������������
8,608,107
Payables under securities lending transactions����
5,607,493
Borrowed money������������������������������������������������ 28,863,708
Total����������������������������������������������������������������� $183,391,260$7,668,602
2,710
—
—
1,518,553$9,189,865$ 993,133———
276,155$1,269,288

March 31, 2021

Consolidated banking subsidiaries had the following derivative contracts, which were not quoted on listed exchanges, outstanding as of March 31, 2021 and 2020, as follows:

Millions of Yen
Due after 3 Years
Due after 5 Years
through 5 Years
through 7 Years¥18,490————¥18,490

Due after 10 Years

¥—
—
—
—
8
¥ 8

Due after 10 Years

¥—
—
—
—
—
¥—

March 31, 2021

$11,116———
1,352$12,468$200,118———
50$200,168

Due after 10 Years

$—
—
—
—
75
$75

*1 In deposits, the cash flow of demand deposits is included in “Due in one year or less.”

March 31, 2021

Bond-related transactions
Bond futures:
Sold����������������������������������������������
Bought������������������������������������������
Total���������������������������������������������������

Contract
Amount¥905——

March 31, 2020

Contract
AmountBond-related transactions
Bond futures:
Sold���������������������������������������������
Bought�����������������������������������������
Total���������������������������������������������������

¥1,546——

Millions of Yen
Contract AmountDue afterFair
One Year
Value

¥—
—
—

¥(1)
—
¥(1)

Millions of Yen
Contract AmountDue afterFair
One Year
Value

¥—
—
—

¥21
—
¥21

Unrealized
Gains/Losses

Contract
Amount

¥(1)
—
¥(1)

$8,176——

Thousands of U.S. Dollars
Contract AmountDue afterFair
One Year
Value

$—
—
—

$(17)
—
$(17)

Contract
AmountUnrealized
Gains/Losses

Receive fixed and pay floating�����
Receive floating and pay fixed�����
Cap transactions:¥164,294
164,294¥154,105
154,105¥ 3,268(1,289)¥ 3,268(1,289)$1,484,141
1,484,141$1,392,105
1,392,105$ 29,529(11,647)$ 29,529(11,647)

Sold������������������������������������������
Bought��������������������������������������
Swaption:

656
656

587
587

(0)
0

7
(4)

5,935
5,935

5,306
5,306

(3)
3

66
(41)

Sold������������������������������������������
Bought��������������������������������������
Total����������������������������������������������������

19,02019,020—19,02019,020—(96)
96¥ 1,97945
96¥ 2,123

171,816
171,816—

171,816
171,816
—

(872)
870
$ 17,881

408
870$ 19,185

Thousands of U.S. Dollars
Contract AmountDue afterFair
One Year
Value*1*2

Unrealized
Gains/Losses

Contract
AmountMillions of Yen
Contract AmountDue afterFair
One Year
Value*1*2

Unrealized
Gains/Losses

Contract
AmountCurrency-related transactions
Currency swaps�������������������������������
Forward exchange contracts:¥169,976¥142,733

¥ 209

¥ 209

$1,535,472$1,289,374$ 1,890$ 1,890

Sold������������������������������������������
Bought��������������������������������������
Currency option contracts:

64,32062,319

4,210
4,145

(2,222)
2,346(2,222)2,346

581,032
562,961

38,03537,450(20,081)
21,200(20,081)
21,200Sold������������������������������������������
Bought��������������������������������������
Total����������������������������������������������������

118,154
118,149—

76,594
76,594—(2,937)
2,945
¥ 340

375
1,767
¥ 2,476

1,067,338
1,067,295—

691,908
691,908—(26,538)
26,607$ 3,077

3,388
15,970$ 22,367

24. DERIVATIVES(1) Derivative Transactions to Which Hedge Accounting Is Not Applied as of March 31, 2021 and 2020
With respect to derivatives to which hedge accounting is not applied, contract amount or notional principal, fair value, and the related valuation gains (losses) at the fiscal
year end date by transaction type and valuation method of fair value are described below. Note that contract amounts do not represent the market risk exposure associated with derivatives.
Consolidated banking subsidiaries had the following derivative contracts, which were quoted on listed exchanges, outstanding as of March 31, 2021 and 2020, as
follows:

Unrealized
Gains/Losses

Thousands of U.S. Dollars
Contract AmountDue afterFair
One Year
Value*1*2

Interest rate-related transactions
Interest rate swaps:

March 31, 2021
Due after 7 Years
through 10 Years

Contract
AmountMillions of Yen
Contract AmountDue afterFair
One Year
Value*1*2

March 31, 2021

Contract
AmountMillions of Yen
Contract AmountDue afterFair
One Year
Value*3

Unrealized
Gains/Losses

Contract
Amount

¥(97)
97

—
—

$50,587
50,587———

Thousands of U.S. Dollars
Contract AmountDue afterFair
One Year
Value*3

Unrealized
Gains/Losses

Other transactions
Earthquake derivatives:
Sold������������������������������������������
Bought��������������������������������������

¥5,600
5,600
—

—
—
—

—
—
—

$(879)
879

—
—

—

—

Unrealized
Gains/Losses

$(17)
—
$(17)

Unrealized
Gains/Losses

¥21
—
¥21

Note: 1 The above transactions are stated at fair value, and the related valuation gains (losses) are reported in the consolidated statement of income.
2 Fair values of above transactions are determined based on closing prices at the Osaka Exchange or other relevant exchanges.

77

Mebuki Financial Group, Inc.

Annual Report 2021

78

March 31, 2020

Contract
AmountMillions of Yen
Contract AmountDue afterFair
One Year
Value*1*2

Unrealized
Gains/Losses

March 31, 2020

Interest rate-related transactions
Interest rate swaps:¥148,971
148,971¥137,184
137,184¥ 4,262(2,390)¥ 4,262(2,390)Sold������������������������������������������
Bought��������������������������������������
Swaption:

1,073
1,073

656
656

(0)
0

8
(5)

Sold������������������������������������������
Bought��������������������������������������
Total����������������������������������������������������
Currency-related transactions

15,69015,690—15,69015,690—(243)
243¥ 1,872(131)
243¥ 1,987

Currency swaps:������������������������������
Forward exchange contracts:¥216,463¥163,777

¥ 274

¥ 274

Sold������������������������������������������
Bought��������������������������������������
Currency option contracts:

96,44296,282

4,400
4,129

(1,084)
1,334(1,084)
1,334

Sold������������������������������������������
Bought��������������������������������������
Total����������������������������������������������������

121,434
121,424—

81,58981,585—(3,235)
3,241
¥ 530

269
1,926
¥ 2,720

Contract
AmountMillions of Yen
Contract AmountDue afterFair
One Year
Value*3

Receive floating and pay fixed������Securities
Total�����������������������������������������������
Currency-related transactions*2*5
Loans, securities, deposits,
Currency swaps������������������������������� foreign exchanges, etc., which
Forward exchange contracts������������ are denominated in foreign
Foreign exchange swap������������������� currencies
Total�����������������������������������������������
Equity-related transactions*3*6
Stock forward contracts¥5,5005,500—

March 31, 2021

—
—
—

¥(95)
95

¥ (834)¥85,000¥ (834)¥137,400—
92,116¥15,429—56,503¥ 2,293—(1,731)

—

—

¥ 562

Available-for-sale securities¥ 3,235

Total�����������������������������������������������

—March 31, 2021———

Hedged Item

Receive floating and pay fixed������Securities
Total�����������������������������������������������
Currency-related transactions*2*5
Loans, securities, deposits,
Currency swaps������������������������������� foreign exchanges, etc., which
Forward exchange contracts������������ are denominated in foreign
Foreign exchange swap������������������� currencies
Total�����������������������������������������������
Equity-related transactions*3*6

¥

—
—

¥ 937
¥ 937

Hedged Item

Contract
AmountMillions of Yen
Contract AmountDue after
One Year

Fair
Value

Thousands of U.S. Dollars
Contract AmountDue after
Fair
Contract
One YearValue
Amount¥   —10,309

¥   —
9,687

¥ —
(179)

$    —
93,126$    —
87,507$   —(1,626)——¥(179)——$(1,626)

Contract
AmountMillions of Yen
Contract AmountDue after
One Year

Fair
Value

¥—
11,464

¥—
6,920

¥ —
(346)

—

—

¥(346)

Interest rate-related transactions
Interest rate swaps:—

Receive fixed and pay floating������Loans and borrowed money
Receive floating and pay fixed������
Total�����������������������������������������������

Contract
AmountMillions of Yen
Contract AmountDue after
One YearThousands of U.S. Dollars
Contract AmountDue after
Fair
Contract
One YearValue
AmountFair
Value¥ 85,000¥50,000¥ 1,519$ 767,841$451,671$ 13,727¥ 85,000¥50,000¥ 1,519$ 767,841$451,671$ 13,727¥ 85,055—
130,733¥   270—
70,121¥(4,060)—(4,440)$ 768,341—
1,180,968$ 2,446—
633,438$(36,678)—(40,111)——¥(8,500)——$(76,790)

Interest rate-related transactions*1*4
Interest rate swaps:

March 31, 2020

Hedged Item

Interest rate-related transactions
Interest rate swaps:
Receive fixed and pay floating������Loans and borrowed money
Receive floating and pay fixed������
Total�����������������������������������������������

Note: The exceptional accrual method of hedge accounting, as specifically permitted for certain interest rate swaps, is valued with the hedged items as a whole so that the fair value is included in
the fair value of borrowed money and loans and bills discounted (“Note 23. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES (5) Fair Values of Financial Instruments”).

Available-for-sale securities

Sold�������������������������������������������

¥  6,946

Total�����������������������������������������������

—Mebuki Financial Group, Inc.

¥85,000¥ 85,000

Consolidated banking subsidiaries had the following derivative contracts, which were accounted for by the exceptional accrual method, outstanding as of March 31,
2021:

Unrealized
Gains/Losses(2) Derivative Transactions to Which Hedge Accounting Is Applied as of March 31, 2021 and 2020
With respect to derivatives to which hedge accounting is applied, contract amount or notional principal and fair value at the fiscal year end date by transaction type andhedge accounting method and valuation method of fair value are as follows. Note that contract amounts do not represent the market risk exposure associated with derivatives.
Consolidated banking subsidiaries had the following derivative contracts, which were accounted for based on the principle method, outstanding as of March 31,
2021 and 2020, as follows:79¥ 85,000

Note: 1. Interest rate-related transactions are primarily accounted for using the deferral method in accordance with “Accounting and Auditing Treatment relating to the Adoption of ‘Accounting
for Financial Instruments’ for Banks” (JICPA Industry Audit Committee Report No. 24, February 13, 2002).
2. Currency-related transactions are primarily accounted for using the deferral method in accordance with “Accounting and Auditing Treatment relating to Accounting for Foreign Currency
Transactions in the Banking Industry” (JICPA Industry Audit Committee Report No. 25, July 29, 2002).
3. Equity-related transactions are accounted for using the deferral method.
4. Fair values of exchange-traded transactions are determined based on closing prices at the Tokyo Financial Exchange or other relevant exchanges. Fair values of over-the-counter-traded transactions are determined based on a discounted cash flow model, an option-pricing model, or other models, as appropriate.
5. Fair value is determined based on a discounted cash flow model.
6. Fair value is determined based on prices provided by correspondent financial institutions.

Note: *1 The above transactions are stated at fair value and the related valuation gains (losses) are reported in the consolidated statement of income.
*2 Fair values of above transactions are determined based on a discounted cash flow model, an option-pricing model, or other models as appropriate.
*3 Acquisition costs are regarded as fair value as it is extremely difficult to determine the fair appraised value.

Stock forward contracts

Fair
Value

Sold�������������������������������������������

Other transactions
Earthquake derivatives:
Sold������������������������������������������
Bought��������������������������������������

Contract
AmountInterest rate-related transactions*1*4
Interest rate swaps:

Receive fixed and pay floating�����
Receive floating and pay fixed�����
Cap transactions

March 31, 2020

Hedged Item

Millions of Yen
Contract AmountDue after
One Year

¥

—
—

¥ 272
¥ 272

$

62,746—$——$ 2,458$ 2,458

Annual Report 2021

80

25. OTHER COMPREHENSIVE INCOME (LOSS)

26. SEGMENT INFORMATION

27. RELATED-PARTY TRANSACTIONS

The components of other comprehensive income (loss) for the years ended
March 31, 2021 and 2020, were as follows:

Under ASBJ Statement No. 17, “Accounting Standard for Segment Information
Disclosures,” and ASBJ Guidance No. 20, “Guidance on Accounting Standard for
Segment Information Disclosures,” an entity is required to report financial anddescriptive information about its reportable segments. Reportable segments areoperating segments or aggregations of operating segments that meet specified
criteria. Operating segments are components of an entity about which separate
financial information is available, and such information is evaluated regularly by
the chief operating decision maker in deciding how to allocate resources and inassessing performance. Generally, segment information is required to be reported on the same basis as is used internally for evaluating operating segment performance and deciding how to allocate resources to operating segments.
The Group engages in banking and other related activities, such as leasing,securities, and credit card services. Segment information is not disclosed due tothe immateriality of operations other than banking.

Related-party transactions of consolidated subsidiaries of the Company with its directors or major individual shareholders for the years ended March 31, 2021 and 2020,
were as follows:Year ended March 31, 2021

Millions of Yen
2021
2020

Unrealized gains (losses)
on available-for-sale securities:(Losses) gains arising during theyear�������������������������������������������� ¥115,932
Reclassification adjustments
to profit or loss����������������������������� (3,731)
Amount before
income tax effect��������������������� 112,201
Income tax effect���������������������� (34,009)
Total������������������������������������������������� ¥ 78,192
Deferred gains (losses) on derivatives
under hedge:
Gains arising during the year���������� ¥ 2,118
Reclassification adjustments(25)
to profit or loss�����������������������������
Amount before income tax
effect��������������������������������������
2,093
(636)
Income tax effect����������������������
Total������������������������������������������������� ¥ 1,457
Land revaluation excess, net of taxes:
Gains arising during the year���������� ¥     —Reclassification adjustments
to profit or loss�����������������������������
—Amount before income tax
effect��������������������������������������
—Income tax effect����������������������
—Total������������������������������������������������� ¥     —Defined retirement benefit plans:(Losses) gains arising during theyear�������������������������������������������� ¥ 17,382
Reclassification adjustments toprofit or loss��������������������������������
1,611
Amount before income tax
effect�������������������������������������� 18,994
Income tax effect���������������������� (5,774)
Total������������������������������������������������� ¥ 13,219
Total other comprehensive loss����������� ¥ 92,869

Thousands of
U.S. Dollars
2021¥(72,359)$1,047,269(3,504)(33,705)(75,864)
22,643¥(53,220)1,013,565(307,221)$ 706,344¥   837$   19,140(1,990)(228)(1,153)351¥   (801)

18,912(5,748)$   13,163¥    —$      ———

—0¥     0——$      —¥ (4,623)$ 157,028

554

14,555(4,069)1,237¥ (2,831)¥(56,853)

171,583(52,165)$ 119,418$ 838,925

March 31, 2021

Millions of Yen (Thousands of U.S. Dollars)
Lending
Investment
Operations
Operations
Other
Total

Total income
from external¥108,277
customers�������������� ($978,118)

March 31, 2020

Total income
from externalcustomers��������������

Lending
Operations¥112,331¥68,606($619,752)¥97,841¥274,726($883,847) ($2,481,717)

Millions of Yen
Investment
Operations
Other¥74,700¥95,705

Total¥282,737

Location

Kinichi Suzuki

—

—

Type

A director or
director’s close relative

Business

Ownerships

Relationship

—

—

—

Transactions(Millions of Yen/
Thousands of U.S. Dollars)

Loan

¥99
($897)

Outstanding Balance(Millions of Yen/
Thousands of U.S. Dollars)

Loans andbills
discounted¥99($894)

Terms and conditions on transactions and transaction policy:
The interest rate on loans is reasonably determined considering the market rate.

Year ended March 31, 2020
Type

A director or
director’s close relative

Other segment-related information:(1) Information by services

Name

Capital(Millions of Yen/Thousands of
U.S. Dollars)Name

Location

Capital(Millions of Yen)

Business

Ownerships

Relationship

Kinichi Suzuki

—

—

—

—

—

Loan

¥102

Yoshie Suto

—

—

—

—

—

Loan

¥134

Yoshihiro Ono

—

—

—

—

—

Loan

¥12

Gunma

¥7

Steel
manufacturing

—

—

Loan

¥11

Companies in which a
Hoshinomajority of voting rights
Seisakusyo
are owned by a director orCo., Ltd.
director’s close relatives

Transactions(Millions of Yen)

Outstanding Balance(Millions of Yen)

Loans andbills
discounted
Loans andbills
discounted
Loans andbills
discounted
Loans andbills
discounted

¥100
¥133
¥11

¥11

Terms and conditions on transactions and transaction policy:
The interest rate on loans is reasonably determined considering the market rate.

(2) Information by geographic region
Since the ordinary income and total tangible fixed assets attributable to the “Japan” segment account for more than 90% of the total of all geographic segments, geographical segment information has not been presented.
(3) Information by major customers
Since there has been no specific customer to whom the Group sells more than
10% of total ordinary income on the consolidated statement of income, information on major customers has not been presented.
(4) Information on loss on impairment of fixed assets by reportable segment
Information on loss on impairment of fixed assets is not disclosed due to immateriality, except for the banking business.
(5) Information on amortization and unamortized balance of goodwill by reportable segment
Information on amortization and unamortized balance of goodwill is not disclosed
due to immateriality, except for the banking business.
(6) Information on gain on negative goodwill by reportable segment
Information on gain on negative goodwill is not disclosed due to immateriality,
except for the banking business.

81

Mebuki Financial Group, Inc.

Annual Report 2021

82

28. SUBSEQUENT EVENTS
Acquisition of treasury stock
At the Board of Directors’ meeting held on May 12, 2021, the Company resolved to acquire treasury stock for the purpose of enhancement of shareholder returns and improving capital efficiency, pursuant to the provisions of the Articles of Incorporation in accordance with the provision of Article 459, Paragraph 1, of the Companies Act.
The repurchase of treasury stock pursuant to the resolution of that meeting has completed.
1. Contents of the resolution adopted by the Board of Directors’ meeting held on May 12, 2021
(1) Class of shares to be acquired:

Common stock(2) Total number of shares to be acquired:

60,000,000 shares (upper limit)(3) Total acquisition cost:¥16,000 million (upper limit) ($144,535 thousand)(4) Period of acquisition:

From May 13, 2021, to August 31, 2021

(5) Method of acquisition:

Market purchases including an off floor own share repurchase trading on the Tokyo Stock Exchange ( ToSTNeT 3 )2. Status of acquisition of treasury stock(1) Class of shares acquired:

Common stock(2) Total number of shares acquired:

60,000,000 shares(3) Total acquisition cost:¥14,520 million ($131,165 thousand)(4) Date of acquisition

May 13, 2021

(5) Method of acquisition:

Through off floor own share repurchase trading on the Tokyo Stock Exchange ( ToSTNeT 3 )Establishment of subsidiary
Based on the premise of obtaining approvals by authorities concerned, The Ashikaga Bank, Ltd. (a wholly owned subsidiary of the Company) will establish the wholly
owned subsidiary named “Ashigin Money Design, Ltd.,” which provides securities intermediation services professionally.

83

Mebuki Financial Group, Inc.

Annual Report 2021

84

85

Mebuki Financial Group, Inc.

Annual Report 2021

86

87

Mebuki Financial Group, Inc.

Annual Report 2021

88

Non-Consolidated Balance Sheet (Unaudited)

Non-Consolidated Statement of Income (Unaudited)

March 31, 2021 The Joyo Bank, Ltd.

Millions of Yen
2021
2020

89

Year Ended March 31, 2021

Thousands of
U.S. Dollars
2021

ASSETSCash and due from banks��������������������������������������������������������������������������������������� ¥ 3,977,233
2,160
Call loans and bills bought ��������������������������������������������������������������������������������������
5,601
Monetary claims bought �����������������������������������������������������������������������������������������
Trading assets �������������������������������������������������������������������������������������������������������
10,113
3,024,670
Securities���������������������������������������������������������������������������������������������������������������
Loans and bills discounted��������������������������������������������������������������������������������������
6,856,163
Foreign exchanges �������������������������������������������������������������������������������������������������
5,269
83,674
Other assets ����������������������������������������������������������������������������������������������������������
Tangible fixed assets ���������������������������������������������������������������������������������������������
71,875Intangible fixed assets ��������������������������������������������������������������������������������������������
7,735
6,961
Prepaid pension cost ���������������������������������������������������������������������������������������������
Customers’ liabilities for acceptances and guarantees����������������������������������������������
17,084
Allowance for loan losses����������������������������������������������������������������������������������������
(37,734)(9)
Allowance for investment losses������������������������������������������������������������������������������
TOTAL�������������������������������������������������������������������������������������������������������������� ¥14,030,800¥ 1,118,929
12,778
5,901
13,124
2,837,426
6,759,983
10,224
83,68574,635
7,998
7,102
12,897(32,903)(292)¥10,911,493$ 35,928,037
19,51750,59891,35527,323,132
61,934,633
47,603755,871649,278
69,87662,887
154,329(340,868)(81)$126,746,165

LIABILITIES AND EQUITY
LIABILITIES:
Deposits ���������������������������������������������������������������������������������������������������������������� ¥ 9,705,556
Negotiable certificates of deposit�����������������������������������������������������������������������������
143,702911,314
Call money and bills sold ����������������������������������������������������������������������������������������
Payables under repurchase agreement��������������������������������������������������������������������
127,201
Payables under securities lending transactions���������������������������������������������������������
378,015
1,024
Trading liabilities�����������������������������������������������������������������������������������������������������
Borrowed money����������������������������������������������������������������������������������������������������
2,007,229
Foreign exchanges��������������������������������������������������������������������������������������������������
672
Bonds �������������������������������������������������������������������������������������������������������������������
—Due to trust account�����������������������������������������������������������������������������������������������
1,432
Other liabilities��������������������������������������������������������������������������������������������������������
43,422
Provision for bonuses for directors���������������������������������������������������������������������������
124
Provision for retirement benefits������������������������������������������������������������������������������
6,999
Provision for reimbursement of deposits�������������������������������������������������������������������
1,621
Provision for point card certificates��������������������������������������������������������������������������
120
Provision for contingent losses��������������������������������������������������������������������������������
1,094
Deferred tax liabilities����������������������������������������������������������������������������������������������
30,921
Deferred tax liabilities for land revaluation����������������������������������������������������������������
7,946
Acceptances and guarantees�����������������������������������������������������������������������������������
17,084
Total liabilities��������������������������������������������������������������������������������������������������� ¥13,385,486¥ 8,973,110
84,27973,25767,430110,835
1,770
938,779
1,689
5,000
1,199
35,559
121
7,618
1,923
121
952
9,501
8,000
12,897¥10,334,047$ 87,674,403
1,298,128
8,232,289
1,149,063
3,414,777
9,255
18,132,151
6,075—
12,939392,257
1,127
63,228
14,6491,091
9,890
279,331
71,786
154,329$120,916,768

EQUITY:
Common stock������������������������������������������������������������������������������������������������������� ¥    85,113
Capital surplus�������������������������������������������������������������������������������������������������������
58,574Retained earnings���������������������������������������������������������������������������������������������������
367,837
Valuation adjustments: �������������������������������������������������������������������������������������������
133,789
Unrealized gains on available-for-sale securities��������������������������������������������������
120,713
Deferred losses on derivatives under hedge accounting���������������������������������������
1,135
Land revaluation surplus �����������������������������������������������������������������������������������
11,940Total equity��������������������������������������������������������������������������������������������������
645,314TOTAL������������������������������������������������������������������������������������������������������������������������� ¥14,030,800¥    85,113
58,574
352,538
81,22069,472(180)
11,928577,446¥10,911,493$    768,862
529,124
3,322,836
1,208,575
1,090,455
10,258107,8625,829,397$126,746,165

Mebuki Financial Group, Inc.

The Joyo Bank, Ltd.

Millions of Yen
2021
2020

INCOME:Interest income:Interest on loans and bills discounted�����������������������������������������������������������������
Interest and dividends on securities��������������������������������������������������������������������
Interest on call loans and bills bought�����������������������������������������������������������������
Interest on deposits with banks��������������������������������������������������������������������������
Other interest income����������������������������������������������������������������������������������������
Trust Fees �������������������������������������������������������������������������������������������������������������
Fees and commissions��������������������������������������������������������������������������������������������
Trading income �����������������������������������������������������������������������������������������������������
Other operating income�������������������������������������������������������������������������������������������
Other income ��������������������������������������������������������������������������������������������������������
Total income������������������������������������������������������������������������������������������������
EXPENSES:Interest expenses:
Interest on deposits�������������������������������������������������������������������������������������������
Interest on negotiable certificates of deposit��������������������������������������������������������
Interest on call money and bills sold�������������������������������������������������������������������
Interest on payables under repurchase agreements���������������������������������������������
Interest on payables under securities lending transactions�����������������������������������
Interest on borrowed money�������������������������������������������������������������������������������
Interest on bonds����������������������������������������������������������������������������������������������
Interest on interest swap������������������������������������������������������������������������������������
Other interest expenses�������������������������������������������������������������������������������������
Fees and commissions��������������������������������������������������������������������������������������������
Other operating expenses����������������������������������������������������������������������������������������
General and administrative expenses�����������������������������������������������������������������������
Provision of allowance for loan losses����������������������������������������������������������������������
Other expenses������������������������������������������������������������������������������������������������������
Total expenses���������������������������������������������������������������������������������������������
INCOME BEFORE INCOME TAXES���������������������������������������������������������������������������������
INCOME TAXES:
Current������������������������������������������������������������������������������������������������������������������
Deferred�����������������������������������������������������������������������������������������������������������������
Total income taxes���������������������������������������������������������������������������������������NET INCOME���������������������������������������������������������������������������������������������������������������

Thousands of
U.S. Dollars
2021¥ 59,980
29,756
16
662
374
28
26,242365
1,056
21,973
140,457¥ 63,264
36,802
99
325
401
46
26,145517
6,666
16,319150,589$ 541,830
268,799
148
5,981
3,384
260
237,062
3,305
9,544
198,495
1,268,809

1,138
10
(57)
25
31
662
18
641
534
8,983
4,046
63,218
9,509
16,958105,720
34,736

3,760
23
623
378
38
1,550
132
2,150
474
8,992
5,934
64,791
5,196
22,187116,236
34,353

10,284
92
(520)
233
282
5,983
171
5,792
4,829
81,15036,552571,075
85,900153,197
955,020
313,789

11,740(1,515)
10,255¥ 24,511

10,851(1,151)
9,699¥ 24,653

106,057(13,689)
92,369$ 221,421

Annual Report 2021

90

Non-Consolidated Balance Sheet (Unaudited)

Non-Consolidated Statement of Income (Unaudited)

March 31, 2021 The Ashikaga Bank, Ltd.

Millions of Yen
2021
2020

Year Ended March 31, 2021

Thousands of
U.S. Dollars
2021

ASSETSCash and due from banks��������������������������������������������������������������������������������������� ¥2,447,722¥ 816,321$22,111,318
4,649
5,976
42,000Call loans and bills bought���������������������������������������������������������������������������������������
6,048
5,947
54,635
Monetary claims bought������������������������������������������������������������������������������������������
Trading account securities��������������������������������������������������������������������������������������
2,312
2,507
20,8901,970
117,796
Money held in trust�������������������������������������������������������������������������������������������������
Securitieswith���������������������������������������������������������������������������������������������������������������
11,757,420
Togetherlocal communities, we will continue1,301,546
to build1,257,599
a more prosperous
Loans and bills discounted��������������������������������������������������������������������������������������
4,943,603
4,717,392
44,657,665
4,324
5,925
39,067
Foreign exchanges��������������������������������������������������������������������������������������������������
futureby providing high-quality comprehensive
Otherassets�����������������������������������������������������������������������������������������������������������
81,652financial
86,845services.
737,599
Tangible fixed assets����������������������������������������������������������������������������������������������
28,48528,201
257,325
9,922
10,94089,631Intangible fixed assets���������������������������������������������������������������������������������������������
Prepaid pension cost����������������������������������������������������������������������������������������������
25,35823,351
229,074
The ingenuityof the entire Group will be combined to contribute to sustainablegrowthin communities.
Deferred tax assets�������������������������������������������������������������������������������������������������
—
4,903
—
9,256
10,131
83,614
Customers’ liabilities for acceptances and guarantees����������������������������������������������
We willAllowancebuild aforbetter
future together with local communities, seeking
solutions(27,311)
to challenges that
affectloan losses����������������������������������������������������������������������������������������
(35,153)(317,556)
TOTAL�������������������������������������������������������������������������������������������������������������� ¥8,831,699¥6,948,735$79,780,479

Group Philosophy of Mebuki Financial Groupthese communities by providing high-quality, comprehensive financial services.

LIABILITIES AND EQUITY
LIABILITIES:
Deposits ���������������������������������������������������������������������������������������������������������������� ¥6,551,940¥5,813,460
196,765
265,902
Negotiable certificates of deposit�����������������������������������������������������������������������������
Call money and bills sold ����������������������������������������������������������������������������������������
41,60337,487
Payables under repurchase agreement��������������������������������������������������������������������
3,053
61,765
242,733
104,712
Payables under securities lending transactions���������������������������������������������������������
Borrowed money����������������������������������������������������������������������������������������������������
1,380,253
276,937
Foreign exchanges��������������������������������������������������������������������������������������������������
232
251
Due to trust account�����������������������������������������������������������������������������������������������
874
374
Other liabilities��������������������������������������������������������������������������������������������������������
30,725
27,132
Provision for bonuses for directors���������������������������������������������������������������������������
122
108
Provision for reimbursement of deposits�������������������������������������������������������������������
838
951
Provision for contingent losses��������������������������������������������������������������������������������
899
1,189
Provision for point card certificates��������������������������������������������������������������������������
260
237
Deferred tax liabilities����������������������������������������������������������������������������������������������
2,406—
Acceptances and guarantees�����������������������������������������������������������������������������������
9,256
10,131
Total liabilities���������������������������������������������������������������������������������������������������The Japanese word mebuki, or “green shoots,” conveys an ¥8,461,966
image of new¥6,600,643
leaves budding$59,186,452
1,777,462
375,818
27,5882,192,717
12,468,411
2,103
7,903
277,553
1,111
7,575
8,128
2,350
21,743
83,614$76,440,525

on tree branches. This word is used in the Group’s name to express its approach of drawing
EQUITY:¥ 135,000¥ 135,000
Common stock�������������������������������������������������������������������������������������������������������
on the knowledge and creativity of each of its companies
to create fresh
ideas andRetained earnings:��������������������������������������������������������������������������������������������������
189,385
188,074
new value. The name Mebuki expresses our wish to create new energy and value
Valuation adjustments:��������������������������������������������������������������������������������������������
45,34725,016
in gains
localoncommunities
pursuesustainable growth along 46,094
with these communities.
Unrealized
available-for-saleandsecurities��������������������������������������������������
25,905
Deferred losses on hedges���������������������������������������������������������������������������������
(747)
(888)
Total equity��������������������������������������������������������������������������������������������������
369,732
348,091
TOTAL������������������������������������������������������������������������������������������������������������������������� ¥8,831,699¥6,948,735$ 1,219,512
1,710,802
409,639
416,390(6,751)
3,339,953$79,780,479

Mebuki
Financial
Group,
Financial
Group,
Inc.Inc.
1 91 Mebuki

The Ashikaga Bank, Ltd.

Millions of Yen
2021
2020

INCOME:Interest income:Interest on loans and bills discounted �����������������������������������������������������������������
Interest and dividends on securities ��������������������������������������������������������������������
Interest on call loans and bills bought �����������������������������������������������������������������
Interest on deposits with banks ��������������������������������������������������������������������������
Other interest income ����������������������������������������������������������������������������������������
Trust Fees ��������������������������������������������������������������������������������������������������������������
Fees and commissions��������������������������������������������������������������������������������������������
Other operating income�������������������������������������������������������������������������������������������
Other income ���������������������������������������������������������������������������������������������������������
Total income ������������������������������������������������������������������������������������������������
EXPENSES:Interest expenses:
Interest on deposits �������������������������������������������������������������������������������������������
Interest on negotiable certificates of deposit ��������������������������������������������������������
Interest on call money and bills sold �������������������������������������������������������������������
Interest on payables under repurchase agreements ���������������������������������������������
Interest on payables under securities lending transactions �����������������������������������
Interest on borrowed money �������������������������������������������������������������������������������
Interest on interest swap ������������������������������������������������������������������������������������
Other interest expenses �������������������������������������������������������������������������������������
Fees and commissions payments ����������������������������������������������������������������������������
Other operating expenses ���������������������������������������������������������������������������������������
General and administrative expenses �����������������������������������������������������������������������
Provision of allowance for loan losses ����������������������������������������������������������������������
Other expenses �����������������������������������������������������������������������������������������������������
Total expenses ���������������������������������������������������������������������������������������������
INCOME BEFORE INCOME TAXES ��������������������������������������������������������������������������������
INCOME TAXES:
Current ������������������������������������������������������������������������������������������������������������������
Deferred�����������������������������������������������������������������������������������������������������������������
Total income taxes ���������������������������������������������������������������������������������������NET INCOME ���������������������������������������������������������������������������������������������������������������

Thousands of
U.S. Dollars
2021¥47,171
19,602
(2)
896
69
10
21,235
1,517
8,757
99,258¥47,945
20,59613356
104
521,670927
4,655
96,275$426,121
177,081
(23)
8,098
628
91
191,827
13,71079,112896,645

462
32
18
140
414
218
225
917
7,043
3,304
49,1599,427
4,442
75,80823,450

1,605
51
332
1,648
1,325
135
1,042
626
7,515
1,285
51,0784,652
8,892
80,19416,081

4,178
297
163
1,270
3,743
1,973
2,039
8,292
63,62929,850444,080
85,16040,134
684,807
211,838

7,294(1,508)
5,785¥17,664

4,341
495
4,836
¥11,245

65,891(13,626)
52,266$159,572

Annual Report 2021

92