Annual Report
2019Year Ended March 31, 2019

Corporate
History (As Statementof March 31, 2019) of Income (Unaudited)
Non-Consolidated
Contents
Year Ended March 31, 2019

The Ashikaga Bank, Ltd.

Notice Regarding the Basic
Agreement Concerning a Business
November 2015

Group Philosophy of the 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.

Securities Co., Ltd. (formerly known
as The Joyo Securities Co., Ltd.)
from The Joyo Bank, Ltd.

The Japanese word mebuki, or “green shoots,” conveys an image of new leaves budding
on tree branches. This word is used in the Group’s name to express its approach of drawing

December 2017

new value. The name Mebuki expresses our wish to create new energy and value
in local communities and pursue sustainable growth along with these communities.

Thousands ofDevelopmentsMillionsof Mebuki.............3of Yen Financial GroupU.S.
Dollars
2019

2018

2019

A Message from the Management ........................5
INCOME:
Exchange of The Joyo Bank, Ltd.
Interest income:and Ashikaga Holdings Co., Ltd.
Interest on loans and bills discounted �����������������������������������������������������������������
¥48,772¥49,379$439,433
SDGs/ESG
Initiatives ..........................................15
Interest and dividends on securities ��������������������������������������������������������������������
29,47422,655265,557
Notice Regarding Definitive
Interest on call loans and bills bought �����������������������������������������������������������������
37 Group for Sustainable
370
The Initiatives of41Mebuki Financial
Interest on deposits
with banks ��������������������������������������������������������������������������
344Local Communities
361
3,104
Agreement
Concerning the........................16
Growth with the
Other interest income ����������������������������������������������������������������������������������������
132
88
1,197
Business Integration of The Joyoand commissions��������������������������������������������������������������������������������������������
22,100business models
21,169 with local regions
199,126
AprilFees
2016
Create growth
...16
Bank,
Ltd. and Ashikaga Holdings
Other operating income�������������������������������������������������������������������������������������������
3,320
1,267
29,916
Other income ���������������������������������������������������������������������������������������������������������
16,543
4,139
149,057
Structural
Reform for Enhanced
Productivity....19Co., Ltd. through a ShareTotal income ������������������������������������������������������������������������������������������������
120,730
99,097
1,087,759
Exchange
EXPENSES:
Developing Human Resources for Value Creation ...20
Interest expenses:
Approvalof stock exchangeInterest on deposits�������������������������������������������������������������������������������������������
2,203
1,236
19,850
Environmental
Initiatives ......................................21
Interest on negotiablecertificatesof
deposit��������������������������������������������������������
68
82
617
agreement at the ordinary general
Interest on call money and bills sold �������������������������������������������������������������������
28
9,744
Initiatives to1,081
Create “Local Communities”............22
meetingof shareholders
The
June 2016
Interest on payables
under repurchaseagreementsof���������������������������������������������
281
—
2,536
Interest on payables
undersecurities
lendingtransactions
2,308
1,249
20,797
Joyo Bank, Ltd. and Ashikaga �����������������������������������
Financial/Non-Financial Highlights.......................23
Interest on borrowed money �������������������������������������������������������������������������������
135
61
1,218
Holdings
Co.,
Ltd.
Other interest expenses �������������������������������������������������������������������������������������
1,633
1,934
14,716
Governance of Mebuki Financial Group ..............25
Fees and commissions payments ����������������������������������������������������������������������������
7,162
7,275
64,530Establishmentof the Mebuki
Other operating expenses���������������������������������������������������������������������������������������
5,013
2,808
45,168
Corporate Governance ....................................25
October 2016
General and administrative
expenses�����������������������������������������������������������������������
49,08847,307442,277
Financial Group, Inc.
Provision of allowance for loan losses ����������������������������������������������������������������������
1,268
2,591
11,428Group Structure and Corporate Data ...............28
Other expenses �����������������������������������������������������������������������������������������������������
10,6493,847
95,947
Acquired all shares of Mebuki
Total expenses ���������������������������������������������������������������������������������������������
80,892
68,422
728,828
List of Directors ...............................................29
Lease
Ltd. (formerly known as
INCOME BEFORE INCOME
TAXESCo.,��������������������������������������������������������������������������������
39,83730,675358,932
April 2017
INCOME TAXES:The Joyo Lease Co., Ltd.) from The
Risk Management System ...............................31
Current ������������������������������������������������������������������������������������������������������������������
8,351
7,900
75,243
Joyo
Bank,
Ltd.
Deferred�����������������������������������������������������������������������������������������������������������������
195
1,420
1,761
Initiatives for Compliance .................................33
Total income taxes ���������������������������������������������������������������������������������������
8,546
9,320
77,004
Acquired all shares of Mebuki
NET INCOME ���������������������������������������������������������������������������������������������������������������
¥31,291¥21,354$281,928
October 2017

on the knowledge and creativity of each of its companies to create fresh ideas andIntegration through a ShareGroup Philosophy of Mebuki Financial Group .........1

March 2018

Opened The Ashikaga Bank, Ltd.

Market of the Group ...........................................35
Mebuki Financial Group’s Overseas BusinessSupport Activities ...............................................37

Organization .......................................................39

Bangkok Representative Office

Stock Information ...............................................39

Opened The Joyo Bank, Ltd. Hanoi

Financial Data ............................................... 40-74

Representative OfficeDisclaimer regarding forward-looking statements
This Annual Report contains certain forward-looking statements, including estimates, forecasts, targets andplans. 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
by management of future performance. We are under no obligation, and disclaim any obligation, to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise.
Annual Report 20191

Mebuki Financial Group, Inc.

Annual Report 2019742

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

Opened Funabashi Branch/
Funabashi Loan Plaza.

Opened Koto Branch.

Future Plan
Opened Tokorozawa Branch.

January
2020

Establishment of Mebuki Financial
Group, Inc. through business integration* March 2018: Relocated to new premises.

- Joyo Lease had its trade name changed to “Mebuki
Lease” and was turned into a directly and whollyowned subsidiary of the Company.
- Integrated the leasing operations within the Group.
- Expanded business units in Tochigi Prefecture to
three (i.e., Utsunomiya, Oyama and Ashikaga).

* May 2018: Relocated to new premises.

January
2018

Reciprocated ATM
installation

December
2017

March
2018

September
2018

October
2018

November
2018

Opened Saitama Office.

Complete system
integration.

October
2017
June
2017

Opened Bangkok Representative
Office.

April
2017
Opened Oji Branch.

October2016

3

Mebuki Financial Group, Inc.

- Mebuki Securities was turned into a
directly and wholly-owned subsidiary of
the Company. Opened Utsunomiya Branch.

Opened Hanoi Representative
Office.

- Joyo Securities had its trade namechanged to “Mebuki Securities.”- Increased the number of Ashikaga
Bank’s branches which provide
financial product intermediary services
from 13 to 128.

Annual Report 20194

Provide universal value through continuous change
Become a comprehensive financial services group that builds the region’s future

A Message from the Management
The business integration enters the 2nd stage:
The finance industry, regional financial institutions in particular, is currently entering aperiod of major change. We continue to suffer the effects of the prolonged negative interest rate policy of the Bank of Japan as well as the high levels of corporate surplus
funds, and there appears to be nothing in the future that would suggest a rise in interest rates. Moreover, while a series of high-yield JGBs will reach redemption in the next
couple of years, given recent interest-rate levels, it is highly unlikely that companies will
choose to reinvest such funds in JGBs, which, in turn, will have a serious impact on
the profits of regional financial institutions. Furthermore, in the long-term, there are concerns for the shrinking regional economy due to the aging population and population
decline.
In such conditions, it is clear that we need to depart from the conventional banking
business led by loan business which has been largely dependent on interest income
and engage in businesses in new domains that are capable of promptly responding to
the needs of local communities. In order to develop new businesses that meet theneeds of local communities and our customers, a stronger management base andmore diverse management resources will become indispensable.
Mebuki Financial Group (the “Company”), which in October 2016 was born in anticipation of such needs through a business integration between Joyo Bank and Ashikaga
Bank (Ashikaga Holdings), will commemorate its third anniversary. Looking back on thebusiness integration, I recall that the region at that time was facing numerous social issues including business and asset succession resulting from a declining and aging
population, as well as the need for steady asset building in line with life plans, among
others. As the two leading banks of the region, with similar visions of growing together
with the region as regional financial institutions, and a desire to face these issues andensure the sustained development of the region and both banks, we decided to enter
into a business integration.
Since the launch of the Group, we have been engaged in major management reforms under the “First Medium-Term Group Business Plan (October 2016 to March2019), including the review of the cost structure through the integration and concentration of the business structure and Group functions, while contributing to the
problem-solving of our customers by providing a wide range of services that leverage
our strengths as regional banks. We have been steadily realizing the effects of synergy
from the business integration and as a result, we have been able to achieve increases
in both revenue and profits for FY2018, despite the increasingly harsh management
environment surrounding regional financial institutions.

Ritsuo Sasajima, President
Mebuki Financial Group, Inc.
5

Mebuki Financial Group, Inc.

Masanao Matsushita, Executive Vice President
Mebuki Financial Group, Inc.
Annual Report 20196

Consistently pursue “the value required by our customers” and continue to be an
indispensable presence for the region

Strengths of Mebuki Financial Group:
A wide-area network and high value-added, one-stop financial services

There are multitudes of

We have been accumulating vast amounts of information, including information on thecompanies around the

problems facing customers in the various industries and business types of the region

world of various businessand customer attributes. We have also earned the deep trust of our customers fromtypes and industries, andhaving long been rooted in the local communities and maintaining relationships. The

each one of these compa-

deep understanding of the local communities and the relationships of both banksnies owes its existence(30,000 corporate customers and 1,800,000 individual customers who consider us as

and its ability to continue

their main banks) acquired from having been closely linked to the community over thebusiness to the existence

years, and the wide-area network born from the integration are our strengths.

of customers who require

Furthermore, the Group is capable of providing the local communities and its cus-

the company’s products

tomers with one-stop “comprehensive financial services” based on its banking, leasing

and services. It goes with-and securities businesses, by effectively utilizing its management resources includingout saying that unless we

its abundant and highly-skilled human resources and the expertise accumulated byprovide the value required

both banks as the region’s leading banks.

by our customers, we will

We pride ourselves on being able to offer optimal solutions to our customers in the

not be paid consideration and will not be viable as a business. While the times and theregion, as we alone are a Group capable of providing advanced coordination and con-business environment may undergo changes, we will ensure the prosperous future ofsultation beyond mere matching through our wealth of high-quality information and theour customers and the region, and ultimately the improvement of the Company’s cor-

deep trust of our customers.

porate value, supported by the deep trust placed in us by the region’s customers, andby leveraging the collective strengths of the Group to pursue and provide “the value
required by our customers.” This commitment is embodied by the Group Philosophy,“together with local communities, we will continue to create a more prosperous future

Miyagi Prefecture(1 branch)by providing high-quality, comprehensive financial services.” As a “comprehensive
financial services group building the region’s future,” we will continue to provide products and services of value to customers and continue to be an indispensable presence
for the region. This, I believe, is the significance of our existence.

Overseas (6 locations)

ShanghaiHong Kong
Hanoi

Osaka Prefecture(1 branch)

New York

BangkokIn the past, customers, in most cases, required funds from a bank. Today, however,Singaporecustomers mainly demand solutions to the problems surrounding their businesses. The

Fukushima Prefecture(11 branches)region faces a wide range of issues, including climate change, the promotion of diversity and Sustainable Development Goals (SDGs)/ESG, responses to global digitalization,
contributing to the improvement of corporate performance and productivity ofcustomers, contributing to personal asset building, as well as the issues of population

Tochigi Prefecture(120 branches)

decline and aging. It would not be an exaggeration to say that initiatives toward ESG
and SDGs, which are increasingly being used as benchmarks for the evaluation of
corporate value, have been the epitome of the corporate activities of the Company, as

Gunma Prefecture(15 branches)

an integral part of the region, since our founding. Going forward we will continue tokeep the Group’s corporate value and the significance of our existence in mind andcontribute to customers and to the region.

Saitama Prefecture(20 branches)

Ibaraki Prefecture(154 branches)

Network of branches(As of March 31, 2019)(Joyo Bank + Ashikaga Bank)

Domestic: 337 branches

Overseas: 6 locationsTokyo(8 branches)
Chiba Prefecture(7 branches)

7

Mebuki Financial Group, Inc.

Annual Report 20198

The value creation process of Mebuki Financial Group:
Creating a business model that grows with local communities, and contributing to
the sustainable growth of society by providing value to stakeholders
While “the business that grows with local communities” is a new business model that goes beyond theProviding these types of value to customers, the local communities and shareholders will revitalize the re-framework of the conventional banking business, its essence is “to offer the value required by our custom-

gional economy, enhance customer satisfaction, improve the company brand and offer job satisfaction anders” and remains unchanged. In addition to contributing to the local communities through providing thea happy organization to the employees. By continuing to provide various types of value to our stakeholders

value required by our customers, we will engage in efficient and highly-profitable management and ensure

including “Communities,” “Customers,” “Shareholders” and “Employees,” we will improve our own corpo-

shareholder returns and the improvement of corporate value in the medium- to long-term by building a

rate value, while contributing to the sustainable growth of local communities.

highly-productive management platform backed by a sound financial capital.

SocialissuesGroup
Philosophy

Providing comprehensive financial services

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

Providing value to stakeholders(details on p. 16-24)

Business model of Mebuki Financial Group
Population
declineAging
Assetbuilding
Asset
succession

Human resources
Networks

Joyo Bank
Ashikaga Bank

Think tank
 xpertise andEsolutionsIntegrated systems

supporting the financial infrastructure Initiatives for regional contribution andenvironmental conservation activities

Asset
management

Customers(Mebuki Securities)

The Joyo Industrial Research InstituteAshigin Research Institute

Providing one-stop
financial functions

Lease E nhancement of financial literacy
through consulting P roviding secure and convenientfinancial services(Mebuki Lease)

Shareholders C orporate value improvement

Financial
capitalCompliance

Financialintermediation

 R evitalization of regional economy by

OUTPUT

Diversity

The Group will maintain and promote the relationships with customers and local communities, as well as the deep understanding of
local communities that both Joyo Bank and Ashikaga Bank have developed over the years. At the same time, the Group will use its
wide-area network to expand its zone of economic interactions, expand the scale and scope of comprehensive financial services that
it offers, and grow along with communities by promoting “the development of local industries, the revitalization of local economies,
and the creation of new markets.”

HumancapitalIntellectual
capitalCommunities(Our vision) Comprehensive Financial Services Group Building the Region’s Future

INPUT

Corporate
growthBusiness
succession

Invested
capitalOwn capitalSound assets

 S table and sustained shareholder returns
Settlement

IT solutions

The Joyo Credit Guarantee
Ashigin Card

The Joyo Computer Service
Ashigin Research Institute P romoting engagement
Employees
W ork-style reforms/promotion ofSophisticated corporate governancesupporting the business model

Sustained improvement of corporate value

through the circulation of value creation

Digitalization
9

Mebuki Financial Group, Inc.

diversity I mprovement of job satisfaction

Annual Report 201910

At the same time, by creating “a business model that grows with local communities”

Basic Strategies of the Second Medium-Term Group Business Plan:
Carrying out structural reforms for enhanced productivity as a transitional period for the next stage of growth

mainly through the enhancement of consulting services and the proactive utilization of
IT services, the Group will make even greater contributions to the local communities.

Following the First Medium-Term Group Business Plan, the Group in April 2019 launched

As stated earlier, sticking to the conventional loan-oriented business model in an age

the Second Medium-Term Group Business Plan (April 2019 to March 2022). By posi-of surplus of corporate funds could result in missed business opportunities with manytioning the three-year period of the Second Medium-Term Group Business Plan as acustomers who need something other than funds. While it goes without saying that

period for achieving full-scale results and also as a transitional period for next growth,raising funds is a crucial element in business management, it is also a fact that manag-

and by carrying out structural reforms at an even faster pace, we will aim to become “aers, in continuing to develop their businesses, are facing various issues beyond raising

comprehensive financial services group building the region’s future.”funds, including the problem of business succession, improving the productivity ofIn the Second Medium-Term Group Business Plan, the Group will promote structuralbusiness processes, and securing manpower. A business that provides broad and di-reforms including the unification of business processes and the administrative systems

verse solutions to such concerns for the customers of the community is at the core ofstructure through the integration of the core systems in January 2020, the optimization

the Second Medium-Term Group Business Plan and at the root of creating “a businessof channels/networks and the unification of the Group and subsidiary banks, andmodel that grows with local communities.”

further promote the ongoing review of the cost structure.

For example, in order to offer the best solutions for enhancing productivity through IT

The conventional banking business which assumed interest income was not theat appropriate prices, it is necessary to establish individual specifications aligned with themost cost-effective business model. Going forward the Group will retain only the nec-

specific business line and size of each customer. Moreover, in order to identify and meetessary businesses and will subject the remaining businesses to a thorough review andthese detailed needs, it is essential to conduct highly personal interviews with business-

improvement of processes. Through these efforts, the Group will cut costs, lower thees. This would not be possible without the relationship of trust with our customers, andbreak-even point and build a structure that can withstand negative factors such as the

such relationships are not achieved overnight. By positioning the focus on businessdecrease in profits due to the redemption of JGBs.

based on the utilization of consulting and IT services, and the development of humanresources that will support these businesses and new value creation, as the basic strate-

Building the region’s future as a comprehensive financial services groupgies of the Second Medium-Term Group Business Plan, the Group intends to make “the1ing) business,” and lay the foundation for creating new value and further growth.

3
The Group’s
strengths

Enhance consulting services
Proactively utilize and invest in IT
Expand business areas

Main Measures

Establish a highly-productive management platform
Advance Group governance

Enhancement of convenience and simplicity
BPR promotion

Develop human resources for value creation

Core system integration
Administrative systems unification

System capable of providing
comprehensive financial services

system. The Group’s expertise for providing solutions will, no doubt, become indis-

Support for asset building
Asset management
Support for digitalization
Responding to a cashless society

Solid customer basethrough IT and improving productivity, including the ongoing integration of the core

(Business matching/business succession, etc.)

Structural reforms for enhanced productivity

Development of specialized personnel
Expansion of personnel and training system
Work-style reforms and diversity promotion

Currently, the Group is focusing all its efforts on the enhancement of efficiency

Expansion of business support menu

pensable to our customers. In this sense, the Group considers creating “a businessmodel that grows with local communities” not merely as a slogan but a reality that will
be realized in the not too distant future.

Integrate core systems
in Jan. 2020

Review of channels and networks
Review of personnel structure
Support for employee skill improvement
Higher employee satisfaction

Full utilization of the synergies
from the business integration(Profit of customer services)

Basic Strategie

2

Create growth business models with local regionstransition from a financial intermediary business to an information intermediary (consult-Level of profit

V i si o nInvestment in growth
Create a new business model

Mebuki Financial Group, Inc.

Enhance productivity
Reduce cost

Structural reforms(Operations/Organization)
2018

11

Revenue from consulting
services

2019

2020

2021

FY2022Annual Report 201912

Our approach to the management objectives of the Second Medium-Term Group Business Plan

Further reinforcement of the corporate governance system to support the business model

Contributing to the sus-

The Company is making efforts to improve its corporate governance, in order to estab-tainable growth of the local

lish a responsible management structure, ensure sound and appropriate operations

communities by taking

and to secure a high level of trust of its stakeholders including shareholders, custom-

maximum advantage ofers, employees and local communities, as well as to enhance its corporate value. In

the Company’s strength ofterms of the corporate governance structure, the Company takes the form of a com-being a comprehensive fi-pany with an audit and supervisory committee. The Company has 12 directors,

nancial group with aincluding directors who are Audit and Supervisory Committee Members, of whom fivewide-area network cover-are outside directors. As part of the Company’s compliance with the Corporate Gover-ing the Kanto area andnance Code, two more outside directors were added to the management team at thecoordinating with various

General Meeting of Shareholders held this year, for their insight as corporate managers

stakeholders to develop

and to deal with issues regarding gender equality and corporate ethics. By welcoming

business is at the heart ofmultiple outside directors with different areas of expertise, the Company has strength-

the Group’s sustained im-ened its corporate governance system into a system capable of ensuring fair andprovement of corporatetransparent decision-making and a solid audit and supervisory function. Going forward

value. In the Second Medium-Term Group Business Plan, we have set the indicators of

the Company, based on the Group Philosophy, will continue to improve its internal con-consolidated ROE, net income attributable to owners of the parent and core OHR astrol system to ensure that the Group’s operations comply with laws and regulations,the management objectives with the aim of improving corporate value.

and the Articles of Incorporation under an appropriate audit and supervisory system,

Discussions were repeated at the Board of Directors meetings and other meetings inand to establish a system to ensure its appropriateness.

the process of determining the “management objectives” of the Medium-Term Group
Business Plan. The management objectives for the First Medium-Term Group Business
Plan comprised these three indicators with the addition of a fourth indicator, the “capital
adequacy ratio.” However, in the current business plan, we intentionally left out thecapital adequacy ratio and clarified our priorities in our management indicators. We do
not undervalue safety (capital adequacy ratio), but for the next three years, we madethe intentional choice of valuing efficiency (ROE). It is our mission to build the foundations for a more efficient business model by expanding non-interest income businesses
through the improvement of consulting services based on the Group’s strengths andunifying the Group, starting with the integration of the core systems, and further promoting the reforms of the cost structure.

5.0 % or more
Net income attributableto owners of the parent approx. ¥47 billion
Core OHR
approx. 60 % (excluding system integration expenses)
Consolidated ROEManagement
objectives(FY2021)“Change for the Future!” Continuous change for a bright future
Going forward, we, at the Mebuki Financial Group, will look to the future and continue
our initiatives for creating the future of the region. The future does not exist independently from the “present.” In a drastically-changing environment, we will continue
innovations in order to provide “the value required by our customers” now and in the
future. Fulfilling present objectives will inevitably foster new needs. We are confident
that our continuing and timeless efforts to provide “the value required by our customers” will ensure the continued growth and development of our customers, the region
and the Group.
In order to continue growing and developing, the Group will also be required to continue changing. “Change for the Future!” Whether a bright future awaits us will dependon the extent that we can keep on changing. All the officers and employees of theGroup will make a concerted effort to continue this change in order to ensure a bright
future for the customers of the region and our shareholders. We, therefore, ask for yourcontinued patronage in the future as well.

(combined value for banks)

July 2019
Ritsuo Sasajima, President
Masanao Matsushita, Executive Vice President
Mebuki Financial Group, Inc.
13

Mebuki Financial Group, Inc.

Annual Report 201914

SDGs/ESG Initiatives
The Mebuki Financial Group will work with all of our stakeholders, including customers, shareholders,
employees and business partners, to build more prosperous local communities and aim together forsustainable growth.

Create growth business models with local regions
Since the business integration in October 2016, a wide range of support policies utilizing the wide-area network
mainly in Ibaraki and Tochigi prefectures are being implemented backed by the Group’s strong customer base,Society
We will work in harmony with local communities to create a more prosperous regional society.

The Initiatives of Mebuki Financial Group for
Sustainable Growth with the Local Communities

p.20 and 22

Support children to become independent (financial education support)
Local employment support collaborating with local governments (cooperation with Ibaraki and Tochigi prefectures/ education loans)
Business succession support for next-generation leaders and successors (Future Creation Workshop/New Leader Training Dojo )Diversity initiatives (promotion of work-style reform/ promotion of active participation of women)

EconomyWe will take initiatives to provide comprehensive financial services and promote the revitalization of theregional economy utilizing a wide-area network.
p.16 - 19

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 and problem resolution of customers by leveraging theGroup’s strengths through the enhancement of consulting services and IT services/data utilization, while at thesame time we utilize the resources held by the Group to cultivate and expand our business areas, thereby creating
a business model that grows with customers and local communities.

Support for new product and service development
We are promoting initiatives to solve the management problems of our customers and to revitalize the region
through business matching that utilizes the information provided by our wide-area network. We have supported thedevelopment of new products and services of customers encountered through business matching, and a numberof new products have been launched that take advantage of local products.

 iscover regional industries and support the creation of new businesses (hold business plan contests/ support with Mebuki Regional
D
Revitalization Fund)Develop new businesses and expand economic exchange (support for manufacturing companies/ support for agricultural businesses)
Business succession, M&A support, and make efforts to resolve the shortage of human resources (staffing/human resources
development support/ support for productivity improvement through the utilization of IT)
Make initiatives to support local sustainable growth (support for refurbishing traditional homes/promoting regional revitalization incooperation with local governments)

Examples of new products born throughbusiness matching

Environment
With the aim of maintaining the natural environment, we will engage in initiatives to preserve a bountiful andbeautiful environment for the future.
p.21
 issemination and development of renewable energy through environment-related financing for power generation projects usingD
clean energyH andle environment-related loans for the introduction of environment-friendly private placement bonds, solar power generation facilities, etc.
Create environment-friendly branches (installation of solar power generation systems, reduction of energy consumption throughswitching to LED lights)
Environmental conservation activities (Joyo Furusato no Mori/ Ashigin Forest)

Governance
We will work to strengthen and enhance corporate governance in order to secure the trust of our stakeholders.
In order to achieve a peaceful and fair society, we will work to cut off relations with antisocial forces andprevent money laundering and terrorism funding.
p. 25 - 34

15

Mebuki Financial Group, Inc.

Business matching by taking advantage of the group’s network
By making the most of Mebuki Financial Group’s wide-area network, Joyo Bank and Ashikaga Bank jointly holdvarious business conferences related to agriculture, food and manufacturing to assist in business matching amongclients.
Number of cases in which information was offered for potential matching
Number of intermediate matches (including those that did not succeed)(Cases)
15,00013,368
11,3198,846

10,000

5,874
5,000
0

2,893
80
31 Mar.
2017

1,077
787

31 Mar.
2018

30 Sep.
2018

203

es

1,000
500

520
288
30 Sep.
2017(Matches)
1,500

Cumulative
number of
successful match

31 Mar.
2019

0

Annual Report 201916

Discovering regional industries and supporting the creation of new businesses

Expanding services that utilize digital technology

Joyo Bank and Ashikaga Bank jointly host the “Mebuki Business Award,” in which entries for innovative and creative business plans in the region are invited and an award is presented to selected plans. Support is provided invarious ways to help make the award-winning plans take off as businesses, such as providing financial assistance

We are collaborating with convenient settlement services that use smartphone apps and promoting cashlessservices in the region while at the same time making efforts to enhance the convenience and services of bothusers and business operators.

by utilizing funds, in addition to making technical proposals and assisting in expanding sales channels.

Smartphone settlement services

Mebuki Regional Revitalization Fund
In addition to food, agricultural and tourism sectors, businesses that
contribute to regional development and winners of the Mebuki BusinessAward are among those that are provided with support for creating new
businesses and expanding businesses through the Fund.

Amount of investment¥(cumulative total)

1.77 billion/ 9 projects

Fund size: ¥4 billion(As of March 31, 2019: Joyo Bank + Ashikaga Bank)

Business succession support
Along with the aging of management executives, an increasing number of companies are having business succession issues. At Mebuki Financial Group, the respective head offices
and branches of Joyo Bank and Ashikaga Bank, as well as
external specialized institutions, collaborate with each other tothink through problems together with customers in order to facilitate business and asset succession, and provide them withassistance in various ways to resolve their issues.

Support details
Support for share transfer or stock exchange listing
Support for organizational restructuring
Delivery of information through seminars
Classes held on an ongoing basis to train nextgeneration management executives and so on…

Cashless shopping se within account balanceUor amount charged
Check usage on app

Solving labor shortages
 educing the cost of cashRhandling
Utilization of settlement
data for marketing

Number of business succession and M&A proposal clients (Joyo Bank + Ashikaga Bank)
4,954

User (Purchaser)

Business operator (Seller)

3,766

Overseas business matching

FY2017FY2018To assist in customers’ overseas business expansion, wehold seminars, business conferences and networking events
overseas, which are utilized as an opportunity not only for
local firms and exhibiting companies to engage in business
Scenes from the “Business Succession and M&A Seminar”

Support for securing personnel
To support companies in securing necessary personnel,
which has become a major management issue for many
companies, Joyo Industrial Research Institute Ltd. (a subsidiary of Joyo Bank) in October 2018, and Ashikaga Bank in
April 2019, commenced personnel placement services.
We are strengthening our consulting services by deepening
our dialogues with our customers, sharing their management
issues and providing appropriate personnel placement andmatching services to solve their personnel problems, andsupporting the review of their personnel systems.
17

Mebuki Financial Group, Inc.

Results of personnel placement by Joyo Industrial Research Institute

Information gathering on
personnel-related needs(from Joyo Bank offices)

negotiations with each other, but also for providing the latest
business information and for Japanese companies with alocal presence across different industries to exchange information with each other.

Cases of successful personnel
placements

180 companies 6 companies, 7 cases(As of March 31, 2019)

Annual Report 201918

Structural Reform for Enhanced Productivity

Developing Human Resources for Value Creation

In light of customer needs, customer contact diversification, and advances in IT digital technology, we will review
the functions and roles of digital channels and manned branches, improve customer convenience and simplicity,and strengthen consulting functions.

We are conducting training to raise the skills of each employee in order to meet the diverse needs of customers
and the region through the utilization of IT and digital technology. We are also establishing systems and working
environments in which diverse human resource can feel job satisfaction and work in the long-term according totheir lifestyles, in order for the Group to grow along with the local communities.

Expanding digital channels of loan products

Utilization of robot advisors

We have improved customer convenience, and customers
can now make applications and complete loan contracts forautomobile loans and educational loans on the Internet.

We have commenced asset management proposals using
robot advisors. Easy-to-operate robot advisors assist customers in selecting funds.

Use of tablets by tellers

New branches that utilize digital technology

We are promoting the digitalization of various procedures including opening bank accounts and making applications forinvestment trusts and life insurance on tablet devices.
Reduce the burden of filling out forms for the customer
Shorten the time required for procedures and administrative paperwork

We are diversifying our branches by utilizing digital technology, for example, by using videophones to connect branches oflimited personnel with neighboring branches and installingcounters with ATMs that can be used for tax payment.

Training human resources capable of utilizing IT technology
We are reinforcing our support for employees to raise theirskill levels and training specialized human resources throughseminars by external lecturers on the utilization of IT-related
knowledge and information.
We are aiming to increase human resources with advanced
IT-related skills and encourage the utilization of the Group’s IT
services and data, while at the same time providing our customers with tools and expertise developed internally by the Group.

Promoting diversity
We are proactively promoting capable and motivated women employees to assistant manager positions or higher(P.24). In order to foster women leaders who will lead the active participation of women and become role models
for younger women employees, we are conducting “Mebuki Women’s Class.”
Furthermore, we are proactively encouraging employees to change their employment status from part-time toregular employees, and providing support for enhancing their skills and careers.

Change in employment status: Frompart-time to regular employee

11 people
Utilization of RPA*
RPA is replacing personnel in carrying out routine tasks such as entering dataand gathering information, and business processes are being automated.
Targeted reduction of operational hours (Joyo Bank + Ashikaga Bank):
A maximum of approx. 54,000 hours per year

Unification of business processes and the administrative system structure through systems integration
In January 2020, we will integrate the core systems of JoyoBank and Ashikaga Bank and aim to reduce operationalcosts including development and maintenance costs.

*RPA (Robotic Process Automation)
Replacing personnel with software (robots) to carry out routine administrative tasks
such as entering data and gathering information in order to automate business processes and improve efficiency.

Shift inmanagement
resources
resulting fromstructuralreforms

People(Staff)Things(Investment
amount)Providing a pleasant working environment“Invested” area 200 people (Consulting services/ IT planning, etc.)“Saved” area 1,000 people (Administrative systems/ head office functions, etc.)
IT investment Total of ¥15 billion in 3 years (Increase of ¥4.0 billion from the previous 3 years)
Branch investment Improved efficiency of approx. 20% of existing branches (review of functions, etc.)

Cost reduction by structural reform ¥5.0 billion or more per year*
Money(Expenses) *Expenses in or after FY2022 – Expenses in FY2018 (excluding system integration costs)

Improvement of customer convenience andsimplicity
More time to respond to customers’ inquiries
Enhancement of consulting function(FY2018: Joyo Bank + Ashikaga Bank)

We are also establishing systems and working environments that allow employees to work in line with their life
stages, such as raising children or nursing care of family, as well as according to their lifestyles.
Introduction of the flexible work system
Short working hours system (childcare and nursing care)
Holding seminars for employees returning to the workplace from childcare leave

External evaluation

Increase in consulting time
100 people input x 4.5 hours (per day) x
240 business days = 100,000 hours per year
(Ashikaga Bank)(Joyo Bank)
The certification as a company supporting for childcare

19

Mebuki Financial Group, Inc.

The company promotiong labor’s healthcare
Annual Report 201920

Environmental Initiatives
Based on Mebuki Financial Group’s philosophy of “Together with local communities, we will continue
to create a more prosperous future by providing high-quality, comprehensive financial services,” offi-

Initiatives to Create “Local Communities”
Societycers and employees of the Group are working as one and making various efforts to realize sustainable

Commenced handling of private placement bonds for SDGs

local communities.

A portion of the commission received when issuing private placement bonds for customers is used for donatingbooks and other materials to the school of the customer’s
choice. Starting from March 2019, organizations engaged
in initiatives for SDGs were also added as recipients ofthese donations. Through this product, we are supporting
initiatives toward the achievement of SDGs together withlocal communities. To date, we have made donations ofmore than ¥70 million to schools and organizations
engaged in initiatives for SDGs.

Environment
Environment-related loans
Mebuki Financial Group is working to spread and develop renewable energy in the region through environment-related loans for
power generation businesses that utilize solar power, wind power,
biomass and other forms of clean energy.
FY2018 Loans for solar power generation

Number of contracts

288

Contract amount¥

42.9 billion(Joyo Bank + Ashikaga Bank)

Contributing to the region through activities to spread financial education
We conduct lessons on finance to teach the importance of 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 specific financial operations.
Financial education lessons conducted

Initiatives for environmental conservation through thepromotion of WEB bank accounts
By promoting bank statements viewed using smartphone apps
and the utilization of WEB bank accounts, we are contributing toenvironmental conservation by reducing the volume of paperused.
We make monetary contributions to environmental conservation
organizations corresponding to the number of registered bank accounts using passbook apps. (Joyo Bank)

Number of lessons conducted

140

Number of participants
Approx.

2,500(FY2018: Joyo Bank + Ashikaga Bank)

Support for regional revitalization through sports
We support regional revitalization through the promotion of sports. Both
Joyo Bank and Ashikaga Bank sponsor local sports clubs and support
the activities of teams together with local community members.

Making branches environmentally-friendly
We are continuing to make branches more environmentally-friendly by installing solar power generation systems and switching the interior lighting of the branches
to LED.
Status of environmentally-friendly branches(Total number of branches)

152

138

branches

FY2017FY2018

Regional contribution initiatives by employees
Our employees are helping out in regional activities through volunteer work, for example, by participating in regional events such as festivals, conducting clean-up activities, collecting recyclable resources and engaging inenvironmental conservation activities.

branches

21

Mebuki Financial Group, Inc.

Annual Report 201922

Financial/Non-Financial Highlights
Financial Highlights

Non-financial Highlights (Joyo Bank + Ashikaga Bank)

Mebuki FG (Consolidated basis)

FY2018
Total income

288.2

Net income attributable to(1)46.3
owners of the parent
Capital adequacy ratio

Progress against
Year-on-year change
forecast
+24.9
—
+3.2

102.9%

—

—

9.94%

18,712t-CO2

CO2 Emission(Billion yen)

The Group’s consolidated total income and total
expenses were 288.2 billion yen and 221.7 billion
yen, respectively.
Net income attributable to owners of the parent
reached 46.3 billion yen.
Consolidated capital adequacy ratio reached 9.94%.

19,366

Financial education
lessons(Number of lessons
conducted/Numberof participants)

18,712140 lessons
Approx. 2,500 participants
140
Approx. 2,800

Approx. 2,500

90

Total of banks (Joyo Bank + Ashikaga Bank) + Group companies other than banking subsidiaries

Net income

FY2018Year-on-year change(2)63.9*+12.5* Net income of total of banks
60.0 billion yen

Progress against
forecast
103.0%[Consolidation adjustments, etc.] (17.5) billion yen = (2) – (1)Dividend income from a subsidiary of Ashikaga Bank
(Recorded under extraordinary income/losses)(12.0) billion yen(4.9) billion yen
Adjustments related to securities

Net Income of group companies other than
3.8 billion yenbanking subsidiarie

Interest expenses of subordinated loans, expenses, etc.(0.6) billion yen

Total (Joyo Bank + Ashikaga Bank)
1H

2H

187.5

185.6

180.7

87.5

Private placement bonds
with donation scheme andissue amount(Cumulative total)

FY2018478 issues
40.8 billion yen

85.7

114.1 billion yen

Ordinary expenses (Billion yen)
1H

2H

FY2016

115.0

92.5

94.9

FY2017

Core net business income (Billion yen)
1H

2H

Number of business matches(Cumulative total)

FY20181,077 matches

478

40.8

114.1

113.5

56.6

310

56.7

56.4

58.3

93.1

FY2018FY201682.1 billion yen
82.1

57.1

FY20171H

57.4

Percentage of women inassistant manager positions
or higher

FY20182H

FY201827.9%

As of Mar. 31, 2018

As of Mar. 31, 2019

273

Number of 1st-grade Certified Skilled
Professionals of Financial Planning(Cumulative total)

27.9

250

As of Mar. 31, 2019

As of Mar. 31, 2018

273

26.7

60.0 billion yen

Net income (Billion yen)

520

27.6

FY201799.9

FY2017

1,077

185.6 billion yen

Gross business profit (Billion yen)

FY2017

60.0

73.6
50.8

66.9

36.1

19.8

46.8

36.3

21.6

32.7

18.3

As of Mar. 31, 2018

34.1

FY2016FY2017

Balance of deposits (Billion yen)
Public sector
Corporate customers
Individual customers

FY201814,438.3

FY2017

Public sector
Corporate customers
Individual customers

11,251.7 billion yen
11,251.7

10,580.8

10,315.4

Dividend and Shareholder Return Policy

FY20181,437.6

1,153.6

1,232.9

3,325.5

3,158.8

3,062.8

28.4

Balance of loans (Billion yen)

750.1

776.3

748.0

29.2

FY2016

14,438.3 billion yen

14,038.8

13,572.9

40.2

46.0

37.2

5,139.1
4,935.9

4,809.6

Mar-17

Mebuki Financial Group, Inc.

Mar-18Mar-19Mar-17

4,674.8

4,491.2

4,272.8

23

We will target a total return ratio* of 30% or more while

Mar-18

Status of Shareholder Returns (Dividends, Acquisition of Own Shares)

taking into account maintaining solid capital levels for fu-

FY2017FY2018ture growth and the appropriate distribution of profits to

Dividend per share

¥11

¥11

our shareholders. We will continue to consider the divi-

Total amount of dividends (1) ¥12.9 billion¥12.9 billion

dend level.

Total amount of acquisitionof own shares (2)—¥2.0 billion

Net income attributable toowners of the parent (3)¥43.0 billion¥46.3 billion

Total return ratio ((1) + (2)) / (3)

30.0%

32.3%

*Total return ratio = (Total amount of dividends + Total acquisition of treasury
stock) /Net income attributable to owners of the parent

10,362.7

10,103.6

9,762.1

As of Mar. 31, 2019

Mar-19Annual Report 201924

Governance of Mebuki Financial Group
Corporate Governance

Organization

Summary

Board of Directors

The Board of Directors decides basic corporate policies and important business matters and supervises the execution of duties by directors. We aim to realize prompt and decisive decision-making
and business execution by entrusting most decision-making authorities relevant to business execution to directors as constituent 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 anda solid supervisory function through the appointment of multiple outside directors that have experience as corporate managers, lawyers, and academic experts.

12 Directors(including 5 Outside Directors)

Audit and Supervisory Committee

The Audit and Supervisory Committee audits the execution of duties by directors and determines
the details of proposals related to the appointment, dismissal, and non-reappointment of accounting auditors to be submitted to the General Meeting of Shareholders.

5 Directors who are Audit and Supervisory
Committee Members(including 3 Outside Directors)

Corporate GovernanceCommittee

We have established the Corporate Governance Committee as an advisory board to the Board of
Directors to ensure the objectivity and transparency of the compensation and the appointment of
directors. Matters regarding nomination of director candidates and the compensation of directors
are decided by the Board of Directors upon deliberation by the Corporate Governance Committee.

2 Representative Directors
All 5 Outside Directors
1 Outside Director of Joyo Bank
1 Outside Director of Ashikaga Bank, a totalof 9 members

Basic approach to corporate governance
A commitment to management characterized by responsibility, 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 are working to strengthen andimprove corporate governance.
We respect shareholders’ rights and ensure equality.
We consider the benefits of stakeholders, including shareholders, and cooperate appropriately with stakeholders.
We disclose company information appropriately and ensure transparency.
We ensure the effectiveness of a transparent, fair, prompt and decisive decision-making function and a supervisory 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 and improvement of
medium-to-long term corporate values.

Corporate governance structure
The Company has adopted a company with an Audit and Supervisory Committee as a corporate governance system, which allows us to realize prompt and decisive decision-making and business execution by
entrusting many of the decision-making authorities relevant to business execution to directors as constituent
members of 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.
General Meeting of Shareholders
Appoint/Dismiss

Appoint/Dismiss

Board of Directors(12 Directors including
5 Outside Directors)

Cooperate

Management
Meeting

ALM/Risk Management
Committee

Compliance
Committee

System Integration
Committee

Group Strategy Committee
Corporate Management
Department

Directly-owned
subsidiaries

Internal Audit Section(Audit Department)

Regional Revitalization
Department

Guide/Manage/Supervise

Appoint/Dismiss

Audit

Audit

The Joyo Bank, Ltd.

The Ashikaga Bank, Ltd. Mebuki Lease Co., Ltd.

(Company with Audit andSupervisory Committee)
Guide/Manage/Supervise(Company with Audit andSupervisory Committee)

7 subsidiaries※(Company with Auditors)

Mebuki Securities Co., Ltd.
(Company with Auditors)

Guide/Manage/Supervise

Report/Request consultation

Mebuki Financial Group, Inc.

Decisionmaking
boardsManagement
Meeting

The Management Meeting is responsible for making decisions on business execution to theextent of the authorities delegated by the Board of Directors, as well as discussion on important matters 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 business execution relevant to group risk management and ALM to the extent of the authorities delegatedby the Board of Directors and for considering and discussing 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 for making decisions on business execution regarding compliance to the extent of the authorities delegated by the Board of Directors, and considering and discussing important matters relevant 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

System Integration
Committee

The System Integration Committee manages and supervises projects as a whole and makes
business execution decisions within the scope of authority delegated by the Board of Directors
based on the system integration project plan decided by the Board of Directors, in addition to
examining and discussing important matters regarding business execution.

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

The Board of Directors of the Company conducts analysis and evaluation of its effectiveness as a whole each year,
in order to utilize the results of such evaluation to improve the operations of the Board of Directors, by confirming
the opinions of each director on such matters as the composition and operation of the Board of Directors.
Regarding the FY2018 evaluation, opinions were exchanged on 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 the composition and operations of the Board of Directors and other matters were distributed to all directors, and replies and comments wereobtained. With regard to the results of the evaluations based on these replies and comments, the Board of Directors of the Company, upon deliberation by the Corporate Governance Committee, finalized and determined the results of analysis and evaluation of the effectiveness of the Board of Directors as a whole.

(Evaluation results)
Report/Request consultation

Report/Request consultation

3 subsidiaries*Including one company which was dissolved effective March 31, 2019, and is currently undergoing liquidation procedures.

25

Audit

Cooperate
Audit

We have established the following committees as bodies to discuss and decide important matters regarding business execution. Each decision-making committee reports the status of deliberation and decisions regarding business execution to the Board of Directors, while under
the supervision of the Board of Directors.

Evaluation of the Board of Directors(5 Audit and Supervisory Committee
Members including 3 Outside Members)

Audit and Supervisory
Committee Office

Corporate Planning
Department

indirectly-owned
subsidiaries

Audit and Supervisory Committee

Accounting Auditor

Mebuki Financial Group, Inc.

Corporate Governance Committee Consult/Report(5 Outside Directors, 2 Representative Directors,
1 Outside Director each from Joyo Bank
and Ashikaga Bank)

Composition

The Board of Directors of the Company has confirmed that directors with adequate knowledge and experience todemonstrate their required functions have been appropriately elected; all directors, upon sharing the roles and responsibilities of the Board of Directors, are engaged in constructive and proactive discussions from the perspectiveof total optimization; and the effectiveness of the Board of Directors as a whole has been mostly assured.
With regard to issues recognized during the previous fiscal year’s evaluation, “improvement of the discussions by
the Board of Directors” and “enhancement of the effectiveness of the supervisory function of the Board of Directors,” were remediated in the operations of the Board of Directors throughout the year.
The following matters were recognized as issues in aiming for the sustainable growth of the Group and the further improvement of corporate value in the medium- to long-term. By implementing the necessary responses tothese issues, the Company will strive to enhance the effectiveness of its corporate governance structure.
1. “Review of the composition of the Board of Directors in order to improve effectiveness”
Review of the ratio of inside and outside directors, and ensuring diversity regarding gender and other factors
Promoting communication among outside directors
2. “Further improvement of the operations of the Board of Directors”
Providing the information required for management decision-making in the appropriate quality and quantity
Securing the necessary time to deliberate basic management policies and management strategies by narrowing down the agenda to necessary items
Annual Report 201926

Compensation for Directors(Directors’ compensation system)
Under the Company’s directors’ compensation system, compensation amounts are to be determined, as follows,
upon dividing the directors into “directors (excluding directors who are Audit and Supervisory Committee Members)”and “directors (who are Audit and Supervisory Committee Members),” within the maximum amount resolved by theGeneral Meeting of Shareholders. At the General Meeting of Shareholders held on June 28, 2016, a resolution was
adopted setting the maximum amount of directors’ compensation at ¥200 million per year for “directors (excluding
directors who are Audit and Supervisory Committee Members) and ¥80 million per year for “directors (who are Audit
and Supervisory Committee Members).
The compensation of executive directors among the “directors (excluding directors who are Audit and Supervisory
Committee Members) comprises a monthly compensation, which is a fixed compensation, stock options, and a bonus which is a performance-linked compensation.
The basic amount of the monthly compensation for each executive director is determined by position. Stock
options comprise stock acquisition rights, with an exercise price of ¥1 per share, granted as stock compensation-type stock options, and the amount of stock options for each executive director is determined based on the
director’s position.
With regard to bonuses which are performance-linked compensation, the basic amount is determined by position
and the total amount of bonus payment is determined within a maximum amount which fluctuates each year according to consolidated profit levels (ROE), and the amount paid to each executive director is determined based on thebasic amounts by position, which is adjusted according to the level of contribution of each executive director to business performance. The consolidated ROE has been adopted as a performance indicator in order to provide incentive
to the directors to improve the Group’s corporate value. Under the First Medium-Term Group Business Plan (October
1, 2016 to March 31, 2019), an ROE of 5.0% or more was targeted, and in the current fiscal year an ROE of 5.1%
was achieved. During the fiscal year under review, performance-linked compensation accounted for approximately
7% of the total compensation for executive directors.
The compensation for outside directors who are not Audit and Supervisory Committee Members is comprised onlyof a monthly fixed compensation, and this monthly compensation amount is determined in accordance with the regulations on compensation set forth by the Board of Directors.
The compensation for “directors (who are Audit and Supervisory Committee Members) is comprised only of amonthly fixed compensation. This monthly compensation amount is determined separately for full time and part time
Directors (who are Audit and Supervisory Committee Members), in accordance with the regulations on compensation
set forth by the Audit and Supervisory Committee, and the compensation amount for each director (who is an Audit
and Supervisory Committee Member) is determined in accordance with the said regulations.

(Board determining directors’ compensation)
The Company has established the Corporate Governance Committee as an advisory board to the Board of Directors.
In order ensure the objectivity and transparency of directors’ compensation, the compensation for “directors (excluding directors who are Audit and Supervisory Committee Members)” is determined by the Board of Directors, and thecompensation for “directors (who are Audit and Supervisory Committee Members)” is determined by the Audit andSupervisory Committee upon deliberation by the Corporate Governance Committee. The Corporate GovernanceCommittee is chaired by an outside director, and the majority of the members are outside directors (including outside
directors of subsidiary banks).

27

Mebuki Financial Group, Inc.

Group Structure and Corporate Data (As of March 31, 2019)

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
Number of employees 117
Credit ratings

A (R&I)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: 183 offices(153 branches, 30 sub-branches)
Overseas: 4 Representative Offices(Shanghai, Singapore, New York, Hanoi)
Number of 3,320
employees*
Credit ratings A+ (R&I)
A2 (Moody’s)

Founded October 1, 1895
Head Office 1-25, Sakura 4-chome, Utsunomiya, Tochigi Prefecture
Paid in capital 135 billion yen
Network Domestic: 154 offices(107 branches, 47 sub-branches)
Overseas: 2 Representative Offices(Hong Kong, Bangkok)
Number of 2,857
employees*
Credit ratings A+ (R&I)

Mebuki Lease Co., Ltd.

Mebuki Securities Co., Ltd.

Founded September 25, 1974
Head Office 4-12, Minami-machi 3-chome, Mito, Ibaraki Prefecture
Paid in capital 100 million yen
Network 13 offices(Head Office, 12 branches)
Number of 63
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 57
employees*Excluding those transferred to organizations

Annual Report 201928

List of Directors

7 Directors

5 Outside Directors

President and Director
Ritsuo Sasajima
June 2011

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 Vice President and Director
Masanao Matsushita
January 2009 Executive Officer, The Ashikaga Bank,
Ltd.
June 2012 Executive Officer, General Manager,
Corporate Planning Department,
Ashikaga Holdings Co., Ltd.
Managing Executive Officer, Corporate
Planning Division, The Ashikaga Bank, Ltd.
April 2014
Executive Officer, Ashikaga Holdings
Co., Ltd.
Managing Executive Officer, The Ashikaga Bank, Ltd.
June 2014 Director, President and Chief Executive
Officer, Ashikaga Holdings Co., Ltd.
Director, President and Chief Executive
Officer, The Ashikaga Bank, Ltd.
June 2016 President, The Ashikaga Bank, Ltd.
(current position)
October 2016 Executive Vice President, the Company(current position)

Director
Tetsuya Akino
June 2016

Executive Officer and General Manager, Personnel Division,
The Joyo Bank, Ltd.
October 2016 General Manager, Corporate Management Department, the Company
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. (current position)

29

Mebuki Financial Group, Inc.

Director
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 andVice 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(current position)
June 2018 Senior Managing Director, The Joyo
Bank, Ltd. (current position)

Director (Audit and Supervisory Committee Member)
Yoshiaki Terakado
June 2004

Executive Officer and General Manager, Retail Banking Division,
The Joyo Bank, Ltd.
June 2006 Executive Officer and General Manager, Business Administration Division,
The Joyo Bank, Ltd.
June 2008 Standing Corporate Auditor, The Joyo
Bank, Ltd.
June 2016 Retired from the position as Standing
Corporate Auditor, The Joyo Bank, Ltd.
October 2016 Director (Audit and Supervisory
Committee Member), the Company(current position)

Director
Yutaka Horie
June 2009
April 2014
April 2015

June 2016
June 2017

Executive Officer, The Ashikaga Bank,Ltd.
Managing Executive Officer,
The Ashikaga Bank, Ltd.
Executive Officer, General Manager,
Corporate Management Department,
Ashikaga Holdings Co., Ltd.
Senior Managing Executive Officer,
The Ashikaga Bank, Ltd.
Senior Managing Director, The Ashikaga Bank, Ltd. (current position)
Director, in charge of Corporate Management, Risk Management, and Information Security, the Company(current position)

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)

Outside Director
Hiromichi Ono

Outside Director
Yoshimi Shu

April 1979
Joined Ajinomoto Co., Inc.
March 2004 General Manager, Finance Department,
Ajinomoto Co., Inc.
June 2007 Corporate Executive Officer, AjinomotoCo., Inc.
June 2011 Member of the Board & Corporate
Vice President, in charge of financeand procurement, Ajinomoto Co., Inc.
June 2017 Retired from the position as Member ofthe Board & Corporate Vice President,
Ajinomoto Co., Inc.
June 2019 Outside Director, the Company(current position)

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 2014Deputy President & Representative
Director, Core Value Management,
Co., Ltd. (current position)
June 2019 Outside Director, the Company(current position)

Outside Director (Audit and Supervisory Committee Member)
Ryuzaburo Kikuchi

Outside Director (Audit and Supervisory Committee Member)
Toru Nagasawa

Outside Director (Audit and Supervisory Committee Member)
Takashi Shimizu

April 1969
Lecturer, Mito Junior College
April 1971
Assistant Professor, Mito Junior College
April 1972
Institutional Assistant, Ibaraki University
April 1974
Lecturer, Ibaraki University
April 1976
Assistant Professor, Ibaraki University
April 1986
Professor, Ibaraki University
September 1996 Dean, College of Education and Education Research Council Member,
Ibaraki University
September 2004 President, National University Corporation
Ibaraki University
August 2008 Retired from the position as President,
National University Corporation Ibaraki
University
June 2009 Outside Director, The Joyo Bank, Ltd.
September 2013 Special Assignment Professor, College of
Human Science, Department of Education, Tokiwa University (current position)
June 2016 Retired from the position as Outside
Director, The Joyo Bank, Ltd.
October 2016 Outside Director (Audit and Supervisory
Committee Member), the Company(current position)

April 1984
April 1995

April 1995

Admitted as an attorney
Nagasawa Law Office (Currently,
Nagasawa General Law Office)opened, Representative Attorney(current position)
September 2007 Outside Corporate Auditor, GREE, 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)

Lecturer, School of Commerce, Waseda
University
Assistant Professor, School ofCommerce, Waseda University
September 2000 Ph.D., Commerce (Waseda University)
April 2002
Professor, School of Commerce,
Waseda University
August 2002 Visiting Researcher, Berkeley, University of California (until August 2003)
April 2005
Professor, Graduate School of Accounting, Waseda University (current
position)
October 2016 Outside Director (Audit and Supervisory
Committee Member), the Company(current position)
April 1997

Annual Report 201930

Risk Management System
The Group aims to enhance the risk management system by positioning it as an important management task
from the perspective 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 on important 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 therisk and return relationship through consideration and discussion focused on
Mebuki Financial Group, Inc.

closer coordination between risk management and profit management while
controlling risks appropriately, and facilitates prompt and efficientdecision-making by management.
Furthermore, we have organized the integrated risk management section
responsible for the supervision and integrated 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.

Board of Directors

Validate appropriatenessand effectiveness ofrisk management system

Audit and Supervisory Committee

Internal audit section (Audit Department)

Decide on important business execution

ALM/Risk Management Committee Analysis, assessment and deliberation on matters for improvement
Integrated risk management section Capturing, measurement, assessment, and reporting

Audit(Corporate Management Department) of risk as a group
Type of risk

Strategic Risk

Credit Risk

Market Risk

Liquidity Risk

Operational Risk
Corporate Management Department/
Corporate Planning Department

Corporate Management Department

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

conducts internal audits as well as audits ofcompanies within the Group.

Report/Consult (risk status, response policies)

The Ashikaga Bank, Ltd.

Mebuki Lease Co., Ltd.

Board of Directors

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

Mebuki Securities Co., Ltd.

Board ofDirectors

Audit and Supervisory Committee

Integrated risk
management section

Integrated risk management section(Risk Management Department)

Type of risk

Strategic Risk

Credit Risk

Market Risk

Liquidity Risk

Operational Risk

Sections in charge of respective risk categories

Strategic Risk, Credit Risk,
Market Risk, Liquidity Risk,
Operational Risk

Branches, head offices and group companies

Sections in charge of respective risk categories

The Group undertakes “integrated risk management” which quantitatively
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, and at 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 our financial soundness (ourcapital 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
allocation of capital, we secure a risk buffer to cover losses larger than those
expected in the statistical methods or risks unable to be captured by the statistical methods. We confirm the sufficiency of our capital reserves, including
the capital to cover the aforementioned risks, by performing stress tests bywhich we capture the impact on our capital reserves under assumed scenarios such as a sudden economic downturn. Furthermore, we confirm the reasonableness and effectiveness of the statistical methods through back tests
in which the risk amount calculated by VaR (value at risk) is compared withactual profit or loss.

Mebuki Financial Group, Inc.

Market risk management

Audit
Type of risk

Integrated risk management

31

Corporate Auditors

Audit

Internal audit section

The Joyo Bank, Ltd.

focusing on credit management during repayment to prevent the status of aclaim from deteriorating.
Internal credit ratings
We categorize our customers into 12-grade rating levels by adding qualitative
assessment to the data on their financial condition and cash flow status. In
addition to serving as the basis for self-assessment systems, internal credit
ratings are used 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.
Self-assessment systems
Companies within the Group strictly implement self-assessment systems
based on common standards and provide appropriate reserves or write down
problem loans based on such assessment. In addition, the reasonableness ofsuch assessment is validated and audited by the sections in charge of validation and auditing, respectively, and is also subject to external 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 thedeterioration of financial conditions of customers. The Group calculates theamount of credit 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 and conductcredit 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
and evaluation of credit situations by rating and region, or based on composition by industry.

Credit risk management
Credit risk refers to the risk of incurring losses as a result of customers becoming unable to pay the principal and interest of loans as promised primarily due to the deterioration of their financial conditions.
Recognizing credit risk as a material risk in our business operations, theGroup aims to enhance the management system to prevent the emergenceof 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 is organizationally and functionally independent from the business promotion sections, is
responsible for the planning and operational management of the internal
credit rating system, self-assessment systems, write-offs and provisions to
the reserve for loan losses, as well as for the monitoring of loan assets as the
specialized organization for the comprehensive supervision and managementof 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

Market risk refers to the risk of incurring losses due to changes in the valueof 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 based on theirunderstanding of risk supported by sufficient advance research and analysis
of market transactions.
For the appropriate control of market risk, we also perform and report to the
ALM/Risk Management Committee of the Company held periodically the quantitative management and measurement 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 insecuring necessary funds caused by an unexpected outflow of funds orsimilar events, or a sharp rise in funding costs.
The Group has established the Group Liquidity Risk Management Rules
to set up the framework under which action plans 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, wemanage 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 performperiodical drills for action plans upon a liquidity crisis to enhance theeffectiveness in a crisis.

Operational risk management
Operational risk refers to the risk of incurring losses caused by inappropriateness 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 the comprehensive 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 thecomprehensive risk management section responsible for operational risk
gather information on and analyze the causes of administrative incidents
occurring inside or outside the Group to establish or revise administrative
rules or enhance the efficiency of administrative processes through the information system based on the results of such analysis. In addition, the Group
has the internal audit section validate the effectiveness of the risk management system to establish the framework to detect or prevent administrative
incidents.
System risk
System risk is the risk of incurring losses primarily due to the failure ofcomputer systems, erroneous computer operation, or inappropriate computeruse.
The Group has taken necessary measures to ensure the safety and reliability of computer systems including failure response exercises aiming toestablish the framework for early recovery 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 with risk characteristics and take appropriate actions for: compliance (legal) risk, the risk of incurring losses mainly due to an illegal act committed by directors andemployees; personnel management risk, the risk of incurring losses mainly
due to an act in violation of laws, regulations or agreements relevant to employment, health or safety; tangible asset risk, the risk of incurring losses due
to damage to tangible assets caused by disasters or defective managementof buildings; and reputational risk, the risk of incurring losses due to the deterioration 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 early recovery of important business operations including the repayment of deposits, fund transfer and remittance upon facing a crisis such as a natural disaster, system
failure or pandemic, as well as limiting human and physical damage to theminimum extent possible.
Upon the occurrence of a crisis, we will establish emergency response
headquarters at the Company and directly-owned subsidiaries to respondto 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 201932

Initiatives for Compliance
Mebuki Financial Group

Board of Directors

Audit and Supervisory Committee

Compliance Committee

Corporate Planning Department

Corporate Management Department

Regional Revitalization Department

Audit Department

Guide/Manage/Supervise
Consult/Report

The Joyo Bank, Ltd.

The Ashikaga Bank, Ltd.

Board of Directors

Managing sections<Joyo Bank>
Corporate Risk Management Division<Ashikaga Bank>
Compliance Management Division
Supervise
Head Office and branches
Officer and staff in change ofmanagement and compliance

Audit and Supervisory Committee

Mebuki Lease Co., Ltd.

Mebuki Securities Co., Ltd.

Board ofDirectors

Corporate Auditors

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

Key bodies in compliance<Mebuki Lease/Mebuki Securities>
Compliance Committee

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

Managing section<Mebuki Lease>
General Affairs
Division<Mebuki Securities>
Administrative
Compliance
Division

SuperviseGroup companies

In addition, the Company established the FY2019 Group’s Basic Policy for Anti-Money Laundering, and has decided to build and maintain a risk management system against money laundering and financing of terrorism through arisk-based approach.
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

Supervise
Head Office and business units/branches
Officer and staff in change ofmanagement and complianceantisocial 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.

The Company has established a management system aimed at group-wide comprehensive management
which enables 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 for compliance, andthereunder, other relevant rules and regulations systematically.
The Compliance Committee established within the Company is responsible for decisions on compliance-related
important business execution of the Company and the Group, and for analysis, assessment and deliberation onmatters for improvement relevant to group-wide compliance.
Furthermore, we put compliance into practice through, among other factors, the establishment of the Legaland Compliance Group of the Corporate Management Department as the managing and supervising section in
charge of group-wide compliance, the designation of the officer responsible for the Corporate Management Department, and the assignment of compliance staff at each management organization within the Group. Importantmatters regarding compliance at directly-owned subsidiaries are consulted on and reported to the Corporate Management Department, which is responsible for the guidance, management and supervision thereof, pursuant to
the Rules for Management of Companies within the Group.

Management system for customer protection (initiatives for customer protection)
The Group has established the Group Management Policy for Customer Protection to organize and ensure theappropriate management system for customer protection from the perspective of the protection and improvementof convenience for all existing and future customers of the Group, as well as for facilitating finance.
Joyo Bank and Ashikaga Bank have established a supervising section in charge of consultation, complaints
and other communication from customers, and have also entered into a basic contract for the implementation of
dispute resolution procedures with the Japanese Bankers Association, the designated dispute resolution organization under the Banking Act, to utilize the financial ADR system for dispute resolution with customers through the
involvement of a third party.
Joyo Bank, which concurrently operates a trust business, has also entered into a basic contract for the
implementation of dispute resolution procedures with the Trust Companies Association of Japan, the designateddispute resolution organization under the Trust Business Act and the Act on Engagement in Trust Business Activities by Financial Institutions.
(Note) Ashikaga Bank has commenced the handling of the trust business, effective July 1, 2019, and has entered into a basic agreement to implement procedures with the Trust Companies Association of Japan.

Compliance program
The Group establishes a compliance program as the action plan to realize compliance. The companies within theGroup establish a program based on the Basic Policy on Group Compliance Program developed annually by theCompany.
The status of the compliance program performed by companies within the Group is reported to and validated
by the Compliance Committee quarterly, and is also subject to the annual overall assessment which is reflected in
the next year’s program.

33

Mebuki Financial Group, Inc.

Annual Report 201934

Market of the Group

Number of
337 officesbank offices
Ibaraki154 offices
Tochigi
120 offices
Gunma
15 offices
Saitama
20 officesTokyo
8 officesChiba
7 offices
Others13 offices

Impressive share of its core market, Ibaraki and Tochigi prefectures,
Near the greater Tokyo region.

as of March 31,2019
Kan-Etsu Expressway
Tohoku Expressway

Joban Expressway

Tochigi
Nikko

Gunma
Utsunomiya

MitoAshikaga
Kita-Kanto
Expressway
Ken-O Expressway—

Tsukuba

Ibaraki

Saitama
Economic scale of our operating area

Within 100km of Tokyo

Ibaraki National Tochigi National Gunma National Saitama National Chiba National Tokyo National
Prefecture Rank Prefecture Rank Prefecture Rank Prefecture Rank Prefecture Rank Metropolitan Rank

Prefectural grossproduct (2016) (¥ trillion)

13.1

11

9.0

14

8.5

16

22.7

5

20.4

7

104.5

1

Population (2018)(thousand)

2,877

11

1,946

19

1,952

18

7,330

5

6,255

6

13,822

1

Prefectural income
per capita (2015) (¥ thousand)

3,079

10

3,481

4

3,145

8

2,977

15

2,920

22

5,378

1

Number of businesses(2016)

118,03113

88,332

19

92,00618

250,8345

196,5799685,615

1

Manufactured goods
shipped (2017) (¥ trillion)

11.2

8

8.9

12

8.7

13

12.7

6

11.4

7

7.8

14

New Factory Locations(excluding power supply
sector) (2017)
(number/area(ha))

46/ 87ha5/4

37/ 97ha8/3

62/ 55ha2/9

37/ 32ha9 / 13- / -ha47 / 47

Tokyo

Chiba

21
17 / 21/ 19haNote: The above ranks are the ranks among the 47 prefectures.
Source: Prefectural gross product and prefectural income per capita data is from the Cabinet Office. Population data and Number of businesses arefrom the Ministry of Internal Affairs and Communications. Manufactured goods shipped and new factory locations data come from the Ministryof Economy, Trade and Industry.

35

Mebuki Financial Group, Inc.

Annual Report 201936

Mebuki Financial Group’s Overseas Business Support Activities

Ashikaga Bank’s Bangkok Representative Office and Joyo Bank’s Hanoi Representative Office were established in November
2017 and February 2018, respectively.
The Group has demonstrated its collaborative creation capabilities through holding events such as the Japan-China BusinessMeeting in Liaoning Province, Joint Seminar and Business Meeting of Regional Banks in Shenzhen City, Guangdong Province,
Bangkok Business Meeting, as well as co-hosting Manufacturers’ Business Meetings in Hanoi and Bangkok.

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 2019), we offer a wide variety of support services through business alliances with local financial institutions and government
agencies in Asia and North America.

Hong Kong Represen tative Office, Ashikaga Bank

Shanghai Representative Office, Joyo Bank
Address

Phone

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

AddressPhone

New York Representative Office, Joyo Bank

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

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

ThailandMajor alliance partners

Japan International Cooperation Agency (JICA)
Japan Bank for International Cooperation (JBIC)

Ashikaga
Bank

Business overview of alliance partners
Provision of various types of information concerning overseas business development;
provision of information concerning foreign country regulations, etc.
Provision of various types of information concerning overseas business development in developing
nations; provision of information concerning foreign country regulations
Provision of loans to support overseas business development

Nippon Export and Investment Insurance (NEXI)

Provision of various types of trade insurance to cover foreign transaction risks in export transactions

Organization for Small & Medium Enterprises and Regional Innovation, JAPANProvision of various types of information concerning overseas business development;
provision of information concerning foreign country regulations, etc.

Tokio Marine & Nichido Fire Insurance
Sompo Japan Nipponkoa Insurance

South East Asia/South Asia

Japan External Trade Organization (JETRO)

Joyo
Bank

Bangkok Bank

37

Mebuki Financial Group, Inc.

Vietin Bank
Vietnam

Foreign Investment Agency of Vietnam
BDO Unibank

India
Provision of security system and crime prevention equipment overseas;
provision of security services overseas

Vietcombank

Metrobank

Central America

Sohgo Security Services

Bank CIMB Niaga

Philippines

Provision of risk information overseas; provision of risk management consulting services;
provision of various types of P&C insurance

Mitsui Sumitomo Insurance
SECOM

Bank Negara Indonesia
Indonesia

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 201938

Financial Data

Organization (as of June 25, 2019)

Consolidated Balance Sheet
March 31, 2019

Mebuki Financial Group, Inc. and Consolidated Subsidiaries(holding company)
Millions of Yen
2019
2018

General Meeting of Shareholders
Accounting Auditors
Corporate GovernanceCommittee

Management Meeting

Cooperate

Board of Directors
Audit and Supervisory Committee

Consult/
Report

ALM/Risk Management Committee

Audit and Supervisory Committee OfficeCompliance Committee

System Integration Committee

Group Strategy Committee(Business plan)(Corporate management)(Regional revitalization)(Audit)Corporate Planning Department

Corporate Management Department

Regional Revitalization Department

Audit Department

Planning GroupIT Digital Strategy Group
System Integration Promotion Group
Administrative BPR Promotion 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

Oversight GroupOperational Audit Group

directly-owned subsidiary

Company with Audit and Supervisory Committee

Company with Audit and Supervisory Committee

Company with Auditors

Company with Auditors

Stock Information (As of March 31, 2019)
Capital and number of issued shares
Paid in capital

117,495,550,000 yen

Number of issued shares

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

1,179,055,218 shares

Major shareholders
Mebuki Financial Group, Inc.
Name

Nomura Financial Partners Co., Ltd.
The Master Trust Bank of Japan, Ltd. (trust account)
Japan Trustee Services Bank, Ltd. (trust account)
Nippon Life Insurance Company
Sompo Japan Nipponkoa Insurance, Inc.
Japan Trustee Services Bank, Ltd. (trust account 9)
STATE STREET BANK AND TRUST COM-PANY 505223
Sumitomo Life Insurance Company
Japan Trustee Services Bank, Ltd. (trust account 5)
The Dai-ichi Life Insurance Company, Limited
Total

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

122,900
51,34550,63734,48732,97432,581
23,77021,65920,083
19,948410,387

10.47
4.37
4.31
2.93
2.81
2.77
2.02
1.84
1.71
1.70
34.98

Name

Mebuki Financial Group, Inc.

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

722,910100.00Ashikaga Bank
Name

Mebuki Financial Group, Inc.

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

1,340,520

100.00Thousands of
U.S. Dollars(Note 1)2019

ASSETSCash and due from banks (Notes 3 and 23)�������������������������������������������������������������� ¥ 1,468,877
Call loans and bills bought (Note 23) ������������������������������������������������������������������������
10,389
Monetary claims bought (Note 23) ���������������������������������������������������������������������������
15,152
Trading assets (Notes 4 and 23) ������������������������������������������������������������������������������
13,799
Money held in trust (Note 5) ������������������������������������������������������������������������������������
23,175
Securities (Notes 4, 10, 11, and 23) ������������������������������������������������������������������������
4,346,628
Loans and bills discounted (Notes 7, 11, 23, and 27) ����������������������������������������������� 11,122,484
Foreign exchanges (Note 7) �������������������������������������������������������������������������������������
6,508
Lease receivables and investments in lease (Note 22) �����������������������������������������������
62,653
Other assets (Notes 11 and 24) �������������������������������������������������������������������������������
205,611
Tangible fixed assets (Note 8) ����������������������������������������������������������������������������������
112,518
Intangible fixed assets (Note 9) ��������������������������������������������������������������������������������
18,388Asset for retirement benefits (Note 14) ���������������������������������������������������������������������
16,550
Deferred tax assets (Note 21) ����������������������������������������������������������������������������������
1,583
Customers’ liabilities for acceptances and guarantees (Note 10) ��������������������������������
21,442
Allowance for loan losses ����������������������������������������������������������������������������������������
(73,179)
Allowance for investment losses ������������������������������������������������������������������������������
(9)
TOTAL �������������������������������������������������������������������������������������������������������������� ¥17,372,575¥ 1,708,734
14,636
15,38812,539—4,176,768
10,497,976
6,416
56,620187,737
115,146
14,801
15,4282,119
24,902(79,324)(9)¥16,769,883$ 13,234,322
93,610136,526
124,328
208,803
39,162,341
100,211,587
58,644564,495
1,852,527
1,013,769
165,678
149,115
14,268
193,195(659,335)(81)$156,523,791

LIABILITIES AND EQUITY
LIABILITIES:
Deposits (Notes 11 and 23) ������������������������������������������������������������������������������������� ¥14,373,888
Negotiable certificates of deposit (Note 23)���������������������������������������������������������������
282,158
Call money and bills sold (Note 23) ��������������������������������������������������������������������������
191,740
Payables under repurchase agreements (Note 11) ����������������������������������������������������
120,832
Payables under securities lending transactions (Notes 11 and 23) �����������������������������
202,152
Trading liabilities�����������������������������������������������������������������������������������������������������
1,065
Borrowed money (Notes 11, 12, and 23) ������������������������������������������������������������������
1,053,077
Foreign exchanges��������������������������������������������������������������������������������������������������
637
Bonds (Note 13) �����������������������������������������������������������������������������������������������������
5,000
Bonds with warrants (Note 13)���������������������������������������������������������������������������������
33,297
Due to trust account �����������������������������������������������������������������������������������������������
566
Other liabilities��������������������������������������������������������������������������������������������������������
116,512
Provision for bonuses for directors ���������������������������������������������������������������������������
284
Liability for retirement benefits (Note 14) ������������������������������������������������������������������
7,429
Provision for retirement benefits for directors������������������������������������������������������������
57
Provision for reimbursement of deposits �������������������������������������������������������������������
3,253
Provision for contingent losses���������������������������������������������������������������������������������
1,955
Provision for point card certificates ��������������������������������������������������������������������������
406
Provision for losses on interest repayments ��������������������������������������������������������������
16
Reserves under special laws������������������������������������������������������������������������������������
2
Deferred tax liabilities (Note 21) �������������������������������������������������������������������������������
27,241
Deferred tax liabilities for land revaluation (Note 8) ����������������������������������������������������
8,823
Negative goodwill����������������������������������������������������������������������������������������������������
1,185
Acceptances and guarantees (Note 10) ��������������������������������������������������������������������
21,442
Total liabilities ��������������������������������������������������������������������������������������������������� 16,453,028¥13,977,912
272,640
340,540
26,314
158,149504
877,856708
5,000
31,881
11
114,060
129
6,014
63
3,781
1,603
294
13
2
28,7899,226
1,343
24,902
15,881,743$129,506,160
2,542,196
1,727,549
1,088,676
1,821,360
9,602
9,488,040
5,741
45,049300,000
5,103
1,049,755
2,562
66,938522
29,314
17,6163,667
150
18245,442
79,501
10,679193,195
148,238,835

117,495
148,541216
489,697(8)

1,058,614
1,338,366
2,099
4,719,279(18,257)

120,727(56)
14,182(2,656)132,197
888,139¥16,769,883

1,108,590(2,408)
121,610(42,937)
1,184,855
8,284,956$156,523,791

EQUITY (Notes 15 and 16):
Common stock �������������������������������������������������������������������������������������������������������
117,495
Capital surplus �������������������������������������������������������������������������������������������������������
148,545
Stock acquisition rights �������������������������������������������������������������������������������������������
233
Retained earnings ���������������������������������������������������������������������������������������������������
523,792
Treasury stock ��������������������������������������������������������������������������������������������������������
(2,026)
Accumulated other comprehensive income:��������������������������������������������������������������
Unrealized gains on available-for-sale securities (Note 6) �������������������������������������
123,042
Deferred losses on derivatives under hedge accounting (Note 24)�������������������������
(267)
Land revaluation surplus (Note 8) �����������������������������������������������������������������������
13,497
Defined retirement benefit plans (Note 14) ����������������������������������������������������������
(4,765)
Total accumulated other comprehensive income ��������������������������������������������
131,507
Total equity���������������������������������������������������������������������������������������������
919,547
TOTAL������������������������������������������������������������������������������������������������������������������������� ¥17,372,575
See notes to consolidated financial statements�

Annual Report 201939

Mebuki Financial Group, Inc.

40

Consolidated Statement of Income
Year Ended March 31, 2019

Consolidated Statement of Changes in Equity

Mebuki Financial Group, Inc. and Consolidated Subsidiaries

Year Ended March 31, 2019

Millions of Yen
2019
2018

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)
2019

¥113,944
57,377
179
764
482
31
52,9052,418
3,751
56,362
288,217¥113,739
45,584
108
652
423
42
50,717
3,669
4,768
43,608263,315$1,026,618
516,965
1,620
6,885
4,344
288
476,665
21,78733,802507,818
2,596,790

6,030
86
1,364
298
2,422
2,284
132
3,886
14,078
11,766
119,636
2,771
57,042
221,799
66,418

3,668
91
589
246
2,395
2,103
132
4,926
13,7408,411
120,427
6,903
37,339200,977
62,33854,329782
12,292
2,686
21,83020,583
1,189
35,015
126,843
106,0121,077,905
24,968513,942
1,998,375
598,415

21,683(1,603)20,07946,338¥ 46,338

20,182(913)
19,26943,069¥ 43,069

195,362(14,447)
180,915
417,499$ 417,499

Yen

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

¥39.47
39.45
11.00

U.S. Dollars¥36�56
36�54
11�00

$0.36
0.36
0.10

See notes to consolidated financial statements�

Consolidated Statement of Comprehensive Income
Year Ended March 31, 2019

Mebuki Financial Group, Inc. and Consolidated Subsidiaries

Millions of Yen
2019
2018

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 loss �������������������������������������������������������������������������������COMPREHENSIVE INCOME �������������������������������������������������������������������������������������������
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Owners of the parent ����������������������������������������������������������������������������������������������

Thousands of
U.S. Dollars(Note 1)
2019¥46,338¥43,069$417,499

2,314
(211)
2
(2,109)(3)¥46,335(7,817)
617
468
2,777
(3,954)¥39,11420,853(1,901)
22(19,002)(29)$417,471¥46,335¥39,114$417,471

Mebuki Financial Group, Inc. and Consolidated Subsidiaries

Millions of Yen

BALANCE, APRIL 1, 2017�������������������������Cash dividends �����������������������������������
Net income attributable to owners of
the parent ���������������������������������������
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, 2018 ��������������������

Stock
Acquisition
RightsCommonStock(Note 15)

CapitalSurplus¥117,495¥148,490¥193

Retained
Earnings

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

Treasury
Stock¥461,631(14,133)¥(6)¥128,545¥(674)¥12,844¥(5,433)

Total¥135,282

43,069(3,084)(3,084)¥132,197

Total

Total
Equity(869)¥117,495

50¥148,541

23
23
¥216

28,065¥489,697(1)¥(8)(7,817)(7,817)¥120,727617
617¥ (56)

1,338
1,338¥14,182

2,777
2,777
¥(2,656)¥863,086(14,133)
43,069(2)
51(869)(3,061)
25,053¥888,139

(2)
0

50

Total
EquityMillions of Yen

BALANCE, APRIL 1, 2018�������������������������Cash dividends �����������������������������������
Net income attributable to owners of
the parent ���������������������������������������
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, 2019 ��������������������

Stock
Acquisition
RightsCommonStock(Note 15)

CapitalSurplus¥117,495¥148,541¥216

Retained
Earnings

Treasury
Stock¥489,697(12,930)¥

Accumulated Other Comprehensive Income
Deferred
Unrealized
Losses on
Gains
DefinedLand
on Available- Derivatives
under Hedge Revaluation Retirement
for-Sale
Benefit Plans
Surplus
Accounting
Securities(8)¥120,727¥ (56)¥14,182¥(2,656)¥132,197

46,338(690)(690)¥131,507

46,338(2,090)
76
687
(674)
31,407¥919,547

Total

Total
Equity(2,090)72

3687¥117,495

3¥148,545

16
16
¥233

34,095¥523,792(2,017)¥(2,026)

2,314
2,314
¥123,042

(211)
(211)
¥(267)(685)(685)¥13,497(2,109)(2,109)¥(4,765)¥888,139(12,930)

Thousands of U.S. Dollars

CommonStock(Note 15)BALANCE, APRIL 1, 2018������������������������� $1,058,614
Cash dividends �����������������������������������
Net income attributable to owners of
the parent ���������������������������������������
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, 2019 �������������������� $1,058,614

CapitalSurplus$1,338,331

Stock
Acquisition
Rights$1,951Retained
Earnings

TreasuryStock$4,412,084(116,499)$

Accumulated Other Comprehensive Income
Deferred
Unrealized
Losses on
Gains
DefinedLand
on Available- Derivatives
under Hedge Revaluation Retirement
for-Sale
Benefit Plans
Surplus
Accounting
Securities(79) $1,087,736$ (507)$127,782$(23,934) $1,191,077(6,172)(6,172)$121,610

417,499(18,833)690
6,194(19,002)(6,223)(6,074)(19,002)(6,223)282,977$(42,937) $1,184,855 $8,284,956

417,499(18,833)
654

35
6,194
35
$1,338,366

148
148$2,099307,194$4,719,279

20,853(18,178)
20,853$(18,257) $1,108,590(1,901)(1,901)$(2,408)$8,001,979(116,499)

See notes to consolidated financial statements�

See notes to consolidated financial statements�

41

Mebuki Financial Group, Inc.

Annual Report 201942

Consolidated Statement of Cash Flows
Year Ended March 31, 2019

Mebuki Financial Group, Inc. and Consolidated Subsidiaries

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 in provision for bonuses for directors �����������������������������������������������������������������������������������
Increase in asset for retirement benefits ��������������������������������������������������������������������������������������������
Decrease in liability for retirement benefits ����������������������������������������������������������������������������������������
Increase (decrease) in provision for retirement benefits for directors ���������������������������������������������������
Increase (decrease) in provision for reimbursement of deposits�����������������������������������������������������������
Increase in provision for contingent losses�����������������������������������������������������������������������������������������
Increase (decrease) in provision for point card certificates ������������������������������������������������������������������
Increase in provision for interest repayments �������������������������������������������������������������������������������������
Gain on fund management ���������������������������������������������������������������������������������������������������������������
Financing expenses �������������������������������������������������������������������������������������������������������������������������
Losses related to securities ��������������������������������������������������������������������������������������������������������������
Foreign exchange losses (gains) �������������������������������������������������������������������������������������������������������
Losses (gains) on disposal of fixed assets������������������������������������������������������������������������������������������
Net increase in trading assets�����������������������������������������������������������������������������������������������������������
Net increase (decrease) in trading liabilities ���������������������������������������������������������������������������������������
Net increase in loans and bills discounted �����������������������������������������������������������������������������������������
Net increase in deposits �������������������������������������������������������������������������������������������������������������������
Net increase (decrease) in negotiable certificates of deposit ���������������������������������������������������������������
Net increase in borrowed money (excluding subordinated borrowings) ������������������������������������������������
Net decrease (increase) in due from banks (excluding cash equivalents)����������������������������������������������
Net decrease (increase) in call loans �������������������������������������������������������������������������������������������������
Net increase (decrease) in call money �����������������������������������������������������������������������������������������������
Net increase (decrease) in payables under securities lending transactions �������������������������������������������
Net decrease (increase) in foreign exchanges - assets ����������������������������������������������������������������������
Net decrease in foreign exchanges - liabilities �����������������������������������������������������������������������������������
Net increase in lease receivables and investments in lease�����������������������������������������������������������������
Net increase (decrease) in due to trust account ���������������������������������������������������������������������������������
Proceeds from fund management �����������������������������������������������������������������������������������������������������
Payments for finance �����������������������������������������������������������������������������������������������������������������������
Other--net ���������������������������������������������������������������������������������������������������������������������������������������
Total adjustments ����������������������������������������������������������������������������������������������������������������������������
Net cash provided by operating activities �������������������������������������������������������������������������������������������������

43

Mebuki Financial Group, Inc.

Millions of Yen
2019
2018

Thousands of
U.S. Dollars(Note 1)
2019

¥ 66,418¥ 62,338$ 598,415(22,828)
8,762
2,747
(158)
(6,144)154(3,849)
(234)
(5)
(528)
352
112
3
(172,748)
16,504
10,471(8,097)368(1,259)560(624,507)
395,975
9,518
215,221(19,082)
4,482(148,800)
44,003(92)(71)(6,032)
554
171,997(16,381)
88,699(60,330)¥ 6,087(22,393)
8,654
1,813
(158)
484
18
(3,561)(1,359)
11
301
54
(0)
0
(160,508)
14,155
11,236
11,488(630)(5,313)(6)(253,246)
470,864(12,064)
142,262
8,693(8,911)
37,228(9,490)806(48)(8,254)(1)
160,454(13,823)(18,880)
349,877¥412,215(205,684)
78,95224,750(1,424)(55,365)
1,396(34,683)(2,116)(47)(4,761)
3,172
1,015
30
(1,556,431)
148,706
94,350(72,953)
3,322(11,349)
5,054(5,626,699)
3,567,671
85,756
1,939,105(171,931)
40,382(1,340,662)
396,463(835)(645)(54,352)
4,996
1,549,671(147,593)
799,170(543,567)$ 54,847

Millions of Yen
2019
2018
INVESTING ACTIVITIES:
Purchases of securities ��������������������������������������������������������������������������������������������������������������������
Proceeds from sales of securities �����������������������������������������������������������������������������������������������������
Proceeds from redemption of securities ��������������������������������������������������������������������������������������������
Payments for increase 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 used in investing activities ��������������������������������������������������������������������������������������������������
FINANCING ACTIVITIES:
Repayments of subordinated borrowings �������������������������������������������������������������������������������������������
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 (DECREACE) IN CASH AND CASH EQUIVALENTS ���������������������������������������������������������������
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR �����������������������������������������������������������������������������
CASH AND CASH EQUIVALENTS, END OF YEAR (Note 3)���������������������������������������������������������������������������

Thousands of
U.S. Dollars(Note 1)2019¥(1,371,972)
822,176
374,002(23,175)(5,730)259(7,086)
11(211,514)¥(1,352,901)
897,937
391,620—(5,337)
2,117(6,101)
6(72,659)$(12,361,229)
7,407,664
3,369,698(208,803)(51,631)2,336(63,851)
105(1,905,711)(40,000)(2,090)75(12,930)(54,944)1,432(258,939)
1,693,567¥1,434,627

—
(2)
50
(14,133)(14,085)(1,796)323,673
1,369,893¥1,693,567(360,393)(18,833)
684(116,499)(495,041)
12,904(2,333,000)
15,258,740$12,925,740

NONCASH INVESTING AND FINANCING ACTIVITY:
Not applicable�
See notes to consolidated financial statements�

Annual Report 201944

Notes to Consolidated Financial Statements
Year Ended March 31, 2019

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 2018 consolidated financial statements to conform to the classifications used in 2019�
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�99 to $1, the approximate rate of exchange at March 31, 2019� Suchtranslations should not be construed as representations that the Japanese yenamounts could be converted into U�S� dollars at that or any other rate�

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�

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa. Consolidation — The consolidated financial statements as of March 31,
2019, include the accounts of the Company and its 14 significant subsidiaries�
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, 2019, do not include
the accounts of three subsidiaries because the total assets, total income, net income, retained earnings, and accumulated other comprehensive income of theentity 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, 2019, do not apply
to the equity method of accounting of three unconsolidated subsidiaries and fiveassociated companies because the net income, retained earnings, and accumulated other comprehensive income of the entity would not have had a material
effect on the consolidated financial statements�
All significant intercompany balances and transactions have been eliminatedin 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�

45

Mebuki Financial Group, Inc.

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 fairvalue, and have been included in trading assets and trading liabilities on a tradedate basis� 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 balance sheet date� Derivatives, including
swaps, futures, and options are valued assuming settlement on the 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�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 their self-assessment
systems� These systems reflect past experience of credit losses; possible credit
losses; business and economic conditions; the character, quality, and performanceof the portfolio; value of collateral or guarantees; and other pertinent indicators�
The consolidated banking subsidiaries have implemented self-assessment
systems to determine their asset quality� The quality of all loans is assessed by
the branches and the related head office divisions, with a subsequent audit by
the Internal Audit division, which is independent from these divisions in accordance with the consolidated banking subsidiaries’ policy and guidelines for the
self-assessment of asset quality�
The consolidated banking subsidiaries have established credit rating systems, under which their customers are classified into five categories� The credit
rating systems are used in the self-assessment of asset quality� All loans areclassified into five categories for self-assessment purposes: “normal,” “in needof caution,” “possible bankruptcy,” “virtual bankruptcy,” and “legal bankruptcy�”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�For other claims, an allowance is provided based on the actual historicalloss ratio�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, 2019 and 2018, the deducted amounts were¥25,870 million ($233,086 thousand) and ¥20,194 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, etc�)at an estimate of the amounts deemed uncollectible based on the respective assessments�
i. Allowance for Investment Losses — Allowance for investment losses is provided at the amount deemed necessary to cover estimated possible losses on investments, which one consolidated banking subsidiary may incur in the future�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 Company accounts for the liability for retirement benefits based on the projected benefit obligations and 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 withinequity (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�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�

Annual Report 201946

q. Reserves under Special Laws — Reserves under special laws is a reservefor contingent liabilities and provided for compensation for losses from securities-related transactions or derivative transactions in the amount of ¥2 million($18 thousand) and ¥2 million as of March 31, 2019 and 2018, pursuant to Article 46-5-1 of the Financial Instruments and Exchange Act and Article 175 of therelated cabinet order�
r. Stock Options — Compensation expense for employee stock options whichwere granted on and after May 1, 2006, is recognized based on the fair value atthe date of grant and over the vesting period as consideration for receiving goods
or services in accordance with the Accounting Standards Board of Japan(“ASBJ”) Statement No� 8, “Accounting Standard for Stock Options�” Stock options granted to nonemployees are accounted for based on the fair value of either
the stock option or the goods or services received� In the consolidated balance
sheet, the stock option is presented as a stock acquisition right as a separate
component of equity until exercised� The accounting standard allows unlistedcompanies to measure options at their intrinsic value if they cannot reliably estimate fair value�s. Stock Issuance Costs — Stock issuance costs are charged to income as
incurred�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 lease�
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�”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 corporate-tax system,
which allows companies to base tax payments on the combined profits or lossesof the parent company and its wholly-owned subsidiaries�
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)�

47

Mebuki Financial Group, Inc.

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 offsetting 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 excluding the time depositsof the Company and the other consolidated subsidiaries�

3. CASH AND CASH EQUIVALENTS
The reconciliation of “Cash and cash equivalents” in the consolidated statementof cash flows and “Cash and due from banks” in the consolidated balance sheets
as of March 31, 2019 and 2018, was as follows:

Cash and due from banks������������������� ¥1,468,877 ¥1,708,734
Deposits with banks of the consolidatedbanking subsidiaries other than the
Bank of Japan ����������������������������������
(34,249)(15,166)
Cash and cash equivalents ����������������� ¥1,434,627 ¥1,693,567

z. Per Share Information — Basic net income per share of common stocks iscomputed by dividing net income attributable to common shareholders by theweighted-average number of shares of common stock outstanding for the period,
retroactively adjusted for stock splits�
Diluted net income per share reflects the potential dilution that could occur
if securities were exercised or converted into common stock� Diluted net income
per share 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 exerciseof outstanding warrants�
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�$13,234,322(308,582)$12,925,740

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”
described in the consolidated balance sheets�Valuation differences recognized as income as of March 31, 2019 and2018, were as follows:
Thousands of
U.S. Dollars
2019

Millions of Yen
2019
2018

Trading securities ��������������������������������

¥15

March 31, 2019

Thousands of
U.S. Dollars
2019

Millions of Yen
2019
2018

Japanese national government bonds ���� ¥ 708,237 ¥ 851,574
Japanese local government bonds ������
939,276795,583
Japanese corporate bonds������������������
789,381
727,179
Japanese corporate stocks �����������������
284,579
312,224
Other securities ��������������������������������� 1,625,152 1,490,205
Total ������������������������������������������������� ¥4,346,628 ¥4,176,768$ 6,381,090
8,462,716
7,112,187
2,564,012
14,642,336$39,162,341

The cost and aggregate fair value of available-for-sale securities andheld-to-maturity securities as of March 31, 2019 and 2018, were as follows:

Cost

Millions of Yen
Unrealized Unrealized
Gains
LossesSecurities classified as:
Available-for-sale: ���������������� ¥3,979,199 ¥213,014
Equity securities ��������������� 143,988 141,744
Debt securities: ���������������� 2,246,502 21,321
Japanese national
government bonds ����� 614,856
7,552Japanese local
government bonds ����� 933,329
5,478Japanese corporate
bonds ������������������������ 698,316
8,291
Others: ���������������������������� 1,588,708 49,948
Foreign bonds ������������� 819,268 16,280
Others������������������������� 769,440 33,667
Held-to-maturity: ������������������ 169,288
1,658Japanese national
government bonds ����������
85,914
610
Japanese local
government bonds ����������
500
0Japanese corporate
bonds ����������������������������
82,874
1,047

Cost

Securities classified as:
Available-for-sale: ���������������� ¥3,833,680 ¥226,533
Equity securities ��������������� 150,542 158,520
Debt securities: ���������������� 2,203,100 18,839
Japanese national
government bonds ����� 757,168
8,391
Japanese local
government bonds ����� 793,365
2,703
Japanese corporate
bonds ������������������������ 652,566
7,744
Others: ���������������������������� 1,480,037 49,172
Foreign bonds ������������� 628,613
1,738
Others������������������������� 851,423 47,434
Held-to-maturity: ������������������ 154,787
651
Japanese national
government bonds ����������
86,96037
Japanese local
government bonds ����������
399
0Japanese corporate
bonds ����������������������������
67,427
613

$142

¥(11)

Securities as of March 31, 2019 and 2018, consisted of the following:

March 31, 2019y. 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�

Thousands of
U.S. Dollars
2019

Millions of Yen
2019
2018

March 31, 2018

Fair Value¥38,037 ¥4,154,177
5,514
280,218217 2,267,607
85

622,32231

938,776100
32,3055,890
26,415
44706,507
1,606,351
829,657
776,693
170,902—86,524—500

4483,877

Millions of Yen
Unrealized Unrealized
Gains
Losses

Cost

Fair Value¥54,921 ¥4,005,292
1,173
307,8902,389 2,219,550
945

764,614885

795,183559
51,357
13,801
37,556518

659,752
1,477,852
616,551
861,301
154,920486

86,5100400

3168,009Thousands of U.S. Dollars
Unrealized Unrealized
Gains
LossesFair Value

Securities classified as:
Available-for-sale: ���������������� $35,851,878 $1,919,221
Equity securities ��������������� 1,297,314 1,277,091
Debt securities: ���������������� 20,240,584 192,106
Japanese national
government bonds ����� 5,539,748
68,042
Japanese local
government bonds ����� 8,409,128
49,362
Japanese corporate
bonds ������������������������ 6,291,707
74,701Others: ���������������������������� 14,313,981 450,025
Foreign bonds ������������� 7,381,460 146,682
Others������������������������� 6,932,520 303,342
Held-to-maturity: ������������������ 1,525,258
14,940Japanese national
government bonds ����������
774,072
5,499
Japanese local
government bonds ����������
4,505
4Japanese corporate
bonds ����������������������������
746,682
9,437$342,707 $37,428,393
49,682
2,524,723
1,956 20,430,734
773

5,607,018

279

8,458,211

903
291,069
53,074
237,995
398

6,365,505
14,472,936
7,475,069
6,997,867
1,539,800—

779,571

—

4,509

398

755,721

Annual Report 201948

Information for available-for-sale securities which were sold during theyears ended March 31, 2019 and 2018, is as follows:

March 31, 2019

Millions of Yen
Realized
Realized
Proceeds
Gains
LossesAvailable-for-sale:
Equity securities ������������������������������������� ¥ 12,215
Debt securities: �������������������������������������� 243,200
Japanese national government bonds ���� 177,798
Japanese local government bonds ������ 50,338
Japanese corporate bonds������������������ 15,063
Others: �������������������������������������������������� 495,026
Foreign bonds ������������������������������������ 221,295
Others ����������������������������������������������� 273,730
Total ���������������������������������������������������������� ¥750,442

March 31, 2018

¥

3
711
644
60
6
25,9086,168
19,739¥26,623

Millions of Yen
Realized
Realized
Proceeds
Gains
LossesAvailable-for-sale:
Equity securities ������������������������������������� ¥ 16,660
Debt securities: �������������������������������������� 237,165
Japanese national government bonds ���� 153,078
Japanese local government bonds ������ 83,623
Japanese corporate bonds������������������
462
Others: �������������������������������������������������� 586,250
Foreign bonds ������������������������������������ 372,610
Others ����������������������������������������������� 213,640
Total ���������������������������������������������������������� ¥840,076

March 31, 2019

¥ 5,852
435
345
66
22
19,029205
18,823¥25,317¥ 7,286
828
706
119
2
7,460
1,288
6,171
¥15,575

¥

12
235
194
40
0
13,528
6,134
7,393¥13,776

Thousands of U.S. Dollars
Realized
Realized
Proceeds
Gains
LossesAvailable-for-sale:
Equity securities ������������������������������������� $ 110,061
Debt securities: �������������������������������������� 2,191,196
Japanese national government bonds ���� 1,601,935
Japanese local government bonds ������ 453,540
Japanese corporate bonds������������������ 135,721
Others: �������������������������������������������������� 4,460,099
Foreign bonds ������������������������������������ 1,993,837
Others ����������������������������������������������� 2,466,262
Total ���������������������������������������������������������� $6,761,356$ 52,731
3,921
3,111
603
207
171,455
1,855
169,600$228,107

$

29
6,408
5,807
545
56
233,432
55,578177,854$239,869

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, 2019 and 2018, were ¥273 million ($2,463 thousand)and nil, 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, 2019 and 2018, securities included equity investments inunconsolidated subsidiaries and associated companies of ¥9 million ($83 thousand) and ¥9 million and capital subscriptions of ¥3,018 million ($27,194 thousand) and ¥2,784 million, respectively�

49

Mebuki Financial Group, Inc.

5. MONEY HELD IN TRUST
Money held in trust for trading purposes as of March 31, 2019 and 2018,consisted of the following:
Millions of Yen
2019
2018

Amounts recorded in the consolidatedbalance sheets ��������������������������������� ¥23,175
Valuation gain (loss) included in the
consolidated statements of income ���—

Thousands of
U.S. Dollars
2019

¥—

$208,803——

6. UNREALIZED GAINS ON AVAILABLE-FOR-SALE SECURITIES
Unrealized gains on available-for-sale securities as of March 31, 2019 and2018, consisted of the following:
Millions of Yen
2019
2018

Unrealized gains: ������������������������������� ¥175,255
Available-for-sale securities ����������� 175,255
Money held in trust, except fortrading and held-to-maturity
purpose ���������������������������������������
—Deferred tax liabilities: ������������������������ 52,212
Unrealized gains on available-for-salesecurities before adjustments byownership share ������������������������������� 123,042
Noncontrolling interests ����������������������
—Company’s ownership share in
unrealized gains on available-for-salesecurities held by affiliates accounted
for using the equity method���������������
—Unrealized gains on available-for-salesecurities ����������������������������������������� ¥123,042

Thousands of
U.S. Dollars
2019¥171,886
171,886$1,579,018
1,579,018—
51,158—
470,429

120,727—

1,108,590———¥120,727$1,108,590

As of March 31, 2019 and 2018, the total unrealized gains include an unrealized gain of ¥277 million ($2,504 thousand) and ¥273 million, respectively,
on available-for-sale-securities contained in certain fund�“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, 2019 and 2018, the amounts of unused commitments
were ¥3,052,722 million ($27,504,484 thousand) and ¥2,922,672 million, respectively� As of March 31, 2019 and 2018, the amounts of unused commitments whose remaining contract terms were within one year were ¥2,139,690
million ($19,278,231 thousand) and ¥2,011,724 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, 2019 and 2018, consolidated banking subsidiaries have the right to sell or
repledge bills discounted and foreign exchange bills bought and their total facevalue was ¥45,440 million ($409,407 thousand) and ¥48,375 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, 2019 and 2018, the carrying amount of the land
after the above onetime revaluation exceeded the market value by ¥25,244 million ($227,450 thousand) and ¥26,942 million, respectively�

9. INTANGIBLE FIXED ASSETS
Intangible fixed assets as of March 31, 2019 and 2018, consisted of the following:
Millions of Yen
2019
2018

Software�������������������������������������������� ¥14,237
Other ������������������������������������������������
4,150
Total ������������������������������������������������� ¥18,388

Thousands of
U.S. Dollars
2019$128,280
37,399$165,678¥10,498
4,303¥14,801

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, 2019 and 2018, were ¥167,258 million($1,506,965 thousand) and ¥143,712 million, respectively�

Tangible fixed assets as of March 31, 2019 and 2018, consisted of the following:

7. LOANS AND BILLS DISCOUNTED
The following loans were included in loans and bills discounted as of March 31,
2019 and 2018:
Millions of Yen
2019
2018

Loans to borrowers
in legal bankruptcy �������������������������� ¥ 3,505
Past due loans ����������������������������������� 136,152
Loans past due
for three months or more ������������������
178
Restructured loans �����������������������������
32,117
Total ������������������������������������������������� ¥171,953

Thousands of
U.S. Dollars
2019¥ 4,437
142,266$

31,5811,226,709

426
37,348¥184,479

1,608
289,373$1,549,272

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�

Millions of Yen
2019
2018

Buildings ������������������������������������������� ¥ 40,181
Land ������������������������������������������������� 59,047
Leased assets������������������������������������
16
Construction in progress���������������������
587
Other ������������������������������������������������ 12,685
Total ������������������������������������������������� ¥112,518¥ 40,556
60,94920
1,202
12,416¥115,146

Thousands of
U.S. Dollars
2019$ 362,032
532,006
149
5,289
114,293$1,013,769

The accumulated depreciation of tangible fixed assets as of March 31,
2019 and 2018, amounted to ¥123,859 million ($1,115,951 thousand) and¥126,724 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� As
of March 31, 2019 and 2018, such deferred profit amounted to ¥10,091 million($90,922 thousand) and ¥10,204 million, respectively� Newly recognizedamounts for the years ended March 31, 2019 and 2018, were ¥28 million ($258
thousand) and ¥344 million, respectively�

11. ASSETS PLEDGED AS COLLATERAL
Assets pledged as collateral and the related liabilities as of March 31, 2019 and2018, were as follows:
Millions of Yen
2019
2018

Assets pledged as collateral:
Securities �������������������������������������� ¥1,512,757 ¥1,244,340
Loans and bills discounted �������������
34,0006,500
Total ��������������������������������������������� ¥1,546,757 ¥1,250,840
Related liabilities to above assets:
Deposits ��������������������������������������� ¥ 97,107 ¥ 113,111
Payables under repurchaseagreements ��������������������������������� 120,832
26,314
Payables under securities lendingtransactions ��������������������������������� 202,152
158,149
Borrowed money ��������������������������� 1,012,938
798,937

Thousands of
U.S. Dollars
2019$13,629,674
306,334$13,936,008$

874,921
1,088,676
1,821,360
9,126,397

Additionally, securities amounting to ¥5,661 million ($51,006 thousand)and ¥31,615 million as of March 31, 2019 and 2018, respectively, were
pledged as collateral for settlements of exchange or as substitute securities for
margins on futures transactions�

Annual Report 201950

Moreover, other assets included the following:Thousands of
U.S. Dollars
2019

Millions of Yen
2019
2018

Deposits for central counterparty��������� ¥94,672
Cash collateral paid for transactions
involving public funds �����������������������
2,070
Guarantee deposits ����������������������������
2,014
Cash collateral paid for financial
instruments ��������������������������������������
1,059¥92,768$852,980

94
2,051

18,657
18,147

1,731

9,548

Borrowed money as of March 31, 2019 and 2018, consisted of the following:Thousands of
U.S. Dollars
2019

Millions of Yen
2019
2018

Borrowed money of which theweighted-average annual interest
rates were 0�23 %, due from April,2019 to March, 2026 ����������������������� ¥1,053,077$9,488,040¥877,856

Annual maturities of borrowed money as of March 31, 2019, for the next
five years were as follows:2020�������������������������������������������������
2021�������������������������������������������������
2022�������������������������������������������������
2023�������������������������������������������������
2024�������������������������������������������������

Millions of Yen

Thousands of
U.S. Dollars¥835,162
43,422
62,95281,43761$7,524,665
391,232
567,194733,735
550

Borrowed money included borrowings from the Bank of Japan and other financial institutions� In addition, borrowed money included subordinated borrowings totaling ¥30,000 million ($270,295 thousand) and ¥70,000 million as ofMarch 31, 2019 and 2018, respectively�

13. BONDS
Bonds as of March 31, 2019 and 2018, consisted of the following:
Millions of Yen
2019
2018

Unsecured Euro-US dollardenominated convertible bonds withstock acquisition rights issued by theCompany, date of issue October 1,
2016, due April 24, 2019*1 ��������������
Unsecured straight bonds issued by
Joyo, date of issue May 24, 2000,
due May 22, 2020, 2�64% interest ����Total �������������������������������������������������

¥33,297
5,000¥38,297¥31,8815,000¥36,881

Thousands of
U.S. Dollars
2019$300,000
45,049$345,049*1 On October 1, 2016, the Company succeeded Euro-US dollar-denominated convertible bondsthat were originally issued by Joyo�

Information on convertible bonds with stock acquisition rights is as follows:
Name:
Euro-US dollar-denominated convertible bonds withstock acquisition rights issued by the Company due
2019Type of stock:

Common stock

Issue price of stockacquisition rights:

Free of charge

Issue price of stock:$5�03

Total sum of issue price: $300,000 thousand
Grant ratio of stockacquisition rights:

100�0%

Exercise period of stockacquisition rights:

From October 1, 2016, to April 10, 2019

Description and price of On execution of the stock acquisition rights, the correthe property to be con- sponding bonds are to be invested, and the bond’s
tributed upon the exer- price is same as face amount�
cise of the stockacquisition rights:

51

Mebuki Financial Group, Inc.

Year Ending March 312020�������������������������������������������������
2021�������������������������������������������������
2022�������������������������������������������������
2023�������������������������������������������������
2024�������������������������������������������������

Millions of Yen

Thousands of
U.S. Dollars¥33,297
5,000
—
—
—

$300,000
45,049———14. RETIREMENT AND PENSION PLANS

12. BORROWED MONEY

Year Ending March 31

Annual maturities of bonds as of March 31, 2019, for the next five years
were as follows:(1) Outline of the adopted retirement benefit plans
The Company’s banking subsidiary, Joyo, and its consolidated subsidiaries haveadopted defined employees’ retirement benefit plans, i�e�, the employees’ welfare
pension fund supplemented by the employees’ public pension system and lumpsum 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, etc�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, 2019and 2018, were as follows:
Millions of Yen
2019
2018

Balance at beginning of year��������������� ¥118,902 ¥117,530
Current service cost �����������������������
3,757
3,531
Interest cost ����������������������������������
505
615
Actuarial losses �����������������������������
4,668
3,262
Benefits paid ���������������������������������
(5,718)(6,077)
Past service cost ���������������������������
——Others ������������������������������������������
62
39
Balance at end of year������������������������ ¥122,177 ¥118,902

Thousands of
U.S. Dollars
2019$1,071,287
33,8584,551
42,059(51,521)—566$1,100,801(b) The changes in plan assets for the years ended March 31, 2019 and 2018,
were as follows:
Millions of Yen
2019
2018

Balance at beginning of year��������������� ¥129,651 ¥122,190
Expected return on plan assets �������
2,925
2,794
Actuarial gains ������������������������������
173
4,301
Contributions from the employer �����
3,482
3,916
Benefits paid ���������������������������������
(3,685)(3,591)Others ������������������������������������������
38
39
Balance at end of year������������������������ ¥132,585 ¥129,651

Thousands of
U.S. Dollars
2019$1,168,134
26,357
1,561
31,373(33,205)351$1,194,571*Figures above exclude retirement and benefit plans calculated by the simplified method�(c) The changes in liabilities for retirement benefits adopting the simplified method for the years ended March 31, 2019 and 2018, were as follows:
Millions of Yen
2019
2018

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

Thousands of
U.S. Dollars
2019¥1,334413(156)¥1,280455(111)$12,027
3,722(1,407)(281)(23)¥1,286(289)—¥1,334(2,534)(216)$11,593(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
2019
2018

Funded defined benefit obligation�������� ¥128,639 ¥126,787
Plan assets ���������������������������������������� (137,760) (136,201)
Total �������������������������������������������������
(9,120)(9,414)
Unfunded defined benefit obligation ����——Net asset arising from defined benefit
obligation ����������������������������������������� ¥ (9,120) ¥ (9,414)
Millions of Yen
2019
2018

Liability for retirement benefits ������������ ¥ 7,429
Asset for retirement benefits ��������������� (16,550)
Net asset arising from defined benefit
obligation ����������������������������������������� ¥ (9,120)

Thousands of
U.S. Dollars
2019

Prior service cost �������������������������������
Actuarial losses ���������������������������������
Total �������������������������������������������������

¥

—
3,030
¥3,030¥ —(4,021)¥(4,021)

Thousands of
U.S. Dollars
2019

$

—
27,304$27,304(g) Amounts recognized in accumulated other comprehensive income (before income tax effect) in respect of defined retirement benefit plans as of March
31, 2019 and 2018, were as follows:
Millions of Yen
2019
2018

Unrecognized prior service cost�����������
Unrecognized actuarial losses ��������������
Total �������������������������������������������������

¥

—
2,888
¥2,888¥—1,285¥1,285

Thousands of
U.S. Dollars
2019

$

—
26,023$26,023(h) Plan assetsa� Components of plan assets
Plan assets as of March 31, 2019 and 2018, consisted of the following:
Debt investments �������������������������������������������������������
Equity investments �����������������������������������������������������
General accounts �������������������������������������������������������
Others �����������������������������������������������������������������������
Total �������������������������������������������������������������������������

2019

2018

50.4%
31.6%
12.1%
5.8%
100.0%

48�8%
31�8%
12�2%
7�2%
100�0%* As of March 31, 2019 and 2018, total plan assets that were set up on corporate pension
plans include a retirement benefit trust of 20�3% and 21�3%�

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�$ (82,178)(i) Assumptions used for the years ended March 31, 2019 and 2018, were set
forth as follows:

Thousands of
U.S. Dollars
2019$ 66,938(149,115)¥ (9,414)$ (82,178)*Figures above include retirement and benefit plans calculated by the simplified method�(e) The components of net periodic benefit costs for the years ended March 31,
2019 and 2018, were as follows:

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

Millions of Yen
2019
2018

$1,159,021(1,241,199)(82,178)—¥ 6,014(15,428)

Millions of Yen
2019
2018

(f) Amounts recognized in other comprehensive income (before income tax effect)
in respect of defined retirement benefit plans for the years ended March 31,
2019 and 2018, were as follows:

2019

2018

Discount rate ������������������������������������������� 0.10% — 0.40% 0�20% — 0�57%
Expected rate of return on plan assets������� 2.50% — 3.30% 2�50% — 3�30%
Expected rate of increase in salary ������������ 4.52% — 9.00% 4�57% — 9�00%(3)Defined contribution plans
The amounts of the required contribution to the defined contribution plans of certain consolidated subsidiaries were ¥740 million ($6,667 thousand) and ¥750
million as of March 31, 2019 and 2018, respectively�

Thousands of
U.S. Dollars
2019¥3,757505(2,925)
1,464—¥3,531615(2,794)2,960—$33,858
4,551(26,357)
13,194—413(13)¥3,201455(16)¥4,751

3,722(120)$28,848*Figures above exclude retirement and benefit plans calculated by the simplified method�

Annual Report 201952

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 such companies, by nature, meet the criteria under the Companies Act� The Company isorganized 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 fiscalyear�
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 so stipulate� The Companies Act provides certain limitations on the amounts available fordividends or the purchase of treasury stock� The limitation is defined as theamount available for distribution to the shareholders, but the amount of equity
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 the equity
account that was charged upon the payment of such dividends until the aggregate amount of the legal reserve and additional paid-in capital equals 25% ofcapital 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, othercapital surplus, and retained earnings can be transferred among the accounts
within equity under certain conditions upon resolution of the shareholders�c. Treasury Stock and Treasury Stock Acquisition Rights
The Companies Act also provides for companies to purchase treasury stock anddispose 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 can purchaseboth 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, 2019 and 2018, were as follows:Year ended March 31, 2019
Dividends paid in the fiscal year ended March 31, 2019

Cash dividends approved at the Board of Directors’ meeting held on May 11, 2018:

Common stock

Cash dividends approved at the Board of Directors’ meeting held on Nov� 12, 2018:

Common stock

Total Amount(Millions of Yen/Thousands of
U.S. Dollars)¥6,478($58,368)
Total Amount(Millions of Yen/Thousands of
U.S. Dollars)¥6,451($58,131)

Per Share Amount(Yen /U.S. Dollars) Dividend Record Date¥5�50($0�05)

Mar� 31, 2018

Jun� 4, 2018

Per Share Amount(Yen /U.S. Dollars) Dividend Record Date¥5�50($0�05)

Effective Date

Sep� 30, 2018

Effective Date

Dec� 4, 2018

Dividends to be paid after March 31, 2019

Cash dividends approved at the Board of Directors’ meeting held on May 13, 2019:

Common stock

Total Amount(Millions of Yen/Thousands of
U.S. Dollars)¥6,451($58,131)

Per Share Amount(Yen /U.S. Dollars) Dividend Record Date¥5�50($0�05)

Mar� 31, 2019

Effective Date

Jun� 4, 2019Year ended March 31, 2018:
Dividends paid in the fiscal year ended March 31, 2018
Cash dividends approved at the Board of Directors’ meeting held on May 12, 2017:

Common stock
Cash dividends approved at the Board of Directors’ meeting held on Nov� 13, 2017:

Common stock

Total Amount(Millions of Yen)

¥7,655
Total Amount(Millions of Yen)

¥6,478Per Share Amount(Yen)
Dividend Record Date

¥6�50*

Mar� 31, 2017

Per Share Amount(Yen)
Dividend Record Date

¥5�50

Effective Date

Jun� 5, 2017

Sep� 30, 2017

Effective Date

Dec� 4, 2017

* 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, 2018
Cash dividends approved at the Board of Directors’ meeting held on May 11, 2018:

Common stock

Total Amount(Millions of Yen)

¥6,478Per Share Amount(Yen)
Dividend Record Date

¥5�50Mar� 31, 2018

Effective Date

Jun� 4, 2018

(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, 2019, were as follows:

As of April 1, 2018

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

Shares in Thousands
Changes During the Year
Increase
Decrease

As of March 31, 20191,179,055
1,179,055

—
—

—
—

1,179,055
1,179,055

1,183
1,183

5,002*1
5,002

214*2
214

5,971
5,971

*1 The number of shares of treasury stock increased by 5,000 thousand shares due to purchases of 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 211
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, 2018, were as follows:

As of April 1, 2017

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

Shares in Thousands
Changes During the Year
Increase
Decrease

As of March 31, 2018

1,179,055
1,179,055

—
—

—
—

1,179,055
1,179,055

1,303
1,303

5*1
5

125*2
125

1,183
1,183

*1 The number of shares of treasury stock increased by 5 thousand shares due to purchases of shares less than the trading unit�
*2 The number of shares of treasury stock decreased by 3 thousand shares due to sales to shareholders in response to their demand to buy additional shares up to the trading unit and by 122
thousand shares due to exercise of the stock acquisition rights�

53

Mebuki Financial Group, Inc.

Annual Report 201954

The stock option activity was as follows:

16. STOCK OPTIONSThe 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 ¥91 million ($828 thousand) and ¥74 million for the fiscal years ended
March 31, 2019 and 2018, respectively�
Details of stock options 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�
8th Series of Stock
Acquisition Rights*1
Mebuki Financial Group, Inc�
9th Series of Stock
Acquisition Rights*1
Mebuki Financial Group, Inc�
10th 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
2009 Stock Option
2010 Stock Option

Persons Granted

Number of Options
Granted (Shares)

Date of Grant

Exercise
Price

Exercise Period

10 directors of Joyo*2

6,733

August 24, 2009*3¥1

From October 1, 2016,
to August 24, 2039

10 directors of Joyo*2

9,453

July 21, 2010*3¥1

From October 1, 2016,
to July 21, 2040

10 directors of Joyo*2

14,040July 20, 2011*3¥1

From October 1, 2016,
to July 20, 2041

10 directors of Joyo*2

13,586

July 19, 2012*3¥1

From October 1, 2016,
to July 19, 2042

10 directors of Joyo*2

16,802

July 18, 2013*3¥1

From October 1, 2016,
to July 18, 2043

15 executive officersof Joyo*2

3,107

July 18, 2013*3¥1

From October 1, 2016,
to July 18, 2043

10 directors of Joyo*2

17,408July 18, 2014*3¥1

From October 1, 2016,
to July 18, 2044

14 executive officersof Joyo*2

6,416

July 18, 2014*3¥1

From October 1, 2016,
to July 18, 2044

10 directors of Joyo*2

16,099July 17, 2015*3¥1

From October 1, 2016,
to July 17, 2045

13 executive officersof Joyo*2

12,366

July 17, 2015*3¥1

From October 1, 2016,
to July 17, 2045

29 directors of
the Company, Joyo and Ashikaga

72,513

December 6, 2016

¥1

From December 7, 2016,
to December 6, 2046

16 executive officersof Joyo

40,040December 6, 2016

¥1

From December 7, 2016,
to December 6, 2046

29 directors of
the Company, Joyo and Ashikaga

92,160August 9, 2017

¥1

From August 10, 2017,
to August 9, 2047

16 executive officers of Joyo

50,948August 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

2,684,900

March 2, 2009

¥550

From March 2, 2011,
to December 31, 2018

2,698,700

January 4, 2010

¥550

From January 1, 2012,
to December 31, 2018

6 directors and executive officers of the company
10 directors and executive officers of Ashikaga
1,848 employees of Ashikaga
6 directors and executive officers of the company
10 directors and executive officers of Ashikaga
1,878 employees of Ashikaga

Mebuki FG
1st

Mebuki FG
2nd

Mebuki FG
3rd

Mebuki FG
5thYear ended March 31, 2019Non-vested (shares):
April 1, 2018 — Outstanding
GrantedCanceled
VestedMarch 31, 2019 — Outstanding

16,833——
10,100
6,733

23,634——
14,181
9,453

35,942——
21,902
14,04034,779——21,193
13,586

Vested (shares):
April 1, 2018 — Outstanding
VestedExercised
Canceled
March 31, 2019 — Outstanding—
10,10010,100———14,181
14,181———
21,902
21,902———
21,193
21,193——

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

¥1
$0�01
¥368
$3�32
¥417
$3�76

¥1
$0�01
¥368
$3�32
¥297
$2�68

¥1
$0�01
¥368
$3�32
¥300
$2�70

¥1
$0�01
¥368
$3�32
¥310
$2�79

Mebuki FG
7th

Mebuki FG
8th

Mebuki FG
9th

Mebuki FG
10th

Year ended March 31, 2019Non-vested (shares):
April 1, 2018 — Outstanding
GrantedCanceled
VestedMarch 31, 2019 — Outstanding

30,569——13,767
16,802

3,107
—
—
—
3,107

31,672——
14,264
17,408

6,416
—
—
—
6,416

Vested (shares):
April 1, 2018 — Outstanding
VestedExercised
Canceled
March 31, 2019 — Outstanding—
13,767
13,767
—
—

—
—
—
—
—

—
14,264
14,264
—
—

—
—
—
—
—

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

¥1
$0�01
¥368
$3�32
¥518
$4�67

¥1
$0�01
—
—
¥542
$4�88

¥1
$0�01
¥368
$3�32
¥500
$4�50

¥1
$0�01
—
—
¥525
$4�73

*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�

55

Mebuki Financial Group, Inc.

Annual Report 201956

Mebuki FG
11th

Mebuki FG
13th

Mebuki FG
14th

Year ended March 31, 2019Non-vested (shares):
April 1, 2018 — Outstanding
GrantedCanceled
VestedMarch 31, 2019 — Outstanding

30,135——
14,036
16,09912,366———
12,366112,231——
39,71872,513

Vested (shares):
April 1, 2018 — Outstanding
VestedExercised
Canceled
March 31, 2019 — Outstanding—
14,036
14,036
—
—

—
—
—
—
—

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

¥1
$0�01
¥368
$3�32
¥680
$6�13

¥1
$0�01
—
—
¥708
$6�38

Mebuki FG
15thYear ended March 31, 2019Non-vested (shares):
April 1, 2018 — Outstanding
GrantedCanceled
VestedMarch 31, 2019 — Outstanding

57

Mebuki FG
12th

135,990——
43,83092,160

Mebuki FG
16th

62,024——
11,07650,9482009 Stock
Option47,740——7,700
40,040Year ended March 31, 2019Non-vested (shares):
April 1, 2018 — Outstanding
GrantedCanceled
VestedMarch 31, 2019 — Outstanding

1,793,800—
1,793,800——

1,868,600—
1,868,600———
39,71839,718
—
—

—
7,700
7,700
—
—

Vested (shares):
April 1, 2018 — Outstanding
VestedExercised
Canceled
March 31, 2019 — Outstanding

—
—
—
—
—

—
—
—
—
—

¥1
$0�01
¥368
$3�32
¥345
$3�11

¥1
$0�01
¥368
$3�32
¥374
$3�37

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

¥550
$4�96
—
—
—
—

¥550
$4�96
—
—
—
—

Mebuki FG
17th

The Assumptions Used to Measure Fair Value of Stock Option
Stock options issued by the Company in the fiscal year ended March 31, 2019, were valued using the Black-Scholes option-pricing model and the following principal parameters:

Mebuki FG
18th—
127,508——
127,508—
147,282——
147,282

Vested (shares):
April 1, 2018 — Outstanding
VestedExercised
Canceled
March 31, 2019 — Outstanding—
43,83043,830———11,076
11,076
—
—

—
—
—
—
—

—
—
—
—
—

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

¥1
$0�01
¥368
$3�32
¥360
$3�24

¥1
$0�01
¥368
$3�32
¥390
$3�51

¥1
$0�01
—
—
¥319
$2�87

¥1
$0�01
—
—
¥348
$3�14

Mebuki Financial Group, Inc.

2010 Stock
OptionVolatility of stock price*1:
Estimated remaining outstanding period*2:
Estimated dividend*3:
Risk free interest rate*4:

Mebuki FG
17th

Mebuki FG
18th

28�60%
6 years¥11 per share(0�03)%

29�74%
3 years¥11 per share(0�09)%*1� Volatility of stock price is calculated based on the actual stock price of the Company during the period� Only a short time has passed since the business combination was conducted through ashare exchange between the Company and Joyo: during the period before the business combination was completed, volatility of stock price was calculated based on the actual stock price of asimilar publicly traded company�
Mebuki FG 17th : From August 14, 2012, to August 13, 2018
Mebuki FG 18th : From August 14, 2015, to August 13, 2018*2� Estimated remaining outstanding period is calculated based on average tenure of retired directors of the Company, Joyo, and Ashikaga and executive officers of Joyo�
*3� Estimated dividend paid in the fiscal year ended March 31, 2017 (excluding a commemorative dividend)*4� Yield of Japanese government bonds approximating the estimated remaining outstanding period at the time when the Company issued each stock option

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�

Annual Report 201958

17. PER SHARE OF COMMON STOCK

18. OTHER INCOME

21. INCOME TAXES

23. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES(1) Net income per share
Reconciliation of the differences between basic and diluted net income per share(“EPS”) for the years ended March 31, 2019 and 2018, was as follows:

Other income for the years ended March 31, 2019 and 2018, consisted of thefollowing:

The Group is subject to Japanese national and local income taxes which, in theaggregate, resulted in a normal effective statutory tax rate of 30�62% and30�86% for the years ended March 31, 2019 and 2018, respectively�
The tax effects of significant temporary differences and tax loss carryforwards, which result in deferred tax assets and liabilities as of March 31, 2019and 2018, were as follows:(1) Group Policies for Financial Instruments
The Group provides financial services centering on banking� As the central business operation of the Group, the consolidated banking subsidiaries raise funds bydeposits as its basic function as a bank; the consolidated banking subsidiaries
also procure funds by call money transactions from short-term markets to maintain an adequate degree of liquidity� The consolidated banking subsidiaries manage those funds through lending to corporate 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 Thousands ofYen
SharesNet Income
WeightedAttributable
Averageto Owners of
Sharesthe Parent

Year Ended March 31, 2019
Basic EPS —Net income available tocommon shareholders �����������
Effect of dilutive securities:
Warrants ��������������������������������
Diluted EPS —Net income
for computation ���������������������
Year Ended March 31, 2018
Basic EPS —Net income available
to common shareholders��������
Effect of dilutive securities �������
Diluted EPS —Net income
for computation ���������������������Yen

U.S. Dollars

EPS¥46,338

1,173,785¥39.47

$0.36

—

594

—

—

¥46,338

1,174,379

Millions of Yen
2019
2018

¥39.45$0.36

Gain on sales of stock andother securities �������������������������������� ¥24,506
Recoveries of write-off of claims ���������
2,237
Gain on disposal of fixed assets ����������
77
Other ������������������������������������������������ 29,541
Total ������������������������������������������������� ¥56,362¥13,078
2,088
942
27,498¥43,608

1,177,843¥36�56—541—¥43,069

1,178,385¥36�54

19. GENERAL AND ADMINISTRATIVE EXPENSES

Salaries and allowances ��������������������� ¥ 53,685
Periodic benefit costs �������������������������
3,826
Other ������������������������������������������������ 62,124
Total �������������������������������������������������� ¥119,636(2) Total equity per share
Total equity per share as of March 31, 2019 and 2018, was as follows:
Yen
2019

Total equity per share������������������������� ¥783.67

2018

U.S. Dollars
2019¥753�83$7.06

Total equity per share as of March 31, 2019 and 2018, is calculated based on
the following:
Millions of Yen
2019
2018

Total equity���������������������������������������� ¥919,547
Deductions from total equity ���������������
233
Total equity attributable
to common shareholders������������������� ¥919,314

Thousands of
U.S. Dollars
2019¥888,139
216$8,284,956
2,099¥887,923$8,282,857$ 483,695
34,477559,733$1,077,905

Other expenses for the years ended March 31, 2019 and 2018, consisted of thefollowing:
Millions of Yen
2019
2018

Loss on sales of stocks and othersecurities ����������������������������������������� ¥15,081
Write-off of loans ������������������������������
9,877
Impairment losses* ����������������������������
2,747
Loss on disposal of fixed assets ����������
446
Other ������������������������������������������������ 28,890
Total �������������������������������������������������� ¥57,042¥ 5,366
4,517
1,813
312
25,329¥37,339

Thousands of
U.S. Dollars
2019$135,878
88,99024,7504,024
260,299$513,942* 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 by fixed assets for the years ended March 31, 2019 and 2018,
were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2019

1,177,872¥ 52,841
5,402
62,183¥120,427

Thousands of
U.S. Dollars
2019

20. OTHER EXPENSES

Number of Shares in Thousands
2019
2018

Number of shares of common stock used incomputing total equity pershare at year-end �������������������������������������������������� 1,173,083$220,799
20,156702
266,162$507,818

General and administrative expenses for the years ended March 31, 2019 and2018, consisted of the following:
Millions of Yen
2019
2018

¥43,069

Thousands of
U.S. Dollars
2019Land ��������������������������������������������������������������
Buildings ��������������������������������������������������������
Software���������������������������������������������������������
Equipment ������������������������������������������������������
Leasehold improvements ���������������������������������
Telephone subscription rights ��������������������������

¥1,643
854
92
72
58
24

2018
¥811
485
383
84
48
—

2019
$14,812
7,699
834
657
529
219

Millions of Yen
2019
2018

Deferred tax assets:
Allowance for loan losses ��������������� ¥27,467 ¥27,445
Write-offs of securities ������������������� 12,705
12,920Liability for retirement benefits ������� 11,196
11,092
Provision for employee bonuses �����
1,886
1,822
Tax loss carryforwards �������������������
1,738
1,647
Depreciation ����������������������������������
1,263
1,251
Provision for reimbursement ofdeposits ��������������������������������������
989
1,149
Other ��������������������������������������������
9,758
9,332
Subtotal deferred tax assets������� 67,004
66,663
Less valuation allowance���������������� (18,247) (18,212)
Total deferred tax assets ����������� 48,756
48,450
Deferred tax liabilities:——
Unrealized gains on availablefor-sale securities ������������������������ (63,483) (63,777)
Retirement benefit trust(4,467)(4,467)
Other ��������������������������������������������
(6,463)(6,875)
Total deferred tax liabilities �������� (74,414) (75,120)
Net deferred tax liabilities ������������������� ¥(25,657) ¥(26,669)

Mebuki Financial Group, Inc.

$247,478
114,470
100,877
16,993
15,666
11,3808,914
87,919603,696(164,406)
439,290—(571,978)(40,252)(58,234)(670,464)$(231,174)

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, 2019 and 2018,is omitted�

22. LEASES
Future minimum payments under noncancelable operating leases as of March
31, 2019 and 2018, were as follows:
LesseeMillions of Yen
2019
2018

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

¥159
124
¥284

¥183
187
¥371

Thousands of
U.S. Dollars
2019$1,442
1,120$2,562

LessorMillions of Yen
2019
2018

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

59

Thousands of
U.S. Dollars
2019

¥2
4
¥7

¥2
3
¥5

Thousands of
U.S. Dollars
2019

$24
39
$64

(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 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�Annual Report 201960

(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 business offices categorize the borrowers based on credit ratings, which are then reviewed
by credit-related divisions in the headquarters� Furthermore, audit divisions examine results and process of the self-assessments for accuracy and adequacy�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 gives the issuers and counterparties
credit ratings as well as carry out assessments of the issuers and counterparties
like 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 VaR related to interest rate risk of loans andbills 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%, andan observation period of five years) for the calculation of VaR related to interest
rate risk of foreign bonds, trust beneficiary right, market fund transaction, andderivatives like interest rate swaps and currency swaps�
As of March 31, 2019 and 2018, the Group’s VaR related to interest raterisks, which is a simple sum of its consolidated banking subsidiaries’ VaR, were¥52,967 million ($477,229 thousand) and ¥42,371 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, 2019 and 2018, the Group’s VaR related to price fluctuation risk, which is a simple sum of its consolidated banking subsidiaries’ VaR,
were ¥100,252 million ($903,261 thousand) and ¥144,794 million, respectively�
Correlation between interest rate risk and price fluctuation risk has not been
considered�(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, 2019 and 2018, the Group’s VaR related to trading account, which is simple sum of its consolidated banking subsidiaries’ VaR,
were ¥7 million ($64 thousand) and ¥5 million, respectively�

61

Mebuki Financial Group, Inc.

(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 balance
sheet structure, lines of credit provided to the Group, collateral management,
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

March 31, 2018

Carrying
AmountUnrealized
Fair Value Gains/Losses(1) Cash and due from banks ����������������������� ¥ 1,468,877 ¥ 1,468,877(2) Securities:
Held-to-maturity securities ����������������������
169,288
170,902
Available-for-sale securities��������������������� 4,152,863 4,152,863(3) Loans and bills discounted���������������������� 11,122,484
Allowance for loan losses*1 ���������������������
(66,422)
Net ���������������������������������������������������� 11,056,061 11,168,148
Total assets ������������������������������������������������ ¥16,847,090 ¥16,960,791(1) Deposits ������������������������������������������������ ¥14,373,888 ¥14,374,359(2) Negotiable certificates of deposit�������������
282,158
282,170(3) Call money and bills sold ������������������������
191,740
191,740(4) Payables under securities lendingtransactions �������������������������������������������
202,152
202,152(5) Borrowed money ������������������������������������ 1,053,077 1,053,406
Total liabilities ��������������������������������������������� ¥16,103,018 ¥16,103,829
Derivative instruments*2 :Hedge accounting is not applied �������������� ¥2,020 ¥
2,020
Hedge accounting is applied��������������������
724
724
Total derivative instruments ������������������������� ¥2,744 ¥
2,744

¥

—
1,613
—

112,087¥113,701
¥

(470)
(12)
—
—
(328)

¥
¥

(811)
—
—

¥

—

Unrealized
Fair Value Gains/Losses(1) Cash and due from banks ����������������������� ¥ 1,708,734 ¥ 1,708,734(2) Securities:
Held-to-maturity securities ����������������������
154,787
154,920
Available-for-sale securities��������������������� 4,002,942 4,002,942(3) Loans and bills discounted���������������������� 10,497,976
Allowance for loan losses*1 ���������������������
(73,370)
Net ���������������������������������������������������� 10,424,606 10,523,344
Total assets ������������������������������������������������ ¥16,291,070 ¥16,389,942(1) Deposits ������������������������������������������������ ¥13,977,912 ¥13,979,361(2) Negotiable certificates of deposit�������������
272,640
272,695(3) Call money and bills sold ������������������������
340,540
340,540(4) Borrowed money ������������������������������������
877,856
878,500
Total liabilities ��������������������������������������������� ¥15,468,950 ¥15,471,099
Derivative instruments*2 :Hedge accounting is not applied �������������� ¥1,804 ¥
1,804
Hedge accounting is applied��������������������
4,634
4,634
Total derivative instruments ������������������������� ¥6,439 ¥
6,439

March 31, 2019
Millions of Yen

March 31, 2019

Millions of Yen
Carrying
Amount¥—133—

98,738¥98,871¥ (1,449)
(55)
—
(644)
¥ (2,148)
¥

—
—

¥

—

Thousands of U.S. Dollars
Carrying
Unrealized
AmountFair Value Gains/Losses(1) Cash and due from banks ����������������������� $ 13,234,322 $13,234,322(2) Securities:
Held-to-maturity securities ���������������������� 1,525,258 1,539,800
Available-for-sale securities��������������������� 37,416,553 37,416,553(3) Loans and bills discounted���������������������� 100,211,587
Allowance for loan losses*1 ���������������������
(598,456)
Net ���������������������������������������������������� 99,613,131 100,623,018
Total assets ������������������������������������������������ $151,789,265 $152,813,693(1) Deposits ������������������������������������������������ $129,506,160 $129,510,397(2) Negotiable certificates of deposit������������� 2,542,196 2,542,307(3) Call money and bills sold ������������������������ 1,727,549 1,727,549(4) Payables under securities lendingtransactions ������������������������������������������� 1,821,360 1,821,360(5) Borrowed money ������������������������������������ 9,488,040 9,491,001
Total liabilities ��������������������������������������������� $145,085,306 $145,092,614
Derivative instruments*2 :Hedge accounting is not applied �������������� $18,200$18,200
Hedge accounting is applied��������������������
6,530
6,530
Total derivative instruments ������������������������� $24,730$24,730$—
14,542—(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 the allowance 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�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�

1,009,887$1,024,428$(4,237)(2) Negotiable certificates of deposit
Refer to (1) Deposits�

(110)
—
—

(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�(2,960)$(7,308)

$

—

$

—

—

*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�

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�
We treat market prices as fair values for floating-rate Japanese Government
Bonds and securitized products�

(4) Payables under securities-lending transactions
Refer to (3) Call money and bills sold�(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
2019
2018

Equity securities without readily
available market price*1*2 �������������� ¥ 4,360
Investments in partnerships*3 ���������� 19,167
Beneficial interests in trust ��������������
948
Total ���������������������������������������������� ¥24,476¥ 4,335
14,703—¥19,038

Thousands of
U.S. Dollars
2019$ 39,291
172,693
8,545$220,529*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, 2019 and 2018, impairment losses on equity securities without readily available market price of ¥6 million ($55 thousand) and ¥2 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�

Annual Report 201962

(6) Maturity Analysis for Financial Assets and Liabilities with Contractual Maturities

March 31, 2019

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, 2018

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, 2019

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¥1,328,182

¥

¥

—

—

¥

—

Due after 10 Years

¥

¥

—

—

25,1667,000
150
18,01652,88418,00050
34,834

26,422—300
26,122

2,721
—
—
2,721

1,188
—
—
1,188

50,00050,000——414,911208,300
85,802
77,25022,227
21,331
2,685,194¥4,453,455

600,774
214,500
148,641
164,124
35,71337,794
1,856,590¥2,510,249

560,357
25,000257,794
123,966
105,853
47,742
1,386,877¥1,973,657

388,127
35,000174,703
71,27280,551
26,600925,491¥1,316,339

850,133
41,150253,549
11,787428,279
115,368
1,013,460¥1,864,782

483,840
78,0006,240
241,727
138,057
19,813
2,933,551¥3,467,392

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¥1,585,188

¥

¥

¥

¥

—

—

¥

—

—

Mebuki Financial Group, Inc.

Deposits * �������������������������������������������������������� ¥13,314,783
Negotiable certificates of deposit�������������������������
281,658
Call money and bills sold ������������������������������������
191,740
Payables under securities lending transactions ����202,152
Borrowed money ������������������������������������������������
815,162
Total ����������������������������������������������������������������� ¥14,805,498¥ 913,897
500——
135,975¥1,050,372

Due in 1 Yearor Less

Due after 1 Yearthrough 3 Years

Deposits *1 �������������������������������������������������������� ¥12,960,866
Negotiable certificates of deposit�������������������������
272,640
Call money and bills sold ������������������������������������
340,540
Borrowed money ������������������������������������������������
697,268
Total ����������������������������������������������������������������� ¥14,271,316¥874,853——
116,443¥991,296

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

Deposits *1 �������������������������������������������������������� $119,963,816
Negotiable certificates of deposit�������������������������
2,537,692
Call money and bills sold ������������������������������������
1,727,549
Payables under securities lending transactions ����1,821,360
Borrowed money ������������������������������������������������
7,344,469
Total ����������������������������������������������������������������� $133,394,886$8,234,049
4,505
—
—
1,225,116$9,463,670$1,207,920———
916,059$2,123,979

1

March 31, 2018

March 31, 2019—

14,583—50
14,53353,20725,000200
28,007

21,792—150
21,642

2,043
—
—
2,043

1,209
—
—
1,209

50,00050,000——326,023
187,000
35,65860,35030,85912,1552,281,662¥4,207,458

769,690367,800
153,220
174,006
45,22629,4381,860,348¥2,683,247

487,82280,000167,188
146,887
60,01833,728
1,345,704¥1,855,320

412,464
35,000188,273
59,87180,26549,053
901,598¥1,316,106

654,686
10,000233,796
33,127
315,60762,155
976,467¥1,632,362

338,124
57,5007,447
171,154
90,346
11,6752,793,958¥3,182,082

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

March 31, 2019

Contract
Amount$11,966,686

$

$

$

$

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

¥2,290
—
—

—

—

$

—

—

—

226,748
63,0691,351
162,328

476,480
162,177450
313,853

238,063—
2,703
235,360

24,517——
24,517

10,708——10,708450,491
450,491——

3,738,282
1,876,746
773,066
696,012200,261
192,196
24,193,122$40,124,838

5,412,875
1,932,607
1,339,236
1,478,736
321,776
340,521
16,727,545$22,616,899

5,048,718
225,246
2,322,686
1,116,913
953,720
430,154
12,495,522$17,782,303

3,496,960
315,344
1,574,045
642,152
725,755
239,665
8,338,510$11,859,987

7,659,551
370,7542,284,432
106,199
3,858,719
1,039,448
9,131,098$16,801,357

4,359,315
702,766
56,2282,177,924
1,243,878
178,520
26,430,776$31,240,582*1 As of March 31, 2019, loans and bills discounted with no contractual maturities amounting to ¥181,659 million ($1,636,724 thousand) and loans and bills discounted whose cash flow cannot
be estimated, such as “legal bankruptcy,” “virtual bankruptcy,” and “possible bankruptcy” loans, amounting to ¥139,657 million ($1,258,290 thousand) are not included�*2 As of March 31, 2018, loans and bills discounted with no contractual maturities amounting to ¥191,531 million and loans and bills discounted whose cash flow cannot be estimated, such as“legal bankruptcy,” “virtual bankruptcy,” and “possible bankruptcy” loans, amounting to ¥146,704 million are not included�

63

Due after 1 Yearthrough 3 Years

March 31, 2019

Due after 7 Years
through 10 Years

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

Due in 1 Yearor Less¥134,067———
101,673¥235,740

Due after 7 Years
through 10 Years¥3,905———241¥4,146

Millions of Yen
Due after 3 Years
Due after 5 Years
through 5 Years
through 7 Years¥129,996——
63,926¥193,922

Due after 10 Years¥7,235———25¥7,260

¥—
—
—
—
—
¥—

Due after 7 Years
through 10 Years¥9,175——211¥9,387

Due after 10 Years¥3,021——
5¥3,027

¥—
—
—
—
¥—

Due after 7 Years
through 10 Years$35,185———
2,172$37,357

Due after 10 Years$65,189———
225$65,415

$—
—
—
—
—
$—

*1 The cash flow of demand deposits is included in “Due in one year or less�”

24. DERIVATIVES(1) Derivative Transactions to Which Hedge Accounting Is Not Applied as of March 31, 2019 and 2018
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, 2019 and 2018, as
follows:

March 31, 2018

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

¥5,579754—

Millions of Yen
Contract AmountDue afterFair
One Year
Value

¥—
—
—

¥(8)
—
¥(8)

Millions of Yen
Contract AmountDue afterFair
One Year
Value

¥—
—
—

¥1
(0)
¥0

Unrealized
Gains/Losses

¥(8)
—
¥(8)

Contract
Amount$20,640——

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

$—
—
—

Unrealized
Gains/Losses

$(75)
—
$(75)

$(75)
—
$(75)

Unrealized
Gains/Losses

¥1
(0)
¥0

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�

Annual Report 201964

Consolidated banking subsidiaries had the following derivative contracts, which were not quoted on listed exchanges, outstanding as of March 31, 2019 and 2018, as follows:

March 31, 2019

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

Unrealized
Gains/Losses

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

March 31, 2018
Unrealized
Gains/Losses

Interest rate-related transactions
Interest rate swaps:
Receive fixed and pay floating �����
Receive floating and pay fixed �����
Cap transactions:¥116,901
116,901¥99,854
99,854¥3,018(1,483)¥3,018(1,483)$1,053,263
1,053,263$899,667
899,667$27,194(13,364)$27,194(13,364)

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

1,173
1,173

1,073
1,073

(0)
0

8
(4)

10,570
10,570

9,669
9,669

(8)
8

74
(44)

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

4,690
4,690
—

4,690
4,690
—

(56)
56
¥1,535(23)
56¥1,571

42,25642,256—42,25642,256—(513)
513$13,831(213)
513$14,160

March 31, 2019

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

Unrealized
Gains/Losses

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

Unrealized
Gains/Losses

Currency-related transactions
Currency swaps�������������������������������
Forward exchange contracts:¥228,866¥205,485

¥ 318

¥ 318

$2,062,051$1,851,392$ 2,871$ 2,871

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

63,68963,806

5,963
5,380

(321)
487

(321)
487

573,830
574,886

53,734
48,476(2,892)
4,388(2,892)
4,388

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

130,934
130,931—

83,923
83,919—(3,569)
3,578
¥ 493

(188)
2,142
¥2,4381,179,696
1,179,668—

756,136
756,098—(32,165)
32,243$ 4,445(1,699)19,301$21,969

March 31, 2019

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

Unrealized
Gains/Losses

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

Unrealized
Gains/Losses

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

¥4,800
4,800
—

—
—
—

¥(84)
84

—
—

$43,247
43,247

—

—

—

—
—
—

$(759)
759

—
—

—

—

Mebuki Financial Group, Inc.

Unrealized
Gains/Losses

Interest rate-related transactions
Interest rate swaps:
Receive fixed and pay floating �����
Receive floating and pay fixed �����
Cap transaction¥113,752
113,752¥ 97,411
97,411¥1,762(275)¥1,762(275)

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

775
775
—

710
710
—

(0)
0
¥1,4873(2)¥1,489Currency swaps�������������������������������
Forward exchange contracts:¥208,362¥186,339

¥ 349

¥ 349

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

64,14885,701

5,320
2,599

1,111
(1,098)1,111(1,098)

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

101,897
101,897—

63,37463,374—(3,392)
3,348
¥ 316

(898)
2,227
¥1,690Note: *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�(2) Derivative Transactions to Which Hedge Accounting Is Applied as of March 31, 2019 and 2018
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,
2019 and 2018, as follows:

March 31, 2019

Hedged Item

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

65

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

Contract
AmountMillions of Yen
Contract AmountDue after
One YearThousands of U.S. Dollars
Contract AmountDue after
Fair
Contract
One YearValue
AmountFair
Value¥147,355
2,042
34,041¥34,000
—
—

¥637
22
97

$1,327,644
18,406
306,710$306,336——$5,743
206
878

—

—

¥757

—

—

$6,828Available-for-sale securities

Sold �������������������������������������������

¥ 3,899

Total �����������������������������������������������

—

¥

—
—

¥ (33)¥ (33)$

35,137—$——$ (298)$ (298)Annual Report 201966

March 31, 2018

Hedged Item

Contract
AmountMillions of Yen
Contract AmountDue after
One Year

The components of other comprehensive income (loss) for the years ended
March 31, 2019 and 2018, were as follows:

Fair
Value

Interest rate-related transactions*1*4
Interest rate swaps:
Interest-bearing financial assets
and liabilities, including loans,available-for-sale securities,
deposits and negotiable
Receive floating and pay fixed ������ certificates of deposit, etc�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

Millions of Yen
2019
2018

¥ 20,000¥——¥ (182)¥ (182)¥131,077
20,50825,062¥4,301——¥3,017
1,193
501

—

—

¥4,711

Total �����������������������������������������������
Equity-related transactions*3*6
Stock forward contracts—

Available-for-sale securities

Sold �������������������������������������������

¥ 4,147¥

Total �����������������������������������������������

—

—

—

¥ 105
¥ 105

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�Consolidated banking subsidiaries had the following derivative contracts, which were accounted for by the exceptional accrual method, outstanding as of March 31,
2019:

March 31, 2019

Hedged Item

Fair
Value

Thousands of U.S. Dollars
Contract AmountDue after
Fair
Contract
One YearValue
Amount—11,588

¥ —
(320)

$
—
152,362$—
104,409$ —(2,884)——¥(320)——$(2,884)

Contract
AmountMillions of Yen
Contract AmountDue after
One Year

Fair
Value

Contract
AmountMillions of Yen
Contract AmountDue after
One YearInterest rate-related transactions
Interest rate swaps:
Receive fixed and pay floating ������Loans and borrowed money
Receive floating and pay fixed ������

¥Total �����������������������������������������������

March 31, 2018

Hedged Item—
16,910¥Interest rate-related transactions
Interest rate swaps:
Receive fixed and pay floating ������Loans and borrowed money
Receive floating and pay fixed ������
Total �����������������������������������������������

¥—18,475—¥—
13,153

¥ —
(471)

—

¥(471)

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”)�

67

Mebuki Financial Group, Inc.

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

25. OTHER COMPREHENSIVE INCOME (LOSS)

Unrealized gains (losses)
on available-for-sale securities:
Gains (losses) arising during theyear �������������������������������������������� ¥13,017
Reclassification adjustments
to profit or loss����������������������������� (9,648)
Amount before
income tax effect ���������������������
3,369
Income tax effect ���������������������� (1,054)
Total ������������������������������������������������� ¥ 2,314
Deferred gains (losses) on derivatives
under hedge:
Gains arising during the year ���������� ¥ 1,683
Reclassification adjustments
to profit or loss����������������������������� (1,985)
Amount before
income tax effect ���������������������
(302)
Income tax effect ����������������������
91
Total ������������������������������������������������� ¥ (211)Land revaluation excess, net of taxes:
Gains arising during the year ���������� ¥—Reclassification adjustments toprofit or loss ��������������������������������
—Amount before income tax
effect ��������������������������������������
—Income tax effect ����������������������
2
Total ������������������������������������������������� ¥2
Defined retirement benefit plans:
Gains arising during the year ���������� ¥ (4,494)
Reclassification adjustments
to profit or loss�����������������������������
1,464
Amount before
income tax effect ��������������������� (3,030)
Income tax effect ����������������������
921
Total ������������������������������������������������� ¥ (2,109)
Total other comprehensive loss ����������� ¥(3)¥ (6,255)

Thousands of
U.S. Dollars
2019(86,929)(11,090)
3,272¥ (7,817)

30,355(9,502)$ 20,853¥ 2,985$ 15,168(2,097)(17,892)

888
(270)
¥ 617

(2,724)822$ (1,901)¥$¥

Ordinary income
from external¥113,944
customers �������������� ($1,026,618)$117,285(4,834)—

March 31, 2019

—

—

—

—
468
468

—
22
22

$

¥ 1,038$ (40,498)

2,960

13,194

3,998(1,221)¥ 2,777¥ (3,954)(27,304)
8,302$ (19,002)$(29)

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

March 31, 2018

Lending
Operations

Ordinary income
from externalcustomers ��������������

¥113,739¥82,695($745,072)¥91,499¥288,139($824,398) ($2,596,088)

Millions of Yen
Investment
Operations
Other¥61,159¥87,473

Total¥262,373(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�

26. SEGMENT INFORMATION
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�

Annual Report 201968

27. RELATED PARTY TRANSACTIONS
Related party transactions of consolidated subsidiaries of the Company with its directors or major individual shareholders for the years ended March 31, 2019 and 2018,
were as follows:Year ended March 31, 2019

Name

Location

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

Kinichi Suzuki

—

—

—

—

—

Loan

¥106
($964)

Yoshie Suto

—

—

—

—

—

Loan

¥138
($1,244)

Yoshihiro Ono

—

—

—

—

—

Loan

¥13
($122)

—

—

Loan

¥11
($101)Type

A director or
director’s close relative

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

Gunma

Business

Ownerships

Relationship

¥7
Steel
($63) manufacturing

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

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

Loans andbills
discounted
Loans andbills
discounted
Loans andbills
discounted¥135($1,219)

Loans andbills
discounted¥11($101)¥104($944)¥12($115)

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

Year ended March 31, 2018
Name

Location

Capital(Millions of Yen)

Business

Ownerships

Relationship

Kinichi Suzuki

—

—

—

—

—

Loan

¥110

Yoshie Suto

—

—

—

—

—

Loan

¥143

Yoshihiro Ono

—

—

—

—

—

Loan

¥15

Gunma

¥7

Steel
manufacturing

—

—

Loan

¥11

Type

A director or
director’s close relative

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

¥109
¥141
¥14

¥11

Terms and conditions on transactions and transaction policy:
The interest rate on loans is reasonably determined considering the market rate�28. SUBSEQUENT EVENTS
Not applicable�

69

Mebuki Financial Group, Inc.

Annual Report 201970

Non-Consolidated Balance Sheet (Unaudited)

Non-Consolidated Statement of Income (Unaudited)

March 31, 2019 The Joyo Bank, Ltd.

Millions of Yen
2019
2018

71

Year Ended March 31, 2019

Thousands of
U.S. Dollars
2019

ASSETSCash and due from banks ��������������������������������������������������������������������������������������� ¥ 726,456
Call loans and bills bought ��������������������������������������������������������������������������������������
9,546
Monetary claims bought �����������������������������������������������������������������������������������������
7,271
Trading assets �������������������������������������������������������������������������������������������������������
10,817
Securities ���������������������������������������������������������������������������������������������������������������
3,025,904
Loans and bills discounted ��������������������������������������������������������������������������������������
6,594,731
Foreign exchanges �������������������������������������������������������������������������������������������������
3,420
Other assets ����������������������������������������������������������������������������������������������������������
80,821
Tangible fixed assets ���������������������������������������������������������������������������������������������
77,171Intangible fixed assets ��������������������������������������������������������������������������������������������
8,531
Prepaid pension cost ����������������������������������������������������������������������������������������������
6,365
Customers’ liabilities for acceptances and guarantees ����������������������������������������������
44,283
Allowance for loan losses ����������������������������������������������������������������������������������������
(32,610)
Allowance for investment losses ������������������������������������������������������������������������������
(9)
TOTAL �������������������������������������������������������������������������������������������������������������� ¥10,562,699

968,263
13,7867,447
8,526
2,802,591
6,063,500
3,341
77,32081,764
9,153
6,495
46,564(35,002)(9)¥10,053,746$ 6,545,239
86,01065,51197,45927,262,858
59,417,352
30,817728,184
695,301
76,86857,349398,982(293,817)(81)$95,168,033

LIABILITIES AND EQUITY
LIABILITIES:
Deposits ���������������������������������������������������������������������������������������������������������������� ¥ 8,729,187
Negotiable certificates of deposit �����������������������������������������������������������������������������
85,123
Call money and bills sold ����������������������������������������������������������������������������������������
59,542
Payables under repurchase agreement ��������������������������������������������������������������������
62,482
Payables under securities lending transactions ���������������������������������������������������������
84,286
Trading liabilities�����������������������������������������������������������������������������������������������������
1,065
Borrowed money ����������������������������������������������������������������������������������������������������
786,125
Foreign exchanges��������������������������������������������������������������������������������������������������
351
Bonds �������������������������������������������������������������������������������������������������������������������
5,000
Due to trust account �����������������������������������������������������������������������������������������������
566
Other liabilities��������������������������������������������������������������������������������������������������������
40,275
Provision for bonuses for directors ���������������������������������������������������������������������������
154
Provision for retirement benefits ������������������������������������������������������������������������������
8,301
Provision for reimbursement of deposits �������������������������������������������������������������������
2,261
Provision for point card certificates ��������������������������������������������������������������������������
114
Provision for contingent losses���������������������������������������������������������������������������������
949
Deferred tax liabilities����������������������������������������������������������������������������������������������
32,131
Deferred tax liabilities for land revaluation ����������������������������������������������������������������
8,143
Acceptances and guarantees�����������������������������������������������������������������������������������
44,283
Total liabilities ���������������������������������������������������������������������������������������������������
9,950,348¥ 8,509,025
67,24965,34026,31461,535504
579,167
451
5,000
11
38,513
65
8,638
2,838
85
946
33,2608,546
46,5649,454,062$78,648,418
766,952
536,469
562,955
759,402
9,602
7,082,847
3,162
45,0495,103
362,874
1,395
74,797
20,377
1,033
8,559
289,50373,375398,982
89,650,855

EQUITY:
Common stock �������������������������������������������������������������������������������������������������������
85,113
Capital surplus �������������������������������������������������������������������������������������������������������
58,574Retained earnings ���������������������������������������������������������������������������������������������������
337,172
Valuation adjustments: �������������������������������������������������������������������������������������������
131,491
Unrealized gains on available-for-sale securities ��������������������������������������������������
119,723
Deferred losses on derivatives under hedge accounting ���������������������������������������
(171)
Land revaluation surplus �����������������������������������������������������������������������������������
11,940Total equity ��������������������������������������������������������������������������������������������������
612,351TOTAL������������������������������������������������������������������������������������������������������������������������� ¥10,562,699

85,11358,574
319,555
136,441
123,847(31)
12,625
599,683¥10,053,746

766,854527,741
3,037,865
1,184,717
1,078,688(1,549)107,579
5,517,178$95,168,033

Mebuki Financial Group, Inc.

¥The Joyo Bank, Ltd.

Millions of Yen
2019
2018

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
2019¥64,082
33,074
139
419
361
31
25,709362
1,954
25,283
151,418¥63,245
30,213
70
291
349
42
24,801
373
3,503
16,252
139,143$577,375
297,991
1,256
3,783
3,257
288
231,634
3,266
17,610227,799
1,364,258

3,893
24
283
16
114
1,449
132
1,944
274
8,535
8,186
66,892386
18,633
110,770
40,648

2,497
16
561
246
1,146
801
132
2,088
859
7,917
6,138
69,347
3,340
7,646
102,740
36,40335,083
225
2,555
150
1,033
13,062
1,189
17,524
2,473
76,90273,762602,691
3,483
167,887
998,018
366,239

11,709210
11,919¥28,729

10,360529
10,890¥25,513

105,496
1,893
107,389$258,850

Annual Report 201972

Non-Consolidated Balance Sheet (Unaudited)

Non-Consolidated Statement of Income (Unaudited)

March 31, 2019 The Ashikaga Bank, Ltd.

Millions of Yen
2019
2018

Year Ended March 31, 2019

Thousands of
U.S. Dollars
2019

ASSETSCash and due from banks ��������������������������������������������������������������������������������������� ¥ 741,475¥ 740,378$ 6,680,561
Call loans and bills bought���������������������������������������������������������������������������������������
843
849
7,600
Monetary claims bought ������������������������������������������������������������������������������������������
7,881
7,941
71,014
Trading account securities���������������������������������������������������������������������������������������
2,982
4,012
26,869
Money held in trust �������������������������������������������������������������������������������������������������
23,175—
208,803
Securitieswith���������������������������������������������������������������������������������������������������������������
1,338,495
12,059,605
Togetherlocal communities, we will continue
to build1,391,021
a more prosperous
Loans and bills discounted ��������������������������������������������������������������������������������������
4,657,025
4,517,299
41,958,962
Foreign exchanges��������������������������������������������������������������������������������������������������
3,088
3,074
27,826
futureby providing high-quality comprehensive
Otherassets �����������������������������������������������������������������������������������������������������������
82,670financial
69,504 services.
744,846
Tangible fixed assets ����������������������������������������������������������������������������������������������
28,60827,001
257,757
Intangible fixed assets ���������������������������������������������������������������������������������������������
9,480
5,207
85,418Prepaid pension cost�����������������������������������������������������������������������������������������������
20,764
18,310187,082
The ingenuityof the entire Group will be combined to contribute to sustainablegrowth in communities.
Deferred tax assets �������������������������������������������������������������������������������������������������
2,475
4,005
22,303Customers’ liabilities for acceptances and guarantees ����������������������������������������������
10,456
10,21994,213
We willAllowancebuild aforbetter
futuretogether with local communities, seeking
solutions(34,283)
to challenges that
affectloan losses����������������������������������������������������������������������������������������
(30,142)(271,580)
TOTAL �������������������������������������������������������������������������������������������������������������� ¥6,899,280¥6,764,543$62,161,278

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

LIABILITIES AND EQUITY
LIABILITIES:
Deposits ����������������������������������������������������������������������������������������������������������������
Negotiable certificates of deposit �����������������������������������������������������������������������������
Call money and bills sold ����������������������������������������������������������������������������������������
Payables under repurchase agreement ��������������������������������������������������������������������
Payables under securities lending transactions ���������������������������������������������������������
Borrowed money ����������������������������������������������������������������������������������������������������
Foreign exchanges��������������������������������������������������������������������������������������������������
Other liabilities��������������������������������������������������������������������������������������������������������
Provision for bonuses for directors ���������������������������������������������������������������������������
Provision for reimbursement of deposits �������������������������������������������������������������������
Provision for contingent losses���������������������������������������������������������������������������������
Provision for point card certificates ��������������������������������������������������������������������������
Acceptances and guarantees�����������������������������������������������������������������������������������
Total liabilities ���������������������������������������������������������������������������������������������������

¥5,709,204
263,084
132,198
58,349117,866
229,574286
27,229
121
992
1,005
210
10,4566,550,580¥5,529,812
279,440
275,200—
96,613
222,366
256
26,562
54
943
656
130
10,2196,442,255

The Ashikaga Bank, Ltd.

$51,438,910
2,370,343
1,191,080
525,720
1,061,958
2,068,429
2,578
245,337
1,097
8,938
9,057
1,896
94,21359,019,558

Millions of Yen
2019
2018

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 ����������������������������������������������������������������������������������������
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 �������������������������������������������������������������������������������
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
2019¥48,772
29,47441344
132
22,1003,320
16,543
120,730¥49,379
22,65537361
8821,1691,267
4,139
99,097$439,433
265,557
370
3,104
1,197
199,126
29,916
149,057
1,087,759

2,203
68
1,081
281
2,308
135
1,633
7,162
5,013
49,088
1,268
10,64980,892
39,837

1,236
82
28
—
1,249
61
1,934
7,275
2,808
47,3072,591
3,847
68,42230,67519,850
617
9,744
2,536
20,797
1,218
14,71664,53045,168442,277
11,42895,947
728,828
358,932

8,351
195
8,546
¥31,291

7,900
1,420
9,320
¥21,354

75,243
1,761
77,004$281,928

EQUITY:The Japanese word mebuki, or “green shoots,” conveys an image of new leaves budding
Common stock �������������������������������������������������������������������������������������������������������
135,000
135,000
1,216,326
on treebranches. This word is used in the Group’s name to express
its approachof drawing
Retained earnings:��������������������������������������������������������������������������������������������������
181,429
157,188
1,634,646
Valuation adjustments:��������������������������������������������������������������������������������������������
32,27030,098
290,748on the knowledge
and creativity of each of its companies tocreate fresh
ideas and
Unrealized
gains
onavailable-for-salesecurities��������������������������������������������������
32,36530,123291,607
new value. The name Mebuki expresses our wish to create new energy and value
Deferred losses on hedges ���������������������������������������������������������������������������������
(95)
(24)
(859)
local
communities and pursue sustainable growth along348,699
with these communities.
Totalinequity��������������������������������������������������������������������������������������������������
322,287
3,141,720
TOTAL������������������������������������������������������������������������������������������������������������������������� ¥6,899,280¥6,764,543$62,161,278

73
1Mebuki Financial Group, Inc.
Mebuki Financial Group, Inc.

Annual Report 201974