22-D-0922
November 2, 2022

Japan Credit Rating Agency, Ltd. (JCR) announces the following credit rating.

The Amagasaki Shinkin Bank (security code: -)<Affirmation>
Long-term Issuer Rating:
Outlook:A
StableRationale(1) The Amagasaki Shinkin Bank (the “Bank”) is a large shinkin bank headquartered in Amagasaki City,
Hyogo Prefecture with a fund volume of approximately 2.9 trillion yen. Having a highly dense branch
network in the city, it enjoys the largest market share for both deposits and loans in the city. Thebusiness foundation is relatively strong as the Bank also has networks in the areas adjacent to thecity in Hyogo Prefecture as well as in Osaka Prefecture. Although the Bank’s unrealized loss on thesecurities has been expanding due to a rise in interest rates in the U.S., and the capital level after
deducting the loss declined, JCR determines that the Bank still maintains the capital adequacycommensurate with the A rating category under the present environment. Therefore, JCR has
affirmed the rating on the Bank. The key factors for the rating decision are whether it can still restrain
the credit costs, in addition to strengthening the earnings capacity, which is the issue from the past.
(2) Core net business income excluding gains and losses on cancellation of investment trusts for thefiscal year ended March 2022 (FY2021) increased slightly more than 30% from the previous fiscal
year to 6.1 billion yen. Due to decline in yield on loans, interest income on loans and discounts
decreased. However, as a result of increasing the balance of primarily for foreign investment trustsin the securities investment, it substantially increased interest and dividend income. Going forward,a rise in foreign currency procurement costs and a decrease in dividend of investment trust can beexpected because of the impact of rising interest rates in the U.S. An increase in costs due partly tosystem investment will also push down the performance. Since majority of foreign currencydenominated bonds held by the Bank are with floating rates; a certain amount of increase in theforeign currency procurement costs can be offset. JCR will closely watch how far the Bank can rise
the fundamental earnings capacity through curbing decline in yield on loans and strengthening thenon-interest business.
(3) Non-performing loans ratio (“NPL”) under the Financial Reconstruction Act at the end of FY2021
increased 1.2 percentage points from the end of the previous fiscal year to 5.48%. It is still at a
relatively high level considering the fact that the Bank makes conservative assessment for theborrowers who are largely affected by the COVID crisis. Meanwhile, the Bank conservatively setsaside allowance for loans for the large potentially bankrupt borrowers and keeps a high coverage
ratio for NPL. The ratio of loans to the real estate industry to the total is relatively low, and the loan
portfolio is well-diversified into small accounts. Credit costs have been at a low level in general andwill unlikely increase substantially in the future, in JCR’s view.
(4) In terms of securities investment, the Bank has strived to rebalance its portfolio by expanding
investment targets to foreign bonds, investment trusts (including foreign investment trusts; the same
applies to herein after), etc. so as to increase interest and dividend income. Consequently, thebalance of investment trusts is also large relative to capital. Exposure to interest rate risk of yendenominated ones is also relatively large to capital. As at the end of FY2021, valuation loss onavailable-for-sale securities was 4.8 billion yen (unrealized) and the amount further expanded. Dueto the fact that foreign bonds held are primarily floating rate ones, concerns over loss-cutting,recording of impairment loss, etc. are limited for the foreseeable future. As for investment trusts, theBank intends to hedge risks to a certain extent preparing for a rise in overseas interest rates while
reducing the unrealized loss over the long-term.

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(5) Consolidated core capital ratio adjusted for valuation loss on securities, etc. was in the middle of
15% range as at the end of FY2021, a good level among regional financial institutions in JCR’s A
category. The Bank intends to increase risk assets to ensure a certain amount of revenue goingforward, in addition to expanding valuation loss on securities at present. These will likely push down
the capital level. That said, JCR views the Bank will be able to maintain a reasonable level as an Arated bank for the time being after considering the factors mentioned above.
Atsushi Kato, Kei Aoki

RatingIssuer: The Amagasaki Shinkin Bank
<Affirmation>
Long-term Issuer Rating: A

Outlook: Stable

Rating Assignment Date: October 28, 2022
The assumptions for the credit ratings and the definitions of the rating symbols are published as "Types of Credit Ratings and Definitionsof Rating Symbols" (January 6, 2014) in Information about JCR Ratings on JCR's website (https://www.jcr.co.jp/en/).
Outline of the rating methodology is shown as "JCR's Rating Methodology" (November 7, 2014) and "Banks" (October 1, 2021)
in Information about JCR Ratings on JCR's website (https://www.jcr.co.jp/en/).
The rating stakeholder participated in the rating process of the aforementioned credit ratings.

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