23-D-1028
November 13, 2023

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 2.9 trillion yen. Having the largest market share both fordeposits and loans in the city, the Bank also operates many branches in Osaka Prefecture. TheBank’s rating reflects solid business foundation in the local area, quality of loan assets that are wellsecured and diversified into small amounts, and sufficient capital adequacy relative to risk, etc. Keyfactors for the rating decision continue to be strengthening the earnings capacity and risk control inthe market division.
(2) While interest on loans was declining, core net business income excluding gains and losses oncancellation of investment trusts for the fiscal year ended March 2023 (FY2022) was 6.1 billion yen,flat from that of the previous fiscal year of 6.1 billion, due to a decrease in non-personnel expenses
and other factors. Yield on loans has turned upward due to the effect of strictly applying the guideline
interest rates, and declining interest on loans is now gradually increasing. Although expenses will
increase to upgrade the core system and others going forward, JCR views that the profit level willremain at a current level. On the other hand, profitability indicators such as ROA are somewhat pale.
JCR will pay attention to whether the Bank can strengthen the earnings capacity for the lending
operation and non-interest business.
(3) Non-performing loans ratio under the Financial Reconstruction Act is in the middle of 5% range,
which is at a rather high level exceeding the shinkin bank average. However, loans are highly secured
through using loans backed by the Credit Guarantee Corporation and adopting conservative
provision methods. The ratio of categorized loans other than normal assets to the total credits is kept
low considering the high composition ratio of business loans. This indicates that the Bank also hasa solid credit management system including credit line management and credit assessment byindustry. Credit costs have been kept low over the long term and will unlikely become a large amountgoing forward.
(4) The market division’s risk exposure is large as indicated by high securities-to-deposit ratio of around40%. The Bank also has a large amount of valuation loss centering on yen-denominated bonds andforeign currency funds. It is working to reduce interest rate risk associated with yen-denominatedbonds through squeezing the position of low-coupon long-term government bonds and purchasing
bear funds. As for investment trusts, it is also containing expansion of price fluctuation risk throughaccumulating the balance while diversifying investment targets. JCR will continue to pay attention towhether the Bank can curb negative effects on earnings and financials through a series of risk control
measures.
(5) Consolidated core capital ratio has been hovering at a high level, in the 16% range. While riskweighted assets are expanding over the medium term, the Bank has accumulated retained earnings
through securing a certain amount of profits each fiscal year by keeping credit costs at a low leveland gains on sales of securities. The capital level adjusted for valuation losses on securities, which
JCR assesses as essential, also remains at a good level among regional financial institutions in theA categories.
Atsushi Kato, Michiya Kidani
RatingIssuer: The Amagasaki Shinkin Bank
<Affirmation>
Long-term Issuer Rating: A

Outlook: Stable

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Rating Assignment Date: November 9, 2023
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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