21-D-0854
October 29, 2021

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 2.8 trillion yen. With a well-established branch
network in the city, it enjoys the largest market share for both deposits and loans among regional
financial institutions there and also has certain business bases in areas adjacent to the city as wellas in Osaka Prefecture. Factors reflected in the rating include relatively firm business bases, loan
assets that are well covered and diversified into small claims and a good capital level. Meanwhile,the enhancement of fundamental earning capacity remains a challenge as ROA (based on core
net business income excluding gains on cancellation of investment trusts) is below the average ofshinkin banks.
(2) Core net business income excluding gains on cancellation of investment trusts for the fiscal yearended March 2021 (FY2020) decreased 0.2 billion yen over the year to 4.7 billion yen despite
growth in loan balance with COVID-related loans, because lower yields pushed down interest onloans and discounts, on top of which interest and dividend on securities also dropped. It isexpected to turn around in FY2021 thanks to brisk securities investment, but interest on loans anddiscounts will likely shrink again. Looking ahead, JCR will closely watch whether the Bank canenhance the earnings capacity of its main business by fulfilling consulting and regional trading
company functions, carrying out business reforms and so forth when costs are projected toincrease due to system investment.
(3) Non-performing loans ratio (“NPL”) under the Financial Reconstruction Act at the end of FY2020
stood higher than shinkin banks’ average at 4.28%, up 0.60 percentage points from a year earlier,partly because of the conservative assessment of borrowers who were drastically affected by theCOVID-19 pandemic. Meanwhile, the Bank conservatively sets aside allowance for loans for thelarge potentially bankrupt debtors and keeps a high coverage ratio for NPL. With the ratio of loans
to the real estate industry to the total being low, the loan portfolio is well-diversified into small
accounts. Credit costs have been at a low level if the increase attributable to the conservative
allowance was excluded and are not likely to grow significantly in the future, either.
(4) In terms of securities investment, the Bank has been striving to rebalance its portfolio byexpanding investment targets to include foreign securities, investment trusts, etc. so as to increaseinterest and dividend income. Consequently, the balance of investment trusts is large relative tocapital. The interest rate risk amount is also somewhat large relative to capital. However, because
the amount of securities-related risks measured by VaR is not large, the Bank intends to continue
taking risks, thus requiring attention to future developments.
(5) Consolidated core capital ratio adjusted for reserves for possible loan losses, etc. being in the 16%
range as of March 31, 2021 is at a good level for a regional financial institution in JCR’s A rating
category. As the Bank intends to continue taking risks in securities investment, the adjusted core
capital ratio will likely decline going forward but can still be maintained at a relatively high level in
JCR’s view.
Hajime Oyama, Atsushi Kato
RatingIssuer: The Amagasaki Shinkin Bank
<Affirmation>
Long-term Issuer Rating: A

Outlook: Stable

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Rating Assignment Date: October 27, 2021
The assumptions for the credit ratings and the definitions of the rating symbols are published as "Types of Credit Ratings andDefinitions of 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/).

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