Profile
Driven by the same spirit that led to the founding of Suruga Bank, in hopes of meeting our customers’
expectations and earning their trust, we have made consistent efforts to maintain a sound business structure.
We have proceeded with self-reliance and rugged independence with regard to capital, personnel, and sales
policies. We readily recognize the public responsibilities we bear as a financial institution. We have worked toensure the smooth flow of funds and the fostering of strong industrial enterprises.
We intend to continue fulfilling our mission to contribute to the public good. Focusing exclusively on soundbanking operations, we aim to build a corporate structure that will endure through change. Moreover, we
desire to provide good quality financial services, as we stay close to our community, and quickly learn of ourcustomers’ needs.
As of March 31, 2003, the Bank had total assets of ¥2,811 billion (US$23,389 million), and a capital adequacy
ratio according to domestic standards of 8.50%.
At term-end, the Bank’s network comprised 120 offices, including a main office, 111 domestic branches, and
8 sub-branches.

Financial Highlights (Consolidated)
Suruga Bank Ltd. and consolidated subsidiaries
Thousands of
U.S. dollars

Millions of yen

Years ended March 31,
For the year:
Total income
Total expenses
Income (loss) before income taxes and minority interests
Net income (loss)

2003

2002

2001

2003

¥

91,46975,826
15,643
7,921¥

91,828 ¥ 120,680
130,357
104,736(38,528)
15,943(23,641)
9,571$

760,979
630,834
130,144
65,902Per share of common stock (in yen and dollars):
Net income (loss)

¥

30.31

¥

(91.34) ¥

$

0.252

At the year end:
Deposits
Loans and bills discounted
Investment securities
Shareholders’ equity
Total assets¥2,672,629
2,026,918
430,074
113,976
2,826,918¥2,664,068
2,001,081
489,694
112,401
2,831,386¥2,720,425
1,938,745
381,319
127,633
2,914,972

Capital adequacy ratio (%)

8.32

8.10

8.86

38.03

$22,234,852
16,862,878
3,577,988
948,223
23,518,457

Notes: 1. Yen amounts are rounded down to the nearest million yen.
2. U.S. dollar amounts have been converted from Japanese yen, solely for convenience, at ¥120.20=US$1.00, the approximate rate of exchange prevailing on
March 31, 2003.
3. Net income (loss) per share is calculated on the basis of the average number of shares of common stock outstanding during each year.
4. The capital adequacy ratio has been computed based on domestic standards.

Forward-Looking Statements:
Statements contained in this report concerning plans, predictions, and strategies toimprove future performance (“Forward-Looking Statements”) are based information
currently available to the Bank’s management, and inevitably involve a certain
element of risk and uncertainty.

“Courteous service from first to last.”

There is a school of manners in Japan, called the Ogasawara Ryu Reihou,
which has developed from the traditional customs and manners of thesamurai class since the Muromachi period. The teachings of this school havebeen handed down in an unbroken line from father to child over the past
700 years and have become a precious asset to those who wish to retain thebeautiful refinements of the traditional Japanese culture. Keishousai
Ogasawara is the current head of the family and of the Ogasawara school.
Suruga Bank believes in these traditional virtues and hopes to epitomize
these ideals. Having adopted a “concierge” approach to banking, we hopeto provide our customers with service that demonstrates our reliability andconsideration.
1

— Excerpt from the writings of Tadamune Ogasawara, who devoted his life to spreading
the teachings of the Ogasawara school of manners.

2

– Suruga Bank does everything possible to ensurethat customers’ dreams come true.
Traditional writings on manners handed down from the Muromachi period repeatedly emphasize
the importance of adapting to the requirements of the moment by basing decisions on time, placeand circumstance. We at Suruga Bank believe in doing our utmost for every customer. We place
great importance on becoming a financial partner for our customers, offering services tailored totheir individual needs. By making the most of every transaction, we help customers choose theright time, place and occasion to make their dreams a reality at every life stage. By providing
personalized, reliable “concierge services,” we enrich customers’ lives and support them in setting
goals and drawing up concrete plans to achieve these ends. This is the Suruga way.

Mitsuyoshi Okano,President &Chief Executive Officer3

– Concierge services begin with an understandingof customers’ needs.
The Ogasawara school of manners holds that one must be adaptable, just like water, which takeson the form of the vessel into which it is poured. As long as we retain the same deep concern forour customers, we must adapt our services to the times and the surroundings. Our customer
relationship management (CRM) is based on the idea of always putting the customer first. We
develop financial products and services on the basis of customers’ needs by placing priority on
their perspective and gleaning information on their views from our branch offices, Access Center,and Internet banking. In 2002, the Japan Institute of Office Automation awarded Suruga Bank thetitle “Best Call Center of the Year.” To attain our vision of becoming a full-fledged “conciergebank,” we evaluate ourselves on the measures we take to make ourselves more accessible, morefamiliar and more dependable. We will maintain our enterprising stance and continue developing
quality services that meet, or even exceed, customer expectations.

This simple knot, tied with a silken cord, symbolizes the mutually beneficial
relationship we have with our customers.

4

– Suruga is a retail bank that provides customers
with the means to succeed.
When we deal with our customers, we do so without any pretensions or affectations.
Our day-to-day training shows itself in our actions. In aiming to become a leader in retail banking,
Suruga Bank is always mindful that heartfelt service is best. To become a dependable partner and afamiliar presence to individual customers as well as small and medium-sized businesses and sole
proprietorships, we take special care to foster close ties with each and every customer, helping
them to set up optimal business or life plans. With their specialist knowledge, experience, andqualifications as certified financial planners, our Personal Concierges are on hand, at the Concierge
Desk in our Access Center, to help customers with their financial planning. Customers visiting ourbranch offices are greeted with a smile and can always expect the best in personalized service. At
Suruga Bank, our actions are determined by the principle of unflagging courtesy, and we make surethat our gratitude about being a part of fulfilling our customers’ dreams is reflected in our service.

The art of tying knots is a way of expressing the beauties of nature with the useof a single cord. The knots shown here are called (from left to right) thechrysanthemum blossom knot, the Chinese top knot and the plum blossom knot.

5

– Suruga Bank faces changing times and needs
with superior adaptability.
In showing courtesy, it is important to be adaptable to change. Suruga Bank is sensitive to the needs ofthe times and offers new products and services that meet these needs. We have developed a number of
new products and services that reflect the progress being made in information technology, including the
Web Concierge service, which allows customers to carry out transactions over the Internet, the Bankers’
Club for staff of financial institutions, and services connected with our online branches accessible via
Internet, mobile phone, and telephone such as the IT Support Loan and IT Mortgage Loan for IT
engineers. We were the first bank in Japan to offer a mortgage loan with a group credit life insurance
rider, under the brand name Super Group Credit Rider Mortgage Loan, for those who cannot get mortgage
loans for health reasons. Suruga has also introduced the Suruga ATM Lottery Service, where customers canselect numbers and purchase lottery tickets at bank ATMs and have their winnings automaticallydeposited into their bank account. We will maintain our flexible stance to changing customer needs andcontinue to pour our energies into developing exciting new products and services.

The art of paper folding is a way of taking time and care to show someone howmuch you care. The design on the left is referred to as the “plant root” envelope;the one on the right is used in Respect for the Aged Day celebrations.

6

– Our heritage is one of courtesy and harmonious
customer relations.
The Ogasawara school of manners teaches that serving others should be our way of life. One time,a member of the Ogasawara family became the lord of Kakegawa Castle, one of the famous castlesof the Tokai region, built by the feudal ruler of Suruga. Over time, the teachings of the Ogasawara
school, which had their origin in the customs of the samurai, spread throughout the country as ameans of promoting harmonious interpersonal relations. These teachings have also shown us how
to offer the best service to all our customers. The spirit of these teachings is rooted in each andevery employee representing the Suruga Bank. Offering the best service means taking account ofourselves and associating with our customers, investors, clients and all of our stakeholders in acourteous manner. We believe that, in this way, we will be able enjoy sustained growth as aconcierge bank.

Etiquette teaches us how to express our concern for others. Born ofhistory, etiquette lives on today.

7

Board of Directors, Auditors and Executive Officers

Mitsuyoshi Okano

Kinosuke Okano

Seiji Inui

Hiroo Goto

Toshiki Hoshino

Atsushi Okamura

Yoshiro Uchiyama

Tatsuya Tamura

Tsuneo Yahagi

Makoto Naruke

Chairman of the Board of Directors
President & Chief Executive Officer

Mitsuyoshi Okano
Chairman of the Board of Officers &Chief Operating Officer

Kinosuke Okano
Senior Managing Director &Chief Financial Officer

Seiji Inui

Managing Director &Senior Executive Advisors

Hiroo Goto
Toshiki Hoshino
Atsushi Okamura
Directors

Yoshiro Uchiyama
Tatsuya Tamura
Tsuneo Yahagi
Makoto Naruke

Standing Auditors

Masataka Oiwa
Yasushi Sakuramoto
Auditors

Yasumi Mochizuki
Takashi Mimura
Senior Executive Officers

Takehiro Katsumata
Ryozo Kinoshita

Executive Officers

Shinji Ihara
Sachio Takahata
Tetsu Ito
Kihachiro Nomura
Kiyokazu Masuda
Kazuya Mochizuki

Officers

Fumiaki Toyama
Osamu Kobayashi
Toru Fukada
Takashi Tsuchiya
Toshihisa Kubozono
Noboru Mori
Yoshihiro Okazaki
Takahiro Aoki
Takahiro Sawanishi
Haruo Asou
(As of June 24, 2003)

8

Review of Operations (Consolidated)

While building up our business with individual

agency service for state-run employee pension

clients and small and medium-sized businesses,

funds and on a denial of reversal of the reserve for

we are carrying out a range of policies aimed at

possible loan losses in excess of the maximum

enabling the Suruga Bank to offer concierge

amount, while carrying out a reversal in deferredbanking services, as an understanding,tax assets resulting from a decline in effective

sympathetic and trusted partner of the customer.

income tax rates under tax effect accounting prior
to introduction of revenue-based taxation for

Business Environment

enterprise tax purposes. As a result of the above,

In fiscal 2002 the Japanese economy remained at a

net income in the term under review totaled ¥7.9

low ebb, reflecting uncertainty in the world

billion (US$65.9 million), compared with a net

economy in the wake of the collapse of the IT

loss of ¥23.6 billion in the previous term.

bubble and corporate failures in the United States,
the destabilizing impact of the Iraq war and the

Deposits

situation on the Korean peninsula, and, at home,

During the year, deposits increased ¥8.5 billion,

deepening deflation and sluggish public anddue to a steady increase in deposits by individuals

private sector investment. Personal spending was

attracted mainly by products designed for on-line

weak overall, although the slump showed signs ofmarketing channels. The balance of deposits

bottoming out. In addition, interest rates

stood at ¥2,672.6 billion (US$22,234.8 million) at

remained low, in response to the Bank of Japan’s

the year-end.

ongoing financial deregulation policies.

Loans and bills discounted
Business Performance

The balance of loans and bills discounted

In this environment, Suruga Bank and its sevenincreased ¥25.8 billion at the year-end to ¥2,026.9

consolidated subsidiaries in fiscal 2002

billion (US$16,862.8 million), reflecting a steadystrengthened operations by firming up theirincrease in loans to individuals. The Bank focused

operating base and financial structure. Results

on loan provision to individuals, with interest

were as follows.

margins reflecting credit risk as closely as
possible.

Earnings
Operating expenses were reduced, thanks to a

Securities

substantial decrease in losses on disposals of non-At the year-end, the balance of securities was

performing loans and strict budget management.

¥59.6 billion below the previous year-end at

Interest on deposits declined amid low interest-¥430.0 billion (US$3,577.9 million). Sales ofrate policies, although revenues from fundJapanese government bonds accounted for mostoperations and securities trading also decreased.

of the decline.

The Bank posted one-time gains on termination of9Capital ratio

increase customer numbers. In addition, we plan

On a consolidated basis, the Bank’s capital ratio

to strengthen our lineup and marketing ofstood at 9.11% at the term-end, by international

investment trust products to cater better to thestandards, and at 8.32% by domestic standards. On

fund management needs of our customers after

a non-consolidated basis, the ratio stood at 8.50%

the ending of the remaining state depositby domestic standards.

guarantees. Our casualty and life insurance
operations—the latter having been launched in

Cash flows

October 2002—will further increase customer

Net cash used in operating activities amounted toconvenience and add to service-based revenues.

¥46.8 billion (US$389.6 million), as increases in

We aim to cut operating costs through aloans and call loans exceeded the increase inrigorous administrative overhaul, improvedeposits.

earnings power and establish a firmer financial

Net cash provided by investing activities

base. In addition, we are expanding our businesscame to ¥42.7 billion (US$355.5 million), mainly

areas in line with demand growth, as well as

reflecting sales and redemption of securities. Net

collaborating with companies in different sectors.

cash used in financing activities amounted to ¥1.6

Based on our “Aim 15” long-term Groupbillion (US$14.0 million) due to dividend

management vision, we are making steadypayments and the Bank’s acquisition of its own

progress toward our goal of becoming a “life andshares. As a result of the above, cash and cash

business concierge.” By providing professional

equivalents decreased ¥5.8 billion to ¥76.5 billion

services in a understanding and reliable way,

(US$637.1 million) at the year-end. The term

Suruga Bank is accomplishing its mission of giving“cash and cash equivalents” refers to cash

shape to the aspirations of customers in theirdeposits with the Bank of Japan.

lifestyles and businesses, and helping provide atime frame for their realization. And by upgrading

Future Tasks

the consultation and communication skills of ourWith the slowdown becoming protracted andemployees, we are entering new services that

rapid change sweeping over not only financial

demand wide-ranging expertise. Making full use of

institutions but also the broader Japanese

Customer Relationship Management (CRM)

economy, customers’ expectations of financial

technology, automatic credit screening, ourinstitutions are becoming more diverse andpersonnel appraisal system and other IT functions,

sophisticated.

we are raising the quality of our management and

The Bank is taking several approaches toward
its ongoing goal of developing its retail businesscentered on individual customers, notably
through development of attractive, winning
products and expansion of business areas to10strengthening the unity of the Group.

Financial Section
Consolidated Balance Sheets

12

Consolidated Statements of Operations

13

Consolidated Statements of Shareholders’ Equity

13

Consolidated Statements of Cash Flows14

Notes to Consolidated Financial Statements

15

Independent Auditors’ Report

23

Non-Consolidated Balance Sheets

24

Non-Consolidated Statements of Operations

25

Non-Consolidated Statements of Shareholders’ Equity

26

Notes to Non-Consolidated Financial Statements

27

Independent Auditors’ Report28

11Consolidated Balance Sheets
Suruga Bank Ltd. and consolidated subsidiaries
Thousands of
U.S. dollars(Note 2)Millions of yen

As of March 31,

2003

2002

2003

AssetsCash and cash equivalents
Due from banks
Call loans, commercial paper and other debt purchased
Trading account securities
Money trusts¥

76,584¥

82,387$637,141

7,663

4,570

63,753

190,286

160,886

1,583,086

489

329

4,069

990

2,002

8,239

430,074

489,694

3,577,988

2,026,918

2,001,081

16,862,878

759

556

6,317

Other assets

23,77023,376

197,758

Premises and equipment (Note 4)

52,42355,187436,139

Deferred tax assets (Note 11)50,32054,129418,637

Customers’ liabilities for acceptances and guarantees

11,37015,866

94,592Less reserve for possible loan losses(44,731)(58,681)(372,145)¥2,826,918¥2,831,386$23,518,457¥2,672,629¥2,664,068$22,234,852

Investment securities
Loans and bills discounted (Note 3)
Foreign exchange

Total assets
Liabilities, minority interests and shareholders’ equity
Liabilities
Deposits
Call money
Borrowed money
Foreign exchange
Other liabilities

—

666

—

10,85814,25990,3367

15

66

16,622

21,178138,287

Reserve for employees’ bonuses

619

727

5,154

Accrued pension and severance costs (Note 7)

227

1,032

1,891

Reserve for possible losses on sales of loans

220

262

1,830

11,37015,866

94,592

2,712,554

2,718,077

22,567,011

387

907

3,222

Common stock

30,04330,043249,943

Capital surplus

18,585

18,585

154,624

Retained earnings

75,867

69,245631,176

Acceptances and guarantees
Total liabilities
Minority interests
Shareholders’ equity

Net unrealized losses on securities, net of taxes(6,134)(1,141)(51,038)

Less treasury stock, at cost

(4,385)(4,331)(36,482)

Total shareholders’ equity

113,976

112,401

948,223¥2,826,918¥2,831,386$23,518,457

Total liabilities, minority interests and shareholders’ equity
See notes to consolidated financial statements.

12

Consolidated Statements of Operations
Suruga Bank Ltd. and consolidated subsidiaries
Thousands of
U.S. dollars(Note 2)Millions of yen

Years ended March 31,
IncomeInterest income (Note 9)
Fees and commissions
Other operating income
Other income (Note 10)
Total income
Expenses
Interest expense (Note 9)
Fees and commissions
Other operating expenses
General and administrative expenses
Other expenses (Note 10)
Total expenses
Income (loss) before income taxes and minority interests
Income taxes (Note 11)
Current
Deferred (credit)
Minority interests in earnings of consolidated subsidiaries
Net income (loss)
See notes to consolidated financial statements.

2003

2002

2003

¥65,663
9,512
7,759
8,534
91,469¥ 67,268
8,188
9,373
6,998
91,828$546,282
79,13664,55871,001
760,979

6,592
5,513
8,890
38,012
16,81775,826
15,643

11,6405,049
7,147
40,682
65,836130,357(38,528)

54,84645,86573,961
316,245
139,915
630,834
130,144

330
7,119
7,449
271
¥ 7,921595(15,667)(15,072)
184¥(23,641)

2,747
59,232
61,9792,262$ 65,902

Consolidated Statements of Shareholders’ Equity
Suruga Bank Ltd. and consolidated subsidiaries
ThousandYears ended March 31,
Balance at March 31, 2001
Net loss for the year
ended March 31, 2002
Cash dividends paid
Net change during the year
Balance at March 31, 2002
Net income for the year
ended March 31, 2003
Cash dividends paid
Net change during the year
Balance at March 31, 2003

Millions of yen

Issued numberof shares ofcommon stock

Commonstock

CapitalsurplusRetainedearnings

Net unrealized
losses on securities,
net of taxes

Treasurystock,
at cost264,939¥30,043¥18,585¥94,188¥(1,931)¥(13,251)790(1,141)

8,920(4,331)(4,993)¥(6,134)(53)¥ (4,385)$ (9,495)$(36,037)(41,542)$(51,038)(444)$(36,482)(23,641)(1,302)
264,939

30,043

18,58569,245
7,921(1,299)264,939¥30,043¥18,585¥75,867

Thousands of U.S. dollars (Note 2)

Balance at March 31, 2002
Net income for the year
ended March 31, 2003
Cash dividends paid
Net change during the year
Balance at March 31, 2003

$249,943$154,624$576,084
65,902(10,811)$249,943$154,624$631,176

See notes to consolidated financial statements.
13

Consolidated Statements of Cash Flows
Suruga Bank Ltd. and consolidated subsidiaries

Millions of yen

Years ended March 31,

Thousands of
U.S. dollars(Note 2)

2003

2002

¥ 15,643
8,366(13,949)
(42)
(107)
1,062
(727)
(3,503)(65,663)
6,592
1,895
11
290

¥ (38,528)
8,617
25,889
(34)
(32)
1,861
(2,636)—(67,268)
11,64019,046
(1)
1,038

(159)
(25,836)
8,560(3,400)(3,093)(29,400)
(666)
(202)
(8)
67,437(7,141)(2,118)(46,159)(681)(46,841)

19,668(52,857)(56,357)(478)
84,602
155,674(3,546)77
166,463(12,899)(2,783)
157,160(1,498)
155,661(1,326)(214,948)
71,219(28,292)(25,732)(244,595)(5,542)(1,685)(66)
561,045(59,417)(17,625)(384,024)(5,670)(389,694)

Cash flows from investing activities
Purchases of investment securities
Proceeds from sales of investment securities
Proceeds from redemption of bonds
Increase in money trusts
Decrease in money trusts
Purchases of premises and equipment
Proceeds from sales of premises and equipment
Net cash provided by (used in) investing activities(738,155)
210,215575,570(4)
1,004(6,174)280
42,737(603,796)
177,467
297,552(41)
834(7,388)533(134,837)(6,141,058)
1,748,885
4,788,441
(37)
8,360
(51,371)
2,337
355,557

Cash flows from financing activities
Dividends paid
Purchases of treasury stock
Proceeds from sales of treasury stock
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

(1,299)(384)—(1,683)(15)(5,802)82,387¥ 76,584(1,302)(689)
28(1,962)
11
18,872
63,514¥ 82,387(10,811)(3,195)—(14,007)(130)(48,275)
685,416
637,141

Cash flows from operating activities
Income (loss) before income taxes and minority interests
Depreciation and amortization
Change in reserve for possible loan losses
Decrease in reserve for possible losses on sales of loans
Decrease in reserve for employees’ bonuses
Increase in accrued pension and severance costs
Gain on contribution of securities to employees’ retirement benefit trust
Gain on return of the substitutional portion of Welfare Pension Fund planInterest income
Interest expense
Loss on investment securities, net
Loss (gain) on money trust investments, net
Loss on sales of premises and equipment, net
Changes in operating assets and liabilities:
Trading securities
Loans
Deposits
Borrowings excluding subordinated debt
Due from banks other than BOJ
Call loans
Call money
Foreign exchange assets
Foreign exchange liabilities
Interest received
Interest paid
Other, net
Subtotal
Income taxes paid
Net cash (used in) provided by operating activities

See notes to consolidated financial statements.
14

2003
$

$

130,144
69,607(116,055)
(349)
(895)
8,842
(6,054)(29,144)(546,282)
54,846
15,77094
2,419

Notes to Consolidated Financial Statements
Suruga Bank Ltd. and consolidated subsidiaries

1. Summary of Significant Accounting Policies(a) Basis of preparation
The accompanying consolidated financial statements of Suruga Bank
Ltd. (the “Bank”) and its subsidiaries have been prepared on the basisof accounting principles and practices generally accepted and appliedin Japan and have been compiled from the consolidated financial statements filed with the Financial Services Agency as required by the
Banking Law of Japan and the Securities and Exchange Law of Japan.
Accordingly, the accompanying consolidated financial statements are
not intended to present the consolidated financial position, results ofoperations and cash flows in accordance with accounting principles andpractices generally accepted and applied in countries and jurisdictions
other than Japan. In addition, the notes to the consolidated financial
statements include information which is not required under accounting
principles generally accepted in Japan but is presented herein as
additional information.
For the convenience of readers outside Japan, certain items presented in the original statements have been reclassified and rearranged.
Certain reclassifications of the prior year’s consolidated financial
statements and the related footnote amounts have been made to conform with the presentation in the current year.

(b) Principles of consolidation
The accompanying consolidated financial statements include theaccounts of the Bank and its significant subsidiaries and certain associated companies, which are as follows:
Suruga Business Service Co., Ltd.
Suruga Staff Service Co., Ltd.
A.P.I. Co., Ltd.
Suruga Capital Co., Ltd. (previously Suruga General Lease Co., Ltd.)
Suruga Computer Service Co., Ltd.
Suruga Card Co., Ltd.
Suruga Credit Service Co., Ltd.

Unrealized gain or loss on securities available-for-sale areincluded in shareholders’ equity, net of income taxes.

(e) Securities in money trusts
Securities included in money trusts are stated by the same method as
those described in (c) and (d) above.

(f) Derivatives
Derivatives positions are stated at their market value as of the fiscal
year-end.

(g) Premises and equipment
Depreciation of premises and equipment of the Bank is computedby the declining-balance method at rates principally based on thefollowing estimated useful lives:
Buildings

15 years to 50 years

Equipment and furniture

4 years to 20 years

Costs of software developed or obtained for internal use are amortized by the straight-line method over an estimated useful life of 5 years.
Certain subsidiaries apply the straight-line method for the depreciation of premises and equipment.

(h) Foreign currency items
Foreign-currency-denominated assets and liabilities are translated into
yen equivalents at the exchange rates prevailing at the balance sheet
date. Until the year ended March 31, 2002, the Bank had adopted therevised “Accounting Standard for Foreign Currency Transactions,”
except for the application of the Industry Audit Committee Report
No. 20 “Temporary Treatment for Accounting and Auditing
Concerning the Accounting for Foreign Currency Transactions in the
Banking Industry” issued by JICPA in November 2000. Since the current fiscal year the Bank has adopted the Industry Audit Committee
Report No. 25 issued by JICPA in July 2002.

(c) Trading account securities

For funding-related swaps, the Bank applies the temporary treatment in the Industry Audit Committee Report No. 25, which is thesame as ever. The net amount of yen exchange difference relating toforward foreign exchange transactions etc. is recorded on the consolidated balance sheet.

Trading account securities are stated at their market value as of the
fiscal year end.

(i) Reserve for possible loan losses

All significant intercompany accounts and transactions have been
eliminated in consolidation.

(d) Investment securities
Debt securities being held to maturity are stated at amortized costcomputed by the moving-average method.
Other securities (available-for-sale securities) whose current value
can be estimated are stated at their market value as of the fiscal year
end and other non-marketable securities are stated at cost or amortizedcost computed by the moving-average method.

The reserve for possible loan losses of the Bank is provided in accordance with the policies regarding write-offs and reserve standards stipulated in “Auditing of Write-offs and Loan Loss Provisions” issued as partof the “Fourth Report by the Auditing Subcommittee for Banks andOther Financial Institutions” by the Japanese Institute of Certified
Public Accountants. The reserve for loans to borrowers who are classified as substantially bankrupt or who are bankrupt in the formal legal
sense is provided based on the amount remaining after deduction of the15amount of their collateral considered to be disposable and of the amountrecoverable under guarantees.
In addition, a reserve is provided for loans to borrowers who,
although not actually bankrupt in the legal sense, are experiencing
serious management difficulties and whose failure is imminent. In suchcases, a portion of the reserve is provided based on the amount remaining after deduction of the amount of their collateral considered to be disposed and of the amount recoverable under guarantees, and the balanceof this reserve is provided after giving full consideration to the amountthe borrower is capable of repaying. In the case of all other loans, thereserve is based on the percentage of actual defaults over a fixed period.
For claims of “substantial bankruptcy” and “legal bankruptcy,” anamount exceeding the estimated value of the collateral or of the guarantees deemed uncollectible is deducted directly from those claims. For
the years ended March 31, 2003 and 2002, the amounts deducted were¥12,620 million (US$104,999 thousand) and ¥10,882 million, respectively.
Provisions for possible loan losses at the consolidated subsidiaries
have been made as deemed necessary with reference to the historicalloan loss experience of these companies.

(n) Hedge accounting
The Bank has adopted “macro hedge” accounting under which the
Bank manages its interest rate risk arising from various assets and liabilities with derivatives. The Bank applies the risk adjustment
approach based on a report issued by the JICPA entitled “Temporary
Treatment for Accounting and Auditing Application of AccountingStandards for Financial Instruments in Banking Industry” (JICPA
Industry Audit Committee Report No. 15). This method is applied on
the basis of the transitional method stipulated in “Accounting and
Auditing Treatment of Accounting Standard for Financial Instruments
in Banking Industry” (JICPA Industry Audit Committee Report
No. 24).
The effectiveness of each macro hedge is reviewed for a reduction
in interest rate risk exposure and for the actual risk on derivatives
within the permitted risk limits established under the Bank’s risk
control policies.
In addition to macro hedge accounting, the Bank and its consolidated subsidiaries have adopted deferral hedge accounting or certain
exceptional treatments permitted under interest rate swaps for a portion of their assets and liabilities.

(j) Reserve for employees’ bonuses
The reserve for employees’ bonuses is provided for the payment ofbonuses to employees, an estimate of which is determined as of thebalance sheet date.

(k) Reserve for possible losses on sales of loans
The reserve for possible losses on sales of loans provides for contingent losses arising from any decline in the market value of the collateral posted on corporate mortgage loans sold to the Cooperative Credit
Purchasing Company, Ltd.

(l) Pension and severance costs
Accrued pension and severance costs is provided for the future paymentof employees’ retirement benefits based on estimated amounts of theactuarially calculated retirement benefit obligation and the pension plan
assets. Prior service cost is amortized by the straight-line method over 5
years. Net actuarial gain (loss) is amortized by the declining-balancemethod over 13 years commencing the year following the year in which
the gain or loss is incurred. The unrecognized net retirement benefit
obligation at April 1, 2000, the date on which the new accounting standard was adopted is being amortized by the straight-line method over a
period of 5 years.

(m) Equipment held under finance leases
Equipment held under finance leases at the Bank and its domestic consolidated subsidiaries is accounted for as equipment leased underoperating leases, except for those leases which transfer the ownershipof the leased equipment to the lessee, in which case the equipment is
capitalized.

16(o) Consumption tax
Consumption tax and local consumption tax of the Bank and its
domestic consolidated subsidiaries are excluded from the transaction
amounts presented. The portions of consumption tax and local consumption tax paid on the purchases of premises and equipment which
are not deductible as tax credits have been included in other assets andare being amortized over a five-year period.

(p) Amounts per share
Effective April 1, 2002, the Bank and its subsidiaries had adopted a
new accounting standard for earnings per share. Basic net income pershare is computed based on the net income available for distribution toshareholders of common stock and the weighted average number ofshares of common stock outstanding during each year.

(q) Treasury stock and reduction of legal reserves
Effective April 1, 2002, the Bank and its subsidiaries had adopted a
new accounting standard for treasury stock and reduction of legal
reserves. As a result, both treasury stock and minority interests
decreased by ¥330 million (US$2,750 thousand) at March 31, 2003.

2. Japanese Yen and U.S. Dollar Amounts
The Japanese yen amounts in the accompanying consolidated financial
statements are presented in millions, with fractions omitted.
Amounts stated in U.S. dollars are translated from Japanese yenamounts, solely for convenience, at ¥120.20 = U.S.$1.00, the exchange
rate prevailing on March 31, 2003. The translation should not be construed as a representation that Japanese yen could be converted into
U.S. dollars at the above or any other rate.

3. Loans and Bills Discounted

5. Assets Pledged(1) Loans and bills discounted at March 31, 2003 and 2002 included
the following:

Assets pledged as collateral at March 31, 2003 and 2002 were as
follows:

Millions of yen
2003
2002

...............................................

Thousands of
U.S. dollars
2003

Loans to companies underbankruptcy procedures¥

Delinquent loans
Loans past due 3 months or more
Restructured loans
Total

91,550 110,402
761,647
1,048
943
8,718
77,628 70,414
645,823¥ 175,957 ¥ 187,271 $1,463,868

5,731 ¥

5,512 $

47,678Loans to companies under bankruptcy procedures consist of nonaccrual loans on which the payment of principal or interest is well pastdue or there is no prospect of recovery of the principal or interest fromthe borrower or from a third party guaranteeing the loan (the balancedoes not include any written-down portion of the loan). These loans
hereafter are referred to as “non-accrual loans.” This category also
includes the loans cited in Article 96-1-3 and 1-4 of the Corporation
Tax Law (Government Ordinance No. 97 of 1965).
Delinquent loans are defined as loans which are past due and notaccruing interest, but which are categorized neither as “Loans to companies under bankruptcy procedures” nor as “Restructured loans” asdefined below.
Loans past due for 3 months or more are classified as such when 3months or more have elapsed since the due date without the payment ofprincipal or interest. Loans to companies under bankruptcy procedures
and delinquent loans are not included in this category.
Restructured loans include loans whose repayment conditions havebeen renegotiated, (such as by reducing the rate of interest or by providing a grace period for the payment of principal/interest, etc.) to support
the rehabilitation of certain borrowers who are encountering financial
difficulties, with the intention of ensuring the recovery of the loans.
Excluded from this category are loans to companies under bankruptcy
procedures, delinquent loans and loans past due for 3 months or more.
(2) Bills discounted is accounted for as financial transactions on thebasis of “Accounting and Auditing Treatment of Accounting Standard
for Financial Instruments in Banking Industry” (JICPA Industry Audit
Committee Report No. 24). As a result, the Bank has rights to sell or
pledge certain commercial bills and foreign exchange bills discounted.
The principal amount of these bills amounted to ¥9,502 million(US$79,058 thousand).

...............................................

Investment securities
Due from banks
Treasury stock (common stock
held by subsidiaries)
Customers’ notes and others

Millions of yen
2003
2002

Thousands of
U.S. dollars
2003¥8,090—¥ 3,042—$67,308
—

1,788
8,959

1,788
12,396

14,87574,540Liabilities related to the above pledged assets were as follows:...............................................

Borrowed money
Deposits

Millions of yen
2003
2002

¥8,981—¥11,260
2,398

Thousands of
U.S. dollars
2003$74,717—

In addition, investment securities totaling ¥141,326 million(US$1,175,765 thousand) and ¥154,451 million at March 31, 2003 and2002, respectively, were pledged as collateral for the settlement of
exchange and short-selling transactions or as margin.

6. Loan Commitments
Contracts for overdraft facilities and loan commitments refer to contracts under which the Bank and its consolidated subsidiaries lend totheir customers funds up to certain prescribed limits in response to
their customers’ loan applications as long as there is no violation of
any of the conditions stipulated in the contracts. The unused portion
within the set limits of such contracts totaled ¥870,209 million(US$7,239,676 thousand) and ¥840,440 million at March 31, 2003
and 2002, respectively.
Since many of these commitments expire without the available
line of credit being fully utilized, the unused amount does not necessarily represent a future commitment. Most of these contracts specify
terms and conditions permitting the Bank and its consolidated subsidiaries to refuse customers’ loan applications or decrease their credit
limits for appropriate reasons (e.g., a change in their financial situation, a deterioration in their creditworthiness, etc.). At the inception of
the contracts, the Bank and its consolidated subsidiaries obtain realestate and securities, etc. as collateral if deemed necessary.
Subsequently, the Bank and its consolidated subsidiaries perform periodic reviews of the customers’ business results based on their internal
rules, and take the necessary measures to reconsider the conditions stipulated in the contracts and/or require additional collateral and guarantees.

4. Accumulated Depreciation
Accumulated depreciation on premises and equipment at March 31,
2003 and 2002 totaled ¥54,801 million (US$455,923 thousand) and¥54,496 million, respectively.

17

7. Employees’ Retirement Benefits

9. Interest Income and Expense

The funded status and amounts recognized in the consolidatedbalance sheets as of March 31, 2003 and 2002 were as follows:

Interest income and expense for the years ended March 31, 2003 and2002 were as follows:...............................................

Projected benefit obligation
Fair value of plan assets
Projected benefit obligationin excess of plan assets
Unrecognized net obligation at transition
Unrecognized net actuarial loss
Unrecognized prior service cost
Net liability recognizedPrepaid pension costAccrued pension and severance costs

Millions of yen
2003
2002

Thousands of
U.S. dollars
2003¥(17,511) ¥(39,958) $(145,689)
12,90927,009107,401(4,602) (12,949)(38,288)
1,679
3,732
13,9685,688
8,831
47,321
—
(647)
—
2,764
(1,032)
23,002
2,992—
24,893¥ (227) ¥ (1,032) $ (1,891)

On April 26, 2002, the Bank was given an approval to resign as agent
for the employees’ pension plan portion from Ministry of Health,Labour & Welfare, due to the enforcement of the Defined-Benefit
Enterprise Pension Plan Law. And the Bank recognized the extinctionof the entrusted portion of the retirement benefit obligations amount ofapproximately ¥21,587 million (US$179,599 thousand) on the date of
the approval in accordance with Statement No. 13 “Practical Guidelinesof Accounting for Retirement Benefits (Interim Report)” (issued by the
Accounting Committee of the JICPA). The required capital for the substitute payment (minimum liability reserve) which is estimated approximately ¥12,035 million (US$100,126 thousand) should be returned togovernment, and the Bank recorded the extraordinary profit of approximately ¥3,503 million (US$29,144 thousand) in the fiscal year ended
March 31, 2003. The pension plan assets calculated to be returned as ofMarch 31, 2003 amounted to ¥11,795 million (US$98,129 thousand).

8. Amounts per Share
The computation of basic net income per share is based on theweighted average number of shares of common stock outstanding during each year, less treasury stock.
Amounts per share of net assets are computed based on the number ofshares of common stock outstanding at each balance sheet date, less treasury stock and shares of common stock of the Bank held by the subsidiaries.
Yen
March 31

2003

2002

Net income (loss)
Net assets¥ 30.31438.31¥ (91.34)
432.0018

U.S. dollars
2003$0.252
3.646

Millions of yen
2003
2002

...............................................

Thousands of
U.S. dollars
2003

Interest income:Interest on loans and discounts
Interest and dividends on securities
Interest on deposited money
Other
Total

¥63,374
2,236
1
51¥65,663¥63,263
3,685
36
282
¥67,268$527,238
18,60412426$546,282

Interest expense:
Interest on deposits
Interest on borrowings and other
Other
Total

¥2,364266
3,961¥6,592¥ 4,293
348
6,999¥11,640$19,672
2,214
32,959$54,846

10. Other Income and Expenses
Other income and expenses for the years ended March 31, 2003 and2002 were as follows:
Millions of yen
2003
2002

Thousands of
U.S. dollars
2003

312

¥ 2,416

$

52

32

438

727

2,636

6,054

464

120

3,866

3,503
294
2,071
1,107
¥ 8,534

—
764
—
1,028
¥ 6,998

29,144
2,449
17,2339,214$ 71,001¥—¥31,381$255
12,968

1,903
8,715

2,127
107,890

1,532

627

12,745

343

1,071

2,857

0

2,207

0

—

17,723

—

—

420

—

873
844
¥16,8171,244
541¥65,836

7,266
7,028
$139,915...............................................

Other income:Gain on sales of stocks and othersecurities
Gain on disposition of premises andequipment
Gain on securities contributed to
employees’ retirement benefit trust
Gain on sales of investments in aconsolidated subsidiary
Gain on return of the substitutional
portion of Welfare Pension Fund plan
Collection of claims written-off
Reversal for possible loan losses
Other
Total
Other expenses:
Provision for possible loan losses
Loss on devaluation of stocks andother securities
Write-offs of loans
Loss on sales of corporate mortgage
loans
Loss on disposition of premises andequipment
Loss on sales of stocks and othersecurities
Loss on redemption of beneficiary
certificates of securities investment trust
Loss on sales of investments inconsolidated subsidiaries
Cost of amortization ofdifferences resulting fromchanges in accounting standards
Other
Total

¥

2,600

—

11. Income Taxes

12. Leases(1) The tax effects of significant temporary differences and loss carryforwards which resulted in deferred tax assets and liabilities at March
31, 2003 and 2002 are summarized as follows:

The pro forma information such as acquisition costs, accumulated
depreciation and obligations on property leased under finance leases
which do not transfer the ownership of leased property to the lessee on
an “as if capitalized” basis is summarized as follows:...............................................

Deferred tax assets:
Reserve for possible loan losses
Accrued enterprise tax
Depreciation
Accrued pension and severance
costs and other
Loss on write-offs of securities
Net unrealized losses on securities
Tax loss carryforwards
Other
Deferred tax assets
Less: valuation allowance
Deferred tax liabilities:
Gain on Establishment ofRetirement Benefit Trusts
Net deferred tax assets

Thousands of
U.S. dollars
2003

Millions of yen
2003
2002

March 31¥35,5349608¥43,4468
678$295,628
78
5,060

3,699
2,043
4,122
6,056
1,356
53,431
(413)

4,492
887
812
—
4,233
54,560(430)

30,781
17,002
34,29950,382
11,286444,520(3,437)

2,698¥50,320—¥54,129

22,445$418,637

Millions of yen
2003
2002

Thousands of
U.S. dollars
2003

Equipment:
Acquisition costs
Less accumulated depreciation
Leased property, net¥35,581
24,125¥11,455¥38,114 $296,018
25,501 200,712¥12,613 $ 95,305

Obligations under finance leases:
Due within one year
Due after one year
Total

¥ 4,787
8,839¥13,627¥ 5,816 $ 39,831
8,757
73,543¥14,574 $113,374

Lease revenue
Depreciation expense¥ 5,232
4,215¥ 5,789 $ 43,532
4,674
35,068(2) Income taxes applicable to the Bank comprises corporation, enterprise and inhabitants’ taxes which, in the aggregate, resulted in astatutory tax rate of approximately 41.6% for the years ended March
31, 2003 and 2002. Analysis of the difference between the statutory
tax rate and the effective tax rate for the year ended March 31, 2002 is
not disclosed because of the loss before income taxes. The difference
between the statutory tax rate and the effective tax rates for the year
ended March 31, 2003 was as follows:
March 31, 2003

Statutory tax rate

41.6%

Adjustments:
Non-deductible expenses
Non-taxable dividend income
Adjustment of deferred tax assets due to tax rate change
Inhabitants’ per capital taxes
Other
Effective tax rate

0.2
(0.7)
7.5
0.5
(1.5)
47.6%

(3) Adjustment of deferred tax assets due to the change in tax rate.
Due to the change in local tax law during the year ended March 31,
2003, the effective tax rate used in the calculation of deferred tax
assets and liabilities is reduced to 40.2% for the current fiscal year
from 41.6% for the prior fiscal year. As a result, deferred tax assets,
net of deferred tax liabilities, decreased by ¥1,317 million (US$10,963
thousand) as of March 31, 2003 and income taxes-deferred increasedby ¥1,174 million (US$9,768 thousand) for the year ended March 31,
2003.

19

13. Segment Information
Information regarding the business segments and total income of the Bank and its consolidated subsidiaries for the years ended March 31, 2003
and 2002 is summarized as follows:(a) Business segment information
Millions of yen
Banking
operations

Other
operations

81,110336
81,447
66,995
14,451¥ 10,359
2,874
13,234
12,604¥ 629¥¥ 2,801,922
3,277
2,117

¥ 37,481
5,089
4,057

¥2,839,404
8,366
6,174

Year ended March 31, 2002
Total income and income before income taxes:
Total income from outside customers
Total income from intersegment transactions
Total
Total expenses(Loss) income before income taxes

Banking
operations

Other
operations¥

81,679177
81,856
120,452¥ (38,596)¥ 10,149
3,726
13,875
13,677¥ 198

Total assets
Depreciation and amortization
Capital expenditures¥2,804,332
3,531
3,034

¥ 37,195
5,086
4,354

Banking
operations

Other
operations

674,793
2,802
677,595
557,363
120,232$ 86,185
23,917110,103104,863$ 5,239$$ 23,310,500
27,264
17,613$311,829
42,34333,757

Year ended March 31, 2003
Total income and income before income taxes:
Total income from outside customers
Total income from intersegment transactions
Total
Total expenses
Income before income taxes
Total assets
Depreciation and amortization
Capital expenditures

¥

¥

Total

Eliminations

Consolidated

91,4693,211
94,681
79,59915,081¥—(3,211)(3,211)(3,773)¥561¥¥ (12,485)——¥2,826,918
8,366
6,174

Eliminations

Consolidated¥

91,828
3,903
95,731
134,129¥ (38,397)¥—(3,903)(3,903)(3,772)¥ (130)¥91,828—91,828130,357¥ (38,528)¥2,841,528
8,617
7,388

¥(10,141)——¥2,831,386
8,617
7,388

¥

¥

91,469—91,46975,826
15,643

Millions of yen
Total

Thousands of U.S. dollars

Year ended March 31, 2003
Total income and income before income taxes:
Total income from outside customers
Total income from intersegment transactions
Total
Total expenses
Income before income taxes
Total assets
Depreciation and amortization
Capital expenditures

$

$

Total

Eliminations

Consolidated

760,979
26,719787,699662,227
125,472$—(26,719)(21,719)(31,392)
$
4,672

$

$23,622,330
69,60751,371$(103,873)——$23,518,457
69,60751,371$$

760,979—
760,979
630,834
130,144(b) Income from international operations
Income from international operations for the year ended March 31, 2003 have not been prepared or disclosed, since income from international
operations are not significant in relation to total consolidated income less than 10 percent.
Millions of yen

Years ended March 31,
Income from international operations
Total consolidated income
Income from international operations as a percentage of total consolidated income

20

2002
¥10,250
91,82811.2%

14. Market Value of Securities(a) The market value of, and the valuation difference on, available-for-sale marketable securities at March 31, 2003 and 2002 aresummarized as follows:
Millions of yen

Cost

Corresponding
amount in thebalance sheet

Valuationdifference

Gain

Loss

StocksBonds:
Government bonds
Municipal bonds
Corporate bonds
Other¥ 38,118
330,855
318,106
3,731
9,018
60,684¥ 34,423
327,488314,5123,768
9,208
57,490¥ (3,695)(3,367)(3,593)36
189(3,194)¥2,072
417
190
37
189
498

¥ 5,768
3,785
3,784
0
—
3,692

Total

¥429,659¥419,402¥ (10,257)¥2,989¥13,246

Gain

Loss

March 31, 2003

March 31, 2003

Cost

Thousands of U.S. dollars
Corresponding
amount in the
Valuationbalance sheet
difference

StocksBonds:
Government bonds
Municipal bonds
Corporate bonds
Other$ 317,129
2,752,544
2,646,473
31,04475,027504,864$ 286,382
2,724,528
2,616,573
31,34876,606478,290$(30,746)(28,016)(29,899)
304
1,579(26,573)$17,244
3,475
1,587
308
1,579
4,149

$ 47,991
31,491
31,487
4—
30,723Total$3,574,539$3,489,202$(85,336)$24,869$110,206

The valuation difference, net of ¥4,124 million (US$34,314 thousand) of related tax assets, resulted in a loss of ¥6,132 million (US$51,022 thousand). The net valuation difference excluding minority interests resulted in a loss of ¥6,134 million (US$51,038 thousand), which has been
included in “Net unrealized losses on securities available-for-sale.”
Millions of yen

Cost

Corresponding
amount in thebalance sheet

StocksBonds:
Government bonds
Municipal bonds
Corporate bonds
Other¥ 39,219
388,604
352,117
14,911
21,57552,729¥ 40,107
389,057
352,300
14,92921,82849,431

¥

888
453
182
17
253
(3,298)¥3,218
814
419
74
320
264

¥2,329
360
237
56
67
3,562

Total

¥480,553¥478,596¥ (1,956)¥4,296¥6,252

March 31, 2002

Valuationdifference

Gain

Loss

The valuation difference, net of ¥813 million of related tax assets, resulted in a loss of ¥1,142 million. The net valuation difference excluding
minority interests resulted in a loss of ¥1,141 million, which has been included in “Net unrealized losses on securities available-for-sale.”(b) Available-for-sale securities sold during the years ended March 31, 2003 and 2002 were as follows:
Millions of yen
2003
2002

Proceeds from sales
Gain
Loss

¥210,215
1,218
253¥177,467
4,367
3,148

Thousands of
U.S. dollars
2003$1,748,885
10,1372,112

21

15. Repayment Schedule for Bonds Held to Maturity
The repayment schedule for bonds classified as available-for-sale securities which are being held to maturity is summarized as follows:
Millions of yen
Due in 1 toDue in 5 to
5 years
10 years

Due within
1 year or lessMarch 31, 2003
Bonds
Government bonds
Municipal bonds
Corporate bonds
Other
Total

Due after
10 years¥127,595
125,027
—
2,568
1,299

¥46,020
32,324
3,730
9,965
25,885¥4,826
933
37
3,855
4,201

¥156,227
156,227——
19,890¥128,895¥71,906¥9,027¥176,117

Thousands of U.S. dollars
Due in 1 toDue in 5 to
5 years
10 years

Due after
10 years

Due within
1 year or lessMarch 31, 2003
Bonds
Government bonds
Municipal bonds
Corporate bonds
Other$1,061,528
1,040,162—
21,366
10,810$382,869
268,922
31,03582,911
215,356$40,150
7,762
312
32,07434,952$1,299,725
1,299,725——
165,481

Total$1,072,338$598,226$75,102$1,465,206

16. Money Trusts
A classification of money trusts by purpose at March 31, 2003 and 2002 is summarized as follows:
Millions of yen
Amount in the
Valuationbalance sheet
difference

March 31, 2003

¥990

Money trusts for trading purposes

Thousands of U.S. dollars
Amount in the
Valuationbalance sheet
difference¥(9)$8,239$(80)

Millions of yen
Amount in the
Valuationbalance sheet
difference

March 31, 2002
Money trusts for trading purposes
Other money trusts¥1,001
1,001

¥ 1
—

The net valuation loss on money trusts for trading purposes has been included in “Income before income taxes and other.”

17. Derivatives
The contract or notional amount and the market value of derivatives at March 31, 2003 and 2002 were as follows:
Millions of yen

March 31, 2003
ListedOver the counter:
Interest rate swaps
Currency swaps

Contract ornotional
amount¥—Market value¥—
228,068—

Unrealized
gain (loss)¥—(1,525)——(1,525)

Millions of yen

March 31, 2002
ListedOver the counter:
Interest rate swaps
Currency swaps

Contract ornotional
amount¥—666
287,070

Market value

¥

—
(18)
(2,359)Unrealized
gain (loss)

¥

—
(18)
(2,359)Derivatives to which hedge accounting has been applied are excluded from the above tables.

22

Thousands of U.S. dollars
Contract ornotional
Unrealized
amountMarket value
gain (loss)$——
1,897,411$——(12,694)$——(12,694)18. Subsequent Events
Appropriations of retained earnings
At a shareholders’ meeting held on June 24, 2003, the Bank’s shareholders duly approved the following year-end appropriations of retained
earnings, which have not been reflected in the accompanying consolidated financial statements for the year ended March 31, 2003:

Year-end cash dividends (¥2.5 = US$0.020 per share)
Bonuses to directors and corporate auditors
Transfer to voluntary reserve

Millions of yen

Thousands of
U.S. dollars

¥ 656
30
5,500

$ 5,463249
45,757

Independent Auditors’ Report
The Board of Directors
Suruga Bank Ltd.
We have audited the accompanying consolidated balance sheets of Suruga Bank Ltd. and consolidated subsidiaries as of March 31, 2003 and 2002, and therelated consolidated statements of operations, shareholders’ equity, and cash flows for the years then ended, all expressed in yen. These financial statements are
the responsibility of the Company’s management. Our responsibility is to independently express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards, procedures and practices generally accepted and applied in Japan. Those standards, proceduresand practices require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Suruga Bank Ltd. andconsolidated subsidiaries at March 31, 2003 and 2002, and the consolidated results of their operations and their cash flows for the years then ended inconformity with accounting principles and practices generally accepted in Japan.
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31, 2003 are presented solely forconvenience. Our audit also included the translation of yen amounts into U.S. dollar amounts and, in our opinion, such translation has been made on the basis
described in Note 2 to the consolidated financial statements.
Shin Nihon & Co.

June 24, 2003
See Note 1 to the consolidated financial statements which explains the basis of preparation of the consolidated financial statements of the Suruga Bank Ltd. and consolidated
subsidiaries under Japanese accounting principles and practices.

23

Non-Consolidated Balance Sheets
Suruga Bank Ltd.
Thousands of
U.S. dollars(Note 2)Millions of yen

As of March 31,

2003

2002

2003

AssetsCash and cash equivalents
Due from banks
Call loans¥

76,582¥82,384$

637,125

6,560

3,435

54,581

190,274

160,879

1,582,978Commercial paper and other debt purchased

12

7

107

Trading account securities

489

329

4,069

Money trusts

990

2,002

8,239

Investment securities (Note 3)Loans and bills discounted (Note 4)
Foreign exchange

428,728

488,215

3,566,792

2,034,104

2,004,953

16,922,664

759

556

6,317

Other assets

16,10015,699133,945

Premises and equipment (Note 5)

39,26940,747

326,703

Deferred tax assets

49,81953,630414,470

Customers’ liabilities for acceptances and guarantees

11,376

15,876

94,647Less reserve for possible loan losses(43,590)(56,619)(362,645)¥2,811,477¥2,812,099$23,389,997

Total assets
Liabilities and shareholders’ equity
Liabilities
Deposits (Note 6)¥2,673,317¥2,664,870$22,240,576

Call money

—

666

—

Borrowed money

17

29

144

Foreign exchange

7

15

66

Other liabilities

9,926

13,57382,579Reserve for employees’ bonuses

572

679

4,759

Accrued pension and severance costs

112

940

936

Reserve for possible losses on sales of loans

220

262

1,830

Acceptances and guarantees

11,376

15,876

94,647

2,695,549

2,696,914

22,425,539

Common stock (Note 8)

30,04330,043249,943

Capital surplus

18,585

18,585

154,624

Legal reserve

30,04330,043249,943

Voluntary reserve

38,172

58,172

317,572

Retained earnings (deficit)

7,487(18,634)

62,290Total liabilities
Shareholders’ equity

Net unrealized losses on securities, net of taxes(6,136)(1,141)(51,053)

Less treasury stock, at cost

(2,267)(1,883)(18,863)

Total shareholders’ equity

115,927

115,185

964,457¥2,811,477¥2,812,099$23,389,997

Total liabilities and shareholders’ equity
See notes to non-consolidated financial statements.

24

Non-Consolidated Statements of Operations
Suruga Bank Ltd.
Thousands of
U.S. dollars(Note 2)Millions of yen

Years ended March 31,

2003

2002

2003

¥62,260¥ 62,939$517,977

2,254

3,662

18,756

50

317

420

Fees and commissions

8,877

7,662

73,855

Other operating income (Note 11)

1,069

2,094

8,896

IncomeInterest income:Interest on loans and discounts
Interest and dividends on securities
Other

Other income

8,664

6,675

72,084

Total income

83,177

83,353691,991

2,364

4,293

19,672

9

82

76

4,030

7,346

33,528

6,239

5,135

51,910

Expenses
Interest expense:
Interest on deposits
Interest on borrowings and rediscounts
Other
Fees and commissions
Other operating expenses (Note 11)

3,340

1,288

27,789General and administrative expenses (Note 12)

36,784

39,676

306,024

Other expenses

15,77264,029131,221

Total expenses

68,540121,852

570,223

Income (loss) before income taxes

14,636(38,499)

121,767

Current

75

76

627

Deferred

7,124(15,698)

59,267

7,199(15,621)59,895¥ 7,436¥(22,878)$ 61,871

Income taxes:

Net income (loss)
See notes to non-consolidated financial statements.

25

Non-Consolidated Statements of Shareholders’ Equity
Suruga Bank Ltd.
ThousandMillions of yen

Years ended March 31,

Number ofsharesCommonstock

CapitalsurplusLegalreserve

Voluntary
reserve

Retained
Net unrealized Treasury
earnings losses on securities, stock,(deficit)
net of taxes
at costBalance at March 31, 2001

264,939¥30,043¥18,585¥30,043¥50,172¥ 13,561¥(1,925)¥—

Net loss for the year ended
March 31, 2002

(22,878)

Cash dividends paid

(1,318)Transfer to voluntary reserve

8,000(8,000)Net change during the year
Balance at March 31, 2002

264,939

30,043

18,58530,04358,172(18,634)784(1,883)(1,141)(1,883)(4,995)(384)¥(6,136)¥(2,267)

Net income for the year
ended March 31, 2003

7,436

Cash dividends paid

(1,315)

Reversal of voluntary reserve(20,000)

20,000Net change during the year
Balance at March 31, 2003

264,939¥30,043¥18,585¥30,043¥38,172¥ 7,487

Thousands of U.S. dollars (Note 2)

Balance at March 31, 2002

Commonstock

CapitalsurplusLegalreserve

Voluntary
reserve

Retained
Net unrealized Treasury
earnings losses on securities, stock,(deficit)
net of taxes
at cost$249,943$154,624$249,943$483,961$(155,028)$ (9,494)$(15,667)(41,559)(3,195)$(51,053)$(18,863)

Net income for the year
ended March 31, 2003

61,871

Cash dividends paid

(10,941)

Reversal of voluntary reserve(166,389)

166,389

Net change during the year
Balance at March 31, 2003

$249,943

See notes to non-consolidated financial statements.

26$154,624$249,943$317,572$ 62,290

Notes to Non-Consolidated Financial Statements
Suruga Bank Ltd.

1. Summary of Significant Accounting Policies

4. Loans and Bills Discounted(a) Basis of Preparation(a) Loans and bills discounted at March 31, 2003 and 2002
were as follows:

Suruga Bank Ltd. (the “Bank”) maintains its accounting records andprepares its financial statements in accordance with accounting principles and practices generally accepted and applied in Japan, theCommercial Code of Japan and the Banking Law of Japan. The accompanying non-consolidated financial statements have been compiled
from the non-consolidated financial statements filed with the Financial
Services Agency as required by the Banking Law of Japan and the
Securities and Exchange Law of Japan. Accordingly, the accompanying non-consolidated financial statements are not intended to present
the non-consolidated financial position and results of operations inaccordance with accounting principles and practices generally accepted
and applied in countries and jurisdictions other than Japan. In addition,
the notes to the non-consolidated financial statements include information which is not required under accounting principles generally
accepted in Japan but is presented herein as additional information.
The non-consolidated financial statements have been prepared on
the same basis as the accounting policies discussed in Note 1 to theconsolidated financial statements except that the accompanying financial statements relate to the Bank only, with investments in subsidiaries
and affiliates being substantially stated at cost.
Certain reclassifications of the prior year’s non-consolidated financial statements and the related footnote amounts have been made toconform with the presentation in the current year.

2. Japanese Yen and U.S. Dollar Amounts
The Japanese yen amounts in the accompanying non-consolidated
financial statements are presented in millions, with fractions omitted.
Amounts stated in U.S. dollars are translated from Japanese yenamounts, solely for convenience, at ¥120.20 = U.S.$1.00, the exchange
rate prevailing on March 31, 2003. The translation should not be construed as a representation that Japanese yen could be converted into
U.S. dollars at the above or any other rate.

Millions of yen
2003
2002

Bills discounted
Loans on bills
Loans on deeds
Overdrafts
Total

¥

9,458
244,488
1,603,007
177,149¥2,034,104¥

11,340262,321
1,547,066
184,225¥2,004,953

Thousands of
U.S. dollars
2003$

78,6912,034,017
13,336,167
1,473,787$16,922,664(b) Loans and bills discounted at March 31, 2003 and 2002
included the following items:
Millions of yen
2003
2002

Loans to companies underbankruptcy procedures
Delinquent loans
Loans past due 3 months or more
Restructured loans
Total

¥

5,403
90,220960
77,628¥174,211¥

5,186
107,794
889
70,414¥184,283

Thousands of
U.S. dollars
2003$

44,950750,5827,986
645,823$1,449,342

5. Premises and Equipment
Premises and equipment at March 31, 2003 and 2002 were as follows:
Millions of yen
2003
2002

Land
Buildings
Furniture and equipment
Guarantee money, net
Software, net
Less: accumulated depreciation
Premises and equipment, net¥14,21123,03622,864
5,693
3,162
68,967(29,697)¥39,269

Thousands of
U.S. dollars
2003$118,229
191,650
190,22247,362
26,310573,775(247,071)$326,703¥14,006
23,02822,483
5,442
4,105
69,065(28,318)¥40,747

6. Deposits
3. Investment Securities

Deposits at March 31, 2003 and 2002 were as follows:

Investment securities at March 31, 2003 and 2002 were as follows:......................................................
......................................................
......................................................

Japanese government bonds
Local government bonds
Corporate bonds
Corporate stock
Other securities
Total
Shares of subsidiaries
included in corporate stock

Millions of yen
2003
2002

Thousands of
U.S. dollars
2003¥314,512
10,3309,768
37,151
56,966¥428,728¥352,300
14,92922,43742,57355,975¥488,215$2,616,573
85,94081,265309,081473,931$3,566,792

¥

¥

$

297

90

Millions of yen
2003
2002

Current deposits¥ 51,625
Ordinary deposits
975,300
Deposits at notice
25,390Time deposits
1,490,247
Other deposits
130,752
Subtotal
2,673,317
Negotiable certificates of deposit—
Total¥ 2,673,317¥

65,353
895,522
34,551
1,496,854
172,5892,664,870—¥2,664,870

Thousands of
U.S. dollars
2003$

429,498
8,113,978211,239
12,398,065
1,087,793
22,240,576—$22,240,576

2,472

7. Acceptances and Guarantees
The Bank provides guarantees for the liabilities of its customers forthe payment of loans from other financial institutions. As a contra
account, “Customers’ liabilities for acceptances and guarantees” ispresented on the assets side of the balance sheet, indicating the Bank’s
right of indemnity from the customers.

27

8. Common Stock

11. Other Operating Income and Expenses

Common stock was as follows:(1) Authorized:
396,029,983 shares no per value at March 31,
2003 and 2002
(2) Issued andoutstanding:
264,939,248 shares at March 31, 2003 and 2002
(3) Treasury stock: 2,267,920 shares at March 31, 2003

Other operating income and expenses for the years ended March 31,
2003 and 2002 were as follows:

9. Capital Surplus and Legal Reserve
Under the Banking Law of Japan, an amount equivalent to at least 20
percent of cash dividends paid and other cash outflows from retained
earnings must be appropriated to the legal reserve until such reserveand the capital surplus account equal 100 percent of the Bank’s statedcapital.
In the case that the sum of the capital surplus account and the legal
reserve exceed 100 percent of the common stock account, then theamount of the excess is available for appropriation by resolution of theshareholders.

10. Amounts per Share
The computation of basic net income (loss) per share is based on theweighted average number of shares of common stock outstanding during each year .
Amounts per share of net assets are computed based on the number of shares of common stock outstanding at each balance sheet date,less treasury stock.
Yen
March 312003

Net income (loss)
Net assets¥ 28.17 ¥ (86.82)
441.22 437.44

2002

U.S. dollars
2003

Millions of yen
2003
2002

Thousands of
U.S. dollars
2003

Other operating income:Gain on foreign exchange transactions
Gain on trading account securities
Gain on sales of bonds
Gain on redemption of bonds
Other
Total

¥ 131
31
905
—
1
¥ 1,069

¥ 120
13
1,951
9
—
¥ 2,094$1,090
260
7,537
—
9
$8,896

Other operating expenses:
Loss on sales of bonds
Loss on redemption of bonds
Loss on devaluation of bonds
Other
Total

¥ 253
374
2,711
—
¥ 3,340

¥ 941
328
—
18
¥ 1,288$ 2,112
3,116
22,560—$27,789

12. General and Administrative Expenses
General and administrative expenses for the years ended March
31, 2003 and 2002 were as follows:
Millions of yen
2003
2002

Salaries and allowances
Depreciation
Taxes
Other
Total

¥14,215
3,278
1,778
17,511¥36,784¥15,764
3,530
1,923
18,457¥39,676

Thousands of
U.S. dollars
2003$118,268
27,273
14,798145,685$306,024$0.234
3.670

Independent Auditors’ Report
The Board of Directors
Suruga Bank Ltd.
We have audited the accompanying non-consolidated balance sheets of Suruga Bank Ltd. as of March 31, 2003 and 2002, and the related nonconsolidated statements of operations and shareholders’ equity for the years then ended, all expressed in yen. These financial statements are theresponsibility of the Company’s management. Our responsibility is to independently express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards, procedures and practices generally accepted and applied in Japan. Those standards,
procedures and practices require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the non-consolidated financial position of Suruga Bank
Ltd. at March 31, 2003 and 2002, and the non-consolidated results of its operations for the years then ended in conformity with accounting principles andpractices generally accepted in Japan.
The U.S. dollar amounts in the accompanying non-consolidated financial statements with respect to the year ended March 31, 2003 are presented solely
for convenience. Our audit also included the translation of yen amounts into U.S. dollar amounts and, in our opinion, such translation has been made on
the basis described in Note 2 to the non-consolidated financial statements.
Shin Nihon & Co.
June 24, 2003
See Note 1 to the non-consolidated financial statements which explains the basis of preparation of the non-consolidated financial statements of Suruga Bank Ltd. underJapanese accounting principles and practices.

28

Corporate Directory(as of April 1, 2003)

Reference
Head Office
23, Tohriyoko-cho, Numazu, Shizuoka, Japan
Phone: (055) 962-0080
Fax: (055) 963-4458

Capital Markets Division
7-1, Nihombashi-Muromachi 1-chome, Chuo-ku, Tokyo
Phone: (03) 3279-5533
Fax: (03) 3242-3284
SWIFT Address: SRFX JP JT

Organization

General Meeting of Shareholders

Corporate Auditors
Board of Corporate Auditors

Customer Relations
Business Division

Board of Directors

Business Promotion
Business Development
Markets Operations

Capital Markets DivisionMarkets Administration
International Operations

Executive Committee

Internal Audit Divisione-Business Planning
System Planning
Operating Division
Business Operations
General Affairs

Officer Committee
Credit Supervision Division
Planning and Administration
Credit Supervision Group

Credit Supervision I
Credit Supervision II
Credit Administration

Credit Administration Group
Asset Assessment
Integral Risk Management
Management Planning
Corporate Planning DivisionCorporate Treasury
Personnel Casting29

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