Message from the President

At Suruga Bank, we have always pursued value in which we canprovide to our various stakeholders, because we believe companies arecorporate members of society, as well as “social systems” that
contribute to the happiness of all people. The role we are expected toplay varies among our stakeholders, as does the value we create forthem. While shareholders might look at how well we perform as asystem for the efficient management of capital, customers look at thevalue we provide — in keeping with our motto of “concierge” banking— as an organization that assists people to realize their dreams, just as
society at large looks at our valuable and continuous contribution to it.
Especially in recent years, the relationship between the corporate
community and the wider society in which it operates has become
even deeper. In addition to the conventional principle of “quality
management,” companies are now required to place greater focus onsocially and environmentally responsible management, thereby adding

new dimensions to their role as social and public institutions byproviding a greater range of value to a broader array of stakeholders.
We believe that our continuous growth as a “value-providing system”
based on the principles of reciprocity and gratitude will help realize abetter society.
Our growth as such a “value-providing system” will never end.
Naturally, as society changes, so too will the role that companies are
expected to play within it, and this will lead to further diversificationin the types of value that companies provide. Suruga Bank continues toenhance its contributions to the betterment of society by being
flexible to societal changes and by providing unique value that isclearly different from that provided by our competitors. As regards toour service, quality matters more than quantity. Make no mistake, there
are big things yet to come from Suruga Bank.
May 21, 2004

Mitsuyoshi Okano,President & Chief Executive Officer

1Review of Operations (Non-consolidated)
The Company’s results for this period are shown below.

Gross operating income

Gross operating income(Billions of yen)

68.2

70

60

58.5

58.5

FY01

FY02

54.2
50

〜
〜
0

FY00

FY03

Expenses & OHR (Overhead Ratio)(Billions of yen)

40

Total 41.9
2.0

Total 39.6
1.9

77.4
30

22.6

(%)

90.00

Total 36.7
1.7

Total 36.4
1.8

67.7

80.00

70.00

62.7

21.9
20

20.4
60.00

20.7

53.4

14.1

14.2

FY02

FY03

17.3
15.7

〜
〜
0

50.00

40.00

FY00

FY01

The gross operating income indicates the Bank’s
earnings from basic banking operations. This figure
comprises three elements: “Net Interest Income,”
which is based on interest payments on loans,marketable securities, and deposits; “Net Fees andCommissions”; and “Other Operating Income,”
which includes proceeds from foreign transactions
and the sale of bonds, etc. With the steady growth inconsumer loans, Suruga Bank has seen an increase in
net interest income, which, combined with anincrease in other banking profit, took the grossoperating income to 68.2 billion yen this period,
representing a year-on-year increase of 9.7 billionyen.

OHR (Overhead Ratio) = Expenses / Gross operating income

Expenses & OHR (Overhead Ratio)
The OHR, also used as an indicator for efficiency,
improved 9.2 percentage points year-on-year, tostand at 53.4% for the reporting period. This increase
was largely due to the increase in gross operating
income and a reduction in expenses.

Personnel expenses
Non-personnel expenses
Taxes
OHR

Net Operating Income & Core Net Operating Income(Billions of yen)

40

35.7
35

30.2

30

24.2

25

21.8

20
15

18.1
13.4 12.0

10

4.5

5
0

FY00

FY01

FY02

FY03

Net operating income = Gross operating income - Expenses - Transfer to general reserve for possible loan losses
Core net operating income = Net operating income (before transfer to general reserve for possible loan losses)- Proceeds from bonds, including JGBs (5 accounts)
Net operating income
Core net operating income

2

Net Operating Income & Core Net
Operating Income
Net operating income refers to what is referred to“Operating profit” in the financial statements ofordinary companies, and is a measure of the profit
earned through basic banking operations. The
general reserve for possible loan losses is added tothis profit earned and net proceeds from transaction
in bonds (including JGBs) are subtracted from thenet operating income. The period under review saw
a year-on-year increase of 13.8 billion yen in net
operating income to 35.7 billion yen, while core net
operating income rose 6.0 billion yen over last year’s
figure to 30.2 billion yen.

Ordinary Profit & Net Income

Ordinary Profit & Net Income

The increase in net operating income of 13.8 billion
yen outweighed the 5 billion yen increase in nonrecurring loss generated through the increase in theamount of non-performing loans disposed of, leaving
ordinary profit 8.8 billion up from previous year at
17.4 billion yen.
The increase in ordinary profit was considerably
offset by the 7.3 billion yen fall in extraordinary
income, while net income for the period was up 1.3
billion yen, standing at 8.7 billion yen.

(Billions of yen)

20

17.4

10.8
10

9.4

8.6

7.4

8.7

(21.9) (22.8)
0

〜
〜
-25

FY00

FY01

FY02

FY03

Ordinary profit
Net income (loss)

Loan Balance & Yield on Outstanding Domestic Loans(March 31)(Billions of yen)

(%)

3.50

2,100

2,072.8
3.30
2,050

3.17
3.06

2,000

3.11
3.10

2,034.1
2.90

2,004.9
2.90

1,955.5
1,950

Loan Balance & Yield on Outstanding
Domestic Loans
As a result of our sales push targeted at individuals
and small-to-medium-sized enterprises, the Bank’s
term-end loan balance increased by 38.7 billion yen
to 2,072.8 billion yen. Likewise, the yield on
outstanding domestic loans also increased 0.06% overthe previous year, to 3.17%.

2.70

〜
〜
0

2.50

01/3

02/3

03/3

04/3

Loan balance
Yield on outstanding domestic loans

Consumer Loans

Consumer Loans(March 31)(Billions of yen)

1,377.8

1,400

1,299.5
1,180.2

1,200

1207.91127.41,001.5
1,000

800

995.1
838.4

The term-end balance of consumer loans saw a netincrease of 109.4 billion yen year-on-year, but withthe offloading of 31.2 billion yen worth of mortgage
loan assets, the final increase was 78.2 billion yen
compared to the end of the previous year. The
proportion of consumer loans as a percentage of allloans was up 2.6 percentage points at 66.4%.

〜
〜
0
01/3
Consumer loans (

02/3

03/3

04/3

represents proportion of mortgage loans)3Review of Operations

Deposits & Yield on Domestic Deposits

Deposits & Yield on Domestic Deposits(March 31)(Billions of yen)

2,800

(%)

0.30

2,725.4
2,664.8

2,673.3

2,702.9

0.24

2,600

0.20

〜
〜

0.14

1,873.7
1,819.7

1,800

0.10

1,748.8
0.08
1,600

〜
〜
0

1,609.1

While interest rates for deposit accounts remain at
an all-time low, deposits increased steadily. Thebalance of deposits from individuals at the end of thisperiod was 53.9 billion yen up on the figure at thesame time last year to 1,873.7 billion yen. The total
deposit balance at the end of the period was up 29.6
billion yen to 2,702.9 billion yen this year.

0.07
0.00

01/3
Deposits (

02/3

03/3

04/3

Deposits from individuals)

Yield on domestic deposits

Interest Margin between Loans and Deposits & Net Interest Margin

The interest margin between loans and deposits is
calculated by subtracting the yield on deposits andthe expense ratio from the yield on outstandingloans. The net interest margin indicates thedifference between the yield on total managed funds
and total procured funds. Due to our promotion ofloans to the retail sector where there is a highinterest margin, especially on consumer loans, theinterest margin between loans and deposits(domestic) saw a year-on-year increase of 0.11% thisperiod to 1.77%.

(%)

2.00

1.66

1.77

1.52
1.50

1.41

1.59

1.64

1.43
1.00

1.08

0.78

0.85

0.55
0.50

0.33

0.00

FY00

FY01

FY02

FY03

Interest margin between loans and deposits
Interest margin between loans and deposits (Domestic)
Net interest margin

Owned Capital & Capital Adequacy Ratio (Domestic Standard)(March 31)(Billions of yen)

150

(%)

148.0
137.4
123.6

10.00

124.1

9.60

9.46

100

9.00

8.50

8.99

8.85

8.32

50

7.70

8.00

7.89

0

7.00

01/3

02/3

03/3

04/3

Capital adequacy ratio = [Owned Capital(Basic items + Supplementary items)/Risk assets] X 100
Tier I capital adequacy ratio = [Owned Capital(Basic items: Tier 1)/Risk assets] X 100
Owned capital
Capital adequacy ratio
Tier 1 capital adequacy ratio

4

Interest Margin between Loans andDeposits & Net Interest Margin

Owned Capital & Capital Adequacy Ratio(Domestic Standard)
The Bank’s owned capital comprises the Tier I
capital (including its capital stock, surpluses, andreserves) and Tier II capital (including the generalreserve for possible loan losses). With an increase ininternal reserves, the Bank’s capital adequacy ratio at
the end of this period increased 0.96% over theprevious period to 9.46%. The Tier I capital adequacy
ratio was up 0.96% year - on - year to 8.85%. Only the
maximum amount for the reserve for possible loan
losses is recorded as a Tier II item in our statements,
with qualifying capital and gains on the revaluationof land not recorded.

Status of Tier I and Deferred Tax Assets

Status of Tier I and Deferred Tax Assets(March 31)(Billions of yen)

150

(%)

46.8

138.5

50.00

43.2
115.2

114.5

120

128.6
40.00

29.1

27.7
90

30.00

53.6

60

20.00

49.8
37.4

38.4
30

10.00

0

The ratio of deferred tax assets to Tier I items at theend of March 31,2004, saw a 14.11% improvement to29.12% from last year, due to an increase in Tier I
items and a reduction in deferred tax assets.
A figure is recorded for deferred tax assets that
represents anticipated future returns on taxes already
paid.

0.00

01/3

02/3

03/3

04/3

Tier I
Deferred tax assets
Deferred tax assets/Tier I

Status of Non-Performing Loans
Balance and Ratio of Loans Disclosed under the Financial Rehabilitation Law(March 31)(Billions of yen)(%)

Total189.9

200

9.37

10

Total174.9
8.52

27.5
23.6

150

Total142.7
6.82

Total98.8

91.1

72.6

26.8

4.99

100

5

61.6

29.0
71.3

50

78.5
54.2

58.7
11.0

0

01/3

0

02/3

03/3

04/3

Ratio of loans disclosed under the Financial Rehabilitation Law = Balance of loans disclosed/Total extended credit
Substandard claims
Doubtful claims
Bankrupt and substantially bankrupt claims
Ratio of loans disclosed under the Financial Rehabilitation Law

Balance and Ratio of Loans Disclosed under
the Financial Rehabilitation Law
Compared to the same time last year, the nonconsolidated balance of loans disclosed inaccordance with the disclosure standards provided
for under the Financial Rehabilitation Law was down
32.2 billion yen at the end of this year to 142.7
billion yen. Of this total, Bankrupt and substantiallybankrupt claims accounted for 26.8 billion yen,
Doubtful claims accounted for 61.6 billion yen, andSubstandard claims amounted to 54.2 billon yen of
the total. Also, the ratio of problem loans which need
to be disclosed to total extended credit was down
1.70% at the end of this year to 6.82%.

Actual Credit Cost(%)

(Billions of yen)

50

2.50

2.00
2.00

40

39.0
30

1.50

20

1.00

0.52

0.53

9.6

10.6

10

0.66
13.4

0

0.50

0.00

FY00

FY01

FY02

FY03

Actual credit cost = transfer to general reserve + amount for non - performing loan disposal - collection of claims written off
Ratio of actual credit cost to average loan balance = actual credit cost divided by average loan balance

Actual Credit Cost
Actual credit cost for fiscal 2003 increased 2.8 billion
yen over the previous term, to stand at 13.4 billion
yen, as a result of accelerated non-performing loan
disposal. The ratio of actual credit cost to averageloan balance rose 0.13 percentage points to 0.66%
for fiscal 2003.

Actual credit cost
Ratio of actual credit cost to average loan balance5

Status of Non-Performing Loans(As of March 31, 2004)

Disclosure of Problem Assets(Billions of yen)Classification under Self-Assessment
Target: Total balance of extended credit

Legally bankrupt borrowers

Problem Assets Based on the Financial Rehabilitation Law
Target: Total balance of extended credit, except substandard
claims(only loans are counted in.)

Borrowers requiring caution

Potentially bankrupt borrowers

26.8

61.6

Target: Loans

Loans to bankrupt borrowers

4.1

Loans past due

83.5

Past due for 3 months or longer

1.3

Restructhred loans

52.8

Total

141.9

100%

61.6

35.6

16.7

84.94%

Substandard Claims

54.2

16.9

12.4

54.18%

Sub-total

142.7

Normal borrowers

1,777.9

Normal assets

1,947.9

Total

2,090.6

Total

2,090.6

Total balance of extended credit: Loans, Acceptance and Guarantees, Foreign exchange, Securities loaned, Suspense payments on loans, Accrued loan interests.

Classifications of Borrowers under Self-Assessment
Legally bankrupt borrowers:

Borrowers who have been legally or formally declared bankrupt.

Substantially bankrupt borrowers:

Borrowers who have not been legally or formally declared bankrupt, but
who are suffering from serious management difficulties with no prospectof revitalization, and are therefore substantially bankrupt.

Potentially bankrupt borrowers:

Borrowers who are not bankrupt, but who are suffering frommanagement difficulties, who have not made progress with business
improvement plans, and who are found to have a rather high risk ofbankruptcy in the future.

Borrowers requiring caution:

Borrowers with problematic lending conditions such as interest waivers
and the like, borrowers who are having problems fulfilling their
obligations and who are already in arrears for repayments of principal orinterest, borrowers facing poor or unstable business conditions, andborrowers with a problematic financial status are those that require
future caution.

Borrowers under supervision:

Those borrowers - within the category of borrowers requiring caution who are three or more months in arrears or have had loans restructured(Borrowers whose loans in part or in full constitute loans requiringsupervision under the Financial Rehabilitation Law.)

Other borrowers requiring caution: Borrowers requiring caution other than those classified as substandard.

6

4.1

Doubtful Claims

146.5

Normal borrowers:

22.7

Risk-Managed Loans

22.3

Borrowers under supervision 77.6

Other borrowers
requiring caution

Covered byreserves Coverage ratio

4.5
Bankrupt and Substantially
Bankrupt Claims

Substantially bankrupt borrowers

Covered by collateraland guarantees

Borrowers whose business results are favorable and who are found not
to have any particular problems in terms of their financial status.

75.3

33.2

76.09%

Loans disclosed in accordance with the Financial
Rehabilitation Law ... 142.7 billion yen

Risk-managed loans to total loans ...141.9 billion yen

6.82％

76.09％

6.84％

76.19％

Ratio to total balance ofextended credit

Coverage ratio

Ratio of risk-managedloans to total loans

Coverage ratio

Overview of write-offs and reserves under self-assessment
Legally bankrupt borrowers andsubstantially bankrupt borrowers:

The amount remaining after the deduction of the amount of collateralconsidered to be disposable and the amount recoverable underguarantees from the loan balance is either written off or is recorded as areserve for bad debt.

Potentially bankrupt borrowers:

A portion of the reserve as deemed necessary is provided based on theamount remaining after deduction of the amount of collateral considered
to be disposable and the amount recoverable under guarantees after
giving full consideration to the percentage of actual defaults over a fixed
period in the past.

Borrowers requiring caution(Borrowers under supervision andother borrowers requiring caution):

Based on the predicted loss ratio where any necessary adjustments for
future expectations have been incorporated into an appropriate loan loss
ratio calculated for the average remaining period, the anticipated loss
over the next three years in the case of substandard borrowers, and overthe next one year in the case of other borrowers, are recorded as a
general reserve for possible loan losses.

Normal borrowers:

Based on the predicted loss ratio where any necessary adjustments for
future expectations have been incorporated into an appropriate loan loss
ratio calculated for the average remaining period, the anticipated loss
over the next one year is recorded as a general reserve for possible loan
losses.

Topics●Jumbo Lottery-Linked Term Deposits
yield our third millionaire!
One of our many customers
who hold Jumbo LotteryLinked Term Deposits
through our net branches“Dream Direct Branch” and“So-net Branch” has won asecond-division prize worth
100 million yen (worthroughly $1 million) in a
jackpot draw (“Dream Jumbo
Lottery” Draw No. 457,
drawn on June 17, 2003).
Another customer had previously won 300 million
yen (a first-division prize worth 200 million and two
adjacent-number prizes) in the Dream Jumbo Lottery
Draw No. 440 held during 2002, and yet anothercustomer won the second-division prize of 100
million yen in the “Year-End Jumbo Lottery” Draw
No. 449. Thus, this is the third customer of ours who
has become a millionaire. To be eligible to take part,customers need to hold a three-year variable interest
term deposit, whereby Jumbo Lottery entries are sent
to them automatically, depending on their deposit
balance.

●Another customer wins millions in“LOTO 6” through the Suruga ATM
Lottery Service.
Another one of our customers won thefirst division prize valued at 103,964,400
yen in “LOTO 6” though Suruga’s ATMbased number-selection type lottery.
(“LOTO 6” Draw No. 137 drawn on May 29, 2003)
Customers can use the Suruga ATM Lottery Service toeasily purchase “LOTO 6,” “MiniLOTO,” and“Numbers” lottery tickets at ATMs. Then if they win,
their winnings are directly deposited into their bankaccounts so that they don’t have to worry about
checking their numbers or missing out on theirwinnings.
*Lottery tickets are not available from some models of ATM in some locations.

●Now customers can use Internet
banking to make contributions to“Make-A-Wish of Japan.”
From August 25, 2003,
Suruga Bank launched an
Internet banking facility
through which people
can make contributions
to “Make-A-Wish ofJapan.” “Make-A-Wish ofJapan” is a non-profit,
volunteer organizationthat was established withthe hope of being able to make the dreams ofseriously ill children and youngsters (aged 3 to 18)
come true and to give them the will to live and thecourage to fight their illnesses.
As part of Suruga Bank’s ongoing contributions tosociety, we have introduced this feature so that
customers who use our Internet banking services canmake contributions from their nominated account tothis worthy organization free of all handling andtransaction fees.

●Opening of the refurbished ShizuokaMinami Branch
On September 8, 2003
our Shizuoka Station
Southern Exit Branch
moved into their new
premises and therefurbished ShizuokaMinami Branch was
opened. The Shizuoka Housing Loan Center was
simultaneously opened at the new branch, and here
customers can access advice on mortgage loans.

●Business revitalization fund set up forthe age-old Ochiai-Rou Inn
Together with the Development Bank of Japan, on
September 29, 2003 Suruga Bank established the
Ochiai-Rou Business Revitalization Fund. The fund7

Topics

was established with the aim of providing assistancefor the rebuilding of the age-old Ochiai-Rou ryokan(traditional-style inn), one of the oldest inns in the
Amagi-Yugashima Onsen area.
The Ochiai-Rou inn
lodged a petition under
the Civil Revitalization
Law on May 29, 2002,
and now there is abusiness revitalization
scheme in place underwhich operations will be transferred to Orion K.K.
We believe that it is very important to assist in therebuilding of this business given that the history andtradition of this inn is deeply tied to this region, andthe significant economic impact its closure would
have on the local economy, due to a likely drop in
the number of sightseers.

●Finance system for “Proton Therapy”– A cutting-edge, advanced medical
treatment
Introduction of the Shizuoka Cancer
Center Advanced Medical Treatment
Plan
Following in the footsteps of
the Fuji Pharma Valley Project,a prefectural government
project which involves theconcentration of advanced
medical and health industries
Shizuoka Prefecture Shizuoka Cancer Centeraround the base of Mount Fuji, on October 15, 2003,
Suruga Bank introduced a new finance product – thefirst of its type in Japan – which offers unsecured
finance for advanced medical treatments for which
patients are liable for the cost.
This credit service, dubbed the Shizuoka Cancer
Center Advanced Medical Treatment Plan, will makefinance available to patients who have been
diagnosed with cancer and who require advanced
medical treatment such as proton therapy (atreatment that targets only cancer cells). This financescheme aims to alleviate the financial concerns of

8patients so that they can concentrate on getting thevery latest cancer therapy, and involves speed
screening and the provision of unsecured finance inconjunction with public medical institutions.

●Launch of our Web BusinessConcierge Service
On December 1, 2003,
Suruga Bank launched
the all-new Web
Business Concierge
Service, which isdesigned to provide
Internet-based businessassistance to enterprises.
This service is available for business operators who
have signed up to use our Business Banking online
banking service, and gives them timely access toquality information including the latest industry
news, management and IT-related information,
finance-related information, information on theregional economy, international trade informationand more. Also with “Business Matching” – anotherfeature of this service – customers can register
information under “Company PR,” “New productinformation,” and “Search for sales outlets” sections,and in doing so are able to send out information tomembers of other regional banking sites around
Japan. In this way, we are assisting our customers bymatching them up with optimally suited business
partners.

●First bank to be awarded the Porter
Prize
On December 4, 2003, Suruga Bank became thefirst Japanese bank to be awarded the Porter Prize,
which was founded for the purpose of raising thecompetitiveness of Japanese corporations and looks
at the unique strategies of companies. The Porter
Prize was named after Professor Michael E. Porter, aHarvard University Professor and the leadinginternational expert in competition strategy. It wasestablished, and is now
run, by Hitotsubashi
University’s Graduate
School of International
Corporate Strategy.
In winning the award,
Suruga Bank wasrecognized for the factthat we maintain a higher
profitability than the
average level for Japanesebanks; that we have been continuously developing
new unique products and services unavailable atother banks; that we successfully provide uniquecustomer values; and that we have constantly
focused on the retail consumer market.

difficult to falsify. This
form of authentication
is extremely accurate(99.9%). This productwas developed in
response to persistentcalls from customers wanting better personalauthentication systems for account holders as
unauthorized withdrawals through the use of fakeseals or identity fraud become increasingly common.
This product offers the ultimate in security, andwhile it may put constraints on convenience, it
ensures that absolutely no person other than theaccount-holder has access to funds.

●Announcement of a new service to beoffered in partnership with ANA●Launch of Pay-Easy - Multi-Payment
Network Service
From January 19, 2004, Suruga
Bank introduced Pay-Easy, amulti-payment network service
that enables the payment oftaxes and other charges via Internet banking, mobilebanking, and business banking.
This very convenient service allows users to pay
their taxes and other charges at any time of the day
or night, even outside banking business hours, overthe Internet using their PC or mobile phone.

●Announcement of plans to introduce
accounts that make exclusive use ofpalm vein pattern authentication
technology
On January 13, 2004, Suruga Bank made theannouncement that we hope to commence sales
from June 2004 of our new Bio-Security Account,which is an ordinary savings account that makes useof palm vein pattern authentication technology. Thisis the first such finance product in the world.
The vein pattern on the palm of your hand is a formof biometric information and is therefore very

On March 16, 2004,
All Nippon Airways Co.,
Ltd. (ANA) together
with Suruga Bank
announced that the twocompanies had enteredinto a partnershipagreement aimed at enhancing the added value
provided to the customers of both companies. Under
this agreement, an Internet-based “Suruga Bank ANA
Branch” will be established, and an ANA Mileage
Club Financial Pass card will be issued, the first suchcard in the world. The card integrates the following
three features into a single card – 1. a bank cash cardfeature, 2. an ANA Mileage Club feature, and 3. theprepaid “electronic money” feature, “Edy” (no card
issuing fee).
In addition to being able to covert mileage (accruedby using the ANA Group or partner company
services) into products, those customers that open
an account with the ANA branch will also haveaccess to Japan’s first mileage-linked mortgage loan
product, offered exclusively through the ANA
branch, and to special mileage gift-linked term
deposits. This service will also allow users to accrue
even more mileage points.

9

Net Branches
An all-new mileage + banking service that lets users accrue mileage points through bank transactions.

ANA Branch
http://www.surugabank.co.jp/ana/(24 hours a day, 365 days a year)
Toll free (from within Japan only): 0120-029-589(From overseas: 055-98-02988)
Telephone reception hours 9:30 am - 5:00 pm Monday - Friday(excluding holidays)
Providing access to leading Internet-based financial services

Softbank Branch
http://www.surugabank.co.jp/softbank/(24 hours a day, 365 days a year)
Toll free (from within Japan only): 0120-708-807
Telephone reception hours 9:00 am - 7:00 pm Monday - Friday(excluding holidays)

9:00 am - 5:00 pm Saturday

Branch exclusively for system engineers (SEs)

SE Bank Branch
http://www.surugabank.co.jp/sebank/(24 hours a day, 365 days a year)
Toll free (from within Japan only): 0120-727-828
Telephone reception hours 9:00 am - 7:00 pm Monday - Friday(excluding holidays)

9:00 am - 5:00 pm Saturday

A banking site tailored to women

So-net Branch
http://www.surugabank.co.jp/so-net/(24 hours a day, 365 days a year)
Toll free (from within Japan only): 0120-50-2189
Telephone reception hours 9:00 am - 7:00 pm Monday - Friday(excluding holidays)

9:00 am - 5:00 pm Saturday

Japan’s first Direct branchDream Direct Branch
http://www.surugabank.co.jp/dream/(24 hours a day, 365 days a year)
Toll free (from within Japan only): 0120-86-1689
Telephone reception hours 9:00 am - 7:00 pm Monday - Friday(excluding holidays)

9:00 am - 5:00 pm Saturday

Direct banking specializing in loans

Direct One Branch
http://www.surugabank.co.jp/directone/(24 hours a day, 365 days a year)
Toll free (from within Japan only): 0120-60-1616
Telephone reception hours 10:00 am - 8:00 pm Monday - Friday(excluding holidays)

10:00 am - 5:00 pm Saturday

Providing access to high value-added business loan services

e-Business Direct Branch
http://www.surugabank.co.jp/ebusinessdirect/(24 hours a day, 365 days a year)
Toll free (from within Japan only): 0120-185-285
Telephone reception hours 10:00 am - 8:00 pm Monday - Friday(excluding holidays)
Catering to B-to-B and B-to-C needs

NetBank Branch
http://www.surugabank.co.jp/sofmap/(24 hours a day, 365 days a year)
Toll free (from within Japan only): 0120-89-5189
Telephone reception hours 9:00 am - 5:00 pm Monday - Friday(excluding holidays)
http://www.surugabank.co.jp/axa-direct/(24 hours a day, 365 days a year)
Toll free (from within Japan only): 0120-788-017
Telephone reception hours 9:00 am - 7:00 pm Monday - Friday(excluding holidays)

10

9:00 am - 5:00 pm SaturdayFinancial Section
Consolidated Balance Sheets

12

Consolidated Statements of Income

13

Consolidated Statements of Shareholders’ Equity

14

Consolidated Statements of Cash Flows

15

Non-Consolidated Balance Sheets

16

Non-Consolidated Statements of Operations

17

11

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

As of March 31,

2004

2003

Change from
2003

2004

ASSETS:Cash and Due from Banks
Call Loans and Bills Purchased
Commercial Paper and Other Debt Purchased
Trading Account Securities
Money Held in Trust
Investment Securities
Loans and Bills Discounted (Note 3)
Foreign Exchanges
Other Assets
Premises and Equipment (Note 4)
Deferred Tax Assets (Note 10)
Customers’ Liabilities for Acceptances and Guarantees
Reserve for Possible Loan Losses

66,577
84,247141,006
190,274
9
12
43
489
1,028
990
513,662
430,074
2,066,868 2,026,918
677
759
29,00523,77051,53952,42338,15350,32010,036
11,370(41,918)(44,731)(17,670)(49,268)
(3)
(446)
38
83,58839,950
(82)
5,235
(884)
(12,167)(1,334)
2,813

629,927
1,334,153
90
409
9,728
4,860,090
19,555,948
6,405
274,439
487,652
360,997
94,961(396,618)

Total Assets

2,876,690

2,826,918

49,772

27,218,188

LIABILITIES, MINORITY INTERESTS AND STOCKHOLDERS’ EQUITY:
Liabilities
Deposits
2,702,336
Negotiable Certificates of Deposit
6,000
Borrowed Money
9,166
Foreign Exchanges
15
Other Liabilities
18,893
Reserve for Employees’ Bonuses
579
Reserve for Employees’ Retirement Benefits
331
Reserve for Possible Losses on Sales of Loans—
Reserve under Special Laws
0
Acceptance and Guarantees
10,036

2,672,629—
10,858
7
16,622
619
227
220
0
11,37029,7076,000(1,692)
8
2,271
(40)
104
(220)
—
(1,334)25,568,520
56,76986,727
148
178,766
5,481
3,138
—
0
94,961

Total Liabilities

2,747,360

2,712,554

34,80625,994,513

238

387

(149)

2,254

Stockholders’ Equity
Common Stock
Capital Surplus
Retained Earnings
Net Unrealized Gains (Losses) on Securities, Net of Taxes
Treasury Stock

30,043
18,586
83,735
1,354(4,627)30,043
18,58575,867(6,134)(4,385)

—
1
7,868
7,488
(242)

284,258
175,854792,271
12,818(43,782)

Total Stockholders’ Equity

129,091

113,976

15,115

1,221,420

2,876,690

2,826,918

49,772

27,218,188

Minority Interests

Total Liabilities, Minority Interests and Stockholders’ Equity
See notes to consolidated financial statements.

12

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

Change from2003

For the Year Ended March 31,

2004

2003

Ordinary Income
Interest Income
Interest on Loans and Discounts
Interest and Dividends on Securities
Interest on Call Loans and Bills Purchased
Interest on Receivables Under Resell Agreements
Interest on Due from Banks
Other Interest income
Fees and Commissions
Other Operating Income
Other Ordinary Income (Note 9)89,546
66,32564,457
1,776
35
1
0
53
10,325
11,6881,207

84,346
65,66363,354
2,236
19
1
1
49
9,512
7,759
1,411

5,200
662
1,103
(460)
16
(0)
(1)
4
813
3,929
(204)

847,254627,543
609,877
16,807335
12
4505
97,697
110,587
11,425

Ordinary Expenses
Interest Expenses
Interest on Deposits
Interest on Negotiable Certificates Deposit
Interest on Call Money and Bills Sold
Interest on Borrowed Money
Other Interest expenses
Fees and Commissions
Other Operating Expenses
General and Administrative Expenses
Other Expenses (Note 9)
Provision of Reserve for Possible Loan Losses
Losses on Write-offs of Loans
Others

71,580
4,362
1,953
5
0
190
2,213
6,098
5,687
37,54817,883
1,533
13,5492,801

74,609
6,592
2,364
—
9
257
3,961
5,513
8,890
38,012
15,600—12,9682,632(3,029)(2,230)
(411)
5
(9)
(67)
(1,748)585(3,203)
(464)
2,283
1,533
581
169

677,266
41,27518,48349
0
1,797
20,94457,70053,813355,266
169,211
14,506
128,196
26,508

Ordinary Profit

17,965

9,737

8,228

169,987

Extraordinary Income (Note 9)
Gain on Disposal of Premises and Equipment
Collection of Claims Written off
Other Extraordinary Gains
Extraordinary Expenses (Note 9)
Losses on Disposal of Premises and Equipment
Other Extraordinary Losses

1,251
244
686
321
2,227
1,386
840

7,122
52
294
6,775
1,216
343
873

(5,871)
192
392(6,454)
1,011
1,043
(33)

11,845
2,309
6,498
3,038
21,077
13,122
7,955

Income before Income Taxes
Income Taxes (Note 10)
Current
Deferred
Minority Interests in Net Income of Consolidated Subsidiaries

16,99015,643

1,347

160,755

523
7,134
137

330
7,119
271

193
15
(134)

4,954
67,5031,300

Net Income

9,194

7,921

1,273

86,9962004

See notes to consolidated financial statements.

13

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

Change from2003

For the Year Ended March 31,

2004

2003

Capital Surplus
Balance at Beginning of Year
Increase in Capital Surplus
Gain on Disposal of Treasury stock
Balance at End of Period

18,5850
018,586

18,585——
18,585—001

175,852
2
2
175,854

Retained Earnings
Balance at Beginning of Year
Increase in Retained Earnings
Net Income
Decrease in Retained Earnings
Cash Dividends Paid
Bonuses to Directors and Corporate Auditors

75,867
9,194
9,194
1,326
1,296
30

69,245
7,921
7,921
1,299
1,299
—

6,622
1,273
1,273
27
(3)
30

717,829
86,99686,996
12,554
12,270283

Balance at End of Period

83,73575,867

7,868

792,271

See notes to consolidated financial statements.

14

2004

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

For the Year Ended March 31,
Cash Flows from Operating Activities
Income before Taxes and Minority Interests
Depreciation and Amortization
Increase in Reserve for Possible Loan Losses
Increase in Reserve for Possible Losses on Sales of Loans
Increase in Reserve for Employees’ Bonuses
Increase in Reserve for Employees’ Retirement Benefits
Gain on Contribution of Securities to Employee Retirement Benefit Trusts
Gain on Return of Substitutional Portion of Welfare Pension Fund Plan
Bonuses to Directors and Corporate Auditors
Interest and Dividend Income
Interest Expenses
Loss (Gain) on Investment Securities, Net
Loss (Gain) on Money Trusts, Net
Loss (Gain) on Sales of Premises and Equipment
Changes in Operating Assets and Liabilities:
Trading Securities
Loans
Deposits
Negotiable Certificates of Deposit
Borrowings Excluding Subordinated Debt
Due from Banks Other Than BOJ
Call Loans
Call Money
Foreign Exchange Assets
Foreign Exchange Liabilities
Interest and Dividend Received
Interest Paid
Other, Net
Subtotal
Income Taxes Paid
Net Cash Provided by (Used in) Operating Activities

Change from
2003

2004

2003

2004

16,9908,084(2,813)
(220)
(40)
1,595
—
—
(30)
(66,325)
4,362(2,355)(54)
1,142

15,6438,366(13,949)
(42)
(107)
1,062
(727)
(3,503)—(65,663)
6,592
1,895
11
290

1,347
(282)
11,136
(178)
67
533
727
3,503
(30)
(662)
(2,230)(4,250)(65)852

160,755
76,494(26,617)(2,081)(380)
15,094——(283)(627,543)
41,275(22,284)(514)
10,813445(39,950)
29,7076,000(1,692)(2,467)49,270—82
766,118(4,611)(4,044)(159)(25,836)
8,560—(3,400)(3,093)(29,400)
(666)
(202)
(8)
67,437(7,141)(2,118)604(14,114)
21,147
6,000
1,708
626
78,670666
284
15(1,319)2,530(1,926)

4,218(377,994)
281,083
56,769(16,010)(23,347)
466,181—778
72625,586(43,629)(38,265)

59,204(46,159)

105,363

560,169

(104)

(681)

577

(990)

59,099(46,841)

105,940559,178

Cash Flows from Investing Activities
Purchase of Securities
Proceeds from Sales of Securities
Proceeds from Redemption of Securities
Increase in Money Trusts
Decrease in Money Trusts
Purchase of Premises and Equipment
Proceeds from Sales of Premises and Equipment(852,488)
32,577
750,539—
16(9,243)899(738,155)
210,215575,570(4)
1,004(6,174)
280(114,333)(177,638)
174,969
4(988)(3,069)619(8,065,936)
308,239
7,101,330—
156(87,458)
8,514

Net Cash Provided by (Used in) Investing Activities(77,698)

42,737(120,435)(735,154)

Cash Flows from Financing Activities
Dividends Paid
Purchase of Treasury Stock
Proceeds from Sales of Treasury Stock(1,296)(229)
2(1,299)
(384)
—

3
155
2

(12,270)(2,172)21

Net Cash Used in Financing Activities(1,524)(1,683)

159(14,421)

Effect of Exchange Rate Changes on Cash and Cash Equivalents
Net Decrease in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Year

(15)
(20,138)
76,584(15)(5,802)82,3870(14,336)(5,803)(142)(190,539)
724,613

Cash and Cash Equivalents at End of Period

56,446

76,584(20,138)

534,074

See notes to consolidated financial statements.
15

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

1. Summary of Significant Accounting Policies(f) Derivatives(a) Basis of preparation

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

The accompanying consolidated financial statements of Suruga Bank
Ltd. (the “Bank”) and consolidated subsidiaries are prepared on thebasis of accounting principles generally accepted in Japan, which are
different in certain respects as to the application and disclosure
requirements of International Financial Reporting Standards, and arecompiled from the consolidated financial statements prepared by theCompany as required by the Securities and Exchange Law of Japan.
For the convenience of readers outside Japan, certain items presented in the original statements have been reclassified andrearranged.
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 affiliates, 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.
All significant intercompany accounts and transactions have been
eliminated in consolidation.

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

(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.
Unrealized gain or loss on available-for-sale securities 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.

16(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.
In the year ended March 31, 2003, the transitional treatment permitted by “Accounting and Auditing Concerning Accounting for Foreign
Currency Transactions in Banking Industry” (JICPA Industry Audit
Committee Report No.25) was applied to foreign currency transactions.
However, effective the year ended March 31, 2004, in accordancewith the principle provisions of JICPA Industry Audit Committee
Report No.25, hedge accounting is applied to currency-swap transactions, exchange swap transactions and similar transactions intended tohedge risks of borrowing and lending in different currencies by swapping the borrowing currency for the lending currency. A summary of
the hedge accounting applied in these transactions is described in (m).
As a result of the application of hedge accounting, currency-swap
transactions and exchange swap transactions, which were accounted
for on an accrual basis, are valued at fair value and the net amount of
the credit balance and the debt balance are recorded on the balance
sheet in Other Assets and Other Liabilities which resulted in an
increase of ¥3,041 million respectively, compared with the corresponding amounts under the previous methods.
In the year ended March 31, 2003, the net fair value of forward
foreign exchange transactions other than those for the above hedging
purpose was recorded in Other Assets or Other Liabilities on the balance sheet. However, effective this consolidated fiscal year, in accordance with JICPA Industry Audit Committee Report No.25, the grossof fair value amounts are presented in Other Assets and Other
Liabilities as Derivatives other than for Trading on the balance sheet.
As a result, Other Assets, and Other Liabilities increased by ¥264 million, respectively, compared with the corresponding amounts under
the previous methods.

(i) Reserve for possible loan losses(m) Hedge accounting

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 theamount of their collateral considered to be disposable and of the amountrecoverable under guarantees.

The Bank applies the deferred method as a hedge accounting for theinterest rate risk accompanying various financial assets and liabilities.
In the previous consolidated fiscal years, as permitted by the transitional treatment in “Accounting and Auditing Treatment of
Accounting Standards for Financial Instruments in Banking Industry”(JICPA Industry Audit Committee Report No.24), hedge accounting
was applied on a macro-hedge basis under which overall interest raterisks inherent in loans, deposits and other instruments were considered
controlled on a macro basis using derivatives.

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 charged off. For the years ended March 31,
2004 and 2003, the amounts charged off were ¥16,885 million(US$159,762 thousand) and ¥12,620 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.

(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.

Effective the year ended March 31, 2004, the general provisions of
JICPA Industry Audit Committee Report No.24 are applied. Under thegeneral provisions, the effectiveness of a fair value hedge is assessed
for each of (i) identified group of hedge deposits, loans and similar
instruments and (ii) corresponding group of hedging instruments suchas interest rate swaps in the same maturity bucket. Also, under thegeneral provisions, the effectiveness of a cash flow hedge is assessed
based on the correlation between a base interest rate index of thehedged cash flow and that of the hedging instrument.
Deferred hedge gains/losses recognized in previous years underthe macro-hedge method are amortized as interest income or interest
expenses over the average remaining maturity (5 years) of the respective hedging instruments.
The unamortized amounts of Gross Deferred Hedge Losses andGains under the macro-hedge method at the end of the year ended
March 31, 2004 were ¥578 million and ¥134 million, respectively.

(n) 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.

(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.

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 ¥105.69 = U.S.$1.00, theexchange rate prevailing on March 31, 2004. 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.

17

3. Loans and Bills Discounted

5. Assets Pledged(1) Loans and bills discounted at March 31, 2004 and 2003 included
the following:

Assets pledged as collateral at March 31, 2004 and 2003 were as
follows:

Millions of yen
2004
2003

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

Thousands of
U.S. dollars
2004

Loans to companies underbankruptcy procedures¥

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

84,863 91,550
802,942
1,453
1,048
13,74752,855 77,628
500,094¥ 143,612 ¥ 175,957 $1,358,804

4,441 ¥

5,731 $

42,019Loans 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 paymentof principal 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 theloans. 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). The Bank has rights to sell or pledge certain commercial bills and foreign exchange bills discounted. The principal amount of these bills amounted to ¥6,819 million (US$64,520
thousand).

4. Accumulated Depreciation
Accumulated depreciation on premises and equipment at March 31,
2004 and 2003 totaled ¥53,173 million (US$503,106 thousand) and¥54,801 million, respectively.

18...............................................

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

Millions of yen
2004
2003

Thousands of
U.S. dollars
2004¥ 8,117¥8,090$ 76,808

1,788
11,967

1,788
8,959

16,918113,232

Liabilities related to the above pledged assets were as follows:...............................................

Borrowed money

Millions of yen
2004
2003

¥8,406¥8,981Thousands of
U.S. dollars
2004$79,536

In addition, investment securities totaling ¥142,556 million(US$1,348,818 thousand) and ¥141,326 million at March 31, 2004 and2003, respectively, were pledged as collateral for the settlement of
exchange, treasury transactions or in lieu of margin money.

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 ¥887,310 million(US$8,395,408 thousand) and ¥870,209 million at March 31, 2004
and 2003, 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.

7. Employees’ Retirement Benefits

9. Other Income and Expenses

The funded status and amounts recognized in the consolidatedbalance sheets as of March 31, 2004 and 2003 were as follows:

Other income and expenses for the years ended March 31, 2004 and2003 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 plan assets
Net liability recognizedPrepaid pension costAccrued pension and severance costs

Millions of yen
2004
2003

Thousands of
U.S. dollars
2004¥(18,389) ¥(17,511) $(173,996)
16,03912,909151,755(2,350)(4,602)(22,240)
839
1,679
7,943
3,365
5,688
31,838(684)—(6,474)
1,169
2,764
11,066
1,501
2,992
14,205¥ (331) ¥ (227) $ (3,138)

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

Net income
Net assets
Diluted net income

2004

2003

¥ 35.28497.1535.28¥ 30.31438.31—

U.S. dollars
2004$0.3334.703
0.333

Diluted net income per share is no presented for the year ended March
31, 2003, since the Bank did not have any potentially dilutive stock.

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

Millions of yen
2004
2003

Other income:Gain on sales of stocks and othersecurities¥ 708
Gain on disposition of premises andequipment
244
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
686
Reversal for possible loan losses—
Gain on change in interest in subsidiaries
282
Other
537
Total
¥ 2,459
Other expenses:
Provision for possible loan losses
Loss on devaluation of stocks andother securities
Write-offs of loans
Loss on disposition of premises andequipment
Loss on sales of stocks and othersecurities
Cost of amortization ofdifferences resulting fromchanges in accounting standards
Other
Total

¥ 312

Thousands of
U.S. dollars
2004

$

6,707

52

2,309

727

—

464

—

3,503
294
2,071
—
1,107
¥ 8,534

—
6,498
—
2,671
5,085
$ 23,271¥ 1,533¥—$ 14,506

115
13,549255
12,9681,090
128,196

1,386

343

13,122

0

0

0

839
2,687
¥20,111873
2,376¥16,817

7,943
25,430$190,289

19

10. Income Taxes

11. Leases(1) Major components of deferred tax assets and liabilities at March
31, 2004 and 2003 are summarized as follows:

The pro forma information such as acquisition costs, accumulated
depreciation and obligations on property leased under finance leases
currently accounted for as operating leases is summarized as follows:...............................................

Deferred tax assets:
Reserve for possible loan losses
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 Unrealized Gains on Securities
Net deferred tax assets

Thousands of
U.S. dollars
2004

Millions of yen
2004
2003

Millions of yen
2004
2003

¥34,421557¥35,534
608$325,684
5,278

4,504
565
—
1,190
1,349
42,588
(827)

3,699
2,043
4,122
6,056
1,366
53,431(413)

42,621
5,349—
11,261
12,764402,959(7,826)

2,698
909¥38,153

2,698—¥50,320

25,527
8,607$360,997(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, 2004 and 2003. The difference between the statutory tax rate andthe effective tax rates for the year ended March 31, 2004 was asfollows:
March 31, 2004

Statutory tax rate

41.6%

Adjustments:
Non-deductible expenses
Non-taxable dividend income
Inhabitants’ per capital taxes
Other
Effective tax rate

0.2
(0.8)
0.4
3.7
45.1%

20

Equipment:
Acquisition costs
Less accumulated depreciation
Leased property, net

Thousands of
U.S. dollars
2004¥34,025
23,108¥10,917¥35,581 $321,940
24,125 218,642¥11,455 $103,298

Minimum lease payment under finance leases:
Due within one year
¥ 4,492
Due after one year
8,217
Total
¥12,710¥ 4,787 $ 42,510
8,839
77,752¥13,627 $120,262¥ 4,943
4,052¥ 5,232 $ 46,773
4,215
38,346

Lease revenue
Depreciation expense

12. Segment Information
Information regarding the business segments and total income of the Bank and its consolidated subsidiaries for the years ended March 31, 2004
and 2003 is summarized as follows:(a) Business segment information
Millions of yen

Year ended March 31, 2004
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

Banking
operations

Other
operations

79,407328
79,736
63,797
15,938¥ 11,390
3,097
14,48813,337¥ 1,150¥¥ 2,852,343
3,207
5,229

¥ 35,508
4,877
4,014

¥2,887,852
8,084
9,243

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

Banking
operations

Other
operations

751,3253,111
754,437
603,628
150,808$107,774
29,305137,080
126,192$ 10,887$$ 26,987,828
30,34649,478$335,969
46,14737,979$27,323,797
76,49487,458

¥

¥

¥

Total

Eliminations

Consolidated

90,7983,426
94,224
77,13417,089¥—(3,426)(3,426)(3,326)¥(99)¥¥ (11,161)——¥2,876,690
8,084
9,243

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

¥

90,798—90,79873,80816,990Millions of yen

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

¥

¥

¥

¥

91,469—91,46975,826
15,643Thousands of U.S. dollars

Year ended March 31, 2004
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

859,099
32,417
891,517
729,821
161,695$—(32,417)(32,417)(31,477)
$
(940)

$

$(105,609)——$27,218,188
76,49487,458$859,099—
859,099
698,344
160,755

21

13. Market Value of Securities(a) The market value of, and the valuation difference on, available-for-sale marketable securities at March 31, 2004 and 2003 aresummarized as follows:
Millions of yen

Cost

Corresponding
amount in thebalance sheet

Valuationdifference

Gain

Loss

StocksBonds:
Government bonds
Municipal bonds
Corporate bonds
Other¥ 37,289
411,779
382,642
21,786
7,350
52,974¥ 42,486
407,588378,761
21,3697,458
54,229¥ 5,197(4,190)(3,881)
(416)
107
1,255

¥6,938
250
113
26
110
2,581

¥1,741
4,440
3,994
443
3
1,325

Total

¥502,042¥504,305¥ 2,262¥9,770¥7,507

Cost

Corresponding
amount in thebalance sheet

Valuationdifference

Gain

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, 2004

Millions of yen

March 31, 2003

March 31, 2004

Cost

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

Loss

StocksBonds:
Government bonds
Municipal bonds
Corporate bonds
Other$ 352,816
3,896,104
3,620,419
206,132
69,551
501,221$ 401,995
3,856,453
3,583,698
202,189
70,565513,103$49,178(39,650)(36,721)(3,943)
1,014
11,882$65,653
2,366
1,070
248
1,047
24,423$ 16,474
42,01737,792
4,192
33
12,541

Total$4,750,141$4,771,552$21,410$92,444$71,033(b) Available-for-sale securities sold during the years ended March 31, 2004 and 2003 were as follows:
Millions of yen
2004
2003

Proceeds from sales
Gain
Loss

22

¥32,577
1,802
164¥210,215
1,218
253

Thousands of
U.S. dollars
2004$308,239
17,0561,560

14. Repayment Schedule for Bonds
The repayment schedule for bonds classified as available-for-sale securities which have definite maturities are summarized as follows:
Due within
1 year or lessMarch 31, 2004
Bonds
Government bonds
Municipal bonds
Corporate bonds
Other
Total

Millions of yen
Due in 1 toDue in 5 to
5 years
10 years

Due after
10 years¥207,680
205,112100
2,467
11,304¥34,076
16,895
9,551
7,629
12,572¥15,916704
11,7173,495
4,618¥156,048
156,048——
23,558¥218,985¥46,649¥20,535¥179,606

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, 2004
Bonds
Government bonds
Municipal bonds
Corporate bonds
Other$1,964,997
1,940,699
952
23,346
106,961$322,420
159,860
90,37472,184
118,958$150,599
6,669
110,862
33,06843,702$1,476,468
1,476,468——
222,902

Total$2,071,959$441,378$194,301$1,699,371

15. Money Trusts
A classification of money trusts by purpose at March 31, 2004 and 2003 is summarized as follows:
Millions of yen
Amount in the
Valuationbalance sheet
difference

March 31, 2004

¥1,028

Money trusts for trading purposes¥28

Thousands of U.S. dollars
Amount in the
Valuationbalance sheet
difference$9,728$267

Millions of yen
Amount in the
Valuationbalance sheet
difference

March 31, 2003
Money trusts for trading purposes

¥990

¥(9)

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

16. Subsequent Events
Appropriations of retained earnings
At a shareholders’ meeting held on June 25, 2004, 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, 2004:
Millions of yen

Thousands of
U.S. dollars

¥ 655
30
7,400

$ 6,205
283
70,016Year-end cash dividends (¥2.5 = US$0.023 per share)
Bonuses to directors and corporate auditors
Transfer to voluntary reserve

17. Cash and Cash Equivalents
A reconciliation between cash and due from banks in the consolidated balance sheets at March 31, 2004 and 2003 and cash and cash equivalents inthe consolidated statements of cash flows for the years then ended is as follows:
Millions of yen
2004
2003

Cash and due from banks
Time deposits
Ordinary deposits
Other deposits
Cash and cash equivalents¥66,577(850)(2,073)(7,206)¥56,446¥84,247(892)(2,246)(4,524)¥76,584

Thousands of
U.S. dollars
2004$629,927(8,050)(19,622)(68,181)$534,07423

24

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

As of March 31,

2004

2003

Change from
2003

2004

ASSETS:Cash and Due from Banks
Call Loans
Bills Purchased
Commercial Paper and Other Debt Purchased
Trading Account Securities
Money Held in Trust
Investment Securities (Note 3)Loans and Bills Discounted (Note 4)
Foreign Exchanges
Other Assets
Premises and Equipment (Note 5)
Deferred Tax Assets
Customers’ Liabilities for Acceptances and Guarantees
Reserve for Possible Loan Losses

65,662
83,143
128,006
190,274
13,000
—
9
12
43
489
1,028
990
512,856
428,728
2,072,830 2,034,104
677
759
21,876
16,10039,39739,26937,45749,81910,042
11,376(40,527)(43,590)(17,481)(62,268)
13,000(3)(446)
3884,12838,726
(82)
5,776
128
(12,362)(1,334)
3,063

621,277
1,211,152
123,001
90
409
9,728
4,852,462
19,612,360
6,405
206,984
372,768
354,408
95,019(383,451)

Total Assets

2,862,361

2,811,477

50,88427,082,617

LIABILITIES AND STOCKHOLDERS’ EQUITY:
Liabilities
Deposits (Note 6)
Negotiable Certificates of Deposit
Borrowed Money
Foreign Exchanges
Other Liabilities
Reserve for Employees’ Bonuses
Reserve for Employees’ Retirement Benefits
Reserve for Possible Losses on Sales of Loans
Reserve under Special Laws
Acceptance and Guarantees

2,702,918
6,000
10
15
11,996535
192—
010,042

2,673,317
—
17
7
9,926
572
112
220
0
11,376

29,601
6,000
(7)
8
2,070
(37)
80
(220)
—
(1,334)25,574,021
56,76994
148
113,508
5,066
1,816
—
0
95,019Total Liabilities

2,731,710

2,695,549

36,161

25,846,444

30,043
18,586
18,585
083,15930,043
43,6729,443
1,357(2,494)30,043
18,585
18,585—75,70230,04338,172
7,487(6,136)(2,267)

—
1
—
0
7,457
0
5,500
1,956
7,493
(227)

284,258
175,854
175,8522
786,822284,258
413,21089,353
12,844(23,606)

130,651

115,927

14,724

1,236,173

2,862,361

2,811,477

50,88427,082,617

Stockholders’ Equity
Common Stock (Note 8)
Capital Surplus
Capital Surplus
Other Capital Surplus
Retained Earnings
Legal Reserve
Voluntary Reserves
Unappropriated Profits at End of Period
Net Unrealized Gains (Losses) on Securities, Net of Taxes
Treasury Stock
Total Stockholders’ Equity
Total Liabilities and Stockholders’ Equity
See notes to non-consolidated financial statements.

25

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

Change from2003

For the Year Ended March 31,

2004

2003

Ordinary Income
Interest Income
Interest on Loans and Discounts
Interest and Dividends on Securities
Fees and Commissions
Other Operating Income (Note 11)
Other Income

80,81464,69462,829
1,774
9,517
5,389
1,213

75,94264,566
62,239
2,254
8,877
1,069
1,429

4,872
128
590
(480)
640
4,320
(216)

764,638
612,114594,473
16,78790,04950,990
11,483

Ordinary Expenses
Interest Expenses
Interest on Deposits
Fees and Commissions
Other Operating Expenses (Note 11)
General and Administrative Expenses (Note 12)
Other Expenses

63,332
4,220
1,953
6,942
192
36,497
15,47967,326
6,404
2,364
6,239
3,340
36,784
14,558(3,994)(2,184)(411)
703(3,148)(287)
921

599,22939,93618,48365,684
1,825
345,325
146,457

Ordinary Profit

17,481

8,616

8,865

165,408

Extraordinary Income
Extraordinary Expenses

884
2,182

7,234
1,214

(6,350)968

8,371
20,651

Income before Income Taxes
Income Taxes
Current
Deferred
Net Income
Unappropriated Profits Brought Forward from Previous Year
Interim Cash Dividends

16,184

14,636

1,548

153,128

61
7,324
8,799
1,300
655

75
7,124
7,436
707
656

(14)
200
1,363
593
(1)

577
69,297
83,253
12,306
6,205

Unappropriated Profits at End of Period

9,443

7,487

1,956

89,354

See notes to non-consolidated financial statements.

26

2004

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

Balance at March 31, 2002

Millions of yen

Number ofsharesCommonstock

CapitalsurplusLegalreserve

Voluntary
reserve

Retained
Net unrealized
Treasury
earnings
gains (losses) on
stock,(deficit) securities, net of taxes at cost

264,939¥30,043¥18,586¥30,043¥58,172¥(18,634)¥(1,141)¥(1,883)(4,995)(384)(6,136)(2,267)

7,493

(227)

¥ 1,357¥(2,494)

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

18,58630,04338,172

7,487

Net income for the year
ended March 31, 2004

8,799

Cash dividends paid

(1,312)

Reversal of voluntary reserve

5,500(5,500)Bonuses to directors andcorporate auditors(30)

Net change during the year
Balance at March 31, 2004

0264,939¥30,043¥18,586¥30,043¥43,672¥ 9,443

Thousands of U.S. dollars (Note 2)

Balance at March 31, 2003

Commonstock

CapitalsurplusLegalreserve

Voluntary
reserve$284,258$175,852$284,258$361,171

Retained
Net unrealized
Treasury
earnings
gains (losses) on
stock,(deficit) securities, net of taxes at cost
$70,842$(58,063)$(21,453)

70,907(2,153)$12,844$(23,606)

Net income for the year
ended March 31, 2004

83,253

Cash dividends paid

(12,419)

Reversal of voluntary reserve

52,038(52,038)

Bonuses to directors andcorporate auditors(283)

Net change during the year
Balance at March 31, 2004

2$284,258$175,854$284,258$413,210$89,353

See notes to non-consolidated financial statements.

27

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, 2004 and 2003
were as follows:

The accompanying non-consolidated financial statements of Suruga
Bank Ltd. (the “Bank”) are prepared on the basis of accounting principles generally accepted in Japan, which are different in certain
respects as to the application and disclosure requirements ofInternational Financial Reporting Standards, and are compiled fromthe non-consolidated financial statements prepared by the Company as
required by the Securities and Exchange Law of Japan.
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 ¥105.69 = U.S.$1.00, the exchange
rate prevailing on March 31, 2004. 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. Investment Securities
Investment securities at March 31, 2004 and 2003 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
2004
2003

Thousands of
U.S. dollars
2004¥378,761
26,813
8,088
45,42553,769¥512,856¥314,512
10,3309,768
37,151
56,966¥428,728$3,583,698
253,698
76,526
429,795
508,743$4,852,462

¥

¥

$

712

297

6,744

Millions of yen
2004
2003

Bills discounted
Loans on bills
Loans on deeds
Overdrafts
Total

¥

6,805
216,596
1,671,058
178,369¥2,072,830

¥

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

Thousands of
U.S. dollars
2004$

64,3912,049,359
15,810,944
1,687,664$19,612,360(b) Loans and bills discounted at March 31, 2004 and 2003
included the following items:
Millions of yen
2004
2003

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

¥

4,184
83,538
1,377
52,825¥141,924¥

5,403
90,220960
77,628¥174,211

Thousands of
U.S. dollars
2004$ 39,587
790,405
13,028499,810$1,342,832

5. Premises and Equipment
Premises and equipment at March 31, 2004 and 2003 were as follows:
Millions of yen
2004
2003

Land
Buildings
Furniture and equipment
Guarantee money, net
Software, net
Less: accumulated depreciation
Premises and equipment, net¥14,899
22,22923,2135,367
2,551
68,261(28,863)¥ 39,397

Thousands of
U.S. dollars
2004$140,978210,323
219,638
50,78824,139645,867(273,099)$372,768¥14,21123,03622,864
5,693
3,162
68,967(29,697)¥ 39,269

6. Deposits
Deposits at March 31, 2004 and 2003 were as follows:
Millions of yen
2004
2003

Current deposits¥ 72,889
Ordinary deposits
1,051,351
Deposits at notice
9,641
Time deposits
1,455,456
Other deposits
113,579
Subtotal
2,702,918
Negotiable certificates of deposit
6,000
Total
¥ 2,702,918¥

51,625975,300
25,3901,490,247
130,752
2,673,317—¥2,673,317

Thousands of
U.S. dollars
2004$

689,657
9,947,500
91,22013,770,994
1,074,647
25,574,021
56,769$25,574,021

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.

28

8. Common Stock
Common stock was as follows:(1) Authorized:
396,029,983 shares no per value at March 31,
2004 and 2003
(2) Issued andoutstanding:
264,939,248 shares at March 31, 2004 and 2003
(3) Treasury stock: 2,614,197 shares at March 31, 2004

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 per share is based on the weighted
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
2004

Net income
Net assets
Diluted net income

2003¥ 33.41 ¥ 28.17
497.93 441.22
33.40—

U.S. dollars
2004$0.316
4.711
0.316

Diluted net income per share is no presented for the year ended March
31, 2003, since the Bank did not have any potentially dilutive stock.

11. Other Operating Income and Expenses
Other operating income and expenses for the years ended March 31,
2004 and 2003 were as follows:
Millions of yen
2004
2003

Thousands of
U.S. dollars
2004

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

¥ 148
—
1,093
553
3,592
¥ 5,389

¥ 131
31
905
—
1
¥1,069$ 1,409—
10,3495,239
33,991$50,990

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

¥ 159
3
—
30
¥ 192

¥ 253
374
2,711
—
¥3,340$ 1,50733—
284$ 1,825

12. General and Administrative Expenses
General and administrative expenses for the years ended March
31, 2004 and 2003 were as follows:
Millions of yen
2004
2003

Salaries and allowances
Depreciation
Taxes
Other
Total

¥ 14,227
3,210
1,838
17,221¥ 36,497¥14,215
3,278
1,778
17,511¥36,784

Thousands of
U.S. dollars
2004$134,614
30,374
17,394
162,942$345,32529

30

Printed in Japan