Annual Report 2007

Message from the President

With around 70% of its land occupied by mountains,
including the world-famous Mount Fuji, Japan is acountry blessed with a beautiful natural environment.
To preserve its precious environmental and natural
resources, and also to help our customers cross thenumerous metaphorical “mountains” that stand in theway of fulfilling their dreams, Suruga Bank aims
always to be its customers’ truly trusted partner. To
accomplish this mission, we must anticipate andquickly ascertain our customers’ needs, and takeprompt action to satisfy them.
The journey of Suruga Bank is a history of innovation. We have constantly developed new products
and services while introducing innovative measuresand programs to increase our value, meet and exceed
the expectations of all our stakeholders, and fulfill our
responsibility as a good corporate citizen. We arecommitted to working with you to bring about a better
tomorrow.

May 23, 2007

Mitsuyoshi Okano
President and Chief Executive Officer

1Review of Operations (Non-consolidated)

The Company’s results for this term are shown below.

Gross Operating Income

76.9

Gross operating income indicates the Bank’s

73.1

earnings from basic banking operations. This figure
comprises three elements: “Net Interest Income,”

68.2

68.0

which is based on interest on loans; “Net Fees andCommissions”; and “Other Operating Income,”
which includes proceeds from foreign transactions.
Gross operating income increased ¥3.7 billion
year-on-year to ¥76.9 billion due to an increase ininterest on loans and discounts on steady growth inconsumer loans and an increase of fees andcommissions resulting from marketing activities to(¥ Billion)

2003

2004

2005

2006

(FY)

increase the balance of individuals’ assets incustody.

35.7
30.2

34.6

36.6 35.9

37.2

38.2

Net Operating Income &Core Net Operating Income
Core net operating income rose ¥2.2 billion
year-on-year due to a rise in net interest income and31.3

net fees and commissions. Net operating income
increased ¥600 million year-on-year, despite anincrease in provisions to the general reserve forpossible loan losses, which was more than offset
by a rise in core net operating income.
Net operating income = Gross operating income – Expenses – Transfer togeneral reserve for possible loan losses(¥ Billion)

2003
Net operating income

2

2004

2005

Core net operating income

2006

(FY)

Core net operating income = Net operating income (before transfer togeneral reserve for possible loan losses)– Proceeds from bonds, including JGBs
(5 accounts)

Ordinary Profit & Net Income

30.4

Ordinary Profit increased ¥7.6 billion year-on-year,

13.37%

on increase in net operating income and fall in the22.7

costs of disposal of nonperforming loans.

20.0
18.3

17.4

Net income for the term increased 5.7 billion, reflecting a increase in ordinary profit.

10.37% 14.3
10.4
8.7
8.12%
7.26%
(¥ Billion)

2003
Ordinary profit

2004
Net income

2005

2006

(FY)

ROE (Net income basis)

Per Share Dividend

11.0

The Bank has decided to increase it’s term-end
divided payment from ¥5 per share (the previous

8.0

forecast) to ¥6 per share, as the business

6.0

performance has almost certainly exceeded it’sprevious target. Consequently, the Bank’s annual

5.0

5.0

dividends per share will amount to ¥11, up ¥3 over

5.0

the previous term.

2.5

2.5
5.0

2.5

2.5

3.0

(¥)

2003
Interim

2004

2005

2006

(FY)

Term end3

Review of Operations

New Standards

175.8
159.3
146.4

137.4

10.73%

10.66%

10.12%

10.13%

2005

2006

10.14%
9.46%
9.53%
8.85%

(¥ Billion)

2003

2004

Owned capital

Capital adequacy ratio(FY)

Tier I capital adequacy ratio

Owned Capital & Capital Adequacy Ratio(Domestic Standard)
The Bank’s owned capital comprises Tier I capital(including its capital stock, capital surplus, andretained earnings) and Tier II capital (including thegeneral reserve for possible loan losses). Beginningwith the reporting term, the Bank has employed the
new accounting standards for the calculation of its
capital ratio (domestic standards), which stood at
10.66% at the end of the reporting term. This is
attributable to: increases in operational risk due tothe adoption of the new accounting standards;
an increase in risk-weighted assets in line with therise in the loan balance; and revaluation of collateralvalue on mortgage loans. These factors combined
to offset an increase in retained earnings. For the
Tier II items, we have posted only the amount of
the reserve for possible loan losses. Neither
subordinated debt nor land revaluation gains havebeen posted.
Capital adequacy ratio = [Owned Capital (Basic items + Supplementary
items) / Risk assets] X 100
Tier I capital adequacy ratio = [Owned Capital (Basic items: Tier I)/ Risk assets] X 100

Status of Tier I and Deferred Tax Assets

167.0

29.1%

The ratio of deferred tax assets to Tier I capital fell

150.2

2.0 percentage points to 9.6%, showing qualitative

137.6

128.6

improvement in capital adequacy. Deferred tax

20.6%

assets declined ¥1.4 billion, and Tier I capitalincreased ¥16.8 billion.
*Deferred tax assets that represents anticipated future returns on taxes
already paid.

11.6%
9.6%
37.4

28.3
17.5

16.1

(¥ Billion)

2003
Tier I

42004
Deferred tax assets

2005
Deferred tax assets / Tier I

2006

(FY)

2,246.8
2,183.1

Loan Balance &Yield on Outstanding Domestic Loans
As a result of strong growth in consumer loans,

2,129.6

the Bank’s loan balance increased by ¥63.6 billion

2,072.8

to ¥2,246.8 billion. Likewise, the yield on outstand-3.35%

ing domestic loans also increased 0.11 percentage
points over the previous year, to 3.35%.

3.24%
3.19%

3.17%

(¥ Billion)

2003

2004

Loan balance

2005

2006

(FY)

Yield on outstanding domestic loans

Consumer Loans

1,668.6
1,572.2
1,472.7
1,377.8

1,303.6

1,375.8

1,446.9¥96.3 billion year-on-year, to ¥1,668.6 billion, andthe year-end balance of mortgage loans increased

74.2%

1,207.9

The year-end balance of consumer loans grewby ¥71.0 billion to ¥1,446.9 billion. The proportion of

72.0%

consumer loans as a percentage of all loans was up

69.1%

2.2 percentage points at 74.2%.

66.4%(¥ Billion)

2003
Consumer loans

2004
(

2005

2006

(FY)

represents proportion of mortgage loans)

Yield on consumer loans

5Review of Operations

2,702.9

Deposit Balance &Yield on Domestic Deposits

2,832.6

2,796.6

2,767.6

0.13%

The balance of deposits rose ¥36.0 billion
year-on-year to ¥2,832.6 billion, due chiefly to asteady increase in deposits from individuals. The

1,873.7

1,934.8

1,957.0

1,980.5

balance of deposits from individuals rose ¥23.5
billion to ¥1,980.5 billion. The yield on domestic
deposits also increased 0.09 of a percentage point

0.07%

over the previous year, to 0.13%, in line with a rise in

0.05%

market interest rates due to the termination of the

0.04%

BOJ’s zero-interest policy.
(¥ Billion)

2003
Deposits

2004
(

2005

Deposits from individuals)

2006

(FY)

Yield on domestic deposits

Individuals’ Assets in Custody (Investments)

299.2

The balance of assets in custody (investment
fund trusts held by individuals) rose ¥79.3 billion

110.9

219.9

year-on-year to ¥299.2 billion, due chiefly to an
expansion in the product line-up and enhanced
marketing capabilities.

88.4
140.4

86.7

33.3
(¥ Billion)

46.5

30.2
15.2 5.7

25.1 7.1

40.1

2003

2004

2005

Foreign-currency
deposits

6

135.3

61.5

84.5

JBGs in custody

Mutual funds

4.5
0.09*

Personal
pension funds

46.6
2006

Single premium
life insurance*

3.8
2.5*(FY)

36.4
1.8

36.0
2.0

36.4
2.0

Expenses & OHR (Overhead Ratio)

37.7
2.2

Due to an increase in investments aimed atstrengthening the marketing capabilities, expenses
increased by ¥1.3 billion year-on-year. The OHR

20.4(overhead ratio), however, improved 0.7 percentage

20.3

20.8

22.0

points to 49.1%, thanks to a rise in grossoperating income.

53.4%

14.2

OHR (Overhead Ratio (%)) = Expenses / Gross operating income X 100

52.9%

13.6

49.8%

49.1%

13.5

13.5

(¥ Billion)

2003
Personnel expenses

2004

2005

Non-personnel expenses

2006
Taxes

(FY)

OHR

Status of Non-Performing Loans

142.7
26.8
61.6
6.82%

Balance and Ratio of Loans Disclosed under
the Financial Rehabilitation Law

138.0
25.0
69.7

During the term under review, the Bank made112.7

good progress in the final disposal of nonperforming

16.7

loans, as well as corporate rehabilitation programs.

89.7

6.42%

As a result, the non-consolidated balance of claims

12.9

disclosed in accordance with the standards

54.9

stipulated under the Financial Rehabilitation Law

39.7

decreased ¥23.0 billion year-on-year, to ¥89.7 billion

5.11%
54.2

at the end of the reporting term. The ratio of

43.2

41.0

37.0
3.95%

claims disclosed under the Financial Rehabilitation

2006

to 3.95%.

(¥ Billion)

2003
Substandard claims

2004
Doubtful claims

2005

(FY)

Bankrupt and substantially bankrupt claims

Ratio of loans disclosed under the Financial Rehabilitation Law

Law to total claims improved 1.16 percentage points

Ratio of loans disclosed under the Financial Rehabilitation Law (%)= Balance of loans disclosed / Total extended credit X 100

7

Status of Non-Performing Loans

Disclosure of Problem Assets(As of March 31, 2007)(¥ Billion)

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

Covered by collateral Covered
and guarantees by reserves
Bankrupt and Substantially
Bankrupt Claims
Doubtful Claims
Substandard Claims
Sub-total
Normal assets
Total

3.95%

12.9
39.7
37.0
89.7
2,178.4
2,268.1

9.5
24.0
19.4
53.0

Coverageratio

3.3 100.00%
13.9 95.76%
6.7 70.66%
24.0 86.01%

86.01%
Coverage ratio(¥ Billion)

Risk-Managed Loans
Target: Loans

Ratio of risk-managed loans to total loans

3.96%

Loans to bankrupt borrowers
Loans past due
Past due for3 months or longer
Restructured loans
Total(¥ Billion)

Classification under Self-Assessment

1.1
50.8
1.1
35.8
89.1

Target: Total balance of extended credit

Legally bankrupt borrowers
Substantially bankrupt borrowers
Potentially bankrupt borrowers
Borrowers requiring caution:
Borrowers under supervision
Other borrowers requiring caution
Normal borrowers
Total

1.4
11.5
39.7
57.1
197.4
1,960.8
2,268.1

85.91%
Coverage ratio
Total balance of extended credit: Loans, Customers’ Liabilities for Acceptances and Guarantees, Foreign exchange, Securities loaned, Suspense
payments on loans, Accrued loan interests.

8Topics

Offering greater security and convenience
Suruga’s bank card has been transformed. The Bank has launched a new bank card incorporating an IC chip, that not onlyoffers greater convenience to our customers, but provides enhanced security to protect their valuable property.
■ Our IC bank card
Suruga Bank’s new bank card is equipped with an IC chip that makes counterfeiting andthe unauthorized reading of information more difficult than with conventional bank cards(which utilize magnetic strips), thus providing enhanced security.
■ Features of the IC bank card
The Bank’s IC bank card has a VISA debit function (not available on some IC bank cards).
* The VISA debit function is a debit card function that is available to VISA members around the world and a payment tool that is more convenientand safer than cash. Unlike a credit card, the function allows money to be taken from your bank account immediately, and you cannot spend
more money than is in your bank balance.
For detailed information on our VISA debit function and IC bank card, visit our website. (Japanese Only)
http://www.surugabank.co.jp/surugabank/01/05/11/0105112000.html
http://www.surugabank.co.jp/surugabank/01/07/0107070011.html

The convenience of the Suruga VISA Debit Card, launched in January 2006, is particularly evident for customers when they goabroad for travel, study or business. To make this level of convenience available to more customers, the Bank has formed
alliances with travel agencies and companies engaging in overseas education.
Travel card available to 15-year olds

Meeting customers’ need for convenient financial services
when they are overseas

The Bank has formed an alliance with H.I.S. Co., Ltd. toissue a debit card meeting needs for currency exchange,
money transfer, and payment when traveling overseas.

We formed alliances with the following companies:
Mainichi Communications Inc.
Staff Service Education International Co., Ltd.

The Bank and H.I.S. have jointly developed a travel card
named World Cabit for overseas travelers and people studying overseas, and began to issue them in March 2007. The
card has a bank card function and a VISA debit card shopping function available both in Japan and abroad. The card iswell received by customers as a payment tool that alleviates
anxiety about money when they are abroad: it allows them totravel and study overseas without any financial worries.

We provide convenient financial services that enable
SURUGA VISA Debit Card holders to withdraw local currencies at ATMs all around the world and to shop at VISA member stores. Customers do not need to open bank accounts
overseas or pay overseas remittance charges.

9

Opening of “d-labo” (dream laboratory) / Midtown Branch
We are pleased to announce the opening of our Midtown Branch, completewith Suruga Bank’s new communication platform “d-labo (dream laboratory)”
within the Tokyo Midtown complex in Roppongi.

Birth of the dream laboratory
Suruga Bank’s “d-labo,” which opened in the Tokyo Midtown complex,
embodies the new banking style envisioned by Suruga Bank for the 21st century, and creates a unique space designed to maximize our relationship withcustomers. Under the keywords of “Creating a future where the dreams ofcustomers come true,” d-labo assists you in finding and living in your dream.

What is d-labo?
Who likes dealing with banks? Sadly, not many. While banks handle one of the most precious aspects of their customers’ lives,
they often leave them feeling dissatisfied with the service they receive. Banks too often see their customers merely as a part of the
product, treating them with a distant and overly official attitude, keeping them waiting too long for service, and setting businesshours at their convenience rather than the customer’s. “d-labo” is different, so different that it is probably the world’s first banking
office that customers enjoy visiting even when it’s not necessary, a banking office that communicates freely with customers via
money. “d-labo” is a space filled with lifestyle tips, and advice about what you can realize by making the best use of money. It’s anenvironment that makes you realize that spending time at this bank is being ambitious for your future. SURUGA’s d-labo declaresthat “dream” is a word that will grow from the year 2007.
10

01

02

Concept of d-labo — dream laboratory —03

Helping to give shape and timeframe for customers’ dreams as a life andbusiness concierge

04

05

01 atlas
The wooden sphere symbolizes the globe. Turn it, and you will findthe various desires and hopes of people around the world collected through the d-labo website. Enjoy a virtual journey on thelarge 103-inch screen to learn about the exciting dreams of others.

02 timeThe dream almanac compiles dreams associated with the various
events that occurred over the past 100 years, and also with possibilities and visions that may come true in the next 100 years.
The almanac consists of different sections, such as environmentand science, to help you find your inspiration in each area.

03 gallery
The drawers contain “pieces of dreams” of various people thatare sure to infuse you with energy and passion.

04 libraryThis “library of dreams, money and the environment” boasts acollection of around 1,500 books and magazines that give you
various inside of dreams & money.

05 refresh counter
Learn more about seminars, gatherings and other exciting events
that will help you find your dream, and ways to achieve it!
Internet Home Page

http://www.d-labo-midtown.com/

11

CSR

Suruga Bank has steadily evolved from community banking centered on the Numazu, Shizuoka and Shonan communities into personal banking serving the greater Tokyo area and direct banking serving customers all over Japan. As a result, expectations of the
Bank have changed, and its social responsibilities are no longer what they were.
As a financial institution with a strong awareness of its public role, we meet all expectations naturally placed on us with regard
to compliance, ethical behavior, accountability, and corporate governance. We are also involved in a range of vital community
activities such as contributions to regional development, and support for the arts and philanthropy. By continuing to deliver superior customer services and maintain our profile in the local economy while we meet these demands, we will carry out our social
responsibilities, meeting the expectations of stakeholders such as our community, our employees and our shareholders.

Companies are being
asked to implement
CSR policies thatcreate value by:

Changing Face of CSR

Starting Point of CSR

ComplianceGood
od employment practicepractProtection
otection of human rights
righ• Differentiating themselves in the marketplace• Building stronger ties of trust with their stakeholders• “Ensuring sound management that is not only compliant with law, but also equitable andethically sound”• Achieving good corporate governance that fosters maximum transparency and credibility

Greater protection ofcustomer privacy

Secure financialtransactions

Fulfilling CSR
Respect
espect for natu
natureSocial contribution

Activities
Ac
ties anand programs
ms to raise
environm
vironmental awarene
areness• Meeting the minimum requirements as a corporate citizen• Minimizing the possible negative impact on our customers andbusiness partners in event of our inability to conduct normal business operations

Products offeringhigh social value

Corporateorporate sustainability

Our Role in the Economy

Community
ommunity developme
development

CSR is an essential obligation of
any company conducting business.

Fairness

Sustainable
GrowthCash flow

Balance

Respect for nature

Eco office

Profitability

Profit plan

Financialancial products offeringofferienvironmental
nvironmental benefits

Pollution control
Green procurementpEnvironmental Initiatives
We are committed to developing financial products that are friendly to the environment, and to engaging
in environment protection activities.

Suruga Bank Environmental Policy
1. By providing environmentally-friendly financial products and services, we support those of ourcustomers who are involved in environmental-protection activities and contribute to improvementof the local environment
2. We work to continuously upgrade environment-management systems and prevent environmental
pollution
3. We will abide by environmental laws and regulations, and comply with other environmental
requirements that Suruga Bank accepts
4. We have set environmental goals and targets, and regularly review progress
5. We take every measure to familiarize all our employees and others working at the Bank with thesebasic policies, and to operate in an environmentally-friendly way
6. We publicly disclose these policies(compiled June 1, 2005)

12

Environmental Management System (EMS)
Suruga Bank is proactively engaged in environmental protection. In 2000, the Bank’s Surugadaira headquarters acquired ISO14001 certification. To effectively harness the benefits of this standard, we have set
up an environment-management system headed by the CEO and operated under the guidance of the ISO
office. In December 2005, the Bank acquired the updated 2004 version of the certification.

Corporate Governance

Basic Policy
Suruga Bank considers more-effective corporate governance to be a priority in hastening and clarifying
management strategy-making. By improving our record in compliance, disclosure, accountability and risk
management, we are creating a management model that puts customers, shareholders and other stakeholders first.

Auditing System
In addition to corporate governance system based on corporate auditors, we have established an internal
audit department separate from the headquarters organization to further strengthen internal controls. As ofJune 27, 2007, three of our ten directors, and three of our five corporate auditors, were external.

Diagram of Suruga Bank’s Corporate Governance System(As of May 24, 2006)

General Meeting of Stockholders
Appointment/
dismissal

Appointment/dismissal
Appointment/dismissal

Board of Corporate Auditors
Audit

Audit

Ratify appointments/dismissals

ReportReportReportReportBoard of Directors
Oversight

Oversight
ReportReportManagement Council

Internal Audit Department

Accounting
Audits

Accounting
Auditors

Legal
AdviceLegal Counsel

ReportVarious committees

Internal Audits

ReportExecutive Council

All offices and branches

13Compliance

Basic Policy
As a bank with a public mission and social responsibilities, we take compliance very seriously. In a financial environment of ever-accelerating liberalization and globalization, banks are expected to operate on abasis of maximum accountability and transparency. In response, we have positioned compliance as a top
management priority and are continuously engaged in efforts to firm up and refine our compliance posture.
Our in-house compliance procedures include an ethical code, a code of conduct and compliance regulations. In addition we have made available our manual of business guidelines in digital format, which features case studies that offer an easy-to-understand approach to rules and regulations that must be
observed by all employees, regardless of rank, in the course of their work.

Enhancing Corporate Ethics and Compliance
Basic compliance policies are drawn up at the Board of
Directors and Executive Committee level, and we have set
up a compliance committee as an advisory body. To
strengthen compliance, we have drawn up an annualcompliance program featuring e-learning, e-newslettersand group training sessions, with progress reviews. Basedon the compliance program and under the supervision of
the management planning department’s complianceframework, all compliance managers and internal officers
have been deployed in all of the Bank’s offices andbranches, enabling us to respond swiftly and appropriately to compliance issues as they arise.

14

Ethical Code (abstract)
1. Be aware of the Bank’s public role
Always be aware of the Bank’s public natureand social mission

2. Observe the law
Observation of all laws and regulations

3. Accountability
Sound management based on the principles ofaccountability

4. Corporate conduct
Behave in a rigorously correct and fair way

Customer Relationships

Customer Relationships Based on Reliable Service
To contribute to the financial rehabilitation of struggling smaller firms and the revitalization of the region, weoffer startup support, management consultation, and corporate rehabilitation services to SMEs and customers who are sole proprietors. We have also improved our asset assessment and credit-risk management
systems, to create a more stable operating base and raise profitability.
By providing high-quality comprehensive financial services, we are determined to meet our obligations asa regional financial institution to fulfill our social mission and responsibilities.

Risk Management

Basic Approaches to Risk Management
Rapid progress in financial deregulation, innovations in financial technologies, and the widening scope ofbusiness operations available have changed the operating environment faced by banks, increasing thediversity and complexity of the risks they face. The management of Suruga Bank regards development of
more-sophisticated approaches to risk management as a priority issue, as it is essential to accurately
understand the risks inherent in all banking operations, and to establish a management system capable ofaddressing them appropriately.

15

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

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

Products with free lottery tickets

Dream Direct Branch
http://www.surugabank.co.jp/dream/(24 hours a day, 365 days a year)
Toll free (from within Japan only): 0120-89-1016
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): 0120-803-689
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/docomo/(24 hours a day, 365 days a year)
Toll free (from within Japan only): 0120-17-2038
Telephone reception hours 9:00 am - 5:00 pm Monday - Friday(excluding holidays)
http://www.surugabank.co.jp/alsok/(24 hours a day, 365 days a year)
Toll free (from within Japan only): 0120-243-053
Telephone reception hours 9:00 am - 5:00 pm Monday - Friday(excluding holidays)

16

Consolidated Financial Section
Consolidated Balance Sheets

18

Consolidated Statements of Income

19

Consolidated Statements of Cash Flows

20

Consolidated Statement of Changes in Net Assets

21

Consolidated Statement of Stockholders’ Equity

23

Notes to Consolidated Financial Statements

24

Report of Independent Auditors

34

17

Consolidated Balance Sheets
Suruga Bank Ltd. and consolidated subsidiaries

Thousands of
U.S. dollars(Note 2)Millions of yen

As of March 31,

2007

2006

Change from
2006

2007

ASSETS:Cash and Due from Banks
Call Loans and Bills Bought
Monetary Claims Bought
Trading Account Securities
Money Held in Trust
Securities
Loans and Bills Discounted
Foreign Exchanges
Other Assets
Premises and Equipment
Tangible Fixed Assets
Intangible Fixed Assets
Deferred Tax Assets
Customers’ Liabilities for Acceptances and Guarantees
Reserve for Possible Loan Losses
Total Assets

102,133
71,543
170,558
200,601
396
397
499
499
2,188
2,246
465,467
468,056
2,242,682 2,179,120
3,207
3,156
32,651
26,461—
55,36941,901—
11,386—
16,51018,2597,467
7,584(37,937)(40,790)3,059,114 2,992,507

30,590(30,043)(1)
0(58)(2,589)63,562
51
6,190(55,369)
41,901
11,386(1,749)(117)
2,853
66,607865,174
1,444,800
3,354
4,234
18,534
3,942,970
18,997,734
27,169276,588—354,949
96,452
139,860
63,255(321,363)
25,913,716

LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS’ EQUITY:
Liabilities
Deposits
Call Money and Bills Sold
Borrowed Money
Foreign Exchanges
Other Liabilities
Reserve for Employees’ Bonus
Reserve for bonus for directors and corporate auditors
Reserve for Employee Retirement Benefits
Reserves under Special Laws
Acceptances and Guarantees
Total Liabilities

2,832,085 2,795,835
2,361
822
8,983
9,252
12
14
30,25819,781
546
526
51
—
133
360
0
0
7,467
7,584
2,881,899 2,834,177

36,250
1,539
(269)
(2)
10,477
20
51
(227)
—
(117)
47,722

23,990,561
20,00076,097
106
256,321
4,625
432
1,128
0
63,25524,412,528

306

—

—

—
30,043—18,640—105,886—
7,306—(3,854)—
158,023— 2,992,507

—
—
—
—
—
—
—

—
—
—
—
—
—
—

—
—
—
—
—
—
—
—
—
—
—
—

254,496
157,905
1,046,772(31,341)
1,427,833
69,202
468
69,671580
3,101
1,501,187
25,913,716

Minority Interest
Stockholders’ Equity
Common Stock
Capital Surplus
Retained Earnings
Net Unrealized Gains (Losses) on Securities, Net of Taxes
Treasury Stock
Total Stockholders’ Equity
Total Liabilities, Minority Interest and Stockholders’ Equity
Net Assets
Common Stock
Capital Surplus
Retained Earnings
Treasury Stock
Total Stockholders’ Equity
Net Unrealized Gains (Losses) on Securities, Net of Taxes
Net Deferred Gains (Losses) on Hedging Instruments, Net of Taxes
Total Valuation and Translation Adjustments
Subscription Rights to Shares
Minority Interest
Total Net Assets
Total Liabilities and Net Assets
See notes to consolidated financial statements.

18—

30,04318,640123,571(3,699)168,555
8,169
55
8,224
68
366
177,215
3,059,114

—
—
—
—
—
—
—
—
—
—
—
—

Consolidated Statements of Income
Suruga Bank Ltd. and consolidated subsidiaries

Thousands of
U.S. dollars(Note 2)Millions of yen

2007

2006

Change from
2006

2007

Ordinary Income
Interest Income
Interest on Loans and Discounts
Interest and Dividends on Securities
Interest on Call Loans and Bills BoughtInterest on Deposits with Banks
Other Interest Income
Fees and Commissions
Other Operating Income
Other Income

105,656
82,908
77,113
3,669
425
1
1,698
14,2717,313
1,163

98,75375,492
71,417
3,493
38
0
541
12,910
7,717
2,633

6,903
7,416
5,696
176
387
1
1,157
1,361
(404)
(1,470)895,015702,318
653,224
31,0853,608
12
14,386
120,892
61,9509,853

Ordinary Expenses
Interest Expenses
Interest on Deposits
Interest on Call Money and Bills Sold
Interest on Borrowings and Rediscount
Other Interest Expenses
Fees and Commissions
Other Operating Expenses
General and Administrative Expenses
Other Expenses
Transfer to Reserve for Possible Loan Losses
Losses on Write-offs of Loans
Others74,398
10,970
5,371
106
144
5,348
7,400
5,382
38,954
11,689
3,588
3,938
4,161

75,760
6,746
1,759
14
151
4,821
6,567
5,693
37,641
19,112
8,430
7,256
3,426

(1,362)
4,224
3,612
92
(7)
527
833
(311)
1,313
(7,423)(4,842)(3,318)737

630,230
92,93345,506899
1,220
45,306
62,69245,598329,986
99,01830,40133,36235,253

Ordinary Profits

31,25722,993

8,264

264,785

Extraordinary Profits
Gains on Dispositions of Premises and Equipment
Gains on Disposal of Fixed Assets
Recoveries of Written-off Claims
Extraordinary Losses
Losses on Dispositions of Premises and Equipment
Losses on Disposal of Fixed Assets
Loss on Impairment of Fixed Assets

3,003
—
105
2,898
219
—
219
—

2,956
240
—
2,716
683
249
—
433

47
—
—
182
(464)
—
—
(433)

25,446—895
24,551
1,857
—
1,857
—

Income before Income Taxes and Others
Provision for Income Taxes and Others
Deferred Income Taxes
Minority Interest

34,042
12,5091,055
132

25,267
1,841
9,100
48

8,775
10,668(8,045)
84

288,374
105,964
8,942
1,119

Net Income

20,345

14,277

6,068

172,347

For the Years Ended March 31,

See notes to consolidated financial statements.

19

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

Thousands of
U.S. dollars(Note 2)Millions of yen

For the Years Ended March 31,
Cash Flows from Operating Activities
Income before Income Taxes and Others
Depreciation and Amortization
Loss on Impairment of Fixed Assets
Increase (Decrease) in Reserve for Possible Loan Losses
Increase (Decrease) in Reserve for Employees’ Bonus
Increase (Decrease) in Reserve for Bonus for Directors and Corporate Auditors
Increase in Reserve for Employee Retirement Benefits
Bonus for Directors and Corporate Auditors
Interest Income
Interest Expenses
Loss (Gain) on Investment Securities, Net
Loss (Gain) on Money Held in Trusts
Loss (Gain) on Sales of Premises and Equipment
Loss (Gain) on Sales of Fixed Assets
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 Provided by (Used in) Operating Activities
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 Held in Trusts
Purchase of Premises and Equipment
Purchase of Tangible Fixed Assets
Proceeds from Sales of Premises and Equipment
Proceeds from Sales of Property and Equipment
Purchase of Intangible Fixed Assets
Net Cash Provided by (Used in) Investing Activities
Cash Flows from Financing Activities
Dividends Paid
Purchase of Treasury Stock
Proceeds from Sales of Treasury Stock
Net Cash Provided by (Used in) Financing Activities
Effect of Exchange Rate Changes on Cash and Cash Equivalents
Net Increase in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Year
Cash and Cash Equivalents at End of Term
See notes to consolidated financial statements.

20

2007

2006

Change from
2006

2007

34,042
6,981—(2,853)
70
51
(954)
(50)
(82,908)
10,970
(942)
(12)
—
113

25,267
7,041
433(2,896)
8
—
245
(30)
(75,492)
6,746(2,689)
(93)
9
—

8,775
(60)
(433)
43
62
51
(1,199)(20)(7,416)
4,224
1,747
81
—
—

288,374
59,137—(24,173)597
432(8,081)(423)(702,318)
92,933(7,987)
(107)
—
962

(0)
(63,562)
36,250(268)
2,499
30,044
1,538
(50)
(1)
81,801(9,701)327
43,383(1,667)
41,7160(55,614)
29,522
3
4,457
17,387822(2,451)
7
74,813(6,589)(5,207)
15,701(2,089)13,611(0)(7,948)
6,728(271)(1,958)12,657
716
2,401
(8)
6,988
(3,112)
5,534
27,682422
28,105(5)(538,435)
307,077(2,277)
21,171
254,508
13,034(428)(16)
692,937(82,181)
2,773
367,504(14,125)
353,378(553,033)
16,138542,051—
71—(7,272)—598(4,662)(6,108)(551,817)
35,517519,772(284)—(12,659)
—
1,005
—
—
(8,467)(1,216)(19,379)
22,279284
71—(7,272)—598(4,662)
2,359(4,684,742)
136,712
4,591,709—
604—(61,603)—
5,067(39,491)(51,742)(2,601)(168)
249(2,519)0
33,08964,201
97,291(1,426)
(164)
815
(775)
11
4,380
59,82064,201(1,175)(4)(566)(1,744)(11)
28,7094,380
33,089(22,033)(1,424)
2,115(21,343)5
280,298
543,852
824,151

Consolidated Statement of Changes in Net Assets
Suruga Bank Ltd. and consolidated subsidiaries

Balance at March 31, 2006
Changes of Items During the Period
Dividends from Surplus
Bonus for Directors and Corporate Auditors
Net Income
Repurchase of Treasury Stock
Disposal of Treasury Stock
Changes in Own Shares Held byConsolidated Subsidiaries
Net Changes of Items Other than
Stockholders’ Equity
Total
Balance at March 31, 2007

CapitalStock

CapitalSurplusMillions of yen
Stockholders’ Equity
Retained
Earnings

30,04318,640105,886

Changes of Items During the Period
Dividends from Surplus
Bonus for Directors and Corporate Auditors
Net Income
Repurchase of Treasury Stock
Disposal of Treasury Stock
Changes in Own Shares Held byConsolidated Subsidiaries
Net Changes of Items Other than
Stockholders’ Equity
Total
Balance at March 31, 2007

Total
Stockholders’ Equity(3,854)

150,716(168)
259(2,601)(50)
20,345
(168)
249

63

63

(2,601)(50)
20,345(9)——

17,685

154—
17,83930,04318,640123,571(3,699)168,555

Millions of yen
Valuation and Translation Adjustments
Subscription
Net Deferred
Net Unrealized
Total Valuation
Rights to
Gains (Losses) on
Gains onand Translation
SharesHedging Instruments,
Other Securities
Adjustments
Net of Taxes

Balance at March 31, 2006

Treasury
Stock

7,306

—

7,306

—

Minority
Interests

Total
Net Assets

306

158,329(2,601)(50)
20,345
(168)
249

(63)

—

862
862

55
55

917
917

68
68

122
59

1,109
18,885

8,169

55

8,224

68

366

177,215

See notes to consolidated financial statements.

21

Consolidated Statement of Changes in Net Assets
Suruga Bank Ltd. and consolidated subsidiaries

Balance at March 31, 2006
Changes of Items During the Period
Dividends from Surplus
Bonus for Directors and Corporate Auditors
Net Income
Repurchase of Treasury Stock
Disposal of Treasury Stock
Changes in Own Shares Held byConsolidated Subsidiaries
Net Changes of Items Other than
Stockholders’ Equity
Total
Balance at March 31, 2007

CapitalStock

Thousands of U.S. dollars (Note 2)
Stockholders’ Equity
CapitalRetained
Treasury
Surplus
Earnings
Stock

Total
Stockholders’ Equity

254,496

157,905(32,649)

1,276,715(1,424)
2,194(22,033)(423)
172,347(1,424)
2,115

538

538

896,962(22,033)(423)
172,347(79)——

149,8101,307—
151,118

254,496

157,905

1,046,772(31,341)

1,427,833

Thousands of U.S. dollars (Note 2)
Valuation and Translation Adjustments
Subscription
Net Deferred
Net Unrealized
Total Valuation
Rights to
Gains (Losses) on
Gains onand Translation
SharesHedging Instruments,
Other Securities
Adjustments
Net of Taxes

Balance at March 31, 2006

61,896—

61,896

Changes of Items During the Period
Dividends from Surplus
Bonus for Directors and Corporate Auditors
Net Income
Repurchase of Treasury Stock
Disposal of Treasury Stock
Changes in Own Shares Held byConsolidated Subsidiaries
Net Changes of Items Other than
Stockholders’ Equity
Total

7,306
7,306

468
468

7,774
7,774

Balance at March 31, 2007

69,202

468

69,671

See notes to consolidated financial statements.

22—

Minority
Interests

Total
Net Assets

2,598

1,341,210

—
—
—
—
—

(22,033)(423)
172,347(1,424)
2,115

—

(538)

—

580
580

1,040
502

9,396
159,976

580

3,101

1,501,187

Consolidated Statement of Stockholders’ Equity
Suruga Bank Ltd. and consolidated subsidiaries

Millions of yen

For the Years Ended March 31,

2006

Capital Surplus
Balance of Capital Surplus at Beginning of Year
Increase
Gains on Sales of Treasury Stock
Decrease
Losses on Sales of Treasury Stock

18,58554
54——

Balance of Capital Surplus at End of Year

18,640Retained Earnings
Balance of Retained Earnings at Beginning of Year
Increase
Net Income
Decrease
Dividends
Bonus for Directors and Corporate Auditors
Losses on Sales of Treasury Stock93,136
14,277
14,277
1,527
1,426
30
71

Balance of Retained Earnings at End of Year105,886

See notes to consolidated financial statements.

23

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 the basis of accounting principles generally accepted inJapan, which are different in certain respects as to the applicationand disclosure requirements of International Financial ReportingStandards, and are compiled from the consolidated financial
statements prepared by the Company 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.
Suruga Computer Service Co., Ltd.
Suruga Card Co., Ltd.
Suruga Credit Service Co., Ltd.
All significant intercompany accounts and transactions havebeen 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 atcost or amortized cost 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.
24(g) Depreciation and amortizationi) Tangible fixed assets
Depreciation of tangible fixed assets of the Bank is computed by
the declining-balance method at rates principally based on following estimated useful lives:
Buildings

15 to 50 years

Equipment and furniture

4 to 20 years

Property and equipment held by the Bank’s consolidated subsidiaries are depreciated, in principle, on a straight line basis.
ii) Intangible fixed assets
Intangible fixed assets are amortized on a straight-line basis.
Costs of software developed or obtained for internal use areamortized by the straight-line method over an estimated useful lifeof 5 years.

(h) Reserve for possible loan losses
The reserve for possible loan losses of the Bank is provided inaccordance with the policies regarding write-offs and reserve standards stipulated in “Auditing of Write-offs and Loan Loss Provisions”
issued as part of the “Fourth Report by the Auditing Subcommittee
for Banks and Other Financial Institutions” by the Japanese Instituteof 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 the amount of their collateral considered to bedisposable and of the amount recoverable 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
such cases, a portion of the reserve is provided based on theamount remaining after deduction of the amount of their collateralconsidered to be disposed and of the amount recoverable underguarantees, and the balance of this reserve is provided after giving full consideration to the amount the borrower is capable ofrepaying. In the case of all other loans, the reserve is based on
the percentage of actual defaults over a fixed term.
For claims of “substantial bankruptcy” and “legal bankruptcy,”
an amount exceeding the estimated value of the collateral or of
the guarantees deemed uncollectible is charged off. For the years
ended March 31, 2007 and 2006, the amounts deducted were
¥8,093 million (US$68,562 thousand) and ¥9,797 million,
respectively.
Provisions for possible loan losses at the consolidated subsidiaries have been made as deemed necessary with reference tothe historical loan loss experience of these companies.

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

(j) Reserve for bonus for directors and corporate auditors
The reserve is provided for the payment of bonus for directors
and corporate auditors, an estimate of which is determined as of
the balance sheet date.
(Changes in accounting standards)
Previously, bonus for directors and corporate auditors was
accounted for as a reduction in unappropriated retained earnings
at the payments. Effective from the year ended March, 2007, theBank and its domestic consolidated subsidiaries have applieded“Accounting Standard for directors’ bonuses” (AccountingStandards Board of Japan (“ASBJ”) Statement No. 4 November
29, 2005). Under the new standards, payments of bonus for
directors and corporate auditors are treated as expenses.
Accordingly, the reserve for bonus for directors and corporate
auditors is maintained at the amount accrued at the term-end,
based on a portion attributable to their services provided during
the term. As a result, operating expenses increased by ¥51 million(US$432 thousand) over the corresponding figure calculated
under the previous standards, and total income and income
before income taxes decreased by the same amount.

(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 thecollateral recorded 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
payment of employees’ retirement benefits based on estimatedamounts of the actuarially calculated retirement benefit obligationand the pension plan assets. Prior service cost is amortized by
the straight-line method over 5 years. Net actuarial gain (loss) isamortized by the declining-balance method over 13 years commencing the year following the year in which the gain or loss is
incurred.

Financial Instruments in the Banking Industry” (JICPA Industry
Audit Committee Report No. 24). Effective the year ended March,
2005, the general provisions of JICPA Industry Audit Committee
Report No. 24 are applied. Under the general provisions, the effectiveness of a fair value hedge is assessed by each of identified(i) group of hedge deposits, loans and similar instruments and(ii) corresponding group of hedging instruments such as interest
rate swaps in the same maturity bucket. Also, under the generalprovisions, 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.
In addition, deferred hedge gains and losses on the macro
hedges recognized in the previous terms are amortized as interest
income or expenses over the remaining maturity (5 years of thehedging instruments in accordance with the regulations set out inthe “Accounting and Auditing Treatment of Preliminary
Accounting Standards for Financial Instruments in the Banking
Industry” (JICPA Industry Audit Committee Report No. 15).
“Macro hedge” refers to the management of interest rate risk
in which overall interest rate risks inherent in loans, deposits, andother interest earning assets and interest-bearing liabilities aremanaged on a net basis using derivatives. The unamortizedamounts of Gross Deferred Hedge Losses and Gains on themacro-hedge method at March 31, 2007 were ¥172 million and¥164 million, respectively.
The deferred method of hedge accounting is applied to transactions to hedge against the foreign exchange fluctuation risks
associated with monetary claims and liabilities denominated inforeign currencies, in accordance with the regulations set out inthe “Accounting and Auditing Treatment of Accounting Standards
for Foreign Currency Transactions in the Banking Industry” (JICPA
Industry Audit Committee Report No. 25). The effectiveness ofcurrency swap and foreign exchange swap transactions is
assessed by comparing foreign currency position of the hedged
assets or liabilities with that of the hedging instruments.

(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 andlocal consumption tax paid on the fixed assets which are notdeductible as tax credits have been included in other assets andare being amortized over a five-year term.

(m) Hedge accounting
The Bank applies the deferred method to account for its derivative
instruments which hedge the interest rate risk on various financial
assets and liabilities in accordance with the general provisions of“Accounting and Auditing Treatment of Accounting Standards for25

Notes to Consolidated Financial Statements

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
yen amounts, solely for convenience, at ¥118.05 = U.S.$1.00, theexchange rate prevailing on March 31, 2007. 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.

(2) Bills discounted is accounted for as financial transactions on
the basis of “Accounting and Auditing Treatment of AccountingStandard for Financial Instruments in Banking Industry” (JICPA
Industry Audit Committee Report No. 24). The Bank has rights tosell or pledge certain commercial bills and foreign exchange bills
discounted. The principal amount of these bills amounted to¥4,535 million (US$38,415 thousand).

4. Accumulated Depreciation
3. Loans and Bills Discounted(1) Loans and bills discounted at March 31, 2007 and 2006
included the following:
Millions of yen
2007
2006

Loans to companies under bankruptcy procedures
Delinquent loans
Loans past due 3 months or more
Restructured loans
Total¥ 1,615 ¥ 2,665
52,092
69,5911,249
1,246
35,84939,796¥90,806 ¥113,299

Thousands of
U.S. dollars
2007$ 13,686
441,273
10,581
303,680$769,221

Loans to companies under bankruptcy procedures consist of
non-accrual loans on which the payment of principal or interest is
well past due or there is no prospect of recovery of the principal
or interest from the borrower or from a third party guaranteeing
the loan (the balance does not include any written-down portionof the loan). These loans hereafter are referred to as “non-accrualloans.” This category also includes the loans cited in Article 96-13 and 1-4 of the Corporation Tax Law (Government Ordinance
No. 97 of 1965).
Delinquent loans are defined as loans which are past due andnot accruing interest, but which are categorized neither as “Loansto companies under bankruptcy procedures” nor as“Restructured loans” as defined below.
Loans past due for 3 months or more are classified as suchwhen 3 months or more have elapsed since the due date without
the payment of principal or interest. Loans to companies underbankruptcy procedures and delinquent loans are not included inthis category.
Restructured loans include loans whose repayment conditions
have been renegotiated, (such as by reducing the rate of interest
or by providing a grace term for the payment of principal/interest,etc.) to support the rehabilitation of certain borrowers who areencountering financial difficulties, with the intention of ensuring therecovery of the loans. Excluded from this category are loans tocompanies under bankruptcy procedures, delinquent loans andloans past due for 3 months or more.

26

Accumulated depreciation on tangible fixed assets at March 31,
2007 and 2006 totaled ¥50,719 million (US$429,647 thousand)and ¥50,491 million, respectively.

5. Assets Pledged
Assets pledged as collateral at March 31, 2007 and 2006 were as
follows:
Millions of yen
2007
2006

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

Thousands of
U.S. dollars
2007¥ 7,751¥ 7,691$65,662

1,788¥10,266

1,788¥10,107

15,147$86,964

Liabilities related to the above pledged assets were as follows:
Millions of yen
2007
2006

Borrowed money¥8,233¥ 8,502

Thousands of
U.S. dollars
2007$69,744

In addition, investment securities totaling ¥142,531 million(US$1,207,382 thousand) and ¥141,899 million at March 31,
2007 and 2006, respectively, were pledged as collateral for thesettlement of exchange, treasury transactions or in lieu of margin
money.

6. Loan Commitments

8. Amounts per ShareContracts for overdraft facilities and loan commitments refer tocontracts under which the Bank and its consolidated subsidiaries
lend to their customers funds up to certain prescribed limits in
response to their customers’ loan applications, as long as there isno violation of any of the conditions stipulated in the contracts.
The unused portion within the set limits of such contracts totaled¥1,024,646 million (US$8,679,767 thousand) and ¥910,751 million at March 31, 2007 and 2006, respectively. As of March 31,
2007, the balance of the unused portion under such contracts
whose contract terms are one year or less, or which include a
special rider that allows the Bank to cancel out the contracts
unconditionally any time, amounted to ¥1,019,162 million(US$8,633,314 thousand).

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.

Since many of these commitments expire without the available line of credit being fully utilized, the unused amount does notnecessarily represent a future commitment. Most of thesecontracts specify terms and conditions permitting the Bank andits consolidated subsidiaries to refuse customers’ loan applications or decrease their credit limits for appropriate reasons (e.g., achange in their financial situation, a deterioration in their creditworthiness, etc.). At the inception of the contracts, the Bank andits consolidated subsidiaries obtain real estate 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 takethe necessary measures to reconsider the conditions stipulated in
the contracts and/or require additional collateral and guarantees.

Amounts per share of net assets are computed based on thenumber of shares 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

U.S. dollars
2007

March 31

2007

2006

Net income¥ 78.01¥ 54.72

Net assets

677.49606.06

5.73

Diluted net income¥ 77.85¥ 54.64

$0.65

$0.66

Diluted net income per share is no presented for the year ended
March 31, 2005, since the Bank did not have any potentially dilutive stock.

9. Other Income and Expenses
Other income and expenses for the years ended March 31, 2007
and 2006 were as follows:
Millions of yen
2007
2006

Other income:Gain on sales of stocks and other securities
Gain on disposition of premises and equipment
Gain on disposal of fixed assets
Collection of claims written-off
Other
Total

Thousands of
U.S. dollars
2007

¥

38
—
105
2,898
1,124
¥ 4,167¥ 1,957
240
—
2,716
676
¥ 5,590

$

325
—
895
24,551
9,527$ 35,300¥ 3,588¥ 8,430$ 30,401

29
3,938
—
219
—

26
7,256
249
—
3

251
33,362
—
1,857
—

—
4,132
¥11,908—
3,833¥19,795—
35,002$100,875

7. Employees’ Retirement Benefits
The funded status and amounts recognized in the consolidatedbalance sheets as of March 31, 2007 and 2006 were as follows:
Millions of yen
2007
2006

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

Thousands of
U.S. dollars
2007¥(18,245) ¥(18,174)
21,476
20,851$(154,555)
181,928

3,231
2,677
—
—
(2,304)(2,704)
—
—
926
(27)
1,059
333
¥ (133) ¥ (360)27,372—(19,522)
—
7,850
8,978
$ (1,128)

Other expenses:
Provision for possible loan losses
Loss on devaluation of stocks
and other securities
Write-offs of loans
Loss on disposition of premises and equipment
Losses on disposal of fixed assets
Loss on sales of stocks and other securities
Cost of amortization of differences resulting
from changes in accounting standards
Other
Total

27

Notes to Consolidated Financial Statements

10. Leases(Lessee side)(Lessor side)

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

The pro forma information such as acquisition costs, accumulated depreciation and obligations on property leased underfinance leases currently accounted for as operating leases is summarized as follows:
Millions of yen
2007
2006

Thousands of
U.S. dollars
2007

Acquisition cost
MovablesOthersTotal¥26,567
3,320¥29,887¥27,1393,207¥30,346$225,049
28,128$253,177

Accumulated depreciation expenses
MovablesOthersTotal¥18,488
2,310¥20,799¥18,941
2,238¥21,179$156,614
19,574$176,189

Net book value
MovablesOthersTotal¥ 8,078
1,009¥ 9,088¥ 8,198968¥ 9,167$ 68,435
8,553$ 76,988

Millions of yen
2007
2006

Minimum lease payment under finance leases
Due within one year
Due after one year
Total

¥ 3,619
6,900¥10,519¥ 3,699
6,794¥10,493$30,657
58,453$89,111

Lease revenue and depreciation
expense for the term
Lease revenue
Depreciation expense¥4,095¥3,389¥4,359¥3,569Thousands of
U.S. dollars
2007$34,695$28,712

Thousands of
U.S. dollars
2007

Acquisition cost
MovablesOthers
Total

¥408
—
¥408

¥410
—
¥410

$3,461—$3,461

Accumulated depreciation expenses
MovablesOthers
Total

¥125
—
¥125

¥ 30
—
¥ 30

$1,063—$1,063

Net book value
MovablesOthers
Total

¥283
—
¥283

¥379
—
¥379

$2,397—$2,397(Note) Amounts corresponding to interest expenses are added to calculate the assumed amount ofacquisition costs due to the small ratio of the balance of future minimum lease payments to thenet book value of premises and equipment at the term-end.

Thousands of
U.S. dollars
2007(Note) Interest income is added to calculate future lease payment receivables due to the small ratio of
the balance of future lease payment receivables to trade receivables at the term-end.

Millions of yen
2007
2006

Millions of yen
2007
2006

Millions of yen
2007
2006

Minimum lease payment under finance leases
Due within one year
Due after one year
Total

¥ 95
187
¥283

¥ 95
284
¥379

Thousands of
U.S. dollars
2007

$ 806
1,590
$2,397(Note) Interest expenses are added to calculate future minimum lease payments due to the small ratioof the balance of future minimum lease payments to net book value of premises and equipment
at the term-end.
Millions of yen
2007
2006

Total lease payments and assumed
depreciation expenses for the term
Total lease payments
Assumed depreciation expenses

¥95
¥95

¥27
¥27

Thousands of
U.S. dollars
2007

$805
$805

Method utilized for calculation of assumed depreciation expenses:
straight-line method assuming the lease term as useful lives ofassets and a residual value of zero.

28

11. New standards for presentation of net assets

Balance-sheet items

Effective from the year ended March 2007, the Bank has adopted
new standards for the presentation of net assets in accordancewith the Business Accounting Standard for Presenting Net Assets(Business Accounting Standard No. 5 issued by the AccountingStandards Board of Japan on December 9, 2005) and Guidelines
for the Application of Business Accounting Standard for
Presenting Net Assets (Implementation Guidance for BusinessAccounting Standards No. 8, on December 9, 2005). Amounts
equivalent to shareholders’ equity under the previous standards
came to ¥176,725 million (US$1,497,036 thousand) as of theconsolidated balance-sheet date. The net asset section for thereporting term was prepared in accordance with changes in regulations for preparing consolidated financial statements andEnforcement Regulations to the Banking Law.

(1) Previously, deferred hedge losses had been included in otherassets and deferred hedge gains included in other liabilities.
Currently, realized and unrealized gains and losses on hedge
instruments are recorded in the amount of net gains (losses) on
deferred hedge under tax-effect accounting.

12. Stock options
Effective from the year ended March 2007, the Bank has applied
new accounting standards to stock options granted on and after
May 1, 2007, in accordance with the Business AccountingStandard for Stock Option (Business Accounting Standard No. 8
issued by the Accounting Standards Board of Japan on
December 27, 2005) and Guidelines for the Application ofBusiness Accounting Standard for Stock Option (Implementation
Guidance for Business Accounting Standards No. 11, on
December 27, 2005). As a result, total income and income before
income taxes decreased by ¥68 million (US$580 thousand).

13. Changes in presentation(2) Previously, minority interests were recorded separately, next tothe liabilities section. Effective from the reporting term, minority
interests are shown in the net asset section.
(3) Premises and equipment were reclassified under “tangible
fixed assets,” “intangible fixed assets” and “other assets.”
Accordingly, land, buildings and equipment that had previously
been recorded under premises and equipment were recorded as“land,” “buildings,” and “other tangible fixed assets” under tangible fixed assets. Regarding guarantee money and leasehold
deposits, which had previously been recorded under premises
and equipment, guarantee money was included in “other” underother assets, and leasehold deposits were included in other intangible fixed assets. Costs of software developed or obtained werereclassified under software and software in process, both ofwhich were included in intangible fixed assets.

Cash flow items
Amounts that had previously been recorded under loss (gain) on
sale of premises and equipment were recorded under “loss (gain)on sale of fixed assets.” Amounts that had previously beenrecorded under purchase of premises and equipment wererecorded under “purchase of property and equipment” andamounts that had previously been recorded under proceeds fromsale of premises and equipment were recorded under “proceedsfrom sale of property and equipment.”

Effective from the year ended March 2007, the Bank has adopted
new accounting standards for the presentation of financial statements in line with changes on April 28, 2006 in Enforcement
Regulations for the Banking Law (1982 Finance Ministry OrderNo. 10). Changes are as follows:2914. Segment Information
Information regarding the business segments and total income of the Bank and its consolidated subsidiaries for the years ended March
31, 2007 and 2006 is summarized as follows:Business segment information
Millions of yen
Banking
operations

Other
operations

Total

¥

94,806314
95,12164,67230,448¥10,849
2,848
13,69812,736¥ 962¥ 105,656
3,163
108,819
77,409¥ 31,410¥—(3,163)(3,163)(3,010)¥ (152)¥ 105,656—
105,656
74,398¥ 31,257

Total assets
Depreciation and amortization
Capital expenditures¥3,035,946
2,867
7,323

¥34,007
4,113
4,610

¥3,069,954
6,981
11,934¥(10,840)——¥3,059,114
6,981
11,934

Year ended March 31, 2006

Banking
operations

Other
operations¥

Year ended March 31, 2007

Total income and income before income taxes:
Total income from outside customers
Total income from intersegment transactions
Total
Total expenses
Income before income taxes¥

Eliminations

Consolidated

Millions of yen
Total

Eliminations¥11,259
2,848
14,10813,582¥ 526

98,753
3,109
101,863
78,684¥ 23,179¥—(3,109)(3,109)(2,923)¥ (189)¥¥2,966,266
2,999
392
8,965

¥36,025
4,042
40
3,694

¥3,002,292
7,041
433
12,659¥(9,785)———¥2,992,507
7,041
433
12,659Banking
operations

Other
operations

Total income and income before income taxes:
Total income from outside customers
Total income from intersegment transactions
Total
Total expenses
Income before income taxes¥

87,493260
87,754
65,101
22,653

Total assets
Depreciation and amortization
Loss on impairment of fixed assets
Capital expenditures

Year ended March 31, 2007¥

Consolidated¥

98,753—98,75375,76022,993Thousands of U.S. dollars

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

30

$

Total

803,107
2,663
805,771
547,841
257,929$ 91,907
24,132116,040
107,890$ 8,149$$25,717,466
24,29362,039$288,078
34,84439,055$26,005,545
59,137101,094$$

895,015
26,795
921,811665,732
266,079

Eliminations$

Consolidated—(26,795)(26,795)(25,501)$ (1,293)$$(91,829)——$25,913,716
59,137101,094$

895,015—895,015
630,230
264,785

15. Market Value of Securities(a) The market value of, and the valuation difference on, available-for-sale marketable securities at March 31, 2007
and 2006 are summarized as follows:
Millions of yen

Cost

Corresponding
amount in thebalance sheet

Valuationdifference

Gain

Loss

¥ 34,593
366,885
322,90327,442
16,53944,920¥446,398¥ 54,588
360,386
316,515
27,344
16,52645,169¥460,144¥19,995(6,498)(6,387)
(98)
(12)
248
¥13,745¥21,050
158
9
94
55
1,445
¥22,654¥1,054
6,657
6,397
192
67
1,196
¥8,908

Cost

Corresponding
amount in thebalance sheet

Valuationdifference

Gain

Loss

¥ 34,395
379,179
343,243
20,335
15,601
37,349¥450,924¥ 54,061
371,575
336,086
19,98915,49937,605¥463,242¥19,666(7,604)(7,156)
(345)
(102)
256
¥12,318¥20,065
69
2
2
64
1,850
¥21,985

¥ 398
7,674
7,159
348
166
1,594
¥9,666

Cost

Corresponding
amount in thebalance sheet

Valuationdifference

Gain

Loss

$ 293,038
3,107,881
2,735,309
232,468
140,103
380,519$3,781,438$ 462,419
3,052,830
2,681,197
231,635
139,997
382,627$3,897,877$169,380(55,050)(54,111)
(833)
(105)
2,108
$116,438$178,317
1,341
77
797
467
12,244$191,903$ 8,936
56,392
54,189
1,630
573
10,135$75,465

March 31, 2007

StocksBonds:
Government bonds
Municipal bonds
Corporate bonds
Other
Total

Millions of yen

March 31, 2006

StocksBonds:
Government bonds
Municipal bonds
Corporate bonds
Other
Total

Thousands of U.S. dollars

March 31, 2007

StocksBonds:
Government bonds
Municipal bonds
Corporate bonds
Other
Total

(b) Available-for-sale securities sold during the years ended March 31, 2007 and 2006 were as follows:
Millions of yen
2007
2006

Proceeds from sales
Gain
Loss

¥16,138126
45¥35,517
2,179
24

Thousands of
U.S. dollars
2007$136,712
1,072
383

31

16. Repayment Schedule for Bonds
The repayment schedule for bonds classified as available-for-sale securities which have definite maturities are summarized as follows:
March 31, 2007

Bonds
Government bonds
Municipal bonds
Corporate bonds
Other
Total

Due within
1 year or less

¥175,807
169,863—5,944
626¥176,434

Millions of yen
Due in 1 toDue in 5 to
5 years
10 years¥37,238
4,958
22,844
9,435
9,340¥46,578¥105,306
98,810
4,499
1,995
9,779
¥115,085

Due after
10 years¥42,883
42,883——
14,057¥56,941

March 31, 2007

Due within
1 year or lessThousands of U.S. dollars
Due in 1 toDue in 5 to
5 years
10 years

Due after
10 years

Bonds
Government bonds
Municipal bonds
Corporate bonds
Other
Total

$1,489,266
1,438,907—
50,3595,307$1,494,574$315,449
42,003
193,516
79,93079,120$394,570$363,265
363,265——
119,082$482,348$892,048
837,021
38,11916,907
82,837$974,886

17. Money Held in Trusts
A presentation of money trusts by purpose at March 31, 2007 and 2006 is summarized as follows:
March 31, 2007

Money trusts for trading purposes

March 31, 2006

Money trusts for trading purposes

Millions of yen
Amount in the
Valuationbalance sheet
difference¥1,097¥97

Thousands of U.S. dollars
Amount in the
Valuationbalance sheet
difference$9,299Millions of yen
Amount in the
Valuationbalance sheet
difference¥1,129¥129

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

32

$828

18. Subsequent Events
Appropriations of retained earnings
At a shareholders’ meeting held on June 27, 2007, the Bank’s shareholders duly approved the following year-end appropriations ofretained earnings, which have not been reflected in the accompanying consolidated financial statements for the year ended March 31,
2007:Year-end dividends from surplus (¥6.0 = US$0.050 per share)

Millions of yen

Thousands of
U.S. dollars¥1,578¥13,375

19. Cash and Cash Equivalents
A reconciliation between cash and due from banks in the consolidated balance sheets at March 31, 2007 and 2006 and cash and cash
equivalents in the consolidated statements of cash flows for the year then ended is as follows:

Cash and due from banks
Time deposits
Ordinary deposits
Other deposits
Cash and cash equivalents

Millions of yen
2007
2006

Thousands of
U.S. dollars
2007¥102,133 ¥71,543
(100)
(350)
(2,163)(2,977)(2,579)(4,014)¥ 97,291 ¥64,201¥865,174(847)(18,323)(21,852)¥824,151

33

34

Non-Consolidated Financial Section
Non-Consolidated Balance Sheets

36

Non-Consolidated Statements of Income

37

Non-Consolidated Statement of Changes in Net Assets

38

Non-Consolidated Statement of Stockholders’ Equity

40

Notes to Non-Consolidated Financial Statements

41

Report of Independent Auditors

45

35

Non-Consolidated Balance Sheets
Suruga Bank Ltd.

Thousands of
U.S. dollars(Note 2)Millions of yen

2007

2006

Change from2006

ASSETS:Cash and Due from Banks
Call Loans
Monetary Claims Bought
Trading Account Securities
Money Held in Trust
Securities
Loans and Bills Discounted
Foreign Exchanges
Other Assets
Premises and Equipment
Tangible Fixed Assets
Intangible Fixed Assets
Deferred Tax Assets
Customers’ Liabilities for Acceptances and Guarantees
Reserve for Possible Loan Losses

101,872
170,558
396
499
2,188
464,7932,246,830
3,207
24,359—32,905
10,282
16,111
7,473(36,245)

70,215
200,601
397
499
2,246
467,2172,183,198
3,156
19,06845,137——
17,532
7,590(38,854)

31,657(30,043)(1)0(58)(2,424)63,632
51
5,291(45,137)
32,905
10,282(1,421)
(117)
2,609

862,961
1,444,800
3,354
4,234
18,534
3,937,259
19,032,869
27,169206,348—
278,740
87,100136,476
63,306(307,038)

Total Assets

3,045,231

2,978,008

67,22325,796,117

LIABILITIES AND STOCKHOLDERS’ EQUITY:
Liabilities
Deposits
Call Money
Foreign Exchanges
Other Liabilities
Reserve for Bonus for Directors and Corporate Auditors
Reserve for Employees’ Bonus
Reserve for Employee Retirement Benefits
Reserves under Special Laws
Acceptances and Guarantees

2,832,697
2,361
12
24,854
51
497
—
0
7,473

2,796,672
822
14
13,402
—
482
223
0
7,590

36,025
1,539(2)
11,452
51
15
(223)
0
(117)

23,995,741
20,000106
210,538
432
4,210
—
0
63,306

Total Liabilities

2,867,946

2,819,207

48,73924,294,335

Stockholders’ Equity
Common Stock
Capital Surplus
Capital Surplus Reserve
Retained Earnings
Earned Surplus Reserve
Voluntary Reserves
Unappropriated Profits at the End of the Term
Net Unrealized Gains (Losses) on Securities, Net of Taxes
Treasury Stock

—
—
—
—
—
—
—
—
—

30,043
18,585
18,585
105,01330,04359,872
15,0977,202(2,044)

—
—
—
—
—
—
—
—
—

—
—
—
—
—
—
—
—
—

Total Stockholders’ Equity—

158,800——

Total Liabilities and Stockholders’ Equity—

2,978,008——

30,043
18,585
18,585
122,402
30,04392,359(1,953)
169,078
8,080
58
8,138
68

—
—
—
—
—
—
—
—
—
—
—
—

—
—
—
—
—
—
—
—
—
—
—
—

254,496
157,440
157,440
1,036,870
254,496782,374(16,546)
1,432,261
68,448491
68,940580

177,285——

1,501,781

3,045,231——

25,796,117

As of March 31,

Net Assets
Common Stock
Capital Surplus
Capital Surplus Reserve
Retained Earnings
Earned Surplus Reserve
Other Retained Earnings
Treasury Stock
Total Stockholders’ Equity
Net Unrealized Gains (Losses) on Securities, Net of Taxes
Net Deferred Gains (Losses) on Hedging Instruments, Net of Taxes
Total Valuation and Translation Adjustments
Subscription Rights to Shares
Total Net Assets
Total Liabilities and Net Assets
See notes to non-consolidated financial statements.

36

2007

Non-Consolidated Statements of Income
Suruga Bank Ltd.

Thousands of
U.S. dollars(Note 2)Millions of yen

For the Years Ended March 31,

2007

2006

Change from
2006

2007

Ordinary Income
Interest Income
Interest on Loans and Discounts
Interest and Dividends on Securities
Trust Fees
Fees and Commissions
Other Operating Income
Other Income

97,32081,34175,5513,665
013,525
1,292
1,162

89,89374,01069,9403,489
012,211
1,096
2,576

7,427
7,331
5,611
176
0
1,314
196
(1,414)

824,401
689,039
639,993
31,048
0
114,572
10,946
9,843

Operating Expenses
Interest Expenses
Interest on Deposits
Fees and Commissions
Other Operating Expenses
General and Administrative Expenses
Other Expenses

66,893
11,033
5,372
7,975
211
37,861
9,811

67,158
6,755
1,759
7,130
263
36,487
16,520

(265)
4,278
3,613
845
(52)
1,374
(6,709)566,651
93,46245,50967,5601,793
320,723
83,111

Ordinary Profits

30,42722,735

7,692

257,749

Extraordinary Profits
Extraordinary Losses

2,995
215

2,927
637

68
(422)

25,371
1,828

Income before Income Taxes and Others
Provision for Income Taxes and Others
Deferred Income Taxes
Net Income

33,206
12,335792
20,07925,024
1,437
9,283
14,3048,182
10,898(8,491)
5,775

281,292
104,492
6,709
170,090

See notes to non-consolidated financial statements.

37

Non-Consolidated Statement of Changes in Net Assets
Suruga Bank Ltd.

Capital Surplus

Balance at March 31, 2006

CapitalStock

CapitalSurplusReserve

30,043

18,585

Millions of yen
Stockholders’ Equity
Retained Earnings
Other Retained Earnings
EarnedReserve for
Surplus
Voluntary
Earned Surplus
Retirement
Reserve
Reserve
Brought Forward
Benefits

30,043840

Changes of Items During the Period
Dividends from Surplus
Bonus for Directors andCorporate Auditors
Net Income
Provision to Voluntary Reserves
Repurchase of Treasury Stock
Disposal of Treasury Stock
Net Changes of Items Other
than Stockholders’ Equity
Total
Balance at March 31, 2007

Changes of Items During the Period
Dividends from Surplus
Bonus for Directors andCorporate Auditors
Net Income
Provision to Voluntary Reserves
Repurchase of Treasury Stock
Disposal of Treasury Stock
Net Changes of Items Other
than Stockholders’ Equity
Total
Balance at March 31, 2007

30,043

18,585

Treasury
Stock

Total
Stockholders’Equity(2,044)

151,598

105,013(2,630)(2,630)(50)
20,079(11,000)(50)
20,079—(9)(9)

11,0006,389

17,38930,043840

70,032

21,487

122,402

Subscription
Rights toSharesTotal
Net Assets

Millions of yen
Valuation and Translation Adjustments
Net Unrealized
Net Deferred
Total Valuation
Gains (Losses) on Gains (Losses) on
and
Available-for-sale Hedging Instruments,
Translation
Securities
Net of Taxes
Adjustments

7,202

—

7,202

—

158,800(2,630)(2,630)

(168)
259

(50)
20,079
—
(168)
249

(50)
20,079
—
(168)
249

90

17,480

878
878

58
58

936
936

68
68

1,004
18,485(1,953)

169,078

8,080

58

8,138

68

177,285

See notes to non-consolidated financial statements.

38

15,097

11,000Stockholders’ Equity

Balance at March 31, 2006

59,032

Total
Retained
Earnings

Non-Consolidated Statement of Changes in Net Assets
Suruga Bank Ltd.

Capital Surplus

Balance at March 31, 2006

CapitalStock

CapitalSurplusReserve

254,496

157,440

Thousands of U.S. dollars (Note 2)
Stockholders’ Equity
Retained Earnings
Other Retained Earnings
EarnedReserve for
Surplus
Voluntary
Earned Surplus
Retirement
Reserve
Reserve
Brought Forward
Benefits

254,496

7,115

Changes of Items During the Period
Dividends from Surplus
Bonus for Directors andCorporate Auditors
Net Income
Provision to Voluntary Reserves
Repurchase of Treasury Stock
Disposal of Treasury Stock
Net Changes of Items Other
than Stockholders’ Equity
Total
Balance at March 31, 2007

Changes of Items During the Period
Dividends from Surplus
Bonus for Directors andCorporate Auditors
Net Income
Provision to Voluntary Reserves
Repurchase of Treasury Stock
Disposal of Treasury Stock
Net Changes of Items Other
than Stockholders’ Equity
Total
Balance at March 31, 2007

127,892

889,565(22,281)(22,281)(423)
170,090(93,180)(423)
170,090
—

(79)

(79)

93,18054,124

147,305

593,241

182,016

1,036,870

93,180254,496

157,440

Stockholders’ Equity

Balance at March 31, 2006

500,061

Treasury
Stock

Total
Stockholders’Equity(17,315)

1,284,185

254,496

7,115

Thousands of U.S. dollars (Note 2)
Valuation and Translation Adjustments
Net Unrealized
Net Deferred
Total Valuation
Gains (Losses) on Gains (Losses) on
and
Available-for-sale Hedging Instruments,
Translation
Securities
Net of Taxes
Adjustments

61,008—Total
Retained
Earnings

61,008Subscription
Rights toShares—Total
Net Assets

1,345,194(22,281)(22,281)(1,424)
2,194

(423)
170,090—(1,424)
2,115

(423)
170,090—(1,424)2,115

769

148,075

7,439
7,439

491
491

7,931
7,931

580
580

8,512
156,587(16,546)

1,432,261

68,448491

68,940580

1,501,781

See notes to non-consolidated financial statements.

39

Non-Consolidated Statement of Stockholders’ Equity
Suruga Bank Ltd.

ThousandMillions of yen

Number of
SharesCommonStockCapitalSurplus

Legal
Reserve

Voluntary
Reserve

Retained
Earnings(Deficit)

Net Unrealized
Gains (Losses)
on Securities,
Net of Taxes

Treasury
Stock,
at CostBalance at March 31, 2005
264,939Net Income for the Year
Ended March 31, 2006
Cash Dividends Paid
Reversal of Voluntary Reserve
Bonus for Directors andCorporate Auditors
Losses on Sales of Treasury Stock
Net Change During the Year

30,043

18,58530,04351,072

11,137

4,896(2,555)8,800

14,304(1,443)(8,800)

Balance at March 31, 2006

30,043264,939

See notes to non-consolidated financial statements.

40

(30)
(71)
18,58530,04359,872

15,097

2,305

511

7,202

(2,044)

Notes to Non-Consolidated Financial Statements
Suruga Bank Ltd.

1. Summary of Significant Accounting Policies

3. Investment Securities(a) Basis of Preparation

Investment securities at March 31, 2007 and 2006 were as follows:

The accompanying non-consolidated financial statements of
Suruga Bank Ltd. (the “Bank”) are prepared on the basis ofaccounting principles generally accepted in Japan, which are different in certain respects as to the application and disclosure
requirements of International Financial Reporting Standards, andare compiled from the non-consolidated financial statements prepared by the Company as required by the Securities andExchange Law of Japan.
The non-consolidated financial statements have been prepared on the same basis as the accounting policies discussed in
Note 1 to the consolidated financial statements except that theaccompanying financial statements relate to the Bank only, withinvestments in subsidiaries and affiliates being substantially statedat cost.
Certain representations of the prior year’s non-consolidated
financial statements and the related footnote amounts have been
made to conform 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
yen amounts, solely for convenience, at ¥118.05 = U.S.$1.00, theexchange rate prevailing on March 31, 2007. 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.

Thousands of
U.S. dollars
2007

Millions of yen
2007
2006

Japanese government bonds
Local government bonds
Corporate bonds
Corporate stock
Other securities
Total¥316,515
27,344
17,341
58,672
44,919¥464,793¥336,086
19,98916,11957,75037,272¥467,217$2,681,197
231,635
146,900
497,013
380,511$3,937,259

Shares of subsidiaries
included in corporate stock

¥

¥

$

712

712

6,038

4. Loans and Bills Discounted(a) Loans and bills discounted at March 31, 2007 and2006 were as follows:
Thousands of
U.S. dollars
2007

Millions of yen
2007
2006

Bills discounted
Loans on bills
Loans on deeds
Overdrafts
Total

¥

4,532
150,843
1,891,307
200,146¥2,246,830

¥

4,274
192,157
1,809,536
177,229¥2,183,198$

38,392
1,277,796
16,021,239
1,695,440$19,032,869(b) Loans and bills discounted at March 31, 2007 and2006 included the following items:

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

Millions of yen
2007
2006

Thousands of
U.S. dollars
2007¥ 1,193
50,8781,185
35,849¥89,105$ 10,109
430,987
10,038
303,680$754,815¥

2,451
68,462
1,211
39,796¥111,922

41

Notes to Non-Consolidated Financial Statements

5. Fixed Assets
Fixed assets at March 31, 2007 and 2006 were as follows:
Millions of yen
2007

Asset category¥15,648
22,04424,752—¥62,445

¥ 743
549
2,450
99
¥3,842

¥

80
278
2,525
—
¥2,884¥16,31122,31524,67899¥63,404¥—
15,965
14,534—¥30,499

¥

—
572
1,252
—
¥1,825¥16,311
6,350
10,14499¥32,905

¥

¥

¥

—
—
—
—

¥13,4655,552
572¥19,589¥ 9,156—150¥ 9,307¥1,361—0¥1,361¥ 4,308
5,552
421¥10,282¥ 112¥ 4,976¥¥¥ 4,976

Intangible fixed assets
Software
Software suspense account
Other
Total

¥

Others————¥¥ 4,935

—
—
—
—

¥

¥ 153

Balance atreporting term-end

Depreciation during
reporting term

Net book
value atterm-end

Increase during
reporting term

Tangible fixed assets
Land
Buildings
Equipment
Construction in progress account
Total

Decline during
reporting term

Accumulated
depreciation at
term-end

Balance at
previous term-end

0—(Notes) 1. The amounts recorded on the balance sheet under the sub-categories of “land” and “buildings” within the category of “tangible fixed assets” are smaller than the amounts recorded above by ¥266 million(US$2,260 thousand) for land and ¥65 million (US$551 thousand) for buildings. These amounts represent the book values of leased assets of which the Bank is the sitting tenant, and are classified as“tangible fixed assets - other.”
2. As the value of intangible fixed assets accounts for no more than 1,000th of the value of the Bank’s total assets, and are thus immaterial, the relevant figures have been omitted from the above categories of Balance at previous term-end, Increase during reporting term, and Decline during reporting term.
3. “Others” includes guarantee money and rental deposits.

Thousands of U.S. dollars
2007

Asset category

Tangible fixed assets
Land
Buildings
Equipment
Construction in progress account
Total
Intangible fixed assets
Software
Software suspense account
Other
Total
Others$132,556
186,738
209,681—$528,977$ 6,297
4,656
20,760838$32,553

$

679
2,357
21,394—$24,431$138,174
189,038
209,047838$537,099$—
135,241
123,117—$258,358

$

—
4,853
10,609—$15,463$138,174
53,79785,929838$278,740

$

$

—
—
—
—

$

$

—
—
—
—

$114,063
47,035
4,845$165,944$ 77,564—
1,278$ 78,843$11,531—4$11,535$ 36,498
47,035
3,566$ 87,100$ 1,301$954$ 42,157$$$ 42,152$$ 41,809
Millions of yen
2006

Land
Buildings
Furniture and equipment
Guarantee money, net
Software, net
Less: accumulated depreciation
Fixed assets, net

42¥15,648
22,04424,752
5,356
7,282
75,084(29,947)¥45,137$

Balance atreporting term-end

4

Depreciation during
reporting term

Net book
value atterm-end

Increase during
reporting term

—
—
—
—

Decline during
reporting term

Accumulated
depreciation at
term-end

Balance at
previous term-end—

6. Deposits

10. Other Operating Income and Expenses

Deposits at March 31, 2007 and 2006 were as follows:
Thousands of
U.S. dollars
2007

Millions of yen
2007
2006

Current deposits
Ordinary deposits
Deposits at noticeTime deposits
Other deposits
Total

¥

73,774
1,054,999
82,601
1,455,364
165,958¥2,832,697¥

80,4071,183,381
18,0001,366,375
148,507¥2,796,672

624,9428,936,884
699,715
12,328,369
1,405,829$23,995,741

Common stock was as follows:(2) Issued andoutstanding:Millions of yen
2007
2006

$

7. Common Stock(1) Authorized:

Other operating income and expenses for the years ended March
31, 2007 and 2006 were as follows:

400,000,000 shares no per value at March
31, 2007 and 2006
264,939,248 shares at March 31, 2007 and2006

Other operating income:Gain on foreignexchange transactions
Gain on sales of bonds
Gain on redemption of bonds
Other
Total
Other operating expenses:
Loss on sales of bonds
Loss on redemption of bonds
Other
Total

Under the Banking Law of Japan, an amount equivalent to atleast 20 percent of cash dividends paid and other cash outflows
from retained earnings must be appropriated to the legal reserve
until such reserve and the capital surplus account equal 100 percent of the Bank’s stated capital.
In the case that the sum of the capital surplus account andthe legal reserve exceed 100 percent of the common stock
account, then the amount of the excess is available for appropriation by resolution of the shareholders.

9. 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.
Amounts per share of net assets are computed based on thenumber of shares of common stock outstanding at each balance
sheet date, less treasury stock.

Net income
Net assets
Diluted net stock2006¥ 76.31673.40¥ 76.16¥ 54.29603.68¥ 54.21

¥

87
222
786
—
¥1,096$ 1,068
746
8,959
172
$10,946

¥

¥

$

45
166
—
¥ 211

24
224
14
¥ 263

383
1,409
—
$ 1,793

11. General and Administrative Expenses

8. Capital Surplus and Legal Reserve

yen

¥ 126
88
1,057
20
¥1,292

General and administrative expenses for the years ended March
31, 2007 and 2006 were as follows:(3) Treasury stock: 1,772,000 shares at March 31, 2007

2007

Thousands of
U.S. dollars
2007

U.S. dollars
2007$0.6465.704$0.645

Salaries and allowances
Depreciation
Taxes
Other
Total

Millions of yen
2007
2006

Thousands of
U.S. dollars
2007¥13,639
3,193
2,207
18,820¥37,861$115,543
27,051
18,701
159,425$320,723¥13,561
3,090
2,071
17,764¥36,487

12. New standards for presentation of net assets
Effective from the year ended March 2007, the Bank has adopted
new standards for the presentation of net assets in accordancewith the Business Accounting Standard for Presenting Net Assets(Business Accounting Standard No. 5 issued by the AccountingStandards Board of Japan on December 9, 2005) and Guidelines
for the Application of Business Accounting Standard for
Presenting Net Assets (Implementation Guidance for BusinessAccounting Standards No. 8, on December 9, 2005). Amounts
equivalent to shareholders’ equity under the previous standards
came to ¥177,158 million (US$1,500,709 thousand) as of thebalance-sheet date. The net asset section for the reporting term
was prepared in accordance with changes in regulations for
preparing financial statements and Enforcement Regulations to
the Banking Law.

43

Notes to Non-Consolidated Financial Statements

13. Stock options
Effective from the year ended March 2007, the Bank has applied
new accounting standards to stock options granted on and after
May 1, 2007, in accordance with the Business AccountingStandard for Stock Option (Business Accounting Standard No. 8
issued by the Accounting Standards Board of Japan on
December 27, 2005) and Guidelines for the Application ofBusiness Accounting Standard for Stock Option (Implementation
Guidance for Business Accounting Standards No. 11, on
December 27, 2005). As a result, total income and income before
income taxes decreased by ¥68 million (US$580 thousand).

14. Reserve for bonus for directors and corporate
auditors
The reserve is provided for the payment of bonus for directors
and corporate auditors, an estimate of which is determined as of
the balance sheet date.
(Changes in accounting standards)
Previously, bonus for directors and corporate auditors was
accounted for as a reduction in unappropriated retained earnings
at the payments. Effective from the year ended March, 2007, theBank has applieded “Accounting Standard for directors’ bonuses”(Accounting Standards Board of Japan (“ASBJ”) Statement No. 4
November 29, 2005). Under the new standards, payments ofbonus for directors and corporate auditors are treated as
expenses. Accordingly, the reserve for bonus for directors andcorporate auditors is maintained at the amount accrued at theterm-end, based on a portion attributable to their services provided during the term. As a result, operating expenses increasedby ¥51 million (US$432 thousand) over the corresponding figure
calculated under the previous standards, and total income andincome before income taxes decreased by the same amount.

44

45

Printed in Japan