Annual Report 2018Year ended March 31, 2018

Profile

The Region’s Best Partner for Creating
a Prosperous, Dynamic and Bright Future
Founded in 1878, The Iyo Bank, Ltd. is a regional financial services institution boasting a solid operating base centered on the four prefectures of Shikoku and the seven prefectures surrounding
the Seto Inland Sea. With branches in Tokyo and Nagoya as well, we are Japan’s No.1 regionalbank in terms of broad regional coverage. In recent years, we have also enhanced our network ofoverseas bases primarily in the ASEAN region to support the international business expansion of
our clients. We at Iyo Bank are working to be the region’s best partner for creating a prosperous,
dynamic and bright future by offering friendly and trustworthy financial services to customers.

Corporate Credo

1

Creating a bright and prosperous future for the region

2

Offering the best service and being worthy of people’s trust

3

Rendering our best service with gratitude in our hearts

Contents
Our Operating Area∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙2
Message from the President∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙4
Corporate Governance / Compliance / Risk Management∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙8
Financial Section∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙10
Corporate Data / Directory∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙49

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

Annual Report 2018Year ended March 31, 2018

010_0057401373009.indd

1

2018/08/27

14:15:29

Cover photos (from the top):
Sunset view at Kurushima-Kaikyo Bridges in ImabariNight view at Dogo Onsen Honkan in
Matsuyama
Terraced fields in Uwajima

Head Office
1, Minami-Horibata-cho, Matsuyama 790-8514
Tel: (089) 941-1141
URL: http://www.iyobank.co.jp/

Year of Foundation
1878
Number of Employees(The Iyo Bank, Ltd. and its Consolidated Subsidiaries)
3,122
Number of Branches(As of March 31, 2018)
151 (Domestic 149, Foreign 2)

Global Network
Our global network comprehensively supports our clients’ overseas business endeavors.
We support our customers’ efforts to globalize their businesses through trade operations, the establishment of local corporations
and fund procurement by leveraging our network of four overseas sites consisting of the Hong Kong branch, Singapore branch andtwo representative offices in New York and Shanghai.
Our overseas network also involves business alliances and cooperations with banks, etc., in China, India, Indonesia, Mexico, Singapore, Philippines, Taiwan, Thailand, U.S.A. and Vietnam (as of March 31, 2018).
Bangkok, Thailand
Business alliance with Kasikorn Bank
Dalian, China
Business alliance with Bank of DalianHanoi, Vietnam
Business cooperation with BIDVJakarta, Indonesia
Business alliance with BNI
Mexico	Business cooperation with Jalisco, Aguascalientes, Guanajuato, Nuevo León and
Makati City, Philippines
Business alliance with Metropolitan Bank
Mumbai, India
Business cooperation with State Bank of India
Shanghai, China
Business alliance with Bank of Communications
Singapore
Business alliance with UOBTaipei, Taiwan
Business alliance with CTBC Financial Holding
Honolulu, Hawaii,U.S.A.
Business alliance with Central Pacific Bank

Banamex (Mexico City)

New York, U.S.A.

Representative Office

Shanghai, China

Representative OfficeHong Kong
BranchSingapore
BranchOur Overseas Business Support• Provision of various types of information about entering overseas markets• Advice about entering overseas markets• Advice about trade operations and fund settlements• Support for funds procurement in the local area overseas• Implementation of overseas business matching• Holding of seminars about entering overseas markets
IYO BANK Annual Report 20181

Our Operating Area

Domestic Branch Network
The No. 1 regional bank in terms of broad regional coverage, Iyo Bank’s network consists of 149
branches located in 13 prefectures (as of March 31, 2018).

Imabari Region
Number of ocean-going vessels owned New vessels completed in Towels (2014)
by domestic ship owners (2017)
Japan (2016)¥45.6 billion shipped in Japan
3,050 total vessels in Japan

12.51 million gross tons in Japan

31.1%

16.9%

5

53.8%

(950 ships)(2.11 million gross tons)(¥24.6 billion)

No.2 in Japan

No.2 in Japan

No.1 in Japan

Hiroshima

Automotive, shipbuilding,electronics* Number of ocean-going vessels owned by domestic ship owners (2017) are Iyogin Regional Economy Research Center, Inc.
(IRC) estimates.

1

Matsuyama Region

Yamaguchi

The Matsuyama region has companies with large shares in
products such as “small oncethrough steam boilers,” “farmmachinery,” and “dried bonito
shavings.”

Imabari

Shipbuilding, ocean transport,
oil, towels and garments

Matsuyama

Electronics, farm machinery, chemicals, tourism

117

2

Ehime

Fukuoka

Chemicals, electronics,
nonferrous metal, general machinery

Ozu
Yawatahama

6

Citrus, food processing

Steel, automotive,
electronics, tourism

Culture fishery

Sea culture industry (2016)¥509.7 billion total national production

12.8%(¥65.5 billion)

No.1 in Japan

Economic Indicators of the Setouchi Region
Total of ten
prefectures

17.1%
Total population(Population
estimate)(October 2017)(Prepared based on various statistical data)
2

IYO BANK Annual Report 2018

Total of nine
prefectures(excluding Hyogo)

13.7%
Total population(Population
estimate)(October 2017)

Total of ten
prefectures

15.6%
Gross prefectural
product(Nominal)(Fiscal 2014)

Total of nine
prefectures(excluding Hyogo)

11.8%
Gross prefectural
product(Nominal)(Fiscal 2014)

1

Kochi

UwajimaOita

Uwajima Region

Niihama
Saijo

Main Industries in Ehime Prefecture• Industries with top national share concentrated in each region• Manufactured product shipments from Ehime Prefecture
totaled ¥4.1 trillion (46% of Shikoku) in 2015

Industrial Structure of the Setouchi
Region• The Setonaikai coastal region has established various industrial structures

2

3

Shikokuchuo Region

Hyogo

Pulp and paper industry (2015)

Okayama¥7,279.2 billion shipped in Japan

Automotive,
oil refining, steel

7.1%

3

(¥520.2 billion)

No.2 in Japan

Osaka

5

Niihama and Saijo Region

KagawaShipbuilding, textiles

Manufactured product shipments (2015)¥1,667.3 billion
Shikokuchuo

Paper manufacturing and processing

Approx. 41% of shipments of manufactured

1

products in Ehime

As a corporate town under the Sumitomo Group, nonferrous
metal, chemicals, steel, machinery and equipment are concentrated in the Niihama region.

Tokushima

No. 1 Market Sharein Ehime

2

Tokyo

About Ehime Prefecture• Area5,676.23 km2 (As of October 1, 2017)• Population

1,354,340 (As of June 1, 2018)• Number ofhouseholds

596,839 (As of June 1, 2018)

Strengthen Measures
Toward Regional
Vitalization through the“Shikoku Alliance”• Formed the “Shikoku Alliance,” a comprehensive alliance between four regionalbanks aiming for revitalizing the Shioku
region in November 2016• Announced key measures and the logo in
April 2017

1

Aichi

* The numbers next to the prefecture names denotenumber of branches.
* These 149 domestic branches include our Internet
branch.

The region, customers and the four banks willsustainably grow and develop
Iyo Bank

Hyakujushi Bank

Build

Utilize

Support industrial
development

Shikoku resources
branding

FosterConnect

Support the formationof financial assets

Shikoku Bank

Support network
expansion

Cooperate

Awa Bank
IYO BANK Annual Report 20183

Message from the President

Financial and Economic Environment

In fiscal 2017, ended March 31, 2018, moderate recovery
continued in the Japanese economy amid an increase in exports fueled by global economic recovery, combined with apickup in capital investment due to improved corporate earnings. Construction investment was likewise robust due toexpanded inbound (tourist) demand and signs of redevelopment primarily in urban areas. A pickup was also seen inpersonal consumption, reflecting an improved employment
and income environment. Moderate recovery is likely to continue, despite the need for caution over the impact of overseas
economic uncertainties and financial market fluctuations.
The economy of Ehime Prefecture showed lingering
weakness in certain areas of production and personal consumption, but overall recovery momentum is expected tocontinue amid ongoing signs of upturn.

Business Performance

Under these circumstances, in keeping with our spirit ofgratitude toward customers we worked to ensure our ability
to provide products and services tailored to customer needs.
We endeavored to expand our fields of operation andstrengthen profitability in the aim of being a bank that is stillneeded 10 years in the future.

Corporate Governance
Iwao Otsuka, President

Introduction

March 15, 2018, marked our 140th anniversary of establishment. I would like to wholeheartedly thank our customers
and members of the local community, whose generous
support has enabled us to serve the community for 140 years.
The Bank was founded on March 15, 1878 in Kawanoishi,
Honai-cho, Yawatahama City, as The 29th National Bank—
the first bank in Ehime Prefecture. Since its founding, theBank has grown in the belief that no development is possible
for us without the development of the local community.
Today, the business environment we face is undergoing
dramatic structural change, including a falling birthrate andincreasingly aging population, population decline, globalization, as well as artificial intelligence and robotics, IoT (theInternet of Things) and other keystone digital technologies.
Based on our commitment to the corporate credo of“creating a bright and prosperous future for the region,” I
believe we can respond effectively to the changes in thebusiness environment. Through the creation of new value forour stakeholders, we can sincerely fulfill that mission, ensuring that the people of our region are glad to still have us
around 10 years down the road and beyond. In this endeavor,
I trust we can count on the continued support of stakeholders
into the future.

4

IYO BANK Annual Report 2018

In corporate governance initiatives, the Bank decided toappoint as outside directors experts thoroughly versed in thebusiness of the Bank and issues facing it, to ensure diversityof insight, specialization and experience. This will enhance theauditing and supervisory functions and energize the Board of
Directors.
In addition, we established the Management Deliberation
Committee, comprising the Bank’s representative directors
and all members of the Audit and Supervisory Committee, todeliberate director nominations and compensation. With
these measures, the Bank has endeavored to strengthen thecorporate governance system and enhance its functions.
Turning to the dividend, our basic policy is to continue to
pay out a stable dividend, while bearing in mind the public
mission of the Bank and the need to ensure a robust operating base with a strong financial position supported by retained earnings.
To mark our 140th anniversary in March 2018, the Bank
paid out a commemorative dividend of ¥2.00 per share in thefiscal year ended March 31, 2018 (the 115th term), as a
gesture of gratitude to our shareholders for their support over
the years.

Regional Vitalization Initiatives

In line with its aim of growing sustainably along with its
region, Iyo Bank is involved in a variety of regional vitalization
measures.
Across our lending and solutions operations, we continued to work to address management issues and growth
support through “sales activities based on assessments ofbusiness viability.” Also, in February 2018 we began handling“Chiiki no Mirai (future in the region)” private-placement
bonds aimed at providing hometown support following

Manabiya private-placement bonds aimed at providing hometown support. By donating a portion of the commissions
collected on corporate bond issuance to local governments,
we will support measures in the “Ehime: Our home of the
future and regional revitalization” campaign, in partnershipwith the bond-issuing companies.
Under the Shikoku Alliance of four regional banks on theisland launched in April 2017, we signed a basic agreement
for partnership in capital markets with Tokyo Stock Exchange,
Inc. in October, to revitalize the regional economy through,for example, support for companies listing. In November, wearranged the “Shikoku inbound business talks in Thailand”
event to raise the profile of Shikoku and encourage tourist
visits, as well as the “Seminar on use of rented plants, forentrants into the Vietnam market,” in support of customers
considering expansion of their business overseas. January
2018 saw the establishment of the Shikoku Alliance CapitalCo., Ltd. a joint investment by four banks, and in March theregional revitalization fund and the public-private joint SME
regeneration fund were created. In April 2018, we relaunched
Iyogin Securities Co., Ltd. as the Shikoku Alliance Securities
Co., Ltd., with the Shikoku Alliance Securities as the core
securities company, to reinvigorate operations. Looking
ahead, we expect these initiatives to promote development of
the region by supporting the growth of customers throughfund investment and other channels.
In measures to reinvigorate the area using Fintech, wehave been carrying out field trials since February 2018 for theelectronic community currency IYOGIN Co-in. This is a cashless settlement system using QR codes. We are carrying out
testing into technological, security and legal aspects and areprogressing with discussions on commercialization.

Head Office Organization

In head office organization initiatives, in August 2017 wetransferred the Ship Finance Division to Imabari City where
there is a cluster of international shipping companies. We willcontribute to the further development of maritime industries
within the prefecture, which has a large share of this businessin Japan, by responding to customers’ diversifying needs forhigh-quality shipping-related information and prompt, wideranging financial services, in Japan and overseas.
We reorganized the Women’s Career Promotion Department established within the Human Resources Division into
the Diversity & Inclusion Promotion Department, to create anenvironment in which all employees at the Bank can give freerein to their individual capabilities at the workplace.

Bank Branches and ATMs

Iyo Bank has a broad-ranging branch network that covers 13
prefectures in Japan, the largest number of prefectures
covered by a regional bank. We have been upgrading ourbranches and strengthening customer service systems so that
customers can use our services more effectively.
In June 2017, the Toiya-machi and Shiomi branches were
integrated, and the Matsuyama Kita branch was newly built
and opened. At the latter, we are opening the “Satto (quick)counter”, which enables us to serve our customers promptly,
and have expanded consultancy booth services. We are also
working to improve customer convenience throughintroduction of new branch functions in a pilot scheme fornext-generation branches, including the addition of an Iyogin
Insurance Plaza Matsuyama Kita, the 10th location within theprefecture with this facility.

Products and Services

In April 2017, we began the rollout of our Raku Raku insurance (application) system able to handle life-insurance policy
and other applications using an Iyo Bank tablet, without any
paper form-filling. In November that year, to provide morecustomer-friendly services by simplifying procedures, we
introduced a system for mobile-terminal applications enablingprior screening for loans without collateral and housing loans.
As part of the initiatives under the Shikoku Alliance, webegan offering the “Shikoku no Mirai (future in Shikoku)”
investment trust launched independently by the Bank in July
2017. We are contributing to revitalization of the Shikoku
economy and formation of customer assets through investments in local companies. In September, we began offering
the new “Shikoku no Kizuna” insurance package combining
all kinds of advisory information relating to health, including ahealth and medical consultation service and healthcare facility
information service to go with our single premium whole life
insurance.
In partnerships and alliances with various outside companies, in May 2017 we also teamed up with TSUBASA Alliancebanks to launch the development of the API common platform
directly linking up Bank systems with Fintech companies, so as
to quickly provide appealing new services to the customers.
In November 2017, we released the “Money Manager”
smartphone application that enables balance inquiries anddeposit/withdrawal detail inquiries from registered accounts
in as few as 3 taps, using fingerprint authentication. In February 2018, we also added an automatic push notification
function for deposit/withdrawal transactions. Through theseand other upcoming functions, we are working to create anenvironment in which transactions can be completed simply
and conveniently at any time and any place.

CSR Activities

In addition to its financial activities, to realize its mission to“create a bright and prosperous future for the region,” Iyo
Bank is undertaking a range of activities under the CSR
Committee as part of its corporate social responsibilities(CSR). As a cross-organizational body at our head office, the
CSR Committee is proactively involved in social welfare
activities, cultural activities, environmental conservation andother issues.
As part of our social welfare activities, we have provided
scholarships and donate welfare devices through the “IyoBank Social Welfare Fund.” In the scholarship program, we
provided support to 22 per-school-year students in our initiative to foster the leaders of the next generation, bringing thetotal of scholarship recipients since the launch of the programin 1978 to 826, and the total scholarship amount to ¥400.59
million (as of March 31, 2018).
In cultural activities, we kept providing aid under the“Regional Cultural Activity Assistance Program” for groups
that are continuing valuable locally-based cultural activities.
As environmental protection activities, in addition to

IYO BANK Annual Report 20185

Message from the President

offering grants through the Iyo Bank Environment Foundation“Evergreen” (public trust), we carried out tree planting aspart of the activities of the Society to Promote the Creation ofForests in Towns, for which the Bank serves as the secretariat,
together with other member companies and organizations.

IR Activities

Iyo Bank is proactively working to improve disclosure. To
increase management transparency, we held annual results
briefings for analysts and institutional investors in Tokyo in
June and December 2017, and held results briefings accompanied by a special lecture presentation in six locations
around Ehime Prefecture in July 2017.
To foster a deeper understanding of its management
activities by stockholders, suppliers and investors, the Bank israted highly, with an “AA” rating by Japan Credit Rating
Agency (JCR), an influential Japanese credit rating agency, an“A” rating by Standard & Poor’s (S&P) and an “AA-” ratingby Rating and Investment (R&I).

Risk Management and Compliance

We launched measures to establish a risk appetite framework
for business management. Through revisions to enable flexible strategy through establishment of project teams andmonitoring measures, we aim to strengthen corporate governance and revitalize management discussions, to ensurebalanced, sustainable growth.
With respect to compliance, we took measures to prevent
antisocial forces from entering facilities and are stepping up
screening measures, as well as positioning ourselves for a
fourth round of mutual evaluation involving Japanese banks
through the FATF (Financial Action Task Force).

Business Performance

In fiscal 2017, ended March 31, 2018, performance was asfollows: The term-end balance of deposits, including NCDs,
increased ¥88.9 billion over the previous fiscal year-end, to¥5,546.0 billion (US$52,202 million). The loan balance at theend of the fiscal year rose ¥249.3 billion from the previous
fiscal year-end, to ¥4,292.6 billion (US$40,404 million). Thebalance of securities at the end of the fiscal year rose ¥72.8
billion from the previous fiscal year-end, to ¥1,810.0 billion(US$17,036 million). The balance of total assets at the end of
the fiscal year rose ¥237.2 billion from the previous fiscal
year-end, to ¥7,059.7 billion (US$66,450 million).
Ordinary income increased ¥2,918 million on a consolidated basis year on year, to ¥102,209 million (US$962 million), due to higher investment income, stemming fromdeclines in interest on loans and discounts, as well as interestand dividends on securities.
Meanwhile, ordinary expenses on a consolidated basisrose ¥3,055 million, to ¥69,286 million (US$652 million), withother ordinary expenses rising due to higher provision ofreserve for loan losses. As a result, net ordinary income
decreased ¥137 million, to ¥32,923 million (US$309 million),while profit attributable to owners of parent increased ¥1,248
million, to ¥22,662 million (US$213 million).
The capital ratio (Basel III standards), which measuresbank prudence and soundness, stood at 14.31%.

6

IYO BANK Annual Report 2018

IssuesAlthough the Japanese economy as a whole is expected toremain in a moderate recovery phase, the Bank’s operating
environment is undergoing significant changes. Such factors
include the emergence of new financial services using digitaltechnologies, as well as an expected shrinkage in the market
due to the falling birthrate and increasingly aging population,and ongoing population decline.
Under these circumstances, the Bank launched its Fiscal
2018 Medium-Term Management Plan in April 2018. The
vision in the plan is transformation of the Bank into a “Digital-Human-Digital Bank” (DHD Bank). What this means isusing digital technologies as widely as possible to bring about
improvements in customer convenience and productivity inareas where digital technologies excel, while focusing resultant human capabilities on jobs that only humans can do,such as consultancy. By creating this new business model, weare endeavoring to deliver value to further assist our customers.
In March 2018, the Bank celebrated its 140th anniversary.
Looking ahead to the 150th anniversary, our 10-year vision is
to make every effort to become the leading financial services
group in the Setouchi region in terms of customer satisfaction.
While working to ensure sound management and further
strengthening the Bank’s business operations, we will continue to put our full efforts into realizing our mission as aregional bank—to “create a bright and prosperous future forthe region.” In these endeavors, we ask for the ongoingsupport of our stockholders.

Iwao Otsuka, President

Start of the Fiscal 2018 Medium-Term Management Plan
Period: Three years, from April 2018 through March 2021

Fiscal 2018 Medium-Term Management Plan

— Whenever, wherever, closer to you —Customer contact points- easy to use -Customers

Group employees- customer-oriented -Administrative procedures- simple -Shareholders

tion of customer nersifica
eds
e
v
i
d

“value” creation
New

Core Policy I

Core Policy III

Strengthen ability to offer values
tailored to each customer

Commit to regional
revitalization actively

Consulting Online businessstrategy
strategy

Regional revitalization strategy

Core Policy IICore Policy IV

Enhance productivity and reduce costthrough optimum resource allocation

Ensure stable, long-term earnings power
through overseas and market investment

BPR
strategy

Branchstrategy

ICTstrategyMarket strategy

Core Policy V
Develop organizational culture that diversityof every person is leveraged and proactively
and mutually enhanced

Personnel strategyCrea

S h rinRegionti o nkin g do f ne wo m e sticv
“methods to deliverm a r k e t , a g i ng p o p u l a t i o n w

alu e

s”

i nin git h d e c l

Risk Appetite
Frameworkbi r t hrat e

Employees

IYO BANK Annual Report 20187

Corporate Governance / Compliance / Risk Management

Corporate Governance
Basic Philosophy
Based on our corporate philosophy, to ensure the unshakeable
trust of our stockholders, customers, employees and otherstakeholders we believe it is vital to raise enterprise value andensure a more sound and transparent management system,
while remaining mindful of our social responsibilities as aregional bank. To meet these responsibilities, we will reinforce
and enhance our efforts at corporate governance, which we
consider one of our most important management priorities.
Through corporate governance appropriate to the Bank,
we seek to achieve sustainable growth and enhance enterprise value over the medium to long term. To this end, we
have formulated and publicized our Corporate Governance
Guide Line, which outlines our fundamental perspectives andframeworks on corporate governance.
Internal Control Systems• T he Board of Directors’ granting of voting rights to directors
on auditing and the Audit and Supervisory Committee
members that include multiple outside directors is expected
to enhance the auditing and supervisory functions, as wellas corporate governance. At the same time, we believe thisdelegation of authority will contribute to swifter decisionmaking and heightened management efficiency. To achievethese aims, we have adopted the system of a “company
with an Audit and Supervisory Committee.”• T he Bank has also separated the management decisionmaking and supervisory functions from business execution,
thereby strengthening the Board of Directors’ decisionmaking function. To further enhance corporate governance, wehave introduced an executive officer system.
• In principle, the Board of Directors meets once a month todecide on important matters stipulated in law and the Articles

Business Executive Functions, Oversight and Internal Controls

Audits/Supervises

Business Execution Directors

Audit and Supervisory Committee
ReportingPresident

ReportingExecutive Committee

Management Planning Council, Budgeting and Integrated Risk
Management Council, Screening Council, Compliance Council

Advisory Board

Compliance Committee

8

Operational Risk
Administration Committee

Whistleblowing

Directs/
Instruction

Credit Risk
Administration Committee
Head Office,Bank Branches

IYO BANK Annual Report 2018

Dismisses

Board of Directors

Cooperates

Appoints/Dismisses

Internal Audit
Division
Audits InternallyAppoints/
Dismisses

Independent
Auditors(CPAs)

Accounting
Audit/
Internal
controlaudit

Collaborates/
Coordinates

Consult
ReportingManagement Deliberation Committee

General Meeting of Stockholders
Appoints/Dismisses

Cooperates

of Incorporation, as well as to make important decisions
related to management policy and management strategy.
• In principle, the Audit and Supervisory Committee meets atleast once each month. In accordance with the law, Articles
of Incorporation and Audit and Supervisory Committee
Regulations, this committee and the Board of Directors
provide a supervisory function, as well as auditing theexecution of business by directors.
• In principle, the Executive Committee, consisting of managing directors and higher-ranked directors, meets once aweek to discuss important issues affecting all areas ofoperations, based on the fundamental policies decided
upon by the Board of Directors. The Executive Committee
comprises four councils, according to the content of matters to be discussed: the Management Planning Council, theBudgeting and Integrated Risk Management Council, theScreening Council and the Compliance Council. The Audit
and Supervisory Committee members are standing members of the Executive Committee, where they provide
appropriate statements and advice.
The Bank established the Management Deliberation
Committee, comprising the Bank’s representative directors
and the Audit and Supervisory Committee members, todeliberate director nominations and compensation andother important matters.
The Management Deliberation Committee, which is
positioned as an advisory body to the Board of Directors, iscomposed of a majority of members who are independent
outside directors.
• To coordinate and strengthen legal observance and risk
management, the Bank holds a quarterly meeting of theCompliance Committee (secretariat: the Compliance Division) and a monthly meeting of the ALM Committee (secretariat: the General Planning Division), both with the director
in charge of the Compliance Division as chairman. We havealso established the Operational Risk Administration Committee, under the Risk Management Division, which meetsquarterly, and the Credit Risk Management Committee. This
committee, under the Risk Management Division, meets
every second month. It is chaired by the director in chargeof the Risk Management Division.
• The Bank holds a semi-annual meeting of the Advisory
Board (secretariat: the General Planning Division) chaired by
the president. To ensure the management transparency andobjectivity of the Group, further strengthen the management base and contribute to the local community, we are
introducing external perspectives regarding the Group’s
management strategies and governance.

Compliance
As an institution with a public profile and social responsibilities,
the Bank regards a good compliance record as indispensable fordeepening the trust and support of our customers, shareholders
and the communities we serve. We ensure not only that all ouremployees observe all laws, ordinances and regulations in theirduties, but also meet the highest ethical standards.
Compliance Organizations
We established a Compliance Council chaired by the President. This committee deliberates matters relating to compliance, and seeks to foster a corporate culture in which
compliance-related information is shared by all employees
from the branch level to top management.
At all head office and branch business departments, wehave appointed compliance officers, who assess progress incompliance-related matters and organize training and awareness-raising activities such as study groups.
The Compliance Division, working closely with the Compliance Committee and compliance officers, integrates collection and management of compliance-related information.

Risk Management
Basic Philosophy
In its daily business operations, a bank is exposed to credit
risks, market risks and other risks. These risks are growing indiversity and complexity as deregulation progresses and thebusiness of banking grows ever more complex. Therefore,
finding ways of appropriately managing risk has become avital challenge for a bank.
On the other hand, for a bank, risk-taking is essential for
generation of revenue. Only by assuming a reasonable levelof risk, it is possible to ensure acceptable earnings growth.
Accordingly, the bank sets reasonable profit targets afterfactoring in all conceivable risks, and takes every precaution
to manage risk Iyo Bank’s management treats risk management as a priority issue.
Each fiscal year, the Board of Directors compiles risk
management policies, and, based on these policies, takes
steps to strengthen risk management and improve the qualityof risk management.
Risk Management Framework

Risk Management Framework
The Bank’s risk management framework has four main pillars:
1. Legal observance under the Compliance Committee
2. Managing revenue-generating risk assets under the ALM
Committee
3. The Credit Risk Administration Committee undertakes
risk management that focuses on curbing credit risk
4. Management of operational risk to minimize administrative and system risk, under the Operational Risk Administration Committee
The Bank’s risk exposure is assessed by the ALM committee by quantifying market and credit risk, and optimal fundmanagement and procurement structures are put in place toassure stable earnings over the medium and long term.
The Credit Risk Administration Committee aims to achieve
an optimal management and procurement structure as well
as secure stable medium- to long-term income by quantifying
the Bank’s credit risk.
At the same time, the Operational Risk Administration
Committee is taking measures to refine operational risk
management through organization-wide discussion andmonitoring regarding important topics arising from reviews ofactual operational risk. With regard to administrative risk,
system risk, legal risk, human-error risk, and fixed asset risk,
which together constitute operational risk, organization-wide
responses include establishment of offices for each categoryof risk, and rigorous risk management. At the same time, theRisk Management Division is responsible for coordination ofrisk management carried out by the departments in charge ofeach category of risk.
Moreover the Risk Management Division, which coordinates overall risk management, manages verification of risk
management at each department.

Board of Directors

Audit and Supervisory Committee

Executive Committee
Management Planning Council(Secretariat: General Planning Division)
Credit Risk
Administration Committee(Secretariat: Risk
Management Division)

Emergency Office(Secretariat: General
Planning Division)

Risk
Categories

Budgeting and Integrated Risk Management Council(Secretariat: Risk Management Division)Operational Risk
Administration Committee(Secretariat: Risk Management Division)

Compliance Committee(Secretariat:
Compliance Division)Operational risk
Marketrisk

Liquidity
risk

Risk Management Division

Creditrisk
Administrativerisk

Divisions
responsible
for eachtype of risk
management

Compliance Council(Secretariat: Compliance Division)

Risk Management Division

RiskManagement
Division
CreditRelated
Divisions

System
risk

Legal
risk

Systems
Operations
ComplianceManagement Development
Division
Division
Division

Human-error
risk

Fixed
asset risk

Human
Resources
Division

GeneralAffairs
Division

Reputational
risk

Compliance

Customer
Satisfaction
Enhancement
Division

Compliance
DivisionInternal
Audit
Division

Bank Branches, Head Office

IYO BANK Annual Report 20189

Financial Section
Financial Highlights
The Iyo Bank, Ltd. and its Consolidated Subsidiaries

Millions of yen

2018

2017

2016

2015

2014

¥1,815,554
4,269,697
7,096,633¥1,735,981
4,021,442
6,849,283¥1,739,757
3,890,085
6,510,076¥1,831,611
3,851,235
6,575,422¥1,749,815
3,708,249
6,124,787

5,525,398
6,450,329

5,437,276
6,240,221

5,324,433
5,920,369

5,264,862
5,977,820

5,199,147
5,617,266¥ 121,002
85,20935,791
23,639¥ 117,356
84,22833,127
21,797¥ 119,819
79,53140,28724,451¥ 124,003
77,881
46,122
26,999¥ 126,352
82,09844,253
26,1333,870(57,093)(4,106)726,157

226,523
6,797(7,401)
783,504(64,206)
38,624(19,106)
557,587

348,931
18,680(25,065)
602,299(23,339)
95,693(3,340)259,700

Years ended March 31:

At Year-End:
AssetsSecurities
Loans and bills discounted
Total assets

Liabilities
Deposits
Total liabilities

For the Year:
Total income
Total expenses
Income before income taxes
Profit attributable to owners of parent
Net cash provided by operating activities
Net cash provided by investing activities
Net cash provided by financing activities
Cash and cash equivalents

Yen

Per Share Data:¥

Basic net income
Stockholders’ equity

74.73
1,969.99¥

68.93
1,864.28¥

77.34
1,790.53¥

85.41
1,825.62¥

82.69
1,548.10

Capital ratio (BIS standards) (%)
Return on equity (ROE) (%)
Price earnings ratio (PER) (Times)

14.31
3.83
10.71

14.58
3.77
10.86

15.42
4.27
9.52

15.81
5.06
16.70

14.41
5.51
11.92

Number of employee

3,122

3,082

3,024

2,977

2,937

Note: Japanese yen amounts, except net income per share, are presented in millions of yen and are rounded down to the nearest million.

Ratings [JCR]

Evaluation gain on securities(Non-consolidated)

Capital ratio(BIS standards)(Billions of yen)

(Yen)

25,000350

Iyo bank(%)

21,454AA-

19,20614

15,00012

140

10,000

10

BBB-

70

5,000

8

Iyo bank has obtained one of the best ratings
among Japanese banks including mega-banks
by Japan Credit Rating Agency, Ltd. (JCR).

(March 31) 2014

A+A

14,827

210

ABBB+

261.7

18,909

15.42
14.41

20,000

280

15.81

16

14.58

14.31

16,758
217.7

218.4

234.9

183.0

BBB

10

IYO BANK Annual Report 201802015 2016 2017 2018

0

6

(March 31) 20142015 2016 2017 2018

Management Discussion and Analysis of Operations
 Business Environment
In fiscal 2017, ended March 31, 2018, moderate recovery
continued in the Japanese economy, amid an increase inexports fueled by global economic recovery combined witha pickup in capital investment due to improved corporate
earnings. Construction investment was likewise robust
due to expanded inbound (visitor) demand and signs ofredevelopment primarily in urban areas. A pickup was
also seen in personal consumption, reflecting an improved
employment and income environment. Moderate recovery
is likely to continue, despite the need for caution over the
impact of overseas economic uncertainties and financial
market fluctuations.
The economy of Ehime Prefecture showed lingering
weakness in certain areas of production and personal
consumption, but overall recovery momentum is expected tocontinue amid ongoing signs of upturn.

Overview of Business Results, etc.
Ordinary income increased ¥3,709 million on a consolidated
basis year on year, to ¥120,985 million (US$1,138 million),
due mainly to higher investment income, stemming fromincreases in interest on loans and discounts, as well asinterest and dividends on securities.
Meanwhile, ordinary expenses on a consolidated basisrose ¥3,038 million, to ¥84,885 million (US$798 million),with other ordinary expenses rising due mainly to higher
provision of reserve for loan losses. As a result, net ordinary
income increased ¥671 million, to ¥36,099 million (US$339
million), while profit attributable to owners of parent
increased ¥1,842 million, to ¥23,639 million (US$222
million).
On a non-consolidated basis, core gross businessprofit recorded an increase of ¥3,671 million, to ¥77,562
million (US$730 million). This result reflected the increase
in investment income, stemming from increases in interest
on loans and discounts, as well as interest and dividends on
Profit Attributable to
Owners of Parent(Billions of yen)

Net Income per Sharesecurities. Core net business profit rose ¥2,837 million, to¥28,450 million (US$267 million). Also, net ordinary income
fell ¥137 million, to ¥32,923 million (US$309 million), due
to lower net gains related to securities and increases incredit costs and operating costs. As a result, net income rose
¥1,248 million, to ¥22,662 million (US$213 million).
 Segment Information

The Iyo Bank Group consists of the Iyo Bank and 13 consolidated
subsidiaries. The Group’s operations center oncommercial banking services, and also cover leasing andother financial services.
Banking Operations
Ordinary income came to ¥103,392 million (US$973
million). This was due to ordinary income from customers of¥102,817 million and ordinary income from intersegment
transactions of ¥574 million. Segment profit increased ¥78
million, to ¥34,757 million (US$327 million).
Leasing Operations
Ordinary income came to ¥15,754 million (US$148 million).
This was attributable to ordinary income from customersof ¥15,265 million and ordinary income from intersegment
transactions of ¥489 million. Segment profit increased ¥229
million, to ¥581 million (US$5 million).
Other Businesses
Ordinary income came to ¥4,526 million (US$42 million).
This was a result of ordinary income from customers of¥2,901 million, and ordinary income from intersegment
transactions of ¥1,624 million. Segment profit increased¥308 million, to ¥779 million (US$7 million).
The term-end balance of deposits, including NCDs,
increased ¥88.1 billion over the previous fiscal year-end, to¥5,525.3 billion (US$52,007 million).

Loans andBills Discounted

Deposits

32

100

(Yen)

(Billions of yen)(Billions of yen)

24

75

3,600

4,500

16

50

2,400

3,000

8

25

1,200

1,500

0

(FY) 2014 2015 2016 2017 2018

0(FY) 2014 2015 2016 2017 2018

4,800

0

(March 31) 2014 2015 2016 2017 2018

6,000

0

(March 31) 2014 2015 2016 2017 2018

IYO BANK Annual Report 2018

11

The loan balance at the end of the fiscal year rose ¥248.2
billion from the previous fiscal year-end, to ¥4,269.6 billion(US$40,188 million).
The balance of securities at the end of the fiscal year rose
¥79.5 billion from the previous fiscal year-end, to ¥1,815.5
billion (US$17,088 million).
The capital ratio (Basel III standards), which measuresbank prudence and soundness, stood at 14.31%.

We met our numerical targets in most categories,
including net income, in the Fiscal 2015 Medium-Term
Management Plan. Though we fell short of targets in the
total balance of assets in custody (consolidated basis), steadyupward momentum continues. Despite a decline due toaggressive risk-taking, the capital ratio (consolidated basis)remained at an adequate level.

Loans by Industry
Millions of yen

2018
Loans and bills
discounted outstanding

Share (%)

2017
Loans and bills
discounted outstanding¥4,204,571
611,729

Share (%)

100.0014.55¥4,019,968
583,006

100.0014.50

Agricultural and forestry

2,918

Fishing

12,141

0.07

3,053

0.08

0.29

13,831Mining, quarrying and gravel extraction

0.34

8,653

0.21

8,789

0.22

Construction

112,939

2.69

112,601

2.80

Electricity, gas and water utilities, sewage

108,078

2.57

92,865

2.31

Years ended March 31:

Domestic total (excluding loans booked offshore)
Manufacturing

Communications

21,7790.52

28,8140.72

Transportation and postal service

679,71616.17

629,907

15.67

Wholesale and retail469,356

11.16

471,197

11.72

Finance and insurance

180,478

4.29

168,309

4.19

Real estate and rental

454,33710.80

412,231

10.25

Service

435,073

10.35

412,714

10.27

Local authorities
Others232,702874,666

5.53
20.80

240,217
842,428

5.97
20.96

Overseas total (including loans booked offshore)
Governments

65,125—100.00—1,473—

100.00——65,125¥4,269,697—
100.00——
1,473¥4,021,442—
100.00—Financial institutions
Others
Total

Total Assets

Return on Equity(Billions of yen)

(%)

(%)

6,000

12

4.5

4,000

8

3.0

2,000

4

1.5

8,000

0

(March 31) 2014 2015 2016 2017 201812

Capital Ratio(BIS standards)

IYO BANK Annual Report 201816

0

(March 31) 2014 2015 2016 2017 2018

6.0

0.0

(March 31) 2014 2015 2016 2017 2018 Financial Position and Business Results
Consolidated gross profit
Consolidated gross profit increased ¥3,768 million over theprevious consolidated fiscal year-end, to ¥84,267 million(US$793 million) due to the increase in interest and dividend
income stemming from an increase in interest on loans
and discounts and an increase in interest and dividends on
securities, as well as an increase in earnings from fees andcommissions, on growth in assets in custody and commission
income from solution sales.

Operating costs
Operating costs increased ¥554 million over the previous
consolidated fiscal year, to ¥52,195 million (US$491 million)
due to an increase in nonpersonnel expenses amid anincrease in investments.
Credit costs
Credit costs increased ¥2,358 million over the previous
consolidated fiscal year, to ¥3,986 million (US$37 million)
due in part to an increase in bankruptcies and downgrades.
Gain (loss) related to stock, etc.
Gain related to stock, etc. decreased ¥366 million over theprevious consolidated fiscal year, to ¥5,836 million (US$54
million) due to the decrease in gains on sales of securities,
etc.
Extraordinary income (losses)
Extraordinary income (losses) increased ¥1,993 million overthe previous consolidated fiscal year, to (¥307 million) (US$2
million) due to a decrease in impairment loss.
Deposits
With deposits held by individuals and corporations bothincreasing steadily, the balance of deposits, including NCDs,
increased ¥88.1 billion over the previous consolidated fiscal
year-end, to ¥5,525.3 billion (US$52,007 million).

Risk management loans
Risk management loans increased ¥1.7 billion over theprevious consolidated fiscal year-end, to ¥66.6 billion(US$626 million).
Risk management loans remained at the low level of
1.56% as a proportion of the outstanding balance of loans
and bills discounted.
Securities
Due to an increase in other securities due in part toacquisition of foreign securities denominated in foreign
currencies, the balance of securities increased ¥79.5 billion
over the previous consolidated fiscal year-end, to ¥1,815.5
billion (US$170,88 million), despite a decline in Japanese
government bonds due in part to redemptions.
 Cash Flow Analysis
Consolidated Cash Flows
Cash flow provided by operating activities was ¥3,870
million (US$36 million), due to such factors as an increase inloans and bills discounted.
Net cash used in investing activities was ¥57,093 million(US$537 million). This was mainly attributable to purchasesof securities.
Net cash used in financing activities was ¥4,106 million(US$38 million) due to the cash dividends paid.
As a result, cash and cash equivalents at the end of theterm fell by ¥57,346 million, to ¥726,157 million (US$6,835
million).
The Bank’s risk exposure is assessed by the ALM
committee by quantifying market and credit risk, andoptimal fund management and procurement structures are
put in place to assure stable earnings over the medium andlong term.
Capital expenditure from acquisition of tangible andintangible fixed assets and other outlays was covered fromBank capital.

Loans and bills discounted
With corporate and housing loans mainly to individuals bothincreasing steadily, loans and bills discounted grew ¥248.2
billion over the previous consolidated fiscal year-end, to¥4,269.6 billion (US$40,188 million).

IYO BANK Annual Report 201813

Consolidated Balance SheetThe Iyo Bank, Ltd. and its Consolidated Subsidiaries
March 31, 2018

Thousands of U.S.
dollars (Note 1)

Millions of yen

2018

2018

¥ 728,327
23,47910,247465
6,337
1,815,554
4,269,697(24,256)
7,092
30,594
93,761
72,8505,375
23,164
179
33,761¥7,096,633¥ 795,208
90,582
11,373568
5,749
1,735,981
4,021,442(23,541)
8,201
29,22449,306
73,835
4,734
19,490561
26,563¥6,849,283$ 6,855,487
220,999
96,451
4,376
59,647
17,089,175
40,189,166(228,313)
66,754
287,970882,539685,71150,592
218,034
1,684
317,780$66,798,126

LIABILITIES AND NET ASSETS
Liabilities
Deposits (Notes 7 and 19)
Call money and bills sold (Note 19)
Payables under repurchase agreements (Notes 7 and 19)
Payables under securities lending transactions (Notes 7 and 19)
Borrowed money (Notes 7, 11 and 19)
Foreign exchange
Borrowed money from trust account
Other liabilities (Note 11)
Accrued employees’ bonuses
Net defined benefit liability (Note 24)
Reserve for losses on repayment of dormant bank accounts
Reserve for contingent losses
Reserve under the special laws
Deferred tax liabilities (Note 26)
Deferred taxes on revaluation excess (Note 9)
Acceptances and guarantees
Total liabilities¥5,525,398
25,497
77,434226,150
419,34165
39
54,8881,650
12,5022,928
426
160,416
9,824
33,7616,450,329¥5,437,276
72,34640,124
324,715
220,887145
29
37,0601,648
12,5722,979
427
053,498
9,945
26,5636,240,221$52,008,640
239,994
728,859
2,128,670
3,947,110
611
367
516,641
15,530117,676
27,5604,009
9568,674
92,469317,780
60,714,693

Net assets (Note 29)
Common stock
Authorized — 600,000,000 shares
Issued — 323,775,366 shares
Capital surplus
Retained earnings
Treasury stock
Total stockholders’ equity
Net unrealized holding gains (losses) on securities (Note 22)
Net deferred gains (losses) on derivatives under hedge accounting
Land revaluation excess (Note 9)
Remeasurements of defined benefit plans (Note 24)
Total accumulated other comprehensive income
Stock acquisition rights (Note 25)
Noncontrolling interests
Total net assets
Total liabilities and net assets

20,948
11,570404,181(5,255)
431,445
166,703(1,240)19,634
6,669
191,766467
22,624646,304¥7,096,633

20,948
11,555384,386(5,370)411,520
153,498(795)
19,901
5,342
177,946479
19,114
609,061¥6,849,283

197,176108,904
3,804,414(49,463)
4,061,041
1,569,117(11,671)
184,80762,772
1,805,026
4,395
212,951
6,083,433$66,798,126

See Notes to Consolidated Financial Statements.

14

2017

ASSETSCash and due from banks (Notes 17 and 19)
Call loans and bills purchased (Note 19)
Monetary claims purchased (Notes 19, 20 and 22)
Trading account securities (Notes 19 and 20)
Money held in trust (Notes 19, 21 and 22)
Securities (Notes 3, 4, 7, 12, 19, 20 and 22)
Loans and bills discounted (Notes 5, 6, 8 and 19)
Reserve for loan losses (Note 19)
Foreign exchange (Note 6)
Lease receivables and investment assets
Other assets (Note 7)
Tangible fixed assets (Notes 9, 10 and 18)
Intangible fixed assets
Net defined benefit asset (Note 24)
Deferred tax assets (Note 26)
Customers’ liabilities for acceptances and guarantees
Total assets

IYO BANK Annual Report 2018

Consolidated Statement of Income
The Iyo Bank, Ltd. and its Consolidated Subsidiaries
For the year ended March 31, 2018

Thousands of U.S.
dollars (Note 1)

Millions of yen

INCOMEInterest and dividend income:Interest on loans and discounts
Interest and dividends on securities
Interest on receivables under resale agreements
Other interest income
Fees and commissions
Other operating income
Other income
Total income
EXPENSESInterest expense:
Interest on deposits
Interest on borrowings and rediscounts
Interest on payables under repurchase agreements
Interest on payables under securities lending transactions
Other interest expense
Fees and commissions
Other operating expenses
General and administrative expenses (Note 14)
Other expenses (Note 15)
Total expenses
Income before income taxes
Income taxes (Note 26):
Current
Deferred
Total taxes
ProfitProfit attributable to noncontrolling interests
Profit attributable to owners of parent

2018

2017

¥ 49,463
26,772(0)
1,078
14,43519,023
10,229121,002¥ 49,496
24,524—
1,118
13,32018,310
10,585
117,356$ 465,577
251,995(0)
10,146
135,871
179,056
96,282
1,138,949

2,479
1,247
401
387
3,001
4,649
14,33852,195
6,509
85,21035,791

3,114
1,144
162
612
2,685
4,551
13,99851,641
6,315
84,22833,127

23,333
11,737
3,774
3,642
28,24743,759134,958
491,293
61,266802,051
336,888

11,431(410)
11,02024,771
1,131¥ 23,639

9,003
1,144
10,14722,9801,183¥ 21,797

107,596(3,859)103,727
233,160
10,645$ 222,505

Per share of common stock (yen and U.S. dollars):
Basic net income
Diluted net income
Dividends

2018

Yen

¥74.73
74.59
14.00

U.S. dollars (Note 1)¥68.93
68.81
12.00

$0.70
0.70
0.13

See Notes to Consolidated Financial Statements.

Consolidated Statement of Comprehensive Income
The Iyo Bank, Ltd. and its Consolidated Subsidiaries
For the year ended March 31, 2018

Thousands of U.S.
dollars (Note 1)

Millions of yen

ProfitOther comprehensive income (Note 16)
Net unrealized holding gains (losses) on securities (Note 22)
Net deferred gains (losses) on derivatives under hedge accounting
Remeasurements of defined benefit plans (Note 24)
Comprehensive income
Comprehensive income attributable to:
Owners of parent
Noncontrolling interests

2018

2017

2018

¥24,771
16,45815,576(444)
1,327¥41,229¥22,980
3,663
(297)
(469)
4,430
¥26,643$233,160
154,913
146,611(4,179)12,490$388,074¥37,726
3,503¥26,089554$355,101
32,972

See Notes to Consolidated Financial Statements.

IYO BANK Annual Report 201815

Consolidated Statement of Changes in Net Assets
The Iyo Bank, Ltd. and its Consolidated Subsidiaries
For the year ended March 31, 2018

Millions of yen
Stockholders’ equity

For the year ended March 31, 2018

Balance at the beginning of
the accounting period
Changes during the accounting period
Dividends
Profit attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stockReversal of land revaluation excess
Changes in items other thanstockholders’ equity, net
Total changes during
the accounting period
Balance at the endof the accounting period

Commonstock

CapitalsurplusRetainedearnings

Treasurystock¥20,948¥11,555¥384,386¥(5,370)(4,111)
23,639
(1)
116

14
267

Total
stockholders’equity¥411,520(4,111)
23,639
(1)
131
267

—

14

19,795115

19,924¥20,948¥11,570¥404,181¥(5,255)¥431,445

Thousands of U.S. dollars (Note 1)
Stockholders’ equity

For the year ended March 31, 2018

Balance at the beginning of
the accounting period
Changes during the accounting period
Dividends
Profit attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stockReversal of land revaluation excess
Changes in items other thanstockholders’ equity, net
Total changes during
the accounting period
Balance at the endof the accounting period

Retainedearnings

Treasury
stock

Total
stockholders’equityCommonstock

Capitalsurplus$197,176$108,763 $3,618,091$(50,545) $3,873,493(38,695)
222,505(38,695)
222,505
(9)
1,233
2,513

(9)
1,091

131
2,513

—
$197,176

131

186,323$108,904 $3,804,414

1,082

187,537$(49,463) $4,061,041
Millions of yen

Total other comprehensive income

For the year ended March 31, 2018

Balance at the beginning of
the accounting period
Changes during the accounting period
Dividends
Profit attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stockReversal of land revaluation excess
Changes in items other thanstockholders’ equity, net
Total changes during
the accounting period
Balance at the endof the accounting period

16

IYO BANK Annual Report 2018

Net
unrealized
holding gains(losses) on
securities

Net deferredgains (losses)
on derivatives
under hedge
accountingLandrevaluation
excess¥153,498¥ (795)¥19,901

Remeasur- Total accumuements oflated otherdefinedcomprehenbenefit plans sive income¥5,342¥177,946

Stockacquisitionrights

Noncontrollinginterests

Total net
assets¥479¥19,114¥609,061(4,111)
23,639(1)
131
267

13,204

(444)

(267)

1,327

13,819

(11)

3,509

17,317

13,204

(444)

(267)

1,327

13,819

(11)

3,509

37,242¥166,703¥(1,240)¥19,634¥6,669¥191,766¥467¥22,624¥646,304

Thousands of U.S. dollars (Note 1)
Total other comprehensive income

For the year ended March 31, 2018

Net
unrealized
holding gains(losses) on
securities

Balance at the beginning of
the accounting period$1,444,823
Changes during the accounting period
Dividends
Profit attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stockReversal of land revaluation excess
Changes in items other thanstockholders’ equity, net
124,284
Total changes during
the accounting period
124,284
Balance at the endof the accounting period$1,569,117

Net deferredgains (losses)
on derivatives
under hedge
accountingLandrevaluation
excessRemeasur- Total accumuements oflated otherdefinedcomprehenbenefit plans sive income

Stockacquisitionrights$ (7,483)$187,321$50,282 $1,674,943$4,508

Noncontrollinginterests

Total net
assets$179,913 $5,732,878(38,695)
222,505
(9)
1,233
2,513

(4,179)(2,513)

12,490130,073(103)

33,028

162,998(4,179)(2,513)

12,490130,073(103)

33,028350,545$(11,671)$184,807$62,772 $1,805,026$4,395$212,951 $6,083,433

Millions of yen
Stockholders’ equity

For the year ended March 31, 2017

Commonstock

CapitalsurplusRetainedearnings

Treasurystock¥20,948¥10,488¥365,732¥(5,398)

Balance at the beginning of
the accounting period
Changes during the accounting period
Dividends
Profit attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stockReversal of land revaluation excess
Purchase of shares of
consolidated subsidiaries
Changes in items other thanstockholders’ equity, net
Total changes during
the accounting period
Balance at the endof the accounting period(3,794)
21,797
(1)
29

5
651
1,061

Total
stockholders’equity¥391,771(3,794)
21,797
(1)
34
651
1,061

—

1,067

18,65428

19,749¥20,948¥11,555¥384,386¥(5,370)¥411,520

Millions of yen
Total other comprehensive income

For the year ended March 31, 2017

Balance at the beginning of
the accounting period
Changes during the accounting period
Dividends
Profit attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stockReversal of land revaluation excess
Purchase of shares of
consolidated subsidiaries
Changes in items other thanstockholders’ equity, net
Total changes during
the accounting period
Balance at the endof the accounting periodNet
unrealized
holding gains(losses) on
securities

Net deferredgains (losses)
on derivatives
under hedge
accountingLandrevaluation
excess¥153,166¥(326)¥20,552

Remeasur- Total accumuements oflated otherdefinedcomprehenbenefit plans sive income¥ 912¥174,305

Stockacquisitionrights

Noncontrollinginterests

Total net
assets¥401¥23,228¥589,707(3,794)
21,797(1)
34651(1,061)

—

331

(469)

(651)

4,430

3,640

77

(3,052)

666

331

(469)

(651)

4,430

3,640

77

(4,113)

19,354¥153,498¥(795)¥19,901¥5,342¥177,946¥479¥19,114¥609,061

See Notes to Consolidated Financial Statements.

IYO BANK Annual Report 201817

Consolidated Statement of Cash Flows
The Iyo Bank, Ltd. and its Consolidated Subsidiaries
For the year ended March 31, 2018

Thousands of U.S.
dollars (Note 1)

Millions of yen

2018

2017

Cash flows from operating activities
Income before income taxes
Depreciation
Impairment losses
Increase (decrease) in reserve for loan losses
Increase (decrease) in accrued employees’ bonuses
Decrease (increase) in net defined benefit asset
Increase (decrease) in net defined benefit liability
Increase (decrease) in reserve for losses on repayment of dormant bank accounts
Increase (decrease) in reserve for contingent losses
Increase (decrease) in reserve under the special laws
Interest and dividend income
Interest expense
Securities losses (gains), net
Money in trust losses (gains), net
Foreign exchange losses (gains), net
Losses (gains) on disposal of tangible fixed assets, net
Net changes in loans and bills discounted
Net changes in deposits
Net changes in borrowed money (excluding subordinated borrowings)
Net changes in due from banks
Net changes in call loans
Net changes in call money
Net changes in payables under securities lending transactions
Net changes in foreign exchange assets
Net changes in foreign exchange liabilities
Net changes in lease receivables and investment assets
Interest income received
Interest expense paid
Net increase (decrease) in borrowed money from trust account
Other
Subtotal
Income taxes paid
Net cash provided by (used in) operating activities¥ 35,791
4,249
203
715
2
(3,674)
(69)
(50)
(1)
0
(77,314)
7,517(6,118)
(717)
3,063
103
(248,254)
88,121
198,454
9,534
68,218(9,539)(98,564)
1,109(79)(1,370)73,044(7,541)
10(24,694)
12,147(8,277)3,870¥ 33,127
4,551
2,246
(2,010)(79)(6,648)(1,268)(86)(13)
0(75,139)7,720(6,941)
(362)
3,365
53
(131,357)
112,843
170,722
14,62812,556
41,483(80)(3,047)32(45)
75,141(8,531)0(5,356)
237,505(10,981)
226,523$

Cash flows from investing activities
Purchases of securities
Proceeds from sales of securities
Proceeds from maturities of securities
Increase in money held in trust
Decrease in money held in trust
Purchases of tangible fixed assets
Proceeds from sales of tangible fixed assets
Purchases of intangible fixed assets
Net cash provided by (used in) investing activities(340,998)
153,862
134,458(1,105)850(2,543)456(2,074)(57,093)(343,111)
162,386
187,902(626)
3,653(1,870)271(1,809)6,797(3,209,695)
1,448,249
1,265,606(10,400)
8,000(23,936)
4,292(19,521)(537,396)

12—(4,111)
(5)
(1)
0

92
(11)
(3,794)
(7)
(1)
0

112
—
(38,695)
(47)
(9)
0

—
(4,106)(3,680)(7,401)—(38,648)(16)(57,346)
783,504¥ 726,157(1)
225,916
557,587¥ 783,504(150)(539,777)
7,374,849$ 6,835,062

Cash flows from financing activities
Proceeds from share issuance to noncontrolling stockholders
Repayments to noncontrolling interests
Cash dividends paid
Cash dividends paid to noncontrolling stockholders
Purchases of treasury stock
Proceeds from sales of treasury stock
Payments from changes in ownership interests in subsidiaries that do not resultin change in scope of consolidation
Net cash provided by (used in) financing activities
Foreign currency translation adjustments
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of year
Cash and cash equivalents at the end of year (Note 17)
See Notes to Consolidated Financial Statements.

18

IYO BANK Annual Report 20182018
336,888
39,994
1,910
6,730
18
(34,582)
(649)
(470)
(9)
0
(727,729)
70,754(57,586)(6,748)28,830969(2,336,728)
829,452
1,867,97889,740642,112(89,787)(927,748)
10,438(743)(12,895)
687,537(70,980)94(232,435)
114,335(77,908)
36,426

Notes to Consolidated Financial Statements
The Iyo Bank, Ltd. and Its Consolidated Subsidiaries
For the year ended March 31, 2018

1. Basis of Presenting Consolidated Financial Statements
The accompanying consolidated financial statements have been
prepared in accordance with the provisions set forth in the Financial
Instruments and Exchange Act and its related accounting regulations
and in conformity with accounting principles generally accepted inJapan (“Japanese GAAP”), which are different in certain respects as toapplication and disclosure requirements from International Financial
Reporting Standards.
The accompanying consolidated financial statements havebeen restructured and translated into English with certain expandeddisclosures from the consolidated financial statements of The Iyo Bank,
Ltd. (the “Bank”) prepared in accordance with Japanese GAAP and filedwith the appropriate Local Finance Bureau of the Ministry of Financeas required by the Financial Instruments and Exchange Act. Some
supplementary information included in the statutory Japanese language
consolidated financial statements, but not required for fair presentation,
is not presented in the accompanying consolidated financial statements.
Translations of the Japanese yen amounts into U.S. dollar amounts
were included solely for the convenience of readers outside Japan, using
the prevailing exchange rate at March 31, 2018, which was ¥106.24 to
U.S. $1.00. The translations should not be construed as representations
that the Japanese yen amounts have been, could have been or couldin the future be converted into U.S. dollars at this or any other rate ofexchange.
2. Significant Accounting Policies(1) Principles of consolidation
The consolidated financial statements include the accounts of the Bankand the following 13 consolidated subsidiaries.
• The Iyogin Credit Guaranty Company Limited• The Iyogin Business Service Company Limited• Iyogin Capital Company Limited• Iyogin Venture Fund Corporation Limited IV• Iyogin Venture Fund Corporation Limited V• Iyo Evergreen Sixtiary Industrialization Support Fund Investment
Business Limited Partnership• Iyo Evergreen Agriculture Support Fund Investment Business Limited
Partnership• Iyo Evergreen Business Succession Support Fund Investment Business
Limited Partnership• Iyogin Regional Economy Research Center, Inc.
• Iyogin DC Card Co., Ltd.
• Iyogin Leasing Company Limited• Iyogin Computer Service Company Limited• Iyogin Securities Co., Ltd. (Currently, Shikoku Alliance Securities Co., Ltd.)The consolidated financial statements exclude the following
subsidiary.
• Iyogin-Ehime University Originated Venture Support Fund Investment
Business Limited Partnership
Iyogin-Ehime University Originated Venture Support Fund Investment
Business Limited Partnership is excluded from the scope of consolidation
because its assets, ordinary income, net income, retained earnings
and accumulated other comprehensive income are immaterial to theconsolidated financial statements.
No unconsolidated subsidiary is accounted for by the equity method.
Iyogin-Ehime University Originated Venture Support Fund Investment
Business Limited Partnership is excluded from the scope of the equity
method because its net income and retained earnings are immaterial tothe consolidated financial statements.

The consolidated financial statements exclude the following affiliatedcompanies.
• Iyogin REVIC Investments Company Limited• Shikoku Alliance Capital Co., LtdNo affiliated companies are accounted for by the equity method.
Iyogin REVIC Investments Company Limited and Shikoku Alliance
Capital Co., Ltd are excluded from the scope of the equity method
because their net income and retained earnings are immaterial to theconsolidated financial statements.
The consolidated financial statements include the accounts offive consolidated subsidiaries with fiscal years that end December 31.
Appropriate adjustments are made for significant transactions during
the period from December 31 to March 31, the date of the consolidated
financial statements.
All significant intercompany balances, transactions and unrealized
profits and losses included in assets and liabilities are eliminated.
(2) Net assets
Under Japanese laws and regulations, including the Companies Act(the “Act”), the entire amount paid for new shares is required to be
designated as common stock. However, a company may, by a resolutionof the Board of Directors, designate an amount not exceeding one halfof the price of the new shares as additional paid-in capital, which isincluded in capital surplus.
Under the Act and the Banking Law, in cases in which a dividend
distribution of surplus is made, the smaller of an amount equal to 20%of the dividend or the excess, if any, of 100% of common stock over
the total of additional paid-in capital and legal earnings reserve must
be set aside as additional paid-in capital or legal earnings reserve. Legalearnings reserve is included in retained earnings in the accompanying
consolidated balance sheets.
Under the Act, legal earnings reserve and additional paid-in capitalcan be used to eliminate or reduce a deficit or can be capitalized by aresolution of the stockholders’ meeting. Additional paid-in capital andlegal earnings reserve may not be distributed as dividends. Under the
Act and the Banking Law, however, by resolution of the stockholders’meeting, all additional paid-in capital and all legal earnings reserve may
be transferred to other capital surplus and retained earnings, respectively,
which are potentially available for dividends.
The maximum amount that the Bank can distribute as dividends is
calculated based on the unconsolidated financial statements of the Bankin accordance with Japanese laws and regulations.
At the meeting of the Board of Directors held on May 11, 2018,
cash dividends amounting to ¥2,214 million ($20,839 thousand) wereapproved by the Board of Directors. The appropriation was not accruedin the consolidated financial statements as of March 31, 2018. Suchappropriations are recognized in the period in which they are approvedby the Board of Directors.
(3) Cash flow statements
In preparing the consolidated statements of cash flows, cash on handand deposits with the Bank of Japan are considered to be cash and cash
equivalents.
(4) Foreign currency translations
Foreign currency assets and liabilities and the accounts of overseas
branches of the Bank are translated into yen at the rates prevailing at theconsolidated balance sheet date.

IYO BANK Annual Report 201819

Consolidated subsidiaries’ foreign currency assets and liabilities aretranslated into yen at the rate prevailing at their respective balance sheet
dates.
(5) Trading account securities
Trading account securities of the Bank and its consolidated subsidiaries
are stated at fair market value. Gains and losses realized on the disposal
and unrealized gains and losses from market value fluctuations of thesesecurities are recognized as gains and losses in the period of the change.
Realized gains and losses on the sale of such trading account securities
are computed using moving average cost.
(6) Securities
Held-to-maturity debt securities are stated at amortized cost by thestraight-line method. Available-for-sale securities with available fairmarket values are stated at fair market value. Realized gains and losseson the sale of such securities are computed using moving average cost.
Available-for-sale securities with fair values that are extremely difficult
to determine are carried at cost using moving average cost. Unrealized
gains and losses on these securities are reported, net of applicable
income taxes, as a separate component of net assets.
Securities included in the money held in the trust account are treatedin the same manner as the securities mentioned above.
(7) Reserve for possible loan losses
The Bank and its consolidated subsidiaries write off loans and makeprovisions for possible loan losses. For loans to insolvent customers who
are undergoing bankruptcy or other collection proceedings or who arein a similar financial condition, the reserve for possible loan losses isprovided in the full amount of such loans, excluding amounts written off
and the portion that is estimated to be recoverable due to the existenceof security interests or guarantees. For the unsecured and unguaranteed
portions of loans to customers not in the above circumstances but for
who there is a high probability of so becoming, the reserve for possible
loan losses is provided for the estimated unrecoverable amounts
determined after an evaluation of the customer’s overall financial
condition. For other loans, such as normal loans and loans requiring
special attention, the reserve for possible loan losses is provided basedon the Bank’s actual rate of loan losses in the past.
Assessments and classifications are made by each business and credit
supervision department and are audited by the Credit Administration
Department, an independent department. The reserve for possible loan
losses is provided based on such procedures.
The estimated unrecoverable portions of loans to insolvent
customers who are undergoing bankruptcy or other collection
proceedings or who are in a similar financial condition are written off.
The estimated unrecoverable amounts are determined after excluding
amounts considered recoverable due to the existence of security
interests or guarantees. As of March 31, 2018 and 2017, the estimatedunrecoverable amounts were ¥20,833 million ($196,093 thousand) and¥22,241million, respectively.
The consolidated subsidiaries write off loans and make provisions forpossible loan losses based on the actual rate of loan losses in the past.
However, unrecoverable amounts of loans to customers who have a highprobability of becoming bankrupt are separately estimated and a reservefor possible loan losses is provided based on those estimations.
(8) Tangible and intangible fixed assets and lease assets
Tangible and intangible fixed assets are generally stated at cost, less theaccumulated depreciation and deferred gains on the sale of real estate.

20

IYO BANK Annual Report 2018

Depreciation of tangible fixed assets (except for lease assets) of the
Bank and its consolidated subsidiaries is recorded using the decliningbalance method. However, buildings acquired after April 1, 1998 andaccompanying facilities and structures acquired on or after April 1, 2016
are depreciated using the straight-line method. The estimated useful
lives of these assets are 15 – 40 years for buildings and 5 – 10 years forequipment.
Depreciation for intangible fixed assets (except for lease assets) of
the Bank and its consolidated subsidiaries is recorded using the straightline method. Internal use software costs of the Bank and its consolidated
subsidiaries are depreciated using the straight-line method over theestimated useful life of mainly five years.
Both tangible and intangible lease assets under finance leases thatare not deemed to transfer the ownership of the lease property are
depreciated using the straight-line method over the lease term with zero
residual value. In cases in which there is a residual value guarantee in thecontract, the residual value is the guaranteed value. In other cases, it isdeemed to be zero.
(9) Accrued employees’ bonuses
Accrued employees’ bonuses are provided for the future payment of
employees’ bonuses based on the estimated amounts of the future
payments that are attributed to the current fiscal year.
(10) Reserve for losses on repayment of dormant bank accounts
Reserve for losses on repayment of dormant bank accounts is provided inconnection with inactive bank accounts the balances of which have been
derecognized as liabilities. The reserve is provided for the possible future
demands on claims of withdrawal from these accounts in an amountbased on historical reimbursement experience.
(11) Reserve for contingent losses
Reserve for contingent losses is maintained to provide against possible
losses from contingencies which are not covered by other specificreserves. The amount of reserve is based on an estimate of the amountpossible future losses.
(12) Reserve under the special laws
Reserve under special laws is provided for contingent liabilities fromfinancial instruments and exchange. This is a reserve pursuant to Article
46-5 of the Financial Instruments and Exchange Act and Article 175
of Cabinet Office Ordinance on the Financial Instruments Business toindemnify losses incurred in connection with the purchase and sale ofsecurities and derivatives and other financial related transactions.
(13) Accounting method for retirement benefits
In calculating benefit obligation, the portion of the projected benefit
obligation attributed to the current fiscal year is determined using thebenefit formula method.
Prior service cost is amortized using the straight-line method over 10
years. Actuarial differences are recognized as expenses using the straightline method within the average of the estimated remaining service yearsof employees commencing with the following period.
Some consolidated subsidiaries use a simplified method to calculate
net defined benefit liability and retirement benefit cost. This simplified
method assumes the Company’s retirement benefit obligations to beequivalent to the benefits that would be payable upon the voluntary
retirement of all employees at the fiscal year-end to calculate net defined
benefit liability and retirement benefit cost.

(14) Derivatives and hedge accounting
Derivative transactions are valued at fair value with changes in fair value
included in current income.
In order to hedge the interest rate risk associated with various
financial assets and liabilities, the Bank applies the deferred hedge
accounting method stipulated in JICPA Industry Audit Committee Report
No. 24, February 13, 2002, “Accounting and Auditing Treatment of
Accounting Standards for Financial Instruments in Banking Industry.”
The effectiveness of hedging is assessed for (i) each identified group ofhedged items, such as deposits, loans and similar instruments, and (ii)the corresponding group of hedging instruments, such as interest rate
swaps, in the same maturity bucket.
For certain assets and liabilities, the Bank and its consolidated
subsidiaries apply the exceptional treatment permitted for interest rate
swaps.
The Bank applies the deferred method of hedge accounting tohedge foreign exchange risk associated with various foreign currency
denominated monetary assets and liabilities as stipulated in JICPA
Industry Audit Committee Report No. 25, July 29, 2002, “Treatment of
Accounting and Auditing Concerning Accounting for Foreign Currency
Transactions in the Banking Industry.” The effectiveness of the currency
swap transactions, exchange swap transactions and similar transactions
that hedge the foreign exchange risk of monetary assets and liabilities
denominated in foreign currencies is assessed based on a comparisonof the foreign currency positions of the hedged monetary assets andliabilities and the hedging instruments.
The Bank also applies fair value hedge accounting to portfolio
hedges of the foreign exchange risk associated with foreign currency
denominated available-for-sale securities (other than bonds) identified
as hedged items in advance as long as the amount of spot and forward
foreign exchange contracts payable exceeds the acquisition costs of thehedged securities in foreign currency.
(15) Finance leases
In connection with finance leases as the lessor, sales and cost of sales arerecognized at the time of receiving lease payment.
(16) Operating leases
As lessor under operating leases, lease related income is recognized on astraight-line basis over the full term of the lease based on the contractual
amount of lease fees per month.
(17) Consumption taxes
National and local consumption taxes are accounted for mainly on a tax
exclusion basis.
(18) Application of consolidated tax reporting
The Bank and its wholly owned consolidated subsidiaries have adopted aconsolidated tax return system.
(19) Per share data
Net income per share is based on the weighted average number ofshares of common stock outstanding during the year, excluding treasury
stock. Diluted net income per share reflects the potential dilution that
could occur if stock options were exercised. Diluted net income per shareof common stock assumes the full exercise of outstanding warrants atthe time of issuance.

Cash dividends per share shown in the accompanying consolidated
statements of income represent dividends declared as applicable to therespective year.
(20) Accounting standards not yet adopted“Accounting Standard for Revenue Recognition” (ASBJ Statement
No.29, March 30, 2018) and “Implementation Guidance on AccountingStandard for Revenue Recognition” (ASBJ Guidance No.30, March 30,
2018)(a)Overview
The above standard and guidance provide comprehensive principles
for revenue recognition. Under the standard and guidance, revenue isrecognized by applying following 5 steps:
Step 1: Identify contract(s) with customers.
Step 2: Identify the performance obligations in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performance obligation in
the contract.
Step 5: Recognize revenue when (or as) the entity satisfies a performanceobligation.
(b)Effective date
Effective from the beginning of the fiscal year ending March 31, 2022.
(c)Effects of the application of the standards
The Bank and its consolidated subsidiaries are currently in the processof determining the effects of these new standards on the consolidated
financial statements.

3. Stocks and Investments in Unconsolidated Subsidiaries andAffiliates
Stocks in unconsolidated subsidiaries and affiliates amounting to ¥75
million ($705 thousand) at March 31, 2018.
Investments in unconsolidated subsidiaries and affiliates amounting
to ¥96 million ($903 thousand) and ¥98 million at March 31, 2018 and2017, respectively.
4. Securities Lending Transactions
At March 31, 2018 and 2017, Japanese government bonds included¥10,344 million ($97,364 thousand) and ¥15,609 million, respectively,of secured loan securities for which the borrowers had the right to sell or
pledge.
5. Loans and Bills Discounted
At March 31, 2018 and 2017 loans and bills discounted included thefollowing:
Millions of yen

Loans to bankrupt customers
Non-accrual loans
Loans overdue threemonths or more
Restructured loans
Total

Thousands of
U.S. dollars(Note 1)2018
¥ 1,158
47,4022017¥ 1,537
45,1262018$ 10,899
446,178

2,342
15,749¥66,651

2,344
15,886¥64,895

22,044
148,239$627,362

IYO BANK Annual Report 201821

Loans to bankrupt customers are loans to customers who are undergoingbankruptcy or similar proceedings or who are in a similar financial
condition. Interest is not being accrued on these loans as there is astrong likelihood that the principal and interest will be uncollectible.
Non-accrual loans are nonperforming loans that are not generatinginterest income because of nonpayment and for which accrued interest
income is not recognized, excluding loans to bankrupt customers andloans on which interest payments are deferred in order to support theborrower’s recovery from financial difficulties.
Loans overdue three months or more are loans not included in theabove categories or in restructured loans for which payments are past
due three months or more.
Restructured loans are loans not included in the above categories forwhich the Bank has granted concessions such as reduced interest rates
or deferral or waiver of interest and/or principal payments to support
customers experiencing financial difficulties.
Amounts described above are before the deduction of reserve forpossible loan losses.

6. Commercial Bills
Bills discounted are accounted for as financing transactions in accordancewith JICPA’s Industry Audit Committee Report No. 24, February 13,
2002, although the Bank has the right to sell or pledge them without
restrictions. The total face value of commercial bills and purchased
foreign exchange bills obtained as a result of discounting was ¥26,842
million ($252,654 thousand) and ¥25,321 million at March 31, 2018 and2017, respectively.
7. Assets Pledged
At March 31, 2018 and 2017 assets pledged as collateral were as
follows:
Thousands of
U.S. dollars(Note 1)Millions of yen

Securities

2018¥776,449

2018$7,308,443

2017¥648,707

The above pledged assets secure the following liabilities:
Thousands of
U.S. dollars(Note 1)Millions of yen

Deposits
Payables under repurchaseagreements
Payables under securities
lending transactions
Borrowed money2018¥ 6,0712017¥ 28,539

77,434

40,124

728,859

226,150
408,807324,715
210,205

2,128,670
3,847,957$

2018
57,144

In addition to the above, assets pledged as collateral for transactions
such as exchange settlement transactions and others were as follows:
Millions of yen

Securities
Other assets

2018¥28,122
36,666

2017¥56,599
11,994

Thousands of
U.S. dollars(Note 1)IYO BANK Annual Report 2018

9. Land Revaluation Excess
In accordance with the Revaluation Act of Land Properties, the Bank
revalued land used in the ordinary course of business as of March 31,
1998. The revaluation excess, net of deferred taxes, is shown as aseparate component of net assets. At March 31, 2018 and 2017, thecurrent market value of the revalued land was lower than the revalued
amount by ¥17,497 million ($164,693 thousand) and ¥18,952 million,
respectively.
10. Tangible Fixed Assets
Accumulated depreciation of tangible fixed assets at March 31, 2018and 2017 amounted to ¥54,779 million ($515,615 thousand) and¥53,331 million, respectively. The amounts that were directly offset
against acquisition costs as of March 31, 2018 and 2017 were ¥8,482
million ($79,838 thousand) and ¥8,479 million, respectively.
11. Borrowed Money and Lease Liabilities
Borrowed money at March 31, 2018 and 2017 consisted of thefollowing:

2018$264,702
345,124

At March 31, 2018, other assets included cash collateral paid forfinancial instruments of ¥1,836 million ($17,281 thousand), guaranteesof ¥79 million ($743 thousand) and security deposits of ¥290 million($2,729 thousand). At March 31, 2017, other assets included cash
collateral paid for financial instruments of ¥6,032 million, guarantees of¥75 million and security deposits of ¥283 million.

22

8. Commitment Lines
Commitment line agreements related to loans are agreements which
oblige the Bank and its consolidated subsidiaries to lend funds up
to certain limits agreed to in advance. The Bank and its consolidated
subsidiaries will lend the funds upon the request of an obligor to draw
down the funds under the loan agreement as long as there is no breachof the various terms and conditions stipulated in the relevant loan
agreement. The unused commitment balances related to these loan
agreements at March 31, 2018 and 2017 amounted to ¥1,118,661
million ($10,529,565 thousand) and ¥1,077,598 million, respectively.
Of these amounts, ¥1,016,612 million ($9,569,013 thousand) and¥1,002,345 million as of March 31, 2018 and 2017, respectively, related
to loans in which the term of the agreement was one year or less or inwhich unconditional cancellation of the agreement was allowed at any
time.
In many cases, the term of the loan agreement runs its course
without the loan ever being drawn down. Therefore, unused loan
commitments do not necessarily affect future cash flows.
Conditions are included in certain loan agreements which allow the
Bank and its consolidated subsidiaries either to decline the request fora loan draw-down or to reduce the agreed limit when there is cause to
do so, such as when there is a change in the financial condition of theobligor or when it is necessary to protect the Bank’s or its consolidated
subsidiaries’ credit. The Bank and its consolidated subsidiaries takevarious measures to protect their credit. Such measures include having
the obligor pledge collateral in the form of real estate, securities, etc.,
on signing the loan agreement or in accordance with the Bank and its
consolidated subsidiaries’ established internal procedures for confirming
the obligor’s financial condition, etc., at regular intervals.

Thousands of
U.S. dollars(Note 1)Millions of yen

Borrowings from banks
Lease liabilities(due within one year)
Lease liabilities(due after one year)2018¥419,341

2017¥220,887

2018$3,947,110

356

426

3,350

446

747

4,198

The weighted average interest rates on the outstanding balances at
March 31, 2018 and 2017 were as follows:
2018
2017
Borrowings from banks
0.18%
0.13%
Lease liabilities(due within one year)——
Lease liabilities(due after one year)——(Note) The “average interest rate” is not shown for lease obligations because the
Bank uses a method in which amounts equal to the interest in the total
capital lease obligations are spread equally over each fiscal year of the lease
period.

Millions of yen

2017
Area

Ehime
area

OthersPurpose of use

Branches
7 branches
Idle assets
2 items
Branches
2 branches
Idle assets
1 itemType

Land andbuildings
Buildings
Land andbuildings
Land andbuildings

Total

The following is a summary of the maturities of borrowed money atMarch 31, 2018.
Borrowings from banks

Year ended March 31:

Millions ofyen

Thousands of
U.S. dollars(Note 1)

2019
2020
2021
2022
2023
Thereafter
Total¥412,183
2,706
1,577
1,053
712
1,107
¥419,341$3,879,734
25,47014,843
9,911
6,701
10,419$3,947,110

Lease liabilities
Millions ofyen

Thousands of
U.S. dollars(Note 1)

¥356
224
170
17
14
19
¥802

$3,350
2,108
1,600
160
131
178
$7,548

12. Guarantee Obligations
Guarantee obligations for private placement bonds in securities inaccordance with the Article 2-3 of the Financial Instruments andExchange Law amounted to ¥48,894 million ($460,222 thousand) and¥38,779 million at March 31, 2018 and 2017, respectively.
13. Acceptances and Guarantees
The principal amount of money trusts to be indemnified by the Bank andits consolidated subsidiaries was ¥39 million ($367 thousand) and ¥29
million at March 31, 2018 and 2017, respectively.
14. General and Administrative Expenses
General and administrative expenses included salaries and allowancesin the amount of ¥21,592 million ($203,237 thousand) and ¥21,545
million at March 31, 2018 and 2017, respectively.
15. Other Expenses(1) For the year ended March 31, 2018, other expenses included loans
written off in the amount of ¥38 million ($357 thousand) andsecurities written off in the amount of ¥3 million ($28 thousand).
For the year ended March 31, 2017, other expenses included loans
written off in the amount of ¥34 million and securities written off in
the amount of ¥21 million.
(2) For the year ended March 31, 2018, impairment losses wereimmaterial. Related information, therefore, is omitted. For the year
ended March 31, 2017, the Bank reduced the book values of thefollowing asset groups to the recoverable amounts and recognizedimpairment loss of ¥2,246 million due to a continuing decrease inreal estate values and operating cash flows.

Total
impairment
loss

Land

Buildings¥1,781¥1,490

¥291

13

—

13

406

368

38

44
¥2,24643¥1,901

1¥344

The Bank allocates its assets to each branch or group of branches,
which is the smallest unit of asset group in managerial accounting. The
consolidated subsidiaries regard each entity as a unit in grouping theirassets.
The recoverable amounts of asset groups are measured at the higherof their net realizable value or value in use. The recoverable amount iscalculated as net realizable value determined by appraisal values basedon real estate appraisal standards less the expected disposal cost.

16. Consolidated Statements of Comprehensive Income
Reclassification adjustments and the related tax effects concerning othercomprehensive income
Thousands of
U.S. dollars(Note 1)Millions of yen

Net unrealized holding
gains (losses) on securities
Incurred during the period
Reclassification adjustments
Before tax effectadjustments
Tax effectNet unrealized holding
gains (losses) on securities
Net deferred gains (losses)
on derivatives under hedge
accounting
Incurred during the period
Reclassification adjustments
Before tax effectadjustments
Tax effect
Net deferred gains(losses) on derivatives
under hedge accounting
Remeasurements ofdefined benefit plans
Incurred during the period
Reclassification adjustments
Before tax effectadjustments
Tax effectRemeasurements ofdefined benefit plans
The total amount of othercomprehensive income

2018

2017

2018

¥28,846(6,046)¥ 4,172(4,803)$271,517(56,908)

22,800(7,224)(631)
334

214,608(67,996)

15,576(297)

146,611(3,225)2,585(2,975)2,300(30,355)
24,331

(640)
195

(675)
206

(6,024)
1,835

(444)

(469)

(4,179)

1,648
239

5,516
875

15,512
2,249

1,887
(560)

6,392
(1,962)

17,761(5,271)

1,327

4,430

12,490¥16,458¥ 3,663$154,913

IYO BANK Annual Report 201823

17. Cash and Cash Equivalents
Cash and cash equivalents in the consolidated statements of cash flows
included due from banks, except for deposits with the Bank of Japan, as
follows:
Millions of yen

Cash and due from banks
in the balance sheets
Due from banks, except
for deposits with the Bankof JapanCash and cash equivalentsin the statements ofcash flows

Thousands of
U.S. dollars(Note 1)

2018

2017

2018

¥728,327¥795,208$6,855,487(2,169)(11,703)(20,416)¥726,157¥783,504$6,835,062

18. Lease Transactions(1) Finance Leases
Finance leases that do not transfer ownership of the lease assets(a) Details of lease assets(i) Tangible fixed assets
Automatic teller machines(ii) Intangible fixed assets
Not applicable(b) The method of depreciation for lease assets
See Note 2(8), “SIGNIFICANT ACCOUNTING POLICIES - Tangible andintangible fixed assets and lease assets.”(2) Operating Leases
Future lease payment receivables under noncancelable operating leases
at March 31, 2018 and 2017 were as follows:
As lessor
Millions of yen

Due within one year
Due after one year
Total

2018
¥ 43
139
¥183

2017
¥ 43
100
¥144

Thousands of
U.S. dollars(Note 1)

2018
$ 404
1,308
$1,722

19. Financial Instruments(1) Financial instruments(a) Policy on financial instruments
The Bank and its consolidated subsidiaries engage mainly in the financial
services business that includes deposit services and lending services andleasing services.
Accordingly, the Bank holds financial assets and liabilities thatare subject to interest rate fluctuations and undertakes asset andliability management (ALM) in order to curb any unfavorable impact
from interest rate fluctuations. The Bank also engages in derivativetransactions as part of its ALM.
(b) Descriptions and risks of financial instruments
The financial assets of the Bank and its consolidated subsidiaries consist
mainly of loans to customers, which are subject to default risk. Also, theBank holds securities that are mainly stocks, bonds and mutual funds forinvestment, management or trading purposes. They are subject to theissuer’s credit risk, interest rate risk and market price risk.
The foreign currency denominated financial assets and liabilities
are subject to foreign currency risk. The Bank uses currency swaps tomanage the risk.

24

IYO BANK Annual Report 2018

The Bank’s derivative transactions include interest rate swaps. The
Bank applies hedge accounting to the interest on loans to hedge interest
rate risks regarding the interest rate swaps as hedge instruments. The
effectiveness is ensured by maintaining a balance of hedge instrumentsthat does not exceed the balance of the hedged items, which aregrouped by incidence and remaining period.
Other transactions not qualifying for hedge accounting expose the
Bank to foreign exchange and interest rate risks.
(c) Risk management system for financial products(i) Credit risk management
The Bank prescribes its credit risk management policy in its “RiskManagement Plan,” which is issued by the Board of Directors
biannually. In particular, the Bank diversifies credit risk by ensuring thatcredit granted is not overconcentrated in certain customers, groups
or industries. The Bank periodically analyzes and evaluates the credit
conditions classified by internal ratings, business area and industry.
The Bank strives to optimize its credit portfolio by promoting effective
credit risk management. Feedback regarding credit risk management isreported to the Board of Directors on a regular basis.
The Bank manages each customer’s credit in compliance with its“Internal Rating System,” part of the Bank’s credit risk management.
The Risk Management Division (RMD), which is completely independent
from other banking business divisions, is responsible for planning andadministrating the internal rating system and conducting, coordinating
and monitoring the internal ratings. The Loan Group is responsible forsupervising the individual credit granted and examining each customers’
finances, purpose for their loan and their ability to repay. The group is
independent from the business promotion group and is divided into
four divisions: the Credit Division - responsible for general loans, theShip Finance Division – responsible for the loans such as loans in the
shipping and shipbuilding industries, the Credit Management Division responsible for the planning of loan administration and troubled credit
and the Corporate Consulting Division - responsible for supporting
company rehabilitation. The assets are initially assessed by each branch
and then by the head office, followed by a validation by RMD, which isalso responsible for the formulation of the assessment standards.
The credit granted by the consolidated subsidiaries is managed
for each customer along with the credit granted by the Bank. RMD
also manages credit risk of issuers and counterparty risk in derivativetransactions by monitoring and periodically evaluating credit informationand market prices.
(ii) Market risk management
In order to properly manage market risk and maintain the Bank’ssoundness and profitability, the Bank has established a comprehensive
risk management structure set forth by the ALM Committee. The ALM
Committee uses various measures such as the gap method, market
value analysis, periodic income/loss simulation and the VaR method tocontrol risk. The ALM Committee also coordinates risk management
plans and hedging strategies by analyzing the profitability structure andforecasting the market and the economic environment. RMD, set up
as an independent supervisor, evaluates the appropriateness of market
transactions dealt with by other divisions.
The Bank sets limits on the quantity of risk that may be undertaken
in its “Risk Management Plan,” which is developed by the Board of
Directors biannually. RMD monitors compliance with the plan and reports
to the Board of Directors monthly.

(Quantitative information on market risk)
The Bank measures market risk based on the VaR method. The variancecovariance model (holding period: 240 business days; confidence
interval: 99.9%; and historical observation period: 1,200 business days)
is applied in the measurement of VaR.
The major market risks for the Bank are equity risk and interest raterisk. Financial instruments affected by interest rate risk are loans andbills discounted, available-for-sale securities, deposits, borrowed money,
interest swap transactions and interest rate cap derivative transactions.
At March 31, 2018 and 2017, the quantity of market risk (expectedloss), which included equity risk and interest rate risk, amounted to¥225.6 billion ($2,123 million) and ¥197.1 billion, respectively.
The Bank confirms the validity of the measurement model by
biannually performing back-testing, which compares VaR with actualfluctuations in profit and loss during the observation period. However,

VaR, the quantity of market risk which is statistically measured withhistorical market fluctuations, may not reflect drastic changes in themarket.
(iii) Liquidity risk management
The liquidity risk management of the Bank is conducted through assetliability management (ALM) and the duration of funds procured withconsideration for the market environment.
(d) Supplementary explanation of matters related to fair values offinancial instruments and others
The fair values of financial instruments include values based on market
prices and values reasonably estimated when the financial instruments
do not have market prices. Since certain assumptions underlie theestimates of such values, the values may differ when other assumptions
are applied.

(2) Fair values of financial instruments
The following tables summarize book values, fair values and any differences between them as of March 31, 2018 and 2017. Unlisted stocks and others
for which the fair value was deemed extremely difficult to determine were excluded from the table below (see Note ii).

(1) Cash and due from banks(2) Call loans and bills purchased(3) Monetary claims purchased(4) Trading account securities
Trading securities(5) Money held in trust(6) Securities
Available-for-sale securities(7) Loans and bills discounted
Reserve for loan losses (*1)
Total Assets(1) Deposits(2) Negotiable certificates of deposit(3) Call money and bills sold(4) Payables under repurchase agreements(5) Payables under securities lending transactions(6) Borrowed money
Total Liabilities
Derivative Transactions (*2)
Derivative transactions to which hedge accounting is
not applied
Derivative transactions to which hedge accounting isappliedTotal Derivative Transactions

Book value

Millions of yen
2018
Fair value¥ 728,327
23,47910,247¥ 728,327
23,47910,247

465
6,337

465
6,337

—
—

1,799,281
4,269,697(22,946)
4,246,750¥6,814,889¥5,084,173
441,225
25,497
77,434226,150
419,341¥6,273,822

1,799,281
4,220,813—

4,220,813¥6,788,951¥5,084,055
441,224
25,497
77,434226,150
419,430¥6,273,793

¥

1,516

¥

¥

536
2,052

¥

Difference

¥

—
—
—

Thousands of U.S. dollars (Note 1)
2018Book value
Fair value
Difference$ 6,855,487 $ 6,855,487
220,999
220,999
96,451
96,451
4,376
59,647

$

—
—
—

4,376
59,647———(25,937)¥(25,937)¥ (117)
(0)
—
—
—
89
¥
(28)

16,936,003 16,936,003
40,189,166 39,729,038(215,982)
39,973,173 39,729,038$64,146,169 $63,902,023$47,855,544 $47,854,433
4,153,096
4,153,087
239,994
239,994
728,859
728,859
2,128,670
2,128,670
3,947,110
3,947,948$59,053,294 $59,053,021(244,135)$(244,135)$ (1,101)
(0)
—
—
—
837
$
(263)

1,516

¥

—

$

14,269 $14,269

$

—

536
2,052

¥

—
—

$

5,045
19,314 $

5,045
19,314$——(*1) General and specific reserves for loan losses relevant to loans and bills discounted are excluded.
(*2) Derivative transactions recorded in other assets and liabilities are presented as a lump sum. Net claims and debts that arise from derivative transactions arepresented on a net basis.
(*3) Immaterial items are omitted.

IYO BANK Annual Report 201825

(1) Cash and due from banks(2) Call loans and bills purchased(3) Monetary claims purchased(4) Trading account securities
Trading securities(5) Money held in trust(6) Securities
Available-for-sale securities(7) Loans and bills discounted
Reserve for loan losses (*1)
Total Assets(1) Deposits(2) Negotiable certificates of deposit(3) Call money and bills sold(4) Payables under repurchase agreements(5) Payables under securities lending transactions(6) Borrowed money
Total Liabilities
Derivative Transactions (*2)
Derivative transactions to which hedge accounting is
not applied
Derivative transactions to which hedge accounting isappliedTotal Derivative Transactions

Book value

Millions of yen
2017
Fair value¥ 795,208
90,582
11,373¥ 795,208
90,582
11,373

568
5,749

568
5,749

—
—

1,721,210
4,021,442(22,232)
3,999,210¥6,623,903¥4,991,984
445,292
72,34640,124
324,715
220,887¥6,095,350

1,721,210
3,978,146—

3,978,146¥6,602,839¥4,991,748
445,290
72,34640,124
324,715
220,927¥6,095,153(21,063)¥(21,063)¥ (236)
(1)
—
—
—
40
¥ (197)

¥

1,470

¥

1,470

¥

—

¥

(5,261)(3,790)¥(5,261)(3,790)¥——Difference

¥

—
—
—

(*1) General and specific reserves for loan losses relevant to loans and bills discounted are excluded.
(*2) Derivative transactions recorded in other assets and liabilities are presented as a lump sum. Net claims and debts that arise from derivative transactions arepresented on a net basis.
(*3) Immaterial items are omitted.

Note i. Methods used to calculate fair value of financial instruments
Assets(1) Cash and due from banks
The fair value of due from banks with no maturity is considered equal
to the book value since the fair value approximates the book value. The
fair value of due from banks with maturity is calculated as the present
value discounted at rates that reflect the proper market risk and credit
risk per contractual terms. The fair value of due from banks with shortcontractual terms (within one year) is considered equal to the book value
since the fair value approximates the book value.
(2) Call loans and bills purchased
The fair value of call loans and bills purchased is considered equal to thebook value since the contractual term is within one year and the fairvalue approximates the book value.
(3) Monetary claims purchased
The fair value of trustee beneficial rights in monetary claims purchasedis based on the price quoted by correspondent financial institutions. For
monetary claims purchased with short contractual terms (within oneyear), the fair value is considered equal to the book value since the fairvalue approximates the book value.
(4) Trading account securities
The fair value of securities such as bonds held for trading is based on themarket price or the price quoted by correspondent financial institutions.
(5) Money held in trust
The fair value of money held in trust is based on the price quoted bycorrespondent financial institutions. Information on money held in
trust classified by the purpose for which it is held is disclosed in Note 21,“MONEY HELD IN TRUST.”26

IYO BANK Annual Report 2018(6) Securities
The fair value of stocks is based on market price. The fair value ofbonds is based on market price or the price quoted by correspondent
financial institutions. The fair value of investment trusts is based on the
publicly disclosed base value. The fair value of private placement bonds
is calculated as the present value discounted at a rate that reflects theproper market rate corresponding to the remaining period and credit risk
based on the internal rating.
Information on securities classified by the purpose for which they areheld is disclosed in Note 20, “Securities.”(7) Loans and bills discounted
The fair value of loans and bills discounted with floating rates are
considered equal to the book value since the rate reflects the market
rate in a short period and the fair value approximates the book value,
unless the creditworthiness of the borrower changes significantly after
the inception date. The fair value of loans and bills discounted with fixed
rates is calculated as the present value, discounting future cash flow at a
rate that reflects the proper market rate corresponding to the remaining
period and credit risk based on the internal rating. The fair value of loans
and bills discounted with short contractual terms (within one year) is
considered equal to the book value since the fair value of these items
approximates the book value.
In addition, the fair value of claims against bankrupt obligors,
substantially bankrupt obligors and intensive control obligors
approximates the consolidated balance sheet amount as of theconsolidated balance sheet date less the allowance for bad debt since
the bad debt is calculated based on the present value of the expected
future cash flow or the estimated collectable amount from collateral and/or guarantees.

For loans and bills discounted, the fair value of loans and bills
discounted with no maturity due to conditions such as limiting theloans to the value of pledged assets is deemed the book value since thefair value is expected to approximate the book value considering theestimated loan period, interest rate and other conditions.
Liabilities(1) Deposits and (2) Negotiable certificates of deposit
The fair value of demand deposits is considered the payable amount asof the consolidated balance sheet date (the book value). In addition,
the fair value of fixed-term deposits is calculated as the present value,
discounting the future cash flow at a rate that reflects the proper market
rate corresponding to the remaining period and credit risk of the Bank.
The fair value of deposits with short contractual terms (within one year)
is considered equal to the book value since the fair value approximates
the book value.
(3) Call money and bills sold (4) Payables under repurchase agreements and (5) Payables under securities lending transactions
The fair value of call money, bills sold and payables under securities
lending transactions is considered equal to the book value since thecontractual term is within one year and the fair value of these items
approximates the book value.
(6) Borrowed money
The fair value of borrowed money with a floating rate is consideredequal to the book value since the rate reflects the market rate in a shortperiod, the creditworthiness of the Bank and its consolidated subsidiaries
has not changed significantly since the inception date and the fair valueof these items approximates the book values.
The fair value of borrowed money with a fixed rate is calculated as
the present value, discounting future cash flow at a rate that reflects theproper market rate corresponding to the remaining period and credit riskof the Bank.

Derivative Transactions
Information on derivative transactions is disclosed in Note 23, “Derivative
Transactions.”
Note ii. Financial instruments whose fair value is deemed extremely
difficult to determine are not included in “Available-for-salesecurities” in the table above.
Consolidated balance sheet
amount (2018)
Category

Millions of yen

Thousands of
U.S. dollars(Note 1)

¥13,0423,230¥16,273$122,759
30,402$153,172

Unlisted stocks (*1) (*2)
Investments in partnerships (*3)
Total(*1) Unlisted stocks are not included in the disclosure of fair value since the fairvalue is deemed extremely difficult to determine.
(*2) The amount impairment on unlisted stock during the year ended March 31,2018 was ¥3 million ($28 thousand).
(*3) Investments in partnerships in which the partnership assets compriseunlisted stocks are not included in the disclosure of fair value since the fairvalue is deemed extremely difficult to determine.
Consolidatedbalance sheet
amount (2017)
Category

Millions of yen

Unlisted stocks (*1) (*2)
Investments in partnerships (*3)
Total

¥12,703
2,066¥14,769(*1) Unlisted stocks are not included in the disclosure of fair value since the fairvalue is deemed extremely difficult to determine.
(*2) The amount impairment on unlisted stock during the year ended March 31,2017 was ¥21 million.
(*3) Investments in partnerships in which the partnership assets compriseunlisted stocks are not included in the disclosure of fair value since the fairvalue is deemed extremely difficult to determine.

Note iii. Expected redemption of monetary claims and securities with maturities

Within 1 year

Due from banks
Call loans and bills purchased
Monetary claims purchased
Securities
Held-to-maturity debt securities
Securities with maturities
Japanese government bonds
Municipal bonds
Corporate bonds
Loans and bills discounted (*)
Total

Due from banks
Call loans and bills purchased
Monetary claims purchased
Securities
Held-to-maturity debt securities
Securities with maturities
Japanese government bonds
Municipal bonds
Corporate bonds
Loans and bills discounted (*)
Total¥ 681,662
23,4794,271
128,352—
128,352
54,00038,01918,217
1,053,188¥1,890,953

1-3 years¥

Millions of yen
2018
3-5 years
5-7 years———
426,794—
426,794
289,700
40,85736,388814,868¥1,241,662——
247
201,702—
201,70291,10039,57026,921
612,718¥814,668

Within 1 year

1-3 years

Millions of yen3.52017
3-5 years
5-7 years¥ 751,237
90,582
3,846
153,654—
153,654
60,80026,962
21,962
1,062,687¥2,062,007

¥

¥

—
—
—
364,830—
364,830
181,500
60,74733,060742,575¥1,107,405

¥

—
—
130
385,349—
385,349
257,100
42,38625,712574,220¥959,7017-10 years

¥

—
—
393
94,135—
94,1359,500
18,84013,161
429,003¥523,533

¥

¥

—
—
—
391,312—391,312
100,500
64,2888,711
477,719¥869,032

7-10 years

—
—
1,242
80,653—80,653—
17,066
13,705
388,754¥470,649¥———
263,497—
263,497
101,000
38,342
10,277427,007¥690,504

Over 10 years

¥

—
—
5,302
66,835—66,83517,00036,903
5,094
795,478¥867,616

Over 10 years

¥

—
—
6,110
61,633—
61,63317,00034,147
5,361
740,654¥808,398

IYO BANK Annual Report 201827

Thousands of U.S. dollars (Note 1)
2018
Within 1 year

Due from banks
Call loans and bills purchased
Monetary claims purchased
Securities
Held-to-maturity debt securities
Securities with maturities
Japanese government bonds
Municipal bonds
Corporate bonds
Loans and bills discounted (*)
Total

1-3 years$ 6,416,246 $—
220,999—
40,201—
1,208,132
4,017,262——
1,208,132
4,017,262
508,283
2,726,844
357,859
384,572
171,470
342,507
9,913,290
7,670,067$17,798,879 $11,687,330

3-5 years

5-7 years

7-10 years

$

$

$

—
—
2,324
1,898,550—
1,898,550
857,492
372,458
253,397
5,767,300$7,668,185

—
—
3,699
886,059—
886,059
89,420177,334
123,879
4,038,055$4,927,833———
3,683,283—
3,683,283
945,971605,120
81,993
4,496,602$8,179,894

Over 10 years$——
49,905
629,094—
629,094
160,015
347,355
47,948
7,487,556$8,166,566(*) Loans and bills discounted on which full repayment is not expected from debtors such as bankrupt obligors, substantially bankrupt obligors and intensively
controlled obligors amounted to ¥48,560 million ($457,078 thousand) and ¥46,664 million, respectively, and loans and bills with no maturities amounted to¥38,158 million ($359,167 thousand) and ¥38,880 million at March 31, 2018 and 2017, respectively.

Note iv. Amounts to be repaid for borrowed money and other interest bearing liabilities

Within 1 year

Deposits (*)
Certificates of deposit
Call money and bills soldPayables under repurchase agreements
Payables under securities lending transactions
Borrowed money
Total¥4,704,290
440,905
25,497
77,434226,150
412,183¥5,886,462

Millions of yen
2018
3-5 years
5-7 years

1-3 years¥338,318
320
—
—
—
4,284
¥342,923¥37,188
—
—
—
—
1,766
¥38,955¥1,923————522¥2,445

7-10 years

Over 10 years¥2,451————342¥2,794

¥ —
—
—
—
—
242
¥242

Millions of yen
2017

Deposits (*)
Certificates of deposit
Call money and bills soldPayables under repurchase agreements
Payables under securities lending transactions
Borrowed money
Total

Deposits (*)
Certificates of deposit
Call money and bills soldPayables under repurchase agreements
Payables under securities lending transactions
Borrowed money
Total

Within 1 year

1-3 years

3-5 years¥4,574,231
444,00272,34640,124
324,715
213,680¥5,669,101¥368,889
1,290
—
—
—
4,952
¥375,131¥44,136
—
—
—
—
1,435
¥45,572

5-7 years¥1,731————445¥2,176

7-10 years

Thousands of U.S. dollars (Note 1)
2018
3-5 years
5-7 years
7-10 years

Within 1 year

1-3 years$44,279,838
4,150,084
239,994
728,859
2,128,670
3,879,734$55,407,210$3,184,469
3,012
—
—
—
40,323$3,227,814$350,037————
16,622$366,669$18,100
—
—
—
—
4,913
$23,013Over 10 years¥2,995————321¥3,316

¥—
—
—
—
—
52
¥52

Over 10 years$23,070
—
—
—
—
3,219
$26,298(*) Demand deposits are included in “Within 1 year.”

20. Securities(1) The following tables summarize acquisition costs, book values and fair values of securities with available fair values as of March 31, 2018.
(a) Trading securities:

Unrealized gains (losses) included in profit
and loss for the fiscal year(b) Held-to-maturity debt securities:
None

28

IYO BANK Annual Report 2018

Millions of yen

Thousands of
U.S. dollars(Note 1)

2018

2018
¥(4)

$(37)

$

—
—
—
—
—
2,277
$2,277

(c) Available-for-sale securities:

Book value

Securities with unrealized gains
Equity securities
Bonds
Japanese government bonds
Municipal bonds
Corporate bonds
Other
Total
Securities with unrealized losses
Equity securities
Bonds
Japanese government bonds
Municipal bonds
Corporate bonds
Other
Total
Total

Millions of yen
2018
Acquisition
cost

Thousands of U.S. dollars (Note 1)
2018
Acquisition
Book value
cost
Difference

Difference¥ 306,191
859,598
581,416
185,598
92,583
246,454¥1,412,245¥

87,661
834,240565,250
178,829
90,160232,134¥1,154,037¥218,529
25,357
16,165
6,769
2,422
14,319¥258,207$ 2,882,068 $ 825,122
8,091,095
7,852,409
5,472,665
5,320,500
1,746,969
1,683,254
871,451
848,6442,319,785
2,184,996$13,292,968 $10,862,547$2,056,937
238,676
152,155
63,714
22,797
134,779$2,430,412

¥

¥

¥

$

$

3,851
98,141—
59,63638,504
291,045
393,037¥1,805,282

4,605
98,881—
59,87739,004
299,310
402,797¥1,556,835

(754)
(740)
—
(240)
(499)
(8,265)(9,760)¥248,447

36,248 $43,345
923,766
930,732——
561,332
563,601
362,424
367,1312,739,504
2,817,300
3,699,519
3,791,387$16,992,488 $14,653,943(7,097)(6,965)—(2,259)(4,696)(77,795)(91,867)$2,338,544

LossesThousands of U.S. dollars (Note 1)
2018
Amount sold
Gains
Losses(d) Available-for-sale securities sold in the year ended March 31, 2018
Millions of yen
2018
Amount sold
Gains

¥ 10,526
28,891
28,82566
87,196¥126,614

Equity securities
Bonds
Japanese government bonds
Corporate bonds
Other
Total

Available-for-sale securities which have readily determinable fair values
are written down to the fair value, and the difference between theacquisition cost and the fair value is treated as loss for the fiscal year
(impairment (devaluation)) if the fair value has significantly deteriorated,compared with the acquisition cost, unless it is deemed that there isa possibility of a recovery in the fair value. The amount of impairment(devaluation) for the year ended March 31, 2018 was ¥337 million($3,172 thousand), including ¥34 million ($320 thousand) of bonds and¥302 million ($2,842 thousand) of other. A security is deemed to have“significantly deteriorated” if the fair value has decreased to 50% orless of the acquisition cost. If the fair value exceeds 50% but is 70% orless of the acquisition cost, the security may be deemed “significantly
deteriorated” considering the quoted market price change during acertain period in the past, business performance and other factors.
(2) The following tables summarize acquisition costs, book values and fairvalues of securities with available fair values as of March 31, 2017.
(a) Trading securities:
Millions of yen
2017

Unrealized gains (losses) included in profit
and loss for the fiscal year(b) Held-to-maturity debt securities:
None

¥(1)

¥6,18239
39
0
863¥7,085

¥ 25
—
—
—
601
¥626

$

99,077
271,940
271,319621
820,745$1,191,773$58,189
367
367
0
8,123
$66,688

$ 235
—
—
—
5,657
$5,892(c) Available-for-sale securities:
Millions of yen
2017
Acquisition
cost

Book value

Securities with unrealized
gains
Equity securities
Bonds
Japanese government bonds
Municipal bonds
Corporate bonds
Other
Total
Securities with unrealized
lossesEquity securities
Bonds
Japanese government bonds
Municipal bonds
Corporate bonds
Other
Total
Total

Difference¥ 272,367
833,865¥

90,765
801,720¥181,601
32,144

549,036
188,367
96,461
265,518¥1,371,751

527,921
179,830
93,968248,505¥1,140,992

21,115
8,536
2,492
17,012¥230,758

¥

¥

¥

4,275
169,01293,01239,65836,341
183,699356,987¥1,728,738

4,979
170,048

93,191
40,08436,772
187,288362,315¥1,503,308(703)(1,036)

(179)
(425)
(431)
(3,588)(5,328)¥225,430

IYO BANK Annual Report 201829

(d) Available-for-sale securities sold in the year ended March 31, 2017
Millions of yen
2017
Amount sold
Gains

Equity securities
Bonds
Japanese government
bonds
Corporate bonds
Other
Total

¥

LossesMillions of yen

8,671
53,789¥5,943480¥

53,68999
63,932¥126,392

479
0
997¥7,420

—
—
458
¥458

0
—

Available-for-sale securities which have readily determinable fair values
are written down to the fair value, and the difference between theacquisition cost and the fair value is treated as loss for the fiscal year
(impairment (devaluation)) if the fair value has significantly deteriorated,compared with the acquisition cost, unless it is deemed that there is apossibility of a recovery in the fair value. No impairment loss on securities
was recognized in the year ended March 31, 2017. A security is deemed
to have “significantly deteriorated” if the fair value has decreased to
50% or less of the acquisition cost. If the fair value exceeds 50% but
is 70% or less of the acquisition cost, the security may be deemed“significantly deteriorated” considering the quoted market price change
during a certain period in the past, business performance and otherfactors.

21. Money Held in Trust(1) The following table summarizes the book values (fair values) andamounts of net unrealized gains and losses for money held in trust
included in profit and loss for the fiscal year ended March 31, 2018.

Money held in trust for investment
Book value (fair value)
Amount of net unrealized gain (loss)
included in profit and loss for the
fiscal year
Other money held in trustBook value (fair value)
Acquisition cost
Difference
Unrealized gains
Unrealized losses

30

IYO BANK Annual Report 2018

Millions of yen

Thousands of
U.S. dollars(Note 1)

2018

2018

¥2,994$28,181

¥

$

—
3,343
2,880
462
480
18

(2) The following table summarizes the book values (fair values) andamounts of net unrealized gains and losses included in the income
statement for money held in trust as of March 31, 2017.

—
31,46627,108
4,348
4,518
169

2017
Money held in trust for investment
Book value (fair value)
Amount of net unrealized gain (loss)
included in the income statement
Other money held in trustBook value (fair value)
Acquisition cost
Difference
Unrealized gains
Unrealized losses¥2,994
¥

0

2,755
2,077
678
678
—

22. Unrealized Holding Gains on Securities
At March 31, 2018 and 2017, unrealized holding gains on securities
were as follows:
Millions of yen

Valuation gains
Available-for-salesecurities
Other money held in
trust
Deferred tax liabilities
Net unrealized holding
gains on securities(before adjustment forminority interests)
Noncontrolling interests
Net unrealized holding
gains on securities

Thousands of
U.S. dollars(Note 1)

2018

2017

2018

¥248,447¥225,430$2,338,544

462(76,127)

678(68,902)4,348(716,556)

172,782(6,079)157,206(3,708)

1,626,336(57,219)¥166,703¥153,498$1,569,117

23. Derivative Transactions(1) At March 31, 2018(a) Derivative transactions to which hedge accounting was not applied
Derivative transactions to which hedge accounting was not applied are set forth in the tables below.
These items do not reflect the market risk of the derivative transactions themselves.
(i) Interest rate contracts

Contract
amountOver-the-counter transactions:Swaps:
Receive fixed rate and pay
floating rate
Receive floating rate and pay
fixed rate
Total

Millions of yen
2018
Portionmaturing over
one year
Fair value

Recognized
gains(losses)

Contract
amountThousands of U.S. dollars (Note 1)
2018
PortionRecognizedmaturing overgains
one year
Fair value(losses)¥45,966¥45,091

¥ 980

¥ 980

$432,661$424,425$ 9,224$ 9,224

45,872—45,077
—

(802)
¥ 177

(802)
¥ 177

431,777—

424,294—(7,548)$ 1,666(7,548)$ 1,666

The above transactions are measured at fair value, and recognized gains (losses) are charged to the consolidated statements of income.
The fair value of over-the-counter transactions is calculated based on the discounted present value and option pricing models.
(ii) Currency and foreign exchange contracts

Contract
amountOver-the-counter transactions:
Currency swaps
Forward exchange contracts:
Sell
Buy
Currency options:
Sell
Buy
Total

Millions of yen
2018
Portionmaturing over
one year
Fair value

Recognized
gains(losses)

Contract
amountThousands of U.S. dollars (Note 1)
2018
PortionRecognizedmaturing overgains
one year
Fair value(losses)¥530,258¥246,737

¥ 148

¥ 148

$4,991,133$2,322,449$ 1,393$ 1,393

169,832
35,748

7,882
7,648

1,643
(453)

1,643
(453)

1,598,569
336,483

74,19071,987

15,464(4,263)

15,464(4,263)58,51358,513—

42,10842,108
—

2,470
2,470
¥6,279(126)643¥1,855

550,762
550,762—

396,347
396,347—

23,24923,249$59,102(1,185)
6,052$17,460

The above transactions are measured at fair value, and recognized gains (losses) are charged to the consolidated statements of income.
The fair value of over-the-counter transactions is calculated based on discounted present value.
(b) Derivative transactions to which hedge accounting was applied
Derivative transactions to which hedge accounting was applied are set forth in the tables below.
These items do not reflect the market risk of the derivative transactions themselves.
(i) Currency and foreign exchange contracts

Hedged item

Method of hedge accounting
Currency swaps
Fund related swaps
Total

Foreign currency
monetary assets

Contract
amount¥131,211
70,383—

Millions of yen
2018
Portionmaturing over
one year¥119,281——

Fair value

¥226
309
¥536

Thousands of U.S. dollars (Note 1)
2018
PortionContract
maturing overamountone year
Fair value$1,235,043
662,490—$1,122,750——$2,1272,908$5,045The above transactions are accounted for with the deferral hedge accounting treatment stipulated in JICPA Industry Audit Committee Report No. 25,
July 29, 2002, “Treatment for Accounting and Auditing of Accounting for Foreign Currency Transactions in the Banking Industry.”
The fair value was calculated based on the discounted present value.

IYO BANK Annual Report 201831

(2) At March 31, 2017(a) Derivative transactions to which hedge accounting was not applied
Derivative transactions to which hedge accounting was not applied are set forth in the tables below.
These items do not reflect the market risk of the derivative transactions themselves.
(i) Interest rate contracts

Contract
amountOver-the-counter transactions:Swaps:
Receive fixed rate and pay
floating rate
Receive floating rate and pay
fixed rate
Total

Millions of yen
2017
Portionmaturing over
one year
Fair value

Recognized
gains(losses)¥42,906¥39,479¥ 1,328¥ 1,32842,806—39,380—¥(1,212)116¥(1,212)
116

The above transactions are measured at fair value, and recognized gains (losses) are charged to the consolidated statements of income.
The fair value of over-the-counter transactions is calculated based on the discounted present value and option pricing models.
(ii) Currency and foreign exchange contracts

Contract
amountOver-the-counter transactions:
Currency swaps
Forward exchange contracts:
Sell
Buy
Currency options:
Sell
Buy
Total

Millions of yen
2017
Portionmaturing over
one year
Fair value

Recognized
gains(losses)¥811,300¥416,376

¥ 134

¥ 134

178,847
96,411

6,837
5,967

706
512

706
512

45,54945,549—28,44028,440
—

1,613
1,613
¥4,581244
75¥1,673

The above transactions are measured at fair value, and recognized gains (losses) are charged to the consolidated statements of income.
The fair value of over-the-counter transactions is calculated based on discounted present value.
(b) Derivative transactions to which hedge accounting was applied
Derivative transactions to which hedge accounting was applied are set forth in the tables below.
These items do not reflect the market risk of the derivative transactions themselves.
(i) Currency and foreign exchange contracts

Hedged item

Method of hedge accounting
Currency swaps
Fund related swaps
Total

Foreign currency
monetary assets

Contract
amount¥142,063
75,980—Millions of yen
2017
Portionmaturing over
one year¥97,178——

Fair value¥(5,651)390¥(5,261)

The above transactions are accounted for with the deferral hedge accounting treatment stipulated in JICPA Industry Audit Committee Report No. 25,
July 29, 2002, “Treatment for Accounting and Auditing of Accounting for Foreign Currency Transactions in the Banking Industry.”
The fair value was calculated based on the discounted present value.

24. Retirement Benefits
For the year ended March 31, 2018(a) Outline of retirement and severance benefits plans
The retirement benefit plans of the Bank consist of a defined benefit
corporate pension fund plan and a retirement lump-sum grant system.
Extra retirement benefits may be paid upon the retirement of employees.

32

IYO BANK Annual Report 2018

In addition, the Bank set up a retirement benefit trust. On April 1, 2014,
the Bank transformed its corporate pension fund plan to a cash balance
plan and established a defined contribution pension plan. Consolidated
subsidiaries use the simplified method in calculating net defined benefit
liability and retirement benefit expenses for their retirement lump-sum
grant systems.

(b) Defined benefit plan(i) Reconciliation of retirement benefit obligations between the
beginning and the end of the period
Thousands of
U.S. dollars(Note 1)Millions of yen

Retirement benefit
obligations at the
beginning of the period
Service cost
Interest cost
Actuarial differences
incurred
Retirement benefits paid
Prior service cost
Retirement benefit
obligations at the end of
the period(iv) Retirement benefit cost and its breakdown

2018

2017

2018

¥66,3412,073
204¥69,5222,094
106$624,444
19,512
1,920

1,144(2,963)(183)(1,183)(3,245)(953)

10,768(27,889)(1,722)

66,616

66,341

627,033

Thousands of
U.S. dollars(Note 1)Millions of yen

Service cost
Interest cost
Expected return on
pension assets
Recognized actuarial
differences
Amortization of priorservice cost2018
¥1,8882042017¥1,9171062018$17,771
1,920

(986)

(955)

(9,280)

818

1,358

7,699

(581)
1,343

(531)
1,897

(5,468)12,641(Note 1) Retirement benefit costs of consolidated subsidiaries using thesimplified method are included in “Service cost.”(Note 2) Employee’ contribution to the corporate pension fund is deducted from“Service cost.”(ii) Reconciliation of pension assets between the beginning and the endof the period(v) Remeasurements of defined benefit plans
The breakdown of items included in remeasurements of defined benefit
plans (before applicable tax effects) was as follows:

Thousands of
U.S. dollars(Note 1)Thousands of
U.S. dollars(Note 1)Millions of yen

2018
Pension assets at the
beginning of the period
Expected return on
pension assets
Actuarial differences
incurred
Employer’s contributions
Retirement benefits paid
Pension assets at the endof the period

Millions of yen

2018

2017

¥73,259¥68,524$689,561

986

955

9,280

2,611
2,553
(2,133)

3,427
2,517
(2,164)

24,57624,030(20,077)

77,27873,259727,390

Prior service cost
Actuarial differences
Total

Thousands of
U.S. dollars(Note 1)Retirement benefit
obligations of thenon-savings plan
Net liabilities and assets
recorded on the
consolidated balance sheets
Net defined benefit liability
Net defined benefit asset
Net liabilities and assets
in the consolidatedbalance sheets

2018

2017

2018

¥ 66,262(77,278)(11,016)¥ 66,026(73,259)(7,233)$ 623,701(727,390)(103,689)

354

314

3,332

(10,661)
12,502(23,164)(6,918)
12,572(19,490)(100,348)
117,676(218,034)(10,661)(6,918)(100,348)(Note) Pension assets include assets in the retirement benefit trust.

2018$ (3,746)
21,517
17,761Thousands of
U.S. dollars(Note 1)Millions of yen(iii) Reconciliation of retirement benefit obligations and pension assets at
the end of the period to net defined benefit liability and net defined
benefit asset in the consolidated balance sheets

Retirement benefit
obligations of thesavings plan
Pension assets

2017
¥ 422
5,969
6,392

(vi) Remeasurements of defined benefit plans
The breakdown of items included in remeasurements of defined benefit
plans (before applicable tax effects) was as follows:(Note) Pension assets include assets in the retirement benefit trust.

Millions of yen

2018¥ (398)
2,286
1,887

Unrecognized prior service
cost
Unrecognized actuarial
differences
Total

2018

2017

2018

¥(3,850)¥(4,249)$(36,238)(5,746)(9,596)(3,459)(7,708)(54,085)(90,323)

2018
50.8%
42.7%
6.5%
100.0%

2017
52.3%
41.2%
6.5%
100.0%(vii) Pension assets(A) Pension asset portfolio
Bonds
Equity securities
Other
Total

(Note) 29.9% of the total pension assets as of March 31, 2018 (29.2% as ofMarch 31, 2017) represent assets in the retirement benefit trust for the
corporate pension fund. 3.6% of which as of March 31, 2018 (3.5% asof March 31, 2017) corresponds to the lump-sum grants system.

(B) Determination of the long-term expected rate of return on pension assets
The long-term expected rate of return on pension assets is determinedbased on the average investment yield on the pension assets for the past
three years. When the average rate is below 1.25% or above 2.0%, it isstated as 1.25% and 2.0%, respectively.

IYO BANK Annual Report 201833

(viii) Actuarial assumptions
The weighted average rate for assumptions used for the actuarial
computation of the retirement benefit obligations for the years ended
March 31, 2018 and 2017 were as follows:
2018
2017
(A) Discount rates
Retirement lump-sum
grant system
0.00%
0.00%
Corporate pension
fund plans
0.30%
0.40%
(B) Long-term expected
return on assets
Pension assets ofcorporate pension fund
2.00%
2.00%
Retirement benefit trust(Retirement lump-sum
grant system andcorporate pension
fund plans)
0.00%
0.00%

(c) Defined contribution plan
The amount of required contribution by the Bank to the defined
contribution plan was ¥333 million ($3,134 thousand) and ¥322 million
at March 31, 2018 and 2017, respectively.

25. Stock Options(1) Stock options to be expensed
Thousands of
U.S. dollars(Note 1)Millions of yen

2018
General and administrative
expenses

2018

2017

¥119

$1,120¥112(Note) A point system is applied to the substantive portion of the retirement
lump-sum grant system and a cash balance plan to defined benefit
corporate pension fund plans, respectively. The “Estimated salary increaserate” is not disclosed due to the insignificant impact it would have on thecalculation of retirement benefit obligations.

(2) Outline of stock options and changes(a) Outline of stock options
2017
2016
2015
2014
2013
2012
2011
Stock Options
Stock Options
Stock Options
Stock Options
Stock Options
Stock Options
Stock Options
Title and number
Directors of the
Directors of the
Directors of the
Directors of the
Directors of the
Directors of the
Directors of theof grantees
Bank: 8
Bank: 7
Bank: 7
Bank: 16
Bank: 18
Bank: 17
Bank: 17
Executive Officers Executive Officers Executive Officers Executive Officersof the Bank: 12of the Bank: 15of the Bank: 14of the Bank: 4
Number of stock
Common shares: Common shares: Common shares: Common shares: Common shares: Common shares: Common shares:
options (*)
140,900
184,600
79,500123,100
140,900
199,500
156,800
Grant dateJuly 14, 2017
July 15, 2016
July 15, 2015
July 16, 2014
July 16, 2013
July 17, 2012
July 15, 2011
Conditions for vesting
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
Requisite service
period
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
Exercise period
July 15, 2017 to July 16, 2016 to July 16, 2015 to July 17, 2014 to July 17, 2013 to July 18, 2012 to July 16, 2011 toJuly 14, 2047
July 15, 2046
July 15, 2045
July 16, 2044
July 16, 2043
July 17, 2042
July 15, 2041(*) Reported in terms of shares of stock(b) Stock options granted and changes
The table below represents stock options outstanding at the year-end and the number of stock options is converted into the number of stock.
(i) Number of stock options

Before vesting
Previous fiscal
year-end
GrantedForfeited
VestedOutstanding
After vesting
Previous fiscal
year-end
VestedExercised
Forfeited
Exercisable

34

2017
Stock Options
shares

2016
Stock Options
shares2015
Stock Options
shares2014
Stock Options
shares2013
Stock Options
shares2012
Stock Options
shares2011
Stock Options
shares—140,900——
140,900

184,600——
38,300146,300

74,600——16,90057,70094,500——21,40073,10085,100——25,20059,900117,300——
37,00080,30071,300——26,20045,100

—
—
—
—
—

—
38,30038,300———16,90016,900———21,40021,400———25,20025,200———37,00037,000———26,20026,200——IYO BANK Annual Report 2018

(ii) Price information

Exercise price
Average exercise
price

2017
Stock Options
Yen (U.S. dollars)¥ 1 ($0)
per share—

2016
Stock Options
Yen (U.S. dollars)¥ 1 ($0)
per share¥935 ($8)
per share2015
Stock Options
Yen (U.S. dollars)¥
1 ($0)
per share¥ 935 ($8)
per share2014
Stock Options
Yen (U.S. dollars)¥ 1 ($0)
per share¥935 ($8)
per share2013
Stock Options
Yen (U.S. dollars)¥ 1 ($0)
per share¥935 ($8)
per share2012
Stock Options
Yen (U.S. dollars)¥ 1 ($0)
per share¥935 ($8)
per share

2011
Stock Options
Yen (U.S. dollars)¥ 1 ($0)
per share¥935 ($8)
per share¥867 ($8)
per share¥601 ($5)
per share¥1,473 ($13)
per share¥989 ($8)
per share¥918 ($8)
per share¥550 ($4)
per share¥704 ($6)
per share

Fair value at the
grant date(3) Valuation technique used for valuating the fair value of stock
options
Stock options granted in the fiscal year were valuated using thefollowing valuation techniques.
(a) Valuation technique: Black-Scholes option pricing model(b) Principal parameters used in the option pricing model

Expected volatility (*1)
Average expected life (*2)
Expected dividends (*3)
Risk free interest rate (*4)

2017 Stock Options
Yen (U.S. dollars)
30.235%5.37 years¥12 ($ 0) per share(0.041%)(*1) Calculated based on actual weekly stock prices from Mar 1, 2012 to July
14, 2017.
(*2) Estimated based on an average of the periods of directors of the Bank.
(*3) Expected dividends are based on the actual dividends on common stock forthe year ended March 31, 2017.
(*4) Japanese government bond yield corresponding to the average expected life.

(4) Method of estimating number of stock options vested
Only the actual number of forfeited stock options is reflected because it
is difficult to rationally estimate the number of stock options that will be
forfeited in the future.

26. Income Taxes
The Bank and its consolidated subsidiaries are subject to a number oftaxes based on income, including corporation tax, inhabitants tax andenterprise tax.
(1) Reconsiliation between the statutory tax rate of the Bank andthe effective income tax rate is not disclosed as the difference isless than 5% of the statutory tax rate.
(2) Adjustments to deferred tax assets and deferred tax liabilities
as a result of revisions of income tax rates
With the enactment of certain laws, the timing of abolishment andrevision of related tax rates was postponed from the consolidated fiscal
year starting on or after April 1, 2017 to October 1, 2019. The effective
statutory tax rate used for the calculation of deferred tax assets anddeferred tax liabilities did not change but there is a reclassification
between the national tax and the local tax. Effects of this change on
consolidated financial statements were immaterial.
Significant components of deferred tax assets and liabilities as ofMarch 31, 2018 and 2017 were as follows:
Thousands of
U.S. dollars(Note 1)Millions of yen

Deferred tax assets:
Excess reserve for loan
lossesNet defined benefit
liability
Reserve for losses on
repayments on dormant
bank accounts
Excess depreciation
Impairment loss on land
Accrued employees’
bonuses
Write-down of securities
Other
Valuation reserve
Total deferred
tax assets
Deferred tax liabilities:
Unrealized holding
gains on securities
Deferred gains on real
property
Retirement benefit
asset
Total deferred
tax liabilities
Net deferred tax liabilities:

2018

2017

2018

¥ 12,884¥ 12,068$ 121,272

—

225

—

928
626
546

939
691
555

8,734
5,892
5,139

504
411
2,566
(964)

507
426
2,355
(985)

4,743
3,868
24,152(9,073)

17,502

16,782

164,740¥(76,026)¥(68,810)$(715,606)

(906)

(909)

(8,527)(806)—(7,586)(77,739)¥(60,237)(69,719)¥(52,937)(731,730)$(566,989)

IYO BANK Annual Report 201835

27. Segment Information(1) Summary of reportable segments
Reportable segments are components of the Bank and its consolidated subsidiaries for which separate financial information is available and is subject toperiodic examination by the Board of Directors to determine the allocation of management resources and assess performances.
The Bank and 13 consolidated subsidiaries (13 consolidated subsidiaries as of March 31, 2017) are engaged mainly in the financial services businessthat includes commercial banking services and leasing services. Therefore, the Bank and its consolidated subsidiaries reportable segments comprise‘Commercial banking’ and ‘Leasing’ and are distinguished by the financial services provided. ‘Commercial banking’ includes deposit services, lending
services, securities investment services and exchange services. ‘Commercial banking’ represents the Bank’s banking service as well as the consolidated
subsidiaries’ business support services, credit guarantee services, credit card services, securities trading services and fund management services. ‘Leasing’
includes leasing services by Iyogin Leasing Company Limited, one of the consolidated subsidiaries.
(2) Methods used to calculate ordinary income, profit and loss, amounts of assets, debt and other items by reportable segment
The accounting policies in Note 2, “SIGNIFICANT ACCOUNTING POLICIES,” have been adopted for the reportable segments. Reportable segment profit
corresponds to ordinary profits. Ordinary income arising from intersegment transactions is based on arm’s length prices.
(3) Information about reported ordinary income, profits and losses, amounts of assets, debts and other items
Segment information as of and for the years ended March 31, 2018 and 2017 was as follows:
Millions of yen
2018
Reportable segments
Commercial
banking
Leasing

Ordinary income
Customers
Intersegment
Total
Segment profit
Segment assets
Segment debt
Other items
Depreciation
Interest income received
Interest expense paid
Extraordinary income
Gain on disposal of noncurrent assets
Extraordinary losses
Losses on disposal of fixed assets
Impairment loss
Provision of reserve for financial products
transaction liabilities
Tax expense
Increase in tangible fixed assets and intangible
fixed assets

Total

Other
businesses

Total

Adjustments¥ 102,817
574¥ 103,392¥ 34,757¥7,074,411¥6,444,526¥15,265489¥15,754¥ 581¥56,719¥37,150¥ 118,083
1,063¥ 119,147¥ 35,338¥7,131,131¥6,481,676¥2,901
1,624¥4,526¥ 779¥9,793¥3,291¥ 120,985
2,688¥ 123,673¥ 36,118¥7,140,924¥6,484,967—(2,688)¥ (2,688)¥(18)¥(44,290)¥(34,637)¥ 120,985—¥ 120,985¥ 36,099¥7,096,633¥6,450,329

¥

¥

¥

¥

¥

¥

¥

4,260
77,349
7,495
3
3
324
120
203

38
83
127
13
13
0
0
—

4,298
77,432
7,622
17
17
324
120
203

70
3
4
—
—
0
0
—

4,369
77,436
7,627
17
17
324
121
203

¥

Consolidated
total

(120)
(122)
(109)
—
—
—
—
—

4,249
77,314
7,517
17
17
324
121
203

—
10,697—86—
10,7840239

011,024—(3)

0
11,020

4,782

136

4,919

29

4,949

(276)

4,672

Notes:
1. Ordinary income is presented as the counterpart of sales of companies in other industries. The difference between ordinary income and operating income in the
consolidated statements of income is in “Adjustments.”
2. “Other businesses” includes software development and information processing not included in the reported segments.
3. Adjustments are as below.
(1) Adjustment of segment profit includes eliminations of intersegment transactions of negative ¥18 million ($169 thousand).
(2) Adjustment of segment assets includes eliminations of intersegment transactions of negative ¥44,290 million ($416,886 thousand).
(3) Adjustment of segment debt includes eliminations of intersegment transactions of negative ¥34,637 million ($326,025 thousand).
(4) Eliminations of intersegment transactions include adjustment of depreciation of negative ¥120 million ($1,129 thousand), adjustment of interest income receivedof negative ¥122 million ($1,148 thousand), adjustment of interest expense paid of negative ¥109 million ($1,025 thousand), adjustment of tax expense ofnegative ¥3 million ($28 thousand) and adjustment of increase in tangible fixed assets and intangible fixed assets of negative ¥276 million ($2,597 thousand).
4. Segment profit is adjusted to ordinary income in the consolidated statements of income.

36

IYO BANK Annual Report 2018

Millions of yen
2017
Reportable segments
Commercial
banking
Leasing

Ordinary income
Customers
Intersegment
Total
Segment profit
Segment assets
Segment debt
Other items
Depreciation
Interest income received
Interest expense paid
Extraordinary income
Gain on disposal of noncurrent assets
Extraordinary losses
Losses on disposal of fixed assets
Impairment loss
Provision of reserve for financial products
transaction liabilities
Tax expense
Increase in tangible fixed assets and intangible
fixed assets

Total

Other
businesses

Total

Adjustments

Consolidated
total¥ 100,003
480¥ 100,484¥ 34,679¥6,833,888¥6,237,214¥15,111499¥15,611¥ 352¥50,981¥34,804¥ 115,115
980¥ 116,095¥ 35,032¥6,884,870¥6,272,018¥2,161
1,574¥3,735¥ 471¥8,571¥2,607¥ 117,276
2,554¥ 119,831¥ 35,503¥6,893,441¥6,274,626—(2,554)¥ (2,554)¥(75)¥(44,158)¥(34,404)¥ 117,276—¥ 117,276¥ 35,428¥6,849,283¥6,240,221

¥

¥

¥

¥

¥

¥

¥

4,467
75,177
7,688
80
80
2,389
133
2,256

51
77
140
—
—
277
—
277

4,518
75,255
7,828
80
80
2,666
133
2,533

92
3
0
—
—
0
0
—

¥

4,610
75,258
7,828
80
80
2,667
133
2,533

(59)
(118)
(108)
—
—
(287)
—
(287)

4,551
75,139
7,720
80
80
2,380
133
2,246

—
9,865

—
21

—
9,887

0
157

0
10,045—102

0
10,147

3,714

8

3,723

43

3,766

(81)

3,685

Notes:
1. Ordinary income is presented as the counterpart of sales of companies in other industries. The difference between ordinary income and operating income in the
consolidated statements of income is in “Adjustments.”
2. “Other businesses” includes software development and information processing not included in the reported segments.
3. Adjustments are as below.
(1) Adjustment of segment profit includes eliminations of intersegment transactions of negative ¥75 million.
(2) Adjustment of segment assets includes eliminations of intersegment transactions of negative ¥44,158 million.
(3) Adjustment of segment debt includes eliminations of intersegment transactions of negative ¥34,404 million.
(4) Eliminations of intersegment transactions includes adjustment of depreciation of negative ¥59 million, adjustment of interest income received of negative ¥118
million, adjustment of interest expense paid of negative ¥108 million, adjustment of extraordinary losses (impairment loss) of negative ¥287 million, adjustmentof tax expense of ¥102 million and adjustment of increase in tangible fixed assets and intangible fixed assets of negative ¥81 million.
4. Segment profit is adjusted to ordinary income in the consolidated statements of income.
Thousands of U.S. dollars (Note 1)
2018
Reportable segments
Commercial
banking
Leasing

Ordinary income
Customers$ 967,780
Intersegment
5,402
Total
$ 973,192
Segment profit$ 327,155
Segment assets$66,588,958
Segment debt
$60,660,071
Other items
Depreciation$
40,097
Interest income received
728,059
Interest expense paid
70,547Extraordinary income
28
Gain on disposal of noncurrent assets
28
Extraordinary losses
3,049
Losses on disposal of fixed assets
1,129
Impairment loss
1,910
Provision of reserve for financial products
transaction liabilities—
Tax expense
100,687
Increase in tangible fixed assets and intangible
fixed assets
45,011

Total

Other
businesses

Total

Adjustments$143,684 $ 1,111,474
4,602
10,005$148,286 $ 1,121,489$ 5,468 $ 332,624$533,876 $67,122,844$349,679 $61,009,751$27,306 $ 1,138,789
15,28625,301$42,601 $ 1,164,090$ 7,332 $ 339,966$92,178 $67,215,022$30,977 $61,040,728

$

$

$

$

357 $
781
1,195
122
122
0
0
—

40,455
728,840
71,743
160
160
3,049
1,129
1,910

658 $
28
37
—
—
0
0
—

—
809

—
101,506

0
2,249

1,280

46,300272

41,123728,878
71,790
160
160
3,049
1,138
1,910

Consolidated
total— $ 1,138,789(25,301)—$ (25,301) $ 1,138,789$(169) $ 339,787$(416,886) $66,798,126$(326,025) $60,714,693(1,129) $(1,148)(1,025)—————39,994
727,72970,754
160
160
3,049
1,138
1,910

0
103,765—(28)

0103,727

46,583(2,597)43,975IYO BANK Annual Report 201837

(4) Related information
For the years ended March 31, 2018 and 2017.
Information by service
Millions of yen
2018
Securities
investment

Loan¥51,953

Ordinary income customers

Otherbusinesses

Lease¥34,978¥15,265¥18,786

Total¥120,985

Millions of yen
2017
Securities
investment

Loan

Ordinary income customers¥51,242

Otherbusinesses

Lease¥32,878¥15,111¥18,043

Total¥117,276

Thousands of U.S. dollars (Note 1)
2018
Securities
investment

Loan$489,015

Ordinary income customers

Otherbusinesses

Lease$329,235$143,684$176,826

Total$1,138,789

Millions of yen
2018
Reportable segments
Commercial
banking
Leasing¥203

Impairment loss

Other
businesses

Total

¥—

¥203

¥—

Total

¥203

(Note) Amounts of “Elimination or common assets” are eliminations of intersegment transactions.
Millions of yen
2017
Reportable segments
Commercial
banking
Leasing

Impairment loss

¥2,256¥277

Otherbusinesses

Total¥2,533Elimination orcommon assets¥—¥(287)

Total¥2,246(Note) Amounts of “Elimination or common assets” are eliminations of intersegment transactions.
Thousands of U.S. dollars (Note 1)
2018
Reportable segments
Commercial
banking
Leasing$1,910

Impairment loss

$—

Other
businesses

Total$1,910Total$—$1,910Account

Outstandingbalance(Millionsof yen)28. Related Party Transactions(1) For the year ended March 31, 2018(a) Transactions between the Bank and its related parties
Directors or major individual stockholders

Type

Name

Capital(Millions
Location of yen)Companies inwhich a major- Ability Center, EhimeInc
ity of voting
rights is owned
by a director or
Miyoshi Iron
the director’sWorks, Co., Ltd. Ehime
close relatives

38

IYO BANK Annual Report 2018¥55

Business

Temporary
Staffing

Transaction
amountOwnerships of(Millionsvoting rights (%) Relationship Transactionsof yen)—38 Manufacturing 0.0% Directly
heldTemporary Temporary
Staffing
Staffing

¥ 5

—

¥—

Banking

65

Loans andbills
discounted

30

Loan

Type

Name

Capital(Thousandsof U.S.
Location dollars)Companies inwhich a major- Ability Center, EhimeInc
ity of voting
rights is owned
by a director or
Miyoshi Iron
the director’sWorks, Co., Ltd. Ehime
close relatives$517

Business

Transaction
amount(Thousands
Ownerships ofof U.S.
voting rights (%) Relationship Transactions
dollars)

Temporary
Staffing—

357 Manufacturing 0.0% Directly
held

Account

Outstandingbalance(Thousandsof U.S.
dollars)

Temporary Temporary
Staffing
Staffing

$ 47

—

$ —

Banking

611

Loans andbills
discounted

282

Loan

(Notes)1. The conditions of the above transactions were the same as those of arm’s length transactions.
2. Loan transaction amounts were reported at the average balance for the period.
3. Ms. Junko Miyoshi, a director (Supervisory Committee Member) owns a majority of the voting rights of Ability Center, Inc.
4. Ms. Junko Miyoshi, a director (Supervisory Committee Member) and her close relative own a majority of the voting rights of Miyoshi Iron Works, Co., Ltd.

(b) Transactions between consolidated subsidiaries of the Bank and its related parties
Directors or major individual stockholders

Type

Name

Companies inwhich a majority of voting
rights is owned
by a director or
the director’sclose relatives

Ability Center,
Inc

Type

Name

Companies inwhich a majority of voting
rights is owned
by a director or
the director’sclose relatives

Ability Center,
Inc

Capital(Millions
Location of yen)

Ehime

¥55

Capital(Thousandsof U.S.
Location dollars)

Ehime

$517

Business

Temporary
Staffing

Business

Temporary
Staffing

Transaction
amountOwnerships of(Millionsvoting rights (%) Relationship Transactionsof yen)Account

Directly Temporary Temporary
19.2% holding
Staffing
Staffing

Otherliabilities¥ 15

Transaction
amount(Thousands
Ownerships ofof U.S.
voting rights (%) Relationship Transactions
dollars)

Account

Directly Temporary Temporary
19.2% holding
Staffing
Staffing

Otherliabilities$141

Outstandingbalance(Millionsof yen)¥0

Outstandingbalance(Thousandsof U.S.
dollars)$0(Notes)1. The conditions of the above transactions were the same as those of arm’s length transactions.
2. Ms. Junko Miyoshi, a director (Supervisory Committee Member) owns a majority of the voting rights of Ability Center, Inc.

(2) For the year ended March 31, 2017(a) Transactions between the Bank and its related parties
Directors or major individual stockholders

Type

Companies inwhich a majority of voting
rights is owned
by a director or
the director’sclose relatives

Name

Capital(Millions
Location of yen)

Business

Ability Center,
Inc

Ehime

¥55

Miyoshi Iron
Works, Co., Ltd.

Ehime

38 Manufacturing

Ownerships ofvoting rights (%) Relationship Transactions

Temporary
Staffing
0.0%

Transaction
amount(Millionsof yen)Account

Outstandingbalance(Millionsof yen)—Temporary
Staffing

Temporary
Staffing

¥ 4

—

¥—

Directly
held

Banking

Loan

110

Loans
and bills
discounted

85(Notes)1. The conditions of the above transactions were the same as those of arm’s length transactions.
2. Loan transaction amounts were reported at the average balance for the period.
3. Ms. Junko Miyoshi, a director (Supervisory Committee Member) owns a majority of the voting rights of Ability Center, Inc.
4. Ms. Junko Miyoshi, a director (Supervisory Committee Member) and her close relative own a majority of the voting rights of Miyoshi Iron Works, Co., Ltd.

IYO BANK Annual Report 201839

(b) Transactions between consolidated subsidiaries of the Bank and its related parties
Directors or major individual stockholders
Capital(Millions
Location of yen)

Type

Name

Companies inwhich a majority of voting
rights is owned
by a director or
the director’sclose relatives

Ability Center,
Inc

Ehime

¥55

Business

Ownerships ofvoting rights (%) Relationship Transactions

Temporary
Staffing

Directly Temporary
15.0% holding
Staffing

Transaction
amount(Millionsof yen)Temporary
Staffing¥ 15

Account

Outstandingbalance(Millionsof yen)Otherliabilities¥0(Notes)1. The conditions of the above transactions were the same as those of arm’s length transactions.
2. Ms. Junko Miyoshi, a director (Supervisory Committee Member) owns a majority of the voting rights of Ability Center, Inc.

29. Changes in Net Assets(1) Type and number of shares issued and treasury stock
Type and number of shares issued and treasury stock in the year ended March 31, 2018 were as follows:
Thousands
Number of shares at the beginningof the accounting period

Shares issued
Common stock
Total
Treasury stock
Common stock
Total

Increase in number of shares
during the accounting period

Decrease in number of shares
during the accounting period

Number of shares at the end of
the accounting period

323,775
323,775————

323,775
323,775

7,585
7,585

1
1

165
165

7,422
7,422

The increase in number of shares of treasury stock was from the purchase of fractional shares (1 thousand shares).
The decrease in number of shares of treasury stock was due to the exercise of stock acquisition rights (165 thousand shares).
Type and number of shares issued and treasury stock in the year ended March 31, 2017 were as follows:
Thousands
Number of shares at the beginningof the accounting period

Shares issued
Common stock
Total
Treasury stock
Common stock
Total

Increase in number of shares
during the accounting period

Decrease in number of shares
during the accounting period

Number of shares at the end of
the accounting period

323,775
323,775————

323,775
323,775

7,625
7,625

1
1

41
41

7,585
7,585

The increase in number of shares of treasury stock was from the purchase of fractional shares (1 thousand shares).
The decrease in number of shares of treasury stock was due to the exercise of stock acquisition rights (41 thousand shares).
(2) Stock acquisition rights and own stock acquisition rights

Division

Details of stockacquisition rights

Type of shares
to be issued

The Bank

Stock acquisition rights
as stock options

Number of shares subject to stock acquisition rights
Beginningbalance
Increase
Decrease
Closing balance

Total

Closing balance
Thousands of U.S.
Millions of yen
dollars (Note 1)

—

467

4,395

—

467

4,395

Record date

Effective date

March 31, 2017

June 8, 2017

(3) Dividends
The following dividends were paid in the year ended March 31, 2018.

Date of resolution

Directors’ meeting held on
May 12, 2017
Directors’ meeting held on
November 10, 201740

IYO BANK Annual Report 2018

Type of shares

Amount of dividends
Thousands of U.S.
Millions of yen
dollars (Note 1)

Cash dividends per share
U.S. dollars
Yen(Note 1)

Common stock¥1,897$17,855

¥6.00

$0.05

Common stock¥2,214$20,839¥7.00$0.06 September 30, 2017 December 8, 2017

The following dividends were paid in the year ended March 31, 2017.

Date of resolution

Type of shares

Annual meeting of stockholders Common stock
held on June 26, 2015
Directors’ meeting held on
Common stock
November 6, 2015

Amount ofdividends

Cashdividends
per share

Millions of yen

Yen

Record date

Effective date

¥1,896¥6.00

March 31, 2016

June 8, 2016

¥1,897¥6.00 September 30, 2016

December 9, 2016

Dividends whose record date is attributable to the year ended March 31, 2018 but which became effective after March 31, 2018.

Date of resolution

Directors’ meeting held on
May 11, 2018

Type ofsharesCommonstock

Amount of dividends
Thousands of U.S.
Millions of yen dollars (Note 1)¥2,214$20,839

Source ofdividends
Retainedearnings

Cash dividends per share
U.S. dollars
Yen(Note 1)

¥7.00

$0.06

Record date

Effective date

March 31, 2018

June 7, 2018

Dividends whose record date is attributable to the year ended March 31, 2017 but which became effective after March 31, 2017.

Date of resolution

Directors’ meeting held on
May 12, 2017

Amount ofdividends

Type ofsharesMillions of yen

Commonstock¥1,897

Source ofdividends
Retainedearnings

Cashdividends
per share
Yen

Record date

Effective date

¥6.00

March 31, 2017

June 8, 2017

IYO BANK Annual Report 2018

41

42

IYO BANK Annual Report 2018

Quarterly Results (Unaudited)
The Iyo Bank, Ltd. and its Consolidated Subsidiaries
For the year ended March 31, 2018

Millions of yen

2018

Ordinary income
Income before income taxes
Profit attributable to ownersof parent

First quarter(April 1 toJune 30, 2017)

Second quarter(July 1 to
September 30, 2017)

Third quarter(October 1 to
December 31, 2017)

Fourth quarter(January 1 toMarch 31, 2018)¥32,543
13,041¥60,757
20,439¥91,233
30,849¥120,985
35,791

8,834

13,66020,582

23,639Yen

2018First quarter(April 1 toJune 30, 2017)

Net income per share¥27.93

Second quarter(July 1 to
September 30, 2017)

Third quarter(October 1 to
December 31, 2017)¥15.25¥21.88Fourth quarter(January 1 toMarch 31, 2018)¥9.66

Thousands of U.S. dollars (Note 1)

2018

Ordinary income
Income before income taxes
Profit attributable to ownersof parent

First quarter(April 1 toJune 30, 2017)

Second quarter(July 1 to
September 30, 2017)

Third quarter(October 1 to
December 31, 2017)

Fourth quarter(January 1 toMarch 31, 2018)$306,315
122,750$571,884
192,385$858,744
290,370$1,138,789
336,888

83,151

128,576

193,731

222,505

Third quarter(October 1 to
December 31, 2017)

Fourth quarter(January 1 toMarch 31, 2018)

U.S. dollars (Note 1)

2018
First quarter(April 1 toJune 30, 2017)

Net income per share$0.26

Second quarter(July 1 to
September 30, 2017)

$0.14

$0.20

$0.09

IYO BANK Annual Report 201843

Nonconsolidated Balance Sheet (Unaudited)
The Iyo Bank, Ltd.
March 31, 2018

Thousands of
U.S. dollars

Millions of yen

2018

44

2017

2018

ASSETSCash and due from banks
Call loans
Monetary claims purchased
Trading account securities
Money held in trust
Securities
Loans and bills discounted
Reserve for loan losses
Foreign exchange
Other assets
Tangible fixed assets
Intangible fixed assets
Prepaid pension cost
Customers’ liabilities for acceptances and guarantees
Total assets¥ 727,624
23,47910,247465
4,273
1,810,035
4,292,668(19,803)
7,092
78,10571,981
5,302
14,48733,761¥7,059,722¥ 794,906
90,582
11,373568
4,539
1,737,182
4,043,352(18,971)
8,201
34,05873,056
4,609
12,432
26,563¥6,822,456$ 6,848,870
220,999
96,451
4,376
40,22017,037,227
40,405,384(186,398)
66,754735,175
677,532
49,905
136,361
317,780$66,450,696

LIABILITIES AND NET ASSETS
Liabilities
Deposits
Call money
Payables under repurchase agreements
Payables under securities lending transactions
Borrowed money
Foreign exchange
Borrowed money from trust account
Other liabilities
Accrued employees’ bonuses
Employees’ severance and retirement benefits
Reserve for losses on repayment of dormant bank accounts
Reserve for contingent losses
Deferred tax liabilities
Deferred taxes on revaluation excess
Acceptances and guarantees
Total liabilities¥5,546,034
25,497
77,434226,150
414,05865
39
47,777
1,508
13,0672,928
426
54,5789,824
33,761
6,453,153¥5,457,066
72,34640,124
324,715
215,702145
29
30,717
1,510
12,9072,979
427
50,177
9,945
26,563
6,245,358$52,202,880
239,994
728,859
2,128,670
3,897,383
611
367
449,708
14,194
122,995
27,5604,009
513,723
92,469317,780
60,741,274

Net assets
Common stock
Authorized — 600,000,000 shares
Issued — 323,775,366 shares
Capital surplus
Legal reserve
Other retained earnings
Treasury stock
Net unrealized holding gains (losses) on securities
Net deferred gains (losses) on hedging instruments
Land revaluation excess
Stock acquisition rights
Total net assets
Total liabilities and net assets

20,948
10,48020,948378,288(6,839)163,880(1,240)19,634
467
606,568¥7,059,722

20,948
10,48020,948359,490(6,989)152,634(795)
19,901
479
577,097¥6,822,456

197,176
98,644
197,176
3,560,692(64,373)
1,542,545(11,671)
184,807
4,395
5,709,412$66,450,696

IYO BANK Annual Report 2018

Nonconsolidated Statement of Income (Unaudited)
The Iyo Bank, Ltd.
For the year ended March 31, 2018

Thousands of
U.S. dollars

Millions of yen

INCOMEInterest and dividend income:Interest on loans and discounts
Interest and dividends on securities
Interest on receivables under resale agreements
Other interest income
Fees and commissions
Other operating income
Other income
Total income
EXPENSESInterest expense:
Interest on deposits
Interest on borrowings and rediscounts
Interest on payables under repurchase agreements
Interest on payables under securities lending transactions
Other interest expense
Fees and commissions
Other operating expenses
General and administrative expenses
Other expenses
Total expenses
Income before income taxes
Income taxes:
Current
Deferred
Net income

2018

2017

2018

¥ 49,541
26,648(0)
1,072
12,941
1,777
10,233102,214¥49,565
24,363—
1,111
11,935
1,736
10,657
99,371$466,312
250,828(0)
10,090121,80916,72696,319962,104

2,480
1,225
401
387
2,999
6,298
344
49,467
5,999
69,60432,610

3,116
1,112
162
612
2,683
6,283
114
49,217
5,319
68,62230,74823,343
11,5303,774
3,642
28,22859,2803,237
465,615
56,466655,158
306,946

10,435(488)¥ 22,662

8,064
1,269
¥21,414

98,221(4,593)$213,309

Yen

Basic net income per share
Diluted net income per share¥71.64
71.51

U.S. dollars¥67.72
67.60

$0.67
0.67

IYO BANK Annual Report 201845

Nonconsolidated Statement of Changes in Net Assets (Unaudited)
The Iyo Bank, Ltd.
For the year ended March 31, 2018

For the year ended March 31, 2018

Balance at the beginning of
the accounting period
Changes during the accounting period
Dividends
Reversal of deferred gains onreal property
Provision of general reserve
Net income
Purchase of treasury stock
Disposal of treasury stock
Transfer of loss on disposalof treasury stockReversal of land revaluation excess
Changes in items other thanstockholders’ equity, net
Total changes during
the accounting period
Balance at the endof the accounting period

For the year ended March 31, 2018

Balance at the beginning of
the accounting period
Changes during the accounting period
Dividends
Reversal of deferred gains onreal property
Provision of general reserve
Net income
Purchase of treasury stock
Disposal of treasury stock
Transfer of loss on disposalof treasury stockReversal of land revaluation excess
Changes in items other thanstockholders’ equity, net
Total changes during
the accounting period
Balance at the endof the accounting period

For the year ended March 31, 2018

Balance at the beginning of
the accounting period
Changes during the accounting period
Dividends
Reversal of deferred gains onreal property
Provision of general reserve
Net income
Purchase of treasury stock
Disposal of treasury stock
Transfer of loss on disposalof treasury stockReversal of land revaluation excess
Changes in items other thanstockholders’ equity, net
Total changes during
the accounting period
Balance at the endof the accounting period

46

IYO BANK Annual Report 2018

Millions of yen
Stockholders’ equity
Capital surplus
Other capital
Common stock Capital reserve
surplus¥20,948¥10,480

Total capitalsurplus¥—¥10,480

(20)

(20)

20

20

—

—

—

—

¥20,948¥10,480¥—¥10,480

Thousands of U.S. dollars
Stockholders’ equity
Capital surplus
Other capital
Common stock Capital reserve
surplus

Total capitalsurplus$197,176$98,644$ —$98,644

(188)

(188)

188

188

—

—

—

—

$197,176$98,644$ —$98,644

Millions of yen
Stockholders’ equity
Retained earnings
Other retained earnings
Retained
Total retained
Deferred gains
Generalearnings
Legal reserve on real property
earnings
reservebrought forward¥20,948¥2,073¥334,594(6)
18,000¥22,823¥380,438(4,111)(4,111)

6(18,000)
22,662——
22,662

Treasury stock

Total
stockholders’equity¥(6,989)¥404,878(4,111)

(1)
152
(20)
267

(20)
267

22,662
(1)
131
—
267

—

(6)

18,000804

18,797150

18,948¥20,948¥2,066¥352,594¥23,627¥399,236¥(6,839)¥423,826

For the year ended March 31, 2018

Balance at the beginning of
the accounting period
Changes during the accounting period
Dividends
Reversal of deferred gains onreal property
Provision of general reserve
Net income
Purchase of treasury stock
Disposal of treasury stock
Transfer of loss on disposalof treasury stockReversal of land revaluation excess
Changes in items other thanstockholders’ equity, net
Total changes during
the accounting period
Balance at the endof the accounting period

Thousands of U.S. dollars
Stockholders’ equity
Retained earnings
Other retained earnings
Retained
Total retained
Deferred gains
Generalearnings
Legal reserve on real property
earnings
reservebrought forward$197,176$19,512(56)$3,149,416

169,427$ 214,824$3,580,929(38,695)(38,695)

56(169,427)
213,309——
213,309

(188)
2,513

(188)
2,513

Treasury stock

Total
stockholders’equity$(65,785)$3,810,975(38,695)

(9)
1,430

213,309
(9)
1,233
—
2,513

—

(56)

169,427

7,567

176,929

1,411

178,350$197,176$19,446$3,318,844$ 222,392$3,757,868$(64,373)$3,989,326

Millions of yen
Valuation and translation adjustments

For the year ended March 31, 2018

Balance at the beginning of
the accounting period
Changes during the accounting period
Dividends
Reversal of deferred gains onreal property
Provision of general reserve
Net income
Purchase of treasury stock
Disposal of treasury stock
Transfer of loss on disposalof treasury stockReversal of land revaluation excess
Changes in items other thanstockholders’ equity, net
Total changes during
the accounting period
Balance at the endof the accounting period

Valuationdifference
on availablefor-salesecurities

Deferred gains
and losses onhedges

Revaluation
reservefor land

Total valuationand translation
adjustments

Subscription
rights tosharesTotal net assets¥152,634¥ (795)¥19,901¥171,740¥479¥577,097(4,111)

22,662(1)
131
267
11,246

(444)

(267)

10,533(11)

10,522

11,246

(444)

(267)

10,533(11)

29,470¥163,880¥(1,240)¥19,634¥182,274¥467¥606,568

Thousands of U.S. dollars
Valuation and translation adjustments

For the year ended March 31, 2018

Balance at the beginning of
the accounting period
Changes during the accounting period
Dividends
Reversal of deferred gains onreal property
Provision of general reserve
Net income
Purchase of treasury stock
Disposal of treasury stock
Transfer of loss on disposalof treasury stockReversal of land revaluation excess
Changes in items other thanstockholders’ equity, net
Total changes during
the accounting period
Balance at the endof the accounting period

Valuationdifference
on availablefor-salesecurities

Deferred gains
and losses onhedges

Revaluation
reservefor land

Total valuationand translation
adjustments

Subscription
rights tosharesTotal net assets$1,436,690$ (7,483)$187,321$1,616,528$4,508$5,432,012(38,695)

213,309
(9)
1,233
2,513
105,854(4,179)(2,513)99,143(103)

99,039105,854(4,179)(2,513)99,143(103)

277,390$1,542,545$(11,671)$184,807$1,715,681$4,395$5,709,412

IYO BANK Annual Report 201847

For the year ended March 31, 2017

Balance at the beginning of
the accounting period
Changes during the accounting period
Dividends
Reversal of deferred gains onreal property
Provision of general reserve
Net income
Purchase of treasury stock
Disposal of treasury stock
Transfer of loss on disposalof treasury stockReversal of land revaluation excess
Changes in items other thanstockholders’ equity, net
Total changes during
the accounting period
Balance at the endof the accounting period

For the year ended March 31, 2017

Balance at the beginning of
the accounting period
Changes during the accounting period
Dividends
Reversal of deferred gains onreal property
Provision of general reserve
Net income
Purchase of treasury stock
Disposal of treasury stock
Transfer of loss on disposalof treasury stockReversal of land revaluation excess
Changes in items other thanstockholders’ equity, net
Total changes during
the accounting period
Balance at the endof the accounting period

Millions of yen
Stockholders’ equity
Capital surplus
Other capital
Capital reserve
surplus

Commonstock¥20,948¥10,480

Total capitalsurplus¥—¥10,480

(3)

(3)

3

3

—

—

—

—

¥20,948¥10,480¥—¥10,480

Millions of yen
Stockholders’ equity
Retained earnings
Other retained earnings
Retained
Total retained
Deferred gains
Generalearnings
Legal reserve on real property
earnings
reservebrought forward¥20,948¥2,079(6)¥313,594

21,000¥ 25,548¥362,170(3,794)(3,794)

6(21,000)
21,414——
21,414

(3)
651

(3)
651

Treasury stock

Total
stockholders’equity¥(7,026)¥386,573(3,794)

(1)
37

—
651

—

(6)

21,000(2,725)

18,26836

18,305¥20,948¥2,073¥334,594¥ 22,823¥380,438¥(6,989)¥404,878

Millions of yen
Valuation and translation adjustments

For the year ended March 31, 2017

Balance at the beginning of
the accounting period
Changes during the accounting period
Dividends
Reversal of deferred gains onreal property
Provision of general reserve
Net income
Purchase of treasury stock
Disposal of treasury stock
Transfer of loss on disposalof treasury stockReversal of land revaluation excess
Changes in items other thanstockholders’ equity, net
Total changes during
the accounting period
Balance at the endof the accounting period

48

IYO BANK Annual Report 2018

21,414(1)
34

Valuationdifference
on availablefor-salesecurities

Deferred gains
and losses onhedges

Revaluation
reservefor land

Total valuationand translation
adjustments

Subscription
rights tosharesTotal net assets¥152,070¥(326)¥20,552¥172,296¥401¥559,271(3,794)

21,414
(1)
34
651
564

(469)

(651)

(556)

77

(478)

564

(469)

(651)

(556)

77

17,826¥152,634¥(795)¥19,901¥171,740¥479¥577,097

Corporate Data
(As of March 31, 2018)Year of Foundation
1878

Board of Directors and Corporate Auditors(As of June 28, 2018)

Common Stock
Authorized 600,000,000 shares
Issued323,775,366 shares
Capital¥20,948 million

President

Iwao Otsuka

Senior Managing Director

Kenji Takata

Managing Directors

Muneaki Todo
Tetsuo Takeuchi
Haruhiro Kono
Kenji Miyoshi

Directors(Audit and Supervisory
Committee Members)

Takaya Iio
Shiro Hirano
Kaname Saeki
Takeshi Ichikawa
Yasunobu Yanagisawa
Soichiro Takahama
Junko Miyoshi

Managing Executive Officers

Takaya Beppu
Eiji Shigematsu
Kenji Morioka
Hideyo Nishimoto
Shinya Fujita
Kensei Yamamoto

Executive Officers

Tetsuya Yagi
Junji Inagaki
Yasuji Fujita
Masamichi Ito
Hiroshi Nagata
Keijiro Joko
Kazuya Chikata
Shinichi Doi
Seiji Komoda
Hirohisa Senba

Number of Stockholders
20,180Major Stockholders
NameJapan Trustee Services Bank, Ltd.
The Master Trust Bank of Japan, Ltd.
Nippon Life Insurance Company
Meiji Yasuda Life Insurance Company
Sumitomo Forestry Co., Ltd.
Sumitomo Life Insurance Company
Sompo Japan Nipponkoa Insurance Inc.
Trust & Custody Services Bank, Ltd.
Employee stock ownership of Iyo Bank
The Bank of Tokyo-Mitsubishi UFJ, Ltd.

Shares(thousands)%

50,167
10,775
8,878
8,867
5,911
5,415
4,793
4,487
4,311
3,988

15.85
3.40
2.80
2.80
1.86
1.71
1.51
1.41
1.36
1.26

*The Bank of Tokyo-Mitsubishi UFJ, Ltd., has changed its nameto MUFG Bank, Ltd., as of April 1, 2018.

Number of Employees(The Iyo Bank, Ltd. and its Consolidated Subsidiaries)
3,122
Number of Branches
151 (Domestic 149, Foreign 2)

Directory(As of March 31, 2018)

Head Office
1, Minami-Horibata-cho, Matsuyama 790-8514
Tel: (089) 941-1141
http://www.iyobank.co.jp/

Singapore Branch
8 Marina View #15-02 Asia Square Tower 1, Singapore
018960, Singapore
Tel: (65) 6394-9830
Fax: (65) 6394-9832

International Division
Tel: (089) 931-9899
Fax: (089) 946-9101
SWIFT Address: IYOBJPJTShanghai Representative Office
Room 1603 Shanghai International Trade Center, 2201 Yan-an
Road (West), Shanghai 200336, People’s Republic of China
Tel: (021) 6270-7488 Fax: (021) 6270-7268

Treasury and Foreign Exchange Department
Tel: (03) 3242-1801
Fax: (03) 3242-1842
SWIFT Address: IYOBJPJTHong Kong Branch
Suite 801, The Hong Kong Club Building, 3A Chater Road
Central, Hong Kong
Tel: 2869-0466
Fax: 2525-4186

New York Representative Office
780 Third Avenue, 18th Floor, New York, N.Y. 10017, U.S.A.
Tel: (212) 688-6031
Fax: (212) 688-6420

IYO BANK Annual Report 201849

HEAD OFFICE
1, Minami-Horibata-cho, Matsuyama 790-8514
Tel: (089) 941-1141
URL: http://www.iyobank.co.jp/

Printed in Japan