Nanto Report
Integrated Report
Fiscal year ended March 2022

Management Philosophy
1. We conduct sound, efficient management.
2. We provide superior comprehensive financial services.
3. We pursue efforts to promote regional development.
4. We seek an identity as a trustworthy bank with strong customer
appeal.

Management Vision“Vitality Creation Bank”
Our mission as a regional financial institution is to contribute to thegrowth and development of our region and customers. Maximizing
all our management and staff capabilities, and creating new value
unique to the Nanto Bank Group, we are reinforcing our position as
the banking group of choice for customers throughout our region.

Editorial Policy
Compiled in pursuit of further understanding among stakeholders of the Nanto Bank Group’s strategies for creating sustainable value in the medium-to-long
term, this Integrated Report was edited in compliance with the “International Integrated Reporting Framework” of the Value Reporting Foundation (former IIRC).
The specific purpose of its creation was to illuminate the path to achievement of our Management Plan, “Nanto Mission and Objectives for the Next 10 Years.”
For detailed financial information, please refer to the separately published “Disclosure Supplement.”

Range of coverage

Date issued

The Report presents key information concerning the Nanto Bank
Group’s management strategies, business model, businessconditions, stakeholders, primary risks and opportunities,
performance and outlook, and governance.

July 2022

Period of coverage
April 1, 2021 ~ March 31, 2022

Precautions concerning future predictions
This report contains forecasts and statements concerning the future prospects for
the Nanto Bank Group’s business strategies and financial condition. These forecasts
and statements involve risks and uncertainties stemming from their dependence
on future events. Please be aware that the actual results may differ materially fromthose foreseen by the Nanto Bank Group.

Basis for creationand presentation

CONTENTS
About Nanto BankS

2Information Highlights

Cultivating Unconventional Human Resources

Target Image

Stakeholder Voice

4
10
12
14
16
18

President’s Message
Progress under the Management Plan
Nara Prefecture’s Potential
Materialities and the SDGs
Value Creation Process
Pursuing Further Value Creation

Fostering Human Resources with Varied
Experiences
Enhancing the Group’s Productivity

 ealizing Sustainable Growth of Our
R
Regional Economy
Contributing to Improved Customer Productivity
Facilitating Customer Commercialization
Stakeholder Voice

Pursuit of Investment Projects and Regional Contribution
through Tourism Promotion and Community Development
S

20

Improving Customer Convenience38

Complex Risks
Reinforcing Risk Management
Risk Management Systems andConscientious Compliance4042Corporate Governance
Executive Officers
Corporate Governance

24
26
28

Realizing a Convenient, Prosperous Society
Support for Customers’ Asset Formation

36

Support for Value Creation

 esponses to the Effects ofR
Accelerating Climate Change
Meeting the Challenge of Climate Change

S

34

G Preparing for Increasingly Varied andDeveloping with Our RegionE ultivating a Healthy Corporate Culture withC
Participation of Diverse Human Resources

32
33

Outside Directors’ Forum

Stakeholder Engagement

About the Nanto Bank Group
Consolidated Financial Statements
Consolidated Financial Statements
Independent Auditors’ Report
Capital Management

44
46
50
54
58
60
101
107

Compiling the Nanto Report
Icons representing the eight categories of content advocated in the “International Integrated Reporting Framework” published by
the Value Reporting Foundation have been employed to further clarify understanding of the Nanto Bank Group’s corporate culture.
Risks and opportunities

The real risks and opportunities affecting our ability
to create value in the short, medium and long term,
and ways of dealing with them.

OutlookWhat is the nature of the operating environment, andhow is the Bank organized to respond?

Governance

Strategies and resources allocation

Basis for creation and presentation

Business model

Performance

Organizational overview and external environment

How does the governance structure ensure short-,
medium- and long-term value creation?

What is the business model, and how resilient is it?

What are our goals, and how do we plan to reachthem?

What are the challenges and uncertainties for
executing strategies, and how might they impact theBank’s business model and future performance?
How were the contents of the Report quantified andevaluated, and how were they selected?

To what extent is the Bank achieving its strategic
objectives, and what is the effect on capital?

Nanto Report 2022, the integrated report of Nanto Bank

1

About Nanto Bank

Information Highlights

Financial Highlights
Net Income(Consolidated)(Non-consolidated)

11.8 billion yen 11.8 billion yen
Consolidated(Billion yen)

15

Non-consolidated

Profit / loss oncustomer services(Consolidated)

1.8 billion yen 0.6 billion yen
Consolidated(Billion yen)(Non-consolidated)

Non-consolidated

2.5

10.8 10.6

10

1.8

11.8 11.8

0.6

0.3
0

-0.9
5

-2.5

3.1 3.3-3.2

0
FY2020

FY2021

FY2022-4.4-5.0

FY2020

FY2021

FY2022

Profit / loss on customer services = Profit from main businesses (loans / commission business)= Average loan balance x deposits / loan yield difference + profit from service transactions - expenses

Capital adequacy ratio(Consolidated)

9.60 %

Consolidated(%)(Non-consolidated)

9.29 %

Non-consolidated(Consolidated)

4.09 %
Consolidated

(%)

6.0

10.0

9.29

9.15

9.06

3.0

(Non-consolidated)

4.25 %

Non-consolidated

9.60

9.47

9.39
9.0

ROE

4.03

4.25

3.95

4.09

1.27
1.16
0

Year ended
March 2020

Year ended
March 2021

Year ended
March 2022

0
FY2020ROE=

ROA(Consolidated)

0.27 %
Consolidated

(%)

0.3

(Non-consolidated)

0.25 %

Non-consolidated

OHR

0.27

0.25

0.25

0.14

68.1 %
Consolidated

85.0
84.0

71.7

Loan balance

FY2022(Non-consolidated)

3,892.5 billion yen

SMEs

Housing loans

4,500

3,477.1

Municipal governments

3,808.1

646.7
608.2
993.3

FY2020Year ended
March 2020

Others3,892.5

723.0

754.8

629.1

602.7

1,042.4

1,088.3

OHR=

1,413.5
Year ended
March 2021

2 Nanto Report 2022, the integrated report of Nanto BankFY2021(Billion yen)

Individuals(Non-consolidated)

5,659.5 billion yen

Corporations

6,000

5,042.1
4,000

FY2022

Expenditures
×100
Gross profit from core businesses

Balance of deposits

2,000

1,228.7
067.8

0FY2021

Core business net income
×100
Average balance of total assets - Average balance of payments received

1,500

68.1

71.4

FY20203,000

67.8 %

100.0

75.0

0

(Billion yen)(Non-consolidated)

Non-consolidated

0.12

ROA=

FY2022(Consolidated)

(%)

0.27

FY2021

Net income
×100[Starting net assets (excluding stock acquisition rights) +Ending net assets (excluding stock acquisition rights)] ÷ 2

187.6
968.7

3,885.8

Municipal government funds, etc.

5,452.6

5,659.5

231.1
1,093.0

306.5

4,128.4

4,250.8

1,102.0

1,446.5
Year ended
March 2022

0Year ended
March 2020

Year ended
March 2021

Year ended
March 2022

Organizational overview
and external environment

PerformanceNon-financial Highlights (non-consolidated)

Rate of CO2 emissions reduction(FY2013

Environment

FY2020)-33.7%(FY2021)

Approx.

37,000tons CO2(Emissions for scopes 1 and 2)(No. of loan transactions/amount: 4 loans, 5.2 billion yen)

(Decrease of 1.2 points from the previous year)(Decrease of approx. 320,000 t–CO2 from the previous year)

Percentage of female executives

Unconventional human resources
Certified personnel participatingin vitality creation

Society

15.1(End March 2022)%(Increase of 0.6 point from theprevious year)

Board of Directors diversification
GovernanceCO2 reduction through renewableenergy-related loans

Human resources with work
experience outside the Bank

559

(Percentage of employees 24.0%)(Increase of 101 from the previous year
(Increase of 5.0 points)

Ratio of outside directors(End June 2022)
Female2 6ofinternal directors

4Outsidedirectors =40%

Nanto Bank Profile (as of March 31, 2022)
Established:

June 1, 1934

Capitalization:¥37,924.15 million

Headquarters:

16 Hashimoto-cho, Nara, Japan

Homepage:https://www.nantobank.co.jp/

Nanto Bank Co., Ltd. was established on June 1, 1934 through a merger of Sixty-eight
Bank Co., Ltd., Yoshino Bank Co., Ltd., Yagi Bank Co., Ltd. and Gose Bank Co., Ltd.
Today, the Bank and its Group offer comprehensive financial services, including leasing,trusts, securities and consulting, in addition to the banking business (deposits, loans,exchange, etc.), with Nara Prefecture and the surrounding region as its primary base ofoperations.

Nanto Report 2022, the integrated report of Nanto Bank

3

Target Image

President’s Message

Realizing sustainable
management incooperation with our
regional community
President (Representative Director)

Takashi Hashimoto

4 Nanto Report 2022, the integrated report of Nanto Bank

Organizational overview
and external environment

GovernanceBusiness model

Risks andopportunities

Strategies andresources allocation

Performance

OutlookIntroduction
The outlook for the Japanese economy remains uncertain today at a time when supply constraints due todisruptions in the global supply chain are exacerbated by the prolonged coronavirus pandemic and risingresources costs.
In Nara prefecture, skies over the tourism industry are brightening, as students on school excursions
return to visiting Nara’s famous shrines and temples. I nevertheless expect it will be some time before
tourism recovers to its pre-pandemic levels, when international visitors were driving the market.
With the recent rise in resources prices exerting negative impact on a wide range of industries in
the region, creating new management issues for customers who have been working to improve their
management structures in the severe environment of the pandemic, many fear additional downward
pressure on the regional economy.
The Nanto Bank Group is not only continuing to pursue its business of supporting customers’ cash
flow, but it is also providing customers with optimal financial services and solutions, such as introductionof appropriate IT and expansion of their sales channels, that add corporate value and reinforce their corebusinesses.
At the same time, the increasing and intensifying risks posed by natural disasters associated with theappearance of new coronavirus variants and global warming, both in Japan and overseas, have brought
growing recognition of the importance of initiatives for sustainability and the SDGs.
These trends are beginning to impose enormous changes on the economic activities and social livesof our customers, signaling that the roles and responsibilities our Group must fulfill will continue to grow in
the future.
Our 10-year Management Plan introduced in April 2020 elucidated the Group’s Mission as pursuitof regional development, fostering of vitality-creating human resources, and enhancement of profitability.
Guided by this Mission, we are working to achieve the goals of the Plan within 10 years by providing value
to our stakeholders.
Supported by intangible assets comprising the trust and confidence invested in us by our
stakeholders, the Nanto Bank Group is contributing to regional development by providing financial services
and solutions that only the Nanto Bank Group can offer. This approach is in harmony with the Group’s goalof realizing sustainable management in cooperation with our regional community.
The objective of this integrated report is to convey not only the Nanto Bank Group’s current businesscircumstances, but also the story of its growth aimed at improving corporate value, to our stakeholders fully
and carefully in an easily understandable manner.

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5

Target Image

President’s Message

Raising targets even higher(Progress in Management Plan implementation)“Increasing Nara prefecture’s GDP,” which is one of the “Objectives for the Next 10 Years” establishedby our Management Plan introduced in April 2020, expresses our Group’s determination to lead theway toward realizing regional development. We recognize this as a key performance indicator showing
our Group’s continued presence as a regional financial institution, and its progress toward achieving
sustainable growth.
As an interim financial goal, meanwhile, we set our sights on moving our non-consolidated profits
from customer service operations, which are our core business profits, into the black for the first time sinceApril 2009. We are fully aware that our ability to continue developing flexible initiatives that contribute tosustainable growth of the region depends on stabilizing the Group's management by returning our corebusinesses to profitability.
Almost immediately after we introduced our
new Management Plan in April 2020, the Japanese
government declared a state of emergency to combat
the spread of the coronavirus. A period of confusion
stemming from such factors as new restrictions on faceto-face sales activities ensued, but our efforts to continue
providing full customer support including cash flow
services paid off. Our activities increased the numberof contact points with new customers and significantly
raised our loan balance, which is a key source of income.
When it comes to payment methods, meanwhile,
the role of bank tellers and ATMs is changing dramatically
due to the expansion of cashless payment systems
and other factors. We have succeeded in reducing expenses steadily according to plan by reorganizing
our branch network through such means as joint branch creation and administrative reform of our branchlobbies and back offices, while also conducting a comprehensive review of our headquarters operations.
As a result, Nanto Bank’s non-consolidated core business profit returned to profitability in fiscal 2021,
three years ahead of schedule.
(Resetting interim targets)
Although returning core business profit into the black had been a longstanding goal, this marks just thestarting point in our efforts to transition from negative to positive results.
If we are to keep pace with the waves of change such as the easing of the Banking Law in ouroperating environment and to continue investing proactively in new business opportunities to expand ourbusiness domain, we must further reinforce our business structure to make it more muscular.
Our new interim targets for the three years through fiscal 2024 have been set on a consolidated basis
to maximize the use of our Group’s resources. Our executive officers and employees throughout the Groupwill work as one to achieve these even higher goals.

6 Nanto Report 2022, the integrated report of Nanto Bank

Organizational overview
and external environment

GovernanceBusiness model

Risks andopportunities

Strategies andresources allocation

Performance

Outlook

Realizing sustainable management in cooperation with
our regional community
While more flexible responses are required to address current issues such as the prolonged coronavirus
epidemic, rising resources prices, and inflationary pressures stemming from supply constraints, I believe
we, the Nanto Bank Group, should take the initiative ourselves and act to improve the regional environment
from a medium- to long-term perspective through efforts to resolve such structural issues facing Japanesesociety as global warming, a shrinking workforce, and weak economic growth.
In December 2021, our Group formulated its Basic Sustainability Policy with reference to climatechange and other global sustainability issues and to the Japanese government's SDGs Action Plan. It also
identified priority materialities and specific themes to be addressed in consideration of their importance toour stakeholders and the Group as a whole.
The action plans and measures currently being implemented by the Group are based on thesematerialities, which we will continue to revise in a timely, appropriate manner in accordance with changes in
our internal and external environments.
Basic Sustainability Policy
Sustainability is at the core of the Nanto Bank Group's Management Philosophy itself.
Guided by its Management Philosophy, the Group will continue to provide the value its stakeholders seek byoffering solutions to social and environmental issues.
We will contribute to realizing sustainable regional communities, and work at the same time to achievesustainable growth of the Group and enhance its corporate value over the medium to long term.

Responding to climate change issues that are not merely
someone else’s concern
Among efforts to address climate change, realization of a decarbonized society is attracting especiallysignificant attention in Japan and abroad. The Japanese government has committed to achieving carbon
neutrality by 2050.
Japan’s large corporations are responding by accelerating efforts to reduce carbon emissions in theiroperations, and the impact of their actions is emerging as an urgent management issue for customers in
the regions comprising their supply chains.
Committed to playing a leadership role in customer and regional decarbonization, we are proactively
developing solutions to meet customers’ needs for finance for their decarbonization activities, consulting
services to facilitate their SDG implementation, and services to visualize and reduce their CO2 emissions.
(Enhancing disclosure according to the TCFD recommendations)
In our efforts to comply with the TCFD recommendations we endorsed last year, we are identifying
opportunities and risks for our Group related to climate change issues. We have taken the initiative by
setting a target of reducing our CO2 emissions by 50% or more from their fiscal 2013 levels by fiscal 2030.
We realize that our Group’s role in responding to climate change issues will continue to expand, andthat its responsibilities in this area will only become greater. Every single Group officer and employee isdetermined to face these issues head-on, rather than viewing them as someone else’s problem.

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Target Image

President’s Message

Unconventional human resources creating the Nanto
Bank Group’s future
Our Management Plan elucidates our commitment to fostering unconventional human resources, andwe are pursuing various measures to achieve this goal. We are motivated in this by the belief that humanresources are among the Group’s most vital management assets supporting its efforts to contribute toregional development and to achieve sustainable growth of the Group itself.
We are fortunate to have been supported since our founding by our customers and our regional
community, and to be blessed with exceptional human resources. We continue to enjoy an enviably highshare of the bank deposits and loans in Nara prefecture.
We realize that the definition of regional customer’s trust and confidence contributing to the Nanto
Bank Group’s exceptional market share will change with shifts in the business environment.
In the past, when banks provided only a limited range of financial products and services, including
deposits, loans, and foreign exchange, and when the widest-held expectations of banks were safety
and security, we enjoyed the trust and confidence of our community simply for providing these banking
services.
With online banks and cashless businesses increasing market share today by adding value throughconvenience, ease, and low cost, we are experiencing a strong sense of urgency stemming from the fact thatour business model, founded on traditional banking products and services, will eventually reach its limits.
In this environment, I believe that one of our strengths is the information-gathering capabilities wehave cultivated over many years through multiple wide-ranging contacts with customers and the regional
community at large.
This information access we have established through connections with customers and the regional
community in the course of our long history cannot be acquired overnight by other financial institutions ordigital players.
That said, we will naturally continue to construct information-gathering systems that make full use ofdigital technologies to provide highly convenient financial products and services. There is some reason forconcern, however, that a strategy that relies solely on digital technology will weaken our close connections
with customers.
I also expect our Group to be further differentiated by our staff of unconventional human resources
who are fully prepared to consult with customers about their most pressing concerns, and to work withthem to resolve the issues involved.
To qualify as “unconventional,” personnel require a broad perspective with experience in bothbanking and other fields. Our Group is creating new growth opportunities for our employees by expanding
its program of external secondments, trainee dispatching, and employee exchanges among Group
companies, while at the same time pursuing concerted efforts to diversify its human resources byintroducing a side job system and expanding mid-career hiring.
In addition to these initiatives, Group member Nara Mirai Design, a regional revitalization company
established in April 2021, engages in proactive regional development projects. These include operating the“Narawashi” e-commerce site, implementing community development projects such as old private houserenovations, and conducting agricultural businesses to revitalize local agriculture. The experience andknowledge acquired by Group officers and employees in businesses outside the framework of the banking
industry have been extremely useful in giving them perspectives appropriate to unconventional humanresources.

8 Nanto Report 2022, the integrated report of Nanto Bank

Organizational overview
and external environment

GovernanceBusiness model

Risks andopportunities

Strategies andresources allocation

Performance

OutlookPlanning a new main building to serve as a base for ourtransition to the future
Our Group plans to complete construction of a new main building in Nara City in fiscal 2024, the 90th
anniversary of our founding, as a next-generation sustainable management headquarters. This new facility
will help us realize two primary objectives: First, it will equip us to offer our customers more value than theywould normally expect; and second, it will provide a venue for fostering unconventional human resourcesand enabling them to play active roles.
The building will be designed to allow flexible, agile reconfigurations to meet the changing needsof our customers and the diverse work styles of our executives and employees. It will be a place forgenerating completely original ideas where unconventional personnel can emerge and flourish naturally as
they repeatedly explore new possibilities and uncover unrecognized customer needs and new roles for ourGroup to perform, helping to shape our future vision.
We are counting on this new main building to serve as a starting point for our Group’s transition into
the future.

The future we are working with stakeholders to realize
Finally, we are committed to continuing our constructive, proactive dialogue with stakeholders, includingtransparent information disclosure. We complied with the revised Corporate Governance Code last year bydisclosing the skill sets of all our Group’s officers, including our outside officers, and we have initiated efforts
this year to diversify our Board of Directors by inviting female outside directors to join it.
In conjunction with the reestablishment of interim targets, we have changed our policy on returns toshareholders to one of returning profits in accordance with our business performance, while also paying astable dividend, after first providing guidelines to the dividend payout ratio.
We are convinced that the future of the Nanto Bank Group lies in building increasingly trusting,cooperative relationships with our stakeholders through timely and appropriate actions in response to theirconcerns and our awareness of the challenges facing the Group.
We look forward to your continued understanding and support as we go forward.

Artist’s conception of the new main building

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9

Target Image

Progress under the Management Plan

Progress under the Management Plan
Management Plan overview
In December 2019, the Nanto Bank Group announced its Nanto Mission and Nanto Goals to be achieved in 10 years.
The Nanto Mission involves three objectives: “regional
Interim targets and achievements
development,” “creation of human resources for vitality creation,”
2019/3 Actual 2020/3 Actual 2021/3 Actual 2022/3 Actual 2024/3 Targetand “improvement of profitability,” while the Nanto Goals are to
Profit from customer(3.8) billion yen (4.4) billion yen (0.9) billion yen 0.6 billion yen
Return toservices“increase Nara prefecture’s GDP by 350 billion yen,” “nurture 350
decreasedecreasedecreaseincrease
profitability(non-consolidated)management personnel,” and “increase ROA to 0.35% or above.”
85.7%
85.0%
71.7%
67.8%
Below 70%
OHR (non-consolidated)
The Group has also identified the following indicators as interim
0.11%
0.12%
0.25%
0.25%
Over 0.25%
ROA (non-consolidated)targets for realization by 2024: profitability of its non-consolidated
Number of qualified
customer services businesses, an OHR of under 70%, an ROA
—
422
458
553
1,000
employeesof over 0.25%, and 1,000 personnel with qualifications related tovitality creation.

Early return to profitability of core business and revised interim targets
As a result of its support for thorough cash management and cost andresources optimization during the coronavirus pandemic years, the Bank
achieved a long-sought accomplishment, a return to profitability in its nonconsolidated customer services businesses, where it recorded an increase of
0.6 billion yen in fiscal 2021 compared to a loss of 4.4 billion yen in the year
immediately preceding implementation of the Management Plan.
In light of these developments, we formulated new interim targets forfiscal 2024 in December 2021. Aimed at further strengthening the Group’s
capabilities, these new targets call for achieving consolidated profit from
customer services of 3 billion yen, a consolidated OHR of under 70%, and a

Revised interim targets
FY2021 results
Profit from customer services (consolidated)

Interim target(FY2024)

1.8 billion yen

3 billion yen

OHR (consolidated)

68.1%

Below 70%

ROE (consolidated)

4.09%

Above 4.0%

ROA (non-consolidated)

0.25%

0.25% or above

553

1,000

Number of employees withqualifications related to vitality creation

consolidated ROE of 4.5 billion yen, with ROE registering above 4.0% on a consolidated basis.

Fiscal 2021 results and outlook for fiscal 2022
Profit from customer services

Trends in profit from customer services (consolidated)(Billions of yen)

As income in 2021, although the yield on loans declined, interest on loans and bills discounted increased
2.7
1.8
by 0.3 billion yen from the previous year to 32.3 billion yen due to an increase in the average loan balance
Planned0.3
as a result of thorough support for financing during the coronavirus pandemic, while net fees andcommissions decreased by 0.3 billion yen from the previous year to 6.4 billion yen.
In the payments category, meanwhile, personnel expenses decreased by 0.9 billion yen from theprevious fiscal year due to planned reductions of the number of employees and overtime work hours,-3.2
while property expenses decreased by 0.5 billion yen from the year before due to lower branch office
2018
2019
2020
2021
2022 (Fiscal year)
maintenance expenses resulting from a reorganization of the branch network and limitations on the
Bank’s activities stemming from the coronavirus pandemic.
As a result of these reductions, the Bank's non-consolidated net profit from customer services increased by 1.6 billion yen from the previous fiscal year to 0.6
billion yen, raising it into the black for the first time in 13 years.
Profit from consolidated customer services increased as well, climbing by 1.4 billion yen from the previous fiscal year to 1.8 billion yen as a result of theincreased profit from non-consolidated customer services.
Looking to fiscal 2022, we plan to raise our interest on loans by 0.2 billion yen from the year before to 32.5 billion yen by increasing the balance of loans
outstanding, primarily in the retail sector, despite expected continuing downward pressure on yields from loans to individuals, especially housing loans. We
anticipate fees and commissions of 6.7 billion yen, a year-on-year increase of 0.2 billion yen, due to higher income from our corporate solutions business alliancesand M&A.
In the payments category, meanwhile, we are planning for a 200 million yen decrease in personnel expenses in response to further reductions in our
employee rolls, and almost unchanged property expenses due to planned strategic IT investments to improve customer convenience and Group productivity.
As a result of these and other factors, the Bank anticipates non-consolidated profit from customer services of 1.0 billion yen in fiscal 2022, an increase of 0.3
billion yen from the previous year.
On a consolidated basis, the Group expects to record a year-on-year increase of 0.5 billion yen through enhanced collaboration with Nanto Bank, with aresulting increase in profit from consolidated customer services of 2.7 billion yen, an increase of 0.9 billion
Trends in credit-related expenses (non-consolidated)(Billions of yen)
yen from the year before.
6.9

Credit-related expenses
Public/private sector support for cash management during the coronavirus pandemic helped to maintainthe number of bankruptcies in Nara prefecture last year at its lowest level since the Great Recession.
Nanto Bank also saw credit-related expenses decrease by 0.9 billion yen from the previous fiscal year to 2.0
billion yen in fiscal 2021 due to a limited occurrence of non-performing loans resulting from our successful
efforts to support our core businesses, including pursuit of in-depth comprehension of customers’

10 Nanto Report 2022, the integrated report of Nanto Bank

2.9
1.4

2.0

2.0
Planned

2018

2019

2020

2021

2022 (Fiscal year)

Business model

Strategies andresources allocation

Performance

Outlookbusinesses and business matching.
The Bank’s NPL balance was 53.3 billion yen at fiscal 2021 year-end, an upturn of 1.2 billion yen
from the end of the previous fiscal year, while the NPL ratio was unchanged from the year before at 1.35%.
Although we plan to continue providing support for cash management of 2.0 billion yen in fiscal
2022, the same level as in the previous year, we will be paying particularly close attention to our customers’
business conditions. This added scrutiny stems from our awareness of the unpredictability of our operating
environment in the shadow of the prolonged pandemic, the yen’s depreciation, rising resources prices,geopolitical risks, and other factors.

Trends in non-performing loans outstanding and the NPL ratio(Billions of yen)
1.57%
1.47%
1.35%
1.35%

Market sector revenue

Market sector revenue trends

Market sector revenue fell by 200 million yen from the previous year to 17.3 billion yen in fiscal 2021
due to a weakening of interest on securities in response to the soft market at the end of the fiscal
year. These numbers include income of 17.0 billion yen and capital income of 0.3 billion yen.
In fiscal 2022, we expect market segment income to decrease by 1.3 billion yen from theprevious year to 16.0 billion yen due to higher foreign currency funding costs and flexible portfolio
rebalancing undertaken to prepare for rising interest rates in response to the prospect of a gradualincrease in interest rates in the United States.

Net Income
Consolidated net income for fiscal 2021 increased by 1.0 billion yen from the previous year to 11.8
billion yen, a result attributable to improvement of the Bank’s non-consolidated net income from
customer services and decreased credit-related expenses. Although the Bank plans to improve its
profit from customer services further in fiscal 2022, consolidated net income is projected to decreaseby 0.8 billion yen from the previous year to 11.0 billion yen due to an expected weakening of market
segment profit in the face of higher interest rates in the United States and Europe.

54.1

51.8

52.0

53.3

2018

2019

2020

2021 (Fiscal year)

18.2
14.7

17.5

(Billions of yen)

17.3

16.0

Planned

2018

2019

2020

2021

Trends in net income
11.1

10.8

2022 (Fiscal year)(Billions of yen)

11.8

11.0

Planned

3.1
2018

2019

2020

2021

2022 (Fiscal year)

Capital policy
Basic policy
In addition to ensuring the Group’s financial soundness, we aim to raise its medium-to long-term corporate value by making returns commensurate withthe cost of shareholders’ equity through strategic investments expected to achieve sustainable growth and stable, flexible returns to shareholders.

Capital adequacy ratio
The Nanto Bank Group’s capital adequacy ratio improved by 0.13% point from the year before
to 9.60% on a consolidated basis and by 0.14% to 9.29% on a non-consolidated basis owing
to an increase in equity capital resulting from higher profits and despite an increase in riskweighted assets.
We will continue our efforts to maintain an appropriate capital adequacy ratio and to
manage capital efficiently.

 rends in the capital adequacy ratio
T(consolidated and non-consolidated)
9.88

9.75

9.64

9.40

2017

2018

In the past, our policy on returns to shareholders called for maintaining stable dividends. In
conjunction with the reestablishment of our interim targets last December, we have changed
our target dividend payout ratio to 30% of net income attributable to shareholders of the parent
company, while maintaining the existing stable dividend of 80 yen per share. As a result, theannual dividend per share for fiscal 2021 was 110 yen.
Looking to fiscal 2022, we predict a dividend per share of 102 yen due to expectations oflower profit resulting from weaker market sector earnings.

Cross-shareholding
Cross-shareholding is conducted when it is determined necessary as a business strategy that
contributes to attainment of sustainable growth and maintenance/enhancement of the value ofthe corporation issuing the stocks and the Nanto Bank Group.
The ratio of the balance of cross-shareholdings to consolidated net assets on a market
value basis declined from 38.3% as of end March 2015 to 26.0% as of end March 2022. The
Bank will seek to reduce this ratio to about 20% by the end of March 2025 through continued
promotion of capital efficiency-conscious management.

9.39

9.47

9.06

9.15

9.29

2019

Consolidated

Policy on returns to shareholders

(%)

9.60

2020

10

2021 (Fiscal year)

Non-consolidated

 rends in dividends and the consolidated
T
dividend payout ratio
23.3%

81.7%

80

80

24.0% 30.1%

30.2%

110

102

80

(Yen)

Forecast

2018
2019
2020
2021
2022 (Fiscal year)
Dividend per share
Consolidated dividend payout ratioT rends in the market value of cross-shareholdings
and the ratio of cross-shareholdings to net assets
26.5%

26.0%

77.9

74.7

(Billions of yen)
Approx. 20
1000

Target2020
2021
Balance of policy
stock holdings (market value)2024 (Fiscal year)
Percentage of net assets(consolidated)

Nanto Report 2022, the integrated report of Nanto Bank

11

Target Image

Nara Prefecture’s Potential

Group-wide efforts to generate regional earning power
Nara prefecture, the Nanto Bank Group’s main market, is an inland prefecture with a tall mountain range
referred to as the “roof of the Kinki region” in the south. It is located in the middle of the Kii Peninsula,which itself lies near the center of Japan. Although the prefecture has no airport or port facilities, it ischaracterized by strong resistance to natural disasters such as earthquakes and typhoons. The Group has
set the goal of increasing Nara prefecture’s GDP by 10% (approximately 350 billion yen) in its commitment
to revitalizing the prefecture and solving challenges facing the regional community.

Overview of Nara prefecture

Economy and industry

Human resources

In the national economy and industry statistics, Nara
Prefecture’s ranks just 40th among Japan’s prefectures in thenumber of private business establishment, a factor indicating
the depth of the corporate market, and 41st in per capita
income, while its (real) GDP ranks just 37th in Japan.

GDP (real)

3,638.5 billion yen

Number ofprivate businesses
Number of
employed residents

46 thousand
486,77737thplace in
Japan

40th

place in
Japan

42

nd
place inJapan

Per capita
income2,632 thousand yen

stplace inJapan

Agricultural
output40.3 billion yen

thplace inJapan

41

When it comes to human resources, Nara prefecture has the besteducated population in the nation, as shown by its young people’s highuniversity enrollment rate and its education-related expenditures. As
this suggests, the prefecture is fertile ground for nurturing outstanding
human resources. Since the number of private businesses is relatively
low, however, as indicated under “Economy and industry” at left,
it suffers from an outflow of these excellent human resources toneighboring cities such as Osaka and Kyoto.

Percentage of high school
graduates obtaining
higher education
Education-related
expenses (monthly)

61.8%

33,927yen

7thplace in
Japan

4

th
place inJapan

Nara prefecture’s overall
employment rate

71.2%

th
place inJapan

Ratio of womenin the labor force

42.4%

th
place in
Japan

46

47

45

Tourism resources
Ratio of forest area

76.8%

6

th
place inJapan

Household finances and living conditions

15,645 thousand yen

3 No.1World Heritage Sites

The residents of Nara prefecture enjoy a relatively affluent
standard of living, with the second highest level of financial
assets per household in Japan and a high percentage ofowner-occupied houses.

Financial assets
per household

Nara is one of Japan’s most richly endowed prefectures interms of historical and cultural resources. It is the home ofmany World Heritage Sites, National Treasures, and otherfamous historical sites and attractions.

2ndplace inJapan

in JapanNational Treasures/
Important Cultural Properties
Historic sites andnatural monuments

Ratio of owner-occupied
households

74.1%

th
place inJapan

6

Number of rooms
in Japanese inns and hotels

Percentage of householdswith smartphones

85.1%

th
place inJapan

13

Number ofannual tourists

1,328

No.1

146

in Japan

9,735

thplace inJapan

26.23 million

Sources:	“State of Nara Prefecture 2021” / Nara Prefecture, “ 2018 Nara Prefecture Economic Performance,” Statistics Bureau, Ministry of Internal Affairs andCommunications, “2019 National Survey of Family Income and Expenditure,” “2020 Household Survey”

12 Nanto Report 2022, the integrated report of Nanto Bank3rdplace inJapan

45

Organizational overview Business modeland external environment

Risks andopportunities

Strategies andresources allocation

Performance

OutlookSpecial capabilities for contributing to regional community development
Since the Nanto Bank Group’s establishment, the regional community and its customers have entrusted it with a large
share of the prefecture’s deposits and loans.
The Group’s unique strengths include information capabilities cultivated over many years through many points ofcontact with customers and others in the region. Our unconventional human resources are adept at leveraging thesestrengths to help individual customers deal with such issues as business succession, including successor selection, as
well as at deploying the Group companies to solve a wide range of challenges facing the region.

Comprehensive Group strengths
The Nanto Bank Group comprising the Bank, 11
consolidated subsidiaries, and two equity method affiliates
provides customers with a comprehensive range offinancial services, including banking, securities, credit
card, and leasing services. We support their efforts toimprove productivity by grasping the real issues they
face and leveraging our Group’s wealth of information
resources to provide consulting services that extend to
appropriate human resources introduction and expertise infinancial enhancement.
In addition to these services, we collaborate withspecialized institutions and a wide range of business
partners in the community to resolve a variety of customer
issues.

Solving customers’ issues

Unconventional human resources

FinanceBanking
Leasing
Securities
Credit cards
Investment

Non-financial
services

Friendly
corporations

Consulting services

Think tanks

IT services
Commercialization
supportInsurance andreal estate brokerage

Information
capabilities

Strong customer base

Human resources

Dominant share of Nara prefecture’s deposit andloan market

Unconventional human resources

Nanto Bank enjoys an unrivaled share of both deposits
and loans in Nara Prefecture.
Trust banks
2.3%
Credit unions
17.5%
Regional banks
3.5%
Metropolitan banks
26.3%
Trust banks
0.0%
Credit unions
21.5%
Regional banks
9.0%
Metropolitan banks
18.5%

Business partners
and externalorganizations

Nanto Bank personnel consult actively with customers
concerning the real concerns unique to each, giving them
the necessary capabilities to realize their goals.
P.34

Number of personnel with qualifications related to vitality creation

Nanto Bank

Deposits(Persons)

50.1%

700

559
458
PlannedFunds usedin lending

Nanto Bank

50.8%

2020

2021

2022 (Fiscal year)(As of end March 2022 among banks and credit unions in Nara prefecture, excluding
Japan Post Bank, agricultural cooperatives, etc.)

Nanto Report 2022, the integrated report of Nanto Bank

13

Target Image

Materialities and the SDGs

Materialities (Priority Issues)
In its concern with adding depth to our Group’s financial businesses, the Board of Directors has discussed thesustainability issues that require global responses. They have identified the materialities and specific themes shown below
to be addressed as priorities, taking into consideration their importance to our stakeholders and our Group businesses.
Please note that these materialities are subject to revision as necessary.
Materiality determination process
STEP

1

STEP

Identification of issues

2

In addition to the issues determined by such international frameworks as theUnited Nations Global Compact, ISO 26000, the Global Reporting Initiative,
and the SDGs, the Group identified an extensive range of environmental, social,and governance issues we can expect to arise in the future. These begin with abasic sustainability policy, developed in consideration of the Group’s operating
environment with reference to the Global Top 10 Risks announced by the World
Economic Forum and the Japanese government’s SDGs Action Plan.

Analysis and evaluationof identified issues

It then identified the issues among thesethat are of particular relevance to the Nanto
Bank Group and analyzed and evaluatedtheir importance from two perspectives:
their impact on our stakeholders and theirfinancial impact on our Group.

STEP

3

Identification of mostsignificant issues

The Management Committee and
Board of Directors drew on the
results of a Step 2 evaluation report
to discuss the opportunities, risks,and priority themes to be addressed,and concluded by identifying thematerialities.

Review in response to changes in the external environment

External environment

Global warming

Risks and opportunities of concern for the Group

E

Risks

Reduction in corporate value due to delays in addressing climate change

Opportunities

Increased demand for capital investment funds for decarbonization

Opportunities

Creation of business opportunities by taking advantage of abundant forest resources

Environment

Sluggishness of the local economy due to the prolonged coronavirus pandemic
Decrease in the number of businesses, including those closing due to the aging ofmanagement, and the resulting exodus of labor to other prefectures
Opportunities Increased opportunities to provide customers with services such as M&A and asset
succession
Opportunities Increase in business opportunities taking advantage of favorable tourism resources
Risks

Normalization of slow economic
growth and low interest rates

Risks

Accelerated transition todigital operations

Declining working-age
population, falling birthrate
and aging population

S
Society

Increased job mobility

Dissemination ofwork-style changes

Changes in banking transactions due to diversified lifestyles, changing life choices, and thegrowing digital native generation
Opportunities Increased opportunities to provide asset succession support and other services against the
backdrop of affluent living standards
Opportunities Increased opportunities to provide products and services to meet needs stemming from ahigh rate of homeownership
Opportunities Increased opportunities to provide products and services to meet various bequest and donation needs
Risks

Organizational rigidity due to homogenization of staff
Acquisition of human resources with high expertise ( e.g., IT, risk management, etc.)
Opportunities Opportunities for women who still have potential to enter the workforce and play active roles
Risks

Opportunities

Progress in diversification

Prolonged coronavirus
pandemicG

Increased
geopolitical risks

Governance

14 Nanto Report 2022, the integrated report of Nanto Bank

Risks

Increased market risk in an uncertain business environment

Organizational overview Business modeland external environment

Risks andopportunities

Strategies andresources allocation

Business plan and the SDGs
Nanto Mission
Pursuit of regional development
Fostering of vitality-creating human resources
Profitability enhancement

SDG
objectives

Solving
regional andsocial issues

Realization ofsustainablecommunities andsocieties

17 goals and
169 targets

SDG policy

Priority action goals

We will work proactively to realize a sustainable regional
community and to solve social problems facing our
region by implementing the three facets of our Mission:
regional development, fostering of vitality-creating humanresources, and improvement of profitability.

Among the 17 SDGs, the Nanto Bank Group has
identified seven priority goals that are particularly relevant
to our areas of operation and business strategies, and to
our objectives for sustainable preservation of our regional
environment.
Materialities (Priority Issues)

Risks
Risks
Risks
Risks

Negative impact on customers’ business and financial conditions of tighter
regulations and changes in the tax system
Increased credit costs due to damage to the value of real estate collateral

Responses to the Effects ofAccelerating Climate ChangeIncreased credit costs due to the impact of technological innovation and market
changes on customers’ business and financial conditions
Suspension of business and increased risk due to damage to sales offices

Opportunities Increased demand for infrastructure investment funds for disaster prevention

measuresOpportunities Increase in wind and flood disasters and environmental changes, accompanied byOpportunities Increased business opportunities associated with the creation of new jobs throughpartnerships with local public bodies and outside organizations
Opportunities Increased demand for funds and opportunities to provide new services by supporting
customers’ cash management and core businesses

Concerns about retirement funds due to the decline in the working-age populationand the aging of society and declining birthrates
Opportunities Increased opportunities to provide various products and services to prepare forlongevity
Opportunities Increased opportunities to provide new products and services through the use ofdigital technologies
Risks

Risks

Impediments to recruitment due to delays in responding to changes in work styles

Opportunities Expansion of business fields prioritizing diverse experiences and advanced expertise

Risks
Risks

Decrease in the value of the Bank’s assets due to borrowers’ deteriorating financial
conditions
Decrease in the value of the Bank’s assets due to fluctuating interest rates, foreignexchange rates, stock prices, etc.

Realizing Sustainable Growth of
Our Regional Economy

Realizing a Convenient,
Prosperous Society

Cultivating a Healthy Corporate
Culture with Participation ofDiverse Human Resources

Fiscal 2022 Action Planemerging opportunities to offer insurance products for disaster preparedness andfinancial products as well as for services related to environmental protection

P.16

17

Preparing for Increasingly
Varied and Complex Risks

Nanto Report 2022, the integrated report of Nanto Bank

15

Target Image

Value Creation Process

Realizing Sustainable Management in Cooperation with
the Regional Community
The Nanto Bank Group is implementing its Management Plan focusing on the 10 years from April 2020,
centered on its Management Vision as a “vitality creation bank” promoting regional revitalization. We are
seeking to realize the Plan’s goals within 10 years by providing value to stakeholders through a threefaceted Nanto Mission comprising “pursuit of regional development,” “fostering of vitality-creating humanresources,” and “profitability enhancement.”

経営資本

Materialities

Customer base
•Information-gathering strengths
achieved through relationships withcustomers•Affording trust and peace of mind
earned through many years ofproviding financial services•Large share of deposits and loans
conducted in Nara prefecture
Nanto Bank
Deposits

50.1%

Funds usedin lending

Nanto Bank

50.8%

Responses to the
Effects of Accelerating
Climate Change

Business事業活動
activity・

Fiscal 2022 Action Plan

E

Realizing Sustainable
Growth of Our Regional
EconomyContributing to Improved
Customer Productivity

Facilitating Customer
Commercialization(As of end March 2022)

Realizing a Convenient,
Prosperous Society

Human resources•Human resources who respondproactively to change, think and act
independently•Unconventional human resources
contributing to growth of theregional economy and the Nanto
Bank Group

Meeting the Challengeof Climate Change

Supporting Customers’
Asset Formation

S
Improving Customer
Convenience

Cultivating Unconventional
Human Resources

Cultivating a Healthy Corporate
Culture with Participation ofDiverse Human Resources

Enhancingthe Group’s Productivity

Financial base
•Full capital adequacy
Capital adequacy ratio

Consolidated 9.60%

Non-consolidated 9.29%(End March 2022)

16 Nanto Report 2022, the integrated report of Nanto Bank

Preparing for Increasingly
Varied and Complex Risks

G

Upgrading
Risk Management

Risk management reform

Management capitalOrganizational overview
and external environment

PeoplePeoplecome

work

Values we provide
for stakeholders

ビジネスモデルIn addition to the Nanto Bank Group’s own
efforts to combat climate change, proactively
supporting the environmental activities of its
regional customers.

P.20

23

Sharing the actual issues facing customers, andpromoting productivity improvement throughunified Group-wide efforts

P.24

Serving as a hub for construction of a platform torevitalize the local economy in order to create andnurture local earning power

P.26

25

27

Acting as a life companion that provides services
to optimize customers’ life planning

P.32

Improving customer convenience and satisfaction
by deploying digital technologies to meet
diversifying customer needs

P.33

Cultivating human resources by enhancing our ability
to create added value through provision of employee
growth opportunities and diversification of humanresources, beginning with the younger generation

P.34

Applying digital technologies to advise customers
on effective use of their management resources,
such as strategic allocation of personnel, to
improve business efficiency

P.38

35

Customers
Supply of funds in accordancewith the borrower’s businesscharacteristics
Financial products and services
to support affluent living
Provision of management
personnel
Creation of new business
opportunities

Local community
Collaboration as a leader inregional development with local
governments, businesses andeducational institutions
Lively town development andbusiness creation

Realzing flexible workstyles
Providing opportunities for
active engagement outside thebusiness of banking

43

Risks andopportunities

Strategies andresources allocation

Performance

Peoplelive

Goals forachievement
by 2030

Nara prefecture
GDP*1

Increase of approx.
¥350 billion

Management
personnel
cultivation*2

350

ROA

0.35% or above

39

P.40

Business model

Employees

Shareholders
Establishing a highly responsive, sophisticatedrisk management system appropriate to today’s
highly uncertain business environment

GovernanceHigh market rating
Continuing stable dividends*1 Since Nara prefecture’s GDP will beannounced approximately two-and-a-halfyears after the fiscal year-end, we intend toachieve this goal by the end of fiscal 2026
for announcement during 2029.
*2 Human resources who can share
management decision-making with local
customers

Nanto Report 2022, the integrated report of Nanto Bank

17

Target Image

Pursuing Further Value Creation

Cultivating humanresources andorganizations customers
can trust and rely on into
the future
Vice President(Representative Director)

Satoshi Ishida

The banking business at the core of our Group has been developed over many years
by building relationships of trust with customers and the regional community. Our
highly motivated personnel, inspired by a desire to contribute to regional community
development, have consistently displayed ethical behavior as individuals who respect thediscipline and rules of banking, thoroughly eliminating risk. The brand image of the Bank asa safe, secure institution and the “best local bank in Nara prefecture” has clearly resulted
from these steady efforts by our predecessors. An asset of immense value and a sourceof strength for the Group as a whole, the brand has helped us secure an approximately
50% share of both deposits and loans in Nara prefecture.

Building on the trust and confidence of our customers into the futureEver since I assumed my current position, I have been discussing changes in the businessenvironment and the appropriate responses to these changes with our management team
as well as with many other executives and employees.
As the percentage of digital natives grows among customers supporting our Group,for example, their expectations for banks may differ increasingly from those of today’s
customers.
Our lack of sensitivity to these changes in the business environment due to theGroup’s steady recurring business has fostered a tendency to postpone structural reform.
If we are to continue building on the trust and confidence our predecessors
established among customers, our management team will be required to nurture humanresources who can identify gaps between our current and future situations that may resultin changes in the business environment; remain constantly alert to our need for change;
determine appropriate ways of changing; and implement the requisite changes quickly.

What changes must we make?
In my opinion, the answer is to use our brains. This means clarifying our objectives,
determining the root cause of the gaps between these and our current situation, andproperly ascertaining the issues for solution.

18 Nanto Report 2022, the integrated report of Nanto Bank

Business model

Risks andopportunities

Strategies andresources allocation

This may seem simple at first glance, but I believe it is essential that this cycle takeroot and become habitual practice in our organization.

How do we effect these changes?
It sometimes takes a drastic decision to change long-standing practices. Reorganizing
our branch network is one example. If the changes involved are too radical, changing the
ingrained thinking of officers and staff may be impossible, and the organizational order
may be disrupted. If they are implemented too slowly, on the other hand, they may beblocked by opposing forces, thus preventing their implementation altogether. It will beessential to take a balanced approach if we are to succeed in introducing change.

How fast can we make changes?
It is best to implement some changes immediately, but others will take time. We should
formulate and implement action plans for individual fiscal years in response to periodic
changes in the environment, but three years seems to me a reasonable rough estimate forrealizing significant change.
A review of the past three years reveals both areas in which we have implementedchanges and areas in which we have yet to change. Last fiscal year’s return to profitability
in our core business was just a beginning. We will continue to pursue reforms withoutcomplacency over the coming three years.
It will be incumbent on us to consider what responses to the business environment
our customers want to see from us. The reasons customers choose to do business withus will change dramatically in the future, and we stand to lose their trust and confidence
unless we foster personnel who can envision the added value we should provide and growas an organization that continuously produces such personnel. As I have suggested, all of
us in the Nanto Bank Group will give these issues careful consideration.

Nanto Report 2022, the integrated report of Nanto Bank

19

Developing with Our Region

E Responses to the Effects of Accelerating Climate Change
Responding
to the SDGs

Meeting the Challenge of Climate Change
Basic Policy
With the number and severity of natural disasters and other impacts ofclimate change on society growing by the day, efforts to achieve carbon
neutrality are accelerating worldwide.
Determined to realize sustainable management in cooperation with its
regional community, the Nanto Bank Group is working to decarbonize its
operations and supporting customers’ efforts to decarbonize theirs.

Fiscal 2022 Action Plan
Current situationand issues

Fiscal 2022 Action Plan•	Global warming

In addition to our own efforts to address climatechange issues, we are actively contributing to our
local customers’ efforts to do the same.

•	Growing
environmental
awareness

Supporting customers’
SDG initiatives

Initiatives forenvironment-related
financing

Goals for achievement

Realization ofsustainable local
communities

Disclosure in accordance with the procedures recommended by
the Task Force on Climate-related Financial Disclosures (TCFD)
Reduction of the Bank’s CO2 emissions

Support for customers’ SDG initiatives
Supporting customers’ SDG initiatives with the e-dash platform
The Bank has partnered with e-dash Co., Ltd., a wholly
owned subsidiary of Mitsui & Co., Ltd., to deploy its
decarbonization platform that enables customers to determine
their current CO2 emissions easily and comprehensively,
set reduction targets, and implement actions to reduce
emissions.

20 Nanto Report 2022, the integrated report of Nanto Banke-dash provides total support for initiatives
from energy optimization to CO2 reduction
through its service platform.

Visualization of CO2
emissions

Reporting of CO2
emissions

Reduction of CO2
emissionse-dash automates
operations from data
entry to calculation andanalysis

Periodic reporting ofdata required for various
reports

Proposal of specificmethods for purposessuch as cost reductionand emissions reduction

Business model

Risks andopportunities

Strategies andresources allocation

Performance

Outlook

Efforts to address climate change issues led by the Nanto SDGs Introduction Consulting Service
We have organized the Nanto SDGs Introduction Consulting Service to support customers’ efforts to contribute torealizing the SDGs by diagnosing their current situations and proposing solutions to the issues facing them.
Service overview
Nanto SDGs Introduction Consulting Service

Name
Eligible customers

Number ofcontracts

Corporations and sole proprietorships

37

 iagnosis of customers’ SDG initiatives and support for reporting on responses to the SDGs. We
Ddeploy a diagnostic tool provided by Tokio Marine & Nichido Fire Insurance Co. to examine thestatus of customer’s efforts to respond to the SDGs, and to support SDG reporting as well as toissue diagnostic reports.
Proposal of consulting services on implementing SDG management. We draw on the diagnostic
reports and SDG action declarations we compile to provide a menu of consulting options for
optimizing SDG management

Details(As of end
June 2022)

Environment-related financing initiatives
The Nanto Bank Group is proactively engaged in loan programs and project financing related to renewable energy,
including solar and biomass power generation. The Group’s renewable energy-related loans contributed to reduction of
CO2 emissions by approximately 370,000 tons of CO2 in fiscal 2021.

Green loans employing external renewable energy assessments
Nanto Bank served as lead manager in organizing a syndicated green loan for a woody biomass power plant construction
project conducted by BPS Ikoma Co, Ltd. This loan received the highest rating of “Green1” in the renewable energy
category of an external evaluation by Japan Credit Rating Agency, Ltd.
BPS Ikoma was established as a member company of TJ Group Holdings, Inc. for the purpose of implementing
a woody biomass power generation business. BPS and other TJ Group companies engage in “local production for
local consumption” of electric power by processing wood waste generated in Japan’s Kinki region into wood chips andsupplying electricity generated by biomass power to local companies and municipalities.
A major share of the carbon-zero electric power generated by the new plant will provide customers with carbon-zero
electricity outside the feed-in tariff system.**Feed-in tariff for renewable energy (FIT)

Educational facilities Public facilities

Summary of the syndicated loan

Factories

Date of contract

Wood waste generation

Local livelihoods

Returnto the community
Supply of locally produced
energy for local consumption

Conversion
to resources

Conversion
to electricity

Renewable energy generation
with woody biomass fuelProperty-dependent
recycling for various uses
Fuel chips

June 17, 2022

Arranger

The Nanto Bank, Ltd.

Co-arranger

Sanjusan Bank, Ltd.

AgentThe Nanto Bank, Ltd.

Origination amount

Senior loans: 4.562 billion yen
Consumption tax loan: 596 million yen

Uses of the funds

Funding for construction of a woody biomass
power plant

Lenders (initial)

The Nanto Bank, Ltd. and Sanjusan Bank, Ltd.

Overview of the power generation facilities(full operation scheduled for April 2025)

Name

BPS Ikoma Kitadahara Power Plant

Location

Kitadahara-cho, Ikoma City, Nara Prefecture

Generated output

9,980 kW

Nanto Report 2022, the integrated report of Nanto Bank

21

Developing with Our Region

E Responses to the Effects of Accelerating Climate Change
Meeting the Challenge of Climate Change
Enhanced disclosure in accordance with TCFD recommendations

Governance* The Task Force on Climate-related Financial Disclosures (TCFD) was established in December 2015
by the Financial Stability Board (FSB) at the request of the G20 finance ministers and the central
bank governors. The TCFD published its final report offering recommendations to encourage
voluntary disclosure by companies in June 2017. These recommendations targeted not only
financial companies but the corporate sector as a whole.

	The Nanto Bank Group has identified addressing the escalating problem of climate change as one of its materiality
issues.
	The Management Committee holds semi-annual meetings overseen by the Board of Directors to discuss specificmeasures, targets, and progress in the Group’s response to climate change, and to ensure realization of appropriate
results from its management strategies.

Strategy	The Group seeks to realize sustainable management in cooperation with the regional community. As a responsible
community member, it is actively pursuing its own decarbonization efforts while also supporting those of its customers.
	In our own efforts toward decarbonization, we have set CO2 emissions reduction targets for the Bank on a nonconsolidated basis and are accelerating efforts to achieve them. Going forward, we will continue working to reduce CO2
emissions by the Group as a whole.
	To support our customers in decarbonizing their businesses and responding to the SDGs, meanwhile, we proactively
develop environment-related loans and propose problem-solving products, working closely with customers to resolve
their business issues.

Qualitative scenario analysis
With reference to the official scenarios,* we conducted a qualitative analysis of climate-related risks and opportunities
from short- (5-year), medium- (10-year), and long-term (30-year) perspectives, as shown below.

Opportunity

Physical risk

Risk

Migration risk

Contents

Impact by scenario
1.5°C

TemporalAbove 4°C perspective

Risk category

Increase in credit costs resulting from adverse effects of tighter climate change
regulations and changes in the tax system on customers’ business and financial
conditions, as well as damage to the value of real estate collateral due to noncompliance with environmental regulations

Large

Short- tolong-term

Credit risk

Increase in credit costs due to the impact of technological innovations andmarket changes focusing on decarbonization on customers’ business andfinancial conditions

Large

Short- tolong-term

Credit risk

Decrease in the Bank’s corporate value due to insufficient responses to climatechangeLarge

Short- tolong-term

Operational risk
(reputational)

Increase in credit costs due to damage to real estate collateral resulting fromlarge-scale windstorms, floods, and other natural disasters, as well as businessstoppages and adverse effects on business stemming from damage tocustomers’ operating bases, etc.

Small ~
mid-sized

Large

Short- tolong-term

Credit risk

Increase in restoration costs stemming from damage to the Bank’s bases bylarge-scale windstorms, flood disasters, and other natural disasters.

Small ~
mid-sized

Large

Short- tolong-term

Operational risk(tangible assets)

Increase in customer demand for capital investment in decarbonization projects

Large

Short- tolong-term—

Increase in demand for funds for infrastructure investment in disaster-prevention
measures

Small ~
mid-sized

Large

Short- tolong-term—

Increase in opportunities to offer disaster preparedness insurance products andfinancial products and services related to environmental protection stemmingfrom growing numbers of windstorms and flood disasters that lead to increasingly
environmentally conscious customer behavior

Large

Large

Short- tolong-term—

Increase in business opportunities for services such as solution provision to
support customers' decarbonization efforts

Large

Short- tolong-term—* Referenced public scenarios
1.5°C scenario with progressive decarbonization: IEA NZE2050, IEA APS, NGFS Net Zero2050, IPCC SSP1-1.9, SSP1-2.6
4°C scenario with warming exceeding 4°C: IEA STEPS, current NGFS policies, IPCC SSP5-8.5

22 Nanto Report 2022, the integrated report of Nanto Bank

Business model

Risks andopportunities

Strategies andresources allocation

Performance

Outlook

Assets associated with carbon emissions
Assets related to carbon emissions (exposure to the electric power and energy sectors but excluding renewableenergy-generation projects) accounted for about 2.0% of the Bank's loans (as of end March 2022).

Risk management
	The Nanto Bank Group recognizes the importance of addressing climate change to sustainable development of theregional community.
	The Bank recognizes two categories of climate change risk: credit risk and operational risk. These are incorporated
into the factors designated for monitoring by the ALM Committee and Operational Risk Management Committee,
respectively, in their efforts to enhance risk management.
	We established a financing policy in October 2020 that clearly states our commitments to declining to provide financing
for the construction of new coal-fired power plants, in principle, and to giving careful consideration to the advisability ofproviding financing for developments that involve logging, taking into account their legality or illegality and their potential
environmental impact.

Loan policies concerning industries and sectors with significant environmental and social impact
As a regional financial institution, we evaluate loans that may have a negative impact on the environment and society carefully and work to
reduce or avoid their impacts, while also providing customers who are sincerely addressing environmental and social issues with appropriate knowledge and support.
We exercise due caution before extending loans to the following industries and sectors that are considered to exert significant impact on the environment and society.
1. Weapons manufacture
We do not extend financing to companies that manufacture inhumane weapons, such as cluster munitions designed for killing anddestruction in war.
2. Coal-fired power generation
We do not, in principle, extend financing for the construction of new coal-fired power plants. Should the construction of high-efficiency
power plants become necessary under national energy policy, however, we will carefully consider whether to finance such projects ona case-by-case basis.
3. Deforestation
As for financing development projects that involve deforestation, the Bank will carefully consider whether the projects involve illegal
logging and their potential environmental impact.

Indicators and targets
CO2 emissions by Nanto Bank (SCOPE 1,2)
In its commitment to reducing its CO2 emissions, theBank has set a reduction target by fiscal 2030 of at least
50% below the fiscal 2013 level.
CO2 emissions in fiscal 2020 were 6,251 t-CO2,
a 33.7% reduction from fiscal 2013. (*Calculation
results based on statutory periodic reporting on energy
conservation.)

CO2 emissions and reduction targets for fiscal 2030
(t-CO2)

10,000Compared to fiscal 201333.7% reduction

5,000

9,427
6,251

0

TargetReduction of 50% or more

Fiscal 2013

Fiscal 2020

4,713

Fiscal 2030
(Target)Environment-related financing
Total fiscal 2021 lending for renewable energy-related
capital investment (solar and biomass power generation)and energy conservation capital investment (interest
subsidy program projects) was 7.2 billion yen.

Nanto Report 2022, the integrated report of Nanto Bank

23

Developing with Our Region

S Realizing Sustainable Growth of Our Regional Economy

Director in Charge, Sales Division
Director and Managing Executive Officer,
General Manager, Sales Promotion Headquarters

Takeshi Sugiura

The Nanto Bank Group is transforming its relationshipmanagement (RM) to enhance customer support. This involves
leveraging our information capabilities cultivated throughactivities aimed at deepening our understanding of customers
as stipulated in the Management Plan to gain the trust andconfidence of customers — even if by just one customer orcompany at a time — by reinforcing our points of contact withcustomers and adding depth to our consulting sales efforts.
We realize that the Group’s role has become moresignificant than ever in today’s business environment, which
has changed dramatically in the wake of the coronavirus
pandemic. Many of our customers sense a looming crisis
concerning their business continuity and anxiety about their
preparations for the future.
In our efforts to enhance customers’ productivity, we willcontinue to provide consulting services to help them solve
problems in a variety of situations, not only by supporting
their cash management procedures, but also by helping them
formulate medium- to long-term management plans such as
financial and business strategies.
We are also working to help customers with asset
formation to realize prosperous lives by providing optimal
financial services as a companion in their life planning.

Contributing to Improved Customer Productivity

Responding
to the SDGs

Basic Policy
Solving customers’ issues through Group-wide “knowledge” activities
With the working-age population in decline in the medium to long term and the effects of the pandemic and highresources prices increasingly apparent in the short term, we believe our customers’ own productivity must increase if they
are to achieve sustainable growth.
We are building relationships with customers by assisting them in improving their productivity. Our role is to help
customers analyze their current situations and identify the issues they face; work with their management based on theseanalyses to formulate plans for improving their operating efficiency and digitalize their operations; and provide them with arange of support services, including PDCA (plan-do-check-act) activities.

Fiscal 2022 Action Plan
Current situationand issues•	Declining
working-age
population•	Aging
management•	Prolonged
coronavirus
pandemic, etc.

24 Nanto Report 2022, the integrated report of Nanto Bank

Goals for achievement

Fiscal 2022 Action Plan

Sharing the real issues faced by customers andworking together as a Group to support theirproductivity improvement
Implementing ourconsulting function

Engaging the services ofbusiness partners

Supporting business
improvement

Achievingsustainable
customer growthBusiness model

Implementing our consulting
function

Strategies andresources allocation

Performance

Optimal support measures according to customer issues

	The Nanto Bank Group provides
customer-driven solutions to
support customers’ management
efforts to share and realize theirvision of the future.
	We leverage the strengths ofboth our Group companies andour business partners to provide
customers with maximized
value, and to create new value incollaboration with them.

Nanto Lease

M&A

Nanto Computer Service

Business succession

Collaboration

Nara Mirai Design

Formulation of growth strategies
Highly skilled personnel placement

Nanto Card Service

Loans and equity

Nanto DC Card

Off-balancing of assets

Nanto Consulting

Corporate insurance

Nanto Mahoroba Securities

IT

Nanto Capital Partners

Support for BPO

Business partners

Cashless transactions

Support for business improvement in response to the external environment	The Nanto Bank Group compiles cross-sectional project
teams of appropriate Group personnel to proactively
support the core businesses of customers impacted by
the prolonged pandemic.

Nanto Fund for Measures to Cope with
Changes in the Business Environment

NEW(June 2022)

Formation of cross-organizational project teams
Credit Analysis Division

Sales branch/
block headquarters

Organizing cross-organizational project teams to support the corebusinesses of customers impacted by the coronavirus pandemic(Business Revitalization Support Office)Corporate Solutions Department
Nanto Consulting
Regional Business
Creation Department, etc.

SME Revitalization Support Council
Reinforcement of cooperation
with external organizations REVIC (Regional Economy Vitalization Corporationof Japan), Business Succession Center

	The Fund is designed to support the cash management of customers who are directly or indirectly affected by rising
crude oil prices and raw materials prices.
Product overview
TargetBusinesses directly or indirectly affected by rising crude oil/raw materials prices

Use of the funds To provide working capital required to deal with the effects of rising crude oil and raw materials prices, etc.
Loan amountUp to 50 million yen

Loan period

7 years

Indicators and plans	One indicator is revenue from corporate solutions
implemented to solve customers’ problems.
	In fiscal 2022, we plan to increase revenues by 100
million yen from the previous year to 1.4 billion yen.

Corporate solutions revenue(Billions of yen)
(Planned)

1.4
0.3
0.3
0.8

2020
Loans

1.3

1.4

0.4

0.5

0.3

0.3

0.6

0.6

2021
Private placement bonds

2022(Fiscal year)

Business alliances, etc.

Nanto Report 2022, the integrated report of Nanto Bank

25

Developing with Our Region

S Realizing Sustainable Growth of Our Regional Economy
Responding
to the SDGs

Facilitating Customer Commercialization
Basic Policy
Working with regional governments and externalorganizations to construct a mechanism for regional
economic revitalization
Although blessed with a wealth of human and tourism resources, Naraprefecture’s labor force and consumer spending are being drained out into
the neighboring metropolises of Osaka and Kyoto.
The Nanto Bank Group acts as a hub for creating and cultivating new
local earning power and engages actively in constructing a platform forrevitalizing the regional economy.
Besides providing customers with financial support, the Group iscontributing to regional development by participating proactively in new
businesses itself.

Fiscal 2022 Action Plan
Current situationand issues

Goals for achievement

Fiscal 2022 Action Plan•	Sluggish
regional
economyConstructing a platform for regional economic
revitalization by serving as a hub for creation andcultivation of regional earning power•	Declining
number ofbusinesses,
etc.

Initiatives for regional
revitalization

Reinforcing collaboration
with other regional
institutions and businesses

Providing support for new
business establishment

Sustainablegrowth of theregional economy

Construction of a platform for revitalization of the regional economy
Regional revitalization initiatives
Universities andtechnical colleges

BANK

YorozuSupport Center

Japan FinanceCorporation

Cooperation withoutside support bodies

Chamber ofCommerce andIndustry

26 Nanto Report 2022, the integrated report of Nanto Bank	Reinforcing partnerships with local governments(partnership agreements for regional development, etc.)	Support for shrines and temples (crowdfunding, etc.)	Reinforcing partnerships with external organizations bydeploying the Fund for Traditional House Renewal andthe Asset Renovation Fund

Cooperation with outside support organizations
	Initiatives for recurrent education and collaboration
between industry and academia (partnerships with
universities and technical colleges)	Incubation program establishment

Support for founders and new business development

Credit guarantee
associations
Prefectural andmunicipal governments

	Provision of start-up support packages (in collaboration
with the Yorozu Support Center, Chamber ofCommerce and Industry, etc.)	Loans for new businesses (in collaboration with Japan
Finance Corporation, credit guarantee associations, etc.)	Nanto Success Road, others

Business model

Strategies andresources allocation

Performance

Initiatives by Nanto Bank Group members for community revitalization
Expansion of sales channels and sales
support for local products [EC business]

Expanding production and sales channels
for agricultural products from Nara
Prefecture [agribusiness]	We are using the “Narawashi” e-commerce site to construct a systemfor conveying producers’ thoughts and the stories behind their
manufacturing processes that will inspire consumers to visit Nara.
	We support our business partners’ efforts to expand their sales
channels by posting their products on the Narawashi site as well as bypromoting sales of the posted products.

Yoshino cedar luncheon board

Wooden business card caseHorii Shougetsu-do
Kimigoromo (10 pieces)

Yamato Mana cultivation kit

Handmade konnyaku set froma Nagano village

Tofu set made with care using
famous water from Nara’s
Omine Mountains

Manshoudo Sakura Yokan(2 pieces)

Rich strawberry cheesecake	As part of efforts to solve the problems of increasing amounts ofabandoned farmland associated with the aging society and shrinking
farming population, we are working to revitalize local agriculture byestablishing sustainable, profitable agricultural systems.
	We are also pursuing efforts to increase the stable production of Nara’s
agricultural products and the volume produced, and to boost their sales
by developing new sales channels for them.

Establishment of tourism centers [real estate and urban development projects]

P.28

	The Group is seeking to increase Nara prefecture’s GDP and its income from tourism by transforming it from a day-trip tourist destination to an extended-stay tourist venue.
We provide financial support for the Nipponia Hotel Nara Tamaramachi, Nipponia Tawaramoto Maruto Shoyu, and Gose Sento Hotel while also developing
facilities and attractions for the opening of accommodation facilities at Sakamoto Ryumon Bunko in the historic town of Yoshino-machi. These projects are part ofefforts to promote excursions and extended-stay tourism by establishing a new tourism base with accommodations in the south-central region of the prefecture.
Nipponia Tawaramoto Maruto Soy Sauce

Nipponia Hotel Nara Naramachi

The town of Tawaramoto-cho in Isogi-gun, Nara prefecture,
which has long produced an abundance of agricultural
products, retains the original rural landscape of ancientJapan. Established in 1689 by Maruto Co. Ltd., Maruto Soy
Sauce is Nara prefecture’s oldest soy sauce brewery. In its
heyday, the company extended its sales channels
nationwide, but its success ended when raw materials
supply problems in the postwar years forced it to close in1949. More recently in 2020, almost 70 years later, thebrewery was renovated and reopened as an old private
residence hotel, Nipponia Taharamoto Maruto Soy Sauce.
The warehouse, brewery, living quarters, and many of theold tools have been retained and renovated to create
unique accommodation and restaurant facilities.

The Nipponia Hotel Nara Naramachi opened for business in November
2018 in a renovated 130-year-old sake brewery formerly operated bylong-established sake maker Nara Toyosawa in the historic township ofNaramachi. The hotel restaurant was renovated using the original building
materials in both the exterior and interior construction to involve thebrewery’s beams and ceilings in its retro atmosphere.

HokuwaChuwa

Nara City
Tawaramoto-choGose City
Yoshino-cho

Nanwa
Sakamoto Ryumon Library

Gose Sento Hotel
We plan to revive an abandoned public bathhouse in the
town of Gose-machi as a bathhouse and to renovate anearby traditional private house into a lodging, working
vacation, and dining facility.

In 2021, the Nanto Bank Group acquired an old private house in Yoshino, a
town in southern Nara prefecture. The house was formerly the primaryresidence of Senji Sakamoto, the founder and one-time president of the
Yoshino Zaimoku Bank, which has special significance for Nanto Bank as
one of the institutions from which it was formed. Plans call for the library’s
renovation over the next few years as a tourist accommodation facility tocreate a regional tourism hub.

Nanto Report 2022, the integrated report of Nanto Bank

27

Developing with Our Region

S Realizing Sustainable Growth of Our Regional Economy

Stakeholder Voice

Pursuit of Investment Projects and Regional Contribution
through Tourism Promotion and Community Development
Motohide Hashimoto and Taisuke Okubo, two organizers of urban development projects in Nara prefecture, spoke with Ryuichiro
Funaki of Nanto Bank about their projects and their expectations for them. They also shared their views of the Nanto Bank
Group’s role in regional revitalization.

MINTO Organization for Promoting Urban Development

The Nanto Bank, Ltd.

Motohide Hashimoto, Vice-Chairman (full-time)

Director and Managing Executive Officer Ryuichiro Funaki

NOTE Nara Co., Ltd.
President and CEO Taisuke Okubo

Organization for Promoting Urban Development (MINTO Organization hereinafter)

NOTE Nara Co., Ltd. (NOTE Nara hereinafter)

The MINTO Organization is a corporation designated by the Ministry of Land,
Infrastructure, Transport and Tourism as a body authorized to promote private
sector urban development under the Act on Special Measures Concerning thePromotion of Urban Development (Act No. 62 1987).
Since its establishment in 1987 as an agency engaged in financing urban
development policy implementation, the MINTO Organization has provided
financial support totaling approximately ¥1.9 trillion for over 1,400 private-sector
urban development projects. It reviews its support for projects and operations
flexibly in accordance with changes in social and economic conditions.
Since the recent demise of the land acquisition and transfer business,
which previously played a key role in Japan, the MINTO Organization has
engaged in mezzanine support, investment in urban renewal, joint urban
restructuring, provision of urban development funding, and support services forthe use of public spaces in urban areas.

NOTE Nara is a private company that engages in urban development
projects involving historical edifices (old traditional private residences)throughout Nara prefecture.
The company restores unoccupied traditional houses to keep
memories of the regional traditions and lifestyles alive.
There are over a million of these old private houses remaining inJapan today, each a repository of regional history and memories. On theother hand, however, they are disappearing at an annual rate of over 4%(40,000 houses/year) due to disuse, along with other regional traditions
and resources.
NOTE Nara cooperates with local governments, villages, andbusinesses to commercialize the use of these traditional residences in its
efforts to keep the residential customs and traditional activities of Naraprefecture alive for future generations.

Name

MINTO Organization for Promoting Urban Development

Name

NOTE Nara Co., Ltd.

Address

3-3-3 Toyosu, Koto-ku, Tokyo

Address

4 Nishijyodo-cho, Nara City

Establishment

October 1, 1987
Transition to a general incorporated foundation, April 1, 2013

Establishment

February 26, 2018

President

Taisuke Okubo

Assets20 million yen

President
Hirofumi Hanaoka(Representative Director)
Assets

5.6 billion yen

28 Nanto Report 2022, the integrated report of Nanto Bank

Business model

Strategies andresources allocation

Urban development in Nara prefecture with an eye to the future
Funaki: With the local economy contracting, our Group has extended its business into Osaka and other major cities and expanded
its lending there. We are aware, however, that this business model will eventually reach its limits. We have consequently set a
goal of increasing Nara Prefecture’s GDP by 10%. We believe that one way to achieve this goal is to reactivate the prefecture's
economy by communicating its attractions to potential visitors, attracting more tourists, and increasing the number of people whointeract with Nara prefecture in other ways.
Okubo: We have seen no major change in the trend toward urbanization, whichconvinces me that a macro trend toward an increased flow of people, including people
from Tokyo and Osaka, toward Nara is inevitable. In this environment, I believe that Nara,
as a regional city, must take measures to promote urban development in accordancewith the characteristics and demographics of the region. From a business perspective,
I think it advisable to capitalize on Nara Prefecture's most distinctive feature, its tourism
resources. One of the reasons my company specializes in remodeling old private
residences in rural areas is that these traditional houses themselves remain repositories
of various local resources, such as history, culture and foods, of the localities in which
they are concentrated. We believe that, by focusing on these local resources unique to
Nara prefecture, we can increase the number of people who come here to live, and also
create a population with ties to the prefecture and an exchange population of frequent visitors. This will maximize the lifetime valueof the regions and businesses in which we are involved. By attracting more people to spend a portion of the 365 days each year
in Nara, we can develop and maintain sustainable businesses in various regions of the prefecture. This will be a deciding factor in
realizing our goal of attracting more people to come and settle in Nara Prefecture.
Hashimoto: Our mission at the MINTO Organization is to provide financing to support local and regional urban development aswell as to support our local communities and the development of local tourism bases. Tourists are extremely important for regional
revitalization, not only in Nara prefecture but also in other prefectures, but our current situation is extremely difficult. I believe thatcuriosity is a deep-rooted human attribute, and that this curiosity is what makes people travel and seek out new foods. I believe thisrepresents a potential source of profit growth from establishing a business and from Nanto Bank’s efforts to raise Nara prefecture's
GDP by 10%. This was my experience when I was working for the Regional Taxation Bureau with responsibility for sake makers.
I found that my interest was aroused further when I not only tasted the sake but also observed the sake-brewing process andlearned about the brewery operations. I think it would be best to go beyond descriptions of the sake brewed in Nara prefecture toprovide information about its background and tell the story behind its brewing. If we do this, I believe tourists will be encouraged
to return to Nara. Nara prefecture has a 1,300-year history dating back to the Nara Period when Nara was Japan’s ancient capital,
and this history gives it an advantage over other regions in its ability to promote Japan’s story.
Funaki: You’re certainly right that Nara prefecture enjoys the advantage of more tourism resources than other regions of Japan.
Unfortunately, even though Nara's representative shrines and temples have high name recognition, we have so far failed tocommunicate the grand history and story of Nara in a unified manner. I’m convinced that we need to disseminate this informationand provide more opportunities for tourists to experience our traditional culture.

Reasons behind the revitalization of Gose-machi and the focus of
the project and related investment
Okubo: There are two key factors supporting revitalization of the town of Gose-machi. First, the local resources necessary
to constructing a narrative and concept are plentiful; and, second, the town offers ideal soil for nurturing a diverse range ofinitiatives with a view to the next five or ten years. As a regional development company, we offer the value required to establish asustainable business. We learned of the existence of a disused public bathhouse in the Gose-machi district of Gose City throughan introduction by Nanto Bank. After about two years of investigation and consideration, we completed a plan based on acomprehensive concept of Gose Sento Hotel development. This is a "stay, eat, enjoy hot water bathing” concept that creates astory identifying the renovated hotel as a place to stay, eat, and relax in a traditional public bath. To foster diversity, we have asked
a local sake brewery and soap maker to invest in the plan and cooperate in its development. These requests reflect our realizationthat we need the ground and the soil to grow together with various local businesses. We plan to make use of the properties of four

Nanto Report 2022, the integrated report of Nanto Bank

29

Developing with Our Region

S Realizing Sustainable Growth of Our Regional Economy<Gose SENTO HOTEL Project>
Diagram of the Fund

Overview of the Asset Renovation FundPrivate-sector urban
development projects

MINTO Investments
Organization

Government

Subsidies

Investments, etc.

Asset
Renovation
Fund
Regional
financial Investments
institutions

Private-sector urban
development projects
Investments, etc.

Name

Asset Renovation Investment Limited Partnership

Date ofestablishment

December 16, 2021
Date of initiation by Nanto Bank: February 4, 2022

Investment
targets

Private urban development projects utilizing old assets anddeveloping teleworking bases, open green spaces, etc.

Nature ofinvestments

Forms of investment (preferred shares, anonymous association
investments), corporate bonds (straight bonds, subordinatedbonds), etc.

Investment
periodApprox. 4 years (until end December 2025)
Remaining period: approx. 14 years (until end December 2035)

Limited liability The Organization for Promoting Urban Development, regional
financial institutions including The Nanto Bank, Ltd., others
partners
Managementcompany

Ohanapana Corporation (100% owned subsidiary of NEC
Capital Solutions Limited)

Source: MINTO Organization

old traditional houses in Gose-machi to establish a structure that creates a sense of circulation through a decentralized approach inwhich accommodation, dining and public bath facilities are scattered through the town.
Funaki: Gose has been a major transportation hub since the Edo period, and the streetscapes of that era remain to this day. The
local people's affection for each other and their social interactions nurtured through the town’s long history remain alive as well. We
want to pass this atmosphere and other aspects of the old town on to the next generation as their cultural heritage. We are also
determined to make this project a pioneering success story by revitalizing the town and enhancing its appeal for tourists.
Hashimoto: When it comes to urban planning, we need leaders like Mr. Okubo. We
should mobilize the strengths of everyone in the community, including people in the local
government, under their leadership to make it work. It is important for us as investors to beaware that we are not only investing in the project, but that we are also pursuing it together.
We launched a fund for the renovation of old assets under the Gose Plan, which is a newprogram of the MINTO Organization conducted jointly with Nanto Bank, which has been
involved in the project from the start, participating actively in various aspects, including
holding local explanatory meetings. We expect realization of the project to take some time,and most likely to remain uncertain at times. Small and medium-sized enterprises requireappropriate guidance to remain in business, and I believe local financial institutions shouldtake good care of them to ensure their success.
Funaki: This project is positioned as part of our investment banking business. Urban development of this kind requires thecollective efforts of the local residents, and we are consequently seeking to create an investment banking model unique among
regional financial institutions, in which we do more than simply provide funds by working alongside the residents.

The Sakamoto Ryumon Bunko Collection in Yoshino-machi by Nara
Mirai Design
Funaki: Next, I would like to ask your opinions of our planned renovation of Sakamoto Ryumon Bunko into an accommodation
facility, a new challenge for us in creating a regional revitalization model and one that we expect will ultimately contribute to anincrease in Nara prefecture’s GDP.
Hashimoto: I understand that the Sakamoto Ryumon Bunko is an old private residence associated with Nanto Bank. We hopethat establishing new ways for visitors to relax and enjoy themselves will produce a flow of visitors touring Nara Prefecture asa whole. I would like to see Sakamoto Ryumon Bunko develop as a core facility of this project offering unique accommodation
functions.
Funaki: Sakamoto Ryumon Bunko was the residence of the founder of Yoshino Zaimoku Bank, one of the predecessors of Nanto
Bank, and in a sense, it is a cultural asset that has been preserved by the local people. Its location in Yoshino, a World Heritage
Site that forms part of the Yoshino-Kumano National Park, adds further to its allure. In this connection, one major issue we face

30 Nanto Report 2022, the integrated report of Nanto Bank

Business model

Strategies andresources allocation

is finding ways to make the most of the area’s cultural heritage and natural resources.
Traveling from the Kii mountain range to our neighboring prefectures, moreover, visitors
will encounter other World Heritage Sites and some of the finest tourist resources inJapan, including Koyasan and Kumano, all within a convenient touring radius. If we canrenovate an accommodation facility here, it will offer easy access to the region fromtransport facilities such as Kansai Airport and Nanki-Shirahama Airport. I believe it offers
immense potential to contribute to an increase in tourism and the number of visitors to
the Yoshino district as a whole by creating new touring routes, not only within the bordersof Nara prefecture but extending to other parts of the Kii Peninsula as well.
Okubo: As manager of Nara Mirai Design, I am currently participating in the project to turn Sakamoto Ryumon Bunko into anaccommodation facility. This is an extremely ambitious project that involves the Bank in urban development from a businessstandpoint. We would like to build a lodging facility here as a motivation for people to visit Yoshino, and as a venue for hosting local
community residents. The initiatives of NOTE Nara and Nanto Bank extend from Nara City to Tawaramoto, Gose, and Yoshino. We
are hoping to establish systems for touring around Nara prefecture that will create a flow of people from the northern to the central
and southern regions of the prefecture, and to lengthen the time tourists remain in the prefecture.

The role the Nara Bank Group should play in resolving regional issues
Funaki: Before we finish, I’d like to ask you about your expectations for our Group in resolving regional issues, and about the role
you think it should play.
Okubo: My hope is that the Nanto Bank Group will continue to act as a catalyst for urban development initiatives. I believe Nanto
Bank’s participation in this project will make our urban development efforts three or four times more effective. When we approach acommunity with a project as outsiders, we require a guide who can clarify the characteristics and customs of the community for us.
Nanto Bank has built close relationships with various businesses, government agencies, and individuals throughout the prefecture
over the years, and I believe it has an extremely important role to play in the revitalization of regional communities, including urban
development.
Hashimoto: I agree that Nanto Bank can play a crucially important role in the revitalization of Nara prefecture. The Bank has
recruited many talented local personnel, making it what might be called a treasure house of human resources. In today’s world, itwould be a waste to work only within the narrow framework of the conventional banking business. Nanto Bank is already involvedin various businesses outside the banking field, for example, including an e-commerce business supporting local products. I believe
the various initiatives you are promoting to increase Nara prefecture’s GDP by 10% and to expand your support for small andmedium-sized enterprises will make the prefecture more vibrant. And I have high hopes that you will achieve significant success inyour plans to increase the number of tourists visiting Nara prefecture, and to create a successful example of revitalization for otherparts of Japan.
Funaki: Regional financial institutions are under pressure today to change their business models. We are working together to solve
regional issues, sweating and taking risks together, with support from residents, outside experts, and public institutions. We realizethat the approach we are initiating represents a significant transition from a lending model to an investment banking model. We
can be proud that every employee of our Group shares a strong desire to contribute to the regional community. I feel confident thatleveraging the strength this gives us to give back to the regional community with the help of people and organizations outside theGroup will set us well on our way to achieving our target of a 10% increase in the prefecture's GDP.
Thank you very much for sharing your time with us today.

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31

Developing with Our Region

S Realizing a Convenient, Prosperous Society
Responding
to the SDGs

Support for Customers’ Asset Formation
Basic Policy
Asset-building tailored to the customer’s life stage
The expansion of online banking and the emergence of cashless businesses and othernew players are raising concern that the numbers of points of contact between the
Nanto Bank Group and its younger customers are diminishing. Transactions with thecustomers who will form our future customer base are essential for the sustainablegrowth of the Group. Meanwhile, customers are also expressing a vague sense of
uncertainty about the future due to Japan’s declining birthrate and aging population, andto the increasing burden on the working-age population to support the older generation.
At Nanto Bank, we engage in dialogue with customers as a life companion to
grasp their future goals and planning. We then join forces with appropriate membersof our Group to provide optimal services, such as asset formation and management
services, to help them realize their objectives.

Fiscal 2022 Action Plan
Current situationand issues

Fiscal 2022 Action Plan•	Concerns about
retirement
funds

Working with customers in their life planning andproviding optimal services as a life companion•	Diversificationof lifestyles,
etc.

Offering products and services that meet the needs of every life stage

Goals for achievement

Realizing affluent
customer lives

Products and services tailored to customers’ life stages
Younger generation
BirthsOlder generation
Employment

Transactions

Generation initiating
asset formation

Channels

We help customers realize prosperous
lifestyles and expand our customer baseby constructing asset-building structuresappropriate to each individual life stage:
the generation that initiates asset
building; the generation that grows theassets; and the generation that benefits
from and passes on the assets.

Home purchases

Retirement

Generations pursuingasset formation

Generation that benefits fromand passes on assets

Payroll transfer/cashless transactions

Pensions
TrustsLoans
Assets under custody

Provision of digital convenience

Expansion of holiday andnighttime banking channels

Face-to-face consulting

Indicators and plans
Assets under custody
112,797
216.0
72.5

114,374

Personal loan balance(Planned)

254.1
87.0

(Billions of yen)(Billions of yen)

282.7

1,096.6

1,144.4

 onthly transfer amount and number ofM
investment trust accounts(Millions of yen)

1,181.4

49,63344,575

107.0
Planned925

60,0001,100

724Planned

143.5

167.1

2020

2021

Nanto Bank

Nanto Mahoroba
Securities(investment trusts only)

32 Nanto Report 2022, the integrated report of Nanto Bank

175.7

2022 (Fiscal year)
Number of investment
trust accounts

2020

2021

2022 (Fiscal year)

2020

2021

2022 (Fiscal year)

Business model

Strategies andresources allocation

Performance

Responding
to the SDGs

Improving Customer Convenience
Basic Policy
Applying digital technologies to enhance customer convenience
In consideration of our expected customer base 10 to 20 years in the
future, we are working from the customer’s perspective to improve
convenience and enhance customer satisfaction by thoroughly investigating
the changes necessary to encourage customers to choose the Nanto Bank
Group while maximizing our application of digital technologies.
We are applying various digital technologies to maintain and expand
our customer base by providing information and speedy proceduresthat meet customer needs through the accumulation, maintenance, andvisualization of data, and by strengthening our connections with every
customer generation.

Fiscal 2022 Action Plan
Current situationand issues

Fiscal 2022 Action Plan•	Diversified
lifestyles andchanging life
choices

Employing digital technologies to meet diversifying
customer needs and improve customer
convenience and satisfaction•	Growing
digital native
generation,etc.

Responding to diversifying
customer needs

Conducting data-driven
sales activities

Goals for achievement

Improving
convenience toenhance customer
satisfaction

Establishing efficientadministrative structures

Applying digital technologies to enhance convenience
Responses to diversifying customerneeds	Developing applications that enable customers
to conduct banking transactions much as theywould at a teller window anytime, anywhere

Establishing efficient administrative
structures	Reducing customer waiting time	Speeding up procedures

Introduction of a Web-based mortgage loan application system
Elimination of the need to visit a branch to apply for a loan
Reduction of the burden on customers by linking data fromapplication to execution

Potential development of banking applications with high UI/UXIntroduction of a bank visit appointment system
Enabling of advance appointments via Web or phone,
information sharing and advance preparation

Digitization of public monetary transactions
Introduction of a file transmission service (ADP)
Introduction of an advance utility bill statement notification service

Conducting data-driven sales activities
	Gathering, maintaining, and visualizing data toprovide timely services according to customers’
life stages
	Providing detailed proposals tailored toindividual customers’ needs

Consideration of data-integration infrastructure construction
Centralization of the Bank’s data management

Nanto Report 2022, the integrated report of Nanto Bank

33

Developing with Our Region

S Cultivating a Healthy Corporate Culture with Participation of Diverse Human Resources
Responding
to the SDGs

Cultivating Unconventional Human Resources
Basic Policy
Cultivating unconventional human resources by providing
growth opportunities and pursuing personnel diversification
Unconventional human resources are employees capable of helping
customers realize their goals and participating with customers in theirdecision-making. This is the type of human resources the Nanto Bank
Group seeks.
Convinced that unconventional personnel require broad perspectives
with experience both inside and outside of banking, we are offering new
growth opportunities by increasing secondments to companies in otherfields, dispatching trainees, and promoting exchanges among our Group
companies, as well as by developing a side job program and expanding
mid-career hiring.

Fiscal 2022 Action Plan
Competencies requiredof staff

Fiscal 2022 Action Plan

Ability to engage
in management
decision-making
with customers(unconventional
personnel)

Enhancing our capabilities in added-value provisionby nurturing unconventional human resources throughdevelopment of growth opportunities and personnel
diversification, beginning with younger people

Business planningcapability
Problem-solving
capability
Ability to innovate

In-house training, OJT, others
Consulting personnel development training
Loan personnel training
Market Management Department trainees

Goals for achievement

Development of growth
opportunities

Cultivation of
unconventional
human resources

Diversification ofhuman resources

Efforts to cultivate unconventional human resources
Developing growth opportunities
Building value-creation relationships with customers requires not only development of employees’ sales and administrativeskills, but also improvement of their management literacy and further enhancement of their problem-solving skills acquiredin the core business.
Main
initiatives

Increased number of secondments
Dispatching trainees
Exchanges among Group companies
Support for acquisition of qualifications that contribute to problem-solving
Training to strengthen logical thinking skills, joint training with other companies

Secondments to outside companies, trainee dispatches, and exchanges among Group companies have increased in
number since fiscal 2021 for such purposes as fostering of young employees.
Achievements (as of June 2022)
Personnel seconded to other organizationsin their twenties to forties (2)Trainees dispatched (7)Exchanges among Group companies (3)(1 to a local company,
1 to a regional government)(4 domestically, 3 overseas)(Seconded full-time directors, 3)

34 Nanto Report 2022, the integrated report of Nanto Bank

Strategies andresources allocation

Performance

Support for acquisition of qualifications contributing to problem-solving
Against the backdrop of customers’ digital issues and changing needs, we encourage our employees to acquire qualifications such as
applied information technology engineer, SME management consultant, licensed real estate consultant, and FP level 1. In August 2020, we
began offering more incentives and reinforcing our support activities.
Number of personnel with requisite qualifications for vital human resources
Monthly qualification allowance

Eligibility for payments

10,000 yen

Financial planning skills test, level 1, SME management
consultant, securities analyst, labor and social insurance
consultant, information-processing security supervisor

20,000 yen

Certified public accountant, attorney, real estateappraiser, certified tax accountant(Persons)

700

559

458

Planned

2020

2021

2022 (Fiscal year)

Training format

Subjects

Basic

New employee training

New employees

Acquisition of basic logical thinking skills

Training in logical thinking

All employees

Acquisition of logical thinking capabilities essential toproblem-solving

Application

Initiatives for reinforcing logical thinking skills
In our efforts to reinforce employees’ logical thinking capabilities, the most essential requirement of unconventional humanresources, we conducted logical thinking training (e-learning) for all our employees in fiscal 2020. We have continued toinclude a logical thinking program in our training of new employees in April of each year since.
We also provide training to support acquisition and application of logical thinking skills through training to strengthen
employees’ capabilities for organizational and team problem-solving through group discussions in which every participant
engages in the discussion (such as consideration of management issues).
Content and objectives

Training to strengthen
logical thinking capabilities Employees in late
20s to early 40s
Group discussions

Acquisition and practice of logical thinking skills throughpractice in solving organizational or team issues
Acquisition and practice of logical thinking skills throughdiscussion (consideration of management issues, etc.)

Efforts to diversify human resources
Main initiatives

Introduction of a side job system

Expansion of mid-career hiring

Introduction of secondary employment system
Our awareness of the importance of diversified experience,advanced expertise and capabilities, and contacts andnetworks acquired through activities in fields in addition tobanking led to creation in 2021 of a system that enables
employees to work on the side. Seventeen employees
had benefited from this system as of June 2022.

Promotion of diversity, including gender equality

Promoting diversity, including gender equality
We are working to raise awareness to promote theadvancement of diverse human resources, including women.
In fiscal 2021, we conducted unconscious bias
training for all our employees (by job level) with the aim ofeliminating unconscious assumptions leading to stereotyped
gender roles.
Name of training
program[Overview]
Eligibility	Only businesses that do not have an employment contract with the sidebusiness are eligible.

Purposes[*Application for engaging in a side business must be made in advance.][Examples of eligible side jobs]
Qualifications..........Lecturing based on official qualifications such as translation,interpretation, career consulting, etc.
Internet-related.......Web designer, programmer, YouTuber, blogger, etc.
businesses
Others....................Sales of self-made products (ornaments, paintings, photographs,etc.), musical activities, etc.

[Results for female employees]

Unconscious bias training•	To eliminate unconscious assumptions concerning stereotyped genderroles and gender differences.
•	To train employees to recognize their own biased views and attitudes,
some version of which everyone has, and to take action to prevent
negative influences on others, including action to achieve gender equality.
•	To promote recognition of diverse values and ways of thinking, and toenable diverse human resources, including women, to maximize theirabilities and play active roles.
(Unit: %)FY2019FY2020

FY2021

Ratio of female employees (female employees/all employees)

39.6

39.6

39.8 As of end March

Ratio of new female employees

64.6

69.1

64.7 Number of new employees joining the Bank in April

Ratio of female managers (assistant manager level and above)

14.3

14.5

15.1 As of end March

Percentage of female managers (deputy manager level and above)

3.9

4.5

5.0 As of end March

Nanto Report 2022, the integrated report of Nanto Bank

35

Developing with Our Region

S Cultivating a Healthy Corporate Culture with Participation of Diverse Human Resources

Stakeholder Voice

Brief personal history

Fostering Human Resources with Varied
Experiences
In its efforts to cultivate “unconventional human resources,” the Bankis working to develop personnel with diverse experiences by appointing
current branch manager-level employees to serve as executives of Group
companies and transferring younger employees to regional companies andmunicipal governments. To clarify these efforts further, we spoke with Yoichi
Funatsu, who participated in the full-scale opening of Nanto Mahoroba
Securities and currently serves as director of the company.

1995 Joined Nanto Bank South Branch2010 Business Administration Department
2017 Corporate Planning Department
2018 Seconded to Nara Securities
2019	Seconded to Nanto Mahoroba
Securities

Nanto Mahoroba Securities Co., Ltd.
Director Yoichi Funatsu

Experience gained through transfer from the Bank to a securities firm
(Opening of Nanto Mahoroba Securities)
I was transferred to Nara Securities, a regional securities company, in October 2018 at the time it became a subsidiary of Nanto Bank.
I had never worked in the securities industry before, nor had I been deeply involved in the deposit asset business during my tenure at
the Bank.
As a former banker, I had no understanding of the rules, systems, or structures of the securities industry. This made opening
Mahoroba Securities something like building a company from scratch.
During the first six months of my secondment, I spent my days revamping the core securities system, but in March 2019, Nanto
Mahoroba Securities (“Mahoroba Securities” hereinafter) was successfully opened as a member of the Nanto Bank Group.
Looking back, I believe the process of opening the new company successfully in cooperation with former Nara Securities
employees and seconded employees from major securities companies was an invaluable experience I would not have had if I had
remained in the banking industry.
(Appointment of a new president from outside the Group)
In July 2020, we welcomed a new president from outside the Nanto Bank Group, and I simultaneously assumed the important
responsibilities as a director.
Since the new president had absolutely no connection with our Group, let alone to its homebase of Nara Prefecture, he felt free
to implement measures calculated to promote Mahoroba Securities’ business performance unrestricted by ties with ownership.
The process was a constant source of confusion to me personally, and I spent hours a day in discussions with the management
team with the President's wishes in mind, while also attending frequent meetings and conducting detailed explanations to the teamand staff.
When new issues arose under these circumstances, I inevitably slipped into the risk-based mindset I had acquired working in the
Bank’s Risk Management Department. In retrospect, I think I often chose “not to do” when given a choice as a result.
The President, on the other hand, views issues more deeply from various angles without preconceptions, and makes boldbusiness decisions quickly. Watching this process closely in my position as a director, I am learning firsthand about management
theory-building and strategizing.

Differences from banking business, feelings on being transferred to anaffiliated company, knowledge and capabilities acquired from the transfer(Differences from the banking business)
Although securities firms and banks are considered to be members of the same industry as “financial institutions,” their completely
different profit structures naturally generate different management perspectives.
A bank’s profit structure is that of a stock business, whereas the profit structure of a securities company, especially of a smallto medium-sized securities company rooted in the community such as Mahoroba Securities, emphasizes accumulation of daily
proceeds.
In this connection, their market is subject to extreme fluctuations in response to domestic and international conditions and trends,
making annual, semi-annual, and even daily planning difficult.
I was surprised myself at how much proceeds fluctuate daily. I also learned firsthand that the perspective on compliance is much

36 Nanto Report 2022, the integrated report of Nanto Bank

Strategies andresources allocation

stricter than I had imagined as a banker.
(Feelings on being transferred to the new company)
Mahoroba Securities is an assortment of employees from the former Nara Securities, support members from major securities firms,
mid-career hires, and people like myself on secondment from banks. All of us come from different backgrounds and consequently
have differing ways of thinking.
We sometimes clash with each other vehemently, and I have often realized during our repeated discussions that my own way of
thinking had become unconsciously entrenched.
It takes courage to act to reform existing rules and habits or to start something new.
As I was tossing about ideas with a diverse group of people, I began to free my mind and direct deeper thought to determining
the essential factors in solving an issue and the best way to achieve them, instead of immediately thinking about the risks and reasons
not to do something.
The transfer also gave me an opportunity to consider Nanto Bank more objectively. I reached the conclusion that the ability of the
Nanto Bank Group to achieve sustainable growth will require flexible thinking, unbounded by precedent, in the changing environmentthat surrounds us today. At the same time, however, my reflections led to a realization that the rigid ideas I have accumulated myself
over the years are unlikely to change right away.
I gained this awareness through the opportunity occasioned by my secondment to Mahoroba Securities, which forced me toaccept new physical circumstances in the forms of a different culture and close interactions with a diverse assortment of colleagues.
This has convinced me that providing secondment opportunities can be an effective means of creating new corporate value.
The excitement I felt at the beginning of my secondment was accompanied by sadness at the thought that I would no longer bea banker, but I now feel I would like to continue working here as long as I am allowed to do so.

How can you apply what you have learned when you return to the Bank?
I want to encourage more exchanges between the Bank and Mahoroba Securities so that more people can experience what other
employees and I have experienced on secondment.
I expect to promote initiatives to enable others to experience the excitement of the securities business, acquire broader
perspectives and higher levels of expertise, and participate in customers’ asset formation through greater cooperation between the
Bank and Mahoroba Securities.
I also want to take up the challenge of employing securities’ functions to contribute to development of our region.
I believe that if exchanges of human resources increase and cooperation between the Bank and Mahoroba Securities deepens,
we will be able to provide new services that are beneficial to our customers and the community in ways that no one could haveimagined in the past.
Nanto Mahoroba Securities Co., Ltd.
Mahoroba Securities seeks to provide customers with new value by leveraging its expertise as a securities company cultivated over its long
history and the Group’s management base in the region, and by delivering high-quality services in cooperation with the Bank.
[Overview]
Company name
Representative
Headquarters
address
CapitalShareholder
composition
Establishment[History]
Nanto Mahoroba Securities Co., Ltd.
Yuji Matsuura, President and Representative Director
Nanto Bank Saidaiji Ekimae Building 3F, 2-1-56, Saidaiji Higashimachi, Nara City, Nara Prefecture
3 billion yen
Nanto Management Service 100%
November 25, 1944

November 1944 Mahoroba Securities’ predecessor Nanto Securities established.
October 1965
Merger of Nara Securities, Nanto Securities, and Tamba City Securities companies
to form Nara Securities
October 2018
Becomes a subsidiary of Nanto Bank.
November
Becomes a wholly owned subsidiary of Nanto Bank.
March 2019
Name changed to Nanto Mahoroba Securities
Begins sales activities in cooperation with Nanto Bank.
September 2019 Becomes a wholly owned subsidiary of Nanto Management Service.**Intermediary holding company

Nanto Report 2022, the integrated report of Nanto Bank

37

Developing with Our Region

S Cultivating a Healthy Corporate Culture with Participation of Diverse Human Resources

IT Strategy and Administrative Division
Director and Managing Executive Officer

Achieving sustainable Group management will require use of digitaltechnology, organizational capabilities to respond flexibly to changes inthe environment, and development and securing of human resources tosupport these efforts.
Digital technology can not only significantly reduce the burdens on
operations that rely on manual work, experience, and intuition, but it canalso provide us with the decision-making information we need to explore
more appropriate solutions to our customers' challenges by combining
and applying various types of information.
The Nanto Bank Group is simultaneously pursuing two initiatives inthe digital technology arena: full integration of the Group’s IT, includingthat used in its branch functions, operating procedures, and paperless
operations; and maximization of convenience for customers throughdigitalization of customer services, as exemplified by cashless payments.
These efforts will reshape our cost structure to create a moremuscular corporate constitution, producing a Group that can provide
customers with value-added information and services, whether or not
the transactions are conducted in person.
While the evolution of digital technology poses some threats, suchas an increase in new entrants into banking from other industries, it also
holds immense potential for the Group. We are committed to providing
financial services that meet the diversifying needs of our customers, andto considering the full range of available options for satisfying customers
and inspiring them to choose our services.

Kazunobu Nishikawa

Enhancing the Group’s Productivity

Responding
to the SDGs

Basic Policy
Improving productivity is not an issue for customers alone, but one that the Nanto Bank Group itself should take theinitiative in addressing. That said, however, the Group continues to lag behind in digitalization of its operations.
Our plans to reduce the number of Group employees will require that we transform our operations by constructing
systems that maximize results with limited resources.
We intend to implement concrete measures to enhance the efficiency and sophistication of our operations by adding
digital technology, such as by introducing an AI-based credit management system, to replace the human resources they
had previously relied upon.

Fiscal 2022 Action Plan
Current situationand issues•	Decreased
number ofcustomers•	Progress ofdigitalization

38 Nanto Report 2022, the integrated report of Nanto Bank

Goals for achievement

Fiscal 2022 Action Plan

Effective deployment of management resources,
including strategic allocation of personnel,
by improving operating efficiency through theapplication of digital technology, etc.
Application of
information

Review of
branch functions

Upgrading of the Bank’s
internal infrastructure

Realizing anorganization thatmaximizes resultswith limited
resources

Strategies andresources allocation

Main initiatives
Application of information (AI-based credit management)

BANK	Introduction of a FinCast system that applies AI to detect business conditions
and identify deteriorating business conditions at an early stage and to create
opportunities for dialogue with customers

FinCastAnalysis
information on return
prediction detection

Review of branch functions
	Transformation of branch offices into consultation venues by systematizing andcentralizing administrative work

Customers

High counter

Low counter

Back officeTeller ATM

Reception navigation

Centralization

Branch office
workload
50% reduction

Installed at
75 branches

Upgrading of the Bank’s internal infrastructure	Creation of an environment that facilitates smooth communication withcustomers and efficient business operations (online consultation services, online
witness confirmation of intent to guarantee, etc.)	Engagement of online conferencing and other activities via individual rental smart phones

Approach
Support forearly responses

Intranet computer

Installed at all branches Trial introduction(Account opening, various notifications)at 17 branches

Smart phone

Customer liaison tablet

Reformation and transformation of branch office operations and image of the next-generation branch office
In our efforts to digitalize all our office operations, we are considering adopting the latest authentication infrastructure and digitizationof all transaction vouchers. We will effect a transformation to next-generation branch offices that deploy leading-edge technologies
to solve local issues, as exemplified by establishment of channels and AI to facilitate remote transactions by anyone from anywhere.

Past

Lobby

Customer service counter

An environment with heavy administrative
burdens on customers and staff•Customers

CenterBranch officeHigh counter
Deposits and withdrawals

Back office
Time-consuming
office work

•StaffComplicatedprocedures

Office work centeredon paper forms

Long waiting times

Procedures involving cash,
monetary instruments

Low counter
Account opening documents

Terminal operation

Current

Document circulation

Lobby

Customer service counter

Transformation to partial self-service procedures

CenterBranch office
Back officeHigh counter

Quick counter*1

QuickcounterApproximately 40% reduction in high counter
processing forms*1 Partial self-service teller window with integrated ATM
With both customers and staff handling ATM procedures together,payment and transfer slips are no longer necessary.

Low counter

Reception desk navigation*2

Reception
desk navigation

Up to 30% reduction in low counter reception time

Document circulation*2 Customer convenience has been improved by eliminating the need to fillin documents by hand and shortening processing times by changing
such processes as account opening and address change proceduresfrom paper to digital operation.

Next-generation

Lobby

CenterBranch officeHigh counter

Branch office value reform
Centralization of back office work

Elimination of branch office SBT terminals
through centralized consolidation

Use of surplus space

Low counter

OfficeScanner

Reduction of office space from 70% to 30%
Use for such purposes as consulting andlocal community activities

Digital data

*SBT: The SBT (super banking terminal) is a device used by the branch office tellers and back office staff of financial institutions.

Nanto Report 2022, the integrated report of Nanto Bank

39

Developing with Our Region

G Preparing for Increasingly Varied and Complex Risks

Risk Management Division
Director and Senior Managing Executive Officer

The environment in which financial institutions operate ischanging dramatically, and the risks they face are growing
increasingly diverse and complex. The Nanto Bank Grouphas responded by positioning appropriate risk management
as one of the most important issues for management. We
are working to enhance our risk management in order tomaintain sound management and appropriate operations,and to ensure customers’ ability to do business with us withpeace of mind.
In recognition of the inextricable linkage between
profitability and risk, we are creating a virtuous cycle toenhance both the soundness and the profitability of ouroperations. This means adopting a proactive stance andmindset to connect enhanced risk management withimproved profitability.
Our Action Plan for Fiscal 2022 places particularemphasis on strengthening credit risk management,
combating money laundering and terrorist financing, andcontrolling market risks.
These efforts will enable the Group to establish
sophisticated, highly agile risk management and governancestructures aimed at acquiring a capability of appropriately
controlling risks.

Kazuya Yokotani

Responding
to the SDGs

Reinforcing Risk Management
Basic Policy

Our efforts to strengthen credit risk management and control market risk will involve striving to achieve appropriate returns
commensurate with the risk by enhancing our risk/return management.
When it comes to combating money laundering and terrorist financing, meanwhile, we reinforced our capabilities byformulating countermeasure policies reflecting our concern that any serious violation occurring due to a lack of effective
internal controls could result in a loss of public confidence and significant damage to our corporate value.

Fiscal 2022 Action Plan
Current situationand issues•	Responding
to anuncertain
business
environment

Goals for achievement

Fiscal 2022 Action Plan

Working in today’s highly uncertain businessenvironment to build a sophisticated, highly agile
risk management and governance structure
Reinforcing credit risk
management

Implementing measuresagainst money launderingand terrorist financing

Controlling market risk

Building anorganization
capable ofappropriate risk
control

Reinforcing credit risk management
We are strengthening our credit risk management by deepening our understanding of customers’ actual conditions throughpersonal communication activities, and by providing full support for their cash management and core business operations.

40 Nanto Report 2022, the integrated report of Nanto Bank

Governance

Risks andopportunities

Performance

Initiatives to combat money laundering and prevent terrorism financing
Recent years have brought increasing demand from the international community for measures to combat money laundering andprevent financing of terrorism. In this context, we have positioned money laundering prevention as one of our most importantmanagement issues. We are working to improve the effectiveness and sophistication of our money laundering countermeasures by,for example, establishing the “Policy Against Money Laundering and Terrorist Financing” as a fundamental Group policy.
In response to the increasing complexity and sophistication of financial crimes, meanwhile, we are also striving to maintain safe,
highly convenient financial services by enhancing our preventive measures to preclude customer engagement in financial crimes.
Policy Against Money Laundering and Terrorist Financing
1. Organizational structure(1)	The Bank shall position money laundering countermeasures as one of its most important
issues for management and shall work proactively to implement these countermeasures.
(2)	The Bank shall establish a centralized management system by designating a person
responsible and a supervisory department for money laundering countermeasures andshall implement measures across the organization in cooperation with the relevant departments.
2. Risk-based approach
The Bank shall employ a risk-based approach to appropriately identify and assess money
laundering and other risks and shall implement mitigation countermeasures commensuratewith the risks.
3. Customer management policy
The Bank shall establish a system for conducting confirmation appropriately at the time oftransactions and other customer management measures in accordance with the applicablelegal and regulatory requirements. It shall also examine and analyze customer transaction
records periodically and implement necessary customer management measures.

4. Reporting of suspicious transactions
The Bank shall confirm and determine whether transactions reported by its branch offices
or detected through transaction monitoring are suspicious and shall notify the authorities
immediately if it determines that the transactions are suspicious.
5. Correspondent bank management
The Bank shall collect information on correspondent banks, assess it appropriately, and takeproper measures in response to the risks associated with it. It shall eliminate any relationships with spurious banks that have no actual business operations.
6. Management and employee training
The Bank shall conduct ongoing training programs to educate its officers and employees
fully with respect to money laundering to raise their levels of expertise and assure proper
responses.
7. Compliance auditing
The independent Internal Audit Department shall conduct regular audits of the Bank’s money-laundering prevention and related systems, and the Bank shall draw on the results of theaudits to improve its systems further.

Cyber Security Initiatives
Nanto Bank has compiled a cyber security policy to reinforce its management systems concerned with preventing cyberattacks and other threats.
[Policy on cyber security]
With threats of cyber-attacks expected to grow in number and urgency in the future, Nanto Bank recognizes ensuring cyber security as an important issue for management in
performing its role of protecting the safety of its customers and assets. The CSIRT* is directing Bank-wide efforts to compile a cyber security roadmap as a guide for use in its
ongoing activities aimed at enhancing the Bank’s readiness to respond promptly to cyber-attacks.
*CSIRT is an internal organization responsible for dealing with computer security incidents.

Market risk control
Market risks have recently proliferated in an environment of increasing geopolitical risks,
rapidly rising interest rates in Europe and the United States, and a weakening yen at home.
The significant impacts market fluctuations exert on the Nanto Bank Group’s
performance make stable, sustainable market management increasingly crucial.
We are conducting portfolio rebalancing to prepare for interest rate risk and to control
the impact of heightened market risk to the greatest extent possible by applying hedging
techniques that reduce the risk of rising interest rates and falling stock prices, while working
at the same time to build and manage a portfolio that earns stable yields.

Market sector earnings
1.28%
17.5

1.21%

17.3

2021

 ccumulation of capitalA
gains through flexible trading
practices edging against risk of risingH
interest rates and falling stock
pricesInvestment balance (unpaid balance basis)(Billions of yen)

(Planned)

1.01%

1,457.0

16.0

Market sector
earnings
Market sector yield

Planned2020

P ortfolio rebalancing to prepare
for rising interest rates

2022(Fiscal year)

40%(Billions of yen)

1,632.5

38%

Self-managed
Outsourced

60%

62%

2021

2022

(Fiscal year)

Nanto Report 2022, the integrated report of Nanto Bank

41

Developing with Our Region

G Preparing for Increasingly Varied and Complex Risks
Risk Management Systems and Conscientious Compliance
Risk management systems
Integrated risk management
Credit risk
Operational risk
To reinforce our ability to manage the risks we face in our banking business,management
management
Nanto Bank has assigned responsibility for each risk to an appropriate department
Integrated risk management systemand established the Risk Management Division to handle them in an integrated
Market risk
Liquidity risk
management
management
manner by determining the various risks’ individual positioning and magnitude andresponding to each promptly and accurately.
Administrative risk management
In our commitment to risk management, we have specified basic risk(Thorough, accurate office work)
System risk management
management policies through various directives, including our “Integrated Risk
(Response to system failures/prevention ofManagement Regulations.”
unauthorized use)
Legal risk management
To realize integrated risk management in which risks are quantified on a unified(Observance of legal compliance)
Human risk management
scale and the amount of each is controlled to an appropriate level in relation to(Response to personnel and labor problems)
Tangible asset risk management
equity capital in consideration of management strength, moreover, we determine(Response to impairment of tangible assets)
the risk capital allotment (capital allocation amount) for each type of risk semiRumor risk management(Response to false assertions circulating in theannually within the range of equity capital, and control each risk amount (value
market and among customers)
at risk = VaR, etc.) to ensure that it falls within the scope of capital. The ALM
Committee evaluates the status of each risk at its monthly meetings as part of efforts to achieve more efficient, effective
risk / return management, and systems are in place to exercise appropriate controls for ensuring management stability
and improving profitability from the perspective of effective use of capital.

Risk management organization(As of July 1, 2022)

Board ofAuditors

Board ofDirectors
Emergency countermeasures
meetings

Variousmanagement meetings(Alert countermeasures meetings)

Variouscommittees

ALM Committee

Operational Risk Management Committee

Compliance Committee

SystemRisk management system

Compliance structure

Supervisorydepartments

Risk Management Division

Compliance Control
Department

Classification(department
in charge)

Credit risk

(Risk Management
Division)

市場リスク
Marketrisk(Risk
Management (RiskManagement（リスク統括部）（リスク統括部）
Division)
Division)

Administrativerisk(Business Support
Department)
Operations
departments

Internal
Audit Division

42 Nanto Report 2022, the integrated report of Nanto Bank

法Compliance
令等遵守

オペレーショナル・リスク（リスク統括部）
Operational risk (Risk Management Division)

流動性リスクLiquidityrisk

System risk
(IT Strategy
Department)

Legal risk

(ComplianceControl
Department)

Human
resources risk
(Personnel andGeneral Affairs
Departments)

Tangible
asset risk

(Personnel andGeneral Affairs
Departments)

Reputation
risk(Corporate
Planning
Department)

Headquarters departments, sales branches, consolidated subsidiaries

Internal Audit Division(ComplianceControl Department)（コンプライアンス統括部）

Governance

Risks andopportunities

Performance

Internal auditing system
Enhancing and reinforcing our risk management will require implementing the PDCA cycle to ensure its effectivefunctioning for autonomous improvement, with the Risk Management Division and the operations departments, including
the individual offices and branches, checking and balancing each other for various risks.
The Internal Audit Division responsible for internal auditing seeks to ensure sound management and appropriate
operations by monitoring the occurrence of risks in each business, verifying their PDCA cycle functions, andrecommending improvements as necessary to promote better, stronger risk management.

Crisis management system
The Bank’s risk management systems discussed here are further augmented by its Crisis Management Plan,
accompanied by a response manual for each type of crisis, compiled to facilitate appropriate responses to crises that
may impact its business, including natural disasters such as large-scale earthquakes, system failures, and epidemics ofinfectious diseases such as the new coronavirus. In the event of a crisis, the Emergency Countermeasures Committee
or Countermeasures Headquarters gathers information depending on the degree of the crisis, and issues centralized
guidance and orders to minimize its impact on operations.
We also implement measures to ensure the Bank’s ability to continue providing customer services as a social
function maintenance provider. These include such measures as enhancing our facilities to enable continued operation,even in the event of a disaster, and ensuring the effectiveness and continuous improvement of our Crisis Management
System through crisis management drills and other measures.

Commitment to strict compliance
Compliance systems reinforcement
Compliance is a matter of unswerving observance, not only of laws, government ordinances, and internal rules, but alsoof ethical and social norms. It is imperative that banks fulfill their social responsibilities and public missions in good faith.
At Nanto Bank, we are implementing the following measures to ensure complete compliance:	Fully aware of its public mission and social responsibility as a financial institution, Nanto Bank seeks to gain the trustof its stakeholders, including its regional community and shareholders, by positioning compliance with laws andregulations as the most important issue for management. To this end, it has formulated “Basic Guidelines” and a “Codeof Conduct” as corporate policies with which all the Bank’s officers and employees are expected to comply.
	In order to define a basic framework for our compliance systems, we have clarified our stance toward compliance withlaws and regulations, not only by establishing compliance regulations but also by formulating disciplinary regulations
that show the fairness and transparency of our disciplinary actions.
	We have established a Compliance Committee chaired by the President to serve as a cross-sectional organization
within the Bank that discusses and decides important matters related to compliance, as well as a supervisorydepartment responsible for planning and supervising compliance.
	Each fiscal year, we prepare a compliance program as a concrete, practical plan for achieving compliance, after which
we investigate the program’s implementation status and make appropriate revisions.
	The Bank is pursuing efforts to optimize operation of its compliance hotline, a whistle-blower system established for
purposes of prevention and early detection and correction of violations of laws and regulations.
	We have compiled a “Compliance Handbook” to serve as a detailed guide to maintaining compliance, and we arefollowing up with efforts to foster a compliance mindset by distributing the handbook to all our management andgeneral personnel, and by holding regular group training and study sessions at every workplace.
	In accordance with our resolute attitude toward antisocial forces that threaten the order and safety of civil society,moreover, we have formulated a set of “Regulations for Dealing with Antisocial Forces, Etc.” and have terminatedrelationships with all such elements.

Nanto Report 2022, the integrated report of Nanto Bank

43

Support for Value Creation

Corporate Governance

Executive Officers
Directors
President (Representative Director)

Vice President (Representative Director)

Takashi Hashimoto

Satoshi Ishida

Apr. 1977 Joined Nanto Bank
June 1999 Manager, Kamimaki Branch
Apr. 2001 Manager, Kyoto Corporate Sales Office, Sales Management
Department
June 2002 Assistant Manager, Kyoto Sales Management Department;
Manager, Corporate Sales Office
June 2003 Manager, Kyoto Branch
June 2005 General Manager, Nanto Bank Public Affairs Division
June 2007 Executive Officer and General Manager, Personnel Planning
Division
June 2010 Executive Officer and General Manager, Sales Management
Division
June 2011 Executive Officer and General Manager, Osaka District
Headquarters
June 2013 Executive Officer, Nanto Bank
June 2014 Senior Executive Officer
June 2015 President (Representative Director) (current position)(Departments) Overall executive control, Corporate Planning Division,
Osaka Block Headquarters, responsibility for special
DX / SDGs missions
Apr. 1997 Joined Dai-Ichi Kangyo Bank, Ltd. (current Mizuho Bank, Ltd.)
July 2001 Chief of Management Guidance, Construction Industry
Division, General Policy Bureau, Ministry of Land,
Infrastructure, Transport and Tourism
Nov. 2003 Manager, Industrial Revitalization Corporation of Japan
July 2010 Director, Industrial Growth Platform Inc.
Aug. 2013 Supervisory Coordinator, General Affairs Division;
Supervisory Bureau, Financial Services Agency
July 2015 Policy Manager, Policy Division, General Affairs Planning
Bureau, Financial Services Agency
July 2016 Manager, Monitoring Planning Office, General Affairs
Division, Inspection Bureau, Financial Services Agency
July 2017 Director, Regional Financial Planning Office, Supervisory
Bureau, Financial Services Agency
Nov. 2018 Director, Industrial Growth Platform Inc.
Feb. 2019 Advisor, Nanto Bank
Apr. 2019 Senior Managing Executive Officer and General Manager,
Corporate Strategy Headquarters
June 2019 Vice President and Executive Officer, General Manager,
Corporate Strategy Headquarters (Representative Director)
Apr. 2020 Vice President and Executive Officer (Representative
Director) (current position)

Director and Senior Managing Executive Officer

Director and Managing Executive Officer

Kazuya Yokotani

Kazunobu Nishikawa(Departments) Personnel and General Affairs divisions, Risk
Management Division, Compliance Control Division,
Nara Chuwa Block Headquarters, Nara Nanwa andWakayama Block Headquarters(Departments) IT Strategy Department, Administrative Support
Department, Nara Hokuwa Block Headquarters, Kyoto
Block Headquarters

Apr. 1985 Joined Nanto Bank
June 2007 Assistant Manager, General Planning Division
Apr. 2011 Manager, Higashi-Ikoma BranchAug. 2012 Assistant General Manager, General Planning Department
June 2014 General Manager, General Planning Department
Apr. 2016 Executive Officer and General Manager, Corporate Planning
Division
Apr. 2018 Executive Officer and General Manager, Public Affairs andRegional Vitality Creation Department
Apr. 2019 Managing Executive Officer and General Manager, Financial
Market Headquarters
June 2019 Director and Managing Executive Officer, General Manager,
Operations Division
Apr. 2020 Director and Managing Executive Officer
Apr. 2022 Director and Senior Managing Executive Officer (current position)

Director and Managing Executive Officer,
General Manager, Sales Promotion Headquarters

Takeshi Sugiura(Departments) Sales Support Department, Corporate Solutions
Department, Asset Consulting Department
Apr. 1986 Joined Nanto Bank
June 2008 Manager, Kami-Koma Branch
May 2010 Senior Analyst, Credit Analysis Division, Nanto Bank
June 2011 Manager, Unebi Branch
Apr. 2013 Manager, Osaka Branch
June 2014 Manager, Sakurai Branch
Apr. 2017 Executive Officer and Manager, Sakurai Branch
Apr. 2018 Executive Officer and Manager, Tokyo Branch
Apr. 2019 Executive Officer and General Manager, Nara Chuwa Block
Headquarters
Apr. 2021 Managing Executive Officer
June 2021 Director and Managing Executive Officer
Apr. 2022 Director, Managing Executive Officer and General Manager,
Sales Promotion Headquarters (current position)

Auditors

Apr. 1986 Joined Nanto Bank
June 2008 Manager, Amagasaki Corporate Sales Office, SalesManagement Department
Sep. 2009 Manager, Amagasaki BranchOct. 2010 Group Manager, Sales Management Department, Nanto Bank
Apr. 2011 Group General Manager, Sales Administrative Division, andGeneral Manager, Nara Corporate Sales Office
Oct. 2012 Assistant General Manager, Sales Management Department
Apr. 2013 Manager, Takada Honmachi Branch
Apr. 2015 General Manager, General Affairs Division
Apr. 2017 Executive Officer and General Manager, Business
Promotion Headquarters
Apr. 2019 Executive Officer and General Manager, Corporate Planning Division
Apr. 2020 Executive Officer and General Manager, Nara Hokuwa
Block Headquarters
Apr. 2021 Managing Executive Officer
June 2021 Director and Managing Executive Officer (current position)

Director and Managing Executive Officer

Ryuichiro Funaki(Departments) Market Operations Department, Regional Business
Creation Division, Tokyo Sales Department
Apr. 1991 Joined Fuji Bank, Ltd. (current Mizuho Bank, Ltd.)
Apr. 2002 Investigator, Corporate Planning Department, Mizuho Bank, Ltd.
May 2004 ShinGinko Tokyo, Ltd. (current The Yachiyo Bank, Ltd.)
Senior Manager, Planning Group
Jan. 2009 Advisor, Industrial Growth Platform, Inc.
June 2009 Executive Officer, Howa Bank, Ltd. (Director, Sales
Administration Department)
July 2012 Principal, Industrial Growth Platform, Inc.
July 2012 Participant, Nuclear Damage Compensation andDecommissioning Facilitation Corporation
Nov. 2016 Specialist Investigator, Financial Services Agency
Apr. 2019 Advisor, Nanto Bank
July 2019 President, Nanto Consulting Co., Ltd.
Apr. 2021 Managing Executive Officer and General Manager, Sales
Promotion Division, Nanto Bank
June 2021 Director and Managing Executive Officer, General Manager,
Sales Promotion Division
Apr. 2022 Director and Managing Executive Officer (current position)

Member (full-time), Audit and Supervisory Board

Member (full-time), Audit and Supervisory Board

Naoki Minowa

Takao Handa

Apr. 1979 Joined Nanto Bank
Feb. 2001 Assistant Section Chief, Credit Analysis Division
June 2004 Assistant Manager, Credit Analysis Division
June 2005 Assistant General Manager, Credit Analysis Division
June 2008 General Manager, General Planning Division
June 2009 Director and General Manager, General Planning Division
June 2010 Director and General Manager, Business Promotion
Headquarters
Apr. 2012 Director and General Manager, Credit Analysis Division
June 2013 Member (full-time), Audit and Supervisory Board
June 2015 Managing Director
Apr. 2017 Director and Senior Managing Executive Officer(Representative Director)
Apr. 2019 Director
June 2019 Member, Audit and Supervisory Board (current position)

Apr. 1981 Joined Nanbu Bank
June 2002 Manager, Keihanna Plaza Branch
June 2004 Manager, Nabari Branch
June 2006 Manager, Osaka North Branch
Nov. 2008 Manager, Osaka North Branch and Manager, Sales Office,Osaka West Corporate Sales Department
Jan. 2009 Assistant Manager, Osaka Central Sales Department
Oct. 2009 Manager, Takada BranchOct. 2011 General Manager, Management Administration
Headquarters
June 2013 Director and General Manager, Value Development Division
June 2014 Director and General Manager, Human Resources Division
Apr. 2016 Director and Executive Officer, General Manager, Human
Resources Division
June 2016 Member, Audit and Supervisory Board (current position)

44 Nanto Report 2022, the integrated report of Nanto Bank

GovernanceOutside Director

Outside Director

Matazaemon Kitamura

Hidetaka Matsuzaka(Main concurrent positions)
President, Kitamura Forestry Co., Ltd.

(Main concurrent positions)
Chairman, Board of Directors, Aussie Capital Co., Ltd.
Advisor, Osaka Gas Co., Ltd.
Outside Director, Hiroshima Gas Co., Ltd.
Outside Director, Nishimatsu Construction Co., Ltd.

Apr. 1978 Joined Fuji Bank, Ltd. (current Mizuho Bank, Ltd.)
Feb. 1988 Director, Kitamura Forestry Co., Ltd.
Sep. 2005 President and CEO, Kitamura Forestry Co., Ltd. (current
position)
June 2016 Outside Director, Nanto Bank (current position)

Apr. 1980 Joined Osaka Gas Co., Ltd.
June 2009 Executive Officer and General Manager, Planning
Department, Osaka Gas Co., Ltd.
Apr. 2011 Managing Executive Officer and General Manager,
Resources and Overseas Business Department
June 2011 Director and Managing Executive Officer, General Manager,
Resources and Overseas Business Division
Apr. 2014 Director and Managing Executive Officer, General Manager,
Corporate Planning Division
Apr. 2015 Vice President and Representative Director
Apr. 2019 Chairman, Board of Directors, Aussie Capital Co., Ltd.
(current position)
June 2019 Advisor, Osaka Gas Co., Ltd. (current position)
June 2020 Outside Director, Nanto Bank (current position)
June 2020 Outside Director, Hiroshima Gas Co., Ltd. (current position)
June 2022 Outside Director, Nishimatsu Construction Co., Ltd. (current
position)

Outside Director

Outside Director

Shuhei Aoki

Kozue Nakayama

Apr. 1981 Joined Bank of Japan
Nov. 2003 Manager, Yokohama Branch
July 2005 Assistant Director, System Information Bureau
May 2008 Supervisor, U.S. Business Relations; Manager, New York
OfficeJune 2011 Director, Financial Markets Bureau
May 2013 Director, Bank Settlement Organization
July 2014 Director, Hitachi, Ltd.
Apr. 2020 Executive Strategist, Hitachi, Ltd.
June 2020 Outside Director, Nanto Bank (current position)(Main concurrent positions)
Outside Director, TDK Corporation
Outside Director, Isuzu Motors Limited
Outside Auditor, Imperial Hotel, Ltd.
Apr. 1982 Joined Nissan Motor Co.
Apr. 2005 General Manager, Planning Department
Apr. 2008 General Manager, Brand Management Office
Sep. 2010 Deputy General Manager, Brand Coordination Division
Apr. 2011 Joined Yokohama City Hall
Apr. 2012 Director, City of Yokohama Culture and Tourism Bureau
June 2018 President and Representative Director, PACIFICO YokohamaInternational Peace Conference Center
June 2019 Outside Corporate Auditor, Imperial Hotel, Ltd.
June 2020 Outside Director, TDK Corporation (current position)
June 2020 Outside Director, Isuzu Motors Ltd. (current position)
June 2022 Outside Director, Nanto Bank (current position)(Note)	Directors Matazaemon Kitamura, Hidetaka Matsuzaka, Shuhei Aoki
and Kozue Nakayama are outside directors as stipulated in Article
2.15 of the Companies Act, and Audit and Supervisory Board
members Takatoshi Kurahashi and Motoi Mitsuishi are outside
auditors as stipulated in Article 2.16 of the Companies Act.
	All outside directors and outside corporate auditors meet the“Independence Judgment Criteria” established by the Bank, and all
are registered with the Tokyo Stock Exchange, Inc. as independent
officers of the Bank.

Member (outside), Audit and Supervisory Board

Member (outside), Audit and Supervisory Board

Takatoshi Kurahashi

Motoi Mitsuishi(Main concurrent positions)Group Executive Officer, Kintetsu Group Holdings, Inc.
President, Kintetsu Real Estate Co., Ltd.

(Main concurrent positions)
Vice President and Representative Director, Mitsubishi UFJ Research &Consulting Co., Ltd.

Apr. 1980 Joined Kintetsu Railway Co., Ltd.
June 2012 Executive Officer, Kintetsu Railway Co., Ltd.
Apr. 2015 Executive Officer, Kintetsu Group Holdings, Inc.
June 2015 Director and Managing Executive Officer
June 2016 Director and Senior Managing Executive Officer
June 2017 Director, Senior Managing Executive Officer, Kintetsu
Railway Co., Ltd.
June 2019 Director, Kintetsu Group Holdings, Inc.
June 2019 President, Kintetsu Real Estate Co., Ltd. (current position)
June 2019 Member (outside), Nanto Bank Audit and Supervisory Board(current position)
June 2021 Group Executive Officer, Kintetsu Group Holdings, Inc.
(current position)

Apr. 1987 Joined The Bank of Tokyo-Mitsubishi, Ltd. (current The
Bank of Tokyo-Mitsubishi UFJ, Ltd.)May 2012 General Manager for Thailand and Manager, Bangkok
Branch, Bank of Tokyo-Mitsubishi UFJ, Ltd.
June 2013 Executive Officer, General Manager for Thailand andManager, Bangkok Branch
Jan. 2015 Executive Officer, dispatched to Bank of Ayudhya (VicePresident)
July 2015 Corporate Officer and Assistant General Manager, Asia &Oceania Headquarters (responsible for special missions);
Manager, Asia & Oceania Sales Department; Manager,
Singapore Branch
May 2017 Managing Executive Officer and General Manager,
Transaction Banking Division
July 2018 Managing Executive Officer and General Manager, Payment
Business Division; Assistant General Manager, Global
Commercial Banking Division
July 2018 Managing Executive Officer, General Manager, Settlement
Business Unit, Mitsubishi UFJ Financial Group, Inc.
June 2019 Vice President and Representative Director, Mitsubishi UFJ
Research & Consulting Co., Ltd. (current position)
June 2020 Member (outside), Nanto Bank Audit and Supervisory Board(current position)
Nanto Report 2022, the integrated report of Nanto Bank

45

Support for Value Creation

Corporate GovernanceCorporate GovernanceWe believe that the basis for governance is a constant pursuit of the best ways of maximizing the value
we provide all our stakeholders in our efforts to achieve the goals of the Nanto Mission and to play an
indispensable role in regional development.

Corporate Governance Structure
The Bank’s Board of Directors comprises 10 members, six internal directors who are familiar with the Group’s operations
and four outside directors who have extensive experience and knowledge outside the Bank.
This structure was adopted to separate supervision and execution and to ensure that the Board comprises memberswith diverse knowledge, experience, and capabilities.
To strengthen the supervisory function of the Board of Directors, the Nomination and Compensation Advisory
Committee has been established directly under the Board of Directors. Comprising the President, Vice President andoutside directors, the Committee is chaired by an outside director and includes knowledgeable outside experts asobservers to enhance the independence, objectivity, and transparency of decision-making.
Structure

General Meeting of Shareholders(As of end March 2022)

Board of Directors
Board of Directors members 10(Including 4 outside directors)

Nomination andCompensation Committee

4 outside directors including the Chairperson

Chairman

Outside Internal

Audit and Supervisory Board
Audit and Supervisory
Board members 4(Including 2 outside corporate auditors)

1 Female Chairman

1 FemaleOpinion-exchange session

Management Meeting

Internal Audit Division

Divisions/Departments

Ratios of outside directors and female directors

As of June 30, 2021

As of June 30, 2022

Ratio ofoutside directors

Ratio offemale directors

0%

40.0%

10.0%

Outside directors

Female directors

Outside directors

Female directors

3 of 9 members

0 of 9 members

4 of 10 members

1 of 10 members

33.3%

46 Nanto Report 2022, the integrated report of Nanto Bank

Ratio ofoutside directors

Ratio offemale directors

Governance

PerformanceDirectors’ skills matrix

Kazunobu Nishikawa

Director and Managing Executive Officer

Takeshi Sugiura

Director and Managing Executive Officer, General
Manager, Sales Promotion Headquarters

Ryuichiro Funaki

Director and Managing Executive Officer

Experience inother industries

Director and Senior Managing
Executive Officer

Human resources
development

Kazuya Yokotani

Human resources
planning

Vice President (Representative Director)

Sales promotion

Satoshi Ishida

Sales planning

President (Representative Director)

Market operations

Takashi Hashimoto

IT & digital

Current position in the Bank

Examination

Name

Risk management

Management
strategy[Full-time directors][Outside directors]
Name

Current position in the Bank

Matazaemon Kitamura

Outside Director

Hidetaka Matsuzaka

Outside Director

Shuhei Aoki

Outside Director

Kozue Nakayama

Outside Director

Regional economy

Economic andfinancial environment

Organization andgovernanceSelection of outside directors
Reasons for appointment and expected contributions

Outside Director

Matazaemon Kitamura

Outside Director

Hidetaka Matsuzaka

Outside Director

Shuhei Aoki

Outside Director

Kozue Nakayama

Mr. Kitamura has engaged in management as a corporate executive for many years. He is well-versed in overallmanagement and offers a wealth of knowledge and experience that enables him to supervise management
accurately and fairly in ways such as by drawing on his deep fund of knowledge to offer informed opinions. As
Chairman of the Bank’s Nomination and Compensation Advisory Committee, he provides leadership among
the outside directors, playing a key role in strengthening cooperation between the outside directors and the
management team.
Mr. Matsuzaka is endowed with wide-ranging experience and knowledge of corporate management andorganizational operations. His extensive knowledge enables him to supervise management accurately and fairly
in such ways as by offering opinions on management from a broad perspective. The Board of Directors expects
him to draw on his rich experience to help supervise the Bank’s management from an independent and objective
standpoint, unimpeded by the conventional confines of a financial institution.
Mr. Aoki has a wealth of knowledge and experience in every aspect of the financial industry, which has prepared
him to supervise management accurately and fairly in such ways as by sharing his opinions with managementfrom a broad perspective. He can be expected to fulfill the duties of outside director by drawing on his extensive
knowledge and experience in the financial field to provide accurate advice, and to supervise the Bank's
management from an independent, objective standpoint.
In addition to her extensive experience as a corporate executive, Mrs. Nakayama currently serves as outside
director and outside corporate auditor for three listed companies. She was appointed to the position of independent
outside director because of her wealth of knowledge and deep insight. She is expected to apply her diverse range
of knowledge and experience to contribute to regional development and to provide advice on the Bank's efforts topromote diversity, as well as to supervise the Bank's management from an independent, objective standpoint.

Nanto Report 2022, the integrated report of Nanto Bank

47

Support for Value Creation

Corporate GovernanceCorporate GovernanceOperational status of the Board of Directors
The Board of Directors is responsible for making important decisions promptly in our highly uncertain operating
environment as well as for supervising management. To enhance the effectiveness of these functions, the Board seeks to
improve its deliberations, particularly with respect to outside directors and outside corporate auditors, by explaining thematters to be deliberated in advance of meetings of the Board of Directors.
The Board of Directors holds opinion exchange meetings, moreover, to discuss important management issues andmedium- to long-term themes after resolutions are made and reports compiled. The directors engage in lively discussions
at these meetings, especially the outside directors, who offer their opinions from various perspectives.

Number of Board of Directors meetings and main subjects of discussion
Board of Directors Meeting Chairman President

Times convened 12

Main items for deliberation• Action plans for the current fiscal year based on the Management Planand monitoring of progress• Initiatives to address issues related to sustainability• Ensuring diversity in core human resources

Opinion-exchange session

Chairman President• Construction of a new main building and reorganization of the branch network• Review of shareholder return policy• Evaluation of the Board of Directors’ effectiveness and follow-up activities

Times convened 8

Main issues discussed• Current status and issues of the Bank with respect to therevised Corporate Governance Code• Reconsideration of interim targets in the current Management Plan

• Response to the revised Principles for Customer-oriented Business Management• Status of new business initiatives

Number of Nominating and Compensation Advisory Committee meetings and main advisory matters
Nomination and Compensation Committee

Chairman Matazaemon Kitamura (Outside Director) Times convened 7

Main consultation contents• Proposals of candidates for the Board of Directors to be presented to theGeneral Meeting of Shareholders• Formulation of the skills matrix required for Board of Directors’ membership• Review of the directors’ compensation system, including introduction of
performance-linked compensation• Policy on determining compensation, etc., for individual directors

Compensation for directors
The Bank has established the following policy for determining the content of compensation, etc., for each individual
director (“determination policy” hereinafter).

Basic policy he compensation system is designed to encourage directors to conduct management from a medium- to long-termTperspective, and to enhance their awareness of their duty to contribute to improving the Bank’s performance andincreasing its corporate value over the medium to long term. As a basic policy, compensation for each director shall be
set at an appropriate level determined by the Board of Directors once a year following deliberation and reporting by the
Nomination and Compensation Advisory Committee.
More precisely, directors’ compensation comprises fixed monthly compensation and performance-linked stock-based
compensation, while compensation for outside directors, whose responsibility is limited to a supervisory function,
comprises only monthly compensation determined in consideration of their duties.

Total amounts and types of compensation paid to the Bank’s directors and corporate auditors
Classification

Number ofrecipients

Eligible directors(excluding outside directors)

11

Total
compensation, Total fixedetc.
compensation

232

210

Total variable
StockBasic
Basiccompensation compensationcompensationcompensation
stock options

206

3

22

22

Bonuses—

Retirement
benefits—(Notes) 1. Total compensation includes 24 million yen in deferred compensation accrued during the current fiscal year.
2.	The Bank has introduced performance-linked stock compensation for directors (excluding outside directors and non-residents of Japan). Performance-linked compensation here is the amount recorded as expenses for the fiscal year under review.
3. Stock-compensation stock options were discontinued as of August 31, 2021.

48 Nanto Report 2022, the integrated report of Nanto Bank

Governance

Performance

Evaluation of the Board of Directors’ effectivenessSince fiscal year 2016, the Bank has followed a policy of conducting an annual analysis and evaluation of the effectivenessof the Board of Directors.
The table shows the progress made in addressing issues identified in the previous year, as well as the methods andresults of the evaluation of the Board of Directors’ effectiveness in fiscal year 2021.
Progress in addressing issues identified in the former year’s evaluation of theeffectiveness of the Board of Directors(1)	Deepen discussions at Board of Directors meetings on strategies that willcontribute to medium- to long-term improvement of corporate value
Action plans, new businesses, etc., were discussed at several Board of
Directors meetings as well as at opinion-exchange meetings.
(2)	Further review of the operation of the Board of Directors meetings to deepen
discussion
Representatives of the divisions responsible are also present at the
preliminary explanatory meetings for outside directors to explain the thinkingof the executives, which provides the basis for discussion at Board of
Directors meetings, and the process leading to the submission of proposals.
(3) Enhancement of executive training to revitalize the Board of Directors
The Bank has formulated a plan for annual executive training and held study
sessions for newly appointed directors and outside officers in addition tothematic study sessions for all internal executive officers on matters such
as TCFD compliance by financial institutions and money laundering andterrorist financing countermeasures introduced as a follow-up to the FATF
examination.
Evaluation method
In fiscal 2021, the Bank conducted an evaluation of the effectiveness of the Bank’s
Board of Directors as discussed below based on the results of a questionnaire
compiled and analyzed by an external consultant.
(1)	In February 2022, a questionnaire was sent to all the directors (9) and all the
corporate auditors (4) regarding the composition, operation, and deliberations of
the Board of Directors ("FY2021 Questionnaire").
(2)	At a Board of Directors meeting on April 28, 2022, the results of thequestionnaire and the external consultant’s analysis were reported along with
the issues for the Bank and their causes (hypotheses) they revealed. Initiatives
to be implemented in response were discussed.
(3)	At a Board of Directors meeting on June 17, 2022, the Bank finalized its
evaluation of the effectiveness of the Board of Directors for fiscal 2021.
The main items included in the questionnaire for fiscal 2021 are as follows. Eachquestion in the questionnaire is designed to be rated on a 5-point scale. Starting in thecurrent fiscal year, comments must be included for each main item.
I. Composition and operation of theBoard of Directors
II. Management and sales strategies
III. Corporate ethics and risk
management
IV. Performance monitoring

V. Dialogue with shareholders
VI. Nomination and compensation ofmanagement
VII. Improvement of previous year’s
issuesSummary of FY2021 Questionnaire analysis and evaluation results
The Board of Directors discussed the results of the external consultant's analysis of
the FY2021 Questionnaire and confirmed that, on the whole, the Bank's Board of
Directors operates appropriately and ensures effectiveness, with examples including
mention of certain issues that had been addressed in the previous year. We recognize,
however, that there is room for further improvement, including addressing the issues
raised in the previous year.
<Issues identified in the questionnaire results>
Atmosphere of the Board of Directors and training of directors and auditors
Formulation and monitoring of management strategies
Promotion of DX and the SDGs
Feedback from investors

Future Initiatives
As a result of discussions held by the Board of Directors concerning issues identified
from the results of the FY2021 Questionnaire, the following initiatives will be
implemented in fiscal 2022 to enhance the effectiveness of the Board of Directors
further.
<Initiatives for fiscal 2022>E nhanced strategy formulation and monitoring by the Board of Directors tocontribute to medium- to long-term improvements in corporate value
Further improvement of Board of Directors’ operations to deepen discussions
Enhanced training for Board members to revitalize the Board of Directors

The corporate auditors’ perspective on sustainable management
Last year’s revision of the Corporate Governance Code has positioned “sustainability” (medium- to long-term sustainability, including ESG factors) as animportant management issue for enhancing corporate value over the medium to long term. The Board of Directors recognizes that addressing this issue will
not only reduce risk but will also create new profit-earning opportunities. It will be important to promote more aggressive measures to address this issue.
The important roles and responsibilities the corporate auditors and Board of Corporate Auditors are expected to perform should not be overly narrow.
The scope of our responsibility should include proactively exercising our authority, in addition to performing such “defensive functions” as conducting
operational and accounting audits, by expressing our opinions appropriately at Board of Directors meetings or in discussions with the management team. We
corporate auditors are charged with following these guidelines.
In our activities as corporate auditors based on these guidelines, we are expected to express our opinions appropriately and proactively and to discussmatters more deeply with management, not only from the perspective of risk management but also from the perspective of business creation in various
situations, including Board of Directors and management meetings, to achieve our goal of realizing sustainable management in cooperation with the regional
community. We are stiving to express our opinions and discuss issues in greater detail proactively in an appropriate manner.
In response to this increased emphasis on the supervisory function of the Board of Directors and the greater role of outside directors, meanwhile, we
auditors have a clear need to strengthen cooperation among the outside directors, corporate auditors, and Board of Corporate Auditors. We intend to create
more opportunities for dialogue with outside directors to discuss a wider range of issues from a broader perspective than ever before.
We are confident that these efforts will not only strengthen the Bank’s governance but will also contribute to providing a higher level of value forstakeholders.

Member (full-time),
Audit and Supervisory Board Naoki Minowa

Member (full-time),
Audit and Supervisory Board Takao Handa

Member (full-time),
Audit and Supervisory Board Takatoshi Kurahashi

Member (full-time),
Audit and Supervisory Board Motoi Mitsuishi

Nanto Report 2022, the integrated report of Nanto Bank

49

Support for Value Creation

Corporate GovernanceOutside Directors’ Forum

We make full use of our diverse range of experience andknowledge in proactively providing recommendations andadvice to support the Group’s growth and to ensure that it ison the right track to the next generation.
What management issues require resolution if the Nanto Bank Group is to grow with the community as a first-stop bank? How do you
evaluate the response of the Group’s governance to the need for further reinforced governance? We asked the three outside directors toshare their views on these issues from a wide range of perspectives, including their own experiences and responsibilities.

Outside Director

Shuhei Aoki

Outside Director

Matazaemon Kitamura

Outside Director

Hidetaka Matsuzaka

Primary focuses as outside directors over the past year

Developing human resources and succession planning, and encouraging business model reform
Kitamura: I joined the Board of Directors in 2016, and I also serve as Chair of the Nomination and Compensation
Committee, which was established in September 2020. The Committee, a majority of whose members are outside
directors, is tasked with ensuring transparency in the discussion process.
I have held discussions with the other Committee members on design of a performance-linked compensation
system for the Group, and on determining the qualities the directors should possess or, in other words, establishinga skills matrix. In fulfilling our responsibility of nominating directors, moreover, we outside directors seek to evaluate
candidates’ awareness of the issues involved in determining the proper nature of the Bank objectively. This is thecontext for my comments.
Matsuzaka: I believe that the Nanto Bank Group is implementing more innovative measures in its governance thanother regional banks, including inviting management personnel to join it from outside the Group. In this connection, thethings I have been emphasizing at every opportunity over the past year, based on my own experience in corporate andorganizational management, are the importance of human resources development and visualization of information.
I have encouraged management to set high expectations so that the Group can reach even greater heights. I wantthem to ask how we can differentiate our business model from that of other financial institutions. In other words, I am

50 Nanto Report 2022, the integrated report of Nanto Bank

Governanceconcerned about the position the Nanto Bank Group should take and the best ways of developing human resources
over the medium to long term in order to realize reforms. When it comes to human resources development, it isparticularly important to cultivate personnel in every generation with diverse experiences, something that cannot be
achieved through training programs and OJT alone.
Kitamura: The Nomination and Compensation Committee feels similarly challenged. One important future role for us
will be to formulate a succession plan. In this uncertain business environment, we hope to develop and construct asystem of nurturing future executive candidates who can make and implement appropriate management decisions onregional development as leaders of the Nanto Bank Group.
Aoki: I have two main impressions of Nanto Bank. First, I feel the Bank is setting a steady, prudent course. The otheris that it is determined to reform itself. These seem to me to be opposing characteristics. It is only natural for a bankto take a prudent approach to management, but there are in fact many banks that are overly fearful of risk and slow toreform due to their determination to maintain ultra-safe operations. Today’s Nanto Bank, by contrast, is showing strong
determination to pursue the dual goals of “safety” and “reform” simultaneously. This strikes me as a wonderful thing.
I try to advise a balance between “safety and stability” and “reform and efficiency” at Board meetings to encourage
the Nanto Bank Group to maintain this management posture. My particular focus is on reform of the business model.
It seems to me that, however much time and energy the executive team invests in developing new businesses as aregional bank, the banking culture’s emphasis on safety over change persists, with the result that the requisite boldness
and speed of reform have not yet been achieved.
In pursuing these activities as an outside director, I have benefited immensely from my experience in market andsettlement system restructuring at financial institutions and in business model renovation in the manufacturing industry.
There are so many situations today in which my experience is not applicable, however, that I realize I have to takespecial care not to neglect learning new things.

Challenges for operation of the Board of Directors

Developing a new framework to put “soul” into the Board of Directors
Kitamura: We receive advance briefings before the Board of Directors meetings. These preliminary explanations
enable us to confirm the thinking of the executive team and the process leading to its proposals to the Board. This
helps to invigorate the meetings.
Aoki: The Board of Directors meeting is a forum for confirming the careful, thorough execution of business by the
management team as well as for providing it with guidance in its efforts to maximize profits. Improving the functions of
the Board of Directors further will require it to acquire “form” and “soul” itself. First, the “form” of the Board of Directors
should include members with various backgrounds in order to assemble expertise and experience directly or indirectly
related to bank management as well as to access the opinions of people of different genders and various ages. It
would also be effective to include outside directors and officers who are briefed in detail in advance and primed for the
Board meetings so that the meetings can serve as forums for the exchange of ideas. The Bank is in the process ofsteadily adopting a form of this kind.
Matsuzaka: That's right. I appreciate the Bank’s efforts to shift the emphasis from form to substance, in such ways
as by providing prior explanations of proposals to be presented in upcoming Board of Directors meeting and byemphasizing discussion at opinion-exchange meetings. The Bank has also introduced effectiveness evaluations incooperation with external organizations, and I believe it is drawing on the results of these evaluations to establish
various committees and determine the proper composition of a Board of Directors with awareness of the issues
involved. The crucial role of the Board of Directors is to discuss management plans and risk management inconsideration of current conditions with a view to the goals of the Nanto Bank Group, however, and to communicate
the direction of these plans clearly, both internally and externally.
Kitamura: I agree completely. The current business environment involves a complex combination of uncertainties,
including geopolitical risk, market risk, and systemic risk, and the importance of finding ways to control these factors
appropriately is intensifying. I believe the Board will need to discuss these issues more deeply in the future.
Matsuzaka: No doubt about it. If we are to promote more in-depth discussions in the limited time available at themeetings, I think it will also be important to create an environment that enables outside directors to share information about
the Bank on a regular basis, in such ways as by making the contents of discussions concerning Board meeting proposals
conducted at management meetings available through a portal site dedicated to meetings of the Board of Directors.
Aoki: I agree with both your observations. In addition to these, I mentioned the “form” of the Board of Directors earlier,but I believe that the most pressing issue is the “soul” of the Board. If the executive team repeats and defends the

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51

Support for Value Creation

Corporate Governanceconclusions reached at management meetings, it will be difficult to consolidateand benefit from diverse ideas. For the Board to conduct wide-ranging
discussions and make fully informed decisions, it is essential that the executive
team and directors talk with each other informally on a regular basis to create
conditions in which both sides are aware of the ideas behind the explanations
and statements as well as of the relevant facts. I am informed that the membersof the Executive Committee now intend to create a forum for free discussionof various management issues outside the Board of Directors. I look forward
to the development of this new framework that will give “soul” to the Board of
Directors.

Human resources development and diversity initiatives

The crucial need to create a culture and structures that enhance the Board’s effectiveness
Kitamura: If the Group is to continue contributing to customers and the regional community as the roles it is expected
to play change, it will need to adopt flexible thinking that is not bound by conventional frameworks. It will also require
an organization that permits personnel who embody this flexible thinking to play an active role.
Matsuzaka: I have been speaking about the importance of human resources development because I see a tendency
for the Nanto Bank Group to focus too much on short-term performance.
It has assembled a group of unconventional people with high potential, but they are not always fully prepared torespond adequately to changes in the times and the social environment. It is ultimately the Bank’s human resources
capabilities that differentiate it from other financial institutions. I feel that the key to winning the appreciation ofcustomers is to become a group of people with broad perspectives who have acquired a wealth of experience outsideof banking to add to their banking experience.
Since developing human resources is a time-consuming process, it will be necessary to change the Bank’s
corporate culture to enable employees to gain new job capabilities and experience in other fields without focusing
on their immediate performance. As I mentioned earlier, it is important to increase the diversity of every generation of
employees. This means establishing systems that enable employees to gain experience outside the bank, not only
by seconding branch managers, but also by giving younger employees more opportunities to be seconded to otherindustries or government agencies. Encouraging side jobs is another good way of broadening the experience of theBank’s human resources.
Kitamura: Efforts are under way to create an environment that makes it easy for the Bank’s female employees toremain active after pregnancy and childbirth, including provision of childcare leave and support for their return to work.
The fact that the banking industry attracts a relatively high number of female employees makes it all the more important
for the Group to expand these efforts further and develop more possibilities for women in management positions if is tocontinue to grow.
Aoki: Human resources policies such as cultivating unconventional human resources, promoting more active roles for
women, and making use of external human resources are all aimed at manpower diversification. In a steadily growing
economy in which a company can grow without changing, uniformity in human resources can be beneficial. In thecurrent situation, however, in which economic growth is no longer easy and the environment and customers’ goals
are changing rapidly, employing human resources with diverse thinking and DNA can be a trump card for corporate
growth and survival. Of course, the process of developing and maintaining diversity is
costly. Not only does it complicate the organization’s operations and human resourcesmanagement, but it takes time and effort to set the stage properly.
Acquiring and maintaining a diverse workforce will require the Bank to develop
new recruitment strategies and enhanced training programs, for example, as well as toconduct a thorough review of its performance evaluation and compensation structures.
Opportunities for unstructured discussion between the outside directors and theexecutive team will also be necessary to create a stronger sense of unity between
them. Although it takes considerable time and effort to achieve and maintain diversity,
however, changes in the business environment are inevitable. The Nanto Bank Groupis moving in the right direction with respect to human resources diversification, but I
believe the time has come to accelerate its progress in realizing diversity.
Kitamura: Yes, that’s right. But it is also important to mention the need to provide

52 Nanto Report 2022, the integrated report of Nanto Bank

Governancecommensurate treatment for specialists and outside personnel who can play an active role immediately by applying
capabilities they have that cannot be acquired through work experience within the Group. It will also be necessary torevitalize the organization and motivate the employees, considering that the commendation system and personnel
evaluation system are matters of particular interest for our times.
Matsuzaka: To enhance the effectiveness of these efforts, it will be essential to create a corporate culture in which
everyone is free to express their opinions and ideas on management issues. As the Bank’s human resources develop,
the speed and level of their work will increase, and their productivity will improve. It will be essential to keep this positive
cycle going.

The Nanto Bank Group’s involvement in the regional economy

Toward realization of sustainable management in cooperation with the regional community
Kitamura: The strength of a regional bank stems from the relationship of trust it enjoys with its customers, and the
Nanto Bank Group seeks to be a first-stop bank that regional customers turn to whenever they have needs. The Bank
believes that its role and responsibility in the local economy include employing its extensive network to help customers
with any issues or concerns that cannot be resolved within the Group alone.
Matsuzaka: As the Nanto Bank’s market share of approximately 50% in Nara prefecture suggests, the reginal
economy is the very foundation of its business. At the same time, the Bank’s stable business operations, including its
provision of appropriate business support for customers, is contributing to development of the regional economy.
Aoki: The banking industry is built on relationships of trust in which banks and their customers trust each other inmonetary transactions. If customers’ need for loans decreases due to a slowdown in economic growth, however,the banks’ profitability and therefore their creditworthiness are also subject to decline. Regional banks consequently
have an urgent need to cultivate profitable new businesses that benefit the local economy. One example in the areaof corporate transactions is services that undertake the whole range of backyard operations for small and mediumsized companies. Thus, while banks trust customers to take out loans, customers rely on them to undertake various
administrative tasks that contribute to development of the regional economy. This mix of services will provide the basis
for the relationship between the Nanto Bank Group and the regional economy going forward.
Kitamura: In its pursuit of sustainable management developed in cooperation withthe regional community, the Nanto Bank Group has set a goal of increasing Naraprefecture’s GDP, a key indicator of the region’s economic strength. To achieve thisgoal, it will need to accumulate a range of stable operations, such as consulting
functions and functions that attract companies from outside the prefecture.
Development of Nara prefecture’s economy will require proposing high-level solutions
to every aspect of the challenges involved, from support for large-scale projects led by
the government and others to solutions for individual business customers.
Matsuzaka: I see the increase in GDP you referred to as emblematic. In addition toits effects on individual businesses, GDP growth involves synergies among various
businesses as well as effects over time, or areas of growth and decline over time,making it extremely difficult to identify direct cause-and-effect relationships between
individual businesses. In this connection, I consider it possible to contribute to regional
revitalization by leveraging the Nanto Bank Group’s high regional market share and strong ties with government
agencies to create structures for services for the elderly as well as to incorporate the SDG perspective.
Aoki: In the world of retail transactions, sophisticated services employing smartphones are multiplying, led by digitalbanks established by distribution companies. Although there are problems in dealing with customers who are notsmartphone users, regional banks will need to provide full-fledged digital services as soon as possible or risk losing
their deposit bases all at once. In the digital world, moreover, the term “regional” will lose its geographical significanceand become disengaged from geographical locations. “Home base” will lose its geographical significance in much thesame way. In this environment, the Nanto Bank Group will maintain a focus on frontiers extending beyond the boundsof its regional economy.

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53

Support for Value Creation

Stakeholder Engagement

Initiatives to improve engagement with stakeholders

Engagement with customers
Customer-oriented business operations
Committed to conducting business in the best interests of our customers, the Nanto Bank Group* has established apolicy and action plan for customer-oriented business operations.
The Policy for Customer-oriented Business Operations is a concrete expression of our commitment to contributing
to customers’ stable asset formation in our sales of financial products. We will put this policy into practice, establish
indicators (KPIs) to confirm the results of these efforts, and review and disclose the results periodically.
* Group companies subject to the KPI: The Nanto Bank, Ltd. and Nanto Mahoroba Securities Co., Ltd.

1. Pursuit of customers’ best interests(1) W e consider it to be in the best interest of our regional customers to nurture their assets, and we strive to conduct ourbusiness operations in an honest, fair manner in full compliance.
(2) In our commitment to providing high-quality products and services, we seek to enhance our consulting methods throughdevelopment of highly specialized human resources and strategic deployment of our Group companies’ capabilities.
(3) W e work to achieve stable growth as well as regional and customer development by maintaining close, long-term
relationships with as many customers as possible and helping them realize their life plans.
2. Prevention of conflicts of interest that may unfairly impair customers’ interests(1) We manage conflicts of interest appropriately to ensure that our customers do not suffer any disadvantage as a result.
(2) The Bank has compiled a Conflicts of Interest Management Policy* to identify and categorize transactions that may unfairly
impair customers’ interests, and has established an integrated conflict of interests management system for all its Group
companies.
* URL: https://www.nantobank.co.jp/riekisouhan/

3. Clarification of fees, etc.
(1) A s concerns fees and commissions of any kind to be borne directly or indirectly by customers and remuneration received
by the Bank from financial product providers or others, the Bank explains the fees and remuneration and the type of service
provided in detail in an easily understood manner.
4. Easily understood provision of important information(1) Since the information customers already have differs from person to person, we explain the important information* requiredby individual customers in detail while checking the customer’s level of understanding.
* Important information includes risks, returns, and costs of products and services, availability of a cooling-off period, conditions for redemption or cancellation, target
customers for the product concerned, and reasons for our determination that a proposed product is best suited for the present customer in light of the customer’s
intentions and needs as well as the particulars of any potential conflicts of interest with the customer and their possible impact on transactions and business operations.

5. Provision of services appropriate to customers(1) W e draw on knowledge acquired through dialogue with customers to support their asset development by providing optimal
financial products and services tailored to the individual.
(2) W e provide financial education and seminars to improve customers' financial knowledge.
(3) W e take care to provide detailed after-sales services to encourage customers to continue doing business with us over thelong term.
6. Efforts to motivate employees and establish a customer-first corporate culture(1) We educate all our executive officers and employees to share and practice a customer-oriented mindset and to reflect this in
our corporate culture.
(2) Among efforts to motivate employees, we have introduced a performance evaluation system that recognizes initiatives that
truly meet customers’ needs and interests.

54 Nanto Report 2022, the integrated report of Nanto Bank

Business model

Performance

Community engagement
Crowdfunding
The Nanto Bank Group interconnects the diverse future aspirations of individuals, organizations, and communities bydeploying crowdfunding to meet customers’ financing needs.
In the past, we have mainly devoted the funds to shrines and temples, but we are accelerating our support for local
arts, hospitals, food and beverage providers, and tourism facilities.
Results
Fiscal year Number of cases
2020

2021

2022

(as of July 15)

1

6

3

Amount raised(thousand yen)

Crowdfunders (titles omitted)

Nanto Bank

17,182 Religious Corporation Shorinji Temple (first round)
Religious Corporation Shorinji Temple (2nd round)
Shorinji Temple Religious Corporation (3rd round)
Religious Corporation Myohoji Temple (Daishisanji Temple)
88,033 Religious Corporation Kongosanmai-in Temple
Religious Corporation Daianji Temple
General Incorporated Association Natsukashii Mirai Creator
Certification Association
Religious Corporation Horyuji Temple
147,400 Religious Corporation Saidaiji Temple
Yamatokoriyama City Watamachi Nicoichi Tenement ProjectConsultation

Customer
introduction

Business alliance

Introduction of
crowdfunding companies

Crowdfunding
operator

Customer(crowdfunding
company)

Concept
publication

Crowdfunding site

Funds

Supporters

Returns

Donations using trusts

Nara Prefecture

Agreement signatories (as of March 31, 2022)

Municipalities

To meet the need for donations of inherited property to local
governments and others, we have concluded an “Agreement
on Donations Through Trusts Instead of Wills” with 36
municipalities, five educational institutions, and various otherorganizations. Use of the Nanto Anshin Todokeru Trust for
Family Happiness (donation course) enables heirs to donate a
portion of their inherited property to municipalities, educational
institutions, and other organizations with which agreements
have been concluded without creating a will.

Asuka Village

Ando Town

Oyodo Town

Kashiba City Katsuragi City Kawai Town Kawakami Village Kawanishi Town

Ikaruga Town

Kanmaki Town Koryo Town

Gojo City

Shimoichi Town Shimokitayama Village Soni Village
Totsukawa Village

Nara City

Ikoma City
Gose City

Uda City

Oji Town

Sakurai City

Sango Town

Tawaramoto
Takatori Town
Town

Tenri City

Higashiyoshino Village Heguri Town

Miyake Town Yamazoe Village

Yamatokoriyama City Yamatotakada City Yoshino Town
Kizugawa City Seika Town
Kyoto Prefecture Ide Town
Religious
Corporation
Kinpusenji
Temple, Social Welfare Corporation Nara Prefectural Council of Social
Educational
Welfare, Public University Corporation Nara Medical University, National University Corporation Nara
institutions, etc. Institute of Science and Technology, Religious Corporation Horyuji Temple

Nanto Anshin Todokeru Trust for Family Happiness [donation course] Product plan
(1) At time of application(2) In the event of inheritance
Product application

Nanto Bank
(trustee)Trust foundation
management

Agreement

ApplicantNanto Bank

(trustee and beneficiary)(trustee)

Conclusion of trust
agreement
Communication of
Designation
application details

Notifier of death

Municipality, etc.

* In principle, theapplicant’s designatedheirs(second beneficiary)

Notification of death
Agreement

Payment of trust funds

Municipality, etc.
(second beneficiary)

Notifier of death* Donations under this agreement will be made using the “Family Happiness” product Nanto Anshin Todokeru Trust.
For product details, please refer to the pamphlet “Nanto Anshin Todokeru Trust for Family Happiness.”.

[About the Bequest Donation System]
We have expanded our services related to inheritance issues by concluding agreements with 16 municipalities and 14 educational institutions to participate in our bequest
donation system.
When a donation is made by bequest to a municipality, educational institution, or other organization that has concluded an agreement with the Bank, our specialized staff areprepared to provide support for the preparation of wills and other documents concerned with bequests and inheritances to facilitate realization of the bequest applicant’s wishes.
Ikoma City, Kashiba City, Kawai
Town, Kawakami Village, Kawanishi
Town, Kammaki Town, Sango
Town, Tawaramoto Town, Tenri
City, Nara City, Yamazoe Village,
Yamatokoriyama City, Yamatotakada
City, Ide Town, Kizugawa City, Seika
Town

Educational
institutions, etc.

Municipalities

Agreement recipients (as of March 31, 2022)
National University Corporation Kyoto University, Public Interest Incorporated Foundation Kyoto University iPS Cell Research
Foundation, Religious Corporation Kimpusenji Temple, Educational Corporation Tezukayama Gakuen, Educational
Corporation Tenri University, Public Interest Incorporated Foundation Tenri Yorozu Consultaion Center, Educational
Corporation Doshisha, Social Welfare Corporation Nara Prefectural Council of Social Welfare, Public University Corporation
Nara Medical University, National Institute of Technology Nara College, National University Corporation Nara Women's
University, National University Corporation Nara Institute of Science and Technology, Incorporated Administrative Agency
Nara National Institute of Cultural Properties, Religious Corporation Horyuji Temple

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55

Support for Value Creation

Stakeholder Engagement

Strengthening contacts with the community through social contributions
Promotion of financial and economic education

SDG seminar

We provided on-site work
experience classes and work
experience for local junior highschool students to help themacquire basic knowledge about
monetary matters.

We endorsed the efforts of SDGs Land
- Mirai Akaruku, an event for younger
elementary school students organized by
the Nara Junior Chamber of Commerceand Industry to raise awareness of theSDGs and organized an exhibit at theevent.
Approximately 1,500 people attended
the event and deepened their understandingof the SDGs with their families.

Nanto Scholarship Society

Cherry Blossom Preservation Society

The Magokoro no Issatsu Campaign

The Nanto Scholarship Society
offers scholarships for highschool and university studentsof outstanding character andacademic ability who reside in Nara
Prefecture. As of March 2022, thesociety had provided scholarshipsupport for 1,461 students since its
establishment in 1964.

The Bank participates as a special member of the
Yoshino Cherry Blossom Preservation Society, which
was established cooperatively by the public andprivate sectors to protect the Shiroyama Sakura
cherry trees (approx. 30,000 trees) on World Heritage
Site Yoshino Mountain (Yoshino-cho, Nara Prefecture),
which have shown signs of remarkable deteriorationin recent years. As a regional financial institution,
Nanto Bank cooperates actively with efforts to protect
and nurture Yoshino’s cherry trees by such means as
dispatching volunteer staff to various related events.

Each year, the Bank donates books contributedby its executive officers and employees to the
Nara Training School for Juvenile Delinquents for
distribution as Christmas presents.
This activity has been conducted since 1987
as part of our Magokoro no Issatsu Campaign
for the purpose of contributing to the emotional
education of young boys.
Besides recent popular works, the donatedbooks include dictionaries, reference books, andother resources of high value for education.

Donations to the Nanto Manyo Charity Walk
Since the 70th anniversary of the Bank’s founding in 2004, we have made annual donations to the Nanto Manyo Charity Walk to improve thewelfare of residents of our regional community. Despite the cancellation of the walk to help combat the coronavirus in 2021, our donation
was in the amount of 600,000 yen, unchanged from the previous year. The donations contribute to the operation of a children’s cafeteria andthe activities of volunteer groups.

Engagement with employees
Awareness raising
Unconscious bias training was conducted for all the Bank’s executive officers and employees with the aim of countering
attitudes concerning gender-based roles and other unconscious assumptions.
System improvement
As of April 1, we established a new maternity leave system for male employees and a fertility treatment leave system aswell as expanding our childcare support systems.
Name

Overview of the systems[Newly established systems]
Male employee maternity leave system

Up to four weeks of paid childcare leave to be taken within eight weeks of the birth of a childFertility treatment leave system

Employees undergoing treatment for infertility are eligible for paid leave totaling up to 12 days a year.

[Expansion of various childcare support systems]
Extension of the period during which employees can benefit fromsuch systems as shorter working hours related to childcare support

Employees raising a child up to junior high school age may work shorter hours.

Expansion of the family support leave system

Employees are eligible for five days of paid leave before and after the birth of a child (grandchild).

Expansion of the child nursing leave system

Employees who are caring for a child up to junior high school age may take five days of paid leave to care for the child.

Staff survey implementation
In its search for measures to improve management’s engagement with employees, the Bank gathered a wide range ofthoughts reflecting diverse values from its employees to help it visualize the issues in its organization and working environment.

56 Nanto Report 2022, the integrated report of Nanto Bank

Business model

Performance

Engagement with shareholders
Investor relations (IR) activities
The purpose of IR activities is to provide information shareholders and investors need to make investment decisions in atimely, continuous, and fair manner as a means of ensuring appropriate evaluation of companies in the capital markets.
The Nanto Bank Group employs IR activities to explain its management strategies and financial results to its stakeholders.
In fiscal 2021, the following initiatives were implemented through Web conferencing and teleconferencing due the spreadof the new coronavirus.
[IR Calendar]
July 2021
July
October

Integrated report issued.
Publication of disclosure supplement (document volume)
Annual report (English) published.

DecemberFiscal 2021 interim results briefing (large-scale in-person meeting) convened.

June 2022

Fiscal 2021 full-year results briefing (large-scale meeting) streamed live.

June

134th Ordinary General Meeting of Shareholders

IR meetings

Publication of management information

Large meetings fordomestic and foreign
institutional investors
and analysts are held
twice a year.
We also hold in-person
and other meetings asneeded.

In addition to theabove presentationsof management
information, we
publish an integrated
report and a minidisclosure magazinethat introduce theGroup’s initiatives.

General Meeting of Shareholders
The 134th Ordinary General Meeting of Shareholders was held at Hotel Nikko Nara on
June 29, 2022.
The meeting was also streamed live over the Internet to enable shareholders to viewit from their homes and other locations.

We are committed to the following activities to promote constructive dialogue with our shareholders.
1. Dialogue with shareholders

To assure constructive dialogue with shareholders, the Director of the Corporate Planning Department, who oversees the Bank’s
IR activities, plays a central role by participating actively in the dialogue.

2. Internal structure facilitating dialogue

The Corporate Planning Department responsible for IR activities has established a system of compiling information from the relevant departments and providing the appropriate information to shareholders.

3. Means of dialogue other than individual meetings

IR activities are conducted as needed to provide shareholders with explanations. We will continue to enhance our disclosure activities and to disseminate information widely by posting it on our website.

4. Feedback on shareholder opinions, etc.

The Director of the Corporate Planning Department provides management with feedback concerning opinions obtained throughdialogue with shareholders at meetings of the Board of Directors and other meetings as appropriate.

5. Management of insider information

The Bank’s basic policy is to disclose information in a fair, timely, and appropriate manner. It has accordingly established internal
rules for prevention of insider trading and has put a strict information management system in place.

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57

Corporate Data (As of March 31, 2022)

Company profile
Name:

The Nanto Bank, Ltd.

Founded:June 1, 1934

Head Office:16, Hashimoto-cho, Nara City, Nara, Japan

Capital:37,924.15 million yen

Total assets:

6,981.9 billion yen

Deposit balance:

5,659.5 billion yen

Loan balance:

3,892.5 billion yen

Loans to small andmedium-sizedenterprises:

1,446.5 billion yen

Domestic offices:

104 (65 in Nara Prefecture, including Internet branches, and 39 in other locations)

Employees:

2,330

Capital adequacy ratio: 9.60% (consolidated);
9.29% (non-consolidated)
https://www.nantobank.co.jp

URL:

Overview of Nanto Bank’s consolidated subsidiary operations
Company name

CapitalPercentage of subsidiaries’
voting rights heldby the Bank (%)

Location

Principal business

Nanto Management Service Co., Ltd.

Nara City,
Nara Prefecture

Subsidiary managementbusiness

40

100

Nanto Business Service Co., Ltd

Nara City,
Nara Prefecture

Bank’s administrative
agency business

10

100

Nanto Credit Guarantee Co., Ltd.

Nara City,
Nara Prefecture

Credit guarantee
business

10

100
(100)

Nanto Lease Co., Ltd.

Nara City,
Nara Prefecture

Leasing business

500

100
(100)

Nanto Computer Service Co., Ltd.

Nara City,
Nara Prefecture

Software development
business

10

100
(100)

Nanto DC Card Co., Ltd.

Ikoma City,
Nara Prefecture

Credit card business

50

100
(100)

Nanto Card Service Co., Ltd.

Ikoma City,
Nara Prefecture

Credit card business

50

100
(100)

Nanto Consulting Co., Ltd.

Nara City,
Nara Prefecture

Consulting business

45

100
(100)

Nanto Challenged Co., Ltd.

Nara City,
Nara Prefecture

Bank’s administrative
agency business

20

100
(100)

Nanto Mahoroba Securities Co., Ltd.

Nara City,
Nara Prefecture

Financial instrument
trading business

3,000

100
(100)

Nanto Capital Partners Co., Ltd.

Nara City,
Nara Prefecture

Investment business

100

100

(millions of yen)

Notes: 1. Figures in parentheses in the “Percentage of subsidiaries’ voting rights held by the Bank” column indicate the percentage of indirect voting rights.
2. Nanto Management Service Co., Ltd. is an intermediate holding company.

(Reference) Affiliated companies accounted for by the equity method
Company name

CapitalPercentage of subsidiaries’
voting rights heldby the Bank (%)

Location

Principal business

Nara Mirai Design Co., Ltd.

Nara City,
Nara Prefecture

Regional
revitalization business30—(39.9)

Nara Kominka Machizukuri Partners Co., Ltd.

Nara City,
Nara Prefecture

Investment business

3

—
(—)

(millions of yen)

Notes: 1. Figures in parentheses in the "Percentage of voting rights held by Nanto Bank" column indicate the percentage of indirect voting rights.
2. Nara Mirai Design, Co., Ltd. was newly established on April 1, 2021, as an equity-method affiliate of Nanto Bank.
3. Nara Kominka Machizukuri Partners Co., Ltd. became an affiliate of the Bank accounted for by the equity method on January 20, 2022, with the acquisition of its sharesby Nara Mirai Design Co., Ltd.
4. In addition to the above, the Group includes three investment partnerships that are non-consolidated subsidiaries and three investment partnerships that are affiliates
not accounted for by the equity method.

58 Nanto Report 2022, the integrated report of Nanto Bank

Organizational overview
and external environment

Stock situation
Total shares issued:

Performance

Stock distribution by owner category
Government and local public bodies

33,025 thousand

Financial institutions*1

0.03%
10 thousand shares

Number of shareholders: 15,351

37.78%
12,478 thousand shares

Individuals/others*2

29.61%
9,782 thousand shares

Financial productbrokerages

1.65%
546 thousand shares

Foreigners

Other domestic corporations

12.31%
4,066 thousand shares

18.59%
6,140 thousand shares*1 Total of banks, trust banks, life insurance companies, non-life insurance companies, others*2 Includes 407 thousand treasury shares*3 The number of shares owned is rounded down to the nearest thousand.

Total shareholder return (TSR)

Major shareholders (top 10)

Name

Ratio of number
Number of of shares owned
shares owned to total number(unit: 1,000)*4 of shares issued(%)*5

The Master Trust Bank of Japan, Ltd.
(trust account)

4,690

14.37

Custody Bank of Japan, Ltd. (trust account)

1,576

4.83

Nippon Life Insurance Company (Standing
proxy: The Master Trust Bank of Japan, Ltd.)
Meiji Yasuda Life Insurance Company (Standing proxy: Custody Bank of Japan, Ltd.)
Nanto Bank Employee Stock Ownership
Association
Sumitomo Life Insurance Company (Standing
proxy: Custody Bank of Japan, Ltd.)

1,053

3.22

1,043

3.19

926

2.83

662

2.02

Mitsubishi UFJ Bank, Ltd.

508

1.55

DMG Mori Seiki Co., Ltd.

476

1.46

Daiwa Gas Co., Ltd.

457

1.40

Kitamura Forestry Co., Ltd.

418

1.28

Mar.
2020

Mar.
2021

Mar.
2022

Nanto Bank (%)

60.3

56.0

58.8

TOPIX
(including dividend) (%)

99.5

141.5

144.3

Dividends per share / Dividend payout ratio
Mar.
2020

Mar.
2021

Mar.
2022

Dividends per share (yen)

80.00

80.00

110.00Consolidated dividend
payout ratio (%)

81.7

24.0

30.1

(Note) *4 The number of shares owned is rounded down to the nearest thousand.
*5 The percentage of shares held is calculated excluding treasury stock (399 thousand shares)
and rounded down to two decimal places. Treasury stock does not include 73 thousand
shares of the Bank's stock held by the BIP Trust for directors' remuneration.

Stock price transitions
(JPY)
4,000

2,000

0

2019/32020/32021/32022/3

Nanto Report 2022, the integrated report of Nanto Bank

59

Financial Data

Consolidated Financial Statements• Consolidated Balance Sheets
The Nanto Bank, Ltd. and Consolidated Subsidiaries as of March 31, 2022 and 2021
Thousands of
U.S. dollars(Note 1)Millions of yen

2022

Assets:Cash and due from banks (Notes 24 and 26) .................................................
Debt purchased (Note 26) ..............................................................................
Money held in trust (Notes 26 and 27)............................................................
Securities (Notes 10, 11, 12, 15, 26 and 27) ..................................................
Loans and bills discounted (Notes 11, 12, 13 and 26) ....................................
Foreign exchanges (Note 11) .........................................................................
Lease receivables and lease investment assets (Note 12)...............................
Other assets (Notes 11, 12 and 16) ...............................................................
Tangible fixed assets (Note 14) .......................................................................
Buildings ....................................................................................................
Land ..........................................................................................................
Construction in progress ............................................................................
Other tangible fixed assets .........................................................................
Intangible fixed assets ....................................................................................
Software ....................................................................................................
Other intangible fixed assets (Note 12) .......................................................
Deferred tax assets (Note 31) .........................................................................
Customers’ liabilities for acceptances and guarantees (Note 11) ....................
Reserve for possible loan losses (Notes 3 and 26)..........................................
Total assets ................................................................................................
Liabilities and net assets:
Liabilities:
Deposits (Notes 12 and 26)............................................................................
Negotiable certificates of deposit (Note 26) ....................................................
Call money and bills sold (Note 26) ................................................................
Payables under repurchase agreements (Notes 12 and 26) ............................
Payables under securities lending transactions (Notes 12 and 26) ..................
Borrowed money (Notes 12, 26 and 36) ........................................................
Foreign exchanges.........................................................................................
Borrowed money from trust account ..............................................................
Other liabilities (Note 36) ................................................................................
Liability for retirement benefits (Note 29) .........................................................
Reserve for reimbursement of deposits ..........................................................
Reserve for contingent losses ........................................................................
Reserve for share-based payment .................................................................
Reserve under special laws ............................................................................
Deferred tax liabilities (Note 31) ......................................................................
Acceptances and guarantees.........................................................................
Total liabilities .............................................................................................
Net assets (Note 8):
Common stock: Authorized 64,000 thousand shares in 2022 and 2021
Issued 33,025 thousand shares in 2022 and 2021 ...............
Capital surplus ...............................................................................................
Retained earnings ..........................................................................................
Less treasury stock: Issued 472 thousand shares in 2022
and 407 thousand shares in 2021 ..................................
Total stockholders’ equity ..........................................................................
Valuation difference on available-for-sale securities (Note 27) .........................
Deferred gains or losses on hedges (Note 28) ................................................
Accumulated adjustments for retirement benefits (Note 29) ............................
Total accumulated other comprehensive income ......................................
Stock acquisition rights ...............................................................................
Total net assets ..........................................................................................
Total liabilities and net assets......................................................................
See Notes to Consolidated Financial Statements.

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60 Nanto
60

2021

1,495,598
1,466
44,0171,470,517
3,870,774
2,488
24,99055,92237,782
10,70823,915
313
2,845
4,858
4,411
447
7,247
8,261
(22,485)
7,001,441¥¥¥

5,647,407
7,540
176,835
12,742
102,432
709,227473
5,467
31,586
11,976
104
834
61
3
12
8,261
6,714,967¥

37,924

¥

¥

¥

¥

2022

1,191,207
1,827
40,5001,428,362
3,786,878
1,238
25,18055,287
38,106
10,97824,162
—
2,965
5,297
4,846
450
1,054
7,172
(21,768)
6,560,343$ 12,219,936
11,978359,645
12,015,009
31,626,554
20,328204,183
456,916
308,701
87,490195,399
2,557
23,24539,692
36,0403,652
59,212
67,497(183,715)$ 57,205,989¥

5,439,967
4,040—
37,077
106,465
626,700
578
6,265
24,893
11,872
158
1,134
—
3
454
7,172
6,266,784$ 46,142,715
61,606
1,444,848
104,109
836,9315,794,811
3,864
44,668258,076
97,851
849
6,814
498
24
98
67,497$ 54,865,323¥

37,924¥$309,861

34,749199,208

34,749189,973

283,920
1,627,649(1,799)(1,693)(14,698)

270,083
15,121
1,814(546)
16,390—286,473
7,001,441

260,953
31,221
2,008(688)
32,542
63
293,559
6,560,343

2,206,740
123,547
14,821(4,461)
133,916—
2,340,656$ 57,205,989¥

• Consolidated Statements of Income
The Nanto Bank, Ltd. and Consolidated Subsidiaries for the Years Ended March 31, 2022 and 2021
Thousands of
U.S. dollars(Note 1)Millions of yen

2022

Income (Note 16):
Interest income:Interest on loans and bills discounted .........................................................
Interest and dividends on securities............................................................
Other interest income .................................................................................
Trust fees .......................................................................................................
Fees and commissions ..................................................................................
Other operating income (Note 17) ..................................................................
Other income (Note 18) ..................................................................................
Total income ...........................................................................................

¥

Expenses:
Interest expense:
Interest on deposits....................................................................................
Interest on borrowings and rediscounts ......................................................
Interest on payables under securities lending transactions..........................
Other interest expense ...............................................................................
Fees and commissions ..................................................................................
Other operating expenses (Note 19) ...............................................................
General and administrative expenses (Note 20) ..............................................
Other expenses (Notes 21 and 22) .................................................................
Total expenses .......................................................................................
Income before income taxes ............................................................................
Income taxes (Note 31):
Current ..........................................................................................................
Deferred.........................................................................................................
Total income taxes .....................................................................................
Net income ........................................................................................................
Net income attributable to owners of parent...................................................

¥

2021

¥

32,34014,2011,644
8
22,246
3,425
3,750
77,616

31,956
15,528635
822,257
4,597
6,306
81,291

2022

$

350
151
34
366
12,3102,418
40,234
3,840
59,706

423
320
48
463
11,935
3,869
41,622
7,245
65,931

2,859
1,233
277
2,990
100,580
19,756
328,736
31,375487,833

17,91015,359146,335

5,885
156
6,042
11,867
11,867

4,606
(108)
4,497
10,861
10,861

48,083
1,274
49,366
96,96096,960¥$U.S. dollars(Note 1)Yen

Per share of common stock (Note 34):
Net income - basic.........................................................................................
Net income - diluted ......................................................................................
Dividends .......................................................................................................

¥

264,237
116,030
13,432
65
181,763
27,98430,639634,169364.29—110.00¥333.02332.73
80.00

$

2.97
—
0.89

See Notes to Consolidated Financial Statements.

• Consolidated Statements of Comprehensive Income
The Nanto Bank, Ltd. and Consolidated Subsidiaries for the Years Ended March 31, 2022 and 2021
Thousands of
U.S. dollars(Note 1)Millions of yen

2022

Net income .........................................................................................................
Other comprehensive income (loss) (Note 23):
Valuation difference on available-for-sale securities .........................................
Deferred gains (losses) on hedges..................................................................
Adjustments for retirement benefits (Note 29) .................................................
Total other comprehensive income (loss) ....................................................
Total comprehensive income (loss) for the year....................................................
Total comprehensive income (loss) attributable to:
Owners of parent ...........................................................................................

2021

¥

10,861¥(16,099)(193)
142(16,151)(4,283)¥(4,283)¥

11,8672022$

96,960¥27,8632,171
110
30,14641,008$(131,538)(1,576)
1,160(131,963)(34,994)¥

41,008$(34,994)

See Notes to Consolidated Financial Statements.

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Financial Data

Consolidated Financial Statements• Consolidated Statements of Changes in Net Assets
The Nanto Bank, Ltd. and Consolidated Subsidiaries for the Years Ended March 31, 2022 and 2021
Millions of yen
Number ofshares ofcommonstock(thousands)

Commonstock

CapitalsurplusRetainedearnings

33,025¥ 37,924¥ 34,749¥ 181,640

Balance at April 1, 2020 ........................
Cumulative effects of changes inaccounting policies ............................
Restated balance at April 1, 2020 .........

Less treasury
stock

Valuationdifferenceonavailablefor-salesecurities(1,745) ¥

¥

3,357

Deferred
gains orlosses onhedges

¥Accumulated
adjustments
for retirement
benefits(162) ¥

Stockacquisitionrights(798) ¥

8891
33,02537,92434,749Total net
assets¥ 255,053
91

181,732(1,745)

3,357

(162)

(798)

88

255,145

Cash dividends ..................................

(2,609)(2,609)Net income attributable to ownersof parent ............................................

10,861

10,861

Purchase of treasury stock.................
Disposition of treasury stock ..............

(11)

Transfer from retained earnings tocapital surplus....................................

11

(1)

(1)

53

41

(11)

—

Net changes in items other thanstockholders’ equity ............................
Balance at April 1, 2021 ........................

27,86333,025¥ 37,924¥ 34,749¥ 189,973¥(1,693) ¥ 31,221

2,171
¥

2,008

¥

110

(24)

30,121(688) ¥

63

¥ 293,559

Cash dividends .................................

(2,609)(2,609)Net income attributable to ownersof parent ...........................................

11,867

11,867Purchase of treasury stock ...............
Disposition of treasury stock ............

(22)

Transfer from retained earnings tocapital surplus ..................................

22

(147)

(147)

41

18

(22)

—

Net changes in items other thanstockholders’ equity...........................
Balance at March 31, 2022 (Note 8)......

(16,099)
33,025¥ 37,924¥ 34,749¥ 199,208¥(1,799) ¥ 15,121

(193)
¥

1,814

¥

142

(63)

(16,214)(546) ¥—

¥ 286,473

Thousands of U.S. dollars (Note 1)

Commonstock

Balance at April 1, 2021 ........................ $309,861 $CapitalsurplusRetainedearnings

Less treasurystock

283,920 $ 1,552,193 $Valuationdifference
on availablefor-salesecurities(13,832) $255,094 $Deferred
gains orlosses onhedges

Accumulated
adjustments
for retirement
benefits

16,406 $(5,621) $StockacquisitionrightsTotal net
assets

514 $ 2,398,553

Cash dividends .................................

(21,317)(21,317)

Net income attributable to ownersof parent ...........................................

96,96096,960Purchase of treasury stock ...............
Disposition of treasury stock ............

(179)

Transfer from retained earnings tocapital surplus ..................................

179(1,201)(1,201)

334

147

(179)

—

Net changes in items other thanstockholders’ equity...........................
Balance at March 31, 2022 (Note 8)...... $See Notes to Consolidated Financial Statements.

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62 Nanto
62309,861 $283,920 $ 1,627,649 $(14,698) $(131,538)(1,576)

1,160

123,547 $

14,821 $(4,461) $(514)(132,478)— $ 2,340,656

• Consolidated Statements of Cash Flows
The Nanto Bank, Ltd. and Consolidated Subsidiaries for the Years Ended March 31, 2022 and 2021
Thousands of
U.S. dollars(Note 1)Millions of yen

2022

Cash flows from operating activities
Income before income taxes ......................................................................
Depreciation ...............................................................................................
Impairment loss..........................................................................................
Share of loss (profit) of entities accounted for using equity method .............
Increase (decrease) in reserve for possible loan losses ...............................
Increase (decrease) in liability for retirement benefits ...................................
Increase (decrease) in reserve for reimbursement of deposits .....................
Increase (decrease) in reserve for contingent losses ...................................
Increase (decrease) in reserve for share-based payment ............................
Interest income ..........................................................................................
Interest expense.........................................................................................
Loss (gain) on securities .............................................................................
Loss (gain) on money held in trust ..............................................................
Foreign exchange losses (gains) .................................................................
Losses (gains) on sales of fixed assets .......................................................
Net decrease (increase) in loans and bills discounted .................................
Net increase (decrease) in deposits ............................................................
Net increase (decrease) in negotiable certificates of deposit .......................
Net increase (decrease) in borrowed money ...............................................
Net decrease (increase) in due from banks (excluding due from the Bank of Japan)...
Net decrease (increase) in call loans and bills bought .................................
Net increase (decrease) in call money .........................................................
Net increase (decrease) in payables under securities lending transactions ...
Net decrease (increase) in foreign exchange assets ....................................
Net increase (decrease) in foreign exchange liabilities .................................
Net decrease (increase) in lease receivables and lease investment assets ....
Net increase (decrease) in borrowed money from trust account .................
Interest received .........................................................................................
Interest paid ...............................................................................................
Other .........................................................................................................
Subtotal .................................................................................................
Income taxes paid ......................................................................................
Net cash provided by operating activities ...............................................

¥

17,910
3,296
62
9
716
419
(53)
(300)
61
(48,185)902(1,260)167(8,530)17(83,896)
207,439
3,500
82,526
1,077
361
152,500(4,032)(1,250)
(104)
135
(797)
48,537(972)
1,094
371,351(3,769)367,5812021¥

15,359
3,574
389
—
957
188
(57)
33
—
(48,121)
1,258
(997)
(534)
(5,353)2(329,601)
410,208(3,330)491,162(406)
584(10,839)(28,679)
(123)
422
(181)
(497)
46,631(1,566)(3,122)537,362(5,283)532,0792022$

146,335
26,930
506
73
5,850
3,423
(433)
(2,451)
498(393,700)
7,369(10,294)
1,364(69,695)
138(685,480)
1,694,901
28,597674,287
8,799
2,949
1,246,016(32,943)(10,213)
(849)
1,103
(6,511)
396,576(7,941)
8,938
3,034,161(30,794)
3,003,358

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 .................................................................
Purchase of tangible fixed assets ...............................................................
Proceeds from sales of tangible fixed assets ..............................................
Purchase of intangible fixed assets.............................................................
Payments for asset retirement obligations ..................................................
Other .........................................................................................................
Net cash used in investing activities ...............................................................

(362,645)
229,244
80,753(19,719)
15,578(1,753)426(1,209)(26)(13)(59,366)(847,735)
655,200
162,204(1,104)608(1,194)
261
(658)
(77)
24
(32,470)(2,963,028)
1,873,061
659,800(161,116)
127,281(14,323)3,480(9,878)(212)(106)(485,055)

Cash flows from financing activities
Dividends paid ..........................................................................................
Purchase of treasury stock .........................................................................
Other .........................................................................................................
Net cash used in financing activities .......................................................
Effect of exchange rate changes on cash and cash equivalents ..................
Net increase (decrease) in cash and cash equivalents..................................
Cash and cash equivalents at beginning of year ...........................................
Cash and cash equivalents at end of year (Note 24) .....................................

(2,609)(147)
0(2,756)9
305,468
1,188,367
1,493,835(2,607)(1)
0(2,609)3
497,002691,364
1,188,367(21,317)(1,201)
0(22,518)73
2,495,857
9,709,673$ 12,205,531¥¥

See Notes to Consolidated Financial Statements.

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Financial Data

Consolidated Financial Statements

Notes to Consolidated Financial Statements
The Nanto Bank, Ltd. and Consolidated Subsidiaries
Years Ended March 31, 2022 and 2021

1. BASIS OF PRESENTATION
The accompanying consolidated financial statements of The Nanto Bank, Ltd. (the “Bank”) and its consolidated subsidiaries (together, the “Group”)
have been prepared in accordance with the provisions set forth in the Japanese Financial Instruments and Exchange Act and its related accounting
regulations and the Ordinance for Enforcement of the Banking Law and in conformity with accounting principles generally accepted in Japan, which
are different in certain respects from the application and disclosure requirements of International Financial Reporting Standards.
The accompanying consolidated financial statements have been restructured and translated into English, with some expanded descriptions, fromthe consolidated financial statements of the Bank prepared in accordance with Japanese GAAP and filed with the appropriate Local Finance Bureau of
the Ministry of Finance as required by the Financial Instruments and Exchange Act. Some supplemental 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.
As permitted by the Financial Instruments and Exchange Act of Japan, amounts less than one million yen have been omitted. As a result, thetotals shown in the financial statements do not necessarily agree with the sum of the individual amounts.
The translation of the Japanese yen amounts into U.S. dollar amounts is included solely for the convenience of readers outside Japan, using theprevailing exchange rate at March 31, 2022, which was ¥122.39 to US$1.00. The translations should not be construed as representations that theJapanese yen amounts have been, could have been or could in the future be converted into U.S. dollars at this or any other rate of exchange.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa. Principles of consolidation
The accompanying consolidated financial statements include the accounts of the Bank and its eleven (twelve in 2021) subsidiaries at March 31, 2022.
(Changes in scope of consolidation)
In the fiscal year ended March 31, 2022, Nanto Investment Advisors Co., Ltd. was excluded from the scope of consolidation because thecompany resolved to dissolve at the annual stockholders’ meeting held on June 30, 2021 and its liquidation was completed on December 9, 2021.
In the fiscal year ended March 31, 2021, Nanto Capital Partners Co., Ltd. was included in the scope of consolidation due to its new establishment
on October 1, 2020. In addition, Nangin Agency Co., Ltd. was excluded from the scope of consolidation because the company resolved to dissolve at
the extraordinary general meeting of stockholders held on September 30, 2020, and its liquidation was completed on March 25, 2021.
The Bank had three (two in 2021) unconsolidated subsidiaries in the fiscal year ended March 31, 2022, Nanto Sixth Industry Support Investment
Limited Partnership, Nanto Regional Vitality Creation Support Investment Limited Partnership and Nanto CVC No. 3 Akebono Investment Limited
Partnership. The unconsolidated subsidiaries were excluded from the scope of consolidation because the portion of their assets, net income (loss),retained earnings, accumulated other comprehensive income and others that correspond to the Bank’s equity were immaterial to the extent that their
exclusion from the scope of consolidation did not preclude reasonable judgment of the Group’s financial position and results of operations.
(Establishment of unconsolidated subsidiaries)
In the fiscal year ended March 31, 2022, Nanto CVC No. 3 Akebono Investment Limited Partnership became an unconsolidated subsidiary due
to its new establishment on February 1, 2022.
The Bank had two (0 in 2021) affiliates over which it had the ability to exercise significant influence over operating and financial policies, Nara Mirai
Design Co., Ltd. and Nara Kominka Machizukuri Partners Co., Ltd., and both are accounted for by the equity method.
(Changes in scope of the equity method)
In the fiscal year ended March 31, 2022, Nara Mirai Design Co., Ltd. was included in the scope of the equity method due to its new establishment
on April 1, 2021. In addition, Nara Kominka Machizukuri Partners Co., Ltd. was included in the scope of the equity method due to the acquisition of its
shares by the Bank on January 20, 2022.
The Bank had three (two in 2021) unconsolidated subsidiaries not accounted for by the equity method in the fiscal year ended March 31, 2022,
Nanto Sixth Industry Support Investment Limited Partnership, Nanto Regional Vitality Creation Support Investment Limited Partnership and Nanto
CVC No. 3 Akebono Investment Limited Partnership, and three (two in 2021) affiliates not accounted for by the equity method, Nanto CVC Investment
Limited Partnership, Nanto CVC No. 2 Investment Limited Partnership and Nara Kominka Machizukuri Fund Investment Limited Partnership. The
unconsolidated subsidiaries and affiliates not accounted for by the equity method were excluded from the scope of the equity method because theeffect of their inclusion on the consolidated financial statements would not have been significant in terms of the portion of net income (loss), retained
earnings, accumulated other comprehensive income and others which correspond to the Bank’s equity.
(Establishment of an unconsolidated subsidiary not accounted for by the equity method)
In the fiscal year ended March 31, 2022, Nanto CVC No. 3 Akebono Investment Limited Partnership became an unconsolidated subsidiary notaccounted for by the equity method due to its new establishment on February 1, 2022.
(Addition or deletion of affiliates not accounted for by the equity method)
In the fiscal year ended March 31, 2022, Nara Kominka Machizukuri Fund Investment Limited Partnership became an affiliate not accounted forby the equity method because Nara Kominka Machizukuri Partners Co., Ltd., an affiliate accounted for by the equity method, is an unlimited liability
partner.
From the fiscal year ended March 31, 2021, Nanto CVC Investment Limited Partnership and Nanto CVC No. 2 Investment Limited Partnershiphave been treated as affiliates not accounted for by the equity method due to the fact that Nanto Capital Partners Co., Ltd., a subsidiary of the Bank,has become an unlimited liability partner of both partnerships jointly with another company. Furthermore, Nara Prefecture Tourism Revitalization
Investment Limited Partnership was dissolved and its liquidation completed.
Potager Co., Ltd., of which the Bank owns between 20% and 50% of the voting rights (execution rights), was not recognized as an affiliate for the
fiscal years ended March 31, 2022 and 2021 because it is held by the Bank’s unconsolidated subsidiary for the purpose of incubating the investees
and not for the purpose of controlling the entity.
All consolidated subsidiaries have fiscal years ending on March 31.
All significant intercompany accounts, transactions and unrealized profits on transactions are eliminated.

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b. Cash and cash equivalents
In preparing the consolidated statements of cash flows, cash and cash equivalents represents cash and due from the Bank of Japan.
c. Finance leases
As lessor:
Finance leases are accounted for in a manner similar to that used for ordinary sale transactions. Revenue from finance lease transactions and related
costs are recognized upon receipt of the lease payments. Finance leases which transfer ownership of the lease assets to the lessee are recognized aslease receivables, and all finance leases which do not transfer ownership of the lease assets to the lessee are recognized as lease investment assets.
For finance leases which commenced before April 1, 2008 and do not transfer ownership of the lease assets to the lessee, the appropriate bookvalue (net of accumulated depreciation and amortization) in tangible and intangible fixed assets as of March 31, 2008 was recorded as the beginningbalance of “Lease receivables and lease investment assets,” and the total amount of interest equivalent for the remaining lease term after the adoptionof the “Accounting Standard for Lease Transactions” (Accounting Standards Board of Japan (“ASBJ”) Statement No. 13, issued on March 30, 2007)
has been allocated over the remaining lease term using the straight-line method.
For the fiscal years ended March 31, 2022 and 2021, differences between income before income taxes and income before income taxes
calculated as if the accounting treatment for ordinary sale transactions had been applied to the finance leases which do not transfer ownership of theleased assets to the lessee were not material.
d. Securities
Trading securities are stated at fair value. Gains and losses realized on disposal and unrealized gains and losses from market value fluctuations arerecognized as gains and losses in the period of the disposal or the change. Cost of sales for such securities is determined using the moving averagemethod. Held-to-maturity debt securities are stated at amortized cost on a straight-line method, cost of which is determined using the moving averagemethod. Stocks of affiliates accounted for by the equity method and unconsolidated subsidiaries and affiliates not accounted for by the equity method
are stated at cost using the moving average method. Available-for-sale securities with available fair values are stated at fair value. Unrealized gains andlosses on available-for-sale securities are reported, net of applicable income taxes, as a separate component of accumulated other comprehensive
income. As of March 31, 2022, equity securities, etc., with no market price included in available-for-sale securities are stated at moving average cost.
As of March 31, 2021, available-for-sale securities for which it is extremely difficult to determine the fair value were stated at moving average cost.
If the fair value of held-to-maturity debt securities or available-for-sale securities declines significantly, the securities are stated at fair value, andthe difference between the fair value and the carrying amount is recognized as a loss in the period of the decline. In such a case, the fair value will be
the carrying amount of the securities at the beginning of the next fiscal year.
Securities managed as trust assets in individually managed money held in trust primarily for securities management purposes are measured at fairvalue.
e. Derivatives and hedge accounting
Derivatives are measured at fair value.
To account for hedging transactions in connection with interest rate risk arising from financial assets and liabilities, the Bank applies the deferredhedge accounting method stipulated in “Treatment for Accounting and Auditing of Application of Accounting Standard for Financial Instruments in the
Banking Industry” (JICPA Industry Audit Committee Report No. 24, March 17, 2022). The Bank assesses the effectiveness of such hedges in offsetting
movement in the fair value from changes in interest rates by classifying the hedged items, such as loans and deposits, and the hedging instruments,
such as interest rate swaps, by their maturity. The Bank assesses the effectiveness of cash flow hedges by verifying the correlation between thehedged items and the hedging instruments.
In order to hedge risk arising from the volatility of exchange rates for available-for-sale securities (excluding bonds) denominated in foreign
currencies, the Bank applies fair value hedge accounting with the condition that the hedged available-for-sale securities are designated in advance andthat sufficient on-balance (actual) or off-balance (forward) liability exposure exists to cover the cost of the hedged securities denominated in the same
foreign currency.
f. Tangible fixed assets (except for leased assets)
Depreciation of tangible fixed assets of the Bank is computed by the declining balance method, except for buildings (excluding facilities attached tobuildings and structures acquired on or before March 31, 2016, which are depreciated by the declining balance method) which are depreciated by thestraight-line method. The estimated useful lives of major items are as follows:
Buildings
6 to 50 years
Others3 to 20 years
Depreciation of the assets of the consolidated subsidiaries is computed principally by the declining balance method over the estimated useful lifeof the asset.
g. Intangible fixed assets (except for leased assets)
Amortization of intangible fixed assets is computed by the straight-line method. Acquisition costs of software to be used internally are capitalized andamortized by the straight-line method primarily over a useful life of five years.
h. Lease assets
Lease assets with respect to finance leases that do not transfer ownership of tangible fixed assets and intangible fixed assets are depreciated oramortized using the straight-line method with the assumption that the term of the lease is the useful life. The residual value of lease assets is the value
guaranteed in the lease contract or zero for assets without such guaranteed value.
i. Reserve for possible loan losses
A reserve for possible loan losses is provided according to predetermined standards.
For loans to insolvent customers who are undergoing bankruptcy or other special liquidation (“bankrupt borrowers”) or who are in a similar
financial condition (“effectively bankrupt borrowers”), the reserve for possible loan losses is provided based on the amount of the claims net ofthe amount expected to be recovered from collateral and guarantees and net of the deducted amount mentioned below. For the unsecured and

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Financial Data

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unguaranteed portions of loans to customers not presently in the above circumstances but for whom there is a high probability of so becoming (“likely
to become bankrupt borrowers”), the Bank deducts the estimated future cash flows and the amount expected to be recovered from collateral andguarantees from the loan amount and of that remainder reports the amount that it recognizes to be necessary after comprehensively judging thecustomer’s ability to pay.
For loans pertaining to customers other than the above, the Bank reports mainly the anticipated loss for the next one or three years. The
anticipated loss is calculated by region using the loss rate based on the average value in a fixed past period of the loan loss ratio with the actual loan
loss of one or three years as its foundation with necessary adjustments such as future prospects, etc.
All claims are assessed by the operating divisions based on the self-assessment criteria for asset quality, and the assessment results are auditedby the Asset Audit Division, which is independent from the operating divisions.
For claims against “bankrupt borrowers” and “effectively bankrupt borrowers,” the amount exceeding the estimated value of collateral andguarantees is deemed uncollectible and is deducted directly from those claims in principle. At March 31, 2022 and 2021, the deducted amounts were
¥6,233 million ($50,927 thousand) and ¥7,689 million, respectively.
The reserve for possible loan losses of the consolidated subsidiaries is provided for general claims by the amount deemed necessary based on
the historical loan loss ratio and for certain doubtful claims by the amount deemed uncollectible based on an assessment of each claim.
j. Employee retirement benefits
In calculating projected benefit obligations, expected benefits are attributed to each period by the benefit formula basis.
Prior service costs are recognized as profit or loss at the time of occurrence.
Actuarial gains and losses are amortized from the fiscal year following the year in which the gains and losses are recognized by the straight-line
method over a fixed period (ten years) within the average remaining service years of the current employees.
Consolidated subsidiaries applied the simplified method where the amount to be required for voluntary termination at the fiscal year-end isrecorded as projected benefit obligations in the calculation of the liability for retirement benefits and retirement benefit costs.
k. Reserve for reimbursement of deposits
A reserve for reimbursement of deposits which were derecognized as liabilities under certain conditions is provided for possible losses on future claimsof withdrawal based on historical reimbursement experience.
l. Reserve for contingent losses
To pay its contribution to the Credit Guarantee Corporation, the Bank provides a reserve for contingent liabilities not covered by other reserves in an
amount deemed necessary based on estimated future losses.
m. Reserve for share-based payment
To prepare for the delivery of the Bank’s shares through the Director Remuneration BIP (Board Incentive Plan) Trust, the estimated amount of shares
to be delivered in proportion to the points allocated to the Directors in accordance with the stock benefit rules is recorded as reserve for share-based
payment.
n. Reserve under special laws
Reserve under the special laws represents Financial Instruments Transaction Liability Reserve prescribed in Article 46-5, Paragraph 1 of the Financial
Instruments Exchange Act. The amount is recorded as determined by the consolidated subsidiaries in accordance with the provisions of Article 175 of
the Cabinet Office Order on Financial Instruments Business, etc., in order to provide for losses arising from security related accidents.
o. Foreign currency translations
Foreign currency assets and liabilities are translated at fiscal year-end exchange rates.
p. Income taxes
Deferred income taxes are recorded to reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for tax andfinancial reporting purposes.
The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary
differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts for income tax purposes.
q. Criteria for recognizing lease income and costs for finance leases
Lease income and costs are recognized at the time of receiving lease fees.
r. Criteria for recognizing revenue from contracts with customers
From the fiscal year ended March 31, 2022, the Group has adopted “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29,
March 31, 2020) and “Implementation Guidance on Accounting Standard for Revenue Recognition” (ASBJ Guidance No. 30, March 26, 2021), andrecognizes revenue when control of promised goods or services is transferred to a customer in an amount that reflects the consideration to which it
expects to be entitled in exchange for those goods or services.
The Bank and its consolidated subsidiaries recognize information on transactions with customers based on the following five steps:
Step 1: Identify the 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 obligations in the contract.
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.
Revenue from transactions with customers of the Bank and its consolidated subsidiaries, etc. relates mainly to transaction services that arerecognized when control of the promised goods or services is transferred to the customer and includes fees and commissions related to deposit
services, lending services, exchange services and others.

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s. Consumption taxes
For the fiscal year ended March 31, 2021, transactions subject to national and local consumption taxes are recorded at amounts exclusive of theconsumption taxes.

3. SIGNIFICANT ACCOUNTING ESTIMATES
Those items whose amounts have been recognized in the consolidated financial statements for the current consolidated fiscal year based on
accounting estimates which could have a material impact on the consolidated financial statements for the next consolidated fiscal year are as follows.
(1) Reserve for possible loan losses
Credit operations are one of the major operations of the Group, and assets with credit risk, such as loans, occupy a very important place inconsolidated net assets on the consolidated balance sheet. So recognition of the reserve for possible loan losses has a large impact on the operating
results and financial position and is judged to be material in the accounting estimates.
(2) Amount recognized in the consolidated financial statements
The reserve for possible loan losses recognized in the consolidated balance sheets as of March 31, 2022 and 2021 was as follows:
Thousands of
U.S. dollars

Millions of yen

2022

Reserve for possible loan losses ..............................................................................

¥

22,4852021¥

21,7682022$

183,715The details concerning the accounting estimates adopted when making the calculation are set forth below.
(3) Accounting estimates(a) Methods for calculating amounts
Calculation methods are stated in the Notes (SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES i. Reserve for possible loan losses). The asset
appraisals stated in the reserve for possible loan losses recognition standards refer to individually analyzing and considering the assets held andclassifying them based on the degree of nonrecovery risk and loss of value risk. Appropriate depreciation and reservation are implemented based on
the category of borrowers (normal borrowers, needs attention borrowers, likely to become bankrupt borrowers, effectively bankrupt borrowers andbankrupt borrowers).
(b) Major assumptions used in calculating amounts
Fiscal year ended March 31, 2022
For the fiscal year ended March 31, 2022, the Bank assumed that losses nearly equivalent to historical loan losses for each category of borrowers
would be incurred. For the claims equivalent to normal claims and claims which need attention, the Bank calculated the required reserve amount foreach region using the expected loss rate taking into consideration the necessary adjustments to the average value of the loan loss ratio for a fixed
period in the past. The determination of the borrower category is based on the credit rating determined by the rating models and the borrower’s
repayment ability based on their substantial financial position, financing capacities, and profitability, etc., and the terms and conditions of the loans andpayment status of the borrower. Also, the Bank gives comprehensive consideration to the borrower’s sustainability, projected profitability, and ability
to pay obligations based on their annual repayable amount, appropriateness of their management improvement plans, and other factors in light of theborrower’s industry characteristics.
Furthermore, in the case that management reconstruction is thought to be proceeding in line with a drastic and highly feasible management
improvement plan and a reasonable and highly feasible management improvement plan, the loans shall be deemed not to qualify as claims
corresponding to restructured loans or claims likely to become bankrupt borrowers.
Note that, at the end of the fiscal year ended March 31, 2022, the Bank anticipated that the impact of the new coronavirus would continue fora certain period of time, and the individual category of borrowers was determined based on the available information after taking into account thecharacteristics of the industrial sector, the possibility of recovery from the short-term business performance, cash flow status, etc. Accordingly, an
additional reserve was not provided.
Fiscal year ended March 31, 2021
For the fiscal year ended March 31, 2021, the Bank operated under the assumption that there was a relationship between the historical loan loss
ratio for each category of borrowers and the expected future loss rate, For claims equivalent to normal claims and claims which need attention,
the Bank calculated the required reserve amount for each region using the expected loss rate taking into consideration the necessary adjustments
to the average value of the loan loss ratio for a fixed period in the past. The determination of the borrower category was based on the credit
rating determined by the rating models and the borrower’s repayment ability based on their substantial financial position, financing capacities, andprofitability, etc., and the terms and conditions of the loans and payment status of the borrower. Also, the Bank gives comprehensive consideration
to the borrower’s sustainability, projected profitability, and ability to pay obligations based on their annual repayable amount, appropriateness of their
management improvement plans, and other factors in light of the borrower’s industry characteristics.
Furthermore, in the case that management reconstruction is thought to be proceeding in line with a drastic and highly feasible management
improvement plan and a reasonable and highly feasible management improvement plan, the loans were deemed not to qualify as claims corresponding
to restructured loans or claims likely to become bankrupt borrowers.
Note that, at the end of the fiscal year ended March 31, 2021, the Bank anticipated that the impact of the new coronavirus would continue fora certain period of time and the individual category of borrowers was determined based on the available information after taking into account thecharacteristics of the industrial sector, the possibility of recovery from the short-term business performance, cash flow status, etc.
(c) The impact on the consolidated financial statements for the next fiscal year
The uncertainties of the material estimates are included in the major assumptions used for the calculation of the amount of the reserve for possible
loan losses, including the expected loss rate by region and by debt classification, the category of borrowers as of the end of the current fiscal year, theamount expected to be recovered using collateral and guarantees and the impact of the new coronavirus, etc.
The major assumptions concerning the estimate of the reserve for possible loan losses are determined based on the available information.
However, if the business condition of a major customer worsens or the situation regarding the new coronavirus worsens or becomes prolonged, there
is a possibility that such events would have an impact on the operating results and financial position for the next fiscal year, such as an increase in thereserve for possible loan losses becoming necessary.

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4. CHANGES IN ACCOUNTING POLICIESFiscal year ended March 31, 2022
(1) Application of accounting standard for revenue recognition
The Group has applied the “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, March 31, 2020) from the beginning of the fiscal
year ended March 31, 2022 and recognizes revenue when control of promised goods or services is transferred to the customer in an amount thatreflects the consideration to which it expects to be entitled in exchange for those goods or services.
The Group applied the Accounting Standard for Revenue Recognition in accordance with the transitional treatment prescribed in Paragraph 84
of the standard, and there was no effect on retained earnings at the beginning of the fiscal year ended March 31, 2022.
Any effects on the consolidated financial statements were immaterial.
Comparative information for the fiscal year ended March 31, 2021 is not included in Note 16, “REVENUE” in accordance with the transitional
treatment prescribed in Paragraph 89-3 of the Accounting Standard for Revenue Recognition.
(2) Application of accounting standard for fair value measurement
The Group has applied the “Accounting Standard for Fair Value Measurement” (ASBJ Statement No. 30, July 4, 2019) from the beginning of the
fiscal year ended March 31, 2022 and will prospectively apply the new accounting policies stipulated by the Accounting Standard for Fair Value
Measurement in accordance with the transitional treatment prescribed in Paragraph 19 of the standard and Paragraph 44-2 of the “AccountingStandard for Financial Instruments” (ASBJ Statement No. 10, July 4, 2019).
The effects on the consolidated financial statements were immaterial.
In addition, the Group discloses financial instruments categorized by fair value hierarchy in Note 26, “FINANCIAL INSTRUMENTS AND RELATEDDISCLOSURES.” However, the comparative information for the previous fiscal year is not included in the said Note in accordance with the transitional
treatment prescribed in Paragraph 7-4 of the “Implementation Guidance on Disclosures about Fair Value of Financial Instruments” (ASBJ Guidance No.
19, July 4, 2019).
(3) Change in criteria for recognizing income from installment sales transactions
The Bank’s consolidated subsidiary, Nanto Lease Co., Ltd., has adopted a method of recording income from installment sales transactions in theamount equivalent to interest expense in accordance with the “Guidance on Accounting Standard for Lease Transactions” (ASBJ Guidance No. 16,
March 25, 2011).
The amount equivalent to interest expense was previously accounted for by the straight-line method, but this has been changed to the interest
method effective from the fiscal year ended March 31, 2022. This change was made based on the judgment that adopting the interest method, whichis the principle method, will more appropriately reflect the status of profit and loss, given the increasing trend of installment sales transactions.
This change in accounting policy has been applied retrospectively, and the consolidated financial statements for the previous fiscal year havebeen prepared on a retrospective basis. As a result, in the consolidated statement of income for the fiscal year ended March 31, 2021, “fees andcommissions,” “total income” and “income before income taxes” increased by ¥28 million each, “income taxes–deferred” increased by ¥8 million, and“net income” and “net income attributable to owners of parent” increased by ¥19 million each compared to those before retrospective application. In
addition, in the consolidated balance sheet as of March 31, 2021, “other assets” and “retained earnings” increased by ¥160 million and ¥111 million,
respectively, while “deferred tax assets” decreased by ¥48 million.
In addition, the beginning balance of “retained earnings” in the consolidated statement of changes in net assets for the fiscal year ended March
31, 2021 increased by ¥91 million due to the cumulative effect reflected in the beginning balance of net assets.
As for per share information, “net assets per share” as of March 31, 2021, “net income per share – basic” and “net income per share – diluted”
for the fiscal year then ended increased by ¥3.42, ¥0.60 and ¥0.60, respectively.
Fiscal year ended March 31, 2021
Not applicable.

5. STANDARDS AND GUIDANCE NOT YET ADOPTED
The following guidance was issued but not yet adopted.
“Implementation Guidance on Accounting Standard for Fair Value Measurement” (ASBJ Guidance No. 31, June 17, 2021)(1) Overview
The method used to calculate the fair value of investment trusts and the handling of the related notes and the notes on the fair value of investments inpartnerships, etc., reported in the net amount and equivalent to equity in the balance sheets have been determined.
(2) Effective date
The Group is scheduled to apply the guidance from the beginning of the fiscal year ending March 31, 2023.
(3) Effects of the application of the standards
The effects of the application of the guidance are expected to be immaterial.

6. CHANGES IN PRESENTATION METHOD
Fiscal year ended March 31, 2022
Not applicable.
Fiscal year ended March 31, 2021
Application of the “Accounting Standard for Disclosure of Accounting Estimates”
The Group has applied the “Accounting Standard for Disclosure of Accounting Estimates” (ASBJ Statement No. 31, March 31, 2020) to theconsolidated financial statements for the fiscal year ended March 31, 2021. Accordingly significant accounting estimates are disclosed in the Notes toConsolidated Financial Statements.

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7. ADDITIONAL INFORMATION
Fiscal year ended March 31, 2022
Director Remuneration BIP (Board Incentive Plan) Trust
The Bank has introduced a Director Remuneration BIP Trust for directors of the Bank (excluding outside directors and nonresidents in Japan;
hereinafter “the Bank’s directors”) from the fiscal year ended March 31, 2022.
(1) Overview of transaction
The Director Remuneration BIP Trust is a board incentive plan designed to motivate the Bank’s directors to contribute to achieving mid- to longterm performance improvement and increasing corporate value. This is a stock-based compensation plan in which points are awarded to the Bank’s
directors based on their position and achievement of performance targets, etc. The Bank’s shares corresponding to the points and a cash payment
equivalent to the value of the Bank’s shares are delivered or paid to the Bank’s directors at the time of their retirement from office.
(2) Accounting treatment for transactions in which the Bank’s shares are delivered through the Trust
The Bank has followed the “Practical Solution on Transactions of Delivering the Company’s Own Stock to Employees, etc., through Trusts” (Practical
Issues Task Force No. 30, March 26, 2015) with respect to the accounting treatment of this trust agreement.
(3) Matters on Bank’s shares held by the Trust(a) The book value of the Bank’s shares held by the Trust as of March 31, 2022 was ¥143 million ($1,168 thousand).
(b) The Bank’s shares held by the Trust are recorded as treasury stock under stockholders’ equity.
(c) The number of shares as of March 31, 2022 was 73 thousand shares and the average number of shares during the fiscal year then ended was 47
thousand shares.
(d) The number of shares at the end of the fiscal year ended March 31, 2022 and the average number of shares during the fiscal year are included intreasury stock to be deducted for computing per share information.
Fiscal year ended March 31, 2021
Not applicable.

8. CHANGES IN NET ASSETS(1) Type and numbers of shares issued and treasury stock for the fiscal years ended March 31, 2022 and 2021
(Thousands of shares)

April 1, 2021
Shares issued
Common stock .....................................
Total ..................................................
Treasury stock
Common stock .....................................
Total ..................................................

2022
Decrease

Increase

Remarks

March 31, 2022

33,02533,025————33,02533,025

407
407

74
74

9
9

472
472

Notes 1, 2 & 3

Notes: 1. The number of shares of treasury stock as of March 31, 2022 includes 73 thousand shares of the Bank’s stock held by the Director Remuneration BIP Trust.
2. The increase of 74 thousand shares in common stock of treasury stock is attributable to an increase of 73 thousand shares due to the acquisition by the Director Remuneration BIP Trust andan increase of 1 thousand shares due to the purchase of shares of less than one unit.
3. The decrease of 9 thousand shares in common stock of treasury stock is attributable to a decrease of 9 thousand shares due to the execution of stock options and a decrease of 0 thousand
shares due to the sale of shares of less than one unit.

(Thousands of shares)

April 1, 2020
Shares issued
Common stock .....................................
Total ..................................................
Treasury stock
Common stock .....................................
Total ..................................................

2021
Decrease

Increase

Remarks

March 31, 2021

33,02533,025————33,02533,025

418
418

1
1

12
12

407
407

Notes 1 & 2

Notes: 1. The increase of 1 thousand shares in common stock of treasury stock is due to the purchase of shares of less than one unit.
2. The decrease of 12 thousand shares in common stock of treasury stock is attributable to a decrease of 12 thousand shares due to the execution of stock options and a decrease of 0
thousand shares due to the sale of shares less than one unit.

(2) Stock acquisition rights
Fiscal year ended March 31, 2022
Not applicable.
Fiscal year ended March 31, 2021
Shares expected to be acquired upon exercise of stock acquisition rights
March 31, 2021

Balance at end ofcurrent fiscal year
(Millions of yen)

Number of sharesClassification

Breakdown

The Bank

Stock acquisitionrights granted as
stock options

April 1, 2020

Total

Increase

Decrease

—

—

—

—

¥63

—

—

—

—

¥63

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Financial Data

Consolidated Financial Statements(3) Information on dividends is as follows:(a) Dividends paid in the fiscal year ended March 31, 2022
Millions of yen (thousands of U.S. dollars), except per share amount (yen (U.S. dollars))
Resolution

Annual stockholders’ meeting held on
June 29, 2021
Board of Directors’ meeting held on
November 12, 2021

Type of shares

Aggregate amount ofdividends

Cash dividends per
share

Record dateCommon stock¥1,304 ($ 10,654)¥40.00 ($ 0.32)

March 31, 2021

June 30, 2021

Common stock¥1,305 ($ 10,662)¥40.00 ($ 0.32)

September 30,
2021

December 6, 2021

Effective date

Note: Aggregate amount of dividends resolved by the Board of Directors on November 12, 2021 includes dividends for the Bank’s shares held by the Director Remuneration BIP Trust of ¥2 million ($16
thousand).

(b) Dividends paid in the fiscal year ended March 31, 2021
Millions of yen, except per share amount (yen)Resolution

Annual stockholders’ meeting held on
June 26, 2020
Board of Directors’ meeting held on
November 12, 2020

Type of shares

Aggregate amount ofdividends

Cash dividends per
share

Common stock¥1,304¥40.00March 31, 2020

June 29, 2020

Common stock¥1,304¥40.00

September 30,
2020

December 7, 2020

Record date

Effective date(c) Dividends to be paid in the fiscal year ending March 31, 2023
Millions of yen (thousands of U.S. dollars), except per share amount (yen (U.S. dollars))
Resolution

Annual stockholders’ meeting held on
June 29, 2022

Aggregate amount ofdividends

Source ofdividends

Cash dividends per
share

Common stock ¥2,283 ($18,653)

Retainedearnings¥70.00 ($0.57) March 31, 2022 June 30, 2022

Type of shares

Record date

Effective date

Note: Aggregate amount of dividends includes dividends for the Bank’s shares held by the Director Remuneration BIP Trust of ¥5 million ($40 thousand).

9. STOCKHOLDERS’ EQUITY
Under the Banking Law of Japan and the Company Law, the entire amount of the issue price of shares is required to be accounted for as capital,
although the Bank may, by resolution of its Board of Directors, account for an amount not exceeding one half of the issue price of the new shares asadditional paid-in capital, which is included in capital surplus.
The Banking Law provides that an amount equal to at least 20% of cash dividends and other cash appropriations be appropriated and set
aside as legal earnings reserve until the total amount of legal earnings reserve and additional paid-in capital equals 100% of common stock. The total
amount of legal earnings reserve and additional paid-in capital of the Bank has reached 100% of common stock. Therefore, the Bank is not required
to provide additional legal earnings reserve.
The legal earnings reserve and additional paid-in capital may be used to eliminate or reduce a deficit by resolution of the stockholders’ meetingor may be capitalized by resolution of the Board of Directors. On condition that the total amount of legal earnings reserve and additional paid-in capitalremains equal to or more than 100% of common stock, they are available for distribution by resolution of the stockholders’ meeting. Legal earnings
reserve is included in retained earnings in the accompanying financial statements.
The maximum amount that the Bank can distribute as dividends is calculated based on the nonconsolidated financial statements of the Bank inaccordance with the Company Law.

10. SHARES OR INVESTMENTS IN CAPITAL OF UNCONSOLIDATED SUBSIDIARIES AND AFFILIATES
Shares or investments in capital of unconsolidated subsidiaries and affiliates at March 31, 2022 and 2021 were as follows:
Thousands of
U.S. dollars

Millions of yen

2022

Shares or investments in capital ................................................................................

¥

2021

2,979

¥

2,446

2022

$

24,340

11. NONPERFORMING CLAIMSThe Bank reported claims based on the Banking Act and the Act on Emergency Measures for the Revitalization of the Financial Functions at March
31, 2022 and 2021. The claims consisted of those recorded in the consolidated balance sheets as corporate bonds in “Securities” (limited to thosefor which redemption of the principal and payment of interest are guaranteed in whole or in part and are issued by private placement of securities
in accordance with Article 2, Paragraph 3 of the Financial Instruments and Exchange Act), loans and bills discounted, foreign exchanges, accrued
interest and suspense payments in “Other assets”, customers’ liabilities for acceptances and guarantees, and securities in lending securities
transactions indicated in the Notes (limited to those under loan for use or lease contracts).
Thousands of
U.S. dollars

Millions of yen

2022

Bankrupt or quasi-bankrupt claims ...........................................................................
Doubtful claims .........................................................................................................
Claims past due for three months or more ................................................................
Restructured claims ..................................................................................................
Total ......................................................................................................................

¥

¥

3,592
42,510161
7,226
53,491

2021

¥

¥

3,848
42,769167
5,361
52,1472022$$

29,348347,332
1,315
59,040437,053

Bankrupt or quasi-bankrupt claims are claims made against obligors who have fallen into bankruptcy for reasons such as the commencement ofbankruptcy proceedings or reorganization proceedings, or the petition for commencement of rehabilitation proceedings, and claims similar to these.
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Doubtful claims are claims that are made against obligors who are yet to have fallen into bankruptcy, but it is highly probable that the contractual
principal and interest cannot be collected/received due to deterioration of the obligor’s financial condition and business performance and those notclassified as bankrupt or quasi-bankrupt claims.
Claims past due for three months or more represent claims for which payments of principal or interest have been in arrears for three months or morefrom the day following the agreed-upon payment date, but do not meet the criteria for bankrupt, quasi-bankrupt claims or doubtful claims.
Restructured claims are claims that provide certain concession favorable to the obligors with the intent of facilitating the obligor’s restructuring orotherwise providing support, such as by reducing or exempting interest, postponing principal/interest payments, releasing credits, or providing otherbenefits and those that are not classified in any of the above categories.
The amounts of claims in the above table are before deduction of reserve for possible loan losses.
(Changes in presentation)“Cabinet Office Ordinance Partially Revising the Ordinance for Enforcement of the Banking Act” (Cabinet Office Ordinance No. 3, January 24, 2020)
became effective on March 31, 2022. Accordingly, the classification of “Risk management claims,” etc., under the Banking Act are presented inaccordance with the classification of claims requiring disclosure based on the Act on Emergency Measures for the Revitalization of Financial Functions
and other requirements.
Bills discounted are accounted for as financing transactions in accordance with “Treatment for Accounting and Auditing of Application of AccountingStandard for Financial Instruments in the Banking Industry” (JICPA Industry Audit Committee Report No. 24, March 17, 2022). This accounting treatment
gives the Bank the right to sell or pledge such bills without restrictions. The total face value of commercial bills and purchased foreign exchange bills
obtained as a result of discounting was ¥14,169 million ($115,769 thousand) and ¥12,797 million at March 31, 2022 and 2021, respectively.
Regarding loan participation and based on the “Accounting Treatment and Presentation of Loan Participation” (JICPA Accounting System Committee
Report No. 3, November 28, 2014), of the participating principal amount accounted for as loans and bills discounted with respect to the original debtor,
the amount recorded in the consolidated balance sheets was ¥3,602 million ($29,430 thousand) and ¥3,104 million at March 31, 2022 and 2021,
respectively.

12. PLEDGED ASSETS
Assets pledged as collateral at March 31, 2022 and 2021 were as follows:
Thousands of
U.S. dollars

Millions of yen

2022

Assets pledged as collateral:
Securities ..............................................................................................................
Loans and bills discounted....................................................................................
Other assets .........................................................................................................
Liabilities corresponding to assets pledged as collateral:
Deposits ...............................................................................................................
Payables under repurchase agreements ...............................................................
Payables under securities lending transactions .....................................................
Borrowed money ..................................................................................................

¥

2021

555,826
387,045
178

¥

2022

503,578
399,3111,978$

55,87837,077
106,465
620,012

107,874
12,742
102,432
700,899

4,541,433
3,162,390
1,454
881,395
104,109
836,931
5,726

In addition to the above, the following were pledged as collateral for transaction guarantees.
Thousands of
U.S. dollars

Millions of yen

2022

Other assets .............................................................................................................

¥

2021

21,514¥2022

20,144$

175,782

The following was pledged as collateral for borrowed money of ¥2,173 million ($17,754 thousand) and ¥2,847 million at March 31, 2022 and 2021,
respectively.
Thousands of
U.S. dollars

Millions of yen

2022

Unexpired lease contract claims ...............................................................................

¥

2021

3,085

¥

2022

3,752

$

25,206

Other assets included initial margins of futures markets and security deposits and other intangible fixed assets included key money as follows:
Thousands of
U.S. dollars

Millions of yen

2022

Initial margins of future markets.................................................................................
Security deposits ......................................................................................................
Key money ...............................................................................................................

¥

2021

762
977
447

¥

2022

664
968
450

$

6,225
7,982
3,652

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Financial Data

Consolidated Financial Statements

13. LOAN COMMITMENTS
Commitment line contracts on overdrafts and loans are agreements to lend to customers when they apply for borrowing up to a prescribed amountas long as there is no violation of any condition established in the contract. The amounts of unused commitments at March 31, 2022 and 2021
were ¥1,027,166 million ($8,392,564 thousand) and ¥980,457 million, respectively, and the amount of unused commitments whose original contract
terms were within one year or unconditionally cancelable at any time at March 31, 2022 and 2021 were ¥951,310 million ($7,772,775 thousand) and¥905,950 million, respectively.
Since many of these commitment line contracts are expected to expire without being drawn upon, the total amount of unused commitments
does not necessarily affect actual future cash flow.
Many of these commitments line contracts have clauses that allow the Group to reject the application from customers or reduce the contract
amounts if economic conditions change. In addition, the Group may request that customers pledge collateral such as real estate and securities or takeother necessary measures such as scrutinizing customers’ financial positions and revising contracts when the need to secure claims arises.

14. TANGIBLE FIXED ASSETS
Accumulated depreciation of tangible fixed assets was ¥44,248 million ($361,532 thousand) and ¥44,621 million at March 31, 2022 and 2021,
respectively. Accumulated capital gains directly offset against the acquisition cost of tangible fixed assets to obtain tax benefits were ¥806 million ($6,585
thousand) and ¥806 million at March 31, 2022 and 2021, respectively. For the fiscal years ended March 31, 2022 and 2021, the capital gain offset
from acquisition costs was nil and ¥62 million, respectively.

15. GUARANTEESThe amount guaranteed by the Bank for privately placed bonds (stipulated by Article 2, Paragraph 3 of the Financial Instruments Exchange Act)
included in “Bonds” of “Securities” was ¥43,674 million ($356,842 thousand) and ¥36,586 million at March 31, 2022 and 2021, respectively.

16. REVENUE(1) Revenue from contracts with customers
Ordinary income is not disclosed by disaggregating revenue from contracts with customers and other sources of revenue.
Revenue from contracts with customers on a disaggregated basis for the fiscal year ended March 31, 2022 was as follows:
Millions of yen

2022
Reportable segments
Banking

Fees and commissions .................................................................... ¥Deposit and loan services ............................................................
Exchange services .......................................................................
Trust related services ...................................................................
Securities related services ............................................................
Agency services...........................................................................
Custody and safe deposit box services ........................................
Guarantee services ......................................................................
Other ...........................................................................................
Ordinary income from contracts with customers .............................. ¥Ordinary income other than the above .............................................
Ordinary income from outside customers......................................... ¥

9,137
1,890
2,349
108
—
2,996
233
—
1,559
9,137
56,34665,483

Leasing

¥

¥
¥

Other

—
—
—
—
—
—
—
—
—
—
8,803
8,803

¥

1,676
—
—
—
283
—
—
—
1,392
1,676
1,568
3,244

¥
¥

Total

¥

¥
¥

10,813
1,890
2,349
108
283
2,996
233
—
2,951
10,81366,71877,531Thousands of U.S. dollars

2022
Reportable segments
Banking

Fees and commissions .................................................................... $Deposit and loan services ............................................................
Exchange services .......................................................................
Trust related services ...................................................................
Securities related services ............................................................
Agency services...........................................................................
Custody and safe deposit box services ........................................
Guarantee services ......................................................................
Other ...........................................................................................
Ordinary income from contracts with customers .............................. $Ordinary income other than the above .............................................
Ordinary income from outside customers......................................... $74,654
15,442
19,192882—
24,4791,903—
12,73774,654
460,380535,035

Leasing

$

$
$

—
—
—
—
—
—
—
—
—
—
71,92571,925

Other

$

$
$

13,693
—
—
—
2,312
—
—
—
11,373
13,693
12,811
26,505

Total

$

$
$

88,34815,442
19,192882
2,312
24,4791,903—
24,111
88,348545,126
633,474

Note: “Other” is business segments which are not included in the reportable segments and include the following services: credit guarantees, real estate leasing and management, software development,
credit cards and securities.

(2) Receivables from contracts with customers
Receivables from contracts with customers of ¥476 million ($3,889 thousand) as of March 31, 2022 was included in other assets.

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72

17. OTHER OPERATING INCOME
For the fiscal years ended March 31, 2022 and 2021, other operating income consisted of the following:Thousands of
U.S. dollars

Millions of yen

2022

Gains on sales of bonds ...........................................................................................
Other ........................................................................................................................
Total ......................................................................................................................

¥

2021

1,928
1,496
3,425

¥

¥

3,861
736
4,597

¥

2022

$
$

15,752
12,22327,984

18. OTHER INCOME
For the fiscal years ended March 31, 2022 and 2021, other income consisted of the following:Thousands of
U.S. dollars

Millions of yen

2022

Gains on sales of stocks and other securities............................................................
Recovery of written-off claims ...................................................................................
Other ........................................................................................................................
Total ......................................................................................................................

¥

2021

2,578
319
852
3,750

¥

¥

3,493
921
1,892
6,306

¥

2022

$

$

21,063
2,606
6,961
30,63919. OTHER OPERATING EXPENSES
For the fiscal years ended March 31, 2022 and 2021, other operating expenses consisted of the following:Thousands of
U.S. dollars

Millions of yen

2022

Losses on sales of bonds .........................................................................................
Other ........................................................................................................................
Total ......................................................................................................................

¥

2021

2,415
2
2,418

¥

¥

3,866
3
3,869

¥

2022

$
$

19,732
16
19,756

20. GENERAL AND ADMINISTRATIVE EXPENSES
For the fiscal years ended March 31, 2022 and 2021, general and administrative expenses consisted of the following:Thousands of
U.S. dollars

Millions of yen

2022

Salaries and allowances ............................................................................................
Retirement benefit costs ...........................................................................................
Other ........................................................................................................................
Total ......................................................................................................................

¥

2021

19,076
1,563
19,59440,234¥¥19,8591,616
20,147
41,622

¥

2022

$

$

155,862
12,770160,094
328,736

21. OTHER EXPENSES
For the fiscal years ended March 31, 2022 and 2021, other expenses consisted of the following:Thousands of
U.S. dollars

Millions of yen

2022

Write-offs of loans .....................................................................................................
Provision for possible loan losses ..............................................................................
Losses on sales of stocks and other securities .........................................................
Other ........................................................................................................................
Total ......................................................................................................................

¥

¥

2021

1,194
1,157
687
802
3,840

¥

938
2,599
2,457
1,251
7,245

¥

2022

$

$

9,755
9,453
5,613
6,552
31,375

22. IMPAIRMENT LOSSThe Group reports impairment loss for the following asset groups.
Fiscal year ended March 31, 2022
Thousands of
U.S. dollars

Millions of yen

RegionNara Prefecture - inside
Nara Prefecture - inside
Nara Prefecture - outside

Principle use

3 business stores etc.
1 idle asset
1 business store, etc.
Total

Type

Buildings, etc.
Land
Buildings, etc.

Impairment loss

¥

¥

34
11
16
62

$

$

277
89
130
506

Regarding the fixed assets above, due to the decline in operating cash flows and the reorganization of the store network, the Bank reduced thecarrying amount to the recoverable amount and reported the decrease as an impairment loss of ¥62 million ($506 thousand) in other expenses.
The Bank uses the grouping method of area and business store units because it continuously determines income and expenditure for each areaand for each business store. For idle assets, the grouping is carried out using each asset as the unit. Furthermore, the Headquarters, Administrative
Center, Training Center, etc., are assets that contribute to the generation of the future cash flows of multiple assets and asset groups, so they are
deemed to be corporate assets. Each subsidiary uses the grouping with each respective company as the unit.
The recoverable amount of impaired assets was measured at the net selling price or value in use, whichever was higher. Net selling prices were
calculated based on Real Estate Appraisal Standards, etc., and the value in use was computed by discounting future cash flows at 1.0% to 1.1%.

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Financial Data

Consolidated Financial Statements

Fiscal year ended March 31, 2021
Millions of yen

RegionNara Prefecture – inside

Principle use

10 business stores andHeadquarters, etc.
Total

Type

Impairment loss

Land and buildings, etc.

¥

389

¥

389

Regarding the fixed assets above, due to the decline in operating cash flows, the reorganization of the store network and changes in the use of theassets, the Bank reduced the carrying amounts to the recoverable amounts and reported the total decrease as an impairment loss of ¥389 million inother expenses.
The Bank uses the grouping method of area and business store units because it continuously determines income and expenditure for each areaand for each business store. For idle assets, the grouping is carried out using each asset as the unit. Furthermore, the Headquarters, Administrative
Center, Training Center, etc., are assets that contribute to the generation of the future cash flows of multiple assets and asset groups, so they are
deemed to be corporate assets. Each subsidiary uses the grouping with each respective company as the unit.
The recoverable amount of impaired assets was measured at the net selling prices or value in use, whichever was higher. Net selling prices were
calculated based on Real Estate Appraisal Standards, etc., and the value in use was computed by discounting future cash flows at 1.8%.

23. OTHER COMPREHENSIVE INCOME (LOSS)
The components of other comprehensive income (loss) for the fiscal years ended March 31, 2022 and 2021 were as follows:
Thousands of
U.S. dollars

Millions of yen

2022

Valuation difference on available-for-sale securities:
Gains (losses) incurred during the year ..................................................................
Reclassification adjustments to net income ...........................................................
Amount before tax effect ...................................................................................
Tax effect ..........................................................................................................
Valuation difference on available-for-sale securities ................................................
Deferred gains or losses on hedges
Gains (losses) incurred during the year ..................................................................
Reclassification adjustments to net income ...........................................................
Amount before tax effect ...................................................................................
Tax effect ..........................................................................................................
Deferred gains or losses on hedges ......................................................................
Adjustments for retirement benefits:
Gains (losses) incurred during the year ..................................................................
Reclassification adjustments to net income ...........................................................
Amount before tax effect ...................................................................................
Tax effect ..........................................................................................................
Adjustments for retirement benefits .......................................................................
Total other comprehensive income (loss) ...............................................................

¥

¥

2021

(22,457)(411)(22,868)
6,769(16,099)¥

39,930(998)
38,931(11,067)
27,8632022$(183,487)(3,358)(186,845)
55,306(131,538)

(448)
169
(278)
84
(193)

2,990
130
3,120
(948)
2,171

(3,660)1,380(2,271)686(1,576)

(14)
218
204
(62)
142
(16,151)

(72)
230
158
(48)
110
30,146

(114)
1,781
1,666
(506)
1,160
(131,963)¥$

24. STATEMENTS OF CASH FLOWS
The reconciliation between cash and due from banks in the consolidated balance sheets at March 31, 2022 and 2021 and cash and cash equivalentsin the consolidated statements of cash flows for the fiscal years then ended was as follows:
Thousands of
U.S. dollars

Millions of yen

2022

Cash and due from banks on the consolidated balance sheets.................................
Current deposits due from banks ..............................................................................
Time deposits due from banks ..................................................................................
Other due from banks ...............................................................................................
Cash and cash equivalents on the consolidated statements of cash flows ................

¥

¥

2021

1,495,598
(80)
(600)
(1,081)
1,493,835¥¥

1,191,207(1,114)(600)(1,126)
1,188,367

2022$ 12,219,936(653)(4,902)(8,832)$ 12,205,531

25. LEASE TRANSACTIONS
Operating leases
As lessee:
Future minimum lease payments under operating leases which were not cancelable at March 31, 2022 and 2021 were as follows:
Thousands of
U.S. dollars

Millions of yen

2022

Due within one year ..................................................................................................
Due after one year ....................................................................................................
Total ......................................................................................................................

¥
¥

211
793
1,004

2021

¥
¥

158
873
1,031

2022

$
$

1,723
6,479
8,203

As lessor:
There were no applicable matters to be noted regarding future minimum lease payments under operating leases which were not cancelable at March
31, 2022 and 2021.

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7426. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURESa. Status of financial instruments(1) Policy on financial instruments
The Group is composed of the Bank, its eleven (twelve in 2021) consolidated subsidiaries and its two (0 in 2021) affiliates accounted for by the equity
method and provides financial services such as banking, securities, leasing and credit guarantee services.
The Group’s major banking business includes (i) the acceptance of deposits, lending services, bills discounting and remittance, and (ii) theguarantee of debt, acceptance of bills and other services related to the banking business. The securities business includes underwriting and dealing
in securities, over-the-counter derivative transactions and other related services, including security index future transactions in accordance with the
Financial Instruments and Exchange Act.
The Bank, in addition to being a money lender and borrower in the interbank market to adjust its surpluses and deficits of funds, raises funds byloans and bonds with consideration for the financial market conditions and the balance of length.
The Bank conducts asset and liability management (ALM), identifying various types of risk exposures associated with the banking business as
the Bank holds financial assets and liabilities exposed to the market risk associated with fluctuation in interest rates. As part of its risk management,
the Bank utilizes derivative transactions such as interest rate swaps. The Bank also enters into derivative transactions for trading purposes with certain
position limits.
(2) Contents and risk of financial instruments
Financial assets held by the Group are composed mainly of loans to corporate and individual customers that are exposed to credit risk arising from
customer nonperformance. In addition, loan balances are significantly concentrated in Nara prefecture, where the head office of the Bank is located.
Accordingly, changes in the economic circumstances of the region could have a great impact on the credit risk.
Securities consist principally of Japanese government bonds, Japanese local government bonds, equity securities, foreign securities, investment
trusts that are classified as other securities (available-for-sale), private bonds guaranteed by the Bank that are classified as held-to-maturity debt
securities and Japanese government bonds classified as trading purpose securities. These securities are exposed to the credit risk of issuers and themarket risk of fluctuation in interest rates and market prices. Since financial assets denominated in foreign currencies are exposed to exchange raterisk, currency related derivative transactions are used to balance the amount of funding and amount of operations for each currency to reduce the risk.
In the banking business, financial liabilities consist principally of deposits from retail clients in Japan and are exposed to interest rate risk. In
addition, foreign currency deposits are exposed to exchange rate risk. With respect to borrowed money, the Group may be forced to raise funds underunfavorable conditions and, accordingly, become significantly exposed to liquidity risk if the fund raising capacity of the Group significantly declined
and led to the inability to repay under circumstances such as the significant deterioration of the financial position of the Group. Furthermore, borrowed
money with floating interest rates is exposed to interest rate risk.
Derivative transactions include interest rate swaps for interest rate related transactions, currency swaps and forward foreign exchangetransactions for currency related transactions, and bond future transactions and bond option transactions for bond related transactions. The Bankutilizes those derivative transactions in order to hedge the position of the customers as well as to capture various risks associated with transactions
with customers and control those risks properly. The Bank also uses derivatives for trading purposes with certain position limits.
The Bank applies the deferred hedge accounting method for derivative transactions when used as hedging instruments. Interest rate swaps
are used as hedging instruments to avoid interest rate risks of hedged items such as loans and deposits with fixed interest rates. Deferred hedge
accounting has been applied to derivatives used as hedging instruments.
The Bank assesses the effectiveness of hedges in offsetting movement in the fair value from changes in interest rates by classifying the hedged
items such as deposits and loans and the hedging instruments such as interest rate swaps by their maturity. For cash flow hedges, the Bank
assesses the effectiveness by verifying the correlation between the hedged items and the hedging instruments. Transactions which do not meetthe requirements of hedge accounting and derivative transactions for trading purposes are exposed to interest rate risk, foreign currency risk, pricefluctuation risk and credit risk.
(3) Risk management system for financial instruments
Credit risk management
The Group has established a framework for credit control which includes credit reviews for individual transactions, credit limits, credit information
management, internal credit ratings, guarantees and collateral and self-assessment in accordance with the Group’s “Rules on credit risk management”
and “Rules on self-assessment of assets.” These credit controls are performed by each branch and the Credit Analysis Division. The independent
Audit Department audits the status of credit risk controls and its results. The status of credit risk controls is periodically evaluated and reported to theManagement Directors’ Committee and board meeting.
Credit risks associated with the issuers of securities are managed by the Financial Investment Division and Risk Management Division. With
respect to the credit risks associated with the issuer of the securities and counterparty risk associated with derivative transactions, related credit
information and fair values of the securities are periodically checked to monitor those risks.
Market risk management(a) Interest rate risk
From the perspective of ALM, the Group manages market risk such as interest rate risk associated with assets and liabilities, including loans, deposits
and securities comprehensively. The Group’s “Rules on Market Risk Management” stipulates that the Bank makes efforts to manage the market sector
effectively, taking risk and reward into account as well as avoiding excessive risk taking by setting appropriate risk limits based on the Group’s ability totake risk and identifying market risk properly.
The ALM Committee, the decision making entity for the management of market risks, sets certain semiannual risk limits determined by VaR based
upon the Bank’s capital adequacy and market conditions. The Bank pursues profit opportunities within the risk limits. The Risk Management Divisionassesses interest rate risk by VaR, reports to the ALM Committee on a monthly basis and properly monitors its operations.
In addition to the VaR methodology, it utilizes a combination of the BPV (basis point value) methodology, simulations of interest rate fluctuations,and EVE (the decrease in economic value with respect to an interest rate shock), etc., to identify and analyze risk from a broader point of view.

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Financial Data

Consolidated Financial Statements(b) Foreign currency risk
With regard to foreign currency risk associated with operations and procurement of financial instruments denominated in foreign currency, theGroup manages risk by balancing the amount of funding and amount of operations for each currency. In addition, as for foreign currency exchangetransactions for investment purposes, the Risk Management Division assesses the foreign currency risk by VaR, reports to the ALM committee on amonthly basis and properly monitors its operations.
(c) Price fluctuation risk
With regard to investments in securities, the Group prepares its asset management plan semiannually and makes investment decisions at the ALM
Committee based upon expected returns and correlations between investment items and related market fluctuation risk. The Financial Investment
Division plays a part in investments for investment purposes, and the Corporate Business Division plays a part in investments for the purposeof business alliances and capital affiliation. Continuous monitoring of market conditions and restrictions on investments in riskier assets such as
securitized instruments help to avoid unnecessary price fluctuation risk.
The Risk Management Division assesses the price fluctuation risk of equity securities, etc., by VaR, reports monthly to the ALM Committee aboutcompliance with risk limits and properly manages the risk.
(d) Derivative transactions
With respect to derivative transactions for hedging purposes, the Group establishes internal rules defining the authority and hedge policies which aregoverned by the Risk Management Division. With respect to derivative transactions for trading purposes, certain trading limits and loss limit rules areset semiannually by the ALM Committee. The Risk Management Division, which serves as the middle office, monitors compliance and calculates thetotal amount of risk. The Financial Investment Division, which serves as the back office, checks each derivative transaction, marked-to-market position,and evaluates the profit and loss from the transactions on a daily basis. In addition to those functions, the related divisions check each other so as not
to exceed limits on loss.
The directors of the Bank are reported to from both the middle office and the back office and monitor the risks associated with the Bank’s
portfolio as a whole, including loans, deposits and securities at the ALM Committee.
(e) Quantitative information relating to market risk
The Group manages the quantity of market risk for financial instruments such as loans, deposits, securities and derivatives by VaR. To calculate VaR,
the Group has adopted the historical method (confidence level of 99%, observation period of 1,250 business days, holding period of 120 businessdays [holding period for equity securities other than purely for investment purposes are 240 business days] and the correlation of risk categories are
not considered.).
At March 31, 2022, the Group’s total market risk (decrease in estimated economic value) was ¥56,464 million ($461,344 thousand) (¥58,770
million in 2021). In addition, the Group conducted back tests comparing actual profit or loss with the VaR calculated by the model. However, VaR is astatistical measure of market risk based on past fluctuations in the market and certain probability of occurrence. It may not be possible to capture therisk if the market fluctuates rapidly under extraordinary circumstances.
Management of liquidity risk associated with financing activities
The Financial Investment Division manages the Bank’s cash position based upon the monthly funding plan designed by the ALM Committee, while theRisk Management Division monitors the situation. The ALM Committee manages financing risk comprehensively by understanding the amount of cash
for which the Bank can liquidate and also can raise from the market on a regular basis.
In addition, the Group categorizes its financing situation into “Regular Phase,” “Concern Phase” and “Crisis Phase” and prepares appropriate
management structures for each phase so that the Group can take proper action accordingly.
(4) Supplementary explanation on the fair value of financial instruments
Certain assumptions are used in measuring the fair value of financial instruments. Accordingly, the result of these fair value measurements may vary if
different assumptions are used.

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b. Fair value of financial instruments
The table below summarizes the carrying amounts, fair values and differences for financial instruments as of March 31, 2022 and 2021. Equity
securities, etc., with no market price and investments in partnerships are not included in the following table (see Note 1 below).
Cash and due from banks, debt purchased, foreign exchange in assets and negotiable certificates of deposit, call money and bills sold, payables
under repurchase agreements, payables under securities lending transactions and foreign exchange in liabilities, whose fair value approximatescarrying amount, and because they are settled within a short term, are also omitted.
Millions of yen

2022
Carrying amountMoney held in trust ..............................................................................................
Securities
Held-to-maturity debt securities .......................................................................
Available-for-sale securities ..............................................................................
Loans and bills discounted ..................................................................................
Reserve for possible loan losses (*1) ................................................................

¥

Total assets .........................................................................................................
Deposits ..............................................................................................................
Borrowed money .................................................................................................
Total liabilities .......................................................................................................
Derivative transactions (*2)
Hedge accounting not applied .........................................................................
Hedge accounting applied (*3) .........................................................................
Total derivative transactions .................................................................................

¥
¥
¥
¥
¥

44,01743,674
1,411,347
3,870,774(22,059)
3,848,714
5,347,754
5,647,407
709,227
6,356,634(4,297)
2,625(1,671)

Fair value¥

44,017

Difference¥

43,678
1,411,347

¥
¥
¥
¥
¥

3,853,164
5,352,208
5,647,422
709,201
6,356,623(4,297)
2,625(1,671)

—
4
—

¥
¥
¥
¥
¥

4,449
4,453
14
(26)
(11)
—
—
—

Millions of yen

2021
Carrying amountMoney held in trust ..............................................................................................
Securities
Held-to-maturity debt securities .......................................................................
Available-for-sale securities ..............................................................................
Loans and bills discounted ..................................................................................
Reserve for possible loan losses (*1) ................................................................

¥

Total assets .........................................................................................................
Deposits ..............................................................................................................
Borrowed money .................................................................................................
Total liabilities .......................................................................................................
Derivative transactions (*2)
Hedge accounting not applied .........................................................................
Hedge accounting applied (*4) .........................................................................
Total derivative transactions .................................................................................

¥
¥
¥
¥
¥

40,50036,586
1,380,014
3,786,878(21,385)
3,765,493
5,222,594
5,439,967
626,700
6,066,668(1,264)
2,902
1,637

Fair value¥

40,500Difference¥

36,634
1,380,014

¥
¥
¥
¥
¥

3,774,099
5,231,248
5,440,015
626,651
6,066,666(1,264)
2,902
1,637

—
48
—

¥
¥
¥
¥
¥

8,605
8,654
47
(48)
(1)
—
—
—

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Financial Data

Consolidated Financial Statements

Thousands of U.S. dollars

2022
Carrying amountMoney held in trust ..............................................................................................
Securities
Held-to-maturity debt securities .......................................................................
Available-for-sale securities ..............................................................................
Loans and bills discounted ..................................................................................
Reserve for possible loan losses (*1) ................................................................
Total assets .........................................................................................................
Deposits ..............................................................................................................
Borrowed money .................................................................................................
Total liabilities .......................................................................................................
Derivative transactions (*2)
Hedge accounting not applied .........................................................................
Hedge accounting applied (*3) .........................................................................
Total derivative transactions .................................................................................

$

Fair value

359,645$

Difference

359,645$356,842
11,531,554
31,626,554(180,235)
31,446,310$ 43,694,370$ 46,142,715
5,794,811$ 51,937,527

31,482,670$ 43,730,762$ 46,142,838
5,794,599$ 51,937,437

$

$

$

$

356,875
11,531,554(35,109)21,447(13,653)

$

—
32
—

(35,109)21,447(13,653)$

36,351
36,383
114
(212)
(89)

$
$

—
—
—

$

(*1) General reserve for possible loan losses and specific reserve for possible loan losses corresponding to loans are deducted.
(*2) Assets and liabilities arising from derivative transactions are presented on a net basis, and net liabilities are presented in parentheses.
(*3) These are interest rate swaps, etc., designated as hedging instruments in order to fix the cash flow from loans, etc., which are the hedged items, and mainly deferred hedge accounting is applied.
The “Practical Solution on the Treatment of Hedge Accounting for Financial Instruments that Reference LIBOR” (Practical Issues Task Force (PITF) No. 40, March 17, 2022) is applied to these
hedging relationships.
(*4) These are interest rate swaps, etc., designated as hedging instruments in order to fix the cash flow from loans, etc., which are the hedged items, and mainly deferred hedge accounting is applied.
The “Practical Solution on the Treatment of Hedge Accounting for Financial Instruments that Reference LIBOR” (PITF No. 40, September 29, 2020) is applied to these hedging relationships.

(Note 1) The carrying amount of equity securities, etc., with no market price and investments in partnerships as of March 31, 2022 and 2021 are set
forth in the table below. These amounts are not included in “Available-for-sale securities” in the table for fair value of financial instruments.
Carrying amountThousands of
U.S. dollars

Millions of yen

2022

Unlisted equity securities (*1) (*2) ..............................................................................
Investments in partnerships (*3) ................................................................................

¥

2021

1,605
13,889

¥

2022

1,688
10,071$

13,113
113,481(*1) Unlisted equity securities are not subject to fair value disclosure in accordance with Paragraph 5 of “Implementation Guidance on Disclosures about Fair Value of Financial Instruments” (ASBJ
Guidance No. 19, March 31, 2020).
(*2) The Group recognized impairment loss on unlisted equity securities of ¥108 million ($882 thousand) and ¥1 million for the fiscal years ended March 31, 2022 and 2021, respectively.
(*3) Investments in partnerships are not subject to fair value disclosure in accordance with Paragraph 27 of “Implementation Guidance on Accounting Standard for Fair Value Measurement” (ASBJ
Guidance No. 31, July 4, 2019).

(Note 2) Redemption schedule of monetary claims and securities with maturities
Millions of yen

2022
Due within one
year or lessDue from banks ...................................................... ¥ 1,439,653
Debt purchased ......................................................
1,466
Securities ...............................................................
69,900
Held-to-maturity debt securities ..........................
11,222
Bonds .............................................................
11,222Available-for-sale securities with contractual
58,678maturities ............................................................
Japanese government bonds..........................
12,500Japanese local government bonds..................
4,822
Corporate bonds ............................................
34,890
Other ..............................................................
6,465
491,586
Loans and bills discounted (*) .................................
Total ....................................................................... ¥ 2,002,607

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Due after one
year throughthree years

Due after three
years throughfive years

Due after five
years throughseven years

Due after sevenyears through ten
years

Due after ten
years

¥

¥

¥

¥

¥

¥

—
—
122,555
21,131
21,131——
19,56910,093
10,093——65,653
1,226
1,226

—
—
194,907————
232,878——

101,423

9,476

64,427

194,907

232,878

54,50024,542
14,425
7,955
740,993863,549

—
8,252
1,223
—
593,427
612,997—
43,752
6,200
14,474
379,604
445,258

20,000142,3131,900
30,693
405,578
600,485

34,0002,206
156,347
40,325
897,715¥ 1,130,593

¥

¥

¥

Millions of yen

2021
Due within one
year or lessDue from banks ...................................................... ¥ 1,137,792
Debt purchased ......................................................
1,827
Securities ...............................................................
64,148
Held-to-maturity debt securities ..........................
7,912
Bonds .............................................................
7,912
Available-for-sale securities with contractual
56,236maturities ............................................................
Japanese government bonds..........................
31,500Japanese local government bonds..................
18,215
Corporate bonds ............................................
3,405
Other ..............................................................
3,115
437,805
Loans and bills discounted (*) .................................
Total ....................................................................... ¥ 1,641,574

Due after one
year throughthree years

Due after three
years throughfive years

Due after five
years throughseven years

Due after sevenyears through ten
years

Due after ten
years

¥

¥

¥

¥

¥

¥

—
—
128,542
17,82017,820——62,525
9,917
9,917

—
—
18,069936
936——
207,673————
227,102——110,72152,60817,133

207,673

227,102

27,00026,63843,794
13,288715,438
843,980

40,000
6,282
6,326
—
622,734
685,260

—
1,062
5,000
11,071
406,843424,9135,000
134,183
3,000
65,490400,465
608,139

33,5002,647
156,859
34,095860,514¥ 1,087,616

¥

¥

¥

Thousands of U.S. dollars

2022
Due within one
year or lessDue from banks ...................................................... $ 11,762,831
Debt purchased ......................................................
11,978
Securities ...............................................................
571,125
Held-to-maturity debt securities ..........................
91,690Bonds .............................................................
91,690Available-for-sale securities with contractual
479,434
maturities ............................................................
Japanese government bonds..........................
102,132
Japanese local government bonds..................
39,398
Corporate bonds ............................................
285,072
Other ..............................................................
52,822
4,016,553
Loans and bills discounted (*) .................................
Total ....................................................................... $ 16,362,505

Due after one
year throughthree years

Due after three
years throughfive years

Due after five
years throughseven years

Due after sevenyears through ten
years

Due after ten
years

$

$

$

$

$

—
—
1,001,348
172,652
172,652——
159,890
82,46582,465——
536,424
10,017
10,017——
1,592,507————
1,902,753——

828,686

77,424526,407

1,592,507

1,902,753

445,297
200,522
117,860
64,997
6,054,359$ 7,055,715—
67,423
9,992—
4,848,655$ 5,008,554—
357,480
50,657
118,261
3,101,593$ 3,638,025

163,412
1,162,782
15,524
250,780
3,313,816$ 4,906,324

277,800
18,024
1,277,449
329,479
7,334,872$ 9,237,625(*) Loans from “bankrupt,” “effectively bankrupt” and “likely to become bankrupt” borrowers, which are not expected to be repaid, amounting to ¥40,871 million ($333,940 thousand) and ¥36,696
million at March 31, 2022 and 2021, respectively, are not included.
Loans whose payment terms were not determined amounting to ¥320,997 million ($2,622,738 thousand) and ¥306,379 million at March 31, 2022 and 2021, respectively, are not included.

(Note 3) Redemption schedule of borrowed money and interest bearing liabilities
Millions of yen

2022
Due within one
year or less

Deposits (*) ............................................................. ¥ 5,194,750
Negotiable certificates of deposit ............................
7,540
Call money and bills sold ........................................
176,835
Payables under repurchase agreements .................
12,742
Payables under securities lending transactions .......
102,432
458,150
Borrowed money ....................................................
Total ....................................................................... ¥ 5,952,451

Due after one
year throughthree years

Due after three
years throughfive years

Due after five
years throughseven years

Due after sevenyears through ten
years

Due after ten
years

¥

¥

¥

¥

¥

¥

405,250————
187,693592,943¥

47,406————60,936108,343

¥

—
—
—
—
—
—
—

¥

—
—
—
—
—
2,447
2,447

¥

—
—
—
—
—
—
—

Millions of yen

2021
Due within one
year or less

Deposits (*) ............................................................. ¥ 5,023,510
Negotiable certificates of deposit ............................
4,040
Call money and bills sold ........................................
—
Payables under repurchase agreements .................
37,077
Payables under securities lending transactions .......
106,465
415,634
Borrowed money ....................................................
Total ....................................................................... ¥ 5,586,727

Due after one
year throughthree years

Due after three
years throughfive years

Due after five
years throughseven years

Due after sevenyears through ten
years

Due after ten
years

¥

¥

¥

¥

¥

¥

366,353————
22,861
389,215¥

50,104————
185,965
236,069

¥

—
—
—
—
—
25
25

¥

—
—
—
—
—
2,214
2,214

¥

—
—
—
—
—
—
—

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Financial Data

Consolidated Financial Statements

Thousands of U.S. dollars

2022
Due within one
year or less

Deposits (*) ............................................................. $ 42,444,235
Negotiable certificates of deposit ............................
61,606
Call money and bills sold ........................................
1,444,848
Payables under repurchase agreements .................
104,109
Payables under securities lending transactions .......
836,9313,743,361
Borrowed money ....................................................
Total ....................................................................... $ 48,635,109

Due after one
year throughthree years

Due after three
years throughfive years

Due after five
years throughseven years

Due after sevenyears through ten
years

$

$

$

$

$

3,311,136————
1,533,564
4,844,701$

387,335————
497,883885,227

—
—
—
—
—
—
—

$

$

—
—
—
—
—
19,99319,993Due after ten
years

$

—
—
—
—
—
—
—

$

(*) Demand deposits are included in “Due within one year or less.”c. Financial instruments categorized by fair value hierarchy
The fair value of financial instruments is categorized into the following three levels depending on the observability and materiality of the inputs used to
calculate fair value.
Level 1: Fair values measured by using observable inputs that are quoted prices in active markets for identical assets or liabilities
Level 2: Fair values measured by using observable inputs other than those included within Level 1
Level 3: Fair values measured by using unobservable inputs
In cases where multiple inputs with a material impact on the fair value measurement are used, the fair value is classified into the lowest level fromwhich significant inputs were used.
(1) Financial instruments carried at fair value in the consolidated balance sheet
Millions of yen

2022
Fair value
Level 1

Money held in trust (trading purposes and other) .............................
Securities
Available-for-sale securities (*1)
Japanese government bonds and Japanese local government
bonds, etc. ..............................................................................
Corporate bonds .....................................................................
Stocks .....................................................................................
Other .......................................................................................
Derivative transactions
Interest rate related ......................................................................
Currency related ..........................................................................
Total assets .....................................................................................
Derivative transactions (*2)
Interest rate related ......................................................................
Currency related ..........................................................................
Total liabilities ...................................................................................

¥¥

Level 2

9,200¥

Level 328,756

¥

Total

—

¥

37,957

120,589

224,764—

345,354—
73,292
43,792

217,10850
49,772———

217,108
73,342
93,564——
246,875

3,170
1,797
525,419

—
—
—

3,170
1,797
772,295

¥

—
—
—

¥

¥
¥
¥

267
6,373
6,640

¥
¥
¥

¥

—
—
—

¥
¥

—

$

267
6,373
6,640

Thousands of U.S. dollars

2022
Fair value
Level 1

Money held in trust (trading purposes and other) .............................
Securities
Available-for-sale securities (*1)
Japanese government bonds and Japanese local government
bonds, etc. ..............................................................................
Corporate bonds .....................................................................
Stocks .....................................................................................
Other .......................................................................................
Derivative transactions
Interest rate related ......................................................................
Currency related ..........................................................................
Total assets .....................................................................................
Derivative transactions (*2)
Interest rate related ......................................................................
Currency related ..........................................................................
Total liabilities ...................................................................................

$

$
$
$

Level 275,169$234,953

Level 3$

Total

310,131985,284

1,836,457—

2,821,750—
598,839
357,807

1,773,903
408
406,667———

1,773,903
599,248
764,474——
2,017,117

25,90014,682
4,292,989———

25,90014,682
6,310,115

—
—
—

$
$
$

2,181
52,071
54,252

$
$
$

—
—
—

$
$
$

2,181
52,071
54,252(*1) Investment trusts, etc., to which the transitional treatment prescribed in Paragraph 26 of the “Implementation Guidance on Accounting Standard for Fair Value Measurement” (ASBJ Guidance No.
31, July 4, 2019) is applied are not included in the above table. The amount of such investment trusts, etc., in the consolidated balance sheet at March 31, 2022 was ¥688,038 million ($5,621,684
thousand).
(*2) The amount of derivative transactions to which hedge accounting is applied in the consolidated balance sheet at March 31, 2022 was ¥2,625 million ($21,447 thousand).

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(2) Financial instruments not carried at fair value in the consolidated balance sheet
Millions of yen

2022
Fair value
Level 1

Securities
Held-to-maturity debt securities
Corporate bonds .....................................................................
Loans and bills discounted ..............................................................
Total assets .....................................................................................
Deposits ..........................................................................................
Borrowed money .............................................................................
Total liabilities ...................................................................................

¥

Level 2

—
—
—
—
—
—

¥
¥
¥

¥
¥
¥
¥

Level 3—47,44447,444
5,647,422
703,425
6,350,847¥

43,6783,805,719
3,849,398
—
5,775
5,775

¥
¥
¥

Total

¥
¥
¥
¥

43,6783,853,164
3,896,842
5,647,422
709,201
6,356,623

Thousands of U.S. dollars

2022
Fair value
Level 1

Securities
Held-to-maturity debt securities
Corporate bonds .....................................................................
Loans and bills discounted ..............................................................
Total assets .....................................................................................
Deposits ..........................................................................................
Borrowed money .............................................................................
Total liabilities ...................................................................................

$
$
$
$

Level 2

—
—
—
—
—
—

$
$
$
$

—
387,646
387,646
46,142,838
5,747,405
51,890,244

Level 3$$$$356,875
31,095,015
31,451,899—
47,18547,185

Total

$
$
$
$

356,875
31,482,670
31,839,545
46,142,838
5,794,599
51,937,437(Note) Valuation techniques and inputs used in fair value measurement
AssetsMoney held in trust:
The fair value of securities managed as trust assets in individually managed money held in trust primarily for securities management purposes isdetermined based the price provided by the financial institutions, and classified according to the level of their components.
Money held in trust categorized by holding purposes is described in Note 27, “SECURITIES AND MONEY HELD IN TRUST.”
Securities:
The fair value of securities with unadjusted quoted prices in active markets are classified as Level 1. This includes mainly listed equity securities andJapanese government bonds.
Even when there are published quoted prices, however, fair values arising from markets that are not active are classified as Level 2. This mainly
includes Japanese local government bonds, corporate bonds and residential mortgage-backed securities.
The fair value of investment trusts is determined using the published standard quotation pursuant to the transitional treatment prescribed in
Paragraph 26 of the Accounting Standard for Fair Value Measurement and is not classified by level.
The fair value of private bonds guaranteed by the Bank is calculated by discounting the total amount of principal and interest at an interest
rate applicable to new similar bonds, following a division into certain periods, redemption methods and guarantee classification. For private bonds
guaranteed by the Bank issued by “bankrupt,” “effectively bankrupt” and “likely to become bankrupt” borrowers, an estimated loan loss is calculated
based on either a present value of estimated future cash flows or an amount expected to be recovered from collateral and guarantees. Therefore, theirfair value approximates the carrying amount of claims at the balance sheet date less reserve for possible loan losses, and such amount is used as fairvalue. The fair value of private bonds guaranteed by the Bank is classified as Level 3.
Securities categorized by the purpose for which they are held are described in Note 27, “SECURITIES AND MONEY HELD IN TRUST.”
Loans and bills discounted:
The fair value of loans and bills discounted is calculated by discounting the total amount of principal and interest at a discounted rate, that is a market
interest rate adjusted for credit risk, etc., following a division into loan type, internal rating and period. For loans with floating interest rates whichreflect market interest rates within a short period of time, fair value approximates carrying amount as long as the credit standing of the borrowers has
not changed significantly from the time of the transaction, therefore the carrying amount is used as the fair value. For loans to “bankrupt,” “effectively
bankrupt” and “likely to become bankrupt” borrowers, the fair value is calculated based on the discounted present value of the estimated future cash
flows or that using an amount expected to be recovered from collateral and guarantees. These are classified as Level 3.
The fair value of embedded derivative loans is determined based on the discounted present value of future cash flows or a value calculated by
option pricing models, etc., using observable inputs, such as interest rates, and are classified as Level 2.
Liabilities
Deposits:
For demand deposits, the amount required to be paid if demanded on the consolidated balance sheet date is deemed to be the fair value. The fairvalue of time deposits is determined based on the present value by discounting future cash flows classified by a certain period. The interest rateapplicable to new deposits is used as the discount rate. For deposits whose contract period is short (within a year), the fair value approximatescarrying amount, which is therefore used as the fair value.
These are classified as Level 2.

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Financial Data

Consolidated Financial Statements

Borrowed money:
The fair value of borrowed money is based on the net present value calculated by discounting the total amount of principal and interest classified bya certain period at an interest rate that takes the remaining period and credit risk into account. For borrowed money with floating interest rates whichreflect market interest rates within a short period of time, the fair value is deemed to approximate the carrying amount as long as the credit standing of
the Bank and its consolidated subsidiaries has not changed significantly after the transaction. In the cases, the carrying amount is used as fair value.
For borrowed money whose contract period is short (within a year), the fair value approximates the carrying amount, which is therefore used as fairvalue.
These are classified mainly as Level 2.
Derivative transactions:
The fair value of derivative transactions with unadjusted quoted prices in active markets available is classified as Level 1. This includes mainly bondfutures transactions and interest rate futures transactions.
However, as most derivatives are over-the-counter transactions and there are no published quoted prices, the fair value is determined based ona discounted present value of future cash flows or a value calculated by option pricing models, etc., depending on the transaction type and the period
to maturity. In cases in which unobservable inputs are not used or their impact is immaterial, fair value is classified as Level 2. These cases include
plain vanilla interest rate swaps and forward foreign exchange contracts. In addition, in cases in which significant unobservable inputs are used, the fairvalue is classified as Level 3.

27. SECURITIES AND MONEY HELD IN TRUSTThe securities in this note include “Trading account securities” and beneficial interests in trust assets under “Debt purchased,” in addition to “Securities”
classified on the consolidated balance sheets.
(1) Trading account securities and securities with available fair values at March 31, 2022 and 2021
(a) Trading securities
Not applicable for the fiscal years ended March 31, 2022 and 2021.
(b) Held-to-maturity debt securities
Millions of yen

2022
Carrying amount

Fair value

Unrealized gains (losses)

Fair value exceeding carrying amount:
Corporate bonds ...........................................................................
Subtotal.........................................................................................

¥¥

21,07521,075¥¥

21,108
21,108¥¥32
32

Fair value not exceeding carrying amount:
Corporate bonds ...........................................................................
Subtotal.........................................................................................
Total ..............................................................................................

¥¥¥

22,59822,59843,674¥¥¥22,56922,56943,678

¥
¥
¥

(28)
(28)
4

Millions of yen

2021
Carrying amount

Fair value

Unrealized gains (losses)

Fair value exceeding carrying amount:
Corporate bonds ...........................................................................
Subtotal.........................................................................................

¥¥

33,12833,128¥¥33,19133,191¥¥

62
62

Fair value not exceeding carrying amount:
Corporate bonds ...........................................................................
Subtotal.........................................................................................
Total ..............................................................................................

¥
¥
¥

3,458
3,458
36,586

¥
¥
¥

3,443
3,443
36,634

¥
¥
¥

(14)
(14)
48

Thousands of U.S. dollars

2022
Carrying amount

Fair value

Unrealized gains (losses)

Fair value exceeding carrying amount:
Corporate bonds ...........................................................................
Subtotal.........................................................................................

$$

172,195
172,195$$

172,465
172,465

$
$

261
261

Fair value not exceeding carrying amount:
Corporate bonds ...........................................................................
Subtotal.........................................................................................
Total ..............................................................................................

$$$

184,639
184,639
356,842$$$

184,402
184,402356,875

$
$
$

(228)
(228)
32

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(c) Available-for-sale securities
Millions of yen

2022

Carrying amount exceeding acquisition cost:
Stocks ...........................................................................................
Bonds ...........................................................................................
Japanese government bonds ....................................................
Japanese local government bonds ............................................
Japanese corporate bonds ........................................................
Others ...........................................................................................
Foreign securities included .........................................................
Subtotal.........................................................................................
Carrying amount not exceeding acquisition cost:
Stocks ...........................................................................................
Bonds ...........................................................................................
Japanese government bonds ....................................................
Japanese local government bonds ............................................
Japanese corporate bonds ........................................................
Others ...........................................................................................
Foreign securities included .........................................................
Subtotal.........................................................................................
Total ..............................................................................................

Carrying amount

Acquisition cost

¥

¥

¥

¥

¥
¥

71,051
206,577
68,00255,70482,87095,78817,905
373,4172,290
355,884
52,587
169,059
134,237
679,755
83,276
1,037,930
1,411,347

¥

¥

¥
¥

31,526
204,585
67,12055,272
82,192
92,645
17,828
328,7562,547
360,183
54,007
170,679
135,497
700,840
90,215
1,063,572
1,392,328

Unrealized gains (losses)

¥

¥

¥

¥
¥

39,525
1,992
882
432
678
3,142
77
44,660(257)(4,298)(1,419)(1,619)(1,259)(21,085)(6,938)(25,641)
19,019Millions of yen

2021

Carrying amount exceeding acquisition cost:
Stocks ...........................................................................................
Bonds ...........................................................................................
Japanese government bonds ....................................................
Japanese local government bonds ............................................
Japanese corporate bonds ........................................................
Others ...........................................................................................
Foreign securities included .........................................................
Subtotal.........................................................................................
Carrying amount not exceeding acquisition cost:
Stocks ...........................................................................................
Bonds ...........................................................................................
Japanese government bonds ....................................................
Japanese local government bonds ............................................
Japanese corporate bonds ........................................................
Others ...........................................................................................
Foreign securities included .........................................................
Subtotal.........................................................................................
Total ..............................................................................................

Carrying amount

Acquisition cost

¥

¥

¥

¥

¥
¥

79,031
330,549
100,423
101,588
128,538
500,188
62,643909,769

1,202
218,746
38,03888,092
92,616250,296
73,980470,245
1,380,014

¥

¥

¥
¥

36,336
326,506
98,672
100,662
127,171491,264
60,797854,107

1,302
219,728
38,401
88,38492,942
263,444
79,644484,476
1,338,583

Unrealized gains (losses)

¥

¥

¥

¥
¥

42,695
4,042
1,750
925
1,366
8,924
1,846
55,662

(100)
(982)
(363)
(292)
(325)
(13,148)(5,664)(14,230)
41,431

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Consolidated Financial Statements

Thousands of U.S. dollars

2022

Carrying amount exceeding acquisition cost:
Stocks ...........................................................................................
Bonds ...........................................................................................
Japanese government bonds ....................................................
Japanese local government bonds ............................................
Japanese corporate bonds ........................................................
Others ...........................................................................................
Foreign securities included .........................................................
Subtotal.........................................................................................
Carrying amount not exceeding acquisition cost:
Stocks ...........................................................................................
Bonds ...........................................................................................
Japanese government bonds ....................................................
Japanese local government bonds ............................................
Japanese corporate bonds ........................................................
Others ...........................................................................................
Foreign securities included .........................................................
Subtotal.........................................................................................
Total ..............................................................................................

Carrying amount

Acquisition cost

$

$

$

580,529
1,687,858
555,617455,135
677,097782,645
146,294
3,051,041$

18,7102,907,786
429,667
1,381,313
1,096,797
5,554,007
680,415$ 8,480,513$ 11,531,554

257,586
1,671,582
548,410451,605
671,558
756,965
145,6652,686,134$$

20,8102,942,912
441,269
1,394,550
1,107,092
5,726,284
737,110$ 8,690,023$ 11,376,158

Unrealized gains (losses)

$

$

$

$
$

322,943
16,275
7,206
3,529
5,539
25,672629
364,899(2,099)(35,117)(11,594)(13,228)(10,286)(172,277)(56,687)(209,502)
155,396

No securities loaned under unsecured securities lending transactions were included at March 31, 2022. Such securities were included in Japanese
government bonds under “Securities” in the amount of ¥40,582 million at March 31, 2021.
(2) Held-to-maturity debt securities sold for the fiscal years ended March 31, 2022 and 2021
Millions of yen

2022
Sales amount

Bonds ...........................................................................................
Japanese corporate bonds ........................................................
Total ..............................................................................................

¥
¥

654
654
654

Gains on sales

Losses on sales

¥

¥

656
656
656

¥

¥

2
2
2

Millions of yen

2021
Sales amount

Bonds ...........................................................................................
Japanese corporate bonds ........................................................
Total ..............................................................................................

¥
¥

175
175
175

Gains on sales

Losses on sales

¥

¥

175
175
175

¥

¥

0
0
0

Thousands of U.S. dollars

2022
Sales amount

Bonds ...........................................................................................
Japanese corporate bonds ........................................................
Total ..............................................................................................

$
$

5,343
5,343
5,343

Gains on sales

Losses on sales

$

$

5,359
5,359
5,359

$

$

16
16
16

(Reason for sale) Sales of Japanese corporate bonds comprise retirement by purchase of private bonds.
(3) Available-for-sale securities sold for the fiscal years ended March 31, 2022 and 2021
Millions of yen

2022
Sales amount

Stocks ...........................................................................................
Bonds ...........................................................................................
Japanese government bonds ....................................................
Japanese local government bonds ............................................
Japanese corporate bonds ........................................................
Others ...........................................................................................
Foreign securities included .........................................................
Total ..............................................................................................

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¥

¥

5,042
51,56651,356179
30
123,283
96,006
179,892

Gains on sales

Losses on sales

¥

¥

¥

1,309
148
148
—
—
3,045
2,241
4,504

¥

53
8
7
0
0
3,040
2,408
3,102

Millions of yen

2021
Sales amount

Stocks ...........................................................................................
Bonds ...........................................................................................
Japanese government bonds ....................................................
Japanese local government bonds ............................................
Japanese corporate bonds ........................................................
Others ...........................................................................................
Foreign securities included .........................................................
Total ..............................................................................................

¥

¥

5,790
82,96882,681
179
107
291,086
241,444379,845

Gains on sales

Losses on sales

¥

¥

1,399
219
219
—
—
5,735
4,787
7,354

¥

128
0
—
0
0
6,195
629
6,324

¥

Thousands of U.S. dollars

2022
Sales amount

Stocks ...........................................................................................
Bonds ...........................................................................................
Japanese government bonds ....................................................
Japanese local government bonds ............................................
Japanese corporate bonds ........................................................
Others ...........................................................................................
Foreign securities included .........................................................
Total ..............................................................................................

$$

41,196421,325
419,609
1,462
245
1,007,296
784,426
1,469,825

Gains on sales

Losses on sales$$

10,695
1,209
1,209
—
—
24,87918,31036,800

$

433
65
57
0
0
24,83819,67425,345$(4) Money held in trust at March 31, 2022 and 2021
Money held in trust for trading purposes
Thousands of
U.S. dollars

Millions of yen

2022

Carrying amount (fair value) .......................................................................................
Amount of net unrealized gains (losses) included in the consolidated
statements of income ...............................................................................................

¥

2021

22,000¥2022

38,000$179,753

(58)

358

2,925

Money held in trust for purposes other than trading or held-to-maturity
Thousands of
U.S. dollars

Millions of yen

2022

Carrying amount .......................................................................................................
Acquisition cost ........................................................................................................
Difference .................................................................................................................
Unrealized gain .....................................................................................................
Unrealized loss......................................................................................................

¥

2021

22,01722,473
(455)
—
(455)

¥

2,500
2,500
—
—
—

2022

$

179,892
183,617(3,717)—(3,717)

The principal amount in trust with contracts to compensate losses on the principal was as follows:
Thousands of
U.S. dollars

Millions of yen

2022

Money held in trust ...................................................................................................

¥

2021

5,467

¥

6,265

2022

$

44,668(5) Components of the valuation difference on available-for-sale securities recorded under net assets at March 31, 2022 and 2021
Thousands of
U.S. dollars

Millions of yen

2022

Valuation difference ...................................................................................................
Deferred tax liabilities ................................................................................................
Valuation difference on available-for-sale securities before adjustment fornoncontrolling interests .............................................................................................
Noncontrolling interests adjustment ..........................................................................
Valuation difference on available-for-sale securities ...................................................

2021

2022

¥

18,562(3,440)¥41,431(10,209)$

151,662(28,106)¥

15,121¥

31,221$

123,547¥—
15,121¥—
31,221$—
123,547(6) Securities reclassified for the fiscal years ended March 31, 2022 and 2021
Not applicable.

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Consolidated Financial Statements(7) Impairment loss on securities
In the event that the fair value of securities other than securities held for trading purpose (excluding stocks, etc. that do not have a market price andinvestments in partnerships) declines significantly from the acquisition cost and the fair value is not expected to recover, such securities are stated atfair value and the difference between the fair value and the acquisition cost is recognized as loss in the period of the decline (“impairment loss”). The fairvalue is regarded as “significantly declined” when (i) the fair value as of the end of the fiscal year has declined by more than 50% of the acquisition cost or (ii)the fair value as of the end of the fiscal year has declined by more than 30% but less than 50% of the acquisition cost, and is not expected to recover
within one year. The Bank recognized impairment loss on stocks of ¥143 million ($1,168 thousand) and ¥33 million for the fiscal years ended March 31,
2022 and 2021, respectively.

28. DERIVATIVE TRANSACTIONS(1) Derivative contracts to which hedge accounting is not appliedWith respect to derivatives to which hedge accounting is not applied, the contract amount or notional principal amount defined in the contract, fairvalue and unrealized gains (losses) by transaction type as of March 31, 2022 and 2021 were as follows.
Note that the contract amount does not represent the market risk exposure of the derivative transactions themselves.
(a) Interest rate related transactions
Millions of yen

2022

Category

Transaction typeInterest rate futures
Exchange
Sold ................................................................
transactions
Bought ...........................................................
Interest rate options
Sold ................................................................
Bought ...........................................................
Over-the-counter Forward rate agreements
Sold ................................................................
transactions
Bought ...........................................................
Interest rate swaps
Receive fixed rate/pay floating rate .................
Receive floating rate/pay fixed rate .................
Receive floating rate/pay floating rate..............
Interest rate options
Sold ................................................................
Bought ...........................................................
Other
Sold ................................................................
Bought ...........................................................
Total ................................................................................................

Contract amount¥¥Contract amount due
after one year

Unrealized gains(losses)

Fair value

—
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

36,68038,409—¥36,68038,243
—

¥

(78)
357
—

¥

(78)
357
—

—
—

—
—

—
—

—
—

—
—
—

—
—
—

—
—
278

—
—
278

¥

¥

¥

Millions of yen

2021

Category

Transaction typeInterest rate futures
Exchange
Sold ................................................................
transactions
Bought ...........................................................
Interest rate options
Sold ................................................................
Bought ...........................................................
Over-the-counter Forward rate agreements
Sold ................................................................
transactions
Bought ...........................................................
Interest rate swaps
Receive fixed rate/pay floating rate .................
Receive floating rate/pay fixed rate .................
Receive floating rate/pay floating rate..............
Interest rate options
Sold ................................................................
Bought ...........................................................
Other
Sold ................................................................
Bought ...........................................................
Total ................................................................................................

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Contract amount¥¥Contract amount due
after one year

Unrealized gains(losses)

Fair value

—
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

25,44528,084—¥25,44527,758
—

¥

257
(102)
—

¥

257
(102)
—

—
—

—
—

—
—

—
—

—
—
—

—
—
—

—
—
154

—
—
154

¥

¥

¥

Thousands of U.S. dollars

2022

Category

Transaction typeInterest rate futures
Exchange
Sold ................................................................
transactions
Bought ...........................................................
Interest rate options
Sold ................................................................
Bought ...........................................................
Over-the-counter Forward rate agreements
Sold ................................................................
transactions
Bought ...........................................................
Interest rate swaps
Receive fixed rate/pay floating rate .................
Receive floating rate/pay fixed rate .................
Receive floating rate/pay floating rate..............
Interest rate options
Sold ................................................................
Bought ...........................................................
Other
Sold ................................................................
Bought ...........................................................
Total ................................................................................................

Contract amount$$Contract amount due
after one year

Unrealized gains(losses)

Fair value

—
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

299,697
313,824—$

299,697
312,468
—

$

(637)
2,916
—

$

(637)
2,916
—

—
—

—
—

—
—

—
—

—
—
—

—
—
—

—
—
2,271

—
—
2,271

$

$

$

Notes: 1. The above transactions are measured at fair value, and unrealized gains (losses), except as in Note 2 below, are recognized in the consolidated statements of income.
2. The following amounts for which the application of hedge accounting was cancelled since the requirements for hedge accounting were not met were included in “Receive floating rate/pay
fixed rate” of interest rate swaps.
Thousands ofMillions of yen
U.S. dollars

2022

Contract amount ......................................................................................................
Fair value ..................................................................................................................
Unrealized gains (losses) ...........................................................................................

¥

2021

¥

1,729
(49)
(49)

2022

2,638
(87)
(87)

$

14,126(400)(400)

The following unrealized gains (losses) on “Receive floating rate/pay fixed rate” were deferred over the hedge period due to the cancellation.
Thousands of
U.S. dollars

Millions of yen

2022

Unrealized gains (losses) ...........................................................................................

¥

2021

¥

81

2022

(118)

$

661

(b) Currency related transactions
Millions of yen

2022

Category

Transaction type
Currency futures
Exchange
Sold ................................................................
transactions
Bought ...........................................................
Currency options
Sold ................................................................
Bought ...........................................................
Over-the-counter Currency swaps .................................................
Forward foreign exchange contracts
transactions
Sold ................................................................
Bought ..........................................................
Currency options
Sold ................................................................
Bought ...........................................................
Other
Sold ................................................................
Bought ...........................................................
Total ................................................................................................

Contract amount¥¥Contract amount due
after one year

Unrealized gains(losses)

Fair value

—
—

—
—

—
—

—
—

—
—
522,426——
435,097——(3,084)——(3,084)¥¥¥35,135
10,835

10,4198,828(2,397)905(2,397)
905

—
—

—
—

—
—

—
—

—
—
—

—
—
—

—
—
(4,575)——(4,575)

¥

¥

¥

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Consolidated Financial Statements

Millions of yen

2021

Category

Transaction type
Currency futures
Exchange
Sold ................................................................
transactions
Bought ...........................................................
Currency options
Sold ................................................................
Bought ...........................................................
Over-the-counter Currency swaps .................................................
Forward foreign exchange contracts
transactions
Sold ................................................................
Bought ..........................................................
Currency options
Sold ................................................................
Bought ...........................................................
Other
Sold ................................................................
Bought ...........................................................
Total ................................................................................................

Contract amount¥¥Contract amount due
after one year

Unrealized gains(losses)

Fair value

—
—

—
—

—
—

—
—

—
—
514,988——348,172——(1,148)——(1,148)¥¥¥19,07911,421

8,801
8,026

(418)
147

(418)
147

—
—

—
—

—
—

—
—

—
—
—

—
—
—

—
—
(1,419)——(1,419)¥¥¥Thousands of U.S. dollars

2022

Category

Transaction type
Currency futures
Exchange
Sold ................................................................
transactions
Bought ...........................................................
Currency options
Sold ................................................................
Bought ...........................................................
Over-the-counter Currency swaps .................................................
Forward foreign exchange contracts
transactions
Sold ................................................................
Bought ..........................................................
Currency options
Sold ................................................................
Bought ...........................................................
Other
Sold ................................................................
Bought ...........................................................
Total ................................................................................................

Contract amountContract amount due
after one year

—
—

—
—

—
—

—
—

—
—
$ 4,268,535——$ 3,555,004——(25,198)——(25,198)

287,074
88,52885,12972,130(19,584)
7,394(19,584)
7,394

—
—

—
—

—
—

—
—

—
—
—

—
—
—

—
—
37,380——37,380$$Note: The above transactions are measured at fair value, and unrealized gains (losses) are recognized in the consolidated statements of income.

(c) Stock related transactions
None.
(d) Bond related transactions
None.
(e) Commodity related transactions
None.
(f) Credit derivative transactions
None.

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Unrealized gains(losses)

Fair value

$

$

$

$

(2) Derivative contracts to which hedge accounting is appliedWith respect to derivatives to which hedge accounting is applied, the contract amount or notional principal amount defined in the contract, and fairvalue by transaction type and by hedge accounting method as of March 31, 2022 and 2021 were as follows. Note that the contract amount does not
represent the market risk exposure of the derivative transactions themselves.
(a) Interest rate related transactions
Millions of yen

2022

Hedge accounting method
Fundamental method

Exceptional accounting
method for interest rate
swaps
Total

Transaction typeInterest rate swaps:
Receive fixed rate/pay
floating rate
Receive floating rate/pay
fixed rate
Interest rate futures
Interest rate options
Other
Interest rate swaps
Receive fixed rate/pay
floating rate
Receive floating rate/pay
fixed rate

Major hedged items
Interest bearing
assets and liabilities
such as loans,
deposits, andsecurities
denominated inforeign currencies

Contract amountContract amount due
after one year—¥

25,065

Fair value—¥

25,060

—
¥

2,625

—
—
—

—
—
—

—
—
—

—

—

—

—

—
—

¥

—

—
¥

—

—
¥

2,625

Millions of yen

2021

Hedge accounting method
Fundamental method

Exceptional accounting
method for interest rate
swaps
Total

Transaction typeInterest rate swaps:
Receive fixed rate/pay
floating rate
Receive floating rate/pay
fixed rate
Interest rate futures
Interest rate options
Other
Interest rate swaps
Receive fixed rate/pay
floating rate
Receive floating rate/pay
fixed rate

Major hedged items
Interest bearing
assets andliabilities such asloans, deposits,
and securities
denominated inforeign currencies

Contract amountContract amount due
after one year—¥

17,971

Fair value—¥

17,971

—
¥

2,902

—
—
—

—
—
—

—
—
—

—

—

—

—

—

—

—

—

¥

—

¥

—

¥

2,902

Thousands of U.S. dollars

2022

Hedge accounting method
Fundamental method

Exceptional accounting
method for interest rate
swaps
Total

Transaction typeInterest rate swaps:
Receive fixed rate/pay
floating rate
Receive floating rate/pay
fixed rate
Interest rate futures
Interest rate options
Other
Interest rate swaps
Receive fixed rate/pay
floating rate
Receive floating rate/pay
fixed rate

Major hedged items
Interest bearing
assets and liabilities
such as loans,
deposits, andsecurities
denominated inforeign currencies

Contract amountContract amount due
after one year—$

204,796

Fair value—$

204,755—$

21,447

—
—
—

—
—
—

—
—
—

—

—

—

—

—
—

$

—

—
$

—

—
$

21,447

Note: Gain/loss on the above contracts is principally deferred until the maturity of the hedged items under the fundamental method in accordance with the “Treatment for Accounting and Auditing ofApplication of Accounting Standard for Financial Instruments in the Banking Industry” (JICPA Industry Audit Committee Report No. 24, March 17, 2022).

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Consolidated Financial Statements(b) Currency related transactions
None.
(c) Stock related transactions
None.
(d) Bond related transactions
None.

29. PROJECTED BENEFIT OBLIGATIONS(1) Outline of employees’ retirement allowance
The Bank provides a non-contributory unfunded lump-sum retirement allowance plan, a funded defined benefit pension plan, and a funded defined
contribution pension plan for employees.
On April 1, 2018, the Bank transferred its defined benefit pension plans to risk sharing pension plans and defined contribution pension plansclassified as a defined contribution plan provided in Paragraph 4 of “Accounting Standard for Retirement Benefits” (ASBJ Statement No. 26, December
16, 2016). In addition, a plan similar to a cash balance plan has been introduced to some of the employees subject to the risk sharing pension plans.
In addition to the amounts that are equivalent to standard contributions, the Bank makes contributions to risk sharing pension plans that arecommensurate with risks as prescribed in the plan terms. Benefits from the risk sharing pension plans increase or decrease each fiscal year based on
the assets of the pension plan.
Under the plan similar to a cash balance plan, a virtual individual account balance corresponding to the funded amounts and source of pension
funds will be set up for each participant, and after retirement, interest principally based on market interest rate trends will be credited to the balance.
Eleven consolidated subsidiaries have non-contributory unfunded lump-sum retirement allowance plans as defined benefit plans and apply thesimplified method in the calculation of their liability for retirement benefits and retirement benefit costs using the method in which the necessary amounts
to be paid for retirement benefits on a voluntary basis is regarded as the retirement benefit obligations.
Certain consolidated subsidiaries have adopted funded defined contribution pension plans and participate in the Smaller Enterprise Retirement
Allowance Mutual Aid Scheme (the “SERAMA Scheme”).
(2) Defined benefit plans(a) Movement in projected benefit obligations
Thousands of
U.S. dollars

Millions of yen

2022

Balance at the beginning of the fiscal year ................................................................
Service cost ..........................................................................................................
Interest cost ..........................................................................................................
Actuarial loss (gain) ...............................................................................................
Benefits paid .........................................................................................................
Prior service costs.................................................................................................
Balance at the end of the fiscal year..........................................................................

¥

¥

2021

12,072
627
80
14
(601)
—
12,191¥

12,028
645
80
72
(754)
—
12,072

¥

2022

$

$

98,635
5,122
653
114
(4,910)—99,607

Note: Plans based on the simplified method have been included in the above.

(b) Movements in plan assets
Not applicable for the fiscal years ended March 31, 2022 and 2021.
(c) Reconciliation from projected benefit obligations and plan assets to liability (asset) for retirement benefits
Thousands of
U.S. dollars

Millions of yen

2022

Funded projected benefit obligations ........................................................................
Plan assets ...............................................................................................................
Funded assets under the SERAMA Scheme .............................................................
Unfunded projected benefit obligations .....................................................................
Net liability (assets) for retirement benefits recorded on the consolidatedbalance sheet ...........................................................................................................
Liability for retirement benefits ...................................................................................
Asset for retirement benefits .....................................................................................
Net liability (assets) for retirement benefits recorded on the consolidatedbalance sheet ...........................................................................................................
Note: Plans based on the simplified method have been included in the above.

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2021

2022

¥

448
—
(215)
232
11,743

¥

415
—
(199)
216
11,656$

3,660—(1,756)
1,895
95,947¥

11,976¥

11,872$97,851¥

11,976—¥

11,872—$97,851—¥

11,976¥

11,872$97,851

(d) Retirement benefit costs
Thousands of
U.S. dollars

Millions of yen

2022

Service cost ..............................................................................................................
Interest cost ..............................................................................................................
Expected return on plan assets.................................................................................
Net actuarial loss amortization ..................................................................................
Amortization of prior service costs ............................................................................
Total retirement benefit costs ....................................................................................

¥

2021

627
80
—
218
—
925

¥

2022

¥

645
80
—
230
—
956

¥

$

$

5,122
653
—
1,781
—
7,557

Note: Retirement benefit costs of consolidated subsidiaries which have applied the simplified method are included in “Service cost.”(e) Adjustments for retirement benefits
The components of adjustments for retirement benefits (before tax effect) were as follows:
Thousands of
U.S. dollars

Millions of yen

2022

Actuarial gain (loss) ...................................................................................................
Total..........................................................................................................................

¥
¥

2021

204
204

2022

¥
¥

158
158

$
$

1,666
1,666

(f) Accumulated adjustments for retirement benefits
The components of accumulated adjustments for retirement benefits (before tax effect) were as follows:
Thousands of
U.S. dollars

Millions of yen

2022

Unrecognized actuarial gain (loss) .............................................................................
Total..........................................................................................................................

¥
¥

2021

(784)
(784)

¥
¥

2022

(988)
(988)

$
$

(6,405)(6,405)(g) Plan assets
Not applicable for the fiscal years ended March 31, 2022 and 2021.
(h) Actuarial assumptions
The principal actuarial assumptions for the fiscal years ended March 31, 2022 and 2021 were as follows:
Discount rate ............................................................................................................................................
Long-term expected rate of return ............................................................................................................
Estimated rate of increase in salary ...........................................................................................................

2022

2021

0.70%
—%
2.50%

0.70%
—%
2.50%

(3) Defined contribution plans(a) Retirement benefit costs for defined contribution plans
The amounts paid to defined contribution plans by the Bank and its consolidated subsidiaries which have newly adopted defined contribution plansfrom the fiscal year ended March 31, 2022 was ¥642 million ($5,245 thousand) and ¥661 million for the fiscal years ended March 31, 2022 and 2021,
respectively.
(b) The amounts equivalent to contributions commensurate with risks
The contributions that are commensurate with risks required to be contributed from the next fiscal year onwards are ¥1,140 million ($9,314 thousand),and the number of years remaining for contributions equivalent to the contributions that are commensurate with risks is seven and a half years.

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Financial Data

Consolidated Financial Statements

30. STOCK OPTIONS(1) Items and amounts expensed related to stock options
Thousands of
U.S. dollars

Millions of yen

2022

General and administrative expenses ........................................................................

¥

2021

3

¥

2022

16

$

24

Note: On August 31, 2021, the Bank abolished a system of stock options granted as stock-based compensation and shifted to a performance-linked stock compensation plan.

(2) Stock options outstanding at March 31, 2022(a) Outline of stock options
Beneficiaries qualifying for stock option rights are entitled to acquire shares of common stock upon the exercise of their rights. The following tablesummarizes the number of shares upon exercise of the stock option rights granted by the Bank outstanding at March 31, 2022:

Stock options

Persons granted

Number ofoptions granted(Note)

2010
Stock Options

15 directorsof the Bank

2011
Stock Options

Date of
grant

Exercise
price

ExerciseperiodVesting
conditions

Target ofservice period

Common stock
9,440 shares

July 29, 2010¥1($0.00)From July 30, 2010
to July 29, 2040

Not definedNot defined

14 directorsof the Bank

Common stock
10,940 shares

July 29, 2011¥1($0.00)From July 30, 2011
to July 29, 2041

Not definedNot defined2012
Stock Options

15 directorsof the Bank

Common stock
13,620 shares

July 27, 2012¥1($0.00)From July 28, 2012
to July 27, 2042

Not definedNot defined2013
Stock Options

15 directorsof the Bank

Common stock
11,950 shares

July 26, 2013¥1($0.00)From July 27, 2013
to July 26, 2043

Not definedNot defined2014
Stock Options

14 directors(excluding
outside directors)of the Bank

Common stock
9,970 shares

July 25, 2014¥1($0.00)From July 26, 2014
to July 25, 2044

Not definedNot defined2015
Stock Options

13 directors(excluding
outside directors)of the Bank

Common stock
8,400 shares

July 24, 2015

¥1($0.00)From July 25, 2015
to July 24, 2045

Not definedNot defined2016
Stock Options

7 directors(excluding
outside directors)of the Bank

Common stock
6,560 shares

July 29, 2016¥1($0.00)From July 30, 2016
to July 29, 2046

Not definedNot defined2017
Stock Options

7 directors(excluding
outside directors)of the Bank

Common stock
6,910 shares

July 28, 2017¥1($0.00)From July 29, 2017
to July 28, 2047

Not definedNot defined2018
Stock Options

7 directors(excluding
outside directors)of the Bank

Common stock
7,800 shares

July 27, 2018¥1($0.00)From July 28, 2018
to July 27, 2048

Not definedNot defined2019
Stock Options

6 directors(excluding
outside directors)of the Bank

Common stock
10,170 shares

July 26, 2019¥1($0.00)From July 27, 2019
to July 26, 2049

Not definedNot defined2020
Stock Options

6 directors(excluding
outside directors)of the Bank

Common stock
10,410 shares

July 22, 2020

¥1($0.00)From July 23, 2020
to July 22, 2050

Not definedNot definedNote: The number of stock options has been converted to the number of shares after the one-for-ten reverse stock split implemented on October 1, 2016.

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(b) Stock option activity:
1) Number of stock options
Number of shares

2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Stock Options Stock Options Stock Options Stock Options Stock Options Stock Options Stock Options Stock Options Stock Options Stock Options Stock Options

Nonvested
March 31, 2021 – Outstanding .....
Granted ...................................
Forfeited ..................................
Vested .....................................
March 31, 2022 – Outstanding .....
VestedMarch 31, 2021 – Outstanding .....
Vested .....................................
Exercised ................................
Forfeited ..................................
March 31, 2022 – Outstanding .....

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

2,603
—
—
2,603
—

590
—
—
590
—

740
—
—
740
—

870
—
—
870
—

770
—
—
770
—

750
—
—
750
—

1,050
—
—
1,050
—

1,260
—
—
1,260
—

2,010
—
670
1,340
—

3,180
—
1,670
1,510
—

8,200
—
2,910
5,290
—

7,807
2,603
4,610
5,800
—

Notes: 1. The number of stock options has been converted to the number of shares after the one-for-ten reverse stock split implemented on October 1, 2016.
2. “Forfeited” under “Vested” refers to unexercised stock acquisition rights that have been granted in connection with the abolition of the system of stock options granted as stock-based
compensation and the introduction of the performance-linked stock compensation plan and that were waived on the condition that the corresponding number of points under the
performance-linked stock compensation plan be granted to those who had not exercised their stock acquisition rights.

2) Price information
Yen

2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Stock Options Stock Options Stock Options Stock Options Stock Options Stock Options Stock Options Stock Options Stock Options Stock Options Stock Options

Exercise price ...........................
Average stock price at exercise date ....
Fair value price at grant date .....

¥

1 ¥
1 ¥
1 ¥
1 ¥
1 ¥
1 ¥
1 ¥
1 ¥
1 ¥
1 ¥
1
—
—
—
—
—
—
—
1,837
1,837
1,837
1,837
4,410
3,860
3,030
3,720
4,010
3,970
3,660
2,861
2,663
1,787
1,485
U.S. dollars

2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Stock Options Stock Options Stock Options Stock Options Stock Options Stock Options Stock Options Stock Options Stock Options Stock Options Stock Options

Exercise price ...........................
Average stock price at exercise date ....
Fair value price at grant date .....

$

0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
—
—
—
—
—
—
—
15.00
15.00
15.00
15.00
36.03
31.53
24.75
30.39
32.76
32.43
29.90
23,37
21.75
14.60
12.13

Note: “Average stock price at exercise date” and “Fair value price at grant date” have been calculated after the one-for-ten reverse stock split implemented on October 1, 2016.

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Financial Data

Consolidated Financial Statements

31. INCOME TAXESThe Group is subject to a number of taxes based on income, including corporation tax, inhabitant tax and enterprise tax, which, in the aggregate,
indicate a statutory tax rate in Japan of approximately 30.4 % for the fiscal years ended March 31, 2022 and 2021.
(1) Significant components of deferred tax assets and liabilities as of March 31, 2022 and 2021 were as follows:
Thousands of
U.S. dollars

Millions of yen

2022

Deferred tax assets:
Excess reserve for possible loan losses.................................................................
Liability for retirement benefits ...............................................................................
Depreciation..........................................................................................................
Write-down of land................................................................................................
Impairment loss ....................................................................................................
Valuation loss on securities ...................................................................................
Tax loss carryforwards ..........................................................................................
Other ....................................................................................................................
Subtotal deferred tax assets: .................................................................................
Valuation allowance pertaining to tax loss carryforwards (Note 3) ..........................
Valuation allowance pertaining to total of deductible temporary differences, etc. ...
Subtotal valuation allowance .....................................................................................
Total deferred tax assets ........................................................................................
Deferred tax liabilities:
Valuation difference on available-for-sale securities ................................................
Deferred gains or losses on hedges ......................................................................
Other ....................................................................................................................
Total deferred tax liabilities ....................................................................................
Net deferred tax assets (liabilities) (Note 1)...........................................................

¥

2021

7,442
3,651
733
875
1,388
2,805
559
2,384
19,840(541)(7,686)(8,228)
11,612(3,440)(792)(143)(4,377)
7,235

¥

¥

¥

2022

7,252
3,619
737
872
1,430
2,757
428
2,323
19,422(425)(7,245)(7,671)
11,751$(10,209)(877)(63)(11,151)
600

60,80529,8305,989
7,149
11,34022,9184,567
19,478
162,104(4,420)(62,799)(67,227)
94,877(28,106)(6,471)(1,168)(35,762)
59,114$

Notes: 1. Net deferred tax assets (liabilities) as of March 31, 2022 and 2021 are included in the following accounts in the consolidated balance sheets:
Thousands of
U.S. dollars

Millions of yen

2022

Deferred tax assets ...................................................................................................
Deferred tax liabilities ................................................................................................

¥

2021

7,247
12

¥

2022

1,054
454

$

59,21298

2. As described in Note 4, “CHANGES IN ACCOUNTING POLICIES,” the Group has changed the criteria for recognizing income from installment sales transactions from the fiscal year ended
March 31, 2022. Accordingly, the figures for the fiscal year ended March 31, 2021 after retrospectively applying this change are presented in the above table.
3. Amount of tax loss carryforwards and their deferred tax assets by carryforwards period
Millions of yen

2022

Tax loss carryforwards (*)...
Valuation allowance .........
Deferred tax assets..........

One year or less

After one year
After two years
After three years
through two years through three years through four years

After four years
through five years

After five years

¥

¥

¥

¥

—
—
—

—
—
—

¥

—
—
—

¥

—
—
—

—
—
—

559
(541)
18

Total

¥

559
(541)
18

Millions of yen

2021

Tax loss carryforwards (*)...
Valuation allowance .........
Deferred tax assets..........

One year or less

After one year
After two years
After three years
through two years through three years through four years

After four years
through five years

After five years

¥

¥

¥

¥

—
—
—

—
—
—

¥

—
—
—

¥

—
—
—

—
—
—

428
(425)
3

Total

¥

428
(425)
3

Thousands of U.S. dollars

2022

Tax loss carryforwards (*)...
Valuation allowance .........
Deferred tax assets..........

One year or less

After one year
After two years
After three years
through two years through three years through four years

After four years
through five years

After five years

$

$

$

$

—
—
—

—
—
—

$

(*) The tax loss carryforwards are the amounts multiplied by the statutory tax rate.

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—
—
—

$

—
—
—

—
—
—

4,567
(4,420)
147

Total

$

4,567
(4,420)147

(2) Significant differences between the statutory tax rate and the effective tax rate for financial statement purposes for the fiscal years
ended March 31, 2022 and 2021
2022

2021

30.4%
3.0%
0.1%
(0.7)%
0.4%
0.3%
33.7%

30.4%
(1.4)%
0.1%(0.7)%
0.4%
0.3%
29.2%

Statutory tax rate ......................................................................................................................................
Valuation allowance...............................................................................................................................
Non-deductible expenses .....................................................................................................................
Non-taxable income..............................................................................................................................
Inhabitant tax on per capita basis, etc. ..................................................................................................
Other ....................................................................................................................................................
Effective tax rate .......................................................................................................................................

32. SEGMENT AND RELATED INFORMATION(1) Overview of the reportable segments
The Bank’s reportable segments are determined on the basis that separate financial information for such segments is available and examined
periodically by the Board of Directors to make decisions regarding the allocation of management resources and assess the business performance ofthe segments within the Group. The Group’s main operations are banking services. The Bank also provides leasing services and operates securities
services, credit card services, and consulting services. The Group has divided its business operations into the two reportable segments of “Banking”
and “Leasing.”(2) Basis of measurement for reported segment profit (loss), segment assets, segment liabilities and other material items
The accounting methods used for reportable business segments are presented in accordance with Note 2, “SUMMARY OF SIGNIFICANTACCOUNTING POLICIES.” The reportable segment profit figures are based on ordinary profit. Income arising from intersegment transactions is basedon arm’s length prices.
(Changes in measurement method of profit (loss) of reportable segments)
As described in Note 4, “CHANGES IN ACCOUNTING POLICIES,” the Group has changed the criteria for recognizing income from installment sales
transactions in the leasing business from the fiscal year ended March 31, 2022. Accordingly, segment information for the fiscal year ended March
31, 2021 is presented in accordance with the new measurement method for profit (loss). As a result of this change, ordinary income from outside
customers, segment assets and tax expense in the leasing business increased by ¥28 million, ¥111 million and ¥8 million, respectively from theamounts that would have been reported without the change.
(3) Reportable segment profit (loss), segment assets, segment liabilities and other material items
Segment information for the fiscal years ended March 31, 2022 and 2021 is summarized as follows:
Millions of yen

2022
Reportable segments
Banking

Ordinary income:Outside customers ......................................... ¥ 65,483
1,402Intersegment income ......................................
Total ............................................................ ¥ 66,886
Segment profit .................................................... ¥ 17,455
Segment assets.................................................. 6,981,997
Segment liabilities ............................................... 6,706,723
Others:Depreciation ...................................................
3,107
Interest income ...............................................
48,920Interest expense .............................................
906
Extraordinary gain ...........................................
85
Extraordinary loss ...........................................
128
Tax expense ...................................................
5,550
2,766
Increase in tangible and intangible fixed assets ...

Leasing

¥
¥
¥

Total

8,773
695
9,468
306
39,22034,364¥74,256
2,098¥ 76,354¥ 17,761
7,021,218
6,741,088

91
5
80
—
0
93
133

3,199
48,925
987
85
128
5,643
2,899

Other

¥
¥
¥

Total

3,186
2,733
5,919
1,567
31,582
13,358¥77,442
4,831¥ 82,274¥ 19,329
7,052,800
6,754,446

113
739
6
160
92
376
67

3,313
49,664
994
246
220
6,020
2,967

Adjustment¥¥¥

Consolidated

88 ¥ 77,531(4,831)—(4,742) ¥ 77,531(1,347) ¥ 17,981(51,359) 7,001,441(39,479) 6,714,967(16)(1,478)
(91)
(160)
(63)
21
(4)

3,296
48,185
902
85
156
6,042
2,963

Notes: 1. Ordinary income (“Total income” less extraordinary gain included in “Other income” in the consolidated statements of income) is presented in place of net sales of operating companies of otherindustry groups.
2. “Other” includes business segments which are not included in the reportable segments and comprises credit guarantees, real estate leasing and management, software development, credit
cards and securities.
3. Adjustments are as below:(1) Adjustment of ordinary income from outside customers of ¥88 million is mainly the recovery of written-off claims included in “Others.”(2) Adjustment of segment profit of ¥(1,347) million is the elimination of intersegment transactions.
(3) Adjustment of segment assets of ¥(51,359) million is the elimination of intersegment transactions.
(4) Adjustment of segment liabilities of ¥(39,479) million is the elimination of intersegment transactions and the adjustment of liability for retirement benefits.
(5) Adjustment of depreciation of ¥(16) million is the elimination of intersegment transactions.
(6) Adjustment of interest income of ¥(1,478) million is the elimination of intersegment transactions.
(7) Adjustment of interest expense of ¥(91) million is the elimination of intersegment transactions.
(8) Adjustment of extraordinary gain of ¥(160) million is the elimination of intersegment transactions.
(9) Adjustment of extraordinary loss of ¥(63) million is the elimination of intersegment transactions.
(10) Adjustment of tax expense of ¥21 million is the elimination of intersegment transactions.
(11) Adjustment of increase in tangible and intangible fixed assets of ¥(4) million is due to intersegment transactions.
4. Segment profit is reconciled to ordinary profit, which represents ordinary income less ordinary expenses. Ordinary expenses represent “Total expenses” less extraordinary loss included in “Other
expenses” in the consolidated statements of income. Therefore, consolidated segment profit, which shows ordinary profit, is reconciled to “Income before income taxes” through the addition/
deduction of extraordinary gain/loss, net.

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Millions of yen

2021
Reportable segments
Banking

Ordinary income:Outside customers ......................................... ¥ 69,680
1,127Intersegment income ......................................
Total ............................................................ ¥ 70,808
Segment profit .................................................... ¥ 14,967
Segment assets.................................................. 6,542,567
Segment liabilities ............................................... 6,260,077
Others:Depreciation ...................................................
3,383
Interest income ...............................................
48,645Interest expense .............................................
1,264
Extraordinary gain ...........................................
92
Extraordinary loss ...........................................
444
Tax expense ...................................................
3,984
1,778
Increase in tangible and intangible fixed assets ...

Leasing

¥
¥
¥

Total

Other

8,487
788
9,275
410
38,36033,573¥78,167
1,915¥ 80,083¥ 15,378
6,580,927
6,293,651

98
5
84
—
0
129
51

3,481
48,650
1,348
92
444
4,114
1,830

¥
¥
¥

Total

2,960
2,664
5,625
1,294
31,767
13,357¥

81,1284,580¥ 85,708¥ 16,672
6,612,694
6,307,008

113
547
7
0
4
355
66

3,595
49,198
1,355
93
449
4,470
1,896

Adjustment¥¥¥

Consolidated

98 ¥ 81,227(4,580)—(4,481) ¥ 81,227(928) ¥ 15,744(52,351)
6,560,343(40,224)
6,266,784(20)(1,077)
(96)
(28)
—
27
(44)

3,574
48,121
1,258
64
449
4,497
1,852

Notes: 1. Ordinary income (“Total income” less extraordinary gain included in “Other income” in the consolidated statements of income) is presented in place of net sales of operating companies of otherindustry groups.
2. “Other” includes business segments which are not included in the reportable segments and comprises credit guarantees, real estate leasing and management, software development, credit
cards and securities.
3. Adjustments are as below:(1) Adjustment of ordinary income from outside customers of ¥98 million is mainly the recovery of written-off claims included in “Others.”(2) Adjustment of segment profit of ¥(928) million is the elimination of intersegment transactions.
(3) Adjustment of segment assets of ¥(52,351) million is the elimination of intersegment transactions.
(4) Adjustment of segment liabilities of ¥(40,224) million is the elimination of intersegment transactions and the adjustment of liability for retirement benefits.
(5) Adjustment of depreciation of ¥(20) million is the elimination of intersegment transactions.
(6) Adjustment of interest income of ¥(1,077) million is the elimination of intersegment transactions.
(7) Adjustment of interest expense of ¥(96) million is the elimination of intersegment transactions.
(8) Adjustment of extraordinary gain of ¥(28) million is the elimination of intersegment transactions.
(9) Adjustment of tax expense of ¥27 million is the elimination of intersegment transactions.
(10) Adjustment of increase in tangible and intangible fixed assets of ¥(44) million is due to intersegment transactions.
4. Segment profit is reconciled to ordinary profit, which represents ordinary income less ordinary expenses. Ordinary expenses represent “Total expenses” less extraordinary loss included in “Other
expenses” in the consolidated statements of income. Therefore, consolidated segment profit, which shows ordinary profit, is reconciled to “Income before income taxes” through the addition/
deduction of extraordinary gain/loss, net.
Thousands of U.S. dollars

2022
Reportable segments
Banking

Ordinary income:Outside customers .........................................
Intersegment income ......................................
Total ............................................................
Segment profit ....................................................
Segment assets..................................................
Segment liabilities ...............................................
Others:Depreciation ...................................................
Interest income ...............................................
Interest expense .............................................
Extraordinary gain ...........................................
Extraordinary loss ...........................................
Tax expense ...................................................
Increase in tangible and intangible fixed assets ...

Leasing

Total$ 535,035
11,455$ 546,498$ 142,617
57,047,119
54,797,965

71,6805,678$ 77,359$
2,500
320,451
280,774

25,386
399,705
7,402
694
1,045
45,346
22,599

743
40
653
—
0
759
1,086

$

Other

Total

$ 606,716
17,141$ 623,858$ 145,118
57,367,579
55,078,748

26,031
22,330$ 48,361$ 12,803
258,043
109,142

26,137399,746
8,064
694
1,045
46,106
23,686

923
6,038
49
1,307
751
3,072
547

$

Adjustment

Consolidated$ 632,747
39,472$ 672,228$ 157,929
57,625,623
55,187,891

719(39,472)$ (38,744)$ (11,005)(419,633)(322,567)$ 633,474—$ 633,474$ 146,915
57,205,989
54,865,323

27,069405,784
8,121
2,009
1,797
49,187
24,242(130)(12,076)(743)(1,307)
(514)
171
(32)

26,930393,700
7,369
694
1,274
49,36624,209$Notes: 1. Ordinary income (“Total income” less extraordinary gain included in “Other income” in the consolidated statements of income) is presented in place of net sales of operating companies of otherindustry groups.
2. “Other” includes business segments which are not included in the reportable segments and comprises credit guarantees, real estate leasing and management, software development, credit
cards and securities.
3. Adjustments are as below:(1) Adjustment of ordinary income from outside customers of $719 thousand is mainly the recovery of written-off claims included in “Others.”(2) Adjustment of segment profit of $(11,005) thousand is the elimination of intersegment transactions.
(3) Adjustment of segment assets of $(419,633) thousand is the elimination of intersegment transactions.
(4) Adjustment of segment liabilities of $(322,567) thousand is the elimination of intersegment transactions and the adjustment of liability for retirement benefits.
(5) Adjustment of depreciation of $(130) thousand is the elimination of intersegment transactions.
(6) Adjustment of interest income of $(12,076) thousand is the elimination of intersegment transactions.
(7) Adjustment of interest expense of $(743) thousand is the elimination of intersegment transactions.
(8) Adjustment of extraordinary gain of $(1,307) thousand is the elimination of intersegment transactions.
(9) Adjustment of extraordinary loss of $(514) thousand is the elimination of intersegment transactions.
(10) Adjustment of tax expense of $171 thousand is the elimination of intersegment transactions.
(11) Adjustment of increase in tangible and intangible fixed assets of $(32) thousand is due to intersegment transactions.
4. Segment profit is reconciled to ordinary profit, which represents ordinary income less ordinary expenses. Ordinary expenses represent “Total expenses” less extraordinary loss included in “Other
expenses” in the consolidated statements of income. Therefore, consolidated segment profit, which shows ordinary profit, is reconciled to “Income before income taxes” through the addition/
deduction of extraordinary gain/loss, net.

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96

(4) Information about services
Millions of yen

2022
Securities andinvestments

Lending

Ordinary income from outside customers................

¥

32,810¥

Leasing

19,540

¥

Other

8,773

¥

Total

16,406¥

77,531Millions of yen

2021
Securities andinvestments

Lending

Ordinary income from outside customers................

¥

32,018¥

Leasing

23,964

¥

Other

8,487

¥

Total

16,757¥

81,227

Thousands of U.S. dollars

2022
Securities andinvestments

Lending

Ordinary income from outside customers................

$

268,077$

Leasing159,653$

Other

71,680$

Total

134,046$

633,474

Note: Ordinary income (“Total income” less extraordinary gain) is presented in place of net sales of operating companies of other industry groups.

(5) Information about geographic areas(a) Ordinary income
The ratio of ordinary income from outside customers within Japan to the total ordinary income in the consolidated statements of income exceeded
90% for both fiscal years ended March 31, 2022 and 2021; therefore, no information about geographic areas is required to be disclosed.
(b) Tangible fixed assets
The ratio of tangible fixed assets located in Japan to the total tangible fixed assets in the consolidated balance sheets exceeded 90% as of March 31,
2022 and 2021; therefore, no information about geographic areas is required to be disclosed.
(6) Information about major customers
There was no ordinary income from a specific customer exceeding 10% of the total consolidated ordinary income for both fiscal years ended March
31, 2022 and 2021; therefore, information about major customers is not required to be disclosed.
(7) Impairment loss on fixed assets for each reportable segment
Millions of yen

2022
Reportable segments
Banking

Impairment loss ...........................................................

¥

Leasing

58

¥

Other

—

¥

Total

3

¥

4

¥

24

$

62

Millions of yen

2021
Reportable segments
Banking

Impairment loss ...........................................................

¥

385

Leasing

¥

Other

—

¥

Total

389

Thousands of U.S. dollars

2022
Reportable segments
Banking

Impairment loss ...........................................................

$

473

Leasing

$

Other

—

$

Total

506

Note: “Other” comprises financial product transactions.

(8) Amortization of goodwill and its remaining balance for each reportable segment
There is no information to be reported on amortization of goodwill and its remaining balance.
(9) Gain on negative goodwill for each reportable segment
There is no information to be reported on gain on negative goodwill.

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Financial Data

Consolidated Financial Statements

33. RELATED PARTY TRANSACTIONS
For the fiscal year ended March 31, 2022, related party transactions were as follows:
Relationshipwith the Bank

Name

Location

Officers of the
Bank and theirrelatives

Haruyuki
Kakutani—

Kitamura
Forestry Co., Osaka City
A company in
Ltd.
Osaka
which a majority(Note 3)of voting rights
NIKKENare held byDaito City
BLAST CO.,
officers of the
Osaka
LTD. (Note 4)
Bank and their
Kyowa Shokai
relatives
Kizugawa
Yakuhin K.K.
City Kyoto(Note 5)Paid-in
VotingOccuparights
capitaltion/
ownership(millions
Business(%)
of yen)Relationship ofrelated parties

Details oftransactions

Officeworker—Executive Officer ofthe Bank
Loans

Lending of money(Note 2)
Interest receivable

32

Forestry

Directly
owned
1.28

Loans

10

Metal
processing—

10

Sales ofchemicals—¥—

Transaction Transaction
Year-end
Year-end
amountamountAccounting balancebalance(millions of (thousands of
title(millions of (thousands ofyen)
U.S. dollars)
yen)
U.S. dollars)
¥—
¥—
Loans
¥11
$89
0

0

—

—

—

Lending of money
Interest receivable

200
2

1,634
16

Loans
—

200
—

1,634
—

Loans

Lending of money
Interest receivable

—
0

—
0

Loans
—

82
—

669
—

Loans

Lending of money
Interest receivable

76
0

620
0

Loans
—

80
—

653
—

Policies regarding and terms and conditions of the transactions
Notes: 1. Terms and conditions of loans are determined on an arm’s length basis.
2. Real estate is accepted as collateral for loan transactions.
3. Matazaemon Kitamura (Director of the Bank) and his relatives owned 6% and 94% of the voting rights, respectively, of this company directly.
4. Relatives of Naoki Minowa (Corporate Auditor of the Bank) owned 62.5% of the voting rights of this company directly.
5. Relatives of Hisayoshi Tahara (Executive Officer of the Bank) owned 62.5% of the voting rights of this company directly.
6. Mr. Satoru Wada resigned as a Director of the Bank on June 29, 2021 and the loan balance to Mr. Masato Ibi, Mr. Wada’s son-in-law, was ¥24 million ($196 thousand) as of that date.

For the fiscal year ended March 31, 2021, related party transactions were as follows:
Relationshipwith the Bank

Officers of the
Bank and theirrelatives

Name

Masato Ibi

Location—

Kitamura
Forestry Co., Osaka City
Ltd.
Osaka
A company in(Note 3)
which a majorityof voting rights
NIKKENare held by
BLAST CO., Daito City
officers of the
LTD.
Osaka
Bank and their(Note 4)
relatives
Kyowa Shokai Kizugawa
Yakuhin K.K.
City
(Note 5)
Kyoto

Transaction
Year-end
amount Accounting balance(millions of
title(millions of
yen)
yen)

Paid-in
VotingOccuparights
capitaltion/
ownership(millions
Business(%)
of yen)Relationship ofrelated parties

Details oftransactions

OfficeworkerLending of money(Note 2)
Interest receivable

¥—

Loans

¥24

—

Son-in-law ofSatoru Wada
(Director andManaging Executive
Officer of the Bank)
Loans

0

—

—

32

Forestry

Directly
owned
1.28

Loans

Lending of money
Interest receivable

200
2

Loans
—

200
—

10

Metal
processing

—

Loans

Lending of money
Interest receivable

60
0

Loans
—

90
—

10

Sales ofchemicals

—

Loans

Lending of money
Interest receivable

77
0

Loans
—

80
—

¥—

Policies regarding and terms and conditions of the transactions
Notes: 1. Terms and conditions of loans are determined on an arm’s length basis.
2. Real estate is accepted as collateral for loan transactions.
3. Matazaemon Kitamura (Director of the Bank) and his relatives owned 6% and 94% of the voting rights, respectively, of this company directly.
4. Relatives of Naoki Minowa (Corporate Auditor of the Bank) owned 62.5% of the voting rights of this company directly.
5. Relatives of Hisayoshi Tahara (Executive Officer of the Bank) owned 62.5% of the voting rights of this company directly.
6. Mr. Yasuo Ueno resigned as a Director of the Bank on June 26, 2020 and the loan balance to Mr. Kohei Ueno, his second son, was ¥20 million as of that date.
7. Mr. Masashi Hashimoto resigned as an Executive Officer of the Bank on March 31, 2021 and the loan balance to Mr. Kazuyuki Hashimoto, Mr. Masashi Hashimoto’s younger brother, was ¥11
million as of that date.

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9834. PER SHARE INFORMATION
Net assets per share at March 31, 2022 and 2021 and net income per share for the fiscal years then ended were as follows:
Yen

U.S. dollars

2022

Net assets per share .................................................................................................
Net income per share – basic ...................................................................................
Net income per share – diluted .................................................................................

¥

2021

8,800.10
364.29—¥8,997.85
333.02332.73

2022

$

71.90
2.97
—

Basic information in computing the above per share data was as follows:
Thousands of
U.S. dollars

Millions of yen

2022(Net assets per share)
Net assets ................................................................................................................
Amounts to be deducted from net assets: ................................................................
Stock acquisition rights .........................................................................................
Net assets attributed to common stock ....................................................................
Outstanding number of shares of common stock at end of year
(unit: thousands of shares) ......................................................................................
(Basic and diluted net income per share)
Net income attributable to owners of parent .............................................................
Net income attributable to common stockholders of parent ......................................
Average outstanding number of shares during the year (unit: thousands of shares) ...
Adjustment to net income attributable to owners of parent .......................................
Increase in number of shares of common stock: (unit: thousands of shares) .............
Stock acquisition rights (unit: thousands of shares) ...............................................
Convertible securities not diluting net income per share ............................................

¥

286,473—(—)
286,4732021¥

11,867
11,86732,577
—
—
(—)
—

$

32,61832,553¥

293,559
63(63)
293,495

2022¥

10,861
10,861
32,615—28(28)—

2,340,656—(—)
2,340,656—$

96,96096,960———(—)—

Notes: 1. As described in Note 4, “CHANGES IN ACCOUNTING POLICIES,” the Group has changed the criteria for recognizing income from installment sales transactions from the fiscal year ended March
31, 2022. Accordingly, the figures for the fiscal year ended March 31, 2021 after retrospectively applying this change are presented in the above table. As a result, compared with the amounts
that would have been reported without the change, net assets per share as of March 31, 2021 increased by ¥3.42 and net income per share – basic and diluted for the fiscal year ended March
31, 2021 each increased by ¥0.60.
2. Net income per share – diluted for the fiscal year ended March 31, 2022 is not presented because there were no residual shares.
3. The Bank introduced the Director Remuneration BIP Trust from the fiscal year ended March 31, 2022. Shares of the Bank remaining in the Trust, which were recorded as treasury stock instockholders’ equity, were included in treasury stock to be deducted for computing net assets per share and net income per share.
The number of shares of treasury stock as of March 31, 2022 that was deducted for computing net asset per share was 73 thousand. In addition, the average number of shares of treasury stockduring the fiscal year ended March 31, 2022 that were deducted for computing net income per share was 47 thousand.

35. SUBSEQUENT EVENTS.
Acquisition of treasury stock
At the Board of Directors’ meeting held on August 2, 2022, the Bank resolved to acquire its treasury stock based on Article 156 of the Companies Act
as applied with the necessary changes mutatis mutandis pursuant, to Article 165, Paragraph 3 of the Act, with the details of the resolution and resultsof the acquisition as follows:(1) Details of the resolution(a) Purpose of the acquisition:(b) Type of shares to be acquired:(c) Total number of shares to beacquired:(d) Total acquisition cost:(e) Acquisition date:(f) Acquisition method:(2) Results of the acquisition(a) Type of shares acquired:(b) Total number of shares acquired:(c) Total acquisition cost:(d) Acquisition date:

To improve capital efficiency and flexibly implement capital policy in response to changes in the management
environment
The Bank’s common stock
Up to 800,000 shares (2.45% of the total number of shares issued, excluding treasury stock)
Up to ¥1,800,000,000 ($14,707 thousand)August 3, 2022
Through the off-hours trading system of the Tokyo Stock Exchange (ToSTNeT-3)

The Bank’s common stock
800,000 shares¥1,615,200,000 ($13,197 thousand)August 3, 2022

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Financial Data

Consolidated Financial Statements

36. BORROWED MONEY AND LEASE OBLIGATIONS
a. The details of borrowed money as of March 31, 2022 and 2021 were as follows:
Thousands of
U.S. dollars

Millions of yen

2022

Borrowed money
Due from April 2022 through August 2030
Average interest rate: 0.05% p.a. ..........................................................................

¥

709,227

2021

¥

2022

626,700$

5,794,811

Annual maturities of borrowed money as of March 31, 2022 were as follows:
Thousands of
U.S. dollars

Millions of yen

2023 .........................................................................................................................................................
2024 .........................................................................................................................................................
2025 .........................................................................................................................................................
2026 .........................................................................................................................................................
2027 .........................................................................................................................................................
2028 and thereafter ..................................................................................................................................
Total..........................................................................................................................................................

¥¥

458,150
86,569101,124
60,731
205
2,447
709,227$$

3,743,361
707,320826,243496,208
1,674
19,993
5,794,811

b. Lease obligations
Lease obligations are included in “Other liabilities” in the accompanying consolidated balance sheets.
Annual maturities of lease obligation as of March 31, 2022 were as follows:
Thousands of
U.S. dollars

Millions of yen

2023 .........................................................................................................................................................
2024 and thereafter ..................................................................................................................................
Total..........................................................................................................................................................

¥
¥

0
—
0

$
$

0
—
0

Average interest rates are omitted since the interest equivalent amount included in total lease charges is allocated over the related period using thestraight-line method.
c. Other
The Group has not issued commercial paper by way of promissory notes to fund operating activities.

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100Financial Data

Independent Auditors’ Report

Independent auditor’s report
To the Board of Directors of The Nanto Bank, Ltd.:
OpinionWe have audited the accompanying consolidated financial statements of The Nanto Bank, Ltd. (“theCompany”) and its consolidated subsidiaries (collectively referred to as “the Group”), which comprisethe consolidated balance sheets as at March 31, 2022 and 2021, the consolidated statements of income,comprehensive income, changes in net assets and cash flows for the years then ended, and notes,
comprising a summary of significant accounting policies and other explanatory information.
In our opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Group as at March 31, 2022 and 2021, and its
consolidated financial performance and its consolidated cash flows for the years then ended inaccordance with accounting principles generally accepted in Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the
Audit of the Consolidated Financial Statements section of our report. We are independent of the Groupin accordance with the ethical requirements that are relevant to our audit of the consolidated financial
statements in Japan, and we have fulfilled our other ethical responsibilities in accordance with theserequirements. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements of the current period. These matters were addressed in thecontext of our audit of the consolidated financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.

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Financial Data

Independent Auditors’ Report

Appropriateness of the estimates of the reserve for possible loan losses for loans and bills
discounted to small and medium-sized enterprises (SMEs)
The key audit matter

How the matter was addressed in ouraudit

The Nanto Bank, Ltd. (“the Company”) and its
consolidated subsidiaries reported loans and bills
discounted of ¥3,870,774 million, accounting for 55.2% of
total assets, and a related reserve for possible loan lossesof ¥22,059 million in the consolidated balance sheet.
Reserve for possible loan losses reported in the balance
sheet of the Company accounted for a significant portionin the consolidated balance sheet.

The primary procedures we performed toassess whether the Company’s estimatesof the reserve for possible loan losses forloans and bills discounted to SMEs wasappropriate included the following:

As described in the Notes to Consolidated Financial
Statements, 2 SUMMARY OF SIGNIFICANTACCOUNTING POLICIES i. Reserve for possible loan
losses and 3 SIGNIFICANT ACCOUNTINGESTIMATES, the Company classifies borrowers based on
their credit risk rating in accordance with thepredetermined standards for write-offs and reserves, andreports the reserve for possible loan losses by calculating
the loan loss ratio based on the category of borrowers byregion.
The category of borrowers is determined based on thecredit rating determined by the rating models and theborrower’s repayment ability based on their substantial
financial position, financing capacities, and profitability,
etc., and the terms and conditions of the loans andpayment status of the borrower. Also, the Company gives
comprehensive consideration to the borrower’s
sustainability, projected profitability, and ability to pay
obligations based on their annual repayable amount,appropriateness of their management improvement plans,
and other factors in light of the borrower’s industry
characteristics.

The Company aims to increase Nara prefecture’s real
gross domestic product by 10% over 2016 in its
management plan, “Nanto Mission and Objectives for the
Next 10 Years,” targeted to be achieved by 2029. To
achieve this goal, the Company will take the initiative inresolving regional economic issues and contribute to thedevelopment of the region by focusing on “contributing to
improved productivity”, “support for asset formation” and“facilitating commercialization.”

102 Nanto Report 2022, the integrated report of Nanto Bank

(1) Internal control testing
In order to test the design and operating
effectiveness of certain of the Company’s
internal controls relevant to thedetermination of the category ofborrowers, we:
l

l

l
l

tested the effectiveness of internal
controls related to various
regulations for the internal selfassessment criteria, and the policy
for write-offs and provisions;tested the effectiveness of internal
controls to ensure the reliability ofborrowers’ financial informationentered into the financing support
system;tested IT application controls overthe quantitative determination of
the category of borrowers; andtested the effectiveness of internal
controls of the Credit Analysis
Division related to thedetermination of the category ofborrowers in consideration ofqualitative factors.

(2) Assessment of determination of thecategory of borrowers
In order to assess the appropriateness ofthe determination of the category ofborrowers, we selected borrowers to betested individually by considering
quantitative factors such as credit limits
and qualitative factors such as the
progress of the Company’s management
improvement plans and the impact of theThe Company operates mainly in Nara prefecture,neighboring prefectures, and Tokyo, but its businesscoverage area is limited. The main borrowers are SMEs,
and the Company’s balance sheet reported loans and bills
discounted to SMEs of ¥1,446,580 million.

spread of the new coronavirus, andperformed the following procedures:ll

Since the fundamental business foundation of SMEs
generally tends to be weaker than medium to large-sizedenterprises, the Company determines the category of SME
borrowers by comprehensively considering not only theirfinancial conditions but their technical capabilities, sales
capacity and growth potential, their managements’ income
status, asset quality, and guarantee status and capacity, inlight of their business condition.
Therefore, there is judgment over the qualitative factors
including the estimate of reasonableness and feasibility ofthe management improvement plan which is important forborrowers categorized as needs attention borrowers(excluding claims corresponding to restructured loans)based mainly on the grounds that a drastic and highly
feasible or a reasonable and highly feasible management
improvement plan exists.
In addition, SMEs are still significantly impacted by thedeterioration of the local economy due to the spread of the
new coronavirus. Accordingly, management’s judgmenton the determination of the category of borrowers may
have a significant impact on the reported amount of thereserve for possible loan losses.

We, therefore, determined that our assessment of theappropriateness of the estimates of the reserve for possible
loan losses for loans and bills discounted to SMEs,
especially the appropriateness of the management’s
judgment on the category of borrowers, was of mostsignificance in our audit of the consolidated financial
statements for the current fiscal year, and accordingly, a
key audit matter.

lcompared the quantitative
information of borrowers,
including financial ratios, to the
supporting materials;
inspected related documents andinquired of personnel in therelevant divisions, such as theCredit Analysis Division, to assess
whether judgments based on
qualitative factors were made in atimely and appropriate manner,and assessed the appropriatenessof the determination of thecategories of borrowers based on
qualitative factors for borrowers
whose category have a relatively
high degree of dependence onmanagement’s judgment,
particularly including those underintensive credit monitoring andthose categorized as needs
attention borrowers (excluding
claims corresponding to
restructured loans) based mainlyon the grounds that a drastic andhighly feasible or a reasonable andhighly feasible management
improvement plan exists; andassessed whether the determinedcategories of borrowers wereappropriate, focusing on therecoverability from the current
business performance andfinancing situation by
understanding the latest businessconditions of borrowers andconsidering their industry
characteristics through theinspection of related documents
and the inquiries of personnel inthe relevant divisions, such as theCredit Analysis Division, toevaluate the impact of the spreadof the new coronavirus onborrowers’ operating results.

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Financial Data

Independent Auditors’ Report

Other Information
The other information comprises the information included in the the Annual Report, but does notinclude the consolidated financial statements, the financial statements, and our auditor’s reports
thereon. Management is responsible for the preparation and presentation of the other information.
Corporate auditors and the board of corporate auditors are responsible for overseeing the directors’
performance of their duties with regard to the design, implementation and maintenance of the reporting
process for the other information.
Our opinion on the consolidated financial statements does not cover the other information and we do
not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read theother information and, in doing so, consider whether the other information is materially inconsistent
with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears
to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of thisother information, we are required to report that fact.
We have nothing to report in this regard.
Responsibilities of Management and Corporate Auditors and the Board of Corporate Auditors
for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with accounting principles generally accepted in Japan, and for such internal
control as management determines is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern inaccordance with accounting principles generally accepted in Japan and using the going concern basis ofaccounting unless management either intends to liquidate the Group or to cease operations, or has no
realistic alternative but to do so.
Corporate auditors and the board of corporate auditors are responsible for overseeing the directors’
performance of their duties with regard to the design, implementation and maintenance of the Group’s
financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’sreport that includes our opinion. Reasonable assurance is a high level of assurance, but is not aguarantee that an audit conducted in accordance with auditing standards generally accepted in Japan
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected toinfluence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of our audit in accordance with auditing standards generally accepted in Japan, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, andobtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The riskof not detecting a material misstatement resulting from fraud is higher than for one resulting from104 Nanto Report 2022, the integrated report of Nanto Bankerror, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or theoverride of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit proceduresthat are appropriate in the circumstances, while the objective of the audit is not to express an
opinion on the effectiveness of the Group’s internal control.

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.

Conclude on the appropriateness of management’s use of the going concern basis of accounting
and based on the audit evidence obtained, whether a material uncertainty exists related to events orconditions that may cast significant doubt on the Group’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’sreport to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor’s report. However, future events or conditions may cause the Group tocease to continue as a going concern.



Evaluate whether the presentation and disclosures in the consolidated financial statements are inaccordance with accounting standards generally accepted in Japan, the overall presentation,
structure and content of the consolidated financial statements, including the disclosures, andwhether the consolidated financial statements represent the underlying transactions and events in amanner that achieves fair presentation.

Obtain sufficient appropriate audit evidence regarding the financial information of the entities orbusiness activities within the Group to express an opinion on the consolidated financial statements.
We are responsible for the direction, supervision and performance of the group audit. We remainsolely responsible for our audit opinion.

We communicate with corporate auditors and the board of corporate auditors regarding, among othermatters, the planned scope and timing of the audit, significant audit findings, including any significant
deficiencies in internal control that we identify during our audit.
We also provide corporate auditors and the board of corporate auditors with a statement that we havecomplied with relevant ethical requirements regarding independence, and communicate with them all
relationships and other matters that may reasonably be thought to bear on our independence, and whereapplicable, related safeguards.
From the matters communicated with corporate auditors and the board of corporate auditors, we
determine those matters that were of most significance in the audit of the consolidated financial
statements of the current period and are therefore the key audit matters. We describe these matters in
our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter should not be communicated in our reportbecause the adverse consequences of doing so would reasonably be expected to outweigh the public
interest benefits of such communication.
Convenience Translation
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year
ended March 31, 2022 are presented solely for convenience. Our audit also included the translation of
yen amounts into U.S. dollar amounts and, in our opinion, such translation has been made on the basis
described in Note 1 to the consolidated financial statements.

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Financial Data

Independent Auditors’ Report

Interest required to be disclosed by the Certified Public Accountants Act of Japan
We do not have any interest in the Group which is required to be disclosed pursuant to the provisions of
the Certified Public Accountants Act of Japan.

Katsuhiko Akimune
Designated Engagement Partner
Certified Public Accountant

Manabu Matsumoto
Designated Engagement Partner
Certified Public Accountant

KPMG AZSA LLC
Osaka Office, Japan
November 1, 2022
Notes to the Reader of Independent Auditor’s Report:
This is a copy of the Independent Auditor’s Report and the original copies are kept separately by theCompany and KPMG AZSA LLC.

106 Nanto Report 2022, the integrated report of Nanto Bank

Financial Data

Capital Management• Consolidated Capital Adequacy Ratio
As of March 31, 2022 and 2021
Millions of yen

2022(1) Capital adequacy ratio ((2)/(3)) .................................................................................................................
(2) Capital ....................................................................................................................................................
(3) Risk-weighted assets ..............................................................................................................................
(4) Requisite capital ......................................................................................................................................

¥

2021

9.60%
273,267
2,844,259
113,770¥

9.47%
264,565
2,793,490
111,739

Note: The capital adequacy ratio was calculated on the basis of the formula provided by the Ministry of Finance under Provision 14, Clause 2 of the Banking Law.

• Nonconsolidated Capital Adequacy Ratio
As of March 31, 2022 and 2021
Millions of yen

2022(1) Capital adequacy ratio ((2)/(3)) .................................................................................................................
(2) Capital ....................................................................................................................................................
(3) Risk-weighted assets ..............................................................................................................................
(4) Requisite capital ......................................................................................................................................

¥

9.29%
261,864
2,817,900
112,716

2021

¥

9.15%
253,354
2,768,260
110,730

Note: The capital adequacy ratio was calculated on the basis of the formula provided by the Ministry of Finance under Provision 14, Clause 2 of the Banking Law.

106

Nanto Report 2022, the integrated report of Nanto Bank

Nanto Report 2022, the integrated report of Nanto Bank107

B-(3)-080031

This publication uses Yoshino 3.9 paper, which supports use of thinned trees from the Yoshino region of Nara prefecture,contributing to increased CO2 absorption by the forests in the region.
The Nanto Bank Group is a supporter of the Kizukai Movement organized to promote use of wood from Japan’s domestic forests.
Issued: October 2022
Nanto Bank, Ltd. Corporate Planning Department
16, Hashimoto-cho, Nara City, Nara Prefecture 630-8677, Japan
Tel.: +81-742-27-1599