Annual Report 2019Year ended March 31, 2019

Profile

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

Corporate Credo

1

Creating a bright and prosperous future for the region

2

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

3

Rendering our best service with gratitude in our hearts

Contents
Our Operating Area∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙2
Message from the President∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙4
Efforts for ESG and SDGs∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙8
Corporate Governance / Compliance / Risk Management∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙10
Financial Section∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙12
Corporate Data / Directory∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙51

THE IYO BANK, LTD.
Annual Report 2019

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

Annual Report 2019Year ended March 31, 2019005_0057401371909.indd

3

2019/08/21

11:26:54

Cover Photos (from the top):
Niihama Taiko Festival
Scenic view of Shimonada station in
Ehime
Shipbuilding company and KurushimaKaikyo Bridge in Imabari

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

Year of Foundation
1878
Number of Employees(The Iyo Bank, Ltd. and its Consolidated Subsidiaries)
3,147
Number of Branches(As of March 31, 2019)
150 (Domestic 149, Foreign 1)

Global Network
Our global network comprehensively supports our clients’ overseas business endeavors.
We support our customers’ efforts to globalize their businesses through trade operations, the establishment of local corporations
and fund procurement by leveraging our network of three overseas sites consisting of the Singapore branch and two representative
offices in Shanghai and Hong Kong.
Our overseas network also involves business alliances and cooperations with banks, etc., in China, India, Indonesia, Mexico, Singapore, Philippines, Taiwan, Thailand, U.S.A. and Vietnam (as of March 31, 2019).
Bangkok, Thailand
Business alliance with Kasikorn Bank
Dalian, China
Business alliance with Bank of DalianHanoi, Vietnam
Business cooperation with BIDVJakarta, Indonesia
Business alliance with BNI
Mexico	Business cooperation with Jalisco, Aguascalientes, Guanajuato, Nuevo León and
Makati City, Philippines
Business alliance with Metropolitan Bank
Mumbai, India
Business cooperation with State Bank of India
Shanghai, China
Business alliance with Bank of Communications
Singapore
Business alliance with UOBTaipei, Taiwan
Business alliance with CTBC Financial Holding
Honolulu, Hawaii,U.S.A.
Business alliance with Central Pacific Bank

Banamex (Mexico City)

Shanghai, China

Representative OfficeHong Kong

Representative Office

Singapore
BranchOur Overseas Business Support• Provision of various types of information about entering overseas markets• Advice about entering overseas markets• Advice about trade operations and fund settlements• Support for funds procurement in the local area overseas• Implementation of overseas business matching• Holding of seminars about entering overseas markets
IYO BANK Annual Report 20191

Our Operating Area

Domestic Branch Network
The No. 1 regional bank in terms of broad regional coverage, Iyo Bank’s network consists of 149
branches located in 13 prefectures (as of March 31, 2019).

Imabari Region
Number of ocean-going vessels owned Towels (2016)by domestic ship owners (2018)¥55.1 billion shipped in Japan
3,573 total vessels in Japan

29.8%

5

62.7%

(1,063 ships)(¥34.5 billion)

No.1 in Japan

No.1 in Japan

Hiroshima

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

Matsuyama Region

1

Yamaguchi

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

Imabari

Shipbuilding, ocean transport,
oil, towels and garments

Matsuyama

Electronics, farm machinery, chemicals, tourism

117

2

Ehime

Fukuoka

Chemicals, electronics,
nonferrous metal, general machinery

Ozu
Yawatahama

6

Citrus, food processing

Steel, automotive,
electronics, tourism

Culture fishery

Sea culture industry (2017)¥497.9 billion total national production

12.3%(¥61.4 billion)

No.1 in Japan

Economic Indicators of the Setouchi Region
Total of ten
prefectures

17.1%
Total population(Population
estimate)(October 2018)(Prepared based on various statistical data)
2

IYO BANK Annual Report 2019

Total of nine
prefectures(excluding Hyogo)

12.7%
Total population(Population
estimate)(October 2018)

Total of ten
prefectures

15.3%
Gross prefectural
product(Nominal)(Fiscal 2015)

Total of nine
prefectures(excluding Hyogo)

11.5%
Gross prefectural
product(Nominal)(Fiscal 2015)

1

Kochi

UwajimaOita

Uwajima Region

Niihama
Saijo

Main Industries in Ehime Prefecture• Industries with top national share concentrated in each region• Manufactured product shipments from Ehime Prefecture
totaled ¥3.8 trillion (45% of Shikoku) in 2016

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

2

3

Shikokuchuo Region

Hyogo

Pulp and paper industry (2016)

Okayama¥7,273.1 billion shipped in Japan

Automotive,
oil refining, steel

7.9%

3

(¥574.6 billion)

No.2 in Japan

Osaka

5

Niihama and Saijo Region

KagawaShipbuilding, textiles

Manufactured product shipments (2016)¥1,422.1 billion
Shikokuchuo

Paper manufacturing and processing

Approx. 37% of shipments of manufactured

1

products in Ehime

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

Tokushima

No. 1 Market Sharein Ehime

2

Tokyo

About Ehime Prefecture• Area5,676.24 km2 (As of October 1, 2018)• Population

1,342,011 (As of June 1, 2019)• Number ofhouseholds

597,726 (As of June 1, 2019)

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

1

Aichi

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

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

Hyakujushi Bank

Build

Utilize

Support industrial
development

Shikoku resources
branding

FosterConnect

Support the formationof financial assets

Shikoku Bank

Support network
expansion

Cooperate

Awa Bank
IYO BANK Annual Report 20193

Message from the President

despite sluggish growth in exports against the backdrop of aslowdown in the global economy.
Although uncertainty remains due to rising downside risk
to domestic and overseas economies, including the development of trade issues, concerns over a slowdown in China’s
economy, and a consumption tax hike, a recovery trend is likely
to continue, supported by solid domestic demand in anticipation of the Olympic and Paralympic Games Tokyo 2020 and
EXPO 2025 OSAKA, KANSAI, JAPAN.
The economy of Ehime Prefecture is expected to continue
on a moderate recovery due to solid consumer spending andcapital investment as public works are increasing for recovery
and reconstruction from the heavy rainfall disaster in westernJapan.

Business Performance

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

Regional Vitalization Initiatives

Iwao Otsuka, President

Introduction

March 15, 2019, marked our 141st anniversary of establishment. I would like to wholeheartedly thank our customers
and members of the local community, whose generous
support has enabled us to serve the community until today
throughout the Meiji, Taisho, Showa, and Heisei eras.
The Bank was founded on 1878 in the current Kawanoishi, Honai-cho, Yawatahama City, as The 29th National
Bank— the first bank in Ehime Prefecture. Since its founding,the Bank has grown in the belief that no development ispossible for us without the development of the local community.
Today, we are facing a new era where the acceleration ofdigital innovation allows us to instantly obtain informationand services and customers’ needs are increasingly sophisticated and diversified.
Amid these changes, my goal is to fully leverage theconvenience of digital technologies and at the same time
provide services only made possible by “human” employees
to become a “Digital-Human-Digital Bank” as a means to
support customers’ bountiful lives and business development.
Under the corporate credo of “creating a bright andprosperous future for the region,” I will make an all-out effort
together with our officers and employees so that Iyo Bank will
become a bank that is still needed 10 years in the future foreveryone. I hope for your continued patronage.

Financial and Economic Environment

In fiscal 2018, ended March 31, 2019, a moderate recovery
continued overall in the Japanese economy owing to steadyconsumer spending due to a solid employment environment,

4

IYO BANK Annual Report 2019

In line with its aim of growing sustainably along with its
region, Iyo Bank has been involved in a variety of regional
vitalization measures and provided support for realizing
customers’ bountiful lives and business development.
As an initiative for supporting customers with their startups and growth, we launched the “Foundation and Regional
Revitalization Businesses Utilizing Crowdfunding” in September 2018 and encouraged new regional projects by, forexample, subsidizing part of contract fees to be paid tobusiness partners for parties that reached target amounts.
Under the Shikoku Alliance of four regional banks on theisland, the 2nd Shikoku Alliance Business Plan Contest wasorganized in February 2019 to raise awareness of entrepreneurship in the Shikoku region and provide businesses incubation services for parties with creative business plans.
As an initiative for community development and tourism
promotion, in April 2018, we concluded the “Cooperation
Agreement on Tourism Town Creation through Utilization ofTown Houses, Traditional Houses and Other Historic Resourcesin Ozu City, Ehime Prefecture,” under which we are promoting town creation through preservation and utilization ofhistoric buildings in the castle town in Ozu City. In addition, in
November 2018, we invested in SORAYAMA ISHIZUCHI Co.
Ltd., a regional tourism service organizer, to revitalize regional
economies and create employment by developing programs
that let tourists enjoy hands-on experience of the local sites topromote tourism in the Ishizuchi Mountain Range and thesurrounding area. Iyo Bank’s other efforts to promote regional
tourism include “HAIKU & WALK,” a website launched in
February 2019 to showcase tanka or haiku poems inscribedon monuments in Matsuyama City in Japanese and English tocommunicate the haiku culture of Ehime prefecture insideand outside Japan.
In October 2018, we established the 2018 Japan Floods
Restoration Support Fund to support the reconstruction fromthe heavy rainfall disaster in western Japan in terms of funding, human resources and eliminating excess debt. In addition, we have provided Group subsidy bridge loans to support
advance expenses paid for facility reconstruction until it iscovered by subsidies, as part of our efforts to support recovery and reconstruction from disaster as well as businessreconstruction.

Head Office Organization

The Bank reformed the head office structure in August 2018
in order to increase the effectiveness of strategies under the“Fiscal 2018 Medium-Term Management Plan — Second
Stage for 150” launched in April 2018. Specifically, we transformed the Business Strategy Department in the General
Planning Division into the Digital Planning Department tomanage ICT strategies that leverage digital technologies.
Also, we established the Consulting Business Division forstrengthening value propositions to customers and the Online
Business Division mainly to improve functions and services via
non-face-to-face channels. Furthermore, the Primary Sector
Commercialization Primary Industry Support Department wasestablished in the Regional Vitalization Division as a step tostrengthen support systems for the development and revitalization of the primary sector, the key industry in the region.

Bank Branches and ATMs

Iyo Bank has a broad-ranging branch network that covers 13
prefectures in Japan, the largest number of prefectures
covered by a regional bank. We have been upgrading ourbranches and strengthening customer service systems so that
customers can use our services more effectively.
While making a shift to next-generation branches thatoffer new functions and services, we placed the “Satto(quick) counter” in 41 branches (as of March 31, 2019) which
provides semi-self-served cash transactions and tax payments
among others. In this way, we have reduced inconvenience tocustomers and worked to make our branches easily accessible.
In addition, we introduced the AGENT System in February
2019 which allows customers to open new accounts andchange their addresses with tablet devices. Customers canmake paperless applications to open new accounts, instead of
the traditional paper-based applications, simply by selecting
options via chat and uploading photos of their driving licenses. In this way, customers will benefit from the convenienceof digitization and a strengthened service structure with lesswaiting time through simple and speedy procedures. In the
future, we will work to maximize customer contact points
and improve advisory and consulting services, while aiming to
reduce waiting time at the counter and realize hassle-freetransactions without forms or seals through the digitization ofadministrative work.

Products and Services

As for financing products, we began handling Natural Disaster Responsive Financing in May 2018 that forgives debt
obligation for a prescribed ratio of principal balance of loans
if an earthquake in a certain scale occurs at a prescribedlocation. It also provides funding within credit limit even after
exemption. Thus, we have supported the smooth business
continuity of our customers.
Our consulting service initiatives included the promotionof ICT consulting that supports the introduction and use of
ICT by our customers to increase productivity and improve
operational efficiency. In addition, in October 2018, welaunched lease intermediary operations to provide compound
proposals of bank lending and lease products to realize
diversified fund procurement for customers, reduce administrative workload, and facilitate the use of tax reduction andsubsidy schemes for capital investment.
As an initiative utilizing Fintech, the TSUBASA Alliance,
which is an alliance among eight regional banks (as of March
31, 2019) including the Bank, is proceeding with the joint
development of an API platform linking the Bank’s systemwith Fintech companies. We launched a series of services
supporting the formation and management of customer
assets, starting with linkage with the automated saving
application Finbee and the automated household accounting/asset management service Money Forward in July 2018, as
well as with the online household accounting service Zaim in
December 2018.
In addition, in December 2018, we introduced the Insurance Robot Advisor that can create personalized insurance byhaving customers answer simple questions including theirage, gender, and family structure using their PC or smartphone.
Furthermore, in March 2019, we commenced linkage
with the settlement service J-Coin Pay that enables QR code
payment and free instant money transfers among users using
smartphones, and other services easily available whenever,wherever, free of charge. We will continue to work on measures to provide financial services that improve customer
convenience and facilitate cashless transactions in the region.

ESG Initiatives

In addition to its financial activities, to realize its mission to“create a bright and prosperous future for the region,” Iyo
Bank has promoted efforts for the environment, society andgovernance (ESG).
As environmental protection activities, in addition tooffering grants through the Iyo Bank Environment Foundation“Evergreen” (public trust), we carried out Iyo Bank Evergreen
Forest activities in four locations in Ehime Prefecture together
with Ehime Prefecture, Ozu City, and FOREST FUND OFEHIME. In addition, we carried out tree planting as part of theactivities of the Society to Promote the Creation of Forests in
Towns, for which the Bank serves as the secretariat, together
with 68 member companies and organizations (as of March
31, 2019). We have aggressively promoted environmental
preservation activities to realize a local community co-existingwith nature.
As part of our social welfare activities, we establishedIyogin Challenge & Smile Co., Ltd. to promote the sustained
employment of persons with disabilities and obtained its
certification as a special subsidiary company in June 2018. In
this way, we have arranged an environment where persons
with disabilities can work with peace of mind, while supporting their engagement in society and self-reliance.
We continue to provide scholarships and donate welfare
devices through the “Iyo Bank Social Welfare Fund.” In thescholarship program, we increased scholarship recipients andamounts as part of our 140th anniversary commemorative
project. In addition, we kept providing aid under the “Regional Cultural Activity Assistance Program.” We also held “Iyogin
Junior Mirai Juku” and other financial education classes topromote financial literacy among children who will build
society in the future, as efforts to create a community withvitality.
As for governance, the Bank has transitioned to a company with an Audit and Supervisory Committee and thenumber of outside directors exceeds one third of the total
number of directors. Thus, we make efforts to strengthen
audit and supervisory functions and revitalize the Board of
Directors. As other measures, we have established the Management Deliberation Committee to deliberate director
nominations and compensation and the Advisory Board to
obtain evaluation and advice about the Bank’s management
strategies and governance from external experts and createda structure where management transparency and objectivity
are ensured.

IYO BANK Annual Report 20195

Message from the President

In addition, for contributing to countermeasures againstmoney laundering and terrorism funding for which strict
standards are internationally required, we established the
Basic Policies for Anti-Money Laundering and Combating the
Financing of Terrorism in June 2018 and clarified the Bank’s
policy. Furthermore, since July 2018, we have worked tostrengthen internal control structures by identifying, assessing, and verifying risks by having the Compliance Divisioncontrol money laundering countermeasures, etc. in an integrated manner.

IR Activities and Ratings

Iyo Bank is proactively working to improve disclosure. To
increase management transparency, we held annual results
briefings for analysts and institutional investors in Tokyo in
June and December 2018, and held results briefings accompanied by a special lecture presentation in four locations
around Ehime Prefecture (Matsuyama, Imabari, Niihama andShikokuchuo) in July 2018.
To foster a deeper understanding of its management
activities by stockholders, suppliers and investors, the Bank israted highly, with an “AA” rating by Japan Credit Rating
Agency (JCR), an influential Japanese credit rating agency, an“A” rating by Standard & Poor’s (S&P), a global credit rating
agency, and an “A+” rating by Rating and Investment (R&I).
Furthermore, the Bank and its group company Shikoku
Alliance Securities Co., Ltd. were rated “A+” and “A,”
respectively, under R&I’s Customer-Oriented Investment Trust
Sales Company Evaluation in December 2018.

Risk Management and Compliance

We have taken measures to establish a risk appetite framework for business management. Through regular discussions
and monitoring, we aim to ensure balanced, sustainablegrowth and soundness. Also, we regularly review our business
continuity structure corresponding to the quality of damages
anticipated, including from disasters such as the Nankai
Trough earthquake and heavy rainfall.
With respect to compliance, we comply with laws andregulations in accordance with the Basic Policy on Dealing
with Antisocial Forces, by enhancing the precision of ourmeasures to block antisocial forces before entering into any
relationships by stepping up screening measures.

Business Performance

In fiscal 2018, ended March 31, 2019, performance was asfollows: The term-end balance of deposits, including NCDs,
increased ¥166.6 billion over the previous fiscal year-end, to¥5,712.6 billion (US$51,469million). The loan balance at theend of the fiscal year rose ¥258.1 billion from the previous
fiscal year-end, to ¥4,550.8 billion (US$41,001million). Thebalance of securities at the end of the fiscal year decreased¥236.7 billion from the previous fiscal year-end, to ¥1,573.3
billion (US$14,175million). The balance of total assets at theend of the fiscal year rose ¥81.0 billion from the previous
fiscal year-end, to ¥7,140.7 billion (US$64,336million).
Ordinary income increased ¥5,013 million on a consolidated basis year on year, to ¥107,222 million (US$966million),
due to higher investment income, stemming from an increase
in interest on loans and discounts as well as an increase inother operating income owing to higher gains on sale ofbonds, etc. Meanwhile, ordinary expenses on a consolidated
basis rose ¥11,587 million to ¥80,873 million (US$728million),with an increase in interest expense as well as other ordinary
expenses rising due to higher provision of reserve for loan
losses. As a result, net ordinary income decreased ¥6,574

6

IYO BANK Annual Report 2019

million to ¥26,349 million (US$237million), while profit
attributable to owners of parent decreased ¥4,400 million to¥18,262 million (US$164million).
The capital ratio (Basel III standards), which measuresbank prudence and soundness, stood at 14.38%.

IssuesAlthough the Japanese economy as a whole is expected toremain in a moderate recovery phase, the Bank’s operating
environment is undergoing significant changes. Such factors
include changes in economic and social structures due to thefalling birthrate, increasingly aging population, and population decline, as well as the acceleration of digital innovation.
Under these circumstances, the Bank launched its “Fiscal
2018 Medium-Term Management Plan” in April 2018 andstriving to realize the vision in the plan, the transformation of
the Bank into a “Digital-Human-Digital Bank.” Capitalizing on
the wave of digital business as a great opportunity, we willdevelop services with high added value that only the Bank
can offer by further leveraging digital technologies to bringabout improvements in customer convenience and productivity, while perfecting attentive and professional consulting
capabilities that only humans can do.
In 2019, Japan transitioned from Heisei to Reiwa. In thisnew era, we will take on challenges by embracing change.
We would like to move ahead and grow hand in hand withmembers of the local community to realize our 10-year visionof becoming the leading financial services group in the
Setouchi region in terms of customer satisfaction.
While working to ensure sound management and further
strengthening the Bank’s business operations, we, as thefull-service financial institution in your hometown, will put
our full effort into realizing a sustainable and vital regional
community. In these endeavors, we ask for the ongoingsupport of our stockholders.

Iwao Otsuka, PresidentFiscal 2018 Medium-Term Management Plan
Period: Three years, from April 2018 through March 2021

Fiscal 2018 Medium-Term Management Plan

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

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

tion of customer nersifica
eds
e
v
i
d

“value” creation
New

Core Policy I

Core Policy III

Strengthen ability to offer values
tailored to each customer

Commit to regional
revitalization actively

Consulting Online businessstrategy
strategy

Regional revitalization strategy

Core Policy IICore Policy IV

Enhance productivity and reduce costthrough optimum resource allocation

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

BPR
strategy

Branchstrategy

ICTstrategyMarket strategy

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

Personnel strategyCrea

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

alu e

s”

i nin git h d e c l

Risk Appetite
Frameworkbi r t hrat e

Employees

IYO BANK Annual Report 20197

Efforts for ESG and SDGs

“Iyogin Declaration on SDGs”
Based on our corporate credo, the Bank aims to realize a bright and prosperous local community by contributing to the achievement of the Sustainable Development Goals (SDGs) advocated by the United Nations and working to overcome social and environmental issues in the region including population decline
and an aging population.
1. Local economy and community	We will expand our efforts for promoting growth in local economies and regional development, and contributeto enriching the lifestyles and developing the businesses of our customers.
2. Financial and information services
	We will provide advanced, high-quality, and comprehensive financial and information services, and continue tomaintain the trust and meet the expectations of our customers.
3. Strong management foundation
	We will work to further strengthen and enhance our management foundation, and fulfill our social responsibilities as a regional bank.
4. Diversity and work style reforms
	We will promote diversity and work style reforms, and endeavor to create an organization in which various typesof human resources can actively perform their roles.
5. Environmental protection
	We will actively and continuously work to reduce the environmental burden and participate in activities for environmental conservation, and endeavor to preserve and protect the natural local environment.

Environment

Social• Hand over a rich, beautiful nature to thenext-generation through active environmental preservation activities• Realize a lively local community via locallybased measures rooted in the region

Iyo Bank Environment Foundation“Evergreen” (Public Trust)(established in 2008)

Iyo Bank Social Welfare Fund (Public
Interest Incorporated Foundation)(established in 1976)• Supporting activities for restoration anddevelopment of the environment while
preserving the natural environment• Cumulative total of approx. ¥51 million
granted to 139 recipients• Increased scholarships and scholarship recipients aspart of 140th anniversary commemorative activity• Cumulative total of ¥632 million granted
as scholarship and welfare equipment“Iyo Bank Evergreen Forest” Activities(started in 2008)• Conducted forest
cultivating activities
under a partnershipentered with Ehime
Prefecture, Ozu City,and Forest Fund of Ehime.
• Contributed to maintaining the local
environment by working together with
the Shikoku Alliance banks

8

IYO BANK Annual Report 2019

Iyo Bank Regional Cultural Activity Assistance Program (established in 1992)• Part of funds for carrying out “grassroots” cultural activities in Ehime granted to the related parties• Cumulative total of ¥222 million granted
to 1,168 groups

Build structures that secure transparency and objectivity by strengthening corporate governanceConduct thorough examination and verification as well as strict risk management for contributing
to countermeasures against money laundering and terrorism funding

GovernanceCorporate governance structure

Thorough examination andverification

Management
Deliberation
Committee

Deliberation on theConsult
nominationof and compensation
for Directors, etc., andimportant mattersregarding management(Business Execution)
Directors

Countermeasures againstmoney laundering and terrorism funding

Advisory
Board

ReportBoard ofDirectors

Evaluation
and advice on
the Bank’s
management
strategy andgovernance

Audit and Supervisory
Committee• Screening of transaction parties based on approx. 3.8
million pieces of the latest profile information• Examination utilizing a database covering 70,000 listedcompanies and 300 million unlisted companies in 212
countries and regions
Examination of negative information reported overseas in the pastComprehensive examination of officers, shareholders
and substantial controllers of overseas business associates

Strict risk management• Conduct ship monitoring by utilizing more than 2,200
shore antennas and more than 50 satellites under ship
finance, the Bank’s strength
Entrance into each sanction area monitored in real time
Strict risk management for ship financing

Independent Outside
Directors

Audit and Supervisory Committee
Independent Outside
Directors

Internal
Directors

 /3 or more of Directors are Independent Outside
1
Directors
Appointment of female Directors
Strengthening of audit and supervision functions andrevitalization of the Board of Directors

IYO BANK Annual Report 20199

Corporate Governance / Compliance / Risk Management

Corporate Governance
Basic Philosophy
Based on our corporate philosophy, to ensure the unshakeable
trust of our stockholders, customers, employees and otherstakeholders we believe it is vital to raise enterprise value andensure a more sound and transparent management system,
while remaining mindful of our social responsibilities as aregional bank. To meet these responsibilities, we will reinforce
and enhance our efforts at corporate governance, which we
consider one of our most important management priorities.
Through corporate governance appropriate to the Bank,
we seek to achieve sustainable growth and enhance enterprise value over the medium to long term. To this end, we
have formulated and publicized our Corporate Governance
Guide Line, which outlines our fundamental perspectives andframeworks on corporate governance.
Internal Control Systems• The Board of Directors’ granting of voting rights to directors
on auditing and the Audit and Supervisory Committee
members that include multiple outside directors is expected
to enhance the auditing and supervisory functions, as wellas corporate governance. At the same time, we believe thisdelegation of authority will contribute to swifter decisionmaking and heightened management efficiency. To achievethese aims, we have adopted the system of a “company
with an Audit and Supervisory Committee.”• The Bank has also separated the management decisionmaking and supervisory functions from business execution,
thereby strengthening the Board of Directors’ decisionmaking function. To further enhance corporate governance, wehave introduced an executive officer system.
• In principle, the Board of Directors meets once a month todecide on important matters stipulated in law and the Articles

Business Executive Functions, Oversight and Internal Controls

Audits/Supervises

Business Execution Directors

Audit and Supervisory Committee
ReportingPresident

ReportingExecutive Committee

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

Advisory Board

Compliance Committee

10

Operational Risk
Administration Committee

Whistleblowing

Directs/
Instruction

Credit Risk
Administration Committee
Head Office,Bank Branches

IYO BANK Annual Report 2019

Dismisses

Board of Directors

Cooperates

Appoints/Dismisses

Internal Audit
Division
Audits InternallyAppoints/
Dismisses

Independent
Auditors(CPAs)

Accounting
Audit/
Internal
controlaudit

Collaborates/
Coordinates

Consult
ReportingManagement Deliberation Committee

General Meeting of Stockholders
Appoints/Dismisses

Cooperates

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

Compliance
As an institution with a public profile and social responsibilities,
the Bank regards a good compliance record as indispensable fordeepening the trust and support of our customers, shareholders
and the communities we serve. We ensure not only that all our
employees observe all laws, ordinances and regulations in theirduties, but also meet the highest ethical standards.

Compliance Organizations
We established a Compliance Council chaired by the President. This committee deliberates matters relating to compliance, and seeks to foster a corporate culture in which
compliance-related information is shared by all employees
from the branch level to top management.
At all head office and branch business departments, wehave appointed compliance officers, who assess progress incompliance-related matters and organize training and awareness-raising activities such as study groups.
The Compliance Division, working closely with the Compliance Committee and compliance officers, integrates collection and management of compliance-related information.

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

Risk Management Framework

Board of Directors

Management Planning Council(Secretariat: General Planning Division)

Emergency Office(Secretariat: General
Planning Division)

Risk
Categories

Audit and Supervisory Committee

Executive Committee
Management Planning Council(CS Enhancement Committee)(Secretariat: Corporate & Retail Banking Planning Division)

Budgeting and Integrated Risk Management Council(Secretariat: Risk Management Division)

Credit Risk
Administration Committee(Secretariat: Risk Management Division)

Compliance Council(Secretariat: Compliance Division)
Compliance Committee(Secretariat:
Compliance Division)Operational Risk
Administration Committee(Secretariat: Risk Management Division)Operational risk

Marketrisk

Liquidity
risk

Risk Management Division

Creditrisk
Administrativerisk

Divisions
responsible
for eachtype of risk
management

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

Risk Management Division

RiskManagement
Division
CreditRelated
Divisions

System
risk

Legal
risk

Systems
Operations
ComplianceManagement Development
Division
Division
Division

Human-error
risk

Fixed
asset risk

Human
Resources
Division

GeneralAffairs
Division

Reputational
risk

Compliance

Customer
Satisfaction
Enhancement
OfficeCompliance
DivisionInternal
Audit
Division

Bank Branches, Head Office

IYO BANK Annual Report 201911

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

Millions of yen

2019

2018

2017

2016

2015

¥1,574,849
4,527,810
7,165,655¥1,815,554
4,269,697
7,096,633¥1,735,981
4,021,442
6,849,283¥1,739,757
3,890,085
6,510,076¥1,831,611
3,851,235
6,575,422

5,688,021
6,517,327

5,525,398
6,450,329

5,437,276
6,240,221

5,324,433
5,920,369

5,264,862
5,977,820

Total income
Total expenses
Income before income taxes
Profit attributable to owners of parent¥ 126,291
98,16328,12918,527¥ 121,002
85,20935,791
23,639¥ 117,356
84,22833,127
21,797¥ 119,819
79,53140,28724,451¥ 124,003
77,881
46,122
26,999Net cash provided by operating activities
Net cash provided by investing activities
Net cash provided by financing activities
Cash and cash equivalents(150,925)
237,490(4,346)808,389

3,870(57,093)(4,106)726,157

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

348,931
18,680(25,065)
602,299

Years ended March 31:

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

Liabilities
Deposits
Total liabilities

For the Year:Yen

Per Share Data:¥

Basic net income
Stockholders’ equity

58.54
1,975.54¥

74.73
1,969.99¥

68.93
1,864.28¥

77.34
1,790.53¥

85.41
1,825.62

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

14.38
2.99
10.01

14.31
3.83
10.71

14.58
3.77
10.86

15.42
4.27
9.52

15.81
5.06
16.70

Number of employee

3,147

3,122

3,082

3,024

2,977

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

Ratings [JCR]

Evaluation gain on securities(Non-consolidated)

Capital ratio(BIS standards)(Billions of yen)

(Yen)

25,000350

Iyo bank

(%)

16

15.81

21,454 21,454
21,205AA-

280 19,206

A+

261.7

14.58

20,00014

227.6
234.9 15,000

12

140

10,000

10

BBB-

70

5,000

8

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

(March 31) 2015

A

210

18,909

15.42
14.31

14.38

16,758
217.7

218.4

234.9

ABBB+
BBB

12

IYO BANK Annual Report 201902016 2017 2018

2019

0

6

(March 31) 20152016 2017 2018 2019

Management Discussion and Analysis of Operations
 Business Environment
In fiscal 2018, ended March 31, 2019, a moderate recovery
continued overall in the Japanese economy owing to steadyconsumer spending due to a solid employment environment,
despite sluggish growth in exports against the backdrop of aslowdown in the global economy.
Although uncertainty remains due to rising downsiderisk to domestic and overseas economies, including thedevelopment of trade issues, concerns over a slowdown in
China’s economy, and a consumption tax hike, a recovery
trend is likely to continue, supported by solid domestic
demand in anticipation of the Olympic and Paralympic
Games Tokyo 2020 and EXPO 2025 OSAKA, KANSAI,JAPAN.
The economy of Ehime Prefecture is expected to continue
on a moderate recovery due to solid consumer spending
and capital investment as public works are increasing forrecovery and reconstruction from the heavy rainfall disasterin western Japan.

Overview of Business Results, etc.
Consolidated ordinary income increased ¥5,301 million year
on year to ¥126,286 million (US$1,137million). This was
mainly due to an increase in investment income, stemmingfrom increases in interest on loans and an increase in otheroperating income, stemming from increases in gain on saleof government bonds, etc.
On the other hand, consolidated ordinary
expenses increased ¥12,743 million to ¥97,628 million(US$879million). This was mainly due to an increase infund procurement costs and other ordinary expenses due
to an increase in provision for reserve for loan losses. As aresult, consolidated ordinary income declined ¥7,441 million
year on year to ¥28,658 million (US$258million). Profit
attributable to owners of parent decreased ¥5,112 million to¥18,527 million (US$166million).
On a non-consolidated basis, gross profit from core
Profit Attributable to
Owners of Parent(Billions of yen)

Net Income per Sharebusiness decreased ¥1,386 million year on year, to ¥76,176
million (US$686million), mainly due to a decrease in interestand dividends on securities. Operating income decreased
2,632 million to 25,818 million (US$232million) due toan increase in system investment, etc. Ordinary income
decreased ¥6,574 million to ¥26,349 million (US$237million),
mainly due to an increase in credit costs and a decrease ingains on securities and other factors. As a result, net income
declined ¥4,400 million year on year to ¥18,262 million(US$164million).
 Segment Information

The Iyo Bank Group consists of the Iyo Bank and 15 consolidated
subsidiaries. The Group’s operations center on commercial
banking services, and also cover leasing and other financial
services.
Banking Operations
Ordinary income came to ¥108,416 million (US$976
million). This was due to ordinary income from customers of¥107,879 million and ordinary income from intersegment
transactions of ¥537 million. Segment profit decreased¥6,395 million, to ¥28,362 million (US$255 million).
Leasing Operations
Ordinary income came to ¥16,784 million (US$151 million).
This was attributable to ordinary income from customersof ¥16,301 million and ordinary income from intersegment
transactions of ¥483 million. Segment profit decreased ¥389
million, to ¥192 million (US$1.7 million).
Other Businesses
Ordinary income came to ¥4,266 million (US$38 million).
This was a result of ordinary income from customers of¥2,106 million, and ordinary income from intersegment
transactions of ¥2,160 million. Segment profit decreased¥708 million, to ¥71 million (US$0.6 million).
Loans andBills Discounted

Deposits

32

100

(Yen)

(Billions of yen)(Billions of yen)

24

75

3,600

4,500

16

50

2,400

3,000

8

25

1,200

1,500

0

(FY) 2015 2016 2017 2018 2019

0(FY) 2015 2016 2017 2018 2019

4,800

0

(March 31) 2015 2016 2017 2018 2019

6,000

0

(March 31) 2015 2016 2017 2018 2019

IYO BANK Annual Report 201913

The term-end balance of deposits, including NCDs,
increased ¥162.6 billion over the previous fiscal year-end, to¥5,688 billion (US$51,247 million).
The loan balance at the end of the fiscal year rose
¥258.1 billion from the previous fiscal year-end, to ¥4,527.8
billion (US$40,794 million).

The balance of sercurities at the end of the fiscal year
reduced ¥240.7 billion from the previous fiscal year-end, to¥1,574.8 billion (US$14,188 million).
The capital ratio (Basel III standards), which measuresbank prudence and soundness, stood at 14.38%.

Loans by Industry
Millions of yen

2019
Loans and bills
discounted outstanding¥4,425,405
643,028

Agricultural and forestry

3,146

Fishing

11,389Years ended March 31:

Domestic total (excluding loans booked offshore)
Manufacturing

Share (%)

100.0014.53¥4,204,571
611,729100.00
14.55

0.07

2,918

0.07

0.26

12,141

0.29

8,614

0.19

8,653

0.21

Construction

116,306

2.63

112,939

2.69

Electricity, gas and water utilities, sewage

134,015

3.03

108,078

2.57

Communications

22,0200.50

21,7790.52

Transportation and postal service

717,925

16.22

679,71616.17

Wholesale and retail511,642

11.56

469,356

11.16

Finance and insurance

174,959

3.95

180,478

4.29

Real estate and rental

481,403

10.88

454,337

10.80

Service

438,574

9.91

435,073

10.35

Local authorities
Others234,824
927,554

5.31
20.96

232,702874,666

5.53
20.80

Overseas total (including loans booked offshore)
Governments

102,405—

100.00—65,125—100.00——102,405¥4,527,810—
100.00——65,125¥4,269,697—
100.00—Mining, quarrying and gravel extraction

Financial institutions
Others
Total

Total Assets

Capital Ratio(BIS standards)

Return on Equity(Billions of yen)

(%)

(%)

6,000

12

4.5

4,000

8

3.0

2,000

4

1.5

8,000

0

(March 31) 2015 2016 2017 2018 201914

Share (%)

2018
Loans and bills
discounted outstanding

IYO BANK Annual Report 201916

0

(March 31) 2015 2016 2017 2018 2019

6.0

0.0

(March 31) 2015 2016 2017 2018 2019 Financial Position and Business Results
Consolidated gross profit
Consolidated gross profit decreased ¥2,106 million to¥82,161 million(US$740 million), mainly due to a decreasein net interest income stemming from a decrease in interestand dividends on securities.

Operating costs
Operating expenses increased ¥165 million from the previous
fiscal year to ¥52,360 million (US$471 million) due to anincrease in nonpersonnel expenses mainly amid an increasein strategic investments.
Credit costs
Credit costs increased ¥2,545 million to ¥6,531 million(US$58 million) due to an increase in bankruptcies anddowngrades.
Gain (loss) related to stock, etc.
Net gains on stocks decreased ¥1,887 million from theprevious fiscal year to 3,949 million (US$35 million) due
to a decrease in gains on sales of securities and losses ondevaluations of securities.
Extraordinary income (losses)
Extraordinary income(losses) decreased by ¥222 million fromthe previous fiscal year to (¥529 million)(US$4 million) due toloss on disposal of company housing.
Deposits
With deposits held by individuals and corporations bothincreasing steadily, the balance of deposits, including NCDs,
increased ¥162.6 billion over the previous consolidated fiscal
year-end, to ¥5,688 billion (US$51,247 million).

Risk management loans
Risk management loans increased ¥6.8 billion over theprevious consolidated fiscal year-end, to ¥73.4 billion(US$661 million).
Risk management loans remained at the low level of
1.62% as a proportion of the outstanding balance of loans
and bills discountd.
Securities
The balance of securities decreased by ¥240.7 billion fromthe previous fiscal year to 1,574.8 billion (US$14,188 million)
due to a decrease in Japanese government bonds and othersecurities as a result of sales and redemption, etc.
 Cash Flow Analysis

Consolidated Cash Flows
Cash flow used in operating activities was ¥150,925 million(US$1,359 million), due to such factors as an increase inloans and bills discounted.
Net cash provided by investing activities was ¥237,490
million (US$2,139 million). This was mainly attributable topurchases of securities and redemption.
Net cash used in financing activities was ¥4,346 million(US$39 million) due to the cash dividends paid.
As a result, cash and cash equivalents at the end of theterm rose ¥82,231 million, to ¥808,389 million (US$7,283
million).
The Bank’s risk exposure is assessed by the ALM
committee by quantifying market and credit risk, andoptimal fund management and procurement structures are
put in place to assure stable earnings over the medium andlong term.
Capital expenditure form acquisition of tangible andintangible fixed assets and other outlays was covered fromBank capital.

Loans and bills discounted
With corporate and housing loans mainly to individuals bothincreasing steadily, loans and bills discounted grew ¥258.1
billion over the previous consolidated fiscal year-end, to¥4,527.8 billion (US$40,794 million).

IYO BANK Annual Report 201915

Consolidated Balance SheetThe Iyo Bank, Ltd. and its Consolidated Subsidiaries
March 31, 2019

Thousands of U.S.
dollars (Note 1)

Millions of yen

2019

2019

¥ 809,668—
10,921349
6,494
1,574,849
4,527,810(27,902)7,164
31,44390,43873,757
7,024
17,500197
35,937¥7,165,655¥ 728,327
23,47910,247465
6,337
1,815,554
4,269,697(24,256)
7,092
30,594
93,761
72,8505,375
23,164
179
33,761¥7,096,633$ 7,294,963—
98,396
3,144
58,50914,189,107
40,794,756(251,392)
64,546283,295
814,830
664,537
63,284
157,671
1,774
323,785$64,561,266

LIABILITIES AND NET ASSETS
Liabilities
Deposits (Notes 7 and 19)
Call money and bills sold (Note 19)
Payables under repurchase agreements (Notes 7 and 19)
Payables under securities lending transactions (Notes 7 and 19)
Borrowed money (Notes 7, 11 and 19)
Foreign exchange
Borrowed money from trust account
Other liabilities (Notes 11 and 23)
Accrued employees’ bonuses
Net defined benefit liability (Note 24)
Reserve for losses on repayment of dormant bank accounts
Reserve for contingent losses
Reverse for share-based payments
Reserve under the special laws
Deferred tax liabilities (Note 26)
Deferred taxes on revaluation excess (Note 9)
Acceptances and guarantees
Total liabilities¥5,688,021
178,31349,82076,968365,856249
31
39,677
1,659
12,281
3,301
516
86
1
54,835
9,769
35,937
6,517,327¥5,525,398
25,497
77,434226,150
419,34165
39
54,8881,650
12,502
2,928
426
—
1
60,416
9,824
33,7616,450,329$51,248,049
1,606,568
448,869
693,467
3,296,296
2,243
279
357,482
14,947
110,649
29,7414,649
774
9494,053
88,016
323,785
58,719,947

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

20,948
11,604
418,320(5,189)445,684
160,696(1,545)
19,590779
179,519397
22,725648,327¥7,165,655

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

188,737
104,549
3,768,988(46,751)
4,015,532
1,447,842(13,920)
176,502
7,018
1,617,434
3,576
204,748
5,841,310$64,561,266

See Notes to Consolidated Financial Statements.

16

2018

ASSETSCash and due from banks (Notes 17 and 19)
Call loans and bills purchased (Note 19)
Monetary claims purchased (Notes 19, 20 and 22)
Trading account securities (Notes 19 and 20)
Money held in trust (Notes 19, 21 and 22)
Securities (Notes 3, 4, 7, 12, 19, 20 and 22)
Loans and bills discounted (Notes 5, 6, 7, 8 and 19)
Reserve for loan losses (Note 19)
Foreign exchange (Note 6)
Lease receivables and investment assets
Other assets (Note 7 and 23)
Tangible fixed assets (Notes 9, 10 and 18)
Intangible fixed assets
Net defined benefit asset (Note 24)
Deferred tax assets (Note 26)
Customers’ liabilities for acceptances and guarantees
Total assets

IYO BANK Annual Report 2019

Consolidated Statement of Income
The Iyo Bank, Ltd. and its Consolidated Subsidiaries
For the year ended March 31, 2019

Thousands of U.S.
dollars (Note 1)

Millions of yen

INCOMEInterest and dividend income:Interest on loans and discounts
Interest and dividends on securities
Interest on receivables under resale agreements
Interest on receivables under securities lending transactions
Other interest income
Fees and commissions
Other operating income
Other income
Total income
EXPENSESInterest expense:
Interest on deposits
Interest on borrowings and rediscounts
Interest on payables under repurchase agreements
Interest on payables under securities lending transactions
Other interest expense
Fees and commissions
Other operating expenses
General and administrative expenses (Notes 14 and 25)
Other expenses (Note 15)
Total expenses
Income before income taxes
Income taxes (Note 26):
Current
Deferred
Total taxes
ProfitProfit attributable to noncontrolling interests
Profit attributable to owners of parent

2019

2018

2019

¥ 52,758
23,966—
62
1,332
15,121
24,2208,831
126,292¥ 49,463
26,772(0)—
1,078
14,43519,023
10,229121,002$ 475,340
215,929—558
12,001
136,237
218,217
79,565
1,137,868

3,548
1,823
625
1,308
4,269
4,829
18,89352,36010,503
98,16328,129

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

31,966
16,424
5,631
11,784
38,46243,508170,222471,754
94,630884,431
253,437

7,953
420
8,374
19,755
1,227¥ 18,527

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

71,6553,784
75,448
177,989
11,055$ 166,924

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

Yen¥58.5458.45
14.00

U.S. dollars (Note 1)¥74.73
74.59
14.00

$0.52
0.52
0.12

See Notes to Consolidated Financial Statements.

Consolidated Statement of Comprehensive Income
The Iyo Bank, Ltd. and its Consolidated Subsidiaries
For the year ended March 31, 2019

Thousands of U.S.
dollars (Note 1)

Millions of yen

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

2019

2018

2019

¥19,755(13,415)(7,220)(305)(5,890)¥6,339¥24,771
16,45815,576(444)
1,327¥41,229$177,989(120,866)(65,050)(2,747)(53,067)$57,113¥6,324
14¥37,726
3,503$56,978126

See Notes to Consolidated Financial Statements.

IYO BANK Annual Report 201917

Consolidated Statement of Changes in Net Assets
The Iyo Bank, Ltd. and its Consolidated Subsidiaries
For the year ended March 31, 2019

Millions of yen
Stockholders’ equity

For the year ended March 31, 2019

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

Commonstock

CapitalsurplusRetainedearnings

Treasurystock¥20,948¥11,570¥404,181¥(5,255)(4,431)
18,527
(232)
298

34
43

Total
stockholders’equity¥431,445(4,431)
18,527
(232)
332
43

—

34

14,13865

14,238¥20,948¥11,604¥418,320¥(5,189)¥445,684

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

For the year ended March 31, 2019

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

Retainedearnings

Treasury
stock

Total
stockholders’equityCommonstock

Capitalsurplus$188,737$104,243 $3,641,598$(47,346) $3,887,242(39,922)
166,924(39,922)
166,924(2,090)2,991
387(2,090)
2,684

306
387

—
$188,737

306

127,380$104,549 $3,768,988

585

128,281$(46,751) $4,015,532
Millions of yen

Total other comprehensive income

For the year ended March 31, 2019

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

18

IYO BANK Annual Report 2019

Net
unrealized
holding gains(losses)
on securities

Net deferredgains (losses)
on derivatives
under hedge
accountingLandrevaluation
excess¥166,703¥(1,240)¥19,634

Remeasur- Total accumuements oflated otherdefinedcomprehenbenefit plans sive income¥ 6,669¥191,766

Stockacquisitionrights

Noncontrollinginterests

Total net
assets¥467¥22,624¥646,304(4,431)
18,527
(232)
332
43

(6,006)

(305)

(43)

(5,890)(12,246)

(70)

100

(12,215)(6,006)

(305)

(43)

(5,890)(12,246)

(70)

100

2,023

¥160,696¥(1,545)¥19,590¥ 779¥179,519¥397¥22,725¥648,327

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

For the year ended March 31, 2019

Net
unrealized
holding gains(losses)
on securities

Balance at the beginning of
the accounting period$1,501,964
Changes during the accounting period
Dividends
Profit attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stockReversal of land revaluation excess
Changes in items other thanstockholders’ equity, net(54,112)
Total changes during
the accounting period(54,112)
Balance at the endof the accounting period$1,447,842

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

Stockacquisitionrights$(11,172)$176,898$ 60,086 $1,727,777$4,207

Noncontrollinginterests

Total net
assets$203,838 $5,823,083(39,922)
166,924(2,090)2,991
387(2,747)(387)(53,067)(110,334)

(630)

900

(110,054)(2,747)(387)(53,067)(110,334)

(630)

900

18,226$(13,920)$176,502$ 7,018 $1,617,434$3,576$204,748 $5,841,310

Millions of yen
Stockholders’ equity

For the year ended March 31, 2018

Commonstock

CapitalsurplusRetainedearnings

Treasurystock¥20,948¥11,555¥384,386¥(5,370)

Balance at the beginning of
the accounting period
Changes during the accounting period
Dividends
Profit attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stockReversal of land revaluation excess
Changes in items other thanstockholders’ equity, net
Total changes during
the accounting period
Balance at the endof the accounting period(4,111)
23,639
(1)
116

14
267

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

—

14

19,795115

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

Millions of yen
Total other comprehensive income

For the year ended March 31, 2018

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

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

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

Stockacquisitionrights

Noncontrollinginterests

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

13,204

(444)

(267)

1,327

13,819

(11)

3,509

17,317

13,204

(444)

(267)

1,327

13,819

(11)

3,509

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

See Notes to Consolidated Financial Statements.

IYO BANK Annual Report 201919

Consolidated Statement of Cash Flows
The Iyo Bank, Ltd. and its Consolidated Subsidiaries
For the year ended March 31, 2019

Thousands of U.S.
dollars (Note 1)

Millions of yen

2019

2018

Cash flows from operating activities
Income before income taxes
Depreciation
Impairment losses
Increase (decrease) in reserve for loan losses
Increase (decrease) in accrued employees’ bonuses
Decrease (increase) in net defined benefit asset
Increase (decrease) in net defined benefit liability
Increase (decrease) in reserve for losses on repayment of dormant bank accounts
Increase (decrease) in reserve for contingent losses
Increase (decrease) in reserve for share-based payments
Increase (decrease) in reserve under the special laws
Interest and dividend income
Interest expense
Securities losses (gains), net
Money in trust losses (gains), net
Foreign exchange losses (gains), net
Losses (gains) on disposal of tangible fixed assets, net
Net changes in loans and bills discounted
Net changes in deposits
Net changes in borrowed money (excluding subordinated borrowings)
Net changes in due from banks
Net changes in call loans
Net changes in call money
Net changes in payables under securities lending transactions
Net changes in foreign exchange assets
Net changes in foreign exchange liabilities
Net changes in lease receivables and investment assets
Interest income received
Interest expense paid
Net increase (decrease) in borrowed money from trust account
Other
Subtotal
Income taxes paid
Net cash provided by (used in) operating activities¥ 28,129
4,430
231
3,645
8
5,664
(221)
373
89
86
0
(78,119)
11,575(4,155)(408)(6,003)297(258,113)
162,622(53,484)890
22,811
125,201(149,181)
(72)
183
(848)
77,560(11,378)(8)(21,070)(139,262)(11,663)(150,925)¥ 35,791
4,249
203
715
2
(3,674)
(69)
(50)
(1)
—
0
(77,314)
7,517(6,118)
(717)
3,063
103
(248,254)
88,121
198,454
9,534
68,218(9,539)(98,564)
1,109(79)(1,370)73,044(7,541)
10(24,694)
12,147(8,277)
3,870$

Cash flows from investing activities
Purchases of securities
Proceeds from sales of securities
Proceeds from maturities of securities
Increase in money held in trust
Decrease in money held in trust
Purchases of tangible fixed assets
Proceeds from sales of tangible fixed assets
Purchases of intangible fixed assets
Net cash provided by (used in) investing activities(416,769)
516,391
144,532(388)
616(3,627)155(3,420)237,490(340,998)
153,862
134,458(1,105)850(2,543)456(2,074)(57,093)(3,755,013)
4,652,590
1,302,207(3,495)5,550(32,678)
1,396(30,813)
2,139,742

92(4,431)
(5)
(232)
231
(4,346)12(4,111)(5)(1)
0(4,106)828(39,922)(45)(2,090)2,081(39,156)

13
82,231
726,157¥ 808,389(16)(57,346)
783,504¥ 726,157

117
740,886
6,542,544$ 7,283,439

Cash flows from financing activities
Proceeds from share issuance to noncontrolling stockholders
Cash dividends paid
Cash dividends paid to noncontrolling stockholders
Purchases of treasury stock
Proceeds from sales of treasury stock
Net cash provided by (used in) financing activities
Foreign currency translation adjustments
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of year
Cash and cash equivalents at the end of year (Note 17)
See Notes to Consolidated Financial Statements.

20

IYO BANK Annual Report 20192019
253,437
39,913
2,081
32,84072
51,031(1,991)
3,360
801
774
0
(703,838)
104,288(37,435)(3,676)(54,085)
2,675(2,325,551)
1,465,195(481,881)
8,018
205,523
1,128,038(1,344,094)
(648)
1,648
(7,640)698,801(102,513)(72)(189,836)(1,254,725)(105,081)(1,359,807)

Notes to Consolidated Financial Statements
The Iyo Bank, Ltd. and Its Consolidated Subsidiaries
For the year ended March 31, 2019

1. Basis Of Presenting Consolidated Financial Statements
The accompanying consolidated financial statements have been
prepared in accordance with the provisions set forth in the Financial
Instruments and Exchange Act and its related accounting regulations
and in conformity with accounting principles generally accepted inJapan (“Japanese GAAP”), which are different in certain respects as
to application and disclosure requirements from International Financial
Reporting Standards.
The accompanying consolidated financial statements havebeen restructured and translated into English with certain expandeddisclosures from the consolidated financial statements of The Iyo Bank,
Ltd. (the “Bank”) prepared in accordance with Japanese GAAP and filedwith the appropriate Local Finance Bureau of the Ministry of Financeas required by the Financial Instruments and Exchange Act. Some
supplementary information included in the statutory Japanese language
consolidated financial statements, but not required for fair presentation,
is not presented in the accompanying consolidated financial statements.
Translations of the Japanese yen amounts into U.S. dollar amounts
were included solely for the convenience of readers outside Japan, using
the prevailing exchange rate at March 31, 2019, which was ¥110.99 to
U.S. $1.00. The translations should not be construed as representations
that the Japanese yen amounts have been, could have been or couldin the future be converted into U.S. dollars at this or any other rate ofexchange.
2. Significant Accounting Policies(1) Principles of consolidation
The consolidated financial statements include the accounts of the Bankand the following 15 consolidated subsidiaries.
• The Iyogin Credit Guaranty Company Limited• The Iyogin Business Service Company Limited• Iyogin Capital Company Limited• Iyogin Venture Fund Corporation Limited IV• Iyogin Venture Fund Corporation Limited V• Iyogin Venture Fund Corporation Limited VI• Iyo Evergreen Sixtiary Industrialization Support Fund Investment
Business Limited Partnership• Iyo Evergreen Agriculture Support Fund Investment Business Limited
Partnership• Iyo Evergreen Business Succession Support Fund Investment Business
Limited Partnership• Iyogin Regional Economy Research Center, Inc.
• Iyogin DC Card Co., Ltd.
• Iyogin Challenge & Smile Co., Ltd.
• Iyogin Leasing Company Limited• Iyogin Computer Service Company Limited• Shikoku Alliance Securities Co., Ltd.
The consolidated financial statements exclude the following
subsidiary.
• Iyogin-Ehime University Originated Venture Support Fund Investment
Business Limited Partnership
Iyogin-Ehime University Originated Venture Support Fund Investment
Business Limited Partnership is excluded from the scope of consolidation
because its assets, ordinary income, net income, retained earnings
and accumulated other comprehensive income are immaterial to theconsolidated financial statements.
No unconsolidated subsidiary is accounted for by the equity method.
Iyogin-Ehime University Originated Venture Support Fund Investment
Business Limited Partnership is excluded from the scope of the equity
method because its net income and retained earnings are immaterial tothe consolidated financial statements.
The consolidated financial statements exclude the following affiliatedcompanies.
• Iyogin REVIC Investments Company Limited• Shikoku Alliance Capital Co., LtdNo affiliated companies are accounted for by the equity method.
Iyogin REVIC Investments Company Limited and Shikoku Alliance
Capital Co., Ltd are excluded from the scope of the equity method
because their net income and retained earnings are immaterial to theconsolidated financial statements.
The consolidated financial statements include the accounts ofsix consolidated subsidiaries with fiscal years that end December 31.
Appropriate adjustments are made for significant transactions during
the period from December 31 to March 31, the date of the consolidated
financial statements.
All significant intercompany balances, transactions and unrealized
profits and losses included in assets and liabilities are eliminated.
(2) Net assets
Under Japanese laws and regulations, including the Companies Act(the “Act”), the entire amount paid for new shares is required to be
designated as common stock. However, a company may, by a resolutionof the Board of Directors, designate an amount not exceeding one halfof the price of the new shares as additional paid-in capital, which isincluded in capital surplus.
Under the Act and the Banking Law, in cases in which a dividend
distribution of surplus is made, the smaller of an amount equal to 20%of the dividend or the excess, if any, of 100% of common stock over
the total of additional paid-in capital and legal earnings reserve must
be set aside as additional paid-in capital or legal earnings reserve. Legalearnings reserve is included in retained earnings in the accompanying
consolidated balance sheets.
Under the Act, legal earnings reserve and additional paid-in capitalcan be used to eliminate or reduce a deficit or can be capitalized by aresolution of the stockholders’ meeting. Additional paid-in capital andlegal earnings reserve may not be distributed as dividends. Under the
Act and the Banking Law, however, by resolution of the stockholders’meeting, all additional paid-in capital and all legal earnings reserve
may be transferred to other capital surplus and retained earnings,
respectively, which are potentially available for dividends.
The maximum amount that the Bank can distribute as dividends is
calculated based on the unconsolidated financial statements of the Bankin accordance with Japanese laws and regulations.
At the meeting of the Board of Directors held on May 10, 2019,
cash dividends in the amount of ¥2,217 million ($19,974 thousand) wereapproved by the Board of Directors. The appropriation was not accruedin the consolidated financial statements as of March 31, 2019. Suchappropriations are recognized in the period in which they are approvedby the Board of Directors.
(3) Cash flow statements
In preparing the consolidated statements of cash flows, cash on handand deposits with the Bank of Japan are considered to be cash and cash
equivalents.
(4) Foreign currency translations
Foreign currency assets and liabilities and the accounts of overseas
branches of the Bank are translated into yen at the rates prevailing at theconsolidated balance sheet date.

IYO BANK Annual Report 201921

Consolidated subsidiaries’ foreign currency assets and liabilities aretranslated into yen at the rate prevailing at their respective balance sheet
dates.
(5) Trading account securities
Trading account securities of the Bank and its consolidated subsidiaries
are stated at fair market value. Gains and losses realized on the disposal
and unrealized gains and losses from market value fluctuations of thesesecurities are recognized as gains and losses in the period of the change.
Realized gains and losses on the sale of such trading account securities
are computed using moving average cost.
(6) Securities
Held-to-maturity debt securities are stated at amortized cost by thestraight-line method. Available-for-sale securities with available fairmarket values are stated at fair market value. Realized gains and losseson the sale of such securities are computed using moving average cost.
Available-for-sale securities with fair values that are extremely difficult
to determine are carried at cost using moving average cost. Unrealized
gains and losses on these securities are reported, net of applicable
income taxes, as a separate component of net assets.
Securities included in the money held in the trust account aretreated in the same manner as the securities mentioned above.
(7) Reserve for possible loan losses
The Bank and its consolidated subsidiaries write off loans and makeprovisions for possible loan losses. For loans to insolvent customers who
are undergoing bankruptcy or other collection proceedings or who arein a similar financial condition, the reserve for possible loan losses isprovided in the full amount of such loans, excluding amounts written off
and the portion that is estimated to be recoverable due to the existenceof security interests or guarantees. For the unsecured and unguaranteed
portions of loans to customers not in the above circumstances but for
who there is a high probability of so becoming, the reserve for possible
loan losses is provided for the estimated unrecoverable amounts
determined after an evaluation of the customer’s overall financial
condition. For other loans, such as normal loans and loans requiring
special attention, the reserve for possible loan losses is provided basedon the Bank’s actual rate of loan losses in the past.
Assessments and classifications are made by each business and credit
supervision department and are audited by the Credit Administration
Department, an independent department. The reserve for possible loan
losses is provided based on such procedures.
The estimated unrecoverable portions of loans to insolvent
customers who are undergoing bankruptcy or other collection
proceedings or who are in a similar financial condition are written off.
The estimated unrecoverable amounts are determined after excluding
amounts considered recoverable due to the existence of security
interests or guarantees. As of March 31, 2019 and 2018, the estimatedunrecoverable amounts were ¥20,253 million ($182,475 thousand) and¥20,833 million, respectively.
The consolidated subsidiaries write off loans and make provisions forpossible loan losses based on the actual rate of loan losses in the past.
However, unrecoverable amounts of loans to customers who have a highprobability of becoming bankrupt are separately estimated and a reservefor possible loan losses is provided based on those estimations.
(8) Tangible and intangible fixed assets and lease assets
Tangible and intangible fixed assets are generally stated at cost, less theaccumulated depreciation.

22

IYO BANK Annual Report 2019

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

Some consolidated subsidiaries use a simplified method to calculate
net defined benefit liability and retirement benefit cost. This simplified
method assumes the Company’s retirement benefit obligations to beequivalent to the benefits that would be payable upon the voluntary
retirement of all employees at the fiscal year-end to calculate net defined
benefit liability and retirement benefit cost.
(15) Derivatives and hedge accounting
Derivative transactions are valued at fair value with changes in fair value
included in current income.
In order to hedge the interest rate risk associated with various
financial assets and liabilities, the Bank applies the deferred hedge
accounting method stipulated in JICPA Industry Audit Committee Report
No. 24, February 13, 2002, “Accounting and Auditing Treatment of
Accounting Standards for Financial Instruments in Banking Industry.”
The effectiveness of hedging is assessed for (i) each identified group ofhedged items, such as deposits, loans and similar instruments, and (ii)the corresponding group of hedging instruments, such as interest rate
swaps, in the same maturity bucket.
For certain assets and liabilities, the Bank and its consolidated
subsidiaries apply the exceptional treatment permitted for interest rate
swaps.
The Bank applies the deferred method of hedge accounting tohedge foreign exchange risk associated with various foreign currency
denominated monetary assets and liabilities as stipulated in JICPA
Industry Audit Committee Report No. 25, July 29, 2002, “Treatment of
Accounting and Auditing Concerning Accounting for Foreign Currency
Transactions in the Banking Industry.” The effectiveness of the currency
swap transactions, exchange swap transactions and similar transactions
that hedge the foreign exchange risk of monetary assets and liabilities
denominated in foreign currencies is assessed based on a comparisonof the foreign currency positions of the hedged monetary assets andliabilities and the hedging instruments.
The Bank also applies fair value hedge accounting to portfolio
hedges of the foreign exchange risk associated with foreign currency
denominated available-for-sale securities (other than bonds) identified
as hedged items in advance as long as the amount of spot and forward
foreign exchange contracts payable exceeds the acquisition costs of thehedged securities in foreign currency.
(16) Finance leases
In connection with finance leases as the lessor, sales and cost of sales arerecognized at the time of receiving lease payment.
(17) Operating leases
As lessor under operating leases, lease related income is recognized on astraight-line basis over the full term of the lease based on the contractual
amount of lease fees per month.
(18) Consumption taxes
National and local consumption taxes are accounted for mainly on a tax
exclusion basis.
(19) Application of consolidated tax reporting
The Bank and its wholly owned consolidated subsidiaries have adopted aconsolidated tax return system.

(20) Per share data
Net income per share is based on the weighted average number ofshares of common stock outstanding during the year, excluding treasury
stock. Diluted net income per share reflects the potential dilution that
could occur if stock options were exercised. Diluted net income per shareof common stock assumes the full exercise of outstanding warrants atthe time of issuance.
Cash dividends per share shown in the accompanying consolidated
statements of income represent dividends declared as applicable to therespective year.
(21) Accounting standards not yet adopted“Accounting Standard for Revenue Recognition” (ASBJ Statement
No.29, March 30, 2018) and “Implementation Guidance on AccountingStandard for Revenue Recognition” (ASBJ Guidance No.30, March 30,
2018)(a) Overview
The above standard and guidance provide comprehensive principles
for revenue recognition. Under the standard and guidance, revenue isrecognized by applying following 5 steps:
Step 1: Identify contract(s) with customers.
Step 2: Identify the performance obligations in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performance obligation in
the contract.
Step 5: Recognize revenue when (or as) the entity satisfies a performanceobligation.
(b) Effective date
Effective from the beginning of the fiscal year ending March 31, 2022.
(c) Effects of the application of the standards
The Bank and its consolidated subsidiaries are currently in the processof determining the effects of the new standard and implementation
guidance on the consolidated financial statements.
(22) Additional information
In the current fiscal year, the Bank introduces the share-based payments
system using the trust for its directors (excluding the audit committee
members) and executive officers with the aim of raising awareness ofcontribution to the medium to long-term performance and corporate
value.
(a) Overview of transactions
The Trust acquires shares of the Bank using funds to be contributed by
the Bank.
In accordance with the internal share delivery regulations set forth by
the Board of Directors of the Bank, the Bank grants points to its directors(excluding the audit committee members) and executive officers. At thetime of retirement, shares of the Bank and money will be delivered inaccordance with the points through the Trust.
(b) Shares of the Bank held by the Trust
Shares of the Bank held by the Trust are recorded as treasury stock in
Net assets at the book value in the Bank.
The book value of the trust is ¥231 million.
The number of shares of the Bank held by the Trust at the end of
the current fiscal year was 300 thousand shares.

IYO BANK Annual Report 201923

3. Stocks and Investments in Unconsolidated Subsidiaries andAffiliates
Stocks in unconsolidated subsidiaries and affiliates amounted to ¥75
million ($675 thousand) at March 31, 2019.
Investments in unconsolidated subsidiaries and affiliates amounted
to ¥94 million ($846 thousand) and ¥96 million at March 31, 2019 and2018, respectively.
4. Securities Lending Transactions
Japanese government bonds were included nil and ¥10,344 million atMarch 31, 2019 and 2018 respectively, of secured loan securities forwhich the borrowers had the right to sell or pledge.
5. Loans and Bills Discounted
Loans and bills discounted included the following:
Millions of yen

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

Thousands of
U.S. dollars(Note 1)2019
¥ 2,142
52,6522018¥ 1,158
47,4022019$ 19,299
474,385

2,811
15,883¥73,490

2,342
15,749¥66,651

25,326
143,102$662,131

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

6. Commercial Bills
Bills discounted are accounted for as financing transactions in accordancewith JICPA’s Industry Audit Committee Report No. 24, February 13,
2002, although the Bank has the right to sell or pledge them without
restrictions. The total face value of commercial bills and purchased
foreign exchange bills obtained as a result of discounting was ¥26,475
million ($238,535 thousand) and ¥26,842 million at March 31, 2019 and2018, respectively.

24

IYO BANK Annual Report 2019

7. Assets Pledged
Assets pledged as collateral were as follows:
Thousands of
U.S. dollars(Note 1)Millions of yen

Securities
Loans
Total

2019
¥336,215
400,033¥736,2482019$3,029,236
3,604,225$6,633,462

2018¥776,449—¥776,449

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

Deposits
Payables under repurchaseagreements
Payables under securities
lending transactions
Borrowed money

2019¥10,2832018¥ 6,071

49,82077,434

448,869

76,968355,523

226,150
408,807

693,467
3,203,198$

2019
92,647

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

Securities
Other assets

2019
¥ 441
50,0002018¥28,122
36,666

Thousands of
U.S. dollars(Note 1)2019
$ 3,973
450,491

Other assets included cash collateral paid for financial instrumentsof ¥3,567 million ($32,138 thousand), guarantees of ¥83 million ($747
thousand) and security deposits of ¥285 million ($2,567 thousand) at
March 31, 2019. Other assets included cash collateral paid for financial
instruments of ¥1,836 million, guarantees of ¥79 million and security
deposits of ¥290 million at March 31, 2018.

8. Commitment Lines
Commitment line agreements related to loans are agreements which
oblige the Bank and its consolidated subsidiaries to lend funds up
to certain limits agreed to in advance. The Bank and its consolidated
subsidiaries will lend the funds upon the request of an obligor to draw
down the funds under the loan agreement as long as there is no breach of
the various terms and conditions stipulated in the relevant loan agreement.
The unused commitment balances related to these loan agreements at
March 31, 2019 and 2018 amounted to ¥1,186,205 million ($10,687,494
thousand) and ¥1,118,661 million, respectively. Of these amounts,¥1,050,558 million ($9,465,339 thousand) and ¥1,016,612 million asof March 31, 2019 and 2018, respectively, related to loans in which theterm of the agreement was one year or less or in which unconditional
cancellation of the agreement was allowed at any time.
In many cases, the term of the loan agreement runs its course
without the loan ever being drawn down. Therefore, unused loan
commitments do not necessarily affect future cash flows.
Conditions are included in certain loan agreements which allow the
Bank and its consolidated subsidiaries either to decline the request fora loan draw-down or to reduce the agreed limit when there is cause to
do so, such as when there is a change in the financial condition of theobligor or when it is necessary to protect the Bank’s or a consolidated
subsidiary’s credit. The Bank and its consolidated subsidiaries takevarious measures to protect their credit, including having the obligor
pledge collateral in the form of real estate, securities, etc., on signing
the loan agreement or in accordance with the Bank and its consolidated
subsidiaries’ established internal procedures for confirming an obligor’s
financial condition, etc., at regular intervals.

9. Land Revaluation Excess
In accordance with the Revaluation Act of Land Properties, the Bank
revalued land used in the ordinary course of business as of March
31, 1998. The revaluation excess, net of deferred taxes, is shown as
a separate component of net assets. The current market value of therevalued land was lower than the revalued amount by ¥15,801 million($142,364 thousand) and ¥17,497 million at March 31, 2019 and 2018,
respectively.
10. Tangible Fixed Assets
Accumulated depreciation of tangible fixed assets at March 31, 2019and 2018 amounted to ¥54,375 million ($489,909 thousand) and¥54,779 million, respectively. The amounts that were directly offset
against acquisition costs as of March 31, 2019 and 2018 were ¥8,399
million ($75,673 thousand) and ¥8,482 million, respectively.

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

2019¥365,856

2018¥419,341

2019$3,296,296

288

356

2,594

627

446

5,649

The weighted average interest rates on the outstanding balances at
March 31, 2019 and 2018 were as follows:
2019
2018
Borrowings from banks
0.39%
0.18%
Lease liabilities(due within one year)——
Lease liabilities(due after one year)——(Note) The “average interest rate” is not shown for lease obligations because the
Bank uses a method in which amounts equal to the interest in the total
capital lease obligations are spread equally over each fiscal year of the lease
period.

The following is a summary of the maturities of borrowed money atMarch 31, 2019.
Borrowings from banks

Lease liabilities

Millions ofyenYear ended March 31:

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

Thousands of
U.S. dollars(Note 1)

¥358,872
2,270
1,746
1,403
743
820
¥365,856$3,233,372
20,452
15,731
12,6406,694
7,388$3,296,296

¥288
234
82
78
74
158
¥915

$2,594
2,108
738
702
666
1,423
$8,243

2020
2021
2022
2023
2024
Thereafter
Total

14. General and Administrative Expenses
General and administrative expenses included salaries and allowancesin the amount of ¥21,699 million ($195,504 thousand) and ¥21,592
million at March 31, 2019 and 2018, respectively.
15. Other Expenses
Other expenses consisted of the following:Thousands of
U.S. dollars(Note 1)Millions of yen

Loans written off
Securities written off

11. Borrowed Money and Lease Liabilities
Borrowed money consisted of the following:

Borrowings from banks
Lease liabilities(due within one year)
Lease liabilities(due after one year)

13. Acceptances and Guarantees
The principal amount of money trusts to be indemnified by the Bank andits consolidated subsidiaries was ¥31 million ($279 thousand) and ¥39
million at March 31, 2019 and 2018, respectively.

2019
¥ 15
1,004

2018
¥38
3

2019
$ 135
9,045

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

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

2019

2018

2019

¥ (6,419)(4,156)¥28,846(6,046)$ (57,834)(37,444)(10,575)
3,355

22,800(7,224)(95,278)
30,227(7,220)15,576(65,050)(4,334)
3,895(3,225)
2,585(39,048)
35,093

(439)
133

(640)
195

(3,955)
1,198

(305)

(444)

(2,747)(7,771)
(704)

1,648
239

(70,015)(6,342)(8,475)
2,585

1,887
(560)

(76,358)
23,290(5,890)1,327(53,067)¥(13,415)¥16,458$(120,866)

12. Guarantee Obligations
Guarantee obligations for private placement bonds in securities inaccordance with the Article 2-3 of the Financial Instruments andExchange Law amounted to ¥55,413 million ($499,261 thousand) and¥48,894 million at March 31, 2019 and 2018, respectively.

IYO BANK Annual Report 201925

17. Cash and Cash Equivalents
Cash and cash equivalents in the consolidated statements of cash flows
included due from banks, except for deposits with the Bank of Japan, as
follows:
Thousands of
U.S. dollars(Note 1)Millions of yen

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

2019

2018

2019

¥809,668¥728,327$7,294,963(1,278)(2,169)(11,514)¥808,389¥726,157$7,283,439

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

Due within one year
Due after one year
Total

2019
¥114
105
¥219

2018
¥128
217
¥346

Thousands of
U.S. dollars(Note 1)2019
$1,027946$1,973As lessor
Millions of yen

Due within one year
Due after one year
Total

2019
¥ 68
205
¥273

2018
¥ 43
139
¥183

Thousands of
U.S. dollars(Note 1)

2019
$ 612
1,847
$2,45919. Financial Instruments(1) Financial instruments(a) Policy on financial instruments
The Bank and its consolidated subsidiaries engage mainly in the financial
services business that includes deposit services and lending services andleasing services.
Accordingly, the Bank holds financial assets and liabilities thatare subject to interest rate fluctuations and undertakes asset andliability management (ALM) in order to curb any unfavorable impact
from interest rate fluctuations. The Bank also engages in derivativetransactions as part of its ALM.

26

IYO BANK Annual Report 2019(b) Descriptions and risks of financial instruments
The financial assets of the Bank and its consolidated subsidiaries consist
mainly of loans to customers, which are subject to default risk. Also, theBank holds securities that are mainly stocks, bonds and mutual funds forinvestment, management or trading purposes. They are subject to theissuer’s credit risk, interest rate risk and market price risk.
The foreign currency denominated financial assets and liabilities
are subject to foreign currency risk. The Bank uses currency swaps tomanage the risk.
The Bank’s derivative transactions include interest rate swaps. The
Bank applies hedge accounting to the interest on loans to hedge interest
rate risks regarding the interest rate swaps as hedge instruments. The
effectiveness is ensured by maintaining a balance of hedge instrumentsthat does not exceed the balance of the hedged items, which aregrouped by incidence and remaining period.
Other transactions not qualifying for hedge accounting expose the
Bank to foreign exchange and interest rate risks.
(c) Risk management system for financial products(i) Credit risk management
The Bank prescribes its credit risk management policy in its “RiskManagement Plan,” which is issued by the Board of Directors biannually.
In particular, the Bank diversifies credit risk by ensuring that credit
granted is not overconcentrated in certain customers, groups orindustries. The Bank periodically analyzes and evaluates the credit
conditions classified by internal ratings, business area and industry.
The Bank strives to optimize its credit portfolio by promoting effective
credit risk management. Feedback regarding credit risk management isreported to the Board of Directors on a regular basis.
The Bank manages each customer’s credit in compliance with its“Internal Rating System,” part of the Bank’s credit risk management.
The Risk Management Division (RMD), which is completely independent
from other banking business divisions, is responsible for planning andadministrating the internal rating system and conducting, coordinating
and monitoring the internal ratings. The Loan Group is responsible forsupervising the individual credit granted and examining each customers’
finances, purpose for the loan and ability to repay. The group is
independent from the business promotion group and is divided into
four divisions: the Credit Division - responsible for general loans, theShip Finance Division – responsible for the loans such as loans in the
shipping and shipbuilding industries, the Credit Management Division responsible for the planning of loan administration and troubled credit
and the Corporate Consulting Division - responsible for supporting
company rehabilitation. The assets are initially assessed by each branch
and then by the head office, followed by a validation by RMD, which isalso responsible for the formulation of the assessment standards.
The credit granted by the consolidated subsidiaries is managed foreach customer along with the credit granted by the Bank. RMD also
manages the credit risk of issuers and counterparty risk in derivativetransactions by monitoring and periodically evaluating credit informationand market prices.
(ii) Market risk management
In order to properly manage market risk and maintain the Bank’ssoundness and profitability, the Bank has established a comprehensive
risk management structure set forth by the ALM Committee. The ALM
Committee uses various measures such as the gap method, market
value analysis, periodic income/loss simulation and the VaR method tocontrol risk. The ALM Committee also coordinates risk management
plans and hedging strategies by analyzing the profitability structure andforecasting the market and the economic environment. RMD, set up
as an independent supervisor, evaluates the appropriateness of market
transactions dealt with by other divisions.
The Bank sets limits on the quantity of risk that may be undertaken
in its “Risk Management Plan,” which is developed by the Board of
Directors biannually. RMD monitors compliance with the plan and reports
to the Board of Directors monthly.
(Quantitative information on market risk)
The Bank measures market risk based on the VaR method. The variancecovariance model (holding period: 120 business days; confidence
interval: 99.9%; and historical observation period: 1,200 business days)
is applied in the measurement of VaR.
The major market risks for the Bank are equity risk and interest raterisk. Financial instruments affected by interest rate risk are loans andbills discounted, available-for-sale securities, deposits, borrowed money,
interest swap transactions and interest rate cap derivative transactions.
At March 31, 2019 and 2018, the quantity of market risk (expectedloss), which included equity risk and interest rate risk, amounted to¥139.3 billion ($1,255 million) and ¥225.6 billion, respectively.

The Bank confirms the validity of the measurement model by
biannually performing back-testing, which compares VaR with actualfluctuations in profit and loss during the observation period. However,
VaR, the quantity of market risk which is statistically measured withhistorical market fluctuations, may not reflect drastic changes in themarket.
(iii) Liquidity risk management
The liquidity risk management of the Bank is conducted through assetliability management (ALM) and the duration of funds procured withconsideration for the market environment.
(d) Supplementary explanation of matters related to fair values offinancial instruments and others
The fair values of financial instruments include values based on market
prices and values reasonably estimated when the financial instruments
do not have market prices. Since certain assumptions underlie theestimates of such values, the values may differ when other assumptions
are applied.

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

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

Book value

Millions of yen
2019
Fair value¥ 809,668—
10,921¥ 809,668—
10,921

349
6,494

349
6,494

—
—

1,555,923
4,527,810(26,114)4,501,696¥6,885,053¥5,228,365
459,656
178,31349,82076,968365,856¥6,358,979

1,555,923
4,473,089—

4,473,089¥6,856,447¥5,229,025
459,656
178,31349,82076,968366,014¥6,359,798

¥

1,071

¥

¥

(4,494)(3,423)¥Thousands of U.S. dollars (Note 1)
2019Book value
Fair value
Difference

Difference

¥

—
—
—

$ 7,294,963 $ 7,294,963——
98,396
98,396
3,144
58,509

$

—
—
—

3,144
58,509———(28,606)¥(28,606)
¥
659
0
—
—
—
158
¥
818

14,018,587 14,018,587
40,794,756 40,301,729(235,282)
40,559,473 40,301,729$62,033,093 $61,775,358$47,106,631 $47,112,577
4,141,418
4,141,418
1,606,568
1,606,568
448,869
448,869
693,467
693,467
3,296,296
3,297,720$57,293,260 $57,300,639(257,734)$(257,734)$ 5,937
(0)
—
—
—
1,423
$ 7,370

1,071

¥

—

$

9,649 $

9,649

$

—

(4,494)(3,423)¥——$(40,490)(30,840) $(40,490)(30,840)$——(*1) General and specific reserves for loan losses relevant to loans and bills discounted are excluded.
(*2) D erivative transactions recorded in other assets and liabilities are presented as a lump sum. Net claims and debts that arise from derivative transactions arepresented on a net basis.
(*3) Immaterial items are omitted.

IYO BANK Annual Report 201927

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

Book value

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

465
6,337

465
6,337

—
—

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

1,799,281
4,220,813—

4,220,813¥6,788,951¥5,084,055
441,224
25,497
77,434226,150
419,430¥6,273,793(25,937)¥(25,937)¥ (117)
0
—
—
—
89
¥
(28)

¥

1,516

¥

1,516

¥

—

¥

536
2,052

¥

536
2,052

¥

—
—

Difference

¥

—
—
—

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

Note i. Methods used to calculate fair value of financial instruments
Assets(1) Cash and due from banks
The fair value of due from banks with no maturity is considered equal
to the book value since the fair value approximates the book value. The
fair value of due from banks with maturity is calculated as the present
value discounted at rates that reflect the proper market risk and credit
risk per contractual terms. The fair value of due from banks with shortcontractual terms (within one year) is considered equal to the book value
since the fair value approximates the book value.
(2) Call loans and bills purchased
The fair value of call loans and bills purchased is considered equal to thebook value since the contractual term is within one year and the fairvalue approximates the book value.
(3) Monetary claims purchased
The fair value of trustee beneficial rights in monetary claims purchasedis based on the price quoted by correspondent financial institutions. For
monetary claims purchased with short contractual terms (within oneyear), the fair value is considered equal to the book value since the fairvalue approximates the book value.
(4) Trading account securities
The fair value of securities such as bonds held for trading is based on themarket price or the price quoted by correspondent financial institutions.
(5) Money held in trust
The fair value of money held in trust is based on the price quoted bycorrespondent financial institutions. Information on money held in trustclassified by the purpose for which it is held is disclosed in Note 21,“MONEY HELD IN TRUST.”28

IYO BANK Annual Report 2019(6) Securities
The fair value of stocks is based on market price. The fair value ofbonds is based on market price or the price quoted by correspondent
financial institutions. The fair value of investment trusts is based on the
publicly disclosed base value. The fair value of private placement bonds
is calculated as the present value discounted at a rate that reflects theproper market rate corresponding to the remaining period and credit risk
based on the internal rating.
Information on securities classified by the purpose for which they areheld is disclosed in Note 20, “SECURITIES.”(7) Loans and bills discounted
The fair value of loans and bills discounted with floating rates are
considered equal to the book value since the rate reflects the market
rate in a short period and the fair value approximates the book value,
unless the creditworthiness of the borrower changes significantly after
the inception date. The fair value of loans and bills discounted with fixed
rates is calculated as the present value, discounting future cash flow at a
rate that reflects the proper market rate corresponding to the remaining
period and credit risk based on the internal rating. The fair value of loans
and bills discounted with short contractual terms (within one year) is
considered equal to the book value since the fair value of these items
approximates the book value.
In addition, the fair value of claims against bankrupt obligors,
substantially bankrupt obligors and intensive control obligors
approximates the consolidated balance sheet amount as of theconsolidated balance sheet date less the allowance for bad debt since
the bad debt is calculated based on the present value of the expected
future cash flow or the estimated collectable amount from collateral
and/or guarantees.

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

Derivative Transactions
Information on derivative transactions is disclosed in Note 23, “Derivative
Transactions.”
Note ii. Financial instruments whose fair value is deemed extremely
difficult to determine are not included in “Available-for-salesecurities” in the table above.
Consolidated balance sheet
amount (2019)
Category

Millions of yen

Thousands of
U.S. dollars(Note 1)

¥12,476
6,449¥18,925$112,406
58,104$170,510

Unlisted stocks (*1) (*2)
Investments in partnerships (*3)
Total(*1) Unlisted stocks are not included in the disclosure of fair value since the fairvalue is deemed extremely difficult to determine.
(*2) The amount of impairment on unlisted stock during the year ended March
31, 2019 was ¥1 million ($9 thousand).
(*3) Investments in partnerships in which the partnership assets compriseunlisted stocks are not included in the disclosure of fair value since the fairvalue is deemed extremely difficult to determine.
Consolidatedbalance sheet
amount (2018)
Category

Millions of yen

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

¥13,0423,230¥16,273(*1) Unlisted stocks are not included in the disclosure of fair value since the fairvalue is deemed extremely difficult to determine.
(*2) The amount of impairment on unlisted stock during the year ended March
31, 2018 was ¥3 million.
(*3) Investments in partnerships in which the partnership assets compriseunlisted stocks are not included in the disclosure of fair value since the fairvalue is deemed extremely difficult to determine.

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

Within 1 year

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

Due from banks
Call loans and bills purchased
Monetary claims purchased
Securities
Held-to-maturity debt securities
Securities with maturities
Japanese government bonds
Municipal bonds
Corporate bonds
Loans and bills discounted (*)
Total¥ 761,918—
4,323
155,695—
155,695
90,70024,993
19,962
1,145,924¥2,067,861

1-3 years¥

Millions of yen
2019
3-5 years
5-7 years———
373,276—
373,276
257,100
48,802
34,465
828,922¥1,202,199——
173
84,768—84,768—25,80629,393626,203¥711,145

Within 1 year

1-3 years

Millions of yen
2018
3-5 years
5-7 years¥ 681,662
23,4794,271
128,352—
128,352
54,00038,01918,217
1,053,188¥1,890,953

¥

¥

—
—
—
426,794—
426,794
289,700
40,85736,388814,868¥1,241,662

¥

—
—
247
201,702—
201,70291,10039,57026,921
612,718¥814,6687-10 years

¥

—
—
1,800
141,199—
141,199
63,50035,151
9,533
477,829¥620,828

¥

¥

—
—
—
236,887—
236,887
3,500
73,4871,797
490,230¥727,118

7-10 years——
393
94,135—
94,1359,500
18,84013,161
429,003¥523,533¥———
391,312—391,312
100,500
64,2888,711
477,719¥869,032

Over 10 years

¥

—
—
4,503
79,418—79,41816,00036,563
4,880
867,610¥951,532

Over 10 years

¥

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

IYO BANK Annual Report 201929

Thousands of U.S. dollars (Note 1)
2019
Within 1 year

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

1-3 years$ 6,864,744 $———
38,949—1,402,784
3,363,149——
1,402,784
3,363,149
817,1902,316,424
225,182439,697
179,854
310,523
10,324,569
7,468,438$18,631,056 $10,831,597

3-5 years

5-7 years

7-10 years

$

$

$

—
—
1,558
763,744—763,744—
232,507
264,825
5,641,976$6,407,288——
16,217
1,272,177—
1,272,177
572,123
316,704
85,8904,305,153$5,593,548———
2,134,309—
2,134,309
31,534
662,104
16,1904,416,884$6,551,202

Over 10 years$——
40,571
715,541—
715,541
144,157
329,426
43,967
7,817,010$8,573,132(*) Loans and bills discounted on which full repayment is not expected from debtors such as bankrupt obligors, substantially bankrupt obligors and intensively
controlled obligors amounted to ¥54,795 million ($493,693 thousand) and ¥48,560 million at March 31, 2019 and 2018, respectively and loans and bills with nomaturities amounted to ¥36,295 million ($327,011 thousand) and ¥38,158 million at March 31, 2019 and 2018, respectively.

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

Within 1 year

Deposits (*)
Certificates of deposit
Call money and bills soldPayables under repurchase agreements
Payables under securities lending transactions
Borrowed money
Total¥4,838,849
457,826
178,31349,82076,968358,872¥5,960,650

1-3 years¥348,674
1,830
—
—
—
4,016
¥354,521

Millions of yen
2019
3-5 years
5-7 years¥36,992
—
—
—
—
2,146
¥39,138¥2,395————385¥2,781

7-10 years

Over 10 years¥1,453————264¥1,717

¥ —
—
—
—
—
170
¥170

Millions of yen
2018

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

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

Within 1 year

1-3 years¥4,704,290
440,905
25,497
77,434226,150
412,183¥5,886,462¥338,318
320
—
—
—
4,284
¥342,923

3-5 years¥37,188
—
—
—
—
1,766
¥38,955

5-7 years¥1,923————522¥2,445

7-10 years

Within 1 year

Thousands of U.S. dollars (Note 1)
2019
1-3 years
3-5 years
5-7 years
7-10 years$43,597,161
4,124,930
1,606,568
448,869
693,467
3,233,372$53,704,387$3,141,490
16,487———36,183$3,194,170$333,291————
19,335$352,626$21,578
—
—
—
—
3,468
$25,056

Over 10 years¥2,451————342¥2,794

¥ —
—
—
—
—
242
¥242

Over 10 years$13,091
—
—
—
—
2,378
$15,469(*) Demand deposits are included in “Within 1 year.”

20. Securities(1) The following tables summarize acquisition costs, book values and fair values of securities with available fair values as of March 31, 2019.
(a) Trading securities:

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

30

IYO BANK Annual Report 2019

Millions of yen

Thousands of
U.S. dollars(Note 1)

2019

2019
¥(4)

$(36)

$

—
—
—
—
—
1,531
$1,531

(c) Available-for-sale securities:

Book value

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

Millions of yen
2019
Acquisition
cost

Thousands of U.S. dollars (Note 1)
2019
Acquisition
Book value
cost
Difference

Difference¥ 285,418
787,329
438,138
252,660
96,530357,278¥1,430,026¥

81,193
766,468
427,245244,999
94,224340,206¥1,187,868¥204,224
20,861
10,8937,661
2,306
17,071¥242,158$ 2,571,565 $ 731,534
7,093,693
6,905,739
3,947,544
3,849,400
2,276,421
2,207,397
869,717
848,941
3,219,010
3,065,195$12,884,277 $10,702,477$1,840,021
187,953
98,14369,024
20,776
153,806$2,181,800¥¥¥ (1,597)
(294)
(4)
—
(290)
(2,458)(4,350)¥237,807$

60,230 $74,619292,404
295,062
56,42856,464——
235,976
238,589
841,427
863,573
1,194,071
1,233,264$14,078,349 $11,935,750$

LossesThousands of U.S. dollars (Note 1)
2019
Amount sold
Gains
Losses

6,685
32,454
6,263—
26,191
93,390132,530¥1,562,556

8,282
32,7496,267—
26,481
95,848136,880¥1,324,749(14,388)(2,648)(36)—(2,612)(22,146)(39,192)$2,142,598(d) Available-for-sale securities sold in the year ended March 31, 2019
Millions of yen
2019
Amount sold
Gains

¥

7,760
84,03977,9296,109
188,560¥280,360

Equity securities
Bonds
Japanese government bonds
Corporate bonds
Other
Total

Available-for-sale securities which have readily determinable fair values
are written down to the fair value, and the difference between theacquisition cost and the fair value is treated as loss for the fiscal year
(impairment (devaluation)) if the fair value has significantly deteriorated
from the acquisition cost, unless it is deemed that there is a possibility ofa recovery in the fair value. The amount of impairment (devaluation) for
the year ended March 31, 2019 was ¥1,086 million ($9,784 thousand),including ¥1,002 million ($9,027thousand) of equity securities and¥83 million ($747 thousand) of bonds. A security is deemed to have“significantly deteriorated” if the fair value has decreased to 50% orless of the acquisition cost. If the fair value exceeds 50% but is 70% orless of the acquisition cost, the security may be deemed “significantly
deteriorated” considering the quoted market price change during acertain period in the past, business performance and other factors.
(2) The following tables summarize acquisition costs, book values and fairvalues of securities with available fair values as of March 31, 2018.
(a) Trading securities:
Millions of yen
2018

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

¥(4)

¥4,964
262
255
7
4,014
¥9,241

¥

0
86
73
13
3,920
¥4,007$

69,916757,176
702,126
55,0401,698,891$2,525,993$44,724
2,360
2,297
63
36,165$83,259

$

0
774
657
117
35,318$36,102(c) Available-for-sale securities:
Millions of yen
2018
Acquisition
cost

Book value

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

¥ 306,191
859,598¥

Difference

87,661
834,240¥218,529
25,357

581,416
185,598
92,583
246,454¥1,412,245

565,250

16,165

178,829
90,160232,134¥1,154,037

6,769
2,422
14,319¥258,207

¥

¥

¥

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

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

(754)
(740)

—
(240)
(499)
(8,265)(9,760)¥248,447

IYO BANK Annual Report 201931

(d) Available-for-sale securities sold in the year ended March 31, 2018
Millions of yen
2018
Amount sold
Gains

Equity securities
Bonds
Japanese government
bonds
Corporate bonds
Other
Total

Losses¥ 10,526
28,891¥6,18239¥ 25—

28,82566
87,196¥126,614

39
0
863¥7,085

—
—
601
¥626

Available-for-sale securities which have readily determinable fair values
are written down to the fair value, and the difference between theacquisition cost and the fair value is treated as loss for the fiscal year
(impairment (devaluation)) if the fair value has significantly deteriorated
from the acquisition cost, unless it is deemed that there is a possibility ofa recovery in the fair value. The amount of impairment (devaluation) for
the year ended March 31, 2018 was ¥337 million. A security is deemed
to have “significantly deteriorated” if the fair value has decreased to
50% or less of the acquisition cost. If the fair value exceeds 50% but
is 70% or less of the acquisition cost, the security may be deemed“significantly deteriorated” considering the quoted market price change
during a certain period in the past, business performance and otherfactors.

21. Money Held in Trust
The following table summarizes the book values (fair values) andamounts of net unrealized gains and losses for money held in trust
included in profit and loss for the fiscal year.
Thousands of
U.S. dollars(Note 1)Millions of yen

2019
Money held in trust forinvestment
Book value (fair value)
Amount of net
unrealized gain (loss)
included in profit andloss for the fiscal year
Other money held in trustBook value (fair value)
Acquisition cost
Difference
Unrealized gains
Unrealized losses

2019

2018

¥2,994¥2,994$26,975

¥

¥

$

(0)

3,500
2,974
526
526
—

—
3,343
2,880
462
480
18

(0)

31,534
26,795
4,739
4,739
—

22. Unrealized Holding Gains on Securities
Unrealized holding gains on securities were as follows:
Thousands of
U.S. dollars(Note 1)Millions of yen

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

2019

2018

2019

¥237,807¥248,447$2,142,598

526(72,771)462(76,127)

4,739(655,653)

165,562(4,866)

172,782(6,079)1,491,683(43,841)¥160,696¥166,703$1,447,842

23. Derivative Transactions(1) At March 31, 2019(a) Derivative transactions to which hedge accounting was not applied
Derivative transactions to which hedge accounting was not applied are set forth in the tables below.
These items do not reflect the market risk of the derivative transactions themselves.
(i) Interest rate contracts

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

Millions of yen
2019Portionmaturing over
one year
Fair value

Recognized
gains(losses)

Contract
amountThousands of U.S. dollars (Note 1)
2019
PortionRecognizedmaturing overgains
one year
Fair value(losses)¥50,901¥33,985¥1,035¥1,035$458,608$306,198$ 9,325$ 9,325

50,890—33,985
—

(847)
¥ 187

(847)
¥ 187

458,509—306,198—(7,631)$ 1,684(7,631)$ 1,684

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

32

IYO BANK Annual Report 2019

(ii) Currency and foreign exchange contracts

Contract
amountMillions of yen
2019Portionmaturing over
one year
Fair value

Recognized
gains(losses)

Contract
amountThousands of U.S. dollars (Note 1)
2019
PortionRecognizedmaturing overgains
one year
Fair value(losses)Over-the-counter transactions:
Forward exchange contracts:
Sell
Buy
Currency options:
Sell
Buy
Total

¥547,099¥420,837

123,538
87,327
69,154
69,154
—

¥

166

¥ 166

$4,929,263$3,791,665$ 1,495$ 1,495

13,781
13,882

479
241

479
241

1,113,055
786,800

124,164
125,074

4,315
2,171

4,315
2,171

50,20850,208—(2,200)
2,200
¥ 888

376
213
¥1,478623,065
623,065—

452,365
452,365—(19,821)
19,821$ 8,000

3,387
1,919
$13,316

The above transactions are measured at fair value, and recognized gains (losses) are charged to the consolidated statements of income.
The fair value of over-the-counter transactions is calculated based on discounted present value.
(iii) Credit derivatives

Contract
amountMillions of yen
2019Portionmaturing over
one year
Fair value

Recognized
gains(losses)

Contract
amountThousands of U.S. dollars (Note 1)
2019
PortionRecognizedmaturing overgains
one year
Fair value(losses)Over-the-counter transactions:Credit default swaps
Sell
Buy
Total

¥1,000——¥1,000
—
—

¥(4)
—
¥(4)

¥(4)
—
¥(4)

$9,009——$9,009
—
—

$(36)
—
$(36)

$(36)
—
$(36)

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

Contract
amountMillions of yen
2019Portionmaturing over
one year
Fair value

Recognized
gains(losses)

Contract
amountThousands of U.S. dollars (Note 1)
2019
PortionRecognizedmaturing overgains
one year
Fair value(losses)Over-the-counter transactions:
Earthquake derivatives
Sell
Buy
Total

¥2,260
2,260
—

¥—
—
—

¥(37)
37
—

¥—
—
—

$20,362
20,362—$———$(333)
333
—

$—
—
—

Transactions above for which the values were not readily determinable are stated at cost.
(b) Derivative transactions to which hedge accounting was applied
Derivative transactions to which hedge accounting was applied are set forth in the tables below.
These items do not reflect the market risk of the derivative transactions themselves.
(i) Currency and foreign exchange contracts

Hedged item

Method of hedge accounting
Currency swaps
Fund related swaps
Total

Foreign currency
monetary assets

Contract
amount¥161,992
36,510—Millions of yen
2019Portionmaturing over
one year¥116,336——

Fair value¥(4,507)13¥(4,494)

Thousands of U.S. dollars (Note 1)
2019
PortionContract
maturing overamountone year
Fair value$1,459,518
328,948—$1,048,166——$(40,607)
117$(40,490)

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

IYO BANK Annual Report 201933

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

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

Millions of yen
2018
Portionmaturing over
one year
Fair value

Recognized
gains(losses)¥45,966¥45,091

¥ 980

¥ 980

45,872—45,077
—

(802)
¥ 177

(802)
¥ 177

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

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

Millions of yen
2018
Portionmaturing over
one year
Fair value¥530,258¥246,737

169,832
35,74858,51358,513—¥

Recognized
gains(losses)

148

¥ 148

7,882
7,648

1,643
(453)

1,643
(453)

42,10842,108—(2,470)2,470¥ 1,338(126)
643¥1,855The above transactions are measured at fair value, and recognized gains (losses) are charged to the consolidated statements of income.
The fair value of over-the-counter transactions is calculated based on discounted present value.
(iii) Credit derivatives
Not applicable(iv) Others
Not applicable(b) Derivative transactions to which hedge accounting was applied
Derivative transactions to which hedge accounting was applied are set forth in the tables below.
These items do not reflect the market risk of the derivative transactions themselves.
(i) Currency and foreign exchange contracts

Hedged item

Method of hedge accounting
Currency swaps
Fund related swaps
Total

Foreign currency
monetary assets

Contract
amount¥131,211
70,383—

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

Fair value

¥226
309
¥536

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

34

IYO BANK Annual Report 201924. Retirement Benefits(a) Outline of retirement and severance benefits plans
The retirement benefit plans of the Bank consist of a defined benefit
corporate pension fund plan and a retirement lump-sum grant system.
Extra retirement benefits may be paid upon the retirement of employees.
In addition, the Bank set up a retirement benefit trust. On April 1, 2014,
the Bank transformed its corporate pension fund plan to a cash balance
plan and established a defined contribution pension plan. Consolidated
subsidiaries use the simplified method in calculating net defined benefit
liability and retirement benefit expenses for their retirement lump-sum
grant systems.
(b) Defined benefit plan(i) Reconciliation of retirement benefit obligations between the
beginning and the end of the period
Thousands of
U.S. dollars(Note 1)Millions of yen

2019
Retirement benefit
obligations at the
beginning of the period
Service cost
Interest cost
Actuarial differences
incurred
Retirement benefits paid
Prior service cost
Retirement benefit
obligations at the end of
the period

2019

2018

¥66,616
2,178
154¥66,3412,073
204$600,198
19,623
1,387

7,866(3,233)—

1,144(2,963)(183)

70,871(29,128)—

73,581

662,951

66,616(ii) Reconciliation of pension assets between the beginning and the endof the period
Thousands of
U.S. dollars(Note 1)Millions of yen

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

2019

2018

2019

¥77,278¥73,259$696,260

1,028

986

9,262

94
2,579
(2,181)

2,611
2,553
(2,133)846
23,236(19,650)

78,80077,278709,973(iii) Reconciliation of retirement benefit obligations and pension assets at
the end of the period to net defined benefit liability and net defined
benefit asset in the consolidated balance sheets
Thousands of
U.S. dollars(Note 1)Millions of yen

Retirement benefit
obligations of thesavings plan
Pension assets
Retirement benefit
obligations of thenon-savings plan
Net liabilities and assets
recorded on the
consolidated balance sheets
Net defined benefit liability
Net defined benefit asset
Net liabilities and assets
on the consolidatedbalance sheets

2019

2018

2019

¥ 73,200(78,800)(5,600)¥ 66,262(77,278)(11,016)$ 659,518(709,973)(50,454)

381

354

3,432

(5,218)12,281(17,500)(10,661)
12,502(23,164)(47,013)
110,649(157,671)(5,218)(10,661)(47,013)(Note) Pension assets include assets in the retirement benefit trust.

(iv) Retirement benefit cost and its breakdown
Thousands of
U.S. dollars(Note 1)Millions of yen

Service cost
Interest cost
Expected return on
pension assets
Recognized actuarial
differences
Amortization of priorservice cost2019
¥ 1,989
154

2018¥1,888204

2019$17,920
1,387(1,028)(986)(9,262)

(107)

818

(964)

(597)
410

(581)
1,343

(5,378)3,694(Note 1) Retirement benefit costs of consolidated subsidiaries using thesimplified method are included in “Service cost.”(Note 2) Employee contribution to the corporate pension fund is deducted from“Service cost.”(v) Remeasurements of defined benefit plans
The breakdown of items included in remeasurements of defined benefit
plans (before applicable tax effects) was as follows:
Thousands of
U.S. dollars(Note 1)Millions of yen(Note) Pension assets include assets in the retirement benefit trust.

Prior service cost
Actuarial differences
Total

2019
¥ (597)(7,878)(8,475)2018¥ (398)
2,286
1,887

2019
$ (5,378)(70,979)(76,358)(vi) Remeasurements of defined benefit plans
The breakdown of items included in remeasurements of defined benefit
plans (before applicable tax effects) was as follows:
Thousands of
U.S. dollars(Note 1)Millions of yen

Unrecognized prior service
cost
Unrecognized actuarial
differences
Total

2019

2018

2019

¥(3,253)¥(3,850)$(29,308)

2,132(1,120)(5,746)(9,596)

19,208(10,090)

IYO BANK Annual Report 201935

(vii) Pension assets(A) Pension asset portfolio
Bonds
Equity securities
Other
Total

2019
50.9%
42.1%
7.0%
100.0%

2018
50.8%
42.7%
6.5%
100.0%(Note) 29.7% of the total pension assets as of March 31, 2019 (29.9% as ofMarch 31, 2018) represent assets in the retirement benefit trust for the
corporate pension fund. 3.6% of which as of March 31, 2019 (3.6% asof March 31, 2018) corresponds to the lump-sum grants system.

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

(viii) Actuarial assumptions
The weighted average rate for assumptions used for the actuarial
computation of the retirement benefit obligations for the years ended
March 31, 2019 and 2018 were as follows:
2019
2018
(A) Discount rates
Retirement lump-sum
grant system
0.00%
0.00%
Corporate pension
fund plans
0.20%
0.30%
(B) Long-term expected
return on assets
Pension assets ofcorporate pension fund
2.00%
2.00%
Retirement benefit trust(Retirement lump-sum
grant system andcorporate pension
fund plans)
0.00%
0.00%
(Note) A point system is applied to the substantive portion of the retirement
lump-sum grant system and a cash balance plan to defined benefit
corporate pension fund plans, respectively. The “Estimate rate of salary
increase” is not disclosed due to the insignificant impact it would haveon the calculation of retirement benefit obligations.

(c) Defined contribution plan
The amount of required contribution by the Bank to the defined
contribution plan was ¥340 million ($3,063 thousand) and ¥333 million
at March 31, 2019 and 2018, respectively.

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

2019
General and administrative
expenses

2018
¥30

¥119

2019
$270

(Note) At the 115th Ordinary General Meeting of Shareholders held on Jun. 28, 2018, the Bank abolished compensation-type stock options and introduced a sharebased payments system using the trust.
In line with the introduction of this system, the Bank will not grant new stock options. However, the unexercised stock acquisition rights already granted as
stock options will continue to exist.

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

36

IYO BANK Annual Report 2019

(b) Stock options granted and changes
The table below represents stock options outstanding at the year-end and the number of stock options is converted into the number of stock.
(i) Number of stock options

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

2017
Stock Options
shares

2016
Stock Options
shares2015
Stock Options
shares2014
Stock Options
shares2013
Stock Options
shares2012
Stock Options
shares2011
Stock Options
shares140,900

146,300

57,70073,10059,90080,30045,100——26,600114,300——
27,200119,100——
12,00045,700——14,50058,600——12,40047,500——18,30062,000——11,00034,100

—

—

—

—

—

—

—

26,60026,600——27,20027,200——16,90016,900——14,50014,500——12,40012,400——18,30018,300——11,00011,000——

Average exercise
price

2017
Stock Options
Yen (U.S. dollars)¥ 1 ($0)
per share¥695 ($6)
per share

2016
Stock Options
Yen (U.S. dollars)¥ 1 ($0)
per share¥695 ($6)
per share2015
Stock Options
Yen (U.S. dollars)¥
1 ($0)
per share¥ 695 ($6)
per share2014
Stock Options
Yen (U.S. dollars)¥ 1 ($0)
per share¥695 ($6)
per share2013
Stock Options
Yen (U.S. dollars)¥ 1 ($0)
per share¥695 ($6)
per share2012
Stock Options
Yen (U.S. dollars)¥ 1 ($0)
per share¥695 ($6)
per share

2011
Stock Options
Yen (U.S. dollars)¥ 1 ($0)
per share¥695 ($6)
per share

Fair value at the
grant date

¥867 ($7)
per share¥601 ($5)
per share¥1,473 ($13)
per share¥989 ($8)
per share¥918 ($8)
per share¥550 ($4)
per share¥704 ($6)
per share(ii) Price information

Exercise price

26. Income Taxes
Income taxes in the consolidated statement of income consists ofcorporation tax, inhabitant tax and enterprise tax.
The statutory tax rate were approximately 30.5% and 30.7% as ofMarch 31,2019 and 2018, respectively.
(1) Reconsiliation between the statutory tax rate of the Bank andthe effective income tax rate is not disclosed as the difference isless than 5% of the statutory tax rate.
(2) Adjustments to deferred tax assets and deferred tax liabilities
as a result of revisions of income tax rates
With the enactment of certain laws, the timing of abolishment andrevision of related tax rates was postponed from the consolidated fiscal
year starting on or after April 1, 2017 to October 1, 2019. The effective
statutory tax rate used for the calculation of deferred tax assets anddeferred tax liabilities did not change but there was a reclassification
between the national tax and the local tax. Effects of this change on the
consolidated financial statements were immaterial.

Significant components of deferred tax assets and liabilities were as
follows:
Thousands of
U.S. dollars(Note 1)Millions of yen

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

2019

2018

2019

¥ 13,171¥ 12,884$ 118,668

1,049

928

9,451

966
576
541

—
546
626

8,703
5,189
4,874

507
406
2,726
(990)

504
411
2,566
(964)

4,567
3,657
24,560(8,919)18,956

17,502

170,790¥(72,689)¥(76,026)$(654,914)

(904)

(906)

(8,144)

—

(806)

—

(73,593)¥(54,637)(77,739)¥(60,237)(663,059)$(492,269)

IYO BANK Annual Report 201937

27. Segment Information(1) Summary of reportable segments
Reportable segments are components of the Bank and its consolidated subsidiaries for which separate financial information is available and is subject toperiodic examination by the Board of Directors to determine the allocation of management resources and assess performances.
The Bank and 15 consolidated subsidiaries (13 consolidated subsidiaries as of March 31, 2018) are engaged mainly in the financial services businessthat includes commercial banking services and leasing services. Therefore, the Bank and its consolidated subsidiaries’ reportable segments comprise‘Commercial Banking’ and ‘Leasing’ and are distinguished by the financial services provided. ‘Commercial Banking’ includes deposit services, lending
services, securities investment services and exchange services. ‘Commercial Banking’ represents the Bank’s banking service as well as the consolidated
subsidiaries’ business support services, credit guarantee services, credit card services, securities trading services and fund management services. ‘Leasing’
includes leasing services by Iyogin Leasing Company Limited, one of the consolidated subsidiaries.
(2) Methods used to calculate ordinary income, profit and loss, amounts of assets, debt and other items by reportable segment
The accounting policies in Note 2, “SIGNIFICANT ACCOUNTING POLICIES,” have been adopted for the reportable segments. Reportable segment profit
corresponds to ordinary profits. Ordinary income arising from intersegment transactions is based on arm’s length prices.
(3) Information about reported ordinary income, profits and losses, amounts of assets, debts and other items
Segment information as of and for the years ended March 31, 2019 and 2018 was as follows:
Millions of yen
2019
Reportable segments
Commercial
Banking
Leasing

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

Total

Other
businesses¥ 107,879
537¥ 108,416¥ 28,362¥7,145,436¥6,512,183¥16,301
483¥16,784¥ 192¥55,124¥36,964¥ 124,180
1,021¥ 125,201¥ 28,554¥7,200,560¥6,549,148¥ 2,106
2,160¥ 4,266¥
71¥11,166¥ 4,646

¥

¥

¥

¥

4,484
78,126
11,555
5
(5)
533
(302)
(231)

32
106
124
—
—
—
—
—

4,517
78,232
11,679
5
(5)
533
(302)
(231)

Total

¥ 126,286
3,181¥ 129,468¥ 28,626¥7,211,726¥6,553,794

68 ¥
4
0
—
—
1
(0)
—

4,586
78,237
11,680
5
(5)
535
(303)
(231)

Adjustments¥—(3,181)¥ (3,181)¥(32)¥(46,071)¥(36,466)¥

Consolidated
total¥ 126,286—¥ 126,286¥ 28,658¥7,165,655¥6,517,327(156) ¥
(117)
(104)
—
—
—
—
—

4,430
78,119
11,575
5
(5)
535
(303)
(231)

—
8,265

—
59

—
8,325

(0)
51

(0)
8,376

—
(2)

(0)
8,374

7,535

1

7,536

73

7,610

(83)

7,526

Notes:
1. Ordinary income is presented as the counterpart of sales of companies in other industries. The difference between ordinary income and operating income in the
consolidated statements of income is in “Adjustments.”
2. ”Other businesses” includes software development and information processing not included in the reportable segments.
3. Adjustments are as below.
(1) Adjustment of segment profit includes eliminations of intersegment transactions of negative ¥32 million ($288 thousand).
(2) Adjustment of segment assets includes eliminations of intersegment transactions of negative ¥46,071 million ($415,091 thousand).
(3) Adjustment of segment debt includes eliminations of intersegment transactions of negative ¥36,466 million ($328,552 thousand).
(4) Eliminations of intersegment transactions include adjustment of depreciation of negative ¥156 million ($1,405 thousand), adjustment of interest income receivedof negative ¥117 million ($1,054 thousand), adjustment of interest expense paid of negative ¥104 million ($937 thousand), adjustment of tax expense ofnegative ¥2 million ($18 thousand) and adjustment of increase in tangible fixed assets and intangible fixed assets of negative ¥83 million ($747 thousand).
4. Segment profit is adjusted to ordinary income in the consolidated statements of income.

38

IYO BANK Annual Report 2019

Millions of yen
2018
Reportable segments
Commercial
Banking
Leasing

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

Total

Other
businesses

Total

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

¥

¥

¥

¥

¥

¥

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

38
83
127
13
13
0
0
—

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

70
3
4
—
—
0
0
—

Consolidated
total

¥

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

¥ 120,985—¥ 120,985¥ 36,099¥7,096,633¥6,450,329(120) ¥
(122)
(109)
—
—
—
—
—

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

—
10,697—86—
10,7840239

011,024—(3)

0
11,020

4,782

136

4,919

29

4,949

(276)

4,672

Notes:
1. Ordinary income is presented as the counterpart of sales of companies in other industries. The difference between ordinary income and operating income in the
consolidated statements of income is in “Adjustments.”
2. “Other businesses” includes software development and information processing not included in the reportable segments.
3. Adjustments are as below.
(1) Adjustment of segment profit includes eliminations of intersegment transactions of negative ¥18 million.
(2) Adjustment of segment assets includes eliminations of intersegment transactions of negative ¥44,290 million.
(3) Adjustment of segment debt includes eliminations of intersegment transactions of negative ¥34,637 million.
(4) Eliminations of intersegment transactions include adjustment of depreciation of negative ¥120 million, adjustment of interest income received of negative ¥122
million, adjustment of interest expense paid of negative ¥109 million, adjustment of tax expense of negative ¥3 million and adjustment of increase in tangible
fixed assets and intangible fixed assets of negative ¥276 million.
4. Segment profit is adjusted to ordinary income in the consolidated statements of income.
Thousands of U.S. dollars (Note 1)
2019
Reportable segments
Commercial
Banking
Leasing

Ordinary income
Customers$ 971,970
Intersegment
4,838
Total
$ 976,808
Segment profit$ 255,536
Segment assets$64,379,097
Segment debt
$58,673,601
Other items
Depreciation$
40,400Interest income received
703,901
Interest expense paid
104,108
Extraordinary income
45
Gain on disposal of noncurrent assets(45)
Extraordinary losses
4,802
Losses on disposal of fixed assets(2,720)
Impairment loss
(2,081)
Provision of reserve for financial products
transaction liabilities—
Tax expense
74,466
Increase in tangible fixed assets and intangible
fixed assets
67,888

Total

Other
businesses

Total

Adjustments$146,869 $ 1,118,839
4,351
9,199
$151,220 $ 1,128,038$ 1,729 $ 257,266$496,657 $64,875,754$333,039 $59,006,649$ 18,974 $ 1,137,814
19,461
28,660$ 38,435 $ 1,166,483$
639 $ 257,915$100,603 $64,976,358$ 41,859 $59,048,508

$

$

$

$

288 $
955
1,117
—
—
—
—
—

40,697
704,856
105,225
45
(45)
4,802
(2,720)(2,081)

612 $
36
0
—
—
9
0
—

41,319704,901
105,234
45
(45)
4,820
(2,729)(2,081)—531—
75,0060459

967,898657

Consolidated
total— $ 1,137,814(28,660)—$ (28,660) $ 1,137,814$(288) $ 258,203$(415,091) $64,561,266$(328,552) $58,719,947(1,405) $(1,054)
(937)
—
—
—
—
—

39,913703,838
104,288
45
(45)
4,820
(2,729)(2,081)075,466—(18)

075,44868,564(747)

67,807IYO BANK Annual Report 201939

(4) Related information
Information by service
Millions of yen
2019
Loan

¥55,878

Ordinary income customers

Securities
investment

Lease¥34,058

Other
businesses¥16,301¥20,048

Total¥126,286

Millions of yen
2018
Loan

Ordinary income customers¥51,953

Securities
investment

Lease¥34,978

Other
businesses¥15,265¥18,786

Total¥120,985

Thousands of U.S. dollars (Note 1)
2019
Loan

$503,450

Ordinary income customers

Securities
investment

Lease$306,856

Otherbusinesses$146,869$180,628

Total$1,137,814

Millions of yen
2019
Reportable segments
Commercial
banking
Leasing¥231

Impairment loss

Total

¥—

Other
businesses

¥231

¥—

Total

¥231

(Note) Amounts of “Elimination or common assets” are eliminations of intersegment transactions.
Millions of yen
2018
Reportable segments
Commercial
banking
Leasing

Impairment loss

¥203

¥—

Total

Other
businesses

¥203

¥—

Total

¥203

(Note) Amounts of “Elimination or common assets” are eliminations of intersegment transactions.
Thousands of U.S. dollars (Note 1)
2019
Reportable segments
Commercial
banking
Leasing$2,081

Impairment loss

$—

Total

Other
businesses$2,081

Total$—$2,081

Account

Outstandingbalance(Millionsof yen)28. Related Party Transactions(1) For the year ended March 31, 2019(a) Transactions between the Bank and its related parties.
Directors or major individual stockholders

40

Type

Name

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

Ability Center,
Inc

IYO BANK Annual Report 2019

Capital(Millions
Location of yen)

Ehime

¥55

Business

Temporarystaffing

Transaction
amountOwnerships of(Millionsvoting rights (%) Relationship Transactionsof yen)—Temporary Temporary
staffing
staffing

¥3

—

¥—

Type

Name

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

Ability Center,
Inc

Capital(Thousandsof U.S.
Location dollars)

Ehime

$495

Business

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

Temporarystaffing—

Temporary Temporary
staffing
staffing$27

Account

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

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

Type

Name

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

Ability Center,
Inc

Type

Name

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

Ability Center,
Inc

Capital(Millions
Location of yen)

Ehime

¥55

Capital(Thousandsof U.S.
Location dollars)

Ehime

$495

Business

Temporarystaffing

Business

Temporarystaffing

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

Directly Temporary Temporary
19.2% holding
staffing
staffing

Otherliabilities¥17

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

Account

Directly Temporary Temporary
19.2% holding
staffing
staffing

Otherliabilities$153

Outstandingbalance(Millionsof yen)¥0

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

(2) For the year ended March 31, 2018(a) Transactions between the Bank and its related parties.
Directors or major individual stockholders

Type

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

Name

Capital(Millions
Location of yen)

Business

Ability Center,
Inc

Ehime

¥55

Miyoshi Iron
Works, Co., Ltd.

Ehime

38 Manufacturing

Ownerships ofvoting rights (%) Relationship Transactions

Temporarystaffing
0.0%

Transaction
amount(Millionsof yen)Account

Outstandingbalance(Millionsof yen)—Temporarystaffing

Temporarystaffing

¥ 5

—

¥—

Directly
held

Banking

Loan

65

Loans
and bills
discounted

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

IYO BANK Annual Report 201941

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

Type

Name

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

Ability Center,
Inc

Capital(Millions
Location of yen)

Ehime

¥55

Business

Ownerships ofvoting rights (%) Relationship Transactions

Temporarystaffing

Directly Temporary
19.2% holding
staffing

Transaction
amount(Millionsof yen)Temporarystaffing¥15

Account

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

29. Changes in Net Assets(1) Type and number of shares issued and treasury stock
Type and number of shares issued and treasury stock in the year ended March 31, 2019 were as follows:
Thousands
Number of shares at the beginningof the accounting period

Shares issued
Common stock
Total
Treasury stock
Common stock
Total

Increase in number of shares
during the accounting period

Decrease in number of shares
during the accounting period

Number of shares at the end of
the accounting period

323,775
323,775————

323,775
323,775

7,422
7,422

302
302

422
422

7,302
7,302

1 The increase in number of shares of treasury stock was from the acquisition of shares by the Trust for the share-based payments system (300thousand shares) and from the purchase of fractional shares (2 thousand shares).
2 The decrease in number of shares of treasury stock was due to the disposal of treasury stock through the third-party allocation to the Trust for theshare-based payments system (300 thousand shares) and due to the exercise of stock acquisition rights (122 thousand shares).
3 The number of shares of treasury stock at the end of the current fiscal year includes the Bank’s shares held by the Trust for the share-based payments
system (300 thousand shares).
Type and number of shares issued and treasury stock in the year ended March 31, 2018 were as follows:
Thousands
Number of shares at the beginningof the accounting period

Shares issued
Common stock
Total
Treasury stock
Common stock
Total

Increase in number of shares
during the accounting period

Decrease in number of shares
during the accounting period

Number of shares at the end of
the accounting period

323,775
323,775————

323,775
323,775

7,585
7,585

1
1

165
165

7,422
7,422

The increase in number of shares of treasury stock was from the purchase of fractional shares (1 thousand shares).
The decrease in number of shares of treasury stock was due to the exercise of stock acquisition rights (165 thousand shares).
(2) Stock acquisition rights and own stock acquisition rights
Stock acquisition rights and own stock acquisition rights in the year ended March 31, 2019 were as follows:

Division

Details of stockacquisition rights

The Bank

Stock acquisition rights
as stock options

Type of shares
to be issued

Total

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

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

—

397

3,576

—

397

3,576

Stock acquisition rights and own stock acquisition rights in the year ended March 31, 2018 were as follows:

Division

Details of stockacquisition rights

The Bank

Stock acquisition rights
as stock options

Total

42

IYO BANK Annual Report 2019

Type of shares
to be issued

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

—

467

—

467

(3) Dividends
The following dividends were paid in the year ended March 31, 2019

Date of resolution

Directors’ meeting held on
May 11, 2018
Directors’ meeting held on
November 9, 2018

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

Type of shares

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

Record date

Effective date

March 31, 2018

June 7, 2018

Common stock¥2,214$19,947

¥7.00

$0.06

Common stock¥2,217$19,974¥7.00$0.06 September 30, 2018 December 10, 2018

The total amount of dividend on common stock resolved at the Directors’ meeting held on November 9, 2018 includes ¥2 thousand in dividends to
the Bank’s shares held by the Trust for the share-based payments system.
The following dividends were paid in the year ended March 31, 2018

Date of resolution

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

Amount ofdividends

Cashdividends
per share

Type of shares

Millions of yen

Yen

Record date

Effective dateCommon stock¥1,897¥6.00

March 31, 2017

June 8, 2017

Common stock¥2,214¥6.00 September 30, 2017

December 8, 2017

Dividends whose record date is attributable to the year ended March 31, 2019 but which became effective after March 31, 2019

Date of resolution

Directors’ meeting held on
May 10, 2019

Type ofsharesCommonstock

Amount of dividends
Thousands of U.S.
Millions of yen dollars (Note 1)¥2,217$19,990

Source ofdividends
Retainedearnings

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

¥7.00

$0.06

Record date

Effective date

March 31, 2019

June 6, 2019

The total amount of dividend on common stock includes ¥2 thousand in dividends to the Bank’s shares held by the Trust for the share-based payments
system.
Dividends whose record date is attributable to the year ended March 31, 2018 but which became effective after March 31, 2018.

Date of resolution

Directors’ meeting held on
May 11, 2018

Amount ofdividends

Type ofsharesMillions of yen

Commonstock¥2,214

Source ofdividends
Retainedearnings

Cashdividends
per share
Yen

Record date

Effective date

¥7.00

March 31, 2018

June 7, 2018

IYO BANK Annual Report 2019

43

44

IYO BANK Annual Report 2019

Nonconsolidated Balance Sheet (Unaudited)
The Iyo Bank, Ltd.
March 31, 2019

Thousands of
U.S. dollars

Millions of yen

2019

2019

2018

ASSETSCash and due from banks
Call loans
Monetary claims purchased
Trading account securities
Money held in trust
Securities
Loans and bills discounted
Reserve for loan losses
Foreign exchange
Other assets
Tangible fixed assets
Intangible fixed assets
Prepaid pension cost
Customers’ liabilities for acceptances and guarantees
Total assets¥ 808,815
0
10,921349
4,759
1,573,300
4,550,809(23,137)
7,164
74,78872,635
6,982
17,45235,937¥7,140,776¥ 727,624
23,47910,247465
4,273
1,810,035
4,292,668(19,803)
7,092
78,10571,981
5,302
14,48733,761¥7,059,722$ 7,287,278
0
98,396
3,144
42,877
14,175,150
41,001,973(208,460)
64,546
673,826
654,428
62,906
157,239
323,785$64,337,111

LIABILITIES AND NET ASSETS
Liabilities
Deposits
Call money
Payables under repurchase agreements
Payables under securities lending transactions
Borrowed money
Foreign exchange
Borrowed money from trust account
Other liabilities
Accrued employees’ bonuses
Employees’ severance and retirement benefits
Reserve for losses on repayment of dormant bank accounts
Reserve for contingent losses
Reserve for share-based payment
Deferred tax liabilities
Deferred taxes on revaluation excess
Acceptances and guarantees
Total liabilities¥5,712,677
178,31349,82076,968360,251249
31
30,427
1,511
12,9733,301
516
86
52,823
9,769
35,937
6,525,658¥5,546,034
25,497
77,434226,150
414,05865
39
47,777
1,508
13,0672,928
426—
54,5789,824
33,761
6,453,153$51,470,195
1,606,568
448,869
693,467
3,245,796
2,243
279
274,141
13,613116,884
29,741
4,649
774
475,925
88,016
323,785
58,795,008

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

20,948
10,48020,948392,106(6,683)
158,875(1,545)
19,590397
615,117¥7,140,776

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

188,737
94,422
188,737
3,532,804(60,212)
1,431,435(13,920)
176,502
3,576
5,542,093$64,337,111

IYO BANK Annual Report 201945

Nonconsolidated Statement of Income (Unaudited)
The Iyo Bank, Ltd.
For the year ended March 31, 2019

Thousands of
U.S. dollars

Millions of yen

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

2019

2018

2019

¥ 52,834
23,770—62
1,327
13,5596,746
8,927
107,228¥ 49,541
26,648(0)—
1,072
12,941
1,777
10,233102,214$476,024
214,163—558
11,956
122,164
60,78080,430966,105

3,549
1,802
625
1,308
4,267
6,495
3,868
49,7709,717
81,40725,821

2,480
1,225
401
387
2,999
6,298
344
49,467
5,999
69,60432,61031,975
16,235
5,631
11,78438,44458,51834,849448,418
87,548733,462
232,6427,035
523¥ 18,262

10,435(488)¥ 22,662

63,384
4,712$164,537

Yen

Basic net income per share
Diluted net income per share

46

IYO BANK Annual Report 2019¥57.71
57.61

U.S. dollars¥71.64
71.51

$0.51
0.51

Nonconsolidated Statement of Changes in Net Assets (Unaudited)
The Iyo Bank, Ltd.
For the year ended March 31, 2019

For the year ended March 31, 2019

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

For the year ended March 31, 2019

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

For the year ended March 31, 2019

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

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

Total capitalsurplus¥—¥10,480

(56)

(56)

56

56

—

—

—

—

¥20,948¥10,480¥—¥10,480

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

Total capitalsurplus$188,737$94,422$ —$94,422

(504)

(504)

504

504

—

—

—

—

$188,737$94,422$ —$94,422

Millions of yen
Stockholders’ equity
Retained earnings
Other retained earnings
Retained
Total retained
Deferred gains
Generalearnings
Legal reserve on real property
earnings
reservebrought forward¥20,948¥2,066¥352,594(6)
18,000¥ 23,627¥399,236(4,431)(4,431)

6(18,000)
18,262—

Treasury stock

Total
stockholders’equity¥(6,839)¥433,826(4,431)—
18,262(232)
388

18,262
(232)
332

(56)

(56)

—

43

43

43

—

(6)

18,000(4,175)

13,817155

13,973¥20,948¥2,059¥370,594¥ 19,452¥413,054¥(6,683)¥437,800

IYO BANK Annual Report 201947

For the year ended March 31, 2019

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

Thousands of U.S. dollars
Stockholders’ equity
Retained earnings
Other retained earnings
Retained
Total retained
Deferred gains
Generalearnings
Legal reserve on real property
earnings
reservebrought forward$188,737$18,614(54)$3,176,808

162,176$ 212,875$3,597,044(39,922)(39,922)54(162,176)
164,537——
164,537

(504)
387

(504)
387

Treasury stock

Total
stockholders’equity$(61,618)$3,908,694(39,922)(2,090)
3,495

—
387

—

(54)

162,176(37,616)

124,488

1,396

125,894$188,737$18,551$3,338,985$ 175,259$3,721,542$(60,212)$3,944,499

Millions of yen
Valuation and translation adjustments

For the year ended March 31, 2019

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

Valuationdifference
on availablefor-salesecurities

Deferred gains
and losses onhedges

Revaluation
reservefor land

Total valuationand translation
adjustments

Subscription
rights tosharesTotal net assets¥163,880¥(1,240)¥19,634¥182,274¥467¥606,568(4,431)

18,262(232)332
43(5,005)

(305)

(43)

(5,354)(70)(5,424)(5,005)

(305)

(43)

(5,354)

(70)

8,549

¥158,875¥(1,545)¥19,590¥176,919¥397¥615,117

Thousands of U.S. dollars
Valuation and translation adjustments

For the year ended March 31, 2019

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

48

IYO BANK Annual Report 2019

164,537(2,090)2,991

Valuationdifference
on availablefor-salesecurities

Deferred gains
and losses onhedges

Revaluation
reservefor land

Total valuationand translation
adjustments

Subscription
rights tosharesTotal net assets$1,476,529$(11,172)$176,898$1,642,256$4,207$5,465,068(39,922)

164,537(2,090)2,991
387(45,094)(2,747)(387)(48,238)(630)(48,869)(45,094)(2,747)(387)(48,238)(630)

77,024$1,431,435$(13,920)$176,502$1,594,008$3,576$5,542,093

For the year ended March 31, 2018

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

For the year ended March 31, 2018

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

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

Commonstock¥20,948¥10,480

Total capitalsurplus¥—¥10,480

(20)

(20)

20

20

—

—

—

—

¥20,948¥10,480¥—¥10,480

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

18,000¥ 22,823¥380,438(4,111)(4,111)

6(18,000)
22,662——
22,662

(20)
267

(20)
267

Treasury stock

Total
stockholders’equity¥(6,989)¥404,878(4,111)(1)
152

22,662
(1)
131
—
267

—

(6)

18,000804

18,797150

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

Millions of yen
Valuation and translation adjustments

For the year ended March 31, 2018

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

Valuationdifference
on availablefor-salesecurities

Deferred gains
and losses onhedges

Revaluation
reservefor land

Total valuationand translation
adjustments

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

22,662(1)
131
267
11,246

(444)

(267)

10,533(11)

10,522

11,246

(444)

(267)

10,533(11)

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

IYO BANK Annual Report 201949

Corporate Data
(As of March 31, 2019)Year of Foundation
1878

Board of Directors and Corporate Auditors(As of June 27, 2019)

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

President

Iwao Otsuka

Senior Managing Director

Kenji Takata
Kenji Miyoshi

Managing Directors

Muneaki Todo
Tetsuo Takeuchi
Haruhiro Kono

Directors(Audit and Supervisory
Committee Members)

Shiro Hirano
Kaname Saeki
Takeshi Ichikawa
Yasunobu Yanagisawa
Junko Miyoshi
Keiji Joko

Number of Stockholders
23,110Major Stockholders
NameJapan Trustee Services Bank, Ltd.
The Master Trust Bank of Japan, Ltd.
Nippon Life Insurance Company
Meiji Yasuda Life Insurance Company
Sumitomo Forestry Co., Ltd.
Sumitomo Life Insurance Company
Employee stock ownership of Iyo Bank
JP MORGAN CHASE BANK 385151 (Standing proxy Mizuho
Bank, Ltd. Settlement & Clearing Services Department)
Sompo Japan Nipponkoa Insurance Inc.
MUFG Bank, Ltd.

Shares(thousands)%

47,27413,082
8,878
8,867
5,911
5,415
4,490
4,377

14.92
4.13
2.80
2.79
1.86
1.70
1.41
1.38

4,293
3,988

1.35
1.25

Number of Employees(The Iyo Bank, Ltd. and its Consolidated Subsidiaries)
3,147
Number of Branches
150 (Domestic 149, Foreign 1)

Senior Managing Executive Officers Kenji Morioka
Managing Executive Officers

Hideyo Nishimoto
Shinya Fujita
Kensei Yamamoto
Yasuji Fujita
Masamichi Ito
Hiroshi Nagata

Executive Officers

Tetsuya Yagi
Keijiro Joko
Kazuya Chikata
Shinichi Doi
Seiji Komoda
Hirohisa Senba
Yoshiki Kume
Toshiki Hamaguchi
Koichi Kihara

Directory(As of March 31, 2019)

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

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

International Division
Tel: (089) 931-9899
SWIFT Address: IYOBJPJTHong Kong Representative Office
Suite 801, The Hong Kong Club Building, 3A Chater Road
Central, Hong Kong
Tel: (852)2869-0466

Treasury and Foreign Exchange Department
Tel: (03) 3242-1801
SWIFT Address: IYOBJPJTShanghai Representative Office
Room 1603 Shanghai International Trade Center, 2201 Yan-an
Road (West), Shanghai 200336, People’s Republic of China
Tel: (021) 6270-7488

IYO BANK Annual Report 201951

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

Printed in Japan