CONTENTS
Message from the President∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 2
About Ishikawa Prefecture∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 3
Bank Profile∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 4
Board of Directors and Audit andSupervisory Committee∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 4
Offices and Subsidiaries∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 4
Corporate Philosophy and Medium-term
Business Plan∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 5

Financial Highlights∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 6
Corporate Governance Structure∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 7
Basic Policy and Operating Structure for
Risk Management∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 8
Consolidated Financial Statements∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 9
Report of Independent Auditors∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙28

FORWARD-LOOKING STATEMENTS
This annual report contains certain forward-looking statements about Hokkoku Bank's future, including outlooks,
plans, forecasts, results, etc. All such forward-looking statements are the result of judgments predicated upon
information available to the Bank at the time of the Annual Report's publication. Unknown risks and uncertainties in
the future may cause actual results to differ significantly from any projections presented in the Bank's Annual Report.
Such risks and uncertainties include, but are not limited to, economic conditions in which the Bank must do
business, pressures from competitive activities, changes in laws and/or regulations, development of new products
and elimination of old ones, and fluctuation of exchange rates.

1

MESSAGE FROM THE PRESIDENT
I would like to express my sincere gratitude for yourvalued patronage of Hokkoku Bank.
We have prepared this “Annual Report 2016” which
presents our business results for the fiscal year ended
on March 31, 2016, as well as the Bank’s recent
undertakings.
It will be greatly appreciated if you would read through it.
During the year under review the Japanese economy
showed improvement in the employment and income
environments as a result of the promotion of economic
fiscal policies, and also being suppor ted by low
resource prices, it continued to show forward progress.
Nevertheless, the economies of emerging countries
showed clear signs of slowing growth, and this effect
was reflected in personal consumption and privatesector capital expenditure. Overall the Japanese
economy performed at a weaker level.
On the other hand, the regional economy has
benefited from the opening of the Shinkansen highspeed train, and it continued on a mild recovery track
led by tourism-related enterprise.
At the Bank, in addition to offering new services suchas business start-up assistance, services to introduce
ICT, and efficiency solutions utilizing IT and financial
technologies, we also helped the region prepare for the
expanding cashless environments through offering
credit card membership services and beginning toprovide Visa debit cards in response to the increased
need to perform cashless transactions.
In addition, in March this year, the Bank established abranch in Singapore, becoming the first Japaneseregional bank to establish an overseas branch in theSouth East Asian region. This has enabled the Bank toprovide a comprehensive support system for ourcustomers who are expanding their businesses
overseas.

Tateki Ataka
President

Looking forward, the Bank is actively working toenhance a regional consulting function, both in Japanand overseas, in order to provide solutions for regional
communities and our individual customers.
In our local region, it has now been one year since theopening of the Hokuriku Shinkansen high-speed train
service. We expect to see the boosted business activity
centered in Kanazawa to continually expand outward.
To ensure that this boost to the economy continues, allofficers and employees of the Bank will think and act
together with everyone in the region and strive toward
the future development of the regional communities
while continuing to maintain sound business operations.
We would be grateful for your continuing support andguidance for the Bank.
August 2016
2

ABOUT ISHIKAWA PREFECTURE
Noto Satoyama Airport
Nanao Port

Toyama Pref.
Kanazawa Port
Komatsu Airport

Fukui Pref.
Luxembourg (Freight)

Sapporo (New Chitose)
North America (Freight)

Hokuriku area

Azerbaijan (Freight)
Seoul

SendaiShanghaiFukuoka

NaritaTokyo (Haneda)
Tokyo

Osaka
Nagoya[Legend]
International Route
Domestic Route

Taipei(As of April 1, 2016)

Naha(Summary)
Located in the middle of the Japanese Islands, Ishikawa Prefecture is a narrow territory extending from south-west to north-east along thecoast and protruding towards the Sea of Japan. Ishikawa Prefecture contains altogether 19 municipalities (11 cities and 8 towns) and her pre­fectural office locates at “Kanazawa City.”
Due to the high accessibility to the urban areas through the well-developed transportation networks such as railways, airports and express­
ways, Ishikawa Prefecture is located in almost the same distance from each of the three major metropolitan areas of Japan. On top of that, theopening of the railway “Hokuriku Shinkansen” in March 2015 has greatly improved the accessibility from Ishikawa Prefecture to the Tokyo met­
ropolitan area.
(Industrial advantage)
Ishikawa Prefecture embraces manufacturing industries such as machinery and textile industries as well as the tourist industry.
Ishikawa Prefecture accumulates various internationally competitive machinery manufacturers such as construction machinery, textile machin­
ery and machining tools manufacturers, etc. Also, there are a lot of co-operative enterprises which provide support to the abovementioned
manufacturers from various fields ranging from machine processing, welding, casting to forging. As the manufacturers possess unique tech­niques, there is a considerable number of “niche top enterprises” which account for the greatest market shares throughout Japan in specificfields (niche markets).
With regard to the textile industry, Ishikawa Prefecture is renowned as one of the largest synthetic textile manufacturing centers in the world
which performs yarn processing such as twisted yarn, dyeing processing, sewing and manufactures woven fabrics and knitted products, etc.
In addition, the well-known “Kanazawa castle town” attracts a substantial number of international and domestic visitors.
Historical streets and buildings remain and the town is filled with elegant, traditional culture.
(Logistics hub for export)
Ishikawa Prefecture allows transport of container freights to all over the world including Asia, North America and Europe. Further, the fluent
logistics is ensured by the regular shipment of international freight to Europe and America. Having a consolidated logistics foundation whichconnects herself with various countries from Asia to worldwide, Ishikawa Prefecture continues to develop as the center of exchange of “People/
Things” in the Hokuriku Region.
3

BANK PROFILE
Hokkoku Bank is a regional financial institution centered in Ishikawa prefecture, on the Sea of Japan coast in central Honshu, Japan's
main island. The Bank’s headquarters is in Kanazawa, the region's largest city. Its business is concentrated in the prefectures of
Ishikawa, Toyama, and Fukui, known collectively as Hokuriku. Hokkoku Bank branches cover this entire region, complemented by officesin the major Japanese cities of Tokyo, Osaka, and Nagoya.
Hokkoku Bank was created by the merger of three Ishikawa prefecture banks in 1943, and has grown steadily ever since. Today it is
widely regarded as one of the most financially sound of Japan's 64 regional banks, with the closest ties to local communities andresidents.
Hokkoku Bank began handling foreign exchange business in 1961; in the ensuing 55 years, it hascontinued to expand its correspondent bank network and formed tie-ups with banks around the world.
The Bank’s overseas offices help our clients track international financial trends and support theiroverseas activities.
As of March 31, 2016, the Bank had 104 branches (including 1 sub-branch), 1,781 employees, and on
a consolidated basis, total assets of ¥3,904,020 million (US$34,646 million) and total shareholders’equity of ¥188,353 million (US$1,671 million).
(*The number of branches is as of June 30, 2016)

Branches
Ishikawa.....................88
Toyama......................10
Fukui............................2
Tokyo...........................1
Osaka..........................1
Nagoya........................1
Singapore....................1
Total.........................104(As of June 30, 2016)

BOARD OF DIRECTORS AND AUDIT AND SUPERVISORY COMMITTEE (As of June 30, 2016)
President
Tateki Ataka
Senior Managing Director
Shuji Tsuemura
Junichi Maeda
Hideaki Hamasaki
Managing Director
Akira Nakanishi
Director
Hidehiro Yamamoto
Kazuya Nakamura
Koichi Nakada
Kenichi Sakai
Nobuhiro Torigoe

Director, Audit and Supervisory Committee Member
Tomohiro Ida
Muneto Yamada
Director (Outside), Audit and Supervisory Committee Member
Hideo Nakashima
Masahiro Kijima
Ichiro Sasaki
Masako Ohsuna
Executive Officer
Toshiyuki Konishi
Akira Nishita
Hiroshi Iwamuro
Yuji Kakuchi
Nobuhide Akazawa
Takayasu Tada

OFFICES AND SUBSIDIARIES (As of July 31, 2016)
Head Office
2-12-6 Hirooka, Kanazawa, Ishikawa 920-8670 Japan
Tel: +81(76) 263-1111
International Department
Head Office
2-12-6 Hirooka, Kanazawa, Ishikawa 920-8670 Japan
Tel: +81(76) 263-1111
Swift: HKOKJPJT
Major Subsidiaries
The Hokkoku General Lease Co., Ltd.
2-2-15, Katamachi, Kanazawa, Ishikawa 920-0981
The Hokkoku Credit Service Co., Ltd.
2-2-15, Katamachi, Kanazawa, Ishikawa 920-0981
The Hokkoku Credit Guarantee Co., Ltd.
1-16 Musashi-machi, Kanazawa, Ishikawa 920-0855
The Hokkoku Management, Ltd.
1-16 Musashi-machi, Kanazawa, Ishikawa 920-0855
The Hokkoku Servicer, Ltd.
2-2-15, Katamachi, Kanazawa, Ishikawa 920-0981
Overseas Offices
Shanghai Representative Office
Suite 350, Shanghai Centre 1376 Nanjing West Road, Jingan
District, Shanghai, 200040, People's Republic of China
Tel: +86(21)6279-8717
Fax: +86(21)6279-8721

Singapore Branch
138 Market Street, #08-02 CapitaGreen, Singapore 048946
Tel: +65-6538-4770
Fax: +65-6538-2726
Support for businesses in Asia
We provide support for clients who have, or are consideringdeveloping, businesses in Asia.
1. Local market research
2. Support on market cultivation, business matching with local
corporates
3. Provision of solutions to issues of clients with existing
businesses
4. Provision of various kinds of information (Local rules andregulations; tax and accounting; contracts and agreements;
labor-related regulations; establishment, operation, andwithdrawal of local companies, etc.)
Financial services
We provide the following financial services for client companies.
1. Deposits (current and savings)
2. Loans (loans on deeds, overdrafts, guarantees)
3. Domestic and overseas remittance
4. Trade financing (letter of credit transactions, purchase andcollection of export bills, forward exchange contracts, etc.)

4

CORPORATE PHILOSOPHY AND MEDIUM-TERM BUSINESS PLAN

Trust — a bridge to a fruitful regional future
Enrich interaction and growth in the region

We shall:Thoroughly understand the regional society, economy, culture, and life.
Provide comprehensive information and financial services.
Lead regional activities in various aspects.
Be a trusted partner in the growth of the region.

Hokkoku Bank’s regional communities:
We offer services tailored to the unique characteristics and needs of all our customers in areas where our business infrastructure is located. The
three Hokuriku prefectures, Toyama, Fukui, and Ishikawa, where our headquarters is located, are our most important regional communities.

Medium-Term Business Plan

NEXT QCS’S (pronounced “Qcees”)[Duration] April 2015 to March 2018

QCS’S
Q ...Quality
Establish the Hokkoku brand based on strengthof people, CS and high level of skills

C ...Cost
Make continuous efforts to reduce cost

Basic policy
We will actively take on challenges to solve regional issues with a focus on realconsulting function as we transform ourselves for new challenges toward the next
decade.
Six missions(1) A truly professional banking(2) Capable and strong organisation to embrace changes

S ...Speed(3) Market share increase in the Hokuriku region

Pursue overwhelming speed(4) Enhancement of profitability and productivity(5) Creating a conducive environment for women to undertake active role

S ...Smile(6) Reduction in the NPL ratio

Bring shines to the region through smiles!
Management benchmarks and targets
March 2016 (Actual)

5

March 2018 (Target)

Net profits from core business¥17.9 billion¥17.5 billion or more

Ordinary profit¥16.6 billion¥16.0 billion or more

Capital adequacy ratio(International standard)

12.81%

14% — 15%

NPL ratio(Before partial direct write-off)

3.10%

2% — 3%

FINANCIAL HIGHLIGHTS
Thousands of
U.S. dollars

Millions of yen

2016

2015

2014

2013

2012

74,686¥74,114¥ 66,576¥69,315¥70,165

Profit before Income Taxes ..................................

16,83016,177

15,486

11,458

14,524

149,366

Profit Attributable to Owners of Parent ...............

9,569

7,989

7,855

6,994

6,314

84,922

Total Assets ..........................................................

3,904,020

4,179,790

3,513,777

3,487,404

3,405,627

34,646,968

Loans and Bills Discounted .................................

2,328,285

2,355,374

2,350,504

2,322,999

2,265,382

20,662,813

Securities and Trading Securities .........................

1,018,306

1,191,361

893,444886,455

902,655

9,037,153

Deposits ................................................................

3,176,117

3,142,315

3,161,969

3,151,712

3,096,758

28,187,052

Total Net Assets ...................................................

235,020

247,730

223,438

218,492

209,777

2,085,731<Consolidated>
Capital adequacy ratio (%) ...................................

12.98

11.72

13.06

13.69

13.62

<Non-consolidated>
Capital adequacy ratio (%) ...................................

12.81

11.18

12.46

13.11

13.20

Total Income ........................................................

¥

2016

$

662,822

U.S. dollar amounts are translated at the rate of ¥112.68 = $1.00

Total Net Assets

Loans and Bills Discounted

Total Income(Billions of yen)(Billions of yen)(Billions of yen)

300

2,500
2,265.3
247.7

250
209.7

218.4

223.4

235.0

2,322.9

2,350.5

2,355.3

2,328.2

2,000

80
70.1

69.3

2012

2013

74.1

74.6

2015

2016

66.5

60

200
1,500
150

40
1,000

100

0

20

500

50

2012

2013

2014

2015

2016

0

2012

2013

2014

2015

2016

0

2014

Capital adequacy ratio (Consolidated)

Deposits

Profit Attributable to Owners of Parent(%)(Billions of yen)(Billions of yen)

16

4,000
13.62

13.69

13.06

12.98
3,096.7

11.72

12

10
3,151.7

3,161.9

3,142.3

3,176.1

3,000

9.5

8

7.8

7.9

2014

2015

6.9
6.3
6

8

Global Standard

2,000
4

4

0

Domestic Standard
Basel II

2012

2013

1,000

Basel III

2014

2015

2016

0

2

2012

2013

2014

2015

2016

0

2012

2013

2016

6

CORPORATE GOVERNANCE STRUCTURE
Basic Approach to the Corporate Governance Structure
In order to realize our corporate philosophy and to achieve the ideas and action goals in the medium-term management plan, the Bankis working to build a corporate governance structure in the belief that it is important to maintain a harmonious relationship withstakeholders, including shareholders, further improve management transparency and reinforce management that strictly observescompliance.
Overview of the Corporate Governance Structure• The model of the corporate governance structure is as follows.
Audit and Supervisory Committee

Board of Directors

audit/supervision

Audit Department

Business Advisory Committee

consultation/guidanceManagement Meeting/various committees(Committees in charge)

Internal report system

ALM Committee

Internal audit system

Risk Management Committee
Management Meeting Rules/various committee regulations

Credit Risk Management Committee
Management Administration Division

Comprehensive Risk Management Rules/Compliance Management Rules

ComplianceComprehensive Risk Management
Operational risk

Management Administration Division

Operational Risk Management Regulations

Legal risk, customer protection, etc.

Credit risk

Market risk

Liquidity risk

Clerical risk

System risk

Other risks(Legal risk, Human risk, Tangible asset risk, Management risk, Reputational risk)

Management Administration Division

Loan-Screening Department

Market Finance DivisionMarket Finance Division
General Planning Department

Market Finance Division

General Clerical Department

System Department

Management Administration Division

Credit Risk
Market Risk
Liquidity Risk
Management Regulations Management Regulations Management Regulations

Clerical Risk
System Risk
Management Regulations Management Regulations

Operating offices, each division of the headquarters

Controlling regulations for subsidiaries,“Comprehensive Crisis Management Manual”

Consolidated Subsidiaries• The Board of Directors, which is the supervisory body responsible for the execution of management decision-making and the duties

of directors, is comprised of 10 directors who are not audit and supervisory committee members, and 6 directors who are audit andsupervisory committee members (of whom 4 are outside directors) for a total of 16 members, as of the filing date for the Bank’s
securities report (June 30, 2016). The Board of Directors holds a regular Board of Directors Meeting once a month and, in addition,holds extraordinary meetings as required for the purpose of making decisions on important matters relating to the Bank’s
management policy and other general management issues.

• The Bank transitioned to a Board with Audit and Supervisory Committee structure upon the approval of partial changes to the Articles

of Incorporation at the 107th Ordinary General Meeting of Shareholders held on June 26, 2015. This transition to an Audit andSupervisory Committee structure will enable the Bank to reinforce the audit and supervisory functions of the Board of Directors andexecutive officers, as well as to improve the transparency and efficacy of the business execution process as a result of the participationin management by outside directors, with the aim of further enhancing corporate governance and improving our corporate value tomeet the expectations of our stakeholders. Furthermore, we are strengthening our business auditing system by establishing a
Business Advisory Committee consisting of third-party committee members from outside the bank and accepting their proposals andadvice. Additionally, the system also enables us to seek individual advice and guidance from individual committee members.

7• The Bank has introduced an executive officer system, and in principle holds management meetings, attended by standing directors(including directors who are audit and supervisory committee members) and executive officers at the headquarters, once a week toimplement the sharing of overall management information, improve management efficiency, and expedite decision-making. In
addition, we are verifying the effectiveness of our policies and confirming the progress of business execution through theestablishment of weekly morning meetings (attendees: executive directors, executive officers at the headquarters and divisional
general manager) and Loan Liaison Committee (attendees: executive directors and executive officers at the headquarters) to reinforce
communication among departments. Furthermore, we have established a committee organization consisting of ALM, Risk
Management, Compliance, Credit Risk Management, CS, CSR, and Business Planning Promotion Committees and are implementing
cross-functional discussions while increasing the involvement of management.

• The Bank has set up a voluntary Nomination and Compensation Committee as a body that deliberates nomination of candidates for

directors to be proposed to General Meetings of Shareholders and compensations for directors who are not audit and supervisorycommittee members. The committee is chaired by president and the majority of the members are outside directors. The Bank is
working to strengthen corporate governance over nomination of candidates for directors and compensations for directors by improving
transparency of the decision-making process and also by ensuring active involvement of outside directors.

• We believe that this structure will enable the Bank to establish an objective and neutral position for audit and supervision, etc.

BASIC POLICY AND OPERATING STRUCTURE FOR RISK MANAGEMENT
As business opportunities for financial institutions grow as a result of advances with financial deregulation, internationalization and therelaxation of regulations, the risks associated with the banking business become more diverse and complex. For banking management
henceforth, it is important to accurately manage risk based on the principle of self-responsibility, while securing adequate incomecommensurate with that risk.
The Bank has laid out the basic matters relating to risk management under its “Comprehensive Risk Management Rules,” whereby eachmanagement department undertakes adequate risk management based on detailed “Risk Management Regulations,” while theManagement Administration Division comprehensively manages overall risk in its role as the supervisory body. “Comprehensive Risk
Management” matters are periodically reported to the Board of Directors subsequent to the discussion of quantitative risk by the ALM
Committee, nonquantitative risk by the Risk Management Committee, and credit risk by the Credit Risk Management Committee.
Transition to a Board with Audit and Supervisory Committee structure
The Bank transitioned to a Board with Audit and Supervisory Committee structure upon the approval of partial changes to the Articles
of Incorporation at the 107th Ordinary General Meeting of Shareholders held on June 26, 2015. This transition to an Audit andSupervisory Committee structure will enable the Bank to reinforce the audit and supervisory functions of directors and executive
officers, as well as improve the transparency and efficacy of the business execution process as a result of the participation in
management by outside directors, with the aim of further enhancing corporate governance and improving our corporate value tomeet the expectations of our stakeholders.
Furthermore, we are strengthening our business auditing system by establishing a Business Advisory Committee consisting of thirdparty committee members from outside the bank and accepting their proposals and advice.

The Bank has set up a voluntary Nomination and Compensation Committee as a body that deliberates candidates for directors to be
proposed to General Meetings of Shareholders and compensations for directors who are not audit and supervisory committee members.
The Committee is chaired by president and the majority of the members are outside directors.
As a regional bank, we aim to grow together with regional society. To this end, the Bank reviewed the director’s compensation system aspart of the management reform and in June 2009, introduced performance-linked compensation and stock compensation-type stock
option systems.
After the shift to a Board with Audit and Supervisory Committee structure in June 2015, compensations for directors who are not audit
and supervisory committee members continue to consist of fixed-amount compensation, performance-linked compensation and stockcompensation-type stock option.
The stock compensation-type stock option is issued to directors who are not audit and supervisory committee members and executive
officers with the aim of giving them greater motivation to contribute to executive directors, etc. to improve business performance and toincrease corporate value, and facilitating their sense of shareholder-oriented management.

8

CONSOLIDATED BALANCE SHEETSThe Hokkoku Bank, Ltd. and Consolidated Subsidiaries

As of March 31
2016
Assets:Cash and due from banks (Notes 7 and 11)
Monetary receivables bought
Trading securities (Note 8)
Money held in trusts (Note 9)
Securities (Notes 7, 8 and 13)
Loans and bills discounted (Notes 6 and 7)
Foreign exchanges
Lease receivables and investment in leased assets (Note 17)
Other assets (Note 13)
Tangible fixed assets (Notes 10 and 12)
Intangible fixed assets
Deferred tax assets (Note 20)
Customers’ liabilities for acceptances and guarantees
Reserve for possible loan losses
Total assets
Liabilities:
Deposits (Notes 7 and 13)
Negotiable certificates of deposit (Note 7)
Call money and bills sold (Note 7)
Guarantee deposit received under securities lendingtransactions (Notes 7 and 13)
Borrowed money (Note 14)
Foreign exchanges
Other liabilities
Reserve for bonuses
Net defined benefit liability (Note 21)
Reserve for directors’ retirement benefits
Deferred tax liabilities (Note 20)
Deferred tax liability arising fromrevaluation of land (Note 10)
Acceptances and guarantees
Total liabilities
Net assets:
Common stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity (Note 15)
Net unrealized gains on available-for-sale securities (Note 8)
Net deferred losses on hedging instruments
Land revaluation surplus (Note 10)
Remeasurements of defined benefit plans (Note 21)
Total accumulated other comprehensive income
Subscription rights to shares (Note 16)
Non-controlling interests
Total net assets
Total liabilities and net assets

See accompanying notes to consolidated financial statements.
9

¥

¥

2016

2015
(Millions of yen)

467,351
3,783
157
15,024
1,018,148
2,328,285
11,044
21,741
16,08436,9238,866
212
16,661(40,265)
3,904,020¥¥(Thousands of U.S. dollars)(Note 2)544,907
3,708
833
15,025
1,190,527
2,355,374
3,553
21,672
14,43838,301
8,970—
17,071(34,594)
4,179,790$

4,147,598
33,576
1,397
133,340
9,035,755
20,662,813
98,016
192,946
142,742
327,683
78,6891,882
147,869(357,343)$ 34,646,968

3,086,299
89,817
67,916

3,079,447
62,867
324,605

27,389,953
797,099602,734

337,5726,865
22
42,427805
17,05856
1,383

374,027
7,585
118
39,950801
13,48050
9,816

2,995,846
60,932
196
376,531
7,144
151,391
501
12,275¥

2,113
16,661
3,669,000¥

2,237
17,071
3,932,060

18,760147,869$ 32,561,237¥

26,673
11,366
150,502(188)
188,353
39,436(181)
3,260(5,623)36,891262
9,512
235,020
3,904,020¥

26,673
11,289148,850(3,931)
182,882
55,742(388)
2,879(2,915)55,317232
9,297
247,730
4,179,790

236,723
100,869
1,335,661(1,674)
1,671,579
349,983(1,608)28,935(49,908)
327,4022,326
84,4232,085,731$ 34,646,968

CONSOLIDATED STATEMENTS OF INCOME
The Hokkoku Bank, Ltd. and Consolidated Subsidiaries

Year ended March 31
2016
IncomeInterest income on:
Interest on loans and discounts
Interest and dividends on securities
Other interest income
Fees and commissions
Other operating income
Other income
Total income¥

Expenses
Interest expenses on:
Deposits
Borrowings and rediscounts
Other
Fees and commissions
Other operating expenses
General and administrative expenses
Other expenses (Note 18)
Total expenses
Profit before income taxes
Income taxes (Note 20):
Current
DeferredProfitProfit attributable to non-controlling interests
Profit attributable to owners of parent

¥

2016

2015
(Millions of yen)

42,85529,825
12,538491
9,429
16,866
5,536
74,686¥(Thousands of U.S. dollars)(Note 2)$42,55530,564
11,851140
10,262
16,035
5,261
74,114

1,841
760
248
832
2,840
13,98230,284
8,906
57,856

1,535
824
254
456
2,805
9,476
32,281
11,83657,937

16,345
6,748
2,204
7,392
25,207124,093268,765
79,044513,456

16,83016,177

149,366

5,647
1,010
6,658
10,172
603
9,569

2,749
4,780
7,530
8,646
657
7,989

50,121
8,966
59,08890,277
5,355
84,922

¥

2016

$

2016

2015
(Yen)

Amounts per share (Note 23)
Net assets
Profit-basic
Profit-diluted¥

380,325
264,688111,279
4,357
83,681
149,684
49,130662,822752.4031.45
31.36(U.S. dollars)(Note 2)¥$782.94
25.54
25.48

6.67
0.27
0.27

See accompanying notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
The Hokkoku Bank, Ltd. and Consolidated Subsidiaries

Year ended March 31
2016

Profit¥Other comprehensive income (Note 19)
Net unrealized gains on available-for-sale securities
Net deferred gains (losses) on hedging instruments
Land revaluation surplus
Remeasurements of defined benefit plans (Note 21)
Total other comprehensive income

2016

2015
(Millions of yen)

10,172¥(16,571)
207
111(2,708)(18,959)(Thousands of U.S. dollars)(Note 2)

8,646$

90,277(147,062)
1,843
991(24,036)(168,263)

21,832
(110)
231
282
22,234Comprehensive income¥(8,787)¥30,881$(77,985)

Total comprehensive income attributable to:
Owners of the parent
Non-controlling interests¥(9,126)338¥

30,104
777$(80,992)
3,006

See accompanying notes to consolidated financial statements.
10

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSThe Hokkoku Bank, Ltd. and Consolidated Subsidiaries
Millions of yen
Shareholders’ equity

Balance at March 31, 2014
Cumulative effect of accounting changes

Commonstock

CapitalsurplusRetainedearnings¥26,673¥11,289¥142,871

Treasury
stock

Total

¥(215) ¥180,620

—

—

(813)

—

(813)

26,673

11,289142,058(215)

179,806

Cash dividends——(2,042)—(2,042)

Profit attributable to owners of parent

—

—

7,989

—

7,989

Transfer from retained earnings to capital surplus

—

20

(20)

—

—

Purchase of treasury stock

—

—

—

(3,786)(3,786)

Disposal of treasury stock

—

(20)

—

70

49

Reversal of land revaluation surplus

—

—

866

—

866

Net changes in items other than shareholders’equity

—

—

—

—

—

Balance at March 31, 2014, as restatedTotal changes during the year

—

—

6,792

(3,716)

3,076

26,673

11,289148,850(3,931)

182,882

Cash dividends——(2,434)—(2,434)

Profit attributable to owners of parent

—

—

9,569

—

9,569

Transfer from retained earnings to capital surplus

—

5,213

(5,213)——Purchase of treasury stock

—

—

—

(1,516)(1,516)

Disposal of treasury stock

—

(11)

—

56

45

Cancellation of treasury stock—(5,202)

—

5,202

—

Reversal of land revaluation surplus

—

—

(269)

—

(269)

Purchase of shares of consolidated subsidiaries

—

76

—

—

76

Net changes in items other than shareholders’equity

—

—

—

—

—

3,742

5,470

Balance at March 31, 2015

Total changes during the year
Balance at March 31, 2016

—

76

1,651

¥26,673¥11,366¥150,502¥(188) ¥188,353

Millions of yen
Accumulated other comprehensive incomeNet
unrealized Net deferredgains ongains (losses)
available-for- on hedging
sale securities instruments
Balance at March 31, 2014
Cumulative effect of accounting changes
Balance at March 31, 2014, as restated¥34,030—¥34,030

Land
revaluation
surplus¥(277) ¥3,514——¥(277) ¥3,514

Noncontrollinginterests

Total net
assets¥(3,197) ¥34,068¥223,438¥215¥8,534

—

—

—

(813)

¥(3,197) ¥34,068¥215¥8,534¥222,624—

Cash dividends

—

—

—

—

—

—

—

(2,042)

Profit attributable to owners of parent

—

—

—

—

—

—

—

7,989

Transfer from retained earnings to capital surplus

—

—

—

—

—

—

—

—

Purchase of treasury stock

—

—

—

—

—

—

—

(3,786)

Disposal of treasury stock

—

—

—

—

—

—

—

49

Reversal of land revaluation surplus

—

—

—

—

—

—

—

866

Net changes in items other than shareholders’equity21,712

(110)

(635)

282

21,24817763

22,029Total changes during the year

21,712

(110)

(635)

282

21,24817763

25,105

Balance at March 31, 2015

55,742

(388)

2,879

(2,915)55,317232

9,297

247,730

Cash dividends

—

—

—

—

—

—

—

(2,434)

Profit attributable to owners of parent

—

—

—

—

—

—

—

9,569

Transfer from retained earnings to capital surplus

—

—

—

—

—

—

—

—

Purchase of treasury stock

—

—

—

—

—

—

—

(1,516)

Disposal of treasury stock

—

—

—

—

—

—

—

45

Cancellation of treasury stock

—

—

—

—

—

—

—

—

Reversal of land revaluation surplus

—

—

—

—

—

—

—

(269)

Purchase of shares of consolidated subsidiaries

—

—

—

—

—

—

—

76

Net changes in items other than shareholders’equity(16,306)

207

381(2,708)(18,425)

29

215(18,180)

207

381(2,708)(18,425)

29

215(12,709)¥(5,623) ¥36,891¥262¥9,512¥235,020

Total changes during the year
Balance at March 31, 2016

(16,306)¥39,436¥(181) ¥3,260

See accompanying notes to consolidated financial statements.
11

Total
Remeasure- Accumulated
ments ofother
Subscription
definedcomprehenrights tobenefit plans sive income
sharesThousands of U.S. dollars (Note 2)
Shareholders’ equity
Commonstock

CapitalsurplusRetainedearnings

Treasury
stock

Total

$236,723$100,190$1,321,003$34,889$1,623,027

Cash dividends——(21,601)—(21,601)

Profit attributable to owners of parent——

84,922—

84,922

Transfer from retained earnings to capital surplus—

46,269(46,269)——

Purchase of treasury stock

—

—

—

(13,458)(13,458)

Disposal of treasury stock

—

(97)

—

501

403

Cancellation of treasury stock—(46,171)—

46,171—

Reversal of land revaluation surplus——(2,393)—(2,393)Purchase of shares of consolidated subsidiaries

—

679

—

—

679

Net changes in items other than shareholders’equity

—

—

—

—

—

Balance at March 31, 2015

Total changes during the year
Balance at March 31, 2016—

679

14,657$ 236,723$ 100,869$1,335,661$33,21448,551(1,674)$1,671,579

Thousands of U.S. dollars (Note 2)
Accumulated other comprehensive income

Balance at March 31, 2015

Net
unrealized Net deferredgains ongains (losses)
available-for- on hedging
sale securities instruments

Land
revaluation
surplus

Total
Remeasure- Accumulated
ments ofother
Subscription
definedcomprehenrights tobenefit plans sive income
shares

Noncontrollinginterests
$

$

2,063

Total net
assets$494,697$3,452$25,550$(25,871)$490,923

82,512$2,198,527

Cash dividends

—

—

—

—

—

—

—

(21,601)

Profit attributable to owners of parent

—

—

—

—

—

—

—

84,922

Transfer from retained earnings to capital surplus

—

—

—

—

—

—

—

—

Purchase of treasury stock

—

—

—

—

—

—

—

(13,458)
403

Disposal of treasury stock

—

—

—

—

—

—

—

Cancellation of treasury stock

—

—

—

—

—

—

—

—

Reversal of land revaluation surplus

—

—

—

—

—

—

—

(2,393)Purchase of shares of consolidated subsidiaries

—

—

—

—

—

—

—

679

Net changes in items other than shareholders’equity(144,713)

1,843

3,385

(24,036)(163,521)

262

1,911

(161,347)

Total changes during the year
Balance at March 31, 2016

(144,713)$ 349,983

1,843
$

1,608

3,385
$

28,935$

(24,036)(163,521)

49,908$ 327,402

262
$

2,326

$

1,911

(112,795)

84,423$2,085,731

See accompanying notes to consolidated financial statements.
12

CONSOLIDATED STATEMENTS OF CASH FLOWSThe Hokkoku Bank, Ltd. and Consolidated Subsidiaries

Year ended March 31
2016
Cash flows from operating activities
Profit before income taxes
Adjustments to reconcile profit before income taxes to net cash provided byoperating activities:
Depreciation and amortization
Losses on impairment
Increase (decrease) in reserve for possible loan losses
Increase (decrease) in reserve for bonuses
Increase (decrease) in net defined benefit liability
Increase (decrease) in directors’ retirement benefits
Increase (decrease) in reserve for reimbursement of deposits
Increase (decrease) in reserve for losses on refund of interest
Increase (decrease) in reserve for customer service points
Accrued interest and dividend income
Accrued interest expenses
Losses (gains) on investment securities, net
Losses (gains) on money trusts
Foreign exchange losses (gains), net
Losses (gains) on disposal of fixed assets
Decrease (increase) in loans and bills discounted
Increase (decrease) in deposits
Decrease (increase) in due from banks (exclusive of the Bank of Japan)
Decrease (increase) in call loans and others
Increase (decrease) in call money and others
Increase (decrease) in guarantee deposit received under securities lendingtransactions
Decrease (increase) in trading account assets
Decrease (increase) in foreign exchange assets
Increase (decrease) in foreign exchange liabilities
Decrease (increase) in lease receivables and investment in leased assets
Interest and dividends received
Interest paid
Other, net
Subtotal
Income taxes paid, net of refund
Net cash provided by (used in) operating activities¥

Cash flows from investing activities
Purchases of securities
Proceeds from sales of securities
Proceeds from redemption of investment securities
Decrease in money held in trusts
Interests and dividends received on investments
Purchases of tangible fixed assets
Purchases of intangible fixed assets
Proceeds from sales of tangible fixed assets
Payment on discharge of asset retirement obligation
Net cash provided by (used in) investing activities
Cash flows from financing activities
Cash dividends paid
Cash dividends paid to non-controlling interests
Payments from changes in ownership interests in subsidiaries that do not resultin change in scope of consolidation
Purchases of treasury stock
Proceeds from sales of treasury stock
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year¥
Cash and cash equivalents at end of year (Note 11)

See accompanying notes to consolidated financial statements.
13

2016

2015
(Millions of yen)

16,830¥(Thousands of U.S. dollars)(Note 2)

16,177$

149,366

3,812
401
5,670
3
3,578
5
7
(30)
11
(42,855)
1,841(4,496)0
3,590
276
27,07133,801(1,177)(75)(257,408)

2,666
1,881
5,759
13
(608)
(2)
18
(15)
19
(42,555)
1,535(8,093)(171)(8,244)839(4,879)(19,654)
216
16,283311,865

33,8373,559
50,32430
31,757
52
62
(269)
104
(380,325)
16,345(39,905)
4
31,8642,452
240,253
299,978(10,452)(668)(2,284,417)(36,455)
675(7,490)(96)(443)
30,469(1,925)
8,023(216,381)(2,198)(218,579)

324,510
(395)
(810)
35
786
31,070(1,655)
15,255641,848(4,146)
637,701(323,530)
5,998(66,476)(858)(3,935)
270,410(17,089)
71,208(1,920,317)(19,509)(1,939,826)(1,116,029)
1,104,447
142,450—
15,304(1,040)(1,602)280(5)143,804(1,229,524)
825,796
150,373
52
13,785(4,929)(3,053)419(37)(247,118)(9,904,416)
9,801,630
1,264,202—
135,821(9,234)(14,224)2,489(47)1,276,221(2,428)(10)(2,040)(13)(21,548)(96)(36)(1,516)45(3,945)(13)(78,734)
544,230
465,496—(3,786)49(5,791)
28
384,820
159,409544,230(319)(13,458)403(35,019)(116)(698,740)
4,829,878
4,131,137¥$

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Hokkoku Bank, Ltd. and Consolidated Subsidiaries
For the years ended March 31, 2016 and 2015
1. Basis of Presentation
The accompanying consolidated financial statements of The Hokkoku
Bank, Ltd. (the “Bank”) and consolidated subsidiaries are prepared on
the basis of accounting principles generally accepted in Japan, which
are different in certain respects as to the application and disclosure
requirements of International Financial Reporting Standards, and arecompiled from the consolidated financial statements prepared by the
Bank as required by the Financial Instruments and Exchange Act ofJapan. In addition, the notes to the consolidated financial statements
include information which is not required under accounting principles
generally accepted in Japan, but is presented herein as additional
information. As permitted by the Financial Instruments and ExchangeAct, amounts of less than one million yen have been rounded down.
As a result, the totals shown in the accompanying consolidated
financial statements (both in yen and U.S. dollars) do not necessarily
agree with the sums of the individual amounts.
2. U.S. Dollar Amounts
The Bank maintains its records and prepares its financial statements inyen. Amounts in U.S. dollars are presented solely for the convenienceof readers outside Japan. The rate of ¥112.68 = U.S. $1.00, the rateof exchange in effect on March 31, 2016 has been used in conversion.
The conversion should not be construed as a meaning that yen could
be converted into U.S. dollars at the above or any other rate.
3. Summary of Significant Accounting Policies
a. Principles of consolidation
The accompanying consolidated financial statements include theaccounts of the Bank and its 5 subsidiaries at March 31, 2016 and2015. All significant inter-company accounts and transactions havebeen eliminated in consolidation.
Ishikawa Small Business Revitalization Fund Investment Limited
Liability Partnership is not consolidated, nor accounted for underthe equity method, since the materiality in terms of assets, share of
its income and its retained earnings is less important and its nonconsolidation will not prevent reasonable judgments regarding theGroup’s financial position and operating results.
b. Trading account securities
Trading account securities are stated at fair value at the end of theyear, and the related cost of sales is determined by the moving
average method.
c. Securities
Held-to-maturity securities are stated at amortized cost (straight-line
method) using the moving average method. Stocks inunconsolidated subsidiaries which are not accounted for by theequity method are stated at cost using the moving average method.
Available-for-sale securities are stated in principle at fair value
based on the market value as of year-end (cost of securities sold is
calculated using the moving average method). However, thosesecurities whose fair value is extremely difficult to be determined
are stated at cost using the moving average method.
The net unrealized gains or losses on available-for-sale securities
are included directly in net assets.
Securities invested as assets in trust in separately managed money
trusts for the principal purpose of securities investment are stated atfair value.
d. Derivative financial instruments
Derivatives are stated at fair value.
e. Tangible fixed assets
Tangible fixed assets are carried at cost less accumulated
depreciation.
Depreciation of tangible fixed assets of the Bank is computed by the
declining-balance method. The useful lives of buildings andequipment are summarized as follows.
		
Buildings
10 to 50 years
		
Others 	  3 to 20 years

Depreciation of tangible fixed assets of the consolidated
subsidiaries is computed primarily by the declining-balance method
over the estimated useful lives of the respective assets.
Depreciation of assets held under finance leases which do nottransfer ownership of the leased assets to the lessee is computed by
the straight-line method over the lease terms of the respective
assets. The salvage value for depreciation purpose is determinedbased on the lease contracts.
f. Intangible fixed assets
Amortization of intangible fixed assets of the Bank is computed by
the straight-line method. Acquisition costs of software to be usedinternally are capitalized and amortized by the straight-line method
primarily over a useful life of five to ten years.
g. Reserve for possible loan losses
The reserve for possible loan losses of the Bank is provided as
detailed below in accordance with the internal rules for providing
reserves for possible loan losses:
For claims to debtors who are legally bankrupt (as a result ofbankruptcy special liquidation, etc.) or who are substantiallybankrupt, a reserve is provided based on the amount of the claims,on the net amount expected to be collected by the disposal ofcollateral, or as a result of the execution of a guarantee.
For claims to debtors who are not currently bankrupt, but are likely
to become bankrupt (“debtors at a risk of bankruptcy”), a reserve isprovided according to the amount considered necessary based onan overall solvency assessment of the amount of the claim, on the
net amount expected to be collected by the disposal of collateral, or
as a result of the execution of guarantee. In addition, for claims tosuch significant debtors and debtors at a risk of bankruptcy who
have restructured loans exceeding a certain credit amount that are
possible to reasonably estimate cash flows from collection ofprincipals and receipt of interest, a reserve is provided according to
the difference between the amount of related cash flows discounted
by the original contract interest rate before restructuring the loans
and its carrying book value.
For other claims, a reserve is provided based on the Bank’s pastloan-loss experience. All claims are assessed by the Business
Section (at the branches and the related head office divisions)based on the Bank’s internal rules for the self-assessment of asset
quality. The Corporate Audit Department, which is independent of
the Business Section, subsequently conducts audits of suchassessments.
The reserves of the consolidated subsidiaries are provided forgeneral claims at an amount based on the actual historical rate ofloan losses and for specific claims (from potentially bankrupt
customers, etc.) at an estimate of the amounts deemed uncollectible
based on the respective assessments.
For collateralized or guaranteed claims from debtors who arelegally or substantially bankrupt, the amounts of the claims deemed
uncollectible in excess of the estimated value of the collateral or
guarantees have been written off in aggregate amounts at ¥36,526
million ($324,160 thousand) and ¥44,179 million as of March 31,
2016 and 2015, respectively.
h. Bonuses to employees
The reserve for bonuses to employees is provided at the estimatedamount to be attributed to the current fiscal year.
i. Directors’ retirement benefits
The reserve for directors’ retirement benefits is recorded at an
estimated amount to be required to be paid if all directors retired at
the balance sheet date.
j. Reserve for reimbursement of deposits
The reserve for reimbursement of deposits is recorded at an
estimated amount to be required to reimburse the customers’ claimson the derecognized sleeping deposit accounts.

14

k. Reserve for loss on refund of interest
The reserve for loss on refund of interest is recorded by a certain
consolidated subsidiary to provide for the customers’ claims torefund the interest exceeding the maximum limit of interest rate
stipulated by the Interest Rate Restriction Act based on the pastexperience of refund.
l. Reserve for customer service points
The reserve for customer service points is recorded at an estimatedamount based on the future expected payment resulting from thecustomers’ use of points granted to contractors of “Hokkoku Point
Service” and credit card members based on the point system
incorporated to promote the use of such services and credit cards.
m. Retirement benefit plans
In calculating retirement benefit obligations, the benefit formulabasis is used as a method of attributing expected retirement benefits
to the period up to the end of this fiscal year. Treatments of priorservice cost and actuarial gains or losses are as follows:
Prior service cost is amortized by the straight-line method over acertain period (10 years) which falls within the average remaining
years of service of the employees when incurred.
Actuarial gains or losses are amortized in the following years after
incurred by the straight-line method over a certain period (10years) that falls within the average remaining years of service of theemployees.
n. Foreign currency translations
Foreign currency assets and liabilities are translated into Japanese
yen equivalents primarily using the applicable rate of exchange
effective at the balance sheet date.
o. Leases
As lessor, all finance leases which transfer ownership of the leased
assets to the lessee are recognized as lease receivables, and all
finance leases which do not transfer ownership of the leased assets
to the lessee are recognized as investment in leased assets.
Investment in leased assets recorded at April 1, 2008, when therevised accounting standard for lease transactions was adopted,
was stated at the reasonable cost less accumulated depreciation atMarch 31, 2008 pursuant to the paragraph 81 of Implementation
Guidance No.16, “Implementation Guidance on AccountingStandard for Lease Transactions” issued on March 30, 2007. If
these lease transactions had been retroactively accounted for as
ordinary sale transactions pursuant to paragraph 80 of the
Guidance, profit before income taxes would have increased by ¥8
million ($73 thousand) and ¥29 million for the years ended March
31, 2016 and 2015, respectively.
Finance lease revenue and related cost of revenue are recorded
when the lease payment is received.
p. Hedge accounting
Hedging interest rate risk
The Bank applied the deferral method to account for financial
instruments that hedge the interest rate risk on financial assets andliabilities of the Bank, as provided in the “Treatment for Accounting
and Auditing of Application of Accounting Standard for Financial
Instruments in Banking Industry” (The Japanese Institute of Certified
Public Accounts Industry Audit Committee Report No. 24, February
13, 2002, hereinafter “JICPA Industry Audit Committee Report No.
24”). The hedge effectiveness is assessed by grouping andspecifying hedged items including deposits and loans and hedging
instruments including interest rate swaps by certain period. Theinterest rate swaps of certain consolidated subsidiaries which
qualify for hedge accounting and meet specific matching criteria
are not re-measured at market value but the differential paid or
received under the swap agreements are recognized and included
in interest expenses or income.
Hedging foreign exchange risk
The Bank applies the deferral method to account for derivative
instruments that hedge the foreign exchange risk on various
foreign-currency financial assets and liabilities, as provided in the“Treatment for Accounting and Auditing with Regard to Accounting
for Foreign Currency Transactions in Banking Industry” (TheJapanese Institute of Certified Public Accounts Industry Audit

15

Committee Report No. 25, July 29, 2002, hereinafter “JICPA
Industry Audit Committee Report No. 25”). The hedge effectivenessof these currency-swap transactions, exchange-swap transactions
and similar instruments to hedge the foreign exchange risks offoreign-currency financial assets or liabilities is assessed bycomparing the foreign currency position of the hedged assets or
liabilities with that of the hedging instruments.
q. Consumption taxes
Transactions subject to national and local consumption taxes arerecorded at amounts exclusive of consumption taxes. Nondeductible
consumption taxes levied on the purchase of premises andequipment are charged to income when incurred.
r. Cash and cash equivalents
For the purpose of reporting cash flows, cash and cash equivalents
consist of cash and due from the Bank of Japan.
4. Changes in Accounting Policies
Accounting Standard for Business Combinations and related guidance
The Bank has adopted the “Accounting Standard for Business
Combinations” (ASBJ Statement No. 21, September 13, 2013,
hereinafter “Statement No. 21”)”, the “Accounting Standard forConsolidated Financial Statements” (ASBJ Statement No. 22,
September 13, 2013 (hereinafter “Statement No. 22”)) and the“Accounting Standard for Business Divestitures” (ASBJ Statement
No.7, September 13, 2013 (hereinafter “Statement No. 7”)) from the
beginning of the year ended March 31, 2016. Under these revised
accounting standards, changes in the Company’s ownership interest
while retaining its controlling financial interest in subsidiaries areaccounted for as capital surplus and acquisition-related costs arecharged to expenses as incurred. With respect to businesscombinations on or after the beginning of the current consolidated
fiscal year, in case acquisition costs are once provisionally allocated
but revised afterwards in the following fiscal year, the final result of
allocation is included in the consolidated financial statements for the
consolidated fiscal year when the relevant business combination
occurs. In addition, the account name presentation is changed fromminority interests to non-controlling interests. Further, net income
before income taxes and minority interests, net income before minority
interests, minority interests in earnings of consolidated subsidiaries arechanged to profit before income taxes, profit, profit attributable tonon-controlling interests and profit attributable to owners of parent,
respectively. Certain reclassifications have been made in the 2015
financial statements to conform to the classifications used in 2016.
Cash flows pertaining to the changes in ownership interests in
subsidiaries that do not result in change in scope of consolidation are
shown under Cash flows from financing activities.
With regard to the application of these accounting standards, theCompany made retroactive adjustments to the beginning balances forthe year ended March 31, 2016 in accordance with transitional
treatments as prescribed in Article 58-2 (4) of Statement No. 21,
Article 44-5 (4) of Statement No. 22 and Article 57-4 (4) of Statement
No. 7.
As a result, capital surplus increased by ¥76 million ($679 thousand)as of the end of the year ended March 31, 2016.
Per share information is stated in Note 23.
5. New Accounting Standards Not Yet Adopted
The revised Implementation Guidance on Recoverability of Deferred
Tax Assets” (ASBJ Guidance No. 26, issued on March 28, 2016)(a) Outline
The implementation Guidance has been partly revised while theguidance provided in the “Audit Treatment for Judgement ofRecoverability of Deferred Assets” (Auditing Committee Report No.
66) basically continues to be applied.
(b) Scheduled Date of Application
The Bank is scheduled to apply this accounting standard from the
beginning of the fiscal year ending March 31, 2017.
(c) Effect of Application of this accounting standard
The effect of the application of this accounting standard is underevaluation.

6. Loans and Bills Discounted
Loans to borrowers under bankruptcy procedures and delinquentloans totaled ¥4,002 million ($35,522 thousand) and ¥67,122
million ($595,692 thousand), respectively, at March 31, 2016, and¥5,180 million and ¥73,259 million, respectively, at March 31,
2015. A loan is placed on non-accrual status when substantial doubt
as to the collectability of its principal and interest is judged to exist, if
payment is post due for a certain period of time, or for other reasons.
Loans to borrowers in bankruptcy represent non-accrual loans, after
the charge-offs of loans deemed uncollectible, to borrowers who arelegally bankrupt as defined in Article 96, Paragraph 1, Subparagraph
3 and 4 of Order of Enforcement of the Corporation Tax Act.
Delinquent loans are non-accrual loans other than loans to borrowers
in bankruptcy or loans on which interest payments have been deferredin order to assist the restructuring of the borrowers.
Loans past due for 3 months or more totaled ¥192 million ($1,710
thousand) and ¥98 million at March 31, 2016 and 2015,
respectively. Loans past due for 3 months or more are those whose
principal or interest payments are 3 months or more past due but are
not included in loans to borrower under bankruptcy procedures ordelinquent loans.
Restructured loans totaled ¥1,014 million ($9,004 thousand) and¥1,036 million at March 31, 2016 and 2015, respectively.
Restructured loans are those who on which the Bank has granted
certain concessions, such as a reduction at the contractual interest rateor principal amount or a deferral of interest/principal payments, inorder to assist the restructuring of the borrowers. Excluded fromrestructured loans are loans to borrowers in bankruptcy procedures,
other non-accrual loans, and loans past due for 3 months or more.
The total of loans to borrowers in bankruptcy procedures, other nonaccrual loans, loans past due for 3 months or more and restructuredloans amounted to ¥72,332 million ($641,929 thousand) and¥79,574 million at March 31, 2016 and 2015, respectively.
Bills discounted are accounted for as financial transactions inaccordance with JICPA Industry Audit committee Report No.24. The
Bank has the right to sell or re-pledge the banker’s acceptance bills,
commercial bills discounted, documentary bills and foreign exchangebought without restrictions. The face value of banker’s acceptancebills, commercial bills, documentary bills and foreign exchangebought at a discount was ¥13,723 million ($121,792 thousand) and¥14,817 million as of March 31, 2016 and 2015, respectively.
Overdraft agreements and loan commitments are agreements underwhich the Bank and its consolidated subsidiaries are obliged to extend
loans up to a prearranged limit unless the customer is in breach ofcontract. The loan commitments not yet drawn down at March 31,
2016 and 2015 totaled ¥439,662 million ($3,901,870 thousand)¥460,028 million, respectively; ¥433,494 million ($3,847,126
thousand) of which, at March 31, 2016 (2015: ¥449,690 million),
was related to agreements whose contractual terms were for one year
or less or which were unconditionally cancelable at any time.
As the majority of these agreements expire without the right to extend
the loans being exercised, the undrawn commitment balance does notnecessarily affect the future cash flows of the Bank or of its
consolidated subsidiaries. These agreements usually include provisions
which stipulate that the Bank and its consolidated subsidiaries havethe right either to refuse the execution of the loans or to reduce thecontractual commitments when there is a change in the borrower’s
financial condition, or when additional assurance of the financial
soundness and creditworthiness of a borrower is necessary, or whenother unforeseen circumstances arise.
The Bank and its consolidated subsidiaries take various measures toprotect their credit. Such measures include obtaining real estate or
securities as collateral at the time of entering into the agreements,
monitoring a customer’s business on a regular basis in accordancewith established internal procedures, and amending the loan
commitment agreements when necessary.

7. Financial Instruments and Related Disclosures
1. Policy on financial instruments
The Group provides financial services such as banking business andleasing business. Major banking business includes lending services,
bills discounting and fund management through dealing andunderwriting Japanese government bonds, municipal bonds andavailable-for-sale securities. On the other hand, the fund is raised
mainly by taking deposits and negotiable certificates of deposit andalso by issuance of bonds, call money and others according tonecessities.
The Group conducts asset and liability management (ALM) andmanages the risks identifying various types of risk exposuresassociated with the banking business, since the Group holds financial
assets and liabilities exposed to the market risk of fluctuation ofinterest rates. As part of the risk management, the Group utilizes
derivative transactions.
2. Contents and risk of financial instruments
Financial assets held by the Group mainly consist of loans tocorporate and individual customers which are exposed to credit risk
arising from nonperformance of the customers. In addition, the loanbalances are concentrated to Ishikawa prefecture where the head
office of the Bank is located and accordingly, the changes in theeconomic circumstances of the region may have a great impact on thecredit risk. Securities mainly consist of Japanese government bonds,
municipal bonds, corporate bonds and equity securities that areclassified as available-for-sale securities. These securities are exposedto credit risk of issuers and market risks of fluctuation in interest rates,
market prices and foreign exchange rates for bonds denominated inforeign currencies.
On the other hand, financial liabilities consist of mainly deposits andnegotiable certificates of deposit, call money and others. With respect
to call money, the Bank may be forced to raise fund underunfavorable conditions and accordingly, significantly increase funding
costs in case that fund raising capacity of the Bank significantly
declined under certain circumstances such as significant deteriorationof financial positions of the Bank.
Derivative transactions consist of hedging activities performed as partof ALM against market risks (interest rate risk and foreign exchangerisk) associated with assets and liabilities held by the Group andtransactions to respond to customers’ diversified needs for hedging
against the risks of customers. The Bank applies hedge accounting forinterest rate swaps and currency swaps employed by the Bank forhedging purposes and periodically verifies the effectiveness ofhedging activities assessing if the correlation between hedging
instruments and hedged items of assets and liabilities is appropriate,
and also if the market risks of interest rates and foreign exchange
rates are offset by hedging instruments.
3. Risk management system for financial instruments
Credit risk management:
The Group has established and operates a credit control system
consisting of credit review by individual transaction, internal credit
rating, self-assessment, major account credit control, measurement ofrisk volume and measures on problem loans in accordance with credit
risk control policies, credit policies, lending operation rules andcontrol policies and procedures on credit risks. These credit controls
are performed by the Loan-Screening Department, the Loan Control
Department and the credit investigation sections of the consolidated
subsidiaries as well as the operating offices and periodically subject toauthorization by and reported to the Board of Directors, whereappropriate. In addition, the Audit Department audits the status ofcredit risk controls. Credit risk associated with the issuers of securities
and counterparty risk associated with cash transactions and derivativetransactions are controlled by periodically identifying credit
information and fair values by the Market Finance Division and theInternational Division.
Market risk management:(1) Interest rate risk
The Bank funds loans and securities mainly with deposits taken, butholds long-term and short-term interest rate gaps arising from thetiming difference in the maturities repricing deposits and loans.
Accordingly, the Management Administration Division monitors
the risk exposures by establishing risk limits based on the
integrated risk control policy and integrated risk control rule and16

reports to the ALM Committee and the Board of Directors. In
addition, the General Planning Department and Management
Administration Division monitor the interest rate risk based on theinterest rate sensitivity analysis, gap analysis, ladder analysis andoutlier approach and report to the ALM Committee on a regularbasis.
The Bank also enters into interest rate swap contracts to hedge theinterest rate fluctuation risk.
(2) Foreign exchange risk
The Bank holds, in part, foreign currency denominated assets andliabilities. These foreign currency denominated assets and liabilities
are appropriately hedged using currency swaps and other,whereby their exposures to the foreign exchange risk arecontrolled.
(3) Price fluctuation risk
The Group controls the price fluctuation risk associated with equity
securities and investment trusts in accordance with the integrated
risk management policies and procedures to control the exposures
within the Bank’s risk tolerance while securing appropriate
earnings. Among these, the Bank established limits for transactions
which require risk controls. Moreover, the middle office of theMarket Finance Division, in cooperation with the Management
Administration Division, monitors the volume of risk exposures andverifies compliance with the operating limit. In addition, theManagement Administration Division specifies risks andimplements measurement and analysis of those risks and stresstests. Such information is reported to the ALM Committee and
Board of Directors on a regular basis and where appropriate.
(4) Derivative transactions
With respect to derivative transactions, the Bank establishedinternal rules defining the authority and hedge policies and credit
lines by counterparty. Front offices that enter into the contacts,back offices that conduct reconciliation procedures and controls
the credit lines and the divisions that assess the effectiveness ofhedges are separated so that the internal control functions
effectively.
(5) Quantitative information related to market risk
Main financial instruments which are exposed to interest rate risk,
stock price fluctuation risk or investment trust price fluctuation risk
are “Loans and bills discounted,” “Securities,” “Deposits,”“Derivatives” and etc. The Bank uses the VaR model to measuremarket risks of interest rate, stock price and investment trust related
instruments. Adopting the variance-covariance method (holding
period: half a year, confidence interval: 99.9%, observation
period: 720 business days) in computing the VaR, the Bank
examines the correlation between interest rate risk and pricefluctuation risk. Total VaR of the Group was ¥83,941 million($744,953 thousand) and ¥86,162 million as of March 31, 2016
and 2015, respectively. With respect to the measurement ofinterest rate risk exposure of liquid deposits, the Bank adopts
deposit internal models.
The Bank implements back-testing to compare the VaR computedby the model with actual profit and loss in the securities andconfirms that the measurement model in use captures the market
risk with sufficient precision. However, the risk under certain
abnormal market fluctuations may not be captured, since the VaR
is measured under a definite probability of incidence statisticallycomputed based on historical market fluctuations. In addition, VaR
is a statistical value computed based on the assumptions and it is
not intended to estimate maximum amount of losses.
4. Supplementary explanation on the fair value of financial
instruments
The fair value of financial instruments comprises the value determinedbased on the quoted market price and the valuation calculated on areasonable basis where no market price is available.
Fair value of financial instruments
The following table summarizes the carrying amount, fair value anddifference of financial instruments as of March 31, 2016 and 2015.
Note that unlisted equity securities whose fair value is difficult todetermine are not included in the table (see Note 2 below).

March 31, 2016
Millions of yen

Cash and due from banks
Securities:
Available-for-sale securities
Loans
Reserve for possible loan
losses (*1)
Total assets
Deposits
Negotiable certificates of deposit
Call money and bills sold
Guarantee deposit received under
securities lending transactions
Total liabilities
Derivative transactions (*2)
To which hedge accounting
is not applied
To which hedge accounting
is applied
Total derivative transactions

Carrying value Fair value
Difference¥467,351 ¥467,351 ¥
—
1,014,283
2,328,285

1,014,283—

2,317,937
3,799,572
3,086,311
89,817
67,91626,441
26,44111
0—(36,790)
2,291,495
3,773,130
3,086,299
89,817
67,916
337,572

337,572—

3,581,605

3,581,617

12

243

243

—

4,725

4,725

—

4,969

4,969

—

March 31, 2016
Thousands of U.S. dollars

Difference
Carrying value Fair value
Cash and due from banks $4,147,598 $4,147,598 $
—Securities:
Available-for-sale securities 9,001,453
9,001,453—
Loans
20,662,813
Reserve for possible loan
(326,500)
losses (*1)
20,336,312 20,570,975
234,663
Total assets
33,485,363 33,720,027
234,663
Deposits
27,389,953 27,390,059
105
Negotiable certificates of deposit
797,099
797,1023
Call money and bills sold602,734
602,734—
Guarantee deposit received under
2,995,846
2,995,846—
securities lending transactions
31,785,633 31,785,742
109
Total liabilities
Derivative transactions (*2)
To which hedge accounting
2,162
2,162
—
is not applied
To which hedge accounting
41,93841,938—is applied
44,101
44,101—
Total derivative transactions
March 31, 2015
Millions of yen

Cash and due from banks
Securities:
Available-for-sale securities
Loans
Reserve for possible loan
losses (*1)
Total assets
Deposits
Negotiable certificates of deposit
Call money and bills sold
Guarantee deposit received under
securities lending transactions
Total liabilities
Derivative transactions (*2)
To which hedge accounting
is not applied
To which hedge accounting
is applied
Total derivative transactions

Carrying value Fair value
Difference¥544,907 ¥544,907 ¥
—
1,186,213
2,355,374

1,186,213—

2,349,715
4,080,836
3,079,472
62,867
324,605

19,414
19,41424
0—(25,073)
2,330,301
4,061,422
3,079,447
62,867
324,605
374,027

374,027—

3,840,948

3,840,973

24

(3)

(3)

—

518

518

—

515

515

—

(*1) A general reserve for possible loan losses and a specific reserve for possible
loan losses corresponding to loans are deducted.
(*2) Derivative transactions recorded under other assets and other liabilities arepresented on a net basis.

17

(Note 1) Computation method for fair value of financial instruments
AssetsCash and due from banks:
With respect to due from banks without maturities, the carrying
amount is presented as the fair value approximates the carrying
amount. With respect to due from banks with maturities, the carrying
amount is presented as the fair value as the fair value approximatesthe carrying amount.
Securities:
The fair value of equity securities is determined using the market priceat the exchanges and the fair value of debt securities is determinedusing the price presented by Japan Securities Dealers Association(“JSDA”) or the price obtained from the financial institutions. The fairvalue of investment trusts is determined using the published standard
quotation. The fair value of private bonds guaranteed by the Bank iscalculated adding the credit risk to the market interest rate
corresponding to the residual maturities.
Loans:
The fair value of loans with variable interest rates is presented using
the carrying amount as the fair value approximates the carrying
amount, as long as the credit situation of the borrowers does not varysignificantly after executing the loans, since they reflect the market
interest rates due to their short-term nature. The fair value of loans
with fixed rates is computed, by discounting the aggregate value ofprincipal and interest at the interest rate assumed if the same loans
were newly executed, for each category of type of loans, internalratings and maturities. As for the loans whose maturity is less than one
year, the carrying amount is presented as the fair value as the fairvalue approximates the carrying amount.
With respect to receivables from “legally bankrupt” borrowers,“substantially bankrupt” borrowers and “likely to become bankrupt”
borrowers, the fair value approximates the carrying amount, net of areserve for possible loan losses and such amount is presented as thefair value.
With respect to loans whose repayment term is not determinedbecause of the characteristics that the loans are limited within theamount of pledged assets, the carrying amount is presented as the fairvalue as the fair value is expected to approximate the carrying
amount considering the expected repayment term and pricing
conditions.
Liabilities
Deposits and negotiable certificates of deposits:
With respect to on-demand deposits, the payment obligation when
demanded at the balance sheet date, which is the carrying amount, isdeemed to be the fair value. The fair value of time deposits iscomputed using the present value by discounting future cash flows foreach category of certain period. The interest rate to be applied whena new deposit is taken is used as the discount rate. Regarding deposits
whose residual maturity is less than one year, the carrying amount ispresented as the fair value as the fair value approximates the carrying
amount.
Call money and bills sold and guarantee deposit received under
securities lending transactions:
The carrying amount is presented as the fair value as the residual
maturity is less than one year and the fair value approximates the
carrying amount, since the remaining maturity is short (less than oneyear).
Derivative transactions
Derivative transactions comprise interest rate related transactions(interest rate swaps, etc.) and currency related transactions (currency
options, currency swaps, etc.) and the fair value of derivatives isdetermined using the value computed using the discounted present
value or option pricing models.

(Note 2) ‌The following table summarizes financial instruments whose
fair value is extremely difficult to estimate: Note that these
instruments are not included in the table above regarding thefair value of financial instruments.
Carrying value
2016
2015
2016
(Millions of yen)

Unlisted equity securities (*1) (*2)
Investment in partnershipTotal¥3,195670¥3,865(Thousands of
U.S. dollars)¥3,861453¥4,314$28,355
5,946$34,301(*1) The fair value of unlisted equity securities is not disclosed, since there is nomarket price and it is extremely difficult to estimate the fair value.
(*2) The Bank recognized loss on impairment of ¥4 million ($43 thousand) on
unlisted equity securities for the years ended March 31, 2016.

(Note 3) ‌Maturity of financial assets and securities with contractual
maturities at March 31, 2016
March 31, 2016
Millions of yen

Due after one Due after three Due after five Due after sevenDue in one year through years through years through years through Due after ten
year or less three years five years seven years ten years
years¥429,399 ¥
— ¥
— ¥
— ¥
— ¥
—

Due from banks
Securities:
Available-for-sale securities
121,742
209,490273,020
115,452
76,456
11,493
with contractual maturities:
Japanese government
71,00086,500166,000
10,00037,000—bonds
Municipal bonds
15,16633,40327,45049,292
4,305—
Corporate bonds
35,576
61,83058,422
23,370
1,122
—
Other
—
27,75621,14632,78934,02911,493Loans (*)
606,022466,960
373,581
190,155
217,787
448,208
Total¥1,157,165 ¥676,450 ¥646,601 ¥305,608 ¥294,244 ¥459,701
March 31, 2016
Thousands of U.S. dollars

Due after one Due after three Due after five Due after sevenDue in one year through years through years through years through Due after ten
year or less three years five years seven years ten years
years$3,810,787 $
— $
— $
— $
— $
—

Due from banks
Securities:
Available-for-sale securities
1,080,429 1,859,159 2,422,967 1,024,604
678,525
101,996
with contractual maturities:
Japanese government
630,102767,660 1,473,198
88,746328,363—
bonds
Municipal bonds
134,598
296,442
243,618
437,458
38,207—
Corporate bonds
315,728
548,729
518,485
207,401
9,957
—
Other
—
246,327
187,665
290,997
301,996
101,996Loans (*)
5,378,263 4,144,126 3,315,423 1,687,573 1,932,799 3,977,707
Total$10,269,481 $6,003,285 $5,738,390 $2,712,178 $2,611,324 $4,079,704(*) Loans from “legally bankrupt,” “substantially bankrupt” and “likely to becomebankrupt” borrowers which are not expected to be repaid amounting to¥11,538 million ($102,404 thousand) are not included.
Loans whose payment term is not determined amounting to ¥14,030 million($124,514 thousand) are not included.

(Note 4) ‌Maturity of bonds and interest bearing liabilities at March
31, 2016
March 31, 2016
Millions of yen

Due after one Due after three Due after five Due after sevenDue in one year through years through years through years through Due after ten
year or less three years five years seven years ten years
years¥2,401,519 ¥280,406 ¥18,902 ¥
— ¥
— ¥
—

Deposits (*)
Negotiable certificates of
88,981835—
deposits
Call money and bills sold67,916——
Guarantee deposit received
337,572——
under securities lendingtransactions
Total¥2,895,988 ¥281,241 ¥18,902 ¥

—

—

—

—

—

—

—

—

—

— ¥

— ¥

—

18

March 31, 2016
Thousands of U.S. dollars

Due after one Due after three Due after five Due after sevenDue in one year through years through years through years through Due after ten
year or less three years five years seven years ten years
years$21,312,736 $ 2,488,516 $ 167,755 $
— $
— $
—

Deposits (*)
Negotiable certificates of789,683
7,415—
deposits
Call money and bills sold602,734——
Guarantee deposit received
2,995,846——
under securities lendingtransactions
Total$25,701,001 $2,495,931 $167,755 $

—

—

—

—

—

—

—

—

—

— $

— $

—

(*) On-demand deposits are included under “Due in one year or less.”

8. Securities(1) Trading securities
Net holding gain or loss resulting from revaluation of trading
securities to fair value included in earnings for the years ended
March 31, 2016 and 2015 were ¥0 million ($6 thousand) ¥0
million, respectively.
(2) Held-to-maturity securities which have a readily determinable fair
value
There were no held-to-maturity securities to be reported at March
31, 2016 and 2015.
(3) Available-for-sale securities which have a readily determinable fairvalue
The acquisition cost and carrying value of available-for-salesecurities which have a readily determinable fair value and therelated unrealized gain or loss at March 31, 2016 and 2015 aresummarized as follows:
March 31, 2016
Millions of yen

Stock
Debt securities
Others
Total

Carrying Acquisition
value
cost
Difference
Gain
Loss
¥120,790 ¥77,788 ¥43,001 ¥46,820 ¥3,818
701,841 689,353
12,487
13,181
693
191,651 190,927
724
3,929
3,205
¥1,014,283 ¥958,069 ¥56,213 ¥63,930 ¥7,716
March 31, 2016
Thousands of U.S. dollars

Stock
Debt securities
Others
Total

Carrying Acquisition
value
cost
Difference
Gain
Loss
$1,071,977 $690,348 $381,628 $415,513 $33,885
6,228,625 6,117,799 110,825 116,979
6,153
1,700,850 1,694,422
6,427
34,871
28,444$9,001,453 $8,502,571 $498,881 $567,364 $68,483
March 31, 2015
Millions of yen

Stock
Debt securities
Others
Total

Carrying Acquisition
value
cost
Difference
Gain
Loss
¥133,530 ¥74,255 ¥59,275 ¥59,623 ¥347
775,491 762,153
13,33813,453
114
277,190 268,336
8,854
9,364
510
¥1,186,213 ¥1,104,744 ¥81,469 ¥82,441 ¥972

Japanese government bonds, equities and others loaned under the
securities lending agreement in the amount of ¥75,494 million($669,991 thousand) and ¥85,766 million are included in above
securities as of March 31, 2016 and 2015, respectively.
Securities excluding trade account securities, whose fair value isavailable, are written down to the fair value if the fair value hassignificantly declined compared with the acquisition cost and suchdecline is not considered to be recoverable. The difference between
the acquisition cost and the fair value is recognized as a loss on
impairment. The related loss on impairment of stocks amounted to¥574 million ($5,098 thousand) and ¥44 million for the year
ended March 31, 2016 and 2015, respectively. The criteria for

19

determining if such decline is significant are as follows:
Securities whose fair value is 50% or less than the acquisition cost
are necessarily written down and securities whose fair value isbetween 50% and 70% of the acquisition cost are written downwhen the market price is considered to be non-recoverable within
one year, taking into consideration the trend of the market priceand operating performances of the issuing entities. The
components of unrealized gain on available-for-sale securities
recorded under net assets at March 31, 2016 and 2015 are as
follows:
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)

Unrealized gain on
available-for-sale securities ¥56,213 ¥81,469 $498,881
Deferred tax liabilities(16,082)(24,766)(142,729)¥40,131 ¥56,702 $356,152
Attributable to non-controlling interest
(695)
(959)
(6,168)
Unrealized gain on availablefor-sale securities, net of tax ¥39,436 ¥55,742 $349,983
Available-for-sale securities sold during the years ended March
31, 2016 and 2015 are summarized as follows:
2016
2015
2016
(Millions of yen)

Proceeds from sales
Gain on sales
Loss on sales(Thousands of
U.S. dollars)¥1,119,647 ¥825,781 $9,936,523
11,068
9,497
98,2294,900
1,242
43,487

9. Money Held in Trusts
Money held in trusts for investment purposes
2016
2015
(Millions of yen)

2016
(Thousands of
U.S. dollars)

Amount recorded in the
consolidated balance sheets ¥15,024 ¥15,025 $133,340
Unrealized gain (loss)
included in profit and loss
24
25
220
for the fiscal year
10. Revaluation of Land
Pursuant to the “Act on Revaluation of Land ” (the “Act”), land used
for the Bank’s business operations was revalued on March 31, 1999.
The excess of the revalued aggregate market value over the total bookvalue (carrying amount) before revaluation was included in net assets
as land revaluation surplus at the net amount of the related tax effectat March 31, 1999. The corresponding income taxes were included inliabilities at March 31, 1999 as deferred tax liability arising fromrevaluation of land. The revaluation of the land was determined basedon the official prices published by the Commissioner of the National
Tax Authority in accordance with Article 2, Paragraph 4 of the“Enforcement Ordinance Concerning Land Revaluation,” with certain
necessary adjustments.
The difference between the total fair value of land for business
operation purposes, which was revalued in accordance with Article
10 of the Act, and the total book value of the land after therevaluation was ¥11,244 million ($99,791 thousand) and ¥11,302
million at March 31, 2016 and 2015, respectively.
11. Cash Flows
A reconciliation between cash and due from banks in the consolidatedbalance sheets at March 31, 2016 and 2015 and cash and cash
equivalents in the consolidated statements of cash flows for the years
then ended is as follows:
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)

Cash and due from banks ¥467,351 ¥544,907 $4,147,598
Due from banks other than
(1,854)(677)(16,460)
the Bank of Japan
Cash and cash equivalents ¥465,496 ¥544,230 $4,131,137

12. ‌Accumulated Depreciation and Deferred Gains on
Tangible Fixed Assets
Accumulated depreciation totaled ¥31,736 million ($281,654
thousand) and ¥33,710 million at March 31, 2016 and 2015,
respectively.
Deferred gains on tangible fixed assets deducted for tax purposes at
March 31, 2016 and 2015 were ¥3,074 million ($27,282 thousand)and ¥3,074 million, respectively.

The Companies Act allows Japanese companies to purchase treasury
stock and dispose of such treasury stock upon resolution of the Boardof Directors. The aggregate purchased amount of treasury stockcannot exceed the amount available for future dividends plus theamount of common stock, additional paid-in capital or legal reservethat could be transferred to retained earnings or other capital surplus
other than additional paid-in capital upon approval of such transfer at
the annual general meeting of shareholders.

13. Assets Pledged
Assets pledged as collateral at March 31, 2016 and 2015 were as
follows:
2016
2015
2016

Dividends are approved by the stockholders at a meeting held
subsequent to the fiscal year to which the dividends are applicable.
Interim dividends may also be paid upon resolution of the Board of
Directors, subject to certain limitations imposed by the Companies Act.
The movements of outstanding shares and cash dividends during theyears ended March 31, 2016 and 2015 are as follows:(a) Number of outstanding shares and treasury stock
For the year ended March 31, 2016

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

Pledged assets:
Securities¥391,066 ¥470,707 $3,470,597
Other assets
743
743
6,594
Liabilities secured by theabove assets:
Deposits¥49,333 ¥51,517 $437,823
Guarantee deposit
337,572
374,027 2,995,846
received under securities
lending transactions
In addition, securities of ¥26,802 million ($237,863 thousand) and¥27,439 million at March 31, 2016 and 2015 were pledged ascollateral for settlement of exchange transactions. Included in otherassets were guarantee deposits of ¥45 million ($407 thousand) and¥170 million at March 31, 2016 and 2015, respectively.
14. Borrowed Money
The details of borrowed money at March 31, 2016 and 2015 were as
follows:
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)

Borrowed money¥6,865 ¥7,585 $60,932
Due from April 2016 throughNovember 2022 Averageinterest rate: 0.54% p.a.

Annual maturities of borrowed money are as follows:(Millions of yen) (Thousands of U.S. dollars)Year ending March 31
2017¥2,001$17,763
2018
1,721
15,2782019
1,441
12,7932020
1,186
10,5302021 and thereafter
514
4,566
$60,932
Total¥6,865
15. Shareholders’ Equity
Japanese banks are subject to the Banking Act and the Companies
Act. The Companies Act requires that all shares of common stock be
issued with no par value and at least 50% of the amount paid of newshares is required to be recorded as common stock and the remaining
net proceeds as additional paid-in capital, which is included in capitalsurplus. The Companies Act permits Japanese companies, upon
approval of the Board of Directors, to issue shares to existing
stockholders without consideration by way of a stock split. Suchissuance generally does not give rise to changes within thestockholders’ accounts.
The Banking Act provides that an amount at least 20% of theaggregate amount of cash dividends and certain other appropriationsof retained earnings associated with cash outlays applicable to eachperiod shall be appropriated as a legal reserve (a component ofretained earnings) until such reserve and additional paid-in capitalequals 100% of common stock. The amount of total additional paid-in
capital and legal reserve that exceeds 100% of common stock may beavailable for dividends by resolution of the stockholders after
transferring such excess in accordance with the Companies Act. In
addition, the Companies Act permits the transfer of a portion of
additional paid-in capital and legal reserve to the common stock byresolution of the Board of Directors.

share

Balance atIncrease during Decrease during Balance at end of
beginning of year
the yearthe year
year

Type of shares
Issued stock:
Common stock 314,601,974
Treasury stock:
Common stock 10,366,645—
5,015,492

14,700,000 299,901,974
14,849,032

533,105

For the year ended March 31, 2015
share

Balance atIncrease during Decrease during Balance at end of
beginning of year
the yearthe year
year

Type of shares
Issued stock:
Common stock 314,601,974
Treasury stock:
Common stock
518,694—
10,018,419— 314,601,974
170,468(b) Dividends paid to the shareholders during the year:
For the year ended March 31, 2016
Date of Resolution Type of
Total
Dividends Date ofresolutionbysharesdividends per share
recordJun. 26, General
Common ¥1,216¥4.0
Mar. 31,2015
meeting of stock
million($0.3)
2015
shareholders($10,799
thousand)Nov. 6, Board of
Common ¥1,217¥4.0
Sep. 30,
2015
Directors
stock
million($0.3)
2015($10,801
thousand)For the year ended March 31, 2015
Date of Resolution Type of
Total
Dividends
resolutionbysharesdividends per shareJun. 27, General
Common ¥1,099
¥3.5
2014
meeting of stock
millionshareholders
Nov. 5, Board of
Common ¥942
¥3.0
2014
Directors
stock
million

10,366,645

Effective
dateJun. 29,2015
Dec. 4,2015

Date ofEffective
recorddate
Mar. 31, Jun. 30,
2014
2014
Sep. 30, Dec. 5,
2014
2014

Dividends applicable to the year ended March 31, 2016, but notrecorded in the accompanying consolidated financial statements, since
the effective date is subsequent to the current fiscal year:
Date of Resolution Type of
Total
Dividends Date ofEffective
resolutionbysharesdividends per share
recorddateJun. 29, General
Common ¥1,197¥4.0
Mar. 31, Jun. 30,
2016meeting of stock
million($0.3)
2016
2016
shareholders($10,627
thousand)(Above cash dividends are distributed from retained earnings.)

20

16. Stock Options
On August 3, 2015, the Bank granted stock options to its directors
and executive officers.
1. The related cost of ¥74 million ($658 thousand) and ¥66 million
was charged to income for the years ended March 31, 2016 and2015, respectively.
2. The stock options outstanding as of March 31, 2016 are as
follows:
Stock
OptionPersons
grantedNumber ofoptions(commonshares)granted2009 Stock
Option9 directors
and
6 officers

Aug. 24,
183,8002009

2010 Stock
Option9 directors
and
6 officers

190,300

2011 Stock
Option9 directors
and
8 officers

2012 Stock
Option9 directors
and
7 officers

2013 Stock
OptionDate of
grant

Exercise
price

Exerciseperiod¥1

From Aug.
25, 2009 to
Aug.24,2034¥1

From Jul. 27,
2010 to Jul.
26, 2035

Aug. 1,
207,700
2011¥1

From Aug. 2,
2011 toAug. 1,
2036

200,800

Jul. 23,2012¥1

From Jul. 24,
2012 to Jul.
23, 2037

11 directors
and
6 officers

210,500

Jul. 29,2013¥1

From Jul. 30,
2013 to Jul.
29, 2038

2014 Stock
Option11 directors
and
6 officers

206,600

Jul. 22,2014¥1

From Jul. 23,
2014 to Jul.
22, 20392015 Stock
Option10
directors
and 7
officers

176,600

Aug. 3,2015¥1

From Aug.4,
2015 toAug. 3,2040

Jul. 26,
2010

Vesting conditions and eligible service period have not been
determined.
The stock option activity is as follows:2009 2010 2011 2012 2013 2014 2015
Stock Stock Stock Stock Stock Stock Stock
Option Option Option Option Option Option Option
Shares Shares Shares Shares Shares Shares Shares
Non-vested:
April 1,————
— 51,200—
2015-Outstanding
Granted—————— 176,600
Forfeited—————— 8,100
Vested————— 51,200 114,300
March 31,—————
— 54,200
2016-Outstanding
Vested:April 1,81,800 98,800 133,600 140,500 175,400 155,400—
2015-Outstanding
Vested————— 51,200 114,300
Exercised
19,100 22,500 22,600 24,700 24,700 27,500 5,900
Forfeited
—
—
—
—
—
—
—
March 31,62,700 76,300 111,000 115,800 150,700 179,100 108,400
2016-Outstanding

Price information of 2009, 2010, 2011, 2012, 2013, 2014 and2015 Stock Option is as follows:2009 2010 2011 2012 2013 2014 2015
Stock Stock Stock Stock Stock Stock Stock
Option Option Option Option Option Option Option(Yen)

Exercise price
Average share price atthe time of exercise
Fair appraisal price atthe date of grant

¥1

¥1

¥1

¥1

¥1

¥1

¥1

414

414

414

414

414

414

391

321

311

252

268

306

326

449

2009 2010 2011 2012 2013 2014 2015
Stock Stock Stock Stock Stock Stock Stock
Option Option Option Option Option Option Option(U.S. dollar)

Exercise price$ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
Average share price at
3.67 3.67 3.67 3.67 3.67 3.67 3.47
the time of exercise
Fair appraisal price at
2.84 2.76 2.23 2.37 2.71 2.89 3.98
the date of grant
3. Estimation method of fair appraisal value of stock options
Black-Scholes option pricing model is used to measure fair value.
The assumptions and estimation methods used to measure fair value of2015 Stock Option are as follows:
2015 Stock Option
Volatility of stock price (Note 1)
29.332%Estimated remaining outstanding period (Note 2)
2.4 years
Estimated dividend (Note 3)¥7 per share
Interest rate with risk free (Note 4)
0.005%
Notes:
1. Volatility of stock price is computed based on the actual stock
prices during the period corresponding to estimated remaining
outstanding period of 2.4 years.
2. Remaining outstanding period is estimated by assuming thedifference between the average retirement age of the retired
directors and executive officers who retired in the past and current
average age of the present directors and executive officers.
3. Actual dividend for the year ended March 31, 2015
4. Yield of Japanese government bonds corresponding to theestimated remaining outstanding period.
4. Estimation method of vested number of stock options
The Bank adopted the method to reflect only actual forfeited number,since it is difficult to estimate the number to be forfeited in future on areasonable basis.
17. Leases
As lessee:a. Finance leases
The Bank and consolidated subsidiaries have tangible fixed assets,
mainly consisting of vehicles, under finance lease arrangements which
do not transfer ownership of the leased assets to the lessee. The leased
assets are depreciated on a straight-line method over respective lease
periods with the salvage value determined in the agreements orotherwise nil.
b. Operating leases
The following table presents the schedule of future minimum lease
payments under non-cancellable operating leases at March 31, 2016
and 2015:
2016

2015

(Millions of yen)

Due within one year
Due after one year
Total

21

2016

(Thousands of
U.S. dollars)¥81 ¥83 $721
115
116
1,028
¥197 ¥200 $1,750

As lessor:
a. Finance leases
Investment in leased assets consists of the following:
2016

Year ended March 31, 2015
2016

2015

(Millions of yen)

Lease receivables
Residual value
Unearned interest
incomeTotal(Thousands of
U.S. dollars)¥19,969 ¥19,701 $177,227
2,458
2,422
21,816(2,103)(2,091)(18,670)¥20,324 ¥20,031 $180,373

Maturities of lease receivables and investment in leased assets at
March 31, 2016 are as follows:Year ending March 31
2017
2018
2019
2020
2021
2022 and thereafter
Total(Millions of yen)(Thousands of U.S. dollars)
Investment
Investment
Lease
in leased
Lease
in leasedreceivables
assetsreceivables
assets¥485 ¥6,736 $4,308 $59,785
432
5,083
3,838
45,113
297
3,626
2,643
32,183
124
2,376
1,103
21,09252
1,271
463
11,281
31
875
277
7,770
¥1,423 ¥19,969 $12,635 $177,227

b. Operating leases
The following table presents the schedule of future minimum lease
payments under non-cancellable operating leases at March 31, 2016:(Millions of yen)

Due within one year
Due after one year
Total

Location
Ishikawa Pref.

¥113
353
¥467

(Thousands of
U.S. dollars)$1,0093,139$4,149

18. Loss on Impairment
The Bank recognized loss on impairment of ¥401 million ($3,559
thousand) and ¥1,881 million on the following asset group for theyears ended March 31, 2016 and 2015, respectively: The loss on
impairment of the Bank is recognized by grouping the areas undercontrol of the area management (or branches if not under control of
the area management) for operating branches and by grouping assets
for idle assets. Headquarters, office centers, dormitories, welfare
facilities, etc. are treated as common use assets because they do not
generate independent cash flows. The consolidated subsidiaries aretreated as a group for one company in principle.
For the following operating branches and idle assets among above
tangible fixed assets, their carrying amounts are reduced to therespective recoverable amounts and the reduced amounts arerecorded under “Other expenses” in the consolidated statements ofincome.
Year ended March 31, 2016
(Millions of (Thousands ofLocation
Main use
Asset typeyen)
U.S. dollars)
Ishikawa Pref.
7 operatingLand¥242 $2,151
branches
4 operating
Buildings
72645
branches
5 idle assets Land
36
325
4 idle assets Buildings
46
416
OutsideIshikawa Pref. 1 idle asset Buildings
2
20
Total
¥401 $3,559

OutsideIshikawa Pref.
Total

Main use
3 operating
branches
3 operating
branches
9 idle assets
4 idle assets

Asset type(Millions of
yen)

Land

¥232

1 idle asset

Land

Buildings

100

Land
Buildings

1,338
184
24
¥1,881

In the assessment of loss on impairment, the recoverable amount iscomputed using the net selling value or the value in use. The net
selling value is determined mainly based on the real estate appraisal
value. In case of using the value in use, the discount rate is not taken
into account in the computation as the estimated use period is short.
19. Other Comprehensive Income
The components of other comprehensive income for the years ended
March 31, 2016 and 2015 were as follows:
2016

2016

2015

(Millions of yen)

Reclassification adjustments
Net unrealized gains onavailable-for-sale securities:
Gain incurred during the year ¥(19,424)
Reclassification adjustment(5,830)
Amount before tax effect(25,255)
Net unrealized gains (losses) on
hedging instruments:
Gain (loss) incurred during
308
the year
Reclassification adjustment
3
Amount before tax effect311
Land revaluation surplus
Gain (loss) incurred during—
the year
Reclassification adjustment—
Amount before tax effect—Remeasurements of defined
benefit plans
Gain (loss) incurred during(4,546)the year
Reclassification adjustment
749
Amount before tax effect(3,796)
Total amount before tax effect(28,739)
Tax effect9,779
Total other comprehensive income ¥(18,959)(Thousands of
U.S. dollars)¥37,786 $(172,390)(8,093)(51,739)
29,693(224,130)

(137)

2,741

(4)
(142)

27
2,768

—

—

—
—

—
—

(230)

(40,348)

878
6,653
648
(33,694)
30,199(255,056)(7,964)
86,793¥22,234 $(168,263)

22

2016

2015

(Millions of yen)Tax effect on othercomprehensive income:Net unrealized gains onavailable-for-sale securities:
Amount before tax effectTax effectAmount after tax effect
Net deferred gains (losses) on
hedging instruments:
Amount before tax effectTax effectAmount after tax effectLand revaluation surplus
Amount before tax effectTax effectAmount after tax effectRemeasurements of defined
benefit plans
Amount before tax effectTax effectAmount after tax effect¥(25,255)
8,683(16,571)

2016(Thousands of
U.S. dollars)¥29,693 $(224,130)(7,861)
77,067
21,832(147,062)

311
(104)
207

(142)
31
(110)

2,768
(924)
1,843

—
111
111

—
231
231

—
991
991

(3,796)
1,088(2,708)

648
(365)
282

(33,694)
9,658(24,036)

20. Income Taxes
The major components of deferred tax assets and liabilities at March
31, 2016 and 2015 are summarized as follows:
2016

2015

(Millions of yen)

Deferred tax assets:
Reserve for possible loan
lossesNet defined benefit liability
Depreciation of real estate
Unrealized loss on writedown of equity securities
Other
Subtotal
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Unrealized gain on availablefor-sale securities
Other
Total deferred tax liabilities
Net deferred tax assets(liabilities)¥13,259

2016(Thousands of
U.S. dollars)¥13,985 $117,673

5,230
719

4,360
900

46,420
6,385

1,879

1,960

16,682

3,677
24,767(9,643)
15,124

3,718
24,924(9,756)15,16832,638219,801(85,579)
134,221(16,082)(24,766)(142,729)(212)(16,295)(218)(24,985)(1,885)(144,614)¥(1,171)¥(9,816) $(10,393)

A reconciliation of the statutory tax rate applicable to the Bank and its
consolidated subsidiaries to the effective tax rate for the years ended
March 31, 2016 and 2015 is presented as follows:
Statutory tax rate
Reconciliation:
Nondeductible permanent differences,such as entertainment expenses
Nontaxable permanent differences,such as dividend income
Per capita residents’ taxes
Valuation allowance
Reduction of deferred tax assets due totax rates change
Other
Effective tax rate

23

2016
32.8%

2015
35.4%

0.5

0.5

(1.1)

(2.7)

0.2
2.2

0.2
5.2

3.4

7.6

1.5
39.5%

0.4
46.6%

Adjustments of deferred tax assets and liabilities due toa change in the corporate income tax rate:
The “Act for Partial Revision of the Income Tax Act, etc., (Act No. 15,
2016)” and the “Act for Partial Revision of the Local Tax Act, etc., (ActNo. 13, 2016),” has been enacted on March 29, 2016 in the Diet
session. As a result, the effective statutory tax rate used in computing
deferred tax assets and liabilities has been reduced from 32.06% to30.69% for the temporary differences expected to be reversed in theyears beginning on April 1, 2016 and 2017 and 30.45% for those
expected to be reversed in the years beginning on and after April 1,
2018. As a result, deferred tax liabilities decreased by ¥247 million($2,197 thousand), and net unrealized gains on available-for-salesecurities and income taxes–deferred increased by ¥830 million($7,371 thousand) and ¥579 million ($5,139 thousand), respectively.
Net deferred gains (losses) on hedging instruments decreased by ¥3
million ($33 thousand). Deferred tax liability arising from revaluationof land decreased by ¥111 million ($991 thousand) and land
revaluation surplus increased by the same amount.
21. Retirement Benefit Plans
The Bank has defined retirement benefit plans, i.e., welfare pension
fund plans, defined contribution pension plans and lump-sum payment
plans, covering substantially all employees who are entitled to lumpsum or annuity payments, the amounts of which are determined byreference to their basic rates of pay, length of service, and theconditions under which termination occurs. The consolidated
subsidiaries have lump-sum payment plans.
The Bank transferred a portion related to future services to defined
contribution pension plans in February 2013.
1. The changes in defined benefit obligation for the years ended
March 31, 2016 and 2015 are as follows:
2016

2015

¥31,057¥29,420$275,629

—

1,259

—

—
460
249
3,947
(1,772)¥33,943

30,679
457
241
1,277
(1,597)¥31,057

—
4,089
2,209
35,036(15,728)$301,237(Millions of yen)

Balance at beginning of year
Cumulative effect ofaccounting changes
Restated balance
Service cost
Interest cost
Actuarial gains or losses
Benefits paid
Balance at end of year

2016

(Thousands of
U.S. dollars)

2. The changes in plan assets for the years ended March 31, 2016
and 2015 are as follows:
2016

2015

¥17,577¥16,589$155,995

351

331

3,119

(598)

1,047

(5,311)

553

557

4,913

(999)
¥16,884(948)¥17,577(8,872)$149,845(Millions of yen)

Balance at beginning of year
Expected return on plan
assetsActuarial gains or losses
Contributions from theemployer
Benefits paid
Balance at end of year

2016

(Thousands of
U.S. dollars)3. Reconciliation between the net defined benefit liability recorded in
the consolidated balance sheet and the balances at end of year ofdefined benefit obligation and plan assets
2016

2015

2016

¥23,892¥21,305$212,038(16,884)
7,007(17,577)
3,728(149,845)
62,193

10,0509,752

89,198¥17,058¥13,480$151,391

2016

2015

¥17,058¥13,480$151,391¥17,058¥13,480$151,391(Millions of yen)

Funded defined benefit
obligation
Plan assets
Unfunded defined benefit
obligation
Net liability recorded in the
consolidated balance sheet(Thousands of
U.S. dollars)

2016(Millions of yen)

Net defined benefit liability
Net liability recorded in the
consolidated balance sheet(Thousands of
U.S. dollars)

4. The components of retirement benefit expenses for the years ended
March 31, 2016 and 2015 are as follows:
2016

2015

2016

¥460
249

¥457
241

$4,089
2,209

(351)

(331)

(3,119)

958

970

8,509

(209)

(91)

(1,855)¥1,107¥1,245$9,832(Millions of yen)

Service cost
Interest cost
Expected return on plan
assetsAmortization of actuarial
gains or losses
Amortization of priorservice cost
Retirement benefit expenses(Thousands of
U.S. dollars)

5. The components of remeasurements of defined benefit plans (before
deducting tax effect) on other comprehensive income as of March
31, 2016 and 2015 are as follows:
2016

2015

¥(209)(3,587)¥(3,796)¥(91)
739¥648(Millions of yen)

Prior service cost
Net actuarial gain or loss
Total

2016

(Thousands of
U.S. dollars)$(1,855)(31,839)$(33,694)

6. The components of remeasurements of defined benefit plans (before
deducting tax effect) on accumulated other comprehensive income
as of March 31, 2016 and 2015 are as follows:
2016

2015

¥1,221¥1,430$10,837(9,317)(5,729)(82,687)¥(8,096)¥(4,299)$(71,850)(Millions of yen)

Unrecognized prior service
cost
Unrecognized net actuarial
gain or loss
Total

2016

2016
57%
25%
12%
6%
100%

8. Assumptions used for the years ended March 31, 2016 and 2015,
were set forth as follows:
Discount rateLong-term expected rate of
return on plan assets
Expected salary increase rate

2016
0.0% to 0.6%

2015
0.0% to 1.9%

2.0%

2.0%

4.9%

4.9%

Note:
The amount of the required contribution to the defined contribution
plan of the Bank was ¥282 million ($2,504 thousand) and ¥286
million for the years ended March 31, 2016 and 2015.
22. Derivatives
The Bank enters into interest rate swaps to hedge interest rate risk
associated with deposits, loans and holding debt securities andcurrency swaps and foreign exchange forward contracts to hedge
foreign exchange risk associated with certain assets and liabilities
denominated in foreign currencies. In addition, to respond to thecustomers’ hedging needs related with their interest rate risk andforeign exchange risk, the Bank enters into derivative contracts
including interest rate swaps, currency swaps, foreign exchange
forward contracts and currency options. These transactions arecovered by the reversing trades to avoid market risk. The effectivenessof these hedging activities is assessed and verified on a regular basis.
Derivative contracts to which hedge accounting is notapplied:With respect to derivatives to which hedge accounting is not applied,contract amount or notional principal amount defined in the contract,fair value, revaluation gain or loss and calculation method of fairvalue by transaction type as of March 31, 2016 and 2015 are as
follows:
Note that contract amount does not represent the market risk exposureof the derivative transactions.
(1) Interest rate derivatives
March 31, 2016
Millions of yen

Contract amount
Valuation
Over one
Total
year Fair value gain (loss)
OTC transactions:Interest rate swaps ‌Receivable floating rate/
Payable fixed rate
¥110
Total

(Thousands of
U.S. dollars)

7. Plan assets(1) The components of plan assets are as follows:
General account
Stock
Debt securities
Other
Total

plan assets
The long-term expected rate of return on plan assets is determinedconsidering the long-term rates of return which are expectedcurrently and in the future from the various components of the plan
assets.

2015
51%
28%
16%
5%
100%

¥ —

¥(0) ¥(0)¥(0) ¥(0)March 31, 2016
Thousands of U.S. dollars

Contract amount
Valuation
Over one
Total
year Fair value gain (loss)
OTC transactions:Interest rate swaps ‌Receivable floating rate/
Payable fixed rate
$979
Total

$ —

$(8) $(8)$(8) $(8)Note:Total plan assets include 4% and 3% of retirement benefit trust
established on corporate pension plans as of March 31, 2016 and2015, respectively.
(2) Method of determining the long-term expected rate of return on

24March 31, 2015(1) Interest rate related derivatives
March 31, 2016

Millions of yen

Contract amountOver one
Valuation
Total
year Fair value gain (loss)
OTC transactions:Interest rate swaps ‌Receivable floating rate/
Payable fixed rate
¥221
Total

¥110

¥(3) ¥(3)¥(3) ¥(3)Notes:
1. Above transactions are stated at fair value and unrealized gain/(loss) is recorded in the consolidated statements of income.
2. Fair value is determined using the discounted present value.

Millions of yen

Hedge accounting
methodContract
Major
Contract amount due
hedged item amount after one year Fair value

Transaction type
Normal method Interest rate swaps:
Receivable fixed rate/
— ¥
— ¥
—
Payable floating rate¥
Loans andReceivable floating rate/
deposits
Payable fixed rate
7,943
7,281
(205)
Other
15,000—17
Total—— ¥(187)(2) Currency derivatives

March 31, 2016

March 31, 2016
Millions of yen

Contract amountOver one
Valuation
Total
year
Fair value gain (loss)
OTC transactions:
Currency swaps
Forward contracts on
foreign exchange
Currency options

Sold
BoughtSold
BoughtTotal¥230 ¥230 ¥(38) ¥(38)26,431
—
247
247
4,181
—
(2)
(2)
20,10019,375(699)
142
20,10019,375737(11)¥244 ¥337

Thousands of U.S. dollars

Hedge accounting
methodContract
Major
Contract amount due
hedged item amount after one year Fair value

Transaction type
Normal method Interest rate swaps:
Receivable fixed rate/
— $
— $
—
Payable floating rate$
Loans andReceivable floating rate/
deposits
Payable fixed rate
70,496 64,619 (1,825)
Other133,120
—
157
Total
—
— $(1,667)
March 31, 2015

March 31, 2016
Thousands of U.S. dollars

Contract amountOver one
Valuation
Total
year
Fair value gain (loss)
OTC transactions:
Currency swaps
Forward contracts on
foreign exchange
Currency options

Sold
BoughtSold
BoughtTotal$2,049 $2,049 $(337) $(337)234,569
—
2,192
2,192
37,107—(21)(21)
178,382 171,947(6,211)
1,262
178,382 171,947
6,548
(98)
$2,171 $2,998
March 31, 2015
Millions of yen

Contract amountOver one
Valuation
Total
year
Fair value gain (loss)
OTC transactions:
Currency swaps
Forward contracts on
foreign exchange
Currency options
Total

Sold
BoughtSold
Bought¥461 ¥461 ¥(111) ¥(111)52,409
—
23
23
2,225
—
(23)
(23)
23,73723,367(1,124)(76)
23,73723,367
1,236
285¥(0) ¥97

Millions of yen

Hedge accounting
methodTransaction type
Normal method Interest rate swaps:
Receivable fixed rate/
— ¥
— ¥
—
Payable floating rate
Loans and ¥Receivable floating rate/ deposits
8,757
7,943
(333)
Payable fixed rate
Total—
— ¥(333)
Notes:
1. Gain/loss on above contacts is deferred until maturity of thehedged items as the normal method in accordance with JICPA
Industry Audit Committee Report No.24.
2. Fair value is determined using the discounted present value.
(2) Currency related derivatives
March 31, 2016
Millions of yen

Hedge accounting
methodTransaction type
Normal method Currency swaps:

Notes:
1. Above transactions are stated at fair value and unrealized gain/(loss) is recorded in the consolidated statements of income.
2. Fair value is determined using the discounted present value.
Derivative contracts to which hedge accounting isapplied:With respect to derivatives to which hedge accounting is applied,contract amount or notional principal amount defined in the contract,fair value and calculation method of fair value by transaction typeand by hedge accounting method as of March 31, 2016 and 2015
are as follows:
Note that contract amount does not represent the market risk exposureof the derivative transactions.

25

Contract
Major
Contract amount due
hedged item amount after one year Fair value

Total

Contract
Major
Contract amount due
hedged item amount after one year Fair value
Foreigncurrency¥60,095 ¥6,385 ¥4,913
denominatedsecurities
—
—
4,913
March 31, 2016
Thousands of U.S. dollars

Hedge accounting
methodTransaction type
Normal method Currency swaps:

Total

Contract
Major
Contract amount due
hedged item amount after one year Fair value
Foreigncurrency$533,324 $56,664 $43,606
denominatedsecurities—— $43,606

March 31, 2015
Millions of yen

Hedge accounting
methodTransaction type
Normal method Currency swaps:

Total

Contract
Major
Contract amount due
hedged item amount after one year Fair value
Foreigncurrency¥68,692 ¥44,597 ¥852
denominatedsecurities—— ¥852

Notes:
1. Gain/loss on above contacts is deferred until maturity of thehedged items as the normal method in accordance with JICPA
Industry Audit Committee Report No.25.
2. Fair value is determined using the discounted present value.
23. Per Share Information
Net assets per share at March 31, 2016 and 2015 and profit per
share for the years then ended is as follows:
2016
Net assets per share
Profit per share-basic
Profit per share-diluted(Yen)¥752.40
31.45
31.36

2015

¥782.94
25.54
25.48

2016

(U.S. dollars)

$

6.67
0.27
0.27

Basic information in computing above per share data is as follows:
2016

2015

(Millions of yen)

(Net assets per share)
Net assets per balance sheets
Amounts to be attributed tosubscription rights to shares
Amounts to be attributed to
non-controlling interests
Net assets attributed to common
stock shareholders
Outstanding number of common
stocks at end of year
(unit: thousand shares)(Profit per share)
Profit attributable to owners ofparentProfit attributable to common
stock shareholders
Average outstanding number ofshares during the year
(unit: thousands shares)(Profit per share-diluted)
Increase in common stock(unit: thousand shares)
Of which, subscription rights toshares (unit: thousand shares)¥235,020

2016(Thousands of
U.S. dollars)¥247,730 $2,085,731

262

232

2,326

9,512

9,297

84,423

225,245

238,200

1,998,981

299,368

304,235¥9,569¥7,989 $84,922

9,569

7,989

304,237

312,698

84,922

24. Segment Information
1. Reportable segments
The reportable segments of the Bank are subject to the periodical
review by the Board of Directors which is the chief operating decision
maker to determine the allocation of management resources andassess performances.
The Group consists of the Bank and its 5 consolidated subsidiaries.
The Group designs comprehensive strategies concerning financial
services including banking and leasing businesses and is engaged inoperating activities. Accordingly, the Bank is composed of operating
segments by financial services based on the group companies and“Banking” and “Leasing” segments are identified as the reportablesegments.
“Banking” segment provides customers with banking operations,credit card business, credit guarantee business, business revitalization
fund management business and servicer business etc.
“Leasing” segment provides customers with leasing business.
2. Calculation method of gross operating income and net operating
incomeAccounting policies adopted by the reportable segments are the sameas those described in Note 3 “Summary of Significant Accounting
Policies,” except for the scope of consolidation. Segment profit of thereportable segments is measured based on income from ordinary
operations and intersegment income is based on the market
transaction price in the same manner as income from externalcustomers.
3. Reportable segment information concerning income, profit or loss,
assets, liabilities and other items
Year ended March 31, 2016
Millions of yen

Reportable segments
Banking Leasing
Total Adjustments Consolidated
Total income:External customers¥65,486 ¥9,199 ¥74,686 ¥— ¥74,686
Intersegments
146
25
171
(171)
—
Total
65,6339,224
74,858(171)
74,686
Segment profit¥17,120 ¥478 ¥17,599 ¥2 ¥17,601
Segment assets¥3,889,791 ¥34,107 ¥3,923,899 ¥(19,878) ¥3,904,020
Other information
Depreciation¥3,598 ¥214 ¥3,812 ¥— ¥3,812
Interest income
42,791
206
42,998(143)
42,855Interest expenses
1,795
177
1,973
(132)
1,841
Increase in tangible and
2,630
2
2,633
—
2,633
intangible fixed assets
Year ended March 31, 2016
Thousands of U. S. dollars

854

781

854

781

(Changes in accounting policies)
As noted in Note 4 “Changes in Accounting Policies,” effective fromthe year ended March 31, 2016, the Bank applied the AccountingStandard for Business Combinations and complied with transitional
treatments as prescribed in Article 58-2 (4) of Statement No. 21,
Article 44-5 (4) of Statement No. 22 and Article 57-4 (4) of Statement
No. 7. As a result, net assets per share increased by ¥0.25 ($0.00)
for the year ended March 31, 2016.

Reportable segments
Banking Leasing
Total Adjustments Consolidated
Total income:External customers$581,176 $81,644 $662,820 $
— $662,820Intersegments
1,301
223
1,525
(1,525)—
Total
582,478
81,867664,346(1,525)662,820
Segment profit$151,943 $4,244 $156,187 $20 $156,208
Segment assets$34,520,690 $302,697 $34,823,387 $(176,419) $34,646,968
Other information
Depreciation$31,938 $1,899 $33,837 $
— $33,837
Interest income
379,763
1,835
381,598(1,273)
380,325
Interest expenses
15,937
1,579
17,516(1,171)
16,345
Increase in tangible and23,34523
23,369—23,369intangible fixed assets
Notes:
1. “Total income” corresponds to “Net Sales” of non-banking
industries.
2. Adjustments refer to the elimination of intersegment transactions

26

Year ended March 31, 2015
Millions of yen

Reportable segments
Banking Leasing
Total Adjustments Consolidated
Total income:External customers¥64,719 ¥9,390 ¥74,109 ¥— ¥74,109
Intersegments
162
30
193
(193)
—
Total
64,881
9,420
74,302(193)
74,109Segment profit¥18,176 ¥777 ¥18,953 ¥(12) ¥18,941
Segment assets¥4,165,670 ¥34,768 ¥4,200,438 ¥(20,647) ¥4,179,790
Other information
Depreciation¥2,449 ¥216 ¥2,666 ¥— ¥2,666
Interest income
42,502
212
42,715(159)
42,555Interest expenses
1,485
194
1,679
(144)
1,535
Increase in tangible and
7,468
4
7,472
—
7,472
intangible fixed assets
Other information:
Information by service line:

25. Related Party Transactions
The related party transactions for the years ended March 31, 2016
and 2015 and related account balances outstanding at March 31,
2016 and 2015 were as follows:
Transactions between the Bank and related parties
Year ended March 31, 2016
Name

Directors and its relatives
Hideo
Nakashima

Loan

Securities
investment

Lease

Other

Total

¥29,799 ¥23,604 ¥9,199 ¥12,082 ¥74,686
Year ended March 31, 2016
Thousands of U.S. dollars

Loan

Securities
investment

Lease

Other

Total

$264,462 $209,485 $81,644 $107,228 $662,820

Nakashima
Co. Ltd.

Name

Millions of yen

Loan

Securities
investment

Lease

Other

Total

¥30,476 ¥21,347 ¥9,390 ¥12,895 ¥74,109

Information about loss on impairment of long-lived assets byreportable segment:
Year ended March 31, 2016
Millions of yen

Loss on impairment

Reportable segments
Banking
Leasing
¥401
¥
—

Total
¥401

Year ended March 31, 2016
Thousands of U.S. dollars

Loss on impairment

Reportable segments
Banking
Leasing$3,559$
—Total$3,559

Year ended March 31, 2015
Millions of yen

Loss on impairment

27¥198/$1,759—

Loan¥471/$4,184

Business Ownership Transaction Transaction Accountsummary /(%)
amountTitle(Millions of yen)

Balance at
end of year
(Millions of yen)

0.32¥(11)/$(98)Loan
Guarantee ¥474/$4,208

Wholesale ofpaper products

0.38

Loan

¥13/$121

Reportable segments
Banking
Leasing¥1,881¥—Directors and its relatives
Hideo
Nakashima

Corporate
auditor

0.30

Loan
Guarantee

¥(10)
¥855

Loan
—

¥209
—

KazuyoNakashima

Wife of Hideo
Nakashima—

Guarantee

¥129

—

—

KumikoSakai

Wife of
Kenichi Sakai—

Guarantee

¥64

—

—

DaisukeSakai

Son ofKenichi Sakai—

Guarantee

¥64

—

—

Companies whose majority is owned by directors and /or its relatives
Nakashima
Co. Ltd.

Year ended March 31, 2015

Income from externalcustomers

Loan—

Director

Companies whose majority is owned by directors and /or its relatives

Millions of yen

Income from externalcustomers

Balance at
end of year
(Millions of yen)
/ (Thousands of
U.S. dollars)Year ended March 31, 2015
Year ended March 31, 2016

Income from externalcustomers

Business Ownership Transaction Transaction Accountsummary /(%)
amountTitle(Millions of yen)
/ (Thousands of
U.S. dollars)

Total¥1,881

Wholesale ofpaper products

0.36

Loan

¥(18)

Loan

¥457

Pato
House renting
Planning, Inc.

—

Loan

¥(7)

Loan

¥64

Transaction terms and policies:
Related party transactions are executed under the same transaction
terms as third parties.
Transactions between the subsidiary of the Bank and related parties:
There was no applicable transaction to be reported for the year ended
March 31, 2016 and 2015.

REPORT OF INDEPENDENT AUDITORS

28

THE HOKKOKU BANK, LTD.
2-12-6 Hirooka, Kanazawa, Ishikawa 920-8670 Japan
Tel: +81(76) 263-1111
http://www.hokkokubank.co.jp
Printed in Japan