2013
Financial Statements

THE TOWA BANK, LTD.

A Message from the President
support our customers when and where needed byconducting interviews with each customer to collectthe information required to accurately ascertain
their situation. To enhance customer satisfaction, we
provided support for customers’ mainline business
operations, and initiated “Towa Customer Support
Activities” as part of our pursuit of a communitybased financial service model. This enabled us toprovide a smooth supply of funds to small andmedium-sized enterprises, and we also provided
consulting services on such matters as management
improvement. The entire management and staff ofthe Bank worked together to support the development of the local economy and to firmly cement our
reputation among the community as a bank that can
We take great pride in our customer satisfaction andbe relied on.

appreciate your continued patronage with The Towa

As a result of our efforts, for its 108th business

Bank, Ltd. To assist you in further understanding

term, The Towa Bank Group recorded a steadyour current situation, we have completed the Bank’s

increase in deposits as well as loans and bills

financial statements for fiscal 2012, ended March 31,

discounted, posting record high figures in both

2013, which are presented hereunder.

ordinary income and net income. The Bank’s business

Following the start of the new government toward

performance for the term under review surpassed thethe end of 2012, the markets became increasingly

targets under our Phoenix Plan III business improve-

enthusiastic about the government’s moves to jolt

ment plan in almost all respects, and we continue tothe economy out of the deflationary stagnation it

record firm results.

has endured for so many years. The appreciation ofTurning to the outlook for the Japanese economy,

the yen on foreign exchange markets was alleviatedwhile there are hopes for a recovery on the back offairly considerably over a very short period, and stock

the government’s economic measures and the weakerprices began to move upward. Then, in March, theyen exchange rate, the general outlook remains

Bank of Japan announced a bold policy departure

uncertain, with the continuing possibility of a down-with the adoption of a plan for “quantitative andturn in overseas economies.

qualitative monetary easing.” This gave a boost to

Amid these circumstances, in keeping with its

positive trends that had been set in motion in bothrole as a regional financial institution, the Groupthe real economy and the financial markets, and thewill continue putting its full efforts into supporting

economy showed signs of a burgeoning recovery.

customers main line business operations through theAmid this business environment, The Towa Banksmooth provision of the necessary financing, so as

Group have been pursuing the Phoenix Plan III, ato contribute to the economic development of thebusiness improvement plan, since April 2012. Under

local communities in which it operates. At the same

this plan, we have exerted our utmost efforts totime, we have assigned top management priority to2

achieving more efficient management as a means ofwill be split into the Relationship Banking Promotion

strengthening the Group’s earning power.

Department, which will be responsible for back-office

In addition, since before the enforcement ofpromote business, and the Relationship Banking“Act concerning Temporary Measures to Facilitate

Strategy Department, which will be in charge ofFinancing for Small and Medium-Sized Enterprises

drawing up strategies and other aspects of planning.

(SMEs), etc.”, our group has been offering consulting

We believe this will create a structure enabling usservices and taking other steps to help its SMEs

to further strengthen the “Towa Customer Support

improve the quality of their management. Despite

Activities.”

the fact that the Act ceased to be in effect at the end

Regarding the Bank’s efforts to support economicof March this year, the Group’s stance on this matter

activities in growth fields, we will proactively provide

has remained unchanged.

financial and management consulting support forbusinesses newly started up in the fields of medical

In fiscal 2013 we will continue to engage in “Towatreatment, nursing care, and social welfare in general.

Customer Support Activities” and to support our

We will also provide support for corporate custom-customers’ mainline business operations.

ers’ entry into overseas markets, as well as support

The principal results of “Towa Customer Support
Activities” in fiscal 2012 included the holding offor intellectual property management, and advice

1,411 business matching sessions, of which 181

on and financial support for business succession andconcluded in business transactions. In a joint devel-

inheritance. We will take an active stance on provid-

opment research project with Gunma University, we

ing support through collaboration with external

made proposals to 30 companies, and joint research

specialists.
With the aim of being a bank that local communi-

has commenced with three of these enterprises. In
collaboration with the Kanto Bureau of Economy,

ties can depend on, we will work to build strong

Trade and Industry we helped 28 companies success-relationships with our corporate customers so as tofully apply for subsidies, and applications are pending

raise the overall customer satisfaction level. In addi-

for a further 11 firms. Regarding application for thetion, we have positioned the strengthening of legal

Monozukuri Subsidy for Small and Medium Enterprisecompliance functions across The Towa Bank Group

Development Project, we helped 86 companies suc-as a top management priority, and will take vigorous

cessfully apply, with a further 31 pending. Further,measures to further reinforce the Bank’s earningin collaboration with the Kanto Bureau of Economy,

power and realize more efficient management. We

Trade and Industry and the Northern Kanto

would like to ask our shareholders for their con-

Association for the Study of Cooperation among

tinued support and encouragement in these future

Industry, Government, and Academia, we introduced

endeavors.

73 companies’ specialist technical know-how tomajor corporations, and brought together buyers

August 2013

from leading food processing companies with representatives of 56 local companies, leading to successfultransactions in five cases.
We also plan to reorganize the divisional structure
at our head office to render the above measures even

Kunimitsu Yoshinaga

more effective. The Business Promotion Department

President and CEO

3

Consolidated Balance Sheets
The Towa Bank, Ltd. and Consolidated Subsidiaries

Millions of yen (Note 1)
2013

March 31,

Assets:Cash and due from banks.................................................................................... ¥ 35,725
Call loans and bills purchased.............................................................................
29,188Commercial paper and other debt purchased.....................................................
209
Trading account securities...................................................................................
13
Securities..............................................................................................................
505,329
Loans and bills discounted.................................................................................. 1,275,715
Foreign exchange.................................................................................................
874
Other assets..........................................................................................................
13,117
Tangible fixed assets............................................................................................
25,200
Buildings..........................................................................................................
5,051
Land.................................................................................................................
18,061
Lease assets (tangible)......................................................................................
323
Other tangible assets.......................................................................................
1,764
Intangible fixed assets..........................................................................................
896
Software...........................................................................................................
715
Lease assets (intangible)..................................................................................
7
Other intangible assets....................................................................................
172
Deferred tax assets...............................................................................................
1,809
Customers’ liabilities for acceptances and guarantees........................................
4,014
Reserve for possible loan losses............................................................................
(12,229)
Total assets.................................................................................................. ¥1,879,865

Thousands of
U.S. dollars (Note 2)
2013

2012

¥   32,392
36,068228
4475,729
1,245,485
959
13,26025,3805,250
18,061
257
1,811
905
693
23
188
4,695
4,555
(14,635)¥1,825,030$

379,861
310,3462,231
146
5,372,985
13,564,226
9,294
139,468
267,952
53,710
192,040
3,439
18,762
9,527
7,610
82
1,834
19,241
42,682(130,029)$19,987,936

Notes: 1. Y
 en figures have been rounded omitting numbers below the million mark, in accordance with the Financial Instruments and Exchange Act ofJapan and generally accepted accounting principles and practices in Japan.
2. T he United States dollar amounts represent translations of Japanese yen, for convenience only, at the exchange rate of ¥94.05 to US$1.00, the rate
prevailing on March 31, 2013.

4

Millions of yen (Note 1)
2013

March 31,

Liabilities:
Deposits................................................................................................................ ¥1,726,342
Borrowed money..................................................................................................
14,984Foreign exchange.................................................................................................
37
Other liabilities....................................................................................................
9,412
Accrued employee bonuses..................................................................................
393
Reserve for employee retirement benefits...........................................................
12,135Reserve for director retirement benefits..............................................................
23
Reserve for reimbursement of dormant deposits................................................
322
Reserve for contingent loss..................................................................................
559
Deferred tax liabilities..........................................................................................
13
Deferred tax liability for land revaluation...........................................................
3,019
Acceptances and guarantees................................................................................
4,014
Total liabilities............................................................................................. 1,771,257
Net assets:
Shareholders’ equity:
Capital stock........................................................................................................
38,653
Capital surplus.....................................................................................................
31,184Retained earnings.................................................................................................
22,651
Treasury stock, at cost..........................................................................................
(423)
Total shareholders’ equity...........................................................................
92,066
Accumulated other comprehensive income:Net unrealized gains on available-for-sale securities...........................................
12,667
Land revaluation account....................................................................................
2,621
Total accumulated other comprehensive income......................................
15,288Stock acquisition rights.......................................................................................
98
Minority interests................................................................................................
1,154
Total net assets............................................................................................
108,607
Total liabilities and net assets..................................................................... ¥1,879,865

5

Thousands of
U.S. dollars (Note 2)

2012

2013

¥1,667,018
32,79462
8,487
376
12,601
34
282
565
16
3,019
4,555
1,729,813$18,355,587
159,319400
100,076
4,181
129,030
247
3,427
5,947
141
32,10842,682
18,833,152

38,65331,190
16,238(180)
85,902410,991
331,578
240,847(4,507)
978,910

6,518
2,621
9,139
66
108
95,216¥1,825,030

134,687
27,868
162,556
1,043
12,274
1,154,783$19,987,936

Consolidated Statements of Income
The Towa Bank, Ltd. and Consolidated Subsidiaries

Millions of yen (Note 1)

Thousands of
U.S. dollars (Note 2)

2013

2012

2013

Income:Interest on loans and discounts...........................................................................
Interest and dividends on securities....................................................................
Other interest income..........................................................................................
Fees and commissions..........................................................................................
Other operating income......................................................................................
Other income.......................................................................................................
Total income...............................................................................................

¥23,153
7,884
120
5,567
401
5,577
42,704¥23,667
7,721
196
5,052
450
5,048
42,137$246,179
83,836
1,284
59,192
4,273
59,298454,065

Expenses:
Interest on deposits..............................................................................................
Interest on borrowings and rediscounts..............................................................
Other interest expenses.......................................................................................
Fees and commissions..........................................................................................
Other operating expenses....................................................................................
General and administrative expenses..................................................................
Other expenses.....................................................................................................
Total expenses.............................................................................................
Income before income taxes and minority interests...........................................

817
116
7
3,606
682
21,644
5,793
32,667
10,037

1,081
214
9
3,169
1,797
22,3436,464
35,080
7,056

8,687
1,234
84
38,344
7,255
230,136
61,595347,338
106,727

Income taxes:
Current............................................................................................................
Deferred...........................................................................................................
Total income taxes......................................................................................
Income before minority interests........................................................................
Minority interests in income...............................................................................
Net income..................................................................................................

1,509
697
2,207
7,830
66
¥ 7,763343(1,017)
(674)
7,731
20
¥ 7,710

16,053
7,417
23,471
83,256705$ 82,550

Net income per share (in yen and dollar):
Basic.................................................................................................................
Diluted.............................................................................................................

¥23.269.74¥22.99
10.41

$0.24
0.10

For the years ended March 31,

6Consolidated Statements of Comprehensive Income
The Towa Bank, Ltd. and Consolidated Subsidiaries

Millions of yen (Note 1)
For the years ended March 31,

Income before minority interests........................................................................
Other comprehensive income:Net unrealized gains on available-for-sale securities.......................................
Land revaluation account................................................................................
Total other comprehensive income................................................................
Total comprehensive income......................................................................
Total comprehensive income attributable to:Shareholders of the parent..............................................................................
Minority interests............................................................................................

7

Thousands of
U.S. dollars (Note 2)

2013

2012

2013

¥ 7,830¥ 7,731$ 83,256

6,146
—
6,146
¥13,976

3,326
446
3,773
¥11,504

65,349—65,349$148,605¥13,91363¥11,486
17$147,933
671

Consolidated Statements of Changes in Net Assets
The Towa Bank, Ltd. and Consolidated Subsidiaries

Millions of yen (Note 1)
For the years ended March 31,

Shareholders’ equity:
Capital stock
Balance at beginning of year...........................................................................
Changes during year:
Total changes during year...........................................................................
Balance at end of year.....................................................................................
Capital surplus
Balance at beginning of year...........................................................................
Changes during year:
Exercise of stock options.............................................................................
Total changes during year...........................................................................
Balance at end of year.....................................................................................
Retained earnings
Balance at beginning of year...........................................................................
Changes during year:
Cash dividends............................................................................................
Net income..................................................................................................
Increase in retained earnings due to exclusion of subsidiary fromconsolidation............................................................................................
Reversal of land revaluation account..........................................................
Total changes during year...........................................................................
Balance at end of year.....................................................................................
Treasury stock
Balance at beginning of year...........................................................................
Changes during year:
Purchase of treasury stock...........................................................................
Exercise of stock options.............................................................................
Total changes during year...........................................................................
Balance at end of year.....................................................................................
Total shareholders’ equity
Balance at beginning of year...........................................................................
Changes during year:
Cash dividends............................................................................................
Net income..................................................................................................
Purchase of treasury stock...........................................................................
Increase in retained earnings due to exclusion of subsidiary fromconsolidation............................................................................................
Reversal of land revaluation account..........................................................
Exercise of stock options.............................................................................
Total changes during year...........................................................................
Balance at end of year.....................................................................................

8

Thousands of
U.S. dollars (Note 2)

2013

2012

2013

¥38,653¥38,653$410,991—
38,653—¥38,653—
410,991

31,190¥31,205

331,639(5)(5)
31,184(14)(14)¥31,190(60)(60)
331,578

16,238¥ 9,432

172,656(1,350)7,763(1,088)7,710(14,358)
82,550——6,413
22,651

0
184
6,805¥16,238——
68,191
240,847(180)¥  (109)(1,919)

(257)
13
(243)
(423)

(91)
21
(70)
¥  (180)(2,733)145(2,587)(4,507)85,902¥79,181

913,367(1,350)
7,763
(257)

(1,088)7,710(91)(14,358)
82,550(2,733)

—
—
7
6,164
¥92,066

0
184
6
6,720
¥85,902——84
65,543$978,910

Millions of yen (Note 1)
For the years ended March 31,

Accumulated other comprehensive income:Net unrealized gains (losses) on available-for-sale securities
Balance at beginning of year...........................................................................
Changes during year:
Net changes in items other than shareholders’ equity...............................
Total changes during year...........................................................................
Balance at end of year.....................................................................................
Land revaluation accountBalance at beginning of year...........................................................................
Changes during year:
Net changes in items other than shareholders’ equity...............................
Total changes during year...........................................................................
Balance at end of year.....................................................................................
Total accumulated other comprehensive income
Balance at beginning of year...........................................................................
Changes during year:
Net changes in items other than shareholders’ equity...............................
Total changes during year...........................................................................
Balance at end of year.....................................................................................
Stock acquisition rights
Balance at beginning of year...........................................................................
Changes during year:
Net changes in items other than shareholders’ equity...............................
Total changes during year...........................................................................
Balance at end of year.....................................................................................
Minority interests
Balance at beginning of year...........................................................................
Changes during year:
Net changes in items other than shareholders’ equity...............................
Total changes during year...........................................................................
Balance at end of year.....................................................................................
Total net assets
Balance at beginning of year...........................................................................
Changes during year:
Cash dividends............................................................................................
Net income..................................................................................................
Purchase of treasury stock...........................................................................
Increase in retained earnings due to exclusion of subsidiary fromconsolidation............................................................................................
Reversal of land revaluation account..........................................................
Exercise of stock options.............................................................................
Net changes in items other than shareholders’ equity...............................
Total changes during year...........................................................................
Balance at end of year.....................................................................................

9

Thousands of
U.S. dollars (Note 2)

2013

2012

2013

¥  6,518¥ 3,188

$

6,149
6,149
¥ 12,667

3,330
3,330
¥ 6,518

65,38365,383$ 134,687¥  2,621¥ 2,359$

27,868——¥  2,621

261
261¥ 2,621$——27,868

9,139¥ 5,547$

97,172

6,149
6,149¥ 15,288

3,592
3,592
¥ 9,139

65,38365,383$ 162,556¥    66¥    28$     702

32
32¥    983737¥    66340
340$   1,043¥    108¥    91$   1,158

1,045
1,045
¥  1,154

17
17¥   108$

11,115
11,115
12,274¥ 95,216¥84,848$1,012,401(1,350)
7,763
(257)

(1,088)7,710(91)(14,358)
82,550(2,733)

—
—
7
7,226
13,391¥108,607

0
184
6
3,647
10,367¥95,216——84
76,839142,382$1,154,783

69,304

Consolidated Statements of Cash Flows
The Towa Bank, Ltd. and Consolidated Subsidiaries

Millions of yen (Note 1)

Thousands of
U.S. dollars (Note 2)

2013

2012

2013

¥ 10,037
1,200—(2,406)
16
(465)
(11)
40
(6)
(31,158)
941
464
(492)
58
(9)
(30,229)
59,324(13,810)(1,132)
6,899
85
(24)
31,096(1,311)656
29,762(589)
29,173¥ 7,056
1,289
299(2,083)
115
272
(18)
20
30
(31,585)
1,305
1,682
(57)
20
23
(19,791)
41,886(1,555)(146)(27,447)
1,860
26
31,332(1,874)
1,135
3,797
14
3,811

$ 106,727
12,769—(25,587)
176(4,951)
(121)
428
(67)
(331,300)
10,006
4,939(5,234)621(100)(321,422)
630,778(146,840)(12,039)
73,355906(258)
330,639(13,946)
6,977
316,455(6,262)
310,192(104,797)
28,13855,227
(776)
(276)
106
(2)

(99,370)
36,75859,171
(830)
(384)
6
(6)

(1,114,272)
299,187
587,217(8,258)(2,944)
1,133
(29)

—
(22,380)

25(4,630)—(237,967)

Cash flows from financing activities:
Decrease in subordinated loans ..........................................................................
Proceeds from issuance of shares to minority interests......................................
Dividends paid.....................................................................................................
Cash dividends paid to minority interests..........................................................
Purchases of treasury stock..................................................................................
Proceeds from exercise of stock options..............................................................
Net cash used in financing activities..........................................................

(4,000)995(1,350)
(16)
(257)
0
(4,628)——(1,088)—(91)
0(1,180)(42,530)
10,587(14,358)(179)(2,733)
1(49,213)

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...........................................................

36
2,201
30,757¥ 32,958

28(1,970)32,728¥30,757

393
23,404
327,033$ 350,437

For the years ended March 31,

Cash flows from operating activities:
Income before income taxes and minority interests...........................................
Depreciation and amortization...........................................................................
Loss on impairment of fixed assets......................................................................
Decrease in reserve for possible loan losses.........................................................
Increase in reserve for employee bonuses...........................................................
(Decrease) increase in reserve for employee retirement benefits........................
Decrease in reserve for director retirement benefits............................................
Increase in reserve for reimbursement of dormant deposits...............................
(Decrease) increase in reserve for contingent loss...............................................
Interest income....................................................................................................
Interest expenses..................................................................................................
Loss on securities - net.........................................................................................
Foreign exchange gain - net................................................................................
Loss on disposal of tangible fixed assets..............................................................
Net decrease (increase) in trading account securities..........................................
Net increase in loans............................................................................................
Net increase in deposits.......................................................................................
Net decrease in borrowings excluding subordinated debt..................................
Net increase in due from banks other than the Bank of Japan...........................
Net increase (decrease) in call loans and others..................................................
Net increase in foreign exchanges - assets...........................................................
Net decrease (increase) in foreign exchange - liabilities.....................................
Interest received...................................................................................................
Interest paid.........................................................................................................
Other....................................................................................................................
Subtotal.......................................................................................................
Income taxes paid................................................................................................
Net cash provided by operating activities..................................................
Cash flows from investing activities:
Purchases of securities..........................................................................................
Proceeds from sale of securities...........................................................................
Proceeds from redemption of securities..............................................................
Purchases of tangible fixed assets........................................................................
Purchase of intangible fixed assets......................................................................
Proceeds from sale of tangible fixed assets..........................................................
Payments for asset retirement obligations..........................................................
Proceeds from sale of stocks of subsidiary resulting in change in scope of
consolidation.....................................................................................................
Net cash used in investing activities...........................................................

10

Supplementary Information
Consolidated Capital Ratio (Domestic Standard)
Millions of yen (Note 1)
March 31,2013

Tier I capital......................................................................................................... ¥Tier II capital........................................................................................................
Deduction............................................................................................................
Total qualifying capital........................................................................................ ¥Thousands of
U.S. dollars (Note 2)

2012

2013

91,956
7,955—
99,912¥ 84,726
12,654—¥ 97,381$   977,744
84,592—$ 1,062,337

Risk-adjusted assets:
On-balance sheet assets................................................................................... ¥ 926,240
Off-balance sheet assets...................................................................................
15,577
Risk-weighted credit equivalent amount .......................................................
941,817
Amount related to operational risk-equivalent assets.....................................
59,854
Total............................................................................................................ ¥1,001,671
Capital ratio.........................................................................................................
9.97%¥904,907
16,519921,426
57,151¥978,577
9.95%$ 9,848,381
165,626
10,014,008
636,411$10,650,419

11Board of Directors and Audit & Supervisory Board(As of June 26, 2013)

President & Chief
Executive Officer
Representative Director
Kunimitsu Yoshinaga

Managing Executive
Officer Director

Managing Executive
Officers

Kiyomi Osawa

Shinobu Fukuda
Masanori Tsunoyama
Naoshi Sando
Hitoshi Ito
Hideaki Minami
Hiroshi Ebara
Hiroyuki Sakurai

Directors

Deputy President &Executive Officer
Director

Sakae Morishige
Masayuki Kon

Hideo Kabe

Executive Officers
Kiyoshi Tomizawa
Kiyoshi Shibasaki
Kazuyoshi Shiraishi
Audit & Supervisory
Board Members
Noboru Kogure
Seiji Tamura
Yasuhisa Fukuda
Shintaro Ando

The Towa Bank Network(As of March 31, 2013)

Head Office:International Department:

12-6, Honmachi 2-chome, Maebashi, Gunma 371-8560, Japan
Phone: +81-27-234-1111
URL: http://www.towabank.co.jp

12-6, Honmachi 2-chome, Maebashi, Gunma 371-8560, Japan
Phone: +81-27-234-1959
Fax:+81-27-230-1735
SWIFT: TOWA JPJT

Service
ServiceNetwork:
Network:
TohokuShinkansen
JoetsuShinkansen

Gunma
Prefecture:
38 branches

Tochigi
Prefecture:
3 branches

Maebashi
NaganoShinkansen

Takasaki

Omiya

Tokyo :
8 branches

SaitamaPrefecture:
42 branchesTokyo12