2015
Financial Statements

THE TOWA BANK, LTD.

A Message from the President

Concerning support of our customers’ main business operations, we have provided business-matching
services, including solutions to expand sales channels
and introduce new products, supported joint researchwith Gunma University and Maebashi Institute ofTechnology, and assisted with applications for various
subsidies including the Monozukuri Subsidy. We havealso fostered technology partnerships with major
companies via Kanto Bureau of Economy, Trade andIndustry and the Highland Kanto Liaison Organization, which is established by universities and companies in Gunma and nearby prefectures led by Gunma
University for the purpose of local industrial promotion, and been involved in proposal development,
including commercial negotiations with major foodprocessing and manufacturing buyers.
Furthermore, in collaboration with the Kanto
Bureau of Economy, Trade and Industry, we became
the first regional bank to hold the “Management
Mentor Exchange Meeting” which introduces ourGroup’s customers to personnel with specialized
knowledge who have retired from major corporations. We also established the “Towa Supporting Fundin Transition of Agriculture, Forestry and Fisheries to
Sextiary Sector” to assist in the creation of new business opportunities and expand sales channels inJapan and overseas in collaboration with primary,secondary and tertiary industry operators. At thesame time, we made a greater effort to foster corporate growth and create new employment by investing

We greatly appreciate your continued patronage of
The Towa Bank, Ltd.
To assist further understanding of our current situation, we have completed the Bank’s financial reports
for fiscal 2014, ended March 31, 2015, which are presented hereunder.
At the beginning of fiscal 2014, the Japanese economy experienced negative growth due to the reactionary fall from last-minute demand caused by the
consumption tax increase. However, in the second
half, with the effects of the tax increase waning, consumer spending gradually recovered. The economy
continued a modest recovery with additional monetary easing by the Bank of Japan in October. At thesame time, continuing depreciation of yen and appreciation of stocks, some companies made improvements in corporate earnings, especially in export
companies, and took an aggressive stance in making
capital investments and boosting salaries.
Amid this business environment, The Towa Bank
Group pursued the Phoenix Plan III, a three-year business improvement plan that ran from April 2012 toMarch 2015. Based on this plan, the entire management and staff of the Bank worked hard to support
our customers’ main business operations together
with the following mottoes in mind: “supporting ourcustomers when and where needed by conducting
interviews to collect their information, in order toaccurately ascertain their situation,” and “never forgetting our modest origins.”

2the decision-making process. This structure wasachieved through multiple independent outside
directors and evaluations of the suitability of management measures by an external evaluation committee
based on the Corporate Governance Code.
As a result, in fiscal 2014, our deposit balance
increased by ¥54.6 billion year-on-year to ¥1.8258
trillion and our loan balance also increased by ¥28.1
billion year-on-year to ¥1.3306 trillion comparedwith fiscal 2013. The number of business loan customer increased by 863 year-on-year to 13,572, developing business relationships with around 2,000
companies and generating results from our businessintroduction services.
Concerning our earnings in fiscal 2014, we posted
earnings last year for ¥10.9 billion in core operating
income, ¥12.3 billion in ordinary income, and ¥12.4
billion in net income due to an increase in the loanbalance (especially loans to SMEs), net interest
income remaining at the same level as the previous
fiscal year, and increase in service transaction profits
from sales of investment trusts and other products.
Hereafter, we will develop our system of customer
support and improve our ability to assess businesspotential in order to further enhance thesustainability of our business model, which focuses on
supporting our customers’ main business operations.
At the same time, we will contribute to the revitalization of regional communities by expanding our support network with municipalities and local
universities, developing and strengthening our humanresources, building strong relationships with customers, and fortifying our management base. We would
like to ask our shareholders for their continued support and encouragement in these future endeavors.

in the Gunma Medical Engineering Cooperation
Fund, which helped companies in different fields thatwere considering business expansion into medicalrelated industries.
In addition, we concluded the “Broad Partnership
Agreement” with Tsukuba Bank and Tochigi Bank to
expand business opportunities for customers including
business matching, tourism promotion, and cross-partnerships with municipalities over a wide area. In orderto support “Regional Comprehensive Strategy Measures” based on the “Communities, Sages & Jobs RebirthAct,” we have been developing the system to address
local economic revitalization such as establishing a“Regional Revitalization Promotion Office” within the“Relationship Banking Strategy Department.”
In terms of providing support for corporate customers’ entry into overseas markets, we have been utilizing
our network of 22 institutions (including banks) in 42
countries to provide information and introduce local
experts to customers with demand for entry into overseas markets such as production bases. We have also
been providing import-export support and financial
services such as impact loans, standby credit, and crossborder loans, and provided import-export support.
In the area of management improvement support,
we deployed managers of the Business Rehabilitation
Office to 10 blocks to help formulate management
improvement plans and provide management guidance. We have also been providing management
improvement support utilizing the knowledge andsupport capabilities of outside institutions including
the SME Business Rehabilitation Support Co-operative
and the Regional Economy Vitalization Corporationof Japan.
Viewing the creation of a sustainable businessmodel looking ahead five or ten years into the future
as an important issue, the Towa Bank Group’s officers
and employees have been creating a business modelthat revitalizes the local economy and improves theearning capacity of the Group by supporting customers’ main business, management improvement andbusiness rehabilitation. Furthermore, in order tostrengthen inspection, supervision and oversight ofbusiness execution, we established an accountable
management structure that ensured transparency ofAugust 2015

Kunimitsu Yoshinaga
President and CEO

3

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

Millions of yen (Note 1)
2015

March 31,

Assets:Cash and due from banks.................................................................................... ¥ 110,388
Call loans and bills purchased.............................................................................
35,889Trading account securities...................................................................................
22
Securities..............................................................................................................
553,225
Loans and bills discounted.................................................................................. 1,325,649
Foreign exchange.................................................................................................
800
Other assets..........................................................................................................
12,463
Tangible fixed assets............................................................................................
24,453
Buildings..........................................................................................................
4,683
Land.................................................................................................................
17,779Lease assets (tangible)......................................................................................
209
Other tangible assets.......................................................................................
1,781
Intangible fixed assets..........................................................................................
1,060
Software...........................................................................................................
732
Other intangible assets....................................................................................
327
Deferred tax assets...............................................................................................
1,984
Customers’ liabilities for acceptances and guarantees........................................
3,485
Reserve for possible loan losses............................................................................
(9,004)
Total assets.................................................................................................. ¥2,060,418

Thousands of
U.S. dollars (Note 2)

2014

2015

41,40851,51420
517,576
1,296,781
844
13,57924,552
4,848
17,779
256
1,667
964
713
250
3,066
3,659
(12,091)¥1,941,877$   918,603
298,654186
4,603,687
11,031,455
6,659
103,718
203,492
38,973
147,951
1,746
14,820
8,823
6,099
2,724
16,51229,001(74,934)$17,145,861¥

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 ¥120.17 to US$1.00, the rate
prevailing on March 31, 2015.

4

Millions of yen (Note 1)
2015

March 31,

Liabilities:
Deposits................................................................................................................ ¥1,823,324
Negotiable certificate of deposit..........................................................................
700
Borrowed money..................................................................................................
74,382Foreign exchange.................................................................................................
96
Other liabilities....................................................................................................
6,231
Accrued employee bonuses..................................................................................
415
Net defined benefit liability.................................................................................
10,371
Reserve for director retirement benefits..............................................................
30
Reserve for reimbursement of dormant deposits................................................
417
Reserve for contingent loss..................................................................................
677
Deferred tax liabilities..........................................................................................
14
Deferred tax liability for land revaluation...........................................................
2,673
Acceptances and guarantees................................................................................
3,485
Total liabilities............................................................................................. 1,922,820
Net assets:
Shareholders’ equity:
Capital stock........................................................................................................
38,653
Capital surplus.....................................................................................................
31,174Retained earnings.................................................................................................
45,509Treasury stock, at cost..........................................................................................
(392)
Total shareholders’ equity...........................................................................
114,945
Accumulated other comprehensive income:Net unrealized gains on available-for-sale securities...........................................
18,825Land revaluation account....................................................................................
3,052
Remeasurements of defined benefit plans...........................................................
361
Total accumulated other comprehensive income......................................
22,239Stock acquisition rights.......................................................................................
177
Minority interests................................................................................................
235
Total net assets............................................................................................
137,597
Total liabilities and net assets..................................................................... ¥2,060,418

5

Thousands of
U.S. dollars (Note 2)

2014

2015

¥1,763,826—
32,77934
6,577
391
10,339
24
388
441
10
2,949
3,659
1,821,421$15,172,879
5,825
618,973802
51,855
3,455
86,304
255
3,475
5,638
124
22,24329,001
16,000,835

38,65331,17934,068(409)
103,492

321,659
259,420
378,706(3,264)
956,521

11,988
2,775
875
15,639136
1,188
120,456¥1,941,877

156,659
25,3983,012
185,070
1,477
1,956
1,145,025$17,145,861

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

Millions of yen (Note 1)

Thousands of
U.S. dollars (Note 2)

2015

2014

2015

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

¥22,880
8,242
100
6,281
397
5,720
43,622¥23,154
8,102
103
5,937
211
5,025
42,534$190,403
68,588838
52,2683,304
47,605363,007

Expenses:
Interest on deposits..............................................................................................
Negotiable certificate of deposit�������������������������������������������������������������������������
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...........................................

724
1
58
5
4,020
239
21,6844,590
31,325
12,296

725
—
35
7
3,789
71
21,343
4,531
30,506
12,027

6,033
12
483
49
33,460
1,995
180,448
38,196
260,679
102,328

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

79
(331)
(252)
12,548108¥12,440

197(1,164)(966)
12,99486¥12,907661(2,758)(2,097)
104,425
900$103,525

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

¥33.6417.15¥38.01
17.68

$0.28
0.14

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,

Thousands of
U.S. dollars (Note 2)

2015

2014

2015

Income before minority interests........................................................................
Other comprehensive income:Net unrealized gains on available-for-sale securities.......................................
Revaluation reserve for land............................................................................
Remeasurements of defined benefit plans......................................................
Total other comprehensive income................................................................
Total comprehensive income......................................................................

¥12,548¥12,994$104,425

6,842
276
(513)
6,605
¥19,154

(681)
—
—
(681)
¥12,31256,9402,304(4,275)54,968$159,394

Total comprehensive income attributable to:Shareholders of the parent..............................................................................
Minority interests............................................................................................

¥19,040
113¥12,229
83$158,448946

7

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

Millions of yen
Shareholders’ equity
Capitalstock

Balance at April 1, 2014���������������������������������� ¥38,653
Cumulative effects of changes inaccounting policies����������������������������������
Restated balance���������������������������������������������� 38,653
Changes of items during the period���������������
Net income�������������������������������������������������
Dividends from surplus������������������������������
Purchase of treasury stock��������������������������
Disposal of treasury stock���������������������������
Changes in items other than shareholders’equity during the period (net amount)�����
Total changes of items during the period������
—Balance at March 31, 2015............................ ¥38,653

CapitalsurplusRetainedearnings

Treasury
stock

Total
shareholders’equity¥31,179¥34,068¥(409)¥103,492

31,179282
34,350(409)

282
103,774(3)
20

12,440(1,281)(3)
15

16¥(392)

11,170¥114,945

12,440(1,281)(5)(5)¥31,174

11,159¥45,509

Millions of yen
Accumulated other comprehensive income
Net unrealized
gains (losses) on
available-for-salesecurities

Balance at April 1, 2014���������������������������������� ¥11,988
Cumulative effects of changes inaccounting policies����������������������������������
Restated balance���������������������������������������������� 11,988
Changes of items during the period���������������
Net income�������������������������������������������������
Dividends from surplus������������������������������
Purchase of treasury stock��������������������������
Disposal of treasury stock���������������������������
Changes in items other than shareholders’equity during the period (net amount)�����
6,836
Total changes of items during the period������
6,836
Balance at March 31, 2015............................ ¥18,825

Land
revaluationaccount

Total
accumulated
otherRemeasurements
comprehensiveof defined
benefit plansincomeStockacquisition
right

Minority
interests

Total
net assets¥2,775¥ 875¥15,639¥136¥1,188¥120,456

2,775

875

15,639

136

1,188

282
120,738
12,440(1,281)
(3)
15

276
276
¥3,052

8

(513)
(513)
¥ 361

6,600
6,600
¥22,239

41
41
¥177

(953)
5,688
(953)
16,859¥  235 ¥137,597

Thousands of U.S. dollars
Shareholders’ equity
Capitalstock

CapitalsurplusRetainedearnings

Treasurystock

Balance at April 1, 2014���������������������������������� $321,659 $259,462 $283,499 $(3,406)
Cumulative effects of changes inaccounting policies����������������������������������
2,346
Restated balance���������������������������������������������� 321,659 259,462 285,846(3,406)
Changes of items during the period���������������
103,525
Net income�������������������������������������������������
Dividends from surplus������������������������������
0(10,665)
Purchase of treasury stock��������������������������
(32)
Disposal of treasury stock���������������������������
(42)
174
Changes in items other than shareholders’equity during the period (net amount)�����
—(42)
92,860141
Total changes of items during the period������
Balance at March 31, 2015............................ $321,659 $259,420 $378,706 $(3,264)

Total
shareholders’equity$861,214
2,346
863,561
103,525(10,665)(32)
131

92,959$956,521

Thousands of U.S. dollars
Accumulated other comprehensive income
Net unrealized
gains (losses) on
available-for-salesecurities

Balance at April 1, 2014���������������������������������� $ 99,765
Cumulative effects of changes inaccounting policies����������������������������������
Restated balance����������������������������������������������
99,765
Changes of items during the period���������������
Net income�������������������������������������������������
Dividends from surplus������������������������������
Purchase of treasury stock��������������������������
Disposal of treasury stock���������������������������
Changes in items other than shareholders’equity during the period (net amount)�����
56,894
Total changes of items during the period������
56,894
Balance at March 31, 2015............................ $156,659

Land
revaluationaccount

Total
accumulated
otherRemeasurements
comprehensiveof defined
benefit plansincomeStockacquisition
right

Minority
interests

Total
net assets$23,094$ 7,288$130,148$1,131$ 9,887$1,002,382

23,0940
7,288

130,148

1,131

9,887

2,346
1,004,728
103,525(10,665)
(32)
131

2,304
2,304
$25,398

9(4,275)(4,275)$ 3,01254,922
54,922$185,070

345
345$1,477(7,930)47,337(7,930)140,296$ 1,956 $1,145,025

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

Millions of yen (Note 1)
2015

Thousands of
U.S. dollars (Note 2)

2014

2015

Cash flows from operating activities:
Income before income taxes and minority interests........................................... ¥  12,296
Depreciation and amortization...........................................................................
1,159
Loss on impairment of fixed assets......................................................................
—
Decrease in reserve for possible loan losses.........................................................
(3,087)
Increase in reserve for employee bonuses...........................................................
23(Decrease) increase in provision for retirement benefits.....................................
—
Increase (decrease) in net defined benefit liabilities...........................................
(354)
Increase (decrease) in provision for directors’ retirement benefits.....................
6
Increase (decrease) in reserve for reimbursement of dormant deposits..............
29(Decrease) increase in reserve for contingent loss...............................................
235
Interest income....................................................................................................
(31,223)
Interest expenses..................................................................................................
790
Loss on securities — net.......................................................................................
6
Foreign exchange gain — net..............................................................................
(585)
Loss on disposal of tangible fixed assets..............................................................
16
Net decrease (increase) in trading account securities..........................................
(1)
Net increase in loans............................................................................................
(28,868)
Net increase in deposits.......................................................................................
59,498Net increase in negotiable certificate of deposit.................................................
700
Net decrease in borrowings excluding subordinated debt..................................
41,603
Net increase in due from banks other than the Bank of Japan...........................
657
Net decrease (increase) in call loans and others..................................................
15,625
Net increase in foreign exchanges — assets........................................................
44
Net decrease (increase) in foreign exchange — liabilities...................................
62
Interest received...................................................................................................
(31,470)
Interest paid.........................................................................................................
(851)
Other....................................................................................................................
689
Subtotal.......................................................................................................
99,943
Income taxes paid................................................................................................
(111)
Net cash provided by operating activities..................................................
99,831¥   12,027
1,150
359
(137)
(1)
(12,135)
11,6940
65(117)(31,360)
769
(97)
(361)
11
(7)
(21,066)
37,483—
17,795262(22,116)29(3)31,813(944)(1,128)23,986(1,398)22,587$   102,328
9,648
0(25,689)
198—(2,949)
55
247
1,961
(259,830)
6,578
50(4,873)139(12)(240,228)
495,120
5,825
346,201
5,471
130,026368
518
261,881(7,089)5,738
831,685(930)
830,755

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..........................................................
Net cash used in investing activities...........................................................

(128,772)
25,55976,500
(809)
(350)
0
(1)
(27,873)(132,311)
22,92895,046
(631)
(314)
—
—
(15,282)(1,071,586)
212,692
636,599(6,733)(2,915)3(9)(231,948)

Cash flows from financing activities:
Cash dividends paid to minority shareholders...................................................
Dividends paid.....................................................................................................
Cash distributions paid to minority shareholders..............................................
Purchases of treasury stock..................................................................................
Proceeds from exercise of stock options..............................................................
Net cash used in financing activities..........................................................

(1,000)(1,281)(66)(3)
0(2,352)—(1,337)(49)(4)
0(1,391)(8,321)(10,665)
(555)
(32)
1
(19,573)

Effect of exchange rate changes on cash and cash equivalents..........................
30
Net increase (decrease) in cash and cash equivalents.........................................
69,637
Cash and cash equivalents at beginning of year.................................................
38,903
Cash and cash equivalents at end of year........................................................... ¥ 108,541

30
5,945
32,958¥   38,903

257
579,491
323,740$   903,231

For the years ended March 31,

10Supplementary Information
Consolidated Capital Ratio (Domestic Standard)[Basel III]
Millions of yen (Note 1)

Thousands of
U.S. dollars (Note 2)

2015

2015

Core capital: instruments and reserves.....................................................................
Core capital: adjustment amount of instruments and reserves...............................
Total qualifying capital.............................................................................................

¥ 120,423
592¥ 119,831$1,002,110
4,929$ 997,181

Risk-adjusted assets:
On-balance sheet assets........................................................................................
Off-balance sheet assets........................................................................................
Credit value adjustment amount.........................................................................
Amount of credit risk assets for CCP-related exposure........................................
Risk-weighted credit equivalent amount.............................................................
Amount related to operational risk-equivalent assets..........................................
Total.................................................................................................................
Capital ratio..............................................................................................................

¥1,028,512
12,691155—
1,041,359
61,212¥1,102,572
10.86%$8,558,813
105,616
1,291—
8,665,721
509,382$9,175,103

March 31,

11

Board of Directors and Audit & Supervisory Board(As of June 25, 2015)

President & Chief
Executive Officer
Representative Director

Senior Managing
Executive Officer
Director

Kunimitsu Yoshinaga

Kiyomi Osawa

Deputy President &Executive Officer
Representative Director

Managing Executive
Officer Directors

Hideo Kabe

Senior Managing
Executive Officer
Hitoshi Ito
Managing Executive
Officers
Masanori Tsunoyama
Naoshi Sando
Kiyoshi Tomizawa
Kiyoshi Shibasaki

Hiroshi Ebara
Hiroyuki Sakurai
Directors
Masayuki Kon
Nobuko Inaba

Executive Officers
Kazuyoshi Shiraishi
Toshiko Fusejima
Seiji Yamamoto
Toru Kobayashi
Audit & Supervisory
Board Members
Noboru Kogure
Hideaki Minami
Shintaro Ando
Shinichi Kato

The Towa Bank Network(As of March 31, 2015)

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