2008
Financial Statements

THE TOWA BANK, LTD.

A Message from the President
I herewith present the financial
results of Towa Bank for fiscal
2007, ended March 31, 2008,
and would like to take thisopportunity to thank our customers for their loyal support.
In fiscal 2007 Japanese
exports held firm, principally tothe healthy economies of East
Asia and other emerging
economies, and both capital
investment and consumer
spending also showed a firm undertone. However, while theeconomy as a whole continued to grow, the corporate operating environment became still more severe owing to the aftereffects of the U.S. subprime loan crisis, the ongoing rise in oil
and raw materials prices, and the appreciation of the yen
against the dollar. Private-sector companies, which have hitherto been the main driver of the economy’s growth, seem set
for a downturn in business performance, and the economy islikely to mark time.
Against this background, to enable the Towa Bank Groupto meet the expectations of its shareholders and business partners, and to fulfill its corporate mission as a regional financial
institution, we decided to take steps to increase the effectiveness of our seventh long-term management plan, which went
into operation in April 2007, and to lay the groundwork forthe future growth and development of the Bank. To this end,
we drew up the Phoenix Plan, under which we will undertakea focused program of improvements from the latter half of fiscal 2007 to the end of fiscal 2009.
As a bank on which our local communities depend for theprovision of reliable financial services, Towa Bank will offer
community-based services that are beneficial to its customers,
and thereby achieve a recovery in profitability. The management
and staff of the Bank are working as one to realize this goal.
During the reporting term, despite our efforts to attract
more individual and corporate depositors, the Bank sufferedyear-on-year decreases in deposits. This was the result of customers’ shift toward alternative investment, and a deterioration of the Bank’s business performance that caused the Kanto
Financial Bureau to issue a business administrative improvement order, which caused harm to the Bank’s reputation fortrustworthiness. As a result, deposits by individuals at thereporting term-end were down by ¥27.7 billion, and deposits
by corporate customers were down by ¥24.5 billion, comparedwith the previous term-end. The total balance of deposits thus
declined by ¥53.1 billion to ¥1,603.3 billion.
Investment trusts have proved to be a popular way ofinvesting financial assets, and the Bank sold investment trustsin the amount of ¥24.9 billion during the reporting term.
However, as a result of a fall in the base price, the net balanceof investment trust assets in custody at the term-end came to¥115.8 billion, down ¥3.9 billion from the previous term-end.
Sales for the term of personal pension funds and public bonds
were generally on target, amounting to ¥5.1 billion and ¥6.1
billion, respectively.
In the field of loans, we actively leveraged our communitybased marketing network to meet the funding needs of retailcustomers and SMEs. As a result, the Bank’s disbursement ofApartment Loans (loans to individuals wishing to construct
apartment buildings, for rental management) increased by ¥8.5
billion over the previous year, while mortgage loans — ourmainstay personal loan product — rose by ¥4.3 billion. As aresult of ¥11.3 billion in write-offs of loans to improve thefinancial soundness of our asset portfolio and the sale ofclaims held by the Bank’s subsidiary Towa Phoenix Co., Ltd. in
the amount of ¥9.9 billion, the term-end loan balance stood at¥1,165.5 billion, for a decrease of ¥16.4 billion from the previous term-end.
In line with the Phoenix Plan, we worked achieve acrossthe-board management rationalization by improving asset
investment efficiency and cutting costs, mainly by holding
down both personnel and non-personnel expenses. Thanks tothese efforts to enhance the Bank’s earning power, we recorded
ordinary income of ¥1,115 million and net income of ¥158
million, both on a consolidated basis, compared with ordinary
loss and net loss figures for the previous business year.
To continue being the kind of bank that our local communities can depend on, we will press ahead with the implementation of the Phoenix Plan so as to regain the trust of ourshareholders and business partners. We will work to firmly put
in place a new management system that emphasizes harnessing the knowledge and expertise of the Bank’s frontline staff inaddressing customer needs. The management of Towa Bank areexerting their full efforts to meet the expectations of all the
Bank’s stakeholders, and I look forward to receiving your further support and encouragement.
August 2008

Kunimitsu Yoshinaga
President and CEO

2

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

Millions of yen (Note 1)
March 31,

2008

Assets:Cash and due from banks...................................................................................
Call loans and bills purchased............................................................................
Commercial paper and other debt purchased....................................................
Trading account securities..................................................................................
Securities .............................................................................................................
Loans and bills discounted .................................................................................
Foreign exchange................................................................................................
Other assets.........................................................................................................
Tangible fixed assets ...........................................................................................
Intangible fixed assets ........................................................................................
Deferred tax assets ..............................................................................................
Customers’ liabilities for acceptances and guarantees .......................................
Reserve for possible loan losses ..........................................................................
Total assets .................................................................................................

¥

36,18725,389377
128452,857
1,165,500
1,968
7,544
34,857
2,278
4,398
8,410
(26,300)¥1,713,599

Thousands of
U.S. dollars (Note 2)

2007

¥

70,639
4,234
621
256
450,608
1,181,954
845
10,69836,174
1,948
6,811
9,777
(30,262)¥1,744,309

2008

$

361,193
253,4103,767
1,280
4,519,989
11,632,904
19,64975,302347,918
22,74443,896
83,944(262,505)$17,103,497

Notes: 1. Yen figures have been rounded omitting numbers below the million mark, in accordance with the Japanese Commercial Code and generally
accepted accounting principles and practices in Japan.
2. The United States dollar amounts represent translations of Japanese yen, for convenience only, at the exchange rate of ¥100.19 to US$1.00,
the rate prevailing on March 31, 2008.

3

Millions of yen (Note 1)
March 31,

Thousands of
U.S. dollars (Note 2)

2008

2007

2008

Liabilities:
Deposits ..............................................................................................................
Call money and bills sold...................................................................................
Borrowed money ................................................................................................
Foreign exchange................................................................................................
Corporate bonds .................................................................................................
Other liabilities ...................................................................................................
Accrued employee bonuses ................................................................................
Reserve for losses on deposits refunded .............................................................
Reserve for employee retirement benefits ..........................................................
Reserve for director retirement benefits .............................................................
Reserve for contingent loss.................................................................................
Deferred tax liabilities.........................................................................................
Deferred tax liability for land revaluation .........................................................
Acceptances and guarantees ...............................................................................
Total liabilities ...........................................................................................

¥1,603,386
21,001
4,713
40
15,000
8,043
236
187
12,165
272
118
63
3,592
8,410
1,677,231¥1,656,560
1,180
1,484
75
15,000
8,796
476
110
13,053
462
—
124
3,833
9,777
1,710,936$16,003,458
209,62047,048403
149,715
80,2782,356
1,866
121,427
2,716
1,185
629
35,854
83,944
16,740,505

Net assets:
Capital stock .......................................................................................................
Capital surplus ....................................................................................................
Accumulated deficit............................................................................................
Treasury stock, at cost.........................................................................................
Total shareholders’ equity .........................................................................

39,5654,000(7,117)(100)
36,34735,565
14,516(21,737)(89)
28,255394,908
39,924(71,042)(1,002)362,788

Net unrealized gains (losses) on available-for-sale securities .............................
Land revaluation account...................................................................................
Total valuation and translation adjustments ............................................

(7,284)2,395(4,888)

2,429
2,340
4,770

(72,704)
23,913(48,790)

Minority interests ...............................................................................................
Total net assets...........................................................................................
Total liabilities and net assets....................................................................

4,908
36,368¥1,713,599

346
33,372¥1,744,309

48,995362,992$17,103,497

4Consolidated Statements of Operations
The Towa Bank, Ltd. and Consolidated Subsidiaries

Thousands of
U.S. dollars (Note 2)

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

2008

2007

2008

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

¥27,847
3,776
124
5,230
261
11,246¥ 27,369
3,797
134
5,706
205
7,288

$277,946
37,688
1,237
52,2082,614
112,254

Total income ..............................................................................................

48,48644,502483,950

Expenses:
Interest on deposits ............................................................................................
Interest on borrowings and rediscounts.............................................................
Interest on corporate bonds ...............................................................................
Other interest expenses ......................................................................................
Fees and commissions ........................................................................................
Other operating expenses...................................................................................
General and administrative expenses ................................................................
Other expenses ...................................................................................................

4,046
272
400
2
2,779
0
22,71815,684

1,694
99
400
2
3,198
0
23,68036,86040,391
2,720
3,997
22
27,7450226,753
156,544

Total expenses............................................................................................

45,90465,936458,174

Income (loss) before income taxes and minority interests................................
Income taxes:
Current ...........................................................................................................
Deferred ..........................................................................................................
Minority interests in income (loss) ....................................................................

2,582(21,434)

25,775

141
2,262
20

109
6,049
(177)

1,412
22,583202¥

158¥(27,415)

$

1,577

¥

0.65

¥(113.60)

$

0.00

0.59

—

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

5

0.00

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

For the year ended March 31, 2008

Capital stock

Millions of yen (Note 1)
Shareholders’ equity
Capital surplus Accumulated deficit Treasury stock

Balance at March 31, 2007............................
Changes during year:
Issuance of shares......................................
Reversal of capital surplus.........................
Net income................................................
Purchases of treasury stock .......................
Reversal of land revaluation account........
Net changes in items other thanshareholders’ equity .......................
Total changes during year ...............
Balance at March 31, 2008 .........................

¥35,565¥ 14,516¥(21,737)¥ (89)¥28,255

4,000
—
—
—
—

4,000
(14,516)————
14,516
158
—
(54)

—
—
—
(11)
—

8,000
—
158
(11)
(54)

—
4,000
¥39,565—(10,516)¥ 4,000—
14,619¥ (7,117)—(11)¥(100)—
8,091¥36,347

Minority
interests

Total
net assets

Valuation and translation adjustments
Net unrealized gains onLandavailable-for-salerevaluation
securities
account
Total

Balance at March 31, 2007............................
Changes during year:
Issuance of shares......................................
Reversal of capital surplus.........................
Net income................................................
Purchases of treasury stock .......................
Reversal of land revaluation account........
Net changes in items other thanshareholders’ equity .......................
Total changes during year ...............
Balance at March 31, 2008 .........................

Total¥ 2,429¥2,340¥ 4,770¥ 346¥33,372

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

8,000
—
158
(11)
(54)

(9,713)(9,713)¥(7,284)

54
54¥2,395(9,658)(9,658)¥(4,888)

4,562
4,562
¥4,908(5,096)2,995¥36,368

Millions of yen (Note 1)
Shareholders’ equity
Capital surplus Accumulated deficit Treasury stock

For the year ended March 31, 2007

Capital stock

Balance at March 31, 2006............................
Changes during year:
Cash dividends* ........................................
Net loss......................................................
Purchases of treasury stock .......................
Disposal of treasury stock .........................
Reversal of land revaluation account........
Net changes in items other thanshareholders’ equity .......................
Total changes during year ...............
Balance at March 31, 2007 .........................

¥35,565¥14,517¥ 6,435¥(88)¥56,431

—
—
—
—
—

—
—
—
(1)
—

(724)
(27,415)
—
—
(33)

—
—
(14)
13
—

(724)
(27,415)
(14)
11
(33)

—
—
¥35,565—(1)¥14,516—(28,173)¥(21,737)

—
(0)
¥(89)

—
(28,175)¥28,255

Minority
interests

Total
net assets

Valuation and translation adjustments
Net unrealized gains onLandavailable-for-salerevaluation
Total
securities
account

Balance at March 31, 2006............................
Changes during year:
Cash dividends* ........................................
Net loss......................................................
Purchases of treasury stock .......................
Disposal of treasury stock .........................
Reversal of land revaluation account........
Net changes in items other thanshareholders’ equity .......................
Total changes during year ...............
Balance at March 31, 2007 .........................

Total¥4,424¥2,307¥6,732¥464¥63,628

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

(724)
(27,415)
(14)
11
(33)

(1,995)(1,995)¥2,42933
33¥2,340(1,962)(1,962)¥4,770

(118)
(118)
¥346

(2,080)(30,255)¥33,372*Appropriation of retained earnings approved at the ordinary general meeting of shareholders held on June 2006.
6

For the year ended March 31, 2008

Capital stockThousands of U.S. dollars (Note 2)
Shareholders’ equity
Capital surplus Accumulated deficit Treasury stock

Balance at March 31, 2007............................
Changes during year:
Issuance of shares......................................
Reversal of capital surplus.........................
Net income................................................
Purchases of treasury stock .......................
Reversal of land revaluation account........
Net changes in items other thanshareholders’ equity .......................
Total changes during year ...............
Balance at March 31, 2008 .........................

$354,984$ 144,892$(216,963)$ (891)$282,022

39,924————39,924(144,892)————
144,892
1,577
—
(548)

—
—
—
(111)
—

79,848
—
1,577
(111)
(548)

—
39,924$394,908—(104,968)$ 39,924—
145,921$ (71,042)—(111)$(1,002)—80,765$362,788

Minority
interests

Total
net assets

Valuation and translation adjustments
Net unrealized gains onLandavailable-for-salerevaluation
securities
account
Total

Balance at March 31, 2007............................
Changes during year:
Issuance of shares......................................
Reversal of capital surplus.........................
Net income................................................
Purchases of treasury stock .......................
Reversal of land revaluation account........
Net changes in items other thanshareholders’ equity .......................
Total changes during year ...............
Balance at March 31, 2008 .........................

Total$ 24,245$23,365$ 47,610$ 3,461$333,094

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

79,848
—
1,577
(111)
(548)

(96,950)(96,950)$(72,704)

548
548$23,913(96,401)(96,401)$(48,790)

45,53345,533$48,995(50,867)
29,898$362,992

7

Consolidated Statements of Cash Flows
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)

2008

2007

2008

Cash flows from operating activities:
Income (loss) before income taxes and minority interests ................................
Depreciation and amortization ..........................................................................
Loss on impairment of fixed assets ....................................................................
Increase (decrease) in reserve for possible loan losses........................................
Decrease in reserve for employee bonuses .........................................................
Increase in reserve for losses on deposits refunded............................................
Decrease in reserve for employee retirement benefits .......................................
Increase (derease) in reserve for director retirement benefits ............................
Increase in reserve for contingent loss ...............................................................
Interest income...................................................................................................
Interest expenses.................................................................................................
Loss (gain) on securities - net .............................................................................
Foreign exchange gain - net ...............................................................................
Loss on disposal of tangible fixed assets ............................................................
Net decrease (increase) in trading account securities ........................................
Net decrease in loans ..........................................................................................
Net decrease in deposits .....................................................................................
Net decrease in borrowings excluding subordinated debt.................................
Net decrease (increase) in due from banks other than the Bank of Japan ........
Net decrease (increase) in call loans and others ................................................
Net increase in call money and others...............................................................
Net decrease (increase) in foreign exchanges - assets ........................................
Net decrease in foreign exchange - liabilities.....................................................
Interest received..................................................................................................
Interest paid........................................................................................................
Other...................................................................................................................
Subtotal ......................................................................................................
Income taxes paid...............................................................................................
Net cash provided by (used in) operating activities..................................

¥ 2,582
4,706
1,035(3,961)
(240)
77
(888)
(190)
118
(31,747)
4,722(1,110)(20)
93
128
16,453(53,173)(770)
305(20,910)
19,821(1,123)(35)
33,358(3,796)73(34,493)(115)(34,608)¥(21,434)
4,545
18
11,221
(1)
110
(562)
462
—
(31,301)
2,196
270
(24)
45
(133)
1,698
(9,566)(199)(342)
40,1945139(0)32,377(1,511)(191)
28,017(82)
27,935$ 25,775
46,974
10,338(39,544)(2,398)768(8,863)(1,899)1,185(316,873)
47,131(11,081)
(207)
932
1,281
164,224(530,730)(7,691)
3,048(208,712)
197,838(11,212)(351)
332,947(37,891)734(344,276)(1,151)(345,427)

Cash flows from investing activities:
Purchases of securities ........................................................................................
Proceeds from sale of securities ..........................................................................
Proceeds from redemption of securities .............................................................
Purchases of tangible fixed assets.......................................................................
Proceeds from sale of tangible fixed assets.........................................................
Net cash provided by (used in) investing activities ..................................

(80,704)
42,92825,617(4,237)426(15,970)(35,057)
24,825
22,589(3,902)229
8,684(805,518)
428,467
255,693(42,298)
4,254(159,401)

Cash flows from financing activities:
Proceeds from issuance of subordinated debt....................................................
Proceeds from issuance of shares .......................................................................
Cash dividends paid ...........................................................................................
Cash dividends paid to minority interests .........................................................
Purchases of treasury stock.................................................................................
Proceeds from sale of treasury stock...................................................................
Net cash provided by (used in) financing activities..................................

3,894
12,543——(11)—
16,426

—
—
(724)
(2)
(14)
42
(698)

38,872
125,193——(111)—
163,954

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

6(34,145)
69,177¥35,0311
35,92333,253¥69,177

64(340,810)
690,458$349,648

8

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

Thousands of
U.S. dollars (Note 2)

2008

2007

2008

Tier I capital ........................................................................................................
Tier II capital.......................................................................................................
Deduction........................................................................................................

¥ 33,972
25,227—¥ 28,602
22,691—$ 339,078
251,796—

Total qualifying capital.......................................................................................

¥ 59,199¥ 51,294$ 590,874

Risk-adjusted assets:
On-balance sheet assets..................................................................................
Off-balance sheet assets..................................................................................
Risk-weighted credit equivalent amount ......................................................
Amount related to operational risk-equivalent assets ...................................

¥816,017
12,774
828,791
58,669¥824,812
11,582
836,395
61,487$8,144,699
127,500
8,272,200
585,583

Total ...........................................................................................................

¥887,461¥897,883$8,857,783

Capital ratio ........................................................................................................

6.67%

5.71%

9

Board of Directors and Corporate Auditors(As of June 27, 2008)

President andChief Executive Officer
Kunimitsu Yoshinaga
Senior Managing
Director

Managing Directors

Directors

Corporate Auditors

Katsuhiro Tamaoki
Hideo Kabe
Noboru Kogure

Shinobu Fukuda
Masami Tsubuku
Seiji Tamura
Masanori Tsunoyama
Masayuki Kon

Kiyoshi Takei
Kazuo Kojima
Toru Ikehara
Yoshikazu Kato

Hitoshi Fukuda

The Towa Bank Network(As of March 31, 2008)

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

Foreign Exchange Operation Center,
Business Administration Department:
12-6, Honmachi 2-chome, Maebashi, Gunma 371-8560, Japan
Phone: +81-27-234-1959
Fax:+81-27-230-1735
SWIFT: TOWA JPJTS
Service
Network:
TohokuShinkansen
JoetsuShinkansen

Gunma
Prefecture:
38 branches

Tochigi
Prefecture:
3 branches

Maebashi
NaganoShinkansen
Takasaki

Omiya

Tokyo :
8 branches

SaitamaPrefecture:
42 branchesTokyo10