2010
Financial Statements

THE TOWA BANK, LTD.

A Message from the President
I herewith present the financialof operating expenses. Through these measures, we will work toward a

results of Towa Bank for fiscal 2009,

substantial improvement in the Bank’s overhead ratio (gross businessended March 31, 2010, and I would

profit/expense ratio).

like to take this opportunity to thankIn order to respond to the growing complexity of the financial

our customers for their loyal support.

environment, increasingly advanced risk management is required.

In fiscal 2009, Japan’s economy

Therefore, we established a new Integrated Risk Management Office asbegan to pick up as exports and pro-part of our efforts to strengthen our risk management and establish aduction increased, after the global

system geared toward advanced risk management methods.
As has been the case up until now, the Bank proactively endeavored

economy hit bottom on economic
stimulus measures implemented by

to facilitate the provision of funds to small and medium-sized corpo-

various nations. At the same time,

rate customers. However, in light of the implementation of the Act onwith its significant supply-demand

Provisional Measures for the Facilitation of Financing to Small andgap still unresolved, the domestic economy continued to be hampered

Medium-Sized Businesses, we made organizational improvements by

by deflation, and the employment and income environments remained

establishing a financing facilitation promotion office within our credit

severe. Because of the fragility of its growth platform, the Japanesemonitoring office. This was done in order to further optimize our con-economy requires continued propping up through an accommodative

sulting functions, such as those relating to the provision of reliable

monetary policy, while the risk accompanying increasing public debt

funding and support for management improvements. We will continuemeans that Japan faces an urgent need to tackle fiscal reform.

to respond appropriately to customers’ consultation requests in orderto ensure smooth and reliable financing for small and medium-sized

Against this backdrop, to enable the Towa Bank Group to live up tobusinesses.

the trust of its customers, and to establish a robust financial foundation

In the area of compliance, on the basis of our general compliancein order to further facilitate the provision of funds for small andmedium-sized businesses and contribute to the revitalization of theregulations and specific ethical rules for the Bank’s directors, corporate

regional community, we cleared our accumulated losses in November

auditors, and other employees, we are working to strengthen our legal

2009 through a reclassification of our capital account. Further, incompliance system, including checking functions. Specifically, we have

December 2009, we drew up the Phoenix Plan II, a new businessset up an outside committee composed of third-party experts with no

improvement plan based on the Act on Special Measures for

personal interests in the Bank to evaluate and offer suggestions on

Strengthening Financial Functions. Under the plan, we have set an

whether the surveillance and checking functions performed by the

improvement period of October 2009 to March 2012, and we also

Bank’s board of directors and committee of corporate auditors are func-

implemented a ¥35 billion capital increase with the support of public

tioning properly. In order to further enhance the objectivity of evalua-funds. As a result of these measures, our non-consolidated capital ade-tions of the Bank’s management, we will have the outside committee

quacy ratio as of March 31, 2010 stood at 9.2%.

conduct checks on the state of progress of the Phoenix Plan II and on
risks associated with new business projects. The Towa Bank Group as a

Moreover, by the end of March 2010, we sold ¥20 billion worth offloating-rate Japanese government bonds, which had been exerting

whole will continue to address the enrichment and reinforcement ofpressure on our earnings because of their low yield.

our compliance system as a top priority.

As we worked to eliminate unfavorable legacies such as these, we

Even in the event that the situation remains severe for Japan’salso strove to provide useful services to customers, such as by opening

regional economies due to stagnant employment conditions and per-an Internet branch in March. Meanwhile, the management and staff ofsonal consumption, Towa Bank will continue to aim to be a bank that

the Towa Bank Group came together as one in devoting their full ener-

local communities can depend on. Through the appropriate optimiza-gies toward realizing the goals of the Phoenix Plan II.

tion of our financial intermediary functions, we will dedicate ourselves

With regard to measures taken to facilitate the provision of funds,

to earning the trust of both our shareholders and business partners. To

we dramatically increased visits to customers, responded to customers’

that end, I would like to ask our stakeholders for their continued sup-diverse funding needs, and provided support for their various businessport and encouragement.

issues. Going forward, we intend to offer new products and services toAugust 2010

meet our customers’ needs. At the same time, we will develop proactive
marketing activities through steps such as increasing the number ofcorporate relations representatives and expanding our business support
office so as to facilitate the provision of funding services to local small
and medium-sized companies.
In the area of cost-cutting, we are working to reduce personnel
expenses by lowering directors’ compensation and employees’ bonuses,
and also implementing measures to reduce clerical costs. We plan totake further measures to realize the efficient allocation of personnel
costs, including a review of our personnel system, while non-personnel

Kunimitsu Yoshinaga

costs will be included in an across-the-board review and paring down

President and CEO

2

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

Millions of yen (Note 1)
March 31,

2010

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................................................................................................
Lease receivables and lease investment assets....................................................
Other assets.........................................................................................................
Tangible fixed assets ...........................................................................................
Intangible fixed assets ........................................................................................
Deferred tax assets ..............................................................................................
Customers’ liabilities for acceptances and guarantees .......................................
Reserve for possible loan losses ..........................................................................
Total assets .................................................................................................

¥

28,53819,474190
31454,603
1,197,415
2,040
6,820
7,202
26,467
1,073
3,628
6,710
(19,357)¥1,734,840

Thousands of
U.S. dollars (Note 2)

2009

¥

52,9573,273
205
30439,061
1,179,742
895
7,593
7,450
27,138
1,322
5,215
7,478
(25,438)¥1,706,928

2010

$

306,729
209,3112,049
334
4,886,111
12,869,896
21,93673,312
77,416284,469
11,54038,99972,129(208,057)$18,646,179

Notes: 1. Yen 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. The United States dollar amounts represent translations of Japanese yen, for convenience only, at the exchange rate of ¥93.04 to US$1.00,
the rate prevailing on March 31, 2010.

3

Millions of yen (Note 1)
March 31,

Thousands of
U.S. dollars (Note 2)

2010

2009

2010

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

¥1,594,085
30,000
4,316
34
—
8,105
233
11,977
248
241
676
32
3,573
6,710
1,660,234¥1,575,762
41,3004,501
22
15,0008,177
231
11,671
177
251
517
40
3,592
7,478
1,668,724$17,133,331
322,441
46,391
373—
87,114
2,504
128,732
2,667
2,590
7,266
354
38,405
72,12917,844,304

Net assets:
Shareholders’ equity:
Capital stock .......................................................................................................
Capital surplus ....................................................................................................
Retained earnings (accumulated deficit) ............................................................
Treasury stock, at cost.........................................................................................
Total shareholders’ equity .........................................................................

38,65331,2053,612(108)
73,362

41,153
5,587(10,927)(106)
35,707415,453
335,399
38,823(1,166)
788,510

Valuation and translation adjustments:
Net unrealized losses on available-for-sale securities .........................................
Land revaluation account...................................................................................
Total valuation and translation adjustments ............................................

(1,183)
2,368
1,184

(4,337)
2,395(1,941)(12,720)
25,451
12,731

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

58
74,606¥1,734,840

4,439
38,204¥1,706,928

633
801,875$18,646,179

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,

2010

2009

2010

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

¥23,917
5,098
142
4,475
596
9,173

¥26,013
4,248
118
4,689
213
7,286

$257,068
54,794
1,526
48,105
6,407
98,598

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

43,40342,570466,499

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

2,634
260
311
17
2,558
756
22,496
10,945

4,091
383
400
4
2,474
186
22,026
17,61328,314
2,803
3,346
189
27,502
8,126
241,789
117,638

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

39,98047,179429,711

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

3,422(4,609)36,788

304
(163)
494

71
(790)
(80)

3,272
(1,752)
5,316

Net income (loss)................................................................................................

¥ 2,786¥ (3,809)$ 29,951¥

8.08¥ (16.71)

$

5.33

—

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

5

0.08
0.05

Consolidated Statements of Changes in Net Assets
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,

Shareholders’ equity:
Capital stock
Balance at end of previous year .....................................................................
Changes during year:
Reduction of capital...................................................................................
Issuance of shares.......................................................................................
Total changes during year .........................................................................
Balance at end of year ....................................................................................
Capital surplus
Balance at end of previous year .....................................................................
Changes during year:
Reduction of capital...................................................................................
Reversal of capital surplus..........................................................................
Issuance of shares.......................................................................................
Total changes during year .........................................................................
Balance at end of year ....................................................................................
Retained earnings (accumulated deficit)
Balance at end of previous year .....................................................................
Changes during year:
Reversal of capital surplus..........................................................................
Decrease of retained earnings due to acquisition of the stock ofconsolidated subsidiaries .........................................................................
Net income (loss) .......................................................................................
Reversal of land revaluation account ........................................................
Total changes during year .........................................................................
Balance at end of year ....................................................................................
Treasury stock
Balance at end of previous year .....................................................................
Changes during year:
Purchase of treasury stock .........................................................................
Total changes during year .........................................................................
Balance at end of year ....................................................................................
Total shareholders’ equity
Balance at end of previous year .....................................................................
Changes during year:
Issuance of shares.......................................................................................
Decrease of retained earnings due to acquisition of the stock ofconsolidated subsidiaries .........................................................................
Net income (loss) .......................................................................................
Purchase of treasury stock .........................................................................
Reversal of land revaluation account ........................................................
Total changes during year .........................................................................
Balance at end of year ....................................................................................
6

2010

2009

2010

¥ 41,153¥ 39,565$ 442,323(20,000)
17,500(2,500)¥ 38,653

—
1,587
1,587
¥ 41,153(214,961)
188,091(26,870)$ 415,453¥ 5,587¥ 4,000$ 60,058

20,000(11,882)
17,50025,617¥ 31,205

—
—
1,587
1,587
¥ 5,587

214,961(127,711)
188,091
275,341$ 335,399¥(10,927)¥ (7,117)$(117,450)

11,882—

127,711

(157)
2,786
27
14,539¥ 3,612—(3,809)—(3,809)¥(10,927)(1,689)29,951
299
156,274$ 38,823

¥

(106)

¥

(100)

$

(1,149)

¥

(1)
(1)
(108)

¥

(6)
(6)
(106)

$

(16)
(16)
(1,166)¥ 35,707¥ 36,347$ 383,782

35,0003,175

376,182

(157)
2,786
(1)
27
37,655¥ 73,362—(3,809)(6)—(640)¥ 35,707(1,689)29,951(16)299
404,727$ 788,510

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

Valuation and translation adjustments
Net unrealized gains (losses) on available-for-sale securities
Balance at end of previous 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 end of previous year .....................................................................
Changes during year:
Net changes in items other than shareholders’ equity .............................
Total changes during year .........................................................................
Balance at end of year ....................................................................................
Total valuation and translation adjustments
Balance at end of previous 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 end of previous 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 end of previous year .....................................................................
Changes during year:
Issuance of shares.......................................................................................
Decrease of retained earnings due to acquisition of the stock ofconsolidated subsidiaries .........................................................................
Net income (loss) .......................................................................................
Purchase of treasury stock .........................................................................
Reversal of land revaluation account ........................................................
Net changes in items other than shareholders’ equity .............................
Total changes during year .........................................................................
Balance at end of year ....................................................................................

7

Thousands of
U.S. dollars (Note 2)

2010

2009

2010

¥ (4,337)¥ (7,284)$ (46,619)

3,153
3,153
¥ (1,183)

2,946
2,946
¥ (4,337)

33,89933,899$ (12,720)¥ 2,395¥ 2,395$ 25,751(27)(27)¥ 2,368——¥ 2,395

(299)
(299)
$ 25,451¥ (1,941)¥ (4,888)$ (20,867)

3,126
3,126
¥ 1,184

2,946
2,946
¥ (1,941)

33,59933,599$ 12,731¥ 4,439¥ 4,908$ 47,714(4,380)(4,380)
¥
58

(469)
(469)
¥ 4,439(47,080)(47,080)$633¥38,204¥36,368$410,628

35,0003,175

376,182

(157)
2,786
(1)
27
(1,254)36,401¥74,606—(3,809)
(6)
—
2,477
1,836
¥38,204(1,689)29,951(16)
299(13,481)391,246$801,875

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)

2010

2009

3,422
1,428
55
—
—
(6,080)
1
(10)
305
70
158
(29,157)
3,224
1,693
20
45
(0)
(8,247)18,323(185)(96)(16,186)(11,300)(1,145)
11
29,578(3,670)362(17,378)(128)(17,507)¥ (4,609)
1,516
107
37
(77)
(862)
(4)
64
(494)
(94)
398
(30,380)
4,878
4,991
(40)
50
97
(14,242)(27,624)
(212)
(215)
22,287
20,2981,072(17)31,287(4,577)
19
3,655
(123)
3,531

$

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.........................................................
Purchases of subsidiary shares............................................................................
Net cash (used in) provided by investing activities ..................................

(179,481)
113,871
43,236(195)
54(4,600)(27,115)(72,445)
57,187
25,663
(235)
27
(96)
10,103(1,929,082)
1,223,898
464,708(2,104)580(49,441)(291,439)

Cash flows from financing activities:
Proceeds from issuance of shares .......................................................................
Repayment of subordinated debt .......................................................................
Retirement by purchase of subordinated debt ...................................................
Cash dividends paid to minority interests .........................................................
Purchases of treasury stock.................................................................................
Net cash provided by financing activities .................................................

34,933(13,600)
(826)
(427)
(1)
20,079

3,094
—
—
(209)
(6)
2,879

375,470(146,173)(8,877)(4,590)(16)
215,812

Effect of exchange rate changes on cash and cash equivalents.........................
Net (decrease) increase in cash and cash equivalents ........................................
Cash and cash equivalents at beginning of year................................................
Cash and cash equivalents at end of year ..........................................................

27(24,516)
51,585¥ 27,06940
16,55435,031¥51,585294(263,504)
554,446$ 290,941

Cash flows from operating activities:
Income (loss) before income taxes and minority interests ................................
Depreciation and amortization ..........................................................................
Loss on impairment of fixed assets ....................................................................
Amortization of goodwill ...................................................................................
Amortization of negative goodwill.....................................................................
Decrease in reserve for possible loan losses........................................................
Increase (decrease) in reserve for employee bonuses .........................................
(Decrease) increase in reserve for reimbursement of dormant deposits ............
Increase (decrease) in reserve for employee retirement benefits .......................
Increase (decrease) in reserve for director retirement benefits ..........................
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 (increase) decrease in trading account securities ........................................
Net increase in loans ..........................................................................................
Net increase (decrease) 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 (decrease) increase in call money and others..............................................
Net (increase) decrease in foreign exchanges - assets ........................................
Net increase (decrease) in foreign exchange - liabilities ....................................
Interest received..................................................................................................
Interest paid........................................................................................................
Other...................................................................................................................
Subtotal ......................................................................................................
Income taxes paid...............................................................................................
Net cash (used in) provided by operating activities..................................

8

¥

2010

36,78815,354592——(65,354)
18
(112)
3,284
759
1,706
(313,389)
34,654
18,201
216
488(6)(88,644)
196,937(1,988)(1,039)(173,971)(121,453)(12,307)126
317,907(39,452)
3,891(186,789)(1,381)(188,171)

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

Thousands of
U.S. dollars (Note 2)

2010

2009

2010

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

¥ 72,780
12,466—¥ 39,996
27,352—$ 782,244
133,987—

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

¥ 85,246¥ 67,349$ 916,232

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

¥858,060
15,406873,466
53,351¥838,800
10,703
849,504
55,715$9,222,490
165,584
9,388,075
573,420

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

¥926,817¥905,219$9,961,495

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

9.19%

7.44%

9

Board of Directors and Corporate Auditors(As of June 29, 2010)

President & Chief
Executive Officer
Representative Director

Senior Managing
Executive Officer
Director

Managing Executive
Officers

Kunimitsu Yoshinaga

Hideo Kabe

Noboru Kogure
Shinobu Fukuda

Deputy President &Executive Officer
Director

Directors

Executive Officers

Sakae Morishige
Masayuki Kon

Masami Tsubuku
Seiji Tamura
Masanori Tsunoyama
Naoshi Sando

Hitoshi Fukuda

Kiyomi Osawa
Hitoshi Ito
Hideaki Minami
Auditors
Kiyoshi Takei
Kazuo Kojima
Toru Ikehara
Yoshikazu Kato

The Towa Bank Network(As of March 31, 2010)

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 JPJT

ServiceNetwork:
Network:
ServiceTohokuShinkansen
JoetsuShinkansen

Gunma
Prefecture:
39 branches

Tochigi
Prefecture:
3 branches

Maebashi
NaganoShinkansen
Takasaki

Omiya

Tokyo :
8 branches

SaitamaPrefecture:
42 branchesTokyo10