2017
Financial Statements

THE TOWA BANK, LTD.

A Message from the President

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 2016, ended March 31, 2017, which are­presented hereunder.
In fiscal 2016, exports increased and production
followed a recovery trend as growth rates in economies overseas gradually grew. Recovery in capital
investment and steady personal consumption also
moved the economy toward a gradual expansion.
Under these economic conditions, the Towa Bank
Group launched Phoenix Plan IV, a three-year business improvement plan scheduled to run from April
2015 to March 2018. Based on this plan, the entire
management and staff of the Bank worked hard to
support our customers’ main business operations andimprove their management with the following mottoes in mind: “Supporting our customers when andwhere needed by meeting with them to collect information and accurately ascertain their situation” and“Never forgetting our modest origins.”
In supporting our customers’ main business operations, we have provided business-matching services,
including solutions to expand sales channels andintroduce new products. We also supported joint
research with Gunma University and the Maebashi
Institute of Technology, and assisted with applications

for various subsidies, including the Monozukuri­Subsidy, in partnership with the Kanto Bureau of
Economy, Trade and Industry, the Organization for
Small & Medium Enterprises and Regional Innovationand others. In another initiative, we fostered tech­
nology partnerships with major companies, includingcommercial negotiations with major manufacturing
and food processing buyers. Also in collaboration
with the Kanto Bureau of Economy, Trade and­Industry, we held the Management Mentor Exchange
Meeting, which introduces our Group’s customers topersonnel with specialized knowledge who haveretired from major corporations, and worked to offer
proposals for assisting our customers with increasing
sales and resolving management issues.
At local universities, including Gunma University,
Takasaki City University of Economics and the Open
University of Japan, executives of the Towa Bank Group
conduct lectures eligible for approving credits, offering
not only their specialized knowledge of finance andeconomics, but also our community-based banking
services, credit administration and other work to­fulfill our role as a regional financial institution.
In addition, to expand business opportunities forour customers, we proactively held joint businessmeetings with Tsukuba Bank, Ltd. and The Tochigi
Bank, Ltd., and set up business-matching sessions
with major corporations under a matching program2

between upstream and downstream enterprises
through cooperation between industry, government,
academia and finance.
About the support of the growth industry that­utilized the Towa Supporting Fund in Transition ofAgriculture, Forestry and Fisheries to the Sextiary
Sector, we offer proposals to owners of agriculture andforestry businesses to support a shift to the sextiary
sector. By introducing those business owners to partners in secondary and tertiary industries, we assist
them in generating business opportunities and creating value. We are also initiating efforts to support
their growth strategies, including market expansion
inside and outside the country, and have alreadyselected a target for the fund’s first investment deal.
In terms of providing support for corporate customers entering overseas markets, we are working tostrengthen and expand our cooperation with outside
institutions, utilizing our overseas network of 37
institutions in 58 countries for providing proactive
assistance. We also support customers with application documents in coordination with the Japan­International Cooperation Agency (JICA), and offer
proposals based on a cofinancing program in­cooperation with the Japan Bank for International
Cooperation (JBIC), among others.
In the area of management improvement support,
we worked to take advantage of our consulting­function by utilizing the knowledge and support
capabilities of outside institutions, including the SME
Business Rehabilitation Support Council and theRegional Economy Vitalization Corporation of Japan.
We also began cooperation for management improvement support with the Gunma and Saitama prefectural credit guarantee corporations, and based on
appropriate assessment of business potential, areworking to put in place a proactive approach to­supplying funds that can contribute to customer
management improvements.

As a result of these and other efforts to support
our customers’ main businesses, our deposit balance
increased ¥54.0 billion year on year to ¥1,914.8 ­billion,
while our loan balance also increased by ¥30.2 billion
to ¥1,381.9 billion in fiscal 2016. C­ oncerning earnings in fiscal 2016, we posted ¥10.7 b­ illion in income
before income taxes and ¥8.5 billion in profit attributable to owners of parent, mainly due to an increasein loan balances, primarily loans to SMEs.
The Towa Bank Group originated as two mutual
financing companies in Gunma and Saitama Prefectures. Since our founding as the Gunma Savings andFinance Company on June 11, 1917, we have continued to support our SME customers as a people’s financial institution, and this year successfully entered our100th year in business. Going forward, we will work
together to ensure support for our customers’ main
businesses, never forgetting our modest origins, andaid in the further vitalization of our communities,building a foundation for the next 100 years. We
would like to ask our shareholders for their continued
support and encouragement in these endeavors.

September 2017

Kunimitsu Yoshinaga
Representative Director
President & Executive Officer
The Towa Bank, Ltd.

3

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

Millions of yen (Note 1)
2017

March 31,

Assets:Cash and due from banks ................................................................................... ¥  231,150
Call loans and bills purchased ............................................................................
1,402
Trading account securities ..................................................................................
27
Securities .............................................................................................................
594,156
Loans and bills discounted ................................................................................. 1,381,948
Foreign exchange ................................................................................................
522
Other assets .........................................................................................................
18,729Tangible fixed assets ...........................................................................................
25,203
Buildings .........................................................................................................
4,714
Land ................................................................................................................
18,031
Lease assets (tangible) .....................................................................................
146
Other tangible assets ......................................................................................
2,311
Intangible fixed assets .........................................................................................
1,713
Software ..........................................................................................................
1,532
Other intangible assets ...................................................................................
181
Deferred tax assets ..............................................................................................
259
Customers’ liabilities for acceptances and guarantees .......................................
4,406
Reserve for possible loan losses ...........................................................................
(7,321)
Total assets ................................................................................................. ¥2,252,199

Thousands of
U.S. dollars (Note 2)

2016

2017

¥  155,779
22,501
21
601,129
1,351,689
507
13,04324,922
4,881
17,960
177
1,903
1,686
756
929
—
3,023
(8,226)¥2,166,077$ 2,060,346
12,500248
5,295,981
12,317,929
4,656
166,944
224,653
42,025
160,721
1,307
20,59915,276
13,661
1,614
2,313
39,276(65,259)$20,074,866

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 conversions of Japanese yen, for convenience only, at the exchange rate of ¥112.19 to US$1.00, the rate
prevailing on March 31, 2017.

4Millions of yen (Note 1)
2017

March 31,

Liabilities:
Deposits ............................................................................................................... ¥1,914,844
Negotiable certificates of deposit ........................................................................
—
Borrowed money .................................................................................................
156,139
Foreign exchange ................................................................................................
74
Other liabilities ...................................................................................................
11,976
Accrued employee bonuses .................................................................................
440
Net defined benefit liability ................................................................................
9,364
Reserve for director retirement benefits .............................................................
0Reserve for reimbursement of dormant deposits ...............................................
440
Reserve for contingent loss .................................................................................
629
Deferred tax liabilities .........................................................................................
16
Deferred tax liability for land revaluation ..........................................................
2,493
Acceptances and guarantees ...............................................................................
4,406
Total liabilities ............................................................................................ 2,100,826
Net assets:
Shareholders’ equity:
Capital stock .......................................................................................................
38,653
Capital surplus ....................................................................................................
31,160Retained earnings ................................................................................................
59,825
Treasury stock, at cost .........................................................................................
(318)
Total shareholders’ equity ..........................................................................
129,322
Accumulated other comprehensive income:Net unrealized gains on available-for-sale securities ..........................................
17,513
Land revaluation account ...................................................................................
3,093
Remeasurements of defined benefit plans ..........................................................
867
Total accumulated other comprehensive income .....................................
21,474
Stock acquisition rights ......................................................................................
227
Non-controlling interests ...................................................................................
348
Total net assets ...........................................................................................
151,372
Total liabilities and net assets .................................................................... ¥2,252,199

5

Thousands of
U.S. dollars (Note 2)

2016

2017

¥1,860,800
700
128,389
16
10,637416
10,072
1
447
682
864
2,493
3,023
2,018,544$17,067,874—
1,391,737
663
106,752
3,926
83,469
7
3,924
5,608
148
22,222
39,276
18,725,611

38,65331,17052,523(373)
121,974

344,538
277,751
533,252(2,836)
1,152,706

21,572
3,079
409
25,061
217
278
147,532¥2,166,077

156,103
27,573
7,735
191,4122,031
3,105
1,349,254$20,074,866

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

Millions of yen (Note 1)

Thousands of
U.S. dollars (Note 2)

2017

2016

2017

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

¥ 21,430
7,197
120
6,503
3,524
4,786
43,561¥22,321
7,384
149
6,357
388
4,530
41,132$191,023
64,152
1,072
57,966
31,411
42,660388,285

Expenses:
Interest on deposits .............................................................................................
Negotiable certificates of deposit �����������������������������������������������������������������������
Interest on call money and bills sold ����������������������������������������������������������������
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 ...............................................................................

545
0
(0)
69
2
4,348
1,103
22,243
4,496
32,81010,751

693
1
—
123
4
4,179
212
21,646
3,774
30,636
10,495

4,859
7
(1)
618
25
38,760
9,839
198,267
40,079292,456
95,829

Income taxes:
Current ...........................................................................................................
Deferred ..........................................................................................................
Total income taxes .....................................................................................
Profit ....................................................................................................................
Profit attributable to non-controlling interests ..................................................
Profit attributable to owners of parent ......................................................

1,204
929
2,133
8,617
63
¥  8,553

1,066
1,225
2,292
8,203
44
¥ 8,158

10,7338,284
19,01876,810569$ 76,240

Profit attributable to owners of parent per share (in yen and U.S. dollars):
Basic ................................................................................................................
Diluted ............................................................................................................

¥  21.94
11.37¥ 20.80
11.69$   0.20
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)

Thousands of
U.S. dollars (Note 2)

For the years ended March 31,

2017

2016

2017

Profit ....................................................................................................................
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 .....................................................................

¥ 8,617¥ 8,203$ 76,810(4,053)—458(3,595)¥ 5,022

2,745
133
47
2,926
¥11,130(36,130)—
4,084(32,045)$ 44,764

Total comprehensive income attributable to:
Owners of parent ............................................................................................
Non-controlling interests ...............................................................................

¥ 4,952
69¥11,08643$ 44,143621

7

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

Millions of yen (Note 1)
Shareholders’ equity
Capitalstock

Balance at April 1, 2016 ������������������������������� ¥38,653
Changes in items during the period:
Dividends from surplus �����������������������������
Profit attributable to owners of parent �����
Disposal of treasury stock ��������������������������
Purchase of treasury stock �������������������������
Increase (decrease) of items forsome other reason �����������������������������������
Changes in items other than shareholders’equity during the period (net amount) ����
Total changes in items during the period �����
—Balance at March 31, 2017 �������������������������� ¥38,653

CapitalsurplusRetainedearnings

Treasury
stock

Total
shareholders’equity¥31,170¥52,523¥(373)¥121,97457(1)(1,237)
8,553
48
(1)

(1,237)
8,553
(9)

(13)

(9)
¥31,160

7,301¥59,825(13)

55¥(318)

7,347¥129,322

Millions of yen (Note 1)
Accumulated other comprehensive income
Net unrealized
gains (losses) on
available-for-salesecurities

Balance at April 1, 2016 ������������������������������� ¥21,572
Changes in items during the period:
Dividends from surplus �����������������������������
Profit attributable to owners of parent �����
Disposal of treasury stock ��������������������������
Purchase of treasury stock �������������������������
Increase (decrease) of items forsome other reason �����������������������������������
Changes in items other than shareholders’equity during the period (net amount) ����
(4,059)Total changes in items during the period �����
(4,059)Balance at March 31, 2017 �������������������������� ¥17,513

Land
revaluationaccount¥3,079

Total
accumulated
otherRemeasurements
comprehensiveof defined
benefit plansincome¥409¥25,061

Stockacquisitionrights

Noncontrollinginterests

Total
net assets

¥217

¥278

¥147,532(1,237)
8,553
48
(1)
(13)

13
13
¥3,093

8

458
458
¥867

(3,587)(3,587)¥21,474

10
10
¥227

69
69
¥348

(3,507)
3,840¥151,372

Thousands of U.S. dollars (Note 2)
Shareholders’ equity
Capitalstock

CapitalsurplusRetainedearnings

Treasury
stock

Total
shareholders’equityBalance at April 1, 2016 ������������������������������� $344,538 $277,836 $468,169 $(3,333) $1,087,211
Changes in items during the period:
Dividends from surplus �����������������������������
(11,033)(11,033)
Profit attributable to owners of parent �����
76,24076,240
Disposal of treasury stock ��������������������������
(84)
513
429
Purchase of treasury stock �������������������������
(17)
(17)
Increase (decrease) of items forsome other reason �����������������������������������
(124)
(124)
Changes in items other than shareholders’equity during the period (net amount) ����
Total changes in items during the period �����
—(84) 65,082
496
65,495
Balance at March 31, 2017 �������������������������� $344,538 $277,751 $533,252 $(2,836) $1,152,706
Thousands of U.S. dollars (Note 2)
Accumulated other comprehensive income
Net unrealized
gains (losses) on
available-for-salesecurities

Land
revaluationaccount

Balance at April 1, 2016 ������������������������������� $192,285 $27,449
Changes in items during the period:
Dividends from surplus �����������������������������
Profit attributable to owners of parent �����
Disposal of treasury stock ��������������������������
Purchase of treasury stock �������������������������
Increase (decrease) of items forsome other reason �����������������������������������
Changes in items other than shareholders’equity during the period (net amount) ���� (36,182)
124
Total changes in items during the period ����� (36,182)
124
Balance at March 31, 2017 �������������������������� $156,103 $27,573

9

Total
accumulated
otherRemeasurements
comprehensiveof defined
benefit plansincome$3,650$223,385

Stockacquisitionrights

Noncontrollinginterests$1,940$2,483 $1,315,020

Total
net assets(11,033)
76,240
429
(17)
(124)
4,084
4,084
$7,735(31,972)(31,972)$191,41290
90$2,031

621(31,260)
621
34,234$3,105 $1,349,254

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

Millions of yen (Note 1)
2017

Thousands of
U.S. dollars (Note 2)

2016

2017

Cash flows from operating activities:
Income before income taxes ............................................................................... ¥   10,751
Depreciation and amortization ..........................................................................
1,568
Loss on impairment of fixed assets .....................................................................
—
Increase (decrease) in reserve for possible loan losses ........................................
(905)
Increase (decrease) in reserve for employee bonuses .........................................
23
Increase (decrease) in reserve for reimbursement of dormant deposits .............
(7)
Increase (decrease) in reserve for contingent loss ..............................................
(52)
Increase (decrease) in net defined benefit liabilities ..........................................
(49)
Increase (decrease) in provision for directors’ retirement benefits ....................
(0)Interest income ...................................................................................................
(28,748)
Interest expenses .................................................................................................
618
Loss (gain) on disposal of tangible fixed assets ..................................................
3
Loss (gain) on securities — net ...........................................................................
(1,792)Foreign exchange loss (gain) — net ....................................................................
(69)
Net (increase) decrease in loans ..........................................................................
(30,258)
Net increase (decrease) in deposits .....................................................................
54,044
Net increase (decrease) in negotiable certificates of deposit ..............................
(700)
Net increase (decrease) in borrowings excluding subordinated debt .................
27,750Net (increase) decrease in due from banks other than the Bank of Japan .........
355
Net (increase) decrease in call loans and others .................................................
21,099Net (increase) decrease in foreign exchange — assets ........................................
(15)
Net increase (decrease) in foreign exchange — liabilities ..................................
57
Interest received ..................................................................................................
29,346
Interest paid ........................................................................................................
(736)
Other ...................................................................................................................
(5,410)Subtotal ......................................................................................................
76,870
Income taxes paid ...............................................................................................
(1,588)Net cash provided by (used in) operating activities ..................................
75,281¥   10,495
1,300
174
(778)
1
30
4
(242)
(29)
(29,856)
823
19
(865)
189
(26,039)
37,475—54,007599
13,387293(79)
30,289(829)(813)
89,557(49)
89,507$     95,829
13,980—(8,068)
212
(66)
(472)
(437)
(4)
(256,247)
5,509
30(15,981)(620)(269,709)
481,720(6,239)247,348
3,164
188,065(135)
515
261,581(6,565)(48,230)
685,178(14,157)
671,021

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

(1,463)(137,990)
25
40,767(420)
100,746(0)
1,663(1,648)(147,389)—
20,273(915)
87,400(0)(42,280)(13,048)(1,229,972)
222
363,380(3,752)897,999(2)
14,827

Cash flows from financing activities:
Proceeds from exercise of stock options .............................................................
0
Purchases of treasury stock .................................................................................
(1)
Dividends paid ....................................................................................................
(1,237)
Net cash provided by (used in) financing activities ..................................
(1,239)Effect of exchange rate changes on cash and cash equivalents .........................
20
Net increase (decrease) in cash and cash equivalents ........................................
75,726
Cash and cash equivalents at beginning of year ................................................
154,531
Cash and cash equivalents at end of year .......................................................... ¥ 230,257

0(2)(1,250)(1,252)
15
45,990108,541¥ 154,531

5(17)(11,033)(11,045)178
674,981
1,377,410$ 2,052,392

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)

2017

2017

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

¥  133,047
1,415¥  131,632$ 1,185,910
12,614$ 1,173,296

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

¥1,117,465
13,660471
1,131,597
59,622¥1,191,219
11.05%$ 9,960,469
121,763
4,204
10,086,436
531,442$10,617,879

March 31,

11

Board of Directors and Audit & Supervisory Board(As of June 27, 2017)

Representative Director
President & Executive
Officer

Directors
Senior Managing
Executive Officers

Kunimitsu Yoshinaga

Hiroshi Ebara
Hiroyuki Sakurai

Representative Director
Deputy President &Executive Officer
Kiyomi Osawa

Executive Officers

Senior Managing
Executive Officer
Hitoshi Ito
Managing Executive
Officers

Outside Directors

Kiyoshi Tomizawa
Kiyoshi Shibasaki
Kazuyoshi Shiraishi
Toshiko Fusejima

Masayuki Kon
Nobuko Inaba

Seiji Yamamoto
Toru Kobayashi
Isao Kitazume
Masami Hashimoto
Ichiro Takenouchi
Audit & Supervisory
Board Members
Hideo Kabe*
Masahiro Sekine*
Shintaro Ando**
Shinichi Kato*** Full-Time Audit & Supervisory Board Member** Outside Audit & Supervisory Board Member

The Towa Bank Network(As of March 31, 2017)

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
Hokuriku
Shinkansen

Takasaki

Omiya

Tokyo:
8 branches

SaitamaPrefecture:
42 branchesTokyo12