2012
Financial Statements

THE TOWA BANK, LTD.

A Message from the PresidentGroup we pursued the Phoenix Plan II, a business
improvement plan, under which we exerted ourutmost efforts to support our customers when andwhere needed. We conducted interviews with each of
our customers to collect the information required toaccurately ascertain their situation, and on that basis we
made revisions to our support measures, enabling us toprovide a smooth supply of funds to small and mediumsized enterprises. We also provided consulting services
on such matters as management improvement.
As a result of these activities, for its 107th business
term, the Group recorded a steady increase in deposits
as well as loans and bills discounted, posting net incomeof ¥7.7 billion for the reporting term. In addition, we
We take great pride in our customer satisfaction andachieved almost all our goals under the Phoenix Plan II,

appreciate your continued patronage with The Towa

which we have been pursuing since October 2009.
Although the business situation is likely to remain

Bank, Ltd. To assist you in further understanding ourcurrent situation, we have completed the Bank’s finan-difficult for some time to come, there are signs ofcial statements for fiscal 2011, ended March 31, 2012,

improvement in domestic demand, including both per-which are presented hereunder.

sonal consumption expenditure and capital investment,

The Japanese economy got off to a difficult start inand we have hopes for an economic recovery against

fiscal 2011, largely as a result of the disruption of supply

the background of special post-disaster reconstruction

chains and an unstable electric power supply situation,

demand, among other factors. Conversely, the outlook isboth caused by the East Japan Big Earthquake of Marchprojected to remain unclear, due to continued downside

11 last year. An improvement in the economy was seenrisks stemming from the worsening European debt crisisin the summer, but thereafter Japanese industry faced

and a general slowdown in the global economy. In thisa sharp deterioration in the earnings environment due

operating environment, at the Towa Bank Group weto the floods in Thailand and the economic downturn

will continue to fulfill our mission as a regional bank byoverseas, as well as the ongoing appreciation of thecarefully ascertaining our customers’ circumstances andyen against the backdrop of the European sovereign

sparing no effort to provide appropriate support. We

debt crisis. These factors served to delay the economy’s

regard it as a top-priority management issue to provide

recovery.

unstinting support for small and medium-sized enterprises, thereby assisting the development of the regional

While the Japanese economy’s performance has

economy.

remained largely unchanged since the beginning of
2012, there have been signs of a nascent recovery. At the

In keeping with its status as a regional financial

same time, there remain many downside risks, including

institution, our bank has cultivated a close relationshipthe further appreciation of the yen and the European

with the regional economy and society throughout its

sovereign debt crisis, and the outlook for the economy ishistory. From here on, we intend to further strengthen

still unclear.

the ties between the Towa Bank Group and the local
community. In their day-to-day interaction with ourAmid this business environment, at the Towa Bank2

customers, the entire management and staff of the Bank

overseas markets or have already set up operations over-will do their utmost to understand the customer’s prob-

seas face growing needs in the areas of financing, trade,lems and put themselves in the customer’s place. We

and investment. To meet these needs, we have been

will live up to our high reputation as a regional financial

taking steps to strengthen our support system, working

institution by enthusiastically listening to our customers

closely with governmental agencies such as JICA (Japanand offering them advice, so as to firmly establish ourInternational Cooperation Agency), JBIC (Japan Bank for

reputation in the local community as a bank that can be

International Cooperation), and JETRO (Japan Externalrelied on. To realize this goal, we will actively engage inTrade Organization) to support our customers’ efforts toactivities in the following five fields.

set up business operations overseas.

First, to raise customer satisfaction, the entire Bank

Fifth, we will take steps to increase the number ofwill offer continuous support for the core operations

female employees in the Bank’s marketing divisions.

of our corporate customers, including providing the

From the current fiscal year onwards we will be actively

information needed to help expand marketing channels

appointing female staff to marketing positions, bothand open up new business operations.

as part of our commitment to widening the sphere of
employment for female staff and as a means of enhanc-

Second, we will provide support for growth areas.

ing the Bank’s overall marketing potential.

The fields of medical treatment, nursing care, and social
welfare in general are expected to record further growthWith the aim of being a bank that local communi-in the near future as a result of the falling birthrate andties can depend on, at the Towa Bank Group, we will

the rising average age of the population. This growthcontinue to fulfill our mission as a regional bank bywill provide new employment opportunities in the

carefully ascertaining our customers’ circumstances andregions in which the Bank operates, due to the progress

sparing no effort to provide appropriate support. We willof medical technology. To assist this growth, we havevisit our customers frequently to collect the necessary

set up a dedicated team within our head office toinformation, will work closely together with them tohandle medical-related financing, and in collaboration

devise effective solutions to their business issues, andwith external medical consultants are actively offering

will support them in every way possible. In addition, we

financial support for the opening and of new hospitals

have positioned the strengthening of legal complianceand clinics, as well as funding for the operation of exist-

functions across the entire Towa Bank Group as a top

ing medical institutions and management consulting

management priority, and will take vigorous measuresservices.

to further reinforce the Bank’s earning power and realize
more efficient management. We would like to ask ourThird, we will offer advice on and financial support
for business succession and inheritance. We operateshareholders for their continued support and encourage-

a management consultation service in collaboration

ment in these future endeavors.

with eternal experts, backed by a full follow-up system,
August 2012

including financial support, enabling our customers
to pass on their businesses to their successors without
problems.
Fourth, we will provide support for corporate customers’ entry into overseas markets. Overseas activities by
the Bank’s customers are on the increase. Moreover,Kunimitsu Yoshinaga

those of our customers that are planning to enter

President and CEO

3

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

Millions of yen (Note 1)
March 31,

2012

Assets:Cash and due from banks ................................................................................... ¥ 32,392
Call loans and bills purchased ............................................................................
36,068Commercial paper and other debt purchased ....................................................
228
Trading account securities ..................................................................................
4
Securities .............................................................................................................
475,729
Loans and bills discounted ................................................................................. 1,245,485
Foreign exchange ................................................................................................
959
Other assets .........................................................................................................
13,260
Tangible fixed assets ...........................................................................................
25,380Intangible fixed assets .........................................................................................
905
Deferred tax assets...............................................................................................
4,695
Customers’ liabilities for acceptances and guarantees .......................................
4,555
Reserve for possible loan losses...........................................................................
(14,635)
Total assets ................................................................................................. ¥1,825,030

Thousands of U.S.
dollars (Note 2)

2011

¥

34,2168,609
239
27
470,044
1,225,693
2,819
14,06925,647
880
5,218
4,501
(16,719)¥1,775,249

2012

$

394,115
438,8442,778
525,788,172
15,153,738
11,673
161,336
308,806
11,011
57,13255,423(178,073)$22,205,014

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 ¥82.19 to US$1.00, the rate
prevailing on March 31, 2012.

4

Millions of yen (Note 1)
March 31,2012

Liabilities:
Deposits ............................................................................................................... ¥1,667,018
Borrowed money .................................................................................................
32,794Foreign exchange ................................................................................................
62
Other liabilities ...................................................................................................
8,487
Accrued employee bonuses .................................................................................
376
Reserve for employee retirement benefits ..........................................................
12,601
Reserve for director retirement benefits .............................................................
34
Reserve for reimbursement of dormant deposits................................................
282
Reserve for contingent loss .................................................................................
565
Deferred tax liabilities .........................................................................................
16
Deferred tax liability for land revaluation ..........................................................
3,019
Acceptances and guarantees ...............................................................................
4,555
Total liabilities ............................................................................................ 1,729,813
Net assets:
Shareholders’ equity:
Capital stock .......................................................................................................
38,653
Capital surplus ....................................................................................................
31,190Retained earnings................................................................................................
16,238Treasury stock, at cost .........................................................................................
(180)
Total shareholders’ equity..........................................................................
85,902
Accumulated other comprehensive income:Net unrealized gains on available-for-sale securities ..........................................
6,518
Land revaluation account ...................................................................................
2,621
Total accumulated other comprehensive income .....................................
9,139
Stock acquisition rights.......................................................................................
66
Minority interests................................................................................................
108
Total net assets ...........................................................................................
95,216
Total liabilities and net assets .................................................................... ¥1,825,030

5Thousands of
U.S. dollars (Note 2)

2011

2012

¥1,625,094
34,35035
9,389
264
12,328
52
261
535
20
3,567
4,501
1,690,400$20,282,494
399,006754
103,264
4,583
153,315
422
3,432
6,883
201
36,741
55,42321,046,523

38,65331,2059,432(109)
79,181

470,297379,494
197,570(2,196)
1,045,165

3,188
2,359
5,547
28
91
84,848¥1,775,249

79,30431,890111,194803
1,326
1,158,490$22,205,014

Consolidated Statements of 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)

2012

2011

2012

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

¥23,667
7,721
196
5,052
450
5,048
42,137¥23,896
6,825
151
4,704
343
6,592
42,514$287,962
93,941
2,389
61,478
5,485
61,423512,680

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

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

1,676
214
14
2,528
3,400
22,328
8,099
38,262
4,252

13,1552,610
11938,562
21,871
271,848
78,655426,82385,856

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

343(1,017)
(674)
7,731
20
¥ 7,710189(2,431)(2,241)
6,493
40¥ 6,453

4,179(12,385)(8,205)
94,062250$ 93,812

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

¥22.9910.41¥18.71
7.12

$0.27
0.12

6

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

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

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

7

Thousands of
U.S. dollars (Note 2)

2012

2011

2012

¥ 7,731¥ 6,493$ 94,062

3,326
446
3,773
¥11,504

4,363
—
4,363
¥10,857

40,475
5,431
45,907$139,970¥11,486
17¥10,824
32$139,760
210

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

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

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

8

Thousands of
U.S. dollars (Note 2)

2012

2011

2012

¥38,653¥38,653$ 470,297—¥38,653—¥38,653—$ 470,297¥31,205¥31,205$ 379,676

(14)
(14)
¥31,190——¥31,205

(181)
(181)
$ 379,494¥ 9,432¥ 3,612$ 114,763(1,088)
7,710

(641)
6,453

(13,249)
93,8120
184
6,805¥16,238—8
5,820¥ 9,43202,244
82,807$ 197,570

¥

(109)

¥

(108)

$

¥

(91)
21
(70)
(180)

¥

(1)
—
(1)
(109)

(1,117)256(860)(2,196)¥79,181¥73,362$ 963,401(1,088)
7,710
(91)

(641)
6,453
(1)

(13,249)
93,812(1,117)

0
184
6
6,720
¥85,902

—
8
—
5,818
¥79,181

0
2,244
74
81,764$1,045,165(1,335)

Thousands of
U.S. dollars (Note 2)

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

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

9

2012

2011

2012

¥ 3,188¥ (1,183)

3,330
3,330
¥ 6,518$

38,7884,371
4,371¥ 3,188$

40,516
40,51679,304¥ 2,359¥ 2,368$

28,702261
261¥ 2,621(8)(8)¥ 2,359

$

3,187
3,187
31,890¥ 5,547¥ 1,184$

67,491

3,592
3,592¥ 9,139

4,362
4,362
¥ 5,547

43,70343,703$ 111,194

¥

28

¥

—

$

341

¥

37
37
66

¥

28
28
28

$

462
462
803

¥

91

¥

58

$

1,115

¥

17
17
108

¥

32
32
91

$

210
210
1,326

¥84,848¥74,606$1,032,349(1,088)
7,710
(91)

(641)
6,453
(1)

(13,249)
93,812(1,117)

0
184
6
3,647
10,367¥95,216

—
8
—
4,423
10,242¥84,848

02,244
74
44,375
126,140$1,158,490

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

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

2012

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

Thousands of
U.S. dollars (Note 2)

2011

2012

¥ 7,056
1,289
299(2,083)
115
272
(18)
20
30
(31,585)
1,305
1,682
(57)
20
23
(19,791)
41,886(1,555)(146)(27,447)—
1,860
26
31,332(1,874)
1,135
3,797
14
3,811

¥

4,252
1,296
122
(2,638)
31
350
(195)
20
(140)
(30,873)
1,905
4,621
71
23
3
(28,278)
31,00930,033(19)
10,815(30,000)(778)
0
31,067(2,269)301
20,734(382)
20,352$(99,370)
36,75859,171
(830)
(384)
6
(6)

(175,740)
123,858
37,947
(223)
—
71
(1)

(1,209,033)
447,244
719,935(10,107)(4,682)73(80)

25(4,630)—(14,088)315(56,336)

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

(1,088)(91)
0(1,180)

(641)
(1)
—
(643)

(13,249)(1,117)1(14,365)

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

28(1,970)32,728¥30,757

38
5,659
27,069¥ 32,728

342(23,980)
398,204$ 374,223

Cash flows from investing activities:
Purchases of securities.........................................................................................
Proceeds from sale of securities ..........................................................................
Proceeds from redemption of securities .............................................................
Purchases of tangible fixed assets .......................................................................
Purchase of intangible fixed assets .....................................................................
Proceeds from sale of tangible fixed assets .........................................................
Payments for asset retirement obligations .........................................................
Proceeds from sale of stocks of subsidiary resulting in change in scope of
consolidation ....................................................................................................
Net cash used in investing activities ..........................................................

10

85,856
15,685
3,644(25,350)
1,404
3,319
(221)
254
369
(384,292)
15,886
20,475
(704)
254
282
(240,805)
509,627(18,928)(1,787)(333,954)—
22,631
326
381,226(22,804)
13,811
46,205173
46,378

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

Thousands of
U.S. dollars (Note 2)

2012

2011

2012

Tier I capital ........................................................................................................
Tier II capital .......................................................................................................
Deduction ...........................................................................................................
Total qualifying capital .......................................................................................

¥ 84,726
12,654—¥ 97,381¥ 78,212
12,233—¥ 90,446$ 1,030,864
153,966—$ 1,184,831

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

¥904,907
16,519921,426
57,151¥978,577
9.95%¥889,907
18,510908,41754,371¥962,789
9.39%$11,009,941
200,993
11,210,934
695,352$11,906,287

11

Board of Directors and Audit & Supervisory Board(As of June 26, 2012)

President & Chief
Executive Officer
Representative Director

Senior Managing
Executive Officer
Director

Kunimitsu Yoshinaga

Hideo Kabe

Deputy President &Executive Officer
Director

Directors

Managing Executive
Officers
Shinobu Fukuda
Masanori Tsunoyama
Naoshi Sando
Hitoshi Ito
Kiyomi Osawa

Sakae Morishige
Masayuki Kon

Executive Officers
Hideaki Minami
Hiroshi Ebara
Hiroyuki Sakurai
Audit & Supervisory
Board Members
Noboru Kogure
Seiji Tamura
Yasuhisa Fukuda
Shintaro Ando

Hitoshi Fukuda

The Towa Bank Network(As of March 31, 2012)

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 Network:
TohokuShinkansen
JoetsuShinkansen

Gunma
Prefecture:
38 branches

Tochigi
Prefecture:
3 branches

Maebashi
NaganoShinkansen
Takasaki

Omiya

Tokyo :
8 branches

SaitamaPrefecture:
42 branchesTokyo12