2009
Financial Statements

THE TOWA BANK, LTD.

A Message from the President
I herewith present the financial

tomers’ business conditions and creditworthiness.

results of Towa Bank for fiscal 2008,

In the area of compliance, on the basis of our general compliance

ended March 31, 2009, and I would

regulations and specific ethical rules for the Bank’s directors, corporate

like to take this opportunity to thankauditors, and other employees, we are working to strengthen our legal

our customers for their loyal support.

compliance system, including checking functions. Specifically, we have

In fiscal 2008, amid a global

set up a committee composed of outside experts with no personal inter-

downturn triggered by the “once-in-

ests in the Bank, to monitor the performance of their duties by the

a-century” financial crisis in the

Bank’s board of directors and committee of corporate auditors.

United States, the Japanese economy

On September 30, 2008 Towa Bank filed a claim with the Maebashi

marked successive negative year-on-

District Court against former president Hiroo Masuda and a former

year growth figures for the first three

director, for compensation for damages resulting from the provision ofquarters of the fiscal year. The econ-loans without due credit screening processes. The management recog-

omy’s deterioration was particularly

nizes that, as exemplified by the case, the level of legal compliance at

sharp in the Oct.-Dec. third quarter, with an annualized negative

the Bank has hitherto not been adequate.

growth rate of 12.1% amid signs that the recession might be here to

We are also working to secure stable and adequate earnings forstay for a long time.

Towa Bank through the operation of an effective risk management sys-

Against this backdrop, the management and staff of Towa Bank

tem that addresses all the various categories of risk to which banks areworked together to realize the goals under our seventh long-term man-

exposed. In particular, we intend to substantially increase the fre-agement plan, as well as the Phoenix Plan, which we drew up as a blue-

quency of visits to customers by our marketing staff to ensure adequate

print for steps to improve profitability. These goals are centered on ourmonitoring of their creditworthiness as an important means of manag-

fundamental mission of being a bank that is willing to extend a lifeline

ing credit risk.

to customers in trouble, no matter how bad the business situation.

Regarding steps to further strengthen the Bank’s capital adequacy,

Specifically, we aim to contribute to the growth and development ofon December 19, 2008 we registered an issue of new shares over a pre-the regional community through the provision of reliable funding ser-determined period of one year and for an amount of ¥6 billion, to give

vices to small and medium-sized companies.

us greater flexibility in new share issuance. On March 27, 2009, inTo bolster our lineup of financial products, we developed andaccordance with the aforementioned registration, we made a capitallaunched a series of new products and services, including new types ofincrease through private placement of shares in the amount of ¥3.1

loans for businesses and individuals, defined contribution pension

billion.

funds, and acting as a counterparty for foreign exchange risk hedging

During the reporting period we took steps to cut costs. Specifically,transactions conducted by our customers. In this way, we invested in

we lowered personnel expenses by reducing directors’ compensation

the development of new products and services in line with our princi-

and employees’ bonuses, and also effected measures to reduce clericalple of “the customer comes first.” We greatly increased the frequency

costs. We plan to take further measures to cut personnel costs throughof our marketing visits to many of our customers, to make sure they are

efficient staff allocation, including a thorough review of our personnel

provided with full information about financial products that meet theirsystem, while all non-personnel costs will be subject to review with theneeds, and we intend to maintain this active marketing stance so as toaim of paring down operating expenses to the minimum. In this way,raise the Bank’s earning power. At the same time, to enable us to utilize

we plan to effect a substantial improvement to the Bank’s overhead

our limited management resources to optimum efficiency, we are tak-ratio (expenses as a percentage of gross business profit).

ing steps to improve the Bank’s earnings structure through such means

Even in the event that the present economic downturn is a pro-as restructuring our asset investment portfolio, redesigning the Bank’slonged one, Towa Bank will continue to provide essential fund procure-branch operations, and reorganizing our marketing system.

ment services for its customers, particularly small and medium-sized

Measures taken by Towa Bank to facilitate the provision of funds tobusinesses. Through the optimal use of our financial intermediarysmall and medium-sized corporate customers include the operation (infunctions, we aim to recover the trust of both our shareholders andDecember 2008 and again in March 2009) of consulting services on

business partners. I look forward to receiving the continued support

weekends and holidays, when the Bank as a whole is closed. These ser-and encouragement of our stakeholders, as we endeavor to place thevices principally involve handling customers’ inquiries relating to cash

Bank on a firm foundation for future prosperity.

flow issues. We also implemented an action program focused on the
Bank’s commitment to supporting its corporate borrowers even in theAugust 2009

worst of economic circumstances. This program involved all Bank
branches, and consisted of offering loans under the government’s
emergency guarantee system to help companies cope with the highprice of raw materials.
During the reporting period we also took measures to reinforce ourbranch support system, by increasing our head office credit monitoring
staff from three to six. This system enables branch staff to provide customers with proposals that perfectly address their business issues. The
Bank will continue to put priority on the reliable supply of funding to

Kunimitsu Yoshinaga

local SMEs, while constantly maintaining an accurate grasp of its cus-

President and CEO

2

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

Millions of yen (Note 1)
March 31,

2009

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

¥

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

Thousands of
U.S. dollars (Note 2)

2008

¥

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

2009

$

539,12133,321
2,092
311
4,469,727
12,010,006
9,120
77,30475,848276,280
13,46153,09976,131(258,966)$17,376,859

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 ¥98.23 to US$1.00,
the rate prevailing on March 31, 2009.

3

Millions of yen (Note 1)
March 31,

Thousands of
U.S. dollars (Note 2)

2009

2008

2009

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

¥1,575,762
41,3004,501
22
15,000
8,177
231
251
11,671
177
517
40
3,592
7,478
1,668,724¥1,603,386
21,001
4,713
40
15,000
8,043
236
187
12,165
272
118
63
3,592
8,410
1,677,231$16,041,556
420,441
45,823234
152,70283,2492,354
2,560
118,819
1,806
5,265
409
36,56976,131
16,987,926

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

41,153
5,587(10,927)(106)
35,70739,5654,000(7,117)(100)
36,347418,953
56,885(111,244)(1,088)363,505

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

(4,337)
2,395(1,941)(7,284)2,395(4,888)(44,156)
24,391(19,765)

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

4,439
38,204¥1,706,928

4,908
36,368¥1,713,599

45,193388,932$17,376,859

4

Consolidated Statements of Operations
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)

2009

2008

2009

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

¥26,013
4,248
118
4,689
213
7,286

¥27,847
3,776
124
5,230
261
11,246$264,821
43,2501,207
47,743
2,173
74,180Total income ..............................................................................................

42,57048,486433,376

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

4,091
383
400
4
2,474
186
22,026
17,613

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

41,647
3,901
4,077
41
25,186
1,897
224,234
179,313

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

47,17945,904

480,300

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

(4,609)2,582(46,923)

71
(790)
(80)

141
2,262
20

728
(8,046)(820)

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

¥ (3,809)¥

158$ (38,785)

Basic................................................................................................................

¥ (16.71)

¥

0.65

$

Diluted............................................................................................................

—Net income (loss) per share (in yen and dollar):

5

0.59

(0.17)—

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 end of previous year .....................................................................
Changes during year:
Issuance of shares.......................................................................................
Total changes during year .........................................................................
Balance at end of year ....................................................................................
Capital surplus
Balance at end of previous year .....................................................................
Changes during year:
Issuance of shares.......................................................................................
Reversal of capital surplus..........................................................................
Total changes during year .........................................................................
Balance at end of year ....................................................................................
Accumulated deficit
Balance at end of previous year .....................................................................
Changes during year:
Reversal of capital surplus..........................................................................
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.......................................................................................
Net income (loss) .......................................................................................
Purchase of treasury stock .........................................................................
Reversal of land revaluation account ........................................................
Total changes during year .........................................................................
Balance at end of year ....................................................................................

6

Thousands of
U.S. dollars (Note 2)

2009

2008

2009

¥ 39,565¥ 35,565$ 402,788

1,587
1,587
¥ 41,153

4,000
4,000
¥ 39,565

16,164
16,164$ 418,953¥ 4,000¥ 14,516$ 40,720

1,587
—
1,587
¥ 5,587

4,000(14,516)(10,516)¥ 4,000

16,164—
16,164$ 56,885¥ (7,117)¥(21,737)$ (72,459)—(3,809)—(3,809)¥(10,927)

14,516158(54)
14,619¥ (7,117)—(38,785)—(38,785)$(111,244)

¥

(100)

¥

(89)

$

(1,022)

¥

(6)
(6)
(106)

¥

(11)
(11)
(100)

$

(66)
(66)
(1,088)¥ 36,347¥ 28,255$ 370,026

3,175(3,809)(6)—(640)¥ 35,707

8,000
158
(11)
(54)
8,091
¥ 36,347

32,329(38,785)(66)—(6,521)$363,505

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.......................................................................................
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)

2009

2008

2009

¥ (7,284)¥ 2,429$ (74,155)

2,946
2,946
¥ (4,337)(9,713)(9,713)¥ (7,284)

29,99829,998$ (44,156)¥ 2,395¥ 2,340$ 24,391——¥ 2,395

54
54¥ 2,395——$ 24,391¥ (4,888)¥ 4,770$ (49,764)

2,946
2,946
¥ (1,941)(9,658)(9,658)¥ (4,888)

29,99829,998$ (19,765)¥ 4,908¥346$ 49,972

(469)
(469)
¥ 4,439

4,562
4,562
¥ 4,908(4,779)(4,779)$ 45,193¥36,368¥33,372$370,235

3,175(3,809)
(6)
—
2,477
1,836
¥38,204

8,000
158
(11)
(54)
(5,096)2,995¥36,368

32,329(38,785)(66)—
25,21918,697$388,932

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)

2009

2008

2009

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

¥ (4,609)
1,516
107
37
(77)
(862)
(4)
(494)
(94)
64
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

¥ 2,582
4,706
1,035
—
—
(3,961)
(240)
(888)
(190)
77
118
(31,747)
4,722(1,110)(20)
93
128
16,453(53,173)(770)
305(20,910)
19,821(1,123)(35)
33,358(3,796)73(34,493)(115)(34,608)$ (46,923)
15,442
1,092
379
(789)
(8,777)(48)(5,030)
(963)
656
4,056
(309,279)
49,66750,811
(412)
515
995
(144,988)(281,221)(2,163)(2,194)
226,894
206,638
10,921(177)
318,510(46,603)200
37,210(1,258)35,952

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 provided by (used in) investing activities ..................................

(72,445)
57,187
25,663
(235)
27
(96)
10,103(80,704)
42,92825,617(4,237)426—(15,970)(737,504)
582,180
261,263(2,393)282(978)102,850

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

—
3,094
—
(209)
(6)
2,879

3,894
7,959
4,583
—
(11)
16,426—31,506—(2,129)(66)
29,311

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

40
16,55435,031¥51,585

6(34,145)
69,177¥35,031412
168,526
356,625$525,1528

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

Thousands of
U.S. dollars (Note 2)

2009

2008

2009

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

¥ 39,996
27,352—¥ 33,972
25,227—$ 407,176
278,451—

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

¥ 67,349¥ 59,199$ 685,627

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

¥838,800
10,703
849,504
55,715¥816,017
12,774
828,791
58,669$8,539,152
108,959
8,648,111
567,197

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

¥905,219¥887,461$9,215,309

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

7.44%

6.67%

9

Board of Directors and Corporate Auditors(As of June 26, 2009)

President andChief Executive Officer
Kunimitsu Yoshinaga
Deputy PresidentManaging Directors

Directors

Corporate Auditors

Katsuhiro Tamaoki
Hideo Kabe
Noboru Kogure

Shinobu Fukuda
Masami Tsubuku
Seiji Tamura
Masanori Tsunoyama
Naoshi Sando
Masayuki Kon

Kiyoshi Takei
Kazuo Kojima
Toru Ikehara
Yoshikazu Kato

Hitoshi Fukuda

The Towa Bank Network(As of March 31, 2009)

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:
38 branches

Tochigi
Prefecture:
3 branches

Maebashi
NaganoShinkansen
Takasaki

Omiya

Tokyo :
8 branches

SaitamaPrefecture:
42 branchesTokyo10