2016
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 2015, ended March 31, 2016, which are presented hereunder.
In fiscal 2015, despite weakness in both exports
and production resulting from the impact of an economic slowdown in China and other emerging countries and a drop in oil prices, Japan’s economy
continued its modest recovery trend. On January 29,
2016, the Bank of Japan decided to introduce quantitative and qualitative monetary easing with negativeinterest rates in an effort to more quickly achieve its
price stability target of 2%.
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,improve their management, and support their business rehabilitation to help them increase sales andresolve management issues 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 Monozukuri
Subsidy, 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 technology partnerships with major companies, includingcommercial negotiations with major food processing
and manufacturing buyers.
Also in collaboration with the Kanto Bureau of
Economy, Trade and Industry, we held theManagement Mentor Exchange Meeting, which introduces our Group’s customers to personnel with specialized knowledge who have retired from major
corporations, and worked to offer proposals for assisting our customers with expansion overseas, increasing sales and resolving management issues.
In addition, in December 2014, we entered into the
Broad Partnership Agreement with Tsukuba Bank, Ltd.
and The Tochigi Bank, Ltd. to expand business opportunities for customers. Under this agreement, we
proactively held joint business meetings and acted asthe ­industry-to-industry coordinator for the Highland

2Kanto Liaison Organization, promoting hiring of individuals with actual experience in supporting small- andmedium-sized enterprises and dispatching our own staff
to the Gunma Industry Support Organization. Throughthese and other efforts we aimed to improve our business assessment capabilities and develop and enhance
infrastructure for supporting our customers’ main business operations.
In the area of management improvement support,
the Business Rehabilitation Office was primarily
responsible for providing support, advice and so forth
to our customers in developing management improvement plans, as we worked to take advantage of ourconsulting function. Meanwhile, to enhance the effectiveness of our management improvement support,
we actively utilized the knowledge and support capabilities of outside institutions, including the SME
Business Rehabilitation Support Councils and theRegional Economy Vitalization Corporation of Japan.
The Towa Bank Group has always been proactive
in promoting women to executive positions, including as officers and branch managers. To further
strengthen the structure supporting our businessmodel, we are also working to expand our employees’
range of activities. This involves supporting a balance
between work and childcare by enhancing our parental leave program and establishing new childcare
leave policies, as well as formulating an action planfor promoting the advancement of women with thegoal of increasing the ratio of women in management
and executive positions and the ratio of female hires.
These and other efforts are aimed at creating an environment that will make it even easier for diverse personnel to play an active part in our business.
To strengthen audit and supervision of businessexecution, we have established an accountable management structure, based on the Corporate
Governance Code. The structure ensures transparency
in our decision-making process by having multiple
independent outside directors, and also includes
assessment of the suitability of management measuresby an external evaluation committee.

As a result, in fiscal 2015, our deposit balance
increased by ¥37.4 billion year on year to ¥1,860.8
billion, while our loan balance also increased by ¥26.0
billion year on year to ¥1,351.6 billion. The numberof business loan customers increased by 821 year on
year to 14,393, as we developed new business relationships with about 2,000 companies and generated
results from our business introduction services.
Concerning earnings in fiscal 2015, we posted ¥9.7
billion in core operating income, ¥10.6 billion inincome before income taxes, and ¥8.1 billion in profit
attributable to owners of parent, mainly due to anincrease in loan balances, primarily loans to SMEs.
In June of 2017, the Towa Bank Group, which originated as two mutual financing companies in Gunma
and Saitama Prefectures, will mark its 100th anniversary. Moving forward, we will continue to keep ourmodest origins in mind as we develop our system ofcustomer support and improve our business assessment capabilities in order to further enhance thesustainability of our business model, which focuseson supporting our customers’ main business operations. At the same time, we will work to expand our
support network with regional municipalities andlocal universities, strengthen our support for theadvancement of female employees and specialized
human resource development, build strong relationships with our customers, and fortify our management base. We would like to ask our shareholders fortheir continued support and encouragement in theseendeavors.

August 2016

Kunimitsu Yoshinaga
President and CEO
The Towa Bank, Ltd.

3

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

Millions of yen (Note 1)
2016

March 31,

Assets:Cash and due from banks.................................................................................... ¥  155,779
Call loans and bills purchased.............................................................................
22,501
Trading account securities...................................................................................
21
Securities..............................................................................................................
601,129
Loans and bills discounted.................................................................................. 1,351,689
Foreign exchange.................................................................................................
507
Other assets..........................................................................................................
13,043
Tangible fixed assets............................................................................................
24,922
Buildings..........................................................................................................
4,881
Land.................................................................................................................
17,960
Lease assets (tangible)......................................................................................
177
Other tangible assets.......................................................................................
1,903
Intangible fixed assets..........................................................................................
1,686
Software...........................................................................................................
756
Other intangible assets....................................................................................
929
Deferred tax assets...............................................................................................
—
Customers’ liabilities for acceptances and guarantees........................................
3,023
Reserve for possible loan losses............................................................................
(8,226)
Total assets.................................................................................................. ¥2,166,077

Thousands of
U.S. dollars (Note 2)

2015

2016

¥ 110,388
35,88922553,225
1,325,649
800
12,46324,453
4,683
17,779
209
1,781
1,060
732
327
1,984
3,485
(9,004)¥2,060,418$ 1,382,491
199,693190
5,334,834
11,995,826
4,500
115,754
221,178
43,319159,394
1,571
16,893
14,965
6,716
8,248
—
26,834(73,009)$19,223,261

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 ¥112.68 to US$1.00, the rate
prevailing on March 31, 2016.

4Millions of yen (Note 1)
2016

March 31,

Liabilities:
Deposits................................................................................................................ ¥1,860,800
Negotiable certificate of deposit..........................................................................
700
Borrowed money..................................................................................................
128,389
Foreign exchange.................................................................................................
16
Other liabilities....................................................................................................
10,637
Accrued employee bonuses..................................................................................
416
Net defined benefit liability.................................................................................
10,072
Reserve for director retirement benefits..............................................................
1
Reserve for reimbursement of dormant deposits................................................
447
Reserve for contingent loss..................................................................................
682
Deferred tax liabilities..........................................................................................
864
Deferred tax liability for land revaluation...........................................................
2,493
Acceptances and guarantees................................................................................
3,023
Total liabilities............................................................................................. 2,018,544
Net assets:
Shareholders’ equity:
Capital stock........................................................................................................
38,653
Capital surplus.....................................................................................................
31,170Retained earnings.................................................................................................
52,523
Treasury stock, at cost..........................................................................................
(373)
Total shareholders’ equity...........................................................................
121,974
Accumulated other comprehensive income:Net unrealized gains on available-for-sale securities...........................................
21,572Land revaluation account....................................................................................
3,079
Remeasurements of defined benefit plans...........................................................
409
Total accumulated other comprehensive income......................................
25,061
Stock acquisition rights.......................................................................................
217
Non-controlling interests....................................................................................
278
Total net assets............................................................................................
147,532
Total liabilities and net assets..................................................................... ¥2,166,077

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

2015

2016

¥1,823,324
700
74,382
96
6,231
415
10,371
30
417
677
14
2,673
3,485
1,922,820$16,514,027
6,212
1,139,412
147
94,4003,697
89,390
11
3,974
6,053
7,672
22,125
26,834
17,913,959

38,65331,17445,509(392)
114,945

343,040
276,627
466,133(3,318)1,082,483

18,825
3,052
361
22,239177
235
137,597¥2,060,418

191,449
27,3293,634
222,4131,931
2,472
1,309,301$19,223,261

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

Millions of yen (Note 1)

Thousands of
U.S. dollars (Note 2)

2016

2015

2016

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

¥22,321
7,384
149
6,357
388
4,530
41,132¥22,880
8,242
100
6,281
397
5,720
43,622$198,096
65,5381,328
56,422
3,449
40,202365,038

Expenses:
Interest on deposits..............................................................................................
Negotiable certificate of deposit�������������������������������������������������������������������������
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................................................................................

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

724
1
58
5
4,020
239
21,6844,590
31,325
12,296

6,151
16
1,096
40
37,093
1,884
192,10933,498271,891
93,147

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

1,066
1,225
2,292
8,203
44
¥ 8,158

79
(331)
(252)
12,548108¥12,440

9,465
10,88020,34672,801393$ 72,407

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

¥20.8011.69¥33.64
17.15

$0.18
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)
For the years ended March 31,

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

7

Thousands of
U.S. dollars (Note 2)

2016

2015

2016

¥ 8,203¥12,548$72,801

2,745
133
47
2,926
¥11,130

6,842
276
(513)
6,605
¥19,154

24,368
1,184
422
25,974$98,776¥11,086
43¥19,040
113$98,389386

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, 2015�������������������������������� ¥38,653
Changes in items during the period:
Profit attributable to owners of parent������
Dividends from surplus������������������������������
Purchase of treasury stock��������������������������
Disposal 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, 2016��������������������������� ¥38,653

CapitalsurplusRetainedearnings

Treasury
stock

Total
shareholders’equity¥31,174¥45,509¥(392)¥114,945

(2)
21

8,158
(1,250)
(2)
16

8,158
(1,250)
(4)
106

(4)
¥31,170

7,014¥52,523106

18¥(373)

7,029¥121,974

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

Balance at April 1, 2015�������������������������������� ¥18,825
Changes in items during the period:
Profit attributable to owners of parent������
Dividends from surplus������������������������������
Purchase of treasury stock��������������������������
Disposal of treasury stock���������������������������
Increase (decrease) of items forsome other reason������������������������������������
Changes in items other than shareholders’equity during the period (net amount)�����
2,746
Total changes in items during the period������
2,746
Balance at March 31, 2016��������������������������� ¥21,572

Land
revaluationaccount¥3,052

Total
accumulated
otherRemeasurements
comprehensiveof defined
benefit plansincome¥361¥22,239

Stockacquisitionrights

Noncontrollinginterests

Total
net assets

¥177

¥235

¥137,597
8,158(1,250)
(2)
16
106

27
27
¥3,079

8

47
47
¥409

2,821
2,821
¥25,061

40
40
¥217

43
43
¥278

2,905
9,934
¥147,532

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

CapitalsurplusRetainedearnings

Treasury
stock

Total
shareholders’equityBalance at April 1, 2015�������������������������������� $343,040 $276,664 $403,879 $(3,481) $1,020,102
Changes in items during the period:
72,40772,407
Profit attributable to owners of parent������
Dividends from surplus������������������������������
(11,094)(11,094)
Purchase of treasury stock��������������������������
(23)
(23)
Disposal of treasury stock���������������������������
(36)
186
150
Increase (decrease) of items forsome other reason������������������������������������
941
941
Changes in items other than shareholders’equity during the period (net amount)�����
—(36)
62,254
163
62,380Total changes in items during the period������
Balance at March 31, 2016��������������������������� $343,040 $276,627 $466,133 $(3,318) $1,082,483
Thousands of U.S. dollars (Note 2)
Accumulated other comprehensive income
Net unrealized
gains (losses) on
available-for-salesecurities

Balance at April 1, 2015�������������������������������� $167,073
Changes in items during the period:
Profit attributable to owners of parent������
Dividends from surplus������������������������������
Purchase of treasury stock��������������������������
Disposal of treasury stock���������������������������
Increase (decrease) of items forsome other reason������������������������������������
Changes in items other than shareholders’equity during the period (net amount)�����
24,375
Total changes in items during the period������
24,375
Balance at March 31, 2016��������������������������� $191,449

Land
revaluationaccount$27,086

Total
accumulated
otherRemeasurements
comprehensiveof defined
benefit plansincome$3,212$197,372

Stockacquisitionrights

Noncontrollinginterests$1,575$2,086 $1,221,137

Total
net assets

72,407(11,094)
(23)
150
941
243
243
$27,3299422
422$3,63425,041
25,041$222,413

356
356$1,931386
25,784386
88,164$2,472 $1,309,301

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

Millions of yen (Note 1)
2016

Thousands of
U.S. dollars (Note 2)

2015

2016

Cash flows from operating activities:
Income before income taxes................................................................................ ¥  10,495
Depreciation and amortization...........................................................................
1,300
Loss on impairment of fixed assets......................................................................
174
Decrease in reserve for possible loan losses.........................................................
(778)
Increase in reserve for employee bonuses...........................................................
1
Increase in reserve for reimbursement of dormant deposits...............................
30
Increase (decrease) in reserve for contingent loss...............................................
4(Decrease) increase in net defined benefit liabilities...........................................
(242)(Decrease) increase in provision for directors’ retirement benefits.....................
(29)
Interest income....................................................................................................
(29,856)
Interest expenses..................................................................................................
823
Loss on disposal of tangible fixed assets..............................................................
19
Loss on securities — net.......................................................................................
(865)
Foreign exchange gain — net..............................................................................
189
Net increase in loans............................................................................................
(26,039)
Net increase in deposits.......................................................................................
37,475
Net increase in negotiable certificate of deposit.................................................
—Net decrease in borrowings excluding subordinated debt..................................
54,007
Net increase in due from banks other than the Bank of Japan...........................
599
Net decrease (increase) in call loans and others..................................................
13,387
Net increase in foreign exchange — assets..........................................................
293
Net (increase) decrease in foreign exchange — liabilities...................................
(79)
Interest received...................................................................................................
30,289Interest paid.........................................................................................................
(829)
Other....................................................................................................................
(813)
Subtotal.......................................................................................................
89,557
Income taxes paid................................................................................................
(49)
Net cash provided by operating activities..................................................
89,507¥  12,296
1,159—(3,087)
23
29
235
(354)
6
(31,223)
790
16
6
(585)
(28,868)
59,498700
41,603657
15,625446231,470(851)
689
99,943(111)
99,831$    93,147
11,541
1,552(6,906)12
267
40(2,153)(260)(264,964)
7,305
176(7,681)
1,680(231,095)
332,584—
479,295
5,322
118,8122,601(708)
268,807(7,361)(7,213)794,794(440)
794,354

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 used in investing activities...........................................................

(1,648)(147,389)—
20,273(915)
87,400(0)(42,280)(809)(128,772)
025,559(350)
76,500(1)(27,873)(14,627)(1,308,039)—
179,918(8,122)775,650(3)(375,224)

Cash flows from financing activities:
Proceeds from issuance of common stock...........................................................
Proceeds from exercise of stock options..............................................................
Purchases of treasury stock..................................................................................
Dividends paid.....................................................................................................
Dividends paid to non-controlling interests.......................................................
Net cash used in financing activities..........................................................

—
0(2)(1,250)—(1,252)(1,000)0(3)(1,281)(66)(2,352)—0(23)(11,094)—(11,116)

Effect of exchange rate changes on cash and cash equivalents..........................
15
Net increase in cash and cash equivalents..........................................................
45,990Cash and cash equivalents at beginning of year.................................................
108,541
Cash and cash equivalents at end of year........................................................... ¥ 154,531

30
69,63738,903¥ 108,541

135
408,149
963,270$ 1,371,420

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)

2016

2016

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

¥  126,521
1,175¥  125,346$ 1,122,842
10,435$ 1,112,406

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

¥1,063,029
13,638474—
1,077,142
60,603¥1,137,745
11.01%$ 9,434,054
121,0364,211—
9,559,302
537,833$10,097,135

March 31,

11

Board of Directors and Audit & Supervisory Board(As of June 28, 2016)

President & Chief
Executive Officer
Representative Director
Kunimitsu Yoshinaga
Deputy President &Executive Officer
Representative Director

Managing Executive
Officers/Directors

Senior Managing
Executive Officer

Hiroshi Ebara
Hiroyuki Sakurai

Hitoshi Ito
Managing Executive
Officers

Directors

Naoshi Sando
Kiyoshi Tomizawa
Kiyoshi Shibasaki
Kazuyoshi Shiraishi

Masayuki Kon
Nobuko Inaba

Kiyomi Osawa

Executive Officers
Toshiko Fusejima
Seiji Yamamoto
Toru Kobayashi
Masahiro Sekine
Isao Kitazume
Audit & Supervisory
Board Members
Hideo Kabe
Hideaki Minami
Shintaro Ando
Shinichi Kato

The Towa Bank Network(As of March 31, 2016)

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
NaganoShinkansen

Takasaki

Omiya

Tokyo:
8 branches

SaitamaPrefecture:
42 branchesTokyo12