21-D-1252
January 31, 2022

Japan Credit Rating Agency, Ltd. (JCR) announces the following credit rating.

The Awa Bank, Ltd. (security code: 8388)<Affirmation>
Long-term Issuer Rating:
Outlook:

AAStable

Rationale(1) The Awa Bank Ltd. (the "Bank") is a regional bank headquartered in Tokushima City, Tokushima
Prefecture with a fund volume of more than 3 trillion yen. Leveraging its business model specializing
in SME financing, the Bank is expanding its business not only in the prefecture, but also in the Kanto
and Kansai areas. In April 2021, it started a comprehensive business alliance with Nomura Securities
Co., Ltd. ("Nomura Securities"). in the financial product brokering business, working to strengthen
the non-interest businesses mainly through expansion of the balance of custody assets. JCR
favorably evaluates its high share of deposits and loans in the prefecture, the robust businessfoundation, and profitability and capital adequacy kept high amid a harsh business environment.
Meanwhile, its quality of assets is being under a downward pressure due to the COVID-19 pandemic.
Whether credit costs can be adequately absorbed with core net business income is an attention point
for the time being.
(2) Core net business income (excluding gains on cancellation of investment trusts; the same applies
hereafter) increased year on year in the first half of the fiscal year ended March 2022 (FY2021),
following on from FY2020. ROA (based on core net business income) is 0.4% on an annualized basis,
which is favorable compared to other leading regional banks. In addition to the growth in loans under
the COVID-19 pandemic and a decrease in foreign currency funding costs, an increase in noninterest income is serving as an earnings drivers. The Bank is reallocating resources from the inside
to the outside of the prefecture, steadily increasing the number of close customers in the Kanto andKansai areas. Moreover, the Bank in recent years has been steadily expanding the outstandingbalance through ship financing, on which it has stepped up efforts. Lendings, mainly to SMEs, areexpected to remain firm and the degree of decline in yields is falling, which would keep interest
income solid. Moreover, because the balance of assets under custody has been growing at asignificantly faster pace than the previous year after the commencement of the alliance with Nomura
Securities, there is plenty of room to expand non-interest income. JCR will pay attention to whether
these factors for higher earnings will lead to further improvement in core net business income.
(3) The non-performing loans ratio disclosed under the Financial Reconstruction Act is in the mid-2%
range, slightly higher than the average for regional banks. While its loans are well diversified into
small lots due to the high weight of SME loans, credit costs tend to increase during economic
downturns. In FY2020, credit costs rose to mid-30% of core net business income mainly due todowngrades in loan category. Also in FY2021, the costs are planned to be at around the same level
as the previous fiscal year. As loans to borrowers requiring caution are on an increasing trend amid
the COVID-19 pandemic, JCR will closely monitor developments in the near term. On the other hand,
there is no significant change in the amount of outstanding securities, and the interest rate risk ofbonds is kept small relative to capital. Although the risk of stock price fluctuations is high, a large
amount of unrealized gains serve as a buffer.
(4) The consolidated core capital ratio adjusted for allowance for loan losses, etc. as of September 30,
2021 stood at in the lower 11% range. Equity capital is sufficient against risks on loan assets andsecurities. JCR assumes that the Bank going forward will maintain a decent capital level as an entity
in JCR’s AA rating category through steady profit accumulation.
Hidekazu Sakai, Akira Minamisawa
RatingIssuer: The Awa Bank, Ltd.
<Affirmation>

Long-term Issuer Rating: AA-

Outlook: Stable

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Copyright © Japan Credit Rating Agency, Ltd. All Rights Reserved.

Rating Assignment Date: January 27, 2022
The assumptions for the credit ratings and the definitions of the rating symbols are published as "Types of Credit Ratings and Definitionsof Rating Symbols" (January 6, 2014) in Information about JCR Ratings on JCR's website (https://www.jcr.co.jp/en/).
Outline of the rating methodology is shown as "JCR's Rating Methodology" (November 7, 2014) and "Banks" (October 1, 2021)
in Information about JCR Ratings on JCR's website (https://www.jcr.co.jp/en/).

Japan Credit Rating Agency, Ltd.
Jiji Press Building, 5-15-8 Ginza, Chuo-ku, Tokyo 104-0061, Japan
Tel. +81 3 3544 7013, Fax. +81 3 3544 7026
Information herein has been obtained by JCR from the issuers and other sources believed to be accurate and reliable. However, because of the possibility of human or mechanical error as well as other factors,
JCR makes no representation or warranty, express or implied, as to accuracy, results, adequacy, timeliness, completeness or merchantability, or fitness for any particular purpose, with respect to any suchinformation, and is not responsible for any errors or omissions, or for results obtained from the use of such information. Under no circumstances will JCR be liable for any special, indirect, incidental orconsequential damages of any kind caused by the use of any such information, including but not limited to, lost opportunity or lost money, whether in contract, tort, strict liability or otherwise, and whether
such damages are foreseeable or unforeseeable. JCR's ratings and credit assessments are statements of JCR's current and comprehensive opinion regarding redemption possibility, etc. of financial obligations
assumed by the issuers or financial products, and not statements of opinion regarding any risk other than credit risk, such as market liquidity risk or price fluctuation risk. JCR's ratings and credit assessments
are statements of opinion, and not statements of fact as to credit risk decisions or recommendations regarding decisions to purchase, sell or hold any securities such as individual bonds or commercial paper.
The ratings and credit assessments may be changed, suspended or withdrawn as a result of changes in or unavailability of information as well as other factors. JCR receives a rating fee paid by issuers for
conducting rating services in principle. JCR retains all rights pertaining to this document, including JCR's rating data. Any reproduction, adaptation, alteration, etc. of this document, including such rating
data, is prohibited, whether or not wholly or partly, without prior consent of JCR.
JCR is registered as a "Nationally Recognized Statistical Rating Organization" with the U.S. Securities and Exchange Commission with respect to the following four classes. (1) Financial institutions, brokers
and dealers, (2) Insurance Companies, (3) Corporate Issuers, (4) Issuers of government securities, municipal securities and foreign government securities.
JCR publishes its press releases regarding the rating actions both in Japanese and in English on the same day. In case that it takes time to translate rating rationale, JCR may publicize the summary version,
which will be replaced by the full translated version within three business days. (Regarding Structured Finance products, JCR only publicize the summary version in English.)

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Copyright © Japan Credit Rating Agency, Ltd. All Rights Reserved.

I n f o r m at i o n D i s c l o s u r e F o r mJapan Credit Rating Agency, Ltd.

Disclosure Required by Paragraph (a)(1)(ii) of Rule 17g-7

1

Issuer:

The Awa Bank, Ltd.

Rating Publication
Date:

January 31, 2022

The Symbol, Number, or Score in the Rating Scale used to Denote Credit Rating Categories andNotches and, the Identity of the Obligor or the Identity and a Description of the Security or Money
Market Instrument as Required by Paragraph (a)(1)(ii)(A) of Rule 17g-7
Please see the news release. If the credit rating is a private rating, please see the report for private
rating.

2

The version of the procedure or methodology used to determine the credit rating; as Required by
Paragraph (a)(1)(ii)(B) of Rule 17g-7
Please see the news release. If the credit rating is a private rating, please see the report for private
rating.

3

The Main Assumptions and Principles used in Constructing the Procedures and Methodologies
used to Determine the Credit Rating as Required by Paragraph (a)(1)(ii)(C) of Rule 17g-7
The credit rating methodology assumes, in principle, to be applied to assess the likelihood of agiven debt payment in light of its issuer’s condition and business environment, etc. in the relevant
future. There is certain limitation, however, in the time horizon that the rating foresees.
The credit rating methodology assumes, in principle, that the factors posted in the below areparticularly important for such likelihood to be determined, and that the rating determination ismade by evaluating each of them not only quantitatively but also employing qualitative analyses.

A) Business Bases
The likelihood of a given debt payment is highly conditional to its issuer’s business bases - how they
can be maintained/ expanded into the future and thereby secure earnings and cash flows in adequacy
and in a sustainable way.
B) Financial Grounds and Asset Quality
The likelihood of debt payment is highly dependent on the degree of the issuer’s indebtedness and loss
absorption capacity in terms of equity capital. Also notable is that a financial institution might see asignificant loss of financial grounds as a result of changes in value of the assets under its possession.
C) Liquidity Positions
The likelihood of debt payment is highly dependent on the adequacy of the issuer’s cash and othersources of repayment (liquidity positions).

1/5D) Order of Seniority in Debt Payment
The likelihood of debt payment can be different between given debts of the same issuer. The
likelihood of debt payment for an individual debt is dependent on the issuer’s discretion, and/ or its
rank relative to other debts of the same issuer in the order of seniority in principal/ interest payment
which is determined by design as financial product or by laws, etc.

4

The Potential Limitations of the Credit Rating as Required by Paragraph (a)(1)(ii)(D) of Rule 17g-7
The credit rating herewith presented by JCR is its summary opinion with regard to the likelihood ofgiven debt payment and hence not necessarily a perfect representation of such likelihood. The credit
rating is not intended to estimate the probability of default or the loss on given default, either.
The objective of the credit rating herewith presented does not include any concerns other than thelikelihood of debt payment, such as risks of price changes, market liquidity, etc.
The credit rating herewith presented is necessary to be reviewed along with possible changes of theissuer of rated objects in its business performance and/ or circumstances which include regulatoryenvironment, and hence subject to possible alteration.

5

Information on the Uncertainty of the Credit Rating as Required by Paragraph (a)(1)(ii)(E) of Rule
17g-7
The information used for the determination of credit rating as herewith presented is obtained by
JCR from the issuer of rated objects and other sources that JCR trusts in terms of accuracy andreliability but possibly contains errors due to human, non-human or other causes. Consequently, thecredit rating determined on the grounds of such information does not constitute, explicitly or
implicitly, any representation or warrant of JCR on the information itself or any consequences of its
use in terms of accuracy, relevance, timeliness, wholeness, market value, or usefulness for any
specific purposes.

6

Use of Due Diligence Services of a Third Party in Taking the Rating Action as Required by Paragraph(a)(1)(ii)(F) of Rule 17g-7
There is no use of any third-party due diligence service in the determination of the credit ratingherewith presented.

7

Use of Servicer or Remittance Reports to Conduct Surveillance of the Credit Rating Required by
Paragraph (a)(1)(ii)(G) of Rule 17g-7
There is no use of any servicer or remittance report to conduct surveillance of the credit ratingherewith presented.

8

The Types of Data Relied Upon for the Purpose of Determining the Credit Rating as Required by
Paragraph (a)(1)(ii)(H) of Rule17g-7
The information posted in the below, which includes data, is used for the determination of the credit
rating herewith presented.
A) Audited financial statements presented by the rating stakeholders

2/5B) Explanations of business performance, management plans, etc. presented by the rating stakeholders

9Overall assessment of the Quality of Information Available and Considered in Determining theCredit Rating as Required by Paragraph (a)(1)(ii)(l) of Rule 17g-7
JCR holds its basic policies for securing the quality of information as a base of due diligence for thedetermination of credit ratings. The information used as a base for the determination of credit ratingherewith presented satisfies such policies, which include the audit by an independent auditor, thewarranty made by the issuer, the publication by the issuer, some independent media or, otherwise,
JCR analyst’s scrutiny, etc.
JCR sees no particular weakness in the quality of information used for the determination of thecredit rating herewith presented as compared to the information used in other cases of the credit
rating for comparable issuers or ratable objects.
If the credit rating is an Indication, please see the report for Indication.

10 Information Relating to Conflicts of Interest as Required by Paragraph (a)(1)(ii)(J) of Rule 17g-7
JCR receives payment of compensation for the determination of the credit rating herewith presented
from either one of those parties who are issuer, underwriter, depositor or sponsor.
JCR did not receive in the last fiscal year in the past payment of compensation from the same party
for any kind of JCR’s service other than the determination of public or private credit rating, such as
one in the ancillary business.

or Measure of the Potential Volatility of the Credit Rating as Required by Paragraph
11 Explanation(a)(1)(ii)(K) of Rule 17g-7
A) Business Bases
The credit rating is subject to alteration if there is improvement or deterioration of the issuer’s
business bases, since its revenue, etc. may improve or deteriorate by the change in its business
management policies, clients’ preferences, competitive situation, or a technological innovation. The
resultant alteration of the credit rating is usually by a notch, with possibility of a few notches if andwhen the change in the business bases is large.
B) Financial Grounds and Asset Quality
The credit rating is subject to alteration if the issuer increases/ decreases its debt/ capital or vice versa
and thereby makes its individual debt payment liability less or more bearable and its loss absorption
capacity into the future decreased or increased. Also, the changes in the quality of asset under theissuer’s holding may affect the credit rating, since such changes could raise or lower the likelihood of
future loss of the issuer’s financial grounds. The resultant alteration of the credit rating is usually by anotch, with possibility of a few notches if and when the change in the financial grounds and/ or asset
quality is large.
C) Liquidity Positions
The credit rating is subject to alteration if there is a change in the issuer’s financial management
policy or in the relations with fund procurement sources and the change thereby makes its liquidity
positions improve or deteriorate. The resultant alteration of the credit rating is usually by a notch, withpossibility of a few notches if and when the change is large.
D) Order of Seniority in Debt Payment and Non-Payment Forgiven by Contract
The credit rating is subject to alteration if there is a change in the rated debt’s status in the order ofseniority relative to other debts caused by the improvement/ deterioration of the issuer’s financial
condition. The resultant alteration of the credit rating is usually a notch, with possibility of a few

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notches if and when the change is large. Also, in case of the financial products for which non-payment
of interest/ principal is contractually permissible, the credit rating is subject to alteration if and when
the likelihood of such non-payment is projected to increase or decrease. The resultant alteration of thecredit rating could be by a notch but often as much as a few notches.

E) Rise and Fall in General Economy and Markets
The credit rating is subject to alteration if there is a rise/ fall in the general economy and/ or themarkets inducing the issuer’s revenues/ expenses to increase/ decrease and vice versa, etc. The
resultant alteration of the credit rating is usually by a notch, with possibility of a few notches if andwhen the change is exceptionally large.
F) Various Events
The credit rating is subject to alteration on occurrence of various events, such as change in the issuer’s
major shareholders, M&A and other organizational change, accident, violation of the law, litigation,legal/ regulatory change, natural disaster, etc., which are unforeseeable at the time when the credit
rating is determined, causing a significant change on the issuer’s business bases, financial grounds, etc.
The resultant alteration of the credit rating could be by a notch but more often than not as much as afew notches.

12

Information on the Content of the Credit Rating, Including the Historical Performance of the Credit
Rating and the Expected Probability of Default and the Expected Loss in the Event of Default as
Required by Paragraph (a)(1)(ii)(L) of Rule 17g-7
Historical records of the credit rating herewith presented are posted in the end of this paper.
The credit rating herewith presented by JCR is its summary opinion with regard to the likelihood ofgiven debt payment and hence not necessarily a perfect representation of such likelihood. The credit
rating is not intended to estimate the probability of default or the loss on given default, either.
Facts of the probability of default are posted as Form NRSRO Exhibit 1 on the JCR website under
the URL:
https://www.jcr.co.jp/en/service/company/regu/nrsro/on the Sensitivity of the Credit Rating to Assumptions Made as Required by Paragraph
13 Information(a)(1)(ii)(M) of Rule 17g-7
A) Business Bases
The credit rating herewith presented could be changed if and when the assumptions made at the timeof its determination turn out to be inaccurate with regard to the issuer’s business bases and powers ofearning or cash flow generation, etc. The resultant change of the credit rating is most likely by a notch,
as JCR speculates, but possibly as much as a few notches if the development is rapid in improvement
or deterioration of the issuer’s business bases on some drastic change in the operational environments,
etc.
B) Financial Grounds and Asset Quality
The credit rating herewith presented could be changed if and when the assumptions made at the timeof its determination turn out to be inaccurate with regard to the issuer’s financial grounds and asset
quality. The resultant change of the credit rating is most likely by a notch, as JCR speculates, but
possibly as much as a few notches if the development is rapid in improvement or deterioration of theissuer’s financial grounds and/ or asset quality on some drastic change in its business bases.
C) Liquidity Risks
The credit rating herewith presented could be changed if and when the assumptions made at the timeof its determination turn out to be inaccurate with regard to the issuer’s liquidity positions. The
resultant change of the credit rating is most likely by a notch, as JCR speculates, but possibly as muchas a few notches if the development is rapid in improvement or deterioration of the issuer’s liquidity
positions on some drastic change in its financial management policy or relations with fundprocurement sources, etc.

4/5D) Order of Seniority in Debt Payment and Non-Payment Forgiven by Contract
The credit rating herewith presented could be changed if and when the assumptions made at the timeof its determination turn out to be inaccurate with regard to the order of seniority in repayment ofinterests and principal. JCR assumes the resultant change of the credit rating is most likely by a notch.
The change could be as much as a few notches if the issuer’s financial structure differs so much andthereby the balance between debts shifted so greatly. Rating change is also possible in case of thefinancial products for which non-payment of interest/ principal is contractually permissible, if andwhen the assumptions made at the time of its determination turns out to be inaccurate. The change ofthe credit rating is assumed to be by a notch but often as much as a few notches.
E) Rise and Fall in General Economy and Markets
The credit rating herewith presented could be changed if and when the assumptions made at the timeof its determination turn out to be inaccurate with regard to the prospects of general economy andmarkets. JCR expects the change should be most likely by a notch but could be as much as a few
notches, should the economy or the markets change so greatly.
on the Representations, Warranties, and Enforcement Mechanisms of an Asset14 Information
backed Security as Required by Paragraph (a)(1)(ii)(N) of rule 17g-7
The credit rating herewith presented is not for an ABS product, and hence no relevant issue.

Japan Credit Rating Agency, Ltd.
Jiji Press Building, 5-15-8 Ginza, Chuo-ku, Tokyo 104-0061, Japan
Tel. +81 3 3544 7013, Fax. +81 3 3544 7026

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The Historical Performance of the Credit Rating
Issuer Name

The Awa Bank, Ltd.
The Awa Bank, Ltd.
The Awa Bank, Ltd.
The Awa Bank, Ltd.
The Awa Bank, Ltd.
The Awa Bank, Ltd.
The Awa Bank, Ltd.
The Awa Bank, Ltd.
The Awa Bank, Ltd.
The Awa Bank, Ltd.
The Awa Bank, Ltd.
The Awa Bank, Ltd.
The Awa Bank, Ltd.
The Awa Bank, Ltd.
The Awa Bank, Ltd.
The Awa Bank, Ltd.
The Awa Bank, Ltd.
The Awa Bank, Ltd.
The Awa Bank, Ltd.
The Awa Bank, Ltd.
The Awa Bank, Ltd.
The Awa Bank, Ltd.
The Awa Bank, Ltd.

Issue Name

Issuer(Long-term)
Issuer(Long-term)
Issuer(Long-term)
Issuer(Long-term)
Issuer(Long-term)
Issuer(Long-term)
Issuer(Long-term)
Issuer(Long-term)
Issuer(Long-term)
Issuer(Long-term)
Issuer(Long-term)
Issuer(Long-term)
Issuer(Long-term)
Issuer(Long-term)
Issuer(Long-term)
Issuer(Long-term)
Issuer(Long-term)
Issuer(Long-term)
Issuer(Long-term)
Issuer(Long-term)
Issuer(Long-term)
Issuer(Long-term)
Issuer(Long-term)

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Publication Date

RatingOutlook/Direction

March 31, 1997
August 10, 1998
February 17, 2000
May 11, 2001
August 22, 2002
October 1, 2003
October 25, 2004
October 7, 2005
September 15, 2006
September 21, 2007
September 18, 2008
September 18, 2009
October 21, 2010
October 14, 2011
October 15, 2012
October 8, 2013
September 29, 2014
October 1, 2015
October 27, 2016
October 27, 2017
November 16, 2018
December 6, 2019
December 4, 2020A+A+
AAAAAAA+A+A+AAAAAAAAAAAAAAAAAAAAAAAAAAAAAA-

StableStableStableStableStableStableStableStableStableStableStableStableStableStableStableAttachment

Attestation Required by Paragraph (a)(1)(iii) of Rule 17g-7

I, Shozo Matsumura, have responsibility to this Rating Action and to the best of my knowledge:

A) No part of the credit rating was influenced by any other business activities.
B) The credit rating was based solely upon the merits of the obligor, security, or money market
instrument being rated.
C) The credit rating was an independent evaluation of the credit risk of the obligor, security, or
money market instrument.

Shozo Matsumura
General Manager of Financial Institution Rating Department

Japan Credit Rating Agency, Ltd.
Jiji Press Building, 5-15-8 Ginza, Chuo-ku, Tokyo 104-0061, Japan
Tel. +81 3 3544 7013, Fax. +81 3 3544 7026