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IndependentAuditor'sReport
TheBoardofDireCtors

TbkyoKiraboshiFinancialGroup,Inc.
WehaveauditedtheaccompanyingconsolidatedfinancialstatementsofTbkyoKiraboshiFinancialCroup, Inc(fbrmerl)GTbkyoTYFinancialGroup,Inc.)anditsconsolidatedsubsidiaries,whichcomprisetheconsolidatedbalancesheetasatMarch31,2018,andtheconsolidatedstatementsofincome,comprehensiveincome,changesinnetassets,andc"hfIowsfbrtheyearthenendedandasummaryofsignifTcantaccountingpolicies
andotherexplanatolyinfbrmation･allexpressedinJapaneseyen.
MQ"fge"fe"歯ReSpo"si"""ん""zeCo"so/im花α厩"α"cig/Mareme"応ManagementisresponsiblefbrthepreparationandfairpresentationoftheseConSolidatedfinancialst3tementS
inaccordancewithaccount加gprinciplesgenerallyacceptedinJapan,andfbrdesigningandoperatingsuch
intemalcontrolasmanagementdeterminesisnecessalytoenablethepreparationandfairpresentationofthe

consOlidatedfinancialstatementsthatare打eefi･ommaterialmisstatement,whetherduetoiTaudorerror.

Azｨ""3ReSpo"s坊"ノヮ

OurresponsibilityiStoexpressanopinionontheseconsolidatedfrnancialstatementsbasedonouraudit:M

conductedouraudit inaccordancewithauditingstandardsgenerallyacceptedinJapan・Thosestandards

requirethatweplanandperfbnntheaudittoobtainreasonableassuranceaboutwhethertheconsolidated
financialstatementsarefreefiommaterialmisstatement.

AnauditinvoIvesperformingProcedurestoobtainauditevidenceabouttheamountsanddisclosuresinthe
consolidatedfinancialstatementsoTheproceduresselecteddependontheauditor'sjudgment,includingthe

assessmentoftherisksofmaterialmisstatementoftheconSolidatedfinancialstatements,whetherduetofiaudorerror.ThepurposeofanauditoftheconsolidatedfinancialstatementsisnottoexprCssanopiniononthe
effbctivenessOftheentity'sinternalcontrol,butinmakingtheseriskassessmentstheauditorconsidersinternal
controlsrelevanttotheentity｡spreparationandfairpresentationoftheconsolidatedfinancialstatementSinordertodesignauditprocedUresthatareappropriateinthecircumstances.Anauditalsoincludesevaluating
theappropriatenessofaccountingpoliciesusedandthereasonablenessofaccountingestimatesmadeby
management,aswellasevaluatingtheoverallpresentatiOnoftheconSOlidatedfinancialstatements.
Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisfbrour
auditopinion.
のうj"jo"Inouropinion,theconsolidatedfinanciaIstatementsreferredtoabovepresentfairly, inallmaterial respects,
theconSOlidatedfinancialPositionofTbkyoKiraboshiFinancialGroup, Inc. (fbnnerly5TbkyoTYFinancial
Group,Inc.)anditsconSolidatedsubsidiariesasatMarch31,2018,andtheirconsolidatedfinancial
perfbmanceandcashnowsfbrtheyearthenendedinconfbnnitywithaccountingprinciplesgenerally
acceptedinJapan.
Co"ve"ie"ce刀α"s/α"o〃WehavereviewedthetranslationoftheseconsolidatedfinancialstatementsintoU.S.dollars,presentedfbrthe

convenienceofreaders,and, inouropinion, theaccompanyingconsolidatedfinancial statementshavebeen
properlytranslatedonthebasisdescribedinNote2.

声""麺土ずJune28,2018

Tbkyo,Japan

AmemberfirmofEmst＆Youn9Clob51LimiにC

LLC

｜
I

Tokyo Kiraboshi Financial Group, Inc. and Consolidated Subsidiaries
Consolidated Financial Statements
Years Ended March 31, 2018 and 2017
Contents:
Tokyo Kiraboshi Financial Group, Inc. and Consolidated Subsidiaries
Independent Auditor’s Report
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
The Tokyo Tomin Bank, Limited
Non-consolidated Balance Sheets (Unaudited)
Non-consolidated Statements of Income (Unaudited)
The Yachiyo Bank, Limited
Non-consolidated Balance Sheets (Unaudited)
Non-consolidated Statements of Income (Unaudited)
ShinGinko Tokyo, Limited
Non-consolidated Balance Sheets (Unaudited)
Non-consolidated Statements of Income (Unaudited)Tokyo Kiraboshi Financial Group Inc. and Consolidated Subsidiaries
Consolidated Balance Sheets
As of March 31, 2018 and 2017
Millions of Yen
2017
2018
AssetsCash and due from banks (Notes 3, 20 and 23)
Call loans and bills bought
Monetary claims bought (Notes 3 and 23)
Trading account securities (Notes 3 and 23)
Securities (Notes 3, 6 and 23)
Loans and bills discounted (Notes 4, 6, 23 and 24)
Foreign exchanges
Other assets (Note 6)
Tangible fixed assets (Note 5)
Intangible fixed assets
Net defined benefit asset (Note 9)
Deferred tax assets (Note 14)
Customers’ liabilities for acceptances and guarantees (Note 10)
Reserve for loan losses
Total assets¥¥

Liabilities
Deposits (Notes 6 and 23)
Negotiable certificates of deposit
Call money and bills sold (Notes 6 and 23)
Payables under securities lending transactions (Notes 6 and 23)
Borrowed money (Notes 6, 7 and 23)
Foreign exchanges
Borrowed money from trust account
Other liabilities (Note 8)
Reserve for employees’ bonuses
Net defined benefit liability (Note 9)
Reserve for officers and directors’ retirement benefits
Reserve for point card program
Reserve for losses on interest repayments
Reserve for losses from reimbursement of inactive accounts
Reserve for losses on cancellation of system contracts
Reserve for losses on transfer of businessReserve for contingent losses
Deferred tax liabilities (Note 14)
Deferred tax liabilities on land revaluation (Notes 5 and 14)
Acceptances and guarantees (Note 10)
Total liabilities¥

Net assets (Notes 11, 12 and 15)
Shareholders’ equity:
Common stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity
Accumulated other comprehensive income:
Valuation difference on available-for-sale securities (Note 13)
Revaluation reserve for land (Note 5)
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Stock acquisition rights
Non-controlling interests
Total net assets
Total liabilities and net assets¥

See notes to consolidated financial statements.

1

377,636
1,264
55,650707
1,208,629
3,676,146
13,556
84,062
59,6272,365
18,391
5,184
5,677(26,195)
5,482,704¥

4,652,109
9,540
58,937357,265
73,558224
53
25,167
2,140
2,845
67
58
8
1,185
200
194
612
1,837
5,677
5,191,683¥¥

Thousands of
U.S. Dollars(Note 2)
2018

515,886
3,987
45,724794
1,281,164
3,621,372
7,584
42,61756,085
1,903
14,125
7,823
7,880(29,644)5,577,306$

4,717,562
21,34040,706361,309
103,416
936
30,150
2,213
4,453
110
57
10
1,010
200
675
1,902
14
7,880
5,293,949$$

3,554,564
11,900523,821
6,655
11,376,407
34,602,278
127,605
791,253
561,249
22,262
173,10948,80153,439(246,570)
51,606,777

43,788,681
89,796554,758
3,362,811
692,375
2,111
505
236,894
20,14926,783631
552
76
11,162
1,882
1,833
5,763
17,29853,43948,867,507

27,500150,576
106,206(625)
283,657

27,500150,733
104,574(632)
282,175

258,847
1,417,323
999,682(5,889)2,669,964

6,075
(242)
10
1,146
6,989
101
271
291,020
5,482,704

3,166
(209)
8
(2,216)748
95
337
283,357
5,577,306

57,182(2,280)99
10,78865,789957
2,557
2,739,269
51,606,777¥$

Tokyo Kiraboshi Financial Group, Inc. and Consolidated Subsidiaries
Consolidated Statements of Income
For the Years Ended March 31, 2018 and 2017
Thousands of
U.S. Dollars(Note 2)
2018

Millions of Yen
2017
2018
IncomeInterest income:Interest on loans and discounts
Interest and dividends on securities
Interest on call loans and bills boughtInterest on receivables under securities borrowing transactions
Interest on due from banks
Other interest income
Trust fees
Fees and commissions
Other operating income
Other income (Note 16)
Total income¥

43,992
12,135
36
0
293
953
56
17,582
3,226
4,986
83,263¥45,992
11,570
77
0
324
924
61
16,165
5,301
22,280102,698$

414,081
114,226
345
0
2,766
8,978
527
165,50230,36946,934
783,732

Expenses
Interest expense:
Interest on deposits
Interest on negotiable certificates of deposit
Interest on call money and bills soldInterest on payables under securities lending transactions
Interest on borrowed money
Interest on bonds payable
Interest on bonds with stock acquisition rights
Other interest expense
Fees and commissions payments
Other operating expenses
General and administrative expenses (Note 17)
Other expenses (Note 18)
Total expenses

1,645
2
448
1,140
88
61
3,473
2,935
61,235
7,496
78,527

2,078
5
26
1,219
128
225
53
55
3,540
1,815
59,976
6,121
75,24815,48919
4,221
10,738829
580
32,694
27,630576,384
70,565739,155

Income before income taxes

4,735

27,45044,577

Income taxes (Note 14):
Current
Deferred
Total income taxes

1,107
(61)
1,045

1,997
(120)
1,876

10,427(582)
9,845

Net income (Note 15)

3,689

25,57434,732

12

38

115

Net income belonging to non-controlling shareholders¥

Net income belonging to parent company’s shareholders
See notes to consolidated financial statements.

2

3,677

¥

25,535$34,616

Tokyo Kiraboshi Financial Group, Inc. and Consolidated Subsidiaries
Consolidated Statements of Comprehensive Income
For the Years Ended March 31, 2018 and 2017
Millions of Yen
2017
2018
¥

Net Income
Other comprehensive income (Note 19):
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Revaluation reserve for land
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Share of other comprehensive income of affiliate accounted for by
the equity method
Total other comprehensive income

3,689

¥

25,574

Thousands of
U.S. Dollars(Note 2)
2018$

34,732

2,852
(32)
2
3,362

(5,318)
(6)
(3)
3,005

26,849(309)
2231,647

66
6,250

104
(2,218)624
58,835Comprehensive income

¥

9,940

¥

23,355$93,567

Total comprehensive income attributable to:Parent company’s shareholders
Non-controlling shareholders

¥

9,918
22

¥

23,30648$

93,359208

See notes to consolidated financial statements.

3

Tokyo Kiraboshi Financial Group, Inc. and Consolidated Subsidiaries
Consolidated Statements of Changes in Net Assets
For the Years Ended March 31, 2018 and 2017
Millions of Yen
Shareholders’ Equity

Thousands
Issued number ofshares ofcommon stock
Balance, March 31, 2016
Issuance of new shares
Increase by shareexchanges
Cash dividends
Net income belonging toparent company’s
shareholders
Purchase of treasury stock
Disposition of treasury
stock
Change in interest in
subsidiaries
Net changes in items otherthan those inshareholders’ equity
Total changes during theyear

29,227

Balance, March 31, 2017
Purchase of shares of
consolidated subsidiaries
Cash dividends
Net income belonging toparent company’s
shareholders
Purchase of treasury stock
Disposition of treasury
stock
Change in interest in
subsidiaries
Reversal of revaluation
reserve for land
Net changes in items otherthan those inshareholders’ equity
Total changes during theyear

30,650

Balance, March 31, 2018

30,650CapitalSurplus

CommonStock¥

20,000
7,500

¥

1,422

Retained
Earnings

99,585
7,500

¥

Total
Shareholders’EquityTreasury
Stock80,913

¥

(594)

¥

43,71943,719(1,874)(1,874)25,5350(47)

25,535
(47)

9

10

(72)

7,500

1,422
¥

27,500(72)

51,147¥150,733

23,660¥104,574

(37)
¥

(632)

82,270
¥

7

3,677
(5)

(38)

3,677
(38)

44

38

(158)

(158)
32

¥

27,500(157)¥

150,576

See notes to consolidated financial statements.

4282,175
7(2,078)(2,078)-

199,905
15,000

32

1,631
¥

106,206

6
¥

(625)

1,481
¥

283,657Millions of Yen
Accumulated Other
Comprehensive Income
Valuationdifference on
available-forsale securities

Deferred
gains orlosses onhedgesBalance, March 31, 2016
Issuance of new shares
Increase by shareexchanges
Cash dividends
Net income belonging toparent company’s
shareholders
Purchase of treasury stock
Disposition of treasury
stock
Change in interest in
subsidiaries
Net changes in items otherthan those inshareholders’ equity
Total changes during the
year

¥

¥

Balance, March 31, 2017
Purchase of shares of
consolidated subsidiaries
Cash dividends
Net income belonging toparent company’s
shareholders
Purchase of treasury stock
Disposition of treasury
stock
Change in interest in
subsidiaries
Reversal of revaluation
reserve for land
Net changes in items otherthan those inshareholders’ equity
Total changes during theyear¥

Balance, March 31, 2018

¥

8,390

6

Revaluation
reserve forland

Foreign
Currency
Translation
Adjustments

Remeasurementsof defined benefit
plans

Total
Accumulated
Other
Comprehensive
Income

¥

¥

¥

¥

(209)

11

(5,221)

2,977

Stock
NonAcquisition controlling
RightsInterests
¥

46

¥

286

Total Net
Assets¥ 203,216
15,00043,719(1,874)25,535
(47)
10
(72)

(5,224)

(6)

-

(3)

3,005

(2,229)49

50(2,129)(5,224)

(6)

-

(3)

3,005

(2,229)49

50

80,140337¥ 283,357

3,166

¥

-

¥

(209)

¥

8

¥

(2,216)

¥

748

¥

95

¥

7
(2,078)
3,677
(38)
38
(158)
32
-

2,909
2,909
6,075

¥

-

(32)

¥

(32)
(242)

2
2
10

¥

See notes to consolidated financial statements.

5

3,362

¥

3,362
1,146

6,240

¥

6,240
6,989

5

¥

5
101

¥

(65)

6,181

(65)
271

7,662
¥ 291,020

Thousands of U.S. Dollars (Note 2)
Shareholders’ Equity
CapitalRetained
Treasury
Surplus
Earnings
Stock

CommonStock
Balance, April 1, 2017
Purchase of shares of
consolidated subsidiaries
Cash dividends
Net income belonging toparent company’s
shareholders
Purchase of treasury stock
Disposition of treasury
stock
Change in interest in
subsidiaries
Reversal of revaluation
reserve for land
Net changes in items otherthan those inshareholders’ equity
Total changes during theyear$

Balance, March 31, 2018$258,847$

1,418,801$

984,322$

Total Shareholders’Equity(5,950)$2,656,021

72

72(19,565)(19,565)
34,616(55)(358)

34,616
(358)

420

365

(1,495)(1,495)309

258,847$(1,477)
1,417,323$

15,359999,682309

Valuationdifference on
available-forsale securities

Deferred
gains orlosses onhedgesThousands of U.S. Dollars (Note 2)
Accumulated Other
Comprehensive Income
Total
Foreign
Accumulated
Revaluation
Remeasurements
Currency
Other
reserve forTranslation of defined benefit Comprehensive
land
plans
Adjustments
IncomeBalance, April 1, 2017
Purchase of shares of
consolidated subsidiaries
Cash dividends
Net income belonging toparent company’s
shareholders
Purchase of treasury stock
Disposition of treasury
stock
Change in interest in
subsidiaries
Reversal of revaluation
reserve for land
Net changes in items otherthan those inshareholders’ equity
Total changes during the
year

$

$

$ (1,971)

Balance, March 31, 2018$

29,800

-

$

76

$

(20,858)$

61(5,889)$7,046

13,9432,669,964$

Stock
Acquisition
Rights

Noncontrolling
Interests

Total Net
Assets$$$ 2,667,142

901

3,172

72
(19,565)
34,616(358)
365(1,495)309
27,382
27,382
57,182

$

-

(309)

-

(309)
$ (2,280)

22

$

22
99

See notes to consolidated financial statements.

6

31,647$31,647
10,78858,743$58,74365,789

56

$

56
957

$

(615)

58,183

(615)
2,557

72,127$ 2,739,269

Tokyo Kiraboshi Financial Group, Inc. and Consolidated Subsidiaries
Consolidated Statements of Cash Flows
For the Years Ended March 31, 2018 and 2017
Thousands of
U.S. Dollars(Note 2)
2018

Millions of Yen
2017

2018
Operating activities:
Income before income taxes
Depreciation and amortization
Retirement benefit expenses
Gain on negative goodwill
Equity in earnings of investment in affiliate
Net decrease in reserve for loan losses
Net (decrease) increase in reserve for employees’ bonuses
Net increase in retirement benefit asset
Net decrease in retirement benefit liability
Net (decrease) increase in reserve for officers and directors’
retirement benefits
Net increase in reserve for point card program
Net decrease in reserve for losses on interest repayments
Net increase in reserve for losses from reimbursement ofinactive accounts
Net increase in reserve for losses on cancellation of system
contracts
Net increase in reserve for losses on transfer of businessNet decrease in reserve for contingent losses
Interest income
Interest expense
Net gains related to securities transactions
Net exchange losses (gains)
Net (gains) losses on disposition of fixed assets
Gain on state subsidy and other grants
Net decrease (increase) in trading securities
Net increase in loans and bills discounted
Net decrease in deposits
Net decrease in negotiable certificates of deposit
Net decrease in borrowed money (excluding subordinatedborrowed money)
Net decrease in due from banks (excluding due from the Bankof Japan)
Net (increase) decrease in call loans and bills bought
Net increase in call money
Net (decrease) increase in payables under securities lendingtransactions
Net increase in foreign exchange-assets
Net (decrease) increase in foreign exchange-liabilities
Net increase in borrowed money from trust accountInterest received
Interest paid
Other-net
Subtotal
Income taxes paid
Income taxes refunded¥¥

Net cash used in operating activities

4,735
3,254
1,008
(35)
(3,449)(72)(4,265)(1,607)¥27,4503,023
830(19,443)
(78)
(454)
37
(5,478)(1,215)$44,57730,6299,489(329)(32,464)(682)(40,150)(15,132)

(42)
1
(2)

24
4
(3)

(403)
10
(21)

175

21

1,649

194
(63)
(57,411)
3,386(1,206)
9,433
(202)
87
(54,773)(65,452)(11,800)200(5)(58,889)
3,793(2,544)(8,308)
272
(156)
(136)
(38,866)(78,076)(12,866)

1,833
(593)
(540,398)
31,880(11,352)
88,796(1,909)823(515,563)(616,081)(111,069)(29,858)(2,009)(281,042)

9,170(7,203)
18,2301,860
29,81940,70686,319(67,800)
171,600(4,044)(5,972)(711)
53
57,753(3,413)(16,175)(160,277)(1,669)379

67,982(1,053)867
60,717(4,354)(5,554)(1,881)(2,745)350(38,073)(56,214)(6,701)
505
543,613(32,126)(152,256)(1,508,639)(15,712)
3,575(161,567)¥(4,276)$(1,520,776)(Continued)

7Tokyo Kiraboshi Financial Group, Inc. and Consolidated Subsidiaries
Consolidated Statements of Cash Flows
For the Years Ended March 31, 2018 and 2017
Thousands of
U.S. Dollars(Note 2)
2018

Millions of Yen
2017

2018
Investing activities:
Purchases of securities
Proceeds from sales of securities
Proceeds from maturity of securities
Purchases of tangible fixed assets
Payments for disposition of tangible fixed assets
Proceeds from sales of tangible assets
Purchases of intangible assets
Payments of investments in capital
Proceeds from state subsidy and other grants¥(473,425)
322,075
192,296(5,809)(118)
1,199(1,019)-¥(556,723)
362,521291,314(4,467)
(171)
42
(758)
(103)
58

$

(4,456,192)
3,031,579
1,810,017(54,679)(1,111)
11,289(9,596)-35,197

91,712

331,306(2,083)
(35)
(38)
38

(2,000)(21,000)
14,881(1,877)
(54)
(47)
10

(19,612)
(334)
(358)
365

(213)

(52)

(2,005)

(379)

81
(363)

(3,569)(2,710)(10,421)(25,515)1

4

12

Net (decrease) increase in cash and cash equivalents(129,078)

77,018(1,214,973)

Cash and cash equivalents at beginning of year

504,444

393,056

4,748,162-

34,369-Net cash provided by investing activities
Financing activities:
Repayments of subordinated borrowings
Payments for redemption of subordinated bonds
Proceeds from issuance of shares
Cash dividends paid
Cash dividends paid to non-controlling interests
Payments for purchase of treasury stock
Proceeds from sales of treasury stock
Payments for acquisition of shares in subsidiaries that do not
result in change in scope of consolidation
Proceeds from sales of shares in subsidiaries that do not resultin change in scope of consolidation
Payments of lease obligations
Net cash used in financing activities
Effect of exchange rate change on cash and cash equivalents

Increase in cash and cash equivalents resulting from shareexchange (Note 21)¥

Cash and cash equivalents at end of year (Note 20)

375,365¥

504,444$3,533,188(Concluded)

See notes to consolidated financial statements.

8

Tokyo Kiraboshi Financial Group, Inc. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2018 and 2017
1. Summary of Significant Accounting Policies
a. Basis of presentation
Tokyo Kiraboshi Financial Group, Inc. (formerly, Tokyo TY Financial Group, Inc., the “Company”) wasestablished as a joint holding company through a share transfer between The Tokyo Tomin Bank, Limited (“Tokyo
Tomin”) and The Yachiyo Bank, Limited (“Yachiyo”) on October 1, 2014. The share transfer was accounted for
applying the purchase method stipulated in accounting standards relating to business combinations with Tokyo
Tomin as the acquiring company and Yachiyo as the acquired company.
The accompanying consolidated financial statements of the Company and its consolidated subsidiaries have been
prepared in accordance with the provisions set forth in the Japanese Financial Instruments and Exchange Act andits related accounting regulations, the Enforcement Regulation for the Banking Act and in conformity withaccounting principles generally accepted in Japan (“Japanese GAAP”), which are different in certain respects as toapplication and disclosure requirements of International Financial Reporting Standards.
As permitted by the Financial Instruments and Exchange Law of Japan, amounts of less than one million yen havebeen omitted. As a result, the totals shown in the accompanying consolidated financial statements (both in yen and
U.S. dollars) do not necessarily agree with the sums of the individual amounts.
b. Principles of consolidation
The accompanying consolidated financial statements include the accounts of the Company and all of its 13
subsidiaries (collectively, the “Group”).
As of November 1, 2017, Kiraboshi Tech, Inc. was established as a 100% owned subsidiary of Tokyo Tomin, aconsolidated subsidiary, and has been included in the scope of consolidation from the year ended March 31, 2018.
As of April 3, 2017, Tomin Management Research Institute Co., Limited changed its trade name to Kiraboshi
Consulting Co., Limited.
As of May 1, 2018, Yachiyo, Tokyo Tomin and ShinGinko Tokyo, Limited (“ShinGinko Tokyo”) conducted anabsorption-type merger, with Yachiyo as the surviving company, and Tokyo Tomin and ShinGinko Tokyo as thedissolving companies, and Yachiyo changed its trade name to Kiraboshi Bank, Ltd. (“Kiraboshi Bank”).
See Note 26.
As of the same date, the following consolidated companies changed their trade names to the following:
Yachiyo Service Co., Ltd.:
Yachiyo Business Service Co., Ltd.:
Yachiyo Credit Service Co., Ltd.:Tomin Card Co., Ltd.:

Kiraboshi Service Co., Ltd.
Kiraboshi Business Service Co., Ltd.
Kiraboshi Credit Service Co., Ltd.
Kiraboshi JCB Co., Ltd.

Under the control and influence concept, those companies which the Company, directly or indirectly, is able toexercise control over operations are fully consolidated, and those companies over which the Group has the ability
to exercise significant influence in terms of its operating and financial policies is accounted for by the equity
method in the consolidated financial statements.
Investments in two affiliated companies are accounted for by the equity method.
As of May 1, 2018, Tokyo TY Leasing Co., Ltd., an affiliated company accounted for by the equity method,changed its trade name to Tokyo Kiraboshi Leasing Co., Ltd.
Tokyo Kanagawa Innovation Support Series 1 Investment Limited Partnership, a subsidiary newly establishedduring the fiscal year ended March 31, 2018, is not consolidated nor accounted for by the equity method but is9stated at cost, because it is insignificant in terms of the aggregated amount of its assets, ordinary income, net
income, retained earnings and other accumulated comprehensive income and, thus, its impact on the consolidated
financial statements is immaterial.
All significant intercompany balances and transactions have been eliminated in consolidation. All material
unrealized profit included in assets resulting from transactions within the Group is also eliminated.
The balance sheet dates of the consolidated subsidiaries at March 31, 2018 are as follows:
December 31.......................... 1
March 31................................ 12
The subsidiary with the balance sheet date of December 31 is consolidated after the accounts are provisionallyclosed as of March 31 for the purpose of consolidation. The other subsidiaries are consolidated on the basis of
their respective financial statements with the same balance sheet date as the consolidated balance sheet date.
c. Trading account securities
Trading account securities are stated at fair value as of the balance sheet date. Cost of sales of trading accountsecurities is determined using the moving average method.
d. Securities
Held-to-maturity debt securities are carried at amortized cost (straight-line method) determined by themoving-average method.
Available-for-sale securities for which fair value is available are stated at the fair value at the fiscal year-end. Costof sales of these available-for-sale securities is determined using the moving-average method. Available-for-salesecurities for which fair value is not readily determinable are stated at cost determined by the moving averagemethod. Valuation difference on available-for-sale securities, net of applicable taxes, is reported in a separate
component of net assets.
e. Derivative transactions
Derivatives are stated at fair value.
f. Depreciation and amortization of fixed assets
Depreciation of tangible fixed assets (other than lease assets) of consolidated subsidiaries conducting banking
business (“banking subsidiaries”) is computed using the declining-balance method based on the estimated useful
lives of the assets, while the straight-line method is mainly applied to buildings.
The following is the range of useful lives of principal tangible fixed assets.
Buildings:
6 to 50 years
Other:
2 to 20 years
Depreciation of tangible fixed assets of other consolidated subsidiaries (“non-banking subsidiaries”) is principally
computed using the declining-balance method based on the estimated useful lives of the assets.
Intangible fixed assets (other than lease assets) are amortized using the straight-line method. Costs of computer
software developed or obtained for internal use are amortized using the straight-line method over the estimateduseful life of 5 years.
Lease assets under finance leases which do not transfer ownership of assets to lessees are depreciated using thestraight-line method over the lease terms of the respective assets. Residual value of these lease assets isguaranteed residual value per the respective lease contracts or zero value.
g. Treatment of deferred assets
Organization costs and stock issuance costs are amortized using the straight-line method over 5 years and 3 years,
respectively.

10

h. Reserve for loan losses
A reserve for loan losses is provided by consolidated banking subsidiaries in accordance with internallyestablished standards for write-offs and provisions:• For claims on borrowers who have entered into bankruptcy, special liquidation proceedings or similar legal
proceedings under the Bankruptcy Law, Special Liquidation in the Commercial Law or other similar laws(“bankrupt borrowers”), and borrowers who are not legally or formally bankrupt but effectively in similar
conditions (“effectively bankrupt borrowers”), a reserve is fully provided based on the amount of claims, netof the expected amount of recoveries from collateral and guarantees.
• For claims on borrowers who are not currently bankrupt but are perceived to have a high risk of falling into
bankruptcy (“potentially bankrupt borrowers”), a reserve is provided in the amount deemed necessary basedon an overall solvency assessment of the claims, net of the expected amount of recoveries from collateral andguarantees.
• For other claims, a reserve is provided based on the rates derived from default experiences for a certain
period in the past and other factors.
For claims on borrowers who are effectively bankrupt borrowers or borrowers whose credit terms are rescheduledor reconditioned and exceed certain thresholds, if cash flows from collection of principal and interest can bereasonably estimated, the difference between the cash flows discounted by the original interest rate and thecarrying value of the loan is provided as a reserve for loan losses (discounted cash flows method).
All claims are assessed by the Asset Assessment Department under the cooperation by credit origination
department in accordance with the Group’s policies and guidelines for the self-assessment of asset quality. For
collateralized or guaranteed claims on bankrupt borrowers and effectively bankrupt borrowers of part of theconsolidated subsidiaries engaged in banking, the amount of the claims exceeding the estimated value of collateraland guarantees was deemed to be uncollectible and was written off against the total amount of the outstanding
claims until the year ended March 31, 2015; however, from the year ended March 31, 2016, in line with the
management integration, such amount is no longer written off directly but provided as a reserve. As of March 31,2018 and 2017, the outstanding write-offs made before April 1, 2015 amounted to ¥1,173 million ($11,050
thousand) and ¥1,615 million, respectively.
For part of the consolidated non-banking subsidiaries, a general reserve is provided based on the historical credit
loss experience for normal claims and a specific reserve is provided at the amount deemed uncollectible based onan evaluation of potential losses for each claim other than normal claims.
i. Reserve for employees’ bonuses
A reserve for employees’ bonuses is recorded at the estimated amount attributed to the current fiscal year, toprovide for the future bonus payments to employees.
j. Reserve for officers’ and directors’ retirement benefits
A reserve for officers’ retirement benefits is recorded to provide future pension payments by certain consolidatedbanking subsidiaries and that for directors’ by certain consolidated non-banking subsidiaries in the amountdeemed accrued at the current fiscal year-end based on the estimated amount of benefits.
k. Reserve for point card program
A reserve for point card program is provided by certain consolidated subsidiaries at the amount considerednecessary to cover the estimated future costs of credit points.
l. Reserve for losses on interest repayments
Certain consolidated subsidiaries account for the necessary amount to provide for possible losses on claims for
repayments of interest on loans that exceed the maximum interest rate set by the Interest Limitation Law.
m. Reserve for losses from reimbursement of inactive accounts
A reserve for losses from reimbursement of inactive accounts is provided by consolidated banking subsidiaries at
the amount considered necessary for future payments of deposits which were derecognized from liabilities, owing
to depositors request for reimbursements.
11

n. Reserve for losses on cancellation of system contracts

A reserve for losses on cancellation of system contracts is provided at the amount considered necessary to cover
the estimated future losses on early cancellation of the outsourcing service contracts for existing core systems as aresult of integrating core systems used by a certain consolidated banking subsidiary to those used by anotherconsolidated banking subsidiary in May 2018.
o. Reserve for losses on transfer of business
A reserve for losses on transfer of business is provided at the amount considered necessary to cover the estimated future
losses on transfer of the business of a certain consolidated subsidiary.

p. Reserve for contingent losses
A reserve for contingent losses is provided by consolidated banking subsidiaries at the amount considerednecessary to cover possible contingent losses in accordance with the Joint Responsibility System of Credit
Guarantee Corporations.
q. Retirement benefits
In determining the retirement benefit liability for certain consolidated banking subsidiaries, the benefit formulabasis is adopted as the attribution method of the projected retirement benefit.
Prior service costs are charged to income using the straight-line method based on the average remaining service
period of the employees (3 years).
Actuarial differences are charged to income from the period following the period in which they arise using thestraight-line method based on the average remaining service period of the employees (11 to 12 years, 14 to 15
years).
Simplified methods are applied by certain consolidated non-banking subsidiaries in calculating the net defined
benefit liability and retirement benefit expenses which allow them to determine based on the amount considerednecessary upon voluntary resignation at the end of fiscal year.
r. Translation of assets and liabilities denominated in foreign currencies
Assets and liabilities denominated in foreign currencies are translated into Japanese yen at the exchange rates
prevailing at the balance sheet date.
s. Hedge accounting
For derivatives to hedge the interest rate risk associated with various financial assets and liabilities of theconsolidated banking subsidiaries, the Group applies the deferred method which is stipulated in “Accounting and
Auditing Treatment of Accounting Standards for Financial Instruments in Banking Industry” (Japanese Institute ofCertified Public Accountants (the “JICPA”) Industry Audit Committee Report No. 24, February 13, 2002). The
Group assesses the effectiveness of such hedge for offsetting changes in interest rate, by classifying the hedged
items (such as deposits and loans) and the hedging instruments (such as interest rate swaps) by their maturity. The
Group had not entered into new derivative transactions for the purpose of hedging against changes in interest rates
related to deposits and loans during the fiscal years ended March 31, 2018 and 2017.
Exceptional treatment is applied to interest rate swaps for certain financial assets.
Consolidated non-banking subsidiaries have no transactions to which hedge accounting is applied.
t. Appropriation of retained earnings
Under the Companies Act of Japan (the “Companies Act”), the appropriation of retained earnings with respect to agiven financial period is made by resolution of the stockholders at a general meeting held subsequent to the closeof such financial period. Therefore, the accounts for that period do not, reflect such appropriations. See Note 26.
u. Cash and cash equivalents
For purposes of the consolidated statements of cash flows, cash and cash equivalents include cash and deposits
with the Bank of Japan which are included in “Cash and due from banks” in the consolidated balance sheets.
12v. Consumption taxes
The Company and its domestic consolidated subsidiaries account for consumption taxes and local consumption
taxes by the tax-exclusion method whereby receipts and payments of consumption taxes are not included in thetransaction amounts and, accordingly, consumption tax amounts do not affect the measurement of profit or losstransactions. However, consumption taxes etc. relating to tangible fixed assets that are not tax-deductible areaccounted for as an expense in the fiscal year in which they are incurred.
w. Accounting Standards and Guidance issued but not yet applied
1. Implementation Guidance on Tax Effect Accounting, etc.
• “Implementation Guidance on Tax Effect Accounting” (ASBJ Guidance No. 28, revision on February
16, 2018)• “Implementation Guidance on Recoverability of Deferred Tax Assets” (ASBJ Guidance No. 26, final
revision on February 16, 2018)(1) Outline
The “Implementation Guidance on Tax Effect Accounting” and “Implementation Guidance on
Recoverability of Deferred Tax Assets” adhere fundamentally to the previous contents and made thefollowing revisions that were deemed necessary, on the occasion of transferring the practical guidelines
on tax effect accounting from the Japanese Institute of Certified Public Accountants (JICPA) to the
Accounting Standards Board of Japan (ASBJ).
(Major accounting treatments revised)• The accounting treatment for taxable temporary differences related to investments in subsidiaries when an
entity prepares separate financial statements• The accounting treatment related to the recoverability of deferred tax assets in entities that qualify as
Category 1(2) Scheduled date of adoption
The Company expects to adopt the implementation guidance from the beginning of the fiscal year ending
March 31, 2019.
(3) Impact of the adoption of implementation guidance
The Company is currently evaluating the effect of the adoption of this implementation guidance on its
consolidated financial statements.
2. Accounting Standard for Revenue Recognition, etc.
• “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, March 30, 2018)• “Implementation Guidance on Accounting Standard for Revenue Recognition” (ASBJ Guidance No. 30,
March 30, 2018)(1) Outline
The International Accounting Standards Board (IASB) and the U.S. Financial Accounting Standards
Board (FASB) jointly developed comprehensive accounting standards for revenue recognition andpublished the “Revenue from Contracts with Customers” (IFRS 15 for the IASB and Topic 606 for the
FASB) in May 2014. IFRS 15 is effective for fiscal years beginning on or after January 1, 2018 andTopic 606 is effective for fiscal years beginning after December 15, 2017. Given these circumstances, the
ASBJ has developed comprehensive accounting standards for revenue recognition and published themwith the implementation guidance thereon.
The basic policy of the ASBJ in developing accounting standards for revenue recognition is thought to set
such accounting standards by adopting basic principles of IFRS 15 as a starting point, from the viewpointof comparability among financial statements, which is one of benefits of ensuring consistency with IFRS
15, and to additionally provide for alternative accounting treatment to the extent that it would not impair
comparability, if there is an item to be taken into consideration in practices that have been conducted inJapan.

13

(2) Scheduled date of adoption
The Company expects to adopt the accounting standard and implementation guidance from the beginningof the fiscal year ending March 31, 2022.
(3) Impact of the adoption of accounting standard and implementation guidance
The Company is currently evaluating the effect of the adoption of this accounting standard andimplementation guidance on its consolidated financial statements.
2. U.S. Dollar Amounts
Amounts in U.S. dollars are included solely for the convenience of readers outside Japan. The rate of ¥106.24 =$1, the approximate rate of exchange on March 31, 2018, has been used in translation. The inclusion of suchamounts is not intended to imply that Japanese yen have been or could be readily converted, realized or settled in
U.S. dollars at that rate or any other rate.
3. Securities
As of March 31, 2018 and 2017, securities included equity investments in an affiliated company that amounted to¥1,031 million ($9,711 thousand) and ¥977 million, respectively.
As of March 31, 2018, Japanese government bonds included bonds of ¥2,999 million ($28,232 thousand), whichwere being loaned to third parties without collateral under lending contracts (securities lending transactions).
Japanese corporate bonds included bonds offered through private placement. The Group’s guarantee obligation forsuch private-placement bonds as of March 31, 2018 and 2017 were ¥46,131 million ($434,222 thousand) and¥32,246 million, respectively.
In the following description, in addition to “Securities”, also presented are negotiable certificates of deposit which
are classified as “Trading account securities” and “Cash and due from banks” in the consolidated balance sheets
and trust beneficiary rights which are classified as “Monetary claims bought” in the consolidated balance sheets.
As of March 31, 2018 and 2017, valuation gain on trading securities included in income before income taxes was¥1 million ($18 thousand) and ¥3 million, respectively.
 Held-to-maturity securities
The following tables summarize carrying values, fair values and differences of securities with available fair values
as of March 31, 2018 and 2017:
Millions of Yen
2018
Carrying value
Securities with fair value exceeding carrying value:
Japanese government bonds
Japanese local government bonds
Japanese corporate bonds
Foreign securities
Subtotal
Securities with fair value not exceeding carrying value:
Japanese government bonds
Japanese local government bonds
Japanese corporate bonds
Foreign securities
Subtotal
Total

¥

¥

14

304,565
22,46469,312
3,997
400,339604
10,62323,02734,254
434,594

Fair value¥¥

317,428
22,67570,052
4,068
414,224604
10,56322,65533,822448,047

Net unrealized
gains (losses)¥¥

12,863210
740
70
13,885
(0)
(60)
(372)
(432)
13,453

Millions of Yen
2017
Carrying value
Securities with fair value exceeding carrying value:
Japanese government bonds
Japanese local government bonds
Japanese corporate bonds
Foreign securities
Subtotal
Securities with fair value not exceeding carrying value:
Japanese government bonds
Japanese local government bonds
Japanese corporate bonds
Foreign securities
Subtotal
Total

¥

¥

295,633
34,28683,007
26,132
439,059
12,126
11,8772,000
26,004
465,063

Fair value¥¥

310,271
34,576
83,962
26,343455,154
11,935
11,772
1,922
25,630480,785

Net unrealized
gains (losses)¥¥

14,638290955
211
16,095
(190)
(105)
(77)
(373)
15,722Thousands of U.S. Dollars
2018
Net unrealized
Carrying value
Fair value
gains (losses)
Securities with fair value exceeding carrying value:
Japanese government bonds
Japanese local government bonds
Japanese corporate bonds
Foreign securities
Subtotal
Securities with fair value not exceeding carrying value:
Japanese government bonds
Japanese local government bonds
Japanese corporate bonds
Foreign securities
Subtotal
Total

$

$

15

2,866,770
211,447
652,41237,623
3,768,253
5,686
99,993
216,749
322,429
4,090,683$$

2,987,847
213,431659,383
38,291
3,898,954
5,685
99,426
213,247
318,359
4,217,314$$

121,077
1,984
6,971
668
130,701(1)(567)(3,501)(4,070)126,631

 Available-for-sale securities
The following tables summarize carrying values, acquisition costs and differences of securities with available fairvalues as of March 31, 2018 and 2017:
Millions of Yen
2018
Acquisition
Net unrealized
Carrying value
cost
gains (losses)
Securities with carrying value exceeding acquisition cost:
Corporate stocks¥
23,904 ¥
14,478 ¥9,426
Bonds:
Japanese government bonds
115,857
115,607250
Japanese local government bonds
18,87818,696
181
Japanese short-term corporate bonds
197,172
195,878
1,293Japanese corporate bonds
Total bonds
331,908
330,182
1,725
107,1842,700
109,885
Other securities
Subtotal
465,698
451,846
13,852
Securities with carrying value not exceeding acquisition cost:
Corporate stocks
10,232
11,185(953)
Bonds:
Japanese government bonds
28,25028,642(391)
Japanese local government bonds
12,703
12,863(159)
Japanese short-term corporate bonds
9,999
9,999
112,164(671)
111,492
Japanese corporate bonds
Total bonds
162,447
163,669(1,222)
165,207(3,603)
161,603
Other securities
334,282
340,061(5,779)Subtotal¥
799,980¥
791,908
¥
8,072
Total
Millions of Yen
2017
Acquisition
Net unrealized
Carrying value
cost
gains (losses)
Securities with carrying value exceeding acquisition cost:
Corporate stocks
Bonds:
Japanese government bonds
Japanese local government bonds
Japanese short-term corporate bonds
Japanese corporate bonds
Total bonds
Other securities
Subtotal
Securities with carrying value not exceeding acquisition cost:
Corporate stocks
Bonds:
Japanese government bonds
Japanese local government bonds
Japanese short-term corporate bonds
Japanese corporate bonds
Total bonds
Other securities
Subtotal
Total
16

¥

¥

24,204¥

16,819¥7,384

148,645
27,141
209,327
385,114109,950
519,269

147,655
26,869207,669
382,194
108,321507,335

989
271
1,658
2,920
1,628
11,933

8,202

9,929

(1,726)

29,05910,928
9,999
117,576
167,563
150,909326,675
845,944

29,90911,184
9,999
118,415
169,509
154,855
334,293841,629

(849)
(256)
(839)
(1,945)(3,946)(7,618)
4,315

¥

¥

Thousands of U.S. Dollars
2018
Acquisition
Net unrealized
Carrying value
cost
gains (losses)
Securities with carrying value exceeding acquisition cost:
Corporate stocks
Bonds:
Japanese government bonds
Japanese local government bonds
Japanese short-term corporate bonds
Japanese corporate bonds
Total bonds
Other securities
Subtotal
Securities with carrying value not exceeding acquisition cost:
Corporate stocks
Bonds:
Japanese government bonds
Japanese local government bonds
Japanese short-term corporate bonds
Japanese corporate bonds
Total bonds
Other securities
Subtotal
Total

$

$

225,005$

136,279$

88,725

1,090,528
177,695
1,855,916
3,124,140
1,034,311
4,383,457

1,088,172
175,983
1,843,739
3,107,895
1,008,893
4,253,068

2,356
1,712
12,177
16,24525,417130,388

96,310105,280(8,970)265,916
119,572
94,126
1,049,441
1,529,057
1,521,113
3,146,481
7,529,939

269,600
121,076
94,126
1,055,763
1,540,567
1,555,036
3,200,884
7,453,953(3,684)(1,503)(6,322)(11,509)(33,922)(54,402)75,985$$

Securities with fair values (excluding securities held for trading purpose) that have substantially declined from theacquisition cost are valued at fair value and losses on devaluation of those securities are recognized in the
consolidated statements of income unless the value is considered recoverable.
For the year ended March 31, 2018, no impairment loss was recognized.
For the year ended March 31, 2017, impairment loss of ¥1 million for bonds was recognized.
Determining whether the fair value has “significantly declined” is based on the fair value declining by more than
50% or the criteria considering the trend of the fair value during a certain past period and credit risks of the issuers
when the fair value declined between 30% and 50% of the acquisition cost.
The following table summarizes total available-for-sale securities sold and amounts of the related gains and losses
for the years ended March 31, 2018 and 2017:
Millions of Yen
2018
Sales proceeds
Realized gains Realized losses¥
10,268¥2,599 ¥
106
Corporate stocks
Bonds:
76,871
162
14
Japanese government bonds
11,444
92
36
Japanese local government bonds
4,0000Japanese short-term corporate bonds
422
19
54,812
Japanese corporate bonds
147,128
677
70
Total bonds
170,232
419
2,412
Other securities¥
327,630¥
3,696 ¥
2,589
Total
17

Millions of Yen
2017
Corporate stocks
Bonds:
Japanese government bonds
Japanese local government bonds
Japanese short-term corporate bonds
Japanese corporate bonds
Total bonds
Other securities
Total

Sales proceeds¥
4,474

Realized gains¥
1,198

Realized losses¥
77

131,326
27,691
28,888
187,905
149,008

1,067
376
448
1,892
1,059

562
11
150
723
867

¥

341,388

¥

4,149

¥

1,669

Thousands of U.S. Dollars
2018
Corporate stocks
Bonds:
Japanese government bonds
Japanese local government bonds
Japanese short-term corporate bonds
Japanese corporate bonds
Total bonds
Other securities
Total

Sales proceeds$
96,657

Realized gains$
24,471

Realized losses$
1,005

723,567
107,725
37,650515,927
1,384,871
1,602,340

1,528
871
3,976
6,376
3,949

138
342
0
181
662
22,708$3,083,869$

34,797$

24,376

4. Loans and Bills Discounted
Loans and bills discounted include loans to borrowers in bankruptcy, delinquent loans, loans past due for threemonths or more, and restructured loans. The amounts of these loans as of March 31, 2018 and 2017 were as
follows:¥

Loans to borrowers in bankruptcy
Delinquent loans
Loans past due for three months or more
Restructured loans
Total

¥

Millions of Yen
2018
2017
6,774
¥
5,768
75,862
83,620
264
239
2,541
3,253
85,444¥92,882Thousands of
U.S. Dollars
2018$
63,770714,070
2,488
23,926$804,255

Loans are generally placed on non-accrual status when the ultimate collectability of either the principal or interest
becomes doubtful because payments have been in arrears for a certain period of time or due to other reasons.
Loans to borrowers in bankruptcy represent non-accrual loans to borrowers in legal bankruptcy as defined in the
Corporation Tax Law. Delinquent loans represent non-accrual loans other than loans to borrowers in bankruptcy
and restructured loans.
Loans past due for three months or more represent loans on which payments of principal or interest have been inarrears for three months or more, but do not meet the criteria for loans to borrowers in bankruptcy and delinquentloans.

18

Restructured loans are loans that have been restructured to support the rehabilitation of certain borrowers who areencountering financial difficulties, with the intention of ensuring recovery of the loans by providing easier
repayment terms for the borrowers (such as by reducing the rate of interest or by providing a grace period for thepayment of principal/interest, etc.), and are not classified in any of the above categories.
These amounts represent the gross amounts before deduction of the reserve for loan losses.
Notes discounted are recorded as cash lending/borrowing transactions in accordance with “Accounting and
Auditing Treatments of the Application of Accounting Standards for Financial Instruments in the Banking
Industry” (JICPA Industry Audit Committee Report No. 24). The Group has a right to sell or collateralize suchbills at its discretion. As of March 31, 2018 and 2017, total face value of commercial bills and bills of exchangeacquired through discounting amounted to ¥42,645 million ($401,408 thousand) and ¥40,944 million,
respectively.
As of March 31, 2018 and 2017, loans and bills discounted included the portion of extended to original borrowers
based on loan participation agreements, as permitted by the JICPA Accounting Committee Report No. 3, in theamount of ¥1,014 million ($9,544 thousand) and ¥500 million, respectively.
Line-of-credit agreements relating to overdrafts and loans are agreements which oblige the Group to lend funds up
to a certain limit agreed to in advance. The Group makes the loan upon the request of an obligor to draw down
funds under such a loan agreement as long as there is no breach of the various terms and conditions stipulated in
the relevant loan agreement. The unused line-of-credit balance relating to these overdrafts and loan agreements asof March 31, 2018 and 2017 amounted to ¥881,307 million ($8,295,438 thousand) and ¥923,915 million,
respectively. The amount related to overdrafts and loans with a term of one year or less or overdrafts and loans
which permit unconditional cancellation at any time were ¥858,882 million ($8,084,356 thousand) and ¥898,224
million, as of March 31, 2018 and 2017, respectively.
As many of these contracts expire undrawn, the aggregate total of the undrawn amount does not necessarily affectthe future cash flows of the Group. Many of these contracts have clauses that allow the Group to turn down a loan
request or reduce the amounts of the credit line if there is a change in financial conditions, a need to establish
increased securities, or other similar reasons. In addition to obtaining necessary collateral (real estate, securities,etc.) at the time the commitment contract is entered into, the Group assesses the condition of the customer’sbusiness operations, and analyzes other information, based on internal procedures and standards. If necessary, thecontract is reviewed and revised, or additional steps are taken to secure the credit extended to the customer.
5. Tangible Fixed Assets
Tangible fixed assets were shown at net of the following accumulated depreciation:¥

Accumulated depreciation

Millions of Yen
2018
2017
35,700¥38,204

Thousands of
U.S. Dollars
2018$
336,035

Land used for Tokyo Tomin’s business activities has been revalued on the basis prescribed by the Law Concerning
Land Revaluation (Proclamation No. 34 dated March 31, 1998), and “Revaluation reserve for land” has beenrecorded in net assets.
Date of revaluation:
March 31, 1998
Revaluation method as stated in Article 3-3 Law Concerning Land Revaluation
The value of land is based on the posted land price governed by the Law Concerning Public Notification of Land
Prices and the standard land price governed by the Order for Enforcement of the National Land Use Planning Law,
with making reasonable adjustments, as stipulated in Article 2-1 or 2-2 of the Order for Enforcement of the Law
Concerning Land Revaluation (Cabinet Order No. 119 promulgated on March 31, 1998). Difference between the19revalued carrying amount and fair value of lands being revalued pursuant to the Article 10 of the law as of March
31, 2018 and 2017 were ¥273 million ($2,569 thousand) and ¥153 million, respectively.
The advanced depreciation entry for tangible fixed assets amounted to ¥140 million ($1,319 thousand) and ¥191
million for the years ended March 31, 2018 and 2017, respectively.
6. Pledged Assets
Assets pledged as collateral as of March 31, 2018 and 2017 consisted of the following:Thousands of
U.S. Dollars
2018

Millions of Yen
2018
2017
Assets pledged as collateral:
Securities
Loan and bills discounted
Other assets
Liabilities corresponding to assets pledged as collateral:
Deposits
Call money and bills soldPayable under securities lending transactions
Borrowed money¥

496,122
9,840
16

¥

505,717
17,54436$

4,669,830
92,620
155

¥

5,063
26,562
332,534
68,000¥43,01315,706354,801
98,000$47,658250,023
3,130,032
640,060

In addition to the assets presented above, securities totaling ¥49,283 million ($463,886 thousand) and ¥82,363
million were pledged as collateral relating to transactions on exchange settlements, foreign exchange
administration services, cooperative system settlements and derivative transactions or as substitutes for futuretransaction margins as of March 31, 2018 and 2017, respectively.
Other assets as of March 31, 2018 and 2017 included following:Thousands of
U.S. Dollars
2018

Millions of Yen
2018
2017
¥
Deposits
Cash collateral paid for financial instruments
Margin deposits to central counterparty clearing house

4,479
113
37,319¥5,701
10,236$42,1601,063
351,277

7. Borrowed Money
Borrowed money as of March 31, 2018 and 2017 included subordinated borrowings amounting to ¥5,000 million($47,063 thousand) and ¥5,000 million, respectively.
Annual maturities of borrowed money as of March 31, 2018 were as follows:
Thousands ofMillions of Yen U.S. Dollars¥
30,291 $285,126
10,084
94,92028,066
264,175
49
461
29
278
5,037
47,413¥73,558 $692,375

Year ending March 31
2019
2020
2021
2022
2023
2024 and thereafter
Total

20

8. Other Liabilities

Lease obligations
Lease obligations of ¥1,939 million ($18,256 thousand) were included in “Other liabilities”. The average interest
rates on lease obligations as of March 31, 2018 with maturities dates subsequent to March 31, 2019 was 4.43%.
The aggregate annual maturities of lease obligations subsequent to March 31, 2018 were summarized as follows:

Millions of Yen
¥
463
421
312
250
197
294
¥
1,939

Year ending March 31
2019
2020
2021
2022
2023
2024 and thereafter
Total

Thousands of
U.S. Dollars
$
4,361
3,970
2,939
2,353
1,856
2,773
$
18,256

9. Retirement Benefit Plans(1) Outline of retirement benefit plans adopted
Tokyo Tomin maintains a corporate pension fund plan and a lump-sum payment plan. As of October 1, 2013, theretirement benefit system was revised and a switch was made from a defined benefit corporate pension plan to acash balance-type pension plan using a point system. In some cases, premium severance may be paid whenemployees retire.
In 1987, for participants with the participating period of 20 years or more, approximately 20% of the retirement
benefits were transferred from a lump-sum payment plan to a welfare pension fund plan.
Concerning the substitutional portion of the welfare pension fund plan, approval by the Minister of Health, Laborand Welfare on the exemption from the obligation to pay the future portion of funds was received on April 1, 2004
and approval on the return of the past portion was received on April 1, 2005.
Yachiyo maintains a corporate pension plan and a lump-sum payment plan. Concerning the corporate pension plan,a corporate pension fund was established as of March 1, 2004 as a result of an approved transfer from a welfare
pension fund and, as of April 1, 2005, the corporate pension plan was transferred from a fund-type to acontract-type.
On March 31, 2004, a portion of retirement benefits was shifted to a defined contribution pension plan established
as of March 1, 2004. The defined contribution pension plan adopted matching contributions as of January 1, 2013.
Certain domestic consolidated subsidiaries, other than the above mentioned two banks, maintain lump-sum
payment plans and defined contribution pension plans. For the lump-sum payment plans, the simplified method isapplied in calculating the net defined benefit liability and retirement benefit expenses.
Tokyo Tomin and Yachiyo have established retirement benefit trusts.

21

(2) Defined benefit plans
The changes in the benefit obligation during the years ended March 31, 2018 and 2017 were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Retirement benefit obligation at beginning of year
Increase due to share exchange
Service cost
Interest cost
Actuarial difference
Retirement benefits paid
Other
Retirement benefit obligation at end of year¥2018
57,637

¥

1,543
236
(139)
(3,576)
1,144¥

56,846

2017
58,717

$

138
1,575
205
485
(3,485)¥57,637

2018542,523

14,5292,227(1,308)(33,665)
10,770$535,076

The changes in plan assets during the years ended March 31, 2018 and 2017 were as follows:
Thousands ofMillions of Yen
U.S. Dollars
2018
2017
2018
Plan assets at beginning of year¥
67,310¥61,833$
633,567
Expected return on plan assets
1,323
1,214
12,458Actuarial difference
3,701
4,000
34,837
Contributions by employers
2,874
2,801
27,055Retirement benefits paid
(2,539)(26,516)(2,817)
Plan assets at end of year¥
67,310$681,402¥72,392
The following table sets forth the funded status of the plans and the amounts recognized in the consolidatedbalance sheets as of March 31, 2018 and 2017.

Funded retirement benefit obligation
Plan assets
Unfunded retirement benefit obligation
Net defined benefit asset in the consolidatedbalance sheets

Net defined benefit liability
Net defined benefit asset
Net defined benefit asset in the consolidatedbalance sheets¥

Millions of Yen
2018
2017
56,609¥57,412(67,310)(72,392)(15,782)(9,897)
224
236

Thousands of
U.S. Dollars
2018$532,848(681,402)(148,554)
2,227¥(15,545)

$

¥
¥

22

¥

(9,672)Millions of Yen
2018
2017
2,845
¥
4,453
(18,391)(14,125)(15,545)¥(9,672)(146,326)

Thousands of
U.S. Dollars
2018$26,783(173,109)$(146,326)

The components of retirement benefit expenses for the years ended March 31, 2018 and 2017 were as follows:

Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial difference
Amortization of prior service cost
Other
Retirement benefit expenses for defined benefit plans¥¥

Millions of Yen
2018
2017
1,543
¥
1,575
236
205
(1,323)(1,214)
1,008
1,258
(427)
3
1,148
2,613
¥
1,400

Thousands of
U.S. Dollars
2018$14,5292,227(12,458)
9,489
10,811$
24,599The components of remeasurements of defined benefit plans included in other comprehensive income (before tax
effect) for the years ended March 31, 2018 and 2017 were as follows:

Prior service cost
Actuarial difference
Total

¥
¥

Millions of Yen
2018
2017
¥
(427)
4,772
4,848
¥
4,344
4,848

Thousands of
U.S. Dollars
2018$
45,636$45,636The components of remeasurements of defined benefit plans included in accumulated other comprehensive
income (before tax effect) as of March 31, 2018 and 2017 were as follows:

Unrecognized actuarial difference¥

Millions of Yen
2018
2017
(1,650)¥
3,198

Thousands of
U.S. Dollars
2018$(15,533)

The plan assets, by major category, as a percentage of total plan assets as of March 31, 2018 and 2017 were as follows:

Debt securities
Equity securities
Cash and due from banks (including call loans)Life insurance general accounts
Other
Total
of total, retirement benefit trusts which were set for corporate pension plans

2018
31.2%
51.2%
13.5%
0.9%
3.2%
100.0%

2017
29.7%
54.0%
8.9%
4.1%
3.3%
100.0%

33.2%

32.3%

The long-term expected rate of return on plan assets has been estimated based on the current and anticipatedallocation of plan assets and the current and long-term expected return on plan assets composed of various assets.
The main assumptions used in accounting for the above plans for the years ended March 31, 2018 and 2017 wereas follows:
2018
0.34% or 0.41%
1.90% or 2.00%
4.00% or 5.00%

Discount rateLong-term expected rate of return on plan assets
Expected rate of salary increase23

2017
0.36% or 0.68%
1.90% or 2.00%
3.38% or 5.00%

(3) Defined contribution plans
The amount to be paid to defined contribution plans by consolidated subsidiaries was ¥95 million ($903 thousand)and ¥96 million for the years ended March 31, 2018 and 2017, respectively.
10. Acceptances and Guarantees
All contingent liabilities arising from acceptances and guarantees are included in this account. As a contra account,“Customers’ liabilities for acceptances and guarantees” are shown on the assets side, which represents the Group’s
right of indemnity from the applicants.
11. Shareholders’ Equity
Japanese companies are subject to the Companies Act of Japan (the “Companies Act”). The significant provisions
in the Companies Act that affect financial and accounting matters are summarized below:(1) Dividends
Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to theyear-end dividend upon resolution at the shareholders’ meeting. For companies that meet certain criteria, such as(1) having a Board of Directors, (2) having independent auditors, (3) having an Audit & Supervisory Board, and(4) the term of service of the directors is prescribed as one year rather than two years of normal term by its articles
of incorporation, the Board of Directors may declare dividends (except for dividends in kind) at any time during
the fiscal year if the company has prescribed so in its articles of incorporation. The Company meets all the above
criteria.
The Companies Act permits companies to distribute dividends in kind (noncash assets) to shareholders subject to acertain limitation and additional requirements.
Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if thearticles of incorporation of the company so stipulate. The Companies Act provides certain limitations on theamounts available for dividends or the purchase of treasury stock. The limitation is defined as the amountavailable for distribution to the shareholders, but the amount of net assets after dividends must be maintained at noless than ¥3 million.
(2) Increases/Decreases and Transfer of Common Stock, Reserve and Surplus
The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (acomponent of retained earnings) or as additional paid in capital (a component of capital surplus), depending on theequity account charged upon the payment of such dividends until the aggregate amount of legal reserve andadditional paid in capital equals 25% of the common stock. Under the Companies Act, the total amount ofadditional paid in capital and legal reserve may be reversed without limitation. The Companies Act also provides
that common stock, legal reserve, additional paid in capital, other capital surplus and retained earnings can betransferred among the accounts under certain conditions upon resolution of the shareholders.
(3) Treasury Stock and Treasury Stock Acquisition Rights
The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stock byresolution of the Board of Directors. The amount of treasury stock purchased cannot exceed the amount available
for distribution to the shareholders which is determined by a specific formula. Under the Companies Act, stockacquisition rights are presented as a separate component of equity. The Companies Act also provides thatcompanies can purchase both treasury stock acquisition rights and treasury stock. Such treasury stock acquisitionrights are presented as a separate component of equity or deducted directly from stock acquisition rights.

2412. Stock Options
The stock options outstanding as of March 31, 2018 were as follows:
Stock option
1st Stock
Option2nd Stock
Option
3rd Stock
OptionGrantees
8 directors
10 directors ofsubsidiaries
7 directors
11 directors ofsubsidiaries
9 directors
7 directors ofsubsidiaries

Number of options
granted (*)

Vesting
periodGrant date

Exercise period

12,000 shares

August 3,
2015

Not defined

From August 3, 2015
to August 2, 2045

22,000 shares

August 1,
2016

Not defined

From August 1, 2016
to July 31, 2046

15,100 shares

August 1,
2017

Not defined

From August 1, 2017
to July 31, 2047(*) Number of options granted is expressed in number of shares of common stock granted.
Conditions for the exercise of stock options are not defined.
The stock option activity for the stock options for the year ended March 31, 2018 was as follows:
1st Stock
Option2nd Stock
Option

3rd Stock
OptionNon-vested (Shares) (*1)
March 31, 2017 – Outstanding
GrantedForfeited
VestedMarch 31, 2018 – Outstanding--

15,10015,100-

Vested (Shares) (*1)
March 31, 2017 – Outstanding
VestedExercised
Forfeited
March 31, 2018 – Outstanding

9,400
3,500
5,900

22,0008,400
13,60015,10015,100Exercise price (Yen)
Average stock price at exercise date (Yen)Fair value price at grant date (Yen)

¥
¥
¥

1
2,813
3,881

¥
¥
¥

1
3,147
2,695

¥
¥
¥

1
2,795

Exercise price (U.S. Dollar)
Average stock price at exercise date (U.S. Dollar)
Fair value price at grant date (U.S. Dollar)

$
$
$

0.00
26.00
36.00

$
$
$

0.00
29.00
25.00

$
$
$

0.00
26.00

(*1) Numbers of options granted are expressed in number of shares of common stock granted.
Fair value price of the 3rd Stock Option is estimated using the Black-Scholes model based on the following
assumptions:
Stock price volatility (*1)
43.0%
Expected remaining period (*2)
3.8 years
Expected dividend (*3)
¥60 ($0.56) per share
Risk free rate (*4)-0.09%(*1) Calculated based on actual stock prices for 2.0 years, i.e., the expected remaining period.
(*2) Estimated by subtracting average term of office of current directors from that of past directors.
25

(*3) Actual dividend for the year ended March 31, 2017.
(*4) Interest rate of government bonds corresponding to the expected remaining period.
Actual numbers of forfeited options are used to measure the number of vested options, considering the difficulty
to reasonably estimate future forfeitures.
Stock option expenses recognized in general and administrative expenses were ¥42 million ($397 thousand) and¥59 million for the years ended March 31, 2018 and 2017, respectively.
13. Valuation Difference on Available-for-sale Securities
Valuation difference on available-for-sale securities as of March 31, 2018 and 2017 consisted of the following:

Valuation difference on available-for-securities
Valuation difference on money held in trust
Deferred tax liabilities applicable to valuation difference
Valuation difference on available-for-sale securities,
net of the applicable income taxes before adjustment for
non-controlling interest
Amount attributable to non-controlling interests
Share of valuation difference on available-for-sale securities
held by affiliate accounted for by the equity method
Valuation difference on available-for-sale securities¥¥

Millions of Yen
2018
2017
8,425 ¥
4,437
(1,451)(2,586)

Thousands of
U.S. Dollars
2018$
79,304(24,349)

5,838
(29)

2,985
(20)

54,954
(282)

266
6,075

200
3,166

2,509
57,182¥$

14. Income Taxes
The significant components of the deferred tax assets and liabilities as of March 31, 2018 and 2017 were as
follows:

Millions of Yen
2017
2018
Deferred tax assets:
Net losses carried forward
Items related to retirement benefits
Reserve for loan losses
Depreciation of securities
Depreciation expense
Other
Subtotal¥

Valuation allowance
Total
Deferred tax liabilities:
Items related to securities
Valuation difference on available-for-sale securities
Items related to asset retirement obligations
Valuation of assets
Total
Net deferred tax assets

¥

26

8,418
3,640
7,065
721
599
3,761
24,207¥

13,131
5,399
8,422
1,006
472
3,385
31,816

Thousands of
U.S. Dollars
2018$

79,241
34,26966,507
6,788
5,646
35,402
227,856(12,517)
11,690(17,725)
14,091(117,821)
110,034(740)(4,253)(60)(3,288)(8,343)
3,346

(896)
(3,419)(23)(3,830)(8,170)5,920(6,970)(40,039)(572)(30,950)(78,532)
31,502¥$

Net deferred tax assets as of March 31, 2018 and 2017 are included in the following accounts in the consolidatedbalance sheets.

Deferred tax assets
Deferred tax liabilities¥

Millions of Yen
2018
2017
5,184 ¥
7,823
1,837
1,902

Thousands of
U.S. Dollars
2018$48,801
17,298The Group is subject to Japanese national and local income taxes which, in the aggregate, resulted in normal
effective statutory tax rates of approximately 30.86% for the years ended March 31, 2018 and 2017.
The following table summarizes the significant differences between the statutory tax rate and the effective tax rate
for consolidated financial statement purposes for the years ended March 31, 2018 and 2017.
2018

Statutory tax rate
Entertainment expenses and other items permanently excluded fromdeductible expenses
Dividend income and other items permanently excluded from reportablerevenue
Per capita inhabitants’ tax
Change in valuation allowance
Refund of income taxes
Gains on negative goodwill
Expiration of net operating loss carried forward
Other
Effective tax rate

2017

30.86%
6.62

30.86%
0.41(4.88)(0.30)

2.43(108.46)(1.35)
97.65(0.78)
22.09%

0.39(3.01)(21.86)0.34
6.83%

15. Amounts per Share
Amounts per share as of and for the years ended March 31, 2018 and 2017 were as follows:
Yen
2018
Net income per share:
Basic
DilutedNet assets per share¥

112.94 ¥77.25
7,729.99

2017830.61 $511.407,476.05

U.S. Dollars
2018
1.06
0.72
72.75

Basic net income per share is computed based on the average number of shares of common stock outstanding
during the year. Diluted net income per share is computed based on the average number of shares of common
stock outstanding during the year after giving effect to the dilutive potential of shares of common stock to beissued upon the exercise of stock acquisition rights.
Net assets per share are computed based on the net assets excluding stock acquisition rights and non-controllinginterests and the number of shares of common stock outstanding at the year end.

27

The bases for calculation are as follows:
Thousands of
U.S. Dollars

Millions of Yen
2018
Basic net income per share:
Net income belonging to parent company’s shareholders¥
Amount not belonging to shareholders of common stock―
preferred dividends
Net income belonging to parent company’s shareholders
in relation to common stock
Average number of shares of common stock during theperiod (thousands of shares)
Diluted net income per share:
Adjustment to net income belonging to parent company’s
shareholders
Including, interest on bonds with stock acquisition rights(net of applicable taxes)
Including, preferred dividends
Effect of dilutive securities (thousands of shares)
Including, bonds with stock acquisition rights
Including, preferred stock
Including, stock acquisition rights
Summary of residual securities not included in calculationof dilutive net income per share because they have no
dilutive effects
Net assets per share:
Total of net assets
Amount deducted from total of net assets
Including, amount paid in for preferred stock
Including, preferred dividends
Including, stock acquisition rights
Including, non-controlling interests
Net asset amount for common stock at year end
Number of shares of common stock outstanding at year
end for calculating net assets per share(thousands of shares)

28

¥

¥

2017

3,677

¥

2018

25,535$34,616

235

221

2,219

3,441

25,31432,39730,47230,476

235

¥

258

235
17,131
17,09932

37
221
19,527666
18,83624--

291,020
55,49155,000117
101
271
235,528
30,469¥283,357
55,56555,000132
95
337
227,791
30,469

$

2,219
2,219

$

2,739,269
522,320517,695
1,109
957
2,557
2,216,949

16. Other Income
Other income for the years ended March 31, 2018 and 2017 is as follows:¥

Gain on sales of securities
Gain on sales of monetary claims
Equity in earnings of investment in affiliate
Gain on negative goodwill
Gain on recovery of write-offs of monetary claims
Gain on disposition of fixed assets
Gain on state subsidy and other grants
Other
Total

¥

Millions of Yen
2018
2017
2,659 ¥
1,235
0
17
35
78
19,443
259
186
647
5
156
1,384
1,156
22,2804,986 ¥

Thousands of
U.S. Dollars
2018$25,035
0
329
2,444
6,094
13,029$46,934

17. General and Administrative Expenses
General and administrative expenses include following items for the years ended March 31, 2018 and 2017:¥

Salaries and allowances
Retirement benefit expenses
Operations consignment expenses

Millions of Yen
2018
2017
26,576 ¥26,983
2,709
1,497
6,006
6,065

Thousands of
U.S. Dollars
2018$
250,158
25,50656,536

18. Other Expenses
Other expenses for the years ended March 31, 2018 and 2017 are as follows:¥

Write-offs of loans
Loss on sales of securities
Write-down of equity securities
Loss on sales of monetary claims
Loss on disposition of fixed assets
Provision for losses on transfer of business
Provision for losses on cancellation of system
contracts
Provision for loan losses
Other
Total

¥

29

Millions of Yen
2017
2018
104 ¥
242
112
121
17
172
156
444
278
194
200
1,480
4,969
7,496

¥

2,419
2,703
6,121

Thousands of
U.S. Dollars
2018
$
987
1,059
166
1,623
4,185
1,833
-

$

13,934
46,77670,565

19. Comprehensive Income
Each component of other comprehensive (loss) income for the years ended March 31, 2018 and 2017 was thefollowing:Thousands of
U.S. Dollars
2018

Millions of Yen
2018
2017
Valuation difference on available-for-sale securities:
Amount arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect
Total
Deferred gains or losses on hedges
Amount arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect
Total
Revaluation reserve for land
Amount arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effectTotal
Foreign currency translation adjustments
Amount arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effectTotal
Remeasurements of defined benefit plans
Amount arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect
Total
Share of other comprehensive income of affiliate
accounted for by the equity method
Amount arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effectTotal
Total other comprehensive income (loss)

¥

¥

30

4,486 ¥
(799)
3,687
(834)
2,852

(5,301) $(2,271)(7,573)2,255(5,318)

-

1
(12)
(10)
4
(6)

-

(47)
(47)
14
(32)

-

(445)
(445)
136
(309)

2
2
2

(3)
(3)
(3)

22
22
22

3,840
1,008
4,848
(1,486)
3,362

3,514
830
4,344
(1,339)3,005

36,146
9,489
45,636(13,988)
31,647

66
66
66
6,250

104
104
104
(2,218) $

624
624
624
58,835¥42,232(7,525)34,707(7,857)
26,84920. Supplementary Cash Flow Information
The reconciliation of cash and due from banks in the consolidated balance sheets to cash and cash equivalents inthe consolidated statements of cash flows as of March 31, 2018 and 2017 was as follows:

Cash and due from banks
Time deposits
Negotiable certificates of deposit
Other deposits
Cash and cash equivalents¥¥

Thousands of
U.S. Dollars
Millions of Yen
2018
2017
2018
377,636 ¥
515,886 $3,554,564
(47)
(40)
(444)
(10,000)(1,400)(20,931)(2,223)¥
504,444$3,533,188375,365

21. Assets and Liabilities Held by Subsidiary Newly Consolidated through Share Exchange
For the year ended March 31, 2017, breakdown of assets and liabilities held by ShinGinko Tokyo newly
consolidated through share exchange at the time of the consolidation was as follows.
Millions of Yen¥
463,533
222,587
175,000(5,976)

Total assets
Including, loans and bills discounted
Including, securities
Including, reserve for loan losses
Total liabilities
Including, deposits

400,370
293,445

22. Leases
Finance leases
As lessee of finance leases which do not transfer ownership of leased assets to lessees:
The leased assets primarily consist of computers, office machinery and equipment and software. See Note 1. f. forthe depreciation method of the leased assets.
Operating leases
Total future lease payments under non-cancelable operating leases as of March 31, 2018 and 2017 were as follows:
As lessee

Within one year
Over one year
Total

¥
¥

Thousands of
U.S. Dollars

Millions of Yen
2017
2018
135 ¥
119
189
342
309
477 ¥

$

Millions of Yen
2018
2017
- ¥
- ¥

Thousands of
U.S. Dollars
2018
$
$
-

$

2018
1,272
3,225
4,498

As lessor

Within one year
Over one year
Total

¥
¥
31

26
26

23. Financial Instruments
Overview(1) Policy for financial instruments
The Group’s operations center on the banking business such as deposits business and lending business, withfinancial services including credit card services and credit guarantee services. The Group raises funds mainly
through local customer deposits and invests them in loans and bills discounted and securities. In this way, theGroup principally holds financial assets and financial liabilities that are subject to interest rate fluctuations, and
the Group conducts asset-liability management (ALM) to minimize the negative impact of interest rate
fluctuations. ALM includes the use of derivative transactions.
(2) Primary details of financial instruments and their risk
The Group’s financial assets mainly consist of loans and bills discounted extended to domestic corporate andprivate customers, and securities. Loans and bills discounted are subject to credit risk stemming from a borrower’s
failure to meet a contractual obligation.
Securities mainly consist of domestic debt and equity securities and investment funds. Debt securities areclassified into held-to-maturity securities and available-for-sale securities. In addition, trading account securities
are held for trading purposes. These securities are subject to issuers’ credit risk and market fluctuation risk ininterest rates and prices, respectively.
The Group’s financial liabilities mainly consist of deposits raised from domestic corporate and private customers.
Such deposits are subject to liquidity risk, which is the risk that the Group is unable to secure the funds required tohonor these deposits because of certain conditions in the operating environment.
The Group is also engaged in derivative transactions with domestic corporate customers and financial institutions.
Such derivative transactions are subject to credit risk stemming from a counterparty’s failure to meet a contractual
obligation and market fluctuation risk in interest rates and exchange rates.
(3) Risk management system for financial instruments(a) Integrated risk management
The Group establishes an integrated risk management system that captures overall risks evaluated by risk category,compares them with the Group’s strength and checks its management soundness.
(b) Management of credit risk
The Group manages credit risk appropriately, in accordance with rules and standards for credit risk management,
mainly through credit screening of each proposal with a perspective of future business prospects, credit rating ofeach borrower, self-assessment of loan assets, assistance efforts for business reconstruction and problem loan
management. Credit portfolio is monitored for concentration level by industry and customer and is aimed to be
developed eliminating concentration risk.
Credit risk management is handled by each branch office and the Credit Management Department and reported
regularly to the Company’s Risk Management Committee. The audit function audits the status of credit risk
management.
(c) Management of market risk
The Group manages market risk appropriately, in accordance with rules and standards for market risk
management, through evaluating, monitoring and controlling market risk under the mutual checking structure ofthree departments, the Market Transaction Department (front office), the Market Operations Management
Department (back office) and the Market Risk Management Department (middle office).
The Market Risk Management Department measures the volume of market risk for measurable market risk and, inorder to control the market risk volume appropriately, sets limits to holdings and losses, monitors the status ofcompliance and reports to the Group Risk Management Committee on a monthly basis.
32

The Group’s main financial instruments affected by market risk are “Due from banks,” “Securities,” “Loans andbills discounted,” “Deposits,” “Borrowed money” and “Derivative transactions.”
The Group calculates Value at Risk (VaR) on these financial assets and financial liabilities (observation period offive years, holding period of six months for listed stocks other than those held for political reasons, Japanese
government bonds, Japanese local government bonds, Japanese corporate bonds, investment funds, foreign
securities, deposits, loans and bills discounted, interest rate swaps and other assets and liabilities that have interest
rate sensitivity, and one year for listed stocks held for political reasons, confidence interval of 99%,
variance-covariance method) and uses it to capture and control the volume of market risk.
The Group’s volume of market risk is managed as the sum of that of the consolidated subsidiaries, Tokyo Tomin,
Yachiyo and ShinGinko Tokyo, and, as of March 31, 2018 and 2017, the volume of market risk were ¥35,899
million ($337,904 thousand) and ¥41,011 million, respectively.
However, such volume is calculated using certain statistical probabilities based on historical market fluctuations.
Consequently, this process may not capture risk in the event that market condition changes drastically in a mannerthat is unthinkable under normal circumstances.
The Group conducts back-testing with respect to each banking subsidiary to check the accuracy of market risk
measurement model by comparing the VaR calculated by the model with actual gains or losses. As a result of suchback-testing for the year ended March 31, 2018, the Group believes that the model being used captures market
risk to an adequate degree of precision.
(d) Management of liquidity risk
In the Group, in accordance with rules and standards for liquidity risk management, the Liquidity Risk
Management Department appropriately handles daily stable cash flow management, mainly through watchingmarket environment and analyzing the status of financing and investments.
The status of cash flow management and status of financing and investments are monitored daily, including
holding certain level or more of assets as liquidity reserve that are readily convertible into cash in a short time,and is reported regularly to the Company’s Risk Management Committee.
(4) Supplementary explanations of the estimated fair value of financial instruments
The fair value of financial instruments is based on the market price or the reasonably calculated values withcertain assumptions in case no market prices exist. Since various assumptions and factors are reflected inestimating the fair value, different assumptions and factors could result in different fair value.

33

Fair values of financial instruments
Carrying values and fair values of the financial instruments on the consolidated balance sheets as of March 31,2018 and 2017 were as follows. The following table does not include financial instruments for which it isextremely difficult to determine the fair value (See Note 2 below). Immaterial items are omitted.

Assets:(1) Cash and due from banks(2) Monetary claims bought(3) Trading account securities:
Trading securities(4) Securities:
Held-to-maturity bonds
Available-for-sale securities(5) Loans and bills discounted
Reserve for loan losses (*1)

Total
Liabilities:(1) Deposits(2) Call money and bills sold(3) Payables under securities lending transactions(4) Borrowed money
Total
Derivatives (*2):
Hedge accounting not applied
Hedge accounting applied
Total

Carrying value

Millions of Yen
2018
Fair value

¥

¥

¥
¥

¥
¥
¥

Assets:(1) Cash and due from banks(2) Monetary claims bought(3) Trading account securities:
Trading securities(4) Securities:
Held-to-maturity bonds
Available-for-sale securities(5) Loans and bills discounted
Reserve for loan losses (*1)

377,636
55,390

34

-

707

-

434,594752,698
3,676,146(25,207)448,047
752,698

13,453-3,650,938
5,271,965

3,673,039
5,307,519

22,10135,5544,652,109
58,937357,265
73,5585,141,870
1,787
1,787

¥
¥

¥
¥
¥

4,652,121
58,937357,265
73,5585,141,881
1,787
1,787

Carrying value

Millions of Yen
2017
Fair value

¥

¥

¥

¥

707

515,886
45,211
794

Total

377,636
55,390Difference

465,063
798,197
3,621,372(28,431)3,592,940
5,418,094 ¥

515,886
45,211

¥
¥

¥

11
11

¥

-

¥

Difference
¥

-

794

-

480,785
798,197

15,722-

3,618,333
5,459,208

25,392
41,114¥

Millions of Yen
Liabilities:(1) Deposits(2) Call money and bills sold(3) Payables under securities lending transactions(4) Borrowed money
Total
Derivatives (*2):
Hedge accounting not applied
Hedge accounting applied
Total

¥

¥
¥
¥

4,717,562
40,706361,309
103,416
5,222,994
1,179
1,179

¥

¥
¥
¥

4,717,519
40,706361,309
103,429
5,222,965

¥

1,179
1,179

¥

¥

(42)
13
(29)
-

¥

Thousands of U.S. Dollars
2018
Fair value
Difference
Carrying value
Assets:(1) Cash and due from banks(2) Monetary claims bought(3) Trading account securities:
Trading securities(4) Securities:
Held-to-maturity bonds
Available-for-sale securities(5) Loans and bills discounted
Reserve for loan losses (*1)$

3,554,564
521,373

$

6,655

Total
Liabilities:(1) Deposits(2) Call money and bills sold(3) Payables under securities lending transactions(4) Borrowed money
Total
Derivatives (*2):
Hedge accounting not applied
Hedge accounting applied
Total

$
$

$
$
$

3,554,564
521,373

$

-

6,655

-

4,090,683
7,084,885
34,602,278(237,273)
34,365,005
49,623,168 $

4,217,314
7,084,885

126,631-

34,573,035
49,957,829

208,030
334,661

43,788,681
554,758
3,362,811
692,375
48,398,627

43,788,793
554,758
3,362,811
692,375
48,398,738

16,822
16,822$$$$

16,822
16,822

$
$

$
$
$

111
111
-

(*1) General and specific reserve for loan losses on “Loans and bills discounted” are deducted.
(*2) Derivatives are included within the amounts indicated for “Other assets” and “Other liabilities.” Net amountsof receivables and payables arising from derivative transactions are indicated. Parentheses indicate totals thatare net payable amounts.
Notes:
1. Primary method of calculating the fair value of financial instruments
Assets(1) Cash and due from banks
With regard to cash and due from banks without maturities and with short-term remaining maturities (within one
35

year), the fair values and book values are similar, so the book values are assumed as the fair values. For due frombanks with maturities over one year, the fair values are determined by the prices indicated by the financial
institutions handling these transactions for the Group.
(2) Monetary claims boughtWith regard to trust beneficiary rights in trust of receivables for public works, the fair values and book values are
similar, so the book values are assumed as the fair values. For the other trust beneficiary rights, the fair values are
determined by the prices indicated by the financial institutions handling these transactions for the Group. With
regard to those other than trust beneficiary rights, the maturities remain short-term (within one year) and the fairvalues and book values are similar, so the book values are assumed as the fair values.
(3) Trading account securities
The fair values of bonds and other securities held for dealing operations are determined by the statistical reference
prices released by the Japan Securities Dealers Association or the prices indicated by the financial institutions
handling these transactions for the Group.
(4) Securities
The fair values of equity securities are determined by their prices on stock exchanges. The fair values of bonds are
determined by the reference statistical prices released by the Japan Securities Dealers Association or the prices
indicated by the financial institutions handling these transactions for the Group. For investment trusts, the fairvalues are determined by the publicly released base prices or base prices indicated by securities investment trust
management companies. For private placement bonds guaranteed by the Group, the present values calculated by
the discounted cash flow method are assumed as the fair values.
With regard to private placement bonds guaranteed by the Group issued by bankrupt borrowers, effectively
bankrupt borrowers and potentially bankrupt borrowers, the fair values are similar to the expected amounts ofrecoveries calculated based on guarantees, etc. at the consolidated balance sheet date, so those expected amounts
are assumed as the fair values.
See Note 3 for the description of securities by classification.
(5) Loans and bills discounted
With regard to loans with floating interest rates, as they reflect market interest rates in the short term, the fairvalues of them are similar to the book values unless the credit status of the borrowers change significantly after
execution, so the book values are assumed as the fair values. With regard to those with fixed interest rates, thepresent values are assumed as the fair values, being calculated by discounting the future cash flows by theappropriate index interest rates such as interest rate swap rates plus credit spread, etc., or by the assumed rates
which would be applied if a similar new loan were entered into. For those with short-term remaining maturities(within one year), the fair values and book values are similar, so the book values are assumed as the fair values.
With regard to loans to bankrupt borrowers, effectively bankrupt borrowers and potentially bankrupt borrowers,
the reserve for loan losses is provided based on the expected amounts of recoveries from collateral and guarantees,
and the fair values are similar to the amounts of claims less the reserve for loan losses on the consolidated balance
sheet at the consolidated balance sheet date, so the net amounts are taken as the fair value.
For loans that have no specific repayment period because loan amounts are limited within the value of the assets
securing them, the fair values are assumed to be similar to the book values based on their expected payment dates
and interest rates, so the book values are taken as the fair value.
Interest rate swaps that qualify for hedge accounting and meet specific matching criteria for an exceptional
treatment are accounted for as part of hedged loans. Their fair values are determined using discounted present
values and included in the fair values of the hedged loans.
Liabilities(1) Deposits
The fair values of demand deposits are determined as if the payment amounts (book values) were demanded on36

the consolidated balance sheet date. The fair values of time deposits and installment savings are calculated bycategorizing these deposits and savings by term, estimating their future cash flows and discounting them to theirpresent values at the rate applied to new deposits (the actual rate for the last month of the fiscal year). For thosewith short-term remaining maturities (within one year), the fair values and book values are similar, so the bookvalues are assumed as the fair values.
(2) Call money and bills soldWith regard to call money and bills sold, the maturities remain short-term (within one year) and the fair values andbook values are similar, so the book values are assumed as the fair values.
(3) Payables under securities lending transactions
With regard to payables under securities lending transactions, the maturities remain short-term (within one year)
and the fair values and book values are similar, so the book values are assumed as the fair values.
(4) Borrowed money
With regard to borrowed money with floating interest rates, as they reflect market interest rates in the short term,
and the credit status of the Company and the consolidated subsidiaries has not changed significantly since theexecution, the fair values of them are similar to the book values, so the book values are assumed as the fair values.
With regard to those with fixed interest rates, the present values are assumed as the fair values, being calculated
for the sum of the principal and interest categorized by the remaining period to the maturity, by discounting by theassumed rates which would be applied if a new similar borrowing were made. For those with short-term
remaining maturities (within one year), the fair values and book values are similar, so the book values are assumed
as the fair values.
Derivatives
Fair value information for derivatives is included in Note 24.
2. Financial instruments for which it is extremely difficult to determine the fair value
Carrying values of financial instruments for which it is extremely difficult to determine the fair value as of March
31, 2018 and 2017 were as follows. These amounts are not included in the items of “Assets - (2) Monetary claimsbought” or “Assets - (4) Available-for-sale securities” in the above table.
Thousands of
U.S. Dollars
2018

Millions of Yen
2018
2017
Carrying value
Monetary claims bought (*1)
¥
260 ¥
513 $
2,447
Unlisted stocks (*2) (*3)
4,463
5,056
42,016
Investments in limited partnerships (*1)
12,846
158,821
16,873
Total
18,416 $203,285¥
21,597 ¥(*1) Monetary claims bought and investments in limited partnerships whose underlying assets or partnershipassets consist of those extremely difficult to determine fair values, are not subject to disclosures of fairvalues.
(*2) Unlisted stocks are not subject to disclosures of fair values because there are no quoted market price and it isextremely difficult to determine the fair value.
(*3) For the year ended March 31, 2018, impairment losses were ¥17 million ($166 thousand) on unlisted stocks.
For the year ended March 31, 2017, impairment losses were not recorded.

37

3. Redemption schedule for receivables and securities with maturities
The redemption schedule for receivables and securities with maturities as of March 31, 2018 and 2017 aresummarized as follows:

Due from banks

Monetary claims bought
Securities:
Held-to-maturity bonds:
Japanese government bonds
Japanese local government
bonds
Japanese corporate bonds
Foreign securities
Available-for-sale securities
with maturities:
Japanese government bonds
Japanese local government
bonds
Japanese short-term corporate
bonds
Japanese corporate bonds
Other
Loans and bills discounted (*)
Total

Millions of Yen
2018
Due after
Due after
Due after
Due after
one year
three years
five years seven years
Due inthroughthrough fivethroughthrough ten Due after
one year
three years
years
seven years
years
ten years
or less¥ 340,532 ¥
- ¥
- ¥
- ¥
- ¥
10,580
3,922
2,198
859
1,291
35,7305,600

68,600133,000

48,000-44,000

3,530
5,643
-

5,000
18,132
10,624

12,12435,198
10,624

1,500
7,290
1,000

150
9,600
1,000

300
2,550
4,000

114,030

10,100

2,000

-

-

16,000

3,228

5,776

3,390

3,576

11,123

4,244

10,00035,245
7,254
773,422¥ 1,309,067 ¥

90,85620,928710,230
944,169 ¥

56,53979,089466,704
800,868 ¥

33,09538,062
265,761
399,144 ¥

56,95433,524
325,375
439,020 ¥33,821
12,158797,613
950,41938

Due from banks

Monetary claims bought
Securities:
Held-to-maturity bonds:
Japanese government bonds
Japanese local government
bonds
Japanese corporate bonds
Foreign securities
Available-for-sale securities
with maturities:
Japanese government bonds
Japanese local government
bonds
Japanese short-term corporate
bonds
Japanese corporate bonds
Other
Loans and bills discounted (*)
Total

Due from banks

Monetary claims bought
Securities:
Held-to-maturity bonds:
Japanese government bonds
Japanese local government
bonds
Japanese corporate bonds
Foreign securities
Available-for-sale securities
with maturities:
Japanese government bonds
Japanese local government
bonds
Japanese short-term corporate
bonds
Japanese corporate bonds
Other
Loans and bills discounted (*)
Total

Millions of Yen
2017
Due after
Due after
Due after
Due after
one year
three years
five years seven years
Due inthroughthrough fivethroughthrough ten Due after
one year
three years
years
seven years
years
ten years
or less¥ 475,564 ¥
- ¥
- ¥
- ¥
- ¥
9,069
2,176
2,771
807
475
29,3802,470

11,10097,100147,000-

44,00010,98016,565
-

5,780
9,693
-

13,82439,012
16,8281,500
14,758
5,609

1,150
9,800
2,000

350
2,971
4,000

24,000130,130

5,000

-

-

16,000

2,283

8,159

2,927

5,533

14,6383,960

10,00040,8292,531
763,687¥ 1,357,980 ¥

81,301
14,167726,049
988,557 ¥

100,528
62,962
451,302792,256 ¥

29,262
24,983
288,381
517,836 ¥

40,637
66,744
313,907449,352 ¥

28,776
10,701
752,795
892,935

Thousands of U.S. Dollars
2018
Due after
Due after
Due after
Due after
one year
three years
five years seven years
Due inthroughthrough fivethroughthrough ten Due after
one year
three years
years
seven years
years
ten years
or less$ 3,205,317 $
- $
- $
- $
- $
99,592
36,91920,694
8,086
12,156336,320

52,710645,7071,251,882

451,807-414,156

33,226
53,115-47,063
170,670
100,000

114,118
331,306
100,000

14,11868,6189,412

1,411
90,361
9,412

2,823
24,00437,6501,073,324

95,067

18,825--

150,60230,38654,372

31,913

33,664

104,699

39,953

94,126
331,755
855,198
532,183
311,513536,096318,351
68,284
196,989
744,443358,266
315,554
114,447
6,685,146
4,392,930
2,501,519
3,062,650
7,507,658
7,279,954$12,321,794 $ 8,887,135 $ 7,538,299 $ 3,757,005 $ 4,132,343 $ 8,945,969

39

(*) As of March 31, 2018 and 2017, loans do not include an estimated ¥83,879 million ($789,531 thousand) and¥90,033 million, respectively, in uncollectible loans such as those to bankrupt borrowers, effectively bankrupt
borrowers and potentially bankrupt borrowers, and ¥253,158 million ($2,382,887 thousand) and ¥235,215 million,
respectively, in loans that have no set term.
4. Repayment schedule for other interest-bearing liabilities
The repayment schedule for other interest-bearing liabilities as of March 31, 2018 and 2017 are summarized asfollows:

Deposits (*)
Call money and bills soldPayables under securities lendingtransactions
Borrowed money
Total

Deposits (*)
Call money and bills soldPayables under securities lendingtransactions
Borrowed money
Total

Deposits (*)
Call money and bills soldPayables under securities lendingtransactions
Borrowed money
Total

Millions of Yen
2018
Due after
Due after
Due after
Due after
Due inone year
three years
five years seven years
one yearthroughthrough fivethroughthrough ten Due afteror less
three years
years
seven years
years
ten years¥ 4,445,776 ¥ 191,605 ¥
14,671 ¥
23 ¥
18 ¥
13
58,937357,265
30,291¥ 4,892,271 ¥

38,150229,755 ¥78
14,750 ¥5,037
5,060 ¥

18 ¥13Millions of Yen
2017
Due after
Due after
Due after
Due after
Due inone year
three years
five years seven years
one yearthroughthrough fivethroughthrough ten Due afteror less
three years
years
seven years
years
ten years¥ 4,433,756 ¥ 244,949 ¥
38,785 ¥
27 ¥
25 ¥
17
40,706361,30930,278¥ 4,866,051 ¥

40,104
285,053 ¥28,033
66,819 ¥

27 ¥

5,000
5,025 ¥

17

Thousands of U.S. Dollars
2018
Due after
Due after
Due after
Due after
one year
three years
five years seven years
Due inthroughthrough fivethroughthrough ten Due after
one year
three years
years
seven years
years
ten years
or less$ 41,846,544 $ 1,803,513 $ 138,099 $
218 $
174 $
131
554,758
3,362,811
285,126
359,096$ 46,049,240 $ 2,162,609 $

739
138,839 $

47,41347,631 $(*) Within deposits, demand deposits are included in the column of “Due in one year or less.”

40

174 $

131

24. Derivative Transactions
The Group has entered into various derivative transactions in order to manage certain risks arising from adverse
fluctuations in interest rates and foreign currency exchange rates.
The fair value and unrealized gain or loss on derivative transactions are estimates considered appropriate based on
the market at the balance sheet date and, thus, fair value is not necessarily indicative of the actual amounts that
may be realized or settled in the future. The contract or notional amount is not a direct measure of the Group’s risk
exposure in connection with the derivative transactions.
Summarized below are the contract or notional amounts and the estimated fair value of the derivative instruments
outstanding at March 31, 2018 and 2017, for which hedge accounting has not been applied.
(1) Interest-related transactions

Contract
or notionalamountOver-the-counter (OTC) interest rate swaps:
Receive/fixed and pay/floating
Receive/floating and pay/fixed
OTC interest rate swaptions:
Sell
Buy
OTC interest rate caps:
Sell
Buy

¥

Millions of Yen
2018
Contract ornotional
amount due
Fair Valueafter one year

110,272 ¥
110,436

100,720 ¥100,821

1,342
(226)

-

(0)
0

1
0

3,801
3,878

3,681
3,743

1,115

96
(20)
1,194

¥

Contract
or notionalamount
¥1,342 ¥
(226)

420
420

Total

OTC interest rate swaps:
Receive/fixed and pay/floating
Receive/floating and pay/fixed
OTC interest rate swaptions:
Sell
Buy
OTC interest rate caps:
Sell
Buy

Unrealized
gains (losses)

Millions of Yen
2017
Contract ornotional
amount due
Fair value
after one year¥

Unrealized
gains (losses)

128,913 ¥128,054

110,763 ¥
110,838

1,484 ¥
(324)

1,070
1,070

420
420

(1)
1

6
1

2,208
2,337

1,924
2,053

1,159

65
(16)
1,215

¥

Total

41

¥

1,484
(324)

Contact ornotional
amountOTC interest rate swaps:
Receive/fixed and pay/floating
Receive/floating and pay/fixed
OTC interest rate swaptions:
Sell
Buy
OTC interest rate caps:
Sell
Buy
Total

$ 1,037,955
1,039,496

Thousands of U.S. Dollars
2018
Contract ornotional
amount due
Fair value
after one year

Unrealized
gains (losses)$$

948,050
948,996$

12,633(2,132)

12,633(2,132)

3,953
3,953

-

(4)
4

18
4

35,77836,50334,64935,233

10,500910(192)
11,241$$

Notes:
1. The above derivative transactions are stated at fair value with the valuation difference being included in the
consolidated statements of income.
2. The fair values of the OTC transactions are determined using the discounted present values or option pricing
model.
(2) Currency-related transactions

OTC currency swaps
OTC foreign exchange contracts:
Sell
Buy
OTC currency options:
Sell
Buy

Contract ornotional
amount¥5,985Millions of Yen
2018
Contract ornotional
amount due
Fair value
after one year¥
1,733 ¥
3

Unrealized
gains (losses)
¥
3

829
(161)

829
(161)

(226)
226
671 ¥

90
(10)
751

63,33026,214406
182

11,402
11,402

3,167
3,167
¥

Total

42

OTC currency swaps
OTC foreign exchange contracts:
Sell
Buy
OTC currency options:
Sell
Buy

Contract ornotional
amount¥ 10,830

Millions of Yen
2017
Contract ornotional
amount due
Fair value
after one year
¥
6,151
¥
12

43,65824,196

446
280

(162)
169

(162)
169

24,7992,289

24,799

2,289

(420)
420
19

108
26
154

Total

OTC currency swaps
OTC foreign exchange contracts:
Sell
Buy
OTC currency options:
Sell
Buy

Unrealized
gains (losses)¥
12¥

Contract ornotional
amount
$56,337

Thousands of U.S. Dollars
2018
Contract ornotional
amount due
Fair value
after one year$
16,317 $35¥

Unrealized
gains (losses)$
35

596,110
246,750

3,826
1,716

7,809
(1,522)

7,809(1,522)

107,329
107,329

29,811
29,811(2,134)
2,133
6,322

852
(102)
7,072

Total

$

$

Notes:
1. The above derivative transactions are stated at fair value with the valuation difference being included in the
consolidated statements of income.
2. The fair values of the OTC transactions are determined using the discounted present values or option pricing
model.

43

Summarized below are the contract or notional amounts and the estimated fair value of the derivative instruments
outstanding at March 31, 2018 and 2017, for which hedge accounting has been applied.
(1) Interest-related transactions

Method ofaccounting

Hedged item

Millions of Yen
2018
Contract ornotional
Contact oramount due
notional
after one year
amountFair value

Interest rate swaps:
Receive/fixed and pay/floating

Exceptional
treatment

Loans andbills
discounted

30,00027,770Total

Method ofaccounting

Hedged item

Millions of Yen
2017
Contract orContract ornotional
notional
amount due
amountafter one year

(Note 2)¥-

Fair value

Interest rate swaps:
Receive/fixed and pay/floating

Exceptional
treatment

Loans andbills
discounted

32,84932,539¥Total

Method ofaccounting

Hedged item

(Note 2)-Thousands of U.S. Dollars
2018
Contract orContract ornotional
notional
amount due
amountafter one year Fair value

Interest rate swaps:
Receive/fixed and pay/floating

Exceptional
treatment

Loans andbills
discounted

Total

282,387

261,397(Note 2)$-

Notes:
1. The fair values of the exchange-traded transactions are based on the closing/final price at Tokyo Financial
Exchange. The fair values of the OTC transactions are determined using the discounted present values or
option pricing model.
2. Interest rate swaps that qualify for hedge accounting and meet specific matching criteria for an exceptional
treatment are accounted for as part of hedged loans and their fair values are included in the fair values of thehedged loans.

4425. Segment Information
The Group’s only reporting segment is the banking business. Note that the Group operates businesses outside thebanking business, including a computer-related service business, an information provision service business, andcredit card services. This information has been omitted because the ratio of these businesses to all segments is notmaterial.
(1) Information by service

Ordinary income from external customers

Ordinary income from external customers

Ordinary income from external customers

Lending¥ 44,251

Millions of Yen
2018
Securities
ServiceOther
investment transactions¥ 15,954 ¥ 17,582¥ 4,827

Total¥ 82,616

Lending¥ 46,196

Millions of Yen
2017
Securities
Serviceinvestment transactions
Other¥ 15,708 ¥ 16,165¥ 5,021

Total¥ 83,092

Lending$ 416,526

Thousands of U.S. Dollars
2018
Securities
ServiceOther
investment transactions$ 150,174 $ 165,502$ 45,435

Total$ 777,637

Note: Ordinary income is presented as counterparts of sales of companies in other industries.
(2) Information by geographical area(a) Ordinary income
Ordinary income from external customers by geographical area has been omitted as ordinary income from thedomestic operations accounted for more than 90% of the consolidated ordinary income.
(b) Tangible fixed assets
Information about tangible fixed assets by geographical area has been omitted as tangible fixed assets in Japanaccounted for more than 90% of the consolidated tangible fixed assets.
(3) Information by major customers
Information by major customers has been omitted as no single customer accounts for more than 10% of theconsolidated ordinary income.

45

26. Subsequent Events
a. Dividends
The following distribution of retained earnings of the Group, which has not been reflected in the accompanying
consolidated financial statements for the year ended March 31, 2018, was approved at the board of directors’
meeting held on May 15, 2018 and became effective on June 11, 2018:

Dividends on common stock (¥ 30 ($0.28) per share)
Dividends on 1st tranche class 1 preferred stock (¥123 ($1.15) per share)
Dividends on class 2 preferred stock (¥12.818 ($0.12) per share)

Millions of Yen
¥
914
92
25

Thousands of
U.S. Dollars
$
8,603
868
241

b. Merger of wholly-owned subsidiaries and change of trade name
Effective May 1, 2018, the Company’s wholly-owned subsidiaries of Tokyo Tomin, Yachiyo and ShinGinko
Tokyo have merged in accordance with the resolution of the Extraordinary General Meeting of Shareholders heldon March 2, 2018 to approve the merger agreement, and effective of the same date, changed its trade name to
Kiraboshi Bank, Ltd.
1. Summary of the business combination(1) Name and business of the merging companies(Surviving company in the absorption-type merger)
Name:
YachiyoNature of business:
Banking(Dissolving companies in the absorption-type merger)
Name:
Tokyo Tomin
Nature of business:
Banking
Name:
ShinGinko Tokyo
Nature of business:
Banking(2) Date of the business combination
May 1, 2018(3) Legal form of the business combination
Absorption-type merger with Yachiyo as the surviving company, and Tokyo Tomin and ShinGinko Tokyo
as the dissolving companies.
(4) Name of company after the business combination
Kiraboshi Bank
(5) Other matters relating to the outline of the transaction
The objective of the merger is to use the “strengths” and ”features” of Tokyo Tomin, Yachiyo and
ShinGinko Tokyo that have been cultivated over the years, to maximize the integration effect by proceedingfrom business integration to merger, to enhance competitiveness and further develop management
efficiency, and thereby establish a solid management foundation that can further demonstrate the Group’s
presence in the Tokyo Metropolitan Area, with a focus on Tokyo and the northeast area of Kanagawa
Prefecture. By demonstrating the true value as a mainstay of regional financial sector, the Group will still
strive to become the No. 1 regional bank most loved by customers in the Tokyo Metropolitan Area.
2. Outline of the accounting treatment applied
The transaction is treated as a transaction under common control pursuant to the “Accounting Standard forBusiness Combinations” and the “Guidance on Accounting Standard for Business Combinations andAccounting Standard for Business Divestitures.”46

The Tokyo Tomin Bank, Limited
Non-consolidated Balance Sheets (Unaudited)
As of March 31, 2018 and 2017
Millions of Yen
2017
2018
AssetsCash and due from banks
Call loans
Monetary claims bought
Trading account securities
Securities
Loans and bills discounted
Foreign exchanges
Other assets
Tangible fixed assets
Intangible fixed assets
Prepaid pension cost
Deferred tax assets
Customers’ liabilities for acceptances and guarantees
Reserve for loan losses
Total assets¥¥

Liabilities
Deposits
Negotiable certificates of deposit
Call money
Payables under securities lending transactions
Borrowed money
Foreign exchanges
Bonds payable
Other liabilities
Reserve for employees’ bonuses
Reserve for officers and directors’ retirement benefits
Reserve for point card program
Reserve for losses from reimbursement of inactive accounts
Reserve for losses on cancellation of system contracts
Reserve for contingent losses
Deferred tax liabilities on land revaluation
Acceptances and guarantees
Total liabilities¥

Net assets
Shareholders’ equity:
Common stock
Capital surplus
Retained earnings
Total shareholders’ equity
Accumulated other comprehensive income:
Valuation difference on available-for-sale securities
Revaluation reserve for land
Total accumulated other comprehensive income
Total net assets
Total liabilities and net assets¥

See notes to consolidated financial statements.

47

325,382
11,2645,025
32
468,546
1,860,166
3,450
59,42737,035
1,508
16,7902,645
2,508(12,589)
2,781,193¥

2,315,952
6,740
26,000306,073
5,358
223
8,847
1,026
46
2
515
85
214
2,508
2,673,594¥¥

Thousands of
U.S. Dollars(Note 2)
2018

316,026
987
2,004
32
543,504
1,837,946
3,329
24,69434,477
1,099
16,221
3,629
3,078(13,725)
2,773,306$

2,312,237
18,740312,048
5,216
935
13,924
1,087
75
2
397
85
280
14
3,078
2,668,124$$

3,062,712
106,026
47,298307
4,410,259
17,509,093
32,477559,365
348,598
14,202
158,043
24,902
23,614(118,498)
26,178,403

21,799,253
63,441
244,7282,880,959
50,432
2,106
83,273
9,658
441
24
4,850
800
2,022
23,61425,165,610

55,62025,583
21,431
102,635

55,62025,583
20,387
101,590

523,536
240,806
201,729
966,072

5,205
(242)
4,963
107,599
2,781,193

3,800
(209)
3,591
105,182
2,773,306

49,001(2,280)46,7201,012,793
26,178,403¥$

The Tokyo Tomin Bank, Limited
Non-consolidated Statements of Income (Unaudited)
For the Years Ended March 31, 2018 and 2017
Millions of Yen
2017
2018
IncomeInterest income:Interest on loans and discounts
Interest and dividends on securities
Interest on call loans
Interest on receivables under securities borrowing transactions
Interest on due from banks
Other interest income
Fees and commissions
Other operating income
Other income
Total income¥

22,139
6,535
20
0
236
162
8,955
1,839
3,128
43,016¥22,785
7,466
59
0
228
131
8,431
2,692
1,659
43,455

Thousands of
U.S. Dollars(Note 2)
2018$

208,387
61,512
191
0
2,224
1,526
84,294
17,31829,445404,901

Expenses
Interest expense:
Interest on deposits
Interest on negotiable certificates of deposit
Interest on call money
Interest on payables under securities lending transactions
Interest on borrowed money
Interest on bonds payable
Other interest expense
Fees and commissions payments
Other operating expenses
General and administrative expenses
Other expenses
Total expenses

428
1
(0)
1,138
83
47
2,403
2,151
30,8893,171
40,314

574
4
13
1,215
103
225
41
2,583
923
29,4183,908
39,013

4,030
13
(1)
10,712788
446
22,621
20,252
290,750
29,850379,465

Income before income taxes

2,702

4,442

25,435

161
349
510

231
1,440
1,672

1,517
3,286
4,803

Income taxes:
Current
Deferred
Total income taxes¥

Net income
See notes to consolidated financial statements.

48

2,191

¥

2,770

$

20,632

The Yachiyo Bank, Limited
Non-consolidated Balance Sheets (Unaudited)
As of March 31, 2018 and 2017
Thousands of
U.S. Dollars(Note 2)
2018

Millions of Yen
2017
2018
AssetsCash and due from banks
Call loans
Monetary claims bought
Trading account securities
Securities
Loans and bills discounted
Foreign exchanges
Other assets
Tangible fixed assets
Intangible fixed assets
Deferred tax assets
Customers’ liabilities for acceptances and guarantees
Reserve for loan losses
Total assets¥¥

Liabilities
Deposits
Negotiable certificates of deposit
Call money
Payable under securities lending transactions
Borrowed money
Foreign exchanges
Other liabilities
Reserve for employees’ bonuses
Reserve for officers and directors’ retirement benefits
Reserve for losses from reimbursement of inactive accounts
Reserve for losses on cancellation of system contracts
Reserve for contingent losses
Deferred tax liabilities on land revaluation
Acceptances and guarantees
Total liabilities¥

Net assets
Shareholders’ equity:
Common stock
Capital surplus
Retained earnings
Total shareholders’ equity
Accumulated other comprehensive income:
Valuation difference on available-for-sale securities
Revaluation reserve for land
Total accumulated other comprehensive income
Total net assets
Total liabilities and net assets¥

See notes to consolidated financial statements.

49

70,28720,0008,675
674
567,201
1,605,223
10,106
20,16730,967
667
5,223
1,504
(9,674)2,331,024¥

2,117,183
6,210
32,937
51,191
0
4,407
825
2,308
670
85
374
2,356
1,504
2,220,055¥¥

173,7433,787
762
566,529
1,552,605
4,255
13,14630,253
583
5,727
2,766
(10,227)
2,343,931$

2,149,113
6,730
15,70649,260
0
4,416
855
2,575
613
85
370
2,481
2,766
2,234,975$$

661,595
188,253
81,658
6,348
5,338,871
15,109,405
95,127
189,830
291,488
6,285
49,162
14,164(91,066)
21,941,123

19,928,310
58,452
310,029
481,852
4
41,485
7,766
21,725
6,311
800
3,529
22,176
14,16420,896,608

43,73432,92232,582
109,239

43,73432,92230,496
107,154411,660
309,890306,686
1,028,237

1,397
331
1,729
110,9692,331,024

1,184
616
1,801
108,956
2,343,931

13,156
3,121
16,277
1,044,515
21,941,123¥$

The Yachiyo Bank, Limited
Non-consolidated Statements of Income (Unaudited)
For the Years Ended March 31, 2018 and 2017
Millions of Yen
2017
2018
IncomeInterest income:Interest on loans and discounts
Interest and dividends on securities
Interest on call loans
Interest on due from banks
Other interest income
Fees and commissions
Other operating income
Other income
Total income¥

18,695
6,985
20
44
345
6,386
689
1,922
35,090¥19,773
6,300
31
71
359
5,901
2,198
1,129
35,766

Thousands of
U.S. Dollars(Note 2)
2018$

175,974
65,751
191
423
3,252
60,113
6,490
18,092
330,291

Expenses
Interest expense:
Interest on deposits
Interest on negotiable certificates of deposit
Interest on call money
Interest on payables under securities lending transactions
Interest on borrowed money
Interest on interest swaps
Other interest expense
Fees and commissions payments
Other operating expenses
General and administrative expenses
Other expenses
Total expenses

730
0
461
2
0
9
1,759
454
24,676
3,644
31,740

770
1
29
3
53
9
12
1,719
586
25,312
3,043
31,541

6,877
9
4,339
26
0
92
16,564
4,281
232,272
34,301
298,765

Income before income taxes

3,349

4,225

31,526

336
319
655

1,185
(760)
425

3,163
3,003
6,166

Income taxes:
Current
Deferred
Total income taxes¥

Net income
See notes to consolidated financial statements.

50

2,694

¥

3,799

$

25,359

ShinGinko Tokyo, Limited
Non-consolidated Balance Sheets (Unaudited)
As of March 31, 2018 and 2017
Millions of Yen
2017
2018
AssetsCash and due from banks
Call loans
Monetary claims bought
Securities
Loans and bills discounted
Other assets
Tangible fixed assets
Intangible fixed assets
Customers’ liabilities for acceptances and guarantees
Reserve for loan losses
Total assets¥¥

Liabilities
Deposits
Call money
Borrowed money
Borrowed money from trust account
Other liabilities
Reserve for employees’ bonuses
Reserve for employees’ retirement benefits
Reserve for losses on cancelation of system contracts
Reserve for contingent losses
Deferred tax liabilities
Acceptances and guarantees
Total liabilities¥

Net assets
Shareholders’ equity:
Common stock
Capital surplus
Retained earnings
Total shareholders’ equity
Accumulated other comprehensive incomeValuation difference on available-for-sale securities
Total net assets
Total liabilities and net assets¥

See notes to consolidated financial statements.

51

21,88941,950164,685
210,842
868
47
136
1,663
(2,674)439,410

269,832
30,00068,000
53
2,433
131
164
30
22
1,149
1,663
373,482¥¥¥

56,0453,000
39,932160,968
230,567
858
23
148
2,035
(4,091)
489,488

297,580
25,00098,000
2,060
132
156
30
24
1,113
2,035
426,133

Thousands of
U.S. Dollars(Note 2)
2018
$

$

$

206,036
394,864
1,550,130
1,984,583
8,176
446
1,288
15,660(25,173)
4,136,012

2,539,841
282,379
640,060
505
22,908
1,239
1,546
282
211
10,822
15,6603,515,457

20,00032,046
10,38962,43620,00032,046
8,203
60,250188,253
301,646
97,789587,689

3,491
65,927439,410

3,104
63,354489,488

32,865620,555
4,136,012¥$

ShinGinko Tokyo, Limited
Non-consolidated Statements of Income (Unaudited)
For the Years Ended March 31, 2018 and 2017
Thousands of
U.S. Dollars(Note 2)
2018

Millions of Yen
2017
2018
IncomeInterest income:Interest on loans and discounts
Interest and dividends on securities
Interest on call loans
Interest on due from banks
Other interest income
Trust fees
Fees and commissions
Other operating income
Other income
Total income

¥

3,112
3,337
0
31
556
56
277
155
934
8,459

¥

3,398
2,700
0
30
539
61
194
215
1,839
8,979

$

29,29731,414
0
292
5,235
527
2,608
1,461
8,793
79,629

Expenses
Interest expense:
Interest on deposits
Interest on call money
Interest on borrowed money
Other interest expense
Fees and commissions payments
Other operating expenses
General and administrative expenses
Other expenses
Total expenses

508
(8)
0
157
36
4,207
1,205
6,107

743
(1)
20
0
144
4,142
785
5,835

4,787
(77)
0
1,482
342
39,602
11,35057,486

Income before income taxes

2,352

3,144

22,143

Income taxes:
Current
Deferred
Total income taxes

151
(135)
16

116
(11)
105

1,427
(1,273)153¥

Net income
See notes to consolidated financial statements.

52

2,336

¥

3,039

$

21,989