To be a financial group that nurtures andgrows with our region

YMFG
ANNUAL REPORT2014

For the year ended March 31, 2014

Achieve mutual prosperity
with the region by transforming
into “One YMFG”

Contents
YMFG Profile .........................................................................1

Kitakyushu Bank Summary ...................................................15

Message from the President ...................................................2

Board of Directors and Corporate Auditors ..........................16

Performance Highlights (YMFG) .............................................4

Corporate Governance.........................................................17

YMFG Medium-Term Management Plan 2013 .......................6

Compliance System..............................................................18

Overseas Networks ..............................................................12

Risk Management System ....................................................19

Yamaguchi Bank Summary ..................................................13

Contributions to the Community and the Environment ........20

Momiji Bank Summary .........................................................14

Financial Section ..................................................................21

Disclaimer Regarding Forward-Looking Statements
The forward-looking statements in this Annual Report are based on management’s assumptions and beliefs in light of information available as of the date of
publication, and involve both known and unknown risks and uncertainties. Actual financial results may differ materially from those presented in this document,
being dependent on a number of factors.

YMFG Profile (As of July 31, 2014)

Organization ChartYMFGHead office: Shimonoseki, Japan, Established: October 2, 2006, Capital: ¥50 billion
General Meeting of Stockholders

Corporate Auditors
Board of Corporate Auditors
Corporate Auditors Office

Board of Directors

Nomination Committee

President

Compensation Committee

Audit and Inspection Dept.
Group Compliance Committee
Group Operational Risk Management Committee
Group ALM Committee
Compliance
Administration Dept.

Risk
Administration Dept.

Corporate
Administration Dept.

Business Strategy
Planning Dept.

IT Planning Dept.

Corporate Planning
Dept.

CustomerCommunication Dept.

Human Resource
Development Office

Regional
Development Office

Operations and Systems
Control Office

Accounting OfficePublic Relations
Office(Subsidiaries)

Yamaguchi Bank
Head office Shimonoseki, JapanFoundedNovember 25, 1878
Established March 31, 1944
Capital¥10 billion
Networks Japan: 133 (108 head officeand branch offices,
25 sub-branch offices)
Overseas: 4 (3 branch offices,
1 representative office)Subsidiaries Sanyu
Yamagin Card Holdings
Yamagin Card
Yamagin Credit Guarantee
Affiliates
YM Lease
Yamaguchi Capital

Momiji Bank
Head office Hiroshima, JapanFoundedNovember 2, 1923
Capital¥87.4 billion
Networks Japan: 115 (95 head officeand branch offices,
20 sub-branch offices)
Subsidiary Momiji Jisho
Affiliate
Momiji Card

Kitakyushu Bank
Head office Kitakyushu, Japan
Established October 1, 2010
Capital¥10 billion
Networks Japan: 32 (31 head officeand branch offices,
1 sub-branch office)

YM SecuritiesQ

YM SaisonQ

Izutsuya Withcard

Q

YM consultingQ

Kitakyushu Economics InstituteQHistoryMar. 2005

Dec. 2005

Oct. 2006

Apr. 2007

The Yamaguchi Bank, Momiji Holdings, Inc., andits subsidiary, Momiji Bank, concluded a basic
agreement on business and capital participation.
The Yamaguchi Bank and Momiji Holdings
concluded a basic agreement on businessmerger.
The Yamaguchi Bank and Momiji Holdings
established Yamaguchi Financial Group (YMFG)
by means of a joint share transfer.
YMFG was listed on the First Section of theTokyo Stock Exchange.
Momiji Holdings was merged into the surviving
corporation, Momiji Bank.

Jul. 2007
Aug. 2007
Oct. 2007
Apr. 2009
Oct. 2010
Mar. 2011
Apr. 2011
Aug. 2011
Oct. 2011

YM Securities was established.
YM Saison was established.
YM Securities commenced operations.
Acquired all outstanding shares in Izutsuya
Withcard Co., Ltd.
Kitakyushu Financial Project was established.
Acquired all issued shares of Momiji Consulting.
Momiji Consulting changed name to YM
Consulting.
Acquired all outstanding shares in The
Kitakyushu Economics Institute, Ltd.
The Kitakyushu Bank was establised.
Annual Report20141

Message from the President

Reinforcing our management foundations
to be adaptable to various changes
in our working environmentThank you for your continued support of the
Yamaguchi Financial Group (“YMFG”).

This annual report provides an overview of theGroup and its business results for the fiscal year
ended March 31, 2014, and is designed to help you
understand more about YMFG.
Based on the YMFG Medium-Term Management
Plan 2013, which commenced during the year underreview, the Group worked to deepen its community
involvement in the regions where it operates, pulling
together as a unified financial group, “One YMFG,”
comprising three banks— Yamaguchi Bank, Momiji
Bank and Kitakyushu Bank—and leveraging its
comprehensive strengths. YMFG will also put forth
every effort toward developing mutually beneficial
relationships with local communities and customers,
aiming to provide financial services that invigorate
our region.

YMFG

2

As part of our international operations to provide

In the fiscal year ended March 31, 2014, thesupport for clients making business inroads overseas,

Group launched the new “YMFG Medium-Termin July 2013 we entered into an affiliate relationshipManagement Plan 2013.” During the first year of thiswith the Metropolitan Bank and Trust Company ofplan, under a basic policy of “transforming YMFG”

the Philippines. This move added the Philippines to

we sought to work together toward the prosperity of

the Yamaguchi Financial Group’s Asian network,

the region by transforming our existing “awareness,”which also includes relationships with banks in China,“actions” and “framework.” We also undertook

South Korea and Indonesia.

initiatives to invigorate the region by leveraging our

In December 2013, we issued $300 million in USdollar-denominated convertible bonds to meet theGroup network and information.
By consolidating Group planning anddollar funding needs of clients conducting businessadministrative departments, we will continue working

overseas.

toward a structure that achieves at a high level both

We plan to continue striving to become recognizedfinance that is closely attuned to the region andfor having strong operations in Asia by providing

an efficient management function. In this manner,overseas business opportunities to our customers

we are reinforcing our management foundations

and strengthening our funding support and otherto be adaptable to various changes in our working

consulting functions.

environment.
We look forward to your continued patronage
and support.
August 2014

Koichi Fukuda
President
Yamaguchi Financial Group, Inc.

Annual Report
20143Performance Highlights (YMFG)Performance during the fiscal year ended March 31, 2014

Business Profits from Core Operations/
Ordinary Profits/Net Income (Three Banks)

Capital Adequacy Ratio (YMFG)
YMFG’s consolidated capital adequacy ratio (uniform

Business profits from core operations were down ¥3.7 billion

international standard) under Basel III was 12.69%. The total

year on year, to ¥30.5 billion. This outcome stemmed fromTier 1 capital adequacy ratio was 11.10%, and consolidated

a decrease in other ordinary income in comparison with

common equity Tier I capital adequacy ratio was 11.10%.

the previous fiscal year’s gain on transfer in line with thesecuritization of loans.
Ordinary profits rose ¥4.3 billion, to ¥50.0 billion, and net

Capital Adequacy Ratio
Tier I Ratio
14

(%)

13.34

income amounted to ¥33.1 billion.

12.69

13

Business Profits from Core Operations
Ordinary Profits
Net Income
60
50(Billions of yen)

12

50.0

11

11.75

45.7
39.4

40

34.2

31.0

30.5

30

33.1

30.5

11.10

2013

2014

9.52

9

21.5

0

20

2012

(Basel III)

(Basel II)

10
0

11.01

10

2012

2013

2014

Capital Strategy (Euro-dollar convertible bonds
issued and Repurchase own shares)

Non-Performing Assets Based on the Financial
Revitalization Law (Three Banks)
Doubtful Assets
Bankrupt and Quasi-Bankrupt Assets
Sub-Standard Loans
Non-Performing Loan Ratio

Euro-dollar convertible bonds issued (Dec. 2013)
Amount
Coupon$300 million
0% (zero cost)Maturity

5 yearsObjective(Billions of yen)(%)

As the Group having strong operations in Asia, to respond400

4

to rising demand for foreign currency loans which corporate

300

2.68

YMFG
2.34 3

2.68
2.31

200

157.4

157.5

2012

53.5

81.4

78.0

63.4

23.0

26.0

22.9

2013

operations, to lower funding cost of U.S.$ with contingent
convertible clause and clause determining face value cash

2

settlement intended to minimize dilution shareholder value.

1

Repurchase own shares (Dec. 2013)

140.9

53.0
100

0

YMFG
141.1

customers spend on the development of their overseas

54.7

2014

Amount

0

9 million shares

Objective

To offset the impact of dilution by raising capital efficiency.
Diagram of scheme(Before)Debt(CB issued)(Repurchase own shares)

Debt

Debt

CB

CB
Capital Adequacy
Ratio is still high.
(12.69%)
CapitalCapitalCapitalRepurchase own shares
YMFG

4Lowering funding cost of U.S.$ with minimizing dilution shareholder valueRatings for YMFG, Yamaguchi Bank andMomiji Bank

Deposit Balance (Three Banks)

Ratings for the Group companies were A (stable) for YMFG,
A+ (stable) for Yamaguchi Bank and Momiji Bank.

¥8,809.4 billion including Negotiable Certificates of Deposit

The total deposit balance at term-end was ¥8,187.2 billion, or(NCDs). This came about because of the expansion of products
and services and steady marketing efforts based on solidcommunity relationships.

AAA

Rating and Investment Information, Inc.

AA

(As of June 20, 2014)

A

YMFG

BBB
B

A+ (stable)
A+ (stable)

C

8,464.7

8,809.4

2012

2013

2014

6,000

Momiji Bank

CC

8,325.3
8,000

Yamaguchi Bank

CCC

(Billions of yen)

10,000A (stable)

BB

Deposit Balance (Three Banks)

4,000
2,000
0

Note: The deposit balance includes the NCD balance.

Balance of Loans/Balance of Personal Loans (Three Banks)
The balance of loans at term-end was ¥6,032.2 billion, as a result of active efforts to live up to the trust placed in us by ourcustomers by meeting healthy demand for funds.
Balance of Loans
Balance of Loans in Japan
Balance of Loans to Small and Medium-Sized Businesses(Billions of yen)

7,000
6,000

Balance of Personal Loans

5,812.5

5,819.9

5,788.7

1,000

6,003.2

5,793.8

5,000

1,062.5
18.3%

800

4,000
3,504.8
60.5%

3,000

1,020.2
17.6%

1,078.618.0%

600

3,520.6
58.6%

3,383.5
58.4%

400

2,000

200

1,000
0

(Billions of yen)

1,200

6,032.2

2012

2013

0

2014

2012

2013

2014

Note: The percentages of loans to small and medium-sized businesses and personal loans are calculated on the basis of the balance of loans in Japan.

Dividend Policy (YMFG)

Expected Performance for the Fiscal YearEnding March 31, 2015 (YMFG)We have continued to provide stable dividends to ourshareholders while securing profits and reinforcing financial

YMFG aims to achieve its consolidated ordinary profits ofhealth to maintain our credit strength.

¥41.5 billion and net income of ¥24.0 billion.

In the year ended March 31, 2014, the dividend per shareat term-end was ¥7. Combined with the interim dividend of ¥6
per share, the full-year dividend amounted to ¥13 per share.
FY2011FY2012FY2013(Yen)
FY2014(Forecast)

Annual dividend per share
11.0(Interim dividend) (5.0)

12.0
(6.0)

13.0
(6.0)

14.0
(7.0)

Annual Report
2014

5

YMFG Medium-Term Management Plan 2013

Our Goal

To be a financial group that nurtures andgrows with our region
Road to “YMFG Zone”
Zone of Over-regional Network Economy(Going beyond individual regions to forge links among the regions, creating a growing economic zone)

Core Objective

Achieve mutual prosperity with the region by transforming into “One YMFG”
As a financial group comprising three banks—Yamaguchi Bank, Momiji Bank and Kitakyushu Bank—we will build relationships deeply rooted in these regions. At the same time, we will forge connections
between the regions, nurture them, and deliver collective Group strength through our transformation into“One YMFG.” Through these efforts, we aim to invigorate the regions and ensure YMFG’s growth.

Priority Measures for Achieving the Core Objective

Transforming into “One YMFG”
Q

Becoming one, going to the “regions” — From “company” to “regions”
We will work to bring together companies and employees, strengthen points of contact between regions
and customers, and leverage the strengths of each bank’s brand to build deep relationships with the regions.

Q

As one “YMFG” —From “company” to “YMFG”
We will enhance Group controls and connections, cultivating a sense of togetherness as the Group, andaugmenting the collective power of the Group as one “YMFG.”

Achieving Mutual Prosperity between the Region and YMFG
Q

Generating regional vigor —As the leading company in the region
By leveraging the network of our Group, including its bases in Asia, we will strive to strengthen points ofcontact between individual regions, between regions and customers, and among customers, thereby
invigorating the region.

Q

Increasing the number of YMFG fans —As the best company in the region
As the best company in the region, we will take advantage of our strengths as a comprehensive financial groupto provide consulting-based sales and unique products and services, increasing the number of YMFG fans.

Reinforcing the Management Foundation to Support “One YMFG”
To transform ourselves into “One YMFG,” we will build a robust management foundation that can adapt toall manner of changes in the environment.

YMFG

6

Targets (to be achieved by fiscal year ending March 31, 2016)

YMFG

Yamaguchi Bank

Momiji Bank

Kitakyushu Bank

Business Profits fromCore Operations¥125 billion or more

¥65 billion or more

¥40 billion or more

¥13 billion or more

Ordinary Profits¥40 billion or more

¥30 billion or more

¥11 billion or more

¥3 billion or more

Net Income¥25 billion or more

¥20 billion or more

¥7 billion or more

¥2 billion or more

Adjusted OHR

Less than 67%

Less than 60%

Less than 74%

Less than 75%

Progress of Measures under the YMFG Medium-Term Management Plan 2013
 Through success on each core objective, steadily make progress toward creating the “YMFG Zone.”
 In the interest of “reinforcing relationships to develop YMFG fans,” boldly take on the challenge of expanding the base ofcustomers who will grow in tandem with YMFG.

Fiscal 2014 (Fiscal Year Ending March 31, 2015)

Transforming into “One YMFG”

Current situationt Reinforce networks deeply rooted
in regions

We are making progress on each core objective, includingt Promote Group unification

toward information-intensive marketing and specifict Make effective use of information
within the Groupinitiatives to reinvigorate the regional economy. In the fiscal

restructuring the branch network, transforming awarenessyear ending March 31, 2015, the second year of themedium-term management plan, we will put every effort into

Achieving Mutual Prosperity
between the Region and YMFGtInvigorate the regional economy
through collaborationt Take part in initiatives to support
business revitalizationt Participate in Asian growth

expanding the customer base to achieve “mutual prosperity
between the region and YMFG.

Priority issue:“Reinforcing relationships to develop YMFG fans”
Basic policy: “Challenge to Change”
1. Change to interact broadly with customers
t Expand our customer base, enter potential markets

Strengthen the Management
Foundation to Support“One YMFG”
t Consolidate back-office operations inmarket and international departmentst Take steps to consolidate Group humanresouces functions

2. Change to interact deeply with customers
t Ensure information-intensive sales, strengthen
consulting-based sales

Increase number of YMFG fans Ù Resolve regional andcustomer issues

Fiscal 2015
(Final Year for the
Medium-Term Plan)

To be a financial group that nurtures and grows with our region
Road to “YMFG Zone”

Fiscal 2013

Annual Report
2014

7


Mutual Prosperity between the Region and YMFG: Community Reinvigoration throughCooperation
Leverage a broad financial network to enhance effective use of information within the Group, strive to invigorate a Group
trading sphere. Assist company startups, and aggressively support growth fields, such as environmental, medical andagricultural.

Leverage Broad Financial Network

Provide Support via Funds

Joint business matching fairs

Yamaguchi Dream Creation Industry Support Fund

• The theme for the eighth fair, in February 2014, was• A fund established in cooperation with Yamaguchi“agriculture, food and health.”

Prefecture to reinforce overall industry, centering oncommerce and industry including agriculture, forestry andPromote collaboration with local government bodies,
universities and other public-sector institutions• Participate proactively in local government bodies’ regional

fisheries, in our region.
• Total fund amount: ¥1.0 billion (of which, ¥0.67 billion
provided by YMFG)• Duration: 10 years

invigoration projects.

• Investment history: 6 projects/¥258.5 million (as of April 2014)

The Yamagin Regional Enterprise Support Foundation• Encourages business start-ups and entry to new business

Hiroshima Innovation Network, Inc.
• Investment fund established with financial institutions,fields among small and medium-sized companies andcentered on Hiroshima Prefecture. Momiji Bank is also anuniversities in the three-prefecture region.
• Fiscal 2013 projects: 19 projects/¥19 million (14 small/investor.
• In May 2013, invested in Momiji Bank customer (1medium company, 5 university R&D projects)

project/¥540 million).

• Since establishment: 416 projects/¥416 million

Results of fiscal 2013 initiatives

Initiatives in Growth Fields

Business Matching(Successful
Projects)

Industry –Government– Academia
Collaboration(Projects)

Business Startup
Support (Number
of Applications
for Aid to Support
Company
Startups)

Yamaguchi Bank

40

20

17

Momiji Bank

182

22

35

collaborate on the initiatives with sales offices, including YM

Kitakyushu Bank

70

15

6

Consulting.

Initiatives targeting environmental, medical andagricultural sectors• Assign personnel who specialize in growth fields to• YM Growth Support Fund and other entities develop
specialized financial products in response to funding needs
in growth fields.

YMFG

8

Mutual Prosperity between the Region and YMFG: Business Turnaround Support Initiatives
 After the conclusion of the Financing Facilitation Act, continue to take part in initiatives to support business revitalization.
 Make use of revitalization support funds to review current state of business and support transformation to new, profitablebusinesses.

Revitalization network withspecialized outside institutions
Q

Auditors, tax accountants, support

Collaborate among sales branches,
headquarters, affiliated companies
Q

associations, etc.

Specialized departments in three Group

Utilize business revitalization fundQ

Establish Yamaguchi Business
Restoration Fundbanks’ headquarters

Customers likely to improve management
More than 1,000 prospects(Three-bank total)Yamaguchi Business Restoration Fund(Yamaguchi Bank, Kitakyushu Bank)Seto Mirai Fund for revitalization of small
and medium-sized companies (Momiji Bank)Q

Established: September 30, 2013

Q

Q

Total fund amount: ¥3.0 billion

Q

Q

Duration: 8 years (may be extended)Q

Established: December 1, 2012
Total fund amount: ¥3.2 billion(of which, ¥0.5 billion provided by Momiji Bank)
Duration: 5 years (may be extended)Reinforcing Relationships to Develop YMFG Fans

We will further accelerate our initiatives of the fiscal year ended March 31, 2014. At the same time, through five core
objectives we will reinforce relationships to increase the number of YMFG fans even more. We will promote initiatives aimed
at a “YMFG Zone” of prosperity with the region.

Present

Reinforcing Relationships to Develop YMFG Fans

Mutual Prosperity
with the Region

Core Objectives in the Year Ending March 31, 2015
(1) Change to interact broadly
1. Provide new business loans to sole
proprietors and small businesses
2. Use IT channels to strengthen pointsof contact with customers(2) Change to interact deeply
3. Enhance consulting expertise
4. Create time and cultivate manpower bypromoting efficiency
5. Enhance effective use of information
within the GroupYMFG fans

Ongoing Initiatives

t Reinforce networks deeply rooted in regions
t Promote Group unificationt Take part in initiatives to invigorate the community

YMFG ZONE

Growth, prosperity

YMFG
Enhanced earnings platform
Grow by responding tocustomer needs Build a
new growth model

Increase in YMFG fansNote: “YMFG fan” is a customer segment that transacts more than a certain amount of business with us.

Broader

Expandtransaction
content

Increasetransaction
partners

DeeperAnnual Report
2014

9


To Be the Largest and Most Respected Financial Group in the Chugoku and Shikoku Regions

Strategic operations centered aroundYamaguchi Bank, the Group’s core bank,attacking both flanks with Momiji Bank
to the east and Kitakyushu Bank to the west.

Yamaguchi Bank
(Head office: Shimonoseki City)

Head office and branches
Sub-branch offices

108
25

Momiji Bank
(Head office: Hiroshima City)

Head office and branches
Sub-branch offices

95
20

Kitakyushu Bank
(Head Office: Kitakyushu City)

Head office and branches
Sub-branch office

31
1

The Group ranks No. 6 among 64 regional banks in Japan in terms of total assets.
The total population and nominal gross prefectural product of the region in which the Group operates (Yamaguchi Prefecture,
Hiroshima Prefecture, Kitakyushu City) are approximately 5 million and ¥20 trillion, respectively, both of which account for
approximately 4% of the national total.
Total Assets(T Yen)Head Office LocationArea

9.6 (6th)

Yamaguchi Pref.

Chugoku

5.2 (4.1%)

20.0 (4.0%)

Yamaguchi Bank

5.6 (—)

Yamaguchi Pref.

Chugoku

1.4 (1.1%)

5.6 (1.1%)

Momiji Bank

3.1 (—)

Hiroshima Pref.

Chugoku

2.8 (2.2%)

11.0 (2.2%)

Kitakyushu Bank

0.9 (—)

Kitakyushu City

Kyushu0.9 (0.7%)

3.3 (0.7%)

Bank

YMFG

Population(M people)

Gross Prefectural Product(T Yen)* Total assets data are taken from kessan tanshin reports of each bank for the fiscal year ended March 2014. Numbers in parentheses ( ) indicate the ranking among 64
regional banks in Japan* The population data are estimates as of October 1, 2013. Numbers in parentheses ( ) indicate the percentage in the total population in Japan.
* Gross prefectural product (nominal) data are taken from the 2011 statistics. Numbers in parentheses ( ) indicate the percentage in the GDP in Japan.

YMFG

10

Economies and Industries of Yamaguchi and Hiroshima Prefecture, and Kitakyushu City

(Reference)
Yamaguchi Prefecture

Excellent industrial concentration

Gateway to exchanges with Asia

Rich industrial human resources• Many plants of major corporations locatedowing to the excellent transportation
network• Excellent harbor conditions with 2• Excellent historical background that has

international harbors and 4 major harbors
in the prefecture

traditionally nurtured the social climate
encouraging study and education• Concentration of primary material industries • The largest export and import center insuch as cement and chemicals owing to the the Chugoku region such as auto partsrich mineral resources
and chemicals• Increasing entries of processing andassembly industries such as transportation
machinery and more recently thepharmaceutical industry• Serves as the production center in westernJapan for many global enterprises• Excellent support system under the industryacademic coordination such as joint research
between a university and a private-sector
company, R&D to develop next generationindustries, etc.

Hiroshima Prefecture
The largest industrial prefecture in the Manufacturing industry centered

Home of many No. 1 enterprises

Chugoku and Shikoku regions

around Mazda Motor Corporation• Many local enterprises in a variety of• Growth of heavy industries, particularly• The formation of a group of broad-basedtransportation machinery such as
automobiles and shipbuilding, leveraging
the technological strength developed
through military manufacturing

automobile-related companies with Mazda
Motor Corporation on top of the hierarchy

industries with nationwide reputation anda large domestic market share throughleveraging excellent technologies (Refer tothe right section)• Ranks No.11 in Japan in terms of nominal
gross prefectural product with a shareof 2.2% in Japan and 40% in the
Chugoku region• The shipbuilding industry encompassing
middle-ranking and small and mediumsized shipbuilding companies and related
manufacturers such as pumps and turbines,
which holds the No. 1 share in Japan• Additional concentration of traditional
industries such as the fiber industry andthe manufacturing of furniture for
newlywed couples

Kitakyushu City
Concentration of a variety of industries City of manufacturing

Environmental and energy industries• Kitakyushu City was born in 1963 through• Steel accounts for approximately 40% of• A forerunner of the eco-town businessa merger of 5 cities.

the total manufacturing industry• Mainly heavy and chemical industries• Concentration of auto assembly plants

leveraging the concentration of industrial
technology with broad manufacturing bases(steel in the main)

including Nissan Motor Kyushu Co., Ltd.,
Toyota Motor Kyushu, Inc., and Daihatsu
Motor Kyushu Co., Ltd.

• New concentration of increasingly diverse
industries such as auto-related industries
due to the proximity to Asia and the highly
developed logistics infrastructure• Recent concentration of semiconductor
design companies owing to the developmentof Kitakyushu Science and Research Park

• Research and development is conducted on
new energy sources such as the technology
to reduce the oxygen content under thepromotion system developed through theindustry-academic-public coordination

Annual Report
2014

11

Overseas Networks

Provide support to overseas business expansion by customers
through our 3 branches in Dalian, Busan, and Qingdao and a
representative office in Hong Kong
Expand overseas business support
services through business allianceswith domestic and foreign financial
institutions and other companies

Mumbai[China]-Yamaguchi Bank, Dalian Branch-Liaoning Normal University
Language trainee:1[Korea]-Yamaguchi Bank, Busan Branch-Pusan National Univ.
Language trainee:1[China]-Yamaguchi Bank, Qingdao Branch

Dalian[China]-Yamaguchi Bank
Hong Kong Representative Office

QingdaoBusan

Shanghai[Thailand]Business Alliance:TMB Bank
Assigned employees:1

Taipei[China]-Kitakyusyu Business
Promotive Office, SHANGHAIAssigned employees:1

Hong Kong[India]Business alliance:
State Bank of India

YangonBangkok

Manila[Philippines]
Business alliance:
Metropolitan Bank & Trust Company

Ho Chi Minh
[Taiwan, Philippines, Myanmar, Vietnam]
Business alliance: Daiwa Securities Group

JakartaInternational Department
2-36, 4-chome Takezaki-cho, Shimonoseki, P.O. Box 24,
Shimonoseki 750-8603, Japan SWIFT Address: YMBKJPJT[Indonesia]
Business alliance:Bank Negara Indonesia

Loans of overseas branches (As of March 31)(Millions of yen)

40,00028,97630,000Overseas Offices
BUSAN BRANCH
4F, Postal Insurance Busan Bldg., Jungang-Dong 3-Ga, 63,
Jungang-Daero, Jung-Gu, Busan, Republic of Korea
SWIFT Address: YMBKKR2P
QINGDAO BRANCH
2F, Crowne Plaza Hotel Qingdao, 76 Hong Kong Central
Road, Qingdao, Shandong Province, The People’s Republic of
China
SWIFT Address: YMBKCNBQDALIAN BRANCH
14F Senmao Building No. 147, Zhongshan Road Xigang
District, Dalian, Liaoning Province, The People’s Republicof China
SWIFT Address: YMBKCNBD

YMFG

12

HONG KONG
403, 4/F, Far East Finance Centre, 16 Harcourt Road,
Hong Kong
REPRESENTATIVE OFFICE Fax: +852-28104902

20,00019,473

22,27824,957

10,000

0

2011

2012

2013

2014

Yamaguchi Bank: The first local bank that can deal with RMB
in China

Yamaguchi Bank Summary

Organization Chart (As of July 31, 2014)
General Meeting ofStockholders
Corporate Auditors
Board of Corporate Auditors

Regional Headquarters

Tokyo Headquarters

Capital Markets and Treasury Dept.

Trading DivisionInternational Dept.

Representative OfficeBusiness Solution Dept.

Direct Center

Asian Trade and Investment Advisory Office

Corporate Auditors Office
Board of Directors
Audit and Inspection Dept.

Branches
Sub-Branch Offices

Regional Development Dept.

Executive Committee

Market and Business Administration Dept.
Credit Supervision Dept.

Loan Support Center

Operations Support Dept.

Operations Central Office

Operations Administration Dept.

Account Management Center

Systems Dept.

System Uniform Promotion office

President

Regional Operations Center

Risk Administration Dept.
Compliance Committee

Compliance Administration Dept.
Secretariat

Corporate Administration Dept.

Overseas Branches

Public Relations Office
Customer Communication Dept.

Customer Relations Center

Corporate Planning Dept.

Accounting Office

History
Nov. 1878
Apr. 1891
May 1897
Nov. 1898
Sep. 1900
Jun. 1912
Mar. 1944
Oct. 2011

Inaugurated Hyakuju National Bank.
Established Kaho Bank as Yamaguchi Prefecture’s first private bank.
Established Senjo Bank.
Reorganized Hyakuju National Bank into Hyakuju Bank at the expiration of Hyakuju’s period of operations as anational bank.
Established Oshima Bank.
Established Ube Bank.
Founded The Yamaguchi Bank (a merger of Hyakuju Bank, Kaho Bank, Senjo Bank, Oshima Bank and Ube Bank, withcapital of ¥13.45 million).
Performed absorption-type company split of business in the Kyushu region, succeeded by Kitakyushu Bank.

Performance During the Fiscal Year Ended March 31, 2014 (Yamaguchi Bank, Non-consolidated) Gross Operating Income/Business Ordinary Profits/Net Income Capital Adequacy Ratio

Profits From Core Operations
Gross Operating Income
Business Profits From Core Operations
80(Billions of yen)

72.3

59.0

40

40

30

30.6
26.3

20

13.9
20

0

2012

Tier I Ratio(Billions of yen)

66.7

60

22.1

Capital Adequacy Ratio

Ordinary Profits
Net Income

18.4

2013

19.8

2014

26.6
16.7

(%)

15
14

14.22
12.89

14.38

13

19.0

13.00

12
11

13.27

11.48

10

0

2012

2013

2014

0

2012
(Basel II)

2013

2014
(Basel III)

Annual Report
2014

13

Momiji Bank Summary

Organization Chart (As of July 31, 2014)
General Meeting of Stockholders

Fukuyama Headquarters

Board of Auditors

Kure Saijo Headquarters

Audit andInspection Dept.

Business Solution Dept.
Board of Directors

Audit Dept.

Direct Center

Regional Development Dept.
Money and Capital Markets
and International Dept.
Operations and Systems Dept.

President
Executive Officers
Committee

Operations Support Dept.

Credit Document Custody Center

Credit Supervision Dept.

Loan Support Center

Corporate Planning Dept.

Accounting Office

Branches
Sub-Branch Offices

Security OfficeCompliance Committee

Corporate Administration Dept.

Secretariat

Customer Communication Dept.

Public Relations Office

Risk Administration Dept.

Customer Relations Center

Compliance Administration Dept.

History
Nov. 1923
Apr. 1941
Oct. 1951
Feb. 1989
Sep. 2001
May 2004
Apr. 2007

Established Hiroshima Mujin.
Merged the four Mujin banks of Hiroshima, Geibi, Soeki and Sanyo into Hiroshima Mujin.
Converted to a mutual savings bank and changed name to Hiroshima Sogo Bank.
Converted to a commercial bank and changed name to Hiroshima-Sogo Bank.
Established holding company Momiji Holdings by stock transfer.
Merged with Setouchi Bank and changed name to Momiji Bank.
Momiji Holdings was merged into the surviving corporation, Momiji Bank.

Performance during the Fiscal Year Ended March 31, 2014 (Momiji Bank, Non-Consolidated) Gross Operating Income/Business Ordinary Profits/Net Income Capital Adequacy Ratio

Profits From Core Operations
Gross Operating Income
Business Profits from Core Operations(Billions of yen)

60

(Billions of yen)

20

17.1

50.9
50

45.3

41.5

15

40

11.3

30

10

20
10
0

YMFG

14

8.0
2012

13.9

2013

8.9
2014

Capital Adequacy Ratio

Ordinary Profits
Net Income

12.5

14

12.96
11.55

12
10

7.4

5

0

14.01

17.3
12.9

(%)

16

8
0
2012

2013

2014

2012

2013

2014

(Basel II)(Basel III)

Kitakyushu Bank Summary

Organization Chart (As of July 31, 2014)
General Meeting of Stockholders
Board of Auditors

Business Solution Dept.

Direct Center

Regional Development Dept.
Board of Directors

Audit Dept.
President

Credit Supervision Dept.

Loan Support Center

Operation Support Dept.
Operations and Systems Dept.
Risk Administration Dept.

Branches
Sub-Branch Offices

Compliance Administration Dept.
Compliance Committee

Corporate Administration Dept.
Customer Communication Dept.

Public Relations Office

Corporate Planning Dept.

History
Oct. 2010
Sep. 2011
Oct. 2011

Established Kitakyushu Financial Project Co., Ltd.
Changed name to The Kitakyushu Bank, Ltd.
Took over Yamaguchi Bank’s business in the Kyushu region by absorption-type company split and commenced operations.

Performance during the Fiscal Year Ended March 31, 2014 (Kitakyushu Bank, Non-Consolidated) Gross Operating Income/Business Ordinary Profits/Net Income Capital Adequacy Ratio

Profits From Core Operations
Gross Operating Income
Business Profits from Core Operations(Billions of yen)

12

10.8

10.9

Capital Adequacy Ratio

Ordinary Profits
Net Income
2.4

10
1.8

2.1

(Billions of yen)

15

2.1

14

1.8

13

(%)

12.64

12.45

8
6

5.4

1.2

1.2

1.2

12.10

12
11

4
2
0

0.9
2012

1.8

1.9

2013

2014

0.6

0.2
0

2012

0
2013

2014

2012

2013

2014

(Basel II)(Basel III)

Annual Report
2014

15

Board of Directors and Corporate Auditors (As of July 31, 2014)

YMFG

President

Koichi Fukuda

Chairman

Senior Managing Director

Hiromichi Morimoto

Fumio Nosaka

Director

Auditor

AuditorDirector

Auditor

Auditor

Hirohide Umemoto

Mitsuhiro Hirozane

Takeshi Yoshimura

Toshio Fujiyoshi

Senior Managing Director

Toshio Kato

Kazuo Tsukuda**
Michiaki Kunimasa**

Director

Hiroaki Tamura** Hiroaki Tamura is an external director under Article 15 of Section 2 of the Companies Act.
** Kazuo Tsukuda and Michiaki Kunimasa are external auditors under Article 16 of Section 2 of the Companies Act.

Yamaguchi Bank
President

Koichi Fukuda
Senior Managing Director

Hiroshi Zaima

Senior Managing Director

Mitsuhiro Fujita

Managing Director

Director

AuditorManaging Director

Director

Hiroaki Yamamoto

Auditor

Hirohide Umemoto
Managing Director

Director

AuditorManaging Director

Director

AuditorToru Tokunaga

Takeshi Yoshimura
Tsutomu Harada

Katsumasa Fujii

Toshihiko Murata
Mitsuhiro Hirozane

Satoaki Nagai

Munefusa Saito*

Norio Haramoto

Toshihiko Yamashita*

Director

Tsuyoshi Amata
Director

Koichiro Kuno
* Munefusa Saito and Toshihiko Yamashita are external auditors under Article 16 of Section 2 of the Companies Act.

Momiji Bank
President

Fumio Nosaka
Chairman

Koichi Fukuda
Senior Managing Director

Yoshimi Hinouchi

Managing Director

Director

Kazunori Takayama

AuditorHironobu Sasaki
Managing Director

Director

AuditorDirector

AuditorDirector

AuditorKoji Oda

Mamoru Konishi

Managing Director

Shigeo Watanabe

Ichinari Koda

Toshio Fujiyoshi
Hirofumi Kato
Yukio Inoue*

Naoto Tada

Tetsuo Yamashita*

Director

Shigeyuki Amano* Yukio Inoue and Tetsuo Yamashita are external auditors under Article 16 of Section 2 of the Companies Act.

Kitakyushu Bank
President

Director

AuditorChairman

Director

AuditorManaging Director

Director

AuditorToshio Kato
Koichi Fukuda
Michiya Yamamoto
YMFG

16

Satoshi Ono
Shinji Yoshidomi
Masatoshi Okano** Masatoshi Okano is an external director under Article 15 of Section 2 of the Companies Act.
** Koji Toshima and Kazumasa Tatsumi are external auditors under Article 16 of Section 2 of the Companies Act.

Nobuaki Ueno
Koji Toshima**
Kazumasa Tatsumi**

Corporate GovernanceIn conducting our business activities, we recognize that fair
practices in compliance with laws and corporate ethics are ourcorporate social responsibility, and we recognize corporate
governance as an important management priority. Based on thisunderstanding, we endeavor to raise our level of soundness,enhance corporate value, boost transparency and reinforce ourcorporate governance structure.
The Board of Directors, consisting of seven directors (including
one outside director), makes decisions about important mattersrelated to the Group’s management and supervises the directors.
The Board of Directors meeting is held once a month in principle
and is presided over by the president. Materials for discussion aresent to the outside director beforehand so the director can gain
a comprehensive understanding of the subjects up for discussion
and can state his/her opinions from a neutral standpoint.

The Nomination Committee discusses matters related to theappointment and dismissal of directors, and the Compensation
Committee discusses matters related to the compensation of
the directors. Both guarantee the objectivity and transparency ofdecision-making processes.
The Board of Corporate Auditors, consisting of four auditors(including two external auditors), holds a meeting once a monthin principle. It receives reports about important matters related
to auditing and makes relevant decisions based on these. The
auditors check the directors’ performance of their duties byattending Board of Directors and other important meetings andby inspecting the Company’s operations and assets.
The Group Asset and Liability Management Committee, theGroup Compliance Committee and Group Operational Risk
Management Committee discuss important management issues.

YMFG Corporate Governance Structure
YMFG
General Meeting of Stockholders
Appointment/Dismissal

Appointment/Dismissal

Appointment/Dismissal

Cooperation
ReportBoard of Corporate Auditors
4 Corporate Auditors(including 2 outside auditors)

Audit
ReportBoard of Directors

Command(including 1 outside director)

Accounting Auditor

7 Directors
Appointment

Appointment/Dismissal
Supervision

Cooperation

Auditors Office

Reports and Recommendation

Nomination Committee
Compensation Committee

Audit and Inspection Dept.

Internal Audit
ReportBusiness Execution Structure
PresidentGroup ALM Committee
Group Compliance Committee

Designated Board Members

Accounting Audit

CommandGroup Operational Risk Management Committee
ReportPolicy Indication/Plan Approval

Operation Departments

Yamaguchi Bank Momiji Bank Kitakyushu Bank YM Securities YM Saison Izutsuya Withcard YM Consulting Kitakyushu Economics InstituteInternal Audits
Principles of Internal Audits
We define an internal audit as a series of processes for objective
verification of the appropriateness and effectiveness of internal
controls (including risk management) and as making suggestions
for necessary improvements.
YMFG has devised standard internal audit rules for the wholeGroup. On the basis of these rules, the internal audit departmentsof each Group company verify the appropriateness andeffectiveness of internal controls and make suggestions fornecessary improvements.
Further, YMFG creates the Group’s medium- to long-term
internal audit plan on the basis of its management policy andconditions. Internal audits by the auditing bodies of each Group
company are conducted on the basis of this plan to ensure theireffectiveness and efficiency.

Implementation of Internal Audits
YMFG’s Audit and Inspection Dept. plans audit processes forthe whole Group, implements audits and supervises each Group
company’s internal audits.
The YMFG Audit and Inspection Dept. devises the rules andmedium- to long-term plans for the Group’s internal audits,
implements audits of the Group companies’ compliance/riskmanagement departments and checks the accuracy of thefinancial statements of the Group companies. The department
monitors and gives guidance and advice to the Group companies’
audit and inspection departments. On the basis of their audit
reports, the department reports on the internal audits of theGroup to the Board of Directors.
The banks’ audit and inspection departments implement
internal audits of branches in Japan and overseas, and reports
to YMFG and to the Board of Directors. In particular, internal
audits of front-line sales outlets are performed to verify the statusof compliance and risk management functions and ensure theirmutual effectiveness.

Annual Report
2014

17

Compliance System

YMFG Compliance System
Group companies

YMFG

General Meeting ofStockholders

The Banks
Board of Directors
Compliance Committee

ReportBoard of Corporate Auditors

ReportAudit

Compliance Administration Dept.

Board of Directors

Accounting Auditor

Other subsidiaries

Direction
ReportInquiry

Reward and Punishment Board
Secretariat: Corporate Administration Dept.
Deliberation

Board of Directors

Group Compliance Committee

Compliance Committee

Secretariat: Compliance
Administration Dept.

Compliance Administration Dept.

Direction

ReportGuidance, Response, Monitoring

Direction

ReportAdviceCompliance Administration
Dept.
Guidance, Direction, Monitoring
Report/Consulting
Direction/
Response
Department in Chargeof operation
Audit

Report/Consulting
Report/Consulting
Compliance supervisor

Departments

Compliance officer

Report/Consulting

LawyerAudit/
ReportReport/Consulting

Report/Consulting

Employees
Audit
Audit and Inspection Dept.

YMFG’s Attitude toward Compliance
YMFG and its Group companies share a common understandingof their responsibilities to fulfill their public mission andcorporate social responsibilities. Accordingly, we accord topmost
management priority to thorough compliance, take the seriousness
of compliance seriously and consider earning the trust of a broadbased society our fundamental policy.

YMFG

18

compliance programs for each fiscal year and monitors the statusof program implementation. The committee discusses ways tocreate and reinforce compliance systems, reports the results ofthese deliberations to the Board of Directors and reflects theseresults in Group operations.
YMFG’s Compliance Administration Department communicateswith compliance personnel at each Group company and, in
accordance with the deliberations of the Group Compliance
Committee, ensures the appropriateness of compliance systems
for the entire Group.

Compliance System

Efforts to Prevent Money Laundering

We have established a compliance administration department totake overall charge of ensuring appropriate compliance for YMFG
and its Group companies. Individual companies’ compliancedepartments handle the centralized management of compliancerelated activities, including the creation of compliance structures
and the training of executives and general employees. Compliancesupervisors and officers at all departments and branches foster
an enhanced awareness of appropriate compliance in daily
operations.
The Group Compliance Committee, chaired by the president,
acts as a deliberative body. This committee formulates GroupThe Act on Punishment of Organized Crimes and Control of
Crime Proceeds and the Law for Prevention of Transfer of
Criminal Proceeds prescribes heightened measures to preventmoney laundering. The Group’s efforts are appropriate and in
conformance with these regulations, in keeping with our aim
of maintaining society’s trust in us as a financial institution.
Specifically, we have formulated a policy of controls andprocedures reasonably designed to prevent and detect money
laundering/terrorist financing activities. We have appointed asenior officer to take charge of this policy and established training
programs on this topic for all management and staff.

Risk Management System

YMFG Risk Management System
YMFG
Report#PBSEPG%JSFDUPST

Group ALM Committee

Committees

Risk Category

Risk
Administration Dept.

Risk
Administration Dept.

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Group Operational Risk Management Committee

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Risk Management
Control Department

Direction/Audit

YM Saison

Izutsuya Withcard

YMFG faces all kinds of risks that have become morediversified and complex along with changes in the economy
and in society. Risk management is one of the most important
issues facing the Group.
As part of our basic risk management policy, we havedevised standard risk management rules that apply to YMFG
and its subsidiaries.
The subsidiaries have organized risk management sections,risk management departments and Group Operational Risk
Management committee to cope with risks. Risk amounts aremeasured by a uniform method, capital is allocated on the

YM Consulting

Kitakyushu Economics Institutebasis of these methods, and risks are collectively managed.
YMFG’s risk management sections cooperates with its
counterparts in the subsidiaries to check risk management
conditions in the whole Group.
The Audit and Inspection Department, which is
independent of the operation departments, implementsinternal audits to ascertain the appropriateness andeffectiveness of risk management. This system applies both to
YMFG and to its subsidiaries.
Annual Report
2014

19

Contributions to the Community and the Environment

Invitation of Foreign Students to Attend Shimonoseki City University
Supporting young human resources from Asia, who are expected to flourish
after returning to their countries
Since 1986, The Yamaguchi Bank has invited students from China, Thailand and Turkey
to attend Shimonoseki City University. The bank has invited a total of 151 students,
offering them housing and financial and lifestyle support to ensure a comfortable study
environment.
Foreign students to Shimonoseki City University
in fiscal 2014

Japan–China Elementary School Exchanges

Yamaguchi Bank Cup Japanese Speech Contest

Inviting school children to Japan every year from
Qingdao and Dalian, China

Advancing grassroots international exchange throughJapanese language education

The Yamaguchi Bank invites school children from Qingdao

Since 1992, we have regularly held the Yamaguchi Bank Cup

and Dalian to Japan to spread the “Small Kindness”

Japanese Language Speech Contest in Qingdao, China. The

movement. The children visit elementary schools and interact

contest has earned praise from the city government for its

with Japanese children, fostering relations between the two

extensive contributions to Japanese-language education, andcountries.

has long driven cultural exchange at the grassroots level.

Efforts on Environmental Issues
Implementing Groupwide Initiatives for the Environment
As part of its efforts to contribute to the creation of a sustainable society, YMFG is working on a number of initiatives to prevent
global warming.
Since 2008, the Group has participated in the Cool Biz campaign for lighter clothing during summer and an early lights-out
campaign, and participates in the Warm Biz campaign for heavier clothing in winter. We are also giving out eco-goods to customers
visiting Group banks on the anniversaries of bank branch openings, and we remain committed to further environmental contribution
activities.

Early Lights-Out Campaign Implementation

Cool Biz Implementation

Period:From June 2009

Period:From June 1 to September 30, 2014

Actions:

One day each month is designated for earlyParticipants:

All Group companies

lights out at 6 p.m.

Actions:

As a general rule, indoor temperatures are set
to 28°C and suit jackets and neckties are notDistributing Eco-Goods

worn.

The Yamaguchi Bank and Momiji Bank are holding campaigns
to curb global warming, such as by giving out environmentally

Warm Biz Implementation

friendly eco-goods on the anniversaries of the opening of each

Period:From December 1, 2013 to March 31, 2014

branch.

Participants:

All Group companies

Actions:

As a general rule, indoor temperatures are set
to 20°C.

YMFG

20Financial Section

Financial Section
YMFG Business Situation ..................................................22
YMFG Consolidated Financial Statements .........................24
YMFG Notes to Consolidated Financial Statements ..........28
Independent Auditor’s Report ............................................55
Yamaguchi Bank Financial Statements ...............................56
Momiji Bank Financial Statements ....................................58
Kitakyushu Bank Financial Statements ...............................6021

YMFG Business Situation
Summary of Business Results

the regions where it operates, pulling together as a uniﬁed

Performance

Yamaguchi Bank, Momiji Bank and Kitakyushu Bank—andﬁnancial group, “One YMFG,” comprising three banks—

During the ﬁscal year ended March 31, 2014, theleveraging its comprehensive strengths. YMFG will also put

Japanese economy remained in a state of gradual recovery.

forth every eﬀort toward developing mutually beneﬁcial

Manufacturing activity continued to pick up, thanks to therelationships with local communities and customers, aiming

correction to the high yen exchange rate, which bolsteredto provide ﬁnancial services that invigorate our region.

exports, and robust internal demand. Stock prices beneﬁted

Banking operations, which are the core of YMFG’sfrom improved consumer sentiment, corporate earnings

business, are conducted through the eﬀorts of its banks torecovered, personal consumption turned upward—due inmeet the varied ﬁnancial needs of customers in the regions

part to a spike in demand prior to the consumption tax hike,where they conduct business via a wide range of ﬁnancial

housing investment rose, and capital expenditure showed

products through their deposit and loan operations.

signs of an upturn.

In line with the introduction of a government measure

Against this backdrop, the regional economy also enjoyed athat exempts lump-sum donations toward education from

gradual recovery. Overall production activity was solid, with

gift tax, Yamaguchi Bank, Momiji Bank and Kitakyushu

robust performance in the mainstay automotive and chemicals

Bank set up and began oﬀering the Kimi no Mirai-e (“forsectors. Public-sector construction grew substantially year on

your future”) ordinary deposit accounts for the lump-sum

year; employment and income conditions trended positively,

provision of educational funds.

with the ratio of jobs to applicants rebounding to a level

We also introduced Kasumin Teiki term deposits, which

exceeding one-to-one; and personal consumption levels

provide customers a sense of closeness with YMFG’s brandwere upbeat.

ambassador, the table tennis player Kasumi Ishikawa.

Meanwhile, the ﬁnancial industry faces the issue of

YMFG has begun employing an environmental rating

conforming to substantial changes in the rules and regulations

ﬁnance system for providing ﬁnancial support to clients’that govern it, including new capital adequacy requirements

eﬀorts toward environmentally friendly management.

and the adoption of international accounting standards.

As part of our international operations to provide

Under these circumstances, in line with their mission of

support for clients making business inroads overseas,

contributing to regional economic development, regional

in July 2013 we entered into an aﬃliate relationshipﬁnancial institutions face vigorous requests to deliver stronger

with the Metropolitan Bank and Trust Company ofﬁnancial soundness and proﬁtability, supply funding more

the Philippines. This move added the Philippines to the

ﬂexibly and further enhance their ﬁnancial services.

Yamaguchi Financial Group’s Asian network, which
also includes relationships with banks in China, SouthYMFG Performance
Amid these ﬁnancial and economic conditions, supported

2013, we issued $300 million in US-dollar-denominatedby its shareholders and business partners all YMFG’sconvertible bonds to meet the dollar funding needs ofoﬃcers and employees were united in their eﬀorts toclients conducting business overseas. We plan to continue

strengthen the Group’s management base and bolster

striving to become recognized for having strong operations

operating performance.

in Asia by providing overseas business opportunities to ourBased on the YMFG Medium-Term Management Plan
2013, which commenced during the year under review, theGroup worked to deepen its community involvement in

22

Korea, India, Thailand and Indonesia. In December

customers and strengthening our funding support and otherconsulting functions.

at year-end, down ¥72.4 billion, due to decreases in Japanese

Financial Results
YMFG’s consolidated operating performance for the year

bonds. This change reﬂected investment decisions made in

ended March 31, 2014, is outlined below.

consideration of market ﬂuctuations.

Total income amounted to ¥161,082 million, up ¥2,630

Total assets amounted to ¥9,635.0 billion at ﬁscal year-

million from the preceding ﬁscal year. The main reasons for thisend, up ¥307.8 billion from one year earlier. This rise wasincrease were higher fees and commissions and a reversal of bad

attributable to growth in loans and bills discounted, based on

debt reserves. Total expenses, meanwhile fell ¥2,995 million,

the increase in deposits, including NCDs.

to ¥111,497 million, mainly as a result of lower operating

At the end of the ﬁscal year, the consolidated capital

expenses and amortization of shares. As a result, income before

adequacy ratio for the Yamaguchi Financial Group (uniform

income taxes grew ¥5,625 million, to ¥49,585 million, and net

international standard) was 12.69%. Our consolidated total

income rose ¥4,003 million, to ¥31,236 million.

Tier 1 capital adequacy ratio was 11.10%, and our consolidated

Although interest rates remained low, due to the expansion

common equity Tier I capital adequacy ratio was 11.10%.

of products and services to meet increasingly diverse customer

Net cash provided by operating activities was ¥526.1

needs and steady sales eﬀorts based on solid community

billion, ¥403.2 billion higher than in the preceding year, due

relationships, the Group succeeded in boosting deposits

mainly to the net change in call loans and bills purchased. Net¥311.9 billion year on year, to ¥8,765.0 billion as of March

cash provided by investing activities came to ¥54.9 billion,

31, 2014, including negotiable certiﬁcates of deposit (NCDs).

a ¥71.6 billion change from the ¥16.7 billion used in these

Loans and bills discounted increased ¥152.2 billion, toactivities in the previous term. Changes in the amounts of¥5,964.1 billion as of March 31, 2014, due to the Group’spurchases of securities and proceeds from sales of securities

eﬀorts to fulﬁll its role as a regional ﬁnancial institution

were the primary factors. Net cash used in ﬁnancing activities

through its function as a ﬁnancial intermediary and aggressive

amounted to ¥20.0 billion, up ¥17.1 billion, due chieﬂy to

eﬀorts to meet demand from business partners with whom thepurchases of treasury stock. As a result of these cash ﬂows,

Group has developed trust-based relationships.

cash and cash equivalents at the end of the year came to

The Group’s holdings of securities came to ¥2,072.0 billion¥874.2 billion, up ¥561.0 billion.

Yamaguchi Financial Group, Inc., Management Indices (Consolidated)
Millions of yen
2014

Millions of yen
2013

Millions of yen
2012

Millions of yen
2011

Consolidated total income
Consolidated net income
Consolidated comprehensive income
Consolidated total net assets
Consolidated total assets
Net assets per share

161,082
31,23634,316
521,562
9,635,044
2,040.39 yen

158,452
27,23351,743
521,423
9,327,236
1,901.30 yen

156,095
17,91929,120472,405
9,115,427
1,720.56 yen

164,323
19,156
7,752
446,2908,758,187
1,624.33 yen

Current term net income per share(current term net loss per share)
Current term net income per share after
stock adjustment
Capital ratio*2
Earnings on equity - increase
Group price earnings ratio

120.66 yen

102.48 yen

66.99 yen

71.18 yen

116.55 yen

102.18 yen

66.88 yen

71.15 yen

12.69%
6.04%
7.70 times

13.34%
5.52%
9.28 times

11.75%
3.92%
11.22 times

11.36%
4.23%
10.81 times

Thousands of
U.S. dollars*1
2014

1,565,119
303,498
333,424
5,067,645
93,616,829
19.83
U.S. dollars
1.17
U.S. dollars
1.13
U.S. dollars*1 US dollar amounts have been translated, for convenience only, at the rate of ¥102.92 = US$1.00 as of March 31, 2014.
*2 YMFG calculated its capital ratio according to the ﬁrst standard through the ﬁscal year ended March 31, 2012. From the ﬁscal year ended March 31, 2013, this ratio is calculated according to the uniform
international standard (Basel 3).

23

YMFG Consolidated Financial Statements
CONSOLIDATED BALANCE SHEETSMarch 31, 2014 and 2013
Millions of yen
2014

ASSETS
AssetsCash and due from banks (Notes 3, 4 and 9)
Call loans and bills purchased (Note 4)
Monetary claims bought
Trading assets (Notes 4 and 6)
Money held in trust (Notes 4 and 6)
Securities (Notes 4, 5, 6 and 9)
Loans and bills discounted (Notes 4 and 7)
Foreign exchanges
Other assets
Tangible ﬁxed assets (Notes 10, 15 and 18)
Intangible ﬁxed assets (Note 18)
Net deﬁned beneﬁt asset
Deferred tax assets (Note 19)
Customers’ liabilities for acceptances and guarantees (Note 16)
Allowance for loan losses
Total assets¥¥

915,056
315,198
8,869
5,753
49,996
2,071,990
5,964,133
15,497
171,199
89,34828,09822,882
15,63948,079(86,693)
9,635,044

Millions of yen
2013

¥

¥

Thousands of
U.S. dollars (Note 1)
2014

347,076
649,843
7,663
9,232
55,4892,144,382
5,811,966
12,739191,081
90,00938,932—
22,37144,605(98,152)
9,327,236$

8,890,944
3,062,553
86,17455,898
485,775
20,132,044
57,949,213
150,573
1,663,420
868,131
273,008
222,328
151,953
467,149(842,334)$ 93,616,829

8,453,058
42,9904,330
2,962
29,236469
95,000—113,995
2,912
1,114
—
22
85
1,086
75
4
932
12,93844,6058,805,813
50,00079,628332,868(2,731)
459,765
34,498(446)
23,333—57,385249
4,024
521,423
9,327,236$ 85,162,903
766,586
128,925
30,976289,2442,789
437,233
300,000
735,718
30,052—43,519272
602
10,766651
68
18,626
123,105
467,149
88,549,184
485,814583,5993,509,775(103,906)
4,475,282
356,646(3,420)221,969(33,667)
541,528
4,188
46,647
5,067,645$ 93,616,829

LIABILITIES AND NET ASSETS
Liabilities

Net Assets(Notes 20
and 21)

See accompanying notes.

24

Deposits (Notes 4 and 9)
Call money and bills sold (Note 9)
Payables under securities lending transactions (Note 9)
Trading liabilities (Notes 4 and 6)
Borrowed money (Notes 9 and 12)
Foreign exchanges
Bonds payable (Notes 4 and 13)
Bonds with warrants
Other liabilities
Provision for bonuses
Provision for retirement beneﬁts (Note 14)
Net deﬁned beneﬁt liability
Provision for directors’ retirement beneﬁts
Provision for loss on interest repayments
Provision for reimbursement of deposits
Provision for customers point services
Reserves under special laws
Deferred tax liabilities (Note 19)
Deferred tax liabilities for land revaluation (Notes 15 and 19)
Acceptances and guarantees (Note 16)
Total liabilities
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity
Unrealized gains on available-for-sale securities
Deferred losses on hedges
Revaluation reserve for land (Note 15)
Remeasurements of deﬁned beneﬁt plans
Total accumulated other comprehensive income
Stock options
Minority interests
Total net assets
Total liabilities and net assets¥¥

8,764,966
78,897
13,2693,188
29,769287
45,00030,87675,720
3,093
—
4,479
28
62
1,108
67
7
1,917
12,67048,079
9,113,482
50,00060,064361,226(10,694)
460,596
36,706(352)
22,845(3,465)55,734431
4,801
521,562
9,635,044¥¥

CONSOLIDATED STATEMENTS OF INCOME

Years ended March 31, 2014 and 2013
Millions of yen
2014

IncomeInterest income:Interest on loans and discounts
Interest and dividends on securities
Other interest income
Trust fees
Fees and commissions
Trading income
Other ordinary income
Recoveries of written-oﬀ claims
Other income
Total income
Expenses
Interest expense:
Interest on deposits
Interest on borrowings and rediscounts
Interest on bonds payable
Other interest expense
Fees and commissions payments
Trading expenses
Other operating expenses
General and administrative expenses
Impairment losses (Note 11)
Other expenses (Note 17)
Total expenses
Income before income taxes
Income taxes (Note 19):
Current
DeferredIncome before minority interests
Minority interests in income
Net income

¥

¥

¥

¥

84,402
17,4731,621
122,411
1,572
26,51621
4,435
158,452

Thousands of
U.S. dollars (Note 1)
2014$

781,743
207,190
11,572
10
239,837
22,639111,359204
190,565
1,565,119

7,606
525
581
287
7,331
—
5,321
87,28846
2,512
111,497
49,585

7,891
447
777
294
7,552
4
2,546
89,693
179
5,109
114,492
43,96073,902
5,101
5,645
2,789
71,230—51,700848,115447
24,4081,083,337
481,782

9,908
7,663
32,014778
31,236

8,068
8,151
27,741
508
27,233

96,26974,456
311,057
7,559
303,498

¥

Yen
2014

Amounts per share of common stock:
Net income (Note 27)

80,457
21,3241,191
124,6842,330
11,461
21
19,613161,082

Millions of yen
2013

120.66

Yen
2013

¥

102.48$

U.S. dollars (Note 1)
2014

$

1.17

See accompanying notes.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Years ended March 31, 2014 and 2013
Millions of yen
2014

Income before minority interests
Other comprehensive income (Note 24)
Unrealized gains (losses) on available-for-sale securities
Deferred gains (losses) on hedges
Share of other comprehensive income in aﬃliated companies accounted
for using equity method
Comprehensive income (Note 24)
Total comprehensive income attributable to owners of the parent
Total comprehensive income attributable to minority interests¥

32,014
2,302
2,204
94
4
34,31633,538
778

Millions of yen
2013¥

27,741
24,002
24,057(62)
751,743
51,235508

Thousands of
U.S. dollars (Note 1)
2014$

311,057
22,367
21,415913
39
333,424
325,865
7,559

See accompanying notes.

25

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS Years ended March 31, 2014 and 2013
Millions of yen
Shareholders’ Equity

Balance at 31st March 2012
Changes of items during the year
Dividend paid
Net income
Purchase of treasury stock
Disposal of treasury stockReversal of revaluation reserve
for landNet changes in terms other thanshareholders’ equity
Total changes of items during
the year
Balance at 31st March 2013
Changes of items during the year
Dividend paid
Net income
Purchase of treasury stock
Disposal of treasury stock
Retirement of treasury stockReversal of revaluation reserve
for landNet changes in terms other thanshareholders’ equity
Total changes of items during
the year
Balance at 31st March 2014

Retained
Earnings

Accumulated other comprehensive income

Unrealized
Total
Total
gains on Deferred Revaluation Remeasurements accumulated
Treasury
Shareholders’ available- losses on reserve forof defined
other
Stock
Equityhedgeslandbenefit plans comprehensive
for-salesecurities
incomeStockoptions

Minority
Interests

Total Net
AssetsCapitalStock

CapitalSurplus¥50,000¥ 79,796 ¥308,835¥ (3,333) ¥435,298(3,321)
27,233(3,321)
27,233(19)453(3,321)
27,233
(19)
453

121

121

(19)
621

(168)
121

¥10,436

24,062602¥(385) ¥23,454

(61)

¥

—

¥33,505

¥ 85

(121)

—

23,880164¥3,517 ¥472,405

507

24,551—(168)

24,03324,46724,062

(61)

(121)

—

23,880164

507

49,01850,00079,628332,868(2,731) 459,765

34,498(446)

23,333—57,385249

4,024

521,423(3,366)
31,236(3,366)
31,236(27,972)445—(3,366)
31,236(27,972)
445
—

488

488

(27,972)474
19,535(29)(19,535)488

2,208— (19,564) 28,358(7,963)831¥50,000 ¥ 60,064 ¥361,226 ¥(10,694) ¥460,596

2,208¥36,706

94(488)(3,465)(1,651)

182

94
(488)
(3,465)(1,651)¥(352) ¥22,845 ¥(3,465) ¥55,734

182
¥431

777

(692)

777
139
¥4,801 ¥521,562

Thousands of U.S. dollars (Note 1)
Shareholders’ Equity

Balance at 31st March 2013
Changes of items during the year
Dividend paid
Net income
Purchase of treasury stock
Disposal of treasury stock
Retirement of treasury stockReversal of revaluation reserve
for landNet changes in terms other thanshareholders’ equity
Total changes of items during
the year
Balance at 31st March 2014
See accompanying notes.

26

Retained
Earnings

Accumulated other comprehensive income

Unrealized
Total
Total
gains on Deferred Revaluation Remeasurements accumulated
Treasury
Shareholders’ available- losses on reserve forof defined
other
Stock
Equityhedgeslandbenefit plans comprehensive
for-salesecurities
incomeCapitalStock

CapitalSurplus$485,814$773,688 $3,234,241 $ (26,535) $4,467,208(32,705)
303,498(271,784)
4,606
189,807(282)(189,807)
4,741$335,192$—$557,569$2,420Minority
Interests

Total Net
Assets$39,098 $5,066,295(32,705)
303,498(271,784)
4,324—(32,705)
303,498(271,784)
4,324
—

4,741

4,741
21,454—$485,814$(4,333) $226,710

Stock
options(190,089) 275,534(77,371)
8,074$583,599 $3,509,775 $(103,906) $4,475,282

21,454$356,646

913(4,741)913(4,741)$(3,420) $221,969(33,667)(16,041)

1,768(33,667)(16,041)$(33,667) $541,528

1,768$4,1887,549(6,724)

7,549
1,350
$46,647 $5,067,645

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended March 31, 2014 and 2013
Millions of yen
2014

Cash ﬂows from operating activities:
Income before income taxes
Depreciation
Impairment losses
Amortization of goodwill
Equity in earnings of aﬃliates
Net change in allowance for loan losses
Net change in provision for bonuses
Net change in provision for retirement beneﬁts
Net change in deﬁned beneﬁt asset
Net change in deﬁned beneﬁt liability
Net change in provision for directors’ retirement beneﬁts
Net change in provision for loss on interest repayments
Net change in provision for reimbursement of deposits
Net change in provision for customers point services
Net change in reserves under special laws
Interest income
Interest expenses
Net gains related to securities transactions
Net gains from money held in trust
Net exchange gains
Net losses from disposition of ﬁxed assets
Net change in trading assets
Net change in trading liabilities
Net change in loans and bills discounted
Net change in deposits
Net change in negotiable certiﬁcates of deposits
Net change in borrowed money excluding subordinated loans
Net change in deposits with bank
Net change in call loans and bills purchased
Net change in call money and bills soldNet change in payables under securities lending transactions
Net change in foreign exchanges (asset account)
Net change in foreign exchanges (liability account)
Net change in issuance and redemption of unsubordinated bonds payable
Interest received
Interest paid
Other, net
Subtotal
Income taxes paid
Income taxes refunds
Net cash provided by operating activities¥

Cash ﬂows from investing activities:
Purchases of securities
Proceeds from sales of securities
Proceeds from maturity of securities
Purchases of money held in trust
Proceeds from sales of money held in trust
Purchases of tangible ﬁxed assets
Proceeds from sales of tangible ﬁxed assets
Purchases of intangible ﬁxed assets
Net cash provided by (used in) investing activities

49,585
10,786
46
4,950
(31)
(11,459)
181—(11,476)
1,899
6
(24)
22
(8)
3
(102,971)
8,998(13,646)(677)(8,479)
203
3,479
227
(152,167)
278,468
33,440532(7,002)
333,440
35,906
8,939(2,758)(182)(30,000)
101,712(8,124)
13,295537,113(11,027)
18
526,104

Thousands of
U.S. dollars (Note 1)
2014

Millions of yen
2013¥

43,96010,913
179
4,950
(16)
(3,901)
13
25
—
—
3
(16)
(179)
(2)
1
(103,496)
9,409(13,046)(522)(7,600)110(2,597)890(10,301)
265,470(127,365)(762)(1,171)(50,194)
23,717
2,684
(790)
233
—
106,616(8,748)(9,897)
128,570(8,736)
3,066
122,900$

481,782
104,800
447
48,096(301)(111,339)
1,759—(111,504)
18,451
58
(233)
214
(78)
29
(1,000,496)
87,427(132,588)(6,578)(82,384)
1,972
33,8032,206(1,478,498)
2,705,674
324,913
5,169(68,033)
3,239,798
348,873
86,854(26,798)(1,768)(291,489)
988,263(78,935)
129,177
5,218,743(107,142)
175
5,111,776(2,758,575)
2,723,138
88,616(9,480)15,638(2,897)141(1,716)54,865(5,300,955)
5,165,197
104,581(6,810)24,879(2,046)266(1,835)(16,723)(26,803,099)
26,458,784
861,018(92,110)
151,943(28,149)
1,370(16,673)
533,084

Cash ﬂows from ﬁnancing activities:
Proceeds from issuance of bonds with warrants
Decrease in subordinated bonds payable
Dividends paid
Dividends paid to minority shareholders
Purchases of treasury stock
Proceeds from disposal of treasury stock
Net cash used in ﬁnancing activities

30,876(20,000)(3,366)(1)(27,972)445(20,018)——(3,321)
(1)
(19)
453
(2,888)300,000(194,326)(32,705)(10)(271,784)
4,324(194,501)

Eﬀect of exchange rate changes on cash and cash equivalents
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year (Note 3)

28
560,979
313,226874,20533
103,322
209,906
313,228272
5,450,631
3,043,393
8,494,024

See accompanying notes.

¥

¥

$

27

YMFG Notes to Consolidated Financial Statements
Years ended March 31, 2014 and 2013

28

1. BASIS OF PRESENTATION

2. SIGNIFICANT ACCOUNTING POLICIESYamaguchi Financial Group, Inc. (“YMFG”) was establishedon October 2, 2006 as a holding company for The Yamaguchi
Bank, Ltd. (“Yamaguchi Bank”) and Momiji Holdings,
Inc. (“Momiji Holdings”) through a statutory share transfer(kabushiki iten). Upon formation of YMFG and completionof the statutory share transfer, Yamaguchi Bank and Momiji
Holdings became wholly owned subsidiaries of YMFG.
Furthermore, in September 2011 Kitakyushu Financial
Project Co., Ltd., received a transfer of approval to handle
business split oﬀ from the Yamaguchi Bank in the Kyushu
region and commenced operations on October 3, 2011.
YMFG and its consolidated subsidiaries (“the Group”)
maintain their accounts and records in accordance withthe provisions set forth in the Financial Instruments andExchange Law and its related accounting regulation and in
conformity with accounting principles and practices generally
accepted in Japan (“Japanese GAAP”). Japanese GAAP are
diﬀerent in certain respects as to application and disclosure
requirements of International Financial Reporting Standards.
The accompanying consolidated ﬁnancial statements are atranslation of the audited consolidated ﬁnancial statementsof YMFG which were prepared in accordance with Japanese
GAAP and were ﬁled with the appropriate Local Finance
Bureau of the Ministry of Finance as required by the Financial
Instruments and Exchange Law.
In preparing the accompanying consolidated ﬁnancial
statements, certain restructuring and reclassiﬁcations havebeen made in the consolidated ﬁnancial statements issued
domestically in order to present them in a form which is morefamiliar to readers outside Japan.
The consolidated ﬁnancial statements are stated in Japaneseyen. The translations of the Japanese yen amounts into U.S.
dollars are included solely for the convenience of readers,using the prevailing exchange rate at March 31, 2014, whichwas ¥102.92 to U.S.$1.00. Such translations should not be
construed as representations that the Japanese yen amounts
have been, could have been, or could in the future be,converted into U.S. dollars at this or any other rate of exchange.

Consolidation and equity method(1) Scope of consolidation
Japanese accounting standards on consolidated ﬁnancial
statements require a company to consolidate any
subsidiaries of which the company substantially controls
the operations, even if it is not a majority owned
subsidiary. Control is deﬁned as the power to govern thedecision making body of an enterprise.
(i) 12 consolidated subsidiaries at March 31, 2014
and 2013.
The names of the consolidated subsidiaries are listed
on page 1.
(ii) Six unconsolidated subsidiaries at March 31, 2014,
and four at March 31, 2013.
Name of major subsidiary:
Yamaguchi Capital 2nd Investment Business Limited
Liability Association
The unconsolidated subsidiaries are excluded
from the scope of consolidation because their total
assets, ordinary income, net income (in proportion
to ownership), retained earnings (in proportion toownership) and accumulated other comprehensive
income are so immaterial that they do not hinder arational judgment of YMFG’s consolidated ﬁnancial
position and results of operations.

(2) Application of the equity method
Japanese accounting standards also require any
unconsolidated subsidiaries and aﬃliates with ﬁnancial
and operating policies over which YMFG is able toexercise material inﬂuence to be accounted for by theequity method.
(i) No unconsolidated subsidiaries were accounted for by
the equity method at March 31, 2014 and 2013.
(ii) As at March 31, 2014 and 2013, the four aﬃliates
accounted for by the equity method were as follows:
YM Saison Co., Ltd.
Yamaguchi Lease Co., Ltd.
Yamaguchi Capital Co., Ltd.
Momiji Card Co., Ltd.
(iii) As at March 31, 2014, six unconsolidated subsidiaries
were not accounted for by the equity method, andfour at March 31, 2013.
Name of major subsidiary:
Yamaguchi Capital 2nd Investment Business Limited
Liability Association

The unconsolidated subsidiaries that are notaccounted for by the equity method are also
excluded from the scope of application of equity
method because their net income (in proportion
to ownership), retained earnings (in proportion toownership) and accumulated other comprehensive
income (in proportion to ownership) are so
immaterial that they do not hinder a rational
judgment of YMFG’s consolidated ﬁnancial position
and results of operations.
(iv) There were no aﬃliates that were not accounted for by
the equity method as at March 31, 2014 and 2013.

are recorded as “Trading income” and “Trading expenses” on
the consolidated statements of income.
Trading assets and trading liabilities are valued, in the caseof securities and commercial paper, at the market value as ofthe date of the balance sheet and, in the case of derivatives,
including swaps, futures and options, at the amount due
if the transactions were to be settled as of the date of thebalance sheet. “Trading income” and “Trading expenses”
include interest income and interest expense, respectively,
and gains and losses, respectively, resulting from the valuationof securities, commercial paper, derivatives, etc., which areincluded in “Trading assets” or “Trading liabilities.”(3) The balance sheet dates of consolidated subsidiaries
The balance sheet date of consolidated subsidiaries is asfollows:
March 31
12 companies(4) Matters related to special purpose companies
outside the scope of disclosure
One special-purpose company was excluded from the scopeof consolidation, as it was determined not to be a subsidiaryof the investor as stipulated in Paragraph 7, Article 8, of the
Financial Statement Regulations as of March 31, 2013.
In addition, eliminating the above-stated specialpurpose company from the scope of consolidation wasdetermined to have no material eﬀect on the ﬁnancial
conditions and operating performance of the Group,
judged from their total amounts in terms of total assets,ordinary proﬁt, net income (in proportion to ownership)and retained earnings (in proportion to ownership),as described in Paragraph 3 of the “Implementation
Guidance on Disclosures about Certain Special Purpose
Entities” (Accounting Standards Board of Japan (“ASBJ”)
Statement No. 15, March 29, 2007). Therefore, notes
regarding this company have been omitted.

(5) Accounting Policies
Trading assets, trading liabilities and transactions for
trading purposes
The valuation method of “Trading assets” and “Trading
liabilities” is as follows:
Balances incurred by transactions of which the purpose is
to earn a proﬁt by taking advantage of short-term ﬂuctuations
in a market or discrepancies in diﬀerent markets of interest
rates, currency exchange rates, share prices or other indices(hereinafter referred to as “trading purposes”) are included in“Trading assets” or “Trading liabilities” in the consolidatedbalance sheets as of the date on which the transactions havebeen contracted. The income or losses on these transactions

Securities
With regard to the valuation of securities, held-to-maturity
debt securities are stated at amortized cost (straight-line
method) using the moving-average method. Investments inunconsolidated subsidiaries that are not accounted for by theequity method are stated at cost determined by the movingaverage method. Available-for-sale securities are in generalstated at fair value (cost of sale calculated primarily according
to the moving-average method) indicated according tomarket price at the consolidated balance sheet date (forequity securities, the average market price during the onemonth period ending on the consolidated balance sheet date).
Available-for-sale securities having no readily available market
value are valued at cost using the moving-average method.
Unrealized gains (losses) on available-for-sale securities arereported as a component of net assets.
Securities constituting trust assets within money held in
trust are valued using the same methods as those for theabove-mentioned trading assets, liabilities and securities.

Derivatives
Derivatives other than those for speciﬁc trading purpose or
those for which certain exceptional accounting treatment isapplied are stated at fair value.

Method of hedge accounting
The subsidiaries that conduct banking business (“theBanks”) apply deferred hedge accounting in accordancewith “Treatments of Accounting and Audit on Applicationof Accounting Standard for Financial Instruments in
Banking Industry”(The Japanese Institute of Certiﬁed Public
Accountants (“JICPA”) Industry Audit Committee Report
No.24). As for the hedge to oﬀset market ﬂuctuation, theBanks assess the eﬀectiveness of the hedge by grouping the29

hedged items such as deposits and loans and the hedging
instruments such as interest rate swaps by their maturity. The
Banks apply exceptional treatments permitted for interest rate
swaps to certain assets and liabilities.
Also, the Banks apply deferred hedge accounting to hedge
foreign exchange risks associated with various foreign currency
denominated monetary assets and liabilities as stipulated
in “Treatment of Accounting and Auditing Concerning
Accounting for Foreign Currency Transactions in Banking
Industry” (JICPA Industry Audit Committee Report No. 25).
The eﬀectiveness of the currency swap transactions, exchange
swap transactions and similar transactions hedging the foreignexchange risks of monetary assets and liabilities denominatedin foreign currencies is assessed based on comparison of theforeign currency position of the hedged monetary assets andliabilities and the hedging instruments.

Allowance for loan losses
The Banks provide allowance for loan losses according to thefollowing write-oﬀ and provisioning standards.
For loans to borrowers who are legally bankrupt (due tobankruptcy, composition, suspension of transactions withbanks by the rules of clearinghouses, etc.) or substantiallybankrupt, an allowance is provided in the amount of loans,net of amounts expected to be collected through dispositionof collateral or through execution of guarantees.
For loans to borrowers in danger of bankruptcy, anallowance is provided in the amount considered uncollectible
based on the amount of loans net of amounts expected tobe collected through disposition of collateral or throughexecution of guarantees, and other sources.
Loans to normal borrowers and borrowers requiringcaution are classiﬁed into certain groups, and an allowance
is provided for each group using the rate of loan losses
experienced for the Group during certain reference periods inthe past.
Each branch as well as the credit supervision department
evaluates all loans in accordance with the self-assessment rule.
Other consolidated subsidiaries provide an allowance foran amount calculated using the rate of collection losses in thepast for loans of normal borrowers in addition to amounts
estimated based on collectibility analysis for borrowers indanger of bankruptcy and certain other borrowers.

Depreciation of tangible ﬁxed assets of the Banks iscomputed by using the declining-balance method except forbuildings (excluding ﬁxtures) acquired after March 31, 1998,
which are depreciated using the straight-line method.
The estimated useful lives of the assets are primarily as follows:
Buildings: 7 to 50 years
Others: 3 to 15 years
Other consolidated subsidiaries depreciate their tangible
ﬁxed assets using mainly the declining-balance method overthe useful lives of the respective assets provided by the tax act
in Japan.
(Changes in accounting policies that are not distinguishable
from changes in accounting estimates)
Due to revisions in the Japanese corporation tax act,
YMFG has revised its method of accounting for depreciation
and amortization in accordance with the post-revision tax act
for property, plant and equipment acquired on or after
April 1, 2012.
This change had the eﬀect of increasing income before
income taxes by ¥23 million during the ﬁscal year ended
March 31, 2013, compared with the amount under theprevious method.

Intangible ﬁxed assets (excluding lease assets)
Amortization of intangible ﬁxed assets is computed by using
the straight-line method. Software costs for internal uses areamortized over the estimated useful life (mainly 5 years).

Lease assets
Lease assets included within tangible and intangible ﬁxed
assets related to ﬁnance lease transactions that do not transfer
ownership are depreciated over the lease term using thestraight-line method. For lease assets with a guaranteed residual
value stated in their lease agreements, the residual value is set
at the guaranteed amount. Otherwise, the residual value isassumed to be zero.

Accounting for certain lease transactions
Consolidated subsidiaries’ ﬁnance lease transactions that do
not transfer ownership belonging to accounting periods thatcommenced prior to April 1, 2008, are treated as operatinglease transactions.

Income taxes
Tangible ﬁxed assets (excluding lease assets)
Tangible ﬁxed assets are stated at cost less accumulated
depreciation, except for certain revalued land.
30

Income taxes comprise corporate, enterprise and inhabitanttaxes. The Group recognizes tax eﬀects of temporary
diﬀerences between the ﬁnancial statement basis and the tax

basis of assets and liabilities. The asset and liability approachis used to recognize deferred tax assets and liabilities for the
expected future tax consequences of temporary diﬀerences.

Foreign currency translation
YMFG and foreign currency assets and liabilities and theaccounts of overseas branches of consolidated subsidiaries aretranslated into yen at the rates prevailing at the consolidatedbalance sheet date.

interest rates in excess of the maximum interest rate prescribedin the Interest Rate Restriction Law.
In accordance with “Audit Guidelines on Consumer Finance
Companies’ Provisions for Possible Losses on Reimbursementsof Excess Interest Payments,” issued by JICPA in 2006, theamount of such provision is rationally estimated and booked
based on actual historical repayment claims by debtors.

Provision for reimbursement of deposits

Provision for bonuses is provided for payment of bonuses
to employees, in the amount of estimated bonuses that are
attributable to the ﬁscal year.

Provision for reimbursement of deposits is provided forin order to meet depositor requests for reimbursement on
deposits already derecognized as liabilities, in an amountdeemed necessary by estimating the losses corresponding to
the expected requests for reimbursements in the future.

Method of accounting for retirement beneﬁts

Provision for customer point services

When calculating retirement beneﬁt obligations, the straightline method is used for attributing expected retirement
beneﬁts to periods through March 31, 2014. The methods
for recognizing past service cost and actuarial gains or losses
are as follows:
Past service cost:
Recognition of past service cost isapportioned by the straight-line
method over a ﬁxed number ofyears (2 years) within the employees’
average remaining service period
from the time of their occurrence
Actuarial gains or losses: Recognition of actuarial gains
or losses are apportioned by thestraight-line method over a ﬁxed
number of years (Mainly 10 to 11
years) within the employees’ averageremaining service period at the timeof their occurrence in each ﬁscal year,
starting from the following ﬁscal year

Provision for customer point services is provided inconjunction with a point system to promote credit card use.
The reserve is recorded for the expected cost to be incurred
when credit card members use points they have received as of
the balance sheet date.

Provision for bonuses

Provision for directors’ retirement beneﬁts
The provision for directors’ retirement beneﬁts forconsolidated subsidiaries outside the banking business isprovided for the estimated amount corresponding to accrued
retirement beneﬁt payments to directors as of the end of theﬁscal year.

Reserves under special laws
Reserves under special laws consist of the ﬁnancial
instruments transaction responsibility reserve posted by YM
Securities Co., Ltd., which were calculated according to thespeciﬁcations of Article 46-5 of the Financial Instruments andExchange Act and Article 175 of the Cabinet Oﬃce Order
Related to the Financial Instruments Business, to prepare forlosses originating from incidents relating to the purchase andsale of securities or other transactions.

Amounts per share of common stock
Computations of net income per share of common stock arebased on the weighted-average number of shares outstanding
during each year.
YMFG has issued potential shares, but “current term net
income per share after stock adjustment” is not shown because
these shares have no dilutive eﬀect.
Cash dividends per share represent the cash dividends
declared as applicable to each year.

Amortization of goodwill
Provision for loss on interest repayment
Provision for loss on interest repayment is provided forpossible losses on reimbursements of excess interest payments
and loan losses related to consumer ﬁnance loans extended at

Goodwill is mainly amortized over a 10-year period using thestraight-line method.

31

Consumption tax
YMFG and its consolidated subsidiaries in Japan employ
the tax exclusion method for consumption tax and local
consumption taxes, meaning that transaction amounts
and consumption tax amounts are treated separately foraccounting purposes.
However, non-deductible consumption taxes for purchaseof property, plant and equipment are recognized as expenses
for the year of the purchase.
Adoption of Consolidated Tax Payment System
YMFG and certain of its consolidated subsidiaries adopted
the consolidated tax payment system as provided under the
Corporation Tax Act.
Changes in Accounting Principles(Changes in accounting principles due to revisions inaccounting standards)(Adoption of the “Accounting Standard for Consolidated
Financial Statements”)
YMFG adopted the “Accounting Standard for Consolidated
Financial Statements” (ASBJ Statement No. 22, September
13, 2013) from the ﬁscal year ended March 31, 2014.
This adoption had no impact on the consolidated ﬁnancial
statements.
(Adoption of the “Accounting Standard for Retirement Beneﬁts”)
From the year ended March 31, 2014, YMFG has adopted
the “Accounting Standard for Retirement Beneﬁts” (ASBJ
Statement No. 26, May 17, 2012) and the “Implementation
Guidance for the Accounting Standard for Retirement
Beneﬁts” (ASBJ Guidance No. 25, May 17, 2012) (excluding
the provisions found in the body of Paragraph 35 of the
Accounting Standard for Retirement Beneﬁts and Paragraph
67 of the Implementation Guidance for the AccountingStandard for Retirement Beneﬁts). Accordingly, from March
31, 2014, YMFG has recorded the diﬀerence between
retirement beneﬁt obligations and plan assets as net deﬁned
beneﬁt asset or net deﬁned beneﬁt liability.
With regard to the application of the Accounting Standard
for Retirement Beneﬁts, in accordance with the transitional
treatment stipulated in Paragraph 37 of the AccountingStandard for Retirement Beneﬁts, the impact of thesechanges is included in remeasurements of deﬁned beneﬁtplans within accumulated other comprehensive income as ofMarch 31, 2014.
32

As a result, as of March 31, 2014, YMFG recorded net
deﬁned beneﬁt asset of ¥22,882 million ($222 million) andnet deﬁned beneﬁt liability of ¥4,479 million ($44 million).
Furthermore, deferred tax assets increased by ¥1,897 million($18 million) and accumulated other comprehensive income
decreased by ¥3,465 million ($34 million).
Accounting Standards Not Applied“Accounting Standard for Retirement Beneﬁts” (ASBJ
Statement, May 17, 2012)(i) Overview
With the view of ﬁnancial reporting improvements and trends
in international convergence, this accounting standard mainly
focuses on, how unrealized actuarial gains and losses and past
service costs should be accounted for and how retirement
beneﬁt obligations and current service costs should bedetermined for the enhancement of disclosures.
(ii) Eﬀective Dates
The revised method of calculation of retirement beneﬁt
obligations and current service costs will be eﬀective on the
Banks’ consolidated ﬁnancial statements at the beginning of
the ﬁscal year commencing April 1, 2014.
(iii) Eﬀects of Adoption of the Accounting Standard
The expected eﬀect of adopting this accounting standard is to
reduce retained earnings by ¥1,994 million ($19 million) in
the ﬁscal year beginning on April 1, 2014.
“Accounting Standard for Business Combinations” (ASBJ
Statement, Sep. 13, 2013)(i) Overview
This accounting standard revises primarily the following areasof the current standard: (1) the treatment of changes in theparent company’s ownership interest in a subsidiary in casewhere additional shares of the subsidiary are acquired and thecontrolling ownership remains in the parent company, (2) thetreatment of acquisition-related expenses, (3) the treatmentof the transitional accounting and (4) the presentation of net
income and changes from minority interest to noncontrollingshareholder interest.
(ii) Eﬀective Dates
The accounting standard will be applied to the Group’s
consolidated ﬁnancial statements from the beginning of theﬁscal year commencing April 1, 2015.
(iii) Eﬀects of Adoption of the Accounting Standard
The Group is currently evaluating the eﬀects.

“Practical Solution on Transactions of Delivering theCompany’s Own Stock to Employees etc. through Trusts”(Dec. 25, 2013)(i) Overview
This standard clariﬁes the practical treatment of transactionsof delivering the company stock to employees or employee
stock ownership plans through trusts.
(ii) Eﬀective Dates
The accounting standard will be applied to the Group’s
consolidated ﬁnancial statements from the beginning of theﬁscal year commencing April 1, 2014.
(iii) Eﬀects of Adoption of the Accounting Standard
The Group is currently evaluating the eﬀects.

3. CONSOLIDATED STATEMENTS OF
CASH FLOWS AND CASH EQUIVALENTS
In preparing the consolidated statements of cash ﬂows, theGroup considers cash and due from THE BANK OF JAPAN
as cash and cash equivalents.
The reconciliation of cash and due from banks in the
consolidated balance sheets and cash and cash equivalents inthe consolidated statements of cash ﬂows at March 31, 2014
and 2013 were as follows:

Cash and due from banks
Time deposits in other banks
Other
Cash and cash equivalents

Thousands ofMillions of yen
U.S. dollars
2014
2013
2014
¥915,056¥347,076 $8,890,944(7,497)(7,387)(72,843)(33,354)(26,461)(324,077)¥874,205¥313,228 $8,494,024

4. FINANCIAL INSTRUMENTS
Items pertaining to the status of ﬁnancial instruments(1) Policies on ﬁnancial instruments
YMFG provides community-based integrated ﬁnancial
services centered on the banking business and including
the securities and credit card businesses. Accordingly, theGroup is subject to a variety of risks, including credit risk,
market risk and liquidity risk. Due to changes in economic,
social and ﬁnancial conditions, these risks have grown morediverse and complex. Under these conditions, the Groupconsiders strengthening its risk management structure as apriority issue. To maintain and enhance the soundness of its
operations, YMFG has created groupwide risk management

regulations, which clarify the Group’s fundamental stance onrisk management.

(2) Content and risks of ﬁnancial instruments
Of ﬁnancial assets held by the Group, principally loans andbills discounted extended to business partners are subject
to the credit risk of breach of contract. The Group holds
securities, principally debt securities, equity securities andinvestment trusts, for trading purposes, for holding tomaturity, for purely investment purposes and to promote
positive business relations. These securities are subject to issuer
credit risk, interest rate ﬂuctuation risk and market priceﬂuctuation risk.
The Group’s ﬁnancial liabilities center on deposits andnegotiable certiﬁcates of deposit, and call money that itraises in the market. However, the Group is subject to theliquidity risk of becoming unable to secure necessary funding.
The Group is also subject to interest rate risk arising fromﬂuctuations in ﬁnancial and economic conditions.
The Group employs derivative transactions to hedge
underlying market risks on its assets and liabilities. The
Group also provides derivatives as ﬁnancial products tomeet customers’ needs. Interest-related and securitiesrelated derivative transactions are employed to limit the
impact on income of future interest rate ﬂuctuations andprice ﬂuctuations for loans and bills discounted, deposits,
securities and other instruments bearing long-term interest
at ﬁxed rates. Currency-related derivative transactions areused primarily to avoid ﬂuctuations in income stemmingfrom future exchange rate ﬂuctuations, stabilize funding
denominated in foreign currencies, as well as oﬀered as
products to clients. With regard to transactions to secure
income through changes in market rates, which are conducted
on a limited basis, the Group has established stringent
standards that include risk limits and loss limits.
As market risk factors, interest rate related and securitiesrelated derivative transactions are subject to the risk of
ﬂuctuations in interest rates and prices, and currency-related
derivative transactions are subject to exchange rate ﬂuctuations.
For transactions that are not conducted on exchanges, theGroup is subject to credit risk, the risk of loss in the eventa counterparty becomes unable to fulﬁll its contractual
obligations due to deteriorating ﬁnancial conditions.
With regard to use of hedge accounting, the Groupapplies deferred hedge accounting after it ensured in advancethat the established conditions are satisﬁed. As for hedging
methods, the Group employees portfolio hedge where certain
group of assets with similar risk is identiﬁed and such risk is33

hedged comprehensively. In addition, for certain individual
hedge and interest swap contracts, exceptional treatments
are applied as permitted under Japanese generally accepted
accounting principles. Under the exceptional treatment,
hedging instruments are treated as oﬀ-balance items and not
re-measured at fair value. Net receipts or payments related
to the swap contracts are recognized and included in interest
expense or income.

(3) Risk management structure related to ﬁnancial
instruments(i) Management of credit risk
Through the appropriate operation of a credit rating system,
the Group endeavors to determine the ﬁnancial conditionsof business partners and accurately evaluate their credit risk.
The Group has raised the precision of its credit evaluations,reviewing business partner credit ratings swiftly andappropriately for each ﬁnancial period and each time their
credit conditions change.
The Group conducts self assessments according to stringent
standards that are consistent throughout the Group. YMFG
performs write-oﬀ and provisions based on the results of its
self assessments. The Group’s authentication departments
verify the content of such inspections. Independence ismaintained through internal audits conducted by audit
departments. In addition, the Group undergoes external
audits conducted by its independent external auditors.
With regard to the screening of individual transactions,
the Group employs a screening system suited to eachsubsidiary bank’s size of the business and characteristics
to conduct detailed screenings that take individual sector
and regional characteristics into consideration. In termsof portfolio management, the Group strives to enhance its
risk management by ﬁrst measuring credit risk, and thenmanaging risk by category, sector and geographic area.
Risk management departments periodically obtain credit
information and fair value as a part of managing credit risks on
securities issuers and counterparty risks on derivative transactions.
(ii) Management of market risk
Qualitative information on the management of market risk
The Group has formulated a market risk management processthat identiﬁes and quantitatively measures inherent market
risks. An asset-liability management (ALM) system is employed
to control market risk within allowable limits, and the GroupALM Committee is periodically held to respond to such risks.
YMFG periodically evaluates market risk conditions andveriﬁes the appropriateness of risk controls.
34

Quantitative information on the management of market risk
The market risk (estimated loss amount) of the loans,securities, deposits and derivatives transactions of Yamaguchi
Bank, Momiji Bank and Kitakyushu Bank of the Group arecalculated according to value at risk (VaR). Furthermore, thecovariance method is used to calculate VaR.
As of March 31, 2014, the market risk (estimated loss
amount) of Yamaguchi Bank was ¥63,526 million ($617
million), the market risk (estimated loss amount) of Momiji
Bank was ¥18,079 million ($176 million) and the maket risk
(estimated loss amount) of Kitakyushu Bank was ¥11,439
million ($111 million). Also, as of March 31, 2013, the market
risk (estimated loss amount) of Yamaguchi Bank was ¥62,592
million, the market risk (estimated loss amount) of Momiji
Bank was ¥22,930 million and the market risk (estimated loss
amount) of Kitakyushu Bank was ¥9,445 million.
Assumptions used in calculating VaR include a holding
period of three months (however, one year for a holding
period for shares held for the purpose of strategic investment),
a conﬁdence interval of 99.9% and an observation period ofﬁve years.
Yamaguchi Bank, Momiji Bank and Kitakyushu Bank
conduct back-testing to compare the VaR calculated by themodel with the actual losses. Based on the results for the year
ended March 31, 2014, the measurement model is considered
to have captured market risk to an acceptable degree of
accuracy. However, as measurements of market risk employ
certain probabilities of occurrence which is statisticallycalculated on the basis of historical market ﬂuctuations, it
is possible that this method may not adequately capture
market risk in the event of sudden changes in the market
environment outside the normally expected scope.
(iii) Management of liquidity risk related to fundraising
The majority of funds is raised through deposits, whichconstitute a stable base for procuring funds. The Groupmanages funds on the basis of elaborate forecasts, conﬁrming
cash ﬂows primarily through cash controls in ﬁnancial markets.
For cash ﬂow management, the Group strives to maintainthe liquidity risk by reducing liquidity risk, ensuring stability,
preparing for unexpected events, and maintaining highly
liquid assets.

(4) Supplementary explanation of items pertaining to
the fair value of ﬁnancial instruments
The fair values of some ﬁnancial instruments are based onmarket prices. The fair values of other instruments, for whichmarket prices are not readily available, are based on rational

calculation. However, as assumptions are used in thesecalculations, diﬀerent assumptions can yield diﬀerent values.

Items pertaining to the fair value of ﬁnancial
instruments
The table below indicates the consolidated balance sheet
amounts of ﬁnancial instruments, as well as their fair values
and the diﬀerences between the two. Line items with little
signiﬁcance to balance sheet amounts have been omitted.
Unlisted equity securities and other instruments for which fairvalue is not easily determinable are not included in the tablebelow. (Refer to (Note 2).)Millions of yen
2014
Consolidatedbalance sheet Fair value
Diﬀerenceamount(1) Cash and due from banks¥ 915,056 ¥ 915,056¥—(2) Call loans and bills purchased
315,198
315,198—(3) Money held in trust
49,99649,996—(4) Securities
Held-to-maturity debt securities
3,171
3,187
16
Available-for-sale securities
2,061,118
2,061,118—(5) Loans and bills discounted
5,964,133
Allowance for loan losses (* 1)(85,152)
5,878,981
5,910,384
31,403
Total assets¥9,223,520 ¥9,254,939¥31,419(1) Deposits¥8,147,033 ¥8,149,311¥ 2,278(2) Negotiable certiﬁcates of deposit
617,933
617,933—(3) Bonds payable
45,00045,251251
Total liabilities¥8,809,966 ¥8,812,495¥ 2,529
Derivative transactions (* 2)Hedge accounting not applied¥(2,145) ¥(2,145)¥—Hedge accounting applied
(974)
(974)
—
Total derivative transactions¥(3,119) ¥(3,119)¥—Millions of yen
2013
Consolidatedbalance sheet Fair value
Diﬀerenceamount(1) Cash and due from banks¥ 347,076 ¥ 347,076¥—(2) Call loans and bills purchased
649,843
649,843—(3) Money held in trust
55,48955,489—(4) Securities
Held-to-maturity debt securities
1,187
1,209
22
Available-for-sale securities
2,136,029
2,136,029—(5) Loans and bills discounted
5,811,966
Allowance for loan losses (* 1)(96,043)
5,715,923
5,782,149
66,226
Total assets¥8,905,547 ¥8,971,795¥66,248(1) Deposits¥7,868,565 ¥7,873,257¥ 4,692(2) Negotiable certiﬁcates of deposit
584,493584,493—(3) Bonds payable
95,00095,261
261
Total liabilities¥8,548,058 ¥8,553,011¥ 4,953
Derivative transactions (* 2)Hedge accounting not applied
¥
607 ¥
607
¥
—
Hedge accounting applied(2,941)(2,941)—
Total derivative transactions¥(2,334) ¥(2,334)¥—

Thousands of U.S. dollars
2014
Consolidatedbalance sheet Fair value
Diﬀerenceamount(1) Cash and due from banks$ 8,890,944 $ 8,890,944$—(2) Call loans and bills purchased
3,062,553
3,062,553—(3) Money held in trust
485,775
485,775—(4) Securities
30,81030,966156
Held-to-maturity debt securities
Available-for-sale securities
20,026,410
20,026,410—(5) Loans and bills discounted
57,949,213
Allowance for loan losses (* 1)(827,361)
57,121,852
57,426,972
305,120
Total assets$89,618,344 $89,923,620$305,276(1) Deposits$79,158,890 $79,181,024$ 22,134(2) Negotiable certiﬁcates of deposit
6,004,013
6,004,013—(3) Bonds payable
437,233
439,672
2,439
Total liabilities$85,600,136 $85,624,709$24,573
Derivative transactions (* 2)$ (20,841) $ (20,841)$—
Hedge accounting not applied
Hedge accounting applied(9,464)(9,464)—
Total derivative transactions$ (30,305) $ (30,305)$—(* 1) The general allowance for loan losses and speciﬁc allowance for loan losses are deducted.
(* 2) The amount collectively represents derivative transactions that are recorded as trading assets andliabilities, and other trading assets and liabilities.
This indicates the net amount of rights and obligations under derivative transactions. Parentheses, ( ),indicate that the net amount is negative.

35

(Note 1) Methods of calculating the fair value of ﬁnancial
instruments(1) Assets(i) Cash and due from banks
As the settlement term of these instruments is short(within one year) and their fair values and book values areapproximately the same, their book values are taken as theirfair values.
(ii) Call loans and bills purchased
As the settlement term of these instruments is short(within one year) and their fair values and book values areapproximately the same, their book values are taken as theirfair values.
(iii) Money held in trust
As for the securities held as trusted assets in money held in
trust established independently for the purpose of investing
mainly in the securities of the Group, the value on stock
exchanges is taken as fair value for the equity securities, andeither the value on exchanges or a price indicated by otherﬁnancial institutions dealing with the speciﬁc instruments istaken as fair value.
Notes pertaining to money held in trust exchanges for the
purpose of holding are indicated within “Money held in trust.”(iv) Securities
For equity securities, fair value is determined by stock
exchange prices; the fair value of debt securities is determinedby exchange prices or from prices received from information
vendors. Fair values of investment trusts are determined byexchange prices or according to standard prices disclosed byinvestment trust management companies.
The fair value of private placement bonds guaranteed by
Yamaguchi Bank and Momiji Bank is determined for eachinternal rating category and period by discounting to present
value the total amount of interest and principal, using as thediscount rate the risk-free rate plus the credit cost determinedfor each internal rating category. However, fair value ofbonds of legally bankrupt debtors, substantially bankrupt
debtors and debtors in danger of bankruptcy is determined bydeducting the expected amount of loss on the bond by using
the same method applied to loans from the bond’s face value.
As of March 31, 2013, the fair value of ﬂoating-rate
Japanese government bonds was determined after taking
market conditions into consideration. If the Group
continuously determined that conditions were such thatmarket prices of ﬂoating-rate Japanese government bonds
were not fair value, the fair values of securities in question
36

were determined in accordance with the “Practical Solution
on Measurement of Fair Value for Financial Assets” (ASBJ
PITF No. 25, October 28, 2008), calculated on a rational
basis and recorded on the consolidated balance sheet at theend of the ﬁscal year. Consequently, on the consolidatedbalance sheet as of March 31, 2013, securities had increasedby ¥1,373 million, deferred tax assets had decreased by ¥356
million, deferred tax liabilities had increased by ¥130 million
and the unrealized gains on available-for-sale securities had
increased by ¥887 million compared with the market prices
indicated by their consolidated balance sheet amounts.
Although rationally determined value was provided by athird-party information provider, the fair value of ﬂoating-rate
Japanese government bonds held by the Group was calculatedby discounting the principal and the future expected
coupon to present value at the interest rate of the referenced
government bonds. The Group determined the amount of
the future expected coupon by taking into consideration the
product characteristics of ﬂoating-rate Japanese government
bonds and adjusting the shape of the yield curve, volatility,
and the timing of interest payments.
(v) Loans and bills discounted
For loans and bills discounted with ﬂoating interest rates, as in
the short term their values reﬂect market interest rates, unlessthe credit status of the obligor has changed signiﬁcantly since
the loans were extended, their fair value is similar to theirbook value, so their book value is taken as their fair value.
For loans and bills discounted bearing ﬁxed interest rates,
fair value is determined for each internal rating category andperiod by discounting to present value the total amount ofinterest and principal, using as the discount rate the risk-freerate for operating loans and bills discounted plus the credit
cost for each internal rating category. For consumer loans andbills discounted, fair value is determined by discounting thetotal amount of interest and principal to their present value
using the assumed interest rate on new loans of the same type.
For instruments having a short settlement period (within oneyear), as their fair values and book values are approximately
the same, their book value is taken as their fair value.
With regard to loans to legally bankrupt obligors, substantiallybankrupt obligors or obligors who are in danger of bankruptcy,
the estimated collectible amount is based on either the present
value of estimated future cash ﬂows or the expected amounts
recoverable from the disposal of collateral and/or underguarantees. As the fair value is essentially equivalent to theamount after deducting the allowance for possible loan losses
from the book value as of the consolidated balance sheet date,
this amount is taken as fair value.
For loans that have no speciﬁc repayment period, as thefair value is assumed to be equivalent with the book value
according to the expected payment dates and interest rates,book value is taken as the fair value.
(2) Liabilities(i) Deposits and (ii) Negotiable certiﬁcates of deposit
The fair value of demand deposits is determined as thepayment amount if payment were required on the consolidatedbalance sheet date (book value). The fair value of time deposits
is determined by discounting future cash ﬂows to their present
value by certain time periods. The discount rate employedis the interest rate required for newly accepted deposits. For
deposits having a short period (within one year), as their fairvalues and book values are approximately the same, their bookvalue is taken as their fair value.
(iii) Bonds payable
The fair value of bonds issued by the Group is determined byusing prices publicly quoted by third-party institutions.
(3)Derivative transactions
The fair value of derivative transactions, comprising interestrate-related transactions (such as interest rate futures,interest rate options and interest rate swaps) currency-relatedtransactions (such as currency futures, currency options
and currency swaps), bond-related transactions (such as
bond futures and bond options) is taken as their value on
exchanges, discounted present value or price as calculatedusing option pricing models.
Interest rates swaps that employ exceptional accounting
treatment are accounted for as part of the loans and bills
discounted that are hedged. Therefore, their fair value isincluded in the fair value of loans and bills discounted.

(Note 2) The consolidated balance sheet amounts of ﬁnancial
instruments for which market prices are not readily available
Financial instruments for which market prices are not readily
available are not included in “Assets (4) Available-for-salesecurities.”

Category(1) Unlisted equity securities(*1, *2)(2) Investments in partnerships,
etc. (*3)
Total

Thousands ofMillions of yen
U.S. dollars
2014
2013
2014
Consolidated balance sheet amount¥6,090¥6,102$59,172
1,611

1,063

15,653¥7,701¥7,165$74,825(*1) As unlisted equity securities have no market prices and their fair value is not readily available, they
are not included in the scope of fair value disclosures.
(*2) During the ﬁscal year ended March 31, 2013 and 2014, impairment losses of ¥10 million and ¥22
million ($214 thousand) were recorded on unlisted equity securities.
(*3) Of investments in partnerships, those partnership assets comprising unlisted equity securities,
which have no readily available fair value, are not included in the scope of fair value disclosure.

(Note 3) Expected maturity amount of monetary claims andsecurities with maturities after the consolidated balance sheet
dateMillions of yen
2014
More than More than More thanWithinone year three years ﬁve years More than
one year and within and within and within seven years
three years ﬁve years seven years¥819,863 ¥
— ¥
— ¥
— ¥
—

(1) Due frombanks(2) Call loans
315,198——
and bills
purchased(3) Securities
102,685522,639644,212
Held-to260
1,139
692
maturity debt
securities
Japanese———government
bond
Corporate
260
470
692
bond
Others—669—
Available-for102,425
521,500
643,520
sale securities
with maturities
Japanese
26,716
139,128
216,876
government
bond
Local
7,976
19,262
3,345
government
bond
Corporate
58,230335,503
328,065
bond
Others9,503
27,607
95,234(4) Loans and 2,040,816 1,148,253
819,357
bills discounted
(*)
Total
¥3,278,562 ¥1,670,892 ¥1,463,569——

189,964—

411,702
1,080

—

—

—

580

—
189,964500
410,62264,575126,004

3,631

10,157

100,976

260,711

20,782
13,750502,276 1,453,431¥692,240 ¥1,865,133

37

Millions of yen
2013
More than More than More thanWithinone year three years ﬁve years More than
one year and within and within and within seven years
three years ﬁve years seven years¥261,184 ¥
— ¥
— ¥
— ¥
—

(1) Due frombanks(2) Call loans
649,843——
and bills
purchased(3) Securities
108,204
324,605
632,638
Held-to290
572
325
maturity debt
securities
Japanese———government
bond
Corporate
290
230
80
bond
Others—342
245
Available-for107,914
324,033
632,313sale securities
with maturities
Japanese
74,141
97,951
214,963
government
bond
Local
6,483
25,147
4,835
government
bond
Corporate
24,452
170,910353,886bond
Others
2,838
30,02558,629(4) Loans and 2,149,019 1,134,306
827,163bills discounted
(*)
Total
¥3,168,250 ¥1,458,911 ¥1,459,801——

400,692—

520,900
—

—

—

—

—

—
400,692—
520,900

194,980

270,972

2,390

15,485

187,517228,159

15,8056,284
460,511 1,240,968¥861,203 ¥1,761,868

Thousands of U.S. dollars
2014
More than More than More thanWithinone year three years ﬁve years More than
one year and within and within and within seven years
three years ﬁve years seven years$7,966,022 $
— $
— $
— $
—

(1) Due frombanks(2) Call loans
3,062,553————
and bills
purchased(3) Securities
997,716 5,078,109 6,259,347 1,845,744 4,000,214
Held-to2,526
11,067
6,724—
10,494maturity debt
securities
Japanese—————government
bond
Corporate
2,526
4,567
6,724
—
5,636
bond
Others
—
6,500
—
—
4,858
Available-for995,190 5,067,042 6,252,623 1,845,744 3,989,720
sale securities
with maturities
Japanese
259,580 1,351,807 2,107,228
627,428 1,224,291
government
bond
Local
77,497
187,155
32,50135,28098,688government
bond
Corporate
565,779 3,259,843 3,187,573
981,112 2,533,142
bond
Others
92,334
268,237
925,321
201,924
133,599(4) Loans and 19,829,149 11,156,753 7,961,106 4,880,257 14,121,949
bills discounted
(*)
Total
$31,855,440 $16,234,862 $14,220,453 $6,726,001 $18,122,163(*) Loans and bills discounted for which no period is speciﬁed are included in “within one year.”(Note 4) Estimated repayment amounts of deposits,
negotiable certiﬁcates of deposit and other interest-bearing
liabilities to be repaid after the consolidated balance sheet dateMillions of yen
2014
More than More thanWithin one one year
two years Three years
year
and within and within or more
two years three years
Deposits (*)¥7,476,391 ¥464,376 ¥165,186¥41,080
Negotiable certiﬁcates of
617,582350——
deposit
Bonds payable
20,000——25,000Total¥8,113,973 ¥464,726 ¥165,186¥66,080

Millions of yen
2013
More than More thanWithin one one year
two years Three years
year
and within and within or more
two years three years
Deposits (*)¥6,622,616 ¥1,022,462 ¥180,277¥43,210
Negotiable certiﬁcates of583,523970——
deposit
Bonds payable
30,00020,000—45,000Total¥7,236,139 ¥1,043,432 ¥180,277¥88,21038

Thousands of U.S. dollars
2014
More than More thanWithin one one year
two years Three years
year
and within and within or more
two years three years$72,642,742 $4,512,009 $1,604,994$399,145
Deposits (*)
Negotiable certiﬁcates of
6,000,602
3,401——
deposit
Bonds payable
194,326——
242,907
Total$78,837,670 $4,515,410 $1,604,994$642,052(*) Within deposits, demand deposits are included in “within one year.”

5. SECURITIESSecurities held at March 31, 2014 include shares of
unconsolidated subsidiaries and aﬃliates amounting to ¥355
million ($3 million) and investments of ¥700 million ($7million). Corresponding ﬁgures at March 31, 2013, were¥327 million and ¥567 million.
The amount of guarantee obligations for private placement
bonds (Financial Instruments and Exchange Law, Article 2,
Item 3), out of bonds included in securities, amounted to¥3,301 million ($32 million) and ¥4,123 million as of March
31, 2014 and March 31, 2013 respectively.
Bonds included in securities as of March 31, 2014, also
include securities lent through unsecured loan agreements(bond lending transactions) of ¥15,015 million ($146
million).

(b) Held-to-maturity debt securities:
Type
Securities with fair value Local
exceeding book value
government
bonds
Corporate
bonds
OthersSubtotal
Securities with fair value Local
not exceeding book value government
bonds
Corporate
bonds
OthersSubtotal
Total

Type
Securities with fair value Local
exceeding book value
government
bonds
Corporate
bonds
OthersSubtotal
Securities with fair value Local
not exceeding book value government
bonds
Corporate
bonds
OthersSubtotal
Total

Millions of yen
2014Book value Fair value Diﬀerence
¥ 500

¥ 502

¥ 2

1,713

1,717

4

670
2,883

680
2,899

10
16

—

—

—

288

288

—

—
288
¥3,171—288¥3,187——¥16

Millions of yen
2013
Book value Fair value Diﬀerence
¥

—

¥

—

¥—

600

603

3

587
1,187

606
1,209

19
22

—

—

—

—

—

—

—
—
¥1,187——¥1,209——¥22

6. FAIR VALUE INFORMATION
Securities
The following tables summarize book values, fair value andacquisition cost of securities with available fair values as ofMarch 31, 2014 and 2013:(a) Trading securities
Amount of unrealized gain (loss) on trading securities
included in the consolidated statement of income— ¥(73) million ($(709) thousand) and ¥6 million as at
March 31, 2014 and 2013, respectively.

Type
Securities with fair value Local
exceeding book value
government
bonds
Corporate
bonds
OthersSubtotal
Securities with fair value Local
not exceeding book value government
bonds
Corporate
bonds
OthersSubtotal
Total

Thousands of U.S. dollars
2014Book value Fair value Diﬀerence$ 4,859$ 4,878$ 19

16,644

16,68339

6,509
28,012

6,607
28,168

98
156

—

—

—

2,798

2,798

—

—
2,798
$30,810—
2,798$30,966

—
—
$156

39

(c) Available-for-sale securities

Type

Millions of yen
2014
Acquisition
Book value
Diﬀerencecost¥ 106,333 ¥ 54,479¥51,854

Securities with fair value Shares
exceeding book value
Japanesegovernment
438,638
436,586bonds
Local
government
40,68739,909bonds
Corporate
931,557
922,097
bonds
Others
68,976
68,197
Subtotal
1,586,191 1,521,268
Securities with fair value Shares
8,996
10,506
not exceeding book value Japanese
government
134,662
135,042bonds
Local
government
3,685
3,693
bonds
Corporate
151,919
152,730
bonds
Others
175,664
182,847
Subtotal
474,926
484,818
Total¥2,061,117 ¥2,006,086

Type

778
9,460
779
64,923(1,510)
(380)

(8)
(811)
(7,183)(9,892)¥55,031

Millions of yen
2013
Acquisition
Book value
Diﬀerence
cost¥ 78,119 ¥ 41,245¥ 36,874

Securities with fair value Shares
exceeding book value
Japanesegovernment
744,311736,185bonds
Local
government
54,26852,911bonds
Corporate
885,528
872,395
bonds
Others102,212
99,195
Subtotal
1,864,438 1,801,931
Securities with fair value Shares
18,23822,426
not exceeding book value Japanese
government
108,696
109,050bonds
Local
government
73
73
bonds
Corporate
79,38780,319bonds
Others65,19770,801
Subtotal
271,591
282,669
Total¥2,136,029 ¥2,084,600

40

2,052

8,126

Type

Securities with fair value Shares
exceeding book value
Japanesegovernment 4,261,932
bonds
Local
government
395,326
bonds
Corporate
9,051,273
bonds
Others670,190
Subtotal
15,411,883
Securities with fair value Shares
87,408
not exceeding book value Japanese
government 1,308,414
bonds
Local
government
35,805bonds
Corporate
1,476,088
bonds
Others1,706,801
Subtotal
4,614,516
Total$20,026,399

Japanese government bond

387,767

7,559

8,959,357

91,916

662,620
14,781,072
102,079

7,570
630,811(14,671)

1,312,106(3,692)35,882(77)

1,483,968(7,880)1,776,595
4,710,630
19,491,702(69,794)(96,114)$534,697

Cost ofsecurities
sold
¥—

Sale
amountGain (loss)
on sale¥—¥—Millions of yen
2013Japanese government bond

Cost ofsecurities
sold¥4,005

Japanese government bondThousands of U.S. dollars
2014
Cost of
Sale
Gain (loss)
securities
amounton sale
sold
$—
$—
$—

(354)

(0)

(5,604)(11,078)¥ 51,429

19,938Millions of yen
2014

13,133(932)

4,241,994(d) Held-to-maturity debt securities sold during the ﬁscal year

1,357

3,017
62,507(4,188)

Thousands of U.S. dollars
2014
Acquisition
Book value
Diﬀerencecost$ 1,033,162 $ 529,334$503,828

Sale
amountGain (loss)
on sale¥4,023¥18(Reason for sale)
During the ﬁscal year ended March 31, 2013, a consolidated
subsidiary, Yamagin Credit Guarantee Co., Ltd., sold thesesecurities to avoid the risk of future interest rate increases.
As the subsidiary sold all its holdings of held-to-maturity
securities during the ﬁscal year ended March 31, 2013, there wasno change in the purpose of holding securities, as is indicated in“(f). Securities for which purpose of holding changed.”(e) Available-for-sale securities sold during the ﬁscal year

SharesJapanese government bondLocal government bondCorporate bond
Others
Total

Millions of yen
2014
Sale
Total gain Total loss
amounton saleon sale¥5,273¥ 1,998¥ 31
1,725,598
5,972
1,941
10,179242—
533,3282,449
159
288,129
7,731
1,376¥2,562,507¥18,392¥3,507

SharesJapanese government bondLocal government bondCorporate bond
Others
Total

Millions of yen
2013
Sale
Total gain Total loss
amounton saleon sale¥ 1,159¥ 170¥ 346
3,904,726
11,248182
10,485170—
1,029,929
4,568
51
130,204
1,890
492¥5,076,503¥18,046¥1,071

SharesJapanese government bondLocal government bondCorporate bond
Others
Total

Thousands of U.S. dollars
2014
Sale
Total gain Total loss
amounton saleon sale$51,234$ 19,413$ 301
16,766,401
58,026
18,85998,9022,351—
5,181,967
23,795
1,545
2,799,543
75,117
13,370$24,898,047$178,702$34,075

basis for determining whether the market value has fallen
signiﬁcantly is as follows.
If the market value of the securities in general has fallen by
30% or more compared with the acquisition cost, the valueof the securities is determined to have “fallen signiﬁcantly.”
However in the case of shares and equivalent securities, if theirmarket value has fallen by 30% or more but less than 50% of
the acquisition cost, the determination of whether the value
has “fallen signiﬁcantly” takes into consideration other factors
such as the issuing company’s credit risk (independent debtor
classiﬁcation, external ratings, etc.) and previous percentage
decreases over a speciﬁc period of time in the past.

Money held in trust
Information on money held in trust as of March 31, 2014 and2013 is as follows:(a) Money held in trust classiﬁed as trading purposes
There are no corresponding amounts as at March 31,
2014 and 2013(b) Money held in trust classiﬁed as held-to-maturity
There are no corresponding transactions as at March 31,
2014 and 2013.
(c) Other money held in trust

Other money held in trust

Millions of yen
2014
Consolidated
Unrealized
Acquisition
balance sheet
gains
cost
amount(losses)¥49,996¥50,013¥(17)

Other money held in trust

Millions of yen
2013
Consolidated
Unrealized
Acquisition
balance sheet
gains
cost
amount(losses)¥55,489¥55,498¥(9)

Other money held in trustThousands of U.S. dollars
2014
Consolidated
Unrealized
Acquisition
balance sheet
gains
cost
amount(losses)$485,775 $485,941$(166)(f) Securities for which purpose of holding changed
There were no securities for which the purpose of holding
changed at March 31, 2014 and 2013.
Impairment losses on securities
Regarding securities (excluding those for which market prices
are not readily available) other than trading securities, if theirmarket values have fallen substantially below their acquisition
price and are not expected to recover to the acquisition price,
such market values are recorded in the consolidated balance
sheets. The valuation diﬀerence is recorded as a loss for theﬁscal year in which such diﬀerence is realized (hereinafter,“impairment losses”).
During the ﬁscal year ended March 31, 2014, impairment
losses totaled ¥113 million ($1 million) (of which, ¥113
million ($1 million) on equity securities) and during the ﬁscal
year ended March 31, 2013, impairment losses totaled ¥3,225
million (of which, ¥3,225 million on equity securities). The

41

Unrealized gains (losses) on available-for-sale securities
Information on unrealized gains (losses) on other securities
and other money held in trust is as follows:

Net unrealized gains
Other securities
Other money held in trust
Deferred tax liabilities
Unrealized gain on available-forsale securities before following
adjustment
YMFG’s interest in net unrealized
gain on valuation of available-forsale securities held by aﬃliates
accounted for by the equity method
Unrealized gains on available-forsale securities

Millions of yen
2014
2013
¥55,338¥51,50255,35551,511(17)(9)(18,646)(17,013)36,692
34,48914

Thousands of
U.S. dollars
2014$537,680
537,845(165)(181,170)
356,510

9Millions of yen
2013

Type
Over-the-counter:
Interest rate swaps:
Receivable ﬁxed,
payable ﬂoating
Receivable ﬂoating,payable ﬁxed
Other
Sold
Total

¥36,706¥34,498$356,646(1) Derivative transactions at March 31, 2014 and 2013, towhich hedge accounting is not applied(a) Interest-rate-related:

Type
Over-the-counter:
Interest rate swaps:
Receivable ﬁxed,
payable ﬂoating
Receivable ﬂoating,payable ﬁxed
Other
Sold
Total

Over oneyear

Fair value

Realized
gains(losses)¥59,080¥55,080

¥ 763

¥ 762

59,20455,204

(622)

(622)

128
—

(0)
¥ 141

4
¥ 144

128
—

Realized
gains(losses)¥64,526¥50,210

¥ 936

¥ 936

64,81650,388

(766)

(766)

168
—

(0)
¥ 170

9
¥ 179

¥

383
—

¥

¥

Contract
amounts

Over oneyear

Fair value

Realized
gains(losses)$574,038$535,173$ 7,414$ 7,404

575,243536,378(6,044)(6,044)

1,244
—

(0)
$ 1,37039$ 1,399

$

1,244
—

$

(b) Currency-related:
Millions of yen
2014

Millions of yen
2014¥

Fair value

Thousands of U.S. dollars
2014

Derivatives

Type
Over-the-counter:
Interest rate swaps:
Receivable ﬁxed,
payable ﬂoating
Receivable ﬂoating,payable ﬁxed
Other
Sold
Total

Over oneyear

136

Valuation diﬀerences on investments in partnerships, etc.,of ¥324 million ($3,148 thousand) at March 31, 2014 and¥82 million at March 31, 2013, for which market values
are extremely diﬃcult to determine, are recorded in othersecurities, within net unrealized gain.

Contract
amounts

Contract
amounts

Contract
amounts

Type
Over-the-counter:
Currency swaps¥145,534
Foreign exchange forward
contracts:
Sold
119,873
Bought
14,229Currency options
Sold
203,186
Bought203,186
Total¥—

Realized
gains(losses)Over oneyear

Fair value¥83,213¥(3,022)¥ (1,295)

615
—

(694)
83

(694)
83

146,722
146,722¥—(5,833)
7,120¥(2,346)

10,551(6,706)¥ 1,939

Millions of yen
2013

Type
Over-the-counter:
Currency swaps
Foreign exchange forward
contracts:
Sold
BoughtCurrency options
Sold
BoughtTotal

42

Contract
amounts

Over oneyear

Fair value

Realized
gains(losses)¥146,365¥94,080¥387¥(1,075)

64,584
18,598800—(1,095)204(1,095)204

251,129
251,129¥—

182,040
182,040¥—(10,741)
11,767¥522

11,228(6,599)¥2,663

Thousands of U.S. dollars
2014
Contract
amounts

Over oneyear

Type
Over-the-counter:
Currency swaps$1,414,050 $808,521
Foreign exchange forward
contracts:
Sold
1,164,720
5,976
Bought138,253—
Currency options
Sold
1,974,213 1,425,593
Bought
1,974,213 1,425,593
Total
$
—$
—

Fair value

Realized
gains(losses)$(29,363)$(12,583)(6,743)806(6,743)806(56,675) 102,517
69,181(65,157)$(22,794) $ 18,840(c) Stock-related:
There were no stock-related transactions as at March 31, 2014
and 2013.

(f) Credit-derivatives:
There were no credit related transactions as at March 31,
2014 and 2013.
(2) Derivative transactions as at March 31, 2014 and 2013, towhich hedge accounting is applied(a) Interest-rate-related:

Type
Principal accounting procedure:Interest rate swaps
Receive ﬂoating, pay ﬁxed
Interest rate swaps employing
exceptional accounting:Interest rate swaps
Receive ﬂoating, pay ﬁxed
Total(d) Bond-related:
Millions of yen
2014

Type
Listed:Bond futures
Sold
Total

Contract
amounts

Over oneyear

Fair value¥62,247
¥
—

¥—
¥—

¥60
¥60

Realized
gains(losses)

¥60
¥60

Type
Principal accounting procedure:Interest rate swaps
Receive ﬂoating, pay ﬁxed
Interest rate swaps employing
exceptional accounting:Interest rate swaps
Receive ﬂoating, pay ﬁxed
Total

Millions of yen
2013

Type
Listed:Bond futures
Sold
Total

Contract
amounts

Over oneyear

Fair value¥21,734
¥
—

¥—
¥—

¥(85)
¥(85)

Realized
gains(losses)

¥(85)
¥(85)

Thousands of U.S. dollars
2014

Type
Listed:Bond futures
Sold
Total

Contract
amounts

Over oneyear

Fair value

Realized
gains(losses)

Type
Principal accounting procedure:Interest rate swaps
Receive ﬂoating, pay ﬁxed
Interest rate swaps employing
exceptional accounting:Interest rate swaps
Receive ﬂoating, pay ﬁxed
Total

Millions of yen
2014
Contract Over one
Fair value
amountsyear¥16,054¥¥15,346¥(615)

275—*¥(615)

308—¥

Millions of yen
2013
Contract Over one
Fair value
amounts
year¥17,586¥342—¥17,586¥(756)

308—*¥(756)¥

Thousands of U.S. dollars
2014
Contract Over one
Fair value
amounts
year$155,985

$

2,993
—

$149,106$(5,976)

2,672
—

*
$(5,976)$(*) Of interest rate swaps employing exceptional accounting, as these instruments are accounted fortogether with the hedged loans and bills discounted, their fair value is included in the fair value of
said loans and bills discounted within “Financial instruments.”(b) Currency-related:$604,810
$
—

$—
$—

$583
$583

$583
$583

(e) Commodity-related:
There were no commodity-related transactions as at March
31, 2014 and 2013.

Type
Principal accounting procedure:
Currency swaps
Total

Millions of yen
2014
Contract Over one
Fair value
amounts
year¥29,267¥—¥—¥—¥(360)¥(360)

43

Type
Principal accounting procedure:
Currency swaps
Total

Type
Principal accounting procedure:
Currency swaps
Total

Millions of yen
2013
Contract Over one
Fair value
amounts
year¥24,946¥—¥—¥—¥(2,185)¥(2,185)

Thousands of U.S. dollars
2014
Contract
Over oneFair value
amounts
year$284,366
$
—

$—
$—

$(3,498)$(3,498)(c) Stock-related:
There were no stock-related transactions at March 31, 2014
and 2013.
(d) Bond-related:
There were no bond-related transactions at March 31, 2014
and 2013.

7. LOANS AND BILLS DISCOUNTED
Loans at March 31, 2014 and 2013 include “Risk-Managed
Loan Amounts” as follows:(1) Loans to borrowers in bankruptcy amounting to¥25,936 million ($252 million) and ¥27,087 million
denote loans subject to Article 96-1-3 and 96-1-4 of“Order for Enforcement of the Corporation Tax Act”
(Cabinet Order No. 97 of 1965) on which interest accrualhas stopped as there is doubt about the collectabilityof either principal or interest because they have been
contractually past due for a considerable period of time orfor other reasons.
(2) Other delinquent loans amounting to ¥91,479 million($889 million) and ¥103,588 million denote loans on
which the Banks have stopped accruing interest excludingloans to borrowers in bankruptcy and loans on whichinterest payments are deferred in order to promote
recovery of borrowers in economic diﬃculty.
(3) Loans past due for three months or more amounting to¥448 million ($4 million) and ¥1,174 million denoteloans where payment of interest or principal has been
delayed for three months or more excluding loans toborrowers in bankruptcy and other delinquent loans.

44(4) Restructured loans amounting to ¥22,435 million ($218
million) and ¥24,837 million denote loans to borrowers
for which the repayment terms have been modiﬁed tomore favorable terms including reduction of interest
rate, deferral of interest payments, extension of principal
payments and debt forgiveness with the objective ofpromoting recovery of borrowers in economic diﬃculty
excluding loans to borrowers in bankruptcy, otherdelinquent loans, and past-due loans.
(5) The total of loans to borrowers in bankruptcy, otherdelinquent loans, past-due loans, and restructured loans
amounted to ¥140,298 million ($1,363 million) and¥156,686 million.
The loan amounts disclosed from (1) to (5) above areamounts before deducting an allowance for loan losses.

Commercial bills
Bills discounted are accounted for as ﬁnancing transactionsin accordance with the Industry Audit Committee Report
No. 24 of the JICPA, although the Banks have the right tosell or pledge them without restrictions. The total face valueof commercial bills and purchased foreign exchange bills
obtained as a result of discounting was ¥47,896 million ($465
million) at March 31, 2014 and ¥50,502 million at March
31, 2013.

Loan participation
Loan participation agreements in which the Banks haveacquired the economic beneﬁts and risks of the underlying
loans from the original lender under the JICPA Laws andRegulations Committee Report No. 3 was ¥1,000 million asof March 31, 2013 and there was no such item as of March
31, 2014.

8. COMMITMENT LINES
Loan agreements and commitment line agreements relating toloans are agreements that oblige the consolidated subsidiaries
to lend funds up to a certain limit agreed in advance. The
consolidated subsidiaries make the loans upon the request ofan obligor to draw down funds under such loan agreements
as long as there is no breach of the various terms andconditions stipulated in the relevant loan agreement. The
unused commitment balance relating to these loan agreements
amounted to ¥860,659 million ($8,362 million) at March31, 2014 and came to ¥816,213 million at March 31, 2013.
Of this amount, ¥802,427 million ($7,797 million) at March
31, 2014, and ¥766,161 million at March 31, 2013, relates toloans for which the term of the agreement is one year or less,or unconditional cancellation of the agreement is allowed at
any time.
In many cases the term of the agreement runs its course
without the loan ever being drawn down. Therefore, the unusedloan commitment will not necessarily aﬀect future cash ﬂows.
Conditions are included in certain loan agreements that allow
the consolidated subsidiaries either to decline the request fora loan draw-down or to reduce the agreed limit amount when
there is due cause to do so, such as when there is a change
in ﬁnancial condition or when it is necessary to protect theconsolidated subsidiaries’ credit. Consolidated subsidiaries
take various measures to protect their credit. Such measures
include having the obligor pledge collateral to the consolidated
subsidiaries in the form of real estate, securities, etc., on signinga loan agreement or in accordance with the consolidated
subsidiaries’ established internal procedures for conﬁrming theobligor’s ﬁnancial condition, etc., at regular intervals.

In addition, securities not included in the above schedules
were pledged as collateral for operating transactions, such as
foreign exchange contracts and forward exchange contracts.
These securities amounted to ¥106,203 million ($1,032
million), cash and due from banks ¥3 million ($29 thousand)and net other assets ¥1,201 million ($12 million) including
security deposits of ¥2,997 million ($29 million) at March
31, 2014. The corresponding ﬁgures at March 31, 2013, were¥111,629 million, ¥3 million and ¥1,191 million, including
security deposits of ¥2,579 million.

10. ACCUMULATED DEPRECIATION
Accumulated depreciation of tangible assets was ¥72,993
million ($709 million) at March 31, 2014, and ¥71,883
million at March 31, 2013.

11. IMPAIRMENT LOSSES
During the ﬁscal year ended March 31, 2014 and 2013,
impairment losses were recorded on the following assets.
Impairment loss

9. PLEDGED ASSETS
Location

At March 31, 2014 and 2013, the following assets were
pledged as collateral for certain liabilities of the Banks.

Cash and due from banks
Securities

Millions of yen
2014
2013
¥
18
¥
18
222,558
216,632

Thousands of
U.S. dollars
2014
$
175
2,162,437

Total

The collateral was pledged to secure the following:

Deposits
Payables under securities lendingtransactions
Borrowed money

Millions of yen
2014
2013
¥27,600¥19,149
13,269
4,330
3,823

4,052

WithinYamaguchi
Prefecture
WithinFukuoka
Prefecture
Other

Thousands of
U.S. dollars
2014$268,169
128,925
37,145

Primary
use

Type

Asset
Land,
scheduled buildings
for sale
Idle assets Land

Asset
Land,
scheduled buildings
for sale

Millions of yen
2014
2013
¥46
¥ —

Thousands of
U.S. dollars
2014
$447

¥—

¥161

$ —

—

18

—

¥46

¥179

$447

The Bank and its consolidated subsidiaries that engage inthe banking and securities business group their business-use
assets into the smallest units possible from the standpoint ofmanagement accounting, which is the branch. Idle assets are,in principle, grouped as units of individual assets. In addition,
corporate headquarters, administrative centers, training
facilities, company housing and dormitories are considered
corporate assets, as these are related to all the consolidated
subsidiaries which are engaged in the banking businesses.
Consolidated subsidiaries that do not engage in the banking
and securities business group their assets, in principle, on an
individual company basis.

45

The book values of the idle assets and assets that are scheduled
for sale are reduced to their recoverable values, and recognized
the reduction of ¥46 million ($447 thousand) as impairment
losses. This amount includes land of ¥34 million ($330
thousand) and buildings of ¥12 million ($117 thousand).
The recoverable amount used to estimate the impairment
loss for the ﬁscal year ended March 31, 2014, is the net selling
price, which is calculated by deducting the expected disposal
cost from the expected disposal value.

12. BORROWED MONEY
Payment schedule of borrowed money as of March 31, 2014is as follows:
2014
2015
2016
2017
2018
Thereafter
Total

Millions of yen¥13,105
4,872
3,939
2,871
1,754
3,228
¥29,769

Thousands of
U.S. dollars$127,332
47,33838,272
27,89517,042
31,364$289,243

Deﬁned beneﬁt plans(1) Reconciliation of retirement beneﬁt obligation balances atthe beginning and the end of the ﬁscal year ended March
31, 2014
Retirement beneﬁt obligations at the
beginning of the ﬁscal year
Service cost
Interest cost
Actuarial diﬀerences
Retirement beneﬁt payments
OthersRetirement beneﬁt obligations at theend of the ﬁscal year

Millions of yen
58,375

Thousands of
U.S. dollars
567,188

1,556
1,042
645
(3,878)239
57,97915,11910,124
6,267(37,680)
2,322
563,340(2) Reconciliation of plan asset balances at the beginning andthe end of the ﬁscal year ended March 31, 2014
Balance of plan assets at the beginningof the ﬁscal year
Expected return on plan assets
Actuarial diﬀerences
Contribution from employer
Retirement beneﬁt payments
OthersBalance of plan assets at the end of theﬁscal year

Millions of yen
67,200Thousands of
U.S. dollars
652,934

1,919
7,480
1,941
(2,396)238
76,382

18,646
72,67818,859(23,280)
2,312
742,149

13. BONDS PAYABLE
Bonds payable include subordinated bonds of ¥25,000 million($243 million) as of March 31, 2014 and ¥45,000 million asof March 31, 2013.

14. PROVISION FOR EMPLOYEERETIREMENT BENEFITS
For the year ended March 31, 2014
Overview of severance payments and pension plans
Some consolidated subsidiaries employ funded and unfundeddeﬁned beneﬁt and deﬁned contribution plans as employee
retirement beneﬁts.
Deﬁned beneﬁt plans include deﬁned beneﬁt corporate
pension plans and lump-sum retirement plans. Also, some areestablished as retirement beneﬁt trusts.
Some consolidated subsidiaries employ the compendium
method for calculating retirement beneﬁt obligations.

46(3) Reconciliation of the balances of retirement beneﬁt
obligations and plan assets at the end of the ﬁscal year
ended March 31, 2014 and the carrying amount of net
deﬁned beneﬁt liability and net deﬁned beneﬁt asset
Retirement beneﬁt obligations offunded plans
Plan assets
Retirement beneﬁt obligations of
unfunded plans
Net carrying amount of obligations
and assets

Retirement beneﬁt obligations
Retirement beneﬁt assets
Net carrying amount of obligations
and assets

Millions of yen
57,935

Thousands of
U.S. dollars
562,913(76,382)(18,447)44(742,149)(179,236)
427(18,403)(178,809)

Millions of yen
4,479
22,882(18,403)

Thousands of
U.S. dollars
43,519222,328(178,809)

(4) Retirement beneﬁt costs and their breakdowns
Service cost*
Interest cost
Expected return on plan assets
Recognized actuarial loss
Amortization of past service cost
OthersRetirement beneﬁt costs on deﬁned
beneﬁt plans

Millions of yen
1,556
1,042
(1,919)
1,840
1
64
2,584

Thousands of
U.S. dollars
15,11910,124(18,646)
17,87810
622
25,107* Excludes employee contribution portion of deﬁned beneﬁt corporate pensions(5) Remeasurements of deﬁned beneﬁt plans
Items posted as remeasurements of deﬁned beneﬁt plans(before tax-eﬀect exclusions) break down as follows.
Unrecognized past service cost
Unrecognized actuarial gain (loss)
Total

Millions of yen
0
5,362
5,362

Thousands of
U.S. dollars
052,09952,099(6) Plan assets(i) Percentages of major asset categories to total plan assets are
as follows.
Bonds
SharesOthers
Total

25%
59%
16%
100%

(Note) Plan assets include 28% of corporate pension plans established as retirement beneﬁt trusts.

(ii) Method of establishing expected long-term return onplan assets(Corporate pensions)
Based on the expected rate of return for individual investment
ﬁduciary institutions, deducting investment cost from theweighted average rate for the policy asset mix (medium- tolong-term portfolio)(Retirement beneﬁt trusts)
Past dividend performance is converted to yield.
(7) Basis of actuarial calculation
The basis of actuarial calculations as of March 31, 2014(i) Discount rate: 1.5%–2.0%(ii) Expected long-term rate of return on plan assets: 1.6%–3.8%
Deﬁned contribution plans
The required contribution to the consolidated subsidiaries’
deﬁned contribution plans is ¥157 million ($1,525 million).

For the year ended March 31, 2013
Until the ﬁscal year ended March 31, 2013, the Banks andother subsidiaries had contributory funded deﬁned beneﬁt
pension plans such as employee pension plans, tax qualiﬁedpension plans and lump-sum severance indemnity plans. The
Banks also had retirement beneﬁt trusts.
The liabilities for severance and retirement beneﬁts
included in the liability section of the consolidated balance
sheet as of March 31, 2013 were as follows:
Millions of yen
2013¥(58,375)
67,20014,037
1(23,977)¥ (1,114)

Projected beneﬁt obligation
Plan assets
Unrecognized actuarial diﬀerences
Unrecognized past service cost
Prepaid pension costs
Provision for retirement beneﬁts(Note 1) Excludes premium retirement beneﬁts paid in extraordinary circumstances.
(Note 2) Certain consolidated subsidiaries employ a simpliﬁed method of calculating retirement beneﬁt
obligations.

Retirement beneﬁt expenses included in the consolidated
statements of income for the year ended March 31, 2013 werecomprised of the following:
Millions of yen
2013¥1,571
1,152(1,547)1
2,786
81¥4,044Service costs—beneﬁts earned during the year
Interest cost on projected beneﬁt obligation
Expected return on plan assets
Past service cost
Amortization of actuarial diﬀerences
Other
Retirement beneﬁt expenses(Note) Retirement beneﬁt obligations of consolidated subsidiaries employing the simpliﬁed method areincluded as a lump sum in “past service cost.”

The summary of assumptions is as follows:Year ended March 31, 2013
Discount rate

1.5%—2.0%

Expected rate of return on plan assets

1.5%—3.7%

Allocation of estimated amount of
retirement beneﬁts

Allocated to each periodby the straight-line method

Period to amortize the past service cost

2 years.
(using the straight-line method
within the employees’ averageremaining service period)

Period to amortize unrecognized net
actuarial cost

Mainly 10—11 years(using the straight-line method
within the employees’ averageremaining service period,
commencing from the next ﬁscal
year of incurrence)47

15. REVALUATION RESERVE FOR LAND

18. LEASE TRANSACTIONS

Pursuant to the Law concerning Revaluation of Land
(Law No. 34, promulgated March 31, 1998, the “Law”),
YMFG revalued certain land used for banking operations by
consolidated subsidiaries. The tax-equivalent portion of thisrevaluation amount was recorded in liabilities under “deferred
tax liabilities for revaluation reserve for land,” and thereminder under net assets as “revaluation reserve for land.”
Revaluation date: March 31, 1998
Item 3, Article 3, of the Law establishes the evaluation
method as that prescribed by Article 2-4 of the Order for
Enforcement of Law on Revaluation of Land (Enforcement
Order No. 119, promulgated March 31, 1998), and theamount of land tax is calculated on the basis of the land
tax amount speciﬁed under Article 16 of the Land-holding
Tax Act, adjusted rationally in accordance with the basis of
calculation announced oﬃcially by the Director General of
the National Tax Administration Agency.
Total diﬀerence between market value of land for businessuse revalued in accordance with Article 10 of the Law and thetotal post-revaluation book value of land at March 31, 2014
and 2013 were ¥23,419 million ($228 million) and ¥23,459
million, respectively.

1. Finance lease transactions(1) Finance lease transactions that do not transfer ownership(i) Content of lease assets
Tangible ﬁxed assets
Mainly oﬃce equipment
Intangible ﬁxed assets
Software(ii) Depreciation method for lease assets
As described in “Lease assets under” (5) Accounting Policies,in “2. SIGNIFICANT ACCOUNTING POLICIES.”(2) The Banks and other consolidated subsidiaries lease certain
equipment under noncancelable ﬁnance leases. Financeleases that do not transfer ownership to lessees are notcapitalized and are accounted for in the same manneras operating leases. Certain information for such noncapitalized ﬁnance leases for the year ended March 31,
2014 and 2013 were as follows:

16. CONTINGENT LIABILITIES —ACCEPTANCES AND GUARANTEESAll contingent liabilities, including letters of credit,
acceptances and guarantees are reﬂected in acceptances andguarantees. As a contra account, customers’ liabilities for
acceptances and guarantees are shown on the asset side, which
represent the Banks’ right of indemnity from customers.

17. OTHER EXPENSES
Other expenses included ¥928 million ($9,017 thousand)in loss on sale of stock and ¥135 million ($1,312 thousand)in devaluation of stock for the year ended March 31, 2014.
For the year ended March 31, 2013, other expenses included¥653 million in loss on sale of stock, and ¥3,235 million indevaluation of stock.

48

Equivalent amount:
Acquisition cost
Accumulated depreciation
Net book value

Millions of yen
2014
2013
¥69
¥1,003
67
(982)
¥ 2
¥ 21

Thousands of
U.S. dollars
2014
$670
651
$ 19

Lease payments
Equivalent depreciation expense
Equivalent interest expense

Millions of yen
2014
2013
¥21
¥219
19
188
¥ 0
¥ 6

Thousands of
U.S. dollars
2014
$214
185
$ 0

Equivalent depreciation expense is computed using thestraight-line method over the lease terms assuming no residual
value. Equivalent interest expense is computed using theinterest rate method over the lease terms for the diﬀerence
between acquisition cost and total lease payments.
Future minimum lease payments under non-cancelable
ﬁnance leases having remaining terms in excess of one year at
March 31, 2014 and 2013 were as follows:
At March 31, 20142015
2016 and thereafter
Total minimum lease payments

Millions of yen
¥ 2
—
¥ 2

Thousands of
U.S. dollars
$19
—
$19

At March 31, 2013
Millions of yen
¥21
2
¥23

2014
2015 and thereafter
Total minimum lease payments

2. Signiﬁcant diﬀerences between the statutory eﬀective tax
rate and the actual income tax rate after application ofdeferred income tax accounting for the year ended March
31, 2014 and 2013 were as follows:%

2. Operating leases
Future minimum lease payments at March 31, 2014 and2013 were as follows:
At March 31, 20142015
2016 and thereafter
Total minimum lease payments

Millions of yen
¥ 52
747
¥799

Thousands of
U.S. dollars
$ 505
7,258
$7,763At March 31, 2013
Millions of yen
¥ 52
799
¥851

2014
2015 and thereafter
Total minimum lease payments

19. INCOME TAXES
1. Signiﬁcant components of the deferred tax assets andliabilities as of March 31, 2014 and 2013 were as follows:

Deferred tax assets:
Allowance for loan losses
Provision for bonuses
Provision for retirement beneﬁts
Net deﬁned beneﬁt liability
Depreciation
Losses on devaluation of securities
Net operating losses carryforwards
Other
Deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Unrealized gains onavailable-for-sale securities
Securities contributed toretirement beneﬁt trusts
Other
Total deferred tax liabilities
Net deferred tax assets

Millions of yen
2014
2013

Thousands of
U.S. dollars
2014¥ 24,891
1,148
—
7,252
951
3,542
2,555
4,605
44,944(5,995)38,949¥ 28,832
1,146
6,159
—
1,025
3,574
10,8684,320
55,924(11,147)
44,777$ 241,848
11,154—70,462
9,240
34,41524,82544,745436,689(58,249)
378,440(18,646)(17,014)(181,170)(5,160)(5,160)(50,136)(1,421)(25,227)¥ 13,722(1,164)(23,338)¥ 21,439(13,807)(245,113)$ 133,327

Eﬀective statutory tax rate
(Adjustments)
Revision of valuation allowances
Items permanently exempted from income such as
dividend income
Non-deductable goodwill amortization
Inhabitant tax on per capita basis
Items permanently excluded from expense such asentertainment expenses
Stated diﬀerence of tax rates on special
reconstruction surtax
Expiration of losses carried forward
Consolidation adjustment
OthersActual tax rate after application of deferred income tax
accounting

2014
37.75

2013
—

(10.39)(1.60)

—
—

3.73
0.27
0.31

—
—
—

1.46

—

5.69
(1.40)(0.39)
35.43

—
—
—
—

(Note) Information for the year ended March 31, 2013 is omitted, as the diﬀerence between theeﬀective statutory tax rate and the actual tax rate after application of deferred income tax
accounting is 5% or less.

3. Revisions in amounts of deferred taxes assets and liabilities
due to changes in the corporate tax rate
The “Act on Partial Revision of the Income Tax Act” (Act No.
10 of 2014) was promulgated on March 31, 2014, repealing
the special reconstruction surtax from ﬁscal years beginningon or after April 1, 2014. Accordingly, the statutoryeﬀective tax rate used for calculating deferred tax assets andliabilities was reduced from 37.75% to 35.38%, resulting ina temporary diﬀerence in assets or liabilities reversed in theﬁscal year beginning April 1, 2014. This change in the tax rate
had the eﬀect of reducing deferred tax assets by ¥547 million($5 million) and increasing income tax adjustments by ¥547
million ($5 million).

49

50

20. NET ASSETS

21. CHANGES IN NET ASSETSThe Companies Act of Japan (the “Act”) became eﬀective
on May 1, 2006, replacing the Japanese Commercial Code(the “Code”). The Act is generally applicable to events andtransactions occurring after April 30, 2006 and for the ﬁscal
years ending after that date.
Under the Act, the entire amount paid for new sharesis in principle required to be designated as common stock.
However, a company may, by a resolution of the Board of
Directors, designate an amount not exceeding one-half of theprice of the new shares as additional paid-in capital, which isincluded in capital surplus.
Under the Act, in cases where dividend distribution of
surplus is made, the smaller of an amount equal to 10% of
the dividend or the excess, if any, of 25% of common stockover the total of additional paid-in capital and legal earnings
reserve must be set aside as additional paid-in capital or legal
earnings reserve. Legal earnings reserve is included in retained
earnings in the accompanying Consolidated Balance Sheets.
Under the Act, legal earnings reserve and additional paid-in
capital may be used to eliminate or reduce a deﬁcit, or may becapitalized, by a resolution of the shareholders’ meeting.
Under the Act, additional paid-in capital and legal earnings
reserve may not be distributed as dividends, however all of these
may be transferred to other capital surplus and retained earnings,
respectively, which are potentially available for dividends.
The maximum amount that YMFG can distribute as
dividends is calculated based on the Non-Consolidated Financial
Statements of the Company in accordance with the Act.
At the annual shareholders’ meeting, held on June 26, 2014,
the shareholders approved cash dividends amounting to ¥1,772
million ($17 million). Such appropriations have not been
accrued in the Consolidated Financial Statements as of March
31, 2014 and to be recognized in the period in which they areapproved by the shareholders.

1. Type and number of shares issued and treasury shares wereas follows:
Number of shares (in thousand)March 31,
March 31,
Increase
Decrease
2013
2014
Shares issued
Common stock
Preferred stock (Type 3)*1
Preferred stock (Type 4)*1
Total
Treasury stock
Common stock*2, *3
Preferred stock (Type 3)*1
Preferred stock (Type 4)*1
Total

264,35311
9264,373

—
—
—
—

—
11
9
20

264,353——
264,353

2,749
—
—
2,749

9,042
11
9
9,062

492
11
9
512

11,299——11,299*1 Increases and decreases in the number of shares are due to acquisitions and extinguishments of Type
3 and Type 4 preferred stock.
*2 Of the increase in the number of shares, 9,000 thousand shares were acquired in the market, and 42
thousand shares were due to the acquisition of fractional shares. Of the decrease in the number ofshares, 449 thousand shares were due to the sale of shares to the Group’s employee stock ownershipprogram, 41 thousand shares were due to the exercise of stock options, and 1 thousand shares werein response to demand for the purchase of fractional shares.
*3 Treasury stock as of March 31, 2014 includes 1,400 thousand shares held by the ESOP Trust for
Employee Shareholders.

Number of shares (in thousand)March 31,
March 31,
Increase
Decrease
2012
2013
Shares issued
Common stock
Preferred stock (Type 3)
Preferred stock (Type 4)
Total
Treasury stock
Common stock*1, *2
Preferred stock (Type 3)
Preferred stock (Type 4)
Total

264,35311
9264,373

—
—
—
—

—
—
—
—

264,35311
9264,373

3,366
—
—
3,366

25
—
—
25

642
—
—
642

2,749
—
—
2,749

*1 The increase in the number of shares is a result of the acquisition of shares of less than a single
trading unit.
The decrease in the number of shares is due to the sale of 622 thousand shares to the Group
employees’ shareholding plan, 19 thousand shares due to the exercise of stock options, and the transfer
through the sale of 2 thousand shares in response to demand for the purchase of fractional shares.
*2 Treasury stock as of March 31, 2013 includes 1,849 thousand shares held by the ESOP Trust for
Employee Shareholders.

2. Information on dividends is as follows:(a) Dividends paid in the ﬁscal year ended March 31, 2014
and 2013.

Type of shares
Resolved at the boardof directors meeting on
May 10, 2013
Common stock

Aggregate
amount ofdividends(Millionsof yen)Cashdividends
per share(Yen)¥1,570*1

Preferred stock (Type 3)¥ 127

Preferred stock (Type 4)¥

Resolved at the boardof directors meeting on
November 8, 2013
Common stock

Type of shares
Resolved at the boardof directors meeting on
May 11, 2012
Common stock98

2¥1,571*Aggregate
amount ofdividends(Millionsof yen)¥1,305*Preferred stock (Type 3)¥ 127

Preferred stock (Type 4)¥

98

Resolved at the boardof directors meeting on
November 9, 2012
Common stock¥1,568*Preferred stock (Type 3)¥ 127

Preferred stock (Type 4)¥

98

Recorddate¥

6.00 Mar. 31,
2013¥11,500 Mar. 31,
2013¥11,500 Mar. 31,
2013¥

6.00 Sep. 30,
2013

Cash
dividends
per share(Yen)

Recorddate¥

5.00 Mar. 31,
2012¥11,500 Mar. 31,
2012¥11,500 Mar. 31,
2012¥

6.00 Sep. 30,
2012¥11,500 Sep. 30,
2012¥11,500 Sep. 30,
2012

Eﬀective
dateJun. 27,2013
Jun. 27,2013
Jun. 27,2013

Type of shares
Resolved at the boardof directors meeting on
May 10, 2013
Common stock

AggregateCashamount ofdividends
dividends
per share(Thousands of(U.S.
U.S. dollars)
dollars)$15,255*1

Preferred stock (Type 3)$ 1,234

Preferred stock (Type 4)$

Resolved at the boardof directors meeting on
November 8, 2013
Common stock952$15,264*2

Recorddate

Eﬀectivedate

0.06 Mar. 31,
2013$111.74 Mar. 31,
2013$111.74 Mar. 31,
2013

Jun. 27,2013
Jun. 27,2013
Jun. 27,2013$

Dec. 10,2013$

0.06 Sep. 30,
2013

Dec. 10,2013*1 The total dividend amount on common stock does not include ¥11 million ($107 thousand) in
dividends to ESOP Trust for employee shareholders. This is because shares held by ESOP trust aretreated as treasury stock.
*2 The total dividend amount on common stock does not include ¥10 million ($97 thousand) in
dividends to ESOP Trust for employee shareholders. This is because shares held by ESOP trust aretreated as treasury stock.

Eﬀectivedate(b) Dividends to be paid in the ﬁscal year ending March 31,
2015 and ﬁscal year ended March 31, 2014 are as follows:

Jun. 29,2012
Jun. 29,2012
Jun. 29,2012

Type of shares
Resolved at theboard of directors
meeting on May
9, 2014
Common stock

Dec. 10,2012
Dec. 10,2012
Dec. 10,2012* The total dividend amount on common stock does not include ¥13 million in dividends to ESOP
Trust for employee shareholders. This is because shares held by ESOP trust are treated as treasury
stock.

Type of shares
Resolved at theboard of directors
meeting on May
9, 2014
Common stock(Millions of yen, except per share amount)
AggregateCashamount of Source
dividends Record
Eﬀective
dividendsof
per share
datedate(Millions dividends(Yen)of yen)¥1,772Retainedearnings¥

7.00

Mar. 31,2014

Jun. 27,
2014(Thousands of U.S. dollars, except per share amount)
AggregateCashamount ofSource dividends
dividends
Record
Eﬀectiveofper share(Thousands
date
date
dividends(U.S.
of U.S.
dollars)
dollars)$17,217

Retainedearnings$

0.07

Mar. 31,2014

Jun. 27,2014(Note) The total dividend amount on common stock does not include ¥10 million ($97 thousand) in
dividends to ESOP Trust for employee shareholders. This is because shares held by ESOP trust
are treated as treasury stock.

51

3. The summary of stock option activity is as indicated below.
(a) Number of stock options

22. STOCK OPTIONS
At a Board of Directors meeting on September 22, 2011,a resolution was passed with regard to subscription
requirements for the allotment of stock options ascompensation to directors of YMFG’s banking subsidiaries,
Yamaguchi Bank, Momiji Bank and Kitakyushu Bank. The
details of this resolution are described below.
1. Recording of expenses related to stock options and thename of line items

General and administrative expenses

Millions of yen
2014
2013
¥208
¥177

Thousands of
U.S. dollars
2014$2,021

2. The content of the stock options is as outlined below.
Category and number of
persons to be granted stock
options

2014
27 directors (excluding outside directors)of YMFG’s subsidiaries, Yamaguchi
Bank, Momiji Bank and Kitakyushu Bank.

Number of stock options byclass of stock*

225,100 shares of YMFG’s common stock

Grant dateJuly 23, 2013

Vesting conditions

No vesting conditions set

Target length of service period No target length of service period set
Period for exercise of rights

July 24, 2013—July 23, 2043

Category and number of
persons to be granted stock
options

2013
27 directors (excluding outside directors)of YMFG’s subsidiaries, Yamaguchi
Bank, Momiji Bank and Kitakyushu Bank.

Number of stock options byclass of stock*294,900 shares of YMFG’s common stock

Grant dateJuly 30, 2012

Vesting conditions

No vesting conditions set

Target length of service period No target length of service period set
Period for exercise of rights

July 31, 2012—July 30, 2042

Note: Stated as the equivalent number of shares.

Category and number of
persons to be granted stock
options

2012
27 directors (excluding outside directors)of YMFG’s subsidiaries, Yamaguchi
Bank, Momiji Bank and Kitakyushu Bank.

Number of stock options byclass of stock*

192,600 shares of YMFG’s common stock

Grant date

October 31, 2011

Vesting conditions

No vesting conditions set

Target length of service period No target length of service period set
Period for exercise of rights

November 1, 2011—October 31, 2041

Note: Stated as the equivalent number of shares.

52

2014
Prior to vesting
As of the end of the previous consolidated
ﬁscal year
GrantedExpired
VestedRights not yet determined
After vesting
As of the end of the previous consolidated
ﬁscal year
Rights determined
Rights exercised
ExpiryAmount unexercised

2013

2012

—

294,900—

225,100——
225,100—
2,600
292,300
—

—
—
—
—

—

—

170,100———

292,300
24,800—267,500—
16,700—
153,400(b) Price information

Exercise price
Average share price at timeof exercise
Fair value on date granted

—

Yen
2013
¥ 1
930

2012
¥ 1
931

U.S. dollars
2014
$0.01
—

973

619

660

9.45

2014
¥ 1

4. Method of estimating the fair value of stock options
The method employed to estimate the fair value of stock
options granted during the consolidated ﬁscal year ended
March 31, 2014 is as follows:(a) Valuation method employed: Black-Scholes method(b) Main base ﬁgures and estimation method
Volatility of stock price*1
Expected number of years remaining*2
Forecast dividend*3
Risk-free interest rate*4

24.78%
3.92 years¥12/share
0.197%*1 Calculated on the basis of stock price performance during a period (August 2009 to July 2013)
corresponding to the expected number of years remaining (3.92 years).
*2 The number of remaining years in service of current directors is estimated on the basis of the average
number of years of service of directors retiring, excluding the current service period.
*3 Based on the actual dividend for the ﬁscal year ended March 31, 2013.
*4 Japanese government bond yields for the expected number of years remaining.

5. Method for estimating the number of rights determined forstock options
Due to the diﬃculty of rationally estimating the future
number of rights that will expire, in general a method is
employed that reﬂects only the number of rights that haveactually expired.

23. INVESTMENT AND RENTAL PROPERTY

25. SEGMENT INFORMATIONThis note is omitted, as the total amount of investment andrental property is immaterial.

Business segment information is not presented, as the Bankand consolidated subsidiaries operate in one segment.
Geographic segment information is not presented, as
domestic income of the Bank and consolidated subsidiaries
and their consolidated assets located substantially in Japan
represent more than 90% of the Group’s consolidated income
and assets.
Overseas sales information is not presented, as overseas sales
are less than 10% of the Group’s consolidated income.

24. CONSOLIDATED STATEMENT OFCOMPREHENSIVE INCOME
Amounts of reclassiﬁcation adjustments and tax eﬀect
amounts related to other comprehensive income in the
consolidated ﬁscal year ended March 31, 2014 and 2013 wereas follows.
Thousands of
U.S. dollars
2014

Millions of Yen
2014
2013
Unrealized gain (loss) on availablefor-sale securities
Amount generated during the year
Reclassiﬁcation adjustments
Before tax eﬀect adjustment
Tax eﬀect amount
Unrealized gain (loss) on availablefor-sale securities
Deferred gain (loss) on hedges:
Amount generated during the year
Reclassiﬁcation adjustments
Before tax eﬀect adjustment
Tax eﬀect amountDeferred gain (loss) on hedges
Share of other comprehensive
income in aﬃliated companies
accounted for using the equity
methodAmount generated during the year
Reclassiﬁcation adjustments
Before tax eﬀect adjustment
Tax eﬀect amount
Share of other comprehensive
income in aﬃliated companies
accounted for using the equity
methodTotal other comprehensive income

17,249(13,413)
3,836(1,632)2,204

50,303(13,055)
37,248(13,191)
24,057

167,596(130,324)
37,272(15,857)
21,415

(89)
235
146
(52)
94

(324)
228
(96)
34
(62)

(865)
2,283
1,418
(505)
913

26. RELATED PARTY TRANSACTIONSThere are no signiﬁcant transactions that should indicate
dealings with related parties.

27. PER SHARE DATA

Net assets per share
Net income per share
Net income per share (diluted)

Yen
2014
2013
¥2,040.39 ¥1,901.30
120.66102.48¥ 116.55 ¥ 102.18

U.S. dollars
2014$19.831.17$ 1.13

Net assets per share are calculated based on the following:
4
—
4
—
4

7
—
7
—
7

39
—
39
—
39

2,302

24,002

22,367

Millions of yen
except number of shares
2014
2013
Net assets¥521,562¥521,423
Amounts excluded from net assets¥ 5,232¥ 24,033
preferred stock issue price—
19,535
dividends on preferred stock—
225
stock options
431
249
minority interests
4,801
4,024
Net assets attributable to common
516,330
497,390
stock at the ﬁscal year-end
Number of common stock at the
253,055
261,605
ﬁscal year-end used for the
calculation of net assets per share(in thousands)

Thousands of
U.S. dollars
2014$5,067,645$ 50,846——
4,188
46,6585,016,799

53

Net income per share is calculated based on the following:

Net income
Amount not attributable tocommon shareholders
Preferred stock dividends
Interim preference stock dividends
Net income attributable tocommon stock
Average shares of common stockduring the year (in thousands)

Millions of yen
except number of shares
2014
2013
¥31,236¥27,233—450——
31,236225
225
26,783258,870

261,356

Thousands of
U.S. dollars
2014$303,498———
303,498

28. SUBSEQUENT EVENTSFor the year ended March 31, 2014
There were no signiﬁcant subsequent events. Dividends weremade in June 2014. Please refer to “20. NET ASSETS.”
For the year ended March 31, 2013
1. Acquisition and Cancellation of Preferred StockAt a Board of Directors meeting on February 22, 2013,
YMFG resolved to acquire all its issued Type 3 preferred stockand Type 4 preferred stock as provided in Article 16-1 of
YMFG’s Articles of Incorporation and Articles 1-1 and 1-2 ofthe Supplementary Provisions to the Articles of Incorporationand cancel this stock in accordance with the acquisition
conditions provided in Article 178 of the Companies Act,
as described below, eﬀective April 2, 2013. This cancellation
was reﬂected in the consolidated ﬁnancial statements as of theeﬀective date by reducing additional paid-in capital.
Type of stock acquired or canceledType 3preferred stock

Total number of shares acquired or
11,000 sharescancelled
Total acquisition price¥11,000,000,000

Type 4preferred stock8,535 shares¥8,535,000,000

2. Redemption of Callable Unsecured Debt Prior to Maturity
At a Board of Directors meeting on May 10, 2013, YMFG
resolved to redeem on August 5, 2013, prior to maturity, all
its No. 3 Redemption of Callable Unsecured Debt Prior to
Maturity (Subordinated), which was issued on August 5, 2010.
(1) Name of issue for early redemption
Yamaguchi Financial Group Inc. No. 3 Redemption ofCallable Unsecured Debt Prior to Maturity (Subordinated)(2) Early redemption amount¥20,000 million

54(3) Early redemption price¥100 for each ¥100 of face value(4) Scheduled date for early redemption
August 5, 2013(5) Method of providing redemption funds
Borrowings from Momiji Bank
(6) Annual reduction in interest expense due to redemption¥226 million

55

Yamaguchi Bank Financial Statements
NONCONSOLIDATED BALANCE SHEETS (UNAUDITED)Millions of yen
2014

ASSETS
AssetsMarch 31, 2014 and 2013

Cash and due from banks
Call loans and bills purchased
Monetary claims bought
Trading assets
Money held in trust
Securities
Loans and bills discounted
Foreign exchanges
Other assets
Tangible ﬁxed assets
Intangible ﬁxed assets
Prepaid pension cost
Customers’ liabilities for acceptances and guarantees
Allowance for loan losses
Total assets¥¥

Thousands of
U.S. dollars
2014

Millions of yen
2013

503,708
288,125
8,296
5,208
48,016
1,358,088
3,299,187
10,26981,67546,497
6,976
17,986
27,680(31,488)5,670,223¥

5,134,128
83,173
4,566
3,405
9,622
1,559
54,001
1,519
85
765
40
7,366
8,632
27,6805,336,541
10,006380
277,885
288,271
30,167(353)
15,59745,411
333,682
5,670,223¥¥

118,607503,996
6,949
8,124
53,6891,368,835
3,225,302
7,457
91,88147,431
10,661—
26,573(37,864)
5,431,641$

4,894,170
2,799,504
80,60650,603
466,537
13,195,569
32,055,839
99,777
793,577
451,779
67,781
174,757
268,947(305,946)$ 55,093,500

4,917,287
53,378
3,083
3,188
9,927
2,158
88,603
1,480
74
806
50
2,845
8,883
26,573
5,118,335
10,006
380
260,866
271,252
26,444(445)
16,05542,054313,306
5,431,641$ 49,884,648
808,133
44,36533,08493,49015,148524,688
14,759
826
7,433
389
71,57083,871
268,947
51,851,351
97,221
3,692
2,700,010
2,800,923
293,111(3,430)151,545441,226
3,242,149$ 55,093,500

LIABILITIES AND NET ASSETS (SHAREHOLDERS’ EQUITY)
Liabilities:

Net assets:

56

Deposits
Call money and bills soldPayables under securities lending transactions
Trading liabilities
Borrowed money
Foreign exchanges
Other liabilities
Provision for bonuses
Provision for retirement beneﬁts
Provision for reimbursement of deposits
Reserve for frequent users services
Deferred tax liabilities
Deferred tax liabilities for land revaluation
Acceptances and guarantees
Total liabilities
Capital stock
Capital surplus
Retained earnings
Total shareholders’ equity
Net unrealized gains on securities
Deferred gains or losses on hedges
Revaluation reserve for land
Total valuation and translation adjustments
Total net assets
Total liabilities, and net assets

¥

¥

¥

NONCONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

Years ended March 31, 2014 and 2013

Millions of yen
2014

IncomeInterest income:Interest on loans and discounts
Interest and dividends on securities
Other interest income
Fees and commissions
Trading income
Other ordinary income
Other income
Total income
Expenses
Interest expense:
Interest on deposits
Interest on borrowings and rediscounts
Other interest expense
Fees and commissions payments
Trading expenses
Other operating expenses
General and administrative expenses
Impairment losses
Other expenses
Total expenses
Income before income taxes and minority interests
Income taxes:
Current
Deferred
Net income

Amounts per share of common stock:
Net income
Cash dividends applicable to the year¥¥

42,144
12,582940
11,618
98
4,666
11,66083,708¥44,107
11,444
1,028
10,391
42
10,545
4,256
81,813$

409,483
122,250
9,133
112,884
952
45,336113,293
813,331

4,528
487
182
3,973
—
3,960
39,005447
1,095
53,67730,031

4,855
475
182
3,886
23
1,519
41,267—
3,104
55,311
26,502

43,995
4,732
1,768
38,603—38,476
378,984
4,343
10,640521,541
291,790

8,387
2,687
18,957

7,877
1,912
16,71381,49026,108184,192

¥

Yen
2014

¥

Thousands of
U.S. dollars
2014

Millions of yen
2013

94.79
13.00

$

Yen
2013

¥

83.56
11.98

U.S. dollars
2014

$

0.92
0.13

57

Momiji Bank Financial Statements
NONCONSOLIDATED BALANCE SHEETS (UNAUDITED)Millions of yen
2014

ASSETS
AssetsMarch 31, 2014 and 2013

Cash and due from banks
Call loans and bills purchased
Monetary claims bought
Trading assets
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
Allowance for loan losses
Total assets¥¥

332,781
27,144573
554
691,112
1,928,364
3,353
80,521
34,424
8,083
6,827
17,77012,329(37,569)
3,106,266

Thousands of
U.S. dollars
2014

Millions of yen
2013

¥

¥

205,235
162,650714
1,117
756,790
1,829,087
3,661
91,737
34,975
10,437—
20,463
12,487(42,120)
3,087,233$

3,233,395
263,7395,567
5,383
6,715,041
18,736,533
32,579782,365
334,473
78,537
66,333
172,658
119,792(365,031)$ 30,181,364

2,820,253
1,007
1,247
17,20551
23,937
873
—
250
5,228
12,4872,882,538
87,46642,067
63,925
193,458
3,493
(10)
7,754
11,237
204,695
3,087,233$ 27,646,211
8,502
84,561
164,3121,020
146,754
10,202
15,7502,925
50,564
119,792
28,250,593
849,844408,735
583,327
1,841,906
13,642(78)
75,301
88,865
1,930,771$ 30,181,364

LIABILITIES AND NET ASSETS (SHAREHOLDERS’ EQUITY)
Liabilities:

Net assets:

58

Deposits
Call money and bills soldPayables under securities lending transactions
Borrowed money
Foreign exchanges
Other liabilities
Provision for bonuses
Provision for retirement beneﬁts
Provision for reimbursement of deposits
Deferred tax liabilities for land revaluation
Acceptances and guarantees
Total liabilities
Capital stock
Capital surplus
Retained earnings
Total shareholders’ equity
Net unrealized gains on securities
Deferred gains or losses on hedges
Revaluation reserve for land
Total valuation and translation adjustments
Total net assets
Total liabilities, and net assets¥¥

2,845,348
875
8,703
16,911
105
15,104
1,050
1,621
301
5,204
12,3292,907,551
87,46642,06760,036
189,569
1,404
(8)
7,750
9,146
198,715
3,106,266¥¥

NONCONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

Years ended March 31, 2014 and 2013

Millions of yen
2014

IncomeInterest income:Interest on loans and discounts
Interest and dividends on securities
Other interest income
Fees and commissions
Other ordinary income
Other income
Total income
Expenses
Interest expense:
Interest on deposits
Interest on borrowings and rediscounts
Other interest expense
Fees and commissions payments
Other operating expenses
General and administrative expenses
Impairment losses
Other expenses
Total expenses
Income before income taxes and minority interests
Income taxes:
Current
Deferred
Net income

Amounts per share of common stock:
Net income
Cash dividends applicable to the year¥¥

28,115
8,583
214
7,025
4,463
7,762
56,162¥

29,796
5,316
599
6,450
15,297
1,063
58,521$

273,173
83,395
2,079
68,25743,36475,418545,686

2,120
46
86
3,175
1,444
30,78095
1,264
39,01017,152

2,107
40
94
3,222
1,075
31,33921
3,594
41,492
17,02920,599447
836
30,84914,030299,067923
12,281
379,032
166,654251
3,969
12,932

325
4,159
12,5452,439
38,564
125,651

¥

Yen
2014

¥

Thousands of
U.S. dollars
2014

Millions of yen
2013

21.76
27.84

$

Yen
2013

¥

21.11
20.32

U.S. dollars
2014

$

0.21
0.27

59

Kitakyushu Bank Financial Statements
NONCONSOLIDATED BALANCE SHEETS (UNAUDITED)Millions of yen
2014

ASSETS
AssetsMarch 31, 2014 and 2013

Cash and due from banks
Call loans and bills purchased
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
Allowance for loan losses
Total assets¥¥

78,8105,151
22,694
804,664
3,338
18,113
18,128
1,796
890
1,865
8,070
(16,868)
946,651

Thousands of
U.S. dollars
2014

Millions of yen
2013

¥

¥

23,48911,395
18,689765,524
3,383
21,762
17,813
2,111
—
3,953
5,745
(17,346)856,518$

727,200
16,803379
23
19,956
316
1,001
30
4,054
5,745
775,507
10,00060,93370,933
2,801
7,277
10,07881,011
856,518$$

765,740
50,049220,501
7,818,344
32,433
175,992
176,137
17,4508,647
18,121
78,410(163,894)
9,197,930

LIABILITIES AND NET ASSETS (SHAREHOLDERS’ EQUITY)
Liabilities:

Net assets:

60

Deposits
Call money and bills soldBorrowed money
Foreign exchanges
Other liabilities
Provision for bonuses
Provision for retirement beneﬁts
Provision for reimbursement of deposits
Deferred tax liabilities for land revaluation
Acceptances and guarantees
Total liabilities
Capital stock
Retained earnings
Total shareholders’ equity
Net unrealized gains on securities
Revaluation reserve for land
Total valuation and translation adjustments
Total net assets
Total liabilities, and net assets¥¥

829,93971
316
86
18,140
340
988
42
4,038
8,070
862,030
10,00062,133
72,133
5,240
7,248
12,48884,621
946,651¥¥$

8,063,923
690
3,070
836
176,253
3,304
9,600
408
39,23478,4108,375,728
97,163603,702700,865
50,91370,424
121,337
822,202
9,197,930

NONCONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

Years ended March 31, 2014 and 2013

Millions of yen
2014

IncomeInterest income:Interest on loans and discounts
Interest and dividends on securities
Other interest income
Fees and commissions
Other ordinary income
Other income
Total income
Expenses
Interest expense:
Interest on deposits
Interest on borrowings and rediscounts
Other interest expense
Fees and commissions payments
Other operating expenses
General and administrative expenses
Impairment losses
Other expenses
Total expenses
Income before income taxes and minority interests
Income taxes:
Current
Deferred
Net income

Amounts per share of common stock:
Net income¥¥

10,406
273
67
1,421
274
377
12,818

Thousands of
U.S. dollars
2014

Millions of yen
2013¥

10,520
290
106
1,232
173
460
12,781$

101,108
2,653
651
13,807
2,662
3,662
124,543

963
4
15
569
1
9,133
—
54
10,739
2,079

930
36
16
515
1
9,157
161
46
10,862
1,919

9,357
39
146
5,529
10
88,739—523
104,343
20,200

237
671
1,171

(102)
803
1,218

2,303
6,519
11,378

¥

Yen
2014

Yen
2013

¥ 1,170,940.85¥1,218,074.95$

U.S. dollars
2014$

11,377.19

61