To be a financial group that nurtures andgrows with our region
Yamaguchi BankYMFGMomiji Bank

Kitakyushu BankANNUAL REPORT2016

For the year ended March 31, 2016

YMFG Profile (As of July 31, 2016)

YMFG Networks

Dalian Branch(Yamaguchi Bank)

Yamaguchi Bank
(Head office: Shimonoseki City)

YM Securities

Busan Branch
Qingdao Branch(Head office: Shimonoseki City)

Momiji Bank
(Head office: Hiroshima City)(Yamaguchi Bank)(Yamaguchi Bank)

Hong Kong Representative Office(Yamaguchi Bank)

Kitakyushu Bank
(Head office: Kitakyushu City) Yamaguchi Bank
Networks in Japan: 133 (109 head office and branch offices, 24 sub-branch offices)
Networks in overseas: 4 (3 branch offices, 1 representative office) Momiji Bank
Networks in Japan: 114 (96 head office and branch offices, 18 sub-branch offices) Kitakyushu Bank
Networks in Japan: 36 (35 head office and branch offices, 1 sub-branch office) YM Securities
Networks in Japan: 19 offices

Contents
YMFG Profile .........................................................................1
Message from the President ...................................................3

Economies and Industries of Yamaguchi Prefecture,
Hiroshima Prefecture, and Kitakyushu City (Reference) .........12YMFG Medium-Term Management Plan (FY2016–FY2018) ....4

Overseas Networks ..............................................................13

Solution Model (Expand the Business Evaluation Function) .....5

Corporate Governance.........................................................14

Lifecycle Management Model (Demonstrate FP Function) .......6Internal Audits and Compliance System ...............................15

Improve Ability to Resolve Issues ............................................7

Risk Management System ....................................................16

YMFG Forecast for the Fiscal Year Ending March 31, 2017 .....8

Contributions to the Community and the Environment ........17

Performance Highlights (YMFG) .............................................9

Financial Section ..................................................................18

Performance Highlights (Three Banks) ..................................11
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.

1

YMFG Annual Report 2016

YMFG Financial Highlights (For the fiscal year ended March 31, 2016)¥10.4

trillion¥9.5

trillion

Total Assets

Net Income(Consolidated)(Consolidated)

Total assets on a consolidated Group basis amounted
to ¥10 trillion.

¥32.2

billion%billion year on year, to¥32.2 billion.

Deposit Balance

Balance of Loans(Three Banks)(Three Banks)

Liquid deposits and timeand savings deposits bothrose favorably.

¥6.4

trillion

Capital Ratio(Basel 3)

13.37

Net income rose ¥1.7

(Consolidated)
This represented a year-on-

Principal contributors to theincrease were rises in housing loans and loans toregional government bodies.

Tier 1 Ratio(Basel 3)

12.72

%

year decrease of 0.06 per-(Consolidated)
This ratio was up 0.99
percentage point.

centage point.

Non-Performing
Loan Ratio

1.62

%

(Three Banks)
Our non-performing loan
ratio improved, dropping by
0.22 percentage point.

Credit RatingA(Stable)R&I(YMFG)
Date of rating announcement: August 10, 2015

YMFG Annual Report 20162

Message from the President

Strengthening the Group’s management
base, bolster operating performance andcontribute to the region

hank you for your continued support of theTthese companies, we worked to provide even better

Yamaguchi Financial Group (“YMFG”).

services to customers in the region.

Group and its business results for the fiscal year

an audit and supervisory committee,” along withended March 31, 2016, and is designed to help you

Yamaguchi Bank, Momiji Bank, Kitakyushu Bank andunderstand more about YMFG.

YM Securities. The new structure is expected to stepThis annual report provides an overview of the

In June 2015, we transitioned to a “company with

With the Bank of Japan’s introduction of aup the management and supervisory functions andnegative interest rate policy in February 2016, thefurther bolster the Group’s corporate governanceenvironment in which financial institutions operate

structure, further enhancing our corporate value.

entered a difficult phase that goes beyond all past

The fiscal year ending March 31, 2017, will markexperience. Against this backdrop, we will fulfill our

the start of a new medium-term management plant,

mission of contributing to economic development

the “YMFG Medium-Term Management Plan 2016.”

from the standpoint of regional revitalization by

With all employees operating in accordance with its

striving to reinforce our financial strength and“consulting first” guidelines, we will endeavor to

profitability. We are aware of the need to further

contribute to the growth of our customers throughfacilitate the provision of funds and expand ourthe combined power of the Group.

financial services. Under these economic conditions,
supported by its shareholders and business partners
all YMFG’s officers and employees were united in

We look forward to your continued patronage
and support.
August 2016

their efforts to strengthen the Group’s management
base, bolster operating performance and contributeto the region.
During the fiscal year ended March 31, 2016,
we established YMFG Zone Planning Co., Ltd., as awholly owned consulting company specializing inregional revitalization in July 2015. In January 2016,
we established YM Asset Management Co., Ltd., toaugment our asset management business. Through3

YMFG Annual Report 2016

Takeshi Yoshimura
President
Yamaguchi Financial Group, Inc.

YMFG Medium-Term Management Plan (FY2016–FY2018)

Our Goals

To be a financial group that nurtures andgrows with our region
Road to “YMFG Zone”
Zone of Over-regional Network Economy

To be a financial group that exceeds customer
expectations through overwhelming quality
Amazing “YMFG Quality”

Core Objective

Change the way, Refine the quality, Design the future.
Behavioral
guidelines

Escape frominterest rate competition

Business Model(Provide deposits and simple services)

Solution model(Expand the business evaluation
function: Change providing value
to resolve management issues)

Consulting first

Escape froma “product-out” mentality(Sell investment trusts andstand-alone, lump-sum insurance)

Lifecycle management model(Demonstrate FP function:
Provide optimal strategies tomatch lifecycle)

Priority Measures/
Keywords

Build a regional management structure, revise the performanceStrengthen on-the-ground capabilities evaluation system and improve on-the-ground productivity
Expand the FP brand

Leverage FP to expand the retail business

Reconfigure the Asia strategy

Put in place an Asian network and strategically allocate specialized
human resources

Take risks proactively

Increase risk tolerance in areas we are currently unable to cover

Improve ability to resolve issues

Create a system that allows for the realization of consulting as
an organization, and cultivate human resources

YMFG Annual Report 2016

4

Solution Model (Expand the Business Evaluation Function)

Business evaluation function:
Grow nearer to customers through the credit function and solution function
Customer needst Consider our future when evaluating us
t Resolve our management issuest Response swiftly

Specific measurest Dismantle credit supervision departments, shift business evaluation function to regions(Qualitative information, region-specific evaluations and proposals)t Establish a regional management structure (Clarify authority and responsibility)t Augment the function for researching industry trends (Conduct at FG)

Headquarters

Local management structure
Regional businessevaluation offices

FG business evaluation
Industry researching, etc.

RegionProvideadded value

SupportCustomers

Regional flagshipoutlets Sales outlets

Solution Group

Credit judgments and solutions

Differentiate ourselves from other banks
through compensation in line with added value

Increase share oftransactions

5

YMFG Annual Report 2016

Discover demand
for funding

Escape from interest
rate competition

Lifecycle Management Model (Demonstrate FP Function)

A structure for providing optimal products and services to match lifecycle and asset scale

YMFG FP brandServices optimized for a variety of customers

Sales channels
with banks as core

YM Securities
YM Asset
Management

Wrap-type
investment
trusts, etc.

High-quality investments,
structure bonds, stocks, etc.

Seniors, wealthy andsemi-wealthy classes

Mediation,
introduction

Provideproducts

Banks

Customers

Resume investment trusts,
savings-type insurance

Asset formation classMediation,
introduction

YM Life Planning

Investment trust sales,
protection-type insurance

Return customers’ investment needs back upstream<PDCA cycle of optimal product design>Compensation in line with added value
Differentiate ourselves from other banks

The three banks
Receive insurance sales commissions

Increase Groupinvestment trust balance

YMFG Annual Report 20166

Improve Ability to Resolve Issues

Provide “consulting as an organization” in order to resolve the issues customers face.
Promote human resource development and increase the number of salespeople, as well as
developing services through alliances with Fintech companies.

Variety of issues
experienced bycustomers andthe region

Small andmedium-sizedcompanies
Succession problems
Management
improvement,
expansion inscale of business

Regional andlocal governments
Overall design ofthe regional economy

Individuals
Future design
Asset investment

YMFG Initiatives
Augment personnelt Consolidate headquarters functions at sales location BPR and FG to increase number of solution personnel (aimfor 50% personnel increase)

Develop human resourcest Develop practical skills (behaviors leading to success)t Increase number sent overseas and into different sectors

Promote human resourcest Reinforce mid-career hires, etc.

Leverage companies specializing in consultingt YM Consulting (corporate, FP)t YMFG ZONE Planning (regional invigoration)

Make use of ITt Pursue highly convenient services through leading-edge technologies

Issue resolved

7

YMFG Annual Report 2016

YMFG Forecast for the Fiscal Year Ending March 31, 2017

Although the operating environment remain adverse, we expect income and profit categories to increase during the fiscal year ending March 31, 2017.
In the first year of our medium-term management plan (2016–2018), we expect consolidated ordinary profits for the YMFG Group to amount to ¥50.0 billion, up ¥0.2 billion year
on year. We also anticipate net income attributable to owners of the parent of ¥33.0 billion, up ¥0.7 billion.
(Billions of yen)

YMFG (Consolidated)
Fiscal Year Ending
March 31, 2017

Year-on-Year Change

Total income

156.0

(9.5)

Ordinary profits

50.0

0.2

Net income attributable to owners of the parent

33.0

0.7

Yamaguchi Bank (Non-Consolidated)
Fiscal Year Ending
March 31, 2017

Year-on-Year Change

Total income

78.0

(9.3)

Ordinary profits

32.0

(2.7)

Net income attributable to owners of the parent

22.0

(2.7)

Momiji Bank (Non-Consolidated)
Fiscal Year Ending
March 31, 2017

Year-on-Year Change

Total income

46.0

(4.8)

Ordinary profits

14.0

(1.4)

Net income attributable to owners of the parent

9.5

(0.9)

Kitakyushu Bank (Non-Consolidated)
Fiscal Year Ending
March 31, 2017

Year-on-Year Change

Total income

14.0

(0.4)

Ordinary profits

3.0

(0.1)

Net income attributable to owners of the parent

2.0

0.1

Note: Figures have been rounded off below the stated amounts.

YMFG Annual Report 20168

Performance Highlights (YMFG)
Performance during the fiscal year ended March 31, 2016
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 decreased ¥5.3 billion

international standard) under Basel III was 13.37%. The total

year on year, to ¥28.4 billion. This outcome stemmed fromTier 1 capital adequacy ratio was 12.72%, and consolidated

lower interest income compared with the previous fiscal year.

common equity Tier I capital adequacy ratio was 12.72%.

Ordinary profits increased ¥3.6 billion, to ¥53.4 billion, andnet income attributable to owners of the parent amounted to¥37.0 billion.

14

Business Profits from Core Operations
Ordinary Profits
Net income Attributable to Owners of the Parent
50.0

53.4

49.8

(%)

13.43

13.37

12.69

13

(Billions of yen)

60
50

Capital Adequacy Ratio
Tier I Ratio

12.72

12

11.73

11

11.10

10

40
30

33.1

30.5

37.0

33.7

32.1

9

28.4

2014

2015

2016
(Basel III)20

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

10
0

2014

2015

2016

Euro-dollar convertible bonds issued (Mar. 2015)

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

Amount
Coupon

Maturity$300 million
5 years
Three-month U.S. dollar LIBOR -0.5% (however,with 0% as minimum)Objective

To meet the growing needs of the Group’s corporate(Billions of yen)(%)

customers as they move into overseas markets and expand their

250

2.5

businesses and transactions overseas, YMFG aims to augment

200

YMFG
1.62 2.0

2.31

1.84
1.62

150

118.0
54.7

100

47.0

42.8

22.9
2014

2015

55.1

50.3

16.0

12.8
2016

convertible bonds to facilitate stable U.S. dollar fundraising.
By attaching contingent conversion and call conditions, we
aim to restrain convertibility to common stock, thereby providing

105.9

63.4

50
0

YMFG
1.5
106.0

140.9

its foreign-denominated lending. We have issued these

1.0
0.5

a debt product that gives ample consideration to existing
shareholders. Rather than being zero-coupon, the bonds have avariable interest rate to further restrain potential dilution.

0.0

Purchase of treasury stock (Mar. 2015)
Amount

10 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.
(13.37%)
CapitalCapitalCapitalRepurchase own shares

Lowering funding cost of U.S.$ with minimizing dilution shareholder value

9

YMFG Annual Report 2016

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.

¥9,526.1 billion including Negotiable Certificates of Deposit

The total deposit balance at term-end was ¥8,714.4 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 August 10, 2015)

A

YMFG

BBB

10,000

Yamaguchi BankB

A+ (stable)

CCC

9,295.2

9,526.1

2015

2016

6,000

A+ (stable)

C

8,809.4

8,000

Momiji BankCC(Billions of yen)

12,000A (stable)

BB

Deposit Balance (Three Banks)

4,000
2,000
0

2014

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 ¥6,471.5 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)

8,000
6,000

6,032.2

6,290.4

6,437.1

3,652.0
58.1%

3,755.1
58.3%(Billions of yen)
1,500

6,471.5

6,326.0

6,003.2

Balance of Personal Loans

1,200

1,078.6
18.0%

900
4,000

3,520.6
58.6%

1,209.9
18.7%

600

2,000
0

1,136.5
18.1%

300
2014

2015

0

2016

2014

2015

2016

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, 2017 (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.

¥50.0 billion and net income attributable to owners of the

In the year ended March 31, 2016, the dividend per shareparent of ¥33.0 billion.

at term-end was ¥8. Combined with the interim dividend of ¥7
per share, the full-year dividend amounted to ¥15 per share.
FY2013

FY2014FY2015(Yen)
FY2016(Forecast)

Annual dividend per share
13.0(Interim dividend) (6.0)

14.0
(7.0)

15.0
(7.0)

18.0
(10.0)YMFG Annual Report 201610

Performance Highlights (Three Banks)

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(Billions of yen)

80

60

59.0

65.9

59.8

40

20

0

2014

22.5

2015

18.3

Tier I Ratio(Billions of yen)

40

30

20

19.7

Capital Adequacy Ratio

Ordinary Profits
Net Income

30.6

31.3

34.8

20.0

15

0

2014

2015

15.22

2016

15.66

14.22

14

14.06

13

13.27

0

2014

10

2016

16.32

16

24.7
19.0

(%)
17

2015

2016
(Basel III)

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)

50

41.5
40

40.0

37.3

Ordinary Profits
Net Income
20

Capital Adequacy Ratio
16

15.4

14

12.9

30

10.6

10.5

10

0

8.9

9.3

8.2

2014

2015

2016

12

11.55

11.31

2014

2015

10.83

10

20
10

(%)

17.3
15.5

15

(Billions of yen)

5

0

0
2014

2015

2016

2016
(Basel III)

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)

15
12

10.9

11.0

Ordinary Profits
Net Income
4

11.5

3.0

3

2
6

0

11

(Billions of yen)

14

3.2

13

1.2
1.9

1.9

1.9

2014

2015

2016

YMFG Annual Report 2016

(%)

12.10
11.49

12

2.1

9

3

Capital Adequacy Ratio

1.5

1.8

10.75

11

1

0

0
2014

2015

2016

2014

2015

2016
(Basel III)

Economies and Industries of Yamaguchi Prefecture,
Hiroshima Prefecture, and Kitakyushu City (Reference)
Yamaguchi Prefecture
Excellent industrial
concentration

Gateway to exchanges with
Asia

Rich industrial humanresources• Many plants of major corporations • Excellent harbor conditions with 2 • Excellent historical backgroundlocated owing to the excellent
international harbors and 4 majorthat has traditionally nurtured thetransportation network
harbors in the prefecturesocial climate encouraging study
and education•Concentration of primary material • The largest export and importindustries such as cement andchemicals owing to the richmineral resources• Increasing entries of processing
and assembly industries such astransportation machinery andmore recently the pharmaceuticalindustry

Major companies and plants
in Yamaguchi Prefecture• Ube Industries Ltd. (cement,chemicals)• Tokuyama Corporation (cement,chemicals)

center in the Chugoku region such • Excellent support system under the • Chofu Seisakusho Co., Ltd. (metal
as auto parts and chemicals
industry-academic coordination
products)
such as joint research between• Serves as the production center• Mitsubishi Heavy Industries, Ltd.
a university and a private-sector
in western Japan for many global(shipbuilding)company, R&D to develop next
enterprises•
Bridgestone Corporation (rubber)generation industries, etc.
• Nippon Steel & Sumikin StainlessSteel Corporation (steel pipes)• Tosoh Corporation (chemicals)

Hiroshima Prefecture
The largest industrial
prefecture in the Chugoku
and Shikoku regions

Manufacturing industry
centered around Mazda
Motor Corporation• Growth of heavy industries,
particularly transportation
machinery such as automobiles
and shipbuilding, leveraging thetechnological strength developed
through military manufacturing• The formation of a group of
broad-based automobile-relatedcompanies with Mazda Motor
Corporation on top of thehierarchy• Ranks No. 12 in Japan in terms of
nominal gross prefectural productwith a share of 2.3%
in Japan.

• The shipbuilding industry
encompassing middle-ranking
and small and medium-sized
shipbuilding companies andrelated manufacturers such as
pumps and turbines, which holds
the No. 1 share in Japan

Home of many No. 1
enterprises

Major companies and plants
in Hiroshima Prefecture• Many local enterprises in a variety • Mazda Motor Corporationof industries with nationwide(automobile)
reputation and a large domestic• Tsuneishi Holdings Corporation
market share through leveraging(shipbuilding)
excellent technologies• Ryobi Limited (non-ferrous metal)(Refer to the right section)• JMS Co., Ltd. (medical equipment)• Molten Corporation (athletic balls)• Aoyama Trading Co., Ltd.
(menswear)• Additional concentration of
traditional industries suchas the fiber industry and the
manufacturing of furniture for
newlywed couples

Kitakyushu City
Concentration of a variety of City of manufacturingindustries• Steel accounts for approximately• Kitakyushu City was born in 1963
through a merger of 5 cities.

40% of the total manufacturingindustry• Concentration of auto assemblyplants including Nissan Motor• New concentration of increasingly Kyushu Co., Ltd., Toyota Motor
Kyushu, Inc., and Daihatsu Motordiverse industries such as autoKyushu Co., Ltd.
related industries due to the• Recent concentration ofproximity to Asia and the highly
semiconductor design companies
developed logistics infrastructure
owing to the development of
Kitakyushu Science and ResearchPark• Mainly heavy and chemicalindustries (steel in the main)

Environmental and energy
industries

Major companies and plants
in Kitakyushu City

• A forerunner of the ecotown business leveraging theconcentration of industrial
technology with broad
manufacturing bases• Nippon Steel & Sumitomo Metal
Corporation (iron manufacturing,steel)• TOTO Ltd. (construction equipment)• Mitsubishi Chemical Corporation• Research and development is(petrochemical functional
conducted on new energy sources products)
such as the technology to reduce• Yasukawa Electric Corporation
the oxygen content under the(industrial robots)
promotion system developed• Mitsui High-tec, Inc.
through the industry-academic(semiconductor-related products)
public coordination• Zenrin Co., Ltd. (information andcommunication)

YMFG Annual Report 201612

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[China]-Yamaguchi Bank, Dalian Branch-Liaoning Normal University
Language trainee:1[China]-Yamaguchi Bank, Qingdao Branch[India]Business alliance:
State Bank of India

Dalian[China]-Yamaguchi Bank
Hong Kong Representative Office[Vietnam]Business alliance: Vietcombank

Mumbai[Korea]-Yamaguchi Bank, Busan Branch-Pusan National Univ.
Language trainee:1[Thailand]Business Alliance:TMB Bank
Assigned employees: 2

QingdaoBusan

Shanghai
Hong
Kong Taipei
Hanoi

YangonBangkok

ManilaHo Chi Minh

[Vietnam]
JETRO
Assigned employee: 1[China]-Kitakyusyu Business
Promotion Office, Shanghai
Assigned employees:1[Philippines]
Business alliance:
Metropolitan Bank & Trust Company[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)

40,00022,278

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

13

YMFG Annual Report 2016

34,3952015

2016

28,97630,000Overseas Offices

35,551
24,95720,00010,000

0

2012

2013

2014

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

Based on its management policy of maintaining a sound and proactive

The Board of Directors, consisting of nine directors (including three

enterprising spirit, YMFG aims for management transparency and fair,outside directors), makes decisions about important matters related toswift and bold decision-making that will lead to sustainable growth andthe Group’s management and supervises the directors. The Nomination

increases in corporate value over the medium to long term. To this end andCommittee discusses matters related to the appointment and dismissal

recognizing that creating an effective corporate governance system is anof directors, and the Compensation Committee discusses matters related

important management priority, on an ongoing basis we are pursuing theto the compensation of the directors. Both guarantee the objectivity andinitiatives described below to enhance our corporate governance.

transparency of decision-making processes.

i. We strive to ensure the rights of shareholders and create an environment

YMFG has adopted an audit and supervisory committee system. The

that facilitates the appropriate exercise of shareholders’ rights andAudit and Supervisory Committee comprises three directors, of whom two

substantive shareholder equality.

are outside directors. The committee audit the execution of operations by

ii. We cooperate closely with our principal stakeholders, including

directors, configure, audit and verify the operation of internal control systems

customers, the local community, shareholders and employees.

at YMFG and its subsidiaries, and prepare audit reports. By having the Auditiii. We diligently disclose important management-related information to ourand Supervisory Committee, which chiefly comprises outside directors, exercise

principal stakeholders.

its voting rights at Board of Directors meetings, we endeavor to reinforce its
auditing and supervisory function with respect to the Board of Directors andiv. We endeavor to ensure the effectiveness of the business execution

enhance the transparency and speed of the decision-making process.

supervisory and auditing function through the establishment of various

The Group Compliance Committee, the Group Asset and Liability

institutions, including the Board of Directors.

Management Committee and Group Operational Risk Management

v. We create systems to promote constructive dialogue in order to build

Committee discuss important management issues.

long-term relationships with shareholders.

YMFG Corporate Governance Structure
YMFG (Company with an Audit and Supervisory Committee)
General Meeting of Stockholders
Appointment/Dismissal(including 2 outside directors)

Audit(Legality and adequacy)

Cooperation
ReportAuditors and Supervisory
Committee Office

9 Directors(including 3 outside directors)

Accounting Auditor
Appointment
Accounting Audit

Appointment/Dismissal
Supervision

Command

Audit and Inspection Dept. Report

Compensation
Committee

Reports andRecommendation

Internal Audit

Nomination
Committee(Voluntary advisory body)PresidentGroup ALM Committee

Business Execution Structure

Designated Board Members

Group Compliance Committee(Executive directors)
CommandGroup Operational Risk Management Committee
ReportAppointment/Dismissal

Board of Directors

Audit and Supervisory Committee
3 Members

Appointment/Dismissal

Cooperation

Policy Indication/Plan Approval

Operation Departments

Yamaguchi Bank

Momiji Bank

Kitakyushu Bank

YM Securities YM Lease, Izutsuya Withcard, YM Consulting, Kitakyushu Economics Institute, Sanyu, Momiji Estate, Yamagin Card, YM
Guarantee, YMFG Zone Planning, YM Asset Management, YM Life Planning, YM Saison, Yamaguchi Capital, Momiji Card

Company with an audit and supervisory committee

YMFG Board of Directors and Corporate Auditors (As of July 1, 2016)
President

Director

Chairman

Director

Susumu Fukuda

Koichi Fukuda

Mitsuru Kato

Senior Managing Director

Director

Director
Audit and Supervisory Committee Member

Hiroaki Tamura*Takeshi Yoshimura

Hirohide Umemoto

Ichinari Koda

Director
Audit and Supervisory Committee Member

Kazuo Tsukuda*

Director
Audit and Supervisory Committee Member

Michiaki Kunimasa** Hiroaki Tamura, Kazuo Tsukuda and Michiaki Kunimasa are outside directors under Article 15 of Section 2 of the Companies Act.

YMFG Annual Report 201614

Internal Audits and Compliance System

Internal Audits
Principles of Internal Audits
We define an internal audit as a series of processes forGroup company’s internal audits.
The YMFG Audit and Inspection Dept. devises the rules andobjective verification of the appropriateness and effectivenessmedium- to long-term plans for the Group’s internal audits,of internal controls (including risk management) and as

implements audits of the Group companies’ compliance/riskmaking suggestions for necessary improvements.

management departments and checks the accuracy of the

YMFG has devised standard internal audit rules for thefinancial statements of the Group companies. The department

whole Group. On the basis of these rules, the internalmonitors and gives guidance and advice to the Groupaudit departments of each Group company verify thecompanies’ audit and inspection departments. On the basis

appropriateness and effectiveness of internal controls andof their audit reports, the department reports on the internal

make suggestions for necessary improvements.

audits of the Group to the Board of Directors and audit andFurther, YMFG creates the Group’s medium- to long-term
internal audit plan on the basis of its management policy andsupervisory committee.
The banks’ audit and inspection departments implement

conditions. Internal audits by the auditing bodies of eachinternal audits of branches in Japan and overseas, andGroup company are conducted on the basis of this plan toreports to YMFG and to the Board of Directors and audit

ensure their effectiveness and efficiency.

and supervisory committee. In particular, internal audits offront-line sales outlets are performed to verify the status of

Implementation of Internal Audits

compliance and risk management functions and ensure their

YMFG’s Audit and Inspection Dept. plans audit processes

mutual effectiveness.

for the whole Group, implements audits and supervises each

Compliance System
YMFG’s Attitude toward Compliancecommittee discusses ways to create and reinforce compliance

YMFG and its Group companies share a common understanding

systems, reports the results of these deliberations to the Boardof their responsibilities to fulfill their public mission andof Directors and reflects these results in Group operations.

corporate social responsibilities. Accordingly, we accord

YMFG’s Compliance Administration Department

topmost management priority to thorough compliance, takecommunicates with compliance personnel at each Groupthe seriousness of compliance seriously and consider earningcompany and, in accordance with the deliberations of thethe trust of a broad-based society our fundamental policy.

Group Compliance Committee, ensures the appropriateness ofcompliance systems for the entire Group.

Compliance System
We have established a compliance administration department

Efforts to Prevent Money Laundering

to take overall charge of ensuring appropriate compliance

The Act on Punishment of Organized Crimes and Control offor YMFG and its Group companies. Individual companies’

Crime Proceeds and the Law for Prevention of Transfer ofcompliance departments handle the centralized management

Criminal Proceeds prescribes heightened measures to preventof compliance-related activities, including the creation ofmoney laundering. The Group’s efforts are appropriate and incompliance structures and the training of executives andconformance with these regulations, in keeping with our aim

general employees. Compliance supervisors and officers at allof maintaining society’s trust in us as a financial institution.

departments and branches foster an enhanced awareness ofSpecifically, we have formulated a policy of controls andappropriate compliance in daily operations.

procedures reasonably designed to prevent and detect money

The Group Compliance Committee, chaired by thelaundering/terrorist financing activities. We have appointed

president, acts as a deliberative body. This committee

a senior officer to take charge of this policy and establishedformulates Group compliance programs for each fiscal year

training programs on this topic for all management and staff.

and monitors the status of program implementation. The

15

YMFG Annual Report 2016

Risk Management System

YMFG Risk Management System
YMFG#PBSEPG%JSFDUPST "VEJUBOE4VQFSWJTPSZ$PNNJUUFF
ReportGroup ALM Committee

Committees

Risk Administration Dept.

Risk Management
Control Department
Risk Category

Risk
Administration Dept.

Risk
Administration Dept.

*OEFQFOEFOU
Auditors

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-JRVJEJUZ3JTL

Credit Risk

Department in Chargeof Risk Management

Group Operational Risk Management Committee

Risk Administration Dept.
Compliance Administration Dept.
Corporate Administration Dept.
*5"ENJOJTUSBUJPO%FQU

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Report on risk
management%JSFDUJPOTPOCBTJDQPMJDJFTBVEJUTZTUFNQSJODJQMFT

Yamaguchi Bank

Momiji Bank

Kitakyushu Bank#PBSEPG%JSFDUPST "VEJUBOE4VQFSWJTPSZ$PNNJUUFF
Committees

Group ALM Committee

Risk Category

Credit Risk

ReportGroup Operational Risk Management Committee

Risk Administration Dept.

Risk Management
Control Department

Direction/Audit

Market Risk
-JRVJEJUZ3JTL

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Operational Riskt1SPDFTTJOHSJTL
t4ZTUFNSJTLt*OGPSNBUJPOSJTLt-FHBMSJTLt5BOHJCMFBTTFUSJTLt1FSTPOOFMSJTL

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FG Audit and*OTQFDUJPO%FQU

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Related Departments

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Operations

YM Securities YM Lease Izutsuya Withcard YM Consulting Kitakyushu Economics Institute Sanyu Momiji Estate Yamagin CardYM Guarantee

YMFG Zone Planning YM Asset Management YM Life Planning YM Saison Yamaguchi Capital Momiji CardYMFG faces all kinds of risks that have become moremeasured by a uniform method, capital is allocated on thediversified and complex along with changes in the economy

basis of these methods, and risks are collectively managed.

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,

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 andrisk management departments and Group Operational Risk

effectiveness of risk management. This system applies both toManagement committee to cope with risks. Risk amounts are

YMFG and to its subsidiaries.
YMFG Annual Report 201616

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 160 students,
offering them housing and financial and lifestyle support to ensure a comfortable study
environment.
Foreign students to Shimonoseki City University
in fiscal 2016

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, 2016

Actions:

Three days each month are 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, Momiji Bank and Kitakyushu Bank areholding campaigns to curb global warming, such as by giving

Warm Biz Implementationout environmentally friendly eco-goods on the anniversaries of

Period:From December 1, 2015 to March 31, 2016

the opening of each branch.

Participants:

All Group companies

Actions:

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

17

YMFG Annual Report 2016

Financial Section

Financial Section
YMFG Business Situation........................................... 19
Consolidated Financial Statements ............................ 21
Notes to Consolidated Financial Statements .............. 25
Independent Auditor’s Report ................................... 56
Yamaguchi Bank Financial Statements ...................... 57
Momiji Bank Financial Statements ............................. 59
Kitakyushu Bank Financial Statements ....................... 61
YMFG Annual Report 201618

YMFG Business Situation
Summary of Business Results

In January 2016, we established YM Asset Management
Co., Ltd., in cooperation with the Daiwa Securities Group

Performance
During the fiscal year ended March 31, 2016, the Japanese

in an effort to reinforce our asset investment business.
Banking operations, which are the core of YMFG’s

economy pursued a course of modest recovery, due in partbusiness, are conducted through the efforts of its banks toto the impact of various government measures. Production

meet the varied financial needs of customers in the regions

activity showed signs of weakness in some areas, stemmingwhere they conduct business via a wide range of financialfrom an economic slowdown in China and other areas ofproducts through their deposit and loan operations.

the overseas economy, but remained strong overall. At the

In deposit products, we offered time deposits withsame time, in February 2016 the Bank of Japan introduced

special interest rates under the “Campaign to deposit youra negative interest rate policy in an attempt to stave offmoney in YMFG, receive it, and rebuild your hometown”

deflation through further monetary easing.

and the “YMFG three arrows lucky campaign.”

Meanwhile, the region continued to enjoy a modest
recovery. Overall production activity was solid, withstrong performance centering on the automotive sector.

In loan products, we began handling the “loan to combat
unoccupied houses” and the “home loan for UJI turners.”
In July 2015, we established YMFG Zone Planning Co.,

Personal consumption began to make a compact,

Ltd., as a wholly owned consulting company specializing inamid improvements in the employment and income

regional revitalization. Putting all its efforts into initiatives

environment.

to address the issues facing the Group’s hometown

Against this backdrop, in line with their mission ofarea of Yamaguchi, Hiroshima and Kitakyushu, the newcontributing to regional economic development, regional

company provides comprehensive business support themed

financial institutions face requests to deliver stronger

on regional revitalization and aimed at boosting thefinancial soundness and profitability, supply funding moreproductivity of the region and the companies located there.

flexibly and further enhance their financial services.

In international operations, Yamaguchi Bank
cosponsored the “Seventh Hong Kong and South China

YMFG Performance
Amid these financial and economic conditions, supported

as one of the 17 regional banks with offices in Hongby its shareholders and business partners all YMFG’sKong. We also cosponsored the “Vietnam Businessofficers and employees were united in their efforts to

Networking Event 2015” in Hanoi in June 2015 andstrengthen the Group’s management base, bolster

in Ho Chi Minh City in December in collaboration with

operating performance and contribute to the region.

Joyo Bank, Hyakujushi Bank, Juroku Bank and Nanto

In the final year of the “YMFG Medium-Term

19

Business Networking Event for Japanese Companies”

Bank, which also use our shared regional bank computer

Management Plan 2013,” which commenced in the fiscal

system. Furthermore, to support customers’ overseas

year ended March 31, 2014, we strengthened regionaltransactions we concluded a trade insurance business

relations as a group centered on three banks—Yamaguchi

agency agreement with Nippon Export and Investment

Bank, Momiji Bank and Kitakyushu Bank—and worked

Insurance. YMFG is reinforcing the Asian network it has

together with YM Securities, YM Consulting and otherconstructed in order to facilitate overseas business efforts

Group companies to pursue comprehensive Groupand will continue to support customers’ Asian businesscapabilities as “One YMFG.”

developments going forward.

YMFG Annual Report 2016

billion at year-end, down ¥203 billion, due to decreases in

Financial Results
YMFG’s consolidated operating performance for the year

Japanese bonds. This change reflected investment decisions

ended March 31, 2016, is outlined below.

made in consideration of market fluctuations.

Total income amounted to ¥166,858 million, up ¥5,421

Total assets amounted to ¥10,438 billion at fiscal

million from the preceding fiscal year. The main reasons foryearend, up ¥243 billion from one year earlier. This rise

this increase were higher other ordinary income, including

was attributable to growth in loans and bills discounted,

income on sales of government and other bonds, and an

based on the increase in deposits, including NCDs.
At the end of the fiscal year, the consolidated capitalincrease in gains on sale of stock.

adequacy ratio for the Yamaguchi Financial Group (uniform

Total expenses, meanwhile, rose ¥3,877 million, to¥115,999 million, due to such factors as an increase ininternational standard) was 13.37%. Our consolidated

other operating expenses. As a result, income before

total Tier 1 capital adequacy ratio was 12.72%, and our

income taxes increased ¥1,544 million, to ¥50,859 million,

consolidated common equity Tier I capital adequacy ratio

and net income attributable to owners of the parent rose

was 12.72%.
Net cash provided by operating activities was ¥22 billion,¥1,773 million, to ¥32,296 million.
Although interest rates remained low, due to the¥205 billion lower than in the preceding fiscal year, mainly

expansion of products and services to meet increasingly

due to change in call loans and negotiable certificates ofdiverse customer needs and steady marketing efforts based

deposit. Net cash provided by investing activities was ¥222

on solid community relationships, the Group succeededbillion, a ¥399 billion change from cash used in thesein boosting deposits ¥301 billion year on year, to ¥9,510

activities in the previous year, principally because of decreased

billion, including negotiable certificates of deposit (NCDs).

purchases of securities. Net cash used in financing activities

Loans and bills discounted increased ¥221 billion, toamounted to ¥28 billion, a change of ¥47 billion from the¥6,449 billion as of March 31, 2016, due to the Group’s

cash provided by these activities in the fiscal year ended

efforts to fulfill its role as a regional financial institution

March 31, 2015. Principal factors were the absence ofthrough its function as a financial intermediary and aggressive

proceeds from issuance of bonds with warrants and payments

efforts to meet demand from business partners with whom

for the redemption of subordinated bonds payable. As a

the Group has developed trust-based relationships.

result of these cash flows, cash and cash equivalents at theend of the fiscal year came to ¥1,159 billion, up ¥216 billion.

The Group’s holdings of securities came to ¥2,121

Yamaguchi Financial Group, Inc., Management Indices (Consolidated)

Consolidated total income
Consolidated net income attributable to owners of
the parent
Consolidated comprehensive income
Consolidated total net assets
Consolidated total assets
Net assets per share
Current term net income per share
Current term net income per share (diluted)
Capital ratio*2
Earnings on equity - increase
Group price earnings ratio

Millions of yen
2016

Millions of yen
2015

Millions of yen
2014

Millions of yen
2013

Thousands of
U.S. dollars*1
2016

166,858
32,296

161,437
30,523

161,180
31,242

158,452
27,233

1,480,813
286,617

7,840
583,168
10,438,005
2,357.89
yen
132.43yen
109.39yen
13.37%
5.62%
7.72 times

75,211
578,388
10,195,184
2,346.56
yen
120.88yen
108.24yen
13.43%
5.61%
11.44 times

34,322
521,470
9,635,044
2,040.02
yen
120.68yen
116.57yen
12.69%
6.04%
7.70 times

51,743
521,423
9,327,236
1,901.30
yen
102.48yen
102.18yen
13.34%
5.52%
9.28 times

69,5785,175,435
92,634,052
20.93
U.S. dollars
1.18
U.S. dollars
0.97
U.S. dollars*1 US dollar amounts have been translated, for convenience only, at the rate of ¥112.68 = US$1.00 as of March 31, 2016.
*2 YMFG calculated its capital ratio according to the uniform international standard (Basel 3).

YMFG Annual Report 201620

Consolidated Financial Statements
CONSOLIDATED BALANCE SHEETSMarch 31, 2016 and 2015

ASSETS
AssetsMillions of yen
2015

Thousands of
U.S. dollars (Note 1)
2016¥ 1,174,642
356,719
7,909
4,250
47,6552,120,651
6,448,887
14,991
13,785
146,530
88,666
9,173
21,694
2,212
47,719(67,478)¥ 10,438,005¥

965,275
283,251
8,362
6,244
48,0962,323,985
6,228,014
14,281
13,349185,284
87,99916,88633,4762,880
52,293(74,491)¥ 10,195,184$ 10,424,583
3,165,770
70,19037,717422,923
18,820,119
57,231,869
133,040
122,338
1,300,408
786,883
81,408
192,528
19,631
423,491(598,846)$ 92,634,052¥ 9,510,090
73,34332,001
3,525
34,553375—
67,60863,755
3,439
2,057
40
30
1,405
75
18
3,932
10,87247,7199,854,837
50,00060,781
415,101(23,426)
502,456
54,020(307)
24,523(3,289)74,947601
5,164
583,168¥ 10,438,005¥ 9,209,080
75,071
24,0285,424
39,822309
25,00072,102
81,218
3,015
3,467
36
37
1,357
71
12
12,991
11,46352,2939,616,796
50,00059,686386,187(24,320)
471,553
71,146(316)
23,994
5,003
99,827512
6,496
578,388¥ 10,195,184$ 84,399,095
650,896
283,999
31,283306,647
3,328—
600,000
565,806
30,52018,255355
266
12,469666
160
34,89596,486423,491
87,458,617
443,734
539,4123,683,893(207,898)
4,459,141
479,411(2,725)
217,634(29,189)
665,1315,334
45,8295,175,435$ 92,634,052

Millions of yen
2016

Cash 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
Lease receivables and investment assets
Other assets
Tangible fixed assets (Notes 10, 11, 16 and 21)
Intangible fixed assets (Note 21)
Net defined benefit asset
Deferred tax assets (Note 22)
Customers’ liabilities for acceptances and guarantees (Note 17)
Allowance for loan losses
Total assets

LIABILITIES AND NET ASSETS
Liabilities

Net Assets(Notes 21
and 22)

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 13)
Foreign exchanges
Bonds payable (Notes 4 and 14)
Bonds with warrants
Other liabilities
Provision for bonuses
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 22)
Deferred tax liabilities for land revaluation (Notes 16 and 22)
Acceptances and guarantees (Note 17)
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 16)
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Stock options
Non-controlling interests
Total net assets
Total liabilities and net assets

See accompanying notes.

21

YMFG Annual Report 2016

CONSOLIDATED STATEMENTS OF INCOME
Years ended March 31, 2016 and 2015

Millions of yen
2016

IncomeInterest income:Interest on loans and discounts
Interest and dividends on securities
Other interest income
Trust fees
Fees and commissions
Trading income
Other operating income
Recoveries of written-off claims
Negative goodwill generated
Gain on returns of retirement benefit trust
Other income (Note 18)
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 (Note 19)
Impairment losses (Note 12)
Losses related to staged acquisition
Other expenses (Note 20)
Total expenses
Income before income taxes
Income taxes (Note 22):
Current
Deferred
Net income
Net income attributable to non-controlling interests
Net income attributable to owners of the parent
Amounts per share of common stock:
Net income attributable to owners of the parent (Note 30)¥¥

76,625
20,3772,021
124,304
1,816
22,00915—
1,339
18,351
166,858

Millions of yen
2015

¥

$

680,023
180,840
17,9369215,690
16,116
195,323133—
11,883
162,860
1,480,813

6,574
833
107
378
7,871
25
17,035
79,101
118—
3,957
115,999
50,859

6,859
684
418
283
7,465
—
7,318
85,423
132
200
3,340
112,122
49,31558,342
7,393
950
3,355
69,853
222
151,180
701,997
1,047—
35,116
1,029,455
451,358

13,4504,721
32,688392
32,296

11,244
6,992
31,079556
30,523

119,365
41,897290,096
3,479
286,617

¥

Yen
2016

¥

78,181
25,3261,289
124,3482,574
14,580321
2,391—
12,426
161,437

Thousands of
U.S. dollars (Note 1)
2016

132.43

Yen
2015

¥

120.88$

U.S. dollars (Note 1)
2016

$

1.18

See accompanying notes.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years ended March 31, 2016 and 2015

Millions of yen
2016

Net income
Other comprehensive income (Note 27)
Unrealized gains (losses) on available-for-sale securities
Deferred gains (losses) on hedges
Revaluation reserve for landRemeasurements of defined benefit plans
Share of other comprehensive income in affiliated companies
accounted for using equity method
Comprehensive income (Note 27)
Comprehensive income attributable to owners of the parent
Comprehensive income attributable to non-controlling interests¥

32,688(24,848)(17,136)9571(8,292)
(0)
7,840
7,459
381

Millions of yen
2015¥

31,07944,132
34,454
36
1,187
8,468
(13)
75,211
74,645
566

Thousands of
U.S. dollars (Note 1)
2016$

290,096(220,518)(152,076)
80
5,067(73,589)(0)
69,57866,197
3,381

See accompanying notes.

YMFG Annual Report 201622

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
Years ended March 31, 2016 and 2015

Millions of yen
Shareholders’ Equity

Balance at 31st March 2014
Cumulative effects of changes inaccounting policies
Restated balance
Changes of items during the year
Dividend paid
Net income attributable to ownersof the parent
Purchase of treasury stock
Disposal of treasury stock
Increase in treasury stock associated withan increase in consolidated subsidiaries
Decrease in treasury stock associatedwith a decrease in affiliates accounted
for under the equity method
Reversal of revaluation reserve for land
Net changes of items other thanshareholders’ equity
Total changes of items during the year
Balance at 31st March 2015
Changes of items during the year
Dividend paid
Net income attributable to ownersof the parent
Purchase of treasury stock
Disposal of treasury stockReversal of revaluation reserve for land
Changes of consolidated subsidiaries
Net changes of items other thanshareholders’ equity
Total changes of items during the year
Balance at 31st March 2016

Retained
Earnings

Accumulated other comprehensive income

Unrealized
Total
gains onTreasury
Shareholders’ availableStock
Equityfor-salesecurities

CapitalStock

CapitalSurplus¥50,000¥59,713 ¥361,184 ¥(10,393) ¥460,504 ¥ 36,706

50,00059,713(1,994)359,190(10,393)(3,564)¥(352)¥22,845¥(3,465) ¥ 55,734¥431¥ 4,801 ¥521,470(352)

22,845(3,465)

431

4,801

55,734(1,994)519,476(14,320)407

30,523(14,320)380

30,523(14,320)
380

(29)

(29)

(29)

15

15
38

15
38

34,440(27) 26,997 (13,927) 13,043
34,440¥59,686 ¥386,187 ¥(24,320) ¥471,553 ¥ 71,146(3,424)32,296
(40)
877

10
42
1,085

—
¥50,000

NonTotal Net
controlling
AssetsInterests(3,564)38—¥50,000

36,706Stock
options(3,564)30,523(27)(1,994)
458,510

Total
Deferred Revaluation Remeasurements accumulated
losses on reserve forof definedotherhedgeslandbenefit plans comprehensive
income573636¥(316)

1,149
1,149¥23,994

8,468
44,093
8,468
44,093¥ 5,003 ¥ 99,827

81
81
¥512

1,695
45,8691,695
58,912¥ 6,496 ¥578,388(3,424)(3,424)32,296
(40)
887
42
1,142

32,296
(40)
887
42
1,142

(17,126)
1,095
28,914894
30,903 (17,126)¥60,781 ¥415,101 ¥(23,426) ¥502,456 ¥ 54,020

99¥(307)

529
529¥24,523(8,292) (24,880)(8,292) (24,880)¥(3,289) ¥ 74,947

89
89
¥601

(1,332) (26,123)(1,332)
4,780¥ 5,164 ¥583,168

Stock
options

NonTotal Net
controlling
AssetsInterests$4,544$ 57,650 $5,133,015

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

Balance at 31st March 2015
Changes of items during the year
Dividend paid
Net income attributable to ownersof the parent
Purchase of treasury stock
Disposal of treasury stockReversal of revaluation reserve for land
Changes of consolidated subsidiaries
Net changes of items other thanshareholders’ equity
Total changes of items during the year
Balance at 31st March 2016
See accompanying notes.

23

YMFG Annual Report 2016

Retained
Earnings

Accumulated other comprehensive income

Unrealized
Total
gains onTreasury
Shareholders’ availableStock
Equityfor-salesecurities

Total
Deferred Revaluation Remeasurements accumulated
losses on reserve forof definedotherhedgeslandbenefit plans comprehensive
incomeCapitalStock

CapitalSurplus$443,734$529,695 $3,427,290$(215,832) $4,184,887(30,387)(30,387)(30,387)

286,617
(355)
7,872
373
10,134

286,617
(355)
7,872
373
10,134

286,617
(355)
7,783

89
373
9,628

—
$443,734

9,717
256,603$539,412 $3,683,893

506

7,934
274,254$(207,898) $4,459,141$ 631,399(151,988)(151,988)$ 479,411$(2,804)

79
79$(2,725)$212,939

4,695
4,695
$217,634$ 44,400$ 885,934(73,589) (220,803)(73,589) (220,803)$(29,189) $ 665,131

790
790$5,334(11,821) (231,834)(11,821)42,420$ 45,829 $5,175,435

CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended March 31, 2016 and 2015
Millions of yen
2016

Cash flows from operating activities:
Income before income taxes
Depreciation
Impairment losses
Amortization of goodwill
Negative goodwill generated
Losses related to staged acquisition
Equity in earnings of affiliates
Net change in allowance for loan losses
Net change in provision for bonuses
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 losses (gains) from money held in trust
Net exchange gains
Net losses from disposition of fixed assets
Gain on returns of retirement benefit trust
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 lease receivables and investment assets
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
Purchases of shares in subsidiaries associated with changes in the scope of consolidation
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Proceeds from issuance of bonds with warrants
Decrease in subordinated bonds payable
Dividends paid
Dividends paid to non-controlling shareholders
Purchases of treasury stock
Proceeds from disposal of treasury stock
Proceeds from sales of shares in subsidiaries that are not associated with changes
in the scope of consolidation
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net change in cash and cash equivalents
Cash and cash equivalents at the beginning of fiscal year
Cash and cash equivalents at the end of fiscal year (Note 3)¥

50,859
7,093
118
4,931
—
—
(4)
(7,012)424
11,783(1,411)
3
(7)
47
4
6
(99,022)
7,893(18,751)
(639)
2,329
74
(1,339)1,994(1,899)(220,873)
262,139
38,871(5,269)6,358(73,015)(1,727)
7,973
(710)
66
(436)
—
95,775(7,620)(25,765)
33,241(11,432)2
21,811Thousands of
U.S. dollars (Note 1)
2016

Millions of yen
2015¥

49,315
10,518132
4,935(2,391)200(44)(12,203)(78)(10,594)(1,012)
9
(25)
250
3
5
(104,797)
8,244(12,936)
1,162(13,554)
70
—
(492)
2,236
(263,881)
294,519
149,596
10,053
18,55932,454(3,826)
10,7591,216
22(13,349)(20,000)
97,621(11,091)
15,000236,605(10,385)994
227,214$451,358
62,9481,047
43,761——(35)(62,229)
3,763
104,570(12,522)
27
(62)
417
35
53
(878,789)
70,048(166,409)(5,671)
20,669657(11,883)
17,696(16,853)(1,960,179)
2,326,402
344,968(46,761)
56,425(647,985)(15,327)
70,758(6,301)586(3,869)—849,973(67,625)(228,657)
295,004(101,456)
18
193,566(1,800,773)
1,782,358
243,846(8,499)9,768(2,737)16(2,061)—
221,918(3,063,268)
2,775,634
113,275(11,000)
11,574(1,936)37(1,367)(94)(177,145)(15,981,302)
15,817,874
2,164,058(75,426)
86,688(24,290)142(18,291)—
1,969,453—(25,000)(3,424)
(2)
(40)
462
18

36,051—(3,564)(1)(14,319)508——(221,867)(30,387)
(18)
(355)
4,100
160

(27,986)

18,675(248,367)(18)
215,725
942,982
1,158,707

33
68,777874,205
942,982(159)
1,914,493
8,368,672
10,283,165¥$

See accompanying notes.

YMFG Annual Report 201624

Notes to Consolidated Financial Statements
Years ended March 31, 2016 and 201525

1. BASIS OF PRESENTATION

2. SIGNIFICANT ACCOUNTING POLICIESYamaguchi Financial Group, Inc. (“YMFG”) is a holding
company for The Yamaguchi Bank, Ltd. (“Yamaguchi
Bank”), Momiji Bank, Ltd. (“Momiji Bank”), The Kitakyushu
Bank, Ltd. (“Kitakyushu Bank”) and other subsidiaries.
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 andin conformity with accounting principles and practices
generally accepted in Japan (“Japanese GAAP”). Japanese
GAAP are different in certain respects as to application anddisclosure requirements of International Financial ReportingStandards.
The accompanying consolidated financial statements
are a translation of the audited consolidated financial
statements of YMFG which were prepared in accordancewith Japanese GAAP and were filed with the appropriate
Local Finance Bureau of the Ministry of Finance as requiredby 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 ismore familiar to readers outside Japan.
The consolidated financial statements are stated inJapanese yen. The translations of the Japanese yenamounts into U.S. dollars are included solely for theconvenience of readers, using the prevailing exchange rate
at March 31, 2016, which was ¥112.68 to U.S.$1.00. Suchtranslations should not be construed as representations
that the Japanese yen amounts have been, could havebeen, 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

YMFG Annual Report 2016

Japanese accounting standards on consolidated
financial statements require a company to consolidate
any subsidiaries of which the company substantiallycontrols the operations, even if it is not a majority
owned subsidiary. Control is defined as the power togovern the decision making body of an enterprise.
(i) 14 consolidated subsidiaries at March 31, 2016
and 13 at March 31, 2015.
The names of the consolidated subsidiaries arelisted on page 1.
The scope of consolidation includes YMFG Zone
Planning Co., Ltd., and YM Asset Management
Co., Ltd., due to their establishment in the fiscal
year ended March 31, 2016.
In addition, due to a merger between
consolidated subsidiaries Yamagin Card Holdings
Co., Ltd., and Yamagin Credit Guarantee Co., Ltd.
(an absorption-type merger with Yamagin Credit
Guarantee Co., Ltd., as the surviving company),
Yamagin Card Holdings Co., Ltd., was excluded
from the scope of consolidation from the fiscal
year ended March 31, 2016. Following the merger,
the name of the surviving company was changed
to YM Guarantee Co., Ltd.
YM Lease Co., Ltd., formerly accounted forby the equity method, was excluded from thescope of application of equity-method affiliates
and included in the scope of consolidation fromthe fiscal year ended March 31, 2015, as YMFG
acquired additional shares in YM Lease, increasing
its percentage of voting rights.
(ii) Five unconsolidated subsidiaries at March 31, 2016
and 2015.
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 arational judgment of YMFG’s consolidated financial
position and results of operations when excluded
from the scope of consolidation.

(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 forby the equity method at March 31, 2016 and 2015.
(ii) As at March 31, 2016 and 2015, three affiliates
accounted for by the equity method, and theseaffiliates at March 31, 2016 were as follows:
YM Saison Co., Ltd.
Yamaguchi Capital Co., Ltd.
Momiji Card Co., Ltd.
YM Lease Co., Ltd., formerly accounted for by
the equity method, was included in the scopeof consolidation and excluded from the scopeof application of equity-method affiliates fromthe fiscal year ended March 31, 2015, as YMFG
acquired additional shares in YM Lease, increasing
its percentage of voting rights.
(iii) As at March 31, 2016 and 2015, fiveunconsolidated subsidiaries were not accounted
for by the equity method.
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 when excluded
from the scope of equity method.
(iv) There were no affiliates that were not accounted
for by the equity method as at March 31, 2016
and 2015.

(3) The balance sheet dates of consolidated
subsidiaries
The balance sheet date of consolidated subsidiaries is
as follows:
March 31
14 companies(4) Accounting Policies
Trading assets, trading liabilities andtransactions 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, shareprices or other indices (hereinafter referred to as “trading
purposes”) are included in “Trading assets” or “Trading
liabilities” in the consolidated balance sheets as of thedate on which the transactions have been contracted.
The income or losses on these transactions are recorded
as “Trading income” and “Trading expenses” in the
consolidated statement of income.
Trading assets and trading liabilities are valued, in thecase of securities and commercial paper, at the market
value as of the date of the balance sheet and, in the caseof derivatives, including swaps, futures and options, at theamount due if the transactions were to be settled as of thedate of the balance sheet. “Trading income” and “Trading
expenses” include interest income and interest expense,
respectively, and gains and losses, respectively, resulting
from the valuation of securities, commercial paper,
derivatives, etc., which are included in “Trading assets” or“Trading liabilities.”

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
in unconsolidated subsidiaries that are not accounted forby the equity method are stated at cost determined by themoving-average method. Available-for-sale securities are in
general stated at fair value (cost of sale calculated primarily
according to the moving-average method) indicatedaccording to market price at the consolidated balance
sheet date (for equity securities, the average market priceduring the one-month period ending on the consolidatedbalance sheet date). Available-for-sale securities having no

YMFG Annual Report 201626

readily available market value are valued at cost using themoving-average method.
Unrealized gains (losses) on available-for-sale securities
are reported 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, February 13, 2002). As for the hedge to offset
market fluctuation, the Banks assess the effectiveness ofthe hedge by grouping the hedged items such as deposits
and loans and the hedging instruments such as interest rate
swaps by their maturity.
Also, the Banks apply deferred hedge accounting tohedge foreign exchange risks associated with various
foreign currency denominated monetary assets andliabilities as stipulated in “Treatment of Accounting and
Auditing Concerning Accounting for Foreign Currency
Transactions in Banking Industry” (JICPA Industry
Audit Committee Report No. 25, July 29, 2002). The
effectiveness of the currency swap transactions, exchange
swap transactions and similar transactions hedging theforeign exchange risks of monetary assets and liabilities
denominated in foreign currencies is assessed basedon comparison of the foreign currency position of thehedged monetary assets and liabilities and the hedging
instruments.
The Banks apply an exceptional treatment, as permitted
if certain conditions are met, for certain interest rate swaps
utilized as hedging instrument. In that treatment, theinterest swap contracts are not recorded at fair values but
the net interest to be paid or received under the contracts
is added or deducted to the interest arising from theirrelated hedged assets or liabilities.

27

YMFG Annual Report 2016

Allowance for loan losses
The Banks provide allowance for loan losses according to
the following 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 ofloans, net of amounts expected to be collected throughdisposition of collateral or through execution of guarantees.
For loans to borrowers in danger of bankruptcy,
an allowance is provided in the amount considered
uncollectible based on the amount of loans, net of amounts
expected to be collected through disposition of collateral or
through execution 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 Banks during certain reference periodsin the 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.

Tangible fixed assets (excluding lease assets)
Tangible fixed assets are stated at cost less accumulated
depreciation, except for certain revalued land.
Depreciation of tangible fixed assets of the Banks iscomputed by using the declining-balance method except
for buildings (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
over the useful lives of the respective assets provided by
the tax act in Japan.

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

Lease assets
Lease assets included within tangible and intangible fixed
assets related to finance lease transactions that do nottransfer ownership are depreciated over the lease termusing the straight-line method. For lease assets with aguaranteed residual value stated in their lease agreements,
the residual value is set at the guaranteed amount.
Otherwise, the residual value is assumed to be zero.

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’
average remaining service period
at the time of their occurrencein each fiscal year, starting fromthe following fiscal year
Some consolidated subsidiaries employ the simplified
method for calculating retirement benefit obligations
and periodic benefit costs, stating retirement benefit
obligations at the amounts required as if all employees
voluntarily terminate their employment as of the year-end.

Income taxes
Income taxes comprise corporate, enterprise and inhabitanttaxes. The Group recognizes tax effects of temporary
differences between the financial statement basis andthe tax basis of assets and liabilities. The asset and liability
approach is used to recognize deferred tax assets andliabilities for the expected future tax consequences of
temporary differences.

Provision for directors’ retirement benefits
The provision for directors’ retirement benefits forconsolidated subsidiaries outside the banking businessis provided for the estimated amount corresponding to
accrued retirement benefit payments to directors as of theend of the fiscal year.

Provision for loss on interest repayment
Foreign currency translation
Foreign currency assets and liabilities and the accounts ofoverseas branches of YMFG and consolidated subsidiaries
are translated into yen at the rates prevailing at theconsolidated balance sheet date.

Provision for bonuses
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 loss on interest repayment is provided forpossible losses on reimbursements of excess interest
payments and loan losses related to consumer financeloans extended at interest rates in excess of the maximum
interest rate prescribed in the Interest Rate Restriction Law.
In accordance with “Audit Guidelines on Consumer
Finance Companies’ Provisions for Possible Losses on
Reimbursements of Excess Interest Payments,” issued by
JICPA in 2006, the amount of such provision is rationallyestimated and booked based on actual historical repayment
claims by debtors.

Method of accounting for retirement benefits
When calculating retirement benefit obligations, thebenefit formula method is used for attributing expected
retirement benefits to periods through the year-end. The
methods for recognizing past service cost and actuarial
gains or losses are as follows:
Past service cost:
Recognition of past service cost
is apportioned by the straightline method over a fixed numberof years (2 years) within theemployees’ average remaining
service period from the time of
their occurrence

Provision for reimbursement of deposits
Provision for reimbursement of deposits is provided for inorder 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.

Provision for customer point services
Provision for customer point services is provided inconjunction with a point system to promote credit carduse. The provision is recorded for the expected cost to be
incurred when credit card members use points they havereceived as of the balance sheet date.
YMFG Annual Report 201628

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
and Exchange Act and Article 175 of the Cabinet Office
Order Related to the Financial Instruments Business,to prepare for future eventual losses originating fromincidents relating to the purchase and sale of securities orother transactions.

Amounts per share of common stock
Computations of net income per share of common stock
are based on the weighted-average number of shares
outstanding during each year.
Cash dividends per share represent the cash dividends
declared as applicable to each year.

Amortization of goodwill
Goodwill is amortized over a 10-year period using thestraight-line method.

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 forpurchase of 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
For the year ended March 31, 2016
(Adoption of the “Accounting Standard for Business
Combinations”)
YMFG has adopted the “Accounting Standard for Business
Combinations” (ASBJ Statement No. 21, September 13,2013), the “Accounting Standard for Consolidated Financial
Statements” (ASBJ Statement No. 22, September 13,2013), the “Accounting Standard for Business Divestitures”(ASBJ Statement No. 7, September 13, 2013), and other29

YMFG Annual Report 2016

related standards from the fiscal year ended March 31,
2016. As a result, the accounting method has beenchanged to record the difference caused by changes inequity in subsidiaries YMFG continues to control as capitalsurplus, and to record acquisition-related costs for the fiscal
year in which the costs were incurred. Furthermore, forbusiness combinations carried out on or after the beginningof the current fiscal year, the accounting method waschanged to reflect the revised acquisition cost allocation
resulting from the finalization of the provisional accounting
treatment in the consolidated financial statements of theyear in which the business combination occurs. In addition,
YMFG has changed its presentation of net income andrelated items, and renamed “minority interests” as “noncontrolling interests.” The consolidated financial statements
for the fiscal year ended March 31, 2015, have been
reclassified to reflect this change.
In the consolidated statements of cash flows for the
fiscal year under review, cash flows for the purchase or saleof shares in subsidiaries without changing the scope of
consolidation are listed under “cash flows from financing
activities.” Cash flows for expenses related to the purchaseof shares in subsidiaries resulting in changes in the scopeof consolidation and expenses related to the purchase orsale of shares in subsidiaries without changing the scope of
consolidation are listed under “Cash flows from operating
activities.”
Adoption of the “Accounting Standard for Business
Combinations” and other related standards is inaccordance with the transitional measures provided for in
Article 58-2 (4) of the “Accounting Standard for Business
Combinations,” Article 44-5 (4) of the “AccountingStandard for Consolidated Financial Statements,”
and Article 57-4 (4) of the “Accounting Standard forBusiness Divestitures.” YMFG has applied the standards
prospectively from the beginning of the fiscal year ended
March 31, 2016.
As a result, income before income taxes for the fiscal
year ended March 31, 2016 decreased by ¥1,086 million($10 million). In addition, capital surplus as of March 31,
2016 increased by ¥1,084 million ($10 million).
The ending balance of capital surplus in the
consolidated statements of changes in net assets for the
fiscal year ended March 31, 2016 increased by ¥1,084
million ($10 million).
Information on the impact per share is provided in therelevant sections.

For the year ended March 31, 2015
(Adoption of the “Accounting Standard for Retirement Benefits”)
YMFG 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, March
26, 2015), applying the provisions as stated in the body ofParagraph 35 of the Accounting Standard for Retirement
Benefits and Paragraph 67 of the Implementation
Guidance for the Accounting Standard for Retirement
Benefits from the fiscal year ended March 31, 2015.
Accordingly, YMFG reviewed the method for calculating
retirement benefit obligations and current service costs,
and changed a method of attributing expected benefit
to periods from the straight-line method to the benefit
formula method. In addition, YMFG has changed its
method of determining discount rates from a methodof using a single discount rate based on the averageremaining service period and average benefit period to amethod of using multiple discount rates for each expected
retirement benefit period.
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, from the beginning of
the fiscal year ended March 31, 2015, changes in amounts
resulting from the method of calculating retirement benefit
obligations and past services costs were recorded inretained earnings.
As a result, at the beginning of the fiscal year ended
March 31, 2015, retirement benefit liabilities increased¥3,086 million, and retained earnings decreased ¥1,994
million. Also, the income before income taxes for the fiscal
year ended March 31, 2015 increased by ¥368 million.
(Adoption of the “Practical Solution on Transactions ofDelivering the Company’s Own Stock to Employees etc.
through Trusts”)
YMFG adopted the “Practical Solution on Transactionsof Delivering the Company’s Own Stock to Employees
etc. through Trusts” (Practical Issues Task Force No. 30,
issued March 26, 2015) from the fiscal year ended March
31, 2015. Accordingly, YMFG recognized at the time ofdisposal the difference arising from the disposal of treasury
shares by YMFG to the trust, and posts as liabilities thedifferences arising from the net amount of gain or loss
from sales of shares sold by the trust to the employee stock
ownership plan (ESOP), dividends paid by YMFG for theshares held by the trust and miscellaneous expenses related
to the trust.
These accounting policies have been applied
retroactively, and the consolidated financial statements
for the fiscal year ended March 31, 2014, reflect thisretroactive application.
Compared with the figures before retroactive
application, as of March 31, 2014, other liabilities
increased ¥92 million, and treasury stock, capital surplus
and retained earnings decreased by ¥301 million, ¥351
million and ¥42 million, respectively.
Due to the reflection of the cumulative effect on net
assets as of April 1, 2013, after retroactive adjustment
to the consolidated statements of changes in net assets,treasury stock, capital surplus and retained earnings
decreased by ¥398 million, ¥367 million and ¥27 million,
respectively.

Accounting Standards Not Yet Applied
For the year ended March 31, 2016
“Implementation Guidance on Recoverability of Deferred
Tax Assets” (ASBJ Guidance No. 26, March 28, 2016)(i) Overview
This guidance principally retains, with certain revisions,the basic content of guidelines on the recoverability ofdeferred tax assets provided in the Japanese Institute ofCertified Public Accountants Auditing Committee Report
No. 66, “Audit Treatment for Judgment of Recoverability ofDeferred Assets.”(ii) Effective Dates
The implementation guidance will be applied to theGroup’s consolidated financial statements from the
beginning of the fiscal year commencing April 1, 2016.
(iii) Effects of Adoption of the Accounting Standard
The Group is currently evaluating the effects.
For the year ended March 31, 2015
“Accounting Standard for Business Combinations” (ASBJ
Statement, Sep. 13, 2013)(i) Overview
This accounting standard revises primarily the following
areas of the current standard: (1) the treatment of changes
in the parent company’s ownership interest in a subsidiaryin case where additional shares of the subsidiary are
acquired and the controlling ownership remains in theparent company, (2) the treatment of acquisition-related
expenses, (3) the treatment of the transitional accounting

YMFG Annual Report 201630

and (4) the presentation of net income and changes fromminority interest to noncontrolling shareholder interest.
(ii) Effective Dates
The accounting standard will be applied to the Group’s
consolidated financial statements from the beginning of
the fiscal year commencing April 1, 2015.

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

Thousands ofMillions of yen
U.S. dollars
2016
2015
2016
¥1,174,642 ¥965,275 $10,424,583(7,066)(13,393)(62,709)(8,869)(8,900)(78,709)¥1,158,707 ¥942,982 $10,283,165

Additional Information(ESOP Trust)
To enhance its welfare benefits, YMFG has introduced the
ESOP Trust for Group employees (hereinafter, “Employees”)(1) Overview of Transactions
Of those Employees enrolled in the Yamaguchi Financial
Group Employee Stock Ownership Plan (hereinafter, the“YMFG’s ESOP”), YMFG has established the trust for
those beneficiaries satisfying certain conditions. This trust
acquired as a lump sum a number of shares in YMFG
corresponding to the number expected to be acquired by
the YMFG’s ESOP over the five-year period beginning in
September 2011. Thereafter, the trust has sold YMFG’sshares to the YMFG’s ESOP each month on a specific date.
(2) Company Shares Residing in the Trust
Company shares residing in the trust are recorded intreasury stock in the net assets section based on the bookvalue of the trust (excluding ancillary expenses). The bookvalue and the number of shares of this treasury stock
amounted to ¥785 million and 1,047 thousand shares on
March 31, 2015, and ¥586 million ($5 million) and 781
thousand shares on March 31, 2016.
(3) Book Value of Borrowings Recorded by Applying theGross Price Method
The book value of borrowings recorded by applying thegross price method was ¥630 million on March 31, 2015,and ¥210 million ($2 million) on March 31, 2016.

3. CONSOLIDATED STATEMENTS OF CASHFLOWS 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 equivalentsin the consolidated statements of cash flows at March 31,
2016 and 2015 were as follows:

31

YMFG Annual Report 2016

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, securities and credit
card businesses. Accordingly, the Group is subject
to a variety of risks, including credit risk, market risk
and liquidity risk. Due to changes in economic, socialand financial conditions, these risks have grown morediverse and complex. Under these conditions, the Groupconsiders strengthening its risk management structure asa priority issue. To maintain and enhance the soundnessof its operations, YMFG has created groupwide risk
management regulations, which clarify the Group’s
fundamental stance on risk 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 or to promote
positive business relations. These securities are subject toissuer credit risk, interest rate fluctuation risk and market
price fluctuation 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 tothe liquidity risk of becoming unable to secure necessary
funding. The Group is also subject to interest rate risk arisingfrom fluctuations 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 andprice 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 areconducted on a limited basis, the Group has establishedstringent standards that include risk limits and loss limits.
As market risk factors, interest rate related andsecurities-related derivative transactions are subject tothe risk of fluctuations in interest rates and prices, andcurrency-related derivative transactions are subject toexchange rate fluctuations. For transactions that are
not conducted on exchanges, the Group is subject tocredit risk, the risk of loss in the event a counterparty
becomes unable to fulfill its contractual obligations due todeteriorating financial conditions.
With regard to use of hedge accounting, the Group applies
deferred hedge accounting after it ensured in advance thatthe established conditions are satisfied. As for hedging
methods, the Group employs the portfolio hedge wherecertain group of assets with similar risk is identified andsuch risk is hedged comprehensively. In addition, for certain
interest swap contracts, exceptional treatments are applied.

(3) Risk management structure related tofinancial instruments(i) Management of credit risk
Through the appropriate operation of a credit rating
system, the Group endeavors to determine the financial
conditions of business partners and accurately evaluate
their credit risk. The Group has enhanced the precisionof its credit evaluations, reviewing business partner credit
ratings swiftly and appropriately for each financial period
and each time their credit conditions change.
The Group conducts self assessments according tostringent standards that are consistent throughout theGroup. The Group performs write-off and provisions
based on the results of its self assessments. The Group’s
authentication departments verify the content of such self
assessments. Independence is maintained 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 terms of
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 onderivative transactions.
(ii) Management of market risk
Qualitative information on the management of market risk
The Group has formulated a market risk management
process that identifies and quantitatively measures market
risks. An asset-liability management (ALM) system is
employed to control market risk within allowable limits, and
the Group ALM Committee is periodically held to respondto such risks.
YMFG periodically evaluates market risk conditions andverifies the appropriateness of risk controls.
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, 2016, the market risk (estimated loss
amount) of Yamaguchi Bank was ¥69,017 million ($613
million), the market risk (estimated loss amount) of Momiji
Bank was ¥17,205 million ($153 million) and the maket
risk (estimated loss amount) of Kitakyushu Bank was¥14,574 million ($129 million). Also, as of March 31, 2015,
the market risk (estimated loss amount) of Yamaguchi
Bank was ¥73,513 million, the market risk (estimated loss
amount) of Momiji Bank was ¥21,416 million and themarket risk (estimated loss amount) of Kitakyushu Bank was¥12,536 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 of five years.
Yamaguchi Bank, Momiji Bank and Kitakyushu Bank
conduct back-testing to compare the VaR calculated by
the model with the actual losses. However, because of
relatively large fluctuations in Japanese stock market prices
this year, instances arose in which they were unable to

YMFG Annual Report 2016

32

capture the risk on Japanese stocks. Consequently, themethod for determining the amount of risk on Japanesestocks was revised beginning in fiscal 2016. Specifically,
VaR is measured for observation periods of both one year
and five years, with the larger number taken as the risk
amount. However, as the practice of measuring market risk
amount with a set risk probability calculated statisticallyon the basis of historical market fluctuations remains
unchanged even after revising the measurement method,in some cases it is not possible to capture market risk inthe event of sudden changes in the market environment
outside the normally expected scope.
As for the year ended March 31, 2015, based on the
results, the measurement model is considered to havecaptured market risk to an acceptable degree of accuracy.
However, as measurements of market risk employ certain
probabilities of occurrence which is statistically calculatedon the basis of historical market fluctuations, it is possiblethat this method may not adequately capture market riskin 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 the managementof financial balances using short-term financial markets.
For cash flow management, the Group strives tomanage the liquidity risk by ensuring stability, preparing forunexpected 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 basedon market prices. The fair values of other instruments, forwhich market prices are not readily available, are basedon rational calculation. However, as assumptions areused in these calculations, different assumptions can yield
different values.

33

YMFG Annual Report 2016

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
fair value is not easily determinable are not included in thetable below. (Refer to (Note 2).)Millions of yen
2016
Consolidatedbalance sheet Fair value Difference
amount(1) Cash and due from banks ¥ 1,174,642 ¥1,174,642 ¥—(2) Call loans and bills purchased
356,719
356,719—(3) Money held in trust
47,65547,655—(4) Securities
Held-to-maturity debt securities
5,129
5,291
162
Available-for-sale securities
2,104,752
2,104,752—(5) Loans and bills discounted
6,448,887
Allowance for loan losses (* 1)(64,931)
6,383,956
6,492,550
108,595
Total assets¥10,072,853 ¥10,181,609¥108,757(1) Deposits¥ 8,703,691 ¥ 8,705,754¥ 2,063(2) Negotiable certificates of
806,399
806,3990
deposit
Total liabilities¥ 9,510,090 ¥ 9,512,153¥ 2,063
Derivative transactions (* 2)
6,605 ¥
6,605 ¥—
Hedge accounting not applied ¥Hedge accounting applied
983
983
—
Total derivative transactions¥
7,588 ¥
7,588 ¥—

Millions of yen
2015
Consolidatedbalance sheet Fair value Difference
amount(1) Cash and due from banks ¥ 965,275 ¥ 965,275¥—(2) Call loans and bills purchased
283,251
283,251—(3) Money held in trust
48,09648,096—(4) Securities
Held-to-maturity debt securities
4,447
4,519
72
Available-for-sale securities
2,310,718 2,310,718—(5) Loans and bills discounted
6,228,014
Allowance for loan losses (* 1)(71,801)
6,156,213 6,210,677
54,464
Total assets¥9,768,000 ¥9,822,536¥54,536(1) Deposits¥8,441,552 ¥8,443,962¥ 2,410(2) Negotiable certificates of
767,528
767,528—
deposit
Total liabilities¥9,209,080 ¥9,211,490¥ 2,410
Derivative transactions (* 2)Hedge accounting not applied ¥(8,761) ¥(8,761) ¥—Hedge accounting applied(1,326)(1,326)—
Total derivative transactions¥ (10,087) ¥ (10,087) ¥—Thousands of U.S. dollars
2016
Consolidatedbalance sheet Fair value Difference
amount$—(1) Cash and due from banks $10,424,583 $10,424,583(2) Call loans and bills purchased 3,165,770
3,165,770—(3) Money held in trust
422,923
422,923—(4) Securities
Held-to-maturity debt securities
45,51846,956
1,438
Available-for-sale securities
18,679,020 18,679,020—(5) Loans and bills discounted
57,231,869
Allowance for loan losses (* 1)(576,250)
56,655,619 57,619,365
963,747
Total assets$89,393,433 $90,358,617$965,185(1) Deposits$77,242,554 $77,260,862$ 18,308(2) Negotiable certificates of
7,156,541
7,156,541
0deposit
Total liabilities$84,399,095 $84,417,403$ 18,308
Derivative transactions (* 2)
58,617 $58,617$—
Hedge accounting not applied $Hedge accounting applied
8,724
8,724
—
Total derivative transactions$
67,341 $
67,341$—(* 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 and liabilities, 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.

(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
their fair 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
their fair values.
(iii) Money held in trust
As for the securities held as trusted assets in money heldin trust established independently for the purpose ofinvesting mainly in the securities of the Group, the value
on stock exchanges is taken as fair value for the equity
securities, and either the value on exchanges or a priceindicated by other financial institutions dealing with thespecific instruments is taken as fair value.
Notes pertaining to money held in trust exchanges forthe purpose of holding are indicated within “Money heldin trust.”(iv) Securities
For equity securities, fair value is determined by stock
exchange prices; the fair value of debt securities isdetermined by exchange prices or prices received frominformation vendors. Fair values of investment trusts are
determined by exchange prices or standard prices disclosed
by investment trust management companies.
The fair value of private placement bonds guaranteedby Yamaguchi Bank and Momiji Bank is determined foreach internal rating category and period by discounting topresent value the total amount of interest and principal,
using as the discount rate the risk-free rate plus thecredit cost determined for each internal rating category.
However, fair value of bonds of legally bankrupt debtors,
substantially bankrupt debtors and debtors in dangerof bankruptcy is determined by deducting the expectedamount of loss on the bond by using the same method
applied to loans from the bond’s face value.
(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, unless the credit status of the obligor has changed
significantly since the loans were extended, their fair value
is similar to their book 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 and period by discounting to present value
the total amount of interest and principal, using as thediscount rate the risk-free rate for operating loans andbills discounted plus the credit cost for each internalrating category. For consumer loans and bills discounted,
fair value is determined by discounting the total amountof interest and principal to their present value using theassumed 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,
substantially bankrupt obligors or obligors who are indanger of bankruptcy, the estimated collectible amountis based on either the present value of estimated future
cash flows or the expected amounts recoverable fromthe disposal of collateral and/or under guarantees. As
the fair value is essentially equivalent to the amount after
deducting the allowance for possible loan losses from the

YMFG Annual Report 201634

book value as of the consolidated balance sheet date, thisamount 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
the payment amount if payment were required on the
consolidated balance sheet date (book value). The fairvalue of time deposits is determined by discounting future
cash flows to their present value by certain time periods.
The discount rate employed is the interest rate required for
newly accepted deposits. For deposits having a short period(within one year), as their fair values and book values areapproximately the same, their book value is taken as theirfair value.
(3)Derivative transactions
The fair value of derivative transactions, comprisinginterest-rate-related transactions (such as interest rate
futures, interest rate options and interest rate swaps)
currency-related transactions (such as currency futures,
currency options and currency swaps), bond-relatedtransactions (such as bond futures and bond options) istaken as their value on exchanges, discounted present
value or price as calculated using 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 offinancial instruments for which market prices are notreadily available
Financial instruments for which market prices are notreadily available are not included in “Assets (4) Availablefor-sale securities.”

35

YMFG Annual Report 2016

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

Thousands ofMillions of yen
U.S. dollars
2016
2015
2016
Consolidated balance sheet amount¥ 6,832¥6,057$60,632
3,939

2,762

34,957¥10,771¥8,819$95,589(*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, 2015 and 2016, impairment losses of ¥15 millionand ¥15 million ($133 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 fairvalue disclosure.

(Note 3) Expected maturity amount of monetary claims andsecurities with maturities after the consolidated balance
sheet dateMillions of yen
2016
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¥1,079,667 ¥
— ¥
— ¥
— ¥
—

(1) Due frombanks(2) Call loans
356,719——and bills
purchased(3) Securities
278,134 549,979 328,786
Held-to476
772
289
maturity debt
securities
Local
—
—
—
government
bond
Corporate
190
772
289
bond
Others286——
Available-for277,658
549,207 328,497
sale securities
with maturities
Japanese
58,209 169,310 114,541
government
bond
Local
2,731
3,362
6,856
government
bond
Corporate
202,719
315,843 176,263
bond
Others13,99960,69230,837(4) Loans and 2,230,165 1,099,315
818,895
bills discounted
(*)
Total
¥3,944,685 ¥1,649,294 ¥1,147,681——

171,503230

551,170
3,362

—

1,400

230

1,962

—
171,273—
547,808

33,081

239,983

7,300

10,411

100,993258,165

29,89939,249553,191 1,747,321¥724,694 ¥2,298,491

Millions of yen
2015
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¥869,860 ¥
— ¥
— ¥
— ¥
—

(1) Due frombanks(2) Call loans
283,251——and bills
purchased(3) Securities
242,598
564,180
531,630
Held-to546
885
723
maturity debt
securities
Local
—
—
—
government
bond
Corporate
110
570
723
bond
Others436
315—
Available-for242,052
563,295
530,907
sale securities
with maturities
Japanese
80,170151,197
237,361
government
bond
Local
16,4184,163
4,273
government
bond
Corporate131,735
353,197
253,978bond
Others13,72954,73835,295(4) Loans and 2,146,945 1,126,783
808,102bills discounted
(*)
Total
¥3,542,654 ¥1,690,963 ¥1,339,732——

338,24730

376,982
2,263

—

900

30

1,363

—
338,217—374,719

170,809

96,770

9,676

4,961

135,888

226,843

21,844
46,145555,296 1,590,889¥893,543 ¥1,967,871

Thousands of U.S. dollars
2016
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$ 9,581,709 $
— $
— $
— $
—

(1) Due frombanks(2) Call loans
3,165,770————
and bills
purchased(3) Securities
2,468,353 4,880,893 2,917,874 1,522,036 4,891,463
Held-to4,224
6,851
2,565
2,041
29,837maturity debt
securities
Local
—
—
—
—
12,425government
bond
Corporate
1,686
6,851
2,565
2,041
17,412bond
Others
2,538
—
—
—
—
Available-for2,464,129 4,874,042 2,915,309 1,519,995 4,861,626
sale securities
with maturities
Japanese
516,587 1,502,574 1,016,516
293,584 2,129,775
government
bond
Local
24,237
29,83760,84564,78592,394government
bond
Corporate
1,799,068 2,803,008 1,564,279
896,282 2,291,134
bond
Others124,237
538,623
273,669
265,344348,323(4) Loans and 19,792,022 9,756,079 7,267,438 4,909,398 15,506,931
bills discounted
(*)
Total
$35,007,854 $14,636,972 $10,185,312 $6,431,434 $20,398,394(*) Loans and bills discounted for which no period is specified are included in “within one year.”(Note 4) Estimated repayment amounts of deposits, negotiablecertificates of deposit and other interest-bearing liabilities
to be repaid after the consolidated balance sheet dateMillions of yen
2016
More than More thanThree
Withinone year two years
or
one year and within and within years
more
two years three years¥7,783,476 ¥690,244 ¥192,698¥37,273
Deposits (*)
Negotiable certificates
806,119280——
of deposit
Total¥8,589,595 ¥690,524 ¥192,698¥37,273

Millions of yen
2015
More than More thanThree
Withinone year two years
or
one year and within and within years
more
two years three years¥7,359,032 ¥563,053 ¥484,617¥34,850
Deposits (*)
Negotiable certificates766,740788——
of deposit
Total¥8,125,772 ¥563,841 ¥484,617¥34,850

YMFG Annual Report 201636

Thousands of U.S. dollars
2016
More than More thanThree
Withinone year two years
years orone year and within and within
more
two years three years$69,075,932 $6,125,701 $1,710,135$330,786
Deposits (*)
Negotiable certificates
7,154,056
2,485——
of deposit
Total$76,229,988 $6,128,186 $1,710,135$330,786(*) Within deposits, demand deposits are included in “within one year.”

5. SECURITIESSecurities held at March 31, 2016 include shares of
unconsolidated subsidiaries and affiliates amounting to¥90 million ($1 million) and investments of ¥1,078 million($10 million). Corresponding figures at March 31, 2015,
were ¥86 million and ¥853 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 ¥6,180 million ($55 million) and ¥4,785 million
as of March 31, 2016 and March 31, 2015 respectively.
Bonds included in securities also include securities
lent through unsecured loan agreements (bond lendingtransactions) of ¥5,065 million ($45 million) and ¥18,561
million, at March 31, 2016 and 2015 respectively.

6. FAIR VALUE INFORMATION(b) Held-to-maturity debt securities:
Type
Securities with fairLocalvalue exceeding book government
value
bonds
Corporate
bonds
OthersSubtotal
Securities with fairLocalvalue not exceeding government
book value
bonds
Corporate
bonds
OthersSubtotal
Total

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

Securities
The following tables summarize book values, fair value andacquisition cost of securities with available fair values as ofMarch 31, 2016 and 2015:(a) Trading securities
Amount of unrealized gain (loss) on trading securities
included in the consolidated statement of income— ¥17 million ($151 thousand) and ¥14 million as at
March 31, 2016 and 2015, respectively.

37

YMFG Annual Report 2016

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

Millions of yen
2016Book value Fair value Difference¥1,400¥1,455

¥ 55

3,337

3,441

104

286
5,023

289
5,185

3
162

—

—

—

106

106

(0)

—
106
¥5,129—106¥5,291—(0)¥162

Millions of yen
2015Book value Fair value Difference
¥ 900

¥ 915

¥15

2,686

2,727

41

751
4,337

767
4,409

16
72

—

—

—

110

110

(0)

—
110
¥4,447—110¥4,519—(0)¥72

Thousands of U.S. dollars
2016Book value Fair value Difference$12,425$12,913$ 488

29,61530,538923

2,538
44,5782,565
46,016

27
1,438

—

—

—

940

940

(0)

—
940
$45,518—940$46,956—(0)$1,438(c) Available-for-sale securities

Type

Millions of yen
2016
Acquisition
Book value
Differencecost¥ 108,872¥49,024¥ 59,848

Securities with book Sharesvalue exceeding
Japaneseacquisition costgovernment
600,562
588,705bonds
Local
government
29,371
28,405bonds
Corporate
1,031,214 1,011,984
bonds
Others117,964
116,084
Subtotal
1,887,983 1,794,202
Securities with book Shares
12,514
13,899value not exceeding Japaneseacquisition costgovernment
14,562
14,630bonds
Local
government
1,288
1,290
bonds
Corporate
22,76022,853bonds
Others
165,645
180,808
Subtotal
216,769
233,480
Total¥2,104,752 ¥2,027,682

Type

11,857966
19,2301,880
93,781(1,385)
(68)
(2)
(93)
(15,163)(16,711)¥ 77,070

Millions of yen
2015
Acquisition
Book value
Differencecost¥ 133,436 ¥ 56,513 ¥ 76,923

Securities with book Sharesvalue exceeding
Japaneseacquisition costgovernment
678,753674,788bonds
Local
government
35,75235,088bonds
Corporate
1,054,576 1,041,975
bonds
Others223,373
210,685
Subtotal
2,125,890 2,019,049
Securities with book Shares
5,695
6,355
value not exceeding Japaneseacquisition costgovernment
57,55657,858bonds
Local
government
3,739
3,759
bonds
Corporate
47,05647,346bonds
Others70,782
72,682
Subtotal
184,828
188,000
Total¥2,310,718 ¥2,207,049

Type

Securities with book Sharesvalue exceeding
Japaneseacquisition costgovernment 5,329,801 5,224,574
bonds
Local
government
260,659
252,086bonds
Corporate
9,151,704 8,981,044
bonds
Others
1,046,893 1,030,208
Subtotal
16,755,262 15,922,985
Securities with book Shares
111,058
123,349
value not exceeding Japaneseacquisition costgovernment
129,233
129,837bonds
Local
government
11,431
11,448bonds
Corporate
201,988
202,813bonds
Others
1,470,048 1,604,616
Subtotal
1,923,758 2,072,063
Total$18,679,020 $17,995,048

8,573
170,660
16,685832,277(12,291)
(604)
(17)
(825)
(134,568)(148,305)$ 683,972

fiscal year ended March 31, 2016 and 2015.
(e) Available-for-sale securities sold during the fiscal year

SharesJapanese government bonds
Local government bonds
Corporate bonds
Others
Total

Millions of yen
2016
Sale
Total gain Total loss
amounton saleon sale¥6,724¥ 3,575¥ 115
1,050,859
8,774
582
—
—
—
161,673
2,074
4359,283
9,395
2,227¥1,578,539¥23,818¥2,928

SharesJapanese government bonds
Local government bonds
Corporate bonds
Others
Total

Millions of yen
2015
Sale
Total gain Total loss
amounton saleon sale
¥
4,677
¥ 760
¥ 92
1,759,555
6,757
913
4,477
23
—
358,5381,641
42
330,695
6,482
846¥2,457,942¥15,663¥1,893664

12,688106,841(660)

105,227(d) Held-to-maturity debt securities sold during the fiscal year
There were no held-to-maturity securities sold during the

3,965

12,601Thousands of U.S. dollars
2016
Acquisition
Book value
Differencecost$ 966,205 $ 435,073 $ 531,132

(302)
(20)
(290)
(1,900)(3,172)¥103,669

YMFG Annual Report 201638

Shares
Japanese government bonds
Local government bonds
Corporate bonds
Others
Total

Thousands of U.S. dollars
2016
Sale
Total gain Total loss
amounton saleon sale$ 59,673$ 31,727$ 1,021
9,326,047
77,8675,165———
1,434,798
18,40635
3,188,525
83,377
19,764$14,009,043$211,377$25,985(b) Money held in trust classified as held-to-maturity
There are no corresponding transactions as at March
31, 2016 and 2015.
(c) Available-for-sale money held in trust

Available-for-sale money heldin trust(f) Securities for which purpose of holding changed
There were no securities for which the purpose of holding
changed at March 31, 2016 and 2015.

Impairment losses on securities
Regarding securities (excluding those for which market
prices are not readily available) other than trading securities,
if their market values have fallen substantially below theiracquisition price and are not expected to recover to theacquisition price, such market values are recorded in the
consolidated balance sheets. The valuation difference
is recorded as a loss for the fiscal year in which suchdifference is realized (hereinafter, “impairment losses”).
During the fiscal year ended March 31, 2016,
impairment losses were ¥682 million ($6,053 thousand)on equity securities and during the fiscal year ended March
31, 2015, impairment losses totaled ¥16 million on equity
securities. The 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 value of the securities is determined to have“fallen significantly.” However in the case of sharesand equivalent securities, if their market 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 suchas 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, 2016
and 2015 is as follows:(a) Money held in trust classified as trading purposes
There are no corresponding amounts as at March 31,
2016 and 2015.

39

YMFG Annual Report 2016

Available-for-sale money heldin trust

Available-for-sale money heldin trust

Millions of yen
2016
Consolidated
Unrealized
Acquisition
balance sheet
gains
cost
amount(losses)¥47,655¥47,642¥13

Millions of yen
2015
Consolidated
Unrealized
Acquisition
balance sheet
gains
cost
amount(losses)¥48,096¥48,273¥(177)

Thousands of U.S. dollars
2016
Consolidated
Unrealized
Acquisition
balance sheet
gains
cost
amount(losses)$422,923 $422,808$115

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

Net unrealized gains
Available-for-sale securities
Available-for-sale money heldin trust
Deferred tax liabilities
Unrealized gains on availablefor-sale securities before
following adjustment
Equivalent to non-controllinginterests
YMFG’s interest in net
unrealized gains on valuationof available-for-sale securities
held by affiliates accounted forby the equity method
Unrealized gains on availablefor-sale securities

Millions of yen
2016
2015
¥77,132 ¥103,611
77,119 103,788
13
(177)

Thousands of
U.S. dollars
2016$684,522
684,407115

23,11254,02032,455
71,156205,121479,401

(0)

10

(9)

0

0

0

¥ 54,020 ¥ 71,146$479,411

Valuation differences on investments in partnerships,
etc., of ¥49 million ($435 thousand) at March 31, 2016and ¥120 million at March 31, 2015, for which market
values are extremely difficult to determine, are recorded inavailable-for-sale securities of net unrealized gains in thelist above.

Derivatives(b) Currency-related:(1) Derivative transactions at March 31, 2016 and 2015, towhich hedge accounting is not applied(a) Interest-rate-related:
Millions of yen
2016
Type
Over-the-counter:
Interest rate swaps:
Receivable fixed,
payable floating
Receivable floating,payable fixedInterest rate cap
Sold
Total

Contract
amounts

Over oneyear

Fair value

Realized
gains(losses)¥36,160¥28,512

¥ 760

¥ 760

36,21928,571

(650)

(650)

64
—

(0)
¥ 110

4
¥ 114

¥

64
—

¥

Millions of yen
2016

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

TypeOver-the-counter:
Interest rate swaps:
Receivable fixed,
payable floating
Receivable floating,payable fixedInterest rate cap
Sold
Total

Over oneyear

Fair value

Realized
gains(losses)¥50,546¥37,556

¥ 582

¥ 582

50,63737,648

(466)

(466)

96
—

96
—

(0)
¥ 116

4
¥ 120

¥

¥

Fair value

Realized
gains(losses)¥327,634 ¥132,655¥ 3,163¥(1,319)

1,292
860

2,621
(65)

2,621
(65)

158,874 114,263
158,874 114,263¥— ¥—(5,626)
6,583¥ 6,676

4,138(1,279)¥ 4,096

148,196
36,781Millions of yen
2015

Millions of yen
2015
Contract
amounts

Over oneyear

Contract
amounts

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

Over oneyear

Fair value

Realized
gains(losses)¥261,656 ¥141,121¥(10,093)¥ (1,732)

(929)
774

(929)
774

Contract
amounts

158,367
25,690174,828 130,634
174,828 130,634¥— ¥—Thousands of U.S. dollars
2016
Type
Over-the-counter:
Interest rate swaps:
Receivable fixed,
payable floating
Receivable floating,payable fixedInterest rate cap
Sold
Total

Contract
amounts

Over oneyear

Fair value

Realized
gains(losses)$320,909 $253,035$ 6,745$ 6,745

321,431(5,769)(5,769)$253,559

568
— $

568
—

$

(0)
976

36
$ 1,012

7,268
3,059

(4,767)
6,847
6,413(3,169)¥(8,602) ¥ 1,791

Thousands of U.S. dollars
2016

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

Over oneyear

Fair value

Realized
gains(losses)$2,907,650 $1,177,272$ 28,071$(11,706)

11,466
7,632

23,260(577)

23,260(577)

1,409,957 1,014,049
1,409,957 1,014,049$— $—(49,929)
58,422$ 59,247

36,723(11,350)$ 36,350

Contract
amounts

1,315,193
326,420

YMFG Annual Report 201640

(c) Stock-related:
There were no stock-related transactions as at March 31,
2016 and 2015.

(2) Derivative transactions as at March 31, 2016 and 2015,
to which hedge accounting is applied(a) Interest-rate-related:(d) Bond-related:
Millions of yen
2016

Type
Listed:Bond futures
Sold
Total

Contract
amounts

Over oneyear

Fair value¥136,594
¥
—

¥—
¥—

¥(182)¥(182)

Realized
gains(losses)¥(182)¥(182)

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

Millions of yen
2015

Type
Listed:Bond futures
Sold
Total

Contract
amounts

Over oneyear¥111,318
¥
—

¥—
¥—

Fair value¥(275)¥(275)

Realized
gains(losses)¥(275)¥(275)

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

Thousands of U.S. dollars
2016

Type
Listed:Bond futures
Sold
Total

Contract
amounts

Over oneyear

Fair value$1,212,229
$
—

$—
$—

$(1,615)$(1,615)

Realized
gains(losses)$(1,615)$(1,615)(e) Commodity-related:
There were no commodity-related transactions as at March
31, 2016 and 2015.
(f) Credit-derivatives:
There were no credit related transactions as at March 31,
2016 and 2015.

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

¥

1,655
—

¥12,074¥(460)

1,608—*¥(460)¥

Millions of yen
2015
Contract Over one
Fair value
amounts
year¥13,710¥275—¥13,710¥(499)

242—*¥(499)¥

Thousands of U.S. dollars
2016
Contract Over one
Fair value
amountsyear$107,153 $107,153$(4,082)

14,688
14,271— $—*$(4,082)$(b) Currency-related:

Type
Principal accounting procedure:
Currency swaps
Total

YMFG Annual Report 2016

¥12,074(*) Of interest rate swaps employing exceptional accounting, as these instruments areaccounted for together with the hedged loans and bills discounted and borrowings, theirfair value is included in the fair value of said loans and bills discounted within “Financial
instruments.”

Type
Principal accounting procedure:
Currency swaps
Total

41

Millions of yen
2016
Contract Over one
Fair value
amountsyear

Millions of yen
2016
Contract Over one
Fair value
amounts
year¥29,891
¥
—

¥96
¥—

¥1,443¥1,443

Millions of yen
2015
Contract Over one
Fair value
amountsyear¥32,730¥—¥—¥—¥(828)¥(828)

Type
Principal accounting procedure:
Currency swaps
Total

Thousands of U.S. dollars
2016
Contract Over one
Fair value
amounts
year$265,273
$
—

$852
$ —

$12,806$12,806(c) Stock-related:
There were no stock-related transactions at March 31,
2016 and 2015.
(d) Bond-related:
There were no bond-related transactions at March 31,
2016 and 2015.

7. LOANS AND BILLS DISCOUNTED
Loans at March 31, 2016 and 2015 include “Risk-Managed
Loan Amounts” as follows:(1) Loans to borrowers in bankruptcy amounting to¥18,738 million ($166 million) and ¥21,398 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
accrual has stopped as there is doubt about thecollectability of either principal or interest because they
have been contractually past due for a considerable
period of time or for other reasons.
(2) Other delinquent loans amounting to ¥73,782 million($655 million) and ¥80,077 million denote loans
on which the Banks have stopped accruing interest
excluding loans to borrowers in bankruptcy and loans
on which interest payments are deferred in order topromote recovery of borrowers in economic difficulty.
(3) Loans past due for three months or more amounting to¥552 million ($5 million) and ¥692 million denote loans
where payment of interest or principal has been delayed
for three months or more excluding loans to borrowers
in bankruptcy and other delinquent loans.
(4) Restructured loans amounting to ¥12,286 million($109 million) and ¥15,260 million denote loans toborrowers for which the repayment terms have been
modified to more favorable terms including reductionof interest rate, deferral of interest payments, extensionof principal payments and debt forgiveness withthe objective of promoting recovery of borrowers ineconomic difficulty excluding loans to borrowers inbankruptcy, other delinquent loans, and past-due loans.
(5) The total of loans to borrowers in bankruptcy, otherdelinquent loans, past-due loans, and restructuredloans amounted to ¥105,358 million ($935 million) and¥117,427 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, February 13, 2002, of the JICPA, although theBanks have the right to sell or pledge them without
restrictions. The total face value of commercial bills andpurchased foreign exchange bills obtained as a result of
discounting was ¥41,223 million ($366 million) at March
31, 2016 and ¥45,680 million at March 31, 2015.

8. COMMITMENT LINES
Loan agreements and commitment line agreements
relating to loans are agreements that oblige theconsolidated subsidiaries to lend funds up to a certain limit
agreed in advance. The consolidated subsidiaries make theloans upon the request of an obligor to draw down funds
under such loan agreements as long as there is no breachof the various terms and conditions stipulated in therelevant loan agreement. The unused commitment balance
relating to these loan agreements amounted to ¥923,165
million ($8,193 million) at March 31, 2016 and ¥898,025
million at March 31, 2015. Of this amount, ¥847,805
million ($7,524 million) at March 31, 2016, and ¥831,960
million at March 31, 2015, relates to loans for which theterm 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 unused loan commitment will not necessarily affectfuture cash flows. Conditions are included in certain loan
agreements that allow the consolidated subsidiaries either
to decline the request for a 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 orwhen it is necessary to protect the consolidated subsidiaries’
credit. Consolidated subsidiaries take various measures
to protect their credit. Such measures include having the

YMFG Annual Report 201642

obligor pledge collateral to the consolidated subsidiaries
in the form of real estate, securities, etc., at entering intoa loan agreement or in accordance with the consolidated
subsidiaries’ established internal procedures for confirming
the obligor’s financial condition, etc., at regular intervals.

9. PLEDGED ASSETSAt March 31, 2016 and 2015, the following assets were
pledged as collateral for certain liabilities of the Banks.

Cash and due from banks
Securities
Lease receivables andinvestment assets

Millions of yen
2016
2015
¥
18 ¥
18
235,549
231,785—
1,955

Thousands of
U.S. dollars
2016
$
160
2,090,424—

The collateral was pledged to secure the following:

Deposits
Payables under securities lending transactions
Borrowed money

Millions of yen
2016
2015
¥38,656¥40,055
32,001
24,028901

5,580

Thousands
ofU.S. dollars
2016$343,060
283,9997,996

In addition, securities not included in the aboveschedules were pledged as collateral for operatingtransactions, such as foreign exchange contracts andforward exchange contracts. These securities amounted to¥104,750 million ($930 million), cash and due from banks¥3 million ($27 thousand) and net other assets ¥1,243
million ($11 million) including security deposits of ¥4,180
million ($37 million) at March 31, 2016. The corresponding
figures at March 31, 2015, were ¥107,910 million, ¥3million and ¥1,197 million, including security deposits of¥3,229 million.

10. ACCUMULATED DEPRECIATION
Accumulated depreciation of tangible assets was ¥73,571
million ($653 million) at March 31, 2016, and ¥74,452
million at March 31, 2015.

43

YMFG Annual Report 2016

11. ADVANCED DEPRECIATION AMOUNTOF TANGIBLE FIXED ASSETSAt March 31, 2016 and 2015, advanced depreciation
amount of tangible fixed assets were ¥8,154 million($72 million) and ¥8,157 million, and there were nocorresponding amount depreciated from certain tangible
fixed assets in fiscal year ended March 31, 2016 and 2015.

12. IMPAIRMENT LOSSES
During the fiscal year ended March 31, 2016 and 2015,
impairment losses were recorded on the following assets.
Location
WithinHiroshima
Prefecture
WithinYamaguchi
Prefecture
WithinFukuoka
Prefecture
Total

PrimaryuseType

Idle assets Land,for salebuildings

Impairment loss
Thousands ofMillions of yen
U.S. dollars
2016
2015
2016
¥ 17
¥ 20
$ 151

Business- Land,use assets buildings

¥ 59

¥ —

$ 523

Business- Land,use assets, buildings
idle assete

¥ 42

¥112

$ 373

¥118

¥132

$1,047YMFG and its consolidated subsidiaries that engage inthe banking and securities business group their businessuse assets into the smallest units possible from thestandpoint of management accounting, which is thebranch. Idle assets are, in principle, grouped as units ofindividual 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 areengaged in the banking businesses.
Consolidated subsidiaries that do not engage in thebanking and securities business group their assets, inprinciple, on an individual company basis.
In the fiscal year ended March 31, 2016 and 2015, thebook values of the business-use and idle assets, whichhave problem in operating cash flow, and assets that arescheduled for sale are reduced to their recoverable values,
and recognized the reduction of ¥118 million ($1,047
thousand) and ¥132 million as impairment losses. This
amount includes land of ¥92 million ($816 thousand) andbuildings of ¥26 million ($231 thousand) in fiscal year ended
March 31, 2016, and land of ¥67 million and buildings of¥65 million in fiscal year ended March 31, 2015.

The recoverable amount used to estimate theimpairment loss for the fiscal year ended March 31, 2016
and 2015, is the net selling price, which is calculated bydeducting the expected disposal cost from the expected
disposal value.

13. BORROWED MONEY
Payment schedule of borrowed money as of March 31,
2016 is as follows:
2016
2017
2018
2019
2020
Thereafter
Total

Millions of yen¥15,139
5,594
4,202
2,713
1,640
5,265
¥34,553

Thousands of
U.S. dollars$134,354
49,64537,291
24,077
14,55446,726$306,647

Defined benefit plans(1) Reconciliation of retirement benefit obligation
balances at the beginning and the end of the
fiscal year ended March 31, 2016 and 2015

Retirement benefit obligations at
the beginning of the fiscal year
Cumulative effects of changes
in accounting policies
Restated balance
Service cost
Interest cost
Actuarial differences
Retirement benefit payments
Past service cost
OthersRetirement benefit obligations
at the end of the fiscal year

15. PROVISION FOR EMPLOYEERETIREMENT BENEFITS
Overview of severance payments and pension plans
Some consolidated subsidiaries employ funded andunfunded defined benefit and defined contribution plans as
employee retirement benefits.
Defined benefit plans include defined benefit corporate
pension plans and lump-sum retirement plans. Also, someare established as retirement benefit trusts.
Some consolidated subsidiaries employ the simplified
method for calculating retirement benefit obligations.

Thousands of
U.S. dollars
2016$535,863

—

3,086

—

60,381
1,707
344
5,200
(3,447)(1,139)(8)¥63,038

61,065
1,555
634
627
(3,742)—
242¥60,381535,863
15,1493,053
46,148(30,591)(10,108)(71)$559,443(2) Reconciliation of plan asset balances at the
beginning and the end of the fiscal year ended
March 31, 2016 and 201514. BONDS PAYABLE
Bonds payable include subordinated bonds. There were no
subordinated bonds as of March 31, 2016 and ¥25,000
million as of March 31, 2015.

Millions of yen
2016
2015
¥60,381¥57,979

Balance of plan assets at the
beginning of the fiscal year
Expected return on plan assets
Actuarial differences
Contribution from employer
Retirement benefit payments
Partial returns of retirement
benefit trust
OthersBalance of plan assets at theend of the fiscal year

Millions of yen
2016
2015
¥90,390¥76,382

Thousands of
U.S. dollars
2016$802,183

2,903(7,497)1,620(2,220)(2,746)

2,805
11,714
1,629(2,368)—25,763(66,534)
14,377(19,702)(24,369)

225¥82,675

228¥90,390

1,997$733,715(3) Reconciliation of the balances of retirement
benefit obligations and plan assets at the end of
the fiscal year ended March 31, 2016 and 2015,
and the carrying amounts of net defined benefit
liability and net defined benefit asset

Retirement benefit obligationsof funded plans
Plan assets
Retirement benefit obligationsof unfunded plans
Net carrying amount of
obligations and assets

Millions of yen
2016
2015
¥ 62,979 ¥ 60,328

Thousands of
U.S. dollars
2016$ 558,919(82,675)(19,696)59(90,390)(30,062)53(733,715)(174,796)
524¥(19,637)¥(30,009)$(174,272)

YMFG Annual Report 2016

44

Net retirement benefit liability
Net retirement benefit asset
Net carrying amount of
obligations and assets

Millions of yen
2016
2015
¥ 2,057 ¥ 3,467(21,694)(33,476)¥(19,637) ¥(30,009)

Thousands of
U.S. dollars
2016$ 18,255(192,527)$(174,272)(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

Thousands ofMillions of yen
U.S. dollars
2016
2015
2016
¥ 1,707¥ 1,555$ 15,149
344
634
3,053
(2,903)(2,805)(25,763)
571
1,637
5,067
(142)
0
(1,260)30¥ (393)57¥ 1,078266$ (3,488)* 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.

Past service cost
Actuarial gain (loss)
Total

Millions of yen
2016
2015
¥
997
¥
0
(13,093)
12,723¥(12,096) ¥12,723

Thousands of
U.S. dollars
2016$ 8,848(116,196)$(107,348)(6) Cumulative remeasurements of defined benefit
plans
Items posted as cumulative remeasurements of defined
benefit plans (before tax-effect exclusions) break down
as follows.

Unrecognized past service cost
Unrecognized actuarial gain
(loss)Total

45

YMFG Annual Report 2016

Millions of yen
2016
2015
¥ (997)¥—
5,732(7,361)¥4,735¥(7,361)

Thousands of
U.S. dollars
2016$ (8,848)
50,870$42,022(7) Plan assets(i) Percentages of major asset categories to total plan assets
are as follows.
2016
21%
65%
14%
100%

Bonds
SharesOthers
Total

2015
20%
64%
16%
100%

(Note) Plan assets include 25% of corporate pension plans established as retirement benefit
trusts at the end of the fiscal year ended March 31, 2016, and 30% at March 31, 2015.

(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 costfrom the weighted average rate for the policy asset mix(medium- to long-term portfolio)(Retirement benefit trusts)
Past dividend performance is converted to yield.

(8) Basis of actuarial calculation
The basis of actuarial calculations as of March 31, 2016 and2015
Discount rate

2016
2015
0.00%—0.63% 0.03%—1.64%

Expected long-term rate of returnon plan assets

1.20%—3.00% 1.50%—6.20%

Expected rate of salary increase

0.80%—4.65% 0.80%—4.65%

Defined contribution plans
The required contribution to the consolidated subsidiaries’
defined contribution plans at the end of the fiscal year
ended March 31, 2016 and 2015 were ¥153 million($1,358 million) and ¥153 million, respectively.

16. REVALUATION RESERVE FOR LAND
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 ofthis revaluation amount was recorded in liabilities under“deferred tax liabilities for revaluation reserve for land,”and the reminder 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 forbusiness use revalued in accordance with Article 10 of the
Law and the total post-revaluation book value of land at
March 31, 2016 and 2015 were ¥23,245 million ($206
million) and ¥23,409 million, respectively.

17. CONTINGENT LIABILITIES —ACCEPTANCES AND GUARANTEESAll contingent liabilities, including letters of credit,
acceptances and guarantees are reflected in acceptancesand guarantees. 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.

18. OTHER INCOME
Other income for the fiscal year ended March 31, 2016
and 2015 included the gains on sale of stock of ¥10,392
million ($92 million) and ¥5,150 million, respectively.

19. GENERAL AND ADMINISTRATIVE
EXPENSES

20. OTHER EXPENSES
Other expenses included ¥1,779 million ($15,788
thousand) in loss on sale of stock, ¥697 million ($6,186
thousand) in devaluation of stock for the year ended March
31, 2016. For the year ended March 31, 2015, otherexpenses included ¥616 million in loss on sale of stock,¥31 million in devaluation of stock and ¥1,199 million inloss on investment of money held in trust.

21. LEASE TRANSACTIONS
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 leasecertain equipment under noncancelable finance leases.
Finance leases that do not transfer ownership to lessees
are not capitalized and are accounted for in the samemanner as operating leases. Certain information forsuch non-capitalized finance leases for the year ended
March 31, 2016 and 2015 were as follows:
Equivalent amount:
Acquisition cost
Accumulated depreciation
Net book value

Millions of yen
2016
2015
¥—
¥11
—
11
¥—
¥—

Thousands of
U.S. dollars
2016
$—
—
$—

Lease payments
Equivalent depreciation expense
Equivalent interest expense

Millions of yen
2016
2015
¥—
¥2
—
2
¥—
¥0

Thousands of
U.S. dollars
2016
$—
—
$—

Items included operating expenses for the year ended
March 31, 2016 and 2015 were as follows:

Salary and allowance
Depreciation

Millions of yen
2016
2015
¥31,417¥30,988
7,093
10,518Millions of
U.S. dollars
2016
$279
63

YMFG Annual Report 201646

Equivalent depreciation expense is computed using thestraight-line method over the lease terms assuming noresidual value. Equivalent interest expense is computed
using the interest rate method over the lease terms for thedifference between acquisition cost and total lease payments.
There are no future minimum lease payments under
non-cancelable finance leases having remaining terms inexcess of one year at March 31, 2016 and 2015.
2. Operating leases
Future minimum lease payments at March 31, 2016 and2015 were as follows:
At March 31, 201620172018 and thereafter
Total minimum lease payments

Thousands of
U.S. dollars
$ 834
8,902
$9,736

Millions of yen
¥ 94
1,003
¥1,097

Millions of yen
¥ 84
1,097
¥1,18120162017 and thereafter
Total minimum lease payments

22. INCOME TAXES
1. Significant components of the deferred tax assets andliabilities as of March 31, 2016 and 2015 were as follows:

47

YMFG Annual Report 2016%
Effective statutory tax rate
(Adjustments)
Revision of valuation allowances
Items permanently exempted from income suchas dividend income
Non-deductable goodwill amortization
Inhabitant tax on per capita basis
Items permanently excluded from expense suchas entertainment expenses
Downward revision in deferred tax assets at theend of the fiscal year due to changes in tax rate
Consolidation adjustment
OthersActual tax rate after application of deferredincome tax accounting

2016
32.83

2015
—

(2.61)(0.42)

—
—

3.15
0.26
0.27

—
—
—

1.83

—

0.07
0.35
35.73

—
—
—

(Note) Information for the year ended March 31, 2015 was omitted, as the difference
between the effective statutory tax rate and the actual tax rate after application ofdeferred income tax accounting is 5% or less of the effective statutory tax rate.

At March 31, 2015

Deferred tax assets:
Allowance for loan losses
Provision for bonuses
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(liabilities)

2. Significant differences between the statutory effective
tax rate and the actual income tax rate after applicationof deferred income tax accounting for the year ended
March 31, 2016 and 2015 were as follows:

Millions of yen
2016
2015

Thousands of
U.S. dollars
2016¥ 17,314
1,118
5,312
752
1,523

¥ 19,703
1,035
4,357
941
2,775

$ 153,656
9,922
47,142
6,674
13,517

304

406

2,698

3,820
30,143(2,377)
27,766

4,374
33,591(3,873)29,71833,901
267,510(21,095)
246,415(23,167)(32,447)(205,600)(4,243)(4,676)(37,655)(2,077)(29,487)¥ 1,721(2,706)(39,829)¥(10,111)(18,433)(261,688)$ 15,273

3. Revisions in amounts of deferred taxes assets andliabilities due to changes in the corporate tax rate
For the year ended March 31, 2016
The “Act on Partial revision of Income Tax Act” (Law No.
15 of 2016) and the “Act on Partial Revision of the Local
Tax Act” (Law No. 13 of 2016) were passed on March
29, 2016, lowering the corporate tax rate from the fiscal
years beginning on or after April 1, 2016. Accordingly, thestatutory effective tax rate used for calculating deferred tax
assets and liabilities was reduced from 32.38% to 30.69%
applied for temporary differences that are expected to
be deductible in the fiscal year beginning April 1, 2016
and 2017, and further to 30.46% applied for temporary
differences that are expected to be deductible in the fiscal
year beginning April 1, 2018.
This change in the tax rate had the effect of reducing
deferred tax liabilities by ¥210 million ($2 million),increasing unrealized gains on available-for-sale securitiesby ¥1,222 million ($11 million), reducing deferred gains orlosses on hedges by ¥7 million ($62 thousand), decreasing
remeasurements of defined benefit plans by ¥72 million($1 million) and increasing deferred income taxes by¥933 million ($8 million). Deferred tax liabilities for land
revaluation decreased by ¥571 million ($5 million), andrevaluation reserve for land increased by the same amount.

For the year ended March 31, 2015
The “Act on Partial revision of Income Tax Act” (Law No.
9 of 2015) and the “Act on Partial Revision of the Local
Tax Act” (Law No. 2 of 2015) were promulgated on March
31, 2015, lowering the corporate tax rate from the fiscal
years beginning on or after April 1, 2015. Accordingly, thestatutory effective tax rate used for calculating deferred tax
assets and liabilities was reduced from 35.38% to 32.38%
applied for temporary differences that are expected to be
deductible in the fiscal year beginning April 1, 2015, andfurther to 32.06% applied for temporary differences thatare expected to be deductible in the fiscal year beginning
April 1, 2016.
This change in the tax rate had the effect of reducing
deferred tax liabilities by ¥1,358 million, increasing
unrealized gains on available-for-sale securities by ¥3,364
million, reducing deferred gains or losses on hedgesby ¥16 million, increasing remeasurements of defined
benefit plans by ¥273 million and raising deferred income
taxes by ¥2,263 million. Deferred tax liabilities for land
revaluation decreased by ¥1,187 million, and revaluation
reserve for land increased by the same amount.

however all of these may be transferred to other capitalsurplus and retained earnings, respectively, which arepotentially available for dividends.
The maximum amount that YMFG can distribute as
dividends is calculated based on the Non-Consolidated
Financial Statements of YMFG in accordance with the Act.
At the annual shareholders’ meeting, held on June 29,
2016, the shareholders approved cash dividends amounting
to ¥1,970 million ($17 million). Such appropriations havenot been accrued in the Consolidated Financial Statements
as of March 31, 2016 and to be recognized in the period inwhich they are approved by the shareholders.
At the annual shareholders’ meeting, held on June
26, 2015, the shareholders approved cash dividends
amounting to ¥1,712 million. Such appropriations have notbeen accrued in the Consolidated Financial Statements asof March 31, 2015 and to be recognized in the period inwhich they are approved by the shareholders.

24. CHANGES IN NET ASSETS
1. Type and number of shares issued and treasury shareswere as follows:
Number of shares (in thousand)March 31,
March 31,
Increase Decrease
2015
2016

23. NET ASSETS
Under the Companies Act of Japan (“the Act”), the entire
amount paid for new shares is 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 the price of the newshares as additional paid-in capital, which is included incapital 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
stock over 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 be capitalized, by a resolution of theshareholders’ meeting.
Under the Act, additional paid-in capital and legal
earnings reserve may not be distributed as dividends,

Shares issued
Common stock
Total
Treasury stock
Common stock*1, *2
Total

264,353
264,353————

264,353
264,353

20,857
20,857

27
27

1,412
1,412

19,472
19,472*1 The increase in the number of shares is due to purchases of shares constituting less than
one trading unit.
Of the decreases in the number of shares, 1,037 thousand shares were due to a shareexchange between YMFG and an affiliated company, 266 thousand shares were due tothe sale of shares to the Group’s employee stock ownership program, 103 thousand shareswere due to the exercise of stock options, 3 thousand shares were due to the changes inownership of YMFG’s subsidiaries, and 1 thousand shares were in response to demand forthe purchase of fractional shares.
*2 Treasury stock as of beginning and ending of fiscal year ended March 31, 2016
include 1,047 thousand shares and 781 thousand shares held by the ESOP Trust for
Employee Shareholders.

YMFG Annual Report 201648

Number of shares (in thousand)March 31,
March 31,
Increase Decrease
2014
2015
Shares issued
Common stock
Total
Treasury stock
Common stock*1, *2
Total

264,353
264,353——

264,353
264,353

11,29911,29910,062
10,062504
504

20,857
20,857*1 Of the increase in the number of shares, 10,000 thousand shares were acquired in themarket, 35 thousand shares were due to the acquisition of fractional shares and 27
thousand shares were due to the transition of a company from an equity-method affiliate
to a consolidated subsidiary. Of the decrease in the number of shares, 353 thousand
shares were due to the sale of shares to the Group’s employee stock ownership program
ESOP Trust for Employee Shareholders, 150 thousand shares were due to the exercise ofstock options, and 1 thousand shares were in response to demand for the purchase of
fractional shares.
*2 Treasury stock as of beginning and ending of fiscal year ended March 31, 2015 include
1,400 thousand shares and 1,047 thousand shares held by the ESOP Trust for Employee
Shareholders.

2. Stock options
Stock options at March 31, 2016 and 2015 were ¥601
million ($5 million) and ¥512 million, respectively.
3. Information on dividends is as follows:(a) Dividends paid in the fiscal year ended March 31, 2016
and 2015.

Type of shares
Resolved at the boardof directors meetingon May 8, 2015
Common stock
Resolved at the boardof directors meetingon November 6, 2015
Common stock

Aggregate
amount ofdividends(Millionsof yen)Cashdividends
per share(Yen)

Recorddate

Effectivedate

Resolved at the boardof directors meetingon November 7, 2014
Common stock¥1,712*1 ¥7.00 Mar. 31, Jun. 29,
2015
2015

¥1,713*2 ¥7.00 Sep. 30, Dec. 10,
2015
2015

Aggregate
amount ofdividends(Millionsof yen)Cashdividends
per share(Yen)

Recorddate

Effective
date¥1,781*1 ¥7.00 Mar. 31,
2014

Jun. 27,
2014¥1,782*2 ¥7.00 Sep. 30,
2014

Dec. 10,2014*1 The total amount of dividend on common stock includes ¥10 million in dividends to ESOP
Trust for employee shareholders.
*2 The total amount of dividend on common stock includes ¥8 million in dividends to ESOP
Trust for employee shareholders.

49

YMFG Annual Report 2016

Resolved at the boardof directors meetingon November 6, 2015
Common stock

Recorddate

Effective
date$15,193*1$0.06 Mar. 31, Jun. 29,
2015
2015

$15,202*2$0.06 Sep. 30, Dec. 10,
2015
2015

*1 The total amount of dividend on common stock includes $62 thousand in dividends to
ESOP Trust for employee shareholders.
*2 The total amount of dividend on common stock includes $53 thousand in dividends to
ESOP Trust for employee shareholders.

(b) Dividends to be paid in the fiscal year ending March 31,2017 and 2016 are as follows:(Millions of yen, except per share amount)
AggregateCashamount of Source
dividends Record
Effective
dividendsof
per share
datedate(Millions of dividends
(Yen)
yen)

Type of shares
Resolved at theboard of directors
meeting on May
13, 2016
Common stock¥1,970* Retained ¥earnings

8.00 Mar. 31,
2016

Jun. 30,
2016* The total amount of dividend on common stock includes ¥6 million in dividends to ESOP
Trust for employee shareholders.

*1 The total amount of dividend on common stock includes ¥7 million in dividends to ESOP
Trust for employee shareholders.
*2 The total amount of dividend on common stock includes ¥6 million in dividends to ESOP
Trust for employee shareholders.

Type of shares
Resolved at the boardof directors meetingon May 9, 2014
Common stock

Type of shares
Resolved at the boardof directors meetingon May 8, 2015
Common stock

AggregateCashamount ofdividends
dividends
per share(Thousands of(U.S. dollars)
U.S. dollars)(Millions of yen, except per share amount)
AggregateCashamount of Source
dividends Record
Effective
dividendsof
per share
datedate(Millions of dividends
(Yen)
yen)

Type of shares
Resolved at theboard of directors
meeting on May
8, 2015
Common stock¥1,712* Retained ¥earnings

7.00 Mar. 31,
2015

Jun. 29,2015* The total amount of dividend on common stock includes ¥7 million in dividends to ESOP
Trust for employee shareholders.

(Thousands of U.S. dollars, except per share amount)
Aggregate
amount ofCashdividends
Source dividends
RecordEffective(Thouofper sharedatedatesands of dividends (U.S. dolU.S. dollars)
lars)Type of shares
Resolved at theboard of directors
meeting on May
13, 2016
Common stock$17,483* Retained
earnings$0.07 Mar. 31,
2016

Jun. 30,
2016* The total amount of dividend on common stock includes $53 thousand in dividends to ESOP
Trust for employee shareholders.

Number of stock options by 182,900 shares of YMFG’s common
class of stock*stock
Grant dateJuly 29, 2014

Vesting conditions

No vesting conditions set

Target length of service
periodNo target length of service period set

Period for exercise of rights July 30, 2014—July 29, 2044

2014
Category and number of
27 directors (excluding outside directors)
persons to be granted stock of YMFG’s subsidiaries, Yamaguchi
options
Bank, Momiji Bank and Kitakyushu Bank.
Number of stock options by 225,100 shares of YMFG’s common
class of stock*stock

25. 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
expenses2015
Category and number of
27 directors (excluding outside directors)
persons to be granted stock of YMFG’s subsidiaries, Yamaguchi
options
Bank, Momiji Bank and Kitakyushu Bank.

Millions of yen
2016
2015
¥172
¥194

Thousands
ofU.S. dollars
2016$1,526

Grant dateJuly 23, 2013

Vesting conditions

No vesting conditions set

Target length of service
periodNo target length of service period set

Period for exercise of rights July 24, 2013—July 23, 2043

2013
Category and number of
27 directors (excluding outside directors)
persons to be granted stock of YMFG’s subsidiaries, Yamaguchi
options
Bank, Momiji Bank and Kitakyushu Bank.
Number of stock options by 294,900 shares of YMFG’s common
class of stock*stock
Grant dateJuly 30, 2012

Vesting conditions

No vesting conditions set

Target length of service
periodNo target length of service period set

Period for exercise of rights July 31, 2012—July 30, 2042

2. The content of the stock options is as outlined below.
2016
Category and number of
27 directors (excluding directors member
persons to be granted stock of Audit and Supervisory Committee,
options
part-time director and outside directors)of YMFG’s subsidiaries, Yamaguchi
Bank, Momiji Bank and Kitakyushu Bank.
Number of stock options by 122,000 shares of YMFG’s common
class of stock*
stock

2012
Category and number of
27 directors (excluding outside directors)
persons to be granted stock of YMFG’s subsidiaries, Yamaguchi
options
Bank, Momiji Bank and Kitakyushu Bank.
Number of stock options by 192,600 shares of YMFG’s common
class of stock*stock
Grant date

October 31, 2011

August 25, 2015

Vesting conditions

No vesting conditions set

Vesting conditions

No vesting conditions set
No target length of service period set

Target length of service
periodNo target length of service period set

Target length of service
periodGrant date

Period for exercise of rights August 26, 2015—August 25, 2045

Period for exercise of rights November 1, 2011—October 31, 2041
Note: Stated as the equivalent number of shares.

YMFG Annual Report 201650

3. The summary of stock option activity is as indicated below.
(a) Number of stock options
2016
2015
2014
2013
2012
Prior to vesting———
As of the end— 182,900of the previous
consolidated
fiscal year
Granted122,000————
Expired
—
—
—
—
—
—
—
—
Vested— 182,900
Rights not yet
122,000————
determined
After vesting— 170,900 205,400 119,700
As of the end—of the previous
consolidated
fiscal year———
Rights determined— 182,900
Rights exercised— 22,500 26,500 34,600 20,300————
Expiry—Amount— 160,400 144,400 170,800 99,400
unexercised

Volatility of stock price*1
Expected number of years remaining*2
Forecast dividend*3
Risk-free interest rate*4

2015
24.89%
3.69 years¥13/share
0.101%*1 Calculated on the basis of stock price performance during a period (November 2010 toJuly 2014) corresponding to the expected number of years remaining (3.69 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, 2014.
*4 Japanese government bond yields for the expected number of years remaining.

5. Method for estimating the number of rights determined
for stock 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.

26. INVESTMENT AND RENTAL PROPERTY(b) Price information

Exercise
price
Averageshare priceat time of
exercise
Fair value on
date granted

Yen2016 2015 2014 2013 2012
¥
1 ¥
1 ¥
1 ¥
1 ¥
1

U.S. dollars
2016$ 0.01

—

1,532

1,532

1,532

1,532

—

1,377

1,015

973

619

660

12.22

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, 2016 and 2015 are 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

201627.87%
3.40 years¥14/share
0.015%*1 Calculated on the basis of stock price performance during a period (March 2012 to August2015) corresponding to the expected number of years remaining (3.40 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, 2015.
*4 Japanese government bond yields for the expected number of years remaining.

51

YMFG Annual Report 2016

This note is omitted, as the total amount of investment andrental property is immaterial.

27. CONSOLIDATED STATEMENTS OFCOMPREHENSIVE INCOME

28. SEGMENT INFORMATION

Amounts of reclassification adjustments and tax effectamounts related to other comprehensive income in the
consolidated fiscal year ended March 31, 2016 and 2015
were as follows.
Thousands of
U.S. dollars
2016

Millions of Yen
2016
2015
Unrealized gains (losses) on
available- for-sale securities
Amount generated during
the year
Reclassification adjustments
Before tax effect adjustment
Tax effect amount
Unrealized gains (losses) on
available-for-sale securities
Deferred gains (losses) onhedgesAmount generated during
the year
Reclassification adjustments
Before tax effect adjustment
Tax effect amountDeferred gains (losses)on hedges
Revaluation reserve for land
Amount generated during
the year
Reclassification adjustment
Before adjustment for tax
effects
Tax effect amount
Revaluation reserve for landRemeasurements of defined
benefit plans
Amount generated during
the year
Reclassification adjustment
Before adjustment for tax
effects
Tax effect amountRemeasurements of defined
benefit plans
Share of other comprehensive
income in affiliated companies
accounted for using theequity method
Amount generated during
the year
Reclassification adjustments
Before tax effect adjustment
Tax effect amount
Share of other comprehensive
income in affiliated companies
accounted for using theequity method
Total other comprehensive
income¥ (7,920)¥61,429$ (70,288)(18,371)(26,291)
9,155(17,136)(12,951)
48,478(14,024)
34,454(163,037)(233,325)
81,249(152,076)

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.

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

(352)

(170)

(3,124)

376
24
(15)
9

250
80
(44)
36

3,337
213
(133)
80

—

—

—

—
—

—
—

—
—

571
571

1,187
1,187

5,067
5,067

Net assets per share are calculated based on the following:
Millions of yen
except number ofshares2016
2015¥583,168 ¥578,388¥ 5,765 ¥ 7,008

Thousands of
U.S. dollars
2016$5,175,435$ 51,163

601
5,164
577,403

512
6,496
571,380

5,334
45,8295,124,272

244,881

243,497(11,558)

11,086(102,574)(539)(12,097)

1,637
12,723(4,783)(107,357)

3,805(8,292)(4,255)
8,468

33,768(73,589)

(0)

(13)

(0)

—
(0)
—
(0)

—
(13)
—
(13)

—
(0)
—
(0)

(24,848)

44,132(220,518)

30. PER SHARE DATA
Yen
2016
2015
Net assets per share¥2,357.89 ¥2,346.56
Net income per share
132.43120.88Net income per share (diluted) ¥ 109.39 ¥ 108.24

Net assets
Amounts excluded from net
assetsstock options
non-controling interests
Net assets attributable tocommon stock at the fiscal
year-end
Number of common stock at
the fiscal year-end used forthe calculation of net assets
per share (in thousands)*

U.S. dollars
2016$20.931.18$ 0.97* Shares of YMFG held by the ESOP trust are shown on the balance sheets as treasury stock,
so are not included in the above number of common stock at the fiscal year-end used forthe calculation of net assets per share. This number of shares held by the ESOP was 1,047
thousand as of March 31, 2015, and 781 thousand as of March 31, 2016.

YMFG Annual Report 2016

52

Net income per share is calculated based on the following:

Net income attributable toowners of the parent
Amount not attributable tocommon shareholders
Net income attributable toowners of the parent forcommon stock
Average shares of common
stock during the year*(in thousands)

Millions of yen
except number ofshares2016
2015¥32,296¥30,523

Thousands of
U.S. dollars
2016$286,617———

32,29630,523

286,617

243,872

252,514

Diluted net income per share is calculated based on
the following:

Net income attributable toowners of the parent
adjustment
Interest expenses(excluding tax amount)
Increase of shares ofcommon stock
Bonds with warrant
Warrant
Dilutive shares not including
calculation due to no
dilutive effectMillions of yen
except number ofshares
2016
2015
¥
6
¥
—

Thousands of
U.S. dollars
2016
$53

6

—

53

51,42729,486—50,728698—

28,801
684
—

—
—
—

* Shares of YMFG held by the ESOP trust are shown on the balance sheets as treasury stock,
so are not included in the above average shares of common stock during the year. The
average number of shares was 1,193 thousand in the fiscal year ended March 31, 2015,
and 907 thousand in the fiscal year ended March 31, 2016.
(Note) As previously described in Changes in Accounting Principles, YMFG’s adoption of
the “Accounting Standard for Business Combinations” and other standards is inaccordance with the transitional measures provided for in Article 58-2 (4) of the“Accounting Standard for Business Combinations,” Article 44-5 (4) of the “AccountingStandard for Consolidated Financial Statements,” and Article 57-4 (4) of the“Accounting Standard for Business Divestitures.”
As a result, net income per share and diluted net income per share decreased ¥4.44($0.04) and ¥3.65 ($0.03) respectively in the fiscal year ended March 31 2016. The
impact on net assets per share was slight.
As previously described in Changes in Accounting Principles, YMFG 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, March 26, 2015), applying the provisions foundin the body of Paragraph 35 of the Accounting Standard for Retirement Benefits
and Paragraph 67 of the Implementation Guidance for the Accounting Standard for
Retirement Benefits from the fiscal year ended March 31, 2015, and in accordance withthe transitional treatment stipulated in Paragraph 37 of the Accounting Standard for
Retirement Benefits.
As a result, at the beginning of the fiscal year ended March 31, 2015, net assets per
share decreased ¥7.88, and net income per share and diluted net income per share
increased ¥0.94 and ¥0.84 respectively.

53

YMFG Annual Report 201631. SUBSEQUENT EVENTS
There were no significant subsequent events. Dividends
were made in June 2016 and 2015. Please refer to “23.
NET ASSETS.”

32. BUSINESS COMBINATIONS
For the year ended March 31, 2016
Transaction under common control
Acquisition of additional shares in subsidiary
1 Overview of the transaction(1) Name and business of combined company
Name: YM Guarantee Co., Ltd.
(hereinafter, “YM Guarantee”)
Business: Credit guarantee business(2) Date of the business combination
February 1, 2016
(3) Legal form of the business combination
Share exchange in which YMFG is the wholly owningparent company and YM Guarantee is the wholly owned
subsidiary company(4) Company name following the combination
No change(5) Overview of other matters related to the transaction
The objective is to strengthen YMFG’s internal control
function of the Group.
2 Overview of accounting standards employed
The transaction is handled under common control
transactions, based on the “Accounting Standard forBusiness Combinations” (ASBJ Statement No. 21,
September 13, 2013) and the “Guidance on AccountingStandard for Business Combinations and AccountingStandard for Business Divestures (ASBJ Guidance No. 10,
September 13, 2013).”

3 Matters related to acquisition of additional sharesin subsidiary(1) Acquisition cost and breakdown
Acquisition consideration Treasury stock¥603 million ($5,351 thousand)Acquisition cost¥603 million ($5,351 thousand)
The above-mentioned transaction is a transaction with
non-controlling owners, and total amount being eliminatedas transactions between consolidated companies.
Expenses directly required for the transaction were ¥2
million ($18 thousand).
(2) Exchange ratio by type of shares, calculation method
and number of shares delivered
1) Exchange ratio by type of shares 1,237 shares of
YMFG’s common stock: 1 share of YM Guarantee’scommon stock2) Exchange ratio calculation method
To ensure the fairness and appropriateness of the shareexchange ratio, YMFG selected Daiwa Institute of ResearchLtd. as an independent calculation agent to calculate theshare exchange ratio. Based on prudent negotiations anddeliberations between YMFG and YM Guarantee of theshare exchange ratio, referring to these calculation results,
the above-stated share exchange ratio was judged to beappropriate, agreed and determined.
3) Number of shares delivered 466 thousand shares(2) Principal reasons for business combination
YM Lease Co., Ltd. has been operating as a leasing
company, and the business combination was executed tofurther enhance the financial services of the financial group
including three banks; Yamaguchi Bank, Momiji Bank andKitakyushu Bank
(3) Date of the business combination
December 5, 2014
(4) Legal form of the business combination
YM Lease Co., Ltd. became a subsidiary of the Groupthrough the acquisition of shares in YM Lease Co., Ltd.
(5) Company name following the combination
The company’s name remains unchanged following the
combination.
(6) Percentage of voting rights acquired
Percentage of voting rights immediately prior to acquisition
21.1% (Note)
Percentage of voting rights acquired on the date of thebusiness combination
28.9%
Total percentage of voting rights following the acquisition
50.0%

4 Changes in YMFG’s equity related to transaction with
non-controlling owners(1) Principal reason for changes in capital surplus
Acquisition of additional shares in subsidiary(2) Amount of increase in capital surplus due to transaction
with non-controlling owners¥1,194 million ($10,596 thousand)

2. Period for which acquired company’s operating
performance is included in the consolidated statements
of income for the period under review
April 1, 2014 to March 31, 2015
As the acquisition date is deemed to have been December
31, 2014, income of the acquired company for the period
from April 1, 2014, through December 31, 2014, isrecorded as equity method investment income.

(Note) This figure includes shares owned by YMFG subsidiaries The Yamaguchi Bank Co., Ltd.,and Yamagin Card Co., Ltd.

(7) Key factors leading to the corporate acquisition decision
Owning 40% or more of the shares in YM Lease Co., Ltd.,
enables YMFG to convert the company to a subsidiary on
the basis of a controlling interest.

For the year ended March 31, 2015
Business combinations due to acquisition
1. Overview of business combination(1) Name and business of acquired company
Name of acquired company YM Lease Co., Ltd.
Business
Leasing

YMFG Annual Report 201654

3. Acquisition cost for the acquired company and its breakdown
Fair value of common stock in
YM Lease Co., Ltd., owned
immediately prior to thebusiness combination¥104 million
Fair value of additional common
stock in YM Lease Co., Ltd.,acquired on the date of thebusiness combination¥94 million
Acquisition cost
¥198 million
4. Difference between the acquisition cost of the acquiredcompany and total acquisition cost for individualtransactions leading up to the transaction Loss related tostaged acquisition¥200 million
5. Negative goodwill generated and reason for generation(1) Amount of negative goodwill generated¥2,331 million(2) Reason for generation
The fair value of net assets exceeded the acquisition cost at
the time of acquisition.
6. Amount and general breakdown of assets acquired
and obligations assumed on the date of the corporate
combination(1) Assets
Current assets¥21,692 million
Noncurrent assets¥644 million
Total assets¥22,336 million(2) Liabilities
Current liabilities¥5,968 million
Long-term liabilities¥12,591 million
Total liabilities¥18,559 million
7. Impact on the consolidated statements of income forthe fiscal year under review based on the assumptionthat the corporate combination was concluded on thestarting day of the fiscal year under review
This information has been omitted, as its impact
is negligible.

55

YMFG Annual Report 2016

YMFG Annual Report 2016

56

Yamaguchi Bank Financial Statements
NONCONSOLIDATED BALANCE SHEETS (UNAUDITED)March 31, 2016 and 2015

Millions of yen
2016

ASSETS
AssetsCash 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

Millions of yen
2015

Thousands of
U.S. dollars
2016¥758,297
322,664
7,160
3,584
45,095
1,413,070
3,481,850
7,711
53,39444,3582,670
17,55325,098(25,707)¥ 6,156,797¥

531,489
263,224
7,769
5,563
44,306
1,584,517
3,450,436
8,272
91,57445,337
3,269
17,38230,541(29,067)¥ 6,054,612$ 6,729,650
2,863,543
63,54331,807400,204
12,540,557
30,900,337
68,433473,857
393,663
23,695
155,777
222,737(228,142)$ 54,639,661¥ 5,568,117
72,53732,001
3,619
8,482
1,343
38,321
1,440
106
946
45
12,752
7,414
25,0985,772,221
10,006380
315,458
325,844
42,262(286)
16,75658,732
384,576¥ 6,156,797¥ 5,454,733
76,79012,329
5,631
9,765
3,052
57,855
1,554
106
933
43
18,0997,820
30,541
5,679,251
10,006
380
293,793304,179
55,083(303)
16,402
71,182
375,361¥ 6,054,612$ 49,415,309
643,743
283,999
32,11875,275
11,919340,086
12,780
941
8,395
399
113,170
65,797
222,737
51,226,668
88,8003,372
2,799,593
2,891,765
375,062(2,538)
148,704
521,228
3,412,993$ 54,639,661

LIABILITIES AND NET ASSETS (SHAREHOLDERS’ EQUITY)
Liabilities:

Net assets:

57

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

YMFG Annual Report 2016

NONCONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Years ended March 31, 2016 and 2015

Millions of yen
2016

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
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¥¥

40,63813,272
1,500
11,51930
10,183
11,59588,737¥41,40816,014
1,002
11,833
54
8,962
5,789
85,062$360,650
117,785
13,312102,228
266
90,371
102,901
787,513

4,201
684
146
4,116
8,212
32,85359
2,420
52,691
36,046

4,171
586
165
4,045
4,481
37,99002,296
53,73431,32837,2836,070
1,296
36,52872,879291,560
524
21,476467,616
319,897

9,423
1,916
24,707

9,764
1,557
20,007

83,62617,004
219,267

¥

Yen
2016

¥

Thousands of
U.S. dollars
2016

Millions of yen
2015

123.53
15.00

$

Yen
2015

¥

100.03
14.00

U.S. dollars
2016

$

1.10
0.13

YMFG Annual Report 2016

58

Momiji Bank Financial Statements
NONCONSOLIDATED BALANCE SHEETS (UNAUDITED)March 31, 2016 and 2015

Millions of yen
2016

ASSETS
AssetsCash 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

Millions of yen
2015

Thousands of
U.S. dollars
2016¥

330,51040,069749
698
675,817
2,034,562
4,928
78,61734,536
3,358
8,704
9,763
12,574(25,753)¥ 3,209,132¥

355,974
20,092593
696
708,923
2,006,372
3,366
76,36533,738
5,612
7,337
10,271
12,816(28,126)¥ 3,214,029$ 2,933,174
355,600
6,647
6,195
5,997,666
18,056,106
43,734
697,702306,496
29,801
77,24586,644
111,590(228,550)$ 28,480,050¥ 2,980,638
947—
13,94457
13,940
1,278
1,620
380
4,470
12,574
3,029,848
10,00089,53367,579167,112
3,751
(29)
8,450
12,172
179,284¥ 3,209,132¥ 2,945,565
1,122
11,69917,291
61
12,470
942
2,096
353
4,709
12,816
3,009,124
87,46642,06758,538188,071
8,632
(21)
8,223
16,834204,905¥ 3,214,029$ 26,452,236
8,404—
123,749506
123,714
11,342
14,377
3,372
39,670111,590
26,888,960
88,747
794,577
599,743
1,483,067
33,289(257)
74,991
108,023
1,591,090$ 28,480,050

LIABILITIES AND NET ASSETS (SHAREHOLDERS’ EQUITY)
Liabilities:

Net assets:

59

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

YMFG Annual Report 2016

NONCONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Years ended March 31, 2016 and 2015

Millions of yen
2016

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¥¥

25,819
7,694
237
7,035
3,260
6,849
50,894¥

26,721
9,027
241
7,134
2,778
5,737
51,638$229,136
68,282
2,103
62,43328,93160,783451,668

1,492
50
231
3,438
1,577
27,37416
1,310
35,48915,405

1,791
55
111
3,251
678
29,44928
892
36,255
15,383

13,241444
2,050
30,511
13,995242,936
151
11,626
314,954
136,714

2,371
2,547
10,487

195
4,557
10,631

21,042
22,604
93,068

¥

Yen
2016

¥

Thousands of
U.S. dollars
2016

Millions of yen
2015

17.85
1.91

$

Yen
2015

¥

17.89
2.65

U.S. dollars
2016

$

0.16
0.02

YMFG Annual Report 2016

60

Kitakyushu Bank Financial Statements
NONCONSOLIDATED BALANCE SHEETS (UNAUDITED)March 31, 2016 and 2015

Millions of yen
2016

ASSETS
AssetsCash 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

Thousands of
U.S. dollars
2016

Millions of yen
2015¥

85,263140
30,943
955,100
3,536
9,240
19,477964
925—
10,047(14,116)¥ 1,101,519¥

76,871
2,841
30,306869,186
5,494
13,35018,677
1,349
864
316
8,936
(15,369)¥ 1,012,821$

756,683
1,242
274,6108,476,216
31,38182,002
172,852
8,555
8,209
—
89,164(125,275)$ 9,775,639¥¥$ 8,674,299
53,372
9,416
1,411
90,3793,346
10,304692
30,68989,164
8,963,427
88,747580,245668,992
74,29068,930143,220812,212$ 9,775,639

LIABILITIES AND NET ASSETS (SHAREHOLDERS’ EQUITY)
Liabilities:

Net assets:

61

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

YMFG Annual Report 2016

977,420
6,014
1,061
159
10,184
377
1,161
78
3,458
10,047
1,009,999
10,00065,38275,382
8,371
7,767
16,13891,520¥ 1,101,519

894,880
65
1,154
47
13,578
356
1,145
71
3,643
8,936
923,875
10,00063,53973,5397,816
7,591
15,407
88,946¥ 1,012,821

NONCONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Years ended March 31, 2016 and 2015

Millions of yen
2016

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
Other interest expense
Fees and commissions payments
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¥¥

10,639
418
52
1,575
417
1,315
14,416¥

10,384
355
63
1,496
257
1,361
13,916$

94,4183,710
461
13,9783,701
11,670127,938

892
11
715
9,486
42
201
11,347
3,069

907
12
627
9,255
112
136
11,049
2,867

7,916
97
6,345
84,185373
1,785
100,701
27,237

880
352
1,837

476
884
1,507

7,810
3,124
16,303

¥

Yen
2016

¥

Thousands of
U.S. dollars
2016

Millions of yen
2015

1,837,055

$

Yen
2015

¥

1,506,950

U.S. dollars
2016$

16,303.29

YMFG Annual Report 2016

62