Co-Creating a Bountiful Future
for Our Region

ANNUAL REPORT

2021

For the year ended March 31, 2021

YMFG Profile (As of July 31, 2021)

Group Companies

Yamaguchi Financial Group
Holding Company

Yamaguchi Bank

Momiji Bank

Kitakyushu Bank

Banking businessBanking businessBanking businessNetworks in Japan:
131 (109 head office and branch offices,
22 sub-branch offices)
Networks in overseas:
4 (3 branch offices, 1 representative office)Networks in Japan:
105 (98 head office and branch offices,
7 sub-branch offices)

Networks in Japan:
37 (37 head office and branch offices)

YM Securities

HOKEN HIROBA

YM Life Planning

Securities businessInsurance and banking agency businesses

Insurance and banking agency businesses

YM Asset Management

Yamagin Card

Izutsuya Withcard

Investment management business

Credit-card business

Credit-card business

YM Consulting

YMFG Zone Planning

YM CareerConsulting businessResearch study of the region/
Consulting business

Job placement business

Data Qvic

INESUS

Nishiseto Regional Co-creation Servicer

Data consulting and media businesses

Benefits package service businessSpecified monetary claims servicing andturnaround initiative business

YM Guarantee

YM Lease

Sanyu

Credit guarantee businessLeasing business

Real estate leasing business

Momiji Estate

YM Saison

Momiji Card

Real estate leasing business

Credit-card and other product planning

Credit-card businessNishiseto Marine Partners

and developing business

Advanced ship finance promoting business

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

Overseas Networks ..............................................................11

Message from the President ...................................................3

Corporate Governance.........................................................12YMFG Medium-Term Management Plan 2019........................4Internal Audits and Compliance System ...............................13

Business Model ......................................................................5

Risk Management System ....................................................14

Performance Highlights (YMFG) .............................................7

Business and Other Risks ......................................................15

Performance Highlights (Three Banks) ....................................9

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

YMFG Forecast for the Fiscal Year Ending March 31, 2022 ...101

YMFG Annual Report 2021

YMFG Financial Highlights (For the fiscal year ended March 31, 2021)¥12.0

trillion¥10.0

trillion

Total Assets

Net Income(Consolidated)(Consolidated)

Total assets on a consolidated Group basis amounted
to ¥12.0 trillion.

¥25.0

billion%billion year on year, to¥25.0 billion.

Deposit Balance

Balance of Loans(Three Banks)(Three Banks)

Liquid deposits and timeand savings deposits
were robust.

¥8.0

trillion

Capital Ratio(Basel 3)

13.43

Net income decreased ¥0.4

(Consolidated)
This represented a year-on-

Principal contributors to theincrease were rises in loans
to small and medium-sizedenterprises.

Tier 1 Ratio(Basel 3)

12.75

%

year increase of 0.81 per-(Consolidated)
This ratio was up 0.31
percentage point.

centage point.

Non-Performing
Loan Ratio

1.26

%

(Consolidated)
Our non-performing loan
ratio down 0.02 percentage
point.

Credit RatingA(Stable)R&I(YMFG)
Date of rating announcement: October 23, 2020

Disclaimer Regarding Forward-Looking Statements
The forward-looking statements in this Annual Report are based on management’s assumptions and beliefs in light of information available as of the date of
publication, and involve both known and unknown risks and uncertainties. Actual financial results may differ materially from those presented in this document,
being dependent on a number of factors.
YMFG Annual Report 2021

2

Message from the President

Co-Creating
a Bountiful Future
for Our Region
Keisuke Mukunashi
President andGroup CEOT

hank you for your continued support of the

In this operating environment, we formulated the

Yamaguchi Financial group (“YMFG”).

YMFG Medium-Term Management Plan 2019. Under

The region is affected by declining childbirth

the plan’s mission of “Working with intention toand aging populations, the outflow of people into

co-create a bountiful future for our region,” we aim

urban areas, a shortage of workers to shoulder

to go beyond the boundaries of finance to address

operations and rapid digital transformation, as well

the social issues facing our region, maintaining an

as the growing novel coronavirus disease (COVID-19)

awareness closely attuned to businesses. We strive topandemic. Amid these circumstances, expectations

be a company that adds value to the region.

are mounting and regional financial groups are being

Going forward, we will continue to concentratecalled upon to play an even greater role in regional

on dialogue with our many stakeholders, including

economic development by helping to invigorate local

people in our region. We will strive to provide

companies and industries, ensure employment andoptimal, value-added services and enhance ourbolster the sustainability of the regional economy.

corporate value by fostering development of the

Furthermore, the environment in which we operateregion. We will create a stable and highly effective

as a regional financial group is calling for increased

corporate governance structure for the Group andaccountability, as well as growing social demands toaugment the transparency of Group management

conduct business operations in a customer-oriented

to ensure accountability to our stakeholders. We

spirit (fiduciary duty). At the same time, we areremain unyielding in our aim to be a company that

exposed to risks in a host of areas that go beyond

truly benefits and adds value to the region. We lookindustry boundaries. These include the emergence

forward to your continued patronage and support.

of fintech, further advances in AI and other new
technologies, and an ongoing move away from theuse of cash.

3

YMFG Annual Report 2021

August 2021

YMFG Medium-Term Management Plan 2019Social trends
ESG
SDGs/Society 5.0

Regional environment

YMFG’s strengths

External environment

Declining populationand other social issues

Trust and trustworthinessAlternative methods forfinancial functions(Fintech, etc.)

Networks
Specialization

Further accelerate our initiatives to date,taking the regional environment and social trends into consideration

Through our business activities, we aim to address regional social issues.
In the process we aim for management focused on creating shared value (CSV),
which refers to both social value and economic value.
Goals
We aim to go beyond the boundaries of finance to address the social issues facing our region, maintaining
an awareness closely attuned to businesses. We strive to be a company that adds value to the region.
MissionWorking with intention to co-create a bountiful future for our region

Basic Goals
By achieving the three basic goals below, realize a CSV management model for YMFG.

Basic Goal 1

Basic Goal 2

Basic Goal 3

Establish a regional
co-creation model

Achieve “shinka” of
the financial model

Combine banking culture
and an entrepreneurial spiritWe will produce a regional
ecosystem for addressing
regional social issues, steadily
generating solutions.

From the perspectives of acting
on behalf of our customers andachieving customer optimization,
we will develop the businessmodel on two fronts: deepening
the model and extending it.

To create value—both economic
and social—we must achieve
fundamental changes in the way
our employees think and act.

We will configure an ecosystem
platform to create new value
by realizing numerous
ecosystems.

(Both are pronounced “shinka” in Japanese.)Meanwhile, to extend the model
we will pursue thorough digitization, and expand and increase
our sales area and scale ofoperation. As a result, we will
make our existing functions moreproductive.

 We will retain the best aspects ofthe banking culture and combinethat with an entrepreneurial
spirit, establishing a regional
co-creation model and afinancial model.

YMFG Annual Report 2021

4

Business Model of the Medium-Term Management Plan

 Establish an original management model for creating shared value (CSV*) [the “YM-CSV Model”],
and work to simultaneously enhance regional social value and YMFG’s economic value.

YM-CSV Model
Basic objective 1

Establishment of a Regional Co-Creation Model

Regional ecosystem

YMFG

Providers ofsysteminfrastructure

Providers ofclient bases

Resolveregional issues
Providers ofgoods andservicesTechnology
providers We will take the lead inarranging a “regional
ecosystem” to resolve
social problems thecommunity faces andsteadily yield solutions.
 By implementing
numerous ecosystems, wewill create new regional
value, converting regional
weaknesses into strengths.

OrganicallyOther Leverage management resources in individual domains to generate
Relations withthe region

Regional
network

Human resource
network

DX

Regional data(integrated database)SupportBasic objective 3

Combination of banking culture*Creating shared value: A management strategy framework. By creating shared value, targets both the economic profit-seeking activities of corporations
and the generation of social value.

5

YMFG Annual Report 2021

Basic objective 2

Evolution and Deeper Focus in the Financial Model

Evolution

Banking model• Higher efficiency throughthorough digitalization• Greater scale

linkedConsulting

Digital data

Life planning

Deeper focus• Higher added value through existing functions • Permeation of a new financial model Thoroughly review the existing banking model from a customer perspective, andtarget evolution and a deeper focus

high levels of competitive advantage in the two models
Funds

Network withinvestee ventures

Ability to assess business feasibility(ability to evaluate organizations’ business models)and entrepreneurial spirit

YMFG Annual Report 2021

6

Performance Highlights (YMFG)
Performance during the fiscal year ended March 31, 2021
Business Profits from Core Operations/
Ordinary Profits/Net Income Attributable to
Owners of the Parent
Business profits from core operations increased ¥25.8 billion
year on year, to ¥55.0 billion.
Ordinary profits increased ¥0.4 billion, to ¥37.0 billion, andnet income attributable to owners of the parent amounted to¥25.0 billion.

(Billions of yen)

60

55.0

international standard) under Basel III was 13.43%. The total
Tier 1 capital adequacy ratio was 12.75%, and consolidated
common equity Tier I capital adequacy ratio were 12.72%.
Capital Adequacy Ratio
Tier I Ratio

33.4
28.6

36.6

14

13.62

13

13.58

12

50

30

YMFG’s consolidated capital adequacy ratio (uniform

(%)

15

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

40

Capital Adequacy Ratio (YMFG)

25.0

25.4

12.62
12.44

12.75

11

37.0

0

29.2

23.1

13.43

2019

2020

2021
(Basel III)

20
10
0

Deposit Balance (Three Banks)
2019

2020

2021

The total deposit balance at term-end was ¥9,629.3 billion, or

Non-Performing Assets Based on the Financial
Revitalization Law (Consolidated)
Doubtful Assets
Bankrupt and Quasi-Bankrupt Assets
Sub-Standard Loans
Non-Performing Loan Ratio(Billions of yen)

(%)

250

2.5

¥10,038.9 billion including Negotiable Certificates of Deposit(NCDs). This came about because of the expansion of products
and services and steady marketing efforts based on solidcommunity relationships.
Deposit Balance (Three Banks)
12,00010,000YMFG 2.0
1.27

8,000

1.25 YMFG 1.5

6,000

101.0

4,000

200
150
100

1.25

1.28

94.6

100.3

50
0

7

101.4

32.8

44.6

44.7

48.4

45.0

45.3

13.4
2019

YMFG Annual Report 2021

10.7
2020

11.1
2021

1.0
0.5
0.0

9,254.8

9,550.9

2019

2020

(Billions of yen)

10,038.9

2,000
0

2021

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 ¥7,963.5 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)

10,0007,500

7,455.6

5,000

7,963.5

7,732.5

7,425.9

7,707.5

7,939.5

4,339.8
58.4%

4,462.4
57.8%

4,675.6
58.8%

Balance of Personal Loans(Billions of yen)
1,500
1,200

1,407.4
18.9%

1,421.0
18.4%

1,404.8
17.6%

900
600

2,500
0

300
2019

2020

2021

0

2019

2020

2021

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.

Ratings for YMFG, Yamaguchi Bank andMomiji Bank

Dividend Policy (YMFG)

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

shareholders while securing profits and reinforcing financial

We have continued to provide stable dividends to ourhealth to maintain our credit strength.
In the year ended March 31, 2021, the dividend per share at
term-end was ¥13. Combined with the interim dividend of ¥13

AAA

Rating and Investment Information, Inc.

AA

(As of October 23, 2020)

A
BBB
BB
B
CCC
CC
C

per share, the full-year dividend amounted to ¥26 per share.

YMFG

A (stable)
Yamaguchi Bank

A+ (stable)

Annual dividend per share(Interim dividend)

2019

2020

2021

(Yen)
2022
(Forecast)

22.0(11.0)

24.0(12.0)

26.0(13.0)

28.0(14.0)

Momiji Bank

A+ (stable)

Expected Performance for the Fiscal YearEnding March 31, 2022 (YMFG)YMFG aims to achieve its consolidated ordinary profits of¥38.0 billion and net income attributable to owners of theparent of ¥26.0 billion.

YMFG Annual Report 20218

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

Capital Adequacy Ratio

Ordinary Profits
Net Income

Tier I Ratio(Billions of yen)

40

30.8
60

52.5

53.9

48.9
40.6

40

21.4

30

25.3

27.8

23.0

19.8

18.8

20

23.1

(%)

20
18

16.57

16

16.57

14

15.24

15.61

15.10

15.39

12

20

10
10

0

2019

2020

0

2021

2019

2020

2021

8

2019

2020

2021
(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)

40

30

30.2

Ordinary Profits
Net Income

Capital Adequacy Ratio

12

31.7

9.6
9

25.9

7.7

(Billions of yen)

14

9.3

12

7.7

7.3

6.3
20

10

0

6

16.8
8.1

8.7

2019

2020

(%)

10.37

10.31

10.66

2019

2020

2021
(Basel III)

10
8

3

0

2021

0
2019

2020

2021

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

11.5

11.5

Ordinary Profits
Net Income(Billions of yen)

8

12

5.5

9
4

3.9

4.0

2019

2020

9

5.3

11.15

11.02

2019

2020

11.21

11

4.1
3.3

10

2.5

4.7
2

3
0

(%)

13

7.2

12.0
6

6

Capital Adequacy Ratio

YMFG Annual Report 2021

2021

0

0
2019

2020

2021

2021
(Basel III)YMFG Forecast for the Fiscal Year Ending March 31, 2022

As the Japanese economy remain on its path gradual recovery, we expect profit categories to increase during the fiscal year ending March 31, 2022.
In the third year of our Medium-Term Management Plan 2019, we expect consolidated
ordinary profits for the YMFG Group to amount to ¥38.0 billion, up 2.8% year on year. We
also anticipate net income attributable to owners of the parent of ¥26.0 billion, up 4.2%.
(Billions of yen)

YMFG (Consolidated)
Fiscal Year Ending
March 31, 2022

Year-on-Year Change

Ordinary profits

38.0

1.0

Net income attributable to owners of the parent

26.0

1.0

Yamaguchi Bank (Non-Consolidated)
Fiscal Year Ending
March 31, 2022

Year-on-Year Change

Ordinary profits

30.0

2.2

Net income attributable to owners of the parent

22.5

2.7

Momiji Bank (Non-Consolidated)
Fiscal Year Ending
March 31, 2022

Year-on-Year Change

Ordinary profits

7.8

(1.5)

Net income attributable to owners of the parent

6.5

(0.8)

Kitakyushu Bank (Non-Consolidated)
Fiscal Year Ending
March 31, 2022

Year-on-Year Change

Ordinary profits

4.8

(2.4)

Net income attributable to owners of the parent

3.5

(1.8)

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

YMFG Annual Report 2021

10

Overseas Networks (As of July 1, 2021)

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[China]-Yamaguchi Bank, Dalian Branch[Korea]-Yamaguchi Bank, Busan Branch[China]-Yamaguchi Bank, Qingdao Branchservices through business allianceswith domestic and foreign financial
institutions and other companies

Mumbai[India]Business alliance:
State Bank of India

Dalian[Vietnam]Business alliance: Vietcombank[Thailand]Business Alliance: TTB Bank
Assigned employee: 1
Business Alliance: Japan FinanceCorporation (JFC)
Representative Office in Bangkok
Assigned employee: 1

YangonQingdaoBusan[China]-Yamaguchi Bank
Hong Kong Representative Office

Hong
Kong

Taipei

Hanoi

Bangkok

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

Ho Chi Minh
[Mexico]Business alliance:-State Government of Aguascalientes-State of Jalisco-State of Guanajuato-State of Nuevo Leon
-Banamex[Vietnam]Business alliance: HD Bank
Assigned employee: 1
Business Alliance: MEILIN
INTERNATIONAL VIETNAM
LPC Ho Chi Minh Office
Assigned employee: 1

International Department
2-36, 4-chome Takezaki-cho, Shimonoseki, P.O. Box 24,
Shimonoseki 750-8603, Japan SWIFT Address: YMBKJPJT[Taiwan, Philippines, Myanmar, Vietnam]
Business alliance: Daiwa Securities Group[Indonesia]
Business alliance:Bank Negara Indonesia

Jakarta

Loans of overseas branches (As of March 31)

30,000Overseas Offices
BUSAN BRANCH
4F, Postal Insurance Busan Bldg., Jungang-Dong 3-Ga, 63,
Jungang-Daero, Jung-Gu, Busan, Republic of Korea
SWIFT Address: YMBKKR2P
QINGDAO BRANCH
2F, Crowne Plaza Hotel Qingdao, 76 Hong Kong Central
Road, Qingdao, Shandong Province, The People’s Republic of
China
SWIFT Address: YMBKCNBQDALIAN BRANCH
14F Senmao Building No. 147, Zhongshan Road Xigang
District, Dalian, Liaoning Province, The People’s Republicof China
SWIFT Address: YMBKCNBDHONG KONG REPRESENTATIVE OFFICE
403, 4/F, Far East Finance Centre, 16 Harcourt Road,
Hong Kong
Fax: +852-28104902

11

YMFG Annual Report 2021

(Millions of yen)

40,00030,49828,63829,68424,99624,0802020

2021

20,00010,000

0

2017

2018

2019

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
enterprising spirit, YMFG aims for management transparency and fair,swift and bold decision-making that will lead to sustainable growth andincreases in corporate value over the medium to long term. To this end andrecognizing that creating an effective corporate governance system is an
important management priority, on an ongoing basis we are pursuing theinitiatives described below to enhance our corporate governance.
i. We strive to ensure the rights of shareholders and create an environmentthat facilitates the appropriate exercise of shareholders’ rights andsubstantive shareholder equality.
ii. We cooperate closely with our principal stakeholders, including
customers, the local community, shareholders and employees.
iii. We diligently disclose important management-related information to ourprincipal stakeholders.
iv. We endeavor to ensure the effectiveness of the business execution
supervisory and auditing function through the establishment of various
institutions, including the Board of Directors.
v. We create systems to promote constructive dialogue in order to build
long-term relationships with shareholders.
The Board of Directors, consisting of 10 directors (including seven outside

directors), makes decisions about important matters related to the Group’s
management and supervises the directors. Furthermore, we have adopted
the chief officer (CXO) system and the executive officer system to fortify the
Board of Directors’ supervisory function and enhance the business executionfunction. The Nomination Committee discusses matters related to theappointment and dismissal of directors, and the Compensation Committee
discusses matters related to the compensation of the directors. Bothguarantee the objectivity and transparency of decision-making processes.
YMFG has adopted an audit and supervisory committee system. The
Audit and Supervisory Committee comprises three directors, of whom two
are outside directors. The committee audit the execution of operations bydirectors, configure, audit and verify the operation of internal control systems
at YMFG and its subsidiaries, and prepare audit reports. By having the Audit
and Supervisory Committee, which chiefly comprises outside directors, exercise
its voting rights at Board of Directors meetings, we endeavor to reinforce its
auditing and supervisory function with respect to the Board of Directors andenhance the transparency and speed of the decision-making process.
The Group Executive Management Meeting, the Group Asset and Liability
Management Committee, the Group Compliance Committee and the Group
Risk Management Committee discuss important management issues.

YMFG Corporate Governance Structure (As of July 12, 2021)
YMFG
General Meeting of Stockholders
Appointment/Dismissal

Cooperation

Appointment/Dismissal

Audit and Supervisory Committee

Board of Directors

3 Members

10 Directors

Auditors and Supervisory
Committee Office

ReportAccounting Auditor

Appointment(including 7 outside directors)(including 2 outside directors)
Cooperation
ReportAppointment/Dismissal

Accounting Audit

Compensation
Committee

Command

Audit and Inspection Dept.

Reports andRecommendation

Internal Audit

Group Executive
Management Meeting

Nomination
Committee(Voluntary advisory body)Business Execution StructureGroup CEOGroup ALM Committee
Group Compliance Committee

Deliberative
organ

Group Risk Management Committee
Investment Project Consideration Committee

Head of CEO Office
Operation Departments

Yamaguchi Bank

Momiji Bank

Kitakyushu Bank

YM Securities YM Lease, YM Consulting, Izutsuya Withcard, Yamagin Card, YM Guarantee, Sanyu, YMFG Zone

Company with an audit and supervisory committee

Planning, YM Asset Management, Momiji Estate, YM Life Planning, Hoken Hiroba, YM Saison, Momiji
Card, Data Qvic, YM Career, Nishiseto Regional Co-creation Servicer, INESUS, Nishiseto Marine Partners

YMFG Board of Directors and Corporate Auditors (As of July 1, 2021)
President and Group CEO

Director

Keisuke Mukunashi

Yuzuru Yamamoto*Director

DirectorTakeshi Yoshimura

Yumiko Nagasawa*
Director

Noriyuki Yanagawa*Director

Minako Suematsu*
Director

Tomoko Mikami*

Director
Audit and Supervisory Committee Member

Susumu Fukuda

Director
Audit and Supervisory Committee Member

Kazuo Tsukuda*

Director
Audit and Supervisory Committee Member

Michiaki Kunimasa** Yuzuru Yamamoto, Yumiko Nagasawa, Noriyuki Yanagawa, Minako Suematsu, Tomoko Mikami, Kazuo Tsukuda and Michiaki Kunimasa are outside directors under Article 15 ofSection 2 of the Companies Act.

YMFG Annual Report 2021

12

Internal Audits and Compliance System

Internal Audits
Principles of Internal Audits

Implementation of Internal Audits

We define an internal audit as a series of processes for

YMFG’s Audit and Inspection Dept. plans audit processes

objective verification of the appropriateness and effectivenessfor the whole Group, implements audits and supervises eachof internal controls (including risk management) and asGroup company’s internal audits.

making suggestions for necessary improvements.
YMFG has devised standard internal audit rules for the

The YMFG Audit and Inspection Dept. devises the rules
and medium-term plans for the Group’s internal audits,

whole Group. On the basis of these rules, the internal audit

implements audits of the Group companies’ compliance/risk

departments of each Group company implement audits.

management departments and checks the accuracy of the

Further, YMFG creates the Group’s medium-term internal
audit plan on the basis of its management policy andfinancial statements of the Group companies.
Internal audits of front-line sales outlets are performed toconditions. Internal audits by the auditing bodies of eachverify the status of compliance and risk management functions

Group company are conducted on the basis of this plan toand ensure their mutual effectiveness.

ensure their effectiveness and efficiency.

The department monitors and gives guidance and advice
to the Group companies’ audit and inspection departments.
On the basis of their audit reports, the department reports on
the internal audits of the Group to the Board of Directors andaudit and supervisory committee.

Compliance System
YMFG’s Attitude toward Compliancebody of YMFG. We also formulate compliance programs for

YMFG shares a common understanding of their responsibilities

each fiscal year, which equate to specific execution plans, andto fulfill their public mission and corporate social

monitor the status of program implementation.

responsibilities as a financial group. Accordingly, we accord
topmost management priority to thorough compliance, take

Efforts to Prevent Money Laundering

the seriousness of compliance seriously and consider earning

The Act on Punishment of Organized Crimes and Control of

the trust of a broad-based society our fundamental policy.

Crime Proceeds and the Law for Prevention of Transfer of
Criminal Proceeds prescribes heightened measures to prevent

Compliance Systemmoney laundering. The Group’s efforts are appropriate and in

To ensure appropriate compliance, YMFG has established theconformance with these regulations, in keeping with our aim

Compliance Management Department. In addition to ensuringof maintaining society’s trust in us as a financial institution.

the status of compliance, this department conducts related

Specifically, we have formulated a policy of controls andtraining for executives and employees. This department liaises

procedures reasonably designed to prevent and detect moneywith the compliance management department of YMFG’slaundering/terrorist financing activities. We have appointed

subsidiaries as part of its efforts to centralize compliancea senior officer to take charge of this policy and establishedmatters throughout the Group.

training programs on this topic for all management and staff.

The Group Compliance Committee acts as a deliberative

13

YMFG Annual Report 2021

Risk Management System

YMFG Risk Management System (AS of July 12, 2021)
YMFG
Board of Directors Audit and Supervisory Committee
Group Executive Management MeetingGroup ALM Committee

Committees
Control Headquarters

Compliance, Risk Control Headquarters

Risk Management
Control Department

Risk Administration Dept.

Risk Category

Audit

Risk
Administration Dept.

Risk
Administration Dept.

Yamaguchi Bank

Momiji Bank

Kitakyushu Bank

Audit andInspection Dept.

Rumor Risk

(Verification of
appropriate and effective
risk management)

Risk Administration Dept.
Corporate Planning
Compliance Administration Dept.
Dept.
Corporate Administration Dept.
IT Administration Dept.
Groupwide Risk Management
Directions on basic policies/
Report on risk
audit system/principles
management

Department in Chargeof Risk Management

Independent
Auditors

Audit

Operational Risk
• Processing risk
• System risk
• Information risk
• Legal risk
• Tangible asset risk
• Personnel risk
• Money laundering andTerrorism financing risksMarket Risk
Liquidity Risk

Credit Risk

ReportGroup Risk Management Committee

Audit

Board of Directors Audit and Supervisory Committee
Committees

YMFG

Group Executive Management MeetingGroup ALM Committee

Risk Management
Control Department
Risk Category

Department in Chargeof Risk Management
Related Departments
Operations

Report

Audit

Risk Administration Dept.
Market Risk
Liquidity Risk

Credit Risk

HQ departments
HQ departments

Independent
Auditors

Group Risk Management Committee

Operational Risk
• Processing risk
• System risk
• Information risk
• Legal risk
• Tangible asset risk
• Personnel risk
• Money laundering andTerrorism financing risks

Reputational Risk

Risk management departments
Sections related to risk management

Operations by HQ, branches, affiliates, etc.

Audit

Audit
Audit
Audit

YM Securities, YM Lease, Izutsuya Withcard, YM Consulting, Sanyu, Momiji Estate, Yamagin Card, YM Guarantee,
YMFG Zone Planning, YM Asset Management, YM Life Planning, Hoken Hiroba, Data Qvic, YM Saison, Momiji Card,YM Career, INESUS, Nishiseto Regional Co-creation Servicer, Nishiseto Marine Partners

YMFG faces all kinds of risks that have become morecope with risks. Risk amounts are measured by a uniform

diversified and complex along with changes in the economy

method, capital is allocated on the basis of these methods,

and in society. Risk management is one of the most importantand risks are collectively managed.

issues facing the Group.
As part of our basic risk management policy, we have devised
standard risk management rules that apply to the Group.

YMFG’s risk management sections check risk management
conditions in the whole Group.
The Audit and Inspection Department, which is independent

The Group has organized risk management sections,of the operation departments, implements internal audits

risk management departments, Group Risk Management

to ascertain the appropriateness and effectiveness of risk

Committee and Group Executive Management Meeting tomanagement. This system applies both to the Group.
YMFG Annual Report 2021

14

Business and Other Risks

Of the matters related to business and economic conditions
outlined in the annual securities report, below are the majorrisks management recognizes as having the potential tomaterially affect the financial condition, operating performanceand cash flows status of YMFG (the Bank and its consolidated
subsidiaries). Recognizing this potential, YMFG strives to prevent
such risk from manifesting and to respond appropriately in theevent they do occur.
The forward-looking items described below are those of which
YMFG is aware as of the end of the fiscal year under review.
1. Credit Risk
(1) Non-Performing LoansYMFG maintains sufficient allowances against non-performing loans
to maintain the soundness of its assets. However, YMFG’s nonperforming loans and credit expenses could increase as the result of
economic movements in Japan and the local community, fluctuations
in real estate values and share prices, and the management status ofrecipients of YMFG’s financing. Such factors could have a negative
effect on operating performance and the financial condition, reducing
reduce equity capital.
To date, YMFG has worked diligently to move non-performing
loans off the balance sheet, to write off non-performing loans
appropriately, and to post sufficient allowances for doubtful accounts.
However, the Group could face larger-than-expected losses when
disposing of non-performing loans or incur higher-than-expected
amortization. Such factors could have a negative effect on operating
performance and the financial condition.
(2) Allowance for Doubtful Accounts
In accordance with predetermined standards, primarily, estimated loss
amounts for the next one year and next three years are calculated for
assets corresponding to normal assets and assets requiring caution.
For assets classed as potentially bankrupt assets, loss amounts
are stated by subtracting from lending amounts the amount ofrecoverable collateral or the expected amount recoverable fromguarantees. However, actual losses may differ from the amounts
expected when the allowance for doubtful accounts is posted. As
a result, actual losses could significantly exceed expected losses,
resulting in an insufficient allowance for doubtful accounts.
Furthermore, worsening overall economic conditions, declines incollateral values and other unexpected factors may require the Groupto revise its set standards and expected losses, resulting in the needto increase the allowance for doubtful accounts. This could have anegative effect on operating performance and the financial condition.
(3) Loans by Business Category, Geographic Region and Other Factors
From a risk management perspective, YMFG conducts credit
management of its portfolio by rating level, business category, scale,region and other factors.
However, large amounts of non-performing loans could be
generated in a specific business category and, if poor businessconditions in that business sector are prolonged, new corporatebankruptcies could arise. In such circumstances, YMFG’s credit
expenses could increase, having a negative impact on YMFG’soperating performance and financial condition.
Furthermore, as YMFG’s main bases of operation are in Yamaguchi
Prefecture, Hiroshima Prefecture and the city of Kitakyushu, theGroup’s operations tend to be particularly affected by regional
economies. Conditions in those regional economies could therefore

15

YMFG Annual Report 2021

have a negative impact on YMFG’s operating performance andfinancial condition.
(4) Response to Borrowers
In some cases, YMFG may not exercise its legal rights even whena borrower defaults on their financial obligations, after taking into
account the efficient and effective recovery of loans, among otherfactors. Furthermore, YMFG may support or cooperate with suchborrowers in their efforts to secure additional loans. YMFG’s credit
costs could rise as the result of a deterioration of the creditworthinessof such borrowers and its support, having a negative impact on
YMFG’s operating performance and financial condition.
(5) Impact of COVID-19
To prevent the spread of the novel coronavirus disease (COVID-19),
companies are being asked to suspend operations, and people arebeing asked to refrain from going outdoors. This situation is affecting
our region to an unprecedented degree. Given these circumstances,
YMFG is working to understand the conditions of individual borrowers
in a timely and appropriate manner and provide various types of
support to help customers with cash flow and other aspects ofbusiness continuity, including through the application various typesof support measures. However, if the operating environment were
to deteriorate, credit costs could rise, having a negative impact on
YMFG’s operating performance and financial condition.
2. Risks Related to the Capital Adequacy Ratio(1) Capital Adequacy Ratio
As YMFG has overseas bases, it calculates a consolidated capital
adequacy ratio according to uniform international standards asprovided by “standards for determining whether a bank holding
company’s equity capital is sufficient, after taking into account assets
held by the bank holding company and its subsidiary companies,
based on the provisions of Article 52-25 of the Banking Act” (Financial
Services Agency Notification No. 20 of 2016).
Accordingly, the consolidated capital adequacy ratio must be
maintained at 8% or higher, the Tier 1 ratio at 6% or higher and theTier 1 ratio on common shares at 4.5% or higher. YMFG’s capital
adequacy ratio currently exceeds these levels. However, changes inamounts of capital stock, retained earnings and valuation differenceson available-for-sales securities, as well as fluctuations in risk assets,
could affect the capital adequacy ratio.
Uniform international standards call for the setting of a capitalconservation buffer (2.5% above individual minimums). Currently, YMFG
exceeds these buffer levels. However, if it were to fall below these levels,
YMFG might limit dividends and other outflows, having a negative
impact on YMFG’s operating performance and financial condition.
Among consolidated banking subsidiaries of YMFG, Yamaguchi
Bank calculates its non-consolidated capital adequacy ratio
according to uniform international standards based on “standards
for determining whether a bank’s equity capital is sufficient, after
taking into account assets held by the bank, based on the provisionsof Article 14-2 of the Banking Act” (Financial Services Agency
Notification No. 19 of 2016). Momiji Bank and Kitakyushu Bank
calculate their non-consolidated capital adequacy ratios according todomestic standards, based on Financial Services Agency Notification
No. 19 of 2016.
(2) Deferred Tax Assets
As of the end of the consolidated fiscal year under review, Japaneseaccounting standards allow companies to record deferred tax assets as
expected tax benefits to be realized in the future.
Uniform international standards allow deferred tax assets related totemporary differences to be included in equity capital, up to a certain
limited amount, and YMFG includes in equity capital an amountcalculated in accordance with Financial Services Agency Notification
No. 28 of 2012.
As the balance sheet amount of deferred tax assets is based on
various forecasts and assumptions, including those related to futuretaxable income, YMFG may reduce deferred tax assets if it decides
that all or part of these deferred tax assets cannot be recovered.
Such a reduction would have a negative impact on YMFG’s operating
performance and financial condition and cause the capital adequacy
ratio to decrease.
3. Market Risks(1) Interest Rate Risk
YMFG, which engages mainly in banking operations, is affected byfluctuations in market interest rates through interest on loans—anasset investment method, yields on bond and other investments, andinterest rates on deposits—a funding method. Mismatches between
the amount and timing of asset investments and funding, as well as
unforeseen interest rate fluctuations, may have a negative effect on
YMFG’s operating performance and financial condition.
(2) Risk of Price Fluctuations on Holdings of Available-for-Sale
Securities
YMFG has substantial holdings of marketable, available-for-salesecurities for investment purposes. Broad-based and large-scale pricedeclines may engender impairments or valuation losses on holdingsof available-for-sale securities, which could have a negative effect on
YMFG’s operating performance and financial condition and lower thecapital adequacy ratio.
(3) Exchange transactions
YMFG’s operations are affected by exchange rate fluctuations.
Ongoing yen appreciation reduces the value of foreign currencytransactions when converted to yen. Also, certain assets and liabilities
are presented in foreign currencies. If it is not possible to offset assets
and liabilities denominated in foreign currencies by the same amountor hedge such differences effectively, YMFG’s operating performanceand the financial condition may be negatively affected.
(4) Impact of COVID-19
YMFG has in place a system to appropriately manage its holdings ofavailable-for-sale securities. However, if financial markets deteriorate,
the value of these holdings of available-for-sale securities could
decrease, having a negative impact on YMFG’s operating performanceand financial condition.
4. Liquidity Risks(1) Cash Flow Risk
YMFG raises the majority of its funds through deposits and istherefore able to manage funds provided through a stable source offunding. However, inconsistencies between investment and funding or
unexpected outflows of funds could hinder funding, rendering YMFG
unable to fulfill its payment obligations on their settlement dates.
Alternatively, YMFG may be compelled to raise funds at substantiallyhigher interest rates than usual, thereby generating losses.

(2) Market Liquidity Risk
Market confusion may make it impossible for YMFG to buy andsell available-for-sale securities or it may have no alternative but to
conduct such transactions at prices less favorable than usual, thereby
generating losses.
(3) Risk Related to Liquidity Regulations
Uniform international standards require the liquidity coverage ratio
to be maintained at 100% or higher. YMFG’s liquidity coverage ratio
currently exceeds this level. However, YMFG’s ratio could fall below
this level due to changes in the amount of eligible liquid assets or cash
outflows, having a negative impact on YMFG’s operating performanceand financial condition.
5. Operational Risks(1) Administrative Risk
Although its operations center on banking, YMFG also conducts
comprehensive, regionally focused financial services including
securities and credit card operations. If executives or employees wereto perform operations inaccurately or if accidents or instances offraud were to occur, in addition to direct losses YMFG could suffera loss among customers of the trust it has cultivated over many
years, consequently having a negative impact on YMFG’s operating
performance and financial condition.
(2) Risk of Information Leaks
YMFG retains significant information about customer deposits andloans that should not be leaked outside. The Group has in placemeasures to prevent outside incursions of its online and other systems.
However, unexpected circumstances could result in outflows of suchinformation. The Group stringently manages information printed on
paper or stored in electronic media in accordance with information
asset management regulations, but such information could be
leaked outside the Group by people with malicious intent or as theresult of the mishandling of information. Such situations could callinto question the Group’s social responsibility and result in claims ofcompensation for damages. In addition, such situations could have anegative effect on operating performance and the financial condition.
(3) System Risk
YMFG has measures in place to address system risk, such as computer
systems going down or malfunctioning, as well as against fraudulent
use and external cyberattacks. YMFG also has thorough security
measures in place and manages information stringently in line with
its security policy. However, the manifestation of system risk due toa disaster, the failure of equipment or telecommunication circuits orprogram failure could result damage or outflows of information. Thissituation could cause the suspension of payment functions and service
operations, as well as a loss in the trust of society, negatively affecting
YMFG’s operating performance and financial condition.
(4) Legal Risk
YMFG strives to ensure thorough compliance and is reinforcing its
systems to prevent legal violations. Nevertheless, YMFG could conduct
legal violations within its various business operations, resulting inlawsuits and negatively affecting YMFG’s operating performance andfinancial condition.
(5) Human Risk
YMFG endeavors to recruit and train competent human resources.
YMFG Annual Report 2021

16

However, the failure to recruit or train sufficient human resources
could result in a decrease in competitiveness and efficiency, negatively
affecting YMFG’s operating performance and financial condition.
(6) Reputational Risk
Negative news reports and rumors about YMFG and the financial
industry, whether true or not, could negatively affect YMFG’soperating performance, financial condition and share price.
6. Business-Related Risk
(1) Risk of Competition
The competitive environment within the financial sector has changed
substantially in recent years, due to extensive deregulation of financial
systems, the restructuring of regional financial institutions andentry into the financial sector of companies from other industries.
YMFG’s sales base could lose its competitive advantage against otherfinancial institutions as a result, negatively affecting YMFG’s operating
performance and financial condition.
(2) Risk of Unsuccessful Business Strategies
Although its operations center on banking, YMFG also conducts
comprehensive, regionally focused financial services including
securities and credit card operations and enacts business strategies
aimed to enhance corporate value. However, greater-than-expectedchanges in the operating environment could prevent YMFG fromgenerating the level of earnings it anticipates, or costs could be higher
than anticipated, negatively affecting YMFG’s operating performanceand financial condition.
Furthermore, YMFG could fall short of its expected results if it isunsuccessful in enacting management strategies for development
outlined in the YMFG Medium-Term Plan 2019, which commenced in
the fiscal year ended March 31, 2020.
(3) Holding Company Risk
Being a bank holding company, the majority of YMFG’s earnings
come from the dividends paid by its wholly owned subsidiaries,
Yamaguchi Bank, Momiji Bank and Kitakyushu Bank. Under certain
conditions, the Banking Act or the Companies Act may restrict theamounts that Yamaguchi Bank, Momiji Bank and Kitakyushu Bank
can pay as dividends to YMFG. In addition, Yamaguchi Bank, Momiji
Bank and Kitakyushu Bank may become unable to pay dividends to
YMFG due to the insufficient posting of earnings. Their inability to pay
dividends to YMFG could render YMFG unable to pay dividends.
(4) Risk of an Expanding Scale of Operations
In line with legislative changes and deregulation, YMFG has
expanded its scope of operations to take advantage of new earning
opportunities. This greater scale of operations exposes YMFG to newrisks. Also, these businesses may not progress as expected. As a result,
YMFG’s operating performance and financial condition could be
negatively affected.
7. Other Risks(1) Risk Related to Pension Obligations
Decreases in the market value or investment yield of YMFG’s pension
assets or changes in the base rate used for calculating retirement benefit
obligations can result in losses. Also, changes in pension plans can incuramortization expenses on past service costs. In addition, changes in theinterest rate environment and other factors can have a negative impact
on the unfunded portion of retirement benefit obligations.

17

YMFG Annual Report 2021

(2) Risk Related to Impairment of Fixed Assets
YMFG applies the “Accounting Standard for Impairment of Fixed
Assets” to the fixed assets it owns. Changes in the purpose of useof these fixed assets, or decreases in profitability or asset values
could lead to valuation losses, having a negative impact on YMFG’soperating performance and financial condition.
(3) Risk of Financial Crimes
In the face of rampant crimes targeting financial institutions, suchas the forgery or theft of cash cards and remittance fraud, YMFG
is strengthening its security measures to prevent damages due tofinancial crimes. However, the advent of sophisticated financial crimes
could render YMFG unable to stop illegal or inappropriate transactions,leading to unexpected losses and credit losses, having a negative
impact on YMFG’s operating performance and financial condition.
(4) Risk of Regulatory Change
As a bank holding company, YMFG is subject to restrictions andsupervision under the Banking Act and is bound to operate within
the restrictions in place as of the end of the consolidated fiscal year
under review (including laws, regulations, policies and conventional
practices). Consequently, future regulatory changes could negatively
affect YMFG’s execution of operations, operating performance,
financial condition and capital adequacy ratio.
(5) Risk of Credit Rating Being Lowered
If rating agencies were to lower their ratings, YMFG could be required toengage in transactions under unfavorable conditions or become unable
to engage in certain transactions. This situation could have a negative
impact on YMFG’s operating performance and financial condition.
(6) Compliance Risk
To encourage all executives and employees to reinforce thecompliance system, each year YMFG formulates compliance program
practice items and undertakes a variety of initiatives. However, if acompliance-related problem were to arise, it could cause direct losses
as well as resulting in the loss of trust among customers cultivatedover many years. As a result, YMFG’s operating performance andfinancial condition could be negatively affected.
(7) Risks Related to External Factors
External factors such as natural disasters (including earthquakes, storm
and flood damage, and contagious diseases), man-made disasters(including terrorism and cybercrime) and technological disasters(including electrical outages and computer trouble), could resultin damage to YMFG’s head office, branches and other locations,threatening YMFG’s ability to continue all or part of its operations andsignificantly affecting YMFG’s operations.
In addition, to help prevent the recent COVID-19 pandemic fromspreading, YMFG has decentralized operations at headquarters
and sales branches, introduced teleworking, and adopted a timeshifted working schedule as part of its health maintenance anddisease-prevention efforts. However, if the pandemic fails to subside,
continues for a protracted period or increases in intensity, or if YMFG
employees were to become infected, ensuring business continuity
could become problematic. As a result, YMFG’s operations andfinancial condition could be negatively affected.

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 ...................... 63
Momiji Bank Financial Statements ............................. 65
Kitakyushu Bank Financial Statements ....................... 67
YMFG Annual Report 2021

18

YMFG Business Situation
Summary of Business Resultsof finance to address the social issues facing our region,
maintaining an awareness closely attuned to business. We

The Regional Economy

strive to be a company that adds value to the region,”

At the beginning of the fiscal year ended March 31, 2021,

and by “establishing a regional co-creation model” andthe Japanese economy deteriorated rapidly because of“achieving ‘shinka’ of the financial model” we will strive tothe novel coronavirus disease (COVID-19) pandemic.

realize the plan’s objectives.

The economy entered a recovery phase after that point,

To support customers’ efforts to advance their businesses

even though the situation remained difficult. Exports andoverseas, we held seminars (the YMFG Overseas Digitalproduction fell substantially, reflecting the global pandemic,

Seminar and the YMFG Overseas Buyers’ Online Businessbut then recovered and entered a growth phase as

Talks) with the three Group banks. Through these seminars,

overseas economies rebounded. Personal consumption also

we augmented efforts by regional manufacturers andplunged, particularly in the restaurant and lodging sectors.

producers to expand their overseas sales routes.

Despite a gradual recovery over the course of the year,
personal consumption remained weak at fiscal year-end.
Although conditions remained difficult, overall the

Financial Results
On a consolidated basis, total income rose ¥10,082 million

regional economy continued to recover. Production activity

year on year, to ¥185,505 million, due to higher gains on

showed signs of resurgence in some areas, as overseas

the sale of stock. Total expenses expanded ¥9,645 million,

demand prompted a rise in automobile production,to ¥148,710 million, mainly because of increased losses

and chemical production levels remained high. Personalon the redemption of Japanese government bonds. As aconsumption benefited from robust sales of passenger

result, net income attributable to owners of the parent fellvehicles and firm sales at supermarkets, DIY stores and¥433 million, to ¥24,958 million.

drugstores. Meanwhile, lackluster conditions persisted in
the restaurant, travel and tourism sectors.
Against this backdrop, from the perspective of regional
invigoration and in line with their mission of contributing

Comprehensive income expanded ¥86,737 million year on
year, to ¥61,533 million. This rise was due primarily to higher
unrealized gains (losses) on available-for-sales securities andan increase in deferred gains (losses) on hedges.

to regional economic development, regional financial

Deposits amounted to ¥10,011.6 billion, up ¥485.6

institutions face requests to deliver stronger financial

billion, due to efforts to enhance products and services tosoundness and profitability, supply funding more flexibly

meet increasingly diverse customer needs, as well as toand further enhance their financial services.

steady progress in developing sales rooted in the region.
Loans and bills discounted increased ¥241.5 billion, to

YMFG Performance

19¥7,894.1 billion as of March 31, 2021, due to the Group’s

Amid these financial and economic conditions, supported

efforts to fulfill its role as a regional financial institution

by its shareholders and business partners all YMFG’sthrough its function as a financial intermediary and aggressive

officers and employees were united in their efforts

efforts to meet demand from business partners with whomto strengthen the Group’s management base, bolster

the Group has developed trust-based relationships.

operating performance and contribute to the region.

The Group’s holdings of securities came to ¥1,785.6

The YMFG Medium-Term Management Plan 2019,billion at year-end, up ¥272.8 billion, due to increases inwhich launched in the fiscal year ended March 31, 2020,

Japanese national and regional government bonds. This

sets a goal, namely: “We aim to go beyond the boundaries

change reflected investment decisions based on a polity of

YMFG Annual Report 2021

Net cash provided by operating activities was ¥1,119.3

enhancing profitability for each fiscal year and across thebillion, a ¥985.3 billion increase from the previous year,

overall portfolio.
Total assets amounted to ¥11,993.7 billion at fiscal year-

mainly due to the rise in deposits and borrowed money.

end, up ¥1,388.3 billion from one year earlier. This increase

Net cash used in investing activities was ¥292.7 billion,

was the result of greater holdings of securities and growth ina ¥127.0 billion increased from the previous year. Net

loans, against a backdrop of higher deposits and borrowing.

cash provided by financing activities was ¥8.8 billion, a

Net assets came to ¥681.1 billion, up ¥50.9 billion

difference of ¥47.9 billion from the net cash used by thesefrom a year earlier. The expansion was due to a ¥19.9

activities in the previous fiscal year, due to the issuance ofbillion rise in retained earnings due to the accumulation ofsubordinated bonds. As a result of these cash flows, cash

income, as well as to a ¥9.8 billion rise in unrealized gains

and cash equivalents at the end of the fiscal year came toon available-for-sale securities and ¥12.1 billion higher¥1,780.2 billion, up ¥835.4 billion.

deferred gains (losses) on hedges.

Yamaguchi Financial Group, Inc., Management Indices (Consolidated)
Millions of yen
2021

Millions of yen
2020

Millions of yen
2019Millions of yen
2018

Thousands of
U.S. dollars*1
2021

Consolidated total income

185,505

175,423

162,593

162,072

1,675,594

Consolidated net income attributable to owners of
the parent

24,95825,391

23,14932,917

225,435

Consolidated comprehensive income

61,533(25,204)652

47,269555,803

Consolidated total net assets

681,139630,245

660,958

660,451

6,152,461

11,993,722

10,605,416

10,304,140

10,366,548

108,334,585

2,729.94
yen2,458.73
yen

2,580.74
yen2,653.60
yen

24.66
U.S. dollars

Current term net income per share

99.63
yen

100.07
yen

94.65
yen

133.65yen

0.90
U.S. dollars

Current term net income per share (diluted)

99.59
yen

93.86
yen

83.27
yen

111.22yen

0.90
U.S. dollars

Capital ratio*2

13.43%

12.62%

13.62%

13.29%—

Earnings on equity - increase

3.84%

3.97%

3.53%

5.20%

—

7.38 times

6.11 times

9.91 times

9.63 times—

Consolidated total assets
Net assets per share

Group price earnings ratio*1 US dollar amounts have been translated, for convenience only, at the rate of ¥110.71 = US$1.00 as of March 31, 2021.
*2 YMFG calculated its capital ratio according to the uniform international standard (Basel 3).

YMFG Annual Report 2021

20

Consolidated Financial Statements
CONSOLIDATED BALANCE SHEETSMarch 31, 2021 and 2020

Millions of yen
2020

Thousands of
U.S. dollars (Note 1)
2021¥

1,807,659
9,189
4,556
1,981
35,093
1,785,562
7,894,126
22,40820,320285,229
88,7909,797
59,6073,254
39,495(73,344)¥ 11,993,722¥

971,777
1,088
5,487
1,542
48,412
1,512,748
7,652,626
20,693
19,763
234,539
92,30010,67935,042
18,42546,098(65,803)¥ 10,605,416$ 16,327,875
83,001
41,153
17,894
316,981
16,128,281
71,304,543
202,403
183,5432,576,360
802,005
88,492
538,407
29,392356,743(662,488)$ 108,334,585¥ 10,011,575
167,152
326,415
749
638,353
194
20,00089,658
2,852
2,789
294
43
709
70
434
17
1,499
10,28539,495
11,312,583
50,00058,655
528,086(18,649)
618,092
19,477
1,480
23,192
12,55356,702
117
6,228
681,139¥ 11,993,722¥$ 90,430,630
1,509,818
2,948,379
6,765
5,765,992
1,752
180,652
809,846
25,761
25,192
2,656
388
6,404
632
3,920
154
13,54092,900356,743
102,182,124
451,630
529,808
4,769,994(168,449)
5,582,983
175,928
13,368
209,484
113,386
512,166
1,057
56,255
6,152,461$ 108,334,585

Millions of yen
2021

ASSETS
AssetsCash and due from banks (Notes 3, 4 and 9)
Call loans and bills purchased (Note 4)
Monetary claims bought
Trading assets (Notes 4 and 6)
Money held in trust (Notes 4 and 6)
Securities (Notes 4, 5, 6 and 9)
Loans and bills discounted (Notes 4, 7 and 8)
Foreign exchanges
Lease receivables and investment assets
Other assets (Notes 4, 6 and 9)
Tangible fixed assets (Notes 10, 11, 15 and 20)
Intangible fixed assets (Note 20)
Net defined benefit asset (Note 14)
Deferred tax assets (Note 21)
Customers’ liabilities for acceptances and guarantees (Note 16)
Allowance for loan losses
Total assets

LIABILITIES AND NET ASSETS
Liabilities

Net Assets(Notes 22
and 23)

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
Corporate bonds
Other liabilities (Notes 4 and 6)
Provision for bonuses
Net defined benefit liability (Note 14)
Provision for directors’ retirement benefits
Provision for loss on interest repayments
Provision for reimbursement of deposits
Provision for customers point services
Provision for directors’ stock benefits
Reserves under special laws
Deferred tax liabilities (Note 21)
Deferred tax liabilities for land revaluation (Notes 15 and 21)
Acceptances and guarantees (Note 16)
Total liabilities
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity
Unrealized gains on available-for-sale securities (Note 6)
Deferred losses on hedges
Revaluation reserve for land (Note 15)
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Stock options (Note 24)
Non-controlling interests
Total net assets
Total liabilities and net assets

See accompanying notes.

21

YMFG Annual Report 2021

9,525,935
91,992
161,466742
27,999197—
101,336
2,765
3,930
294
10
1,029
70
389
28
53
10,83846,0989,975,171
50,00058,656508,212(14,321)602,547
9,689(10,657)
24,455(2,022)
21,465127
6,106630,245¥ 10,605,416

CONSOLIDATED STATEMENTS OF INCOME
Years ended March 31, 2021 and 2020

Millions of yen
2021

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 claimsCompensation for branch relocation
Other income (Note 17)
Total income
Expenses
Interest expense:
Interest on deposits
Interest on borrowings and rediscounts
Interest on bonds payable
Other interest expense
Fees and commissions
Other operating expenses
General and administrative expenses (Notes 18 and 24)
Impairment losses (Note 12)
Other expenses (Note 19)
Total expenses
Income before income taxes
Income taxes (Note 21):
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 29)¥¥

69,18837,395849
025,3891,925
27,0959
2
23,653
185,505

Millions of yen
2020

¥

$

624,948
337,7747,669
0229,329
17,388244,73981
18
213,648
1,675,594

2,274
945
81
2,546
9,577
50,89564,541381
17,470148,710
36,795

5,110
3,042
572
1,487
9,282
31,63969,272
144
18,517139,065
36,35820,5408,536
732
22,99786,505459,715582,974
3,441
157,800
1,343,240
332,354

11,65513025,01052
24,95813,250(2,137)25,245(146)
25,391

105,275
1,174
225,905
470
225,435

¥

Yen
2021

¥

75,941
21,527899
123,0291,304
34,14615
418,557
175,423

Thousands of
U.S. dollars (Note 1)
2021

99.63

Yen
2020

¥

100.07$

U.S. dollars (Note 1)
2021

$

0.90

See accompanying notes.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years ended March 31, 2021 and 2020

Millions of yen
2021

Net income
Other comprehensive income (Note 26)
Unrealized gains (losses) on available-for-sale securities
Deferred gains (losses) on hedges
Remeasurements of defined benefit plans
Comprehensive income (Note 26)
Comprehensive income attributable to owners of the parent
Comprehensive income attributable to non-controlling interests¥¥

25,01036,5239,811
12,137
14,57561,53361,45974

Millions of yen
2020

¥

¥

25,245(50,449)(36,031)(9,387)(5,031)(25,204)(25,049)(155)

Thousands of
U.S. dollars (Note 1)
2021

$

$

225,905
329,898
88,619109,629
131,650
555,803555,135
668

See accompanying notes.

YMFG Annual Report 2021

22

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
Years ended March 31, 2021 and 2020
Millions of yen
Shareholders’ Equity

Balance at March 31, 2019
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
Net changes of items other thanshareholders’ equity
Total changes of items during the year
Balance at March 31, 2020
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
Net changes of items other thanshareholders’ equity
Total changes of items during the year
Balance at March 31, 2021

Accumulated other comprehensive income

Unrealized
Total
gains onTreasury
Shareholders’ availableStock
Equityfor-salesecurities

Total
Deferred Revaluation Remeasurements accumulated
losses on reserve forof definedotherhedgeslandbenefit plans comprehensive
income¥58,685 ¥488,620¥(14,795) ¥582,510¥ (1,270)(5,870)(5,870)(5,870)71

25,391
(339)
784
71

25,391
(339)
784
71

(29)
19,592¥58,656 ¥508,212

474
20,037¥(14,321) ¥602,547(6,347)(6,347)(6,347)

1,263

24,958(5,001)672
1,263

24,958(5,001)
672
1,263

(1)
19,874¥58,655 ¥528,086(4,328)15,545¥(18,649) ¥618,092

CapitalStock

CapitalSurplus¥50,000

Retained
Earnings

25,391
(339)
813

(29)

—
¥50,000

24,958(5,001)673(1)—¥50,000¥ 45,710(36,021)(9,387)(36,021)(9,387)¥ 9,689 ¥(10,657)

9,788
9,788
¥ 19,477

12,137
12,137¥ 1,480¥24,526(71)(71)¥24,455(1,263)(1,263)¥23,192¥ 3,009¥ 71,975(5,031) (50,510)(5,031) (50,510)¥ (2,022) ¥ 21,465

14,575
14,575¥12,553

35,23735,237¥ 56,702

Stock
options

NonTotal Net
controlling
AssetsInterests¥209¥6,264 ¥660,958

(82)
(82)
¥127

(10)
(10)
¥117

(158) (50,750)(158) (30,713)¥6,106 ¥630,245

122
35,349122
50,894¥6,228 ¥681,139

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

Balance at March 31, 2020
$451,630
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
Net changes of items other thanshareholders’ equity
Total changes of items during the year
Balance at March 31, 2021
$451,630
See accompanying notes.

23

YMFG Annual Report 2021

CapitalSurplusRetained
Earnings

Accumulated other comprehensive income

Unrealized
Total
gains onTreasury
Shareholders’ availableStock
Equityfor-salesecurities$529,817 $4,590,480 $(129,356) $5,442,571(57,330)
225,435(45,172)6,079(9)
11,409$ 87,518

Total
Deferred Revaluation Remeasurements accumulated
losses on reserve forof definedotherhedgeslandbenefit plans comprehensive
income$ (96,261) $220,893$ (18,264) $193,886

Stock
options

NonTotal Net
controlling
AssetsInterests$1,147$55,153 $5,692,756(57,330)(57,330)

225,435(45,172)
6,070
11,409225,435(45,172)
6,070
11,409(9) 179,514(39,093) 140,412$529,808 $4,769,994 $(168,449) $5,582,983

88,41088,410$175,928

109,629
109,629$ 13,368(11,409) 131,650(11,409) 131,650$209,484 $113,386

318,280
318,280$512,166(90)(90)$1,0571,102
319,293
1,102
459,705$56,255 $6,152,461

CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended March 31, 2021 and 2020
Millions of yen
2021

Cash flows from operating activities:
Income before income taxes
Depreciation
Impairment losses
Amortization of goodwill
Equity in earnings of affiliates
Net change in allowance for loan losses
Net change in provision for bonuses
Net change in defined benefit asset
Net change in defined benefit liability
Net change in provision for directors’ retirement benefits
Net change in provision for directors’ stock 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
Increase (decrease) 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 losses (gains)
Net losses (gains) from disposition of fixed assets
Net change in trading assets
Net change in trading liabilities
Net change in loans and bills discounted
Net change in deposits
Net change in negotiable certificates of deposits
Net change in borrowed money excluding subordinated loans
Net change in deposits with bank
Net change in call loans and bills purchased
Net change in call money and bills soldNet change in payables under securities lending transactions
Net change in foreign exchanges (asset account)
Net change in foreign exchanges (liability account)
Net change in lease receivables and investment assets
Interest received
Interest paid
Other, net
Subtotal
Income taxes paid
Income taxes refunds
Net cash provided by (used in) operating activities¥

36,795
5,787
381
378
7
7,542
87
(24,565)(1,141)
(0)
45
33
(321)
0
(11)
(107,432)
5,846
8,440
3,680
(9,935)
(733)
(439)
6
(241,500)
600,731(115,091)
610,354(487)(7,170)75,160164,949(1,715)(3)(558)
82,401(6,668)48,673
1,133,526(14,227)
2
1,119,301

Thousands of
U.S. dollars (Note 1)
2021

Millions of yen
2020¥

36,358
6,142
144
355
(3)
8,754
175
3,633
1,024
1
89
(5)
(252)
(1)
—
(98,367)
10,211(15,667)
(969)
5,869
105
(77)
174
(244,239)
128,682
166,480(1,554)
1,444
39,522(41,474)
93,755(2,143)(98)(1,654)
92,591(10,785)(35,671)
142,549(9,857)1,359
134,051$

332,355
52,272
3,441
3,414
63
68,124786(221,886)(10,306)
0406
298(2,899)0(99)(970,391)
52,80576,23533,240(89,739)(6,621)(3,965)54(2,181,375)
5,426,167(1,039,572)
5,513,088(4,399)(64,764)
678,891
1,489,920(15,491)(27)(5,040)744,296(60,229)439,644
10,238,696(128,507)
18
10,110,207

Cash flows from investing activities:
Purchases of securities
Proceeds from sales of securities
Proceeds from maturity of securities
Purchases of money held in trust
Proceeds from sales of money held in trust
Purchases of tangible fixed assets
Proceeds from sales of tangible fixed assets
Purchases of intangible fixed assets
Net cash provided by (used in) investing activities(2,623,555)
2,286,070
60,669(49,940)
37,131(1,666)754(2,202)(292,739)(3,489,606)
3,221,245
126,090(64,810)
46,914(2,899)28(2,720)(165,758)(23,697,543)
20,649,174
547,999(451,088)
335,390(15,048)
6,811(19,890)(2,644,195)

Cash flows from financing activities:
Payments for redemption of bonds with subscription rights to shares
Issuance of subordinated bonds
Dividends paid
Dividends paid to non-controlling shareholders
Purchases of treasury stock
Proceeds from disposal of treasury stock
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)—
19,885(6,347)(3)(5,001)297
8,831
3
835,396944,784
1,780,180(33,246)—(5,870)
(3)
(339)
393
(39,065)(2)(70,774)
1,015,558
944,784—
179,613(57,330)(27)(45,172)
2,683
79,76727
7,545,806
8,533,863
16,079,669

¥

¥

$

See accompanying notes.

YMFG Annual Report 2021

24

Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020

25

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 applicationand disclosure requirements of International Financial
Reporting Standards.
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, 2021, which was ¥110.71 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 2021

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) Consolidated subsidiaries were 19 and 17 at March
31, 2021 and 2020, respectively.
The names of the main consolidated subsidiaries
are listed on page 1.
The scope of consolidation includes Nishiseto
Regional Co-creation Servicer Inc. and Inesus inc.
due to its establishment in the fiscal year ended
March 31, 2021.
The scope of consolidation includes YM Career
Inc. due to its establishment in the fiscal year
ended March 31, 2020.
In addition, Kitakyushu Economics Institute, Inc.,
formerly a consolidated subsidiary, was excluded
from the scope of consolidation in the fiscal year
ended March 31, 2020 due to the merger between
Kitakyushu Economics Institute, Inc. and YMFG
Zone Planning Co., Ltd. (an absorption-type merger
in which YMFG Zone Planning Co., Ltd. was thesurviving company).
(ii) No unconsolidated subsidiary at March 31, 2021
and one unconsolidated subsidiary at March 31,
2020.
Maple Funding Corporation, an unconsolidated
subsidiary not accounted for by the equity methodin the fiscal year ended March 31, 2020, wasliquidated in the fiscal year ended March 31, 2021.
The unconsolidated subsidiary was excluded
from the scope of consolidation at March 31,
2020 because its total assets, ordinary income,net income (in proportion to ownership), retained
earnings (in proportion to ownership) andaccumulated other comprehensive income were
so immaterial that they do not hinder a rational

judgment of YMFG’s consolidated financial position
and results of operations when excluded from thescope 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 subsidiary was accounted for by
the equity method at March 31, 2021 and 2020.
(ii) As at March 31, 2021 and 2020, two affiliates
were accounted for by the equity method.
Affiliates as at March 31, 2021 and 2020 were as
follows:
YM Saison Co., Ltd.
Momiji Card Co., Ltd.
(iii) As at March 31, 2021, no unconsolidated
subsidiary was not accounted for by the equity
method and one as at March 31, 2020.
Maple Funding Corporation, an unconsolidated
subsidiary not accounted for by the equity methodin the fiscal year ended March 31, 2020, wasliquidated in the fiscal year ended March 31, 2021.
The unconsolidated subsidiary was also excluded
from the scope of application of equity method
at March 31, 2020 because its net income (inproportion to ownership), retained earnings(in proportion to ownership) and accumulated
other comprehensive income (in proportion toownership) were so immaterial that they do nothinder a rational judgment of YMFG’s consolidated
financial position and results of operations whenexcluded from the scope of equity method.
(iv) There were no affiliates that were not accounted
for by the equity method as at March 31, 2021
and 2020.

(3) The balance sheet dates of consolidated
subsidiaries
The balance sheet date of all of the consolidated
subsidiaries is March 31 every year.

(4) Accounting Policies
Criteria for recording dividends payable
on securities
Dividends distributed from other retained earnings (cashdividends only) are recorded in the fiscal year that includes theeffective date of the dividend-related resolution by the issuing
company’s general meeting of shareholders, Board of Directors
or other institution with decision-making authority.

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. Available-forsale securities are in general stated at fair value (cost ofsale calculated primarily according to the moving-averagemethod) indicated according to market price at the

YMFG Annual Report 2021

26

consolidated balance sheet date (for equity securities, theaverage market price during the one-month period endingon the consolidated balance sheet date). Available-forsale securities having no readily available market value arevalued at cost using the moving-average method.
Unrealized gains (losses) on available-for-sale securities(excluding valuation differences due to foreign exchange
fluctuations, which are included in foreign exchange trading
gains or losses as other operating income or other operating
expenses) are reported as a component of net assets.

Criteria for recording sales and cost of sales of installment
sales transactions
Payment dates are used as the basis for installment
agreements, with installment sales and installment
costs recoded in accordance with the elapsed period.
Installment sales are recorded in “other operating
income,” and installment costs are recorded in “otheroperating expenses.” Unrealized profit on installment
sales is recorded under “other liabilities,” and unrealized
installment profit is deferred for installment receivables thathave not come due as of the end of the fiscal year.

Money in trust
Trust assets within money held in trust are valued using themarket value method.

Derivatives
Derivatives other than those for which exceptional
accounting treatment is applied are stated at fair value.

Criteria for recording gains or losses on thecancellation of investment trusts
When handling the cancellation of investment trusts
by consolidated subsidiaries engaged in the banking
business, YMFG does not offset cancellation gains andlosses occurring on each transaction. Rather, cancellation
losses are recorded in “loss on redemption of government
bonds, etc.,” which is within “other operating expenses.”
Cancellation gains are recorded in “interest and dividends
on securities.”(Additional information)
YMFG applied the “Accounting Standard for Accounting
Policy Disclosures, Accounting Changes and Error
Corrections” (ASBJ Statement No. 24, March 31, 2020) toconsolidated financial statements financial statements forthe year ended March 31, 2021. This standard provides
new disclosure on the basis for accounting treatment
and procedures to be employed when the stipulations ofrelated accounting standards are unclear.

Criteria for recording income and expenses
related to lease transactions
Criteria for recording income and cost are recognized at
the time lease fees are received. Income is recorded in“other operating income,” and cost of sale is recorded in“other operating expenses.”

27

YMFG Annual Report 2021

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 theeffectiveness of the 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, October 8, 2020). 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 based oncomparison of the foreign currency position of the hedged
monetary assets and liabilities and the hedging instruments.
The Banks apply an exceptional accounting treatment,
as permitted if certain conditions are met, for certain
interest rate swaps utilized as hedging instrument. In thattreatment, the interest swap contracts are not recorded atfair values but the net interest to be paid or received under
the contracts is added or deducted to the interest arisingfrom their related hedged assets or liabilities.

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 expected
losses are estimated for the upcoming one or three-year
periods. Expected loss amounts are calculated by using
average values for actual rates of losses from bad debts
and default probabilities during a specific period in thepast, based on actual amounts of bad debt or bankruptcy
over a one or three-year period, and adjusted as necessary
for future forecasts.
Each branch as well as the credit supervision
department evaluates all loans in accordance with the selfassessment rule.
Other consolidated subsidiaries provide an allowance foran amount calculated using the rate of collection losses
in the past for loans of normal borrowers in addition toamounts estimated based on collectability analysis forborrowers in danger of bankruptcy and certain otherborrowers.

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
Corporation 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.

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

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.

Tangible fixed assets (excluding lease assets)
Depreciation of tangible fixed assets of YMFG and its
consolidated subsidiaries that conduct banking business arecomputed by using the declining-balance method except
for buildings (excluding fixtures) acquired after April 1, 1998
and fixtures and buildings acquired after April 1, 2016,
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: 2 to 15 years

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.

Method of accounting for retirement benefits
When calculating retirement benefit obligations, thebenefit formula method is used for attributing expected
retirement benefits to the year-end. The following methods
are used to expense prior service costs and actuarial gains
or losses.

YMFG Annual Report 2021

28

Prior service costs: Expensed as incurred using the straightline method over a fixed period (two years) within theemployee’s average remaining service period (two years)
Actuarial gains or losses: Apportioned for each fiscal year
as incurred using the straight-line method over a fixed
period (10–11 years) and expensed in each of the following
fiscal years
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.

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.

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 directors’ stock benefits
The provision for directors’ stock benefits is determinedaccording to the directors’ stock benefit regulations for
YMFG and its subsidiaries (banks within YMFG (Yamaguchi
Bank, Momiji Bank and Kitakyushu Bank) and YM
Securities; the same shall apply hereafter) in preparation
for the payment of stock benefits to directors (excluding
directors who are members of the Audit and Supervisory
Committee, part-time directors and outside directors ) and
executive officers (hereinafter, “Subject Directors, etc.”)
based on expected stock benefit obligations as of March
31, 2021.

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 the specified formula 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 originatingfrom incidents relating to the purchase and sale ofsecurities or other 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
Provision for loss on interest repayment
Provision for loss on interest repayment is provided forpossible losses on reimbursements of excess interest
payments and loan losses related to consumer finance loans
extended at 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 2012, the amount of such provision is rationallyestimated and booked based on actual historical repayment
claims by debtors.

29

YMFG Annual Report 2021

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

Consumption taxes
YMFG and its consolidated subsidiaries employ thetax 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.

Major accounting estimates
Allowance for loan losses
The items below relate to all banks within YMFG.
1. Amounts in the consolidated financial statements for the
fiscal year ended March 31, 2021

Total loan amount before
intra-Group eliminations
Corresponding allowance for loan losses

Millions ofyen
2021¥7,963,538

Thousands of
U.S. dollars
2021$71,931,515

69,505

627,811

Of this, the following amounts were to borrowers ofmanagement improvement support initiatives.

Total loan amount before
intra-Group eliminations
Corresponding allowance for loan losses

Millions ofyen
2021¥137,771

Thousands of
U.S. dollars
2021$1,244,431

15,835143,031

2. Details of major accounting estimates related to items
identified separately(1) Calculation method
At YMFG banks, branches and departments conducting
self-assessments perform asset appraisals of all obligations,
including loans, based on asset self-assessment criteria.
Asset appraisals are conducted in accordance withborrowers’ credit risk. In addition to financial details andother quantitative information, judgments incorporate
factors related to the borrower, such as forecasts forthe future. Appraisals also take into consideration thesatisfaction of certain conditions, such as the formulation ofmanagement improvement plans determined to be rationaland highly likely to be achieved. Borrower categories are
determined on the basis of such considerations.
Information related to recording the allowance for loan
losses is provided in “Criteria for recording allowance forloan losses” within “Items related to accounting policies.”(2) Major assumptions
YMFG’s main bases of operation are in Yamaguchi
Prefecture, Hiroshima Prefecture and the city of Kitakyushu.
In addition to a shrinking population, decreasing birthrate
and aging population, and a shortage of businesssuccessors, recently the region has been affected by
the COVID-19 pandemic, which has reduced corporate
earnings, lowered personal consumption and led to
uncertainty about the future.
As one aspect of its efforts to achieve regional
revitalization and regional economic invigoration amid
these circumstances, YMFG conducts business feasibility
assessments. YMFG designates borrowers that it
determines to require management improvement support
as “borrowers of management improvement support
initiatives” and concentrates on providing such support.
The determination of borrower categories as borrowersof management improvement support initiatives is basedon YMFG’s estimates of future forecasts, namely, theexpectation that management improvement plans on
which such support is based are rational and achievable.
The economic impact of the COVID-19 pandemic
is expected to persist for some time. YMFG strives toascertain the status of individual borrowers through theirtimely disclosure information. Including efforts under
different support systems, the Group provides various
types of support to ensure cash flow and other aspectsof customer business continuity. YMFG calculates theallowance for loan losses based on the assumption that the
impact on loan credit expenses will be limited.
(3) Impact on consolidated financial statements for the
next fiscal year
Actual losses that exceed bad-debt expectations, aninsufficient allowance for loan losses, deterioration of theoverall economic environment, a decrease in the valueof collateral or other unforeseen circumstances could
require the Group to change the standards it has set or
adjust expected losses. Furthermore, accumulations in theallowance for loan losses could have a significant effect on
operating performance and the financial condition.
If the COVID-19 pandemic persists for a long period oftime or increases in severity, the operating environment
could deteriorate further. This situation could have amaterial impact on the allowance for loan losses for thefollowing fiscal year.

YMFG Annual Report 2021

30

Goodwill valuation
1. Amounts in the consolidated financial statements for the
fiscal year ended March 31, 2021

Goodwill

Millions ofyen
2021¥2,340Thousands of
U.S. dollars
2021$21,136

Impairment losses on goodwill are not stated in the
consolidated statements of income.
2. Details of major accounting estimates related to items
identified separately(1) Calculation method
In the event of signs of impairment of fixed assets stated in
the consolidated financial statements (including goodwill),
if the total amount of undiscounted future cash flows
from the target assets falls below the book value of fixed
assets (including goodwill), book value is reduced to therecoverable value, and the reduction in book value isrecognized as an impairment loss.
YMFG recorded major goodwill at the acquisition of
Hoken Hiroba, a consolidated subsidiary. Hoken Hiroba is
an independent insurance agent with branches centeredin western Japan. During the fiscal year ended March 31,
2021, Hoken Hiroba experienced a substantial decline
in the number of people visiting its branches amid the
COVID-19 pandemic, and income declined accordingly.
As a result, YMFG determined signs of impairment in thisbusiness, including goodwill. In deliberating on whether torecognize impairment losses, YMFG determined that theamount of undiscounted future cash flows from the target
fixed assets (including goodwill) exceeded their book value,
so did not recognize impairment losses.
(2) Major assumptions
Estimates of undiscounted future cash flows are based on
profit plans formulated by Hoken Hiroba’s management.
These profit plans are based on past performance andreflect management’s assessments of future forecasts. The
plans incorporate major assumptions, such as that sales will
increase as the number of customers visiting branches rises.
(3) Impact on consolidated financial statements for the
next fiscal year
The above-mentioned measures reflect highly uncertain
assumptions about future increases in customer visits anda corresponding rise in sales. If actual performance falls

31

YMFG Annual Report 2021

substantially below expectations in the following fiscal year,
expectations of future cash flows could be significantly
affected, prompting YMFG to record impairment losses.

Standards and guidance not yet adopted
The following standard and guidance were issued but not
yet adopted.
- “Accounting Standard for Revenue Recognition” (ASBJ
Statement No. 29, March 31, 2020)- “Implementation Guidance on Accounting Standard for
Revenue Recognition” (ASBJ Guidance No. 30, March
26, 2021)(1) Overview
The above standard and guidance provide comprehensive
principles for revenue recognition. Under the standard andguidance, revenue is recognized by applying following 5 steps:
Step 1: Identify contract(s) with customers.
Step 2: Identify the performance obligations in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performanceobligation in the contract.
Step 5; Recognize revenue when (or as) the entity
satisfies a performance obligation.
(2) Effective date
Effective from the beginning of the fiscal year ending
March 31, 2022.
(3) Effects of the application of the standards
The application of the “Accounting Standard for Revenue
Recognition” has an immaterial impact on the consolidated
financial statements.
- “Accounting Standard for Fair Value Measurement” (ASBJ
Statement No. 30, July 4, 2019)- “Implementation Guidance on Accounting Standard for
Fair Value Measurement” (ASBJ Guidance No. 31, July 4,
2019)- “Accounting Standard for Management of Inventories”(ASBJ Statement No. 9, July 4, 2019)- “Accounting Standard for Financial Instruments” (ASBJ
Statement No. 10, July 4, 2019)- “Implementation Guidance on Disclosures about Fair
Value of Financial Instruments” (ASBJ Guidance No. 19,
March 31, 2020)

(1) Overview
In order to enhance comparability with internationallyrecognized accounting standards,“Accounting Standard for Fair Value Measurement” and“Implementation Guidance on Accounting Standard for
Fair Value Measurement” (together, hereinafter referred toas “Fair Value Accounting Standards”) were developed andguidance on methods measuring fair value was issued. Fair
Value Accounting Standards are applicable to the fair value
measurement of the following items:- Financial instruments in “Accounting Standard for
Financial Instruments”; and- Inventories held for trading purposes in “AccountingStandard for Measurement of Inventories.” and, underthe “revised Implementation Guidance on Disclosuresabout Fair Value of Financial Instruments,” with notes
outlining details of fair value of financial instruments foreach level.
(2) Effective date
Fair Value Accounting Standards and guidance will beeffective from the beginning of the consolidated fiscal year
ending March 31, 2022.
(3) Effects of the application of the standards
The application of the “Accounting Standard for Fair
Value Measurement” has an immaterial impact on the
consolidated financial statements.

Changes in Presentation Method
Application of the “Accounting Standard for Disclosure of
Accounting Estimates”
YMFG applied the “Accounting Standard for Disclosureof Accounting Estimates” (ASBJ Statement No. 31, March
31, 2020) for consolidated financial statements beginningwith the fiscal year ended March 31, 2021, as described in
the note to the consolidated financial statements related tomajor accounting estimates.
The note does not describe information for the fiscal
year ended March 31, 2020, in accordance with thetransitional handling set forth in the paragraph 11 of that
accounting standard.

Additional Information(ESOP Trust)
To enhance its welfare benefits, YMFG has introduced
the ESOP Trust for Group employees (hereinafter,“Employees”), which ended in March 2021.
1. ESOP Trust for Employees introduced in March 2017
(1) Overview of Transactions
Of those Employees enrolled in YMFG’s ESOP, YMFG has
established the trust for those beneficiaries satisfying
certain conditions. This trust acquired as a lump sum
certain number of shares of YMFG corresponding to thenumber expected to be acquired by YMFG’s ESOP over the
five-year period beginning in March 2017. Thereafter, thetrust sold YMFG’s shares to YMFG’s ESOP each month ona specific date. As a result, the trust sold all its shares in
YMFG, and the trust was concluded in March 2021.
(2) Company Shares Residing in the Trust
YMFG’s shares residing in the trust are recorded in treasury
stock in the net assets section based on the book value ofthe trust (excluding ancillary expenses).
The book value and the number of shares of this treasury
stock amounted to ¥588 million and 456 thousand shareson March 31, 2020. The trust no longer holds any shares in
YMFG, having sold all of its shares as of March 31, 2021.
(3) Book Value of Borrowings Recorded by Applying theGross Price Method
The book value of borrowings recorded by applying thegross price method was ¥929 million on March 31, 2020.
As of March 31, 2021, the book value of borrowings
recorded by applying the gross price method was zero, as
the trust sold all its shares in YMFG in December 2021 andconcluded in March 2021.
(Board Benefit Trust (BBT))YMFG has introduced a Board Benefit Trust (“BBT”) to raiseawareness among Subject Directors,etc. of YMFG and its
subsidiaries (banks within the Group (Yamaguchi Bank,
Momiji Bank and Kitakyushu Bank) and YM Securities; thefollowing shall apply hereinafter) toward raising operating
performance at YMFG over the medium to long term andcontributing to increases in corporate value.
(1) Overview of Transactions
Via the trust, YMFG acquires YMFG’s common sharesusing funds provided by YMFG. YMFG’s share and cashYMFG Annual Report 2021

32

equivalent to fair value of YMFG’s stock measured at
the time of retirement are granted to be distributed via
the trust to Subject Directors,etc. according to Subject
Directors,etc.’ positions, and the level of achievementof operating performance in accordance with directors’
stock benefit regulations established by YMFG and its
subsidiaries.
(2) Company Shares Residing in the Trust
YMFG’s shares residing in the trust are recorded as treasury
stock in the net assets section based on the book value ofthe trust (excluding ancillary expenses).
The book value and the number of shares of thistreasury stock amounted to ¥805 million ($7 million) and
921 thousand shares on March 31, 2021 and ¥878 millionand 1,005 thousand shares on March 31, 2020.
(Treatment Related to the Application of Tax EffectAccounting for the Transition from the Consolidated
Taxation System to the Group Tax Sharing System)
With regard to matters related to the transition to thegroup tax sharing system established by the “Act for thePartial Amendment of the Income Tax Act” (Act No. 8 of2020) and the revision of the single tax payment system
to coincide with the transition to the group tax sharing
system, YMFG and certain consolidated subsidiaries basetheir amounts of deferred tax assets and deferred tax
liabilities on tax law prior to revision without applying
No. 44 of the “Implementation Guidance on Tax EffectAccounting” (ASBJ Guidance No. 28, February 16,2018), in accordance with treatment under Paragraph 3of the “Practical Solution on the Treatment of Tax EffectAccounting for the Transition from the Consolidated
Taxation System to the Group Tax Sharing System” (PITF
No. 39, March 31, 2020).

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,
2021 and 2020 were as follows:

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

Thousands ofMillions of yen
U.S. dollars
2021
2020
2021
¥1,807,659 ¥971,777 $16,327,875(15,172)(15,873)(137,043)(12,307)(11,120)(111,172)¥1,780,180 ¥944,784 $16,079,660

4. FINANCIAL INSTRUMENTS
Items pertaining to the status offinancial instruments(1) Policies on financial instruments
YMFG provides community-based integrated financial
services centered on the banking, securities and credit cardbusinesses. Accordingly, the Group is subject to a variety
of risks, including credit risk, market risk and liquidity
risk. Due to changes in economic, social and financial
conditions, these risks have grown more diverse andcomplex. Under these conditions, the Group considers
strengthening its risk management structure as a priority
issue. To maintain and enhance the soundness of its
operations, YMFG has created groupwide risk management
regulations, which clarify the Group’s fundamental stanceon 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 from 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.

33

YMFG Annual Report 2021

The Group’s financial liabilities center on deposits andnegotiable certificates of deposit, and call money thatit raises 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 andprice fluctuations for loans and bills discounted, deposits,
securities and other instruments bearing long-term interest
at fixed rates. Currency-related derivative transactions areused primarily to avoid fluctuations in income stemmingfrom future exchange rate fluctuations, stabilize funding
denominated in foreign currencies, as well as offered as
products to clients. With regard to transactions to secure
income through changes in market rates, which 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 Groupapplies deferred hedge accounting after it ensured inadvance that the established conditions are satisfied. As forhedging methods, the Group employs the portfolio hedge
where certain group of assets with similar risk is identified
and such risk is hedged comprehensively. In addition, forcertain interest swap contracts, exceptional accounting
treatment 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 torespond to 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 Bankof the Group are calculated according to value at risk
(VaR). Furthermore, the covariance method is used to
calculate VaR.
As of March 31, 2021, the market risk (estimated loss
amount) of Yamaguchi Bank was ¥65,092 million ($588
million), the market risk (estimated loss amount) of Momiji

YMFG Annual Report 2021

34

Bank was ¥19,718 million ($178 million) and the market
risk (estimated loss amount) of Kitakyushu Bank was¥20,587 million ($186 million). Also, as of March 31, 2020,
the market risk (estimated loss amount) of Yamaguchi
Bank was ¥41,387 million, the market risk (estimated loss
amount) of Momiji Bank was ¥14,658 million and themarket risk (estimated loss amount) of Kitakyushu Bankwas ¥17,198 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 themodel with the actual losses. Increasing price volatility infinancial markets has led to cases in which the banks wereunable to cover risks. As a result, VaR was corrected, using a
multiple obtained from the number of conflicts resulting fromback-testing from the fiscal year ended March 31, 2021.
However, as the practice of measuring market risk
amount with a set risk probability calculated on the basisof historical market fluctuations remains unchanged evenafter revising the measurement method to appropriately
capture the market risk amount, in some cases it is notpossible to capture market risk in the event of suddenchanges 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 are usedin these calculations, different assumptions can yield
different values.

35

YMFG Annual Report 2021

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
2021
Consolidatedbalance sheet Fair value Difference
amount(i) Cash and due from banks¥ 1,807,659 ¥ 1,807,659¥—(ii) Call loans and bills purchased
9,189
9,189
—
(iii) Money held in trust
35,09335,093—(iv) Securities
31,621
31,992371
Held-to-maturity debt
securities
Available-for-sale securities
1,731,871
1,731,871—(v) Loans and bills discounted
7,894,126
Allowance for loan losses (*1)
(69,721)
7,824,405
7,913,644
89,240Total assets¥11,439,838 ¥11,529,448¥89,611(i) Deposits¥10,011,575 ¥10,011,851¥ 276(ii) Call money and bills sold167,152
167,152—(iii) Payables under securities
326,415
326,415—lending transactions(iv) Borrowed money
638,353
637,903(450)
Total liabilities¥11,143,495 ¥11,143,321¥ (174)
Derivative transactions (*2)
(6,549) ¥(6,549)¥—Hedge accounting not applied ¥Hedge accounting applied¥(5,504) ¥(5,504)¥—
Total derivative transactions¥(12,053) ¥(12,053)¥—Millions of yen
2020
Consolidatedbalance sheet Fair value Difference
amount¥ 971,777 ¥ 971,777¥—(i) Cash and due from banks(ii) Call loans and bills purchased
1,088
1,088
—
(iii) Money held in trust
48,412
48,412—(iv) Securities
Held-to-maturity debt
13,36013,528168
securities
Available-for-sale securities
1,482,995
1,482,995—(v) Loans and bills discounted
7,652,626
Allowance for loan losses (*1)
(62,316)
7,590,310
7,705,683
115,373
Total assets¥10,107,942 ¥10,223,483¥115,541(i) Deposits¥ 9,525,935 ¥ 9,526,272¥
337(ii) Call money and bills sold91,992
91,992—(iii) Payables under securities
161,466
161,466—
lending transactions(iv) Borrowed money
27,99928,339341
Total liabilities¥ 9,807,392 ¥ 9,808,069¥
678
Derivative transactions (*2)(31) ¥(31) ¥—
Hedge accounting not applied ¥Hedge accounting applied¥(16,330) ¥(16,330) ¥—Total derivative transactions¥(16,361) ¥(16,361) ¥—Thousands of U.S. dollars
2021
Consolidatedbalance sheet Fair value Difference
amount$—(i) Cash and due from banks $ 16,327,875 $ 16,327,875(ii) Call loans and bills purchased
83,001
83,001—(iii) Money held in trust
316,981
316,981—(iv) Securities
285,620
288,971
3,351
Held-to-maturity debt
securities
Available-for-sale securities 15,643,311 15,643,311—(v) Loans and bills discounted
71,304,543 71,968,783
Allowance for loan losses (*1)(629,762)(487,932)
70,674,781 71,480,842
806,061
Total assets$103,331,569 $104,140,981$809,412(i) Deposits$ 90,430,630 $ 90,433,123$ 2,493(ii) Call money and bills sold
1,509,818
1,509,818—(iii) Payables under securities
2,948,379
2,948,379—
lending transactions(iv) Borrowed money
5,765,992
5,761,928(4,064)
Total liabilities$100,654,819 $100,653,248$ (1,571)
Derivative transactions (*2)(59,155) $(59,155) $—Hedge accounting not applied $Hedge accounting applied$(49,715) $(49,715) $—Total derivative transactions$ (108,870) $ (108,870) $—(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 held in
trust established independently for the purpose of investing
mainly in the securities, the value on stock exchanges is taken
as fair value for the equity securities, and either the value on
exchanges or a price indicated by other financial institutions
dealing with the specific instruments is taken as fair value.
Additional information related to money held in trust by
the purpose of holding are described in the note entitled“Money held in 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
the total amount of interest and principal to their present
value, 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.

(* 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 assets and liabilities. This indicates the net amount ofrights and obligations under derivative transactions. Parentheses, ( ), indicate that the net
amount is negative.

YMFG Annual Report 2021

36

(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 the total amountof interest and principal to their present value, using as
the discount rate the risk-free rate for operating loans
and bills 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 in dangerof bankruptcy, the estimated collectible amount is based oneither the present value of estimated future cash flows or the
expected amounts recoverable from the disposal of collateral
and/or under guarantees. As the fair value is essentiallyequivalent to the amount after deducting the allowance forpossible loan losses from the book value as of the consolidatedbalance sheet date, this amount is taken as fair value.
For loans that have no specific repayment period, as thefair value is assumed to be equivalent with the book value
according to the expected payment dates and interest
rates, book value is taken as the fair value.
(2) Liabilities(i) Deposits
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.

37

YMFG Annual Report 2021(ii) Call money and bills sold and (iii) Payables under security
lending transactions
As the contract period is short (within one year) and themarket value is similar to the book value, the book value istaken as the market value.
(iv) Borrowed money
Short-term market interest rates are used for borrowings
having a short contract period (within one year) or variableinterest rates. In addition, the market value is assumed
to be similar to the book value, as the credit standingof YMFG and its consolidated subsidiaries is unchanged
before and after taking out these borrowings. The current
values of borrowings having a long contract period (morethan one year) and borrowings with fixed interest rates
are calculated by applying an assumed discount rate to
the total principal amount borrowed, separating principal
amounts according to their borrowing periods.
(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.”

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

Thousands ofMillions of yen
U.S. dollars
2021
2020
2021
Consolidated balance sheet amount¥ 7,466¥ 6,933$ 67,437
14,6059,459

131,921¥22,071¥16,392$199,358(*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, 2021 and 2020, impairment losses of ¥55 million($497 thousand) and ¥47 million 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
2021
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¥1,708,158 ¥
— ¥
— ¥
— ¥
—

(1) Due frombanks(2) Call loans
9,189
—
—
—
—
and bills
purchased(3) Money held
35,093————in trust(4) Securities
80,433
120,923
241,993
192,571
802,099
Held-to1,544
5,458
14,956
6,195
3,470
maturity debt
securities
Local
100
700
2,530
900
2,970
government
bond
Corporate
1,444
4,758
12,426
5,295
500
bond
Available-for78,889
115,465
227,037
186,376
798,629
sale securities
with maturities
Japanese——
24,600—420,800
government
bond
Local
8,601
28,53825,572
46,433
159,412government
bond
Corporate
61,70524,786
74,23758,59530,093bond
Others
8,583
62,141
102,628
81,348
188,324(5) Loans and 1,638,436 1,109,516 1,133,446
958,395 3,054,333
bills discounted
(*)
Total
¥3,471,309 ¥1,230,439 ¥1,375,439 ¥1,150,966 ¥3,856,432

Millions of yen
2020
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¥ 875,998 ¥
— ¥
— ¥
— ¥
—

(1) Due frombanks(2) Call loans
1,088
—
—
—
—
and bills
purchased(3) Money held
48,412————in trust(4) Securities
65,968161,330
166,133
174,273
627,818
Held-to700
1,763
5,751
1,749
3,400
maturity debt
securities
Local
—
200
1,700
800
2,200
government
bond
Corporate
700
1,563
4,051
949
1,200
bond
Available-for65,268
159,567
160,382
172,524
624,418
sale securities
with maturities
Japanese
9,000
42,00023,10021,500234,600
government
bond
Local
6,725
22,15822,057
26,974
131,548
government
bond
Corporate
35,38573,29059,27386,13680,112bond
Others14,15822,11955,952
37,914
178,158(5) Loans and 1,693,152 1,047,647 1,065,149
856,915 2,989,763
bills discounted
(*)
Total
¥2,684,618 ¥1,208,977 ¥1,231,282 ¥1,031,188 ¥3,617,581

YMFG Annual Report 2021

38

Thousands of U.S. dollars
2021
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$15,429,121 $
— $
— $
— $
—

(1) Due frombanks(2) Call loans
83,001————and bills
purchased(3) Money held
316,981————in trust(4) Securities
726,519 1,092,250 2,185,827 1,739,418 7,245,045
Held-to13,946
49,300135,091
55,95731,343maturity debt
securities
Local
903
6,323
22,8528,129
26,827government
bond
Corporate
13,04342,977112,239
47,8284,516
bond
Available-for712,573 1,042,950 2,050,736 1,683,462 7,213,702
sale securities
with maturities
Japanese——
222,202— 3,800,921
government
bond
Local
77,689257,773
230,982
419,411 1,439,906
government
bond
Corporate557,357
223,882
670,554529,266
271,818
bond
Others77,527561,295
926,998734,785 1,701,057(5) Loans and 14,799,350 10,021,823 10,237,973 8,656,806 27,588,592
bills discounted
(*)
Total
$31,354,972 $11,114,073 $12,423,800 $10,396,224 $34,833,637(*) Loans and bills discounted for which no period is specified are included in “within one year.”(Note 4) Estimated repayment amounts of deposits,
negotiable certificates of deposit and other interest-bearing
liabilities to be repaid after the consolidated balance sheet date(i) Deposits (*)(ii) Call money andbills sold(iii) Payables under
securities lendingtransactions(iv) Borrowed money
Total

39

YMFG Annual Report 2021

Millions of yen
2021
More than More thanThree
Withinone year two years
or
one year and within and within years
more
two years three years¥ 9,290,409¥429,417¥255,309¥36,441
167,152———
326,415———

622,413¥10,406,389

5,134¥434,551

3,810¥259,119

6,995¥43,436(i) Deposits (*)(ii) Call money andbills sold(iii) Payables under
securities lendingtransactions(iv) Borrowed money
Total(i) Deposits (*)(ii) Call money andbills sold(iii) Payables under
securities lendingtransactions(iv) Borrowed money
Total

Millions of yen
2020
More than More thanThree
Withinone year two years
or
one year and within and within years
more
two years three years¥8,921,149 ¥446,573 ¥129,113¥29,099
91,992———
161,466

—

—

—

9,232
¥9,183,840

5,917¥452,491

4,215¥133,327

8,635¥37,734

Thousands of U.S. dollars
2021
More than More thanThree
Withinone year two years
years orone year and within and within
more
two years three years$83,916,620 $3,878,755 $2,306,106$329,157
1,509,818———
2,948,379———

5,622,012
46,37334,414$93,996,829 $3,925,128 $2,340,520

63,183$392,340(*) Within deposits, demand deposits are included in “within one year.”

5. SECURITIESSecurities held at March 31, 2021 include shares of
unconsolidated subsidiaries and affiliates amounting
to ¥27 million ($244 thousand) and no investments.
Corresponding figures at March 31, 2020, were ¥27
million and ¥1 million.
Of bonds held at March 31, 2021, the total amountcomprises waivers in the event of substantial bankruptcy
and subordinated bonds.
The amount of guarantee obligations for private
placement bonds (Financial Instruments and Exchange
Law, Article 2, Item 3), out of bonds included insecurities, amounted to ¥33,260 million ($300 million)and ¥11,376 million as of March 31, 2021 and March
31, 2020 respectively.

6. FAIR VALUE INFORMATION
Securities
The following tables summarize book values, fair value andacquisition cost of securities with available fair values as ofMarch 31, 2021 and 2020:(a) Trading securities
Amount of unrealized gain (loss) on trading securities
included in the consolidated statement of income— ¥(0) million ($(2) thousand) and ¥(3) million as at
March 31, 2021 and 2020, respectively.
(b) Held-to-maturity debt securities:
Type
Local
government
bonds
Corporate
bonds
Subtotal
Securities with fairLocalvalue not exceeding government
book value
bonds
Corporate
bonds
Subtotal
Total
Securities with fairvalue exceeding
book value

Type
Local
government
bonds
Corporate
bonds
Subtotal
Securities with fairLocalvalue not exceeding government
book value
bonds
Corporate
bonds
Subtotal
Total
Securities with fairvalue exceeding
book value

Millions of yen
2021
Book value Fair value Difference¥ 3,930 ¥ 3,970¥ 40

23,83324,174341

27,763
3,270

28,144
3,263

381
(7)

588

586

(3)

3,858
¥31,6213,849¥31,993(10)¥371

Millions of yen
2020
Book value Fair value Difference¥ 2,900 ¥ 2,947
¥ 47

8,225

8,349

124

11,1252,000

11,296
1,997

171
(3)

235

235

(0)

2,235
¥13,360

2,232¥13,528(3)¥168

Thousands of U.S. dollars
2021
Book value Fair value Difference$ 35,498 $ 35,859
$ 361

Type
Local
government
bonds
Corporate
215,274 218,354
bonds
Subtotal
250,772 254,213
Securities with fairLocal
29,53729,473value not exceeding government
book value
bonds
Corporate
5,311
5,293
bonds
Subtotal
34,84834,766
Total$285,620 $288,971
Securities with fairvalue exceeding
book value

3,080
3,441
(63)

(27)
(90)
$3,351(c) Available-for-sale securities

Type

Millions of yen
2021
Acquisition
Book value
Differencecost¥ 93,820 ¥ 31,882¥ 61,939
2,095
1,806
288

Securities with book Sharesvalue exceeding
Japaneseacquisition costgovernment
bonds
Local
113,741
113,379
government
bonds
Corporate
157,781
157,241bonds
Others83,75083,007
Subtotal
451,187
387,315
Securities with book Shares
12,182
14,012
value not exceeding Japanese
446,712458,570
acquisition costgovernment
bonds
Local
155,407
155,946
government
bonds
Corporate
92,592
93,038bonds
Others573,792
595,195
Subtotal
1,280,685 1,316,761
Total¥1,731,872 ¥1,704,076

362
540
743
63,872(1,830)(11,857)
(539)
(447)
(21,403)(36,076)¥ 27,796

YMFG Annual Report 2021

40

Type

Millions of yen
2020
Acquisition
Book value
Differencecost¥ 75,378 ¥ 34,954¥ 40,424
43,45743,031
426

Securities with book Sharesvalue exceeding
Japaneseacquisition costgovernment
bonds
Local
94,33894,077government
bonds
Corporate
242,770
240,383
bonds
Others
213,118
198,674
Subtotal
669,061
611,119
Securities with book Shares
11,832
15,250value not exceeding Japanese
293,589
300,872
acquisition costgovernment
bonds
Local
115,538
116,161
government
bonds
Corporate
94,33994,726bonds
Others298,636
330,612Subtotal
813,934
857,621
Total¥1,482,995 ¥1,468,740

Type

41

YMFG Annual Report 2021(e) Available-for-sale securities sold during the fiscal year

SharesJapanese government bonds
Local government bonds
Corporate bonds
Others
Total

Millions of yen
2021
Sale
Total gain Total loss
amounton saleon sale¥ 15,294¥11,515¥ 16
442,674
510
2,380
3,114
49
—
89,621
1,174—
803,113
17,6001,653¥1,353,816¥30,848¥4,049

SharesJapanese government bonds
Local government bonds
Corporate bonds
Others
Total

Millions of yen
2020
Sale
Total gain Total loss
amounton saleon sale¥ 14,689¥10,229¥ 64
1,253,003
6,494
1,453
6,840
59
—
92,8101,263
101,256,723
16,3926,260¥2,624,065¥34,437¥7,787

SharesJapanese government bonds
Local government bonds
Corporate bonds
Others
Total

Thousands of U.S. dollars
2021
Sale
Total gain Total loss
amounton saleon sale$ 138,145$104,010$ 145
3,998,501
4,607
21,49828,128443—
809,511
10,604—
7,254,205
158,974
14,931$12,228,490$278,638$36,574261
2,387
14,44457,942(3,418)(7,283)(623)(387)(31,976)(43,687)¥ 14,255

Thousands of U.S. dollars
2021
Acquisition
Book value
Differencecost$ 847,439 $ 287,978 $ 559,471
18,923
16,313
2,601

Securities with book Sharesvalue exceeding
Japaneseacquisition costgovernment
bonds
Local
1,027,378 1,024,108
government
bonds
Corporate
1,425,174 1,420,296
bonds
Others756,481749,770
Subtotal
4,075,395 3,498,465
Securities with book Shares
110,035
126,565
value not exceeding Japanese
4,034,974 4,142,083
acquisition costgovernment
bonds
Local
1,403,730 1,408,599
government
bonds
Corporate
836,347
840,376bonds
Others5,182,838 5,376,163
Subtotal
11,567,924 11,893,786
Total$15,643,319 $15,392,251(d) Held-to-maturity debt securities sold during the fiscal year
There were no held-to-maturity securities sold during
the fiscal year ended March 31, 2021 and 2020.

3,270
4,878
6,711
576,931(16,530)(107,100)(4,869)(f) Securities for which purpose of holding changed
There were no securities for which the purpose ofholding changed at March 31, 2021 and 2020.

(4,038)

Impairment losses on securities(193,325)(325,862)$ 251,069

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 as
the consolidated balance sheet amounts. The valuationdifference is recorded as a loss for the fiscal year in whichsuch difference is realized (hereinafter, “impairment losses”).

During the fiscal year ended March 31, 2021, impairment
losses were ¥457 million ($4,128 thousand) on equity
securities and during the fiscal year ended March 31, 2020,
impairment losses totaled ¥771 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 shares and equivalent
securities, if their market value has fallen by 30% or more
but less than 50% of the acquisition cost, the determinationof whether the value has “fallen significantly” takes into
consideration other factors such as the issuing company’s
credit risk (independent debtor classification, externalratings, etc.) and previous percentage decreases over a
specific period of time in the past.

(b) Money held in trust classified as held-to-maturity
There are no corresponding transactions as at March
31, 2021 and 2020.
(c) Available-for-sale money held in trust

Available-for-sale money heldin trust

Available-for-sale money heldin trust

Money held in trust
Information on money held in trust as of March 31, 2021
and 2020 was as follows:(a) Money held in trust classified as trading purposes

Money held in trust classified as
trading purposes

Money held in trust classified as
trading purposes

Money held in trust classified as
trading purposes

Millions of yen
2021
Unrealized gains
Consolidated(losses) included
balance sheet
in profit (loss) for
amountthe fiscal year
¥4,673¥—

Millions of yen
2020
Unrealized gains
Consolidated(losses) included
balance sheet
in profit (loss) for
amountthe fiscal year
¥4,714¥—

Thousands of U.S. dollars
2021
Unrealized gains
Consolidated(losses) included
balance sheet
in profit (loss) for
amountthe fiscal year
$42,209$—

Available-for-sale money heldin trust

Millions of yen
2021
Consolidated
Unrealized
Acquisition
balance sheet
gains
cost
amount(losses)¥30,420¥30,932¥(512)

Millions of yen
2020
Consolidated
Unrealized
Acquisition
balance sheet
gains
cost
amount(losses)¥43,698¥44,695¥(997)

Thousands of U.S. dollars
2021
Consolidated
Unrealized
Acquisition
balance sheet
gains
cost
amount(losses)$274,772 $279,397$(4,625)

Unrealized gains (losses) on available-for-salesecurities
Information on unrealized gains (losses) on available-forsale securities and available-for-sale money held in trust
was 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
2021
2020
¥27,545 ¥13,501
28,057
14,498(512)(997)

Thousands of
U.S. dollars
2021$248,803
253,428(4,625)

8,055
19,490

3,821
9,680

72,758176,045

13

(9)

117

—

—

—

¥19,477¥ 9,689$175,928

YMFG Annual Report 2021

42

Valuation differences on investments in partnerships,
etc., of ¥263 million ($2,376 thousand) at March 31, 2021
and ¥244 million at March 31, 2020, for which market
values are extremely difficult to determine, are recorded inavailable-for-sale securities of net unrealized gains in thelist above.

Derivatives(1) Derivative transactions at March 31, 2021 and 2020, towhich hedge accounting is not applied(a) Interest-rate-related:
Millions of yen
2021
Type
Over-the-counter:
Interest rate swaps:
Receivable fixed,
payable floating
Receivable floating,payable fixed
Total

Over oneyear

Fair value¥43,231¥36,499

¥ 41

¥ 41

43,23236,500

438

438

—

¥479

¥479

—

¥

Millions of yen
2020
Type
Over-the-counter:
Interest rate swaps:
Receivable fixed,
payable floating
Receivable floating,payable fixed
Total

Contract
amounts

Over oneyear

Fair value

Realized
gains(losses)¥22,108¥20,751

¥ 561

¥ 561

22,10920,752

(352)

(352)

¥

¥

¥ 209

¥ 209

—

—

Thousands of U.S. dollars
2021
Type
Over-the-counter:
Interest rate swaps:
Receivable fixed,
payable floating
Receivable floating,payable fixed
Total

Contract
amounts

Realized
gains(losses)Over oneyear

Fair value$390,489 $329,681

$ 370

$ 370

329,690

3,956

3,956

—

$4,326$4,326

390,498$— $Millions of yen
2021

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

Contract
amounts

Realized
gains(losses)Over oneyear

Fair value¥289,392 ¥ 64,017¥(7,083)

160,202
133,339

60,71753,672(2,625)2,683(2,625)
2,683

166,746 121,677
166,746 121,677¥— ¥—(6,878)6,876¥(7,027)

1,120
452¥ 1,558

Realized
gains(losses)

Contract
amounts¥(b) Currency-related:

¥

(72)

Millions of yen
2020

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

Over oneyear

Fair value

Realized
gains(losses)¥282,308 ¥103,826¥(1,583)¥ (393)

128,295
136,993

39,15836,153(2,384)
3,714(2,384)
3,714

133,467
98,561
133,467
98,561¥— ¥—(5,020)5,034¥ (239)606744¥ 2,287

Contract
amounts

Thousands of U.S. dollars
2021

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

Over oneyear

Fair value

Realized
gains(losses)$2,613,964 $ 578,240$(63,978)$1,447,042
1,204,399

548,433
484,798(23,711)
24,234(23,711)
24,234

1,506,151 1,099,061
1,506,151 1,099,061$— $—(62,126)
62,108$(63,473)

10,117
4,083$ 14,073

Contract
amounts(650)(c) Stock-related:
There were no stock-related transactions as at March 31,
2021 and 2020.
(d) Bond-related:
There were no bond-related transactions as at March 31,
2021 and 2020.

43

YMFG Annual Report 2021

(e) Commodity-related:
There were no commodity-related transactions as at March
31, 2021 and 2020.
(f) Credit-derivatives:
There were no credit related transactions as at March 31,
2021 and 2020.
(2) Derivative transactions as at March 31, 2021 and 2020,
to which hedge accounting is applied(a) Interest-rate-related:
Millions of yen
2021
Contract Over one
Fair value
amountsyear

Type
Principal accounting procedure:Interest rate swaps
Receive floating, payable fixed¥279,245 ¥279,245
Interest rate swaps employing
exceptional accounting treatment:Interest rate swaps
Receive floating, payable fixed
75
75
Total
¥
— ¥
—

¥2,234*¥2,234

Millions of yen
2020
Contract Over one
Fair value
amountsyear

Type
Principal accounting procedure:Interest rate swaps
Receive floating, payable fixed¥225,994 ¥225,994
Interest rate swaps employing
exceptional accounting treatment:Interest rate swaps
Receive floating, payable fixed
168
108
Total
¥
— ¥
—

¥(14,933)*¥(14,933)

Thousands of U.S. dollars
2021
Contract Over one
Fair value
amountsyear

Type
Principal accounting procedure:Interest rate swaps
Receive floating, payable fixed$2,522,311 $2,522,311
Interest rate swaps employing
exceptional accounting treatment:Interest rate swaps
Receive floating, payable fixed
677
677
Total
$
— $
—

$20,179*$20,179(*) Of interest rate swaps employing exceptional accounting treatment, as these instruments
are accounted for together with the hedged loans and bills discounted and borrowings,
their fair value is included in the fair value of said loans and bills discounted within“Financial instruments.”(b) Currency-related:

Type
Principal accounting procedure:
Currency swaps
Total

Type
Principal accounting procedure:
Currency swaps
Total

Type
Principal accounting procedure:
Currency swaps
Total

Millions of yen
2021
Contract Over one
Fair value
amountsyear¥176,233¥—¥75,844¥—¥(7,737)¥(7,737)

Millions of yen
2020
Contract Over one
Fair value
amounts
year¥133,852¥—¥22,602¥—¥(1,397)¥(1,397)

Thousands of U.S. dollars
2021
Contract Over one
Fair value
amounts
year$1,591,844$—$685,069$—$(69,885)$(69,885)(c) Stock-related:
There were no stock-related transactions at March 31,
2021 and 2020.
(d) Bond-related:
There were no bond-related transactions at March 31,
2021 and 2020.

7. LOANS AND BILLS DISCOUNTED
Loans at March 31, 2021 and 2020 include “Risk-Managed
Loan Amounts” as follows:(1) Loans to borrowers in bankruptcy amounting to¥22,494 million ($203 million) and ¥16,372 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 ¥66,572 million($601 million) and ¥71,435 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.
YMFG Annual Report 202144

(3) Loans past due for three months or more amounting to¥445 million ($4 million) and ¥767 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 ¥10,630 million($97 million) and ¥9,931 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 ¥100,141 million ($905 million) and¥98,505 million.
The loan amounts disclosed from (1) to (4) 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, October 8, 2020, of the JICPA, although the Banks
have the right to sell or pledge them without restrictions.
The total face value of commercial bills and purchased
foreign exchange bills obtained as a result of discounting
was ¥20,648 million ($187 million) at March 31, 2021 and¥32,049 million at March 31, 2020.

Loan Participation
Based on “Accounting Treatment and Presentation ofLoan Participation,” (Japanese Institute of Certified Public
Accountants Accounting System Committee Report No.
3, November 28, 2014), the consolidated balance sheet
amount of loan participation agreements in which theBanks have acquired the economic benefits and risks of
the underlying loans from the original lender was ¥2,783
million ($25 million) at March 31, 2021 and ¥2,694 million
at March 31, 2020.

45

YMFG Annual Report 2021

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 makethe loans upon the request of an obligor to draw down
funds under such loan agreements as long as there is nobreach of the various terms and conditions stipulated in therelevant loan agreement. The unused commitment balance
relating to these loan agreements amounted to ¥949,071
million ($8,573 million) at March 31, 2021 and ¥907,251
million at March 31, 2020. Of this amount, ¥774,026
million ($6,991million) at March 31, 2021 and ¥751,011
million at March 31, 2020, 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 doso, such as when there is a change in financial condition
or when it is necessary to protect the consolidated
subsidiaries’ credit. Consolidated subsidiaries take various
measures to protect their credit. Such measures include
having the obligor pledge collateral to the consolidated
subsidiaries in the form of real estate, securities, etc., atentering into a loan agreement or in accordance with theconsolidated subsidiaries’ established internal proceduresfor confirming the obligor’s financial condition, etc., atregular intervals.

9. PLEDGED ASSETS

11. ADVANCED DEPRECIATION AMOUNTOF TANGIBLE FIXED ASSETSAt March 31, 2021 and 2020, the following assets were
pledged as collateral for certain liabilities of the Banks.

Cash and due from banks
Securities
Loans and bills discounted

Millions of yen
2021
2020
¥
14 ¥
14
588,440
373,158
633,488—

Thousands of
U.S. dollars
2021
$
126
5,315,148
5,722,049

12. IMPAIRMENT LOSSES

The collateral was pledged to secure the following:

Deposits
Call money
Payables under securities
lending transactions
Borrowings

Millions of yen
2021
2020
¥ 39,569 ¥ 42,258—
21,222
326,414
161,466

Thousands of
U.S. dollars
2021$ 357,411—
2,948,370

613,500

5,541,505—

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 ¥23,225 million ($210 million) at March 31, 2021 andsecurities amounted to ¥6,223 million at March 31, 2020.
Also, other assets included security deposits, collateralpledged for transactions involving public funds, collateralpledged for financial instruments, collateral pledged forexchange settlements, the financial futures margin andmargin on bond futures transactions, as indicated below.

Deposits
Collateral pledged fortransactions involving
public funds
Collateral pledged forfinancial instruments
Collateral pledged forexchange settlements
Financial futures margin
Margin on bondfutures transactions

Millions of yen
2021
2020
¥ 2,220¥ 2,552
1,199
1,199

At March 31, 2021 and 2020, accumulated advanced
depreciation amount of tangible fixed assets were ¥8,147
million ($74 million) and ¥8,175 million. There were nosuch advance depreciation expenses in fiscal year ended
March 31, 2021 and 2020.

Thousands of
U.S. dollars
2021$ 20,052
10,83022,50330,587203,261

76,40075,600690,091

10
1,000

10
1,000

90
9,033

10. ACCUMULATED DEPRECIATION
Accumulated depreciation of tangible assets was ¥80,146
million ($724 million) at March 31, 2021, and ¥78,245
million at March 31, 2020.

During the fiscal year ended March 31, 2021 and 2020,
impairment losses were recorded on the following assets.
Location
WithinHiroshima
Prefecture
WithinYamaguchi
PrefecturePrimaryuse

Business- Buildings,
use assets movable
property
Business- Land,use assets buildings,
movableproperty
Business- Buildings
use assets

WithinAichi
Prefecture
Within Tokyo Welfare
Metropolitan facility forsale
WithinBusinessFukuoka
use assets
Prefecture
WithinIdle assets
Ehime
for salePrefecture
Within Tokyo BusinessMetropolitan use assets
Other

Total

Type

Impairment loss
Thousands ofMillions of yen
U.S. dollars
2021
2020
2021
¥183
¥ —
$1,653¥155¥ —$1,400

¥ 37

¥ —

$ 334

Buildings

¥

5

¥ —

$

45

Buildings,
movablepropertyLand,
buildings

¥

1

¥ 12

$

9

¥ —

¥ 93

$

—

¥ —

¥ 28

$

—

¥ —

¥ 11

$

—

¥381

¥144

$3,441

Buildings,
movableproperty
Business- Buildings,
use assets movable
property

YMFG 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.

YMFG Annual Report 2021

46

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, 2021, the bookvalues of business-use assets, which were determined
not to create sufficient operating cash flow and assets
to be moved, discontinued in use or sold are reduced totheir recoverable values, and recognized the reduction of¥381 million ($3,441 thousand) as impairment losses. This
amount includes buildings (including exit costs) of ¥248
million ($2,240 thousand) and land of ¥132 million ($1,192
thousand), movable property of ¥1 million ($9 thousand).
The recoverable amount used to estimate theimpairment loss for the fiscal year ended March 31, 2021,
is the net selling price, which is calculated by deducting the
expected disposal cost from the expected disposal value. In
the fiscal year ended March 31, 2020, the book values ofassets for which the use had been changed from businessuse are reduced to their recoverable values, and recognized
the reduction of ¥144 million as impairment losses. This
amount includes land of ¥88 million, buildings of ¥46
million and movable property of ¥10 million in fiscal year
ended March 31, 2020.
The recoverable amount used to estimate theimpairment loss for the fiscal year ended March 31,
2020, is the net selling price, which is calculated byusing assessed value based on roadside land prices or by
deducting the expected disposal cost from the expected
disposal value.

13. BORROWED MONEY
Payment schedule of borrowed money as of March 31,
2021 is as follows:
2021
2022
2023
2024
2025
Thereafter
Total

47

YMFG Annual Report 2021

Millions of yen¥622,413
5,134
3,810
2,246
1,078
3,671
¥638,352

Thousands of
U.S. dollars$5,622,012
46,37334,414
20,287
9,737
33,159$5,765,982

14. PROVISION FOR EMPLOYEERETIREMENT BENEFITS
Overview of severance payments and pension plans
YMFG and some consolidated subsidiaries employ funded
and unfunded defined benefit and defined contributionplans 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.

Defined benefit plans(1) Reconciliation of retirement benefit obligation
balances at the beginning and the end of the
fiscal year ended March 31, 2021 and 2020

Retirement benefit obligations at
the beginning of the fiscal year
Service cost
Interest cost
Actuarial differences
Past service cost
Retirement benefit payments
OthersRetirement benefit obligations
at the end of the fiscal year

Millions of yen
2021
2020
¥61,677¥60,535
1,853
110(1,023)(5,577)(3,099)12¥53,953

1,784
99
2,257
—
(2,995)(4)¥61,676

Thousands of
U.S. dollars
2021$557,104
16,737994(9,240)(50,375)(27,992)108$487,336(2) Reconciliation of plan asset balances at the
beginning and the end of the fiscal year ended
March 31, 2021 and 2020

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

Millions of yen
2021
2020
¥ 92,788¥96,3022,060
17,167623(2,162)294¥110,770

Thousands of
U.S. dollars
2021$ 838,118

2,137
18,607(4,561)
155,063759
5,627(2,150)(19,528)301
2,655¥92,788 $1,000,542

(3) Reconciliation of the balances of retirement
benefit obligations and plan assets at the end of
the fiscal year ended March 31, 2021 and 2020,
and the carrying amounts of net defined benefit
liability and net defined benefit asset
Thousands ofMillions of yen
U.S. dollars
2021
2020
2021
Retirement benefit obligations ¥ 53,846¥ 61,588 $ 486,370
of funded plans
Plan assets(110,770)(92,788) $(1,000,542)(56,924)(31,200)(514,172)Retirement benefit obligations
107
88
966
of unfunded plans
Net carrying amount of¥ (56,817) ¥(31,112) $ (513,206)
obligations and assets

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

Thousands of
U.S. dollars
Millions of yen
2021
2020
2021
¥ 2,789 ¥ 3,930$ 25,192(59,607)(35,042)(538,407)¥(56,818) ¥(31,112) $(513,215)(6) Cumulative remeasurements of defined
benefit plans
Items posted as cumulative remeasurements of defined
benefit plans (before tax-effect exclusions) break down
as follows.
Millions of yen
2021
2020
¥(15,263)¥2,908

Thousands of
U.S. dollars
2021$(137,865)—¥2,908(25,183)$(163,048)

Unrecognized actuarial gain
(loss)
Unrecognized past service cost
(2,788)
Total¥(18,051)(7) Plan assets(i) Percentages of major asset categories to total plan assets
are as follows.
2021
30%
53%
17%
100%

Bonds
SharesOthers
Total

2020
30%
47%
23%
100%

(Note) Plan assets include 49% of corporate pension plans established as retirement benefit
trusts at the end of the fiscal year ended March 31, 2021, and 45% at March 31, 2020.

(4) Retirement benefit costs and their breakdowns
Thousands of
U.S. dollars
2021$ 16,737994(18,607)(181)(25,183)723$(25,517)* Excludes employee contribution portion of defined benefit corporate pensions(ii) Method of establishing expected long-term return onplan assets(Corporate pensions)
Based on the weighted average rate according to the policy
asset mix (medium- to long term portfolio) of the expected
rate of return for individual investment fiduciary institutions,net of investment cost
(Retirement benefit trusts)
Past dividend performance is converted to yield.

(5) Remeasurements of defined benefit plans(8) Basis of actuarial calculation

Items posted as remeasurements of defined benefit plans(before tax-effect exclusions) break down as follows.

The basis of actuarial calculations as of March 31, 2021
and 2020

Service cost*
Interest cost
Expected return on plan assets
Recognized actuarial loss
Recognized past service cost
OthersRetirement benefit costs on
defined benefit plans

Actuarial gain (loss)
Past service cost
Total

Millions of yen
2021
2020
¥ 1,853¥ 1,784
110
99(2,060)(2,137)(20)(418)(2,788)—80
71¥(2,825)¥ (601)Millions of yen
2021
2020
¥18,171¥(7,235)
2,788—¥20,959¥(7,235)

Thousands of
U.S. dollars
2021$164,132
25,183$189,315

Discount rate

2021
2020
0.00%—0.98% 0.00%—0.51%

Expected long-term rate of returnon plan assets

1.60%—2.60% 1.50%—2.60%

Expected rate of salary increase

0.63%—3.84% 0.63%—3.84%

Defined contribution plans
The required contribution to the consolidated subsidiaries’
defined contribution plans at the end of the fiscal year
ended March 31, 2021 and 2020 were ¥269 million ($2million) and ¥279 million, respectively.

YMFG Annual Report 2021

48

15. 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, 2021 and 2020 were ¥15,005 million ($136
million) and ¥18,369 million, respectively.

16. 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 shownon the asset side, which represent the Banks’ right ofindemnity from customers.

17. OTHER INCOME
Other income included the gains on sale of stock of ¥19,295
million ($174 million), income from investment partnershipof ¥343 million ($3 million) for the fiscal year ended March
31, 2021 and the gains on sale of stock of ¥13,840 million,
income from investment partnership of ¥1,574 million andgains on investment in money held in trust of ¥984 million
for the fiscal year ended March 31, 2020.

49

YMFG Annual Report 2021

18. GENERAL AND ADMINISTRATIVE
EXPENSES
Items included operating expenses for the year ended
March 31, 2021 and 2020 were as follows:

Salary and allowance
Depreciation

Millions of yen
2021
2020
¥30,214¥31,328¥ 5,787¥ 6,142

Thousands of
U.S. dollars
2021$272,911$ 52,272

19. OTHER EXPENSES
Items included other expenses for the year ended March
31, 2021 and 2020 were as follows:

Loss on investment in money
held in trust
Loss on sale of stock
Losses on investment
partnership
Losses on devaluation ofstocks and other securities

Millions of yen
2021
2020
¥3,680¥ 16

Thousands of
U.S. dollars
2021$33,240

¥ 656
¥ 574

¥4,408¥ 360$ 5,925$ 5,185

¥ 512

¥ 818

$ 4,625

In addition to the above, the ESOP Trust for employee
shareholders was unable to pay off its debt obligations,so the Group recorded a loss on loan guarantees of ¥535
million ($5 million) for the redemption period ended March
31,2021.

20. LEASE TRANSACTIONS
1. Finance lease transactions
Finance lease transactions that do not transfer ownership
Borrower(i) Content of lease assets
Tangible fixed assets
Mainly vehicles and 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. Operating leases
Future minimum lease payments at March 31, 2021 and2020 were as follows:
Borrower

Within one year
More than one year
Total minimum lease payments

Millions of yen
2021
2020
¥117
¥123
575
726
¥692
¥849

Thousands of
U.S. dollars
2021$1,057
5,194$6,251

LenderWithin one year
More than one year
Total minimum lease payments

Millions of yen
2021
2020
¥ 4
¥1
27
7
¥31
¥8

Thousands of
U.S. dollars
2021
$ 36
244
$280

21. INCOME TAXES
1. Significant components of the deferred tax assets andliabilities as of March 31, 2021 and 2020 were as follows:

Deferred tax assets:
Allowance for loan losses
Unrealized gains onavailable-for-sale securities
Provision for bonuses
Depreciation
Losses on devaluationof securities
Net operating losses
carryforwards
Net defined benefit liability
Deferred gains or losses
on hedges
Other
Deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Unrealized gains onavailable-for-sale securities
Net defined benefit asset
Securities contributed toretirement benefit trusts
Reserve for advanced
depreciation of
non-current assets
Deferred gains or losses
on hedges
Other
Total deferred tax liabilities
Net deferred tax assets(liabilities)

Millions of yen
2021
2020

Thousands of
U.S. dollars
2021¥ 18,519
3,829¥17,174664$ 167,275
34,586

901
584
581

867
642
505

8,138
5,275
5,248

486

511

4,390

143
—

1,474
4,672

1,292
—

1,808
26,851(1,632)
25,2192,376
28,885(1,501)
27,384

16,331
242,535(14,741)
227,794(11,884)(4,486)(107,344)(6,421)(3,045)(129)(3,045)(57,998)(27,504)(1,334)(664)(12,049)(644)—(5,817)(136)(23,464)¥ 1,755(687)(9,012)¥18,372(1,228)(211,940)$ 15,854

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, 2021 were as follows:
2021
Effective statutory tax rate
(Adjustments)
Changes in the valuation reserve
Items that are not permanently included in
profits, such as dividends received
Non-deductible goodwill amortization
Items that are not permanently included inlosses, such as entertainment expenses
Inhabitant tax on a per capita basis
Consolidation adjustments
OthersTax burden after the application oftax-effect accounting

2020

30.46%—%

0.44%(0.63)%

—
—

0.28%
0.72%

—
—

0.36%
0.14%
0.26%
32.03%————%(Note) Significant differences between the statutory
effective tax rate and the actual income tax rate after
application of deferred income tax accounting for the year
ended March 31, 2020 were omitted, as the difference
between the effective statutory tax rate and the actual tax
rate after application of deferred income tax accounting
were 5% or less of the effective statutory tax rate.

22. 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.

YMFG Annual Report 2021

50

Under the Act, additional paid-in capital and legal
earnings reserve may not be distributed as dividends,
however all of these may be transferred to other 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 25,
2021, the shareholders approved cash dividends amounting
to ¥3,225 million ($29 million). Such appropriations havenot been accrued in the Consolidated Financial Statements
as of March 31, 2021 and to be recognized in the period inwhich they are approved by the shareholders.
At the annual shareholders’ meeting, held on June25, 2020, the shareholders approved cash dividends
amounting to ¥3,063 million. Such appropriations have notbeen accrued in the Consolidated Financial Statements asof March 31, 2020 and to be recognized in the period inwhich they are approved by the shareholders.

Number of shares (in thousand)March 31,
March 31,
Increase Decrease
2019
2020
Shares issued
Common stock
Total
Treasury stock
Common stock*1, *2, *3
Total

Number of shares (in thousand)March 31,
March 31,
Increase Decrease
2020
2021
Shares issued
Common stock
Total
Treasury stock
Common stock*1, *2, *3
Total

264,353
264,353————

264,353
264,353

10,55910,559

7,160
7,160

549
549

17,171
17,171*1 The increase in the number of treasury stock is due to market purchases of 7,159
thousand shares, and purchases of shares constituting less than one trading unit, totaling
1 thousand shares.
The decrease of treasury stock included the sale of 456 thousand shares from the ESOP
Trust for Group employees to the YMFG stock ownership plan, 84 thousand shares dueto the exercise of rights of the Board Benefit Trust (BBT), the 8 thousand shares for the
exercise of share options and purchases of shares constituting less than one trading unit,
which amounted to 0 thousand shares.
*2 Treasury stock as of beginning and ending of fiscal year ended March 31, 2021 include
456 thousand shares held by the ESOP Trust for employee shareholders. The trust has soldall of the Company’s shares it held; as of March 31, 2021, the trust had no holdings ofCompany shares.
*3 Treasury stock as of beginning and ending of fiscal year ended March 31, 2021 include
1,005 thousand shares and 921 thousand shares held by the Board Benefit Trust (BBT).

—
—

—
—

264,353
264,353

10,74910,749

445
445

635
635

10,55910,559*1 The increase in the number of treasury stock is due to additional increase of Board Benefit
Trust (BBT) of 443 thousand shares, and purchases of shares constituting less than one
trading unit, totaling 1 thousand shares.
The decrease of treasury stock included the sale of 533 thousand shares from the ESOP
Trust for Group employees to the YMFG stock ownership plan, the 85 thousand shares forthe exercise of share options, 16 thousand shares due to the exercise of rights of the Board
Benefit Trust (BBT) and purchases of shares constituting less than one trading unit, whichamounted to 0 thousand shares.
*2 Treasury stock as of beginning and ending of fiscal year ended March 31, 2020 include 990
thousand shares and 456 thousand shares held by the ESOP Trust for employee shareholders.
*3 Treasury stock as of beginning and ending of fiscal year ended March 31, 2020 include
578 thousand shares and 1,005 thousand shares held by the Board Benefit Trust (BBT).

2. Stock options
Stock options at March 31, 2021 and 2020 were ¥117
million ($1 million) and ¥127 million, respectively.
3. Information on dividends is as follows:(a) Dividends paid in the fiscal year ended March 31, 2021
and 2020.

23. CHANGES IN NET ASSETS
1. Type and number of shares issued and treasury shareswere as follows:

264,353
264,353

Type of shares
Resolved at the boardof directors meetingon May 15, 2020
Common stock
Resolved at the boardof directors meeting on
November 13, 2020
Common stock

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

Recorddate

Effective
date¥3,063*1¥12.00 Mar. 31, Jun. 26,
2020
2020

¥3,284*2¥13.00 Sep. 30, Dec. 10,
2020
2020

*1 The total amount of dividend on common stock includes ¥18 million in dividends to ESOP
Trust for employee shareholders and Board Benefit Trust (BBT).
*2 The total amount of dividend on common stock includes ¥14 million in dividends to ESOP
Trust for employee shareholders and Board Benefit Trust (BBT).

Type of shares
Resolved at the boardof directors meetingon May 10, 2019
Common stock
Resolved at the boardof directors meeting on
November 7, 2019
Common stock

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

Recorddate

Effective
date¥2,807*1¥11.00 Mar. 31,
2019

Jun. 26,2019¥3,063*2¥12.00 Sep. 30,
2019

Dec. 10,2019*1 The total amount of dividend on common stock includes ¥17 million in dividends to ESOP
Trust for employee shareholders and Board Benefit Trust (BBT).
*2 The total amount of dividend on common stock includes ¥15 million in dividends to ESOP
Trust for employee shareholders and Board Benefit Trust (BBT).

51

YMFG Annual Report 2021

Type of shares
Resolved at the boardof directors meetingon May 15, 2020
Common stock

AggregateCashamount ofdividends
dividends
per share(Thousands of(U.S. dollars)
U.S. dollars)

Resolved at the boardof directors meeting on
November 13, 2020
Common stock

24. STOCK OPTIONS
Recorddate

Effective
date$27,667*1$0.11 Mar. 31, Jun. 26,
2020
2020

$29,663*2$0.12 Sep. 30, Dec. 10,
2020
2020

*1 The total amount of dividend on common stock includes $163 thousand in dividends to
ESOP Trust for employee shareholders and Board Benefit Trust (BBT).
*2 The total amount of dividend on common stock includes $126 thousand in dividends to
ESOP Trust for employee shareholders and Board Benefit Trust (BBT).

(b) Dividends to be paid in the fiscal year ending March 31,
2021 and 2020 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 14, 2021
Common stock¥3,225* Retained
earnings¥13.00 Mar. 31,
2021

Jun. 28,
2021* The total amount of dividend on common stock includes ¥12 million in dividends to Board
Benefit Trust (BBT).

(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 15, 2020
Common stock¥3,063*Retainedearnings¥12.00 Mar. 31,
2020

Jun. 26,2020

At a Board of Directors meeting, resolutions were passedwith regard to subscription requirements for the allotmentof stock options as compensation to directors of YMFG’s
banking subsidiaries, Yamaguchi Bank, Momiji Bank andKitakyushu Bank. The details of these resolutions aredescribed below.
1. Recording of expenses related to stock options and thename of line items.
There were no expenses in the fiscal year ended March 31,
2021 and 2020.
2. The contents of the stock options are outlined as below.
Category and number of
persons to be granted
stock options

Number of stock options
by class of stock*2016
27 directors (excluding directors who
are members of the Audit and Supervisory Committee, part-time directors andoutside directors) of YMFG’s subsidiaries, Yamaguchi Bank, Momiji Bank andKitakyushu Bank.
122,000 shares of YMFG’s common
stock

Grant dateAugust 25, 2015

Vesting conditions

No vesting conditions set

Target length of service
periodNo target length of service period set

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

Category and number of
persons to be granted
stock options

2015
27 directors (excluding outside directors)of YMFG’s subsidiaries, Yamaguchi Bank,
Momiji Bank and Kitakyushu Bank.

Number of stock options
by class of stock*

182,900 shares of YMFG’s common
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

* The total amount of dividend on common stock includes ¥18 million in dividends to ESOP
Trust and for employee shareholders and Board Benefit Trust (BBT).

(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 14, 2021
Common stock $29,130 * Retained
earnings

Category and number of
persons to be granted
stock options

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

Number of stock options
by class of stock*

225,100 shares of YMFG’s common
stock

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
$0.12 Mar. 31,
2021

Jun. 28,
2021* The total amount of dividend on common stock includes $108 thousand in dividends toBoard Benefit Trust (BBT).

YMFG Annual Report 2021

52

Category and number of
persons to be granted
stock options

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

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

Category and number of
persons to be granted
stock options

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

Number of stock options
by class of stock*

192,600 shares of YMFG’s common
stock

Grant date

October 31, 2011
No vesting conditions set

Target length of service
periodNo target length of service period set

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

From the fiscal year ended March 31, 2016, the issuanceof stock options to directors of the YMFG subsidiaries From
the fiscal year ended March 31, 2016, the issuance of stock
options to directors of the YMFG subsidiaries Yamaguchi
Bank, Momiji Bank and Kitakyushu Bank (excluding directors
who are Audit and Supervisory Committee members, parttime directors and outside directors) was discontinued.
3. The summary of stock option activity is as indicated below.
(a) Number of stock options
2016

53

2015

2014

2013

2012

—

—

—

—

—

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

35,00039,30021,90020,200

7,800

—
3,400
—
31,600—5,100—
34,200———21,900———20,200

—
—
—
7,800

YMFG Annual Report 2021

Exercise price
Average share priceat time of exercise
Fair value on dategranted

2016
¥
1
646

2015
¥
1
646

Yen
2014
¥ 1
—

2013
¥ 1
—

2012
¥ 1
—

1,377

1,015

973

619

660

4. 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.

25. INVESTMENT AND RENTAL PROPERTY

Vesting conditions

Prior to vesting
As of the endof the previous
consolidated
fiscal year
GrantedExpired
VestedRights not yet
determined
After vesting
As of the endof the previous
consolidated
fiscal year
Rights determined
Rights exercised
ExpiryAmountunexercised(b) Price information

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

26. CONSOLIDATED STATEMENTS OFCOMPREHENSIVE INCOME

28. RELATED PARTY TRANSACTIONS

Amounts of reclassification adjustments and tax effectamounts related to other comprehensive income in the
consolidated fiscal year ended March 31, 2021 and 2020
were as follows.
Millions of Yen
2021
2020
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)on hedges
Amount generated during
the year
Reclassification adjustments
Before tax effect adjustment
Tax effect amountDeferred gains (losses)on hedges
Remeasurements of defined
benefit plans
Amount generated during
the year
Reclassification adjustments
Before adjustment for
tax effects
Tax effect amountRemeasurements of defined
benefit plans
Total other comprehensive
incomeThousands of
U.S. dollars
2021¥ 33,907¥(25,811)$ 306,269(19,864)
14,043(4,232)9,811(25,959)(51,770)
15,739(36,031)(179,424)
126,845(38,226)
88,61917,106(14,259)

154,512348
17,454(5,317)
12,137760(13,499)
4,112(9,387)

3,143
157,655(48,026)
109,629

20,979(6,818)

189,495(20)
20,959(418)(7,236)(181)
189,314(6,384)
14,5752,205(5,031)(57,664)
131,650¥ 36,523¥ (50,449)$ 329,898

27. SEGMENT INFORMATIONBusiness segment information is not presented, as theGroup’s business is predominantly consisted of the banking
business, and the securities brokerage, credit card, leasing,consulting and other businesses conducted by the Group
collectively is limited.
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.

Details of the transactions between the consolidated
subsidiaries of YMFG submitting the consolidated financial
statements and related parties are as follows:
Executives and major shareholders of YMFG submitting theconsolidated financial statements (only for individuals), etc.
For the year ended March 31, 2021
Category:
Executive
Name:
Kazuo Tsukuda
Occupation or title:
Director and Audit andSupervisory Committee
Member of YMFG
Relationship with related party: Lender of funds
Content of transaction:
Lending of funds*
Transaction amount:¥223 million ($2 million)(average balance)
Account name:Loan
Year-end balance:¥223 million ($2 million)* Conditions for this transaction and for method of deciding this transaction conditions were
the same as general transactions.

For the year ended March 31, 2020
Category:
Executive
Name:
Kazuo Tsukuda
Occupation or title:
Director and Audit andSupervisory Committee
Member of YMFG
Relationship with related party: Lender of funds
Content of transaction:
Lending of funds*
Transaction amount:¥223 million (averagebalance)
Account name:Loan
Year-end balance:¥223 million* Conditions for this transaction and for method of deciding this transaction conditions were
the same as general transactions.

29. PER SHARE DATA
Yen
2021
2020
Net assets per share¥2,729.94 ¥2,458.73
Net income per share
99.63
100.07
Net income per share (diluted) ¥ 99.59 ¥ 93.86

U.S. dollars
2021$24.660.90$ 0.90YMFG Annual Report 2021

54

Net assets per share are calculated based on the following:

Net assets
Amounts excluded fromnet assets
Stock 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)*

Millions of yen
except number ofshares2021
2020¥681,139 ¥630,245¥ 6,345 ¥ 6,233

Thousands of
U.S. dollars
2021$6,152,461$ 57,312

117
6,228
674,794127
6,106
624,012

1,057
56,255
6,095,149

247,182

253,794—* Shares of YMFG held by the ESOP trust and the Board Benefit Trust (BBT) are shown on thebalance sheets as treasury stock, so are not included in the above number of common stockat the fiscal year-end used for the calculation of net assets per share. This number of shares
held by the ESOP and the Board Benefit Trust (BBT) was 1,461 thousand as of March 31,
2020, and 921 thousand as of March 31, 2021.
The ESOP Trust for employee shareholders sold all its holdings of Company shares in
December 2020; the trust held none of the Company’s shares as of March 31, 2021.

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 ofshares2021
2020¥ 24,958 ¥ 25,391

Thousands of
U.S. dollars
2021$225,435———

24,95825,391

225,435

250,496

253,747—

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

Net income adjustment
attributable to owners of
the parent
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
2021
2020
¥ —
¥ 398

Thousands of
U.S. dollars
2021
$—

—

398

—

118

21,003——
118—

20,852
150
—

—
—
—

* Shares of YMFG held by the ESOP trust and the Board Benefit Trust (BBT) are shown on thebalance 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 1,103 thousand in the fiscal year
ended March 31, 2021 and 1,487 thousand in the fiscal year ended March 31, 2020.
The ESOP Trust for employee shareholders sold all its holdings of Company shares in
December 2020; the trust held none of the Company’s shares as of March 31, 2021.

55

YMFG Annual Report 2021

30. SUBSEQUENT EVENTSFor the year ended March 31, 2021
There were no significant subsequent events. Dividends
were made in June 2021. Please refer to “22. NET ASSETS.”
For the year ended March 31, 2020
There were no significant subsequent events. Dividends
were made in June 2020. Please refer to “22. NET ASSETS.”     &+ &) &!)+&)*& $, ! !%%!# )&,' %'!%!&%*14-B1-A05@10 @41-//;9<-:E5:3 /;:?;850-@1025:-:/5-8?@-@191:@?;2+-9-3A/455:-:/5-8
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 C45/45?-?53:525/-:@<;>@5;:;2@41
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&.+ $++).*)**!%&,),!+'41<>59->E<>;/10A>1?C1<1>2;>910@;-??1??@41-<<>;<>5-@1:1??;2@41.;>>;C1>/8-??525/-@5;:;2@41.;>>;C1>? ;29-:-3191:@59<>;B191:@?A<<;>@
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  :@1>:-8/;:@>;8@1?@5:3

YMFG Annual Report 2021

56

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57

YMFG Annual Report 2021

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YMFG Annual Report 2021

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0;5:3?;C;A80>1-?;:-.8E.11D<1/@10@;;A@C1534@41<A.85/5:@1>1?@.1:125@?;2?A/4/;99A:5/-@5;: 61

YMFG Annual Report 2021

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YMFG Annual Report 2021

62

Yamaguchi Bank Financial Statements
NONCONSOLIDATED BALANCE SHEETS (UNAUDITED)March 31, 2021 and 2020

Millions of yen
2021

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
Deferred tax assets
Customers’ liabilities for acceptances and guarantees
Allowance for loan losses
Total assets

Millions of yen
2020

Thousands of
U.S. dollars
2021¥

967,224
24,356
4,556
1,373
25,1801,174,387
4,374,246
10,482160,869
41,8883,185
21,146—
21,470(32,975)¥ 6,797,387¥

616,575
33,168
5,487
990
40,738945,873
4,234,787
10,367
118,689
44,273
3,570
19,0386,917
25,438(30,420)¥ 6,075,490$ 8,736,555
219,998
41,153
12,402
227,441
10,607,777
39,510,848
94,6801,453,065
378,358
28,769191,004—
193,930(297,850)$ 61,398,130¥ 5,639,379
84,938259,166
1,122
292,561
6,194
50,761
34
119
137
439
44
634
6,826
21,4706,363,824
10,006380
394,051
404,437
13,225476
15,42529,126
433,563¥ 6,797,387¥ 5,358,972
85,701
115,421
742
4,844
4,082
65,437
41
106
137
622
43
—
7,380
25,4385,668,966
10,006
380
379,841
390,227
8,891(9,283)
16,68916,297
406,524¥ 6,075,490$ 50,938,298
767,2122,340,945
10,1352,642,589
55,948458,504
307
1,075
1,237
3,965
397
5,727
61,657
193,930
57,481,926
90,3803,432
3,559,308
3,653,120
119,456
4,300
139,328
263,084
3,916,204$ 61,398,130

LIABILITIES AND NET ASSETS (SHAREHOLDERS’ EQUITY)
Liabilities:

Net assets:

63

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 directors’ stock benefits
Provision for reimbursement of deposits
Provision for customers point 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 2021

NONCONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Years ended March 31, 2021 and 2020

Millions of yen
2021

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¥¥

36,37827,928657
10,877103
10,954
11,60598,502¥

42,19915,704
1,039
9,889
63
15,95513,026
97,875$328,588
252,263
5,934
98,248930
98,943
104,823889,729

1,564
729
3,060
4,705
27,902
24,658197
9,287
72,101
26,401

4,006
2,596
1,008
4,815
18,57926,952
121
9,231
67,30830,567

14,127
6,585
27,64042,498252,028
222,726
1,779
83,886651,260
238,469

5,711
851
19,8398,154(588)
23,001

51,585
7,687
179,197

¥

Yen
2021

¥

Thousands of
U.S. dollars
2021

Millions of yen
2020

99.20
36.23

$

Yen
2020

¥

115.01
43.14

U.S. dollars
2021

$

0.90
0.33

YMFG Annual Report 2021

64

Momiji Bank Financial Statements
NONCONSOLIDATED BALANCE SHEETS (UNAUDITED)March 31, 2021 and 2020

Millions of yen
2021

ASSETS
AssetsCash and due from banks
Call loans and bills purchased
Trading assets
Money held in trust
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
2020

Thousands of
U.S. dollars
2021¥

734,062—608
4,673
557,057
2,332,083
6,101
91,621
34,677
2,114
18,291
11,492
8,017(27,213)¥ 3,773,583¥

273,147
1,088
590
4,714
527,7422,316,966
7,983
87,92735,174
2,258
15,949
11,191
7,515(23,688)¥ 3,268,556$ 6,630,494—
5,492
42,2095,031,677
21,064,791
55,108
827,577
313,224
19,095
165,215
103,803
72,414(245,804)$ 34,085,295¥ 3,209,720
2,214
67,249296,73928
18,249
7
92
238
4,419
8,017
3,606,972
10,00059,533
96,070165,603(8,394)
996
8,405
1,007
166,610¥ 3,773,583¥ 3,010,767
6,530
46,0457,624
31
23,796
7
80
352
4,419
7,515
3,107,166
10,00059,53392,317
161,850(7,481)(1,384)
8,405(460)
161,390¥ 3,268,556$ 28,992,142
19,998607,434
2,680,327
253
164,846
63
831
2,150
39,91572,41432,580,373
90,326
537,738
867,763
1,495,827(75,820)
8,996
75,9199,095
1,504,922$ 34,085,295

LIABILITIES AND NET ASSETS (SHAREHOLDERS’ EQUITY)
Liabilities:

Net assets:

65

Deposits
Call money and bills soldPayables under securities lending transactions
Borrowed money
Foreign exchanges
Other liabilities
Provision for bonuses
Provision for directors’ stock 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 2021

NONCONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Years ended March 31, 2021 and 2020

Millions of yen
2021

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¥¥

22,334
8,862
740
6,193
3,971
5,539
47,639¥22,862
5,167
177
5,697
6,391
3,378
43,672$201,734
80,047
6,684
55,93935,86850,032
430,304

403
148
(0)
3,848
11,79517,042
183
5,132
38,551
9,088

651
338
478
3,918
3,231
19,287—8,135
36,038
7,634

3,640
1,337
(2)
34,757
106,540
153,934
1,653
46,355348,216
82,0882,801(1,027)
7,314

2,632
(1,285)
6,287

25,300(9,276)
66,064

¥

Yen
2021

¥

Thousands of
U.S. dollars
2021

Millions of yen
2020

16.79
8.50

$

Yen
2020

¥

14.43
9.83

U.S. dollars
2021

$

0.15
0.08

YMFG Annual Report 2021

66

Kitakyushu Bank Financial Statements
NONCONSOLIDATED BALANCE SHEETS (UNAUDITED)March 31, 2021 and 2020

Millions of yen
2021

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
Customers’ liabilities for acceptances and guarantees
Allowance for loan losses
Total assets

Thousands of
U.S. dollars
2021

Millions of yen
2020¥

106,607—
48,591
1,257,209
11,856
9,962
19,066928
1,170
12,007(10,614)¥ 1,456,782¥

81,689238
36,484
1,180,763
6,310
8,576
19,355960
847
13,145(9,437)¥ 1,338,930$

962,939—438,903
11,355,876
107,091
89,982
172,216
8,382
10,568108,455(95,872)$ 13,158,540¥ 1,189,817
95,16735,609
2
5,798
7
1,213
89
31
3,751
3,458
12,007
1,346,949
10,00077,33187,331
14,735
7,767
22,502
109,833¥ 1,456,782¥ 1,181,146
33,168
700
50
4,897
15
1,199
95
56
1,071
3,458
13,145
1,239,000
10,00073,67583,675
8,488
7,767
16,25599,930¥ 1,338,930$ 10,747,150
859,606
321,642
18
52,371
63
10,957804
280
33,881
31,235
108,455
12,166,462
90,326
698,501
788,827
133,095
70,156203,251
992,078$ 13,158,540

LIABILITIES AND NET ASSETS (SHAREHOLDERS’ EQUITY)
Liabilities:

Net assets:

67

Deposits
Call money and bills soldBorrowed money
Foreign exchanges
Other liabilities
Provision for bonuses
Provision for retirement benefits
Provision for directors’ stock benefits
Provision for reimbursement of deposits
Deferred tax liabilities
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 2021

NONCONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Years ended March 31, 2021 and 2020

Millions of yen
2021

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
General and administrative expenses
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¥¥

11,000
574
52
1,722
382
3,766
17,496

Thousands of
U.S. dollars
2021

Millions of yen
2020¥

11,228
627
46
1,535
171
2,123
15,730$99,3595,185
470
15,5543,450
34,017
158,035

307
90
3
1,295
7,073
1,580
10,347
7,149

456
365
6
1,247
7,591
608
10,273
5,457

2,773
813
27
11,69763,888
14,272
93,46064,575

1,877
(22)
5,294

1,423
(77)
4,111

16,954(199)
47,820

¥

Yen
2021

Yen
2020

¥ 5,294,543.73
1,713,650.74¥ 4,110,771.21
2,148,141.73$

U.S. dollars
2021$

47,823.54
15,478.73

YMFG Annual Report 2021

68

Yamaguchi Financial Group, Inc.
Corporate Planning Dept.