An n u al R ep o r tPROFILE

The Joyo Bank, Ltd., was established in 1935 out of the merger of the Tokiwa Bankand Goju Bank (both founded in 1878), and celebrated its 130th year in business.
As a leading financial institution in Ibaraki Prefecture and surrounding regions,
the Bank, with the philosophy of “Practicing sound management, creation ofvalues, and partnership with the home region,” is contributing to the growth of its
home region by providing stable and comprehensive financial services.

Management Philosophy“Sound management, creation of value, and partnership with the home region”(1) Focusing on retail banking as our core business, Joyo Bank will pursue sound management and steady banking activities.
(2) Joyo Bank will create high-value business together with our customers, regional communities, and shareholders.
(3) By providing financial services in our base territory of Ibaraki Prefecture and adjacent areas, Joyo Bank will contribute to social andeconomic progress in the home region.

Action Guidelines
We will— Provide the most appropriate products and services based on a keen understanding of our customers.
— Undertake steady banking activities and grow together with our customers.
— Seek to further improve our financial skills.

CONTENTS
1 Corporate Data/Service Network

23 Consolidated Financial Statements

2 Message from the President

23 Consolidated Balance Sheets

4 Management Policy

24 Consolidated Statements of Income

6 Relationship Banking

24 Consolidated Statements of Comprehensive Income

7 Financial Highlights

25 Consolidated Statements of Changes in Net Assets

9 Business Highlights

27 Consolidated Statements of Cash Flows

12 Corporate Social Responsibility (CSR)

28 Notes to the Consolidated Financial Statements

14 Corporate Governance and Internal Control System

67 Report of Independent Auditors

68 Organization
69 Board of Directors and Corporate Auditors/
Market Business Group and Overseas Offices/
Affiliated Companies

Corporate Data
As of March 31, 2014

■ Date of Establishment

July 30, 1935

■ Head Office5-5, Minami-machi 2-chome, Mito, Ibaraki 310-0021, Japan
Phone: 029-231-2151
URL: http://www.joyobank.co.jp/
http://www.joyobank.co.jp/joyobank/eng/ (English Page)■ Domestic Network

Head Office, Tokyo Business Division (Tokyo Main Office), and 150 Branches, 27 Sub-branches■ Overseas Network

2 Representative Office: Shanghai, Singapore■ Number of Employees

3,671■ Stock Exchange Listing

Tokyo Stock Exchange■ Paid-in Capital¥85,113 million■ Number of Shares(as of March 31, 2014)

Authorized
Issued and Outstanding■ Number of Shareholders(1 trading unit = 1,000 shares)

28,232

2,167,515 thousand
789,231 thousand

Service Network
As of March 31, 2014

Japan:
Miyagi
Fukushima

Shanghai Representative OfficeTochigi Ibaraki
Mito-City
Saitama
Tokyo

Chiba

Osaka

Singapore Representative Office

Japan:• Miyagi Pref. (1 Branch)• Saitama Pref. (3 Branches)• Fukushima Pref. (10 Branches)• Chiba Pref. (6 Branches)• Tochigi Pref. (Tochigi Wholesale Office,6 Branches, 1 Sub-Branch)• Mito-City (Head Office, International Business
Office, International Operations Office)• Tokyo (Tokyo Business Div. (Tokyo Main Office),
4 Branches)• Ibaraki Pref. (Head Office, 119 Branches, 26
Sub-Branches)• Osaka Pref. (1 Branch)

1• Treasury and Securities Div.
Markets Administration and International Div.

MESSAGE FROM THE PRESIDENT
We Will Provide Comprehensive Financial Services as well as to Contribute to the Reconstruction and
Growth of our Customers and the Region

In fiscal 2013, Japan showed moderate recovery, on themeetings for the agricultural production and food process-back of government measures to bring the country out ofing, restaurant and retail industries. In a sign of its good

deflation and revive the economy under the three-pronged

name in this area, it was also recipient for the second con-

“Abenomics” policy of Japanese Prime Minister Shinzo

secutive year of the Food Action Nippon Award of Japan’sAbe. The economy of Ibaraki Prefecture also showed signs

Ministry of Agriculture, Forestry and Fisheries.

of pick-up, with an increase in personal consumption and

In individual banking operations, the Bank supported

housing investment in the second half offsetting sluggish

a wide range of customers’ asset management needs

exports and flat production within the prefecture during

including expansion of its lineup of investment trust prod-

the first half.

ucts ahead of the launch of the Nippon Individual Savings

Against this financial and economic backdrop, the Joyo

Account (NISA) tax exemption system for small invest-

Bank completed its 11th Medium-Term Business Plan (fiscal

ments. We broadened funding options for those wishing

2011-fiscal 2013) intended to create the “best partner bankto relocate or renovate their homes or facing major lifestylethat grows with its customers in the home region.” In thechanges after retirement, by developing the Joyo Reverse

year under review, the last year of the plan, the Bank carried

Mortgage “Ju-katsu Style,” the first product of its kind inout the following measures to contribute to recovery andJapan (a “reverse mortgage” provides rent reimbursements).

growth at our customers and in our region.

Additionally, we expanded our alliances with investment

In corporate business, in addition to ongoing measurestrust companies and expanded our lineup of services toto ensure a smooth flow of funding to customers, the Bank

meet customers’ diversifying succession-planning and otherstrengthened measures to foster creation of new busi-

asset-related needs.

nesses including launch of the Collaborative Innovation

In network initiatives, we opened new branches in“Action D” Project, which aims to bring together local man-promising markets beyond Ibaraki that offered pros-

ufacturers and major companies in the joint development

pects of fruitful economic exchange with our prefecture.

of new technologies. The Bank also worked on identifying

Examples were the Saitama branch in Saitama City, andas yet undetected innovative and creative business plans in

the relocation of the Tochigi branch provisionally operated

the region through the Joyo Business Award, which it orga-

inside the Oyama Branch to Tochigi City in April 2014. We

nized for a second year. In support of measures for agribusi-

have also made preparations to step up our information-ness, the Bank launched the Joyo Growth Support Fundgathering capabilities as more of our customers respondfor Agriculture, Forestry and Fisheries and expanded its

to globalization by expanding overseas. We have applied

support for the “sixth industrialization” a government initia-

to the United States financial authorities to open a New

tive integrating local-level primary, secondary and tertiary

York Representative office, which we plan to launch in theindustry to boost rural economies (so-named because (1) x

autumn of 2014.

(2) x (3) = (6)). In addition to this measure, the Bank under-

As a result of the foregoing measures, we increased

took various measures centered on its business matchinggross business profit by ¥4.1 billion year on year to ¥35.8

2

billion, and net income by ¥1.16 billion to ¥22.0 billion in
the year under review, despite a year-on-year drop in interest income due to lower yield on loans. The capital ratio, anindicator of banking soundness, remained at the high levelof 12.19% for the Bank, and at 12.60% on a consolidated
basis. In recognition of our shareholders’ support over theyears, we have increased the annual dividend in fiscal 2013by ¥0.50 to ¥9.00 per share.
Looking to fiscal 2014 and beyond, our 12th MediumTerm Business Plan embodies our vision of becoming the“best partner bank in collaboration with the community
for the future.” Under the Plan, we aim to help our regionalcustomers and the local community address challenges
raised by social and economic structural change, as wellas to accelerate our own growth as a group, through theprovision of comprehensive financial services. We havealso expanded the Joyo Regional Reconstruction Project“Bonding” activities into the broader “PLUS+ project for collaborative growth for the future,” which aims to spur reconstruction and rehabilitation in areas affected by earthquake

Kazuyoshi Terakado

disasters.

President

Everybody working for the Joyo Bank, from front-line
employees to executives, is committed to meeting the
expectations of our customers, shareholders and the local
community. I trust we can count on your continued support in this endeavor.

Kazuyoshi Terakado
President
July 2014

3

MANAGEMENT POLICY• 12th Medium-Term Business Plan (Plan duration: Fiscal 2014 through fiscal 2016)

VisionBest Partner Bank for the Collaborative
Creation of the Region’s Future
In the environment surrounding the regional economy, along with changes to the socioeconomic structure such as thedecline in the total population and further decrease in the birthrate and aging of the population, and the decline in thepotential economic growth rate, a multitude of challenges are expected to emerge.
In the 12th Medium-Term Business Plan, we aim to solve — together with our customers and the region — the local
challenges accompanying socioeconomic changes by contributing more than ever to the reconstruction and growth of
our customers and the region and providing comprehensive financial services based on original and creative ideas, which

Five Basic Strategies to Achieve Our Vision

we tackled in the 11th Medium-Term Business Plan, and also to contribute to the Joyo Bank Group’s growth.
To define this approach, we established the vision of becoming the “Best Partner Bank for the Collaborative Creation of
the Region’s Future” and we will execute our five basic strategies starting with “collaborative creation.”

1. Collaborative Creation
We will share the various challenges brought about by changes in the socioeconomic structure with customers andlocal communities, and demonstrate collaborative creation*1 to contribute to solving customers’ and communities’
problems by providing comprehensive financial services that are original and creative.
As part of these efforts, we will launch the “project for the collaborative creation of the region’s future ‘PLUS+’”and move forward working together as a group.

2. Expansion of Customer BaseIn demonstrating collaborative creation, it is essential to spread business and expand our customer network basedon strong relationships of trust, which area prerequisite for sharing and solving the challenges facing customers’ andlocal communities, and we will expand our customer base in the Ibaraki region*2.

3. Strengthening investment return
In light of advancing globalization and securitization, we will strengthen investment returns by increasing returns on
securities and foreign currency loans in order to not only raise money for lending, but to also enhance profitability.

4. Renewal of operation
Seek to strengthen points of contact with customers in order to share and solve challenges facing customers andlocal communities, innovate marketing channels by strengthening direct channel marketing, strengthen collaboration among channels, and construct effective marketing channels. In addition, we will pursue innovations in marketing and administrative processes through ongoing construction of BPR promotion systems.

5. Remaking human resources portfolio
In the area of human resources, our most important business resource for achieving our vision, we will increase support for self-directed development, strengthen the organizational human resources development structure including
the restructuring of the development system, and expand opportunities to participate in comprehensive financial
resources.

*1. C
 ollaborative creation refers to sharing the various challenges brought about by changes in the socioeconomic structure with customers and local communities and contributeto solving the challenges facing customers’ and communities’ by providing comprehensive financial services based on creative and original ideas that leverage consulting, information technology (IT) and other services.
*2. T he Ibaraki region is that area where the provision and development of the transportation infrastructure is advancing and includes the Tsukuba Express, Kita-Kanto Expressway,
Metropolitan Inter-City Expressway (Ken-Ō Expressway) and is forming a deeper connection with Ibaraki Prefecture.

4

[About the logo]• Orange rectangles show “customers,” ”local communities,” ”Joyo
Bank,” the red rectangle shows “additional value.”• Spread made by four rectangles shows a “+” shape , and projects
the image of four rectangles making new value like a wind mill.

To “demonstrate collaborative creation” centered on the basic strategies of the 12th Medium-Term Business Plan, we started
the “project for the collaborative creation of region’s future ‘PLUS+.’” We will make ever-greater efforts to recover from theGreat East Japan Earthquake and contribute to solving the various challenges of the region.

Project Policy
Seeking to possibilities for utilizing comprehensive financial service to resolve challenges in local area, create collaboratively
the region’s future by business development through valuable planning and actions.

Three “PLUS’s”
1. Aiming to create additional values for customers, local communities and the Bank by solving challenges in our home region
and to provide greater support for recovery after the Great East Japan Earthquake.
2. Aiming to provide “advanced comprehensive financial service” which are essential service for the economy in our home region,such as “investment, funding, and settlement” and mixed creative functions such as “consulting and information technology.”
3. Acting to resolve agendas with positive thinking which improves motivation and brings about better business opportunities.

“Best partner bank forthe collaborative creation ofregion’s future”

Three components
1. Resolving challenges by smooth financial functions
development through activation
2. Businessthe local community and economy

3. Social contribution to region’s futureManagement Goals(Individual)
Contribution to satisfied lives(Corporate)
Assistance for growing sector(Public)
Creating active local communities

Expand consolidated net income
Aiming for record-high consolidated and nonconsolidated net income in final fiscal
year plan (FY2016)

Numerical targets (FY2016)
Consolidated
net income after tax¥30.0 billion or more

OHR*1

under 60%

Non-consolidated
net income after tax¥27.0 billion or more

ROE*2

approx. 5%

Non-consolidated
ordinary profit¥40.0 billion or more

Capital adequacy ratio

approx. 12%

Non-consolidated
gross business profit¥120.0 billion or more

*1. O
 HR is a primary indicator of management efficiency and shows the amount ofexpenses used to generate one unit of gross business profit.
*2. R
 OE is a primary indicator of capital efficiency and shows how much profit was
raised using shareholders’ equity.

5

RELATIONSHIP BANKING• Relationship Banking Policies
The local economy is the bedrock of the operations of a regional bank. Our mission is to contribute to the development oflocal society and economy by providing communities with reliable financial services.
To fulfill this mission, the Bank has adopted the following three priority policies:
Priorities• Strengthen support for customer companies tailored to their stage of corporate growth• Develop new financing options for SMEs
• Contribute to a sustainable growth of local economy• Efforts to Facilitate Financing
Joyo Bank began facilitating the smooth flow of funds through the establishment of the Financial Facilitation
Engagement Policy in January 2010. This policy was established with the aim of fulfilling the Bank’s important mission
as a regional financial institution to contribute to the development of the local society and economy by providing communities with reliable financial services. Although the SME Financing Facilitation Act expired in March 2013, we will
earnestly continue efforts to facilitate the smooth flow of funds by actively demonstrating our financial intermediaryfunctions. Joyo Bank will also provide various forms of assistance to small and medium-sized businesses at each businessstage by leveraging consulting functions based mainly on collaborations with Group companies and external organizations, beginning with offering smooth financing.

Implementation Status Including Changes in Loan Conditions (Standards as of March 31, 2014)
To SMEs

To housing fund recipients
Monetary amounts(millions of yen)

No. of loans
Total amount received
Among loans executed

Monetary amounts(millions of yen)

No. of loans

66,141

1,520,027

3,118

33,80563,262

1,465,923

2,582

27,276Among loans declined

497

9,879

69

819

Among loans under review

600

9,811

35

375

Among loans discontinued

1,782

34,412432

5,334

Notes: 1.	Japanese yen amounts are rounded down to the nearest million yen.
2.	No. of loans and monetary amounts are the cumulative totals as of the date of the above standards beginning on the effective date of the SME
Financing Facilitation Act (December 4, 2009). In addition, the No. of loans represents claim amounts derived from the claim units and monetaryamounts as of the application date.

6

FINANCIAL HIGHLIGHTS
Consolidated capital ratio
Remained at high levels

Despite a decline in business profit due to reduced interest
income as a result of lower yield on loans, gross businessprofit and net income both rose year on year on an increasein gains on shareholdings, etc. and a fall in credit cost.
Business profit declined year on year by ¥8.2 billion
to ¥37.2 billion, while gross business profit increased ¥4.1
billion to ¥35.8 billion. Net income increased ¥1.6 billion
to ¥22.0 billion. In March 31, 2014, Basel III (domestic) standards were adopted for computing the capital ratio. The
consolidated capital ratio was 12.60%, and the Bank-only
ratio was 12.19%. Both remain at high levels.

(%)

1412.60%

13

12.78%

12.81%

1212.43%

12.40%

Basel II

Basel IIIAs of March 31,
2012

As of March 31,
2013

As of March 31,
201412.19%

11
100

Consolidated capital ratio
Consolidated Tier I ratio

Net income
Net income climbed ¥1.6 billion to ¥22.0 billion year on year.

Deposits(Billions of yen)
(%)
100
5,000
Increased
1.8% fromthe previous fiscal year-end
to ¥7,490.9¥4,982.5¥4,800.6
billion
77.0%
75.9%
80

4,000

(Billions of yen)

¥3,785.6(Billions of yen) ¥3,696.8

25

¥22.0

¥20.3

20
¥16.7

9,000
3,000

98.6%

7,500
2,000

¥7,266.6 ¥7,165.5

(%)

10

60

¥7,355.3 ¥7,238.6

80

6,000
1,000
4,500

15

100

(%)

98.4%

2011

2012

1,500

0

FY2011FY20120

FY2013

Percentage of80loans
to regional customers
70

03,000 As of March 31, As of March
40 31, As of March 31,

5

Balance of loans to¥7,490.9 ¥7,369.3
90
regional customers
40
20

60

98.3%
Loan balance
100

0

60

2013

50

20
As of March 31,
2012

0 As of March 31,

As of March 31,
2014

2013

0

Loan balance
Balance of loans to regional customers
Percentage of loans to regional customers

Deposit balance
Local deposit balance
Local deposit balance percentage

Business profit, Ordinary income(Billions of yen)(%)
100on year to ¥37.2
5,000 profit decreased ¥8.2 billion year
Business¥4,982.5¥4,800.6
billion,andordinary
incomeincreased ¥4.1
billion to ¥35.8
77.0%
75.9%
80
4,000
¥3,785.6
billion.
¥3,696.8

Loans (Percentage of loans to regional customers)(Billions of yen)
(%)
100
5,000
Increased
5.0% fromtheprevious
fiscalyear-endto ¥5,399.3¥4,982.5¥4,800.6
billion
77.0%
75.9%

60

3,000of yen)(Billions
60
2,000
50

40
¥41.9

1,000
40
300
20

¥29.9

Loan balance¥31.7

As of March 31, As of March 31, As of March 31,
2011
2012
2013

6,000
2,000
5,000

to regional customers
20¥37.2 ¥35.8

1,000
4,000

0

3,00002,000¥3,785.6

75.9%

(%)

60

¥4,982.5

100¥5,139.980¥3,785.6

FY2011FY2012Business profit

0

FY201375.4%
40¥5,399.3¥3,879.4

60
As of March 31, As of March 31, As of March 31,
2011
2012
2013

20

5,000

¥4,982.5100

regional customers
70

Percentage of loans¥4,073.6
to regional customers
60

As of March 31,
2012

50
40
30

20
0 As of March 31,
2013

As of March 31,
20140

Loan balance
Balance of loans to regional customers
Percentage of loans to regional customers

Ordinary income

(%)

(%)

Balance of loans
80 to
75.4%

0

7
(Billions of yen)

Loan balance

40

1,000

10
0

¥3,696.8
3,000of yen)(Billions

Balance of loans toregional customers
Percentage of loans

¥45.4

80

4,000

(Billions of yen)

5,000

(%)

¥4,982.5100

Market share within Ibaraki Prefecture
Secured an ongoing high share of both deposits and loansof over 40%.
Deposits

Loans to individuals
Loans to individuals stood at ¥1,326.3 billion due to theongoing firm performance of housing loans.

Loans

1,500

12.43%

15.68%
43.01%

17.69%(Billions of yen)

1,250

15.59%

Joyo Bank¥1,326.3 ¥1,317.8

1,000

44.91%

Joyo Bank

750
500

22.33%

16.45%¥1,212.3 ¥1,211.3¥1,138.3 ¥1,137.2

250

7.17%
Joyo Bank
Other regional banks

0

4.74%

City banks/Trust banks
Shinkin banks (credit unions)

As of March 31,
2012

As of March 31,
2013

As of March 31,
2014

Balance of loans to individuals
Balance of loans to local individuals

Other

Note: Market share is calculated on the basis of private financial institutions.

Assets in custody(Billions of yen)
(%)
5,000
Increased
4.5% fromthe previous fiscal100
year-end to ¥1,189.4¥4,982.5¥4,800.6
billion
77.0%
75.9%
80
4,000
(Billions of yen)

1,200
3,000

200
0

¥3,696.8¥1,138.0¥1,032.6

1,000
2,000
800
1,000
600

0
400

¥3,785.6¥453.9¥368.1

As of March 31, As of March 31, As of March¥60.531,¥65.22012
2011
2013

As of March 31,
2012

60
40

Balance of loans toregional¥534.0 customers

20

Percentage of loans
to regional customers

As of March 31,
2013

5,000
4,000

¥4,800.6
77.0%

3,000
3,000

2,000
1,000
1,500

¥1,831.8

2011

0

As of March 31,
2014

As of March 31,
2012¥1,217.1

250

32,994

Housing loan

(Billions of yen)

¥4,800.6

As of March 31,
2013¥4,982.5

20
10

As of March 31,
2014

(%)

32,42532,995 32,374

0 As of March 31,

As of March 31,
2014

80
60

12,00040
20
As of March 31,
2012

2013

Number of loans to SMEs
Number of loans to regional SMEs

Apartment loan

100

As of March 31,
2013

18,0000

As of March 31,
2014

(%)

2013

32,552 100 32,891

6,000
As of March 31,
2012

030,000¥496.9¥426.9Percentage of loans¥1,719.5
to regional customers
30

Number of loans to SMEs

24,000¥368.3¥1,973.6
20¥1,623.9

201242.2%Balance of loans to0

Balance of loans to regional SMEs
Balance of loans to SMEs
Percentage of loans to SMEs to total loans
Percentage of loans to regional SMEs to total regional loans

750

5,000

¥1,645.0500

36,0000

35.7%¥1,838.3

Loan balance50

regional customers
40
40 36.5%¥298.8(Number of loans)

500

41.8%

0
1,000 As of March 31, As of March 31, As of March 31,

1,500¥1,110.0

(%)

60

36.7%

(Billions of yen)

¥1,037.2

80¥3,785.6¥58.3

Housing loan
Housing loans increased 9.6% from the previous fiscal yearend to ¥1,217.1 billion.

1,000

75.9%

43.4%

2,500
2,000

Insurance (based on the cumulative total of insurance premium revenue)
Government and other public bonds
Foreign currency-denominated deposits
Investment trust

1,250

(%)

100

¥4,982.5(Billions of yen) ¥3,696.8¥298.10¥297.6¥245.5(Billions of yen)

¥1,189.4
Loan balance¥325.8¥353.6Loans to SMEs

8

(Billions of yen)

5,000

¥4,800.6(%)¥4,982.5

100

BUSINESS HIGHLIGHTS
Support for Overseas Business Development

exhibiting their wares, including the Japanese Food Trade
Fair in Singapore 2013 and the Japan-China Manufacturing
Forum in Shanghai and Guangdong in China.
In addition, we positioned ourselves to offer comprehensive support to customers entering foreign markets
with overseas network. We plan to open a representative
office in New York in autumn in 2014, bringing our totalof overseas representative offices to three (Shanghai andSingapore are the other two).

Through alliances with overseas banks and other institutions, we support customers who are moving overseas bymaking available standby credit denominated in local currencies, and through provision of information. In fiscal 2013,
we signed a business alliance with BDO Unibank, Inc. of thePhilippines and Vietcombank of Vietnam.
In business matching events, we provided forums forour customer companies to engage in business talks withoverseas local companies and also among the companies

Overseas Network
Representative Office

Thailand• Kasikorn Bank
• Bangkok Bank

Indonesia• Bank Negara Indonesia (BNI)

Philippines• BDO Unibank

Japan

Provides information on each country’s domesticbanking conditions and offers a variety of financial services, beginning with opening accounts

Japan• NIPPONKOA Insurance Company, Ltd.
• Tokio Marine & Nichido• Mitsui Sumitomo Insurance Company, Ltd.
Manages a variety of overseas business risks• Nippon Export and Investment Insurance (NEXI)
Provides export insurance to manage the risks associatedwith overseas export transactions• Nippon Express (Tokyo Branch Office)Offers a full range of logistical services and expertise• Hitachi Regional Technical Support Center (HITS)
Supports the overseas development of small- to mediumsized businesses in the Hitachi area

Singapore• Secom Co., Ltd.
• SOHGO SECURITY SERVICES CO., LTD. (ALSOK)
Provides and sells security systems and devices overseas
Proposes and provides overseas security services

Representative Office• Japan Bank for International Cooperation (JBIC)(State Bank of India)(Vietcom bank)

Provides information on country’s domestic banking
conditions and offers a variety of financial services,beginning with opening accounts

9Support for Manufacturers

subsidy, the team leverages the Bank’s coordination role tosupport corporate customers’ growth through new technology and product development and business expansion
in alliance with external organizations such as universities
and research institutes, or other companies.

Joyo Bank is expanding “next X” activities
to provide assistance to local manufacturing businesses over the next decade.
As part of these activities, we provide support for thecreation of new businesses and for promotion of alliancesamong companies and creation of new marketing channels
through forums such as the Joyo Manufacturing Forum,
technology and business meetings, in which many major
companies participate, as well as the “Action D” project, acollaborative venture with Daiwa House Industry Co., Ltd.
Likewise, we offer a wide range of support through ourown networks, including support for industrial partnerships with universities and government agencies, suchas the “Hizazume Meeting,” which brings together small
groups for opinion exchanges on technological and productdevelopment with university professors and experts fromresearch institutions. Another example is our Joyo Practical
Manufacturing Workshop which supports personnel training.

Support for the Agri-Business
The Bank offers customers new exchange and businessmeeting opportunities by convening the Joyo Commercial
Food Fair to support the development of sales channels forfood businesses as well as the Regional Bank Food Selection
event in collaboration with regional banks nationwide. In
addition, we are enhancing our financial products for farmers by handling “Daichi” series multi-purpose loans, which
are guaranteed by Ibaraki Agriculture Credit Guarantee Fund
Association, and operating the Asset-Based Lending (ABL)system as a method for providing finance to cattle breeders
using fattening cattle as collateral. We are also strengthening
customers’ partnerships with universities and government
agencies, including expansion into agribusiness, under the“next X” activities.

Joyo Manufacturing Forum
Individual presentation in
the “Action D” project

Regional Bank Food Selection event

Team for industrial partnerships with
universities and government agencies

Support for Medical and Welfare Businesses

To be able to provide support to companies involved in
manufacturing, it is necessary to have the capability to evaluate their new technologies and products. To enhance ourown ability to identify such promising companies, we haveestablished a team specializing in industrial partnerships
with universities and government agencies. It comprises
three coordinators from external organizations and manufacturers, and two highly experienced branch managers. In
addition to helping with applications for various kinds of

The ongoing demographic change in Japan (a falling birthrate coupled with an increasing number of aged), reformof the social security system and advances in medicalcare raise the prospect of a range of new financing needs,
including funding for upgrading of hospitals and theiroperation as businesses and for companies entering thehealthcare market. We have set up healthcare and welfare
teams within the Head Office and provide information

10

Joyo Bank’s Business Reconstruction Funds

through consultations and seminars on longer-term business development and new business creation in these new
fields. In April 2013, we also overhauled the JOYO Clinic
Support Loan product. In addition to extending lending
caps, we took measures to expand the scope of preferential
interest rates and improve ease of use of our services.

We support the early revival of businesses by establishing the
Ibaraki Iki-iki Fund II jointly with financial institutions in theprefecture as well as the Joyo Business Reconstruction Fundin partnership with Risa Partners Inc. In addition, we are working to enhance assistance approaches to small and mediumsized businesses by strengthening our consultation functions
based on broader tie-ups with external institutions.

Online Banking for Corporations JWEBOFFICEJWEBOFFICE is an online banking service that enables
users to undertake balance and payment inquiries, moneyand bulk transfers, salary deposits, reimbursements andother transactions anywhere. Likewise, customers can use
the Joyo Densai Service. Customers may access funding
through credit transfer and discount by electronic registration of credit totals, payment dates and other details withdensai.net Co., Ltd. using J-WEB OFFICE (Japan only).

Support for Environmental and
New Energy Measures
We support companies that are working to bring about asustainable society through protection of the environment.
In addition to offering loans with preferential interest rates
to fund capital investment at companies that protect theenvironment through renewable energy businesses such as
solar power generation, and energy-saving equipment, weare involved in environmental financing, including introduction of environmental screening and ratings for lending.
In measures to respond to the government’s Feed-in Tariff
Scheme for Renewable Energy, we offer services to meeta range of needs, including financing support frameworks
for businesses involved in solar power generation using theAsset-Based Lending mechanism, acting as intermediaryfor solar-panel manufacturers and other companies, andbusiness consultation using the expertise of Joyo Industrial
Research Institute, Ltd.

Joyo Industrial Research Institute
In order to revitalize the region, Joyo Industrial ResearchInstitute conducts surveys and research on a consignment
basis while providing various consulting services. The
Institute’s staff includes a large number of experts, including certified SME management consultants, ISO auditors
who offer effective solutions to the wide range of issues
faced by our customers in the region.

Joyo Area Research Center
The Joyo Area Research Center cooperates with various
economic associations—beginning with those located in
Ibaraki Prefecture—and research institutions, performing
various tasks that contribute to the regional communityand economy. In particular, the Center conducts researchand publishes data on economic industry trends andregional development, holding lectures and sending speakers to regional organizations and events.

11

CORPORATE SOCIAL RESPONSIBILITY (CSR)
Environmental Preservation Initiatives

Development of Eco-Friendly Branches
In measure to promote the development of eco-friendly
bank branches, we have started to install solar panels andLED lighting, mainly at new branches.

Environmental Principles (Established in 2008)
The main operational base of the Joyo Bank Group is Ibaraki
Prefecture, an area blessed with beautiful natural scenery,
including abundant greenery and water resources. We
believe it is the Bank’s social mission to help protect andnurture this rich and varied natural environment while realizing a sustainable society in our local region. To this end,
we work hand in hand with a diverse range of partners inpreserving the natural environment of our home –Ibaraki
on a continuous basis.
Save The Forest In JapanThe Bank is a member of Save The Forest In Japan, an organization established by regional banks from all over thecountry dedicated to ensuring healthily growing forests. In
conjunction with its efforts to preserve forests in disasteraffected areas, Save The Forest In Japan held the Tohoku
Summit in April 2013 with the objective of contributing to
the recovery of natural environments in the Tohoku region
that were severely damaged during the Great East Japan
Earthquake.

“Eco-Ibaraki” Environmental Conservation Trust
Joyo Bank subsidizes organizations that engage in environmental preservation activities in Ibaraki Prefecture. In fiscal
2013, we oversaw the environmental protection activities ofKunita Junior High School, Mito City, one of the recipientsof grants the Bank makes through the Trust, and held a ceremony for grant presentation.
Overview: Jointly established with Nipponkoa InsuranceCo., Ltd. in 1992. Each year, this trust accepts
entries from organizations seeking funding,which are evaluated and selected by the
executive committee.
Funds donated in fiscal 2013:85 organizations totaling ¥9,230,000

Joyo Furusato Forest
We have also signed a “forestry partnership agreement”
with Ibaraki Prefecture and Ibaraki Forestry Support Centerin September 2009. In Naka City, we established the Joyo
Furusato Forest. Through thinning, planting and other activities, the Bank is committed to conservation and cultivationof local forests. In addition, we carried out tree-planting
activities at Hitachinaka City and Mount Tsukuba. The
Bank also provided support for environmental education,
enabling local elementary school children to visit the Joyo
Furusato Forest in Naka City and get hands-on experience offorestry protection.

12

Impediment-Removal Initiatives

rich local environments through art and culture. Working
together with people throughout Ibaraki Prefecture, theCenter focuses on supporting cultural promotion activities
and local cultural activities.
In fiscal 2013, the Bank published in its in-house journal
Joyo Geibun a serial about the ancient work “Hitachi no
Kuni Fudoki” (Topography of Hitachi Province), 1,300 years
after an imperial edict for the compilation of literature. It
also organized a panel exhibit and lectures.

Pamphlet entitled Being a People-Friendly Bank
We have detailed in a booklet the various
services we offer for the elderly and customers with disabilities. We also provide
documents written in Braille.

Deployment of personnel with Grade 2 Service CareFitters qualifications
We have deployed around200 holders of Grade 2
Service Care-Fitters qualifications at our branches,to assist customers withphysical disabilities andStudying a guidebook forprovide reassurance tothe visually impaired
elderly customers.

Hiroko Koda soprano recital andtango concert, to commemorate the first anniversary of the
opening of the Geibun Gakuen
School Tsukuba Course

Joyo Historical Materials Museum
The Museum features theCurrency Gallery, which displays historical currency notes
and banking materials, andthe Historical Materials Library,
Art Spot
where visitors can view documents pertaining to local culture and finance. At the Art
Spot, the Museum periodically displays various exhibits.
In addition, the Museum holds classes on finance forvarious organizations and provides lectures to local residents on financial history and other topics.

Wheelchairs Available
Wheelchairs are available at 153 Joyo Bank branches tomake banking comfortable and worry free for customers
with physical disabilities and the elderly.
Universal design for ATMs screens
We have optimized screen designs,
including increased size of buttons
and lettering for greater ease ofuse, and special color patterns andcontrast to cater to those who have difficulty distinguishing colors. We have also installed at all branches ATMs withintercom receivers using Braille for the visually impaired.

Joyo Volunteer Club
The Bank operates the Joyo Volunteer Club to encourage
volunteer-based initiatives by Bank employees. Around
3,200 employees registered in the Club participate inactivities in such areas as social welfare, environmental
protection, international exchanges, sports activities
and various events. We also participated in support andfundraising activities for areas affected by the Great East
Japan Earthquake. In October 2013, the Bank took partin a tree-planting event intended as an act of memorial
for the deceased andrecovery for the townof Minamisoma, inFukushima Prefecture.

Support Program for People with Dementia
We run the Dementia Supporter Training Program for all
employees in an effort to promote proper understanding of
dementia while cultivating “dementia supporters” who help
those suffering from this disease and offer heartfelt support
to their families.

Joyo Geibun Center Foundation
The Center’s ongoing objective is to contribute to prosperous and comfortable individual lifestyles by creating

Commemorative tree-planting event
in Minamisoma City

13

CORPORATE GOVERNANCE AND INTERNAL CONTROL SYSTEM
To ensure a greater trust from customers, the regional community and our shareholders, we believe it is essential that
our management be efficient, sound and transparent, andfirmly rooted in compliance. Constantly to be mindful ofthe importance of corporate ethics, we have establishedeight basic principles under which we are strengthening
and expanding our corporate governance.

The Joyo Bank Corporate Philosophy
Corporate Social Responsibly (CSR) and Public Mission
Always keep in mind the Bank’s CSR and public mission, and deepen trust
through sound and open business management.
Compliance
Comply with the legal and social code and execute honest and open business activities.
Fight Against Crime

Corporate Governance at Joyo Bank

Ensure that the Bank has no relationship with organized crime.
Provide Valuable Financial Services

The Board of Directors meets twice a month in principle
to exercise decision-making and supervisory functions.
The Bank has a total of 12 directors, of whom two external
directors appointed to strengthen supervisory functions
by providing an outside perspective. Nine of them are
executive directors, and the others a managing director(in charge of internal auditing) and two external directors.
Major items relating to conduct of operations excluding
those decided by the Board of Directors are handled by an
Executive Officer Committee created as an assessment anddecision-making body. Executive Officer Committee meetings are held twice a month to discuss and implement specific policies and proposals in the conduct of business.
Special committees (Compliance Committee, General
Budget Committee, ALM Committee, Risk Management
Committee and Sound Asset Committee) have been established to determine the major themes for management
audits. Reports are compiled regarding the discussions anddecisions of these committees for perusal of the Board of
Directors.

We will contribute to the development of the region in which we operateby responding to our customers’ needs and providing valuable financial
services, considering the security of customers’ information.
Relationship with the Regional Community
We will communicate openly and freely with the community where we doour business, raising our transparency through active disclosure of corporate information.
Respecting the Human Rights of our Employees
We will provide a work environment that respects individuality and protects the rights of all employees.
Environmental Initiatives
We will reduce environmental load, and help the environment throughcore banking activities.
Community Contribution Activities
We are committed to contributing to the community we serve, as a good
corporate citizen that marches in step with regional society.

(Internal audit)

Corporate Audit Division(Operating execution)(Decision-making/
Management supervision)

Business Section

Board of Corporate
Auditors
General Meetingof Shareholders

Board of Directors

Executive Officer
Committee

Business Management Div.
Business Promortion Div.
Government and Municipal Business Div.
Regional Partnership Div.
Treasury and Securities Div.
Markets Administration and International Div.
Credit Examination Div.
Business Innovation Div.
Operation Management Div.
Computer System Div.

Auditing Company

Corporate Risk Management Div.
Corporate Planning Div.
Personnel Div.
General Affairs Div.

14

In order to audit performance of duties by directors,
the auditors attend important meetings such as the Boardof Directors and Executive Officer Committee meetings,
peruse relevant documents, and carry out business andasset status inspections, all of which are based on theauditing policies and plans outlined at Board of Corporate
Auditors meetings (held once a month in principle).
With regard to internal auditing, the Corporate Audit
Division (the auditing office) monitors internal management in terms of appropriateness and effectiveness of conduct, and suggests improvements when problem areas are
identified. Results of the audits are regularly submitted in areport to the Board of Directors.
In addition to strengthening internal auditing, we havecreated a Compliance Audit Committee comprising four
outside experts including lawyers and Certified Public
Accountants (CPAs) to ensure greater expert input andobjectivity.

carry out internal audits across the Group. We will resolutely
take action to prevent transactions with criminal bodies
that threaten public order and security or disrupt economic
development.
Risk Management Standards and other Controls
In addition to establishing risk management standards
for appropriate management of all categories of risk, it is
our mission to build a comprehensive internal risk management structure to ensure a sound financial positionand stable earnings in the future by creating frameworks
for comprehensive understanding and control of risk.
Moreover, we also have business contingency plans inplace should any event disrupt our core systems, such as
natural disasters or a systems failure.
The management of risk is the responsibility of various
risk management departments, as set down in the in-house
regulations. Comprehensive risk management is carried out
by one department that oversees risk management for theentire Bank. The Board of Directors has appointed the director to oversee the risk management program.
We have established a Risk Management Committee tomeasure the extent of various risks and make decisions onrisk management policies. This committee will meet regularly to ensure an accurate grasp of the situation regarding
risk management issues across the Bank. The officer incharge of risk management will make regular reports to theBoard of Directors on the current state of risk management
and the countermeasures that the Bank is taking against
risks.

Internal Controls and Risk Management
Compliance
Based upon our philosophy of soundness, cooperationand partnership with the home region, we attach great
importance to compliance in our management. We haveestablished a corporate ethics guideline and a code of
conduct. Moreover, we have established a set of guidelines
to ensure that every director and employee complies withthe law and with the Bank’s Articles of Incorporation. Everycompany within Joyo Bank Group follows the same strict
guidelines. We have put standards into place to establish acompliance system across the Group as a whole.
To ensure the best standards in compliance, we haveestablished a Compliance Office that oversees the compliance program as defined by the Board of Directors.
The Office makes regular reports to the Board.
Moreover, we have established a whistleblower hotline forthe entire Group, called the Compliance Hotline.
In addition to the Compliance Committee, we haveappointed outside experts to form a Compliance Audit
Committee, which monitors compliance issues on a regularbasis.
To ensure that our internal controls perform theirintended functions, our various auditing functions, which
are independent from business execution departments,

System to Ensure the Effective Execution of theirDuties by the Directors of Joyo Bank
We have put in place business plans to clarify our operational targets, as well as an overall budget every year, todefine specific policies.
We have determined the scope of decision-making
responsibilities for each director, to achieve efficient
operations.
We have established an Executive Officer Committee
its functions and details of convocation, etc., are laid downin our Executive Officer regulations. We have also set up a
range of committees, grouping executive directors, executive officers and division heads, who meet as and whenneeded.

15

Compliance System

Supporting Corporate Auditors
To support internal auditing, a staff who has enough knowledge and ability as an auditor is assigned to assist the corporate auditor is assigned to assist the corporate auditors.
To ensure the independence of this assistant from theinfluence of the business execution departments, in case oftransfer of the staff, the executive director in charge of all
personnel transfers should inform the corporate auditors
in advance. The corporate auditors are entitled to express
their opinions and advice regarding the personnel transferof the staff.
The corporate auditors attend meetings of the
Executive Officer Committee and offer their opinions on
the audit process and all related matters. The directors andemployees report any and all information the corporate
auditors deem necessary to complete the audit.
In order to enhance the efficiency of the audit system,
the corporate auditors maintain close coordination withall headquarters departments other than the internal audit
sections.
The representative directors and accounting auditors
each meet regularly with corporate auditors and exchange
opinions on the issues related to the audits.

Internal auditing function

We place high priority on strengthening our compliancesystem to ensure sound banking operations, fulfill our social
responsibility and public mission, and maintain the trust ofcustomers, shareholders and other stakeholders.
Also, we establish a compliance program each year andensure that each executive and employee are fulfilling theirroles in compliance. In addition, we build a compliancesystem whose ultimate supervisory organ is the Board of
Directors and place dedicated compliance officers in eachmajor division to undertake wide-ranging inspections oflegal issues in each division. To supplement internal compliance activities by outside audits to inject the required
professional knowledge and objectivity, the Bank set up aCompliance Audit Committee, consisting of outside professionals including lawyers and CPAs. The Committee evaluates and audits the Bank’s compliance activities. We strive
to further strengthen and improve compliance activities.

[Oversight of decision-making]Board of Directors[Auditing organizations]Board of Corporate Auditors(Auditors)[Policy establishing and performance evaluation]
Compliance Committee[Auditing department]
Corporate Audit Division
Branch audit group
Operations and Asset Auditing Group
Main office[Management]
Compliance and Risk Management Division[Supervision]
Compliance and Supervisory Officer

Head office departments and branches, etc.
[Senior Manager] Supervisor [Administrator] Compliance Officer
External auditing functions[Group company management]
Corporate Planning Division
Group Business OfficeGroup company[Senior Manager] Representative [Manager] Compliance Officer
Evaluation and audit[External audit]
Compliance Audit Committee

16[Compliance report]
Executive Officer Committee

Code of Conduct
We will• get to know our customers and offer optimal products and services• expand business scale and grow with our customers• increase our financial expertise

Policy Regarding Solicitations for Financial Products
In accordance with the Law Concerning the Sale of Financial Products, our solicitations for products are based on
the following policies.
1. Financial product solicitation is based on tailoring products to the level of understanding, experience and financial
status of the customer.
2. To ensure that our customers make choices based on their own judgment and at their own liability, we will provide
easy-to-understand explanations so that the customer has sufficient understanding of financial products and the risks
attached.
3. We assure that sales are never based on the provision of misleading or false statements or information, nor do we act
in a manner leading to any misunderstanding by our customers.
4. Our solicitations will not be conducted at times or in locations that cause inconvenience.
5. We are setting up a training system within the Bank to ensure proper solicitation to our customers.

Risk Management

results of transactions (business administration departments) are separated, thus creating an organizational structure that allows for mutual checks and balances.
The various risks that are incurred during banking operations are managed by specific risk management departments depending on the type of risk.
We also have established a risk management supervision department, which supervises the management systems for all risks and is responsible for holding meetings of
the Risk Management Committee, an organ for the examination of Bank-wide solutions to risks. The department also
provides regular reports on the overall status of risks to theBoard of Directors.
Additionally, internal auditing staff verify that risk
management is functioning appropriately and effectively
through the integrated risk management department
and each risk management related department, thereby
increasing the effectiveness of the system.

While the financial industry has grown due to deregulationand the advancement of financial technology, the risks carried by banks continue to diversify and become ever more
complicated. In this environment, we are working to meetthe highly advanced and various needs of our customers,
and we also have placed emphasis on the subject of “riskmanagement” to ensure the maintenance and improvement of sound operations which is one of the most vital
issues facing management.
The Risk Management System
In our fundamental rules regarding risk management, wehave outlined our fundamental thinking and management
procedures including policies regarding risk management,
organizational structure, and responsibilities.
In business management, the departments that carryrisks when conducting transactions (marketing departments) and the departments that internally manage the17Risk Management System
Risk Management
Committee
ALM Committee

Credit Risk
Management
Dept.

Market Risk
Management
Dept.

Board of Directors

Internal Auditing Dept.

Integrated Risk Management Dept.

Verification of suitability
and validity of the risk
management system

Liquidity Risk
Management
Dept.

Operational Risk Management Office

Administrative
Risk
Management
Dept.

System Risk
Management
Dept.

Personal
Management
Risk
Management
Dept.

Tangible
Assets Risk
Management
Dept.

Compliance(legal)Risk
Management
Dept.

Business Promotion Departments, Administrative Control Departments, Group Companies

Integrated Risk Management

With regard to capital allocation, we ensure a risk buffer is in place to position us to deal with losses that exceed
scenarios used by our statistical tools, or which are difficult to quantify using statistical methods. To confirm ourcapital adequacy including the risks mentioned above, we
use stress tests that enable us to appraise the impact on
Bank capital of scenarios such as a sudden economic slowdown. In addition, back-testing through comparison of risk
amounts calculated using VaR formulas and actual profit
performance enables us to confirm the appropriatenessand effectiveness of our statistical methods.

At a time of increasing diversification and complexity inbanking operations, we have adopted a policy of integrated
risk management to gain a quantitative understanding ofrisk, using statistical methods such as Value at Risk (VaR)
for individual risk categories (credit risk and market risk), toenable systematic risk management rather than management by individual risk category.
By comparing and contrasting comprehensive
amounts at risk with the bank’s financial resources (owncapital), we are committed to maintaining capital at an
appropriate level.

MarginRisk Buffer
Shareholders’Equity(Tier I basis)

Credit Risk

Interest-rate
Risk
Price
Fluctuation Risk
Operational
Risk(Allocated Resource) (Capital Allocation)

18

Credit Risk
Interest-rate
Risk
Price
Fluctuation Risk
Operational
Risk(Risk Capital)

Stress Test

Allocation of Risk Capital
We pre-allocate capital to cover risk in terms of individual
categories (credit risk, interest-rate risk, price fluctuation risk
and operational risk). Each month, we carry out monitoring
to confirm that each quantified risk amount (amount ofrisk capital to be used) is kept within the allocated capital
parameters.

Risk
Exposure
Under
StressCredit Risk Management• Internal Credit RatingsCreditrisk is the risk of not receiving principal or loan payments as promised on loans due to a deterioration in credibility of the debtor. This is recognized as one of the mostserious risks make within banking operations.
In order to prevent the occurrence of nonperforming
loans and improve the soundness of our assets, we makeevery effort to ensure good credit risk management.

We classify our customers into a 12-grade rating class basedon quantitative appraisal of financial condition and cash
flows, and qualitative appraisal. In addition to serving as
the basis for asset self-assessments, ratings for customers,
credit worthiness are used across the full range of credit risk
management, including monitoring of credit risk exposure,setting of lending rate and allocation of lending authority.

 verview of Basic Policy and Procedures with RegardO
to Credit Risk Management
We have compiled management guidelines for credit risk,
which serve as a basic policy for appropriate managementof credit risk on individual loans and management of thecredit portfolio, focusing on risk dispersion as its basic tool.

• Asset Self-Assessment
In asset self-assessments to evaluate the soundness ofassets, the branch carry out a primary evaluation by making
a decision on credit category based on a credit rating. Thenthe head office department in charge of credit screening
checks these (secondary assessment), and the Corporate
Audit Division audits the results of the asset self-assessment
and verifies the appropriateness of procedures. Based onthese results, the Bank provides appropriate reserves andwrites down problem loans based on the assessments.

 redit Risk Management for Individual LoansCWe have separated credit-screening departments from loan
departments, and constantly work toward screening stricter
while also focusing on credit management before due dateto prevent the status of a claim from deteriorating.
We have created a set of basic parameters for loans,designed to speed up decision-making on loans and toensure more rigorous risk management. We also have a system for accurately reflecting in the asset self-assessments
the business performance achieved by the borrower andchanges in the value of collateral.
We have also adopted an automated scoring system forsmall-amount loans to unify credit screening standards andimprove efficiency.

• Quantification of Credit Risk ManagementT he quantification of credit risk management refers to thestatistical forecasting of future losses (amount of credit risk)that can be expected from the bankruptcy or deteriorationof business at borrowers. Based on credit ratings, we calculate credit risk for each customer in view of the security andother factors.
Loan Portfolio Management
We treat loan assets in their entirety as a single portfolio andconduct credit risk management from a macro-perspective.
Based on the quantification of credit risk, we carry out periodic monitoring to determine whether or not credit risk isconcentrated in specific rating groups, sectors or corporategroups, and analyze and evaluate credit situations by rating,region and sector.

19Market Risk Management

liquidity status, we are creating a system enabling us torapidly respond, to the fullest possible degree, in cases ofmaterialization of liquidity risk events, based on countermeasures drawn up for emergency situations.

Market risk refers to the possibility of losses arising fromexposure to risk of change in the value of assets and liabilities of the Bank and in its earnings, due to fluctuations ininterest rates, foreign exchange rates and stock prices, etc.
We manage all assets and liabilities (deposits, loans,securities, and others) comprehensively based on ALM(asset and liability management) to manage market risks.

Operational Risk Management
Operational risk refers to the risk of losses arising from
irregular procedures or employee conduct in operations,or inappropriate system operation or detrimental external events. The Bank divides such risk into five categories:
administrative risk, system risk, risk to tangible assets, personnel management risk, and compliance (legal) risk.
We have also established a management office for eachrisk category, as well as supervision of overall operationalrisk measures.

Market Risk Management System
The front and back office departments are separated. We
have also established middle-office risk management sections to enable a mutual system of checks and balances.
Market Risk Control
To control market risk at appropriate levels, we set loss limits, position limits and other thresholds for each category oftransaction, after setting risk tolerance parameters (capital
allocation) reflecting the Bank’s financial strength, riskreturn profile and other factors.
We also have in place a system in which an ALM
Committee decides whether to conduct checks on statusof compliance with monthly thresholds and other mattersand takes measures when necessary. In addition to using
VaR, we also approach market risk with multifaceted analysis using tools such as basis point value (BPV) analysis, gap
analysis, scenario analysis (simulation method) and sensitivity analysis. This enables us to control risks within a tolerable range reflective of the Bank’s financial strength.

Administrative Risk
Administrative risk is the risk of damages due to improper
administration resulting in accidents or improprieties. We
have taken steps to uphold and improve the quality of ouradministrative operations, to ensure that customers are notinconvenienced by inappropriate administrative management and that administrative management is as error-freeand prompt as possible.
In addition to analyzing and evaluating the circumstances, causes and processes surrounding administrative
mistakes, we verify the effectiveness of countermeasures
after their introduction and repeat them as often as necessary to ensure that the problem is resolved. We are drawing
up regulations for administrative processes, and ensuring
their strict application by all staff from executives down
through guidance and training. We are also verifying theeffectiveness of internal audits and taking steps to preempt
accidents.

Liquidity Risk Management
Liquidity risk refers to the possibility of losses arising fromexposure to risk due to difficulty in securing needed funding after an unforeseen funding outflow or similar events,
or a sharp rise in fund-procurement costs. At the Bank,
maintaining liquidity risk at a safe and appropriate level is abasic management policy. As a matter of policy, we maintain a certain level of assets that can be quickly converted
into liquid form (liquidity reserve assets), and ensure thatany funding gap for a given period of time (the amountnecessary for fund procurement) is kept within the parameters of assets that can be quickly converted into liquid form.
In addition to continuous monitoring of market trends andSystem Risk
System risk is the risk of losses due to the breakdown ofcomputer systems, erroneous computer operation, andinappropriate computer use. Measures to ensure appropriate management of such risk is based on protection of
information data and ensuring stable operation of computer systems.

20

Tangible Assets Risk, Human Resources Risk andCompliance (Legal) Risk
Risk to tangible assets (inadequate precautions to prevent
damage from earthquakes and neglect of building management), personnel management risk relating to safety
and hygiene at the workplace, and compliance risk (legalityof business, illegal behavior by any executives and employees) are addressed through appropriate measures after
identification and evaluation using methods to gauge risk
scale and features, and the effect of risk reduction measuresis later assessed.

Ensuring strict confidentiality in the management ofcustomer information
We ensure strict confidentiality in our management of customers’ personal data. We have drawn up detailed in-houserules for the handling of customer information, practicing
strict control of data access and office access as well as theencryption of confidential information. In these ways, we
protect our customers from the leakage of their personal
information to outside parties as a result of misconduct orhuman error.
Protection of Confidential Private Information
We have drawn up and made public a privacy policy as a
response to the Law Concerning the Protection of Private
Information, and have put in place safeguards for the protection and appropriate handling of personal data.

Crisis Management
We have established a set of general emergency guidelines
providing specific measures for dealing with situations suchas major disasters, system failures and reputational damage,and for minimizing disruption of relations with business
partners. We aim to strengthen our crisis management
through continuous training and upgrading of procedures.

Privacy Policy
We work to build on the mutual trust we have with our customers, the region, and our shareholders, stress the importance of our social responsibility, and offer high-quality
financial services. For the protection of personal data, wehave established the following policy based on our respect
for all individuals, and will put all our efforts into the protection of private information.

Customer Protection
To ensure peace of mind for our customers, the Bank established the Customer Protection Management Policy, and isdeveloping a management system that includes the establishment of a controlling division.

Privacy Mark
Based on the “Privacy Mark” certification, administered by
Japan Information Processing Development Corporation(JIPDEC), the Bank meets the “requirements for management of personal information protection” (JISQ15001) laid
down by Japanese Industrial Standards Committee andnow has in place mechanisms for appropriate protectionof personal information. The Joyo Bank is the first regional
financial institution in the North Kanto area to obtain thiscertification.

Adequate explanations of products and services
We always provide explanations of our financial products
and services to ensure that customers understand the
products or services adequately. We are working to further
improve the quality of explanations by perfecting our staff’s
knowledge of financial products and services, so they canenable customers to understand them more easily.
Listening attentively to customer feedback
Management of customer queries, consultation, requests,
complaints and disputes is undertaken on an integrated
basis by the Customer Counseling Office in the businessplanning division. We have in place a system for discussing
measures for improvement and for prevention of issues
arising within the operational departments. We have also
signed agreements with designated dispute settlement
organizations and also work through external entities toreach settlements.
21

Policy for Protection of Personal Confidential Information• Strict compliance with laws and regulations

entrusted to an outside organization under an outsourcing arrangement, we require that protection of
personal information be contractually assured, andcarries out checks.

	We comply with all laws, ordinances and otherregulations regarding confidentiality of personal
information.
• Appropriate access• Security management measures	We acquire personal information only by appropriate and legal methods, and only when necessary forbusiness operations. Personal information is nevergathered in an inappropriate way.

	We have in place appropriate security management
mechanisms to ensure prevention of leakage, loss ordestruction of personal data, and other measures.
• Appropriate response to complaints• Ban on unapproved use of personal information	When customers have questions or complaints
regarding our protection of personal information,
we investigate these questions or complaints anddeal with them appropriately and promptly, within areasonable period of time.

	We only use personal information inasmuch as itis necessary for achievement of business objectives, and do not use such information for any otherpurpose.
		 In addition, information that is registered withcredit-data organizations of which we are a member is used where appropriate for credit-related
purposes.

• Continuous improvement
	The Bank has compiled regulations for ensuring
strict legal compliance and protection of personal
information.
		 In addition to ensuring that these measures arefamiliar to all employees and other affected parties,
the Bank continually upgrades them. Regular audits
into acquisition, use and handling of personal information are part of our broad and thorough commitment to confidentiality.

• Ban on provision of personal information to third
parties	Except when prescribed by laws and ordinances, wenever provide personal information to third parties
without first obtaining the affected person’s agreement. In addition, when personal information is

Financial Crime Prevention
We are fully committed to preventing crimes involving accounts held at our banks, and to protecting the financial assets of ourcustomers. We require identification when a new account is set up or for a large-amount transaction. In addition to working toprevent inappropriate transactions, when an account is used, we will cancel transactions when considered necessary and will
work hard toward crime prevention. We also have implemented measures to prevent the crimes of use of forged ATM cards
and online hacking.

22

Consolidated Financial Statements

Consolidated Balance Sheets
THE JOYO BANK, LTD. and Consolidated Subsidiaries

2014

2013

Thousands of
U.S. dollars (Note 2)
2014

Assets:Cash and due from banks (Note 24)
Call loans and bills purchased
Other debt purchased
Trading assets (Note 25)
Securities (Notes 7, 8, 13, 24 and 25)
Loans and bills discounted (Notes 6, 10, 11 and 24)
Foreign exchanges (Note 6)
Lease receivables and lease investment assets (Notes 7 and 23)
Other assets (Note 7)
Tangible fixed assets (Note 19)
Intangible fixed assets
Deferred tax assets (Note 15)
Customers’ liabilities for acceptances and guarantees
Reserve for possible loan losses
Reserve for devaluation of investment securities
Total assets¥  224,661
7,181
14,6603,387
2,760,304
5,363,389
2,251
36,08147,812
96,121
10,902
2,245
14,522(46,915)(35)¥8,536,571¥  318,396
1,829
27,3362,719
2,651,398
5,108,316
1,844
30,90655,41093,8398,958
2,801
15,731(51,420)(35)¥8,268,033$ 2,182,873
69,773
142,447
32,915
26,819,906
52,112,221
21,878350,579
464,557
933,943
105,928
21,821
141,106(455,848)(347)$82,943,757

Liabilities and net assets
Liabilities:
Deposits (Notes 7 and 24)
Call money and bills soldPayables under securities lending transactions (Notes 7 and 24)
Trading liabilities
Borrowed money (Notes 7, 10 and 24)
Foreign exchanges
Bonds (Note 12)
Due to trust account
Other liabilities (Note 10)
Reserve for director’s bonuses
Reserve for employees’ retirement benefits (Note 14)
Net defined benefit liability (Note 14)
Reserve for directors’ retirement benefits
Reserve for reimbursement of dormant deposits
Reserve for frequent users services
Reserve for losses on interest refunded
Reserve for other contingent losses
Reserves under the special laws
Deferred tax liabilities (Note 15)
Deferred tax liabilities for land revaluation (Note 3)
Negative goodwill
Acceptances and guarantees
Total liabilities¥7,489,932
71,839105,996141
218,248353
15,00019
62,790
48
—
8,834
39
1,993
127
2
1,505
1
14,352
11,872
1,975
14,522¥8,019,600¥7,359,923
38,466
91,283
160
120,245265
15,00026
82,157
49
5,265
—
33
1,849
130
6
1,519
1
15,162
11,974
2,133
15,731¥7,761,383$72,774,317
698,016
1,029,891
1,378
2,120,567
3,437
145,744186
610,094475—
85,838379
19,3711,243
29
14,625
17
139,448
115,358
19,193
141,106$77,920,719

Net assets:
Common stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity
Unrealized gains on available-for-sale securities (Note 25)
Deferred losses on hedging instruments, net of taxes
Land revaluation excess, net of taxes (Note 15)
Remeasurements of defined benefit plans (Note 14)
Total accumulated other comprehensive income
Equity warrants
Minority interests
Total net assets
Total liabilities and net assets¥   85,113
58,574
300,506(21,079)
423,11386,445(2,072)
12,184(5,656)90,900113
2,843
516,971¥8,536,571¥   85,113
58,574
286,893(23,299)407,28187,047(2,651)
12,359—96,754120
2,493
506,649¥8,268,033$   826,982
569,1212,919,801(204,815)
4,111,090
839,925(20,137)
118,391(54,961)
883,217
1,104
27,6255,023,037$82,943,757

Millions of yen
March 31,

See accompanying notes to the consolidated financial statements.

23

Consolidated Statements of Income
THE JOYO BANK, LTD. and Consolidated Subsidiaries

2014

2013

Thousands of
U.S. dollars (Note 2)2014¥ 95,180
69,63524,854689
24,3051,517
7,800
30,382
159,186¥ 98,070
72,78624,420863
23,9491,089
5,956
21,401
150,467$  924,796
676,599
241,495
6,701
236,157
14,74775,788295,208
1,546,698

Millions of yen
Years ended March 31,

Income:Interest and dividend income:Interest on loans and discounts
Interest and dividends on securities
Other interest income
Fees and commissions
Trading income
Other operating income
Other income (Note 17)
Total income
Expenses:
Interest expenses:
Interest on deposits
Interest on borrowings and rediscounts
Other interest expenses
Fees and commissions
Other operating expenses
General and administrative expenses
Other expenses (Note 18)
Total expenses
Income before income taxes and minority interests
Income taxes:
Current
Deferred (Note 15)
Income before minority interests
Minority interests in net income of consolidated subsidiaries
Net income

2,583
692
1,497
7,136
6,215
72,785
28,106
119,018
40,168

3,355
509
1,362
7,011
973
71,176
31,054
115,443
35,024

25,105
6,727
14,55069,34260,387707,207273,092
1,156,413
390,285

12,2772,500
25,389347¥ 25,042

10,861
1,143
23,018291¥ 22,726

119,292
24,298
246,694
3,373$  243,320

Net income per share (in yen and dollars) (Note 30)¥  33.52¥  30.06$     0.32

Consolidated Statements of Comprehensive Income
THE JOYO BANK, LTD. and Consolidated Subsidiaries

2014

2013

Thousands of
U.S. dollars (Note 2)
2014¥25,389
(17)
(596)
579
25,372¥23,018
46,88846,83453
69,906$246,694(171)(5,797)
5,626
246,52225,019352

69,612294

243,098
3,423

Millions of yen
Years ended March 31,

Income before minority interests
Other comprehensive income (Note 20)
Unrealized gains on available-for-sale securities
Deferred gains on hedging instruments, net of taxes
Comprehensive income(Attributable to)Shareholders of parent
Minority interest
See accompanying notes to the consolidated financial statements.

24Consolidated Statements of Changes in Net Assets
THE JOYO BANK, LTD. and Consolidated Subsidiaries

2014

2013

Thousands of
U.S. dollars (Note 2)
2014

Shareholders’ equity
Common stock
Balance at end of the previous year
Changes during the year
Total changes during the year
Balance at end of the current year

¥ 85,113——¥ 85,113¥ 85,113——¥ 85,113$  826,982——$  826,982

Capital surplus
Balance at end of the previous year
Changes during the year
Total changes during the year
Balance at end of the current year

¥ 58,574——¥ 58,574¥ 58,574——¥ 58,574$  569,121——$  569,121¥286,893¥275,598$2,787,540(6,735)25,042(24)(4,844)174
13,612¥300,506(6,069)22,726(5)(5,450)93
11,295¥286,893(65,439)
243,320(241)(47,071)
1,693
132,261$2,919,801¥ (23,299)¥ (24,913)$ (226,385)(2,710)
85
4,844
2,219
¥ (21,079)(3,854)
18
5,450
1,614
¥ (23,299)(26,332)830
47,071
21,569$ (204,815)¥407,281¥394,371$3,957,259(6,735)25,042(2,710)60—
174
15,832¥423,113(6,069)22,726(3,854)13—
93
12,909¥407,281(65,439)
243,320(26,332)
588
—
1,693
153,831$4,111,090¥ 87,047¥ 40,214$  845,773

(601)
(601)
¥ 86,445

46,832
46,832¥ 87,047(5,848)(5,848)$  839,925

Millions of yen
Years ended March 31,

Retained earnings
Balance at end of the previous year
Changes during the year
Cash dividends
Net income
Disposal of treasury stock
Retirement of treasury stock
Transfer from land revaluation excess
Total changes during the year
Balance at end of the current year
Treasury stock
Balance at end of the previous year
Changes during the year
Purchase of treasury stock
Disposal of treasury stock
Retirement of treasury stock
Total changes during the year
Balance at end of the current year
Total shareholders’ equity
Balance at end of the previous year
Changes during the year
Cash dividends
Net income
Purchase of treasury stock
Disposal of treasury stock
Retirement of treasury stock
Transfer from land revaluation excess
Total changes during the year
Balance at end of the current year
Accumulated Other Comprehensive Income:Unrealized gains on available-for-sale securities
Balance at end of the previous year
Changes during the year
Net changes in items other than shareholders’ equity
Total changes during the year
Balance at end of the current year
25

2014

2013

Thousands of
U.S. dollars (Note 2)2014¥   (2,651)¥  (2,705)$    (25,764)

579
579¥   (2,072)53
53¥  (2,651)

5,626
5,626
$    (20,137)¥ 12,359¥ 12,452$  120,084

(174)
(174)
¥ 12,184(93)(93)¥ 12,359(1,693)(1,693)$  118,391¥——(5,656)(5,656)¥ (5,656)

¥

—
—
—
—
—

$      ——
(54,961)(54,961)$   (54,961)¥ 96,754¥ 49,961$  940,094(5,853)(5,853)¥ 90,900

46,793
46,793¥ 96,754(56,876)(56,876)$  883,217¥    120¥     81$    1,171(6)(6)¥    113

39
39¥    120(67)(67)$    1,104¥  2,493¥  2,201$   24,223

350
350¥  2,843

291
291¥  2,493

3,402
3,402
$   27,625¥506,649¥446,615$4,922,748(6,735)25,042(2,710)60
174(5,510)
10,321¥516,971(6,069)22,726(3,854)13
93
47,12460,033¥506,649(65,439)
243,320(26,332)
588
1,693(53,542)
100,288$5,023,037

Millions of yen
Years ended March 31,

Deferred losses on hedging instruments, net of taxes
Balance at end of the previous year
Changes during the year
Net changes in items other than shareholders’ equity
Total changes during the year
Balance at end of the current year
Land revaluation excess, net of taxes
Balance at end of the previous year
Changes during the year
Net changes in items other than shareholders’ equity
Total changes during the year
Balance at end of the current year
Remeasurements of defined benefit plans
Balance at end of the previous year
Changes during the year
Net changes in items other than shareholders’ equity
Total changes during the year
Balance at end of the current year
Total accumulated other comprehensive income
Balance at end of the previous year
Changes during the year
Net changes in items other than shareholders’ equity
Total changes during the year
Balance at end of the current year
Equity warrants
Balance at end of the previous year
Changes during the year
Net changes in items other than shareholders’ equity
Total changes during the year
Balance at end of the current year
Minority interests
Balance at end of the previous year
Changes during the year
Net changes in items other than shareholders’ equity
Total changes during the year
Balance at end of the current year
Total net assets
Balance at end of the previous year
Changes during the year
Cash dividends
Net income
Purchase of treasury stock
Disposal of treasury stock
Transfer from land revaluation excess
Net changes in items other than shareholders’ equity
Total changes during the year
Balance at end of the current year
See accompanying notes to the consolidated financial statements.

26¥

Consolidated Statements of Cash Flows
THE JOYO BANK, LTD. and Consolidated Subsidiaries

Millions of yen
2014
2013

Years ended March 31,

Cash flows from operating activities:
Income before income taxes and minority interests
Depreciation
Impairment losses
Amortization of negative goodwill
Net increase (decrease) in reserve for possible loan losses
Net decrease in reserve for devaluation of investment securities
Net increase in reserve for directors' retirement benefits
Net increase in reserve for reimbursement of dormant deposits
Net decrease in reserve for frequent users services
Net decrease in reserve for other contingent losses
Net decrease in reserve for losses on interest refunded
Net increase (decrease) in reserve for bonuses to directors and corporate auditors
Net increase in reserve for employees' retirement benefits

Thousands of
U.S. dollars (Note 2)
2014

Interest and dividend income
Interest expenses
Net losses related to securities transactions
Foreign exchange gains, net
Losses on disposal of tangible fixed assets
Net decrease (increase) in trading assets
Net decrease in trading liabilities
Net increase in lease investment assets
Net increase in loans and bills discounted
Net increase in deposits
Net decrease in negotiable certificates of deposit
Net increase in borrowed money excluding subordinated borrowings
Net decrease (increase) in due from banks excluding cash equivalents
Net decrease in call loans and others
Net increase in call money and bills soldNet increase in payables under securities lending transactions
Net increase in foreign exchange (assets)
Net decrease in foreign exchange (liabilities)
Net decrease (increase) in due to trust accountInterest and dividends received
Interest paid
Others, net
Subtotal
Income taxes paid
Net cash provided by operating activities¥40,168
5,841
597
(158)
(4,504)
—
5
144
(2)
(13)
(3)
(1)
—
(606)
(101,539)
4,773
95(23,567)
554
(667)
(18)
(5,174)(255,073)
135,439(5,429)103,003(5,597)
7,324
33,373
14,712(407)
88(7)
102,620(5,724)(7,559)32,686(12,453)
20,232¥ 35,024
5,334
308
(158)
713
(275)
7
137
(7)
(221)
(4)
3
40
—
(104,699)
5,227
4,314
(27,468)
620
1,056
(31)
(2,412)(155,545)
86,606(4,392)
20,936
3,729
7,933
20,90452,394(86)27
9104,557(6,969)1,732
49,349(5,370)43,978$390,285
56,756
5,803(1,535)(43,765)
—
57
1,402
(21)
(135)
(30)
(10)
—
(5,894)(986,583)
46,382932(228,991)
5,389(6,487)(182)(50,279)(2,478,367)
1,315,965(52,759)
1,000,814(54,388)
71,165324,265
142,954(3,957)858(69)997,086(55,622)(73,446)
317,589(121,005)
196,583

Cash flows from investing activities:
Purchases of securities
Proceeds from sale of securities
Proceeds from redemption of securities
Purchases of tangible fixed assets
Proceeds from sales of tangible fixed assets
Purchases of intangible fixed asstes
Net cash used in investing activities(794,302)
417,373
282,427(7,099)154(3,751)(105,198)(712,034)
319,994
302,033(5,486)186(2,188)(97,494)(7,717,666)
4,055,315
2,744,145(68,981)
1,502(36,453)(1,022,137)

Cash flows from financing activities:
Repayments of subordinated borrowings
Cash dividends paid
Cash dividends paid to minority interests
Purchases of treasury stock
Proceeds from sales of treasury stock
Net cash used in financing activities
Translation adjustment for cash and cash equivalents
Net increase in (decrease in) cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year (Note 3)(5,000)(6,735)(2)(2,710)60(14,386)20(99,332)
309,695¥210,363—(6,069)(2)(3,854)
13(9,912)
25(63,402)373,098¥309,695(48,581)(65,439)(21)(26,332)
588(139,785)
195(965,144)
3,009,092$2,043,948

Net decrease in net defined benefit liability

See accompanying notes to the consolidated financial statements.

27

Notestotothe
theConsolidated
ConsolidatedFinancial
FinancialStatements
Statements
Notes
THE
JOYO
BANK,
and Consolidated
Subsidiaries
THE
JOYO
BANK,
LTD.LTD.
and Consolidated
Subsidiaries

1. Basis of Preparation

The accompanying consolidated financial statements of The Joyo Bank, Ltd. (the “Bank”) and consolidated subsidiaries areprepared on the basis of accounting principles generally accepted in Japan, which are different in certain respects as to theapplication and disclosure requirements of International Financial Reporting Standards, and are compiled from the consolidated
financial statements prepared by the Bank as required by the Financial Instruments and Exchange Act of Japan.
For the convenience of readers outside Japan, certain items presented in the original consolidated financial statements havebeen reclassified and rearranged.
In addition, the notes to the consolidated financial statements include information which is not required under accounting
principles generally accepted in Japan but is presented herein as additional information.

2. Japanese Yen and U.S. Dollar Amounts

As permitted by the Financial Instruments and Exchange Act of Japan, amounts of less than one million yen have been rounded off.
As a result, the totals shown in the accompanying consolidated financial statements (both in yen and U.S. dollars) do not necessarily
agree with the sums of the individual amounts. Solely for the convenience of the reader, the U.S. dollar amounts represent atranslation of the Japanese yen amounts at ¥102.92 = US$1.00, the exchange rate prevailing on March 31, 2014.

3. Significant Accounting Policies(a) Consolidation
The accompanying consolidated financial statements include the accounts of the Bank and nine major subsidiaries.
There are no unconsolidated subsidiaries. There are no unconsolidated subsidiaries and affiliates that are accounted for by theequity method. An affiliate, Ibaraki-kizuna Investment Limited Partnership, is not accounted for under the equity method because
the amounts of net income, retained earnings and accumulated other comprehensive income of the affiliate are immaterial, and assuch, it does not have any significant impacts on the consolidated financial statements when excluded from the scope of equity
method.
All significant intercompany transactions have been eliminated in consolidation. Assets and liabilities held by consolidated
subsidiaries are stated at fair value at a time of acquisition.
(b) Consolidated subsidiaries’ closing dateClosing date of nine consolidated subsidiaries is March 31.
(c) Transactions for trading purposes
Transactions for “trading purposes” (seeking to capture gains arising from short-term changes in interest rates, currency exchange
rates or market prices of securities and other market-related indices or from arbitrage between markets) are valued at market or fairvalue, and have been included in trading assets and trading liabilities on a trade date basis. Gain or loss on such trading transactions
are reflected as trading income or trading expenses in the consolidated statements of income.
Among the trading assets and liabilities, securities and monetary claims are carried at market value as of the balance sheet date.
Derivatives including swaps, futures, and options are valued assuming settlement on the balance sheet date.
Trading income or trading expenses include interest received or paid during the fiscal year. The year-on-year valuationdifferences of securities and monetary claims are also recorded in the above-mentioned accounts. As for the derivatives, assumingthat the settlement will be made in cash, the year-on-year valuation differences are also recorded in the above-mentioned accounts.
(d) Securities
Securities other than trading securities have been accounted for by the following methods:
Marketable debt securities held to maturity are stated at amortized cost by the moving-average cost method. Equity shares andinvestment trusts listed on Japanese markets are stated at fair value based on their average market prices over the month prior to
the balance sheet date. (Acquisition cost is basically calculated by the moving-average cost method.) Other listed securities arestated at fair value based on the market prices prevailing on the balance sheet date. (Acquisition cost is basically calculated by themoving-average cost method.) Other available-for-sale securities which are extremely difficult to determine the fair value are statedat cost or amortized cost by the moving-average cost method.
Unrealized gain or loss on available-for-sale securities (net of the related tax effect) has been reported as a component of net
assets.
(e) Derivatives
Derivatives positions held by the Bank (not including transactions for trading purposes) are stated at fair value.

28

(f) Depreciation of tangible fixed assets
Depreciation of tangible fixed assets held by the Bank is calculated by the declining-balance method, except for buildings acquiredon or after April 1, 1998 of which depreciation is calculated by the straight-line method. The estimated useful lives are as follows:
Buildings: 6~50 years
Other: 3~20 years
Depreciation of tangible fixed assets held by the consolidated subsidiaries is calculated principally by the declining-balancemethod, based on the respective estimated useful lives of the assets.
Depreciation of intangible fixed assets is calculated using the straight-line method. Software for internal use is depreciated using
the straight-line method over its estimated useful life (mainly 5 years).
Depreciation of lease assets in “Tangible fixed assets”, which are the finance leases other than those that transfer the ownershiplease property to the lessee is calculated using the straight-line method over the lease term with zero residual value unless residual
value is guaranteed by the corresponding lease contracts.
(g) Reserve for possible loan losses
The reserve for possible loan losses of the Bank is provided as detailed below, in accordance with the internal rules for providing
reserves for possible loan losses:
For claims to debtors who are legally bankrupt (as a result of bankruptcy, special liquidation, etc.) or who are substantiallybankrupt, a reserve is provided based on the amount of the claims, net of the amounts expected to be collected by the disposal ofcollateral or as a result of the execution of guarantees.
For claims to debtors who are not currently bankrupt, but are likely to become bankrupt, a reserve is provided based on theamount considered necessary based on an overall solvency assessment of the amount of claims net of the amounts expected to becollected by the disposal of collateral or as a result of the execution of guarantees.
For other claims, a reserve is provided based on the Bank’s historical loan-loss experience.
All claims are assessed by the Business Section (at the branches and the related head office divisions) based on the Bank’s
internal rules for the self-assessment of asset quality.
The Corporate Audit Department, which is independent of the Business Section, subsequently conducts audits of suchassessments, and a reserve is provided based on the audit results.
The reserves of the consolidated subsidiaries are provided for general claims at an amount based on the actual historical rate ofloan losses and for specific claims (from potentially bankrupt customers, etc.) at an estimate of the amounts deemed uncollectible
based on the respective assessments.
For collateralized or guaranteed claims from debtors who are legally or substantially bankrupt, the amounts of the claims deemed
uncollectible in excess of the estimated value of the collateral or guarantees have been written off in aggregate amounts of ¥19,748
million and ¥20,250 million as of March 31, 2014 and 2013, respectively.
(h) Reserve for devaluation of investment securities
A reserve for the devaluation of investment securities is provided at the amount deemed necessary to cover estimated possible
losses on investments which the Bank and its consolidated subsidiaries may incur in the future.
(i) Reserve for employees’ retirement benefits
In calculating the projected benefit obligation, the straight-line basis is used to attribute the expected benefit attributable to therespective fiscal year.
Prior service cost is deferred and amortized using the straight-line method over certain years (10 years) within the averageremaining service period of the eligible employees.
Unrealized actuarial losses are deferred and amortized using the straight-line method over a ten-year period commencing withthe following year, which is shorter than the average remaining service period of the eligible employees.
(Additional information)
The Bank transferred part of the defined benefit plan to the defined contribution plan on May 1, 2014.
The Bank adopted ““Guidance on Accounting for Transfers between Retirement Benefit Plans” (Accounting Standards Board ofJapan (ASBJ) Application Guidance No.1 issued on January 31, 2002) and “Practical Solution on Accounting for Transfer
between Retirement Benefit Plans” (Practical Issues Task Force No. 2 issued on February 7, 2007) to account for the transfer.
This change has no material impact on the consolidated financial statements for the year ended March 31, 2014.
(j) Reserve for directors’ bonuses
Reserve for directors’ bonuses represents estimated cost of directors’ (including executive officers) bonuses attributable to the fiscal year.

29

(k) Reserve for directors’ retirement benefits
Reserve is made for the payments of retirement allowances to directors and corporate auditors of the consolidated subsidiaries
based on an estimate of the amount attributable to the fiscal year.
(l) Reserve for reimbursement of dormant deposits
Reserve for reimbursement of dormant deposits which were derecognized as liabilities under certain conditions is provided forpossible losses on the future claims.
(m) Reserve for frequent users services
Reserve for frequent users services, which is provided to meet future use of credits granted to credit card customers, is recorded in
the amount deemed necessary based on the estimated future use of unused credits. This program applies to cards issued by the
Bank and one of its subsidiaries.
(n) Reserve for losses on interest refunded
One consolidated subsidiary provides a provision for losses on interest refunded in an amount deemed necessary based on
estimated amounts to be refunded, taking into account historical records of interest refunded on the portion of loans whose interest
rates exceeded the maximum interest rate stipulated by the Interest Limitation Law.
(o) Reserve for contingent losses
The Bank makes reserve for possible losses on loans guaranteed by the credit guarantee corporations in an amount deemednecessary based on estimated losses in the future, calculated using historical default rates after exclusion of contingent losses
covered by other reserves.
(p) Reserves under special laws
The reserve under the special laws is a reserve for contingent liabilities and provided for compensation for losses fromsecurities-related transactions or derivative transactions in the amount of ¥1 million as of March 31, 2014 and 2013, pursuant to
Article 46-5-1 of the Financial Instruments and Exchange Act and Article 175 of the related cabinet order.
(q) Negative goodwill
Negative goodwill is amortized using the straight-line method over 20 years.
(r) Deferred charges
Stock issuance costs are charged to expenses as incurred.
(s) Translation of foreign currencies
Foreign currency-denominated assets and liabilities of the Bank are translated into Japanese yen at the rates prevailing at thebalance sheet date. Foreign currency-denominated assets and liabilities held by consolidated subsidiaries are translated into
Japanese yen principally at the rates prevailing at the respective balance sheet dates.
All consolidated subsidiaries have a fiscal year end of March 31.
(t) Leases
As for finance lease transactions that do not transfer ownership of the leased property and which commenced prior to April 1, 2008,
their treatment was as follows.
As a lessee
Using the same method applied to operating lease transactions.
As a lessor
In line with the stipulations of Article 81 of the Guidance on Accounting Standard for Lease Transactions (ASBJ Guidance No. 16,
issued on March 30, 2007), book value (after deduction of accumulated depreciation) of lease assets included in tangible fixed
assets and intangible assets as of the previous balance sheet date (March 31, 2008) was recorded as the initial balance of “Lease
receivables and lease investment assets.
(u) Recognition of income on finance lease
As a lessor income and expense are recognized when lease receivables are collected as for finance lease transactions that do nottransfer ownership of the property.

30

(v) Hedging
Hedging against interest rate risks
The deferred method of hedge accounting is applied to transactions to hedge against the interest rate risks associated with
monetary claims and debt in accordance with the regulations set out in the “Accounting and Auditing Treatment of AccountingStandards for Financial Instruments in the Banking Industry” (JICPA Industry Audit Committee Report No. 24).
The Bank assesses the effectiveness of such hedges in offsetting movement of the fair value with the changes in interest rates,by classifying the hedged items (deposits or loans) and the hedging instruments (interest swaps) by their maturity. As to cash flow
hedges, the Bank assesses the effectiveness of such hedges in fixing cash flows by verifying the correlation between the hedged
items and the hedging instruments.
Hedging against foreign exchange fluctuation risks
The deferred method of hedge accounting is applied to transactions to hedge against the foreign exchange fluctuation risks
associated with monetary assets and liabilities denominated in foreign currencies, in accordance with the regulations set out in the“Accounting and Auditing Treatment of Accounting Standards for Foreign Currency Transactions in the Banking Industry” (JICPA
Industry Audit Committee Report No. 25).
To minimize the foreign exchange fluctuation risks on monetary assets and liabilities, the Bank engages in currency swaps,
foreign exchange swaps, and similar transactions. The effectiveness of these transactions in the hedging of the foreign exchangerisks of monetary assets and liabilities denominated in foreign currencies is assessed through comparison of the foreign currency
position of the hedged monetary assets and liabilities, with that of the hedging instruments.
When certain criteria are met, exceptional accrual method for interest rate swap is applied to some assets and liabilities held by
the Bank and its consolidated subsidiaries.
(w) Consumption tax
Consumption tax is excluded from transactions reported by the Bank and its consolidated subsidiaries. However, non-deductible
consumption tax on tangible fixed assets is charged to income as incurred.
(x) Land revaluation excess
In accordance with the Law concerning the Revaluation of Land (Act No. 119, effective March 31, 1998), the Bank revalued the land
held for its operations on March 31, 1998. The net unrealized gain is presented in net assets net of the applicable income taxes asland revaluation excess, net of taxes.
The difference between the carrying amount and the fair value of premises revalued pursuant to Article 10 of the Law was¥29,682 million and ¥29,364 million as of March 31, 2014 and 2013, respectively.
(y) Earnings per share
The computation of earnings per share of common stock is based on the weighted average number of shares outstanding during
each year.
(z) Statements of cash flows
Cash and cash equivalents in the statements of cash flows represent cash and due from banks in the consolidated balance sheets,
excluding deposits with banks other than the Bank of Japan as well as the time deposits of certain consolidated subsidiaries.
Millions of yen
2014

March 31,2013

Cash and due from banks¥224,661

Deposits with banks other than the Bank of Japan

(14,298)(8,700)Cash and cash equivalents¥210,363¥309,695

4. Accounting change¥318,396

From the fiscal year ended March 31, 2014, the Bank and its consolidated subsidiaries have adopted the Accounting Standard for
Retirement Benefits (ASBJ Statement No. 26, May 17, 2012) and the Guidance on Accounting Standard for Retirement Benefits(ASBJ Guidance No. 25, May 17, 2012) (excluding the provisions set out in the main text of Paragraph 35 and Paragraph 67 of the
Accounting Standard and the Guidance, respectively). Accordingly, the difference between the projected benefit obligation and plan
assets is reported as net defined benefit liability.
In accordance with the transitional treatment stipulated in Paragraph 37 of the Accounting Standard, unrecognized actuarial loss andunrecognized prior year service cost, net of deferred tax are reported as remeasurements of defined benefit plans in accumulated
other comprehensive income from the fiscal year ended March 31, 2014.

31

As a result of this change, ¥8,834 million was recorded as net defined benefit liability and deferred tax assets increased by ¥3,083
million and accumulated other comprehensive income decreased by ¥5,656 million.

5. Standards Issued but not yet effective

Accounting Standard for Retirement Benefits(1) Outline
The accounting standards have been revised in light of improving financial reporting and considering the trends of international
convergence. The major revisions are changes in accounting treatments for unrecognized actuarial losses, unrecognized priorservice costs, calculation methods for retirement benefit obligation, service cost and enhancement of disclosure items.
(2) Dates of application
The Bank intends to adopt calculation methods for retirement benefit obligation and service cost from the fiscal year beginningon April 1, 2014.
(3) Impact of adoption of the revised accounting standards
The impact of adoption of the revised accounting standard is currently being examined.
Accounting Standard for Business Combinations(1) Outline
The accounting standards have been revised mainly on (i) the treatment of a change in the parent company’s ownership interestin a subsidiary in the case where the parent company continues to control the subsidiary upon additionally acquiring the sharesof the subsidiary or other cases, (ii) the treatment of acquisition cost, (iii) the treatment of the transitional accounting, and (iv) the
presentation of net income and the change in presentation from minority interests to non-controlling interests.
(2) Dates of application
The Bank intends to adopt revised accounting standards from the fiscal year beginning on April 1, 2015.
(3) Impacts of adoption of the revised accounting standards
Impacts of adoption of the revised accounting standard are not yet determined.

6. Bills Discounted
Bills discounted are accounted for as financial transactions in accordance with JICPA Industry Audit Committee Report No. 24. The
Bank has the rights to sell or pledge bank acceptances bought, commercial bills discounted, documentary bills and foreignexchanges bought without restrictions. The face value at March 31, 2014 and 2013 totaled ¥22,859 million and ¥26,010 million,
respectively.

7. Pledged Assets

Assets pledged as collateral at March 31, 2014 and 2013 were as follows:
Millions of yen
2014

March 31,

2013

Pledged assets:¥440,698

Securities¥289,879

Liabilities covered by pledged assets:
Deposits

26,047

20,673

Payables under securities lending transactions

105,996

91,283

Borrowed money

196,996

95,940In addition to the above, securities amounting to ¥48,096 million and ¥45,946 million at book value were pledged as collateral inconnection with bank transfer settlements and futures transactions as of March 31, 2014 and 2013, respectively.
One consolidated subsidiary had pledged its lease receivables amounting to ¥259 million and ¥575 million as of March 31, 2014
and 2013, respectively.
“Other assets” included lease deposits of ¥1,401 million and ¥1,518 million, at March 31, 2014 and 2013, respectively.“Other
assets”also included Initial margins on futures transactions of ¥160 million at both March 31, 2014 and 2013.

32

8. Investments in unconsolidated subsidiaries and affiliates

Investments in unconsolidated subsidiaries and affiliates at March 31, 2014 and 2013 were as follows:
Millions of yen
2014

2013

¥423

Investments¥395

9. Commitments and Contingent Liabilities

Overdraft facilities and line-of-credit contracts are agreements under which, subject to compliance with the contractual conditions,
the Bank or consolidated subsidiaries pledge to provide clients with funds up to a fixed limit upon submission of a loan application to
the Bank. The unused amount related to such facilities/contracts stood at ¥1,552,123 million and ¥1,496,374 million at March 31,
2014 and 2013, respectively. Of this amount, facilities/contracts which expire within one year or which are unconditionally cancelable
at any time, totaled ¥876,495 and ¥942,282 million at March 31, 2014 and 2013, respectively.
Most of these agreements will expire without the clients’ having utilized the financial resources available to them, and the amountof the non-executed financing will not necessarily impact on the Bank or its consolidated subsidiaries’ future cash flows. Most ofthese facilities/contracts contain a clause which allows the Bank or its consolidated subsidiaries to reject a loan application or to
reduce the upper limit requested in view of changing financial conditions, credit maintenance and other reasonable concerns.
When necessary, the Bank will demand collateral such as real estate or marketable securities at the date on which an agreement
is entered into. In addition, after facilities/contracts are set forth the Bank will regularly assess the business status of the clients,
based on predetermined internal procedures and, when prudent, will revise the agreements or reformulate their policies to maintaincreditworthiness.

10. Borrowed Money

Borrowed money included subordinated debt of ¥5,400 million and ¥10,400 million, at March 31, 2014 and 2013.
Borrowed money at March 31, 2014 and 2013 consisted of the following:
Millions of yen
Description

2014

%
2013

Due

Average interest rate

Bills rediscounted

¥—

¥—

—

Other borrowings

218,248

120,245

0.24

April 2014 - September 2019

Lease obligations

30

3

5.06

April 2014 - July 2020

Notes:—

1. Average interest rate represents the weight average interest rate based on the balances and rates at respective fiscal year-end.
2. The repayment schedule within five years on borrowed money at March 31, 2014 was as follows:
Millions of yen
Other borrowings

Within 1 year

Lease obligations¥206,032¥4

After 1 year within 2 years

6,136

4

After 2 years within 3 years

3,055

5

After 3 years within 4 years

2,800

4

After 4 years within 5 years

225

4

11. Non-Performing Loans

In accordance with the disclosure requirements under the Rules for Bank Accounting in Japan, the balance of loans and bills
discounted at March 31, 2014 and 2013 included the following non-performing loans:
Millions of yen
March 31,

2014

2013

Loans in bankruptcy and dishonored bills¥1,694¥1,575

Delinquent loans

100,471

116,116

Loans past due with respect to interest payments for more than 3 months
Restructured loans
Total

944

854

23,82337,139¥126,933¥155,685

Notes: 1. Loans in bankruptcy and dishonored bills refers to loans (excluding charged-off amounts) stipulated in Article 96, Paragraph 1, Item 3 (a) to (e) or
Item 4 of the Enforcement Regulation to Corporation Tax Act (1965 Enforcement Regulation No. 97) to which accrued interest receivables are
not recognized as accruals for accounting purposes since no repayment of principal or payment of interest has been made for a considerable
period. Delinquent loans refers to loans with respect to which accrued interest receivables are not recognized as accruals for accounting
purposes, excluding loans falling into the category of restructured loans. Loans past due with respect to interest payments for more than 3months refers to loans with respect to which repayment of principal or payment of interest are past due for three months or more, excluding loans
falling into the categories of loans in bankruptcy and dishonored bills or delinquent loans. Restructured loans refers to loans to borrowers to33

whom financial support is given in the form of reduction in interest, waiver of repayment of the principal or payment of interest, or debt forgivenesswith the aim of corporate rehabilitation, excluding loans falling into loan categories mentioned above.
2. The above amounts are stated before the deduction of the reserve for possible loan losses.

12. Bonds

Bonds at March 31, 2014 and 2013 consisted of the following:
IssuerDescription

The Joyo Bank,Ltd.

2nd Unsecured StraightBonds
1st Unsecured
Subordinated Bonds withearly redemption clause

The Joyo Bank,
Ltd.

Date of issue

Millions of yen
2014

May 24, 2000
January 31,
2012

Total

%

2013

Interest rate

Collateral

Due

5,000

5,000

2.64

—

10,00010,0001.22—¥15,000¥15,000

May 22, 2020
January 31, 2022

Note: After the consolidated closing date, the Bank had no redemption schedule for a period of five years or less.

13. Privately placed bonds

Privately placed bonds (Article 2-3 of Financial Instruments and Exchange Law) guaranteed by the Bank at March 31, 2014 and2013 were as follows:
Millions of yen
2014

2013

¥17,704

Privately placed bonds¥16,688

14. Employees’ Retirement Benefits

For the fiscal year ended March 31, 2014(a) Outline of current retirement benefit system
The Bank and its consolidated subsidiaries have adopted defined employees’ retirement benefit plans, i.e., the employees’ welfare
pension fund supplemented by the employees’ public pension system and lump-sum retirement benefits. In addition, extra benefits
which are excluded from the projected benefit obligation in employees’ retirement benefits accounting may be paid on acase-by-case basis. The Bank has established an employees’ retirement benefit trust. As of the end of March 31, 2014, the Bankand nine consolidated subsidiaries have lump-sum retirement benefits for employees. The Bank and its consolidated subsidiaries
have jointly established a fund under a defined benefit pension plan and it is included in the section of defined benefit pension plan of
the note. Net defined benefit liability and service cost in the defined benefit pension plan and lump-sum retirement benefit adopted
by the consolidated subsidiaries are calculated by the simplified method.
(b) Defined benefit pension plan
(1) Reconciliation of the projected benefit obligation between April 1, 2013 and March 31, 2014 is as follows (Except for thesimplified method):
Millions of yen¥64,418

Retirement benefit obligation as of April 1, 2013

1,790

Service cost

753

Interest cost
Actuarial loss incurred

1,068

Payment of retirement benefit(3,399)Prior service cost incurred－

Decrease due to amendment of defined benefit pension plan

(2,559)Retirement benefit obligations as of March 31, 2014

¥62,07234

(2) Reconciliation of the plan assets between April 1, 2013 and March 31, 2014 is as follows (Except for the simplified
method):Millions of yen¥50,730

Plan assets as of April 1, 2013

737

Expected return on plan assets

4,226

Actuarial loss incurred
Contribution by the Bank and its consolidated subsidiaries

2,153

Payment of retirement benefit(1,893)

Decrease due to amendment of defined benefit pension plan

(2,190)Plan assets as of March 31, 2014

¥53,763(3) Reconciliation of the net defined benefit liability adopting the simplified method between April 1, 2013 and March 31,
2014 is as follows:
Millions of yen¥498

Net defined benefit liability as of April 1, 2013
Retirement benefit expense

412

Payment of retirement benefit(34)

Contribution to the defined benefit pension plan(349)

Net defined benefit liability as of March 31, 2014

¥526

(4) Reconciliation of the projected benefit obligation and plan assets between net defined benefit liability and net defined
benefit asset is as follows:
Millions of yen

Retirement benefit obligation of the funded pension plan

¥69,960

Plan assets(61,125)
8,834

Retirement benefit obligation of the unfunded pension plan－

Net defined benefit liability and asset on the consolidated balance sheet¥8,834
Millions of yen

Net defined benefit liability¥8,834

Net defined benefit asset－

Net defined benefit liability and asset on the consolidated balance sheet¥8,834

Note: Including the simplified method(5) Components of retirement benefit expenses are as follows:
Millions of yen¥1,790Service cost
Interest cost

753

Expected return on plan assets(737)

Amortization of unrecognized actuarial loss

1,082

Amortization of prior service cost

98

Retirement benefit expense adopting the simplified method

412
37

Other

¥3,436Retirement benefit expense on defined benefit pension plan(6) Components of remeasurements of defined benefit plans are as follows (Before deferred tax assets deduction):
Millions of yen¥69

Unrecognized prior service cost
Unrecognized actuarial loss

8,670

Total

¥8,74035

(7) Plan assets
Proportions of major components of plan assets are as follows:
Bond

38.1%

Equity40.2%

General account

17.8%

Other

3.9%

Total

100.0%

Note: A retirement benefit trust was established for corporate pension plans and totaling to 17.6% of the total plan assets
Expected rate of return on pension plan assets is determined considering current and future portfolio of pension assets and current
and future long term expected rate of return on various assets in the portfolio.
(8) The assumptions used in accounting for the defined benefit plans:Discount rate

1.27%

Expected rate of return on plan assets

2.5%

For the fiscal year ended March 31, 2013(a) Outline of current retirement benefit system
The Bank and its consolidated subsidiaries have adopted defined employees’ retirement benefit plans, i.e., the employees’ welfare
pension fund supplemented by the employees’ public pension system and lump-sum retirement benefits. In addition, extra benefits
which are excluded from the projected benefit obligation in employees’ retirement benefits accounting may be paid on acase-by-case basis. The Bank has established an employees’ retirement benefit trust. As of the end of March 31, 2013, the Bankand nine consolidated subsidiaries have lump-sum retirement benefits for employees. The Bank and its consolidated subsidiaries
have jointly established a fund under a defined benefit pension plan.
(b) The following table sets forth the changes in the retirement benefit obligation, the plan assets and the funded status of
the Bank and its consolidated subsidiaries at March 31, 2013:
Millions of yen
March 31,2013

Retirement benefit obligation¥(72,736)

Fair value of plan assets

58,550Funded status(14,186)

Unrecognized actuarial loss

13,312

Unrecognized prior service cost

172

Net retirement benefit obligation(701)

Prepaid pension cost

4,563

Reserve for employees’ retirement benefits
Notes:¥(5,265)

1. The above amounts do not include any extra benefits.
2. The consolidated subsidiaries have adopted a simplified method for the calculation of their retirement benefit obligation.

(c) Cost for retirement benefits of the Bank and its consolidated subsidiaries included the following components for the
fiscal years ended March 31, 2013:
Millions of yen
Years ended March 31,

2013

Service cost

¥1,799Interest cost

1,109

Expected return on plan assets(642)

Amortization:
Amortization of prior service cost98

Amortization of unrecognized actuarial loss

1,531

Total retirement benefit cost

¥3,895

Note: Retirement benefit cost of consolidated subsidiaries which is calculated by a simplified method has been included in “service cost” referred to above.

36

(d) The assumptions used in accounting for the defined benefit plans for the fiscal years ended March 31, 2013 were as
follows:
Years ended March 31,

2013

Discount rate

1.17%

Expected rate of return on plan assets

2.5%

Periodic allocation of estimated retirement benefits

Straight-line method

Amortization period of prior service cost

10 years

Amortization period of actuarial gain/loss

10 years

15. Deferred Tax Assets

Millions of yen
2014

March 31,2013

Deferred tax assets:
Reserve for possible loan losses¥19,859¥21,243

Reserve for retirement benefits

－

8,683

Net defined benefit liability

11,379－Depreciation

1,531

1,848

Devaluation of securities

1,672

2,586

Reserve for employee bonuses

946

939

Reserve for reimbursement of dormant deposits

703

652

Others

7,726

8,409

Valuation allowance(3,727)(4,291)

40,245¥40,072

Total
Deferred tax liabilities:¥(45,535)¥(45,615)

Retirement benefit trust(5,186)(5,186)

Reversal of reserve for possible loan losses after elimination ofintercompany balances
Others(11)(1,618)(15)(1,616)

Unrealized gain on available-for-sale securities(52,351)(52,433)¥(12,106)¥(12,360)

Total
Net deferred tax assets

The effective tax rate reflected in the consolidated statements of income for the fiscal years ended March 31, 2014 and 2013 differsfrom the statutory tax rate for the following reasons:
2014

2013

Statutory tax rate

37.66%

Effect of changes in statutory tax rate

1.69%

－%

Valuation allowance(1.40)%(2.69)%

Permanent differences including dividends received deduction(2.00)%(2.16)%

Permanent differences including entertainment expenses

0.25%

0.28%

Other

0.59%

1.18%

Effective tax rate

36.79%

34.27%

37.66%“Act on Partial Amendment to the Income Tax Act, etc.” (Act No. 10, 2014) was promulgated on March 31, 2014, and the special
corporation tax for restoration has been abolished. Accordingly, the effective statutory tax rate used for the calculation of deferred
tax assets and liabilities from the temporary differences, expected to be either deductible, taxable or expired on or after the fiscal
year beginning April 1, 2014, has been lowered from 37.66% to 35.28%. As a result of this change, deferred tax assets
decreased by ¥681 million, deferred losses on hedging instruments, net of taxes increased ¥0 million and deferred income taxes
increased by ¥680million.

37

16. Shareholders’ Equity

In accordance with the Banking Act of Japan, the Bank has provided a legal reserve by appropriation of retained earnings, which isincluded in retained earnings. The Banking Act of Japan provides that an amount equivalent to at least 20% of the amount to be
disbursed as distributions of earnings be appropriated to the legal reserve until the total of such reserve and the capital surplus
equals 100% of the common stock.
The Companies Act of Japan (the “Act”), provides that an amount equal to 10% of the amount to be disbursed as distributions ofcapital surplus (other than the capital reserve) and retained earnings (other than the legal reserve) be transferred to the capitalreserve and the legal reserve, respectively, until the sum of the capital reserve and the legal reserve equals 25% of the capital stock
account. Such distributions can be made at any time by resolution of the shareholders or by the Board of Directors if certain
conditions are met.
Under the Act, upon the issuance and sale of new shares of common stock, the entire amount of the proceeds is required to beaccounted for as common stock, although a company may, by resolution of the Board of Directors, account for an amount notexceeding one-half of the proceeds as capital surplus.

17. Other Income

Millions of yen
2014Years ended March 31,

2013¥30,376

Other ordinary income
Gain on disposal of tangible fixed assets
Total

18. Other Expenses¥21,3856

16¥30,382¥21,401

Millions of yen
2014Years ended March 31,

2013

Losses on disposal of tangible fixed assets¥561

Losses on impairment

597

308

Write-offs of claims

4,000

5,088

Write down of equity shares

1,458

1,705

¥636

121

163

Others21,36623,150

Total¥28,106¥31,054

Losses on sale of claims

Impairment losses were recorded in an aggregate amount deemed irrecoverable on idle assets, primarily located in Ibaraki
Prefecture.
Impairment losses recognized on a consolidated basis for the fiscal years ended March 31, 2014 and 2013 can be broken down
into the three categories of losses on land holdings in the amount of ¥424 million and ¥261 million, respectively, losses on buildingsin the amount of ¥171 million and ¥46 million, respectively and losses on movable assets in the amount of ¥1 million and ¥0 million,
respectively.
The recoverable amounts used for the measurement of such impairment losses are net sales prices, which are calculated on thebasis of appraisal values after deduction of the estimated cost of disposal.

19. Tangible Fixed Assets

Accumulated depreciation on tangible fixed assets amounted to ¥90,608 million and ¥92,941 million, as of March 31, 2014 and2013, respectively.
The accumulated capital gains directly offset against the acquisition costs of tangible fixed assets to obtain tax benefits at March
31, 2014 and 2013 amounted to ¥6,463 million and ¥6,432 million, respectively. For the years ended March 31, 2014 and 2013, thecapital gains offset were ¥46 million and ¥116 million.

38

20. Supplementary Information to Consolidated Statements of Comprehensive Income
Millions of yen

2014Years ended March 31,

2013

Unrealized gains on available-for-sale securities:
The amount arising during the period¥7,146¥75,084

Reclassification adjustments(7,820)(3,257)

Before adjustments of tax effect(673)

71,826

77(24,991)(596)

46,834

Tax effectUnrealized gains on available-for-sale securities
Deferred gain (loss) on hedging instruments, net of taxes:
The amount arising during the period

2,065

1,129

Reclassification adjustments(1,168)(1,047)

Before adjustments of tax effect

896

81

Tax effect

(317)

(27)

579

53

¥(17)

¥46,888

Deferred gain (loss) on hedging instruments, net of taxes
Total

21. Changes in Net Assets(1) Types and number of shares issues and treasury stock are as follows:
Number of shares
March 31, 2014

Increase

April 1, 2013

Decrease

March 31, 2014

Shares issued:
Common stockTotal

799,231―

10,000789,231799,231―

10,000789,231

48,455

5,159

10,17643,43848,455

5,159

10,17643,438Treasury stock:
Common stock
Total
Notes:

1. Decrease in number of shares issued is cancellation of treasury stock stipulated by the Article 178 of the ACT
2. Increase in number of treasury stock includes purchase of fractional shares 159 thousands and acquisition of common stock 5,000 thousands.
3. Decrease in number of treasury stock includes purchase of fractional shares 11 thousands, cancellation of treasury stock 10,000 thousands andexecution of stock options 164 thousands.

Number of shares
March 31, 2013

Increase

April 1, 2012

Decrease

March 31, 2013

Shares issued:
Common stock
Total

810,231―

11,000799,231810,231―

11,000799,231

Treasury stock:
Common stock
Total
Notes:

49,37010,122

11,03748,45549,37010,122

11,03748,455

1. Decrease in number of shares issued is cancellation of treasury stock stipulated by the Article 178 of the ACT
2. Increase in number of treasury stock includes purchase of fractional shares 122 thousands and acquisition of common stock 10,000 thousands.
3. Decrease in number of treasury stock includes purchase of fractional shares 15 thousands, cancellation of treasury stock 11,000 thousands andexecution of stock options 22 thousands.

39

(2) Information on stock acquisition rights is as follows:
Millions of yen

Number of shares

March 31, 2014

Detail of stockacquisitionrightsThe Bank

Stock Options

Type ofsharesIncrease

April 1, 2013

Total

Decrease

March 31, 2014

―

¥113

―

¥113
Millions of yen

Number of shares

March 31, 2013

Detail of stockacquisitionrightsThe Bank

Stock Options

Type ofsharesIncrease

April 1, 2012

Total

March 31, 2014

Decrease

March 31, 2013

March 31, 2013

―

¥120

―

¥120

(3) Information on dividends is as follows:(a) Dividends paid in the fiscal year ended March 31, 2014
Aggregate amount ofdividends (Millions of yen)

Cash dividends
per share (yen)Common stock¥3,378

4.5

March 31, 2013

June 27, 2013

Common stock¥3,356

4.5

September 30, 2013

December 3, 2013

Type of shares

Ordinary general
meeting of shareholders
held on June 26, 2013
Meeting of board of
directors held on
November 8, 2013

Record date

Effective date(b) Dividends to be paid after March 31, 2014

Ordinary general
meeting of shareholders
held on June 26, 2014

Type of shares

Aggregate amount ofdividends(Millions of yen)

Common stock¥3,356

Source ofdividends

Cash dividends
per share (yen)Retainedearnings

4.5

Record date

Effective date

March 31, 2014

June 27, 2014(c) Dividends paid in the fiscal year ended March 31, 2013
Aggregate amount ofdividends (Millions of yen)

Cash dividends
per share (yen)Common stock¥3,043

4

March 31, 2012

June 28, 2012

Common stock¥3,0254

September 30, 2012

December 10, 2012

Type of shares

Ordinary general
meeting of shareholders
held on June 27, 2012
Meeting of board of
directors held on
November 9, 2012

Record date

Effective date(d) Dividends to be paid after March 31, 2013

Ordinary general
meeting of shareholders
held on June 26, 2013

Type of shares

Aggregate amount ofdividends(Millions of yen)

Common stock¥3,378Source ofdividends

Retainedearnings

40

Cash dividends
per share (yen)

4.5

Record date

Effective date

March 31, 2013

June 27, 2013

22. Segment Informationa. Outline of the reportable segments
The reportable segments of the Company are those units for which discrete financial information can be obtained and which are
regularly examined by the management meeting, which is the highest decision-making body for decisions on the allocation ofmanagement resources and for assessing business performance.
Comprised of the Bank and its nine subsidiaries, the Group’s main business is banking. Other operations include leasing, credit
guarantee services, banking administrative agency services, securities trading and other financial business. “Banking” and“leasing” are its reportable segments, while credit guarantee services are included in “Other.”b. Calculation method of the amount of ordinary income, segment profit, assets and other items by the reportable segment
Accounting method of the reportable segment is as described in “Significant Accounting Policies.” Ordinary income is regarded as
the segment profit. Ordinary income from internal transactions is calculated based on actual market price.
c. Information related to ordinary income, segment profit, assets and other items by the reportable segment
Millions of yen

Year ended March 31, 2014

Banking
operations

The reportable segment
Leasing

Total

Other

Total

Adjustments

Consolidated

Ordinary income:From external
Customers
From internaltransactions
Total

136,663

16,503

153,167

6,012

159,179－

159,179

1,887
138,551543
17,047

2,431
155,598

5,277
11,289

7,708
166,887(7,708)(7,708)－159,179

35,837

1,290

37,1283,845

40,973346

41,320Assets8,509,629

54,6368,564,265

45,167

8,609,433(72,861)

8,536,571

Liabilities

8,005,924

46,645

8,052,570

29,2308,081,800(62,199)

8,019,600

Depreciation

5,807

102

5,910

239

6,149

(308)

5,840

Interest income

95,31662

95,378

186

95,565(384)

95,180Interest expenses

4,715

294

5,010

144

5,154

(380)

4,773

Segment profit

OthersGain on disposal of
tangible fixed assets
Losses on disposal of
tangible fixed assets
Losses on impairment

6

－

6

－

6

－

6

522
169

0
－

522
169

39
459

561
629

－
(31)

561
597

Provision for Financial
Instruments Transaction
Liability Reserve
Tax expenses－
13,047－498－
13,546

01,236

014,782－(3)

0
14,778

Increase in tangible andintangible fixed assets

10,455

8

10,464387

10,851－

10,851

Notes:

1. Ordinary income is presented as the counterpart of sales of a non-banking company. Adjustments refer to differences between ordinary
income and ordinary income posted in Consolidated Statements of Income.
2. Adjustments are as follows:a) Adjustments in Ordinary income total Include elimination of intersegment transactions of ¥(7,866) million.
b) Adjustments in assets of ¥(72,861) million include elimination of intersegment transactions of ¥(59,106) million.
c) Adjustments in liabilities of ¥(62,199) million include elimination of intersegment transactions of ¥(56,064) million.
d) Adjustments in depreciation of ¥(308) million include depreciation of lease assets presented as tangible fixed assets on the consolidated
financial statements of ¥(308) million.
e) Adjustments in Interest income of ¥(384) million include intersegment interests of ¥(378) million.
f ) Adjustments in interest expenses of ¥(380) million include intersegment interest of ¥(378) million.
g) Adjustments in tax expenses of ¥(3) million include deferred income taxes of ¥(3) million due to eliminations of intersegment reserve forpossible loan losses.
3. Segment profit is adjusted to ordinary profit posted in the Consolidated Statements of Income.

41

Millions of yen

Year ended March 31, 2013

Banking
operations

The reportable segment
Leasing

Total

Other

Total

Adjustments

Consolidated

Ordinary income:From external
Customers
From internaltransactions
Total¥129,515¥15,635¥145,151¥5,299¥150,451¥—¥150,451

1,647
131,163721
16,357

2,369
147,520

4,875
10,175

7,244
157,696(7,244)(7,244)—150,451

31,726

1,222

32,9482,743

35,692261

35,953

Assets8,243,641

46,5568,290,197

42,411

8,332,608(64,575)

8,268,033

Liabilities

7,746,950

39,363

7,786,314

28,481

7,814,795(53,411)

7,761,383

Depreciation

5,180

66

5,246

257

5,504

(170)

5,334

Interest income

98,20962

98,272

212

98,484(414)

98,070Interest expenses

5,180

294

5,475

162

5,638

(411)

5,227

16

—

16

—

16

—

16

622
228

—
—

622
228

14
80

636
308

—
—

636
308

Tax expenses

10,513502

11,016993

12,010(4)

12,005

Increase in tangible andintangible fixed assets

7,462

16

7,479

195

7,674

—

7,674

Segment profit

OthersGain on disposal of
tangible fixed assets
Losses on disposal of
tangible fixed assets
Losses on impairment

Notes:

1. Ordinary income is presented as the counterpart of sales of a non-banking company. Adjustments refer to differences between ordinary
income and ordinary income posted in Consolidated Statements of Income.
2. Adjustments are as follows:a) Adjustments in Ordinary income total Include elimination of intersegment transactions of ¥(7,402) million.
b) Adjustments in assets of ¥(64,575) million include elimination of intersegment transactions of ¥(53,524) million.
c) Adjustments in liabilities of ¥(53,411) million include elimination of intersegment transactions of ¥(50,523) million.
d) Adjustments in depreciation of ¥(170) million include depreciation of lease assets presented as tangible fixed assets on the consolidated
financial statements of ¥(169) million.
e) Adjustments in Interest income of ¥(414) million include intersegment interests of ¥(407) million.
f ) Adjustments in interest expenses of ¥(411) million include intersegment interest of ¥(408) million.
g) Adjustments in tax expenses of ¥(4) million include deferred income taxes of ¥(4) million due to eliminations of intersegment reserve forpossible loan losses.
3. Segment profit is adjusted to ordinary profit posted in the Consolidated Statements of Income.

Related Informationa. Information by service
Millions of yen
Year ended March 31, 2014

Ordinary income fromexternal customers:

Lending¥69,594

Investment insecurities¥40,457

Leasing¥16,503

Other¥32,623

Total¥159,179

Note: Ordinary income is presented as the counterpart of sales of a non-banking company. Adjustments refer to differences between ordinary income
and ordinary income posted in Consolidated Statements of Income.
Millions of yen
Year ended March 31, 2013

Ordinary income fromexternal customers:

Lending¥72,655

Investment insecurities¥30,537

Leasing¥15,635

Other¥31,622

Total¥150,451

Note: Ordinary income is presented as the counterpart of sales of a non-banking company. Adjustments refer to differences between ordinary income
and ordinary income posted in Consolidated Statements of Income.

b. Information by geographic area
Segment information by geographic area is not disclosed since over 90% of the total consolidated ordinary income and tangible fixed
assets of the Bank and its consolidated subsidiaries resides in Japan.

42

c. Information by customer
Segment information by customer has not been disclosed since no single customer represented 10% or more of total ordinary
income.
Impairment loss information by the reportable segments
Millions of yen
The reportable segment
Year ended March 31, 2014

Impairment loss:

Banking operations

Leasing

¥169

Other

Total

¥―

¥169

Total

¥427

¥597

Note: Other includes idle assets and the like of the consolidated subsidiaries and includes adjustments of ¥(31) million.
Millions of yen
The reportable segment
Year ended March 31, 2013

Impairment loss:

Banking operations

Leasing

¥228

Other

Total

¥—

¥228

Total

¥80

¥308

Note: Other includes idle assets and the like of the consolidated subsidiaries.
Amortization and unamortized balance of goodwill
Millions of yen
The reportable segment
Year ended March 31, 2014

Negative goodwill:
Amortization
Unamortized balanceBanking operations

Leasing

¥158
1,975

Other

Total

¥―
―

¥158
1,975

Total

¥―
―

¥158
1,975

Millions of yen
The reportable segment
Year ended March 31, 2013

Negative goodwill:
Amortization
Unamortized balanceBanking operations

¥158
2,133

Leasing

Other

Total

¥—
—

Gain on negative goodwill
Not applicable for the fiscal year ended March 31, 2014 and 2013.

43

¥158
2,133

Total

¥—
—

¥158
2,133

23. Leases(a) Finance leases
Finance lease transactions in which ownership of leased property is not transferred to the lessee are accounted for as operatingleases, book value (after deduction of accumulated depreciation) of lease assets included in tangible fixed assets and intangible
assets as of the previous balance sheet date (March 31, 2008) was recorded as the initial balance of “Lease receivables and lease
investment assets.”), as follows:
As lessee
Acquisition cost, aggregate depreciation expenses, and book value at March 31, 2014
Tangible fixed assets

Total

Acquisition cost

¥5 million¥5 million

Accumulated Depreciation expenses¥3 million¥3 million

Book value at term-end¥1 million¥1 million

Note: The acquisition cost presented above is inclusive of interest expenses, as the balance of acquisition cost and minimum lease payment is
insignificant compare to the total book value of tangible fixed assets.

Acquisition cost, aggregate depreciation expenses, and book value at March 31, 2013
Tangible fixed assets

Total

Acquisition cost

¥5 million¥5 million

Accumulated Depreciation expenses¥3 million¥3 million

Book value at term-end¥2 million¥2 million

Note: The acquisition cost presented above is inclusive of interest expenses, as the balance of acquisition cost and minimum lease payment is
insignificant compare to the total book value of tangible fixed assets.

Lease payments that would have been required for finance leases at March 31, 2014:
Within one year

Over one year

Total

¥0 million¥1 million¥1 million

Note: Lease payments presented above is inclusive of interest expenses, as the balance of acquisition cost and minimum lease payment is
insignificant compare to the total book value of tangible fixed assets.

Lease payments that would have been required for finance leases at March 31, 2013:
Within one year

Over one year

Total

¥0 million¥1 million¥2 million

Note: Lease payments presented above is inclusive of interest expenses, as the balance of acquisition cost and minimum lease payment is
insignificant compare to the total book value of tangible fixed assets.

Lease fees paid and depreciation expenses that would have been incurred under finance leases for the fiscal year ended
March 31, 2014:
Lease fees

Depreciation expenses¥0 million¥0 million

Note: Calculation method for depreciation expenses
The lease assets are depreciated by the straight-line method on the assumption that the lease term is the useful life and the residual value is
zero.

Lease fees paid and depreciation expenses that would have been incurred under finance leases for the fiscal year ended
March 31, 2013:
Lease fees

Depreciation expenses¥0 million¥0 million

Note: Calculation method for depreciation expenses
The lease assets are depreciated by the straight-line method on the assumption that the lease term is the useful life and the residual value is
zero.

44

(b) Operating leases
Future lease payments under non-cancellable operating lease transactions for the fiscal year ended March 31, 2014 were as
follows:
Within one year

Over one year

Total

As lessee¥53 million¥250 million¥303 million

As lessor¥4 million¥― million¥4 million

Future lease payments under non-cancellable operating lease transactions for the fiscal year ended March 31, 2013 were as
follows:
Within one year

Over one year

Total

As lessee¥46 million¥279 million¥325 million

As lessor¥18 million¥4 million¥22 million

No losses are recognized for the impairment of lease assets.

24. Financial Instruments(1) Status of Financial Instrumentsa. Policy on Financial Instruments
The Bank and its nine consolidated subsidiaries (the “Group”) provide financial services such as leasing, agent of banking
administrative work and securities business, and centering on banking service.
The Group raises funds by acceptance of the deposits, and invests the funds in loans and securities. We have financial assets andliabilities of which the values fluctuate with changes in interest rates, foreign exchange rates and market prices. To avoid adverse
effects from such fluctuations, the Group performs integrated assets and liabilities management (the “ALM”) in each company.
Moreover, we are engaged in derivatives transactions, such as those related to interest rates, currencies and bonds, for hedging
and non-hedging purposes. Some consolidated subsidiaries are also engaged in interest rate related derivatives in connection withinvestments in securities and for hedging purposes.
b. Financial Instruments and Risks
The financial assets held by the Group consist primarily of securities and loans. Loans are subject to credit risk which could cause
financial losses to the Group from non-performance of obligations by borrowers. Securities include mainly bonds, stocks and theseare held trading, held-to-maturity and available-for-sale purposes. With regard to securities, the Group is exposed to credit risk ofissuers, interest-rate risk, and market price volatility risk.
The deposits include current deposits and savings deposits without maturities, and time deposits with maturities. These deposits
expose the Group to liquidity risk that could be caused by concentrated withdrawals by customers.
The Group has liquidity risk with the borrowed money and bonds that it would become impossible to execute payments at the due
dates when the Group lost access to the financial markets. Although the floating-rate borrowings expose us to the interest rate risk,
we partially mitigate this risk using interest rate swaps.
We are engaged in derivatives transactions to meet customers’ demands to hedge exchange-rate and interest-rate risks and to
appropriately manage the Bank’s market risks. Moreover, we utilize derivatives transactions for efficient ALM and hedging ofindividual transactions.
Derivatives transactions have market risk that losses could arise from market changes including those in interest rates andexchange rates. Additionally, derivatives transactions have credit risk that transactions are not fulfilled as provided by the contracts
due to an event such as a failure of the counterparty.
Regarding hedging transactions to offset fluctuations in interest rates, the hedged items (e.g., loans) and the hedging instruments(e.g., interest rate swaps) are grouped by maturity to assess the effectiveness. As for cash flow hedges, we examine interest-ratecorrelation between the hedged items and the hedging instruments. Moreover, to assess the effectiveness of hedging transactions
for foreign exchange risk, we designate transactions such as currency swaps and foreign exchange swaps as the hedging
instruments and verify that we hold foreign currency positions of those hedging instruments that match the hedged items including
monetary claims and obligations denominated in foreign currencies. We also perform “after-the-fact test” to confirm certain interest
rate swaps continuously meet the requirements for exceptional accrual method.
We have set position limits and loss limits for trading transactions involving short-term purchases and sales of financial
instruments.

45

c. Risk Management for Financial Instruments(a) Integrated Risk Management
The Bank holistically controls risks from various financial assets and liabilities and risks related to banking business throughintegrated risk management. The Bank calculates apportionable risk capital using Tier I capital and allocates by risk category and by
department. The Bank periodically quantities risks it takes and controls such risks within the allocated capital. The Bank assesses
unquantifiable risks using stress test and other measures.
(b) Credit Risk Management
The Group has enacted “Guidelines for Credit Risk Management,” which provides for basic policies comprising appropriate credit
exposure management on individual and portfolio bases. The portfolio-based credit exposure management involves diversificationof risk. Credit Risk Management Group has been segregated from the divisions under Business Headquarters to achieve rigorous
credit review, and conducts thorough monitoring of borrower’s financial condition to prevent deterioration of loans.
In the self-assessments that evaluate the quality of assets, the business offices categorize the borrowers based on credit ratings,
which are then reviewed by Credit Examination Division in the Headquarters. Furthermore, Corporate Audit Division examines
results and processes of the self-assessments for accuracy and adequacy. As for credit risk of the issuers of securities, Treasury andSecurities Division monitors credit information and market prices and gives the issuers credit ratings as well as carries out
self-assessments of the issuers like for general borrowers.
(c) Market Risk Management(i) Interest-rate Risk Management
The Group has set risk limits corresponding to the Group’s financial strength to interest-rate risk in the banking account, and applies
and monitors the limits rigorously through the ALM. In order to control the interest-rate risk appropriately: The Group has established “Risk Management Basic Rules,” “Integrated Risk Management Rules,” and “ALM Guidance.” The Board of Directors (the “Board”) establishes risk tolerance limits for interest-rate risk within the allocable capital range after
discussions at the General Budget Committee every half year.
The ALM Committee discusses and reports to the Board detail plans to address interest-rate risk every month.
Interest-rate risk is measured using value at risk (“VaR”). The ALM Committee sets alarm points somewhat below the risk limits
and monitors the points as well as the limits on a monthly basis.
Moreover, the Group analyzes interest-rate risk from various aspects using tools such as basis-point value (“BPV”), the scenario
analysis (simulation method) and the interest rate sensitivity analysis in addition to VaR, and controls the risk within a tolerable range
reflective of the Group’s financial strength.
(ii) Foreign Exchange Risk Management
The Group controls foreign exchange risk by using hedging instruments such as currency swaps and foreign exchange swaps. In
addition, the Group also enters into offsetting transactions in financial markets on an individual or aggregate basis, in order toreverse out foreign exchange risk arising from foreign exchange transactions offered by customers. Additionally, the Group converts
into yen an amount equivalent to monthly interest income denominated in foreign currencies every month, in order to mitigate foreignexchange risk arising from foreign-currency denominated revenues.
(iii) Price Fluctuation Risk Management
The Group has set risk limits corresponding to the Group’s financial strength to price-fluctuation risk arising from financial
instruments such as stocks and investment trusts, and applies and monitors the limits rigorously through the ALM.
The Board establishes risk tolerance limits for price-fluctuation risk within the allocable capital range after discussions at theGeneral Budget Committee every half year.
Price-fluctuation risk is measured using VaR. The ALM Committee sets alarm points somewhat below the risk limits and monitors
the points as well as the limits on a monthly basis. To prevent unrealized losses from being accumulated, the Group monitors andmanages unrealized gains and losses under certain policies on a daily basis.
(iv) Derivatives Transactions
The Group utilizes derivatives transactions chiefly as hedging instruments for interest-rate and foreign exchange risks. The Group
controls counterparty credit risk in derivatives transactions by setting credit limits.
For derivatives transactions with financial institutions, the Group sets an individual credit line and manages credit exposures on adaily basis in accordance with “Credit Line Management Rule for Banking and Security Companies.”
For derivatives transactions with customers, the Group also sets an individual credit line to reflect factors such as thecreditworthiness and outstanding transactions, just like for financing transactions, and manages the credit exposures together withthose arising from other transactions on an individual basis.
(v) Trading Transactions
The Group primarily trades bonds, foreign exchanges and derivatives transactions for trading purposes. We set utilize certain
measures such as position limits, risk tolerance limits and loss limits in accordance with “Trading and Risk Management Rules.”46

(vi) Quantitative Information related to Market Risk
1. Banking Account(1) Interest rate risk
The Bank adopts the variance-covariance method as the measurement method (a holding period of 6 months, a confidence intervalof 99%, and observation period of 5 years) for calculating VaR related to interest rate risk of interest rate swaps in loans and bills
discounted, domestic bonds, deposits, borrowed money, corporate bonds and derivatives. The Bank adopts the historical simulation
method (a holding period of 6 months, a confidence interval 99%, and observation period of 5 years) for calculating VaR related tointerest rate risk of interest rate swaps and currency swaps in foreign bonds, trust beneficiary right, market fund transactions andderivatives. As of March 31, 2014 VaR related to interest rate risk was ¥37,338 million.
(2) Price fluctuation risk
The Bank adopts the historical simulation method (a holding period of 6 months, a confidence interval of 99%, and observation
period of 5 years) for calculating VaR related to price fluctuation risk of listed equities and mutual funds. As of March 31, 2014 VaR
related to price fluctuation risk was ¥55,281 million. Correlation between interest rate risk and price fluctuation risk has not been
considered.
2. Trading Account
The Bank adopts the historical simulation method (a holding period of 1 day, a confidence interval of 99%, and observation period of
5 years) for calculating VaR related trading securities, trading purpose foreign exchange transactions and derivatives such as
forward transactions and option transactions. As of March 31, 2014, VaR related to trading account was ¥1 million.
3. Validity of VaR
The Bank performs back testing to compare VaR calculated by its internal model against actual profit and loss to confirm themeasurement model used captures market risk with sufficient accuracy. However, VaR statistically quantifies market risk calculated
based on past market movements. Therefore, there could be cases in which VaR cannot capture risk under sudden and dramaticchanges in market conditions beyond normal circumstances.
(d) Management of Liquidity Risk in Funding
To manage liquidity risk under “Market and Liquidity Risk Management Rules,” the Bank:
 Conducts financing activities after fully analyzing its cash flows.
 Pays continuous attention to the balance sheet structure, lines of credit provided to the Group, collateral management andcosts to maintain the liquidity.
 Strives to maintain the diversity and stability of funding sources.
In addition, the liquidity risk borne by the Group is reported to the Board and the ALM Committee on a monthly basis.
d. Supplementary Explanation Concerning Matters Related to Fair Value of Financial Instruments
Fair value of financial instruments includes a value based on market prices as well as a reasonably calculated value when no market
price is available. Because certain assumptions are used in the fair value calculation, such value may vary when different
assumptions are used.

47

(2) Disclosures Regarding Fair Value of Financial Instruments and Other Items
The table below sets forth fair values of financial instruments at March 31, 2014 and 2013 except for those whose fair values are
extremely difficult to determine (see (Note2)). In addition, those financial instruments which are immaterial are not listed below.
Millions of yen
March 31, 2014

Consolidated balance
sheet amount¥224,661(1) Cash and due from banks

Fair value

Difference¥224,661¥―(2) Securities
35,75735,986

228

Available-for-sale securities

2,715,449

2,715,449―(3) Loans and bills discounted

5,363,389

Held-to-maturity debt securities(41,349)

Reserve for possible loan losses (*1)
Sub-total

5,322,040

5.392,304

70,263

Total assets

8,297,909

8,368,401

70,491(1) Deposits

7,497,902

7,480,413(511)(2) Negotiable certificates of deposit

10,03010,030―(3) Payables under securities lending transactions

105,996

105,996―(4) Borrowed money

218,248

217,619629

7,814,178

7,814,059

118―

Total liabilities
Derivatives transactions (*2)
Transactions not accounted for as hedging instruments
Transactions accounted for as hedging instruments
Total derivatives transactions

494

494

(4,827)(4,827)―¥(4,332)¥(4,332)¥―(*1) General and individual reserves for possible loan losses are deducted from loans and bills discounted.
(*2) Derivatives transactions recorded in trading assets/liabilities and other assets and other liabilities are presented on an aggregate basis. Claims anddebts that arose from derivatives transactions are presented on a net basis.
Millions of yen
March 31, 2013

Consolidated balance
sheet amount(1) Cash and due from banks¥318,396

Fair value

Difference¥318,396¥―(2) Securities
34,28934,544254

Available-for-sale securities

Held-to-maturity debt securities

2,608,405

2,608,405―(3) Loans and bills discounted

5,108,316
5,141,569

78,239Reserve for possible loan losses (*1)(44,986)

Sub-total

5,063,329

Total assets

8,024,420

8,102,914

78,494(1) Deposits

7,344,463

7,345,331(867)(2) Negotiable certificates of deposit

15,45915,459―(3) Payables under securities lending transactions

91,28391,283―(4) Borrowed money

120,245

120,657(412)

7,571,452

7,572,732(1,280)―Total liabilities
Derivatives transactions (*2)
Transactions not accounted for as hedging instruments
Transactions accounted for as hedging instruments
Total derivatives transactions

511

511

(6,692)(6,692)―¥(6,181)¥(6,181)¥―(*1) General and individual reserves for possible loan losses are deducted from loans and bills discounted.
(*2) Derivatives transactions recorded in trading assets/liabilities and other assets and other liabilities are presented on an aggregate basis. Claims anddebts that arose from derivatives transactions are presented on a net basis.

48

(Note 1) Calculation Methods for Fair Value of Financial Instruments
Assets(1) Cash and Due from Banks
Since fair value of these items approximates the book value, we deem the carrying value to be the fair value.
(2) Securities
Fair value of shares is determined by reference to quoted market prices on stock exchanges. Fair value of bonds is determined byreference to quoted market prices or prices offered by financial institutions, or based on the price best estimated. Fair value ofinvestment trusts is determined by reference to their publicly available net asset value per unit. Fair value of privately placed bonds
guaranteed by the Bank is determined by the discounted cash flow method. The discount rates used in the calculation were
calculated based on the bankruptcy probability by credit rating and the coverage ratio of an individual claim.
In the fiscal year ended March 31, 2014, we treat market prices as fair value for Japanese Government Bonds (JGBs) withvariable interest rates and securitized products that we own.
We used a reasonably estimated value as the fair value of securitized products (e.g., collateralized loan obligations), except thosesubject to impairment, of which external credit rating is not downgraded, of which collateral asset pools are not deteriorated, andwhich the Group intends to continue to hold. The reasonably estimated price was calculated using the discounted cash flow method
or other pricing methods using the default rate, recovery rate, pre-payment rate and discount rate as primary pricing variables.
Please see “24. Securities Information” for details of securities in each purpose of holding.
(3) Loans and bills discounted
Since floating-rate loans and bills discounted reflect market interest rates in a short period, the fair value approximates the carrying
value unless the credit standing of the borrower is not significantly different after the loan was made or the bill was drawn. The fairvalue is therefore deemed equal to the carrying value.
Fair value of fixed-rate loans and bills discounted are determined as the total of principal and interest discounted by the type,internal credit rating and maturities. Discount rates used in the calculation were interest rates which would be applied when similarloans were newly extended. Fair value of fixed-rate loans and bills discounted whose terms are short (i.e., within one year)
approximates their carrying value and is therefore deemed equal to the carrying value.
Possible losses on legally bankrupt loans, substantially bankrupt loans and potentially bankrupt loans are computed based on
recoverable amounts estimated as the present value of future cash flows or the collectible amounts from collateral and guarantees.
Then the fair value of those loans approximates the consolidated balance sheet amount at the closing date minus the currently
estimated losses, and is therefore deemed equal to the amounts.
Fair value of loans and bills discounted for which repayment terms are not set because of their attributes (e.g., loans are limited tothe amounts of assets pledged as collateral) is assumed to approximate their carrying value, considering the expected repayment
periods and interest rate conditions, and are deemed equal to the carrying value.
Liabilities(1) Deposits and (2) Negotiable certificates of deposit
For demand deposits, we deem the amount that the Group would require to pay on the consolidated balance sheet date (i.e.,
carrying value) to be the fair value.
With respect to time deposits with long deposit terms (i.e., one year or longer), we used the present value of future cash flows
calculated by time band as the fair value. The discount rates used in the calculation were the interest rates that would apply to newly
accepted deposits.
(3) Payables under securities lending transactions
As for short-term loans with maturity of one year or less, the book value is deemed as the fair value since the fair value approximates
the book value.
(4) Borrowed money
We used as the fair value the present value of future cash flows calculated by borrowing period. The discount rates used in thecalculation were interest rates that would be applied to new borrowings. Fair value of borrowings for a short term (i.e., within oneyear) approximates the carrying value and is deemed equal to the carrying value.
Derivatives Instruments
See “26. Derivatives.”

49

(Note 2) The following table summarizes financial instruments, of which fair value is extremely difficult to determine:
Fair value of available-for-sale securities in the above table excludes the following items at March 31, 2014 and 2013.
Millions of yen
Consolidated balance sheet amounts
2014Years ended March 31,

2013

Unlisted stocks (*1) (*2)

¥5,502

Investments in partnerships and others (*3)

3,594

3,373

Total

¥9,097¥8,704¥5,330(*1) Unlisted stocks are excluded from “Disclosures Regarding Fair Value of Financial Instruments and Other Items” since no market price is available andtheir fair value is extremely difficult to determine.
(*2) Impairment losses on unlisted stocks were ¥5 million and ¥43 million, as of March 31, 2014 and 2013.
(*3) Out of investments in partnerships and others, certain partnerships holding assets whose fair value was extremely difficult to determine are excluded
from “Disclosures Regarding Fair Value of Financial Instruments and Other Items.”(Note 3) Redemption schedule of money claims and securities with stated maturities after the consolidated balance sheet
date is as follows:
Millions of yen
March 31, 2014

1 year or less

1-3 years

3-5 years

5-7 years

7-10 years

Over 10 years¥224,661

¥―

¥―

¥―

¥―

¥―

Held-to-maturity debt securities

12,054

12,526

11,174―――

Japanese government bonds

9,500

4,000

―

―

―

―

Municipal bonds

―

―

50

―

―

―

Corporate bonds

2,554

8,526

11,124―――248,496
140,700

448,986
260,600

671,099379,200

598,264
417,800

254,480
125,000

96,553―

Municipal bonds

60,462

87,123

123,104

15,75633,305―

Corporate bonds

31,061

41,58347,179129,795

94,257

28,109Foreign bonds

13,73058,962

117,780

34,685―68,444

Other

2,542

716

3,835

227

1,917

―

Loans and bills discounted (*)

1,482,505

1,016,357

782,908

443,699422,683

1,043,050

Total¥1,967,717¥1,477,871¥1,465,182¥1,041,964¥677,163¥1,139,604

Cash and due from banks
Securities

Available-for-sale securities
with maturities
Japanese government bonds(*) Legally bankrupt loans, substantially bankrupt loans and potentially bankrupt loans amounting to ¥102,165 million, and loans and bills discounted without
maturities amounting to ¥70,018million were excluded from the table above.
Millions of yen
March 31, 2013

Cash and due from banks

1 year or less

1-3 years

3-5 years

5-7 years

7-10 years

Over 10 years¥318,396

¥―

¥―

¥―

¥―

¥―

Held-to-maturity debt securities

13,205

10,872

10,211―――

Japanese government bonds

11,000

2,100

―

―

―

―

Municipal bonds

―

―

―

―

―

―

Corporate bonds

2,205

8,772

10,211―――

231,132
101,000

489,354
257,400

504,541
342,900

444,097
330,300

471,485
318,000

106,321―

Municipal bonds

37,037

146,930

61,308―50,313―

Corporate bonds

69,16655,43736,46475,408

101,752

33,784Foreign bonds

21,515

26,52662,52938,389―71,207

Other

2,413

3,059

1,338

―

1,420

1,329

Loans and bills discounted (*)

3,072,577

697,694506,993

251,517219,949

172,021

Total¥3,635,310¥1,197,920¥1,021,745¥695,615¥691,434¥278,342

Securities

Available-for-sale securities
with maturities
Japanese government bonds(*) Legally bankrupt loans, substantially bankrupt loans and potentially bankrupt loans amounting to ¥117,692 million, and loans and bills discounted without
maturities amounting to ¥69,871million were excluded from the table above.

50

(Note 4) Redemption schedule of borrowed money and other interest-bearing liabilities after the consolidated balance
sheet date at March 31, 2014 and 2013 is as follows:
Millions of yen
1 year or lessMarch 31, 2014

1-3 years

3-5 years

5-7 years

7-10 years

Over 10 years¥6,772,166¥597,972¥103,132¥2,524¥4,106¥―

Negotiable certificates of deposit

10,030

―

―

―

―

―

Payables under securities
lending transactions
Borrowed money

105,996
206,032

―
9,191

―
3,025

―
―

―
―

―
―

¥7,094,226¥607,163¥106,157¥2,524¥4,106¥―

Deposits (*)Total(*) Demand deposits were included in “1 year or less.”
Millions of yen
March 31, 2013

1 year or less

Deposits (*)¥6,616,152¥615,630¥106,207¥2,099¥4,372¥―

Negotiable certificates of deposit

15,459

―

―

―

―

―

Payables under securities
lending transactions
Borrowed money

91,283
103,735―
11,540

―
4,970

―
―

―
―

―
―

¥6,826,631¥627,170¥111,177¥2,099¥4,372¥―Total

1-3 years

3-5 years

5-7 years

7-10 years

Over 10 years(*) Demand deposits were included in “1 year or less.”

25. Securities Information
The amounts shown in the following tables include “Securities”, trading securities in “Trading assets” and trust beneficiary right in“Other debt purchased”.
Year ended March 31, 2014(a) Trading Securities
Millions of yen
March 31, 2014

Unrealized gain recognized as income¥(10)

Trading securities(b) Held-to-maturity debt securities
Type

March 31, 2014

Securities with fair value
exceeding consolidatedbalance sheet amountMillions of yen
Consolidated balance
sheet amount

Difference¥26,178

¥230

4,903

4,904

1

Municipal bonds

49

50

0

Corporate bonds

20,994

21,223

228

―

―

―

Foreign bonds

―

―

―

Other

―

―

―

Sub-total

25,947

26,178

230

Bonds

9,810

9,808

(2)

8,600

8,600

(0)

Municipal bonds

―

―

―

Corporate bond

1,210

1,208

(1)

―

―

―

Foreign bonds

―

―

―

Other

―

―

―

Japanese government bonds

Other:

Securities with fair value notexceeding consolidatedbalance sheet amount

Fair value¥25,947

Bonds:

Japanese government bonds

Other:

Sub-total
Total

51

9,810

9,808

(2)

¥35,757¥35,986¥228

(c) Available-for-sale securities
Type

March 31, 2014

Securities with consolidatedbalance sheet amountexceeding acquisition cost

Millions of yen
Consolidated balance
sheet amount

Difference¥195,165¥111,070¥84,095

Bonds

2,004,673

1,969,315

35,357

Japanese government bonds

1,358,037

1,334,741

23,295

Municipal bonds

277,457

273,6113,845

Corporate bonds

369,178

360,962

8,215
15,940267,459

251,519

Foreign bonds

163,895

160,913

2,982

Other

103,563

90,606

12,957

Sub-total

2,467,298

2,331,905

135,393

Stocks13,96815,752(1,783)

Bonds

73,38673,449(62)

Japanese government bonds

10,002

10,002(0)

Municipal bonds

46,096

46,124

(27)

Other

Securities with consolidatedbalance sheet amount notexceeding acquisition cost

Acquisition cost

StocksCorporate bonds

17,287

17,322

(34)

Other

169,491

171,574(2,082)Foreign bonds

139,163

140,591(1,428)Other

30,32830,982(654)

Sub-total

256,846

260,776(3,929)¥2,724,144¥2,592,681¥131,463

Total(d) Held-to-maturity debt securities sold during the fiscal year
No held-to-maturity debt securities were sold during the fiscal year ended March 31, 2014.
(e) Available-for-sale securities sold during the fiscal year
Millions of yen
Year ended March 31, 2014

Sales proceeds

Gains on sales

Losses on sales

Stocks¥46,144¥7,352¥1,458

Bonds

258,419

1,231

2,277

249,416

1,224

1,911

Municipal bonds

―

―

―

Corporate bonds

9,003

7

365

Japanese government bonds

103,653

5,965

3,937

Foreign bonds

88,562

1,662

3,937

Other

15,0914,302

0¥408,217¥14,549¥7,673

Other

Total

(f) Securities Recognized for Impairment Loss
For available-for-sale securities with market values, in cases where the market value has fallen substantially from the acquisition
price and it is considered there is little likelihood of recovery to the acquisition price level, the securities are stated at market value on
the consolidated balance sheets and the difference between the market value and the acquisition price is posted as a loss(“impairment loss”).
Impairment losses for the fiscal year were nil.
Pursuant to “Practical Guidelines for Accounting for Financial Instruments” (JICPA Accounting Committee Report No. 14), theBank recognized the impairment losses on listed equity shares whose average market price over the one-month period immediately
prior to the balance sheet date declined by 30% or more compared with acquisition cost, and other securities whose market price atthe balance-sheet date also declined by 30% or more compared with acquisition cost.
(g) Money held in trust classified as available-for-sale securities
Not applicable as of March 31, 2014.

52

(h) Unrealized gain on available-for-sale securities
March 31, 2014

Millions of yen

Unrealized (losses) gains:¥131,987

Available-for-sale securities—

Other money held in trust
Deferred tax assets (liabilities)(45,535)

Net unrealized gains on available-for-sale securities

86,452(7)

Less minority interests¥86,445

Unrealized gains on available-for-sale securities

Note: The total unrealized gains include an unrealized gain of ¥524 million on available-for-sale securities, which constitute the property of related
associations.

Year ended March 31, 2013(a) Trading Securities
Millions of yen
March 31, 2013

Unrealized gain recognized as income

Trading securities¥(4)(b) Held-to-maturity debt securities
Type

March 31, 2013

Securities with fair value
exceeding consolidatedbalance sheet amountMillions of yen
Consolidated balance
sheet amount

Bonds:

Difference¥30,177

10,10010,101

1

Municipal bonds

―

―

―

Corporate bonds

19,80820,075

267

―

―

―

Foreign bonds

―

―

―

Other

―

―

―

Sub-total

29,90830,177

268

Bonds

4,380

4,366

(13)
(0)

Japanese government bonds

Other:

Securities with fair value notexceeding consolidatedbalance sheet amount

Fair value¥29,908

Japanese government bonds

¥268

3,000

3,000

Municipal bonds

―

―

―

Corporate bonds

1,380

1,366

(13)
(0)

Other:

774

774

Foreign bonds

―

―

―

Other

774

774

(0)

Sub-total
Total

53

5,155

5,141

(13)

¥35,063¥35,318¥254

(c) Available-for-sale securities
Type

March 31, 2013

Securities with consolidatedbalance sheet amountexceeding acquisition cost

Millions of yen
Consolidated balance
sheet amount

Difference¥177,231¥108,773¥68,457

Bonds

1,987,026

1,942,887

44,138Japanese government bonds

1,300,188

1,271,840

28,347

Municipal bonds

301,379

295,647

5,731

Corporate bonds

385,458

375,398

10,05924,602

Other

Securities with consolidatedbalance sheet amount notexceeding acquisition cost

Acquisition cost

Stocks

246,783

222,181

Foreign bonds

178,010

171,716

6,294

Other

68,77350,46418,308Sub-total

2,411,041

2,273,842

137,199

Stocks15,39017,749(2,358)

Bonds

103,888

104,159(271)

Japanese government bonds

102,090102,359(269)

Municipal bonds

―

―

―

Corporate bonds

1,798

1,800

(1)

Other

89,00991,708(2,698)Foreign bonds

57,87858,479

(600)

Other

31,13133,229(2,098)Sub-total
Total

208,288

213,617(5,328)¥2,619,330¥2,487,460¥131,870(d) Held-to-maturity debt securities sold during the fiscal year
No held-to-maturity debt securities were sold during the fiscal year ended March 31, 2013.
(e) Available-for-sale securities sold during the fiscal year
Millions of yen
Year ended March 31, 2013

Sales proceeds

Gains on sales

Losses on sales

Stocks¥18,958¥1,178¥1,705

Bonds

242,4133,640

81

222,5093,296

28

Municipal bonds

―

―

―

Corporate bonds

19,903

343

52

Japanese government bonds

Other47,3381,031

408

Foreign bonds

41,133

237

408

Other

6,204

793

―

¥308,710¥5,850¥2,195Total(f) Securities Recognized for Impairment Loss
For available-for-sale securities with market values, in cases where the market value has fallen substantially from the acquisition
price and it is considered there is little likelihood of recovery to the acquisition price level, the securities are stated at market value on
the consolidated balance sheets and the difference between the market value and the acquisition price is posted as a loss(“impairment loss”).
Impairment losses for the fiscal year amounted to ¥1,387 million, comprising ¥904 million from stocks and ¥483 million frombonds.
Pursuant to “Practical Guidelines for Accounting for Financial Instruments” (JICPA Accounting Committee Report No. 14), theBank recognized the impairment losses on listed equity shares whose average market price over the one-month period immediately
prior to the balance sheet date declined by 30% or more compared with acquisition cost, and other securities whose market price atthe balance-sheet date also declined by 30% or more compared with acquisition cost.
(g) Money held in trust classified as available-for-sale securities
Not applicable as of March 31, 2013.

54

(h) Unrealized gain on available-for-sale securities
March 31, 2013

Millions of yen

Unrealized (losses) gains:
Available-for-sale securities¥132,661

Other money held in trust—

Deferred tax assets (liabilities)(45,612)

Net unrealized gains on available-for-sale securities

87,049Less minority interests(2)

Unrealized gains on available-for-sale securities¥87,047

Note: The total unrealized gains include an unrealized gain of ¥791 million on available-for-sale securities, which constitute the property of related
associations.

26. Money held in trust(1) Trading money held in trust
Not applicable as of March 31, 2014
Not applicable as of March 31, 2013
(2) Held-to-maturity money held in trust
Not applicable as of March 31, 2014
Not applicable as of March 31, 2013
(3) Other money held in trust
Not applicable as of March 31, 2014
Not applicable as of March 31, 201355

27. Derivatives

Year ended March 31, 2014
1. Derivative instruments not accounted for as hedges
Regarding the derivative instruments to which hedge accounting is not applied, the following tables summarize contract amount,market value and unrealized gain or loss for each type of derivative transaction, respectively, at the end of the consolidated balance
sheet date, as well as determination of fair value.
Contract amount does not represent itself the market risk of derivative instruments.
(1) Interest-rate Derivatives
Millions of yen
Contract amountOver 1 year

Fair value

Unrealized gain (loss)

March 31, 2012
Transactions
listed on exchanges:

Interest-rate futures:
Sold

¥―

Bought

―

¥―

¥―

¥―

Interest-rate options:
Sold

―

―

―

―

Bought――――Over-the-counter transactions:
Forward rate agreements:
Sold

―

―

―

―

Bought

―

 ―

―

―

Receivable fixed / payable floating

153,920

33,626384

384

Receivable floating / payable fixed

153,920

33,626

(54)

(54)

―

―

―

―

Sold

―

―

―

―

Bought

―

―

―

―

Sold

340

110

(0)

9

Bought

340

110

0

(4)

Interest-rate swaps:

Receivable floating / payable floating
Interest-rate options:

Caps:

Swaption:Sold

48,783

4,650

(92)

22

Bought48,783

4,650

92

92

Sold

―

―

―

―

Bought

―

―

―

―

¥330

¥450

Others:

Total

―――

―――

Notes: 1. The transactions in this table have been revalued at the market rates prevailing on the balance sheet date, and unrealized gain (loss) is included in
the Consolidated Statements of Income.
2. Calculation of fair value
The fair value of transactions listed on exchanges has been calculated on the basis of the closing prices on the Tokyo Financial Exchange, etc. The fairvalue of over-the-counter transactions has been calculated at their discounted future cash flows or by utilizing option pricing models.

56

(2) Currency Derivatives
Millions of yen
Contract amountOver 1 year

Fair value

Unrealized gain (loss)March
31, 2013
Transactions
listed on exchanges:

Currency futures:
Sold

¥―

¥―

¥―

¥―

Bought

―

―

―

―

Sold

―

―

―

―

Bought――――258,937

169,438

163

163

Sold

2,062

351

(6)

(6)

Bought

1,110

10

7

7

Currency options:Over-the-counter transactions:
Currency swaps
Forward foreign exchange contracts:

Currency options:Sold12,733

3,583

(270)

(12)

Bought12,733

3,583

270

113
―

Others:
Sold

―

―

―

Bought

―

―

―

―

¥164

¥265

Total

―――

―――

Notes: 1. The transactions in this table have been revalued at the market rates prevailing on the balance sheet date, and unrealized gain (loss) is included in
the Consolidated Statements of Income.
2. Calculation of fair value
Fair value is calculated at discounted future cash flows, etc.

(3) Stock Derivatives
Not applicable as of March 31, 2014.
(4) Bond Derivatives
Millions of yen
Contract amountOver 1 year

Fair value

Unrealized gain (loss)

March 31, 2013
Transactions
listed on exchanges:

Bond futures:
Sold

¥434

¥―

¥0

¥0

Bought

―

―

―

―

Sold

―

―

―

―

Bought――――Bond future options:Over-the-counter transactions:
Bond over-the-counter options:
Sold

―

―

―

―

Bought

―

―

―

―

Sold

―

―

―

―

Bought

―

―

―

―

¥0

¥0

Others:

Total

―――

―――

Notes: 1. The transactions in this table have been revalued at the market rates prevailing on the balance sheet date, and unrealized gain (loss) is included in
the Consolidated Statements of Income.
2. Calculation of fair value
The fair value of transactions listed on exchanges has been calculated on the basis of the closing prices on the Osaka Exchange, Inc. The fair value ofover-the-counter transactions has been calculated at their discounted future cash flows or by option pricing models.

(5) Commodity Derivatives
Not applicable as of March 31, 2014.

57

(6) Credit Derivatives
Not applicable as of March 31, 2014.
2. Derivative Instruments accounted for as hedges
Regarding the derivative instruments to which hedge accounting is applied, the following tables summarize contract amount, market
value and unrealized gain or loss for each type of derivative transaction, respectively, at the end of the consolidated balance sheet
date, as well as determination of fair value.
Contract amount does not represent itself the market risk of derivative instruments.
(1) Interest-rate Derivatives
March 31, 2014
Millions of yen
Method of hedge

Deferred method

TypeInterest rate swap
Receivable fixed /payable floating
Receivable floating /payable fixedInterest rate futures
Interest rate options

Hedged items

Interest bearing financial
assets and liabilities
including loans,available-for-salesecurities, deposits andnegotiable certificates ofdeposit, etc.

Contract amounts¥―¥―

90,000―90,000―(3,333)
―

―

―

―

―

―

―

9,000

9,000

367

38,339―――32,817―――(2,043)¥(5,008)

Interest rate swap
Receivable fixed /payable floating
Receivable floating /payable fixed

Total
Notes:

Fair value

¥―

Other
Exceptional accrual
method for interest
rate swap

Over 1 year

Loans, borrowed money―――

1. Primarily, the Bank applies the deferred method of hedge accounting which is described in “Accounting and Auditing Treatment relating to the
Adoption of ‘Accounting for Financial Instruments’ for Banks,” issued by the Japanese Institute of Certified Public Accountants (“JICPA”), (JICPA
Industry Audit Committee Report No. 24).
2. Determination of fair value:
The fair value of exchange-traded derivative instruments is based on closing prices at the Tokyo Financial Exchange or other relevant exchanges.
The fair value of over-the-counter traded derivative instruments is determined based on a discounted cash flows model, an option pricing modelor other models as appropriate.
3. The exceptional accrual method of hedge accounting, as specifically permitted for certain interest rate swaps, is valued with the hedged items asa whole, so that the fair value is included in the fair value of Loans and Bills Discounted and other items (See: 31. Financial Instruments (2)Disclosures Regarding the Fair Value of Financial Instruments and Other Items).

(2) Currency Derivatives
March 31, 2014
Millions of yen
Method of hedge

Type

Deferred method

Currency swaps
Forward foreign exchange
contracts
Foreign exchange swaps
Other

Treatment for forward
foreign exchange
contracts, etc.

Hedged items

Foreigncurrency-denominatedloans, securities, deposits
and foreign exchanges,
etc.

Contract amounts¥(1,153)―
47,704

―
―

―
(340)

―

―

―

―

―

―

―

―
¥(1,494)

Forward foreign exchange
contracts――――

Fair value¥154

Currency swap

Total

Over 1 year

¥46,084――――――

Notes: 1. Primarily, the Bank applies the deferred method of hedge accounting which is described in “Accounting and Auditing Treatment relating to
Accounting for Foreign Currency Transactions in the Banking Industry” (JICPA Industry Audit Committee Report No. 25).
2. Determination of fair value:
Fair value is determined based on the discounted cash flows model.

(3) Stock Derivatives
Not applicable as of March 31, 2014.

58

(4) Bond Derivatives
Not applicable as of March 31, 2014.

Year ended March 31, 2013
1. Derivative instruments not accounted for as hedges
Regarding the derivative instruments to which hedge accounting is not applied, the following tables summarize contract amount,market value and unrealized gain or loss for each type of derivative transaction, respectively, at the end of the consolidated balance
sheet date, as well as determination of fair value.
Contract amount does not represent itself the market risk of derivative instruments.
(1) Interest-rate Derivatives
Millions of yen
Contract amountOver 1 year

Fair value

Unrealized gain (loss)March
31, 2012
Transactions
listed on exchanges:

Interest-rate futures:
Sold

¥―

¥―

¥―

¥―

Bought

―

―

―

―

Sold

―

―

―

―

Bought

―

―

―

―

Sold

―

―

―

―

Bought――――Interest-rate options:Over-the-counter transactions:
Forward rate agreements:

Interest-rate swaps:
Receivable fixed / payable floating

145,624

23,616288

288

Receivable floating / payable fixed

145,624

23,616

(49)

(49)

―

―

―

―

Sold

―

―

―

―

Bought

―

―

―

―

Sold

547

340

(0)

21

Bought

547

340

0

(11)

Receivable floating / payable floating
Interest-rate options:

Caps:

Swaption:
Sold44,600

2,100

(81)

16

Bought

44,600

2,100

81

81

Sold

―

―

―

―

Bought

―

―

―

―

¥238

¥345

Others:

Total

―――

―――

Notes: 1. The transactions in this table have been revalued at the market rates prevailing on the balance sheet date, and unrealized gain (loss) is included in
the Consolidated Statements of Income.
2. Calculation of fair value
The fair value of transactions listed on exchanges has been calculated on the basis of the closing prices on the Tokyo Financial Exchange, etc. The fairvalue of over-the-counter transactions has been calculated at their discounted future cash flows or by utilizing option pricing models.

59

(2) Currency Derivatives
Millions of yen
Contract amountOver 1 year

Fair value

Unrealized gain (loss)March
31, 2013
Transactions
listed on exchanges:

Currency futures:
Sold

¥―

¥―

¥―

¥―

Bought――――Currency options:
Sold

―

―

―

―

Bought――――532,930

237,128

272

272

Sold

3,810

51

(282)

(282)

Bought

2,507

―

280

280

Sold

10,326

2,069

(234)

16

Bought10,326

2,069

236

70

Over-the-counter transactions:
Currency swaps
Forward foreign exchange contracts:

Currency options:

Others:
Sold

―

―

―

―

Bought

―

―

―

―

¥272

¥357

Total

―――

―――

Notes: 1. The transactions in this table have been revalued at the market rates prevailing on the balance sheet date, and unrealized gain (loss) is included in
the Consolidated Statements of Income.
2. Calculation of fair value
Fair value is calculated at discounted future cash flows, etc.

(3) Stock Derivatives
Not applicable as of March 31, 2013.
(4) Bond Derivatives
Not applicable as of March 31, 2013.
(5) Commodity Derivatives
Not applicable as of March 31, 2013.
(6) Credit Derivatives
Not applicable as of March 31, 2013.

2. Derivative Instruments accounted for as hedges
Regarding the derivative instruments to which hedge accounting is applied, the following tables summarize contract amount, market
value and unrealized gain or loss for each type of derivative transaction, respectively, at the end of the consolidated balance sheet
date, as well as determination of fair value.
Contract amount does not represent itself market the risk of derivative instruments.

60

(1) Interest-rate Derivatives
March 31, 2013
Millions of yen
Method of hedge

Deferred method

TypeInterest rate swap
Receivable fixed /payable floating
Receivable floating /payable fixedInterest rate futures
Interest rate options

Hedged items

Interest bearing financial
assets and liabilities
including loans,available-for-salesecurities, deposits andnegotiable certificates ofdeposit, etc.

Contract amounts

¥

―

¥

―

80,000―(4,220)
―

―

―

―

―

―

―

9,000

9,000

516

43,862―――38,339―――(2,630)¥ (6,333)

Interest rate swap
Receivable fixed /payable floating
Receivable floating /payable fixed

Total
Notes:¥

Fair value

80,000―Other
Exceptional accrual
method for interest
rate swap―

Over 1 year

Loans, borrowed money―――

1. Primarily, the Bank applies the deferred method of hedge accounting which is described in “Accounting and Auditing Treatment relating to the
Adoption of ‘Accounting for Financial Instruments’ for Banks,” issued by the Japanese Institute of Certified Public Accountants (“JICPA”), (JICPA
Industry Audit Committee Report No. 24).
2. Determination of fair value:
The fair value of exchange-traded derivative instruments is based on closing prices at the Tokyo Financial Exchange or other relevant exchanges.
The fair value of over-the-counter traded derivative instruments is determined based on a discounted cash flows model, an option pricing modelor other models as appropriate.
3. The exceptional accrual method of hedge accounting, as specifically permitted for certain interest rate swaps, is valued with the hedged items asa whole, so that the fair value is included in the fair value of Loans and Bills Discounted and other items (See: 31. Financial Instruments (2)Disclosures Regarding the Fair Value of Financial Instruments and Other Items).

(2) Currency Derivatives
March 31, 2013
Millions of yen
Method of hedge

Type

Deferred method

Currency swaps
Forward foreign exchange
contracts
Foreign exchange swaps
Other

Treatment for forward
foreign exchange
contracts, etc.

Hedged items

Foreigncurrency-denominatedloans, securities, deposits
and foreign exchanges,
etc.

Contract amounts(¥2,416)―
20,143

―
―

―
(56)

―

―

―

―

―

―

―

―
¥(2,472)

Forward foreign exchange
contracts――――

Fair value¥―

Currency swap

Total

Over 1 year

¥31,962――――――

Notes: 1. Primarily, the Bank applies the deferred method of hedge accounting which is described in “Accounting and Auditing Treatment relating to
Accounting for Foreign Currency Transactions in the Banking Industry” (JICPA Industry Audit Committee Report No. 25).
2. Determination of fair value:
Fair value is determined based on the discounted cash flows model.

(3) Stock Derivatives
Not applicable as of March 31, 2013.
(4) Bond Derivatives
Not applicable as of March 31, 2013.

61

28. Stock Options(a) The Bank recorded stock option expenses in “General and administrative expenses” of ¥47 million and ¥46 million for the fiscal
years ended March 31, 2014 and 2013, respectively.
(b) Outline of stock options, size and changes(1) Outline of stock options
March 31, 2014

1st equity warrant

2nd equity warrant

Persons to whom stock options are granted

Directors of the Bank: 10

Executive officers of the Bank: 12

Type and number of shares (*)

Common shares: 56,698

Common shares: 41,546

Grant dateAugust 24, 2009

August 24, 2009

Condition for vesting

Not applicableNot applicable

Eligible service period

Not applicableNot applicable

Period for exercise of stock options

From August 25, 2009 to August 24, 2039

From August 25, 2009 to August 24, 2039

March 31, 2014

Persons to whom stock options are granted

3rd equity warrant

Directors of the Bank: 10

4th equity warrant

Executive officers of the Bank: 13

Type and number of shares (*)

Common shares: 79,606

Common shares: 61,881

Grant dateJuly 21, 2010

July 21, 2010

Condition for vesting

Not applicableNot applicable

Eligible service period

Not applicableNot applicable

Period for exercise of stock options

From July 22, 2010 to July 21, 2040

From July 22, 2010 to July 21, 2040

March 31, 2014

5th equity warrant

6th equity warrant

Persons to whom stock options are granted

Directors of the Bank: 10

Executive officers of the Bank: 13

Type and number of shares (*)

Common shares: 78,720

Common shares: 60,999

Grant dateJuly 20, 2011

July 20, 2011

Condition for vesting

Not applicableNot applicable

Eligible service period

Not applicableNot applicable

Period for exercise of stock options

From July 21, 2011 to July 20, 2041

From July 21, 2011 to July 20, 2041

March 31, 2014

7th equity warrant

8th equity warrant

Persons to whom stock options are granted

Directors of the Bank: 10

Executive officers of the Bank: 16

Type and number of shares (*)

Common shares: 76,174

Common shares: 73,080

Grant dateJuly 19, 2012

July 19, 2012

Condition for vesting

Not applicableNot applicable

Eligible service period

Not applicableNot applicable

Period for exercise of stock options

From July 20, 2012 to July 19, 2042

From July 20, 2012 to July 19, 2042

March 31, 2014

Persons to whom stock options are granted

9th equity warrant

Directors of the Bank: 10

10th equity warrant

Executive officers of the Bank: 15

Type and number of shares (*)

Common shares: 47,254

Common shares: 41,968

Grant dateJuly 18, 2013

July 18, 2013

Condition for vesting

Not applicableNot applicable

Eligible service period

Not applicableNot applicable

Period for exercise of stock options

From July 19, 2013 to July 18, 2043

From July 19, 2013 to July 18, 2043(*) The table above presents the number of common shares converted from the stock options.

62

(2) Size and changes of stock options
a. Number of stock options in the fiscal years ended March 31, 2014
March 31, 2014

1st equity
warrant

2nd equity
warrant

3rd equity
warrant

4th equity
warrant

5th equity
warrant

6th equity
warrant

7th equity
warrant

8th equity
warrant

9th equity
warrant

10th
equitywarrant

37,408―

13,776―52,521―

28,073―78,720―51,131
 ―76,174―

68,730―47,254―

41,968―Non-vested:
Previous fiscal
year-end outstanding
GrantedForfeited
VestedOutstanding on
March 31, 2014
Vested:Previous fiscal
year-end outstanding
Vested

―

―

―

―

―

―

―

―

―

―

13,812

10,496

19,392

19,017

27,20024,221

26,32024,360――23,596

3,280

33,1299,056

51,52026,91049,85444,37047,254

41,968―13,812

10,496

19,392

19,017

27,20024,221

26,32024,360―Exercised

13,812

10,496

19,392

19,017

27,20024,221

26,32024,360――Forfeited

―

―

―

―

―

―

―

―

―

―

Exercisable

―

―

―

―

―

―

―

―

―

―

1st equity
warrant

2nd equity
warrant

3rd equity
warrant

4th equity
warrant

5th equity
warrant

Yen
6th equity
warrant

7th equity
warrant

8th equity
warrant

9th equity
warrant

10th
equitywarrant

1

1

1

1

1

1

1

1

1

1

499

499

499

499

499

499

499

499

―

―

417

439

297

318

300

321

310

331

518

542

b. Price information

March 31, 2014

Exercise price
Average share price at
exercise
Fair value at the gratedate

c. Valuation technique for fair value of stock options
Stock options granted during the fiscal year ended March 31, 2014 were valued using the Black-Scholes option pricing model andthe following principal parameters:
9th equity warrant

10th equity warrant

Expected volatility (*1)

33.56%

27.19%

Average expected life (*2)

6 years

3 years

Expected dividends (*3)

¥8.5 per share¥8.5 per share

Risk-free interest rate (*4)

0.38%

0.14%

(*1) Expected volatility is calculated based on the actual stock prices at the following period corresponding to the average expected life.
9th equity warrant: From July 18, 2007 to July 17, 2013
10th equity warrant: From July 20, 2010 to July 17, 2013(*2) The average tenure of the directors and the executive officers who retired in the past is used as the average expected life in the above table.
(*3) Actual dividends on common stock for the fiscal year ended March 31, 2013.
(*4) Japanese government bond yield corresponding to the average expected life.

d. Method of estimating number of stock options vested
Only the actual number of forfeited stock options is reflected because it is difficult to reasonably estimate the number of stock options
that will be forfeited in the future.

29. Related-Party Transactions

No material transactions occurred with related-parties for the fiscal year ended March 31, 2014 and 2013.

63

30. Per-share Data
Yen
2014

March 31,2013

¥689.21¥671.35

Earnings per share-basic

33.52

30.06

Earnings per share-diluted

33.51

30.05

Net assets per share

Note: Bases for calculation of net assets per share are as follows:
Millions of yen

Net assets
Deduction from nets assets

2014

2013

¥516,971¥506,649

2,956

2,613

Attributable to equity warrants

113

120

Attributable to minority interests

2,843

2,493

Net assets after deduction of the portion described above

514,014504,035

Number of common shares (in thousands)

745,792

750,776

Note: Bases for calculation of earnings per share (basic and diluted) are as follows:
Millions of yen
2014

March 31,2013

Earnings per share¥25,042

Net income
Earnings not available to common shareholders¥22,726―—

Net income after deduction of the portion described above

25,042

22,726Weighted average number of common shares for the fiscal year (in thousands)

746,908

755,916

Diluted earnings per share
Adjustment to net income―—

Increase in common shares (in thousands)

320

338

Attributable to equity warrants (in thousands)

320

338

Equity warrants that have no dilutive effects on earnings per share―—

From the fiscal year ended March 31, 2014, the Bank and consolidated subsidiaries have adopted the Accounting Standard for Retirement Benefits (ASBJ
Statement No. 26, May 17, 2012) and the Guidance on Accounting Standard for Retirement Benefits (ASBJ Guidance No. 25, May 17, 2012) (excluding theprovisions set out in the main text of Paragraph 35 and Paragraph 67 of the Accounting Standard and the Guidance, respectively) and the transitional treatment
stipulated in Paragraph 37 of the Accounting Standard.
As a result of this change, net assets per share decrease ¥7.58 as of March 31, 2014.

64

31. Significant Subsequent Events

1. Significant Subsequent Events
Issuance of euro-US dollar-denominated convertible bonds with stock acquisition rights (SAR) maturing in 2019 (the “Bonds”)
At the board of directors’ meeting held on April 8, 2014, the Bank decided to issue the Bonds and payment was completed on April
24, 2014.
(1) Bond nameJoyo Bank, Ltd. Euro-U.S. dollar-denominated convertible bonds with SAR maturing in 2019(2) Issue price (amount paid)
100% of the face value of this bond (face value of each bond: US$100,000)(3) Issue price (offer price)102.5% of the face value of this bond(4) Total sum of issue price (total sum of paid amount)
US$300 million(5) Bond interest rate
The Bonds have no interest rate(6) Existence of collaterals and guarantees
The Bonds have no collaterals or guarantees(7) Bond due date of payment and date of issue
April 24, 2014
(8) Terms of redemption, etc.
The Bonds will be redeemed for 100% of its face value on April 24, 2019 (maturity date). In addition, there is a provision in terms
and condition of issuance concerning early redemption and buyback or retirement in certain cases.
(9) Matters related to stock acquisition rights
a. Total number of SAR
The total number of 3,000 and the total face value of these bonds connected to alternative stock acquisition rights divided by
US$100,000 .
b. Type, content and number of shares which are the object of these SAR
The type and content of shares which are the object of these SAR will be common shares of the Bank (1,000 shares shallconstitute one unit), and the number of the Bank’s common shares to be granted through the exercise of the SAR shall be thetotal of the face value of the bonds connected to the exercise request divided by the convertible value listed in 6. below.
However, any fraction of less than one (1) share resulting from the exercise shall be rounded down to the nearest number ofshares and no cash adjustment shall be made.
c. Allotment day of stock acquisition rights
April 24, 2014
d. Exercise period of stock acquisition rights
From May 9, 2014 to April 10, 2019 (local time at the exercise request location)e. Amount to be paid upon exercise of the SAR
Upon the exercise of the SAR, the Bonds to which said SAR is attached will be used at face value to pay for the new shares
to be issued.
f. Convertible value
US$6.05 (initially)g. The increase in capital and capital reserves in the event of the issuance of shares through the exercise of the SAR
The increase in capital in the event of the issuance of shares through the exercise of the SAR shall be the amount obtainedby multiplying by 0.5 the limit of the increase in capital, etc., which was calculated as set forth in Article 17 of the Ordinanceon Company Accounting . Any fraction of less than one (1) yen created as a result of calculation shall be rounded up. The
increase in capital reserves shall be the amount obtained by subtracting the increase in capital from the limit of the increase incapital, etc.
h. Granting of SAR by the successor company, etc. in the event of organizational restructuring by the Bank
Certain provisions exist for the terms and conditions of the issuance.
i. Reason that no cash is required in exchange for the SAR
The SAR is one attached to a convertible bond with SAR. No cash is required in exchange for the SAR considering the factthat the SAR cannot be separately transferred, the Bonds and the SAR are closely related as the Bonds are used as funds at
the time of exercise of the SAR, and taking into account the economic value to be acquired by the Bank based on the value ofthe SAR, the interest rate of the Bonds, and other conditions such as paid-in amount.
(10) Use of proceeds

65Proceeds of approximately US$300 million raised through the issuance of the convertible bonds with SAR are planned to beallocated to foreign currency-denominated loans in fiscal 2014.
(11) Financial instruments exchange on which the Bond is listed
Singapore Stock Exchange
2. Acquisition of treasury stock
At the board of directors meeting held on April 8, 2014, the Bank resolved to acquire treasury stock based on the provisions of Article
156 of the Companies Act of Japan, which is applied by replacing the relevant terms and phrases pursuant to the provision of Article
165, Paragraph 3, of the Companies Act.
(1) Class of shares to be acquired: Common stock of the Bank
(2) Total number of shares to be acquired: 20,000,000 shares (upper limit)(3) Total acquisition cost: ¥12,000 million (upper limit)(4) Period of acquisition: From April 9, 2014 to September 22, 2014(5) Method of acquisition: Purchase through the market
3. Cancellation of treasury stock
At the board of directors meeting held on April 8, 2014, the Bank resolved to cancel treasury stock based on the provisions of Article
178 of the Companies Act of Japan.
(1) Class of shares to be cancelled: Common stock of the Bank
(2) Total number of shares to be cancelled: 20,000,000 shares(3) Total number of outstanding shares after cancellation: 769,231,875 shares(4) Cancellation date: July 18, 2014

66

67

Organization

As of June 26, 2014

The JOYO BANK, LTD.

Corporate Audit Division

General Meeting of
Shareholders
Board of Corporate Auditors
Corporate Auditors
Board of Directors

Corporate Management Group
Corporate Risk Management Division
Credit Risk Management Office
Legal and Compliance Office
Corporate Planning Division
Group Management OfficePublicity Office
IT Strategy Office
Tokyo Sub-Headquarters
Personnel Division

Executive Officer Committee

Staff Counseling Office
Company Management Support Office
Human Resource Development Office
General Affairs Division

Credit Risk Management Group
Credit Examination Division
Loan Supervision Office
Company Management Support Office

Operational Reforms GroupOperational Innovation Division

Operation Systems GroupOperation Management Division
Client Asset Service Office
Data Processing Center
Area Data Processing Center
Computer System Division

Business Headquarters
Business Management Division
Customer Service Office
Customer Counceling OfficeBusiness Promotion Division
Asset Management Promotion OfficeIntegrated Finance Service OfficeDirect Banking Center
Living and Business Consulting Center
Pension Business Promotion Center
Government and Municipal Business Division
Regional Partnership DivisionInternational Market Business Group
Treasury and Securities DivisionMarkets Administration and International DivisionInternational Business OfficeInternational Operations Office
Overseas Representative Office68

Domestic Branches

Board of Directors and Corporate Auditors
Chairman
Kunio Onizawa
President
Kazuyoshi Terakado
Deputy President
Mikio Kawamata

Senior Managing Directors
Shigeru Ichimura
Hideo Sakamoto

As of June 26, 2014

Directors
Toshihiko Kawamura (outside)
Ryuzaburo Kikuchi (outside)

Managing Directors
Katsuhiko Ito
Atsuyuki Kurosawa
Eiji Murashima
Makoto Sasanuma
Ritsuo Sasajima

Corporate Auditors
Yoshiaki Terakado (standing)
Hideo Torihata (standing)
Akira Yasu
Sanenori Hitomi
Toshio Mizushima

Market Business Group and Overseas Offices

As of June 26, 2014

Head Office5-5, Minami-machi 2-chome, Mito, Ibaraki 310-0021, Japan

Phone: +81-29-231-2151

Markets Administration and International Division

7-2, Yaesu 2-chome, Chuo-ku, Tokyo 104-0028, Japan

Phone: +81-3-3273-1741

International Business Office

5-5 Minami-machi 2-chome, Mito, Ibaraki 310-0021, Japan

Phone: +81-29-300-2727

International Operations Office3-3, Shinhara 1-chome, Mito, Ibaraki 310-0045, Japan

Phone: +81-29-255-6671

Shanghai Representative Office

Room 1901, Shanghai International Trade Centre, 2201
Yan An Road (West), Shanghai 200336 P.R. of China

Phone: +86-21-6209-0258

Singapore Representative Office

30 Cecil Street, #11-04 Prudential Tower, Singapore 049712

Phone: +65-6225-6543

7-2, Yaesu 2-chome, Chuo-ku, Tokyo 104-0028, Japan

Phone: +81-3-3273-5245

Treasury and Securities Division

Affiliated Companies

As of March 31, 2014

Established

Capital Stock(millions of yen)

Share of
Voting Rights

Sale of software and contract of
calculation businesses

1973

47.5

5%

4-12, Minami-machi 3-chome, Mito,
Ibaraki

Leasing of machinery and equipment, claim
acquisition

1974

100

5%

The Joyo Credit Guarantee Co., Ltd.

4-12, Minami-machi 3-chome, Mito,
IbarakiCredit guarantee of housing loans from the
Bank

1978

30

5%

The Joyo Credit Co., Ltd.

4-12, Minami-machi 3-chome, Mito,
IbarakiCredit card services

1982

100

5%

The Joyo Business Service Co., Ltd.

8-1, Sasano-machi 1-chome,
Hitachinaka, Ibaraki

Agent in charge of administrative work for
the Bank

1984

100

100%

The Joyo Industrial Research Institute, Ltd.

5-18, Sannomaru 1-chome, Mito,
IbarakiConsulting, investigation and research

1995

100

5%

The Joyo Equipment Management Co., Ltd.

5-5, Minami-machi 2-chome, Mito,
Ibaraki

Maintenance and management of operational
properties and equipment of the Bank

1999

100

100%

3-3, Jonan 1-chome, Mito, Ibaraki

Management and maintenance of ATMs and
CDs

1999

50

100%

4-12, Minami-machi 3-chome, Mito,
Ibaraki

Dealing of securities, mediation, commission
and substitution of trading of securities

2007

3,000

100%

Company Name

Address

Main Business Activities

The Joyo Computer Service Co., Ltd.

16-25, Nishihara 2-chome,
Mito, Ibaraki

The Joyo Lease Co., Ltd.

The Joyo Cash Service Co., Ltd.
The Joyo Securities Co., Ltd.

■ Principal Shareholders
The 10 largest shareholders of the Bank and their respective shareholdings at March 31, 2014 were as follows:

The Bank of Tokyo-Mitsubishi UFJ, Ltd. .....................................................................................................
NIPPONKOA Insurance Company, Ltd. ......................................................................................................
Nippon Life Insurance Company ...................................................................................................................
Japan Trustee Services Bank, Ltd. (Trust Account) ..............................................................................
The Dai-ichi Mutual Life Insurance Company .......................................................................................
Northern Trust Co. (AVFC) Re Silchester International Investors
International Value Equity................................................................................................................................
Sumitomo Life Insurance Company ............................................................................................................
Northern Trust Company (AVFC) US Tax Exempted Pension Funds .......................................
State Street Bank and Trust Company 505223......................................................................................
The Master Trust Bank of Japan, Ltd. (Trust Account) .......................................................................
Total..........................................................................................................................................................................

Number of Shares Held(Thousands)

Percentage of Total Shares Outstanding(%)

28,992
28,973
26,603
22,914
17,049

3.67
3.67
3.37
2.90
2.16

16,52016,44815,165
14,556
14,402
201,423

2.09
2.08
1.92
1.84
1.79
25.52%For further information, please contact to: Markets Administration and International Division, The Joyo Bank, Ltd.
7-2, Yaesu 2-chome, Chuo-ku, Tokyo 104-0028, Japan

69