2014
Financial Statements

THE TOWA BANK, LTD.

A Message from the President

We greatly appreciate your continued patronage with

reputation among the community as a bank that

The Towa Bank, Ltd.

can be relied on. The entire management and staff

Assisting in further understanding our currentof the Bank have worked to support our customers’situation, we have completed the Bank’s financial

main business operations together with the following

reports for fiscal 2013, ended March 31, 2014, which

mottoes in mind: “supporting our customers whenare presented hereunder.

and where needed by conducting interviews to collect

Following the unprecedented implementation of

their information required to accurately ascertain

monetary easing by the Bank of Japan, the Japanese

their situation,” and “never forgetting our modest

economy started to recover in fiscal 2013, particularly

origins.”
Concerning support of our customers’ main busi-

in terms of domestic demand. And consumer
spending picked up due to asset effects, including

ness operations, we have provided business-matchingstock-price rise and higher corporate earnings asservices at all branches, including solutions tothe strong yen corrected. As it became clear that

expand sales channels and introduce new products;

Japan was emerging from the deflationary cycle

assisted with applications for various subsidies, suchsupported by public investment, improving businessas business start-up subsidies and the Monodukuri

sentiment resulted in higher capital expenditure andSubsidy which supports trial product development

the economy continued to recover gradually, withand capital spending in the growing business areas

additional support of last minute demand before thefor Small and Medium Enterprise Development

consumption tax went up.

Project that is linked with Kanto Bureau of Economy,
Trade and Industry and the Organization for Small

Amid this business environment, The Towa Bank
Group has been pursuing the Phoenix Plan III, a& Medium Enterprises and Regional Innovation

three-year business improvement plan that runs fromand through joint research with Gunma University

April 2012 to March 2015 and aims to cement ourand Maebashi Institute of Technology; fostered2

technology partnerships with major companies via

and generating results from our business introduction

Kanto Bureau of Economy, Trade and Industry andservices. Over the two years since the start of thethe Highland Kanto Liaison Organization which is

Phoenix Plan III business improvement plan, we haveestablished by universities and companies in Gunma

made 1,568 business loan customers.

and nearby prefectures led by Gunma University

Concerning the earnings in fiscal 2013, we posted

for the purpose of local industrial promotion; andrecord high earnings last year for ¥11.3 billion in core

been involved in proposal development, including

operating income, ¥11.9 billion in ordinary income,commercial negotiations with major food processingand ¥12.6 billion in net income, because of increases

and manufacturing buyers. Other activities include

in the loan balance (especially loans to SMEs), net

support in growing business areas such as healthcare;interest income, and service transaction profits fromtraining for the next generation of managers andsales of investment trusts and other products.

business succession and inheritance consultations

I attribute these improvements in the deposit andusing our network of external specialists, such asloan balance, the number of business loan customer

CPAs and licensed tax accountants; and even support

and our earnings power to customer’s appreciation

on intellectual property matters. We have deliveredfor our exhaustive visiting by entire management andsteady business results in customer support services.

staff working together and supporting customers’ corebusiness.

In terms of providing support for corporate customers’ entry into overseas markets, we have formed

The Towa Bank Group started out as two mutual

new business partnerships with two overseas leasing

loan companies in Gunma and Saitama prefectures.

companies and six financial institutions in Asia, andWe will work to visit even more of our customers

have developed links with the Japan International

and provide them with the necessary information

Cooperation Agency (JICA), Japan External Tradeand funds to support their main businesses, always

Organization (JETRO), Japan Bank for International

keeping modesty in mind forever and ever. In thisCooperation (JBIC), Japan Finance Corporation (JFC),

way, we hope to support the development and revi-and other bodies. We have expanded our support

talization of regional communities. We would like to

network through these efforts to be able to act as a

ask our shareholders for their continued support andone-stop-shop to help corporate customers move into

encouragement in these future endeavors.

overseas markets.
Having developed our customer support services inAugust 2014

this way, in fiscal 2013, our deposit balance increasedby ¥37 billion year-on-year to ¥1.7711 trillion andour loan balance also increased by ¥23.2 billion yearon-year to ¥1.3025 trillion compared with fiscal 2012.
The number of business loan customer increased by
856 in comparison with the previous year, developing

Kunimitsu Yoshinaga

business relationships with around 2,000 companies

President and CEO

3

Consolidated Balance Sheets
The Towa Bank, Ltd. and Consolidated Subsidiaries

Millions of yen (Note 1)
2014

March 31,

Assets:Cash and due from banks.................................................................................... ¥ 41,408
Call loans and bills purchased.............................................................................
51,514
Commercial paper and other debt purchased.....................................................
—
Trading account securities...................................................................................
20
Securities..............................................................................................................
517,576
Loans and bills discounted.................................................................................. 1,296,781
Foreign exchange.................................................................................................
844
Other assets..........................................................................................................
13,579Tangible fixed assets............................................................................................
24,552
Buildings..........................................................................................................
4,848
Land.................................................................................................................
17,779Lease assets (tangible)......................................................................................
256
Other tangible assets.......................................................................................
1,667
Intangible fixed assets..........................................................................................
964
Software...........................................................................................................
713
Lease assets (intangible)..................................................................................
—
Other intangible assets....................................................................................
250
Deferred tax assets...............................................................................................
3,066
Customers’ liabilities for acceptances and guarantees........................................
3,659
Reserve for possible loan losses............................................................................
(12,091)
Total assets.................................................................................................. ¥1,941,877

Thousands of
U.S. dollars (Note 2)

2013

2014

35,72529,188209
13505,329
1,275,715
874
13,11725,2005,051
18,061
323
1,764
896
715
7
172
1,809
4,014
(12,229)¥1,879,865$   402,338
500,530—
203
5,028,923
12,599,899
8,205
131,946
238,559
47,110172,7492,494
16,205
9,368
6,931
—
2,436
29,79235,554(117,488)$18,867,833¥

Notes: 1. Y
 en figures have been rounded omitting numbers below the million mark, in accordance with the Financial Instruments and Exchange Act ofJapan and generally accepted accounting principles and practices in Japan.
2. T he United States dollar amounts represent translations of Japanese yen, for convenience only, at the exchange rate of ¥102.92 to US$1.00, the rate
prevailing on March 31, 2014.

4

Millions of yen (Note 1)
2014

March 31,

Liabilities:
Deposits................................................................................................................ ¥1,763,826
Borrowed money..................................................................................................
32,779Foreign exchange.................................................................................................
34
Other liabilities....................................................................................................
6,577
Accrued employee bonuses..................................................................................
391
Provision for retirement benefits.........................................................................
—Net defined benefit liability.................................................................................
10,339Reserve for director retirement benefits..............................................................
24
Reserve for reimbursement of dormant deposits................................................
388
Reserve for contingent loss..................................................................................
441
Deferred tax liabilities..........................................................................................
10
Deferred tax liability for land revaluation...........................................................
2,949
Acceptances and guarantees................................................................................
3,659
Total liabilities............................................................................................. 1,821,421
Net assets:
Shareholders’ equity:
Capital stock........................................................................................................
38,653
Capital surplus.....................................................................................................
31,179Retained earnings.................................................................................................
34,068Treasury stock, at cost..........................................................................................
(409)
Total shareholders’ equity...........................................................................
103,492
Accumulated other comprehensive income:Net unrealized gains on available-for-sale securities...........................................
11,988Land revaluation account....................................................................................
2,775
Remeasurements of defined benefit plans...........................................................
875
Total accumulated other comprehensive income......................................
15,639Stock acquisition rights.......................................................................................
136
Minority interests................................................................................................
1,188
Total net assets............................................................................................
120,456
Total liabilities and net assets..................................................................... ¥1,941,877

5

Thousands of
U.S. dollars (Note 2)

2013

2014

¥1,726,342
14,984
37
9,412
393
12,135
—
23
322
559
13
3,019
4,014
1,771,257$17,137,838
318,490
331
63,906
3,802—
100,463
233
3,769
4,293
99
28,66235,554
17,697,445

38,65331,18422,651(423)
92,066375,571
302,950
331,015(3,976)
1,005,559

12,667
2,621—
15,28898
1,154
108,607¥1,879,865

116,486
26,965
8,509
151,961
1,321
11,544
1,170,387$18,867,833

Consolidated Statements of Income
The Towa Bank, Ltd. and Consolidated Subsidiaries

Millions of yen (Note 1)

Thousands of
U.S. dollars (Note 2)

2014

2013

2014

Income:Interest on loans and discounts...........................................................................
Interest and dividends on securities....................................................................
Other interest income..........................................................................................
Fees and commissions..........................................................................................
Other operating income......................................................................................
Other income.......................................................................................................
Total income...............................................................................................

¥23,154
8,102
103
5,937
211
5,025
42,534¥23,153
7,884
120
5,567
401
5,577
42,704$224,976
78,725
1,008
57,686
2,051
48,824413,272

Expenses:
Interest on deposits..............................................................................................
Interest on borrowings and rediscounts..............................................................
Other interest expenses.......................................................................................
Fees and commissions..........................................................................................
Other operating expenses....................................................................................
General and administrative expenses..................................................................
Other expenses.....................................................................................................
Total expenses.............................................................................................
Income before income taxes and minority interests...........................................

725
35
7
3,789
71
21,343
4,531
30,506
12,027

817
116
7
3,606
682
21,644
5,793
32,667
10,037

7,051
348
76
36,821
696
207,383
44,032
296,410
116,862

Income taxes:
Current............................................................................................................
Deferred...........................................................................................................
Total income taxes......................................................................................
Income before minority interests........................................................................
Minority interests in income...............................................................................
Net income..................................................................................................

197(1,164)(966)
12,99486¥12,907

1,509
697
2,207
7,830
66
¥ 7,763

1,921(11,317)(9,395)
126,257
841$125,416

Net income per share (in yen and dollar):
Basic.................................................................................................................
Diluted.............................................................................................................

¥38.01
17.68¥23.26
9.74

$0.37
0.17

For the years ended March 31,

6Consolidated Statements of Comprehensive Income
The Towa Bank, Ltd. and Consolidated Subsidiaries

Millions of yen (Note 1)
For the years ended March 31,

Thousands of
U.S. dollars (Note 2)

2014

2013

2014

Income before minority interests........................................................................
Other comprehensive income:Net unrealized gains on available-for-sale securities.......................................
Total other comprehensive income................................................................
Total comprehensive income......................................................................

¥12,994¥ 7,830$126,257

(681)
(681)
¥12,312

6,146
6,146
¥13,976(6,621)(6,621)$119,636

Total comprehensive income attributable to:Shareholders of the parent..............................................................................
Minority interests............................................................................................

¥12,22983¥13,91363$118,823
813

7

Consolidated Statements of Changes in Net Assets
The Towa Bank, Ltd. and Consolidated Subsidiaries

Millions of yen
Shareholders’ equity

Balance at April 1, 2013.......................................
Changes of items during the period
Dividends from surplus...................................
Net income......................................................
Disposal of treasury stock................................
Purchase of treasury stock...............................
Reversal of revaluation reserve for land..........
Exercise of stock options.................................
Changes in items other than shareholders’equity during the period (net amount).........
Total changes of items during the period...........
Balance at March 31, 2014................................

Capital stock

Capital surplus

Retained earnings

Treasury stock

Total shareholders’equity¥38,653¥31,184¥22,651¥(423)¥ 92,066(1,337)
12,907
(5)

18
(4)
(154)

—
¥38,653(5)¥31,179

11,416¥34,06814¥(409)

Millions of yen
Accumulated other comprehensive income

Balance at April 1, 2013.......................................
Changes of items during the period
Dividends from surplus...................................
Net income......................................................
Disposal of treasury stock................................
Purchase of treasury stock...............................
Reversal of revaluation reserve for land..........
Exercise of stock options.................................
Changes in items other than shareholders’equity during the period (net amount).........
Total changes of items during the period...........
Balance at March 31, 2014................................

Net unrealized
gains (losses) on
available-for-salesecurities

Land revaluationaccount

Remeasurementsof defined
benefit plans

Total accumulated
othercomprehensive
income¥12,667¥2,621¥ —¥15,288

(678)
(678)
¥11,988

154
154¥2,775

875
875
¥875

351
351
¥15,639

Millions of yen
Stock acquisitionrightsMinority interests

Balance at April 1, 2013.......................................
Changes of items during the period
Dividends from surplus...................................
Net income......................................................
Disposal of treasury stock................................
Purchase of treasury stock...............................
Reversal of revaluation reserve for land..........
Exercise of stock options.................................
Changes in items other than shareholders’equity during the period (net amount).........
Total changes of items during the period...........
Balance at March 31, 2014................................

¥ 98¥1,154

Total net assets¥108,607(1,337)
12,907
13
(4)
(154)
—

37
37
¥136

33
33
¥1,1888423
11,848¥120,456(1,337)
12,907
13
(4)
(154)

11,425¥103,492

Thousands of U.S. dollars
Shareholders’ equity

Balance at April 1, 2013.......................................
Changes of items during the period
Dividends from surplus...................................
Net income......................................................
Disposal of treasury stock................................
Purchase of treasury stock...............................
Reversal of revaluation reserve for land..........
Exercise of stock options.................................
Changes in items other than shareholders’equity during the period (net amount).........
Total changes of items during the period...........
Balance at March 31, 2014................................

Capital stock

Capital surplus

Retained earnings

Treasury stock

Total shareholders’equity$375,571$303,001$220,090$(4,118)$ 894,544(12,993)
125,416
(51)

181
(39)
(1,498)—$375,571(51)$302,950

110,924$331,015

141$(3,976)

Thousands of U.S. dollars
Accumulated other comprehensive income

Balance at April 1, 2013.......................................
Changes of items during the period
Dividends from surplus...................................
Net income......................................................
Disposal of treasury stock................................
Purchase of treasury stock...............................
Reversal of revaluation reserve for land..........
Exercise of stock options.................................
Changes in items other than shareholders’equity during the period (net amount).........
Total changes of items during the period...........
Balance at March 31, 2014................................

Net unrealized
gains (losses) on
available-for-salesecurities

Land revaluationaccount

Remeasurementsof defined
benefit plans

Total accumulated
othercomprehensive
income$123,079$25,466$   —$148,546(6,592)(6,592)$116,486

1,498
1,498
$26,965

8,509
8,509
$8,5093,415
3,415$151,961

Thousands of U.S. dollars
Stock acquisitionrightsMinority interests

Balance at April 1, 2013.......................................
Changes of items during the period
Dividends from surplus...................................
Net income......................................................
Disposal of treasury stock................................
Purchase of treasury stock...............................
Reversal of revaluation reserve for land..........
Exercise of stock options.................................
Changes in items other than shareholders’equity during the period (net amount).........
Total changes of items during the period...........
Balance at March 31, 2014................................

$ 953$11,216

Total net assets$1,055,260(12,993)
125,416129(39)(1,498)—368
368$1,321

328
328$11,544

9

4,111
115,126$1,170,387(12,993)
125,416129(39)(1,498)111,015$1,005,559

Consolidated Statements of Cash Flows
The Towa Bank, Ltd. and Consolidated Subsidiaries

Millions of yen (Note 1)

Thousands of
U.S. dollars (Note 2)

2014

2013

2014

Cash flows from operating activities:
Income before income taxes and minority interests...........................................
Depreciation and amortization...........................................................................
Loss on impairment of fixed assets......................................................................
Decrease in reserve for possible loan losses.........................................................
Increase in reserve for employee bonuses...........................................................
(Decrease) increase in provision for retirement benefits.....................................
Increase (decrease) in net defined benefit liabilities...........................................
Increase (decrease) in provision for directors’ retirement benefits.....................
Increase (decrease) in reserve for reimbursement of dormant deposits..............
(Decrease) increase in reserve for contingent loss...............................................
Interest income....................................................................................................
Interest expenses..................................................................................................
Loss on securities - net.........................................................................................
Foreign exchange gain - net................................................................................
Loss on disposal of tangible fixed assets..............................................................
Net decrease (increase) in trading account securities..........................................
Net increase in loans............................................................................................
Net increase in deposits.......................................................................................
Net decrease in borrowings excluding subordinated debt..................................
Net increase in due from banks other than the Bank of Japan...........................
Net decrease (increase) in call loans and others..................................................
Net increase in foreign exchanges - assets...........................................................
Net decrease (increase) in foreign exchange - liabilities.....................................
Interest received...................................................................................................
Interest paid.........................................................................................................
Other....................................................................................................................
Subtotal.......................................................................................................
Income taxes paid................................................................................................
Net cash provided by operating activities..................................................

¥ 12,027
1,150
359
(137)
(1)
(12,135)
11,6940
65(117)(31,360)
769
(97)
(361)
11
(7)
(21,066)
37,483
17,795262(22,116)29(3)31,813(944)(1,128)23,986(1,398)22,587¥ 10,037
1,200—(2,406)
16
(465)
—
(11)
40
(6)
(31,158)
941
464
(492)
58
(9)
(30,229)
59,324(13,810)(1,132)
6,899
85
(24)
31,096(1,311)656
29,762(589)
29,173$ 116,862
11,175
3,497(1,334)(18)(117,910)
113,629
0637(1,141)(304,709)
7,476
(943)
(3,507)114(69)(204,684)
364,198
172,901
2,550(214,891)
287(34)
309,104(9,176)(10,963)
233,056(13,585)
219,471

Cash flows from investing activities:
Purchases of securities..........................................................................................
Proceeds from sale of securities...........................................................................
Proceeds from redemption of securities..............................................................
Purchases of tangible fixed assets........................................................................
Purchase of intangible fixed assets......................................................................
Proceeds from sale of tangible fixed assets..........................................................
Payments for asset retirement obligations..........................................................
Net cash used in investing activities...........................................................

(132,311)
22,92895,046
(631)
(314)
—
—
(15,282)(104,797)
28,13855,227
(776)
(276)
106
(2)
(22,380)(1,285,576)
222,782
923,499(6,138)(3,053)——(148,485)

Cash flows from financing activities:
Decrease in subordinated loans ..........................................................................
Proceeds from issuance of shares to minority interests......................................
Dividends paid.....................................................................................................
Cash dividends paid to minority interests..........................................................
Purchases of treasury stock..................................................................................
Proceeds from exercise of stock options..............................................................
Net cash used in financing activities..........................................................

——(1,337)(49)(4)
0(1,391)(4,000)995(1,350)
(16)
(257)
0
(4,628)——(12,993)
(485)
(39)
1
(13,515)

Effect of exchange rate changes on cash and cash equivalents..........................
Net increase (decrease) in cash and cash equivalents.........................................
Cash and cash equivalents at beginning of year.................................................
Cash and cash equivalents at end of year...........................................................

30
5,945
32,958¥ 38,903

36
2,201
30,757¥ 32,958

295
57,765320,236$ 378,001

For the years ended March 31,

10Supplementary Information
Consolidated Capital Ratio (Domestic Standard)[Basel II]
Millions of yen (Note 1)
2013

March 31,

Tier I capital..............................................................................................................
Tier II capital.............................................................................................................
Deduction.................................................................................................................
Total qualifying capital.............................................................................................
Risk-adjusted assets:
On-balance sheet assets........................................................................................
Off-balance sheet assets........................................................................................
Risk-weighted credit equivalent amount ............................................................
Amount related to operational risk-equivalent assets..........................................
Total.................................................................................................................
Capital ratio..............................................................................................................

¥¥

91,956
7,955—
99,912¥ 926,240
15,577
941,81759,854¥1,001,671
9.97%[Basel III]
Millions of yen (Note 1)

Thousands of
U.S. dollars (Note 2)

2014

2014

Core capital: instruments and reserves.....................................................................
Core capital: adjustment amount of instruments and reserves...............................
Total qualifying capital.............................................................................................

¥ 111,847—¥ 111,847$ 1,086,745—$ 1,086,745

Risk-adjusted assets:
On-balance sheet assets........................................................................................
Off-balance sheet assets........................................................................................
Credit value adjustment amount.........................................................................
Amount of credit risk assets for CCP-related exposure........................................
Risk-weighted credit equivalent amount.............................................................
Amount related to operational risk-equivalent assets..........................................
Total.................................................................................................................
Capital ratio..............................................................................................................

¥ 973,784
10,194
46—
984,025
60,864¥1,044,889
10.70%$ 9,461,563
99,052455—
9,561,070
591,373$10,152,444

March 31,

11

Board of Directors and Audit & Supervisory Board(As of June 26, 2014)

President & Chief
Executive Officer
Representative Director
Kunimitsu Yoshinaga
Deputy President &Executive Officer
Director

Managing Executive
Officer Director

Managing Executive
Officers

Kiyomi Osawa
Hiroshi Ebara
Hiroyuki Sakurai

Masanori Tsunoyama
Naoshi Sando
Hitoshi Ito
Hideaki Minami
Kiyoshi Tomizawa
Kiyoshi Shibasaki

Directors
Masayuki Kon
Nobuko Inaba

Hideo Kabe

Executive Officers
Kazuyoshi Shiraishi
Toshiko Fusejima
Seiji Yamamoto
Audit & Supervisory
Board Members
Noboru Kogure
Seiji Tamura
Shintaro Ando
Shinichi Kato

The Towa Bank Network(As of March 31, 2014)

Head Office:International Department:

12-6, Honmachi 2-chome, Maebashi, Gunma 371-8560, Japan
Phone: +81-27-234-1111
URL: http://www.towabank.co.jp

12-6, Honmachi 2-chome, Maebashi, Gunma 371-8560, Japan
Phone: +81-27-234-1959
Fax:+81-27-230-1735
SWIFT: TOWA JPJT

Service
ServiceNetwork:
Network:
TohokuShinkansen
JoetsuShinkansen

Gunma
Prefecture:
38 branches

Tochigi
Prefecture:
3 branches

Maebashi
NaganoShinkansen

Takasaki

Omiya

Tokyo :
8 branches

SaitamaPrefecture:
42 branchesTokyo12