Report 2008

Corporate Data

As of May 31, 2008

Date of Establishment

October 19, 1895

Head office

23, Tohriyoko-cho, Numazu, Shizuoka, Japan

Number of Branches and offices

Domestic: 126

Paid-in Capital

30,043 million yen

Ratings

A3 (long-term deposits, Moody’s)

Mt. Fuji

The Greater Tokyo Area

Kanagawa

Shizuoka
Numazu(Head Office)

Major markets
Shizuoka Prefecture
Kanagawa Prefecture
The Greater Tokyo Area

Message from the President

With a maximum depth of 2,500 meters, Suruga Bay,the deepest in Japan, lies at the foot of Mt. Fuji, Japan’stallest peak. In this age of uncertainty, Suruga Bank aim toleverage such abundance and depth, and make it wisdomby which to navigate. To realize a sound future for ourcustomers, the local community, and society as a whole,
to provide ever greater value, we must accurately read thetrends, which are changing in the depths. Thus, we must
think more deeply than anyone.
Suruga Bank is pursuing further growth and reforms
so as to continue creating services that meet customers’
needs and simultaneously exceed their expectations.
We help customers to realize their dreams, and provide
the necessary support to set a deadline for realizing those
dreams. In this way, we work to create a deeper relationship with our customers, and maintain enduring ties.

May 14, 2008

Mitsuyoshi Okano
President and Chief Exective Officer

1Review of Operations (Non-consolidated)
The Company’s results for this period are shown below.

Gross Operating Income
79.6
76.9
73.1
68.0

(¥ Billion)

2004

2005

2006

2007

(FY)

Net Operating Income &Core Net Operating Income

41.6 41.2
34.6
31.3

36.6 35.9

37.2 38.2(¥ Billion)

2004
Net operating income

2005Core net operating income

2006

2007

Gross operating income indicates a bank’s earnings
from basic banking operations. This figure comprises three elements: Net interest income, which isbased on interest on loans, securities and deposits;
Net fees and commissions; and Other operating
income, which includes proceeds from foreign transactions. Thanks to an increase in lucrative consumer
loans and higher interest rates on loans and bonds
following the authorities’ raising of the policy rate,
the gross operating income of Suruga Bank for thereporting period recorded an increase of ¥2.7 billion
over the previous year.

(FY)

Net operating income indicates what is referred
to “operating profit” in the financial statements ofordinary companies. Core net operating income isnet operating income before transfer to the generalreserve for possible loan losses, after deduction of
net proceeds from bond-related transactions. In
spite of an increase in expenses, core net operating
income rose ¥3.0 billion year-on-year, in line witha rise in gross operating income on core banking
operations, due mainly to an increase in interest
income. Net operating income increased ¥4.3 billion
year-on-year on a non-consolidated basis as aresult of the rise in core net operating income anda decrease in provisions to the general reserve forpossible loan losses.
Net operating income = Gross operating income – Expenses – Transfer togeneral reserve for possible loan losses
Core net operating income = Net operating income (before transfer togeneral reserve for possible loan losses)– Proceeds from bonds, including JGBs
(5 accounts)2

Ordinary Profit & Net Income
32.6
30.4
22.7
20.0

18.3

17.8
14.3

10.4

(¥ Billion)

2004
Ordinary profit

2005

2006

2007

(FY)

Ordinary profit increased ¥2.2 billion year-on-year
thanks to an increase in profits on our conventionalbanking operations. A steady growth in the balanceof consumer loans, one of our mainstay businessfields, more than offset the posting of an impairment
loss on equity share holdings, which is attributable
to sharp declines in world stock markets triggeredby the U.S. mortgage loan crisis.
Despite an increase in ordinary profit, net income
decreased ¥2.1 billion year-on-year, mainly due toan increase in net extraordinary losses owing tochanges in accounting standards.

Net income

Per Share Dividend
13.0
11.0
8.0
5.0

7.0
6.0

5.0

2.5
5.0
2.5

(¥)

2004
Interim

Term end

6.0

3.0
2005

2006

2007

(FY)

In line with a growth in earnings figures, theBank recorded an increase in retained earnings,
and this resulted in a steady rise in the Bank’s
regulatory capital. In view of the fact that the Bank’s
performance figures for the fiscal 2007 appear
to be favorable, we have decided to increase ourterm-end divided payment from our original estimateof ¥6 per share to ¥7 per share, bringing the Bank’s
annual dividends per share to ¥13, up ¥2 over theprevious term.
We will make a further effort to increase shareholder return on a priority basis, while simultaneously
strengthening the Bank’s financial position.

3

Review of Operations

Owned Capital & Capital Adequacy Ratio(Domestic Standard)

New standards
New standards

188.9

175.8
146.4

159.3

10.96%
10.73%

10.66%

10.12%

10.13%

10.14%(¥ Billion)

10.42%

9.53%
2004

Owned capital

2005
Capital adequacy ratio

2006

2007

(FY)

Tier I ratio

Regulatory capital comprises the basic componentsof Tier I, i.e. capital, capital surplus, and retained
earnings, in addition to supplementary items (Tier II),
notably the general reserve for possible loan losses.
The capital ratio has been calculated according to
new standards (Basel II) with effect from the previous term-end. For the reporting period, as a resultof the increase in retained earnings (thanks to higher
profits for the period), the capital ratio increased by
0.30 of a percentage point compared with the endof the previous period, to 10.96%. With respect toTier II, the general reserve for possible loan losses
was the only item recognized by the Bank.
Capital adequacy ratio = [Owned Capital (Basic items + Supplementary
items) / Risk assets] X 100
Tier I capital adequacy ratio = [Owned Capital (Basic items: Tier I)/ Risk assets] X 100

Loan Balance & Yield on Outstanding
Domestic Loans

2,327.5

As a result of strong growth in consumer loans, theBank’s loan balance as of the term-end increasedby ¥80.6 billion year-on-year to ¥2,327.5 billion.
Likewise, the yield on outstanding domestic loans
also rose 0.30 of a percentage point over the previous year, to 3.65% on a non-consolidated basis, asa result of an increase in profitable consumer loans
and higher interest rates on loans stemming fromthe BOJ’s hike in the policy rate in February 2007.

2,246.8
2,183.1

3.65%

2,129.6

3.35%
3.24%
3.19%
(¥ Billion)

2004
Loan balance

4

2005
Yield on outstanding domestic loans

2006

2007

(FY)

Consumer Loans
1,668.6
1,446.9

1,572.2

1,472.7
1,303.6

1,375.8

1,746.8
1,507.4
75.0%

74.2%
72.0%

69.1%

(¥ Billion)

2004
Consumer loans (

2005

2006

Represents proportion of mortgage loans)

2007

(FY)

Yield on consumer loans

The term-end balance of consumer loans grew
¥78.1 billion year-on-year, to ¥1,746.8 billion. This
increase came in spite of a deterioration in the mortgage loan market resulting from such factors as thesteep fall in housing construction starts, which wascaused by the implementation of stricter inspections
for conformity with mandatory building standards
following a scandal relating to falsification of theearthquake resistance of a number of condominium
buildings.
The balance of mortgage loans at the end of theperiod increased by ¥60.5 billion to ¥1,507.4 billion
year-on-year. The proportion of consumer loans as
a percentage of all loans was up 0.8 of a percentage
point at 75.0%.

Deposit Balance & Yield on Domestic Deposits
2,767.6

2,832.6

2,796.6

2,887.3

The term-end balance of deposits rose ¥54.6
billion year-on-year, to ¥2,887.3 billion on a nonconsolidated basis. The balance of deposits fromindividuals rose steadily throughout the period,
ending the period up ¥35.5 billion year-on-year, at¥2,016.0 billion. The yield on domestic deposits
also increased 0.16 of a percentage point over theprevious term-end, to 0.29%.

0.29%
1,934.8

1,957.0

1,980.5

2,016.0

0.13%(¥ Billion)

0.05%
2004

Deposits (

0.04%
2005

Deposits from individuals)

2006

2007

(FY)

Yield on domestic deposits

5Review of Operations

Loan/Deposit Interest Margins(Total and Domestic) & Net Interest Margin
1.93

1.92

1.88

1.86

1.07

1.10

2005

2006

1.95

1.84
1.77

0.99

1.95

1.19

(%)

2004
Interest margin between loans and deposits

2007

Interest margin between loans and deposits (Demestic)(FY)

Net interest margin

The loan/deposit interest margin expresses the loan
yield after deduction of the deposit yield and theexpense ratio. The net interest margin reflects thedifference between the yield on fund investments
and total procurement costs. Thanks to the highproportion to total loans of loans made under floating interest rate conditions, the increase in the loan
yield more than offset the rise in the deposit yield aswell as the rise in the expense ratio due mainly toincreased expenditure for strengthened marketing
activities. As a result, the domestic loan/depositinterest margin registered a year-on-year increase of
0.09 of a percentage point, to 1.95%.

Expenses & OHR (Overhead Ratio)
Due to an increase in investments aimed at strengthening the Bank’s marketing capabilities, such as the
opening of new branches, expenses increased by¥2.0 billion year-on-year. The OHR (overhead ratio),which indicates business efficiency, rose by 0.9
percentage points year-on-year, to 50.0%, due toan increase in expenses, which more than offset arise in gross operating income.

39.8
2.3

37.7
2.2

36.0
2.0

36.4
2.0

20.3

20.8

22.0

23.5

49.8%

49.1%

50.0%

13.5

13.5

14.0

2005

2006

52.9%

13.6

OHR (Overhead Ratio (%)) = Expenses / Gross operating income X 100(¥ Billion)

2004
Personnel expenses

6

Non-personnel expenses

Taxes

2007
OHR

(FY)

Individuals’ Assets in Custody (Investments)
331.3

The balance of assets in custody (investment
vehicles) at the term-end rose ¥32.0 billion year-onyear, due mainly to an expansion in the product lineup (chiefly investment fund trusts held by individuals
and personal pension insurance) and enhanced
marketing capabilities without affecting the adverse
effect of a decline in stock prices in the second halfof the period.

299.2
135.3
110.9

219.9
88.4
140.4

136.5

135.3

61.5
86.7
46.5
(¥ Billion)

25.1 7.1

40.1

2004

2005

Foreign-currency deposits

4.5
0.09*

JBGs in custody

46.6
2006

49.6

3.8
2.5

Mutual funds

2007

5.7
4.0 (FY)

Personal pension funds

Single premium life insurance*

Status of Non-Performing Loans
Balance and Ratio of Loans Disclosed under
the Financial Rehabilitation Law
138.0
6.42%
25.0

112.7
16.7
5.11%

69.7

89.7
12.9

54.9
39.7
3.95%
43.2

41.0

37.0

2004

2005

2006

79.4
13.8
33.2
3.38%
32.3

(¥ Billion)

Substandard claims

Doubtful claims

2007

Bankrupt and substantially bankrupt claims

Ratio of loans disclosed under the Financial Rehabilitation Law(FY)During the period under review, with the goal of
creating a sounder asset portfolio, the Bank madeefforts to speed up its final disposal of nonperforming loans and pursue corporate rehabilitation
programs for borrowers. As a result, the non-consolidated balance of loans disclosed in accordancewith the standards stipulated under the Financial
Rehabilitation Law decreased ¥10.2 billion yearon-year, to ¥79.4 billion at the end of the reporting
period. The ratio of loans disclosed under the
Financial Rehabilitation Law to total extended credit
improved 0.57 of a percentage point to 3.38%.
Ratio of loans disclosed under the Financial Rehabilitation Law (%)= Balance of loans disclosed / Total extended credit X 100

7

Status of Non-Performing Loans

Disclosure of Problem Assets(As of March 31, 2008)(¥ Billion)

Problem Assets Based on the Financial Rehabilitation Law
Target: Total balance of extended credit, except substandard claims (only loans are counted in.)Ratio to total balance of extended credit

Bankrupt and Substantially
Bankrupt Claims
Doubtful Claims
Substandard Claims
Sub-total
Normal assets
Total

3.38%

13.8
33.2
32.3
79.4
2,268.1
2,347.6

Covered by collateraland guarantees

Covered byreserves

Coverage ratio

8.9
19.6
14.9
43.5

4.9
11.4
7.2
23.5

100.00%93.25%
68.79%
84.48%

84.48%
Coverage ratio(¥ Billion)

Risk-Managed Loans

Classification under Self-Assessment
Target: Loans

Ratio of risk-managed loans to total loans

3.39%

Loans to bankrupt borrowers
Loans past due
Past due for3 months or longer
Restructured loans
Total
Loan balance(¥ Billion)

1.2
45.4
1.1
31.1
79.0
2,327.5

Target: Total balance of extended credit

Legally bankrupt borrowers
1.3
Substantially bankrupt borrowers
12.4
Potentially bankrupt borrowers
33.2
Borrowers requiring caution:
Borrowers under supervision
49.8
Other borrowers requiring caution
212.6
Normal borrowers
2,037.9
Total
2,347.6

84.39%
Coverage ratio
Total balance of extended credit: Loans, Customers’ Liabilities for Acceptances and Guarantees, Foreign exchange, Securities loaned,
Suspense payments on loans, Accrued loan interests, Private bonds with a guarantee of the Bank.

8

Topics

Offering greater security and convenience
IC Cash Card incorporating biometric ID system
In November 29, 2007 Suruga Bank introduced a biometric IC cash card for enhanced
protection of its customers’ assets. The Bank’s ATMs realize customer verification bychecking the pattern of the user’s finger vein, with the aim of preventing illegal withdrawals through the use of forged or stolen cash cards. Each user’s biometric data is stored
in the card. These biometric IC cash cards can also be used at the ATMs of collaborating
financial institutions that have introduced the same biometric system.
In June 2004, Suruga Bank was the first in the world to introduce a biometrics-based
deposit account, called “Bio Security Deposit,” requiring finger vein authentication forwithdrawals made at the Bank’s teller counter. Now, the Bank’s ATMs can also undertake biometric authentication.
Suruga Bank will continue to put top priority on protecting its customers’ valuable assets.
Finger vein authentication enables an extremely high level of security, in that the finger vein
pattern of the person making the withdrawal at an ATM must match the finger vein pattern datastored in the IC chip of the cash card being used. Such authentication effectively prevents theuse of forged or stolen cash cards.
* The finger vein pattern data has been stored as digital data in the IC chip embedded in the cash card.

For details, please see visit our website:
http://www.surugabank.co.jp/surugabank/kojin/topics/701128.html

Expanding collaborations with partners
outside the banking industry
Issuing debit cards in collaboration with Kinki
Nippon Tourist Co., Ltd., providing foreign currency
exchange services for people going overseas fortravel or study purposes, and responding to overseas
fund transfer and settlement needs
Suruga Bank and Kinki Nippon Tourist Co., Ltd., have developed an international debit card – KNT Travel Cash – featuring
a foreign currency exchange and shopping feature, and began
issuing this card in June 2007. Then, in March 2008, we beganoffering a “family card” under our Family Pack program, targeting young people traveling overseas for study.

Cultivating new markets
Sapporo Branch and Dream Plaza Sapporo Opened
The Sapporo Branch and the Dream Plaza Sapporo (DPSapporo) were opened on May 30, 2008. These facilities
provide full support for the life- and money plans of our diverse
client base living primarily in the Sapporo area – the commercial
and cultural center of Hokkaido – by offering consultation
services for our core businesses, including mortgage loans,investment trusts, and other assets in custody. We help individual customers realize their dreams by getting them to set a
deadline. We will continue to expand our lineup of services withthe aim of becoming a “Life and Business Concierge.”

9

Alliance with Japan Post BankJapan Post Bank and Suruga Bank announced their tie-up in consumer loans, centered on mortgage loans, in April 2008.
Through this tie-up, we are actively working to help meet the diverse life-design and wealth-building needs of individual
customers. We serve the Japanese public by helping individuals realize their dreams.

Yoshifumi Nishikawa, President of Japan Post Holdings (center), Shokichi Takagi, President of Japan Post Bank (right), and Mitsuyoshi Okano, President
and CEO of Suruga Bank (left) at the joint press conference held on the occasion of the signing of the alliance agreement.

Details of the alliance agreement

Overview of Japan Post Bank

• Japan Post Bank will serve as an intermediary agent for the consumer loans offered by
Suruga Bank. Japan Post Bank will also introduce customers, undertake advertising for
Suruga Bank loan products, and promote Suruga Bank’s consumer loan products andservices.

Established:

September 1, 2006

Name:

Japan Post Bank Co., Ltd.
(The name Japan Post
Corporation was changed toJapan Post Bank Co., Ltd. on
October 1, 2007.)• Suruga Bank will develop consumer loan products and provide support for marketing andadministrative operations, mainly through the dispatch of personnel to Japan Post Bank.

Chairman & CEO: Koji Furukawa
Address:

1-3-2 Kasumigaseki,
Chiyoda-ku, Tokyo• The two banks will provide joint funding for the establishment of a subsidiary to handle
consignment of the clerical work involved in consumer loans, and will also dispatch staff
to this subsidiary. Both banks will be responsible for the subsidiary’s management andsupervision of operations.

Paid-in capital:¥3,500 billion

Shareholders:Japan Post Holdings Co., Ltd.
100%

Employees:

Approximately 11,200(As of March 2008)

Main sites:

Headquarters, 234 branches(13 large branches, 221
ordinary branches)
Banking industry• The banks will work together to develop a new business scheme for strategically expanding the consumer loan business with the objective of realizing sustainable growth for bothpartners.

10

As of July 1, 2008

Industry:Our Product Lineup (As of July 1, 2008)

Mortgage Loans

Multipurpose Loans

Card Loans“Dream Stage” Mortgage Loan

“Dream Navigation Course”“Get Ready” Credit Card Loan

Through our lineup of mortgage loan
products, we offer customer-focusedmortgage loans to support the dreams
of individuals. These loans, targeting theself-employed, owners of small- andmedium-sized businesses, businesspeople, working women, and active
senior citizens, provide a stage uponwhich their dreams of home ownershipcan unfold.

We offer a choice of two loan products(a specified-purpose loan, and a familyservice loan) which will enable you to set
off on the course toward realizing yourdream.
This loan product is intended forindividuals interested in investing in theirself-improvement to upgrade their skills,
as well as people who require funds forfamily-related purposes. These loans
offer support for those who would like torealize their dreams of a more comfortable lifestyle.

We must be ready to face the contingencies that arise in the course of daily
life. Our “Get Ready” credit card loan
supports your preparations for dreamrealization.

A view of the
Shibuya Branch
Suruga Bank’s website for customers of Japan Post Bank

http://www.surugabank.co.jp/yb/

11

Suruga Bank
helps realize
soccer dreams

Suruga Bank is the main sponsor of the Suruga Cup Shizuoka Youth (Under 15) Soccer
Tournament, the Suruga Cup Shizuoka Youth League, and the Suruga Cup Shizuoka Soccer
Tournament (the winner to represent Shizuoka Prefecture in the Emperor’s Cup National Soccer
Tournament).
Through the sponsorship of these tournaments, the Bank is helping Japan to become moreinternationally competitive in soccer while simultaneously promoting Shizuoka as the birthplaceof youth soccer activities in Japan. Through soccer, Suruga Bank aims to raise the local
community’s passion for sports and also help individuals with aspirations in the field of soccer
to realize those dreams.

In addition to hosting Suruga Cup
matches, the Bank also sponsors
a soccer clinic led by Masakuni
Yamamoto, soccer coach and TV
soccer commentator.

12

Suruga Bank Championship 2008 Osaka
J.League Yamazaki Nabisco Cup/Copa Sudamericana
Championship Final
Presenting sponsor
Starting in the current fiscal year, the reigning champions of the J.League Yamazaki Nabisco Cup
and the Copa Sudamericana will compete in the Suruga Bank Championship 2008 Osaka J.League
Yamazaki Nabisco Cup/Copa Sudamericana Championship Final, with Suruga Bank serving as thepresenting sponsor. The event is co-sponsored by the Japan Football Association (JFA), the Japan
Professional Football League (J.League), and the South American Football Confederation (CONMEBOL).
Suruga Bank’s objective in serving as presenting sponsor of this tournament is to support the further
growth and advancement of soccer, which is a popular sport in Japan.

For details, please see visit our website:

http://www.surugabank.co.jp/
surugabank/kojin/topics/080414.html
13

CSR

Suruga Bank has steadily evolved from community banking centered on the Numazu, Shizuoka and Shonan communities into personalbanking serving the greater Tokyo area and direct banking serving customers all over Japan. As a result, expectations of the Bank havechanged, and its social responsibilities are no longer what they were.
As a financial institution with a strong awareness of its public role, we meet all expectations naturally placed on us with regard tocompliance, ethical behavior, accountability, and corporate governance. We are also involved in a range of vital community activities
such as contributions to regional development, and support for the arts and philanthropy. By continuing to deliver superior customer
services and maintain our profile in the local economy while we meet these demands, we will carry out our social responsibilities, meeting the expectations of stakeholders such as our community, our employees and our shareholders.

Companies are being
asked to implement
CSR policies thatcreate value by:

Changing Face of CSR

Starting Point of CSR

ComplianceGood employment practiceProtection of human rights• Differentiating themselves in the marketplace• Building stronger ties of trust with their stakeholders• “Ensuring sound management that is not only compliant with law, but also equitable andethically sound”• Achieving good corporate governance that fosters maximum transparency and credibility

Greater protection ofcustomer privacy

Secure financialtransactions

Fulfilling CSR
Respect for nature

Social contribution

Activities and programs to raise
environmental awareness• Meeting the minimum requirements as a corporate citizen• Minimizing the possible negative impact on our customers andbusiness partners in event of our inability to conduct normal business operations

Products offeringhigh social value

Corporate sustainability

Our Role in the Economy

Community development

CSR is an essential obligation of
any company conducting business.

Fairness

Sustainable
GrowthCash flow

Balance

Respect for nature

Eco office

Profitability

Profit plan

Financial products offering
environmental benefits

Pollution control
Green procurement

Environmental Initiatives
We are committed to developing financial products that are friendly to the environment, and to engaging in environment protection
activities.

Suruga Bank Environmental Policy
1. By providing environmentally-friendly financial products and services, we support those of ourcustomers who are involved in environmental-protection activities and contribute to improvement of
the local environment
2. We work to continuously upgrade environment-management systems and prevent environmental
pollution
3. We will abide by environmental laws and regulations, and comply with other environmental requirements that Suruga Bank accepts
4. We have set environmental goals and targets, and regularly review progress
5. We take every measure to familiarize all our employees and others working at the Bank with thesebasic policies, and to operate in an environmentally-friendly way
6. We publicly disclose these policies(compiled June 1, 2005)

14

Environmental Management System (EMS)
Suruga Bank is proactively engaged in environmental protection. In 2000, the Bank’s Surugadaira headquarters acquired ISO14001
certification. To effectively harness the benefits of this standard, we have set up an environment-management system headed by
the CEO and operated under the guidance of the ISO office. In December 2005, the Bank acquired the updated 2004 version of thecertification.

Corporate Governance

Basic Policy
At Suruga Bank, we have drawn up a statement of our corporate goals under the title of “Our Philosophy.” This document clarifies therole that we wish Suruga Bank to play in society as a whole, lays down the principles of corporate conduct that we intend to follow,
and states the points on which we place priority in the management of the Bank. Our Philosophy encapsulates the basic stance of the
management of Suruga Bank toward corporate activities. Corporate governance is one of the top-priority issues for the Bank, and by
putting Our Philosophy into practice, we intend to create and operate a more effective corporate governance system.

Corporate Governance System
At Suruga Bank the management functions of supervision and execution are separated. To maximize management efficiency the Bank
has adopted an executive officer system, and outside directors have been appointed to encourage more free and wide-ranging debate
at meetings of the Board of Directors, as well as to increase transparency. In these ways, we have adopted a management system thatfacilitates flexible and swift response to changes in the business environment.
The Board of Directors of the Bank consists of nine members. The Board decides substantial matters relating to management policy,
and deliberates on important issues. The Board is assisted by the Compliance Committee, which acts as an advisory body to theBoard, and also examines compliance issues of importance and takes all other necessary steps to strengthen legal compliance at theBank.
The Bank has also established a Management Council, which is composed of the seven members of the Board of Directors who
serve on a regular basis and deliberates on matters of importance such as business plans, in accordance with the management policies
laid down by the Board.
A number of committees have been set up to act as advisory bodies, notably the Integrated Risk Management Committee, andthese committees help strengthen the Bank’s risk management and raise the overall level of management of the Bank. The Executive
Council, which is composed of a number of executive officers appointed by the Board of Directors, deliberates on matters of importance such as the execution of business operations.
The Bank’s Internal Audit Department is separated from the other sections of the Bank on which it makes audits, and is under the
direct control of the Management Council. The Internal Audit Department principally works to ensure that the Bank’s internal control
systems are functioning properly and effectively. The department reports regularly to the Board of Directors and the Management
Council with regard to its latest findings.

15

Corporate Governance

Auditing System
The Bank employs the Statutory Auditor system as stipulated in the Corporation Law. The Bank’s Board of Corporate Auditors consistsof five members, a majority of whom are currently outside auditors. In addition to attending meetings of the Board of Directors andother top-level management bodies, the corporate auditors audit the performance of their duties by the Bank’s directors. The corporate
auditors hold regular meetings with the staff of the Accounting Auditor (an external accounting company as stipulated by law), theInternal Audit Department, and the staff of the Compliance Section within the Management Planning Department to share data andensure mutual understanding of methods and goals.
The accounting audit of the Bank is conducted by Shinnihon Ernst & Young, an accounting firm in accordance with the stipulationsof the Certified Public Accountant Law. The Bank has also concluded advisory service contracts with a number of attorneys, whoprovide the Bank’s management with advice on legal questions as required.

Diagram of Suruga Bank’s Corporate Governance System
General Meeting of Stockholders
Appointment/
dismissal

Appointment/dismissal
Appointment/dismissal

Board of Corporate Auditors
Audit

Audit

Ratify appointments/dismissals

ReportReportReportReportBoard of Directors
Oversight

Oversight
ReportReportManagement Council

Internal Audit Department

Accounting
Audits

Accounting
Auditors

Legal
AdviceLegal Counsel

ReportVarious committees

Internal Audits

ReportExecutive Council

16

All offices and branches

Compliance

Basic Policy
As a bank with a public mission and social responsibilities, we take compliance very seriously. In a financial environment of everaccelerating liberalization and globalization, banks are expected to operate on a basis of maximum accountability and transparency. In
response, we have positioned compliance as one of our priority management issues, and are continuously engaged in efforts to firm up
and refine our compliance posture. Our in-house compliance procedures include an ethical code, a code of conduct and complianceregulations. In addition we have made available our manual of business guidelines in digital format, which features case studies thatoffer an easy-to-understand approach to rules and regulations that must be observed by all employees, regardless of rank, in thecourse of their work.

Enhancing Corporate Ethics and Compliance
Basic compliance policies are drawn up at the Board of Directors andExecutive Committee level, and we have set up a compliance committee
as an advisory body. To strengthen compliance, we have drawn up
an annual compliance program featuring e-learning, e-newsletters andgroup training sessions, with progress reviews. Based on the compliance program and under the supervision of the management planningdepartment’s compliance framework, all compliance managers andinternal officers have been deployed in all of the Bank’s offices andbranches, enabling us to respond swiftly and appropriately to complianceissues as they arise.

Ethical Code (abstract)
1. Be aware of the Bank’s public role
Always be aware of the Bank’s public natureand social mission

2. Observe the law
Observation of all laws and regulations

3. Accountability
Sound management based on the principles ofaccountability

4. Corporate conduct
Behave in a rigorously correct and fair way

Risk Management

Basic Approaches to Risk Management
Rapid progress in financial deregulation, innovations in financial technologies, and the widening scope of business operations available
have changed the operating environment faced by banks, increasing the diversity and complexity of the risks they face. Amid thesebusiness circumstances, the Bank intends to secure stable earnings and establish a sound operational base. The management of
Suruga Bank has drawn up the Regulations for Comprehensive Risk Management to enable the development of more-sophisticatedapproaches to risk management and facilitate an accurate understanding of the risks inherent in all banking operations, which will allow
us to address those risks appropriately.

17

Net Branches
An all-new mileage + banking service that lets users accrue mileage points through bank transactions.

ANA Branch
http://www.surugabank.co.jp/ana/
Toll free (from within Japan only): 0120-029-589 (From overseas: 055-98-02988)
Telephone reception hours 9:30 am - 5:00 pm Monday - Friday (excluding holidays)

A feature-packed financial services website for OCN subscribers

OCN Branch
http://www.surugabank.co.jp/ocn/
Toll free (from within Japan only): 0120-005-175
Telephone reception hours 9:00 am - 5:00 pm Monday - Friday (excluding holidays)

A banking site tailored to women

So-net Branch
http://www.surugabank.co.jp/so-net/
Toll free (from within Japan only): 0120-50-2189
Telephone reception hours 9:00 am - 7:00 pm Monday - Friday (excluding holidays)
9:00 am - 5:00 pm Saturday (excluding holidays)
Providing access to leading Internet-based financial services

Directbank Branch
http://www.surugabank.co.jp/directbank/Toll free (from within Japan only): 0120-708-807
Telephone reception hours 9:00 am - 5:00 pm Monday - Friday (excluding holidays)

All kinds of services for more convenient online banking

NetBank Branch
http://www.surugabank.co.jp/netbank/Toll free (from within Japan only): 0120-55-4189
Telephone reception hours 9:00 am - 5:00 pm Monday - Friday (excluding holidays)

Our popular products come with Takarakuji lottery tickets

Dream Direct Branch
http://www.surugabank.co.jp/dream/
Toll free (from within Japan only): 0120-86-1689
Telephone reception hours 9:00 am - 7:00 pm Monday - Friday (excluding holidays)
9:00 am - 5:00 pm Saturday (excluding holidays)
Direct banking specializing in loans

Direct One Branch
http://www.surugabank.co.jp/directone/
Toll free (from within Japan only): 0120-60-1616
Telephone reception hours 10:00 am - 8:00 pm Monday - Friday
10:00 am - 5:00 pm Saturday, Sunday, holidays
Branch exclusively for system engineers (SEs)

SE Bank Branch
http://www.surugabank.co.jp/sebank/Toll free (from within Japan only): 0120-803-689
Telephone reception hours 9:00 am - 5:00 pm Monday - Friday (excluding holidays)

Providing access to high value-added business services

e-Business Direct Branch
http://www.surugabank.co.jp/ebusinessdirect/
Toll free (from within Japan only): 0120-185-285
Telephone reception hours 10:00 am - 7:00 pm Monday - Friday (excluding holidays)

18

Consolidated Financial Section
Consolidated Balance Sheets (unaudited)20

Consolidated Statements of Income (unaudited)

21

Consolidated Statements of Changes in Net Assets (unaudited)

22

Consolidated Statements of Cash Flows (unaudited)

25

Notes to Consolidated Financial Statements (unaudited)

26

19

Consolidated Balance Sheets (unaudited)
Suruga Bank Ltd. and consolidated subsidiaries

Thousands of
U.S. dollars

Millions of yen
As of March 31,

ASSETS:Cash and Due from Banks
Call Loans and Bills Bought
Monetary Claims Bought
Trading Account Securities
Money Held in Trust
Securities
Loans and Bills Discounted
Foreign Exchanges
Other Assets
Tangible Fixed Assets
Intangible Fixed Assets
Deferred Tax Assets
Customers’ Liabilities for Acceptances and Guarantees
Reserve for Possible Loan Losses
Total Assets
LIABILITIES AND NET ASSETS:
Liabilities
Deposits
Call Money and Bills Sold
Borrowed Money
Foreign Exchanges
Other Liabilities
Reserve for Employees’ Bonus
Reserve for Bonus to Directors and Auditors
Reserve for Employee Retirement Benefits
Reserve for Retirement Allowances to Directors and Auditors
Reserves for Possible Losses on Repayment of Sleeping Accounts
Reserves under Special Laws
Acceptances and Guarantees
Total Liabilities
Net Assets
Common Stock
Capital Surplus
Retained Earnings
Treasury Stock
Total Stockholders’ Equity
Net Unrealized Gains (Losses) on Securities, Net of Taxes
Net Deferred Gains (Losses) on Hedging Instruments, Net of Taxes
Total Valuation and Translation Adjustments
Subscription Rights to Shares
Minority Interests
Total Net Assets
Total Liabilities and Net Assets
See notes to consolidated financial statements.

20

Change from
2007

2008

84,213102,133
147,600
170,558
—
396
3
499
2,469
2,188
464,973465,467
2,323,561 2,242,682
3,165
3,207
40,92732,651
41,693
41,901
6,971
11,386
22,733
16,5106,536
7,467(36,587)(37,937)
3,108,262 3,059,114(17,920)(22,958)
(396)
(496)
281
(494)
80,879
(42)
8,276
(208)
(4,415)
6,223
(931)
1,350
49,148840,542
1,473,202—
35
24,6474,640,914
23,191,554
31,595
408,494
416,144
69,583226,901
65,240(365,181)
31,023,675

2,885,309
—
5,313
10
23,009
590
51
143
2,560
297
0
6,536
2,923,822

2,832,085
2,361
8,983
12
30,258
546
51
133
—
—
0
7,467
2,881,899

53,224(2,361)(3,670)(2)(7,249)
44
—
10
2,560
297
—
(931)
41,923

28,798,375—
53,034
107
229,655
5,898
509
1,434
25,5532,966
065,24029,182,775

30,04330,043
19,48918,640137,563
123,571(1,992)(3,699)185,102
168,555(2,116)8,169
27
55(2,089)
8,224
243
68
1,181
366
184,439
177,215
3,108,262 3,059,114—
849
13,992
1,707
16,547(10,285)(28)(10,313)
175
815
7,224
49,148299,862
194,522
1,373,022(19,889)
1,847,519(21,128)277(20,850)
2,434
11,796
1,840,899
31,023,675

2008

2007

Consolidated Statements of Income (unaudited)
Suruga Bank Ltd. and consolidated subsidiaries

Thousands of
U.S. dollars

Millions of yen
For the years ended March 31,

Ordinary Income
Interest Income
Interest on Loans and Discounts
Interest and Dividends on Securities
Interest on Call Loans and Bills BoughtInterest on Deposits with Banks
Other Interest Income
Fees and Commissions
Other Operating Income
Other Income
Ordinary Expenses
Interest Expenses
Interest on Deposits
Interest on Call Money and Bills Sold
Interest on Borrowings and Rediscount
Other Interest Expenses
Fees and Commissions
Other Operating Expenses
General and Administrative Expenses
Other Expenses
Transfer to Reserve for Possible Loan Losses
Losses on Write-offs of Loans
Losses on Write Down of Equity Securities
OthersOrdinary Profits
Extraordinary Profits
Gains on Disposal of Fixed Assets
Recoveries of Written-off Claims
Extraordinary Losses
Losses on Disposal of Fixed Assets
Provision for Prior Year Adjustments Retirement Allowances to
Directors and Auditors
Provision for Prior Year Adjustments of Reserve for
Possible Losses on Repayment of Sleeping Accounts
Income before Income Taxes and Others
Provision for Income Taxes and Others
Deferred Income Taxes
Minority Interest
Net Income

2008

2007

Change from
2007

2008

116,672
92,94984,917
5,140
990
5
1,896
14,7395,827
3,155
84,658
14,833
10,230
126
124
4,351
8,443
6,584
41,181
13,616
2,441
2,692
3,202
5,278
32,013
1,116
18
1,097
3,416
755

105,656
82,908
77,113
3,669
425
1
1,698
14,2717,313
1,163
74,398
10,970
5,371
106
144
5,348
7,400
5,382
38,954
11,689
3,588
3,938
29
4,132
31,257
3,003
105
2,898
219
219

11,016
10,041
7,804
1,471
565
4
198
468
(1,486)
1,992
10,260
3,863
4,859
20
(20)
(997)
1,043
1,202
2,227
1,927
(1,147)(1,246)
3,173
1,146
756
(1,887)(87)(1,801)
3,197
536

1,164,510
927,734
847,562
51,3119,882
53
18,924
147,114
58,166
31,494
844,980
148,051
102,1101,266
1,245
43,42884,27165,715411,034
135,908
24,372
26,87831,96952,688319,529
11,140189
10,951
34,101
7,536

2,394

—

2,394

23,896267
29,713
11,788680
112
17,131—
34,042
12,5091,055
132
20,345267(4,329)
(721)
(375)
(20)
(3,214)

2,667
296,569
117,657
6,793
1,123
170,993

See notes to consolidated financial statements.

21

Consolidated Statements of Changes in Net Assets (unaudited)
Suruga Bank Ltd. and consolidated subsidiaries

Millions of yen
Stockholders’ Equity

Balance at March 31, 2007
Changes of Items During the Period
Dividends from Surplus
Net Income
Repurchase of Treasury Stock
Disposal of Treasury Stock
Net Changes of Items Other than
Stockholders’ Equity
Total
Balance at March 31, 2008

CapitalStock

CapitalSurplusRetained
Earnings

Treasury
Stock

Total
Stockholders’Equity30,04318,640123,571(3,699)168,555

(143)
1,850

(3,140)17,131
(143)
2,698

1,707
(1,992)—
16,547
185,102(3,140)17,131848—
30,043848
19,48913,991
137,563

Millions of yen
Valuation and Translation Adjustments
Net Deferred
Net Unrealized
Gains (Losses) on
Total Valuation
Subscription
Gains onHedging Instruments, and Translation
Rights to
Other Securities
Net of Taxes
Adjustments
SharesBalance at March 31, 2007
Changes of Items During the Period
Dividends from Surplus
Net Income
Repurchase of Treasury Stock
Disposal of Treasury Stock
Net Changes of Items Other than
Stockholders’ Equity
Total
Balance at March 31, 2008
See notes to consolidated financial statements.

22

8,169

55

8,224

68

Minority
Interests

Total
Net Assets

366

177,215————(10,286)(10,286)(2,116)

(27)
(27)
27

(10,313)(10,313)(2,089)(3,140)17,131
(143)
2,698
175
175
243

815
815
1,181

(9,322)
7,224
184,439

Thousands of U.S. dollars (Note 2)
Stockholders’ Equity

Balance at March 31, 2007
Changes of Items During the Period
Dividends from Surplus
Net Income
Repurchase of Treasury Stock
Disposal of Treasury Stock
Net Changes of Items Other than
Stockholders’ Equity
Total
Balance at March 31, 2008

CapitalStock

CapitalSurplusRetained
Earnings

Treasury
Stock

Total
Stockholders’Equity299,862

186,054

1,233,372(36,928)

1,682,361(1,427)
18,466(31,342)
170,993(1,427)
26,935

17,038(19,889)—
165,158
1,847,519(31,342)
170,9938,468—
299,862

8,468
194,522

139,650
1,373,022

Thousands of U.S. dollars (Note 2)
Valuation and Translation Adjustments
Net Deferred
Net Unrealized
Gains (Losses) on
Total Valuation
Gains onHedging Instruments, and Translation
Other Securities
Net of Taxes
Adjustments

Balance at March 31, 2007
Changes of Items During the Period
Dividends from Surplus
Net Income
Repurchase of Treasury Stock
Disposal of Treasury Stock
Net Changes of Items Other than
Stockholders’ Equity
Total
Balance at March 31, 2008

81,539552

82,091

Subscription
Rights toSharesMinority
Interests

Total
Net Assets

683

3,654

1,768,791————(102,667)(102,667)(21,128)

(274)
(274)
277

(102,942)(102,942)(20,850)(31,342)
170,993(1,427)
26,935
1,751
1,751
2,434

8,141
8,141
11,796(93,049)
72,1081,840,899

See notes to consolidated financial statements.

23

Consolidated Statements of Changes in Net Assets (unaudited)

Millions of yen
Stockholders’ Equity

Balance at March 31, 2006
Changes of Items During the Period
Dividends from Surplus
Bonus for Directors and Corporate Auditors
Net Income
Repurchase of Treasury Stock
Disposal of Treasury Stock
Changes in Own Shares Held byConsolidated Subsidiaries
Net Changes of Items Other than
Stockholders’ Equity
Total
Balance at March 31, 2007

CapitalStock

CapitalSurplusRetained
Earnings

Treasury
Stock

Total
Stockholders’Equity30,04318,640105,886(3,854)

150,716(168)
259(2,601)(50)
20,345
(168)
249

63

63

154
(3,699)—17,839168,555(2,601)(50)
20,345(9)—30,043—18,64017,685
123,571

Millions of yen
Valuation and Translation Adjustments
Net Deferred
Net Unrealized
Gains (Losses) on
Total Valuation
Subscription
Gains onHedging Instruments, and Translation
Rights to
Other Securities
Net of Taxes
Adjustments
SharesBalance at March 31, 2006
Changes of Items During the Period
Dividends from Surplus
Bonus for Directors and Corporate Auditors
Net Income
Repurchase of Treasury Stock
Disposal of Treasury Stock
Changes in Own Shares Held byConsolidated Subsidiaries
Net Changes of Items Other than
Stockholders’ Equity
Total
Balance at March 31, 2007
See notes to consolidated financial statements.

24

7,306

—

7,306

—

Minority
Interests

Total
Net Assets

306

158,329(2,601)(50)
20,345
(168)
249

862
862
8,169

55
55
55

917
917
8,224

68
68
68

(63)

—

122
59
366

1,109
18,885
177,215

Consolidated Statements of Cash Flows (unaudited)
Suruga Bank Ltd. and consolidated subsidiaries

Thousands of
U.S. dollars(Note 2)Millions of yen
For the Years Ended March 31,
Cash Flows from Operating Activities
Income before Income Taxes and Others
Depreciation and Amortization
Increase (Decrease) in Reserve for Possible Loan Losses
Increase (Decrease) in Reserve for Employees’ Bonus
Increase (Decrease) in Reserve for Bonus for Directors and Corporate Auditors
Increase in Reserve for Employee Retirement Benefits
Increase in Reserve for Retirement Allowances to Directors and Auditors
Increase in Reserves for Possible Losses on Repayment of Sleeping Accounts
Bonus for Directors and Corporate Auditors
Interest Income
Interest Expenses
Loss (Gain) on Investment Securities, Net
Loss (Gain) on Money Held in Trusts
Loss (Gain) on Sales of Fixed Assets
Changes in Operating Assets and Liabilities:
Trading Securities
Loans
Deposits
Borrowings Excluding Subordinated Debt
Due from Banks Other Than BOJ
Call Loans
Call Money
Foreign Exchange Assets
Foreign Exchange Liabilities
Interest Received
Interest Paid
Other, Net
Subtotal
Income Taxes Paid
Net Cash Provided by (Used in) Operating Activities
Cash Flows from Investing Activities
Purchase of Securities
Proceeds from Sales of Securities
Proceeds from Redemption of Securities
Increase in Money Trusts
Decrease in Money Held in Trusts
Purchase of Tangible Fixed Assets
Proceeds from Sales of Property and Equipment
Purchase of Intangible Fixed Assets
Net Cash Provided by (Used in) Investing Activities
Cash Flows from Financing Activities
Dividends Paid
Purchase of Treasury Stock
Proceeds from Sales of Treasury Stock
Net Cash Provided by (Used in) Financing Activities
Effect of Exchange Rate Changes on Cash and Cash Equivalents
Net Increase in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Year
Cash and Cash Equivalents at End of Term

2008

2007

Change from
2007

2008

29,713
7,213(1,349)44—(1,016)2,560
297—(92,949)
14,833
3,010
17
736

34,042
6,981(2,853)
70
51
(954)
—
—
(50)
(82,908)
10,970
(942)
(12)
113

(4,329)
232
1,504
(26)
(51)
(62)
2,560
297
50
(10,041)
3,863
3,952
29
623

296,569
72,030(13,468)448—(10,144)
25,5532,966—(927,734)
148,051
30,045
179
7,347

496
(80,879)
53,223(3,669)(5,185)23,354(2,361)41(1)92,561(14,976)(2,447)23,267(18,000)
5,266(0)(63,562)
36,250(268)
2,499
30,044
1,538
(50)
(1)
81,801(9,701)327
43,383(1,667)
41,716496(17,317)
16,973(3,401)(7,684)(6,690)(3,899)91
0
10,760(5,275)(2,774)(20,116)(16,333)(36,450)

4,953(807,259)
531,224(36,628)(51,761)
233,102(23,565)417(18)923,862(149,477)
24,425232,231(179,662)
52,567(661,145)
24,538618,349(299)—(6,332)99(2,980)(27,770)(553,033)
16,138542,051—
71(7,272)598(4,662)(6,108)(108,112)
8,400
76,298
(299)
(71)
940
(499)
1,682
(21,662)(6,598,915)
244,923
6,171,766(2,988)—(63,205)
989(29,750)(277,180)(3,140)
(143)
2,698
(584)
(17)
(23,105)
97,291
74,185(2,601)(168)
249(2,519)0
33,08964,201
97,291

(539)
25
2,449
1,935
(17)
(56,194)
33,089(23,105)(31,342)(1,427)
26,935(5,835)(171)(230,620)
971,065
740,444

See notes to consolidated financial statements.

25

Notes to Consolidated Financial Statements (unaudited)
Suruga Bank Ltd. and consolidated subsidiaries

1. Summary of Significant Accounting Policies(d) Investment securities(a) Basis of preparation

Debt securities being held to maturity are stated at amortized costcomputed by the moving-average method.
Other securities (available-for-sale securities) whose current
value can be estimated are stated at their market value as of the
fiscal year end and other non-marketable securities are stated atcost or amortized cost computed by the moving-average method.
Unrealized gain or loss on available-for-sale securities areincluded in shareholders’ equity, net of income taxes.

The accompanying consolidated financial statements of Suruga
Bank Ltd. (the “Bank”) and consolidated subsidiaries are preparedon the basis of accounting principles generally accepted in Japan,
which are different in certain respects as to the application anddisclosure requirements of International Financial ReportingStandards, and are compiled from the consolidated financial
statements prepared by the Company as required by the
Securities and Exchange Law of Japan.
For the convenience of readers outside Japan, certain items
presented in the original statements have been reclassified andrearranged.
Certain reclassifications of the prior year’s consolidated
financial statements and the related footnote amounts have been
made to conform with the presentation in the current year.

(e) Securities in money trusts
Securities included in money trusts are stated by the same
method as those described in (c) and (d) above.

(f) Derivatives
Derivatives positions are stated at their market value as of the
fiscal year-end.

(b) Principles of consolidation
The accompanying consolidated financial statements include theaccounts of the Bank and its significant subsidiaries and certain
affiliates, which are as follows:
Suruga Business Service Co., Ltd.
Suruga Staff Service Co., Ltd.
A.P.I. Co., Ltd.
Suruga Capital Co., Ltd.
Suruga Computer Service Co., Ltd.
Suruga Card Co., Ltd.
SDP Co., Ltd.
All significant intercompany accounts and transactions havebeen eliminated in consolidation.

(c) Trading account securities
Trading account securities are stated at their market value as of
the fiscal year end.

26(g) Depreciation and amortizationi) Tangible fixed assets
Depreciation of tangible fixed assets of the Bank is computed by
the declining-balance method at rates principally based on following estimated useful lives:
Buildings
15 to 50 years
Equipment and furniture
4 to 20 years
Property and equipment held by the Bank’s consolidated
subsidiaries are depreciated, in principle, on a straight line basis.
ii) Intangible fixed assets
Intangible fixed assets are amortized on a straight-line basis.
Costs of software developed or obtained for internal use areamortized by the straight-line method over an estimated useful lifeof 5 years.

(Changes in accounting standards)
The Bank has adopted new accounting standards for the depreciation of tangible fixed assets acquired on April 1, 2007 andafter, as stipulated in the amendments to the Income Tax Law offiscal 2007. The adoption of the new standards has no material
effect on the performance of the Bank.
(Additional information)
Regarding tangible fixed assets acquired up to and including
March 31, 2007, an amount equivalent to the residual value of theassets under the previous accounting standards is depreciatedon an equal-amount basis over five years, beginning with the term
following that in which the book value of the assets is reduced
to the residual value. The adoption of the new standards has nomaterial effect on the performance of the Bank.

For claims of “substantial bankruptcy” and “legal bankruptcy,”
an amount exceeding the estimated value of the collateral orof the guarantees deemed uncollectible is charged off. For theyears ended March 31, 2008 and 2007, the amounts deducted
were ¥4,350 million (US$43,418 thousand) and ¥8,093 million,
respectively.
Provisions for possible loan losses at the consolidated
subsidiaries have been made as deemed necessary with reference to the historical loan loss experience of these companies.

(i) Reserve for employees’ bonus
The reserve for employees’ bonus is provided for the payment ofbonus to employees, an estimate of which is determined as of thebalance sheet date.

(j) Reserve for bonus for directors and corporate auditors(h) Reserve for possible loan losses
The reserve for possible loan losses of the Bank is provided inaccordance with the policies regarding write-offs and reserve
standards stipulated in “Auditing of Write-offs and Loan Loss
Provisions” issued as part of the “Fourth Report by the Auditing
Subcommittee for Banks and Other Financial Institutions” by theJapanese Institute of Certified Public Accountants. The reserve
for loans to borrowers who are classified as substantially bankrupt
or who are bankrupt in the formal legal sense is provided basedon the amount remaining after deduction of the amount of theircollateral considered to be disposable and of the amount recoverable under guarantees.
In addition, a reserve is provided for loans to borrowers who,
although not actually bankrupt in the legal sense, are experiencing
serious management difficulties and whose failure is imminent.
In such cases, a portion of the reserve is provided based on theamount remaining after deduction of the amount of their collateralconsidered to be disposed and of the amount recoverable underguarantees, and the balance of this reserve is provided after
giving full consideration to the amount the borrower is capable ofrepaying. In the case of all other loans, the reserve is based on
the percentage of actual defaults over a fixed term.

The reserve is provided for the payment of bonus for directors
and corporate auditors, an estimate of which is determined as of
the balance sheet date.

(k) Accrued retirement benefits of directors andcorporate auditors
A provision is made for accrued retirement benefits of directors
and corporate auditors in an amount accrued at the end of thereporting period based on internal regulations.
(Changes in accounting standards)
Previously, the Bank expensed executive retirement benefits asthey were incurred. However, due to the mandatory applicationof new accounting standards as stipulated in JICPA Audit andAssurance Practice Committee Report No. 42 dated April 13,
2007 for the period ended March 31, 2008 and subsequentterms, the Bank adopted the new accounting standards for thereporting period. The adoption of the new standards has caused
ordinary expenses and extraordinary losses to increase by ¥161
million and ¥2,394 million, respectively, and ordinary profit andincome before income taxes to decrease by ¥161 million and¥2,555 million, respectively.

27

Notes to Consolidated Financial Statements (unaudited)

The reserve for possible losses on sales of loans provides forcontingent losses arising from any decline in the market value ofthe collateral recorded on corporate mortgage loans sold to the
Cooperative Credit Purchasing Company, Ltd.

(ii) corresponding group of hedging instruments such as interest
rate swaps in the same maturity bucket. Also, under the generalprovisions, the effectiveness of a cash flow hedge is assessed
based on the correlation between a base interest rate index of thehedged cash flow and that of the hedging instrument.
In addition, deferred hedge gains and losses on the macro
hedges recognized in the previous terms are amortized asinterest income or expenses over the remaining maturity (5 yearsof the hedging instruments in accordance with the regulations
set out in the “Accounting and Auditing Treatment of Preliminary
Accounting Standards for Financial Instruments in the Banking
Industry” (JICPA Industry Audit Committee Report No. 15).
“Macro hedge” refers to the management of interest rate risk
in which overall interest rate risks inherent in loans, deposits, andother interest earning assets and interest-bearing liabilities aremanaged on a net basis using derivatives.
The deferred method of hedge accounting is applied totransactions to hedge against the foreign exchange fluctuation
risks associated with monetary claims and liabilities denominatedin foreign currencies, in accordance with the regulations set out inthe “Accounting and Auditing Treatment of Accounting Standards
for Foreign Currency Transactions in the Banking Industry” (JICPA
Industry Audit Committee Report No. 25). The effectivenessof currency swap and foreign exchange swap transactions is
assessed by comparing foreign currency position of the hedged
assets or liabilities with that of the hedging instruments.

(n) Pension and severance costs(p) Consumption tax

Accrued pension and severance costs is provided for the future
payment of employees’ retirement benefits based on estimatedamounts of the actuarially calculated retirement benefit obligationand the pension plan assets. Prior service cost is amortized by
the straight-line method over 5 years. Net actuarial gain (loss)
is amortized by the declining-balance method over 13 years
commencing the year following the year in which the gain or loss
is incurred.

Consumption tax and local consumption tax of the Bank andits domestic consolidated subsidiaries are excluded from thetransaction amounts presented. The portions of consumption tax
and local consumption tax paid on the fixed assets which are notdeductible as tax credits have been included in other assets andare being amortized over a five-year term.

(l) Reserve for possible losses on
repayment of sleeping accounts
A provision is made for possible losses on repayment of sleeping
accounts in the future in an amount deemed necessary, taking
into account the Bank’s historical refund record.
(Changes in accounting standards)
Previously, the Bank removed certain deposit accounts meetingthe definition of sleeping accounts from liabilities, and posted
gains in a corresponding amount and, upon claims on repayments of the deposits, expensed losses on repayment of deposits
as they incurred. However, due to the mandatory applicationof the new accounting standards stipulated in JICPA Audit andAssurance Practice Committee Report No. 42 to the period
ended March 31, 2008, the Bank has adopted the new accounting standards for the reporting period. The adoption of the newstandards has caused other ordinary expenses and extraordinary
losses to increase by ¥29 million and ¥267 million, respectively,
and ordinary profit and income before income taxes to decreaseby ¥29 million and ¥297 million, respectively.

(m) Reserve for possible losses on sales of loans(o) Hedge accounting
The Bank applies the deferred method to account for its derivative
instruments which hedge the interest rate risk on various financial
assets and liabilities in accordance with the general provisions of“Accounting and Auditing Treatment of Accounting Standards
for Financial Instruments in the Banking Industry” (JICPA Industry
Audit Committee Report No. 24). Effective the year ended March,
2005, the general provisions of JICPA Industry Audit Committee
Report No. 24 are applied. Under the general provisions, theeffectiveness of a fair value hedge is assessed by each of identified(i) group of hedge deposits, loans and similar instruments and28

2. Japanese Yen and U.S. Dollar Amounts
The Japanese yen amounts in the accompanying consolidated
financial statements are presented in millions, with fractions
omitted.
Amounts stated in U.S. dollars are translated from Japanese
yen amounts, solely for convenience, at ¥100.19 = U.S.$1.00,
the exchange rate prevailing on March 31, 2008. The translation
should not be construed as a representation that Japanese yen
could be converted into U.S. dollars at the above or any other rate.

3. Loans and Bills Discounted(1) Loans and bills discounted at March 31, 2008 and 2007
included the following:
Millions of yen
2008
2007

Loans to companies under bankruptcy procedures ¥ 1,566
Delinquent loans
46,536Loans past due 3 months or more
1,209
Restructured loans
31,167
Total¥80,481¥ 1,615
52,092
1,249
35,849¥90,806

Thousands of
U.S. dollars
2008$ 15,639
464,486
12,072311,085$803,284

Loans to companies under bankruptcy procedures consist of
non-accrual loans on which the payment of principal or interest is
well past due or there is no prospect of recovery of the principal
or interest from the borrower or from a third party guaranteeing
the loan (the balance does not include any written-down portionof the loan). These loans hereafter are referred to as “non-accrualloans.” This category also includes the loans cited in Article 961-3 and 1-4 of the Corporation Tax Law (Government Ordinance
No. 97 of 1965).
Delinquent loans are defined as loans which are past due
and not accruing interest, but which are categorized neither
as “Loans to companies under bankruptcy procedures” nor as“Restructured loans” as defined below.
Loans past due for 3 months or more are classified as suchwhen 3 months or more have elapsed since the due date without
the payment of principal or interest. Loans to companies underbankruptcy procedures and delinquent loans are not included inthis category.
Restructured loans include loans whose repayment conditions
have been renegotiated, (such as by reducing the rate of interest
or by providing a grace term for the payment of principal/interest,etc.) to support the rehabilitation of certain borrowers who areencountering financial difficulties, with the intention of ensuring therecovery of the loans. Excluded from this category are loans tocompanies under bankruptcy procedures, delinquent loans andloans past due for 3 months or more.

(2) Bills discounted is accounted for as financial transactions on the basis of “Accounting and Auditing Treatment of
Accounting Standard for Financial Instruments in Banking
Industry” (JICPA Industry Audit Committee Report No. 24). The
Bank has rights to sell or pledge certain commercial bills andforeign exchange bills discounted. The principal amount of thesebills amounted to ¥3,412 million (US$34,057 thousand).
(3) The Bank posted ¥25,000 million under Loans and Bills
Discounted on the Consolidated Balance Sheets for assets
held under loan participation agreements meeting the criteria
stipulated in the JICPA Accounting System Committee Report
No. 3 issued on June 1, 1995.

4. Accumulated Depreciation
Accumulated depreciation on tangible fixed assets at March 31,
2008 and 2007 totaled ¥50,120 million (US$500,255 thousand)and ¥50,719 million, respectively.

5. Assets Pledged
Assets pledged as collateral at March 31, 2008 and 2007 were as
follows:

Investment securities
Treasury stock (common stock held by subsidiaries)
Customers’ notes and others

Millions of yen
2008
2007

Thousands of
U.S. dollars
2008¥7,750—¥5,560$77,354—$55,500¥ 7,751
1,788¥10,266

Liabilities related to the above pledged assets were as follows:

Borrowed money

Millions of yen
2008
2007

Thousands of
U.S. dollars
2008¥4,163$41,556¥8,233

In addition, investment securities totaling ¥141,579 million(US$1,413,107 thousand) and ¥142,531 million at March 31,
2008 and 2007, respectively, were pledged as collateral for thesettlement of exchange, treasury transactions or in lieu of margin
money.

29

Notes to Consolidated Financial Statements (unaudited)

6. Loan Commitments

8. Amounts per ShareContracts for overdraft facilities and loan commitments refer tocontracts under which the Bank and its consolidated subsidiaries
lend to their customers funds up to certain prescribed limits in
response to their customers’ loan applications, as long as there
is no violation of any of the conditions stipulated in the contracts.
The unused portion within the set limits of such contracts totaled¥1,056,247 million (US$10,542,440 thousand) and ¥1,024,646
million at March 31, 2008 and 2007, respectively. As of March
31, 2008, the balance of the unused portion under such contracts
whose contract terms are one year or less, or which include a
special rider that allows the Bank to cancel out the contracts
unconditionally any time, amounted to ¥1,049,823 million(US$10,478,329 thousand).
Since many of these commitments expire without theavailable line of credit being fully utilized, the unused amount
does not necessarily represent a future commitment. Most ofthese contracts specify terms and conditions permitting the
Bank and its consolidated subsidiaries to refuse customers’ loan
applications or decrease their credit limits for appropriate reasons(e.g., a change in their financial situation, a deterioration in their
creditworthiness, etc.). At the inception of the contracts, the Bankand its consolidated subsidiaries obtain real estate and securities,
etc. as collateral if deemed necessary. Subsequently, the Bankand its consolidated subsidiaries perform periodic reviews of thecustomers’ business results based on their internal rules, and takethe necessary measures to reconsider the conditions stipulated in
the contracts and/or require additional collateral and guarantees.

The computation of basic net income per share is based on theweighted average number of shares of common stock outstanding during each year, less treasury stock.
Amounts per share of net assets are computed based on thenumber of shares of common stock outstanding at each balance
sheet date, less treasury stock and shares of common stock of
the Bank held by the subsidiaries.
yen
March 31

Net income
Net assets
Diluted net income

2008

2007

U.S. dollars
2008¥ 65.18695.41¥ 65.08¥ 78.01
677.49¥ 77.85

$0.65
6.94
$0.64

Diluted net income per share is no presented for the year ended
March 31, 2005, since the Bank did not have any potentiallydilutive stock.

9. Other Income and Expenses
Other income and expenses for the years ended March 31, 2008
and 2007 were as follows:
Millions of yen
2008
2007

Other income:Gain on sales of stocks and other securities¥ 1,719
Gain on disposition of premises and equipment—
Gain on disposal of fixed assets
18
Collection of claims written-off
1,097
Other
1,436
Total
¥ 4,271

Thousands of
U.S. dollars
2008

¥

38
—
105
2,898
1,124
¥ 4,167$ 17,157—
189
10,951
14,337$ 42,635¥ 3,588
29
3,938
—
219
—

$ 24,372
31,96926,878
—
7,536
122

—

—

—

23,896—
4,132¥11,908

2,667
52,565$170,009

7. Employees’ Retirement Benefits
The funded status and amounts recognized in the consolidatedbalance sheets as of March 31, 2008 and 2007 were as follows:
Millions of yen
2008
2007

Projected benefit obligation¥(18,704) ¥(18,245)
Fair value of plan assets
16,964
21,476
Projected benefit obligation in excess of plan assets(1,740)3,231
Unrecognized net actuarial loss
3,683
(2,304)
Net liability recognized
1,943
926
Prepaid pension cost
2,086
1,059
Accrued pension and severance costs¥ (143) ¥ (133)30

Thousands of
U.S. dollars
2008$(186,687)
169,319(17,368)
36,762
19,393
20,827$ (1,434)

Other expenses:
Provision for possible loan losses¥ 2,441
Loss on devaluation of stocks and other securities
3,202
Write-offs of loans
2,692
Loss on disposition of premises and equipment—
Losses on disposal of fixed assets
755
Loss on sales of stocks and other securities
12
Cost of amortization of differences resulting
from changes in accounting standards—
Provision for prior year adjustments retirement
allowances to directors and auditors
2,394
Provision for prior year adjustments of reserve forpossible losses on repayment of sleeping accounts
267
Other
5,266
Total
¥17,033

10. Leases(Lessor side)
The pro forma information such as acquisition costs, accumulated
depreciation and obligations on property leased under financeleases currently accounted for as operating leases is summarized
as follows:
Millions of yen
2008
2007

Acquisition cost
MovablesOthers
Total
Accumulated depreciation expenses
MovablesOthersTotal
Net book value
MovablesOthers
Total

Minimum lease payment under finance leases
Due within one year
Due after one year
Total

Thousands of
U.S. dollars
2008¥25,361
2,975¥28,337¥26,567
3,320¥29,887$253,138
29,697$282,836¥17,925
2,103¥20,028¥18,488
2,310¥20,799$178,916
20,990$199,906¥ 7,436872¥ 8,308¥ 8,078
1,009¥ 9,088$ 74,222
8,707$ 82,929

Millions of yen
2008
2007

¥3,1046,435¥9,539¥ 3,619
6,900¥10,519

Thousands of
U.S. dollars
2008$30,989
64,228$95,218(Note) Interest income is added to calculate future lease payment receivables due to the small ratio of
the balance of future lease payment receivables to trade receivables at the term-end.

Lease revenue and depreciation expense for the term
Lease revenue
Depreciation expense

Millions of yen
2008
2007

Thousands of
U.S. dollars
2008¥3,869¥3,290$38,624$32,841¥4,095¥3,389(Lessee side)
The pro forma information such as acquisition costs, accumulated
depreciation and obligations on property leased under financeleases currently accounted for as operating leases is summarized
as follows:
Millions of yen
2008
2007

Acquisition cost
MovablesOthers
Total
Accumulated depreciation expenses
MovablesOthersTotal
Net book value
MovablesOthers
Total

Thousands of
U.S. dollars
2008

¥468
—
¥468

¥408
—
¥408

$4,677—$4,677

¥250
—
¥250

¥125
—
¥125

$2,502—$2,502

¥217
—
¥217

¥283
—
¥283

$2,175—$2,175(Note) Amounts corresponding to interest expenses are added to calculate the assumed amount ofacquisition costs due to the small ratio of the balance of future minimum lease payments to thenet book value of premises and equipment at the term-end.

Millions of yen
2008
2007

Minimum lease payment under finance leases
Due within one year
Due after one year
Total

¥110
107
¥217

¥ 95
187
¥283

Thousands of
U.S. dollars
2008$1,101
1,073$2,175(Note) Interest expenses are added to calculate future minimum lease payments due to the small ratioof the balance of future minimum lease payments to net book value of premises and equipment
at the term-end.

Millions of yen
2008
2007

Total lease payments and assumed
depreciation expenses for the term
Total lease payments
Assumed depreciation expenses

¥110
¥110

¥95
¥95

Thousands of
U.S. dollars
2008$1,101$1,101

Method utilized for calculation of assumed depreciation expenses:
straight-line method assuming the lease term as useful lives ofassets and a residual value of zero.

31

Notes to Consolidated Financial Statements (unaudited)

11. Segment Information
Information regarding the business segments and total income of the Bank and its consolidated subsidiaries for the years ended March
31, 2008 and 2007 is summarized as follows:Business segment information
Millions of yen
Year ended March 31, 2008

Banking
operations

Other
operations

Total

Total income and income before income taxes:
Total income from outside customers
Total income from intersegment transactions
Total
Total expenses
Income before income taxes
Total assets
Depreciation and amortization
Capital expenditures¥ 105,425
329
105,754
72,462¥ 33,292¥3,089,635
3,171
6,134

¥11,247
3,944
15,191
16,253¥ (1,062)¥34,289
4,041
3,179

¥ 116,672
4,273
120,946
88,715¥ 32,230¥3,123,924
7,213
9,313

Year ended March 31, 2008

Banking
operations

Other
operations

Total$ 1,052,250
3,290
1,055,541
723,247$ 332,294
30,837,760
31,65961,223$112,259
39,365
151,624
162,225$ (10,600)
342,246
40,33431,732$ 1,164,510
42,656
1,207,166
885,473$ 321,693
31,180,006
71,993
92,956

Banking
operations

Other
operations

Total

94,806314
95,12164,672¥ 30,448¥3,035,946
2,867
7,323

¥10,849
2,848
13,69812,736¥ 962¥34,007
4,113
4,610

¥ 105,656
3,163
108,819
77,409¥ 31,410¥3,069,954
6,981
11,934

Eliminations

Consolidated¥—(4,273)(4,273)(4,056)¥ (216)¥(15,662)——¥ 116,672—
116,672
84,658¥ 32,013¥3,108,262
7,213
9,313

Eliminations

Consolidated$—(42,656)(42,656)(40,492)$ (2,163)(156,331)——$ 1,164,510—
1,164,510
844,980$ 319,529
31,023,675
71,993
92,956

Eliminations

Consolidated¥¥ 105,656—
105,656
74,398¥ 31,257¥3,059,114
6,981
11,934

Thousands of U.S. dollars

Total income and income before income taxes:
Total income from outside customers
Total income from intersegment transactions
Total
Total expenses
Income before income taxes
Total assets
Depreciation and amortization
Capital expenditures

Millions of yen
Year ended March 31, 2007

Total income and income before income taxes:
Total income from outside customers
Total income from intersegment transactions
Total
Total expenses
Income before income taxes
Total assets
Depreciation and amortization
Capital expenditures

32

¥

—
(3,163)(3,163)(3,010)¥ (152)¥(10,840)——

12. Market Value of Securities(a) The market value of, and the valuation difference on, available-for-sale marketable securities at March 31, 2008 and 2007 are summarized as follows:
Millions of yen

Cost

Corresponding
amount in
the balance sheet

Valuationdifference

Gain

Loss

¥ 35,636
381,333
322,341
32,47016,521
46,689¥463,659¥ 41,824
374,373
324,904
32,893
16,57543,960¥460,157¥ 6,187(6,959)(7,436)423
53(2,729)¥(3,501)¥ 8,743
732
166
461
105
925
¥10,402¥ 2,556
7,692
7,602
38
51
3,655
¥13,904

Cost

Corresponding
amount in
the balance sheet

Valuationdifference

Gain

Loss

$ 355,691
3,806,101
3,317,111
324,087
164,902
466,009$4,627,803$ 417,449
3,736,634
3,242,884
328,313
165,437
438,768$4,592,852$ 61,757(69,467)(74,227)4,226
534(27,241)$(34,950)$ 87,270
7,315
1,657
4,606
1,051
9,241
$103,827$ 25,512
76,78275,885380
517
36,482$138,778

Cost

Corresponding
amount in
the balance sheet

Valuationdifference

Gain

Loss

¥ 34,593
366,885
322,90327,442
16,53944,920¥446,398¥ 54,588
360,386
316,515
27,344
16,52645,169¥460,144¥19,995(6,498)(6,387)
(98)
(12)
248
¥13,745¥21,050
158
9
94
55
1,445
¥22,654¥1,054
6,657
6,397
192
67
1,196
¥8,908March 31, 2008

StocksBonds:
Government bonds
Municipal bonds
Corporate bonds
Other
Total

Thousands of U.S. dollars

March 31, 2008

StocksBonds:
Government bonds
Municipal bonds
Corporate bonds
Other
Total

Millions of yen

March 31, 2007

StocksBonds:
Government bonds
Municipal bonds
Corporate bonds
Other
Total

(b) Available-for-sale securities sold during the years ended March 31, 2008 and 2007 were as follows:
Millions of yen
2008
2007

Proceeds from sales
Gain
Loss

¥24,538
1,847
16¥16,138
126
45

Thousands of
U.S. dollars
2008$244,923
18,444163

33

Notes to Consolidated Financial Statements (unaudited)

13. Repayment Schedule for Bonds

15. Subsequent Events

The repayment schedule for bonds classified as available-for-salesecurities which have definite maturities are summarized asfollows:

Appropriations of retained earnings

March 31, 2008

Due within
1 year or lessMillions of yen
Due inDue in1 to 5 years
5 to 10 years

Bonds
Government bonds
Municipal bonds
Corporate bonds
Other
Total

¥188,547
179,872
5,535
3,140
505
¥189,053¥37,777
5,028
19,87012,87913,061¥50,839

March 31, 2008

Due within
1 year or lessThousands of U.S. dollars
Due inDue in1 to 5 years
5 to 10 years

Bonds
Government bonds
Municipal bonds
Corporate bonds
Other
Total

$1,881,904
1,795,308
55,24531,3505,044$1,886,948$377,061
50,184
198,324
128,552
130,366$507,428¥148,887
140,004
7,488
1,394
7,098
¥155,985

Due after
10 years

¥

—
—
—
—
15,361¥15,361

At a shareholders’ meeting held on June 24, 2008, the Bank’s
shareholders duly approved the following year-end appropriations of retained earnings, which have not been reflected in theaccompanying consolidated financial statements for the year
ended March 31, 2008:
Millions of yen

Thousands of
U.S. dollars¥1,842$18,389

Year-end dividends from surplus(¥7.0 = US$0.069 per share)

16. Cash and Cash Equivalents$1,486,052
1,397,390
74,743
13,91870,846$1,556,899

Due after
10 years

$

—
—
—
—
153,323$153,323

14. Money Held in Trusts
A presentation of money trusts by purpose at March 31, 2008
and 2007 is summarized as follows:

March 31, 2008

Money trusts for trading purposes

March 31, 2008

Money trusts for trading purposes

March 31, 2007

Money trusts for trading purposes

Millions of yen
Amount in
Valuation
the balance sheet
difference¥1,049¥49

Thousands of U.S. dollars
Amount in
Valuation
the balance sheet
difference$10,474$493

Millions of yen
Amount in
Valuation
the balance sheet
difference¥1,097¥97

The net valuation loss on money trusts for trading purposes has
been included in “Income before income taxes and other.”34

A reconciliation between cash and due from banks in the consolidated balance sheets at March 31, 2008 and 2007 and cash andcash equivalents in the consolidated statements of cash flows forthe year then ended is as follows:

Cash and due from banks
Time deposits
Ordinary deposits
Other deposits
Cash and cash equivalents

Millions of yen
2008
2007

Thousands of
U.S. dollars
2008¥84,213 ¥102,133
(325)
(100)
(2,475)(2,163)(7,227)(2,579)¥74,185 ¥ 97,291$840,542(3,243)(24,712)(72,140)$740,444

Non-Consolidated Financial Section
Non-Consolidated Balance Sheets (unaudited)36

Non-Consolidated Statements of Income (unaudited)37

Non-Consolidated Statements of Changes in Net Assets (unaudited)

38

Notes to Non-Consolidated Financial Statements (unaudited)

41

35

Non-Consolidated Balance Sheets (unaudited)
Suruga Bank Ltd.

Thousands of
U.S. dollars

Millions of yen
As of March 31,

ASSETS:Cash and Due from Banks
Call Loans
Monetary Claims Bought
Trading Account Securities
Money Held in Trust
Securities
Loans and Bills Discounted
Foreign Exchanges
Other Assets
Tangible Fixed Assets
Intangible Fixed Assets
Deferred Tax Assets
Customers’ Liabilities for Acceptances and Guarantees
Reserve for Possible Loan Losses
Total Assets
LIABILITIES AND NET ASSETS:
Liabilities
Deposits
Call Money
Foreign Exchanges
Other Liabilities
Reserve for Employees’ Bonus
Reserve for Bonus to Directors and Auditors
Reserve for Retirement Allowances to Directors and Auditors
Reserves for Possible Losses on Repayment of Sleeping Accounts
Reserves under Special Laws
Acceptances and Guarantees
Total Liabilities
Net Assets
Common Stock
Capital Surplus
Capital Surplus Reserve
Other Capital Surplus
Retained Earnings
Earned Surplus Reserve
Other Retained Earnings
Treasury Stock
Total Stockholders’ Equity
Net Unrealized Gains (Losses) on Securities, Net of Taxes
Net Deferred Gains (Losses) on Hedging Instruments, Net of Taxes
Total Valuation and Translation Adjustments
Subscription Rights to Shares
Total Net Assets
Total Liabilities and Net Assets
See notes to non-consolidated financial statements.

36

Change from
2007

2008

83,457
101,872
147,600
170,558
—
396
3
499
2,469
2,188
466,111464,793
2,327,529 2,246,830
3,165
3,207
32,42424,35933,24232,905
5,185
10,282
21,71916,111
6,542
7,473(33,336)(36,245)
3,096,116 3,045,231(18,415)(22,958)
(396)
(496)
281
1,318
80,699
(42)
8,065
337
(5,097)
5,608
(931)
2,909
50,885

832,994
1,473,202—
35
24,647
4,652,273
23,231,157
31,595
323,629
331,799
51,760216,781
65,300(332,729)
30,902,447

2,887,332—
10
16,886
538
51
2,555
297
0
6,542
2,914,215

2,832,697
2,361
12
24,854
497
51
—
—
0
7,473
2,867,946

54,635(2,361)(2)(7,968)
41
—
2,555
297
—
(931)
46,26928,818,573—
107
168,545
5,378
509
25,5052,966
065,30029,086,887

30,04330,043
18,587
18,585
18,585
18,585
2—
137,127
122,402
30,04330,043
107,083
92,359(1,975)(1,953)
183,783
169,078(2,157)8,080
30
58(2,126)
8,138
243
68
181,901
177,285
3,096,116 3,045,231—
2—
2
14,725—
14,724(22)
14,705(10,237)(28)(10,264)
175
4,616
50,885299,862
185,526
185,50520
1,368,670
299,862
1,068,807(19,713)
1,834,346(21,530)308(21,221)2,434
1,815,560
30,902,447

2008

2007

Non-Consolidated Statements of Income (unaudited)
Suruga Bank Ltd.

Thousands of
U.S. dollars

Millions of yen
For the years ended March 31,

Ordinary Income
Interest Income
Interest on Loans and Discounts
Interest and Dividends on Securities
Trust Fees
Fees and Commissions
Other Operating Income
Other Income
Operating Expenses
Interest Expenses
Interest on Deposits
Fees and Commissions
Other Operating Expenses
General and Administrative Expenses
Other Expenses
Ordinary Profits
Extraordinary Profits
Extraordinary Losses
Income before Income Taxes and Others
Provision for Income Taxes and Others
Deferred Income Taxes
Net Income

2008

2007

Change from
2007

2008

107,725
91,04082,9495,203
013,988636
2,060
75,094
14,868
10,231
9,171
1,985
40,143
8,925
32,631
1,109
3,458
30,282
11,107
1,292
17,882

97,32081,34175,5513,665
013,525
1,292
1,162
66,893
11,033
5,372
7,975
211
37,861
9,811
30,4272,995
215
33,206
12,335792
20,07910,405
9,699
7,398
1,538
(0)
463
(656)
898
8,201
3,835
4,859
1,196
1,774
2,282
(886)
2,204
(1,886)
3,243(2,924)(1,228)500(2,197)

1,075,212
908,675
827,919
51,9400139,617
6,351
20,568749,521
148,400
102,124
91,53819,821
400,674
89,086
325,691
11,07834,517302,252
110,869
12,895
178,487

See notes to non-consolidated financial statements.

37

Non-Consolidated Statements of Changes in Net Assets (unaudited)
Suruga Bank Ltd.

Millions of yen
Stockholders’ Equity
Capital Surplus

Balance at March 31, 2007
Changes of Items During the Period
Dividends from Surplus
Net Income
Provision to Voluntary Reserves
Repurchase of Treasury Stock
Disposal of Treasury Stock
Net Changes of Items Other than
Stockholders’ Equity
Total
Balance at March 31, 2008

CapitalStock

CapitalSurplusReserve

Other
CapitalSurplus

Total
CapitalSurplus

EarnedSurplusReserve

30,043

18,585—

18,58530,043—30,043—
18,585

2

2

2
2

2
18,587

Stockholders’ Equity

Balance at March 31, 2007
Changes of Items During the Period
Dividends from Surplus
Net Income
Provision to Voluntary Reserves
Repurchase of Treasury Stock
Disposal of Treasury Stock
Net Changes of Items Other than
Stockholders’ Equity
Total
Balance at March 31, 2008

Treasury
Stock

Total
Stockholders’Equity(1,953)

169,078(143)
121(3,158)17,882
—
(143)
123

(21)
(1,975)

14,704
183,783

See notes to non-consolidated financial statements.

38—
30,043Retained Earnings
Other Retained Earnings
EarnedReserve for
SurplusRetirement Voluntary
Brought
Benefits
Reserve
Forward

840

—
840

70,032

21,487

122,40216,500(3,158)17,882(16,500)(3,158)17,882—

16,50086,532(1,775)
19,711

14,724
137,127

Millions of yen
Valuation and Translation Adjustments
Net Unrealized
Net Deferred
Gains (Losses) on Gains (Losses) on Total Valuation
Available-for-sale Hedging Instruments, and Translation
Securities
Net of Taxes
Adjustments

8,080

58

8,138

Total
Retained
Earnings

Subscription
Rights toSharesTotal
Net Assets

68

177,285(3,158)17,882—(143)
123(10,237)(10,237)(2,157)

(27)
(27)
30

(10,264)(10,264)(2,126)

175
175
243

(10,089)
4,615
181,901

Thousands of U.S. dollars (Note 2)
Stockholders’ Equity
Capital Surplus

Balance at March 31, 2007
Changes of Items During the Period
Dividends from Surplus
Net Income
Provision to Voluntary Reserves
Repurchase of Treasury Stock
Disposal of Treasury Stock
Net Changes of Items Other than
Stockholders’ Equity
Total
Balance at March 31, 2008

CapitalStock

CapitalSurplusReserve

Other
CapitalSurplus

Total
CapitalSurplus

EarnedSurplusReserve

299,862

185,505—

185,505

299,862—
299,862—
185,505

20

20

20
20

20
185,526

Stockholders’ Equity

Balance at March 31, 2007
Changes of Items During the Period
Dividends from Surplus
Net Income
Provision to Voluntary Reserves
Repurchase of Treasury Stock
Disposal of Treasury Stock
Net Changes of Items Other than
Stockholders’ Equity
Total
Balance at March 31, 2008

Treasury
Stock

Total
Stockholders’Equity(19,495)

1,687,577(1,427)
1,209(31,521)
178,487—(1,427)
1,230

(217)
(19,713)

146,769
1,834,346—
299,862

Retained Earnings
Other Retained Earnings
EarnedReserve for
SurplusRetirement Voluntary
Brought
Benefits
Reserve
Forward

8,384

—
8,384

698,993

214,463

1,221,704

164,687(31,521)
178,487(164,687)(31,521)
178,487—

164,687
863,681(17,721)
146,965
196,742 1,368,670

Thousands of U.S. dollars (Note 2)
Valuation and Translation Adjustments
Net Unrealized
Net Deferred
Gains (Losses) on Gains (Losses) on Total Valuation
Available-for-sale Hedging Instruments, and Translation
Securities
Net of Taxes
Adjustments

80,649579

Total
Retained
Earnings

81,229Subscription
Rights toSharesTotal
Net Assets

683

1,769,491(31,521)
178,487—(1,427)
1,230(102,180)(102,180)(21,530)

(270)
(270)
308

(102,450)(102,450)(21,221)

1,751
1,751
2,434

(100,699)
46,0691,815,560

See notes to non-consolidated financial statements.

39

Non-Consolidated Statements of Changes in Net Assets (unaudited)

Capital Surplus

Balance at March 31, 2006
Changes of Items During the Period
Dividends from Surplus
Bonus for Directors andCorporate Auditors
Net Income
Provision to Voluntary Reserves
Repurchase of Treasury Stock
Disposal of Treasury Stock
Net Changes of Items Other than
Stockholders’ Equity
Total
Balance at March 31, 2007

CapitalStock

CapitalSurplusReserve

EarnedSurplusReserve

30,043

18,58530,04330,043

18,585

Treasury
Stock

Total
Stockholders’Equity(2,044)

151,598

59,03230,043840

11,00070,032Millions of yen
Valuation and Translation Adjustments
Net Unrealized
Net Deferred
Gains (Losses) on Gains (Losses) on Total Valuation
Available-for-sale Hedging Instruments, and Translation
Securities
Net of Taxes
Adjustments

7,202

—

7,202

Total
Retained
Earnings

15,097105,013(2,630)(2,630)(50)
20,079(11,000)(50)
20,079
—

(9)

(9)

6,389
21,487

17,389122,402

Subscription
Rights toSharesTotal
Net Assets—

158,800(2,630)(2,630)

(168)
259

(50)
20,079
—
(168)
249

(50)
20,079
—
(168)
249

90
(1,953)

17,480169,078

See notes to non-consolidated financial statements.

40

840

11,000Stockholders’ Equity

Balance at March 31, 2006
Changes of Items During the Period
Dividends from Surplus
Bonus for Directors andCorporate Auditors
Net Income
Provision to Voluntary Reserves
Repurchase of Treasury Stock
Disposal of Treasury Stock
Net Changes of Items Other than
Stockholders’ Equity
Total
Balance at March 31, 2007

Millions of yen
Stockholders’ Equity
Retained Earnings
Other Retained Earnings
Reserve for
Retirement
Voluntary
Earned Surplus
Benefits
Reserve
Brought Forward

878
878
8,080

58
58
58

936
936
8,138

68
68
68

1,004
18,485
177,285

Notes to Non-Consolidated Financial Statements (unaudited)
Suruga Bank Ltd.

1. Summary of Significant Accounting Policies

3. Investment Securities(a) Basis of Preparation

Investment securities at March 31, 2008 and 2007 were as
follows:

The accompanying non-consolidated financial statements of
Suruga Bank Ltd. (the “Bank”) are prepared on the basis ofaccounting principles generally accepted in Japan, which are
different in certain respects as to the application and disclosure
requirements of International Financial Reporting Standards, andare compiled from the non-consolidated financial statements
prepared by the Company as required by the Securities andExchange Law of Japan.
The non-consolidated financial statements have been
prepared on the same basis as the accounting policies discussed
in Note 1 to the consolidated financial statements except that theaccompanying financial statements relate to the Bank only, withinvestments in subsidiaries and affiliates being substantially statedat cost.
Certain representations of the prior year’s non-consolidated
financial statements and the related footnote amounts have been
made to conform with the presentation in the current year.

2. Japanese Yen and U.S. Dollar Amounts
The Japanese yen amounts in the accompanying nonconsolidated financial statements are presented in millions, withfractions omitted.
Amounts stated in U.S. dollars are translated from Japanese
yen amounts, solely for convenience, at ¥100.19 = U.S.$1.00,
the exchange rate prevailing on March 31, 2008. The translation
should not be construed as a representation that Japanese yen
could be converted into U.S. dollars at the above or any otherrate.

Millions of yen
2008
2007

Japanese government bonds¥324,904 ¥316,515
Local government bonds
32,89327,344
Corporate bonds
17,38017,341
Corporate stock
47,08658,672Other securities
43,84644,919
Total¥466,111 ¥464,793
Shares of subsidiaries included in corporate stock ¥ 2,052 ¥712

Thousands of
U.S. dollars
2008$3,242,884
328,313
173,471469,972
437,631$4,652,273$ 20,489

4. Loans and Bills Discounted(a) Loans and bills discounted at March 31, 2008 and 2007 wereas follows:
Millions of yen
2008
2007

Bills discounted
Loans on bills
Loans on deeds
Overdrafts
Total

¥

3,408 ¥ 4,532
155,503150,843
1,925,564 1,891,307
243,053
200,146¥2,327,529 ¥2,246,830

Thousands of
U.S. dollars
2008$

34,023
1,552,086
19,219,124
2,425,922$23,231,157(b) Loans and bills discounted at March 31, 2008 and 2007
included the following items:
Millions of yen
2008
2007

Loans to companies under bankruptcy procedures ¥ 1,293
Delinquent loans
45,406Loans past due 3 months or more
1,168
Restructured loans
31,167
Total¥79,036¥ 1,193
50,8781,185
35,849¥89,105

Thousands of
U.S. dollars
2008$ 12,910
453,203
11,662311,085$788,863

41

Notes to Non-Consolidated Financial Statements (unaudited)

5. Fixed Assets
Fixed assets at March 31, 2008 and 2007 were as follows:
Millions of yen
2008

Asset category

Tangible fixed assets
Buildings
Land
Guarantee money, net
Other
Total
Intangible fixed assets
Software
Software suspense account
Other
Total
OthersBalance at
previous term-end

Increase during
reporting term

Decline during
reporting term

Balance atreporting term-end

Accumulated
depreciation at
term-end

Depreciation during
reporting term

Net book
value atterm-end¥22,072
16,04499
25,187¥63,404

¥ 915
23
588
2,098
¥3,625

¥ 343
127
144
2,503
¥3,118¥22,645
15,940542
24,782¥63,911¥16,155——
14,512¥30,668

¥ 639
—
—
1,369
¥2,008¥ 6,489
15,940542
10,270¥33,242¥¥¥¥14,977
436
571¥15,986¥ 5,264¥10,643—
157¥10,800¥
0¥1,486—
6¥1,493¥ —¥ 4,334436
414¥ 5,185¥ 5,264———¥—¥ 4,976

—
—
—
¥ —
¥ 400

—
—
—
¥ —
¥ 111

(Notes) 1. As the value of intangible fixed assets accounts for no more than 1,000th of the value of the Bank’s total assets, and are thus immaterial, the relevant figures have been omitted from the above
categories of Balance at previous term-end, Increase during reporting term, and Decline during reporting term.
2. “Others” includes guarantee money and rental deposits.
Thousands of U.S. dollars
2008

Asset category

Tangible fixed assets
Buildings
Land
Guarantee money, net
Other
Total
Intangible fixed assets
Software
Software suspense account
Other
Total
OthersBalance at
previous term-end

Increase during
reporting term

Decline during
reporting term

Balance atreporting term-end

Accumulated
depreciation at
term-end

Depreciation during
reporting term

Net book
value atterm-end$220,310
160,143988
251,400$632,843$ 9,136
229
5,875
20,943$36,184$ 3,424
1,269
1,446
24,986$31,128$226,022
159,103
5,417
247,357$637,899$161,253——
144,847$306,100$6,378——13,666$20,044$ 64,769
159,103
5,417
102,509$331,799$$$$149,493
4,358
5,708
$159,560$ 52,550$106,231—
1,568$107,799$
5$14,839—62$14,901$—$ 43,262
4,358
4,139
$ 51,760$ 52,544

Accumulated
depreciation at
term-end

Depreciation during
reporting term

Net book
value atterm-end———$—$ 49,672———$—$ 3,995———$—$ 1,117

Millions of yen
2007

Asset category

Tangible fixed assets
Land
Buildings
Equipment
Construction in progress account
Total
Intangible fixed assets
Software
Software suspense account
Other
Total
Others42

Balance at
previous term-end

Increase during
reporting term

¥15,648
22,04424,752—¥62,445

¥ 743
549
2,450
99
¥3,842

¥

80
278
2,525
—
¥2,884¥16,31122,31524,67899¥63,404¥—
15,965
14,534—¥30,499

¥

—
572
1,252
—
¥1,825¥16,311
6,350
10,14499¥32,905¥¥¥¥13,4655,552
572¥19,589¥ 4,976¥ 9,156—150¥ 9,307¥0¥1,361—0¥1,361¥ —¥ 4,308
5,552
421¥10,282¥ 4,976———¥—¥ 4,935

—
—
—
¥ —
¥ 153

Decline during
reporting term

—
—
—
¥ —
¥ 112

Balance atreporting term-end

6. Deposits

10. Other Operating Income and Expenses

Deposits at March 31, 2008 and 2007 were as follows:

Current deposits
Ordinary deposits
Deposits at noticeTime deposits
Other deposits
Total

Millions of yen
2008
2007

Thousands of
U.S. dollars
2008¥ 87,202 ¥ 73,774
1,086,522 1,054,999
68,046
82,601
1,504,489 1,455,364
141,070
165,958¥2,887,332 ¥2,832,697$ 870,375
10,844,624
679,173
15,016,367
1,408,033$28,818,573

7. Common Stock
Common stock was as follows:(1) Authorized:
400,000,000 shares no per value at March 31,
2008 and 2007
(2) Issued andoutstanding:
264,939,248 shares at March 31, 2008 and2007(3) Treasury stock: 1,736,350 shares at March 31, 2008

Other operating income and expenses for the years ended March
31, 2008 and 2007 were as follows:

Other operating income:Gain on foreign exchange transactions
Gain on sales of bonds
Gain on redemption of bonds
Other
Total
Other operating expenses:
Loss on sales of securities
Loss on sales of bonds
Loss on redemption of bonds
Other
Total

Thousands of
U.S. dollars
2008

¥ 166
128
341
—
¥ 636

¥ 126
88
1,057
20
¥1,292$ 1,658
1,286
3,405
—
$ 6,351

¥

¥

$

1
4
327
1,652
¥1,985

—
45
166
—
¥ 211

17
40
3,272
16,490$19,821

11. General and Administrative Expenses
General and administrative expenses for the years ended March
31, 2008 and 2007 were as follows:

8. Capital Surplus and Legal Reserve
Under the Banking Law of Japan, an amount equivalent to atleast 20 percent of cash dividends paid and other cash outflows
from retained earnings must be appropriated to the legal reserve
until such reserve and the capital surplus account equal 100
percent of the Bank’s stated capital.
In the case that the sum of the capital surplus account andthe legal reserve exceed 100 percent of the common stock
account, then the amount of the excess is available for appropriation by resolution of the shareholders.

Millions of yen
2008
2007

Millions of yen
2008
2007

Salaries and allowances
Depreciation
Taxes
Other
Total

¥14,268
3,501
2,312
20,061¥40,143¥13,639
3,193
2,207
18,820¥37,861

Thousands of
U.S. dollars
2008$142,412
34,946
23,077200,236$400,674

9. Amounts per Share
The computation of basic net income per share is based on theweighted average number of shares of common stock outstanding during each year.
Amounts per share of net assets are computed based on thenumber of shares of common stock outstanding at each balance
sheet date, less treasury stock.
Yen

Net income
Net assets
Diluted net stock

2008

2007

U.S. dollars
2008¥ 67.94690.17¥ 67.83¥ 76.31673.40¥ 76.16$0.6786.888$0.67743

Notes to Non-Consolidated Financial Statements (unaudited)

12. Accrued retirement benefits of directors andcorporate auditors
A provision is made for accrued retirement benefits of directors
and corporate auditors in an amount accrued at the end of thereporting period based on internal regulations.
(Changes in accounting standards)
Previously, the Bank expensed executive retirement benefits asthey were incurred. However, due to the mandatory applicationof new accounting standards as stipulated in JICPA Audit andAssurance Practice Committee Report No. 42 dated April 13,
2007 for the period ended March 31, 2008 and subsequentterms, the Bank adopted the new accounting standards for thereporting period. The adoption of the new standards has caused
ordinary expenses and extraordinary losses to increase by ¥161
million and ¥2,394 million, respectively, and ordinary profit andincome before income taxes to decrease by ¥161 million and¥2,555 million, respectively.

13. Reserve for possible losses on repayment of
sleeping accounts
A provision is made for possible losses on repayment of sleeping
accounts in the future in an amount deemed necessary, taking
into account the Bank’s historical refund record.
(Changes in accounting standards)
Previously, the Bank removed certain deposit accounts meetingthe definition of sleeping accounts from liabilities, and posted
gains in a corresponding amount and, upon claims on repayments of the deposits, expensed losses on repayment of deposits
as they incurred. However, due to the mandatory applicationof the new accounting standards stipulated in JICPA Audit andAssurance Practice Committee Report No. 42 to the period
ended March 31, 2008, the Bank has adopted the new accounting standards for the reporting period. The adoption of the newstandards has caused other ordinary expenses and extraordinary
losses to increase by ¥29 million and ¥267 million, respectively,
and ordinary profit and income before income taxes to decreaseby ¥29 million and ¥297 million, respectively.

44