Annual Securities Report“Yukashoken Hokokusho”(Excerpt)
For the fiscal years ended March 31, 2018 and 2017

FIDEA Holdings Co. Ltd.
and Subsidiaries

Message from the President and CEO———————————————————————————————————————
Dear Shareholders and Investors,
I would like to express my deepest gratitude for your continued support for the FIDEA Group, including the
Shonai Bank, Ltd., and the Hokuto Bank, Ltd.
In fiscal 2017 the FIDEA Group launched its third Medium-term Management Plan, “Consulting andInnovation.”
The environment surrounding regional financial institutions is growing more and more difficult because of thedeclining birthrate and associated declining and aging population, the prolonged negative interest rateenvironment, and changes in competitive environment due to the entry of other industries into the field. Under
these circumstances, we will be committed more closely than ever to our customers and aim at a transformation
to a business model in which we identify both the apparent and potential needs of customers through dialogue
with them and exercise consulting capabilities in a timely manner, thereby supporting the growth of regional
economies.
Specifically, in order to satisfy needs related to business succession and M&A, which have been increasing
among our local firms, we will formulate a support team comprising personnel with professional expertise andskills across our two banks and proactively offer consultation. Moreover, in expanded cooperation with otherlocal banks and business partners, we will provide business information in a broader range of areas andendeavor to enhance our lineup of solutions to various issues of our clients, including marriage-arrangement
support and staffing services.
As a leader in regional economies, we will also continue to proactively support regional revitalization projects.
In fiscal 2017, we were actively engaged in initiatives to help overcome structural problems in areas with adeclining population and support the sustainable development of regional areas, such as: inviting the Thainational badminton team to Misato Town, Akita Prefecture as the site for their training camp for the Tokyo
Olympics; supporting asset securitization in line with the large-scale redevelopment of retail facilities, which are
the core customer attraction in the center of Tsuruoka City, Yamagata Prefecture; accumulating achievements insupporting agribusinesses using the Shonai Bank’s agribusiness support fund; and supporting incomers and theirstart-up businesses in cooperation with local governments.
In April 2018, we restructured the headquarter functions of the holding company and the two banks. To enableboth the Shonai Bank and the Hokuto Bank to fulfill their responsibilities in the revitalization of their respective
business areas and devote efforts in solving issues of their customers, we have integrated planning-related
functions, including those of the holding company, and are now forwarding the integration of administration
centers and other back-office operations. The holding company and the two banks are making a united effort toexert further synergies, and working on the enhancement of consulting business systems in a speedy manner.
Under the slogan “Reaching out to the community and stepping into the next generation - Trust FIDEA,”FIDEA Group will strive to become the best advisor for our customers, as a readily accessible provider of
information and expertise in solving our customers’ needs and issues.
I appreciate your continued support and guidance.

July 2018
Yuichi Tao
President and CEO
FIDEA Holdings Co. Ltd.

1

FIDEA Holdings Co. Ltd. and Subsidiaries
Consolidated Balance Sheets
March 31, 2018 and 2017

Millions of yen
2018
2017
Assets:Cash and due from banks (Notes 10, 19 and 23)
Monetary claims bought (Note 23)
Trading account securities (Notes 4 and 23)
Money held in trust (Notes 5 and 23)
Securities (Notes 4, 5, 10, 13 and 23)
Loans and bills discounted (Notes 6, 22 and 23)
Foreign exchange assets (Note 23)
Tangible fixed assets (Note 7):
Buildings
Land
Lease assets
Construction in progress
Other tangible fixed assets
Intangible fixed assets:
Software
Other intangible fixed assets
Defined benefit asset (Note 12)
Deferred tax assets (Note 20)
Customers’ liabilities for acceptances andguarantees (Note 22)
Other assets (Note 10)
Allowance for loan losses (Notes 6 and 23)¥

Total assets

156,177
4,121
303
14,002744,685
1,738,367
2,145¥

77,180
3,841
704
9,606
937,382
1,759,326
2,055

Thousands of
U.S. dollars(Note 1)2018$

1,469,624
38,7782,851
131,758
7,007,480
16,358,022
20,18415,753
10,741
187
41
2,385

11,122
11,059
224
3,839
2,590

148,235
101,072
1,759
385
22,442

1,856
136
348
1,720

2,598
137
618
1,734

17,464
1,279
3,274
16,18522,01521,801

207,161

61,391(14,410)

17,344(16,315)577,688(135,598)¥ 2,761,970¥ 2,846,854$ 25,990,119(Continued)

2

FIDEA Holdings Co. Ltd. and Subsidiaries
Consolidated Balance Sheets
March 31, 2018 and 2017

Millions of yen
2018
2017
Liabilities:
Deposits (Note 23)
Negotiable certificates of deposit (Note 23)
Payables under securities lending transactions(Notes 10 and 23)
Borrowed money (Notes 9, 10 and 23)
Foreign exchange liabilities (Note 23)
Bonds payable (Notes 11 and 23)
Defined benefit liability (Note 12)
Provision for reimbursement of deposits
Provision for contingent loss
Other provisions
Deferred tax liabilities (Notes 5 and 20)
Deferred tax liabilities for land revaluation (Note 8)
Acceptances and guarantees
Other liabilities (Note 9)

Thousands of
U.S. dollars(Note 1)2018

¥ 2,429,106
99,843¥ 2,392,320
141,595$ 22,857,871
939,52160,778

129,789

571,920

15,100
52
2,266
762
419
17
3,888
502
22,015
11,46016,400
36
5,000
2,690
647
344
31
3,325
536
21,801
20,397142,090489
21,323
7,170
3,942
159
36,586
4,723
207,161
107,838

2,646,213

2,734,916

24,900,846

18,00029,261
48,634(5)
95,89018,00029,27245,519(9)92,781

169,379
275,345457,645(47)
902,324

19,1681,090(644)
19,614250

18,808
1,127(945)
18,990165

180,370
10,256(6,060)184,567
2,352

Total net assets

115,756

111,937

1,089,263

Total liabilities and net assets¥ 2,761,970¥ 2,846,854$ 25,990,119

Total liabilities
Net assets (Note 14):
Common stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity
Accumulated other comprehensive income:Unrealized gain (loss) on available-for-sale securities(Note 5)
Revaluation reserve for land (Note 8)
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Non-controlling interests

See notes to consolidated financial statements.

(Concluded)

3

FIDEA Holdings Co. Ltd. and Subsidiaries
Consolidated Statements of Income
Years Ended March 31, 2018 and 2017
Thousands of
U.S. dollars(Note 1)
2018

Millions of yen
2018
2017
Income:Interest income:Interest on loans and discounts
Interest and dividends on securities
Other
Fees and commissions
Other operating income
Other income¥

Total income

21,996
12,785
36
8,555
3,830
3,970

¥

22,903
11,625
29
8,720
6,151
2,758

$

206,982
120,306
338
80,502
36,04037,35751,17552,188481,556

1,518
602
73
44
5
3,634
6,258
29,854
763
2,158

2,126
803
76
134
6
3,529
5,574
29,7352,752
1,564

14,284
5,664
686
414
47
34,19558,887
280,925
7,179
20,306

Total expenses

44,91346,306422,631

Income before income taxes

6,261

5,881

58,915

Income taxes (Note 20):
Current
Deferred

1,710
236

1,330
(103)

16,091
2,220

1,947

1,226

18,321

4,314

4,654

40,594

32

27

301

Expenses:
Interest expenses:
Interest on deposits
Interest on payables under securities lending transactions
Interest on borrowings and rediscounts
Interest on bonds payable
Other
Fees and commissions
Other operating expenses
General and administrative expenses (Note 15)
Provision of allowance for loan losses
Other expenses (Notes 16 and 17)

Total income taxes
Net income
Net income attributable to non-controlling interests
Net income attributable to owners of parent

¥

4,281

¥

4,627

Yen
Per share of common stock (Note 25):
Basic net income
Diluted net income
Cash dividends applicable to the year¥

See notes to consolidated financial statements.
4

22.98
18.38
6.00

$

40,284

U.S. dollars
¥

25.18
20.63
6.00

$

0.21620.17290.0564

FIDEA Holdings Co. Ltd. and Subsidiaries
Consolidated Statements of Comprehensive Income
Years Ended March 31, 2018 and 2017

Millions of yen
2018
2017
Net income¥

Other comprehensive income (Note 18):
Unrealized gain (loss) on available-for-sale securities
Remeasurements of defined benefit plans
Total other comprehensive income (loss)

4,314

¥

4,654

Thousands of
U.S. dollars(Note 1)
2018$

(11,256 )94(11,162 )

388
301
689

40,594
3,651
2,832
6,483

Comprehensive income (loss)

¥

5,004

¥

(6,507)$47,087

Total comprehensive income (loss) attributable to:
Owners of parent
Non-controlling interests

¥

4,949
54

¥

(6,533)25$

46,570508

See notes to consolidated financial statements.

5

FIDEA Holdings Co. Ltd. and Subsidiaries
Consolidated Statements of Changes in Net Assets
Years Ended March 31, 2018 and 2017
Shareholders’ equity

Commonstock
Balance as of April 1, 2016¥

18,000Capitalsurplus¥Treasury
stock

¥

¥

42,652(1,768)
4,627

Cash dividends
Net income attributable to owners of parent
Acquisition of treasury stock
Sale of treasury stock
Purchase of shares of consolidated
subsidiaries
Reversal of revaluation reserve for land
Net changes of items other thanshareholders’ equity

(4)

Total
shareholders’equity
¥

(107)
102

93
1,421
7

Balance as of March 31, 2017

18,00029,27245,519(1,203)
4,281

Cash dividends
Net income attributable to owners of parent
Acquisition of treasury stock
Sale of treasury stock
Purchase of shares of consolidated
subsidiaries
Reversal of revaluation reserve for land
Net changes of items other thanshareholders’ equity
Balance as of March 31, 2018

27,757Retainedearnings(0)88,405

Millions of yen
Accumulated other comprehensive income
Unrealized
Totalgain (loss) on
Remeasureaccumulated
available-forotherments ofsale
Revaluation
defined benefit comprehensive
securities
reserve for landplansincome¥30,064¥29,261¥

48,634¥¥30,158¥¥ 120,035

1,471(1,768)
4,627
(107)
195

(1,768)
4,627
(107)
195

1,421
7

1,421
7
(11,255)(7 )

94(11,168)(1,305)(12,473)

18,808

1,127

(945)

18,990165

111,937(0)
5(1,203)
4,281
(0)
4

(1,203)
4,281
(0)
4

(9)
36

(9)
36
359

¥

(1,040)92,78136

18,000¥Total
net assets

(9)

(9)

¥

1,134

Noncontrollinginterests(5)¥

95,890¥(36 )19,168

¥

1,090

301
¥

(644)

624
¥

19,614

Thousands of U.S. dollars (Note 1)
Accumulated other comprehensive income
Unrealized
Totalgain (loss) on
Remeasureaccumulated
Total
available-forments ofotherTreasuryshareholders’sale
Revaluation
defined benefit comprehensive
stock
equitysecurities
reserve for landplansincome$(84)$ 873,068$ 176,983$
10,605$ (8,892)$ 178,695

85

709

250

¥ 115,756

Noncontrollinginterests
$
1,552

Total
net assets$1,053,326¥

Shareholders’ equity

Balance as of March 31, 2017

Commonstock$ 169,379

Cash dividends
Net income attributable to owners of parent
Acquisition of treasury stock
Sale of treasury stock
Purchase of shares of consolidated
subsidiaries
Reversal of revaluation reserve for land
Net changes of items other thanshareholders’ equity
Balance as of March 31, 2018

Capitalsurplus$ 275,449

Retainedearnings$ 428,333(11,320)
40,284

(0)
47

(0)
(84)
338

(11,320)
40,284(0)
37(11,320)
40,284
(0)
37

(84)
338

(84)
338
3,378

$ 169,379$ 275,345$ 457,645$(47)$ 902,324$ 180,370

See notes to consolidated financial statements.

6

(338)
$

10,256

$

2,832

5,871

(6,060)$ 184,567

$

799

6,671

2,352

$1,089,263

FIDEA Holdings Co. Ltd. and Subsidiaries
Consolidated Statements of Cash Flows
Years Ended March 31, 2018 and 2017

Millions of yen
2018
2017
Operating activities:¥ 6,261
Income before income taxes
Adjustments for:
Income taxes—paid(1,341)
Depreciation and amortization
2,663
255
Loss on impairment—fixed assets
Amortization of goodwill
Change in allowance for loan losses(1,905)273
Change in defined benefit asset
Change in defined benefit liability
131
Change in provision for reimbursement of deposits
115
Change in provision for contingent loss
75
Change in other provisions(13)
Interest income(34,818)
Interest expenses
2,244
102
Gain on securities―net(1,050)Loss (gain) on money held in trust—net
5
Foreign exchange loss—net
71
Loss on sale and disposal of fixed assets—net
Loss on reduction of non-current assets
100
Subsidy income(100)
Net change in loans and bills discounted
20,958Net change in deposits
36,785
Net change in negotiable certificates of deposit(41,752)
Net change in trading account securities
401
Net change in borrowed money, excluding subordinatedborrowings(1,300)Net change in due from banks, excluding due from Bank of Japan
2,858
Net change in call loans and bills bought(279)
Net change in call money and bills soldNet change in payables under securities lending transactions(69,011)
Net change in foreign exchange assets(89)
Net change in foreign exchange liabilities
15
Interest received
35,785Interest paid
(2,701)(42,612)
Other—net
Total adjustments(94,133)
Net cash provided by (used in) operating activities¥ (87,872)—(Forward)

¥

5,881

Thousands of
U.S. dollars(Note 1)
2018$

58,915(2,558)
2,368
22
15
129
216
177
(25)
20
0
(34,557)
3,148(2,380)(204)
1
82(10,345)(41,001)(3,868)(50)(12,618)
25,0582,399(17,926)
2,568
1,232
1,082
705
(122)
(327,637)
21,116959(9,880)
47
668
940
(940)
197,214346,146(392,886)
3,773(4,600)1,065(185)(20,000)
50,959829
2635,594(3,623)(6,854)(35,599 )(12,232)
26,893(2,625)(649,393)(837)
141
336,736(25,416)(400,978)(885,790)¥ (29,718)$ (826,874)(Continued)
7

FIDEA Holdings Co. Ltd. and Subsidiaries
Consolidated Statements of Cash Flows
Years Ended March 31, 2018 and 2017

Net cash provided by (used in) operating activities—(Forward)
Investing activities:
Purchase of securities
Proceeds from sales of securities
Proceeds from maturity of securities
Increase in money held in trust
Decrease in money held in trust
Purchase of tangible fixed assets
Proceeds from sales of tangible fixed assets
Purchase of intangible fixed assets
Proceeds from subsidy income
Net cash provided by (used in) investing activities
Financing activities:
Redemption of subordinated bonds
Repayment of lease obligations
Dividends paid
Dividends paid to non-controlling shareholders
Purchase of treasury stock
Proceeds from sales of treasury stock
Net cash used in financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of year
Cash and cash equivalents at the end of year (Note 19)

Millions of yen
2018
2017

Thousands of
U.S. dollars(Note 1)
2018

(87,872)(29,718)$ (826,874)(330,522)
398,526
114,332(5,000)1,483(2,702)
189
(341)
39
176,006(367,477)
303,069
115,562(2,500)940(4,374)84(706)
44,599(3,110,209)
3,750,127
1,075,863(47,049)
13,955(25,425)
1,778(3,208)366
1,656,215(5,000)(76)(1,201)(0)
3(6,274)(57)(1,763)(2)(0)
236(1,587)(47,049)(715)(11,301)(0)
28(59,038)(5)
81,85472,289¥ 154,143(1)
13,29258,99772,289(47)
770,245680,239$ 1,450,484

¥

¥

¥

See notes to consolidated financial statements.

(Concluded)

8

FIDEA Holdings Co. Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
Years Ended March 31, 2018 and 2017
1. Basis of Presentation
FIDEA Holdings Co. Ltd. (the “Company”) is a holding company and conducts its operations through its
subsidiaries and affiliates. The Company was established as a joint holding company between The Shonai Bank,
Ltd. (“Shonai”) and The Hokuto Bank, Ltd. (“Hokuto”) on October 1, 2009 by way of a transfer of shares.
The accompanying consolidated financial statements have been prepared in accordance with the provisions set
forth in the Japanese Financial Instruments and Exchange Act and its related accounting regulations, theOrdinance for the Enforcement of the Banking Act of Japan (the “Banking Act”) and the Companies Act of Japan(the “Companies Act”), and in conformity with accounting principles generally accepted in Japan, which are
different in certain respects as to application and disclosure requirements of International Financial ReportingStandards.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been madeto the consolidated financial statements issued domestically in order to present them in a form which is morefamiliar to readers outside Japan.
In preparing the accompanying consolidated financial statements, Japanese yen amounts are presented in millionsof yen by rounding down figures to the nearest million. As a result, the totals in yen in the accompanying
consolidated financial statements do not necessarily agree with the sums of the individual amounts.
The translation of yen amounts into U.S. dollar amounts is included solely for the convenience of readers outside
Japan and has been made at ¥106.27 = U.S.$1.00, the exchange rate prevailing on March 31, 2018. Thistranslation should not be construed as a representation that yen can be converted into U.S. dollars at the above or
any other rate.
2. Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its 6 subsidiaries (collectively the“Group”) as of March 31, 2018 and 2017.
Under the control of influence concept, those companies in which the Company, directly or indirectly, is able toexercise control over operations are fully consolidated. The Company has 4 unconsolidated subsidiaries as ofMarch 31, 2018 and 2017.
All significant intercompany accounts and transactions have been eliminated in consolidation. All material
unrealized profit included in assets resulting from transactions within the Group is eliminated.
The excess of the acquisition cost over the underlying equity in the net assets of the consolidated subsidiaries
measured at fair value at their respective dates of acquisition is presented as “goodwill” and is amortized by thestraight-line method over a period of five years. Insignificant amounts of goodwill are fully charged to income in
the fiscal year when it is incurred.
The balance sheet dates of all 6 subsidiaries are March 31.
Those companies over which the Company has the ability to exercise significant influence, but does not control
are accounted for using the equity method. However, the Company has no affiliates to be accounted for using theequity method.

9

3. Significant Accounting Policies(1) Trading account securities
Trading account securities are stated at fair value as of the balance sheet date, and cost of trading accountsecurities sold is determined principally using the moving-average method.
(2) Securities
Non-trading securities are classified into two categories: held-to-maturity debt securities andavailable-for-sale securities. Held-to-maturity debt securities are carried at amortized cost being determinedby the moving-average method. Available-for-sale securities are generally stated at fair value determinedbased on the quoted market price as of the balance sheet date, except for equity securities which are stated atfair value determined based on the average market price during one month before the balance sheet date.
Cost of sales of theses available-for-sale securities is principally determined using the moving-averagemethod. Available-for-sale securities, for which it is extremely difficult to determine the fair value, are statedat cost determined by the moving-average method.
Unrealized gain or loss on available-for-sale securities is recorded under net assets, net of income taxes.
(3) Securities held in money trusts
Securities that are part of trust assets in independently managed money trusts with the primary purpose to
manage securities are stated at fair value as of the balance sheet date.
(4) Derivatives
Derivatives are stated at fair value.
(5) Tangible fixed assets
Depreciation of tangible fixed assets of the Group, except for lease assets, is calculated by the straight-line
method. The principal useful lives are as follows:
Buildings
Others5 to 50 years
4 to 20 years

The Group leases automated teller machines, etc. under finance lease arrangements as a lessee.
Lease assets under finance lease arrangements which do not transfer ownership of the lease assets to thelessee are depreciated over the respective lease contract periods using the straight-line method with salvage
values defined in the lease contracts, otherwise with no residual value.
(6) Intangible fixed assets
Intangible fixed assets, except for lease assets, are amortized by the straight-line method. Amortization of
the cost of software intended for internal use is calculated by the straight-line method based on a useful life
(principally five years) determined by the Group.
(7) Allowance for loan losses
Allowance for loan losses is provided by the consolidated banking subsidiaries and other major consolidated
subsidiaries in accordance with the prescribed standards. For claims on borrowers who have declaredbankruptcy or have commenced special liquidation proceedings or similar legal proceedings (the “bankrupt
borrowers”), or borrowers who are not legally or formally insolvent but are regarded as substantially in thesame situation (the “virtually bankrupt borrowers”), an allowance is generally provided based on the
carrying amount of the claims, after the write-off stated below, net of the expected amount recoverable fromcollateral and guarantees.
For claims on borrowers who are not currently bankrupt but are likely to become bankrupt (the “potentiallybankrupt borrowers”), an allowance is provided at the amount deemed necessary based on the overall
solvency assessment of the borrowers and the amount of the claims, net of the expected amount recoverablefrom collateral and guarantees.
For other claims, an allowance is provided based on the historical loan-loss ratio calculated from pastexperiences during a certain period after categorizing into definite types.
All claims are assessed for the quality by the Asset Assessment Department with the cooperation by
operating offices in accordance with the Standards for Asset Self-Assessment, and then the assessment
results are audited by the Asset Audit Department which is independent from the Asset Assessment
Department.
10For collateralized or guaranteed claims on the bankrupt borrowers and virtually bankrupt borrowers of
Hokuto and certain consolidated subsidiaries, the amount of the claims exceeding the estimated value ofcollateral and guarantees is deemed to be uncollectible and is charged off against the total amount of theoutstanding claims. These write-offs amounted to ¥12,073 million ($113,606 thousand) and ¥10,506 million
for the years ended March 31, 2018 and 2017, respectively.
Allowances for loan losses of other consolidated subsidiaries are provided based on the historical loan loss
ratio.
(8) Provision for reimbursement of deposits
Provision for reimbursement of deposits is provided at an estimated amount of the future payments to bemade for reimbursement claims on deposits which were derecognized and credited from liability to income.
(9) Provision for contingent loss
Provision for contingent loss is provided at an estimated amount of the future payments to be made for aburden charge to the Credit Guarantee Corporations in connection with the responsibility-sharing system.
(10) Other provisions
Other provisions include provision for point service program of the consolidated subsidiaries.
Provision for point service program relating to credit business engaged by consolidated subsidiaries isprovided for the future burdens when the service will be used at the necessary amount based on thereasonably estimated amount to be used in future.
(11) Retirement benefits
The benefit formula method is used as a method of attributing expected retirement benefits to each period in
calculating retirement benefit obligation.
Past service costs are amortized by the straight-line method over a certain period (five years) within the
average remaining years of service of the eligible employees when such past service costs occur at Shonai, aconsolidated subsidiary of the Company.
Actuarial gains and losses are amortized from the year following the year in which the gains and losses
occur by the straight-line method over a certain period of 10 to 15 years within the average remaining yearsof service of the eligible employees when such actuarial gains and losses occur.
Certain consolidated subsidiaries adopt the simplified method in calculating defined benefit liability andretirement benefit expenses. Under this method, the severance payment amount required at the fiscal
year-end for voluntary termination is deemed as retirement benefit obligations.
(12) Foreign currency translation
The assets and liabilities denominated in foreign currencies of the consolidated subsidiaries are translated
into Japanese yen at the exchange rates in effect at the balance sheet date.
(13) Hedge accounting
Interest rate risk hedging
With respect to the hedge accounting for the interest rate risk arising from financial assets and liabilities of
the consolidated banking subsidiaries, the Group applies deferral hedge accounting, under which gains orlosses on derivatives are deferred until maturity of the hedged transactions, as stipulated in the JapaneseInstitute of Certified Public Accountants (“JICPA”) Industry Audit Committee Report No. 24 (February 13,2002). With respect to hedging transactions to offset fluctuations of the market price, the effectiveness ofhedging transactions is assessed by specifying the hedged items such as deposits and loans and bills
discounted and hedging instruments such as interest rate swaps after grouping these items by definite
remaining maturity. With respect to hedging transactions to fix cash flows, the effectiveness of hedging isassessed by verifying the correlation of interest floating factors of hedged items and hedging instruments.
Foreign exchange risk hedging
With respect to the hedge accounting for the foreign exchange risk arising from financial assets andliabilities denominated in foreign currencies of the consolidated banking subsidiaries, the Group applies
deferral hedge accounting, under which gains or losses on derivatives are deferred until maturity of the11

hedged transactions, as stipulated in the JICPA Industry Audit Committee Report No. 25 (July 29, 2002).
Hedge effectiveness is assessed by comparing the amount of monetary assets and liabilities denominated inforeign currencies as underlying hedged items with the corresponding foreign-currency amount of therespective hedging instruments such as currency swaps and foreign exchange swaps entered into in order tohedge foreign exchange risk associated with monetary assets and liabilities denominated in foreign
currencies.
In addition, in order to hedge foreign exchange risk of available-for-sale securities denominated in foreign
currencies except for debt securities, the fair value hedge is applied as portfolio hedging on the condition
that liabilities of spot and forward foreign exchange contracts exceeding the acquisition costs of the foreign
currency denominated securities on a basis of foreign currency exist, designating the issues of foreign
currency denominated securities to be hedged in advance.
(14) Cash and cash equivalents
In preparing the consolidated statements of cash flows, of cash and due from banks in the consolidatedbalance sheets, cash and due from Bank of Japan (“BoJ”) are considered to be cash and cash equivalents.
(15) Consumption taxes
Transactions are principally stated exclusive of national and local consumption taxes.
(16) Accounting standard and guidance issued but not yet applied“Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, March 30, 2018)“Implementation Guidance on Accounting Standard for Revenue Recognition” (ASBJ Guidance No. 30,
March 30, 2018)(i) Overview
Conducting a joint project to clarify the comprehensive principles for recognizing revenues, theInternational Accounting Standards Board (“IASB”) and the Financial Accounting Standards Board(“FASB”) in the US issued “Revenues from Contracts with Customers” (IFRS 15 by IASB and Topic
606 by FASB) in May 2014. IFRS 15 shall be effective from a fiscal period beginning on or afterJanuary 1, 2018 and Topic 606 shall be effective from a fiscal period beginning after December 15,
2017. Under these circumstances, ASBJ also developed a comprehensive accounting standard forrevenue recognition and issued a new standard together with its implementation guidance.
As a basic policy for the development of the new standard, ASBJ determined to adopt the core
principles of IFRS 15 in order to enhance comparability of financial statements, which is one of thebenefits aligning with IFRS 15. In addition, for any practical issue to be considered in Japan,
alternative treatment shall be added to the extent that comparability is not impaired.
(ii) Scheduled date of application
The Company and its consolidated subsidiaries will apply the new accounting standard andimplementation guideline effective from the fiscal year beginning on April 1, 2021.
(iii) Effect from the application of the new accounting standard and implementation guideline
The effect from the application of the new accounting standard and implementation guideline iscurrently under evaluation.

12

4. Securities
Gain and loss from revaluation of trading account securities included in the consolidated statements of income
was immaterial in amount for the years ended March 31, 2018 and 2017.
Securities at March 31, 2018 and 2017 consisted of the following:
Millions of yen
Acquisition
cost

Carrying
amountMarch 31, 2018
Securities whose carrying amount exceeds theiracquisition cost:
Held-to-maturity debt securities
Available-for-sale securities:
Equity securities
Debt securities:
Japanese government bonds
Municipal bonds
Corporate bonds
Other
Subtotal
Securities whose carrying amount does not exceed
their acquisition cost:
Held-to-maturity debt securities
Available-for-sale securities:
Equity securities
Debt securities:
Japanese government bonds
Municipal bonds
Corporate bonds
Other
Subtotal
Total

¥

-

¥

19,250438,922
194,051
167,893
76,97785,019¥ 543,192

¥

¥

-

¥

9,966
427,252
189,407
163,11174,734
72,583¥ 509,803¥

9,284
11,669
4,644
4,782
2,242
12,435¥ 33,389

-

¥

-

¥

4,026
63,977
5,947
42,772
15,257
129,979¥ 197,983¥ 741,175¥

4,383
64,538
6,011
43,152
15,374
134,851¥ 203,773¥ 713,577

¥

¥

¥

13

Unrealized
gain (loss)
-

-

(356)
(561)
(63)
(380)
(117)
(4,872)¥ (5,790)¥ 27,598

Millions of yen
Acquisition
cost

Carrying
amountMarch 31, 2017
Securities whose carrying amount exceeds theiracquisition cost:
Held-to-maturity debt securities
Available-for-sale securities:
Equity securities
Debt securities:
Japanese government bonds
Municipal bonds
Corporate bonds
Other
Subtotal
Securities whose carrying amount does not exceed
their acquisition cost:
Held-to-maturity debt securities
Available-for-sale securities:
Equity securities
Debt securities:
Japanese government bonds
Municipal bonds
Corporate bonds
Other
Subtotal
Total

¥

-

¥

19,275525,091
235,681
192,733
96,675
114,779¥ 659,146¥¥

Unrealized
gain (loss)-¥

11,157510,790229,515
187,206
94,068
101,639¥ 623,587

¥

-

¥

-

¥

2,067
69,357
10,34642,054
16,956
203,442¥ 274,867¥ 934,013¥

2,205
70,244
10,50942,64817,086
210,940¥ 283,390¥ 906,978

¥

¥

¥

-

8,117
14,300
6,165
5,527
2,607
13,140¥ 35,558
-

(137)
(887)
(162)
(594)
(130)
(7,497)¥ (8,523)¥ 27,035

As of March 31, 2018 and 2017, ¥276 million ($2,597 thousand) and ¥214 million of capital investment inunconsolidated subsidiary were included in the balance of securities, respectively.
Thousands of U.S. dollars
Acquisition
cost

Carrying
amountMarch 31, 2018
Securities whose carrying amount exceeds theiracquisition cost:
Held-to-maturity debt securities
Available-for-sale securities:
Equity securities
Debt securities:
Japanese government bonds
Municipal bonds
Corporate bonds
Other
Subtotal
Securities whose carrying amount does not exceed
their acquisition cost:
Held-to-maturity debt securities
Available-for-sale securities:
Equity securities
Debt securities:
Japanese government bonds
Municipal bonds
Corporate bonds
Other
Subtotal
Total

$

-

$

181,142
4,130,253
1,826,018
1,579,872
724,353
800,028$ 5,111,433$

93,7794,020,438
1,782,318
1,534,873
703,246
683,005$ 4,797,242$ 87,362
109,805
43,70044,99821,097
117,013$ 314,190

$

-

$

-

$

37,884602,023
55,961
402,484
143,568
1,223,101$ 1,863,018$ 6,974,451$

41,244607,30256,563406,060
144,669
1,268,947$ 1,917,502$ 6,714,754

$

$

$

14

Unrealized
gain (loss)

-

$

-

-

(3,349)(5,279)(592)(3,575)(1,100)(45,845)$ (54,483)$ 259,696

Available-for-sale securities sold for the years ended March 31, 2018 and 2017 were as follows:
Millions of yen
March 31, 2018
Equity securities
Debt securities:
Japanese government bonds
Municipal bonds
Corporate bonds
Other
Total

Sales proceeds

March 31, 2017
Equity securities
Debt securities:
Japanese government bonds
Municipal bonds
Corporate bonds
Other
Total

Sales proceeds

¥

7,938
110,216
59,85344,9285,434
287,083¥ 405,238

Realized gain

¥

¥

1,733
1,245
772
471
1
1,518
4,497

Realized loss

¥

¥

164
57
20
31
5
4,347
4,568

Millions of yen¥

7,486
85,201
31,22552,454
1,522
210,926¥ 303,615

Realized gain

¥

¥

746
2,357
713
1,634
10
3,295
6,399

Realized loss

¥

¥

437
305
286
11
7
3,231
3,973

Thousands of U.S. dollars
March 31, 2018
Equity securities
Debt securities:
Japanese government bonds
Municipal bonds
Corporate bonds
Other
Total

Sales proceeds$

74,696
1,037,131
563,216
422,772
51,1332,701,449$3,813,286

Realized gain

$ 16,307
11,715
7,264
4,432
9
14,284$ 42,316

Realized loss

$

$

1,543
536
188
291
47
40,90542,984

Write-down of securities
Non-trading securities, with the exception of those whose fair value is extremely difficult to determine, whose
fair value significantly declined compared with their acquisition cost and is not considered to be able to recover
their acquisition cost, are written down to their respective fair value which is recorded as the carrying amount on
the consolidation balance sheet. The related loss on revaluation is charged to income for the year.
For the year ended March 31, 2018, ¥27 million ($254 thousand) of available-for-sale securities were written
down. Of which, equity securities were ¥27 million ($254 thousand). For the year ended March 31, 2017, ¥28
million of available-for-sale securities were written down. Of which, equity securities were ¥0 million and othersecurities were ¥28 million.
The criteria for determining whether the fair value is “significantly declined” are as follows:(1) If the fair value as of the balance sheet date declines 50% or more compared to the acquisition cost, thedifference is recognized as write-down of securities.
(2) If the fair value as of the balance sheet date declines by 30% or more but less than 50% compared to theacquisition cost, write-down of securities is recognized for the securities which meets criteria of the Group after
considering the financial condition of the issuer and past trend of the market value for a certain period.

15

5. Unrealized Gain and Loss on Available-for-Sale Securities
Unrealized gain (loss) on available-for-sale securities at March 31, 2018 and 2017 consisted of the following:
Millions of yen
2018
2017
¥ 27,598¥ 27,035
27,59827,035(8,225)(8,400)

Unrealized gain:
Available-for-sale securities
Money held in trust
Deferred tax liabilities
Unrealized gain on available-for-sale securities before
adjustments by equity interest:
Non-controlling interests
Unrealized gain on available-for-sale securities

Thousands of
U.S. dollars
2018$ 259,696
259,696(79,043)

19,19818,810180,653(29)¥ 19,168(1)¥ 18,808(272)$ 180,370

6. Loans and Bills Discounted and Risk Monitored Loans
Loans and bills discounted
Bills discounted are accounted for as financial transactions rather than as purchased bills in accordance withJICPA Industry Audit Committee Report No. 24 “Treatment of Accounting and Auditing concerning Applicationof Accounting Standard for Financial Instruments in Banking Industry” (February 13, 2002). The Group has theright to sell or pledge (repledge) such bills without any restrictions. These include commercial bills discounted
and foreign exchange bills purchased, etc. The total face value of such financial transactions at March 31, 2018and 2017 amounted to ¥4,919 million ($46,287 thousand) and ¥5,185 million, respectively.
Contracts for overdraft facilities and loan commitments are contracts under which the Group lends money tocustomers up to their prescribed limits at the customers’ request as long as there are no violations of any of theconditions in the contracts. The aggregate unutilized balances within the limits of these contracts totaled¥307,257 million ($2,891,286 thousand) and ¥293,324 million at March 31, 2018 and 2017, respectively,
including the contracts whose contractual periods were either less than one year or revocable at any time, in theamount of ¥278,438 million ($2,620,099 thousand) and ¥282,779 million, respectively.
Since many of these commitments expire without being fully utilized, the unutilized amounts do not necessarily
represent future cash commitments of the consolidated subsidiaries. Most of these contracts include provisions
which stipulate that the consolidated subsidiaries can reject customers’ requests or decrease the contract limits foran appropriate reason, such as a change in financial situation and preservation of claims. At the inception of thecontracts, they obtain collateral in the form of real estate, securities, and so forth, if deemed necessary.
Subsequently, they, based on its internal rules, perform periodic reviews of the customers’ business results andmay take necessary measures such as reconsidering the terms and conditions of the contracts and/or requiring
additional collateral or guarantees.

16

Risk monitored loans
Risk monitored loans which were included in loans and bills discounted at March 31, 2018 and 2017 consisted of
the following:
Millions of yen
2018
2017
Loans to bankrupt borrowers
Delinquent loans
Loans past due for 3 months or more
Restructured loans
Total¥ 1,192
29,7203,059¥ 33,971¥

1,951
31,6894,479¥ 38,120

Thousands of
U.S. dollars
2018$ 11,216
279,665
28,785$ 319,666

Loans to bankrupt borrowers represent non-accrual loans to borrowers who are legally bankrupt as defined in
Articles 96-1-3 and 96-1-4 of the Order for Enforcement of the Corporation Tax Act (Cabinet Order No. 97 of
1965).
Delinquent loans represent non-accrual loans other than (i) loans to bankrupt borrowers and (ii) loans on whichinterest payments have been suspended in order to facilitate or support the reconstruction of borrowers who areexperiencing financial difficulties.
Loans past due for 3 months or more represent loans on which the payment of principal and/or interest has notbeen received for three months or more from the day after the due date, and which are not classified as “loans tobankrupt borrowers” or “delinquent loans.”
Restructured loans are loans which have been restructured to facilitate or support the reconstruction of borrowers
who are experiencing financial difficulties, with the intention of ensuring the recovery of the loans by providing
more flexible repayment terms for the borrowers (such as reducing the rate of interest, suspending the payment ofprincipal/interest, forgiving debt, etc.) and loans which are not classified in any of the above categories.
The amounts presented in the table above are stated before deducting the amount of allowance for loan losses.
7. Tangible Fixed Assets
At March 31, 2018 and 2017, accumulated depreciation of tangible fixed assets was ¥32,076 million ($301,834
thousand) and ¥32,225 million, respectively.
The amounts of advanced depreciation by reduction of carrying amount of assets as of and for the years ended
March 31, 2018 and 2017 were as follows:

Millions of yen
2018
2017
Balance as of the fiscal year-end
Amount applicable for the year

¥ 1,237
100

17

¥

1,157
-

Thousands of
U.S. dollars
2018$ 11,640
940

8. Revaluation of Land
In accordance with the “Act on Revaluation of Land” (Act No. 34 of March 31, 1998), land used for business
operations of Shonai was revalued as of the date indicated below. The excess of revaluation to carrying amount at
the time of revaluation, net of income taxes corresponding to the excess which are recognized as “Deferred tax
liabilities for land revaluation,” is stated as “Revaluation reserve for land” under net assets.
Date of revaluation: September 30, 1999
The method of revaluation of asset set forth in Article 3, Paragraph 3 of the “Act on Revaluation of Land”:
Fair values are determined based on the land price registered in the book of taxation on land stipulated in Article
2-3 of the “Order for Enforcement of Act on Revaluation of Land” (the “Ordinance”) (Cabinet Order No. 119 ofMarch 31, 1998), with price adjustments by shape and time and the appraisal value by an independent real estateappraiser as provided by Article 2-5 of the Ordinance.
The difference between the total fair values of land used for business operations revalued pursuant to Article 10of the “Act on Revaluation of Land” and carrying amount after revaluation of the relevant land at March 31, 2018and 2017 was ¥1,494 million ($14,058 thousand) and ¥1,609 million, respectively.
9. Borrowed Money and Lease Obligations
Borrowed money and lease obligations at March 31, 2018 and 2017 were as follows:
Millions of yen
2018
2017
Borrowed money

Thousands of
U.S. dollars
2018

Averageinterest rate(%)

¥ 15,100¥ 16,400$ 142,090

0.48

Current portion of lease obligations

63

72

592

1.35

Lease obligations, less current portion

129

158

1,213

0.92

Maturity
June 2018
through
Apr. 2024
Apr. 2019
through
Sept. 2022

Note: Average interest rate is calculated based on the interests and the balances as of the balance sheet date by the weighted averagemethod.

Annual maturities of borrowed money and lease obligations within five years at March 31, 2018 are as follows:
Millions of yen

Borrowed money

Due in one year
or less

Due after one
year through twoyears

Due after two
years throughthree years

Due after three
years throughfour years

Due after four
years throughfive years

¥

¥

¥

¥

¥

1,700

63

Lease obligations

4,300

53

1,400

39

2,700

-

30

5

Thousands of U.S. dollars

Borrowed money

Due in one year
or less

Due after one
year through twoyears

Due after two
years throughthree years

Due after three
years throughfour years

Due after four
years throughfive years

$

$

$

$

$

15,996592

40,462498

13,173366

25,406282

Lease obligations
Note: Lease obligations are included in “Other liabilities” in the accompanying consolidated balance sheet.

47

Subordinated borrowings of ¥5,000 million ($47,049 thousand) and ¥5,000 million were included in borrowed
money at March 31, 2018 and 2017, respectively.

18

10. Assets Pledged
Assets pledged as collateral at March 31, 2018 and 2017 consisted of the following:Thousands of
U.S. dollars
2018

Millions of yen
2017
2018
Securities¥ 72,843¥ 143,563$

685,452

The liabilities secured by the above pledged assets at March 31, 2018 and 2017 consisted of the following:Thousands ofMillions of yen
U.S. dollars
2017
2018
2018
Payables under securities lending transactions¥ 60,778¥ 129,789

10,10011,400Borrowed money$

571,920
95,040In addition to the pledged assets listed above, the following assets are pledged as collateral of domestic exchangetransactions or as margins on futures contracts at March 31, 2018 and 2017:
Thousands ofMillions of yen
U.S. dollars
2017
2018
2018
Securities¥ 126,323¥ 180,533$ 1,188,698

8

8

75

41,0636,300

386,402

Cash and due from banks
Other assets

Note: Other assets include guarantee deposits in the amount of ¥551 million ($5,184 thousand) and ¥567 million at March 31, 2018and 2017, respectively.

11. Bonds Payable
Bonds payable at March 31, 2017 consisted of ¥5,000 million of Shonai 5th subordinated bonds. In the year
ended March 31, 2018, the bonds were fully redeemed before the original redemption date of July 27, 2022.
12. Retirement Benefit Plans
Shonai, a consolidated banking subsidiary of the Company, has a funded defined benefit corporate pension plan
and an unfunded lump-sum payment plan as defined benefit plans to provide for employees’ retirement benefits.
Under the defined benefit corporate pension plan, a lump-sum payment or pension is provided based on the basesalary used for retirement benefits calculation and service years. In addition, this plan is a type of quasi cash
balance plan. Under the lump-sum payment plan, a lump-sum payment is provided as a retirement benefit basedon the base salary used for retirement benefits calculation and service years.
Hokuto, a consolidated banking subsidiary of the Company, has a funded defined benefit corporate pension plan
and a funded lump-sum payment plan as defined benefit plans to provide for employees’ retirement benefits.
Under the defined benefit corporate pension plan, pension or a lump-sum payment is provided based on service
years. Hokuto maintains a cash balance plan for defined benefit corporate pension plan and a virtual individual
account balance which is corresponding to each participant’s funded amount and the source of pension amount isestablished under this plan. In this virtual individual account balance, mainly interest credits based on the trend of
market interest rate and contributed credits based on the interest granted each month are accumulated.
Under the lump-sum payment plan, points are accumulated during the service based on the service years and thefunctional classes. Employees who terminate their employment are entitled to lump-sum payments based on theaccumulated points at the time of the termination multiplied by unit price by point and additional benefits basedon the functional class at the time of the termination. A retirement benefit trust is established for the lump-sum
payment plan.
Each of Shonai and Hokuto has a defined contribution corporate pension plan as the defined contribution plan.
19

Certain consolidated subsidiaries other than consolidated banking subsidiaries have unfunded defined benefit
pension plans (lump-sum payment plans only). These consolidated subsidiaries adopt the simplified method in
calculating defined benefit liability and retirement benefit expenses under lump-sum payment plans.
Defined benefit pension plans(1) Reconciliation between retirement benefit obligations at beginning of year and end of year
Thousands of
U.S. dollars

Millions of yen
2018
Retirement benefit obligations at beginning of year
Service costs
Interest costs
Actuarial gains and losses arising during year
Retirement benefits paid¥

Retirement benefit obligations at end of year¥

13,819
491
16
86
(730)
13,6832017¥¥

14,039
477
9
67
(774)
13,8192018$ 130,036
4,620
150
809
(6,869)$ 128,756(2) Reconciliation between plan assets at beginning of year and end of year
Thousands of
U.S. dollars

Millions of yen
2018
Plan assets at beginning of year
Expected return on plan assets
Actuarial gains and losses
Contribution from employer
Retirement benefits paid¥

Plan assets at end of year¥

11,748
151
326
113
(574)
11,7662017¥

12,119
155
(46)
181
(662)
11,748¥2018$ 110,548
1,420
3,067
1,063
(5,401)$ 110,717

Note: Retirement benefit trust is included in plan assets.
(3) Reconciliation between retirement benefit obligations and plan assets at end of year and defined benefit
liability and defined benefit asset on the consolidated balance sheets
Thousands of
U.S. dollars

Millions of yen
2018
Funded retirement benefit obligation
Plan assets
Unfunded retirement benefit obligation
Net balance of liability and asset recorded on the
consolidated balance sheets

2017

¥

11,814(11,766)
48
1,868

¥

11,840(11,748)
92
1,978

¥

1,917

¥

2,071

$ 111,169(110,717)
451
17,577$

18,038

Thousands of
U.S. dollars

Millions of yen
Defined benefit liability
Defined benefit asset
Net balance of liability and asset recorded on the
consolidated balance sheets

2018

¥

2,266
(348)

¥

2,690
(618)

$

21,323(3,274)

¥

1,917

¥

2,071

$

18,038

Note: Retirement benefit trust is included in plan assets.
20

(4) Retirement benefit expenses and components thereofService costs
Interest costs
Expected return on plan assets
Amortization of actuarial gains and losses
Amortization of past service costs
Other
Retirement benefit expenses on defined benefit
plans

Millions of yen
2018
2017
¥
491
¥
477
16
9
(151)
(155)
234
282
(42)
(42)
1
22

Thousands of
U.S. dollars
2018
$
4,620
150
(1,420)
2,201
(395)
9

¥

$

549

¥

593

5,166

Note: Retirement benefit expenses of the consolidated subsidiaries adopting the simplified method arecollectively included in “Service costs.”(5) Components of items recorded in remeasurements of defined benefit plans in other comprehensive income,before tax, are as follows:
Millions of yen
2017
2018
¥
(42)
¥
(42)
168
474
¥
126
¥
432

Past service costs
Actuarial gains and losses
Total

Thousands of
U.S. dollars
2018
$
(395)
4,460
$
4,065

(6) Components of items recorded in remeasurements of defined benefit plans in accumulated othercomprehensive income, before tax, are as follows:

Millions of yen
2018
2017
¥
(31)
¥
(73)
1,339
864
¥
1,265
¥
833

Unrecognized past service costs
Unrecognized actuarial gains and losses
Total

Thousands of
U.S. dollars
2018
$
(291)
8,130
$
7,838

(7) Components of plan assets(a) Percentages to total plan by major category are as follows:
2018
36.3%
36.6
11.8
0.2
6.2
8.9
100.0%

Debt securities
Equity securities
Cash and deposits
Call loans
General account
Other
Total

2017
43.4%
31.0
14.9
3.2
6.2
1.3
100.0%

Note: 30.3% and 30.7% of the total plan assets consisted of the retirement benefit trust established forthe lump-sum payment plan as of March 31, 2018 and 2017, respectively.
21

(b) Determination of expected long-term rate of plan assets
The expected long-term rate of return on plan assets is determined considering current and expecteddistribution of plan assets and current and expected long-term rate of return derived from various
components of plan assets.
(8) Actuarial assumptions at end of year
2018
0.00% - 0.18%
1.00% - 1.50%
3.61%

Discount rate
Expected long-term rate of return on plan assets
Expected rate of salary increase (Note)2017
0.01% - 0.24%
1.00% - 1.50%
3.61%

Note: Hokuto maintains a cash balance plan for the defined benefit corporate pension plan, and a point
system is adopted for the lump-sum payment plan. Accordingly, the expected rate of salary increase is
not included in the basis for calculation of retirement benefit obligations and others for the years
ended March 31, 2018 and 2017.
Defined contribution pension plans
The amounts to be contributed to the defined contribution pension plans of the Company and its consolidated
subsidiaries were ¥163 million ($1,533 thousand) and ¥157 million as of March 31, 2018 and 2017, respectively.
13. Contingent Liabilities
Guarantee liabilities for corporate bonds acquired through private offering (as defined in Article 2-3 of the
Financial Instruments and Exchange Act) among those classified as corporate bonds in “Securities” amounted to¥8,070 million ($75,938 thousand) and ¥7,507 million at March 31, 2018 and 2017, respectively.
14. Shareholders’ Equity
Japanese banks are required to comply with the Banking Act and the Companies Act. The Companies Act
stipulates that neither additional paid-in capital nor the legal reserve is available for dividends, but that both may
be used to reduce or eliminate a deficit. Under the Banking Act, an amount which is at least equal to 20% of theaggregate amount of cash dividends and certain appropriations of retained earnings associated with cash outlays
applicable to each fiscal period is to be appropriated to the legal reserve until the aggregate amount of the legal
reserve and the capital surplus account equals 100% of the amount of share capital. The Companies Act also
provides that if the aggregate amount of additional paid-in capital and the legal reserve exceeds 100% of theamount of share capital, the excess may be distributed to the shareholders either as a return of capital or as
dividends subject to the approval of the shareholders.
The maximum amount which the bank can distribute as dividends is calculated based on the non-consolidated
financial statements of the bank and in accordance with the Companies Act.

22

Movements in common stock, preferred stock and treasury stock during the years ended March 31, 2018 and2017 are summarized as follows:
Number of shares (in thousands)
April 1, 2017
Issued shares:
Common stock
Preferred stock class B
Total

Decrease

March 31, 2018

181,42125,000206,421--

181,42125,000206,421

42
42

2
2

19
19

25
25

Treasury stock:
Common stock
Total
Note:

Increase

Ref.

Note

Increase in number of shares is due to request for purchase of less than one unit. Decrease in number of shares is due torequest for sale of less than one unit and sale of the shares held by consolidated subsidiaries.
Number of shares (in thousands)

Issued shares:
Common stock
Preferred stock class B
Total

April 1, 2016

Increase

172,876
25,000197,876

8,544

20
20

Treasury stock:
Common stock
Total

Decrease

March 31, 2017

Ref.

181,42125,000206,421Note 1

8,544

-

1,499
1,499

1,478
1,478

42
42

Note 2-

Note 1: Increase in number of shares is due to issuance of new shares in connection with the share exchange whereby FIDEA Card
Co., Ltd. and FIDEA Information Systems INC became wholly-owned subsidiaries of the Company.
Note 2: Increase in number of shares is due to request for purchase of less than one unit and acquisition of shares by consolidated
subsidiaries in connection with the share exchange. Decrease in number of shares is due to request for sale of less than one
unit and sale of the acquired shares by consolidated subsidiaries.

15. General and Administrative Expenses
General and administrative expenses for the years ended March 31, 2018 and 2017 included the following:

Salaries and allowances
Retirement benefit expenses

Millions of yen
2018
2017
¥ 13,221¥ 13,521
712
751

Thousands of
U.S. dollars
2018$ 124,409
6,699

16. Other Expenses
Other expenses for the years ended March 31, 2018 and 2017 consisted of the following:

Loss on sales of equity securities, etc.
Loss on disposal of fixed assets
Impairment loss
Loss on reduction of non-current assets
Other
Total

Millions of yen
2018
2017
¥
272
¥
476
121
85
255
22
100
981
1,410
¥ 2,158¥ 1,564

23

Thousands of
U.S. dollars
2018$ 2,559
1,138
2,399
940
13,268$ 20,306

17. Impairment Loss
For the year ended March 31, 2018, with regard to assets from which cash flows declined due to decrease inincome from operating activities, idle properties and assets which were determined to be sold, the Company
recognized the impairment loss by writing off the carrying amount of each asset to its respective recoverable
amount.

Category
Business assets
Business assets
Business assets
Idle assets
Idle assets
Assets held for sale

Area
Within Yamagata
Prefecture
Within Akita
Prefecture
Within Miyagi
Prefecture
Within Yamagata
Prefecture
Within Akita
Prefecture
Within Akita
Prefecture

Main use
Banking office –three locations
Banking office –one location
Banking office –one location
Idle assets –two locations
Idle assets –21 locations
Banking office –one location

Description
Land andbuildings

Impairment loss
Thousands ofMillions of yen
U.S. dollars¥

Buildings
Land
Land
Land andbuildings
Land

Total

¥

116

$

1,091

0

0

52

489

25

235

14

131

47

442

255

$

2,399

Banking offices of consolidated subsidiaries in the banking business are grouped by office which is the minimum
unit for management accounting purposes. Certain banking office group which operates in cooperation isconsidered as one unit, and banking offices located in the same building are also considered as one unit. For idle
assets and assets held for sale, each asset is considered as the minimum unit. Head office, administrative centersand others are considered as corporate assets since they contribute to generate future cash flows of multiple assets
or asset groups.
The Company and consolidated subsidiaries in other than the banking business are grouped by entity as a generalrule.
The recoverable amount of relevant asset group is measured at net selling price and calculated by deducting
estimated costs to sell from the amount which properly reflects the fair market value such as real estate appraisal
value or roadside land prices.
The disclosure of impairment loss for the year ended March 31, 2017 was omitted due to insignificancy.

24

18. Other Comprehensive Income
Reclassification adjustments and income tax effect for each component of other comprehensive income for theyears ended March 31, 2018 and 2017 were as follows:
Thousands of
U.S. dollars
Millions of yen
2017
2018
2018
Unrealized gain (loss) on available-for-salesecurities:
Gain arising during the year¥461
¥ (13,935)$
4,338
Reclassification adjustments
102(2,250)959
Before income tax effect563(16,186)
5,297
Income tax effect
4,929(1,646)(175)
Unrealized gain (loss) on
available-for-sale securities
388(11,256)
3,651
Remeasurements of defined benefit plans:
Adjustments arising during the year
240
(113)
2,258
Reclassification adjustments
192
239
1,806
Before income tax effect
432
126
4,065
Income tax effect(31)(1,232)(131)
Remeasurements of defined benefit
94
2,832
301
plans
Total other comprehensive income¥689¥ (11,162)$
6,483
19. Cash and Cash Equivalents
A reconciliation of cash and due from banks in the accompanying consolidated balance sheets to cash and cash
equivalents in the accompanying consolidated statements of cash flows at March 31, 2018 and 2017 issummarized as follows:

Millions of yen
2017
2018
Cash and due from banks
Due from banks (excluding due from BoJ)
Cash and cash equivalents¥¥

156,177(2,033)
154,143

25¥¥

77,180(4,891)
72,289Thousands of
U.S. dollars
2018$1,469,624(19,130)$1,450,484

20. Income Taxes
The tax effect of temporary differences which gave rise to significant portions of the deferred tax assets andliabilities at March 31, 2018 and 2017 consisted of the following:

Millions of yen
2017

2018
Deferred tax assets:
Allowance for loan losses
Defined benefit liability
Tax loss carryforwards
Depreciation
Write-down of securities
Other
Gross deferred tax assets
Valuation allowance
Total deferred tax assets¥

Deferred tax liabilities:
Unrealized gain on available-for-sale securities
Other
Total deferred tax liabilities
Net deferred tax assets (liabilities)

Thousands of
U.S. dollars

7,171
1,913
1,659
695
98
1,214
12,751(5,918)¥ 6,833

7,312
1,920
2,019
768
110
1,037
13,169(5,937)¥ 7,231

$

¥

¥

$

¥

(8,400)(601)(9,001)(2,168)

¥

2018

¥

(8,225)(597)(8,822)(1,591)$$

67,47918,001
15,611
6,539
922
11,423
119,986(55,688)
64,298(79,043)(5,655)(84,699)(20,400)

Reconciliation of the statutory tax rate to the effective tax rate for the year ended March 31, 2018 is omitted since
the difference is less than 5% of the effective statutory tax rate.
Reconciliation of the statutory tax rate to the effective tax rate for the year ended March 31, 2017 is as follows:

Normal effective statutory tax rate
Non-deductible expenses such as entertainment expenses
Non-taxable income such as dividend income
Per capita inhabitant tax
Valuation allowance
Consolidation adjustments
Reduction of deferred tax assets due to change in income
tax rates
Other
Actual effective tax rate

26

2017
30.81%
0.61(7.07)
1.16(9.86)
6.60(1.40)
20.85%

21. Segment Information(1) Segment information
The Group has a single segment of banking business. Accordingly, segment information by reportablesegment is omitted.
(2) Related information
Information by service
Millions of yen
Securities
March 31, 2018
Ordinary income from external customers

Lending¥

22,104

investment¥

17,283

Other¥

11,638

Total¥

51,026

Millions of yen
Securities
March 31, 2017
Ordinary income from external customers

Lending¥

23,088

investment¥

18,024

Other¥

11,072

Total¥

52,185

Thousands of U.S. dollars
Securities
March 31, 2018
Ordinary income from external customers

Lending$

207,998

investment$

162,632

Other$

109,513

Total$

480,154“Ordinary income” is defined as income less certain special income included in the accompanying consolidated statements ofincome.

Geographic informationa. Ordinary income
Information about ordinary income by geographic area for the years ended March 31, 2018 and 2017
is omitted as ordinary income from external customers in Japan was more than 90% of ordinary
income in the consolidated statements of income.
b. Tangible fixed assets
Information about tangible fixed assets by geographic area as of March 31, 2018 and 2017 is omitted
as tangible fixed assets in Japan was more than 90% of “Tangible fixed assets” in the consolidatedbalance sheets.
Information by major customer
Information by major customer for the years ended March 31, 2018 and 2017 is omitted since there was no
single external customer accounting for 10% or more of the consolidated ordinary income.

2722. Related Party Transactions
Transactions between the Company’s consolidated subsidiaries and their directors and major shareholders as ofMarch 31, 2018 and 2017 and for the years then ended are as follows:
2018
Type

Companies,
etc. whose
voting rights
are owned by
the director(including thedirector oftheconsolidated
subsidiaries)
or his/her
relatives

Name

Address

Capital(Millions ofyen)

Akita Kubota
Co., Ltd.
Note (1)

Akita city,
Akita Pref.

¥60

Agricultural
machines
distributor

0.0% directly
heldLending¥123 million($1,157
thousand)

Loans andbills
discounted¥69 million($649
thousand)Akita city,
Akita Pref.

¥40

Car
distributor

0.0% directly
heldLending¥931 million($8,760
thousand)

Loans andbills
discounted¥900 million($8,468
thousand)Akita city,
Akita Pref.

¥36

Rental andlease ofvehicles

0.0% directly
heldLending¥300 million($2,822
thousand)

Loans andbills
discounted¥300 million($2,822
thousand)Lending¥27 million($254
thousand)--Guarantee forliabilities¥7 million($65
thousand)Customers’
liabilities for
acceptancesandguarantees¥4 million($37
thousand)Lending¥51 million($479
thousand)--Guarantee forliabilities¥81 million($762
thousand)

Netz Toyota
Akita Co.,
Ltd.
Note (2)Toyota Renta
Lease Akita
Co., Ltd.
Note (2)Ugo Setsubi
Co., Ltd.
Note (3)Ugo
Densetsu
Kogyo Co.,
Ltd.
Note (4)Ugo
Hatsuhenden
Koji Co., Ltd.
Note (4)

Akita city,
Akita Pref.

Akita city,
Akita Pref.

¥20

¥30

Business

Ownershipsof votingrights (%)

Transaction
type

Transaction
amountAccount

Balance at
March 31,2018

0.0% directly
heldPipe works

Electric
works

0.0% directly
heldLending
Akita city,
Akita Pref.

¥20

Electric
works

Guarantee forliabilities¥22 million($207
thousand)¥0 million($0
thousand)Customers’
liabilities for
acceptancesandguarantees
Loans andbills
discounted¥103 million($969
thousand)¥10 million($94
thousand)

-

-

2017
Type

Companies,
etc. whose
voting rights
are owned by
the directorof theconsolidated
subsidiary or
his/her
relatives

Name

Address

Akita Kubota
Co., Ltd.
Note (1)

Akita city,
Akita Pref.

Netz Toyota
Akita Co.,
Ltd.
Note (2)Toyota Renta
Lease Akita
Co., Ltd.
Note (2)Ugo Setsubi
Co., Ltd.
Note (3)Capital(Millions ofyen)

Business

Ownershipsof votingrights (%)¥60

Agricultural
machines
distributor

0.0% directly
heldTransaction
type

Transaction
amountAccount

Balance at
March 31,2017

Lending¥169 million

Loans andbills
discounted¥109 million

Guarantee forliabilities¥0 million--

Akita city,
Akita Pref.

¥40

Car
distributor

0.0% directly
heldLending¥703 million

Loans andbills
discounted¥900 million

Akita city,
Akita Pref.

¥36

Rental andlease ofvehicles

0.0% directly
heldLending¥300 million

Loans andbills
discounted¥300 million

Lending¥21 million

Guarantee forliabilities¥7 million

Lending¥26 million-

Guarantee forliabilities¥36 million

Customers’
liabilities for
acceptancesandguarantees

Lending¥35 million

Loans andbills
discounted

Akita city,
Akita Pref.

¥20

Ugo
Densetsu
Kogyo Co.,
Ltd.
Note (4)

Akita city,
Akita Pref.

¥30

Ugo
Hatsuhenden
Koji Co., Ltd.
Note (4)

Akita city,
Akita Pref.

¥200.0% directly
heldPipe works

Electric
works

0.0% directly
heldElectric
works

-

28

Loans andbills
discounted
Customers’
liabilities for
acceptancesandguarantees¥112 million¥3 million¥25 million¥3 million

Notes: (1) Akita Kubota Co., Ltd. is a subsidiary of Ishii Shoji Co., Ltd. Tadanari Ishii, who is a director of Hokuto which is a significant consolidated subsidiary of theCompany, and his relatives own the majority of voting rights of Ishii Shoji Co., Ltd.
(2) Tadanari Ishii, who is a director of Hokuto which is a significant consolidated subsidiary of the Company, his relatives and Ishii Shoji Co., Ltd. own the
majority of voting rights of Netz Toyota Akita Co., Ltd. Toyota Renta Lease Akita Co., Ltd. is a subsidiary of Netz Toyota Akita Co., Ltd.
(3) As of March 2018, Hiroyuki Sato, who is a director of the Company, his relatives and Shin-ichi Nanayama, a director and audit & supervisory board member of
Hokuto, which is a significant consolidated subsidiary of the Company, own the majority of voting rights of Ugo Setsubi Co., Ltd. As of March 2017, Hiroyuki
Sato, who is a director of Hokuto, which is a significant consolidated subsidiary of the Company, his relatives and Shin-ichi Nanayama, a director and audit &supervisory board member of Hokuto, own the majority of voting rights of Ugo Setsubi Co., Ltd.
(4) Shin-ichi Nanayama, a director and audit & supervisory board member of Hokuto which is a significant consolidated subsidiary of the Company, and his
relatives own the majority of voting rights of Ugo Densetsu Kogyo Co., Ltd. Ugo Hatsuhenden Koji Co., Ltd. is a subsidiary of Ugo Densetsu Kogyo Co., Ltd.
(5) The transactions are with Hokuto, which is a significant consolidated subsidiary of the Company, and the trading conditions and policies are the same as thoseof the transactions with general parties.
(6) The transaction amount is shown by the average balance.

There is no other related party transaction to be disclosed for the years ended March 31, 2018 and 2017.
23. Financial Instruments and Related Disclosures
1. Status of Financial Instruments(1) Policy on financial instruments
The Group is engaged in financial information services centering on banking business such as deposit-taking andlending services for domestic corporate and individual customers and management of securities such as debt andequity securities and investment trusts. The Group accepts risk as long as it remains financially healthy andintends to improve its earning power in order to continue to conduct these services.
The Group holds financial assets and liabilities exposed to the fluctuation risk of interest rates. Accordingly, theGroup conducts asset and liability management (ALM) and enters into derivative transactions if necessary inorder to avoid adverse effect by the interest-rate fluctuation.
(2) Contents of financial instruments and their risks
Financial assets held by the Group mainly consist of loans and bills discounted to domestic corporate andindividual customers, which are exposed to credit risk arising from customers’ nonperformance of contractual
obligations. In addition, securities, principally consisting of equity securities, debt securities, investment trusts
and investment in partnerships, are held for the purposes of net investment and strategic investment. These
financial assets are exposed to credit risk of issuers and fluctuation risk of interest rates and market prices.
Major financial liabilities, consisting of deposits and negotiable certificates of deposit, are principally deposits
accepted from domestic corporate and individual customers. They require attentions to liquidity risk arising fromconcentrated cancellation of deposits, but most of those deposits are from individual customers and accordingly,
the risk is dispersed to small accounts. The liquidity risk is also controlled by limiting the ratio of large deposit
accounts to a certain level.
Derivative contracts which the Group enters into consist of interest rate swaps employed as part of ALM andfutures of debt securities held as available-for-sale securities, options, etc. These derivatives are not entered into
for speculative purpose but mainly for hedging purposes.
(3) Risk management system for financial instruments
The Group has established the “Basic Policy on Risk Management” and various risk control rules and a system toconduct the risk management as follows:a. Credit risk management:
In accordance with the “Credit Policy” and “Credit Risk Management Rule,” for loans and bills discounted,
a credit control system has been established and maintained, including credit review by individual contract,credit limit control, credit information control, internal ratings, retrospective control including
self-assessment, establishment of guaranty and security, countermeasures for problem accounts, credit
concentration risk management, etc. These credit controls are performed by the loan departments inaddition to each operating office, being reported to and discussed at the management meetings on a regularbasis. Furthermore, the status of credit control is examined by the internal audit department.
29

b. Market risk management:
For market transactions, front office, middle office and back office, each of which is independent of others,
are mutually controlled.
Interest rate risk management:
The Group manages the fluctuation risk of interest rates by ALM. In accordance with the “Market Risk
Management Rule,” the Group measures the exposure of interest rate risk, monitoring by gap analysis andsensitivity analysis on a regular basis, and the monitoring results are reported to the management meetings
on a regular basis. In addition, the future countermeasures based on the analysis of current status are
discussed.
Foreign exchange risk management:
The Group manages foreign exchange risk, in accordance with the “Market Risk Management Rule,” byestablishing total positions and loss limits or entering into hedging activities.
Price fluctuation risk management:
The Group manages price fluctuation risk in accordance with “Market Risk Management Rule.” Risk
exposures to securities are monitored for usage against the pre-set limit by the Risk Control Department ona daily basis based on Value at Risk (VaR) and other risk indexes such as 10BVP and reported to the
management meetings.
Derivative transactions:With respect to derivative transactions, the Group segregates the duties of the departments responsible for
execution of transactions, verification of hedge effectiveness, and operation administration and conducts
transactions under the management and control based on the handling rules.
Quantitative information about market risk:
Financial instruments not for trading purposes
The Group identifies and manages the market risk volume using VaR on a daily basis (monthly basis withregard to interest rate risk volume of deposits, loans and bills discounted, etc.), since the Group holds manyfinancial instruments whose fair values fluctuate on a daily basis and such fluctuation amount is greaterthan other risk categories. The market risk volume of the Group is controlled as the total amounts ofmarket risk volume of Shonai and Hokuto which are the subsidiaries.
Market risk volume of the banking business of the Group at March 31, 2018 and 2017 and for the years
then ended was as follows:
Billions of yen
2018

Due from banks, loans and bills
discounted and others
Securities:
Debt securities
Equity securities
Other

Average

Maximum

Minimum

As of thefiscal year-end

¥

¥

¥

¥

0.0
27.3
5.8
5.6
19.9

30

0.0
35.2
8.8
7.7
25.5

0.0
21.7
3.4
4.2
15.5

0.0
23.3
3.4
6.4
15.6

Billions of yen
2017

Due from banks, loans and bills
discounted and others
Securities:
Debt securities
Equity securities
Other

Average

Maximum

Minimum

As of thefiscal year-end

¥

¥

¥

¥

0.0
51.0
13.1
12.8
30.3

0.0
55.0
16.3
14.9
32.9

0.0
35.1
8.8
7.7
24.7

0.0
35.1
8.8
7.7
24.8

Millions of U.S. dollars
2018

Due from banks, loans and bills
discounted and others
Securities:
Debt securities
Equity securities
Other

Average

Maximum

Minimum

As of thefiscal year-end

$

$

$

$

0
256
54
52
187

0
331
82
72
239

0
204
31
39
145

0
219
31
60
146

(*1) VaR is measured in principle using the variance/co-variance method.
(*2) Holding period is assumed to be 60 business days for higher market liquidity financial instruments such
as Japanese government bonds, municipal bonds, listed equity securities (excluding strategic
investments), etc., 250 business days for cross-holding shares of listed equity securities, and 125 or 250
business days for less market liquidity financial instruments, due from banks, loans and bills
discounted, etc.
(*3) 99 % is used for confidence interval, and 250 business days are used as extraction period of market
data to measure volatility.
(*4) The total amount does not agree with the sum of the individual amounts since correlation between therisk factors of debt securities and equity securities is taken into account.
(*5) The current interest rate risk volume of deposits, loans and bills discounted, etc., represents decreasing
interest rate risk, not increasing interest rate risk. The increasing interest rate risk is managed as internal
control. Therefore, the interest rate risk volume of due from banks, loans and bills discounted andothers is considered to be zero.
Within the Group, each banking subsidiary implements backtests comparing the VaR of one day holding
period measured by the model and actual change in losses, in order to verify the accuracy of themeasurement model of the market risk volume concerning the VaR of securities.
The measurement model currently in use is deemed to capture the market risk on the reasonably accurate
basis. However, the Group will take conservative actions as necessary when VaR is expected to increase due
to an increase in volatility.
In implementing the risk management using the VaR, the following particular points are paid attention to:(i) Quantitative information such as VaR of market risk is determined based on the statistical assumptions
and may result in a different value depending on the different assumptions and calculation methods.
(ii) Quantitative information such as VaR of market risk is a statistical value calculated based on theassumptions and not intended to estimate the amount of maximum losses. Profit or loss is assumed to
exceed VaR on the frequency corresponding to the confidence interval.
31

(iii) Future market conditions may differ significantly from the past.
Financial instruments for trading purposes are excluded from the scope of disclosure, since the outstandingbalance at any banking subsidiary is very insignificant and the materiality of effect on the management isquite limited.
c. Liquidity risk management:
The Group sets limits on liquidity risk management and reports to the management meetings, monitoring
the results on a daily basis in accordance with the “Liquidity Risk Management Rule.”(4) Supplementary explanation about fair value of financial instruments
The fair value of financial instruments includes, in addition to the value determined based on the market price, avaluation calculated on a reasonable basis, such as theoretical price if no market price is available. Since certain
assumptions are used in calculating the value, the result of such calculation may vary if different assumptions areused.
2. Fair value of financial instruments
The carrying amount, the fair value and their difference as of March 31, 2018 and 2017 were as follows. Notethat unlisted equity securities for which fair value is extremely difficult to determine are not included in thefollowing table (See Note 2 below).
Millions of yen
March 31, 2018

Carrying amount

Cash and due from banks¥

Fair value¥

Difference

4,100

4,100

-

Trading securities

303

303

-

Money held in trust

14,002

14,002-

741,175

741,175-

1,758,436

34,374

Monetary claims bought (*1)

156,177

156,177¥

Trading account securities:

Securities:
Available-for-sale securities
Loans and bills discounted:

1,738,367

Allowance for loan losses (*1)

(14,304)
1,724,062

Foreign exchange assets (*1)

2,144

2,144

Total assets¥ 2,641,966¥ 2,676,340¥

34,374-

Deposits¥ 2,429,106¥ 2,429,243¥

Negotiable certificates of deposit

99,843

99,843

136-

Payables under securities lending transactions

60,77860,778-Borrowed money

15,10015,16262

Foreign exchange liabilities

52

52

-

Bonds payable

-

-

-

Total liabilities¥ 2,604,880¥ 2,605,080

¥

199

¥

¥

334

¥

-

334

¥

-

Derivative transactions (*2):
To which hedge accounting is not applied
Total derivative transactions

¥

32

334
334

¥

Millions of yen
March 31, 2017

Carrying amount

Cash and due from banks¥

Fair value¥

77,180Difference

3,821

3,821

-

Trading securities

704

704

-

Money held in trust

9,606

9,606

-

934,013934,013-

1,779,814

36,676

Monetary claims bought (*1)

77,180¥

Trading account securities:

Securities:
Available-for-sale securities
Loans and bills discounted:

1,759,326(16,188)

Allowance for loan losses (*1)

1,743,137
Foreign exchange assets (*1)

2,054

2,054

Total assets¥ 2,770,519¥ 2,807,196¥

36,676

Deposits¥ 2,392,320¥ 2,392,621¥

Negotiable certificates of deposit

141,595

141,595

300-

Payables under securities lending transactions

129,789

129,789-

Borrowed money

16,40016,519

119

36

36

-

Bonds payable

5,000

5,063

63

Total liabilities¥ 2,685,143¥ 2,685,627

¥

484

¥

¥

1,188

¥

-

1,188

¥

-

Foreign exchange liabilities-

Derivative transactions (*2):
To which hedge accounting is not applied
Total derivative transactions

¥

33

1,188
1,188

¥

Thousands of U.S. dollars
March 31, 2018

Carrying amount

Cash and due from banks$ 1,469,624

Fair value

38,58038,580-

Trading securities

2,851

2,851

-

Money held in trust

131,758

131,758-

6,974,451

6,974,451-

16,223,412

16,546,871

323,459

20,175

20,175-

Total assets$ 24,860,882$ 25,184,341$

323,459

Deposits$ 22,857,871$ 22,859,160

$

1,279

939,521939,521

Monetary claims bought (*1)$

Difference

1,469,624$

Trading account securities:

Securities:
Available-for-sale securities
Loans and bills discounted:

16,358,022

Allowance for loan losses (*1)(134,600)

Foreign exchange assets (*1)

Negotiable certificates of deposit-

Payables under securities lending transactions

571,920571,920-

Borrowed money

142,090

142,674583

Foreign exchange liabilities

489

489

-

Bonds payable

-

-

-

Total liabilities$ 24,511,903$ 24,513,785

$

1,872

$

3,142

$

3,142

$

-

$

3,142

$

3,142

$

-

Derivative transactions (*2):
To which hedge accounting is not applied
Total derivative transactions(*1) General and specific allowances for loan losses corresponding to loans and bills discounted are deducted. With respect toallowance for loan losses related to monetary claims bought and foreign exchange assets, carrying amount is shown, net ofallowance, since the amount is insignificant.
(*2) Assets and liabilities arising from derivative transactions are presented in net amounts, and net liabilities are shown inparenthesis.

(Note 1) Calculation method for the fair value of financial instruments
Assets:Cash and due from banks
For due from banks without maturity, the carrying amount is presented as the fair value since the fair value
approximates the carrying amount. For due from banks with maturity, the carrying amount is presented as the fairvalue since the fair value approximates the carrying amount because the remaining maturity is mostly short(within one year).
Monetary claims bought
The carrying amount is presented as the fair value since the fair value approximates the carrying amount because
the remaining term is short (within one year).
Trading account securities
For securities such as debt securities held for dealing purpose, the fair value is determined using the price at theexchange or the price presented by the financial institutions with which they are transacted.
Money held in trust
For securities that are invested as part of trust assets in an independently managed money trust with the primary
purpose of managing securities, the fair value of equity securities is determined using the price at the exchange
and the fair value of debt securities is determined using the price at the exchange or the price presented by the34

financial institutions with which they are transacted.
Securities
The fair value of equity securities is determined using the price at the exchange (average market price during one
month before the fiscal year-end) and the fair value of debt securities is determined using the price at theexchange or the price presented by the financial institutions with which they are transacted. The fair value ofinvestment trust is determined based on the published standard quotation price.
For privately placed bonds, the fair value is determined by discounting the future cash flows of bonds categorizedbased on the internal ratings and terms using credit risk spread by credit rating and market interest rate.
Loans and bills discounted
For the loans and bills discounted with short remaining terms (within one year), the carrying amount is presented
as the fair value since the fair value approximates the carrying amount. For the loans and bills discounted without
predetermined maturity because of characteristics such as the loans and bills discounted being limited within theamount of the pledged assets, the carrying amount is presented as the fair value since the fair value is considered
to approximate the carrying amount considering the expected repayment term and interest rate conditions.
The fair value of the loans and bills discounted with fixed interest rates categorized by type of loans and bills
discounted, internal rating and term is calculated by discounting the total of principal and interest using credit
risk spread by credit rating and market interest rate. The fair value of the loans and bills discounted with floatinginterest rates, categorized by internal rating and term, is calculated by discounting the total of principal andinterest, basically until the interest maturity date, using credit risk spread by credit rating and market interest rate.
Credit risk spread is calculated by remaining term based on accumulated default rate by credit rating and loss rateby debtor classification.
For loans and bills discounted due from bankrupt, virtually bankrupt or potentially bankrupt borrowers, loan
losses are estimated based on factors such as the present value of estimated future cash flows or the expectedamount to be collected from collaterals and guarantees. Since the fair value of these items approximates the
carrying amount net of the recoded amount of allowance for loan losses, such carrying amount is presented as thefair value.
Foreign exchange assets
Foreign exchange assets consist of foreign currency deposits with other banks (due from other foreign banks) andexport bills and traveler’s checks, etc. (foreign bills bought). For these items, the carrying amount is presented as
the fair value, since the fair value approximates the carrying amount because they are deposit without maturity or
have short-term remaining terms (within one year).

35

Liabilities:
Deposits and Negotiable certificates of deposit
For demand deposits, the amount payable on demand as of the balance sheet date (i.e., the carrying amount) is
considered to be the fair value. The fair value of time deposit is determined using the discounted present value of
future cash flows, grouping by certain maturity length. The discount rate used is the interest rate that would beapplied to newly accepted deposits. For deposits whose remaining term is short (within one year), the carrying
amount is presented as the fair value since the fair value approximates the carrying amount.
Payables under securities lending transactions
The carrying amount is presented as the fair value since the fair value approximates the carrying amount because
the remaining term is short (within one year).
Borrowed money
For borrowed money whose remaining term is short (within one year), the carrying amount is presented as thefair value since the fair value approximates the carrying amount.
For subordinated borrowed money whose remaining term is more than one year and which is subject to call
option giving a right to redeem before maturity and step-up clause, the fair value is calculated by discounting theestimated cash flows after taking into consideration the possibility of redemption before maturity by the interest
rate corresponding to the estimated period after taking into consideration credit risk of the consolidated
subsidiaries.
Foreign exchange liabilities
The carrying amount is presented as the fair value, since the fair value of these liabilities approximates the
carrying amount because they are settled within a short period of time.
Bonds payable
For subordinated bonds payable issued by the principal consolidated subsidiary of the Company and subject tocall option giving a right to redeem before maturity and step-up clause, the fair value is calculated by discounting
the estimated cash flows after taking into consideration the possibility of redemption before maturity by theinterest rate corresponding to the estimated period after taking into consideration credit risk of the related
subsidiary.
Derivative transactions:
Please see Note 24.
(Note 2) Financial instruments whose fair value is extremely difficult to determine are as follows. These financial
instruments are not included in “Securities” under “Assets” of the fair value information of financial instruments.
Thousands of
U.S. dollars

Millions of yen
2017

2018
Unlisted equity securities (*1) (*2)¥

Investment in partnerships (*3)

1,547

¥

1,962

Total

¥

3,510

1,548

2018
$

1,820
¥

3,369

14,557
18,462$

33,029(*1) The fair value of unlisted equity securities is not disclosed since no market price is available and it is extremely difficult todetermine the fair value.
(*2) The Company recognized write-down of unlisted equity securities in an amount of ¥0 million ($0 thousand) and ¥14 million
for the years ended March 31, 2018 and 2017, respectively.
(*3) The fair value of investment in partnerships whose assets consist of securities such as unlisted equity securities whose fairvalue is extremely difficult to determine is not disclosed.

36

(Note 3) Repayment schedule of monetary receivables and securities with contractual maturities subsequent toMarch 31, 2018
Millions of yen

March 31, 2018
Due from banks (*1)
Monetary claims bought
Securities:
Available-for-sale securities withmaturity:
Japanese government bonds

Due in one
year or lessDue after one
year throughthree years

Due after three
years throughfive years

Due after five
years throughseven years¥ 123,559

¥

¥

¥

-

-

Due after sevenyears throughten years¥-

Due after ten
years

4,121

-

¥

-

66,527

170,711

133,518

54,653

97,587

126,244

25,500104,400

29,00014,5002,000

19,000

Municipal bonds

19,12530,32352,71423,43939,14640,861

Corporate bonds

14,354

12,978

8,673

6,593

3,803

43,602

Other
Loans and bills discounted (*2)
Total

7,548

23,00943,131

10,12052,63722,780270,691

305,635

259,964

192,624

189,147

423,838¥ 464,900¥ 476,347¥ 393,482¥ 247,278¥ 286,734¥ 550,082

Due in one
year or lessDue after one
year throughthree years

Due after three
years throughfive years

Due after five
years throughseven years

Due after sevenyears throughten years

Due after ten
years$ 1,162,689

$

$

$

Thousands of U.S. dollars

March 31, 2018
Due from banks (*1)
Monetary claims bought

-

-

-

$

-

$

-

38,778

-

-

-

-

-

626,018

1,606,389

1,256,403

514,284918,293

1,187,955

Japanese government bonds

239,954

982,403272,889

136,444

18,819178,789

Municipal bonds

179,966

285,339

496,038

220,560

368,363384,501

Corporate bonds

135,071

122,122

81,612

62,04035,786410,294

Other

71,026

216,514405,862

95,229495,313214,359

Loans and bills discounted (*2)

2,547,200

2,876,023

2,446,259

1,812,590

1,779,872

3,988,312

Total$ 4,374,705$4,482,422$3,702,663$2,326,884$2,698,165$5,176,267

Securities:
Available-for-sale securities withmaturity:(*1) Due from banks without maturity is shown under “Due in one year or less.”(*2) Loans and bills discounted as of March 31, 2018 do not include ¥30,900 million ($290,768 thousand) of receivables such as those due frombankrupt, virtually bankrupt or potentially bankrupt borrowers since these are not certain when they can be collected or redeemed, and¥65,564 million ($616,956 thousand) of receivables without maturity.

37

(Note 4) Repayment schedule of bonds payable, borrowed money and other interest bearing liabilities subsequent
to March 31, 2018
Millions of yen

March 31, 2018
Deposits (*)
Negotiable certificates of deposit
Payables under securities lendingtransactions
Borrowed money

Due in one
year or lessDue after one
year throughthree years¥ 2,158,655¥¥

Due after
seven years
through ten
years

Due after five
years throughseven years

8,940

¥

-

¥

-

Due after ten
years
¥

-

99,843

-

-

-

-

-

60,778

-

-

-

-

-

1,700

5,700

2,700

5,000

-

-

-

-

-

-

-

-

Bonds payable
Total

108,968

Due after
three years
through fiveyears

¥ 2,320,976¥

114,668¥

11,640

¥

5,000

¥

-

¥

-

Thousands of U.S. dollars

March 31, 2018
Deposits (*)
Negotiable certificates of deposit
Payables under securities lendingtransactions
Borrowed money
Bonds payable
Total

Due after
three years
through fiveyears

Due after five
years throughseven years

Due after
seven years
through ten
years

Due after ten
years

$

$

$

Due in one
year or lessDue after one
year throughthree years$20,312,929$ 1,025,388

939,521

-

-

-

-

-

571,920

-

-

-

-

-

15,996

53,63625,40647,049

-

-

-

-

-

-

-

-

$21,840,368$ 1,079,025$ 109,532(*) Demand deposits are shown under “Due in one year or less” of deposits.

38$

84,125$-47,049

$

-

-

$

-

-

24. Derivatives
Derivative transactions to which hedge accounting is not appliedWith respect to derivatives to which hedge accounting is not applied, contract amount or notional principal, fairvalue and related valuation gain or loss by transaction type at the balance sheet date and calculation method of
the fair value were as follows. Note that contract amounts do not represent the market risk exposure associatedwith the derivative transactions.
Currency related derivatives at March 31, 2018 and 2017 were as follows:
Millions of yen
Contract amountMarch 31, 2018
OTC transactions:
Forward foreign exchange contracts:
Sold
Bought
Total

Total

Over one year

¥ 84,733
965

¥

42
42

Fair value

¥
¥

376
(41)
334

Valuation gain
(loss)

¥
¥

376
(41)
334

Millions of yen
Contract amountMarch 31, 2017
OTC transactions:
Forward foreign exchange contracts:
Sold
Bought
Total

Total

Over one year

¥ 139,820
2,532

¥

497
494

Fair value

Valuation gain
(loss)¥ 1,16522¥ 1,188¥ 1,16522¥ 1,188

Thousands of U.S. dollars
Contract amountMarch 31, 2018
OTC transactions:
Forward foreign exchange contracts:
Sold
Bought
Total

Total

Over one year

$ 797,336
9,080

$

395
395

Fair value

$
$

3,538
(385)
3,142

Valuation gain
(loss)$ 3,538(385)$ 3,142

Notes: (1) Above transactions are stated at the fair value, and the related valuation gain (loss) are reported in the consolidated
statements of income.
(2) The fair value is calculated using the discounted present value.

Derivative transactions to which hedge accounting is appliedWith respect to derivatives to which hedge accounting is applied, contract amount or notional principal and fairvalue at the balance sheet date by transaction type and hedge accounting method and calculation method of thefair value were as follows. Note that contract amounts do not represent the market risk exposure associated withthe derivative transactions.
There was no derivative transaction to which hedge accounting is applied at March 31, 2018 and 2017.

39

25. Amounts per Share
Amounts per share at March 31, 2018 and 2017 and for the years then ended are summarized as follows:Yen
Net assets
Net income:
Basic
Diluted¥2018
581.32

¥

22.98
18.38

2017
560.77

$

25.18
20.63

U.S. dollars
2018
5.47020.21620.1729Net income per share—basic and net income per share—diluted for the years ended March 31, 2018 and 2017
were calculated based on the following information:
Thousands of
U.S. dollars

Millions of yen
2018
Net income attributable to owners of parent —basic:
Amounts not attributed to common stock shareholders
O/W, dividends for preferred stock based on the resolution at theBoard of Directors’ meeting
O/W, interim dividends for preferred stock
Net income attributable to common stock owners of parent
Average outstanding number of shares of common stock(Unit: thousand shares)
Net income attributable to owners of parent —diluted:
Adjustments to net income attributable to owners of parent
O/W, dividends for preferred stock class B
Increase in number of shares of common stock (Unit: thousand shares)
O/W, preferred stock class B

¥

¥

4,281
112
56
56
4,169

¥

2017
4,627
118

2018
$ 40,284
1,053

59
59
4,509

526
526
39,230¥181,381¥

112
112
51,546
51,546$

179,054¥

118
118
45,24845,248

$

1,053
1,053

Net assets per share at March 31, 2018 and 2017 were calculated based on the following information:
Thousands of
U.S. dollars

Millions of yen
Total net assets
Amounts deducted from total net assets:
O/W, payment for preferred stock
O/W, dividends for preferred stock
O/W, non-controlling interests
Net assets attributable to common stock as of March 31, 2018 and2017
Number of shares of common stock as of March 31, 2018 and 2017used to calculate net assets per share (Unit: thousand shares)

26. Subsequent Events
None to report.

40

2018
¥ 115,756(10,307)(10,000)
(56)
(250)

2017
¥ 111,937(10,224)(10,000)
(59)
(165)

2018
$1,089,263(96,988)(94,099)(526)(2,352)¥ 105,449¥ 101,712$ 992,274

181,396

181,37927. Non-Consolidated Financial Statements of Shonai and Hokuto as of March 31, 2018 and 2017 and for
the Years Then Ended
The Shonai Bank, Ltd.
Non-Consolidated Balance Sheets
March 31, 2018 and 2017
Millions of yen
2018
2017
Assets:Cash and due from banks
Monetary claims bought
Trading account securities
Money held in trust
Securities
Loans and bills discounted
Foreign exchange assets
Tangible fixed assets:
Buildings
Land
Lease assets
Construction in progress
Other tangible fixed assets
Intangible fixed assets:
Software
Other intangible fixed assets
Customers’ liabilities for acceptances and guarantees
Prepaid pension cost
Other assets
Allowance for loan losses¥

58,652
1,923
284
10,500381,800
940,744
1,455

47,278
1,725
43
7,606
472,001
965,197
1,172$

551,914
18,095
2,672
98,804
3,592,735
8,852,394
13,691

10,066
6,466
5
41
1,609

5,397
6,708
19
3,839
1,659

94,72060,84547385
15,140

654
68
6,543

6,154
639
61,56923,495(7,075)

887
69
6,606
17
7,594
(7,067)221,087(66,575)¥ 1,437,236¥ 1,520,756$ 13,524,381-

Total assets¥

Thousands of
U.S. dollars
2018-(Continued)

41

The Shonai Bank, Ltd.
Non-Consolidated Balance Sheets
March 31, 2018 and 2017
Millions of yen
2018
2017
Liabilities:
Deposits
Negotiable certificates of deposit
Payables under securities lending transactions
Borrowed money
Foreign exchange liabilities
Bonds payable
Provision for retirement benefits
Provision for reimbursement of deposits
Provision for contingent loss
Deferred tax liabilities
Deferred tax liabilities for land revaluation
Acceptances and guarantees
Other liabilities¥ 1,224,322
67,796
47,118
15,1000Thousands of
U.S. dollars
2018$ 11,520,861
637,959443,380
142,090
0

1,396
254
277
4,048
502
6,543
3,281

¥ 1,213,987
111,465
88,391
16,400
33
5,000
1,294
122
225
3,639
536
6,606
8,021

¥ 1,370,642¥ 1,455,723$ 12,897,732

8,500
20,30823,33952,14813,3551,090
14,4458,500
20,30822,46751,276
12,6291,127
13,756

79,984
191,098
219,619
490,712125,670
10,256135,927

Total net assets

66,59465,033626,649

Total liabilities and net assets¥ 1,437,236¥ 1,520,756$ 13,524,381-

Total liabilities
Net assets:
Common stock
Capital surplus
Retained earnings
Total shareholders’ equity
Unrealized gain on available-for-sale securities
Revaluation reserve for land
Total valuation and translation adjustments-

13,1362,390
2,606
38,091
4,723
61,56930,874(Concluded)

42

The Shonai Bank, Ltd.
Non-Consolidated Statements of Income
Years Ended March 31, 2018 and 2017
Millions of yen
2018
2017

Thousands of
U.S. dollars
2018

Income:Interest income:Interest on loans and discounts
Interest and dividends on securities
Other
Fees and commissions
Other operating income
Other income¥ 11,884
7,329
21
4,015
833
2,101

¥ 12,451
6,325
16
4,141
2,378
1,263

Total income

26,186

26,577

246,410

926
33
194
73
44
2
2,370
3,052
14,953
1,981

1,407
70
293
76
134
3
2,385
2,837
14,611
2,333

8,713
310
1,825
686
414
18
22,301
28,719140,707
18,641

Total expenses

23,63324,153

222,386

Income before income taxes

2,552

2,423

24,014

Income taxes:
Current
Deferred

1,119
53

872
(416)

10,529
498

1,172

455

11,028

Expenses:
Interest expenses:
Interest on deposits
Interest on negotiable certificates of deposit
Interest on payables under securities lending transactions
Interest on borrowings and rediscounts
Interest on bonds payable
Other
Fees and commissions
Other operating expenses
General and administrative expenses
Other expenses

Total income taxes
Net income

¥

43

1,379

¥

1,968

$

$

111,828
68,965
197
37,781
7,838
19,77012,976

The Hokuto Bank, Ltd.
Non-Consolidated Balance Sheets
March 31, 2018 and 2017
Millions of yen
2018
2017
Assets:Cash and due from banks
Monetary claims bought
Trading account securities
Money held in trust
Securities
Loans and bills discounted
Foreign exchange assets
Tangible fixed assets:
Buildings
Land
Lease assets
Other tangible fixed assets
Intangible fixed assets:
Software
Other intangible fixed assets
Prepaid pension cost
Deferred tax assets
Customers’ liabilities for acceptances and guarantees
Other assets
Allowance for loan losses¥

Total assets

97,506964
18
3,502
362,754
811,973689¥

29,947
906
661
2,000
465,346
811,103
883

Thousands of
U.S. dollars
2018$

917,530
9,071
169
32,953
3,413,512
7,640,660
6,483

5,329
7,802
1
681

5,369
8,343
5
802

50,14573,416
9
6,408

812
62
561
1,345
15,49036,727(5,303)

1,425
62
834
1,341
15,213
8,726(7,054)

7,640
583
5,279
12,656
145,760
345,600(49,901)¥ 1,340,922¥ 1,345,920$ 12,618,067(Continued)

44

The Hokuto Bank, Ltd.
Non-Consolidated Balance Sheets
March 31, 2018 and 2017
Millions of yen
2018
2017
Liabilities:
Deposits
Negotiable certificates of deposit
Payables under securities lending transactions
Borrowed money
Foreign exchange liabilities
Provision for reimbursement of deposits
Provision for contingent loss
Deferred tax liabilities for land revaluation
Acceptances and guarantees
Other liabilities

Thousands of
U.S. dollars
2018¥ 1,209,429
36,347
13,659
2,500
51
508
142
1,060
15,4903,624¥ 1,182,344
35,23041,398
5,000
3
525
119
1,217
15,213
7,629$11,380,718
342,025
128,531
23,524
479
4,780
1,336
9,974
145,760
34,101

1,282,813

1,288,680

12,071,261

12,50019,99917,66150,161
5,779
2,168
7,947

12,50019,99916,146
48,646
6,065
2,528
8,594

117,624
188,190
166,189
472,01454,38020,40074,781

Total net assets

58,10857,240546,795

Total liabilities and net assets¥ 1,340,922¥ 1,345,920$12,618,067

Total liabilities
Net assets:
Common stock
Capital surplus
Retained earnings
Total shareholders’ equity
Unrealized gain on available-for-sale securities
Revaluation reserve for land
Total valuation and translation adjustments(Concluded)
45

The Hokuto Bank, Ltd.
Non-Consolidated Statements of Income
Years Ended March 31, 2018 and 2017
Millions of yen
2018
2017

Thousands of
U.S. dollars
2018

Income:Interest income:Interest on loans and discounts
Interest and dividends on securities
Other
Fees and commissions
Other operating income
Other income¥ 10,345
5,420
13
3,870
1,552
1,807

¥ 10,724
5,318
10
3,854
2,396
1,603

Total income

23,00923,909216,514

543
15
407
58
0
1,675
2,722
14,131
1,326

622
27
509
104
0
1,559
2,062
14,462
1,957

5,109
141
3,829
545
0
15,761
25,614
132,972
12,477

Total expenses

20,881

21,305

196,490

Income before income taxes

2,127

2,603

20,015

348
(35)

276
258

3,274
(329)

312

534

2,935

Expenses:
Interest expenses:
Interest on deposits
Interest on negotiable certificates of deposit
Interest on payables under securities lending transactions
Interest on borrowings and rediscounts
Other
Fees and commissions
Other operating expenses
General and administrative expenses
Other expenses

Income taxes:
Current
Deferred
Total income taxes
Net income

¥

46

1,815

¥

2,069

$

$

97,34651,002
122
36,416
14,60417,003

17,079