THE KAGOSHIMA BANK, LTD.
and consolidated subsidiaries
Consolidated Financial Statements for theYear Ended March 31, 2014, andIndependent Auditor’s ReportTHE KAGOSHIMA BANK, LTD. and Subsidiaries
Consolidated Balance Sheet
March 31, 2014

Millions of Yen
2014
2013

Thousands of
U.S. Dollars
2014

168,429$

AssetsCash and due from banks (Notes 4 and 18)¥¥

88,936

1,636,505

Call loans and bills bought (Note 18)

21,613

21,631

210,000

Monetary receivables bought

9,086

9,945

88,291

178

181

1,739

9,484

7,500

92,150Investment securities (Notes 5, 11, and 18)

1,149,563

1,160,444

11,169,483

Loans and bills discounted(Notes 7, 17, and 18)

2,425,898

2,272,324

23,570,724

Foreign exchange assets (Note 8)

2,919

1,358

28,370

Lease receivables and investments in leases(Note 11)22,627

19,846

219,853

Other assets (Note 11)17,31625,651

168,252

Tangible fixed assets (Notes 9 and 10)55,45454,847

538,811

Intangible fixed assets (Note 9)

6,645

8,590

64,567

Asset for retirement benefits (Note 14)

7,086

Trading securities (Notes 5 and 18)
Money held in trust (Note 6)

Deferred tax assets (Note 20)

68,850

517

611

5,029

Customers' liabilities for acceptances andguarantees (Note 15)27,631

26,153

268,474

Allowance for doubtful accounts (Note 18)(34,488)(31,218)(335,101)

Total assets¥

3,889,964

See accompanying Notes to Consolidated Financial Statements.
2¥

3,666,804$

37,796,002

Thousands of
U.S. Dollars
2014

Millions of Yen
2014
2013

Liabilities and Equity
Liabilities:
Deposits (Notes 11, 12, and 18)
Negotiable certificates of deposit (Note 18)
Call money and bills sold (Note 18)
Payables under securities lendingtransactions (Note 11)
Borrowed money (Notes 11, 13, and 18)
Foreign exchange liabilities (Note 8)
Other liabilities
Accrued bonuses to directors and audit &supervisory board members
Provision for retirement benefits(Note 14)
Liability for retirement benefits (Note 14)
Provision for directors’ and audit &supervisory board members’ retirement
Provision for reimbursement of deposits
Provision for contingent losses
Deferred tax liabilities (Note 20)
Deferred tax liabilities for land revaluation(Notes 2(g) and 20)
Acceptances and guarantees (Note 15)
Total liabilities¥

3,291,756
91,16553,466¥

3,144,798
68,867
20,785$31,983,646
885,792
519,500

20,80076,941
55
23,591

32,74544,18523
22,940202,107
747,585540
229,221

50

56

493

1,122
1,498

Equity (Notes 16 and 22):
Common stock, no par value;
Authorized: 800,000,000 shares
I ssued: 210,403,655 shares in 2014 and 2013
Capital surplus
Retained earnings
Treasury stock, at cost, 562,775 shares in2014 and 538,735 shares in 2013
Accumulated other comprehensive
incomeUnrealized gains on available-for-salesecurities (Note 5)
Deferred losses on derivatives under hedge
accounting
Land revaluation surplus (Note 2(g))
Defined retirement benefit plans
Total

649
452
238
4,544

868
586
240
8,309

6,311
4,398
2,314
44,152

8,255
27,631
3,601,100

8,312
26,1533,379,993

80,215
268,474
34,989,315

18,13011,216
205,571

18,13011,216
197,702

176,163
108,983
1,997,389

(371)

(355)

(3,607)31,81335,656309,104(196)
14,259(1,165)279,258(295)
14,363
276,419(1,906)
138,554(11,327)
2,713,353

10,392286,8113,666,804

93,3332,806,686
37,796,002

Minority interests
9,605
Total equity
288,864¥ 3,889,964
Total liabilities and equity
See accompanying Notes to Consolidated Financial Statements.

3

14,562¥$

THE KAGOSHIMA BANK, LTD. and Subsidiaries
Consolidated Statement of Income
Year Ended March 31, 2014
Millions of Yen
2014
2013

Income:Interest income and dividends:
Interest on loans and discounts
Interest and dividends on securities
Other interest income
Total interest income and dividends
Fees and commissions
Other operating income
Gain on negative goodwill (Note 3)
Other income
Total income¥

Expenses:
Interest expenses:
Interest on deposits
Interest on borrowings and rediscounts
Interest on payables under securities lendingtransactions
Other interest expenses
Total interest expenses
Fees and commissions
Other operating expenses
General and administrative expenses
Provision of allowance for doubtful accounts
Other expenses
Total expenses
Income before income taxes and minority interests
Income taxes:
Current
Deferred
Total income taxes (Note 20)
Net income before minority interests
Minority interests in net income
Net income¥

37,1479,663
130
46,941
11,66916,412
1,398
4,019
80,441¥

37,95910,05085
48,095
11,442
16,110Thousands of
U.S. Dollars
2014

$

2,716
78,364360,940
93,8901,266
456,096
113,385
159,469
13,58639,053
781,590

1,203
258

1,219
158

11,692
2,514

29
687
2,178
2,901
12,38840,602
5,056
1,482
64,60915,831

90
776
2,244
2,754
12,80841,0833,874
2,068
64,834
13,530283
6,678
21,16928,193
120,368
394,505
49,12914,400627,766
153,824

6,632(1,060)
5,572
10,258605
9,653 ¥

6,193
(1,089)
5,104
8,426
639
7,786 $

64,445(10,300)
54,144
99,6795,880
93,798Yen

U.S. Dollars

Per-share information:
Net income - basic (Note 22)
Cash dividends applicable to the year

¥

46.00
9.00

See accompanying Notes to Consolidated Financial Statements.

4

¥

37.10
9.00

$

0.44
0.08

THE KAGOSHIMA BANK, LTD. and Subsidiaries
Consolidated Statement of Comprehensive Income
Year Ended March 31, 2014

NET INCOME BEFORE MINORITY
INTERESTS¥

Millions of Yen
2014
2013
10,258 ¥8,426

Thousands of
U.S. Dollars
2014$
99,679OTHER COMPREHENSIVE INCOME (Note 21):

Unrealized gains (losses) on available-for-salesecurities
Deferred gains on derivatives under hedge
accounting
Total other comprehensive income (loss)
COMPREHENSIVE INCOME
TOTAL COMPREHENSIVE INCOME
ATTRIBUTABLE TO :Owners of the parent
Minority interests(3,826)

15,640(37,175)

98(3,727)65
15,705960(36,215)

¥

6,531

¥

24,131$

63,463

¥

5,909
622

¥

23,431
700$

57,4186,044

See accompanying Notes to Consolidated Financial Statements.

5THE KAGOSHIMA BANK, LTD. and Subsidiaries
Consolidated Statement of Changes in Equity
Year Ended March 31, 2014
Millions of Yen
Accumulated Other Comprehensive Income
Outstanding
Number of
Shares ofCommonStock
BALANCE, APRIL 1, 2012

210,403,655

CommonStock¥

18,130CapitalSurplus¥11,216

Retained
Earnings¥

Net income
Cash dividends, ¥9.00 per share
Purchases of treasury stock (34,877 shares)
Disposals of treasury stock (707 shares)
Reversal of land revaluation surplus
Net change in the year
BALANCE, MARCH 31, 2013

TreasuryStock

191,243¥(338)

20,076¥

Deferred Gains(Losses) on
Derivatives
under Hedge
Accounting
(360)

¥

Land
Revaluation
Surplus¥

DefinedRetirement
Benefit Plans

14,820¥210,403,655

11,21618,13015,579

65

(456)

7,786
(1,784)(17)
0456
15,18735,656(295)

14,363

276,419

(103)

9,653
(1,888)(16)
0
103(5,013)

(17)
0

(0)
456

(355)

197,702
9,653(1,888)

(16)
0

(0)
103

(3,843)
210,403,655¥

18,130¥11,216¥

205,571

¥

(371)

¥

254,789

31,813

98
¥

(196)

¥

(1,165)

14,259¥(1,165)¥279,258

Total
EquityMinority
Interests

Total

7,786
(1,784)

Net income
Cash dividends, ¥9.00 per share
Purchases of treasury stock (24,525 shares)
Disposals of treasury stock (485 shares)
Reversal of land revaluation surplus
Net change in the year
BALANCE, MARCH 31, 2014

Unrealized
Gains(Losses) on
Available
for-sale
Securities

9,698

¥

¥

¥

264,488693

7,786(1,784)(17)
0456
15,881

10,392286,811

(786)

9,653
(1,888)(16)
0
103(5,800)9,605¥

288,864

Thousands of U.S. Dollars
Accumulated Other Comprehensive Income

BALANCE, MARCH 31, 2013

CommonStockCapitalSurplusRetained
Earnings$ 176,163$ 108,983$ 1,920,937

Net income
Cash dividends, $0.08 per share
Purchases of treasury stock (24,525 shares)
Disposals of treasury stock (485 shares)
Reversal of land revaluation surplus
Net change in the year
BALANCE, MARCH 31, 2014

Treasury
Stock$(3,455)

Unrealized
Gains(Losses) on
Available
for-sale
Securities

Deferred Gains(Losses) on
Derivatives
under Hedge
Accounting

Land
Revaluation
Surplus$$346,444

DefinedRetirement
Benefit Plans

Total

Minority
Interests

Total
Equity$ 139,559$ 2,685,766$ 100,975$ 2,786,741

960(1,005)(11,327)

93,798(18,351)
(155)
3
1,005
(48,713)(7,641)

93,798(18,351)
(155)
3
1,005
(56,354)(1,906)$ 138,554(11,327)$ 2,713,353

93,333$ 2,806,686(2,866)

93,798(18,351)
(155)
3

(0)
1,005

(37,339)$ 176,163$ 108,983$ 1,997,389$(3,607)

See accompanying Notes to Consolidated Financial Statements.

6$309,104$$$

THE KAGOSHIMA BANK, LTD. and Subsidiaries
Consolidated Statement of Cash Flows
Year Ended March 31, 2014

Millions of Yen
2014
2013

Cash flows from operating activities:
Income before income taxes and minority interests¥
Adjustments for:
Depreciation and amortization
Impairment losses
Gain on negative goodwill
Increase in allowance for doubtful accounts
Interest income and dividends recognized on statementof incomeInterest expenses recognized on statement of income
Net gain on sales or maturities of investment securities
Increase in loans and bills discounted
Increase in deposits
Increase in negotiable certificates of deposit
Increase in borrowed money
Decrease (increase) in due from banks
Decrease (increase) in call loans and bills purchased
Increase in call money and bills soldDecrease in payables under securities lendingtransactions
Interest and dividends received
Interest paid
Increase in lease receivables and investments in leases
Other, net
Subtotal
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities:
Purchases of investment securities
Proceeds from sales or maturities of investment securities
Net change in money held in trust
Purchases of tangible fixed assets
Proceeds from sales of tangible fixed assets
Purchases of intangible fixed assets
Purchase of investments in subsidiaries
Net cash provided by (used in) inves tingactivities
Cash flows from financing activities:
Dividends paid
Other, net
Net cash used in financing activities
Effect of exchange rate changes on cash and cash
equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year¥
Cash and cash equivalents at end of year (Note 4)
See accompanying Notes to Consolidated Financial Statements.

7

15,831¥

13,530Thousands of
U.S. Dollars
2014$

153,824

5,160
116(1,398)
3,269

5,494
248
2,905

50,1401,135(13,586)
31,769( 46,941)
2,178(3,207)(153,574)
146,958
22,29832,756113
876
32,681(48,095)
2,244(1,276)(68,431)
46,382
15,887
24,465(39)(9,707)
13,963(456,096)
21,169(31,163)(1,492,173)
1,427,890
216,658
318,270
1,101
8,520
317,546(11,944)
48,720(2,276)(2,780)(6,945)81,893(6,952)
74,941(23,218)
49,548(2,547)(282)(6,402)
14,667(5,884)
8,783(116,055)
473,377(22,119)(27,017)(67,487)795,705(67,548)
728,157(375,664)
388,230(2,000)(2,990)209(1,208)(3)
6,573(520,003)
493,7502,464(2,146)511(1,084)(26,507)(3,650,063)
3,772,159(19,432)(29,051)
2,038(11,746)(29)
63,874(1,888)(34)(1,923)(1,786)(36)(1,822)(18,353)(337)(18,690)

13
79,60587,940167,545

21(19,526)
107,466
87,940 $131
773,472
854,450
1,627,923¥

THE KAGOSHIMA BANK, LTD. and Subsidiaries
Notes to Consolidated Financial Statements

1. Basis of Presenting Consolidated Financial Statements
The accompanying consolidated financial statements of THE KAGOSHIMA BANK, LTD. (the“Bank”) and subsidiaries (together, the “Group”) have been prepared in accordance with theprovisions set forth in the Japanese Financial Instruments and Exchange Act and its related
accounting regulations and the Enforcement Regulation for the Banking Law of Japan and inaccordance with accounting principles generally accepted in Japan, which are different in certain
respects as to the application and disclosure requirements of International Financial ReportingStandards.
In preparing these consolidated financial statements, certain reclassifications and rearrangements
have been made to the consolidated financial statements issued domestically in order to present
them in a form, which is more familiar to readers outside Japan. In addition, certain
reclassifications have been made in the 2013 consolidated financial statements to conform to theclassifications used in 2014. Japanese yen figures less than a million yen are rounded down to thenearest million yen, except for per share data.
The consolidated financial statements are stated in Japanese yen, the currency of the country inwhich the Bank is incorporated and operates. The translations of Japanese yen amounts into U.S.
dollar amounts are included solely for the convenience of readers outside Japan and have been
made at the rate of ¥102.92 to $1, the approximate rate of exchange at March 31, 2014. Suchtranslations should not be construed as representations that the Japanese yen amounts could be
converted into U.S. dollars at that or any other rate.

2. Summary of Significant Accounting Policies(a) Principles of consolidation
The accompanying consolidated financial statements include the accounts of the Bank and its
subsidiaries. The number of consolidated subsidiaries as of March 31, 2014 and 2013, is seven.
Under the control or influence concept, those companies in which the Bank, directly or indirectly,
is able to exercise control over operations are to be fully consolidated.
One unconsolidated subsidiary was dissolved on February 24, 2014. As a result, there were no
unconsolidated subsidiaries as of March 31 2014.
All significant intercompany balances and transactions have been eliminated in consolidation.
All material unrealized profit included in assets resulting from transactions within the Group isalso eliminated.
Fiscal year-ends of all subsidiaries are at the end of March.

8

(b) Business Combinations
In October 2003, the Business Accounting Council (the “BAC”) issued a Statement of Opinion,“Accounting for Business Combinations,” and in December 2005, the Accounting Standards Boardof Japan (the “ASBJ”) issued ASBJ Statement No. 7, “Accounting Standard for Business
Divestitures” and ASBJ Guidance No. 10, “Guidance for Accounting Standard for Business
Combinations and Business Divestitures.” The accounting standard for business combinations
allowed companies to apply the pooling-of-interests method of accounting only when certain
specific criteria are met such that the business combination is essentially regarded as auniting-of-interests. For business combinations that do not meet the uniting-of-interests criteria,
the business combination is considered to be an acquisition and the purchase method of accounting
is required. This standard also prescribes the accounting for combinations of entities undercommon control and for joint ventures.
In December 2008, the ASBJ issued a revised accounting standard for business combinations, ASBJ
Statement No. 21, “Accounting Standard for Business Combinations.” Major accounting changes
under the revised accounting standard are as follows: (1) The revised standard requires accounting
for business combinations only by the purchase method. As a result, the pooling-of-interests
method of accounting is no longer allowed. (2) The previous accounting standard required
research and development costs to be charged to income as incurred. Under the revised standard,
in-process research and development costs (IPR&D) acquired in the business combination are
capitalized as an intangible asset. (3) The previous accounting standard provided for a bargain
purchase gain (negative goodwill) to be systematically amortized over a period not exceeding 20
years. Under the revised standard, the acquirer recognizes the bargain purchase gain in profit orloss immediately on the acquisition date after reassessing and confirming that all of the assets
acquired and all of the liabilities assumed have been identified after a review of the procedures usedin the purchase price allocation.

(c) Cash and cash equivalents
Cash and cash equivalents in the consolidated statement of cash flows are composed of cash on
hand and due from the Bank of Japan.

(d) Trading securities
Trading securities are stated at fair value at the fiscal year-ends. Related gains or losses, both
realized and unrealized, are included in current earnings. Accrued interest on trading securities is
included in other assets. The cost of trading securities is mainly determined by themoving-average method.

(e) Investment securities
Debt securities for which the Group has the positive intent and ability to hold to maturity are stated
at amortized cost. Marketable securities are carried at fair value as available-for-sale securities,
with the net unrealized gains or losses reported in a separate component of equity, net of applicable
income taxes. Available-for-sale securities whose fair values cannot be reliably determined arestated at the moving average cost. For other-than-temporary declines in fair value, securities are
reduced to net realizable value by a charge to income. Accrued interest on securities is included
in other assets. Funds entrusted to trust banks for securities (included in “Money held in trust”) of
the Bank are stated at fair value.

9(f) Derivatives and hedge accounting
The Bank uses swaps, forward and option contracts, and other types of derivative contracts.
These derivative instruments are used for trading purposes to generate revenues and fee income,and to hedge exposures arising from fluctuations in interest and foreign exchange rates.
Derivatives are carried at fair value, with the unrealized and realized gains and losses recorded incurrent earnings.
(1) Hedging against interest rate changes
The Bank applies deferred hedge accounting based on the rules of the Japanese Institute ofCertified Public Accountants (the “JICPA”) Industry Audit Committee Report No. 24, “Accounting
and Auditing Treatments on the Application of Accounting Standards for Financial Instruments in
the Banking Industry” for interest rate derivatives to manage interest rate risk from various
financial assets and liabilities as a whole.
Under this rule, the effectiveness of cash flow hedges is assessed based on the correlation between
a base interest rate index of the hedged cash flow and that of the hedging instrument.
(2) Hedging against currency fluctuations
The Bank applies deferred hedge accounting based on the rules of the JICPA Industry Audit
Committee Report No. 25, “Treatment for Accounting and Auditing of Application of AccountingStandard for Foreign Currency Transaction in Banking Industry” for funding swap transactions andcurrency swap transactions related to lending or borrowing in different currencies.
Pursuant to the rules, the Bank assesses the effectiveness of funding swap transactions andcurrency swap transactions executed for the purpose of offsetting the risk of changes in currency
exchange rates by verifying that there are foreign-currency monetary claims and debts
corresponding to the foreign-currency positions.

(g) Tangible fixed assets(1) Tangible fixed assets are stated at cost less accumulated depreciation.
Tangible fixed assets of the Bank are depreciated using the declining-balance method over thefollowing estimated useful lives of the assets, except for buildings acquired on or after April 1,
1998, which have been depreciated using the straight-line method.
Buildings
19 to 50 years
Other
2 to 20 years
Tangible fixed assets of the subsidiaries are principally depreciated by the straight-line method
over the estimated useful lives of the assets.
(2) Land revaluation
Under the “Law of Land Revaluation,” the Bank elected a onetime revaluation of its own-use land
to a value based on real estate appraisal information as of March 31, 1998.
The resulting land revaluation surplus is stated as a component of equity, and represents the totalof unrealized appreciation of land, net of income taxes, as a component of equity. There was noeffect on the consolidated statement of income. Continuous readjustment is not permitted unlessthe land value subsequently declines significantly such that the amount of the decline in value
should be removed from the land revaluation surplus account and related deferred tax liabilities.
At March 31, 2014 and 2013, the difference in the carrying values of land used for the banking
business after reassessment of the current fair value of such land at the respective year-ends
amounted to ¥15,376 million ($149,404 thousand) and ¥14,592 million.

10(h) Intangible fixed assets
Intangible fixed assets mainly consisted of computer software developed or obtained for internal
use and are amortized using the straight-line method over the estimated useful lives, mainly five
years.

(i) Long-lived assets
The Group reviews its long-lived assets for impairment whenever events or changes incircumstances indicate the carrying amount of an asset or asset group may not be recoverable.
An impairment loss would be recognized if the carrying amount of an asset or asset group exceeds
the sum of the undiscounted future cash flows expected to result from the continued use andeventual disposition of the asset or asset group. The impairment loss would be measured as theamount by which the carrying amount of the asset exceeds its recoverable amount, which is thehigher of the discounted cash flows from the continued use and eventual disposition of the asset or
the net selling price at disposition.

(j) Allowance for doubtful accounts
The allowance for doubtful accounts of the Bank is established to cover future credit losses inaccordance with the internal rules for self-assessment of asset quality.
The allowance for doubtful accounts is calculated in accordance with the Bank’s internal rules
based on the “Practical Guidelines for Audits of the Self-Assessment of Assets of Financial
Institutions Including Banks, Write-Down and Allowance for Doubtful Accounts” (Report No. 4 of
the Ad Hoc Committee for the Audit of Banks, etc., of JICPA).
For claims to borrowers who are legally bankrupt and virtually bankrupt, an allowance has been
provided based on the net of amounts exceeding the expected collectible amounts through thedisposal of collateral or execution of guarantees. For claims to borrowers who are possibly
bankrupt, an allowance has been provided for the loan losses at the amounts considered to benecessary based on an overall solvency assessment of the borrowers, after deducting the amount
expected to be collected through the disposal of collateral or execution of guarantees. For claims
to large-lot borrowers who are classified as “Need attention,” whose loans are classified as
restructured loans and whose future cash flows of principal and interest are reasonably estimated,
an allowance is provided for as the difference between the present value of expected future cash
flows discounted at the contracted interest rate and the carrying amount of the claims. In cases
where it is difficult to reasonably estimate future cash flows, an allowance is provided based on theestimated credit losses within the remaining loan terms calculated by the Bank. For other claims,
the allowance is provided based on historical loan-loss retio.
All claims are assessed by the Bank’s operating divisions in accordance with the Bank’s internal
rules for the self-assessment of asset quality. The inspection division, which is independent fromoperating divisions, conducts audits of these assessments.
Regarding the subsidiaries, a general allowance for loan losses is provided in the amount deemednecessary based on the historical loan-loss ratio, and the allowance for specific claims is provided
in the amount deemed uncollectible based on the respective assessments.

(k) Accrued bonuses to directors and audit & supervisory board members
Bonuses to directors and audit & supervisory board members are accrued at the end of the year towhich such bonuses are attributable.

11(l) Retirement and Pension Plans
The Bank has a defined benefit corporate pension fund plan and a retirement lump-sum grant planof unfunded, and introduced a cash balance plan in the corporate pension fund plan. Some ofsubsidiaries have a retirement lump-sum grant system. The amount of liability for employees’
retirement benefit is determined based on the projected benefit obligations and the pension assets
at the balance sheet date. Prior service cost is amortized using the straight-line method over 10
years. Net actuarial gain or loss is amortized using the declining-balance method over 10 years
commencing from the next fiscal year of occurrence.
In May 2012, the ASBJ issued ASBJ Statement No. 26, “Accounting Standard for Retirement
Benefits” and ASBJ Guidance No. 25, “Guidance on Accounting Standard for Retirement
Benefits,” which replaced the accounting standard for retirement benefits that had been issued by
the Business Accounting Council in 1998 with an effective date of April 1, 2000, and the otherrelated practical guidance, and were followed by partial amendments from time to time through2009.
(a)Under the revised accounting standard, actuarial gains and losses and past service costs that are
yet to be recognized in profit or loss are recognized within equity (accumulated othercomprehensive income), after adjusting for tax effects, and any resulting deficit or surplus isrecognized as a liability (liability for retirement benefits) or asset (asset for retirement benefits).
(b)The revised accounting standard does not change how to recognize actuarial gains and losses
and past service costs in profit or loss. Those amounts are recognized in profit or loss over acertain period no longer than the expected average remaining service period of the employees.
However, actuarial gains and losses and past service costs that arose in the current period andhave not yet been recognized in profit or loss are included in other comprehensive income, andactuarial gains and losses and past service costs that were recognized in other comprehensive
income in prior periods and then recognized in profit or loss in the current period shall be treatedas reclassification adjustments (see Note 14).
(c)The revised accounting standard also made certain amendments relating to the method of
attributing expected benefit to periods and relating to the discount rate and expected future salary
increases.
This accounting standard and the guidance for (a) and (b) above are effective for the end of annual
periods beginning on or after April 1, 2013, and for (c) above are effective for the beginning ofannual periods beginning on or after April 1, 2014, or for the beginning of annual periods
beginning on or after April 1, 2015, subject to certain disclosure in March 2015, both with earlier
application being permitted from the beginning of annual periods beginning on or after April 1,
2013. However, no retrospective application of this accounting standard to consolidated financial
statements in prior periods is required.
The Bank applied the revised accounting standard and guidance for retirement benefits for (a) and(b) above effective March 31, 2014. As a result, asset for retirement benefits of ¥7,086 million($68,850 thousand) and liability for retirement benefits of ¥1,498 million ($14,562 thousand) wererecorded as of March 31, 2014. In addition, deferred tax assets increased by ¥87 million ($846
thousand), deferred tax liabilities decreased by ¥548 million ($5,333 thousand), and accumulated
other comprehensive income decreased by ¥1,165 million ($11,327 thousand).

(m) Provision for directors’ and audit & supervisory board members’ retirement benefits
Provision for directors’ and audit & supervisory board members’ retirement benefits, which areprovided for payments of retirement benefits to them, are recorded in the amount deemed accruedat the consolidated balance sheet date based on the estimated amount of benefits.
12

(n) Provision for reimbursement of deposits
Provision for reimbursement of deposits that were derecognized as liabilities under certain
conditions is provided for possible losses on future claims of withdrawal based on the historicalreimbursement experience.

(o) Provision for contingent losses
Provision for contingent losses is provided for possible losses from contingent events related to theenforcement of the “responsibility-sharing system,” and is calculated by estimation of futureburden charges and other payments to the Credit Guarantee Corporations.

(p) Leases
Lease revenue and lease costs are recognized when lease payments are made.

(q) Foreign currency translation
Assets and liabilities denominated in foreign currencies are mainly translated into Japanese yen at
the exchange rates at the balance sheet date. Revenues and expenses are translated at theexchange rates at transaction dates. Gains or losses resulting from foreign currency translation
are included in the net income.

(r) Per-share information
Basic net income per share is computed by dividing net income available to common shareholders
by the weighted-average number of common shares outstanding for the period.
Cash dividends per share presented in the accompanying consolidated statement of income are
dividends applicable to the respective years, including dividends to be paid after the end of theyear.

(s) Income taxes
The provision for income taxes is computed based on the pretax income included in the
consolidated statement of income. The asset and liability approach is used to recognize deferred
tax assets and liabilities for the expected future tax consequences of temporary differences between
the carrying amounts and the tax bases of assets and liabilities. Deferred taxes are measured byapplying currently enacted tax laws to the temporary differences.
A valuation allowance is provided for any portion of the deferred tax assets if it is considered more
likely than not that they will not be realized.

(t) New accounting pronouncements
Accounting standard for retirement benefits−On May 17, 2012, the ASBJ issued ASBJ
Statement No. 26, “Accounting Standard for Retirement Benefits,” and ASBJ Guidance No. 25,“Guidance on Accounting Standard for Retirement Benefits,” which replaced the AccountingStandard for Retirement Benefits that had been issued by the Business Accounting Council in 1998
with an effective date of April 1, 2000, and the other related practical guidance, and were followedby partial amendments from time to time through 2009.

13

Major changes are as follows:(a) Treatment in the balance sheet
Under the current requirements, actuarial gains and losses and past service costs that are yet to berecognized in profit or loss are not recognized in the balance sheet, and the difference between
retirement benefit obligations and plan assets (hereinafter, “deficit or surplus”), adjusted by suchunrecognized amounts, is recognized as a liability or asset.
Under the revised accounting standard, actuarial gains and losses and past service costs that are yet
to be recognized in profit or loss shall be recognized within equity (accumulated othercomprehensive income), after adjusting for tax effects, and any resulting deficit or surplus shall berecognized as a liability (liability for retirement benefits) or asset (asset for retirement benefits).
(b) Treatment in the statement of income and the statement of comprehensive income
The revised accounting standard does not change how to recognize actuarial gains and losses andpast service costs in profit or loss. Those amounts would be recognized in profit or loss over acertain period no longer than the expected average remaining service period of the employees.
However, actuarial gains and losses and past service costs that arose in the current period and have
not yet been recognized in profit or loss shall be included in other comprehensive income andactuarial gains and losses and past service costs that were recognized in other comprehensive
income in prior periods and then recognized in profit or loss in the current period shall be treated asreclassification adjustments.
(c) Amendments relating to the method of attributing expected benefit to periods and relating to thediscount rate and expected future salary increases
The revised accounting standard also made certain amendments relating to the method of attributing
expected benefit to periods and relating to the discount rate and expected future salary increases.
This accounting standard and the guidance for (a) and (b) above are effective for the end of annual
periods beginning on or after April 1, 2013, and for (c) above are effective for the beginning ofannual periods beginning on or after April 1, 2014, or for the beginning of annual periods beginningon or after April 1, 2015, subject to certain disclosure in March 2015, both with earlier application
being permitted from the beginning of annual periods beginning on or after April 1, 2013.
However, no retrospective application of this accounting standard to consolidated financial
statements in prior periods is required.

The Bank applied to the revised accounting standard for (a) and (b) above effective March 31, 2014,
and expects to apply (c) above from on April 1, 2014, and is in the process of measuring the effects
of applying the revised accounting standard for (c) above in the future applicable periods.

3. Business Combinations
On March 26, 2014, the Bank acquired additional shares of KAGOSHIMA HOSYO SERVICE Co.,
Ltd., which has been a consolidated subsidiary, owned by minority shareholders in exchange forcash in the amount of ¥3 million ($29 thousand) to strengthen the governance through changing thecapital structure of this company.
The Bank accounted for this transaction as a transaction with minority shareholders pursuant to
ASBJ Statement No. 21, “Accounting Standard for Business Combinations,” and ASBJ GuidanceNo. 10, “Guidance on Accounting Standard for Business Combinations and Business Divestitures”
issued on September 13, 2013.
The Bank recognized a gain on negative goodwill of ¥1,398 million ($13,586 thousand) arisingfrom the transaction, since the acquisition cost of the subsidiary shares from minority shareholders
was lower than the decreased amount of minority interests (Note 2(b)).

14

4. Cash and Cash Equivalents
A reconciliation of the cash and cash equivalents balances on the consolidated statement of cash
flows and the cash and due from banks balances on the consolidated balance sheet was as follows:
Thousands ofMillions of Yen
U.S. Dollars
2014
2013
2014
Cash and due from banks¥
168,429 ¥88,936$
1,636,505
Less: due from banks other thanthe Bank of Japan
(883)
(996)
(8,582)
Cash and cash equivalents¥
167,545 ¥87,940$1,627,923

5. Trading Securities and Investment Securities
At March 31, 2014 and 2013, trading securities consisted of the following:

National government bonds
Local government bonds
Total

¥
¥

Millions of Yen
2014
2013
11
¥
17
167
164
178
¥
181

Thousands of
U.S. Dollars
2014
$
111
1,627
$
1,739

At March 31, 2014 and 2013, investment securities consisted of the following:

National government bonds
Local government bonds
Corporate bonds
Equity securities
Other
Total

¥

¥

Millions of Yen
2014
2013
316,057 ¥468,816
71,854
89,623574,794
450,453
74,754
68,612
112,10382,9381,149,563 ¥
1,160,444

Thousands of
U.S. Dollars
2014$
3,070,901
698,1585,584,866
726,331
1,089,224$
11,169,483

At March 31, 2014 and 2013, carrying amounts of trading securities and the related net unrealized
gains or losses included in current earnings were as follows:
Thousands ofMillions of Yen
U.S. Dollars
2014
2013
2014
Carrying
Unrealized
Carrying
Unrealized
Unrealized
Carrying
amountsgains
amountsgains
gains
amounts
Trading securities
¥
178 ¥
0 ¥
181 ¥
0 $
1,739 $
3

15

At March 31, 2014 and 2013, gross unrealized gains and losses for available-for-sale securities
with fair value were as follows:
Milli ons of Yen
Gross
Gross
unrealized
unrealized
Cost
gains
lossesFair value
At March 31, 2014:
Bonds:
National government bonds¥
309,380 ¥
6,676 ¥¥
316,057
Local government bonds
70,465
1,388
71,854
Corporate bonds
568,6316,196(32)574,794
Equity securities
39,46433,219(311)
72,372
Other
108,085
1,970(474)
109,581
Total¥
1,096,027 ¥ 49,451 ¥(818) ¥ 1,144,660

Cost

At March 31, 2013:
Bonds:
National government bonds
Local government bonds
Corporate bonds
Equity securities
Other
Total

¥

¥

456,007
87,366442,537
37,276
79,047
1,102,235

Cost
At March 31, 2014:
Bonds:
National government bonds
Local government bonds
Corporate bonds
Equity securities
Other
Total

$

$

3,006,026
684,6625,524,982
383,447
1, 050,193
10,649,313

Milli ons of Yen
Gross
Gross
unrealized
unrealized
gains
losses¥¥12,8092,257
7,990
29,832
2,653
55,542¥¥

Fair value

¥
(74)
(829)
(93)
(997)

¥

T housands of U.S. Dollars
Gross
Gross
unrealized
unrealized
gains
losses$64,874
13,49560,204
322,771
19,141$ 480,485$$

468,816
89,623
450,453
66,28081,606
1,156,780

Fair value$(319)(3,023)(4,613)(7,955)3,070,901
698,1585,584,866
703,195
1,064,721$ 11,121,841

At March 31, 2014 and 2013, net unrealized gains on available-for-sale securities, net of applicable
income taxes and minority interests, recorded in a separate component of equity on theaccompanying consolidated balance sheet were as follows:
Thousands ofMillions of Yen
U.S. Dollars
2014
2013
2014
Unrealized gains¥
48,632 ¥54,545 $472,530
Less: applicable income taxes(16,707)(18,793)(162,332)
Less: minority interests portion
(112)
(95)
(1,093)Net unrealized gains in equity¥
31,813 ¥35,656 $309,10416

During the years ended March 31, 2014 and 2013, the Group sold available-for-sale securities andrecorded gains of ¥5,504 million ($53,486 thousand) and ¥4,191 million, respectively, and losses of¥1,861 million ($18,082 thousand) and ¥2,861 million, respectively, on the accompanying
consolidated statement of income.

6. Money Held in Trust
At March 31, 2014 and 2013, the carrying amounts and unrealized gains of money held in trust
were as follows:(a) Money held in trust for trading
Thousands ofMillions of Yen
U.S. Dollars
2014
2013
2014
Carrying amounts
Unrealized gains recognized in income

¥

9,484
105

¥

7,500
0

$

92,1501,020(b) Money held in trust held to maturity
None.
(c) Other money held in trust (money held in trust other than held for trading or held to maturity)
None.

7. Loans and Bills Discounted
At March 31, 2014 and 2013, loans and bills discounted consisted of the following:Thousands ofMillions of Yen
U.S. Dollars
2014
2013
2014
Bills discounted¥
12,904¥
15,624 $125,386
Loans on notes
148,493
152,770
1,442,809
Loans on deeds
1, 968,129
1,813,217
19,122,907
Overdrafts
296,370
290,7122,879,620
Total¥
2,425,898¥
2,272,324 $
23,570,724
The loans and bills discounted include “loans to borrowers in bankruptcy” totaling ¥4,623 million($44,920 thousand) and ¥5,000 million as of March 31, 2014 and 2013, respectively, as well as“past due loans” totaling ¥24,278 million ($235,895 thousand) and ¥26,990 million as of March 31,
2014 and 2013, respectively. “Loans to borrowers in bankruptcy” are loans to borrowers who arelegally bankrupt and are placed on nonaccrued status. “Past due loans” include loans classified as“possible bankruptcy” and “virtual bankruptcy” under the Bank’s self-assessment guidelines andare loans on which accrued interest income is not recognized, excluding loans to bankrupt
borrowers and loans on which interest payments are deferred in order to support the borrower’s
recovery from financial difficulties.
In addition to “past due loans”, certain other loans classified as “Need attention” under the Bank’s
self-assessment guidelines include “accruing loans contractually past due for three months or
more,” which are loans on which the principal and/or interest is three months or more past due but
exclude “loans to borrowers in bankruptcy” or “past due loans.” There was no “accruing loans
contractually past due for three months or more” as of march 31, 2014 and 2013.
“Restructured loans” are loans where the Bank has restructured lending conditions, such as by areduction of the original interest rate, forbearance of interest payments, principal repayments, or17renunciation of claims to support the borrowers’ reorganization, but exclude “loans to borrowers inbankruptcy,” “past due loans,” and “accruing loans contractually past due for three months ormore.” The outstanding balances of “restructured loans” as of March 31, 2014 and 2013, were¥42,188 million ($409,915 thousand) and ¥25,683 million, respectively.
Total amount of assets, which consisted of “loans to borrowers in bankruptcy,” “past due loans,”“accruing loans contractually past due for three months or more” and “restructured loans” as ofMarch 31, 2014 and 2013, were ¥71,090 million ($690,732 thousand) and ¥57,675 million,
respectively. The allowance for doubtful accounts is not deducted from the amounts of loans
shown in the above.
Bills discounted are treated as secured lending transactions. As of March 31, 2014 and 2013, theBank had the right by contract or custom to sell or repledge bills discounted and foreign exchangebills bought, and their total face value was ¥12,906 million ($125,399 thousand) and ¥15,626
million, respectively.

8. Foreign Exchange
At March 31, 2014 and 2013, foreign exchanges assets and liabilities consisted of the following:Thousands ofMillions of Yen
U.S. Dollars
2014
2013
2014
Assets:Due from banks
¥
2,720
¥
1,159
$
26,436
Foreign bills of exchange purchased
12
12Foreign bills of exchange receivable
197
196
1,921
Total
¥
2,919
¥
1,358
$
28,370Liabilities:
Foreign bills of exchange sold
Foreign bills of exchange payable
Total

¥
¥

29
26
55

¥
¥

7
15
23

$
$

287
253
540

9. Tangible Fixed Assets and Intangible Fixed Assets
At March 31, 2014 and 2013, the major classifications of tangible fixed assets and intangible fixed
assets consisted of following:Thousands ofMillions of Yen
U.S. Dollars
Tangible fixed assets
2014
2013
2014
Buildings¥
36,536¥35,939$354,999
Land
36,77436,966357,313
Construction in progress
71
17
691
Other
16,622
15,313
161,504
90,004
88,237874,508
Less: accumulated depreciation(34,550)(33,390)(335,697)
Total¥
55,454¥54,847$
538,811
Intangible fixed assets
Software
¥
6,492
¥
8,437
$
63,085
Other
152
153
1,481
Total
¥
6,645
¥
8,590
$
64,56718

10. Fixed Asset Impairment Losses
The bank wrote down the carrying amounts to the recoverable amounts and recognized impairment
losses for the years ended March 31, 2014 and 2013, as follows:
Purposeof useArea

Type

In useKagoshima Land and buildings
Not in use Kagoshima Land and buildings
Outside of
Not in use
Land and buildings
Kagoshima
Total

¥

¥

Millions of
Yen
2014
2013
59 ¥
160
52
69
5
116

¥

17
248

Thousands of
U.S. Dollars
2014
$
575
508

$

The Bank groups assets by branch, which is a minimum unit for managerial accounting.
treats each consolidated subsidiary as a unit for asset grouping.

51
1,135
The Bank

The recoverable value is calculated based on the real estate appraisal value less the estimated cost of
disposal.

11. Assets Pledged
At March 31, 2014 and 2013, assets pledged as collateral were as follows:

Investment securities
Investment in leases
Other

¥

Millions of Yen
2014
2013
298,134¥
336,862
1, 417
1,977
2, 267
3,037

Thousands of
U.S. Dollars
2014$
2,896,761
13,76922,032At March 31, 2014 and 2013, the liabilities related to the above pledged assets were as follows:
Thousands ofMillions of Yen
U.S. Dollars
2014
2013
2014
Deposits¥
27,106¥
10,853$
263,371
Borrowed money
73,43941,596
713,554
Payables under securities lendingtransaction
20,80032,745202,107
In addition to the above, investment securities totaling ¥19,604 million ($190,479 thousand) and¥19,656 million at March 31, 2014 and 2013, respectively, were pledged as collateral for thesettlement of exchange, derivatives, and other transactions.

1912. Deposits
At March 31, 2014 and 2013, deposits consisted of the following:

Demand deposits
Time deposits
Other
Total

¥

¥

Millions of Yen
2014
2013
1,973,399¥
1,885,867
1,276,172
1,234,559
42,184
24,371
3,291,756¥
3,144,798

Thousands of
U.S. Dollars
2014$
19,174,106
12,399,650
409,879$
31,983,646

13. Borrowed Money
At March 31, 2014, the annual maturities of borrowed money, which were due through March
2019 with an weighted-average annual interest rate of 0.16%, were as follows:
Millions ofThousands ofYears ending March 31,
Yen
U.S. Dollars
2015¥
12,462$
121,086
2016
1,912
18,5852017
61,307595,682
2018
856
8,317
2019
392
3,808
Total
¥
76,930$747,479
Apart from borrowed money, lease obligations are included in other liabilities.
At March 31, 2014, the annual maturities of lease obligations, which were due through March
2019 with an weighted-average annual interest rate of 2.07%, were as follows:
Millions ofThousands ofYears ending March 31,
Yen
U.S. Dollars
2015
¥
12
$
117
2016
11
109
2017
2018
2019
Total
¥
23
$
226

14. Retirement and Pension Plans
The retirement benefits systems of the Bank consist of a defined benefit corporate pension fundplan and a retirement lump-sum grant system of unfunded.
The Bank introduced a cash balance plan in the corporate pension fund plan, and pays a pension or
lump sum that has been funded on the basis of length of service and professional qualifications andage. In addition, the Bank pays a lump sum based on length of service or factors such as theprofessional qualifications of the constant.
A retirement benefit trust was set up on the corporate pension fund plan.
Some of subsidiaries have a retirement lump-sum grant system.
Extra retirement benefits may be paid up on the retirement of employees of the Bank andsubsidiaries.

20

Year Ended March 31, 2014
(1) The changes in defined benefit obligation for the year ended March 31, 2014, were as
follows:
Thousands ofMillions of Yen U.S. Dollars
Balance at beginning of year¥

Service cost
Interest cost
Actuarial losses
Benefits paid

23,711$

230,386

855
331
(575)
(1,272)

8,312
3,217
(5,588)(12,360)

Balance at end of year¥
23,050 $223,966(Note)All subsidiaries use the simplified method. The retirement benefit costs are recognized
as “service cost.”(2) changes in plan assets for the year ended March 31, 2014, were as follows:
Thousands of
U.S. Dollars

Millions of Yen
Balance at beginning of year
Expected return on plan assets
Actuarial gains
Contributions from the employer
Benefits paid¥

25,568
127
2,183
1,929
(1,171)$

248,428
1,241
21,21818,748(11,382)

Balance at end of year¥

28,637$278,254(3) Reconciliation between the liability recorded in the consolidated balance sheet and thebalances of defined benefit obligation and plan assets
Thousands of
U.S. Dollars

Millions of Yen
Funded defined benefit obligation
Plan assets¥(21,551)
28,637
7,086(1,498)$(209,403)
278,254
68,650(14,562)

¥

5,587

$

54,288

Unfunded defined benefit obligation
Net asset arising from defined benefit
obligation

Liability for retirement benefits
Asset for retirement benefits
Net asset arising from defined benefit
obligation

21

Millions of Yen

Thousands of
U.S. Dollars¥(1,498)
7,086$(14,562)
68,650

¥

5,587

$

54,288

(4) The components of net periodic benefit costs for the year ended March 31, 2014, were as
follows:
Thousands ofMillions of Yen U.S. Dollars
Service cost
Interest cost
Expected return on plan assets
Recognized actuarial losses
Amortization of prior service cost

¥

855
331
(127)
1,008
7

$

8,312
3,217
(1,241)
9,795
76

Net periodic benefit costs

¥

2,074

$

20,159(5) Accumulated other comprehensive income on defined retirement benefit plans as of March
31, 2014
Thousands ofMillions of Yen U.S. Dollars
Unrecognized prior service cost
Unrecognized actuarial losses

¥

675
1,126

$

6,561
10,946

Total

¥

1,801

$

17,508(6) Plan assets

a. Components of plan assets
Plan assets consisted of the following:
Debt investments
Equity investments
General account assets of life insurance companies
Others

29%
29
28
14

Total
100%
(Note)
Total pension assets include the retirement benefit trust of 17%.

b. Method of determining the expected rate of return on plan assets
The e
xpected rate of return on plan assets is determined based on the investment yield
average of the past five years, in consideration of the long-term rates of return and theallocation of expected pension assets at present and in the future.
(7) Assumptions used for the year ended March 31, 2014, were set forth as follows:
Discount rate
Expected rate of return on plan assets
Defined benefit pension plan
The retirement benefit trust

22

1.5%
0.5
0.5

Year Ended March 31, 2013
The provision for retirement benefits at March 31, 2013, consisted of the following:
Milli ons of Yen
Projected benefit obligation
Fair value of plan assets
Unrecognized prior service cost
Unrecognized actuarial loss
Net liability
Prepaid pension expense¥(23,711)25,568683
4, 8937, 433
8,555

Provision for retirement benefits¥(1,122)The components of net periodic benefit costs for the year ended March 31, 2013, are as follows:
Milli ons of Yen
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
Recognized actuarial loss

¥

819
403
( 213)( 209)
1, 200Net periodic benefit costs

¥

2,000

Assumptions used for the year ended March 31, 2013, are set forth as follows:
Discount rate
Expected rate of return on plan assets
Defined benefit pension plan
The retirement benefit trust
Amortization period of prior service cost
Recognition period of actuarial gain/loss

1.4%
0.5%
2.5%
10 years
10 years

15. Acceptances and Guarantees
The Bank provides guarantees for the liabilities of its customers for payments of loans or otherliabilities to other financial institutions. As a contra account, “Customers’ liabilities for
acceptances and guarantees” are shown as assets on the accompanying consolidated balance sheet
indicating the Bank’s right of indemnity from the customers.

16. Equity
Japanese banks are subject to the Banking Law and the Companies Act of Japan (the “CompaniesAct”). The significant provisions in the Banking Law and the Companies Act that affect financial
and accounting matters are summarized below:

23

(a) Dividends
Under the Companies Act, companies can pay dividends at any time during the fiscal year in
addition to the year-end dividend upon resolution at the shareholders’ meeting. For companies
that meet certain criteria such as (1) having a Board of Directors, (2) having independent auditors,(3) having an Audit & Supervisory Board , and (4) the term of service of the directors is prescribedas one year rather than two years of normal term by its articles of incorporation, the Board of
Directors may declare dividends (except for dividends-in-kind) at any time during the fiscal year if
the company has prescribed so in its articles of incorporation. The Bank meets all the above
criteria.
The Companies Act permits companies to distribute dividends-in-kind (noncash assets) toshareholders subject to certain limitations and additional requirements.
Semiannual interim dividends may also be paid once a year upon resolution by the Board of
Directors if the articles of incorporation of the company so stipulate. The Companies Act and the
Banking Law provide certain limitations on the amounts available for dividends or the purchase oftreasury stock.
(b) Increases/decreases and transfer of common stock, reserve, and surplus
The Banking Law requires that an amount equal to 20% of dividends must be appropriated as alegal reserve (a component of retained earnings) or as additional paid-in capital (a component of
capital surplus) depending on the equity account charged upon the payment of such dividends until
the aggregate amount of the legal reserve and additional paid-in capital equals 100% of capitalstock. Under the Companies Act, the total amount of additional paid-in capital and legal reserve
may be reversed without limitation. The Companies Act also provides that capital stock, legal
reserve, additional paid-in capital, other capital surplus, and retained earnings can be transferredamong the accounts under certain conditions upon resolution of the shareholders.
(c) Treasury stock and treasury stock acquisition rights
The Companies Act also provides for companies to purchase treasury stock and dispose of suchtreasury stock by resolution of the Board of Directors. The amount of treasury stock purchased
cannot exceed the amount available for distribution to the shareholders, which is determined by
specific formula. Under the Companies Act, stock acquisition rights are presented as a separate
component of equity. The Companies Act also provides that companies can purchase bothtreasury stock acquisition rights and treasury stock. Such treasury stock acquisition rights arepresented as a separate component of equity or deducted directly from stock acquisition rights.

17. Loan Commitments
Contracts for overdraft facilities and loan commitment limits are contracts that the Bank makeswith customers up to prescribed limits in response to customers’ loan applications as long as there
is no violation of any condition in the contracts. The amount of unused commitments at March
31, 2014 and 2013, was ¥634,160 million ($6,161,680 thousand) and ¥602,182 million,
respectively, and the amount of unused commitments whose original contract terms are within one
year or unconditionally cancelable at any time at March 31, 2014 and 2013, was ¥625,400 million($6,076,567 thousand) and ¥597,142 million, respectively.
Since many of these commitments expire without being drawn upon, the unused amount does notnecessarily represent a future cash requirement. Most of these contracts have conditions thatallow the Bank to refuse customers’ loan applications or decrease the contract limits for legitimate
reasons (e.g., changes in financial situation, deterioration in customers’ creditworthiness). At the
inception of the contracts, the Bank obtains real estate, securities, etc., as collateral if considered tobe necessary. Subsequently, the Bank performs a periodic review of customers’ business results
based on internal rules and takes necessary measures to reconsider conditions in the contracts
and/or require additional collateral and guarantees.

2418. Financial Instruments and Related Disclosures(a) Policy on financial instruments
The main business of the Group is banking operations, which consist of deposit-taking and lending
services, securities investment, etc. Additionally, the Group provides other financial services, suchas leasing services.
Accordingly, the Bank holds financial assets and liabilities that are subject to interest rate
fluctuations and conducts Asset-Liability Management (“ALM”) in order to minimize any
unfavorable impacts from interest rate fluctuations. The Bank also conducts derivative transactions
as part of ALM.

(b) Nature and extent of risks arising from financial instruments
The main financial instruments that the Group has are as follows:
The Group provides loans mainly to domestic corporations and individual customers. Loans are
exposed to credit risk, which represents losses on defaults caused by a deterioration in a borrower’s
financial condition. Moreover, fixed interest rate loans are exposed to interest rate risks.
The Group holds securities, such as national government bonds, local government bonds, corporate
bonds and equity securities. These securities are exposed to interest rate risks, market price risks,
foreign exchange risks and credit risks.
The Bank handles deposits and negotiable certificates of deposit from customers. These deposits
are exposed to interest rate risks.
Call money is exposed to liquidity risk, which may lead the Bank to face difficulties in raisingnecessary funds under certain circumstances.
The Group conducts derivative transactions mainly to manage market risks of loans and securities,
etc., and partly applies hedge accounting to them.

(c) Risk management for financial instruments(1) Credit risk management
As a basis of credit risk management, the Bank periodically monitors the debtors’ financial status.
This checking system is called the “Monitoring System of Customers.”
The Bank has established a “Lending Policy” to advance the credit risk control systems forindividual accounts and to enhance the effectiveness of these credit portfolio management
measures. In addition, the Bank assists debtors, which have problems in their financial conditions
and guides their management in financial aspects.
To enhance its risk management system, the Bank has established a system of checks and balancesin its credit risk management operations by separating the Corporate Risk Management Department
from the Credit & Investment Planning Department. In addition, regarding business loans, theCorporate Risk Management Department is responsible for measuring credit risks and planning acredit rating system.

25

Corporate credit rates are decided by the Monitoring System of Customers with a financial support
system “Key Man.” The Monitoring System of Customers gives corporate credit rates withinternal standards based on actual financial or nonfinancial conditions and decides the credit ratingclassification, lending policies, and lending rates according to the corporate credit rates.
The Credit Risk Management Department reports the management situation of the credit portfolio
to the Risk Management Committee and the ALM Committee regularly or as needed, and theagenda is reported to the Board of Directors.
Regarding credit examinations and lending judgment on individual transactions, the Bank
establishes a “Lending Policy,” which determines the basic lending policies, individual lending
criterion and, to prevent the concentration of lending, conducts credit examinations in accordancewith the policy.
(2) Market risk management
The Bank recognizes the importance of appropriate market risk management to attain its purpose.
Therefore, its basic policy is to understand the market risk situation precisely and to take andmanage appropriate business risks by establishing an appropriate market risk management systemthat enables it to manage and take certain market risks.
The Bank has separated its departments into the market division (front office), the officemanagement division (back office), and the risk management division (middle office) and has
established an effective mutual monitoring system.
Moreover, the Bank conducts strict operational management with retention limits, Value at Risk(“VaR”) limits, and loss limits, which are decided by the Executive Board on a semiannual basis.
The middle office reports to directors on a daily basis and to the Risk Management Committee on amonthly basis on the status of risks of market transactions, such as retention limits, unrealized
gains or losses, Basis Point Value of the securities portfolio, and VaR. The study results of the
Risk Management Committee are reported to the Board of Directors.
The ALM Committee monitors market risks, including interest risk of bank accounting in terms ofcomprehensive management of assets and liabilities and studies hedging strategies based on thefinancial environment and market forecasts.

（Quantitative information of market risk）
1) Financial instruments held for trading purposes
Concerning trading securities and fund trusts, the Bank has set upper holding limits. As of March
31, 2014 and 2013, the limit of trading securities was ¥10,000 million ($97,162 thousand) and¥10,000 million, respectively, and the limit of fund trusts was ¥12,000 million ($116,595 thousand)and ¥14,000 million, respectively. For trading securities, the Bank has not set an allowablepotential loss amount to trade securities with customers. The Bank holds fund trusts to earn profit
by taking advantage of short-term fluctuations in the market or discrepancies in interest rates,
currency exchange rates, or other market indices in different markets. In order to manage risks,
the Bank has set an allowable potential loss amount for fund trusts, which was ¥360 million($3,497 thousand) and ¥300 million as of March 31, 2014 and 2013, respectively.

262) Financial instruments held for other than trading purposes(a) Management of interest rate risks
The main financial instruments that are affected by interest rate risks in the Bank are “Loans andbills discounted,” bonds within “Securities,” “Deposits,” and interest rate swaps of “Derivativetransactions.”
The Bank has computed the VaR of these financial assets and liabilities with thevariance-covariance method and uses that method for quantitative analysis of interest rate risk
management. The assumptions for computing VaR are based on a 60-day holding period, 99%
confidence level, and a five-year observation period. The aggregate amount of interest rate risks(value of estimated record of losses) was ¥5,400 million ($52,467 thousand) and ¥10,100 million asof March 31, 2014 and 2013, respectively. The Bank conducts back-testing to verify thereliability of VaR by monthly monitoring and analysis. The results support the reliability of theBank’s model, which has captured interest rate risks with sufficient accuracy.
The Bank has computed interest rate risks with core deposits estimated by the core deposits
measurement model. In this model, the Bank estimates the amount of core deposits from a shiftof the lower 99th percentile of deposit decrease in the future distribution of demand deposits. The
distribution is computed by a linear regression model and a future interest rate scenario, and thelinear regression model uses the one-month Tokyo Interbank Offered Rate as an explanatory
variable.
The Bank conducts back-testing to verify the reliability of the core deposits measurement model bycomparing core deposits expectations and core deposits actual values, which are measured with thecore deposits measurement model. The results support the reliability of the Bank’s model, which
has captured core deposits movements with sufficient accuracy.
The VaR and the core deposits measurement model represent the amount of interest rate risks andcore deposits arising with a certain probability using a statistical methodology based on historicalinterest rate fluctuations and the relationship between interest rate fluctuations and deposit
fluctuations. It may not be able to capture the interest rate risks and movements of core deposits
arising under drastic market movements beyond normal estimates.
(b) Management of market price risks
The Bank uses VaR for quantitative analysis of market price risk of trading securities in“Securities.” The assumptions for computing VaR include a 60-day holding period (regarding apart of asset, for example, cross-shareholdings is 125 days), a 99% confidence level, and a one-year
observation period. The VaR was ¥26,100 million ($253,595 thousand) and ¥26,000 million as ofMarch 31, 2014 and 2013, respectively.
The Bank conducts research to compare the VaR calculated using the model with gains or losses,
which are assumed to have been incurred when the portfolio was fixed. According to the resultsof the research, it is believed that the measurement model used is adequate to capture market risk.
It should be noted that VaR measures the amount of market risk at certain probability levels
statistically calculated based on historical market fluctuations, and therefore, there may be cases
where market risk cannot be captured in such situations when market conditions change
dramatically beyond what was experienced historically.

27

(3) Liquidity risk management
The financing condition of the Bank is stable because the Bank raises most of its operational funds
by deposits.
The Financing Management Department, which is in the Market Financing Department, monitors
the Bank’s financing conditions on a daily, weekly, and monthly basis and conducts adequate
market funding as needed.
The Risk Management Department, which is independent from the Financing Management
Department, monitors the Bank’s financing conditions on a daily basis, and endeavors to secure
available funding methods, such as preparation of market funding with holding securities to prepare
for contingencies.
The monitoring results of the Bank’s financing conditions and market liquidity risks are reported to
the Risk Management Committee, and the study results of the Risk Management Committee arereported to the Board of Directors.
(4) Derivative transactions risk management
As for derivative transactions, the basic policy of the Bank is to reduce market risks of loans andsecurities.
Market risks and credit risks are inherent in derivative transactions used by the Bank.
Market risks include interest rate risks in interest-related derivative transactions, exchange raterisks in currency-related derivative transactions, and market price risks in security/bond-related
derivative transactions.
As for credit risks, the Bank handles trades with stock exchanges and only creditable banks andsecurities companies, and reduces default risks appropriately by operational limits.
The Bank manages its risks mainly by checking whether the effective derivative transactions areused to reduce asset and liability risks, such as fluctuations in interest rates and foreign exchange
rates. The basic policy is studied by the ALM Committee, and the transactions and management
are conducted by the Market Financing Department.

(d) Supplementary explanation of matters relating to fair values of financial instruments
Fair values of financial instruments include values based on market prices, and values deemed to bemarket prices obtained by a reasonable estimate when financial instruments do not have market
prices. Because certain assumptions are adopted for calculating such values, values may differ
when adopting different assumptions.

(e) Fair values of financial instruments
The following table summarizes the carrying amounts and the fair values of financial instruments
as of March 31, 2014 and 2013, together with their differences. Note that the following table does
not include unlisted equity securities and certain other securities for which fair value is extremely
difficult to determine.

28

Fair value of financial instruments
Milli ons of Yen
Carrying amountAt March 31, 2014
AssetsCash and due from banks¥
168,429
Call loans and bills bought
21,613
Trading securities
178
Investment securities
Available-for-sale securities
1,144,660
Loans and bills discounted
2,425,898
Allowance for doubtful accounts (*1)
(32,645)
2,393,253
Total¥
3,728,135

Liabilities
Deposits
Negotiable certificates of deposit
Call money and bills soldBorrowed money
Total

Derivative transactions (*2)
Hedge accounting is not applied
Hedge accounting is applied
Total

¥

3,291,756
91,16553,46676,941
3,513,331

¥

(128)
(303)
(431)

Unrealized
gains/losses

Fair value¥

168,429
21,613178¥

1,144,660¥

2,430,161
3,765,042¥

3,292,230
91,19353,46676,944
3,513,835

¥

¥

(128)
(303)
(431)

¥

¥

36,90736,907

473
27
2
504

Milli ons of Yen
Carrying amountAt March 31, 2013
AssetsCash and due from banks¥
Call loans and bills bought
Trading securities
Investment securities
Available-for-sale securities
Loans and bills discounted
Allowance for doubtful accounts (*1)
Total
Liabilities
Deposits
Negotiable certificates of deposit
Call money and bills soldBorrowed money
Total
Derivative transactions (*2)
Hedge accounting is not applied
Hedge accounting is applied
Total

88,936
21,631181¥

1,156,780
2,272,324(29,370)
2, 242,953
3,510,484¥

3,144,798
68,867
20,78544,185
3,278,635

¥

140
(455)
(314)

29

Unrealized
gains/losses

Fair value¥

88,936
21,631181¥

1,156,780¥

2,277,140
3,544,670¥

3,145,443
68,882
20,78544,1983,279,309

¥

¥

140
(455)
(314)

¥

¥

34,18634,186

644
15
13
673

Thousands of U.S. Dollars
Carrying amountAt March 31, 2014
AssetsCash and due from banks$
1,636,505
Call loans and bills bought
210,000
Trading securities
1,739
Investment securities
Available-for-sale securities
11,121,844
Loans and bills discounted
23,570,724
Allowance for doubtful accounts (*1)(317,190)
23,253,534
Total$
36,223,623

Liabilities
Deposits
Negotiable certificates of deposit
Call money and bills soldBorrowed money
Total

$

31,983,646
885,792
519,500
747,585
34,136,523

Unrealized
gains/losses

Fair value$

1,636,505
210,000
1,739$

11,121,844$

23,612,139
36,582,228$

31,988,249
886,062
519,500
747,610
34,141,422$

358,605
358,605

4,602
270

$

24
4,898

Derivative transactions (*2)
Hedge accounting is not applied(1,247)(1,247)
Hedge accounting is applied(2,948)(2,948)
Total$(4,196) $(4,196) $(*1) Allowance for doubtful accounts relevant to loans and bills discounted have been deducted.
(*2) Derivatives recorded in “Other assets” and “Other liabilities” are aggregated and shown hereinin total. Derivative instruments are presented as net of assets and liabilities associated with
derivative transactions.
(f) Method used for determining the fair value of financial instruments

Assets(1)Cash and due from banks
Fair values of cash and due from banks that have no maturity dates are approximately equivalent tocarrying amounts.
Regarding cash and due from banks with maturity dates, the fair values are approximately
equivalent to the carrying amounts because of their short maturities (less than one year).

(2)Call loans and bills purchased
Fair values of call loans and bills purchased are approximately equivalent to carrying amounts
because of their short maturities.
(3)Trading securities
For securities, such as bonds that are held for trading, the fair values are measured at the quoted
market prices in bond markets or the quoted prices obtained from financial institutions.

30

(4)Investment securities
Fair values of stocks are measured at the quoted market prices in stock markets. Fair values ofbonds are mainly measured at the quoted market prices in bond markets or the quoted prices
obtained from financial institutions.
Fair values of investment trusts are measured at the standard prices disclosed publicly.
See Note 5 for information related to securities by holding purpose.

(5)Loans and bills discounted
Because floating-rate loans are immediately affected by the movement of market rates, the fairvalues of these loans are equivalent to carrying amounts in cases where the credit risk of debtors
has not significantly changed from the execution of the loans.
Fixed-rate loans are segmented by loan type, internal rating, and period, and their fair value isdetermined by discounting the total amount of principal and interest by the assumed interest rate on
new lending of a similar type.
For loans to debtors who are legally bankrupt, virtually bankrupt, and possible bankrupt, anallowance for doubtful accounts calculated from the current value of expected future cash flows orfrom the amount expected to be collected through disposal of collateral or execution of guarantees
is provided. Therefore, the carrying amounts at the consolidated balance sheet date, net of reserveamounts, are regarded as the fair values.
The carrying amounts of loans and bills discounted that do not have fixed maturities due to loan
characteristics, such as limited loan amounts within the value of pledged assets, approximate fairvalue due to their expected repayment periods and interest rate conditions.

Liabilities(1)Deposits
Fair value of demand deposits is recognized as the payment amount required at the balance sheet
date (i.e., carrying amounts). The fair values of time deposits are calculated by classifying themon the basis of their terms and by discounting future cash flows. The discount rates used in suchcalculations are interest rates used when accepting new deposits.
(2)Negotiable certificates of deposit
Fair values of fixed negotiable certificates of deposit are calculated by classifying them on the basisof their terms and by discounting future cash flows. The discount rates used in such calculations
are interest rates used when accepting new negotiable certificates of deposit.
(3)Call money and bills soldFair values of call money and bills sold are equivalent to carrying amounts because of their shortmaturities.
(4)Borrowed money
The carrying amount of borrowed money with floating interest rates approximates fair value
because the market rates are promptly reflected in the floating interest rate, and the credit risks of
the Bank and its subsidiaries have not changed significantly after borrowing. The fair value ofborrowed money with fixed interest rates is determined by discounting future cash flows at the ratethat would be applied for similar new contracts. Fair values of borrowed money with maturitiesof less than one year are approximately equivalent to carrying amounts because of their shortmaturities.

31

Derivatives
Please see Note 19 for the fair value of derivatives.
(g) Financial instruments whose fair value cannot be reliably determined
Carrying amountThousands of
U.S. Dollars
2014

Millions of Yen
2014
2013

Unlisted stocks (*1) (*2)
Investments in partnerships (*3)
Total

¥
¥

2,381
2,521
4,902

¥
¥

2,332
1,331
3,664

$
$

23,13724,501
47,638(*1) Equity securities without a readily available market price are outside the scope of the fairvalue disclosure because their fair values cannot be reliably determined.
(*2) During the year ended March 31, 2014, impairment losses on unlisted stocks were notrecognized. During the year ended March 31, 2013, impairment losses of ¥0 million on
unlisted stocks were recognized.
(*3) Investments in partnerships, the assets of which comprise equity securities without a readily
available market price, are outside the scope of the fair value disclosure because the fair valueof those investments cannot be reliably determined.

(h) Maturity analysis for financial assets and securities with contractual maturities

At March 31, 2014
Due from banks
Call loans and bills purchased
Available-for-sale securities
Nati onal government bonds
Local government bonds
Corporate bonds
Other
Loans and bills discounted (*)
Total

At March 31, 2014
Due from banks
Call loans and bills purchased
Available-for-sale securities
Nati onal government bonds
Local government bonds
Corporate bonds
Other
Loans and bills discounted (*)
Total

Due in 1 year orLess¥
121,829
21,613132,052
58,783
8,681
58,9485, 638718,315¥
993,811

Due from 5 to 7
years

¥

¥

113,227
81,271
8,312
22,1301, 513201,090314,318

Milli ons of Yen
Due from 1 to 3
years
¥

¥

351,439
54,74935,766
230,50730,415500,336
851,776

Milli ons of Yen
Due from 7 to 10
years
¥

¥

Due from 3 to 5
years

¥

¥

344,961
102,734
19,093
165,944
57,187
380,517725,478

Due after 10 years¥

78,97918,51836,90660,355
105
211,940
290,920

36,906¥385,383
422,290(*) Loans and bills discounted to borrowers who are legally bankrupt, virtually bankrupt, and possibly
bankrupt amounting to ¥28,313 million are excluded from the table above as of March 31, 2014.

32

At March 31, 2013
Due from banks
Call loans and bills purchased
Available-for-sale securities
Nati onal government bonds
Local government bonds
Corporate bonds
Other
Loans and bills discounted (*)
Total

At March 31, 2013
Due from banks
Call loans and bills purchased
Available-for-sale securities
Nati onal government bonds
Local government bonds
Corporate bonds
Other
Loans and bills discounted (*)
Total

Due in 1 year orLess¥
47,893
21,631
84,72336,19017,684
26,336
4, 511
695,222¥
849,470

Due from 5 to 7
years

¥

¥

116,325
77,3197,828
16,378
14,799208,043
324,369

Milli ons of Yen
Due from 1 to 3
years
¥

¥

300,108
98,25332,909155,566
13,378449,648
749,757

Milli ons of Yen
Due from 7 to 10
years
¥

¥

197,707
115,240
10,44570,798
1,224
178,890376,598

Due from 3 to 5
years

¥

¥

269,218
70,062
20,756
137,676
40,724383,407652,626

Due after 10 years¥

115,447
71,75043,697¥

325,808441,255(*)Loans and bills discounted to borrowers who are legally bankrupt, virtually bankrupt, and possibly
bankrupt amounting to ¥31,303 million are excluded from the table above as of March 31, 2013.

At March 31, 2014
Due from banks
Call loans and bills purchased
Available-for-sale securities
Nati onal government bonds
Local government bonds
Corporate bonds
Other
Loans and bills discounted (*)
Total

T housands of U.S. Dollars
Due in 1 year orDue from 1 to 3
Due from 3 to 5
less
years
years
$
1,183,732 $$
210,000
1,283,060
3,414,684
3,351,739
571,159
531,958
998,198
84,350347,519
185,521572,761
2,239,678
1,612,365
54,789295,527555,653
6,979,361
4,861,415
3,697,215$
9,656,154$
8,276,100$
7,048,954

33

At March 31, 2014
Due from banks
Call loans and bills purchased
Available-for-sale securities
Nati onal government bonds
Local government bonds
Corporate bonds
Other
Loans and bills discounted (*)
Total

Due from 5 to 7
years

$

$

T housands of U.S. Dollars
Due from 7 to 10
years
Due after 10 years$$

1,100,153
789,652
80,766215,029
14,705
1,953,854
3,054,008$

767,391
179,932

358,596

586,435
1,023
2,059,273
2,826,664

358,596$

3,744,500
4,103,096(*)Loans and bills discounted to borrowers who are legally bankrupt, virtually bankrupt, and possibly
bankrupt amounting to $275,104 thousand are excluded from the table above as of March 31,
2014.

(i) Scheduled repayment amount after the balance sheet date for borrowed money and otherinterest-bearing liabilities
Milli ons of Yen
Due in 1 year orDue from 1 to 3
Due from 3 to 5
less
years
years
At March 31, 2014
Deposits (*)¥
3,182,129 ¥
96,999¥12,627
Negotiable certificates of deposit
90,815350
Call money and bills sold53,466
Borrowed money (*)
12,462
63,220
1,248
Total
¥
3,338,874¥
160,570¥
13,875At March 31, 2014
Deposits (*)¥
Negotiable certificates of deposit
Call money and bills soldBorrowed money (*)
Total
¥

0

Milli ons of Yen
Due from 7 to 10
years
¥

6
6

¥

Due from 5 to 7
years

Due in 1 year or
less
At March 31, 2013
Deposits (*)¥
3,022,632
Negotiable certificates of deposit
68,837
Call money and bills sold
20,785
Borrowed money (*)
39,513Total¥
3,151,768

At March 31, 2013
Deposits (*)¥
Negotiable certificates of deposit
Call money and bills soldBorrowed money (*)
Total¥

Milli ons of Yen
Due from 1 to 3
years¥
110,454
30

¥

3,546
114,0310Milli ons of Yen
Due from 7 to 10
years
¥

6
6

¥

Due from 5 to 7
years

34

4
4

7
7

Due after 10 years¥¥

Due from 3 to 5
years¥
11,710¥1,110
12,821

Due after 10 years¥¥

T housands of U.S. Dollars
Due in 1 year orDue from 1 to 3
Due from 3 to 5
less
years
years
At March 31, 2014
Deposits (*)$
30,918,476 $
942,475$
122,692
Negotiable certificates of deposit
882,391
3,400
Call money and bills sold519,500
Borrowed money (*)
121,086
614,267
12,125
Total$
32,441,454$
1,560,144$
134,818At March 31, 2014
Deposits (*)$
Negotiable certificates of deposit
Call money and bills soldBorrowed money (*)
Total$

Due from 5 to 7
years

T housands of U.S. Dollars
Due from 7 to 10
years
Due after 10 years
1
$
$

66
67

39
39

$

$

(*) Regarding deposits, demand deposits are included in deposits with maturity dates of one year
or less. Please see Note 13 for annual maturities of borrowed money.

19. Derivative Instruments
The Bank has entered into various transactions involving derivative instruments in the normal
course of business to meet the financing needs of its customers for risk management, the Bank’s
ALM and as a source of income. These derivative instruments involve, elements of credit andmarket risk. The Bank is exposed to credit losses in the event of nonperformance bycounterparties. However, the Bank does not expect nonperformance by its counterparties because
the counterparties to these derivatives are limited to major international financial institutions.

(a) Derivative transactions to which hedge accounting is not applied at March 31, 2014 and 2013

No tional
principal orcontract
amounts
At March 31, 2014
Over-the-counter
Foreign exchange contracts:
Currency swaps
Foreign exchange forward contracts
Forward exchange contracts soldForward exchange contracts bought¥

10,904230
157

35

Milli ons of Yen
Contract
amount due
after oneyear
Fair value

Valuation
gains(losses)¥¥

10,904

¥

9
0
(1)

9
0
(1)

No tional
principal orcontract
amounts
At March 31, 2013
Over-the-counter
Foreign exchange contracts:
Currency swaps
Foreign exchange forward contracts
Forward exchange contracts soldForward exchange contracts bought

At March 31, 2014
Over-the-counter
Foreign exchange contracts:
Currency swaps
Foreign exchange forward contracts
Forward exchange contracts soldForward exchange contracts bought¥

27,935

Milli ons of Yen
Contract
amount due
after oneyear
Fair value

Valuation
gains(losses)¥¥

27,935

¥

174
157

29

29

(3)
4

(3)
4

T housands of U.S. Dollars
No tional
Contractprincipal oramount due
contract
after one
amounts
year
Fair value

Valuation
gains(losses)$

105,948
2,238
1,530

36

$

105,948

$

89
8
(10)

$

89
8
(10)

(b) Derivative transactions to which hedge accounting is applied at March 31, 2014 and 2013
Milli ons of Yen
Contract
Contract
amount due
amountafter one year

Hedged item
At March 31, 2014
Interest rate contracts:
Interest rate swaps receive floating and pay
FixedLoans and bills
discounted¥

Foreign currency
call loans¥

Loans and bills
discounted¥

Foreign currency
call loans¥

11,907 ¥

11,907¥24,007 ¥Loans and bills
discounted

37$

106,432

$

¥

(455)

Fair value¥

106,432(3)

Fair value

T housands of U.S. Dollars
Contract
Contract
amount due
amountafter one year

Hedged item
At March 31, 2014
Interest rate contracts:
Interest rate swaps receive floating and pay
Fixed

21,633 ¥(303)

Fair value

Milli ons of Yen
Contract
Contract
amount due
amountafter one year

Hedged item
At March 31, 2013
Foreign exchange:
Forward contracts sold¥Milli ons of Yen
Contract
Contract
amount due
amountafter one year

Hedged item
At March 31, 2013
Interest rate contracts:
Interest rate swaps receive floating and pay
Fixed

10,954

Milli ons of Yen
Contract
Contract
amount due
amountafter one year

Hedged item
At March 31, 2014
Foreign exchange:
Forward contracts sold10,954 ¥Fair value(3)

Fair value$(2,948)

T housands of U.S. Dollars
Contract
Contract
amount due
amountafter one year

Hedged item
At March 31, 2014
Foreign exchange:
Forward contracts sold

Foreign currency
call loans$

210,201$

Fair value

$

(32)

The below interest rate swaps that qualify for hedge accounting and meet specific matching criteria
are not remeasured at market value but the differential paid or received under the swap agreements
is recognized and included in interest expense or income. In addition, the fair value of suchinterest rate swaps is included in that of the hedged items in Note 18 (i.e., loans and bills
discounted).
Milli ons of Yen
Contract
Contract
amount due
Hedged item
amountafter one year
Fair value
At March 31, 2014
Interest rate contracts:
Interest rate swaps receive floating and pay Loans and bills
discounted
Fixed¥
36,246 ¥34,360 ¥Milli ons of Yen
Contract
Contract
amount due
amountafter one year

Hedged item
At March 31, 2013
Interest rate contracts:
Interest rate swaps receive floating and pay
FixedLoans and bills
discounted

40,585 ¥40,564¥

T housands of U.S. Dollars
Contract
Contract
amount due
amountafter one year

Hedged item
At March 31, 2014
Interest rate contracts:
Interest rate swaps receive floating and pay
Fixed

¥

Fair value

Loans and bills
discounted$

352,184 $Fair value

333,860 $Fair values are calculated based on the discounted cash flow method or other valuation method.

38

20. Income Taxes
The Bank and its subsidiaries are subject to Japanese national and local income taxes that, in theaggregate, resulted in normal effective statutory tax rates of approximately 37.7% for the years
ended March 31, 2014 and 2013.
The tax effects of temporary differences that give rise to a significant portion of deferred tax assets
and liabilities at March 31, 2014 and 2013, were as follows:
Thousands ofMillions of Yen
U.S. Dollars
2014
2013
2014
Deferred tax assets:
Allowance for doubtful accounts¥
11,302¥
10,194$
109,820
Provision for retirement benefits
396
Liability for retirement benefits
529
5,140
Provision for directors’ and audit &supervisory board members’
retirement benefits
229
307
2,227
Provision for reimbursement ofdeposits
159
217
1,552
Depreciation
279
321
2,712
Write-downs of investment securities
1,155
1,114
11,223
Unrealized losses onavailable-for-sale securities
289
352
2,808
Losses on impairment of fixed assets
2,216
2,399
21,531
Other
2,021
2,200
19,645Less, valuation allowance(3,699)(3,897)(35,943)
Subtotal
14,482
13,606
140,719
Deferred tax liabilities:
Unrealized gains on available-for-salesecurities(16,996)(19,145)(165,141)
Asset for retirement benefits(1,268)(12,328)
Other
(244)
(2,159)(2,372)
Subtotal(18,509)(21,305)(179,842)
Net deferred tax assets (liabilities)¥(4,026)¥(7,698)$(39,122)
A reconciliation of the differences between the Japanese statutory effective tax rate and the actual
effective tax rate on pretax income reflected in the accompanying consolidated statement of income
for the year ended March 31, 2014, is as follows:
Per centage ofpretax income
2014Japanese statutory effective tax rate
37.7%
Increase (decrease) due to:
Nondeductible expenses
0.7
Nontaxable income(2.4)
Effect of tax rate reduction
1.1
Resident tax per capital levy
0.3
Increase in valuation allowance
0.1
Gain on negative goodwill
(3.3)
Other
1.0
Actual effective income tax rate
35.2
%

39

A reconciliation between the normal effective statutory tax rate for the year ended March 31, 2013,
and the actual effective tax rate reflected in the accompanying consolidated statement of income
was not required under Japanese accounting standards due to immaterial differences.
New tax reform laws enacted in 2014 in Japan changed the normal effective statutory tax rate forthe fiscal year beginning on or after April 1, 2014, from approximately 37.7% to 35.3%. The
effect of this change was to decrease deferred tax assets in the consolidated balance sheet as ofMarch 31, 2014, by ¥180 million ($1,750 thousand), to increase income taxes deferred in the
consolidated statement of income for the year then ended by the same amount.

21. Other Comprehensive Income
The components of other comprehensive income for the years ended March 31, 2014 and 2013, wereas follows:
Thousands ofMillions of Yen
U.S. Dollars
2014
2013
2014
Unrealized gains (losses) on available-for-salesecurities
Gains (losses) arising during the year¥
(2,705)¥25,161$ (26,291)
Reclassification adjustments to profit or loss
(3,206)(1,276)(31,156)
Amount before income tax effect(5,912)
23,884(57,447)
Income tax effect2,086(8,244)
20,271
Total¥(3,826)¥
15,640$ (37,175)
Deferred gains (losses) on derivatives under hedge
accounting
Losses arising during the year
¥
(10)
¥
(74)
$
(99)
Reclassification adjustments to profit or loss
162
174
1,583
Amount before income tax effect
152
100
1,483
Income tax effect
(53)
(35)
(523)
Total
¥
98
¥
65
$
960
Total other comprehensive income¥(3,727)¥
15,705$36,215

22. Per-Share Information
Net income per share, as presented in the consolidated statement of income, is based on theweighted-average number of common shares outstanding during each year. The weightedaverage number of common shares outstanding for the years ended March 31, 2014 and 2013, was
209,853 thousand and 209,882 thousand, respectively.

23. Subsequent EventAppropriation of retained earnings
The shareholders of the Bank approved the following appropriations of retained earnings at theannual general shareholders’ meeting held on June 26, 2014:
Thousands of U.S.
Millions of Yen
Dollars
Cash dividends
¥
944
$
9,185

40

24.

SEGMENT INFORMATION

Under ASBJ Statement No. 17, “Accounting Standard for Segment Information Disclosures” and ASBJ Guidance No. 20, “Guidance on Accounting Standard for Segment Information Disclosures,” an entity is required to report financial
and descriptive information about its reportable segments. Reportable segments are operating segments or aggregations of operating segments that meet specified criteria. Operating segments are components of an entity about which
separate financial information is available and such information is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Generally, segment information is required
to be reported on the same basis as is used internally for evaluating operating segment performance and deciding how to allocate resources to operating segments.
1. Description of reportable segments
The Group’s reportable segments are those for which separate financial information is available and regular evaluation by the Board of Directors is being performed in order to decide how resources are allocated among the Group.
The Bank concentrates on the banking business, and also conducts other financial services business including leasing. Therefore, the Group’s reportable segments consist of Banking and Leasing.
Banking consists of deposit business, loan business, exchange business, and securities business.
Leasing consists of a leasing business.
2. Methods of measurement for the amounts of ordinary income, profit (loss), assets, and other items for each reportable segment
The accounting policies of each reportable segment are consistent with those disclosed in Note 2, “Summary of Significant Accounting Policies.”
3. Information about ordinary income, profit (loss), assets, and other items is as follows.

Millions of Yen
2014
Reportable segment
Banking

Leasing

Total

Other

Total

Reconciliations

Consolidated

Ordinary income:External customers¥

Intersegment

65,642¥

11,817¥77,459

¥

1,570

¥

79,030¥¥79,030

228

1,022

1,250

546

1,796

(1,796)65,87012,83978,7102,116

80,827(1,796)79,030

Segment profit

13,043830

13,874809

14,683(37)

14,646

Segment assets

3,868,173

33,801

3,901,974

14,644

3,916,619(26,654)

3,889,964

Total

Other:
Depreciation

¥

5,063

¥

74

¥

5,137

¥

22

¥

5,160

¥

¥

5,160

Interest income and dividends

46,91536

46,952

135

47,087(146)

46,941

Interest expenses

2,242

163

2,405

5

2,410

(232)

2,178

41

Millions of Yen
2013
Reportable segment
Banking

Leasing

Total

Other

Total

Reconciliations

Consolidated

Ordinary income:External customers¥

Intersegment

65,000¥11,754¥76,754

¥

1,608

¥

78,362¥¥78,362

233

1,185

1,418

535

1,954

(1,954)

65,233

12,94078,1732,143

80,317(1,954)78,362

Segment profit

12,461890

13,352813

14,166(39)

14,126

Segment assets

3,647,465

29,9693,677,435

14,137

3,691,573(24,768)

3,666,804

Total

Other:
Depreciation

¥

5,264

¥

212

¥

5,477

¥

17

¥

5,494

¥

¥

5,494

Interest income and dividends

48,05436

48,091

158

48,250(154)

48,095Interest expenses

2,295

187

2,482

3

2,486

(242)

2,244

Reconciliations

Consolidated

Thousands of U.S. Dollars
2014
Reportable segment
Banking

Leasing

Total

Other

Total

Ordinary income:External customers$

Intersegment

637,802$

114,820$752,623$

15,259$767,882$$

767,882

2,218

9,930

12,1495,305

17,455(17,455)

640,021

124,751

764,772

20,565785,338(17,455)

767,882

Segment profit

126,737

8,070

134,808

7,862

142,670(361)

142,309

Segment assets

37,584,275

328,420

37,912,696

142,292

38,054,988(258,986)

37,796,002

Total

Other:
Depreciation$

49,193726$$

49,920$220$

50,140$$50,140Interest income and dividends

455,848356

456,204

1,314

457,518(1,422)456,096

Interest expenses

21,787

1,585

23,37351

23,425(2,256)21,169Note: 1. The “Other” segment contains business that is not included in these reportable segments, such as guarantee business and credit card business.
2. Reconciliations were eliminations of intersegment transactions.

3. Segment profit represents profit which is deducted for certain special income and loss from income before income taxes and minority interests in the accompanying consolidated statement of income.

42

Related Information for the years ended March 31, 2014 and 2013
Segment information by services
Millions of Yen
2014
Securities
investment
businessLoanbusiness
Ordinary income fromexternal customers¥

36,919¥

Leasingbusiness

15,396¥

11,629Other¥

15,084

Total¥

79,030Millions of Yen
2013
Securities
investment
businessLoanbusiness
Ordinary income fromexternal customers¥

37,854¥

Leasingbusiness

14,510¥

11,639Other¥

14,358

Total¥

78,362Thousands of U.S. Dollars
2014
Securities
investment
businessLoanbusiness
Ordinary income fromexternal customers$

358,721$

Leasingbusiness

149,597$43

112,999

Other$

146,564

Total$

767,882