Integrated Report

Year ended March 31,2020

The Hyakujushi Bank, Ltd.

Strategy for value co-creation

Hyakujushi Group’s Value Creation Process
Capital to be utilized

Business model

Value to be provided

Corporate Vision

Financial capital• Sound financial and earnings bases
solid deposit base centered on• Aindividuals• Advanced risk management

Local communities• Revitalization of local economy• Enhancement of local attractions• Development of local industry

New Medium-Term Management Plan (April 2020 to March 2023)
Try

Mirai (Future)!
Corporate customers

Human capital

feasibility evaluation with• Businessaccumulated expertisevariety of solution methods• AComprehensive
financial functions• provided as a group(enhancement of corporate value)• Business continuity and revitalization• Solid relationship of trust

Social capitalIntellectual capital• Growth of customers-Taking on the challenge of co-creating a sustainable future
where stakeholders can live their lives with a smile-

set of expert human resources• Diverse
participation and advancement• Women’s
in the workplace
human resources develop• Extensive
ment system

and well-established network• Historicof branches
high transaction share in local• AKagawaPrefecture.
• Strong alliances with other banks

VisionCreationof commonvalue withcustomers
andcommunities

Transformation
to a general
consultinggroup1
See p.8 for details

2

Developmentof human
resources
Hyakujushi Bank
with highMedium-Term
Management Plan market value

Key Strategies

Structural reforms
leading to the future

See p.9 for details

3

Generalconsulting
group that
Establishment co-createsof athe futurecompetitiveof customadvantage
ers andcommunities

Retail customers• Highly convenient life
• Stable asset formation• Safe and extensive life plans
Officers and employees• Creating opportunities
for everyone• Rewarding workplace• Improvement of employee satisfaction

See p.9 for details

Realization of asustainable
society(Sustainable future
where all stakeholders
can live their lives witha smile)Shareholders

Natural capital• Stable profit returns• Medium- to long-term enhancement of corporate

environment with few natural• Regional
disasters• Warm and rich natural environment• Abundant tourism resources

value• Information disclosure and extensive communication

Code of Conduct

Enhancement of corporate value and sustainability
External
environment
Social issues
01

Th e Hyakujushi Bank, Ltd .

Impact of COVID-19

Shrinking population, declining birthrate and aging population

Prolonged low interest rate environment

Changes in consumer awareness and behaviors

Advancement of ICT

Global warming, climate change Work-life balance

Regional revitalization

Reinforcement of corporate governanceDiversity

Integrated Rep ort 202002

Strategy for value co-creation

Message from the President
working-age population in the next 30 years due to shrinking

operations of branches and the Head Office, and reducing

population, combined with declining birthrate and aging popu-

costs. However, with regard to management targets (consoli-

lation, and that this will have a large impact on the growth of

dated profit, consolidated ROE, and consolidated capital ratio),the local economy in the medium- to long-term. We must

profits were lower than planned mainly due to an increase inincrease the Bank’s sustainability by responding appropriately

credit costs resulting from the rise in the number of bankrupt-

to these changes in the environment.

cies nationwide, in addition to sluggish income from market
investments caused by changes in the market environment.
Consequently, we fell short of the final year targets, leaving

Response to COVID-19

some issues to be addressed going forward.

Furthermore, there has been a significant impact from the

Final results against management targets

stagnation of production and consumption activities due to the
spread of COVID-19 since the beginning of the year, and theManagement targets

number of enquiries from customers regarding their cash flow
situations is increasing on a daily basis. It is the mission andPeriod of the previous medium-term management plan
FY 2017

FY 2018

FY 2019¥5.5 billion ¥7.7 billion

Consolidated ¥9.5 billion¥9.6 billion
profitor higher¥10.2
billionEfficiency

Consolidated
3.0%
ROE
or higher

3.56%

3.58%

1.92%

2.87%

Soundness

Consolidated
9.5%
capital ratio or higher

9.53%

9.42%

9.04%

9.17%

customers are facing difficult situations. To meet the needs ofour customers, we support their cash flow situations by offer-

FY 2016

Profitability

purpose of the Bank as a regional financial institution to provide support at the very time when our communities andFinal year
targets

ing our unique products, “114 emergency special loans (inresponse to COVID-19)” and “deferment-type small ABL
loans,” in addition, we will also working to support our customers’ core business after the recovery from COVID-19.

The new medium-term management plan “TryI am deeply grateful for your continued wholehearted support for the Hyakujushi Bank.
The Bank commenced a new medium-term management plan “Tryperiod from April 2020 to March 2023. By providing new value in our unique way, we aim to become aJuly, 2020
Yujiro Ayada, President

Accomplishments and challenges ofthe previous medium-term
management plan

formulated and launched in the current fiscal year in response

Under the previous medium-term management plan “Challenge

communities, while trying to co-create a future where not

Value Plus” (plan period: April 2017 to March 2020), which
focused on “three challenges” to strengthen sales capabilities and“five pluses” to build the business foundation, the Bank aimed
at transforming itself to a business model in which it wouldgrow alongside its communities, by providing customers andForeword

to such business environment and challenges. Under the plan,
the Hyakujushi Group will make every possible effort as a“local platformer*1” to solve the issues faced by customers andonly customers and communities but also all other stakeholders, such as shareholders, officers and employees can live theirlives with a smile.
*1 Local platformer
A local platformer goes beyond the realm of finance to solve various issues faced by local

communities with full support that goes beyond the realm ofcustomers by providing them with the Hyakujushi Group’s consulting functions andfinance. In terms of “three challenges,” we were able to achieve

platforms, such as the information network.

I sincerely thank you for your continued patronage for theExternal environment and understanding of the current situation

Hyakujushi Bank.

The environment surrounding the Bank is becoming harsher

of local branding, consulting sales through business feasibility

due to the continued low interest rate environment, intensify-

evaluation, and provision of products and services tailored toing competition resulting from business integration of otherthe life stage of each customer. In terms of “five pluses,” weneighboring banks, and the entry of companies from otherwere able to carry out our initiatives largely as planned, ex-industries. In addition, it is expected that Kagawa Prefecture,

panding the functions of the smartphone app, reorganizing thewhere the Bank is based, will see a roughly 30% fall in its

network of bank branches in Kagawa Prefecture, reforming the

Since its establishment in 1878, the Bank has grown together
with its customers and communities as a local leading bank,building up its foundation of today. I am deeply grateful to allof you as this would not have been possible without your warm
support.
03

Mirai(Future)!” (plan period: April 2020 to March 2023) was

Mirai (Future)!” which covers thegeneral consulting group that co-creates the future of customers and communities.

New medium-term management planTh e Hyakujushi Bank, Ltd .

some positive results in our strategies, such as the promotion

To that end, we formulated three key strategies: transformation to a general consulting group, development of humanresources with high market value, and structural reforms
leading to the future.

Integrated Rep ort 202004

Strategy for value co-creation

Message from the President
Transformation to a general consulting group

Corporate SA, LPA, and LPC system has started on a trial basis

Development of human resources with high market value

returns profits and value to communities, we strive to realize a

In terms of “transformation to a general consulting group,” wein some regions from this April, and it will be expanded gradu-

For “development of human resources with high market value,”future where all stakeholders can live their lives with a smile.

aim to create shared value with our customers and communi-

ally going forward.

the Bank strive to develop and secure specialized human re-

In April 2020, we also co-founded a regional trading compa-

ties by providing a one-stop service covering the entire process*2sources necessary to become a general consulting group. By

Towards the sustainable development of local communities

from the identification of issues and provision of solutions to

ny SHIKOKU BRAND inc. through the Shikoku Alliance . The

systematically developing human resources, increasing mid-ca-

the supply of funds. To achieve this, we will first review our

new company engages in branding and promotion of Shikoku

reer hiring, creating rewarding workplaces and providing

sales structure.

resources, as well as the development of sales channels fordiverse career paths, we will build a highly sustainable organiza-

those resources. We intend to promote Shikoku’s attractions

tion that constantly produces human resources with highIn addition to solving social issues through the new medi-with high problem-solving skills will be assigned to major

both in Japan and overseas to raise their recognition and create

market value.

um-term management plan, the Group is stepping up its

locations in Kagawa Prefecture as Corporate SAs (Corporate

new added value.

For corporate customers, bank staff from the Head Officeefforts to protect the environment and respect humanrights. In April 2020, the Bank compiled and announced the

Solution Advisors). Corporate SAs will support relationshipIn addition, in response to labor shortage, which has become

managers at branches and strengthen cooperation with thea social issue, the Bank fully entered the recruiting business inIn “structural reforms leading to the future,” the Bank will reorga-

standards of conduct for its officers and employees as the

Head Office to swiftly and accurately solve customers’ worries

April 2020 in collaboration with its group company

nize the network of bank branches, reduce administrative work-

Hyakujushi Bank’s Environmental Policy and the Hyakujushi

and problems. For retail customers, bank staff who can handle

Hyakujushi Jinzai Center Corporation. In this way and throughloads, and curb costs as part of its efforts to realize low-cost

Bank’s Human Rights Policy. We will continue to carry out

all types of retail operations will be assigned to branches asother means, the Hyakujushi Group will work as one to resolve

management. At the same time, we aim to maintain and secure

responsible corporate activities and contribute to the

LPAs (Life Plan Advisors) and will help customers realize their

the issues for customers and local communities.

the profit level of the Group by increasing fee income, imple-

sustainable development of our communities.

life plans. Furthermore, we will assign bank staff from theHead Office with specialized knowledge to regional locations
as LPCs (Life Plan Consultants) and have them cooperate with

Structural reforms leading to the future

menting structured finance, and strengthening market invest-*2 Shikoku Alliance
A comprehensive partnership agreement signed by four first-tier regional banks in Shikoku inments.

November 2016 with the aim of revitalizing Shikoku, while maintaining management independence.

LPAs, thereby improving the quality of solution proposals. The

Management targets of the new medium-term management plan
While these strategies will be steadily implemented, we presume

New Medium-Term Management Plan (April 2020 to March 2023)

that the impact of COVID-19, which has been spreading since the

Hyakujushi Bank’s major themes of SDGS

Plan title

Mirai (Future)!

Formulation of environmental policy
Formulation of human rights policy

Issues faced bycustomers andcommunities
Solve

Hyakujushi GroupExter
nal cooperation

Execution of the medium-term
management plan’s strategies

Improvement of market
value (ESG investment)

G

Proper disclosure(communication)

profit of ¥6.0 billion or higher, consolidated capital ratio of 9.0%

“General consulting group”
that co-creates the future of customers and communities
through providing new value in the Bank’s own unique way

or higher, and OHR (non-consolidated basis) of 75% or less for

Basic policy

Creation of sharedvalue with customers
and communities

Profitability

Establishment of acompetitive
advantage

Officers &employees

Improvement ofcustomer royalty

1. Transformation to a general consulting group
2. Development of human resources with high market value
3. Structural reforms leading to the future

Indicators

FY 2019(actual)Targets(final year)

Consolidated profit¥7.7 billion¥6.0 billion
or higher

9.17%

9.0%
or higher

73.78%

75%
or less

Local
communities
Customers

Conclusion
Amid drastic changes in the domestic and overseas environ-Soundness

Efficiency

Key strategies

Shareholders
Investors

the final year of the plan (FY 2022).
Type

Local
communities

Solving social issues

new medium-term management plan as follows: consolidated
VisionCo-create a future where stakeholders can live their lives with a smile

S

Environmental
conservation
Reduction ofenvironmental impact

on certain assumptions and in consideration of the long-term

Try

Customers

E

Hyakujushi Group

beginning of the year, will last for a long term. Accordingly, based
impact of COVID-19, we have set the management targets of the

Shareholders

Three initiatives (Hyakujushi’s ESG)

Consolidated capital ratio

Non-consolidated OHR(gross operating profit basis)

ment, we must adapt to the environment and change ourselves
if we are to constantly meet the expectations of our customers,
communities, and shareholders. The Bank will continue to takeon challenges without fear of changing itself so that it can over-

Unprecedented severe conditions are likely to continue
during the three-year period of the plan, but we hope toovercome this difficult situation with our customers and local
communities. By creating a virtuous cycle in which the Bank

come various difficulties, grow further and present a better
version of itself to the next generation.
I sincerely thank you and humbly request your continued
support and patronage of the Bank.

grows in line with the development of local communities, and05

Th e Hyakujushi Bank, Ltd .

Integrated Rep ort 202006

Strategy for value co-creation

New Medium-Term
Management Plan
While a harsh environment continues for regional financial institutions, the Bank commenced a new medium-term management plan
“Try

Mirai (Future)!” (plan period: April 2020 to March 2023).

Under this medium-term management plan, the Hyakujushi Group strives to create shared value with its customers and local
communities by going beyond the realm of finance to solve various issues that face the customers and communities as a “local platformer” and establish a competitive advantage by improving operational efficiency and strategically allocating human resources.

Ensuring customer-oriented business operation

Entry into the management consulting business

Building systems to strengthen solutions

Contributing to the development of local industryG

Recruiting business
Regional trading company

Improvementof sustainability

Compliance

Risk management

BCP

ChannelreformICT strategy

Capital policy

Advancement of asset management and asset succession
proposals

Assignment of staff withexpertise in each field,
human resources development

External
cooperation

Advancementof proposals

Shift to a life plan-based retail sales system

Advancementof proposals

Branches

Supportstructure

Staff
dispatchIn-house
production

Corporate SAs

LPAs(Corporate Solution Advisors)(Life Plan Advisors)

Specialize in solutions sales

Assets custodian business

Personal loan businessOne-stop shop for solution proposals basedon life plans

Assignment to major locations

Development of staff in charge of each location++

Enhancement of businessfeasibility evaluation

Creation of business hours

Outsourcing of specialized
consulting services in thefields where the Bank is
not able to offer services

LPCs(Life Plan Consultants)

Appointment of specialist
staff with expertise in
assets custodian sales

Reinforcement of solutions sales throughthe assignment of dedicated staff withadvanced skills

External experts

Head Office(Assets custodian department)

Provide support
as required

PB Team(Private Banking Team)A specialized team thatmakes advanced proposals
on asset utilization andsuccession work.
Concentrationof administrative work

Reductionof administrative
burdenHead Office(Personal loan department)

Investors

Hyakujushi Bank

Development of human resources with high market value
Structural reforms leading to the futureManagementfoundation

Local
governments

Establishment of acompetitive advantage

Transformation to a general consulting groupKey
strategies

Proper disclosure(communication)

Market investment strategy

Creation of shared value
with customers andcommunities

Retail sales strategy

Basic
policyUnderstanding customer needs and strengthening proposal capabilities by assigning Corporate SAs

Specializedorganizations

Consulting business

Securing various points of contact with retail customers

Head Office(Corporate sales
department)

Localcommunities

ICT

Solving issues through the enhancement of businessfeasibility evaluation

Other financial
institutions

Alliances

Issues of customers
and communities

Retail customers

Entry into the management consulting business

Customers

Hyakujushi Group

Code of Ethics,Environmental Policy,Human Rights Policy

Corporate Vision

Real estate business

Guarantee services

Employees

Bank

Securities operations

Shareholders

Leasing

Dialogue and governance

Card

Finance

Solving social issues

Non-financeS

Environmental
conservation
Reduction of environmental
impactCorporate sales strategy

E

Code of Conduct

1 Transformation to a general consulting group

Corporate customers

Plan diagram

SDGs

Key strategy

RAF (Risk Appetite Framework)

Local communities
Management targets (final year)
Profitability(1) Consolidated profit¥

6.0

Strengthening initiatives for ship finance

Expansion of local resources
Soundnessbillion or higher(2) Consolidated capital ratio

9.0% or higher

Efficiency(3) OHR (non-consolidated)

Exploration of local resources% or lessExploration of new attractions andresources that have not yet beenspotted in communities

75

Branding (value increase)

Nationwide expansion

T O P I C SCreation of Ship Financing Office
Provision of consulting services toimprove the value of discoveredresources

Nationwide promotion of local
resources through sales channel
development and promotional support(April 2020)
We will further strengthen our provision of financing
and other types of support to customers in themaritime industry.

(1) Consolidated profit is profit attributable to owners of parent. (2) Consolidated capital ratio is consolidated core capital ratio based on Basel III that factors in transitional arrangements.
(3) OHR (non-consolidated basis) = Overhead costs / Gross operating profits* The management targets are formulated based on certain assumptions and factor in the impact of COVID-19.

07

Th e Hyakujushi Bank, Ltd .

Integrated Rep ort 202008

Strategy for value co-creation

Strategy for value co-creation

New Medium-Term
Management Plan

Hyakujushi Group’s Sustainability
The Hyakujushi Bank’s SDGs Declaration

2 Development of human resources with high market value

Key strategy

Development of professional human resources

Creation of rewarding workplaces and providing diverse career paths

Strengthen human resources development

Improvement of working environments and enhanced careerdevelopment

Recruitment of external human resources

The Hyakujushi Bank strives to create a sustainable society by linking the SDGs advocated by the UN to
its corporate actions with the aim of realizing its Corporate Vision to “prosper together with customers
and communities.”

Review of the branch awarding system
Creation ofdiverse roles

Securing professional
human resources
Concentrated
development

Major themes

Selection ofhuman resources

Improvementof employee
satisfaction (ES)Internal training

External training

Creation of local value

Review of
the human resources
systemActive role at the Head Office

The Bank’s initiatives

Support for startups
Industrial development
Support for tourism promotion

We will create local value by unearthing and promoting local attractions.

Cooperation agreements with local public entities

3 Structural reforms leading to the future

Key strategy

Channel reform to support sales strategies
Reorganization of the branch network

Developing the local economy

Site functions

Point for cash
Point for branch administration and transactions
Point for consultation

Standard
type

Highfunction
typeLight-duty
type

ATM

Functions complemented
through mutual coordination

Point for community

High-function type

Strategic sites with high-level consulting functions

Light-duty
type

Low-cost branches with limited
services and staff (Quick Square)

Expansion of non-face-to-face channels

114 BANKBANK
Portal app

Passbook app

Online contract for housing loans

114
SmartLife
Web

Expansion offunctionsWebsite for employees of corporate customers

App to open investment trust accounts
Expansion of functions of the corporate intranet banking

Human resources creation through operational process reforms

Execution of thorough low-cost management

Reduction of branch administrative work

Reduction of non-personnel expenses through costmanagement

Reinforcement of sales force by relocating humanresources to sales departments

Reinforcement of earning power at branches and the Head Office
Promotion of financial consulting utilizing IT
Loan Examination with the use of AI screening

Staff optimization through personnel control

Social issues
to be solved

We will create a virtuous cycle of mutual growthby going beyond the realm of finance to provide full
support to our customers and the communities.

Supporting the happiness of
local residents
We will support people’s happy lives by assisting
their asset formation and revitalizing the region
through social contribution.

Creating opportunities
for everyone
We will embrace diverse ways of thinking and provide opportunities for our officers, employees, and local residents
to take an active role in communities and workplaces.

Business feasibility evaluation
Business matching
Support for M&A andbusiness succession
Support for overseas
business

Support for management
improvement and business
revitalization
Support in the agriculture
field
Support in the medical andnursing care field

Support for asset formation

Environmental business

Smartphone apps

Financial education

Internet banking

Social contribution

Promotion of culture, art,and sports
Environmental conservation

Human resources development

Corporate governance

Promotion of women’s
participation and advancementin the workplace

Compliance structure
Risk management structure

Workstyle innovation

Enhancement of market investment

09

Th e Hyakujushi Bank, Ltd .

Integrated Rep ort 202010

Strategy for value co-creation

Developing
the local economy

Creating local value

Initiatives for regional revitalization
Support for startups

Initiatives for corporate customers

Number of cases of the Bank’s involvement in startups or second startups

To solve various issues faced by customers at the time of startups and second
startups, we assist clients with creating management plans and developing sales
channels. We also hold startup(Cases)Number of cases of involvement in startups
Number of cases of involvement in second startups

22

45

Growth support through business feasibility evaluation
The Bank provides support for corporate customers’ growth by offering solutions for their management challenges and needs, based on evaluations of their business feasibility*.

25* Evaluation of business feasibility by gaining an understanding of the business through dialogue with the customer, and by analyzing from financial and industrial perspectives.

support seminars in collaboration

Process of growth support

with each municipality and chamber of commerce.

274

273

FY 2017

FY 2018

311
Dialogue with customers

Sharing business feasibility
evaluation and management
issues with customers

Business feasibility evaluation

Solution provision

Growth of customers

FY 2019

Number of customers for which business feasibility evaluation was performed

Establishment of a regional trading company SHIKOKU BRAND inc.

Number of recipients of proposals on management improvement(Recipients of evaluation)(Recipients of proposals)

3,849

2,028

1,983

3,167

In April 2020, we founded SHIKOKU BRAND inc., a regional trading company

2,349

Number of cases of solutions implemented(Number of cases of solutions implemented)

2,557
1,589

1,281

jointly invested by the four Shikoku Alliance banks. This is Japan’s first regional

686

trading company established by multiple financial institutions. The trading company
will engage in integrated operations from product development utilizing on

FY 2017

FY 2018

FY 2019

FY 2017

FY 2018

FY 2019

FY 2017

FY 2018

FY 2019

regional resources to branding and development of sales channels.

Support for business succession and M&A
Case Study of Branding Business at the
Hyakujushi Bank

The Bank assisted a client in the food manufacturing industry hoping to raise its name recognition with the development of

To address customers’ successor issues, the Bank leverages its extensive network to

new products and marketing activities using “Social Networking Service”. The product we helped develop was awarded a

support the succession of treasury shares and offer support and consulting for businessprize at the prefectural product contest, and led to improvement of the company’s name recognition.

succession such as M&A. We also help business succession through the Shikoku Alliance
Regional Revitalization Fund, which is run by Shikoku Alliance Capital Co., Ltd. jointly

Number of cases of consultation for business succession and M&A(Cases)Number of cases of consultation for M&A
Number of cases of consultation for business succession

680

Main initiatives (FY 2019)
Teshimaworkshops” featuring the industry and tourism resources of Kagawa
Prefecture.The Setouchi Monitor Girls shed light on local attractions fromfemale perspectives and disseminate information on them.

11

Th e Hyakujushi Bank, Ltd .

899

931

FY 2018

FY 2019

Past activities of the Setouchi Monitor Girls

Female staff members from the Bank and the Kagawa Prefecture
government formed the “Setouchi Monitor Girls” and held “monitoring

910

745

founded by the four Shikoku Alliance banks.

Support for tourism promotion

782

Tadotsu Town

Sanuki City

Response to COVID-19

FY 2017

Publication of the Teshima Sightseeing Leaflet in multiple languages(four languages including Japanese) (April 2019)

We extend financial support to our customers who have been affected by the spread of COVID-19.We have set up consultation desks at all of our branches to

JR Shikoku commercialized sightseeing plans developed throughworkshops as travel packages(Tadotsu Town: June 2019, Sanuki City: February 2020)

The Bank launched “114 emergency special loans (in response to COVID-19)” in February 2020 and “deferment-type small ABL loans” in March 2020 torespond swiftly and flexibly to various requests from customers, such as new financing needs and amendment of repayment conditions.
support business funds of business operators.

Integrated Rep ort 202012

Supporting
the happiness of
local residents

Creating
opportunities foreveryone

Initiatives for retail customers

Human rights initiatives

Support for customers’ asset formation

We support customers’ asset formation by offering customer-centric proposals focusing on long-term, diversified and asset accumulation.
The Bank also holds seminars and consultation sessions for employees of our corporate customers to offer opportunities for them to think about
their own life plans.
Cumulative number of NISA, iDeCo, and installment investment trust contracts(Contracts)

NISA

iDeCo

Installment investment trusts

67,76860,11948,023
7,424(Sessions)

単位：億円

993

20,543

14,221
13,306

14,59630,24932,592

32,629FY 2017

FY 2018

FY 2019

10,350

Number of consultation sessions held on life planning

125

134

FY 2017

FY 2018

Hyakujushi Bank’s Human Rights Policy

Respecting human rights isessential to realizing a safe, secure,and prosperous society, andfulfilling the social responsibility is
an important management issue for
the Hyakujushi Bank as a memberof the local community.
We will respect human rights inall aspects of our corporate
activities, including recruitment
activities, and contribute to thecreation of a sustainable society as
a company trusted by society.

FY 2019

Environmental conservation initiatives

Respect for international norms
We will respect international norms regarding human rights, including the Universal Declaration of
Human Rights.
Elimination of discrimination
We will not discriminate or infringe human rights based on race, nationality, belief, religion, disability,
origin, gender, sexual orientation, gender identity, etc. in all of our corporate activities.
Creation of comfortable working environments
We will respect each person’s human rights and create comfortable working environments free of harassment.
Implementation Human rights education
We will provide education on human rights issues on a continuous basis in order to deepen our correctunderstanding and awareness of human rights.
Information disclosure and dialogue
We strive to improve the Bank’s initiatives for human rights through proactive information disclosureand dialogue with our stakeholders.

Hyakujushi Bank’s Environmental Policy

Protecting the abundant nature of
local areas is the mission of the
Hyakujushi Bank as a member ofthe local community, and is also an
important management issue toimprove its own corporate value.
The Bank will contribute to thecreation of a sustainable society by
reducing the environmental impact
of its corporate activities andsupporting customers who engage
in environmental conservation.

Reduction of environmental impact
We strive to reduce our environmental impact by implementing resource and energy conservation.
Promotion of environmental conservation activities
We will deepen our understanding of environmental issues, and each officer and employee will promote
environmental conservation activities both inside and outside the Bank.
Support for initiatives of our customers
We will support our customers’ environmental initiatives through providing eco-friendly products andservices.

Offering eco-friendly products
We offer a variety of products, including those with preferential interest rates, tosupport customers who seek to be eco-friendly.
Eco-friendly private placement bonds (Nickname: 114 Olive Bond)
Hyakujushi SDGs and environment support loans (Nickname: 114 SDGs Loan)
Hyakujushi renewable energy project support loans (abbreviation: 114 Energy Support)
Investment in sustainability bonds*
In August 2019, we invested in a sustainability bond issued by Japan Railway Construction, Transport and Technology Agency.

* Sustainability bonds are bonds that are issued only for projects that contribute to environmental and social
sustainability.

Th e Hyakujushi Bank, Ltd .

Cumulative underwriting amount of environmentally friendly private placement bonds(cumulative since FY 2007)

80 cases ¥11.9

billionElectricity consumption (FY 2019)
Head Office and Sanjo Operations Center

down

Promotion of women’s participation and advancement in the workplace
We are actively promoting female employees to managerial positions. The ratio of
female managers at the Bank was 24.0% at the end of March 2020, which exceeded
the national average ratio of 14.9%*.
Furthermore, Seeds Hanamomo, a group set up for promoting the active participation of women, leads the Bank’s efforts to create working environments where female
employees can work comfortably and play active roles.

Ratio of female managers (as of the end of March 2020)

24.0

%

* Source: The White Paper on Gender Equality 2019, the Cabinet OfficeInformation disclosure and dialogue
We strive to improve the Bank’s initiatives for environmental conservation through proactive information disclosure and dialogue with our stakeholders.

Support for initiatives of our customers

13

Promotion of diversity

Compliance with laws and regulations
We will comply with various environmental agreements and standards that the Bank endorses, inaddition to laws and regulations for environmental conservation.

47.51

%

* Compared to FY 2010

Improvement of working environments
The Bank announced “Health and Productivity Management Declaration” in order to drive initiatives formaintaining and improving the health of employees and their families.
In February 2020, we were recognized for two years in a row as a “Certified Health & Productivity
Management Outstanding Organization” under the large enterprise category in a program, which is led by the
Ministry of Economy, Trade and Industry and Nippon Kenko Kaigi to recognize outstanding enterprises engaging
in efforts for health and productivity management.
Establishment of in-house nursery school
We have an in-house nursery school Hyakujushi
Momokko Land as part of our efforts to create a stressfree working environment for employees raisingchildren.

Rate of childcare leave taken(FY 2019)

100%

Integrated Rep ort 202014

Management foundation underpinning growth

Corporate Governance
We are striving to improve our governance and compliance structures based on the recognition that such efforts are indispensable for the Bank’s sustainable growth and medium- to long-term enhancement of corporate value.

SystemInitiatives to strengthen governance and compliance systems
The Bank established the “Nomination and Remuneration Governance Committee,” which is an advisory body to the Board of Directors comprised of a majority of Outside Directors,
in order to strengthen the governance structure. This committee deliberates on the following: nomination of candidate Directors and dismissal of Directors; nomination and dismissalof Representative Directors; remuneration and other matters concerning Directors not serving as Audit and Supervisory Committee Members; matters concerning assessment of theeffectiveness of the Board of Directors; and other important matters in terms of governance and management. The Board of Directors is to respect the findings of the committee.
Furthermore, the Bank appointed a Chief Compliance Officer (CCO), who has the highest responsibility to centrally manage the overall compliance, in an aim to bolster thecompliance systems. In addition to conducting investigations on compliance and reporting the results to the Board of Directors, the CCO gives instructions for prompt improvement
and response in case of finding any compliance-related problem in measures and responses taken by each division.

Results of initiatives to strengthen governance
Before 2013

2014

2015

Appointment of one Outside Director

2016

Increase to two

2017

2018

Increase to four

2019
Increase to five

Number of Directors

15(including 7 Audit and Supervisory Committee Members)

Abolishment of the Advisor
SystemIntroduction of stock option program
Introduction of a performance-linked stock compensation system

Abolishment of the Retirement
Benefit System for Officers

Revision of proportions of fixed remuneration andvariable remuneration

Introduction of theexecutive officer system

Delegation of part of the decision-making authority of the Board of Directors for execution of business to the Executive Committee and other committees

Masakazu Toyoshima

Director and Managing Executive Officer

15

Th e Hyakujushi Bank, Ltd .

Director and Senior Managing Executive
Officer and CCO (Representative Director)

Executive Directors

Akihiko Fujimura

Director and Managing Executive Officer

Director and Senior Managing Executive
Officer (Representative Director)

Hiroyuki Kurokawa

Director and Managing Executive Officer

Aiming tofurtherstrengthen
governance

Revenue Management
Committee

Risk Management
Committee

Head Office and Branches

Board of Directors
Audit and Supervisory
Committee
Executive Committee
Nomination and Remuneration
Governance Committee(Voluntary committee)
Executive Officer System

Accounting Auditors

Kiichiro Oyama

Director and Managing Executive Officer

Director and Managing Executive Officer

Compliance Committee

Internal audit

Instruction

Accounts
audit

Auditing Division

Accounting Auditors

Overview

Auditing Division

Kazuhisa Anada

Executive Committee

Ernst & Young ShinNihon LLC

Introduction of third-party evaluations

Ryuji Nishikawa

Collaboration/
Reporting

Audit/Supervision

Accounting Auditors

Board of Directors and Audit and Supervisory Committee Members (as of July 1, 2020)

Ryohei Kagawa

Appointment/
Supervision/
Dismissal

Audit and Supervisory Committee

1 yearExpedited distribution of Board of Directors’ meeting agenda in advancePresident (Representative Director)

Audit/Supervision

Advisory body

ReportYes

Delegation of part of the decision-making authority for execution of important operations to the
President and Representative Director

Yujiro Ayada

Directors serving as Audit and Supervisory Committee Members

Board of Directors

Nomination and Remuneration Governance Committee

Appointment/Dismissal(2 years for Audit and Supervisory Committee Members)

Establishment of policy tofoster successors

Self-assessment of the Board of Directors and resolving of issues

Appointment/Dismissal

Representative Directors(One-third of Directors now Outside Directors)

Appointment of CCO

Other

Directors not serving as Audit and Supervisory Committee Members

5

Adoption of an Executive Officer System

Appointment of three Outside Audit& Supervisory Board Members

Appointment/Dismissal

Term of Office of Directors

Establishment of the Nomination andRemuneration Governance Committee

Establishment of the Governance Council

General Meeting of Shareholders

Company with Audit andSupervisory Committee

2020

Creation and revision of Corporate Governance Guidelines

Revision of theexecutive
remuneration system

Institutional Design

Number of (Independent) Outside Directors

Transition to a Company with Audit and Supervisory Committee

Reinforcement ofoversight as well as
audit andsupervisionCorporate Governance Framework (as of July 1, 2020)

The Board of Directors consists of 15 directors (including 5 outside directors), in principle, meets once a month, and also meets as necessary. In addition tomatters stipulated by laws and regulations or the articles of incorporation, the Board passes resolutions on important matters concerning management andoversees the execution of duties by directors and executive officers.
The Audit and Supervisory Committee consists of 7 Directors (including 5 outside directors) serving as Audit and Supervisory Committee Members. In
principle, the committee meets once a month, and occasionally as necessary to audit and supervise the execution of duties by directors.
The Executive Committee which consists of Managing Executive Officers and above, holds periodic or occasional meetings as a decision-making body forimportant matters related to business execution. In addition, the Bank has established a “Revenue Management Committee,” “Compliance Committee” and “RiskManagement Committee,” and set up a system to make consultation and decisions on more specialized matters.
The Nomination and Remuneration Governance Committee is chaired by an Outside Director appointed by mutual election. It is comprised of the President of
the Bank, the Chairman of the Audit and Supervisory Committee, and Outside Directors, and meets twice per year as a general rule. As an advisory body to theBoard of Directors, the committee deliberates on the following: nomination of candidate Directors and dismissal of Directors; nomination and dismissal ofRepresentative Directors; remuneration and other matters concerning Directors not serving as Audit and Supervisory Committee Members; and otherimportant matters in terms of governance and management. The Board of Directors is to respect the findings of the committee.
In order to expedite management decision-making and strengthen business execution functions, the Bank has introduced an Executive Officer System, and 22
executive officers (of whom seven serve concurrently as Directors) appointed by the Board of Directors, are responsible for business execution, with the aim ofachieving agile decision-making and speedy corporate management.
From the perspective of maintaining and improving the soundness and appropriateness of operations, the Auditing Division, which is an Outside department, also fulfills an internal
audit role and conducts inspections of assets and risks as needed, as well as internal audits of the Head Office and branches as well as subsidiaries etc. to determine whether theiroperations are conducted appropriately in accordance with laws and regulations and administrative procedures.The results of audits are reported toThe Board of Directors.
The Bank’s Accounting Auditors are Ernst & Young ShinNihon LLC. As Accounting Auditors, they conduct appropriate audits from an independent standpoint.

Tadahiko Tamura

Toshiya Yoritomi

Hideki Kuwashiro

Junichi Itoh

Yasuko Yamada

Nobuyuki Souda

Director (Audit and Supervisory
Committee Member)

Director (Audit and Supervisory
Committee Member) (Outside)

Director (Audit and Supervisory
Committee Member)

Director (Audit and Supervisory
Committee Member) (Outside)

Director (Audit and Supervisory
Committee Member) (Outside)

Michiyo Ihara

Director (Audit and Supervisory
Committee Member) (Outside)

Director (Audit and Supervisory
Committee Member) (Outside)
Integrated Rep ort 2020

16

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Consolidated Financial Highlights

Interview with an Outside Director

Thousands of
U.S. dollars(Note 1)Millions of yen
For the years ended or as of March 31

Michiyo Ihara

Please tell us how you evaluate the Bank’s
corporate governance system.

I view that the corporate governance structure has advanced in the five
years since I became an Outside Director. The concurrent holding of theposition as an Audit and Supervisory Committee Member as a result of thetransition to a Company with Audit and Supervisory Committee three
years ago has given me more opportunities to understand the actual
situation within the Bank, and I believe that the supervisory function of theBoard of Directors and the business execution function have beenstrengthened. The “Governance Structure Reconstruction Project” was set
up two years ago, and progress has been made in a wide variety of areas,from governance to compliance and corporate culture. In addition, theratio of Outside Directors reached one-third of all Directors last year, andthe Board of Directors welcomed another female Outside Director, raising
its objectivity and diversity. I will continue to fulfill my duties as an
Outside Director to further enhance the governance system, with a viewthat there is no panacea system.

Q2

How were you involved as an Outside Director informulating the new medium-term management
plan? Please also tell us how you evaluate the process.

Outside Directors with different backgrounds and expertise exchanged
frank questions and opinions from their respective positions about thepolicies, outlines, and drafts of the executive divisions. At the same time,
we had many discussions based on the common wish of “creating asustainable future for the Bank.” I view that the new medium-termbusiness plan formulated in this way precisely meets this intention. The
new medium-term management plan is based on the Sustainable
Development Goals (SDGs), and contains key strategies, such as thetransformation to a general consulting group that goes beyond the realmof finance. In recent years, the phrases “together with customers and17

Th e Hyakujushi Bank, Ltd .

2019

2018

2017

2016

2020

¥76,895
65,928
10,9663,518(266)¥77,292
68,477
8,814
3,565
(450)

¥80,890
65,775
15,114
3,720
807¥90,552
71,65518,897
5,145
3,050¥81,416
61,927
19,4893,878
2,879$706,560
605,788
100,762
32,325(2,444)

—
7,715

115
5,584

359
10,227

1,054
9,645

1,099
11,632—70,890AT YEAR-END:
Loans and bills discounted
Securities and trading account securities
Foreign exchange assets
Other assets
Total assets

2,847,316
1,259,734
9,793
837,097
4,953,946

2,825,869
1,046,956
5,750
1,017,044
4,895,624

2,833,526
1,031,025
6,997
905,507
4,777,061

2,776,554
1,444,834
3,684
701,461
4,926,538

2,747,341
1,415,126
8,649
548,540
4,719,661

26,162,969
11,575,245
89,984
7,691,785
45,520,040

Deposits and negotiable certificates ofdeposit
Foreign exchange liabilities
Other liabilities
Total liabilities

4,155,267
296
548,5444,704,115

4,044,109
352
564,580
4,609,048

4,053,820
241
419,385
4,473,454

4,160,361
145
472,896
4,633,409

4,113,555
206
323,862
4,437,631

38,181,264
2,719
5,040,374
43,224,432

37,32230,486173,374(1,999)239,184

37,32230,486167,615(2,041)
233,382

37,32230,486
164,359(2,096)230,072

37,322
26,332160,985(6,220)218,420

37,322
24,920
153,335(6,179)209,398

342,938
280,124
1,593,071(18,368)
2,197,776

15,04847,822

49,72249,012

54,256138,270(7,447)
7,976(4,971)(1,121)
8,540(2,109)

(39)
8,741
4,984

(1,231)
8,557
2,139

(7,806)
8,961(1,171)(68,427)
73,288(45,676)

10,60541—249,831¥4,953,946

53,131
61—
286,576¥4,895,624

63,408124
10,000303,606¥4,777,061

58,478142
16,087
293,129¥4,926,538

FOR THE YEAR:
Total income
Total expenses
Profit before income taxes
Income taxes-current
Income taxes-deferred
Profit attributable to non-controllinginterests
Profit attributable to owners of parent

Outside Director

Q1

2020

communities” and “reinforcement of consulting” are often used in the
management plans of regional financial institutions, but those samephrases used by the Bank are more meaningful and truly represent thetransformation of a business model, indicating a paradigm shift. In termsof “reinforcement of consulting” under the new medium-term
management plan, instead of just presenting knowledge and tools, I
would like everyone to think and contemplate together with customers
using the enhanced business feasibility evaluation and solve their issues
with unique ideas. I think that this is even more important in the harsheconomic environment caused by COVID-19. With great expectation
for the Bank’s efforts to “TRY” co-creating a “FUTURE” full of smiles
with its customers and communities, I will continue to be fully involvedin the progress of the efforts as an Outside Director with a neutral andobjective perspective.

Q3

What do you think are the key points in increasing
the Bank’s corporate value?

Perhaps the most important thing for the Bank to increase its corporate
value is to come face to face with local communities. The Bank’s
corporate value will be raised by working determinedly towards value
co-creation with local communities, as stated in the new medium-term
management plan, and contribution to the SDGs, on which the
management plan is based, while establishing a competitive advantage
unique to the Bank by earning the trust and empathy of local
communities. To achieve this, I would like each employee to work on
self-improvement with a passion for communities and to take on thechallenge of creating shared value as a professional. Moreover, I strongly
recognize the necessity of possessing a high sense of values and ethics
that earn the trust and empathy of customers and communities, as wellas the importance of governance structures. In that sense, I believe thatnone other than strengthening and enhancing the governance system andeffectively executing the new medium-term management plan areparamount to increasing the Bank’s corporate value.

Common stock
Capital surplus
Retained earnings
Treasury stock
Total stockholders’ equity
Net unrealized gains on other securities,
net of taxes
Net deferred losses on hedging
instruments, net of taxes
Revaluation reserve for landRemeasurements of defined benefit plans
Total accumulated other comprehensive
incomeShare subscription rights
Non-controlling interests
Total net assets
Total liabilities and net assets

54,23997,445201376
18,190—282,030
2,295,607¥4,719,661 $45,520,040

Notes: 1. Yen figures have been rounded, omitting numbers below the million mark, in accordance with the Japanese Commercial Code and the common accounting practice inJapan.
2. U.S. dollar amounts represent translations of Japanese yen at the exchange rate of ¥108.83 to US$1.00 on March 31, 2020.

Attention regarding forward-looking statements
The reader is advised that this report contains forward-looking statements, which are not statements of historical fact but constituteestimates or projections based on facts known to the Bank’s management as of the time of writing. Actual results may therefore differ
substantially from such statements.

Integrated Rep ort 2020

18

Risk Management
While the growing globalization of economic and financial affairs, together with the increasing sophisticationof financial technology, are creating new business opportunities for financial institutions, the risks faced byfinancial institutions are also becoming more varied and complex. We regard sophisticated risk management
techniques as being of primary importance for maintaining the soundness of a bank’s business, and we also recognize the importance of appropriate responses to changing customer needs. To achieve these goals, we makeevery effort to properly recognize, assess and manage risks.

Efforts toward Comprehensive Risk Management

Basic concepts of risk management

Risk Management Framework

Banking operations are facing a variety of risks, including
credit risk, market risk, liquidity risk, and operational risk.
We apply proper management to each risk depending on thecharacteristics of the operation and the risk. By ascertaining
risks in a comprehensive manner and comparing them to ourlevel of capital adequacy, we strive to achieve soundness andstability in our overall management and also to improve theefficiency of our operations: in other words, to practice integrated risk management.
Moreover, our basic policies on overall and specific risk
management are determined by the Board of Directors foreach financial year, and through implementation of measuresfor each category of risk in accordance with these policies, we
strive to achieve sophisticated risk management on an ongoingbasis.

We have defined the types of risks to manage in our risk
management rules, drawn up by the Board of Directors. We
then determine the category to which each risk belongs, anddecide the divisions responsible for managing each category,along with management rules. We have also established an
independent Risk Control Division to integrate risk management and carry out comprehensive management.
Additionally, through the establishment of the Risk Management Committee and subcommittees for each risk category as organizations under the Committee, andcross-sectional consultations on matters regarding risk management on a regular basis, we have put in place a highlysophisticated framework for the maintenance and management of risk.

Risk Management Framework
General Meeting of Shareholders

Audit and Supervisory Committee

Board of Directors
Risk Management Committee

Overall Risk
Control Divisions

Risks Subject to Management
Risk Classification

Outline of Risks

Division in Charge

Credit Risk

Risk of reduction in the value of assets or their loss altogether due to deteriorating financial
position at customers to which the Bank has granted credit

Market Risk

Risk of suffering loss due to volatility of financial assets and liabilities resulting from financial
market fluctuation

Risk Control DivisionInterest Rate Risk

Risk of reduced profits or total losses due to changes in interest rates arising because of discrepancies in interest rates on assets and liabilities, and in instrument maturities

Foreign Exchange Risk

Risk of suffering loss due to a decrease in the yen-converted amount of foreign currency denominated assets and liabilities due to exchange market fluctuations

Price Volatility Risk

Risk of a fall in asset values due to changes in the value of securities

Risk Control Division

Liquidity Risk

Risk of suffering loss from difficulty in procuring necessary funds or abnormally high interest raterequirements in securing funds, due to causes such as unforeseen outflows of funding or turmoil
in financial markets

Treasury and International
Division

Operational Risk

Risk of suffering loss due to inappropriate or malfunctioning internal processes, personnel conduct or IT systems, or external factors

Risk Control Division

Process Risk

Risk of suffering loss due to or by executives’ or employees’ failure to perform duties, or to
improper outside intervention

System Risk

Risk of suffering loss due to partial or complete system breakdown, malfunction, system deficiency, or improper use of the computer system

Legal Risk

Risk of losses due to the violation of laws and ordinances and contracts and signing of inappropriate contractual commitments

Compliance Management
Division

Human Resources Risk

Risk of losses caused by labor malpractice, workplace safety and environmental hygiene deficiencies and risk of employer liability in the event of illegal behavior by Bank employees

Personnel Division

Tangible Asset Risk

Risk of suffering loss due to damage to assets resulting from disaster or defective asset
management

General Administration
Division

Operations Supervision
Division

Practice of comprehensive risk management
We have introduced a framework for risk-adjusted capital
allocation in which the credit and market risks inherent inbanking operations are quantified; capital corresponding torisk amount (risk-adjusted capital) is allocated for each risk
category, and risks are controlled within risk-adjusted capital,
to earn revenues that correspond to the risks while keeping
overall risks within our management capacity. Under thisframework, based on the amount of equity capital (core capital) less the operational risk equivalent amount, risk-adjusted
capital to cover credit and market risk is allocated each halfyear and the changes in risk trends and the risk-return balance
are monitored, enabling ascertainment and management ofrisk-adjusted profitability and efficiency.

In addition, stress tests are conducted on a regular basis andthe impact that major changes in the economic and market
environments have on Bank profits and management stability
is monitored, and the management soundness is also assessed.

Definitions
Core capital:
Equity capital established under Basel III (domestic standard)
Operational risk equivalent amount:
Calculated using the Basic Indicator Approach
Return on risk-adjusted capital (RORAC):
Profit and loss indicator, arrived at by deducting expenses, deemed allowancecosts and capital costs from gross operating profits

Risk Control Division

Risk Audit System
Credit Risk Management
Subcommittee

Risk Management
DivisionsMarket Risk Management
Subcommittee

Operational Risk
Management Subcommittee

Credit Risk

Market Risk

Liquidity Risk

Operational Risk

Risk Control Division

Risk Control Division

Treasury andInternational Division

Risk Control Division

Each division, office, branch

Auditing
Division

In order to enhance and strengthen risk management, it isnecessary to verify whether the risk management system isfunctioning effectively. The Audit Department periodically
audits the operations of the Bank’s head office, subsidiaries
and branches to verify the adequacy of the risk management
system.

In this way, the Bank is committed to the development of arisk management system that will enable us to manage a variety of risks appropriately and to identify and address issues at
an early stage in order to gain the trust of our customers.

Subsidiaries

19

Th e Hyakujushi Bank, Ltd .

Integrated Rep ort 2020

20

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Consolidated Balance Sheets

Compliance System

2020

2019

Thousands of U.S. dollars(Note 1)2020

¥ 652,010
29,264
5—
1,259,729
2,847,316
9,793
24,48675,17537,319
5,897
3,351
5,995
20,996(17,396)¥4,953,946¥ 829,933
38,993153
4,748
1,046,803
2,825,869
5,750
20,89764,86138,645
6,665
4,526
883
23,684(16,791)¥4,895,624$ 5,991,087
268,896
45—
11,575,199
26,162,969
89,984
224,993
690,756
342,91054,18530,79155,085
192,924(159,845)$45,520,040

Basic Policy

Millions of yen
As of March 31

Regional financial institutions have highly public and social nature and bear the social mission of contributing to the development of asound regional economy. The Bank strives to practice thorough compliance as one of the top priorities in its management in order to
win trust from customers, local residents, and shareholders. Specifically, we ensure that each officer and employee execute their duties
in compliance with laws, regulations, and other rules, while they take actions based on high level of ethics.

Compliance System

Compliance System

At the Bank, under the oversight of CCO (Chief Compliance
Officer), who has the highest responsibility for compliance, theCompliance Management Division centrally manages all compliance-related issues. We also appoint a manager or a person in
charge at each department, office, and branch to put into practice and instill compliance, while aiming to spread complianceculture by checking the compliance status with a checklist andconducting study sessions. Furthermore, the Compliance Committee, chaired by the CCO, holds cross-organizational discussions to improve and upgrade the system.

Audit and Supervisory
Committee

Board of Directors

Compliance Committee(Chairman: CCO)

Executive Committee

Compliance Management Division
Instructions

Educationother relevant policies, and strives to enhance its anti-money
laundering system. Furthermore, we have in place an antimoney laundering policy and disclose it on our website.

The Hyakujushi Bank, Ltd. (hereinafter, “the Bank”) strongly
recognizes the importance of measures to prevent money
laundering and terrorism financing (hereinafter, “money
laundering”). In response to stern demands from the international community, the Bank regards the prevention ofmoney laundering as one of the important issues in its management strategy and other relevant policies, and will build
an internal control system as described below to conduct
the Bank’s business on that basis.

Customer management policy• To protect our customers from money laundering, theBank will determine and implement risk reduction measures to be taken and appropriately manage customers, bycreating a customer acceptance policy, as well as investigating and analyzing customer information and transaction
details.

Risk-based approach• The Bank will identify and assess its own risks pertaining tomoney laundering, and take measures commensurate withthe risks in order to effectively reduce them.

21

Th e Hyakujushi Bank, Ltd .

2019¥4,065,082
90,18534,782
112,699
305,608296
66,883
29
1,836
37
364
127
80
—
5,103
20,996
4,704,115¥3,953,878
90,231
43,374
142,634
269,620352
65,293
25
824
48
445
90
63
13,1205,360
23,6844,609,048$37,352,586
828,677
319,599
1,035,550
2,808,122
2,719
614,563266
16,870
339
3,344
1,166
735
—
46,889
192,924
43,224,432

37,32230,486173,374(1,999)239,184

37,32230,486167,615(2,041)
233,382

342,938
280,124
1,593,071(18,368)
2,197,776

15,048(7,447)
7,976(4,971)
10,60541249,831¥4,953,946

47,822(1,121)
8,540(2,109)53,131
61
286,576¥4,895,624

138,270(68,427)
73,288(45,676)
97,445376
2,295,607$45,520,040
U.S. dollars(Note 1)
2020

Millions of yen
As of March 31

In response to stern demands from the international community, the Bank regards the prevention of money laundering as
one of the important issues in its management strategy andOrganizational structure• The Bank will build a centralized management system bydesignating a person and a department responsible foranti-money laundering measures. In addition, we will
advance our measures across the organization through theactive involvement of management.

2020

Thousands of U.S. dollars(Note 1)
2020

Head Office, Branches

Anti-Money Laundering Policy

Operation policy• The Bank will comply with anti-money laundering laws
and regulations.

Assets:Cash and due from banks
Monetary claims bought
Trading account securities
Money held in trust (Note 7)
Securities (Notes 6, 10 and 11)
Loans and bills discounted (Notes 9 and 12)
Foreign exchange assets (Note 9)
Lease receivables and investments in leases
Other assets (Note 11)
Tangible fixed assets (Notes 14 and 15)
Intangible fixed assets
Net defined benefit asset
Deferred tax assets
Customers’ liabilities for acceptances and guarantees
Reserve for possible loan losses
Total assets

Notification of suspicious transactions• The Bank will build a system utilizing IT systems and othertools to accurately detect, monitor, and analyze suspicious
customers and transactions, while notifying authorities
without delay in case of suspected money laundering.
Management of correspondent banks• The Bank will collect information on correspondent banks,
evaluate it properly, and take appropriate measures according to risks. In addition, we will cut off relationships withfictitious banks that have no actual status.
Training for officers and employees• The Bank will provide appropriate and continuous training
to all officers and employees to deepen their professional
understanding of anti-money laundering as a wholeorganization.
Internal audit• The Bank’s internal audit department with an independent
standpoint, conducts regular audits on the status of the Bank’s
anti-money laundering and other preventive measures, andwill improve the Bank’s system based on the audits results.

Liabilities and net assets
Liabilities:
Deposits (Note 11)
Negotiable certificates of deposit
Call money and bills sold (Note 11)
Payables under securities lending transactions (Note 11)
Borrowed money (Notes 11 and 30)
Foreign exchange liabilities
Other liabilities
Reserve for bonuses for directors and corporate auditors
Net defined benefit liability
Reserve for retirement benefits for directors and corporate auditors
Reserve for claims on dormant accounts
Reserve for contingent liabilities
Reserve for stock-based compensation plan
Deferred tax liabilities
Deferred tax liability for land revaluation (Note 15)
Acceptance and guarantees
Total liabilities
Net assets :Stockholders’ equity:
Common stock
Capital surplus
Retained earnings
Treasury stock
Total stockholders’ equity
Accumulated other comprehensive income:Net unrealized gains on available-for-sale securities, net of taxes
Net deferred losses on hedging instruments, net of taxes
Revaluation reserve for land (Note 15)
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Share subscription rights
Total net assets
Total liabilities and net assets

Yen
As of March 31

2020

2019

Per share
Net assets¥8,461.18¥9,708.42$77.746

See accompanying notes to consolidated financial statements.

22

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Consolidated Statements of Income

Consolidated Statements of Changes in Net Assets
Millions of yen

For the years ended March 31

Income:Interest on loans and bills discounted
Interest and dividends on securities
Other interest income
Fees and commissions
Other operating income
Other income (Note 18)
Total income
Expenses:
Interest on deposits and negotiable certificates of deposit
Interest on call money and bills soldInterest on borrowed money
Other interest expenses
Fees and commissions
Other operating expenses
General and administrative expenses (Note 19)
Other expenses (Note 6 and 20)
Total expenses
Profit before income taxes
Income taxes :Current
Deferred
Subtotal
ProfitProfit attributable to non-controlling interests
Profit attributable to owners of parent

2019

2020

¥29,210
12,772604
11,374
8,965
13,96676,895¥31,153
12,757553
11,505
5,832
15,48577,292$268,400
117,357
5,549
104,51182,376
128,328
706,560

2,173
407
458
2,142
3,380
4,476
36,972
15,91665,928
10,966

2,521
780
94
3,928
3,328
5,674
37,625
14,521
68,477
8,814

19,966
3,739
4,208
19,682
31,057
41,128339,722
146,246
605,788
100,762

3,518
(266)
3,251
7,715
—
¥ 7,715

3,565
(450)
3,114
5,700
115
¥ 5,584

32,325(2,444)29,87270,890—$ 70,890
U.S. dollars(Note 1)
2020

Yen
For the years ended March 31

2020

2019

Per share
Basic earnings¥261.35¥189.25

Millions of yen
Stockholders’ equity

Thousands of U.S. dollars(Note 1)2020
For the years ended March 31
Balance as of March 31, 2018
Dividends from surplus
Profit attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Transfer from revaluation reserve for land
Net changes in items other than stockholders’equityTotal changes in items during the period
Balance as of March 31, 2019
Dividends from surplus
Profit attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Transfer from revaluation reserve for land
Net changes in items other than stockholders’equityTotal changes in items during the period
Balance as of March 31, 2020

For the years ended March 31
Balance as of March 31, 2018

Profit attributable to owners of parent

Transfer from revaluation reserve for land
Net changes in items other than stockholders’equityTotal changes in items during the period

Consolidated Statements of Comprehensive Income

Balance as of March 31, 2019

Total
stockholders’equity¥37,322¥30,486¥164,359¥(2,096)¥230,072

—
—
—
—
—

—
—
—
—
—

(2,512)
5,584
—
(16)
200

—
—
(8)
63
—

(2,512)
5,584
(8)
46
200

—

—

—

—

—

—
¥37,322—¥30,486

3,256¥167,615

54¥(2,041)

3,310¥233,382

—
—
—
—
—

—
—
—
—
—

(2,513)
7,715
—
(6)
564

—
—
(3)
45
—

(2,513)
7,715
(3)
38
564

—

—

—

—

—

—
¥37,322—¥30,486

5,758¥173,374

42¥(1,999)

5,801¥239,184

Net unrealized
gains onavailable-forsale securities,
net of taxes¥49,722

Millions of yen
Accumulated other comprehensive income
Total
Net deferred
accumulated
losses on
Remeasurements
otherhedging
Revaluationof defined benefit comprehensive
instruments,
reserve forplans
incomenet of taxes
land

¥

Share
subscription
rights

Noncontrollinginterests

Total net
assets(39)¥8,741¥4,984¥63,408¥124¥ 10,000¥303,606

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

(2,512)
5,584
(8)
46
200

(1,899)(1,899)¥47,822(1,082)(1,082)¥ (1,121)

(200)
(200)
¥8,540(7,094)(7,094)¥(2,109)(10,277)(10,277)¥53,131

(62)
(62)
¥ 61

(10,000)(10,000)¥—(20,339)(17,029)¥286,576

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

(2,513)
7,715
(3)
38
564

(32,774)(32,774)¥15,048(6,325)(6,325)¥(7,447)

(564)
(564)
¥7,976(2,861)(2,861)¥(4,971)(42,526)(42,526)¥10,605

(20)
(20)
¥ 41

—
—
—

(42,546)(36,744)¥249,831

Changes in items during the period
Dividends from surplus
Profit attributable to owners of parent

Millions of yen

Treasury stock

Changes in items during the period

Disposal of treasury stock

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Retainedearnings

Changes in items during the period

Purchase of treasury stock

See accompanying notes to consolidated financial statements.

Capitalsurplus

Changes in items during the period

Dividends from surplus$2.401

Commonstock

Thousands of U.S. dollars(Note 1)2020

For the years ended March 31

2020

2019

ProfitOther comprehensive loss (Note 21)
Net unrealized losses on available-for-sale securities, net of taxes
Net deferred losses on hedging instruments, net of taxes
Remeasurements of defined benefit plans
Total comprehensive loss
Total comprehensive loss attributable to:
Owners of parent
Non-controlling interests¥ 7,715(41,961)(32,774)(6,325)(2,861)¥(34,246)¥ 5,700(10,076)(1,899)(1,082)(7,094)¥ (4,376)$ 70,890(385,564)(301,148)(58,118)(26,288)$(314,674)¥(34,246)—¥ (4,492)
115$(314,674)—

Purchase of treasury stock
Disposal of treasury stock
Transfer from revaluation reserve for land
Net changes in items other than stockholders’equityTotal changes in items during the period
Balance as of March 31, 2020¥

See accompanying notes to consolidated financial statements.

23

24

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Consolidated Statements of Cash FlowsThe Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Consolidated Statements of Changes in Net Assets

Thousands of U.S. dollars (Note 1)

Millions of yen

Stockholders’ equity
For the years ended March 31

CapitalsurplusRetainedearnings

Balance as of March 31, 2019

$342,938$280,124$1,540,154

Transfer from revaluation reserve for land

—
—
—
—
—

—
—
—
—
—

(23,091)
70,890
—
(55)
5,182

—
—
(27)
413
—

(23,091)
70,890
(27)
349
5,182

Net changes in items other than stockholders’equity

—

—

—

—

—

—
$342,938—$280,124

52,908$1,593,071

Treasury stock

For the years ended March 31

Total
stockholders’equityCommonstock$(18,754) $2,144,463

Changes in items during the period
Dividends from surplus
Profit attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock

Total changes in items during the period
Balance as of March 31, 2020

385
53,303$(18,368) $2,197,776

Thousands of U.S. dollars (Note 1)
Accumulated other comprehensive income

For the years ended March 31

Net unrealized
gains onavailable-forsale securities,
net of taxes

Net deferredlosses on
hedging
instruments,
net of taxes

Revaluation
reserve forland

Remeasurementsof defined benefit
plans

Total
accumulated
othercomprehensive
incomeSharesubscription
rightsBalance as of March 31, 2019

$439,419$(10,300)$78,471$(19,378)$488,201

$560

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

(301,148)(58,118)(5,182)(26,288)(301,148)$138,270(58,118)$(68,427)(5,182)$73,288(26,288)$(45,676)

Noncontrollinginterests$

Total net
assets—$2,633,244

—
—
—
—
—

—
—
—
—
—

(23,091)
70,890
(27)
349
5,182

(390,756)

(183)

—

(390,939)(390,756)$ 97,445

(183)
$376

—
—

(337,627)$2,295,607

Changes in items during the period
Dividends from surplus
Profit attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Transfer from revaluation reserve for land
Net changes in items other than stockholders’equityTotal changes in items during the period
Balance as of March 31, 2020

See accompanying notes to consolidated financial statements.

$

Thousands of U.S. dollars(Note 1)
2020

2020

2019

10,966
3,380
1,090
604
3
(1,929)
4
(10)
(80)
37
17
(42,587)
5,183(3,615)
(119)
1,436
19
148
(21,447)
111,203(45)
35,988240
9,729(8,592)(29,934)(4,043)(56)(3,589)43,826(4,952)(24,237)
78,639(4,059)74,580¥ 8,814
3,274
1,450
609
(13)
(1,989)
7
8
49
(7)
22
(44,466)
7,325(3,033)
46(6,117)
79
(97)
7,656
(3,673)(6,037)23,004
9,497(6,149)31,70590,6301,247
110(2,065)44,341(7,312)
6,721
155,640(2,620)153,020$

Cash flows from investing activities
Purchase of securities
Proceeds from sales of securities
Proceeds from redemption of securities
Decrease in money held in trust
Purchases of tangible fixed assets
Purchases of intangible fixed assets
Proceeds from sales of tangible fixed assets
Proceeds from sales of intangible fixed assets
Net cash used in investing activities(1,175,010)
673,893248,795
4,867(1,433)(1,116)253
0(249,748)(941,512)
640,530
296,789—(1,341)(2,208)250—(7,491)(10,796,747)
6,192,162
2,286,088
44,721(13,167)(10,254)2,324
0(2,294,845)

Cash flows from financing activities
Purchase of treasury stock
Proceeds from sales of treasury stock
Dividends paid
Dividends paid to non-controlling interests
Repayments to non-controlling interests
Net cash used in financing activities(3)
5(2,513)——(2,511)(8)
2(2,512)(115)(10,000)(12,635)(27)
45(23,091)——(23,072)(1)(177,681)
800,081¥ 622,399

1
132,895
667,185¥800,081(9)(1,632,647)
7,351,658$ 5,719,002

Cash flows from operating activities
Profit before income taxes
Depreciation
Impairment losses
Net change in reserve for possible loan losses
Net change in reserve for bonuses for directors and corporate auditors
Net change in net defined benefit asset
Net change in net defined benefit liability
Net change in reserve for retirement benefits for directors and corporate auditors
Net change in reserve for claims on dormant accounts
Net change in reserve for contingent liabilities
Net change in reserve for stock-based compensation planInterest income
Interest expenses
Net gain related to securities transactions
Net loss (gain) on money held in trust
Net loss (gain) related to foreign exchange
Net loss on disposal of fixed assets
Net change in trading account securities
Net change in loans and bills discounted
Net change in deposits
Net change in negotiable certificates of deposit
Net change in borrowed money excluding subordinated borrowings
Net change in due from banks other than Bank of Japan
Net change in call loans and others
Net change in call money and others
Net change in payables under securities lending transactions
Net change in foreign exchange assets
Net change in foreign exchange liabilities
Net change in lease receivables and investments in leases
Proceeds from fund operations
Payments on fund procurement
Other
Subtotal
Payment of income taxes
Net cash provided by operating activities

Effect of exchange rate changes on cash and cash equivalents
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year (Note 3)¥

100,762
31,057
10,015
5,549
27(17,724)
36
(91)
(735)
339
156
(391,316)
47,624(33,216)(1,093)
13,194174
1,359(197,068)
1,021,804(413)
330,680
2,205
89,396(78,948)(275,052)(37,149)(514)(32,978)
402,701(45,502)(222,705)
722,585(37,296)685,288

See accompanying notes to consolidated financial statements.

25

26

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements
1. Basis of presenting consolidated financial
statements(c) Lease assets
Lease assets held by the Bank are depreciated over the leasing contract periodsby the straight-line method with residual value at zero.

2. Fiscal year ends

(6) Reserve for possible loan losses
Reserve for possible loan losses is provided as follows, based on the defined rules
for write-offs and provisioning.
Reserve for possible loan losses for bankrupt or substantially bankrupt
borrowers is provided based on the amount after deducting the collectible
portion, based on the fair value of any underlying collateral or guarantees,
except for a portion written-off, as explained below.
Reserve for possible loan losses for borrowers not currently bankrupt but
likely to go bankrupt is provided considering the overall solvency assessment
after deducting the collectible portion, based on the fair value of any underlying
collateral or guarantees.
Reserve for possible loan losses on loans other than the above is provided
principally at the amounts of expected losses over the next 1 year or 3 years,
which are determined by making necessary adjustments considering forecasts ofloss rates calculated based on the average historical default rates corresponding
to a certain period consistent with those for 1 year or 3 years.
In accordance with the Bank’s asset self-assessment standards, loans areassessed by branch staff and head office staff in charge of inspection, the resultsof which are audited by independent staff in charge of audits. Provision is madeto reflect these assessment procedures.
In the case of loans to borrowers who are bankrupt or substantiallybankrupt, the amount remaining after deduction of the amount of collateralconsidered to be disposable and the amount recoverable under guarantees is set
off from the original outstanding loan balance. The amount of such write-offs
totaled ¥13,419 million ($123,302 thousand) and ¥13,964 million for the fiscal
years ended March 31, 2020 and 2019, respectively.
A reserve for possible losses on ordinary loans held by the Bank’s
consolidated subsidiaries is provided based on loan loss experience as calculatedusing the historical default rates. A reserve for possible losses on specific loans
held by the Bank’s consolidated subsidiaries is provided based on the amountdeemed irrecoverable after careful examination of the recoverability of the loans
in question on an individual basis.

The accompanying consolidated financial statements of The Hyakujushi Bank,
Ltd. (hereinafter the “Bank”) and its consolidated subsidiaries (hereinaftercollectively the “Group”) are prepared on the basis of accounting principles
generally accepted in Japan, which are different in certain respects as to theapplication and disclosure requirements of International Financial ReportingStandards, and are compiled from the consolidated financial statements
prepared by the Bank as required by the Financial Instruments and Exchange Act
of Japan.
The Japanese yen figures in the consolidated financial statements are in
millions, with fractions omitted.
The translation of the Japanese yen amounts into U.S. dollars is included
solely for the convenience of the reader, using the prevailing exchange rate at
March 31, 2020, which was ¥108.83 to U.S.$1.00. The conveniencetranslations should not be construed as representations that the Japanese yenamounts have been, could have been, or could in the future be, converted into
U.S. dollars at this or any other rate of exchange.

The account closing date of the Bank and its consolidated subsidiaries is thesame.

3. Significant accounting policies(1) Consolidation
The consolidated financial statements include the accounts of the Bank and all 9
subsidiaries.
There are no affiliates accounted for by the equity method as of March 31,
2020.
Shikoku Alliance Capital Co., Ltd. is an affiliate not accounted for by theequity method. Affiliated companies not accounted for by the equity method are
excluded from the scope of the equity method because the Bank’s interests intheir respective amounts of net profits or losses, retained earnings or otheraccumulated comprehensive income do not have a material impact on the
consolidated financial statements.
(2) Trading account securities
Under the Accounting Standards for Financial Instruments, trading accountsecurities are stated at fair value (cost of sales is calculated by the movingaverage cost method).
(3) Securities
Held-to-maturity debt securities are stated at amortized cost using the movingaverage cost method. Investments in affiliates not accounted for by the equity
method are stated at cost by the moving-average cost method. Available-for-salesecurities of which market prices are available are stated at fair value based
principally on their market prices at the balance-sheet date (cost of sales iscalculated by the moving-average cost method), whereas those for which themarket value is not readily determinable are stated at cost by the movingaverage cost method.
Unrealized gain or loss on available-for-sale securities (net of the related tax
effect) has been reported as a component of net assets.

(8) Reserve for retirement benefits for directors and corporate
auditors
In order to provide for the payment of retirement benefits to directors andcorporate auditors of consolidated subsidiaries, a provision is made for thepayments of retirement benefits to directors and corporate auditors based on
the estimated amount incurred at the end of the consolidated reporting period.

(4) Derivatives
Under the Accounting Standards for Financial Instruments, derivatives arestated at fair value.

(10) Reserve for contingent liabilities
A provision is made for an estimated amount considered necessary for losses
which may occur in the future due to contingencies other than those covered forin other reserves.

(5) Depreciation(a) Tangible fixed assets (excluding lease assets)
Depreciation of tangible fixed assets is calculated principally using the decliningbalance method (However, the straight-line method is used for facilities attached
to buildings and structures acquired on or after April 1, 2016). Useful lives oftangible fixed assets are as follows:
Buildings: 10 to 50 years
Equipment: 5 to 15 years
Tangible fixed assets held by the consolidated subsidiaries are depreciated, inprinciple, by the declining-balance method, based on the respective estimateduseful lives of the assets.
(b) Intangible fixed assets (excluding lease assets)
Intangible fixed assets are amortized by the straight-line method. Depreciationof software for internal use is calculated using the straight-line method over theuseful lives (principally 5 years).

27(7) Reserve for bonuses for directors and corporate auditors
A provision is made for the payments of bonuses to directors and corporate
auditors of the Bank based on an estimated amount deemed necessary.

(9) Reserve for claims on dormant accounts
A provision is made for losses on claims on dormant accounts in the future in an
amount deemed necessary, taking into account the Bank’s historical refund
record.

(11) Reserve for stock-based compensation plan
In order to provide for the delivery of the Bank’s shares from the BIP Trust, aprovision is made for an estimated amount of benefits corresponding to thenumber of points allotted to directors in accordance with BIP Trust’s sharedelivery rules.

(12) Accounting method for retirement benefits
To calculate retirement benefit obligations, the Bank used the benefit formula asa method for attributing estimated retirement benefits over the period until
March 31, 2020. The amortization method for prior service costs and actuarial
differences is as follows:
Prior Service Costs:
Prior service costs are charged fully to income at the time of occurrence.
Actuarial Differences:
Actuarial differences of the plans are to be amortized from the fiscal year
following their occurrence by the straight-line method over a fixed period of 10
years, which is within the average remaining service period of the employees at
the time of occurrence in each fiscal year.
In calculating net defined benefit liability and retirement benefit costs, someconsolidated subsidiaries apply a simplified method that provides theirretirement benefit obligation at an amount to be paid for voluntary termination
at the balance sheet date.
(13) Foreign currency translation
Receivables and payables in foreign currencies are translated into Japanese yen
primarily at the year-end rates.
(14) Accounting standards for posting of earnings and expenses
Consolidated subsidiaries engaged in the leasing business post income andexpenses relating to lease transactions as “Other income” and “Other expenses,”
respectively, at the time of receipt of lease charges.
(15) Hedge accounting(a) Hedges against interest rate fluctuations
The Bank applies the deferred hedge accounting method to interest rate swaps
used to hedge interest rate risk on certain financial assets when the critical termsof the underlying hedged items and hedging instruments match.
Evaluation of hedge effectiveness is omitted as material terms related to thehedged items and hedging instruments are substantially identical and the market
fluctuations or cash flow fluctuations are offset at the time of commencement
and continuously thereafter.
(b) Hedging against currency fluctuations
The Bank applies the deferred hedge accounting stipulated in the basic
provisions of JICPA Industry Audit Committee Report No. 25 issued on July29, 2002 to currency swap and foreign exchange swap transactions executed forthe purpose of lending or borrowing funds in different currencies.
Pursuant to JICPA Industry Audit Committee Report No. 25, the Bank
assesses the effectiveness of currency swap and foreign exchange swap
transactions executed for the purpose of offsetting the risk of changes incurrency exchange rates by verifying that there are foreign currency monetaryclaims and debts corresponding to the foreign-currency positions.
(16) Statements of cash flows
The reconciliations between cash and due from banks in the consolidatedbalance sheets and cash and cash equivalents in the consolidated statements ofcash flows are as follows:

March 31
Cash and due from banks............
Time deposits with banks otherthan Bank of Japan .................
Deposits with banks other thanBank of Japan .......................
Other ...................................
Cash and cash equivalents .....

Thousandsof U.S.
Millions of yen
dollars
2019
2020
2020
¥652,010 ¥829,933 $5,991,087(27,542)(29,542)(253,073)

(413)

(228)

(3,794)(80)(1,655)(15,207)¥622,399 ¥800,081 $5,719,002(17) Consumption taxes
In the accounting treatment of the Bank and its domestic consolidated
subsidiaries, the National Consumption Tax and the Local Consumption Tax are
excluded from the transaction amounts.
(18) Accounting Standards Issued but Not Effective(a) “Accounting Standard for Revenue Recognition” (the Accounting Standards Board ofJapan (“ASBJ”) Statement No. 29, March 31, 2020) and “Implementation Guidanceon Accounting Standard for Revenue Recognition” (ASBJ Guidance No. 30, March 31,
2020)(i) Overview
This is a comprehensive accounting standard for revenue recognition. Under
the standard and guidance, revenue is recognized by applying following five
steps:
Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in thecontract
Step 5: Recognize revenue when (or as) the entity satisfies a performanceobligation(ii) Scheduled date of adoption
The Group expects to adopt the accounting standard and implementation
guidance from the beginning of the fiscal year ending March 31, 2022.
(iii)Impact of adopting the accounting standard and implementation guidance
The Group is currently evaluating the impact of the adoption.
(b) “Accounting Standard for FairValue Measurement” (ASBJ Statement No. 30, July 4,2019),“Implementation Guidance on Accounting Standard for FairValue
Measurement” (ASBJ Guidance No. 31, July 4, 2019),“Accounting Standard for
Financial Instruments” (ASBJ Statement No. 10, July 4, 2019) and “Implementation
Guidance on Disclosures about FairValue of Financial Instruments” (ASBJ GuidanceNo. 19, March 31, 2020)(i) Overview
In order to enhance comparability with rules prescribed in international
accounting standards, “Accounting Standard for Fair Value Measurement”
and “Implementation Guidance on Accounting Standard for Fair Value
Measurement” (collectively, the “Accounting Standard for Fair Value
Measurement, etc.”) have been developed. Thereby, guidance, etc. on themeasurement methods for fair value have been prescribed. The AccountingStandard for Fair Value Measurement, etc. will be applied to fair value offinancial instruments in “Accounting Standard for Financial Instruments.”
In addition, “Implementation Guidance on Disclosures about Fair Valueof Financial Instruments” has been revised, and related notes such as thebreakdown of fair value of financial instruments by level have beenprescribed.
(ii) Scheduled date of adoption
The Group expects to adopt the accounting standards and implementation
guidances from the beginning of the fiscal year ending March 31, 2022.
(iii)Impact of adopting the accounting standards and implementation guidances
The Group is currently evaluating the impact of the adoption.
(c) “Accounting Standard for Accounting Policy Disclosures, Accounting Changes andError Corrections” (ASBJ Statement No.24, March 31, 2020)(i) Overview
This standard has been prescribed for the purpose of explaining an outline ofaccounting principles and treatments applied when relevant accounting
standards are unspecified.
(ii) Scheduled date of adoption
The Group expects to adopt the accounting standard from the end of the
fiscal year ending March 31, 2021.
(d) “Accounting Standard for Disclosure of Accounting Estimates” (ASBJ Statement No.
31, March 31, 2020)(i) Overview
This standard has been prescribed for the purpose of disclosing information
valuable for users of the financial statements regarding details of accounting
estimates, which have been used for the financial statements for the current
fiscal year, with the risk of significantly affecting the financial statements forthe following year.
(ii) Scheduled date of adoption
The Group expects to adopt the accounting standard from the end of the
fiscal year ending March 31, 2021.

28

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements
4. Additional information(a) Board Incentive Plan (BIP) Trust
The Bank has introduced a BIP Trust for directors (excluding directors serving
as audit and supervisory committee members, outside directors and nonresidents of Japan; hereinafter collectively referred to as the “Bank’s directors”).
(i) Transaction overview
The BIP Trust is a stock incentive plan for directors, aimed at further raising
motivation to contribute to the medium- to long-term improvement of businessperformance and enhance the Bank’s corporate value. Under the plan, a certain
number of points are granted to the Bank’s directors based on their ranks andthe level of achievement of performance targets, and the Bank’s sharescorresponding to the aggregate number of points or money equivalent to thevalue of the Bank’s shares are granted or delivered to the Bank’s directors upon
their retirement.
(ii) Accounting treatment for transactions delivering the Company’s own stock
through the trust
The Bank applies the “Practical Solution on Transactions of Delivering theCompany’s Own Stock to Employees, etc., through Trusts” (ASBJ PITF No. 30,
March 26, 2015).
(iii)Matters relating to the Bank’s shares held by the trust(1) The book values of the shares held by the trust were ¥203 million ($1,865
thousand) and ¥221 million as of March 31, 2020 and 2019, respectively.
(2) The Bank’s shares held by the trust have been recorded as treasury stock instockholders’ equity.
(3) The numbers of shares at year-end were 54 thousand and 59 thousand forthe fiscal years ended March 31, 2020 and 2019, respectively. The average
numbers of shares during the year were 56 thousand and 60 thousand for the
fiscal years ended March 31, 2020 and 2019, respectively.
(4) The number of shares at year-end and the average number of shares during
the year in (3) above are included in the number of treasury stock to be
deducted in the calculation of per share information.
(5) The Bank implemented a reverse stock split as of October 1, 2018. The
average numbers of shares during the year in 3) above are calculated basedon the assumption that the reverse stock split was implemented at the
beginning of the fiscal year ended March 31, 2019.
(b) Impact on reserve for possible loan losses due to the spread of novel coronavirus disease(COVID-19)
The Group assumes that it will take approximately 1 year for COVID-19 to becontained and the economy will recover gradually after that.
Based on this assumption, the Group reviewed the classification of obligors
and calculated reserve for possible loan losses taking into account the impact of
COVID-19 on specified obligors (insolvent obligors) on an individual basis. As aresult, reserve for possible loan losses as of March 31, 2020 amounted to¥17,396 million ($159,845 thousand).
The Group calculated reserve for possible loan losses based on information
available at the time of preparing the consolidated financial statements. In casewhere highly uncertain circumstances continue and obligors’ medium- tolong-term financial position, etc. deteriorate beyond the Group’s assumption,
reserve for possible loan losses in the consolidated financial statements for theyear ending March 31, 2021 might be affected.

29

5. Changes in net assets(1) Type and number of shares issued and treasury shares are as follows:
Thousands of shares
Increase
Decrease

March 31, 20192020
Shares issued
Common stock .........................................................................
30,000Total ......................................................................................
30,000Treasury stock
Common stock (Notes 1, 2 and 3) ..................................................
488
Total ......................................................................................
488

March 31, 2020

—
—

—
—

300,000
300,000

1
1

11
11

478
478

Notes: 1. The number of shares of common stock at the end of the fiscal years ended March 31, 2020 and 2019 includes 54 thousand and 59 thousand shares, respectively, of the Bank’s shares
held by the BIP Trust.
2. The 1 thousand share increase in the number of common shares of treasury stock is due to a purchase demand for fractional shares from shareholders.
3. The 11 thousand share decrease in the number of common shares of treasury stock consists of decreases of 6 thousand shares due to the exercise of share subscription rights, 4 thousand
shares due to the delivery of shares to the beneficiaries from the BIP Trust, and 0 thousand shares due to an additional purchase demand for fractional shares from shareholders.

Thousands of shares
Increase
Decrease

2019
March 31, 2018
Shares issued
Common stock (Note 1) ..............................................................
300,000
Total ......................................................................................
300,000
Treasury stock
Common stock (Notes 2, 3 and 4) ..................................................
5,000
Total ......................................................................................
5,000

March 31, 2019——

270,000
270,000

30,00030,000

9
9

4,521
4,521

488
488

Notes: 1.Based on the resolution made at the 149th Regular Annual General Meeting of Shareholders held on June 28, 2018, the Bank has implemented a 1-for 10 reverse stock split as of
October 1, 2018. As a result, total number of shares outstanding has decreased by 270,000 thousand to 30,000 thousand.
2. The number of shares of common stock at the end of the fiscal years ended March 31, 2019 and 2018 includes 59 thousand and 611 thousand shares, respectively, of the Bank’s shares
held by the BIP Trust.
3. The 9 thousand share increase is due to a purchase demand for fractional shares from shareholders.
4. The 4,521 thousand share decrease in the number of common shares of treasury stock consists of decreases of 4,480 thousand shares due to the reverse stock split, 13 thousand shares
due to the delivery of shares to the beneficiaries from the BIP Trust, and 26 thousand shares due to the exercise of share subscription rights.

(2) Matters concerning share subscription rights and own share options
The balance of share subscription rights (for stock options) at the end of March 31, 2020 and 2019 stood at ¥41 million ($376 thousand) and ¥61 million, respectively. At
end of the previous and current fiscal years, no shares had been earmarked for share subscription rights.
(3) Information on dividends(a) Dividends paid
2020
Resolution
Type of share
June 27, 2019 (Regular Annual General Meeting of Shareholders)Common(Note 1) .................................................................................
stock
November 11, 2019 (Meeting of the Board of Directors)
Common(Notes 1 and 2) ........................................................................
stock

Total dividend
amount(Millions of yen)

Dividend
per share(Yen)¥1,330

¥45.0

1,183

40.0

Total dividend
amount(Millions of yen)

Dividend
per share(Yen)¥1,182

¥4.0

1,330

4.5

Record date
Effective date
March 31,
June 28,20192019
September 30, December 10,
2019
2019

2019
Resolution
Type of share
June 28, 2018 (Regular Annual General Meeting of Shareholders)Common(Note 1) .................................................................................
stock
November 9, 2018 (Meeting of the Board of Directors)
Common(Notes 1, 2 and 3) .....................................................................
stock

Record date
March 31,2018
September 30,
2018

Effective dateJune 29,2018
December 10,
2018

30

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements

2020

Resolution
June 27, 2019 (Regular Annual General Meeting of Shareholders)(Note 1) ..............................................................................
November 11, 2019 (Meeting of the Board of Directors)(Notes 1 and 2) .....................................................................

Type of share
Commonstock
Commonstock

Total dividend
amount(Thousands of
U.S. dollars)

Dividend
per share(U.S. dollars)$12,220$0.413

10,8700.367

Record date
Effective date
March 31,
June 28,20192019
September 30, December 10,
2019
2019

Notes: 1. In accordance with the resolutions approved at the Bank’s Regular Annual General Meetings of Shareholders held on June 27, 2019 and June 28, 2018, total amount of dividends paid
includes the dividend payment to the BIP Trust of ¥2 million ($18 thousand) and ¥2 million, respectively.
Moreover, in accordance with the resolutions approved at the Meetings of the Board of Directors held on November 11, 2019 and November 9, 2018, total amount of dividends paid
includes the dividend payment to the BIP Trust of ¥2 million ($18 thousand) and ¥2 million, respectively.
These exclusions reflect the Bank’s classification of the shares held by the Trust as treasury stock.
2. In accordance with the resolutions approved at the Bank’s Regular Annual General Meeting of Shareholders held on June 27, 2019 and the Meeting of the Board of Directors held on
November 9, 2018, dividend per share includes a commemorative dividend of ¥5.0 ($0.045) and ¥0.5, respectively, to celebrate the Bank’s 140th Anniversary.
3. Concerning dividend per share in accordance with the resolution approved at the Meeting of Board of Directors held on November 9, 2018, the reverse stock split as of October 1,
2018 is not taken into account since the record date is September 30, 2018.

(b) Dividends paid after the balance-sheet date2020
Total dividend
amountResolution
Type of share (Millions of yen)
June 26, 2020 (Regular Annual General Meeting of Shareholders)Common(Note 1) .................................................................................
stock¥1,183

Source ofdividends
Retainedearnings

Dividend
per share
(Yen)
¥40.0

Record date Effective date
March 31,
June 29,
2020
2020

2019
Total dividend
amountResolution
Type of share (Millions of yen)
June 27, 2019 (Regular Annual General Meeting of Shareholders)Common(Notes 1 and 2) ........................................................................
stock¥1,330Source ofdividends
Retainedearnings

Dividend
per share
(Yen)
¥45.0

Total dividend
amountDividend(Thousands of Source ofper share
Resolution
Type of share U.S. dollars) dividends (U.S. dollars) Record date Effective dateJune 26, 2020 (Regular Annual General Meeting of Shareholders)CommonRetained
March 31,
June 29,(Note 1) .................................................................................
stock$10,870
earnings$0.3672020
2020
Notes: 1. The total dividend amount includes the ¥2 million ($18 thousand) dividends for the BIP Trust.
2. The Bank conducted a 1-for-10 reverse stock split as of October 1, 2018.

(1) Investments in affiliates
Investments in affiliates as of March 31, 2020 and 2019 totaled ¥25 million($229 thousand) and ¥25 million, respectively.
(2) Securities lending transactions
National government bonds as of March 31, 2020 and 2019 included bonds of¥28,000 million ($257,281 thousand) and nil, respectively, which were lent tothird parties without collateral under lending contracts.
(3) Trading account securities
Valuation profit (losses) of nil and ¥(0) million were recognized for the fiscal
years ended March 31, 2020 and 2019, respectively.
(4) Held-to-maturity debt securities
Not applicable.
(5) Available-for-sale securities(a) Consolidated balance sheet amount and acquisition cost of available-for-salesecurities and their difference as of March 31, 2020 and 2019 were as
follows:

31

2019
Consolidated balance sheet
amount exceedingacquisition cost
Equity stock ..................... ¥Bonds:
National .......................
Local ...........................
Corporate.....................

117,132 ¥

52,958¥ 64,173

279,920
145,997
143,716
569,634
158,536
845,302275,219
144,080
142,861
562,160
154,714
769,834

4,700
1,916
855
7,473
3,821
75,46817,61921,350(3,731)

—
—
—
—
4,843
4,847
4,843
4,847
Other ..........................
174,887
178,120
Subtotal .......................
197,350
204,319
Total .................................... ¥1,042,653 ¥ 974,153

—
—
(3)
(3)
(3,233)(6,968)¥ 68,499

Other ..........................
Subtotal .......................
Consolidated balance sheet
amount not exceedingacquisition cost
Equity stock .....................
Bonds:
National .......................
Local ...........................
Corporate.....................

Record date Effective date
March 31,
June 28,
2019
2019

2020

6. Securities and trading account securities

Millions of yen
Consolidatedbalance sheet Acquisition
amountcost
Difference

Millions of yen
Consolidatedbalance sheet Acquisition
amountcost
Difference

2020
Consolidated balance sheet
amount exceedingacquisition cost
Equity stock ..................... ¥ 79,613 ¥ 37,303
Bonds:
National .......................
153,641
151,051
Local ...........................
122,871
121,556
Corporate.....................
80,63880,236357,151
352,843
Other ..........................
199,732
189,926
Subtotal .......................
636,497580,073
Consolidated balance sheet
amount not exceedingacquisition cost
Equity stock .....................
21,835
33,108
Bonds:
National .......................
176,282
178,987
Local ...........................
150,137
150,923
Corporate.....................
69,28669,745395,707399,656
Other ..........................
201,292
220,979
Subtotal .......................
618,835
653,744
Total .................................... ¥1,255,333 ¥1,233,818¥ 42,310
2,590
1,314
402
4,308
9,805
56,423(11,273)(2,704)(785)(459)(3,949)(19,686)(34,909)¥ 21,514

Thousands of U.S. dollars
Consolidatedbalance sheet Acquisition
amountcost
Difference

2020
Consolidated balance sheet
amount exceedingacquisition cost
Equity stock ..................... $ 731,535 $ 342,763
Bonds:
National ....................... 1,411,752 1,387,953
Local ........................... 1,129,017 1,116,934
Corporate.....................
740,953
737,259
3,281,732 3,242,148
Other .......................... 1,835,266 1,745,162
Subtotal ....................... 5,848,543 5,330,083
Consolidated balance sheet
amount not exceedingacquisition cost
Equity stock .....................
200,634
304,217
Bonds:
National ....................... 1,619,792 1,644,647
Local ........................... 1,379,555 1,386,777
Corporate.....................
636,644
640,861
3,636,010 3,672,296
Other .......................... 1,849,600 2,030,497
Subtotal ....................... 5,686,253 6,007,020
Total .................................... $11,534,806 $11,337,112$388,771
23,79812,073
3,693
39,58490,094518,450(103,583)(24,846)(7,213)(4,217)(36,285)(180,887)(320,766)$197,684

Other ...................................
Total ....................................

Millions of yen
Proceeds
Gains onLosses on
from salesale
sale¥ 5,733¥ 3,786¥ —342,250
51,261
36,236
429,748
237,078¥672,559

1,033
232
81
1,347
4,907
¥10,041

Other ...................................
Total ....................................

268,120
97,182
39,160404,463
220,226¥633,015

Millions of yen
Gains onLosses onsalesale¥6,001
¥ —
698
610
213
1,522
1,478
¥9,001

802
—
—
802
4,840
¥5,643Thousands of U.S. dollars
Proceeds
Gains onLosses on
from sale
sale
sale
2020
Equity stock ........................... $ 52,678$34,788$—
Bonds:
National .......................... 3,144,813
9,491
13,893
Local ..............................
471,019
2,131—
Corporate........................
332,959744—
3,948,800
12,377
13,893
Other ................................... 2,178,425
45,08826,959Total .................................... $6,179,904$92,263$40,852(6) Impairment losses on securities
Securities with fair values that have fallen significantly below their acquisition
cost and whose fair values are not expected to recover are recorded at fair valueon the consolidated balance sheet with the valuation differences expensed on the
consolidated statements of income (“impairment loss”).
Impairment losses of ¥1,948 million ($17,899 thousand) and ¥293 million
were recorded in the fiscal years ended March 31, 2020 and 2019, respectively.
The Bank has standards for determining whether fair value has decreased
significantly, based on “Practical Guidelines on Accounting Standards for
Financial Instruments” (JICPA Accounting Practice Committee Report No. 14,
February 16, 2018). The following are the details of this policy.
If, as of the end of the fiscal year, fair value has decreased by 50 percent or
greater than acquisition cost, all securities are deemed to have decreasedmaterially. If the decrease is between 30 percent and 50 percent, thedetermination shall be made in light of the issuing entity’s credit risk and otherfactors (classification of creditor according to self-assessment; and external
credit rating).

7. Matters relating to money held in trust(b) Gains and losses on sale of available-for-sale securities for the fiscal years
ended March 31, 2020 and 2019 are as follows:

2020
Equity stock ...........................
Bonds:
National ..........................
Local ..............................
Corporate........................

2019
Equity stock ...........................
Bonds:
National ..........................
Local ..............................
Corporate........................

Proceeds
from sale¥ 8,325

1,512
—
—
1,512
2,934
¥4,446

Money held in trust classified as held for trading purposes
No money held in trust for trading purposes was recorded as of March 31,
2020. The amount on the consolidated balance sheet as of March 31, 2019 was¥4,748 million.

8. Net unrealized gains on available-for-salesecurities

The following is a breakdown of net unrealized gains on available-for- salesecurities recorded in the consolidated balance sheet:

Valuation difference ..................
Available-for-sale securities ...
Money held in trust ............
Deferred tax liabilities. ..............
Net unrealized gains on availablefor-sale securities (before equity
equivalent) ..........................
Net unrealized gains attributable tonon-controlling interests .........
Parent’s ownership interest ofaffiliates’ unrealized gains onavailable-for-sale securities ......
Net unrealized gains on availablefor-sale securities ..................

Thousands ofMillions of yen
U.S. dollars
2019
2020
2020
¥21,514 ¥ 68,499 $197,684
68,49921,514
197,684———(20,677)(6,466)(59,413)
15,04847,822

138,270

—

—

—

—

—

—

¥15,048¥ 47,822$138,270

32

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements
9. Loans and bills discounted

Loans and bills discounted as of March 31, 2020 and 2019 included thefollowing non-performing amounts:

Loans under bankruptcy.............
Non-accrual loans ....................
Loans past due over 3 months ......
Restructured loans ...................
Total ....................................

Thousands ofMillions of yen
U.S. dollars
2019
2020
2020
¥ 941 $ 10,346¥ 1,126
27,22427,574
253,367
324
193
1,773
23,874
26,783
246,099¥52,366 $511,596¥55,677

Bills discounted are treated as financial transactions in accordance with
“Accounting and Auditing Treatment Relating to Adoption of AccountingStandards for Financial Instruments for Banks (JICPA Industry Audit Committee
Report No. 24, February 13, 2002).” Commercial bills and foreign bills bought
are permitted to be sold or pledged and their total face value was as follows:

Bills discounted .............................

Millions of yen
2019
2020
¥21,173¥16,580

Thousands of
U.S. dollars
2020$152,347

10. Guarantee obligations

Guarantee obligations for bonds in private placement (defined in Article 2,
Paragraph 3 of the Financial Instruments and Exchange Act of Japan) included incorporate bonds under “Securities” in the consolidated balance sheets were
¥22,006 million ($202,205 thousand) and ¥18,935 million as of March 31,
2020 and 2019, respectively.

12. Commitment line agreements on overdrafts andloans

Commitment line agreements on overdrafts and loans are agreements to lendfunds to customers upon application up to a prescribed amount as long as there
is no violation of any condition established in the contract. The balance of unusedloans under these agreements as of March 31, 2020 and 2019 was as follows:

Unused commitments ...............
Contracts with less than a yearof contract period orcontacts that are cancellable
unconditionally at any time

Millions of yen
2019
2020
Assets pledged as collateral:
Securities ........................
Liabilities corresponding to assets
pledged as collateral:
Deposits ..........................
Payables under securities
lending transactions .........
Borrowed money ...............
Call money ......................

¥462,322

Thousands of
U.S. dollars
2020¥433,613 $4,248,111

59,99534,909551,272

112,699
7
5,767

142,634
244,367—

1,035,55064
52,990In addition to the assets presented above, the following assets were pledged ascollateral for exchange clearance transactions and futures contracts at March
31, 2020 and 2019:

Securities...............................
Other assets ...........................

Thousands ofMillions of yen
U.S. dollars
2019
2020
2020
¥ 409 $ 3,721¥ 405
30,00030,000275,659

As of March 31, 2020 and 2019, in addition to the items presented above, otherassets included cash collateral paid for financial instruments of ¥22,414 million($205,954 thousand) and ¥4,568 million, and guarantees and household
deposits of ¥1,175 million ($10,796 thousand) and ¥1,177 million,
respectively.

857,679

952,2427,880,906

Since many of these commitments are expected to expire without being drawn
upon, the total amount of unused commitments does not necessarily have effecton the future cash flow of the Group. Many of these commitments have clausesthat allow the Group to refuse an application from customers or reduce the limit
amount with proper reasons (e.g. changes in financial situation, to secure claims,etc.). In addition, the Group may request the customers to pledge collateralsuch as real estate and securities at the time of the contracts if necessary and takenecessary measures periodically based on a prescribed internal procedure after
conclusion of contracts such as monitoring customers’ business status, revising
contracts and securing claims.

13. Income taxes(1) Deferred tax assets
Major components of deferred tax assets as of March 31, 2020 and 2019 wereas follows:

11. Assets pledged as collateral

Assets pledged as collateral as of March 31, 2020 and 2019 consisted of thefollowing:Thousands ofMillions of yen
U.S. dollars
2019
2020
2020
¥923,414 ¥1,015,611 $8,484,921

Millions of yen
2019
2020

Thousands of
U.S. dollars
2020

Deferred tax assets:
Net unrealized losses on availablefor-sale securities .................. ¥ 10,611 ¥ 2,118 $ 97,500
Excess reserve for possible loan
losses ................................
7,876
8,078
74,225Net defined benefit liability.........
2,866
3,713
34,117
Net deferred losses on hedging
instruments.........................
506
3,363
30,901
Excess depreciation ..................
1,012
1,091
10,024
Reserve for bonuses..................
429
459
4,217
Other ...................................
2,715
2,643
24,285
Subtotal ................................
17,52529,961
275,300
Valuation reserve .....................
(6,787)(6,613)(60,764)
Deferred tax assets ...................
23,348
10,737
214,536
Deferred tax liabilities:
Net unrealized gains on availablefor-sale securities ...............
(22,795) (156,923)(17,078)
Reserve for advanced depreciation of non-current assets .....
(140)
(139)
(1,277)
Net deferred gains on hedging
instruments ......................
(16)
(110)
(1,010)
Other ................................
(23)
(25)
(229)
Deferred tax liabilities...........
(22,975) (159,450)(17,353)

Net deferred tax assets(liabilities) ........................

¥ 5,995¥ (12,237) $ 55,085(2) Income taxes
The following table shows the major items responsible for the difference
between the statutory tax rate and the effective tax rate after application oftax-effect accounting for the fiscal years ended March 31, 2020 and 2019.
Statutory income tax rate .............................
Reconciliation:
Non-deductible expenses, including
entertainment expenses .........................
Non-taxable income, including dividend
income .............................................
Per-capita resident tax ..............................
Increase (decrease) of valuation reserve .........
Other ..................................................
Effective income tax rate under tax-effectaccounting ............................................

Millions of yen
Impairment losses
2019
2020

2019
30.4%

0.6

0.8

(3.0)
0.6
(1.6)
2.6

(4.9)
0.7
7.1
1.2

29.6%

35.3%

14. Accumulated depreciation and reduction entry

Accumulated depreciation of tangible fixed assets as of March 31, 2020 and2019 amounted to ¥38,647 million ($355,113 thousand) and ¥37,644 million,
respectively.
Reduction entry, which is deferred gain on tangible fixed assets deductible
for tax purposes, amounted to ¥2,452 million ($22,530 thousand) and ¥2,458
million as of March 31, 2020 and 2019, respectively. Reduction entry for the
fiscal years ended March 31, 2020 and 2019 amounted to ¥(5) million ($(45)thousand) and ¥57 million.

Kagawa Pref ... Assets forbusiness use
and idle assets(2020: 16
locations2019: 16
locations)Land,
buildings
andmovablesOther ........... Assets forbusiness use
and idle assets(2020: 12
locations2019: 11locations)Land andbuildings

Total ............

Based on the Law on the Revaluation of Land, the Bank’s land was revalued on
March 31, 1999.
The amounts equivalent to deferred tax on the land revaluation wererecorded as deferred tax liability for land revaluation in liabilities, and net
unrealized gains on the land revaluation were recorded as revaluation reserve forland in stockholders’ equity.
As of March 31, 2020 and 2019, the difference between the carrying
amount and the fair value of the revalued land was ¥12,685 million ($116,557
thousand) and ¥13,869 million, respectively.

16. Asset retirement obligations

Notes on asset retirement obligations have been omitted due to immateriality.

17. Investment and rental property

Notes on investment and rental property have been omitted due toimmateriality.

18. Other income

Other income includes the following:

Lease revenue .........................
Gain on sale of equity securities ...

Thousands ofMillions of yen
U.S. dollars
2019
2020
2020
¥6,970¥7,586$69,705
6,001
3,786
34,78819. General and administrative expenses

Salaries and allowances were included in general and administrative expenses,
which amounted to ¥14,954 million ($137,406 thousand) and ¥15,478 million
for the fiscal years ended March 31, 2020 and 2019, respectively.

20. Other expenses(1) Other expenses include the following:Thousands ofMillions of yen
U.S. dollars
2019
2020
2020
¥5,727¥6,267$57,585
4,360
4,063
37,333
1,948—

17,899

¥ 178

¥ 852

land: 125

land: 793

buildings: 48

buildings: 56

movables: 2

movables: 2

¥ 911

¥ 596

land: 878

land: 560

buildings: 33¥1,090land: 1,004
buildings: 82
movables: 3buildings: 36¥1,450land: 1,354
buildings: 93
movables: 2

Thousands of
U.S. dollars
Impairment
losses2020

15. Revaluation reserve for land

Cost of lease ...........................
Loan write-offs .......................
Loss on devaluation of equity
securities ............................

33

2020
30.4%

(2) Impairment losses
During the fiscal years ended March 31, 2020 and 2019, the Bank recorded
impairment losses on fixed assets as described below:

Kagawa Pref ... Assets forbusiness use
and idle assets(2020: 16
locations)Land,
buildings
andmovablesOther ........... Assets forbusiness use
and idle assets(2020: 12
locations)Land andbuildings

Total ............

$ 1,635
land: 1,148
buildings: 441
movables: 18$ 8,370
land: 8,067
buildings: 303$10,015
land: 9,225
buildings: 753
movables: 27

The Bank posted impairment losses of ¥1,090 million ($10,015 thousand) and¥1,450 million, respectively, during the fiscal years ended March 31, 2020 and2019 on land, buildings and movables due to a fall in operating cash flows andcontinuous declines in land prices. The Bank reduced the carrying amounts ofthe corresponding assets to the recoverable amounts, and recorded thedifference between the carrying amount and recoverable amount of each asset as
impairment losses under other expenses.
In general, the Bank treats each of its branches as a single asset group unit forrecognition and measurement of impairment losses; however, jointly managed
branches are treated as a single cash generating unit. Values of idle assets andassets for disposal are measured on an individual basis.
Regarding head office buildings, operation and training centers,
dormitories, and housing and welfare facilities, these facilities are classified as
the Bank’s common property, as it is deemed difficult to specify each asset as asource of identifiable cash flows in the future.
At the Bank’s consolidated subsidiaries, each business base of subsidiaries isusually considered as the smallest grouping unit. Idle assets and assets for
disposal, however, are valued on an individual basis.
The recoverable amounts are measured using the higher of either the net
selling prices or value in use. Net selling prices are calculated on the basis ofappraisal values of land or the amounts computed using the method laid downby the National Tax Agency of Japan for calculation of land prices (used as thebasis for computing taxable amounts as set forth in Article 16 of the Land Tax
Law) after deducting estimated costs of disposal, and value in use is calculated bydiscounting the future cash flow at discount rates of 0.1% and 0.3% for the
fiscal years ended March 31, 2020 and 2019, respectively.

34

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements
21. Matters relating to consolidated statements ofcomprehensive income

The amount of recycling and amount of income tax effects associated with othercomprehensive loss:
Millions of yen
2019
2020
Net unrealized losses on availablefor-sale securities, net of taxes:
Amount recognized during theyear ............................... ¥(41,176)
Amount of recycling ..............
(5,808)
Prior to income tax effect.....
(46,984)
Income tax effect ...............
14,210Net unrealized losses onavailable-for-sale securities,
net of taxes ...................
(32,774)
Net deferred losses on hedging
instruments, net of taxes:
Amount recognized during theyear ...............................
(10,645)
Amount of recycling ..............
1,557
Prior to income tax effect.....
(9,088)
Income tax effect ...............
2,762
Net deferred losses on
hedging instruments ........
(6,325)Remeasurements of defined benefit
plans:
Amount recognized during theyear ...............................
(3,865)
Amount of recycling ..............
(246)
Prior to income tax effect.....
(4,111)
Income tax effect ...............
1,249
Remeasurements of defined
benefit plans ..................
(2,861)
Total other comprehensive loss .... ¥(41,961)

Thousands of
U.S. dollars
2020¥ 1,457 $(378,351)(4,186)(53,367)(2,729) (431,719)
829
130,570(1,899)(301,148)(3,835)2,280(1,554)472(97,813)
14,306(83,506)
25,379(1,082)(58,118)(9,884)(308)(10,192)
3,098(35,514)(2,260)(37,774)
11,476(7,094)(26,288)¥(10,076) $(385,564)

22. Finance leases

Information on finance leases for the fiscal years ended March 31, 2020 and2019 are as follows:
1. As lessee
Finance lease transactions that do not transfer ownership(1) Components of lease assets(a) Tangible fixed assets
Primarily consisting of ATMs(b) Intangible fixed assets
Not applicable.
(2)Depreciation and amortization methods for lease assets
Depreciation and amortization methods for lease assets are described in “3.
Significant accounting policies (5) Depreciation”.
2. As lessor(1) Breakdown of investment in leases

Lease receivables......................
Estimated residual value .............
Interest received ......................
Investments in leases .................

35

Thousands ofMillions of yen
U.S. dollars
2019
2020
2020
¥19,485 $215,032¥23,402
2,689
3,149
28,935(2,276)(2,881)(26,472)¥19,897 $217,485¥23,669(2) Schedule for collection of lease receivables and receivables oninvestments in leases by leasing contract maturity

2020
Up to 1 year ...........................
Over 1 year, up to 2 years...........
Over 2 years, up to 3 years .........
Over 3 years, up to 4 years .........
Over 4 years, up to 5 years .........
Over 5 years ...........................

Millions of yen
Receivables on
Lease receivables investments in leases¥284¥6,616
250
5,550
184
4,441
64
3,149
27
1,896
11
1,747

2019
Up to 1 year ...........................
Over 1 year, up to 2 years...........
Over 2 years, up to 3 years .........
Over 3 years, up to 4 years .........
Over 4 years, up to 5 years .........
Over 5 years ...........................

Millions of yen
Receivables on
Lease receivables investments in leases¥288¥5,802
249
4,813
227
3,770
164
2,645
45
1,412
30
1,040

2020
Up to 1 year ...........................
Over 1 year, up to 2 years...........
Over 2 years, up to 3 years .........
Over 3 years, up to 4 years .........
Over 4 years, up to 5 years .........
Over 5 years ...........................

Thousands of U.S. dollars
Receivables on
Lease receivables investments in leases$2,609$60,792
2,297
50,996
1,690
40,806588
28,935248
17,421
101
16,052

23. Financial instruments

1. Disclosures related to financial instruments(1) Financial instrument policies
The Group provides banking services, including leasing and other financial
services. The Group limits risk within the scope of its business capacity, while
realizing profits commensurate with the risk of the financial instruments held.
To accomplish this goal, the Group quantifies, to the greatest extent possible,
various risks related to financial instruments using statistical methods. It
categorizes capital (risk capital) according to the size of the risk, engaging in“integrated risk management,” incorporating a capital allocation system thatmonitors risk versus return. The Group continues to improve efficiency in risk
management, ensuring greater stability and soundness for the business as awhole.
(2) Nature and extent of risks arising from financial instruments
The major types of financial assets held by the Group are loans and bills
discounted and securities. Loans and bills discounted are mainly for domestic
corporations and individuals, and are exposed to credit risk, interest rate risk,
and foreign exchange risk. If loans and bills discounted are concentrated
excessively on a particular corporate group or industry type, the Group’s
stockholders’ equity may suffer significant adverse effects. Therefore, the Group
has set maximum loan balances for each corporate group or industry type, andhas in place a system for monitoring compliance with these thresholds toprevent such an excessive concentration of risk.
Securities mainly consist of stocks, bonds, investment trusts and direct
investments. These investments are used as a pure investment vehicle or as partof a Group investment policy. In addition, certain bonds are held for resale.
These investments are exposed to the credit risk of the issuing body, interest raterisk, price volatility risk and/or foreign exchange risk. Securities include
financial instruments with limited market liquidity, including private placement
bonds underwritten by the Group, private equity shares, and direct investments.
Financial liabilities mainly consist of deposits received from domestic
corporations and individuals. These financial liabilities are exposed to interest
rate risk, exchange rate risk, and liquidity risk.
Derivative transactions entered into by the Group include interest rate andcurrency swaps, options, futures/forward contracts, and cap transactions. Thesetransactions are generally entered into with a client to cover the underlying
financial instrument. Such transactions are variously exposed to interest raterisk, foreign exchange risk, price volatility risk, and the credit risk of thecounter party.
For certain interest rate swaps, individual deferred hedge accounting isapplied so that the hedged items and hedging instruments directly match.
Evaluation of hedge effectiveness is omitted as material terms related to thehedged items and hedging instruments are substantially identical and the market
fluctuations or cash flow fluctuations are offset at the time of commencement
and continuously thereafter. In addition, the Bank applies the deferred hedge
accounting stipulated in the basic provisions of JICPA Industry Audit Committee
Report No. 25 for currency swap and foreign exchange swap transactions thatare concluded for the purpose of hedging foreign exchange rate risk associatedwith foreign currency denominated financial assets. Hedge effectiveness of thesehedge transactions is evaluated by confirming the correspondence of theposition to the amount of foreign currency denominated financial assets hedged.
(3) Risk management for financial instruments(a) Credit risk management
The Group has compiled Credit Risk Management Rules and related
documents, and the Risk Management Committee (Credit Risk Management
Subcommittee) monitors and manages credit risk exposures.
In addition, the Risk Management Division acts as the credit risk managing
department for granting and verifying internal credit ratings, measures theamount of credit risk and sets and manages credit limits.
(b) Market risk management
The Group has established Market Risk Management Rules along with relevant
documentation, and the Risk Management Committee (Market Risk
Management Subcommittee) monitors market risk and maintains management
systems. The Revenue Management Committee (Budget ALM Subcommittee)
deliberates on the stability of medium and long-term profit in light of risk
circumstances.

Departments involved in the execution of market transactions (Treasury
and International Division) have been divided into front office (transaction
execution), back office (clerical), and middle office (market risk management)roles. This creates a system of internal checks and balances, with the Risk
Management Division in charge of managing overall market risk.
(i) Interest rate risk management
The Group manages interest rate risk using statistical methods to quantify thesize of the interest rate risk. When deemed necessary, the Group establishes andmanages limits on positions and/or profits and losses for securities, derivatives,and other market transactions. The Group also enters into derivativetransactions for interest rate swaps to hedge interest rate risk as part of ALM.
(ii) Foreign exchange risk management
The Group uses statistical methods to quantify and manage foreign exchangerisk. The Group also establishes and manages limits on positions and profits andlosses.
(iii) Price volatility risk management
The Group uses statistical methods to quantify and manage price volatility risk.
The Group establishes and manages limits on positions and profits and losses.
(iv) Quantitative information regarding market risks
a. Financial instruments held for trading purposes
In measuring the VaR of interest rate risks associated with trading securities,
interest rate futures and related transactions as well as the VaR of foreign
currency exchange risks associated with foreign exchange trading andrelated transactions, the Group applies the historical simulation methodwith a holding period of 10 days, a confidence interval of 99% and an
observation period of 1,200 business days. As of March 31, 2020 (theconsolidated balance sheet date), the volume of the aforementioned risks offinancial instruments held for trading purposes (estimated amount of loss)
amounted to ¥7 million ($64 thousand) (compared with ¥17 million at theend of the previous fiscal year).
b. Financial instruments not held for trading purposes
In measuring the VaR of interest rate risks associated with loans and bills
discounted, investment securities, deposits, and interbank, interest rate
swap and related transactions, as well as the VaR for volatility risks associatedwith the prices of publicly listed company shares and investment trusts, etc.
the Group applies the historical simulation method with a holding period of
120 days, a confidence interval of 99% and an observation period of 1,200
business days.
In addition, in measuring the VaR of risks involving interest rates ofmoney held in trust, price volatility or exchange rates, the Group applies thehistorical simulation method with a holding period of 20 days, a confidence
interval of 99% and an observation period of 1,200 business days.
The VaR of financial instruments not held for trading purposes
amounted to ¥50,852 million ($467,260 thousand) and ¥43,402 million asof March 31, 2020 and 2019, respectively.
c. VaRThe Group uses back testing to compare the VaR computed by the models
and the hypothesized gain/loss (gain or loss assumed generated when theportfolio is fixed at the time of measuring the VaR) to verify the reliability ofthese measured models.
However, VaR determined using the historical simulation method is ameasure of the volume of market risk at a certain event probability
statistically computed utilizing changes in historical market data. In thiscontext, there are cases in which VaR cannot capture risk under sudden anddramatic changes in the market beyond normal circumstances. To
supplement the limitations of VaR, the Group conducts stress testing
periodically in addition to the management using VaR.

36

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements(c) Liquidity risk management
The Group has established Liquidity Risk Management Rules and other related
guidelines as a basis for managing liquidity risk. The Group has also established
Liquidity Crisis Response Rules to ensure a prompt response to unexpected
situations that may affect cash management. These rules assume that unexpected
situations will arise and classify them into the categories of “caution” and “crisis”,
thereby enabling the Group to respond in a timely and appropriate manner.
The Liquidity Risk Management Department (Treasury and International
Division) performs daily and monthly cash projections to ensure proper andstable cash management based on the Group’s investment/acquisition structure,ensuring sufficient liquidity reserves. The Liquidity Risk Management
Department is also responsible for identifying, analyzing, assessing andmonitoring liquidity risk in consideration of internal and external factors that
may have an impact on the said risk.
(4) Supplementary information regarding fair value of financial
instruments
The fair value of financial instruments includes their respective market prices,and rationally calculated values if the fair value of the financial instrument is notavailable. Certain assumptions are used to calculate the said values, and the saidvalues may vary when differing assumptions are used.
2. Fair value of financial instruments
The consolidated balance sheet amount, fair values and the differences as ofMarch 31, 2020 and 2019 are as follows. Private equity shares or other shares
whose fair values are not readily determinable are not included in the following
table.
Millions of yen
Consolidatedbalance sheet
amountFair value Difference
2020(1) Cash and due from banks ....... ¥ 652,010 ¥ 652,010¥—(2) Monetary claims bought ........
29,26429,264—(3) Trading account securities ......
55—(4) Money held in trust ..............
———(5) Securities
Available-for-sale securities .... 1,255,333 1,255,333—(6) Loans and bills discounted ...... 2,847,316
Reserve for possible loan
losses*1 ............................
(15,646)
2,831,669 2,855,278
23,608
Total assets ............................ 4,768,283 4,791,892
23,608(1) Deposits ........................... 4,065,082 4,065,202
120(2) Negotiable certificates ofdeposit .............................
90,18590,1883(3) Call money and bills sold .......
34,782
34,782—(4) Payables under securities
lending transactions..............
112,699
112,699—(5) Borrowed money.................
305,608
305,785
177
Total liabilities......................... 4,608,358 4,608,659
300
Derivative Transactions*2
Not subject to hedge accounting
551
551
—
Subject to hedge accounting .....
(10,857)(10,857)—
Total Derivative Transactions ....... ¥ (10,305) ¥ (10,305) ¥—Millions of yen
Consolidatedbalance sheet
2019
amountFair value Difference(1) Cash and due from banks ....... ¥ 829,933 ¥ 829,933¥—(2) Monetary claims bought ........
38,99338,993—(3) Trading account securities ......
153
153
—
(4) Money held in trust ..............
4,748
4,748
—
(5) Securities
Available-for-sale securities .... 1,042,653 1,042,653—(6) Loans and bills discounted ...... 2,825,869
Reserve for possible loan
losses*1 ............................
(14,957)
2,810,911 2,838,583
27,672
Total assets ............................ 4,727,392 4,755,065
27,672(1) Deposits ........................... 3,953,878 3,954,181
302(2) Negotiable certificates ofdeposit .............................
90,231
90,2332(3) Call money and bills sold .......
43,37443,374—(4) Payables under securities
lending transactions..............
142,634
142,634—(5) Borrowed money.................
269,620
269,817
197
Total liabilities ........................ 4,499,739 4,500,241502
Derivative Transactions*2
Not subject to hedge accounting
Subject to hedge accounting .....
Total Derivative Transactions ...... ¥492(2,117)(1,624) ¥492(2,117)(1,624)¥———

Thousands of U.S. dollars
Consolidatedbalance sheet
amountFair value Difference
2020(1) Cash and due from banks ....... $ 5,991,087 $ 5,991,087 $—(2) Monetary claims bought ........
268,896
268,896—(3) Trading account securities ......
4545—(4) Money held in trust ..............
———(5) Securities
Available-for-sale securities .... 11,534,806 11,534,806—(6) Loans and bills discounted ...... 26,162,969
Reserve for possible loan
losses*1 ............................ (143,765)
26,019,195 26,236,129
216,925
Total assets ............................ 43,814,049 44,030,984
216,925(1) Deposits ........................... 37,352,586 37,353,689
1,102(2) Negotiable certificates ofdeposit .............................
828,677
828,705
27(3) Call money and bills sold .......
319,599
319,599—(4) Payables under securities
lending transactions.............. 1,035,550 1,035,550—(5) Borrowed money................. 2,808,122 2,809,749
1,626
Total liabilities......................... 42,344,555 42,347,321
2,756
Derivative Transactions*2
Not subject to hedge accounting
5,062
5,062
—
Subject to hedge accounting .....
(99,761)(99,761)—
Total Derivative Transactions ...... $ (94,688) $ (94,688) $—*1 General reserve for possible loan losses and specific reserve for possible loan losses forloans and bills discounted are deducted from above.
*2 Derivative transactions in the above table are recorded on a net basis with liabilities
presented in parentheses.
*3 Items with no material impact have not been listed.

37

Calculation method for fair value of financial instruments
Assets(1) Cash and due from banks
The fair value of due from banks with no maturity date is valued at book value,
since the book value approximates the fair value. Due from banks with amaturity date is valued at present value in each category by deposit term,
discounting by an assumed applicable interest rate when new deposits are
accepted.
Items with a short contract period are valued at book value, since book value
approximates their fair value.
(2) Monetary claims bought
Items with a short contract period are valued at book value, since the book value
approximates their fair value.
(3) Trading account securities
Corporate bonds and other available-for-sale securities are valued at market
prices and using an internal model.
(4) Money held in trust
With respect to securities that are managed as trust assets in individually
managed money held in trust accounts whose main purpose is securities
investment, stocks are valued at the stock market price, while debt-securities
are valued at the stock market price or the price stated by the correspondent
financial institution.
Notes concerning money held in trust by holding purpose are presented in“7. Matters relating to money held in trust.”(5) Securities
Stocks and corporate bonds are valued at market prices. Investment trusts arevalued at their published base price. Private placement bonds guaranteed by theGroup are categorized according to internal credit rating and maturity, andvalued at fair value, discounting the total amount of principal and interest by anassumed applicable interest rate when similar bonds are issued.
See “6. Securities and trading account securities” for further information
about the securities by intent of holding.
(6) Loans and bills discounted
Loans and bills discounted are valued at present value in each category byinternal rating and maturity, discounting the total amount of principal andinterest by an assumed applicable interest rate when similar loans are made.
For loans to borrowers who are bankrupt, substantially bankrupt, or likely
to go bankrupt, the estimated uncollectible amount is based on the present valueof estimated future cash flows, or the estimated collectible portion based on thecollateral or guarantee securing the loan. As such, the balance of the loan on the
consolidated balance sheet as of the last day of the fiscal period less the estimateduncollectible amount approximates the fair value.
For loans with no repayment deadline because loan amounts are less thanthe value of the assets securing them, their fair values are valued at book value,
because they are assumed to approximate the fair values due to expected
repayment deadlines and interest rate conditions.

Liabilities(1) Deposits and (2) Negotiable certificates of deposit
The Group considers the fair value of demand deposits to be the payment (bookvalue) of the instrument as if demanded on the last day of the fiscal year. The fairvalue of time deposits is valued at present value in each category by specificdeposit term, discounting future cash flow by the interest rate used when
accepting new deposits. Since book value approximates fair value for items witha short deposit term, the book value shall be the fair value for these instruments.
(3) Call money and bills sold
Due to the short contract period of these instruments, the Group considers
their book value to approximate the fair value.
(4) Payables under securities lending transactions
Due to the short contract period, the Group considers their book value toapproximate the fair value.
(5) Borrowed money
Borrowed money with variable interest rates reflects market interest rates overa short-term. As the credit status of the Group has not significantly changed
since these transactions were executed, the Group believes that the book value
approximates the fair value of these instruments. The fair value for borrowed
money with fixed interest rates is valued at present value, discounting the total
amount of principal and interest categorized by specific term by an assumed
applicable interest rate when similar borrowings are entered into.
Derivative Transactions
See “26. Derivative transactions” for further information about derivatives.
The following are financial instruments whose fair values are not readily
determinable as of March 31, 2020 and 2019. These are not included in the“Assets (5) Securities” section under fair value information for financial
instruments.
Thousands of
U.S. dollars
Consolidated
Consolidated balance balance sheet
sheet amountamount
2019
2020
2020
¥2,714¥2,712$24,919
1,435
1,683
15,464¥4,150¥4,395$40,384
Millions of yen

Category
1. Private equity shares*1*2 ........
2. Investments in partnership*3*4 ..
Total ....................................

*1 As private equity shares have no market price, and their fair values are not readily
determinable, their fair values are not stated.
*2 The Group did not recognize any impairment loss for unlisted equity stock for the fiscal
years ended March 31, 2020 and 2019, respectively.
*3 For investments in partnership for which the fair value is not readily determinable, thefair value has not been disclosed because the underlying partnership assets are comprisedof unlisted equity stock.
4* The Group recognized impairment loss on investments in partnership of ¥29 million($266 thousand) and ¥31 million for the fiscal years ended March 31, 2020 and 2019,respectively.

The redemption schedule and the corresponding estimated amounts of monetary claims and securities with maturities subsequent to March 31, 2020 and 2019 are as follows:2020
Due from banks ..................................................
Monetary claims bought ........................................
Securities:
Available-for-sale securities with maturities ................
National government bonds .............................
Local government bonds .................................
Corporate bonds...........................................
Other ........................................................
Loans and bills discounted* ....................................
Total ...............................................................

Up to 1 year
¥ 605,116
29,264

Over 1 year,
up to 3 years¥——

81,73233,3003,492
24,11020,8301,090,280¥1,806,393

100,783
37,0001,472
16,29946,011
464,786¥565,570

Millions of yen
Over 3 years, Over 5 years,
up to 5 years
up to 7 years
¥
—
¥
—
—
—
96,244—
18,372
13,94663,925332,254¥428,499

75,29340,00013,772
1,063
20,457214,313¥289,606

Over 7 years,
up to 10 years¥——

Over 10 years¥——

449,01870,000226,501
79,40073,117
218,882¥667,900

253,324
144,000
8,771
14,981
85,572459,094¥712,419

38

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements

2019
Due from banks ..................................................
Monetary claims bought ........................................
Securities:
Available-for-sale securities with maturities ................
National government bonds .............................
Local government bonds .................................
Corporate bonds...........................................
Other ........................................................
Loans and bills discounted* ....................................
Total ...............................................................

2020
Due from banks ..................................................
Monetary claims bought........................................
Securities:
Available-for-sale securities with maturities ................
National government bonds .............................
Local government bonds .................................
Corporate bonds...........................................
Other ........................................................
Loans and bills discounted*....................................
Total ...............................................................

Up to 1 year
¥ 784,986
38,993

Over 1 year,
up to 3 years¥——

177,576
100,000
15,976
38,84222,7581,086,700¥2,088,256

152,466
45,3003,806
29,54673,813494,976¥647,442

Up to 1 year
$ 5,560,194
268,896

Over 1 year,
up to 3 years$——

751,006
305,98132,086
221,538
191,399
10,018,193$16,598,300

926,058
339,979
13,525
149,765
422,778
4,270,752$5,196,820

Millions of yen
Over 3 years, Over 5 years,
up to 5 years
up to 7 years
¥
—
¥
—
—
—

24. Accrued retirement benefits
Over 7 years,
up to 10 years¥——

Over 10 years¥——

87,79340,00013,3504,285
30,158219,162¥306,956

227,535
10,00099,59057,50060,445215,044¥442,580

72,89754,0004,000
4,576
10,321
463,909¥536,807

Thousands of U.S. dollars
Over 3 years, Over 5 years,
up to 5 years
up to 7 years
$
—
$
—
—
—

Over 7 years,
up to 10 years$——

Over 10 years$——

4,125,866
643,204
2,081,236
729,578
671,845
2,011,228$6,137,094

2,327,703
1,323,164
80,593
137,655
786,290
4,218,450$6,546,163

126,047
25,0007,300
12,627
81,119292,316¥418,363

884,351—
168,813
128,144587,383
3,052,963$3,937,324

691,840
367,545
126,545
9,767
187,972
1,969,245$2,661,086*Loans and bills discounted do not include ¥28,727 million ($263,962 thousand) and ¥28,181 million in loans to bankrupt, substantially bankrupt and likely to go bankrupt borrowers or otherloans of which repayment is not expected, or ¥38,977 million ($358,145 thousand) and ¥25,577 million in loans with no established maturity as of March 31, 2020 and 2019, respectively.

The redemption schedule of corporate bonds, borrowed money and other interest-bearing debt scheduled to be repaid subsequent to March 31, 2020 and 2019 is asfollows:

2020
Deposits* .........................................................
Negotiable certificates of deposit .............................
Call money and bills sold.......................................
Payables under securities lending transactions .............
Borrowed money ................................................
Total ...............................................................

2019
Deposits* .........................................................
Negotiable certificates of deposit .............................
Call money and bills sold.......................................
Payables under securities lending transactions .............
Borrowed money ................................................
Total ...............................................................

2020
Deposits* .........................................................
Negotiable certificates of deposit .............................
Call money and bills sold.......................................
Payables under securities lending transactions .............
Borrowed money ................................................
Total ...............................................................
*Among deposits, demand deposits are included in “Up to 1 year.”39

Up to 1 year
¥3,853,385
90,00334,782
112,699
187,409¥4,278,280

Up to 1 year
¥3,741,698
89,54943,374
142,634
9,852¥4,027,109

Up to 1 year
$35,407,378
827,005
319,599
1,035,550
1,722,034$39,311,586

Over 1 year,
up to 3 years¥205,226142——
113,014¥318,383

Millions of yen
Over 3 years, Over 5 years,
up to 5 years
up to 7 years¥6,108
¥ 146
40
—
—
—
—
—
3,720
902
¥9,868¥1,049Over 1 year,
up to 3 years¥205,158590——
226,152¥431,900

Millions of yen
Over 3 years, Over 5 years,
up to 5 years
up to 7 years¥ 6,530
¥ 298
92
—
—
—
—
—
31,821
875¥38,443¥1,173

Over 1 year,
up to 3 years$1,885,748
1,304
—
—
1,038,445$2,925,507

Thousands of U.S. dollars
Over 3 years, Over 5 years,
up to 5 years
up to 7 years$56,124$1,341
367
—
—
—
—
—
34,181
8,288$90,673$9,638Over 7 years,
up to 10 years
¥215
—
—
—
561
¥777

Over 7 years,
up to 10 years
¥192
—
—
—
793
¥985

Over 7 years,
up to 10 years$1,975———
5,154$7,139Over 10 years
¥ —
—
—
—
—
¥ —

Over 10 years
¥ —
—
—
—
125
¥125

Over 10 years
$ —
—
—
—
—
$ —

(d) Breakdown of retirement benefit costs(1) Overview of retirement benefit scheme adopted by the Bank
As defined-benefit type plans, the Bank has established a contract-type defined
benefit corporate pension plan and a retirement lump-sum payment plan. In
some cases, an extra severance package is provided to employees on theirretirement and so on. In addition, the Bank has set up a retirement benefit trust.
The Bank’s domestic consolidated subsidiaries have established a retirement
lump-sum payment plan as defined-benefit type plans, and a defined
contribution pension plan as defined-contribution type plan. Further, for theretirement lump-sum payment plan of domestic consolidated subsidiaries, net
defined benefit liability and retirement benefit costs are calculated by thesimplified method.

Thousands of
U.S. dollars
2020

Millions of yen
2019
2020
¥58,824
1,730
139
(918)
(2,373)—¥52,638
1,483
482
6,614
(2,393)—$540,512
15,896
1,277(8,435)(21,804)—¥57,403¥58,824$527,455*Retirement benefit costs of domestic consolidated subsidiaries that apply the simplified
method are all recorded within “Service costs.”(b) Reconciliation of pension assets at beginning and end of period

For the fiscal years ended March 31,
Pension assets at beginning of
period ...............................
Expected return on pension
assets...........................
Actuarial differences ...........
Contribution from employer...
Retirement benefits paid ......
Pension assets at end of period .....

Thousands of
U.S. dollars
2020

Millions of yen
2019
2020
¥62,527¥64,551$574,538

739(4,783)2,001(1,565)¥58,919718(3,270)2,038(1,511)¥62,527

6,790(43,949)
18,386(14,380)$541,385(c) Reconciliation of retirement benefit obligations and pension assets at end of period andnet defined benefit liability and net defined benefit asset recorded in the consolidatedbalance sheet

As of March 31,
Retirement benefit obligations offunded plan .........................
Pension assets .........................
Retirement benefit obligations of
unfunded plan ......................
Net amount of liabilities and assets
recorded in consolidated balance
sheet .................................

As of March 31,
Net defined benefit liability.........
Net defined benefit asset ............
Net amount of liabilities and assets
recorded in consolidated balance
sheet .................................

Thousands of
U.S. dollars
2020

Millions of yen
2019
2020
¥ 57,403(58,919)(1,515)—¥ (1,515)¥ 58,824 $ 527,455(62,527) (541,385)(3,702)(13,920)
—

—

(308)
—

(2,260)
—

¥ 884

¥ 938

$ 8,122(e) Remeasurements of defined benefit plans in other comprehensive income
The breakdown of items (before adjusting for tax effects) recorded inremeasurements of defined benefit plans.

For the fiscal years ended March 31,
Actuarial differences .................
Total ....................................

Thousands ofMillions of yen
U.S. dollars
2019
2020
2020
¥(4,111) ¥(10,192) $(37,774)¥(4,111) ¥(10,192) $(37,774)(f) Remeasurements of retirement benefit plans in accumulated other comprehensive
income
The following is a breakdown of items (before adjusting for tax effects) recorded
in remeasurements of retirement benefit plans:

As of March 31,
Unrecognized actuarial differences
Total ....................................

Thousands ofMillions of yen
U.S. dollars
2019
2020
2020
¥(3,031) $(65,634)¥(7,143)¥(3,031) $(65,634)¥(7,143)(g) Items related to pension assets(i) The following is the percentage of total pension assets by main category:
As of March 31,
Bonds ....................................................
Stocks ....................................................
Life insurers’ general account .......................
Other ....................................................
Total .....................................................

¥(3,702)$(13,920)

2020
19%
39
28
14
100%

2019
15%
45
26
14
100%

Note: Total pension assets include retirement benefit trusts established for the
corporate pension plan (18.71% and 20.16 % as of March 31, 2020 and 2019,respectively) and retirement benefit trusts established for the retirement
lump-sum payment plan (19.61% and 20.71% as of March 31, 2020 and 2019,respectively).

(ii) Method for determining expected long-term rate of return on pension assets:
To determine expected long-term rate of return on pension assets, the Bank
considers the current and projected pension asset allocations, as well as
long-term rate of current returns and expected returns from each category
consisting pension assets.
(h) Assumptions for making actuarial calculation
Major assumptions for actuarial calculations at the end of the fiscal year

¥ (3,702) $ (13,920)

Thousands ofMillions of yen
U.S. dollars
2019
2020
2020
¥ 824
¥ 1,836$ 16,870(4,526)(3,351)(30,791)¥(1,515)(246)—*Retirement benefit costs of domestic consolidated subsidiaries that use the simplified
method are recorded in a lump-sum in “Service costs.”(2) Defined benefit plan(a) Reconciliation of retirement benefit obligations at beginning and end of period

For the years ended March 31,
Retirement benefit obligations at
beginning of period ...............
Service costs* ...................
Interest costs ....................
Actuarial differences ...........
Retirement benefits paid ......
Prior service costs ..............
Retirement benefit obligations at
end of period .......................

For the fiscal years ended March 31,
Service costs* .........................
Interest costs ..........................
Expected return on pension assets
Amortization of actuarial
differences ..........................
Amortization of past service costs ...
Retirement benefit costs fordefined benefit plans ..............

Thousands ofMillions of yen
U.S. dollars
2019
2020
2020
¥1,483¥1,730$15,896
482
139
1,277
(718)
(739)
(6,790)1) Discount rate .......................................
2) Expected long-term rate of return ..............
3) Assumed salary increase rate .....................

2020
0.23%
2.00%
3.20%

2019
0.23%
2.00%
3.10%

(3) Defined contribution pension plan
The required contribution to the defined contribution plans of consolidated
subsidiaries was ¥7 million ($64 thousand) and ¥7 million for the years ended
March 31, 2020 and 2019, respectively.

40

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements
25. Stock options

26. Derivative transactions

1. Gain recognized as a result of stock options not being exercised
before expiration for the fiscal years ended March 31, 2020 and2019

Other income .........................

(1) Type of transactions
The Group undertakes the following derivative transactions: interest-rate swaps
and others for interest rate-related transactions; currency swaps, forward
exchange contracts and currency options for currency-related transactions; andbond futures for bond-related transactions.

Thousands ofMillions of yen
U.S. dollars
2019
2020
2020
¥20
¥—
$—

2. Stock option details, size, and changes(1) Stock option details
2012 stock options 2013 stock options 2014 stock options 2015 stock options 2016 stock options
Category and number of grantrecipients ................................

The Bank’s ten
directors

The Bank’s ten
directors

The Bank’s ten
directors(excluding
outside directors)

The Bank’s nine
directors(excluding
outside directors)

The Bank’s eight
directors(excluding
outside directors)

Type and number of stock options
granted (Note) .......................... Common stock:
17,500 shares
Grant date .................................. July 24, 2012
Vesting terms .............................. No vesting terms
Service period .............................. No service period
specifiedExercise period ............................ July 25, 2012 toJuly 24, 2042

Common stock:
17,250 shares
July 23, 2013
No vesting terms
No service period
specified
July 24, 2013 toJuly 23, 2043

Common stock:
13,660 shares
July 25, 2014
No vesting terms
No service period
specified
July 26, 2014 to
July 25, 2044

Common stock:9,430 shares
July 24, 2015
No vesting terms
No service period
specified
July 25, 2015 toJuly 24, 2045

Common stock:
13,770 shares
July 26, 2016
No vesting terms
No service period
specified
July 27, 2016 toJuly 26, 2046

Note: Converted to the number of shares equivalent to that after the 1-for-10 reverse stock split implemented on October 1, 2018.

(2) Stock option size and changes(a) Number of stock options(2) Aims and policy
The Bank offers derivative products to meet customer needs, and to minimize
risk from exchange rate and interest rate fluctuations regarding the Bank’s assets
and liabilities.
Fair value of interest rate-related transactions as of March 31,
2020 and 2019 were as follows:

2020
Over the Counter
Interest rate swaps:
Fixed ratereceivable/variable rate
payable ..........
Variable ratereceivable/fixed
rate payable.....
Others:Sell ..................
Buy ..................
Total ...................

2012 stock options 2013 stock options 2014 stock options 2015 stock options 2016 stock options
Prior to vesting (shares):
Prior fiscal year end .................
Granted ................................
Expired ................................
Vested shares .........................
Unvested shares ......................
After vesting (shares):
Prior fiscal year end .................
Vested shares .........................
Exercised ..............................
Expired ................................
Unexercised...........................

1,460
—
—
—
1,460

2,880
—
—
1,440
1,440

3,420
—
—
1,140
2,280

3,440
—
—
860
2,580

8,120
—
—
2,960
5,160

—
—
—
—
—

—
1,440
1,440
—
—

—
1,140
1,140
—
—

—
860
860
—
—

—
2,960
2,960
—
—

Note: Converted to the number of shares equivalent to that after the 1-for-10 reverse stock split implemented on October 1, 2018.

2019
Over the Counter
Interest rate swaps:
Fixed ratereceivable/variable rate
payable ..........
Variable ratereceivable/fixed
rate payable.....
Others:Sell ..................
Buy ..................
Total ...................

Millions of yen
Contracted value
Appraised
Total
Over 1 year Fair value profit/(loss)¥21,920¥20,186¥ 634

Note: Converted to the price equivalent to that after the 1-for-10 reverse stock split implemented on October 1, 2018.

3. Method for estimating number of vested stock options
In general, as it is difficult to rationally estimate the future number of expired
stock options only the actual number of expired stock options is reflected.

41

2020
Over the Counter
Interest rate swaps:
Fixed ratereceivable/variable rate
payable ..........
Variable ratereceivable/fixed
rate payable.....
Others:Sell ..................
Buy ..................
Total ...................

2020
Over the Counter
Currency swaps ......
Forward exchange
contracts:
Sell ...............
Buy ...............
Currency options:Sell ...............
Buy ...............
Others:Sell ...............
Buy ...............
Total ...................

¥ 634

21,92020,186

(360)

(360)

6,699
6,699

6,699
6,699

(9)
9
¥ 273

100
(17)
¥ 357

Millions of yen
Contracted value
Appraised
Total
Over 1 year Fair value profit/(loss)¥21,740¥20,405

¥ 681

¥ 681

21,74020,405

(390)

(390)

5,120
5,120

5,110
5,110

(5)
5
¥ 290

88
(19)
¥ 360

(b) Unit price information (in year)
2012 stock options 2013 stock options 2014 stock options 2015 stock options 2016 stock options
Exercise price .............................. Per share: ¥1 Per share: ¥1 Per share: ¥1 Per share: ¥1 Per share: ¥1
Average price at exercise................. Per share: ¥ — Per share: ¥2,221 Per share: ¥2,221 Per share: ¥2,221 Per share: ¥2,221
Fair value on grant date .................. Per share: ¥2,560 Per share: ¥3,210 Per share: ¥3,350 Per share: ¥4,090 Per share: ¥2,850

Fair value of currency-related transactions as of March 31, 2020 and 2019 wereas follows:

Thousands of U.S. dollars
Contracted value
Appraised
Total
Over 1 year Fair value profit/(loss)$201,415$185,481$ 5,825$ 5,825

201,415

185,481(3,307)(3,307)61,55461,55461,55461,554(82)
82$ 2,508918(156)$ 3,280

2019
Over the Counter
Currency swaps ......
Forward exchange
contracts:
Sell ...............
Buy ...............
Currency options:Sell ...............
Buy ...............
Others:Sell .....................
Buy .....................
Total ...................

Millions of yen
Contracted value
Appraised
Total
Over 1 year Fair value profit/(loss)¥71,942¥35,296¥

86,83243,306

636
1,099

57
207

57
207

315,412315,412226,181
226,181(9,524)
9,524

5,833
(2,688)

14,462
14,462

14,462
14,462

96
(96)
278

96
133
¥ 3,652

¥

13

¥

13

Millions of yen
Contracted value
Appraised
Total
Over 1 year Fair value profit/(loss)¥246,303¥66,554¥25

38,70445,169

7,431
5,150

(135)
312

(135)
312

326,412326,412

227,707
227,707(10,142)
10,1425,377(2,363)

5,172
5,172

5,172
5,172

75
(75)
201

75
2
¥ 3,293¥¥25

Thousands of U.S. dollars
Contracted value
Appraised
Total
Over 1 year Fair value profit/(loss)

2020
Over the Counter
Currency swaps ...... $ 661,049 $ 324,322
Forward exchange
contracts:
Sell ...............
797,868
5,843
Buy ...............
397,923
10,098Currency options:Sell ............... 2,898,208 2,078,296
Buy ............... 2,898,208 2,078,296
Others:Sell ...............
132,886
132,886
Buy ...............
132,886
132,886
Total ...................

$

119

$

119

523
1,902

523
1,902

(87,512)87,51253,597(24,699)

882(882)$ 2,554882
1,222$ 33,556

42

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements(3) Derivative transactions subject to hedge accounting
The following are the contracted value or the amount equivalent to the principal and the fair value for each type of derivative transaction subject to hedge accounting asof the end of the fiscal year, as well as the fair value calculation method. The contracted value, other price or value below does not indicate by itself the market risk of thederivative transaction.
(a) Interest rate-related transactions
As of March 31, 2020

Hedge accounting method

Type
Main hedged item
Interest rate swaps
securities
General accounting rules Variable rate receivable/fixed Available-for-sale(bonds)rate payable
Total

Contracted value

Millions of yen
Contracted value over
1 year¥301,252¥301,252

Fair value¥(10,681)¥(10,681)

Hedge accounting method

Type
Main hedged item
Interest rate swaps
securities
General accounting rules Variable rate receivable/fixed Available-for-sale(bonds)rate payable
Total

Contracted value¥119,000¥50,000

Fair value¥(1,450)¥(1,450)

As of March 31, 2020

Hedge accounting method

TypeInterest-rate swaps
General accounting rules Variable rate receivable/fixed
rate payable
Total

Main hedged item
Available-for-sale securities(bonds)Thousands of U.S. dollars
Contracted value
Contracted value
over 1 year
$2,768,097$2,768,097

Fair value$(98,143)$(98,143)

Notes: 1. In general, deferred hedge accounting method is applied to hedging transactions for interest rate risk arising from financial assets.
2. Calculation of fair value
Fair value is calculated based on the discounted cash flow method, etc.

(b) Currency-related transactions
As of March 31, 2020

Hedge accounting method

Type
Currency swaps
General accounting rules
Monetary swaps

Main hedged item
Foreign currency receivables
Total

Contracted value¥29,784
32,589Millions of yen
Contracted value over
1 year¥24,343—

Fair value
¥ 66
(242)
¥(176)

As of March 31, 2019

Hedge accounting method

Type
Currency swaps
General accounting rules
Monetary swaps

Main hedged item
Foreign currency receivables
Total

Contracted value¥79,387
27,804

Millions of yen
Contracted value over
1 year¥30,551—

Fair value¥(605)(61)¥(666)

As of March 31, 2020

Hedge accounting method
General accounting rules

Type
Currency swaps
Monetary swaps

Main hedged item
Foreign currency receivables
Total

Thousands of U.S. dollars
Contracted value overContracted value
1 year$273,674$223,679—
299,448

Fair value$ 606(2,223)$(1,617)

Notes: 1. In general, deferred hedge accounting is applied according to “Accounting and Auditing for Foreign Currency Transactions in the Banking Industry” (JICPA Industry Audit Committee
Report No. 25).
2. Calculation of fair value
Fair value is calculated based on the discounted cash flow method, etc.

43(1) Overview of reportable segments
Reportable segments are the Group’s constituent business units for which separate financial data can be obtained and that are examined periodically by the Board of
Directors for the purposes of determining the allocation of management resources and evaluating operating results.
The Group is engaged mainly in banking activities. Consolidated subsidiaries provide financial services primarily engaging in leasing activities. The Bank and its
individual consolidated subsidiaries, which comprise a corporate group, each prepare business and other plans while developing business activities.
As a result, the Group has identified the two reportable segments of banking and leasing, which comprise the basic segments of the Bank and its individual consolidated
subsidiaries by operation. Operations under the banking segment include the provision of services relating deposits, loans, marketable securities and related investment aswell as foreign currency exchange. Operations under the leasing segment include leasing and other operations conducted by Hyakujushi Lease Co., Ltd.
(2) Calculation methods for ordinary income, profit and loss, assets and liabilities and other items by reportable segment
The method of accounting treatment applied to reportable segments is the same as that described in “3. Significant accounting policies.”
Moreover, reportable segment profit is based on ordinary profit.
Intersegment ordinary income is based on transaction prices between third parties.
(3) Information regarding ordinary income, profit and loss, assets and liabilities and other items by reportable segment
Information about reportable segments of the Bank and its consolidated subsidiaries for the years ended March 31, 2020 and 2019 is as follows:

As of March 31, 2019
Millions of yen
Contracted value over
1 year

27. Segment information

2020
Ordinary income:Outside customers ...........................
Inter-segment transactions ..................
Total ..................................................
Segment profit ......................................
Segment assets ......................................
Segment liabilities ..................................
Other items: ........................................
Depreciation ..................................
Interest income ...............................
Interest expenses .............................
Gain from disposal of tangible assets ......
State subsidy...................................
Other extraordinary income ...............
Loss from disposal of tangible assets ......
Impairment losses ............................
Loss on tax purpose reduction entry oftangible assets ..............................
Other extraordinary loss ....................
Tax expenses ..................................
Increases in tangible fixed assets andintangible fixed assets .....................

2019
Ordinary income:Outside customers ...........................
Inter-segment transactions ..................
Total ..................................................
Segment profit ......................................
Segment assets ......................................
Segment liabilities ..................................
Other items: ........................................
Depreciation ..................................
Interest income ...............................
Interest expenses .............................
Gain from disposal of tangible assets ......
State subsidy...................................
Other extraordinary income ...............
Loss from disposal of tangible assets ......
Impairment losses ............................
Loss on tax purpose reduction entry oftangible assets ..............................
Other extraordinary loss ....................
Tax expenses ..................................
Increases in tangible fixed assets andintangible fixed assets .....................

Leasing¥

66,871644¥ 67,515¥ 10,687¥4,931,606¥4,695,651¥ 7,749531¥ 8,281¥ 204¥32,923¥28,508

74,6201,175¥ 75,796¥ 10,892¥4,964,529¥4,724,160¥ 2,107
3,670¥ 5,778¥ 1,303¥22,080¥ 9,818

76,728
4,846¥ 81,575¥ 12,195¥4,986,610¥4,733,978¥—(4,846)¥ (4,846)¥ (212)¥(32,663)¥(29,863)

¥

¥

¥

¥

¥

¥

¥

¥

104
225
87
51
—
112
0
—

¥

3,006
42,914
5,264
55
—
112
79
1,090

282
74
49
—
—
—
7
—

Total
¥

3,288
42,989
5,313
55
—
112
87
1,090

Adjustment

Consolidated
total

Banking

2,901
42,689
5,177
4
—
—
79
1,090

Total

Millions of yen
Otherbusinesses

91
(401)
(130)
(0)
—
—
—
—

76,728—¥ 76,728¥ 11,982¥4,953,946¥4,704,115
3,380
42,587
5,183
54
—
112
87
1,090

—
—
2,618

—
5
94

—
5
2,713

—
—
510

—
5
3,224

—
—
27

—
5
3,251

2,057

7

2,064

416

2,481

68

2,549

Adjustment

Consolidated
total

Banking

Leasing

68,038791¥ 68,830¥
9,155¥4,876,689¥4,603,241¥ 7,118587¥ 7,705¥ 226¥29,893¥25,630¥

75,157
1,378¥ 76,535¥
9,382¥4,906,582¥4,628,871¥ 2,039
3,819¥ 5,858¥ 1,592¥21,672¥ 9,943¥

77,196
5,198¥ 82,394¥ 10,974¥4,928,255¥4,638,815¥—(5,198)¥ (5,198)¥ (544)¥(32,630)¥(29,767)

¥

¥

¥

¥

¥

¥

¥

¥

¥

2,780
44,723
7,427
34
57
—
89
1,450

Total

Millions of yen
Otherbusinesses

97
319
79
0
—
6
0
—

2,877
45,042
7,507
34
57
6
90
1,450

303
242
54
—
—
—
13
—

Total

3,180
45,284
7,562
34
57
6
104
1,450

93
(818)
(236)
(1)
—
—
—
—

77,196—¥ 77,196¥ 10,430¥4,895,624¥4,609,048
3,274
44,466
7,325
32
57
6
104
1,450

57
—
2,599

—
100
(5)

57
100
2,593

—
—
501

57
100
3,095

—
—
19

57
100
3,114

3,213

5

3,218

209

3,427

92

3,520

44

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements

Banking2020
Ordinary income:Outside customers ........................... $ 614,453
Inter-segment transactions ..................
5,917
Total .................................................. $ 620,371
Segment profit ...................................... $98,199Segment assets ...................................... $45,314,766
Segment liabilities .................................. $43,146,659
Other items: ........................................
Depreciation .................................. $26,656
Interest income ...............................
392,253
Interest expenses .............................
47,569Gain from disposal of tangible assets ......
36
State subsidy...................................
—
Other extraordinary income ...............
—
Loss from disposal of tangible assets ......
725
Impairment losses ............................
10,015
Loss on tax purpose reduction entry oftangible assets ..............................
—
Other extraordinary loss ....................
—Tax expenses ..................................
24,055
Increases in tangible fixed assets andintangible fixed assets .....................
18,901Thousands of U.S. dollars
Other
Total
businesses
Total

Leasing$ 71,202
4,879$ 76,091$ 1,874$302,517$261,949
$

955
2,067
799
468
—
1,029
0
—

$

685,656
10,796$ 696,462$ 100,082$45,617,283$43,408,618$$ 19,360
33,722$ 53,091$ 11,972$202,885$ 90,214

27,621
394,32148,369
505
—
1,029
725
10,015$ 2,591
679
450
—
—
—
64
—

—
45
863

—
45
24,928

—
—
4,686

64

18,965

3,822

Adjustment$

705,026
44,528$ 749,563$ 112,055$45,820,178$43,498,833$

30,212395,010
48,819
505
—
1,029
799
10,015

Consolidated
total

$

— $ 705,026(44,528)—$ (44,528) $ 705,026$ (1,947) $ 110,098$(300,128) $45,520,040$(274,400) $43,224,432$

836 $(3,684)(1,194)
(0)
—
—
—
—

31,057391,316
47,624
496
—
1,029
799
10,015—45
29,624

—
—
248

—
45
29,872

22,797624

23,421

Notes: 1. In place of sales, which are usually posted by companies other than banks, the Bank and its consolidated subsidiaries report ordinary income. In addition, adjusted differences arerecorded as the difference between ordinary income and ordinary income recorded on consolidated statements of income.
2. The Other businesses segment is comprised of business segments not included in reportable segments and mainly consists of credit card and credit guarantee operations.
3. The adjusted amounts of segment profit, segment assets, segment liabilities, depreciation, interest income, interest expenses, gain from disposal of tangible assets, tax expenses andincreases in tangible fixed assets and intangible fixed assets are recorded as eliminations.
4. Segment profit is adjusted with ordinary profit recorded on consolidated statements of income.

(Associated information)
1. Information on each service
Millions of yen
2020
Income from external customers ..........................

Lending services¥29,812Securities investment
services¥24,360

Leasing services¥7,749Securities investment
services¥23,255

Lending services¥31,881

Leasing services¥7,118

2020
Income from external customers ..........................

Thousands of U.S. dollars
Securities investment
Lending services
services
Leasing services$273,931$223,835$71,202

Other¥14,805

Total¥76,728

Other¥14,941

Other$136,037

Total¥77,196

Total$705,026

2. Information on each area
(1) Ordinary income
Information is omitted since the amount attributed to income from external customers in Japan accounts for more than 90% of the ordinary income in the
consolidated statements of income.
(2) Tangible fixed assets
Information is omitted since the amount attributed to tangible fixed assets located in Japan accounts for more than 90% of the tangible fixed assets in the
consolidated balance sheets.
3. Information on each major customer
Information is omitted since there are no specific customers from whom ordinary income accounts for 10% or more of ordinary income in the consolidated statements
of income.

45

Millions of yen
2020
Impairment losses on fixed assets ..........................

Securities investment
Lending services
services¥1,090¥—2019
Impairment losses on fixed assets ..........................

Securities investment
Lending services
services¥1,450¥—2020
Impairment losses on fixed assets ..........................

Thousands of U.S. dollars
Securities investment
Lending services
services
Total$10,015$—$10,015

Total¥1,090

Other
¥—

Total
¥1,090¥—Total¥1,450$—

Total$10,015

Millions of yen

28. Related-party transactions

Not applicable to the fiscal years ended March 31, 2020 and 2019.

29. Per share data

Amounts per share as of March 31, 2020 and 2019 and for the fiscal years thenended were summarized as follows:
Yen
U.S. dollars
2019
2020
2020
Net assets per share .................... ¥8,461.18 ¥9,708.42$77.746
Basic earnings per share ...............
189.25261.35
2.401
Diluted earnings per share ............
189.05261.222.400

Net assets ..............................
Amount excluded from net assets .
(of which, share subscription
rights) ...............................
Net assets attributable to common
stock at the fiscal year-end ......
Number of common stock at the
fiscal-year end for calculation of
net assets per share (inthousands) ..........................

Total¥1,450

Other

Other

3. The Bank’s own stock remaining in the BIP Trust recorded as treasury stock instockholders’ equity is included in treasury stock to be deducted in thecalculation of net assets per share, basic earnings per share, and diluted earnings
per share.
The number of the said treasury stock deducted at year- end in the calculationof net assets per share was 54 thousand shares and 59 thousand shares as of March
31, 2020 and 2019, respectively. Moreover, the average number of the said
treasury stock deducted in the calculation of basic earnings per share and diluted
earnings per share during the year was 56 thousand shares and 60 thousand
shares for the fiscal years ended March 31, 2020 and 2019, respectively.
4. The Bank implemented a 1-for 10 reverse stock split as of October 1, 2018.
Basic and diluted earnings per share figures are calculated based on theassumption that the reverse stock split was implemented at the beginning of the
fiscal year ended March 31, 2019.

30. Borrowed money

The weighted average interest rate applicable to the total balance of borrowed
money as of March 31, 2020 is 0.21%.

Notes: 1. Net assets per share figures are calculated on the basis of the following.

Millions of yen
2019
Income from external customers ..........................

(Information on impairment losses on fixed assets by reportable segment)
Information regarding impairment losses on fixed assets by reportable segment for the years ended March 31, 2020 and 2019 was as follows:

Millions of yen,Thousands of
except number of shares
U.S. dollars
2019
2020
2020
¥286,576 $2,295,607¥249,831
61
41
376
41

61

376

249,790

286,514

2,295,231

29,521

29,511

Annual maturities of borrowed money as of March 31, 2020 are as follows:

Up to 1 year
Over 1 year, up to 2 years
Over 2 years, up to 3 years
Over 3 years, up to 4 years
Over 4 years, up to 5 years
Over 5 years

Millions of yen¥187,409
81,336
31,678
2,349
1,370
1,466

Thousands of
U.S. dollars$1,722,034
747,367
291,077
21,584
12,58813,4702. Basic and diluted earnings per share figures are calculated on the basis of thefollowing.

Basic earnings per share
Profit attributable to owners ofparent ............................
Amount not attributable tocommon stockholders ........
Profit attributable to common
stockholders ....................
Average number of common
stock during the year (inthousands) ......................
Diluted earnings per share ..........
Increase in number of common
stock (in thousands) ...........
(of which, sharesubscription rights) ........

Millions of yen,
except number of shares
2019
2020

Thousands of
U.S. dollars
2020¥7,715¥5,584$70,890

—

—

—

7,715

5,584

70,89029,51929,505

14

30

14

30

46

Independent Auditor’s Report

The Board of Directors
The Hyakujushi Bank, Ltd.
OpinionWe have audited the accompanying consolidated financial statements of The Hyakujushi
Bank, Ltd. and its consolidated subsidiaries (the Group), which comprise the consolidated balance
sheet as at March 31, 2020, and the consolidated statements of income, comprehensive
income, changes in net assets, and cash flows for the year then ended, and notes to the consolidated
financial statements.
In our opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Group as at March 31, 2020, and its
consolidated financial performance and its consolidated cash flows for the year then ended inaccordance with accounting principles generally accepted in Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for
the Audit of the Consolidated Financial Statements section of our report. We are independent of
the Group in accordance with the ethical requirements that are relevant to our audit of theconsolidated financial statements in Japan, and we have fulfilled our other ethical responsibilities
in accordance with these requirements. We believe that the audit evidence we have obtained issufficient and appropriate to provide a basis for our opinion.
Responsibilities of Management, the Audit and Supervisory Committee for the Consolidated
Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated
financial statements in accordance with accounting principles generally accepted in Japan, and forsuch internal control as management determines is necessary to enable the preparation of
consolidated financial statements that are free from material misstatement, whether due to fraud
or error.
In preparing the consolidated financial statements, management is responsible for assessing theGroup’s ability to continue as a going concern and disclosing, as required by accounting principles
generally accepted in Japan, matters related to going concern.
The Audit and Supervisory Committee is responsible for overseeing the Group’s financial
reporting process.

47

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error, and toissue an auditor’s report that includes our opinion. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these consolidated financial
statements.
As part of an audit in accordance with auditing standards generally accepted in Japan, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:・ Identify and assess the risks of material misstatement of the consolidated financial
statements, whether due to fraud or error, design and perform audit procedures responsive tothose risks, and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion.
・ Consider internal control relevant to the audit in order to design audit procedures that areappropriate in the circumstances for our risk assessments, while the purpose of the audit of
the consolidated financial statements is not expressing an opinion on the effectiveness of theGroup’s internal control.
・ Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
・ Conclude on the appropriateness of management’s use of the going concern basis ofaccounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Group’s ability tocontinue as a going concern. If we conclude that a material uncertainty exists, we are required
to draw attention in our auditor’s report to the related disclosures in the consolidated financial
statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the Group to cease to continue as a going concern.
・ Evaluate the overall presentation, structure and content of the consolidated financial
statements, including the disclosures, and whether the consolidated financial statements
represent the underlying transactions and events in a manner that achieves fair presentation inaccordance with accounting principles generally accepted in Japan.
・ Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the groupaudit. We remain solely responsible for our audit opinion.
We communicate with the Audit and Supervisory Committee regarding, among other matters, theplanned scope and timing of the audit and significant audit findings, including any significant
deficiencies in internal control that we identify during our audit.
We also provide the Audit and Supervisory Committee with a statement that we have compliedwith the ethical requirements regarding independence that are relevant to our audit of the financial
statements in Japan, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.

48Interest Required to Be Disclosed by the Certified Public Accountants Act of Japan
Our firm and its designated engagement partners do not have any interest in the Group which is
required to be disclosed pursuant to the provisions of the Certified Public Accountants Act ofJapan.
Convenience Translation
The U.S. dollar amounts in the accompanying consolidated financial statements with respect tothe year ended March 31, 2020 are presented solely for convenience. Our audit also included thetranslation of Japanese yen amounts into U.S. dollar amounts and, in our opinion, such translation
has been made on the basis described in Note 1 to the consolidated financial statements.

Ernst & Young ShinNihon LLC
Tokyo, Japan
June 26, 2020

長 尾 礎 樹㊞
Motoki Nagao
Designated Engagement Partner
Certified Public Accountant

川 口 輝 朗㊞
Teruaki Kawaguchi
Designated Engagement Partner
Certified Public Accountant

49

Corporate Information

Corporate Information

Profile (as of March 31, 2020)

Overseas Support Organizations

Head Office
Established
Total assets
Deposits and negotiable certificates of deposit
Loans and bills discounted
Paid-in capital
Total shares issued
Employees
OfficesNon-branch ATMs and CDs

5-1 Kamei-cho, Takamatsu, Kagawa
November 1, 1878
¥4,934.8 billion¥4,168.3 billion¥2,855.3 billion¥37.3 billion
30,000 thousand shares
2,157
125 (Head Office, 99 branches, 21 sub-branches, 1 Quick Square, 4 Consulting Plaza)
Overseas Representative Offices: 2 (Shanghai, Singapore)
161 locations

VietnamBusiness cooperation
VIETCOMBANK
Foreign Investment Agency
Business collaboration
HDBank(Bank staff deployment)

China
Representative Office

India
Business collaboration
State Bank of India
TaiwanBusiness collaboration
CTBC Holding Co., Ltd.

ThailandBusiness collaboration
KASIKORNBANK Public Company Limited(Bank staff deployment)

Organization (as of July 1, 2020)

the Philippines
Business collaboration
Metropolitan Bank and Trust Company

The Hyakujushi Bank

General Meeting of Shareholders
Board of Directors
ChairmanPresident
Vice President
Directors
Nomination and Remuneration GovernanceCommittee
Audit and Supervisory Committee
Audit and Supervisory
Committee Members

VariousCommittees
Executive
Committee

MexicoBusiness cooperation
Mexico State Government
Estado de Aguascalientes
JaliscoGuanajuato
Nuevo LeónEl Banco Nacional deMéxico (Banamex)

Corporate Headquarters[Corporate Administration Sector]
Corporate Strategy Office
Corporate Planning Group
Corporate Planning
Financial Affairs Group
Division
Public Relations and CSR GroupTokyo Liaison Office
Risk Control Division

Risk Control Group
Credit Risk Control Group

Compliance Management
Division

Legal Compliance Group
Money Laundering Countermeasures Group

General Administration
Division

Compliance and Legal Affairs Office
General Administration Group
General Affairs Administration Group

Personnel Division

Personnel Planning Group
Salary and Welfare Group
Personnel Development GroupOperations Supervision
Division

Operations System Supervision GroupOperations Management GroupOperations Guidance Group
Systems Planning Group
Systems Management Group

Central Operations
DivisionCentral Operations Center
Operations Center
Business Support Center
Branch Support Center
Central Receivables Documents Center

Executive Secretariat
Office[Market Sector]

Treasury andInternational Division

Business and Planning Group
Market Business Group
Securities Operation Group
Market Management Group
Fund Securities Management Group
Foreign Exchange Business Support Group
Overseas Representative Offices

Singapore
Representative Office
Registered in Singapore

List of Major Shareholders (as of March 31, 2020)
Name

Subsidiaries
Nihonbashi FudosanCo., Ltd.
Central Business
Division
Branches

Hyakujushi Business
Service Co., Ltd.

Sub-branches

Hyakujushi Jinzai
Center Corporation

Deposit andExchange
Operations Area
liaison & Loan
Operations Area

Hyakujushi Saita
Agency Co., Ltd.

Central Foreign
Exchange Branch

The Hyakujushi System
Service Co., Ltd.
The Hyakujushi JCB
Card Co., Ltd.

[Marketing Related Sector]
Business Strategy
Division

Business Strategy Group
Channel Strategy Group
Branch Management Group
Customer Service Center

Regional Vitalization
Division

Regional Vitalization Group

Solution Promotion
Division

Consulting Group
Asset Accumulation Group

Business Support
Division

Loan Business Center
Asset Business Center
DB Center

The Hyakujushi DC
Card Co., Ltd.

Credit Supervision
Division

Auditing DivisionInspection Group
Risk Audit Group

Hyakujushi Lease
Co., Ltd.

of shares held to the total
No. of shares held Ratio
number of shares outstanding(thousand shares) (excluding
treasury shares) (%)

Address

Japan Trustee Services Bank, Ltd. (Trust Account)
The Master Trust Bank of Japan, Ltd. (Trust Account)
Nippon Life Insurance Company
Japan Trustee Services Bank, Ltd. (Trust Account 9)
NH Foods Ltd. (Note) 2
TAIHEIYO CEMENT CORPORATION (Note) 3
Hyakujushi Bank Employee Shareholding Association
Meiji Yasuda Life Insurance Company
SUMITOMO LIFE INSURANCE COMPANY
Tadano Ltd.
Total

8-11, Harumi 1-Chome, Chuo-ku, Tokyo
11-3, Hamamatsu-cho 2-Chome, Minato-ku, Tokyo
6-6, Marunouchi 1-Chome, Chiyoda-ku, Tokyo
8-11, Harumi 1-Chome, Chuo-ku, Tokyo
4-9, Umeda 2-Chome, Kita-ku, Osaka
3-5, Daiba 2-Chome, Minato-ku, Tokyo
5-1 Kamei-cho, Takamatsu-shi, Kagawa Prefecture
1-1, Marunouchi 2-Chome, Chiyoda-ku, Tokyo
18-24, Tsukiji 7-Chome, Chuo-ku, Tokyo
34, Shindenchoko, Takamatsu-shi, Kagawa Prefecture
–

1,552
1,006
900
777
632
595
571
569
500
438
7,544

5.25
3.40
3.04
2.62
2.13
2.01
1.93
1.92
1.69
1.48
25.50

(Notes)1. The 423 thousand treasury shares held by the Bank are excluded from the number of shares outstanding.
2. The number of shares held by NH Foods Ltd. includes 500 thousand shares that have been contributed to the retirement benefit trust; however, the right to provide instructions for the voting rights to those shares has
been retained by NH Foods Ltd.
3. The number of shares held by TAIHEIYO CEMENT CORPORATION includes 595 thousand shares that have been contributed to the retirement benefit trust; however, the right to provide instructions for the voting
rights to those shares has been retained by TAIHEIYO CEMENT CORPORATION.

Active Shareholder Return
In order to realize the Bank’s Corporate Vision of “ensuring sound business management and enhancing corporate value,” while
endeavoring to improve our equity capital by increasing retained earnings, the Bank is also working to improve the satisfaction of
our shareholders by continuing to pay stable dividends.
(Billions of yen)

Total dividend amount

10.0

Dividend payout ratio Status of dividends

23.1%

30.6%

Number of shareholders

Individuals

FY2017

13,846

13,00010,0002.3

Trends of Number of
Share Unit Holders

10,7625.0

0(Persons)

16,00047.6%

Hyakujushi Sogo
Hosho Co., Ltd.
Consulting Plaza Branch

Credit Planning Group
Credit Department
Ship Financing Office
Management Support Group
Credit Management Group
Real Estate Valuation and Financial Registration CenterIndonesia
Business collaboration
PT. Bank Negara Indonesia (Persero) Tbk.
(Bank staff deployment)

2.6

FY20182.3

FY2019

7,000
4,000

8,368

8,293

7,317

7,273

March 31,2016

March 31,
2017

8,850

12,878

9,777

7,869
March 31,2018

March 31,2019

March 31,
2020

Audit and Supervisory Committee Members’ Office50

Th e Hyakujushi Bank, Ltd .

Integrated Rep ort 202051

THE HYAKUJUSHI BANK, LTD.
5-1, Kamei-cho, Takamatsu, Kagawa 760-8574, Japan
http://www.114bank.co.jp