Annual Report 2016
The Hyakujushi Bank, Ltd.

The Hyakujushi Bank, Ltd. / Annual Report 2016

Who we are
Hyakujushi has the meaning of 114 in Japanese.
The Hyakujushi Bank, Ltd., was established as
Japan’s 114th national bank.

The Hyakujushi Bank,in Numbers

We were established in 1878 in the city of
Takamatsu, the capital of Kagawa Prefecture,
centered on Shikoku, one of the major islandsof Japan.

Due to the early establishment of offices in otherprefectures, the Bank now possesses one of themost extensive networks of branch offices for aregional bank. We will bring together customers
from both the local area and outside our prefecture

Indicator (Financial)

Indicator (Non-financial)

Deposits and negotiablecertificates of deposit

Percentage of managerial
positions held by females¥

so that they can build a relationship.

4,125.5billionLoans and bills discounted¥

2,752.5billion20.1%

Number of shareholders

8,368

Profile (Non-consolidated) (As of March 31, 2016)01

Head Office:5-1, Kamei-cho, Takamatsu, Kagawa

Established:

November 1, 1878

Total assets:¥4,701.6 billion

Deposits and negotiablecertificates of deposit:¥4,125.5 billion

Loans and bills discounted:¥2,752.5 billion

Paid-in capital:¥37.3 billion

Total shares issued:

310,076 thousand shares

Capital ratio:

9.38%

Employees:

2,315

Offices:124 (Head office, 103 branches, 21 sub-branches)

Non-branch ATMs:

221 machines in 175 locations

Capital ratio (consolidated)

9.59

%

Years of establishment

138

02

The Hyakujushi Bank, Ltd. / Annual Report 2016

History of the Hyakujushi Bank
In 1872, Japan adopted a banking system, and the Regulation of National Bank was promulgated. 153 nationalbanks from the First National Bank to the One Hundred Fifty-Third National Bank were founded pursuant to thisregulation throughout Japan in between 1872 and 1879. The Hyakujushi Bank was founded as Japan’s 114th
national bank in Takamatsu City, Kagawa Prefecture. The Hyakujushi Bank is a bank with tradition that hasremained steadfast for many years as a leader of Kagawa Prefecture’s economy, and it is one of a few banks withnumbers in their names.

Since 1878
1Opening of Singapore Representative Office

1973• Entered into a correspondent banking relationships withfive overseas banks• Was listed on the First Section of Tokyo and Osaka Stock Exchanges

3

4

1 Building used at the time of the establishment (around 1887)“View of prosperous Hyakujushi Bank” by Mitsui Atsuo
2 Former Head Office (currently Takamatsu Branch)
3 Former Head Office damaged by air raids in World War II(rightmost building)
4 Present Head Office

Establishment of “Setouchi Brand Corporation”

2014• The 125th anniversary of the founding• Established the 1st Hyakujushi Venture Fund Cooperation
Limited• Received the “Commendation to Companies Promoting
Equal Employment,” an award presented by Director of
Kagawa Prefectural Labor Standards Bureau (Encouragement Award)• Started services of “114 Direct Insurance Center”• “Association of Regional Bank Presidents to Accelerate
Shining Women’s Active Careers” was launched

2005• Opened Shanghai Representative Office• Established “Regional Infrastructure Promotion Conference” together with the Chance member banks• Introduced a “shareholder special benefit program”

1987

2007

2016

• Became the first regional bank to issue Swiss franc-denominated private
convertible bonds• The balance of deposit reached ¥2 trillion• Started the cooperation on mainframe system forregional bank project, named “Chance” *• The 138th anniversary of the founding• Was certified as an excellent company under the Act toAdvance Women’s Success in their Working Life
• Signed “Agreement on the Activation of the Tourism
Industry in the Setouchi Region” with seven regionalbanks in Setouchi region and the Development Bank ofJapan Inc.,” and established “Setouchi Brand Corporation”• Balances of deposit and loans and bills discounted hit
record high

1978

2

2003

Signing of “Agreement on Mutual Support
in the Event of Large-scale Disasters”• Increased paid-in capital by ¥2 billion to ¥10 billion• The 100th anniversary of the founding• The balance of deposit reached ¥1 trillion• The English trade name was changed to The Hyakujushi Bank, Ltd. or
The 114th Bank, Ltd. (in December)

1997

2008
• The 130th anniversary of the founding• The first female branch manager was appointed• Installed a computer backup system against disasters

2013• Opened Singapore Representative Office2015• Signed “Agreement on Mutual Support in the Event ofLarge-scale Disasters” with Chance member banks

2016
Deposits: ¥ 4.1 trillion
Loans: ¥2.7 trillion* A joint IT system reflecting the common and individual needs of member banks (Joyo Bank, Hyakujushi Bank, Juroku Bank,
Nanto Bank, and Yamaguchi Financial Group), built on the Bank of Tokyo-Mitsubishi UFJ’s mainframe system as a base.

1970s
19th Century

1990s

20th Century

1970• The Japan World Exposition
opened in Osaka

1973• The oil crisis broke out

1979• The second oil crisis broke out

03

1980s

2000s

2010s
Next Stage

21st Century

1985• The Plaza Accord was signed

1989• The Heisei era started• The consumption tax (3%)
was introduced• East Germany’s Berlin Wallwas opened• Tokyo Stock Exchange priceaverage hit a record high of
38,915.87 yen

1995• The World Trade Organization(WTO) commenced• The Great Hanshin-Awaji Earthquake occurred

1997• The consumption tax was raised
from 3% to 5%

2001• September 11 attacks occurred in the US

2005• EXPO 2005 AICHI JAPAN was held

2009

2015

• November 2015 Paris attacks occurred• The TPP was within reach2016• Negative interest rates were introduced• A new flu strain broke out in Mexico and spreadaround the world

1999• The single currency “Euro” waslaunched by 11 EU member
countries

04

The Hyakujushi Bank, Ltd. / Annual Report 2016

Message from the President
I would like to extend our sincere appreciation for your continued support and patronage of the Hyakujushi
Bank, Ltd.
Since our foundation in 1878, we have continued in step with the development of the local communities.

Overview of Fiscal 2015
The Japanese economy during fiscal 2015 has shown signs ofgradual recovery due to brisk consumer spending resulting
from improved employment and income situation, eventhough corporate exports and productions diminished withthe slowdown of emerging economies such as China.
Also, at home in Kagawa, the economy has continued torecover gradually due to the gentle improvement in consumer
spending and stable capital investment as a result of sustained
and steady improvement of supply and demand in labor, eventhough housing investment and corporate productions tended
to level off.
Amid such a financial and economic environment, in our
medium-term management plan “Best Partners Plan” (Plan
term: fiscal 2014 to 2016) which started from April 2014, we
set our goal of becoming “a financial service group that contributes to the future of the community and our customers” asa long-term vision. We strive to improve our corporate values
by implementing various measures to achieve the above goal.
To begin with, the long-term vision embedded in thismedium-term management plan strives to “prosper together
with customers and communities,” which is our corporate
vision, while “creating a vigorous corporate culture” and“ensuring sound business management and enhancing corporate value.”
In order to realize this corporate vision, we need to pursue
our mission as a regional financial institution, contributing to
the sustainable development of the local economies and thecustomer’s future. Through further cooperation with local
governments and active utilization of information and connections we possess, we work to create a dynamic, bustling
region through the revitalization of industry, the creation of
new industries, and the promotion of tourism.
Also, we practice our “customer-centric principle” and takeaction in the position of our customers. We train our staff so
as to provide financial intermediary functions that facilitate
the supply of funds and consulting capabilities that provide
optimal financial services for customer needs, while implementing the “Ikuboss Declaration” in April, 2016 and05

improving the working environment to facilitate a better
work-life balance.
As a result of all these efforts, for fiscal 2015, ordinary
income increased by ¥0.9 billion year-on-year to ¥17.5 billion, and net income increased by ¥2.6 billion year-on-year to¥11.2 billion.
Based on the above results, starting from fiscal 2015, we
increased annual dividends by ¥1, from ¥7 to ¥8 per share inan effort to improve shareholders’ return. Due to the flexible
acquisition of treasury stock responding to the profit environment, shareholder return rate (cumulatively for the period of
the medium-term management plan) became 34.9%. Furthermore, while enhancing shareholders’ satisfaction by anactive return to our shareholders, we will improve the capitalratio through accumulation of internal reserves.

Issues to be tackled
Due to the introduction of the negative interest rate policy by
the Bank of Japan, we and the financial industry have stepped
into an unknown area and the business environment surrounding regional financial institutions is becoming increasingly severe.
Under such conditions, in fiscal 2016, the final year of themedium-term management plan, we will “rigorously promoteretail business opportunities,” “enhance investment capabilities,” and “strengthening of human resources force,” which arebasic strategies of the “Best Partners Plan,” and do our best toachieve all our targets. In addition, along with the aim of
expanding cooperation with local authorities, etc., we willfurther demonstrate our financial intermediary and consulting
functions and actively participate in regional revitalization by
boosting regional economic development.
In order to build up a loyal trust among customers, we will
work with all our efforts to further enhance internal control
systems related to compliance and customer protection as
well as CSR activities including environmental protection andsocial contribution.
We ask for your continued understanding and support inour endeavors.

Tomoki Watanabe, President

06

The Hyakujushi Bank, Ltd. / Annual Report 2016

Our Business ModelIn our Medium-Term Management Plan “Best Partners Plan” (plan period: April 1, 2014 - March 31, 2017
(3 years), we are working on the following two fundamental strategies - “rigorously promote retail business
opportunities” and “enhance investment capabilities” with the aim of achieving our ideal of becoming “a financialgroup that can contribute to the future for our region and customers.”

Improve customer
satisfaction

Improve shareholder
satisfaction• Offering outstanding products/services andimproving their quality• Continuing stable dividend payments• Improving shareholder return policies• Enhancing communication means
No. of unit shareholders (end of Mar. 2016):

8,368• Creating comfortable office environment forcustomers• Working on expanding community-based
financing• Working on facilitating financing
No. of borrowers of business loans(end of Mar. 2016):

17,973

Management Vision:

1. Prosper together with customers and communities. 2. Create a vigorous corporate culture.
Our Medium-Term Management Plan: The “Best Partners Plan”
Our Vision:

A financial group that can contribute to the future of our region and customers

II. Enhance investment capabilities

Partnering with each customer

Managing portfolio withdiversified investments

Corporate banking strategy

Personal banking strategy• Enhancing consulting sales• Defining a regional strategy• Expanding relations• Enhancing life planning capabilities

Increasing contact points with customers
Improving quality of business services

Channel/process innovation

Active asset allocation

Development of human resources

IT strategy

Innovation in administrative processes

Risk management

Compliance

Behavioral guideline: Thorough practice of customer-centric principle07• Securing open personnel system
Strong commitment
to these activities

No. of employees participating invarious activities :4,000 or more (approx.)• Enhancing various training programs• Promoting diversity• Managing “mental” and “physical” healthNo. of employees (end of Mar. 2016):

2,315

3. Ensure sound business management and enhance corporate value.

Management Indices(Final fiscal year (FY 2016) target)¥18 billion or more
ROE (current-term-net-profit base)

3.5% (approx.)
Capital ratio (consolidated)(*)

9% (approx.)
Loan balance¥3 trillion (approx.)III. Strengthening of organization and personnel
Strengthening of human resources force• Activities for local
communities• Environmental
conservation activities• Social contribution
activities• Financial education

Improve employee
satisfaction

Banking businessLeasing business• Hyakujushi Lease

Hyakujushi Bank
Hyakujushi Saita
AgencyCredit card business• Hyakujushi DC Card
• Nishinippon JCB Card

Improving risk return ratiosMore flexible market operations

Risk monitoring

Gain more trust from
communities

Total financial services that Hyakujushi Bank Group can offer

Net operating profit
I. Rigorously promote retail business opportunities

We will continue to work on fulfilling our corporate social responsibilities through various efforts to achieve
the sustainable prosperity of society in cooperation with “customers, communities, shareholders, and employees”
under our management philosophy “Prosper together with customers and communities.”

Deposit balance¥4 trillion or more

Credit guarantee business• Hyakujushi Sogo Hosho

Other businesses• Nihonbashi Fudosan• Hyakujushi Business Service• Hyakujushi Personnel Center• Hyakujushi System Service(*) After taking into account transitionalarrangements based on Basel III (domestic
standard)

08

The Hyakujushi Bank, Ltd. / Annual Report 2016

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Review of Operations

2015

2014

2013

2012

2016

¥81,416
61,927
19,4893,878
2,879¥77,671
60,33917,332
3,562
3,841¥80,592
58,92821,6635,769
3,700¥74,961
64,331
10,6304,939(1,218)¥77,064
63,574
13,4893,202
3,610$722,541
549,582
172,958
34,41625,5501,099
11,632

970
8,957

963
11,230

1,056
5,851

863
5,813

9,753
103,230

AT YEAR-END:
Loans and bills discounted
Securities and trading account securities
Foreign exchange assets
Other assets
Total assets

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

2,696,444
1,454,691
13,507450,4614,615,105

2,614,215
1,335,649
17,446525,899
4,493,211

2,528,403
1,318,454
7,382
280,089
4,134,329

2,424,741 24,381,798
1,215,523 12,558,803
5,470
76,757373,161 4,868,122
4,018,896 41,885,525

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

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

3,971,363
354
347,911
4,319,629

3,953,427
140
282,729
4,236,360

3,652,466
579
229,861
3,882,906

3,583,949 36,506,522
841
1,828
206,250 2,874,174
3,791,041 39,382,596

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

Common stock
37,32237,32237,32237,32237,322331,221
Capital surplus
24,92024,92024,92024,92024,920221,157
Retained earnings
143,886
138,689
129,575
125,848 1,360,800
153,335
Treasury stock(4,730)(4,181)(2,935)(3,266)(6,179)(54,836)
Total stockholders’ equity
201,398
196,751
188,882
184,824 1,858,342
209,398
Net unrealized gains on other securities,
net of taxes
68,952
37,722
38,173
19,24554,256
481,505
Net deferred losses on hedging
instruments, net of taxes(3,010)
(24)
(136)
(69)
(7,806)(69,275)
Revaluation reserve for land
8,722
8,044
8,057
8,083
8,961
79,526
Remeasurements of defined benefit plans
1,631(2,719)——(1,171)(10,392)
Total accumulated other comprehensive
income76,29743,02246,09527,25954,239481,354
Share subscription rights
196
156
120
117
201
1,783
Non-controlling interests
17,583
16,92016,324
15,652
18,190161,430
Total net assets
295,476
256,851
251,422
227,854 2,502,928
282,030
Total liabilities and net assets¥4,719,661 ¥4,615,105 ¥4,493,211 ¥4,134,329 ¥4,018,896 $41,885,525
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 in Japan.
2. U.S. dollar amounts represent translations of Japanese yen at the exchange rate of ¥112.68 to US$1.00 on March 31, 2016.

Attention regarding forward-looking statements
The reader is advised that this report contains forward-looking statements, which are not statements of historical fact but
constitute estimates 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.

Final fiscal year
(FY 2016)
targetItems
Net operating profit¥18 billion or more

ROE (current-term-net-profit base)

9% (approx.)

Loan balance¥3 trillion (approx.)

Deposit balance¥4 trillion or more

Loan share in Kagawa Prefecture(4 business categories)*

43%

Loan balance of small and mediumsized enterprises¥1,960.0 billion

Housing/unsecured loan balance¥530.0 billion

The number of borrowers of businessloans

17,000

Amount of assets under custody(yearly)¥160.0 billion* Share among major banks, first-tier regional banks, second-tier regionalbanks and shinkin banks (including local public entities)

Net operating profit

Capital ratio (consolidated)(Billions of yen)

14.0

15.3

Loan balance

Deposit balance(Billions of yen)

17.2

10.21%

18.0

2,700.0 2,702.1
10.00%

9.50%

2,312.5 2,385.0 2,369.5(Billions of yen)

4,125.5

3,000.0

9.72%

15.0

3,982.6

2,800.0 2,752.5
3,800.03,900.0

4,000.0

9.00%

2,535.1

2,445.8

Risk assets (consolidated)

FY 2014 FY 2014 FY 2015 FY 2015 FY 2016
plan
resultplan
resultplan

Loan share in
Kagawa Prefecture

FY 2014 FY 2014 FY 2015 FY 2015 FY 2016
plan
resultplan
resultplan

FY 2014 FY 2014 FY 2015 FY 2015 FY 2016
plan
resultplan
resultplan

FY 2014 FY 2014 FY 2015 FY 2015 FY 2016
plan
resultplan
resultplan

Loan balance of small andmedium-sized enterprises, etc.

Housing/unsecured loan balance

The number of borrowers ofbusiness loans(Billions of yen)(Billions of yen)

1,960.0
40.89%
41.00%

1,870.0

39.83%
42.00%

43.00%FY 2014 FY 2014 FY 2015 FY 2015 FY 2016
plan
resultplan
resultplan

09

3.5% (approx.)

Capital ratio (consolidated)

Final fiscal year
(FY 2016)
target

Items

Operating base indices2016

Management indicesMillions of yen
For the years ended or as of March 31

The Japanese economy during fiscal 2015 has shown signs of gradual recovery due to brisk consumer spending
resulting from improved employment and income situation, even though corporate exports and productions
diminished with the slowdown of emerging economies starting with China.
Also, at home in Kagawa, the economy has continued to recover gradually due to the gentle improvement in
consumer spending and stable capital investment as a result of sustained and steady improvement of supply anddemand in labor, even though housing investment and corporate productions tended to level off.
Under such circumstances, the Bank steadily implemented the fundamental strategies for its medium-term
management plan “Best Partners Plan”: “rigorously promote retail business opportunities,” “enhance investment
capabilities,” and “strengthen organization and personnel,” and endeavored to achieve various targets. As a result,the Bank’s results for the fiscal year ended March 31, 2016 were as follows:
Net operating profit increased by ¥1,901 million to ¥17,243 million from the previous fiscal year, reflecting
an increased interest income, etc. Deposit balance increased by ¥142,879 million to ¥4,125,576 million fromthe end of the previous fiscal year, reflecting an increase in all of personal, corporate and public deposits. Loanbalance increased by ¥50,437 million to ¥2,752,562 million from the end of the previous fiscal year, reflecting
increased corporate and personal loans despite a decrease in public loans. The Bank proactively worked on housing loans, and as a result, housing loan balance at the end of the fiscal year ended March 31, 2016 increased by¥21,853 million to ¥482,942 million from the end of the previous fiscal year.

Management indicesThousands of
U.S. dollars(Note 1)

Operating base indices

Consolidated Financial Highlights

530.0

1,847.7

1,790.0 1,780.9

FY 2014 FY 2014 FY 2015 FY 2015 FY 2016
plan
resultplan
result
plan

485.0

498.0

17,973

507.6

470.0

FY 2014 FY 2014 FY 2015 FY 2015 FY 2016
plan
resultplan
resultplan

16,73516,00016,50017,000FY 2014 FY 2014 FY 2015 FY 2015 FY 2016
plan
resultplan
resultplan

10

The Hyakujushi Bank, Ltd. / Annual Report 2016

Our Operating Area
Economic environment in Kagawa Prefecture
The local economy of Kagawa Prefecture for the fiscal year
2015 continued to recover moderately, despite the very
weak recovery in housing investment and enterprises’
production, reflecting a moderate recovery of consumer

In Kagawa Prefecture
spending as well as continuous brisk capital investment withthe steady, continuous improvement of labor market
conditions.

1. Major actors are not big companies but small- and medium-sized manufacturers with highproductivity
2. The industrial structure is well-balanced and does not rely on specific types of sector
3. A decline in production is likely to be small even at the face of a large economic downturn, such as
the Lehman collapse (slightly influenced by such events)
In addition, in Kagawa Prefecture, there are many companies called “niche top company,” which boast a high market share in
their respective market, though the size of the market may be small.
* “Niche top company”: A top-share company in its niche area in the world or Japan

3rd

place

National
ranking Items

Leather gloves for sport, including
synthetic leather ones

Share innational
total

1st

5,908
million yen
2,772Japanese-style fans, including frames million
yen
Iron wire gauze, including welded
35,599million yen
wire gauze and wire-cylinders

92.6%

9.8%

3rd Naked barley

6.9%

Sunflowers

3rd Cut-stones and stone products

96,402
million yen
20,397
million yen
6,945
million yen

9.9%

4th Broccoli

4th Steel cargo shipbuilding, power
vessel 20 gross tonnage or more

140,967
million yen

10.7%

5th Winter lettuce

4.5%

7th Yellowtail

4.3%

9th Peach

5th Balances and scales

10th

National
ranking Items

95.4%

Leather handbags

2loan plazas

Major banks
8.91%

Shinkin banks
10.58%The Bank
39.83%First-tier regional banksother than the Bank
12.57%First-tierregional banksother than theBank
19.43%

Deposits

Second-tier regional banks
19.51%Loans

The Bank
48.97%

Second-tier regional banks
21.25%TOPICS

We set up “Setouchi Monitor Girls” in cooperation with Kagawa Prefecture Government, and havebeen disseminating information on attractive features of the region from women’s point of views
through monitoring workshops.

Joining product development project
We collaborated with Takamatsu Mitsukoshi Ltd. (department store) to propose package designs
and prices of products made from vegetables (pickles) produced by devoted farmers and traditional“Niosu” (fine old vinegar).

placen Agricultural, forestry and fishery products
Value ofmanufactured
goods shipped

Knitted gloves for apparel731
million yen
4,934
million yen

53.9%
21.5%

Source: Kagawa Prefecture “Kagawa in the light of 100 Indices” (2016), and METI “Statistics Table(Manufactured goods) in Census of Manufacture 2014”11

Total fertility rate:

3,816
million yen

2nd Japanese noodles

sub-branches +placen Industrial products

Precooked frozen foods

21

A destination-based tourism plan found out at the “Higashikagawa City Monitoring Workshop” heldby the “Setouchi Monitor Girls” was sold as a travel product planned by Shikoku Railway Company.

Deposit/saving balance (per household):

1stbranches +Commercialization of optional tour plan

Indices for Kagawa Prefecture

8th

Major banks
7.23%

63

Shinkin banks
11.72%

The characteristics of the industrial structure of Kagawa Prefecture are as follows:

Jobs-to-applicants ratio:

Densely-connected network of branches of the Bank:

OlivesMarguerite

2nd Garlic
Miniature potted plant

Production

252
tons
3,050,000
pieces720
tons
79,000
pots
2,520
tons
2,251,000
pieces
9,380
tons
16,700
tons
7,332
tons
1,490
tons

Share innational
total

97%

Outside Kagawa Prefecture
Wide-area network of branches of the Bank38

branches in10

prefectures

69%
4%
3%
17%
9%
6%
9%

Features of Setouchi Region
Setouchi Region, including Kagawa Prefecture here with a variety of tourist
attractions around the Inland Sea, has a high growth potential for more visitors
and accumulation of globally competitive industries, .
The Bank, together with other financial institutions in Setouchi Region as wellas companies outside the region, provides management support and financing
to tourism-related companies to aim at maximizing the value of the region.
The Bank established “Setouchi Brand Corporation” in April 2016.

Hiroshima Pref.
Okayama Pref.
Hyogo Pref.

Tokyo Pref.
Aichi Pref.
Osaka Pref.
Tokushima Pref.

Kagawa Pref.

5%1%

Source: Kagawa Prefecture “Kagawa in the light of 100 Indices” (2016) and Survey by Agricultural
Administration and Fisheries Department, Kagawa Prefecture

Kochi Pref.
Ehime Pref.
Fukuoka Pref.

12

The Hyakujushi Bank, Ltd. / Annual Report 2016

TopicsActive Participation in Regional Surface Regeneration

Employment of Overseas Students

Launch of Japanese version of DMO

In response to the increasing sophistication of overseas businesses, the Bank is actively recruiting overseas students and employed
one student each in 2015 and 2016. For 2017, we are proactively working on recruitment activities such as employment seminars
for foreign students, and taking initiatives to train more highly specialized personnel.

The Bank has entered into the “Agreement on the Activation of the Tourism Industry in the Setouchi Region” with seven regionalbanks in the Setouchi region and the Development Bank of Japan Inc. As a result of this agreement, the Bank, financial institutionsin the Setouchi region and companies within and outside of the region have together contributed capital for the establishment of
Setouchi Brand Corporation in April 2016. In an effort to make the Setouchi region a destination of choice for people both insideand outside Japan, the company will provide management and funding support for tourism-related industries in a bid to maximize
value in the Setouchi region.

Promotion of Work-Life Balance
In April 2016, the Bank implemented the “Ikuboss Declaration,” pledging to engage in working-style reform, including the reduction of overtime and encouraging employees to take paid leave, and to support their private lives and the careers of all of our staff
members and customers. In addition, we have become the first company in Shikoku to join the “Ikuboss Corporate Alliance.”

Destination-based Tourism* Support by “Tourism Promotion Desk”
The “Tourism Promotion Desk, which is the point of contact between local
governments and tourism-related associations, takes advantage of our networkand expertise as a local bank and works to implement and cooperate with eachmeasure pertaining to regional activation.
The female employees of the Bank and Kagawa Prefecture have formed the“Setouchi Monitor Girls” who shine a spotlight on industrial tourism in
Kagawa Prefecture and regularly hold training sessions to discover new tourism resources. Since its launch in 2014, eight training sessions have been held.
In November 2015, a tourism plan that was created in Higashikagawa City,
Kagawa Prefecture was released as a tourism product planned by Shikoku Railway Company.

Details of the “Ikuboss Declaration”• The Bank will support both the work and family lives of all of our staff members by improving the efficiency of operations, which will lead to improved productivity, working to
reduce overtime and encourage staff members to take paid leave.
• We will advance working-style reform by becoming an “Ikuboss” who will support the private lives and careers of all our staff and customers in the region so that they will fully enjoy
a work-life balance, which will lead to the achievement of the goals of our organization.
• The Hyakujushi Bank, Ltd. will work to foster a vibrant corporate culture through workingstyle reform and work unitedly so that we contribute to the regional revitalization byachieving the coexistence and co-prosperity of our customers and the regional society.

* Destination-based Tourism: The region taking in tourists (destination) plans high value-added experience-based and cultural exchange-based tourism products
taking advantage of the tourism resources of the region, including its history, culture and nature, and uses these to appeal to tourists.

Efforts Toward Environmental Protection

Efforts to Promote Migration to and Cultural Exchange with Kagawa Prefecture

The Bank provides a variety of products to support the individuals and companies who are working on environmental protection.

Introduction of “Kagawa Migrant Support Housing Loans”
After being commissioned by the “Kagawa Living Support Team,” which Kagawa Prefecture formed with the aim of encouraging
migration to the prefecture by promoting the attraction of Kagawa to migrants from outside the prefecture, in November 2014,
the Bank introduced “Kagawa Migrant Support Housing Loans,” providing preferential interest rates to people hoping to move to
Kagawa Prefecture.

Introduction of “Vacant House Measures and 114 Unsecured Housing Loans”
The Bank has introduced “Vacant House Measures and 114 Unsecured Housing Loans” to deal with the vacant house issue, which is
becoming a social problem. The measures apply not only to the demolition costs of a vacant house but also the refurbishments
costs associated with the purchase of properties registered with the Vacant House Bank. In cases where customers take advantageof the subsidy system for “vacant house demolition” and “vacant house refurbishment” implemented by local governments throughout Kagawa Prefecture, the Bank provides preferential interest rates.

Efforts Toward Diversity

Supporting the Active Promotion of Women• Environment-friendly private placement bonds (known as: Hyakujushi Olive Bonds)
It provides preferential interest rates to companies that are able to acquire third-party certification and demonstrate environment-friendly management.
• Hyakujushi Environment Support Loan (known as: Hyakujushi Olive Fund)
It evaluates the customer’s environmental initiatives in three stages and reflects the evaluation in the interest rate on the loan.
• Hyakujushi Renewable Energy Business Support Loan (known as: Hyakujushi Energy Support)
It responds to demand for capital expenditure from businesses participating in the solar power generation business, etc. by taking
advantage of the feed-in tariff system for renewable energy.

Efforts Toward Financial Education Activities
As part of the Bank’s financial education activities, we provide workplace tours andpractical experience for elementary, middle and high school students. We also hold
events during summer vacations to educate parents and children about finance in collaboration with the Kagawa Prefecture Finance Public Relations Committee. We also
participate as a lecturer in special lectures held by high schools and universities in
Kagawa Prefecture to deepen the understanding of finance and banks as part of ourefforts to further spread financial education.

The Bank has long had a corporate culture in which women work. For this reason, thepercentage of women in managerial positions at the Bank stood at 20.1% as at March
2016, which is higher than the national ratio of 11.3%. The Bank will continue tomaintain this level and will strive to create a working environment in which employees
can work with peace of mind in spite of various life experiences such as marriage,
childbirth, childrearing and nursing care, in a bid to maintain and improve the ratio of
women in managerial positions.

13

14

The Hyakujushi Bank, Ltd. / Annual Report 2016

Board of Directors and Audit & Supervisory Board Members
Board of Directors

Audit & Supervisory Board Members

Tomoki Watanabe

Ryohei Kagawa

President(Representative Director)

Apr. 1974 Joined the Bank
Jan. 2003 General Manager, Osaka Branch, the Bank
Jun. 2004 Director and General Manager,Tokyo Branch, the Bank
Mar. 2006 Director and General Manager,Tokyo Branch and General

Director Senior Managing
Executive Officer(Representative Director)

Yukio Hirao

Masanobu Satomi

Full-time Audit & Supervisor Board Member

Full-time Audit & Supervisor Board Member

Apr. 1982 Joined the Bank
Feb. 2004 Deputy General Manager, Kobe Branch, the Bank
Mar. 2006 Acting General Manager, Corporate Planning Division, the Bank
Jan. 2010 Deputy General Manager, Corporate Planning Division, the Bank
Apr. 2010 General Manager, Corporate Planning Division, the Bank
Apr. 2012 Executive Officer and General Manager, Kobe Branch, the Bank
Apr. 2014 Managing Executive Officer, the Bank
Jun. 2014 Director and Managing Executive Officer, the Bank
Apr. 2016 Director and Senior Managing Executive Officer, the Bank (toApr. 1982 Joined the Bank
Mar. 2006 General Manager, Ritsurin Branch, the Bank
Apr. 2008 General Manager, Nagoya Branch, the Bank
Apr. 2010 General Manager, Business Management Division, the Bank
Apr. 2012 Executive Officer and General Manager,Tokyo Branch andApr. 1974 Joined the Bank
Jul. 1997 General Manager, Matsushima Branch, the Bank
Jun. 2006 General Manager in charge of IT Systems, Operations
Jun. 2007 Director in charge of Treasury and International Division, theApr. 1977 Joined the Bank
Feb. 2002 General Manager, Nagao Branch, the Bank
Mar. 2005 General Manager Executive Secretariat Office, the Bank
Jun. 2008 General Manager, Personnel Division, the Bank
Jun. 2009 Executive Officer and General Manager, Personnel Division, theOct. 2012 Executive Officer and General Manager,Tokyo Branch andJun. 2008 Director and Executive Officer in charge of Treasury and

Apr. 2012 Executive Officer and General Manager, Auditing Division, theKiyoshi Irie

Ryuji Nishikawa

Teruo Kiuchi

Apr. 1977 Joined the Bank
Mar. 2005 General Manager, Hiroshima Branch, the Bank
Jun. 2007 General Manager, Corporate Planning Division, the Bank
Jun. 2009 Executive Officer and General Manager, Corporate Planning

Apr. 1978 Joined the Bank
Feb. 2002 Deputy General Manager, Executive Secretariat Office, the Bank
Nov. 2002 Acting General Manager, Corporate Planning Division, the Bank
Jan. 2008 General Manager, Executive Secretariat Office, the Bank
Apr. 2010 Executive Officer and General Manager, Marugame Branch, theApr. 1979
Jun. 2003
Jan. 2008
Apr. 2010
Apr. 2012

Jun. 2006
Jun. 2007
Jun. 2008
Jun. 2009Manager,Tokyo Public Affairs Division, the BankManaging Director and General Manager, Corporate Planning
Division, the BankManaging Director, the Bank
Director and Senior Managing Executive Officer, the Bank
President (to present)

Director Managing Executive Officer

Division, the Bank
Apr. 2010 Managing Executive Officer, the Bank
Jun. 2010 Director and Managing Executive Officer, the Bank (to present)

present)

Director Managing Executive Officer

Bank

Apr. 2012 Managing Executive Officer, the Bank
Jun. 2012 Director and Managing Executive Officer, the Bank (to present)

Joined the Bank
Deputy General Manager, Central Business Division, the Bank
General Manager, Kurashiki Branch, the Bank
Executive Officer and General Manager, Imabari Branch, theBank
Apr. 2013 Managing Executive Officer, the Bank
Apr. 2014 Managing Executive Officer and General Manager, Central
Business Division, the Bank
Apr. 2016 Managing Executive Officer, the Bank
Jun. 2016 Director and Managing Executive Officer, the Bank (to present)

Apr. 1981 Joined the Bank
Jan. 2003 Deputy General Manager, Central Business Division, the Bank
Mar. 2006 Deputy General Manager,Tokyo Branch, the Bank
Jun. 2007 General Manager, Hiroshima Branch, the Bank
Apr. 2011 Executive Officer and General Manager, Central Business

General Manager in charge of Tokyo Public Affairs, General
Manager,Tokyo Liaison Officer, the Bank
Apr. 2016 Managing Executive Officer, the Bank
Jun. 2016 Director and Managing Executive Officer, the Bank (to present)

Nov. 1985 Professor, Faculty of Economics, Kagawa University
Apr. 2002 Dean, Faculty of Economics, Kagawa University
Apr. 2004 Professor and Dean, Graduate School of Management
Dec. 2007 Management Committee, NHK
Apr. 2008 Management Committee and Auditing Committee, NHK
Apr. 2009 Professor Emeritus, Kagawa University (to present)
Apr. 2014 Professor, Faculty of Business Administration,Takamatsu

Jul. 2010
Jun. 2013
Jun. 2014

Mr. Etsuya Kanamori has held important positions in the Ministryof Education, Culture, Sports, Science and Technology for many
years and has a wealth of experience and extensive insight inadministrative areas. The Bank expects that he will provide
accurate advice on the overall management of the Bank based onthat experience and insight, as well as checking functions for the
Board of Directors from an objective and neutral standpoints, andtherefore requests his election as an Outside Director.

Director (outside)

University (to present)

Jun. 2014 Outside Director, Shikoku Electric Power Co., Inc. (to present)
Jun. 2015 Director, the Bank (to present)

Mr. Michiyo Ibara has a wealth of experience and expert
knowledge as a university professor. The Bank expects that he will
provide accurate advice on the overall management of the Bank
based on that experience and knowledge, as well as checking
functions for the Board of Directors from an objective and neutral
standpoint, and therefore requests his election as an Outside
Director.

* Outside Director

Hideki Kuwashiro

Kazuo Kobayashi

Junichi ItohApr.1981 Registered as a lawyer (to present)
May 1984 Established Kuwashiro Law Firm (to present)
Jun. 2003 Legal System Reform Promotion Headquarters Committee,

Apr. 1980 Joined Nippon Life Insurance Company
Mar. 2007 Executive Officer, Nippon Life Insurance Company
Mar. 2010 Managing Executive Officer, Nippon Life Insurance Company
Jul. 2010 Director and Managing Executive Officer, Nippon Life Insurance

Apr. 1975
Jun. 2002
Jun. 2005
Jan. 2006
May 2009

Audit & Supervisor Board Member (outside)

Audit & Supervisor Board Member (outside)

Japan Federation of Bar Associations

Apr. 2004 Chairman, Kagawa Bar Association
Apr. 2006 Takamatsu Summary Court Mediation Committee
Oct. 2009 Dispute Coordinating Committee, Kagawa Labor Bureau (toAudit & Supervisor Board Member (outside)

Company

Mar. 2012 Director and Senior Managing Executive Officer, Nippon Life

Insurance Company

present)

Oct. 2009 Chairman, Kagawa Prefecture Human Resources Committee
Jun. 2013 Audit & Supervisory Board Member, the Bank (to present)
Jun. 2014 Justice System Reform and Regional Judicial Reform Promotion

Jun. 2015 Audit & Supervisory Board Member, the Bank (to present)
Mar. 2016 Director and Executive Vice President, Nippon Life Insurance

Company (to present)

Mr. Kazuo Kobayashi has wide-ranging knowledge and experiencethat covers overall finance field, and also has excellent personality
and insights. The Bank has determined that he will contribute toappropriate audit on the business operations of the Bank from an
independent standpoint, and therefore nominates him as a
candidate for Outside Director.

Joined The Mitsubishi Bank, Ltd.
Executive Officer,The Bank of Tokyo-Mitsubishi, Ltd.
Managing Director,The Bank of Tokyo-Mitsubishi Ltd.
Managing Director,The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Senior Managing Executive Officer,The Bank of Tokyo-Mitsubishi
UFJ, Ltd.
Jun. 2011 Director, Senior Executive Vice President, CFO, NIKONCORPORATION
Jun. 2016 Advisor, NIKON CORPORATION (to present)
Jun. 2016 Audit & Supervisory Board Member, the Bank (to present)

Mr. Junichi Itoh has wide-ranging knowledge and experience thatcovers overall finance field, and also has excellent personality andinsights. The Bank has determined that his experience as CFO(Chief Financial Officer) at NIKON CORPORATION willcontribute to appropriate audit on the business operations of the
Bank from an independent standpoint, and therefore nominates
him as a candidate for Outside Director.

Details of Remuneration, etc. for Directors
Remuneration, etc. for Directors is appropriate, fair and balanced, in
accordance with the roles, responsibilities and performance of eachdirector.
Part of the remuneration, etc. for Directors (excluding Outside
Directors) is linked to the medium and long-term shareholder return
equivalent and the Bank’s financial performance in order to increase
the incentive of Directors to enhance the corporate value of the Bank.
Remuneration, etc. for Outside Directors shall reflect the performance of their duties.
Remuneration, etc. for Directors shall be determined by the Boardof Directors in consultation with the Governance Committee (Note)
within the upper limit of annual remuneration approved by the Annual
General Meeting of Shareholders.
Remuneration, etc. for Audit & Supervisory Board Members shallbe based on a different system from that of remuneration, etc. for
Directors, and shall be determined in consultation with Audit & Supervisory Board Members within the upper limit of annual remuneration
approved by the Annual General Meeting of Shareholders.
The annual remuneration limit for Directors was approved at the137th Annual General Meeting of Shareholders held on June 29, 2006

to be ¥270 million. The annual remuneration limit for Audit & Supervisory Board Members was approved at the 140th Annual General
Meeting of Shareholders held on June 26, 2009 to be ¥67 million.
A resolution was passed at the 140th Annual General Meeting of
Shareholders held on June 26, 2009 with regard to the introduction ofshare remuneration type stock options for the purpose of enhancing
the incentive of Directors of the Bank to increase corporate value andraise shareholder-centric management awareness. This move takes into
account the elimination of the Retirement Benefit System for Officers
that resulted from a review of the officers’ remuneration system as partof management reforms. The annual limit of stock option allocation
shall be ¥100 million, separate from the existing amount of remuneration for Directors.
With regard to the fiscal year under review, there is no officer whose
total consolidated remuneration, etc. is ¥100 million or above.
(Note): The majority of officers who compose the advisory body established for the
purpose of strengthening the oversight functions of the Board of Directors
shall be Outside Directors and Outside Audit & Supervisory Board Members.

Current fiscal year (April 1, 2015 – March 31, 2016)

Changes in the Composition of the Board of Directors
Number of Directors
Number of Outside Directors
Number of female Directors(Reference) Average attendance at Board of
Director meetings

Bank

Apr. 2014 Executive Officer and Advisor to Auditing Division, the Bank
Jun. 2014 Audit & Supervisory Board Member, the Bank (to present)

Division, the Bank

Apr. 1976 Joined the Ministry of Education
Apr. 1997 Superintendent, Kagawa Prefecture Board of Education
Jul. 2004 General Manager, Private Education Institution Department,

Jul. 2007

Bank

International Division, the Bank
Jun. 2009 Director and Managing Executive Officer, the Bank
Apr. 2011 Director and Senior Managing Executive Officer, the Bank
Apr. 2016 Director, the Bank
Jun. 2016 Audit & Supervisory Board Member, the Bank (to present)

Apr. 2014 Managing Executive Officer, General Manager,Tokyo Branch,Michiyo Ihara

Higher Education Bureau, Ministry of Education, Culture,
Sports, Science and Technology
Director, Elementary and Secondary Education Bureau, Ministryof Education, Culture, Sports, Science and Technology
Deputy Minister, Ministry of Education, Culture, Sports, Scienceand Technology
Managing Director,The Foundation for Welfare of Educators (topresent)
Director, the Bank (to present)

Joined the Bank
General Manager, Ota Branch, the Bank
General Manager, Kanonji Branch, the Bank
Executive Officer and General Manager,Tokyo Branch, the Bank
Executive Officer and General Manager, Corporate Planning
Division, the Bank
Apr. 2013 Managing Executive Officer, the Bank
Jun. 2013 Director and Managing Executive Officer, the Bank (to present)

Bank

Mr. Hideki Kuwashiro has specialized legal knowledge and awealth of experience as a lawyer. He also has excellent personality
and insights. The Bank has determined that he will contribute toappropriate audit on the business operations of the Bank from an
independent standpoint, and therefore nominates him as a
candidate for Outside Director.

Director Managing Executive Officer

Etsuya Kanamori
Director (outside)

General Manager in charge of Tokyo Public Affairs and General
Manager,Tokyo Liaison Officer, the Bank
Apr. 2014 Managing Executive Officer, the Bank
Jun. 2015 Director and Managing Executive Officer, the Bank
Apr. 2016 Director and Senior Managing Executive Officer, the Bank (topresent)

Supervision Division, the Bank

Headquarters Committee, Japan Federation of Bar Associations(to present)

Takashi Mori

Apr. 1981
Jun. 2005
Jul. 2008
Apr. 2010

General Manager in charge of Tokyo Public Affairs, the Bank

Director Managing Executive Officer

Kazushi Kozuchi

Director Managing Executive Officer

15

Yujiro Ayada

Director Senior Managing
Executive Officer(Representative Director)

Type of Officers

unit
persons
persons
persons

2013
11
–
–

2014
11
1
–

2015
11
2
1*

%

–

100

100

Directors
Audit & Supervisory Board Members
Outside Officers

Number11
2
6

Total remuneration, etc.
(million yen)
295
41
35

Basic remuneration
213
41
35

Bonus
40
–
–

Share remuneration-type
stock options remuneration
40––(Notes): 1. “Number” and “Total remuneration, etc.” include two Directors and one Audit & Supervisory Board Member who resigned as of the conclusion of the 146th Annual General Meeting of
Shareholders held on June 26, 2015 due to the expiration of their terms of office.
2. Outside Officers shall consist of two Outside Directors and four Outside Audit & Supervisory Board Members.
3. There are no officers who are also employees of the Bank.

16

The Hyakujushi Bank, Ltd. / Annual Report 2016

Corporate Governance
Executive Committee

Basic Approach to Corporate GovernanceWith the aim to realize its Corporate Vision, the Bank hasenhanced its corporate governance framework, which is centered on the Board of Directors, so that it operates a fair,
speedy and decisive decision-making process.
The appointment of a number of Outside Directors provides the Board of Directors with oversight functions from anexternal perspective. As a company with an Audit & Supervisory Board, in addition to this management oversight, theAudit & Supervisory Board Members and the Audit &Supervisory Board ensure the effectiveness of management
oversight by overseeing management independently from theBoard of Directors and from an objective and neutral
standpoint.
The Bank will continue to develop the necessary systems toensure sound management decisions, and undertake communication with shareholders and other stakeholders and thedisclosure of information.

The Executive Committee consists of the President, senior
management executive officers and managing executive officers and, as a body that deliberates and decides importantmatters pertaining to the execution of management duties, itmeets on a regular or as needed basis. In addition, the Bank
has established the Revenue Management Committee, theCompliance Committee and the Risk Management Committee which provide a structure to discuss and decide more
specialized matters.

Executive Officer System
To speed up management decision-making and strengthenbusiness execution functions, the Bank has introduced an
executive officer framework. Executive officers (as of July 1,2016 there were 23, of whom seven concurrently serve as
directors) appointed by the Board of Directors strive for

Corporate Governance Framework
General Meeting of Shareholders
Appointment/Dismissal

Oversight anddecision-making functions

Appointment/
Dismissal
Opinion, comment, etc.

Board of Directors(8 Directors and 2 Outside Directors)

ReportAudit & Supervisory Board(2 Audit & Supervisory Board Members and 2
Outside Audit & Supervisory Board Members)

Appointment/Dismissal/OversightBusiness execution functions

Revenue Management
Committee

Head Office and Branches

Internal audit

From the perspective of maintaining and improving thesoundness and appropriateness of operations, the Auditing
Division (an independent division) also fulfills an internal
audit role and conducts inspections of assets and risks andinternal audits of the operations of the head office as well as
branches and subsidiaries. The results of audits are reported tothe management.

Accounting Auditors
The Bank’s accounting auditors are Ernst & Young ShinNihon.
As accounting auditors, they conduct appropriate audits froman independent standpoint.

Efforts Toward Improved Effectiveness of Corporate GovernanceCompliance
Committee

Risk Management
Committee

Operations audit
Accounts audit

Accounting Auditors(Ernst & Young ShinNihon LLC)

Auditing Division

Based on the recognition that strengthened governance isessential for the continued growth and the medium to longterm enhancement of our corporate value, we have executed
the following initiatives from the fiscal year ended March
2016.

Election of Multiple Outside Directors

Overview of Corporate Governance Structure

17

Auditing Division

Communication

Representative Directors

Executive
Committee

Appointment/
Dismissal

corporate management with flexible decision-making andspeed of action.

Board of Directors

Audit & Supervisory Board

The Board of Directors consists of 10 directors including 2
outside directors and meets once a month as a general ruleand also as needed. In addition to specific matters stipulated
by laws and regulations and in the Articles of Incorporation,
the Board passes resolutions on important matters related to
management and oversees the execution of directors’ andexecutive officers’ duties.

The Audit & Supervisory Board consists of five members
including three outside members who are fair and have ahigh degree of professionalism to ensure the independence
and neutrality of the audit framework. Audit & Supervisory
Board Members, based on auditing policies, appropriately
audit and oversee management by attending important company meetings including Board of Director meetings andstating their opinions.

The Annual General Meeting of Shareholders held in June2015 elected the Bank’s first female Independent Outside
Director to create a system of two Outside Directors in the
expectation that multiple directors will further strengthen theoversight functions of the Bank’s management from an external perspective and provide accurate advice for the overallmanagement of the Bank based on their wealth of experienceand knowledge.

Enactment of Corporate Governance Guidelines
The Bank has enacted the Corporate Governance Guidelines, which establish the Bank’s basic policy and operations
policy for corporate governance.
The guidelines set out the Bank’s basic policy pertaining
to stock policy holding, the election of multiple Independent Outside Directors and standards regarding the nomination and remuneration of directors.

Establishment of the Governance Council
The Bank has established the Governance Council, which is anadvisory body to the Board of Directors. The majority of its
members are Outside Directors and Outside Audit & Supervisory Board Members.
The Council will hold discussions with regard to “mattersrelating to the nomination and remuneration of directors,etc.” and “other important management matters.” The Council will strive to strengthen the oversight functions of theBoard of Directors by advising the Board of Directors asnecessary.
Members
Members are Outside Directors (two Outside Directors andthree Outside Audit & Supervisory Board Members), theChairman of the Board of Directors (President), and full-time
Audit & Supervisory Board Members.
Internal officers (including Audit & Supervisory Board
Members) who have been nominated by the Chairman of theBoard of Directors are able to attend Council meetings andoffer their opinions.

18

The Hyakujushi Bank, Ltd. / Annual Report 2016

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 year, and through implementation of measures for eachcategory of risk in accordance with these policies, we strive toachieve sophisticated risk management on an ongoing basis.

We have defined the types of risks in our risk management
rules, drawn up by the Board of Directors. We then determine the category to which each risk belongs, and decide
the divisions responsible for managing each category, alongwith management rules. We have also established an independent Risk Management 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
Audit & Supervisory Board
Audit & Supervisory Board Members

General Meeting of Stockholders

Board of Directors
Risk Management Committee

Overall Risk
Management 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 Management 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 Management 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 Management 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 and Legal Affairs
OfficeHuman 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 balanceis 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 Management Division

Risk Audit and Inspection Readiness
Credit Risk Management
Subcommittee

Risk Control
DivisionsMarket Risk Management
Subcommittee

Credit Risk

Market Risk

Liquidity Risk

Operational Risk

Risk Management Division

Risk Management Division

Treasury andInternational Division

Risk Management Division

Each division, office, branch
Subsidiaries

19

Operational Risk
Management Subcommittee
Auditing
Division

To strengthen our risk management system, it is necessary to
conduct regular inspections of the effectiveness of system
functioning. To this end, we have set up a dedicated section
within the Auditing Division. The section (Risk Audit Group)
is tasked with verifying that risk is being properly managed,
both in the Bank’s Head Office departments and branches,
and in our subsidiaries. The Group carries out inspections of
the status of risk management implementation, including
regular checks of the adequacy of risk-related operations atour branches. The Head Office departments, subsidiaries andindividual branches are also required to conduct self-inspections to confirm that procedures are being followed as laid
down. These inspections improve the level of risk management and minimize the probability of human or system error.
We are working to build up the trust of our customers
through due measures for monitoring and minimizing risks ofall kinds, and through creation of systems for early recognition and management of risk-related issues.
20

The Hyakujushi Bank, Ltd. / Annual Report 2016

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Compliance System

Consolidated Balance Sheets
2016

2015

Thousands of U.S. dollars(Note 1)
2016

¥ 405,424
1,690
30,445
11
4,895
1,415,115
2,747,341
8,649
16,99834,15842,810
4,021
3,041
1,206
21,794(17,942)¥4,719,661¥ 305,246
3,605
31,0592
4,901
1,454,688
2,696,444
13,507
16,86531,70943,716
4,625
4,691
1,286
21,140(18,387)¥4,615,105$ 3,598,012
14,998270,18997
43,441
12,558,706
24,381,798
76,757150,851
303,141
379,925
35,68526,987
10,702
193,414(159,229)$41,885,525

Basic Policy

Millions of yen
As of March 31

The function of banks is highly public in nature, and is intimately bound up with the welfare of society as awhole. Their primary role is to assist the sound development of the economy. At the Hyakujushi Bank, tohonor the trust placed on us by our stockholders, customers and the local community, all our executives andemployees assign a high priority to compliance with laws and regulations, as well as the observance of highethical standards in the conduct of the Bank’s business. Compliance is a key priority at the Hyakujushi Bank.

Compliance System
The Compliance and Legal Affairs Office exercises overall
supervision of compliance issues, and implements centralized
management of matters related to compliance. Furthermore,
Compliance officers with responsibility for compliance matters are designated in each division, office, and branch of the
Bank to ensure that the rules of compliance are observed andthat all staff are fully aware of issues concerned. Staff are also

required to confirm the compliance status of each business
unit by filling out a checklist, and compliance seminars areheld to keep staff up-to-date and fully informed regarding
compliance-related matters. To further improve the efficiency
of compliance systems, the Compliance Committee has been
established, as well as the Rewards and Penalties Committee.

Compliance System

Board of Directors
Executive Committee
Compliance
Committee

Rewards andPenalties Committee
Overall Compliance Supervision
Compliance and Legal Affairs OfficeInstructions

Education

Inspection

Auditing Division

Head Office, Branches and Group Companies

Assets:Cash and due from banks (Notes 3 and 23)
Call loans and bills bought (Note 23)
Monetary claims bought
Trading account securities (Notes 7 and 23)
Money held in trust (Notes 8 and 23)
Securities (Notes 7, 11, 12 and 23)
Loans and bills discounted (Notes 10, 13 and 23)
Foreign exchange assets (Note 10)
Lease receivables and lease investment assets (Note 22)
Other assets (Notes 12, 23 and 26)
Tangible fixed assets (Notes 15, 18, 19 and 22)
Intangible fixed assets
Net defined benefit asset (Note 24)
Deferred tax assets (Note 14)
Customers’ liabilities for acceptances and guarantees
Reserve for possible loan losses (Note 23)
Total assets

2016

2015

Thousands of U.S. dollars(Note 1)
2016

¥3,935,432
178,123
26,254
88,867
83,727206
10,00075,409
40
1,159
48
504
108
—
10,116
5,836
21,7944,437,631¥3,801,437
169,926
48,06840,520128,635354
10,00071,955
23
155
51
539
107
1,173
19,364
6,176
21,1404,319,629$34,925,736
1,580,786
232,996788,667
743,051
1,828
88,746669,231354
10,285
425
4,472
958
—
89,776
51,792
193,414
39,382,596

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

37,322
24,920143,886(4,730)201,398

331,221
221,157
1,360,800(54,836)
1,858,342

54,256(7,806)
8,961(1,171)
54,239201
18,190282,030¥4,719,661

68,952(3,010)8,722
1,631
76,297
196
17,583
295,476¥4,615,105

481,505(69,275)
79,526(10,392)
481,354
1,783
161,430
2,502,928$41,885,525
U.S. dollars(Note 1)
2016

Millions of yen
As of March 31

Liabilities and net assets
Liabilities:
Deposits (Notes 12 and 23)
Negotiable certificates of deposit (Note 23)
Call money and bills sold (Note 23)
Payables under securities lending transactions (Note 12)
Borrowed money (Notes 12, 16 and 23)
Foreign exchange liabilities
Corporate bond (Notes 17 and 23)
Other liabilities (Notes 23 and 26)
Reserve for bonuses for directors and corporate auditors
Net defined benefit liability (Note 24)
Reserve for retirement benefits for directors and corporate auditors
Reserve for claims on dormant accounts
Reserve for contingent liabilities
Reserve for litigation loss
Deferred tax liabilities (Note 14)
Deferred tax liability for land revaluation (Note 18)
Acceptance and guarantees
Total liabilities
Net assets (Note 6):
Stockholders’ equity:
Common stock
Capital surplus
Retained earnings
Treasury stock
Total stockholders’ equity
Accumulated other comprehensive income:Net unrealized gains on securities, net of taxes (Note 9)
Net deferred losses on hedging instruments, net of taxes (Note 26)
Revaluation reserve for land (Note 18)
Remeasurements of defined benefit plans (Note 24)
Total accumulated other comprehensive income
Share subscription rights (Note 25)
Non-controlling interests
Total net assets
Total liabilities and net assets

Yen
As of March 31

2016

2015

Per share (Note 29)
Net assets¥891.90¥928.83$7.915

See accompanying notes to consolidated financial statements.

21

22

The Hyakujushi Bank, Ltd. / Annual Report 2016

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
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
Other expenses (Note 20)
Total expenses
Profit before income taxes
Income taxes (Note 14):
Current
Deferred
Subtotal
ProfitProfit attributable to non-controlling interests
Profit attributable to owners of parent

2015

2016

¥33,239
16,846693
10,7209,268
10,647
81,416¥33,607
14,439463
10,844
5,692
12,624
77,671$294,985
149,503
6,150
95,13682,25094,488722,541

2,359
219
249
1,882
2,935
6,000
38,922
9,355
61,927
19,489

2,208
236
401
990
2,823
2,661
40,108
10,90960,33917,332

20,935
1,943
2,209
16,702
26,04753,248345,420
83,022549,582
172,958

3,878
2,879
6,757
12,732
1,099¥11,632

3,562
3,841
7,403
9,928
970
¥ 8,957

34,41625,55059,966112,992
9,753$103,230

Per share (Note 29)
Basic earnings

2015

2016

¥39.05For the years ended March 31
Balance as of March 31, 2014
Cumulative effects of changes in accounting policies
Restated balance reflecting changes in accounting
policies
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
Provision for revaluation reserve for land
Net changes in items other than stockholders’equityTotal changes in items during the period
Balance as of March 31, 2015¥29.84$0.346

See accompanying notes to consolidated financial statements.

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, 2016

For the years ended March 31
Balance as of March 31, 2014
Cumulative effects of changes in accounting policies
Restated balance reflecting changes in accounting
policies
Changes in items during the period
Dividends from surplus

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Profit attributable to owners of parent

Consolidated Statements of Comprehensive Income

Purchase of treasury stock
Disposal of treasury stock
Transfer from revaluation reserve for landMillions of yen

Thousands of U.S. dollars(Note 1)2016

For the years ended March 31

2016

2015

ProfitOther comprehensive income (loss) (Note 21)
Net unrealized gains (losses) on other securities, net of taxes
Net deferred losses on hedging instruments, net of taxes
Revaluation reserve for landRemeasurements of defined benefit plans (Note 24)
Total comprehensive income (loss)
Total comprehensive income (loss) attributable to:
Owners of parent
Non-controlling interests¥ 12,732(22,099)(14,807)(4,796)307(2,803)(9,367)¥ 9,928
33,30431,302(2,985)636
4,350
43,233$112,992(196,121)(131,407)(42,563)2,724(24,875)(83,129)¥(10,356)
988¥42,190
1,042$(91,906)
8,768

Commonstock

CapitalsurplusRetainedearnings

Treasury stock

Total
shareholders’equity¥37,322—¥24,920—¥138,689(1,611)¥(4,181)—¥196,751(1,611)

37,322

24,920137,077(4,181)

195,139

—
—
—
—
—
—

—
—
—
—
—
—

(2,103)
8,957
—
(4)
11
(52)

—
—
(780)
231
—
—

(2,103)
8,957
(780)
226
11
(52)

—

—

—

—

—

—
37,322—
24,9206,808
143,886(549)(4,730)6,259
201,398

—
—
—
—
—

—
—
—
—
—

(2,239)
11,632
0
(13)
69

—
—
(1,687)239—(2,239)
11,632(1,687)
225
69

—

—

—

—

—

—
¥37,322—¥24,920

9,448¥153,335(1,448)¥(6,179)

8,000¥209,398

Changes in items during the period

U.S. dollars(Note 1)2016

Yen
For the years ended March 31

Millions of yen
Stockholders’ equity

Thousands of U.S. dollars(Note 1)
2016

Provision for revaluation reserve for land
Net changes in items other than stockholders’equityTotal changes in items during the period
Balance as of March 31, 2015

Net unrealized
gains on othersecurities,
net of taxes¥37,722—

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(24)—¥8,044—¥(2,719)—¥43,022—¥156—¥16,920—¥256,851(1,611)37,722

(24)

8,044

(2,719)43,022

156

16,920255,239

—
—
—
—
—
—

—
—
—
—
—
—

—
—
—
—
—
—

—
—
—
—
—
—

—
—
—
—
—
—

—
—
—
—
—
—

—
—
—
—
—
—

(2,103)
8,957
(780)
226
11
(52)

31,23031,23068,952(2,985)(2,985)(3,010)

678
678
8,722

4,350
4,350
1,631

33,27433,27476,297

39
39
196

663
663
17,58333,97740,236295,476

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

(2,239)
11,632(1,687)
225
69(14,696)(14,696)¥54,256(4,796)(4,796)¥(7,806)

238
238¥8,961(2,803)(2,803)¥(1,171)(22,057)(22,057)¥54,239

5
5
¥201

607
607
¥18,190(21,445)(13,445)¥282,030

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, 2016

See accompanying notes to consolidated financial statements.

23

24

The Hyakujushi Bank, Ltd. / Annual Report 2016

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Consolidated Statements of Cash Flows

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

Commonstock

CapitalsurplusRetainedearnings

Balance as of March 31, 2015

$331,221$221,157$1,276,943

—
—
—
—
—

—
—
—
—
—

(19,870)
103,230
0
(115)
612

—

—

—

—
$331,221—$221,157

83,848$1,360,800

Treasury stock

Total
shareholders’equity$(41,977) $1,787,344

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, 2016——
(14,971)
2,121—(19,870)
103,230(14,971)
1,996
612

—

—

(12,850)
70,997$(54,836) $1,858,342

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

For the years ended March 31

Net unrealized
gains on othersecurities,
net of taxes

Net deferredlosses on
hedging
instruments,
net of taxes

Revaluation
reserve forland

Balance as of March 31, 2015

$ 611,927$(26,712)

—
—
—
—
—

Remeasurementsof defined benefit
plans

Total
accumulated
othercomprehensive
incomeSharesubscription
rights

Noncontrollinginterests

Total net
assets$77,405$ 14,474$ 677,112$1,739$156,043$2,622,257

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

(19,870)
103,230(14,971)
1,996
612(130,422)(42,563)

2,112(24,875)(195,749)

44

5,386

(190,317)(130,422)$ 481,505(42,563)$(69,275)

2,112$79,526(24,875)$(10,392)(195,749)$ 481,354

44$1,783

5,386$161,430(119,320)$2,502,928

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, 2016

See accompanying notes to consolidated financial statements.

Thousands of U.S. dollars(Note 1)2016

For the years ended March 31

2016

2015

Cash flows from operating activities
Profit before income taxes
Depreciation
Impairment losses
Amortization of goodwill
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 litigation loss
Interest income
Interest expenses
Net gain related to securities transactions
Net loss 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 assets and lease investment assets
Proceeds from fund operations
Payments on fund procurement
Other
Subtotal
Payment of income taxes
Net cash provided by (used in) operating activities¥ 19,489
3,320
111
—
(445)
17
(1,434)
5
(2)
(35)
0
(1,173)(50,780)
4,712(3,624)
6
3,092
20
(9)
(50,896)
133,994
8,197(41,907)30,125
2,529(21,813)
48,347
4,858
(147)
(132)
50,873(4,808)(7,300)125,191(4,073)
121,118¥ 17,332
3,361
91
6(3,332)
(2)
(521)
7
1
(19)
(6)
1,173
(48,510)3,836(1,818)—(21,713)74
6(82,229)
32,128(14,192)
20,5529,443(2,277)
9,473
30,618
3,938
213
1,085
48,585(3,835)(1,105)2,365(5,687)(3,321)$ 172,958
29,463985—(3,949)150(12,726)
44
(17)
(310)
0
(10,410)(450,656)
41,817(32,161)53
27,440177(79)(451,686)
1,189,155
72,745(371,911)
267,350
22,444(193,583)
429,064
43,113(1,304)(1,171)
451,482(42,669)(64,785)
1,111,031(36,146)
1,074,884

Cash flows from investing activities
Purchase of securities
Proceeds from sales of securities
Proceeds from redemption of securities
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 provided by (used in) investing activities(746,554)
520,540
244,415(1,313)(973)
157
2
16,274(645,628)
349,082
242,327(1,248)(1,289)406
3(56,347)(6,625,434)
4,619,630
2,169,107(11,652)(8,635)
1,393
17
144,426(3,000)(1,687)225(2,239)(382)(7,084)(13,000)(780)
226(2,103)(382)(16,040)(26,624)(14,971)
1,996(19,870)(3,390)(62,868)(5)
130,303240,831¥371,13410(75,698)
316,529¥240,831(44)
1,156,398
2,137,300$3,293,698

Cash flows from financing activities
Repayment of subordinated borrowings
Purchase of treasury stock
Proceeds from sales of treasury stock
Dividends paid
Dividends paid to non-controlling interests
Net cash used in financing 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)
See accompanying notes to consolidated financial statements.

25

26

The Hyakujushi Bank, Ltd. / Annual Report 2016

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements
1. Basis of presenting consolidated financial
statements
The accompanying consolidated financial statements of The Hyakujushi Bank,
Ltd. (the “Bank”) and its consolidated subsidiaries are prepared on the basis ofaccounting principles generally accepted in Japan, which are different in certain
respects as to the application and disclosure requirements of International
Financial Reporting Standards, and are compiled from the consolidated financial
statements prepared by the Bank as required by the Financial Instruments andExchange 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, 2016, which was ¥112.68 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.

2. Fiscal year ends
Account closing dates of consolidated subsidiaries are as follows:
March 31: 9 companies
January 31: 1 company
Hyakujushi Preferred Capital Cayman Limited, whose account closing date is
January 31, has been included in the scope of consolidation on the balance sheet
based on the provisional closing of accounts, as of March 31.

3. Significant accounting policies(1) Consolidation
The consolidated financial statements include the accounts of the Bank and its 10
subsidiaries.
Non-consolidated subsidiaries: 1
3rd Hyakujushi Venture Fund Cooperation Limited
Non-consolidated subsidiaries were excluded from the scope of
consolidation because their assets, ordinary income, net income (corresponding
to equity), retained earnings (corresponding to equity) and accumulated othercomprehensive income (corresponding to equity) have no material impact on
the Bank’s financial position and results of operations.
Non-consolidated subsidiaries not accounted for by the equity method: 1
3rd Hyakujushi Venture Fund Cooperation Limited
The non-consolidated subsidiary that is not accounted for by the equity
method was excluded from the scope of equity method because its profit or loss
(corresponding to equity), retained earnings (corresponding to equity) andaccumulated other comprehensive income (corresponding to equity) have nomaterial impact on the consolidated financial statements.
2nd Hyakujushi Venture Fund Cooperation Limited completed liquidation
proceedings during the fiscal year ended March 31, 2016.
(2) Trading account securities
Under the Accounting Standard for Financial Instruments, trading accountsecurities are stated at fair market value (cost of sales is calculated by themoving-average cost method).
(3) Securities
Marketable debt securities held to maturity are stated at amortized cost using
the moving-average cost method. Investments in non-consolidated subsidiaries
that are not accounted for by the equity method are stated at cost by the movingaverage cost method. Available-for-sale securities of which market prices areavailable are stated at fair value based principally on their market prices at thebalance-sheet date (cost of sales is calculated by the moving-average cost
method), whereas those for which the market value is not readily determinable
are stated at cost or amortized cost using the moving-average 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.

27(4) Derivatives
Under the Accounting Standard for Financial Instruments, derivatives are stated
at fair value.
(5) Depreciation(a) Tangible fixed assets (excluding lease assets)
Depreciation of tangible fixed assets is calculated principally using the decliningbalance method. Useful lives of tangible 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 on a straight-line basis. Depreciation ofsoftware for internal use is calculated using the straight-line method over theuseful lives (principally 5 years).
(c) Lease assets
Lease assets held by the consolidated subsidiaries are depreciated over theleasing contract periods by the straight-line method with residual value at zero.
(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
based on loan loss experience as calculated using historical default rates.
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 ¥14,524 million ($128,895 thousand) and ¥21,479 million for the years
ended March 31, 2016 and 2015, 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.
(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.
(8) Reserve for retirement benefits for directors and corporate
auditors
In order to provide for the payment of retirement benefits to directors ofconsolidated subsidiaries, a provision has been recorded as reserve forretirement benefits for directors and corporate auditors at the end of theconsolidated reporting period.

(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.

(17) 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:(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.

Thousandsof U.S.
Millions of yen
dollars
2015
2016
2016
¥405,424 ¥305,246 $3,598,012(11) Reserve for litigation loss
A provision is made for litigation losses for an estimated amount considerednecessary for losses which may occur in the future.
(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, 2016. 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 by the straight-line
method from each succeeding fiscal year over a period of 10 years within the
average remaining service period of the employees at the time of occurrence ineach fiscal year.
In calculating retirement benefit liabilities and retirement benefit costs,
some consolidated 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 hedge transactions
to manage interest-rate risk associated with various financial assets, as defined
under “Accounting and Auditing Treatment relating to the Adoption of‘Accounting for Financial Instruments’ for Banks” (JICPA Industry Audit
Committee Report No. 24 issued on February 13, 2002).
The hedging instruments are considered to highly effectively offset thechange in fair value or cash flows arising from the hedged items both at inception
and onward because the terms of hedged items and the corresponding hedging
instruments are substantially identical.
(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 July 29,
2002 to currency swap and foreign exchange swap transactions executed for the
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) Goodwill
Goodwill is amortized by the straight-line method over a period of 5 years.

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 .....

(32,810)(62,542)(291,178)

(359)

(503)

(3,186)(1,369)(1,119)(9,930)¥371,134 ¥240,831 $3,293,698(18) 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.

4. Change in accounting policies(Application of Accounting Standard for Business Combinations, etc.)
From the fiscal year ended March 31, 2016, the Bank applies Revised
Accounting Standard for Business Combinations (Accounting Standards Boardof Japan (ASBJ) Statement No. 21 issued on September 13, 2013), Revised
Accounting Standard for Consolidated Financial Statements (ASBJ Statement
No. 22 issued on September 13, 2013), Revised Accounting Standard forBusiness Divestitures (ASBJ Statement No. 7 issued on September 13, 2013),
etc. Accordingly, differences arising from changes in the Bank’s ownershipinterests in subsidiaries in cases where control is retained are recognized incapital surplus, and the acquisition costs in connection with businesscombinations are recognized as expenses in the fiscal year in which they arise.
Regarding business combinations that take place on or after the beginning of the
fiscal year ended March 31, 2016, an adjustment to the provisional amountarising from the finalization of the tentative accounting treatment relating to thepurchase price allocation is recognized in the consolidated financial statements
for the accounting period in which the combination occurs. In addition, thepresentation of profit and other items has been revised, and the line item
“minority interests” has been renamed as “non-controlling interests.” In order toreflect these changes in presentation, the consolidated financial statements forthe fiscal year ended March 31, 2015 have been reclassified.
In applying the Revised Accounting Standard for Business Combinations,etc., the Bank follows the transitional accounting treatments set forth inParagraph 58-2 (4) of the Revised Accounting Standard for Business
Combinations, Paragraph 44-5 (4) of the Revised Accounting Standard forConsolidated Financial Statements and Paragraph 57-4 (4) of the Revised
Accounting Standard for Business Divestitures prospectively from the beginningof the fiscal year ended March 31, 2016.
These changes had no effect on profit or loss in the consolidated financial
statements for the fiscal year ended March 31, 2016.

5. Additional information(Employee Stock Ownership Plan (ESOP) Trust)As a benefit package for employees, the Bank conducts transactions that deliver
the Bank’s own stock to the employee shareholding association through a trust.
1. Transaction overview
The Bank sets up trusts that have as their beneficiaries employees that are
members of the Hyakujushi Bank Employee Shareholding Association(hereinafter “the Bank’s shareholding association”) who meet specificrequirements. Said trusts purchase in advance during the acquisition period thenumber of Bank shares expected to be purchased by the Bank’s shareholding
association over a five-year period. The trusts then sell the Bank shares to the
Bank’s shareholding association on a fixed day every month. In the event that theshare price rises and earnings have accumulated in the trust, upon its
termination a cash distribution of the funds will be made to the employee

28

The Hyakujushi Bank, Ltd. / Annual Report 2016

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements
beneficiaries in proportion to their contribution. In the event that the shareprice declines and a transfer loss occurs, the Bank will bear the loss so there isno additional burden on the employee members.
2. 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). However, this has been accounted for with a previously
adopted method and transactions between the Bank and the trust, such as
dividends distributed by the Bank to the trust, are offsetting.
3. Matters relating to the Bank’s shares held by the trusts(1) The book value of the trusts was ¥430 million as of March 31, 2015 and¥240 million ($2,129 thousand) as of March 31, 2016.
(2) The Bank’s shares held by the trusts have been recorded as treasury stock instockholders’ equity.
(3) The number of shares at year-end was 1,177 thousand as of March 31, 2015
and 657 thousand as of March 31, 2016. The average number of shares
during the year was 1,487 thousand for the fiscal year ended March 31, 2015
and 942 thousand for the fiscal year ended March 31, 2016.
(4) The number of shares at year-end and the average number of shares during
the year in (3) above are included in the treasury shares to be deducted in thecalculation of per share information.
4. The book value of the corresponding liabilities based on the gross pricemethod was ¥466 million as March 31, 2015 and ¥233 million ($2,067
thousand) as of March 31, 2016.

2015
Resolution
June 27, 2014 (Regular Annual General Meeting of Shareholders) ........
November 10, 2014 (Meeting of the Board of Directors) ..............

June 26, 2015 (Regular Annual General Meeting of Shareholders) ........

(1) Type and number of shares issued and treasury shares are as follows:
Thousands of shares
Increase
Decrease

March 31, 20152016
Shares issued
Common stock .........................................................................
310,076
Total ......................................................................................
310,076
Treasury stock
Common stock(Notes 1, 2 and 3) ...................................................
11,104
Total ......................................................................................
11,104

November 9, 2015 (Meeting of the Board of Directors) ................
March 31, 2016

—
—

—
—

310,076
310,076

4,015
4,015

632
632

14,487
14,487

Notes: 1. The number of shares of common stock at the beginning and end of the fiscal year ended March 31, 2016 includes 1,177 thousand shares and 657 thousand shares of the Bank’s shares
held by the Employee Stock Ownership Plan (ESOP) Trust.
2. The 4,015 thousand share increase in the number of common shares of treasury stock consists of a 4,000 thousand share increase due to a share purchase based on a resolution of theboard of directors and a 15 thousand share increase due to a purchase demand for fractional shares from shareholders.
3. The 632 thousand share decrease in the number of common shares of treasury stock consists of a 520 thousand share decrease due to the sale of shares from the ESOP Trust to theemployee shareholding association, a 112 thousand share decrease due to the exercise of share subscription rights and a 0 thousand share decrease due to a purchase demand for fractional
shares from shareholders.

Dividend
per share(Yen)

Record date
March 31,2014
September 30,
2014

¥3.5
3.5

Effective dateJune 30,
2014
December 10,
2014

2016

Resolution

6. Changes in net assets

Total dividend
amountType of share (Millions of yen)
Commonstock¥1,051
Commonstock
1,052

Type of share
Commonstock
Commonstock

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

Dividend
per share(U.S. dollars)$9,282$0.031

10,5870.035

Record date
Effective date
March 31,
June 29,2015
2015
September 30, December 10,
2015
2015

Note: In accordance with a resolution approved at the Bank’s Regular Annual General Meeting of Shareholders held on June 26, 2015 and June 27, 2014, the total amount of dividends paid
excludes the ¥4 million ($35 thousand) and ¥6 million dividend payment to the Employee Stock Ownership Plan (ESOP) Trust. Moreover, the total amount of dividends paid excludes the¥3 million ($26 thousand) and ¥5 million dividend payment to the ESOP Trust pursuant to the resolutions approved by the Board of Directors at meetings held on November 9, 2015 andNovember 10, 2014, respectively.
These exclusions reflect the Bank’s classification of the shares held by the Trust as treasury stock.

(b) Dividends paid after the balance-sheet date2016
Total dividend
amountSource of
Resolution
Type of share (Millions of yen) dividends
CommonRetained
June 29, 2016 (Regular Annual General Meeting of Shareholders) ..........
stock¥1,182
earnings

Dividend
per share
(Yen)
¥4.0

Record date Effective date
March 31, June 30,
2016
2016

2015
2015
March 31, 2014
Shares issued
Common stock .........................................................................
310,076
Total ......................................................................................
310,076
Treasury stock
Common stock(Notes 1, 2 and 3) ...................................................
9,711
Total ......................................................................................
9,711

Thousands of shares
Increase
Decrease

March 31, 2015

—
—

—
—

310,076
310,076

2,017
2,017

625
625

11,104
11,104

Notes: 1. The number of shares of common stock at the beginning and end of the fiscal year ended March 31, 2015 includes 1,773 thousand shares and 1,177 thousand shares of the Bank’s shares
held by the Employee Stock Ownership Plan (ESOP) Trust.
2. The 2,017 thousand share increase in the number of common shares of treasury stock consists of a 2,000 thousand share increase due to a share purchase based on a resolution of theboard of directors and a 17 thousand share increase due to a purchase demand for fractional shares from shareholders.
3. The 625 thousand share decrease in the number of common shares of treasury stock consists of a 596 thousand share decrease due to sale of shares from the ESOP Trust to the employee
shareholding association, and a 29 thousand share decrease 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, 2016 and 2015 stood at ¥201 million ($1,783 thousand) and ¥196 million, respectively.
At end of the previous and current fiscal year, no shares had been earmarked for share subscription rights.
(3) Information on dividends(a) Dividends paid
2016
Resolution

Type of share
CommonJune 26, 2015 (Regular Annual General Meeting of Shareholders) ...........
stock
CommonNovember 9, 2015 (Meeting of the Board of Directors) ...................
stock

29

Total dividend
amount(Millions of yen)

Dividend
per share(Yen)¥1,046

¥3.5

1,193

4.0

Record date
Effective date
March 31,
June 29,2015
2015
September 30, December 10,
2015
2015

Total dividend
amountResolution
Type of share (Millions of yen)
CommonJune 26, 2015 (Regular Annual General Meeting of Shareholders) ..........
stock¥1,046

Source ofdividends
Retainedearnings

Dividend
per share
(Yen)
¥3.5

Record date Effective date
March 31,
June 29,
2015
2015

2016
Total dividend
amountDividend(Thousands of Source ofper share
Resolution
Type of share U.S. dollars) dividends (U.S. dollars) Record date Effective dateCommonRetained
March 31, June 30,
June 29, 2016 (Regular Annual General Meeting of Shareholders) ..........
stock$10,489
earnings$0.0352016
2016
Note: The total dividend on March 31, 2016 and 2015 excludes the ¥2 million ($17 thousand) and ¥4 million dividends for the ESOP Trust. This is because the shares held by this trust are treatedas treasury stock.

7. Securities and trading account securities(1) Total amount of investments in non-consolidated subsidiaries
The total amount of investments in non-consolidated subsidiaries as of March
31, 2016 and 2015 was ¥61 million ($541 thousand) and ¥150 million,
respectively.
(2) Trading account securities
There was no valuation gain or loss recognized for the year ended March 31,
2016. A valuation gain of ¥0 million was recognized for the year ended March
31, 2015.
(3) Held-to-maturity debt securities
Not applicable.

30

The Hyakujushi Bank, Ltd. / Annual Report 2016

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements(4) Other securities(a) Consolidated balance sheet amount and acquisition cost of other securities
and their difference as of March 31, 2016 and 2015 were as follows:
Millions of yen
Consolidatedbalance sheet Acquisition
amountcost
Difference

2016
Consolidated balance sheet
amount exceedingacquisition cost
Equity stock ..................... ¥ 115,555 ¥ 61,704
Bonds:
National .......................
494,048473,681
Local ...........................
152,091
147,792
Corporate.....................
263,342
260,282
909,481881,755
Other ..........................
241,317232,131
Subtotal ....................... 1,266,355 1,175,591
Consolidated balance sheet
amount not exceedingacquisition cost
Equity stock .....................
17,767
19,896
Bonds:
National .......................
7,939
8,006
Local ...........................
3,493
3,498
Corporate.....................
1,012
1,013
12,445
12,518Other ..........................
115,433
125,853
Subtotal .......................
145,646
158,268
Total .................................... ¥1,412,001 ¥1,333,859¥53,851
20,367
4,299
3,059
27,726
9,185
90,763(2,128)
(67)
(4)
(1)
(73)
(10,419)(12,621)¥78,142Millions of yen
Consolidatedbalance sheet Acquisition
amountcost
Difference

2015
Consolidated balance sheet
amount exceedingacquisition cost
Equity stock ..................... ¥ 143,945 ¥ 66,145
Bonds:
National .......................
588,526
576,529
Local ...........................
146,088
142,350
Corporate.....................
223,461
221,059
958,076
939,939
Other ..........................
238,897
227,092
Subtotal ....................... 1,340,919 1,233,177
Consolidated balance sheet
amount not exceedingacquisition cost
Equity stock .....................
16,21818,093
Bonds:
National .......................
4,964
4,974
Local ...........................
17,54017,547
Corporate.....................
39,554
39,582
62,05962,104
Other ..........................
32,57336,641
Subtotal .......................
110,851
116,838
Total .................................... ¥1,451,771 ¥1,350,016

31¥ 77,799
11,996
3,738
2,402
18,137
11,804
107,741(1,874)
(9)
(6)
(27)
(44)
(4,067)(5,986)¥101,754

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

2016
Consolidated balance sheet
amount exceedingacquisition cost
Equity stock ..................... $ 1,025,514 $ 547,603
Bonds:
National ....................... 4,384,522 4,203,771
Local ........................... 1,349,760 1,311,608
Corporate..................... 2,337,078 2,309,921
8,071,361 7,825,301
Other .......................... 2,141,613 2,060,090
Subtotal ....................... 11,238,507 10,433,004
Consolidated balance sheet
amount not exceedingacquisition cost
Equity stock .....................
157,676
176,570
Bonds:
National .......................
70,456
71,050Local ...........................
30,99931,043
Corporate.....................
8,981
8,990
110,445
111,093
Other .......................... 1,024,432 1,116,906
Subtotal ....................... 1,292,563 1,404,579
Total .................................... $12,531,070 $11,837,584$477,910
180,750
38,152
27,147246,059
81,514805,493(18,885)
(594)
(35)
(8)
(647)
(92,465)(112,007)$693,485(b) Gains and losses on sale of securities available for sale for the years ended
March 31, 2016 and 2015 are as follows:

2016
Equity stock ...........................
Bonds:
National ..........................
Local ..............................
Corporate........................
Other ...................................
Total ....................................

2015
Equity stock ...........................
Bonds:
National ..........................
Local ..............................
Corporate........................
Other ...................................
Total ....................................

Proceeds
from sale¥ 4,339295,725
74,005
15,453385,184
95,258¥484,781

Proceeds
from sale¥ 8,543
285,312
12,366
1,262
298,941
15,178¥322,664

Millions of yen
Gains onLosses onsale
sale¥1,662
¥
0
4,917
1,100
613
6,630
1,214
¥9,507

369
32
—
401
5,470
¥5,871Millions of yen
Gains onLosses on
sale
sale
¥ 609
¥
8
3,118
366
1
3,486
201
¥4,298

1,403
—
—
1,403
887
¥2,300Thousands of U.S. dollars
Proceeds
Gains onLosses on
from sale
sale
sale
2016
Equity stock ........................... $ 38,507$14,749$
0
Bonds:
National .......................... 2,624,467
43,636
3,274
Local ..............................
656,771
9,762
283
Corporate........................
137,1405,440—
3,418,388
58,8393,558
Other ...................................
845,385
10,77348,544
Total .................................... $4,302,280$84,371$52,103(5) 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”).
No impairment losses were recorded in the fiscal years ended March 31,
2016 and 2015.
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).
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, the entire holding is 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).

8. Matters relating to money held in trust
Money held in trust classified as held for trading purposes
The amount on the consolidated balance sheet as of March 31, 2016 and 2015
were ¥4,895 million ($43,441 thousand) and ¥4,901 million, respectively.

9. Net unrealized gains on securities available for sale
The following is a breakdown of net unrealized gains on securities available forsale recorded in the consolidated balance sheet:

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

Thousands ofMillions of yen
U.S. dollars
2015
2016
2016
¥78,142 ¥101,754 $693,485
101,754
78,142
693,485———(32,549) (210,720)(23,744)
54,397

69,205

482,756

(141)

(252)

(1,251)———¥54,256¥ 68,952$481,505

10. Loans and bills discounted
Loans and bills discounted as of March 31, 2016 and 2015 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
2015
2016
2016
¥ 1,438¥ 1,136$ 10,081
33,21833,060293,397
354
413
3,665
30,641
23,998
212,974¥65,652 $520,127¥58,608

Bills discounted are treated as financial transactions in accordance with “JICPA
Industry Audit Committee Report No. 24.” Commercial bills and foreign bills
bought are permitted to be sold or pledged and their total face value was asfollows:

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

Millions of yen
2015
2016
¥24,265¥23,354

11. 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
¥11,825 million ($104,943 thousand) and ¥14,434 million as of March 31,
2016 and 2015, respectively.

12. Assets pledged as collateral
Assets pledged as collateral as of March 31, 2016 and 2015 consisted of thefollowing:
Millions of yen
2015
2016
Assets pledged as collateral:
Securities.........................
Liabilities corresponding to assets
pledged as collateral:
Deposits ..........................
Payables under securities
lending transactions .........
Borrowed money ...............

¥297,688

Thousands of
U.S. dollars
2016¥278,547 $2,641,888

19,92620,023

176,837

88,86755,38340,52095,405

788,667
491,506

In addition to the assets presented above, the following assets were pledged ascollateral for exchange clearance transactions and futures contracts at March 31,
2016 and 2015:

Securities...............................

Thousands ofMillions of yen
U.S. dollars
2015
2016
2016
¥42,686 $407,144¥45,877

As of March 31, 2016 and 2015, other assets included guarantee money andhousehold deposits of ¥1,240 million ($11,004 thousand) and ¥1,250 million,
respectively.

13. 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, 2016 and 2015 was as follows:
Thousands ofMillions of yen
U.S. dollars
2015
2016
2016
Unused commitments ............... ¥1,011,663 ¥974,311 $8,978,194
Contracts with less than a yearof contract period orcontacts that are cancellable
unconditionally any time ...
918,846 8,198,216
923,775
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 Bank and its consolidated subsidiaries. Many ofthese commitments have clauses that allow the Bank and its consolidated
subsidiaries to refuse an application from customers or reduce the limit amountwith proper reasons (e.g. changes in financial situation, to secure claims, etc.).
In addition, the Bank and its consolidated subsidiaries may request thecustomers to pledge collateral such as real estate and securities at the time of thecontracts if necessary and take necessary measures periodically based on aprescribed internal procedure after conclusion of contracts such as monitoringcustomers’ business status, revising contracts and securing claims.

Thousands of
U.S. dollars
2016$207,259

32

The Hyakujushi Bank, Ltd. / Annual Report 2016

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements
14. Income taxes(1) Deferred tax assets
Major components of deferred tax assets as of March 31, 2016 and 2015 wereas follows:
Millions of yen
2015
2016
Excess reserve for possible loan
losses.................................
Valuation loss on securities
available for sale ...................
Net deferred losses on hedging
instruments, net of taxes .........
Net defined benefit liability.........
Excess depreciation ..................
Reserve for bonuses ..................
Other ...................................
Subtotal ................................
Valuation reserve .....................
Deferred tax assets ...................
Deferred tax liabilities:
Net unrealized gains on
securities, net of taxes .........
Reserve for advanced
depreciation of non-current
assets..............................
Other ................................
Net deferred tax assets (liabilities)

Thousands of
U.S. dollars
2016¥ 7,962¥ 10,113$ 70,660

3,836

1,915

34,043

3,437
2,981
1,132
472
2,644
22,466(3,625)
18,841

1,420
2,149
1,329
504
3,134
20,568(4,026)
16,54230,502
26,455
10,046
4,188
23,464
199,378(32,170)
167,208

15. Accumulated depreciation and reduction entry
Accumulated depreciation of tangible fixed assets as of March 31, 2016 and2015 amounted to ¥36,623 million ($325,017 thousand) and ¥35,675 million,
respectively.
Reduction entry, which is deferred gain on tangible fixed assets deductible
for tax purposes, amounted to ¥2,481 million ($22,018 thousand) and ¥2,481
million as of March 31, 2016 and 2015, respectively.

16. Borrowed money
Borrowed money consists of loans from other financial institutions. As of March
31, 2016 and 2015, subordinated borrowings in the amount of ¥1,000 million($8,874 thousand) and ¥4,000 million, respectively, were included in borrowed
money.

17. Corporate bond
(27,581)(34,465)(244,772)

(142)
(27)
¥(8,910)(150)(3)¥(18,077)(1,260)(239)$(79,073)(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, 2016 and 2015.
Statutory income tax rate .............................
Reconciliation:
Non-deductible expenses, including
entertainment expenses .........................
Non-taxable income, including dividend
income .............................................
Other permanent differences, including writeoffs of securities with a long-term holding
period ..............................................
Per-capita resident tax ..............................
Increase (decrease) of valuation reserve .........
Decrease in term-end balance of deferred tax
assets due to income tax changes ..............
Other ..................................................
Effective income tax rate under tax-effectaccounting ............................................

2016
32.8%

2015
35.3%

0.4

0.4

(1.1)

(3.1)

(0.4)
0.3
0.8

0.1
0.4
(0.3)

2.6
(0.8)

7.3
2.6

34.6%

42.7%

(3) Adjustment of deferred tax assets and deferred tax liabilities
due to change in income tax rate
Following the enactment by the Japanese Diet on March 29, 2016 of the “Act for
Partial Revision of the Income Tax Act, etc.” and the “Act for Partial Revision of
the Local Tax Act, etc.,” the corporate tax rate was reduced from fiscal years
beginning on or after April 1, 2016. The statutory tax rate used to calculatedeferred tax assets and deferred tax liabilities was lowered from 32.0% to30.6% for the temporary differences expected to be eliminated in the fiscal
years starting April 1, 2016 and April 1, 2017, and will be further lowered to30.4% for the temporary differences expected to be eliminated in the fiscal year
starting April 1, 2018 and thereafter. As a result of this tax rate change, deferred
tax liabilities, net of deferred tax assets, deferred losses on hedging instruments
and remeasurements of defined benefit plans decreased by ¥537 million($4,765 thousand), ¥179 million ($1,588 thousand), and ¥26 million ($230
thousand), respectively, whereas net unrealized gains on securities and income

33

taxes-deferred increased by ¥1,246 million ($11,057 thousand) and ¥505
million ($4,481 thousand), respectively. In addition, deferred tax liability forland revaluation decreased by ¥307 million ($2,724 thousand) and revaluation
reserve for land increased by the same amount as of and for the fiscal year ended
March 31, 2016.

Corporate bond consists solely of subordinated bonds in the amount of ¥10,000
million ($88,746 thousand) and ¥10,000 million as of March 31, 2016 and2015.

18. Revaluation reserve for land
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, 2016 and 2015, the difference between the carrying
amount and the fair value of the land revalued was ¥16,081 million ($142,713
thousand) and ¥16,129 million, respectively

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

20. Other expenses(1) Loan write-offs were included in other expenses, which amounted to¥2,472 million ($21,938 thousand) and ¥3,930 million for the years ended
March 31, 2016 and 2015, respectively.
(2) Impairment losses
During the years ended March 31, 2016 and 2015, the Bank recorded
impairment losses on fixed assets as described below:

Kagawa Pref ... Idle assetsLand,
and/or assets
buildings
for disposal
and(2016: 9 items movables
2015: 13 items)
Other ........... Idle assets,Land,
assets forbuildings
business use
and/orand/or assets for movables,
disposal
etc.
(2016: 3 items
2015: 3 items)
Total ............

Thousands of
U.S. dollars
Impairment
losses2016
Kagawa Pref ... Idle assets
Land,
$789
(2016: 9 items) buildings
land: 736
andmovables buildings: 35
movables: 0
Other ........... Idle assets, assets Land,$195
for business use buildings
land: 186
(2016: 3 items) andmovables, buildings: 0
etc.
movables: 0
Total ............
$985
land: 931
buildings: 44
movables: 0
The Bank posted impairment losses of ¥111 million ($985 thousand) and¥91 million, respectively, during the years ended March 31, 2016 and 2015 onland, buildings and/or movables, etc. due to continuous declines in land prices.
The Bank reduced the carrying amounts of the corresponding assets to therecoverable amounts, and recorded the difference between the carrying amountand recoverable amount of each asset as impairment losses under otherexpenses.
In general, the Bank treats each of its branches as a single asset group unit forrecognition and measurement of impairment loss; 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 is usually considered as thesmallest 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 a discount rate of 0.5%.

21. Matters relating to consolidated statements ofcomprehensive income
The amount of recycling and amount of income tax effects associated with othercomprehensive income (loss):
Millions of yen
2015
2016
Net unrealized gains (losses) onother securities, net of taxes:
Amount recognized during theyear ............................... ¥ (17,128)
Amount of recycling ..............
(6,481)
Prior to income tax effect.....
(23,609)
Income tax effect ...............
8,802
Net unrealized gains (losses)
on securities available forsale .............................
(14,807)
Net deferred losses on hedging
instruments, net of taxes:
Amount recognized during theyear ...............................
(8,071)
Amount of recycling ..............
1,281
Prior to income tax effect.....
(6,789)
Income tax effect ...............
1,993
Deferred losses on hedging
instruments ...................
(4,796)
Revaluation reserve for land:
Amount recognized during theyear ...............................
—
Amount of recycling ..............
—
Prior to income tax effect.....
—
Income tax effect ...............
307
Revaluation reserve for land..
307
Remeasurements of defined benefit
plans:
Amount recognized during theyear ...............................
(3,946)
Amount of recycling ..............
(136)
Prior to income tax effect.....
(4,082)
Income tax effect ...............
1,279
Remeasurements of defined
benefit plans ..................
(2,803)
Total other comprehensive income(loss) ................................. ¥ (22,099)

Thousands of
U.S. dollars
2016¥46,679 $(152,005)(3,472)(57,516)
43,206(209,522)(11,904)
78,11531,302(131,407)(5,151)762(4,389)1,403(71,627)
11,368(60,250)
17,687(2,985)(42,563)

—
—
—
636
636

—
—
—
2,724
2,724

6,094
507
6,602
(2,251)(35,019)(1,206)(36,226)
11,3504,350(24,875)¥33,304$(196,121)

22. Finance leases
Information on finance leases for the years ended March 31, 2016 and 2015 are
as follows:

Millions of yen
Impairment losses
2015
2016
¥26
¥ 89
land: 20
land: 83
buildings: 4 buildings: 5
movables: 0 movables: 0
¥ 22

¥65

land: 21

land: 62

buildings: 0

buildings: 3

movables: 0¥111
land: 105
buildings: 5
movables: 0

movables: ¥91
land: 83
buildings: 8
movables: 0

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
None(2) Depreciation and amortization methods for lease assets
Depreciation and amortization methods for lease assets are described in Note 3.
Significant accounting policies (5) Depreciation.

34

The Hyakujushi Bank, Ltd. / Annual Report 2016

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements
2. As lessor(1) Breakdown of lease investment assets

Lease receivables .....................
Estimated residual value.............
Interest received ......................
Lease investment assets ..............

Thousands ofMillions of yen
U.S. dollars
2015
2016
2016
¥16,716 $149,014¥16,791
1,703
1,801
15,983(1,781)(1,832)(16,258)¥16,637 $148,739¥16,760(2) Schedule for collection of lease receivables and receivables onlease investment assets by leasing contract maturity

2016
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
Lease receivables investment assets¥67¥5,404
62
4,193
50
3,211
38
2,123
6
1,174
0
682

2015
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
Lease receivables investment assets¥56¥5,311
50
4,344
46
3,142
41
2,161
33
1,093
2
662

2016
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
Lease receivables investment assets$594$47,958
550
37,211443
28,496337
18,84053
10,4180
6,052(3) Regarding finance lease transactions that do not transfer ownership of theleased assets to the lessee and whose date of commencement of leasing was prior
to the start of application of the new accounting standards, the book value (after
deduction of accumulated depreciation expenses) of the tangible fixed assets andintangible fixed assets at the end of the last business term prior to the start ofapplication of the new accounting standards is taken as the beginning balance ofthe lease assets.
Regarding the lease investment assets in question, amounts equivalent tointerest receivable under the new accounting standards will be allocated on astraight-line basis to the remaining interest period.
On the assumption of application of the new accounting standards forleasing transactions at the beginning of the leasing transactions in question,
profit before income taxes would have decreased by ¥3 million ($26 thousand)(¥14 million in the previous fiscal year) compared with the amount posted in
the Consolidated Statements of Income.

35

23. Financial instruments
1. Disclosures related to financial instruments(1) Financial instrument policies
The Bank and its subsidiaries (the “Group”) provide 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 thefinancial instruments held. To accomplish this goal, the Group quantifies, to thegreatest extent possible, various risks related to financial instruments using
statistical methods. It categorizes capital (risk capital) according to the size of therisk, engaging in “integrated risk management,” incorporating a capital
allocation system that monitors risk versus return. The Group continues toimprove efficiency in risk management, ensuring greater stability and soundness
for the business as a whole.
(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. Certain bonds are held for resale. These
investments are exposed to the credit risk of the issuing body, interest rate risk,
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.
Some derivatives transactions entered into by the Group involve interest
rate swaps that were concluded in line with the amount and timing of theinterest income cash flow of the underlying financial assets for the purpose ofhedging exposure to interest rate risks. Evaluation of the effectiveness of thehedges was omitted in accordance with “JICPA Industry Audit Committee
Report No. 24” because the terms and conditions of the hedging instruments
were closely matched with those of underlying hedged financial assets. Some
derivative transactions entered into by the Group involve currency swaps andforeign exchange swaps for the purpose of hedging exchange rate fluctuation
risk associated with financial assets denominated in foreign currencies. Suchtransactions are treated as deferred hedges as defined under “JICPA Industry
Audit Committee Report No. 25.” The Group assesses hedge effectiveness forhedging transactions to confirm whether a position is commensurate with thevalue of the foreign currency-denominated financial asset subject to the hedge.
(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.

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 and variancecovariance methods is a measure of the volume of market risk at a certain
event probability statistically computed utilizing changes in historicalmarket data. In this context, there are cases in which VaR cannot capture risk
under sudden and dramatic 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.

(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 derivative transactions for interest rate swaps tohedge interest rate risk as part of ALM.

(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 said risk.

(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, 2016 (theconsolidated balance sheet date), the volume of the aforementioned risks(estimated amount of loss) amounted to ¥12 million ($106 thousand)(compared with ¥7 million at the end 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, the Group applies thehistorical simulation method with a holding period of 120 days, a confidence
interval of 99% and an observation period of 1,200 business days. As of
March 31, 2016, the volume of the aforementioned risks (taking into
consideration the correlation or reciprocal risks) amounted to ¥31,291
million ($277,697 thousand) (compared with ¥28,210 million at the end of
the previous fiscal year). Results of statistical analysis are used for liquid
deposits, which are recognized as being in part long-term fixed
procurement and as such subject to interest rate risk.
In addition, in measuring the VaR of price volatility risks of investment
trusts, the Group applies the variance covariance method with a holding
period of 20 days, a confidence interval of 99% and an observation periodof 240 business days, while in measuring the VaR of risks involving interest
rates of money held in trust, price volatility or exchange rates, the Groupapplies the historical simulation method with a holding period of 20 days, aconfidence interval of 99% and an observation period of 1,200 businessdays. As of March 31, 2016, the volume of the aforementioned risks
amounted to ¥14,338 million ($127,245 thousand) (compared with
¥5,776 million at the end of the previous fiscal year).

(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 said values, and said values
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, 2016 and 2015 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
2016(1) Cash and due from banks ....... ¥ 405,424 ¥ 405,424¥—(2) Call loans and bills bought ......
1,690
1,690
—
(3) Trading account securities ......
1111—(4) Money held in trust ..............
4,895
4,895
—
(5) Securities
Other securities .................. 1,412,001 1,412,001—(6) Loans and bills discounted ...... 2,747,341
Reserve for possible loan losses(15,845)
2,731,495 2,777,180
45,684
Total assets ............................ 4,555,519 4,601,203
45,684(1) Deposits ........................... 3,935,432 3,935,766
334(2) Negotiable certificates ofdeposit .............................
178,123
178,16238(3) Call money and bills sold .......
26,25426,254—(4) Borrowed money ................
83,727
83,7291(5) Corporate bonds .................
10,00010,01010
Total liabilities ........................ 4,233,537 4,233,922
384
Derivative Transactions*2
Not subject to hedge accounting
15,661
15,661—
Subject to hedge accounting .....
(6,314)(6,314)—
Total Derivative Transactions ...... ¥9,347 ¥
9,347
¥—

36

The Hyakujushi Bank, Ltd. / Annual Report 2016

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements
Millions of yen
Consolidatedbalance sheet
2015
amountFair value Difference(1) Cash and due from banks ....... ¥ 305,246 ¥ 305,246¥—(2) Call loans and bills bought ......
3,605
3,605
—
(3) Trading account securities ......
22—(4) Money held in trust ..............
4,901
4,901
—
(5) Securities
Other securities .................. 1,451,771 1,451,771—(6) Loans and bills discounted ...... 2,696,444
Reserve for possible loan losses(15,341)
2,681,103 2,703,404
22,301
Total assets ............................ 4,446,631 4,468,932
22,301(1) Deposits ........................... 3,801,437 3,801,853
416(2) Negotiable certificates ofdeposit .............................
169,926
169,95327(3) Call money and bills sold .......
48,06848,068—(4) Borrowed money ................
128,635
128,65015(5) Corporate bonds .................
10,00010,03434
Total liabilities ........................ 4,158,066 4,158,560
493
Derivative Transactions*2
Not subject to hedge accounting
12,194
12,194—
Subject to hedge accounting .....
(10,097)(10,097)—
Total Derivative Transactions ...... ¥2,096 ¥
2,096¥—
Thousands of U.S. dollars
Consolidatedbalance sheet
amountFair value Difference
2016(1) Cash and due from banks ....... $ 3,598,012 $ 3,598,012 $—(2) Call loans and bills bought ......
14,99814,998—(3) Trading account securities ......
97
97—(4) Money held in trust ..............
43,44143,441—(5) Securities
Other securities .................. 12,531,070 12,531,070—(6) Loans and bills discounted ...... 24,381,798
Reserve for possible loan losses (140,619)
24,241,169 24,646,609
405,431
Total assets ............................ 40,428,816 40,834,247
405,431(1) Deposits ........................... 34,925,736 34,928,700
2,964(2) Negotiable certificates ofdeposit ............................. 1,580,786 1,581,132
337(3) Call money and bills sold .......
—
232,996
232,996(4) Borrowed money ................
743,051
743,0688(5) Corporate bonds .................
88,746
88,83588
Total liabilities ........................ 37,571,325 37,574,742
3,407
Derivative Transactions*2
Not subject to hedge accounting
138,986
138,986—
Subject to hedge accounting .....
(56,034)(56,034)—
Total Derivative Transactions ...... $ 82,951 $ 82,951 $—*1 General reserve for possible loans 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.

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 deposit are
accepted.
Items with a short contract period are valued at book value, since book value
approximates their fair value.

37(2) Call loans and bills 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 purpose held are presented in “8.
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 the Group are categorizedaccording to internal credit rating and maturity, and valued at fair value,
discounting by a projected interest rate applicable when a bond in the same total
amount of principal and interest is issued.
See “7. 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.
Loans to borrowers who are bankrupt, substantially bankrupt, or likely to
go bankrupt are valued net of the estimated uncollectible amount based on thecurrent value of estimated future cash flows, or the estimated collectible portion
based on the collateral or guarantee underlying the loan. As such, the balance ofthe loan on the consolidated balance sheet as of the last day of the fiscal period
less the current estimated uncollectible amount approximates the fair value.
For loans and bills discounted with no repayment deadline, due to theirnature, such as the limited range of pledged assets for said loans, their fair values
are valued at book value, because they are assumed to approximate the fairvalues 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) Borrowed money
Borrowed money subject to variable interest rates reflects market interest rates
over a short-term. As the credit status of the Bank and its consolidated
subsidiaries 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 subject to fixed interest rates isvalued at present value, discounting the total amount of principal and interest
categorized by specific term by an assumed applicable interest rate when similarborrowings are entered into.

(5) Corporate bonds
The fair value of corporate bonds is valued at present value by discounting thetotal amount of principal and interest by an assumed applicable interest rate
when similar corporate bonds are issued.
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, 2016 and 2015. 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
2015
2016
2016
¥2,767¥2,760$24,494
150
353
3,132
¥2,917¥3,113$27,626
Millions of yen

Category
1. Private equity shares*1*2 ........
2. Investment in partnership*3 .....
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 recorded a ¥2 million ($17 thousand) and ¥0 million impairment loss forunlisted equity stock for the fiscal years ended March 31, 2016 and 2015, 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.

The redemption schedule and the corresponding estimated amounts of monetary claims and securities with maturities subsequent to March 31, 2016 and 2015 are as
follows:

2016
Deposits ...........................................................
Call loans and bills bought .....................................
Monetary claims bought ........................................
Securities:
Other securities with maturities ..............................
National government bonds .............................
Local government bonds .................................
Corporate bonds...........................................
Other ........................................................
Loans and bills discounted* ....................................
Total ...............................................................

2015
Deposits ...........................................................
Call loans and bills bought .....................................
Monetary claims bought........................................
Securities:
Other securities with maturities ..............................
National government bonds .............................
Local government bonds .................................
Corporate bonds...........................................
Other ........................................................
Loans and bills discounted*....................................
Total ...............................................................

2016
Deposits ...........................................................
Call loans and bills bought .....................................
Monetary claims bought........................................
Securities:
Other securities with maturities ..............................
National government bonds .............................
Local government bonds .................................
Corporate bonds...........................................
Other ........................................................
Loans and bills discounted*....................................
Total ...............................................................

Up to 1 year
¥ 367,994
1,690
29,615

Over 1 year,
up to 3 years¥———

138,633
49,383
26,31743,475
19,457
1,083,774¥1,621,708

309,649
108,695
30,774
118,470
51,708547,898¥857,548

Up to 1 year
¥ 268,053
3,605
29,982

Over 1 year, up
to 3 years¥———

167,934
59,77347,67828,96931,513
1,066,934¥1,536,510

311,439
126,168
45,952
90,76948,548517,360¥828,800

Up to 1 year
$ 3,265,832
14,998262,823

Over 1 year,
up to 3 years$———

1,230,324
438,258
233,555
385,827
172,674
9,618,157$14,392,154

2,748,038
964,634
273,109
1,051,384
458,892
4,862,424$7,610,472

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

Over 7 years,
up to 10 years¥———

Over 10 years
¥
—
—
830

78,66958,506—
1,362
18,800
164,032¥242,701

195,906
12,42879,31431,65372,509194,611¥390,517

126,701
104,724—
13,9398,037
375,951¥503,483

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

Over 7 years,
up to 10 years¥———

Over 10 years
¥
—
—
1,077

155,847
127,588
2,949
13,933
11,376
178,914¥334,761

126,361
50,34938,81921,495
15,697
175,084¥301,445

66,06743,536—
10,505
12,026355,187¥422,333

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
$
—
—
7,365

1,738,604
110,294
703,887
280,910
643,494
1,727,112$3,465,717

1,124,432
929,392—
123,704
71,325
3,336,448$4,468,255

347,207168,249
19,17855,452
104,326
316,775¥663,983

413,180
186,074
28,23097,343
101,532
329,825¥743,006

3,081,354
1,493,157
170,198
492,119925,860
2,811,279$5,892,642

698,162
519,222—
12,087
166,844
1,455,733$2,153,895*Loans and bills discounted do not include ¥34,224 million ($303,727 thousand) and ¥34,672 million in loans to bankrupt, substantially bankrupt and likely to go bankrupt borrowers or otherloans of which repayment is not expected, or ¥30,071 million ($266,870 thousand) and ¥38,465 million in loans with no established maturity.

38

The Hyakujushi Bank, Ltd. / Annual Report 2016

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements
The redemption schedule of corporate bonds, borrowed money and other interest-bearing debt scheduled to be repaid subsequent to March 31 2016 and 2015 is asfollows:

2016
Deposits* .........................................................
Negotiable certificates of deposit .............................
Call money and bills sold.......................................
Borrowed money ................................................
Corporate bonds.................................................
Total ...............................................................

2015
Deposits* .........................................................
Negotiable certificates of deposit .............................
Call money and bills sold.......................................
Borrowed money ................................................
Corporate bonds.................................................
Total ...............................................................

2016
Deposits* .........................................................
Negotiable certificates of deposit .............................
Call money and bills sold.......................................
Borrowed money ................................................
Corporate bonds.................................................
Total ...............................................................

Up to 1 year
¥3,687,555
176,320
26,25454,918—¥3,945,047

Up to 1 year
¥3,556,295
169,926
48,06820,480—¥3,794,769

Up to 1 year
$32,725,905
1,564,785
232,996487,380—$35,011,066

Over 1 year,
up to 3 years¥238,929
1,803—
21,109—¥261,842

Millions of yen
Over 3 years, Over 5 years,
up to 5 years
up to 7 years¥ 8,095
¥ 486
—
—
—
—
4,708
1,941
—
10,000¥12,804¥12,428

Over 1 year,
up to 3 years¥235,953——
62,047—¥298,000Millions of yen
Over 3 years, Over 5 years,
up to 5 years
up to 7 years¥ 8,217
¥ 522
—
—
—
—
39,5385,164—
10,000¥47,755¥15,687

Over 1 year,
up to 3 years$2,120,420
16,001—
187,335—$2,323,766

Thousands of U.S. dollars
Over 3 years, Over 5 years,
up to 5 years
up to 7 years$ 71,840$ 4,313————
41,782
17,225—88,746$113,631$110,294

Over 7 years,
up to 10 years
¥365
—
—
559
—
¥925

Over 7 years,
up to 10 years
¥ 448
—
—
745
—
¥1,194

Over 7 years,
up to 10 years$3,239——4,960—$8,209Over 10 years
¥ —
—
—
489
—
¥489

Over 10 years
¥ —
—
—
659
—
¥659

Over 10 years
$ —
—
—
4,339
—
$4,339*Among deposits, demand deposits are included in “Up to 1 year.”

24. Accrued retirement benefits(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 ...............
Cumulative effects of changes
in accounting policies .......
Restated balance ................
Service costs .....................
Interest costs ....................
Actuarial differences ...........
Retirement benefits paid ......
Prior service costs ..............
Retirement benefit obligations at
end of period .......................

39

Millions of yen
2015
2016

Thousands of
U.S. dollars
2016¥51,656¥48,617$458,430—
51,656
1,503
473
835
(1,882)—

2,491
51,108
1,491
468
277
(1,690)——458,430
13,338
4,197
7,410(16,702)—¥52,587¥51,656$466,693

For the 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
2016

Millions of yen
2015
2016
¥56,192¥48,527$498,686

630(3,110)2,131(1,375)¥54,468

556
6,372
2,105
(1,369)¥56,192

5,591(27,600)
18,911(12,202)$483,386(c) Reconciliation of retirement benefit obligations and pension assets at end of period andretirement benefit liabilities and assets recorded in the consolidated balance 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 .................................

¥(1,881)¥(4,535)$(16,693)(d) Breakdown of retirement benefit costs

For the 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
2015
2016
2016
¥1,491¥1,503$13,338
468
473
4,197
(556)
(630)
(5,591)
(136)
—

507
—

(1,206)—¥1,210¥1,911$10,738*Retirement benefit costs of domestic consolidated subsidiaries that use the simplified
method are recorded in a lump-sum in “Service costs.”(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 years ended March 31,
Actuarial differences .................
Total ....................................

Thousands ofMillions of yen
U.S. dollars
2015
2016
2016
¥6,602¥(4,082)$(36,226)¥6,602¥(4,082)$(36,226)(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:(b) Reconciliation of pension assets at beginning and end of period(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,
retirement benefit liabilities and retirement benefit costs are calculated by thesimplified method.

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

Thousands ofMillions of yen
U.S. dollars
2015
2016
2016
¥ 155
¥ 1,159$ 10,285(4,691)(3,041)(26,987)

Thousands of
U.S. dollars
2016

Millions of yen
2015
2016
¥52,587(54,468)(1,881)¥51,656(56,192)(4,535)$466,693(483,386)(16,693)———¥(1,881)¥(4,535)$(16,693)

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

Thousands ofMillions of yen
U.S. dollars
2015
2016
2016
¥2,399¥(1,683)$(14,936)¥2,399¥(1,683)$(14,936)(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 .....................................................

2016
13%
53
27
7
100%

2015
13%
56
25
6
100%

Note: Total pension assets include retirement benefit trusts established for the
corporate pension plan (21.88% as of March 31, 2016 and 23.28% as of March
31, 2015) and retirement benefit trusts established for the retirement lumpsum payment plan (20.24% as of March 31, 2016 and 20.61% as of March 31,2015).

(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
1) Discount rate .......................................
2) Expected long-term rate of return ..............
3) Assumed salary increase rate .....................

2016
0.92%
2.00%
3.20%

2015
0.92%
2.00%
3.20%

(3) Defined contribution pension plan
The required contribution to the defined contribution plans of consolidated
subsidiaries were ¥6 million ($53 thousand) in the fiscal year ended March 31,
2016 and ¥6 million in the fiscal year ended March 31, 2015.

25. Stock options
1. Stock option expenses and accounts for the fiscal years ended
March 31, 2016 and 2015

Operating expense ...................

Thousands ofMillions of yen
U.S. dollars
2015
2016
2016
¥48
¥40
$354

2. Stock option details, size, and changes(1) Stock option details
2009 stock options 2010 stock options 2011 stock options 2012 stock options 2013 stock options 2014 stock options
Category and number of grantrecipients ................................ The bank’s twelve The bank’s ten
The bank’s ten
The bank’s ten
The bank’s ten
The bank’s ten
directors
directors
directors
directors
directors
directors (excluding
outside directors)
Type and number of stock options
granted (Note) .......................... Common stock:
Common stock:
Common stock:
Common stock:
Common stock:
Common stock:
128,500 shares
159,000 shares
187,300 shares
175,000 shares
172,500 shares
136,600 shares
Grant date .................................. July 24, 2009
July 26, 2010
July 26, 2011
July 24, 2012
July 23, 2013
July 25, 2014
Vesting terms .............................. No vesting terms No vesting terms No vesting terms No vesting terms No vesting terms No vesting terms
Service period .............................. No service period No service period No service period No service period No service period No service period
specified
specified
specified
specified
specified
specifiedExercise period ............................ July 25, 2009 to
July 27, 2010 toJuly 27, 2011 toJuly 25, 2012 toJuly 24, 2013 toJuly 26, 2014 to
July 24, 2039
July 26, 2040
July 26, 2041
July 24, 2042
July 23, 2043
July 25, 2044

40

The Hyakujushi Bank, Ltd. / Annual Report 2016

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements
3. Method for estimating fair value of stock options
The following method was used to estimate the fair value of 2015 stock options
granted during the consolidated fiscal year ended March 31, 2016.
(1) Valuation technique: Black-Scholes formula(2) Important assumptions and estimation methods
2015 stock options
Stock volatility*1 ..........................
31.3%
Projected remaining years*2 .............
2.3 years
Projected annual dividend*3 .............
Per share: ¥7
Risk-free interest rate*4. .................
0.01%

2015 stock options
Category and number of grantrecipients ........................... The bank’s nine
directors(excluding
outside directors)
Type and number of stock options
granted (Note) ........................ Common stock:
94,300 shares
Grant date ............................. July 24, 2015
Vesting terms.......................... No vesting terms
Service period......................... No service period
specifiedExercise period ....................... July 25, 2015 toJuly 24, 2045

*1 Calculated weekly for the period beginning the week of April 1, 2013 through the weekof July 20, 2015 based on actual market prices.
*2 Estimated according to the average remaining tenures of directors as of the date ofissuance based on the average service period from the date of assumption of office to thedate of resignation, or the period from the date of assumption of office to the issuance
date.
3* Actual dividends for the fiscal year ended March 2015.
4* Yield of Japanese government bonds during the period of the projected remaining years.

Note: Converted to equivalent number of shares.

(2) Stock option size and changes(a) Number of stock options
2009 stock options 2010 stock options 2011 stock options 2012 stock options 2013 stock options 2014 stock options
Prior to vesting (shares):
Prior fiscal year end .................
Granted ................................
Expired ................................
Vested shares ..........................
Unvested shares ......................
After vesting (shares):50,700——8,100
42,60086,300——13,10073,200105,000——
15,50089,500131,200——
18,100113,100

158,100——
32,200125,900

136,600——
25,500111,100

Prior fiscal year end .................
Vested shares ..........................
Exercised ..............................
Expired ................................
Unexercised...........................

—
8,100
8,100
—
—

—
13,10013,100———15,50015,500———18,10018,100———32,20032,200———25,50025,500——4. 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.

26. Derivative transactions(1) Type of transactions
The Bank and its consolidated subsidiaries undertake the following derivativetransactions: interest-rate swaps and others for interest-rate relatedtransactions; currency swaps, forward exchange contracts and currency options
for currency-related transactions; and bond futures for bond-relatedtransactions.
(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.
Market prices of interest-rate related transactions as of March 31, 2016 and2015 were as follows:

2015 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 ............................

—
94,300——94,300—————(b) Unit price information (in year)
2009 stock options 2010 stock options 2011 stock options 2012 stock options 2013 stock options 2014 stock options
Exercise price .............................. Per share: ¥ 1 Per share: ¥ 1 Per share: ¥ 1 Per share: ¥ 1 Per share: ¥ 1 Per share: ¥ 1
Average price at exercise................. Per share: ¥444 Per share: ¥444 Per share: ¥444 Per share: ¥444 Per share: ¥444 Per share: ¥444
Fair value on grant date .................. Per share: ¥418 Per share: ¥315 Per share: ¥279 Per share: ¥256 Per share: ¥321 Per share: ¥335
2015 stock options
Exercise price .............................. Per share: ¥ 1
Average price at exercise................. Per share: ¥ —Fair value on grant date .................. Per share: ¥409

41

2016
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)¥31,546¥26,927

¥ 839

¥ 839

31,54626,927

(557)

(557)

753
753

576
576

0
0
¥ 281

54
(15)
¥ 320

Millions of yen
Contracted value
Appraised
Total
Over 1 year Fair value profit/(loss)

2015
Over the Counter
Interest-rate swaps:
Fixed ratereceivable/variable rate
payable .......... ¥49,276
Variable ratereceivable/fixed
rate payable..... 49,276
Others:Sell ..................
1,240
Buy ..................
1,240
Total ...................

¥41,587

¥ 917

¥ 917

41,587

(430)

(430)

1,101
1,101

1
1
¥ 490

69
(18)
¥ 538

2016
Over the Counter
Interest-rate swaps:
Fixed ratereceivable/variable rate
payable ..........
Variable ratereceivable/fixed
rate payable.....
Others:Sell ..................
Buy ..................
Total ...................

Thousands of U.S. dollars
Contracted value
Appraised
Total
Over 1 year Fair value profit/(loss)$279,960$238,968$ 7,445$ 7,445279,960

238,968(4,943)(4,943)

6,682
6,682

5,111
5,111

0
0
$ 2,493479(133)$ 2,839

Market prices of currency-related transactions as of March 31, 2016 and 2015
were as follows:

2016
Over the Counter
Currency swaps ......
Forward exchange
contracts:
Sell ...............
Buy ...............
Currency options:Sell ...............
Buy ...............
Total ...................

2015
Over the Counter
Currency swaps ......
Forward exchange
contracts:
Sell ...............
Buy ...............
Currency options:Sell ...............
Buy ...............
Total ...................

Millions of yen
Contracted value
Appraised
Total
Over 1 year Fair value profit/(loss)¥386,881¥312,040

64,42568,320189,611
189,611

¥

116

¥ 116

1,413
1,352

1,392
(929)

1,392
(929)

128,286
128,286

7,400
7,400
¥15,380

1,277
367¥2,223

Millions of yen
Contracted value
Appraised
Total
Over 1 year Fair value profit/(loss)¥311,216¥225,509

¥

99

¥

99

68,42061,076600
1,081(1,320)1,965(1,320)1,965

168,184
168,184

110,460
110,460

5,468
5,468
¥11,681

2,579(1,128)¥2,195

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

2016
Over the Counter
Currency swaps ...... $3,433,448 $2,769,258
Forward exchange
contracts:
Sell ...............
571,751
12,539
Buy ...............
606,318
11,998Currency options:Sell ............... 1,682,738 1,138,498
Buy ............... 1,682,738 1,138,498
Total ...................

$ 1,029$ 1,029

12,353(8,244)

12,353(8,244)

65,672
65,672$136,492

11,332
3,257$19,728

42

The Hyakujushi Bank, Ltd. / Annual Report 2016

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements(b) Currency related transactions
As of March 31, 2016

There were no bond-related transactions as of March 31, 2016.
Market prices of bond-related transactions as of March 31, 2015 were as
follows:

2015
Financial
instruments
exchange
Bond futures:
Sell ...............
Buy ...............
Total ...................

Millions of yen
Contracted value
Appraised
Total
Over 1 year Fair value profit/(loss)

Hedge accounting method

Type
Currency swaps
General accounting rules
Monetary swaps

Main hedged item
Foreign currency receivables

Contracted value¥109,395
61,341Millions of yen
Contracted value over
1 year¥44,040—

Contracted value¥76,908
62,299Millions of yen
Contracted value over
1 year¥34,849—

Total¥4,438
—

¥—
—

¥21
—
¥21

As of March 31, 2015

¥21
—
¥21

Hedge accounting method

Type
Currency swaps
General accounting rules
Monetary swaps

Notes: 1. The above transactions were listed at market values and recognized profit (loss)
were included in the consolidated statements of income.
2. The derivatives transactions for which hedge accounting has been applied were
excluded from the above tables.
3. Fair values for financial instruments exchange transactions refer to final prices at
the Osaka Stock Exchange and others. Fair values for over the countertransactions were calculated at discounted present values and formulas for option
pricing.

Main hedged item
Foreign currency receivables
Total

Hedge accounting method

Type
Currency swaps
General accounting rules
Monetary swaps

Main hedged item
Foreign currency receivables

Thousands of U.S. dollars
Contracted value overContracted value
1 year$970,846$390,841—
544,382

Total(a) Interest rate related transactions
As of March 31, 2016

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

Contracted value¥60,000

Millions of yen
Contracted value over
1 year¥60,000

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

Contracted value¥40,000

Millions of yen
Contracted value over
1 year¥40,000

Fair value$35,747(4,037)$31,709

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
Calculated at discounted present value.

Fair value¥(9,887)¥(9,887)

As of March 31, 2015

Hedge accounting method

Fair value¥(6,105)(822)¥(6,928)

As of March 31, 2016

(3) Derivative transactions subject to hedge accounting
The following are the contracted value, the equivalent principal and the fair value for each type of derivative transaction subject to hedge accounting as of the end of the
fiscal year, as well as the market price calculation method. The contracted value, other price or value below does not indicate by itself the market risk of the derivativetransaction.

Hedge accounting method

Fair value¥4,028(455)¥3,573

Fair value¥(3,169)¥(3,169)

27. Segment information(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 114 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 “Notes to Consolidated Financial Statements.”
Moreover, reportable segment profit is based on ordinary profit.
Intersegment ordinary income is based on transaction prices between third parties.

As of March 31, 2016
Hedge accounting
methodGeneral accounting rules

TypeInterest-rate swaps
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
$532,481$532,481

Fair value$(87,744)$(87,744)

Notes: 1. In general deferred hedge accounting is applied according to “Accounting and Auditing Treatment relating to the Adoption of ‘Accounting for Financial Instruments’ for Banks” (JICPA
Audit Committee Report No. 24).
2. Calculation of fair value
Calculated at discounted present values and using formulas for option pricing.

43

44

The Hyakujushi Bank, Ltd. / Annual Report 2016

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements(3) Information regarding ordinary income, profit and loss, assets and liabilities and other items by reportable segment
Information about industry segments of the Bank and its consolidated subsidiaries for the years ended March 31, 2016 and 2015 is as follows:

Banking2016
Ordinary income:Outside customers ........................... ¥ 72,866Inter-segment transactions ..................
305
Total .................................................. ¥ 73,171
Segment profit ...................................... ¥ 17,516
Segment assets ...................................... ¥4,701,890
Segment liabilities .................................. ¥4,443,052
Other items: ........................................
Depreciation .................................. ¥2,819Interest income ...............................
50,720Interest expenses .............................
5,050
Increases in property, plant andequipment and intangible assets ........
1,681

2015
Ordinary income:Outside customers ...........................
Inter-segment transactions ..................
Total ..................................................
Segment profit ......................................
Segment assets ......................................
Segment liabilities ..................................
Other items: ........................................
Depreciation ..................................
Interest income ...............................
Interest expenses .............................
Increases in property, plant andequipment and intangible assets ........

Banking¥

Leasing

Total

Millions of yen
Total

¥

¥

79,261909¥ 80,171¥ 17,825¥4,727,122¥4,464,002¥ 2,120
3,781¥ 5,902¥ 1,921¥31,205¥10,353

81,381
4,691¥ 86,073¥ 19,747¥4,758,328¥4,474,355—(4,691)¥ (4,691)¥ (126)¥ (38,666)¥ (36,724)

81,381—¥ 81,381¥ 19,620¥4,719,661¥4,437,631

¥

¥

¥

¥

¥

¥

4

2,911
50,851
5,155
1,685

Leasing

Total

211

3,246
51,318
5,232
1,897

74
(538)
(520)
133

3,320
50,780
4,712

Millions of yen
Otherbusinesses

Total

Adjustment¥ 1,765
3,687¥ 5,453¥ 1,596¥30,717¥10,788

77,636
4,584¥ 82,220¥ 18,672¥4,652,318¥4,354,951—(4,584)¥ (4,584)¥(0)¥(37,212)¥(35,321)

77,636—¥ 77,636¥ 18,671¥4,615,105¥4,319,629

¥

¥

¥

¥

¥

¥

¥

1,787

Banking2016
Ordinary income:Outside customers ........................... $ 646,663
Inter-segment transactions ..................
2,706
Total .................................................. $ 649,369
Segment profit ...................................... $ 155,449
Segment assets ...................................... $41,727,813
Segment liabilities .................................. $39,430,706
Other items: ........................................
Depreciation .................................. $25,017
Interest income ...............................
450,124
Interest expenses .............................
44,817
Increases in property, plant andequipment and intangible assets ........
14,918

3

1,790

335
483
84

¥

231

3,295
49,0774,390
2,022

Thousands of U.S. dollars
Other
Total
businesses
Total

Leasing

3,361
48,510
3,836

87

2,109

Adjustment

Consolidated
total

$

$

703,4168,067$ 711,492$ 158,191$41,951,739$39,616,631$ 18,814
33,555$ 52,378$ 17,048$276,934$ 91,879

722,231
41,631$ 763,871$ 175,248$42,228,682$39,708,510—(41,631)$ (41,631)$ (1,118)$ (343,148)$ (325,914)

722,231—$ 722,231$ 174,121$41,885,525$39,382,596$$

25,834451,286
45,749$ 2,964
4,135
683

$

$

$

14,953

1,872

35

$

66
(566)
(554)

¥

$ 56,744
5,360$ 62,113$ 2,742$223,926$185,924
816
1,162
922

$

¥

Consolidated
total

75,870896¥ 76,767¥ 17,076¥4,621,600¥4,344,162
2,959
48,593
4,306

2015
Income from external customers ..........................

Securities investment
Lending services
services¥33,843¥20,770

2016
Income from external customers ..........................

Thousands of U.S. dollars
Securities investment
Lending services
services
Leasing services$297,657$249,680$56,744

Leasing services¥6,394Other¥13,312

Total¥81,381

Other¥16,498

Total¥77,636

Other$118,139

Total$722,231

Millions of yen
Leasing services¥6,523(Information on impairment losses of fixed assets by reportable segment)
Information regarding impairment losses on fixed assets by reportable segment for the years ended March 31, 2016 and 2015 was as follows:¥ 6,523621¥ 7,145¥ 476¥24,893¥20,656
93
118
125

2016
Income from external customers ..........................

Securities investment
Lending services
services¥33,540¥28,134

2,031

69,346275¥ 69,621¥ 16,600¥4,596,706¥4,323,506
2,866
48,475
4,181

¥

334
466
77

¥

Adjustment

Consolidated
total¥ 6,394604¥ 6,999¥ 309¥25,232¥20,950
92
131
104

¥

Millions of yen
Otherbusinesses(Associated information)
Information on Each Service

28,807455,431
46,432
16,835656(4,774)(4,614)
1,180

Millions of yen
2016
Impairment losses on fixed assets ..........................

Securities investment
Lending services
services
¥111
¥—

2015
Impairment losses on fixed assets ..........................

Securities investment
Lending services
services
¥91
¥—

2016
Impairment losses on fixed assets ..........................

Thousands of U.S. dollars
Securities investment
Lending services
services
Total
$985
¥—
$985

Total
¥111

Other
¥—

Total
¥111

Millions of yen
Total

Other
¥91

Total
¥—

Other

¥91

Total
¥—

$985

29,463450,656
41,81718,024

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 are recorded
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 and increases in property, plant and equipment andintangible assets are recorded as eliminations.
4. Segment profit is adjusted with ordinary profit recorded on consolidated statements of income.

45

46

The Hyakujushi Bank, Ltd. / Annual Report 2016

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements
28. Related-party transactions
Not applicable to the years ended March 31, 2016 and 2015.

29. Per share data
Amounts per share as of March 31, 2016 and 2015 and for the fiscal years thenended were summarized as follows:

Net assets per share ....................
Basic earnings per share ...............
Diluted earnings per share ............

Yen
U.S. dollars
2015
2016
2016
¥928.83¥891.90$7.91529.84
39.05$0.34629.78
38.97$0.345

Notes: 1. The net assets per share figure is calculated on the basis of the following.

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

Millions of yen,Thousands of
except number of shares
U.S. dollars
2015
2016
2016
¥295,476 $2,502,928¥282,030
17,78018,392
163,223
201

196

1,783

18,19017,583

161,430

263,638

277,696

2,339,705

295,588298,971

2. Basic earnings per share is calculated on the basis of the following.

Basic earnings per share
Profit attributable to owners ofparent ............................
Amount not attributable tocommon equity holders ofparent ............................
Profit attributable to common
equity holders of parent ......
Average number of shares ofcommon stock during theyear (in thousands) ............
Diluted earnings per share
Increase in number of common
stock shares (in thousands) ..
(of which, sharesubscription rights) ........

Millions of yen,
except number of shares
2015
2016

Thousands of
U.S. dollars
2016¥ 11,632¥ 8,957$103,230———

11,632

8,957

103,230

297,871

300,138

623

600

623

600

3. The Bank’s own stock remaining in the ESOP Trust and recorded as treasury
stock in stockholders’ 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 shares of said treasury stock to be deducted at year- end in thecalculation of net assets per share was 1,177 thousand shares as of March 31,
2015 and 657 thousand shares as of March 31, 2016. Moreover, the average
number of shares of said treasury stock to be deducted in the calculation of basic
earnings per share and diluted earnings per share during the year was 1,487
thousand shares for the fiscal year ended March 31, 2015 and 942 thousand
shares for the fiscal year ended March 31, 2016.
4. As stated in “Change in accounting policies,” the Bank applies the Revised
Accounting Standard for Business Combinations etc., and follows the transitional
accounting treatments set forth in Paragraph 58-2 (4) of the Revised AccountingStandard for Business Combinations, Paragraph 44-5 (4) of the Revised
Accounting Standard for Consolidated Financial Statements and Paragraph 57-4
(4) of the Revised Accounting Standard for Business Divestitures.
These changes had no effect on profit or loss in the consolidated financial
statements for the fiscal year ended March 31, 2016.

30. Important subsequent events
Not applicable.

47

48

The Hyakujushi Bank, Ltd. / Annual Report 2016

Corporate Information
Profile (as of March 31, 2016)

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
¥4,701.6 billion¥4,125.5 billion¥2,752.5 billion¥37.3 billion
310,076 thousand shares
2,315
124 (Head Office, 102 branches, 21 sub-branches)
Overseas Representative Offices: 2 (Shanghai, Singapore)
221 machines in 175 locations

VietnamBusiness cooperation
VIETCOMBANK
Foreign Investment Agency

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)

the Philippines
Business collaboration
Metropolitan Bank and Trust Company

Organization (as of July 1, 2016)
Corporate Headquarters

Risk Control Division

Risk Control Group
Credit Risk Control Group

General Administration
Division

General Administration Group
General Affairs Administration Group

List of Major Shareholders (as of March 31, 2016)

General Meeting of Shareholders

Compliance and Legal Affairs Office
Personnel Planning Group
Salary and Welfare Group
Personnel Division
Personnel Development Group
Board of Directors
ChairmanOperations 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
Central Receivables Documents Center

President
Deputy President
Directors
Executive
Committee

VariousCommittees

Executive Secretariat
OfficeTokyo Liaison 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

Indonesia
Business collaboration
PT. Bank Negara Indonesia (Persero) Tbk.
(Bank staff deployment)

Singapore
Representative Office[Corporate Administration Sector]
Corporate Planning Group
Corporate Planning
Financial Affairs Group
Division
Public Relations and CSR Group

MexicoBusiness cooperation
Mexico State Government
Estado de Aguascalientes
JaliscoNameCentral Business
DivisionSub-branches

Branches

Customer Service
Department
Customer Department

Address

Japan Trustee Services Bank, Ltd. (trust account)
Nippon Life Insurance Company
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
NH Foods Ltd. (Note) 1
Sompo Japan Nipponkoa Insurance Inc.
TAIHEIYO CEMENT CORPORATION (Note) 2
TADANO LTD.
Mitsui Engineering & Shipbuilding Co., Ltd. (Note) 3
Meiji Yasuda Life Insurance Company
Hyakujushi Bank Employee Shareholding Association
Total

8-11, Harumi 1-Chome, Chuo-ku, Tokyo
6-6, Marunouchi 1-Chome, Chiyoda-ku, Tokyo
7-1, Marunouchi 2-Chome, Chiyoda-ku, Tokyo
4-9, Umeda 2-Chome, Kita-ku, Osaka
26-1, Nishi-Shinjuku 1-Chome, Shinjuku-ku, Tokyo
3-5, Daiba 2-Chome, Minato-ku, Tokyo
Ko-34 Shinden-cho, Takamatsu-shi, Kagawa
6-4, Tsukiji 5-Chome, Chuo-ku, Tokyo
1-1, Marunouchi 2-Chome, Chiyoda-ku, Tokyo
5-1 Kamei-cho, Takamatsu-shi, Kagawa Prefecture–of shares held to
No. of shares held Ratio
the total number of(thousand shares) shares
outstanding (%)
16,654
5.37
9,000
2.90
6,645
2.14
6,326
2.04
6,071
1.95
5,952
1.91
5,885
1.89
5,845
1.88
5,699
1.83
5,392
1.73
73,47323.69(Notes)1. The number of shares held by NH Foods Ltd. includes 5,000 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.
2. The number of shares held by TAIHEIYO CEMENT CORPORATION includes 5,952 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.
3. The number of shares held by Mitsui Engineering & Shipbuilding Co., Ltd. includes 2,000 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 Mitsui Engineering & Shipbuilding Co., Ltd.
4. In addition to the above, there are 14,487 thousand treasury shares (of which 13,830 thousand shares are held by the Bank and 657 thousand shares are held by the Employee Stock Ownership Plan (ESOP) Trust), andthe ratio of these to the total number of shares outstanding is 4.67%.

Central Foreign Exchange BranchOverseas Representative Offices[Marketing Related Sector]
Business Management
Division

Active Shareholder Return

Regional Revitalization OfficeBusiness Planning Group
Branch Management Group
Corporate Business Group
Customer Service Center
Retail Business Planning Group
Home Loan Business Group

Audit & Supervisory Board
Members
Audit & Supervisory Board

49

Loan Plaza Branch

Retail Banking Division

Pension Center
DB Center
Personal Loan Business Center
Credit Center

Retail Business
Promotion Division

Asset Management GroupOperations Management Group

Credit Supervision
Division

Credit Planning Group
Screening 1 Group
Screening 2 GroupManagement Support Group
Credit Management Group
Real Estate Valuation and Financial Registration Center

Auditing Division
Audit & Supervisory
Board Members’ OfficeInspection Group
Risk Audit Group

The Bank works to make an active return to shareholders by continuously paying stable dividends as well as through the flexible
acquisition of treasury stock in response to the profit environment.
With the aim of making further returns, the Bank increased the ordinary dividend from an annual ¥7 to ¥8 from the interim
dividend for the fiscal year ended March 31, 2016. The number of shareholders holding whole units of shares increased by 1,259
shareholders, mainly individual shareholders, during the year.
The Bank will continue to work to improve the satisfaction of our shareholders through positive shareholder return, andimprove our equity capital by increasing retained earnings.

Record date

Dividend per share(Persons)

At the endof interim At year-end For the year
period

8,000

9,000

7,000
6,000

Fiscal year ended March 31, 2015

¥3.50

¥3.50

¥7.00

Fiscal year ended March 31, 2016

¥4.00

¥4.00

¥8.00

4,000

Fiscal year ending March 31, 2017 (forecast)

¥4.00

¥4.00

¥8.00

3,000

5,000

Number of shareholders

8,096
6,985

7,859
6,757

Individuals

Trends of Number of
Share Unit Holders
8,368

7,565

7,580

7,590

6,491

6,507

6,513

7,109
7,317
6,053

March 31, March 31, March 31, March 31, March 31, March 31, March 31,
2010
2011
2012
2013
2014
2015
2016

50

THE HYAKUJUSHI BANK, LTD.
5-1, Kamei-cho, Takamatsu, Kagawa 760-8574, Japan
Phone: (087) 831-0114
http://www.114bank.co.jp