Annual Report 2017
The Hyakujushi Bank, Ltd.

Message from the President

Yujiro Ayada, President

I would like to express my sincere gratitude to all our stakeholders for your warm support and patronage.
Based on a new management structure, the Bank launched the medium-term management plan “Challenge
Value Plus” with a three years plan period from April 2017 to March 2020. Here, I will explain my aspirations
embraced in “Challenge Value Plus” as a president.
August 2017

■ Foreword
I sincerely thank you for your continued patronage andsupport.
Having assumed office as President of the Hyakujushi Bank,
Ltd. on April 1, 2017, I would like to offer some observations
and comments on the Bank’s activities.
Although there are some signs of recovery in the local
Kagawa prefecture in certain sectors, the environment
surrounding the local banks is becoming more severe in viewof the long-term low interest rates symbolized by negativeinterest rates, in addition to regional issues such as declining
population and birth rate and aging population. It is also
necessary to respond to the new capital adequacy regulationand new technologies such as FinTech; as well as prepare forthe exit strategy of the Bank of Japan’s monetary easing policyin the near future. Although it is such an environment that isdifficult to navigate, on the other hand I think that it is a great
01

opportunity for the bank to transform itself.
The Bank launched a new medium-term management plan
“Challenge Value Plus” in April 2017. In order to realize ourvision, namely, to “grow together with the region by going
beyond the financial sphere in providing whole-hearted
support for the region’s aspirations” through multifaceted
innovation encompassing our business fields and the businessfoundation in order to co-create new value, we are resolved to
do our utmost to contribute to growth of our customers andthe region.
■ Results and issues of the previous
medium-term management plan
Before discussing the new medium-term management plan, letme review the previous medium-term management plan, “Best
Partners Plan,” that covered the period from April 2014 toMarch 2017.

We recognize in the future, it is necessary to further enhance
efficiency so that stable profits can be secured even in low
interest rate environments, and to positively take risks basedon appropriate risk management to strengthen profitability for
the Bank.

Previous medium-term
management plan
Management targets

Co-create new value

FY 2016
Targets

Results

et operating
Profitability ①Nprofit¥18 billion or more

¥15.7 billion②ROE(current-termnet-profit base)

3.5% (approx.)

3.43%

Soundness ③Capital ratio(consolidated)

9.0% (approx.)

9.53%④Loan balance¥3 trillion (approx.)¥2,780.7 billion⑤Deposit balance¥4 trillion or more

¥4,173.0 billion

Efficiency

The Bank formulated the new medium-term management plan
“Challenge Value Plus” covering the period from April 2017 toMarch 2020 with a view to fully realizing the Bank’s Corporate
Vision to “prosper together with customers and communities,”while continuing to adhere to the strategy of emphasizing
quality and the region. Under this plan, we aim to establish abusiness model enabling the Bank to improve its sustainability
while at the same time contributing to growth of customers
and the region by having diverse contact points with customers
and the region and addressing their issues in business and otherspheres of life in a whole-hearted manner.
The key strategies for this drive are the “five pluses” tostrengthen the business foundation and the “three challenges”
to strengthen sales capabilities. With the “five pluses,” as well as
fostering sales personnel through systematic implementationof measures for channel innovation and productivity
improvement by the Head Office, the Bank will establish aframework for providing thorough support to customers at any
time through strengthening of organization, sophisticated risk
management, and alliances. Based on this framework, branches
and the Head Office will unite to tackle the “three challenges”:
create local value, enhance business value of corporate
customers, and enhance lifetime value of retail customers.
Furthermore, by strengthening market operations
capabilities and the management foundation, we aim toreinforce the Bank’s sustainability.

Scale1) Net operating profit = Gross operating profits – Expenses
2) ROE (current-term-profit base) = Profit / ((Beginning capital + Ending capital)/2)
3) The consolidated capital ratio is the consolidated core capital ratio, after taking into accounttransitional arrangements based on Basel III (domestic standard).

3

Challenges

Communities

Corporate customers

Retail customers

Challenge to create
local value

Challenge to enhancebusiness value

Challenge to enhance
lifetime value

Channelinnovation

5

Pluses

Productivity
improvement

Sophisticatedrisk management

Strengtheningof organization
Alliances

Enhancement of management Foundation

Strengthening market operations capabilities

And for the growth of our bank

■ New medium-term management plan

Sales capabilities

For our customers’ / regional growthWith the “Best Partners Plan,” the Bank implemented two
fundamental strategies, “rigorously promote retail business
opportunities” and “strengthening market operations
capabilities” supported by “strengthening of human resources
force,” so as to enhance added value of the Bank and the local
economy. In response to the great change in the environment
brought about by the introduction of a negative interest rate
policy by the Bank of Japan in February 2016, the Banktransformed its policy to “shift from quantity to quality” and“emphasize ROA” aiming to secure profit by enhancing theefficiency of transactions. We also responded by allocating
management resources strategically to local communities.
As a result, although net operating profit for fiscal 2016 fell
short of the target because of an inevitable decrease in interest
income resulting from the negative interest rate policy, weachieved the targets for ROE, the consolidated capital ratio,
and the deposit balance. The loan balance fell short of thetarget, reflecting the Bank’s policy to shift from quantity toquality by curtailing increases in loans in urban areas and public
loans at ultra-long-term fixed interest rates.

Business foundation

I will continue to challenge the future02

Message from the President

Through steady implementation of these strategies, ourtargets on a consolidated basis for the final year of the new
medium-term management plan, fiscal 2019, are as follows:
consolidated profit of 9.5 billion yen or more (profitability),
consolidated ROE of 3.0% or higher (efficiency), andconsolidated capital ratio of 9.5% or higher.
New medium-term management plan final year (FY 2019)
management targets
IndicesTargets

Profitability

Profit (consolidated)¥9.5 billion or more

Efficiency

ROE (consolidated)

3.0% or moreSoundness

Capital ratio (consolidated)

9.5% or more

■ To revitalize the region
The destinies of regional banks are intertwined with those of
the regions where they are based and the customers who livein those regions. Banks cannot prosper if the region or
customers lack vigor. Growing together with customers andthe region is the only way we can survive.
The Bank established the Regional Vitalization Division in
April 2017 for “creation of local value” and put in place aframework for one-stop execution of planning andimplementation of measures for invigorating the region. The
Regional Vitalization Division will play a central role instrongly supporting the development of the region throughcollaboration between the Head Office and branches.
For example, Kagawa Prefecture, where the Bank is based,
has a balanced industrial structure centering on small andmedium-sized enterprises without being overly dependent on
any particular sectors. In addition to construction machinery
manufacturers, many food-related companies are based in
Kagawa Prefecture and large factories in the shipbuilding
sector are located on the coast. Therefore, while the regional
economy of Kagawa Prefecture is resistant to change in theeconomic environment, the prefecture lacks a core industry ora group of companies that can serve as a powerful engine forthe regional economy.
To address this issue, the Bank is striving to nurture coreindustries in collaboration with local public bodies. Raresugars, which Kagawa Prefectural Government is promoting,have proven efficacy in preventing obesity and diabetes. Inview of their potential to become a future core industry, theBank has made proposals to companies in the food and03

pharmaceutical sectors regarding new product development
and other initiatives. Moreover, the Bank, in cooperation with
Kagawa Prefectural Government, set up “Setouchi Monitor
Girls,” in order to reveal the hidden charm of the region. Thisteam, consisting of female employees of the Bank and Kagawa
Prefectural Government, plans and makes proposals fordestination-based tourism and products capitalizing on thehidden charm of the region from women’s unique perspectives
through monitoring workshops. These initiatives are yielding
results, including commercialization of some new products.
In October 2016, the Bank set up the Konkatsu Desk within
the Business Management Division (currently, Regional
Vitalization Division). The Konkatsu Desk offers support topeople who are seeking marriage partners and thus, in thecourse of offering this support, is actively involved in solving
regional problems such as population decline, low birthrate,
aging population and business succession.
■ Supporting growth of customers
In the corporate sector, the Bank will proactively become
involved in all business flows of customers, including planning,procurement, and sales, and in all the stages from startup to
turnaround, in order to “enhance business value” of customers.
For this purpose, the Bank started an initiative on a trial
basis in July 2016. Under this initiative, the Bank discloses its
evaluation of customers’ business potential in “Hyakujushi
Value-up Sheet” to customers and engages in future-oriented
dialogues with them.
The objective of this initiative is to evaluate customers’
business lines and growth potential from the Bank’s
perspective and to work with customers to find solutions andresolve their management issues identified in the course of ourevaluation. As well as tapping demand for loans, stemmingfrom resolution of issues, we would like to boost income fromfees and commissions by providing solutions.
In the retail sector, we will offer various products andservices according to life stages of customers throughappropriate channels in order to enhance their lifetime value.
Mindful that smartphones have become the principal
communication tools for retail customers, we are planning toenrich services by introducing new technologies such as
FinTech.

In the logo of the Shikoku Alliance, the letter S of
Shikoku and the letter A of Alliance form a ribbon andthe four colors of the ribbon represent the four partnerbanks. This logo expresses the aspirations of thepartners to unite and collaborate in pursuit of a single
goal, namely, the revitalization of Shikoku, which will
be a gift to all of Shikoku.

■ Alliances
For early realization of growth of customers and invigorationof the region, we will actively leverage alliances with local
public bodies, other regional banks, and various expert
institutions and organizations.
In November 2016, the Bank, The Awa Bank, Ltd. The Iyo
Bank, Ltd. and The Shikoku Bank, Ltd. signed a comprehensive
partnership agreement for revitalization of Shikoku (Shikoku
Alliance). Under the agreement, the partners will demonstrate
their presence in their respective regions and continuously
contribute to revitalization of Shikoku. Through the Shikoku
Alliance, the partners intend to address various issues
throughout Shikoku in a cooperative effort while maintaining
their independent management rooted in their respective
regions, and are implementing various measures on fivethemes—develop, utilize, connect, nurture, and collaborate.
Since the announcement of the key measures in April 2017,
the four partner banks have started business matching services
and sales of structured bonds and foreign bonds handled by
Iyogin Securities*, and have jointly developed investment trustand insurance products.
The four partner banks are resolved to collaborate closely in
implementing various measures so that customers canpersonally experience the benefits of the alliance as soon as
possible.
*A securities firm in the Iyo Bank Group■ Strengthening of governanceTo accelerate the above-mentioned initiatives, it is necessary toestablish a corporate governance structure with highmanagement transparency and objectivity.

Following the resolution at the 148th Annual General
Meeting of Shareholders held in June 2017, the Banktransitioned from a Company with Audit & Supervisory Board
to a Company with Audit and Supervisory Committee. At thesame time, the Bank introduced a performance-linked stockcompensation system in which a portion of executive
compensation varies in accordance with the performance orother factors in order to motivate the Bank’s directors to
improve the medium- to long-term business performance andcorporate value.
The Bank is also strengthening Group management. In April
2017, the Bank acquired shares of its consolidated subsidiaries,
including those held indirectly, in order to have 100%
substantial interest in them.
■ Conclusion
In order to meet the expectations of the region and ourshareholders amid a dramatically changing businessenvironment, we must change ourselves to adapt to theenvironment.
We are resolved to become a trailblazer in this severe
environment by continuing to tackle challenges and embracechange so as to be worthy successors to our predecessors who
have overcome various difficulties in the 139 years since thefoundation of the Bank and built up the present-day Bank, andto hand over a further enhanced Hyakujushi Bank to the next
generation.
I sincerely thank you and humbly request your continued
support and patronage of the Bank.

04

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Consolidated Financial Highlights<Non-consolidated>Thousands of
U.S. dollars(Note 1)Millions of yen
For the years ended or as of March 31

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
AT YEAR-END:
Loans and bills discounted
Securities and trading account securities
Foreign exchange assets
Other assets
Total assets
Deposits and negotiable certificates ofdeposit
Foreign exchange liabilities
Other liabilities
Total liabilities
Common stock
Capital surplus
Retained earnings
Treasury stock
Total stockholders’ equity
Net unrealized gains on other securities,
net of taxes
Net deferred losses on hedging
instruments, net of taxes
Revaluation reserve for landRemeasurements of defined benefit plans
Total accumulated other comprehensive
incomeShare subscription rights
Non-controlling interests
Total net assets
Total liabilities and net assets

2017

2016

2015

2014

2013

2017

¥90,552
71,65518,897
5,145
3,050¥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)$807,130638,693
168,437
45,85927,186

1,054
9,645

1,099
11,632

970
8,957

963
11,230

1,056
5,851

9,394
85,9702,776,554
1,444,834
3,684
701,461
4,926,538

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

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

24,748,676
12,878,456
32,837
6,252,437
43,912,452

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

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

37,083,171
1,292
4,215,135
41,299,661

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

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

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

37,322
24,920138,689(4,181)
196,751

37,322
24,920129,575(2,935)
188,882332,667
234,708
1,434,931(55,441)
1,946,875

49,012

54,256

68,952

37,722

38,173436,866(1,231)
8,557
2,139

(7,806)
8,961(1,171)(3,010)
8,722
1,631

(24)
8,044
(2,719)

(136)
8,057
—

(10,972)
76,272
19,06558,478142
16,087
293,129¥4,926,538

54,239201
18,190282,030¥4,719,661

76,297
196
17,583
295,476¥4,615,105

43,022
156
16,920256,851¥4,493,211

46,095521,240120
1,265
16,324
143,390
251,4222,612,790¥4,134,329 $43,912,452

Notes: 1.	‌Yen figures have been rounded, omitting numbers below the million mark, in accordance with the Japanese Commercial Code and the common accounting practice inJapan.
2. U.S. dollar amounts represent translations of Japanese yen at the exchange rate of ¥112.19 to US$1.00 on March 31, 2017.

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

05

Major Accounts (Non-consolidated)
The Bank’s share of deposits in Kagawa
Prefecture■ Total Deposits (Including negotiable certificates of deposit)

4,173.0¥

billion(Billions of yen)(up ¥47.4 billion from FY 2015)
4,000

The deposit balance increased by ¥47.4 billion
from the end of the previous fiscal year to¥4,173.0 billion, owing to increases in retailand corporate deposits despite a decrease inpublic deposits.
The Bank’s share of deposits in Kagawa
Prefecture where the Bank is based wasapproximately 50%.

RetailCorporate

PublicMajor banks
7.37%

5,000

3,000

3,982.6

4,125.5

4,173.0

1,510.4

1,635.3

1,696.7

166.9

164.4

137.8

First-tier regional banksother than the Bank
12.40%

2,000
1,000
0

2,307.8

2,323.2

2,338.4

FY 2014

FY 2015

FY 2016

2,780.7¥

billionThe Bank

48.70%

Second-tierregional banks
19.63%■ Loan balance(Billions of yen)

Shinkin banks
11.90%

RetailSmall and medium-sized enterprises
Medium and large-sized companies
Public

4,000

The Bank’s share of loans in Kagawa
Prefecture
Major banks
9.27%(up ¥28.2 billion from FY 2015)
3,000

The loan balance increased by ¥28.2 billion
from the end of the previous fiscal year to¥2,780.7 billion, as a result of the promotionof loans to small and medium-sized enterprises
and retail loans.
The Bank’s share of loans in Kagawa
Prefecture where the Bank is based wasapproximately 40%.

2,702.1
338.8

2,000

1,000

0

582.2

2,752.5

2,780.7

607.3

568.2

297.3

304.4

1,287.6

1,332.1

1,360.3

493.3

515.6

547.6

FY 2014

FY 2015

FY 2016

Shinkin banks
10.28%The Bank

First-tier regional banksother than the Bank
19.62%

39.25%

Second-tierregional banks
21.58%■ Securities

1,446.6¥

billion(Billions of yen)

Stocks

Bonds

Other

2,000

(up ¥30.4 billion from FY 2015)
1,500

Securities increased by ¥30.4 billion from theend of the previous fiscal year to ¥1,446.6
billion, due to increases in the balance of stocks
and other securities (investment trusts, foreign
securities, etc.) owing to higher stock prices,
despite a decrease in the balance of bonds.

1,455.4

1,416.1

271.6

1,446.6

357.1

453.4

1,000

1,020.1
500

0

163.6
FY 2014

921.9

839.7

137.1
FY 2015

153.4
FY 2016

Financial Soundness■ Capital ratio (Domestic Standard)
Non-consolidatedConsolidated

9.19
9.53

(%)

%

12

Although the capital ratio decreased as a resultof partial prepayment of subordinatedborrowings, it is well above 4%, the level ofcapital adequacy required for banks operating
only in Japan (domestic standard). The
soundness of the Bank’s management is highly
regarded by rating agencies.

Rating

Consolidated

10.21

9.72

9.53

9.85

9.38

9.19

10
8

%

Non-consolidated

6

Moody’s

Japan Credit Rating
Agency (JCR)

4

A3
A

2
0

FY 2014

FY 2015

FY 201606

History of the Hyakujushi Bank
Founded in 1878 as the Hyakujushi National Bank
The Hyakujushi Bank was founded as Japan’s 114th national bank under the name of “the Hyakujushi National Bank” on November
1, 1878 with the mission of issuing banknotes. The Hyakujushi Bank is a bank with tradition that has remained steadfast for many
years as a leader of Kagawa Prefecture’s economy, and it is one of a few banks with numbers* in their names.
*Banks using the order in which they were approved at the time of foundation as bank names

Setouchi Brand Corporation established (2016)

1978

1998

• Founded as the Hyakujushi National Bank

• The 100th anniversary of the founding• The balance of deposit reached ¥1 trillion• Started over-the-counter sales of investment trusts

1980• Reorganized as The Takamatsu Hyakujushi Bank, Ltd.

1924
• The Takamatsu Hyakujushi Bank, Ltd. was established through themerger with the Takamatsu Bank

Former Head Office damaged by air raids inWorld War II (rightmost building)(1945)• Started over-the-counter sales of non-life insurance
products

1982

2002

• Loan balance reached ¥1 trillion• Started over-the-counter sales of personal pension
insurance products

1983• The Head Office was damaged by air raids on Takamatsu in WorldWar II but survived the fire

• Started securities business

1987• The balance of deposit reached ¥2 trillion• The trade name was changed to The Hyakujushi Bank, Ltd.

1990

1950

1991

1952

1878

• Tokyo Branch opened• Constructed a new building and relocated the Operations
Center to Sanjo-cho, Takamatsu City

1960

1994

• Started foreign exchange business• Started trust business

1966

1995

• Constructed a new building and relocated the Head Office to thecurrent location• Deposit balance reached ¥3 trillion

19th Century

07

20th Century

1980s

¥

2005

4,173.0
billion(2017)• Started securities brokerage business• Opened Shanghai Representative Office

2007
2013

Loan balance

2,780.7¥

billion(2017)

2016• Deposit balance reached ¥4 trillion• Invested in Setouchi Brand Corporation• The four regional banks in Shikoku concluded acomprehensive partnership agreement for revitalization of
Shikoku (Shikoku Alliance)

2017• Tomoki Watanabe and Yujiro Ayada assumed office as
Chairman and President, respectively• Transitioned to a Company with Audit and Supervisory
Committee• Was listed on the First Section of Tokyo and Osaka Stock Exchanges

1880s 1890s 1900s 1910s 1920s 1930s 1940s 1950s 1960s 1970s(including negotiablecertificates of deposit)• Opened Singapore Representative Office

1973
Present Head Office (completed in 1966)

Total
deposit balance• Started the cooperation on mainframe system for regionalbank project, named “Chance”• Loan balance reached ¥2 trillion• Osaka Branch opened

2001• The Bank’s first ATM was installed at the Head Office

1945
1948

Former Head Office (currently
Takamatsu Branch)(1926)

Shikoku Alliance announces key measures (2017)

1878
1898

Building used at the time of the establishment (around 1887) “View of prosperous
Hyakujushi Bank” by Mitsui Atsuo

Change of President (2017)

1990s

2000s

2010s

2017

21st Century

08

Business Model Pursued by the Hyakujushi Bank
The Bank pursues a business model designed to achieve a “virtuous cycle of the regional economy.” Against the backdrop of a businessenvironment that remains challenging for regional financial institutions, the Bank will demonstrate financial intermediary functions
by utilizing its organizations, human resources, and sales network to the maximum, do its utmost to enhance customers’ earnings
power and to accumulate the region’s financial assets so as to contribute to growth of customers and the region, leading to stronger
competitiveness and stable performance of the Bank.

Medium-Term Management Plan

Challenge Value Plus

Operating environment of banks
Lackluster demand for funds● Long-term low interest rateenvironment and reduced
interest margin● Declining and aging population
with low birth rate
● 

The emergence of new competitors
using FinTech● Diversification of customer needs andchange in lifestyles● Financial deregulation● 

The Hyakujushi Bank’s management resources■ Management resources■ Strengths

Number of employees Number of Group companies

● 

2,327

10

Number of offices

Number of overseas offices

1242Growth potential of the Setouchi region
and Shikoku● Extensive, well-established network ofoffices● Overwhelming share in Kagawa
Prefecture where the Bank is based● Extensive support from the Head Office● Female advancement

Current state of the regional economy (Kagawa Prefecture)● Deposit balance (per household): 3rd in Japan● Jobs-to-applicants ratio: 9th in Japan● Industrial structure

A balanced industrial structure centering on small andmedium-sized enterprises without being overly
dependent on any particular sectors. Therefore, while
the regional economy of Kagawa Prefecture is resistant
to change in the economic environment, the prefecture
lacks a core industry or a group of companies that canserve as a powerful engine for the regional economy.
●	A region showing advanced population decline

After peaking in 1999 at 1.03 million, the populationof Kagawa Prefecture was just under 970,000 as ofApril 1, 2017. Considering the fact that Japan’s
population started to decrease six years ago (2011),
Kagawa Prefecture is a region showing advanced
population decline.

09■ Overview of the economy of
Kagawa Prefecture

The economy of Kagawa Prefecture is on a moderate
recovery track. While capital investment hasbottomed out, a moderate recovery in enterprises’
production is continuing, and consumer spending andhousing investment are also showing signs of recovery(August 2017).

TOP I CS

Support customers
and the region toresolve issues
Demonstration of financial
intermediary functions

Enhance
corporate valueof the Bank
Strengthen competitiveness
Secure stable performance
Enhance resilience ofmanagement

Virtuous
cycle

Growth ofcustomers andthe region

Corporate customers: Increase sales,
improve productivity
Retail customers: Accumulate
and increase financial assets

Two consecutive years of increasein the number of tourists visiting
Kagawa Prefecture

The number of tourists visiting major sightseeing spots in
Kagawa Prefecture increased for the second consecutive year infiscal 2016, reaching 4,754,367, the highest number in the past
five years. The total number of overnight guests from abroadincreased 70.3% from fiscal 2015 to 358,360. The growth rate
was higher than that of any other prefecture in Japan.

Business model pursued by the Bank
10

Our Medium-Term Management Plan
Medium-Term Management Plan (From April 2017 to March 2020)

Challenge Value Plus

As society in the region we serve is reshaped by ongoing issues such as low birth rates and longer life spans as well as adeclining population, inspired by the Bank’s Corporate Vision to “prosper together with customers and communities,”“create a vigorous corporate culture” and “ensure sound business management and enhance corporate value,” we haveformulated a medium-term management plan “Challenge Value Plus” covering the three years from fiscal 2017.
We strive to create multifaceted innovation encompassing our business fields and the business foundation in order torealize a virtuous cycle of growth of customers and the region and our growth in accordance with the Bank’s action
guideline, “provide thorough support to customers and communities at any time.”– Co-create new value, going beyond the financial sphere –Innovation in pursuit of growth together with customers and the region
Basic policy

Realizing a virtuous cycle of growth ofcustomers and the region and the Bank’s growth
Who : The Hyakujushi Bank and Group Companies
Where :	Mainly in Kagawa Prefecture and the Setouchi economic
regionFinal year (FY 2019)

3 Challenges (Strengthen sales capabilities)

P ro f i t a b i l i t yCommunities : Challenge to create local value
Corporate customers : Challenge to enhance business value
Retail customers : Challenge to enhance lifetime value

Profit attributable toowners of parent

9.5

Vi s i o nbillion yen or more

Grow together with the

How :	By utilizing organizations, human resources, andalliances to the maximum
and achieve the Bank’s growth

5 Pluses (Strengthen the business foundation):	Strive for further development of customers and the region

Channel innovation

What :	Contribute to growth of customers and the region
Do

Productivity improvement

Provide thorough support to customers
and communities at any time

Sophisticated risk management• Provide thorough support to customers and the region• Grow together with customers and the region

Alliances

Improve the investment system

Enhance investment

Enhance the management foundation
	
ICT strategy Business continuity plan (master plan)
GovernanceCompliance

Consolidated capital ratio

Channel innovation

realize a virtuous cycle to secure sustainability and stability of the Bank.

Retailcustomers
Enhance lifetime value

11● Respond to any management issues with the Bank’s one-stop solutions through involvement in all the business flows of corporate customers based on in-depth% or higher● Enhance non-face-to-face channels (call center, Internet banking, mobile banking, etc.).

Plusesadministrative errors and waiting time).

● Promote innovation in Head Office business processes to realize a lean Head Office, freeing up human resources for sales and reducing costs.
● Proactively tackle workstyle innovation (“personnel system innovation,” “strengthening of organization and personnel,” and “personnel management”) to create value for

the Bank.

● Reform the commendation system for branches so that bank staff at branches can take action on their own initiative by aligning their activities with the targets of themedium-term management plan.
Group companies.

Sophisticated risk
management
Alliances

corporate customers’ business evolution.
● Offer services according to life cycles of retail customers via the optimal channels (branch, ATM, call center, the Internet, etc.) and provide one-stop financial● Respond to customers’ trust by thorough implementation of customer-centric sales approaches. Enhance quality of retail sales by vigorously utilizing information● Improve efficiency and quality of sales.

● Strengthen the earning power of the Hyakujushi Bank Group as a whole by offering comprehensive services based on a collaborative effort involving the Bank and the● Provide powerful support for growth of corporate customers by offering appropriate funding and proposing solutions through involvement in various stages oftools.

9.5

the region’s aspirations.

● Achieve unprecedented cost reduction to secure profit given an increase in revenues cannot be expected in the low-interest-rate environment.

Strengthening oforganization

evaluation of business potential.

services to become customers’ lifetime partner.

Productivity
improvement

5

relocation of people from elsewhere in Japan, support for people seeking marriage partners, and other initiatives while collaborating with local public bodies
centering on Kagawa Prefecture where the Bank is based.

Strengthening market
operations capabilities

Challenges

3

Enhance business value

whole-hearted support for● Promote innovation in administrative processes of branches to achieve both low-cost operation (reduced administrative burden) and customer satisfaction (reduction of● Strive to enhance power of the local brand through creation of new industry, attraction of companies to the region, development of tourism, promotion of● Actively leverage Shikoku Alliance, external expert institutions, etc.

Corporate
customers

financial sphere in providing

Strategic CSR● By contributing to the development of the regional economy and the stable life of people in the region whose destiny we share as a regional financial institution,

Create local value% or higher

S o u n d n es sStrengthening market operations capabilities• Have diverse contact points with customers and the region

Communities

3.0

Consolidated ROE

Strengthening of organization

Action guideline

region by going beyond theE f f i c i en c y● Implement integrated management of risk and profit to maintain soundness while maximizing corporate value.
● Actively leverage various alliances with other regional financial institutions, local public bodies, external expert institutions, etc.

● Foster specialists through in-house training and by dispatching trainees.
Improve theinvestment system ● I ntegrate management systems etc. to achieve sophisticated management of securities and enhance efficiency.
● Thoroughly implement “distribution” and “turnover” to achieve earnings targets.
Enhance investment● Construct and manage a sound and optimal portfolio.

12The Hyakujushi Bank’s Growth Strategy

3

3

Challenges

Enhance business value

Create local value– Initiatives for corporate customers –– Initiatives for communities –The Bank has classified its sales territory into three zones

Based on in-depth evaluation of business potential through active

and metropolitan areas, and further clarified the strategy foreach area. We will support invigoration of the areas throughShikoku other than
Kagawa Prefecture,
Okayama, Hiroshima,
Hyogo, and Fukuoka

involvement in all the business flows and various stages of

Tokyo
Osaka

corporate customers’ business evolution, we will
provide powerful support for growth of

NagoyaStablestage

customers through the appropriate

Kagawasupply of funds and proposalof solutions.

Startup
stage

Greater Setouchi region

Kagawa Prefecture

Metropolitan areas

Secure profitability of individual branches

Protect and develop local communities

Pursue return on assets

In the greater Setouchi region covering
Shikoku excluding Kagawa Prefecture, and theterritory from Hyogo to Fukuoka, we will
pursue efficiency and profitability oftransactions by strengthening the earnings basethrough resolution of issues of customers
whose main bank is the Bank.

In Kagawa Prefecture, we will emphasize
protection and development of communities
and seek to resolve issues in the region
through initiatives for regional revitalization.
We will also implement a strategy emphasizing
market share through efforts to become themain bank of customers for every transaction
and proactively invest management resources.

In the metropolitan areas, namely, Tokyo,
Nagoya, and Osaka as strategic operation base,we will put the highest priority on efficiencyof transactions. We will also work on businessmatching between customers in themetropolitan areas and those in other regions.

●Centering on the Regional Vitalization Division established in April 2017, we will provide support that goes beyond the financial sphere throughcollaboration with branches and the Head Office, the Shikoku Alliance and external expert institutions etc., in addition to support for core businesses ofcorporate customers and asset accumulation in the region.

●●F inancing for
supporting startups
S upport for subsidy
applications

Stagnationstage

Regeneration
stage

Growthstage●

Provision of new means for procuring funds●

Support for overseas business development●

Support for M&A (buy side)●

Business matching●

Support for subsidy applications●

Financing of funds for growth

●

●

●

●

S upport for businessrehabilitation
S upport for business
improvement
S upport for businesssuccession
S upport for M&A(sell side)S upport for businessplanning

Provide powerful support for growth of customers

consisting of Kagawa Prefecture, the greater Setouchi region,

implementation of respective strategies.

Challenges

Evaluation of business potential(Hyakujushi Value-up Sheet)

Co-create value with the region and corporate
customers through resolution of issues and bybecoming their main bankStrengthening of consulting
capabilities
Invest in human resources for regional
revitalization and to strengthen issue-resolution
capabilities
Prioritized allocation of personnel
in Kagawa Prefecture
Achieve both low-cost operation and customer
satisfaction
Create dialogue timeand salesperson

The Hyakujushi Bank

Collaboration

Branches

Regional Vitalization Division

Credit Supervision Division

13

going beyond the
2 Initiatives
financial sphere● Management Support Group

Examples•Establishment of the Konkatsu Desk forsupporting people seeking marriage partners(October 2016)•Making proposals for the development of products
and services capitalizing on local resources● Overseas Representative Offices

Treasury and International Division● Overseas Support DeskBusiness Management Division
Retail Banking Division
Retail Business Promotion Division etc.

Organization of
Analysis
Proposal
information• Basic information• Financial analysis• Explanation of theevaluation results• Products and services • Analysis of the• Financial information external environment • Proposal of solutions
for issues etc.
• Analysis of theinternal environment● We are supporting growth of customers through evaluation

Head Office
Regional Vitalization Promotion Group● Regional revitalization● Startup support● Agricultural promotion● Tourism promotion● Konkatsu support for people seeking marriage partners
Consulting Group● Business succession● Business matching● Healthcare and long-term care ● M&A

evaluation of a customer’s business potential to the customer
and engages in future-oriented dialogues with the customer.

Tie-upof their business potential from a wide, in-depth, long-term
perspective.

Tie-up

Shikoku Alliance1

Support for core businesses ofcorporate customers and asset
accumulation in the region

Various organizations and external expert institutions● As an initiative launched in July 2016, the Bank discloses its

Facilitated supply of funds attuned to funding needs
Support forstartups
Number of cases forsupport for startups
Healthcare andlong-term care field
Number of borrowers(cumulative)

Fees and commissions gained by offering solutions

FY 2016 (result)

FY 2019 (plan)

253

336

As of March 31, 2017(result)

As of March 31, 2020
(plan)

1,325

1,475

Agricultural field

As of March 31, 2017(result)

As of March 31, 2020
(plan)

Number of borrowers(cumulative)

206

260

Business matching

FY 2016 (result)

FY 2019 (plan)

Fees received¥107 million¥275 million

303

700

FY 2016 (result)

FY 2019 (plan)¥63 million¥275 million

504

820

Number of cases for supportof market cultivation
Business succession /M&A
M&A commissions
received
Number of cases of
M&A consulting

14

The Hyakujushi Bank’s Growth Strategy

35

Challenges

Enhance lifetime value

PlusesStrengthen the business foundation– Initiatives for retail customers –■ Channel innovation
We will pursue channel innovation by comprehensively promoting reorganization of face-to-face channels and enhancement of non-face-to-face channels
to strengthen sales capabilities and enhance customer services.

Face-to-face channels

Non-face-to-face channels(branch network, door-to-door sales, etc.)

Offering channels and products and services according to retail customers’ life stages and lifestyles, we will be the one-stop provider of all the financial
services customers need throughout their lives.

Reorganize the branch network and sales
personnel allocation to enhance efficiency
and quality of sales■ Transformation into a service provider creating lifetime value for customers
Criteria for classificationof retail customers

Asset succession
stage

Credit card,
consumer loans,mortgage loans, etc.

Asset accumulation
stage

Gain more “mass” segment customers
with a view to increased customertransactions leading to more customers
in the “flow,” “stock,” and “core” main
segments.

Asset utilization
stage

Life stages■ Productivity improvement“Stock” main
segment

Encourage customers toengage in diverse
transactions with the Bank,
thus increasing transaction
volume, in order to migrate
customers in this segment to the“core” main segment“Flow” main
segment

Innovation in administrative
processes of branches
Consulting by expert staff

Propose products
corresponding tocustomers’ lifecycles inorder to migrate customers
in this segment to the “core”
main segment

3 Everys

Internet / smartphone / call center /ATM, AI, etc.

Secure a position as the bank for customers’ main accounts, and by accumulating assets and other capitalthrough saving in installments, migrate customers in this segment to the “stock” or “flow” main segments(Billions of yen)

■ Retail sales innovation

397.0

Provide meticulous comprehensive support for customers’
asset accumulation by offering customer-centric proposals
emphasizing long-term, installment, and distributed
investment

318.1
49.4

335.2
52.0

359.2

62.0

56.0

147.6

Provide honest, impartial support for asset management
and accumulation

150.0

staff

3) Concentrate customer-contact-type administrative
processes at the center● Advancement of female staff. Innovation in thecommendation systemfor branches● Longer evaluation period. Strengthening ofGroup capabilities● Offer comprehensive services● Curtailment of long working hours● Introduction of benchmarking and processevaluation● Strengthen the earning power of the Hyakujushi

Bank Group as a whole■ Sophisticated risk management● C ultivate a proactive risk culture to secure stable profit based on appropriate risk

4) Enhance efficiency of loan administrative processes

management5) Enhance efficiency of administrative processes for
assets under custody● I mprove the portfolio to maintain soundness while maximizing corporate value■ Alliances
We will actively leverage alliances with other regional financial institutions, local public bodies, external expert institutions, etc.
Regarding Shikoku Alliance, a comprehensive tie-up agreement concluded in November 2016 by the four first-tier regional banks in Shikoku, thefour partner banks will combine their strengths and expertise to achieve sustainable growth and development of the respective regions, customers, andthe banks themselves while maintaining sound competitive relationships.

<Shikoku Alliance>

152.0

Connect● Joint establishment of a fund management company● Joint research of regional economies through think

tanks
etc.

● Commencement of business matching among thefour banks● Holding meetings for exchanges on overseas

The Iyo Bank, Ltd.

The Hyakujushi Bank, Ltd.

business● Holding meetings for exchanges among young

managers

Deploy customer-centric sales systems
121.0

133.2

151.2

180.0

0

March 31, 2017(result)

March 31, 2018
(plan)

Utilize● Implementation of a “startup campaign,” with lucky

Enhance quality of services

15

120

. Workstyle innovation

Develop155.0

Basic policy for operations that support customers’ asset
management and accumulation

1) Transform the branch format

trative
Adminisranches
staff at b n of
Reductio2) Minimize back-office operations
by using support offices

Proactive use oftechnology (Every Tech)for anytime (Every Time)
anywhere (Every Place)“Mass” segment

Thoroughly implement a customer-centric approachand foster experts■ Strengthening of organization

Free up human resources for sales through innovation in various
administrative processes to enhance customer services“Core”
main segment

NISA, installment
investment trust,
individual-type defined
contribution pension
plan (iDeCo), etc.

Actively invest in non-face-to-face channels
by determining priorities while
coordinating with the face-to-face channel
strategy in order to maintain and enhance
the level of service

Strengthen sales capabilities and enhance customer services
Channels used

Proactively respond
Asset management,
to customers so that
asset succession, etc.
they will maintain or
increase balances and propose theoptimum portfolio to increase returns(Internet, mobile banking, etc.)

Channelinnovation
PDCA

March 31, 2019(plan)March 31, 2020
(plan)■ Investment trust ■ Single-premium insurance ■ Financial instrument intermediation

winners receiving local products from the four
prefectures● Establishment and improvement of a platform topromote branding of Shikoku’s resources● Holding of a forum on Shikoku
etc.

The Shikoku Bank, Ltd.

The Awa Bank, Ltd.

Collaborate● Share administrative processes● Exchange of human resourcesamong the four banks
etc.

Nurture● Joint use of Iyogin Securities● Joint structuring of an investment trust unique to

Shikoku Alliance● Creation of new services utilizing FinTech

etc.

16

Corporate Governance■ Basic Approach to Corporate Governance■ Corporate Governance Framework (as of July 1, 2017)

With the aim of realizing its Corporate Vision, the Bank has established a corporate governance framework centered on the Board of
Directors, in order to ensure effective operation of a fair, speedy and decisive decision-making process. The appointment of a numberof Outside Directors provides the Board of Directors with oversight functions from an external perspective. As a result of the transition
to a Company with Audit and Supervisory Committee which is comprised of a majority of Outside Directors, Directors serving as
Audit and Supervisory Committee Members have voting rights at the Board of Directors meetings, thereby enhancing audit andsupervision of the Board of Directors and persons who execute business.

SystemAppointment of one Outside
Director
Increase of the number of Outside Directors from
one to two

Appointment of three
Outside Audit & Supervisory
Board Members

Delegation of part of the decision-making authorityof the Board of Directors for execution of businessto the Executive Committee and other committees

Introduction of theexecutive officer system andestablishment of various
committees

Abolishment of the
Retirement Benefit
System for Officers

Introduction of stock option program
Revision of proportions of fixed remuneration andvariable remuneration

Enhancement of meetingbodies consisting mainlyof Outside Officers

Improvement ofoperation of theBoard of Directors

Initiatives for further strengtheningof corporate governance

Creation of the Corporate Governance Guidelines andestablishment of the Governance Council

Faster decisionmaking

Revision of theexecutive
remuneration
systemTransition to a
Company with
Audit andSupervisory
Committee

2010-13

2014

Introduction of aperformancelinked stockcompensation
systemExpedited distribution of Board of Directors’
meeting agenda in advance

2015

2016

2017

■ Board of Directors and Audit and Supervisory Committee Members (as of July 1, 2017)

Tomoki Watanabe

Yujiro Ayada

Ryohei Kagawa

Teruo Kiuchi

Ryuji Nishikawa

Kazushi Kozuchi

Takashi Mori

Kiichiro Oyama

Chairman(Representative Director)

Director and Managing Executive Officer

17

President(Representative Director)

Director and Managing Executive Officer

15 (including 6 Audit andSupervisory Committee Members)

Director and Senior Managing Executive Officer(Representative Director)

Director and Managing Executive Officer

Appointment/Dismissal

Directors not serving as Audit andSupervisory Committee Members
Board of Directors

Appointment/Dismissal

Appointment/Dismissal

Directors serving as Audit andSupervisory Committee Members
Audit and Supervisory Committee
Audit/Supervision

Advisory bodyAppointment/
Supervision/
Dismissal

Governance Council

Collaboration/
Reporting

Audit/Supervision

4

Representative Directors

Term of Office of Directors

Executive Directors

Report1 year (2 years for Audit andSupervisory Committee Members)

Yes

Executive
Committee

Revenue Management
Committee

Risk Management
Committee

Accounting Auditors

Ernst & Young ShinNihon LLC

Head Office and Branches

Compliance
Committee

Internal audit

Instruction

Accounts
audit

Auditing Division

Accounting
Auditors

Overview

Self-assessment of the Board of Directors and resolving ofissues2009

Number of Directors

Adoption of
an Executive Officer System
Delegation of part ofthe decision-making
authority forexecution ofimportant operations
to the President andRepresentative
Director

General Meeting of Shareholders

Company with Audit andSupervisory Committee

Number of
Independent Directors

The Bank’s initiatives to strengthen corporate governanceReinforcement ofoversight as well as
audit and supervision

Institutional Design

The Board of Directors consists of 15 directors (including 4 outside directors), in principle, meets once a month, and also meet as necessary. In addition to matters
stipulated by laws and regulations or the articles of incorporation, the Board passes resolutions on important matters concerning management and oversees the execution ofduties by directors and executive officers.
Audit and Supervisory
The Audit and Supervisory Committee consists of 6 Directors (including 4 outside directors) serving as Audit and Supervisory Committee Members. In principle, thecommittee meets once a month, and occasionally as necessary to audit and supervise the execution of duties by directors.
Committee
The Executive Committee consists of persons whose positions are Managing Executive Officer or higher, and holds periodic or occasional meetings as a decision-making body
Executive Committee
for important matters related to business execution. In addition, the Bank has established a “Revenue Management Committee”, “Compliance Committee” and “RiskManagement Committee”, and set up a system to make consultation and decisions on more specialized matters.
The Governance Council is chaired by the Chairman of the Board of Directors. It is comprised of Outside Directors, the Chairman of the Board of Directors, and theGovernance Council
Chairman of the Audit and Supervisory Committee. The Governance Council meets once every six-month term as a general rule, discusses matters relating to nomination of
Directors, remuneration and other compensation for Directors other than Audit and Supervisory Committee Members, matters concerning evaluation of the Board of(Voluntary committee)
Directors, as well as other important management matters, and provides advice to the Board of Directors as needed.
In order to speed up management decision-making and strengthen business execution functions, the Bank has introduced an Executive Officer System, and 25 executive officers
Executive Officer System (of whom seven serve concurrently as Directors) appointed by the Board of Directors, are executing their business with flexible decision-making and speedy corporate
management.
From the perspective of maintaining and improving the soundness and appropriateness of operations, the Auditing Division, which is an independent organization, also
fulfills an internal audit role and conducts inspections of assets and risks and internal audits of the Head Office and branches as well as subsidiaries etc. to determine whether
Auditing Division
their operations are conducted appropriately in accordance with laws and regulations and administrative procedures. The results of audits are reported to The Board of
Directors.
Accounting Auditors
The Bank’s Accounting Auditors are Ernst & Young ShinNihon. As Accounting Auditors, they conduct appropriate audits from an independent standpoint.
Board of Directors

Director and Managing Executive Officer

Yukio Hirao

Masanobu Satomi

Hideki Kuwashiro

Michiyo Ihara

Kazuo Kobayashi

Junichi ItohDirector(Audit and Supervisory Committee Member)

Director and Senior Managing Executive Officer

Masakazu Toyoshima

Director and Managing Executive Officer

Director(Audit and Supervisory Committee Member) (outside)

Director(Audit and Supervisory Committee Member)

Director(Audit and Supervisory Committee Member) (outside)

Director(Audit and Supervisory Committee Member) (outside)

Director(Audit and Supervisory Committee Member) (outside)18

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

Efforts toward Comprehensive Risk Management

Basic concepts of risk management

Risk Management Framework

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

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

Risk Management Framework
General Meeting of Shareholders

Audit and Supervisory Committee

Board of Directors
Risk Management Committee

Overall Risk
Control Divisions

Risks Subject to Management
Risk Classification

Outline of Risks

Division in Charge

Credit Risk

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

Market Risk

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

Risk Control DivisionInterest Rate Risk

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

Foreign Exchange Risk

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

Price Volatility Risk

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

Risk Control Division

Liquidity Risk

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

Treasury and International
Division

Operational Risk

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

Risk Control Division

Process Risk

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

System Risk

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

Legal Risk

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

Compliance 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 balance
are monitored, enabling ascertainment and management ofrisk-adjusted profitability and efficiency.

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

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

Risk Control Division

Risk Audit and Inspection Readiness
Credit Risk Management
Subcommittee

Risk Management
DivisionsMarket Risk Management
Subcommittee

Operational Risk
Management Subcommittee

Credit Risk

Market Risk

Liquidity Risk

Operational Risk

Risk Control Division

Risk Control Division

Treasury andInternational Division

Risk Control Division

Each division, office, branch

Auditing
Division

To strengthen the risk management system, it is necessary to
conduct regular inspections of the effectiveness of system
functioning. At the Bank, the Auditing Division carries out
periodic inspections of operations of the Bank’s Head Office
departments, subsidiaries and individual branches to verify
appropriateness of the risk management system. The Head

Office departments, subsidiaries and individual branches arealso 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.

Subsidiaries

19

20

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Consolidated Balance Sheets

Compliance System

2017

2016

Thousands of U.S. dollars(Note 1)
2017

¥ 551,313
6,731
22,74841
4,795
1,444,793
2,776,554
3,684
17,041
39,694
41,404
4,990
7,105
927
21,203(16,490)¥4,926,538¥ 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$ 4,914,101
59,996
202,763365
42,73912,878,090
24,748,676
32,837
151,894353,810369,052
44,47863,3308,262
188,991(146,982)$43,912,452

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 a whole. Their primary role isto assist the sound development of the economy. At the Hyakujushi Bank, to honor the trust placed on us by our shareholders, customers and the local community, all our executives and employees assign a high priority to compliance with laws and regulations, as wellas the observance of high ethical standards in the conduct of the Bank’s business. Compliance is a key priority at the Bank.

Compliance System

Compliance System

The Compliance and Legal Affairs Office exercises overall
supervision of compliance issues, and implements centralized
management of matters related to compliance. Furthermore,
officers with responsibility for compliance matters are designated in each division, office, and branch of the Bank to ensurethat the rules of compliance are observed and that all staff are
fully aware of issues concerned. Staff are also required to confirm the compliance status of each business unit by filling out achecklist, and seminars are held to keep staff up-to-date andfully informed regarding compliance-related matters.

Audit and Supervisory
Committee

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

As of March 31

The operating methods of money laundering and criminal
circumstances are constantly changing and in recent years
have become elaborately complex. Because of strong calls forinternational cooperation to prevent money laundering, theBank has instituted a money laundering prevention policy thathas been made public on its website as an expression of its
resolve to prevent money laundering so that the Bank is neverused as a channel for criminal funds.

The Hyakujushi Bank, Ltd. (hereinafter, “the Bank”) strongly
recognizes the importance of measures to prevent money
laundering and terrorism financing (hereinafter, “money
laundering”). In response to stern demands from the international community, the Bank will build an internal control
system as described below for the Anti- Money Laundering,and conduct the Bank’s business on that basis.
Money laundering is “the act of trying to hide the source
and attribution of criminal profits” and terrorism financing is“the act of providing funds to terrorists for terrorist activities.”
The operating methods and criminal circumstances ofmoney laundering are constantly changing and in recent
years have become elaborately complex. Because of strong
calls for international cooperation to prevent money laundering, the Bank stipulates this policy to reiterate its resolve
to prevent money laundering so that the Bank is never used
as a channel for criminal funds.

• With respect to customer due diligence, the Bank will
instruct and train officers and employees and disseminate
information on Anti- Money Laundering.

Customer due diligence• With respect to customer due diligence, the Bank will
establish an internal system capable of taking appropriate
measures in a timely manner.

21

2017

2016

Thousands of U.S. dollars(Note 1)
2017

¥4,013,132
147,229
51,682
118,779
206,111
145—
53,776
33
171
46
416
116
14,903
5,660
21,203
4,633,409¥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$35,770,853
1,312,318
460,664
1,058,730
1,837,160
1,292—
479,329
294
1,524
410
3,707
1,033
132,837
50,450188,991
41,299,661

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

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

332,667
234,708
1,434,931(55,441)
1,946,875

49,012(1,231)8,557
2,139
58,478142
16,087
293,129¥4,926,538

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

436,866(10,972)
76,272
19,065521,240
1,265
143,390
2,612,790$43,912,452
U.S. dollars(Note 1)
2017

Millions of yen

Anti-Money Laundering Policy

Operational policy• The Bank will clarify its role internally concerning theAnti- Money Laundering and will create a system capableof taking appropriate measures in a timely manner.

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

Confirmation of measures to freeze assets• With respect to the confirmation of measures to freeze theassets of terrorists, the Bank will establish an internal systemcapable of taking appropriate measures in a timely manner.
• With respect to the confirmation of measures to freeze theassets of terrorists, the Bank will instruct and train officers
and employees and disseminate information on AntiMoney Laundering.
Notification of suspicious transactions• With respect to suspicious transactions, the Bank will
establish an internal system capable of taking appropriate
measures in a timely manner.
• The Bank will, under law, promptly notify authorities of
suspicious transactions.
• The Bank will promptly take appropriate measures concerning suspicious transactions.
• With respect to suspicious transactions, the Bank will
instruct and train officers and employees and disseminate
information on Anti- Money Laundering.
Verification of compliance• The Bank will review compliance concerning the AntiMoney Laundering and work to continuously improve its
system based on the results of the review.

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

Yen
As of March 31

2017

2016

Per share
Net assets¥937.15¥891.90$8.353

See accompanying notes to consolidated financial statements.

22

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Consolidated Statements of Income

Consolidated Statements of Changes in Net Assets
Millions of yen

For the years ended March 31

Income:Interest on loans and bills discounted
Interest and dividends on securities
Other interest income
Fees and commissions
Other operating income
Other income
Total income
Expenses:
Interest on deposits and negotiable certificates of deposit
Interest on call money and bills soldInterest on borrowed money
Other interest expenses
Fees and commissions
Other operating expenses
General and administrative expenses (Note 20)
Other expenses (Note 21)
Total expenses
Profit before income taxes
Income taxes :Current
Deferred
Subtotal
ProfitProfit attributable to non-controlling interests
Profit attributable to owners of parent

2016

2017

¥31,978
15,848497
11,184
18,636
12,40690,552¥33,239
16,846693
10,7209,268
10,647
81,416$285,034
141,260
4,429
99,688
166,111
110,580
807,130

2,105
569
145
2,523
3,220
14,041
39,744
9,304
71,65518,897

2,359
219
249
1,882
2,935
6,000
38,922
9,355
61,927
19,48918,762
5,071
1,292
22,48828,701
125,153354,256
82,930638,693
168,437

3,878
2,879
6,757
12,732
1,099¥11,632

5,145
3,050
8,196
10,7001,054¥ 9,645

45,85927,18673,054
95,3739,394$ 85,970
U.S. dollars(Note 1)2017

Yen
For the years ended March 31

Per share
Basic earnings

2016

2017

¥32.61Millions of yen
Stockholders’ equity

Thousands of U.S. dollars(Note 1)
2017

¥39.05$0.290See accompanying notes to consolidated financial statements.

For the years ended March 31
Balance as of March 31, 2015
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

Retainedearnings

Treasury stock

Total
shareholders’equity¥37,322¥24,920¥143,886¥(4,730)¥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

—
—
—
—

—
—
—
—

(2,367)
9,645
—
(32)

—
—
(387)
346

(2,367)
9,645
(387)
314

—

1,412

—

—

1,412

—

—

404

—

404

Changes in items during the period
Dividends from surplus
Profit attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Change in ownership interest of parent due totransactions with non-controlling interests
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, 2017

For the years ended March 31
Balance as of March 31, 2015

—

—

—

—

—

—
¥37,322

1,412¥26,332

7,650¥160,985(40)¥(6,220)

9,021¥218,420

Net unrealized
gains on othersecurities,
net of taxes

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

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

(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

Disposal of treasury stock

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

(2,367)
9,645
(387)
314

Change in ownership interest of parent due totransactions with non-controlling interests
Transfer from revaluation reserve for land

—
—

—
—

—
—

—
—

—
—

—
—

—
—

1,412
404

(5,243)(5,243)¥ 49,012

6,575
6,575
¥(1,231)

(404)
(404)
¥8,5573,311
3,311¥ 2,139

4,239
4,239
¥ 58,478

(58)
(58)
¥142

(2,103)(2,103)¥16,087

2,077
11,098¥293,129

Changes in items during the period
Dividends from surplus
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

Consolidated Statements of Comprehensive Income

Capitalsurplus

Changes in items during the period

Profit attributable to owners of parent

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Commonstock

Balance as of March 31, 2016
Changes in items during the period

Millions of yen

Thousands of U.S. dollars(Note 1)2017

For the years ended March 31

2017

2016

ProfitOther comprehensive income (loss) (Note 22)
Net unrealized losses on other securities, net of taxes
Net deferred gains (losses) on hedging instruments, net of taxes
Revaluation reserve for landRemeasurements of defined benefit plans
Total comprehensive income (loss)
Total comprehensive income (loss) attributable to:
Owners of parent
Non-controlling interests¥10,700
4,685(5,201)
6,575
—
3,311
15,385¥ 12,732(22,099)(14,807)(4,796)307(2,803)(9,367)$ 95,373
41,759(46,358)
58,605—29,512
137,133¥14,289
1,096¥(10,356)
988$127,364
9,769

Dividends from surplus
Profit attributable to owners of parent
Purchase of treasury stock

Net changes in items other than stockholders’equityTotal changes in items during the period
Balance as of March 31, 2017

See accompanying notes to consolidated financial statements.

23

24

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

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

Consolidated Statements of Changes in Net Assets

2017

2016

Thousands of U.S. dollars(Note 1)
2017

Cash flows from operating activities
Profit before income taxes
Depreciation
Impairment losses
Net change in reserve for possible loan losses
Net change in reserve for bonuses for directors and corporate auditors
Net change in net defined benefit asset
Net change in net defined benefit liability
Net change in reserve for retirement benefits for directors and corporate auditors
Net change in reserve for claims on dormant accounts
Net change in reserve for contingent liabilities
Net change in reserve for litigation loss
Interest income
Interest expenses
Net gain related to securities transactions
Net loss on money held in trust
Net loss 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 operating activities¥    18,897
2,678
248
(1,451)
(7)
(305)
10
(2)
(88)
8
—
(48,324)
5,345(5,249)
100
2,394
226
(29)
(29,213)77,700(30,893)
123,384(11,221)
2,655
25,42829,911
4,965
(60)
(43)
48,616(5,469)(9,155)201,056(3,517)
197,539¥ 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$    168,437
23,8702,210(12,933)(62)(2,718)
89
(17)
(784)
71
—
(430,733)
47,642(46,786)891
21,3382,014(258)(260,388)
692,575(275,363)
1,099,777(100,017)
23,665
226,651
266,610
44,255(534)(383)
433,336(48,747)(81,602)
1,792,102(31,348)
1,760,754

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(1,130,677)
853,192
232,780(1,335)(1,997)505
1(47,530)(746,554)
520,540
244,415(1,313)(973)
157
2
16,274(10,078,233)
7,604,884
2,074,872(11,899)(17,800)
4,501
8(423,656)(1,000)(10,000)(430)
203(2,367)(382)(3,000)—(1,687)225(2,239)(382)(8,913)(89,134)(3,832)
1,809(21,098)(3,404)(1,362)(15,339)—(7,084)(12,140)(136,723)(1)
134,668
371,134¥   505,802(5)130,303240,831¥ 371,134(8)
1,200,356
3,308,084$  4,508,441

Thousands of U.S. dollars (Note 1)

Millions of yen

Stockholders’ equity
For the years ended March 31

CapitalsurplusRetainedearnings

Balance as of March 31, 2016

$332,667$222,123$1,366,743

—
—
—
—

—
—
—
—

(21,098)
85,970—(285)——(3,449)3,084(21,098)
85,970(3,449)2,798—

12,585——

12,585

—

—

3,601

—

3,601

—

—

Treasury stock

For the years ended March 31

Total
shareholders’equityCommonstock$(55,076) $1,866,458

Changes in items during the period
Dividends from surplus
Profit attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Change in ownership interest of parent due totransactions with non-controlling interests
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, 2017

—

—

—

—
$332,667

12,585$234,708

68,187$1,434,931(356)
80,408$(55,441) $1,946,875

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, 2016

$483,608$(69,578)

—
—
—
—
—

Remeasurementsof defined benefit
plans

Total
accumulated
othercomprehensive
incomeSharesubscription
rights

Noncontrollinginterests

Total net
assets$79,873$(10,437)$483,456$1,791$162,135$2,513,860

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

(21,098)
85,970(3,449)
2,798

—

—

—

—

—

—

12,585

Changes in items during the period
Dividends from surplus
Profit attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Change in ownership interest of parent due totransactions with non-controlling interests
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, 2017

—

—

—

—

—

—

—

3,601

(46,733)

58,605(3,601)

29,51237,784(516)(18,744)

18,513(46,733)$436,866

58,605$(10,972)(3,601)$76,272

29,512$ 19,065

37,784$521,240(516)$1,265

See accompanying notes to consolidated financial statements.

(18,744)
98,921$143,390 $2,612,790

Cash flows from financing activities
Repayment of subordinated borrowings
Redemption of subordinated bonds
Purchase of treasury stock
Proceeds from sales of treasury stock
Dividends paid
Dividends paid to non-controlling interests
Payments from changes in ownership interests in subsidiaries that do not
result in change in scope of consolidation
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. 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 (collectively,the “Group”) areprepared on the basis of accounting 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 and Exchange Act of Japan.
The Japanese yen figures in the consolidated financial statements are in
millions, with fractions omitted.
The translation of the Japanese yen amounts into U.S. dollars is included
solely for the convenience of the reader, using the prevailing exchange rate at
March 31, 2017, which was ¥112.19 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. There are no non-consolidated subsidiaries or affiliates accounted
for by the equity method as of March 31, 2017.
3rd Hyakujushi Venture Fund Cooperation Limited completed liquidation
proceedings in February 2017.
(2) Trading account securities
Under the Accounting Standard for Financial Instruments, trading accountsecurities are stated at fair value (cost of sales is calculated by the movingaverage 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 by 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.
(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 (However, the straight-line method is used for facilities attached
to buildings and structures acquired on or after April 1, 2016). Useful lives oftangible fixed assets are as follows:
Buildings: 10 to 50 years
Equipment: 5 to 15 years
Tangible fixed assets held by the consolidated subsidiaries are depreciated, inprinciple, by the declining-balance method, based on the respective estimateduseful lives of the assets.

27(b) Intangible fixed assets (excluding lease assets)
Intangible fixed assets are amortized by the straight-line method. Depreciationof software for internal use is calculated using the straight-line method over theuseful lives (principally 5 years).
(c) Lease assets
Lease assets held by the Bank are depreciated over the leasing contract periodsby the straight-line method with residual value at zero.
(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 ¥12,685 million ($113,067 thousand) and ¥14,524 million for the years
ended March 31, 2017 and 2016, 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 andcorporate auditors of consolidated subsidiaries, a provision is made for thepayments of retirement benefits to directors and corporate auditors based on
the estimated amount incurred at the end of the consolidated reporting period.
(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.
(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.
(11) 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, 2017. The amortization method for prior service costs and actuarial
differences is as follows:

Prior Service Costs:
Prior service costs are charged fully to income at the time of occurrence.
Actuarial Differences:
Actuarial differences of the plans are to be amortized from the fiscal year
following their occurrence by the straight-line method over a fixed period of 10
years, which is within the average remaining service period of the employees at
the time of occurrence in each fiscal year.
In calculating net defined benefit liability and retirement benefit costs, someconsolidated subsidiaries apply a simplified method that provides theirretirement benefit obligation at an amount to be paid for voluntary termination
at the balance sheet date.
(12) Foreign currency translation
Receivables and payables in foreign currencies are translated into Japanese yen
primarily at the year-end rates.
(13) 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.
(14) 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.
(15) Statements of cash flows
The reconciliations between cash and due from banks in the consolidatedbalance sheets and cash and cash equivalents in the consolidated statements ofcash flows are as follows:

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

Thousandsof U.S.
Millions of yen
dollars
2016
2017
2017
¥551,313 ¥405,424 $4,914,101(44,542)(32,810)(397,022)

(284)

(359)

(2,531)(1,119)(683)(6,087)¥505,802 ¥371,134 $4,508,441

4. Change in accounting policies(Application of Practical Solution on a change in depreciation method due to Tax Reform
2016)
From the fiscal year ended March 31, 2017, in accordance with the revision to
the Corporate Tax Act of Japan, the Bank applied the “Practical Solution on achange in depreciation method due to Tax Reform 2016” (Accounting Standards
Board of Japan (ASBJ) Practical Issues Task Force (PITF) No. 32 issued on June17, 2016) and the depreciation method for facilities attached to buildings andstructures acquired on or after April 1, 2016 has been changed from thedeclining-balance method to the straight-line method.
The effect of this change on profit before income taxes for the year ended
March 31, 2017 was immaterial.

5. Additional information(Application of Revised Implementation Guidance on Recoverability of Deferred Tax Assets)
From the fiscal year ended March 31, 2017, the Bank applied the “Revised
Implementation Guidance on Recoverability of Deferred Tax Assets” (ASBJ
Guidance No. 26 issued on March 28, 2016).
(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.
In addition, the trust period reached maturity on March 20, 2017 andliquidation procedures are underway.
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
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 ¥23 million ($205 thousand) and ¥240
million as of March 31, 2017 and 2016, respectively.
(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 65 thousand and 657 thousand as ofMarch 31, 2017 and 2016, respectively. The average number of shares
during the year was 348 thousand and 942 thousand for the years ended
March 31, 2017 and 2016, respectively.
(4)	The number of shares at year-end and the average number of shares during
the year in (3) above are included in the 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 nil and ¥233 million as March 31, 2017 and 2016, respectively.

(16) 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.

28

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements
6. Changes in net assets

2017(1) Type and number of shares issued and treasury shares are as follows:
March 31, 20162017
Shares issued
Common stock..........................................................................
310,076
Total.......................................................................................
310,076
Treasury stock
Common stock(Notes 1, 2 and 3)....................................................
14,487
Total.......................................................................................
14,487

Thousands of shares
Increase
Decrease

March 31, 2017

Type of share
Commonstock
Commonstock

Dividend
per share(U.S. dollars)$10,535$0.035

10,5530.035

Record date
Effective date
March 31,
June 30,2016
2016
September 30, December 9,
2016
2016

—
—

—
—

310,076
310,076

June 29, 2016 (Regular Annual General Meeting of Shareholders).........

1,015
1,015

894
894

14,60814,608

Note: In accordance with a resolution approved at the Bank’s Regular Annual General Meeting of Shareholders held on June 29, 2016 and June 26, 2015, the total amount of dividends paid
excludes the ¥2 million ($17 thousand) and ¥4 million dividend payment to the Employee Stock Ownership Plan (ESOP) Trust. Moreover, the total amount of dividends paid excludes the¥1 million ($8 thousand) and ¥3 million dividend payment to the ESOP Trust pursuant to the resolutions approved by the Board of Directors at meetings held on November 11, 2016 andNovember 9, 2015, respectively.
These exclusions reflect the Bank’s classification of the shares held by the Trust as treasury stock.

Notes: 1. The number of shares of common stock at the beginning and end of the fiscal year ended March 31, 2017 includes 657 thousand shares and 65 thousand shares of the Bank’s shares heldby the Employee Stock Ownership Plan (ESOP) Trust.
2. The 1,015 thousand share increase in the number of common shares of treasury stock consists of a 1,000 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 894 thousand share decrease in the number of common shares of treasury stock consists of a 592 thousand share decrease due to the sale of shares from the ESOP Trust to theemployee shareholding association, a 302 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.

Thousands of shares
Increase
Decrease

2016
March 31, 2015
Shares issued
Common stock..........................................................................
310,076
310,076
Total.......................................................................................
Treasury stock
11,104
Common stock(Notes 1, 2 and 3)....................................................
Total.......................................................................................
11,104

Resolution

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

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.

(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, 2017 and 2016 stood at ¥142 million ($1,265 thousand) and ¥201 million, respectively.
At end of the previous and current fiscal year, no shares had been earmarked for share subscription rights.

November 11, 2016 (Meeting of the Board of Directors) ...................

(b) Dividends paid after the balance-sheet date2017
Total dividend
amountSource of
Resolution
Type of share (Millions of yen) dividends
CommonRetained
June 29, 2017 (Regular Annual General Meeting of Shareholders)............
stock¥1,181earnings

Dividend
per share
(Yen)
¥4.0

Record date Effective date
March 31,
June 30,
2017
2017

2016
Total dividend
amountResolution
Type of share (Millions of yen)
CommonstockJune 29, 2016 (Regular Annual General Meeting of Shareholders)...........
¥1,182

Source ofdividends
Retainedearnings

Dividend
per share
(Yen)
¥4.0

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

2017
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, 2017 (Regular Annual General Meeting of Shareholders)............
stock$10,526
earnings$0.0352017
2017
Note: The total dividend amount excludes the ¥0 million ($0 thousand) and ¥2 million dividends for the ESOP Trust. This is because the shares held by this trust are treated as treasury stock.

(3) Information on dividends(a) Dividends paid
2017
Resolution

Type of share
CommonJune 29, 2016 (Regular Annual General Meeting of Shareholders)............
stock
CommonNovember 11, 2016 (Meeting of the Board of Directors)...................
stock

Total dividend
amount(Millions of yen)

Dividend
per share(Yen)¥1,182

¥4.0

1,184

4.0

7. Securities and trading account securities
Record date
Effective date
March 31,
June 30,2016
2016
September 30, December 9,
2016
2016

(2) Trading account securities
A valuation gain of ¥0 million ($0 thousand) was recognized for the year ended
March 31, 2017. There was no valuation gain or loss recognized for the year
ended March 31, 2016.

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

(1) Total amount of investments in non-consolidated subsidiaries
There were no investments in non-consolidated subsidiaries as of March 31,
2017. The total amount of investments in non-consolidated subsidiaries as ofMarch 31, 2016 was ¥61 million.

Record date
March 31,2015
September 30,
2015

Effective dateJune 29,2015
December 10,2015(3) Held-to-maturity debt securities
Not applicable.
(4) Other securities(a) Consolidated balance sheet amount and acquisition cost of other securities
and their difference as of March 31, 2017 and 2016 were as follows:

Millions of yen
Consolidatedbalance sheet Acquisition
amountcost
Difference

2017
Consolidated balance sheet
amount exceedingacquisition cost
Equity stock...................... ¥ 136,871 ¥ 62,448
Bonds:
National........................
345,273
338,529
Local............................
105,573
103,559
Corporate......................
218,731217,275
669,578
659,364
Other...........................
166,268
162,853
Subtotal........................
972,717884,665
Consolidated balance sheet
amount not exceedingacquisition cost
Equity stock......................
12,005
16,065
Bonds:
National........................
60,76962,199Local............................
52,14352,596
Corporate......................
57,25057,722
170,163
172,518
Other...........................
286,811
297,987
Subtotal........................
468,980
486,571
Total..................................... ¥1,441,698 ¥1,371,237¥ 74,422
6,744
2,013
1,455
10,214
3,414
88,051(4,059)(1,430)(453)(471)(2,354)(11,175)(17,590)¥ 70,461

30

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements

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
1,012
1,013
Corporate......................
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)¥78,142

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

2017
Consolidated balance sheet
amount exceedingacquisition cost
Equity stock...................... $ 1,219,992 $   556,627
Bonds:
National........................ 3,077,573 3,017,461
Local............................
941,019923,068
Corporate...................... 1,949,647 1,936,669
5,968,250 5,877,208
Other........................... 1,482,021 1,451,582
Subtotal........................ 8,670,264 7,885,417
Consolidated balance sheet
amount not exceedingacquisition cost
Equity stock......................
107,005
143,194
Bonds:
National........................
541,661
554,407
Local............................
464,774
468,811
Corporate......................
510,295
514,502
1,516,739 1,537,730
Other........................... 2,556,475 2,656,092
Subtotal........................ 4,180,229 4,337,026
Total..................................... $12,850,503 $12,222,452$663,356
60,112
17,942
12,96991,04130,430784,838(36,179)(12,746)(4,037)(4,198)(20,982)(99,607)(156,787)$628,050(b) Gains and losses on sale of securities available for sale for the years ended
March 31, 2017 and 2016 are as follows:2017
Equity stock............................
Bonds:
National...........................
Local...............................
Corporate.........................
Other....................................
Total.....................................

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

Proceeds
from sale¥ 6,666
668,595
77,592
23,035769,223
83,856¥859,746

Millions of yen
Gains onLosses on
sale
sale¥ 2,644¥
63
12,402
1,558
673
14,633
2,109¥19,387

11,212——
11,2122,821¥14,097

Millions of yen
Proceeds
Gains onLosses on
from salesale
sale¥ 4,339¥1,662¥
0295,725
74,005
15,453385,184
95,258¥484,781

4,917
1,100
613
6,630
1,214
¥9,507

369
32
—
401
5,470
¥5,871Thousands of U.S. dollars
Proceeds
Gains onLosses on
from sale
sale
sale
2017
Equity stock............................ $ 59,417$
561$ 23,567
Bonds:
National........................... 5,959,488
99,937
110,544
Local...............................
—
691,612
13,887
Corporate.........................
205,3215,998—
6,856,431
130,430
99,937
Other....................................
25,144
747,446
18,798
Total..................................... $7,663,303 $172,805 $125,652(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 years ended March 31, 2017and 2016.
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, 2017 and 2016
were ¥4,795 million ($42,739 thousand) and ¥4,895 million, respectively.

31

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
2016
2017
2017
¥ 70,461 ¥ 78,142 $ 628,050
78,142
70,461
628,050———(23,744) (189,535)(21,264)
49,19654,397438,506

(183)

(141)

(1,631)———¥ 49,012¥ 54,256$ 436,866

In addition to the assets presented above, the following assets were pledged ascollateral for exchange clearance transactions and futures contracts at March
31, 2017 and 2016:

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

As of March 31, 2017 and 2016, other assets included cash collateral paid forfinancial instruments of ¥10,091 million ($89,945 thousand) and nil, andguarantees and household deposits of ¥1,195 million ($10,651 thousand) and¥1,240 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, 2017 and 2016 was as follows:

10. Loans and bills discounted
Loans and bills discounted as of March 31, 2017 and 2016 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
2016
2017
2017
¥ 1,136¥ 986$ 8,788
33,06026,123
232,846
413
283
2,522
23,99823,894
212,977¥58,608 $457,153¥51,288

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
2016
2017
¥23,354¥20,791

Thousands of
U.S. dollars
2017$185,319

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¥13,775 million ($122,782 thousand) and ¥11,825 million as of March 31,2017 and 2016, respectively.

12. Assets pledged as collateral
Assets pledged as collateral as of March 31, 2017 and 2016 consisted of thefollowing:
Millions of yen
2016
2017
Assets pledged as collateral:
Securities..........................
Liabilities corresponding to assets
pledged as collateral:
Deposits...........................
Payables under securities
lending transactions..........
Borrowed money................

¥357,281

Thousands of
U.S. dollars
2017¥297,688 $3,184,606

21,31919,926

190,025

118,779
179,024

88,86755,383

1,058,730
1,595,721

Thousands ofMillions of yen
U.S. dollars
2016
2017
2017
¥45,877 $274,552¥30,802

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

Thousands ofMillions of yen
U.S. dollars
2016
2017
2017
¥993,008 ¥1,011,663 $8,851,127

934,278

923,775

8,327,640

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

14. Income taxes(1) Deferred tax assets
Major components of deferred tax assets as of March 31, 2017 and 2016 wereas follows:
Millions of yen
2016
2017
Excess reserve for possible loan
losses.................................
Valuation loss on securities
available for sale....................
Net defined benefit liability..........
Excess depreciation...................
Net deferred losses on hedging
instruments, net of taxes..........
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...............................
Net deferred gains on hedging
instruments, net of taxes.......
Net deferred tax assets (liabilities).

Thousands of
U.S. dollars
2017¥     7,410¥  7,962$   66,048

5,347
1,570
1,033

3,836
2,981
1,132

47,66013,994
9,207

678
481
2,438
18,961(6,042)
12,919

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

6,043
4,287
21,730169,007(53,855)
115,152(26,612)(27,581)(237,204)

(141)

(142)

(1,256)(140)¥(13,975)(27)(1,247)¥ (8,910) $(124,565)

32

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements(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, 2017 and 2016.
Statutory income tax rate..............................
Reconciliation:
Non-deductible expenses, including
entertainment expenses..........................
Non-taxable income, including dividend
income..............................................
Per-capita resident tax...............................
Increase 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.............................................

2017
30.6%

2016
32.8%

0.5

0.4

(1.1)
0.3
13.1

(1.1)
0.3
0.5

—
(0.1)

2.6
(0.9)

43.3%

34.6%

15. Accumulated depreciation and reduction entry
Accumulated depreciation of tangible fixed assets as of March 31, 2017 and2016 amounted to ¥37,019 million ($329,967 thousand) and ¥36,623 million,
respectively.
Reduction entry, which is deferred gain on tangible fixed assets deductible
for tax purposes, amounted to ¥2,436 million ($21,713 thousand) and ¥2,481
million as of March 31, 2017 and 2016, respectively.

16. Borrowed money
Borrowed money consists of loans from other financial institutions. As of March
31, 2017 and 2016, subordinated borrowings in the amount of nil and ¥1,000
million, respectively, were included in borrowed money.

17. Corporate bondCorporate bond consists solely of subordinated bonds in the amount of nil and¥10,000 million as of March 31, 2017 and 2016, respectively.

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, 2017 and 2016, the difference between the carrying
amount and the fair value of the revalued land was ¥15,579 million ($138,862
thousand) and ¥16,081 million, respectively

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

20. General and administrative expenses
Salaries and allowances were included in general and administrative expenses,
which amounted to ¥15,749 million ($140,377 thousand) and ¥15,775 million
for the years ended March 31, 2017 and 2016, respectively.

21. Other expenses(1) Loan write-offs were included in other expenses, which amounted to¥2,819 million ($25,127 thousand) and ¥2,472 million for the years ended
March 31, 2017 and 2016, respectively.

33

22. Matters relating to consolidated statements ofcomprehensive income(2) Impairment losses
During the years ended March 31, 2017 and 2016, the Bank recorded
impairment losses on fixed assets as described below:

Kagawa Pref.... Idle assetsLand,(2017: 13 items buildings
2016: 9 items) andmovablesOther............ Idle assetsLand,
and/or assets buildings
for business use and/or(2017: 4 items movables,
2016: 3 items) etc.
Total.............

Millions of yen
Impairment losses
2016
2017
¥ 89
¥178
land: 83
land: 166
buildings: 4buildings: 10
movables: 0
movables: 0
¥ 70

¥ 22

land: 53

land: 21

buildings: 13

buildings: 0

movables: 3¥248
land: 220
buildings: 24
movables: 3

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

Thousands of
U.S. dollars
Impairment
losses2017
Kagawa Pref.... Idle assets
Land,$1,586(2017: 13 items) buildings
land: 1,479
andbuildings: 89
movables
movables: 0
Other............ Idle assetsLand,$  623and/or assets buildings
land: 472
for business use and/or(2017: 4 items) movables, buildings: 115
etc.
movables: 26
Total.............
$2,210land: 1,960
buildings: 213
movables: 26
The Bank posted impairment losses of ¥248 million ($2,210 thousand) and¥111 million, respectively, during the years ended March 31, 2017 and 2016 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 discount rates of 0.6% and 0.5% for theyears ended March 31, 2017 and 2016, respectively.

2. As lessor(1) Breakdown of lease investment assets

The amount of recycling and amount of income tax effects associated with othercomprehensive income (loss):
Millions of yen
2016
2017
Net unrealized losses on othersecurities, net of taxes:
Amount recognized during theyear................................
Amount of recycling...............
Prior to income tax effect......
Income tax effect................
Net unrealized losses on
securities available
for sale.........................
Net deferred gains (losses) on
hedging instruments, net oftaxes:
Amount recognized during theyear................................
Amount of recycling...............
Prior to income tax effect......
Income tax effect................
Deferred gains (losses) on
hedging instruments.........
Revaluation reserve for land:
Amount recognized during theyear................................
Amount of recycling...............
Prior to income tax effect......
Income tax effect................
Revaluation reserve for land...
Remeasurements of defined benefit
plans:
Amount recognized during theyear................................
Amount of recycling...............
Prior to income tax effect......
Income tax effect................
Remeasurements of defined
benefit plans...................
Total other comprehensive income(loss)..................................

Thousands of
U.S. dollars
2017

¥ 440
(7,913)(7,472)
2,271¥(17,128)(6,481)(23,609)
8,802$ 3,921(70,532)(66,601)
20,242(5,201)(14,807)(46,358)

7,594
1,852
9,447
(2,871)(8,071)
1,281(6,789)1,993

67,68816,507
84,205(25,590)

6,575(4,796)58,605

—
—
—
—
—

—
—
—
307
307

—
—
—
—
—

3,885
872
4,757
(1,446)(3,946)(136)(4,082)
1,279

34,628
7,772
42,401(12,888)

3,311(2,803)29,512¥  4,685¥(22,099)$ 41,759

23. Finance leases
Information on finance leases for the years ended March 31, 2017 and 2016 are
as follows:
1. As lessee
Finance lease transactions that do not transfer ownership(1) Components of lease assets(a) Tangible fixed assets
Primarily consisting of ATMs(b) Intangible fixed assets
None(2) Depreciation and amortization methods for lease assets
Depreciation and amortization methods for lease assets are described in “3.
Significant accounting policies (5) Depreciation”.

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

Thousands ofMillions of yen
U.S. dollars
2016
2017
2017
¥16,791 $150,280¥16,860
1,801
1,908
17,006(1,832)(1,957)(17,443)¥16,760 $149,852¥16,812(2) Schedule for collection of lease receivables and receivables onlease investment assets by leasing contract maturity

2017
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¥75¥5,266
62
4,257
49
3,172
12
2,208
4
1,174
—
780

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

2017
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$668$46,938552
37,944436
28,273106
19,68035
10,464—
6,952(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 by thestraight-line method 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 ¥1 million ($8 thousand)(¥3 million in the previous fiscal year) compared with the amount posted in theConsolidated Statements of Income.

34

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements
24. Financial instruments
1. Disclosures related to financial instruments(1) Financial instrument policies
The Group provides banking services, including leasing and other financial
services. The Group limits risk within the scope of its business capacity, while
realizing profits commensurate with the risk of the financial instruments held.
To accomplish this goal, the Group quantifies, to the greatest extent possible,
various risks related to financial instruments using statistical methods. It
categorizes capital (risk capital) according to the size of the risk, engaging in“integrated risk management,” incorporating a capital allocation system thatmonitors risk versus return. The Group continues to improve efficiency in risk
management, ensuring greater stability and soundness for the business as awhole.
(2) Nature and extent of risks arising from financial instruments
The major types of financial assets held by the Group are loans and bills
discounted and securities. Loans and bills discounted are mainly for domestic
corporations and individuals, and are exposed to credit risk, interest rate risk,
and foreign exchange risk. If loans and bills discounted are concentrated
excessively on a particular corporate group or industry type, the Group’s
stockholders’ equity may suffer significant adverse effects. Therefore, the Group
has set maximum loan balances for each corporate group or industry type, andhas in place a system for monitoring compliance with these thresholds toprevent such an excessive concentration of risk.
Securities mainly consist of stocks, bonds, investment trusts and direct
investments. These investments are used as a pure investment vehicle or as partof a Group investment policy. 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.

35(b) Market risk management
The Group has established Market Risk Management Rules along with relevant
documentation, and the Risk Management Committee (Market Risk
Management Subcommittee) monitors market risk and maintains management
systems. The Revenue Management Committee (Budget ALM Subcommittee)
deliberates on the stability of medium and long-term profit in light of risk
circumstances.
Departments involved in the execution of market transactions (Treasury
and International Division) have been divided into front office (transaction
execution), back office (clerical), and middle office (market risk management)roles. This creates a system of internal checks and balances, with the Risk
Management Division in charge of managing overall market risk.
(i) Interest rate risk management
The Group manages interest rate risk using statistical methods to quantify thesize of the interest rate risk. When deemed necessary, the Group establishes andmanages limits on positions and/or profits and losses for securities, derivatives,and other market transactions.
The Group also enters into derivative transactions for interest rate swaps tohedge interest rate risk as part of ALM.
(ii) Foreign exchange risk management
The Group uses statistical methods to quantify and manage foreign exchangerisk. The Group also establishes and manages limits on positions and profits andlosses.
(iii) Price volatility risk management
The Group uses statistical methods to quantify and manage price volatility risk.
The Group establishes and manages limits on positions and profits and losses.
(iv) Quantitative information regarding market risks
a. Financial instruments held for trading purposes
In measuring the VaR of interest-rate risks associated with trading securities,
interest-rate futures and related transactions as well as the VaR of foreign
currency exchange risks associated with foreign exchange trading andrelated transactions, the Group applies the historical simulation methodwith a holding period of 10 days, a confidence interval of 99% and an
observation period of 1,200 business days. As of March 31, 2017 (theconsolidated balance sheet date), the volume of the aforementioned risks offinancial instruments held for trading purposes (estimated amount of loss)
amounted to ¥12 million ($106 thousand) (compared with ¥12 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 and investment trusts, etc.
the Group applies the historical simulation method with a holding period of
120 days, a confidence interval of 99% and an observation period of 1,200
business days.
In addition, in measuring the VaR of risks involving interest rates ofmoney held in trust, price volatility or exchange rates, the Group applies thehistorical simulation method with a holding period of 20 days, a confidence
interval of 99% and an observation period of 1,200 business days. The VaR
of financial instruments not held for trading purposes amounted to ¥52,487
million ($467,840 thousand) and ¥45,629 million as of March 31, 2017and 2016, respectively.
In measuring the VaR of price volatility risks of investment trusts in theyear ended March 31, 2016, the Group applied the variance covariancemethod with a holding period of 20 days, a confidence interval of 99% andan observation period of 240 business days.

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.
(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.
(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, 2017 and 2016 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
2017(1) Cash and due from banks........ ¥ 551,313 ¥ 551,313¥—(2) Call loans and bills bought.......
—
6,731
6,731
(3) Trading account securities.......
—
41
41(4) Money held in trust...............
4,795
4,795
—
(5) Securities
Other securities................... 1,441,698 1,441,698—(6) Loans and bills discounted....... 2,776,554
Reserve for possible loan
losses*1.............................
(14,650)
2,761,904 2,784,287
22,382
Total assets............................. 4,766,484 4,788,867
22,382(1) Deposits............................ 4,013,132 4,013,491
359(2) Negotiable certificates ofdeposit..............................
3
147,229
147,233(3) Call money and bills sold........
51,682
51,682—(4) Payables under securities
lending transactions..............
118,779
118,779—(5) Borrowed money..................
206,111206,229118(6) Corporate bonds..................
———
Total liabilities......................... 4,536,935 4,537,416
480
Derivative Transactions*2
Not subject to hedge accounting.
1,039
1,039
—
Subject to hedge accounting......
(2,446)(2,446)—
Total Derivative Transactions....... ¥ (1,406) ¥ (1,406) ¥—Millions of yen
Consolidatedbalance sheet
2016
amountFair value Difference(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*1.............................
(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) Payables under securities
lending transactions..............
88,86788,867—(5) Borrowed money..................
83,727
83,7291(6) Corporate bonds..................
10
10,00010,010Total liabilities......................... 4,322,405 4,322,790
384
Derivative Transactions*2
Not subject to hedge accounting.
15,661
15,661—
Subject to hedge accounting......
(6,314)(6,314)—
9,347 ¥
9,347
Total Derivative Transactions....... ¥¥—Thousands of U.S. dollars
Consolidatedbalance sheet
amountFair value Difference
2017(1) Cash and due from banks........ $ 4,914,101 $ 4,914,101 $—(2) Call loans and bills bought.......
59,99659,996—(3) Trading account securities.......
365
365
—
(4) Money held in trust...............
42,73942,739—(5) Securities
Other securities................... 12,850,503 12,850,503—(6) Loans and bills discounted....... 24,748,676
Reserve for possible loan
losses*1............................. (130,582)
24,618,094 24,817,604
199,500
Total assets............................. 42,485,818 42,685,328
199,500(1) Deposits............................ 35,770,853 35,774,052
3,199(2) Negotiable certificates ofdeposit.............................. 1,312,318 1,312,354
26(3) Call money and bills sold........
—
460,664
460,664(4) Payables under securities
lending transactions.............. 1,058,730 1,058,730—(5) Borrowed money.................. 1,837,160 1,838,211
1,051(6) Corporate bonds..................
———
Total liabilities......................... 40,439,745 40,444,032
4,278
Derivative Transactions*2
Not subject to hedge accounting.
9,261
9,261
—
Subject to hedge accounting......
(21,802)(21,802)—
Total Derivative Transactions....... $    (12,532) $    (12,532) $—*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.

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.

36

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements
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.
(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.

(4) Payables under securities lending transactions
Due to the short contract period, the Group considers their book value toapproximate the fair value.
(5) Borrowed money
Borrowed money subject to variable interest rates reflects market interest rates
over a short-term. As the credit status of the Group has not significantly changed
since these transactions were executed, the Group believes that the book value
approximates the fair value of these instruments. The fair value for borrowed
money subject to fixed interest rates is valued at present value, discounting thetotal amount of principal and interest categorized by specific term by anassumed applicable interest rate when similar borrowings are entered into.
(6) 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, 2017 and 2016. 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
2016
2017
2017
¥2,760¥2,721$24,253
353
373
3,324
¥3,113¥3,094$27,578
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 ¥38 million ($338 thousand) and ¥2 million impairment loss forunlisted equity stock for the fiscal years ended March 31, 2017 and 2016, 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, 2017 and 2016 are as
follows:

2017
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
¥ 512,499
6,731
22,748Over 1 year,
up to 3 years¥———

155,525
64,40019,072
46,40225,6501,084,433¥1,781,938

377,577
162,600
27,939111,334
75,703528,379¥905,956

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
2017
Deposits............................................................ $ 4,568,134
Call loans and bills bought......................................
59,996
Monetary claims bought.........................................
202,763
Securities:
Other securities with maturities...............................
1,386,264
National government bonds..............................
574,026
Local government bonds..................................
169,997
Corporate bonds............................................
413,601
Other.........................................................
228,630
Loans and bills discounted*.....................................
9,666,039
Total................................................................ $15,883,215

Over 1 year,
up to 3 years$———
3,365,513
1,449,327
249,032
992,370
674,774
4,709,680$8,075,193

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¥———

73,66543,0004,000
3,378
23,287
169,486¥243,152

399,065
32,00096,33090,485
180,250
196,109¥595,175

67,13152,0005,000—
10,131
411,892¥479,023

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

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$———

3,557,046
285,230
858,632
806,533
1,606,649
1,748,007$5,305,062

598,368
463,499
44,567—90,302
3,671,378$4,269,747

150,859
45,3003,806
22,096
79,656
320,818¥471,677

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

1,344,674
403,779
33,924
196,951
710,0092,859,595$4,204,269

656,609383,278
35,65330,109207,567
1,510,705$2,167,323*Loans and bills discounted do not include ¥27,147 million ($241,973 thousand) and ¥34,224 million in loans to bankrupt, substantially bankrupt and likely to go bankrupt borrowers or otherloans of which repayment is not expected, or ¥38,287 million ($341,269 thousand) and ¥30,071 million in loans with no established maturity as of March 31, 2017 and 2016, respectively.

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.

37

38

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, 2017 and 2016 is asfollows:

2017
Deposits*..........................................................
Negotiable certificates of deposit..............................
Call money and bills sold.......................................
Payables under securities lending transactions...............
Borrowed money.................................................
Corporate bonds..................................................
Total................................................................

2016
Deposits*..........................................................
Negotiable certificates of deposit..............................
Call money and bills sold.......................................
Payables under securities lending transactions...............
Borrowed money.................................................
Corporate bonds..................................................
Total................................................................

2017
Deposits*..........................................................
Negotiable certificates of deposit..............................
Call money and bills sold.......................................
Payables under securities lending transactions...............
Borrowed money.................................................
Corporate bonds..................................................
Total................................................................

Over 1 year,
up to 3 years¥241,434
521——
10,623—¥252,579

Millions of yen
Over 3 years, Over 5 years,
up to 5 years
up to 7 years¥  7,571
¥ 257
90
92
—
—
—
—
145,388783——¥153,049¥1,132Up to 1 year
¥3,687,555
176,320
26,254
88,86754,918—¥4,033,915

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

Over 10 years
¥ —
—
—
—
489
—
¥489

Up to 1 year
$33,545,931
1,306,052
460,664
1,058,730
428,451—$36,799,857

Over 1 year,
up to 3 years$2,152,009
4,643
—
—
94,687—$2,251,350

Thousands of U.S. dollars
Over 3 years, Over 5 years,
up to 5 years
up to 7 years$    67,483$ 2,290
802
820
—
—
—
—
1,295,908
6,979——$1,364,194$10,090

Over 7 years,
up to 10 years$ 3,110
—
—
—
7,549
—
$10,660

Over 10 years$    —
—
—
—
3,565
—
$3,565Up to 1 year
¥3,763,518
146,526
51,682
118,779
48,068—¥4,128,576

Over 7 years,
up to 10 years
¥ 349
—
—
—
847
—
¥1,196

Over 10 years
¥ —
—
—
—
400
—
¥400

*Among deposits, demand deposits are included in “Up to 1 year.”

25. Accrued retirement benefits(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, net
defined benefit liability and retirement benefit costs are calculated by thesimplified method.
(2) Defined benefit plan(a) Reconciliation of retirement benefit obligations at beginning and end of period

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

39

Millions of yen
2016
2017

Thousands of
U.S. dollars
2017¥52,587
1,514
482
(138)
(1,831)—¥51,656
1,503
473
835
(1,882)—$468,731
13,494
4,296(1,230)(16,320)—¥52,614¥52,587$468,972

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
2017

Millions of yen
2016
2017
¥54,468¥56,192$485,497

630
3,747
2,096
(1,394)¥59,547630(3,110)2,131(1,375)¥54,468

5,615
33,39818,682(12,425)$530,769(c) Reconciliation of retirement benefit obligations and pension assets at end of period andnet defined benefit liability and net defined benefit asset recorded in the consolidatedbalance sheet

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

Thousands of
U.S. dollars
2017

Millions of yen
2016
2017
¥ 52,614(59,547)(6,933)—¥ (6,933)¥ 52,587 $ 468,972(54,468) (530,769)(1,881)(61,796)—

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

Thousands ofMillions of yen
U.S. dollars
2016
2017
2017
¥ 1,159¥ 171$ 1,524(3,041)(7,105)(63,330)¥(6,933)¥(1,881)$(61,796)(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
2016
2017
2017
¥1,503¥1,514$13,494
473
482
4,296
(630)
(630)
(5,615)
872
—

(136)
—

7,772
—

¥2,238¥1,210$19,948*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
2016
2017
2017
¥(4,082)¥4,757$42,401¥(4,082)¥4,757$42,401(f) Remeasurements of retirement benefit plans in accumulated other comprehensive
income
The following is a breakdown of items (before adjusting for tax effects) recorded
in remeasurements of retirement benefit plans:

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

Thousands ofMillions of yen
U.S. dollars
2016
2017
2017
¥(1,683)¥3,074$27,399¥(1,683)¥3,074$27,399(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......................................................

2017
13%
54
25
8
100%

2016
13%
53
27
7
100%

Note: Total pension assets include retirement benefit trusts established for the
corporate pension plan (22.30% and 21.88 % as of March 31, 2017 and 2016,
respectively) and retirement benefit trusts established for the retirement
lump-sum payment plan (21.18% and 20.24% as of March 31, 2017 and 2016,
respectively).

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

2017
0.92%
2.00%
3.10%

2016
0.92%
2.00%
3.20%

(3) Defined contribution pension plan
The required contribution to the defined contribution plans of consolidated
subsidiaries was ¥7 million ($62 thousand) and ¥6 million for the years ended
March 31, 2017 and 2016, respectively.

26. Stock options
1. Stock option expenses and accounts for the fiscal years ended
March 31, 2017 and 2016

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

Thousands ofMillions of yen
U.S. dollars
2016
2017
2017
¥40
¥39
$347

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—

¥ (1,881) $ (61,796)

40

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 2016 stock options
granted during the consolidated fiscal year ended March 31, 2017.
(1) Valuation technique: Black-Scholes formula(2) Significant assumptions and estimation methods
2016 stock options
Stock volatility*1...........................
31.3%
Projected remaining years*2..............
4.4 years
Projected annual dividend*3..............
Per share: ¥8
Risk-free interest rate*4...................
(0.35) %2015 stock options 2016 stock options
Category and number of grant
The bank’s eightrecipients............................ The bank’s nine
directors
directors(excluding(excluding
outside directors) outside directors)
Type and number of stock options
granted (Note)......................... Common stock: Common stock:
94,300 shares
137,700 shares
Grant date.............................. July 24, 2015
July 26, 2016
Vesting terms.......................... No vesting terms No vesting terms
Service period.......................... No service period No service period
specified
specifiedExercise period........................ July 25, 2015 to July 27, 2016 toJuly 24, 2045
July 26, 2046

*1 Calculated weekly for the period beginning the week of February 27, 2012 through theweek of July 18, 2016 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 issuancedate.
*3 Actual dividends for the year ended March 2016.
*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

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.

27. Derivative transactions

Prior to vesting (shares):
Prior fiscal year end..................
Granted.................................
Expired.................................
Vested shares...........................
Unvested shares.......................
After vesting (shares):42,600——25,90016,70073,200——36,20037,00089,500——45,70043,800113,100——
57,40055,700125,900——
56,60069,300111,100——
44,80066,300(1) Type of transactions
The Group undertakes the following derivative transactions: interest-rate swaps
and others for interest-rate related transactions; currency swaps, forward
exchange contracts and currency options for currency-related transactions; andbond futures for bond-related transactions.

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

—
25,90025,900———36,20036,200———45,70045,700———57,40057,400———56,60056,600———44,80044,800——(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, 2017 and2016 were as follows:

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

94,300——35,70058,600—137,700——
137,700—
35,70035,700
—
—

—
—
—
—
—

2017
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)¥20,634¥15,506

¥ 487

¥ 487

20,634

15,506

(324)

(324)

386
386

349
349

(0)
0
¥ 162

39
(10)
¥ 192

(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: ¥303 Per share: ¥303 Per share: ¥303 Per share: ¥303 Per share: ¥303 Per share: ¥303
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 2016 stock options
Exercise price............................... Per share: ¥ 1 Per share: ¥ 1
Average price at exercise.................. Per share: ¥303 Per share: ¥ —Fair value on grant date................... Per share: ¥409 Per share: ¥285

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

2017
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)$183,920$138,211$ 4,340$ 4,340

183,920

138,211(2,887)(2,887)

3,440
3,440

3,110
3,110

(0)
0
$ 1,443347(89)$ 1,711

Market prices of currency-related transactions as of March 31, 2017 and 2016
were as follows:

2017
Over the Counter
Currency swaps.......
Forward exchange
contracts:
Sell................
Buy................
Currency options:Sell................
Buy................
Total....................

2016
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)¥389,677¥264,888¥    82¥   82

107,852
122,563

1,080
1,032

637
155

637
155

219,407219,407

147,726
147,726(7,512)7,512¥   876

2,496
(600)
¥2,772Millions of yen
Contracted value
Appraised
Total
Over 1 year Fair value profit/(loss)¥386,881¥312,040¥   116¥  11664,42568,320

1,413
1,352

1,392
(929)

1,392
(929)

189,611
189,611

128,286
128,286(7,400)7,400¥   579

1,277
367¥2,223Thousands of U.S. dollars
Contracted value
Appraised
Total
Over 1 year Fair value profit/(loss)

2017
Over the Counter
Currency swaps....... $3,473,366 $2,361,066
Forward exchange
contracts:
Sell................
961,333
9,626
Buy................ 1,092,459
9,198
Currency options:Sell................ 1,955,673 1,316,748
Buy................ 1,955,673 1,316,748
Total....................

$    730$   730

5,677
1,381

5,677
1,381

(66,957)
66,957$   7,808

22,247(5,348)$24,708

42

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements(3) Derivative transactions subject to hedge accounting
The following are the contracted value, 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.
(a) Interest rate related transactions
As of March 31, 2017

Hedge accounting method

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

Contracted value¥90,000

Millions of yen
Contracted value over
1 year¥90,000

Fair value¥(1,142)¥(1,142)

As of March 31, 2016

Hedge accounting method

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

Fair value¥(9,887)¥(9,887)

As of March 31, 2017
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
$802,210$802,210

Fair value$(10,179)$(10,179)

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
		 Fair value is calculated based on the discounted cash flow method and option pricing model, etc.

(b) Currency related transactions
As of March 31, 2017

Hedge accounting method

Type
Currency swaps
General accounting rules
Monetary swaps

Main hedged item
Foreign currency receivables

Contracted value¥112,263
36,537

Millions of yen
Contracted value over
1 year¥47,193—

Total

Fair value¥(1,687)383¥(1,303)

28. Business Combinations(Transactions under common control, etc.)
Additional acquisition of shares in subsidiaries
1. Outline of transaction(1) Names of the companies whose shares were acquired and business descriptions
Name
The Hyakujushi System Service Co., Ltd.
The Hyakujushi DC Card Co., Ltd.
Nishinippon JCB Card Co., Ltd.
The Hyakujushi Sogo Hosho Co., Ltd.
(2) Dates of business combinations
Name
The Hyakujushi System Service Co., Ltd.
The Hyakujushi DC Card Co., Ltd.
Nishinippon JCB Card Co., Ltd.
The Hyakujushi Sogo Hosho Co., Ltd.

Hedge accounting method

Type
Currency swaps
General accounting rules
Monetary swaps

Main hedged item
Foreign currency receivables

Contracted value¥109,395
61,341

Total

Fair value¥4,028(455)¥3,573As of March 31, 2017

Hedge accounting method

Type
Currency swaps
General accounting rules
Monetary swaps

Main hedged item
Foreign currency receivables
Total

Thousands of U.S. dollars
Contracted value overContracted value
1 year
$1,000,650$420,652—
325,670

Fair value$(15,036)
3,413$(11,614)

Date
April 1, 2016
April 1, May 31, and November 1, 2016
April 1 and November 1, 2016
March 31, 2017(3) Legal form of business combinations
		 Acquisition of shares from non-controlling interests(4) Names of companies after business combinations
		 No change has been made.
(5) Other matters concerning the outline of transaction
		 The Bank has acquired part of the shares held by non-controlling interests to strengthen corporate governance and group management.
2. Outline of accounting treatment
In accordance with the Revised Accounting Standard for Business Combinations (ASBJ Statement No. 21 issued on September 13, 2013) and the Revised Guidance on
Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures (ASBJ Guidance No.10, September 13, 2013), the transaction was
accounted for as a transaction with non-controlling interests among the transactions under common control.
3. Matters concerning additional acquisition of shares in subsidiaries
Acquisition cost of shares and breakdown by types of consideration
Consideration for acquisition
Cash and due from banks
Cash and due from banks
Cash and due from banks
Acquisition cost.....................

Millions of yen¥1,145217
42¥1,405

Thousands of U.S.
dollars$10,205
1,934
374$12,523

Date of business combination
April 1 and May 31, 2016
November 1, 2016
March 31, 2017

4. Matters concerning changes in the Bank’s ownership interests in relation to transactions with non-controlling interests(1) Main factor for changes in capital surplus
		 Additional acquisition of shares in subsidiaries(2) Increase in capital surplus due to transaction with non-controlling interests

As of March 31, 2016
Millions of yen
Contracted value over
1 year¥44,040—

Business description
Data processing services
Credit card business
Credit card business
Credit guarantee services

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

Millions of yen¥1,111280
19¥1,412Thousands of U.S.
dollars$ 9,902
2,495
169$12,585

Date of business combination
April 1 and May 31, 2016
November 1, 2016
March 31, 201729. 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 Hyakujushi Lease Co., Ltd.

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

43

44

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements(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.
In addition, as mentioned in “4. Change in accounting policies”, in accordance with the revision to the Corporate Tax Act of Japan, “Practical Solution on a change indepreciation method due to Tax Reform 2016” (ASBJ PITF No. 32 issued on June 17, 2016) has been applied from the year ended March 31, 2017; the depreciation
method for facilities attached to buildings and structures acquired on or after April 1, 2016 is changed from the declining-balance method to the straight-line method.
The impact of this change on segment income of “Banking” and “Other businesses” was immaterial and there was no effect on that of “Leasing”.
(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, 2017 and 2016 is as follows:

Banking2017
Ordinary income:Outside customers............................ ¥ 81,807
Inter-segment transactions...................
347
Total................................................... ¥ 82,155
Segment profit....................................... ¥ 17,013
Segment assets....................................... ¥4,907,967
Segment liabilities................................... ¥4,637,953
Other items:.........................................
Depreciation................................... ¥2,165
Interest income................................
48,279Interest expenses..............................
5,686
Increases in property, plant andequipment and intangible assets.........
2,671

2016
Banking
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

Banking2017
Ordinary income:Outside customers............................ $ 729,182
Inter-segment transactions...................
3,092
Total................................................... $ 732,284
Segment profit....................................... $ 151,644
Segment assets....................................... $43,746,920
Segment liabilities................................... $41,340,164
Other items:.........................................
Depreciation................................... $19,297
Interest income................................
430,332
Interest expenses..............................
50,681
Increases in property, plant andequipment and intangible assets.........
23,807

Leasing

Total

Millions of yen
Otherbusinesses

Total

¥

88,379742¥ 89,121¥ 17,347¥4,933,385¥4,658,756¥ 2,129
3,783¥ 5,913¥ 2,124¥31,461¥10,108

90,508
4,525¥ 95,034¥ 19,471¥4,964,847¥4,668,865—(4,525)¥ (4,525)¥    (99)¥(38,308)¥(35,455)¥   90,508—¥   90,508¥   19,372¥4,926,538¥4,633,409

¥

¥

2,256
48,423
5,770¥   338
448
69

¥

¥

83
(548)
(495)

¥    2,678
48,324
5,345

2,673

231

104

3,009

Adjustment

Consolidated
total

1

Leasing

Total¥ 6,394604¥ 6,999¥ 309¥25,232¥20,950
¥

92
131
104

¥

79,261909¥ 80,171¥ 17,825¥4,727,122¥4,464,002
¥

4

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

2,904

Millions of yen
Otherbusinesses¥ 2,120
3,781¥ 5,902¥ 1,921¥31,205¥10,353
¥

334
466
77

2,595
48,872
5,840

Total
¥

81,381
4,691¥ 86,073¥ 19,747¥4,758,328¥4,474,355
¥

211

—
(4,691)¥ (4,691)¥ (126)¥(38,666)¥(36,724)¥     74
(538)
(520)

1,897

133

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

3,320
50,780
4,712

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

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

2017
Income from external customers...........................

Thousands of U.S. dollars
Securities investment
Lending services
services
Leasing services$290,052$329,369$58,570

Adjustment

Consolidated
total

$

$

$ 18,976
33,719$ 52,705$ 18,932$280,426$ 90,097$

806,738
40,333$ 847,080$ 173,553$44,253,917$41,615,696—(40,333)$ (40,333)$(882)$(341,456)$(316,026)

806,738—$ 806,738$ 172,671$43,912,452$41,299,661$$

20,108431,616
51,430$ 3,0123,993
615$    23,130
435,618
52,054$739(4,884)(4,412)$    23,870
430,733
47,642

23,8252,059

25,884926

26,820

Leasing services¥6,571

Other¥14,443

Total¥90,508

Other¥13,312

Total¥81,381

Other$128,736

Total$806,738

Millions of yen
Leasing services¥6,394

2. Information on each area
(1) Ordinary income	Information is omitted since the amount attributed to income from external customers in Japan accounts for more than 90% of the ordinary income in the
consolidated statements of income.
(2) Tangible fixed assets
	Information is omitted since the amount attributed to tangible fixed assets located in Japan accounts for more than 90% of the tangible fixed assets in the
consolidated balance sheets.
3. Information on each major customer
	Information is omitted since there are no specific customers from whom ordinary income accounts for 10% or more of ordinary income in the consolidated statements
of income.
(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, 2017 and 2016 was as follows:
Millions of yen
2017
Impairment losses on fixed assets...........................

Securities investment
Lending services
services
¥248
¥—

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

Securities investment
Lending services
services
¥111
¥—

2017
Impairment losses on fixed assets...........................

Thousands of U.S. dollars
Securities investment
Lending services
services
Total$2,210$—$2,210

Total
¥248

Other
¥—

Total
¥248

¥—

Total
¥111

$—

Total
$2,210Millions of yen

2,031

787,7616,613$ 794,375$ 154,621$43,973,482$41,525,590

8

2017
Income from external customers...........................

¥$ 58,570
3,511$ 62,082$ 2,968$226,553$185,426
811
1,283
748

$

¥

3,246
51,318
5,232

Thousands of U.S. dollars
Other
Total
businesses
Total

Leasing¥

Millions of yen
Securities investment
Lending services
services¥32,541¥36,952

Consolidated
total¥ 6,571394¥ 6,965¥ 333¥25,417¥20,803
91
144
84

¥

Adjustment(Associated information)
1. Information on Each Service

Total
¥111

Other

Other

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. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements
30. Related-party transactions

32. Significant subsequent events

Not applicable to the years ended March 31, 2017 and 2016.

(Retirement of treasury stock)
At the Meeting of the Board of Directors held on May 12, 2017, the Bank
resolved to retire treasury stock in accordance with the provisions in Article 178of the Companies Act of Japan, and implemented it on June 1, 2017.
(1) Reason for retirement	To address concerns regarding the future release of the Bank’s treasury stock
into the market(2) Method used for retirement
Deducted from retained earnings(3) Type of shares
Common stock(4) Total number of shares retired
10,076,069 shares(5) Retirement dateJune 1, 201731. Per share data
Amounts per share as of March 31, 2017 and 2016 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
2016
2017
2017
¥891.90¥937.15$8.353
39.05
32.61
0.290
38.97
32.55
0.290

Notes: 1. The net assets per share figures are 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
2016
2017
2017
¥282,030 $2,612,790¥293,129
18,392
16,230144,665
142

201

1,265

16,087

18,190143,390

276,899

263,638

2,468,125

295,467

295,588

2. Basic earnings per share figures are 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
2016
2017

Thousands of
U.S. dollars
2017¥  9,645¥ 11,632$85,970

—

—

—

9,645

11,632

85,970295,791

297,871

488

623

488

623

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 65 thousand shares and 657 thousand
shares as of March 31, 2017 and 2016, respectively. 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 348
thousand shares and 942 thousand shares for the fiscal years ended March 31,2017 and 2016, respectively.

47

48

Corporate Information
Profile (as of March 31, 2017)

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
¥4,904.9 billion¥4,173.0 billion¥2,780.7 billion¥37.3 billion
310,076 thousand shares
2,327
124 (Head Office, 103 branches, 21 sub-branches)
Overseas Representative Offices: 2 (Shanghai, Singapore)
169 locations

VietnamBusiness cooperation
VIETCOMBANK
Foreign Investment Agency
Business collaboration
FORVAL VIETNAM(Bank staff secondment)

China
Representative Office
Bank of Tokyo-Mitsubishi UFJ(China), Ltd.
(Bank staff deployment)

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

ThailandBusiness collaboration
KASIKORNBANK Public Company Limited(Bank staff deployment)

Organization (as of July 1, 2017)

the Philippines
Business collaboration
Metropolitan Bank and Trust Company

The Hyakujushi Bank

Executive
Committee
Governance Council

Audit and Supervisory Committee

Board of Directors

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

General Meeting of Shareholders

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

Corporate Headquarters

Risk Control Division

Risk Control Group
Credit Risk Control Group

General Administration
Division

General Administration Group
General Affairs Administration Group

Singapore
Representative Office

List of Major Shareholders (as of March 31, 2017)

Compliance and Legal Affairs Office
Personnel Planning Group
Salary and Welfare Group
Personnel Division
Personnel Development GroupOperations Supervision
Division

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

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

Executive Secretariat
OfficeTreasury andInternational Division

Name

Subsidiaries
Hyakujushi Saita
Agency Co., Ltd.

Central Business
Division
Branches

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

Deposit andExchange
Operations Area
liaison & Loan
Operations Area
Central Foreign
Exchange Branch[Marketing Related Sector]
Business Management
Division

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

Regional Vitalization
Division

Regional Vitalization Promotion Group

Nihonbashi FudosanCo., Ltd.
Hyakujushi Business
Service Co., Ltd.
Hyakujushi Jinzai
Center Corporation
Hyakujushi Preferred
Capital Cayman Limited
The Hyakujushi System
Service Co., Ltd.
Hyakujushi JCB Card
Co., Ltd.

Retail Business Planning Group
Home Loan Business Group
Retail Banking Division

Hyakujushi Lease
Co., Ltd.

Sub-branches[Market Sector]

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

Japan Trustee Services Bank, Ltd. (trust account)
Nippon Life Insurance Company
The Master Trust Bank of Japan, Ltd. (Trust Account)
NH Foods Ltd. (Note) 1
Sompo Japan Nipponkoa Insurance Inc.
TAIHEIYO CEMENT CORPORATION (Note) 2
Mitsui Engineering & Shipbuilding Co., Ltd. (Note) 3
Meiji Yasuda Life Insurance Company
Japan Trustee Services Bank, Ltd. (Trust Account 9)
Hyakujushi Bank Employee Shareholding Association
Total

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 DivisionInspection Group
Risk Audit Group

8-11, Harumi 1-Chome, Chuo-ku, Tokyo
6-6, Marunouchi 1-Chome, Chiyoda-ku, Tokyo
11-3, Hamamatsu-cho 2-Chome, Minato-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
6-4, Tsukiji 5-Chome, Chuo-ku, Tokyo
1-1, Marunouchi 2-Chome, Chiyoda-ku, Tokyo
8-11, Harumi 1-Chome, Chuo-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 (%)
16,858
5.43
9,000
2.90
6,569
2.11
6,326
2.04
6,071
1.95
5,952
1.91
5,845
1.88
5,699
1.83
5,642
1.81
5,576
1.79
73,54023.71(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 14,608 thousand treasury shares (of which 14,543 thousand shares are held by the Bank and 65 thousand shares are held by the Employee Stock Ownership Plan (ESOP) Trust), andthe ratio of these to the total number of shares outstanding is 4.71%.

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

114 DC Card Co., Ltd.

Dividend per share(Persons)

Hyakujushi Sogo
Hosho Co., Ltd.

At the endof interim At year-end For the year
period8,000

Loan Plaza Branch
Pension Center
DB Center
Personal Loan Business Center
Credit Center

Address

Number of shareholders

Individuals

9,000

Fiscal year ended March 31, 2015

¥3.50

¥3.50

¥7.00

Fiscal year ended March 31, 2016

¥4.00

¥4.00

¥8.00

Fiscal year ended March 31, 2017

¥4.00

¥4.00

¥8.00

Fiscal year ending March 31, 2018 (forecast)

¥4.00

¥4.00

¥8.00

7,580

7,590

6,507

6,513

March 31,2013

March 31,
2014

7,000
6,000
5,000

Trends of Number of
Share Unit Holders

8,368

8,293

7,317

7,273

March 31,2016

March 31,
2017

7,109
6,053

4,000
3,000

March 31,
2015

Audit and Supervisory Committee Members’ Office49

50

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