Annual Report

2018Year ended March 31,2018

The Hyakujushi Bank, Ltd.

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

We are deeply grateful for your continued support
during the 140 years of our development together
with the region, and are committed to creatinga bright future together with you.

The Bank’s first ATM wasinstalled at the Head Office

Former Head Office damaged by air raids in WorldWar II (rightmost building)(1945)The Head Office was damaged by air raids on
Takamatsu in World War II but survived the fire

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

Launched the medium-term management plan
“Challenge Value Plus” (covering from April 2017
to March 2020)
Transitioned to a Company with Audit andSupervisory Committee

The four regional banks in Shikoku concluded acomprehensive partnership agreement for revitalizationof Shikoku (Shikoku Alliance)

Founded as the Hyakujushi National Bank

Opened Singapore
Representative Office

2017
2016

Opened Shanghai
Representative Office

2013
2007

2005
Relocated to the newly-constructed Head Office at thecurrent location (Kamei-cho, Takamatsu)

Former Head Office (currently Takamatsu Branch)(1926)

1980

The trade name was changed to The
Hyakujushi Bank, Ltd.

The Takamatsu Hyakujushi Bank, Ltd. wasestablished through the merger with the
Takamatsu Bank

Started the cooperation on
mainframe system for regionalbank project, named “Chance”

1973

2018

Principal 140th anniversarycommemorative events
140th anniversary commemorative forest matching (scheduled for October 2018)
We will expand the target region and the number of participants for the “Forest Matching-Collaboration of Forest Creation,” a forest conservation activity based on agreementswith Kagawa Prefecture and other government organizations.
Customer Appreciation Day (scheduled
for November 2018)
On the Bank’s foundation day, we willhold an event at all branches to express
our appreciation to customers who visit
the Bank.

140th anniversary commemorative
campaigns and events
We will hold various campaigns andevents to commemorate the Bank’s 140th
anniversary.

Donation of dodgeballs to elementary
schools in Kagawa Prefecture (scheduled
for November 2018)
We will donate dodgeballs to 159
elementary schools in Kagawa Prefecture
as part of our efforts to support sounddevelopment of children who will leadthe next generation.

Debuted “Hyakujushi Bank 140th
Anniversary Barbapapa Train” foroperation (April 2018 onward)
A train running on the Kotohira Line,
operated by TAKAMATSU-KOTOHIRAELECTRIC RAILROAD Co., Ltd., iswrapped with images of Barbapapa, theBank’s character.

1966

Reorganized as The Takamatsu
Hyakujushi Bank, Ltd.

1948
1945

Was listed on the First
Section of Tokyo andOsaka Stock Exchanges

1924
1898

1878

1929

1941

Great
Pacific War
Depression

1882 The Bank of Japan established in accordance with the Bank of Japan Act
01

1970

1988

1991 Collapse of the bubble

Japan World Exposition,
Osaka

Great Seto
Bridge opened

1998
1999

economyAkashi-Kaikyo Bridge
openedSetouchi Shimanami Kaido
Expressway opened

2005 Removal of the full deposit
pay-off guarantee

2008 Collapse of Lehman Brothers

2013 The Bank of Japan introduced quantitative and qualitative monetary easing2016 The Bank of Japan introduced a negative interest rate policy
The UK voted to leave the EU

02

Message from the President

To proactively address these issues, in April 2017 the Bank
launched the medium-term management plan “Challenge ValuePlus” (covering the period from April 2017 to March 2020).
Under this plan, we intend to fulfill our mission as a regional
financial institution by deepening dealings with local
communities and contribute to the development of local
communities and the regional economy.
■ Medium-term management plan

The Hyakujushi Bank will celebrate its 140th anniversary on 1 November 2018.
I am deeply grateful to everyone who has supported the Bank over the years andlook forward to continuing to shape a new future together with you.
July, 2018

Yujiro Ayada, President■ Foreword
I sincerely thank you for your continued patronage and supportof the Hyakujushi Bank.
Since its founding in 1878, the Bank has devoted itself tobuilding the strong business foundation it enjoys today by
developing together with customers and local communities as
the leading bank in the region we serve. We owe this success to
the wholehearted support of our stakeholders.
In the domestic economy, corporate earnings are rising andcapital investment is increasing due to active production andgrowing exports against a backdrop of economic expansion
overseas. Also, the economy is on a recovery trend as consumer
spending continues to pick up owing to improvements in
03

employment and income conditions. In Kagawa Prefecture,
our home ground, although production activities are showing acertain lack of resilience, the economy has gradually recovered
due to an increase in capital investment and recovery inpersonal spending.
Although economic situation is relatively stable, the businessenvironment in which regional banks operate is becoming
increasingly challenging. The banks embrace various problems
such as the reduction of the profit margin by the prolongationof the ultra-low interest environment, progress of a declining
population, low birth rate coupled with aging population, andthe emergence of new competition using the ICT (informationand communication technology).

At the core of the medium-term management plan “Challenge
Value Plus” are the “three challenges” to strengthen sales
capabilities and “five pluses” to strengthen the businessfoundation.
With the “five pluses,” the Bank will foster sales personnel
through channel reform and productivity improvement
measures and establish a framework for supporting customers
at any time through strengthening of organizational capabilities,
greater sophistication in risk management, and utilization ofalliances.
Under this framework, we will create a virtuous cycle inwhich customers, the region, and the Bank grow together bytackling the “three challenges”: creation of local value (for local
communities), enhancement of business value (for corporate
customers), and enhancement of lifetime value (for retailcustomers).
Furthermore, by “strengthening market operations
capabilities” and “enhancing the management foundation,”including strengthening of governance and establishment of a

Medium-term management plan “Challenge ValuePlus” conceptual diagram

Co-create new value
Sales capabilities

3

Challenges

Communities

Corporate customers

Retail customers

Challenge to create
local value

Challenge to enhancebusiness value

Challenge to enhance
lifetime value

Business foundation
Channelreform5

Pluses

Productivity
improvement

Sophistication ofrisk management

Strengtheningof organization
Alliances

Enhancement of management Foundation

Strengthening
marketoperations
capabilities

business continuity system, we aim to reinforce the Bank’s
sustainability more than ever.
■ Offering customer-oriented services
Challenge to enhance business value
To provide solutions aligned with the life stages and needs ofcorporate customers, the Bank discloses to customers its
evaluation of their business potential. The purpose of thisinitiative is not merely to convey to customers the Bank’s
evaluation of their business environment and growth potential,
but also to grapple with, consider, and resolve together withcustomers business issues and other concerns identified in thatprocess. Two years have passed since we began this initiative,
and it has been well received by customers, contributing to
identification of new funding needs as well as earning of fees
and commissions from the provision of solutions.
Also, accompanying the gradual economic recovery in
Kagawa Prefecture, “labor shortages” are becoming increasingly
serious. To solve this problem by improving productivity using
IT, in April 2018 the Bank established the “Udon Prefecture IT
Utilization Promotion Consortium” together with anorganization comprised mainly of IT management specialists
and IT vendors. The consortium is the first of its kind in Japan.
Furthermore, anticipating the retirement of the cohort ofbusiness owners from Japan’s baby-boom generation, we areproviding business succession support through measuresconcerning treasury stock and M&A, successor upbringing
support by the study session enforcement with the young
business owners and assisting sons of business owners seeking
marriage partners at the Konkatsu Desk, established within the
Regional Vitalization Division.
Challenge to enhance lifetime value
For retail customers, we are offering products and services
suitable for customers based on the perspective of “whatcustomers are seeking”. In the last fiscal year, we enhanced ouroffering of installment products, which are convenient forcustomers just beginning to accumulate assets, digitizedinvestment trust sales, and introduced an investment trust
Robot-advisor service.
We are also enhancing services centering on smartphones,
the principal communication tool for retail customers. In
January 2018 we introduced the Hyakujushi Bank App, asmartphone application with newly added features such as GPS
search for branches and ATMs, and account opening andpersonal loan application services.

04

Message from the President

supporting business succession, new business startups, andbusiness revitalization in the region.

■ Supporting the sustained growth of local
communities*1 The rare sugar that occurs only in trace amounts in natural world. It is effective inpreventing obesity and diabetes

Challenge to create local value
Regional banks share the same fate as the regions where they
are based and the customers who live there. For this reason,
the Bank has positioned “creation of local value” as one of thegrowth strategies and actively promotes the initiative.
In collaboration with regional public organizations, we assist
with new business startups and attraction of businesses to theregion, popularization and promotion of rare sugar*1, which isa new regional resource, promotion of sightseeing, etc. In
addition, we have also entered into fee-based contracts with
regional public organizations and undertake our own initiatives
such as support for the creation of homepages, video clips andbuilding a social media presence in each city town.
Under the “comprehensive partnership agreement forrevitalization of Shikoku (Shikoku Alliance),” concluded in
November 2016 by the four first-tier regional banks in
Shikoku, various initiatives have launched since theannouncement of key measures in April 2017. During the firstyear of business matching services, which started in May 2017by the four partner banks, the number of agreements
exceeded 300. In January 2018, Shikoku Alliance Capital Co.,
Ltd. was established, and also in March, two funds with a total
amount of 7.0 billion yen (Shikoku Alliance Regional
Revitalization Fund and Shikoku Small and Medium
Enterprises Support Fund) were formed with a purpose of■ Preparation of a framework to support growth
The Bank is working on establishing a framework to support
the growth of customers and local communities. We are
pursuing greater efficiency in administrative processes andimproving customer waiting time at service counters byintroducing “semi-self-service counters*2,” mainly at branches
in Kagawa Prefecture, and gradually implementing“concentration of small-quantity multi-varieties administrative
affairs at Headquarters”.
Also, in April 2018 we reorganized sales-related head office
functions, changing from the previous structure organized byproducts and services to a structure organized by functions,
namely, strategy, promotion, and back-office operations.
Eliminating barriers between corporate and retail and between
products will enable the Head Office and branches to offer
seamless support for corporate and retail customers.
*2 A style of branch operation such that customers and bank staff jointly process tax payments
and other transactions■ Results in the first year of the medium-term
management plan
The Bank achieved relatively strong results in the first year of
the medium-term management plan, thanks in part to steadyprogress with the abovementioned initiatives.
Profit attributable to owners of parent in the fiscal year
ended March 31, 2018 was 10.22 billion yen, compared withthe target of 9.03 billion yen in the medium-term
management plan. Consolidated ROE, an indicator of
efficiency, was 3.58%, compared with the target of 3.14%.
Meanwhile, the consolidated capital ratio, which indicatessoundness, was 9.42%, 0.10% below the target. This is due toa greater-than-expected increase in loans to small- andmedium-sized enterprises in Kagawa Prefecture and the
Setouchi region.
In terms of operations, the total deposit balance was 4,066.2
billion yen, a decrease of 108.6 billion yen from the end of theprevious fiscal year, partly as a result of curbing corporate
deposits from clients outside Kagawa Prefecture inconsideration of costs. However, retail deposits, which isemphasized in the management strategy, increased by 33.1
billion yen year on year. The loan balance was 2,837.8 billion
yen, an increase of 57.1 billion yen from the end of theprevious fiscal year, as a result of focusing on promotion ofloans to small- and medium-sized enterprises in the Setouchi
region, mainly in Kagawa Prefecture.

■ Strengthening of governance
Strengthening of governance is essential for the Hyakujushi
Bank to continue its growth as a regional financial institution
and develop into a more prominent stage.
The Bank is working to strengthen Group management. For
instance, last year we raised the substantial interest inconsolidated subsidiaries to 100%.
Also, the Bank has further strengthened the auditing andsupervision by transitioning to a Company with Audit &Supervisory Committee, and increased the speed of decisionmaking by delegating part of the authority of the Board of
Directors to the President and Representative Director.
Furthermore, we have introduced a performance-linked stockcompensation system in which a portion of executive
compensation varies in accordance with business performanceor other factors in order to motivate the directors to improve
medium- to long-term business performance and increase
corporate value.
■ Conclusion
The Hyakujushi Bank is focusing on its proper role as aregional financial institution ten to twenty years from now, andis committed to continuing to meet the expectations ofstakeholders. To that end, we intend to further increase ourability to adapt to changes and engage in highly expeditious
management.
I sincerely thank you and humbly request your continued
support of the Bank.

Medium-term management plan: Progress of management targets
Soundness

Profitability(Billions of yen) ■ Result ■ Plan
10.5
10.22

10.0
9.5

9.62
9.03

9.0

9.5% or higher in the final year
(%)
10.00

9.64
9.12

9.50

Result9.53

8.5

Loan balance(Including negotiable certificates of deposit)(Billions of yen)(Billions of yen)

■ RetailPlan

4,125.5

4,173.0

4,066.2

2,323.2

2,338.4

2,371.5

FY 2015

FY 2016

FY 20172,752.5

2,780.7

2,837.8

FY 2015

FY 2016

FY 2017

3.58
3.50

3.34
3.14

9.33

3.10

3.18

3.00

9.00

7.5

Result9.60

9.52

Total deposits

Consolidated ROE

3.0% or higher in the final year
(%)
4.00

Plan

9.42

8.0

Efficiency

Consolidated capital ratio

Profit attributable to owners of parent
9.5 billion yen or more in the final year

7.0
6.5

05

FY 2016

FY 2017
FY 2018
FY 2019
Period covered by the medium-term management plan

8.50

FY 2016

FY 2017
FY 2018
FY 2019
Period covered by the medium-term management plan

2.50

FY 2016

FY 2017
FY 2018
FY 2019
Period covered by the medium-term management plan06

Business Model Pursued by the Hyakujushi Bank(Our Medium-Term Management Plan)
Against the backdrop of a business environment that remains challenging for regional financial institutions, the Bank is demonstrating
financial intermediary functions by utilizing its organizations, human resources, and sales network to the maximum, and doing its
utmost to support asset accumulation and such of customers and the region. The Bank pursues a business model designed to achieve a“virtuous cycle of the regional economy” by contributing to growth of customers and the region, leading to stronger competitivenessand stable performance of the Bank.

Medium-Term Management Plan

Challenge Value Plus
(From April 2017 to March 2020)

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●

Vi sionThe emergence of new competitors
using FinTech● Diversification of customer needs andchange in lifestyles● Financial deregulation

Grow together with the region by going beyond the financial sphere●in providing whole-hearted support for the region’s aspirations.
Final year (FY 2019)

Profitability

Efficiency

Soundness

Profit attributable to owners of parent

Consolidated ROE

Consolidated capital ratio

9.5

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

Number of employees Number of Group companies

●

2,283

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*9 companies after completion of liquidation of Hyakujushi Preferred Capital Cayman Limited, which was decided at the Board of Directors meeting held on April 27,
2018 (Liquidation is scheduled for completion by the end of December 2018.)

Current state of the regional economy (Kagawa Prefecture)● Deposit balance (per household): 3rd in Japan● Jobs-to-applicants ratio: 8th 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 960,000 as of
October 1, 2017. Considering the fact that Japan’s
population started to decrease seven years ago (2011),
Kagawa Prefecture is a region showing advanced
population decline.

07

billion yen or more

TOP I CS

9.46 million tourists visited
Kagawa Prefecture, thesecond highest record ever

The number of tourists visiting Kagawa Prefecture exceeded 9.46 million in2017, the second highest record ever, exceeding 9 million for the fifth
consecutive year. The number of foreign nationals entering Japan at Takamatsu
Airport increased more than fivefold to 120,000 compared with five years
ago, setting a new record. Setouchi Triennale, an international art festival, will
be held in 2019 and the number of tourists is expected to further increase.

9.5% or higher

3

Challenges

Improve theinvestment system

1 2 3Realizing a virtuous cycle of growth of customers and the region and the Bank’s growth

Communities

Corporate customers

Retail customers

Challenge

Challenge

Challenge

to create local value

to enhance business value

to enhance lifetime value

Action guideline% or higher

Strengthening market
operations capabilities

Strengthen sales capabilities

Enhanceinvestment

Provide thorough support to customers and communities at any time

■ Overview of the economy of
Kagawa Prefecture

The economy of Kagawa Prefecture is gradually
expanding as a result of increased capital investment
and a recovery of consumer spending against the
backdrop of a favorable labor market, despite asomewhat weak recovery of production activities.

3.0

Strengthen the business foundation

5

PlusesChannelreformProductivity
improvement
Sophistication ofrisk management

Strengtheningof organization
Alliances

Enhance the management foundation◆ICT strategy ◆Business continuity plan (master plan) ◆Governance ◆Compliance ◆Strategic CSR

08

Growth Strategy (Three Challenges)

Create local value

Enhance business value– Initiatives for communities –– Initiatives for corporate customers –We offer strong support for our customers’ growth by actively taking part in their overall business flows and stages as well providing appropriate■ Regional strategy

financing and solutions through in-depth evaluation of business feasibility.

The Bank classifies its sales territories into three zones
consisting of Kagawa Prefecture, the greater Setouchi region,

Shikoku other than
Kagawa Prefecture,
Okayama, Hiroshima,
Hyogo, and Fukuoka

and metropolitan areas. We are supporting invigoration of theareas by formulating and implementing strategies

Tokyo
Osaka

Evaluation of business potential(Hyakujushi Value-up Sheet)

Nagoya● As an initiative launched in July 2016, the Bank discloses its evaluation of

Kagawacorresponding to each region.

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.

a customer’s business potential to the customer and engages in futureoriented dialogues with the customer.
● We are supporting growth of customers through evaluation of theirbusiness potential from a wide, in-depth, long-term perspective.

Financing for supporting startups● Support for subsidy applications● Support for business planning

Startup
stage●

Growthstage●

Provision of new means for procuring
funds● Support for overseas businessdevelopment● Support for M&A (buy side)● Business matching● Support for subsidy applications● Financing of funds for growth

Stablestage
Stagnationstage
Regeneration
stage

Providepowerful
support for
growth ofcustomers

Support for business rehabilitation● Support for business improvement● Support for business succession● Support for M&A (sell side)●

Organization of
information

Analysis• Basic information• Products and services• Financial information• Financial analysis• Analysis of theexternal environment• Analysis of theinternal environment

Proposal• Explanation of theevaluation results• Proposal of solutions
for issues etc.

■ Regional revitalization
Centering on the Regional Vitalization Division established in April 2017, we are providing support that goes beyond the financial sphere for regional
revitalization in collaboration with Kagawa Prefecture, local municipalities, external expert institutions, etc.

Establishment of “Udon Prefecture IT Utilization Promotion Consortium”

Holding of startup seminars
In cooperation with local
municipalities and chambers ofcommerce, the Bank holds startup
seminars for people who wish tolaunch businesses in local areas.

Support for sales of local specialties
Having entered into a fee-based
advisory contract with Manno-cho,
Kagawa Prefecture, the Bank is
supporting the town’s development
measures centering on thebranding of local specialties. The
Bank’s support includes productplanning, cultivation of customers,
and creation of a promotional
website and video clips.

First inJapan

The consortium was establishedjointly with an organization of IT
management specialists and others,with an aim to enhance
productivity of small- andmedium-sized enterprises throughpromoting utilization of IT. In April
2018, the consortium held aseminar on the topic of subsidies
available for IT implementation.

Recommendations for measures to invigorate areas
We provided recommendations forpromotion and invigoration of
Tadotsu-cho, Kagawa Prefecture,including advice with regard to
establishment of a destination
management/marketingorganization (DMO*) for tourism
promotion.

*DMO (Destination Management/Marketing Organization)
An organization that invigorates tourist destinations and integrally manage the entire area.

09

FY 2017
Number of customers for which business feasibility evaluation was performed: 2,349 customers(of whom 1,141 customers engaged in dialogues* with the Bank)*Number of customers with whom the Bank engaged in dialogues by presenting
Number of customers to which solutions were offered: 686 customers results of “Hyakujushi Value-up Sheet” business feasibility evaluation and local
benchmarking

Proposals of solutions according to customers’ lifestyles

Business matching

Provision of funds according to customers’ needs(Number of cases)

Number of cases for support of market cultivation

556 500

600

FY 2017

FY 2018700■ Result■ PlanInitiatives for loans utilizing current assets (Note)
Number of transactions (cumulative)231■ Result

133

303
FY 2016(Number of cases)

FY 2016

FY 2019

FY 2017Note) Focusing on the value of assets held by customers, such as accounts receivable and other claims, merchandise
inventories, and machinery and equipment, the Bank is strengthening initiatives for loans utilizing current assets
based on the commercial distribution.

Business succession(Number of cases)■ Result

Number of cases of M&A consulting

504

FY 2016680 670

FY 2017745

FY 2018

820

FY 2019■ PlanAgricultural field(Billions of yen)
■ Result

Amount of loans executed■ Plan

5.3
3.4

3.0

FY 2016

FY 2017

3.0

3.0

FY 2018

FY 201910

Growth Strategy (Five Pluses)

Growth Strategy (Three Challenges)

Strengthen the business foundation
Channel reform

Enhance lifetime value■ Enhancement of mobile banking– Initiatives for retail customers –We are enhancing mobile banking centering on smartphones. In January 2018 we introduced the Hyakujushi Bank App, a smartphone application.

We provide meticulous comprehensive support for customers’ asset accumulation by offering customer-centric proposals emphasizing long-term,
installment, and distributed investment. We also focus on fostering bank staff with expert knowledge and establishing sales structure.

Register on social media, such as Facebook or LINE,and information on campaigns and events is distributed
in a timely manner.

Basic policy for operations that support customers’ asset management and accumulation
Provide honest, impartial support for asset
management and accumulation

Deploy customer-centric sales systems

Enhance quality of services

Thoroughly implement a customer-centric approachand foster experts

Free-of-charge diagnosis by the “Mirai no shisan”
investment trust Robot-advisor is available.

● KPIs

Productivity improvement

Number of accounts for installment investment trust

Number of qualified financial planners

Consultation meetings on weekends and holidays(Number of accounts)■ 1st grade Certified Skilled Professional of Financial Planning (Number of persons)■ 2nd grade Certified Skilled Professional of Financial Planning■ Mortgage loans, etc.
■ Pensions, etc.

1,172
81

6,270

1,239

116

83

FY 2017

FY 2016

Digitization of sales of investment trust and pension products
Reduction of administrative
workload at branches

1,156
FY 201735

44

FY 2016

FY 2017■ Result ■ Plan

397.0

11

■ Innovation in administrative processes of branches
Transformation of the branch format
Adoption of semi-self-service operation so that customers and bank staff jointly
handle transactions using a dedicated ATM
Customers:
No need to fill in aform, reduce waiting
time
Bank staff:
No need to checkcash or enter slips,
etc.

317.0

335.2

FY 2016

FY 2017

FY 2019*Investment trusts, financial instrument intermediation, single-premium insurance

Trialapplication for

35

administrative
processes
Concentration ofwide-variety,low-volume
administrative
processes

Main administrative processes
Processing of wire transfers
Checking of account transfer request forms
Checking of identity confirmation records
Collection of tax and public utility charges

From trial
application
to full-scalerollout

31 other administrative processes

In January 2018, we introduced a new Assistant tool of 114Bank for Customer Expectations (called “ACE”). Efficient and accurate administrative
processes are achieved through automated preparation of contracts and slips reflecting the content of loan approval documents.
Receipt

FY 2018

Minimization of back-office operations and concentration ofcustomer-contact-type administrative processes at the center■ Introduction of a new loan administrative process support system

Before introduction

318.8

359.2

Investment trust Robot-advisor

Enhancement ofservice quality

We are working on the creation of sales staff by solving the problems of administrative work, performing business reform of branches to alleviate
administrative burden

Balance of assets under custody* (results and plan) (Billions of yen)

Elimination of the need forcustomers to fill in forms

Making time
for dialogues

125
81

81
1,091

(Number of persons)After introduction

7,424

FY 2016“Branch/ATM”→ The Bank’s branches and ATMs are shown on themap. Nearby ATMs are indicated by using the GPSfunction.

“Application for account opening”“Application for personal loans” etc.
→ Use your smartphone to take a photo of yourdriving license, and the name and the address areautomatically recognized.

Screening

Contract

Issuing of slips

Person in chargeof the customer
Receivea loanapplication

Prepare an
approval
document andan assessment
document

Preparea contract
document

Requestfora contract

Issue
transaction
slips

Person in chargeof the customer
Receivea loanapplication

Journal entry

Chiefof loans

Person in chargeof journal entries

Chiefof loans

Inspect
slips

Performjournalentries

Inspect thejournalChiefof loans
Prepare an
approval
document andan assessment
document

Automated
printing toprepare acontract

Requestfora contract

Automatedpreparationof transaction
slips

Inspect
slips andperformjournalentries

Free up time andhuman resources forcustomer operations
Closing
process

All processes from issuing of slips
to journal entries can be handled
by just two persons (the person
in charge and the chief of loans).
Person in chargeof journal entries
Automated
linkage ofjournal data

(Abolition)

Closing
process

Strengthen

consulting sales
Enhancethe evaluation ofbusiness feasibility

A contract document and an implementation slip are preparedbased on the approval document and the assessment document.

12

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Consolidated Financial Highlights

Growth Strategy (Five Pluses)

Alliances

Thousands of
U.S. dollars(Note 1)Millions of yen

Through Shikoku Alliance, a comprehensive partnership of four regional banks in Shikoku, the partners are tackling revitalization of Shikoku by

For the years ended or as of March 31

combining their strengths and expertise while maintaining sound competitive relationships.

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■ Key measures implemented
Structuring of funds totaling 7.0 billion yen■ Structuring of funds for business succession and rehabilitation
support through a jointly established fund management company

Business
succession fundPromotion of business matching services by the four banks■ Since its launch in May 2017, numbers of registrations fordemands and deals concluded have both increased steadily.

Result in the first year
Number of registrations for demands:
over 2,000
Number of deals concluded: over 300

Rehabilitation fund

4.0 billion yen

3.0 billion yen
Revitalizationof Shikoku

Establishment of a new business modelby charging fees

Established Shikoku Alliance CapitalCo., Ltd., a fund managementcompany■ Other measures

Started “Shikoku Alliance
Regional Revitalization Fund‘The Future of Shikoku’,” aninvestment trust

2017

2018
July

September

OctoberNovemberJanuary

MarchStarted “The Bonds of Shikoku,” anAnnounced the plan to rename Iyogin Securities Co.,
insurance product combined with aLtd. as Shikoku Alliance Securities Co., Ltd.
service for provision of healthHeld the first Shikoku Alliance Business
related information
Contest with goals such as enhancing
Concluded a basic agreement withawareness about startups andthe Tokyo Stock Exchange forentrepreneurship.
revitalization of Shikoku

2018

2017

2016

2015

2014

2018

¥80,890
65,775
15,114
3,720
807¥90,552
71,65518,897
5,145
3,050¥81,416
61,927
19,4893,878
2,879¥77,671
60,33917,332
3,562
3,841¥80,592
58,92821,6635,769
3,700$761,389
619,117
142,262
35,015
7,596

359
10,227

1,054
9,645

1,099
11,632

970
8,957

963
11,2303,379
96,263

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

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

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

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

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

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

26,670,990
9,704,678
65,8608,523,221
44,964,806

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

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

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

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

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

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

38,157,191
2,268
3,947,524
42,107,059

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

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

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

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

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

351,298
286,9541,547,053(19,728)
2,165,587

49,72249,012

54,256

68,952

37,722

468,015

(39)
8,741
4,984

(1,231)
8,557
2,139

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

(24)
8,044
(2,719)(367)
82,275
46,912

63,408124
10,000303,606¥4,777,061

58,478142
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

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

43,022596,837
156
1,167
16,92094,126
256,851
2,857,737¥4,493,211 $44,964,806

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 ¥106.24 to US$1.00 on March 31, 2018.

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.

13

14

The Hyakujushi Bank is actively working to resolve ESG-related social issues forthe purpose of fulfilling our social responsibilities through creating even better
relationships, not only with customers and local regions we serve but also withnature and environment, to realize a sustainably society.
*ESG stands for Environment, Social and Governance. A concept advocated for assessing corporate value from non-financial perspectives

Environment■ Support for tourism promotion
To support destination-based tourism*, female staff of the Bank and Kagawa Prefecture officials formed the “Setouchi Monitor Girls,” a team that shines a
spotlight on industrial tourism in Kagawa Prefecture through monitoring workshops. Participants engage in activities to contribute to regional vitalization
by discovering new attractions of the region and widely disseminating information.
* In destination-based tourism, communities that are the destinations for tourists attract tourists by planning high-value-added experiential and interactive tourism
products utilizing local tourism resources such as history, culture, and nature.

■ Konkatsu support for people seeking marriage partners■ Offering of CSR private placement bonds

We cooperate with the activities of the Kagawa Matchmaking Support
Center (EN-MUSU Kagawa), established by Kagawa Prefecture, and also
hold our own Konkatsu support events for people seeking marriage
partners and cooperate with similar events planned by local public
institutions.

The Bank offers CSR private placement bonds. We donate a portion of
the issuing fees received from customers issuing private placement
bonds to purchase goods designated by the bond issuers and donate
them to their chosen schools or local public institutions.

Financial education

We are working to create an environmentally friendly society through measures such as provision of financial products andservices, local forest conservation activities, and energy-saving branches.
Environmental conservation initiatives
Forest Matching

Energy-saving building

We have concluded Hyakujushi Forest forest
matching agreements with Kagawa Prefecture andother government entities and engage in forest
conservation activities. In 2017 the four partnerbanks in the Shikoku Alliance began participating in
one another’s forest conservation activities.

The Head Office building has received BELCA Award* in the Best Reform category from the Building
and Equipment Long-Life Cycle Association (BELCA) in recognition of its contribution to energy
conservation through a major renovation using the double-skin construction method, which involved
covering the existing external wall glass with a new glass screen. The building, which also received anaward in the Long Life category in 1993, became the first building to win an award in both categories.
*An award system by which BELCA recognizes existing buildings that have been appropriately maintained over many years
or have undergone excellent renovations

Use of wallpaper passbooks

As part of the Bank’s support for financial education activities, we host workplace tours and work experience events for elementary, junior high, and highschool students as well as holding the Summer Holiday Parent-Child bonding workshops for elementary school students. We also strive to disseminate
financial education by dispatching instructors to give special lectures at high schools and universities in Kagawa Prefecture for the purpose of deepening
understanding of finance and banks.

Workstyle Innovation
We strive to create an excellent working environment to secure and retain skilled human resources.
Attained excellent company certification
mark “Nickname: Eruboshi (Top)” a
recognition system based on the Act on
Promotion of Women’s Participation andAdvancement in the Workplace
July 2016

Attained the “Platinum Kurumin”
certification from the Minister of
Health, Labour and Welfare based on the
Act on Advancement of Measures to
Support Raising Next-Generation
ChildrenJune 2017

NEW

Establishment of in-housenursery school

April 2018

We help protect the environment by using recyclable wallpaper as the material for passbook covers andusing plant-derived ink for printing.

Development of eco-friendly financial products

We offer various products that correspond to the values of environmentally conscious individuals and companies.

Environmentally friendly
private placement bonds

Hyakujushi environment
support loans(Nickname: 114 Olive Bond)

We offer preferential interest rates to companies
that have obtained third-party certification orwhose practice of environmentally conscious
management is confirmed.

(Nickname: 114 Olive Fund)We evaluate customers’ environmental initiatives
using a three-level rating scale and reflect theevaluation results in loan interest rates.

Hyakujushi renewableenergy project support loans(abbreviation: 114 Energy Support)

We meet the facilities funding needs of operatorsthat utilize the feed-in tariff scheme forrenewable energy to enter the solar power
generation or other renewable energy businesses.

Supporting women’s participation and advancement
Following the enforcement of the Act of Promotion of Women’sParticipation and Advancement in the Workplace, we are actively promoting
female employees to managerial positions. The ratio of female managers at
the Bank was 22.4% in April 2018, which exceeded the national ratio of
13.2%.
*Source: White Paper on Gender Equality 2018 edition

Regional vitalization initiatives■ Holding of business forums and seminars
We hold various business forums and seminars to support our customer’s core businesses and asset formation. Through these events, we propose optimal
solutions according to the customers’ life stages.

15

Number of female managers

20.0%

21.2%

Ratio of female managers

22.4%
246

Target

25%

233
219
April 2016

Social
We support the growth of customers and regions through the “three challenges” set forth in the medium-term management
plan and interaction with local communities.We are also actively working to create an environment where employees canwork for many years with fulfillment through workstyle innovation.

Number and ratio of female managers

April 2017

April 2018

Development of professionals■ Dispatching employees for external training andsecondments to growing fields
The Bank has instituted the Cross-industry Training for the purpose of
inspiring employees to pursue personal growth through contact withdifferent cultures as well as developing personnel capable of generatingideas unconstrained by conventional wisdom and acting based on a broad
perspective. We aim to improve the judgment of employees by
dispatching mid-career employees to corporate customers as trainees toexperience the field of different industries.

■ Introduction of the Company Qualification
In June 2017 the Bank introduced the Company Qualification, whichenables employees to challenge themselves to acquire qualifications
focusing on areas they have voluntarily selected. Under this system, we
divide the branch operations into six categories and establish three levelsof qualifications for each categories: Officer (beginner), Leader(intermediate), and Meister (top level). We are working on nurturingpersonnel with comprehensive capabilities that combine knowledge withpractical abilities.
16

Governance
We are striving to improve the governance structure based on the recognition that strengthening of corporate governance is
indispensable for the Bank’s sustainable growth and enhancement of medium- to long-term corporate value.

■ Corporate Governance Framework (as of July 1, 2018)

Initiatives to strengthen corporate governance

SystemWith 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.

The Bank’s initiatives to strengthen corporate governance
Before 2009
Reinforcementof oversight aswell as audit
and supervision

2009

2010-13

2014

2015

2016

Directors from one to two

Transition to a
Company with Audit
and Supervisory
Committee

Creation of the Corporate Governance Guidelines
and establishment of the Governance Council

Increased the numberof Outside Directors
from two to four

Appointment of one Outside
Director
Increase of the number of Outside
Appointment of three
Outside Audit & Supervisory
Board Members

Fasterdecisionmaking

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

Revision of
the executive
remuneration
systemAbolishment of the
Retirement Benefit
System for Officers

2017

Introduction of stock option program
Revision of proportions of fixed remuneration and variable remuneration

Delegation of part ofthe decision-making
authority forexecution ofimportant operations
to the President andRepresentative
Director

Introduction of aperformancelinked stockcompensation
system2018

Aim tofurtherstrengthen
corporate
governanceTeruo Kiuchi

Ryuji Nishikawa

Takashi Mori

Kiichiro Oyama

Masakazu Toyoshima

17

Director and Managing Executive Officer

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

Executive
Committee

Revenue Management
Committee

ReportRisk Management
Committee

Head Office and Branches

Ernst & Young ShinNihon LLC

Ryohei Kagawa

Director and Managing Executive Officer

Directors not serving as Audit andSupervisory Committee Members
Board of Directors

Appointment/Dismissal

Accounting Auditors

Yujiro Ayada

Director and Managing Executive Officer

Number of
Independent Directors

Yes

Tomoki Watanabe

Director and Senior Managing Executive Officer(Representative Director)

15 (including 6 Audit andSupervisory Committee Members)

Adoption of
an Executive Officer System■ Board of Directors and Audit and Supervisory Committee Members (as of July 1, 2018)

President(Representative Director)

Number of Directors

Appointment/Dismissal

Supervisory Committee Members)

Self-assessment of the Board of Directors andresolving of issues

Chairman(Representative Director)

General Meeting of Shareholders

Company with Audit andSupervisory Committee

1 year (2 years for Audit andEnhancement of meetingbodies consisting mainly Expedited distribution of Board ofof Outside Officers
Directors’ meeting agenda in advance

Improvementof operationof the Boardof Directors

Institutional Design

Internal audit

Instruction

Accounts
audit

Auditing Division

Accounting
Auditors

Overview
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 LLC As Accounting Auditors, they conduct appropriate audits from an independent standpoint.
Board of Directors

Masanobu Satomi

Tadahiko Tamura

Hideki Kuwashiro

Michiyo Ihara

Kazuo Kobayashi

Junichi ItohDirector(Audit and Supervisory Committee Member)

Director and Senior Managing Executive Officer

Director and Managing Executive Officer

Compliance
Committee

Akihiko Fujimura

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

General Administration
Division

Human Resources Risk

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

Personnel Division

Tangible Asset Risk

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

General Administration
Division

Operations Supervision
Division

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

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

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

Risk Control Division

Risk Audit 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

2018

2017

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

¥ 706,534—
32,84455
4,795
1,030,970
2,833,526
6,997
18,831
76,41940,503
6,157
12,099845
22,661(16,181)¥4,777,061¥ 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$ 6,650,357—
309,149517
45,1339,704,160
26,670,990
65,860177,249
719,305
381,240
57,953
113,883
7,953
213,300(152,306)$44,964,806

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 of the General Administration Division exercises overall supervision of compliance issues,and implements centralized management of matters related tocompliance. Furthermore, officers with responsibility for compliance matters are designated in each division, office, and branch of
the Bank to ensure that the rules of compliance are observed andthat all staff are fully aware of issues concerned. Staff are also
required to confirm the compliance status of each business unit byfilling out a checklist, and seminars are held to keep staff up-todate and fully 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 Office of the General Administration Division
Instructions

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

2018

2017

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

¥3,957,552
96,268
11,66952,003
246,615
241
62,353
39
185
39
395
98
41
17,644
5,643
22,661
4,473,454¥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$37,251,054
906,137
109,836
489,486
2,321,300
2,268
586,907
367
1,741
367
3,717
922
385
166,076
53,115
213,300
42,107,059

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

37,322
26,332160,985(6,220)218,420351,298
286,9541,547,053(19,728)
2,165,587

49,722
(39)
8,741
4,984
63,408124
10,000303,606¥4,777,061

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

468,015(367)
82,275
46,912596,837
1,167
94,1262,857,737$44,964,806
U.S. dollars(Note 1)
2018

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 6, 10 and 11)
Loans and bills discounted (Notes 9 and 12)
Foreign exchange assets (Note 9)
Lease receivables and lease investment assets
Other assets (Note 11)
Tangible fixed assets (Notes 14 and 15)
Intangible fixed assets
Net defined benefit asset
Deferred tax assets
Customers’ liabilities for acceptances and guarantees
Reserve for possible loan losses
Total assets

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 (Note 11)
Negotiable certificates of deposit
Call money and bills soldPayables under securities lending transactions (Note 11)
Borrowed money (Notes 11 and 32)
Foreign exchange liabilities
Other liabilities
Reserve for bonuses for directors and corporate auditors
Net defined benefit liability
Reserve for retirement benefits for directors and corporate auditors
Reserve for claims on dormant accounts
Reserve for contingent liabilities
Reserve for stock-based compensation plan
Deferred tax liabilities
Deferred tax liability for land revaluation (Note 15)
Acceptance and guarantees
Total liabilities
Net assets :Stockholders’ equity:
Common stock
Capital surplus
Retained earnings
Treasury stock
Total stockholders’ equity
Accumulated other comprehensive income:Net unrealized gains on other securities, net of taxes
Net deferred losses on hedging instruments, net of taxes
Revaluation reserve for land (Note 15)
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Share subscription rights
Non-controlling interests
Total net assets
Total liabilities and net assets

Yen
As of March 31

2018

2017

Per share
Net assets¥994.85¥937.15$9.364

See accompanying notes to consolidated financial statements.

22

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Consolidated Statements of Income

Consolidated Statements of Changes in Net Assets
Millions of yen

For the years ended March 31

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

2017

2018

¥31,481
15,744846
11,644
7,565
13,60580,890¥31,978
15,848497
11,184
18,636
12,40690,552$296,319
148,192
7,963
109,600
71,206
128,059
761,389

2,150
566
126
3,012
3,492
8,285
39,2998,842
65,775
15,114

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

20,2375,327
1,185
28,35032,86877,983369,907
83,226619,117
142,262

5,145
3,050
8,196
10,7001,054¥ 9,645

3,720
807
4,528
10,586359¥10,227

Millions of yen
Stockholders’ equity

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

35,015
7,596
42,62099,642
3,379$ 96,263

For the years ended March 31
Balance as of March 31, 20162017

Per share
Basic earnings¥34.64¥32.61Dividends from surplus
Profit attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Retirement of treasury stock
Change in ownership interest of parent due totransactions with non-controlling interests
Provision for revaluation reserve for land
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
Dividends from surplus
Profit attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Retirement of treasury stock
Change in ownership interest of parent due totransactions with non-controlling interests
Provision for revaluation reserve for land
Transfer from revaluation reserve for land
Net changes in items other than stockholders’equityTotal changes in items during the period

Totalshareholders’equity¥37,322¥24,920¥153,335¥(6,179)¥209,398

—
—
—
—
—

—
—
—
—
—

(2,367)
9,645
—
(32)
—

—
—
(387)
346
—

(2,367)
9,645
(387)
314
—

—

1,412

—

—

1,412

—
—

—
—

—
404

—
—

—
404

—

—

—

—

—

—
¥37,322

1,412¥26,332

7,650¥160,985(40)¥(6,220)

9,021¥218,420

—
—
—
—
—

—
—
—
—
—

(2,364)
10,227(10)(4,293)

—
—
(232)
63
4,293

(2,364)
10,227
(232)
52
—

—

4,153

—

—

4,153

—
—

—
—

(184)
—

—
—

(184)
—

—

—

—

—

—

—
¥37,322

4,153¥30,486

3,374¥164,359

4,124¥(2,096)

11,652¥230,072$0.326

For the years ended March 31
Balance as of March 31, 2016

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¥54,256¥(7,806)¥8,961¥(1,171)¥54,239¥201¥18,190¥282,030

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

(2,367)
9,645
(387)
314
—

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

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

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

(2,364)
10,227
(232)
52
—

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

4,153
(184)
—

709
709
¥49,722

1,191
1,191
¥ (39)

184
184¥8,741

2,844
2,844¥ 4,984

4,930
4,930
¥63,408

(18)
(18)
¥124

(6,087)(6,087)¥10,000(1,175)
10,476¥303,606

Changes in items during the period

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Dividends from surplus

Consolidated Statements of Comprehensive Income

Profit attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock

Millions of yen
For the years ended March 31

2018

2017

ProfitOther comprehensive income (Note 21)
Net unrealized gains (losses) on other securities, net of taxes
Net deferred gains on hedging instruments, net of taxes
Remeasurements of defined benefit plans
Total comprehensive income
Total comprehensive income attributable to:
Owners of parent
Non-controlling interests¥10,586
4,562
525
1,191
2,844
15,148¥10,700
4,685(5,201)
6,575
3,311
15,385¥14,973
175¥14,289
1,096

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

$ 99,642
42,940
4,941
11,21026,769142,582$140,935
1,647

Retirement of treasury stock
Change in ownership interest of parent due totransactions with non-controlling interests
Provision for revaluation reserve for land
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
Changes in items during the period
Dividends from surplus
Profit attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Retirement of treasury stock
Change in ownership interest of parent due totransactions with non-controlling interests
Provision for revaluation reserve for land
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, 201823

Treasury stock

Changes in items during the period

See accompanying notes to consolidated financial statements.

See accompanying notes to consolidated financial statements.

Retainedearnings

U.S. dollars(Note 1)
2018

Yen
2018

Capitalsurplus

Changes in items during the period

Balance as of March 31, 2018

For the years ended March 31

Commonstock

24

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

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

Consolidated Statements of Changes in Net Assets

Thousands of U.S. dollars (Note 1)

Millions of yen

Stockholders’ equity
For the years ended March 31

CapitalsurplusRetainedearnings

Balance as of March 31, 2017

$351,298$247,853$1,515,295

Retirement of treasury stock

—
—
—
—
—

—
—
—
—
—

(22,251)
96,263—(94)(40,408)——(2,183)592
40,408(22,251)
96,263(2,183)489—

Change in ownership interest of parent due totransactions with non-controlling interests—

39,090——39,090

Provision for revaluation reserve for land
Transfer from revaluation reserve for land

—
—

—
—

(1,731)———(1,731)—

Net changes in items other than stockholders’equity

—

—

—

—

—

—
$351,298

39,090$286,954

31,758$1,547,053

Treasury stock

For the years ended March 31

Total
shareholders’equityCommonstock$(58,546) $2,055,911

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

Total changes in items during the period
Balance as of March 31, 2018

38,817
109,676$(19,728) $2,165,587

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, 2017

$461,332$(11,586)

Retirement of treasury stock

—
—
—
—
—

Change in ownership interest of parent due totransactions with non-controlling interests
Provision for revaluation reserve for landRemeasurementsof defined benefit
plans

Total
accumulated
othercomprehensive
incomeSharesubscription
rights

Noncontrollinginterests

Total net
assets$80,544$20,133$550,432$1,336$151,421$2,759,120

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

(22,251)
96,263(2,183)
489
—

—

—

—

—

—

—

—

39,090

—
—

—
—

—
—

—
—

—
—

—
—

—
—

(1,731)—

6,673

11,2101,731

26,76946,404(169)(57,294)(11,059)

6,673$468,015

11,210$ (367)

1,731$82,275

26,769$46,91246,404$596,837(169)$1,167

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

Transfer from revaluation reserve for land
Net changes in items other than stockholders’equityTotal changes in items during the period
Balance as of March 31, 2018

See accompanying notes to consolidated financial statements.

(57,294)
98,606$ 94,126 $2,857,737

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

2018

¥

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

2017

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

15,114
2,857
151
(308)
6
(906)
13
(6)
(21)
(18)
41
(48,073)
5,855
(674)
—
7,583
(40)
(14)
(56,971)(55,579)(50,961)
40,503
6,161(3,364)(40,012)(66,775)(3,313)95(1,790)47,823(6,061)(18,682)(227,368)(5,678)(233,047)¥ 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$(1,106,238)
1,189,836
318,510(920)(2,353)
279—
399,114(1,130,677)
853,192
232,780(1,335)(1,997)505
1(47,530)(10,412,631)
11,199,510
2,998,023(8,659)(22,147)
2,626—
3,756,720

142,262
26,891
1,421(2,899)56(8,527)
122
(56)
(197)
(169)
385
(452,494)
55,111(6,344)—
71,376(376)(131)(536,248)(523,145)(479,678)
381,240
57,991(31,664)(376,618)(628,529)(31,184)894(16,848)
450,141(57,050)(175,847)(2,140,135)(53,445)(2,193,589)

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——(1,568)24(2,364)(380)(1,000)(10,000)(430)
203(2,367)(382)——(14,759)225(22,251)(3,576)(393)(4,681)(1,362)(15,339)(3,699)(44,060)

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)(3)
161,382
505,802667,185(1)
134,668
371,134¥ 505,802(28)
1,519,032
4,760,937$ 6,279,979¥

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. (hereinafter the “Bank”) and its consolidated subsidiaries (hereinaftercollectively the “Group”) are prepared on the basis of accounting principles
generally accepted in Japan, which are different in certain respects as to theapplication and disclosure requirements of International Financial ReportingStandards, and are compiled from the consolidated financial statements
prepared by the Bank as required by the Financial Instruments and Exchange Act
of Japan.
The Japanese yen figures in the consolidated financial statements are in
millions, with fractions omitted.
The translation of the Japanese yen amounts into U.S. dollars is included
solely for the convenience of the reader, using the prevailing exchange rate at
March 31, 2018, which was ¥106.24 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, 2018.
Shikoku Alliance Capital Co., ltd. is an affiliate not accounted for by theequity method. Affiliated companies not accounted for by the equity method are
excluded from the scope of the equity method because the Bank’s interests intheir respective amounts of net profits or losses, retained earnings or otheraccumulated comprehensive income do not have a material impact on the
consolidated financial statements.
(2) Trading account securities
Under the Accounting Standards for Financial Instruments, trading accountsecurities are stated at fair value (cost of sales is calculated by the movingaverage cost method).
(3) Securities
Marketable debt securities held to maturity are stated at amortized cost using
the moving-average cost method. Investments in non-consolidated subsidiaries
not accounted for by the equity method are stated at cost by the moving-average
cost method. Available-for-sale securities of which market prices are available
are stated at fair value based principally on their market prices at the balancesheet date (cost of sales is calculated by the moving-average cost method),whereas those for which the market value is not readily determinable are statedat 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 Standards for Financial Instruments, derivatives arestated 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 ¥10,931 million ($102,889 thousand) and ¥12,685 million for the fiscal
years ended March 31, 2018 and 2017, 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) Reserve for stock-based compensation plan
A provision is made in relation to the BIP Trust from the fiscal year ended March
31, 2018. In order to provide for the delivery of the Bank’s shares from the BIP
Trust, a provision is made for an estimated amount of benefits corresponding to
the number of points allotted to directors in accordance with BIP Trust’s sharedelivery rules.

(12) Accounting method for retirement benefits
To calculate retirement benefit obligations, the Bank used the benefit formula asa method for attributing estimated retirement benefits over the period until
March 31, 2018. The amortization method for prior service costs and actuarial
differences is as follows:
Prior Service Costs:
Prior service costs are charged fully to income at the time of occurrence.
Actuarial Differences:
Actuarial differences of the plans are to be amortized from the fiscal year
following their occurrence by the straight-line method over a fixed period of 10
years, which is within the average remaining service period of the employees at
the time of occurrence in each fiscal year.
In calculating net defined benefit liability and retirement benefit costs, someconsolidated subsidiaries apply a simplified method that provides theirretirement benefit obligation at an amount to be paid for voluntary termination
at the balance sheet date.
(13) Foreign currency translation
Receivables and payables in foreign currencies are translated into Japanese yen
primarily at the year-end rates.
(14) Accounting standards for posting of earnings and expenses
Consolidated subsidiaries engaged in the leasing business post income andexpenses relating to lease transactions as “Other income” and “Other expenses,”
respectively, at the time of receipt of lease charges.
(15) Hedge accounting(a) Hedges against interest rate fluctuations
The Bank applies the deferred hedge accounting method to interest rate swaps
used to hedge interest rate risk on certain financial assets when the critical termsof the underlying hedged items and hedging instruments match.
Hedge effectiveness is evaluated in accordance with risk management
procedures by designating hedges, managing the hedging instruments andhedged items integrally and verifying whether the hedged interest rate risk on
the hedged items is offset by the hedging instrument.
(b) Hedging against currency fluctuations
The Bank applies the deferred hedge accounting stipulated in the basic
provisions of JICPA Industry Audit Committee Report No. 25 issued on July29, 2002 to currency swap and foreign exchange swap transactions executed forthe purpose of lending or borrowing funds in different currencies.
Pursuant to JICPA Industry Audit Committee Report No. 25, the Bank
assesses the effectiveness of currency swap and foreign exchange swap
transactions executed for the purpose of offsetting the risk of changes incurrency exchange rates by verifying that there are foreign currency monetaryclaims and debts corresponding to the foreign-currency positions.
(16) Statements of cash flows
The reconciliations between cash and due from banks in the consolidatedbalance sheets and cash and cash equivalents in the consolidated statements ofcash flows are as follows:

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

Thousandsof U.S.
Millions of yen
dollars
2017
2018
2018
¥706,534 ¥551,313 $6,650,357(39,042)(44,542)(367,488)

(239)

(284)

(2,249)

(683)
(67)
(630)
¥667,185 ¥505,802 $6,279,979(17) Consumption taxes
In the accounting treatment of the Bank and its domestic consolidated
subsidiaries, the National Consumption Tax and the Local Consumption Tax are
excluded from the transaction amounts.

4. Additional information(Employee Stock Ownership Plan (ESOP) Trust)As a benefit package for employees, the Bank conducts transactions that deliver
the Bank’s own stock to the employee shareholding association through a trust.
In addition, the trust period reached maturity and ended in July 2017.
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 nil and ¥23 million as of March 31, 2018and 2017, 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 nil and 65 thousand as of March 31,2018 and 2017, respectively. The average number of shares during the year
was 4 thousand and 348 thousand for the fiscal years ended March 31, 2018and 2017, 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.
(Board Incentive Plan (BIP) Trust)
The Bank has introduced a BIP Trust for directors (excluding directors serving
as audit and supervisory committee members, outside directors and nonresidents of Japan; hereinafter collectively referred to as the “Bank’s directors”).
1. Transaction overview
The BIP Trust is a stock incentive plan for directors, aimed at further raising
motivation to contribute to the medium- to long-term improvement of businessperformance and enhance the Bank’s corporate value. Under the plan, a certain
number of points are granted to the Bank’s directors based on their ranks andthe level of achievement of performance targets, and the Bank’s sharescorresponding to the aggregate number of points or money equivalent to thevalue of the Bank’s shares are granted or delivered to the Bank’s directors upon
their retirement.
2. Accounting treatment for transactions delivering the Company’s own stock
through the trust
The Bank applies the “Practical Solution on Transactions of Delivering theCompany’s Own Stock to Employees, etc., through Trusts” (ASBJ PITF No. 30,
March 26, 2015).
3. Matters relating to the Bank’s shares held by the trust(1) The book value of the shares held by the trust was ¥226 million ($2,127
thousand) as of March 31, 2018.
(2) The Bank’s shares held by the trust have been recorded as treasury stock instockholders’ equity.
(3) The number of shares at year-end and the average number of shares during
the year were 611 thousand and 356 thousand, respectively, for the fiscal
year ended March 31, 2018.
(4) The number of shares at year-end and the average number of shares during
the year in (3) above are included in the number of treasury stock to be
deducted in the calculation of per share information.

28

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements
5. Changes in net assets

2018(1) Type and number of shares issued and treasury shares are as follows:
Thousands of shares
Increase
Decrease

March 31, 20172018
Shares issued
Common stock (Note 1) ..............................................................
310,076
Total ......................................................................................
310,076
Treasury stock
Common stock (Notes 2, 3, 4 and 5) ...............................................
14,608
Total ......................................................................................
14,608March 31, 2018——

10,076
10,076300,000
300,000

625
625

10,233
10,233

5,000
5,000

Notes: 1. The 10,076 thousand share decrease in the number of shares issued is due to the retirement of treasury stock.
2. The number of shares of common stock at the beginning of the fiscal year ended March 31, 2018 includes 65 thousand shares of the Bank’s shares held by the Employee Stock Ownership
Plan (ESOP) Trust.
3. The number of shares of common stock at the end of the fiscal year ended March 31, 2018 includes 611 thousand shares of the Bank’s shares held by the Board Incentive Plan (BIP)
Trust.
4. The 625 thousand share increase in the number of common shares of treasury stock consists of a 611 thousand share increase due to a share acquisition by the BIP Trust and a 14
thousand share increase due to a purchase demand for fractional shares from shareholders.
5. The 10,233 thousand share decrease in the number of common shares of treasury stock consists of a 10,076 thousand share decrease due to retirement of treasury stock, a 65 thousand
share decrease due to the termination of ESOP Trust and a 92 thousand share decrease due to the exercise of share subscription rights.

Thousands of shares
Increase
Decrease

2017
March 31, 2016
Shares issued
Common stock .........................................................................
310,076
Total ......................................................................................
310,076
Treasury stock
Common stock(Notes 1, 2 and 3) ...................................................
14,487
Total ......................................................................................
14,487

March 31, 2017

—
—

—
—

310,076
310,076

1,015
1,015

894
894

14,60814,608Notes: 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.

(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, 2018 and 2017 stood at ¥124 million ($1,167 thousand) and ¥142 million, respectively.
At end of the previous and current fiscal years, no shares had been earmarked for share subscription rights.
(3) Information on dividends(a) Dividends paid

Type of share
CommonJune 29, 2017 (Regular Annual General Meeting of Shareholders) ...........
stock
CommonNovember 10, 2017 (Meeting of the Board of Directors) ......................
stock

Total dividend
amount(Millions of yen)

Dividend
per share(Yen)¥1,182

¥4.0

1,182

4.0

Record date
Effective date
March 31,
June 30,20172017
September 30, December 8,
2017
2017

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

29

June 29, 2017 (Regular Annual General Meeting of Shareholders) ........
November 10, 2017 (Meeting of the Board of Directors) ...................

Total dividend
amount(Millions of yen)

Dividend
per share(Yen)¥1,184

¥4.0

1,186

4.0

Effective dateJune 30,
2016
December 9,
2016$11,125$0.037

11,125

0.037

Record date
Effective date
March 31,
June 30,20172017
September 30, December 8,
2017
2017

(b) Dividends paid after the balance-sheet date2018
Total dividend
amountSource of
Resolution
Type of share (Millions of yen) dividends
CommonRetained
June 28, 2018 (Regular Annual General Meeting of Shareholders) ...........
stock¥1,182
earnings

Dividend
per share
(Yen)
¥4.0

Record date Effective date
March 31,
June 29,
2018
2018

2017
Total dividend
amountResolution
Type of share (Millions of yen)
CommonJune 29, 2017 (Regular Annual General Meeting of Shareholders) ...........
stock¥1,182

Source ofdividends
Retainedearnings

Dividend
per share
(Yen)
¥4.0

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

2018
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 29,
June 28, 2018 (Regular Annual General Meeting of Shareholders) ...........
stock$11,125
earnings$0.0372018
2018
Note: The total dividend amount includes the ¥2 million ($18 thousand) dividends for the Board Incentive Plan (BIP) Trust.

(1) Total amount of investments in affiliates
The total amount of investments in affiliates as of March 31, 2018 was ¥25
million ($235 thousand). There were no investments in affiliates as of March 31,
2017.
(2) Trading account securities
A valuation loss of ¥(0) million ($(0) thousand) and gain of ¥0 million wererecognized for the fiscal years ended March 31, 2018 and 2017, respectively.
(3) Held-to-maturity debt securities
Not applicable.

Record date
March 31,2016
September 30,
2016

Type of share
Commonstock
Commonstock

Dividend
per share(U.S. dollars)Note: In accordance with a resolution approved at the Bank’s Regular Annual General Meeting of Shareholders held on June 29, 2017 and June 29, 2016, the total amount of dividends paid
includes the ¥0 million ($0 thousand) and ¥2 million dividend payment to the Employee Stock Ownership Plan (ESOP) Trust, respectively. Moreover, the total amount of dividends paid
includes the ¥2 million ($18 thousand) dividend payment to the Board Incentive Plan (BIP) Trust and the ¥1 million dividend payment to the ESOP Trust pursuant to the resolutions
approved by the Board of Directors at meetings held on November 10, 2017 and November 11, 2016, respectively.
These exclusions reflect the Bank’s classification of the shares held by the Trust as treasury stock.

6. Securities and trading account securities

2018
Resolution

Resolution

Total dividend
amount(Thousands of
U.S. dollars)(4) Other securities(a) Consolidated balance sheet amount and acquisition cost of other securities
and their difference as of March 31, 2018 and 2017 were as follows:

Millions of yen
Consolidatedbalance sheet Acquisition
amountcost
Difference

2018
Consolidated balance sheet
amount exceedingacquisition cost
Equity stock ..................... ¥ 135,228
Bonds:
National .......................
244,572
Local ...........................
54,411
Corporate.....................
157,764
456,748
Other ..........................
111,401
Subtotal .......................
703,378
Consolidated balance sheet
amount not exceedingacquisition cost
Equity stock .....................
14,708
Bonds:
Local ...........................
9,907
Corporate.....................
38,171
48,078Other ..........................
260,972
Subtotal .......................
323,759
Total .................................... ¥1,027,137¥ 58,236¥76,991

241,290
53,290156,968
451,549
109,403619,189

3,282
1,120
796
5,199
1,998
84,18918,682(3,973)

9,975
38,41048,385
269,658
336,726¥955,915

(68)
(239)
(307)
(8,685)(12,966)¥71,22230

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements

Millions of yen
Consolidatedbalance sheet Acquisition
amountcost
Difference

2017
Consolidated balance sheet
amount exceedingacquisition cost
Equity stock ..................... ¥Bonds:
National .......................
Local ...........................
Corporate.....................

136,871 ¥

62,448¥ 74,422

345,273
105,573
218,731669,578
166,268
972,717

338,529
103,559
217,275
659,364
162,853884,665

6,744
2,013
1,455
10,214
3,414
88,051

12,005

16,065(4,059)60,76962,19952,14352,59657,25057,722
170,163
172,518
Other ..........................
286,811
297,987
Subtotal .......................
468,980
486,571
Total .................................... ¥1,441,698 ¥1,371,237(1,430)(453)(471)(2,354)(11,175)(17,590)¥ 70,461

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

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

2018
Consolidated balance sheet
amount exceedingacquisition cost
Equity stock ..................... $1,272,853 $ 548,155
Bonds:
National ....................... 2,302,070 2,271,178
Local ...........................
512,151
501,600
Corporate..................... 1,484,977 1,477,484
4,299,209 4,250,272
Other .......................... 1,048,578 1,029,772
Subtotal ....................... 6,620,651 5,828,209
Consolidated balance sheet
amount not exceedingacquisition cost
Equity stock .....................
138,441
175,847
Bonds:
Local ...........................
93,251
93,891
Corporate.....................
359,290
361,539452,541455,431
Other .......................... 2,456,438 2,538,196
Subtotal ....................... 3,047,430 3,169,484
Total .................................... $9,668,081 $8,997,693$ 724,689
30,892
10,542
7,492
48,93618,806
792,441

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

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

Thousands of U.S. dollars
Proceeds
Gains onLosses on
from sale
sale
sale
2018
Equity stock ........................... $54,367$38,864$—
Bonds:
National .......................... 5,229,847
22,96622,825
Local .............................. 3,039,655
10,7581,628
Corporate........................ 1,186,116
3,454
828
9,455,638
37,18925,291Other ................................... 1,727,964
8,273
51,807
Total .................................... $11,237,970$84,327$77,099(5) Impairment losses on securities
Securities with fair values that have fallen significantly below their acquisition
cost and whose fair values are not expected to recover are recorded at fair valueon the consolidated balance sheet with the valuation differences expensed on the
consolidated statements of income (“impairment loss”).
No impairment losses were recorded in the fiscal years ended March 31,2018 and 2017.
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).

7. Matters relating to money held in trust(37,396)(640)(2,249)(2,889)(81,748)(122,044)$ 670,387(b) Gains and losses on sale of securities available for sale for the fiscal years
ended March 31, 2018 and 2017 are as follows:
Millions of yen
Proceeds
Gains onLosses on
from sale
sale
sale
2018
Equity stock ........................... ¥5,776¥4,129¥ —Bonds:
National ..........................
555,619
2,440
2,425
Local ..............................
322,933
1,143
173
Corporate........................
126,013367
881,004,567
3,951
2,687
Other ...................................
183,579879
5,504
Total .................................... ¥1,193,922¥8,959¥8,19131

2017
Equity stock ...........................
Bonds:
National ..........................
Local ..............................
Corporate........................

Proceeds
from sale¥ 6,666

Money held in trust classified as held for trading purposes
The amount on the consolidated balance sheet as of March 31, 2018 and 2017
were ¥4,795 million ($45,133 thousand) and ¥4,795 million, respectively.

8. Net unrealized gains on securities available for sale

9. Loans and bills discounted

Loans and bills discounted as of March 31, 2018 and 2017 included thefollowing non-performing amounts:

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

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

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

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 ...................

49,722

49,196

468,015

—

(183)

—

—

—

—

¥ 49,722¥ 49,012$ 468,015

Millions of yen
2017
2018
¥20,791¥23,246

Thousands of
U.S. dollars
2018$218,806

10. Guarantee obligations

Guarantee obligations for bonds in private placement (defined in Article 2,
Paragraph 3 of the Financial Instruments and Exchange Act of Japan) included incorporate bonds under “Securities” in the consolidated balance sheets were
¥15,558 million ($146,442 thousand) and ¥13,775 million as of March 31,2018 and 2017, respectively.

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, 2018 and 2017 was as follows:
Thousands ofMillions of yen
U.S. dollars
2017
2018
2018
Unused commitments ............... ¥1,037,364 ¥993,008 $9,764,344
Contracts with less than a yearof contract period orcontacts that are cancellable
unconditionally any time ...
934,278 9,198,155
977,212Since many of these commitments are expected to expire without being drawn
upon, the total amount of unused commitments does not necessarily have effecton the future cash flow of the Group. Many of these commitments have clausesthat allow the Group to refuse an application from customers or reduce the limit
amount with proper reasons (e.g. changes in financial situation, to secure claims,etc.). In addition, the Group may request the customers to pledge collateralsuch as real estate and securities at the time of the contracts if necessary and takenecessary measures periodically based on a prescribed internal procedure after
conclusion of contracts such as monitoring customers’ business status, revising
contracts and securing claims.

13. Income taxes(1) Deferred tax assets
Major components of deferred tax assets as of March 31, 2018 and 2017 wereas follows:

11. Assets pledged as collateral

Assets pledged as collateral as of March 31, 2018 and 2017 consisted of thefollowing:
Millions of yen
2017
2018
Assets pledged as collateral:
Securities.........................
Liabilities corresponding to assets
pledged as collateral:
Deposits ..........................
Payables under securities
lending transactions .........
Borrowed money ...............

¥317,995

Thousands of
U.S. dollars
2018¥357,281 $2,993,175

15,54521,319146,31952,003
219,613

118,779
179,024

489,486
2,067,140

In addition to the assets presented above, the following assets were pledged ascollateral for exchange clearance transactions and futures contracts at March
31, 2018 and 2017:

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

Thousands ofMillions of yen
U.S. dollars
2017
2018
2018
¥ 71,222 ¥ 70,461 $ 670,387
70,461
71,222
670,387———(21,264) (202,362)(21,499)

Thousands ofMillions of yen
U.S. dollars
2017
2018
2018
¥ 986 $ 10,673¥ 1,134
26,12323,864
224,623
283
567
5,336
23,89423,854
224,529¥51,288 $465,173¥49,420

12. Commitment line agreements on overdrafts andloans

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

Thousands ofMillions of yen
U.S. dollars
2017
2018
2018
¥30,802 $ 60,777¥ 6,457
7,000
29,000272,966

Millions of yen
2017
2018
Excess reserve for possible loan
losses.................................
Valuation loss on securities
available for sale ...................
Excess depreciation ..................
Reserve for bonuses..................
Net defined benefit liability.........
Net deferred losses on hedging
instruments, net of taxes .........
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
2018¥ 6,918¥ 7,410$ 65,116

3,941
940
480
212

5,347
1,033
481
1,570

37,095
8,847
4,518
1,995

131
2,433
15,058(6,160)
8,898

678
2,438
18,961(6,042)
12,9191,233
22,900141,735(57,981)
83,753(25,441)(26,612)(239,467)

(141)

(141)

(1,327)(113)¥(16,798)(140)(1,063)¥(13,975) $(158,113)

As of March 31, 2018 and 2017, in addition to the items presented above, otherassets included cash collateral paid for financial instruments of ¥5,660 million($53,275 thousand) and ¥3,091 million, and guarantees and household depositsof ¥1,186 million ($11,163 thousand) and ¥1,195 million, respectively.

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, 2018 and 2017.
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 ......................
Other ..................................................
Effective income tax rate under tax-effectaccounting ............................................

2018
30.6%

2017
30.6%

0.5

0.5

(1.7)
0.4
0.8
(0.7)

(1.1)
0.3
13.1
(0.1)

29.9%

43.3%

14. Accumulated depreciation and reduction entry

Accumulated depreciation of tangible fixed assets as of March 31, 2018 and2017 amounted to ¥36,616 million ($344,653 thousand) and ¥37,019 million,
respectively.
Reduction entry, which is deferred gain on tangible fixed assets deductible
for tax purposes, amounted to ¥2,401 million ($22,599 thousand) and ¥2,436
million as of March 31, 2018 and 2017, respectively.

15. 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, 2018 and 2017, the difference between the carrying
amount and the fair value of the revalued land was ¥15,334 million ($144,333
thousand) and ¥15,579 million, respectively.

16. Asset retirement obligations

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

17. Investment and rental property

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

18. Other income

Other income consists of the following.

Lease revenue .........................
Gain on sale of equity securities ...
Gain on bad debts recovered .......

Thousands ofMillions of yen
U.S. dollars
2017
2018
2018
¥6,460¥6,524$61,408
2,644
4,129
38,864
1,175
775
7,294

19. General and administrative expenses

Salaries and allowances were included in general and administrative expenses,
which amounted to ¥15,742 million ($148,173 thousand) and ¥15,749 million
for the years ended March 31, 2018 and 2017, respectively.

20. Other expenses(1) Other expenses consist of the following.

Cost of lease ...........................
Loan write-offs .......................
Provision for reserve for possible
loan losses..............................

33

Thousands ofMillions of yen
U.S. dollars
2017
2018
2018
¥5,342¥5,380$50,6402,819
2,450
23,060476—(2) Impairment losses
During the years ended March 31, 2018 and 2017, the Bank recorded
impairment losses on fixed assets as described below:

4,480

Kagawa Pref ... Idle assets
Land,(2018: 17 items buildings
2017: 13 items) andmovablesOther ........... Idle assetsLand,
and/or assets buildings
for business use and/or(2018: 7 items movables,
2017: 4 items) etc.
Total ............

Millions of yen
Impairment losses
2017
2018
¥178
¥ 53
land: 166
land: 38
buildings: 10
buildings: 12
movables: 0
movables: 1
¥ 97

¥ 70

land: 86

land: 53

buildings: 10

buildings: 13

movables: 0¥151
land: 125
buildings: 23
movables: 1

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

Thousands of
U.S. dollars
Impairment
losses2018
Kagawa Pref ... Idle assets
Land,
$ 498
(2018: 17 items) buildings
land: 357
andmovables buildings: 112
movables: 9
Other ........... Idle assets
Land,
$ 913
and/or assets buildings
land: 809
for business use and/or(2018: 7 items) movables, buildings: 94
etc.
movables: 0
Total ............
$1,421
land: 1,176
buildings: 216
movables: 9
The Bank posted impairment losses of ¥151 million ($1,421 thousand) and¥248 million, respectively, during the fiscal years ended March 31, 2018 and2017 on land, buildings and/or movables, etc. due to continuous declines inland prices. The Bank reduced the carrying amounts of the corresponding assets
to the recoverable amounts, and recorded the difference between the carrying
amount and 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.
For the fiscal year ended March 31, 2018, the recoverable amounts aremeasured using net selling prices, which are calculated on the basis of appraisal
values of land or the amounts computed using the method laid down by the
National Tax Agency of Japan for calculation of land prices (used as the basis forcomputing taxable amounts as set forth in Article 16 of the Land Tax Law) after
deducting estimated costs of disposal.
For the fiscal year ended March 31, 2017, the recoverable amounts aremeasured using the higher of either the net selling prices or value in use. Net
selling prices are calculated on the basis of appraisal values of land or theamounts computed using the method laid down by the National Tax Agency ofJapan for calculation of land prices (used as the basis 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 by discounting thefuture cash flow at a discount rate of 0.6% for the fiscal year ended March 31,
2017.

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

21. Matters relating to consolidated statements ofcomprehensive income

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

The amount of recycling and amount of income tax effects associated with othercomprehensive income (loss):
Thousands of
U.S. dollars
2018

Millions of yen
2017
2018
Net unrealized gains (losses) onother securities, net of taxes:
Amount recognized during theyear ...............................
Amount of recycling ..............
Prior to income tax effect.....
Income tax effect ...............
Net unrealized gains (losses)
on other securities, net oftaxes ...........................
Net deferred gains on hedging
instruments, net of taxes:
Amount recognized during theyear ...............................
Amount of recycling ..............
Prior to income tax effect.....
Income tax effect ...............
Net deferred gains 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 ..............................

¥ 2,978(2,222)
755
(229)

¥ 440
(7,913)(7,472)
2,271$ 28,030(20,914)
7,106(2,155)525(5,201)

4,941

(161)
1,873
1,712
(520)

7,594
1,852
9,447
(2,871)(1,515)
17,62916,114(4,894)

1,191

6,575

11,210

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

3,303
784
4,087
(1,242)

3,885
872
4,757
(1,446)31,0897,379
38,469(11,690)

2,844

3,311

26,769¥ 4,562¥ 4,685$ 42,940

22. Finance leases

Information on finance leases for the fiscal years ended March 31, 2018 and2017 are as follows:
1. As lessee
Finance lease transactions that do not transfer ownership(1) Components of lease assets(a) Tangible fixed assets
Primarily consisting of ATMs(b) Intangible fixed assets
Not applicable.

Thousands ofMillions of yen
U.S. dollars
2017
2018
2018
¥16,860 $166,632¥17,703
1,908
2,218
20,877(1,957)(2,059)(19,380)¥16,812 $168,128¥17,862(2) Schedule for collection of lease receivables and receivables onlease investment assets by leasing contract maturity

2018
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¥256¥5,470
221
4,384
182
3,410
165
2,353
105
1,265
37
818

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

2018
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$2,409$51,487
2,080
41,265
1,713
32,097
1,553
22,147988
11,907348
7,699(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 in the previous
fiscal year compared with the amount posted in the Consolidated Statements ofIncome. However, there is no effect of this application in the fiscal year ended
March 31, 2018.

(2) Depreciation and amortization methods for lease assets
Depreciation and amortization methods for lease assets are described in “3.
Significant accounting policies (5) Depreciation”.

34

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements
23. Financial instruments

1. Disclosures related to financial instruments(1) Financial instrument policies
The Group provides banking services, including leasing and other financial
services. The Group limits risk within the scope of its business capacity, while
realizing profits commensurate with the risk of the financial instruments held.
To accomplish this goal, the Group quantifies, to the greatest extent possible,
various risks related to financial instruments using statistical methods. It
categorizes capital (risk capital) according to the size of the risk, engaging in“integrated risk management,” incorporating a capital allocation system thatmonitors risk versus return. The Group continues to improve efficiency in risk
management, ensuring greater stability and soundness for the business as awhole.
(2) Nature and extent of risks arising from financial instruments
The major types of financial assets held by the Group are loans and bills
discounted and securities. Loans and bills discounted are mainly for domestic
corporations and individuals, and are exposed to credit risk, interest rate risk,
and foreign exchange risk. If loans and bills discounted are concentrated
excessively on a particular corporate group or industry type, the Group’s
stockholders’ equity may suffer significant adverse effects. Therefore, the Group
has set maximum loan balances for each corporate group or industry type, andhas in place a system for monitoring compliance with these thresholds toprevent such an excessive concentration of risk.
Securities mainly consist of stocks, bonds, investment trusts and direct
investments. These investments are used as a pure investment vehicle or as partof a Group investment policy. 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.
Hedge accounting is applied as necessary for those derivative transactions
entered into for ALM purposes. For further information on hedging
instruments, hedged items, hedging policy and hedge effectiveness related tothe hedge accounting applied, see “3. Significant accounting policies (15) Hedge
accounting.”(3) Risk management for financial instruments(a) Credit risk management
The Group has compiled Credit Risk Management Rules and related
documents, and the Risk Management Committee (Credit Risk Management
Subcommittee) monitors and manages credit risk exposures.
In addition, the Risk Management Division acts as the credit risk managing
department for granting and verifying internal credit ratings, measures theamount of credit risk and sets and manages credit limits.
(b) Market risk management
The Group has established Market Risk Management Rules along with relevant
documentation, and the Risk Management Committee (Market Risk
Management Subcommittee) monitors market risk and maintains management
systems. The Revenue Management Committee (Budget ALM Subcommittee)
deliberates on the stability of medium and long-term profit in light of risk
circumstances.
Departments involved in the execution of market transactions (Treasury
and International Division) have been divided into front office (transaction
execution), back office (clerical), and middle office (market risk management)roles. This creates a system of internal checks and balances, with the Risk
Management Division in charge of managing overall market risk.

35(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.

The Liquidity Risk Management Department (Treasury and International
Division) performs daily and monthly cash projections to ensure proper andstable cash management based on the Group’s investment/acquisition structure,ensuring sufficient liquidity reserves. The Liquidity Risk Management
Department is also responsible for identifying, analyzing, assessing andmonitoring liquidity risk in consideration of internal and external factors that
may have an impact on said risk.

(ii) Foreign exchange risk management
The Group uses statistical methods to quantify and manage foreign exchangerisk. The Group also establishes and manages limits on positions and profits andlosses.

(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.

(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, 2018 (theconsolidated balance sheet date), the volume of the aforementioned risks offinancial instruments held for trading purposes (estimated amount of loss)
amounted to ¥6 million ($56 thousand) (compared with ¥12 million at theend of the previous fiscal year).
b. Financial instruments not held for trading purposes
In measuring the VaR of interest rate risks associated with loans and bills
discounted, investment securities, deposits, and interbank, interest rate
swap and related transactions, as well as the VaR for volatility risks associatedwith the prices of publicly listed company shares and investment trusts, etc.
the Group applies the historical simulation method with a holding period of
120 days, a confidence interval of 99% and an observation period of 1,200
business days.
In addition, in measuring the VaR of risks involving interest rates ofmoney held in trust, price volatility or exchange rates, the Group applies thehistorical simulation method with a holding period of 20 days, a confidence
interval of 99% and an observation period of 1,200 business days. The VaR
of financial instruments not held for trading purposes amounted to ¥43,336
million ($407,906 thousand) and ¥52,487 million as of March 31, 2018and 2017, respectively.
c. VaRThe Group uses back testing to compare the VaR computed by the models
and the hypothesized gain/loss (gain or loss assumed generated when theportfolio is fixed at the time of measuring the VaR) to verify the reliability ofthese measured models.
However, VaR determined using the historical simulation method is ameasure of the volume of market risk at a certain event probability
statistically computed utilizing changes in historical market data. In thiscontext, there are cases in which VaR cannot capture risk under sudden anddramatic changes in the market beyond normal circumstances. To
supplement the limitations of VaR, the Group conducts stress testing
periodically in addition to the management using VaR.
(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.

2. Fair value of financial instruments
The consolidated balance sheet amount, fair values and the differences as ofMarch 31, 2018 and 2017 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
2018(1) Cash and due from banks ....... ¥ 706,534 ¥ 706,534¥—(2) Call loans and bills bought ......
———(3) Monetary claims bought ........
32,84432,844—(4) Trading account securities ......
55
55—(5) Money held in trust ..............
4,795
4,795
—
(6) Securities
Other securities .................. 1,027,137 1,027,137—(7) Loans and bills discounted ...... 2,833,526
Reserve for possible loan
losses*1 ............................
(14,380)2,819,145 2,842,239
23,094
Total assets ............................ 4,590,513 4,613,607
23,094(1) Deposits ........................... 3,957,552 3,957,868
316(2) Negotiable certificates ofdeposit .............................
96,26896,271
2(3) Call money and bills sold .......
11,66911,669—(4) Payables under securities
lending transactions..............
52,00352,003—(5) Borrowed money.................
246,615
246,732
116
Total liabilities ........................ 4,364,109 4,364,545
435
Derivative Transactions*2
Not subject to hedge accounting
539
539
—
Subject to hedge accounting .....
3,308
3,308
—
Total Derivative Transactions ...... ¥3,847 ¥
3,847¥—

Millions of yen
Consolidatedbalance sheet
2017
amountFair value Difference(1) Cash and due from banks ....... ¥ 551,313 ¥ 551,313¥—(2) Call loans and bills bought ......
6,731
6,731
—
(3) Monetary claims bought ........
22,74822,748—(4) Trading account securities ......
41
41—(5) Money held in trust ..............
4,795
4,795
—
(6) Securities
Other securities .................. 1,441,698 1,441,698—(7) 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 ............................ 4,789,233 4,811,616
22,382(1) Deposits ........................... 4,013,132 4,013,491
359(2) Negotiable certificates ofdeposit .............................
147,229
147,2333(3) Call money and bills sold .......
51,682
51,682—(4) Payables under securities
lending transactions..............
118,779
118,779—(5) Borrowed money.................
206,111206,229
118
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)¥—
Thousands of U.S. dollars
Consolidatedbalance sheet
amountFair value Difference
2018(1) Cash and due from banks ....... $ 6,650,357 $ 6,650,357 $—(2) Call loans and bills bought ......
———(3) Monetary claims bought ........
309,149
309,149—(4) Trading account securities ......
517
517
—
(5) Money held in trust ..............
45,13345,133—(6) Securities
Other securities .................. 9,668,081 9,668,081—(7) Loans and bills discounted ...... 26,670,990
Reserve for possible loan
losses*1 ............................ (135,353)
26,535,626 26,753,002
217,375
Total assets ............................ 43,208,894 43,426,270
217,375(1) Deposits ........................... 37,251,054 37,254,028
2,974(2) Negotiable certificates ofdeposit .............................
906,137
906,16518(3) Call money and bills sold .......
109,836
109,836—(4) Payables under securities
lending transactions..............
489,486
489,486—(5) Borrowed money................. 2,321,300 2,322,402
1,091
Total liabilities ........................ 41,077,833 41,081,937
4,094
Derivative Transactions*2
Not subject to hedge accounting
5,073
5,073
—
Subject to hedge accounting .....
31,137
31,137—
Total Derivative Transactions ...... $36,210 $36,210 $—*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.

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) Monetary claims bought
Items with a short contract period are valued at book value, since the book value
approximates their fair value.
(4) Trading account securities
Corporate bonds and other available-for-sale securities are valued at market
prices and using an internal model.
(5) 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 “7.
Matters relating to money held in trust.”(6) Securities
Stocks and corporate bonds are valued at market prices. Investment trusts arevalued at their published base price. Private placement bonds guaranteed by theGroup are categorized according to internal credit rating and maturity, andvalued at fair value, discounting by a projected interest rate applicable when abond in the same total amount of principal and interest is issued.
See “6. Securities and trading account securities” for further information
about the securities by intent of holding.
(7) Loans and bills discounted
Loans and bills discounted are valued at present value in each category byinternal rating and maturity, discounting the total amount of principal andinterest by an assumed applicable interest rate when similar loans are made.
Loans to borrowers who are bankrupt, substantially bankrupt, or likely to
go bankrupt are valued net of the estimated uncollectible amount based on thecurrent value of estimated future cash flows, or the estimated collectible portion
based on the collateral or guarantee underlying the loan. As such, the balance ofthe loan on the consolidated balance sheet as of the last day of the fiscal period
less the current estimated uncollectible amount approximates the fair value.

For loans and bills discounted with no repayment deadline, due to theirnature, such as the limited range of pledged assets for said loans, their fair values
are valued at book value, because they are assumed to approximate the fairvalues due to expected repayment deadlines and interest rate conditions.
Liabilities(1) Deposits and (2) Negotiable certificates of deposit
The Group considers the fair value of demand deposits to be the payment (bookvalue) of the instrument as if demanded on the last day of the fiscal year. The fairvalue of time deposits is valued at present value in each category by specificdeposit term, discounting future cash flow by the interest rate used when
accepting new deposits. Since book value approximates fair value for items witha short deposit term, the book value shall be the fair value for these instruments.
(3) Call money and bills sold
Due to the short contract period of these instruments, the Group considers
their book value to approximate the fair value.
(4) 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.
Derivative Transactions
See “25. Derivative transactions” for further information about derivatives.
The following are financial instruments whose fair values are not readily
determinable as of March 31, 2018 and 2017. These are not included in the“Assets (6) Securities” section under fair value information for financial
instruments.

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

Thousands ofMillions of yen
U.S. dollars
Consolidated
Consolidated balance balance sheet
sheet amountamount
2017
2018
2018
¥2,721¥2,723$25,630373
1,108
10,429¥3,094¥3,832$36,069*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 ¥nil and ¥38 million impairment loss for unlisted equity stock forthe fiscal years ended March 31, 2018 and 2017, 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.

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 ...............................................................

2018
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
$ 6,280,365—
309,149

Over 1 year,
up to 3 years$———

1,376,562
400,978
112,603
688,478
174,491
10,385,316$18,351,411

2,652,381
1,254,706
181,494
557,021659,158
4,778,209$7,430,600

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

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$———

1,300,178
94,126
127,070
471,611607,3702,020,830$3,321,018

249,011—42,356
20,670185,975
4,213,761$4,462,772

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

1,489,203
517,695
9,412
60,128
901,967
2,921,018$4,410,231

619,041—
122,364
37,424459,252
1,806,391$2,425,442*Loans and bills discounted do not include ¥25,021 million ($235,513 thousand) and ¥27,147 million in loans to bankrupt, substantially bankrupt and likely to go bankrupt borrowers or otherloans of which repayment is not expected, or ¥32,924 million ($309,902 thousand) and ¥38,287 million in loans with no established maturity as of March 31, 2018 and 2017, respectively.

The redemption schedule of corporate bonds, borrowed money and other interest-bearing debt scheduled to be repaid subsequent to March 31, 2018 and 2017 is asfollows:

2018
Deposits* .........................................................
Negotiable certificates of deposit .............................
Call money and bills sold.......................................
Payables under securities lending transactions..............
Borrowed money ................................................
Total ...............................................................

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

Up to 1 year
¥3,750,627
96,086
11,66952,003
13,723¥3,924,110

Over 1 year,
up to 3 years¥198,980———
150,939¥349,919

Millions of yen
Over 3 years, Over 5 years,
up to 5 years
up to 7 years¥ 7,432
¥303
142
40
—
—
—
—
80,401
594¥87,975¥938

Over 7 years,
up to 10 years
¥208
—
—
—
693
¥902

Over 10 years
¥ —
—
—
—
262
¥262

Up to 1 year
¥3,763,518
146,526
51,682
118,779
48,068¥4,128,576

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¥1,132

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

Over 10 years
¥ —
—
—
—
400
¥400

Up to 1 year
$35,303,341
904,423
109,836
489,486
129,169$36,936,276

Over 1 year,
up to 3 years$1,872,929———
1,420,736$3,293,665

Thousands of U.S. dollars
Over 3 years, Over 5 years,
up to 5 years
up to 7 years$ 69,954$2,852
1,336
376
—
—
—
—
756,786
5,591$828,077$8,829Over 7 years,
up to 10 years$1,957———
6,522$8,490Over 10 years
$ —
—
—
—
2,466
$2,466

The redemption schedule and the corresponding estimated amounts of monetary claims and securities with maturities subsequent to March 31, 2018 and 2017 are as follows:2018
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 ...............................................................

37

Up to 1 year
¥ 667,226—
32,844

Over 1 year,
up to 3 years¥———

146,246
42,60011,96373,144
18,5381,103,336¥1,949,654

281,789
133,300
19,282
59,17870,029507,637¥789,427

Millions of yen
Over 3 years, Over 5 years,
up to 5 years
up to 7 years
¥
—
¥
—
—
—
—
—
158,21355,0001,000
6,388
95,825
310,329¥468,543

65,767—
13,0003,976
48,791
191,911¥257,679

Over 7 years,
up to 10 years¥———

Over 10 years¥———

138,131
10,00013,50050,10464,527
214,693¥352,825

26,455
—
4,500
2,196
19,758447,670¥474,1252018
Deposits* .........................................................
Negotiable certificates of deposit .............................
Call money and bills sold.......................................
Payables under securities lending transactions..............
Borrowed money ................................................
Total ...............................................................
*Among deposits, demand deposits are included in “Up to 1 year.”

38

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements
24. Accrued retirement benefits

Thousands of
U.S. dollars
2018

Millions of yen
2017
2018
¥52,614
1,484
482
409
(2,352)—¥52,587
1,514
482
(138)
(1,831)—$495,237
13,9684,536
3,849(22,138)—¥52,638¥52,614$495,463*Retirement benefit costs of domestic consolidated subsidiaries that apply the simplified
method are all recorded within “Service costs.”(b) Reconciliation of pension assets at beginning and end of period

For the 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
2018

Millions of yen
2017
2018
¥59,547¥54,468$560,495

673
3,712
2,081
(1,463)¥64,551

630
3,747
2,096
(1,394)¥59,547

6,334
34,93919,587(13,770)$607,596(c) Reconciliation of retirement benefit obligations and pension assets at end of period andnet defined benefit liability and net defined benefit asset recorded in the consolidatedbalance sheet

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

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

39

Thousands of
U.S. dollars
2018

Millions of yen
2017
2018
¥ 52,638(64,551)(11,913)—¥(11,913)¥ 52,614 $ 495,463(59,547) (607,596)(6,933) (112,132)
—

—

784
—

872
—

7,379
—

¥2,078¥2,238$19,559(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
2017
2018
2018
¥4,757¥4,087$38,469¥4,757¥4,087$38,469(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
2017
2018
2018
¥3,074¥7,161$67,403¥3,074¥7,161$67,403(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 .....................................................

¥(6,933) $(112,132)

2018
13%
54
24
9
100%

2017
13%
54
25
8
100%

Note: Total pension assets include retirement benefit trusts established for the
corporate pension plan (21.70% and 22.30 % as of March 31, 2018 and 2017,
respectively) and retirement benefit trusts established for the retirement
lump-sum payment plan (22.62% and 21.18% as of March 31, 2018 and 2017,
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¥(6,933) $(112,132)

Thousands ofMillions of yen
U.S. dollars
2017
2018
2018
¥ 171 $ 1,741¥
185(7,105) (113,883)(12,099)¥(11,913)

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
2017
2018
2018
¥1,514¥1,484$13,968
482
482
4,536
(630)
(673)
(6,334)*Retirement benefit costs of domestic consolidated subsidiaries that use the simplified
method are recorded in a lump-sum in “Service costs.”(2) Defined benefit plan(a) Reconciliation of retirement benefit obligations at beginning and end of period

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

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

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

2018
0.92%
2.00%
3.10%

2017
0.92%
2.00%
3.10%

1. Stock option expenses and accounts for the fiscal years ended
March 31, 2018 and 2017

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

Thousands ofMillions of yen
U.S. dollars
2017
2018
2018
¥39
¥9
$84

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
2015 stock options 2016 stock options
Category and number of grantrecipients ............................... The bank’s nine
The bank’s eight
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
Note: Converted to equivalent number of shares.

(2) Stock option size and changes(a) Number of stock options
2009 stock options 2010 stock options 2011 stock options 2012 stock options 2013 stock options 2014 stock options
Prior to vesting (shares):
Prior fiscal year end .................
Granted ................................
Expired ................................
Vested shares ..........................
Unvested shares ......................
After vesting (shares):
Prior fiscal year end .................
Vested shares ..........................
Exercised ..............................
Expired ................................
Unexercised...........................

16,700———16,70037,000——13,10023,90043,800——15,50028,30055,700——14,60041,10069,300——14,40054,90066,300——11,40054,900

—
—
—
—
—

—
13,10013,100———15,50015,500———14,60014,600———14,40014,400———11,40011,400——(3) Defined contribution pension plan
The required contribution to the defined contribution plans of consolidated
subsidiaries was ¥7 million ($65 thousand) and ¥7 million for the years ended
March 31, 2018 and 2017, respectively.

40

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements
Market prices of currency-related transactions as of March 31, 2018 and 2017
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 ............................

58,600——8,600
50,000137,700——
14,800122,900

—
8,600
8,600
—
—

—
14,80014,800——2018
Over the Counter
Currency swaps ......
Forward exchange
contracts:
Sell ...............
Buy ...............
Currency options:Sell ...............
Buy ...............
Total ...................

(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: ¥ — Per share: ¥374 Per share: ¥374 Per share: ¥374 Per share: ¥374 Per share: ¥374
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: ¥374 Per share: ¥374
Fair value on grant date .................. Per share: ¥409 Per share: ¥285

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

26. Derivative transactions(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.
(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, 2018 and2017 were as follows:

2018
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)¥20,465¥15,969

¥ 528

¥ 528

20,465

15,969

(350)

(350)

728
728

713
713

(0)
0
¥ 177

37
(9)
¥ 205

2017
Over the Counter
Interest-rate swaps:
Fixed ratereceivable/variable rate
payable ..........
Variable ratereceivable/fixed
rate payable.....
Others:Sell ..................
Buy ..................
Total ...................

2018
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

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

2017
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)¥309,233¥242,540

¥

48

¥

48

57,90538,022

4,133
4,015

566
(252)

566
(252)

275,481
275,481

196,027
196,027(11,447)
11,447
¥
362

1,677
848
¥2,887

2018
Over the Counter
Currency swaps ...... $2,910,702 $2,282,944
Forward exchange
contracts:
Sell ...............
545,039
38,902
Buy ...............
357,887
37,791
Currency options:Sell ............... 2,593,006 1,845,133
Buy ............... 2,593,006 1,845,133
Total ...................

$150,310$ 4,969$ 4,969

192,629

150,310(3,294)(3,294)

6,852
6,852

6,711
6,711

(0)
0
$ 1,666

348(84)$ 1,929

$

451

$

451

5,327
(2,371)

5,327(2,371)(107,746)
107,746$ 3,407

15,785
7,981$27,174

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)
¥2,772(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, 2018

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¥80,000

Millions of yen
Contracted value over
1 year¥69,000

Fair value
¥309
¥309

As of March 31, 2017

Hedge accounting method$192,629

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

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, 2018
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
$753,012$649,472

Fair value$2,908$2,908Notes: 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.

41

42

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements
28. Segment information(b) Currency related transactions
As of March 31, 2018

Hedge accounting method
General accounting rules

Type
Currency swaps
Monetary swaps

Main hedged item
Foreign currency receivables
Total

Contracted value¥111,909
36,593

Millions of yen
Contracted value over
1 year¥44,977—

Contracted value¥112,263
36,537

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

Fair value¥2,757241¥2,998

As of March 31, 2017

Hedge accounting method

Type
Currency swaps
General accounting rules
Monetary swaps

Main hedged item
Foreign currency receivables
Total

Fair value¥(1,687)383¥(1,303)(1) Overview of reportable segments
Reportable segments are the Group’s constituent business units for which separate financial data can be obtained and that are examined periodically by the Board of
Directors for the purposes of determining the allocation of management resources and evaluating operating results.
The Group is engaged mainly in banking activities. Consolidated subsidiaries provide financial services primarily engaging in leasing activities. The Bank and its
individual consolidated subsidiaries, which comprise a corporate group, each prepare business and other plans while developing business activities.
As a result, the Group has identified the two reportable segments of banking and leasing, which comprise the basic segments of the Bank and its individual consolidated
subsidiaries by operation. Operations under the banking segment include the provision of services relating deposits, loans, marketable securities and related investment aswell as foreign currency exchange. Operations under the leasing segment include leasing and other operations conducted by Hyakujushi Lease Co., Ltd.
(2) Calculation methods for ordinary income, profit and loss, assets and liabilities and other items by reportable segment
The method of accounting treatment applied to reportable segments is the same as that described in “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.
(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, 2018 and 2017 is as follows:

As of March 31, 2018

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
$1,053,360$423,352—
344,437

Fair value$25,950
2,268$28,219

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.

27. 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 Lease Co., Ltd.
The Hyakujushi Sogo Hosho Co., Ltd.

Business description
Leasing services
Credit guarantee services(2) Date of business combinations
April 3, 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 type of consideration
Consideration for acquisition
Cash and due from banks
Acquisition cost ....................

Millions of yen¥1,729¥1,729Thousands of U.S.
dollars$16,274$16,274

Banking2018
Ordinary income:Outside customers ........................... ¥ 72,023
Inter-segment transactions ..................
394
Total .................................................. ¥ 72,417
Segment profit ...................................... ¥ 13,018
Segment assets ...................................... ¥4,756,322
Segment liabilities .................................. ¥4,475,457
Other items: ........................................
Depreciation .................................. ¥2,367Interest income ...............................
48,049Interest expenses .............................
6,206
Gain from disposal of tangible assets ......
12
Loss from disposal of tangible assets ......
76
Impairment losses ............................
151
Tax expenses ..................................
3,835
Increases in property, plant andequipment and intangible assets ........
2,963

2017
Banking
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
Gain from disposal of tangible assets ......
0
Loss from disposal of tangible assets ......
247
Impairment losses ............................
248
Tax expenses ..................................
7,457
Increases in property, plant andequipment and intangible assets ........
2,671

Leasing

Total

Total

¥ 2,1073,978¥ 6,085¥ 2,051¥31,569¥10,01080,813
4,752¥ 85,566¥ 15,317¥4,815,706¥4,508,864—(4,752)¥ (4,752)¥(37)¥(38,645)¥(35,409)

80,813—¥ 80,813¥ 15,279¥4,777,061¥4,473,454

¥

¥

¥

¥

¥

¥

10

2,974

Leasing

Total

306
436
61
—
14
—
575
200

2,769
48,635
6,345
77
91
151
4,510

¥

Consolidated
total

78,706774¥ 79,481¥ 13,265¥4,784,137¥4,498,853
2,462
48,199
6,283
77
76
151
3,935

¥

Adjustment¥ 6,683380¥ 7,064¥ 247¥27,814¥23,396
95
150
76
65
0
—
99

¥

Millions of yen
Otherbusinesses

3,174Millions of yen
Otherbusinesses

Total

87
(561)
(489)
(0)
—
—
17

¥

128

3,303

Adjustment

Consolidated
total¥ 6,571394¥ 6,965¥ 333¥25,417¥20,803¥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)

¥

¥

¥

¥

¥

¥

¥

91
144
84
44
0
—
87
1

2,256
48,423
5,770
44
247
248
7,544
2,673

338
448
69
—
23
—
662
231

2,595
48,872
5,840
44
270
248
8,206
2,904

2,857
48,073
5,855
77
91
151
4,528

83
(548)
(495)
—
—
—
(9)
104

90,508—¥ 90,508¥ 19,372¥4,926,538¥4,633,409
2,678
48,324
5,345
44
270
248
8,196
3,009

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
Millions of yen¥4,153

43

Thousands of U.S.
dollars$39,090

44

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements

Banking2018
Ordinary income:Outside customers ........................... $ 677,927
Inter-segment transactions ..................
3,708
Total .................................................. $ 681,635
Segment profit ...................................... $ 122,533
Segment assets ...................................... $44,769,597
Segment liabilities .................................. $42,125,913
Other items: ........................................
Depreciation .................................. $22,279Interest income ...............................
452,268
Interest expenses .............................
58,414Gain from disposal of tangible assets ......
112
Loss from disposal of tangible assets ......
715
Impairment losses ............................
1,421
Tax expenses ..................................
36,097
Increases in property, plant andequipment and intangible assets ........
27,889Thousands of U.S. dollars
Other
Total
businesses
Total

Leasing$ 62,904
3,576$ 66,490$ 2,324$261,803$220,218
$

894
1,411
715
611
0
—
931
94

$

740,832
7,285$ 748,126$ 124,858$45,031,410$42,346,131$$ 19,832
37,443$ 57,275$ 19,305$297,147$ 94,220

23,173453,680
59,139
724
715
1,421
37,038$ 2,880
4,103
574
—
131
—
5,412

27,993

1,882

Adjustment$

760,664
44,728$ 805,402$ 144,173$45,328,557$42,440,361$

26,063457,784
59,723
724
856
1,421
42,451$—(44,728)$ (44,728)$(348)$(363,751)$(333,292)$

818(5,280)(4,602)
(0)
—
—
160

29,875

1,204

Consolidated
total$

760,664—$ 760,664$ 143,815$44,964,806$42,107,059$

26,891
452,494
55,111
724
856
1,421
42,62031,089Notes: 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, gain from disposal of tangible assets, tax expenses andincreases in property, plant and equipment and intangible assets are recorded as eliminations.
4. Segment profit is adjusted with ordinary profit recorded on consolidated statements of income.

(Associated information)
1. Information on each service(Information on impairment losses on fixed assets by reportable segment)
Information regarding impairment losses on fixed assets by reportable segment for the years ended March 31, 2018 and 2017 was as follows:
Millions of yen
2018
Impairment losses on fixed assets ..........................

Securities investment
Lending services
services
¥151
¥—

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

Securities investment
Lending services
services
¥248
¥—

2018
Impairment losses on fixed assets ..........................

Thousands of U.S. dollars
Securities investment
Lending services
services
Total$1,421$—$1,421

Securities investment
services¥26,661

Lending services¥32,193

Leasing services¥6,68329. Related-party transactions

Not applicable to the years ended March 31, 2018 and 2017.

30. Per share data

Amounts per share as of March 31, 2018 and 2017 and for the fiscal years thenended were summarized as follows:
Yen

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

Securities investment
Lending services
services¥32,541¥36,952

2018
Income from external customers ..........................

Thousands of U.S. dollars
Securities investment
Lending services
services
Leasing services$303,021$250,950$62,904

Other¥15,274

Total¥80,813Millions of yen
Leasing services¥6,571

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

2018¥994.85
34.64
34.59

U.S. dollars
2017
2018
¥937.15$9.364
32.61
0.326
32.55
0.325

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

Other¥14,443

Total¥90,508

Other$143,768

Total$760,664

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.

Other
¥—

Total
¥151

¥—

Total
¥248

$—

Total
$1,421Millions of yen

Millions of yen
2018
Income from external customers ..........................

Total
¥151

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
2017
2018
2018
¥293,129 $2,857,737¥303,606
16,23010,124
95,293
124

142

1,167

10,00016,087

94,126

293,481276,899

2,762,434

294,999

295,467

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
2017
2018

Thousands of
U.S. dollars
2018¥ 10,227¥ 9,645$96,263———

10,227

9,645

96,263295,233

295,791

415

488

415

488

Total
¥248

Other

Other

The number of shares of said treasury stock to be deducted at year- end in thecalculation of net assets per share was 611 thousand shares and 65 thousand
shares as of March 31, 2018 and 2017, 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 361
thousand shares and 348 thousand shares for the fiscal years ended March 31,2018 and 2017, respectively.

31. Significant subsequent events(Redemption of preferred equity securities)
At the Board of Directors’ meeting held on April 27, 2018, the Bank resolved toapprove the full redemption of all preferred equity securities issued by the
Bank’s consolidated subsidiary, Hyakujushi Preferred Capital Cayman Limited,and determined a policy of liquidating the company. In addition, the company is
to be liquidated by the end of December 2018. The details of the redeemablepreferred securities are as follows:
1. Issuer
Hyakujushi Preferred Capital Cayman Limited
2. Type of the issued security
Permanent non-cumulative preferred equity securities with yendenominated dividends
3. Total amount of redemption¥10,000 million ($94,126 thousand)
4. Planned date of redemption
July 25, 2018
5. Reason for redemption
Because the date for voluntary redemption is approaching(Reverse stock split)
At the Board of Directors’ meeting held on May 14, 2018, the Bank resolved tosubmit a proposal concerning a reverse stock split to the 149th Regular Annual
General Meeting of Shareholders held on June 28, 2018, the proposal of which
was approved at the said General Meeting of Shareholders. In addition, at the
aforementioned Board of Directors’ meeting, a resolution was made to change
the number of shares constituting one unit of stock and partially amend the
Articles of Incorporation, contingent upon the approval of the proposal
concerning the reverse stock split at the General Meeting of Shareholders.
The details are as follows:
1. Change in the number of shares constituting one unit of stock(1) Reason for change
To comply with the “Action Plan for Consolidating Trading Units”
announced by stock exchanges in Japan that aims to standardize the trading
unit for common shares issued by all domestic listed companies to 100
shares by October 1, 2018.
(2) Change in the number of shares constituting one unit of stock
Effective October 1, 2018, the number of common shares of the Bank
constituting one unit of stock will be changed from 1,000 shares to 100
shares.

3. The Bank’s own stock remaining in the ESOP Trust and BIP Trust and recorded
as treasury stock in stockholders’ equity is included in treasury stock to be
deducted in the calculation of net assets per share, basic earnings per share, anddiluted earnings per share.

45

46

The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements
2. Reverse stock split(1) Purpose of reverse stock split
As described in “1. Change in the number of shares constituting one unit ofstock” above, to change the number of shares constituting one unit of stockfrom 1,000 shares to 100 shares, the Bank will implement a 1-for-10 reverse
stock split so that the investment unit will be at a level deemed desirable by
the stock exchanges (not less than ¥50,000 ($470.632) and less than
¥500,000 ($4,706.325)) without changing the number of voting rights ofshareholders.
(2) Details of reverse stock split
a. Class of stock for reverse stock split
Common stockb. Method and ratio for reverse stock split
Effective October 1, 2018, the Bank will implement a 1-for-10 reverse
stock split based on the number of shares held by each shareholder listed orrecorded on the final shareholder registry as of September 30, 2018 (inpractice September 28, 2018).
c. Number of shares to be decreased by the reverse stock split
Total number of shares outstanding before the reverse stock split
Total number of shares outstanding before thereverse stock split (as of March 31, 2018)
300,000,000 shares
Decrease in number of shares due to the reverse
stock split
270,000,000 shares
Total number of shares outstanding after the reverse
stock split
30,000,000 shares
Note: “Decrease in number of shares due to the reverse stock split” and “Total numberof shares outstanding after the reverse stock split” are theoretical values
determined by multiplying the ratio of reverse stock split to “Total number ofshares outstanding before the reverse stock split (as of March 31, 2018).”

5. Effect on per share information
Pro forma per share information for the fiscal years ended March 31, 2018and 2017, based on the assumption that the reverse stock split was
implemented at the beginning of the fiscal year ended March 31, 2017, is asfollows:
Yen
U.S. dollars
2017
2018
2018
Net assets per share .................. ¥9,948.53 ¥9,371.55$93.642
Basic earnings per share .............
326.10346.403.260
Diluted earnings per share ..........
325.56345.92
3.256

32. Borrowed money

The weighted average interest rate applicable to the total balance of borrowed
money as of March 31, 2018 is 0.05%.
Annual maturities of borrowed money as of March 31, 2018 are as follows:

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

Millions of yen¥13,723
5,977
144,962
78,9881,412
1,553

Thousands of
U.S. dollars$129,169
56,2591,364,476
743,486
13,29014,617d. Effect of reverse stock split
As a result of the reverse stock split, the total number of shares outstanding
will decrease to one-tenth of the original number. However, since there are
no changes to the amount of net assets, etc., the amount of net assets per
share will increase tenfold. Excluding other factors such as market
fluctuations, there is no change in the asset value of the shares.
(3) Treatment of fractions of less than one shareIf fractional shares of less than one share arise as a result of the reverse stock
split, such shares shall be subject to a lump-sum disposal in accordance with
Article 235 of the Companies Act. The proceeds of the disposal will beallotted to the relevant shareholders in proportion to their respective
fractional shares.
3. Partial amendments to the Articles of Incorporation
In line with “1. Change in the number of shares constituting one unit ofstock” and “2. Reverse stock split,” as of October 1, 2018, the total numberof shares authorized to be issued by the Bank and the number of sharesconstituting one unit of stock will be changed from 993 million shares to99.3 million shares and 1,000 shares to 100 shares, respectively.
4. Schedule for the reverse stock split
Date of resolution of the Board of Directors
Date of resolution of the Regular Annual General
Meeting of Shareholders
Effective date of the reverse stock split
Effective date of the change in the number of sharesconstituting one unit of stock
Effective date of the change in the number of sharesauthorized to be issued
Effective date of the partial amendments to the
Articles of Incorporation due to the reverse stock
split and the change in the number of sharesconstituting one unit of stock47

May 14, 2018
June 28, 2018
October 1, 2018
(Scheduled)
October 1, 2018
(Scheduled)
October 1, 2018
(Scheduled)
October 1, 2018
(Scheduled)48

Corporate Information
Profile (as of March 31, 2018)

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
¥4,749.1 billion¥4,066.2 billion¥2,837.8 billion¥37.3 billion
300,000 thousand shares
2,283
124 (Head Office, 103 branches, 21 sub-branches)
Overseas Representative Offices: 2 (Shanghai, Singapore)
165 locations

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

China
Representative Office

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

ThailandBusiness collaboration
KASIKORNBANK Public Company Limited(Bank staff deployment)

Organization (as of July 1, 2018)

the Philippines
Business collaboration
Metropolitan Bank and Trust Company

The Hyakujushi Bank

General Meeting of Shareholders
Board of Directors
Governance Council
Audit and Supervisory Committee

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

Risk Control Group
Credit Risk Control Group

General Administration
Division

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

Personnel Division

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

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

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

Executive Secretariat
OfficeTreasury andInternational Division

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

List of Major Shareholders (as of March 31, 2018)
Name

Hyakujushi Saita
Agency Co., Ltd.

Central Business
Division
Branches

Hyakujushi Lease
Co., Ltd.
Nihonbashi FudosanCo., Ltd.

Deposit andExchange
Operations Area
liaison & Loan
Operations Area
Central Foreign
Exchange BranchBusiness Strategy
Division
Regional Vitalization
Division

Regional Vitalization Group

Solution Promotion
Division

Consulting Group
Asset Accumulation Group

Business Support
Division

Loan Business Center
Asset Business Center
DB Center

Credit Supervision
Division

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

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.

Inspection Group
Risk Audit Group

Audit and Supervisory Committee Members’ Office

17,298
9,000
6,802
6,675
6,326
5,952
5,845
5,699
5,643
5,001
74,243

5.85
3.04
2.30
2.25
2.14
2.01
1.97
1.92
1.90
1.69
25.11

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.
(Persons)

Dividend per share

Hyakujushi Sogo
Hosho Co., Ltd.

Number of shareholders

Individuals

Trends of Number of
Share Unit Holders

8,368

8,293

7,317

7,273

March 31,2016

March 31,2017

10,000At the endof interim At year-end For the year
periodConsulting Plaza Branch

Auditing Division

8-11, Harumi 1-Chome, Chuo-ku, Tokyo
6-6, Marunouchi 1-Chome, Chiyoda-ku, Tokyo
8-11, Harumi 1-Chome, Chuo-ku, Tokyo
11-3, Hamamatsu-cho 2-Chome, Minato-ku, Tokyo
4-9, Umeda 2-Chome, Kita-ku, Osaka
3-5, Daiba 2-Chome, Minato-ku, Tokyo
6-4, Tsukiji 5-Chome, Chuo-ku, Tokyo
1-1, Marunouchi 2-Chome, Chiyoda-ku, Tokyo
5-1 Kamei-cho, Takamatsu-shi, Kagawa Prefecture
7-18-24, Tsukiji, Chuo-ku, Tokyo–(Notes)1. The 4,389 thousand treasury shares held by the Bank are excluded from the number of shares outstanding.
2. The number of shares held by NH Foods Ltd. includes 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.
3. 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.
4. 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.

114 DC Card Co., Ltd.

*A policy to dissolve Hyakujushi
Preferred Capital Cayman Limited
was decided at the Board of
Directors meeting of the Bank
held on April 27, 2018 and its
liquidation is scheduled forcompletion by the end of
December 2018.

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

Address

Japan Trustee Services Bank, Ltd. (trust account)
Nippon Life Insurance Company
Japan Trustee Services Bank, Ltd. (Trust Account 9)
The Master Trust Bank of Japan, Ltd. (Trust Account)
NH Foods Ltd. (Note) 2
TAIHEIYO CEMENT CORPORATION (Note) 3
Mitsui Engineering & Shipbuilding Co., Ltd. (Note) 4
Meiji Yasuda Life Insurance Company
Hyakujushi Bank Employee Shareholding Association
SUMITOMO LIFE INSURANCE COMPANY
Total

Subsidiaries[Marketing Related Sector]
Business Strategy Group
Channel Strategy Group
Branch Management Group
Customer Service CenterIndonesia
Business collaboration
PT. Bank Negara Indonesia (Persero) Tbk.
(Bank staff deployment)

Singapore
Representative OfficeSub-branches[Market Sector]

49

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

Corporate Headquarters

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 ended March 31, 2018

¥4.00

¥4.00

¥8.00

Fiscal year ending March 31, 2019 (forecast)¥4.50¥45.00

—

9,000
8,000

7,590

7,000
6,000
5,000

6,513
March 31,
2014

7,109

8,850
7,869

6,053
March 31,2015

March 31,2018

*The Bank intends to implement a 1-for-10 reverse stock split with an effective date of October 1, 2018. For the fiscal year ending March 31, 2019, the amount of year-end dividend per share(forecast) presented is the amount after taking into consideration the impact of the said reverse stock split and the total amount of dividend for the full year is not presented (indicated as “—”).
When the impact of the reverse stock split is not taken into consideration, the amount of the year-end dividend per share (forecast) for the fiscal year ending March 31, 2019 is ¥4.50 and theamount of dividend per share for the full year is ¥9.00.

50

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