The Awa Bank, Ltd

Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
Years Ended March 31, 2022 and 2023Consolidated Balance Sheets
The Awa Bank, Ltd. and its Consolidated Subsidiaries
As of March 31, 2022 and 2023

2022
AssetsCash and due from banks (Notes 3 and 4)
Call loans and bills purchased (Note 4)
Commercial paper and other debt purchased (Notes 4 and 5)
Securities (Notes 4, 5, 6 and 9)
Loans and bills discounted (Notes 4, 6, 7 and 8)
Foreign exchange (Notes 6 and 7)
Lease receivables and investment assets (Notes 4 and 6)
Other assets (Notes 6, 9 and 12)
Tangible fixed assets (Notes 10 and 11)
Intangible fixed assets
Deferred tax assets (Note 17)
Customers' liabilities for acceptances and guarantees (Notes 6 and 18)
Reserve for possible loan losses
Total assets
Liabilities
Deposits (Notes 4 and 9)
Negotiable certificates of deposit (Note 4)
Call money and bills sold (Note 4)
Payables under securities lending transactions (Notes 4 and 9)
Borrowed money (Notes 4, 9 and 19)
Foreign exchange
Other liabilities (Note 19)
Accrued employees' bonuses
Accrued directors' bonuses
Accrued directors' retirement benefits
Accrued stock compensation program for directors
Reserve for reimbursement of deposits
Reserve for contingent liabilities
Deferred tax liabilities (Note 17)
Deferred tax liabilities for land revaluation account (Note 11)
Acceptances and guarantees (Note 18)
Total liabilities

\

\

\

Net Assets
Common stock
Authorized - 100,000,000 shares
Issued - 41,040,000 shares in 2023 and 43,240,000 shares in 2022
Capital surplus
Retained earnings
Treasury stock－ Issued 273,664 shares in 2023 and 1,603,702 shares in 2022
Total shareholders' equity
Net unrealized holding gains (losses) on securities (Note 5)
Net deferred gains (losses) on derivatives under hedge accounting
Land revaluation account (Note 11)
Total accumulated other comprehensive income
Total net assets
Total liabilities and net assets\

Millions of yen
2023

690,236
18,3581,398
1,031,863
2,117,033
9,240
28,93548,70038,147
4,528
214
8,482
(19,414)
3,977,726

3,167,043
133,504
12,85040,945
266,375
18
40,154
22
54
14
257
271
1,205
15,4272,691
8,482
3,689,322\\\

482,868
140,894817
935,370
2,172,312
8,879
30,05746,01938,438
4,515
212
8,924
(18,981)3,850,329$

3,250,619
130,006
128,1102
40,016
22
50
15
290
193
1,314
9,454
2,545
8,924
3,571,566$$

3,616,176
1,055,148
6,118
7,004,942
16,268,344
66,494225,095
344,634
287,860
33,812
1,587
66,831(142,147)
28,834,935

24,343,735
973,608
959,40914
299,677
164
374
112
2,171
1,445
9,840
70,80019,05966,831
26,747,292

23,452
20,106
185,469(4,100)23,452
20,106
189,153(846)

175,630
150,572
1,416,558(6,335)

224,927
58,375(24)
5,126
63,476
288,404
3,977,726

231,866
42,401(297)
4,792
46,896
278,763
3,850,329

1,736,433
317,539(2,224)35,887351,201
2,087,643
28,834,935

See Notes to Consolidated Financial Statements.

1

Thousands of
U.S. dollars(Note 1)
2023

\

$

Consolidated Income Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

Thousands of
U.S. dollars(Note 1)
2023

Millions of yen
2022
2023
Income:Interest and dividend income:Interest on loans and discounts
Interest and dividends on securities
Other interest income
Trust fees
Fees and commissions
Other operating income
Other income (Notes 14 and 20)
Total income\

Expenses:
Interest expense:
Interest on deposits and certificates of deposit
Interest on borrowings, rediscounts and bonds
Other interest expense
Fees and commissions
Other operating expenses
General and administrative expenses (Note 13)
Other expenses:
Provision for loan losses
Other expenses (Note 15)
Total expenses
Income before income taxes
Income taxes (Note 17):
Current
Deferred
Net income
Net income attributable to owners of the parent company\

23,782
14,205814
2
9,570
16,081
3,526
67,984\24,786
15,279
4,013
2
9,461
18,843
15,69588,081

$

450
133
1,042
1,265
14,81529,783

835
393
6,369
1,288
32,857
29,403

6,253
2,943
47,697
9,645
246,064
220,197

3,352
1,191
52,033956
1,335
73,4397,159
9,997
549,981

15,95014,642

109,653

5,080
(242)
11,112
11,112

3,527
907
10,207
10,207

26,413
6,792
76,43976,439\$U.S. dollars(Note 1)2023

Per share of common stockYen
2022
Net income per share - basic
Dividends\

185,621
114,423
30,053
14
70,852
141,114
117,539
659,634265.38
42.50

2023
\

248.21
50.00

$

1.858
0.374

For the years ended March 31, 2022 and 2023, diluted net income per share of common stock was not disclosed because no dilutive
securities were outstanding.
See Notes to Consolidated Financial Statements.

2

Consolidated Statements of Comprehensive Income
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

Thousands of
U.S. dollars(Note 1)
2023

Millions of yen
2022
2023
Net income
Other comprehensive income:Net unrealized holding gains (losses) on securities
Net deferred gains (losses) on derivatives under hedge accounting
Remeasurements of defined benefit plans
Total other comprehensive income (Note 16)
Comprehensive income
Comprehensive income attributable to:
Owners of the parent company\

11,112\

10,207\(14,819)1,503(18)(13,334)(2,222)\(2,222)

See Notes to Consolidated Financial Statements.

3$

76,439\(15,973)(272)(16,245)(6,038)$(119,621)(2,036)(121,658)(45,218)\(6,038)$(45,218)

Consolidated Statements of Changes in Net Assets
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

Millions of yen
Stockholders' equity
Number of sharesof common stock
issuedBalance at March 31, 2021
Changes during the accounting period
Dividends
Net income attributable to owners of
the parent company
Purchase of treasury stock
Disposal of treasury stock
Cancellation of treasury stockReversal of land revaluation account
Changes other than changes instockholders' equity (net)Total changes during the accounting
periodBalance at March 31, 2022
Changes during the accounting period
Dividends
Net income attributable to owners of
the parent company
Purchase of treasury stock
Disposal of treasury stock
Cancellation of treasury stockReversal of land revaluation account
Changes other than changes instockholders' equity (net)Total changes during the accounting
periodBalance at March 31, 2023

43,240,000

Common stock

Capital surplus

Retained earnings

Treasury stock

\

\

\

\

23,452

20,106

176,045(3,529)Total
shareholders'equity\216,075---(1,696)-(1,696)---

11,112
(0)
8

(960)
389
-

11,112
(960)
389
8

-

-

-

-

-

-

43,240,000\

23,452

20,106\\

9,424
185,469\(571)(4,100)\8,852
224,927---(1,876)-(1,876)(2,200,000)---

10,207(0)(4,980)333(2,067)
342
4,980
-

10,207(2,067)
342
333

-

-

-

-

-

-

(2,200,000)
41,040,000\

23,452

20,106\\

3,684
189,153

\

3,254
(846)

\

6,938
231,866

Millions of yen
Accumulated other comprehensive income
Net deferredgains (losses)
on derivatives
under hedge
accounting

Net unrealized
holding gains(losses) on
securities
Balance at March 31, 2021
Changes during the accounting period
Dividends
Net income attributable to owners of
the parent company
Purchase of treasury stock
Disposal of treasury stock
Cancellation of treasury stockReversal of land revaluation account
Changes other than changes instockholders' equity (net)Total changes during the accounting
periodBalance at March 31, 2022
Changes during the accounting period
Dividends
Net income attributable to owners of
the parent company
Purchase of treasury stock
Disposal of treasury stock
Cancellation of treasury stockReversal of land revaluation account
Changes other than changes instockholders' equity (net)Total changes during the accounting
periodBalance at March 31, 2023

\

\

\

73,194\(1,528)Landrevaluationaccount\

5,134

Remeasurementsof defined
benefit plans

Total
accumulated
othercomprehensive
income\\18

76,819Total
net assets\

292,894

-

-

-

-

-

(1,696)

-

-

-

-

-

11,112(960)
389
8(14,819)

1,503

(8)

(18)

(13,343)(13,343)(14,819)
58,375

\

1,503
(24)

(8)
5,126

\

\

(18)
-

\

(13,343)
63,476\(4,490)288,404

-

-

-

-

-

(1,876)

-

-

-

-

-

10,207(2,067)342
333(15,973)

(272)

(333)

-

(16,579)(16,579)(15,973)
42,401

\

(272)
(297)

(333)
4,792

\

\

See Notes to Consolidated Financial Statements.

4

-

\

(16,579)
46,896\(9,640)278,763

Consolidated Statements of Changes in Net Assets
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

Thousands of U.S. dollars (Note 1)
Stockholders' equity
Number of sharesof common stock
issuedBalance at April 1, 2022
Changes during the accounting period
Dividends
Net income attributable to owners of
the parent company
Purchase of treasury stock
Disposal of treasury stock
Cancellation of treasury stockReversal of land revaluation account
Changes other than changes instockholders' equity (net)Total changes during the accounting
periodBalance at March 31, 2023

43,240,000

Common stock

Capital surplus

Retained earnings

Treasury stock

$

$

$

$

175,630

150,572

1,388,968(30,704)

Total
shareholders'equity$1,684,467---(14,049)-(14,049)(2,200,000)---

76,439(0)(37,294)
2,493(15,479)
2,561
37,294-76,439(15,479)
2,561
2,493

-

-

-

-

-

-

(2,200,000)
41,040,000$

175,630

150,572$$

27,5891,416,558$

24,369(6,335)$51,958
1,736,433

Thousands of U.S. dollars (Note 1)
Accumulated other comprehensive income
Net deferredgains (losses)
on derivatives
under hedge
accounting

Net unrealized
holding gains(losses) on
securities
Balance at April 1, 2022
Changes during the accounting period
Dividends
Net income attributable to owners of
the parent company
Purchase of treasury stock
Disposal of treasury stock
Cancellation of treasury stockReversal of land revaluation account
Changes other than changes instockholders' equity (net)Total changes during the accounting
periodBalance at March 31, 2023$$

437,167

$

(179)

Land
revaluationaccount$

38,388Remeasurementsof defined
benefit plans

Total
accumulated
othercomprehensive
income$$-475,368

Total
net assets$

2,159,844

-

-

-

-

-

(14,049)

-

-

-

-

-

76,439(15,479)
2,561
2,493

(119,621)(2,036)(2,493)-(124,159)(124,159)(119,621)
317,539$(2,036)(2,224)(2,493)35,887$$

See Notes to Consolidated Financial Statements.

5

-

$

(124,159)
351,201$(72,193)2,087,643

Consolidated Statements of Cash Flows
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

Thousands of
U.S. dollars(Note 1)
2023

Millions of yen
2022
Cash flows from operating activities:
Income before income taxes
Depreciation
Impairment loss
Increase (decrease) in reserve for possible loan losses
Net change in provision for contingent liabilities
Increase (decrease) in accrued employees' bonuses
Increase (decrease) in accrued directors' bonuses
Decrease (increase) in net defined benefit asset
Increase (decrease) in net defined benefit liability
Net change in reserve for retirement payments to directors
Net change in accrued stock compensation program for directors
Net change in reserve for claims on dormant accounts
Interest and dividend income
Interest expense
Securities losses (gains), net
Losses (gains) on investments in money held in trust, net
Foreign exchange losses (gains), net
Losses (gains) on disposal of tangible fixed assets, net
Net decrease (increase) in trading account securities
Net decrease (increase) in loans and bills discounted
Net increase (decrease) in deposits
Net increase (decrease) in certificates of deposit
Net increase (decrease) in borrowed money(except for subordinated borrowed money)
Net decrease (increase) in due from banks(except for deposits with the Bank of Japan)
Net decrease (increase) in call loans, bills purchased,
commercial paper and other debt purchased
Net increase (decrease) in call money
Net increase (decrease) in payables under securities lending transactions
Net decrease (increase) in foreign exchange (assets)
Net increase (decrease) in foreign exchange (liabilities)
Interest and dividends received
Interest paid
Other
Subtotal
Income taxes paid
Net cash provided by (used in) operating activities

\

2023

15,950
3,120
140
1,076
102
(0)
10
6,158
(119)
5
61
(72)
(38,801)
1,626
(699)
(0)
(20,233)
88775(30,118)
77,062
4,662\

14,642
3,062
701
(432)
108
0
(3)
0
32
(78)
(44,079)
7,598
3,524
(0)
(25,320)83(55,279)
83,575(3,497)$

109,653
22,931
5,249(3,235)
808
0
(22)
0
239
(584)
(330,105)
56,901
26,391(0)(189,620)
621(413,981)
625,889(26,188)

29,385(138,265)(1,035,460)(84)(24,743)(185,299)

1,367
1,779
(1,119)644
739,321(1,629)9,967
100,438(3,765)96,672(121,955)(12,850)(40,945)(4,722)(16)
43,107(7,553)
7,496(315,808)(5,947)(321,755)(913,315)(96,233)(306,635)(35,362)(119)322,826(56,564)
56,137(2,365,071)(44,536)(2,409,608)

Cash flows from investing activities:
Payments for purchases of securities
Proceeds from sales of securities
Proceeds from maturities of securities
Payments for increases in money held in trust
Proceeds from decreases in money held in trust
Payments for purchases of tangible fixed assets
Payments for disposals of tangible fixed assets
Proceeds from sales of tangible fixed assets
Purchases of intangible fixed assets
Net cash provided by (used in) investing activities(213,004)
75,087105,095(1,000)1,000(3,039)(87)
92(1,173)(37,030)(318,540)
294,509
121,322(1,004)
1,004(2,435)(77)
29(1,558)93,250(2,385,531)
2,205,564
908,574(7,518)
7,518(18,235)(576)
217(11,667)
698,344

Cash flows from financing activities:
Dividends paid
Payments for purchases of treasury stock
Proceeds from sales of treasury stock
Net cash provided by (used in) financing activities(1,696)(960)
389(2,267)(1,876)(2,067)342(3,601)(14,049)(15,479)
2,561(26,967)

Foreign currency translation adjustments
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year (Note 3)

4
57,378631,227
688,605(3)(232,110)
688,605
456,494(22)(1,738,261)
5,156,931
3,418,662\

See Notes to Consolidated Financial Statements.

6

\

$

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

1.

Basis of Presentation of Consolidated Financial Statements

The accompanying consolidated financial statements of The Awa Bank, Ltd. (the “Bank”) and its consolidated
subsidiaries have been prepared in accordance with the provisions set forth in the Japanese Financial Instruments andExchange Law and the Japanese Banking Law, generally conform with the Japanese Uniform Rules for Bank
Accounting and the guidelines of Japanese regulatory authorities and are in conformity with accounting principles
generally accepted in Japan (“Japanese GAAP”), which are different in certain respects from the application anddisclosure requirements of International Financial Reporting Standards.
The accompanying consolidated financial statements have been restructured and translated into English, with some
expanded descriptions, from the consolidated financial statements of the Bank prepared in accordance with Japanese
GAAP and filed with the appropriate Local Finance Bureau of the Ministry of Finance as required by the Financial
Instruments and Exchange Law. Some supplementary information included in the statutory Japanese language
consolidated financial statements, but not required for fair presentation, is not presented in the accompanying
consolidated financial statements.
As permitted by the Financial Instruments and Exchange Act of Japan, amounts of less than one million yen havebeen rounded down. As a result, the totals shown in the accompanying consolidated financial statements (both in yen
and U.S. dollars) do not necessarily agree with the sums of the individual amounts.
The translations of the Japanese yen amounts into U.S. dollar amounts are included solely for the convenience ofreaders outside Japan, using the prevailing exchange rate at March 31, 2023, which was \133.53 to U.S.$1.00. The
translations should not be construed as representations that the Japanese yen amounts have been, could have been or
could in the future be converted into U.S. dollars at this or any other rate of exchange.

7

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

2.

Significant Accounting Policies(1) Principles of consolidation
The consolidated financial statements for the years ended March 31, 2022 and 2023 include the accounts of the Bankand the following six subsidiaries:
The Awagin Guaranty Company Limited
The Awagin Card Company Limited
The Awagin Consulting Company Limited
The Awagin Connect Company Limited
The Awagin Lease Company Limited
The Awagin Growth Companies Investment Limited PartnershipAll significant intercompany balances, transactions and unrealized profits and losses included in assets and liabilities
have been eliminated. In the elimination of investments in subsidiaries, the assets and liabilities of the subsidiaries,
including the portion attributable to noncontrolling shareholders, are evaluated using the fair value at the time the
Bank acquired control of the respective subsidiary.
The following subsidiary of the Bank was excluded from the scope of consolidation for the years ended March 31,
2022 and 2023 because the exclusion did not affect the reasonable interpretation of the financial condition andoperating results of the enterprise group in terms of assets and the Bank’s ownership percentage of net income,retained earnings or accumulated other comprehensive income.
The Awagin AFFrinnovation Investment Limited Partnership
The following subsidiary of the Bank was also not accounted for using the equity method for the years ended March
31, 2022 and 2023 because the exclusion did not have a material impact on the consolidated financial statements interms of the Bank’s ownership percentage of net income, retained earnings or accumulated other comprehensive
income.
The Awagin AFFrinnovation Investment Limited Partnership
The following three affiliates of the Bank were not accounted for using the equity method for the years ended March
31, 2022 and 2023 because the exclusion did not have a material impact on the consolidated financial statements interms of the Bank’s ownership percentage of net income, retained earnings or accumulated other comprehensive
income.
Shikoku Alliance Capital Company Limited
Shikoku Brand Company Limited
The Awagin Regional Revitalization Investment Limited Partnership
The Awagin Regional Revitalization Investment Limited Partnership expired on September 30, 2022 and was
liquidated on May 31, 2023.

8

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

2.

Significant Accounting Policies (cont’d)(2) Securities
Held-to-maturity debt securities are stated at amortized cost. Equity securities of nonconsolidated subsidiaries andaffiliates which are not accounted for using the equity method are stated at moving average cost. Available-for-salesecurities are stated at fair market value. Unrealized gains and unrealized losses on these securities are reported, netof applicable income taxes, as a separate component of shareholders’ equity or net assets. Realized gains and losseson the sale of such securities are computed using moving average cost. Available-for-sale securities with no available
fair market values are stated at moving average cost.
(3) Depreciation method for fixed assets① Tangible fixed assets (except for leased assets)
Tangible fixed assets are generally stated at cost, less the accumulated depreciation. Depreciation of tangible fixed
assets owned by the Bank and its consolidated subsidiaries is recorded using the straight-line method. At March 31,
2022 and 2023, the estimated useful life for buildings and equipment was 19 to 50 years and 4 to 8 years, respectively.
② Intangible fixed assets
Depreciation for intangible fixed assets of the Bank and its consolidated subsidiaries is recorded using the straight-line
method. Internal use software costs of the Bank and its consolidated subsidiaries are depreciated using thestraight-line method over the estimated useful life of 5 years. Goodwill is expensed when incurred.
③ Leased assets
Leased assets are business equipment included in tangible fixed assets. Leased assets in tangible fixed assets
capitalized under finance leases that do not transfer ownership of the leased assets to the lessee are depreciated using
the straight-line method over the lease period. The residual value of a leased asset with a residual value guarantee
clause is the guaranteed amount. For a leased asset without such a clause, the residual value is zero.

9

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

2.

Significant Accounting Policies (cont’d)(4) Reserve for possible loan losses
The Bank writes off loans and makes provisions for possible loan losses based on the financial circumstances of theborrower and the status of the loan.
For loans to insolvent customers who are undergoing bankruptcy or other collection proceedings (“bankrupt
obligors”) or who are in a similar financial condition (“substantially bankrupt obligors”), the reserve for possible loan
losses for the portions of the loans that are neither secured nor guaranteed is provided in the full amount, excluding
write-off amounts and the portion that is estimated to be recoverable due to the existence of security interests orguarantees.
For loans to customers not presently in the above circumstances but who have a high probability of becoming
insolvent (“intensively controlled obligors”), the reserve for possible loan losses is provided at estimated future loss
amounts for the portions of the loans that are neither secured nor guaranteed in the amounts estimated to be
unrecoverable after an evaluation of the customer’s overall financial condition (“non-secured amount”). Estimatedfuture loss amounts are calculated using an estimated loss ratio obtained from an average of the actual default ratio
based on actual defaults for the past three years. The estimated loss ratio is set at a lower limit that the Bank deems
necessary.
For “Capital subordinated loans (Special early business improvement type)” and “Loans with adequate capitalcharacteristics,” the reserve for possible loan losses is provided by the “method used to calculate the estimated loan
loss amount by deeming capital eligible loans with subordination characteristics to be unrecoverable,” in accordancewith “Auditing Treatment for Calculation of Estimated Loan Losses on Capital Eligible Loans and Accounting forConversion of Loans Held by Banks and Other Financial Institutions into Capital Eligible Loans” (The JapaneseInstitute of Certified Public Accountant (“JICPA”) Industry Committee Report No. 32, September 9, 2020).
In addition, of loans other than loans to bankrupt obligors, substantially bankrupt obligors and intensively
controlled obligors, for loans to customers in certain industries such as the “Hotel” and “Restaurant” industries on
which COVID-19 has had a significant effect and who meet certain conditions, estimated future loss amounts arecalculated as follows.
① For customers whose loan terms have not been amended, the estimated future loss is recorded at an amountcalculated by multiplying the loan amount by an expected loss ratio which takes into account the increase incredit risk expected to be incurred when the terms are amended.
② For customers whose loan terms have been amended, the estimated future loss is recorded at an amountcalculated by multiplying the non-secured amount by a certain loss ratio, in addition to the estimated future
loss amount based on the customer’s classification.
For other loans, the reserve for possible loan losses is provided at estimated future loss amounts mainly for one yearor three years, which is calculated using an estimated loss ratio obtained from an average of the actual default ratio
based on actual defaults for the past one year or three years.
Assessments and classifications regarding possible loan losses are made by each business department and credit
supervision department and are audited by the independent Credit Administration Department. The reserve forpossible loan losses is provided based on the audit results. The consolidated subsidiaries write off loans and makeprovisions for possible loan losses based on their actual rate of loan losses in the past. However, unrecoverable
amounts of loans to customers who have a high probability of becoming bankrupt are estimated and a reserve forpossible loan losses is provided based on the estimation.
For the fiscal years ended March 31, 2022 and 2023, the Bank wrote off portions of loans that were estimated to be
unrecoverable from insolvent customers who were undergoing bankruptcy or other collection proceedings. The
estimated unrecoverable amounts were determined after excluding estimated recoverable amounts due to theexistence of security interests or guarantees. As of March 31, 2022 and 2023, the write-off of the estimatedunrecoverable amounts was \18,610 million and \16,548 million ($123,927 thousand), respectively.

10

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

2.

Significant Accounting Policies (cont’d)(5) Accrued employees’ bonuses
Accrued employees’ bonuses were recorded to pay bonuses to employees of the consolidated subsidiaries for the
fiscal years ended March 31, 2022 and 2023.
(6) Accrued directors’ bonuses
Accrued directors’ bonuses were recorded to provide for the payment of bonuses to directors in an estimatedpayment amount attributable to the current period.
(7) Accrued directors’ retirement benefits
A provision is made for accrued retirement benefits of directors and corporate auditors of the consolidated
subsidiaries in the amount deemed accrued at the end of the reporting period.
(8) Accrued stock compensation program for directors
A provision is made for the accrued stock compensation program for directors, etc., based on the internal regulations
for the distribution of shares to directors in the amount deemed accrued at the end of the reporting period.
(9) Reserve for reimbursement of deposits
A provision is made in an amount deemed necessary for losses on future reimbursements of deposits, taking into
account the Bank’s estimated refund amount.
(10) Reserve for contingent liabilities
A provision is made in an estimated amount for future payments to credit guarantee associations on loan-loss burden
sharing.
(11) Accounting for retirement benefits
The Bank and its consolidated subsidiaries provide risk sharing pension plans and defined contribution pension plans.
The amount of required contribution was recorded as expense.
(12) Translation of foreign currencies
Foreign currency denominated assets and liabilities held by the Bank at the year end are translated into Japanese yenat the exchange rates prevailing at the end of the fiscal year.

11Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

2.

Significant Accounting Policies (cont’d)(13) Recognition of revenue and expense① Recognition of revenue and expense from finance lease transactions
Income and expenses related to finance lease transactions are recognized when lease payments are received.
② Recognition of revenue from transactions with customers
The Accounting Standard for Revenue Recognition (Accounting Standards Board of Japan (“ASBJ”) Statement No. 29,
March 31, 2020) and the Implementation Guidance on Accounting Standard for Revenue Recognition (ASBJ Guidance
No. 30, March 26, 2021) have been adopted, and revenues are recognized at the time of the transfer of promised
goods or services to customers in an amount to which the Bank expects to be entitled in exchange for those goods orservices.
The Bank and its consolidated subsidiaries recognize revenues by applying the following 5 steps:
Step 1: Identify the contract with the customer.
Step 2: Identify the performance obligations in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performance obligations in the contract.
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.
Revenue from transactions with customers of the Bank and its consolidated subsidiaries relates mainly totransaction services for which revenue is recognized at the time the services are provided to customers. This revenue
include fees and commissions for exchange services, funding transaction services, securities related services, agency
services, and other banking services.
(14) Derivatives and hedge accounting
Derivative financial instruments are carried at market value.
① Hedging against interest rate risk
In order to hedge against the interest rate risk associated with various financial assets and liabilities, the Bank applies
the deferred hedge method stipulated in Accounting and Auditing Treatment of Accounting Standards for Financial
Instruments in Banking Industry (JICPA Industry Committee Report No. 24, March 17, 2022; hereinafter, the“Industry Committee Report No. 24”).
The effectiveness of hedging is assessed for each identified group of hedged deposits, loans and similar items and thecorresponding group of hedging instruments, such as interest rate swaps, in the same maturity bucket. In assessing
the effectiveness of cash flow hedges, the correlation between the interest rate sensitivities of the hedged items andthe hedging instruments is examined.
The Treatment of Hedge Accounting for Financial Instruments that Reference LIBOR (Practical Issues Task Force(“PITF”) No. 40, March 17, 2022) is applied to these hedging relationships.
② Hedging against foreign currency risk
The Bank applies the deferred method of hedge accounting to hedge against foreign exchange risks associated withvarious foreign currency denominated monetary assets and liabilities as stipulated in Accounting and Auditing
Concerning Accounting for Foreign Currency Transactions in the Banking Industry (JICPA Industry Committee
Report No. 25, October 8, 2020; hereinafter, the “Industry Committee Report No. 25”). Assessment of theeffectiveness of these hedge transactions is conducted by confirming whether the notional amounts of the hedging
foreign exchange swaps, etc., correspond to the hedged foreign currency denominated receivables or payables.
(15) Cash flow statements
In preparing consolidated statements of cash flows, cash on hand and deposits with the Bank of Japan are considered
to be cash and cash equivalents.

12Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

2.

Significant Accounting Policies (cont’d)(16) Income taxes
The tax effects of loss carryforwards and the temporary differences between the carrying amounts of assets andliabilities for tax and financial reporting are recognized. The asset-liability approach is used to recognize deferred tax
assets and liabilities for the expected future tax consequences of temporary differences between the carrying amountsof assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
(17) Per share data
Net income per share is based on the weighted average number of shares of common stock outstanding during the year,
excluding treasury stock.
Cash dividends per share shown in the accompanying consolidated statements of income represent dividends
declared as applicable to the respective year.
The Bank’s own shares held by the Directors Compensation BIP Trust and the Awagin Group Employee
Shareholding Association Dedicated Trust are recorded as treasury stock in the net assets section and are deductedfrom the weighted average number of shares outstanding during the year for the purpose of calculating net income pershare.
(18) Significant accounting estimates
Items for which the amount has been recorded in the consolidated financial statements for the year ended March 31,
2023 based on accounting estimates that may affect the consolidated financial statements for the year ending March
31, 2024 are as follows:
Reserve for possible loan losses① The amount of reserve for possible loan losses recorded in the consolidated financial statements for the years
ended March 31, 2022 and 2023 were \19,414 million and \18,981 million ($142,147 thousand), respectively.
② Information that contributes to understanding significant accounting estimates for certain identified items(i) Calculation method
The calculation method of reserve for possible loan losses is described in Note 2. (4), “Significant Accounting
Policies- Reserve for possible loan losses.”(ii) Major assumptions
Major assumptions include the “Customer’s future financial outlook,” determined by an individual evaluation of eachcustomer’s ability to earn profits. On the whole, the economy has been recovering from the effects of COVID-19 forthe fiscal year ending March 31, 2023. However, the effects are still expected to be significant in certain industries,
such as the “Hotel” and “Restaurant” industries. Reserve for possible loan losses for loans to customers in suchindustries is calculated on the assumption that these customers will have higher credit risk. The amount of additional
reserve for possible loan losses as of March 31, 2022 and 2023 was \785 million and \605 million ($4,530 thousand),
respectively.
(iii) Effects on the consolidated financial statements for the year ending March 31, 2024
If changes in a customer's business performance or the effects of COVID-19 on the economy are significantly
different from the projections made with assumptions used in the estimates as of March 31, 2023, there may besignificant effects on the reserve for possible loan losses in the consolidated financial statements for the year ending
March 31, 2024.

13

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

2.

Significant Accounting Policies (cont’d)(19) Changes in accounting policies
Adoption of Implementation Guidance on Accounting Standard for Fair Value Measurement
The Bank and its consolidated subsidiaries apply “Implementation Guidance on Accounting Standard for Fair Value
Measurement” (ASBJ Guidance No. 31, June 17, 2021) since the year ended March 31, 2023, and prospectively apply
the new accounting policies under ASBJ Guidance No. 31 in accordance with the transitional provision set out inparagraph 27-2 of ASBJ Guidance No. 31.
The notes to investment trusts in Note 4. “Financial Instruments” (3) “Fair value of financial instruments andclassification by level of inputs” for the year ended March 31, 2022 were not provided in accordance with theparagraph 27-3 of ASBJ Guidance No. 31.
(20) Accounting standards and guidance not yet adopted
Following accounting standards and guidance are those issued but not yet adopted.
- Accounting Standard for Current Income Taxes (ASBJ Statement No. 27, October 28, 2022)- Accounting Standard for Presentation of Comprehensive Income (ASBJ Statement No. 25, October 28, 2022)- Guidance on Accounting Standard for Tax Effect Accounting (ASBJ Guidance No. 28, October 28, 2022)① Overview
The above standards and guidance were issued as a result of the discussions on the two issues below:
・ Categories in which income tax expense should be recorded (taxes on other comprehensive income)・ Tax effects associated with sales of shares of subsidiaries, etc. (i.e., shares of subsidiaries or affiliates) when thegroup taxation regime is applied② Effective date
The standards and guidance will be effective from the beginning of the fiscal year ending March 31, 2025.
③ Effects of application of the standards and guidance
The effects of application of Accounting Standard for Current Income Taxes, etc. on the consolidated financial
statements are currently under evaluation.

14

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

2.

Significant Accounting Policies (cont’d)(21) Additional information
Executive Compensation BIP (Board Incentive Plan) Trust
The Bank introduced a performance linked stock compensation program using a scheme referred to as the “Executive
Compensation BIP (Board Incentive Plan) Trust” (the “BIP”) for directors of the Bank (excluding members of the
Audit and Supervisory Committee and outside directors) and executive officers (together the “Directors, etc.”) to
motivate them to contribute to the improvement of the Bank’s mid- to long-term business performance and its
corporate value. Based on the resolution of the Directors’ meeting held on July 24, 2023, the Bank extended the trust
period of the BIP for five years from August 31, 2023 to August 31, 2028. In addition, the Bank made an additional
contribution of \224 million ($1,677 thousand) and acquired 112 thousand of its own shares from the stock market.
① Overview of the transaction
Based on internal regulations for the distribution of shares, the Bank’s shares and the cash equivalent of the market
value of the Bank’s shares will be delivered and paid to the Directors, etc., according to points granted based on
business performance and the individual’s position among Directors, etc., at the time of retirement.
② The remaining balance of the Bank’s own stock in the trusts(i) The Bank records the remaining balance of the Bank’s own stock in the BIP as treasury stock in the section of net
assets(ii) The carrying amount and the number of shares of such treasury stock as of March 31, 2022 and 2023 were \704
million and \648 million ($4,852 thousand) and 202 thousand shares and 186 thousand shares, respectively.

15

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

2.

Significant Accounting Policies (cont’d)

Trust-Based Employee Shareholding Incentive Plan
The Bank introduced a trust-based employee shareholding incentive plan designed for the employees of the Group andto provide incentives for improving the Bank’s medium- to long-term corporate value and to support asset building byencouraging employees to acquire and hold shares through the expansion of the employee shareholding association asa measure of enhancing employee welfare and benefits.
① Overview of the transaction
The Bank established the Awagin Group Employee Shareholding Association Dedicated Trust (the “Trust”) in thetrust bank. The Trust acquires in advance a certain number of the Bank’s shares that are expected to be acquired by
the Awagin Group Employee Shareholding Association (the “Shareholding Association”) for three years after theestablishment. Until the termination of the Trust, the shares will be continually sold to the Shareholding Association.
If a significant amount of realized gains on sale of shares remain within the Trust upon its termination, these gains will
be distributed as residual assets to the Shareholding Association members who satisfy the eligibility requirements forbeneficiaries. Moreover, the Bank provides guarantees for the loans undertaken to acquire its shares. Therefore, if
there is a residual loan balance equivalent to a realized loss on the sale of these shares within the Trust upon its
termination due to a decline in the Bank’s stock price, the Bank will repay this residual loan balance based on theguarantee agreement. The Trust was terminated as of December 2022.
② The remaining balance of the Bank’s own stock in the trusts(i) The Bank records the remaining balance of the Bank’s own stock in the trusts as treasury stock in the section of
net assets.
(ii) The carrying amount and the number of shares of such treasury stock as of March 31, 2022 were \286 million and
114 thousand shares. Since all of the Bank’s stocks held by the Trust were sold and the Trust was terminatedduring the fiscal year ended March 31, 2023, such treasury stock was not recorded as of March 31, 2023.
③ Carrying amounts of debt recorded through the application of the gross price method
The carrying amounts of debt recorded through the application of the gross price method as of March 31, 2022 was¥337 million. Since the Trust was terminated, such debt was not recorded as of March 31, 2023.

3. Cash and Cash Equivalents
A reconciliation between “Cash and due from banks” in the consolidated balance sheets and “Cash and cash
equivalents at end of year” in the consolidated statements of cash flows at March 31, 2022 and 2023 is as follows:
Thousands ofMillions of yen
2022
Cash and due from banks ------------- \Due from banks (excluding deposits with
the Bank of Japan) ------------------Cash and cash equivalents ------------ \U.S. dollars
2023

2023

690,236\482,868$

3,616,176(1,631)
688,605\(26,374)
456,494$(197,513)
3,418,662

16

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

4.

Financial Instruments（１） Overview of financial instruments① Policy on financial instruments
The Bank and its consolidated subsidiaries (the “Group”) provide mainly banking services and other financial services,
including leasing. The Group holds financial assets such as loans and securities raised by deposits. In order toeffectively manage its assets and liabilities, the Bank works on asset and liability management (ALM) and conducts
derivative transactions as part of this ALM.
② Descriptions and risks of financial instruments
The financial assets of the Bank consist mainly of loans to domestic customers. They are subject to credit risk arisingfrom changes in the domestic economy and the financial status of the borrowers. The Group reduces its total credit
risk by holding a well-diversified portfolio of loans and not concentrating it lending with certain customers.
Also the Bank holds securities that consist mainly of stocks, bonds and mutual funds for investment and trading
purposes. They are subject to credit risk, interest rate risk and market price risk. The Group's portfolio consists
mainly of government bonds and municipal bonds, which are low risk.
The financial liabilities of the Bank consist mainly of the deposits of domestic customers, which create liquidity risk
in connection with the raising of necessary funds in case of unexpected withdrawal. To manage this risk, the Group
tries to maintain and improve the soundness and reliability of its assets and ensure stable cash management.
Derivative transactions include interest rate swaps, currency swaps, forward foreign exchange contracts, currency
options and bond futures contracts. The Bank engages in derivative transactions principally to stabilize its earnings byhedging the risk of future fluctuations in interest rates，market prices and exchange rates related to assets andliabilities. These transactions are also executed in order to provide various services to customers.
For interest rate risk, the Bank applies hedge accounting based on “Industry Committee Report No. 24.” The Bank
assesses the effectiveness of hedges in offsetting movement in the fair value from changes in interest rates byclassifying hedged items such as deposits and loans and hedging instruments such as interest rate swaps by incidence
and remaining period. For cash flow hedges, the Bank assesses the effectiveness by verifying the correlation of theinterest rate fluctuation between the hedged items and the hedging instruments.
For exchange rate risk, the Bank applies hedge accounting based on “Industry Committee Report No. 25.” The
Bank uses currency swaps and other methods to hedge exchange rate risk and evaluates the effectiveness of thehedges by confirming that a foreign currency hedge position exists in an amount equivalent to the foreign currency
denominated monetary assets or liabilities being hedged.
Derivative transactions are subject to market risk and credit risk, but the Bank does not engage in complicated or
speculative transactions.
③ Risk management systems for financial products
The Bank and its consolidated subsidiaries manage risk as follows:17

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

4.

Financial Instruments (cont’d)(i) Credit risk management
The Bank prescribes “Credit Risk Management Standards” and carries out its credit risk management by division,
maintains an appropriate portfolio and seeks to improve on the soundness of its assets. In addition, the Bank reviews
the system for credit risk management periodically and works to improve it.
The Credit Division functions independently from the Business Promotion Division to maintain and improve thesoundness of assets. The Risk Management Division verifies credit ratings, conducts self assessments, administers thecredit portfolio and exerts influence on the system of internal checks to branches and the Credit Division while trying
to further enhance the credit rating and self-assessment.
(ii) Market risk management(Management for interest rate risks, market price risks and foreign exchange risks)
The Bank has set its market risk policy “to take adequate market risk within the Bank’s management vitality, assessmarket risk accurately and execute policy and controls that corresponds to that vitality and the scale andcharacteristics of the business to earn a profit.” In this way, the Bank enhances its system of management andoptimizes its market risk management.
The Trading Division of the Bank, in addition to maintaining the Trade Execution Section (front office), maintains
the Market Risk Management Section (middle office) and the Administrative Processing Section (back office) to
confirm and monitor the transactions of the Trade Execution Section, sets the tolerance levels for risk, measures
profit and loss on market risks. The middle office reports these risks to the Board of Directors regularly.
The Risk Management Division, which is independent from the divisions above, monitors risk and profit and loss andreports the information to the ALM Committee regularly. The Group strives to improve risk management, in part, by
discussing future measures. The Bank uses the VaR (Value at Risk) method for calculations of interest rate risk,
foreign exchange risk and market price risk. For interest rate risk denominated in Japanese yen, the Bank analyzes thegaps in risk, including the deposits and loans of the entire Bank, and uses the BPV (Basis Point Value) method andpresent value method for detailed management.

18

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

4.

Financial Instruments (cont’d)(Quantitative information on market risk)
The Bank measures market risk based on the VaR method. The variance-covariance model is applied in themeasurement (holding period: 60 business days (cross-shareholdings: 120 business days), confidence interval: 99% andhistorical observation period: 250 business days). The amount of market risk (estimated amount of loss) of the Groupas of March 31, 2022 and 2023 was \71,980 million and \68,301 million ($511,503 thousand), respectively.
The Bank identifies the interest rate risk sorted by an internal model for liquid deposits which have had no incomingor outgoing movement to or from the Bank for a considerable period of time as core deposits and categorizing theseusing maturity periods of up to 10 years.
The Bank periodically performs back-testing to compare VaR measured by the model with the hypothetical profit
and loss which are assumed to have been incurred when the portfolio was fixed, as it was at the point the risk amount
was measured. The bank believes that the model estimates market risk with sufficient accuracy. As VaR represents themarket risk arising with a certain probability using a statistical methodology based on historical market volatilities,
however, risks arising from drastic market movements beyond normal estimation may not be captured by this method.
(iii) Liquidity risk management related to fund procurement
The Bank maintains the soundness and reliability of its assets and makes daily analysis of fund procurement and asset
management for the stable supply of funds and maintains a sound level of highly negotiable debt securities, such as
government bonds. In addition, the Bank sets risk management policies and organizes liquidity risk management tomaximize its assurance.
④ Supplementary explanation for the fair value of financial instruments
Since certain assumptions are used in the calculation of the fair value of financial instruments, the results of thecalculations may vary if different assumptions are used.

19

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

4.

Financial Instruments (cont’d)(2) Fair value of financial instruments
The following table summarizes book values, fair values and any differences between the book value and fair value as ofMarch 31, 2022 and 2023. Stocks with no available fair market values and investments in partnerships were excluded
from the table (see Note 1). Notes to “Cash” have been omitted, and notes to deposits with the Bank of Japan in “Duefrom banks,” “Call loans and bills purchased,” “Foreign exchange (assets and liabilities),” “Call money and bills sold”
and “Payables under securities lending transactions” have been omitted since their book values approximate the fairvalue because of their short maturities.

(1) Due from banks (excluding deposits
with the Bank of Japan)(2) Commercial paper and other debt
purchased(3) Securities
Held-to-maturity debt securities
Available-for-sale securities(4) Loans and bills discounted
Reserve for possible loan losses (*1)(5) Lease receivables and investment assets
Reserve for lease losses (*1)
Total assets:(1) Deposits(2) Negotiable certificates of deposit(3) Borrowed money
Total liabilities:
Derivative transactions (*2)
Hedge accounting not applied
Hedge accounting applied (*3)
Total derivative transactions:

Millions of yen
2022
Book value
Fair value

Difference

\

\

1,631

\

1,631

-

1,398

1,398

-

1,015,286
2,117,033(18,518)
2,098,514
28,935(802)
28,132\ 3,144,963\ 3,167,043
133,504
266,375\ 3,566,923

1,015,286-

2,106,060

7,545

30,087\3,154,464\3,167,174
133,506
266,353\3,567,034

\

\

\

(5,071)(8,234)(13,306)(5,071)(8,234)\ (13,306)

\
\

\
\
\

1,955
9,500
131
1
(22)
111
-

(*1) “General and specific reserves for loan losses related to loans and bills discounted” and “General and specific reserves for loan
losses related to lease receivables and investment assets” are excluded.
(*2) Derivative transactions recorded in other assets and liabilities are presented as a lump sum.
Net claims and debts that arise from derivative transactions are presented on a net basis, and net liabilities are presented inparentheses.
(*3) Deferred hedging is applied mainly to interest rate swaps and other designated as hedging instruments in offsetting movementin the fair value from changes in interest rates. The “Treatment of Hedge Accounting for Financial Instruments that Reference
LIBOR” (PITF No. 40, March 17, 2022) is applied to these hedging relationships.

20

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

4.

Financial Instruments (cont’d)(1) Due from banks (excluding deposits
with the Bank of Japan)(2) Commercial paper and other debt
purchased(3) Securities
Held-to-maturity debt securities
Available-for-sale securities(4) Loans and bills discounted
Reserve for possible loan losses (*1)(5) Lease receivables and investment assets
Reserve for lease losses (*1)

Millions of yen
2023
Book value
Fair value

Difference

Thousands of U.S. dollars
2023
Book value
Fair value
Difference

\

\

$

26,374\26,259(115)

197,513$

196,652

$

(861)

817

817

-

6,118

6,118

-

917,942
2,172,312(18,227)
2,154,085
30,057(670)
29,386\ 3,128,606\ 3,250,619
130,006
128,110\ 3,508,735

917,942-6,874,425-

2,158,734

4,648

6,874,425
16,268,344(136,501)
16,131,843
225,095(5,017)220,070$23,429,985$24,343,735
973,608
959,409$26,276,754

16,166,659

34,80831,372
1,986
234,943
14,873
Total assets:\3,135,125\ 6,519$23,478,806 $ 48,820(1) Deposits\3,250,725\
106$24,344,529 $793(2) Negotiable certificates of deposit
130,008
1
973,623
7(3) Borrowed money
128,071(38)
959,117(284)
Total liabilities:\3,508,805\
69$26,277,278 $516
Derivative transactions (*2)
Hedge accounting not applied\(564) \
(564) \$
(4,223) $(4,223) $Hedge accounting applied (*3)
(10,214)(10,214)(76,492)(76,492)
Total derivative transactions:\ (10,778) \ (10,778) \$ (80,715) $ (80,715) $(*1) “General and specific reserves for loan losses related to loans and bills discounted” and “General and specific reserves for loan
losses related to lease receivables and investment assets” are excluded.
(*2) Derivative transactions recorded in other assets and liabilities are presented as a lump sum.
Net claims and debts that arise from derivative transactions are presented on a net basis, and net liabilities are presented inparentheses.
(*3) Deferred hedging is applied mainly to interest rate swaps and other designated as hedging instruments in offsetting movementin the fair value from changes in interest rates. The “Treatment of Hedge Accounting for Financial Instruments that Reference
LIBOR” (PITF No. 40, March 17, 2022) is applied to these hedging relationships.

(Note 1) Stocks with no available fair market value and investments in partnerships were not included in
Available-for-sale securities in “(2) Fair value of financial instruments” above. These financial instruments were as
follows:
Book value
Millions of yen
Millions of yen
Thousands of U.S. dollars
2022
2023
2023
Unlisted stocks (*1)(*2) \7,601 \
7,899 $
59,155Investments inpartnerships (*3)\
8,975 \
9,528 $
71,354(*1) Unlisted stocks are not included in the disclosure of fair value in accordance with Paragraph 5 of the Implementation Guidanceon Disclosures about Fair Value of Financial Instruments (ASBJ Guidance No. 19, March 31, 2020).
(*2) The amount of unlisted stocks impaired during the years ended March 31, 2022 and 2023 was \72 million and \29 million ($217
thousand), respectively.
(*3) Investments in partnerships are not included in the disclosure of fair value in accordance with Paragraph 24-16 of the
Implementation Guidance on Accounting Standard for Fair Value Measurement (ASBJ Guidance No. 31, June 17, 2021).

21

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

4.

Financial Instruments (cont’d)(Note 2) Expected collection of monetary claims and securities with maturities:

Within 1
year¥649,826
18,358

1-3
years
\
-

Millions of yen
2022
3-5
5-7
years
years
\
\
-

7-10
years
\
-

Over 10years\-

Due from banks
Call loans and bills purchased
Commercial paper and other debt
purchased
1,397
Securities
Held-to-maturity debt securities
Japanese government bonds
Municipal bonds
Short-term corporate bonds
Corporate bonds
OthersAvailable-for-sale securities with
101,450
182,374
112,778
82,89489,426
170,101
maturities
Japanese government bonds
33,10041,6004,000
12,0008,000
71,300
Municipal bonds
19,04737,93137,14824,23819,933
26,690
Short-term corporate bonds
Corporate bonds
19,45425,69820,807
13,21022,32367,733
Others29,84877,14450,82133,445
39,1694,376
Loans and bills discounted (*1)
422,640
398,914331,998
242,512264,249
394,169
Lease receivables and investment
assets (*2)
8,318
11,914
6,313
1,238
457
107
Total
¥1,201,993¥593,203¥451,090¥326,645¥354,132¥564,378(*1) Loans and bills discounted on which full repayment is not expected from debtors such as bankrupt obligors,
substantially bankrupt obligors and intensively controlled obligors in the amount of \42,985 million and those
without terms in the amount of \19,562 million are not included.
(*2) Lease receivables and investment assets on which full repayment is not expected from debtors such as bankrupt
obligors, substantially bankrupt obligors and intensively controlled obligors in the amount of \585 million are notincluded. There are no monetary claims or securities without maturities.

22

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

4.

Financial Instruments (cont’d)Due from banks
Call loans and bills purchased
Commercial paper and other debt
purchased
Securities
Held-to-maturity debt securities
Japanese government bonds
Municipal bonds
Short-term corporate bonds
Corporate bonds
OthersAvailable-for-sale securities withmaturities
Japanese government bonds
Municipal bonds
Short-term corporate bonds
Corporate bonds
OthersLoans and bills discounted (*1)
Lease receivables and investment
assets (*2)
TotalMillions of yen
2023
3-5
5-7
years
years
\
\
-

Within 1
year¥416,431
140,894

1-3
years\ 25,000
-

816

-

-

-

-

-

-

-

7-10
years
\
-

Over 10
years
\
-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

82,375

131,741

123,496

59,351

69,134

183,92118,70019,47830,112
14,083416,333

23,70044,171
46,21817,651
419,848

8,700
31,06462,26821,463355,061

10,50019,19818,665
10,987
266,098

19,50014,76728,736
6,130
255,816

64,00041,03577,551
1,335
396,543

8,514¥1,065,365

12,423¥589,013

6,574¥485,132

1,517¥326,967

499¥325,451

47¥580,513

23

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

4.

Financial Instruments (cont’d)Within 1
year$3,118,632
1,055,148

Thousands of U.S. dollars
2023
1-3
3-5
5-7
years
years
years
$ 187,223
$
$
-

7-10
years

Over 10years$-

Due from banks$
Call loans and bills purchased
Commercial paper and other debt
purchased
6,110
Securities
Held-to-maturity debt securities
Japanese government bonds
Municipal bonds
Short-term corporate bonds
Corporate bonds
OthersAvailable-for-sale securities with
616,902
986,602924,855444,476
517,741
1,377,375
maturities
Japanese government bonds
140,043
177,488
65,15378,634
146,034
479,293
Municipal bonds
145,869
330,794
232,636
143,772
110,589
307,309
Short-term corporate bonds
Corporate bonds
225,507346,124
466,322
139,781215,202580,775
Others105,466
132,187
160,735
82,28145,907
9,997
Loans and bills discounted (*1)
3,117,898
3,144,222
2,659,035
1,992,795
1,915,794
2,969,692
Lease receivables and investment
assets (*2)
63,76093,03549,232
11,360
3,736
351
Total
$7,978,469 $4,411,091 $3,633,131 $2,448,640 $2,437,287 $4,347,435(*1) Loans and bills discounted on which full repayment is not expected from debtors such as bankrupt obligors,
substantially bankrupt obligors and intensively controlled obligors in the amount of \43,230 million ($323,747
thousand) and those without terms in the amount of \19,379 million ($145,128 thousand) are not included.
(*2) Lease receivables and investment assets on which full repayment is not expected from debtors such as bankrupt
obligors, substantially bankrupt obligors and intensively controlled obligors in the amount of \480 million ($3,594
thousand) are not included. There are no monetary claims or securities without maturities.

24

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

4.

Financial Instruments (cont’d)(Note 3) Amount payable for borrowed money and other interest-bearing liabilities:

Deposits (*)
Negotiable certificates ofdepositCall money and bills soldPayables under securities
lending transactions
Borrowed money
Total

Deposits (*)
Negotiable certificates ofdepositCall money and bills soldPayables under securities
lending transactions
Borrowed money
Total

Millions of yen
2022
3-5
5-7
years
years
\ 19,116\
623

Within 1
year\ 3,000,610

1-3
years
\ 145,207

7-10
years
\ 1,485

Over 10years\-

133,504
12,850

-

-

-

-

-

40,945
243,871\ 3,431,782

20,518\ 165,725

1,864\ 20,980

72
695

50
\ 1,535\-

Millions of yen
2023
3-5
5-7
years
years
\ 18,676\
867

Within 1
year\ 3,107,960

1-3
years
\ 121,558

7-10
years
\ 1,556

Over 10years\-

130,006
-

-

-

-

-

-

65,373\ 3,303,340

6,261\ 127,819

55,260\ 73,936854\ 1,722143\ 1,700

\

217
217

Thousands of U.S. dollars
2023
1-3
3-5
5-7
years
years
years
$ 910,342$ 139,863$ 6,492

Within 1
year$ 23,275,368

7-10
years
$ 11,652

Over 10years$-

Deposits (*)
Negotiable certificates ofdeposit973,608
Call money and bills soldPayables under securities
lending transactions
Borrowed money
489,575
46,888
Total$ 24,738,560$ 957,230(*) Demand deposits are included in “Within 1 year.”

25

\

-

-

-

-

413,839$ 553,703

6,395$ 12,895

1,070$ 12,731

1,625$ 1,625

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

4.

Financial Instruments (cont’d)(3) Fair value of financial instruments and classification by level of inputs
Based on the observability and the significance of the inputs used to determine fair values, the fair value of financial
instruments is presented by categorizing measurements into the following three levels:
Level 1 : fair value measured by quoted prices of identical assets or liabilities in active markets.
Level 2 : fair value measured using observable inputs other than Level 1.
Level 3 : fair value measured using unobservable inputs.
When multiple inputs from different levels were used in measuring fair value, the Bank and its subsidiaries classified
the fair values into the level from which the lowest level of inputs were used.

① Financial instruments measured at fair value in the consolidated balance sheet
Millions of yen
2022
Level 2
Level 3

Level 1
Commercial paper and otherdebt purchased\

Securities
Available-for-sale securities
Japanese government bonds
and municipal bonds
Corporate bonds
Equity securities

-

\

-

\

Total

201

\

201

173,782
127,504

167,769
154,196-

18,912-

341,552
173,109
127,504

55,097

175,077-

230,174

Interest rate related

-

1,727

-

1,727

Currency related

-

6,082

-

6,082

Others (*1)
Derivative transactions (*2):

Total assets\

356,384\

504,853\

19,114\880,351

\

-

\

1,859

\

-

\

1,859

Derivative transactions (*2):
Interest rate related
Currency related-

19,256

Total liabilities-

19,256\\21,116\\21,116(*1) Investment trusts to which the transitional treatment stipulated in Paragraph 26 of the Implementation Guidanceon Accounting Standard for Fair Value Measurement (ASBJ Guidance No. 31, July 4, 2019) was applied were
excluded from the above table. The amount of such investment trusts, etc., in the consolidated balance sheet was\142,945 million.
(*2) Derivative transactions are interest rate swaps designated as hedging instruments in offsetting market
fluctuations of loans and bills discounted, etc., and deferred hedging is mainly applied. The Treatment of Hedge
Accounting for Financial Instruments that Reference LIBOR (PITF No. 40, March 17, 2022) is applied to these
hedging relationships.

26

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

4.

Financial Instruments (cont’d)Millions of yen
2023
Level 2
Level 3

Level 1
Commercial paper and otherdebt purchased\

Securities
Available-for-sale securities
Japanese government bonds
and municipal bonds
Corporate bonds
Equity securities

-

\

-

\

Total

103

\

103

147,591108,216

170,687
245,380-

18,448-318,279
263,829
108,216

77,217150,398-

227,616

Interest rate related

-

1,124

-

1,124

Currency related

-

7,300

-

7,300

OthersDerivative transactions (*1):

Total assets\

333,026\

574,892\

18,552\926,471

\

-

\

1,843

\

-

\

1,843

Derivative transactions (*1):
Interest rate related
Currency related
Total liabilities\-

17,360\27

19,204\-

17,360\19,204

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

4.

Financial Instruments (cont’d)Thousands of U.S. dollars
2023
Level 2
Level 3

Level 1
Commercial paper and otherdebt purchased$

Securities
Available-for-sale securities
Japanese government bonds
and municipal bonds
Corporate bonds
Equity securities

-

$

-

$

Total

771

$

771

1,105,302
810,424

1,278,267
1,837,639-

138,156-

2,383,576
1,975,803
810,424578,274

1,126,323-

1,704,605

Interest rate related

-

8,417

-

8,417

Currency related-

54,669-54,669$ 2,494,016$ 4,305,339$

138,935$ 6,938,298

$

$

$

-

OthersDerivative transactions (*1):

Total assets
Derivative transactions (*1):
Interest rate related
Currency related-

13,802130,008

Total liabilities-$

13,802130,008$$
143,817$$
143,817(*1) Derivative transactions are interest rate swaps designated as hedging instruments in offsetting market
fluctuations of loans and bills discounted, etc., and deferred hedging is mainly applied. The Treatment of Hedge
Accounting for Financial Instruments that Reference LIBOR (PITF No. 40, March 17, 2022) is applied to these
hedging relationships.

28

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

4.

Financial Instruments (cont’d)② Financial instruments other than those measured at fair value in the consolidated balance sheet
Millions of yen
2022
Level 2
Level 3

Level 1
Due from banks (excluding
deposits with the Bank of Japan)
Commercial paper and otherdebt purchased

\

-

\

1,631

\

Total

-

\

1,631

-

-

1,197

1,197

-

-

2,106,060

2,106,060--

30,08730,087

1,631\ 2,137,345\ 2,138,976\-\ 3,167,174

Loans and bills discounted
Lease receivables andinvestment assets
Total assets

\

-

\

Deposits\-\ 3,167,174

Negotiable certificates of deposit-

133,506-

133,506

Borrowed money-

255,425

10,928266,353-\ 3,556,106

10,928\ 3,567,034

Total liabilities

\

29

\

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

4.

Financial Instruments (cont’d)Millions of yen
2023
Level 2
Level 3

Level 1
Due from banks (excluding
deposits with the Bank of Japan)
Commercial paper and otherdebt purchased
Loans and bills discounted
Lease receivables andinvestment assets
Total assets

\

-

\

Deposits

\

\

-

\

26,259

\

Total

-

\

26,259--713
2,158,734

713
2,158,734--

31,372

31,372

26,259\ 2,190,820\ 2,217,079\-\ 3,250,725-\ 3,250,725

Negotiable certificates of deposit-

130,008-

130,008

Borrowed money-

114,558

13,512

128,071-\ 3,495,292

13,512\ 3,508,805

Total liabilities\

Thousands of U.S. dollars
2023
Level 2
Level 3

Level 1
Due from banks (excluding
deposits the Bank of Japan)
Commercial paper and otherdebt purchased

$

\

-

$

196,652

$

Total

-

$

196,652

-

-

5,339

5,339

-

-

16,166,659

16,166,659--

234,943

234,943

196,652$ 16,406,949$ 16,603,602$-$ 24,344,529

Loans and bills discounted
Lease receivables andinvestment assets
Total assets

$

-

$

Deposits$-$ 24,344,529

Negotiable certificates of deposit-

973,623-

973,623

Borrowed money-

857,919

101,190959,117-$ 26,176,080

101,190$ 26,277,278

Total liabilities

$

30

$

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

4.

Financial Instruments (cont’d)(Note 1) Valuation techniques and inputs used in measuring fair value
AssetsDue from banks (excluding deposits with the Bank of Japan)
The fair value of due from banks (excluding deposits with the Bank of Japan) with no maturity or short contractual
terms (within 1 year) is considered to be the book value because the fair value approximates the book value. Thosewith maturities and long contractual terms (over 1 year) are deposits with embedded derivatives, and their fair values
are based on values provided by financial institutions using observable inputs such as interest rates and implied
volatilities. The fair value is categorized as Level 2.
Commercial paper and other debt purchased
The fair value of trust beneficial rights in other debt purchased is based on the price quoted for corresponding
securities. For factoring, these transactions have short contractual terms (within 1 year). Therefore, the fair value isconsidered to be the book value because the fair value of these items approximates the book value. The fair value iscategorized as Level 3.
Securities
When quoted unadjusted prices in active markets are available, fair values are categorized as Level 1. This includes
mainly listed equity securities and Japanese government bonds.
When quoted prices are available but not considered to be in active markets, fair values are categorized as Level 2.
This includes mainly municipal bonds, corporate bonds and other securities. For mutual funds for which no quoted
market prices exist, net asset value is used as fair value if there are no significant constraints that would require risk
compensation from market participants with respect to cancellation or repurchase request, and the fair value iscategorized as Level 2.
When quoted market prices are not available, fair values are determined by using valuation techniques such as thediscounted present value method of future cash flows. The valuation is based on the maximum use of observable inputs,
which are TIBOR, swap rates, etc. Of corporate bonds, the inputs for bank-guaranteed private placed bonds include
credit spreads, with interest rates assumed for similar new underwritings of the total amount of principal and interestfor each category based on the issuer’s internal rating and term. The fair value of claims against bankrupt obligors,
substantially bankrupt obligors and intensive control obligors, because the bad debt is calculated based on the present
value of the expected future cash flow or the estimated collectable amount from guarantees, approximates theconsolidated balance sheet amount as of the consolidated balance sheet date less the allowance for bad debts. Whensignificant unobservable inputs are used for valuation, the fair value is categorized as Level 3.
Loans and bills discounted
The fair value of loans and bills discounted with floating interest rates is considered to be equal to the book value
since the rate reflects the market rate in a short period and the fair value of these items approximates the book value,
unless the creditworthiness of the borrower changes significantly from the inception date. The fair value of loans andbills discounted with a fixed rate is calculated as the present value, discounting future cash flow at credit spread witha rate that reflects the proper market rate corresponding to the remaining period and credit risk based on the internalrating. The fair value of loans and bills discounted with short contractual terms (within 1 year) is considered to be thebook value because the fair value of these items approximates the book value. In addition, the fair value of claims
against bankrupt obligors, substantially bankrupt obligors and intensive control obligors, because the bad debt iscalculated based on the present value of the expected future cash flow or the estimated collectable amount fromcollateral and/or guarantees, approximates the consolidated balance sheet amount as of the consolidated balance
sheet date less the allowance for bad debts. The fair value of loans and bills discounted with no maturity due toconditions such as limiting the loans to the value of pledged assets is deemed to be the book value since the fair value
is expected to approximate the book value considering the estimated loan period, interest rate and other conditions.
The fair value is categorized as Level 3.

31Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

4.

Financial Instruments (cont’d)

Lease receivables and investment assets
The fair value of lease receivables and investment assets takes into consideration the loan loss ratio of eachcategory of borrower and the discounted market interest rate on the consolidated balance sheet date. In addition, thefair value of claims against bankrupt obligors, substantially bankrupt obligors and intensive control obligors, because
the bad debt is calculated based on the present value of the expected future cash flow or the estimated collectableamount from collateral and/or guarantees, approximates the consolidated balance sheet amount as of the consolidatedbalance sheet date less the allowance for bad debts. The fair value is categorized as Level 3.
Liabilities
Deposits and negotiable certificates of deposit
The fair value of demand deposits is considered to be the payable amount as of the consolidated balance sheet date(the book value). The fair value of floating interest rate deposits, time deposits (matured), nonresident Japanese yen
deposits and foreign currency time deposits is considered less important and is expected to approximate the bookvalue. The fair value of fixed-term deposits and negotiable certificates of deposit is calculated as the present value,
discounting the future cash flow at a rate that reflects when the Bank received the new deposit. The fair value ofdeposits with short terms (within 1 year) is considered to be the book value because the fair value of these items
approximates the book value. The fair value is categorized as Level 2.
Borrowed money
The fair value of borrowed money with floating interest rates is considered to be the book value since the rate
reflects the market rate in a short period and the fair value of these items approximate the book value, unless thecreditworthiness of the Bank and its consolidated subsidiaries changes significantly from the inception date. The fairvalue of borrowed money with short contractual terms (within 1 year) is considered to be the book value because thefair value of these items approximates the book value. The fair value is categorized as Level 2.
The fair value of borrowed money with a fixed rate is calculated as the present value by discounting the total amountof principal and interest at an interest rate for similar new loans. The fair value is categorized as Level 3.
Derivative Transactions
Derivative transactions for which unadjusted quoted market prices in active markets are available are categorized as
Level 1. This mainly includes bond futures contracts and interest rate futures contracts.
However, since most derivative transactions are over-the-counter transactions and there are no published quoted
market prices, fair values are calculated using valuation techniques such as the discounted present value method or
the Black-Scholes model, depending on the type of transaction and the period to maturity. The main inputs used inthese valuation techniques are interest rates, exchange rates, volatility, etc. When unobservable inputs are not usedor when they are used but their effect is not material, the fair values are categorized as Level 2. This includes Plain
Vanilla interest rate swaps, currency swaps, currency options, and foreign exchange forward contracts.

32

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

4.

Financial Instruments (cont’d)(Note 2) Description of the fair value of Level 3 financial instruments carried on the consolidated balance sheet at fairvalue
① Quantitative information on significant unobservable inputs
2022
Category

Valuation
methodology

Significant
unobservable inputs

Input range

Weighted
average of
inputsDiscounted present
value technique

Credit spread

0.4447179% 3.0155407%

1.1135471%

Securities
Available-for-sale securities
Corporate bonds

2023
Category

Valuation
methodology

Significant
unobservable inputs

Input range

Weighted
average of
inputsDiscounted present
value technique

Credit spread

0.059% - 5.997%

0.828%

Securities
Available-for-sale securities
Corporate bonds② Reconciliation from the beginning balance to the ending balance, valuation gains (losses) recognized for the period
Millions of yen
2022
Income (expenses) or othercomprehensive income

Commercial paperand other debt
purchased
Securities
Available-for-salesecurities
Corporate
bonds

Beginningbalance

Recordedin income(expenses)
(*1)

\

\

319

18,886-(2)

Recorded inothercomprehensive
income (*2)\(1)

Net ofpurchases,
sales,
issuanceandsettlement

\

(116)

19

8

Reclassification
to Level 3 fair
value

\

-

-

Reclassificationfrom Level 3
fair value

\

-

-

Endingbalance

Valuation
gains(losses)onfinancialassetsandliabilities
(*1)

\

\

201

18,912--(*1) The valuation losses are included in “other operating expenses” in the consolidated income statements.
(*2) The valuation gains (losses) are included in “net unrealized holding gains (losses) on securities” in the
consolidated statements of comprehensive income.

33

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

4.

Financial Instruments (cont’d)Millions of yen
2023
Income (expenses) or othercomprehensive income

Commercial paperand other debt
purchased
Securities
Available-for-salesecurities
Corporate
bonds

Beginningbalance

Recordedin income(expenses)
(*1)

\

\

201

18,912

Net ofpurchases,
sales,
issuanceandsettlement

Recorded inothercomprehensive
income (*2)

-

\

(18)

(0)

\

Reclassification
to Level 3 fair
value

(97)

127

\

Reclassificationfrom Level 3
fair value

-

(572)

\

Endingbalance--

Valuation
gains(losses)onfinancialassets andliabilities
(*1)

\

-

103

\

-

18,448-

Thousands of U.S. dollars
2023
Income (expenses) or othercomprehensive income

Commercial paperand other debt
purchased
Securities
Available-for-s
ale securities
Corporate
bonds

Beginningbalance

Recordedin income(expenses)
(*1)

$

$

1,505

141,631-(134)

Recorded inothercomprehensive
income (*2)

$

(0)

951

Net ofpurchases,
sales,
issuanceandsettlement

$

(726)

(4,283)

Reclassification
to Level 3 fair
value

$

-

-

Endingbalance

Valuation
gains(losses)onfinancialassetsandliabilities
(*1)

-

$

$

-

138,156

Reclassificationfrom Level 3
fair value

$

771

-

-

(*1) The valuation losses are included in “other operating income” and “other operating expenses” in the
consolidated income statements.
(*2) The valuation gains (losses) are included in “net unrealized holding gains (losses) on securities” in the
consolidated statements of comprehensive income.
③ Description of the fair value valuation process
The Group has established policies and procedures for the calculation of fair value in the risk management division,and each trading division calculates fair value in accordance with these policies and procedures. The Group verifies
the validity of the valuation techniques and inputs used to calculate fair value and the appropriateness of the levelclassification of the fair value in the valuation division.
In calculating fair value, the Group uses valuation models that most appropriately reflect the nature, characteristics,
and risks of individual assets. When the Group uses quoted prices obtained from third parties, the Group also verifies
the appropriateness of the prices by confirming the valuation techniques and inputs used, comparing them with themarket prices of similar financial instruments, and by other appropriate methods.

34Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

4.

Financial Instruments (cont’d)④ Description of the effect on fair value when significant unobservable inputs are changed
The most significant unobservable input used in the calculation of the fair value of bank-guaranteed private
placements of bonds is the credit spread. A significant increase (decrease) in this input, by itself, will result in asignificant decrease (increase) in the fair value.

5.

Securities

Unsecured securities that have been loaned and that allow the borrowers to sell the borrowed securities amounted to\56,166 million and \52,863 million ($395,888 thousand) as of March 31, 2022 and 2023, respectively, and areincluded in Japanese government bonds in Securities.
(1) Acquisition costs, book values and fair values of securities with market values
The following tables summarize acquisition costs, book values and fair values of securities with market values as ofMarch 31, 2022 and 2023. The amounts in the following tables include trust beneficiary interests in commercial paperand other debt purchased as well as securities.
① Trading securities for the years ended March 31, 2022 and 2023:
Not applicable.
② Held-to-maturity debt securities for the years ended March 31, 2022 and 2023:
Not applicable.

35

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

5.

Securities (cont’d)③ Available-for-sale securities:※ Book value exceeded acquisition cost.

Equity securities -----------Bonds:
Japanese government bonds Municipal bonds ----------Corporate bonds ---------Other --------------------Total ----------------------

Book (fair)value\
122,632

Millions of yen
2022
Acquisition
cost\
47,111

Difference\
75,520116,184
75,92155,065203,163
572,967\

112,330
74,65153,759187,004
474,857

\

3,853
1,269
1,305
16,15998,109

\

5,529

\

(657)

\

(2,073)(779)(1,693)(7,482)(12,686)\

85,422\※ Book value did not exceed acquisition cost.
Equity securities -----------Bonds:
Japanese government bonds Municipal bonds ----------Corporate bonds ---------Other --------------------Total ----------------------

\

4,872

\

57,59891,847118,043
170,158
442,520\

59,672
92,627
119,737
177,640
455,207

Grand total -----------------\ 1,015,487\

930,06536

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

5.

Securities (cont’d)※ Book value exceeded acquisition cost.

Equity securities -----------Bonds:
Japanese government bonds Municipal bonds ----------Corporate bonds ---------Other --------------------Total ----------------------

Book (fair)value\
103,147

Millions of yen
2023
Acquisition
cost\
40,574

Difference\
62,572

98,06170,904
89,341
101,340
462,795\

94,321
69,67588,28891,191
384,052

\

3,740
1,228
1,052
10,14978,743

\

5,748

\

(678)

\

(2,267)(1,797)(4,577)(6,963)(16,283)\

62,460\※ Book value did not exceed acquisition cost.
Equity securities -----------Bonds:
Japanese government bonds Municipal bonds ----------Corporate bonds ---------Other --------------------Total ----------------------

\

5,069

\

49,53099,783
174,488
126,379455,250\

51,797
101,580
179,065
133,342
471,533

Grand total -----------------\

918,046\855,58537

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

5.

Securities (cont’d)※ Book value exceeded acquisition cost.
Thousands of U.S. dollars
2023
Book (fair)
Acquisition
value
cost
Difference
Equity securities ------------Bonds:
Japanese government bonds -Municipal bonds ----------Corporate bonds ----------Other ---------------------Total ----------------------$

772,463734,374
530,996
669,070
758,930$ 3,465,850$

303,856$

468,598$

706,365
521,792
661,184
682,925
2,876,147$

28,0089,196
7,878
76,005
589,702$

43,046$(5,077)$(16,977)(13,457)(34,276)(52,145)(121,942)$

467,760※ Book value did not exceed acquisition cost.
Equity securities ------------Bonds:
Japanese government bonds -Municipal bonds ----------Corporate bonds----------Other ---------------------Total ----------------------$

37,961

370,927
747,270
1,306,732
946,446$ 3,409,346$

387,905
760,727
1,341,009
998,592
3,531,288

Grand total -----------------$ 6,875,204$

6,407,436④ Held-to-maturity debt securities sold for the years ended March 31, 2022 and 2023:
Not applicable.

38

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

5.

Securities (cont’d)⑤ Available-for-sale securities sold in the years ended March 31, 2022 and 2023:

Equity securities ------------Bonds:
Japanese government bonds -Municipal bonds ----------Corporate bonds----------Other ---------------------Total ----------------------

Equity securities -----------Bonds:
Japanese government bonds Municipal bonds ----------Corporate bonds----------Other --------------------Total ----------------------

Equity securities -----------Bonds:
Japanese government bonds Municipal bonds ----------Corporate bonds----------Other --------------------Total ----------------------

Amount sold\
4,152

Millions of yen
2022
Gains
\
1,451

Losses
\
348

9,830
9,717
7,767
43,61975,087

79
7
34
1,469
3,043

11
48
44
1,722
2,175

\

\

\

Amount sold\
29,508Millions of yen
2023
Gains
\
14,079Losses\161

49,563
17,606
13,593
184,237
294,509

599
0
44
1,207
15,931

1,638
400
309
16,87919,388\\\

Thousands of U.S. dollars
2023
Amount sold
Gains
Losses$
220,984$
105,436$1,205
371,175
131,850
101,797
1,379,742$ 2,205,564

4,485
0
329
9,039
119,306$39$

12,266
2,995
2,314
126,406
145,195

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

5.

Securities (cont’d)⑥ Securities reclassified for the years ended March 31, 2022 and 2023:
Not applicable.
⑦ Available-for-sale securities with market values are considered impaired if the market value decreases materiallybelow the acquisition cost and the decline is not considered recoverable. The market value is used for the balance
sheet amount, and the amount of write-down is accounted for as an impairment loss for the fiscal year. Impairment loss
for the fiscal year ended March 31, 2022 was \95 million, including \93 million of equity securities and \2 million of
corporate bonds. Impairment loss for the fiscal year ended March 31, 2023 was \39 million ($292 thousand), including\18 million ($134 thousand) of equity securities and \21 million ($157 thousand) of corporate bonds.
The market value is deemed to have decreased materially when it has fallen by 50% or more from the acquisition cost.
In such cases, impairment accounting is applied uniformly. In cases in which the market value has fallen by 30% or more
but less than 50%, historical price trends over a specific period and the recent business performance of the issuing
company are taken into account to determine whether or not the acquisition cost can be recovered. Securities whose
acquisition costs are deemed not to be recoverable are written down to the current market value.
(2) Net unrealized holding gains on securities stated at market value
Net unrealized holding gains on securities stated at market value at March 31, 2022 and 2023 were as follows:

Millions of yen
2022
Available-for-sale securities -------------Deferred tax liabilities ------------------Net unrealized holding gains on securities(before adjustment for noncontrollinginterests)---------------------------Noncontrolling interests------------------\Net unrealized holding gains on securities ---\85,504(25,800)

2023\

59,704(1,329)58,37562,626(18,894)

Thousands of
U.S. dollars
2023$

43,731(1,329)\42,401

469,003(141,496)

327,499(9,952)$

317,539（*）Net unrealized holding gains for the years ended March 31, 2022 and 2023 included net unrealized gains of \82
million and \165 million ($1,235 thousand), respectively, on available-for sales securities which are components ofpartnerships, etc.
(3) Guarantee obligations for privately placed bonds
At March 31, 2022 and 2023, the amount of guarantee obligations for privately placed bonds (Securities and Exchange
Law, Article 2, Item 3) included in corporate bonds amounted to \19,198 million and \18,626 million ($139,489
thousand), respectively.

40

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

6．

Loans and Bills Discounted

Claims under the Banking Act and the Act on Emergency Measures for the Revitalization of the Financial Functions
are those recorded in the following accounts in the consolidated balance sheets: the corporate bonds in “securities”(limited to those for which redemption of the principal and payment of interest is guaranteed in whole or in part and forwhich the bonds were issued through private placement of securities (Article 2, Paragraph 3 of the Financial
Instruments and Exchange Act), “loans and bills discounted,” “foreign exchange,” accrued interest and suspense
payments in “other assets,” “customers’ liabilities for acceptances and guarantees,” and “lease receivables andinvestment assets,” and those securities as noted as securities on loan (limited to those under a loan-for-use or alease agreement).

\

16,16327,8151,491
5,303

Thousands of
U.S. dollars
2023$
121,043
208,305
11,166
39,713\50,773$

Millions of yen
Legal bankruptcy and de facto bankruptcy --Bankruptcy risk------------------------Loans past due three months or more------Restructured loans ----------------------\

Total ---------------------------------\

2022
16,38427,497254
7,328
51,4642023

380,236“Legal bankruptcy and de facto bankruptcy” are claims against borrowers who have fallen into bankruptcy for reasons
such as the commencement of bankruptcy proceedings, the commencement or petition for commencement of
rehabilitation proceedings and claims equivalent thereto.
“Bankruptcy risk” are loans to borrowers who are not currently in bankruptcy but are in difficult financial situations
and with a high possibility that the principal and interest cannot be collected according to the contract, excluding“legal bankruptcy and de facto bankruptcy.”“Loans past due three months or more” are loans for which the payment of the principal and/or interest is past due
three months or more from the day following the contractual payment date, excluding “legal bankruptcy and de facto
bankruptcy” and “bankruptcy risk.”“Restructured loans” are loans for which the Bank has relaxed its lending conditions for borrowers in financial
difficulties, such as by a reduction of the original interest rate, the forbearance of interest payments, the granting of amaturity date extension and/or the renunciation of claims in order to support the borrower’s financial recovery or
restructuring. These loans exclude those in “legal bankruptcy and de facto bankruptcy,” “bankruptcy risk” and “loans
past due three months or more.”
The above claim amounts are before deducting any reserve for possible loan losses.

7.

Commercial Bills

Discounts of commercial bills are accounted for as financing transactions as stipulated in Industry Committee Report
No. 24. The Bank has rights to use commercial bills discounted or foreign exchange purchased in the form of sale oruse as (re)collateral. The total face value of commercial bills obtained as a result of discounting was \6,812 million and\7,035 million ($52,684 thousand) at March 31, 2022 and 2023, respectively.

41

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

8.

Commitment Lines

Loan agreements and commitment line agreements related to loans are agreements which oblige the Bank and its
consolidated subsidiaries to lend funds up to a certain limit agreed to in advance. The Bank and its consolidated
subsidiaries lend the funds upon the request of the borrower to draw down funds under the agreement as long as there
is no breach of the various terms and conditions stipulated in the agreement. The unused commitment balances related
to these agreements at March 31, 2022 and 2023 amounted to \384,093 million and \368,311 million ($2,758,264
thousand), respectively. Of these amounts, \370,558 million and \356,570 million ($2,670,336 thousand), respectively,
related to loans in which the term of the agreement was one year or less or in which unconditional cancellation of theagreement was allowed at any time.
In many cases, the term of the agreement expires without the loan ever being drawn down. In these cases, theunused loan commitment does not necessarily affect future cash flows. Conditions are also included in certain loan
agreements which allow the Bank and its consolidated subsidiaries either to decline the request for a loan drawdown or
to reduce the agreed to limit when there is a reason such as a change in financial circumstances or necessity of credit
risk management.
The Bank and its consolidated subsidiaries take various measures to manage credit risk. Such measures include
having the obligor pledge collateral such as real estate or securities on signing the loan agreement or confirming theobligor’s financial condition at regular intervals in accordance with the Bank and its consolidated subsidiaries’
established internal procedures.

42

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

9.

Assets Pledged

At March 31, 2022 and 2023, assets and future receipts pledged as collateral were as follows:

Securities ------------------\

Millions of yen
2022
313,062\2023
134,231

Thousands of
U.S. dollars
2023$
1,005,249

2023
12,476

Thousands of
U.S. dollars
2023$
93,432

112,800

844,753

The above pledged amounts secure the following liabilities:

Deposits ------------------Payables under securities lendingtransactions ---------------Borrowed money ------------\

Millions of yen
2022
12,695\40,945254,000

At March 31, 2022 and 2023, certain investment securities amounting to \1,578 million and \1,593 million ($11,929
thousand), respectively, and other assets of \20,049 million including deposits with the central counterparty of\20,000 million and other of \49 million and other assets of \20,042 million ($150,093 thousand) including deposits
with the central counterparty of \20,000 million ($149,779 thousand) and other of \42 million ($314 thousand),
respectively, were pledged as collateral for exchange settlement and handling and others of government funds or in
substitution for clearing margins on futures and others.
At March 31, 2022 and 2023, other assets included cash collateral paid for financial instruments of \11,507 million
and \8,510 million ($63,730 thousand), respectively, and guarantee deposits of \274 million and \292 million ($2,186
thousand), respectively.

10.

Tangible Fixed Assets

Accumulated depreciation of tangible fixed assets at March 31, 2022 and 2023 amounted to \32,817 million and\33,225 million ($248,820 thousand), respectively. Accumulated capital gains that directly offset acquisition costs oftangible fixed assets to obtain tax benefits at March 31, 2022 and 2023 amounted to \734 million and \696 million($5,212 thousand), respectively. No such offset was newly recorded for the years ended March 31, 2022 and 2023.

11.

Land Revaluation AccountIn accordance with the Land Revaluation Law, the Bank revalued land used in the ordinary course of business as ofMarch 31, 1999. The revaluation excess, net of deferred taxes, is shown as land revaluation account, a separate
component of shareholders' equity. At March 31, 2022 and 2023, the market values of the revalued land decreased
from the revalued amount by \7,584 million and \6,967 million ($52,175 thousand), respectively.

12.

Other Assets

As of March 31, 2022 and 2023, other assets included receivables from contracts with customers of \386 million and\452 million ($3,385 thousand), respectively.

43

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

13.

General and Administrative Expenses

For the years ended March 31, 2022 and 2023, general and administrative expenses included salaries and allowancesof \8,904 million and \9,420 million ($70,545 thousand), respectively, depreciation expenses of \3,120 million and\3,062 million ($22,931 thousand), respectively, and outsourcing expenses of \3,690 million and \3,668 million($27,469 thousand), respectively.

14.

Other Income

For the years ended March 31, 2022 and 2023, other income included gain on sale of securities of \2,661 million and\15,283 million ($114,453 thousand), respectively.

15.

Other Expenses(1) Loss on loans and securities
For the years ended March 31, 2022 and 2023, other expenses included loans written off of \27 million and \18 million($134 thousand), respectively, losses on the sale of securities of \505 million and \161 million ($1,205 thousand),
respectively, and securities written off of \165 million and \48 million ($359 thousand), respectively.
(2) Impairment loss
For the year ended March 31, 2022, the Bank reduced the book value of business use assets whose operating cash
flows had decreased and real estate values had declined and assets that were to be disposed of due to relocation andrebuilding to the recoverable amounts and recognized impairment loss of \140 million.

Area

Purpose of use

OperatingassetsTokushimaarea

Branchesand others

5 locations

Idle assets

Tokushima
area

Idle
assets2 locations

Impairment
loss
Millions of
yen
2022

Type
Land andbuildings(Land)(Buildings)\

Land
Land andbuildings(Land)(Buildings)

Total

135
67
68
4

\
\

140
72
68

The Bank allocates its assets to each branch (or group of branches if the management is in a group), which is thesmallest unit of an asset group, and the consolidated subsidiaries regard each entity as a unit in a group. The
recoverable amount is the net realizable value, which is determined by the appraisal value based on Real EstateAppraisal Standards less the expected disposal cost or zero for assets to be disposed of due to relocation orrebuilding.

44Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

15.

Other Expenses (cont’d)(2) Impairment loss (cont’d)
For the year ended March 31, 2023, the Bank reduced the book value of business use assets whose operating cash
flows had decreased and real estate values had declined and assets that were to be disposed of due to relocation andrebuilding to the recoverable amounts and recognized impairment loss of \701 million ($5,249 thousand).

OperatingassetsIdle assets
Total

Area

Purpose of use

Type

Tokushimaarea

Branches
9 locations
and others

Other area
Tokushimaarea

BranchLand andbuildings(Land)(Buildings)
Buildings

1 location

Impairment loss
Millions ofThousands ofyen
U.S. dollars
2023
\

Land

Idle assets 4 locations

Land andbuildings(Land)(Buildings)

671
565
106
23

$

6
\
\

701
572
129

5,025
4,231
793
172
44

$
$

5,249
4,283
966

The Bank allocates its assets to each branch (or group of branches if the management is in a group), which is thesmallest unit of an asset group, and the consolidated subsidiaries regard each entity as a unit in a group. The
recoverable amount is the net realizable value, which is determined by the appraisal value based on Real EstateAppraisal Standards less the expected disposal cost or zero for assets to be disposed of due to relocation orrebuilding.

45Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

16.

Other Comprehensive Income

Amounts reclassified to net income (loss) in the current period that were recognized in other comprehensive income inthe current or previous periods and the tax effects for each component of other comprehensive income for the years
ended March 31, 2022 and 2023 were as follows:

Millions of yen
2022
2023

Thousands of
U.S. dollars
2023

Net unrealized holding gains (losses) on securities
Increase (decrease) during the year ------------------ \Reclassification adjustments -----------------------Subtotal, before tax ------------------------------Tax (expense) benefit -----------------------------Subtotal, net of tax -------------------------------(20,536)(765)(21,301)
6,481(14,819)

Net deferred gains (losses) on derivatives under hedge
accounting
Increase (decrease) during the year -----------------Reclassification adjustments -----------------------Subtotal, before tax ------------------------------Tax (expense) benefit -----------------------------Subtotal, net of tax -------------------------------

1,119
1,043
2,162
(658)
1,503

(6,762)
6,370
(392)
119
(272)

(50,640)
47,704(2,935)891(2,036)

Remeasurements of defined benefit plans
Increase (decrease) during the year -----------------Reclassification adjustments -----------------------Subtotal, before tax ------------------------------Tax (expense) benefit -----------------------------Subtotal, net of tax ------------------------------Total other comprehensive income ----------------- \

(26)
(26)
8
(18)
(13,334)(16,245)(121,658)

46

\

\

(26,395)
3,517(22,878)
6,905(15,973)$$(197,670)
26,338(171,332)
51,711(119,621)

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

17.

Income Taxes

The Bank and its consolidated subsidiaries are subject to a number of taxes based on income, including corporation
tax, inhabitants tax and enterprise tax.
A reconciliation of the statutory tax rate and effective tax rate for the years ended March 31, 2022 and 2023 was notdisclosed because the difference between the statutory tax rate and effective tax rate was less than 5% of the statutory
tax rate.
Significant components of deferred tax assets and liabilities as of March 31, 2022 and 2023 were as follows:

Millions of yen
2022
2023
Deferred tax assets:
Excess reserve for possible loan losses ---------------- \Excess depreciation ------------------------------Tax loss carryforwards ----------------------------Net deferred gains (losses) on derivatives under hedge
accounting -------------------------------------Others-----------------------------------------Valuation allowance ------------------------------Total deferred tax assets -----------------------------

10,566
702
3

\

9,909
756
4

Thousands of
U.S. dollars
2023$

74,208
5,661
29

10
2,211
(2,657)
10,837130
2,057(2,958)9,900

973
15,404(22,152)
74,140

Deferred tax liabilities:
Deferred gains on real property ---------------------Unrealized gains on securities ----------------------Others-----------------------------------------Total deferred tax liabilities ---------------------------(245)(25,800)(5)(26,050)(245)(18,894)(1)(19,142)(1,834)(141,496)(7)(143,353)

Net deferred tax liabilities----------------------------- \(15,213)47\(9,241)$(69,205)

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

18.

Acceptances and Guarantees

All commitments and contingent liabilities arising in connection with customers' needs in foreign trade and othertransactions are included in “Acceptances and guarantees” in Liabilities in the Consolidated Balance Sheets. A contra
account, “Customers' liabilities for acceptances and guarantees,” representing the Bank's right of indemnity from
customers is shown in Assets.

19.

Borrowed Money

Borrowed money at March 31, 2022 and 2023 consisted of the following:

Millions of yen
2022
2023
Borrowings from banks and others---------------------- \266,375\
128,110
Lease obligations (payable within 1 year)---------------- \64\
57
Lease obligations (excluding those payable within 1 year)--- \57\
45

Thousands of
U.S. dollars
2023$
959,409
$
426
$
337

(Lease obligations are included in other liabilities.)

The following is a summary of aggregate annual maturities of borrowings from banks and others and lease obligations
within 5 years at March 31, 2023.

・Borrowings from banks and others:
Year ending March 31:
2024-----------------------2025-----------------------2026-----------------------2027-----------------------2028------------------------

Millions of yen\
65,3733,586
2,674
54,368891

Thousands of
U.S. dollars$
489,575
26,85520,025407,159
6,672

・Lease obligations:Year ending March 31:
2024-----------------------2025-----------------------2026-----------------------2027-----------------------2028------------------------

Millions of yen
\
57
27
11
5
1

48

Thousands of
U.S. dollars
$

426
202
82
37
7

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

20.

Employees' Severance and Retirement Benefits(1) Overview of retirement benefit plan
The Bank and its consolidated subsidiaries apply risk sharing pension plans and defined contribution pension plans as
their defined contribution plans.
Previously, the Bank and its consolidated subsidiaries applied funded contributory pension plans and lump-sum
payment plans as their defined benefit plans as well as defined contribution pension plans. Of these defined benefit
plans, the defined benefit pension plans have been transferred to risk sharing pension plans which are classified as
defined contribution plans stipulated in Paragraph 4 of “Accounting Standard for Retirement Benefits” (ASBJ
Statement No. 26, December 16, 2016) on April 1, 2021. In addition, the retirement benefit trust established by the
Bank has been cancelled on the same day.
Risk sharing pension plans are designed to maintain the financial balance of the pensions, because in addition to thestandard contribution equivalent, a risk-taking contribution equivalent is stipulated in advance in the policies so thatthe amount of benefits increases or decreases according to the financial status of the risk sharing pension plan in eachconsolidated fiscal year.
Regarding the accounting treatment associated with the transition of retirement benefit plan, “Practical Solution on
Accounting for Risk Sharing Pension Plan” (PITF No. 33, December 16, 2016), “Accounting for Transfer between
Retirement Benefit Plans (ASBJ Guidance No. 1, December 16, 2016) and “Practical Solution on Accounting forTransfer between Retirement Benefit Plans” (PITF No. 2, February 7, 2007) are applied. As a result, gain on
termination of retirement benefit plan of \44 million was recorded in other income for the fiscal year ended March 31,
2022.
(2) Defined benefit plans① Movement in projected benefit obligation (excluding plans to which the simplified method is applied):Thousands of
U.S. dollars
2023

Millions of yen
2022
2023
Projected benefit obligation at beginning of year -- \Service cost ------------------------------Interest cost ------------------------------Actuarial differences -----------------------Retirement benefits paid --------------------Effects of transition to risk sharing pension plan-Projected benefit obligation at end of year ------- \24,853(24,853)
-

49

\

\

-

$

$

-

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

20.

Employees' Severance and Retirement Benefits (cont’d)② Movement in plan assets:
Thousands of
U.S. dollars
2023

Millions of yen
2022
2023
Plan assets at beginning of year --------------- \Expected return on plan assets ---------------Actuarial differences -----------------------Employer contribution ----------------------Employee contribution ----------------------Retirement benefits paid --------------------Effects of transition to risk sharing pension plan-Plan assets at end of year --------------------- \31,038(31,038)
-

\

\

-

$

$

-

(*) Plan assets include the assets of the retirement benefits trust.

③ Reconciliation of net defined benefit liability applying the simplified method:
Thousands of
U.S. dollars
2023

Millions of yen
2022
2023
Net defined benefit liability at beginning of year --- \Net retirement benefit expenses --------------Retirement benefits paid --------------------Effects of transition to risk sharing pension plan-Net defined benefit liability at end of year -------- \

119 \
(119)
- \

50

-

$

$

-

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

20.

Employees' Severance and Retirement Benefits (cont’d)④ Reconciliation from the ending balances of projected benefit obligation and plan assets to net defined benefit
liability and net defined benefit asset recorded on the consolidated balance sheet for the years ended March 31,
2022 and 2023:
Not applicable.
⑤ Net retirement benefit expenses and their breakdown for the years ended March 31, 2022 and 2023:
Not applicable.
In addition to the net retirement benefit expenses, gain on termination of retirement benefit plan of \44 million wasrecorded in other income for the fiscal year ended March 31, 2022
⑥ The components of remeasurements of defined benefit plans in other comprehensive income (before income tax
effect):Thousands of
U.S. dollars
2023

Millions of yen
2022
2023
Prior service costs -------------------------Actuarial differences -----------------------Total -------------------------------------

\

(26)
(26)

\

\
\

-

$
$

-

⑦ The components of remeasurements of defined benefit plans in accumulated other comprehensive income (before
income tax effect) for the years ended March 31, 2022 and 2023:
Not applicable.
⑧ Plan assets for the years ended March 31, 2022 and 2023：
Not applicable.

⑨ Actuarial assumptions at end of year for the years ended March 31, 2022 and 2023:
Not applicable.
(3) Defined contribution plans(i) The amount of retirement benefit expenses related to the defined contribution plans
The amount of required contribution to the defined contribution plans was \847 million and \839 million ($6,283
thousand) as of March 31, 2022 and 2023, respectively.
(ii) Matters related to the amount of risk-taking contribution equivalent
The amount of risk-taking contribution equivalent required from the fiscal year ending March 31, 2024 and after is nil.

51

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

21.

Derivative Transactions

The Bank enters into various derivative contracts, including swaps, options, forwards and futures, that cover interest
rates, foreign currencies and stocks and bonds in order to meet customers' needs and manage the risks of market
fluctuations related to the assets, liabilities and interest rates of the Bank and its consolidated subsidiaries. In
connection with these transactions, the Bank has established procedures and controls to minimize market and credit
risk, including limits on transaction levels, hedging exposed positions, daily reporting to management and the outside
review of trading department activities. At March 31, 2022 and 2023, outstanding derivatives were as follows:
Currency and foreign exchange transactions:Contract
amountOver-the-counter transactions:
Currency swaps\
Forward exchange contracts
Sell ----------------------------Buy ----------------------------Currency options
Sell ----------------------------Buy -----------------------------

Millions of yen
2022
Portionmaturing
Marketover one yearvalue

6,159 \

6,159 \

Recognized
gain(loss)- \4

117,022
30,69027,12427,358(9,739)4,667(9,739)4,667

54,96054,960-(1,376)
1,376(1,008)
1,266

Contract
amountMillions of yen
2023
Portionmaturing
Marketover one year
value

Recognized
gain(loss)

Thousands of
U.S. dollars
2023
Recognized
gain(loss)

Over-the-counter transactions:
Currency swaps\
48,230 \38,030 \(576) \
(568) $
(4,253)Forward exchange contracts
Sell ----------------------------49,275
27,015(5,250)(5,250)(39,317)
Buy ----------------------------57,421
27,024
5,262
5,262
39,406
Currency options
Sell ----------------------------14,806
(214)
(79)
(591)
Buy ----------------------------14,806
214
106
793
The above transactions were recorded at fair values, and recognized gains and losses were included in the
consolidated statements of income.

52

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

22.

Revenue Recognition(1) Breakdown of revenue from contracts with customers
Millions of yen
2022
Reportable segment

Service revenues
Deposit services
Exchange services
Securities related services
Agency services
OthersOrdinary income arising fromcontracts with customers
Other ordinary income
Ordinary income from externalcustomers

Commercial
banking
\
8,193
1,028
1,458
2,293
1,022
2,390

Leasing
\

-

\

Total
8,193
1,028
1,458
2,293
1,022
2,390

Adjustments\-

Consolidated
total
\
8,193
1,028
1,458
2,293
1,022
2,390

\
\

8,193
44,974\\

14,770\\8,193
59,745

\
\

(0)

\
\

8,193
59,745\53,168\

14,770\67,939\(0)\

67,938Millions of yen
2023
Reportable segment

Service revenues
Deposit services
Exchange services
Securities related services
Agency services
OthersOrdinary income arising fromcontracts with customers
Other ordinary income
Ordinary income from externalcustomers

Commercial
banking
\
8,166
997
1,309
1,777
1,600
2,482

Leasing

Total

\

-

\

8,166
997
1,309
1,777
1,600
2,482

Adjustments\-

Consolidated
total
\
8,166
997
1,309
1,777
1,600
2,482

\
\

8,166
64,657\\

15,257\\

8,166
79,915

\
\

-

\
\

8,166
79,915\72,824\

15,257\88,081\-\

88,081Thousands of U.S. dollars
2023
Reportable segment

Service revenues
Deposit services
Exchange services
Securities related services
Agency services
OthersOrdinary income arising fromcontracts with customers
Other ordinary income
Ordinary income from externalcustomers

Commercial
banking$
61,154
7,466
9,803
13,307
11,982
18,587

Leasing
$

-

$

Total
61,154
7,466
9,803
13,307
11,982
18,587

Adjustments$-

Consolidated
total$
61,154
7,466
9,803
13,307
11,982
18,587$$

61,154484,213$$

114,258$$

61,154598,479

$
$

-

$
$

61,154598,479$

545,375$

114,258$

659,634$-$

659,63453

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

22.

Revenue Recognition (cont’d)(2) Understanding revenue from contracts with customers
Information that provides a basis for understanding revenue from contracts with customers is as described in Note2(13), “Significant Accounting Policies -Recognition of revenue and expense.”

23.

Segment Information(1) General information about reportable segments
The Group’s reportable segments are components of the Group for which separate financial information is provided toand used by the ALM Committee and Management Meeting periodically to determine the allocation of resources andassess performance.
The Group is engaged mainly in commercial banking and leasing services. Therefore, the Bank and its consolidated
subsidiaries recognize reportable segments by the financial services provided: ‘Commercial banking’ and ‘Leasing.’‘Commercial banking’ includes deposit services, lending services, securities investment services and exchange
services. ‘Commercial banking’ represents the Bank’s banking services and the consolidated subsidiaries’ credit
guarantee services, credit card services, management consulting services, online mall operation services andinvestment services to growing companies.
‘ Leasing’ includes the leasing services of The Awagin Lease Company Limited, one of the consolidated
subsidiaries.
(2) Reporting segment ordinary income, profit or loss, segment assets, segment liabilities and other material items
The accounting policies for the reportable segments are the same as the Group’s accounting policies described in
Note 2, “Significant Accounting Policies.” Reportable segment profit is based on operating profit, and intersegment
ordinary income is based on arm’s length pricing.

54

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

23.

Segment Information (cont’d)(3) Information about reported segment ordinary income, profit or loss and amounts of assets, liabilities and othermaterial items
Segment information as of and for the years ended March 31, 2022 and 2023 was as follows:
Millions of yen
2022
Reportable segment
Commercial
banking
Ordinary income
Customers
Intersegment
Total
Segment profit
Segment assets
Segment liabilities
Other items
Depreciation
Interest income received
Interest expense paid
Extraordinary income
Gains on disposal of fixed assets
Gain on termination of retirement
benefit plan

Extraordinary losses
Losses on disposal of fixed assets
Impairment loss

\
\
\
\
\
\

Leasing

53,168684
53,852
15,873
3,947,255
3,675,097
2,931
39,281
1,597
0

\

Total

14,770177
14,948781
42,87026,611

\
\
\
\
\

135
68
56
9

0

-

\
\
\
\
\
\

Consolidated
total

Adjustments

67,939861
68,80016,6553,990,125
3,701,709
3,066
39,349
1,653
10

\
\
\
\
\
\

(0)
(861)
(861)
(520)
(12,399)(12,387)
54
(547)
(27)
35

0

-

\
\
\
\
\
\

67,93867,938
16,134
3,977,726
3,689,322
3,120
38,801
1,626
45
0

-

9

9

35

44

230

0

230

0

230

89
140

0
-

89
140

0
-

89
140

Tax expenses
4,583
241
4,825
12
4,838
Increase in tangible fixed assets
and intangible fixed assets
4,124
26
4,150
62
4,213
(*1) Ordinary income is presented as the counterpart of sales of companies in other industries.
(*2) Adjustments are as below.
1. Adjustment of ordinary income from customers of negative \0 million is for the adjustment of gain on sale of shares.
2. Adjustment of segment profit of negative \520 million is for the adjustment of gain on sale of shares and the elimination ofintersegment transactions.
3. Adjustment of segment assets of negative \12,399 million is for the elimination of intersegment transactions and others.
4. Adjustment of segment liabilities of negative \12,387 million is for the elimination of intersegment transactions and others.
5. Adjustment of depreciation of \54 million is due to intersegment transactions.
6. Adjustment of interest income received of negative \547 million is for the elimination of intersegment transactions.
7. Adjustment of interest expense paid of negative \27 million is for the elimination of intersegment transactions.
8. Adjustment of gain on termination of retirement benefit plan of \35 million is for the adjustment associated with the termination of theretirement benefit plan.
9. Adjustment of losses on disposal of fixed assets of \0 million is due to intersegment transactions.
10. Adjustment of tax expenses of \12 million is due to intersegment transactions and termination of the retirement benefit plan.
11. Adjustment of increase in tangible fixed assets and intangible fixed assets of \62 million is due to intersegment transactions.
(*3) Segment profit is reconciled to net income in the consolidated statements of income.

55

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

23.

Segment Information (cont’d)Millions of yen
2023
Reportable segment
Commercial
banking

Ordinary income
Customers
Intersegment
Total
Segment profit
Segment assets
Segment liabilities
Other items
Depreciation
Interest income received
Interest expense paid
Extraordinary income
Gains on disposal of fixed assets
Gain on termination of retirement
benefit plan

\
\
\
\
\
\

Leasing

72,824693
73,517
15,144
3,818,209
3,555,703
2,883
44,566
7,563
0

\

Total

15,257171
15,429806
47,24030,978

\
\
\
\
\

126
71
63
0

0

0

\
\
\
\
\
\

Consolidated
total

Adjustments

88,081
865
88,947
15,951
3,865,450
3,586,681
3,009
44,638
7,626
0
0

\
\
\
\
\
\

(865)
(865)
(522)
(15,120)(15,115)
53
(558)
(28)
-

\
\
\
\
\
\

88,081
88,081
15,4283,850,329
3,571,566
3,062
44,079
7,598
0
0

-

-

-

-

-

779

5

785

0

785

Losses on disposal of fixed assets
Impairment loss

83
695

5

83
701

0
-

83
701

Tax expenses
Increase in tangible fixed assets
and intangible fixed assets

4,190

244

4,435

0

4,435

3,111

834

3,945

48

3,994

Extraordinary losses

56

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

23.

Segment Information (cont’d)Thousands of U.S. dollars
2023
Reportable segment
Commercial
banking

Ordinary income
Customers
Intersegment
Total
Segment profit
Segment assets
Segment liabilities
Other items
Depreciation
Interest income received
Interest expense paid
Extraordinary income
Gains on disposal of fixed assets
Gain on termination of retirement
benefit plan

Extraordinary losses
Losses on disposal of fixed assets
Impairment loss

$
$
$
$
$
$

Leasing545,375
5,189
550,565
113,41228,594,390
26,628,495$

21,590333,752
56,638
0

$

$
$
$
$

Total

114,258
1,280
115,547
6,036
353,778
231,992

$

943
531
471
0

$

0

0

$
$
$
$

Consolidated
total

Adjustments

659,634
6,477
666,119
119,456
28,948,176
26,860,488$

22,534334,291
57,110
0

$

0

$
$
$
$

(6,477)(6,477)(3,909)(113,232)(113,195)396(4,178)
(209)
-

$
$
$
$
$
$

659,634
659,634
115,539
28,834,935
26,747,292
22,931
330,105
56,901
0
0

-

-

-

-

-

5,833

37

5,878

0

5,878

621
5,204

37

621
5,249

0
-

621
5,249

Tax expenses
31,378
1,827
33,213
033,213
Increase in tangible fixed assets
and intangible fixed assets
23,2986,245
29,543359
29,910(*1) Ordinary income is presented as the counterpart of sales of companies in other industries.
(*2) Adjustments are as below.
1. Adjustment of segment profit of negative \522 million ($3,909 thousand) is for the elimination of intersegment transactions.
2. Adjustment of segment assets of negative \15,120 million ($113,232 thousand) is for the elimination of intersegment transactions andothers.
3. Adjustment of segment liabilities of negative \15,115 million ($113,195 thousand) is for the elimination of intersegment transactions
and others.
4. Adjustment of depreciation of \53 million ($396 thousand) is due to intersegment transactions.
5. Adjustment of interest income received of negative \558 million ($4,178 thousand) is for the elimination of intersegment transactions.
6. Adjustment of interest expense paid of negative \28 million ($209 thousand) is for the elimination of intersegment transactions.
7. Adjustment of losses on disposal of fixed assets of \0 million ($0 thousand) is due to intersegment transactions.
8. Adjustment of tax expenses of \0 million ($0 thousand) is due to intersegment transactions.
9. Adjustment of increase in tangible fixed assets and intangible fixed assets of \48 million ($359 thousand) is due to intersegment
transactions.
(*3) Segment profit is reconciled to net income in the consolidated statements of income.

57

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

23.

Segment Information (cont’d)(4) Related information
For the years ended March 31, 2022 and 2023:
Information by service:
Millions of yen
2022
Security
investments

Loans
Ordinary income
Customers\

24,398 \Leasing

17,326 \Other businesses

14,770 \11,442 \Total
67,938Millions of yen
2023
Security
investments

Loans
Ordinary income
Customers\

25,096\

Leasing

33,620 \Other businesses

15,257\

14,107 \Total
88,081Thousands of U.S. dollars
2023
Security
investments

Loans
Ordinary income
Customers$

187,942 $Leasing

251,778 $Other businesses

114,258(5) Impairment loss on tangible fixed assets by reportable segment
For the years ended March 31, 2022 and 2023:
Millions of yen
2022
Reportable segments
Commercial
banking
Leasing
Impairment loss
\
140 \
- \

$

105,646 $

Total
140

Millions of yen
2023
Reportable segments
Commercial
banking
Impairment loss\

Leasing
695 \

Total
5 \

701

Thousands of U.S. dollars
2023
Reportable segments

Impairment loss

Commercial
banking$
5,204 $

Leasing

Total
37 $

58

5,249

Total
659,634

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

24.

Transactions with Related Parties

There were no transactions with related parties for the year ended March 31, 2022.
Transactions with related parties for the year ended March 31, 2023 were as follows:(Directors and major individual shareholders)Name

Location

Ooue
TimberIndustry
Association(*1)

Kamikatsucho,
Katsuuragun

CapitalBusiness

Percentage
forpossessionof votingrightsRelationshipTransactions(*2), (*3)

Lending\3 million($22 thousand)Lumbering-

Lending andborrowing
fundsInterest
received

Transaction
amountAccount

Balance at endof year\($-)

Loans andbills
discounted\16 million($119 thousand)\0 million($0 thousand)

Unearnedrevenue\0 million($0 thousand)(*1) A member of Board of Directors, Masaki Hashizume’s close relative has entire rights to make decisions on business execution.
(*2) The terms and conditions of the transactions are determined based on those of other general transactions.
(*3) Masaki Hashizume was appointed as a member of Board of Directors on June 29, 2022. Therefore, the above transaction
amounts include transactions only after that date.

There were no related party transactions involving consolidated subsidiaries of the Bank for the years ended March 31,
2022 and 2023.

59

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

25.

Changes in Net Assets(1) Type and number of shares
The type and number of shares issued and treasury stock for the years ended March 31, 2022 and 2023 were as
follows:
For the year ended March 31, 2022:
Number of shares
as of the previous
fiscal year end(thousands)
Shares issued
Common stock
43,240Total
43,240Treasury stock
Common stock
1,305
Total
1,305

Increase in number ofshares during theaccounting period(thousands)

Decrease in numberof shares during theaccounting period(thousands)

Number of shares asof the fiscal year end(thousands)--

43,24043,240

450
450

152
152

(*1 and *2)

1,603
1,603

(*1) The number of treasury stock as of March 31, 2021 and 2022 included the Bank’s own shares of 210 thousand shares and 202
thousand shares, respectively, held by the BIP and the Bank’s own shares of 259 thousand shares and 114 thousand shares,
respectively, held by the Trust.
(*2) The 450 thousand increase in the number of shares of treasury stock was due to the purchase of fractional shares (0 thousand
shares) and acquisition through the market (450 thousand shares). The 152 thousand decrease in the number of shares oftreasury stock was due to the sales of fractional shares (0 thousand shares), the delivery of the Bank’s own shares by the BIP(8 thousand shares) and the sales of the Bank’s own shares by the Trust (144 thousand shares).
.

For the year ended March 31, 2023:
Number of shares
as of the previous
fiscal year end(thousands)
Shares issued
Common stock
43,240Total
43,240Treasury stock
Common stock
1,603
Total
1,603

Increase in number ofshares during theaccounting period(thousands)

Decrease in numberof shares during theaccounting period(thousands)

Number of shares asof the fiscal year end(thousands)

-

2,200
2,200

(*1)

1,000
1,000

2,330
2,330

(*2 and *3)

41,04041,040273273(*1) The 2,200 thousand decrease in the number of shares of issued common stock was due to the cancellation of treasury stock(2,200 thousand shares).
(*2) The number of treasury stock as of March 31, 2022 and 2023 included the Bank’s own shares of 202 thousand shares and 186
thousand shares, respectively, held by the BIP. The number of treasury stock as of March 31, 2022 included the Bank’s own
shares of 114 thousand shares held by the Trust.
(*3) The 1,000 thousand increase in the number of shares of treasury stock was due to the purchase of fractional shares (0 thousand
shares) and acquisition through the market (1,000 thousand shares). The 2,330 thousand decrease in the number of shares oftreasury stock was due to the sale of fractional shares (0 thousand shares), the delivery of the Bank’s own shares by the BIP(16 thousand shares), the sale of the Bank’s own shares by the Trust (114 thousand shares) and the cancellation of treasury
stock (2,200 thousand shares).

60

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

25.

Changes in Net Assets (cont’d)(2) Dividends
The following dividends were paid in the years ended March 31, 2022 and 2023:
Year ended March 31, 2022:
Date ofresolution

Type ofsharesDirectors'
meeting held on
May 14, 2021
Directors'
meeting held on
November 12,
2021

Amount ofdividends

Cash dividends

per share

Recorddate

Effectivedate\ 20.00

March 31,2021

June 10,2021\ 20.00

September
30, 2021

December
6, 2021

Millions of
yen

Yen

Common
stock

\ 848

Common
stock

\ 848

Year ended March 31, 2023:
Cash dividends per
share

Amount of dividends
Date ofresolution

Type ofsharesDirectors'
meeting held on
May 13, 2022

Common
stock

\ 943

$

7,062

\ 22.50$

Directors'
meeting held on
November 11,
2022

Common
stock

\ 932

$

6,979

\ 22.50$

Millions ofyen

Thousandsof U.S.
dollars

Recorddate

Effective
date

0.16

March 31,2022

June 10,
2022

0.16

September
30, 2022

December
5, 2022

U.S.
dollars

Yen（*1) The amount of dividends resolved at the Directors’ meeting held on May 13, 2022 includes \4 million ($29thousand) ofdividends for the Bank’s own shares held by the BIP and \2 million ($14 thousand) of dividends for the Bank’s own shares heldby the Trust.
（*2) The amount of dividends resolved at the Directors’ meeting held on November 11, 2022 includes \4 million ($29 thousand) ofdividends for the Bank’s own shares held by the BIP and \0 million ($0 thousand) of dividends for the Bank’s own shares heldby the Trust.

61

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

25.

Changes in Net Assets (cont’d)

The following dividends were recorded during the fiscal years ended March 31, 2022 and 2023 and became effective
after March 31, 2022 and 2023:
For the fiscal year ended March 2022, the dividends became effective after March 31, 2022:

Date ofresolution

Directors'
meeting held on
May 13, 2022

Type ofsharesCommonstock

Amount ofdividends

Millions of
yen
\

943

Cash
dividends
per share

Source ofdividends

Recorddate

Effective
date

March 31,2022

June 10,2022

Yen
Retainedearnings\

22.50

For the fiscal year ended March 2023, the dividends became effective after March 31, 2023:
Cash dividends per
share

Amount of dividends
Date ofresolution

Type ofsharesDirectors'
meeting held on
May 12, 2023

CommonstockMillions ofyen

Thousandsof U.S.
dollars\ 1,126$ 8,432

Source ofdividends

Retainedearnings

\

Yen

U.S.
dollars27.50$ 0.20Recorddate

Effective
date

March 31,2023

June 12,2023(*) The amount of dividends includes \5 million ($37 thousand) of dividends for the Bank’s own shares held by the BIP.

62

Notes to Consolidated Financial Statements
The Awa Bank, Ltd. and its Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2023

26.

Subsequent Events

Establishment of subsidiary
The Bank resolved to establish “The Awagin Capital Company Limited,” at the Directors’ meeting held on June 29,2023 and established the subsidiary on July 12, 2023.
<Establishment of investment subsidiary>① Purpose of establishment
In response to the key issue of “regional economic development and industrial promotion” in the new management
plan “Growing beyond 130th," the Bank established the subsidiary for the purpose of contributing to the realization ofa sustainable regional society by actively supporting and fostering venture companies and companies engaged inbusiness succession.
② Outline of subsidiary
Name of company:
Head office:Businesses:

Capital:Establishment date:
Shareholder:

The Awagin Capital Company Limited
3F Awagin Sumitomo Seimei Bldg., 2-21-2 Higashi Senba-cho, Tokushima city
Operation and management of investment limited partnerships (Fund)
Consulting services
All operations incidental or related to the above\100 million ($748 thousand)July 12, 2023
The Awa Bank, Ltd. (a wholly owned subsidiary)

63

The Awa Bank, Ltd.
24-1,Nishisemba-cho 2 chome,Tokushima 770-8601,Japan
Phone: 088(623)3131