2016
Annual Report

The Bank of Iwate, Ltd. Annual Report 2016

Sachio Taguchi
President

Message from the President
Five and a half years have passed since the Great East Japan Earthquake occurred. Post-earthquake
reconstruction activities are now going into the stage for a further leap forward. In light of these circumstances, theBank launched its new medium-term management plan, “Iwagin Frontier Plan 2nd stage – The・Innovation” as thesecond stage of the long-term vision “Demonstrating a dominant presence as a driving force in the region, while
establishing our position as a top quality bank.” This plan is geared to the “Step” stage of the “Hop, Step andJump” stages of the long-term vision, which is defined as a period in which we strongly promote regional
revitalization, looking beyond the reconstruction, while storing energies and forging solid footing for the next
“Jump” stage.
Environment surrounding the Bank is becoming increasingly challenging, including profitability decline due tolower yield caused by quantitative and qualitative monetary easing with negative interest rates by the Bank of Japan,
intensifying competition as well as future market shrinkage due to declining population. In this plan, in order toovercome this environment, we will take on challenges for “innovation” with the aim of adapting to theenvironment and vigorously push forward innovative changes in all aspects beyond conventional thought.

― 1 ―Overview of the Medium-term Management Plan

Sachio Taguchi, President― 2 ―Analysis of the Financial Position and Business Performance of the Bank(on a consolidated basis)
Financial Position
Principal Accounts
Deposits (including negotiable certificate of deposit) and Asset Under Management
Deposits (including negotiable certificate of deposit) at the term-end decreased by ¥21.4 billion from the previous
term-end to ¥3,248.3 billion (US$28,827.7 million). This was attributable to the decrease in public deposits
outweighing the increase in deposits by corporate clients and individuals.
Furthermore, the term-end balance of asset under management posted a decrease of ¥5.1 billion from the previous
term-end to ¥257.4 billion (US$2,284.3 million), reflecting decreases in public bonds and investment trusts.
Loans
The term-end balance of loans rose by ¥ 31.8 billion from the previous term-end to ¥ 1,772.8 billion (US$15,733.2
million) as loans to corporate clients, loans to individuals and loan to local governments all reported increases.
Securities
The value of total securities decreased by ¥61.5 billion from the previous term-end to ¥1,321.2 billion(US$11,726.0 million). This was mainly attributable to a decline in bonds including national bonds and corporate
bonds.
Cash Flow Analysis
With regards to cash flow situation for the current fiscal year, net cash provided by operating activities was a net
inflow of ¥44.6 billion (US$395.5 million), partly due to a decrease in call loans and an increase in negotiablecertificate of deposit.
Net cash provided by investing activities was a net inflow of ¥57.2 billion (US$507.9 million), partly due toproceeds from sale and redemption of securities. Net cash used in financing activities was a net outflow of ¥1.8
billion (US$15.7 million), mainly attributable to cash dividends paid. As a result of the above, the term-end balanceof cash and cash equivalents increased by ¥100.0 billion from the previous term-end, to ¥352.5 billion (US$3,128.5
million).
Business Performance
Earnings
Total income increased by ¥2.1 billion from the previous term to ¥46.5 billion (US$413.6 million). This was mainly
attributable to increases in gain on sale of bonds and stocks as well as interest and dividends on securities, in spiteof a decrease in interest on loans and discounts resulting from a reduction in yield.
Total expenses increased by ¥2.1 billion from the previous term to ¥35.3 billion (US$314.9 million). This was
mainly due to increases in loss on redemption of bonds and provision of reserve for possible loan losses, despite
declines in property rental expenses and retirement benefit expenses.
As a result, income before income taxes decreased by ¥0.4 billion from the previous term to ¥11.1 billion (US$98.7
million), and net income attributable to owners of parent declined by ¥0.2 billion from the previous term to ¥7.1
billion (US$63.1 million).
Capital Ratio
The capital ratios rose by 0.09% to 13.07% on a consolidated capital adequacy basis and by 0.10% on a
non-consolidated capital adequacy basis to 13.03%, as a result of the increase in equity capital due to accumulated
internal reserves overweighing the growth of risk assets attributable to an increase in the balance of loans.

― 3 ―Corporate Governance
1 Corporate Governance(1) Outline of the Bank’s Governance Structure① Governance structure and basic approach to corporate governance
The Governance structure of the Bank is developed on the basis of the coordination between appointed
outside directors and the Board of Corporate Auditors as well as internal audit divisions. The reason behind
the adoption of this structure is the philosophy that supervision of management should be reinforced by theenhanced functions of the Board of Directors and the appointment of highly independent outside directors
and outside auditors.
Ever since its establishment, the management of the Bank of Iwate has been based on the two fundamental
mission objectives of contributing to the development of the regional community and ensuring the financial
soundness of the Bank under all circumstances. Amid today’s rapidly changing business environment, themanagement of the Bank continues to uphold these principles in its day-to-day performance of business
operations. To fulfill the duties expected of us as the leading bank in our region, by our business partners,
shareholders, and the community as a whole, we take complete responsibility for our management
decisions and believe it is necessary to establish and maintain the highest standard of corporate governancethat includes improved management transparency and strengthened management oversight functions.
②

Outline of the corporate governance functions within the Bank
The Bank has chosen the corporate auditor system, under which the execution of business by directors ismonitored by the Board of Directors and corporate auditors. In regard to the business execution system, in
addition to utilizing the executive officers system, the Bank has also established the Executive Committee
and the Compliance Committee along with the Board of Directors as mechanisms that discuss and decide
the matters referred by the Board of Directors.
Furthermore, the Bank continues to strengthen management oversight functions, as evidenced by the
expanded functions of the Board of Directors, the appointment of outside directors and the strengthened
functions of auditors. The Bank is also planning to reinforce its organization with a greater emphasis oncompliance, such as by positioning the Compliance Committee on a par with the Executive Committee.

― 4 ―

③

Organization chart
General Meeting of Shareholders
Appointment/dismissal

Board of Directors
12 directors(3 outside directors)
Appointment/
dismissal;
oversight

Appointment/dismissal

Appointment/dismissal

Board of Corporate Auditors
4 corporate auditors(3 outside auditors)

Audit
Audit

Reports

Accounting Auditors

Reports
Reports
Coordination

Coordination

Audit

President

Audit Division

Reports

Executive Committee(Discussion of important matters)

ALM Committee
Credit Risk Committee
Reports

Financing Facilitation
Committee

Visiting audit andmonitoring, etc.

Reports

References and reports
on important items

Operational Risk Committee
Compliance Committee

Recommendations
on plans, reports, etc.

Disclosureof policies;
approval of plans

Customer Interest Protection Committee
Recommendations
on plans, reports, etc.

Disclosureof policies

Customer service offices (Head Office and branches), support divisions④

Internal control system development
With regard to internal control, the Board of Directors has laid down the Basic Policies Regarding theStructure of the Bank’s Internal Control System, and established a system for eleven items, including asystem that ensures that the conduct of all directors and employees conforms both to law and regulations aswell as to the Articles of Incorporation of the Bank and a system that ensures the adequacy of business
operations by the Group consisting of the Bank and subsidiaries etc.

⑤

Development of risk management structureWith regard to risk management, the Bank, upon developing structures for the execution of operations andmonitoring, has established a structure to manage individual risks as well as a structure to manage suchrisks on an integral basis. To firm up these management structures, the Risk Management Regulations havebeen set out to clearly indicate the basic principles of risk management and to clearly define the structureof responsibility. Furthermore, the Risk Management Division is in place as the department responsible forboth the integrated management of the various categories of risks, and risk management throughout theBank.
The Audit Division, upon ensuring its independence from the departments being audited, undertakes
auditing of the appropriateness and effectiveness of internal control systems, including compliance and risk
management, and strives to improve business administration based on the verification of that auditing.

⑥

Accounting audit
Accounting audits of the Bank are conducted by the independent auditing company KPMG AZSA LLC at
the request of the Bank. The certified public accountants in charge of auditing the Bank’s financial
statements for the reporting term are Atsushi Fukuda, Motofumi Okumura, and Toru Narushima, assisted
by nine other certified public accountants and twenty four additional staff.

― 5 ―(2) Internal Audits and Auditing by Corporate Auditors① Internal audits
The Bank’s Audit Division, with a staff of eighteen, is responsible for conducting internal audits as anorganization independent of all business divisions. Audits are conducted on all divisions of the head office,branches, subsidiaries and affiliates for the purpose of verifying adequacy and effectiveness of the internal
control system, as well as to prevent fraud and errors. Internal audits are furthermore conducted on Bank’s
securities reports and financial statements in order to confirm the effective operation of the Bank’s internal
control system. Staff of the division strives to enhance coordination with corporate auditors by exchanging
information to ensure objective and efficient auditing.
② Auditing by corporate auditors
The Board of Corporate Auditors comprises four corporate auditors. Auditing conducted by the Bank’s
corporate auditors consists of audits of divisions at the Bank’s Head office as well as on-site audits ofbranch offices conducted on a periodical basis. In addition, the corporate auditors carry out their auditing
tasks by collaborating and exchanging information with the Audit Division and the accounting auditors.
Furthermore, corporate auditors regularly meet with accounting auditors to receive reports and exchange
opinions, and also undertake activities such as fieldwork to confirm the adequacy of the execution of duties
by accounting auditors.
(3) Outside Directors and Outside Auditors① Human relationships, capital relationships, trading relationships and other conflicts of interest
The outside directors and outside auditors of the Bank have no special conflicts of interest with the Bankother than standard transactions such as deposits, and the Bank has determined that there are no risks ofconflict of interests between the outside directors and outside auditors, and the general shareholders. The
Bank has also determined that no conflicts of interest including human relationships, capital relationships
and significant trading relationships exist between the Bank and the entities that the outside directors andoutside auditors serve.
The Bank’s relationship with each of the outside directors and outside auditors is as follows.
Outside Directors- The Bank has three outside directors; Hiroshi Miura, Atsushi Takahashi and Fumio Ube. Mr. Miura, as
the President and CEO of IWATE NIPPO CO., LTD., is in an executive position of said company as ofthe date of submission of the Annual Securities Report (hereinafter “currently”). Mr. Takahashi served as
the Chairman of The Sumitomo Trust and Banking Company, Limited (currently Sumitomo Mitsui Trust
Bank, Limited) until March 2011, and is currently the advisor of said company, as well as an outside
director of Keio Corporation. Mr. Ube served as the Representative Director and Executive Vice
President of Tohoku Electric Power Company, Incorporated until June 2012, as the Vice Chairman of
TOHOKU ECONOMIC FEDERATION until June 2015, and currently serves as Chairman of Tohoku
Productivity Center.
- In terms of the transactions between the Bank and the outside directors, transactions including loans exist
between the entities in which the outside directors currently serve as executive directors, and entities inwhich the outside directors served as executive directors in the past; however, they are all standardtransactions and do not pose any special conflicts of interest.
- In terms of capital relationships between the Bank and outside directors, Mr. Takahashi holds 1,000
shares of the Bank’s shares; however, such shares only account for a small portion of outstanding shares.
- The Bank’s three outside directors have been reported to the Tokyo Stock Exchange, Inc. as independent
directors who pose no risk of conflict of interest with general shareholders.

― 6 ―Outside Auditors- The Bank has three outside auditors: Masahiko Mochizuki, Shinobu Obara and Mizuhiko Yoshida. Mr.
Mochizuki served as Representative Director and President of Sanrikutetsudo Co., Ltd., and was in an
executive position of said company; however, he resigned from the position on June 24, 2016. Mr. Obara
currently serves as Director and Executive Vice President of Iwate Menkoi Television Co., Ltd., and is in
an executive position of said company.
- In terms of transactions between the Bank and the outside auditors, transactions including loans exist
between the entities in which Mr. Mochizuki and Mr. Obara currently serve as executive directors and Mr.
Yoshida; however, they are standard transactions and do not pose special conflicts of interest.
Additionally, there are no special conflicts of interest between the Bank and Mr. Ikeda.
- The Bank’s three outside auditors have been reported to the Tokyo Stock Exchange, Inc. as independent
directors who pose no risk of conflict of interest with general shareholders.
② The status and standards for functions, duties, and appointment of outside directors and outside auditorswith regard to corporate governance
The Bank elects outside directors and outside auditors in order to reinforce the functions of monitoring andsupervision of the Bank’s management. The Bank’s Board of Directors and corporate auditors monitor the
directors’ execution of duties, while the outside directors undertake the role of reinforcing management
decision-making and supervisory functions, with full regard for the interests of general shareholders andfrom an objective, outside position based on extensive knowledge. Additionally, the outside auditors, basedon their extensive insight and specialized knowledge, undertake the role of reinforcing the audit functions
in regard to directors’ execution of duties.
In addition to the establishment of independence standards for outside directors and outside auditors, theBank expects the officers to objectively and appropriately fulfill the functions and roles of supervision andaudit based on specialty understanding and extensive knowledge, and elects them based on the fundamental
understanding that no conflicts of interest will arise with the general shareholders.
③ Cooperation between outside auditors and internal audit divisions
Outside auditors monitor and supervise the management of the Bank through attendance at the Board of
Directors meetings and the Board of Corporate Auditors meetings, reports from the Compliance Committee
and other committees, and cooperation with the Audit Division and accounting auditors to ensure effective
audits based on a high level of independence.
(4) Outline of the Liability Limitation Agreement
The Bank has concluded liability limitation agreements with its outside directors and outside auditors,
under which the liability for damages due to the negligence of duty on the side of outside directors andoutside auditors is confined to the minimum statutory limits, in accordance with the provisions of Article
427, Paragraph 1 of the Corporation Law.

― 7 ―(5) Compensation for Directors and Corporate Auditors① Aggregate amount of compensation paid to directors and corporate auditors, aggregate amount ofcompensation by category of compensation, and the number of eligible directors and corporate auditors
Classification of directors
and corporate auditors

Numberof persons

Aggregate amount of compensation
Basic
Bonus
(¥ million)
compensation

Stock option

Retirement
benefits

Directors (excluding
9
255
182
24
48
outside directors)
Corporate auditors
1
19
19(excluding outside
auditors)
Outside directors and729
29
outside auditors(Notes) 1. The above numbers of persons include one auditor who retired at the closing of the 133rd General
Meeting of Shareholders held on June 23, 2015 and one director who resigned as of March 31, 2016.
2. The above amounts include ¥24 million accrued bonuses for directors and corporate auditors during
the current fiscal year (¥24 million for directors), and ¥48 million for stock compensation-type stockacquisition rights (¥48 million for directors).
3. Apart from the above, ¥32 million employees’ compensation was paid as compensation to directors
concurrently serving as employees (¥25 million employees’ salaries and ¥7 million employees’
bonuses).
② Combined compensation for individual directors and corporate auditors
Not applicable, as there are no directors or corporate auditors whose combined compensations exceeded¥100 million.
③ Policies on determining the amount of compensation for directors and corporate auditors
Annual compensation limits payable to the Bank’s directors and corporate auditors are determinedaccording to a resolution passed at the General Meeting of Shareholders, and are set at a maximum of ¥260
million for directors, including outside directors, and a maximum of ¥60 million for corporate auditors. In
addition to the aforementioned limits for compensation, the General Meeting of Shareholders has passed a
resolution to allocate stock acquisition rights to directors (excluding outside directors) as stockcompensation-type stock options at an annual limit of ¥80 million.
The Bank’s compensation system for directors (excluding outside directors) comprises basic fixedcompensation, bonuses and stock compensation-type stock options, while that for outside directors andcorporate auditors comprises basic fixed compensation alone.
The monthly amount of basic fixed compensation is decided at the Board of Directors meeting and at theBoard of Corporate Auditors meeting following the General Meeting of Shareholders, based on the duties
and experience of each director and corporate auditor that is paid. The amount of bonus for directors andcorporate auditors is decided according to the Bank’s internal rules separately set out, in consideration of
the Bank’s financial business results each fiscal year as well as each director and corporate auditor’s
personal contribution thereto.

― 8 ―(6) Holding of Shares① Number of stocks held by the Bank for other purposes than pure investment and their balance sheet value
Number of stocks held: 137
Balance sheet value: ¥21,138 million② Classification, stock name, number of shares, balance sheet values, and purpose of holding investment
securities for purposes other than pure investment are as follows:(Previous fiscal year)
The stocks whose balance sheet values exceed a hundredth of capital amount are displayed below.
(Specific investment stocks)
Balance sheet
Number ofvaluesPurpose of holding
Stock nameshares(Millions of yen)
Tohoku Electric Power Company, Inc.

2,277,797

3,111

Mitsubishi UFJ Financial Group, Inc.
TAIYO NIPPON SANSO CORPORATION
East Japan Railway Company
NIPPON STEEL & SUMITOMO METALCORPORATION
Daiwa Securities Group Inc.
TOSHIBA CORPORATIONSECOM CO., LTD.
The Bank of Kyoto, Ltd.
The Yamagata Bank, Ltd.
Tokio Marine Holdings, Inc.
THE AKITA BANK, LTD.
JFE Holdings, Inc.
The Toho Bank, Ltd.
NTN CORPORATION
Yamaguchi Financial Group, Inc.
THE OITA BANK, LTD.
The Iyo Bank, Ltd.
The Aomori Bank, Ltd.
The Yamanashi Chuo Bank, Ltd.
The Hyakugo Bank, Ltd.
The Ogaki Kyoritsu Bank, Ltd.
ARCS COMPANY, LIMITEDThe Daishi Bank, Ltd.
THE KAGOSHIMA BANK, LTD.
Sumitomo Seika Chemicals Company, Limited
Electric Power Development Co., Ltd.
The Musashino Bank, Ltd.
DCM Holdings Co., Ltd.
THE BANK OF SAGA LTD.
The Kita-Nippon Bank, Ltd
MS&AD Insurance Group Holdings, Inc.
ORIX Corporation
Nagase & Co., Ltd.
The Hokkoku Bank, Ltd.
Mitsubishi UFJ Lease & Finance Company Limited
YAKUODO Co., Ltd.
THE SHIMIZU BANK, LTD.
NEC Corporation
MIKUNI CORP.
Sumitomo Mitsui Trust Holdings, Inc.
Katakura Industries Co., Ltd.

4,040,310
1,822,849
200,000
5,935,431

3,004
2,987
1,928
1,795

Reinforcement of relationshipthrough shareholding
Ibid.
Ibid.
Ibid.
Ibid.

1,099,806
2,024,483
104,644
540,000
1,323,800
127,086
1,517,159
200,047
1,052,090
657,555
300,000
860,000
277,000
937,000
656,000
619,000
863,000
109,590731,000
377,000
356,000
72,00071,600317,949
801,000
68,25066,756132,300
137,000
500,000
296,600
60,00045,400372,556
193,884
259,375
99,000

1,040
1,020
839
679
673
576
556
530
519
418
414
401
395
362
345
344
327
315
309
308
304
291
288
286
242
239
224
223
215
209
176
142
137
131
128
128
121

Ibid.
Ibid.
Ibid.
Ibid.
Ibid.
Ibid.
Ibid.
Ibid.
Ibid.
Ibid.
Ibid.
Ibid.
Ibid.
Ibid.
Ibid.
Ibid.
Ibid.
Ibid.
Ibid.
Ibid.
Ibid.
Ibid.
Ibid.
Ibid.
Ibid.
Ibid.
Ibid.
Ibid.
Ibid.
Ibid.
Ibid.
Ibid.
Ibid.
Ibid.
Ibid.
Ibid.
Ibid.

― 9 ―

(Current fiscal year)
The stocks whose balance sheet values exceed a hundredth of capital amount are displayed below.
(Specific investment stocks)
Balance sheet
Number ofvaluesPurpose of holding
Stock nameshares(Millions of yen)
Tohoku Electric Power Company, Inc.
2,277,797
3,307 Close ties to local economy as well as
Mitsubishi UFJ Financial Group, Inc.

4,040,310

2,107

TAIYO NIPPON SANSO CORPORATION

1,822,849

1,946

East Japan Railway Company

200,000

1,942

SECOM CO., LTD.

104,644

875

Daiwa Securities Group Inc.

1,099,806

761

The Yamagata Bank, Ltd.

1,323,800

565

Tokio Marine Holdings, Inc.

127,086482

THE AKITA BANK, LTD.

1,517,159

465

The Bank of Kyoto, Ltd.

540,000

396

The Toho Bank, Ltd.

1,052,090

379

The Aomori Bank, Ltd.

937,000

307

Yamaguchi Financial Group, Inc.

300,000306

JFE Holdings, Inc.

200,047303

THE OITA BANK, LTD.

860,000

301

The Ogaki Kyoritsu Bank, Ltd.

863,000

293

The Daishi Bank, Ltd.

731,000

282

ARCS COMPANY, LIMITED

109,590276

Kyushu Financial Group, Inc.

418,470

271

The Yamanashi Chuo Bank, Ltd.

656,000

270

The Hyakugo Bank, Ltd.

619,000

261

DCM Holdings Co., Ltd.

317,949

258

Electric Power Development Co., Ltd.

72,000253

NTN CORPORATION

657,555236

1,024,483

224

ORIX Corporation

132,300

212

MS&AD Insurance Group Holdings, Inc.

66,756209

TOSHIBA CORPORATION― 10 ―

promotion of general transactions andreinforcement of relationship
Maintenance and reinforcement ofcollaborative relationship forfinance-related businesses
Maintenance and reinforcement ofbusiness relationship
Close ties to local economy as well as
promotion of general transactions andreinforcement of relationship
Maintenance and reinforcement ofbusiness relationship
Maintenance and reinforcement ofcollaborative relationship forfinance-related businesses
Maintenance and reinforcement
cooperative relationship
Maintenance and reinforcement ofcollaborative relationship forfinance-related businesses
Maintenance and reinforcement
cooperative relationship
Maintenance and reinforcement
cooperative relationship
Maintenance and reinforcement
cooperative relationship
Maintenance and reinforcement
cooperative relationship
Maintenance and reinforcement
cooperative relationship
Maintenance and reinforcement ofbusiness relationship
Maintenance and reinforcement
cooperative relationship
Maintenance and reinforcement
cooperative relationship
Maintenance and reinforcement
cooperative relationship
Close ties to local economy as well as
promotion of general transactions andreinforcement of relationship
Maintenance and reinforcement
cooperative relationship
Maintenance and reinforcement
cooperative relationship
Maintenance and reinforcement
cooperative relationship
Close ties to local economy as well as
promotion of general transactions andreinforcement of relationship
Maintenance and reinforcement ofbusiness relationship
Maintenance and reinforcement ofbusiness relationship
Maintenance and reinforcement ofbusiness relationship
Maintenance and reinforcement ofbusiness relationship
Maintenance and reinforcement ofcollaborative relationship forfinance-related businesses

Number ofsharesBalance sheet
values(Millions of yen)

The Musashino Bank, Ltd.

71,600202

Sumitomo Seika Chemicals Company, Limited

356,000

197

The Kita-Nippon Bank, Ltd

68,250195

YAKUODO Co., Ltd.

60,000191

THE BANK OF SAGA LTD.

801,000

169

Nagase & Co., Ltd.

137,000

169

Mitsubishi UFJ Lease & Finance Company
Limited296,600

146

Stock name― 11 ―

Purpose of holding
Maintenance and reinforcement
cooperative relationship
Maintenance and reinforcement ofbusiness relationship
Maintenance and reinforcement
cooperative relationship
Close ties to local economy as well as
promotion of general transactions andreinforcement of relationship
Maintenance and reinforcement
cooperative relationship
Maintenance and reinforcement ofbusiness relationship
Maintenance and reinforcement ofbusiness relationship③ Balance sheet value, dividend income, gain or loss on sales and gain or loss on valuation, in respect of theinvestment stocks held purely for investment purpose(Millions of yen)
At the end of the previous fiscal year
Gain or loss on
Balance sheet value Dividend income Gain or loss on sales
valuation
Listed stocks
23,970424
245
12,586
Unlisted stocks(Millions of yen)
At the end of the current fiscal year
Balance sheet value Dividend income Gain or loss on sales
Listed stocks
Unlisted stocks

22,983
-

512
-

771
-

Gain or loss on
valuation
11,025-④ Of all investment stocks held during the current fiscal year, those whose purpose of holding changed fromother than pure investment to pure investment
Balance sheet value
Stock name
Number of shares(Millions of yen)
NIPPON STEEL & SUMITOMO METAL
193,543418
CORPORATION(7) Statutory Number of Directors
The Articles of Incorporation of the Bank stipulate that there shall be no more than twelve directors.
(8) Resolutions for Appointment of Directors
The Articles of Incorporation provide that resolutions for appointment of directors are passed by simple
majority at a General Meeting of Shareholders at which at least one-third of eligible shareholders withvoting rights are present, without use of cumulative voting.
(9) Important Items that may be Approved by Resolution of the Board of Directors① Based on Article 165, Paragraph 2 of the Corporation Law, the Articles of Incorporation of the Bank
provide that Bank shares may be purchased on the markets by resolution of the Board of Directors only,
without the need for approval at the General Meeting of Shareholders. This measure is intended to ensure
flexible adjustment of the number of the Bank’s shares on the market.
② Based on Article 454, Paragraph 5 of the Corporation Law, the Articles of Incorporation of the Bank
provide that an interim dividend may be paid by resolution of the Board of Directors only, with September
30 each year as date of record. This measure is to ensure a more stable distribution of profits toshareholders.
(10) Special Resolutions of the General Meeting of Shareholders
Based on Article 309, Paragraph 2 of the Corporation Law, special resolutions may be passed with amajority of two-thirds of eligible shareholders at a meeting at which at least one-third of shareholders withvoting rights are present. By relaxing quorum requirements for approval of special resolutions by theGeneral Meeting of Shareholders, our objective is to achieve smoother progress through the agenda at
meetings of shareholders.

― 12 ―

2 Compensation for Audit Certification Services(1) Compensation Paid to Certified Public Accountants for Audit Certification Services
FY2014Compensation forCompensation foraudit certification
services other thanservices
audit certification¥55¥1(Millions of yen)
FY2015Compensation forCompensation foraudit certification
services other thanservices
audit certification¥55¥0

For the Bank
For consolidated
subsidiaries of the
Bank
Total
¥55
¥1
¥55
¥0
Notes: 1. Compensation paid during the previous term with respect to audit certification services includes ¥1million paid to KPMG AZSA LLC for the auditing of the English-language version (translation) of theBank’s financial statements on a consolidated basis for fiscal 2014.
2. Compensation paid during the reporting term with respect to audit certification services includes ¥1million paid to KPMG AZSA LLC for the auditing of the English-language version (translation) of theBank’s financial statements on a consolidated basis for fiscal 2015.
(2) Other Important Compensatory Payments
None(3) Nature of Services Performed for the Bank by the Certified Public Accountants Other than Financial
Accounting
Previous fiscal year
This comprises advisory services concerning the notification of capital ratio under Basel III, as well asadvisory services regarding the interpretation of regulatory requirements relating to the calculation of
credit risk assets.
Current fiscal year
This is advisory services regarding the interpretation of regulatory requirements relating to the calculationof credit risk assets.
(4) Changes in Policy Regarding Payment of Compensation for Auditing Services
There were no changes during the reporting period.

― 13 ―

Consolidated Balance Sheets
The Bank of Iwate, Ltd. and its consolidated subsidiaryYears ended 31 March 2016 and 2015

ASSETSCash and due from banks (Notes 3 and 6)
Call loans and bills bought (Note 6)
Commercial paper and other debt purchased (Note 6)
Trading account securities (Note 4)
Money held in trust (Notes 5 and 6)
Securities (Notes 4, 6, 8 and 17)
Loans and bills discounted (Notes 6, 7, 9 and 29)
Foreign exchange assets
Premises and equipment (Notes 11 and 25)
Intangible assets (Notes 12 and 25)
Net defined benefit asset (Note 18)
Deferred tax assets (Note 19)
Customers’ liabilities for acceptances and guarantees (Note 17)
Other assets (Notes 6, 8 and 10)
Reserve for possible loan losses (Note 6)
Total assets
LIABILITIES AND NET ASSETS
Liabilities:
Deposits (Notes 6, 8 and 13)
Call money (Notes 6 and 8)
Borrowed money (Notes 6, 8 and 14)
Foreign exchange liabilities
Corporate bonds with stock acquisition rights (Notes 6 and 15)
Accrued bonuses for directors and corporate auditors
Net defined benefit liability (Note 18)
Retirement benefits for directors and corporate auditors
Provision for losses on reimbursement of dormant deposits
Provision for contingent losses
Deferred tax liabilities (Note 19)
Acceptances and guarantees (Note 17)
Other liabilities (Notes 6, 16 and 25)
Total liabilities
Net assets (Note 20):
Common stock:
Authorized — 49,450 thousand shares at 31 March 2016 and 31 March 2015
Issued and outstanding —18,498 thousand shares at 31 March 2016 and 31
March 2015
Capital surplus
Retained earnings
Treasury stock, at cost
Net unrealized holding gains on available-for-sale securities (Note 4)
Net unrealized losses on hedging derivatives (Note 6)
Remeasurements of defined benefit plans (Note 18)
Stock acquisition rights (Note 21)
Total net assets
Total liabilities and net assets

Millions of yen
2016
2015
¥364,926¥274,895
20,000105,000
3,907
6,094
－
2
4,985
4,985
1,321,286
1,382,794
1,772,818
1,741,016
1,710
1,797
16,287
16,514
1,875
2,195
1,180
2,774
7
6
6,527
8,187
6,319
6,144
(7,480)(6,419)¥3,514,347¥3,545,984

Thousands of
U.S. dollars(Note 1)
2016
$3,238,605
177,494
34,674－44,24011,726,003
15,733,209
15,176
144,542
16,64010,472
6257,92556,079(66,383)$31,188,738¥3,248,304
1,127
13,584
1
11,268
25
1,440
2
501
297
12,306
6,527
25,8673,321,249¥3,269,768
10,00013,837
5
12,017
22
2,373
5
470
237
15,675
8,187
20,694
3,353,290$28,827,689
10,002
120,5549
100,000
222
12,779
18
4,446
2,636
109,21257,925229,561
29,475,053

12,0904,811
138,254(3,748)47,198(4,074)(1,580)147
193,098¥3,514,347

12,0904,811
132,390(3,742)
48,402(1,290)(66)
99
192,694¥3,545,984

107,295
42,696
1,226,961(33,262)
418,868(36,156)(14,022)1,305
1,713,685$31,188,738

2016

2015

U.S. dollars
2016¥10,867.07¥10,846.26

Yen
Per share data:
Net assets (Note 27)

See accompanying notes.

― 14 ―$96.44

Consolidated Statements of Income
The Bank of Iwate, Ltd. and its consolidated subsidiaryYears ended 31 March 2016 and 2015
Thousands of
U.S. dollars(Note 1)Millions of yen
Income:Interest income:Interest on loans and discounts
Interest and dividends on securities
Other interest income
Fees and commissions
Other operating income (Note 22)
Other income (Note 24)
Total income
Expenses:
Interest expenses:
Interest on deposits
Interest on borrowings
Other interest expenses
Fees and commissions
Other operating expenses (Note 22)
General and administrative expenses (Note 23)
Other expenses (Note 24)
Total expenses

2016

2015

2016

¥19,442
14,408
120
7,610
2,090
2,934

¥20,177
13,770
202
7,508
607
2,594

$172,542
127,867
1,065
67,536
18,54826,03846,60444,858413,596

1,203
156
598
3,077
1,940
26,361
2,149

1,320
146
430
2,876
146
27,308
1,145

10,676
1,385
5,307
27,307
17,217
233,946
19,07235,48433,371

314,910

Income before income taxes
Provision for income taxes (Note 19)
Current
Deferred

11,120

11,487

98,686

3,657
356

2,277
1,856

32,455
3,159

4,013

4,133

35,614

Net income

7,107

7,354

63,072

Net income attributable to non-controlling interests
Net income attributable to owners of parent

－

－

－

¥7,107¥7,354$63,072

Yen
Per share data:
Net income (Note 27)
Diluted net income (Note 27)
Cash dividends applicable to the year (Note 30)

See accompanying notes.

― 15 ―

U.S. dollars

2016

2015

¥400.26
359.1970.00¥414.15371.87
65.00

2016
$3.55
3.19
0.62

Consolidated Statements of Comprehensive Income
The Bank of Iwate, Ltd. and its consolidated subsidiaryYears ended 31 March 2016 and 2015
Thousands of
U.S. dollars(Note 1)Millions of yen
2016
Net income
Other comprehensive income (losses) (Note 26):
Net unrealized holding gains (losses) on available-for-sale securities
Net unrealized gains (losses) on hedging derivatives (Note 6)
Remeasurements of defined benefit plans (Note 18)
Share of the other comprehensive income (losses) of affiliates accounted forusing the equity method

2015

2016

¥7,107¥7,354$63,072(1,203)(2,784)(1,514)

16,322(871)
1,463(10,676)(24,707)(13,436)

(1)

5

(9)

(5,502)

16,919(48,828)

Comprehensive income (losses)¥1,605¥24,273$14,244

Total comprehensive income (losses)
Attributable to:
Owners of parent
Non-controlling interests¥1,605¥24,273$14,244

1,605－

24,273－

14,244－

Total other comprehensive income (losses)

See accompanying notes.

― 16 ―

Consolidated Statements of Changes in Net Assets
The Bank of Iwate, Ltd. and its consolidated subsidiaryYears ended 31 March 2016 and 2015
Millions of yen
Shareholders’ equity

Accumulated other comprehensive income (losses)
Net unrealized

Common stock

CapitalRetained

Treasury

surplusearnings

stock, at costTotalholding gains

shareholders’(losses) on

equityavailable-for-salesecurities

BALANCE, 1 April 2014
Cumulative effects ofchanges in accounting
policies
Restated balance
Change during year
Cash dividends
Net income attributable toowners of parent
Acquisition of treasury
stock
Disposal of treasury stock
Net changes of items otherthan shareholders’ equity
during year
Total change during year
BALANCE, 1 April 2015
Change during year
Cash dividends
Net income attributable toowners of parent
Acquisition of treasury
stock
Disposal of treasury stock
Net changes of items otherthan shareholders’ equity
during year
Total change during year
BALANCE, 31 March 2016

Net unrealized
gains (losses)on hedging

Total
Remeasurements

accumulatedof definedotherbenefit plans

derivatives

comprehensive

Stock

Total

acquisition

net assets

rightsincome (losses)¥12,090¥4,811¥127,231¥(3,739)¥140,393¥32,075¥(419)¥(1,529)¥30,127¥55¥170,575－
12,090－4,811(1,129)126,102－(3,739)(1,129)139,264－
32,075－(419)－(1,529)－30,127－55(1,129)169,446－－(1,066)－(1,066)

－

－

－

－

－

(1,066)

－

－

7,354

－

7,354

－

－

－

－

－

7,354

－
－

－
－

－
(0)

(6)
3

(6)
3

－
－

－
－

－
－

－
－

－
－

(6)
3

－

－

－

－

－

16,327

(871)

1,463

16,91944

16,963－12,090

－
4,811

6,288
132,390(3)(3,742)

6,285
145,549

16,327
48,402(871)(1,290)

1,463
(66)

16,91947,04644
99

23,248
192,694－－(1,243)－(1,243)

－

－

－

－

－

(1,243)

－

－

7,107

－

7,107

－

－

－

－

－

7,107

－
－

－
－

－
(0)

(6)
0

(6)
0

－
－

－
－

－
－

－
－

－
－

(6)
0

－

－

－

－

－

(1,204)(2,784)(1,514)(5,502)48(5,454)－¥12,090－¥4,811

5,864¥138,254(6)¥(3,748)5,858¥151,407(1,204)¥47,198(2,784)¥(4,074)(1,514)¥(1,580)(5,502)¥41,544

48
¥147

404
¥193,098

Thousands of U.S. dollars (Note 1)
Shareholders’ equity

Accumulated other comprehensive income (losses)
Net unrealized

Common stock

CapitalRetained

Treasury

surplusearnings

stock, at costTotalholding gains

shareholders’(losses) on

equityavailable-for-salesecurities

BALANCE, 1 April 2015
Change during year
Cash dividends
Net income attributable toowners of parent
Acquisition of treasury
stock
Disposal of treasury stock
Net changes of items otherthan shareholders’ equity
during year
Total change during year
BALANCE, 31 March 2016

Net unrealized
gains (losses)on hedging

Total
Remeasurements

accumulatedof definedotherbenefit plans

derivatives

comprehensive

Stock

Total

acquisition

net assets

rightsincome (losses)$107,295$42,696$1,174,920$(33,209)$1,291,702$429,553$(11,449)$(586)$417,518$879$1,710,099－－(11,031)－(11,031)

－

－

－

－

－

(11,031)－－

63,072－

63,072

－

－

－

－

－

63,072

－
－

－
－

－
(0)

(53)
0

(53)
0

－
－

－
－

－
－

－
－

－
－

(53)
0

－
－

－
－

(10,685)(10,685)(24,707)(24,707)(13,436)(13,436)(48,828)(48,828)426
426(48,402)$107,295$42,696$418,868$(36,156)$(14,022)$368,690$1,305－－－52,041$1,226,961(53)$(33,262)

51,988$1,343,690

See accompanying notes.

― 17 ―

3,586$1,713,685

Consolidated Statements of Cash Flows
The Bank of Iwate, Ltd. and its consolidated subsidiaryYears ended 31 March 2016 and 2015
Millions of yen
2016
2015

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

Cash flows from operating activities:
Income before income taxes¥11,120
Adjustments to reconcile income before income taxes to net cash provided by (used in) operating activities:
Depreciation
2,086
Impairment losses
64
Equity in (gains) losses of affiliates(30)
Increase (decrease) in reserve for possible loan losses
1,061
Increase (decrease) in provision for contingent losses
60
Increase (decrease) in accrued bonuses for directors
3(Increase) decrease in net defined benefit asset(1,104)
Increase (decrease) in net defined benefit liability(411)
Increase (decrease) in retirement benefits for directors and corporate auditors(3)
Increase (decrease) in provision for losses on reimbursement of dormant deposits
32Interest income(33,970)
Interest expenses
1,957
Investment securities (gains) losses, net(2,125)(Increase) decrease in money held in trust(30)
Foreign exchange (gains) losses, net
74(Gains) losses on disposal of premises and equipment
4
Net (increase) decrease in loans and bills discounted(31,802)
Net increase (decrease) in deposits(52,541)
Net increase (decrease) in negotiable certificates of deposit
31,077
Net increase (decrease) in borrowed money(253)
Net (increase) decrease in due from banks, excluding the Bank of Japan
10,015
Net (increase) decrease in call loans and others
87,188Net increase (decrease) in call money(8,873)
Net (increase) decrease in foreign exchange assets
87
Net increase (decrease) in foreign exchange liabilities(5)
Interest received
34,847
Interest paid
(1,979)Other, net(19)
Sub-total
46,530
Income taxes paid
(1,966)
Income taxes refunded1
Net cash provided by (used in) operating activities
44,565¥11,487$98,687

2,089
15
(17)
(3,384)
8
(2)
(661)
(76)
(1)
146
(34,149)
1,896
(603)
(116)
303
(296)
(102,104)
20,582(35,237)
2,694
22,08942,101
10,000(612)(6)
35,154(1,872)(164)(30,736)(3,982)
1(34,717)

18,513
568
(266)
9,416
532
27
(9,798)(3,647)(27)284(301,474)
17,368(18,859)
(266)
657
35
(282,233)(466,285)
275,799(2,245)88,880773,766(78,745)772(44)309,256(17,563)(169)
412,939(17,448)
9395,500

Cash flows from investing activities:
Acquisition of securities
Proceeds from sale of securities
Proceeds from redemption of securities
Acquisition of premises and equipment
Proceeds from sale of premises and equipment
Acquisition of intangible assets
Net cash provided by (used in) investing activities(213,921)
79,547
193,229(1,221)
52(452)
57,234(219,313)
28,426
189,906(1,335)553(294)(2,057)(1,898,482)
705,955
1,714,847(10,836)461(4,011)
507,934(523)(1,243)(6)
0(1,772)(511)(1,066)(6)
0(1,583)(4,642)(11,031)(53)
0(15,726)

19
100,046
252,468¥352,514

30(38,327)
290,795¥252,468

169
887,877
2,240,575$3,128,452

Cash flows from financing activities:
Repayments of lease obligations
Cash dividends paid
Payment for acquisition of treasury stock
Proceeds from sale of treasury stock
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
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)

See accompanying notes.

― 18 ―

Notes to Consolidated Financial Statements
The Bank of Iwate, Ltd. and its consolidated subsidiaryYears ended 31 March 2016 and 2015
1. BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements of The Bank of Iwate, Ltd. (the “Bank”) and its consolidated subsidiary havebeen prepared in accordance with the provisions set forth in the Financial Instruments and Exchange Law of Japan, its related
accounting regulations and the Banking Law of Japan, and in conformity with accounting principles generally accepted in Japan(“Japanese GAAP”), which are different in certain respects as to application and disclosure requirements to 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 theappropriate 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 necessarily
required for fair presentation, is not presented in the accompanying consolidated financial statements.
The translation of the Japanese yen amounts into U.S. dollars is included solely for the convenience of readers, using the prevailingexchange rate at 31 March 2016, which was ¥112.68 to U.S. $1. The convenience 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.

2. SIGNIFICANT ACCOUNTING POLICIESReporting entity
The consolidated financial statements include the accounts of the Bank and its significant subsidiary. Japanese GAAP on
consolidated financial statements requires consolidation of all significant investees that are controlled through substantial ownershipof majority voting rights or existence of certain conditions. All significant intercompany transactions and account balances are
eliminated.
An unconsolidated subsidiary is excluded from the scope of consolidation because in terms of its total assets, ordinary income, net
income or loss (amount corresponding to equity), retained earnings (amount corresponding to equity) and accumulated othercomprehensive income or loss (amount corresponding to equity), it has minor impact on the consolidated financial statements even
if it is excluded from the scope of consolidation.
Investments in affiliates over which the Bank has the ability to exercise significant influence in terms of operating and financial
policies of the investees are accounted for by the equity method.
The unconsolidated subsidiary and investments in affiliates that are not accounted for by the equity method are excluded from thescope of equity method because in terms of their net income or loss (amount corresponding to equity), retained earnings (amountcorresponding to equity) and accumulated other comprehensive income or loss (amount corresponding to equity), they have minor
impact on the consolidated financial statements even if they are excluded from the scope of equity method.

― 19 ―

Trading account securities and securities
Securities are classified as follows based on the purpose: (a) securities held for trading purposes (“trading account securities”), (b)debt securities intended to be held to maturity (“held-to-maturity debt securities”), (c) equity securities issued by subsidiaries andaffiliated companies, and (d) all other securities that are not classified in any of the above categories (“available-for-sale securities”).
(a) Trading account securities — National government bonds held for trading purposes are presented as trading account securities.
Trading account securities are stated at fair value. Gains and losses realized on disposal and unrealized gains and losses from market
value fluctuations are recognized as gains or losses in the period of the change.
(b) Held-to-maturity debt securities are carried at amortized cost (straight-line method) using the moving-average method.
(c) Equity securities issued by subsidiaries and affiliated companies, which are not consolidated or accounted for by the equity
method, are carried at cost using the moving-average method.
(d) Available-for-sale securities with available fair values are primarily carried at the period end market prices (cost of securities
sold is calculated using the moving-average method).
Securities for which it is extremely difficult to determine the fair value are stated at moving average cost.
Net unrealized holding gains (losses) on these securities, net of applicable income taxes, are reported in a separate component of net
assets.
Available-for-sale securities with available fair values are written down when a significant decline in fair value below the cost ofsuch securities is deemed to be other than temporary. The amount written down is accounted for as an impairment loss.

Money held in trust
Securities that are invested as part of trust assets in independently managed money trusts that invest primarily in securities are stated
at fair value.

Derivatives and hedge accounting
The Bank employs forward exchange contracts, currency swaps and interest rate swaps to meet customers’ needs and to mitigate
interest rate risks and foreign exchange risks. Derivative financial instruments are stated at fair value.
If derivative financial instruments are used as hedges and meet certain hedging criteria, the Bank defers recognition of gains orlosses resulting from changes in fair value of the derivative financial instruments until the related losses or gains on the hedged
items are recognized (deferral method).
Transactions to hedge against interest rate risks affecting the financial assets and liabilities of the Bank are accounted for using
deferred hedge accounting in accordance with the provisions of “Treatment of Accounting and Auditing of Application of
Accounting Standard for Financial Instruments in the Banking Industry” (Japanese Institute of Certified Public Accountants(“JICPA”) Industry Audit Committee Report No. 24, 13 February 2002).
Regarding the effectiveness of a hedge, a hedge that is intended to offset the effects of market fluctuations is assessed on agroup-by-group comparison of hedged items and hedging instruments. Both hedged items, including deposits and loans, andhedging instruments, including interest rate swaps, are classified into groups by remaining maturity period. The effectiveness of acash flow hedge is assessed on the basis of the correlation between the base interest rate index of the hedged cash flow and that of― 20 ―

the hedging instrument.
As for the hedging transactions against currency exchange risks arising from assets and liabilities in foreign currencies, the Bank
applies deferred hedge accounting in accordance with the provisions of “Treatment of Accounting and Auditing Concerning
Accounting for Foreign Currency Transactions in the Banking Industry” (JICPA Industry Audit Committee Report No. 25, 29 July
2002). The Bank assesses the effectiveness of currency swap and foreign exchange swap transactions executed for offsetting therisks of changes in currency exchange rates by verifying that there exist foreign currency positions of the hedging instruments
corresponding to the foreign currency monetary claims and debts to be hedged.
Certain interest rate swaps which qualify for hedge accounting and meet specific matching criteria are not remeasured at fair values,
but the differential to be paid or received under the swap contracts is recognized as interest expenses or income (exceptional
method).
Depreciation and amortization methods(1)

Premises and equipment (except leased assets)

Premises and equipment are stated at cost less accumulated depreciation. The Bank and its consolidated subsidiary (the “Group”)
depreciate their premises and equipment under the declining-balance method over their estimated useful lives. Estimated useful lives
are as follows:
Buildings: 3-30 years
Equipment and furniture: 2-20 years
Depreciation of buildings acquired by the Bank on and after 1 April 1998 (excluding installed facilities such as electrical and water
facilities) is computed under the straight-line method, in accordance with the revision of corporate tax regulations.
(2)Intangible assets (except leased assets)

The Group amortizes its intangible assets under the straight-line method over their estimated useful lives. Costs of computer
software developed or obtained for internal use are amortized using the straight-line method over estimated useful lives of 5 years.
(3)

Leased assets

Depreciation and amortization of leased assets pertaining to finance lease transactions other than those that transfer the ownership ofthe leased assets to the Bank, which are included in “Premises and equipment” and “Intangible assets,” are computed under thestraight-line method. The lease term is equal to the useful life and that there is no residual value except where residual value
guarantees are stipulated in lease contracts.
Depreciation of leased assets that transfer the ownership to the Bank is computed by the same method used for owned assets.

Reserve for possible loan losses
The reserve for loans to borrowers which are classified as legally bankrupt or substantially bankrupt is calculated by deducting theestimated disposal value of collateral and the amount deemed collectible from guarantees from the book value.
The Bank also provides specific reserves for potentially bankrupt borrowers for an amount deemed necessary based on the loanbalance, less expected collection from disposal of collateral, guarantees and repayment on uncovered portion of the loan from
historical experiences.
For all the other loans, general reserves are provided collectively. The ratio of the general reserves is determined based on the― 21 ―

Bank’s loan loss experience. The above-mentioned reserve for possible loan losses is made on the basis of the results of a strict
assessment of the quality of all the Bank’s loan assets, using the Bank’s internally established rules for self-assessment.

Accrued bonuses for directors and corporate auditors
Accrued bonuses for directors and corporate auditors are provided in the amount of the estimated bonuses which are attributable toeach fiscal year.

Retirement benefits for directors and corporate auditors
Retirement benefits for directors and corporate auditors are provided for the future payments of directors and corporate auditors’
retirement benefits incurred up to the end of the fiscal year based on the approved internal rule.

Provision for losses on reimbursement of dormant deposits
Provision for losses on reimbursement of dormant deposits which were recorded as profit is provided for the future reimbursement
based on the historical reimbursement experience.

Provision for contingent losses
Provision for contingent losses is provided for estimated future payments related to a risk-share agreement with public credit
guarantee associations for the Bank’s loans guaranteed by the associations. The provision is calculated by expected loss ratios basedon historical foreclosure experiences by the category of the borrowers.

Accounting for retirement benefits
Upon the calculation of projected benefit obligation, the estimated amount of all retirement benefits to be paid at future retirement
dates is allocated by using the benefit formula basis. The Bank has set up retirement benefit trusts.
Actuarial differences are amortized as income or expenses commencing from the following year under the straight-line method over
10 years.
The consolidated subsidiary adopts a simplified method, as allowed for small companies, which is to record retirement benefits
liabilities for an amount assuming all employees would retire at the end of the fiscal year on a voluntary basis.

Income taxes
Income taxes consist of corporation, enterprise and inhabitants taxes. The provision for income taxes is computed based on thepretax income of each of the Bank and its consolidated subsidiary with certain adjustments required for tax purposes.
Deferred tax assets and liabilities are recorded based on the temporary differences between the financial statement and tax bases ofassets and liabilities. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future
tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes.

― 22 ―

Foreign currency translation
Assets and liabilities denominated in foreign currencies are translated into Japanese yen at the exchange rate prevailing at the end ofeach year.
Appropriations of retained earnings
Under the Companies Law of Japan, the appropriation of retained earnings with respect to a given financial period is made byresolution of the shareholders at a general meeting held subsequent to the close of the said financial period. The accounts for that
period, therefore, do not reflect such appropriations. See Note 30 in Section 4.

Amounts per share
Net income per share of common stock is computed based on the weighted average number of shares outstanding, excluding
treasury stock, during each year. Diluted net income per share reflects the potential dilution that could occur if stock options to issuecommon stock were exercised. Cash dividends per share represent the amounts applicable to the respective years and consist ofinterim dividends for the current year and year-end dividends declared after the end of the year.

Consumption taxes
With respect to the Group, national and local consumption taxes are accounted for with the tax exclusion method.

Changes in accounting policies
Application of “Accounting Standard for Business Combinations,” etc.
The Group has adopted “Revised Accounting Standard for Business Combinations” (the Accounting Standards Board of Japan(“ASBJ”) Statement No. 21, 13 September 2013, “Business Combinations Accounting Standard”), “Revised Accounting Standard
for Consolidated Financial Statements” (ASBJ Statement No. 22, 13 September 2013, “Consolidation Accounting Standard”),“Revised Accounting Standard for Business Divestitures” (ASBJ Statement No. 7, 13 September 2013, “Business Divestitures
Accounting Standard”) and others effective from the year ended 31 March 2016. As a result, differences arising from changes in theequity in subsidiaries over which the Bank retains control are recognized in capital surplus, and acquisition-related costs areaccounted for as expenses in the periods in which the costs are incurred. For business combination implemented on or after the
beginning of the year ended 31 March 2016, the restatement of purchase price allocation by finalizing the tentative accounting
treatment is reflected in the consolidated financial statements for the period in which the business combination occurred. In addition,
the presentation method of net income was amended as well as the presentation method of minority interests was amended to
non-controlling interests. To reflect these changes in presentation, adjustments have been made to the consolidated financial
statements for the previous fiscal year presented herein.
These revised accounting standards are applied in accordance with the transitional provisions set forth in Paragraph 58-2 (4) ofBusiness Combinations Accounting Standard, Paragraph 44-5 (4) of Consolidation Accounting Standard and Paragraph 57-4 (4) ofBusiness Divestitures Accounting Standard effective from the beginning of the year ended 31 March 2016 onward.
The effect on profit and loss and per share data from the above changes for the year ended 31 March 2016 is immaterial.

― 23 ―

Unapplied new accounting standards“Revised Implementation Guidance on Recoverability of Deferred Tax Assets” (hereinafter, “Implementation Guidance” (ASBJ
Guidance No. 26, 28 March 2016)(1) Overview
The Implementation Guidance has been partially revised basically following the guidelines regarding recoverability of deferred tax
assets prescribed in JICPA Audit Committee Report No. 66, “Auditing Treatment for Determining the Recoverability of Deferred
Tax Assets.”(2) Date of adoption
The Bank will adopt the Implementation Guidance from the beginning of the year ending 31 March 2017.
(3) The effect of adopting accounting standards
The effect of adopting the Implementation Guidance is currently under assessment.

3. NOTES TO CONSOLIDATED STATEMENTS OF CASH FLOWS(1) Cash and cash equivalents
In preparing the consolidated statements of cash flows, cash and due from the Bank of Japan are considered to be cash and cash
equivalents. At 31 March 2016 and 2015, the reconciliation of cash and cash equivalents in the consolidated statements of cash
flows with cash and due from banks in the consolidated balance sheets was as follows:

Cash and due from banks
Less: Time deposits
Deposits in foreign currencies
Deposits in other banks other than the Bank of Japan
Cash and cash equivalents

Millions of yen
2016
2015
¥364,926¥274,895(12,000)(12,000)―(10,000)
(412)
(427)
¥352,514¥252,468

Thousands of
U.S. dollars
2016$3,238,605(106,496)―(3,657)$3,128,452

4. TRADING ACCOUNT SECURITIES AND SECURITIES
Trading account securities held by the Bank at 31 March 2016 and 2015 consisted of the following:
Millions of yen
2016
2015
¥―
¥―

Local government bonds¥2¥2

Thousands of
U.S. dollars
2016
$―
$―

The Bank records ¥0 million of net valuation gains in the consolidated statements of income for the year ended 31 March 2015.

― 24 ―

Securities held by the Bank at 31 March 2016 and 2015 consisted of the following:
Millions of yen
2016
2015
¥435,353¥482,399
284,845
267,888324,731370,351
44,571
53,162
231,786
208,994¥1,321,286¥1,382,794

National government bonds
Local government bonds
Corporate bonds
Corporate stocks
Other securities

Thousands of
U.S. dollars
2016$3,863,622
2,527,911
2,881,887
395,554
2,057,029$11,726,003

Unsecured loaned securities which borrowers have the right to sell or pledge in the amount of ¥89,000 million ($789,847 thousand)and ¥73,500 million at 31 March 2016 and 2015 were included in national government bonds, respectively.

A. The following tables summarize acquisition costs, book values and fair values of securities with available fair values at 31 March
2016 and 2015:(a) Held-to-maturity debt securities
Millions of yen
At 31 March 2016:

Book value¥37,724

Fair value¥42,751

Difference¥5,027

Gain¥5,030At 31 March 2015:

41,29944,022

2,723

2,729

At 31 March 2016:

Book value$334,789

Thousands of U.S. dollars
Fair value
Difference$379,402$44,613― 25 ―

Gain$44,640

Loss
¥(3)
(6)

Loss
$(27)

(b) Available-for-sale securities
Securities below include negotiable certificates of deposit classified as cash and due from banks.
Millions of yen
Acquisition cost
At 31 March 2016:
Corporate stocks
Bonds
Other
At 31 March 2015:
Corporate stocks
Bonds
Other

Book value

Difference

Gain

Loss

¥24,144967,596
222,846¥42,963
1,012,332
226,663¥18,819
44,736
3,817¥19,458
44,8877,182¥(639)(151)(3,365)¥1,214,586¥1,281,958¥67,372¥71,527¥(4,155)¥24,511
1,051,598
195,667¥51,591
1,086,937
203,716¥27,080
35,3398,049¥27,148
35,3799,712¥ (68)(40)(1,663)¥1,271,776¥1,342,244¥70,468¥72,239¥ (1,771)

Thousands of U.S. dollars
Acquisition cost
At 31 March 2016:
Corporate stocks
Bonds
Other

Book value

Difference

Gain

Loss

$214,270
8,587,114
1,977,689$381,283
8,984,132
2,011,564$167,013
397,018
33,875$172,684
398,358
63,738$(5,671)(1,340)(29,863)$10,779,073$11,376,979$597,906$634,780$(36,874)

B. Total sales of available-for-sale securities sold in the years ended 31 March 2016 and 2015 amounted to ¥79,536 million($705,857 thousand) and ¥28,426 million, respectively. The related gains and losses amounted to ¥3,980 million ($35,321thousand)and ¥5 million ($44 thousand) in 2016, and ¥799 million and ¥115 million in 2015, respectively.

C. Available-for-sale securities other than trading securities (except securities whose fair values are extremely difficult to determine)
written down for the year ended 31 March 2015 amounted to ¥83 million, due to a significant decline in fair value below the costwhich is deemed to be other than temporary. There were no available-for-sale securities other than trading securities written down
for the year ended 31 March 2016.

D. Net unrealized holding gains on available-for-sale securities on the consolidated balance sheets at 31 March 2016 and 2015
consisted of the following:Thousands of
U.S. dollars

Millions of yen
2016
Net unrealized holding gains before deferred tax on:
Available-for-sale securities
Deferred tax liabilities
Net unrealized holding gains before interests adjustment
Equity of net unrealized holding gains on available-for-sale securities
owned by affiliates that are accounted for by the equity method
Net unrealized holding gains on available-for-sale securities― 26 ―

2015¥67,373(20,187)
47,186

2016¥70,468(22,080)
48,388$597,914(179,153)
418,761

12

14

107

¥47,198¥48,402$418,868

E. Equity securities issued by unconsolidated subsidiaries and affiliated companies are as follows:
Thousands ofMillions of yen
2016
SharesInvestments

U.S. dollars

2015

¥482
269

¥434
―

2016
$4,2782,387

5. MONEY HELD IN TRUST
Money held in trust at 31 March 2016 and 2015 consisted of the following:Thousands of
U.S. dollars

Millions of yen
2016
Money held in trust for trading purposes:
Carrying amount
Realized gains included in earnings¥4,985－2015¥4,985－

2016$44,240－

6. FINANCIAL INSTRUMENTS(1) Overview
a. Policy for financial instruments
The Group provides financial services, focusing on banking businesses such as deposit taking, granting loans, and trading of
securities and investing in securities.
Regarding the main operations of the Group, the Bank raises funds through deposits and call money, etc. and applies them to loans
receivable and investing in securities. Therefore, the financial assets and liabilities of the Group tends to be affected by interest rate
fluctuations, and are exposed to risks stemmed from changes in financial market environments (interest rate risks and pricefluctuation risks), as well as to risks arising from fund shortage.
The Group manages those risks using the ALM method in order to appropriately control the balance between revenues and risks inconsideration of the status of the financial assets and liabilities, trend of financial markets, policies for fund management andinvestment policies. The Group uses derivatives for the purpose of reducing risks and not using derivatives for speculative purposes.

b. Types of financial instruments and related risks
The financial assets of the Group consists mainly of loans for domestic enterprises and individuals and investment securities.
Loans are exposed to credit risks stemming from defaults of borrowers. The largest industrial categories of loans as of the current
fiscal year-end was local governments, followed by individuals, manufacturing industries, and whole and retail sales industries, andmore or less all kind of industries as a whole.
Securities are fundamentally constituted of bonds, stocks and investment trusts, which are held for investing purposes,
held-to-maturity purposes and for maintaining business relationships, while trading securities are held for trading purposes. Theseare exposed to credit risks of issuers, interest rate risks and risks stemming from fluctuation of market prices.
Liabilities, such as deposits, corporate bonds and call money, etc., are exposed to risks arising from fluctuation of interest rates
stemming from mismatching between interests or periods of assets and liabilities. In addition, these are exposed to risks of fund― 27 ―

shortage where the Group fails to control cash receipts and disbursement due to unexpected fund outflow and suffering losses fromunusual high interest rates imposed on, as well as market liquidity risks where the Group fails to raise funds owing to market
shrinkage and are obliged to enter into unusual unfavorable transactions.
Regarding derivative transactions, the Group enters into interest rate swap contracts in terms of ALM control and adopt hedge
accounting to them as hedging instrument for interest rate risks on loans and bonds as hedge items. The Group evaluates
effectiveness of the hedge based on accumulated fluctuation of cash flows of hedging instruments and hedged items for the periods
beginning from implementation of the hedging to the date of the evaluation and analysis on them.
Furthermore, there are interest rate swap contracts (hedging instruments) and loans and bonds (hedged items), which are treatedunder the exceptional method.
The consolidated subsidiary neither holds financial assets such as securities nor owes borrowings except deposits and negotiable
deposits.

c. Monitoring of credit risks
In accordance with the internal policies of the Group for managing credit risks arising from loans, each related division monitors
credit worthiness of their customers periodically and due dates and outstanding balances by individual customer. In addition, theGroup is making efforts to identify and mitigate risks of bad debts from customers who are having financial difficulties.
The results of the above monitoring are regularly reported to the board of directors and the results of monitoring internal rating, loan
portfolios and quantification of credit risks are quarterly reported to the credit risk committee. Audit Division strictly reviews toensure the monitoring procedures function properly.
Credit risks of issuers of securities and counterparty risks of derivative transactions are controlled through periodical review on
credit information and fair value of securities by Financial Markets Division.

d. Monitoring of market risks(Interest rate risks)
The risks arising from fluctuations in interest rates are controlled using ALM at the ALM committee, with reference to thediscussion at the fund management meeting and interest rate analysis group, through monitoring and analysis of execution of the
ALM and the discussion of future actions. Concretely, the results of the above monitoring are reported monthly to the ALM
committee using gap analysis or interest rate sensitivity analysis such as BPV and VaR. Derivative instruments such as interest rate
swap contracts to hedge interest rate risks are used in terms of ALM.
(Foreign currency exchange risks)Foreign currency swap contracts and foreign currency exchange swap contracts are used in order to control the foreign currency
exchange risks.
(Price fluctuation risks)
In accordance with the internal policies of the Group on managing market related risks, the risks arising from fluctuation of market
price of stocks are controlled through a daily VaR based on certain holding periods and confidence interval by confirming whether
the quantities of its risk exceed a certain portion of equity capital or not. Upper limits on losses on an aggregation basis or on a

― 28 ―

realization basis are defined to control them on a daily basis. These results are reported by Risk Management Division to the
management on a daily basis.
Investments in securities at Financial Markets Division are executed in accordance with invested items and investing guidelines
prescribed in the market business operation standards, the marketing risk management standards and primary polices on investing,and controlled through continuous monitoring. The information related to the market environment and the investment status isreported to the management on a regular basis.
(Derivative transactions)
In conducting derivative transactions, each division responsible for execution of transactions, evaluation of efficiency of the hedging
and related administration are clearly identified, following the hedge transaction guidelines, the market business operation standards
and market risk management standards, with setting up segregation of duties and checking systems.
(Information on volume of market risk)
1. Financial instruments in Market Investment Division
The Bank employs the variance-covariance method in calculating VaR of bonds and stocks held using the following parameters forcalculation.
Holding period

Confidence interval

Observation period

Investments in bond

3 months

99%

1 yearInvestments in stock

3 months

99%

1 yearShares held for policy reasons

6 months

99%

1 yearInvestments in trust

3 months

99%

1 year

The risk indicator of market investment departments, which is supposed to describe estimated losses, at the end of the years ended
31 March 2016 and 2015 was as follows:
Millions of yen

Thousands of U.S. dollars

2016

2015

¥34,372¥34,7752016$305,041

The Group periodically verifies the effectiveness of risk measurement by a back testing protocol that compares the volume under
VaR with the amount of actual gains or losses or hypothetical gains or losses on a fixed portfolio. As a result of conducting the backtesting protocol, the Group supposes the method undertaken will provide a reliable indicator of the market risks.
The method of variance and covariance the Bank uses to measure the volume under VaR assumes that changes in the market follow
a normal distribution. Accordingly, under conditions subject to changes in the market exceeding the assumption, risks may beunderestimated.

― 29 ―

2. Financial instruments such as deposits and loans receivable, etc.
The Group employs the variance-covariance method in calculating VaR of deposits and loans receivable, etc., using such parametersof six months as holding period, 99% as confidence interval and one year as observation period.
The risk indicator on interest rates of deposits and loans receivable, etc., which is supposed to describe estimated losses, at the endof the years ended 31 March 2016 and 2015 was as follows:
Millions of yen
2016

Thousands of U.S. dollars

2015¥4,995¥2,1492016$44,329

The calculation was conducted using cash flows allocated according to the interest terms of the related financial assets and liabilities
and the periodic fluctuations of interest. The method of variance and covariance the Bank undertakes to measure the volume under
VaR employs statistically calculated interest rate risks based on the past normal interest rate fluctuations, so if changes in theinterest market go beyond those assumptions, the impact may exceed the calculated amount.

e. Monitoring of liquidity risks
The Group adequately manages its liquidity risks based on various internal quantitative standards prescribed in fund management
regulations, monitoring their liquidity positions on a daily basis with minimum fund reserve established twice a year.

f. Supplementary explanation of the estimated fair value of financial instruments
The fair value of financial instruments is based on their quoted market price, if available. When there is no quoted market priceavailable, the fair value is reasonably estimated. Since various assumptions and factors are reflected in estimating the fair value,
different assumptions and factors could result in different fair values.

― 30 ―

(2) Fair value of financial instruments
The carrying amounts and the estimated fair value of financial instruments at 31 March 2016 and 2015 were as follows.
Millions of yen

Thousands of U.S. dollars
2015

2016

Assets:Cash and due from banks
Call loans and bills bought
Commercial paper and other debt
purchased
Money held in trust
Securities
Held-to-maturity debt securities
Available-for-sale securities
Loans and bills discounted
Reserve for possible loan losses
Liabilities:
Deposits
Call money
Borrowed money
Corporate bonds with stockacquisition rights
Derivative transactions:
Derivative instruments not
qualifying for hedge accounting
Derivative instruments qualifying
for hedge accounting

2016

Carrying
amounts

Fair value

Carrying
amounts

Fair value

Carrying
amounts

Fair value¥364,926
20,000¥364,926
20,000¥274,895
105,000¥274,895
105,000$3,238,605
177,494$3,238,605
177,494

3,907
4,985

3,976
4,985

6,094
4,985

6,185
4,985

34,67444,24035,28644,24034,851
1,281,958
1,772,818(7,404)39,808
1,281,958

36,104
1,342,244
1,741,016(6,318)38,737
1,342,244

309,292
11,376,979
15,733,209(65,708)353,284
11,376,979

1,765,414

1,775,739

1,734,698

1,737,434

15,667,501

15,759,132

3,248,304
1,127
13,584

3,248,655
1,127
13,6393,269,768
10,00013,837

3,270,190
10,00013,941

28,827,689
10,002
120,554

28,830,804
10,002
121,042

11,268

10,63512,017

11,957100,000

94,382

308

308

(80)

(80)

2,733

2,733

(4,714)(8,620)(1,132)(3,106)(41,835)(76,500)(Note 1) Methods to determine the estimated fair value of financial instruments
a. Cash and due from banks, call loans and bills bought
All cash and due from banks, call loans and bills bought are short-term in nature, and therefore their carrying amounts approximate
the fair value.
b. Commercial paper and other debt purchased
As for commercial paper and other debt purchased whose terms are less than one year, their carrying amounts are supposed toapproximate the fair value, while the fair value of those with longer terms is based on either quoted market prices or prices provided
by the financial institutions making markets.
c. Money held in trust
For the securities that are invested as part of trust assets in independently managed money trusts that invest primarily in securities,
the fair value of the equity securities is determined using quoted market prices and the fair value of debt securities is determinedusing the prices provided by the financial institutions that the Bank has been dealing with.
d. Held-to-maturity debt securities and available-for-sale securities
The fair values of held-to-maturity debt securities and available-for-sale securities are based on either quoted market prices or prices
provided by the financial institutions making markets in these bonds. Private placement bonds are based on the discounted present― 31 ―

value, which is calculated by discounting estimated future cash flows arising from the financial assets.
e. Loans and bills discounted
Carrying amounts of loans and bills discounted with floating rates, which indicate the short-term market interest rates, are supposed
to approximate the fair value as long as the credit status of the borrower has not largely changed. The fair value of loans and bills
discounted with fixed rates is based on the present value of the total of principal and interest discounted by the interest rate to be
applied if similar new loans were entered into, by the types, self-assessment and the terms. As for loans and bills with short-term
settlement (within a year), their carrying amounts are supposed to approximate the fair value.
The estimated uncollectable amount of loans to borrowers which are classified as legally bankrupt, substantially bankrupt andpotentially bankrupt is based on the estimated disposal value of collateral and the amount deemed collectible from guarantees, andtherefore their carrying amounts after deduction of reserve for possible loan losses at the closing date are supposed to approximate
the fair value.
Carrying amounts of loans and bills discounted with no specified repayment dates settled, due to some characteristics such as theoutstanding balance which is not exceeding the value of collateral, are supposed to approximate the fair value, given the estimatedrepayment period, interest rates and other conditions.
f. Deposits
The fair value of deposits at notice is based on the payment amount that would be required to pay at the end of the year.
The fair value of time deposits is based on the present value of the total of principal and interest discounted by an interest rate to be
applied if similar new deposits were entered into. As to time deposits with short-term maturities, their carrying amounts
approximate the fair value.
g. Call money
Call money are short-term in nature, and therefore their carrying amounts approximate the fair value.
h. Borrowed money
The fair value of borrowed money is based on the present value discounted by an interest rate to be applied if a similar new
borrowing is entered into. As to borrowed money with short-term maturity, its carrying amount approximates the fair value.
i. Corporate bonds with stock acquisition rights
The fair value of corporate bonds is determined using the prices provided by the financial institutions that the Bank has been dealing
with.
j. Derivative transactions
Please refer to the following section of the notes to Derivatives.
(Note 2) The following table summarizes book values of securities for which it is extremely difficult to determine the fair values at
31 March 2016 and 2015:
Thousands of
U.S. dollars

Millions of yen
2016
Available-for-sale securities

2015¥4,477¥4,446― 32 ―

2016$39,732

(Note 3) Expected collections of assets and payments of liabilities with maturities at 31 March 2016 and 2015 were as follows:
Millions of yen
2016
Within one
year

One to three
years

Three tofive years

Five toseven years

Seven toten years

Over tenyears

Due from banks (*1)
Call loans and bills bought
Commercial paper and other debt purchased
Securities
Held-to-maturity debt securities
Mainly consists of followings:
National bonds
Corporate bonds
Available-for-sale securities
Mainly consists of followings:
National bonds
Local government bonds
Corporate bonds
Loans and bills discounted¥341,615
20,000
1,034

¥－
－
－

¥－
－
－

¥－
－
－

¥－
－
－

¥－
－
2,873

648

12,255－－－21,948－648
102,056

10,002－
344,166－－
339,518－－
80,141－－
275,181

21,948－70,81425,2982,922
36,571
314,827

168,288
11,123
138,327
397,005

129,999
32,098106,281
347,574

15,12725,29233,878144,866

13,782
203,367
6,181
139,077

50,90910,043
1,323
240,543

Deposits
Call money
Borrowed money (*2)

3,083,583
1,127－

156,009
－
－

7,200
－
－

163
－
10,000

1,349
－
－

－
－
－

Millions of yen
2015
Within one
year

One to three
years

Three tofive years

Five toseven years

Seven toten years

Over tenyears

Due from banks (*1)
Call loans and bills bought
Commercial paper and other debt purchased
Securities
Held-to-maturity debt securities
Mainly consists of followings:
National bonds
Corporate bonds
Available-for-sale securities
Mainly consists of followings:
National bonds
Local government bonds
Corporate bonds
Loans and bills discounted¥252,015
105,000
2,298

¥－
－
－

¥－
－
－

¥－
－
－

¥－
－
－

¥－
－
3,796

1,115

640

12,405－－21,944－
1,115
138,776－640
276,571

10,002－365,127－－
188,123－－
239,395

21,944－62,21526,192
18,70252,801
268,011

101,186
7,407
120,589
399,185

178,084
16,345
114,362
360,31385,31831,20665,304
152,759

25,933
167,106
15,541
144,650

33,74027,122－230,090

Deposits
Call money
Borrowed money (*2)

3,084,281
10,000－176,764
－
－

8,192
－
－

174
－
10,000

357
－
－

－
－

Notes: *1. Due from banks that does not have maturity is included in the “within one year” column.
*2. Borrowed money is stated for the long-term and interest-bearing borrowed money.

― 33 ―－

Thousands of U.S. dollars
2016
Within one
year

One tothree years

Three tofive years

Five toseven years

Seven toten years

Over tenyears

Due from banks
Call loans and bills bought
Commercial paper and other debt purchased
Securities
Held-to-maturity debt securities
Mainly consists of followings:
National bonds
Corporate bonds
Available-for-sale securities
Mainly consists of followings:
National bonds
Local government bonds
Corporate bonds
Loans and bills discounted$3,031,727
177,494
9,177

$－
－
－

$－
－
－

$－
－
－

$－
－
－

$－
－
25,497

5,751

108,759－－－

194,782－5,751
905,715

88,764－
3,054,366－－
3,013,117－－
711,226－－
2,442,146

194,782－
628,452

224,51225,932
324,556
2,793,992

1,493,504
98,713
1,227,609
3,523,296

1,153,701
284,860
943,2113,084,611

134,247
224,459
300,657
1,285,641

122,3111,804,819
54,854
1,234,265

451,801
89,128
11,7412,134,744

Deposits
Call money
Borrowed money

27,365,841
10,002－

1,384,531－－

63,898－－1,447－
88,747

11,972－－－－－Derivatives
As stated in significant accounting policies, the Bank deals in interest rate swaps, currency swaps, forward exchange contracts.
a. Derivative instruments not qualifying for hedge accounting
Notional amounts, fair values, and valuation gains (losses) for the years ended 31 March 2016 and 2015 were as follows:(Currency-related transactions)
Millions of yen
2016

Thousands of U.S. dollars
2015

Valuation
Notional

gains

amounts Fair value (losses)

Forward foreign exchange:
Sell
Buy

¥7,632
1,328

¥303
5

¥303
5

2016
Valuation

Notional

gains

amounts Fair value (losses)¥4,879
104

¥(78)
(2)

¥(78)
(2)

Valuation
Notional

gains

amounts Fair value (losses)$67,732
11,786$2,68944$2,68944

Note: Transactions in the above table are revalued at fair value. Valuation gains (losses) generated from revaluation are included in
the consolidated statements of income.

― 34 ―

b. Derivative instruments qualifying for hedge accounting
Notional amounts and fair values for the years ended 31 March 2016 and 2015 were as follows:(Interest-related transactions)
Millions of yen

Thousands of U.S. dollars

2016
Notional
amounts
Interest rate swap:
Receive floating / Pay fixed rate
(Deferral method)
Receive floating / Pay fixed rate
(Exceptional method)

2015

Fair value

Notional
amounts

2016
Fair value

Notional
amounts

Fair value¥47,856¥(5,823)¥43,827¥ (1,896)$424,707$ (51,677)

22,622(3,906)22,717(1,974)

200,763(34,665)(Currency-related transactions)
Millions of yen
2016
Notional
amounts
Currency swap:(Deferral method)¥80,000

Thousands of U.S. dollars
2015

Fair value¥1,109

Notional
amounts

2016
Fair value¥91,000¥764

Notional
amounts

Fair value$709,975$9,842

7. LOANS AND BILLS DISCOUNTED
Loans and bills discounted at 31 March 2016 and 2015 consisted of the following:

Millions of yen
Bills discounted
Loans on notes
Loans on deeds
Overdrafts

Thousands of
U.S. dollars

2016

2015

2016

¥3,656
76,347
1,507,049
185,766¥3,72589,304
1,465,609
182,378$32,446
677,556
13,374,592
1,648,615¥1,772,818¥1,741,016$15,733,209

Bills discounted are accounted for as financial transactions in accordance with JICPA Industry Audit Committee Report No. 24. The
Bank has rights to sell or pledge commercial bills discounted and foreign bills of exchanges bought without restrictions. The total
face value at 31 March 2016 and 2015 was ¥3,657 million ($32,455 thousand) and ¥3,725 million, respectively.

― 35 ―

The Bank is required to disclose loans to customers who meet specific criteria in accordance with the Banking Law. Doubtful loans
at 31 March 2016 and 2015 consisted of the following:Thousands of
U.S. dollars

Millions of yen
2016
Loans to borrowers under bankruptcy proceedings
Past due loans
Loans past due three months or more
Restructured loans, including loans to borrowers financiallyassisted by the Bank

¥893
31,70616

2015¥1,007
26,4981192016$7,925281,381142

9,640

10,07485,552¥42,255¥37,698$375,000

8. PLEDGED ASSETSAt 31 March 2016, deposits of ¥35,260 million ($312,922 thousand) and borrowed money of ¥3,493 million ($30,999 thousand)were secured by a pledge of securities in the amount of ¥87,295 million ($774,716 thousand) and guarantee money deposits in theamount of ¥71 million ($630 thousand). At 31 March 2015, deposits of ¥28,649 million, call money of ¥10,000 million, andborrowed money of ¥3,725 million were secured by a pledge of securities in the amount of ¥120,746 million and guarantee money
deposits in the amount of ¥71 million. In addition to the above-mentioned assets pledged as collateral, the Bank provided securitiesof ¥47,136 million ($418,317 thousand) and ¥43,103 million, and other assets in the amount of ¥3 million ($27 thousand) and ¥3
million, respectively, as collateral for transactions such as exchange settlement transactions at 31 March 2016 and 2015.

9. COMMITMENT LINE AGREEMENT
Commitment line agreements are agreements to lend to customers a prescribed amount when they apply for borrowing, unlessviolation of the condition of the agreement exists. The amount of unused commitment line related to such agreements at 31 March
2016 and 2015 amounted to ¥691,264 million ($6,134,753 thousand) and ¥685,132 million, respectively. The amount ofcommitment line agreements, having a condition that the original agreement period was less than one year or unconditionallycancelable at any time, was ¥658,476 million ($5,843,770 thousand) and ¥647,388 million at 31 March 2016 and 2015, respectively.
The amount of unused commitment line does not necessarily affect the future cash flows of the Group because most of suchagreements were terminated without being used. The majority of these agreements contain provisions which stipulate that the Bank
may refuse to make loans or may decrease the commitment line when there are certain changes in financial conditions, security forthe loans or other reasons. When entering into loan agreements with the customers, the Bank requests pledges of collateral in theform of premises or securities if necessary. After entering into loan agreements, the Bank periodically checks the financial conditionof the customers based on its internal rules and performs certain actions relating to the security of the loans if necessary.

― 36 ―

10. OTHER ASSETS
Other assets at 31 March 2016 and 2015 consisted of the following:Thousands of
U.S. dollars

Millions of yen
2016
Accrued income
Other

2015

2016

¥3,7152,604¥3,7092,435¥32,969
23,110¥6,319¥6,144¥56,079

11. PREMISES AND EQUIPMENT
Premises and equipment at 31 March 2016 and 2015 consisted of the following:Thousands of
U.S. dollars

Millions of yen
2015

2016

Land
Buildings
Equipment
Leased assets
Other

2016
¥8,84434,191
8,010
1,531
108

¥ 8,906
33,618
7,808
1,531
375

$78,488
303,435
71,086
13,587958

Accumulated depreciation

52,68436,39752,23835,724

467,554
323,012¥16,287¥16,514$144,542

To conform with the Companies Law of Japan, deferred gains on sale of real estate in the amount of ¥1,024 million ($9,088
thousand) and ¥1,030 million at 31 March 2016 and 2015, respectively, were deducted from the acquisition cost of premises andequipment.

12. INTANGIBLE ASSETS
Intangible assets at 31 March 2016 and 2015 consisted of the following:Thousands of
U.S. dollars

Millions of yen
2016
SoftwareLeased assets
Other― 37 ―

2015

2016

¥952
680
243

¥1,1431,013
39$8,4496,035
2,156¥1,875¥2,195$16,640

13. DEPOSITS
Deposits at 31 March 2016 and 2015 consisted of the following:Thousands of
U.S. dollars

Millions of yen
Current deposits
Ordinary deposits
Deposits at noticeTime deposits
Other deposits
Negotiable certificates of deposit

2016

2015

2016

¥49,514
1,637,095
2,600
1,167,734
144,260
247,101¥49,127
1,650,347
6,281
1,198,132
149,857
216,024$439,421
14,528,710
23,074
10,363,276
1,280,263
2,192,945¥3,248,304¥3,269,768$28,827,689

14. BORROWED MONEY
Subordinated borrowings with a special provision stipulating that fulfillment of obligation is subordinated to other obligations
included in borrowed money at 31 March 2016 and 2015 consisted of the following:Thousands of
U.S. dollars

Millions of yen

Subordinated borrowings

2016

2015

2016

¥10,000¥10,000$88,747

15. CORPORATE BONDS WITH STOCK ACQUISITION RIGHTS
Corporate bonds with stock acquisition rights at 31 March 2016 and 2015 were summarized as follows:
Thousands of
U.S. Dollars

Millions of Yen
Name

IssuedZero coupon convertiblebond-type bonds withstock acquisition rights
due 2018 payable in
U.S. dollars

25 July 2013

2016

2015

¥11,268¥12,0172016$100,000

Coupon Rate(%)

Secured or
UnsecuredDue

Non-interest

Unsecured

25 July 2018

Notes: 1. Outline of corporate bonds with stock acquisition rights was as follows:
Zero coupon convertible bond-type bonds with stock acquisition rights due
2018 payable in U.S. dollars
Type of stock involved
Issue price of stock acquisition rights
Issue price of stock (Yen / U.S. Dollars)
Total amount of issue(Millions of Yen / Thousands of U.S. Dollars)
Total amount of stock acquisition rights exercised
Percentage of stock acquisition right granted
Exercise period of stock acquisition rights

Common stock
Gratis¥5,632 ($49.98)¥11,268 ($100,000)－
100%
From 8 August 2013 to 11 July 2018

Upon the request to exercise stock acquisition rights from the bondholders, it shall be deemed as payment by thebondholders of the full amount required to be paid upon the exercise of stock acquisition rights, rather than as redemptionof corporate bonds with stock acquisition rights at their total amount of issue. In addition, if the bondholders exercise thestock acquisition rights, it would be considered that such request has been made.

― 38 ―

2. These corporate bonds are bonds issued in European markets and denominated in U.S. dollars. The amount of corporate
bonds with stock acquisition rights was translated into Japanese yen at the telegraphic transfer middle rate at 31 March
2016 announced by the Bank.
3. Annual maturities of corporate bonds with stock acquisition rights at 31 March 2016 were as follows:Year ending 31 March
2017
2018
2019
2020
2021 and thereafter

Millions of yen

Thousands of U.S.
dollars¥－－
11,268－－$－－100,000－－

16. OTHER LIABILITIESOther liabilities at 31 March 2016 and 2015 consisted of the following:Thousands of
U.S. dollars

Millions of yen
2016
Accrued income taxes
Accrued expenses
Unearned income
Lease obligations
Other

2015

2016

¥2,179
2,586
630
1,868
18,604

¥287
2,728
702
2,391
14,586$19,338
22,9505,591
16,578165,104¥25,867¥20,694$229,561

17. CONTINGENT LIABILITIES, ACCEPTANCES AND GUARANTEESAll contingent liabilities including letters of credit, acceptances and guarantees are reflected in acceptances and guarantees. As acontra account, customers’ liabilities for acceptances and guarantees are shown on the asset side, which represent the Bank’s right ofindemnity from customers.
The amount of guarantee obligation for privately-placed bonds (Financial Instruments and Exchange Law, Article 2, Paragraph 3),
out of bonds included in securities, stands at ¥1,485 million ($13,179 thousand) in 2016 and ¥1,690 million in 2015.

18. EMPLOYEES’ SEVERANCE AND RETIREMENT BENEFITSThe Group has adopted funded and unfunded defined benefit plans to prepare for the employees’ retirement benefits.
Under the defined benefit pension plan, which is a funded plan, employees receive lump-sum payments or pensions based onsalaries and service periods and a cash balance plan has been introduced. Each participant has a hypothetical individual account withthe amount equivalent to the reserve as resource of pension for each participant. In hypothetical individual accounts, interest credits
based on trends in market interest rates and benefit credits based on the salary level are accumulated. Also, the Bank has set up
retirement benefit trusts related to defined benefit pension plan.
Under the lump-sum retirement benefit plan (even though it is an unfunded plan, this has become a funded plan as a result of setting
up retirement benefit trusts.), predetermined points based on years of service and ability-based grade / job title are given to eachparticipant annually, and employees receive lump-sum payments, which are calculated by multiplying the unit price of points to the― 39 ―

accumulated points at the time of retirement, as retirement benefits.
The consolidated subsidiary adopts the simplified method in calculating net defined benefit liability and retirement benefit expenses.

Defined benefit plans(i) Change in projected benefit obligation
Thousands of
U.S. dollars

Millions of yen
2016

2015

2016

Balance at beginning of year
Cumulative effects of changes in accounting policies¥26,164－¥24,582
1,745$232,197－

Restated balance
Service costs (including the amount of employee contributions)Interest costs
Actuarial differences
Retirement benefits paid

26,164
735
272
2,842
(1,544)

26,327735
273
132(1,303)

232,197
6,523
2,414
25,222(13,703)

Balance at end of year

¥28,469¥26,164$252,653

Note: Since the consolidated subsidiary which adopts the simplified method is insignificant, its net defined benefit liability,
retirement benefit expenses and retirement benefits paid are included in the above accounts. The retirement benefit expenses
are included in service costs at once.
(ii) Change in plan assets
Thousands of
U.S. dollars

Millions of yen
2016

2015

2016

Balance at beginning of year
Expected return on plan assets
Actuarial differences
Employer contributions
Employee contributions
Retirement benefits paid

¥26,565
555
432
1,326
55
(724)

¥23,726
491
1,666
1,330
56
(704)

$235,756
4,925
3,834
11,768488(6,425)

Balance at end of year

¥28,209¥26,565$250,346(iii) Reconciliation from projected benefit obligation and plan assets to net defined benefit liability (asset)
Thousands of
U.S. dollars

Millions of yen
2016
Funded projected benefit obligation
Plan assets

2015

2016

¥28,455(28,209)¥26,152(26,565)$252,529(250,346)

Unfunded projected benefit obligation

246
14

(413)
12

2,183
124

Net liability (asset) recognized in consolidated balance sheets

260

(401)

2,307

1,440
(1,180)2,373(2,774)

12,779(10,472)¥260¥(401)$2,307

Net defined benefit liability
Net defined benefit asset
Net liability (asset) recognized in consolidated balance sheets

Note: The table above includes the plans to which the simplified method is applied.

― 40 ―

(iv) Retirement benefit expenses and its breakdown
Millions of yen
2016
2015

Thousands of
U.S. dollars
2016

Service costs (excluding the amount of employee contributions)Interest costs
Expected return on plan assets
Amortization of actuarial differences

¥680
272
(555)
235

¥680
273
(491)
730

$6,035
2,414(4,925)2,085

Retirement benefit expenses¥632¥1,192$5,609Note: The retirement benefit expenses of the consolidated subsidiary adopting the simplified method are included in service costs.

(v) Remeasurements of defined benefit plans on other comprehensive income
The component of items recognized in remeasurements of defined benefit plans (pre-tax) on other comprehensive income was asfollows:
Thousands of
U.S. dollars

Millions of yen
2016

2015

2016

Actuarial differences¥(2,175)¥ 2,264$(19,303)

Total¥(2,175)¥ 2,264$(19,303)(vi) Remeasurements of defined benefit plans on accumulated other comprehensive income
The component of items recognized in remeasurements of defined benefit plans (pre-tax) on accumulated other comprehensive
income was as follows:
Thousands of
U.S. dollars

Millions of yen
2016

2015

2016

Unrecognized actuarial differences¥(2,274)¥(99)$(20,181)

Total¥(2,274)¥(99)$(20,181)(vii) Plan assets(a) Percentage by major category of plans assets was as follows:
2016

2015

Bonds
Equities
Cash and deposits
Other

68%
18%
0%
14%

66%
19%
0%
15%

Total

100%

100%

Retirement benefit trusts set up for defined benefit pension plans account for 19% and 18% of total plan assets for the years
ended 31 March 2016 and 2015, respectively. In addition, retirement benefit trusts set up for the lump-sum retirement
benefit plans account for 23% and 22% of total plan assets for the years ended 31 March 2016 and 2015, respectively.
(b) Determination procedure of long-term expected rate of return on plan assets
In determining a long-term expected rate of return on plan assets, the Bank considers the current and projected asset
allocations, as well as a current and future long-term rate of return for various categories of the plan assets.

― 41 ―

(viii) Bases for calculation of actuarial assumptions
The bases for calculation of actuarial assumptions (presented as a weighted-average rate) at 31 March 2016 and 2015 was asfollows:
2016
Discount rateLong-term expected rate of return on plan assets

2015
0.4%
2.0%

1.0%
2.1%

19. INCOME TAXESThe Group is subject to a number of taxes based on income such as corporation, inhabitant and enterprise taxes, which, in theaggregate, indicated a statutory tax rate in Japan of approximately 32.8% and 35.3% for the years ended 31 March 2016 and 2015,
respectively.
Significant components of the Bank’s deferred tax assets and liabilities at 31 March 2016 and 2015 were as follows:
Thousands of
U.S. dollars

Millions of yen
2016

2015

2016

Deferred tax assets:
Reserve for possible loan losses
Net defined benefit liability
Accumulated depreciation
Securities
Deferred hedge
Other¥1,755
3,279
1,126
620
1,779
1,362

¥1,522
3,177
1,190
699
608
1,279

$15,575
29,1009,993
5,502
15,78812,087

Subtotal
Valuation allowance

9,921(1,587)

8,475(1,611)

88,045(14,084)

8,334

6,864

73,961(20,187)(446)(0)(22,080)(452)(1)(179,153)(3,958)(0)Total deferred tax assets
Deferred tax liabilities:
Net unrealized holding gains on available-for-sale securities
Deferred gains on sale of real estate
Other
Total deferred tax liabilities
Net deferred tax liabilities(20,633)(22,533)(183,111)¥(12,299)¥(15,669)$(109,150)

The following summarizes the significant difference between the statutory tax rate and the Bank’s effective tax rate for the years
ended 31 March 2016 and 2015.
2016
Statutory tax rate

2015

32.8%

35.3%

Non-deductible expenses

0.3

0.3

Non-taxable income

(0.7)

(1.7)

Per capita inhabitant taxes

0.4

0.3

Valuation allowance

0.5

(3.0)

Decrease in deferred tax assets due to tax rate changes

2.4

4.8

Other, net

0.4

(0.0)

36.1%

36.0%

Effective tax rate

― 42 ―

(Revisions to amounts of deferred tax assets and deferred tax liabilities due to change in rate of income taxes)
On 29 March 2016, “Partial Amendment of the Income Tax Law” and “Partial Amendment of the Local Tax Law” were enacted by
the Diet, and the rate of income taxes will be lowered from the years beginning on or after 1 April 2016. Accordingly, the statutory
tax rate applied to the calculation of deferred tax assets and liabilities has been lowered from 32.0% to 30.6% for temporary
differences expected to be reversed during the years beginning on 1 April 2016 and 2017 and 30.4% for the years beginning on orafter 1 April 2018.
This change resulted in decrease in deferred tax liabilities by ¥663 million ($5,884 thousand), increase in net unrealized holding
gains on available-for-sale securities by ¥1,059 million ($9,398 thousand), decrease in net unrealized losses on hedging derivativesby ¥94 million ($834 thousand), decrease in remeasurements of defined benefit plans on accumulated other comprehensive incomeby ¥34 million ($302 thousand), and increase in provision for income taxes-deferred by ¥268 million ($2,378 thousand).

20. NET ASSETS
Under the Companies Law and the Banking Law of Japan, the following is provided: the entire amount of the issue price of shares isrequired to be accounted for as capital, although a company may, by resolution of its board of directors, account for an amount notexceeding one-half of the issue price of the new shares as additional paid-in capital, which is included in capital surplus.
The Companies Law and the Banking Law provide that an amount equal to at least 20% of cash dividends and other cash
appropriations shall be appropriated and set aside as a legal earnings reserve until the total amount of legal earnings reserve andadditional paid-in capital equals 100% of common stock. The legal earnings reserve and additional paid-in capital may be used toeliminate or reduce a deficit by a resolution of the shareholders’ meeting or may be capitalized by resolution of the board of
directors. On condition that the total amount of legal earnings reserve and additional paid-in capital remains equal to or exceeds
100% of common stock, they are available for distribution by the resolution of the shareholders’ meeting. Legal earnings reserve is
included in retained earnings in the accompanying financial statements.
The maximum amount that the Bank can distribute as dividends is calculated based on the non-consolidated financial statements of
the Bank in accordance with the Companies Law.
The number of treasury stock held by the Group was 742 thousand shares at 31 March 2016.

21. STOCK OPTION
1. Share-based compensation expenses accounted for as general and administrative expenses
The balance of stock acquisition rights granted for the stock option program was ¥147 million ($1,305 thousand) and ¥99 million at
31 March 2016 and 2015, respectively.
Share-based compensation expenses which were accounted for as general and administrative expenses for the years ended 31 March
2016 and 2015 amounted to ¥48 million ($426 thousand) and ¥46 million, respectively.

― 43 ―

2. Details of stock options, volume and activity(a) Details of stock options
2013 Stock Option Plan

2014 Stock Option Plan

2015 Stock Option Plan

Directors of the Bank: 9
Common stock: 13,400
shares24 July 2013
Not applicableNot applicable
From 25 July 2013 to 24
Exercise period
July 2043
Note: Reported in terms of shares of stock.

Directors of the Bank: 9
Common stock: 10,400
shares24 July 2014
Not applicableNot applicable
From 25 July 2014 to 24
July 2044

Directors of the Bank: 9
Common stock: 9,100
shares23 July 2015
Not applicableNot applicable
From 24 July 2015 to 23
July 2045

Title and number of grantees
Number of stock options bytype of shares
Grant dateCondition for vesting
Requisite service period(b) Volume and activity
The following describes volume and activity that existed during the year ended 31 March 2016. The number of stock options isreported in terms of shares of stock.
(i) Number of stock options
2013 Stock Option Plan

2014 Stock Option Plan

2015 Stock Option Plan

Before vesting (shares):
At 31 March 2015
GrantedForfeited
VestedOutstanding

12,800——600
12,20010,400——400
10,000

—
9,100
—
300
8,800

After vesting (shares):
At 31 March 2015
VestedExercised
Forfeited
Outstanding

—
600
—
—
600

—
400
—
—
400

—
300
—
—
300

(ii) Price information2013 Stock Option Plan
Exercise price
Average exercise price
Fair value at the grant date2014 Stock Option Plan

¥1 ($0.01)—¥4,119 ($36.55)¥1 ($0.01)—¥4,437 ($39.38)

2015 Stock Option Plan
¥1 ($0.01)—¥5,287 ($46.92)

3. Valuation method for fair value of stock options
The valuation method for fair value of stock options granted in the year ended 31 March 2016 were as follows:(a) The valuation method: Black-Scholes formula(b) Major basic numerical values and valuation method
2015 Stock Option Plan
Stock price volatility (*1)
Expected years to expiration (*2)
Expected dividends (*3)
Risk-free interest rate (*4)

30.3%
3.5years¥65 ($0.58) per share
0.03%

Notes:*1. Stock price volatility was calculated based on the actual stock prices from 16 January 2012 to 13 July 2015.
*2. As a rational estimation was difficult due to the insufficient amount of historical data, expected years to expiration― 44 ―

were set up by the estimated average remaining service period.
*3. Expected dividends are determined based on actual dividends for the year ended 31 March 2015.
*4. Risk-free interest rate is Japanese government bond yield corresponding to the expected years to expiration.
4. Estimation method for the vested number of stock options
Since it is difficult to make a reasonable estimate on future forfeited stock options, the actual number of forfeited stock options isreflected in the estimation.

22. OTHER OPERATING INCOME AND EXPENSES
Other operating income and expenses for the years ended 31 March 2016 and 2015 consisted of the following:Thousands of
U.S. dollars

Millions of yen
2016
Other operating income:Gain on sale of foreign bills of exchange
Gain on trading account securities transactions
Gain on sale of bonds

2015

2016

¥23
9
2,058

¥53
1
553

$204
80
18,264¥2,090¥607$18,548

Thousands of
U.S. dollars

Millions of yen
2016
Other operating expenses:
Loss on sales of bonds
Loss on redemption of bonds
Loss on financial instruments
Other

2015

2016

¥5
1,798
136
1

¥114
31
－
1

$44
15,9571,207
9¥1,940¥146$17,217

23. GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses for the years ended 31 March 2016 and 2015 consisted of the following:Thousands of
U.S. dollars

Millions of yen
2016
Salaries and allowances
Fringe benefits and welfare
Retirement benefit expenses
Depreciation for premises and equipment
Rental expenses
Taxes other than income taxes
Deposit insurance premium
Business consignment expenses
Other expenses― 45 ―

2015

2016¥11,257
2,712
632
2,086
758
1,382
1,197
2,673
3,664

¥11,175
2,648
1,192
2,089
755
1,256
1,981
2,507
3,705

$99,902
24,0685,609
18,513
6,727
12,265
10,62323,72232,517¥26,361¥27,308$233,94624. OTHER INCOME AND EXPENSES
Other income and expenses for the years ended 31 March 2016 and 2015 consisted of the following:Thousands of
U.S. dollars

Millions of yen
2016
Other income:Reversal of reserve for possible loan losses
Gain on sale of stocks and other securities
Gain on disposal of premises and equipment
Other

2015

2016

¥－
1,923
81
930

¥983
246
438
927

$－
17,066719
8,253¥2,934¥2,594$26,038
Thousands of
U.S. dollars

Millions of yen
2016
Other expenses:
Provision of reserve for possible loan losses
Loss on disposal of premises and equipment
Loss on devaluation of stocks and other securities
Loss on transfer of receivables
Other

2015

2016

¥1,459
85
2
92
511

¥－
142
85
350
568

$12,948
754
18
817
4,535

¥2,149¥1,145$19,072

25. LEASE TRANSACTIONS
A. Finance leases(a) As lessee(1) Finance leases that transfer the ownership(i) Details of leased assets
Premises and equipment:
Mainly consisted of equipment for the Bank’s network system
Intangible assets:
Mainly consisted of software for the branch operating system(ii) Depreciation and amortization methods of leased assets
Depreciation and amortization methods of leased assets are described in Note 2. Depreciation and amortization methods (3) Leased
assets.

― 46 ―

(2) Finance leases other than those that transfer the ownership(i) Details of leased assets
Premises and equipment:
Mainly consisted of equipment for the branch operating system
Intangible assets:
Mainly consisted of software for the branch operating system(ii) Depreciation and amortization methods of leased assets
Depreciation and amortization methods of leased assets are described in Note 2. Depreciation and amortization methods (3) Leased
assets.
(3) Current portion of lease obligations and lease obligations (excluding current portion) at 31 March 2016 and 2015 consisted of
the following:
Millions of yen
2016
Current portion of lease obligations
Lease obligations (excluding current portion)

2015

Thousands of
U.S. dollars

Average interest
rate (%)

2016

2016

¥535
1,333

¥523
1,868

$4,748
11,830¥1,868¥2,391$16,578

Note: The average interest rate represents the weighted-average rate applicable to the year-end balance.

The aggregate annual maturities of lease obligations were summarized as follows:Year ending 31 March
2017
2018
2019
2020
2021 and thereafterYear ending 31 MarchMillions ofyen

Thousands of
U.S. dollars

2016

2016

¥535
538
524
271
－

Millions of
yen
2015

2016
2017
2018
2019
2020 and thereafter

¥523
535
538
524
271

― 47 ―$4,748
4,775
4,650
2,405
－

2.43%
2.53%

B. Operating leases(a) As lessee
There were no future lease payments under non-cancelable operating leases at 31 March 2016 and 2015.

(b) As lessor
Future lease receivables under non-cancelable operating leases at 31 March 2016 were ¥241 million ($2,139 thousand) including¥11 million ($98 thousand) due within one year.
Future lease receivables under non-cancelable operating leases at 31 March 2015 were ¥252 million including ¥11 million due
within one year.

26. COMPREHENSIVE INCOME
Reclassification adjustments and tax effect amounts of other comprehensive income (losses) for the years ended 31 March 2016 and2015 were as follows:
Thousands of
U.S. dollars

Millions of yen
2016
Net unrealized holding gains (losses) on available-for-sale securities:
Amount for the year
Reclassification adjustment

2015

2016

¥469
(3,565)¥22,617(1,081)$4,162(31,638)

Amount before tax effectTax effect amount(3,096)
1,893

21,536(5,214)(27,476)
16,800Net unrealized holding gains (losses) on available-for-salesecurities(1,203)

16,322(10,676)(4,496)540(1,616)367(39,900)
4,792

Amount before tax effectTax effect amount(3,956)
1,172(1,249)378(35,108)
10,401

Net unrealized gains (losses) on hedging derivatives

Net unrealized gains (losses) on hedging derivatives:
Amount for the year
Reclassification adjustment(2,784)(871)(24,707)

Remeasurements of defined benefit plans:
Amount for the year
Reclassification adjustment(2,410)
235

1,534
730

(21,388)
2,085

Amount before tax effectTax effect amount(2,175)
661

2,264
(801)

(19,303)
5,867

Remeasurements of defined benefit plans(1,514)

1,463(13,436)

1
(2)

5
－

9
(18)

(1)
－

5
－

(9)
－

Share of other comprehensive income (losses) of affiliates accounted
for by the equity method:Amount for the year
Reclassification adjustment
Amount before tax effectTax effect amount
Share of other comprehensive income (losses) of affiliates
accounted for by the equity method
Total other comprehensive income (losses)― 48 ―

(1)

5

(9)

¥(5,502)¥16,919$(48,828)27. PER SHARE DATA
Amounts per share at March 31 2016 and 2015 and for the years then ended were as follows:Yen
Net assets per share
Net income per share
Diluted net income per share

U.S. dollars

2016

2015

¥10,867.07
400.26359.19¥10,846.26
414.15371.872016$96.44
3.55
3.19

Amounts per share were calculated based on the following:Thousands of
U.S. dollars

Millions of yen or
thousands of shares
Net assets per share:
Total net assets
Amount to be deducted from total net assets
Stock acquisition rights
Net assets at the end of fiscal year attributed to common stock
Number of shares of common stock at the end of fiscal year usedin computing net assets per share attributed to common stock

2016

2015

2016

¥193,098
147
147
192,951¥192,694
99
99
192,595$1,713,685
1,305
1,305
1,712,380

17,756

17,757

Net income per share:
Net income attributable to owners of parent
Net income attributable to owners of parent attributed to common
stock
Average number of shares of common stock during the year

7,107

7,354

63,072

7,107
17,756

7,354
17,757

63,072

Diluted net income per share:
Number of increased common stock used in computing diluted
net income per share
Convertible bond-type bonds with stock acquisition rights
Compensation-type stock option

2,030
2,001
29

2,019
1,999
20

As described in “Changes in accounting policies,” the Bank has adopted the transitional accounting in accordance with thetransitional accounting treatments set forth in Paragraph 58-2 (4) of the Accounting Standard for Business Combinations, Paragraph44-5 (4) of the Consolidated Accounting Standard and Paragraph 57-4 (4) of the Accounting Standard for Business Divestitures.
As a result, the effect on net assets per share, net income per share and diluted net income per share for the year ended 31 March
2016 is immaterial.

― 49 ―

28. SEGMENT INFORMATION(1) Reportable segment information
Reportable segment information was omitted as the Group had a single segment, commercial banking business for the years ended
31 March 2016 and 2015.
(2) Other segment-related informationa. Information by services
Information by services for the years ended 31 March 2016 and 2015 was as follows:
2016
Millions of yen

Ordinary income from external customers

Banking

Investment
in securities

Other

Total

¥19,326¥18,388¥8,809¥46,523

2015
Millions of yen

Ordinary income from external customers

Banking

Investment
in securities

Other

Total

¥20,045¥14,569¥9,806¥44,420

2016
Thousands of U.S. dollars

Ordinary income from external customers

Banking

Investment
in securities

Other

Total

$171,512$163,188$78,177$412,877

Note: “Ordinary income” corresponds to net sales of non-banking industries.

b. Information by geographic regioni. Ordinary income
Information as to ordinary income from domestic customers for the years ended 31 March 2016 and 2015 was omitted, because theamount of ordinary income from domestic customers was more than 90% of consolidated ordinary income.
ii. Premises and equipment
Information as to premises and equipment for the years ended 31 March 2016 and 2015 was omitted, because there were no
premises and equipment located abroad.

c. Major customers’ segment information
Major customers’ segment information was not shown for the years ended 31 March 2016 and 2015, since there was no customer
accounting for more than 10% of ordinary income to customers in the consolidated statements of income.

d. Information on impairment of fixed assets for each reportable segment
Information on impairment of fixed assets for each reportable segment was omitted for the years ended 31 March 2016 and 2015,
since the Group had a single segment.

― 50 ―

e. Segment information on amortization of goodwill and its remaining balance
There is no information to be reported on amortization of goodwill and its remaining balance for the years ended 31 March 2016
and 2015.

f. Information on gain in negative goodwill for each reportable segment
There is no information to be reported on gain in negative goodwill for the years ended 31 March 2016 and 2015.

29. RELATED PARTY TRANSACTIONS(1) Related party transactions
a. Transactions between the Bank and related parties
Transactions with executive officers of the Bank and major shareholders (limited to individual) and others
For the year ended 31 March 2016
Category

Executive officer
and close family
members

Corporate/
Individual nameBusiness

Voting rights(%)

Relation to therelated party

Type of transaction

Amount oftransaction

Account

Balance at 31
March 2016

Mizuhiko Yoshida

Corporate Auditorof the Bank－

Creditor

Term loan－

Loans and bills
discounted¥27 million($240 thousands)

Satoshi Kikuchi

Close family
member of a
Director of theBank－

Creditor

Term loan－

Loans and bills
discounted¥12 million($106 thousand)For the year ended 31 March 2015
Category

Corporate/
Individual nameBusiness

Voting rights(%)

Relation to therelated party

Type of transaction

Amount oftransaction

Account

Balance at 31
March 2015

Executive officer
and close family
members

Satoshi Kikuchi

Close family
member of a
Director of theBank－

Creditor

Term loan－

Loans and bills
discounted¥13 million

Note: Terms and conditions of the transaction are determined on an arm’s length basis.

b. Transactions between the Bank’s consolidated subsidiary and related parties
There is no significant transaction to be disclosed between the Bank’s consolidated subsidiary and related parties for the years ended
31 March 2016 and 2015.

(2) Notes to the Bank’s parent company and significant affiliates
There is no information to be reported on the notes to the Bank’s parent company and significant affiliates for the years ended 31
March 2016 and 2015.

― 51 ―

30. SUBSEQUENT EVENTS
1. Gain associated with the revisions of its defined benefit plans
As of 1 April 2016, the Bank has transferred part of the defined benefit plans (excluding the portion for vested pensioners in a
waiting period and current pensioners) to defined contribution plans. Regarding the accounting treatment associated with thistransfer, “Guidance on Accounting for Transfer between Retirement Benefit Plans” (ASBJ Guidance No. 1, 31 January 2002) and“Practical Solution on Accounting for Transfer between Retirement Benefit Plans” (ASBJ Practical Issues Task Force No. 2, 7
February 2007) are applied to the portion transferred to the defined contribution plans as partial termination of retirement benefit
plans.
Accordingly, a gain will be recognized in other income in the amount of ¥864 million ($7,668 thousand) for the year ending 31
March 2017, which resulted from the decrease in projected benefit obligation associated with the transfer.

2. Business combination through additional acquisition of shares of affiliates
The Bank made Iwagin Lease Data Co., Ltd. (“Iwagin Lease Data”), Iwagin DC Card Co., Ltd. (“Iwagin DC Card “) and Iwagin
Credit Service Co., Ltd. (“Iwagin Credit Service”), which were equity-method affiliates of the Bank in the previous consolidated
fiscal year, (hereinafter, “Three Group Companies”) its consolidated subsidiaries as of 17 May 2016 through additional acquisitionof the shares of the Three Group Companies.
(a) Overview of the business combination through acquisition(i) Name and business description of acquired companies
Name of acquired companies

Business description

Iwagin Lease Data
Iwagin DC Card
Iwagin Credit Service

Leasing and computerized accounting services
Credit cards and credit guarantee
Credit cards and credit guarantee(ii) Major reason for the business combination
With an aim to maximize synergy by enhancing the use of the group’s management resources effectively and efficiently and also
to accelerate and to enhance the efficiency of the group’s management, the Bank has decided to make the Three Group
Companies its subsidiaries.
(iii) Date of the business combination
17 May 2016(iv) Legal form of the business combination
Acquisition of shares by cash(v) Name of the company subsequent to the business combination
There will be no change to the name of the company.

― 52 ―

(vi) Ratio of voting rights acquired
Iwagin Lease Data

Iwagin DC Card

Iwagin Credit Service

Ratio of voting rights
immediately before thebusiness combination

5.0%

5.0%

5.0%

Ratio of voting rights
additionally acquired on thedate of businesscombination

91.3

70.0

70.0

Ratio of voting rights after
the business combination

96.3

75.0

75.0

(vii) Major reason for determining the acquiring company
The Bank acquired the shares of the Three Group Companies by cash, hence the Bank is the acquirer.
(b) Calculation of acquisition cost(i) Acquisition cost of the acquired companies and the breakdown of respective considerations

Fair value on the date of business combination of common stock held by the Bank
immediately before the business combination
Consideration of common stock additionally acquired

Cash

Acquisition cost

Millionsof yenThousands of
U.S. dollars¥204$1,8103,275

29,065¥3,479$30,875(ii) The difference between the acquisition cost of the acquired companies and the total amount of the acquisition cost of therespective transactions leading to the acquisition
Loss on step acquisitions: ¥251 million ($2,228 thousand)(iii) Details of the major cost related to acquisition and the amount
Consulting fee: ¥8 million ($71 thousand)(c) Allocation of acquisition cost(i) The amount of assets accepted and liabilities assumed on the date of the business combination and major breakdown
thereof
Millions of yen
Current assets
Non-current assets
Total assets

Thousands of U.S.
dollars¥18,943$168,113

3,378

29,979¥22,321$198,092

Millions of yen

Thousands of U.S.
dollars

Current liabilities¥7,373$65,433

Non-current liabilities

5,735

50,896¥13,108$116,329

Total liabilities― 53 ―

(ii) The amount of gain on bargain purchase and the cause of the occurrencea. The amount of gain on bargain purchase: ¥4,340 million ($38,516 thousand)b. The cause of the occurrence
Gain on bargain purchase occurred as the amount of assets and liabilities of the acquired companies calculated by fairvalue on the date of the business combination surpassed the acquisition cost.

2. Making Iwagin DC Card and Iwagin Credit Service the Bank’s wholly owned subsidiaries through a share exchange
The Bank conducted a share exchange with Iwagin DC Card and Iwagin Credit Service (hereinafter, “Two Subsidiaries”), where the
Bank became a wholly owning parent company and the Two Subsidiaries became wholly owned subsidiaries, with an effective dateof 30 June 2016.
(a) Overview of the business combination(i) Name and business description of the combined companies
Name of combined companies

Business description

Iwagin DC Card

Credit cards and credit guarantee

Iwagin Credit Service

Credit cards and credit guarantee(ii) Date of the business combination
30 June 2016(iii) Legal form of the business combination
It is a simplified share exchange where the Bank is the wholly owning parent company and the Two Subsidiaries are thewholly owned subsidiaries.
(iv) Name of the company subsequent to the business combination
There will be no change to the name of the company.
(v) Any other significant matters
The purpose of the share exchange is as described in Section 2. (a) (ii) Major reason for the business combination.
(b) Overview of accounting treatment
Based on “Revised Accounting Standard for Business Combinations” (ASBJ Statement No. 21, 13 September 2013) and“Revised Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business
Divestitures” (ASBJ Guidance No. 10, 13 September 2013), the share exchange is accounted for as a transaction with
non-controlling interests among the transactions under common control.

(c) Additional acquisition of shares of subsidiaries(i) Acquisition cost and the breakdown of respective considerations
Millions Thousands ofof yenU.S. dollars
Considerations

Fair value of common stock of the Bank issued on the date of the business combination

Acquisition cost

― 54 ―¥548$4,863¥548$4,863

(ii) Share exchange ratio by class of shares, their calculation method and the number of shares delivereda. Share exchange ratios by class of sharesa) Iwagin DC Card
The Bank

Iwagin DC Card

(wholly owing parent company in share exchange)(wholly owned subsidiary in share exchange)

1730

Note: For each common stock issued by Iwagin DC Card, 730 shares of the Bank’s common stock were delivered byallotment. However, 300 shares of Iwagin DC Card’s common stock held by the Bank are not subject toallotment.
b) Iwagin Credit Service
The Bank

Iwagin Credit Service(wholly owing parent company in share exchange)(wholly owned subsidiary in share exchange)

1689

Note: For each common stock issued by Iwagin Credit Service, 689 shares of the Bank’s common stock were deliveredby allotment. However, 300 shares of Iwagin Credit Service’s common stock held by the Bank were not subject
to allotment.

b. Calculation method of exchange ratio
To ensure fairness and appropriateness in the determination of share exchange ratio in the share exchange, the Bank
appointed Deloitte Tohmatsu Financial Advisory LLC and the Two Subsidiaries appointed Minamiaoyama FAS Corporation
as independent third-party valuation institutions (hereinafter, collectively “Third Party Institutions”) and requested to
calculate a share exchange ratio to be used in each share exchange.
The Third Party Institutions determined that the value of the Bank’s common stock should be analyzed using the average
market price analysis (Using 17 May 2016 as the record date, the analysis is based on the closing price of the record date andthe simple average of closing prices over one-month, three-month, and six-month periods prior to the record date of theBank’s stock on the First Section of the Tokyo Stock Exchange), based on the fact that the Bank’s common stock is listed on
the Tokyo Stock Exchange and the market price of the stock is available. On the other hand, to reflect the valuation of futurebusiness activities, the Third Party Institutions determined that the value of the Two Subsidiaries’ common stock that are notlisted should be analyzed using the discount dividend analysis method (DDM analysis) widely used in financial institutions
for evaluation, which is an analysis where the stock is evaluated by discounting the profit attributable to shareholders byusing the cost of capital to the present value after considering the internal reserves required to maintain certain capital
structures.
Based on these calculation results, share exchange ratios were determined through discussions among the parties concerned.

― 55 ―

c. Number of shares delivered
Upon the share exchange, the Bank delivered 141,900 shares of the Bank’s common stock to shareholders of the Two
Subsidiaries (excluding the Bank) as of the time immediately before the Bank acquires all the issued shares of the Two
Subsidiaries excluding common stock of the Two Subsidiaries held by the Bank.

― 56 ―

─ 57 ── 58 ─

Corporate Profile
・Corporate Data (As of March 31, 2016)
EstablishedMay 2, 1932
Paid-in Capital¥12,090 million

Employees
Stock Listing

1,467First Section of
the Tokyo Stock Exchange

Authorized Shares
49,450,000
Issued and Outstanding
18,497,786
Branches
108 (Iwate Prefecture 90)
SharesShareholders
7,091
・Board of Directors and Corporate Auditors (As of July 1, 2016)
Chairman
Directors
Corporate Auditors
Executive Officers
Masahiro Takahashi
Motomu Sato
Katsuya Sato (standing)
Katsuhiro Kawamura
Yasushi Sasaki
Masahiko Mochizuki
Yuji Chiba
Hiroshi Miura(standing)Kensei Ishikawa
President
Atsushi Takahashi
Shinobu Obara
Sachio Taguchi
Fumio Ube
Mizuhiko Yoshida
Senior Managing
Notes:
Director
1. Hiroshi Miura, Atsushi Takahashi and Fumio Ube satisfy the requirements for
Yuichi Kato
outside directors as stipulated in Article 2, Item 15 of the Corporation Law.
Managing Directors
2. Masahiko Mochizuki, Shinobu Obara and Mizuhiko Yoshida are outside auditors as
Keiji Iwata
stipulated in Article 2, Item 16 of the Corporation Law.
Shigeki Miura
Mikio Kikuchi
Hiroaki Takahashi
・Organization (As of July 1, 2016)
General Meeting of Shareholders
Board of Directors

Board of Corporate Auditors
Corporate Auditors (standing)Corporate Auditors

Executive
Committee
Chairman

General Planning Division
Profit Management Office

President

Public Relations and CSR OfficeSenior Managing Directors
Managing Directors

Tokyo Liaison Office
Personnel and General Affairs Division

Directors
Executive Officers

Human Resources Development Office
Corporate Strategy Division
Public Affairs and Regional Revitalization Office

Retail Strategy Division
Direct Banking Center
Credit Card Center
Customer Response Center
CS Promotion OfficeMorioka Loan Plaza
Financial Markets DivisionInternational Business Office
Loan Supervision DivisionCorporate Financial Support Office
Personal Loan Center
Business Management Division
Operations Concentration Center
Receivables Documents Center
Systems Division
Risk Management Division
Financial Products Management OfficeCompliance Office
General Secretariat
Audit Division― 59 ―

・The Bank of Iwate Group

Iwagin Business
Service Co., Ltd.
1-2-3 Chuo Dori,Morioka City, Iwate
Prefecture
Iwagin Lease Data Co.,Ltd.
1-5-31 Nakanohashi
Dori, Morioka City,
Iwate Prefecture

10Administrative
work of theBank

September 4, 1979

100%

Voting Rights
of Subsidiaries,
etc. Other than
Said
Subsidiaries,
etc.
0%

30

Computerizedaccounting
services,
leasing

April 1, 1972

96.3%

0%

Iwagin DC Card Co.,Ltd.
1-2-14 Nakanohashi
Dori, Morioka City,
Iwate Prefecture20

Credit cards
and consumer
loans

August 1, 1989

100%

0%

Iwagin Credit Service
Co., Ltd.
14-10-301 Morioka
Ekimae Dori, Morioka
City, Iwate Prefecture20

Credit cards
and consumer
loans

August 1, 1989

100%

0%

Iwagin Enterprise
Creation Capital Co.,Ltd.
1-2-3 Chuo Dori,Morioka City, Iwate
Prefecture

50

Investment
fundmanagement

April 1, 2015

40%

0%

Name/Address

Capital(Millions ofyen)

Main Business― 60 ―

Date of
Establishment

The Bank’s
VotingRightsHead Office

A message from Iwate Bank concerning reconstruction

Trust, and beyond
By virtue of your support, the Bank of Iwate was able to celebrate the 84th
anniversary of its foundation in May of this year.
This is entirely thanks to your loyal patronage, and all executives and employeesof the Bank extend our heartfelt gratitude.
The Bank will continue to dedicate its utmost efforts to the reconstruction anddevelopment of the regional community, as we strive to be your trusted bank ofchoice.
We thank you for your continued support and loyal patronage.

― 50 ―

The Bank of Iwate, Ltd.

2-3, Chuodori 1-chome, Morioka, Iwate 020-8688, Japan
Phone: +81-19-623-1111
URL: https://www.iwatebank.co.jp/

General Planning Division
Public Relations and CSR Office2-3, Chuodori 1-chome, Morioka, Iwate 020-8688, Japan
Phone: +81-19-623-1111 Fax: +81-19-652-7571
SWIFT: BAIWJPJT