Annual Report

2015

The Bank of Iwate, Ltd. Annual Report 2015

Sachio Taguchi
President

Message from the President
Four and a half years have passed since the Great East Japan Earthquake occurred. Although “restoration andreconstruction” is making gradual progress in the affected areas, there are concerns that problems faced the regional
community, such as a decreasing birthrate, aging society and declining population, may worsen rapidly and that themarket that forms the Bank’s base of operations will shrink, depending on how the reconstruction situation
develops and other factors.
In light of these circumstances, in April 2013 the Bank formulated the long-term vision “Demonstrating adominant presence as a driving force in the region, while establishing our position as a top quality bank” as acommitment for the next 10 years and launched its three-year medium-term management plan “Iwagin FrontierPlan – Reconstruction and Creation, toward a Prosperous Future” as the first stage of that vision. Under the threebasic policies of “Active contribution to the revitalization of the regional community,” “Reform of the organizationand earnings structure to enhance profitability,” and “Strengthening of CS activities and fostering of humanresources” of the plan, the Bank will not only strongly support reconstruction of the region but also focus its
energies on nurturing and promoting new industries to support the next generation in order to be actively involvedin the reconstruction and development of the local economy.
Continuing from the first fiscal year of the plan (fiscal 2013), in fiscal 2014, the income level was achieved andthe principal indicator targets were almost attained. Regarding the final fiscal year (the current fiscal year), apartfrom the enhancement of the speed of response to the Earthquake, we are looking ahead to the future and intend to
take a step further to make efforts on the contribution related to the revitalization of the regional community
including the nurture of new industries, as well as the support for business start-ups and foundation.
As the top regional bank, we recognize that recovery from the disaster is our responsibility and our greatest
mission. We are committed to supporting the reconstruction of the region and creating a prosperous future bymaking full use of our relationship banking function and being a proactive driver of the local economy.

― 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 ¥14.6 billion from the previous
term-end to ¥3,269.7 billion (US$27,209.5 million). This was attributable to the decrease in public deposits
resulting from reversal of reconstruction-related funds outweighing the increase in deposits by corporate clients andindividuals.
Furthermore, the term-end balance of investment trusts within asset under management posted an increase of ¥17.3
billion from the previous term-end to ¥81.4 billion (US$677.4 million), while the term-end balance of public bonds
decreased by ¥20.4 billion to ¥45.7 billion (US$380.3 million) and the total balance, including effective insurance
policies, stood at ¥262.5 billion (US$2,184.4 million).
Loans
Loans to local governments increased. Loans to corporate clients also rose, mainly attributable to an increase inloans to small and midsize firms. Loans to individuals grew due to an increase in the balance of housing loans.
As a result, the term-end value of total loans increased by ¥102.1 billion from the previous term-end to ¥1,741.0
billion (US$14,487.9 million).
Securities
The value of total securities increased by ¥23.8 billion from the previous term-end, to ¥1,382.8 billion(US$11,507.0 million) as a result of increased purchases of foreign securities and investment trusts.
Cash Flow Analysis
Net cash provided by operating activities decreased by ¥86.4 billion to a net outflow of ¥34.7 billion (US$288.9
million), partly due to an increase in loans and a decrease in negotiable certificate of deposit.
Net cash used in investing activities decreased by ¥121.2 billion to a net outflow of ¥2.1 billion (US$17.1million),
partly due to the acquisition of securities.
Net cash provided by financing activities decreased by ¥7.1 billion to a net outflow of ¥1.6 billion (US$13.2
million), partly due to the payment of dividends.
As a result of the above, the term-end balance of cash and cash equivalents decreased by ¥38.3 billion from theprevious term-end, to ¥252.5 billion (US$2,100.9 million).
Business Performance
Earnings
Total income decreased by ¥1.6 billion from the previous term to ¥44.9 billion (US$373.3 million). This was
mainly attributable to the decrease in interest income resulting from lower interest on loans and securities caused bya reduction in yield, as well as decreases in reversal of provision for possible loan losses and gain on sale of bonds,
in spite of increase in fees and commissions boosted primarily by fees related to asset under management andrecording of gain on disposal of premises and equipment.
Total expenses decreased from the previous term-end by ¥0.4 billion to ¥33.4 billion (US$277.7 million) as a resultof a reduction in general and administrative expenses. General and administrative expenses decreased by ¥0.5
billion to ¥27.3 billion (US$227.2 million) as a result of a reduction in personnel expenses, mainly retirement
benefit expenses, as well as a decrease in property rental expenses, although there was an increase in tax as a resultof the consumption tax hike.
As a result, income before income taxes decreased from the previous term by ¥1.2 billion to ¥11.5 billion (US$95.6
million).
Capital Ratio
The capital ratios fell by 0.17% to 12.98% on a consolidated capital adequacy basis and by 0.19% on a
non-consolidated capital adequacy basis to 12.93% mainly as a result of the growth of risk assets attributable to anincrease 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 implementation of outside directors, along with thereinforcement of corporate auditors’ functions through the appointment of highly independent 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 nine 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.

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 Takayuki Narita, assistedby six other certified public accountants and seventeen 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”). While he is currently
serving as an outside director at five companies including Iwate Broadcasting Co., Ltd., he also served as
executive director of numerous other entities with which the Bank has had transactions in the past. 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 andExecutive Vice President of Tohoku Electric Power Company, Incorporated until June 2012, the Vice
Chairman of TOHOKU ECONOMIC FEDERATION until June 2015, and currently serves as an auditor
at Tousei Kougyo Co., Ltd.
- 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.
- Mr. Takahashi and Mr. Ube 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: Katsunori Ikeda, Shinobu Obara and Mizuhiko Yoshida. Mr. Obara
currently serves as the Director and Executive Vice President of Iwate Menkoi Television Co., Ltd. andthe Representative Director and President of Ma cherie, Inc., and is in executive positions in these
entities.
- In terms of transactions between the Bank and the outside auditors, transactions including loans exist
between the entities in which Mr. Obara currently serves as an executive director 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.
- Mr. Ikeda and Mr. Yoshida 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.
Although the Bank has not determined any specific provisions regarding independence in the election of
their outside directors and outside auditors, it expects the officers to objectively and appropriately fulfill thefunctions and roles of supervision and audit based on specialty understanding and extensive knowledge,
and elects them based on the fundamental understanding that no conflicts of interest will arise with thegeneral 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
10
234
166
22
46
outside directors)
Corporate auditors
2
21
21(excluding outside
auditors)
Outside directors and63232
outside auditors(Notes) 1. The above numbers of persons include one director and one auditor who resigned at the closing of
the 132nd General Meeting of Shareholders held on June 20, 2014 and one auditor who resigned asof January 31, 2015 .
2. The above amounts include ¥22 million accrued bonuses for directors and corporate auditors during
the current fiscal year (¥22 million for directors), and ¥46 million for stock compensation-type stockacquisition rights (¥46 million for directors).
3. Apart from the above, ¥43 million employees’ compensation was paid as compensation to directors
concurrently serving as employees (¥34 million employees’ salaries and ¥9 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: 141
Balance sheet value: ¥28,772 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, Incorporated
2,277,797
2,423 Reinforcement of relationshipthrough shareholding
Mitsubishi UFJ Financial Group, Inc.
4,040,310
2,290 Ibid.
NIPPON STEEL & SUMITOMO METAL
5,935,431
1,673 Ibid.
CORPORATION
East Japan Railway Company
200,000
1,521 Ibid.
TAIYO NIPPON SANSO CORPORATION
1,822,849
1,480 Ibid.
Daiwa Securities Group Inc.
1,099,806
987 Ibid.
TOSHIBA CORPORATION
2,024,483
884 Ibid.
SECOM CO., LTD.
104,644622 Ibid.
The Yamagata Bank, Ltd.
1,323,800
581 Ibid.
The Bank of Kyoto, Ltd.
540,000
460 Ibid.
THE AKITA BANK, LTD.
1,517,159
452 Ibid.
Tokio Marine Holdings, Inc.
127,086393 Ibid.
388 Ibid.
200,047
JFE Holdings, Inc.
353 Ibid.
1,052,090
The Toho Bank, Ltd.
344 Ibid.
860,000
THE OITA BANK, LTD.
305 Ibid.
656,000
The Yamanashi Chuo Bank, Ltd.
305 Ibid.
222,000
The Chugoku Bank, Limited
279 Ibid.
300,000
Yamaguchi Financial Group, Inc.
277 Ibid.
731,000
The Daishi Bank, Ltd.
273 Ibid.
277,000
The Iyo Bank, Ltd.
267 Ibid.
937,000
The Aomori Bank, Ltd.
262 Ibid.
619,000
The Hyakugo Bank, Ltd.
246 Ibid.
377,000
THE KAGOSHIMA BANK, LTD.
246 Ibid.
356,000
Sumitomo Seika Chemicals Company, Limited
The Musashino Bank, Ltd.
244 Ibid.
71,600The Ogaki Kyoritsu Bank, Ltd.
243 Ibid.
863,000
NTN CORPORATION
230 Ibid.
657,555
ARCS COMPANY, LIMITED
220 Ibid.
109,590
DCM Holdings Co., Ltd.
219 Ibid.
317,949
Electric Power Development Co., Ltd.
209 Ibid.
72,000
ORIX Corporation
192 Ibid.
132,300
The Kita-Nippon Bank, Ltd.
187 Ibid.
68,250
The Hokkoku Bank, Ltd.
180 Ibid.
500,000
THE BANK OF SAGA LTD.
179 Ibid.
801,000
Nagase & Co., Ltd.
174 Ibid.
137,000
MS&AD Insurance Group Holdings, Inc.
157 Ibid.
66,756
Mitsubishi UFJ Lease & Finance Company
150 Ibid.
296,600
LimitedKatakura Industries Co., Ltd.
129 Ibid.
99,000
THE SHIMIZU BANK, LTD.
121 Ibid
45,400― 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
3,111 Reinforcement of relationshipthrough shareholding
3,004 Ibid.
4,040,310
Mitsubishi UFJ Financial Group, Inc.
2,987 Ibid.
1,822,849
TAIYO NIPPON SANSO CORPORATION
1,928 Ibid.
200,000
East Japan Railway Company
NIPPON STEEL & SUMITOMO METAL
5,935,431
1,795 Ibid.
CORPORATION
Ibid.
Daiwa Securities Group Inc.
1,099,806
1,040 Ibid.
TOSHIBA CORPORATION
2,024,483
1,020 Ibid.
SECOM CO., LTD.
104,644839 Ibid.
The Bank of Kyoto, Ltd.
540,000679 Ibid.
The Yamagata Bank, Ltd.
1,323,800
673 Ibid.
Tokio Marine Holdings, Inc.
127,086576 Ibid.
THE AKITA BANK, LTD.
1,517,159
556 Ibid.
JFE Holdings, Inc.
200,047530 Ibid.
519 Ibid.
1,052,090
The Toho Bank, Ltd.
418 Ibid.
657,555
NTN CORPORATION
414 Ibid.
300,000
Yamaguchi Financial Group, Inc.
401 Ibid.
860,000
THE OITA BANK, LTD.
395 Ibid.
277,000
The Iyo Bank, Ltd.
362 Ibid.
937,000
The Aomori Bank, Ltd.
345 Ibid.
656,000
The Yamanashi Chuo Bank, Ltd.
344 Ibid.
619,000
The Hyakugo Bank, Ltd.
327 Ibid.
863,000
The Ogaki Kyoritsu Bank, Ltd.
315 Ibid.
109,590
ARCS COMPANY, LIMITED309 Ibid.
731,000
The Daishi Bank, Ltd.
308 Ibid.
377,000
THE KAGOSHIMA BANK, LTD.
304 Ibid.
356,000
Sumitomo Seika Chemicals Company, Limited
291 Ibid.
72,000Electric Power Development Co., Ltd.
288 Ibid.
71,600The Musashino Bank, Ltd.
286 Ibid.
317,949
DCM Holdings Co., Ltd.
242 Ibid.
801,000
THE BANK OF SAGA LTD.
239 Ibid.
68,250
The Kita-Nippon Bank, Ltd.
224 Ibid.
66,756
MS&AD Insurance Group Holdings, Inc.
223 Ibid.
132,300
ORIX Corporation
215 Ibid.
137,000
Nagase & Co., Ltd.
209 Ibid.
500,000
The Hokkoku Bank, Ltd.
176 Ibid.
296,600
Mitsubishi UFJ Lease & Finance Company
Limited142 Ibid.
60,000YAKUODO Co., Ltd.
137 Ibid.
45,400
THE SHIMIZU BANK, LTD.
131 Ibid.
372,556
NEC Corporation
128 Ibid.
193,884MIKUNI CORP.
128 Ibid.
259,375
Sumitomo Mitsui Trust Holdings, Inc.
121 Ibid.
99,000
Katakura Industries Co., Ltd.

― 10 ―

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
18,143
359
166
7,111
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

23,970
-

424
-

245
-

Gain or loss on
valuation
12,586-④ Of all investment stocks held during the current fiscal year, those whose purpose of holding changed fromother than pure investment to pure investment meanwhile
None(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.

― 11 ―

2 Compensation for Audit Certification Services(1) Compensation Paid to Certified Public Accountants for Audit Certification Services
FY2013Compensation forCompensation foraudit certification
services other thanservices
audit certification¥55¥8(Millions of yen)
FY2014Compensation forCompensation foraudit certification
services other thanservices
audit certification¥55¥1

For the Bank
For consolidated
subsidiaries of the
Bank
Total
¥55
¥8
¥55
¥1
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 2013.
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 2014.
(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 the preparation of the comfort letter associated with the issuance of Euro and U.S.
dollar-denominated convertible bond-type bonds with stock acquisition rights subject to call, as well as theadvisory services concerning the notification of capital ratio under Basel III.
Current 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.
(4) Changes in Policy Regarding Payment of Compensation for Auditing Services
There were no changes during the reporting period.

― 12 ―

Consolidated Balance Sheets
The Bank of Iwate, Ltd. and its consolidated subsidiary
31 March 2015 and 2014ASSETSCash 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 2015 and 31 March 2014
Issued and outstanding —18,498 thousand shares at 31 March 2015 and 31
March 2014
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
Remeasurements of defined benefit plans (Note 18)
Stock acquisition rights (Note 21)
Total net assets
Total liabilities and net assets

Millions of yen
2015
2014
¥274,895¥335,312
105,000
146,029
6,094
7,162
2
－
4,985
4,985
1,382,794
1,358,979
1,741,016
1,638,911
1,797
1,185
16,514
16,756
2,195
2,667
2,774
1,104
6
7
8,187
7,558
6,144
5,933
(6,419)(9,803)¥3,545,984¥3,516,785

Thousands of
U.S. dollars(Note 1)2015
$2,287,551
873,762
50,711
17
41,483
11,506,982
14,487,942
14,954137,422
18,26623,08450
68,12851,128(53,416)$29,508,064¥3,269,768
10,00013,837
5
12,017
22
2,373
5
470
237
15,675
8,187
20,694
3,353,290¥3,284,422－
11,144
11
10,292
24
1,960
6
324
229
8,800
7,558
21,4403,346,210$27,209,520
83,215
115,14542
100,000
183
19,747
42
3,911
1,972
130,440
68,129172,206
27,904,552

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

12,0904,811
127,231(3,739)32,075(419)(1,529)55
170,575¥3,516,785

100,607
40,035
1,101,689(31,139)402,780(10,735)(549)
824
1,603,512$29,508,064

2015

2014

U.S. dollars
2015¥10,846.26¥9,602.66

Yen
Per share data:
Net assets (Note 27)

See accompanying notes.

― 13 ―$90.26

Consolidated Statements of Income
The Bank of Iwate, Ltd. and its consolidated subsidiaryYears ended 31 March 2015 and 2014
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 23)
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 23)
General and administrative expenses (Note 22)
Other expenses (Note 24)
Total expenses

2015

2014

2015

¥20,177
13,770
202
7,508
607
2,594

¥20,919
14,019
307
7,119
924
3,146

$167,904
114,588
1,681
62,478
5,051
21,58644,85846,434373,288

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

1,294
138
286
2,656
553
27,809989

10,984
1,215
3,578
23,933
1,215
227,245
9,528

33,37133,725

277,698

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

11,487

12,70995,590

2,277
1,856

3,425
1,564

18,94815,445

4,133

4,989

34,393

Net income before minority interests

7,354

7,720

61,197

Minority interests in net income
Net income

－

－

－

¥7,354¥7,720$61,197

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

See accompanying notes.

― 14 ―

U.S. dollars

2015

2014

¥414.15371.8765.00¥429.49398.91
60.00

2015
$3.45
3.09
0.54

Consolidated Statements of Comprehensive Income
The Bank of Iwate, Ltd. and its consolidated subsidiaryYears ended 31 March 2015 and 2014
Thousands of
U.S. dollars(Note 1)Millions of yen
2015
Net income before minority interests
Other comprehensive income (Note 26):
Net unrealized holding gains on available-for-sale securities
Net unrealized gains (losses) on hedging derivatives
Remeasurements of defined benefit plans (Note 18)
Share of the other comprehensive income of affiliates accounted for using theequity method

2014

2015

¥7,354¥7,720$61,197

16,322
(871)
1,463

84
106
－

135,824(7,248)
12,1755

2

42

16,919192

140,793

Comprehensive income¥24,273¥7,912$201,990

Total comprehensive income
Attributable to:
Owners of the parent
Minority interests¥24,273¥7,912$201,990

24,273－

7,912－

201,990－

Total other comprehensive income

See accompanying notes.

― 15 ―

Consolidated Statements of Changes in Net Assets
The Bank of Iwate, Ltd. and its consolidated subsidiaryYears ended 31 March 2015 and 2014
Millions of yen
Shareholders’ equity

Accumulated other comprehensive income
Net unrealized

Common stock

CapitalRetained

Treasury

surplusearnings

stock, at costTotalholding gains

shareholders’onequityavailable-for-salesecurities

BALANCE, 1 April 2013
Change during year
Cash dividends
Net income
Acquisition of treasury
stock
Disposal of treasury stock
Cancellation of treasurystock
Net changes of items otherthan stockholders’ equity
during year
Total change during year
BALANCE, 1 April 2014
Cumulative effects ofchanges in accounting
policies
Restated balance
Change during year
Cash dividends
Net income
Acquisition of treasury
stock
Disposal of treasury stock
Cancellation of treasurystock
Net changes of items otherthan stockholders’ equity
during year
Total change during year
BALANCE, 31 March 2015

Net unrealized
gains (losses)on hedging
derivatives

Total
Remeasurements

accumulatedof definedotherbenefit planscomprehensive

Stock

Total

acquisition

net assets

rightsincome¥12,090¥4,811¥123,721¥ (4,125)¥136,497¥31,989¥ (525)¥－¥31,464¥－¥167,961－－－－(1,175)
7,720－－(1,175)
7,720

－
－

－
－

－
－

－
－

－
－

(1,175)
7,720

－
－

－
－

－
－

(2,649)－(2,649)
－

－
－

－
－

－
－

－
－

－
－

(2,649)－－－(3,035)

3,035

－

－

－

－

－

－

－

－

－

－

－

－

86

106

(1,529)(1,337)55(1,282)－
12,090

－
4,811

3,510
127,231386(3,739)3,896
140,393

86
32,075106(419)(1,529)(1,529)(1,337)30,127

55
55

2,614
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)
7,354－－(1,066)
7,354

－
－

－
－

－
－

－
－

－
－

(1,066)
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)

16,919¥47,04644¥99

23,248¥192,694

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

Accumulated other comprehensive income
Net unrealized

Common stock

CapitalRetained

Treasury

surplusearnings

stock, at costTotalholding gains

shareholders’onequityavailable-for-salesecurities

Net unrealized
gains (losses)on hedging
derivatives

Total
Remeasurements

accumulatedof definedotherbenefit planscomprehensive

Stock

Total

acquisition

net assets

rightsincomeBALANCE, 1 April 2014
Cumulative effects ofchanges in accounting
policies
Restated balance
Change during year
Cash dividends
Net income
Acquisition of treasury
stock
Disposal of treasury stock
Cancellation of treasurystock
Net changes of items otherthan stockholders’ equity
during year

$100,607$40,035$1,058,758$ (31,114)$1,168,286$266,914$ (3,487)$(12,724)$250,703$458$1,419,447－
100,607－
40,035(9,395)
1,049,363－(31,114)(9,395)
1,158,891－
266,914－(3,487)－(12,724)－
250,703－458(9,395)1,410,052

－
－

－
－

(8,871)
61,197－－(8,871)
61,197

－
－

－
－

－
－

－
－

－
－

(8,871)
61,197

－
－

－
－

－
(0)

(50)
25

(50)
25

－
－

－
－

－
－

－
－

－
－

(50)
25

－

－

－

－

－

－

－

－

－

－

－

－

－

－

－

－

135,866(7,248)

12,175

140,793366

141,159

Total change during year
BALANCE, 31 March 2015－
$100,607－$40,035

52,326$1,101,689(25)$ (31,139)

52,301$1,211,192

135,866$402,780(7,248)$ (10,735)

12,175$ (549)140,793$391,496

366$824

193,460$1,603,512

See accompanying notes.

― 16 ―

Consolidated Statements of Cash Flows
The Bank of Iwate, Ltd. and its consolidated subsidiaryYears ended 31 March 2015 and 2014
Millions of yen
2015
2014

Thousands of
U.S. dollars(Note 1)
2015

Cash flows from operating activities:
Income before income taxes
Adjustments to reconcile income before income taxes to net cash provided by operating activities:
Depreciation
Impairment losses
Equity in (gains) losses of affiliates
Increase (decrease) in reserve for possible loan losses
Increase (decrease) in provision for contingent losses
Increase (decrease) in accrued bonuses for directors(Increase) decrease in prepaid pension costs
Increase (decrease) in liability for severance and retirement benefits(Increase) decrease in net defined benefit asset
Increase (decrease) in net defined benefit liability
Increase (decrease) in retirement benefits for directors and corporate auditors
Increase (decrease) in provision for losses on reimbursement of dormant deposits
Interest income
Interest expenses
Investment securities (gains) losses, net(Increase) decrease in money held in trust
Foreign exchange (gains) losses, net(Gains) losses on disposal of premises and equipment
Net (increase) decrease in loans and bills discounted
Net increase (decrease) in deposits
Net increase (decrease) in negotiable certificates of deposit
Net increase (decrease) in borrowed money
Net (increase) decrease in due from banks, excluding the Bank of Japan
Net (increase) decrease in call loans and others
Net increase (decrease) in call money
Net (increase) decrease in foreign exchange assets
Net increase (decrease) in foreign exchange liabilities
Interest received
Interest paid
Other, net
Sub-total
Income taxes paid
Income taxes refunded
Net cash provided by (used in) operating activities¥11,487¥12,709$95,590

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)

2,122
48
(53)
(3,972)
16
(10)
2,447
(1,635)(3,072)
1,564
(414)
53
(35,244)
1,718
(454)
(5)
80
168
(27,670)
9,265(21,018)889
21,04054,196(470)682
1136,316(2,030)6,992
54,269(2,641)
6
51,634

17,384125(141)(28,160)
67
(17)
―
―
(5,501)
(632)
(8)
1,215
(284,173)
15,777(5,018)(965)
2,521(2,463)(849,663)
171,274(293,226)
22,418183,815350,345
83,215(5,093)(50)
292,536(15,578)(1,365)(255,771)(33,136)8(288,899)

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
Payment for retirement of premises and equipment
Acquisition of intangible assets
Net cash used in investing activities(219,313)
28,426
189,906(1,335)553－(294)(2,057)(361,649)
56,750183,391(1,075)
－
(68)
(598)
(123,249)(1,825,023)
236,548
1,580,311(11,109)
4,602－(2,446)(17,117)－(511)(1,066)(6)
0(1,583)

9,859
(493)
(1,175)(2,649)－5,542－(4,252)(8,871)(50)
0(13,173)30(38,327)
290,795¥252,468

64(66,009)356,804¥290,795

249(318,940)
2,419,864$2,100,924

Cash flows from financing activities:
Proceeds from issuance of subordinated bonds and corporate bonds with stock acquisition rights
Repayments of lease obligations
Cash dividends paid
Payment for acquisition of shares in treasury
Proceeds from sale of shares in treasury
Net cash provided by (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.

― 17 ―

Notes to Consolidated Financial Statements
The Bank of Iwate, Ltd. and its consolidated subsidiaryYears ended 31 March 2015 and 2014
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 required for fairpresentation, 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 2015, which was ¥120.17 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.
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.

Trading account securities and securities
Securities are classified as follows based on 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 purpose are presented as trading account securities.
Trading account securities are stated at fair market value. Gains and losses realized on disposal and unrealized gains and losses frommarket value fluctuations are recognized as gains or losses in the period of the change.

― 18 ―

(b) Held-to-maturity debt securities are carried at amortized cost (straight-line method) using the moving-average method.
(c) Available-for-sale securities with available fair market 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 market value are stated at moving average cost.
Net unrealized holding gains (losses) on these securities and net of applicable income taxes are reported in a separate component of
net assets.
Securities included in money held in trust are stated at fair market value.
Available-for-sale securities with available fair market values are written down when a significant decline in fair value below thecost of such 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 an independently managed money trusts that invest primarily in securities arestated 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 market 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.
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 the Japanese Institute of Certified Public Accountants (“JICPA”)
Industry Audit Committee Report No. 24.
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
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 “Accounting and Auditing Concerning Accounting for
Foreign Currency Transactions in the Banking Industry” (JICPA Industry Audit Committee Report No. 25). The Bank assesses theeffectiveness of currency swap and foreign exchange swap transactions executed for offsetting the risks 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 paid or received under the swap contracts are recognized as interest expenses or income.

― 19 ―

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 depreciate theirpremises 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: 3-20 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 Bank and its consolidated subsidiary amortize their 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 estimateduseful 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.
Furthermore, 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 based on the amount calculated by deducting theestimated disposal value of collateral and the amount deemed collectible from guarantees from the book value.
For all the other loans, general reserves are provided collectively. The ratio of the general reserves is determined based on the
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.

― 20 ―

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 attributed to each fiscal year.

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 the estimated future deposits required due to the implementation of burden charge
system of credit guarantee corporations.

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 also set up retirement benefit trusts.
Actuarial differences are recognized as income or expenses commencing from the following year under the straight-line method
over 10 years.
In addition, the consolidated subsidiary adopts the simplified method.

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.

― 21 ―

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.

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 Bank and its consolidated subsidiary, national and local consumption taxes are accounted for with the tax
exclusion method.

Changes in accounting policies
Application of “Accounting Standard for Retirement Benefits,” etc.
The Bank and its consolidated subsidiary have adopted the main clause of Paragraph 35 of “Accounting Standard for Retirement
Benefits” (ASBJ Statement No. 26, 17 May 2012, hereinafter “Retirement Benefits Standard”) and the main clause of Paragraph 67
of “Guidance on Accounting Standard for Retirement Benefits” (ASBJ Guidance No. 25, 26 March 2015, hereinafter “Retirement
Benefits Guidance”) from the year ended 31 March 2015. Accordingly, the Bank and its consolidated subsidiary have revised thecalculation method for projected benefit obligation and service costs, and have changed the method of attributing the estimatedamount of all retirement benefits to be paid to periods of services from the straight-line method to the benefit formula basis, and alsochanged the method of determining the discount rate from using the discount rate based on the terms closely related to theemployees’ average remaining service years to using a single weighted average discount rate that reflects the estimated term andamount of benefit payments.
The Retirement Benefits Standard and the Retirement Benefits Guidance are applied in accordance with the transitional provisions
set forth in Paragraph 37 of the Retirement Benefits Standard. The effect of the change in calculation method for projected benefit
obligation and service costs is reflected as increase or decrease in retained earnings at the beginning of the year ended 31 March2015.
As a result of this change, at the beginning of the year ended 31 March 2015, net defined benefit asset decreased by ¥810 million($6,740 thousand), net defined benefit liability increased by ¥935 million ($7,781 thousand) and retained earnings decreased by― 22 ―

¥1,129 million ($9,395 thousand). Meanwhile, income before income taxes for the year ended 31 March 2015 increased by ¥64
million ($533 thousand).
The effects of this change on per share data are described in Note 27.

Unapplied new accounting standards
Accounting standards for business combinations(1)

Overview
The following items have been mainly revised; (i) accounting treatment for changes in the parent’s ownership interests in a
subsidiary when the parent continues to retain control of that subsidiary after the additional acquisition of ownership interest inthat subsidiary or in other cases, (ii) accounting treatment of acquisition-related costs, (iii) provisional accounting treatment,and (iv) presentation of net income as well as the change of minority interests to non-controlling interests.

(2)

Date of adoption
The Bank will adopt the accounting standards effective from the beginning of the year ending 31 March 2016.

(3)

The effect of adopting the accounting standards
The effect of adopting these accounting standards has not been determined.

― 23 ―

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 2015 and 2014, 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
2015
2014
¥274,895¥335,312(12,000)(24,000)(10,000)(20,000)
(427)
(517)
¥252,468¥290,795

Thousands of
U.S. dollars
2015$2,287,551(99,859)(83,215)(3,553)$2,100,924(2) Significant non-cash transactions
Assets and liabilities associated with finance lease transactions that were recorded in the years ended 31 March 2015 and 2014
amounted to nil and ¥297 million, respectively.

4. TRADING ACCOUNT SECURITIES AND SECURITIES
Trading account securities held by the Bank at 31 March 2015 and 2014 consisted of the following:
Millions of yen
2015
2014
¥2
¥－
¥2
¥－

Local government bonds

Thousands of
U.S. dollars
2015
$17
$17

The Bank records ¥0 million ($0 thousand) of net valuation gains in consolidated statement of income for the year ended 31 March
2015.

Securities held by the Bank at 31 March 2015 and 2014 consisted of the following:
Millions of yen
2015
2014
¥482,399¥473,105
267,888
293,032
370,351
399,669
53,162
41,069208,994
152,104¥1,382,794¥1,358,979

National government bonds
Local government bonds
Debentures
Stock shares
Other securities

Thousands of
U.S. dollars
2015$4,014,305
2,229,242
3,081,892
442,390
1,739,153$11,506,982

Unsecured loaned securities which borrowers have the right to sell or pledge in the amount of ¥73,500 million ($611,634 thousand)and ¥85,000 million at 31 March 2015 and 2014 were included in national government bonds, respectively.

― 24 ―

A. The following tables summarize acquisition costs, book values and fair values of securities with available fair values at 31 March
2015 and 2014:(a) Held-to-maturity debt securities
Millions of yen
At 31 March 2015:

Book value¥41,299

Fair value¥44,022

Difference¥2,723

Gain¥2,729At 31 March 2014:

43,312

44,638

1,326

1,335

At 31 March 2015:

Book value$343,671

Thousands of U.S. dollars
Fair value
Difference$366,331$22,660

Loss
¥ (6)
(9)

Gain
$22,710

Loss

Gain

Loss

$ (50)(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 2015:
Corporate stocks
Bonds
Other
At 31 March 2014:
Corporate stocks
Bonds
Other

Book value

Difference¥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)¥24,472
1,099,709
145,781¥39,5111,130,926
148,458¥15,039
31,217
2,677¥15,627
31,271
3,468¥ (588)(54)(791)¥1,269,962¥1,318,895¥48,933¥50,366¥ (1,433)

Thousands of U.S. dollars
Acquisition cost
At 31 March 2015:
Corporate stocks
Bonds
Other

Book value

Difference

Gain

Loss

$203,969
8,750,920
1,628,252$429,316
9,044,995
1,695,232$225,347
294,075
66,980$225,913
294,408
80,819$ (566)(333)(13,839)$10,583,141$11,169,543$586,402$601,140$ (14,738)

B. Total sales of available-for-sale securities sold in the years ended 31 March 2015 and 2014 amounted to ¥28,426 million($236,548 thousand) and ¥56,746 million, respectively. The related gains and losses amounted to ¥799 million ($6,649thousand)and ¥115 million ($957 thousand) in 2015, and ¥991 million and ¥43 million in 2014, respectively.

C. Available-for-sale securities other than trading securities (except securities whose fair market values are extremely difficult todetermine) written down for the years ended 31 March 2015 and 2014 amounted to ¥83 million ($691 thousand) and ¥76 million,
respectively, due to a significant decline in fair value below the cost which is deemed to be other than temporary.

― 25 ―

D. Net unrealized holding gains on available-for-sale securities on the consolidated balance sheets at 31 March 2015 and 2014
consisted of the following:Thousands of
U.S. dollars

Millions of yen
2015
Net unrealized holding gains before deferred tax on:
Available-for-sale securities
Deferred tax liabilities
Net unrealized holding gains before minority interests adjustment
Equity of net unrealized holding gains on available-for-sale securities:
Owned by affiliates that are accounted for under the equity method

2014¥70,468(22,080)
48,388Net unrealized holding gains on available-for-sale securities

2015¥48,933(16,867)
32,066$586,403(183,740)
402,663

14

9

117

¥48,402¥32,075$402,780

5. MONEY HELD IN TRUST
Money held in trust at 31 March 2015 and 2014 consisted of the following:Thousands of
U.S. dollars

Millions of yen
2015
Money held in trust for trading purpose:
Carrying amount
Realized gains included in earnings¥4,985－2014¥4,985－

2015$41,483－

6. FINANCIAL INSTRUMENTS(1) Overview
a. Policy for financial instruments
The Bank and its consolidated subsidiary provide financial services, focusing on banking businesses such as depositing,accommodating, and trading of securities and investing in securities.
Regarding the main operations of the Bank and its consolidated subsidiary, 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 Bank and its
consolidated subsidiary are tended to be affected by interest rate fluctuations, and are exposed to risks stemmed from changes infinancial market environments (interest rate risks and price fluctuation risks), as well as to risks arising from fund shortage.
The Bank and its consolidated subsidiary manage those risks using the ALM method in order to appropriately control the balance
between revenues and risks in consideration of the status of the financial assets and liabilities, trend of financial markets, policies forfund management and investment policies. The Bank and its consolidated subsidiary use derivatives for the purpose of reducing
risks and avoid using derivatives for speculative purposes.

b. Types of financial instruments and related risks
The financial assets of the Bank and its consolidated subsidiary consist mainly of loans for domestic enterprises and individuals andinvestment securities.
Loans are exposed to credit risks stemming from defaults of borrower. The largest industrial categories of loans as of the current
fiscal year-end was local governments, followed in order by individuals, manufacturing industries, and whole and retail sales― 26 ―

industries, and we can found that it covers approximately every 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 business transaction purposes, while trading securities are held for trading purposes. These areexposed 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 arisen from fluctuation of interest rates
stemming from mismatching between interests or periods of assets and liabilities. In addition, these are exposed to risks of fundshortage where the Bank and its consolidated subsidiary fail to control cash receipts and disbursement due to unexpected fundoutflow and suffering losses from unusual high interest rates imposed on, as well as market liquidity risks where the Bank and its
consolidated subsidiary fail to raise funds owing to market shrinkage and are obliged to enter into unusual unfavorable transactions.
Regarding derivative transactions, the Bank and its consolidated subsidiary enter 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
Bank and its consolidated subsidiary evaluate 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 andanalysis 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 Bank and its consolidated subsidiary for managing credit risks arising fromaccommodation procedures, each related division monitors credit worthiness of their main customers periodically and due dates andoutstanding balances by individual customer. In addition, the Bank and its consolidated subsidiary are making efforts to identify andmitigate 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
to ensure 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 fund accommodation 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

― 27 ―

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 Bank and its consolidated subsidiary 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 andconfidence interval by confirming whether the quantities of its risk exceed a certain portion of equity capital or not. Upper limits onlosses on an aggregation basis or on realization basis are defined to control them on a daily basis. These results are reported by the
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 market environment and investment status is reported tothe management on a regular basis.
(Derivative transactions)
In conducting derivative transactions, each division and its role responsible for execution of transactions, evaluation of efficiency ofthe 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 variance and 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 year ended 31
March 2015 and 2014 was as follows:
Millions of yen

Thousands of U.S. dollars

2015

2014

¥34,775¥30,0622015$289,382

The Bank and its consolidated subsidiary periodically verify the effectiveness of risk measurement by a back testing protocol thatcompares the volume under VaR with the amount of actual gains or losses or hypothetical gains or losses on a fixed portfolio. As aresult of conducting the back testing protocol, the Bank and its consolidated subsidiary suppose 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― 28 ―

a normal distribution. Accordingly, under conditions subject to changes in the market exceeding the assumption, risks may beunderestimated.

2. Financial instruments such as deposits and loans receivable, etc.
The Bank and its consolidated subsidiary employ variance and covariance method in calculating VaR of deposits and loans
receivable, etc., using such parameters of 6 months as holding period, 99% as confidence interval and 1 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 year ended 31 March 2015 and 2014 was as follows:
Millions of yen
2015

Thousands of U.S. dollars

2014¥2,1492015¥8,600$17,883

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 Bank and its consolidated subsidiary adequately manage their liquidity risks based on various internal quantitative standards
prescribed in fund management regulation, 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 assumption and factors could result in different fair value.

― 29 ―

(2) Fair value of financial instruments
The carrying amounts and the estimated fair value of financial instruments at 31 March 2015 and 2014 were as follows.
Millions of yen

Thousands of U.S. dollars
2014

2015

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 bonds
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

2015

Carrying
amounts

Fair value

Carrying
amounts

Fair value

Carrying
amounts

Fair value¥274,895
105,000¥274,895
105,000¥335,312
146,029¥335,312
146,029$2,287,551
873,762$2,287,551
873,762

6,094
4,985

6,185
4,985

7,162
4,985

7,292
4,985

50,711
41,48351,46941,48336,104
1,342,244
1,741,016(6,318)38,737
1,342,244

36,9391,318,895
1,638,911(9,728)38,134
1,318,895

300,441
11,169,543
14,487,942(52,575)

322,352
11,169, 543

1,734,698

1,737,434

1,629,183

1,631,251

14,435,367

14,458,134

3,269,768
10,00013,837

3,270,190
10,00013,941

3,284,422－
11,144

3,284,847－
11,144

27,209,520
83,215
115,145

27,213,032
83,215116,011

12,017

11,957

10,292

11,630100,000

99,501

(80)

(80)

9

9

(666)

(666)

(1,132)(3,106)

(647)

(905)

(9,420)(25,847)(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
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 fair value, while the fair value of those with long-term is based on either quoted market prices or prices provided by thefinancial institutions making markets.
c. Money held in trust
For the securities that are invested as part of trust assets in an 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 bonds and available-for-sale securities
The fair values of held-to-maturity bonds 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― 30 ―

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 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 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 2015 and 2014:
Thousands of
U.S. dollars

Millions of yen
2015
Available-for-sale securities

2014¥4,446¥3,145― 31 ―

2015$36,998

(Note 3) Expected collections of assets and payments of liabilities with maturities at 31 March 2015 and 2014 were as follows:
Millions of yen
2015
Within one
year

One to three
years

Three tofive years

Five toseven years

Seven toten years

Over tenyears

Call loans and bills bought
Commercial paper and other debt purchased
Securities
Held-to-maturity bonds
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¥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

3,084,281
10,000－176,764
－
－

8,192
－
－

174
－
10,000

357
－
－

－
－
－

Note: Borrowed money is stated for the long-term and interest-bearing borrowed money.

Millions of yen
2014
Within one
year

One to three
years

Three tofive years

Five toseven years

Seven toten years

Over tenyears

Call loans and bills bought
Commercial paper and other debt purchased
Securities
Held-to-maturity bonds
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¥146,029
788

¥－
1,394

¥－
－

¥－
－

¥－
－

¥－
4,980

1,176

1,762

12,061－－

21,940－1,176
143,382－
1,762
231,792

10,003－
370,178－－
244,841－－
227,744

21,940－44,036

14,44152,64453,915
307,146

56,514
21,58390,822335,560

195,858
12,264
143,246
324,142

133,237
29,732
72,096
149,661

37,696
139,170
36,653
134,198

3,416
37,639－222,795

Deposits
Call money
Borrowed money

3,114,822－－

159,234
－
－

9,950
－
－

119
－
－

297
－
10,000－－－― 32 ―

Thousands of U.S. dollars
2015
Within one
year

One tothree years

Three tofive years

Five toseven years

Seven toten years

Over tenyears$873,762
19,123

$－
－

$－
－

$－
－

$－
－

$－
31,588

9,278

5,326

103,229－－

182,608

Call loans and bills bought
Commercial paper and other debt purchased
Securities
Held-to-maturity bonds
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－
9,278
1,154,831－
5,326
2,301,498

83,232－
3,038,421－－
1,565,474－－
1,992,136

182,608－
517,725

217,958
155,629439,386
2,230,265

842,024
61,6381,003,487
3,321,836

1,481,934
136,016
951,668
2,998,361

709,978259,682
543,430
1,271,191

215,803
1,390,580
129,325
1,203,711

280,768
225,697－
1,914,704

Deposits
Call money
Borrowed money

25,665,982
83,215－

1,470,949－－

68,170－－1,448－
83,215

2,971
－
－

－
－
－

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, market values, and valuation gains (losses) for the years ended 31 March 2015 and 2014 were as follows:(Currency-related transactions)
Millions of yen

Thousands of U.S. dollars

2015

2014
Valuation

Notional

gains

amounts Fair value (losses)

Forward foreign exchange:
Sell
Buy

¥4,879
104

¥(78)
(2)

¥(78)
(2)

2015
Valuation

Notional

gains

amounts Fair value (losses)

¥21
296

¥(0)
9

¥(0)
9

Valuation
Notional

gains

amounts Fair value (losses)$40,601
865$(649)(17)$(649)(17)

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.

― 33 ―

b. Derivative instruments qualifying for hedge accounting
Notional amounts and market values for the years ended 31 March 2015 and 2014 were as follows:(Interest-related transactions)
Millions of yen

Thousands of U.S. dollars

2015
Notional
amounts
Interest rate swap:
Receive floating / Pay fixed rate
(Deferral method)
Receive floating / Pay fixed rate
(Exceptional method)

2014
Notional
amounts

Fair value

2015
Fair value

Notional
amounts

Fair value¥43,827¥ (1,896)¥14,798¥ (647)$364,708$ (15,778)

22,717(1,974)

22,813(258)

189,041(16,427)(Currency-related transactions)
Millions of yen

Thousands of U.S. dollars

2015

2014

Notional amounts Fair value

Notional
amounts Fair value

Currency swap
(Deferral method)¥91,000

¥764

2015

¥－

¥－

Notional
amounts

Fair value$757,261$6,358

7. LOANS AND BILLS DISCOUNTED
Loans and bills discounted at 31 March 2015 and 2014 consisted of the following:

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

Thousands of
U.S. dollars

2015

2014

2015

¥3,72589,304
1,465,609
182,378¥3,58097,904
1,377,689
159,738$30,998
743,147
12,196,130
1,517,667¥1,741,016¥1,638,911$14,487,942

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 2015 and 2014 was ¥3,725 million ($30,998 thousand) and ¥3,589 million, respectively.

― 34 ―

The Bank is required to disclose loans to customers who meet specific criteria in accordance with the Banking Law. Doubtful loans
at 31 March 2015 and 2014 consisted of the following:Thousands of
U.S. dollars

Millions of yen
2015
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

¥1,007
26,4981192014¥1,65130,88692

2015$8,380220,505
990

10,074

8,153

83,831¥37,698¥40,782$313,706

8. PLEDGED ASSETSAt 31 March 2015, deposits of ¥28,649 million ($238,404 thousand), call money of ¥10,000 million ($83,215 thousand), andborrowed money of ¥3,725 million ($30,998 thousand) were secured by a pledge of securities in the amount of ¥120,746 million($1,004,793 thousand) and guarantee money deposits in the amount of ¥71 million ($591 thousand). At 31 March 2014, deposits of¥12,221 million and borrowed money of ¥926 million were secured by a pledge of securities in the amount of ¥162,027 million andguarantee money deposits in the amount of ¥71 million. In addition to the above-mentioned assets pledged as collateral, the Bank
provided securities of ¥43,103 million ($358,684 thousand) and ¥41,443 million, and other assets in the amount of ¥3 million ($25
thousand) and ¥3 million, respectively, as collateral for transactions such as exchange settlement transactions at 31 March 2015 and2014.

9. COMMITMENT LINE AGREEMENT
Commitment line agreements are agreements to lend to customers to 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
2015 and 2014 amounted to ¥685,132 million ($5,701,356 thousand) and ¥680,377 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 ¥647,388 million ($5,387,268 thousand) and ¥644,950 million at 31 March 2015 and 2014, respectively.
The amount of unused commitment line does not necessarily affect the future cash flows of the Bank and its consolidated subsidiarybecause most of such agreements 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 for the loans or other reasons. When entering into loan agreements with the customers, the Bank requests
pledges of collateral in the form of premises or securities if necessary. After entering into loan agreements, the Bank periodicallychecks the financial condition of the customers based on its internal rules and performs certain actions relating to the security of theloans if necessary.

― 35 ―

10. OTHER ASSETS
Other assets at 31 March 2015 and 2014 consisted of the following:Thousands of
U.S. dollars

Millions of yen
2015
Accrual income
Other

2014

2015

¥3,7092,435¥3,965
1,968$30,865
20,263¥6,144¥5,933$51,128

11. PREMISES AND EQUIPMENT
Premises and equipment at 31 March 2015 and 2014 consisted of the following:Thousands of
U.S. dollars

Millions of yen
2015

2014

2015

Land
Buildings
Equipment
Leased assets
Other¥ 8,906
33,618
7,808
1,531
375

¥ 8,998
33,643
7,971
1,531
108

$74,112279,754
64,975
12,7403,120

Accumulated depreciation

52,23835,72452,25135,495434,701
297,279¥16,514¥16,756$137,422

To conform with the Companies Law of Japan, deferred gains on sale of real estate in the amount of ¥1,030 million ($10,008
thousand) and ¥1,041 million at 31 March 2015 and 2014, respectively, were deducted from the acquisition cost of premises andequipment.

12. INTANGIBLE ASSETS
Intangible assets at 31 March 2015 and 2014 consisted of the following:
Intangible assets
Thousands of
U.S. dollars

Millions of yen
2015
SoftwareLeased assets
Other― 36 ―

20142015¥1,1431,013
39¥1,2551,372
40$9,5118,430
325¥2,195¥2,667$18,26613. DEPOSITS
Deposits at 31 March 2015 and 2014 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

2015

2014

2015

¥49,127
1,650,347
6,281
1,198,132
149,857
216,024¥51,185
1,711,574
4,604
1,217,411
48,388251,260$408,812
13,733,436
52,2689,970,309
1,247,042
1,797,653¥3,269,768¥3,284,422$27,209,520

14. BORROWED MONEY
Subordinated borrowings with a special provision stipulating that fulfillment of obligation is subordinated to otherobligations included in borrowed money at 31 March 2015 and 2014 consisted of the following:Thousands of
U.S. dollars

Millions of yen

Subordinated borrowings

2015

2014

2015

¥10,000¥10,000$83,215

15. CORPORATE BONDS WITH STOCK ACQUISITION RIGHTS
Corporate bonds with stock acquisition rights at 31 March 2015 and 2014 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

2015

2014

¥12,017¥10,2922015$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¥6,012 ($50.03)¥12,017 ($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.

― 37 ―

2. These corporate bonds are bonds issued in European market and denominated in U.S. dollars. The amount of corporate
bonds with stock acquisition rights was translated into Japanese yen at telegraphic transfer middle rate at 31 March 2015
announced by the Bank.
3. Annual maturities of corporate bonds with stock acquisition rights at 31 March 2015 were as follows:Year ending 31 MarchMillions of yen

2016
2017
2018
2019
2020 and thereafterThousands of U.S.
dollars¥－－－
12,017－$－－－100,000－

16. OTHER LIABILITIESOther liabilities at 31 March 2015 and 2014 consisted of the following:Thousands of
U.S. dollars

Millions of yen
2015
Accrual income taxes
Accrued expenses
Unearned income
Lease obligations
Other

2014

2015

¥287
2,728
702
2,391
14,586¥1,879
2,733
723
2,902
13,203$2,38822,701
5,842
19,897
121,378¥20,694¥21,440$172,206

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 ¥1,690 million ($14,063 thousand) in 2015 and ¥1,852 million in 2014.

18. EMPLOYEES’ SEVERANCE AND RETIREMENT BENEFITSThe Bank and its consolidated subsidiary have 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 period and 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 pay credits based on such as salary level are accumulated. Also, the Bank has set up
retirement benefit trust in the defined benefit pension plan.
Under the lump-sum retirement benefit plan (even though this is unfunded plan, this has become funded plan as a result of setting up
retirement benefit trust.), predetermined points based on years of service and ability-based grade / job title are given to each― 38 ―

participant annually, and employees receive lump-sum payments, which are calculated by multiplying the unit price of points to theaccumulated 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
2015

2014

2015

Balance at beginning of year
Cumulative effects of changes in accounting policies¥24,582
1,745¥24,652－$204,560
14,521

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

26,327735
273
132(1,303)

－
708
370
209
(1,357)

219,081
6,116
2,272
1,099
(10,843)

Balance at end of year

¥26,164¥24,582$217,725

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
2015

2014

2015

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

¥23,726
491
1,666
1,330
56
(704)

¥21,842
446
759
1,330
55
(706)

$197,436
4,086
13,864
11,068466(5,858)

Balance at end of year

¥26,565¥23,726$221,062(iii) Reconciliation from projected benefit obligation and plan assets to net defined benefit liability (asset)
Thousands of
U.S. dollars

Millions of yen
2015

2014

Funded projected benefit obligation
Plan assets¥26,152(26,565)¥24,571(23,726)$217,625(221,062)

Unfunded projected benefit obligation

(413)
12

845
11

(3,437)100

Net liability (asset) recognized in consolidated balance sheets

(401)

856

(3,337)

Net defined benefit liability
Net defined benefit asset

2,373(2,774)

1,960(1,104)

19,747(23,084)

Net liability (asset) recognized in consolidated balance sheets¥(401)¥856$(3,337)

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

― 39 ―

2015

(iv) Retirement benefit expenses and its breakdown
Thousands of
U.S. dollars
2015

Millions of yen
2015
2014
Service costs (excluding the amount of employee contributions)Interest costs
Expected return on plan assets
Amortization of actuarial differences

¥680
273
(491)
730

¥652
370
(446)
708

$5,6582,272(4,086)
6,075

Retirement benefit expenses¥1,192¥1,284$9,919Note: The retirement benefit expenses of the consolidated subsidiary adopting the simplified method are included in service costs at
once.
(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
2015

2014

2015

Actuarial differences¥ 2,264¥－$ 18,840

Total¥ 2,264¥－$ 18,840(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:
Millions of yen
2015

Thousands of
U.S. dollars

2014

2015

Unrecognized actuarial differences¥(99)¥(2,364)$(824)

Total

¥(99)

¥(2,364)$(824)(vii) Plan assets(a) Percentage by major category of plans assets was as follows:
2015

2014

Bonds
Equities
Cash and deposits
Other

66%
19%
0%
15%

67%
18%
0%
15%

Total

100%

100%

Retirement benefit trust set up for defined benefit pension plans accounts for 18% and 19% of total plan assets for the years
ended 31 March 2015 and 2014, respectively. In addition, retirement benefit trust set up for the lump-sum retirement benefit
plans accounts for 22% and 24% of total plan assets for the years ended 31 March 2015 and 2014, respectively.
(b) Determination procedure of long-term expected rate of return on plan assets
In determining long-term expected rate of return on plan assets, the Bank considers the current and projected asset
allocations, as well as current and future long-term rate of return for various categories of the plan assets.

― 40 ―

(viii) Basis for calculation of actuarial assumptions
Basis for calculation of actuarial assumptions (presented as weighted-average rate) at 31 March 2015 and 2014 was as follows:
2015
Discount rateLong-term expected rate of return on plan assets

2014
1.0%
2.1%

1.5%
2.0%

19. INCOME TAXESThe Bank and its consolidated subsidiary are subject to a number of taxes based on income such as corporation tax, inhabitant taxes
and enterprise tax, which, in the aggregate, indicated a statutory tax rate in Japan of approximately 35.3% and 37.7% for the years
ended 31 March 2015 and 2014, respectively.
Significant components of the Bank’s deferred tax assets and liabilities at 31 March 2015 and 2014 were as follows:
Thousands of
U.S. dollars

Millions of yen
2015

2014

2015

Deferred tax assets:
Reserve for possible loan losses
Net defined benefit liability
Accumulated depreciation
Securities
Other¥1,522
3,177
1,190
699
1,887

¥2,975
3,883
1,349
749
1,701

$12,665
26,437
9,903
5,817
15,703

Subtotal
Valuation allowance

8,475(1,611)

10,657(2,127)70,525(13,406)

6,864

8,530

57,119(22,080)(452)(1)(16,867)(456)(0)(183,740)(3,761)(8)(22,533)(17,323)(187,509)¥(15,669)¥(8,793)$(130,390)

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

The following summarizes the significant difference between the statutory tax rate and the Bank’s effective tax rate for the years
ended 31 March 2015 and 2014.
2015
Statutory tax rate

2014

35.3%

37.7%

Non-deductible expenses

0.3

0.4

Non-taxable income

(1.7)

(1.3)

Per capita inhabitant taxes

0.3

0.3

Valuation allowance

(3.0)

1.3

Decrease in deferred tax assets due to tax rate changes

4.8

1.3

Other, net

(0.0)

(0.4)

Effective tax rate

36.0%

39.3%

― 41 ―

(Revisions to amounts of deferred tax assets and deferred tax liabilities due to change in rate of income taxes)
On 31 March 2015, “Partial Amendment of the Income Tax Law” and “Partial Amendment of the Local Tax Law” were
promulgated, and the rate of income taxes will be lowered from the years beginning on and after 1 April 2015. Accordingly, theeffective tax rate applied to the calculation of deferred tax assets and liabilities has been lowered from 35.3% to 32.8% and 32.0%
for temporary differences expected to be reversed during the year beginning on 1 April 2015 and the years beginning on and after 1
April 2016.
This change resulted in decrease in deferred tax liabilities by ¥1,656 million ($13,780 thousand), increase in net unrealized holding
gains on available-for-sale securities by ¥2,274 million ($18,923 thousand), decrease in net unrealized losses on hedging derivativesby ¥63 million ($524 thousand), decrease in remeasurements of defined benefit plans on accumulated other comprehensive incomeby ¥1 million ($8 thousand), and increase in provision for income taxes-deferred by ¥554 million ($4,610 thousand).

20. NET ASSETS
Under the Companies Law (the “Law”) and the Banking Law of Japan, the following are provided; the entire amount of the issue
price of shares is required to be accounted for as capital, although a company may, by resolution of its board of directors, accountfor an amount not exceeding one-half of the issue price of the new shares as additional paid-in capital, which is included in capitalsurplus.
The Law and the Banking Law provide that an amount equal to at least 20% of cash dividends and other cash appropriations shall beappropriated and set aside as a legal earnings reserve until the total amount of legal earnings reserve and additional paid-in capitalequals 100% of common stock. The legal earnings reserve and additional paid-in capital may be used to eliminate 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 areavailable 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 Law.
The amount of treasury stock held by the Bank and its consolidated subsidiary was 741 thousand shares at 31 March 2015.

21. STOCK OPTION
1. Share-based compensation expenses accounted for as general and administrative expenses
The balance of stock acquisition rights granted for stock option program was ¥99 million ($824 thousand) and ¥55 million at 31
March 2015 and 2014, respectively.
Share-based compensation expenses which were accounted for as general and administrative expenses for the year ended 31 March
2015 and 2014 amounted to ¥46 million ($383 thousand) and ¥55 million, respectively.

― 42 ―

2. Detail of stock options, volume and activity(a) Detail of stock options
2013 Stock Option PlanTitle and number of grantees
Number of stock options by type of shares
Grant dateCondition for vesting
Requisite service period
Exercise period
Note: Reported in terms of shares of stock.

2014 Stock Option Plan

Directors of the Bank: 9
Common stock: 13,400 shares
24 July 2013
Not applicableNot applicable
From 25 July 2013 to 24 July 2043

Directors of the Bank: 9
Common stock: 10,400 shares
24 July 2014
Not applicableNot applicable
From 25 July 2014 to 24 July 2044(b) Volume and activity
The following describes volume and activity that existed during the year ended 31 March 2015. 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

Before vesting (shares):
At 31 March 2014
GrantedForfeited
VestedOutstanding

13,400——600
12,800—10,400——10,400After vesting (shares):
At 31 March 2014
VestedExercised
Forfeited
Outstanding

—
600
600
—
—

—
—
—
—
—

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

¥1 ($0.01)¥4,850 ($40.36)¥4,119 ($34.28)¥1 ($0.01)—¥4,437 ($36.92)

3. Valuation method for fair value of stock options(a) The valuation method : Black-Scholes formula(b) Major basic numerical values and valuation method
2014 Stock Option Plan
Stock price volatility (*1)
Expected years to expiration (*2)
Expected dividends (*3)
Risk-free interest rate (*4)

30.7%
4.4years¥60 ($0.50) per share
0.12%

Notes:*1. Stock price volatility was calculated based on the actual stock prices from 22 February 2010 to 14 July 2014.
*2. As a rational estimation was difficult due to the insufficient amount of historical data, expected years to expiration
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 2014.

― 43 ―

*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. GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses for the years ended 31 March 2015 and 2014 consisted of the following:Thousands of
U.S. dollars

Millions of yen
2015
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

2014

2015

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

¥11,360
2,582
1,284
2,122
740
1,176
1,808
2,602
4,135

$92,993
22,035
9,919
17,384
6,283
10,452
16,485
20,86230,832¥27,308¥27,809$227,245

23. OTHER OPERATING INCOME AND EXPENSES
Other operating income and expenses for the years ended 31 March 2015 and 2014 consisted of the following:Thousands of
U.S. dollars

Millions of yen
2015
Other operating income:Gain on sale of bonds
Gain on sale of foreign bills of exchange
Gain on financial instruments
Gain on trading account securities transactions
Other

2014

¥553
53
－
1
－

¥825
90
5
4
0

$4,602
441
－
8
－

¥607

¥924

$5,051Thousands of
U.S. dollars

Millions of yen
2015
Other operating expenses:
Loss on redemption of bonds
Loss on sales of bonds
Other― 44 ―

2015

2014

2015

¥31
114
1

¥434
43
76

$258
949
8

¥146

¥553

$1,215

24. OTHER INCOME AND EXPENSES
Other income and expenses for the years ended 31 March 2015 and 2014 consisted of the following:Thousands of
U.S. dollars

Millions of yen
2015
Other income:Reversal of provision for possible loan losses
Gain on sale of stocks and other securities
Gain on disposal of premises and equipment
Other

2014

¥983
246
438
927

¥2,182166
11
787$8,180
2,047
3,645
7,714

¥2,594¥3,146$21,586
Thousands of
U.S. dollars

Millions of yen
2015
Other expenses:
Loss on transfer of receivables
Loss on disposal of premises and equipment
Loss on devaluation of stocks and other securities
Other

2015

2014

2015

¥350
142
85
568

¥217
179
76
517

$2,912
1,182
707
4,727

¥1,145¥989$9,52825. 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 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.
(2) Finance leases other than those that transfer the ownership(i) Details of leased assets
Premises and equipment:
Mainly consisted of equipment for branch operating system
Intangible assets:
Mainly consisted of software for 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.

― 45 ―

(3) Current portion of lease obligations and lease obligations (excluding current portion) at 31 March 2015 and 2014 consisted of
the following:
Millions of yen
2015
Current portion of lease obligations
Lease obligations (excluding current portion)

2014

Thousands of
U.S. dollars

Average interest
rate (%)

2015

2015

¥523
1,868

¥511
2,391

$4,352
15,545¥2,391¥2,902$19,897

2.42%
2.50%

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
2016
2017
2018
2019
2020 and thereafterYear ending 31 MarchMillions ofyen

Thousands of
U.S. dollars

2015

2015

¥523
535
538
524
271

$4,352
4,452
4,477
4,361
2,255

Millions of
yen
2014

2015
2016
2017
2018
2019 and thereafter

¥511
523
535
538
795

B. Operating leases(a) As lessee
There were no future lease payments under non-cancelable operating leases at 31 March 2015 and 2014.

(b) As lessor
Future lease receivables under non-cancelable operating leases at 31 March 2015 were ¥252 million ($2,097 thousand) including¥11 million ($92 thousand) due within one year.
Future lease receivables under non-cancelable operating leases at 31 March 2014 were ¥263 million including ¥11 million due
within one year.

― 46 ―

26. COMPREHENSIVE INCOME
Reclassification adjustments and tax effect amounts of other comprehensive income for the years ended 31 March 2015 and 2014
were as follows:
Thousands of
U.S. dollars

Millions of yen
2015
Net unrealized holding gains on available-for-sale securities:
Amount for the year
Reclassification adjustment

2014

2015

¥22,617(1,081)

¥557
(589)

$188,208(8,995)

Amount before tax effectTax effect amount

21,536(5,214)(32)
116

179,213(43,389)

Net unrealized holding gains on available-for-sale securities

16,322

84

135,824(1,616)
367

(20)
184

(13,448)
3,054(1,249)
378

164
(58)

(10,394)
3,146

Net unrealized gains (losses) on hedging derivatives:
Amount for the year
Reclassification adjustment
Amount before tax effectTax effect amount

(871)

106

(7,248)Remeasurements of defined benefit plans:
Amount for the year
Reclassification adjustment

Net unrealized gains (losses) on hedging derivatives

1,534
730

－
－

12,765
6,075

Amount before tax effectTax effect amount

2,264
(801)

－
－

18,840(6,665)Remeasurements of defined benefit plans

1,463

－

12,175

5
－

2
－

42
－

5
－

2
－

42
－

Share of other comprehensive income of affiliates accounted for using
the equity method:Amount for the year
Reclassification adjustment
Amount before tax effectTax effect amount
Share of other comprehensive income of affiliates accounted forusing the equity method
Total other comprehensive income― 47 ―

52

42¥16,919¥192$140,793

27. PER SHARE DATA
Net assets per share at March 31, 2015 and 2014 and net income per share for the years then ended were as follows:Yen
Net assets
Net income
Diluted net income

U.S. dollars

2015

2014

¥10,846.26
414.15371.87¥9,602.66
429.49398.91

2015$90.26
3.45
3.09

Net assets per share and net income per share were calculated based on the following:Thousands of
U.S. dollars

Millions of yen or
thousands of shares
2015

2014

2015

¥192,694
99
99
192,595¥170,575
55
55
170,520$1,603,512
824
824
1,602,688

17,757

17,758Net income:Net income
Net income attributed to common stock
Average number of shares of common stock during the year

7,354
7,354
17,7577,720
7,720
17,976

Diluted net income: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

2,019
1,999
20

1,378
1,369
9

Net assets:
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

61,197
61,197

As described in “Changes in accounting policies,” the Bank and its consolidated subsidiary have adopted the main clause of
Paragraph 35 of Retirement Benefits Standard and the main clause of Paragraph 67 of Retirement Benefits Guidance from the year
ended 31 March 2015. The Retirement Benefits Standard and the Retirement Benefits Guidance are applied in accordance with thetransitional provisions set forth in Paragraph 37 of the Retirement Benefits Standard.
As a result of this change, net assets per share at 1 April 2014 decreased by ¥63.58 ($0.53) , while net income per share and diluted
net income per share for the year ended 31 March 2015 increased by ¥2.34 ($0.02) and ¥2.10 ($0.02), respectively.

― 48 ―

28. SEGMENT INFORMATION(1) Reportable segment information
Reportable segment information was omitted as the Bank and its consolidated subsidiary had a single segment, commercial banking
business for the years ended 31 March 2015 and 2014.
(2) Other segment-related informationa. Information by services
Information by services for the years ended 31 March 2015 and 2014 was as follows:
2015
Millions of yen

Ordinary income from external customers

Banking

Investment
in securities

Other

Total

¥20,045¥14,569¥9,806¥44,420

2014
Millions of yen

Ordinary income from external customers

Banking

Investment
in securities

Other

Total

¥20,714¥15,010¥10,700¥46,4242015
Thousands of U.S. dollars

Ordinary income from external customers

Banking

Investment
in securities

Other

Total

$166,805$121,237$81,601$369,643

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 2015 and 2014 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 2015 and 2014 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 2015 and 2014, since there was no customer
accounting 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 2015 and 2014,― 49 ―

since the Bank and its consolidated subsidiary had a single segment.

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 2015
and 2014.

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 2015 and 2014.

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 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($108 thousand)Note: Terms and conditions of the transaction are determined in the same way as other ordinary transactions.
There is no significant transaction to be disclosed between the Bank and related parties for the year ended 31 March 2014.

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 2015 and 2014.

(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 2015 and 2014.

30. SUBSEQUENT EVENTS
Cash dividends
On 23 June 2015, the shareholders of the Bank authorized the following appropriations of retained earnings at 31 March 2015:
Millions of yen
Cash dividends (¥35 ($0.29) per share for year-end)¥622― 50 ―

Thousands of
U.S. dollars$5,176

─ 51 ─

Corporate Profile
・Corporate Data (As of March 31, 2015)
EstablishedMay 2, 1932
Paid-in Capital¥12,090 million

Employees
Stock Listing

1,458First Section of
the Tokyo Stock Exchange

Authorized Shares
49,450,000
Issued and Outstanding
18,497,786
Branches
109 (Iwate Prefecture 91)
SharesShareholders
7,038
・Board of Directors and Corporate Auditors (As of July 1, 2015)
Chairman
Directors
Corporate Auditors
Executive Officers
Masahiro Takahashi
Yasuyuki Aramichi
Katsuya Sato (standing)Hiroaki Takahashi
Mikio Kikuchi
Katsunori Ikeda (standing)
Katsuhiro Kawamura
President
Hiroshi Miura
Shinobu Obara
Motomu Sato
Sachio Taguchi
Atsushi Takahashi
Mizuhiko Yoshida
Fumio Ube
Senior Managing
Notes:
Director
1. Hiroshi Miura, Atsushi Takahashi and Fumio Ube satisfy the requirements for
Masahiro Saito
outside directors as stipulated in Article 2, Item 15 of the Corporation Law.
Managing Directors
2. Katsunori Ikeda, Shinobu Obara, and Mizuhiko Yoshida are outside auditors as
Osamu Sakamoto
stipulated in Article 2, Item 16 of the Corporation Law.
Keiji Iwata
Yuichi Kato
Shigeki Miura・Organization (As of July 1, 2015)
General Meeting of Shareholders
Board of Directors

Board of Corporate Auditors
Corporate Auditors (standing)Corporate Auditors

Executive
Committee
Chairman

General Planning Division
Cost Strategy 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
Sales Management Division
Direct Banking Center
Credit Card Center
Customer Response Center
CS Promotion OfficePrivate Banking Office
Regional Support Division
Public Affairs OfficeFinancial 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― 52 ―

・The Bank of Iwate Group(Consolidated
subsidiary)
Iwagin Business
Service Co., Ltd.
1-2-3 Chuo Dori,Morioka City, Iwate
Prefecture(Equity method
affiliate)
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

5%

20%

(Equity method
affiliate)
Iwagin DC Card Co.,Ltd.
1-2-14 Nakanohashi
Dori, Morioka City,
Iwate Prefecture20

Credit cards
and consumer
loans

August 1, 1989

5%

20%

(Equity method
affiliate)
Iwagin Credit Service
Co., Ltd.
14-10-301 Morioka
Ekimae Dori, Morioka
City, Iwate Prefecture20

Credit cards
and consumer
loans

August 1, 1989

5%

20%

(Non-equity method
affiliate)
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― 53 ―

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 83rd
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