The Bank of Iwate, Ltd. Annual Report 2014

Annual Report2014Sachio Taguchi
President

Message from the President
Three 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 of last year 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.
In fiscal 2013, we were able to secure an income level above the initial plan as a result of concerted efforts madeby officers and employees to press ahead with the medium-term management plan. In fiscal 2014 as well, thesecond year of the plan, we intend to untiringly and expeditiously work toward completing the plan.
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)
Deposits (including negotiable certificate of deposit) decreased due primarily to a decrease in public deposits. As aresult, total deposits decreased by ¥11.8 billion during the term, to ¥3,284.4 billion (US$31,912.4 million).
Loans
Loans to local governments as well as individuals increased. As a result, the value of total loans increased by ¥27.7
billion during the term, to ¥1,638.9 billion (US$15,924.1 million).
Securities
The value of total securities increased by ¥119.8 billion during the term, to ¥1,358.9 billion (US$13,204.2 million).

Cash Flow Analysis
Net cash provided by operating activities decreased by ¥198.1 billion to a net inflow of ¥51.6 billion (US$501.7
million), due primarily to a decrease in call loans.
Net cash used in investment activities decreased by ¥10.4 billion to a net outflow of ¥123.2 billion (US$1,197.5
million), due primarily to acquisition of securities.
Net cash provided by financing activities increased by ¥17.3 billion to a net inflow of ¥5.5 billion (US$53.8
million), due primarily to the issuance of bonds with stock acquisition rights.
As a result of the above, the term-end balance of cash and cash equivalents decreased by ¥66.0 billion from theprevious term-end, to ¥290.8 billion (US$2,825.4 million).

Business Performance
Earnings
Total income increased by ¥1.2 billion to ¥46.4 billion (US$451.2 million). This was mainly attributable to theincrease in fees and commissions boosted primarily by fees related to asset under management and recording of thereversal of provision for possible loan losses. Total expenses decreased by ¥0.3 billion to ¥33.7 billion (US$327.7
million). This was mainly attributable to the decreases in losses on sale of stocks and other securities and inamortization thereof, despite the increase in depreciation and other expenses associated with system investments.
As a result, income before income taxes increased by ¥1.4 billion to ¥12.7 billion (US$123.5 million), while net
income increased by ¥1.3 billion to ¥7.7 billion (US$75.0 million).

Capital Ratio
The capital ratios stood at 13.15% on a consolidated basis, while 13.12% on a non-consolidated basis. From thefiscal year ended 31 March 2014, the Bank has calculated its capital ratio in accordance with the new standards
under Basel III.

― 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 well-being 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 are working to raise our management transparency, strengthen management oversightfunctions, and practice corporate governance in a manner that meets the very highest standards.
②

Outline of the corporate governance functions within the Bank
The Bank has chosen the corporate auditor system, in which business execution of directors is monitoredby the Board of Directors and corporate auditors. As executive institutions for operation, the Board of
Directors is in place along with the Executive Committee and the Compliance Committee that discusses
and decides the matters referred by the Board of Directors, on top of executive officers system.
With the purpose to reinforce executive structure focused on corporate governance, the Bank has placed
the Compliance Committee on a par with the Executive Committee, along with the hitherto efforts toenhance functions to supervise management including extended functions of the Board of Directors,
appointment of outside directors and strengthening of corporate auditors’ functions.

― 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, which contains nine items, including a statement of theneed for the Bank to operate a system that ensures that the conduct of all directors and employees conforms
both to the law and to the Articles of Incorporation of the Bank.

⑤

Development of risk management structure
For the purpose of risk management, the Bank, upon developing structure for the execution of operations
and monitoring, has developed 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 while defining the specificfunctions responsible for each category of risk within the Bank. Meanwhile, the Risk Management
Division is in place as the department responsible for managing various categories of risks on an integral
basis, which coordinates risk management across the Bank.
The Audit Division responsible for internal audits is striving to improve business administration byauditing to examine the adequacy and effectiveness of the internal control system including complianceand risk management, upon ensuring its independence from the departments being audited.

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 were Atsushi Fukuda, Motofumi Okumura, and Takayuki Narita, and they
were assisted by six other certified public accountants and eighteen other staff.

― 5 ―(2) Internal Audits and Auditing by Corporate Auditors① Internal audits
The Bank’s Audit Division, with a staff of eighteen, is primarily responsible for conducting internal audits
as an organization 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 theinternal control system, as well as to prevent fraud and errors. The audits focus principally on checking theaccuracy of the Bank’s securities reports and financial statements, to confirm the effective operation of theBank’s internal control system. Staff of the division is making effort to enhance coordination withcorporate 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 with the collaboration of the Audit Division and the accounting auditors. Furthermore, corporate
auditors regularly meet with accounting auditors to receive reports and exchange opinions, and attend
visiting audits by accounting auditors to check the adequacy of their execution of duties.
(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 stockholders. 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 for which the outside directors
and outside 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 directors of numerous other entities with which the Bank 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 currently he is 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 and currently
serves as the Vice Chairman of TOHOKU ECONOMIC FEDERATION.
- 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, etc. and entities
in which 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 held only account for a small portion of outstanding
shares.

― 6 ―Outside Auditors- The Bank has three outside auditors; Hisaki Miyadate, Koichi Adachi and Shinobu Obara. Mr. Obara
currently serves as the Senior Managing Director of Iwate Menkoi Television Co., Ltd. and theRepresentative Director and President of Ma cherie, Inc., and is in executive positions, etc. 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, etc., however, they arestandard transactions and do not pose special conflicts of interest. Additionally, there are no special
conflicts of interest between the Bank and Mr. Miyadate and Mr. Adachi.
- As for Mr. Miyadate and Mr. Adachi, they have been reported to the Tokyo Stock Exchange, Inc. as
independent directors/corporate auditors with no risks of conflicts of interest between generalstockholders.
② The status and standards for functions, duties, and appointment of outside directors and outside auditors
The Bank elects outside directors and outside auditors in order to reinforce the functions of monitoring andsupervision over the Bank’s management. At the Bank, the Board of Directors and the corporate auditors
conduct monitoring over the directors’ execution of duties; and the outside directors, based on their deep
experience and knowledge and from an objective outside position that pays due consideration to theinterests of the general stockholders, play a vital role in reinforcing the management’s decision-making andsupervisory functions. Additionally, the outside auditors, based on their extensive insight and specialized
knowledge, play a vital role in reinforcing the audit functions over the 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, and elects them based on the fundamental understanding thatno conflicts of interest will arise with the general stockholders.
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
etc., and cooperation with the Audit Division and accounting auditors to ensure the effectiveness of 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, Item 1 of the Corporation Law.

― 7 ―(5) Compensation for Directors and Corporate Auditors① Aggregate amount of compensation paid to directors and corporate auditors, amount of compensation by
category of compensation, and the number of persons that were paid, by classification of directors andcorporate auditors
Aggregate amount of compensation
Classification of directors
NumberRetirement
Basicand corporate auditorsof persons (¥ million)
Bonus
Stock option
benefits
compensation
Directors (excluding
10
290
154
22
55
57
outside directors)
Corporate auditors
1
20
18
0
1
(excluding outside
auditors)
Outside directors and
7
37
34
1
1
outside auditors(Notes) 1. The above numbers of persons include two directors who retired at the closing of the 131st General
Meeting of Shareholders held on June 21, 2013.
2. The above amounts include ¥23 million accrued bonuses for directors and corporate auditors (¥22
million for directors, nil for corporate auditors and ¥1 million for outside directors/auditors), ¥10
million for the difference between the retirement benefits paid to the directors and corporate auditors
retired during the current fiscal year and the provision for retirement benefits made for the same
directors and corporate auditors during the previous fiscal year (¥10 million for directors and nil foroutside directors/auditors), ¥49 million outstanding portion of the final payment of retirement
benefits for directors and corporate auditors made according to the resolution of the 131st General
Meeting of Shareholders (¥47 million for directors, ¥1 million for corporate auditors and ¥1 million
for outside directors/auditors) and ¥55 million for stock compensation-type stock acquisition rights(¥55 million for directors).
3. Apart from the above, ¥43 million employees’ compensation was paid to directors concurrently
serving as employees (¥34 million employees’ salary and ¥9 million employees’ bonus).
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 The Group’s Policies on deciding the amount of compensation for directors and corporate auditors
For compensation for directors and corporate auditors, maximum aggregate amounts payable per year are
determined based on the resolution of General Meeting of Shareholders, which are ¥260 million for
directors including outside directors and ¥60 million for corporate auditors. Apart from the aforementioned
aggregate limits for compensation, stock acquisition rights are allocated to directors (excluding outside
directors) as stock compensation-type stock options with the annual aggregate limit of ¥80 million, basedon the resolution of General Meeting of Shareholders.
The Bank’s compensation system for directors (excluding outside directors) comprises basic fixedcompensation, bonus 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 after the General Meeting of Shareholders, based on the scope andnature of responsibility as well as experience of each director and corporate auditor that is paid. The
amount of bonus for directors and corporate auditors is decided according to the Bank’s internal rules
separately set out, in consideration of the Bank’s financial business results in 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: 144
Balance sheet value: ¥22,519 million② Classification, stock name, number of shares, balance sheet values, and purpose of holding of investment
securities for other purposes 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)
Mitsubishi UFJ Financial Group, Inc.
4,040,310
2,254 Reinforcement of relationshipthrough shareholding
Tohoku Electric Power Company, Incorporated
2,277,797
1,731 Ibid.
East Japan Railway Company
200,000
1,544 Ibid.
NIPPON STEEL & SUMITOMO METAL
5,935,431
1,394 Ibid.
CORPORATIONTAIYO NIPPON SANSO CORPORATION
1,822,849
1,162 Ibid.
TOSHIBA CORPORATION
2,024,483
955 Ibid.
Daiwa Securities Group Inc.
1,099,806
721 Ibid.
The Yamagata Bank, Ltd.
1,323,800
586 Ibid.
SECOM CO., LTD.
104,644507 Ibid.
The Bank of Kyoto, Ltd.
540,000
495 Ibid.
THE AKITA BANK, LTD.
1,517,159
397 Ibid.
JFE Holdings, Inc.
200,047353 Ibid.
The Chugoku Bank, Limited
222,000
341 Ibid.
Tokio Marine Holdings, Inc.
127,086336 Ibid.
The Toho Bank, Ltd.
1,052,090
317 Ibid.
THE OITA BANK, LTD.
860,000
306 Ibid.
The Ogaki Kyoritsu Bank, Ltd.
863,000
295 Ibid.
The Hyakugo Bank, Ltd.
619,000
290 Ibid.
Yamaguchi Financial Group, Inc.
300,000
285 Ibid.
The Yamanashi Chuo Bank, Ltd.
656,000
281 Ibid.
The Daishi Bank, Ltd.
731,000
280 Ibid.
The Aomori Bank, Ltd.
937,000
267 Ibid.
The Musashino Bank, Ltd.
71,600264 Ibid.
DCM Holdings Co., Ltd.
317,949
255 Ibid.
THE KAGOSHIMA BANK, LTD.
377,000
250 Ibid.
The Iyo Bank, Ltd.
277,000
246 Ibid.
ARCS COMPANY, LIMITED
109,590232 Ibid.
The Hokkoku Bank, Ltd.
500,000
196 Ibid.
THE BANK OF SAGA LTD.
801,000
191 Ibid.
Electric Power Development Co., Ltd.
72,000178 Ibid.
The Kita-Nippon Bank, Ltd.
68,250164 Ibid.
NTN CORPORATION
657,555
161 Ibid.
ORIX Corporation
13,230157 Ibid.
Nagase & Co., Ltd.
137,000
157 Ibid.
Mitsubishi UFJ Lease & Finance Company
29,660147 Ibid.
LimitedMS&AD Insurance Group Holdings, Inc.
66,756137 Ibid.
The Shikoku Bank, Ltd.
474,000
136 Ibid.
Sumitomo Seika Chemicals Company, Limited.
356,000
128 Ibid.
THE SHIMIZU BANK, LTD.
45,400127 Ibid.
― 9 ―(Current fiscal year)
The stocks whose balance sheet values exceed a hundredth of capital amount are displayed below.
(Specific investment stocks)
Balance sheet
Number ofvaluesPurpose of holding
Stock nameshares(Millions of yen)
Tohoku Electric Power Company, 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.
JFE Holdings, Inc.
200,047388 Ibid.
The Toho Bank, Ltd.
1,052,090
353 Ibid.
THE OITA BANK, LTD.
860,000
344 Ibid.
The Yamanashi Chuo Bank, Ltd.
656,000
305 Ibid.
The Chugoku Bank, Limited
222,000
305 Ibid.
Yamaguchi Financial Group, Inc.
300,000
279 Ibid.
The Daishi Bank, Ltd.
731,000
277 Ibid.
The Iyo Bank, Ltd.
277,000
273 Ibid.
The Aomori Bank, Ltd.
937,000
267 Ibid.
The Hyakugo Bank, Ltd.
619,000
262 Ibid.
THE KAGOSHIMA BANK, LTD.
377,000
246 Ibid.
Sumitomo Seika Chemicals Company, Limited.
356,000
246 Ibid.
The Musashino Bank, Ltd.
71,600244 Ibid.
The Ogaki Kyoritsu Bank, Ltd.
863,000
243 Ibid.
NTN CORPORATION
657,555
230 Ibid.
ARCS COMPANY, LIMITED
109,590
220 Ibid.
DCM Holdings Co., Ltd.
317,949219 Ibid.
Electric Power Development Co., Ltd.
72,000209 Ibid.
ORIX Corporation
132,300
192 Ibid.
The Kita-Nippon Bank, Ltd.
68,250187 Ibid.
The Hokkoku Bank, Ltd.
500,000
180 Ibid.
THE BANK OF SAGA LTD.
801,000
179 Ibid.
Nagase & Co., Ltd.
137,000
174 Ibid.
MS&AD Insurance Group Holdings, Inc.
66,756157 Ibid.
Mitsubishi UFJ Lease & Finance Company
296,600
150 Ibid.
LimitedKatakura Industries Co., Ltd.
99,000129 Ibid.
THE SHIMIZU BANK, LTD.
45,400121 Ibid.

― 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
At the end of the previous fiscal year
Gain or loss on
Balance sheet value Dividend income Gain or loss on sales
valuation(Millions of yen)
(Millions of yen)
(Millions of yen)
(Millions of yen)
Listed stocks
15,084
289
(109)
4,898
Unlisted stocks-

At the end of the current fiscal year
Balance sheet value Dividend income Gain or loss on sales(Millions of yen)
(Millions of yen)
(Millions of yen)
Listed stocks
Unlisted stocks

18,143
-

359
-

166
-

Gain or loss on
valuation(Millions of yen)
7,111-

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, Clause 2 of the Corporation Law, the Articles of Incorporation of the Bank providethat Bank shares may be purchased on the markets by resolution of the Board of Directors only, without theneed 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, Clause 5 of the Corporation Law, the Articles of Incorporation of the Bank providethat an interim dividend may be paid by resolution of the Board of Directors only, with September 30 eachyear as date of record. This measure is to ensure a more stable distribution of profits to shareholders.
(10) Special Resolutions of the General Meeting of Shareholders
Based on Article 309, Clause 2 of the Corporation Law, special resolutions may be passed with a majorityof two-thirds of eligible shareholders at a meeting at which at least one-third of shareholders with voting
rights are present. By relaxing quorum requirements for approval of special resolutions by the General
Meeting of Shareholders, our objective is to achieve smoother progress through the agenda at meetings ofshareholders.

― 11 ―

2 Compensation for Audit Certification Services(1) Compensation Paid to Certified Public Accountants for Audit Certification Services
FY2012Compensation forCompensation foraudit certification
services other thanservices
audit certification¥55-(Millions of yen)
FY2013Compensation forCompensation foraudit certification
services other thanservices
audit certification¥55¥8

For the Bank
For consolidated
subsidiaries of the
Bank
Total
¥55
¥55
¥8
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 2012.
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 2013.
(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
None
Current 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 service concerning the notification of capital ratio under Basel III.
(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 2014 and 2013ASSETSCash and due from banks (Notes 3 and 6)
Call loans and bills bought (Note 6)
Commercial paper and other debt purchased (Note 6)
Money held in trust (Notes 5 and 6)
Securities (Notes 4, 6, 8 and 17)
Loans and bills discounted (Notes 6, 7 and 9)
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)
Borrowed money (Notes 6, 8 and 14)
Call money
Corporate bonds (Notes 6 and 15)
Foreign exchange liabilities
Liability for severance and retirement benefits (Note 18)
Net defined benefit liability (Note 18)
Accrued bonuses for directors and corporate auditors
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 2014 and 31 March 2013
Issued and outstanding —18,498 thousand shares at 31 March 2014 and 19,098
thousand shares at 31 March 2013
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
2014
2013
¥335,312¥422,360
146,029
190,000
7,162
17,383
4,985
4,985
1,358,979
1,239,216
1,638,911
1,611,241
1,185
1,867
16,756
17,018
2,667
2,741
1,104
－
7
7
7,558
5,180
5,933
9,084
(9,803)(13,775)¥3,516,785¥3,507,307

Thousands of
U.S dollars(Note 1)
2014
$3,257,987
1,418,859
69,58848,436
13,204,227
15,924,126
11,514
162,806
25,913
10,72768
73,436
57,646(95,249)$34,170,084¥3,284,422
11,144－
10,292
11
－
1,960
24
6
324
229
8,800
7,558
21,4403,346,210¥3,296,175
10,255
470
－
－
1,635
－
34
420
271
213
8,128
5,180
16,565
3,339,346$31,912,379
108,278－
100,000
107－
19,044
233
58
3,148
2,225
85,50373,436208,31732,512,728

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

12,090
4,811
123,721(4,125)31,989(525)－－
167,961¥3,507,307

117,470
46,745
1,236,213(36,329)
311,650(4,071)(14,856)534
1,657,356$34,170,084

2014

2013

U.S dollars
2014¥9,602.66¥9,148.71

Yen
Per share data:
Net assets (Note 27)

See accompanying notes.

― 13 ―$93.30Consolidated Statements of Income
The Bank of Iwate, Ltd. and its consolidated subsidiaryYears ended 31 March 2014 and 2013
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
General and administrative expenses (Note 22)
Other operating expenses (Note 23)
Other expenses (Note 24)
Total expenses

2014

2013

2014

¥20,919
14,019
307
7,119
924
3,146

¥22,300
13,358
281
6,654
429
2,226

$203,255
136,213
2,983
69,1708,97830,56746,43445,248451,166

1,294
138
286
2,656
27,809
553
989

1,355
141
286
2,609
27,4761,189
920

12,573
1,341
2,779
25,806
270,200
5,373
9,610

33,72533,976327,682

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

12,70911,272

123,484

3,425
1,564

3,060
1,797

33,27815,196

4,989

4,857

48,474

Net income before minority interests

7,720

6,415

75,010Minority interests in net income
Net income

－

－

－

¥7,720¥6,415$75,010Yen
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

2014

2013

¥429.49398.91
60.00¥349.42340.90
65.00

2014
$4.17
3.88
0.58

Consolidated Statements of Comprehensive Income
The Bank of Iwate, Ltd. and its consolidated subsidiaryYears ended 31 March 2014 and 2013
Thousands of
U.S dollars(Note 1)Millions of yen
2014
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
Share of the other comprehensive income of affiliates accounted for using theequity method

2013

2014

¥7,720¥6,415$75,01084
106

16,081
(269)

816
1,030

2

3

19

192

15,815

1,865

Comprehensive income¥7,912¥22,230$76,875

Total comprehensive income
Attributable to:
Owners of the parent
Minority interests¥7,912¥22,230$76,875

7,912－

22,230－76,875－

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 2014 and 2013
Millions of yen
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 2012
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

¥12,090¥4,811¥118,408¥(4,123)¥131,186¥15,905¥(256)¥－¥15,649¥－¥146,835－－－－(1,102)
6,415－－(1,102)
6,415

－
－

－
－

－
－

－
－

－
－

(1,102)
6,415

－
－

－
－

－
(0)

(3)
1

(3)
1

－
－

－
－

－
－

－
－

－
－

(3)
1

－

－

－

－

－

－

－

－

－

－

－

－

－

－

－

－

16,084

(269)

－
4,811

5,313
123,721(2)(4,125)

5,311
136,497

16,084
31,989

(269)
(525)

15,81531,464－－－

15,815－
12,090－－－15,815

Total change during year
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

21,126167,961－－－－(1,175)
7,720－－(1,175)
7,720

－
－

－
－

－
－

－
－

－
－

(1,175)
7,720

－
－

－
－

－
－

(2,649)－(2,649)
－

－
－

－
－

－
－

－
－

－
－

(2,649)－－－(3,035)

3,035

－

－

－

－

－

－

－

BALANCE, 31 March 2014

－

－

－

－

－

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

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 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

$117,470$46,745$1,202,109$ (40,080)$1,326,244$310,814$ (5,101)$－$305,713$－$1,631,957

－
－

－
－

(11,417)75,010－－(11,417)75,010

－
－

－
－

－
－

－
－

－
－

(11,417)75,010

－
－

－
－

－
－

(25,738)－(25,738)
－

－
－

－
－

－
－

－
－

－
－

(25,738)－－－(29,489)

29,489

－

－

－

－

－

－

－

－

－

－

－

－

836

1,030

(14,856)(12,990)534(12,456)

Total change during year
BALANCE, 31 March 2014－
$117,470－$46,745

34,104$1,236,213

3,751$ (36,329)

37,855$1,364,099

836$311,650

1,030$ (4,071)(14,856)$ (14,856)(12,990)$292,723

534$534

25,399$1,657,356

See accompanying notes.

― 16 ―

Consolidated Statements of Cash Flows
The Bank of Iwate, Ltd. and its consolidated subsidiaryYears ended 31 March 2014 and 2013
Millions of yen
2014
2013

Thousands of
U.S dollars(Note 1)
2014

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
Increase (decrease) in provision for disastrous losses
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 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
Net increase (decrease) in negotiable certificates of deposit
Net increase (decrease) in borrowed money
Interest received
Interest paid
Other, net
Sub-total
Income taxes paid
Income taxes refunded
Net cash provided by operating activities¥12,709¥11,272$123,484

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
21,04054,196(470)682
11(21,018)889
36,316(2,030)6,992
54,269(2,641)
6
51,634

1,897
58
(32)
(3,397)(24)
6(2,447)(7,720)
―
―
2
87
(77)
(35,938)
1,782
(383)
9
(162)
194
(92,900)
439,078(4,060)32,311(4,530)(532)－(98,655)(16,744)
36,313(2,111)
2,044
255,341(5,655)
9249,695

20,618466(515)(38,593)
155(97)
23,776(15,886)(29,848)
15,196(4,023)515―(342,441)
16,693(4,411)
(49)
777
1,632
(268,850)
90,021
204,431526,584(4,567)6,627
107(204,217)
8,638
352,857(19,724)
67,937527,293(25,660)
58
501,691

Cash flows from investing activities:
Acquisition of securities
Proceeds from sale of securities
Proceeds from redemption of securities
Acquisition of money held in trust
Acquisition of premises and equipment
Payment for retirement of premises and equipment
Acquisition of intangible assets
Net cash used in investing activities(361,649)
56,750183,391－(1,075)(68)(598)(123,249)(332,359)
40,377
184,905(4,000)(1,197)(40)(534)(112,848)(3,513,885)
551,399
1,781,880－(10,445)(661)(5,810)(1,197,522)

9,859
－
(493)
(1,175)(2,649)－5,542－(10,450)(191)(1,102)(3)
0(11,746)

95,793－(4,790)(11,417)(25,738)－
53,84864(66,009)356,804¥290,795

44
125,145
231,659¥356,804

621(641,362)
3,466,809$2,825,447

Cash flows from financing activities:
Proceeds from issuance of subordinated bonds and corporate bonds with stock acquisition rights
Payment for redemption 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 2014 and 2013
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 2014, which was ¥102.92 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 (hereafter, “trading account securities”),(b) debt securities intended to be held to maturity (hereafter, “held-to-maturity debt securities”), (c) equity securities issued bysubsidiaries and affiliated companies, and (d) all other securities that are not classified in any of the above categories (hereafter,“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 (hereinafter“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, included in “Premises and equipment” and “Intangible assets”, is computed under the straight-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.

Deferred assets
Bond issuance cost is recognized as expenses in full when incurred.

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.
(Additional information)
The Bank approved the terms for abolition of its retirement benefit program for directors and corporate auditors at the Board of
Directors meeting held on 13 May 2013 and termination payment at the 131st general meeting of shareholders of the Bank held on
21 June 2013. In addition, at the regular Board of Directors meeting held on 25 March 2014, the Bank decided to abolish theretirement benefits payment program for executive officers and to pay t accrued retirement benefits associated with the abolishmentof the system.
Consequently, retirement benefits for directors and corporate auditors of the Bank are reversed and ¥355 million ($3,449 thousand)of accrued termination payment is included in other liabilities for the year ended 31 March 2014. There are no changes in the
consolidated subsidiary.

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 equally to each service year using the estimated number of total service years. The Bank has also set up retirement
benefit trust.
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 Company 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 28.

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
The Bank and its consolidated subsidiary have adopted “Accounting Standard for Retirement Benefits” (ASBJ Statement No. 26, 17
May 2012, hereinafter “Retirement Benefits Standard”) and “Guidance on Accounting Standard for Retirement Benefits” (ASBJ
Guidance No. 25, 17 May 2012, hereinafter “Retirement Benefits Guidance”), except the article 35 of Retirement Benefits Standard
and the article 67 of Retirement Benefits Guidance, from the end of the year ended 31 March 2014. The Bank and its consolidated
subsidiary changed their accounting to recognize the difference between projected benefit obligation and plan assets either as net
defined benefit asset or net defined benefit liability.
In accordance with the article 37 of Retirement Benefits Standard, unrecognized actuarial differences, net of tax, were recognized asremeasurements of defined benefit plans under accumulated other comprehensive income at the end of the year ended 31 March2014.
As a result, net defined benefit asset of ¥1,104 million ($10,727 thousand) and net defined benefit liability of ¥1,960 million($19,044 thousand) were recognized at 31 March 2014. In addition, deferred tax liability and accumulated other comprehensive
income decreased by ¥834 million ($8,103 thousand) and ¥1,529 million ($14,856 thousand), respectively.
The effects of this change on per share data are described in note 27.

― 22 ―

Unapplied new accounting standards
Accounting standards for retirement benefits(1)

Overview
Accounting standards for retirement benefits have been revised from the viewpoint of improvements to financial reporting andinternational convergence, and the following items have been revised; accounting treatment for unrecognized actuarial
differences and service costs, and calculation method for projected benefit obligation and service costs, as well as expansion ofrelated disclosures.

(2)

Date of adoption
The Bank and its consolidated subsidiary will adopt the revised method for calculating projected benefit obligation and service
costs from the beginning of the year ending 31 March 2015.

(3)

The effect of adopting the accounting standards
As a result of adopting these accounting standards, the retained earnings at the beginning of the year ending 31 March 2015
will decrease by ¥1,129 million ($10,970 thousand), and income before income taxes for the following year will increase by¥64 million ($622 thousand).

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 2014 and 2013, 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 is as follows:

Thousands of
U.S. dollars
2014$3,257,987(233,191)(194,326)(5,023)$2,825,447

Millions of yen
2014
2013
¥335,312¥422,360(24,000)(65,000)(20,000)
－
(517)
(556)
¥290,795¥356,804

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(2) Significant non-cash transactions
Assets and liabilities associated with finance lease transactions that were recorded in the years ended 31 March 2014 and 2013
amounted to ¥297 million ($2,886 thousand) and ¥3,289 million, respectively.

4. SECURITIESSecurities held by the Bank at 31 March 2014 and 2013 consisted of the following:
Millions of yen
2014
2013
¥473,105¥432,392
293,032
276,647
399,669
378,430
41,06935,866
152,104
115,881¥1,358,979¥1,239,216

National government bonds
Local government bonds
Debentures
Stock shares
Other securities

Thousands of
U.S. dollars
2014$4,596,823
2,847,182
3,883,298
399,038
1,477,886$13,204,227

Unsecured loaned securities which borrowers have the right to sell or pledge in the amount of ¥85,000 million ($825,884 thousand)and ¥45,000 million at 31 March 2014 and 2013 were included in National government bonds, respectively.

A. The following tables summarize acquisition costs, book values and fair values of securities with available fair values at 31 March2014 and 2013:(a) Held-to-maturity debt securities

At 31 March 2014:

Book value¥43,312Fair value¥44,638

Millions of yen
Difference¥1,326

Gain¥1,335

At 31 March 2013:

46,20947,657

1,448

1,466

At 31 March 2014:

Book value$420,832

Fair value$433,716

Loss
¥ (9)
(18)

Thousands of U.S. dollars― 24 ―

Difference$12,884

Gain$12,971

Loss$ (87)

(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 2014:
Corporate stocks
Bonds
Other
At 31 March 2013:
Corporate stocks
Bonds
Other

Book value

Difference

Gain

Loss

¥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)¥23,7021,021,131
112,991¥34,460
1,058,007
114,322¥10,758
36,876
1,331¥11,640
36,9922,534¥(882)(116)(1,203)¥1,157,824¥1,206,789¥48,965¥51,166¥(2,201)

Thousands of U.S. dollars
Acquisition cost
At 31 March 2014:
Corporate stocks
Bonds
Other

Book value

Difference

Gain

Loss

$237,777
10,685,086
1,416,449$383,900
10,988,399
1,442,460$146,123
303,313
26,011$151,836
303,838
33,696$ (5,713)(525)(7,685)$12,339,312$12,814,759$475,447$489,370$ (13,923)

B. Total sales of available-for-sale securities sold in the years ended 31 March 2014 and 2013 amounted to ¥56,746 million($551,360 thousand) and ¥38,664 million, respectively. The related gains and losses amounted to ¥991 million ($9,629thousand)and ¥43 million ($418 thousand) in 2014, and ¥1,187 million and ¥673 million in 2013, 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 2014 and 2013 amounted to ¥76 million ($738 thousand) and ¥49 million,
respectively, due to a significant decline in fair value below the cost which is deemed to be other than temporary.

D. Net unrealized holding gains on available-for-sale securities on the consolidated balance sheets at 31 March 2014 and 2013
consisted of the following:Thousands of
U.S. dollars

Millions of yen
2014
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
Net unrealized holding gains on available-for-sale securities― 25 ―

2013¥48,933(16,867)
32,0662014¥48,965(16,983)
31,982$475,447(163,885)
311,5629

7

88¥32,075¥31,989$311,650

5. MONEY HELD IN TRUST
Money held in trust at 31 March 2014 and 2013 consisted of the following:Thousands of
U.S. dollars

Millions of yen
2014
Money held in trust for trading purpose:
Carrying amount
Realized gains included in earnings¥4,985－2013¥4,985－

2014$48,436－

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 and so on. So the financial assets and liabilities of the Bank andits 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. Total balance of loans as of the current fiscal year end ismade up of mainly that of local governments, and secondly individuals, manufacturing industries, whole and retail sales industries
in terms of industrial categories 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 suffer 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― 26 ―

control and adopt hedge accounting to them as hedging instrument and treating 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 flow ofhedging instruments and hedged items for the periods beginning from implementation of the hedging to the date of the evaluation
and analysis on them.
Furthermore, there are interest rate swap contracts (hedging instruments) and loans and bonds (hedged items), which are treatedunder qualified method.
The consolidated subsidiary neither holds financial assets such as securities nor owes borrowings except cash 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 monitors due
dates and outstanding balances by individual customer. In addition, the Bank and its consolidated subsidiary are making efforts to
identify and mitigate risks of bad debts from customers who are having financial difficulties.
The results of the above monitoring are regularly reported to the Board of Directors and the results of monitoring internal rating,loan portfolios and quantification of credit risks are reported to the credit risk committee. Theses monitoring procedures are
subjected to austere internal audit.
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 at the financial market section.

d. Monitoring of market risks(Interest rate risks)
The risks arising from fluctuations in interest rates are controlled using the ALM method at the ALM committee, with reference tothe discussion 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 on a monthly to the ALM
committee using gap analysis, interest rate sensitivity analysis, BPV and VaR. Derivative instruments such as interest rate swap
contracts for the purposes of hedging the interest rate risks are used in terms of the ALM method.
(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 daily measuring VaR based on a certain holding periods
and credit sections, confirming whether the quantities of risks 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.

― 27 ―

Investing in securities at the financial market section is 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 of the investments. The information related to market environment and investment
status is reported to the 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 or related administration is clearly identified, following the hedge transaction guidelines, the market business operation
standards and marketing 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 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 2014 and 2013 was as follows:
Millions of yen

Thousands of U.S. dollars

2014

2013

¥30,062¥17,7032014$292,091

The Bank periodically verifies the effectiveness of risk measurement under the VaR method by a back testing protocol thatcompares the volume under the VaR method with the amount of gains or losses. As a result of conducting the back testing protocol
with holding period of 1 day, the Bank supposes the method undertaken will provide a reliable indicator of the market risks.
The method of variance and covariance the Bank uses to measure the volume under VaR assumes that changes in the market follow
a normal distribution. Accordingly, under conditions subject to changes in the market exceeding the assumption, risks may beunderestimated.

2. Financial instruments such as deposits and loans receivable, etc.
The Bank employs variance and covariance method in calculating VaR of deposits and loans receivable, etc., using such parametersof 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 2014 and 2013 was as follows:
Millions of yen
2014¥8,600Thousands of U.S. dollars

2013¥2,604

2014$83,560― 28 ―

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.

(2) Fair value of financial instruments
The carrying amounts and the estimated fair value of financial instruments at 31 March 2014 and 2013 are as follows.
Millions of yen

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
Borrowed money
Corporate bonds
Derivative transactions:
Derivative instruments not
qualifying for hedge accounting
Derivative instruments qualifying
for hedge accounting

Carrying
amounts

Thousands of U.S. dollars
2013

2014
Fair value

Carrying
amounts¥335,312
146,029¥335,312
146,029

7,162
4,985

2014

Fair value

Carrying
amounts

Fair value¥422,360
190,000¥422,360
190,000$3,257,987
1,418,859$3,257,987
1,418,859

7,292
4,985

17,383
4,985

17,552
4,985

69,58870,851

48,43648,43636,9391,318,895
1,638,911(9,728)38,134
1,318,895

29,462
1,206,789
1,611,241(13,681)

30,741
1,206,789

358,910
12,814,759
15,924,126(94,520)

370,521
12,814,759

1,629,183

1,631,251

1,597,560

1,603,522

15,829,606

15,849,699

3,284,422
11,144
10,292

3,284,847
11,144
11,6303,296,175
10,255―

3,296,561
10,255―31,912,379
108,278
100,000

31,916,508
108,278
113,000

9

9

(23)

(23)

87

87

(647)

(905)

(835)

(1,426)(6,286)(8,793)― 29 ―

(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 value of held to maturity bonds and available-for-sale securities is based on either quoted market prices or prices provided
by the financial institutions making markets in these bonds.
e. Loans and bills discounted
Fair value of loans and bills discounted 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. As for loans and bills with short-term settlement, their carrying amounts
are supposed to approximate fair value.
The fair value of loans to borrowers which are classified as legally bankrupt or substantially bankrupt is based on the estimateddisposal value of collateral and the amount deemed collectible from guarantees, and therefore approximate their carrying amounts
after deduction of the specific reserves for potentially bankrupt borrowers.
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. 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.
h. Corporate bonds
The fair value of corporate bonds is determined using the prices provided by the financial institutions that the Bank has been dealing
with.
i. Derivative transactions
Please refer to the following section of the notes to Derivatives.

― 30 ―

(Note 2) The following table summarizes book values of securities for which it is extremely difficult to determine the fair market
values at 31 March 2014 and 2013:
Thousands of
U.S. dollars

Millions of yen
2014
Available-for-sale securities

2013¥3,1452014¥2,965$30,558(Note 3) Expected collections of assets and payments of liabilities with maturities at 31 March 2014 and 2013 are as follows:
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
Borrowed money

3,114,822－

159,234
－

9,950
－

119
－

297
10,000－－Note: Borrowed money is stated for the long-term and interest-bearing borrowed money.

― 31 ―

Millions of yen
2013
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¥190,000
10,636

¥－
1,413

¥－

¥－

¥－

－

－

－

¥－
5,334

3,627

2,259

640

－

－

22,9363,000
627
149,298

－

－

－

－

2,259
256,189640
192,540－－

204,764

290,212

21,9361,000
66,004

31,64828,62073,759294,852

44,27871,811
100,331
320,799

75,717
8,731
80,782
317,362

135,020
9,590
55,544
141,180

96,702
121,970
63,488123,219

Deposits
Borrowed money

3,129,317

156,388

10,077

131

－

－

－

262
10,000－－24,09135,925－

203,462－

Thousands of U.S. dollars
2014
Within one
year

One tothree 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$1,418,859
7,656

$－
13,545

$－
－

$－
－

$－
－

$－
48,387

11,426

17,121

117,188－－

213,175－
11,426
1,393,140－
17,121
2,252,157

97,192－
3,596,755－－
2,378,945－－
2,212,825

213,175－
427,866

140,313
511,504
523,853
2,984,318

549,106
209,707882,452
3,260,396

1,903,012
119,161
1,391,819
3,149,456

1,294,569
288,884
700,505
1,454,149

366,265
1,352,215
356,1311,303,906

33,191
365,711－2,164,740

Deposits
Borrowed money

30,264,497－

1,547,163－

96,677
－

1,156
－

2,886
97,163－－― 32 ―

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 2014 and 2013 are as follows:(Interest-related transactions)
Millions of yen

Thousands of U.S. dollars

2014

2013

2014

Valuation
Notional

gains

amounts Fair value (losses)

Interest rate swap:
Receive floating / Pay fixed rate

¥－

¥－

¥－

Valuation
Notional

gains

amounts Fair value (losses)¥4,962¥(29)

Valuation
Notional

¥(29)

gains

amounts Fair value (losses)

$－

$－

$－

Note: Transactions in the above table are revalued at fair market value. Valuation gains (losses) generated from the revaluation are
included in the consolidated statements of income.
(Currency-related transactions)
Millions of yen

Thousands of U.S. dollars

2014

2013

2014

Valuation
Notional

gains

amounts Fair value (losses)

Forward foreign exchange:
Sell
Buy

¥21
296

¥(0)
9

¥(0)
9

Valuation
Notional

gains

amounts Fair value (losses)

¥27
380

¥1
5

Valuation
Notional

¥1
5

gains

amounts Fair value (losses)

$204
2,876

$(0)
87

$(0)
87

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

b. Derivative instruments qualifying for hedge accounting
Notional amounts and market values for the years ended 31 March 2014 and 2013 are as follows:(Interest-related transactions)
Millions of yen
2014
Notional
amounts
Interest rate swap:
Receive floating / Pay fixed rate
(Deferral method)
Receive floating / Pay fixed rate
(Exceptional method)

Thousands of U.S. dollars
2013

Fair value

Notional
amounts

2014
Fair value

Notional
amounts

Fair value¥14,798¥ (647)¥30,223¥(811)$143,782$ (6,286)

22,813(258)

22,919(591)

221,658(2,507)― 33 ―

(Currency-related transactions)
Millions of yen

Thousands of U.S. dollars

2014
Notional
amounts
Currency swap:
Receive foreign currency / Pay
Japanese yen (Deferral method)

2013
Fair value¥－¥－

Notional
amounts

2014
Fair value¥125,000

Notional
amounts¥ (24)

Fair value$－

7. LOANS AND BILLS DISCOUNTED
Loans and bills discounted at 31 March 2014 and 2013 consisted of the following:Thousands of
U.S. dollars

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

2014

2013

2014

¥3,58097,904
1,377,689
159,738¥4,572
104,613
1,298,745
203,311$34,785
951,263
13,386,018
1,552,060¥1,638,911¥1,611,241$15,924,126

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 2014 and 2013 was ¥3,589 million ($34,872thousand) and ¥4,572 million, respectively.

The Bank is required to disclose loans to customers who meet specific criteria in accordance with the Banking Law. Doubtful loans
at 31 March 2014 and 2013 consisted of the following:Thousands of
U.S. dollars

Millions of yen
2014
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

¥1,65130,88692

2013¥1,94436,91115

2014$16,042300,097
894

8,153

9,614

79,217¥40,782¥48,484$396,250

8. PLEDGED ASSETSAt 31 March 2014, deposits amounting to ¥12,221 million ($118,743 thousand) and borrowed money amounting to ¥926 million($8,997 thousand) were secured by a pledge of securities in the amount of ¥162,027 million ($1,574,300 thousand) and guaranteemoney deposits in the amount of ¥71 million ($690thousand). At 31 March 2013, deposits amounting to ¥26,899 million weresecured by a pledge of securities in the amount of ¥105,690 million and guarantee money deposits in the amount of ¥73 million. In
addition to the above-mentioned assets pledged as collateral, the Bank provided securities of ¥41,443 million ($402,672 thousand)and ¥41,823 million, and cash in the amount of ¥3 million ($29 thousand) and ¥3 million, respectively, as collateral for transactions
such as exchange settlement transactions at 31 March 2014 and 2013.

― 34 ―$－

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 March2014 and 2013 amounted to ¥680,377 million ($6,610,736thousand) and ¥621,196 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 ¥644,950 million ($6,266,518 thousand) and ¥604,120 million at 31 March 2014 and 2013, 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.

10. OTHER ASSETS
Other assets at 31 March 2014 and 2013 consisted of the following:Thousands of
U.S. dollars

Millions of yen
2014
Accrual income
Other

2013

2014

¥3,965
1,968¥4,445
4,639$38,525
19,121¥5,933¥9,084$57,646

11. PREMISES AND EQUIPMENT
Premises and equipment at 31 March 2014 and 2013 consisted of the following:Thousands of
U.S. dollars

Millions of yen
2014

2013

2014

Land
Buildings
Equipment
Leased assets
Other¥ 8,998
33,643
7,971
1,531
108

¥8,93233,359
9,386
1,315
261

$87,427
326,885
77,44914,876
1,049

Accumulated depreciation

52,25135,49553,25336,235

507,686
344,880¥16,756¥17,018$162,806

To conform with the Corporate Law of Japan, deferred gains on sale of real estate in the amount of ¥1,041 million ($10,115
thousand) and ¥1,046 million at 31 March 2014 and 2013, respectively, were deducted from the acquisition cost of premises andequipment.

― 35 ―

12. INTANGIBLE ASSETS
Intangible assets at 31 March 2014 and 2013 consisted of the following:
Intangible assets
Thousands of
U.S. dollars

Millions of yen
2014
SoftwareLeased assets
Other

2013

2014

¥1,2551,372
40¥1,051
1,649
41$12,194
13,331388¥2,667¥2,741$25,913

13. DEPOSITS
Deposits at 31 March 2014 and 2013 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

2014

2013

2014

¥51,185
1,711,574
4,604
1,217,411
48,388251,260¥43,014
1,577,768
5,390
1,210,882
186,842
272,279$497,328
16,630,140
44,734
11,828,712
470,151
2,441,314¥3,284,422¥3,296,175$31,912,379

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 2014 and 2013 consisted of the following:Thousands of
U.S. dollars

Millions of yen

Subordinated borrowings

2014

2013

2014

¥10,000¥10,000$97,163

15. CORPORATE BONDS
Corporate bonds with stock acquisition rights at 31 March 2014 and 2013 were summarized as follows:
Thousands of
U.S. Dollars

Millions of Yen
Name

IssuedZero coupon convertiblebond-type bonds with
subscription rights toshares due 2018 payable
in U.S. dollars

25 July 2013

2014

2013

¥10,292― 36 ―

2014¥－$100,000

Coupon Rate(%)

Secured or
UnsecuredDue

Non-interest

Unsecured

25 July 2018

Notes: 1. Outline of corporate bonds with stock acquisition rights at 31 March 2014 was as follows:
Zero coupon convertible bond-type bonds with subscription rights to shares due 2018 payable
in U.S. dollars
Type of stock involved
Issue price of stock acquisitionrightsIssue price of stock (Yen/ U.S.
Dollars)
Total amount of issue(Millions of Yen / Thousands of
U.S. Dollars)
Total amount of stock acquisitionrights exercised
Percentage of stock acquisitionright granted
Exercise period of stockacquisition rights

Common stock
Gratis¥5,149 ($50.03)¥10,292 ($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 its total amount of issue. In addition, if the bondholders exercise thestock acquisition rights, it would be considered that such request has been made.
2. 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 2014
announced by the Bank.
3. Annual maturities of corporate bonds with stock acquisition rights at 31 March 2014 were as follows:Year ending 31 March
2015
2016
2017
2018
2019 and thereafter

Millions of yen

Thousands of U.S.
dollars¥－－－－
10,292$－－－－100,000

16. OTHER LIABILITIESOther liabilities at 31 March 2014 and 2013 consisted of the following:Thousands of
U.S. dollars

Millions of yen
2014
Accrual income taxes
Accrued expenses
Unearned income
Lease obligations
Other― 37 ―

20132014¥1,879
2,733
723
2,902
13,203

¥972
3,556
497
3,097
8,443

$18,257
26,554
7,025
28,197
128,284¥21,440¥16,565$208,317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, Item 3), out ofbonds included in Securities, stands at ¥1,852 million ($17,995 thousand) in 2014 and ¥2,227 million in 2013.

18. EMPLOYEES’ SEVERANCE AND RETIREMENT BENEFITS
Year ended 31 March 2014
The 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 have set up a
retirement benefit trust in the defined benefit pension plan.
Under the lump-sum retirement benefit plans (Even though these are unfunded plans, these have become funded plans as a result ofsetting up retirement benefit trusts.), predetermined points based on years of service and ability-based grade / job title are given toeach participant annually, and employees receive lump-sum payments, which are calculated by multiplying the unit price of points
to the accumulated points at the time of retirement, as retirement benefits.
The consolidated subsidiary adopts the simplified method in calculating net defined benefit liability and retirement benefit expenses.

― 38 ―

Defined benefit plans(i) Change in projected benefit obligation
Millions of yen

Thousands of
U.S. dollars

2014

2014

Balance at beginning of year
Service costs (including the amount of employee contributions)Interest costs
Actuarial differences
Retirement benefits paid

¥24,652708
370
209(1,357)$239,526
6,879
3,595
2,031
(13,185)

Balance at end of year

¥24,582$238,846

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
Millions of yen

Thousands of
U.S. dollars

2014

2014

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

¥21,842
446
759
1,330
55
(706)

$212,223
4,333
7,375
12,923534(6,859)Balance at end of year

¥23,726$230,529(iii) Reconciliation from projected benefit obligation and plan assets to net defined benefit liability (asset) for retirement benefits

Funded projected benefit obligation
Plan assets

Millions of yen

Thousands of
U.S. dollars

2014

2014

¥24,571(23,726)$238,739(230,529)

Unfunded projected benefit obligation

845
11

8,210
107

Net liability (asset) recognized in consolidated balance sheets

856

8,317

1,960
(1,104)

19,044(10,727)¥856$8,317

Net defined benefit liability
Net defined benefit asset
Net liability (asset) recognized in consolidated balance sheets(iv) Retirement benefit expenses and its breakdown

Millions of yen
2014

Thousands of
U.S. dollars
2014

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

¥652
370
(446)
708

$6,335
3,595(4,333)
6,879

Retirement benefit expenses¥1,284$12,476

Note: The retirement benefit expenses of the consolidated subsidiary adopting simplified method are included in service costs atonce.

― 39 ―

(v) Remeasurements of defined benefit plans
The component of items recognized in remeasurements of defined benefit plans (pre-tax) was as follows:
Millions of yen

Thousands of
U.S. dollars

2014

2014

Unrecognized actuarial differences¥2,364$22,969

Total¥2,364$22,969(vi) Plan assets(a) Percentage by major category of plans assets was as follows:
Bonds
Equities
Cash and deposits
Other

67%
18%
0%
15%

Total

100%

Retirement benefit trust set up for defined benefit pension plans and that set up for lump-sum retirement benefit plansaccount for 19% and 24% of total plan assets, 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 returns for various categories of the plan assets.
(vii) Basis for calculation of actuarial assumptions
Basis for calculation of actuarial assumptions (presented as weighted-average rate) at 31 March 2014 was as follows:
Discount rateLong-term expected rate of return on plan assets

1.5%
2.0%

Year ended 31 March 2013
The liability for severance and retirement benefits included in the consolidated balance sheets at 31 March 2013 consisted of thefollowing:
Millions of yen
2013
Projected benefit obligation
Unrecognized actuarial differences
Less fair value of plan assets[of which plan assets of retirement benefit trust]Prepaid pension costs¥24,652(3,622)(21,842)[10,000]
2,447¥1,635Retirement benefit expenses included in the consolidated statements of income for the year ended 31 March 2013 were comprised of
the following:
Millions of yen
2013
Service costs - benefits earned during the year
Interest cost on projected benefit obligation
Expected return on plan assets
Amortization of actuarial differences

¥659
373
(306)
1,036
¥1,762― 40 ―

The discount rate used by the Bank in 2013 was 1.5%. The rate of expected return on plan assets of retirement benefit trust and therate of expected return on plan assets used by the Bank in 2013 were 1.5% and 3.0 %, respectively.
The estimated amount of all retirement benefits to be paid at future retirement dates is allocated equally to each service year using
the estimated number of total service years.
Prior service costs are recognized in the statements of income when they are determined to occur actuarially.
Actuarial differences are recognized in ten years (using the straight-line method within the employees’ average remaining service
period, commencing from the next fiscal year of incurrence).

19. INCOME TAXESThe Bank and its subsidiary are subject to a number of taxes based on income such as corporation tax, inhabitant taxes andenterprise tax, which, in the aggregate, indicated a statutory tax rate in Japan of approximately both 37.7% for the years ended 31
March 2014 and 2013.
Significant components of the Bank’s deferred tax assets and liabilities at 31 March 2014 and 2013 are as follows:
Thousands of
U.S. dollars

Millions of yen
2014

2013

2014

Deferred tax assets:
Reserve for possible loan losses
Liabilities for severance and retirement benefits
Net defined benefit liability
Accumulated depreciation
Securities
Other¥2,975
－
3,883
1,349
749
1,701

¥4,348
3,270
－
1,357
722
1,618

$28,906－
37,728
13,107
7,277
16,528Subtotal
Allowance to reduce deferred tax assets to expected realizable value

10,657(2,127)

11,315(1,971)

103,546(20,666)

8,530

9,344

82,880(16,867)(456)(0)(16,983)(482)(0)(163,884)(4,431)(0)

Total deferred tax assets
Deferred tax liabilities:
Net unrealized holding gains on available-for-sale securities
Deferred gains on sale of real estate
Other
Total deferred tax liabilities
Net deferred tax liabilities(17,323)(17,465)(168,315)¥(8,793)¥(8,121)$(85,435)

The following summarizes the significant difference between the statutory tax rate and the Bank’s effective tax rate for the years
ended 31 March 2014 and 2013.
2014
Statutory tax rate

2013

37.7%

37.7%

Non-deductible expenses

0.4

0.4

Non-taxable dividend income

(1.3)

(1.3)

Per capita inhabitant taxes

0.3

0.4

Valuation allowance

1.3

4.8

Decrease in deferred tax assets due to tax rate changes

1.3－

Other, net

(0.4)

1.1

39.3%

43.1%

― 41 ―

(Revisions to amounts of deferred tax assets and deferred tax liabilities due to change in rate of income taxes)
On 31 March 2014, “Partial Amendment of the Income Tax Law” was promulgated, according to which the Special Reconstruction
Corporation Tax will no longer be imposed from the years beginning on or after 1 April 2014. Accordingly, for temporary
differences expected to be reversed in the year beginning on 1 April 2014, the effective tax rate applied to the calculation of deferred
tax assets and liabilities for this fiscal year, will be lowered from 37.7% in previous fiscal year to 35.3%.
As a result, the amount of deferred tax assets decreased by ¥149 million ($1,448 thousand), net unrealized holding gains onavailable-for-sale securities increased by ¥10 million ($97 thousand) and provision for income taxes-deferred increased by ¥159
million ($1,545 thousand).

20. NET ASSETS
Under the Japanese Corporate Law (the “Law”) and the Banking Law of Japan, the following are provided: The entire amount of theissue price of shares is required to be accounted for as capital, although a company may, by resolution of its board of directors,
account for an amount not exceeding one-half of the issue price of the new shares as additional paid-in capital, which is included incapital surplus.
The Law and 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 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 shareholders’ meeting. Legal earnings reserve is included in retained earnings in theaccompanying 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 740 thousand shares at 31 March 2014.

21. STOCK OPTION
1. Share-based compensation expenses accounted for as general and administrative expenses
The Bank resolved to grant stock acquisition rights to certain directors of the Bank at the Board of Directors’ meeting held on 21
June 2013. The balance of stock acquisition rights granted for stock option program is ¥55 million ($534 thousand) at 31 March
2014. There is no balance at 31 March 2013.
Share-based compensation expense which was accounted for as general and administrative expenses for the year ended 31 March2014 amounted to ¥55 million ($534 thousand). There is no amount for the year ended 31 March 2013.

― 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.

Directors of the Bank: 9
Common stock: 13,400 shares
24 July 2013
Not applicableNot applicable
From 25 July 2013 to 24 July 2043(b) Volume and activity
The following describes volume and activity that existed during the year ended 31 March 2014. The number of stock options isreported in terms of shares of stock.
(i) Number of stock options
Before vesting (shares):2013 Stock Option Plan―
13,400――13,400At 31 March 2013
GrantedForfeited
VestedOutstanding
After vesting (shares):

—
—
—
—
—

At 31 March 2013
VestedExercised
Forfeited
Outstanding(ii) Price information2013 Stock Option Plan
Exercise price
Average exercise price
Fair value at the grant¥1 ($0.01)—¥4,119 ($40.02)

3. Valuation method for fair value of stock options(a) The valuation method : Black-Scholes formula(b) Major basic numerical values and valuation method:
2013 Stock Option Plan
Stock price volatility (*1)
Expected years to expiration (*2)
Expected dividends (*3)
Risk-free interest rate (*4)

28.2%
4.3years¥65 ($0.63) per share
0.21%

Notes:*1. Stock price volatility was calculated based on the actual stock prices from 30 March 2009 to 15 July 2013.
*2. As a rational estimation was difficult due to the lack of historical data, expected years to expiration was set up by theestimated average remaining service period.
*3. Expected dividends are determined based on actual dividends for the year ended 31 March 2013.
*4. Risk-free interest rate is Japanese government bond yield corresponding to the expected years to expiration.

― 43 ―

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 2014 and 2013 consisted of the following:Thousands of
U.S. dollars

Millions of yen
2014
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

2013

2014

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

¥11,051
2,565
1,761
1,897
753
1,306
1,687
2,477
3,979

$110,377
25,087
12,476
20,618
7,190
11,426
17,56725,28240,177¥27,809¥27,476$270,200

23. OTHER OPERATING INCOME AND EXPENSES
Other operating income and expenses for the years ended 31 March 2014 and 2013 consisted of the following:Thousands of
U.S. dollars

Millions of yen
2014
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

2013

2014

¥825
90
5
4
0

¥301
123
－
5
0

$8,016
874
49
39
0

¥924

¥429

$8,978

Thousands of
U.S. dollars

Millions of yen
2014
Other operating expenses:
Loss on redemption of bonds
Loss on sales of bonds
Loss on financial instruments
Other― 44 ―

2013

2014

¥434
43
－
76

¥45
558
586
0

$4,217
418
－
738

¥553

¥1,189$5,373

24. OTHER INCOME AND EXPENSES
Other income and expenses for the years ended 31 March 2014 and 2013 consisted of the following:Thousands of
U.S. dollars

Millions of yen
2014
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

¥2,182
166
11
787

¥723
885
7
611

$21,201
1,613
107
7,646

¥3,146¥2,226$30,567

2014
Other expenses:
Loss on transfer of receivables
Loss on disposal of premises and equipment
Loss on devaluation of stocks and other securities
Loss on sale of stocks and other securities
Other

2013

2013

2014

¥217
179
76
－
517

¥58
201
58
116
487

$2,109
1,739
739
－
5,023

¥989

¥920

$9,61025. LEASE TRANSACTIONS
A. Finance leases(1) Finance leases that transfer the ownership(i) Details of leased assets(a) Premises and equipment:
Mainly consisted of equipment for the Bank’s network system(b) Intangible assets:
Mainly consisted of software for branch operating system(ii) Depreciation and amortization method of leased assets
Depreciation and amortization method of leased assets is 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(a) Premises and equipment:
Mainly consisted of equipment for branch operating system(b) Intangible assets:
Mainly consisted of software for branch operating system(ii) Depreciation and amortization method of leased assets
Depreciation and amortization method of leased assets is described in Note 2. Depreciation and amortization methods (3) Leased
assets.

― 45 ―

(3) The following pro forma amounts present the acquisition cost, accumulated depreciation and net book value of the leased assets
at 31 March 2013, which would have been reflected in the consolidated balance sheets if finance leases other than those that transfer
the ownership of the leased assets to the Bank (which are currently accounted for in the same manner as operating leases) were
capitalized.
There is no pro forma amount of leased assets at 31 March 2014.
Millions of yen
At 31 March 2013

Acquisition cost

Accumulated
depreciation

Net book value

¥145
8

¥145
8

¥－
－

¥153

¥153

¥－

Premises and equipment
Intangible assets
Total

There were no lease payments under certain finance leases, which are accounted for in the same manner as operating leases, for theyear ended 31 March 2014. Such lease payments described above for the year ended 31 March 2013 were ¥23 million.
Future lease payments at 31 March 2014 and 2013, inclusive of interest under such leases, were nil.

(4) Current portion of lease obligations and lease obligations (excluding current portion) at 31 March 2014 and 2013 consisted of
the following:
Millions of yen
2014
Current portion of lease obligations
Lease obligations (excluding current portion)

2013

Thousands of
U.S. dollars

Average interest
rate (%)

2014

2014

¥511
2,391

¥462
2,635

$4,96523,232¥2,902¥3,097$28,197

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

The aggregate annual maturities of lease obligations are summarized as follows:Year ending 31 March

2014
2015
2016
2017
2018
2019 and thereafterThousands of
U.S. dollars

Millions of yen
¥511
523
535
538
795

2013
¥462
472
482
493
1,188

2014
$4,965
5,082
5,198
5,227
7,725

B. Operating leases(a) As lessee
There were no future lease payments under non-cancelable operating leases at 31 March 2014. Future lease payments under
non-cancelable operating leases at 31 March 2013 were ¥1 million due within one year.

― 46 ―

2.41%
2.49%

(b) As lessor
Future lease receivables under non-cancelable operating leases at 31 March 2014 were ¥263 million ($2,555 thousand) including¥11 million ($107 thousand) due within one year.
Future lease receivables under non-cancelable operating leases at 31 March 2013 were ¥326 million including ¥13 million due
within one year.

26. COMPREHENSIVE INCOME
Reclassification adjustments and tax effect amounts of other comprehensive income for the years ended 31 March 2014 and 2013
were as follows:
Thousands of
U.S. dollars

Millions of yen
2014
Net unrealized holding gains on available-for-sale securities:
Amount for the year
Reclassification adjustment

2013

2014

¥557
(589)

¥24,759(470)$5,412(5,723)

Amount before tax effectTax effect amount

(32)
116

24,289(8,208)

(311)
1,127

Net unrealized holding gains on available-for-sale securities

84

16,081

816

(20)
184

(617)
202

(194)
1,788

Amount before tax effectTax effect amount

164
(58)

(415)
146

1,594
(564)

Net unrealized gains (losses) on hedging derivatives

106

(269)

1,030

Share of other comprehensive income of affiliates accounted for using
the equity method:Amount for the year
Reclassification adjustment

2
－

3
－

19
－

Amount before tax effectTax effect amount

2
－

3
－

19
－

Share of other comprehensive income of affiliates accounted forusing the equity method

2

3

19

¥192

¥15,815$1,865Net unrealized gains (losses) on hedging derivatives:
Amount for the year
Reclassification adjustment

Total other comprehensive income― 47 ―

27. Per Share Data
Net assets per share at March 31, 2014 and 2013 and net income per share for the years then ended were as follows:Yen
Net assets
Net income
Diluted net income

U.S. dollars

2014

2013

¥9,602.66
429.49398.91¥9,148.71
349.42340.902014$93.30
4.17
3.88

Net assets per share and net income per share were calculated based on the following:
Millions of yen or
thousands of shares

Thousands of
U.S. dollars

2014

2013

2014

¥170,575
55
55
170,520¥167,961－－
167,961$1,657,356
534
534
1,656,822

17,75818,359Net income:Net income
Net income attributed to common stock
Average number of shares of common stock during the year

7,720
7,720
17,9766,415
6,415
18,359Diluted net income:Number of increased common stock used in computing diluted
net income per share
Convertible bond-type bonds with acquisition rights
Compensation-type stock option

1,378
1,369
9

459
459
－

Net asset:
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

75,01075,010As described in “Changes in accounting policies”, the Bank and its consolidated subsidiary have adopted the Retirement Benefits
Standard, etc. and accounted for in accordance with the transitional provisions set forth in paragraph 37 of the Retirement Benefits
Standard.
As a result, net assets per share declined by ¥86.11 ($0.84) at March 31, 2014.

― 48 ―

28. SEGMENT INFORMATION(1) Reportable segment information
Reportable segment information has been omitted as the Bank and its consolidated subsidiary have a single segment, commercial
banking business for the years ended 31 March 2014 and 2013.
(2) Other segment related informationa. Information by services
Information by services for the years ended 31 March 2014 and 2013 was as follows:
2014
Millions of yen

Ordinary income from external customers

Banking

Investment
in securities

Other

Total

¥20,714¥15,010¥10,700¥46,4242013
Millions of yen

Ordinary income from external customers

Banking

Investment
in securities

Other

Total

¥22,011¥14,544¥8,686¥45,2412014
Thousands of U.S. dollars

Ordinary income from external customers

Banking

Investment
in securities

Other

Total

$201,263$145,841$103,965$451,069

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 2014 and 2013 was omitted, because theamount of ordinary income from domestic customers was more than 90% of consolidated ordinary income.
ii. Tangible fixed assets
Information as to tangible fixed assets for the years ended 31 March 2014 and 2013 was omitted, because there was no tangible
fixed asset located abroad.

c. Major customers’ segment information
Major customers’ segment information is not shown for the years ended 31 March 2014 and 2013, since there is 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 has been omitted for the years ended 31 March 2014 and― 49 ―

2013, since the Bank and its consolidated subsidiary have 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 2014
and 2013.

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 2014 and 2013.

29. SUBSEQUENT EVENTS
Cash dividends
On 20 June 2014, the shareholders of the Bank authorized the following appropriations of retained earnings at 31 March 2014:
Millions of yen
Cash dividends (¥30 ($0.29) per share for year end)¥533

― 50 ―

Thousands of
U.S. dollars$5,179─ 51 ─

Corporate Profile
・Corporate Data (As of March 31, 2014)
EstablishedMay 2, 1932
Paid-in Capital¥12,090 million

Employees
Stock Listing

1,489
First Section of
the Tokyo Stock Exchange

Authorized Shares
49,450,000
Issued and Outstanding
18,497,786
Branches
110 (Iwate Prefecture 92)
SharesShareholders
7,382
・Board of Directors and Corporate Auditors (As of July 1, 2014)
Chairman
Directors
Corporate Auditors
Executive Officers
Masahiro Takahashi
Yasuyuki Aramichi
Katsuya Sato (standing)Shuetsu Inagaki
Shigeki Miura
Hisaki Miyadate (standing)Hiroaki Takahashi
Mikio Kikuchi
Koichi Adachi
President
Hiroshi Miura
Shinobu Obara
Sachio Taguchi
Atsushi Takahashi
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. Hisaki Miyadate, Koichi Adachi and Shinobu Obara are outside auditors as
Osamu Sakamoto
stipulated in Article 2, Item 16 of the Corporation Law.
Keiji Iwata
Yuichi Kato・Organization (As of July 1, 2014)
General Meeting of Shareholders
Board of Directors
Executive

Board of Corporate Auditors
Corporate Auditors (standing)Corporate Auditors

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
CS Promotion Office

Customer Response Center

Private 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
Systems Division
Risk Management Division
Financial Products Management OfficeCompliance Office
General Secretariat
Audit Division― 52 ―

・The Bank of Iwate Group
Name/Business Lines
Iwagin Business Service Co., Ltd.
Cash Management Services
Iwagin Lease Data Co., Ltd.
Computerized Accounting Services, Leasing
Iwagin DC Card Co., Ltd.
Credit Cards and Consumer Loans
Iwagin Credit Service Co., Ltd.
Credit Cards and Consumer Loans

Equity
100%
5%
5%
5%

― 53 ―

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 82nd
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: http://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