JOYO BANKPROFILE

The Joyo Bank, Ltd., was established in 1935 out of the merger of theTokiwa Bank and Goju Bank (both founded in 1878), and celebrating its
130th year in Business.
As a leading financial institution in Ibaraki Prefecture and surrounding
regions, the Bank, with the philosophy of “Practicing sound management,
creation of values, and partnership with the home region,” is contributing
to the growth of its home region by providing stable and comprehensive
financial services.

Management Philosophy“Sound management, creation of value, and partnership with the home region”(1) Focusing on retail banking as our core business, Joyo Bank will pursue sound management and steady banking activities.
(2) Joyo Bank will create high-value business together with our customers, regional communities, and shareholders.
(3) By providing financial services in our base territory of Ibaraki Prefecture and adjacent areas, Joyo Bank will contribute to socialand economic progress in the home region.

Action Guidelines
We will— Provide the most appropriate products and services based on a keen understanding of our customers.
— Undertake steady banking activities and grow together with our customers.
— Seek to further improve our financial skills.

CONTENTS
1 Financial Highlights
2 Message from the President
4 Management Policy
5 Business Highlights (Non-consolidated basis)
10 Corporate Social Responsibility (CSR)
15 Corporate Governance and Internal Control System
24 Consolidated Balance Sheets
25 Consolidated Statements of Income
26 Consolidated Statements of Changes in Net Assets
27 Consolidated Statements of Cash Flows
28 Notes to the Consolidated Financial Statements

41 Report of Independent Certified Public Accountants
42 Non-Consolidated Balance Sheets (Unaudited)
43 Non-Consolidated Statements of Income (Unaudited)
44 Non-Consolidated Statement of Changes
in Net Assets (Unaudited)
47 Organization
48 Board of Directors and Corporate Auditors/
Market Business Group and Overseas Office
49 Service Network/Affiliated Companies
50 Corporate Data

FINANCIAL HIGHLIGHTS
Consolidated
THE JOYO BANK, LTD. and Consolidated Subsidiaries
Thousands of
U.S. dollars

Millions of yen
Years Ended March 31

2008

2007

2008

For the Year Ended
Total Income
Total Expenses
Income before Income Taxes and Minority Interests
Net Income¥ 229,078
202,909
26,16913,924¥ 197,653
143,967
53,68526,319$ 2,286,441
2,025,244
261,197
138,982

At the Year End
Total Assets
Deposits
Loans and Bills Discounted
Securities
Net Assets
Capital Ratio¥7,384,570
6,385,531
4,635,216
2,301,379
432,016
13.22%¥7,444,736
6,309,618
4,402,579
2,605,232
518,81011.98%$73,705,659
63,734,215
46,264,262
22,970,148
4,311,969¥¥$

For the Year Ended
Net Cash (Used in) Provided by Operating Activities
Net Cash Provided by (Used in) Investing Activities
Net Cash Used in Financing Activities
Net Decrease in Cash and Cash Equivalents
Cash and Cash Equivalents at End of Year(55,787)
75,531(22,368)(2,653)
113,725

92,097(58,690)(34,724)(1,314)
116,379(556,814)
753,886(223,263)(26,489)
1,135,100

Notes: 1. Japanese yen amounts are rounded down to the nearest million yen.
2. U.S. dollar amounts represent translation of Japanese yen at the exchange rate of ¥100.19 to US$1.00 on March 31, 2008.

Non-Consolidated
THE JOYO BANK, LTD.
Thousands of
U.S. dollars

Millions of yen
Years Ended March 31

2008

2007

2008

For the Year Ended
Total Income
Total Expenses
Income before Income Taxes
Net Income¥ 207,479
182,935
24,543
12,940¥ 175,963
122,956
53,007
26,186$ 2,070,858
1,825,889
244,968
129,157

At the Year End
Total Assets
Deposits
Loans and Bills Discounted
Securities
Net Assets¥7,371,265
6,405,962
4,669,468
2,306,788
427,662¥7,430,806
6,326,301
4,438,855
2,607,267
515,631$73,572,869
63,938,140
46,606,132
23,024,137
4,268,515

Notes: 1. Japanese yen amounts are rounded down to the nearest million yen.
2. U.S. dollar amounts represent translation of Japanese yen at the exchange rate of ¥100.19 to US$1.00 on March 31, 2008.

1

MESSAGE FROM THE PRESIDENT“For the Best ‘Partner Bank’ in a New Financial Era.”

Deepening Relations of Trust with Our Customers
Launch of 10th Medium-Term Business Plan
Our business environment continues to change, as
competitive pressures intensify amid ongoing economic
and social structural reform, changing customer preferences and new entrants moving into the financial sector
such as Japan Post Bank. At the same time, a new
finance-industry regulatory architecture is emerging inJapan under the Basel II regulation and the Financial
Instruments and Exchange Act.
Against this backdrop, the Joyo Bank launched its
10th Medium-Term Business Plan, which will run forthree fiscal years starting in April 2008.
In the plan, the Bank relaunched itself as “the ‘best
partner’ bank in a new financial era.” To contribute to
the development of the local community and economy,
we are committed to providing the best in financial
products and services and deepening relationships of
mutual trust between the customer and the Bank, by
better understanding customer needs. To fully serve as“best partner,” we have set targets for strengthening
profitability on a consolidated basis, risk control systems and management resources.
In the plan, we take measures to strengthen ourGroupwide consolidated earnings capabilities throughexpansion of business domains developed under theprevious medium-term business plan. In addition tostrengthening our ability to provide comprehensive
financial services to our customers on a Groupwide
basis, we are further improving our consultation functions and putting business relations with our customers
on a firmer footing. We aim to further broaden our business catchment area based on expansion of the local
economy triggered by infrastructure projects such as a
new expressway linking Ibaraki with its neighboring
prefectures.

2

Furthermore, ahead of our establishment of
upgraded risk-management mechanisms, which will
form the basis of future earnings growth, we are positioning ourselves to better meet Basel II capital adequacy and new financial reporting requirements. We arealso sophisticating our management organization
through more effective use of IT and creation of robustand efficient operational framework.
Employee’s ability, which underpins the quality of
our financial services, is a vital management resource.
We will step up efforts to strengthen investments inpersonnel development, while continuing our rigorous
commitment to compliance, which we regard as the sinequa non for assuring customers trust. We will also
ensure that our customers are supported by adequate
briefing and information regarding financial products, andthat confidential information is appropriately managed.

Responding to Diversified Customer Needs
In fiscal 2007, the final fiscal year of the previous
medium-term business plan, we took the following
measures to meet diversifying customer needs.
For corporate customers, we provided a morediversified range of financing channels, including underwriting of private placement bonds and syndicatedloans. We launched loan products available for movable
collateral. In addition, we bolstered business-matchingsupport, for example through round-table sessions and“Food Selection 2007,” a joint event involving eightregional banks, for agricultural producers and companies in processing, restaurant and retailing sectors.
For individual customers, we dept convenience byoverhauling some of our mortgage loan products,
increasing our lineup of asset management vehicles,
and by initiating QUICPay settlement acceptance services for small sums using mobile phones.

In branch network activities, we opened a comprehensive loan center in Nagareyama-shi, Chiba
Prefecture, an full-range financial center for individual
customers intended to cover their financial needs frommortgage loans through asset consultation. At the sametime, we established a wholesale hub at the same
premises as a specialized office for exploring new customers for business loans. In April 2008, we opened
another loan center within the Moriya branch in Ibaraki
Prefecture, and in May another wholesale outlet inSoka-shi in Saitama Prefecture.
Turning to Group companies, in November 2007,
we established a wholly owned subsidiary, The Joyo
Securities Co., Ltd. In May 2008, we completed aframework for integrated supply of products and services after opening the first jointly operated office ofboth the Bank and Joyo Securities at the Bank’s head
office.

Soundness, Cooperation, and Partnership with
the Community
The Bank contributes to the development of the local
community and economy under its management philosophy of “soundness, cooperation and partnership withthe community.” As a “best partner bank in a new financial era,” we regard the creation of true satisfaction forcustomers and compliance-based management as firstpriorities, and are committed to putting the customer
first and providing high-quality financial services.

Kunio Onizawa
President

Every executive and employee of the Joyo Bank will
work together meet the expectations of customers,
regional partners and shareholders. I would ask our
stakeholders for their continued support in thisendeavor.

Kunio Onizawa
President
July 2008

3

MANAGEMENT POLICY

10th Medium-Term Business Plan
“For the ‘Best Partner’ Bank in a New Financial Era”
Amid ongoing economic and social structural reform, diversifying customer preferences, and with new financeindustry regulatory architecture emerging in Japan under the Basel II regulation for capital adequacy and the Financial
Instruments and Exchange Law, the Bank faces a new era in its operating environment.
The Bank implements measures under the 10th Medium-Term Business Plan to further strengthen its customer
base, to earn the trust of customers, shareholders and local community members.

The 10th Medium-Term Business Plan
(April 2008 to March 2011)

To make Joyo Bank “the ‘Best Partner’ Bank in a New Financial Era”

Goal

By “For the ‘Best Partner’ Bank in a New Financial Era” we aim to remain an indispensable partof our customers’ living, while promptly and flexibly grasping the new business chances createdby change.
• The Three Cs for the Realization of the “Best Partner”
Consultation: Accurately understand customer needs and advise accordingly
Convenience: Increase convenience from the customer’s viewpoint
Compliance: Build trust by complying with laws and regulations

Strengthen profitability on a consolidated basis

Build on management resources

Basic
Aims

Strengthen management organization
To be a “‘Best Partner’ Bank in a new financial era” flexible enough to achieve sustainablegrowth, we have set targets for all of the above three aims. We will also build trust through rigorous compliance, and offer customer support through briefing and information regarding financial
products, while ensuring that confidential information is appropriately managed.

4

BUSINESS HIGHLIGHTS (NON-CONSOLIDATED BASIS)
Revenues and Earnings
Business profit declined ¥24.4 billion, or 46.2% year-onyear to ¥28.4 billion. Growth in interest income resulting
from higher interest payments on loans was more thanoffset by a decline in fees and commissions, particularly
for investment trusts, as well as impairment losses resulting from a plunge in the prices of securities and a loss on
the sale of investments. Core business profit, the mainindicator of the Bank’s profitability, increased by ¥100
million, or 0.2%, to ¥52.3 billion.
Ordinary profit declined ¥22.8 billion, or 47.9%, to¥24.8 billion, due to a rise in the total credit cost resulting
from an additional provision for possible loan losses, aswell as the decline in business profit.
Net income decreased by ¥13.2 billion, or 50.5%, to¥12.9 billion.
*Core business profit is the amount of business profit (prior to generalprovisions for possible loan losses) adjusted for gains and losses onbond trading.

Deposits, Loans and Securities
During the term, deposits increased ¥70.5 billion for aterm-end balance of ¥6,355.8 billion. Of this total, ordinary deposits increased by ¥2.7 billion to a term-end
balance of ¥3,302.1 billion, and time deposits increased¥85.6 billion to ¥2,655.7 billion.
Loans increased by ¥230.6 billion during the term, to¥4,669.4 billion, on growth in loans to corporate clientsand mortgage loans. Lending to individuals, especiallymortgage loans, increased ¥34.6 billion to ¥1,039.7
billion. In addition, lending to SMEs grew by ¥33.2 billion
to ¥1,958.4 billion.
Securities holdings decreased by ¥300.4 billion to¥2,306.7 billion. Of this total, Japanese government
bonds increased by ¥117.0 billion to ¥877.2 billion at theend of term, owing primarily to portfolio managementtaking into account domestic and overseas interest rate
fluctuations and market trends. The balance of othersecurities declined by ¥365.3 billion to ¥437.9 billion,
primarily due to the selling off of foreign securities and theposting of impairment losses caused by a decline in theprice of securitized products.
Assets under custody grew ¥19.2 billion to ¥1,086.6
billion as a result of growth in sales of government bonds
issued solely for individual investors, as well as in pension

insurance. This more than offset a decline in sales ofinvestment trusts in response to sluggish fund pricemovements.
Mortgage and other housing loans continued to show
a strong performance. Mortgage loans increased by¥41.1 billion to ¥911.7 billion, while loans to apartmentbuilding owners rose ¥19.2 billion to ¥302.8 billion.

Capital Ratio
Our capital ratio on a consolidated basis, stood at
13.22% (Tier I ratio: 12.07%), while the ratio on a nonconsolidated basis also kept at a high level of 13.11%(Tier I ratio: 12.06%).
The capital ratio (domestic standard) has been calculated in accordance with the criteria for judging whether afinancial institution’s regulatory capital is sufficient in lightof the assets held, etc. under the provisions of Article 142 of the Banking Law (Notification No. 19 of 2006, theFinancial Services Agency).
It should be noted that the minimum level required forbanks complying with domestic standards is 4%.

Consolidated Accounts
The Bank currently has ten consolidated subsidiaries. On
a consolidated basis, ordinary income for the year
increased by ¥34.7 billion to ¥226.7 billion. Ordinary
expenses for the year increased by ¥58.2 billion to¥200.5 billion. Ordinary profit decreased to ¥26.2 billion,
and net income also posted a year-on-year decline, to¥13.9 billion.
Turning to cash flows in the year, net cash used inoperating activities totaled ¥55.7 billion due primarily to
an increase in loans. Net cash provided by investing
activities amounted to ¥75.5 billion due to proceeds fromsecurities transactions. Net cash used in financing activities totaled ¥22.3 billion as a result of repayment of subordinated debt and purchases of own shares. As a resultof the above, cash and cash equivalents at the end of theterm decreased by ¥2.6 billion to ¥113.7 billion.

5Asset Soundness
Results of Processing Non-Performing Loans in
Fiscal 2007
We have calculated write-offs and reserve amounts for
non-performing loans based on results from asset selfassessments and established rules on write-offs andprovision of reserves. Credit costs for non-performing
loans processed in fiscal 2007 totaled ¥15.2 billion.
Below is a breakdown.
In fiscal 2007, a growing number of customers
showed deterioration in their earnings performance,
affected by the surging price of crude oil and amendments to the Building Standards Law. Given this background, we employed stricter standards for asset
self-assessments, with the aim of minimizing loan losses
in the future. As a result, total credit costs in fiscal 2007
rose ¥8.3 billion year-on-year.
In the previous fiscal year, the provision to the specificreserve for possible loan losses, at ¥1,754 million, wasmore than offset by the amount of the reversal of thegeneral reserve for possible loan losses. This elimination
is indicated in the table below by a dash in the specificreserve column.

March 31

Write-off of claims
Net provision for specific reserves
Provision for specific foreign borrowers
Losses on bulk sale of loans
Provision for other contingent losses
Other
Total

2008

Millions of Yen
2007 Change¥10,689 ¥6,036 ¥4,652
3,438— 3,438
—
—
—
165
372
(207)
911
400
510
—
—
—
¥15,205 ¥6,810 8,395

provided specific reserves for bad debts totaling ¥18.9
billion, a reserve ratio of 55.85%.
Claims deemed to be unrecoverable or valueless(¥38.3 billion) based on self-assessment have been executed on a “partial direct charge-offs” basis, and havebeen deducted in the balance sheet asset amounts. For
the general reserve for possible loan losses, we haveconducted an appropriate reserve provision following theguidelines of the Financial Inspection Manual prepared by
the Financial Services Agency. For borrowers requiringcaution, we have divided these into three categories toinclude debtors requiring management, and have provided reserves after consideration of the historical loanloss ratio of each category.
In the future, we will continue to improve our credit
risk management system, and will conduct appropriate
write-offs, provide reserves in a sufficient amount, andwork toward improving the soundness of our asset
portfolio.
Reserve Based on Self-Assessment

March 31, 2008

Claims of balance (i)Claims secured
by collateral (ii)Claims with uncertain
collectibility (A)=(i)-(ii)Specific reserve (B)Reserve ratio (B)/(A)

6

Total

¥83.3

¥13.1

¥7.4 ¥103.8

49.3

13.1

7.3

33.9
0
18.9
0
55.83% 100.00%

69.8

0
33.9
0
18.9
100.00% 55.85%

Reserve for Possible Loan Losses
March 31

Reserve for Possible Loan Losses
For debtors deemed to be in a state of bankruptcy or
substantially bankrupt based on self-assessment, we
deducted the value of collateral amounts from the loan
amounts. After that, we provided reserves in an amountof 100% of the amount of the claims thought to be unrecoverable. Furthermore, for loans to debtors who are at
risk, we provided reserves based on the Bank’s historicalloan-loss ratio in an amount equivalent to 55.83% of thevalue of claims at risk of being unrecoverable. As a result,compared to the ¥33.9 billion total of non-performing
loans for which there is a risk of no recovery, we have

Billions of Yen
Potentially Substantially
Legallybankrupt
bankrupt
bankrupt
borrowers borrowers borrowers

2008

General loan loss reserve¥15.1
Specific reserve
19.1
Reserve for specific foreign borrowers—
Reserve for possible loan losses
34.2
Reserve for assistance to specific borrowers—
Reserve for possible losses on sale of loans—
Reserve for other contingent losses
1.0

Billions of Yen
2007 Change

¥16.8
22.7
—
39.5
—
—
0.5

¥(1.6)
(3.6)
—
(5.2)
—
—
0.5

Enhanced Managerial and Financial Support for
Businesses
To raise the quality of assets, not only must we aggressively undertake the disposal of non-performing loans, wemust also strengthen our efforts to resolve problems on
the debtor side, such as deterioration in performance
resulting from changes in the economic climate or industrial structure, and weakened financial positions resulting
from declining asset values. This is the vital role we are
expected to fulfill in the revitalization and development of
the local economy, and it is something that the entire
Bank is working toward.
Specifically, the Company Management Support
Office has been cooperating closely with our branch staff
to provide management analysis, advice on improvement
strategies, support for the drafting of operational reform
plans and, where necessary, support based on partnerships with external organizations, such as the SME
Rehabilitation Support Association. Through these activities, we are providing support for rehabilitation and operational improvement of our corporate customers.
In fiscal 2007, we saw improvements in the borrowerclassifications of 28 of our debtors (debtors’ credit ratingbased on upon the financial positions of the companies inquestion). We will maintain our commitment to supporting
the managements of troubled companies, with the aim ofrevitalizing the regional economy.
Disclosure of the Bank’s Assets
We continue to view the improvement of asset quality asa priority management issue, and in addition to working
toward the disposal of non-performing loans and increasing the health of our assets, we will endeavor to makedisclosure of all pertinent information.

Risk-Monitored Claims under the Banking Law
For loans subject to risk management under the Banking
Law, Joyo Bank has adopted four classifications fordisclosure purposes. Loans to debtors in bankruptcy
based on self-assessment are “loans in bankruptcy anddishonored bills.” Loans to debtors who are substantiallyor potentially in bankruptcy are “delinquent loans.” Loansto companies requiring caution (those which have beendelinquent for three months or more) are “loans past duewith respect to interest payments for more than threemonths.” Loans to debtors whom we support throughinterest reduction or waiver of loan repayment are“restructured loans.”
Reflecting our efforts to strengthen corporate rehabilitation programs, the amount of bad debts subject tomandatory disclosure increased ¥9.1 billion to ¥155.6
billion, which represented 3.33% of the total loan balance. We have kept a high coverage ratio of 68.26%.
Risk-Monitored Assets under the Banking Law(Non-consolidated)
March 31

Loans in bankruptcy
and dishonored bills
Delinquent loans
Loans past due with respect
to interest payments for morethan three months
Restructured loans
Total (a)Loans and bills discounted (b)Ratio of risk-monitored assets toloans outstanding (a)/(b)Portion covered by collateraland guarantees (c)Coverage ratio (c)/(a)(Consolidated)
March 31

Loans in bankruptcy
and dishonored bills
Delinquent loans
Loans past due with respect
to interest payments for morethan three months
Restructured loans
Total

Billions of Yen
2007
Change

2008

¥

7.2
95.8

1.2
51.2
¥ 155.6¥4,669.4
3.33%

¥

5.7 ¥
89.1

1.4
6.7

2.0
(0.8)
49.5
1.6
¥ 146.5 ¥ 9.1¥4,438.8 ¥230.6
3.30%

0.03%

¥ 106.2 ¥ 103.9
2.3
68.26%
70.91% (2.65%)

2008

Billions of Yen
2007
Change

¥ 7.4
97.1

¥ 5.9
90.0

¥1.5
7.0

1.4
51.3
¥157.32.1
49.7¥147.9

(0.7)
1.6
¥9.4

7

Claims Subject to Mandatory Disclosure under the
Financial Revitalization Law
Disclosure of the results of an asset assessment isrequired under the Financial Revitalization Law. Under thelaw, the Bank regards non-performing loans determinedthrough self-assessment to be loans to legally or substantially bankrupt companies as “bankrupt and quasibankrupt assets.” Loans to potentially bankrupt
companies are “doubtful assets.” Loans past due (threemonths or more) and restructured loans are “substandard
loans.”
Claims subject to disclosure under the Financial
Revitalization Law during fiscal 2007 increased by ¥8.9
billion year-on-year, to ¥156.4 billion, accounting for3.30% of all claims, nearly unchanged from the previous
year’s level. Furthermore, the ¥0.8 billion differential
between the ¥156.4 billion in claims for disclosure under
the Financial Revitalization Law, which excludes normal
claims, and the ¥155.6 billion in claims (loans and bills
discounted only) for mandatory disclosure in accordancewith the Banking Law represents non-loan claims including customers’ liabilities for acceptances and guarantees,
accrued interest and suspense payments.

8

Problem Assets under the Financial Revitalization Law
March 312008

Bankrupt andquasi-bankrupt assets (a)Doubtful assets (b)Substandard loans (c)Problem assets (A)=(a)+(b)+(c)Normal assets (d)Total (B)=(A)+(d)Ratio of problem assets (A)/(B)Billions of Yen
2007
Change¥20.6 ¥ 17.4 ¥ 3.2
83.3
78.5
4.9
52.5
51.6
0.9
156.4
147.4
8.9
4,569.2
4,350.7 218.5¥4,725.6 ¥4,498.2 ¥227.4
3.30%
3.27% 0.03%

Coverage Status at Fiscal 2007 Year-End

March 31, 2008

Problem assets (a)Assets secured bycollateral andguarantees (b)Reserve for possible
loan losses (c)Coverage ratio{(b)+(c)}/(a)Billions of Yen
Bankrupt andquasi-bankrupt Doubtful Substandard
assetsassets
loans
Total

¥20.6

¥83.3

¥52.5

¥156.4

20.5

49.4

11.6

81.5

0

19.0

6.3

25.3

100.00%81.99%

34.04% 68.26%

The disclosure-based assets for each borrower classification of self-assessment are summarized below.

Self-Assessment: Classification of Borrowers and Disclosure-Based Assets (Billions of Yen)
Self-Assessment
Classificationof Borrowers
Legally Bankrupt
Substantially Bankrupt
Potentially Bankrupt

Borrowers Requiring Caution

Normal Borrowers

Problem Assets
under Financial
Revitalization Law
Bankrupt andQuasi-Bankrupt
Assets 20.6

Legally
Bankrupt 7.4
Substantially
Bankrupt 13.2

Doubtful Assets
83.3

Risk-Monitored
Assets underthe Banking Law
Loans in Bankruptcy andDishonored Bills 7.2

Delinquent Loans
95.8

Substandard Loans
52.5

Loans Past Due with Respect
to Interest Payments forMore than Three Months 1.2
Restructured Loans 51.2

Subtotal 156.4

Subtotal 155.6

Normal Loans
4,569.2

Note: Assets Covered by Disclosure Standards

Note: Categorization of Disclosure Standards

Financial Revitalization Law:
Loans, securities lending, foreign exchange, interest receivable,suspense payments, and customers’ liabilities for acceptanceand guarantees

Financial Revitalization Law:
Categorized by borrower basis, in accordance with selfassessment results. (As an exception, Substandard Loans are
categorized on individual loan basis.)

Banking Law:
Loans and bills discounted

Banking Law:
Loans to Legally Bankrupt Borrowers, Substantially Bankrupt
Borrowers, and Potentially Bankrupt Borrowers are categorized
on an individual borrower basis, in accordance with selfassessment results. Loans to Borrowers Requiring Caution aredisclosed on an individual loan basis.

9

CORPORATE SOCIAL RESPONSIBILITY (CSR)
Relationship Banking Policies
The local economy is the bedrock of the operations of a regional bank. Our mission is to contribute to the development oflocal society and economy by providing communities with reliable financial services.
To fulfill this mission, the Bank has adopted the following three priority policies:(1) Strengthen support for customer companies tailored to their stage of corporate growth(2) Develop new financing options for SMEs
(3) Contribute to a sustainable growth of regional economy
In addition to continuing to improve customer convenience and providing greater safeguards to protect to customer
interests, we will continue to contribute to regional prosperity by providing optimized financial products and services to ourcustomers while deepening our local roots.

Key Initiatives(1) Strengthen support for customer companies tailored to their stage of corporate growth1) Support for start-ups and launch of new businesses> Support new ventures, Organize forums for dialog among businesses2) Support for business succession and M&A activities> Meet business succession needs, Propose M&A solutions when companies cannot find a successor at
the helm3) Support customers’ management reform and business revitalization programs> Offer support for corporate rehabilitation, Raise skill levels among bank’s staff involved in management
reform and business revitalization(2) Develop new financing options for SMEs
1) Promote funding methods that do not depend excessively on real estate collateral or personal guarantees> Increase loan products using a quick “scoring system” (in which points are allotted for creditworthinessin preset categories), Expand loan products guaranteed by external organizations2) Improve ability to rapidly and accurately assess enterprise value of customer companies> Improve credit-screening abilities, and ability to understand situations faced by companies from theirperspective3) Rigorously diversify funding channels> Promote syndicated loans, private placement bonds and lump-sum factoring, etc., Leverage assetbacked loan
(3) Contribute to a sustainable regional economy
1) Contribute to the revitalization of the region in the broad sense, without focusing solely on companies
under rehabilitation> Business support for customers using public information services promoting regional development andestablishment of new factories or logistics facilities> Contribute to regional development by better meeting funding and PFI needs of local public organizations and corporations> Develop a manufacturing business support organization to serve as a platform for business matching for
manufacturers and technology-driven companies
10

Contributions to the Regional Community

Lending to Local Customers

In line with our philosophy of “Soundness, Corporation,
Partnership with the Community,” we will continue tocontribute to the development of the local communityand economy through a robust business performance
under a sound management, enabling us to provide local
customers with comprehensive, high-quality financial
services.
Supply of financial services for the region is our mission. Disclosure of information relating to that contribution
is our duty.
“Region” refers to Ibaraki Prefecture and neighboringareas forming the main catchment area (by location of
main branches) of the Bank: Fukushima, Tochigi,
Saitama, Chiba and Miyagi prefectures.
Lending to customers outside the local region ismainly limited to lending to corporate customers in Tokyo
or Osaka who have factories or offices in the areas mentioned above and who have a deep relationship with local
business.

Regional and SME Lending
Loans to customers in our region totaled ¥3,643.1 billion,
and accounted for 78% of all loans made by Joyo Bank.
Loans to SMEs totaled ¥1,958.4 billion, andaccounted for 41.9% of all loans. Of all regional lending,
48.4% went to local SMEs.
The total number of SME borrowers is 33,454, of
which 98.4% are local companies.
Balance of Loans, Balance of Loans and Percentage of Loans toRegional Customers(Billions of yen)

5,000

¥4,433.7¥4,669.4¥4,438.8

4,000

100
80

79.3%
78.0%
79.2%
¥3,643.1¥3,515.3¥3,522.6

3,000

60

Loan balance

2,000

40

Balance of loans toregional customers

1,000

20

Percentage of loans
to regional customers

00
As of March 31, As of March 31, As of March 31,
2006
2007
2008

Deposits
Balance of Loans and Percentage of Loans to SMEs, andBalance of Loans and Percentage of Loans to Regional SMEs

18.37%
40.34%
18.58%

Joyo Bank

Joyo Bank(Billions of yen)

City banks/Trust banks

2,000¥1,909.7

Other regional banks
Shinkin banks (credit unions)¥1,925.1¥1,736.7¥1,958.4¥1,748.8¥1,765.3

1,500

Other

49.4%

49.6%

48.4%

43.0%

43.3%

41.9%

6.22%

500

0

Balance of loans to
SMEs

60

Balance of loans toregional SMEs

40

Percentage of loans to
SMEs

20

Loans to regional SMEs
as percentage of loans
to regional customers

0
As of March 31, As of March 31, As of March 31,
2006
2007
2008

11.30%

Joyo Bank

19.19%

80

1,000

16.49%

Loans

100

City banks/Trust banks

41.95%
Joyo Bank

Other regional banks

Number of SME Customers & Number of Regional SME
Customers(Unit: Customers)

40,000Shinkin banks (credit unions)Other

21.95%
5.61%

Note: Figures for share exclude postal savings, which are held in the
public sector.

33,27230,00032,78833,44432,92833,45432,952

Number of SMEs

20,000

Number of regional
SMEs
10,0000
As of March 31, As of March 31, As of March 31,
2006
2007
2008

11

Loans to Individuals
Loans to individual customers have grown to ¥1,039.7
billion, with mortgages performing well. Of these, ¥1,038
billion or 99.8% are loans to local individuals. Loans to
individuals are 22.2% of all loans, and loans to local
individuals are 28.4% of all regional loans.
Optimal Financial Services for Local Customers
98.3% of deposits, in an amount of ¥6,250.8 billion, arefrom local customers, and 99.5% of assets in custody arefrom local customers. Japanese government bonds
issued to individual investors and pension insurance
premiums have shown strong increases.
Balance of Loans and Percentage of Loans to Individuals,
Percentage of Regional Loans used for Loans to Local
Individuals(Billions of yen)

1,200

28.4%

28.4%

21.8%

22.6%

22.2%

¥967.3¥1,005.1¥1,039.7

27.4%

900

30

20

Balance of loans to
individuals
Percentage of loans
to individuals

600
10
300

Percentage of regionalloans used for loans
to local individuals

00
As of March 31, As of March 31, As of March 31,
2006
2007
2008

Deposit Balance, Local Deposit(Billions of yen)

100

7,000
6,000
5,000

97.9%

97.9%

98.3%

¥6,146.4¥6,285.2¥6,355.8¥6,022.7¥6,153.8¥6,250.8

80

4,000

60

3,000

40
20

1,000
0

0
As of March 31, As of March 31, As of March 31,
2006
2007
2008

12

Measures to Develop New Ventures
Investment by Joyo Bank
We provide financial support to companies developing
new businesses and new ventures via the “Ibaraki
Venture Business Development Partnership” and the“Nikko Region-Based Industry, Education, andGovernment-Partnered Investment Partnership.”As part of our efforts to support troubled companies
in the Ibaraki Prefecture area, we have invested in an
investment fund operated by the Organization for Small &Medium Enterprises and Regional Innovation and Ibaraki
Prefecture. By providing rehabilitation support to local
SMEs, we help to revitalize the local economy.
Working with Agri-Business
The Bank’s core market is also an agricultural region, andagribusiness is involved in much of its economic development. We support regional industry and the regional
economy by training and supporting individuals andcorporations involved in agriculture. In business lending,we offer the “Daichi” loan for farmers, an unsecured
product that in principle does not require a guarantor (forcorporations, a representative alone will serve as guarantor). We also organize business-partner meetings for the
agricultural production and food processing, restaurant
and retail industries in Ibaraki and Fukushima prefectures,and “regional bank food selection 2007” events in partnership with other regional banks, to develop marketing
channels from production to processing.

Deposit balance
Local deposit balance

2,000

Initiatives for Stimulating the Local Economy

Local deposit balance
percentage

Tie-ups with External Institutions
We foster and support new ventures and establishedcompanies beginning new businesses with entities suchas the Advanced Industrial Science and Technology
institute, the Organization for Small & Medium Enterprises
and Regional Innovation, Ibaraki Corporation for Smalland Medium Enterprise Promotion, Foundation for the
Promotion of Small and Medium Enterprises, theDevelopment Bank of Japan, the Shoko Chukin Bank,
the Norinchukin Bank, the Japan Finance Corporation for
Small Businesses, and other partners in industry, academia and local government.

Invitation of Companies to the Area
For corporate customers investigating to locate in JoyoBank’s operating area, we introduce suitable sites, give
briefings on each, and take other measures to invitecompanies to our area. We also offer financing support tocompanies that have decided to set up operations in ourcatchment area, and help with development support inareas such as information services regarding local business sectors based on our expertise and networks.
Since the enactment in June 2007 of the Business
Location Promotion Law, the Bank has been a memberof Local Industry Revitalization Associations set up in six
Ibaraki Prefecture localities to attract business to the areaand boost its economy.
These are also means through which we are contributing to the revitalization of the regional economy.
Joyo Area Research CenterWith the aim of contributing to the comprehensive promotion of the region, we conduct research into the economy, industry and social change in Ibaraki Prefecture,and provide information needed by industries and forother strategic activities. The Joyo Area Research Center
developed out of the Foundation for Industrial Researchfounded in March 1969.
This foundation cooperates with various economic
associations and research institutions, performing various
tasks that contribute to the regional community andeconomy. The Center researches into and publishes dataon economic industry trends and regional development,
holding lectures and sending speakers to local SMEs.

Joyo Industrial Research Institute
The Joyo Industrial Research Institute is a regional thinktank that was established as part of Joyo Bank’s 60th
anniversary in April 1995. It is a membership-basedorganization.
The Institute comprises an industrial research department, which offers local private businesses consultancy
services in areas such as support for restructuring andISO certification, a regional research department forinvestigations and research for local planning and development projects by local authorities, and a training
department which holds lectures and practical seminars.
It also provides information and promotes exchange
among members through its JIR News newsletter and
the Joyo Village business website.
With a team of specialist staff, including SME consultants, ISO examiners, first-class registered architects andcertified engineers, who can respond to diversified customer needs, we help communities solve the various
problems they face.

Environmental Preservation Activities“Eco Ibaraki” Charitable Trust Environmental
Conservation FundIn October 1992, we jointly invested ¥100 million alongwith Nippon Fire and Marine (currently NIPPONKOA
Insurance) and other partners to establish the Charitable
Trust “Eco Ibaraki,” an environmental conservation fund.
This fund is used to support environmental conservation
projects in Ibaraki Prefecture. Its purpose is to contributeto lifestyles that are in harmony with nature, to the development and prosperity of local society, and to the preservation of the local environment.
In fiscal 2007, we contributed grants totaling ¥4.92
million to 48 organizations. Since the fund’s establishment in 1992, it has contributed ¥45.83 million to 353
schools and groups.

13

Environment-Friendly Financial Products, andSupport for Environmental Initiatives of Our
Customers
In order to contribute to environmental conservation in
the region and to actively support efforts to preserve theenvironment, we have introduced environmental products(including the Joyo Eco Select Loan and a mortgage loan
with a preferred interest rate for eco-friendly housing).
Group company Joyo Industrial Research Center, holds
explanatory meetings on the acquisition of the international environmental standards ISO14001 and offers
individual consulting services, working to support ourcustomers’ acquisition of ISO certification.
Registration under the Ibaraki Eco-Business Plan
In March 2007, our nine business offices were officiallyapproved as Ibaraki Eco-Businesses by the prefectural
government. The registration recognizes our measures tocombat serious environmental problems such as global
warming. We will continue our environmental activities inyears ahead.
Resource and Energy Saving
We work to reduce waste through sorting and recycling oftrash, the recycling of used documents and green procurement (preferential purchasing of Green Mark products) as
much as possible. The entire bank strives to saveresources and energy, planning to reduce the use ofenergy, water and fuel.
Local Contributions to Environmental Conservation
As part of the Joyo Volunteer Club’s activities and individual branch contributions, we participate in clean-up operations and recycling activities in local areas, actively working
with everyone in the region to preserve the environment.

14

CORPORATE GOVERNANCE AND INTERNAL CONTROL SYSTEM
To ensure a greater level of trust from customers, thelocal community and our shareholders, we believe it isessential that our management be efficient, sound andtransparent, and firmly rooted in compliance. Constantly
mindful of the importance of corporate ethics, we haveestablished eight basic principles under which we arestrengthening and expanding our corporate governance.
Corporate Governance at Joyo Bank
Joyo Bank employs the conventional Japanese statutory
auditor system for corporate governance pursuant to the
Corporation Law. The Bank appoints directors, statutory
auditors and accounting auditors. Our corporate governance bodies are as follows: General Meetings ofShareholders, Board of Directors, and Board of
Corporate Auditors (made up of statutory auditors). We
have a total of 12 directors, with nine executive directors,
excluding the chairman who is the Chairman of theBoard, the vice chairman and a senior managing director
in charge of the internal audit division. There are no outside directors. Of a total of five statutory auditors, three
are outside auditors.
The Bank’s Board of Directors meets twice a month inprinciple to deal with decision-making by the management and supervision. We have set up an Executive
Officer Committee to discuss and determine resolutions
regarding major matters facing the Bank other than matters subject to a special resolution by the Board of
Directors. The Executive Officer Committee meets twice amonth in principle to draft and implement on specificpolicies.
Special committees (Compliance Committee, General
Budget Committee, ALM Committee, Risk Management
Committee and Sound Asset Committee) have been
established to determine the major themes for management audits. Reports are compiled regarding the discussions and decisions of these committees for perusal of
the Board of Directors.
In order to audit performance of duties by directors,
the auditors attend important meetings such as theBoard of Directors and Executive Officer Committee
meetings, peruse relevant documents, and carry out
business and asset status inspections, all of which are
based on the auditing policies and plans outlined at
Board of Corporate Auditors meetings (held once amonth in principle).
With regard to internal auditing, the Corporate Audit
Division (the auditing office) monitors internal management in terms of appropriateness and effectiveness ofconduct, and suggests improvements when problem
areas are identified. Results of the audits are regularly
submitted in a report to the Board of Directors.
In addition to strengthening internal auditing, we havecreated a Compliance Audit Committee comprising four
outside experts including lawyers and CPAs to ensure
greater expert input and objectivity.
The Joyo Bank Corporate Philosophy
Corporate Social Responsibly (CSR) and Public Mission
Always keep in mind the Bank’s CSR and public mission, and establish
greater trust through sound and open business management.

General Meetingof Shareholders

Decision-making/
Management
supervision
Board of Directors

Internal Control Department
Operating execution
Executive Officer
Committee

Business Section
Market Business Group

Retail Banking Business Group
Corporate Banking Business Group
Public Business Group

Corporate Auditors

Credit Risk Management Group

Board of Corporate
Auditors

Operation Systems Group

Corporate Risk Management DivisionCorporate Planning Division
Personnel Division
General Affairs Division

15

Compliance
Comply with the legal and social code and execute honest and open
business activities.
Fight Against Crime
Ensure that the Bank has no relationship with organized crime.
Provide Valuable Financial Services
We will contribute to the development of the region in which we operateby responding to our customers’ needs and providing valuable financial
services, taking security issues into due consideration.
Relationship with the Local Community

Committees, which monitor compliance issues on aregular basis.
To ensure that our internal controls perform theirintended functions, our various auditing functions, which
are independent from business execution departments,
carry out internal audits across the Group.
We will resolutely take action to prevent transactions
with criminal bodies that threaten public order and security or disrupt economic development.

We will communicate openly and freely with the community where we
do our business, raising our transparency through active disclosure ofcorporate information.
Respecting the Individual Rights of our Employees
We will provide a work environment that respects individuality andprotects the rights of all employees.
Respecting the Individual Rights of our Employees
We will provide a work environment that respects individuality andprotects the rights of all employees.
Environmental Initiatives
We will reduce environmental impact, and help the environment throughcore banking activities.
Community Contribution Activities
We are committed to contributing to the community we serve, as good
corporate citizen that marches in step with local society.

Internal Controls and Risk Management
Compliance
Based upon our philosophy of soundness, cooperationand partnership with the home region, we attach great
importance to compliance in our management. We haveestablished a corporate ethics guideline and a code of
conduct. Moreover, we have established a new set of
guidelines to ensure that every director and employee
complies with the law and with the Bank’s Articles ofIncorporation. Every company within Joyo Bank Group
follows the same strict guidelines. We have put standards
into place to establish a compliance system across theGroup as a whole.
To ensure the best standards in compliance, we haveestablished a Compliance Office that oversees the compliance program as defined by the Board of Directors.
The Office makes regular reports to the Board. Moreover,
we have established a whistleblower hotline for the entire
Group, called the Compliance Hotline.
In addition to the Compliance Committee, we haveappointed outside experts to form Compliance Audit

16

Risk Management Standards and other Controls
In addition to establishing risk management standards forappropriate management of all categories of risk, it is ouraim to build a comprehensive internal risk management
structure to ensure a sound financial position and stableearnings in the future by creating frameworks for comprehensive understanding and control of risk. Moreover, we
also have business contingency plans in place should any
event disrupt our core systems, such as natural disasters
or a systems failure.
The management of risk is the responsibility of various
risk management departments, as set down in theinhouse regulations. Comprehensive risk management iscarried out by one department that oversees risk management for the entire Bank. The Board of Directors has
appointed one high-ranking officer to oversee the risk
management program.
We have established a Risk Management Committee
to measure the extent of various risks and make decisions on risk management policies. This committee willmeet regularly to ensure an accurate grasp of the situation regarding risk management issues across the Bank.
The officer in charge of risk management will make regular reports to the Board of Directors on the current stateof risk management and the countermeasures that the
Bank is taking against risks.
System to Ensure the Effective Execution of theirDuties by the Directors of Joyo Bank
We have put in place a business plan to clarify our operational targets, as well as an overall budget every year, todefine specific policies.
We have determined the scope of decision-making
responsibilities for each director, to achieve efficient
operations.

We have established an Executive Officer Committeethat consists of executive directors and executive officers
to discuss important matters affecting the daily conductof operations. We have also set up a range of committees, grouping executive directors, executive officers anddivision heads, who meet as and when needed.
Supporting Corporate Auditors
One able and competent staff member is assigned toassist the corporate auditors.
To ensure the independence of this assistant from theinfluence of the business execution departments, in caseof transfer of the staff, the executive director in charge ofall personnel transfers should inform the corporate auditors in advance. The corporate auditors are entitled toexpress their opinions and advice regarding the transferof the staff member who has been being selected for theduties.
The corporate auditors attend meetings of the
Executive Officer Committee and offer their opinions on
the audit process and all related matters.
The directors and employees of the Bank report any
and all information the corporate auditors deem necessary to complete the audit.
In order to improve the efficiency of the audit system,
the corporate auditors maintain open communication
channels with all headquarters departments other than
the internal audit sections.
Internal auditing function

Compliance System
The Bank places a high priority on strengthening its
compliance system to ensure sound banking operations,fulfill its social responsibility and public mission, andmaintain the trust of customers, shareholders and otherstakeholders.
The Bank establishes a compliance program eachyear and ensure that executives are fulfilling their roles incompliance.
Creating a compliance system whose ultimate supervisory organ is the Board of Directors and place dedicated compliance officers in each major division toundertake wide-ranging inspections to address how
division are addressing legal issues.
Supplementing internal compliance activities by outside audits to inject the required professional knowledge
and objectivity. Accordingly, the Bank will set up aCompliance Audit Committee, consisting of outside
professionals including a lawyer and a Certified Public
Accountant (CPA). The Committee evaluates and audits
the Bank’s compliance activities. The Bank is striving tofurther strengthen and improve its compliance activities.

[Oversight of decision-making]Board of Directors[Auditing organizations]Board of Corporate Auditors(Auditors)[Policy establishing and performance evaluation]
Compliance Committee[Auditing department]
Corporate Audit Division
Branch audit group
Operations and asset auditing group
Main office[Management]
Compliance and Risk Management Division[Supervision]
Compliance and supervisory officer

Head office departments and branches, etc.
[Senior Manager] Supervisor [Administrator] Compliance officer
External auditing functions

The Chairman of the Board, representative directors
and accounting auditors each meet regularly with corporate auditors and exchange opinions on the issues
related to the audits.

[Compliance report]
Executive Officer Committee[Group company management]
Corporate Planning Division
Group business officeGroup company[Senior Manager] Representative [Manager] Compliance officer

Evaluation and audit[External audit]
Compliance Audit Committee

17

Code of Conduct
We will● get to know our customers and offer optimal products and services● expand business scale and grow with our customers● increase our financial expertise

Policy Regarding Solicitations for Financial Products
In accordance with the Law Concerning the Sale of Financial Products, our solicitations for products are based on thefollowing policies.
1. Financial product solicitation is based on tailoring products to the level of understanding, experience and financial status of the customer.
2. To ensure that our customers make choices based on their own judgment and at their own liability, we will provide
easy-to-understand explanations so that the customer has sufficient understanding of financial products and the risks
attached.
3. We assure that sales are never based on the provision of misleading or false statements or information, nor do we act
in a manner leading to any misunderstanding by our customers.
4. Our solicitations will not be conducted at times or in locations that cause inconvenience.
5. We are setting up a training system within the Bank to ensure proper solicitation to our customers.

Risk Management
While the financial industry has grown due to deregulationand the advancement of financial technology, the risks
carried by banks continue to diversify and become evermore complicated. In this environment, we are working tomeet the highly advanced and various needs of our customers, and we also have placed emphasis on the subject of “risk management” to ensure the maintenance andimprovement of sound operations which is one of themost vital issues facing management.
The Risk Management System
In our fundamental rules regarding risk management wehave outlined our fundamental thinking and management
procedures including policies regarding risk management, organizational structure, and responsibilities.
In business management, the departments that carryrisks when conducting transactions (marketing departments) and the departments that internally manage theresults of transactions (business administration departments) are separated, thus creating an organizational

18

structure that allows for mutual checks and balances.
The various risks that are incurred during banking operations are managed by specific risk management departments depending on the type of risk.
We also have established a risk management supervision department, which supervises the management
systems for all risks, and is responsible for holding meetings of the Risk Management Committee, which is anorgan for the examination of Bank-wide solutions to risks.
The department also provides regular reports on theoverall status of risks to the Board of Directors.
Additionally, internal auditing staff verify that risk management is functioning appropriately and effectively
through the Integrated risk management department andeach risk management related department, thereby
increasing the effectiveness of the system.

Risk Management System

Risk Management
Departments

Risk Management
Committee

Credit Risk
Board of Directors

Integrated Risk
Management Dept.

Market Risk
Liquidity Risk

Internal Auditing Dept.

Business Promotion
Departments,
Administrative
Control Departments,
Group Companies

Operational Risk

Verification of suitability
and validity of the risk
management system

Integrated Risk Management
The Bank has adopted integrated risk management forquantitative understanding of risk using statistical methods for each category of risk, in order to manage not only
individual risk categories but also to enable systematic
risk management as the business of banking grows morediversified and complex.
This integrated approach enables the Bank to manage
what extent of risk amount can be permitted relative toallocated economic capital, the indicator of financial
soundness, and whether or not management resources
are being deployed efficiently.
Allocation of Risk Capital
In integrated risk management, levels of economic capitalthat may be allocated to cover the scale of permissible
risk within Tier I (core capital) are determined. This is thenallocated by risk type and category to control risk within
the permitted parameters. In the case of major change
which cannot be analyzed in terms of past data, we use
special simulations (stress testing) to verify capital adequacy levels.
• Credit Risk Management
Credit risk is the risk of not receiving principal or loan
payments as promised on loans due to a decline in
the credit situation of the debtor. This is seen as oneof the most serious risks undertaken within banking
operations.

In order to prevent the occurrence of nonperforming loans and improve the soundness of our assets,
we undertake every effort to ensure good credit risk
management.
• Overview of Basic Policy and Procedures with
Regard to Credit Risk Management
The Bank has compiled management guidelines for
credit risk, which serve as a basic policy for appropriate management of credit risk on individual loans andmanagement of the credit portfolio, focusing on
spreading risk as its basic tool.
• Credit Risk Management for Individual Loans
We have separated credit-screening departmentsfrom lending departments, and constantly work
toward making screening stricter while also focusing
on credit management before due date to prevent thestatus of a claim from deteriorating.
The Bank has created a set of basic parameters
for lending, designed to speed up decision-making in
lending decisions and to ensure more rigorous risk
management. We also have a system for accuratelyreflecting in the asset self-assessments the businessperformance achieved by the borrower and changes
in the value of collateral.
The Bank has also adopted an automated scoring
system for small-lot loans to unify credit screening
standards and improve efficiency.

19• Internal Credit Ratings
We have a 12-stage rating process including quantitative appraisal of data such as financial condition of theborrower and cash flows. In addition to serving as thebasis for asset self-assessments, ratings for borrower
creditworthiness are used across the full range ofcredit risk management, including assessment ofamount of credit risk, setting of interest rates for loans
and setting of decision-making powers.
• Asset Self-Assessment
In asset self-assessments to evaluate the soundnessof assets, a primary evaluation is carried out first,
followed by a decision on credit category based on acredit rating by the individual branch concerned. Thenthe head office department in charge of credit screening checks this (secondary assessment) and the
Corporate Audit Division audits the results of the asset
self-assessment and verifies the appropriateness ofprocedures. Based on these results, the Bank provides appropriate reserves and writes down problem
loans based on the assessments.
• Internal credit ratings and category of borrowers
under asset self-assessment
Borrower
ratings
1

1

2

2

3

3

4

4

5

5

6

6

Borrower category
under asset
self-assessment

Normal borrowers

7

8-1

8

8-2

9

8-3

10

9

Potentially bankrupt

11

10-1

Substantially bankrupt

12

10-2

Legally bankrupt

20

Borrowers requiring caution(Substandard loans)• Quantification of Credit Risk Management
The quantification of credit risk management refers to
the statistical forecasting of future losses (amount ofcredit risk) that can be expected from the bankruptcy
or deterioration of business at borrowers. Based on
our customer credit ratings, the Bank calculates credit
risk for each borrower in light of its health and otherfactors.
• Loan Portfolio Management
We treat loan assets in their entirety as a single portfolio and conduct credit risk management from amacro-perspective. Based on the quantification of
credit risk, we carry out periodic monitoring to determine whether or not credit risk is concentrated in
specific rating groups, sectors or corporate groups,
and analyze and evaluate credit situations by rating,region and sector.
Market Risk Management
Market risk refers to fluctuation primarily in earnings
caused by interest rate changes, foreign exchange rate
fluctuations, and changes in the demand for funds within
the financial industry. Assets such as loans and securities
and liabilities such as deposits are constantly influenced
by such changes.
We manage all assets and liabilities (deposits, loans,securities, and others) comprehensively based on ALM(asset and liability management) to manage market risks.
• Market Risk Management System
The front and back office departments are separated.
The bank has also established middle-office risk
management sections to create a system of mutual
checks and balances.
• Market Risk Control
The scale of risks involved in assets and liabilities(deposits, loans, securities) go through a multifaceted
analysis — gap analysis, basis point value (BPV),
simulation of interest fluctuation, and Value at Risk
(VaR) — in order to clarify the state of risks and conduct asset allocation effectively and implement risk
control measures.
The Bank engages in financial derivative transactions to meet the diverse needs of its customers andhedge its own risks arising from interest fluctuations.
For the risks associated with financial derivatives, inaddition to conducting daily mark-to-market valuation
and BPV analyses to accurately grasp the size andnature of the risk, we also manage risk appropriately
by establishing limits according to objectives.
Operational Risk Management
Administrative risk refers to the risk of losses arising from
irregular procedures or employee conduct in banking
operations, or inappropriate system operation or detrimental external events. The Bank divides such risk up
into five categories, administrative risk, system risk, risk totangible assets, personnel management risk, and compliance (legal) risk.
The Bank has also established a management officefor each risk category, as well as supervision of overall
operational risk measures.
• Administrative Risk
Administrative risk is the risk of damages due toimproper administration resulting in accidents or
improprieties. The Bank has taken steps to uphold
and improve the quality of its administrative operations, to ensure that customers are notinconvenienced by inappropriate administrative management and that administrative management is as
error-free and prompt as possible.
In addition to analyzing and evaluating the circumstances, causes and processes surrounding administrative mistakes, the Bank verifies the effectiveness ofcountermeasures after their introduction and repeats
them as often as necessary to ensure that the problem is resolved. We are drawing up regulations foradministrative processes, and ensuring their strict
application by all staff from executives down throughguidance and training. We are also verifying the effectiveness of internal audits and taking steps to preempt
accidents.
• System Risk
System risk is the risk of losses due to the breakdownof computer systems, erroneous computer operation,and inappropriate computer use. Measures to ensure
appropriate management of such risk is based onprotection of information assets and ensuring stable
operation of computer systems.

Tangible Assets Risk, Human Resources Risk andCompliance (Legal) Risk
Risk to tangible assets (inadequate precautions to prevent damage from earthquakes and management neglectof buildings), personnel management risk relating tosafety and hygiene at the workplace, and compliance risk
(legality of business, illegal behavior by executives andemployees of the Bank) are addressed through appropriate measures after identification and evaluation using
methods to gauge risk scale and features, and the effectof risk reduction measures is later assessed.
• Crisis Management
We have established a set of general emergency
guidelines providing specific measures for dealing withsituations such as major disasters, system failures andreputational damage, and for minimizing disruption ofrelations with business partners. We aim to strengthen
our crisis management through continuous training
and upgrading of procedures.
• Management of Customer Information
In view of the importance of information retained bybanks, we drafted our “rules regarding the management of important information,” which clarify ourfundamental policies regarding our information management system, conduct standards, functions andresponsibilities.
Furthermore, in conjunction with the full implementation of the Law Concerning the Protection of Private
Information, we have enhanced our information management system and improved security for building
access and building management in order to control
access by external parties. In addition, we have varied
the access privileges to customer information depending on the type of information and limited access to
the locations where information is stored.
Fundamentally we have banned the removal of
information from the premises and have enforced
transmission of faxes by internal lines and dataencryption in order to create a system that prevents
information from being leaked externally due to inappropriate actions or administrative errors. We plan toevaluate these measures as necessary.

21

Corresponding to Basel II capital adequacy
requirements
On March 31, 2007, the Basel II capital adequacy regulations were introduced. The new regulations have threemain pillars. The Bank is taking aggressive measures toimprove its risk management while meeting the newrequirements.
• Pillar 1
Minimum capital adequacy requirements
Under Basel II, a Japanese bank’s capital adequacymust be higher than the domestic standard of 4% and
the international standard of 8% after computation ofrisk assets (risk amount). Basel II rules increase thesophistication of credit-risk computations, and bring
operational risk under new regulations. On a consolidated basis, the Joyo Bank maintains a high capitalratio of 13.22%, having computed risk amount using
the Foundation Internal Ratings Based Approach forcredit risk and the Standardized Approach for operational risk (with approval of authorities).
• Pillar 2Internal capital adequacy management andevaluation
For significant risk including risks not covered by Pillar
1, financial institutions carry out their own assessmentof capital adequacy needed for continuation of business, which is then verified by financial authorities.
The Bank is creating a framework for independent
capital adequacy management, through a comprehensive approach to risk management.
• Pillar 3
Corresponding to market rules through disclosure
By increasing disclosure through methods such as
risk volume and calculation methods, financial institutions will achieve higher levels of market discipline andenhance risk management.
Protection of Confidential Private Information
The Bank has drawn up and made public a privacy policy
as a response to the Law Concerning the Protection ofPrivate Information, and has put in place over safeguards
for the protection and appropriate handling of personal
data.

22

• Privacy Policy
We are working to build on the mutual trust we havewith our customers, the region, and our shareholders,stress the importance of our social responsibility, andoffer high-quality financial services. For the handling of
personal data, we have established the following
policy based on our respect for all individuals, andwill put all our efforts into the protection of private
information.
Policy for Protection of Personal Confidential
Information
Compliance with laws and ordinances The Bank complies with all laws, ordinances and other regulations
regarding confidentiality of personal information.
• Appropriate Access
The Bank accesses personal information using only
appropriate and legal methods, and only when necessary for conduct of business operations. Personal
information is never gathered in an inappropriate way.
• Ban on unapproved use of personal information
The Bank only uses personal information inasmuch as
it is necessary for achievement of business objectives,and does not use such information for any otherpurpose. In addition, information that is registered withcredit-data organizations of which the Bank is a member is used where appropriate for credit-related
purposes.
• Ban on provision of personal information to third
parties
Except when prescribed by laws and ordinances, theBank does not provide personal information to third
parties without first obtaining the affected person’s
agreement. In addition, when personal information is
entrusted to an outside organization under an outsourcing arrangement, the Bank requires that protection of personal information be contractually assured,and carries out checks.
• Security management measures
The Bank has in place appropriate security management mechanisms to ensure prevention of leakage,loss or destruction of personal data, and othermeasures.

• Appropriate response to complaints
When customers have questions or complaints
regarding our handling of personal information, weinvestigate these questions or complaints and deal
with them appropriately and promptly, within a reasonable period of time.
• Continuous improvement
The Bank has compiled regulations for ensuring strictlegal compliance and protection of personal information. In addition to ensuring that these measures arefamiliar to all Bank employees and other affectedparties, the Bank continually upgrades them. Regular
audits into acquisition, use and handling of personal
information are part of our broad and thorough commitment to confidentiality.
• Privacy MarkIn October 2006, the Bank was awarded Japan
Information Processing Development Corporation(JIPDEC)’s “Privacy Mark” certification. We were thesixth bank or trust bank, and the first regional financial
institution in the North Kanto area, to gain thisaccreditation.
Based on this accreditation, the Bank meets the“requirements for management of personal information protection” (JIS Q15001) laid down by JapaneseIndustrial Standards Committee and now has in placemechanisms for appropriate protection of personal
information.
Financial Crime Prevention
We are putting every effort into preventing crimes involving accounts held at our banks, and to protect the financial assets of our customers. We require identification
when a new account is set up or for a large-amounttransaction. In addition to working to prevent inappropriate transactions, when an account is used, we will cancel
transactions when considered necessary and will work
hard toward crime prevention. We also have
implemented measures to prevent the crimes of use offorged ATM cards and online hacking.

23

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Consolidated Balance Sheets
THE JOYO BANK, LTD. and Consolidated Subsidiaries

Millions of yen
March 31,

Thousands of
U.S. dollars (Note 2)

2008

2007

2008

AssetsCash and due from banks (Note 3)
Call loans and bills purchased
Commercial paper and other debt purchased
Trading assets (Note 5)
Money held in trust
Securities (Notes 6, 8 and 25)
Loans and bills discounted (Notes 7, 9 and 11)
Foreign exchanges
Other assets
Tangible fixed assets
Intangible fixed assets
Deferred tax assets (Note 14)
Customers’ liabilities for acceptances and guarantees
Reserve for possible loan losses
Reserve for devaluation of investment securities
Total assets¥ 136,252
3,885
65,725
26,0633,281
2,301,379
4,635,216
1,037
69,531
122,929
10,50019,33028,363(38,879)(48)¥7,384,570¥ 140,313
3,541
85,237
29,1702,591
2,605,232
4,402,579
984
51,557
119,927
11,826
2,733
32,862(43,748)(74)¥7,444,736$ 1,359,942
38,786
656,007
260,145
32,75022,970,148
46,264,262
10,357
693,993
1,226,962
104,809
192,942
283,094(388,057)(486)$73,705,659

Liabilities and net assets
Liabilities:
Deposits (Notes 8 and 15)
Call money and bills sold (Note 19)
Payables under securities lending transactions (Note 8)
Trading liabilities (Note 16)
Borrowed money (Note 10)
Foreign exchanges
Bonds (Note 12)
Due to trust account
Other liabilities
Reserve for bonuses to directors and corporate auditors
Reserve for employees’ retirement benefits (Note 13)
Reserve for directors’ retirement benefits
Reserve for reimbursement of dormant deposits (Note 3)
Reserve for frequent users services (Note 3)
Reserve for losses on interest refunded
Reserve for other contingent losses
Deferred tax liabilities (Note 14)
Deferred tax liabilities for land revaluation (Notes 3 and 14)
Goodwill
Acceptances and guarantees
Total liabilities¥6,385,531
162,682
166,230
203
71,445303
15,00017
98,483
—
4,173
650
1,223
160
8
1,093
—
14,061
2,923
28,363
6,952,553¥6,309,618
108,447
203,254
89
74,550350
15,00016
120,259
50
5,286
—
—
—
5
551
38,307
14,196
3,081
32,862
6,925,926$63,734,215
1,623,741
1,659,148
2,032
713,095
3,029
149,715
171
982,965—
41,657
6,488
12,213
1,603
83
10,910—140,343
29,179283,094
69,393,689

Net assets:
Common stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity
Unrealized gains on available-for-sale securities
Deferred losses on hedging instruments, net of taxes
Land revaluation excess, net of taxes (Notes 3 and 14)
Total valuation and translation adjustments
Minority interests
Total net assets
Total liabilities and net assets

85,11358,574
255,255(21,671)377,271
43,833(1,130)10,81953,521
1,222
432,016¥7,384,570

85,11358,574
256,069(21,174)
378,581
128,938(791)
10,953
139,100
1,128
518,810¥7,444,736

849,516584,6292,547,717(216,300)
3,765,563
437,506(11,287)
107,986534,204
12,202
4,311,969$73,705,659

See accompanying notes to the consolidated financial statements.

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Consolidated Statements of Income
THE JOYO BANK, LTD. and Consolidated Subsidiaries

Millions of yen
Years ended March 31,

Income:Interest and dividend income:Interest on loans and discounts
Interest and dividends on securities
Other interest income
Fees and commissions
Trading income (Note 18)
Other operating income
Other income (Note 20)
Total income
Expenses:
Interest expenses:
Interest on deposits
Interest on borrowings and rediscounts (Note 19)
Other interest expenses
Fees and commissions
Other operating expenses
General and administrative expenses
Other expenses (Note 21)
Total expenses
Income before income taxes and minority interests
Income taxes:
Current
Deferred (Note 14)
Minority interests in net income of consolidated subsidiaries
Net income
Net income per share (in yen and dollars)

Thousands of
U.S. dollars (Note 2)

2008

2007

2008

¥ 95,888
46,6062,563
25,294474
23,14835,102
229,078¥ 85,237
47,351
1,527
26,378473
8,957
27,727
197,653$ 957,070
465,177
25,583
252,466
4,733
231,050
350,359
2,286,441

17,174
8,658
11,915
6,998
47,25871,90338,999202,909
26,1697,959
8,216
12,594
6,555
7,504
70,16730,969143,967
53,685

171,422
86,422
118,931
69,852471,689
717,672
389,253
2,025,244
261,197

13,331(1,218)131¥ 13,924¥ 17.55

16,7909,840
735¥ 26,319¥ 32.31133,064(12,160)
1,311$ 138,982$
0.17

See accompanying notes to the consolidated financial statements.

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Consolidated Statements of Changes in Net Assets
THE JOYO BANK, LTD. and Consolidated Subsidiaries

Millions of yen
Shareholders’ equity

Years ended March 31

Commonstock

Balance at March 31, 2006

¥85,113

Capital surplus

Retainedearnings¥58,581 ¥242,080

Valuation and translation adjustments

Totalshareholders’
Treasury stock
equityUnrealized
gains onavailablefor-salesecurities¥(15,052) ¥370,722 ¥107,086

Deferred
losses on
hedging
instruments,
net of taxes

¥

—

Land
revaluation
excess,net of taxes

Totalvaluation andtranslation
adjustments¥11,000 ¥118,086

Minority
interests

Total net
assets¥5,700 ¥494,509

Changes during the year:
Cash dividends(5,306)

Bonuses to directors andcorporate auditors
Net income
Purchase of treasury stock
Disposal of treasury stock(11)

Retirement of treasury stock

4

Increase in retained earnings due totransfer from land revaluation
excess(5,306)(5,306)

(50)

(50)

(50)

26,31926,31926,319(34)(13,207)(13,241)(13,241)(6,985)

6,997

—

—

87

92

92

46

46

46

Net changes of items other thanshareholders’ equity

21,851

(791)

(46)

21,013(4,572)

16,441

Total changes during the year—

(7)

13,988(6,121)

7,859

21,851

(791)

(46)

21,013(4,572)

24,300

Balance at March 31, 2007

85,11358,574

256,069(21,174)

378,581

128,938(791)

10,953

139,100

1,128

518,810

Changes during the year:
Cash dividends(5,970)(5,970)(5,970)Net income

13,924

13,924

13,924(9,482)(9,482)(9,482)

83

84

84

8,901

—

—

134

134

Purchase of treasury stock
Retirement of treasury stock0

Disposal of treasury stock(0)

Increase in retained earnings due totransfer from land revaluation
excess(8,901)134

Net changes of items other thanshareholders’ equity
Total changes during the year—

Balance at March 31, 2008

¥85,113—(85,104)

(339)

(134)

(85,578)94(85,484)(85,104)

(339)

(134)

(85,578)

94(86,793)¥(21,671) ¥377,271 ¥ 43,833¥(1,130)(813)¥58,574 ¥255,255(496)(1,309)¥10,819 ¥ 53,521¥1,222 ¥432,016

Thousands of U.S. dollars (Note 2)
Shareholders’ equity

Year ended March 31, 2008

Commonstock

Balance at March 31, 2007

$849,516

Capital surplus

Retainedearnings$584,629 $2,555,834

Valuation and translation adjustments
Unrealized
gains onavailablefor-salesecurities

Deferred
losses on
hedging
instruments,
net of taxes$(211,346) $3,778,633 $1,286,940$ (7,899)

Total
shareholders’
Treasury stock
equityLandrevaluation
excess,net of taxes

Totalvaluation andtranslation
adjustments$109,327 $1,388,368

Minority
interests

Total net
assets$11,260 $5,178,262

Changes during the year:
Cash dividends(59,595)

Net income

138,982

Purchase of treasury stock
Retirement of treasury stock2

Disposal of treasury stock(2)

Increase in retained earnings due totransfer from land revaluation
excess(88,845)(59,595)(59,595)

138,982

138,982(94,640)(94,640)(94,640)

838

841

841

88,848

—

—

1,341

1,341

1,341

Net changes of items other thanshareholders’ equity
Total changes during the year—

Balance at March 31, 2008

$849,516—(8,117)$584,629 $2,547,717

See accompanying notes to the consolidated financial statements.

26(849,434)(3,387)(1,341)(854,164)

941(853,222)(849,434)(3,387)(1,341)(854,164)

941(866,292)$(216,300) $3,765,563 $ 437,506$(11,287)(4,953)(13,070)$107,986 $ 534,204$12,202 $4,311,969

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Consolidated Statements of Cash Flows
THE JOYO BANK, LTD. and Consolidated Subsidiaries

Millions of yen
Years ended March 31,

2008

Cash flows from operating activities:¥ 26,169
Income before income taxes and minority interests
Depreciation
17,242
Impairment losses
115
Amortization of goodwill(181)
Net decrease in reserve for possible loan losses(4,868)Net (decrease) increase in reserve for devaluation of investment securities(25)
650
Net increase in reserve for directors’ retirement benefits
Net increase in reserve for reimbursement of dormant deposits
1,223
Net increase in reserve for frequent users services
160
Net increase in reserve for other contingent losses
541
Net increase in reserve for losses on interest refunded3
Net (decrease) increase in reserve for bonuses to directors and corporate auditors(50)(1,112)
Net decrease in reserve for employees’ retirement benefits
Interest and dividend income(147,803)
Interest expenses
37,749Net losses related to securities transactions
17,553
Net gains on money held in trust(9)
Foreign exchange losses (gains), net
35,953Losses on disposal of tangible fixed assets
365
Net decrease in trading assets
3,106
Net increase (decrease) in trading liabilities
114
Net increase in loans and bills discounted(232,636)
Net increase in deposits
66,891
Net increase in negotiable certificates of deposit
9,020
Net increase in borrowed money excluding subordinated borrowings
3,895
Net decrease in due from banks excluding cash equivalents
1,407
Net decrease in call loans and others
19,167
Net increase (decrease) in call money and bills sold54,235Net decrease in payables under securities lending transactions(37,023)
Net (increase) decrease in foreign exchange (assets)(53)
Net decrease in foreign exchange (liabilities)(46)
Net increase (decrease) in due to trust account1
Interest and dividends received
150,314
Interest paid
(34,773)
Others, net(19,448)
Subtotal(32,153)
Income taxes paid
(23,634)
Net cash (used in) provided by operating activities(55,787)
Cash flows from investing activities:
Purchases of securities(1,567,160)
Proceeds from sale of securities
1,388,788
Proceeds from redemption of securities
273,855
Increase in money held in trust(1,500)Purchases of tangible fixed assets(18,669)
Proceeds from sales of tangible fixed assets
217
Purchases of intangible fixed assets—
Net cash provided by (used in) investing activities
75,531
Cash flows from financing activities:
Proceeds from issuance of subordinated debt—
Repayment of subordinated debt
(7,000)Cash dividends paid
(5,970)Cash dividends paid to minority interests(0)
Purchases of treasury stock(9,482)
Proceeds from sales of treasury stock84
Net cash used in financing activities(22,368)
Translation adjustment for cash and cash equivalents(29)
Net decrease in cash and cash equivalents(2,653)
Cash and cash equivalents at beginning of year
116,379
Cash and cash equivalents at end of year (Note 3)¥ 113,725

Thousands of
U.S. dollars (Note 2)

2007

2008

¥ 53,685
16,30572(79)(11,063)
0
—
—
—
138
5
50
(1,354)(138,374)
28,7713,863(1)(27,982)
1,295
171
(28)
(10,913)137,168
6,441
2,210
12,96818,417(48,671)(77,505)100(2,185)(1)
137,452(26,792)
19,23293,395(1,298)92,097$

261,197
172,097
1,148(1,815)(48,593)
(254)
6,488
12,213
1,603
5,409
30
(499)
(11,103)(1,475,230)
376,775
175,199(98)
358,8543,650
31,0101,143(2,321,953)
667,648
90,03638,876
14,046
191,307541,321(369,537)
(535)
(468)
11
1,500,297(347,080)(194,120)(320,921)(235,892)(556,814)(880,914)
523,727
316,141—(16,513)1,194(2,325)(58,690)(15,641,883)
13,861,549
2,733,363(14,971)(186,345)
2,173—
753,886

10,000(25,000)(5,306)(0)(14,509)92(34,724)
3(1,314)
117,694¥116,379—(69,867)(59,595)(0)(94,640)
841(223,263)(298)(26,489)
1,161,590$ 1,135,100

See accompanying notes to the consolidated financial statements.

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Notes to the Consolidated Financial Statements
THE JOYO BANK, LTD. and Consolidated Subsidiaries

1. Basis of Preparation
The accompanying consolidated financial statements of The Joyo
Bank, Ltd. (the “Bank”) and consolidated subsidiaries areprepared on the basis of accounting principles generally acceptedin Japan, which are different in certain respects as to theapplication and disclosure requirements of International Financial
Reporting Standards, and are compiled from the consolidated
financial statements prepared by the Bank as required by the
Financial Instruments and Exchange Act of Japan.
For the convenience of readers outside Japan, certain items
presented in the original consolidated financial statements havebeen reclassified and rearranged.
In addition, the notes to the consolidated financial statements
include information which is not required under accounting
principles generally accepted in Japan but is presented herein as
additional information.

2. Japanese Yen and U.S. Dollar Amounts
As permitted by the Financial Instruments and Exchange Act ofJapan, amounts of less than one million yen have been rounded
off. As a result, the totals shown in the accompanying consolidated
financial statements (both in yen and U.S. dollars) do notnecessarily agree with the sums of the individual amounts. Solely
for the convenience of the reader, the U.S. dollar amounts
represent a translation of the Japanese yen amounts at ¥100.19 =US$1.00, the exchange rate prevailing on March 31, 2008.

3. Significant Accounting Policies(a) Consolidation
The accompanying consolidated financial statements include theaccounts of the Bank and 10 significant subsidiaries. In the fiscal
year ended March 31, 2008, The Joyo Securities Co., Ltd. wasestablished and included in the scope of consolidation.
Joyo No. 1 Investment Limited Partnership was excluded fromthe scope of consolidation because its assets, ordinary income,net income and retained earnings have no material impact on the
Bank’s financial position and results of operations.
All significant intercompany transactions have been eliminatedin consolidation. Assets and liabilities held by consolidated
subsidiaries are stated at fair value at a time of acquisition.
(b) Translation of foreign currencies
Foreign currency-denominated assets and liabilities are translated
into Japanese yen at the rates prevailing at the balance sheet date.
No foreign currency-denominated assets and liabilities were heldby the consolidated subsidiaries.
(c) Transactions for trading purposes
Transactions for “trading purposes” (seeking to capture gains
arising from short-term changes in interest rates, currency
exchange rates or market prices of securities and other marketrelated indices or from arbitrage between markets) are valued atmarket or fair value, and have been included in trading assets andtrading liabilities on a trade date basis. Gain or loss on such tradingtransactions are reflected as trading income or trading expenses in
the consolidated statements of income.
Among the trading assets and liabilities, securities and monetaryclaims are carried at market value as of the balance sheet date.
Derivatives including swaps, futures, and options are valued
assuming settlement on the balance sheet date.
28

Trading income or trading expenses include interest received or
paid during the fiscal year. The year-on-year valuation differences of
securities and monetary claims are also recorded in the abovementioned accounts. As for the derivatives, assuming that thesettlement will be made in cash, the year-on-year valuationdifferences are also recorded in the above-mentioned accounts.
No consolidated subsidiaries have engaged in trading activities
or other transactions in order to generate profit from short-term
price fluctuations.
(d) Securities
Securities other than trading securities have been accounted
for by the following methods:
Marketable debt securities held to maturity are stated atamortized cost by the moving-average cost method. Availablefor-sale securities of which market prices are available arestated at fair value based on the market prices, etc. at the fiscal
year end, whereas those of which fair value is not available arestated at cost or amortized cost by the moving-average cost
method.
Unrealized gain or loss on available-for-sale securities (net ofthe related tax effect) has been reported as a component of net
assets.
Investments in securities held in money trusts whose
investment is operated solely by the Bank on behalf of thetrustors, are stated at fair value.
(e) Derivatives
Derivatives positions held by the Bank (not includingtransactions for trading purposes) are stated at fair value.
(f) Depreciation of tangible fixed assets
Depreciation of tangible fixed assets held by the Bank iscalculated by the declining-balance method, except for buildings
acquired on or after April 1, 1998 of which depreciation is
calculated by the straight-line method. The estimated useful lives
are as follows:
Buildings: 6~50 years
Equipment: 3~20 years
Depreciation of tangible fixed assets held by the consolidated
subsidiaries is calculated principally by the declining-balancemethod, based on the respective estimated useful lives of theassets.
Depreciation of the leased assets of a consolidated subsidiaryis calculated by the straight-line method over the lease terms.
Depreciation of intangible fixed assets is calculated using thestraight-line method. Software for internal use is depreciatedusing the straight-line method over its estimated useful life (mainly
5 years).
(Change to accounting policy)
In accordance with the amendment of the income tax laws in
fiscal 2007, fixed tangible assets acquired on or after April 1,
2007 are depreciated using the new depreciation method after
amendment. As a result of this change, income before income
taxes was lower by ¥59 million than would have been under theprevious method.
(Additional information)
From the fiscal year ended March 31, 2008, residual values oftangible fixed assets acquired before April 1, 2007 aredepreciated over five years using the straight line methodbeginning with the year after the fiscal year in which the allowable
limit for depreciation is reached. Due to this change, income
before income taxes declined by ¥227 million.
(g) Reserve for possible loan losses
The reserve for possible loan losses of the Bank is provided as
detailed below, in accordance with the internal rules for providing
reserves for possible loan losses:
For claims to debtors who are legally bankrupt (as a result ofbankruptcy, special liquidation, etc.) or who are substantiallybankrupt, a reserve is provided based on the amount of theclaims, net of the amounts expected to be collected by thedisposal of collateral or as a result of the execution of guarantees.
For claims to debtors who are not currently bankrupt, but arelikely to become bankrupt, a reserve is provided based on theamount considered necessary based on an overall solvency
assessment of the amount of claims net of the amounts expected
to be collected by the disposal of collateral or as a result of theexecution of guarantees.
For other claims, a reserve is provided based on the Bank’s
historical loan-loss experience.
All claims are assessed by the Business Section (at thebranches and the related head office divisions) based on the
Bank’s internal rules for the self-assessment of asset quality. The
Corporate Audit Department, which is independent of theBusiness Section, subsequently conducts audits of suchassessments, and a reserve is provided based on the audit results.
The reserves of the consolidated subsidiaries are provided forgeneral claims at an amount based on the actual historical rate ofloan losses and for specific claims (from potentially bankrupt
customers, etc.) at an estimate of the amounts deemed
uncollectible based on the respective assessments.
For collateralized or guaranteed claims from debtors who arelegally or substantially bankrupt, the amounts of the claims
deemed uncollectible in excess of the estimated value of thecollateral or guarantees have been written off in aggregate
amounts of ¥39,953 million and ¥42,761 million as of March 31,
2008 and 2007, respectively.
(h) Reserve for devaluation of investment securities
A reserve for the devaluation of investment securities is provided
at the amount deemed necessary to cover estimated possible
losses on investments which the Bank and its consolidated
subsidiaries may incur in the future.
(i) Reserve for employees’ retirement benefits
Reserve for retirement benefits of the Bank and its subsidiaries isprovided for the amount deemed necessary, based on estimatedpension benefits obligations and pension plan assets at the fiscal
year end, to cover required retirement benefits for eligible
employees.
Prior service cost is deferred and amortized using the straightline method over certain years (10 years) within the averageremaining service period of the eligible employees.
Unrealized actuarial losses are deferred and amortized using
the straight-line method over a ten-year period commencing withthe following year, which is shorter than the average remaining
service period of the eligible employees.
(j) Reserve directors’ retirement benefits

Reserve is made for the payments of retirement allowances todirectors and auditors of the Bank based on an estimate of theamount attributable for the term.
(Change to accounting method)
Previously, the Bank charged to income the expenses required for
payments of allowances upon the retirement of directors andcorporate auditors, when they were incurred. However, effectivefrom the fiscal year, the Bank has made a provision for lump-sum
payments of retirement allowances pursuant to the new
regulations for accounting practices on the payment of retirement
allowances for directors and corporate auditors (BusinessAccounting Standard No. 4, issued on November 29, 2006).
The publication of the Treatment of Accounting and Auditing
Concerning Allowance under the Special Tax Law and Retirement
Allowances for Directors and Auditors (JICPA Auditing andAssurance Report No. 42 issued on April 13, 2007) caused the
Bank to adopt the method for provision in the amount deemednecessary at the fiscal year end. As a result of this change,
general and administrative expenses were lower by ¥42 million,
other expenses higher by ¥692 million and income before income
taxes lower by ¥650 million, than would have been under theprevious method.
(k) Reserve for reimbursement of dormant deposits
Reserve for reimbursement of dormant deposits which were
derecognized as liabilities under certain conditions is provided forpossible losses on the future claims of withdrawal based on thehistorical repayment experience.
(Change in accounting method)
Formerly, deposits which were derecognized as liabilities were
expensed when they were actually reimbursed. However, from thefiscal year ended March 31, 2008, such reserve is provided in theestimated amount as described above in accordance with the“Treatment for Auditing of Reserve under Special Taxation
Measures Law, Reserve under Special Laws and Reserve for
Retirement Benefits to Directors and Corporate Auditors” (JICPA
Audit and Assurance Practice Committee Report No. 42) of April
13, 2007.
As a result of this change, ordinary expenses and extraordinary
losses respectively increased by ¥128 million and ¥1,094 million
compared with the level under the previous method, while
ordinary income and income before income taxes respectivery
decreased by ¥128 million and ¥1,223 million.
(l) Reserve for frequent users services
Reserve for frequent users services, which is provided to meet
future use of credits granted to credit card customers, is recordedin the amount deemed necessary based on the estimated future
use of unused credits. This program applies to cards issued by
the Bank and one of its subsidiaries.
(Additional information)
Loyalty award expenses from credit cards issued by the Bank andone of its consolidated subsidiaries were previously recognized at
the time of payment. But from the reporting term, a reserve has
been set up to meet expenses expected to arise in future basedon reasonable estimates of likely future use of the programme.
As a result of this change, ordinary expenses and extraordinary
losses respectively increased by ¥66 million and ¥94 million
compared with the previous method, while ordinary profit and29

income before income taxes were respectively ¥66 million and¥160 million lower.
(m) Reserve for losses on interest refunded
One consolidated subsidiary provides a provision for losses oninterest refunded in an amount deemed necessary based on
estimated amounts to be refunded, taking into account historical
records of interest refunded on the portion of loans whose interest
rates exceeded the maximum interest rate stipulated by theInterest Limitation Law.
(n) Reserve for other contingent losses
The Bank makes reserve for possible losses on loans guaranteedby the credit guarantee corporations in an amount deemednecessary based on estimated losses in the future, calculatedusing historical default rates after exclusion of contingent losses
covered by reserves.
(Additional information)
In line with the introduction of the shared responsibility system for
new financing with credit guarantee corporation guarantees, as of
October 1, 2007, estimated amounts of future financial payments
in preparation for payment in subrogation are provided in an
amount deemed necessary beginning with the fiscal 2007, under
the reserve for other contingent losses.
As a result of this change, ordinary profit and income before
income taxes both declined by ¥182 million compared with under
the former method.
(o) Goodwill
Goodwill is amortized using straight-line method over 20 years.
(p) Land revaluation excess
In accordance with the Law concerning the Revaluation of Land,
the Bank revalued the land held for its operations on March 31,
1998. The net unrealized gain is presented in net assets net of theapplicable income taxes as land revaluation excess, net of taxes.
The difference between the revalued carrying amount and thefair value of premises revalued pursuant to the Article 10 of the
Law were ¥25,494 million and ¥26,454 million as of March 31,
2008 and 2007, respectively.
(q) Leases
Finance leases other than those which transfer the ownership ofthe leased property to the Bank and its consolidated subsidiaries
are accounted for as operating leases.
(r) Hedging
Hedging against interest rate changes
The deferred method of hedge accounting is applied totransactions to hedge against the interest rate risks associatedwith monetary claims and debt in accordance with the regulations
set out in the “Accounting and Auditing Treatment of AccountingStandards for Financial Instruments in the Banking Industry”(JICPA Industry Audit Committee Report No. 24).
The Bank assesses the effectiveness of such hedges in
offsetting movement of the fair value with the changes in interest
rates, by classifying the hedged items (loans) and the hedging
instruments (interest swaps) by their maturity. As to cash flow
hedges, the Bank assesses the effectiveness of such hedges infixing cash flows by verifying the correlation between the hedged
items and the hedging instruments.
In addition, a portion of deferred hedge losses and gains, which30

was previously under the “macro hedge,” i.e., the management ofinterest rate risk arising from large-volume transactions in loans,
deposits and other interest-earning assets, and interest-bearing
liabilities as a whole using derivatives, in accordance with theregulations set out in the “Accounting and Auditing Treatment ofPreliminary Accounting Standards for Financial Instruments in the
Banking Industry” (JICPA Industry Audit Committee Report No.
15) is no longer subject to hedge accounting effective the year
ended March 31, 2005. The deferred hedge losses and gains
related to hedging instruments to which the Bank discontinued
the application of hedge accounting, or applied fair value hedge
accounting as a result of the change mentioned above, areperiodically charged to interest expenses or interest income
effective fiscal 2003 by maturity and notional principal of eachhedge instrument.
Deferred hedge losses under macro hedge stood at ¥959
million and ¥2,292 million at March 31, 2008 and 2007, respectively.
Hedging against foreign exchange fluctuation risk
The deferred method of hedge accounting is applied totransactions to hedge against the foreign exchange fluctuation
risks associated with monetary claims and liabilities denominatedin foreign currencies, in accordance with the regulations set out inthe “Accounting and Auditing Treatment of Accounting Standards
for Foreign Currency Transactions in the Banking Industry” (JICPA
Industry Audit Committee Report No. 25).
To minimize foreign exchange fluctuation risk on monetaryclaims and liabilities, the Bank engages in currency swaps, foreignexchange swaps, and similar transactions. The effectiveness ofthese transactions in the hedging of the foreign exchange risks ofmonetary claims and liabilities denominated in foreign currencies
is assessed through comparison of the foreign currency positionof the hedged monetary claims and liabilities, with that of thehedging instruments.
(s) Consumption tax
Consumption tax is excluded from transactions reported by the
Bank and its consolidated subsidiaries. However, non-deductible
consumption tax on tangible fixed assets is charged to income as
incurred.
(t) Earnings per share
The computation of earnings per share of common stock isbased on the weighted average number of shares outstanding
during each year.
(u) Statements of cash flows
Cash and cash equivalents in the statements of cash flows
represent cash and due from banks in the consolidated balance
sheets, excluding deposits with banks other than the Bank ofJapan as well as the time deposits of certain consolidated
subsidiaries.
Millions of yen
March 31,

Cash and due from banks
Deposits with banks other thanthe Bank of Japan
Cash and cash equivalents

2008

2007

¥136,252¥140,313(22,526)(23,934)¥113,725 ¥116,379

(Accounting policy for financial instruments)
The partial amendments of ASBJ Accounting Standard No. 10“Accounting Standard for Financial Instruments” and JICPA
Accounting Committee Report No. 14, “Practical Guidelines for
Accounting for Financial Instruments” (June 15 and July 4, 2007)
take effect in the year after implementation of the Financial
Instrument and Exchange Act with regard to securities. The Bank
adopted the revised “Accounting Standard” and “Practical
Guidelines” starting from the fiscal year under review.

as of March 31, 2008 and 2007, respectively.
One consolidated subsidiary had pledged its lease receivables
amounting to ¥6,048 million and ¥6,274 million as collateral forborrowed money of ¥4,695 million and ¥4,700 million as of March
31, 2008 and 2007, respectively.
Lease deposits as of March 31, 2008 and 2007 of ¥1,452
million and ¥1,462 million, respectively, have been included inother assets. Initial margins on futures transactions as of March
31, 2008 and 2007 of ¥160 million and ¥160 million, respectively,
have been included in other assets.

5. Trading Assets

9. Commitments and Contingent Liabilities

4. Application of New Accounting Standards

Millions of yen
March 31,

Trading securities
Trading securities-related financial derivatives
Trading-related financial derivatives
Other trading assets
Total

2008

2007

¥ 2,685—397
22,981¥26,063¥ 3,9140265
24,989¥29,170

6. Securities
Millions of yen
March 31,

Japanese government bonds
Japanese local government bonds
Corporate bonds
Corporate stocks
Other securities
Total

2008

2007

¥ 877,653 ¥ 761,036
375,864
320,063
393,882
402,016
216,013
318,757
437,964
803,359¥2,301,379 ¥2,605,232

Notes: 1. Securities include ¥24 million and ¥65 million of investments in nonconsolidated
subsidiaries as of March 31, 2008 and 2007, respectively.
2. Corporate bonds include ¥22,460 million and ¥21,702 million of guarantee
obligations for privately placed bonds (under article 2-3 of the Financial
Instruments and Exchange Act) as of March 31, 2008 and 2007, respectively.

7. Bills Discounted
Bills discounted are accounted for as financial transactions inaccordance with JICPA Industry Audit Committee Report No. 24.
The Bank has the rights to sell or pledge bank acceptancesbought, commercial bills discounted, documentary bills andforeign exchanges bought without restrictions. The face value atMarch 31, 2008 and 2007 totaled ¥42,959 million and ¥51,217
million, respectively.

8. Pledged Assets
Assets pledged as collateral at March 31, 2008 and 2007 were as
follows:
Millions of yen
March 31,

Pledged assets:
Securities
Liabilities covered by pledged assets:
Deposits
Payables under securities
lending transactions

2008

2007

¥359,337¥340,120

31,06524,413

166,230

203,254

Overdraft facilities and line-of-credit contracts are agreements
under which, subject to compliance with the contractual
conditions, the Bank or consolidated subsidiaries pledge toprovide clients with funds up to a fixed limit upon submission of aloan application to the Bank. The unused amount related to such
facilities/contracts stood at ¥1,386,616 million and ¥1,403,626
million at March 31, 2008 and 2007, respectively. Of this amount,facilities/contracts which expires within one year or which areunconditionally cancelable at any time, totaled ¥1,292,252 millionand ¥1,302,674 million at March 31, 2008 and 2007, respectively.
Most of these agreements will expire without the clients’ having
utilized the financial resources available to them, and the amountof the nonexecuted financing will not necessarily impact on the
Bank or its consolidated subsidiaries’ future cash flows. Most ofthese facilities/contracts contain a clause which allows the Bankor its consolidated subsidiaries to reject a loan application or to
reduce the upper limit requested in view of changing financial
conditions, credit maintenance and other reasonable concerns.
When necessary, the Bank will demand collateral such as realestate or marketable securities at the date on which an
agreement is entered into. In addition, after facilities/contracts areset forth the Bank will regularly assess the business status of theclients, based on predetermined internal procedures and, when
prudent, will revise the agreements or reformulate their policies tomaintain creditworthiness.

10. Borrowed Money
Borrowed money at March 31, 2008 and 2007 included
subordinated debt of ¥35,000 million and ¥42,000 million,
respectively.
Borrowed money at March 2008 and 2007 consisted of thefollowing:
Description

Bills rediscounted
Other borrowings

Millions of yen
2008
2007
¥

—
71,445¥—74,550%
Averageinterest rate

Due

—
1.66

—
April 2008 February 2018

Notes: 1. Average interest rate represents the weight average interest rate based on
the balances and rates at respective year-end.
2. The repayment schedule within five years on borrowed money at March
31, 2008 was as follows:2008

In addition to the above, securities amounting to ¥108,050 millionand ¥67,575 million at book value were pledged as collateral inconnection with exchange settlements and futures transactions

Within 1 year
After 1year through 2 years
After 2 years through 3 years
After 3 years through 4 years
After 4 years through 5 years¥ 4,3101,260
20,880615
230

31

11. Non-Performing Loans
In accordance with the disclosure requirements under the Rules
for Bank Accounting in Japan, the balance of loans and bills
discounted at March 31, 2008 and 2007 included the following
non-performing loans:
Millions of yen
March 31,2008

Loans in bankruptcy and dishonored bills
Delinquent loans
Loans past due with respect to interest
payments for more than 3 months
Restructured loans
Total

¥

2007

7,453
97,107¥

1,436
51,324¥157,321

2,196
49,714¥147,915

Bonds at March 31, 2008 and 2007 consisted of the following:

The Joyo
2nd
May 22,
Bank, Unsecured 2000
Ltd.
Straight
Bonds
Total

Millions of yen%
Collateral
2008
2007 Interest rate
¥10,000 ¥10,000
2.02
—

5,000

5,000

¥15,000¥15,000

2.64

—

Due
May 24,2010

May 22,
2020

The redemption schedule within five years on bonds at March 31,
2008 was as follows:
2008
Within 1 year
After 1year through 2 years
After 2 years through 3 years
After 3 years through 4 years
After 4 years through 5 years¥——
10,000——13. Employees’ Retirement Benefits(a) Outline of current retirement benefit system
The Bank and its consolidated subsidiaries have adopted defined
employees’ retirement benefit plans, i.e., the employees’ welfare
pension fund supplemented by the employees’ public pension
system and lump-sum retirement benefits. In addition, extra
benefits may be paid on a case-by-case basis. The Bank has
established an employees’ retirement benefit trust. As of the endof March 31, 2008, the Bank and 10 consolidated subsidiaries
32

Retirement benefit obligation
Fair value of plan assets
Funded status
Unrecognized net retirement benefit
obligation at transition
Unrecognized actuarial gain
Unrecognized prior service cost
Net retirement benefit obligation
Prepaid pension costReserve for employees’ retirement benefits

2008

2007

¥(61,331)
54,168(7,162)¥(60,673)
65,031
4,358

—
8,787
664
2,288
6,462
¥ (4,173)—(5,325)
762
(204)
5,081
¥ (5,286)

Notes: 1. The above amounts do not include any extra benefits.
2. The consolidated subsidiaries have adopted a simplified method for the
calculation of their retirement benefit obligation.

(c) Cost for retirement benefits of the Bank and its consolidated
subsidiaries included the following components for the years
ended March 31, 2008 and 2007:
Millions of yen
Years ended March 31,

12. Bonds

1st
May 24,The JoyoBank, Unsecured
2000
Ltd.
Straight
Bonds

Millions of yen
March 31,

2. The above amounts are stated before the deduction of the reserve forpossible loan losses.

Description Date of
issue(b) The following tables set forth the changes in the net retirement
benefit obligation, the plan assets and the funded status of the
Bank and its consolidated subsidiaries at March 31, 2008 and
2007:

5,946
90,059Notes: 1. Loans in bankruptcy and dishonored bills refers to loans (excluding
charged-off amounts) stipulated in Article 96, Paragraph 1, Item 3 (a) to (e)or Item 4 of the Enforcement Regulation to Corporation Tax Law (1965
Enforcement Regulation No. 97) to which accrued interest receivables are
not recognized as accruals for accounting purposes as no repayment ofprincipal or payment of interest have been made for a considerable period.
Delinquent loans refers to loans with respect to which accrued interest
receivables are not recognized as accruals for accounting purposes,
excluding loans falling into the category of restructured loans.
Loans past due with respect to interest payments for more than 3 months
refers to loans with respect to which repayment of principal or payment ofinterest are past due three months or more, excluding loans falling into thecategories of loans in bankruptcy and dishonored bills or delinquent loans.
Restructured loans refers to loans to borrowers to whom financial support isgiven in the form of reduction in interest, waiver of repayment of the principal or payment of interest, or debt forgiveness with the aim of corporate
rehabilitation, excluding loans falling into loan categories mentioned above.

Issuerhave lump-sum severance payment systems for employees. The
Bank and its consolidated subsidiaries have jointly established afund under a defined benefit pension plan.

2008

Service cost
¥1,913
Interest cost
1,036
Expected return on plan assets(878)
Amortization:
Amortization of prior service cost98
Amortization of unrecognized actuarial (gain) loss
(1)
Total retirement benefit cost
¥2,1682007¥1,899
1,012
(782)
98
(322)
¥1,904

Note: Retirement benefit cost of consolidated subsidiaries which is calculated by asimplified method has been included in “service cost” referred to above.

(d) The assumptions used in accounting for the defined benefit
plans for the years ended March 31, 2008 and 2007 were as
follows:
Years ended March 31,

2008

Discount rate
Expected rate of return on plan assets
Periodical allocation of estimatedretirement benefits
Amortization period of prior service cost
Amortization period of actuarial gain/loss

2.0%
3.5%

2007

2.0%
3.5%

Straight-line method
10 years
10 years
10 years
10 years

14. Deferred Tax Assets
Millions of yen
March 31,

Deferred tax assets:
Reserve for possible loan losses
Reserve for retirement benefits
Devaluation of securities
Depreciation
Reserve for employee bonuses
Net operating loss carry forwards
OthersValuation allowance
Total
Deferred tax liabilities:
Unrealized gain on available-for-sale securities
Retirement benefit trust
Reversal of reserve for possible loan losses
after elimination of intercompany balances
OthersTotal
Net deferred tax assets (liabilities)

2008

2007

¥27,767
8,497
9,486
4,041
1,186
496
13,101(8,809)¥55,767¥29,122
9,502
4,746
—
—
829
16,728(6,400)¥54,528¥(26,427)(9,495)¥(80,015)(9,495)(16)(497)(36,437)¥ 19,330

(18)
(573)
(90,103)¥(35,574)

The effective tax rate reflected in the consolidated statements ofincome for the year ended March 31, 2008 and 2007 differs from thestatutory tax rate for the following reasons:
2008
2007
Statutory tax rate
40.32%
40.32%
Valuation allowances
9.21%
8.21%
Dividends exempted forincome tax purposes(3.45)%
—%
Other
0.21%
1.07%
Effective tax rate
46.29%
49.60%

15. Deposits
Millions of yen
March 31,

Current deposits
Time deposits
Negotiable certificates of deposit
Others
Total

2008

2007

¥3,548,007 ¥3,583,922
2,646,328 2,561,042
45,411
36,390145,783
128,263¥6,385,531 ¥6,309,618

16. Trading Liabilities
Millions of yen
March 31,

2008

2007

Trading securities–related financial derivatives
Trading-related financial derivatives
Total

¥ 5
198
¥203

¥—
89
¥89

17. Shareholders’ Equity
In accordance with the Banking Law of Japan, the Bank has provided
a legal reserve by appropriation of retained earnings, which is included
in retained earnings. The Banking Law of Japan provides that an
amount equivalent to at least 20% of the amount to be disbursed as
distributions of earnings be appropriated to the legal reserve until the
total of such reserve and the capital surplus equals 100% of thecommon stock.
The new Corporation Law of Japan (the “Law”), which superseded

most of the provisions of the Commercial Code of Japan, went into
effect on May 1, 2006. The Law provides that an amount equal to 10%of the amount to be disbursed as distributions of capital surplus (otherthan the capital reserve) and retained earnings (other than the legal
reserve) be transferred to the capital reserve and the legal reserve,
respectively, until the sum of the capital reserve and the legal reserve
equals 25% of the capital stock account. Such distributions can bemade at any time by resolution of the shareholders or by the Board of
Directors if certain conditions are met.
Under the Law, upon the issuance and sale of new shares ofcommon stock, the entire amount of the proceeds is required to beaccounted for as common stock, although a company may, byresolution of the Board of Directors, account for an amount notexceeding one-half of the proceeds of the sale of new shares as capitalsurplus.

18. Trading Income
Millions of yen
Years ended March 31,

2008

2007

Revenue from trading securities
Revenue from trading-related financial derivatives
Other trading revenue
Total

¥187
116
170
¥474

¥305
55
112
¥473

19. Interest on Borrowings and Rediscounts
Millions of yen
Years ended March 31,

Call money and bills sold
Securities lending transactions
Borrowings
Total

2008

2007

¥6,096
1,597
964¥8,658¥4,6832,390
1,142¥8,216

20. Other Income
Millions of yen
Years ended March 31,

Other ordinary income
Gain on disposal of tangible fixed assets
Gains on collection of loan assets
Reversal of reserve for possible loan losses
Total

2008

2007

¥32,8168
2,277—¥35,102¥22,099
248
3,695
1,684
¥27,727

21. Other Expenses
Millions of yen
Years ended March 31,

2008

Losses on disposal of tangible fixed assets¥ 373
Losses on impairment
115
Write-offs of claims
12,143
Write down of equity shares
322
Losses on sale of claims
206
Provision for reserve for directors’ retirement benefits
692
Provision for reserve for repayment for prescribed deposits 1,094
Provision for reserve for frequent users services
94
Others23,960Total¥38,9992007¥ 1,543
72
7,460
199
499
—
—
—
21,196¥30,969

Impairment losses were recorded in an aggregate amountdeemed irrecoverable on idle assets, primarily located in Ibaraki
Prefecture.
33

Impairment losses recognized on a consolidated basis for the
fiscal year ended March 31, 2008 and 2007 can be broken down
into the two categories of losses on land holdings in the amountof ¥113 million and ¥70 million, respectively, and losses onbuildings in the amount of ¥1 million and ¥2 million, respectively.
The recoverable amounts used for the measurement of such
impairment losses are net sales prices, which are calculated on
the basis of appraisal values after deduction of the estimated costof disposal.

22. Accumulated Depreciation of Tangible Fixed Assets
Accumulated depreciation on tangible fixed assets, recognized forthe fiscal year ended March 31, 2008 and 2007, amounted to¥147,029 million and ¥144,378 million, respectively.

23. Segment Information(a) Business segment information
Segment information by type of business for the years ended
March 31, 2008 and 2007 are summarized as follows:
Millions of yen
Year ended
March 31, 2008

Banking
operations

Leasing

Other

Total

Eliminations

Consolidated

Ordinary income:Ordinary income
from external¥ 204,949 ¥17,250 ¥ 4,593 ¥ 226,793 ¥— ¥ 226,793
customers
Ordinary income
from internaltransactions
551
1,961 5,737
8,251(8,251)—
Total
205,500 19,212 10,330
235,044(8,251)
226,793
Ordinary expenses
180,678 18,787 9,471
208,938(8,399)200,538
Ordinary income, net ¥ 24,822 ¥ 424 ¥ 858 ¥ 26,105 ¥148 ¥ 26,254
Assets¥7,374,092 ¥44,437 ¥36,002 ¥7,454,532 ¥(69,962) ¥7,384,570
Depreciation
4,187 12,904
151
17,243(0)
17,242Losses on impairment
115
—
—
115
—
115
Capital expenditures
6,464 12,762
553
19,779—19,779Millions of yen
Year ended
March 31, 2007

Banking
operations

Leasing

Other

Total

Eliminations Consolidated

Ordinary income:Ordinary income
from externalcustomers¥ 169,547 ¥17,671 ¥ 4,805 ¥ 192,025 ¥— ¥ 192,025
Ordinary income
from internaltransactions
622
2,167 6,871
9,662(9,662)—
Total
170,170 19,839 11,677
201,687(9,662)
192,025
Ordinary expenses
122,518 19,260 9,878
151,657(9,381)
142,276
Ordinary income, net ¥ 47,652 ¥ 578 ¥ 1,798 ¥ 50,029 ¥ (280) ¥ 49,748
Assets¥7,433,633 ¥45,676 ¥32,135 ¥7,511,444 ¥(66,708) ¥7,444,736
Depreciation
2,872 13,289
143
16,305(0)
16,305Losses on impairment
72
—
—
72
—
72
Capital expenditures
5,746 11,295
203
17,245—
17,245
Notes: 1. Classification is made according to nature of businesses of consolidated entities.
In addition, “other” includes guarantee business.
2. Instead of the net sales and the operating income of a non-financial company,
ordinary income in gross and net amount is indicated.
3. In accordance with the amendment of the income tax laws in 2007, tangible fixed assets acquired on or after April 1, 2007 are depreciated basedon the new depreciation method under the amended laws. Due to thischange, in ordinary expenses, banking operations and leasing operations
were respectively higher than would have been under the previous methodby ¥57 million and ¥0 million, and other operations were ¥2 million higher.
These changes correspondingly reduced ordinary income.

34

4. From the fiscal year ended March 31, 2008, residual values of tangible
fixed assets acquired before April 1, 2007 are depreciated over five years
using the straight line method beginning with the period after the fiscal year
in which the allowable limit for depreciation is reached. Due to this change,in ordinary expenses, banking operations, leasing operations and otheroperations were respectively higher than under the previous method by¥213 million, ¥0 million and ¥14 million, causing ordinary income to decline
correspondingly.
5. Previously, the Bank charged to income the expenses required for payments of allowances upon the retirement of directors and corporate
auditors, when they were incurred. However, effective from the fiscal year,
the Bank has made a provision for lump-sum payments of retirement
allowances pursuant to the new regulations for accounting practices on
the payment of retirement allowances for directors and corporate auditors(Business Accounting Standard No. 4, issued on November 29, 2006). The
publication of the Treatment of Accounting and Auditing Concerning
Allowance under the Special Tax Law and Retirement Allowances for
Directors and Auditors (JICPA Auditing and Assurance Report No. 42
issued on April 13, 2007) caused the Bank to adopt the method for provision in the amount deemed necessary at the fiscal year end. As a result of
these changes, in ordinary expenses, banking operations, leasing operations and other operations were respectively ¥31 million, ¥1 million and ¥9
million lower than under the previous method, meaning that ordinary
income rose correspondingly.
6. Formerly, deposits which were derecognized as liabilities were expensed
when they were actually reimbursed. However, from the fiscal year ended
March 31, 2008, such reserve is provided in the estimated amount as
described above in accordance with the “Treatment for Auditing ofReserve under Special Taxation Measures Law, Reserve under Special
Laws and Reserve for Retirement Benefits to Directors and Corporate
Auditors” (JICPA Audit and Assurance Practice Committee Report No. 42)
of April 13, 2007. As a result of this change, in ordinary expenses, banking
operations were ¥128 million higher than under the previous method,causing ordinary income to fall by a corresponding sum.
7. Loyalty award expenses from credit cards issued by the Bank and one ofits consolidated subsidiaries were previously recognized at the time of
payment. But from the reporting term, a reserve has been set up to meet
expenses expected to arise in future based on reasonable estimates oflikely future use of the programme. As a result of this change, in ordinary
expenses, banking operations and other operations were respectively ¥38
million and ¥28 million higher than under the previous method, causing
ordinary income to decline correspondingly.
8. In line with the introduction of the shared responsibility system for new
financing with credit guarantee corporation guarantees, as of October 1,
2007, estimated amounts of future financial payments in preparation for
payment in subrogation are provided in an amount deemed necessary
beginning with the fiscal 2007, under the reserve for other contingent
losses. As a result of these changes, in operating expenses, banking
operations increased by ¥182 million compared with the previous method,causing operating income, net to decline by the same amount.

(b) Geographic segment information
Segment information by geographic area has not been disclosed
since over 90% of the total consolidated ordinary income andassets of the Bank and consolidated subsidiaries reside in Japan.
(c) Ordinary income from foreign operations
Segment information related to the Bank’s foreign operations forthe years ended March 31, 2008 and 2007 are as follows:
Millions of yen
Years ended March 31,

Ordinary income from foreign operations (A)Ordinary income (B)(A)/(B)

2008

2007

¥ 29,527
226,79313.01%¥ 29,295
192,025
15.25%

Note: Ordinary income arising from foreign operations refers to ordinary income fromforeign currency-denominated transactions and yen-denominated transactions
with non-residents in Japan, as well as offshore transactions (excluding intersegment transactions).

(a) Securities held for trading purposes

24. Leases(a) Finance leases
Finance leases, as lessee, at March 31, 2008 and 2007 aresummarized as follows:
Millions of yen
March 31,

2008

2007

Equipment
Accumulated depreciation
Total

¥38
(23)
¥15

¥49
(25)
¥24

Lease payments for finance leases:
Within one year
Over one year
Total

Carrying value
Holding gains charged to income

¥ 5
9
¥15

¥11
13
¥24

Total lease payments under finance leases for the year ended
March 31, 2008 and 2007 were ¥11 million and ¥14 million,
respectively. Depreciation which would have been recorded underfinance leases for the year ended March 31, 2008 and 2007 were
¥11 million and ¥14 million, respectively.
Finance leases, as lessor, at March 31, 2008 and 2007 aresummarized as follows:
No impairment losses have been recognized on leased assets.
Millions of yen
2008

2007

Equipment
Others
Accumulated depreciation
Total¥61,995
4,016(33,784)¥32,227¥63,592
4,012(34,780)¥32,823

Lease payments receivable for finance leases:
Within one year
Over one year
Total

¥11,655
25,884¥37,539¥12,290
25,884¥38,175

Note: Minimum lease payment receivable presented above includes interest amounts,
as the total balance at minimum lease payment receivable and residual value ofleased assets is small as a percentage of the book value of receivables.

Total lease payments received under finance leases for the year
ended March 31, 2008 and 2007 were ¥13,309 million and¥13,505 million, respectively. Depreciation under finance leases
for the year ended March 31, 2008 and 2007 were ¥11,472
million and ¥11,632 million, respectively.
(b) Operating leases
Future minimum lease payments for operating leases at March 31,
2008 and 2007 were ¥499 million and ¥541 million, of which ¥37
million and ¥41 million were due within one year.

25. Securities Information
The information includes trading account securities andcommercial paper in trading assets and trust beneficiary rights incommercial paper and other debt purchased in addition tosecurities.

2008

2007

¥25,666
53¥28,90437(b) Marketable debt securities held to maturity
Millions of yen
March 31, 2008

Note: Acquisition cost and minimum lease payment presented above include interest
amounts calculated under the interest method, as the balances of acquisition
cost and minimum lease payment are small as a percentage of the book valueof total tangible fixed assets.

March 31,

Millions of yen
March 31,

Book
value

Japanese government
bonds
¥
—
Japanese local
government bonds
1,803
Corporate bonds
29,210
Others11,813
Total¥42,827

Marketvalue

Unrealized
gain (net)Unrealized
gain (gross)

Unrealized
loss (gross)

—

¥ —

¥ —

¥ —

1,853
29,097
11,547¥42,498

49
(112)
(265)
¥(328)

49
78
6
¥134

—
191
272
¥463

Unrealized
gain (net)Unrealized
gain (gross)

Unrealized
loss (gross)

—

¥ —

¥ —

¥ —

3,548
26,221
19,464¥49,234

144
(230)
(21)
¥(107)

144
67
15
¥227

—
297
36
¥334

¥

Millions of yen
March 31, 2007

Book
value

Japanese government
bonds
¥
—
Japanese local
government bonds
3,404
Corporate bonds
26,452Others
19,486
Total¥49,342

Marketvalue¥

Note: Market value is based on the market prices at the fiscal year end.

(c) Marketable available-for-sale securities
Millions of yen
Unrealized
gain (gross)

Unrealized
loss (gross)

Equity securities¥ 125,372 ¥ 212,323 ¥86,950 ¥ 92,765
Debt securities:
Japanesegovernment bonds
882,788877,653 (5,134)
3,916
Japanese local
government bonds
369,257
374,0604,802
4,907
Corporate bonds
362,920364,672
1,752
1,911
Others489,802472,065 (17,736)
2,452
Total
¥2,230,141 ¥2,300,775 ¥70,634 ¥105,954¥ 5,815

March 31, 2008

Cost

Book
value

Unrealized
gain (net)

9,051
105
159
20,189¥35,320

Millions of yen
March 31, 2007

Cost

Book
value

Unrealized
gain (net)Unrealized
gain (gross)

Equity securities¥ 124,044 ¥ 315,147 ¥191,103 ¥191,624
Debt securities:
Japanesegovernment bonds
769,108
761,036(8,071)
671
Japanese local
government bonds
316,594
316,659
65
1,973
Corporate bonds
375,900
375,564(335)
1,145
Others819,200
844,959
25,75829,991
Total¥2,404,848 ¥2,613,367 ¥208,518 ¥225,406

Unrealized
loss (gross)

¥

521

8,743
1,908
1,481
4,232
¥16,887

Notes: 1. Book value is based on the market prices at the fiscal year end.
2. Pursuant to “Practical Guidelines for Accounting for Financial Instruments”(JICPA Accounting Committee Report No. 14, amended on July 3, 2001), theBank recognized the impairment losses on listed equity shares whose market
price at the balance sheet date declined 30% or more compared with acquisition cost, taking into consideration the recoverability. As of March 31, 2008
and 2007, the Bank devaluated the marketable available-for-sale securities
and recognized as a loss of ¥307 million and ¥9 million, respectively.

35

(d) Marketable available-for-sale securities sold(h) Unrealized gain on available-for-sale securities

Millions of yen
Years ended March 31,

Proceeds from sales of marketableavailable-for-sale securities
Gains
Losses2008

2007¥1,370,112
32,371
31,236¥496,387
9,217
7,527

(e) Major components and balance sheet amounts of nonmarketable securities

Millions of yen
March 31,

Unrealized gain:
Available-for-sale securities
Other money held in trust
Deferred tax liabilities
Net unrealized gains onavailable-for-sale securities
Minority interests
Unrealized gains on available-for-sale securities

2008

2007

¥70,634 ¥208,518
(375)
440
(26,422)(80,015)
43,836
128,943(2)(5)¥43,833 ¥128,938

Millions of yen
Book value
March 31,

Non-marketable debt securities held to maturity:
Trust beneficiary rights
Non-marketable available-for-sale securities:
Unlisted equity securities
Investments in investment partnerships

2008

2007

¥

—

¥6,017

3,690
2,092

3,734
2,147

(f) Schedule of redemption of available-for-sale securities
with maturity dates and debt securities being held tomaturity
Millions of yen
March 31, 2008

Debt securities:
Japanesegovernment bonds
Japanese local
government bonds
Corporate bonds
OthersTotal

One yearor less

One tofive years

Five toten yearsOverten years¥138,390 ¥ 517,473 ¥183,507 ¥ 38,282
58,939171,161 145,762—
49,335202,123 80,946
61,47625,579165,467 82,010 183,985¥272,245 ¥1,056,226 ¥492,227 ¥283,744

Millions of yen
March 31, 2007

Debt securities:
Japanesegovernment bonds
Japanese local
government bonds
Corporate bonds
OthersTotal

One yearor less

One tofive years

Five toten yearsOverten years¥ 27,563 ¥ 362,214 ¥312,869 ¥ 58,388
38,543
152,179 129,340—
52,887
228,832 71,319
48,976
41,461
289,955 187,193 263,462¥160,456 ¥1,033,181 ¥700,722 ¥370,827(g) Money held in trust classified as available-for-sale securities
Millions of yen
March 31,

2008

2007

Cost
Book value
Unrealized gain (net)Unrealized gain (gross)
Unrealized loss (gross)¥3,656
3,281
(375)
—
375

¥2,151
2,591
440
440
—

Note: Book value is based on the market prices at the fiscal year end.

36

26. Derivatives(a) Transactions(1) The Bank conducts derivative transactions related to fluctuationsin interest rates, currency exchanges and bond prices, which areclassified into hedging and non-hedging purposes.
One of the Bank’s consolidated subsidiaries engages ininterest-related derivative transactions for hedging purposes.
(2) Policies: The Bank enters into derivative transactions to: (1) meetcustomer needs for hedging of risks involved in fluctuations inforeign exchanges and interest rates; (2) mitigate risks involved in
the Bank’s operations in the context of efficiently managing its
overall assets and liabilities, and; (3) hedge individual transactionsof the Bank. For trading in derivatives for the purpose ofincreasing earnings over a short-term period, the Bank has set
certain position limits and loss-cut rules.
The above-mentioned consolidated subsidiary follows trading
policies similar to those of the Bank.
(3) Purposes: The Bank conducts derivatives transactions inaccordance with the above-mentioned policies. The Bank
employs hedge accounting in some of its derivatives transactions.
a. Methods of hedge accounting
The Bank has adopted ordinary treatment for deferred hedges
and special treatment for interest-rate swaps.
b. Policies and implementation of hedging transactions
The Bank uses hedging transactions to mitigate its exposure tointerest rate risk, risk involving fluctuations in foreign exchange
rates and stock prices, and credit risk, in accordance with its
internal rules (Rules on Transactions under Hedge Accounting)based on the Practical Guidelines on Accounting for Financial
Instruments.
During the prior and current years, hedge accounting has
been applied to the following financial instruments and assets
and liabilities hedged:
Hedging instruments: Interest-rate swaps, currency swaps
and foreign exchange swaps
Assets and liabilities hedged:(Yen-denominated) Loans and bills discounted, deposits,
and borrowed money(Foreign-currency denominated) Bonds and deposits
c. Assessment of hedging effectivenessThe effectiveness of hedging was assessed in accordance with
Rules on Transactions under Hedge Accounting. As forhedging against interest rate changes by means of offsetting

fluctuations in fair value arising from changes in interest rates,
the Bank assesses the hedge effectiveness by correlating agroup of hedged items (i.e. loans) with hedging instruments(such as interest rate swaps) classified by remaining maturity
bucket. As for cash flow hedges, the Bank assesses theeffectiveness of such hedges in fixing cash flows by verifying
the correlation between the hedged items and hedging
instruments. As for hedging foreign exchange fluctuations, theBank assesses the effectiveness of utilizing currency andexchange swap transactions as hedging instruments throughconfirmation of the fact that there exists a sufficient balance ofhedging instruments in the form of foreign exchanges,
corresponding to the hedged items in the form of monetaryclaims and obligations denominated in foreign currencies.
In addition, the Bank confirmed that its hedging methods for
its special treatment of interest-rate swaps met the required
criteria.
(4) Nature of Risks: Derivative transactions involve market risk andcredit risk. Market risk refers to the risk of losses from fluctuationsin interest rates and currency exchanges, etc. Credit risk is the riskthat a position cannot be settled according to the original contract
terms due to the bankruptcy or insolvency of the counterparty.
(5) Risk Management System: The Board of Directors (the “Board”) is
responsible for determining policies on the basis of in-house
regulations on risk management, taking due account of the
maximum transaction volumes, the maximum allowable loss
amounts, and loss-cutting rules on derivative transactions, which
are reported to the Board on a regular basis. For credit risk
management, the current exposure method is applied for risk
control, by setting credit lines by counterparty.
Regarding the organizational structure, the Bank clearly
segregates back-office work from front-office work. Furthermore,
the Bank has established middle-office sections to ensure that thesystem of checks and balances works effectively.
(6) Supplementary Explanation of Quantitative Information: The
contract amounts presented are the notional contract amounts or
the principal for calculation purpose. Accordingly, they do not
represent the actual market risk exposure relating to all derivative
positions.

(b) Interest-rate derivatives
March 31, 2008

Millions of yen
Contract amounts
MarketUnrealized

Total

Over 1 year

value

gain (loss)

¥

—
—

¥ —
—

¥ —
—

—
—

—
—

—
—

—
—

—
—

—
—

35,749163

163

35,749

35

35

—

—

—

—
—

—
—

—
—

3,231
3,231

(12)
12

110
(49)

4,483
4,483

(104)
103

102
103

—
—

—
—

—
—

—

¥198

¥467

Millions of yen
Contract amounts
MarketUnrealized

Total

Transactions listed on exchanges:
Interest-rate futures:
Sold¥—
Bought—Interest-rate options:
Sold—
Bought—Over-the-counter transactions:
Forward rate agreements:
Sold—
Bought—Interest-rate swaps:
Receivable fixed/
payable floating
103,942
Receivable floating/payable fixed
103,942
Receivable floating/payable floating—
Interest-rate options:
Sold—
Bought
—
Caps:
Sold
4,601
Bought4,601
Swaption:
Sold36,100Bought36,100
Others:Sold—
Bought—Total¥

March 31, 2007—

Transactions listed on exchanges:
Interest-rate futures:
Sold¥—
Bought—Interest-rate options:
Sold—
Bought—Over-the-counter transactions:
Forward rate agreements:
Sold—
Bought—Interest-rate swaps:
Receivable fixed/
payable floating
70,434
Receivable floating/payable fixed
70,434
Receivable floating/payable floating—
Interest-rate options:
Sold—
Bought
—
Caps:
Sold
3,258
Bought3,258
Swaption:
Sold32,876
Bought32,876
Others:Sold—
Bought
—
Total

¥

—

¥

Over 1 year

value

gain (loss)

¥

—
—

¥ —
—

¥ —
—

—
—

—
—

—
—

—
—

—
—

—
—

26,65054

54

26,650

122

122

—

—

—

—
—

—
—

—
—

2,781
2,781

(20)
20

65
(29)

4,010
4,010

(224)
224

51
224

—
—

—
—

—
—

—

¥176

¥489

¥

37

Notes: 1. The above derivatives are valued at market and unrealized gain (loss) is
accounted for in the consolidated statements of income. Derivatives to which
hedge accounting is applied have not been included in the above table.
2. Calculation of market value
The market value of transactions listed on exchanges has been calculatedon the basis of the closing prices on the Tokyo International Financial
Exchange, etc. The market value of over-the-counter transactions has been
calculated at their discounted present value or by utilizing calculation
models for options prices.

(c) Currency Derivatives

March 31, 2008

Millions of yen
Contract amounts
MarketUnrealized

Totalgain (loss)

Over 1 year

value

Listed:Currency futures:
Sold
¥
— ¥
— ¥ —
Bought———Currency options:
Sold
—
—
—
Bought———Over-the-counter transactions:
Currency swaps
657,902 635,524 1,404
Forward foreignexchange contracts:
Sold
12,1802,763(156)
Bought16,1682,358
157
Currency options:
Sold
7,156
2,672
(264)
Bought
7,156
2,672
265
Others:Sold———
Bought
—
—
—
Total

¥

March 31, 2007

— ¥

¥

—
—
—
—

1,404

(156)
157
(113)
166
—
—

— ¥1,405¥ 1,458

Millions of yen
Contract amounts
MarketUnrealized

Totalgain (loss)

Over 1 year

value

Listed:Currency futures:
Sold
¥
— ¥
— ¥
—
Bought———Currency options:
Sold
—
—
—
Bought———Over-the-counter transactions:
Currency swaps
552,195 520,582 1,309
Forward foreignexchange contracts:
Sold
10,374
4,424(292)
Bought
8,841
4,410
292
Currency options:Sold17,405—(205)
Bought17,405—
206
Others:Sold———
Bought
—
—
—
Total

¥

— ¥

— ¥1,310

¥

—
—
—
—

1,309

(292)
292

38

Not applicable as of March 31, 2008 and 2007.

(e) Bond Derivatives
March 31, 2008

Listed:Bond futures:
Sold
BoughtBond future options:
Sold
BoughtOver-the-counter transactions:
Bond options:
Sold
BoughtOthers:Sold
BoughtTotal

March 31, 2007

Listed:Bond futures:
Sold
BoughtBond future options:
Sold
BoughtOver-the-counter transactions:
Bond options:
Sold
BoughtOthers:Sold
BoughtTotal

Millions of yen
Contract amounts
MarketTotal Over 1 year
value

¥—
—

¥ (5)
—

¥ (5)
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

¥ —

¥—

¥ (5)

¥ (5)

Millions of yen
Contract amounts
MarketTotal Over 1 year
value

Unrealized
gain (loss)

¥537
—

¥—
—

¥ 0
—

¥ 0
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

¥ —

¥—

¥ 0

¥ 0

Notes: 1. The transactions described above are marked to market, and the unrealized gains and losses are charged to income. Derivatives under hedge
accounting are excluded from the above tables.
2. Calculation of fair market value
Financial derivatives listed on securities exchanges are stated using theclosing prices on the Tokyo Stock Exchange as of the balance-sheet date,
and those traded over the counter are stated using discounted present
value or option price calculation models.

(f) Commodity Derivatives
Not applicable as of March 31, 2008 and 2007.

——(g) Credit Derivatives¥1,285

Unrealized
gain (loss)

¥556
—

(53)
30

Notes: 1. The transactions in this table have been revalued at the market rate prevailing on the balance sheet date, and unrealized gain (loss) is accounted
for in the consolidated statements of income. Derivatives which qualify as
hedges have been excluded from this table.
2. Calculation of market valueMarket value is calculated at discounted present value, etc.

(d) Stock Derivatives

Not applicable as of March 31, 2008 and 2007.

27. Stock Options
No expenses related to the exercise of stock options were recorded for the fiscal year ended March 31, 2008.
Changes to the nature and scale of stock options are listed below.
Persons to whom stock options are granted
Type and number of shares
Date of rights granted
Terms and conditions
Eligible service period
Period for exercise of stock options
Exercise price
Balance of stock options outstanding at beginning of year
Exercised options
Expired options
Balance of outstanding options at end of year

2000

2001

Directors of the Bank: 10
Employees of the Bank: 10
Common shares: 175,000
August 1, 2000
Not applicableNot applicable
From July 1, 2002 to June 30, 2007
¥411
67,00060,0007,000
0Directors of the Bank: 10
Employees of the Bank: 8
Common shares: 268,000
August 1, 2001
Not applicableNot applicable
From July 1, 2003 to June 30, 2008
¥375
175,000
140,000
035,00028. Related-Party Transactions
For the year ended March 31, 2008, material transactions with major individual shareholders are as follows:
Nature of relationship
Relationshipwith the
Bank

Name

Location

A company
Usui Setsubi Hitachi-Omiya,in which
Kogyo Co. Ltd. Ibaraki Pref.
majority voting
rights areheld byrelatives of adirector of
the Bank

Paid-in capital(Millions of yen)

Businessline

Voting rights
ownership (%)

10

Hygiene facility
installation forwater supply
and wastewater treatment—

Directors
and statutory
auditors

Businesstie-ups

Details oftransaction

Transaction
amount(Millions of yen)NotapplicableNot
applicable

Lending of
money

—

Guarantees

1

Accounting
title
Loans
receivable

Acceptancesand guarantees

Year-endbalance(Millions of yen)
10

1

Policies on, and terms and conditions of, the transaction
Interest is reasonably determined in a manner similar to ordinary transactions, taking into account the prevailing market interest rates. The loan period
shall not exceed 5 years. Repayment of principal shall be made on a straight-line basis every month or in lump-sum on the due date. However, repayment before the due date shall be allowed.
Nature of relationship
Relationshipwith theBank
A companyin whichmajority voting
rights areheld byrelatives of adirector of
the Bank

Name

Location

Rarara Ltd.

Mito,
Ibaraki Pref.

Paid-in capital(Millions of yen)

Businessline

Voting rights
ownership (%)

3

Beauty salon—

Directors
and statutory
auditors

Businesstie-ups

Details oftransaction

NotapplicableNot
applicable

Lending ofmoneyTransaction
amount(Millions of yen)—Accounting
title
Loans
receivable

Year-endbalance(Millions of yen)
4

Policies regarding, and terms and conditions of, the transaction
Interest is reasonably determined in a manner similar to ordinary transactions, taking into account the prevailing market interest rates. The loan period is
5 years. Repayment of principal shall be made on a straight-line basis every month.
For the year ended March 31, 2007, material transactions with major individual shareholders are as follows:
Nature of relationship
Relationshipwith the
Bank

Name

Location

A company
Usui Setsubi Hitachi-Omiya,in which
Kogyo Co. Ltd. Ibaraki Pref.
majority voting
rights areheld byrelatives of adirector of
the Bank

Paid-in capital(Millions of yen)

Businessline

Voting rights
ownership (%)

10

Hygiene facility
installation forwater supply
and wastewater treatment—

Directors
and statutory
auditors

Businesstie-ups

Details oftransaction

Transaction
amount(Millions of yen)NotapplicableNot
applicable

Lending of
money

10

Guarantees

2

Accounting
title
Loans
receivable

Acceptancesand guarantees

Year-endbalance(Millions of yen)
13

2

Policies on, and terms and conditions of, the transaction
Interest is reasonably determined in a manner similar to ordinary transactions, taking into account the prevailing market interest rates. The loan period
shall not exceed 5 years. Repayment of principal shall be made on a straight-line basis every month or in lump-sum on the due date. However, repayment before the due date shall be allowed.

39

Nature of relationship
Relationshipwith theBank
A companyin whichmajority voting
rights areheld byrelatives of adirector of
the Bank

Name

Location

Rarara Ltd.

Mito,
Ibaraki Pref.

Paid-in capital(Millions of yen)

Businessline

Voting rights
ownership (%)

3

Beauty salon—

Directors
and statutory
auditors

Businesstie-ups

Details oftransaction

NotapplicableNot
applicable

Lending ofmoneyTransaction
amount(Millions of yen)—Accounting
title
Loans
receivable

Year-endbalance(Millions of yen)
6

Policies regarding, and terms and conditions of, the transaction
Interest is reasonably determined in a manner similar to ordinary transactions, taking into account the prevailing market interest rates. The loan period is
5 years. Repayment of principal shall be made on a straight-line basis every month.
Note: For the year ended March 31, 2008 and 2007 the Bank has made no related-party transactions with parties falling into categories of parent, subsidiary and sister companies, and major corporate shareholders.

29. Per-share Data
Yen
March 31,

Net assets per share
Earnings per share-basic
Earnings per share-diluted

2008

2007

¥549.34
17.55
17.54

¥647.60
32.31
32.31

Note: Bases for calculation of earnings per share (basic and diluted) are as follows:

Millions of yen
March 31,

Earnings per share
Net income
Earnings not available tocommon shareholders
Net income after deduction of the
portion described above
Weighted average number of commonshares for the fiscal year (in thousands)
Diluted earnings per share
Adjustment to net income
Increase in common shares (in thousands)
Of which, acquisition of own shares understock option pursuant to provisions in
Article 210-2, Paragraph 2 of theCommercial Code (in thousands)
Share warrants that have no dilutive
effects on earnings per share

40

2008

2007

¥ 13,924¥ 26,319——

13,924

26,319793,419814,389

—
29

—
169

29

169

—

—

Report of Independent Certified Public Accountants

41

F

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L

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A

T

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M

E

N

T

S

Non-Consolidated Balance Sheets (Unaudited)
THE JOYO BANK, LTD.

Millions of yen
March 31,

AssetsCash and due from banks
Call loans and bills purchased
Commercial paper and other debt purchased
Trading assets
Money held in trust
Securities
Loans and bills discounted
Foreign exchanges
Other assets
Tangible fixed assets
Intangible fixed assets
Deferred tax assets
Customers’ liabilities for acceptances and guarantees
Reserve for possible loan losses
Reserve for devaluation of investment securities
Total assets
Liabilities and shareholders’ equity
Liabilities:
Deposits
Call money and bills soldPayables under securities lending transactions
Trading liabilities
Borrowed money
Foreign exchanges
Bonds
Due to trust account
Other liabilities
Reserve for bonuses to directors and corporate auditors
Reserve for employees’ retirement benefits
Reserve for reimbursement of dormant deposits
Reserve for frequent users services
Reserve for other contingent losses
Deferred tax liabilities
Deferred tax liabilities for land revaluation
Acceptances and guarantees
Total liabilities
Net assets:
Common stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity
Unrealized gains on other securities
Deferred losses on hedging instruments, net of taxes
Land revaluation excess
Total valuation and translation adjustments
Total net assets
Total liabilities and net assets

2008

2007

2008

¥ 136,038 ¥ 140,106
3,885
3,541
65,72585,237
26,06329,1703,281
2,591
2,306,788
2,607,267
4,669,468
4,438,855
1,037
984
58,77540,33282,892
79,821
8,150
9,657
15,135—28,36332,862(34,293)(39,569)(48)(53)¥7,371,265 ¥7,430,806$ 1,357,802
38,786
656,007
260,145
32,75023,024,137
46,606,132
10,357
586,643827,351
81,352
151,065
283,101(342,279)(486)$73,572,869¥6,405,962
162,682
166,230
203
64,000303
15,00017
81,072
635
3,831
1,223
61
1,093
—
12,921
28,363
6,943,603¥6,326,301
108,447
203,25489
67,000350
15,00016
103,449
50
4,968
—
—
551
39,777
13,05632,862
6,915,175$63,938,140
1,623,741
1,659,148
2,032
638,786
3,029
149,715171
809,190
6,342
38,243
12,213617
10,910—128,968
283,101
69,304,354

85,113
85,11358,57458,574
255,169
256,967(22,899)(22,403)375,957
378,251
43,704
128,905(1,130)
(791)
9,132
9,266
51,705
137,380
427,662515,631¥7,371,265 ¥7,430,806

849,516584,6292,546,855(228,559)
3,752,442
436,211(11,287)
91,148516,072
4,268,515$73,572,869

Notes: 1. Japanese yen amounts are rounded down to the nearest million yen.
2. U.S. dollar amounts represent translation of Japanese yen at the exchange rate of ¥100.19 to US$1.00 on March 31, 2008.

42

Thousands of
U.S. dollars

F

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T

S

Non-Consolidated Statements of Income (Unaudited)
THE JOYO BANK, LTD.

Thousands of
U.S. dollars

Millions of yen
Years ended March 31,

Income:Interest income:Interest on loans and discounts
Interest and dividends on securities
Other interest income
Fees and commissions
Trading income
Other operating income
Other income
Total income
Expenses:
Interest expenses:
Interest on deposits
Interest on borrowings and rediscounts
Other interest expenses
Fees and commissions
Other operating expenses
General and administrative expenses
Other expenses
Total expenses
Income before income taxes
Income taxes:
Current
Deferred
Net income
Per share (in yen and dollars):
Net income
Cash dividends applicable to the year

2008

2007

2008

¥ 96,117
46,5892,603
22,320474
23,148
16,225
207,479¥ 85,407
47,3391,567
23,296
473
8,957
8,921
175,963$ 959,349
465,01225,980222,782
4,733
231,050
161,949
2,070,858

17,232
8,658
11,7807,707
47,25872,087
18,210182,935
24,543

7,974
8,216
12,4697,293
7,504
70,5598,938
122,956
53,007

172,001
86,422
117,578
76,925
471,689
719,511
181,760
1,825,889
244,968

12,859(1,256)¥ 12,940

16,36810,451¥ 26,186

128,351(12,540)$ 129,157¥16.308.00¥32.127.00$0.162
0.079

Notes: 1. Japanese yen amounts are rounded down to the nearest million yen.
2. U.S. dollar amounts represent translation of Japanese yen at the exchange rate of ¥100.19 to US$1.00 on March 31, 2008.

43

F

I

N

A

N

C

I

A

L

S

T

A

T

E

M

E

N

T

Millions of yen
Shareholders’ equity
Retained earnings
Other retained earnings
SpecialReserve reserve for
Earnedfordispositiongs
surplus
Legal dispositions of fixed
Voluntary brought
reserve of fixed assets assets
reserves
forwardTotal
retainedearnings

S

Non-Consolidated Statement of Changes in Net Assets (Unaudited)
THE JOYO BANK, LTD.

Capital surplus

Years ended March 31,

Commonstock

Capitalreserve

Other
capitalsurplus

Balance at March 31, 2006

¥85,113¥58,574¥ 7

Total
capitalsurplus¥58,581 ¥55,317

¥ —

Total
Treasury shareholders’stockequity¥ — ¥163,432 ¥24,349 ¥243,099 ¥(14,978) ¥371,815

Changes during the year:
Cash dividends
Bonuses to directors andcorporate auditors
Net income
Reserve for dispositions of fixed assets

115

Voluntary reserves(5,329)(5,329)(5,329)

(50)

(50)

(50)

26,18626,18626,186

(115)

—

—

10,000 (10,000)

Purchase of treasury stock
Retirement of treasury stock

4

4

Disposal of treasury stock

(11)

(11)

Increase in retained earnings due totransfer from land revaluation excess

—

—

—

(14,509)(14,509)

—

87

92

(6,985)(6,985)

6,997

—

46

46

46

Net changes of items other thanshareholders’ equity
Total changes during the year
Balance at March 31, 2007

—

—

(7)

(7)

—

115

—

10,0003,752

13,868(7,424)

85,11358,574—58,57455,317

115—

173,432

28,102

256,967(22,403) 378,251

6,435

Changes during the year:
Cash dividends(5,970)(5,970)(5,970)Net income

12,94012,94012,940

(140)

—

—

Special reserve for dispositions of
fixed assets

140

Voluntary reserves

12,000 (12,000)

Purchase of treasury stock——

Disposal of treasury stock00Retirement of treasury stock

00

Increase in retained earnings due totransfer from land revaluation excess—(9,482)(9,482)—83

84(8,901)(8,901)

8,901

—

134

134

12,000 (13,938)(1,797)134

Net changes of items other thanshareholders’ equity
Total changes during the year
Balance at March 31, 2008

44

—

—

—

¥85,113¥58,574¥———¥58,574 ¥55,317

—

¥115

140

(496)

(2,293)¥140 ¥185,432 ¥14,163 ¥255,169 ¥(22,899) ¥375,957

Millions of yen
Valuation and translation adjustment

Balance at March 31, 2006

Unrealized(losses) gains onavailable-for-salesecurities

Deferred
losses on
hedging
instrument,
net of taxes

Landrevaluation
excess,net of taxes

Totalvaluation andtranslation
adjustments

Total net
assets¥107,079¥ —¥9,313¥116,392¥488,207

Changes during the year:
Cash dividends(5,329)Bonuses to directors andcorporate auditors(50)

Net income

26,186

Reserve for dispositions of fixed assets—

Voluntary reserves—

Purchase of treasury stock(14,509)

Retirement of treasury stock

92

Disposal of treasury stock—

Increase in retained earnings due totransfer from land revaluation excess

46

Net changes of items other thanshareholders’ equity

21,826

(791)

(46)

20,988

Total changes during the year

21,826

(791)

(46)

20,98820,98827,424

Balance at March 31, 2007

128,905

(791)

9,266

137,380

515,631

Changes during the year:
Cash dividends(5,970)Net income

12,940Special reserve for dispositions of
fixed assets—

Voluntary reserves—

Purchase of treasury stock(9,482)

Disposal of treasury stock

84

Retirement of treasury stock—

Increase in retained earnings due totransfer from land revaluation excess

134

Net changes of items other thanshareholders’ equity(85,201)

(339)

(134)

(85,675)(85,675)

Total changes during the year

(85,201)

(339)

(134)

(85,675)(87,969)

Balance at March 31, 2008

¥ 43,704¥(1,130)¥9,132¥51,705¥427,662

Note: Japanese yen amounts are rounded down to the nearest million yen.

45

F

I

N

A

N

C

I

A

L

S

T

A

T

E

M

E

N

Thousands of U.S. dollars (Note)
Shareholders’ equity
Retained earnings
Other retained earnings
SpecialReserve reserve for
Earnedfordispositiongs
surplus
Legal dispositions of fixed
Voluntary brought
reserve of fixed assets assets
reserves
forwardTotal
retainedearnings

T

S

Non-Consolidated Statement of Changes in Net Assets (Unaudited)
THE JOYO BANK, LTD.

Capital surplus

Year ended March 31,

Commonstock

Capitalreserve

Other
capitalsurplus

Balance at March 31, 2007

$849,516 $584,629

$—

Total
capitalsurplus$584,629 $552,121 $1,156

$

Total
Treasury shareholders’stockequity— $1,731,031$280,488 $2,564,798 $(223,605) $3,775,338

Changes during the year:
Cash dividends(59,595)(59,595)(59,595)

Net income

129,157

129,157

129,157

Special reserve for dispositions of
fixed assets

1,406

Voluntary reserves(1,406)——

119,772 (119,772)——

Purchase of treasury stock
Disposal of treasury stock00Retirement of treasury stock

0

0

—

(94,640)(94,640)

—

838

841

(88,854)(88,854)

88,854

—

1,341

1,341

119,772 (139,115)(17,935)

Increase in retained earnings due totransfer from land revaluation excess

1,341

Net changes of items other thanshareholders’ equity
Total changes during the year
Balance at March 31, 2008——

$849,516 $584,629

—

$—

—

—

—

$584,629 $552,121 $1,156

1,406(4,950)(22,886)$1,406 $1,850,803$141,367 $2,546,855 $(228,559) $3,752,442

Thousands of U.S. dollars (Note)
Valuation and translation adjustment

Balance at March 31, 2007

Unrealized
gains onavailable-for-salesecurities

Deferred
losses on
hedging
instrument,
net of taxes

Landrevaluation
excess,net of taxes

Totalvaluation andtranslation
adjustments

Total net
assets$1,286,609$ (7,899)$92,490$1,371,199$5,146,538

Changes during the year:
Cash dividends(59,595)

Net income

129,157

Special reserve for dispositions of
fixed assets—

Voluntary reserves—

Purchase of treasury stock(94,640)

Disposal of treasury stock

841

Retirement of treasury stock—

Increase in retained earnings due totransfer from land revaluation excess
Net changes of items other thanshareholders’ equity

1,341(850,397)(3,387)(1,341)(855,125)(855,125)

Total changes during the year

(850,397)(3,387)(1,341)(855,125)(878,021)

Balance at March 31, 2008

$ 436,211$(11,287)$91,148$ 516,072$4,268,515

Note: U.S. dollar amounts represent translation of Japanese yen at the exchange rate of ¥100.19 to US$1.00 on March 31, 2008.

46

Organization

THE JOYO BANK, LTD.
Internal Administration Group
Corporate Audit DivisionCorporate Risk Management Division
Credit Risk Management Office
General Meeting of
Shareholders

Legal and Compliance Office
Corporate Planning Division
Group Management Office

Board of Corporate Auditors
Corporate Auditors

Publicity Office
Tokyo Sub-Headquarters
Personnel Division

Board of Directors

Staff Counseling Office
Executive Secretariat
General Affairs Division

Executive Officer Committee

Credit Risk Management Group
Credit Examination Division
Loan Supervision Office
Company Management Support Office
Operation Systems GroupOperation Planning Division
Data Processing Center
Area Data Processing Center
Computer System Division
Business Headquarters
Business Planning DivisionInternational Business Office
Overseas Representative Office (Shanghai)
Foreign Exchanges Centering Office
Hokuto District Business Division
Customer Services Division
Customer Counceling Office
Retail Banking Business Group
Retail Banking Division
Custody Business Promotion OfficeCall Center
Loan Operation Center
Consumer Finance Center
Living and Business Consulting Center
Pension Business Promotion Center
Corporate Banking Business Group
Corporate Banking Business Division
Business Information Support Office

Head Office
Tokyo Business Division (Tokyo Main Office)146 Branches, 26 Sub-branches

Quick Business Center
Area Corporate Business Division
Public Business Group
Government and Municipal Business DivisionMarket Business Group
Treasury and Securities DivisionMarkets and Business Administration Division
Securities Business Office

As of June 26, 2008

47

Board of Directors and Corporate Auditors

ChairmanIsao Shibuya
Deputy Chairman
Yuto Kawahara
President
Kunio Onizawa
Senior Managing Director
Tsutomu Tohyama

Managing Directors
Takenori Hotate
Yoshiyuki Miyanaga
Kazuyoshi Terakado
Takao Tateno
Kazuo Komuro
Mikio Kawamata
Toru Hakata
Etsuo Hiraoka

Corporate Auditors
Kyohei Tomita (standing)
Yoshiaki Terakado (standing)
Akira Yasu
Toshihiko Kawamura
Sanenori Hitomi

As of June 26, 2008

Market Business Group and Overseas Office■ Head Office5-5, Minami-machi 2-chome, Mito,
Ibaraki 310-0021, Japan
Phone: 029-231-2151■ Market Business GroupManaging Director
Toru Hakata■ Markets and Business Administration
Division
7-2, Yaesu 2-chome, Chuo-ku,
Tokyo 104-0028, Japan
Phone: 03-3273-1741
General Manager
Jun Kawauchi
Deputy General Manager
Osato Aizawa• Operations Group (Tokyo)
Senior Manager
Hitoshi Gotou

48■ International Operations Office3-3, Shinhara 1-chome, Mito,
Ibaraki 310-0045, Japan
Phone: 029-255-6671
Telex: J23278 JOYOBANK3632105 JOYOBKSwift: JOYOJPJTGeneral Manager
Akihiko Hashimoto■ Treasury and Securities Division
7-2, Yaesu 2-chome, Chuo-ku,
Tokyo 104-0028, Japan
Phone: 03-3273-5245
General Manager
Ritsuo Sasajima
Deputy General Manager
Osamu Midorikawa• Investment Group
Senior Manager
Masahide Takauchi• Business Promotion GroupManager
Hiroshi Iijima■ Shanghai Representative Office(Business Planning Division)
Room 1901, Shanghai International Trade
Centre, 2201 Yan An Road (West),
Shanghai 200335 P.R. of China
Phone: 86-21-6209-0258
Chief Representative
Katsunori Suzuki
Deputy Chief Representative
Hisanori SonobeService Network

Miyagi Pref. (1 Branch)
Mito (Head Office, International Business Office,International Operations Office)Ibaraki Pref. (Head Office, 119 Branches,
24 Sub-Branches)
Fukushima Pref. (10 Branches)
Tochigi Pref. (5 Branches, 1 Sub-Branch)

Overseas:
Shanghai Representative Office
As of March 31, 2008

Chiba Pref. (Tokatsu Wholesale office,5 Branches, 1 Sub-Branch)
Tokyo (Tokyo Business Div. (Tokyo Main Office), 3 Branches)
Treasury and Securities Div.
Markets and Business Administration Div.
Saitama Pref. (2 Branches)
Osaka Pref. (1 Branch)

Affiliated Companies■ The Joyo Computer Service Co., Ltd.

■ The Joyo Business Service Co., Ltd.

16-25, Nishihara 2-chome, Mito, Ibaraki
Established 1973, Capital Stock: ¥47.5 million
Share of Voting Rights: 5%

8-1, Sasano-machi 1-chome, Hitachinaka, Ibaraki
Established 1984, Capital Stock: ¥100 million
Share of Voting Rights: 100%

Sale of software and contract of calculation
businesses

Agent in charge of administrative work for the
Bank■ The Joyo Lease Co., Ltd.

■ The Joyo Staff Service Co., Ltd.

4-12, Minami-machi 3-chome, Mito, Ibaraki
Established 1974, Capital Stock: ¥100 million
Share of Voting Rights: 5%

4-12, Minami-machi 3-chome, Mito, Ibaraki
Established 1991, Capital Stock: ¥30 million
Share of Voting Rights: 100%

Leasing of machinery and equipment, claim
acquisition

Temporary staffing business for the Bank

■ The Joyo Credit Guarantee Co., Ltd.
4-12, Minami-machi 3-chome, Mito, Ibaraki
Established 1978, Capital Stock: ¥30 million
Share of Voting Rights: 5%

Credit guarantee of housing loans from theBank■ The Joyo Credit Co., Ltd.
4-12, Minami-machi 3-chome, Mito, Ibaraki
Established 1982, Capital Stock: ¥100 million
Share of Voting Rights: 5%■ The Joyo Industrial Research Institute,Ltd.
5-18, Sannomaru 1-chome, Mito, Ibaraki
Established 1995, Capital Stock: ¥100 million
Share of Voting Rights: 5%

Consulting, investigation and research■ The Joyo Equipment Management
Co., Ltd.
5-5, Minami-machi 2-chome, Mito, Ibaraki
Established 1999, Capital Stock: ¥100 million
Share of Voting Rights: 100%

Maintenance and management of operational properties and equipment of the Bank

■ The Joyo Cash Service Co., Ltd.
3-3, Jonan 1-chome, Mito, Ibaraki
Established 1999, Capital Stock: ¥50 million
Share of Voting Rights: 100%

Management and maintenance of ATMs and
CDs■ The Joyo Securities Co., Ltd.
4-12, Minami-machi 3-chome, Mito, Ibaraki
Established 2007, Capital Stock: ¥3,000 million
Share of Voting Rights: 100%

Dealing of securities, mediation, commission
and substitution of trading of securities

As of March 31, 2008

Credit card services
49Corporate Data

Date of Establishment

July 30, 1935

Head Office5-5, Minami-machi 2-chome, Mito, Ibaraki 310-0021, Japan
Phone: 029-231-2151
URL: http://www.joyobank.co.jp/
http://www.joyobank.co.jp/joyobank/eng/ (English Page)

Domestic Network

Head Office, Tokyo Business Division (Tokyo Main Office), and
146 Branches, 26 Sub-branches

Overseas Network

1 Representative Office: Shanghai

Number of Employees

3,586

Stock Exchange Listing

Tokyo Stock Exchange

Paid-in Capital¥85,113 million

Number of Shares(as of March 31, 2008)

Authorized
2,167,515 thousand
Issued and Outstanding 822,231 thousand

Number of Shareholders(1 trading unit = 1,000 shares)

33,223

Principal Shareholders

The 10 largest shareholders of the Bank and their respective
shareholdings at March 31, 2008 were as follows:
Number of Shares
Held(Thousands)

Percentage of Total
SharesOutstanding(%)

Northern Trust Company (AVFC) Sub Account American Client ...........
The Bank of Tokyo-Mitsubishi UFJ, Ltd. .............................................
NIPPONKOA Insurance Company, Ltd. ..............................................
Nippon Life Insurance Company .........................................................
Japan Trustee Services Bank, Ltd. (Trust Account) ..............................
The Dai-ichi Mutual Life Insurance Company .......................................
The Master Trust Bank of Japan, Ltd. (Trust Account) .........................
Sumitomo Life Insurance Company.....................................................
The Gunma Bank, Ltd. .......................................................................
Meiji Yasuda Life Insurance Company .................................................

62,07737,992
37,97328,00318,091
17,04916,485
16,448
10,465
9,722

7.54%
4.62
4.61
3.40
2.20
2.07
2.00
2.00
1.27
1.18

Total ............................................................................................

254,308

30.92%
As of March 31, 2008

For further information,please write to:Markets and Business
Administration Division,
The Joyo Bank, Ltd.
7-2, Yaesu 2-chome,
Chuo-ku, Tokyo
104-0028, Japan

50