An n u al R ep o r t

2016

1

PROFILE

The Joyo Bank, Ltd., was established in 1935 out of the merger of the Tokiwa Bankand Goju Bank, both of which were founded in 1878.
As a leading financial institution in Ibaraki Prefecture and surrounding regions,
Joyo Bank, with the philosophy of “Practicing sound management, creation ofvalues, 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 social andeconomic progress in the home region.

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

CONTENTS
1 Corporate Data/Service Network

23 Consolidated Financial Statements

2 Message from the President

23 Consolidated Balance Sheets

4 Management Policy

24	Consolidated Statements of Income

6	Initiatives of “PLUS+” Project for the Collaborative
Creation of the Region’s Future

24	Consolidated Statements of Comprehensive Income

8 Business Integration with Ashikaga Holdings

27 Consolidated Statements of Cash Flows

10 Financial Highlights

28 Notes to the Consolidated Financial Statements

12 Business Highlights

69 Report of Independent Auditors

13 ESG Initiatives

25 Consolidated Statements of Changes in Net Assets

70 Organization
71 	Board of Directors and Corporate Auditors/
Market Business Group and Overseas Offices/
Affiliated Companies

Corporate Data
As of March 31, 2016

■ 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/eng/ (English Page)■ Domestic Network

Head Office, Tokyo Business Division (Tokyo Main Office), and 150 Branches, 29 Sub-branches■ Overseas Network

3 Representative Offices: Shanghai, Singapore, New York

■ Number of Employees

3,638■ Stock Exchange Listing

Tokyo Stock Exchange■ Paid-in Capital¥85,113 million■ Number of Shares(as of March 31, 2016)

Authorized
Issued and Outstanding■ Number of Shareholders(1 trading unit = 1,000 shares)

28,2502,167,515 thousand
766,231 thousand

Service Network
As of March 31, 2016

Japan:
Miyagi
Fukushima
Tochigi Ibaraki
Mito-City
SaitamaShanghai Representative Office

Tokyo

Chiba

Osaka

New York Representative Office

Singapore Representative Office

Japan:• Miyagi Pref. (1 Branch)• Saitama Pref. (3 Branches)• Fukushima Pref. (10 Branches)• Chiba Pref. (6 Branches)• Tochigi Pref. (7 Branches, 1 Sub-Branch)• Mito-City (Head Office, International Business
Office, International Operations Office)• Tokyo (Tokyo Business Div. (Tokyo Main Office),
5 Branches)• Ibaraki Pref. (Head Office, 117 Branches,
28 Sub-Branches)• Treasury and Securities Div.
Markets Administration and International Div.
• Osaka Pref. (1 Branch)

1

MESSAGE FROM THE PRESIDENT
We will contribute to customers and communities through the provision of comprehensive financial services.

Asian nations in which growth is expected as part of efforts
to reinforce support for customers seeking to deploy operations overseas.
We helped to commemorate our 80th anniversary bycreating the Joyo Mirai Kyoso Juku. This educational program promotes learning and the exchange of ideas among
young managers and business owners who are vital to the
future of Ibaraki Prefecture as part of a focus on cultivating
local human resources.
In retail banking, we bolstered our investment trust andinsurance product lineup. We also worked to accommodate
the diversifying asset management needs of our customers.
For example, we began handling Mirai Select, an offering
for new investors that combines several investment trust
products and allows people to diversify their portfolios
with small payments. We also started offering a workplace reserve fund program, which is used in the Nippon
Individual Savings Account (“NISA”) tax exemption system
for small investments in corporate welfare programs andasset formation for employees and officers.
In the area of individual financing, we continued toincrease our handling of housing loans that encourage
long-term residency in coordination with a municipal grant
program. We also enhanced our range of loan products for
women in keeping with ongoing contributions to regionalsocial and economic progress as a financial intermediary.
On the sales channel front, we enhanced our branch
network along the Tsukuba Express Line. We launched the
Tsukuba Shintoshi Branch in August 2015 and opened a
Loan Plaza within the Misato Branch. We opened Money
Advice Desks in three branches in Ibaraki Prefecture from
April 2016 to provide more finely tuned financial services.
These desks provide asset management and other information on weekday evenings and weekends.
Our range of social contribution activities included
advising people affected by the Kanto-Tohoku Heavy
Rainfall Disaster of September 2015 and providing a temporary ATM service through our mobile customer inquiry
vehicle.
One regional initiative was our creation of the Ibaraki
Shopping Street Revitalization Fund, which draws on

In fiscal 2015, Japan’s economy showed signs of a gradual
recovery from the start of the fiscal year, with the impact ofa consumption tax increase running its course and companies posting favorable results. The turnaround was generally weak, however, in light of concerns about slowdowns
in China and other emerging nations, as well as declining
business confidence as the yen rose and share prices slid
from the start of the year.
The economy in Ibaraki Prefecture was generally weak,
mainly due to observable lackluster production, despite firm
personal consumption throughout the year.
Operating in this economic environment, Joyo Bankis carrying out its 12th Medium-Term Business Plan (fromfiscal 2014 to fiscal 2016), which represents our vision forbecoming the “Best Partner Bank for the Collaborative
Creation of the Region’s Future.” The fiscal year underreview was the middle year of the plan, and we carried out
the following policies, centering on the “PLUS+” Project
for the Collaborative Creation of the Region’s Future. Our
objective is to help customers and communities solve local
issues arising due to structural changes in society and theeconomy through provision of comprehensive financial services while translating these efforts into our own growth as
the Joyo Bank Group.
In July 2015, we celebrated our 80th anniversary. We
are deeply grateful to our customers, the local community,and our shareholders for the support over the years thatenabled us to reach that milestone. We marked the occasion by carrying out commemorative programs to express
our gratitude and our commitment to collaborative creation for the future.
In corporate banking, we continued to streamline
funding to customers. We set up the Joyo Establishment
Support Plan to provide funding to support starting up abusiness, and began handling medical institution debentures for medical institution customers. These initiatives
were part of efforts to diversify funding vehicles for customers launching operations, creating new businesses, or pursuing growth.
We again held food fairs and forums for manufacturing enterprises. We also held fairs and business seminars in2

cooperation with the Regional Economy Vitalization
Corporation of Japan. We stepped up efforts to resolve
local issues through public and private-sector cooperation. For example, we signed the Partnership Agreementon the Promotion of Relocation to Ibaraki Prefecturewith the Ibaraki Prefectural Government and the Japan
Trans-Housing Institute. This accord focuses on using theYutori Life Ibaraki Appeal Residual Value Guarantee-type
Relocation Plan, a pioneering new housing loan productthat incorporates a rental guarantee from the Japan TransHousing Institute.
As a result of these initiatives, in fiscal 2015 non-consolidated net income increased ¥3.8 billion, to ¥27.7 billion. On
a consolidated basis, profit attributable to owners of parentrose ¥2.3 billion, to ¥31.0 billion. The consolidated return on
equity was 5.2%. The capital ratio, an indicator of banking
soundness remained high, at 12.00%.
In recognition of our shareholders’ support over theyears, we have increased the annual dividend for fiscal 2015by ¥3.0 per share, to ¥13.0 per share. The increase included
a special dividend of ¥1.0 to commemorate our 80th anniversary. We plan to pay an interim dividend of ¥6.0 per
share in fiscal 2016.
On November 2, 2015, we entered into a basic agreement for business integration with Ashikaga Holdings Co.,
Ltd. We set up an Integration Preparation Committee andengaged in deliberations and assessments.
On April 25, 2016, we concluded share exchange andbusiness integration agreements. We aim to launch the
Mebuki Financial Group, Inc., on October 1, 2016. Whilemaintaining and enhancing customer relations and the
deep understanding of local communities that we andAshikaga Holdings subsidiary The Ashikaga Bank, Ltd., havebuilt over the years, we will provide more convenient, highquality comprehensive financial services that can only comefrom the integration of leading regional banks.
Everyone at Joyo Bank will continue striving to meetthe expectations of customers, community members, andshareholders. We look forward to your ongoing support andencouragement for our efforts in the year ahead.

Kazuyoshi Terakado
President

Kazuyoshi Terakado
President
July 2016

3

MANAGEMENT POLICY• 12th Medium-Term Business Plan (Plan duration: Fiscal 2014 through fiscal 2016)

VisionBest Partner Bank for the Collaborative
Creation of the Region’s Future
In the environment surrounding the regional economy, along with changes to the socioeconomic structure such as thedecline in the total population and further decrease in the birthrate and aging of the population, and the decline in thepotential economic growth rate, a multitude of challenges are expected to emerge.
In the 12th Medium-Term Business Plan, we aim to solve — together with our customers and the region — the local
challenges accompanying socioeconomic changes by contributing more than ever to the reconstruction and growth of
our customers and the region and providing comprehensive financial services based on original and creative ideas, which

Five Basic Strategies to Achieve Our Vision

we tackled in the 11th Medium-Term Business Plan, and also to contribute to the Joyo Bank Group’s growth.
To define this approach, we established the vision of becoming the “Best Partner Bank for the Collaborative Creation of
the Region’s Future” and we will execute our five basic strategies starting with “collaborative creation.”

1. Collaborative Creation
We will share the various challenges brought about by changes in the socioeconomic structure with customers andlocal communities, and demonstrate collaborative creation*1 to contribute to solving customers’ and communities’
problems by providing comprehensive financial services that are original and creative.
As part of these efforts, we will launch the “PLUS+” Project for the Collaborative Creation of the Region’s Future
and move forward working together as a group.

2. Expansion of Customer BaseIn demonstrating collaborative creation, it is essential to spread business and expand our customer network basedon strong relationships of trust, which are a prerequisite for sharing and solving the challenges facing customers andlocal communities, and we will expand our customer base in the Ibaraki region*2.

3. Strengthening Investment Return
In light of advancing globalization and securitization, we will strengthen investment returns by increasing returns on
securities and foreign currency loans in order to not only raise money for lending, but to also enhance profitability.

4. Renewal of Operation
Seek to strengthen points of contact with customers in order to share and solve challenges facing customers andlocal communities, innovate marketing channels by strengthening direct channel marketing, strengthen collaboration among channels, and construct effective marketing channels. In addition, we will pursue innovations in marketing and administrative processes through ongoing construction of business process re-engineering (BPR) systems.

5. Remaking Human Resources Portfolio
In the area of human resources, our most important business resource for achieving our vision, we will increase support for self-directed development, strengthen the organizational human resources development structure including
the restructuring of the development system, and expand opportunities to participate in comprehensive financial
resources.

*1. C
 ollaborative creation refers to sharing the various challenges brought about by changes in the socioeconomic structure with customers and local communities and contributeto solving the challenges facing customers’ and communities’ by providing comprehensive financial services based on creative and original ideas that leverage consulting, information technology (IT) and other services.
*2. T he Ibaraki region is that area where the provision and development of the transportation infrastructure is advancing and includes the Tsukuba Express, Kita-Kanto Expressway,
Metropolitan Inter-City Expressway (Ken-Ō Expressway) and is forming a deeper connection with Ibaraki Prefecture.

4

[About the logo]• Orange rectangles show “customers,” ”local communities,” and”Joyo Bank,” and the red rectangle shows “additional value.”• Spread made by four rectangles shows a “+” shape , and projects
the image of four rectangles making new value like a wind mill.

To “demonstrate collaborative creation” centered on the basic strategies of the 12th Medium-Term Business Plan, we started
the “PLUS+” Project for the Collaborative Creation of the Region’s Future. We will make ever-greater efforts to recover from theGreat East Japan Earthquake and contribute to solving the various challenges of the region.

Project Policy
Seeking possibilities to utilize comprehensive financial services to resolve challenges in the local area, and to collaboratively
create the region’s future by business development through valuable planning and actions.

Three “PLUS’s”
1. Aiming to create additional values for customers, local communities and Joyo Bank by solving challenges in our home region
and to provide greater support for recovery after the Great East Japan Earthquake.
2. Aiming to provide “advanced comprehensive financial services” which are essential services for the economy in our home region,such as “investment, funding, and settlement” and mixed creative functions such as “consulting and information technology.”
3. Acting to resolve agendas with positive thinking, which improves motivation and brings about better business opportunities.

“Best Partner Bank for
the Collaborative Creation of
the Region’s Future”

Three components
1. Resolving challenges by smooth financial functions
development through activation of
2. Businessthe local community and economy

3. Social contribution to region’s futureManagement Goals(Individual)
Contribution to satisfied lives(Corporate)
Assistance for growing sector(Public)
Creating active local communities

Expand consolidated net income
Aiming for record-high consolidated and non-consolidated net income in final fiscal
year of plan (FY2016)

Numerical targets (FY2016)
Consolidated
net income after tax¥30.0 billion or more

OHR*1

under 60%

Non-consolidated
net income after tax¥27.0 billion or more

ROE*2

approx. 5%

Non-consolidated
ordinary profit¥40.0 billion or more

Capital adequacy ratio

approx. 12%

Non-consolidated
gross business profit¥120.0 billion or more

*1. O
 HR is a primary indicator of management efficiency and shows the amount ofexpenses used to generate one unit of gross business profit.
*2. R
 OE is a primary indicator of capital efficiency and shows how much profit was
raised using shareholders’ equity.

5

Initiatives of “PLUS+” Project for the Collaborative Creation of the Region’s Future
Business creation through the revitalizationof local economies and industrial promotion

Under the 12th Medium-Term Business Plan launchedin April 2014 for becoming the “Best Partner Bank for the
Collaborative Creation of the Region’s Future” and centering on “PLUS+” Project for the Collaborative Creation of theRegion’s Future, we aim to solve — together with our customers and the region — local challenges.

15th Joyo Commercial Food Fair 2016 in Tsukuba
In February 2016, Joyo Bank held the 15th Joyo Commercial
Food Fair 2016 in Tsukuba with the aim of expanding
sales channels for food-related companies, supporting
the procurement of food ingredients, and encouraging
the exchange of information. Approximately 250 companies representing agricultural producers, food processors,wholesalers and retailers came to the event, which wasattended by 2,700 visitors and 1,200 companies.
Joyo Bank also invited two overseas buyers to the eventand facilitated business negotiations with food-relatedcompanies. We also
had foreign exchange
students taste andjudge the foods on
display as a marketing
event.

Provide solutions with the ample provision offunds
Joyo Bank will continue to engage in smooth capital supply
for customers and enhance various capital supply methods
responding to customers’ business stages, such as forming
funds for new business creation toward regional economic
revitalization.
General Agreement Reached with the Japan Bank forInternational Cooperation to Support the Overseas
Business Development of Small and Medium-Sized
Companies
In February 2016, Joyo Bank signed a general agreement with the Japan Bank for International Cooperation(“JBIC”) to financially support the overseas business development of small and medium-sized companies (“SMEs”).
JBIC established a credit line for procuring U.S. dollars in a
two-step loan scheme,
facilitating the effective
provision of mediumand long-term funds
for corporate customers of SMEs developing
business overseas.

Conclusion of a Partnership Agreement on the
Promotion of Relocation to Ibaraki Prefecture
Through Japan’s first public-private partnership initiative,
Joyo Bank has signed a partnership agreement with Ibaraki
Prefecture and the Japan Trans-housing Institute (“JTI”) to
encourage people to live in Ibaraki Prefecture. This initiative
aims to revitalize the region by having people relocate to
Ibaraki Prefecture from the over-populated Tokyo metropolitan area or live in both Tokyo and Ibaraki Prefecture.
Based on this agreement, JoyoBank began offering Yutori Life
housing loans with JTI providing rent guarantees, as a new
product that is Japan’s first to
encourage people to move tothe prefecture.

Joyo Collaborative Community Creation Fund
Joyo Bank formed the Joyo Collaborative Community
Creation Fund with the aim of revitalizing regional economies through the creation of new business, and is working to funnel growth money into the Fund. To date, theFund has provided financing totaling ¥3,994 million for 11
projects, backing the commercialization of innovative andcreative new business plans by utilizing a diverse rangeof funding methods including the acquisition of classified
stocks and the provision of subordinated loans.

64th Joyo Business Award
Joyo Bank has
continued to hold
the Joyo BusinessAward event,where Joyo Bank
solicits and awards
innovative and creative new business plans in growth fields
that are likely to revitalize the local economy.
This year, we added the “Regional Revitalization
Category” to the Grand Prize and also created the “HitachiAward” with help from Hitachi, Ltd., and presented awards
to 17 business plans out of the 261 business plan ideas
received. The Joyo Bank Group continues to support thecommercialization of business in various ways.

Starting in October 2015, study sessions and field trips
to observe industrial technology were held based on such
topics as management strategy andcorporate value. In
its inaugural year, 29
students participatedin the school.

Social Contribution for the Region’s Future
Responding to the damage caused by heavy rain in the
Kanto and Tohoku regions in September 2015
Torrential rainfall in the Kanto and Tohoku regions caused
significant damage in many communities, such as Joso City,
where a river washed out. We sincerely hope that everyone
affected by this torrential downpour has been able torecover.
Joyo Bank has taken the following initiatives with theaim of helping the people and communities affected by
the torrential rainfall recover and return to normal as soon
as possible.
[Main Initiatives]• Setting up consultation offices and exclusive consultation
telephone services for the disaster victims• Handling support financing for the victims (for individuals
and corporate customers)• Providing free storage for valuables and other items• Volunteer activities performed by Joyo Bank’s officers andemployees• Donations to charities helping affected regions (Ibaraki
Prefecture, Joso City, etc.)

Creation of Startup Support Consulting Service andJoyo Establishment Support Plan (80th Anniversary
Commemorative Event)As an event celebrating the 80th anniversary of its founding, in October 2015 Joyo Bank newly created the Startup
Support Consulting Service within its Living and Business
Consulting Center, and published the Startup Support
Handbook. Partnering with the Ibaraki Prefecture Yorozu
Support Center*, we offer consulting services for startinga first or second business, and began providing the Joyo
Establishment Support Plan, a financing plan that supports
the creation of new businesses, as a part of our proactive
efforts to provide financial support.
* A consulting service set up by Ibaraki Small and Medium Enterprise
Promotion Public Corporation for the purpose of helping SMEs in Ibaraki
Prefecture solve their business problems.

Joyo Mirai Kyoso Juku
(80th Anniversary Commemorative Event)
We created the Joyo Mirai Kyoso Juku for the purpose of
fostering young proprietors and successors of local businesses for the next generation of business.
This school holds study sessions a total of 10 times togive business owners an opportunity to learn essential
knowledge, meet people from other types of business, andforge relationships.

7

BUSINESS INTEGRATION WITH ASHIKAGA HOLDINGSWe and The Ashikaga Bank, Ltd., a subsidiary of Ashikaga Holdings Co., Ltd., maintain solid financial capabilities as leading
financial institutions with primary business platforms in the northern Kanto region, centered on Ibaraki and Tochigi Prefectures.
With the operating climate changing, both banks will collaborate to mutually maintain their solid local platforms. They aim
to expand their operational underpinnings through integration, while drawing on each other’s management resources andexpertise to grow together with their communities.
The specific arrangement for the business integration is to exchange Joyo Bank shares for those in Ashikaga Holdings tocreate a new company and financial group with a common philosophy. Joyo Bank and Ashikaga Bank will operate alongsideeach other. They will draw on synergies to offer speedy, high-quality services that they can not deliver independently, thereby
meeting the expectations of their customers, communities, and shareholders.

Name ofholdingcompany

The significanceof the newcompany nameHead Office
Location:(Registeredaddress)

Mebuki Financial Group, Inc.
Note: Ashikaga Holdings will be renamed Mebuki Financial Group, Inc.

Mebuki is Japanese for “green shoots.” The name reflects a Group company commitment to callupon a great amount of expertise and creativity to produce fresh ideas and new values after another.
This company name expresses our desire to bring new value and vitality to our communities andgrow sustainably with them.

7-2, Yaesu 2-chome, Chuo-ku, Tokyo
104-0028, Japan
Note: T he headquarters of Ashikaga Holdings will move to the above address.
The headquarters of subsidiaries Joyo Bank and Ashikaga Bank will notchange.

Mito Head Office5-5, Minami-machi 2-chome, Mito,
Ibaraki 310-0021, Japan
Head Office
Location:(Office address)

Utsunomiya Head Office
1-25, Sakura 4-chome, Utsunomiya City,
Tochigi 320-8610, Japan
Note: T he head office of Mebuki Financial Group, Inc., will consist of full-time officers and employees and concurrent officers
and employees of Joyo Bank and Ashikaga Bank, and will be located in Mito, Ibaraki Prefecture, and Utsunomiya, Tochigi
Prefecture.

8

GroupManagement
Philosophy

Provide high-quality comprehensive
financial services to continue creatinga prosperous future with local communities.
The new financial group will maintain and enhance the customer bases, regional ties, relationships, anddeep community understandings of both banks. It will leverage regional networks to grow together
with the regions by broadening economic exchange throughout the regions and expanding the scaleand scope of comprehensive financial services to cultivate regional industries, revitalize the regional
economy, and create new markets.

A comprehensive financial group that creates a new regional futureObjectives andBasic Strategies

Consolidate ingenuity forregional revitalization

Expand comprehensive
financial services

Expand area and channels

Build a management structure for the newfinancial group

Innovate operations

Gains from synergies withloans and bills discounted

Fiscal 2015 results+¥700.0 billion
Simple aggregations

Synergy Goals
for Fiscal 2020

Joyo Bank

Ashikaga Bank

Deposits¥8.1033 trillion¥5.2245 trillion¥13.3279 trillion

Loans¥5.9127 trillion¥4.2744 trillion¥10.1871 trillion

Ordinary profit(consolidated)

Schedule

Top-line costsynergies
About +¥15.0 billion

Shift personnel to sales
and strategy areas
About +150 people¥47.6 billion¥30.3 billion¥78.0 billion

Open 15 new branches(including leasing andsecurities branches)

Saturday, October 1, 2016: Scheduled effective date of share exchange
Form a new financial group, Mebuki Financial Group, under which Joyo Bank and Ashikaga Bank will
engage in operations.
Note: The integration is subject to regulatory and other approvals.

9

FINANCIAL HIGHLIGHTS
Consolidated capital ratio
Remained at high levels

On a non-consolidated basis, business profit rose ¥3.6
billion year on year to ¥43.9 billion, while ordinary profit
increased by ¥2.3 billion year on year to ¥42.7 billion andnet income by ¥3.8 billion year on year to ¥27.7 billion in fiscal 2015, all of which were increases compared to the previous fiscal year, and exceeded official announcement levels.
Net income rose for the fifth consecutive year.
The capital ratio remained at the high level of 11.51%
on a non-consolidated basis and 12.00% on a consolidated
basis.

(%)

14
13

12.60%

12

12.40%

12.19%

12.00%

11.92%
11.51%

11
10
0

As of March 31,
2014

As of March 31,
2015

As of March 31,
2016

Consolidated capital ratio
Non-consolidated capital ratio

Net income
Net income climbed ¥3.8 billion to ¥27.7 billion year on year.

Deposits(Billions of yen)(%)
100 fiscal year-end
5,000 increased 4.8% from the previous
Deposits¥4,982.5
to ¥8,103.3 75.9%
billion XX.X%
XX.X%
80

4,000

(Billions of yen) ¥3,785.6(Billions of yen)

30
25

9,000
3,000

¥27.7
¥23.9

¥22.0

7,500
2,000

20

(%)

Loan balance100
60 97.4%
100¥7,897.3
Balance of loans to¥7,728.7 ¥7,601.1¥8,103.3¥7,490.9 ¥7,369.3
90
regional customers
40
80
Percentage of80loans
to regional customers
20
60
70
98.3%

98.3%

(%)

15

6,000
1,000
4,500

10

0
3,000 As of March 31, As of March
40 31, As of March 31,
2012

5
0

2013

1,500
FY2013

FY20140

FY2015

0

60

2014

50

20
As of March 31,
2014

0 As of March 31,
2015

As of March 31,
20160

Loan balance
Balance of loans to regional customers
Percentage of loans to regional customers

Deposit balance
Local deposit balance
Local deposit balance percentage

Business profit, Ordinary income(Billions of yen)(%)
5,000 profit increased ¥3.6 billion year100
Businesson year to ¥43.9¥4,982.5¥4,800.6
billion,and ordinary
incomeincreased ¥2.3
billion to ¥42.7
77.0%
75.9%
80
4,000
¥3,785.6
billion.
¥3,696.8

Loans (Percentage of loans to regional customers)(Billions of yen)(%)
5,000increased 4.5% from the previous 100
Loansfiscal year-end to¥4,982.5¥4,800.6¥5,912.7 billion
77.0%
75.9%

Loan balance

60
Balance of loans to50
regional customers¥43.9 ¥42.7
40
2,000¥40.2 ¥40.4
40Percentage of loans¥37.2 ¥35.8
to regional customers
20
1,000
30
0
0
20 As of March 31, As of March 31, As of March 31,

3,000of yen)(Billions

2011

2012

¥3,696.8¥3,785.6

75.4%

(%)

60

3,000of yen)(Billions
7,000
2,000
6,000

100

¥5,399.3

2013

2011

2,000

2012

FY2014

Business profit

0

FY20155,000¥4,982.5100

regional customers

As of March 31,
2014

70

Percentage of loans
60
to regional customers¥4,503.8
50
40
30
20

20
0 As of March 31,
2015

As of March 31,
20160

Loan balance
Balance of loans to regional customers
Percentage of loans to regional customers

Ordinary income

(%)

(%)

2013

40

10
(Billions of yen)

Loan balance

Balance of loans
80 to
76.1%

40
¥5,912.7¥5,656.480
20¥4,273.8¥4,073.6
4,000
60
0
0
3,000 As of March 31, As of March 31, As of March 31,

1,000
FY2013

75.5%

5,000
1,000

10
0

80

4,000

(Billions of yen)

5,000

(%)

¥4,982.5100

Market share within Ibaraki Prefecture
Secured an ongoing high share of both deposits and loansof over 40%.
Deposits

Loans to individuals
Loans to individuals stood at ¥1,544.5 billion due to theongoing firm performance of housing loans.

Loans

1,500
¥1,326.3 ¥1,317.8

11.72%

15.79%¥1,544.5 ¥1,514.0

1,000

46.03%

Joyo Bank

Joyo Bank

750
500

22.92%

16.58%¥1,437.7 ¥1,418.3

1,250

14.79%

43.14%

17.49%(Billions of yen)

250

7.00%
Joyo Bank
Other regional banks

0

4.54%

City banks/Trust banks
Shinkin banks (credit unions)

As of March 31,
2014

As of March 31,
2015

As of March 31,
2016

Balance of loans to individuals
Balance of loans to local individuals

Other

Note: Market share is calculated on the basis of private financial institutions.

Assets in custody(Billions of yen)(%)
5,000 in custody decreased 4.8% from 100
Assetsthe previous fiscal¥4,982.5¥4,800.6
year-end
to77.0%¥1,035.775.9%
billion.
80
4,000(Billions of yen)

1,200
3,000

200
0

¥3,696.8¥1,089.0¥1,044.0

1,000
2,000
800
1,000
600

0
400

¥3,785.6¥423.3¥388.7¥239.2¥298.1¥53.7
As of March 31, As
of March 31, As of March
31,
¥58.3
2011
2012
2013

As of March 31,
2014

As of March 31,
2015(Billions of yen)

5,000
4,000

¥1,035.7
Balance of loans toregional customers

2,500
2,000

20

¥445.5 of loans
Percentage
to regional customers

2,000
1,000
1,500

¥186.2

42.9%

42.2%
36.5%
¥1,973.6¥2,106.3¥1,719.5

37.2%¥1,833.8¥325.4

500

2011

0

As of March 31,
2016

2012

As of March 31,
2014

Loan balance50

43.4%Balance of loans toregional customers
40¥2,264.0
40
38.2%
Percentage of loans¥1,955.7
to regional customers
30
20
0

2013

As of March 31,
2015

10

As of March 31,
2016

Number of loans to SMEs

(Number of loans)

1,500¥1,316.3¥1,217.1

36,000¥1,410.9(%)

32,995 32,374 100 33,067 32,381
80

24,000¥496.9500¥651.0¥580.5250

18,00060

12,00040

6,000
As of March 31,
2014

Housing loans(Billions of yen)

¥4,800.6

As of March 31,
20150

As of March 31,
201620
As of March 31,
2014

100

0 As of March 31,
2015

As of March 31,
2016

Number of loans to SMEs
Number of loans to regional SMEs

Apartment loans(%)¥4,982.5

33,297 32,517

30,000

1,000
750

20

0

Balance of loans to regional SMEs
Balance of loans to SMEs
Percentage of loans to SMEs to total loans
Percentage of loans to regional SMEs to total regional loans(Billions of yen)

5,000

(%)

60

0
1,000 As of March 31, As of March 31, As of March 31,

Housing loans
Housing loans increased 7.1% from the previous fiscal yearend to ¥1,410.9 billion.

080¥3,785.6¥78.5

Insurance (based on the cumulative total of insurance premium revenue)
Government and other public bonds
Foreign currency-denominated deposits
Investment trust

1,250

75.9%

3,000
3,000

40

0

¥4,800.6
77.0%

(%)

100

¥4,982.5(Billions of yen) ¥3,696.8

Loan balance60¥372.7¥298.8Loans to SMEs

11

(Billions of yen)

5,000

¥4,800.6(%)¥4,982.5

100

BUSINESS HIGHLIGHTS
Support for Overseas Business Expansion

In addition, we also host business conferences to help
our customers expand their sales channels overseas. In
fiscal 2015, this included our co-sponsorship and supportof the FBC Shanghai 2015 manufacturing forum in China,
the Mfair Bangkok 2015 manufacturing forum in Thailand,
and Oishii Japan 2015, an exhibition of Japanese foodand beverages in Singapore, at which we served as anintermediary providing contact and business opportunities
between local companies and our exhibiting customers.

We are also assisting our corporate customers to expand
business overseas through the issuance of local currency
stand-by credit and by providing local information, basedon our business alliances with foreign financial institutions
and government agencies. In February 2016 we formed
one such business alliance with the state authorities ofAguascalientes and Jalisco of the United Mexican States tostrengthen our coordination with foreign banks and various
other institutions.

Overseas Network
Thailand• Kasikorn Bank
• Bangkok Bank

Indonesia• Bank Negara Indonesia (BNI)

Philippines• BDO Unibank

Representative Office

China

Mexico•	Bank ofCommunications• Bank of China•	Jalisco• Aguascalientes

New York

Taiwan•	Chinatrust
Commercial Bank

VietnamIndia•	Foreign Investment Agency• Vietcombank• State Bank of India
Provides information on each country’s domestic banking conditions and offersa variety of financial services, beginning with opening accounts

Representative OfficeJapan• Sompo Japan Nipponkoa Insurance Inc.
• Tokio Marine & Nichido• Mitsui Sumitomo Insurance Company, Ltd.
Manages a variety of overseas business risks• Nippon Export and Investment Insurance (NEXI)	Provides export insurance to manage the risks associatedwith overseas export transactions

Singapore• Nippon Express (Tokyo Branch Office)Offers a full range of logistical services and expertiseJapan• Hitachi Regional Technical Support Center (HITS)	Supports the overseas development of small- to mediumsized businesses in the Hitachi area in the northern part ofIbaraki Prefecture• Secom Co., Ltd.
• SOHGO SECURITY SERVICES CO., LTD. (ALSOK)
	Provides and sells security systems and devices overseas
Proposes and provides overseas security services

Representative Office• Japan Bank for International Cooperation (JBIC)
	Provides information on countries’ domestic banking
conditions and offers a variety of financial services,beginning with opening accounts

12ESG Initiatives
for nursing care, and for employees to take time off whena spouse is transferred to a different location for work. We
also provide allowances for employees to assist with childrearing and childcare.

Joyo Bank conducts a variety of initiatives to help customers and communities from the perspective of ESG,
namely, the Environment, Social (as in regional society), andGovernance, based on the recognition that a company’ssocial responsibilities (CSR) comprise working to bringabout a sustainable society.

Universal Design Initiatives
Communication Tools
All of our bank branches have hearing aids and writingboards to facilitate communication with customers who
have hearing impediments. Some bank branches are also
equipped with comuoon speakers for the hard of hearing.

Environment
Environmental Preservation Initiatives
Joyo Furusato no Mori forestation activities
Joyo Bank participates in Save The Forest In Japan, an association established by regional banks throughout Japanto preserve the beauty and health of the country’s provincial woodlands for future generations. Joyo Bank enteredan Ibaraki Cooperative Forest Partners Pact with Ibaraki
Prefecture and the Ibaraki Forestry Support Center andestablished Joyo Furusato no Mori in Naka City. The Bank is
working to protect and nurture provincial woodlands andto create forests through activities such as forest maintenance and tree planting. In other activities, as a part of theirtraining program, all new employees take part in treeplanting activities in Naka City and the Mt. Tsukuba area.

Financial Consulting Services in Sign Language
At the Tsukuba Loan Plaza, Joyo Bank offers reservationbased financial consulting services in sign language. A
sign language interpreter is available for meetings with afinancial consultant. Joyo Bank holds training sessions for
employees so thatthey are able to conduct basic banking
transactions using
sign language or writing on boards.

Social
Measures to Support Female Employees
Playing Active Roles

Interacting with Local Communities
Financial Education Initiatives
Joyo Bank also engages in initiatives to provide financial
education to children, the leaders of tomorrow, about theimportance of money and the role of banks in society.
The financial classes are a fun way for children to learn
about the history of banknotes, how to use their money
wisely, and interact with our humanoid communication
robot PALRO.

Appointing Female Employees as Bank Officers
We believe that it is extremely important that the perspectives and mindsets of women are integrated into an organization if that organization is to thrive. Accordingly, we
actively appoint talented and motivated female employees
as bank officers.
As of March 31,
2016, we had 316
female bank officers comprising
17.6% of the total.
Expanding Measures to Promote Work-Life Balance
Joyo Bank has advanced measures to promote work-lifebalance so that employees can work more flexibly aroundtheir lifestyles, including child rearing and nursing care.
We have in place systems for employees to take time off

Lifting the equivalent of ¥100 million inbanknotes at the Joyo Historical Materials
Museum13

Humanoid communication robot PALRO

Governance

The Joyo Bank Corporate Philosophy

Corporate GovernanceCorporate Social Responsibly (CSR) and Public Mission
Always keep in mind Joyo Bank’s CSR and public mission, and deepen trust

To more securely earn the trust of all stakeholders including
customers, local communities, employees, and shareholders,
Joyo Bank believes that its management must be rooted
firmly in compliance, sound and efficient, and extremely
fair and transparent. Always aware of the importance ofcorporate ethics, Joyo Bank has established a corporate philosophy comprising eight basic principles under which it isstriving to strengthen and enhance corporate governance.

through sound and open business management.
Compliance
Comply with the legal and social code and execute honest and open business activities.
Fight Against Crime
We will resolutely build countermeasures and refuse all relationships withorganized crime and other antisocial forces, which threaten public law andorder and safety and stand in the way of sound economic development.
Provide Valuable Financial Services
We will contribute to economic and social development with valuable

Corporate Governance at Joyo Bank
Joyo Bank became a company with an Audit & Supervisory
Committee following passage of a resolution to change
the articles of incorporation by the General Meeting of
Shareholders on June 28, 2016. The organization includes theGeneral Meeting of Shareholders, directors, Board of Directors,
Audit & Supervisory Committee, and an auditing company.
The Board of Directors meets once a month, in principle, to exercise decision-making and supervisory functions.
To the extent possible under the scope stipulated by laws
and regulations and the articles of incorporation, decisionmaking and supervisory functions should be separated, andthe chair of the Board of Directors should in principle bea Chairman and non-executive director who ensures highquality discussion during Board of Directors meetings, andoperates them effectively and efficiently.
The Audit & Supervisory Committee consists of fivepeople, all of whom are directors, and three are outside
members. The Committee meets once a month in principle. Based on an auditing policy and plan formulated by thefinancial services that respond to customers’ needs and pay due consideration to the protection of their interests. To this end, we will apply
creativity and ingenuity to provide infrastructure and functions to support
customers’ economic activity, while upgrading the security level of ourservices and ensuring business continuity in the event of a disaster.
Relationship with the Regional Community
We will strive to disclose data such as business information actively andfairly, and to communicate broadly and openly with society.
Respecting the Human Rights of our Employees
We will respect the human rights and individuality of our employees,
ensuring a safe and productive work environment in which people fromdiverse backgrounds can achieve their full potential.
Environmental Initiatives
We will strive to reduce environmental burdens by efficiently using
resources and reducing waste, while working through our main businessas a bank to address environmental problems and provide financial services contributing to environmental protection.
Community Contribution Activities
We recognize that our continued existence and development is supported
by regional society, and as a good corporate citizen, we will develop
together with local communities and actively contribute to them.

(Internal audit)

Corporate Audit Division(Operating execution)(Decision-making/
Management supervision)

General Meetingof Shareholders

Business Section

Board of Directors
Audit &
Supervisory
Committee

Executive Officer
Committee

Business Management Div.
Business Promotion Div.
Government and Municipal Business Div.
Regional Partnership Div.
Treasury and Securities Div.
Markets Administration and International Div.
Credit Examination Div.
Business Innovation Div.

Consult

AdviseOperation Management Div.
Computer System Div.

Corporate GovernanceCommittee

Corporate Risk Management Div.
Corporate Planning Div.
Personnel Div.
General Affairs Div.

Auditing Company

14

Audit & Supervisory Committee, the Audit & Supervisory
Committee members audit the directors’ execution ofduties by attending important meetings, examining documentation of important resolutions, and investigating thestatus of Joyo Bank’s business operations and assets.
Joyo Bank has also adopted the Executive Officer
Committee system to expedite business execution. Under thissystem, important decisions for business execution other thanmatters to be resolved exclusively by the Board of Directors are
discussed and approved by the Executive Officer Committee.
Furthermore, Joyo Bank has established a Corporate
Governance Committee to upgrade corporate governancewith a view to sustaining growth and enhancing corporate
value from a medium- to long-term perspective. As an advisory body to the Board of Directors, composed in majority by independent directors, the Corporate GovernanceCommittee nominates candidates for appointment to theBoard and deliberates matters such as the compensation of
directors, and reports back to the Board of Directors. Special
committees are established by Joyo Bank to deal with
important management themes (Compliance Committee,
General Budget Committee, ALM Committee, Risk
Management Committee, and Sound Asset Committee).
The committees conduct discussions and make determinations, and follow procedures in their respective bylaws toreport their findings and recommendations to the Board of
Directors and other pertinent bodies.

basic guidance for its corporate activities. Moreover, rules
governing the compliance system have been establishedand disseminated to the directors and employees to ensurethat Joyo Bank remains in compliance with laws and regulations and its Articles of Incorporation.
Board of Directors Regulations govern the operation of
Joyo Bank’s Board of Directors. These regulations guide theBoard’s business decisions and supervision of directors’ execution of duties. The regulations also stipulate separation ofduties among directors to ensure that Joyo Bank’s businessis carried out appropriately.
Joyo Bank also has a Compliance and Risk Management
Division to supervise and rigorously enforce compliance.
This division implements a compliance program approvedby the Board of Directors to supervise compliance throughout Joyo Bank and periodically report back to the Boardof Directors. Joyo Bank has also established a Compliance
Hotline that serves as an internal whistleblower system.
Important matters of compliance are discussed by JoyoBank’s Compliance Committee, while a Compliance Audit
Committee comprising a panel of outside experts periodically verifies Joyo Bank’s overall compliance standing.
Independent of Joyo Bank’s business execution divisions, there is also a Corporate Audit Division that conducts
internal audits to ensure Joyo Bank’s internal controls arefunctioning properly.
Regulations and system for managing the risk of loss
Joyo Bank has regulations for managing the risk of loss andaims to manage various risks appropriately and establish
systems for comprehensively monitoring and managing
the risks to ensure sound management and a steady streamof revenue and income. At the same time, Joyo Bank isbuilding up a framework of business continuity plans (BCPs)
in preparation for emergency situations such as natural
disasters and core ICT system failures.
The management of risk is the responsibility of various
risk management departments, as established in the inhouse regulations. Comprehensive risk management is carried out by one department that oversees risk management
for the entire Bank. The Board of Directors has appointed
the director to oversee the risk management program.
The Risk Management Committee was set up to periodically assess Joyo Bank’s overall risk exposure, as well as
measure individual risks and deliberate policies for countering them. The director in charge of risk management

Internal Controls and Risk Management System
Joyo Bank is working to establish and strengthen internal
control to enable the Audit & Supervisory Committee and
Board of Directors to execute their duties and for the JoyoBank Group, including subsidiaries, to conduct appropriate
execution of duties through the following systems, basedon a “Basic Policy on Internal Control Systems ” approvedby the Board of Directors.
System for ensuring directors and employees are
executing their duties in compliance with laws andregulations and Joyo Bank’s Articles of Incorporation
Compliance is the highest management priority under
Joyo Bank’s Management Philosophy of “Practicing soundmanagement, creation of values, and partnership with thehome region.” To ensure compliance, Joyo Bank also has
a Corporate Philosophy and Action Guidelines providing
15

periodically reports back to the Board of Directors on the status of Joyo Bank’s risk management and countermeasures.

to be reassigned, the director in charge is to give advancenotice to the Audit & Supervisory Committee, and the Audit& Supervisory Committee is allowed to give its opinion.
Furthermore, the Audit & Supervisory Committee staff
are to assist the Audit & Supervisory Committee memberswith their duties by exclusively following their instructions.

System for ensuring the efficient execution of duties
by directors
Joyo Bank formulates business plans to clarify its management vision and earnings targets, and compiles a generalbudget, among other details, each fiscal year to make theplans more specific.
To carry out operations efficiently, Joyo Bank has established Standards on Head Office Decision-Making Authoritythat clarify the decision-making authority attached to thebusiness assignments and duties of each director.
Joyo Bank has an Executive Officer Committee andExecutive Officer Committee Regulations prescribing
details such as the committee’s role and when it meets. The
committee is tasked with deliberating important businessexecution matters. Various other committees made up of
executive directors, executive officers, and division generalmanagers have also been established as needed to address
various business issues.

System relating to reports to the Audit & Supervisory
Committee from officers and employees of the JoyoBank Group (excluding directors who are members of
Joyo Bank’s Audit and Supervisory Committee) andother reports to the Audit & Supervisory Committee
Audit & Supervisory Committee members attend the
Executive Officer Committee and other important meetingsof the Joyo Bank Group, at which they are given the opportunity to confirm their opinions.
Officers and employees of the Joyo Bank Group areencouraged to report matters that could cause significant damage to Joyo Bank to the Audit & Supervisory
Committee or Audit and Supervisory Committee members, take advantage of the internal whistleblower system to report the details confidentially and otherwise
provide information considered necessary by the Audit &Supervisory Committee.
Officers and employees are not to be treated unfairly
for having divulged such information to the Audit& Supervisory Committee and Audit & Supervisory
Committee members.

System for ensuring the reliability of financial reporting
Joyo Bank and each of its Group companies have regulations governing the structure, organization, and implementation of internal control systems for financial reporting toensure that it is reliable.
Matters relating to directors and employees whoshould assist the Audit & Supervisory Committee
Joyo Bank is to assign at least one employee as the Audit& Supervisory Committee staff for assisting the Audit& Supervisory Committee members with their duties.
Furthermore, a director responsible for assisting the Audit
and Supervisory Committee will not be appointed.
Furthermore, Joyo Bank is to assign Audit & Supervisory
Committee staff with knowledge and capabilities suitable
for assisting with auditing duties, and having no involvement in Joyo Bank’s business execution.

Matters relating to advances or reimbursements for
expenses incurred by Audit & Supervisory Committee
members when executing their duties (only relating
to the duties of the Audit & Supervisory Committee)
and policy on accounting for the expenses andreimbursements
Joyo Bank is to bear the necessary expenses requested by
the Audit & Supervisory Committee members, unless JoyoBank can prove that the expenses were unnecessary for the
execution of the Audit & Supervisory Committee members’
duties related to the Audit & Supervisory Committee.

Matters relating to the independence of the above
employees from the Board of Directors (excluding
directors who are members of the Audit & Supervisory
Committee) and ensuring that the employees carry out
instructions from the Audit & Supervisory Committee
In the event that Audit & Supervisory Committee staff are

Other systems for ensuring effectiveness of audits
carried out by the Audit & Supervisory Committee
The Audit & Supervisory Committee, Corporate Audit
Division for internal audits, and other business divisions
and departments cooperate with one another to raise the16[Auditing organizations]Audit & Supervisory Committee[Oversight of decision-making]Board of Directors[Compliance report]
Executive Officer Committee[Policy establishing and performance evaluation]
Compliance Committee[Auditing department]
Corporate Audit Division
Supervisory group
Branch audit group
Operations and Asset Auditing Group
Main office[Management]
Compliance and Risk Management Division[Supervision]
Compliance and Supervisory Officer

Group company[Senior Manager] Representative [Manager] Compliance Officer

Head office departments and branches, etc.
[Senior Manager] Supervisor [Administrator] Compliance Officer
External auditing functions[Group company management]
Corporate Planning Division
Group Business OfficeEvaluation and audit[External audit]
Compliance Audit Committee

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
the following 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 Joyo Bank to ensure proper solicitation to our customers.

Risk Management

effectiveness of the auditing system.
Meetings are held periodically between the Chairmanof the Board of Directors, Joyo Bank’s representative directors, the auditing company and the Audit & Supervisory
Committee to exchange opinions.

On one hand, deregulation and globalization of finance,
advances in ICT, and the growing diversification and sophistication of customer needs have broadened the business

17

Risk Management System
Risk Management
Committee
ALM Committee

Credit Risk
Management
Dept.

Market Risk
Management
Dept.

Board of Directors

Internal Auditing Dept.

Integrated Risk Management Dept.

Verification of suitability
and validity of the risk
management system

Liquidity Risk
Management
Dept.

Operational Risk Management Office

Administrative
Risk
Management
Dept.

System Risk
Management
Dept.

Personal
Management
Risk
Management
Dept.

Tangible
Assets Risk
Management
Dept.

Compliance(legal)Risk
Management
Dept.

Business Promotion Departments, Administrative Control Departments, Group Companies

opportunities for Joyo Bank. However, on the other hand,
this has also meant that Joyo Bank’s risk exposures havegrown much more diversified and complex. Amid this environment, Joyo Bank is striving to increase the sophisticationof its risk management, having positioned it as a priority
business issue from the perspective of maintaining andimproving sound management.

supervision department, which supervises the management systems for all risks and is responsible for holding
meetings of the Risk Management Committee, an organ
for the examination of Bank-wide solutions to risks. The
department also provides regular reports on the overall
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 and each risk management
related department, thereby increasing the effectiveness ofthe system.

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
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

Integrated Risk Management
At a time of increasing diversification and complexity inbanking operations, we have adopted a policy of integrated
risk management to gain a quantitative understanding ofrisk, using statistical methods such as Value at Risk (VaR)
for individual risk categories (credit risk and market risk), toenable systematic risk management rather than management by individual risk category. By comparing and contrasting comprehensive amounts at risk with Joyo bank’s
financial resources (own capital), we are committed tomaintaining capital at an appropriate level.
18

Allocation of Risk Capital
We pre-allocate capital to cover risk in terms of individual
categories (credit risk, interest-rate risk, price fluctuation risk
and operational risk). Each month, we carry out monitoring
to confirm that each quantified risk amount (amount ofrisk capital to be used) is kept within the allocated capital
parameters.
With regard to capital allocation, we ensure a risk buffer is in place to position us to deal with losses that exceed
scenarios used by our statistical tools, or which are difficult to quantify using statistical methods. To confirm ourcapital adequacy including the risks mentioned above, we
use stress tests that enable us to appraise the impact on
Bank capital of scenarios such as a sudden economic slowdown. In addition, back-testing through comparison of risk
amounts calculated using VaR formulas and actual profit
performance enables us to confirm the appropriatenessand effectiveness of our statistical methods..

Credit Risk

Credit Risk
Interest-rate
Risk
Price
Fluctuation Risk
Operational
Risk(Risk Capital)

Stress Test

Interest-rate
Risk
Price
Fluctuation Risk
Operational
Risk(Allocated Resource) (Capital Allocation)• Internal Credit Ratings
We classify our customers into a 12-grade rating class basedon quantitative appraisal of financial condition and cash
flows, and qualitative appraisal. In addition to serving as
the basis for asset self-assessments, ratings for customers’
credit worthiness are used across the full range of credit risk
management, including monitoring of credit risk exposure,setting of lending rate and allocation of lending authority.

MarginRisk Buffer
Shareholders’Equity(Tier I basis)

Credit Risk Management for Individual Loans
We have separated credit-screening departments fromloan departments, and constantly work toward screening
more strictly while also focusing on credit management
before due date to prevent the status of a claim fromdeteriorating.
We have created a set of basic parameters for loans,designed to speed up decision-making on loans and toensure more rigorous risk management. We also have a system for accurately reflecting in the asset self-assessments
the business performance achieved by the borrower andchanges in the value of collateral.
We have also adopted an automated scoring system forsmall-amount loans to unify credit screening standards andimprove efficiency.

Risk
Exposure
Under
Stress• Asset Self-Assessment
In asset self-assessments to evaluate the soundness ofassets, the branches carry out a primary evaluation by

Credit Risk Management

making a decision on credit category based on a credit rating. Then the head office department in charge of credit
screening checks these (secondary assessment), and the
Corporate Audit Division audits the results of the asset selfassessment and verifies the appropriateness of procedures.
Based on these results, Joyo Bank provides appropriate
reserves and writes down problem loans based on theassessments.

Credit Risk
Credit risk is the risk of not receiving principal or loan payments as promised on loans due to a deterioration in credibility of the debtor. This is recognized as one of the mostserious risks make within banking operations.
In order to prevent the occurrence of nonperforming
loans and improve the soundness of our assets, we makeevery effort to ensure good credit risk management.

• Quantification of Credit Risk Management

Overview of Basic Policy and Procedures with Regard
to Credit Risk Management
We have compiled management guidelines for credit risk,
which serve as a basic policy for appropriate managementof credit risk on individual loans and management of thecredit portfolio, focusing on risk dispersion as its basic tool.

The quantification of credit risk management refers to thestatistical forecasting of future losses (amount of credit risk)that can be expected from the bankruptcy or deteriorationof business at borrowers. Based on credit ratings, we calculate credit risk for each customer in view of the security andother factors.
19

Loan Portfolio Management
We treat loan assets in their entirety as a single portfolio
and conduct credit risk management from a macroperspective. Based on the quantification of credit risk, we
carry out periodic monitoring to determine whether or notcredit risk is concentrated in specific rating groups, sectors
or corporate groups, and analyze and evaluate credit situations by rating, region, and sector.

or a sharp rise in fund-procurement costs. At Joyo Bank,
maintaining liquidity risk at a safe and appropriate level is abasic management policy. As a matter of policy, we maintain a certain level of assets that can be quickly converted
into liquid form (liquidity reserve assets), and ensure thatany funding gap for a given period of time (the amountnecessary for fund procurement) is kept within the parameters of assets that can be quickly converted into liquid form.
In addition to continuous monitoring of market trends andliquidity status, we are creating a system enabling us torapidly respond, to the fullest possible degree, in cases ofmaterialization of liquidity risk events, based on countermeasures drawn up for emergency situations.

Market Risk Management
Market risk refers to the possibility of losses arising fromexposure to risk of change in the value of assets and liabilities of Joyo Bank and in its earnings, due to fluctuations ininterest rates, foreign exchange rates, and stock prices, etc.
We manage all assets and liabilities (deposits, loans,securities, and others) comprehensively based on ALM(asset and liability management) to manage market risks.

Operational Risk Management
Operational risk refers to the risk of losses arising from
irregular procedures or employee conduct in operations,or inappropriate system operation or detrimental external
events. Joyo Bank divides such risk into five categories:
administrative risk, system risk, risk to tangible assets, personnel management risk, and compliance (legal) risk.
We have also established a management office for eachrisk category, as well as supervision of overall operationalrisk measures.

Market Risk Management System
The front and back office departments are separated. We
have also established middle-office risk management sections to enable a mutual system of checks and balances.
Market Risk Control
To control market risk at appropriate levels, we set loss
limits, position limits, and other thresholds for each category of transaction, after setting risk tolerance parameters(capital allocation) reflecting Joyo Bank’s financial strength,risk-return profile, and other factors. We also have in placea system in which an ALM Committee decides whether
to conduct checks on status of compliance with monthly
thresholds and other matters and takes measures whennecessary.
In addition to using VaR, we also approach market risk
with multifaceted analysis using tools such as basis pointvalue (BPV) analysis, gap analysis, scenario analysis (simulation method), and sensitivity analysis. This enables us
to control risks within a tolerable range reflective of JoyoBank’s financial strength.

Administrative Risk
Administrative risk is the risk of damages due to improper
administration resulting in accidents or improprieties. We
have taken steps to uphold and improve the quality of ouradministrative operations, to ensure that customers are notinconvenienced by inappropriate administrative management and that administrative management is as error-freeand prompt as possible.
In addition to analyzing and evaluating the circumstances, causes, and processes surrounding administrative
mistakes, we verify the effectiveness of countermeasures
after their introduction and repeat them as often as necessary to ensure that the problem is resolved. We are drawing
up regulations for administrative processes, and ensuring
their strict application by all staff from executives down
through guidance and training. We are also verifying theeffectiveness of internal audits and taking steps to preempt
accidents.

Liquidity Risk Management
Liquidity risk refers to the possibility of losses arising fromexposure to risk due to difficulty in securing needed funding after an unforeseen funding outflow or similar events,

20

System Risk
System risk is the risk of losses due to the breakdown ofcomputer systems, erroneous computer operation, andinappropriate computer use. Measures to ensure appropriate management of such risk is based on protection of dataand ensuring stable operation of computer systems.

Listening Attentively to Customer Feedback
Management of customer queries, consultation, requests,
complaints and disputes is undertaken on an integrated
basis by the Customer Counseling Office in the Business
Management Division. We have in place a system for discussing measures for improvement and for prevention ofissues arising within the operational departments. We havealso signed agreements with designated dispute settlement organizations and also work through external entities
to reach settlements.

Tangible Assets Risk, Human Resources Risk andCompliance (Legal) Risk
Risk to tangible assets (inadequate precautions to prevent
damage from earthquakes and neglect of building management), personnel management risk relating to safety
and hygiene at the workplace, and compliance risk (legalityof business, illegal behavior by any executives and employees) are addressed through appropriate measures after
identification and evaluation using methods to gauge risk
scale and features, and the effect of risk reduction measuresis later assessed.

Ensuring Strict Confidentiality in the Management of
Customer Information
We ensure strict confidentiality in our management of customers’ personal data. We have drawn up detailed in-houserules for the handling of customer information, practicing
strict control of data access and office access as well as theencryption of confidential information. In these ways, we
protect our customers from the leakage of their personal
information to outside parties as a result of misconduct orhuman error.

Crisis Management
We have established a set of general emergency guidelines
providing specific measures for dealing with situations suchas major disasters, system failures and reputational damage,and for minimizing disruption of relations with business
partners. We aim to strengthen our crisis management
through continuous training and upgrading of procedures.

Protection of Confidential Private Information
We have drawn up and made public a privacy policy as a
response to the protection of private information, and have
put in place safeguards for the protection and appropriate
handling of personal information.

Customer Protection

Privacy Policy

To ensure peace of mind for our customers, Joyo Bank
established the Customer Protection Management Policy,
and is developing a management system that includes theestablishment of a controlling division.

For the protection of personal data, personal numbers or
specific personal information (hereinafter, the personal
numbers and specific personal information are referred toas “specific personal information”), we have established thefollowing policy based on our respect for all individuals,
and pledge to put all our efforts into the protection of private information and specific personal information.

Adequate Explanations of Products and Services
We always provide explanations of our financial products
and services to ensure that customers understand the
products or services adequately. We are working to further
improve the quality of explanations by perfecting our staff’s
knowledge of financial products and services, so they canenable customers to understand them more easily.

21

Policy for Protection of Personal Confidential Information• Strict compliance with laws and regulations

outsourcing arrangement, we require that protection standards for personal information and specificpersonal information be contractually assured andmanaged safely, and carry out checks.

	We comply with all laws, ordinances, and otherregulations regarding confidentiality of personal
information and specific personal information.

• Security management measures• Appropriate access	We have in place appropriate security management
mechanisms to ensure prevention of illegal access,leakage, loss or destruction of personal informationor specific personal information. In addition, we
conduct appropriate supervision of employees or
outside organizations (including subcontractors andthe like) who are entrusted to handle personal information or specific personal information.

	We acquire personal information and specific personal information only by appropriate and legal
methods, and only when necessary for business
operations. Personal information is never gatheredin an inappropriate way.
• Ban on unapproved use of personal information
	We only use personal information and specific personal information in as much as it is necessary forachievement of business objectives, and do not use
such information for any other purpose. In addition,
we use specific personal information within thescope of purposes of use permitted under laws andordinances. Moreover, we use information that isregistered with credit-data organizations of which
we are a member where appropriate for creditrelated purposes.

• Appropriate response to complaints	When customers have questions or complaints
regarding our protection of personal information or
specific personal information, we investigate thesequestions or complaints and deal with them appropriately and promptly, within a reasonable period oftime.
• Continuous improvement
	Joyo Bank has compiled regulations for protectionof personal information and specific personal information. In addition to ensuring that these measures
are familiar to all employees and other affected parties, Joyo Bank continually upgrades them. Regular
audits into acquisition, use and provision of personal
information and specific personal information arepart of our broad and thorough commitment toconfidentiality.

• Ban on provision of personal information to third
parties	Except when prescribed by laws and ordinances, wenever provide personal information to third parties
without first obtaining the affected person’s agreement. In addition, except when prescribed by laws
and ordinances, specific personal information isnever provided to third parties. Moreover, when personal information and specific personal informationis entrusted to an outside organization under an

Financial Crime Prevention
We are fully committed to preventing crimes involving accounts held at our banks, including preventing remittance fraud, theuse of forged ATM cards, online hacking, and to protecting the financial assets of our customers.

22Consolidated Financial Statements

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

2016

2015

Thousands of
U.S. dollars (Note 2)
2016

Assets:Cash and due from banks (Notes 3 (z) and 24)
Call loans and bills purchased
Other debt purchased (Note 25)
Trading assets (Note 25)
Securities (Notes 7, 8, 13, 24 and 25)
Loans and bills discounted (Notes 6, 9, 11 and 24)
Foreign exchanges (Note 6)
Lease receivables and lease investment assets (Note 7)
Other assets (Note 7)
Tangible fixed assets (Notes 3 (x) and 19)
Intangible fixed assets
Net defined benefit asset (Note 14)
Deferred tax assets (Note 15)
Customers’ liabilities for acceptances and guarantees
Reserve for possible loan losses
Reserve for devaluation of investment securities
Total assets¥  442,713
2,000
9,977
5,918
2,736,884
5,869,596
4,241
42,50264,583
94,300
9,936
—
1,986
14,727(40,659)(9)¥9,258,701¥  496,348
14,356
12,5094,999
2,742,510
5,618,019
3,296
38,571
52,71994,961
10,5701,438
1,966
14,961(41,765)(9)¥9,065,458$ 3,928,946
17,74988,54352,52324,289,004
52,090,849
37,640377,199
573,161
836,886
88,187—
17,628130,701(360,840)(79)$82,168,102

Liabilities and net assets:
Liabilities:
Deposits (Notes 7 and 24)
Call money and bills soldPayables under securities lending transactions (Notes 7 and 24)
Trading liabilities
Borrowed money (Notes 7, 10 and 24)
Foreign exchanges
Bonds (Note 12)
Bonds with warrant attached (Note 12)
Due to trust account
Other liabilities (Note 10)
Reserve for director’s bonuses
Net defined benefit liability (Note 14)
Reserve for directors’ retirement benefits
Reserve for reimbursement of dormant deposits
Reserve for frequent users services
Reserve for losses on interest refunded
Reserve for other contingent losses
Reserves under the special laws
Deferred tax liabilities (Note 15)
Deferred tax liabilities for land revaluation (Note 3 (x))
Negative goodwill
Acceptances and guarantees
Total liabilities¥8,111,153
45,560130,247895
174,118886
15,00033,804
13
78,62748
15,475
38
2,354
145
6
1,045
2
31,295
9,526
1,659
14,727
8,666,631¥7,725,643
44,324
143,395
160
345,388551
15,00036,051
13
66,084
62
7,997
39
2,164
138
7
1,169
2
48,507
10,136
1,817
14,961
8,463,618$71,983,963
404,332
1,155,909
7,947
1,545,249
7,864
133,120300,000
117
697,793432
137,343
341
20,892
1,290
55
9,280
17
277,738
84,544
14,725
130,701
76,913,662

Net assets (Note 21):
Common stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity (Note 16)
Unrealized gains on available-for-sale securities (Note 25)
Deferred losses on hedging instruments, net of taxes
Land revaluation excess, net of taxes (Note 3 (x))
Remeasurements of defined benefit plans (Note 14)
Total accumulated other comprehensive income
Equity warrants
Non-controlling interests
Total net assets
Total liabilities and net assets   85,113
58,574
333,964(21,569)
456,082
135,031(3,073)13,002(10,667)
134,293
132
1,562
592,070¥9,258,701   85,113
58,574
311,093(21,619)
433,160
159,909(1,725)
12,666(3,756)167,094
147
1,437
601,840¥9,065,458   755,352
519,826
2,963,831(191,423)
4,047,586
1,198,361(27,273)
115,396(94,670)
1,191,815
1,175
13,8635,254,439$82,168,102

Millions of yen
March 31,

See accompanying notes to the consolidated financial statements.

23

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

2016

2015

Thousands of
U.S. dollars (Note 2)
2016¥ 96,245
66,35929,208676
26,5392,211
9,556
28,847
163,400¥ 95,952
67,78827,455708
26,297
1,842
5,240
28,574
157,906$  854,144
588,919259,218
6,006
235,533
19,62684,808
256,016
1,450,129

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
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 (Note 17)
Other expenses (Note 18)
Total expenses
Profit before income taxes
Income taxes:
Current
Deferred (Note 15)
ProfitProfit attributable to non-controlling interests
Profit attributable to owners of parent

6,577
2,650
1,219
2,707
6,477
4,163
70,78428,365
116,368
47,032

5,120
2,395
903
1,821
7,490
2,263
72,161
24,926111,963
45,94358,36923,52010,82324,02557,48336,952
628,189
251,736
1,032,731
417,398

13,937
1,925
31,169135¥ 31,034

12,497
4,517
28,927247¥ 28,680

123,687
17,088276,622
1,202$275,420

Earnings per share (in yen and dollars) (Note 30)¥  42.93¥  39.48$   0.38

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

2016

2015

Thousands of
U.S. dollars (Note 2)2016¥ 31,169(32,649)(24,888)(1,348)498(6,911)¥ (1,479)¥ 28,927
76,78273,489
347
1,045
1,900
¥105,710$ 276,622(289,753)(220,878)(11,963)
4,423(61,334)$ (13,130)¥ (1,605)
125¥105,438
271$ (14,244)
1,113

Millions of yen
Years ended March 31,

ProfitOther comprehensive income (Note 20):
Unrealized gains on available-for-sale securities
Deferred gains (losses) on hedging instruments, net of taxes
Land revaluation excess, net of taxes (Note 3 (x))
Remeasurements of defined benefit plans (Note 14)
Comprehensive income(Attributable to)Shareholders of parent
Non-controlling interests
See accompanying notes to the consolidated financial statements.

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

2016

2015

Thousands of
U.S. dollars (Note 2)
2016

Shareholders’ equity:
Common stock:
Balance at end of the previous year
Changes during the year
Total changes during the year
Balance at end of the current year

¥ 85,113——¥ 85,113¥ 85,113——¥ 85,113$  755,352——$  755,352

Capital surplus:
Balance at end of the previous year
Changes during the year
Total changes during the year
Balance at end of the current year

¥ 58,574——¥ 58,574¥ 58,574——¥ 58,574$  519,826——$  519,826¥311,093—
311,093¥300,506(748)
299,757$2,760,854—
2,760,854(8,312)
31,034(12)—
161
22,871¥333,964(6,622)
28,680(3)(11,283)564
11,335¥311,093(73,770)
275,420
(108)
—
1,435
202,976$2,963,831¥ (21,619)¥ (21,079)$ (191,866)

(28)
78
—
49
¥ (21,569)(11,842)
19
11,283(539)¥ (21,619)

(250)
693
—
442
$ (191,423)¥433,160—
433,160¥423,113(748)
422,364$3,844,166—
3,844,166(8,312)
31,034
(28)
65
—
161
22,921¥456,082(6,622)
28,680(11,842)16—
564
10,795¥433,160(73,770)
275,420
(250)
585
—
1,435
203,419$4,047,586¥159,909¥ 86,445$1,419,151(24,878)(24,878)¥135,031

73,46473,464¥159,909(220,789)(220,789)$1,198,361

Millions of yen
Years ended March 31,

Retained earnings:
Balance at end of the previous year
Cumulative effects of changes in accounting policies
Restated balance
Changes during the year:
Cash dividends
Net income
Disposal of treasury stock
Retirement of treasury stock
Transfer from land revaluation excess
Total changes during the year
Balance at end of the current year
Treasury stock:
Balance at end of the previous year
Changes during the year:
Purchase of treasury stock
Disposal of treasury stock
Retirement of treasury stock
Total changes during the year
Balance at end of the current year
Total shareholders’ equity:
Balance at end of the previous year
Cumulative effects of changes in accounting policies
Restated balance
Changes during the year:
Cash dividends
Net income
Purchase of treasury stock
Disposal of treasury stock
Retirement of treasury stock
Transfer from land revaluation excess
Total changes during the year
Balance at end of the current year
Accumulated other comprehensive income:Unrealized gains on available-for-sale securities:
Balance at end of the previous year
Changes during the year
Net changes in items other than shareholders’ equity
Total changes during the year
Balance at end of the current year

25

2016

2015

Thousands of
U.S. dollars (Note 2)2016¥ (1,725)¥ (2,072)$  (15,309)(1,348)(1,348)¥ (3,073)347347¥ (1,725)(11,963)(11,963)$  (27,273)¥ 12,666¥ 12,184$  112,408

336
336¥ 13,002

481
481¥ 12,666

2,988
2,988
$  115,396¥ (3,756)¥ (5,656)$  (33,335)(6,911)(6,911)¥ (10,667)

1,900
1,900
¥ (3,756)(61,334)(61,334)$  (94,670)¥167,094¥ 90,900$1,482,914(32,801)(32,801)¥134,293

76,19476,194¥167,094(291,099)(291,099)$1,191,815¥    147¥    113$    1,305

(14)
(14)
¥    13233
33¥    147

(130)
(130)
$    1,175¥  1,437¥  2,843$   12,758

124
124¥  1,562(1,405)(1,405)¥  1,437

1,104
1,104
$   13,863¥601,840—
601,840¥516,971(748)
516,222$5,341,144—
5,341,144(8,312)
31,034
(28)
65
—
161
(32,691)(9,769)¥592,070(6,622)
28,680(11,842)16—
564
74,821
85,617¥601,840(73,770)
275,420
(250)
585
—
1,435
(290,124)(86,705)$5,254,439

Millions of yen
Years ended March 31,

Deferred losses on hedging instruments, net of taxes:
Balance at end of the previous year
Changes during the year
Net changes in items other than shareholders’ equity
Total changes during the year
Balance at end of the current year
Land revaluation excess, net of taxes:
Balance at end of the previous year
Changes during the year
Net changes in items other than shareholders’ equity
Total changes during the year
Balance at end of the current year
Remeasurements of defined benefit plans:
Balance at end of the previous year
Changes during the year
Net changes in items other than shareholders’ equity
Total changes during the year
Balance at end of the current year
Total accumulated other comprehensive income:Balance at end of the previous year
Changes during the year
Net changes in items other than shareholders’ equity
Total changes during the year
Balance at end of the current year
Equity warrants:
Balance at end of the previous year
Changes during the year
Net changes in items other than shareholders’ equity
Total changes during the year
Balance at end of the current year
Non-controlling interests:
Balance at end of the previous year
Changes during the year
Net changes in items other than shareholders’ equity
Total changes during the year
Balance at end of the current year
Total net assets:
Balance at end of the previous year
Cumulative effects of changes in accounting policies
Restated balance
Changes during the year:
Cash dividends
Net income
Purchase of treasury stock
Disposal of treasury stock
Retirement of treasury stock
Transfer from land revaluation excess
Net changes in items other than shareholders’ equity
Total changes during the year
Balance at end of the current year
See accompanying notes to the consolidated financial statements.

26

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

Millions of yen
2016
2015

Years ended March 31,

Thousands of
U.S. dollars (Note 2)
2016

Cash flows from operating activities:
Profit before income taxes
Depreciation
Impairment losses
Gain on negative goodwill
Amortization of negative goodwill
Net decrease in reserve for possible loan losses
Net decrease in reserve for devaluation of investment securities
Net increase (decrease) in reserve for bonuses to directors and corporate auditors
Net decrease (increase) in net defined benefit asset
Net increase (decrease) in net defined benefit liability
Net increase (decrease) in reserve for directors’ retirement benefits
Net increase in reserve for reimbursement of dormant deposits
Net increase in reserve for frequent users services
Net decrease in reserve for other contingent losses
Net increase (decrease) in reserve for losses on interest refundedInterest and dividend income
Interest expenses
Net losses (gains) related to securities transactions
Foreign exchange losses (gains), net
Losses on disposal of tangible fixed assets
Net increase in trading assets
Net increase in trading liabilities
Net increase in loans and bills discounted
Net increase in deposits
Net increase in negotiable certificates of deposit
Net increase (decrease) in borrowed money excluding subordinated borrowings
Net decrease (increase) in due from banks excluding cash equivalents
Net decrease (increase) in call loans and others
Net increase (decrease) in call money and bills soldNet increase (decrease) in payables under securities lending transactions
Net increase in foreign exchange (assets)
Net increase in foreign exchange (liabilities)
Net increase in lease investment assets
Net decrease in due to trust accountInterest and dividends received
Interest paid
Others, net
Subtotal
Income taxes paid
Net cash provided by (used in) operating activities¥ 47,032
6,173
208
—
(158)
(1,106)
—
(13)
1,438
7,478
(1)
189
6
(123)
(1)
(103,468)
6,577(5,953)20,018
444
(918)
734
(251,576)
372,864
12,644(171,269)(43,084)
14,8891,235(13,147)(944)
334(3,931)(0)
103,618(6,756)(23,741)(30,307)(11,713)(42,020)¥ 45,943
5,710
1,020
(1,335)(158)(5,150)(26)
13(1,438)
(836)
0
170
10
(336)
4
(103,319)
5,120
1,658
(35,769)
102(1,612)19(254,630)
235,695
15
132,539
11,383(5,024)(27,515)
37,399(1,045)198(2,489)(5)
102,982(5,367)680
134,608(13,624)
120,983$   417,398
54,787
1,851—(1,402)(9,815)—(121)
12,766
66,366(9)
1,682
60(1,094)(9)(918,254)
58,369(52,833)
177,661
3,946(8,152)6,520(2,232,666)
3,309,056
112,217(1,519,966)(382,365)
132,138
10,968(116,682)(8,381)
2,966(34,890)(3)
919,580(59,958)(210,698)(268,966)(103,952)(372,919)

Cash flows from investing activities:
Purchases of securities
Proceeds from sale of securities
Proceeds from redemption of securities
Purchases of tangible fixed assets
Proceeds from sales of tangible fixed assets
Purchases of intangible fixed assets
Purchases of subsidiary stock
Net cash provided by (used in) investing activities(881,587)
606,454
233,760(3,482)494(1,990)—(46,350)(863,354)
736,166
287,759(4,665)
1,941(2,259)(339)
155,249(7,823,813)
5,382,096
2,074,555(30,909)
4,387(17,667)—(411,350)

Cash flows from financing activities:
Repayments of subordinated borrowings
Proceeds from issuance of bonds with warrant attached
Purchases of treasury stock
Proceeds from sales of treasury stock
Cash dividends paid
Cash dividends paid to non-controlling interests
Net cash provided by (used in) financing activities
Translation adjustment for cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year (Note 3 (z))

—
—
(28)
7
(8,312)(1)(8,334)(13)(96,719)
493,433¥ 396,713(5,400)30,674(11,842)3(6,622)
(2)
6,810
27
283,070
210,363¥ 493,433

—
—
(250)
63
(73,770)(8)(73,965)(121)(858,357)
4,379,070$ 3,520,713

See accompanying notes to the consolidated financial statements.

27

Notestotothe
theConsolidated
ConsolidatedFinancial
FinancialStatements
Statements
Notes
THE
JOYO
BANK,
and Consolidated
Subsidiaries
THE
JOYO
BANK,
LTD.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 accepted in 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 of Japan, 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 not necessarily
agree with the sums of the individual amounts. Solely for the convenience of the reader, the U.S. dollar amounts represent atranslation of the Japanese yen amounts at ¥112.68 = US$1.00, the exchange rate prevailing on March 31, 2016.

3. Significant Accounting Policies(a) Consolidation
The accompanying consolidated financial statements include the accounts of the Bank and nine major subsidiaries (together, the“Group”).
There are no unconsolidated subsidiaries. There are no unconsolidated subsidiaries and affiliates that are accounted for by theequity method. Four affiliates, Ibaraki-kizuna Investment Limited Partnership, Ibaraki New Industry Creation Investment Limited
Partnership, Ibaraki Creation Investment Limited Partnership and Ibaraki Revitalization Investment Limited Partnership, are notaccounted for under the equity method because the amounts of net income, retained earnings and accumulated othercomprehensive income of the affiliate are immaterial, and as such, it does not have any significant impacts on the consolidated
financial statements when excluded from the scope of equity method.
All significant intercompany transactions have been eliminated in consolidation. Assets and liabilities held by consolidated
subsidiaries are stated at fair value at a time of acquisition.
(b) Consolidated subsidiaries’ closing dateClosing date of nine consolidated subsidiaries is March 31.
(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 market-related indices or from arbitrage between markets) are valued at market or fairvalue, and have been included in trading assets and trading liabilities on a trade date basis. Gain or loss on such trading transactions
are reflected as trading income or trading expenses in the consolidated statements of income.
Among the trading assets and liabilities, securities and monetary claims 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.
Trading income or trading expenses include interest received or paid during the fiscal year. The year-on-year valuationdifferences of securities and monetary claims are also recorded in the above-mentioned accounts. As for the derivatives, assumingthat the settlement will be made in cash, the year-on-year valuation differences are also recorded in the above-mentioned accounts.
(d) Securities
Securities other than trading securities have been accounted for by the following methods:
Marketable debt securities held to maturity are stated at amortized cost by the moving-average cost method. Equity shares andinvestment trusts listed on Japanese markets are stated at fair value based on their average market prices over the month prior to
the balance sheet date. (Acquisition cost is basically calculated by the moving-average cost method.) Other listed securities arestated at fair value based on the market prices prevailing on the balance sheet date. (Acquisition cost is basically calculated by themoving-average cost method.) Other available-for-sale securities which are extremely difficult to determine the fair value are statedat cost or amortized cost by the moving-average cost method.
Unrealized gain or loss on available-for-sale securities (net of the related tax effect) has been reported as a component of net
assets.

128(e) Derivatives
Derivatives positions held by the Group (not including transactions for trading purposes) are stated at fair value.
(f) Depreciation of tangible fixed assets
Depreciation of tangible fixed assets held by the Bank is calculated by the straight-line method. The estimated useful lives are as
follows:
Buildings: 6~50 years
Other: 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 the assets.
Depreciation of intangible fixed assets is calculated using the straight-line method. Software for internal use is depreciated using
the straight-line method over its estimated useful life (mainly 5 years).
Depreciation of lease assets in “Tangible fixed assets”, which are the finance leases other than those that transfer the ownershiplease property to the lessee is calculated using the straight-line method over the lease term with zero residual value unless residual
value is guaranteed by the corresponding lease contracts.
(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 of bankruptcy, special liquidation, etc.) or who are substantiallybankrupt, a reserve is provided based on the amount of the claims, net of the amounts expected to be collected by the disposal ofcollateral or as a result of the execution of guarantees.
For claims to debtors who are not currently bankrupt, but are likely 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 becollected by the disposal of collateral or as a result of the execution 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 the branches 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 the Business Section, subsequently conducts audits of suchassessments, and a reserve is provided based on the audit results.
The reserves of the consolidated subsidiaries are provided for general 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 are legally or substantially bankrupt, the amounts of the claims deemed
uncollectible in excess of the estimated value of the collateral or guarantees have been written off in aggregate amounts of ¥15,772
million and ¥16,905 million as of March 31, 2016 and 2015, 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
In calculating the projected benefit obligation, the benefit formula basis is used to attribute the expected benefit attributable to therespective fiscal year.
Prior service cost is deferred and amortized using the straight-line 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 for directors’ bonuses
Reserve for directors’ bonuses represents estimated cost of directors’ (including executive officers) bonuses attributable to the fiscal year.

(k) Reserve for directors’ retirement benefits
Reserve is made for the payments of retirement allowances to directors and corporate auditors of the consolidated subsidiaries
based on an estimate of the amount attributable to the fiscal year.

229

(l) 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.
(m) 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 recorded in
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.
(n) Reserve for losses on interest refunded
One consolidated subsidiary provides a provision for losses on interest 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 the Interest Limitation Law.
(o) Reserve for contingent losses
The Bank makes reserve for possible losses on loans guaranteed by the credit guarantee corporations in an amount deemednecessary based on estimated losses in the future, calculated using historical default rates after exclusion of contingent losses
covered by other reserves.
(p) Reserves under special laws
The reserve under the special laws is a reserve for contingent liabilities and provided for compensation for losses fromsecurities-related transactions or derivative transactions in the amount of ¥2 million and ¥2 million as of March 31, 2016 and 2015,
pursuant to Article 46-5-1 of the Financial Instruments and Exchange Act and Article 175 of the related cabinet order.
(q) Negative goodwill
Negative goodwill is amortized using the straight-line method over 20 years.
(r) Deferred charges
Stock issuance costs are charged to expenses as incurred.
(s) Translation of foreign currencies
Foreign currency-denominated assets and liabilities of the Bank are translated into Japanese yen at the rates prevailing at thebalance sheet date. Foreign currency-denominated assets and liabilities held by consolidated subsidiaries are translated into
Japanese yen principally at the rates prevailing at the respective balance sheet dates.
All consolidated subsidiaries have a fiscal year end of March 31.
(t) Leases
As for finance lease transactions that do not transfer ownership of the leased property and which commenced prior to April 1, 2008,
their treatment was as follows.
As a lessor
In line with the stipulations of Article 81 of the Guidance on Accounting Standard for Lease Transactions (the Accounting Standards
Board of Japan (“ASBJ”) Guidance No. 16, March 25, 2011), book value (after deduction of accumulated depreciation) of leaseassets included in tangible fixed assets and intangible assets as of the previous balance sheet date (March 31, 2008) was recorded
as the initial balance of “Lease receivables and lease investment assets.
(u) Recognition of income on finance lease
As a lessor income and expense are recognized when lease receivables are collected as for finance lease transactions that do nottransfer ownership of the property.
(v) Hedging
Hedging against interest rate risks
The deferred method of hedge accounting is applied to transactions to hedge against the interest rate risks associated with
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” (the Japanese Institute of Certified Public Accountants (“JICPA”)
Industry Audit Committee Report No. 24, February 13, 2002).

3
30

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 (deposits or loans) and the hedging instruments (interest swaps) by their maturity. As to cash flow
hedges, the Bank assesses the effectiveness of such hedges in fixing cash flows by verifying the correlation between the hedged
items and the hedging instruments.
Hedging against foreign exchange fluctuation risks
The deferred method of hedge accounting is applied to transactions to hedge against the foreign exchange fluctuation risks
associated with monetary assets and liabilities denominated in foreign currencies, in accordance with the regulations set out in the“Accounting and Auditing Treatment of Accounting Standards for Foreign Currency Transactions in the Banking Industry” (JICPA
Industry Audit Committee Report No. 25, July 29, 2002).
To minimize the foreign exchange fluctuation risks on monetary assets and liabilities, the Bank engages in currency swaps,
foreign exchange swaps, and similar transactions. The effectiveness of these transactions in the hedging of the foreign exchangerisks of monetary assets and liabilities denominated in foreign currencies is assessed through comparison of the foreign currency
position of the hedged monetary assets and liabilities, with that of the hedging instruments.
When certain criteria are met, exceptional accrual method for interest rate swap is applied to some assets and liabilities held by
the Bank and its consolidated subsidiaries.
(w) Consumption tax
Consumption tax is excluded from transactions reported by the Group. However, non-deductible consumption tax on tangible fixed
assets is charged to income as incurred.
(x) Land revaluation excess
In accordance with the Law concerning the Revaluation of Land (Act No. 119, effective March 31, 1998), the Bank revalued the land
held for its operations on March 31, 1998. The net unrealized gain is presented in net assets net of the applicable income taxes asland revaluation excess, net of taxes.
The difference between the carrying amount and the fair value of premises revalued pursuant to Article 10 of the Law was¥28,487 million and ¥28,950 million as of March 31, 2016 and 2015, respectively.
(y) Earnings per share
The computation of earnings per share of common stock is based on the weighted average number of shares outstanding during
each year.
(z) 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 of Japan as well as the time deposits of certain consolidated subsidiaries.
Millions of yen
2016

March 31,2015

¥442,713

Cash and due from banks
Deposits with banks other than the Bank of Japan
Cash and cash equivalents¥496,348(45,999)(2,914)¥396,713¥493,433

4. Accounting change

Accounting Standard for Business Combinations and other
The “Accounting Standard for Business Combinations” (ASBJ Statement No. 21, September 13, 2013), the “Accounting Standard
for Consolidated Financial Statements” (ASBJ Statement No. 22, September 13, 2013) and the “Accounting Standard for Business
Divestitures” (ASBJ Statement No. 7, September 13, 2013), etc. have been applied from the beginning of the current fiscal year. The
new standards require the Bank to record the changes in the equity interests in subsidiaries over which the Bank keeps its control in
additional paid in capital. The new standards also changed the accounting treatment of the acquisition related expenses and require
entities to charge the acquisition related expenses when it incurred. For business combinations implemented on or after the
beginning of the fiscal year, adjustments of the preliminary purchase price allocation will be accounted for on a retrospective basis,i.e., during the fiscal year in which the acquisition took place. In addition, the presentation of net income, etc. has been changed andminority shareholder equity has been changed to non-controlling interests. To reflect these changes, the accompanying
consolidated financial statements for the previous fiscal year have been reclassified.
Also from this fiscal year, disbursements for acquisitions or proceeds from sales of shares of subsidiaries without change ofscope of consolidation have been presented in cash flows from financing activities, while cash out flows for acquisition
related-expenses from acquisitions of shares of subsidiaries with change of scope of consolidation and cash out flows for the431expenses of acquisition or sales of shares of subsidiaries without change of scope of consolidation have been presented in cash
flows from operating activities in the consolidated statements of cash flows.
Application of the Accounting Standard for Business Combinations and other applicable standards are subject to the transitional
treatment stipulated in Article 58-2-4 of the Accounting Standard for Business Combinations, Article 44-5-4 of the AccountingStandard for Consolidated Financial Statements and Article 57-4-4 of the Accounting Standard for Business Divestitures, whichhave been applied from the beginning of the current fiscal year on a prospective basis.
Note that there are no financial impacts on the consolidated financial statements for the current fiscal year due to this applicationof related accounting standards.
Moreover, the financial impacts on the information of per share data are presented in Note 30.

5. Standards issued but not yet effective

Implementation Guidance on Recoverability of Deferred Tax Assets (ASBJ Guidance No.26, March 28, 2016)(1) Outline
This guidance is in line with the existing guidelines "Audit Treatment on Determining the Recoverability of Deferred Tax Assets”(JICPA Audit Committee Report No. 66), however there are certain revised treatments in relation to the recoverability of deferred tax
assets.
(2) Date of the adoption
The Bank intends to adopt the new accounting standards from the beginning of the fiscal year which starts on April 1, 2016.
(3) Impacts of the adoption of the new guidance
The Bank is currently assessing the impacts of the adoption of the new guidance on the financial statements .

6. Bills Discounted
Bills discounted are accounted for as financial transactions in accordance with JICPA Industry Audit Committee Report No. 24,
February 13, 2002. The Bank has the rights to sell or pledge bank acceptances bought, commercial bills discounted, documentarybills and foreign exchanges bought without restrictions. The face value at March 31, 2016 and 2015 totaled ¥20,782 million and¥21,861 million, respectively.

7. Pledged Assets

Assets pledged as collateral at March 31, 2016 and 2015 were as follows:
Millions of yen
2016

March 31,

2015

Pledged assets:¥585,191

Securities¥601,823

Liabilities covered by pledged assets:
Deposits

41,54840,714

Payables under securities lending transactions

130,247

143,395

Borrowed money

152,760

319,926

In addition to the above, securities amounting to ¥60,726 million and ¥60,943 million at book value were pledged as collateral inconnection with bank transfer settlements and futures transactions as of March 31, 2016 and 2015, respectively.
One consolidated subsidiary had pledged its lease receivables amounting to ¥188 million and ¥127 million as of March 31, 2016
and 2015, respectively.
“Other assets” included lease deposits of ¥1,347 million and ¥1,365 million, at March 31, 2016 and 2015, respectively. “Other
assets” also included Initial margins on futures transactions of ¥160 million at both March 31, 2016 and 2015.

8. Investments in unconsolidated subsidiaries and affiliates

Investments in unconsolidated subsidiaries and affiliates at March 31, 2016 and 2015 were as follows:
Millions of yen
2016

2015

¥591

Investments

¥425

5
32

9. Commitments and Contingent Liabilities
Overdraft facilities and line-of-credit contracts are agreements under which, subject to compliance with the contractual conditions,
the Bank or consolidated subsidiaries pledge to provide clients with funds up to a fixed limit upon submission of a loan application to
the Bank. The unused amount related to such facilities/contracts stood at ¥1,620,874 million and ¥1,605,200 million at March 31,
2016 and 2015, respectively. Of this amount, facilities/contracts which expire within one year or which are unconditionally cancelable
at any time, totaled ¥869,918 and ¥879,018 million at March 31, 2016 and 2015, respectively.
Most of these agreements will expire without the clients’ having utilized the financial resources available to them, and the amountof the non-executed 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 Bank or 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 real estate or marketable securities at the date on which an agreement
is entered into. In addition, after facilities/contracts are set forth the Bank will regularly assess the business status of the clients,
based on predetermined internal procedures and, when prudent, will revise the agreements or reformulate their policies to maintaincreditworthiness.

10. Borrowed Money

Borrowed money at March 31, 2016 and 2015 consisted of the following:
Millions of yen
Description

2016

%
2015

Due

Average interest rate

Bills rediscounted

¥—

¥—

—

Other borrowings

174,118

345,388

0.28

April 2016 - October 2020

Lease obligations

21

26

4.26

April 2016 - August 2020—

Notes: 1. Average interest rate represents the weight average interest rate based on the balances and rates at respective fiscal year-end.
2. The repayment schedule within five years on borrowed money at March 31, 2016 was as follows:
Millions of yen
Other borrowings

Within 1 year

Lease obligations¥159,960¥5After 1 year within 2 years

9,443

4

After 2 years within 3 years

1,370

4

After 3 years within 4 years

3,245

4

After 4 years within 5 years

100

2

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, 2016 and 2015 included the following non-performing loans:
Millions of yen
March 31,

2016

2015

Loans in bankruptcy and dishonored bills¥1,243¥1,278Delinquent loans

79,542

87,175Loans past due with respect to interest payments for more than 3 months
Restructured loans
Total

720

479

25,40326,353¥106,910¥115,287

Notes: 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 Act (1965 Enforcement Regulation No. 97) to which accrued interest receivables are
not recognized as accruals for accounting purposes since no repayment of principal or payment of interest has 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 3months refers to loans with respect to which repayment of principal or payment of interest are past due for three months or more, excluding loans
falling into the categories of loans in bankruptcy and dishonored bills or delinquent loans. Restructured loans refers to loans to borrowers towhom financial support is given in the form of reduction in interest, waiver of repayment of the principal or payment of interest, or debt forgivenesswith the aim of corporate rehabilitation, excluding loans falling into loan categories mentioned above.
2. The above amounts are stated before the deduction of the reserve for possible loan losses.

633

12. Bonds

Bonds included subordinated bond of ¥1,000 million at both March 31, 2016 and 2015.
Bonds at March 31, 2016 and 2015 consisted of the following:
IssuerDescription

The Joyo Bank,Ltd.

2nd Unsecured StraightBonds
1st Unsecured
Subordinated Bonds withearly redemption clause
Euro-USdollar-denominatedconvertible bonds withstock acquisition rights
maturing in 2019 (Note 1)

The Joyo Bank,Ltd.
The Joyo Bank,
Ltd.

Millions of yen

Date of issue

2016

May 24, 2000

Total

%
Interest rate

Collateral

Due

5,000

5,000

2.64

—

10,00010,0001.22—

33,804($300,000
thousand)

36,051($300,000
thousand)¥48,804¥51,051January 31,
2012

April 24, 20142015

May 22, 2020
January 31, 2022

April 24, 2019―—

Note: 1. Information on convertible bonds with stock acquisition rights is as follows:
Bond nameJoyo Bank, Ltd. Euro-U.S. dollar-denominated convertible bonds with SAR maturing in 2019

Type of stock

Common stock

Issue price of stock acquisition rights

Free of charge

Issue price of stock$6.04

Total sum of issue price$300,000 thousand

Grant ratio of stock acquisition rights

100.0%

Exercise period of stock acquisition rights

From May 9, 2014 to April 10, 2019

Substitute payment

On execution of the stock acquisition rights the corresponding bonds are to be invested and thebonds price is same as face amount.

Note: 2. The repayment schedule within five years on bonds at March 31, 2016 was as follows:
Millions of yen

Within 1 year
After 1 year within 2 years¥ ――After 2 years within 3 years―

After 3 years within 4 years

33,804After 4 years within 5 years

5,000

13. Privately placed bonds

Privately placed bonds (Article 2-3 of Financial Instruments and Exchange Law) guaranteed by the Bank at March 31, 2016 and2015 were as follows:
Millions of yen
2016

2015

¥28,221

Privately placed bonds¥22,338

14. Employees’ Retirement Benefits(a) Outline of current retirement benefit system
The Group 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 which are excluded from the
projected benefit obligation in employees’ retirement benefits accounting may be paid on a case-by-case basis. The Bank has
established an employees’ retirement benefit trust. As of the end of March 31, 2016, the Bank and its all consolidated subsidiaries
have lump-sum retirement benefits for employees. The Group have jointly established a fund under a defined benefit pension planand it is included in the section of defined benefit pension plan of the note. Net defined benefit liability and service cost in the defined
benefit pension plan and lump-sum retirement benefit adopted by the consolidated subsidiaries are calculated by the simplified
method.

734

(b) Defined benefit pension plan
(1) Reconciliation of the projected benefit obligation between the beginning of the fiscal year and the end of the fiscal year
(Except for the simplified method):
Millions of yen
2016

2015

¥69,080Retirement benefit obligation at the beginning of the fiscal year
Cumulative effects of changes in accounting policies¥62,072－

1,156

Restated balance

69,08063,229Service cost

1,680

1,444

Interest cost

725

967

Actuarial loss incurred

8,054

6,678

Payment of retirement benefit(3,360)(3,239)Prior service cost incurred
Retirement benefit obligations at the end of the fiscal year－－

¥76,181¥69,080(2) Reconciliation of the plan assets between the beginning of the fiscal year and the end of the fiscal year (Except for thesimplified method):
Millions of yen
2016

2015

¥63,088

Plan assets at the beginning of the fiscal year
Expected return on plan assets
Actuarial loss incurred¥53,763909

794(2,705)

8,414

Contribution by the Bank and its consolidated subsidiaries

2,010

2,038

Payment of retirement benefit(1,999)(1,922)¥61,303¥63,088

Plan assets at the end of the fiscal year

(3) Reconciliation of the net defined benefit liability adopting the simplified method between the beginning of the fiscal
year and the end of the fiscal year:
Millions of yen
2016

2015

Net defined benefit liability at the beginning of the fiscal year

¥567

¥526

Retirement benefit expense

386

393

Payment of retirement benefit

(38)

(32)

Contribution to the defined benefit pension plan

(317)

(320)

Net defined benefit liability at the end of the fiscal year

¥598

¥567

(4) Reconciliation of the projected benefit obligation and plan assets between net defined benefit liability and net defined
benefit asset is as follows:
Millions of yen
2016

2015

Retirement benefit obligation of the funded pension plan

¥83,538¥76,723

Plan assets(68,063)(70,164)

15,475

6,559

Retirement benefit obligation of the unfunded pension plan
Net defined benefit liability and asset on the consolidated balance sheet－－¥15,475¥6,559Millions of yen
2016

2015

Net defined benefit liability¥15,475¥7,997

Net defined benefit asset

－

1,438

¥15,475¥6,559Net defined benefit liability and asset on the consolidated balance sheet

Note: Including the simplified method

835

(5) Components of retirement benefit expenses are as follows:
Millions of yen
2016

2015

Service cost

¥1,680Interest cost

725

967

Expected return on plan assets

(909)

(794)
1,402

¥1,444

Amortization of unrecognized actuarial loss

944

Amortization of prior service cost－

69

Retirement benefit expense adopting the simplified method

386

393

Other
Retirement benefit expense on defined benefit pension plan－－

¥2,828¥3,482(6) Components of remeasurements of defined benefit plans are as follows (Before deferred tax assets deduction):
Millions of yen
2016

Prior service cost
Actuarial loss
Total

2015

¥－

¥69

(9,814)3,137¥ (9,814)¥3,207(7) Components of remeasurements of defined benefit plans are as follows (Before deferred tax assets deduction):
Millions of yen
2016

2015

¥－

¥－

Unrecognized actuarial loss

15,347

5,532

Total

¥15,347¥5,532

Unrecognized prior service cost(8) Plan assets
Proportions of major components of plan assets are as follows:
2016

2015

Bond

41.5%

Equity

36.9%

41.8%

General account

17.1%

16.4%

38.1%

Other

4.5%

3.7%

Total

100.0%

100.0%

Note: A retirement benefit trust was established for corporate pension plans and totaling to 16.3% of the total plan assets
Expected rate of return on pension plan assets is determined considering current and future portfolio of pension assets and current
and future long term expected rate of return on various assets in the portfolio.
(9) The assumptions used in accounting for the defined benefit plans:
2016

2015

Discount rate

0.39%

Expected rate of return on plan assets

2.50%

2.50%

Expected increase rate in salary

4.74%

4.92%

1.05%

(c) Defined contribution plan
Total defined contribution expenses of the Group was ¥452 million and ¥368 million for the fiscal years ended March 31, 2016 and2015, respectively.

936

15. Deferred Tax Assets

Millions of yen
2016

March 31,2015

Deferred tax assets:
Reserve for possible loan losses¥15,330¥16,783

Net defined benefit liability

11,8699,629

Devaluation of securities

1,302

1,473

Reserve for employee bonuses

829

844

Reserve for reimbursement of dormant deposits

715

692

Depreciation

510

417

6,709

7,666

OthersValuation allowance
Total(2,887)(3,474)34,37934,031

Deferred tax liabilities:¥ (57,712)¥ (73,544)

Retirement benefit trust(4,467)(4,701)

Reversal of reserve for possible loan losses after elimination ofintercompany balances
Others(11)(1,496)(7)(2,318)

Unrealized gain on available-for-sale securities(63,688)(80,572)¥ (29,309)¥ (46,540)

Total
Net deferred tax assets (liabilities)

The effective tax rate reflected in the consolidated statements of income for the fiscal years ended March 31, 2016 and 2015 differsfrom the statutory tax rate for the following reasons:
2016

2015

Statutory tax rate

32.75 %

Effect of changes in statutory tax rate

2.02 %

4.49 %

Valuation allowance(1.24)%(0.55)%(2.24)%

35.28 %

Permanent differences including dividends received deduction(0.90)%

Permanent differences including entertainment expenses

0.20 %

0.20 %

Other

0.89 %(0.15)%

Effective tax rate

33.72 %

37.03 %

“Act on Partial Amendment to the Income Tax Act, etc.” (Act No. 15, 2016) and “Act on Partial Amendment to the Local Tax Act, etc.”(Act No. 13, 2016) were passed by the Japanese Diet on March 29, 2016, and the corporate tax rate and other rates have been
lowered from the fiscal year beginning on or after April 1, 2016. Due to this change, the effective statutory tax rate used for the
calculation of deferred tax assets and deferred tax liabilities has been changed from the previous rate of 31.98%. The rate of 30.62%
has been applied to the temporary differences, expected to be realized in the fiscal year beginning on April 1, 2016 and the fiscal
year beginning on April 1, 2017, while the rate of 30.39% has been applied to the temporary differences, expected to be realized inor after the fiscal year beginning on April 1, 2018.
As a result of this change, deferred tax liabilities decreased by ¥1,771 million, remeasurements of defined benefit plansdecreased by ¥227 million, deferred losses on hedging instruments, net of taxes decreased by ¥68 million, unrealized gains onavailable-for-sale securities increased by ¥3,019 million, deferred income taxes increased by ¥951 million, deferred tax liabilities forland revaluation decreased by ¥498 million and land revaluation excess, net of taxes increased by ¥498 million.

1037

16. Shareholders’ Equity

In accordance with the Banking Act of Japan, the Bank has provided a legal reserve by appropriation of retained earnings, which isincluded in retained earnings. The Banking Act 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 the common stock.
The Companies Act of Japan (the “Act”), provides that an amount equal to 10% of the amount to be disbursed as distributions ofcapital surplus (other than the capital reserve) and retained earnings (other than the legal reserve) be transferred to the capitalreserve 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 be made at any time by resolution of the shareholders or by the Board of Directors if certain
conditions are met.
Under the Act, upon the issuance and sale of new shares of common stock, the entire amount of the proceeds is required to beaccounted for as common stock, although a company may, by resolution of the Board of Directors, account for an amount notexceeding one-half of the proceeds as capital surplus.

17. General and Administrative Expenses

General and administrative expenses mainly include the following:
Millions of yen
2016

Years ended March 31,

Salaries
Retirement benefit expenses

2015¥32,009¥31,629

3,161

3,735

18. Other Expenses

Other expenses mainly include the following:
Millions of yen
2016

Years ended March 31,

2015¥4,396

Write-offs of claims¥3,347

Write down of equity shares

711

534

Impairment losses

208

1,020

Impairment losses were recorded in an aggregate amount deemed irrecoverable on idle assets, primarily located in Ibaraki
Prefecture.
Impairment losses recognized on a consolidated basis for the fiscal years ended March 31, 2016 and 2015 can be broken down
into the one category of losses on land holdings in the amount of ¥208 million and ¥1,020 million, respectively.
The recoverable amounts used for the measurement of such impairment losses are net sales prices, which are calculated on thebasis of appraisal values after deduction of the estimated cost of disposal.

19. Tangible Fixed Assets

Accumulated depreciation on tangible fixed assets amounted to ¥86,362 million and ¥87,601 million, as of March 31, 2016 and 2015,
respectively.
The accumulated capital gains directly offset against the acquisition costs of tangible fixed assets to obtain tax benefits at March
31, 2016 and 2015 amounted to ¥7,112 million and ¥7,108 million, respectively. For the years ended March 31, 2016 and 2015, thecapital gains offset were ¥128 million and ¥460 million, respectively.

1138

20. Supplementary Information to Consolidated Statements of Comprehensive Income
Millions of yen

2016

Years ended March 31,

2015

Unrealized gains on available-for-sale securities:¥ (27,578)

The amount arising during the period¥107,924(13,142)(6,425)(40,720)

101,498

Tax effect

15,832(28,009)

Unrealized gains on available-for-sale securities(24,888)

73,489Reclassification adjustments
Before adjustments of tax effect

Deferred gains (losses) on hedging instruments, net of taxes:
The amount arising during the period
Reclassification adjustments

488

2,157

(2,368)(1,492)(1,880)

665

532

(317)

(1,348)347

The amount arising during the period－－

Reclassification adjustments－－

Before adjustments of tax effectTax effect
Deferred gain (loss) on hedging instruments, net of taxes
Land revaluation excess, net of taxes:

Before adjustments of tax effect－－Tax effect

498

1,045

Land revaluation excess, net of taxes

498

1,045

Remeasurements of defined benefit plans:
The amount arising during the period
Reclassification adjustments(10,759)

1,735

944

1,471

Before adjustments of tax effect(9,814)3,207

Tax effect2,903(1,306)

Remeasurements of defined benefit plans
Total(6,911)1,900¥ (32,649)¥76,782

Decrease

March 31, 2016

21. Changes in Net Assets(1) Types and number of shares issues and treasury stock are as follows:
Thousands of shares
March 31, 2016

Increase

April 1, 2015

Shares issued:
Common stockTotal

766,231――766,231766,231――766,231

Treasury stock:
Common stock
Total
Notes:

43,47345

157

43,361

43,47345

157

43,361

1. Increase in number of treasury stock includes purchase of fractional shares, 45 thousand shares.
2. Decrease in number of treasury stock includes sale of fractional shares, 12 thousand shares, and execution of stock options, 144 thousand shares.
Thousands of shares

March 31, 2015

Increase

April 1, 2014

Decrease

March 31, 2015

Shares issued:
Common stockTotal

789,231―

23,000766,231789,231―

23,000766,231

Treasury stock:
Common stock
Total
Notes:

43,43823,07423,04043,47343,43823,07423,04043,473

1. Decrease in number of shares issued is cancellation of treasury stock stipulated by the Article 178 of the ACT
2. Increase in number of treasury stock includes purchase of fractional shares, 74 thousand shares, and acquisition of common stock, 23,000 thousand shares.
3. Decrease in number of treasury stock includes sale of fractional shares, 5 thousand shares, cancellation of treasury stock, 23,000 thousand shares and executionof stock options, 34 thousand shares.

1239

(2) Information on stock acquisition rights is as follows:
Millions of yen

Thousands of shares

March 31, 2016

Detail of stockacquisitionrightsThe Bank

Stock Options

Type ofsharesIncrease

April 1, 2015

Decrease

March 31, 2016

March 31, 2016

¥132

―

Total

¥132

―

Millions of yen

Thousands of shares

March 31, 2015

Detail of stockacquisitionrightsThe Bank

Stock Options

Type ofsharesIncrease

April 1, 2014

Total

Decrease

March 31, 2015

March 31, 2015

―

¥147

―

¥147

(3) Information on dividends is as follows:(a) Dividends paid in the fiscal year ended March 31, 2016
Aggregate amount ofdividends (Millions of yen)

Cash dividends
per share (yen)Common stock¥3,975

5.5

March 31, 2015

June 26, 2015

Common stock¥4,337

6.0

September 30, 2015

December 2, 2015

Type of shares

Ordinary general
meeting of shareholders
held on June 25, 2015
Meeting of board of
directors held on
November 9, 2015

Record date

Effective date(b) Dividends to be paid after March 31, 2016

Ordinary general
meeting of shareholders
held on June 28, 2016

Type of shares

Aggregate amount ofdividends(Millions of yen)

Source ofdividends

Cash dividends
per share (yen)Common stock¥5,060Retainedearnings

7.0

Record date

Effective date

March 31, 2016

June 29, 2016(c) Dividends paid in the fiscal year ended March 31, 2015
Aggregate amount ofdividends (Millions of yen)

Cash dividends
per share (yen)Common stock¥3,356

4.5

March 31, 2014

June 27, 2014

Common stock¥3,266

4.5

September 30, 2014

December 2, 2014

Type of shares

Ordinary general
meeting of shareholders
held on June 26, 2014
Meeting of board of
directors held on
November 7, 2014

Record date

Effective date(d) Dividends to be paid after March 31, 2015

Ordinary general
meeting of shareholders
held on June 25, 2015

Type of shares

Aggregate amount ofdividends(Millions of yen)

Source ofdividends

Cash dividends
per share (yen)Common stock¥3,975Retainedearnings

5.5

Record date

Effective date

March 31, 2015

June 26, 20151340

22. Segment Informationa. Outline of the reportable segments
The reportable segments of the Group are those units for which discrete financial information can be obtained and which are
regularly examined by the management meeting, which is the highest decision-making body for decisions on the allocation ofmanagement resources and for assessing business performance.
Comprised of the Bank and its nine subsidiaries, the Group’s main business is banking. Other operations include leasing, credit
guarantee services, banking administrative agency services, securities trading and other financial business. “Banking” and“leasing” are its reportable segments, while credit guarantee services are included in “Other.”b. Calculation method of the amount of ordinary income, segment profit, assets and other items by the reportable segment
Accounting method of the reportable segment is as described in “Significant Accounting Policies.” Ordinary income is regarded as
the segment profit. Ordinary income from internal transactions is calculated based on actual market price.
c. Information related to ordinary income, segment profit, assets and other items by the reportable segment
Millions of yen

Year ended March 31, 2016

Banking
operations

The reportable segment
Leasing

Total

Other

Total

Adjustments

Consolidated

Ordinary income:From external
Customers
From internaltransactions
Total

136,943

19,694

156,638

6,675

163,314－163,314

1,769
138,712467
20,162

2,237
158,875

4,983
11,6597,220
170,534(7,220)42,717949

43,666

3,481

47,147(7,220)537－
163,314

Assets9,231,780

70,8649,302,644

52,6859,355,330(96,628)

9,258,701

Liabilities

8,660,071

61,6738,721,744

31,7398,753,484(86,853)

8,666,631

Depreciation

6,002

245

6,247

305

6,553

(379)

6,173

Interest income

96,360113

96,474134

96,608(363)

96,245Interest expenses

6,513

331

6,845

90

6,935

(358)

6,577

83

－

83

3

86

－

86

528
208

0
－

529
208

93
－

623
208

(92)
－

531
208

Tax expenses

14,288316

14,604

1,116

15,720142

15,862

Increase in tangible andintangible fixed assets

5,359

18

5,378

95

5,473

－

5,473

Segment profit

47,685

OthersGain on disposal of
tangible fixed assets
Losses on disposal of
tangible fixed assets
Losses on impairment

Notes:

1. Ordinary income is presented as the counterpart of sales of a non-banking company.
2. Adjustments are as follows:a) Adjustments in Ordinary income total of ¥(7,220) million include elimination of intersegment transactions of ¥(7,378) million.
b) Adjustments in assets of ¥(96,628) million include elimination of intersegment transactions of ¥(85,862) million.
c) Adjustments in liabilities of ¥(86,853) million include elimination of intersegment transactions of ¥(83,615) million.
d) Adjustments in depreciation of ¥(379) million include depreciation of lease assets presented as tangible fixed assets on the consolidated
financial statements of ¥(389) million.
e) Adjustments in Interest income of ¥(363) million include intersegment interests of ¥(355) million.
f ) Adjustments in interest expenses of ¥(358) million include intersegment interest of ¥(355) million.
g) Adjustments in tax expenses of ¥142 million include deferred income taxes of ¥137 million due to elimination of intersegment
transactions and depreciation of lease assets presented as tangible fixed assets on the consolidated financial statements.
3. Segment profit is adjusted to ordinary profit posted in the Consolidated Statements of Income.

14
41

Millions of yen

Year ended March 31, 2015

Banking
operations

The reportable segment
Leasing

Total

Other

Total

Adjustments

Consolidated

Ordinary income:From external
Customers
From internaltransactions
Total

131,532

18,270149,802

6,316

156,118－

156,118

1,882
133,415493
18,763

2,376
152,178

5,106
11,423

7,482
163,601(7,482)－
156,118

40,404956

41,361

3,703

45,064(7,482)665

Assets9,032,543

63,204

9,095,748

47,6989,143,447(77,988)9,065,458

Liabilities

8,447,816

54,5738,502,390

28,9338,531,324(67,705)

8,463,618

Depreciation

5,855

211

6,067

256

6,323

(620)

5,703

Interest income

96,11180

96,191

161

96,353(400)

95,952

Interest expenses

5,062

327

5,389

127

5,517

(396)

5,120

108

－

108

343

451

－

451

－

－

－

－

－

Losses on disposal of
tangible fixed assets
Losses on impairment

1,335

1,335

546
1,020

0
－

546
1,020

7
－

553
1,020

－
－

553
1,020

Provision for Financial
Instruments Transaction
Liability Reserve
Tax expenses－
15,063－376－
15,44001,213

016,653－361

017,015

Increase in tangible andintangible fixed assets

6,239

253

6,492

431

6,924

－

6,924

Segment profit

45,730

OthersGain on disposal of
tangible fixed assets
Gain on negative goodwill

Notes:

1. Ordinary income is presented as the counterpart of sales of a non-banking company.
2. Adjustments are as follows:a) Adjustments in Ordinary income total of ¥(7,482) million include elimination of intersegment transactions of ¥(7,640) million.
b) Adjustments in assets of ¥(77,988) million include elimination of intersegment transactions of ¥(67,626) million.
c) Adjustments in liabilities of ¥(67,705) million include elimination of intersegment transactions of ¥(65,337) million.
d) Adjustments in depreciation of ¥(620) million include depreciation of lease assets presented as tangible fixed assets on the consolidated
financial statements of ¥(620) million.
e) Adjustments in Interest income of ¥(400) million include intersegment interests of ¥(392) million.
f ) Adjustments in interest expenses of ¥(396) million include intersegment interest of ¥(393) million.
g) Adjustments in tax expenses of ¥361 million include deferred income taxes of ¥366 million due to elimination of intersegment
transactions and depreciation of lease assets presented as tangible fixed assets on the consolidated financial statements.
h) Information on negative goodwill is described in “Gain on negative goodwill”.
3. Segment profit is adjusted to ordinary profit posted in the Consolidated Statements of Income.

Related Informationa. Information by service
Millions of yen
Year ended March 31, 2016

Ordinary income fromexternal customers:

Lending¥66,321

Investment insecurities

Leasing¥43,327¥19,694

Other¥33,970

Total¥163,314

Note: Ordinary income is presented as the counterpart of sales of a non-banking company.
Millions of yen
Year ended March 31, 2015

Ordinary income fromexternal customers:

Lending¥67,763

Investment insecurities¥35,052

Leasing¥18,270

Other¥35,033

Total¥156,118

Note: Ordinary income is presented as the counterpart of sales of a non-banking company.

1542

b. Information by geographic area
Segment information by geographic area is not disclosed since over 90% of the total consolidated ordinary income and tangible fixed
assets of the Group resides in Japan.
c. Information by customer
Segment information by customer has not been disclosed since no single customer represented 10% or more of total ordinary
income.
Impairment loss information by the reportable segments
Millions of yen
The reportable segment
Year ended March 31, 2016

Impairment loss:

Banking operations

Leasing

¥208

Other

Total

¥―

¥208

Total

¥―

¥208

Millions of yen
The reportable segment
Year ended March 31, 2015

Impairment loss:

Banking operations

Leasing¥1,020

Other

Total

¥―

¥1,020Total¥―¥1,020

Amortization and unamortized balance of goodwill
Millions of yen
The reportable segment
Year ended March 31, 2016

Negative goodwill:
Amortization
Unamortized balanceBanking operations

Leasing

¥158
1,659

Other

Total

¥―
―

¥158
1,659

Total

¥―
―

¥158
1,659

Millions of yen
The reportable segment
Year ended March 31, 2015

Negative goodwill:
Amortization
Unamortized balanceBanking operations

¥158
1,817

Leasing

Other

Total

¥―
―

¥158
1,817

Total

¥―
―

¥158
1,817

Gain on negative goodwill
Not applicable for the fiscal year ended March 31, 2016.
Gain on negative goodwill ¥1,335 million occurred in the fiscal year ended March 31, 2015, as the Bank acquired the stock fromminority shareholders due to improvement in capital efficiency.

1643

23. Leases

Operating leases
Future lease payments under non-cancellable operating lease transactions for the fiscal year ended March 31, 2016 were as
follows:
Millions of yen
Within one year

Over one year

Total

As lessee

¥63

¥212

¥276

As lessor

¥1

¥5

¥7

Future lease payments under non-cancellable operating lease transactions for the fiscal year ended March 31, 2015 were as
follows:
Millions of yen
Within one year

Over one year

Total

As lessee

¥65

¥252

¥317

As lessor

¥0

¥2

¥2

24. Financial Instruments(1) Status of Financial Instrumentsa. Policy on Financial Instruments
The Group provide financial services such as leasing, agent of banking administrative work and securities business, and centeringon banking service.
The Group raises funds by acceptance of the deposits, and invests the funds in loans and securities. We have financial assets andliabilities of which the values fluctuate with changes in interest rates, foreign exchange rates and market prices. To avoid adverse
effects from such fluctuations, the Group performs integrated assets and liabilities management (the “ALM”) in each company.
Moreover, we are engaged in derivatives transactions, such as those related to interest rates, currencies and bonds, for hedging
and non-hedging purposes. Some consolidated subsidiaries are also engaged in interest rate related derivatives in connection withinvestments in securities and for hedging purposes.
b. Financial Instruments and Risks
The financial assets held by the Group consist primarily of securities and loans. Loans are subject to credit risk which could cause
financial losses to the Group from non-performance of obligations by borrowers. Securities include mainly bonds, stocks and theseare held trading, held-to-maturity and available-for-sale purposes. With regard to securities, the Group is exposed to credit risk ofissuers, interest-rate risk, and market price volatility risk.
The deposits include current deposits and savings deposits without maturities, and time deposits with maturities. These deposits
expose the Group to liquidity risk that could be caused by concentrated withdrawals by customers.
The Group has liquidity risk with the borrowed money and bonds that it would become impossible to execute payments at the due
dates when the Group lost access to the financial markets. Although the floating-rate borrowings expose us to the interest rate risk,
we partially mitigate this risk using interest rate swaps.
We are engaged in derivatives transactions to meet customers’ demands to hedge exchange-rate and interest-rate risks and to
appropriately manage the Bank’s market risks. Moreover, we utilize derivatives transactions for efficient ALM and hedging ofindividual transactions.
Derivatives transactions have market risk that losses could arise from market changes including those in interest rates andexchange rates. Additionally, derivatives transactions have credit risk that transactions are not fulfilled as provided by the contracts
due to an event such as a failure of the counterparty.
Regarding hedging transactions to offset fluctuations in interest rates, the hedged items (e.g., loans) and the hedging instruments(e.g., interest rate swaps) are grouped by maturity to assess the effectiveness. As for cash flow hedges, we examine interest-ratecorrelation between the hedged items and the hedging instruments. Moreover, to assess the effectiveness of hedging transactions
for foreign exchange risk, we designate transactions such as currency swaps and foreign exchange swaps as the hedging
instruments and verify that we hold foreign currency positions of those hedging instruments that match the hedged items including
monetary claims and obligations denominated in foreign currencies. We also perform “after-the-fact test” to confirm certain interest
rate swaps continuously meet the requirements for exceptional accrual method.
We have set position limits and loss limits for trading transactions involving short-term purchases and sales of financial
instruments.

1744

c. Risk Management for Financial Instruments(a) Integrated Risk Management
The Bank holistically controls risks from various financial assets and liabilities and risks related to banking business throughintegrated risk management. The Bank calculates apportionable risk capital using Tier I capital and allocates by risk category and by
department. The Bank periodically quantities risks it takes and controls such risks within the allocated capital. The Bank assesses
unquantifiable risks using stress test and other measures.
(b) Credit Risk Management
The Group has enacted “Guidelines for Credit Risk Management,” which provides for basic policies comprising appropriate credit
exposure management on individual and portfolio bases. The portfolio-based credit exposure management involves diversificationof risk. Credit Risk Management Group has been segregated from the divisions under Business Headquarters to achieve rigorous
credit review, and conducts thorough monitoring of borrower’s financial condition to prevent deterioration of loans.
In the self-assessments that evaluate the quality of assets, the business offices categorize the borrowers based on credit ratings,
which are then reviewed by Credit Examination Division in the Headquarters. Furthermore, Corporate Audit Division examines
results and processes of the self-assessments for accuracy and adequacy. As for credit risk of the issuers of securities, Treasury andSecurities Division monitors credit information and market prices and gives the issuers credit ratings as well as carries out
self-assessments of the issuers like for general borrowers.
(c) Market Risk Management(i) Interest-rate Risk Management
The Group has set risk limits corresponding to the Group’s financial strength to interest-rate risk in the banking account, and applies
and monitors the limits rigorously through the. In order to control the interest-rate risk appropriately: The Group has established “Risk Management Basic Rules,” “Integrated Risk Management Rules,” and “ALM Guidance.” The Board of Directors (the “Board”) establishes risk tolerance limits for interest-rate risk within the allocable capital range after
discussions at the General Budget Committee every half year.
The ALM Committee discusses and reports to the Board detail plans to address interest-rate risk every month.
Interest-rate risk is measured using value at risk (“VaR”). The ALM Committee sets alarm points somewhat below the risk limits
and monitors the points as well as the limits on a monthly basis.
Moreover, the Group analyzes interest-rate risk from various aspects using tools such as basis-point value (“BPV”), the scenario
analysis (simulation method) and the interest rate sensitivity analysis in addition to VaR, and controls the risk within a tolerable range
reflective of the Group’s financial strength.
(ii) Foreign Exchange Risk Management
The Group controls foreign exchange risk by using hedging instruments such as currency swaps and foreign exchange swaps. In
addition, the Group also enters into offsetting transactions in financial markets on an individual or aggregate basis, in order toreverse out foreign exchange risk arising from foreign exchange transactions offered by customers. Additionally, the Group converts
into yen an amount equivalent to monthly interest income denominated in foreign currencies every month, in order to mitigate foreignexchange risk arising from foreign-currency denominated revenues.
(iii) Price Fluctuation Risk Management
The Group has set risk limits corresponding to the Group’s financial strength to price-fluctuation risk arising from financial
instruments such as stocks and investment trusts, and applies and monitors the limits rigorously through the ALM.
The Board establishes risk tolerance limits for price-fluctuation risk within the allocable capital range after discussions at theGeneral Budget Committee every half year.
Price-fluctuation risk is measured using VaR. The ALM Committee sets alarm points somewhat below the risk limits and monitors
the points as well as the limits on a monthly basis. To prevent unrealized losses from being accumulated, the Group monitors andmanages unrealized gains and losses under certain policies on a daily basis.
(iv) Derivatives Transactions
The Group utilizes derivatives transactions chiefly as hedging instruments for interest-rate and foreign exchange risks. The Group
controls counterparty credit risk in derivatives transactions by setting credit limits.
For derivatives transactions with financial institutions, the Group sets an individual credit line and manages credit exposures on adaily basis in accordance with “Credit Line Management Rule for Banking and Security Companies.”
For derivatives transactions with customers, the Group also sets an individual credit line to reflect factors such as thecreditworthiness and outstanding transactions, just like for financing transactions, and manages the credit exposures together withthose arising from other transactions on an individual basis.
(v) Trading Transactions
The Group primarily trades bonds, foreign exchanges and derivatives transactions for trading purposes. We set utilize certain
measures such as position limits, risk tolerance limits and loss limits in accordance with “Trading and Risk Management Rules.”(vi) Quantitative Information related to Market Risk

1845

1. Banking Account(1) Interest rate risk
The Bank adopts the variance-covariance method as the measurement method (a holding period of 6 months, a confidence intervalof 99%, and observation period of 5 years) for calculating VaR related to interest rate risk of interest rate swaps in loans and bills
discounted, domestic bonds, deposits, borrowed money, corporate bonds and derivatives. The Bank adopts the historical simulation
method (a holding period of 6 months, a confidence interval 99%, and observation period of 5 years) for calculating VaR related tointerest rate risk of interest rate swaps and currency swaps in foreign bonds, trust beneficiary right, market fund transactions andderivatives. As of March 31, 2016 and 2015, VaR related to interest rate risk was ¥28,613 million and ¥24,549 million, respectively.
(2) Price fluctuation risk
The Bank adopts the historical simulation method (a holding period of 6 months, a confidence interval of 99%, and observation
period of 5 years) for calculating VaR related to price fluctuation risk of listed equities and mutual funds. As of March 31, 2016 and2015, VaR related to price fluctuation risk was ¥85,325 million and ¥67,398 million, respectively. Correlation between interest raterisk and price fluctuation risk has not been considered.
2. Trading Account
The Bank adopts the historical simulation method (a holding period of 10 day, a confidence interval of 99%, and observation periodof 5 years) for calculating VaR related trading securities, trading purpose foreign exchange transactions and derivatives such as
forward transactions and option transactions. As of March 31, 2016 and 2015, VaR related to trading account was ¥8 million and ¥12
million, respectively.
3. Validity of VaR
The Bank performs back testing to compare VaR calculated by its internal model against actual profit and loss to confirm themeasurement model used captures market risk with sufficient accuracy. However, VaR statistically quantifies market risk calculated
based on past market movements. Therefore, there could be cases in which VaR cannot capture risk under sudden and dramaticchanges in market conditions beyond normal circumstances.
(d) Management of Liquidity Risk in Funding
To manage liquidity risk under “Market and Liquidity Risk Management Rules,” the Bank:
 Conducts financing activities after fully analyzing its cash flows.
 Pays continuous attention to the balance sheet structure, lines of credit provided to the Group, collateral management andcosts to maintain the liquidity.
 Strives to maintain the diversity and stability of funding sources.
d. Supplementary Explanation Concerning Matters Related to Fair Value of Financial Instruments
Fair value of financial instruments includes a value based on market prices as well as a reasonably calculated value when no market
price is available. Because certain assumptions are used in the fair value calculation, such value may vary when different
assumptions are used.

1946

(2) Disclosures Regarding Fair Value of Financial Instruments and Other Items
The table below sets forth fair values of financial instruments at March 31, 2016 and 2015 except for those whose fair values are
extremely difficult to determine (see (Note2)). In addition, those financial instruments which are immaterial are not listed below.
Millions of yen
March 31, 2016

Consolidated balance
sheet amount¥442,713(1) Cash and due from banks

Fair value

Difference¥442,713¥―(2) Securities
35,972

36,467494

Available-for-sale securities

2,692,533

2,692,533―(3) Loans and bills discounted

5,869,596

Held-to-maturity debt securities(35,244)

Reserve for possible loan losses (*1)
Sub-total

5,834,352

5,935,923

101,570

Total assets

9,005,572

9,107,638

102,065(1) Deposits

8,088,463

8,089,317(854)(2) Negotiable certificates of deposit

22,68922,689―(3) Payables under securities lending transactions

130,247

130,247―(4) Borrowed money

174,118

174,139(20)

8,415,519

8,416,394

(875)

1,201

1,201

―

916

916

―

¥2,117¥2,117¥―

Total liabilities
Derivatives transactions (*2)
Transactions not accounted for as hedging instruments
Transactions accounted for as hedging instruments
Total derivatives transactions(*1) General and individual reserves for possible loan losses are deducted from loans and bills discounted.
(*2) Derivatives transactions recorded in trading assets/liabilities and other assets and other liabilities are presented on an aggregate basis. Claims anddebts that arose from derivatives transactions are presented on a net basis.
Millions of yen
March 31, 2015

Consolidated balance
sheet amount(1) Cash and due from banks¥496,348

Fair value

Difference¥496,348¥―(2) Securities
39,53939,760220

Available-for-sale securities

Held-to-maturity debt securities

2,695,172

2,695,172―(3) Loans and bills discounted

5,618,019

Reserve for possible loan losses (*1)

(36,598)

Sub-total

5,581,420

5,653,947

72,526

Total assets

8,812,481

8,885,229

72,747(1) Deposits

7,715,598

7,716,010(411)(2) Negotiable certificates of deposit

10,045

10,045―(3) Payables under securities lending transactions

143,395

143,395―(4) Borrowed money

345,388

345,083305

8,214,428

8,214,534(106)―

Total liabilities
Derivatives transactions (*2)
Transactions not accounted for as hedging instruments
Transactions accounted for as hedging instruments
Total derivatives transactions

590

590

(5,819)(5,819)―¥(5,229)¥(5,229)¥―(*1) General and individual reserves for possible loan losses are deducted from loans and bills discounted.
(*2) Derivatives transactions recorded in trading assets/liabilities and other assets and other liabilities are presented on an aggregate basis. Claims anddebts that arose from derivatives transactions are presented on a net basis.

20
47

(Note 1) Calculation Methods for Fair Value of Financial Instruments
Assets(1) Cash and Due from Banks
Since fair value of these items approximates the book value, we deem the carrying value to be the fair value.
(2) Securities
Fair value of shares is determined by reference to quoted market prices on stock exchanges. Fair value of bonds is determined byreference to quoted market prices or prices offered by financial institutions, or based on the price best estimated. Fair value ofinvestment trusts is determined by reference to their publicly available net asset value per unit. Fair value of privately placed bonds
guaranteed by the Bank is determined by the discounted cash flow method. The discount rates used in the calculation were
calculated based on the bankruptcy probability by credit rating and the coverage ratio of an individual claim.
We treat market prices as fair value for Japanese Government Bonds (JGBs) with variable interest rates and securitized productsthat we own.
We used a reasonably estimated value as the fair value of securitized products (e.g., collateralized loan obligations), except thosesubject to impairment, of which external credit rating is not downgraded, of which collateral asset pools are not deteriorated, andwhich the Group intends to continue to hold. The reasonably estimated price was calculated using the discounted cash flow method
or other pricing methods using the default rate, recovery rate, pre-payment rate and discount rate as primary pricing variables.
Please see “25. Securities Information” for details of securities in each purpose of holding.
(3) Loans and bills discounted
Since floating-rate loans and bills discounted reflect market interest rates in a short period, the fair value approximates the carrying
value unless the credit standing of the borrower is not significantly different after the loan was made or the bill was drawn. The fairvalue is therefore deemed equal to the carrying value.
Fair value of fixed-rate loans and bills discounted are determined as the total of principal and interest discounted by the type,internal credit rating and maturities. Discount rates used in the calculation were interest rates which would be applied when similarloans were newly extended. Fair value of fixed-rate loans and bills discounted whose terms are short (i.e., within one year)
approximates their carrying value and is therefore deemed equal to the carrying value.
Possible losses on legally bankrupt loans, substantially bankrupt loans and potentially bankrupt loans are computed based on
recoverable amounts estimated as the present value of future cash flows or the collectible amounts from collateral and guarantees.
Then the fair value of those loans approximates the consolidated balance sheet amount at the closing date minus the currently
estimated losses, and is therefore deemed equal to the amounts.
Fair value of loans and bills discounted for which repayment terms are not set because of their attributes (e.g., loans are limited tothe amounts of assets pledged as collateral) is assumed to approximate their carrying value, considering the expected repayment
periods and interest rate conditions, and are deemed equal to the carrying value.
Liabilities(1) Deposits and (2) Negotiable certificates of deposit
For demand deposits, we deem the amount that the Group would require to pay on the consolidated balance sheet date (i.e.,
carrying value) to be the fair value.
With respect to time deposits with long deposit terms (i.e., one year or longer), we used the present value of future cash flows
calculated by time band as the fair value. The discount rates used in the calculation were the interest rates that would apply to newly
accepted deposits.
(3) Payables under securities lending transactions
As for short-term loans with maturity of one year or less, the book value is deemed as the fair value since the fair value approximates
the book value.
(4) Borrowed money
We used as the fair value the present value of future cash flows calculated by borrowing period. The discount rates used in thecalculation were interest rates that would be applied to new borrowings. Fair value of borrowings for a short term (i.e., within oneyear) approximates the carrying value and is deemed equal to the carrying value.
Derivatives Instruments
See “27. Derivatives.”

21
48

(Note 2) The following table summarizes financial instruments, of which fair value is extremely difficult to determine:
Fair value of available-for-sale securities in the above table excludes the following items at March 31, 2016 and 2015.
Millions of yen
Consolidated balance sheet amounts
2016

Years ended March 31,

2015

Unlisted stocks (*1) (*2)

¥3,116

Investments in partnerships and others (*3)

5,262

4,588

Total

¥8,378¥7,797¥3,209(*1) Unlisted stocks are excluded from “Disclosures Regarding Fair Value of Financial Instruments and Other Items” since no market price is available andtheir fair value is extremely difficult to determine.
(*2) Impairment losses on unlisted stocks were ¥17 million and ¥0 million, as of March 31, 2016 and 2015.
(*3) Out of investments in partnerships and others, certain partnerships holding assets whose fair value was extremely difficult to determine are excluded
from “Disclosures Regarding Fair Value of Financial Instruments and Other Items.”(Note 3) Redemption schedule of money claims and securities with stated maturities after the consolidated balance sheet
date is as follows:
Millions of yen
March 31, 2016

1 year or less

1-3 years

3-5 years

5-7 years

7-10 years

Over 10 years¥374,012

¥―

¥―

¥―

¥―

¥―

Held-to-maturity debt securities

2,984

12,01918,448

2,377

142

―

Japanese government bonds

1,000

―

2,000

―

―

―

Municipal bonds

―

50

200

―

―

―

Corporate bonds

1,984

11,96916,248

2,377

142

―

153,506
90,000542,841
362,000

758,110
407,800

332,941
120,000

183,316
20,000175,869
4,000

Cash and due from banks
Securities

Available-for-sale securities
with maturities
Japanese government bonds
Municipal bonds

6,882

8,734

101,02252,56943,189―Corporate bonds

16,53338,452

131,603

100,670

61,32785,428Foreign bonds

38,395

110,819

97,83958,85137,43786,425

Other

1,694

22,835

19,844851

21,361

16

Loans and bills discounted (*)

1,409,842

1,027,383

828,346

500,771

531,986

1,419,316

Total¥1,940,345¥1,582,243¥1,604,904¥836,090¥715,444¥1,595,186(*) Legally bankrupt loans, substantially bankrupt loans and potentially bankrupt loans amounting to ¥80,786 million, and loans and bills discounted without
maturities amounting to ¥71,163 million were excluded from the table above.
Millions of yen
March 31, 2015

Cash and due from banks

1 year or less

1-3 years

3-5 years

5-7 years

7-10 years¥421,670

¥―

¥―

¥―

Held-to-maturity debt securities

16,37910,78011,956

Japanese government bonds

11,5001,000―

Municipal bonds――

Corporate bonds

4,879
185,775
67,000Over 10 years

¥―

¥―

423

―

―

―

―

―

200

―

―

―

9,780

11,756423――

454,631
337,200

681,541
375,300

487,607304,500

236,378
50,000106,922
5,000

Securities

Available-for-sale securities
with maturities
Japanese government bonds
Municipal bonds

75,216

7,761

58,44919,246

41,775―

Corporate bonds

22,23734,864

81,761

107,857

119,91426,268Foreign bonds

20,04866,548140,279

55,22911,81875,654

Other

1,274

8,256

25,751774

12,870―Loans and bills discounted (*)

1,440,141

1,010,506

793,410474,640

491,894

1,250,182

Total¥2,063,967¥1,475,917¥1,486,908¥962,671¥728,272¥1,357,105(*) Legally bankrupt loans, substantially bankrupt loans and potentially bankrupt loans amounting to ¥88,454 million, and loans and bills discounted without
maturities amounting to ¥68,789 million were excluded from the table above.

22
49

(Note 4) Redemption schedule of borrowed money and other interest-bearing liabilities after the consolidated balance
sheet date at March 31, 2016 and 2015 is as follows:
1 year or lessMarch 31, 2016

Millions of yen
3-5 years
5-7 years

1-3 years

7-10 years

Over 10 years¥7,376,371¥623,716¥81,684¥2,523¥4,167¥―

Negotiable certificates of deposit

22,689

―

―

―

―

―

Payables under securities
lending transactions
Borrowed money

130,247
159,960―
10,813

―
3,345

―
―

―
―

―
―

¥7,689,269¥634,529¥85,030¥2,523¥4,167¥―

Deposits (*)Total(*) Demand deposits were included in “1 year or less.”
Millions of yen
3-5 years
5-7 years

March 31, 2015

1 year or less

Deposits (*)¥6,993,163¥618,246¥97,241¥2,596¥4,350¥―

Negotiable certificates of deposit

10,045

―

―

―

―

―

Payables under securities
lending transactions
Borrowed money

143,395
79,562―
112,358―
153,468

―
―

―
―

―
―

¥7,226,166¥730,604¥250,709¥2,596¥4,350¥―Total

1-3 years

7-10 years

Over 10 years(*) Demand deposits were included in “1 year or less.”

25. Securities Information

The amounts shown in the following tables include “Securities”, trading securities in “Trading assets” and trust beneficiary right in“Other debt purchased” described in the consolidated balance sheets.
Please see Note 8 for investments in unconsolidated subsidiaries and affiliates.
Year ended March 31, 2016(a) Trading Securities
Millions of yen
Unrealized gain recognized as income

March 31, 2016¥17

Trading securities(b) Held-to-maturity debt securities
Type

March 31, 2016

Securities with fair value
exceeding consolidatedbalance sheet amountMillions of yen
Consolidated balance
sheet amount

Difference¥35,302¥35,809

¥507

3,001

3,025

24

Municipal bonds

249

251

1

Corporate bonds

32,051

32,532481

Bonds:
Japanese government bonds

Other:

Securities with fair value notexceeding consolidatedbalance sheet amount

Fair value

―

―

―

Foreign bonds

―

―

―

Other

―

―

―

Sub-total

35,30235,809

507

Bonds

670

657

(12)

―

―

―

Japanese government bonds
Municipal bonds

―

―

―

Corporate bond

670

657

(12)

Other:―――

Foreign bonds

―

―

―

Other

―

―

―

Sub-total

670

657

(12)

¥35,972¥36,467

¥494

Total

23
50

(c) Available-for-sale securities
Type

March 31, 2016

Securities with consolidatedbalance sheet amountexceeding acquisition cost

Millions of yen
Consolidated balance
sheet amount

Difference¥230,252¥114,192¥116,059

Bonds

1,636,975

1,592,460

44,514

1,012,900

984,333

28,567

Municipal bonds

174,394

171,0863,308

Corporate bonds

449,679

437,041

12,63838,578Japanese government bonds

610,088571,509

Foreign bonds

401,341

392,536

8,805

Other

208,746

178,973

29,773Sub-total

Other

Securities with consolidatedbalance sheet amount notexceeding acquisition cost

Acquisition cost

Stocks2,477,316

2,278,163

199,153

Stocks9,615

11,138(1,523)

Bonds

77,461

77,612(150)

Japanese government bonds

32,05932,199(139)

Municipal bonds

41,374

41,380(5)

Corporate bonds

4,027

4,032

(5)

133,258

138,123(4,864)Foreign bonds

46,594

46,978

(383)

Other

86,664

91,145(4,481)Other

Sub-total
Total

220,336

226,875(6,539)¥2,697,652¥2,505,038¥192,613(d) Held-to-maturity debt securities sold during the fiscal year
No held-to-maturity debt securities were sold during the fiscal year ended March 31, 2016.
(e) Available-for-sale securities sold during the fiscal year
Year ended March 31, 2016

Millions of yen
Gains on sales

Sales proceeds

Losses on sales

Stocks¥29,799¥5,215

¥711

Bonds

385,654

5,176

55

321,874

4,829

9

―

―

―

Japanese government bonds
Municipal bonds
Corporate bonds
Other
Foreign bonds
Other
Total

63,779347

45161,196

3,586

826

155,946

2,158

788

5,250

1,427

37

¥576,650¥13,978¥1,592(f) Securities Recognized for Impairment Loss
For available-for-sale securities with market values, in cases where the market value has fallen substantially from the acquisition
price and it is considered there is little likelihood of recovery to the acquisition price level, the securities are stated at market value on
the consolidated balance sheets and the difference between the market value and the acquisition price is posted as a loss(“impairment loss”).
Impairment losses for the fiscal year were nil.
Pursuant to “Practical Guidelines for Accounting for Financial Instruments” (JICPA Accounting Committee Report No. 14, April 14,2015), the Bank recognized the impairment losses on listed equity shares whose average market price over the one-month period
immediately prior to the balance sheet date declined by 30% or more compared with acquisition costs, and other securities whosemarket price at the balance-sheet date also declined by 30% or more compared with acquisition costs.

24
51

(g) Unrealized gain on available-for-sale securities
March 31, 2016

Millions of yen

Unrealized (losses) gains:¥192,765

Available-for-sale securities
Other money held in trust―

Deferred tax assets (liabilities)

57,712Net unrealized gains on available-for-sale securities

135,053
21

Less minority interests¥135,031

Unrealized gains on available-for-sale securities

Note: The total unrealized gains include an unrealized gain of ¥151 million on available-for-sale securities, contained in certain fund.

Year ended March 31, 2015(a) Trading Securities
Millions of yen
Unrealized gain recognized as income

March 31, 2015

Trading securities¥(5)(b) Held-to-maturity debt securities
Type

March 31, 2015

Securities with fair value
exceeding consolidatedbalance sheet amountMillions of yen
Consolidated balance
sheet amount

Bonds:

Difference¥29,426¥29,661

¥235

4,000

4,001

0

Municipal bonds

49

50

0

Corporate bonds

25,37525,609233

Japanese government bonds

Other:

Securities with fair value notexceeding consolidatedbalance sheet amount

Fair value

―

―

―

Foreign bonds

―

―

―

Other

―

―

―

Sub-total

29,426

29,661235

Bonds

10,113

10,099

(14)

8,500

8,500

(0)

Municipal bonds

150

149

(0)

Corporate bond

1,463

1,449

(13)

Japanese government bonds

Other:
Foreign bonds

―

―

―

―

―

―

Other

―

―

―

Sub-total

10,113

10,099(14)¥39,539¥39,760

¥220

Total

25
52

(c) Available-for-sale securities
Type

March 31, 2015

Securities with consolidatedbalance sheet amountexceeding acquisition cost

Millions of yen
Consolidated balance
sheet amount

Difference¥266,760¥121,280

Bonds

1,694,823

1,657,965

36,8581,175,240

1,151,075

24,164

Japanese government bonds¥145,479

Municipal bonds

136,231

133,2862,945

Corporate bonds

383,351

373,603

9,748
53,977

Other

Securities with consolidatedbalance sheet amount notexceeding acquisition cost

Acquisition cost

Stocks565,135

511,158

Foreign bonds

355,457

347,633

7,823

Other

209,678

163,524

46,153Sub-total

236,315

2,526,719

2,290,404

Stocks

5,091

5,578

(487)

Bonds

99,577

99,827(250)

Japanese government bonds

5,264

5,277

(13)

Municipal bonds

69,023

69,131(107)

Corporate bonds

25,29025,418

(128)

Other

70,55873,240(2,681)

Foreign bonds

40,48040,643

(163)

Other

30,07832,596(2,518)Sub-total
Total

175,227

178,646(3,419)¥2,701,946¥2,469,050¥232,896(d) Held-to-maturity debt securities sold during the fiscal year
No held-to-maturity debt securities were sold during the fiscal year ended March 31, 2015.
(e) Available-for-sale securities sold during the fiscal year
Year ended March 31, 2015

Millions of yen
Gains on sales

Sales proceeds

Losses on sales

Stocks¥17,249¥3,345

¥534

Bonds

623,644

2,767

1,250

Japanese government bonds

470,036

2,424

1,250

Municipal bonds

128,246

223―

Corporate bonds

25,361

119―

92,426

1,404

345

Foreign bonds

87,793

409

345

Other

4,632

994

―

¥733,320¥7,517¥2,130

Other

Total

(f) Securities Recognized for Impairment Loss
For available-for-sale securities with market values, in cases where the market value has fallen substantially from the acquisition
price and it is considered there is little likelihood of recovery to the acquisition price level, the securities are stated at market value on
the consolidated balance sheets and the difference between the market value and the acquisition price is posted as a loss(“impairment loss”).
Impairment losses for the fiscal year were nil.
Pursuant to “Practical Guidelines for Accounting for Financial Instruments” (JICPA Accounting Committee Report No. 14, April 14,2015), the Bank recognized the impairment losses on listed equity shares whose average market price over the one-month period
immediately prior to the balance sheet date declined by 30% or more compared with acquisition cost, and other securities whosemarket price at the balance-sheet date also declined by 30% or more compared with acquisition cost.

26
53

(g) Unrealized gain on available-for-sale securities
March 31, 2015

Millions of yen

Unrealized (losses) gains:
Available-for-sale securities¥233,486

Other money held in trust—

Deferred tax assets (liabilities)

73,544

Net unrealized gains on available-for-sale securities

159,941

Less minority interests

31

Unrealized gains on available-for-sale securities¥159,909

Note: The total unrealized gains include an unrealized gain of ¥590 million on available-for-sale securities, contained in certain fund.

26. Money held in trust(1) Trading money held in trust
Not applicable as of March 31, 2016
Not applicable as of March 31, 2015(2) Held-to-maturity money held in trust
Not applicable as of March 31, 2016
Not applicable as of March 31, 2015(3) Other money held in trust
Not applicable as of March 31, 2016
Not applicable as of March 31, 20152754

27. Derivatives

Year ended March 31, 2016
1. Derivative instruments not accounted for as hedges
Regarding the derivative instruments to which hedge accounting is not applied, the following tables summarize contract amount,market value and unrealized gain or loss for each type of derivative transaction, respectively, at the end of the consolidated balance
sheet date, as well as determination of fair value.
Contract amount does not represent itself the market risk of derivative instruments.
(1) Interest-rate Derivatives
Millions of yen
March 31, 2016

Contract amountOver 1 year

Fair value

Unrealized gain (loss)

Transactions listed on exchanges:
Interest-rate futures:
Sold

¥―

Bought

―

¥―

¥―

¥―

Interest-rate options:
Sold

―

―

―

―

Bought

―

―

―

―

Sold

―

―

―

―

Bought――――Receivable fixed / payable floating

137,605

60,451

1,900

1,900

Receivable floating / payable fixed

137,605

60,451

(887)

(887)

―

―

―

―

Sold

―

―

―

―

Bought

―

―

―

―

Sold

50

―

(0)

2

Bought

50

―

―

(1)

Sold

19,560

2,030

(2)

76

Bought19,560

2,030

2

2

Sold

―

―

―

―

Bought――――¥1,012¥1,093Over-the-counter transactions:
Forward rate agreements:

Interest-rate swaps:

Receivable floating / payable floating
Interest-rate options:

Caps:

Swaption:

Others:

Total

―――

―――

Notes: 1. The transactions in this table have been revalued at the market rates prevailing on the balance sheet date, and unrealized gain (loss) is included in
the Consolidated Statements of Income.
2. Calculation of fair value
The fair value of transactions listed on exchanges has been calculated on the basis of the closing prices on the Tokyo Financial Exchange, etc. The fairvalue of over-the-counter transactions has been calculated at their discounted future cash flows or by utilizing option pricing models.

28
55

(2) Currency Derivatives
Millions of yen
March 31, 2016

Contract amountOver 1 year

Fair value

Unrealized gain (loss)

Transactions listed on exchanges:
Currency futures:
Sold

¥―

¥―

¥―

¥―

Bought

―

―

―

―

Sold

―

―

―

―

Bought――――122,90957,267

52

52

Sold

30,752

4,502

355

355

Bought28,360

511

(220)

(220)

Sold

30,297

20,291(1,114)(409)

Bought30,297

20,291

1,115

757

Sold

―

―

―

―

Bought

―

―

―

―

¥188

¥536

Currency options:Over-the-counter transactions:
Currency swaps
Forward foreign exchange contracts:

Currency options:

Others:

Total

―――

―――

Notes: 1. The transactions in this table have been revalued at the market rates prevailing on the balance sheet date, and unrealized gain (loss) is included in
the Consolidated Statements of Income.
2. Calculation of fair value
Fair value is calculated at discounted future cash flows, etc.

(3) Stock Derivatives
Not applicable as of March 31, 2016.
(4) Bond Derivatives
Not applicable as of March 31, 2016.
(5) Commodity Derivatives
Not applicable as of March 31, 2016.
(6) Credit Derivatives
Not applicable as of March 31, 2016.

29
56

2. Derivative Instruments accounted for as hedges
Regarding the derivative instruments to which hedge accounting is applied, the following tables summarize contract amount, market
value and unrealized gain or loss for each type of derivative transaction, respectively, at the end of the consolidated balance sheet
date, as well as determination of fair value.
Contract amount does not represent itself the market risk of derivative instruments.
(1) Interest-rate Derivatives
March 31, 2016
Millions of yen
Method of hedge

Deferred method

TypeInterest rate options
Other

Over 1 year

Fair value

Interest bearing financial
assets and liabilities,
including loans,available-for-salesecurities, deposits andnegotiable certificates ofdeposit, etc.

¥―

¥―

¥―

205,000―

175,000―(4,533)
―

―

―

―

―

―

―

4,000

2,000

82

27,295―――

21,772―――(1,383)¥(5,835)

Interest rate swap
Receivable fixed /payable floating
Receivable floating /payable fixed

Total
Notes:

Contract amounts

Interest rate swap
Receivable fixed /payable floating
Receivable floating /payable fixedInterest rate futures

Exceptional accrual
method for interest
rate swap

Hedged items

Loans, borrowed money―――

1. Primarily, the Bank applies the deferred method of hedge accounting which is described in “Accounting and Auditing Treatment relating to the
Adoption of ‘Accounting for Financial Instruments’ for Banks” (JICPA Industry Audit Committee Report No. 24, February 13, 2002).
2. Determination of fair value:
The fair value of exchange-traded derivative instruments is based on closing prices at the Tokyo Financial Exchange or other relevant exchanges.
The fair value of over-the-counter traded derivative instruments is determined based on a discounted cash flows model, an option pricing modelor other models as appropriate.
3. The exceptional accrual method of hedge accounting, as specifically permitted for certain interest rate swaps, is valued with the hedged items asa whole, so that the fair value is included in the fair value of Loans and Bills Discounted and other items (See: 24. Financial Instruments (2)Disclosures Regarding Fair Value of Financial Instruments and Other Items).

(2) Currency Derivatives
March 31, 2016
Millions of yen
Method of hedge

Type

Deferred method

Currency swaps
Forward foreign exchange
contracts
Foreign exchange swaps
Other

Treatment for forward
foreign exchange
contracts, etc.

Hedged items

Foreigncurrency-denominatedloans, securities, deposits
and foreign exchanges,
etc.

Contract amounts¥1,678――――92,831

―
―

―
3,771

―

―

―

―

―
¥5,450Currency swap――――

Fair value¥1,869Forward foreign exchange
contracts

Total

Over 1 year

¥56,168――――――

Notes: 1. Primarily, the Bank applies the deferred method of hedge accounting which is described in “Accounting and Auditing Treatment relating to
Accounting for Foreign Currency Transactions in the Banking Industry” (JICPA Industry Audit Committee Report No. 25, July 29, 2002).
2. Determination of fair value:
Fair value is determined based on the discounted cash flows model.

(3) Stock Derivatives
Not applicable as of March 31, 2016.

(4) Bond Derivatives
Not applicable as of March 31, 2016.

30
57

Year ended March 31, 2015
1. Derivative instruments not accounted for as hedges
Regarding the derivative instruments to which hedge accounting is not applied, the following tables summarize contract amount,market value and unrealized gain or loss for each type of derivative transaction, respectively, at the end of the consolidated balance
sheet date, as well as determination of fair value.
Contract amount does not represent itself the market risk of derivative instruments.
(1) Interest-rate Derivatives
Millions of yen
March 31, 2015

Contract amountOver 1 year

Fair value

Unrealized gain (loss)

Transactions listed on exchanges:
Interest-rate futures:
Sold

¥―

Bought

―

¥―

¥―

¥―

Interest-rate options:
Sold

―

―

―

―

Bought

―

―

―

―

Sold

―

―

―

―

Bought――――Over-the-counter transactions:
Forward rate agreements:

Interest-rate swaps:
Receivable fixed / payable floating

172,11453,650665

665

Receivable floating / payable fixed

172,11453,650

(91)

(91)

―

―

―

―

Sold

―

―

―

―

Bought

―

―

―

―

Sold

110

50

(0)

2

Bought

110

50

0

(1)

Receivable floating / payable floating
Interest-rate options:

Caps:

Swaption:
Sold51,823

8,590

(108)

34

Bought

51,823

8,590

108

108

Sold

―

―

―

―

Bought

―

―

―

―

¥573

¥718

Others:

Total

―――

―――

Notes: 1. The transactions in this table have been revalued at the market rates prevailing on the balance sheet date, and unrealized gain (loss) is included in
the Consolidated Statements of Income.
2. Calculation of fair value
The fair value of transactions listed on exchanges has been calculated on the basis of the closing prices on the Tokyo Financial Exchange, etc. The fairvalue of over-the-counter transactions has been calculated at their discounted future cash flows or by utilizing option pricing models.

31
58

(2) Currency Derivatives
Millions of yen
March 31, 2015

Contract amountOver 1 year

Fair value

Unrealized gain (loss)

Transactions listed on exchanges:
Currency futures:
Sold

¥―

¥―

¥―

¥―

Bought

―

―

―

―

Sold

―

―

―

―

Bought――――183,694

115,599

83

83

Sold

5,206

542

(124)

(124)

Bought

5,404

26

56

56

Currency options:Over-the-counter transactions:
Currency swaps
Forward foreign exchange contracts:

Currency options:Sold23,144

8,702

(524)

(130)

Bought23,144

8,702

526

269

Sold

―

―

―

―

Bought

―

―

―

―

¥16

¥155

Others:

Total

―――

―――

Notes: 1. The transactions in this table have been revalued at the market rates prevailing on the balance sheet date, and unrealized gain (loss) is included in
the Consolidated Statements of Income.
2. Calculation of fair value
Fair value is calculated at discounted future cash flows, etc.

(3) Stock Derivatives
Not applicable as of March 31, 2015.
(4) Bond Derivatives
Not applicable as of March 31, 2015.
(5) Commodity Derivatives
Not applicable as of March 31, 2015.
(6) Credit Derivatives
Not applicable as of March 31, 2015.

32
59

2. Derivative Instruments accounted for as hedges
Regarding the derivative instruments to which hedge accounting is applied, the following tables summarize contract amount, market
value and unrealized gain or loss for each type of derivative transaction, respectively, at the end of the consolidated balance sheet
date, as well as determination of fair value.
Contract amount does not represent itself the market risk of derivative instruments.
(1) Interest-rate Derivatives
March 31, 2015
Millions of yen
Method of hedge

Deferred method

TypeInterest rate options
Other

Over 1 year

Fair value

Interest bearing financial
assets and liabilities,
including loans,available-for-salesecurities, deposits andnegotiable certificates ofdeposit, etc.

¥―

¥―

¥―

170,000―

170,000―(2,643)
―

―

―

―

―

―

―

9,000

4,000

218

32,817―――

27,295―――(1,632)¥(4,057)

Interest rate swap
Receivable fixed /payable floating
Receivable floating /payable fixed

Total
Notes:

Contract amounts

Interest rate swap
Receivable fixed /payable floating
Receivable floating /payable fixedInterest rate futures

Exceptional accrual
method for interest
rate swap

Hedged items

Loans, borrowed money―――

1. Primarily, the Bank applies the deferred method of hedge accounting which is described in “Accounting and Auditing Treatment relating to the
Adoption of ‘Accounting for Financial Instruments’ for Banks” (JICPA Industry Audit Committee Report No. 24, February 13, 2002).
2. Determination of fair value:
The fair value of exchange-traded derivative instruments is based on closing prices at the Tokyo Financial Exchange or other relevant exchanges.
The fair value of over-the-counter traded derivative instruments is determined based on a discounted cash flows model, an option pricing modelor other models as appropriate.
3. The exceptional accrual method of hedge accounting, as specifically permitted for certain interest rate swaps, is valued with the hedged items asa whole, so that the fair value is included in the fair value of Loans and Bills Discounted and other items (See: 24. Financial Instruments (2)Disclosures Regarding Fair Value of Financial Instruments and Other Items).

(2) Currency Derivatives
March 31, 2015
Millions of yen
Method of hedge

Type

Deferred method

Currency swaps
Forward foreign exchange
contracts
Foreign exchange swaps
Other

Treatment for forward
foreign exchange
contracts, etc.

Hedged items

Foreigncurrency-denominatedloans, securities, deposits
and foreign exchanges,
etc.

Contract amounts¥(1,890)―
90,871―――(1,286)

―

―

―

―

―

―

―

―
¥(3,176)

Forward foreign exchange
contracts――――

Fair value¥180

Currency swap

Total

Over 1 year

¥71,784――――――

Notes: 1. Primarily, the Bank applies the deferred method of hedge accounting which is described in “Accounting and Auditing Treatment relating to
Accounting for Foreign Currency Transactions in the Banking Industry” (JICPA Industry Audit Committee Report No. 25, July 29, 2002).
2. Determination of fair value:
Fair value is determined based on the discounted cash flows model.

(3) Stock Derivatives
Not applicable as of March 31, 2015.
(4) Bond Derivatives
Not applicable as of March 31, 2015.

33
60

28. Stock Options(a) The Bank recorded stock option expenses in “General and administrative expenses” of ¥44 million and ¥46 million for the fiscal
years ended March 31, 2016 and 2015, respectively.
(b) Outline of stock options, size and changes(1) Outline of stock options
March 31, 2016

1st equity warrant

2nd equity warrant

Persons to whom stock options are granted

Directors of the Bank: 10

Type and number of shares (*)

Common shares: 56,698

Common shares: 41,546

Grant dateAugust 24, 2009

August 24, 2009

Condition for vesting

Not applicableNot applicable

Eligible service period

Not applicableNot applicable

Period for exercise of stock options

From August 25, 2009 to August 24, 2039

From August 25, 2009 to August 24, 2039

March 31, 2016

Executive officers of the Bank: 12

3rd equity warrant

4th equity warrant

Persons to whom stock options are granted

Directors of the Bank: 10

Executive officers of the Bank: 13

Type and number of shares (*)

Common shares: 79,606

Common shares: 61,881

Grant dateJuly 21, 2010

July 21, 2010

Condition for vesting

Not applicableNot applicable

Eligible service period

Not applicableNot applicable

Period for exercise of stock options

From July 22, 2010 to July 21, 2040

From July 22, 2010 to July 21, 2040

March 31, 2016

5th equity warrant

6th equity warrant

Persons to whom stock options are granted

Directors of the Bank: 10

Executive officers of the Bank: 13

Type and number of shares (*)

Common shares: 78,720

Common shares: 60,999

Grant dateJuly 20, 2011

July 20, 2011

Condition for vesting

Not applicableNot applicable

Eligible service period

Not applicableNot applicable

Period for exercise of stock options

From July 21, 2011 to July 20, 2041

From July 21, 2011 to July 20, 2041

March 31, 2016

7th equity warrant

8th equity warrant

Persons to whom stock options are granted

Directors of the Bank: 10

Executive officers of the Bank: 16

Type and number of shares (*)

Common shares: 76,174

Common shares: 73,080

Grant dateJuly 19, 2012

July 19, 2012

Condition for vesting

Not applicableNot applicable

Eligible service period

Not applicableNot applicable

Period for exercise of stock options

From July 20, 2012 to July 19, 2042

From July 20, 2012 to July 19, 2042

March 31, 2016

9th equity warrant

10th equity warrant

Persons to whom stock options are granted

Directors of the Bank: 10

Executive officers of the Bank: 15

Type and number of shares (*)

Common shares: 47,254

Common shares: 41,968

Grant dateJuly 18, 2013

July 18, 2013

Condition for vesting

Not applicableNot applicable

Eligible service period

Not applicableNot applicable

Period for exercise of stock options

From July 19, 2013 to July 18, 2043

From July 19, 2013 to July 18, 2043

March 31, 2016

11th equity warrant

12th equity warrant

Persons to whom stock options are granted

Directors of the Bank: 10

Executive officers of the Bank: 14

Type and number of shares (*)

Common shares: 48,960

Common shares: 41,133

Grant dateJuly 18, 2014

July 18, 2014

Condition for vesting

Not applicableNot applicable

Eligible service period

Not applicableNot applicable

Period for exercise of stock options

From July 19, 2014 to July 18, 2044

From July 19, 2014 to July 18, 2044

34
61

March 31, 2016

13th equity warrant

14th equity warrant

Persons to whom stock options are granted

Directors of the Bank: 10

Executive officers of the Bank: 13

Type and number of shares (*)

Common shares: 34,231

Common shares: 28,464

Grant dateJuly 17, 2015

July 17, 2015

Condition for vesting

Not applicableNot applicable

Eligible service period

Not applicableNot applicable

Period for exercise of stock options

From July 18, 2015 to July 17, 2045

From July 18, 2015 to July 17, 2045(*) The table above presents the number of common shares converted from the stock options.

(2) Size and changes of stock options
a. Number of stock options in the fiscal years ended March 31, 2016
March 31, 2016

1stequitywarrant

2nd
equitywarrant

3rd
equitywarrant

4th
equitywarrant

5th
equitywarrant

6th
equitywarrant

7th
equitywarrant

8th
equitywarrant

9th
equitywarrant

10th
equitywarrant

23,596―

3,280―

33,129―4,528―

51,520―17,940―49,854―31,320―47,254―34,000―Non-vested:
Previous fiscal
year-end outstanding
GrantedForfeited

―

―

―

―

―

―

―

―

―

―

9,208

3,280

12,9284,528

14,4008,970

13,934

18,27013,713

14,876

14,388―20,201―

37,1208,970

35,92013,05033,541

19,124

―
9,208

―
3,280

―
12,928―4,528―
14,400―8,970―
13,934―
18,270―13,713―
14,876

Exercised

9,208

3,280

12,9284,528

14,4008,970

13,934

18,27013,713

14,876

Forfeited

―

―

―

―

―

―

―

―

―

―

Exercisable

―

―

―

―

―

―

―

―

―

―

March 31, 2016

11th
equitywarrant

12th
equitywarrant

13th
equitywarrant

14th
equitywarrant

48,960―41,133―――

34,231

28,464――――

14,20815,906――34,752

25,227

34,231

28,464―
14,208―15,906――――

Exercised

14,20815,906――

Forfeited

―

―

―

―

Exercisable

―

―

―

―

VestedOutstanding on
March 31, 2016
Vested:Previous fiscal
year-end outstanding
VestedNon-vested:
Previous fiscal
year-end outstanding
GrantedForfeited
VestedOutstanding on
March 31, 2016
Vested:Previous fiscal
year-end outstanding
Vested35
62

b. Price information
Yen

March 31, 2016

Exercise price
Average share price at
exercise
Fair value at the grate
date

1st
equitywarrant

2nd
equitywarrant

3rd
equitywarrant

4th
equitywarrant

5th
equitywarrant

6th
equitywarrant

7th
equitywarrant

8th
equitywarrant

9th
equitywarrant

10th
equitywarrant

1

1

1

1

1

1

1

1

1

1

689

689

689

689

689

689

689

689

689

689

417

439

297

318

300

321

310

331

518

542

11th
equitywarrant

12th
equitywarrant

13th
equitywarrant

14th
equitywarrant

1

1

1

1

689

689

―

―

500

525

680

708

Yen

March 31, 2016

Exercise price
Average share price at
exercise
Fair value at the gratedate

c. Valuation technique for fair value of stock options
Stock options granted during the fiscal year ended March 31, 2016 were valued using the Black-Scholes option pricing model andthe following principal parameters:
13th equity warrant

14th equity warrant

Expected volatility (*1)

25.64%

26.72%

Average expected life (*2)

6 years

3 years

Expected dividends (*3)

¥10.0 per share¥10.0 per share

Risk-free interest rate (*4)

0.14%

0.03%

(*1) Expected volatility is calculated based on the actual stock prices at the following period corresponding to the average expected life.
13th equity warrant: From July 17, 2009 to July 16, 2015
14th equity warrant: From July 17, 2012 to July 16, 2015(*2) The average tenure of the directors and the executive officers who retired in the past is used as the average expected life in the above table.
(*3) Actual dividends on common stock for the fiscal year ended March 31, 2015.
(*4) Japanese government bond yield corresponding to the average expected life.

d. Method of estimating number of stock options vested
Only the actual number of forfeited stock options is reflected because it is difficult to reasonably estimate the number of stock options
that will be forfeited in the future.

29. Related-Party Transactions

Transactions occurred with related-party for the fiscal year ended March 31, 2016 are as follows:
Millions of yen

Category

Name

Location

CapitalMillions of yen
Ownership
ratio of
Description of Transaction
voting rights transactions
amountMillions of yen

Account

Balances

Loans andCompany majority heldby relatives of director

Oarai town,
Ito dentist Ibaraki prefecture

bills
¥22

―

Loan rending¥21

discounted¥21

Note: The interest rate of the loan was reasonably determined based on the same conditions as those for ordinary business partners, considering market
interest rate and other.

No material transactions occurred with related-parties for the fiscal year ended March 31, 2015.

36
63

30. Per-share Data
Yen
2016

March 31,2015

¥816.71

Net assets per share¥830.50

Earnings per share-basic

42.93

39.48

Earnings per share-diluted

42.91

39.46

Bases for calculation of net assets per share are as follows:
Millions of yen
2016

Net assets

2015¥592,070¥601,840

1,694

1,584

Deduction from nets assets

132

147

1,562

1,437

Net assets after deduction of the portion described above

590,375

600,255

Number of common shares (in thousands)

722,870

722,758

Attributable to equity warrants
Attributable to non-controlling interests

Bases for calculation of earnings per share (basic and diluted) are as follows:
Millions of yen
2016

March 31,2015

Earnings per share¥31,034

Net income
Earnings not available to common shareholders¥28,680――

Net income after deduction of the portion described above

31,034

28,680Weighted average number of common shares for the fiscal year (in thousands)

722,846

726,349

Diluted earnings per share
Adjustment to net income――

Increase in common shares (in thousands)

301

346

Attributable to equity warrants (in thousands)

301

346

Equity warrants that have no dilutive effects on earnings per share――

As described in Note 4, from the fiscal year ended March 31, 2016, the Group has adopted the Revised Accounting Standard forBusiness Combinations and other applicable standards; hence, the Group is following the transition treatment stipulated in Article
58-2-4 of the Accounting Standard for Business Combinations, Article 44-5-4 of the Accounting Standard for Consolidated Financial
Statements and Article 57-4-4 of the Accounting Standard for Business Divestitures.
As a result of the adoption, there are no effects to net assets per share, earnings per share or diluted earnings per share.
Euro-US dollar-denominated convertible bonds with stock acquisition rights maturing in 2019 were not included in the calculationof diluted earnings per share because it had no dilutive effect. (see Note12)

37
64

31. Significant Subsequent event

Information regarding a definitive agreement concerning the business integration of The Bank, Ltd. and Ashikaga Holdings, Ltd.
through a share exchange
The Bank and Ashikaga Holdings Co., Ltd.(President: Masanao Matsushita) (“Ashikaga HD”) (together, the “Companies”), in
accordance with the Basic Agreement agreed upon between the Bank and Ashikaga HD on November 2, 2015, resolved at therespective meetings of their board of directors held on April 25, 2016 to consummate the business integration (the “Business
Integration”) through a share exchange subject to obtaining the approval of shareholders of the Companies and regulatory approvals,
and entered into a share exchange agreement (the “Share Exchange Agreement”). At the same time, the Bank, Ashikaga HD and
The Ashikaga Bank, Ltd. (“Ashikaga Bank”) entered into a business integration agreement, which is described below.
The Share Exchange Agreement was approved by both of General Shareholders’ Meetings of the Companies held on June 28,
2016.
(1) Purpose of the Business Integration
The new financial group that will be established through the integration of the Companies will aim to maintain and promote therelationships with customers and the deep understanding of local communities that the Bank and Ashikaga Bank (the “Banks”) havebuilt over the years, as well as to realize the advancement of comprehensive financial services and operational efficiencies by taking
advantage of the wide-area network and other connections to be formed through the Business Integration.
Through this, the Banks will be able to provide more convenient, high-quality comprehensive financial services that can only beachieved through the integration of leading regional banks. The Banks will also aim to become a group that is highly valued by eachof its stakeholders by achieving sustained growth as a driving force for regional developments and revitalizations, and through the
improvement of corporate value in response to the expectations of shareholders and markets, as well as expansion of opportunities
for active roles by officers and employees while enhancing their pride in and enjoyment of their duties. The Banks will also be afinancial group that is open to other regional financial institutions which are sympathetic to their corporate philosophy.
(2) The Method of Share Exchange Method and the Allotment of Shares in the Share Exchange (share exchange ratio)a. The Method of Share exchange
The Business Integration will be carried out by the holding company method. In order to complete the Business Integration quickly,
the Companies will utilize Ashikaga HD, which already has been a holding company structure, for the holding company of the newfinancial group.
Specifically, subject to the approval of the Companies’ shareholders meetings for matters necessary for the Business Integrationand the regulatory approvals required for the Business Integration, the Bank will carry out the Share Exchange with Ashikaga HD,
and Ashikaga HD plans to change its company name to Mebuki Financial Group, Inc. (“Mebuki FG”).
The schedule of the Business Integration is as follows:
November 2, 2015
March 31, 2016
April 25, 2016

Execution of the Basic Agreement
Record date for the General Shareholders’ Meetings of the Companies
Resolution of the Board of Directors of the Companies
Execution of the Share Exchange Agreement and the Business Integration Agreement
June 28, 2016
General Shareholders’ Meetings of the Companies
September 27, 2016 (planned) Last trading day of the shares of the Bank
September 28, 2016 (planned) Date of the delisting of the shares of the Bank
October 1, 2016 (planned)
Effective date of the Share Exchange
Note that the above schedule may be changed upon consultation between the Companies if necessary in the course of the Share
Exchange or for other reasons.

3865

b. The Allotment of the Share Exchange (Share Exchange Ratio)
The Bank
Share Exchange Ratio
1.170

Mebuki FG (currently Ashikaga HD)
1(Note 1) Details of the allotment in the Share Exchange
Shareholders of the Bank will receive 1.170 shares of Mebuki FG (currently Ashikaga HD: hereinafter the same) common stock foreach share of the Bank common stock.
If the number of Mebuki FG shares that shareholders of the Bank will receive through the Share Exchange includes a fraction of
one share, the relevant shareholder will be paid cash corresponding to such fractional share pursuant to Article 234 of theCompanies Act (“Companies Act”) and other relevant laws and regulations.
Note that the above Share Exchange Ratio may be adjusted upon consultation between the Companies if any material changes
occur or are revealed for the fundamental assumptions of the calculation(Note 2) Number of newly issued Mebuki FG shares to be delivered through the Share Exchange (planned)
Common stock: 845,758, 343 shares
The above number is calculated based on the total number of issued and outstanding shares of the Bank (766,231,875 shares) asof March 31, 2016. However, the Bank plans to cancel all of its treasury shares immediately before the Share Exchange takes effect(the “Record Date”). Accordingly, treasury shares held by the Bank (43,361,496 shares) as of March 31, 2016 are not included in
calculating the above number.
The number of newly issued Mebuki FG shares to be delivered through the Share Exchange may change if the number oftreasury shares of the Bank as of March 31, 2016 changes before the Record Date for such reasons as purchase request of sharesby shareholders of the Bank.
(Note 3) Shares less than one unit
When the Business Integration is consummated, shareholders of the Bank who receive shares of less than one unit (100 shares) of
Mebuki FB (“Shares Less than One Unit”) may not sell Shares Less than One Unit on the Tokyo Stock Exchange or any otherfinancial instruments exchange markets. Shareholders who receive Shares Less than One Unit may request Mebuki FG topurchase their Shares Less than One Unit pursuant to Article 192, Paragraph (1) of the Companies Act, or will be able to requestthat Mebuki FB sell the number of shares needed, together with the Shares Less than One Unit held by such shareholder, toconstitute shares of one unit pursuant to Article 194, Paragraph (1) of the Companies Act and the Articles of Incorporation, unless
Mebuki FB does not possess sufficient number of shares requested to be sold.
c. Stock Acquisition Rights and Bonds with Stock Acquisition Rights
With respect to each stock acquisition right issued by the Bank (including stock acquisition rights attached to bonds), Mebuki FG will
deliver to the holders of the stock acquisition rights (including the stock acquisition rights attached to bonds) issued by the Bank andoutstanding as of the Record Date, the stock acquisition rights of Mebuki FG for the replacement of the stock acquisition rights of the
Bank based on the terms of the stock acquisition rights and the share exchange ratio.
Mebuki FG will assume the liabilities of bonds with stock acquisition rights issued by the Bank and the Bank will guarantee suchliabilities.

39
66

(3) Profile of the Holding Company After the Business Integration
Name
Location of the headquarters

Representatives and directors(planned)

Capital
Net assets
Total assets
Fiscal year end
Nature of business

Mebuki Financial Group, Inc.
7-2, Yaesu 2-chome, Chuo-ku, Tokyo(Note) The head office functions of Mebuki Financial Group, Inc. will be comprised of its full-timeofficers and employees as well as those with concurrent posts of the Bank or Ashikaga Bank, andwill be located in Mito, Ibaraki and Utsunomiya, Tochigi.
In addition, there is no change to the location of the head office of the Bank (Mito, Ibaraki
Prefecture) and the head office of Ashikaga Bank (Utsunomiya, Tochigi Prefecture).
Representative Director andKazuyoshi Terakado(currently, President of the
President
Bank)
Representative Director andMasanao Matsushita(currently, Director, President
Vice President
and CEO of Ashikaga HD and
Director, President and CEO
of Ashikaga Bank)
Director
Eiji Murashima(currently, Managing Directorof the Bank)
Director
Kiyoshi Kato
(currently, Executive Officer of
Ashikaga Bank)
Director
Ritsuo Sasajima(currently, Managing Directorof the Bank)
Director
Kazuyuki Shimizu(currently, Executive Officer
and General Manager ofCorporate Planning
Department of
Ashikaga HD and Managing
Executive Officer of Ashikaga
Bank)
Director
Hidebumi Nishino(currently Managing Executive
Officer of the Bank)
Yoshiaki Terakado(currently, Corporate Auditor
Directorof the Bank)(Audit and Supervisory
Committee Member)
Kunihiro Ono(currently, Director of
Director
Ashikaga HD and Director of(Audit and Supervisory
Ashikaga Bank)
Committee Member)
Ryuzaburo Kikuchi(currently, Outside Director of
Director
the Bank)(Audit and Supervisory
Committee Member)
Toru Nagasawa(currently, representative
Directorlawyer of Nagasawa Law(Audit and Supervisory
Offices)Committee Member)
Takashi Shimizu(currently, Professor of the
Director
Graduate School of(Audit and Supervisory
Accountancy, Waseda
Committee Member)
University)(Note) Ryuzaburo Kikuchi, Toru Nagasawa and Takashi Shimizu, Directors (Audit andSupervisory Committee Members) are Outside Directors as defined in Article 2, Item (xv) of theCompanies Act.
¥117,495 million
Not determined at this time
Not determined at this time
March, 31
Management and operation of banks and other companies that the Company may have as
subsidiaries under the Banking Act and all businesses incidental or related thereto.

40
67

(4) Profile of the Company Concerned with this Share Exchange
Name
Location
Representative
Business
CapitalDate established
Number of shares issued and outstanding
Fiscal year end
Total assets (consolidated)
Net assets (consolidated)
Deposits (non-consolidated)
Loans and bills discounted (non-consolidated)
Number of employees (consolidated)
Number of branches (including sub-branches)
Major shareholders and shareholding ratio(as of September 30, 2015)

Ashikaga Holdings Co., Ltd.
1-25, Sakura 4-chome, Utsunomiya, Tochigi
Masanao Matsushita, President and Chief Executive Officer
Bank holding company¥117,495 million
April 1, 2008
333,250 thousand shares
March 31
¥6,219,821 million¥295,229 million¥5,143.4 billion (Ashikaga Bank only)¥4,226.2 billion (Ashikaga Bank only)
2,946
153 branches (Ashikaga Bank only)
Nomura Financial Partners, Co., Ltd.
ORIX Corporation
Sompo Japan Nippon Kowa Insurance, Inc.
Mitsui Sumitomo Insurance Co., Ltd.
NORTHERN TRUST CO. (AVFC)RE 15PCT TREATY ACCOUNT

36.87%
12.00%
5.70%
4.50%
3.04%

(5) Summary of Accounting Treatment of the Share Exchange
The Share Exchange is a reverse acquisition under the Accounting Standard for Business Combinations, and it is expected that thepurchase method will be applied to the transaction, under which the Bank will be the acquiring company and Ashikaga HD will be theacquired company. The amount of goodwill (or negative goodwill) which is expected to be recognized as a result of the Share
Exchange has yet to be determined.

32. Asset retirement obligation

Information on asset retirement obligation is omitted as asset retirement obligation is not recorded as of April 1, 2015 and March 31,
2016.

41
68

69

Organization

As of June 28, 2016

The Joyo Bank, Ltd.

Corporate Audit Division

General Meeting of
Shareholders

Corporate Management Group
Corporate Risk Management Division
Credit Risk Management Office
Legal and Compliance Office

Board of Directors
Audit & Supervisory Committee
Executive Officer Committee

Corporate Planning Division
Group Company Management OfficePublicity Office
IT Strategy Office
Tokyo Sub-Headquarters
Personnel Division
Human Resource Development Office
Staff Counseling Office
Executive Secretariat
General Affairs Division

Credit Risk Management Group
Credit Examination Division
Loan Supervision Office
Company Management Support Office

Operational Reforms GroupOperational Innovation Division

Operation Systems GroupOperation Management Division
Asset Management Business Operations Office
Data Processing Center
Area Data Processing Center
Computer System Division

Business Headquarters
Business Management Division
Customer Service Office
Customer Counseling OfficeBusiness Promotion Division
Asset Management Business Promotion OfficeIntegrated Finance Service OfficeDirect Banking Center
Living and Business Consulting Center
Pension Business Promotion Center
Government and Municipal Business Division
Regional Partnership DivisionInternational Market Business Group
Treasury and Securities DivisionMarkets Administration and International Division*Domestic branches include Loan Plaza branches.

International Business OfficeInternational Operations Office
Overseas Representative Office70

Domestic Branches*

Board of Directors and Corporate Auditors
Chairman
Kunio Onizawa

Deputy President
Hideo Sakamoto

President
Kazuyoshi Terakado

Managing Directors
Katsuhiko Ito
Atsuyuki Kurosawa
Eiji Murashima
Ritsuo Sasajima
Hiroshige Sonobe
Masaru Seki
Hiroaki Yokochi

As of June 28, 2016

Directors(Audit & Supervisory
Committee Members)Hideo Torihata
Takao Shimizu

Outside Directors(Audit & Supervisory
Committee Members)
Toshihiko Kawamura
Toshio Mizushima
Kinichi Suzuki

Market Business Group and Overseas Offices
Head OfficeMarkets Administration and International DivisionInternational Business OfficeInternational Operations Office

As of June 28, 2016

5-5, Minami-machi 2-chome, Mito, Ibaraki 310-0021, Japan
7-2, Yaesu 2-chome, Chuo-ku, Tokyo 104-0028, Japan
5-5 Minami-machi 2-chome, Mito, Ibaraki 310-0021, Japan
5-5 Minami-machi 2-chome, Mito, Ibaraki 310-0021, Japan
Room 1901, Shanghai International Trade Centre, 2201
Yan An Road (West), Shanghai 200336 P.R. of China
30 Cecil Street, #11-04 Prudential Tower, Singapore 049712
712 Fifth Avenue, 8th Floor, New York, NY 1009
7-2, Yaesu 2-chome, Chuo-ku, Tokyo 104-0028, Japan

Shanghai Representative Office
Singapore Representative Office
New York Representative OfficeTreasury and Securities Division

Phone: +81-29-231-2151
Phone: +81-3-3273-1741
Phone: +81-29-300-2727
Phone: +81-29-300-2386
Phone: +86-21-6209-0258
Phone: +65-6225-6543
Phone: +1-347-686-8420
Phone: +81-3-3273-5245

Affiliated Companies

As of March 31, 2016

Established

Capital Stock(millions of yen)

Share of
Voting Rights

Sale of software and contract of
calculation businesses

1973

47.5

5%

4-12, Minami-machi 3-chome, Mito,
Ibaraki

Leasing of machinery and equipment, claim
acquisition

1974

100

15%

The Joyo Credit Guarantee Co., Ltd.

4-12, Minami-machi 3-chome, Mito,
IbarakiCredit guarantee of housing loans from Joyo
Bank

1978

30

5%

The Joyo Credit Co., Ltd.

4-12, Minami-machi 3-chome, Mito,
IbarakiCredit card services

1982

100

5%

The Joyo Business Service Co., Ltd.

8-1, Sasano-cho 1-chome,
Hitachinaka, Ibaraki

Agent in charge of administrative work for
Joyo Bank

1984

100

100%

The Joyo Industrial Research Institute, Ltd.

5-18, Sannomaru 1-chome, Mito,
IbarakiConsulting, investigation and research

1995

100

5%

The Joyo Equipment Management Co., Ltd.

5-5, Minami-machi 2-chome, Mito,
Ibaraki

Maintenance and management of operational
properties and equipment of Joyo Bank

1999

100

100%

3-3, Shinhara 1-chome, Mito, Ibaraki

Management and maintenance of ATMs and
CDs

1999

50

100%

4-12, Minami-machi 3-chome, Mito,
Ibaraki

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

2007

3,000

100%

Company Name

Address

Main Business Activities

The Joyo Computer Service Co., Ltd.

16-25, Nishihara 2-chome,
Mito, Ibaraki

The Joyo Lease Co., Ltd.

The Joyo Cash Service Co., Ltd.
The Joyo Securities Co., Ltd.

■ Principal Shareholders
The 10 largest shareholders of Joyo Bank and their respective shareholdings at March 31, 2016 were as follows:

The Bank of Tokyo-Mitsubishi UFJ, Ltd. .....................................................................................................
Nippon Life Insurance Company ...................................................................................................................
Japan Trustee Services Bank, Ltd. (Trust Account) ..............................................................................
Sompo Japan Nipponkoa Insurance Inc. ..................................................................................................
STATE STREET BANK AND TRUST COMPANY 505223........................................................................
The Master Trust Bank of Japan, Ltd. (Trust Account) .......................................................................
The Dai-ichi Life Insurance Company, Limited .....................................................................................
Sumitomo Life Insurance Company ............................................................................................................
Meiji Yasuda Life Insurance Company........................................................................................................
Japan Trustee Services Bank, Ltd. (Trust Account 9) �������������������������������������������������������������������������
Total..........................................................................................................................................................................

Number of Shares Held(Thousands)

Percentage of Total Shares Outstanding(%)

28,992
25,20323,49523,17818,57517,703
17,04916,448
11,422
11,154
193,221

3.78
3.28
3.06
3.02
2.42
2.31
2.22
2.14
1.49
1.45
25.21%For further information, please contact: Markets Administration and International Division, The Joyo Bank, Ltd.
7-2, Yaesu 2-chome, Chuo-ku, Tokyo 104-0028, Japan71