JOYO BANK
Annual Report

2013

PROFILE

The Joyo Bank, Ltd., was established in 1935 out of the merger of the Tokiwa Bankand Goju Bank (both founded in 1878), and celebrated its 130th year in business.
As a leading financial institution in Ibaraki Prefecture and surrounding regions,
the Bank, with the philosophy of “Practicing sound management, creation 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
2 Message from the President
4 Management Policy
6 Relationship Banking
7 Financial Highlights

22 Consolidated Financial Statements
22 Consolidated Balance Sheets
23	Consolidated Statements of Income
23	Consolidated Statements of Comprehensive Income
24 Consolidated Statements of Changes in Net Assets
26 Consolidated Statements of Cash Flows

9 Business Highlights

27 Notes to the Consolidated Financial Statements

11 Corporate Social Responsibility (CSR)

59 Report of Independent Auditors

13 Corporate Governance and Internal Control System

60 Non-Consolidated Financial Statements
22 Non-Consolidated Balance Sheets
23	Non-Consolidated Statements of Income

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

Corporate Data
As of March 31, 2013

■ Date of Establishment

July 30, 1935

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

Head Office, Tokyo Business Division (Tokyo Main Office), and 148 Branches, 27 Sub-branches■ Overseas Network

2 Representative Office: Shanghai, Singapore■ Number of Employees

3,722■ Stock Exchange Listing

Tokyo Stock Exchange■ Paid-in Capital¥85,113 million■ Number of Shares(as of March 31, 2013)

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

28,831

2,167,515 thousand
799,231 thousand

Service Network
As of March 31, 2013

Japan:
Miyagi
Fukushima

Shanghai Representative OfficeTochigi Ibaraki
Mito-City
Saitama
Tokyo

Chiba

Osaka

Singapore Representative Office

Japan:• Miyagi Pref. (1 Branch)• Saitama Pref. (3 Branches)• Fukushima Pref. (10 Branches)• Chiba Pref. (6 Branches)• Tochigi Pref. (Tochigi Wholesale Office,6 Branches, 1 Sub-Branch)• Mito-City (Head Office, International Business
Office, International Operations Office)• Tokyo (Tokyo Business Div. (Tokyo Main Office),
4 Branches)• Ibaraki Pref. (Head Office, 119 Branches, 26
Sub-Branches)• Osaka Pref. (1 Branch)1• Treasury and Securities Div.
Markets Administration and International Div.

MESSAGE FROM THE PRESIDENT
We Will Provide Comprehensive Financial Services as well as to Contribute to the Reconstruction and
Growth of our Customers and the Region

The Japanese economy in fiscal 2012 showed signs of

exchange opinions on such topics as technology and prod-

rebounding in the summer due mainly to the effects of

uct development.

recovery-related demand following the Great East JapanFor overseas business development, we took steps

Earthquake and government stimulus measures. Following

to enhance our services by opening the Singapore

this, however, the slowdown in the economy grew more

Representative Office and expanding collaboration primar-

pronounced because of weak production activities mainly

ily with overseas banks.

in export industries that primarily reflected a downturn in

To support new business creation, we founded the Joyo

the global economy.

Business Award—which seeks and recognizes innovative

Despite signs of a gradual recovery in the first half of fis-and creative business plans—and strengthened regionalcal 2012, the economy in Ibaraki Prefecture weakened over-economic revitalization measures by establishing the Joyo

all due mainly to sluggish personal consumption coupled

Regional Co-creation Fund and assisting in new businesswith decreases in exports and production in the second half.

launches. To support business reconstruction, the Bank

In this business environment, the Bank undertook its

bolstered related services upon the expiry of the SME

11th Medium-Term Business Plan (running from fiscal

Financing Facilitation Act, which included setting up its

2011 through fiscal 2013), which seeks to create “The best

own business reconstruction fund.

partner bank that grows with its customers in the home

For retail customers, we strengthened our lineup ofregion.” In fiscal 2012, the interim year of the plan, we

financial products and services to meet their various financ-continued to give our full support to the Joyo Regional

ing needs at each stage of their lives, including enhanc-

Reconstruction Project “Bonding” to contribute to theing loan, investment trust and insurance services. We also

reconstruction and growth of our customers and thebolstered systems for providing financial services, namely

region.

changing to a more customer-oriented retail format (com-In our corporate banking services, we satisfied theprehensive retail financial centers) at our 18 branches indiverse financing needs of customers—which included

Ibaraki Prefecture. In addition, we increased points of con-supplying a smooth flow of funds to meet recovery-related

tact for retail customers by setting up a website especiallydemand—while strengthening our business assistancefor employees of client companies and enhancing benefit

initiatives.

packages for client companies.

Regarding our assistance to manufacturing businesses,

We further expanded our branch network along thewe expanded “next X” activities to provide assistance overTsukuba Express commuter train line. In particular, we

the next decade as well as strengthened support initiatives

commenced Rokucho Branch (Adachi-ku, Tokyo) opera-

through collaboration with industry, academia, govern-tions within the Koshigaya Branch in advance of its open-

ment and the financial sector. These initiatives included

ing planned for the summer of 2013. Moreover, we have

convening small face-to-face meetings with profes-

met the diverse fund settlement needs of our customers

sors from regional universities and research institutes toby commencing the Joyo Densai Service, which forwards

2

electronically recorded monetary claims (a new fund settlement procedure) along with providing cashing services.
Through these initiatives, fiscal 2012 ordinary income
increased ¥1.7 billion year on year to ¥31.7 billion, andnet income climbed ¥3.5 billion to ¥20.3 billion. Despitea decline in interest income caused by a drop in interest
rates, these increases were mainly due to a rise in fees andcommissions centered on sales of assets in custody as wellas an improvement in credit costs. The capital ratio, which
is an indicator of the Bank’s financial soundness, remainedat the high level of 12.81% on a consolidated basis.
In order to maintain the constant support of shareholders, we increased the annual dividend by ¥0.50 per share to¥8.50 as well as introduced a shareholder special benefit.
This entails selecting local specialty items to be given as
gifts to shareholders with the aim of contributing to theregion’s restoration. In addition, the Bank sponsored the“GANBA-PPE (Go for it) ! IBARAKI/ FUKUSHIMA ¥100 Food
Tasting Store,” a food tasting and marketing event that
supports local food products and agriculture. For its con-

Kazuyoshi Terakado

tribution to the recovery of local food products and agri-

President

culture, this event received high acclaim from the Ministryof Agriculture, Forestry and Fisheries, and in 2012 wasawarded for the first time the Food Action Nippon Award,
which is sponsored by financial institutions nationwide.
In fiscal 2013, the Joyo Bank Group will work together
to promote the Joyo Regional Reconstruction Project“Bonding” in an ongoing effort to contribute to the reconstruction and growth of its customers and the region.
Everyone in the Joyo Bank group is committed to

Kazuyoshi Terakado

meeting the expectations of our customers, our sharehold-President

ers, and the region. I hope you will all continue to support

July 2013

us in the future.

3

MANAGEMENT POLICY• 11th Medium-Term Business Plan to Build a Sound Management Base (FY2011 – FY 2013)
Social and economic structural changes, such as declining population, the decrease of the working-age population,and the spreading of economic activities, are well underway. Moreover, the Great East Japan Earthquake caused tremendous devastation to our customers and to the region and completely transformed the business environment inwhich the Bank operates.
Against this backdrop, in J-Cube, our 11th Medium-Term Business Plan for building a sound management base,which covers the three-year period from fiscal 2011 through fiscal 2013, we set the goal of “becoming the best partnerbank that grows with its customers in the home region” in order to vigorously promote efforts to rebuild the lives ofcustomers and the region and to support business reconstruction and improvement.

Our Goal

To be the best partner bank that grows with its customers
Contribute to the development and the growth of customers and the region by providing comprehensive financial services.

◆ Contribute to regional reconstruction and growth by expanding the customer base
Seek sustained growth that is capable of responding flexibly and with precision to the changing social and economic structure by focusing efforts oncustomer and regional recovery and expanding the customer base in the Ibaraki area.

◆ Build a stable and sound management base by focusing on strong employee
on-the-job performance
Enhance the ability of branches, which have the closest relationship with customers, to solidly execute their business in terms of both operations andadministration, in order to contribute to regional reconstruction and growth and increase the Bank’s earnings capacity.

◆ Strengthen the organization as a whole by improving human resource capabilities
Strengthen the organization by improving employees’ ability to achieve self-sustaining growth through their contributions to customer and regional
growth and revitalization and by developing each and every employees’ knowledge and their job performance capabilities as financial professionals.

Bu s in es s t ar g et s :Strengthen earning capacity (on consolidated basis)

Fiscal 2013 Targets• Core gross business profit• Core business profit• Net income• Consolidated net income• OHR *1
• ROE *2
• Tier I ratio including common stock *3¥120.0 billion or more
¥ 50.0 billion or more
¥ 25.0 billion or more
¥ 27.0 billion or more
mid 50% range
mid 5% range
approx. 12%*1. OHR is a leading indicator of management efficiency and indicates the amount of expenses incurred to obtain one unit of gross business profit.
*2. ROE is a leading indicator of capital efficiency and indicates how much profit was obtained using shareholders’ equity.
*3. Tier I ratio including common stock is an indicator of financial soundness and indicates how much core capital is comprised of common stock andretained earnings versus risk assets such as loans and securities.

4

Customers,
region, employees,
shareholders

Building a Strong Management Base:
The six sides of a cube represent key strategies for achieving our goal of becoming the best partner bank that grows with its
customers in the home region.
Through the execution of these strategies, we will share our growth with stakeholders including customers, the community, employees and shareholders. Because we express this growth as the three dimensions of a cube, we established J-Cube,
our 11th Medium-Term Business Plan to build a sound management base.

Optimize sa
les channelsExpand thstren eecustomer base ann su ort
customgethfor dr developppm
ent

en
th nt
g
n e
re m es
Stvestiliti
in pabca

Improv
on-the e employee-job capabilit
ies

g

kin

-ta
isk
r
e ty
rovabilipImresouRaise hum
rce capabialnities

The Six Key Strategies of
1. Expand the customer base and strengthen
support for customer development

4. Optimize sales channels
Meet the diverse needs of customers by optimizing the sales
network, building stronger collaboration between channels
and strengthening online banking.

Expand the customer base by expanding the Bank’s presence
and promoting a wider range of transactions with each customer. Help customers rebuild their lives and businesses andgrow based on the strong customer base.

5. Improve risk-taking ability
Improve risk-taking ability based on enhanced risk management system to build a strong management base.

2. Strengthen investment capabilities
Increase earnings by strengthening investment capabilities
of funds procured through expanded customer base andstronger portfolio management capabilities for more stableprofitability.

6. Raise human resource capabilities
Support employee growth and increase opportunities for success by getting the right person for the right job.

3. Improve employee on-the-job capabilities
Raise business efficiency and streamline headquarters throughdrastic business reforms. Improve employee on-the-job capabilities through more efficient use of the workforce and time.

5

RELATIONSHIP BANKING• Relationship Banking Policies
The local economy is the bedrock of the operations of a regional bank. Our mission is to contribute to the development oflocal society and economy by providing communities with reliable financial services.
To fulfill this mission, the Bank has adopted the following three priority policies:
Priorities• Strengthen support for customer companies tailored to their stage of corporate growth• Develop new financing options for SMEs
• Contribute to a sustainable growth of local economy• Efforts to Facilitate Financing
Joyo Bank began facilitating the smooth flow of funds through the establishment of the Financial Facilitation
Engagement Policy in January 2010. This policy was established with the aim of fulfilling the Bank’s important mission
as a regional financial institution to contribute to the development of the local society and economy by providing communities with reliable financial services. Although the SME Financing Facilitation Act expired in March 2013, we will
earnestly continue efforts to facilitate the smooth flow of funds by actively demonstrating our financial intermediaryfunctions. Joyo Bank will also provide various forms of assistance to small and medium-sized businesses at each businessstage by leveraging consulting functions based mainly on collaborations with Group companies and external organizations, beginning with offering smooth financing.

Implementation Status Including Changes in Loan Conditions (Standards as of March 31, 2013)
To SMEs

To housing fund recipients
Monetary amounts(millions of yen)

No. of loans
Total amount received
Among loans executed

Monetary amounts(millions of yen)

No. of loans

51,653

1,212,608

2,763

30,143

48,905

1,156,870

2,271

24,099Among loans declined

348

7,518

50

555

Among loans under review

848

18,14558

704

Among loans discontinued

1,552

30,072384

4,783

Notes: 1.	Japanese yen amounts are rounded down to the nearest million yen.
2.	No. of loans and monetary amounts are the cumulative totals as of the date of the above standards beginning on the effective date of the SME
Financing Facilitation Act (December 4, 2009). In addition, the No. of loans represents claim amounts derived from the claim units and monetaryamounts as of the application date.

6

FINANCIAL HIGHLIGHTS
Consolidated capital ratio
Remained at high levels

Business profit, ordinary income and net income increased
compared with the previous fiscal year. Despite a decline
in interest income caused by a drop in interest rates, theseincreases were mainly due to a rise in fees and commissions centered on sales of assets in custody as well as an
improvement in credit costs.
Business profit grew ¥3.4 billion year on year to ¥45.4
billion, ordinary income increased ¥1.7 billion to ¥31.7 billion and net income climbed ¥3.5 billion to ¥20.3 billion.
The capital ratio, which is an indicator of the Bank’s financial
soundness, stood at 12.81% on a consolidated basis and12.40% on a non-consolidated basis.

(%)

14
12.77%

12.78%

12.81%

11.81%

12.11%

12.18%

As of March 31,
2011

As of March 31,
2012

As of March 31,
2013

13
12
11
10
0

“Region” refers to Ibaraki Prefecture and neighboring areas forming
the main catchment area (by location of main branches) of the Bank:
Fukushima, Tochigi, Saitama, Chiba and Miyagi prefectures. Loansto customers outside the local region are mainly limited to loans tocorporate customers in Tokyo or Osaka who have factories or officesin the areas mentioned above and who have a deep relationship with
regional business.

Consolidated capital ratio
Consolidated Tier I ratio

Deposits(Billions of yen)
(%)
100
5,000
Increased
1.2% fromthe previous fiscal year-end
to ¥7,355.3¥4,982.5¥4,800.6
billion
77.0%
75.9%
80

4,000

Net income
Net income climbed ¥3.5 billion to ¥20.3 billion year on year.

7,500
2,000

¥20.3

60

(%)

2011

¥12.9

0

5

Percentage of80loans
to regional customers

0

60

2013

60

As of March 31,
2011

Balance of loans to

70

2012

1,500

10

98.4%
Loan balance
100¥7,355.3 ¥7,238.6
90
regional customers
40
20

100

0
80
3,000 As of March 31, As of March 31, As of March 31,

¥16.7

50

40

As of March 31,
2012

As of March 31,
2013

0

20

0

FY2010FY2011

Deposit balance
Local deposit balance
Local deposit balance percentage

FY20120Loan balance

BalanceOrdinaryof loans to regionalcustomers
Business profit,
incomePercentage of loans to regional customers
Business profit grew ¥3.4 billion year on year to ¥45.4 billion,
and ordinary income increased ¥1.7 billion to ¥31.7 billion.
(Billions of yen)(Billions of yen)

Loans (Percentage of loans to regional customers)(Billions of yen)
(%)
100
5,000
Increased
3.1% fromtheprevious
fiscalyear-endto ¥5,139.9¥4,982.5¥4,800.6
billion
77.0%
75.9%

0
0 As of March 31, As of March 31, As of March 31,
FY20102011

2012

Business profit(Billions of yen)

¥4,800.6
77.0%

75.9%

Loan balance

20

Percentage of loans
to regional customers

100¥3,696.8

60 75.4%¥4,982.580¥5,139.940¥3,785.6

60

2011

0

20

Balance of loans to70regional customers

Percentage of60loans¥3,879.4

to regional customers
50

2012

1,000
FY20120

As of March 31,
2011

40

2013

30

20
0 As of March 31,
2012

As of March 31,
2013

0

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

Ordinary income

100

(%)

Loan balance
80

75.9%

0
2,000 As of March 31, As of March
40 31, As of March 31,

0

FY2011 2013(%)

¥4,800.6

4,000
1,000
3,000

¥31.7
Balance of loans to

40

(%)

¥4,982.5

5,000
2,000

regional customers

¥18.9

20
1,000
10

77.0%

6,000
3,000

80
¥45.4

¥29.9

30
2,000

¥3,785.6(Billions of yen) ¥3,696.8

100

60

80

4,000

(%)

5,000
¥4,982.5
60 ¥4,800.6
77.0%
75.9%
4,000
50
¥3,785.6
¥41.9
¥41.9
¥3,696.8
40
3,000

5,000

(%)

98.6%

¥7,266.6 ¥7,165.5¥6,817.5 ¥6,716.5

6,000
1,000
4,500

25

15

98.5%

9,000
3,000

(Billions of yen)

20

¥3,785.6(Billions of yen) ¥3,696.8

7(Billions of yen)

5,000

¥4,800.6
77.0%

(%)

¥4,982.5
75.9%

100

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 ¥1,212.3 billion due to theongoing firm performance of housing loans.

Loans

1,500

12.88%

15.91%
42.83%

17.80%(Billions of yen)

1,250

Joyo Bank

As of March 31,
2011

As of March 31,
2012¥1,212.3 ¥1,211.3

750
500

22.37%

16.26%¥1,138.2 ¥1,137.2

1,000

44.12%

15.72%

Joyo Bank¥1,115.5 ¥1,114.2

250

7.20%
Joyo Bank
Other regional banks

0

4.91%

City banks/Trust banks
Shinkin banks (credit unions)

As of March 31,
2013

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
Increased
10.2% fromthe previous fiscal100year-end to¥4,982.5¥4,800.6¥1,138.0
billion
77.0%
75.9%
80
4,000
(Billions of yen)

1,200
3,000

200
0

¥3,696.8¥1,032.6¥1,033.3

1,000
2,000
800
1,000
600
0
400

¥3,785.6¥313.8¥368.1¥370.9¥353.6

As of March 31, As of March 31, As of March 31,¥65.42012
2011
2013
¥65.2

¥282.9As of March 31,
2011(Billions of yen)

5,000
4,000

40

Balance of loans toregional¥453.9 customers

20

Percentage of loans
to regional customers¥4,800.6
77.0%

3,000
3,000
2,500
2,000

75.9%

43.4%

37.5%

36.7%

60

Percentage of loans

01,000 As of March 31, As of March 31, As of March 31,¥297.6500¥1,801.1

2011

0

As of March 31,
2013¥1,831.8¥1,631.8¥1,645.0

2012

As of March 31,
2011

Loan balance50

41.8%Balance of loans toregional customers
40
40 35.7%¥60.5¥1,838.3
to regional customers
30
20¥1,623.902013

As of March 31,
2012

10

As of March 31,
2013

Number of loans to SMEs

(Number of loans)

1,200¥1,037.2¥1,008.5

36,000¥1,110.033,333(%)

32,55232,891 32,425

0 As of March 31,

As of March 31,
2013

32,902 100 32,994

30,00080

800

24,000600

18,00060

12,00040400¥335.9¥426.9¥368.3200

6,000
As of March 31,
2011

Housing loan

(Billions of yen)

¥4,800.6

As of March 31,
2012¥4,982.50

As of March 31,
201320
As of March 31,
2011

100

2012

Number of loans to SMEs
Number of loans to regional SMEs

Apartment loan

(%)

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

(%)

44.1%

¥325.80

Housing loan
Housing loans increased 7.0% from the previous fiscal yearend to ¥1,110.0 billion.

080¥3,785.6

2,000
1,000
1,500

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

1,000

(%)

100

¥4,982.5(Billions of yen) ¥3,696.8

Loan balance
60 ¥1,138.0¥245.5
As of March 31,
2012

Loans to SMEs

8

(Billions of yen)

5,000

¥4,800.6(%)¥4,982.5

100

BUSINESS HIGHLIGHTS
Support for Overseas Business Development
development, including information on each country in theregion and trade transactionrelated procedures.
Moreover, we hold theJapan-China Manufacturing
Forum in China as well as
various seminars to provide thelatest information on local conditions and other topics.

We support our customers’ overseas business development
through business collaboration with external organizations,
including overseas banks. To further this aim, we opened
the Singapore Representative Office in September 2012,
firmly positioning ourselves in the main hub of Southeast
Asia. This was the first such opening since we establishedthe Shanghai Representative Office over 16 years ago.
In February 2013, we established the toll-free Joyo
Overseas Business Expansion Consultation Line to offer
a multitude of advice necessary for overseas business

Overseas Network
Representative Office

Thailand• Kasikorn Bank
• Bangkok Bank

Indonesia

Japan• Bank Negara Indonesia (BNI)
Provides information on each country’s domestic banking conditions and offers a variety offinancial services, beginning with opening
accounts

ShanghaiJapan• NIPPONKOA Insurance Company, Ltd.
• 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

Bangkok• Nippon Express (Tokyo Branch Office)Offers a full range of logistical services and expertise• Hitachi Regional Technical Support Center (HITS)	Supports the overseas development of small- to mediumsized businesses in the Hitachi area

Singapore

Representative Office• Secom Co., Ltd.
• SOHGO SECURITY SERVICES CO., LTD. (ALSOK)
	Provides and sells security systems and devices overseas
Proposes and provides overseas security services

Jakarta• Japan Bank for International Cooperation (JBIC)(State Bank of India)
	Provides information on India’s domestic banking conditions and offers a variety of financial services, beginningwith opening accounts

9Support for Manufacturers

Guarantee Fund Association, and operating the Asset-Based
Lending (ABL) system as a method for providing finance tocattle breeders using fattening cattle as collateral.

Joyo Bank is expanding “next X”
activities to provide assistance tolocal manufacturing businesses
over the next decade. Our “next X”
A manufacturing
activities are strengthening support technology workshop
initiatives through collaboration withindustry, academia, government and thefinancial sector. These initiatives included
actively convening small face-to-face meetings with professors from universities in Ibaraki Prefecture and research institutes to exchange opinions on such topics as technologicaland product development.
The Bank is also leveraging its networks to provide support in a variety of areas. In particular, we hold the Joyo
Manufacturing Forum as a venue to support sales channel
development through business matching with big corporations as well as manufacturing technology workshops toassist in efforts to develop personnel and upgrade technological capabilities.

Joyo Bank’s Business Reconstruction Funds
We support the early revival of businesses by establishing the
Ibaraki Iki-iki Fund II jointly with financial institutions in theprefecture as well as the Joyo Business Reconstruction Fundin partnership with Risa Partners Inc. In addition, we are working to enhance assistance approaches to small and mediumsized businesses by strengthening our consultation functions
based on broader tie-ups with external institutions.

Online Banking for Corporations JWEBOFFICEJWEBOFFICE is an online banking service that enables users toundertake balance and payment
inquiries, money and bulk transfers, salary deposits, reimbursements and other transactions anywhere. Throughthese services, JWEBOFFICE supports businesses’ efforts to
reduce cumbersome administrative burdens. JWEBOFFICE
can be accessed once a user’s identity has been verified
using a onetime password. Through these and other measures, we are enhancing the security of this online service.

Support for Medical and Welfare Businesses
We offer consulting services tofacilitate future business expansion and provide information
to help launch new businesses.
To facilitate these services, wehave established medical and welfare teams. We also meetthe various needs of medical and welfare businesses mainly
by holding seminars focusing on operational advice andrisk management information.

Joyo Industrial Research Institute
In order to revitalize the region, Joyo Industrial ResearchInstitute conducts surveys and research on a consignment
basis while providing various consulting services. The
Institute’s staff includes a large number of experts, including certified SME management consultants, ISO auditors
who offer effective solutions to the wide range of issues
faced by our customers in the region.

Support for the Agri-Business
The Bank offers customers new
exchange and business meeting opportunities by convening
the Joyo Commercial Food Fairto support the development of
The Regional Bank Foodsales channels for food businesses
Selection eventworkshop
as well as the Regional Bank
Food Selection event in collaboration with regional banks
nationwide. In addition, we are enhancing our financial products for farmers by handling “Daichi” series multi-purpose
loans, which are guaranteed by Ibaraki Agriculture Credit

Joyo Area Research Center
The Joyo Area Research Center cooperates with various
economic associations—beginning with those located in
Ibaraki Prefecture—and research institutions, performing
various tasks that contribute to the regional communityand economy. In particular, the Center conducts researchand publishes data on economic industry trends andregional development, holding lectures and sending speakers to regional organizations and events.

10

CORPORATE SOCIAL RESPONSIBILITY (CSR)
Environmental Preservation Initiatives

Development of Eco-Friendly Branches
In fiscal 2012, we opened the renovated Tone and Ogawa
branches equipped with solar panels in an effort to promote the development of eco-friendly bank branches.

Environmental Principles (Established in 2008)
The main operational base of the Joyo Bank Group is Ibaraki
Prefecture, an area blessed with beautiful natural scenery,
including abundant greenery and water resources. We
believe it is the Bank’s social mission to help protect andnurture this rich and varied natural environment while realizing a sustainable society in our local region. To this end,
we work hand in hand with a diverse range of partners inpreserving the natural environment of our home –Ibaraki
on a continuous basis.
Save The Forest In JapanThe Bank is a member of Save The Forest In Japan, an organization established by regional banks from all over thecountry dedicated to ensuring healthily growing forests. In
conjunction with its efforts to preserve forests in disasteraffected areas, Save The Forest In Japan held the Tohoku
Summit in April 2013 with the objective of contributing to
the recovery of natural environments in the Tohoku region
that were severely damaged during the Great East Japan
Earthquake.

“Eco-Ibaraki” Environmental Conservation Trust
Joyo Bank subsidizes organizations that engage in environmental preservation activities in Ibaraki Prefecture and support the recovery of areas affected by the Great East Japan
Earthquake (limited to environmental preservation activities). In fiscal 2012, we held a ceremony to present grants
to five of these organizations, all of which reported on thestatus of their activities.
Overview: Jointly established with Nipponkoa InsuranceCo., Ltd. in 1992. Each year, this trust accepts
entries from organizations seeking funding,which are evaluated and selected by the
executive committee.
Funds donated in fiscal 2012:75 organizations totaling ¥9,030,000 (including sevenfor disaster-related activities)

Joyo Furusato Forest
We have also signed a “forestry partnership agreement”
with Ibaraki Prefecture and Ibaraki Forestry Support Centerin September 2009. In Naka City, we established the Joyo
Furusato Forest. Through such ongoing activities as clearing underbrush, thinning and tree planting, we are helping
to protect and cultivate local forests. In March 2013, weplanted trees around Mount Tsukuba.

11

Barrier-Free Initiatives

we commemorated the 30th anniversary of the Joyo Geibun Center
Foundation establishment withthe opening of the Geibun Gakuen
School.

Pamphlet entitled Being a People-Friendly Bank
We produced a pamphlet that provides
information on products and services forthe elderly and customers with disabilities.
We also created a braille version for visually impaired customers.

Charity Concert:
Yuzo Kayama and
The Wild Ones Concert

Wheelchairs Available
Wheelchairs are available at 78 Joyo Bank branches to makebanking comfortable and worry free for customers withphysical disabilities and the elderly.

Joyo Historical Materials Museum
The Museum features the Currency Gallery, which displays
historical currency notes and banking materials, and theHistorical Materials Library, where visitors can view documents pertaining to local culture and finance. At the Art
Spot, the Museum periodically displays various exhibits.
In addition, the Museum holds classes on finance forvarious organizations and provides lectures to local residents on financial history and other topics.

Braille Document Preparation Services
We prepare transaction documents in braille upon request
for visually impaired customers.
ATM for the Visually Impaired
Joyo Bank has equipped every branch with ATMs featuring
audio guidance functions and phone receivers with braillebuttons. In addition, these ATMs are accessible to customers in wheelchairs.
Support Program for People with Dementia
We run the Dementia Supporter Training Program for all
employees in an effort to promote proper understanding of
dementia while cultivating “dementia supporters” who help
those suffering from this disease and offer heartfelt support
to their families.

Art Spot

Joyo Volunteer Club
The Bank operates the Joyo Volunteer Club to encourage
volunteer-based initiatives by Bank employees. Around
3,400 employees registered in the Club participate in activities in such areas as social welfare, environmental protection, international exchanges, regional development andvarious events. The Club also takes part in activities that
support and raise money for regions impacted by the Great
East Japan Earthquake while donating approximately 6,000
towels to welfare facilities each year.

Dementia Supporter Training Program

Joyo Geibun Center Foundation
The Center’s ongoing objective is to contribute to prosperous and comfortable individual lifestyles by creatingrich local environments through art and culture. Working
together with people throughout Ibaraki Prefecture,
the Center focuses on supporting cultural promotion
activities and local cultural activities. In October 2012,

Rubble removal activities in
Higashimatsushima City, Miyagi Prefecture

12

CORPORATE GOVERNANCE AND INTERNAL CONTROL SYSTEM
To ensure a greater trust from customers, the regional community and our shareholders, we believe it is essential that
our management be efficient, sound and transparent, andfirmly rooted in compliance. Constantly to be mindful ofthe importance of corporate ethics, we have establishedeight basic principles under which we are strengthening
and expanding our corporate governance.

The Joyo Bank Corporate Philosophy
Corporate Social Responsibly (CSR) and Public Mission
Always keep in mind the Bank’s CSR and public mission, and deepen trust
through sound and open business management.
Compliance
Comply with the legal and social code and execute honest and open business activities.
Fight Against Crime

Corporate Governance at Joyo Bank

Ensure that the Bank has no relationship with organized crime.
Provide Valuable Financial Services

The Board of Directors meets twice a month in principle
to exercise decision-making and supervisory functions.
The Bank has a total of 12 directors, of whom two external
directors appointed to strengthen supervisory functions
by providing an outside perspective. Nine of them are
executive directors, and the others a managing director(in charge of internal auditing) and two external directors.
Major items relating to conduct of operations excluding
those decided by the Board of Directors are handled by an
Executive Officer Committee created as an assessment anddecision-making body. Executive Officer Committee meetings are held twice a month to discuss and implement specific policies and proposals in the conduct of business.
Special committees (Compliance Committee, General
Budget Committee, ALM Committee, Risk Management
Committee and Sound Asset Committee) have been established to determine the major themes for management
audits. Reports are compiled regarding the discussions anddecisions of these committees for perusal of the Board of
Directors.

We will contribute to the development of the region in which we operateby responding to our customers’ needs and providing valuable financial
services, considering the security of customers’ information.
Relationship with the Regional Community
We will communicate openly and freely with the community where we doour business, raising our transparency through active disclosure of corporate information.
Respecting the Human Rights of our Employees
We will provide a work environment that respects individuality and protects the rights of all employees.
Environmental Initiatives
We will reduce environmental load, and help the environment throughcore banking activities.
Community Contribution Activities
We are committed to contributing to the community we serve, as a good
corporate citizen that marches in step with regional society.

In order to audit performance of duties by directors,
the auditors attend important meetings such as the Boardof Directors and Executive Officer Committee meetings,
peruse relevant documents, and carry out business andasset status inspections, all of which are based on theauditing policies and plans outlined at Board of Corporate(Internal audit)(Decision-making/
Management supervision)

Corporate Auditors
Board of Corporate
Auditors
General Meetingof Shareholders

Board of Directors

Corporate Audit Division(Operating execution)

Business Section

Executive Officer
Committee

Business Planning Div.
Customer Services Div.
Business Promortion Div.
Government and Municipal Business Div.
Treasury and Securities Div.
Markets Administration and International Div.
Credit Examination Div.
Operation Planning Div.
Computer System Div.
Corporate Risk Management Div.
Corporate Planning Div.
Personnel Div. • General Affairs Div.

Auditing Company

13

Risk Management Standards and other Controls
In addition to establishing risk management standards
for appropriate management of all categories of risk, it is
our mission to build a comprehensive internal risk management structure to ensure a sound financial positionand stable earnings in the future by creating frameworks
for comprehensive understanding and control of risk.
Moreover, we also have business contingency plans inplace should any event disrupt our core systems, such as
natural disasters or a systems failure.
The management of risk is the responsibility of various
risk management departments, as set down in the in-house
regulations. Comprehensive risk management is carried out
by one department that oversees risk management for theentire Bank. The Board of Directors has appointed the director to oversee the risk management program.
We have established a Risk Management Committee tomeasure the extent of various risks and make decisions onrisk management policies. This committee will meet regularly to ensure an accurate grasp of the situation regarding
risk management issues across the Bank. The officer incharge of risk management will make regular reports to theBoard of Directors on the current state of risk management
and the countermeasures that the Bank is taking against
risks.

Auditors meetings (held once a month in principle).
With regard to internal auditing, the Corporate Audit
Division (the auditing office) monitors internal management in terms of appropriateness and effectiveness of conduct, and suggests improvements when problem areas are
identified. Results of the audits are regularly submitted in areport to the Board of Directors.
In addition to strengthening internal auditing, we havecreated a Compliance Audit Committee comprising four
outside experts including lawyers and Certified Public
Accountants (CPAs) to ensure greater expert input andobjectivity.

Internal Controls and Risk Management
Compliance
Based upon our philosophy of soundness, cooperation andpartnership with the home region, we attach great importance to compliance in our management. We have established a corporate ethics guideline and a code of conduct.
Moreover, we have established a new set of guidelines toensure that every director and employee complies withthe law and with the Bank’s Articles of Incorporation. Everycompany within Joyo Bank Group follows the same strict
guidelines. We have put standards into place to establish acompliance system across the Group as a whole.
To ensure the best standards in compliance, we haveestablished a Compliance Office that oversees the compliance program as defined by the Board of Directors.
The Office makes regular reports to the Board.
Moreover, we have established a whistleblower hotline forthe entire Group, called the Compliance Hotline.
In addition to the Compliance Committee, we haveappointed outside experts to form a Compliance Audit
Committee, which monitors compliance issues on a regularbasis.
To ensure that our internal controls perform theirintended functions, our various auditing functions, which
are independent from business execution departments,
carry out internal audits across the Group. We will resolutely
take action to prevent transactions with criminal bodies
that threaten public order and security or disrupt economic
development.

System to Ensure the Effective Execution of theirDuties by the Directors of Joyo Bank
We have put in place business plans to clarify our operational targets, as well as an overall budget every year, todefine specific policies.
We have determined the scope of decision-making
responsibilities for each director, to achieve efficient
operations.
We have established an Executive Officer Committee
its functions and details of convocation, etc., are laid downin our Executive Officer regulations. We have also set up a
range of committees, grouping executive directors, executive officers and division heads, who meet as and whenneeded.

14

Compliance System

Supporting Corporate Auditors
To support internal auditing, a staff who has enough knowledge and ability as an auditor is assigned to assist the corporate auditor is assigned to assist the corporate auditors.
To ensure the independence of this assistant from theinfluence of the business execution departments, in case oftransfer of the staff, the executive director in charge of all
personnel transfers should inform the corporate auditors
in advance. The corporate auditors are entitled to express
their opinions and advice regarding the personnel transferof the staff.
The corporate auditors attend meetings of the
Executive Officer Committee and offer their opinions on
the audit process and all related matters. The directors andemployees report any and all information the corporate
auditors deem necessary to complete the audit.
In order to enhance the efficiency of the audit system,
the corporate auditors maintain close coordination withall headquarters departments other than the internal audit
sections.
The representative directors and accounting auditors
each meet regularly with corporate auditors and exchange
opinions on the issues related to the audits.

Internal auditing function

We place high priority on strengthening our compliancesystem to ensure sound banking operations, fulfill our social
responsibility and public mission, and maintain the trust ofcustomers, shareholders and other stakeholders.
Also, we establish a compliance program each year andensure that each executive and employee are fulfilling theirroles in compliance. In addition, we build a compliancesystem whose ultimate supervisory organ is the Board of
Directors and place dedicated compliance officers in eachmajor division to undertake wide-ranging inspections oflegal issues in each division. To supplement internal compliance activities by outside audits to inject the required
professional knowledge and objectivity, the Bank set up aCompliance Audit Committee, consisting of outside professionals including lawyers and CPAs. The Committee evaluates and audits the Bank’s compliance activities. We strive
to further strengthen and improve compliance activities.

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

Head office departments and branches, etc.
[Senior Manager] Supervisor [Administrator] Compliance officer
External auditing functions[Group company management]
Corporate Planning Division
Group business officeGroup company[Senior Manager] Representative [Manager] Compliance officer
Evaluation and audit[External audit]
Compliance Audit Committee

15[Compliance report]
Executive Officer 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 the Bank to ensure proper solicitation to our customers.

Risk Management

results 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 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 theBoard 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 of the system.

While the financial industry has grown due to deregulationand the advancement of financial technology, the risks carried by banks continue to diversify and become ever more
complicated. In this environment, we are working to meetthe highly advanced and various needs of our customers,
and we also have placed emphasis on the subject of “riskmanagement” to ensure the maintenance and improvement of sound operations which is one of the most vital
issues facing management.
The Risk Management System
In our fundamental rules regarding risk management, wehave outlined our fundamental thinking and management
procedures including policies regarding risk management,
organizational structure, and responsibilities.
In business management, the departments that carryrisks when conducting transactions (marketing departments) and the departments that internally manage the16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

Integrated Risk Management

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.

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 the bank’s financial resources (owncapital), we are committed to maintaining capital at an
appropriate level.

MarginRisk Buffer
Shareholders’Equity(Tier I basis)

Credit Risk

Interest-rate
Risk
Price
Fluctuation Risk
Operational
Risk(Allocated Resource) (Capital Allocation)

17

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

Stress Test

Allocation of Risk Capital
We pre-allocate capital (Tier I basis) to cover risk in termsof individual categories (credit risk, interest-rate risk, pricefluctuation risk and operational risk). Each month, we carryout monitoring to confirm that each quantified risk amount(amount of risk capital to be used) is kept within the allocated capital parameters.

Risk
Exposure
Under
StressCredit Risk Management• Internal Credit RatingsCreditrisk 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.

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.

 verview of Basic Policy and Procedures with RegardO
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.

• Asset Self-Assessment
In asset self-assessments to evaluate the soundness ofassets, the branch carry out a primary evaluation by making
a decision on credit category based on a credit rating. Thenthe head office department in charge of credit screening
checks these (secondary assessment), and the Corporate
Audit Division audits the results of the asset self-assessment
and verifies the appropriateness of procedures. Based onthese results, the Bank provides appropriate reserves andwrites down problem loans based on the assessments.

 redit Risk Management for Individual LoansCWe have separated credit-screening departments from loan
departments, and constantly work toward screening stricter
while also focusing on credit management before due dateto prevent the status of a claim from deteriorating.
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.

• Quantification of Credit Risk ManagementT he 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.
Loan Portfolio Management
We treat loan assets in their entirety as a single portfolio andconduct credit risk management from a macro-perspective.
Based on the quantification of credit risk, we carry out periodic monitoring to determine whether or not credit risk isconcentrated in specific rating groups, sectors or corporategroups, and analyze and evaluate credit situations by rating,region and sector.

18Market Risk Management

liquidity 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 refers to the possibility of losses arising fromexposure to risk of change in the value of assets and liabilities of the 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. The 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 oftransaction, after setting risk tolerance parameters (capital
allocation) reflecting the Bank’s financial strength, riskreturn profile and other factors.
We also have in place a system in which an ALM
Committee decides whether to conduct checks on statusof compliance with monthly thresholds and other mattersand takes measures when necessary. In addition to using
VaR, we also approach market risk with multifaceted analysis using tools such as basis point value (BPV) analysis, gap
analysis, scenario analysis (simulation method) and sensitivity analysis. This enables us to control risks within a tolerable range reflective of the Bank’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,
or a sharp rise in fund-procurement costs. At the 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 andSystem 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
information data and ensuring stable operation of computer systems.

19

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

Crisis Management
 e have established a set of general emergency guidelines
W
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.

Privacy Policy
We work to build on the mutual trust we have with our customers, the region, and our shareholders, stress the importance of our social responsibility, and offer high-quality
financial services. For the protection of personal data, wehave established the following policy based on our respect
for all individuals, and will put all our efforts into the protection of private information.

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

Privacy Mark
Based on the “Privacy Mark” certification, administered by
Japan Information Processing Development Corporation(JIPDEC), the Bank meets the “requirements for management of personal information protection” (JISQ15001) laid
down by Japanese Industrial Standards Committee andnow has in place mechanisms for appropriate protectionof personal information. The Joyo Bank is the first regional
financial institution in the North Kanto area to obtain thiscertification.

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.
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 customer
services department. We have in place a system for discussing measures for improvement and for prevention of issues
arising within the operational departments. We have also
signed agreements with designated dispute settlement
organizations and also work through external entities toreach settlements.
20

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

entrusted to an outside organization under an outsourcing arrangement, we require that protection of
personal information be contractually assured, andcarries out checks.

	We comply with all laws, ordinances and otherregulations regarding confidentiality of personal
information.
• Appropriate access• Security management measures	We acquire personal information only by appropriate and legal methods, and only when necessary forbusiness operations. Personal information is nevergathered in an inappropriate way.

	We have in place appropriate security management
mechanisms to ensure prevention of leakage, loss ordestruction of personal data, and other measures.
• Appropriate response to complaints• Ban on unapproved use of personal information	When customers have questions or complaints
regarding our protection of personal information,
we investigate these questions or complaints anddeal with them appropriately and promptly, within areasonable period of time.

	We only use personal information inasmuch as itis necessary for achievement of business objectives, and do not use such information for any otherpurpose.
		 In addition, information that is registered withcredit-data organizations of which we are a member is used where appropriate for credit-related
purposes.

• Continuous improvement
	The Bank has compiled regulations for ensuring
strict legal compliance and protection of personal
information.
		 In addition to ensuring that these measures arefamiliar to all employees and other affected parties,
the Bank continually upgrades them. Regular audits
into acquisition, use and handling of personal information are part of our broad and thorough commitment to confidentiality.

• 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, when personal information is

Financial Crime Prevention
We are fully committed to preventing crimes involving accounts held at our banks, and to protecting the financial assets of ourcustomers. We require identification when a new account is set up or for a large-amount transaction. In addition to working toprevent inappropriate transactions, when an account is used, we will cancel transactions when considered necessary and will
work hard toward crime prevention. We also have implemented measures to prevent the crimes of use of forged ATM cards
and online hacking.

21

Consolidated Financial Statements

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

2013

2012

Thousands of
U.S. dollars (Note 2)
2013

Assets:Cash and due from banks (Note 26)
Call loans and bills purchased
Commercial paper and other debt purchased
Trading assets (Notes 5 and 27)
Securities (Notes 6, 8, 26 and 27)
Loans and bills discounted (Notes 7, 9, 11 and 26)
Foreign exchanges
Lease receivables and lease investment assets (Notes 8 and 25)
Other assets (Note 8)
Tangible fixed assets (Note 22)
Intangible fixed assets
Deferred tax assets (Note 14)
Customers’ liabilities for acceptances and guarantees
Reserve for possible loan losses
Reserve for devaluation of investment securities
Total assets¥  318,396
1,829
27,3362,719
2,651,398
5,108,316
1,844
30,90655,41093,8398,958
2,801
15,731(51,420)(35)¥8,268,033¥  385,528
3,385
33,714
3,776
2,458,416
4,952,771
1,757
28,49455,05892,957
8,247
13,892
18,293(50,706)(311)¥8,005,275$ 3,385,392
19,454
290,659
28,92028,191,368
54,314,899
19,610328,622589,155
997,765
95,25029,786167,266(546,733)(380)$87,911,038

Liabilities and net assets
Liabilities:
Deposits (Notes 8, 15 and 26)
Call money and bills sold (Notes 8 and 19)
Payables under securities lending transactions (Notes 8 and 19)
Trading liabilities (Note 16)
Borrowed money (Notes 8, 10, 19 and 26)
Foreign exchanges
Bonds (Note 12)
Due to trust account
Other liabilities
Reserve for directors’ bonuses
Reserve for employees’ retirement benefits (Note 13)
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 14)
Deferred tax liabilities for land revaluation (Note 3)
Negative goodwill
Acceptances and guarantees
Total liabilities¥7,359,923
38,466
91,283
160
120,245265
15,00026
82,157
49
5,265
33
1,849
130
6
1,519
1
15,162
11,974
2,133
15,731
7,761,383¥7,277,708
17,561
38,888192
99,309238
15,00016
68,211
46
5,224
26
1,711
137
10
1,740
1
—
12,0502,291
18,2937,558,660$78,255,433
408,999
970,585
1,707
1,278,522
2,822
159,489280
873,551531
55,981
352
19,664
1,383
65
16,153
13
161,213
127,316
22,683
167,266$82,524,017

Net assets:
Common stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity
Unrealized gains on available-for-sale securities
Deferred losses on hedging instruments, net of taxes
Land revaluation excess, net of taxes (Note 14)
Total accumulated other comprehensive income
Equity warrants
Minority interests
Total net assets
Total liabilities and net assets

85,11358,574
286,893(23,299)407,28187,047(2,651)
12,35996,754120
2,493
506,649¥8,268,033

85,11358,574
275,598(24,913)394,371
40,214(2,705)
12,452
49,961812,201
446,615¥8,005,275

904,976
622,7963,050,437(247,735)
4,330,474
925,540(28,194)
131,409
1,028,755
1,282
26,507
5,387,020$87,911,038

Millions of yen
March 31,

See accompanying notes to the consolidated financial statements.

22

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

2013

2012

Thousands of
U.S. dollars (Note 2)
2013¥ 72,786
24,420863
23,9491,089
5,956
21,401
150,467¥ 76,781
23,927
1,104
22,175594
6,713
22,394
153,691$  773,908
259,6549,185
254,649
11,58663,329227,556
1,599,869

Millions of yen
Years ended March 31,

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

3,355
509
1,362
7,011
973
71,176
31,054
115,443
35,024

4,309
487
1,406
7,089
1,215
72,08034,515
121,105
32,58535,672
5,413
14,491
74,555
10,346
756,799
330,192
1,227,470
372,398

10,861
1,143
23,018291¥ 22,726

5,276
8,832
18,476341¥ 18,134

115,491
12,162
244,745
3,102$  241,642

Net income per share (in yen and dollars)¥  23.65¥  23.65$     0.29

See accompanying notes to the consolidated financial statements.

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

2013

2012

Thousands of
U.S. dollars (Note 2)
2013¥23,018
46,88846,83453—
69,906¥18,476
11,414
10,084(401)
1,730
29,891$244,745
498,549
497,978571—
743,295

69,612294

29,549341

740,168
3,126

Millions of yen
Years ended March 31,

Income before minority interests
Other comprehensive income (Note 23)
Unrealized gains on available-for-sale securities
Deferred gains (losses) on hedging instruments, net of taxes
Land revaluation excess, net of taxes
Comprehensive income(Attributable to)Shareholders of parent
Minority interest
See accompanying notes to the consolidated financial statements.

23

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

2013

2012

Thousands of
U.S. dollars (Note 2)
2013

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$  904,976——$  904,976

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$  622,796——$  622,796¥275,598¥266,435$2,930,340(6,069)22,726(5)(5,450)93
11,295¥286,893(6,134)
18,134(20)(3,073)256
9,163¥275,598(64,531)
241,642(53)(57,952)992
120,097$3,050,437¥ (24,913)¥ (25,858)$ (264,901)(3,854)
18
5,450
1,614
¥ (23,299)(2,191)
61
3,073
944
¥ (24,913)(40,983)
195
57,952
17,165$ (247,735)¥394,371¥384,264$4,193,211(6,069)22,726(3,854)13—
93
12,909¥407,281(6,134)
18,134(2,191)41—
256
10,107¥394,371(64,531)
241,642(40,983)142—
992
137,262$4,330,474

Millions of yen
Years ended March 31,

Retained earnings
Balance at end of the previous year
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
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

24

2013

2012

Thousands of
U.S. dollars (Note 2)
2013¥ 40,214¥ 30,129$  427,585

46,832
46,832¥ 87,047

10,085
10,085¥ 40,214

497,954497,954$  925,540¥  (2,705)¥  (2,304)$   (28,765)53
53¥  (2,651)

(401)
(401)
¥  (2,705)

571
571$   (28,194)¥ 12,452¥ 10,978$   132,402

(93)
(93)
¥ 12,359

1,473
1,473
¥ 12,452

(992)
(992)
$   131,409¥ 49,961¥ 38,803$  531,222

46,793
46,793¥ 96,754

11,157
11,157¥ 49,961

497,533
497,533$1,028,755¥     81¥     69$      8663939¥    1201111¥     81416
416$    1,282¥  2,201¥  1,859$   23,404

291
291¥  2,493

341
341¥  2,201

3,103
3,103
$   26,507¥446,615¥424,997$4,748,704(6,069)22,726(3,854)13
93
47,12460,033¥506,649(6,134)
18,134(2,191)41
256
11,51021,618¥446,615(64,531)
241,642(40,983)142992
501,052
638,315$5,387,020

Millions of yen
Years ended March 31,

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
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
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
Minority 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
Changes during the year
Cash dividends
Net income
Purchase of treasury stock
Disposal 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.

25

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

Millions of yen
2013
2012

Years ended March 31,

Thousands of
U.S. dollars (Note 2)
2013

Cash flows from operating activities:
Income before income taxes and minority interests
Depreciation
Impairment losses
Amortization of negative goodwill
Net increase (decrease) in reserve for possible loan losses
Net increase (decrease) in reserve for devaluation of investment securities
Net increase in reserve for directors’ retirement benefits
Net increase in reserve for reimbursement of dormant deposits
Net increase (decrease) in reserve for frequent users services
Net decrease in reserve for other contingent losses
Net increase (decrease) in reserve for losses on interest refunded
Net increase in reserve for bonuses to directors and corporate auditors
Net increase in reserve for employees’ retirement benefits
Interest and dividend income
Interest expenses
Net losses related to securities transactions
Foreign exchange losses (gains), net
Losses on disposal of tangible fixed assets
Net decrease in trading assets
Net decrease in trading liabilities
Net decrease (increase) in lease investment assets
Net increase in loans and bills discounted
Net increase in deposits
Net increase (decrease) in negotiable certificates of deposit
Net increase in borrowed money excluding subordinated borrowings
Net decrease (increase) in due from banks excluding cash equivalents
Net decrease in call loans and others
Net increase in call money and bills soldNet increase in payables under securities lending transactions
Net decrease (increase) in foreign exchange (assets)
Net decrease (increase) in foreign exchange (liabilities)
Net decrease (increase) in due to trust accountInterest and dividends received
Interest paid
Others, net
Subtotal
Income taxes paid
Net cash provided by operating activities¥ 35,024
5,334
308
(158)
713
(275)
7
137
(7)
(221)
(4)
3
40
(104,699)
5,227
4,314
(27,468)
620
1,056
(31)
(2,412)(155,545)
86,606(4,392)
20,936
3,729
7,933
20,90452,394(86)27
9104,557(6,969)1,732
49,349(5,370)43,978¥ 32,585
6,290
860
(158)
(131)
8
0
129
8
(143)
1
46
59
(107,432)
6,204
4,915
2,135
391
3,898
(90)
26
(182,874)
452,900
7,982
60,721
(679)
655
3,925
25,556
6,058
(177)
(2)
107,002(8,040)155422,788(7,369)415,419$  372,398
56,716
3,283(1,680)7,585(2,928)
75
1,464
(80)
(2,350)(49)
33
428(1,113,235)
55,57745,871(292,057)
6,599
11,235(333)(25,654)(1,653,855)
920,859(46,699)
222,604
39,65984,356222,272
557,096
(919)
291
105
1,111,726(74,099)
18,415
524,713(57,105)
467,607

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
Net cash used in provided by investing activities(712,034)
319,994
302,033(5,486)186(2,188)(97,494)(878,412)
334,599
280,759(3,814)81(2,330)(269,118)(7,570,811)
3,402,388
3,211,415(58,333)
1,984(23,264)(1,036,621)

Cash flows from financing activities:
Proceeds from issuance of subordinated bonds
Proceeds from issuance of subordinated borrowings
Repayments of subordinated borrowings
Cash dividends paid
Cash dividends paid to minority interests
Purchases of treasury stock
Proceeds from sales of treasury stock
Net cash used in financing activities
Translation adjustment for cash and cash equivalents
Net increase in (used in) cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year (Note 3)———(6,069)(2)(3,854)
13(9,912)
25(63,402)373,098¥309,695

10,000
5,400(20,000)(6,134)(0)(2,191)
41(12,884)(4)
133,411
239,686¥373,098———(64,531)(23)(40,983)
142(105,395)
274(674,135)
3,967,019$3,292,884

See accompanying notes to the consolidated financial statements.

26

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

1. Basis of Preparation

The accompanying consolidated financial statements of The Joyo Bank, Ltd. (the “Bank”) and consolidated subsidiaries areprepared on the basis of accounting principles generally 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 ¥94.05 = US$1.00, the exchange rate prevailing on March 31, 2013.

3. Significant Accounting Policies(a) Consolidation
The accompanying consolidated financial statements include the accounts of the Bank and nine major subsidiaries.
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) 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.
(c) 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.
(d) Derivatives
Derivatives positions held by the Bank (not including transactions for trading purposes) are stated at fair value.
(e) Depreciation of tangible fixed assets
Depreciation of tangible fixed assets held by the Bank is calculated by the declining-balance method, except for buildings acquiredon or after April 1, 1998 of which depreciation is calculated by the straight-line method. The estimated useful lives are as follows:
Buildings: 6~50 years
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.

27

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).
(Changes in accounting policies which are difficult to distinguish from changes in accounting estimates)
In accordance with the amendment of the Corporation Tax Act, effective from the fiscal year ended March 31, 2013 the Bank and its
consolidated subsidiaries have changed depreciation method for tangible fixed assets acquired on or after April 1, 2012. As a resultof the change income before income taxes and minority interests increased by ¥99 million.
Among tangible fixed assets relating to non-ownership-transfer finance lease transactions, lease assets are depreciated by thestraight-line method on the assumption that the lease term is the useful life. The residual value is estimated to be zero unlessresidual value guarantees are agreed on the lease contracts.
(f) 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 ¥20,250
million and ¥28,660 million as of March 31, 2013 and 2012, respectively.
(g) 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.
(h) Reserve for employees’ retirement benefits
Reserve for retirement benefits of the Bank and its subsidiaries is provided for the amount deemed necessary, based on estimatedpension benefits obligations and pension plan assets at the fiscal year end, to cover required retirement benefits for eligible
employees.
Prior service cost is deferred and amortized using the 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.
(i) 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.
(j) 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.

28

(k) 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.
(l) 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.
(m) 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.
(n) 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, pursuant to Article 46-5-1 of the Financial Instruments and Exchange Act
and Article 175 of the related cabinet order.
(o) Negative goodwill
Negative goodwill is amortized using the straight-line method over 20 years.
(p) 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.
(q) 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 lessee
Using the same method applied to operating lease transactions.
As lessor
In line with the stipulations of Article 81 of the Guidance on Accounting Standard for Lease Transactions (ASBJ Guidance No. 16,
issued on March 30, 2007), book value (after deduction of accumulated depreciation) of lease assets 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.
(r) 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” (JICPA Industry Audit Committee Report No. 24).
The Bank assesses the effectiveness of such hedges in offsetting movement of the fair value with the changes in interest rates,by classifying the hedged items (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).
To minimize the foreign exchange fluctuation risks on monetary assets and liabilities, the Bank engages in currency swaps,

29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.
(s) Consumption tax
Consumption tax is excluded from transactions reported by the Bank and its consolidated subsidiaries. However, non-deductible
consumption tax on tangible fixed assets is charged to income as incurred.
(t) Land revaluation excess
In accordance with the Law concerning the Revaluation of Land, the Bank revalued the land held for its operations on March 31,
1998. The net unrealized gain is presented in net assets net of the applicable income taxes as land 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¥29,364 million and ¥28,436 million as of March 31, 2013 and 2012, respectively.
(u) 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.
(v) 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
2013

March 31,2012

¥318,396

Cash and due from banks
Cash and cash equivalents¥385,528(8,700)(12,430)¥309,695¥373,098

Deposits with banks other than the Bank of Japan

4. Standards Issued but not yet effective

Accounting Standard for Retirement Benefits (ASBJ Statement No. 26, May 17, 2012) and Guidance for Accounting Standard for
Retirement Benefits (ASBJ Guidance No. 25, May 17, 2012)(1) Outline
The accounting standards have been revised in light of improving financial reporting and considering the trends of international
convergence. The major revisions are (i) changes in accounting treatments for unrecognized actuarial losses and unrecognizedprior service costs, and enhancement of disclosure items; and (ii) changes of calculation methods for retirement benefit
obligation and service costs.
(2) Dates of application
The Bank intends to adopt (i) above to the consolidated financial statements as of the end of the fiscal year beginning on April 1,
2013, and (ii) from the fiscal year beginning on April 1, 2014.
(3) Impacts of adoption of the revised accounting standards
Impacts of adoption of the revised accounting standard are currently examined.

5. Trading Assets
Millions of yen
2013

March 31,

2012

¥2,320

Trading securities¥3,361

Trading securities-related financial derivatives－0

Trading-related financial derivatives

399

413

¥2,719¥3,776Total

30

6. Securities
Millions of yen
2013

March 31,

Japanese government bonds

2012¥1,415,379¥1,400,947

Japanese local government bonds

301,379

298,469

Corporate bonds

408,445

387,344

Corporate stocks

197,952

166,353

Other securities

328,241

205,300¥2,651,398¥2,458,416

Total

Notes: 1. Corporate bonds include ¥16,688 million and ¥14,636 million of guarantee obligations for privately placed bonds (under Article 2-3 of the
Financial Instruments and Exchange Act) as of March 31, 2013 and 2012, respectively.

7. Bills Discounted
Bills discounted are accounted for as financial transactions in accordance with JICPA Industry Audit Committee Report No. 24. The
Bank has the rights to sell or pledge bank acceptances bought, commercial bills discounted, documentary bills and foreignexchanges bought without restrictions. The face value at March 31, 2013 and 2012 totaled ¥26,010 million and ¥27,085 million,
respectively.

8. Pledged Assets

Assets pledged as collateral at March 31, 2013 and 2012 were as follows:
Millions of yen
2013

March 31,

2012

Pledged assets:
Securities¥289,879¥232,879

Liabilities covered by pledged assets:
Deposits

20,67323,308

Payables under securities lending transactions

91,28338,888Borrowed money

95,94076,610In addition to the above, securities amounting to ¥45,946 million and ¥99,072 million at book value were pledged as collateral inconnection with bank transfer settlements and futures transactions as of March 31, 2013 and 2012, respectively.
One consolidated subsidiary had pledged its lease receivables amounting to ¥575 million and ¥1,323 million as of March 31, 2013
and 2012, respectively.
“Other assets” included lease deposits of ¥1,518 million and ¥1,410 million, at March 31, 2013 and 2012, respectively.“Other
assets”also included Initial margins on futures transactions of ¥160 million at both March 31, 2013 and 2012.

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 ¥1,496,374 million and ¥1,509,314 million at March 31,
2013 and 2012, respectively. Of this amount, facilities/contracts which expire within one year or which are unconditionally cancelable
at any time, totaled ¥942,282 and ¥929,457 million at March 31, 2013 and 2012, 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.

31

10. Borrowed Money

Borrowed money included subordinated debt of ¥10,400 million, at March 31, 2013 and 2012.
Borrowed money at March 31, 2013 and 2012 consisted of the following:
Millions of yen
2013

Description

%
2012

Due

Average interest rate

Bills rediscounted

¥—

¥—

—

Other borrowings

120,245

99,3090.34

April 2013 - September 2019

Lease obligations

3

—

8.93

April 2013 - September 2017—

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, 2013 was as follows:
Millions of yen
Other borrowings

Within 1 year

Lease obligations¥103,735¥0After 1 year within 2 years

5,970

0

After 2 years within 3 years

5,570

0

After 3 years within 4 years

2,570

0

After 4 years within 5 years

2,400

0

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, 2013 and 2012 included the following non-performing loans:
Millions of yen
March 31,

2013

2012

Loans in bankruptcy and dishonored bills¥1,575¥2,079Delinquent loans

116,116

111,103

854

789

37,13945,938¥155,685¥159,910

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

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.

12. Bonds

Bonds at March 31, 2013 and 2012 consisted of the following:
IssuerDescription

The Joyo Bank,Ltd.

2nd Unsecured StraightBonds
1st Unsecured
Subordinated Bonds withearly redemption clause

The Joyo Bank,
Ltd.
Total

Date of issue

Millions of yen
2013

May 24, 2000
January 31,
2012

2012

%
Interest rate

Collateral

5,000

5,000

2.64

—

10,00010,0001.22—¥15,000¥15,000

Note: After the consolidated closing date, the Bank had no redemption schedule for a period of five years or less.

32

Due

May 22, 2020
January 31, 2022

13. Employees’ Retirement Benefits(a) Outline of current retirement benefit system
The Bank and its consolidated subsidiaries have adopted defined employees’ retirement benefit plans, i.e., the employees’ welfare
pension fund supplemented by the employees’ public pension system and lump-sum retirement benefits. In addition, extra benefits
may be paid on a case-by-case basis. The Bank has established an employees’ retirement benefit trust. As of the end of March 31,
2013, the Bank and nine consolidated subsidiaries have lump-sum retirement benefits for employees. The Bank and its consolidated
subsidiaries have jointly established a fund under a defined benefit pension plan.
(b) The following table sets forth the changes in the retirement benefit obligation, the plan assets and the funded status of the Bankand its consolidated subsidiaries at March 31, 2013 and 2012:
Millions of yen
2013

March 31,2012¥(72,736)

Retirement benefit obligation¥(63,279)

Fair value of plan assets

58,55051,203Funded status(14,186)(12,076)

Unrecognized actuarial loss

13,312

11,112

Unrecognized prior service cost
Net retirement benefit obligation
Prepaid pension costReserve for employees’ retirement benefits
Notes:

172

270

(701)

(693)

4,563

4,531

¥(5,265)¥(5,224)

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

(c) Cost for retirement benefits of the Bank and its consolidated subsidiaries included the following components for the fiscal years
ended March 31, 2013 and 2012:
Millions of yen
2013

Years ended March 31,

2012

Service cost

¥1,799¥1,815Interest cost

1,109

1,099

Expected return on plan assets

(642)

(718)

Amortization:
Amortization of prior service cost
Amortization of unrecognized actuarial loss
Total retirement benefit cost

98

98

1,531

2,124

¥3,895¥4,419Note: Retirement benefit cost of consolidated subsidiaries which is calculated by a simplified method has been included in “service cost” referred to above.

(d) The assumptions used in accounting for the defined benefit plans for the fiscal years ended March 31, 2013 and 2012 were as
follows:
2013

Years ended March 31,

2012

Discount rate

1.17%

Expected rate of return on plan assets

2.5%

3.0%

Straight-line method

Straight-line method

Periodic allocation of estimated retirement benefits

2.0%

Amortization period of prior service cost

10 years

10 years

Amortization period of actuarial gain/loss

10 years

10 years

33

14. Deferred Tax Assets

Millions of yen
2013

March 31,2012

Deferred tax assets:
Reserve for possible loan losses¥21,243¥23,082

Reserve for retirement benefits

8,683

8,776

Depreciation

1,848

2,290

Devaluation of securities

2,586

2,389

Reserve for employee bonuses

939

957

Reserve for reimbursement of dormant deposits

652

603

8,409

8,555

OthersValuation allowance
Total(4,291)(5,235)¥40,072¥41,421

Deferred tax liabilities:¥(45,615)¥(20,606)

Retirement benefit trust(5,186)(5,186)

Reversal of reserve for possible loan losses after elimination ofintercompany balances
Others(15)(1,616)(20)(1,715)(52,433)(27,529)¥(12,360)¥13,892

Unrealized gain on available-for-sale securities

Total
Net deferred tax assets

The effective tax rate reflected in the consolidated statements of income for the fiscal years ended March 31, 2013 and 2012 differsfrom the statutory tax rate for the following reasons:
2013

2012

37.66%

Statutory tax rate
Effect of changes in statutory tax rate

40.32%－%

7.89%

Valuation allowance(2.69)%(4.55)%(2.38)%

Permanent differences including dividends received deduction(2.16)%

Permanent differences including entertainment expenses

0.28%

0.30%

Other

1.18%

1.71%

Effective tax rate

34.27%

43.29%

15. Deposits

Millions of yen
2013

March 31,2012

Current deposits¥4,422,678¥4,317,343

Time deposits

2,816,395

2,828,842

Negotiable certificates of deposit

15,45919,852Others105,389

111,669

Total¥7,359,923¥7,277,708

16. Trading Liabilities

Millions of yen
2013

March 31,2012

Trading-related financial derivatives

¥160

¥192

Total

¥160

¥192

34

17. 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.

18. Trading Income

Millions of yen
2013

Years ended March 31,

2012

Revenue from trading securities

¥957

¥475

Revenue from trading-related financial derivatives

131

117

Other trading revenue－

1¥1,089

¥594

Total

19. Interest on Borrowings and Rediscounts

Millions of yen
2013

Years ended March 31,

2012

Call money and bills sold¥91

Payables under securities lending transactions

207

51

Borrowed money

209

400

Total

¥509

¥487

20. Other Income¥35

Millions of yen
2013

Years ended March 31,

2012¥21,385

Other ordinary income¥22,377

Gain on disposal of tangible fixed assets

16－

Others－17¥21,401¥22,394

Total

35

21. Other Expenses

Millions of yen
2013

Years ended March 31,

2012

Losses on disposal of tangible fixed assets¥636

Losses on impairment

308

860

Write-offs of claims

5,088

5,582

Write down of equity shares

939

1,622

Losses on sale of claims

163

347

Others23,91625,713

Total¥31,054¥34,515¥391

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, 2013 and 2012 can be broken down
into the three categories of losses on land holdings in the amount of ¥261 million and ¥858 million, respectively, losses on buildingsin the amount of ¥46 million and ¥2 million, respectively and losses on movable assets in the amount of ¥0 million and nil,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.

22. Accumulated Depreciation of Tangible Fixed Assets

Accumulated depreciation on tangible fixed assets amounted to ¥92,941 million and ¥95,814 million, as of March 31, 2013 and 2012,
respectively.

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

2013

Years ended March 31,

2012

Unrealized gains on available-for-sale securities:
The amount arising during the period¥75,084¥15,797

Reclassification adjustments(3,257)(2,835)

Before adjustments of tax effect71,826

12,962

Tax effect(24,991)(2,877)

Unrealized gains on available-for-sale securities

46,834

10,084

Deferred gain/loss on hedging instruments, net of taxes:
The amount arising during the period

1,129

859

Reclassification adjustments(1,047)(1,179)(319)

Before adjustments of tax effect81

Tax effect

(27)

(81)

Deferred gain/loss on hedging instruments, net of taxes

53

(401)

The amount arising during the period――

Reclassification adjustments――

Land revaluation excess, net of taxes:

Before adjustments of tax effect――Tax effect

―

1,730

Land revaluation excess, net of taxes
Total

36

―

1,730

¥46,888¥11,41424. Segment Informationa. Outline of the reportable segments
The reportable segments of the Company 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.
In addition, ordinary profit is operating income plus non-operating revenue (including interest income, dividend income andgain/loss on sale of securities), after deduction of non-operating expenses (including interest expenses, gain/loss on sale ofsecurities, and securities valuation gains/losses).
c. Information related to ordinary income, segment profit, assets and other items by the reportable segment
Millions of yen

Year ended March 31, 2013

Banking
operations

The reportable segment
Leasing

Total

Other

Total

Adjustments

Consolidated

Ordinary income:From externalcustomers
From internaltransactions
Total¥129,515¥15,635¥145,151¥5,299¥150,451¥—¥150,451

1,647
131,163721
16,357

2,369
147,520

4,875
10,175

7,244
157,696(7,244)(7,244)*1—
150,451

31,726

1,222

32,9482,743

35,692261

35,953

Assets8,243,641

46,5568,290,197

42,411

8,332,608(64,575)

8,268,033

Liabilities

7,746,950

39,363

7,786,314

28,481

7,814,795(53,411)

7,761,383

Depreciation

5,180

66

5,246

257

5,504

(170)

5,334

Interest income

98,20962

98,272

212

98,484(414)

98,070Interest expenses

5,180

294

5,475

162

5,638

(411)

5,227

16

—

16

—

16

—

16

622
228

—
—

622
228

14
80

636
308

—
—

636
308

Tax expenses

10,513502

11,016993

12,010(4)

12,005

Increase in tangible andintangible fixed assets

7,462

16

7,479

195

7,674

—

7,674

Segment profit

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. Adjustments refer to differences between ordinary
income and ordinary income posted in Consolidated Statements of Income.
2. Adjustments are as follows:a) *1 Include intersegment transactions of ¥(7,402) million.
b) Adjustments in assets of ¥(64,575) million include elimination of intersegment transactions of ¥(53,524) million.
c) Adjustments in liabilities of ¥(53,411) million include elimination of intersegment transactions of ¥(50,523) million.
d) Adjustments in depreciation of ¥(170) million include depreciation of lease assets presented as tangible fixed assets on the consolidated
financial statements of ¥(169) million.
e) Adjustments in Interest income of ¥(414) million include intersegment interests of ¥(407) million.
f) Adjustments in interest expenses of ¥(411) million include intersegment interest of ¥(408) million.
g) Adjustments in tax expenses of ¥(4) million include deferred income taxes of ¥(4) million due to eliminations of intersegment reserve forpossible loan losses.

37Millions of yen
The reportable segment
Year ended March 31, 2012

Banking
operations

Leasing

Total

Other

Total

Adjustments

Consolidated

Ordinary income:From externalcustomers
From internaltransactions
Total¥133,669¥15,270¥148,940¥4,733¥153,673¥—¥153,673

1,269
134,938

1,035
16,3052,304
151,244

4,755
9,489

7,059
160,733(7,059)(7,059)*1—
153,673

29,9791,870

31,8491,928

33,77844

33,822

Assets7,984,854

41,612

8,026,467

37,782

8,064,249(58,973)

8,005,275

Liabilities

7,545,571

35,1327,580,703

25,4397,606,142(47,482)7,558,660

Depreciation

5,939

55

5,995

263

6,259

31

6,290

Interest income

101,940

57

101,998

227

102,225(412)

101,813Interest expenses

Segment profit

Others

6,146

297

6,443

173

6,617

(413)

6,204

Other extraordinary gain

―

—

―

17

17

—

17

Losses on disposal of
tangible fixed assets
Losses on impairment

345
389

—
—

345
389

45
732

391
1,122

—
(262)

391
860

Provision for reserves
under special law
Other extraordinary loss*

—
―

—
—

—
―

0
2

0
2

—
—

0
2

Tax expenses

12,448761

13,210908

14,119(10)

14,109

Increase in tangible andintangible fixed assets

5,694

0

5,694

451

6,145

—

6,145

* Other extraordinary loss refers to loss on disposal of noncurrent assets and impairment loss.
Notes: 1. Ordinary income is presented as the counterpart of sales of a non-banking company. Adjustments refer to differences between ordinary
income and ordinary income posted in Consolidated Statements of Income.
2. Adjustments are as follows:a) *1 Include intersegment transactions of ¥(7,217) million.
b) Adjustments in assets of ¥(58,973) million include elimination of intersegment transactions of ¥(49,568) million.
c) Adjustments in liabilities of ¥(47,482) million include elimination of intersegment transactions of ¥(46,575) million.
d) Adjustments in depreciation of ¥(31) million include depreciation of lease assets presented as tangible fixed assets on the consolidated
financial statements of ¥(32) million.
e) Adjustments in Interest income of ¥(412) million include intersegment interests of ¥(364) million.
f) Adjustments in interest expenses of ¥(413) million include intersegment interest of ¥(364) million.
g) Adjustments in losses on impairment of ¥(262) million are those between consolidated balance sheet amount and non-consolidatedbalance sheet amount.
h) Adjustments in tax expenses of ¥(10) million include deferred income taxes of ¥(10) million due to eliminations of intersegment reservefor possible loan losses.

Related Informationa. Information by service
Millions of yen
Year ended March 31, 2013

Ordinary income fromexternal customers:

Lending¥72,655

Investment insecurities¥30,537

Leasing¥15,635

Other¥31,622

Total¥150,451

Note: 1. Ordinary income is presented as the counterpart of sales of a non-banking company. Adjustments refer to differences between ordinary
income and ordinary income posted in Consolidated Statements of Income.
Millions of yen
Year ended March 31, 2012

Ordinary income fromexternal customers:

Lending¥76,624

Investment insecurities¥31,365

Leasing¥15,270

Other¥30,413

Total¥153,673

Note: 1. Ordinary income is presented as the counterpart of sales of a non-banking company. Adjustments refer to differences between ordinary
income and ordinary income posted in Consolidated Statements of Income.

38

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 Bank and its consolidated subsidiaries 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, 2013

Banking operations

Leasing¥228

Impairment loss:

Other

Total

¥—

¥228

Total

¥80

¥308

Millions of yen
The reportable segment
Year ended March 31, 2012

Banking operations

Impairment loss:

Leasing

Other

Total

¥389

¥—

¥389

Total

¥470

¥860

Amortization and unamortized balance of goodwill
Millions of yen
The reportable segment
Year ended March 31, 2013

Banking operations

Negative goodwill:
Amortization
Unamortized balance

Leasing

Other

Total

¥158
2,133

—
—

¥158
2,133

Total

—
—

¥158
2,133

Millions of yen
The reportable segment
Year ended March 31, 2012

Banking operations

Negative goodwill:
Amortization
Unamortized balance

Leasing

Other

Total

¥158
2,291

—
—

¥158
2,291

Total

—
—

¥158
2,291

25. Leases(a) Finance leases
Finance lease transactions in which ownership of leased property is not transferred to the lessee are accounted for as operatingleases (please see 3(q) “In line with the stipulations of Article 81 of the Guidance on Accounting Standard for Lease Transactions(ASBJ Guidance No. 16, issued on March 30, 2007), book value (after deduction of accumulated depreciation) of lease assets
included in tangible fixed assets and intangible assets as of the previous balance sheet date (March 31, 2008) was recorded as theinitial balance of “Lease receivables and lease investment assets.”), as follows:
As lessee
Acquisition cost, aggregate depreciation expenses, and book value at March 31, 2013
Tangible fixed assets

Total

Acquisition cost

¥5 million¥5 million

Accumulated Depreciation expenses¥3 million¥3 million

Book value at term-end¥2 million¥2 million

Note: The acquisition cost presented above is inclusive of interest amounts, as the balance of acquisition cost and minimum lease payment is small asa percentage of the total book value of tangible fixed assets.

Lease payments that would have been required for finance leases:
Within one year

Over one year

Total

¥0 million¥1 million¥2 million

Note: Lease payments presented above is inclusive of interest amounts, as the balance of acquisition cost and minimum lease payment is small as apercentage of the total book value of tangible fixed assets.

39

Lease fees paid and depreciation expenses that would have been incurred under finance leases:
Lease fees

Depreciation expenses¥0 million¥0 million

Note: Method of calculation of depreciation expenses
The lease assets are depreciated by the straight-line method on the assumption that the lease term is the useful life and the residual value iszero.

(b) Operating leases
As lessee
Future lease payments under non-cancellable operating lease transactions were as follows:
Within one year

Over one year

Total

As lessee¥46 million¥279 million¥325 million

As lessor¥18 million¥ 4 million¥22 million

No losses are recognized for the impairment of lease assets.

26. Financial Instruments(1) Status of Financial Instrumentsa. Policy on Financial Instruments
The Bank and its nine consolidated subsidiaries (the “Group”) provide financial services such as leasing, agent of banking
administrative work and securities business, and centering on 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. With regard to securities, the Group is exposed tocredit risk of issuers, 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 mitigate this risk using interest rate swaps partially.
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.

40

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 diversification ofrisk. Credit Risk Management Group has been segregated from the divisions under Business Headquarters to achieve rigorous
credit review, and conducts thorough monitoring 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 the credit
ratings, which is 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 ALM. 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

41

1. Banking Account(1) Interest rate risk
The Bank adopts the variance-covariance method as measurement method (a holding period of 6 months, a confidence interval
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, 2013 VaR related to interest rate risk was ¥ 36,740 million.
(2) Price fluctuation risk
The Bank adopts the historical simulation method (a holding period of 6 months, a confidence interval 99%, and observation periodof 5 years) for calculating VaR related to price fluctuation risk of listed equities and mutual funds. As of March 31, 2013 VaR related
to price fluctuation risk was ¥ 112,703 million. Correlation between interest rate risk and price fluctuation risk has not been
considered.
2. Trading Account
The Bank adopts the historical simulation method (a holding period of 1 day, a confidence interval 99%, and observation period of 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, 2013, VaR related to trading account was ¥ 16 million.
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.
In addition, the liquidity risk borne by the Group is reported to the Board and the ALM Committee on a monthly basis.
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.

42

(2) Disclosures Regarding Fair Value of Financial Instruments and Other Items
The table below sets forth fair values of financial instruments at March 31, 2013 and 2012 except for those whose fair values are
extremely difficult to determine (see (Note2)). In addition, those financial instruments which are immaterial are not below listed.
Millions of yen
March 31, 2013

Consolidated balance
sheet amount¥318,396(1) Cash and due from banks

Fair value

Difference¥318,396¥―(2) Securities
34,28934,544254

Available-for-sale securities

2,608,405

2,608,405―(3) Loans and bills discounted

5,108,316

Held-to-maturity debt securities(44,986)

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

5,063,329

5,141,569

78,239Total assets

8,024,420

8,102,914

78,494(1) Deposits

7,344,463

7,345,331(867)(2) Negotiable certificates of deposit

15,45915,459―(3) Payables under securities lending transactions

91,28391,283―(4) Borrowed money

120,245

120,657(412)

7,571,452

7,572,732(1,280)Total liabilities
Derivatives transactions (*2)
Transactions not accounted for as hedging instruments
Transactions accounted for as hedging instruments
Total derivatives transactions

511

511

―

(6,692)(6,692)―(6,181)(6,181)―(*1) General and individual reserves for possible loan losses are deducted from loans and bills discounted.
(*2) Derivatives transactions recorded in other assets and other liabilities are presented in a lump sum. Net claims and debts that arose from derivatives
transactions are presented on a net basis.
Millions of yen
March 31, 2012

Consolidated balance
sheet amount(1) Cash and due from banks(2) Securities
Held-to-maturity debt securities
Available-for-sale securities(3) Loans and bills discounted
Reserve for possible loan losses (*1)

Fair value

Difference¥385,528¥385,528¥―

30,9372,417,781
4,952,771(43,917)

31,1152,417,781

178―

73,555Sub-total

4,908,854

4,982,409

Total assets

7,743,100

7,816,834

73,733(1) Deposits(2) Negotiable certificates of deposit(3) Borrowed money

7,257,856
19,85299,3097,259,521
19,852
99,693(1,664)―(384)

Total liabilities

7,377,017

7,379,066(2,048)Derivatives transactions (*2)
Transactions not accounted for as hedging instruments
Transactions accounted for as hedging instruments

675(4,916)675(4,916)――

Total derivatives transactions(4,241)(4,241)―(*1) General and individual reserves for possible loan losses are deducted from loans and bills discounted.
(*2) Derivatives transactions recorded in other assets and other liabilities are presented in a lump sum. Net claims and debts that arose from derivatives
transactions are presented on a net basis.

43

(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.
In the fiscal year ended March 31, 2013, we treat market prices as fair value for Japanese Government Bonds (JGBs) withvariable interest rates and securitized products that we own.
In the previous fiscal year, the reasonably estimated value of Japanese Government Bonds (JGBs) with variable interest rates thathave widely fluctuating differences between market price and theoretical price was set as the fair value. The reasonably estimatedvalue is calculated based on the discounted cash flow method or other pricing methods using JGB yields and the volatility ofswaptions as primary pricing variables. In the previous term, the reasonably estimated value of JGBs with variable interest rates was
set as the fair value. The reasonably estimated value is calculated based on the discounted cash flow method or other pricing
methods using JGB yields and the volatility of swaptions as primary pricing variables.
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 by the discounted cash flow method orother pricing methods using the default rate, recovery rate, pre-payment rate and discount rate as primary pricing variables.
Please see “27. 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 collaterals 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 rate that would applied to new borrowings. Fair value of borrowings for a short term (i.e., within one year)
approximates the carrying value and is deemed equal to the carrying value.
Derivatives Instruments
See “28. Derivatives.”

44

(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, 2013 and 2012.
Millions of yen
Consolidated balance sheet amounts
2013

Years ended March 31,

2012

Unlisted stocks (*1) (*2)

¥5,330Investments in partnerships and others (*3)

3,373

4,323

Total

¥8,704¥9,697¥5,374(*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 ¥43 million and ¥21 million, as of March 31, 2013 and 2012.
(*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, 2013

1 year or less

1-3 years

3-5 years

5-7 years¥318,396¥―¥―

Held-to-maturity debt securities

13,205

10,872

10,211

Japanese government bonds

11,0002,100―

Municipal bonds

―

―

―

Corporate bonds

2,205

8,772

231,132
101,000

Municipal bonds
Corporate bonds

7-10 years¥―

Over 10 years

¥―

¥―

―

―

―

―

―

―

―

―

―

10,211―――

489,354
257,400

504,541
342,900

444,097
330,300

471,485
318,000

106,321―37,037

146,930

61,308―50,313―

69,16655,43736,46475,408

101,752

33,784Foreign bonds

21,515

26,52662,52938,389―71,207

Other

2,413

3,059

1,338

―

1,420

1,329

Loans and bills discounted (*)

3,072,577

697,694506,993

251,517219,949

172,021

Total¥3,635,310¥1,197,920¥1,021,745¥695,615¥691,434¥278,342

Cash and due from banks
Securities

Available-for-sale securities
with maturities
Japanese government bonds(*) Legally bankrupt loans, substantially bankrupt loans and potentially bankrupt loans amounting to ¥117,692 million, and loans and bills discounted without
maturities amounting to ¥69,871million were excluded from the table above.
Millions of yen
March 31, 2012

Cash and due from banks

1 year or less

1-3 years

3-5 years

5-7 years

7-10 years

Over 10 years¥385,528

¥―

¥―

¥―

¥―

¥―

Held-to-maturity debt securities

17,375

6,344

7,417

―

―

―

Japanese government bonds

12,000

―

―

―

―

―

―

―

―

―

―

―

5,375

6,344

7,417

―

―

―

Securities

Municipal bonds
Corporate bonds
Available-for-sale securities
with maturities

239,135

491,107534,752

392,395

424,546

79,204

Japanese government bonds

129,000

241,700

346,100

332,200

300,000―

Municipal bonds

67,392

107,888

93,906355

23,258―

Corporate bonds

31,362

105,027

45,68038,137

96,62941,865

Foreign bonds

11,26533,46946,02721,0232,360

36,027

114

3,022

3,038

680

2,298

1,311

Loans and bills discounted (*)

1,415,532

1,057,362

695,606

399,234

386,278815,797

Total¥2,057,571¥1,554,813¥1,237,776¥791,630¥810,825¥895,001

Other(*) Legally bankrupt loans, substantially bankrupt loans and potentially bankrupt loans amounting to ¥113,183 million, and loans and bills discounted without
maturities amounting to ¥69,776million were excluded from the table above.

45

(Note 4) Redemption schedule of borrowed money and other interest-bearing liabilities after the consolidated balance
sheet date at March 31, 2013 and 2012 is as follows:
1 year or lessMarch 31, 2013

Millions of yen
3-5 years
5-7 years

1-3 years

7-10 years

Over 10 years¥6,616,152¥615,630¥106,207¥2,099¥4,372¥―

Negotiable certificates of deposit

15,459

―

―

―

―

―

Payables under securities
lending transactions
Borrowed money

91,283
103,735―
11,540

―
4,970

―
―

―
―

―
―

¥6,826,631¥627,170¥111,177¥2,099¥4,372¥―

Deposits (*)Total(*) Demand deposits were included in “1 year or less.”
Millions of yen
March 31, 2012

1 year or less

Deposits (*)¥6,571,224¥592,393¥88,440¥1,760¥4,037¥―

Negotiable certificates of deposit

19,852

―

―

―

―

―

Borrowed money

79,534

10,685

7,060

2,030

―

―

¥6,670,610¥603,078¥95,500¥3,790¥4,037¥―Total

1-3 years

3-5 years

5-7 years

7-10 years

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

27. Securities Information
Year ended March 31, 2013(a) Trading Securities
Millions of yen
Unrealized gain recognized as income

March 31, 2013¥(4)

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

March 31, 2013

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

10,10010,101

1

Municipal bonds

―

―

―

Corporate bonds

19,80820,075

267

―

―

―

―

―

―

Japanese government bondForeign bonds

notDifference¥30,177

Other:

Securities with fair value
exceeding consolidatedbalance sheet amount

Fair value¥29,908

Bonds:

¥268

Other

―

―

―

Sub-total

29,90830,177

268

Bonds

4,380

4,366

(13)

3,000

3,000

(0)

Municipal bonds

―

―

―

Corporate bond

1,380

1,366

(13)
(0)

Japanese government bond

774

774

Foreign bonds

―

―

―

Other

774

774

(0)

Sub-total

5,155

5,141

(13)

¥35,063¥35,318¥254

Other:

Total

46

(c) Available-for-sale securities
Type

March 31, 2013

Securities with consolidatedbalance sheet amountexceeding acquisition cost

Millions of yen
Consolidated balance
sheet amount

Difference¥177,231¥108,773¥68,457

Bonds

1,987,026

1,942,887

44,1381,300,188

1,271,840

28,347

Municipal bonds

301,379

295,647

5,731

Corporate bonds

385,458

375,398

10,05924,602

Japanese government bond

246,783

222,181

Foreign bonds

178,010

171,716

6,294

Other

68,77350,46418,308Sub-total

2,411,041

2,273,842

137,199

Stocks15,39017,749(2,358)

Bonds

103,888

104,159(271)

Japanese government bonds

102,090102,359(269)

Municipal bonds

―

―

―

Corporate bonds

1,798

1,800

(1)

Other

89,00991,708(2,698)Foreign bonds

57,87858,479

(600)

Other

31,13133,229(2,098)

Other

Securities with consolidatedbalance sheet amount notexceeding acquisition cost

Acquisition cost

StocksSub-total
Total

208,288

213,617(5,328)¥2,619,330¥2,487,460¥131,870(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, 2013.
(e) Available-for-sale securities sold during the fiscal year
Year ended March 31, 2013

Millions of yen
Gains on sales

Sales proceeds

Losses on sales

Stocks¥18,958¥1,178¥1,705

Bonds

242,4133,640

81

222,5093,296

28

Municipal bonds

―

―

―

Corporate bonds

19,903

343

52

Japanese government bonds

47,3381,031

408

Foreign bonds

41,133

237

408

Other

6,204

793

―

¥308,710¥5,850¥2,195

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 amounted to ¥1,387 million, comprising ¥904 million from stocks and ¥483 million frombonds.
Pursuant to “Practical Guidelines for Accounting for Financial Instruments” (JICPA Accounting Committee Report No. 14), theBank 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 whose market price atthe balance-sheet date also declined by 30% or more compared with acquisition cost.
(g) Money held in trust classified as available-for-sale securities
Not applicable as of March 31, 2013.

47

(h) Unrealized gain on available-for-sale securities
March 31, 2013

Millions of yen

Unrealized (losses) gains:¥132,661

Available-for-sale securities—

Other money held in trust
Deferred tax assets (liabilities)(45,612)

Net unrealized gains on available-for-sale securities

87,049(2)Less minority interests¥87,047

Unrealized gains on available-for-sale securities

Note: The total unrealized gains include an unrealized gain of ¥791 million on available-for-sale securities, which constitute the property of related
associations.

Year ended March 31, 2012(a) Trading Securities
Millions of yen

March 31, 2012

Unrealized gain recognized as income

Trading securities¥7(b) Held-to-maturity debt securities
Type

March 31, 2012

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

Bonds:

notDifference¥26,238¥26,445

11,501

11,5032

Municipal bonds

―

―

―

Corporate bonds

14,737

14,941

204

―

―

―

Foreign bonds

―

―

―

Other

―

―

―

Sub-total

26,23826,445

207

Bonds

4,699

4,670

(29)

Japanese government bond

500

500

(0)

Municipal bonds

―

―

―

Corporate bond

4,199

4,169

(29)

Other:

2,235

2,229

(5)

―

―

―

2,235

2,229

(5)

Japanese government bond

Other:

Securities with fair value
exceeding consolidatedbalance sheet amount

Fair value

Foreign bonds
Other
Sub-total
Total

48

¥207

6,934

6,899

(34)

¥33,172¥33,345¥172

(c) Available-for-sale securities
Type

March 31, 2012

Securities with consolidatedbalance sheet amountexceeding acquisition cost

Securities with consolidatedbalance sheet amount notexceeding acquisition cost

Millions of yen
Consolidated balance
sheet amount

Acquisition cost

Difference

Stocks¥110,902¥74,191Bonds

1,926,122

1,898,828¥36,710
27,293

Japanese government bonds

1,287,289

1,271,590

15,698Municipal bonds

289,880

284,359

5,520

Corporate bonds

348,951

342,877

6,073

Other

119,178

113,323

5,855

Foreign bonds

86,16683,455

2,711

Other

33,012

29,867

3,144

Sub-total

2,156,203

2,086,343

69,859Stocks50,07757,853(7,776)

Bonds

129,702

129,929(226)

Japanese government bonds

101,656

101,777(121)

Municipal bonds

8,588

8,592

(3)

Corporate bonds

19,457

19,559

(102)

Other

95,62597,276(1,650)Foreign bonds

69,83870,488

(650)

Other

25,787

26,788(1,000)Sub-total
Total

275,405

285,058(9,653)¥2,431,609¥2,371,402¥60,206(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, 2012.
(e) Available-for-sale securities sold during the fiscal year
Year ended March 31, 2012

Millions of yen
Gains on sales

Sales proceeds

Losses on sales

Stocks¥13,168¥1,943

Bonds

294,2444,922

1

265,774

4,464

―
―

Japanese government bonds¥2,022

Municipal bonds

10,110110

Corporate bonds

18,360348

119,549495

989

Foreign bonds

11,288

209

―

Other

8,260

285

989

¥326,963¥7,361¥3,013

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 amounted to ¥1,824 million, comprising ¥1,600 million from stocks and ¥223 million frombonds.
Pursuant to “Practical Guidelines for Accounting for Financial Instruments” (JICPA Accounting Committee Report No. 14), theBank 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 whose market price atthe balance-sheet date also declined by 30% or more compared with acquisition cost.
(g) Money held in trust classified as available-for-sale securities
Not applicable as of March 31, 2012.

49

(h) Unrealized gain on available-for-sale securities
March 31, 2012

Millions of yen

Unrealized (losses) gains:
Available-for-sale securities¥60,835

Other money held in trust—

Deferred tax assets (liabilities)(20,620)

Net unrealized gains on available-for-sale securities

40,214

Less minority interests(0)

Unrealized gains on available-for-sale securities¥40,214

Note: The total unrealized gains include an unrealized gain of ¥628 million on available-for-sale securities, which constitute the property of related
associations.

28. Derivatives

Year ended March 31, 2013
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 transactions, respectively, at the end of the consolidated balance
sheet date, as well as determination of fair value.
Contract amount does not represent itself market risk of derivative instruments.
(1) Interest-rate Derivatives
Millions of yen
Contract amountOver 1 year

Fair value

Unrealized gain (loss)

Transactions listed on exchanges:
Interest-rate futures:
Sold

¥―

¥―

¥―

¥―

Bought

―

―

―

―

Sold

―

―

―

―

Bought

―

―

―

―

Sold

―

―

―

―

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

Interest-rate swaps:
Receivable fixed / payable floating

145,624

23,616288

288

Receivable floating / payable fixed

145,624

23,616

(49)

(49)

―

―

―

―

Sold

―

―

―

―

Bought――――Receivable floating / payable floating
Interest-rate options:

Caps:
Sold

547

340

(0)

21

Bought

547

340

0

(11)

Sold

44,600

2,100

(81)

16

Bought

44,600

2,100

81

81

Sold

―

―

―

―

Bought

―

―

―

―

¥238

¥345

Swaption:

Others:

Total

―――

―――

Notes: 1. The transactions in this table have been revalued at the market rate prevailing on the balance sheet date, and unrealized gain (loss) is accounted
for in the consolidated statements of income.
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 International Financial Exchange,
etc. The fair value of over-the-counter transactions has been calculated at their discounted future cash flows or by utilizing option pricing models.

50

(2) Currency Derivatives
Millions of yen
Contract amountOver 1 year

Fair value

Unrealized gain (loss)

Transactions listed on exchanges:
Currency futures:
Sold

¥―

¥―

¥―

¥―

Bought

―

―

―

―

Sold

―

―

―

―

Bought――――532,930

237,128

272

272

Sold

3,810

51

(282)

(282)

Bought

2,507

―

280

280

Sold

10,326

2,069

(234)

16

Bought10,326

2,069

236

70

Sold

―

―

―

―

Bought

―

―

―

―

¥272

¥357

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 rate prevailing on the balance sheet date, and unrealized gain (loss) is accounted
for 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, 2013.
(4) Bond Derivatives
Not applicable as of March 31, 2013.
(5) Commodity Derivatives
Not applicable as of March 31, 2013.
(6) Credit Derivatives
Not applicable as of March 31, 2013.

51

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 transactions, respectively, at the end of the consolidated balance sheet
date, as well as determination of fair value.
Contract amount does not represent itself market risk of derivative instruments.
(1) Interest-rate Derivatives
March 31, 2013
Millions of yen
Method of hedge

Deferred method

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

Hedged items

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

Contract amounts

¥

―

―

¥

―

80,000―(4,220)
―

―

―

―

―

―

―

9,000

9,000

516

43,862―――38,339―――(2,630)¥ (6,333)

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

Total
Notes:¥

Fair value

80,000―Other
Exceptional accrual
method for interest
rate swap

Over 1 year

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,” issued by the Japanese Institute of Certified Public Accountants (“JICPA”), (JICPA
Industry Audit Committee Report No. 24).
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: 31. Financial Instruments (2)Disclosures Regarding the Fair Value of Financial Instruments and Other Items).

(2) Currency Derivatives
March 31, 2013
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(¥2,416)―
20,143

―
―

―
(56)

―

―

―

―

―

―

―

―
¥(2,472)

Forward foreign exchange
contracts――――

Fair value¥―

Currency swap

Total

Over 1 year

¥31,962――――――

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).
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, 2013.
(4) Bond Derivatives
Not applicable as of March 31, 2013.

52

Year ended March 31, 2012
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 transactions, respectively, at the end of the consolidated balance
sheet date, as well as determination of fair value.
Contract amount does not represent itself market risk of derivative instruments.
(1) Interest-rate Derivatives
Millions of yen
Contract amountOver 1 year

Fair value

Unrealized gain (loss)

Transactions listed on exchanges:
Interest-rate futures:
Sold

¥―

¥―

¥―

¥―

Bought

―

―

―

―

Sold

―

―

―

―

Bought

―

―

―

―

Sold

―

―

―

―

Bought――――Receivable fixed / payable floating

120,314

26,421

301

301

Receivable floating / payable fixed

120,314

26,421

(79)

(79)

―

―

―

―

Sold

―

―

―

―

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

Interest-rate swaps:

Receivable floating / payable floating
Interest-rate options:

Caps:
Sold

997

547

(0)

53

Bought

997

547

0

(23)

Swaption:
Sold45,125

3,230

(119)

28

Bought45,125

3,230

119

119
―

Others:

Total

Sold

―

―

―

Bought

―

―

―

―

¥221

¥399

―――

―――

Notes: 1. The transactions in this table have been revalued at the market rate prevailing on the balance sheet date, and unrealized gain (loss) is accounted
for in the consolidated statements of income.
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 fair value of over-the-counter transactions has been calculated at their discounted future cash flows or by utilizing option pricing models.

53

(2) Currency Derivatives
Millions of yen
March 31, 2012

Contract amountOver 1 year

Fair value

Unrealized gain (loss)

Transactions listed on exchanges:
Currency futures:
Sold

¥―

¥―

¥―

¥―

Bought――――Currency options:
Sold

―

―

―

―

Bought――――723,880

499,982

386

386

Sold

4,843

215

(21)

(21)

Bought

3,106

―

84

84

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

Currency options:Sold

15,461

3,787

(453)

(59)

Bought15,681

3,787

457

182
―

Others:
Sold

―

―

―

Bought

―

―

―

―

¥453

¥573

―――

Total

―――

Notes: 1. The transactions in this table have been revalued at the market rate prevailing on the balance sheet date, and unrealized gain (loss) is accounted
for in the consolidated statements of income.
2. Calculation of fair value
Fair value is calculated at discounted future cash flows, etc.

(3) Stock Derivatives
Not applicable as of March 31, 2012.
(4) Bond Derivatives
Millions of yen
Contract amountOver 1 year

Fair value

Unrealized gain (loss)

Transactions listed on exchanges:
Bond futures:
Sold

¥426

¥―

¥0

¥0

Bought――――Bond future options:
Sold

―

―

―

―

Bought――――Over-the-counter transactions:
Bond options:
Sold

―

―

―

―

Bought

―

―

―

―
―

Others:

Total

Sold

―

―

―

Bought

―

―

―

―

¥0

¥0

―――

―――

Notes: 1. The transactions in this table have been revalued at the market rate prevailing on the balance sheet date, and unrealized gain (loss) is accounted
for in the consolidated statements of income.
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 fair value of over-the-counter transactions has been calculated at their discounted future cash flows or by option pricing models.

54

(5) Commodity Derivatives
Not applicable as of March 31, 2012.
(6) Credit Derivatives
Not applicable as of March 31, 2012.
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 transactions, respectively, at the end of the consolidated balance sheet
date, as well as determination of fair value.
Contract amount does not represent itself market risk of derivative instruments.
(1) Interest-rate Derivatives
March 31, 2012
Millions of yen
Method of hedge

Deferred method

TypeInterest rate swap
Receivable fixed /payable floating
Receivable floating/ payable fixedInterest rate futures
Interest rate options
Other

Exceptional accrual
method for interest
rate swap

Hedged items

Contract amounts

Interest bearing
financial assets andliabilities includingloans,
available-for-salesecurities, deposits
and negotiablecertificates of deposit,
etc.

¥

―

Over 1 year

Fair value

¥

―

¥

―

60,000―60,000―(4,335)
―

―

―

―

―

―

―

9,000

9,000

597

42,489―――37,307―――(2,818)¥ (6,556)

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

Total

Loans, borrowed
money

―――

Notes: 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,” issued by the Japanese Institute of Certified Public Accountants (“JICPA”), (JICPA
Industry Audit Committee Report No. 24).
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: 31. Financial Instruments (2)Disclosures Regarding the Fair Value of Financial Instruments and Other Items).

(2) Currency Derivatives
March 31, 2012
Millions of yen
Method of hedge

Deferred method

Type

Currency swaps
Forward foreignexchange contracts
Foreign exchange
swaps
Other

Treatment for forward
foreign exchange
contracts, etc.
Total

Hedged items

Contract amounts

Foreigncurrency-denominate
d loans, securities,
deposits and foreignexchanges, etc.

Over 1 year¥―(¥394)

―

―

―

4,936
―

―
―

(186)
―

―

―

―

―

―
¥(580)

Currency swap
Forward foreignexchange contracts――――

Fair value¥17,953――――――

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).
2. Determination of fair value:
Fair value is determined based on the discounted cash flows model.

55

(3) Stock Derivatives
Not applicable as of March 31, 2012.
(4) Bond Derivatives
Not applicable as of March 31, 2012.

29. Stock Options(a) The Bank recorded stock option expenses in “General and administrative expenses” of ¥46 million for the fiscal years ended
March 31, 2013 and 2012.
(b) Outline of stock options, size and changes(1) Outline of stock options
March 31, 2013

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, 2013

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, 2013

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, 2013

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(*) The table above presents the number of common shares converted from the number of stock options.

56

(2) Size and changes of stock options
a. Number of stock options in the fiscal years ended March 31, 2013
March 31, 2013

1st equity
warrant

2nd equity
warrant

3rd equity
warrant

4th equity
warrant

5th equity
warrant

6th equity
warrant

7th equity
warrant

8th equity
warrant

37,408―17,056―52,521―

32,601―78,720―60,999――76,174―73,080Non-vested:
Previous fiscal
year-end outstanding
GrantedForfeited

―

―

―

―

―

―

―

―

Vested

―

3,280

―

4,528

―

9,868

―

4,350

37,408

13,77652,521

28,07378,72051,131

76,174

68,730

―
―

―
3,280

―
―

―
4,528

―
―

―
9,868

―
―

―
4,350

Outstanding on
March 31, 2013
Vested:Previous fiscal
year-end outstanding
VestedExercised

―

3,280

―

4,528

―

9,868

―

4,350

Forfeited

―

―

―

―

―

―

―

―

Exercisable

―

―

―

―

―

―

―

―

1st equity
warrant

2nd equity
warrant

3rd equity
warrant

4th equity
warrant

5th equity
warrant

6th equity
warrant

7th equity
warrant

8th equity
warrant

1

1

1

1

1

1

1

1

―

355

―

355

―

355

―

426

417

439

297

318

300

321

310

331

b. Price information
Yen
March 31, 2013

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, 2013 were valued using the Black-Scholes option pricing model andthe following principal parameters:
7th equity warrant

8th equity warrant

Expected volatility (*1)

32.54%

24.41%

Average expected life (*2)

6 years

3 years

Expected dividends (*3)¥8 per share¥8 per share

Risk-free interest rate (*4)

0.26%

0.10%

(*1) Expected volatility is calculated based on the actual stock prices at the following period corresponding to the average expected life.
7th equity warrant: From July 19, 2006 to July 18, 2012
8th equity warrant: From July 21, 2009 to July 18, 2012(*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, 2012.
(*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.

30. Related-Party Transactions

No material transactions occurred with related-party for the fiscal years ended March 31, 2013.
Transactions occurred with related-party for the fiscal years ended March 31, 2012 are as follows:
Category

Company majority heldby relatives of director

Name

Ito dentist

Location

Oarai town,
Ibaraki prefecture

Description oftransactions

Loan lending

57

Transaction
amount―Account

Loans and bills
discounted

Balance¥10 million

31. Per-share Data
Yen
2013

March 31,2012

¥671.35¥583.98

Earnings per share-basic

30.06

23.66

Earnings per share-diluted

30.05

23.65

Net assets per share

Note: Bases for calculation of earnings per share (basic and diluted) are as follows:
Millions of yen
2013

March 31,2012

Earnings per share¥22,726

Net income¥18,134——

Net income after deduction of the portion described above

22,72618,134Weighted average number of common shares for the fiscal year (in thousands)

755,916

766,344

Earnings not available to common shareholders

Diluted earnings per share
Adjustment to net income——

Increase in common shares (in thousands)

338

228

Attributable to equity warrants

338

228

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

32. Significant Subsequent Events

1. Acquisition of treasury stock
At the board of directors meeting held on May 10, 2013, the Bank resolved to acquire treasury stock based on the provisions ofArticle 156 of the Companies Act of Japan, which is applied by replacing the relevant terms and phrases pursuant to the provision of
Article 165, Paragraph 3, of the Companies Act.
(1) Class of shares to be acquired: Common stock of the Bank
(2) Total number of shares to be acquired: 5,000,000 shares (upper limit)(3) Total acquisition cost: ¥3,500 million (upper limit)(4) Period of acquisition: From May13, 2013 to September 20, 2013(5) Method of acquisition: Purchase through the market
2. Cancellation of treasury stock
At the board of directors meeting held on May 10, 2013, the Bank resolved to cancel treasury stock based on the provisions of Article
178 of the Companies Act of Japan.
(1) Class of shares to be cancelled: Common stock of the Bank
(2) Total number of shares to be cancelled: 10,000,000 shares(3) Total number of outstanding shares after cancellation: 789,231,875 shares(4) Cancellation date: July 25, 2013

58

59

Non-Consolidated Financial Statements

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

2013

2012

Thousands of
U.S. dollars
2013¥  318,319
1,829
27,3362,719
2,644,104
5,139,973
1,844
3,400
38,85883,3798,471—
15,731(45,118)(35)¥8,240,814¥  385,492
3,385
33,7143,776
2,452,292
4,982,564
1,757
3,031
42,077
82,734
7,662
9,526
18,293(43,970)(311)¥7,982,027$ 3,384,576
19,454
290,659
28,92028,113,817
54,651,494
19,61036,160413,163886,548
90,074—
167,266(479,732)(380)$87,621,634¥7,371,951
38,466
91,283
160
115,340265
15,00026
61,712
49
4,766
1,849
95
1,519
16,614
10,976
15,731
7,745,810¥7,287,588
17,561
38,888
192
96,010238
15,00016
51,237
46
4,754
1,711
99
1,740
—
11,053
18,2937,544,431$78,383,319
408,999
970,585
1,707
1,226,368
2,822
159,489280
656,171
531
50,683
19,664
1,020
16,153
176,653
116,713167,266
82,358,432   85,113
58,574
280,396(24,066)
400,017
86,988(2,651)
10,52994,866120
495,004¥8,240,814   85,113
58,574
271,650(25,881)
389,455
40,141(2,705)
10,62348,05881
437,596¥7,982,027

904,976
622,796
2,981,360(255,894)
4,253,239
924,915(28,194)111,958
1,008,680
1,282
5,263,201$87,621,634

Millions of yen
March 31,

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

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

2013

2012

Thousands of
U.S. dollars
2013

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¥ 72,912
24,391
905
21,048
283
5,956
5,680
131,179¥ 76,890
23,904
1,145
19,264
302
6,694
6,736
134,938$  775,253
259,348
9,626
223,804
3,014
63,33660,3991,394,784

Expenses:
Interest expenses:
Interest on deposits
Interest on borrowings and rediscounts
Other interest expenses
Fees and commissions
Other operating expenses
General and administrative expenses
Other expenses
Total expenses

3,358
509
1,313
7,848
973
70,42515,858100,287

4,314
487
1,344
7,908
1,215
71,51018,914
105,694

35,704
5,413
13,96883,454
10,346
748,813
168,622
1,066,324

30,891

29,243

328,460

9,468
1,044
¥ 20,378

4,131
8,317
¥ 16,795

100,680
11,106$  216,673

Millions of yen
Years ended March 31,

Income before income taxes
Income taxes:
Income taxes – Current
Income taxes – Deferred
Net income

61Organization

As of June 26, 2013

The JOYO BANK, LTD.

Internal Administration Group
Corporate Audit Division

General Meeting of
Shareholders
Board of Corporate Auditors

Corporate Management Group
Corporate Risk Management Division
Credit Risk Management Office
Legal and Compliance Office
Corporate Planning DivisionCorporate Auditors
Board of Directors

Group Management OfficePublicity Office
IT Strategy Office
Tokyo Sub-Headquarters
Personnel Division

Executive Officer Committee

Staff Counseling Office
Company Management Support Office
Human Resource Development Office
General Affairs Division

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

Operation Systems GroupOperation Planning Division
Data Processing Center
Area Data Processing Center
Computer System Division

Business Headquarters
Area Management OfficeBusiness Planning Division
Customer Services Division
Customer Counceling OfficeBusiness Promotion Division
Asset Management Promotion OfficeIntegrated Finance Service OfficeDirect Banking Center
Living and Business Consulting Center
Pension Business Promotion Center
Government and Municipal Business DivisionInternational Market Business Group
Treasury and Securities DivisionMarkets Administration and International Division
Securities Business OfficeInternational Business OfficeInternational Operations Office
Overseas Representative Office

62

Head Office
Tokyo Business Division (Tokyo Main Office)148 Branches, 27 Sub-branches

Board of Directors and Corporate Auditors
Chairman
Kunio Onizawa
President
Kazuyoshi Terakado
Deputy President
Mikio Kawamata

Senior Managing Directors
Shigeru Ichimura
Hideo Sakamoto

As of June 26, 2013

Directors
Toshihiko Kawamura (outside)
Ryuzaburo Kikuchi (outside)

Managing Directors
Katsuhiko Ito
Atsuyuki Kurosawa
Eiji Murashima
Makoto Sasanuma
Ritsuo Sasajima

Corporate Auditors
Yoshiaki Terakado (standing)
Hideo Torihata (standing)
Akira Yasu
Sanenori Hitomi
Toshio Mizushima

Market Business Group and Overseas Offices

As of June 26, 2013

Head Office5-5, Minami-machi 2-chome, Mito, Ibaraki 310-0021, Japan

Phone: +81-29-231-2151

Markets Administration and International Division

7-2, Yaesu 2-chome, Chuo-ku, Tokyo 104-0028, Japan

Phone: +81-3-3273-1741

International Business Office

5-5 Minami-machi 2-chome, Mito, Ibaraki 310-0021, Japan

Phone: +81-29-300-2727

International Operations Office3-3, Shinhara 1-chome, Mito, Ibaraki 310-0045, Japan

Phone: +81-29-255-6671

Shanghai Representative Office

Room 1901, Shanghai International Trade Centre, 2201
Yan An Road (West), Shanghai 200336 P.R. of China

Phone: +86-21-6209-0258

Singapore Representative Office

30 Cecil Street, #11-04 Prudential Tower, Singapore 049712

Phone: +65-6225-6543

7-2, Yaesu 2-chome, Chuo-ku, Tokyo 104-0028, Japan

Phone: +81-3-3273-5245

Treasury and Securities Division

Affiliated Companies

As of March 31, 2013

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

5%

The Joyo Credit Guarantee Co., Ltd.

4-12, Minami-machi 3-chome, Mito,
IbarakiCredit guarantee of housing loans from the
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-machi 1-chome,
Hitachinaka, Ibaraki

Agent in charge of administrative work for
the 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 the Bank

1999

100

100%

3-3, Jonan 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 the Bank and their respective shareholdings at March 31, 2013 were as follows:
Number of Shares Held(Thousands)

Percentage of Total Shares Outstanding(%)

Northern Trust Company (AVFC) Sub Account American Client ..............................................

39,479

5.25%

The Bank of Tokyo-Mitsubishi UFJ, Ltd. .....................................................................................................

28,992

3.86

NIPPONKOA Insurance Company, Ltd. ......................................................................................................

28,973

3.85

Nippon Life Insurance Company ...................................................................................................................

28,003

3.72

Japan Trustee Services Bank, Ltd. (Trust Account) ..............................................................................

24,564

3.27

The Dai-ichi Mutual Life Insurance Company .......................................................................................

17,0492.27

Sumitomo Life Insurance Company ............................................................................................................

16,448

2.19

Northern Trust Company (AVFC) US Tax Exempted Pension Funds .......................................

16,363

2.17

The Master Trust Bank of Japan, Ltd. (Trust Account) .......................................................................

15,552

2.07

Meiji Yasuda Life Insurance Company .......................................................................................................

9,722

1.29

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

225,14728.17%For further information, please contact to: Markets Administration and International Division, The Joyo Bank, Ltd.
7-2, Yaesu 2-chome, Chuo-ku, Tokyo 104-0028, Japan

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