JOYO BANK
Annual Report 2010

PROFILE
The Joyo Bank, Ltd., was established in 1935 out of the merger of theTokiwa Bank and Goju Bank (both founded in 1878), and celebrated its 130th year
in business in 2008.
As a leading financial institution in Ibaraki Prefecture and surrounding
regions, the Bank, with the philosophy of “Practicing sound management,
creation of values, and partnership with the home region,” is contributing
to the growth of its home region by providing stable and comprehensive
financial services.

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

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

CONTENTS
1 Financial Highlights

27 Consolidated Statements of Changes in Net Assets

2 Message from the President

29 Consolidated Statements of Cash Flows

4 Management Policy

30 Notes to the Consolidated Financial Statements

5 Relationship Banking

77 Report of Independent Auditors

7 Business Highlights (Non-consolidated basis)

78 Organization

11 Corporate Social Responsibility (CSR)
16 Corporate Governance and Internal Control System

79 Board of Directors and Corporate Auditors/
Market Business Group and Overseas Office

25 Consolidated Balance Sheets

80 Service Network/Affiliated Companies

26 Consolidated Statements of Income

81 Corporate Data

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

Millions of yen

Years Ended March 31
For the Year Ended
Total Income
Total Expenses
Income before Income Taxes and Minority Interests
Net Income

2010

2009

2010

¥ 163,587
141,562
22,025
14,051¥ 195,817
192,937
2,879
5,178

$ 1,758,252
1,521,520
236,731
151,026

At the Year End
Total Assets
Deposits
Loans and Bills Discounted
Securities
Net Assets
Capital Ratio¥7,416,708
6,685,607
4,808,134
2,151,554
428,10112.70%¥7,414,285
6,646,813
4,911,988
1,975,080
374,881
12.91%$79,715,265
71,857,343
51,678,148
23,125,051
4,601,263
12.70%¥¥ (112,937)
164,271(11,493)
39,825
153,550$

For the Year Ended
Net Cash Provided by (Used in) Operating Activities
Net Cash Provided by (Used in) Investing Activities
Net Cash Used in Financing Activities
Net Increase (Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents at End of Year80,662(98,170)(6,232)(23,750)
129,800

866,969(1,055,146)(66,991)(255,369)
1,395,105

Notes: 1. Japanese yen amounts are rounded down to the nearest million yen.
2. U.S. dollar amounts represent translation of Japanese yen at the exchange rate of ¥93.04 to US$1.00 on March 31, 2010.

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

Millions of yen

Years Ended March 31
For the Year Ended
Total Income
Total Expenses
Income before Income Taxes
Net Income

2010

2009

2010

¥ 143,677
123,662
20,013
12,994¥ 175,022
172,955
2,067
5,051

$1,544,250
1,329,127
215,101
139,660

At the Year End
Total Assets
Deposits
Loans and Bills Discounted
Securities
Net Assets¥7,404,353
6,705,675
4,839,087
2,156,889
422,197¥7,401,837
6,666,778
4,945,900
1,980,906
370,279

79,582,470
72,073,033
52,010,823
23,182,384
4,537,801

Notes: 1. Japanese yen amounts are rounded down to the nearest million yen.
2. U.S. dollar amounts represent translation of Japanese yen at the exchange rate of ¥93.04 to US$1.00 on March 31, 2010.

1

MESSAGE FROM THE PRESIDENT
We will Deepen Our Relationship of Trust with Our Customers, andContributing to the Development of the Regional Society and Economy.

Japanese economy showed several

system, acted as trustee for privately-placed

signs of a recovery in fiscal 2009,bonds, and arranged syndicated loans. Withbecause of the backdrop of anregard to our customer management support

improvement in Asian economies

services, we held the second Joyo Manufacturing

and the effects of the government’s emergency

Forum in Tsukuba City, the Joyo Agricultural

stimulus measures. However, this burgeoning

Networking Seminar, and other events to help

recovery proved unsustainable. Capital invest-

develop new marketing channels for our custom-

ment was sluggish, and the employment situa-

ers and enhance their business strength.
For retail customers, we strengthened ourtion remained severe.
Amid this difficult financial and businesslineup of financial products and services toenvironment, we continued to pursue our 10th

meet their various financing needs at each

Medium-Term Business Plan (April 2008 to Marchstage of their lives. In the field of mortgage2011), under which we aim to become “the ‘Best

loans, we responded proactively to customers’

Partner Bank’ in a new financial era.” We explain

financing needs by offering consulting services

the various measures taken by the Bank in fiscal

for first-time buyers and dedicated products for

2009, which was the second year under thiscustomers seeking mortgage refinancing. In thethree-year plan as followings:

field of asset management, we responded to the

In our corporate banking services, wediversification of customer needs by commenc-

responded proactively to our local customers’

ing to handle option-embeded Australian dollar-

fund procurement needs, particularly small anddenominated term deposits, and expanding our

medium-sized enterprises, and also focused on

handling of single-premium whole life insurance

providing management supports. During thepolicies to all branches excepting Loan Plazas.

term under review, we actively worked to meet

To facilitate financing in our local region, andour customers’ diverse range of funding needs

based on the Law to Facilitate the Smooth Flowthrough various means. We encouraged theof Funds,” which went into effect in December

use of the government’s emergency guarantee

2009, we established the “Policy on Facilitating2the Flow of Funds” and reorganized the Bank’s
internal structure to constructively demonstrate
the Bank’s financial intermediary functions.
With respect to contributions to our local
region, we commenced “the Joyo Home-Town
Forest tree-planting project” at Naka City as partof our environmental preservation activities, and
we also made efforts to educate the public about
the functions of financial institutions, by making a
DVD for elementary school children that explainsroles of the bank.
Kunio Onizawa

As a result of our efforts mentioned above,

President

interest on loans and deposits recorded a decline
in fiscal 2009 due to the downward movementof interest rates, while net income posted a yearon-year increase of ¥7.9 billion to ¥12.9 billion asa result of a decline in interest expenses, notablyinterest on deposits, and reductions achieved ingeneral and administrative expenses.
All members of the Joyo Bank Group committed to meet the expectations of our customers,
the people of Ibaraki Prefecture, and our

Kunio Onizawa

shareholders. I would like to take this opportunity

President

to thank you all for your continued support andJuly 2010

encouragement.

3

MANAGEMENT POLICY

The 10th Medium-Term Business Plan
“For the ‘Best Partner’ Bank in a New Financial Era”
Amid ongoing economic and social structural reform, diversifying customer needs, and with a new financial industry
structure emerging in Japan under the Basel II regulations for capital adequacy and the Financial Instruments andExchange Act, the Bank faces a new era in its operating environment.
The Bank implements measures under the 10th Medium-Term Business Plan to further strengthen its customers’ pointof view, to earn the trust of customers, shareholders and local community members.

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

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

Basic
Aims

Under the 10th medium-term business plan, the Bank aims to become “the ‘Best Partner’ Bank in a New
Financial Era” — an institution that remains indispensable to its customers and is able to swiftly andflexibly take business opportunities.
We will forge close business relationships by increasing our contacts with the customer, support
regional growth, provide financial instruments and services in a way that sustains our own growth
prepare ourselves for expansion of business activities following the upgrading of regional transportation infrastructure.

Three Basic Aims

Basic
Aims

Strengthen
profitability on
a consolidated
basis

Build onmanagement
resources

Strengthen
management
organization

To be a “‘Best Partner’ Bank in a new financial era” flexible enough to achieve sustainable growth, wehave set goals for all of the above three aims. We will also build trust throughrigorous compliance, and offer customer support through briefing and information regarding financial
instruments, while ensuring that confidential information is appropriately managed.

4

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:(1) Strengthen support for customer companies tailored to their stage of corporate growth(2) Develop new financing options for SMEs
(3) Contribute to a sustainable growth of regional economy
In addition to continuing to improve customer convenience and providing greater safeguards to protect to customer
interests, we will continue to contribute to regional prosperity by providing optimized financial products and services to ourcustomers while deepening our local roots.

Key Initiatives(1) Strengthen support for customer companies tailored to their stage of corporate growth1) Support for start-ups and launch of new businesses> Support new ventures, Organize forums for dialog among businesses2) Support for business succession and M&A activities> Meet business succession needs, Propose M&A solutions when companies cannot find a successor at the helm3) Support customers’ management reform and business revitalization programs> Offer support for corporate rehabilitation, Raise skill levels among bank’s staff involved in management reformand business revitalization(2) Develop new financing options for SMEs
1) Promote funding methods that do not depend excessively on real estate collateral or personal guarantees> Increase loan products using a quick “scoring system” (in which points are allotted for creditworthiness in preset
categories), Expand loan products guaranteed by external organizations2) Improve ability to rapidly and accurately assess enterprise value of customer companies> Improve credit-screening abilities, and ability to understand situations faced by companies from theirperspective3) Rigorously diversify funding channels> Promote syndicated loans, private placement bonds and lump-sum factoring, etc., Leverage asset-backed loan

(3) Contribute to a sustainable regional economy
1) Contribute to the revitalization of the region in the broad sense, without focusing solely on companies underrehabilitation> Business support for customers using public information services promoting regional development and establishment of new factories or logistics facilities> Contribute to regional development by better meeting funding and PFI needs of local public organizations andcorporations> Develop a manufacturing business support organization to serve as a platform for business matching for manufacturers and technology-driven companies

5Facilitating Financing for
Small & Medium-Sized Enterprises (SMEs)

Principal Measures(1) Internal Organization
In light of the “SME Financial Facilitation Bill,” has beeneffective since December 2009, we have made the following changes to the Bank’s internal organization to makemore effective performance of its financial intermediaryfunctions.
• In January 2010 we established the “Policy on Facilitating
Financing” to enable speedier and more effective
consultations with our customers regarding changes inloan conditions.
• We appointed a senior managing director (representative director) as officer with overall responsibility forpromoting and managing the funding facilitation process
throughout the Bank, and appointed funding facilitation
officers at all of our branches.
• We organized a Coordinating Committee for Facilitating
Financing at the head office to monitor the progress offacilitate financing for SMEs, and to implement specificimprovement plans.
(2) Enhancement of Customer Consultation Desks
As shown below, we increased the number of consultation
desks in line with our commitment to actively consult withcustomers on fund procurement and loan repayment
matters.
• We established consultation desks for customers including SMEs that are open on holidays to facilitate financing
for the calendar year-end and fiscal year-end.
• For customers who have taken out a mortgage loan, we
set up support desk to provide emergency consultations
on loan repayments.
• For questions and complains related to the Facilitating
Financing such as changing loan conditions, we set up
Loan Hotline (toll-free number) to help our customers tosolve their problems and make our customers satisfied.

In line with our philosophy of “Sound management,
creation of value, and partnership with the home region,”
we assign high management priority to the Bank’s rolein facilitating financing for SMEs. To that end, we engage
in community-based banking services, encouraging
our customers to take advantage of the government’s
emergency guarantee system and providing support
to manufacturing-sector enterprises. In these ways, weassist our corporate customers to grow and develop. We
also offer management consultation services to improvecustomers’ business performance, including drawing up
management reform plans. For our individual customers,
we are expanding consultation services on the repaymentof home mortgage loans.
We will continue taking steps to facilitate financing
for SMEs research into effective methods of supplying
SMEs with the funds they require. Through the pursuit ofcommunity-based banking services, we will contribute to
the development of the local community and economy.

6

BUSINESS HIGHLIGHTS (NON-CONSOLIDATED BASIS)
Fees and commissions on the management of clients’assets declined by ¥0.6 billion due to the lowering of thecommission rate on sales of insurance and a decline in fees
and commissions on the sale of investment trusts. Housing
mortgage loans remained firm, rising ¥50.1 billion to ¥986.1
billion. Loans for the building of apartments increased by¥9.4 billion to ¥329.3 billion.

Revenues and Earnings
Operating profit increased by ¥31.3 billion over theprevious fiscal year, to ¥41.6 billion, mainly as a result of a
substantial improvement in earnings on investments inbonds, including Japanese government bonds, as well as
progress in reducing expenses. Meanwhile, core businessprofit decreased ¥2.3 billion year on year, to ¥45.3 billion,
owing to a decline in interest income on loans in line with afall in interest rates, as well as a decline in income from fees
and commissions.
In spite of a decline in stock-related profits, ordinary
income increased by ¥17.0 billion year on year, to ¥18.5
billion, thanks to higher business profit.
Net income rose ¥7.9 billion over the previous year, to¥12.9 billion.

Capital Ratio
The capital ratio is one of the key indicators of a bank’s
financial soundness.
The Bank’s capital ratio remained at a high level. On
a consolidated basis at the reporting term-end, it stoodat 12.70% (Tier I ratio: 11.40%), while the ratio on a nonconsolidated basis stood at 12.46% (Tier I ratio: 11.29%).
The minimum level required for banks complying withdomestic standards is 4%.
Regarding the method of calculation of the capital ratio at
the Joyo Bank, to more accurately calculate risk-weighted
assets, since the end of March 2008 we have been applying
the Basic Internal Credit Rating Method, a method of calculating credit risk that more accurately reflects the risk posedby borrowers and raises the overall level of the Bank’s credit
risk management. For operational risk calculations, weconsistently apply the standardized approach (TSA).

*Core business profit = Business profit + General provisions for possible
loan losses – gains and losses on bond trading

Deposits, Loans and Securities
Deposits (excluding CDs) increased by ¥118.4 billion during
the term under review, to ¥6,681.1 billion at the term-end.
Of this total, ordinary deposits rose ¥130.9 billion to aterm-end balance of ¥3,547.7 billion, while time deposits
increased ¥26.1 billion to ¥2,805.7 billion.
Loans decreased by ¥106.8 billion during the term, to¥4,839.0 billion at term-end. Loans to individuals, especiallymortgage loans, increased by ¥44.6 billion to ¥1,100.0 billion, while loans to small and medium enterprises (“SMEs”)
decreased ¥96.9 billion to ¥1,881.6 billion, as a result of
lackluster capital investment amid the business downturn.
Securities holdings increased by ¥175.9 billion to¥2,156.8 billion, as the Bank’s purchases of Japanese
government bonds more than offset its selloff of foreign
securities.

*Tier I capital: This is a bank’s core equity capital and mainly consists ofcapital, legal reserve, and retained earnings.

Consolidated Accounts
The Bank currently has nine consolidated subsidiaries.
On a consolidated basis, ordinary income for the year
decreased by ¥32.0 billion to ¥161.3 billion, while ordinary
expenses also decreased by ¥50.3 billion, to ¥141.0 billion.
As a result, ordinary income, net, increased by ¥20.3 billion
year on year, while net income increased by ¥14.0 billion.
Regarding cash flows for the reporting term, on a consolidated basis, net cash provided by operating activities
came to ¥80.6 billion due to a decrease in loans, while net
cash used in investing activities amounted to ¥98.1 billion,
as a result of the acquisition of securities. Net cash used infinancing activities came to ¥6.2 billion, due to the payment

Clients’ Assets, and Housing Loans
Clients’ assets increased by ¥56.2 billion year on year to¥1,056.0 billion, due to steady growth in annuity insurance
as well as an increase in investment trusts as the market
recovered.

7

of dividends. As a result, cash and cash equivalents on
a consolidated basis at the reporting term-end stood at¥129.8 billion, down ¥23.7 billion year on year.

March 31
Write-off of claims
Net provision for specific reserves
Losses on bulk sale of loans
Provision for contingent losses
Other
Total

Asset Soundness
Strengthened support for customers’ restructuring andmanagement improvement
The Bank plays a vital role in the revitalization of theregional economy and in supporting the development of
the regional community through its support of corporate
restructuring and management improvement services. We
therefore take an active approach to these services, as a pillar of our community-based banking activities. Ensuring thefacilitating financing to corporate customers is particularly
important in view of the recent severity of the businessenvironment, and the entire Bank is tackling this issue on apriority basis.
Specifically, our Company Management Support
Office is working with our branches to provide corporate
customers with advice on management analysis andrelated improvement measures and support for the makingof full-scale management improvement plans. Whennecessary, we also collaborate with external organizations
such as the SME Restructuring Support Council operated
by the government’s Small and Medium Enterprise Agency.
In these ways, we offer consultation and guidance onmanagement improvement for our SME customers.
As a result of our activities in this field in fiscal 2009, werealized an improvement in the borrower categorization(which depends on the financial position of the borrower)of 47 enterprises. We will continue to exert every possible
efforts toward supporting our customers’ management,so as to contribute to the revitalization of the regional
economy.

Millions of Yen
2010
2009
Change¥ 9,852 ¥11,904 ¥(2,051)
6,166
4,197
1,969
159
99
59
1,090
1,083
6
330
12
318
¥17,599 ¥17,297 ¥ 302

Reserve for Possible Loan Losses
For debtors in a state of legally or substantially bankrupt
based on self-assessment, we reserved for possible loan
losses for an amount of 100% of the amount of the claims
thought to be uncollectible after we deducted the value ofcollateral amounts from the loan amounts. Furthermore, fora state of substantially bankrupt, we provided reserves for
61.34% of uncollectible loans based on the Bank’s historicalrate of loan-loss. As a result, compared to the ¥29.7 billion
total of uncollectible loans, our specific reserves for possible
loan losses amount to ¥18.2 billion, a reserve for possible
loan losses ratio of 61.35%.
The Claims we deemed to be uncollectible or valueless (¥46.4 billion) based on self-assessment have been
conducted on a “partial direct write-off” basis, and havebeen deducted in the balance sheet asset amounts. For thegeneral reserve for possible loan losses, we have conducted
an appropriate reserve provision following the guidelines of
the Financial Inspection Manual prepared by the Financial
Services Agency. For borrowers requiring caution, we havedivided them into three categories to include debtors
requiring management, and have provided reserves forpossible loan losses based on the Bank’s historical loan-loss
ratio.
In the future, we will continue to improve our credit
risk management system, conduct appropriate write-offs,
provide reserves for possible loan losses in a sufficientamount, and work toward improving the soundness of ourasset portfolio.

Results of Processing Non-performing Loans in Fiscal 2009
We have calculated write-off and reserve amounts forpossible loan losses based on results of asset self assessment in line with established internal rules. Credit costs for
non-performing loans processed in fiscal 2009 totaled ¥17.5
billion as shown below;

8Reserve Based on Self-Assessment

Risk-Monitored Assets under the Banking Law
Billions of Yen

March 31, 2010
Claims of balance (i)Claims secured
by collateral (ii)Claims with uncertain
collectibility (A)=(i)-(ii)Specific reserve (B)Reserve ratio (B)/(A)Potentially Substantially
Legallybankrupt
bankrupt
bankrupt
borrowers borrowers borrowers(Non-consolidated)
March 31
Loans in bankruptcy
and dishonored bills
Delinquent loans
Loans past due with respect
to interest payments for morethan three months
Restructured loans
Total (a)Loans and bills discounted (b)Ratio of risk-monitored assets toloans outstanding (a)/(b)Portion covered by collateraland guarantees (c)Coverage ratio (c)/(a)

Total

¥77.3

¥15.6

¥5.3

¥98.3

47.5

15.6

5.3

68.5

29.7
18.2
61.34%

0.0
0.0
100.00%0.0
0.0
100.00%29.7
18.2
61.35%

Reserve for Possible Loan Losses
March 31
General loan loss reserve
Specific reserve
Reserve for possible loan losses
Reserve for other contingent losses

2010
¥14.5
18.5
33.1
¥ 1.9

Billions of Yen
2009 Change
¥12.6
¥1.9
17.7
0.8
30.4
2.7
¥ 1.6
0.3

(Consolidated)
March 31
Loans in bankruptcy anddishonored bills
Delinquent loans
Loans past due with respect tointerest payments for more than
three months
Restructured loans
Total

Disclosure of the Bank’s Assets
We continue to view the improvement of asset quality as
apriority management issue, work toward the disposal ofbad debt and ensure the soundness of our assets, with full
disclosure of all pertinent information.

2010
¥

5.2
92.7

Billions of Yen
2009
Change8.4
94.1¥ (3.1)
(1.4)

1.6
19.3
¥ 119.0¥4,839.0

1.8
16.4¥ 120.9¥4,945.9(0.2)
2.8¥ (1.9)¥(106.8)

2.45%

2.44%

0.01%

¥ 95.580.29%¥ 96.179.49%¥ (0.5)
0.80%

2010
¥

¥

Billions of Yen
2009
Change

5.6
95.2

¥ 9.1
96.4

¥(3.5)
(1.2)

2.2
19.3
¥122.42.4
16.4¥124.5(0.1)
2.8¥(2.0)

Claims Subject to Mandatory Disclosure under the
Financial Revitalization Law
Disclosure of the results of an asset assessment is required
under the Financial Revitalization Law. Under the law, theBank regards non-performing loans determined throughself-assessment to be loans to legally or substantiallybankrupt companies as “bankrupt and quasi-bankrupt
assets.” Loans to potentially bankrupt companies are“doubtful assets.” Loans past due (three months or more)
and restructured loans are “substandard loans.”
Claims subject to disclosure under the Financial
Revitalization Law during fiscal 2009 decreased by ¥1.8
billion year-on-year, to ¥119.4 billion, accounting for 2.44%of all claims. Furthermore, the ¥0.4 billion differential
between the ¥119.4 billion in claims for disclosure under
the Financial Revitalization Law, which excludes normal
claims, and the ¥119.0 billion in claims (loans and bills
discounted only) for mandatory disclosure in accordancewith the Banking Law represents non-loan claims including
customers’ liabilities for acceptances and guarantees,
accrued interest and suspense payments.

Risk-Monitored Claims under the Banking Law
For loans subject to risk management under the Banking
Law, we have adopted four classifications for disclosure
purposes. Loans to debtors in legally bankrupt based on
self-assessment are “loans in bankruptcy and dishonored
bills.” Loans to debtors who are substantially or potentiallyin bankruptcy are “delinquent loans.” Loans to companies
requiring caution (those which have been delinquent forthree months or more) are “loans past due with respect tointerest payments for more than three months.” Loans to
debtors whom we support through interest reduction or
waiver of loan repayment are “restructured loans.”
Thanks to the Bank’s effective measures for corporate
rehabilitation including the creation of rehabilitation
programs, risk-monitored loans decreased ¥1.9 billion yearon-year to ¥119.0 billion. The bank maintained a coverage
ratio of 80.29%.

9

Problem Assets under the Financial Revitalization Law
March 31
Bankrupt andquasi-bankrupt assets (a)Doubtful assets (b)Substandard loans (c)Problem assets (A)=(a)+(b)+(c)Normal assets (d)Total (B)=(A)+(d)Ratio of problem assets (A)/(B)2010

Coverage Status at Fiscal 2009 Year-End

Billions of Yen
2009
Change

¥

21.0
77.3
21.0
119.4
4,767.9¥4,887.3
2.44%

¥

25.0
77.8
18.3
121.2
4,880.6¥5,001.8
2.42%

March 31, 2010
Problem assets (a)Assets secured bycollateral andguarantees (b)Reserve for possible
loan losses (c)Coverage ratio{(b)+(c)}/(a)¥ (4.0)
(0.4)
2.7
(1.8)
(112.7)¥(114.5)
0.02%

Billions of Yen
Bankrupt andquasi-bankrupt Doubtful Substandard
assetsassets
loans
¥21.0
¥77.3
¥21.0

Total
¥119.4

21.0

47.6

6.0

74.6

0.0

18.3

3.0

21.3

100.00%85.10%

43.10%

80.3%

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

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

Borrowers Requiring Caution

Normal Borrowers

Problem Assets
under Financial
Revitalization Law
Legally
Bankrupt 5.3

Bankrupt andQuasi-Bankrupt
Assets 21.0

Substantially
Bankrupt 15.7

Doubtful Assets
77.3

Risk-Monitored
Assets underthe Banking Law
Loans in Bankruptcy andDishonored Bills 5.2

Delinquent Loans
92.7

Substandard Loans
21.0

Loans Past Due with Respect
to Interest Payments forMore than Three Months 1.6
Restructured Loans 19.3

Subtotal 119.4

Subtotal 119.0

Normal Loans
4,767.9

Note: Assets Covered by Disclosure Standards

Note: Categorization of Disclosure Standards

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

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

Banking Law:
Loans and bills discounted

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

10

CORPORATE SOCIAL RESPONSIBILITY (CSR)
Contributions to the Regional Community

Loans to Regional Customers

Under the management philosophy, “Soundness,
Corporation, Partnership with the home region,” we willcontinue to contribute to the development of the regional
community and economy by providing regional customers with comprehensive high-quality financial services,
based on a robust business performance under a soundmanagement.
We regard supply of financial services for the region
as our mission. We will continue to ensure due disclosureof diverse information relating to our contribution to theregional economy.

Regional and SME Loans
Loans to customers in our region totaled ¥3,724.8 billion,
and accounted for 76.9% of all loans made by the Bank.
Loans to SMEs totaled ¥1,881.6 billion, and accounted for
38.8% of all loans. Of all regional loans, 46.1% went to SMEs.
The total number of SMEs is 33,422, of which 98.6% arelocal.
Balance of Loans, Balance of Loans andPercentage of Loans to Regional Customers(Billions of yen)

5,000

“Region” means Ibaraki Prefecture and neighboring areas forming themain territory (by location of branches) of the Bank: Fukushima, Tochigi,
Saitama, Chiba and Miyagi prefectures.
Loans to customers outside the local region are mainly limited toloans to corporate customers in Tokyo or Osaka who have factories oroffices in the areas mentioned above and who have a deep relationshipwith regional business.

¥4,669.4¥3,779.3

4,000
3,000

¥4,945.9

78.0%
76.4%
¥3,643.1¥4,839.0¥3,724.8

80

76.9%
60

Loan balance

2,000

40

Balance of loans toregional customers

1,000

20

Percentage of loans
to regional customers

0Market share within Ibaraki Prefecture (as of Sept. 30, 2009)
The Bank maintained a high market share for total deposits
and loans within Ibaraki Prefecture, at over 40% each.

1000
As of March 31, As of March 31, As of March 31,
2008
2009
2010

Balance of Loans and Percentage of Loans to SMEs, andBalance of Loans and Percentage of Loans to Regional SMEs
(Billions of yen)

2,000 ¥1,958.4¥1,765.3¥1,978.5

100¥1,881.6¥1,717.1¥1,778.1

1,500

Deposits

48.4%

47.0%

46.1%

41.9%

40.0%

38.8%

1,000

15.79%

18.61%

Joyo Bank

42.10%

City banks/Trust banks

Joyo Bank

Other regional banks

500

0Shinkin banks (credit unions)

80

Balance of loans to
SMEs

60

Balance of loans toregional SMEs

40

Percentage of loans to
SMEs

20

Loans to regional SMEs
as percentage of loans
to regional customers

0
As of March 31, As of March 31, As of March 31,
2008
2009
2010

Other

16.71%

Number of SME Customers and Number of Regional SME Customers

6.79%

Loans

(Unit: Customers)

12.14%

40,00033,45430,00033,692
32,95233,42233,22532,979

Joyo Bank

17.93%

42.84%

City banks/Trust banks

Joyo Bank

Other regional banks

Number of SMEs

20,000

Number of regional
SMEs

Shinkin banks (credit unions)

10,000Other

21.63%

0
As of March 31, As of March 31, As of March 31,
2008
2009
2010

5.46%
Note: Figures for share exclude public sector.

11

Loans to Individuals
Loans to individuals have increased to ¥1,100.0 billion, withmortgage loans performing well. Of these, ¥1,098.6 billion
or 99.8% are loans to individuals in the region.
Loans to individuals are 22.7% of all loans, and loans to
individuals in the region are 29.5% of all regional loans.

Initiatives for Stimulating the Regional Economy
Measures to Develop New Ventures
Investment by Joyo Bank
We provide financial support to companies developing
new businesses and new ventures by the “Ibaraki Venture
Business Development Partnership” and the “Nikko RegionBased Industry, Education, and Government-Partnered
Investment Partnership.”As part of our efforts to support corporations in the
Ibaraki Prefecture area, we have invested in an investment
fund operated by the Organization for Small & Medium
Enterprises and Regional Innovation and Government of
Ibaraki Prefecture. By providing rehabilitation support to
SMEs, we help to revitalize the regional economy.

Optimal Financial Services for Regional Customers
98.3% of deposits, in an amount of ¥6,573.5 billion, arefrom regional customers, and 99.6% of clients’ assets arefrom regional customers. In addition to a steady growth inannuity insurance, investment trusts also increased, on theback of a market recovery.
Balance of Loans and Percentage of Loans to Individuals,
Percentage of Regional Loans used for Loans to Individualsin the Region(Billions of yen)

28.4%

27.8%

22.2%

21.3%

¥1,039.7¥1,055.4

1,200

900

29.5%

Working with Agri-Business
We operate in a predominantly agricultural area, and are
actively engaged in agri-business. We aim to contribute toregional industrial and economic revitalization by fosteringand supporting ambitious farmers and agri-businesses.
In business funding support measures, we offer threeseries of “Daichi” multi-purpose loans. For firms specializing
in beef-fattening, we have developed the Asset-Based
Lending (ABL) system as a new method for providing
finance using fattening cattle as collateral. By giving support to ambitious farmers and food-production companies,
we aim to support the development of new instruments
and services in our region. In this endeavor, we offer loan
instruments designed for the development of related businesses in agriculture, commerce and food-processing.
As a means of supporting development of marketing
channels for food producers and processors, we conduct
regular business matching meetings for the agricultural
production and food processing, restaurant and retailindustries, and, in partnership with regional banks acrossJapan, the regional bank’s annual Food Selection exhibit.

30

22.7%
20
¥1,100.0

Balance of loans
to individuals
Percentage ofloans to individuals

600
10
300

0

0

Percentage ofregional loans used
for loans to local
individuals

As of March 31, As of March 31, As of March 31,
2008
2009
2010

Deposit Balance, Deposits by Customers in the Region(Billions of yen)

100

7,000
6,000
5,000

98.3%

98.1%

98.3%

¥6,355.8¥6,562.7¥6,681.1¥6,250.8¥6,444.4¥6,573.5

80

4,000

60

3,000

40

2,000
20

1,000
0

Deposit balance
Local deposit
balance
Local deposit
balancepercentage0
As of March 31, As of March 31, As of March 31,
2008
2009
2010

Support for Manufacturers of Excellence
Our business area comprises Ibaraki, Tochigi and Fukushima
prefectures. Due to their proximity to Tokyo and their goodtransportation infrastructure, many major companies have
set up plants in these prefectures, and a need has arisen

12

to secure high-quality SMEs as suppliers. As a importantpillar of regional revitalization, we support highly capablemanufacturers in meeting these needs. We offer support
in development of marketing channels, in quality management areas such as acquisition of ISO certification, and in
upgrading technological and management capabilities,
through means such as business matching meetings for
major and regional manufacturers, as well as between
regional manufacturers.

Joyo Area Research CenterWith the aim of contributing to the comprehensive
promotion of the region, we conduct research into theeconomy, industry and social change in Ibaraki Prefecture,and provide information needed by industries and forother strategic activities. The Joyo Area Research Center
developed out of the Foundation for Industrial Researchfounded in March 1969.
This foundation cooperates with various economic
associations and research institutions, performing various
tasks that contribute to the regional community andeconomy. The Center researches into and publishes dataon economic industry trends and regional development,
holding lectures and sending speakers to regional organizations and events.

Tie-ups with External Institutions
We foster and support new ventures and establishedcompanies beginning new businesses with entities suchas National Institute of Advanced Industrial Science andTechnology (AIST), the Organization for Small & Medium
Enterprises and Regional Innovation, Ibaraki Corporation for
Small and Medium Enterprise Promotion, the Development
Bank of Japan, the Shoko Chukin Bank, the Japan FinanceCorporation, and other partners in industry, academia andregional government.
Invitation of Companies to the Area
We actively encourage companies to set up manufacturing
plants in our business area, by showing them eligible sites
and providing local information. For those that have madea decision to move in, we offer funding and provide business information collected and accumulated through our
networks. In addition to cooperating with inspection tours
and seminars for attracting companies to Ibaraki Prefecture,
we cooperate with prefectural and municipal governments
in measures to invite businesses to the area and revitalize
its industries. In fiscal 2009 we held Industrial Location
Seminars at three sites in Tochigi and Chiba prefectures.
We introduced companies to the dramatically improved
business environment of Ibaraki Prefecture thanks to transportation infrastructure upgrades across the whole region.
For example, we participate in regional industrial revitalization associations in eight areas of Ibaraki Prefecture.
By attracting companies in this way, we are helping torevitalize the regional economy.

Joyo Industrial Research Institute
Joyo Industrial Research Institute was established as partof activities to commemorate the 60th anniversary of thefounding of the Bank, in April 1995 as a regional think tank.
The Institute consists of three departments: 1) the
Industrial Research Department, which provides consulting
services, mainly to private-sector enterprises, that include
support for management structural reforms and acquisitionof ISO certification; 2) the Regional Research Department,
which conducts surveys and analysis of the regional
community to assist local governments in drawing up
regional plans and community development projects; and3) the Training Department, which holds lectures, practicalseminars and other training events.

13

Environmental Policies— Building a regional community that contributes to theglobal environment —1. Reduce the environmental load of the Bank’s business
operations through resource conservation, energy
conservation, and recycling
2. Support customers’ environmental preservation activities
by providing eco-friendly financial products and services
3. Ensure that all executives and employees of the Groupare fully aware of these policies and actively participate intheir implementation

The Institute also publishes the JIR News, a newsletter,and has created the Joyo Village website on which it posts
information for members to read to and provides forums
for members to exchange information and communicate
with each other.

Forest Preservation Activities
In April 2009, the Bank joined the Voluntary Club ofRegional Banks for the Protection of Japan’s Forests, anorganization set up to coordinate the activities of regionalbanks to protect the nation’s forests, which cover 70% ofJapan’s land area.
In September 2009 the Joyo Bank signed the Ibaraki
Collaborative Forest Partners Agreement with the prefectural government of Ibaraki and the Ibaraki Afforestation
Support Center, and commenced the Joyo Home-Town
Forest tree-planting Project in Naka City. In November wecarried out forest-thinning and weeding, and in March2010 we planted Oshima cherry trees, Japanese nutmeg,
and hinoki cypress trees as a first step toward recreating
the kind of mixed forest that previously existed all over thisregion.

The Institute’s staff includes a large number of experts
in various fields to meet the diverse needs of its corporate
customers. These experts include certified SMEs management consultants, ISO auditors, first-class registeredarchitects, and engineers that offer effective solutions to
the wide range of issues faced by our customers in theregion.
Environmental Preservation Activities
Through its environmental preservation activities, the Bank
seeks to reduce the environmental impact of its business
operations and provide support for customers tackling
the task of environmental preservation. These activities arepart of the Bank’s efforts undertaken in collaboration withnumerous partners in the region to realize a sustainablecommunity in Ibaraki Prefecture and neighboring areas.

Expanding lineup of environment-related financial
products and services
New eco-friendly products
To contribute to preservation of the region’s environment,
the Bank provides environment-related financial products
to support companies working on environmental preservation. We constantly work to meet our customers’ needs bydeveloping new products and improving existing ones.

Environmental Principles and Policies (established July
2008)
Environmental Principles
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 thisend, we work hand in hand with a diverse range of partners
in preserving the natural environment of our home -Ibarakion a continuous basis.

14• New eco-friendly farmer registrants added to “Daichi,” anfree loan program for farmers.
• Two new loan-usage plans added to the Joyo Eco-SelectLoan series
1. ISO Plan (additional expenses arising from acquisition of
Eco-Action 21 certification)
2. Global Warming Prevention Plan

Addressing Revised Energy Conservation Act
Under the Revised Energy Conservation Act, companies
with a total energy consumption equivalent to 1,500
kiloliters of crude oil or more in fiscal 2009 must report thisto the relevant authorities and be designated as a Specified
Business Corporation.
In line with this revision, the Bank was designateda Specified Business Corporation. (The total amount ofenergy consumed by the Bank in fiscal 2009 is shownin the following table.) Accordingly, for fiscal 2010 andafter, the Bank will be required to routinely report its totalenergy consumption to relevant authorities, and to draw
up medium- and long-term energy consumption andconservation plans.
The Bank has a system in place to monitor theenergy consumption awareness and attitude across theorganizations in the Bank in line with the “@ Energy-Minded
Services” guidelines introduced in February 2009.

Eco-friendly housing mortgage loans and home renovation loans
Loans for new home construction or renovation of homesthat will incorporate 100% electric utilities, “Eco-Jozu,” anenergy conserving gas-only home heating and coolingsystem, and similar eco-friendly home energy systems.
Loans for purchase of eco-friendly automobiles
Loans for the purchase of hybrid cars and other eco-friendly
automobiles.
Support for acquisition of ISO certification
Our affiliated company, the Joyo Industrial ResearchInstitute, Ltd., holds explanatory seminars on how toacquire ISO 14001 internationally recognized certificationfor environmental management systems, and also provides
consulting on an individual-company basis to help corporate customers acquire this important certification.
Registration under the Ibaraki Eco-Business Plan
The Bank applied for inclusion in the Ibaraki Eco-Friendly
Business Premises Registration System, operated by the
Ibaraki Prefectural Government, in which business premisesthat engage in environment-friendly operations are listed.
As a result, we received certification for the listing of all 108
Bank offices and two centers in
Ibaraki Prefecture, as well as for
all companies in the Joyo Bank
Group.
In addition, our 10 offices
in Fukushima Prefecture havesigned the “Fukushima Protocol
for the Prevention of Global
Warming.”

15

CORPORATE GOVERNANCE AND INTERNAL CONTROL SYSTEM
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
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 ofconduct, and suggests improvements when problem areas
are identified. Results of the audits are regularly submitted
in a report to the Board of Directors.
In addition to strengthening internal auditing, we havecreated a Compliance Audit Committee comprising four
outside experts including lawyers and Certified Public
Accountants (CPAs) to ensure greater expert input andobjectivity.

To ensure a greater trust from customers, the regional
community and our shareholders, we believe it is essentialthat our management be efficient, sound and transparent,
and firmly rooted in compliance. Constantly to be mindfulof the importance of corporate ethics, we have establishedeight basic principles under which we are strengthening
and expanding our corporate governance.

Corporate Governance at Joyo Bank
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. Executive directors
number eight excluding the Chairman of the Board andmanaging director (responsible for auditing duties). 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
and decision-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.

General Meetingof Shareholders

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
Ensure that the Bank has no relationship with organized crime.
Provide Valuable Financial Services
We will contribute to the development of the region in which we operate

Decision-making/
Management
supervisionCorporate Audit Division
Operating execution

Business Section
Corporate Auditors
Board of Corporate
Auditors
Board of Directors

Business Planning Division
Customer Services Division
Retail Banking DivisionCorporate Banking Business Division
Government and Municipal Business Division
Treasury and Securities DivisionMarkets and Business Administration Division

Executive
Officer
Committee

Credit Examination Division
Operation Planning Division
Computer System DivisionCorporate Risk Management DivisionCorporate Planning Division
Personnel Division•General Affairs Division

Auditing Company

16

by responding to our customers’ needs and providing valuable financial

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 carriedout by one department that oversees risk management for
the entire Bank. The Board of Directors has appointed the
director to oversee the risk management program.
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.

services, taking security issues into due consideration.
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.

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 Committeethat consists of executive directors and executive officers
to discuss important matters affecting the daily conductof operations. We have also set up a range of committees,grouping executive directors, executive officers and division heads, who meet as and when needed.

17

Supporting Corporate Auditors
Supporting Corporate Auditors
To support internal auditing, a staff who has enoughknowledge and ability as an auditor is assigned to assist thecorporate 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 Chairman of the Board, representative directors andaccounting auditors each meet regularly with corporate
auditors and exchange opinions on the issues related tothe audits.

Internal auditing function

Compliance System
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.
We establish a compliance program each year and ensurethat each executive and employee are fulfilling their roles incompliance.
We build a compliance system whose ultimate supervisory organ is the Board of Directors and place dedicatedcompliance officers in each major division to undertakewide-ranging inspections of legal issues in each division.
To supplement internal compliance activities by outside
audits to inject the required professional knowledge andobjectivity, the Bank set up a Compliance 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 andimprove 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

18[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.

the 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 meetingsof the Risk Management Committee, an organ for theexamination of Bank-wide solutions to risks. The department also provides regular reports on the overall status ofrisks to the Board of Directors.
Additionally, internal auditing staff verifies 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.

Risk Management
While the financial industry has grown due to deregulationand the advancement of financial technology, the risks carried by banks continue to diversify and become 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 thatcarry risks when conducting transactions (marketing
departments) and the departments that internally manage

19

Risk Management System
Risk Management
Departments

Risk Management
Committee

Credit Risk
Integrated Risk
Management Dept.

Board of Directors

Market Risk
Liquidity Risk

Business Promotion
Departments,
Administrative
Control Departments,
Group Companies

Operational Risk

Internal Auditing Dept.
Verification of suitability
and validity of the risk
management system

Risk Management through the PDCA Cycle
At the Joyo Bank we use the PDCA cycle described below
in our risk management process. This allows continuous
improvement of risk management, and conforms to ourbelief in the need to consistently refine the Bank’s risk
management methods.
Plan: Identify and evaluate the various risks to which
the Bank’s operations are exposed, and draw up
a plan for risk avoidance and mitigationDo:
Put the plan into practice
Check: Evaluate the results of the plan’s
implementation
Act: Take improvement measures in the event thatthe avoidance and mitigation plan process isinsufficient, or in the event that new problems
emergeIntegrated Risk Management
We have adopted integrated risk management for quantitative understanding of risk using statistical methods for eachcategory of risk, in order not only to manage individual risk
categories but also to enable systematic risk management
as the business of banking grows more diversified andcomplex.
This integrated approach enables us to manage what
extent of risk amount can be permitted relative to allocatedeconomic capital, the indicator of financial soundness, andwhether or not management resources are being deployed
efficiently.
Allocation of Risk Capital
In integrated risk management, levels of economic capitalthat may be allocated to cover the scale of permissible
risk within Tier I (core capital) are determined. This is thenallocated by risk type and category to control risk within
the permitted parameters. In the case of major change
which cannot be analyzed in terms of historical data, we
use special simulations (stress testing) to verify capital
adequacy levels.

Continuous Improvement of Risk Management
ActionCheck

ActionPlan
CheckCredit Risk Management
Credit risk is the risk of not receiving principal or loan
payments as promised on loans due to a deterioration incredibility of the debtor. This is recognized as one of themost serious risks make within banking operations.

Do
Plan

Check

Do
Plan

Do

20

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.

Internal credit ratings and categories of borrowers
under asset self-assessment

Overview of Basic Policy and Procedures with Regard to
Credit Risk Management

1
2
3
4
5
6
7
8
9
10
11
12

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 spreading risk as its basic tool.
Credit Risk Management for Individual Loans
We 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.

Borrower
ratings
1
2
3
4
5
6
8-1
8-2
8-3
9
10-1
10-2

Borrower category
under asset
self-assessment

Normal borrowers

Borrowers requiring caution(Substandard loans)
Potentially bankrupt
Substantially bankrupt
Legally bankrupt

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

Internal Credit Ratings

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

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.
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.

21

Market Risk Management
Market risk refers to fluctuation primarily in earnings caused
by interest rate changes, foreign exchange rate fluctuations,and changes in the demand for money within the financial
market. Assets like loans and securities and liabilities likedeposits are constantly influenced by such changes.
We manage all assets and liabilities (deposits, loans,securities, and others) comprehensively based on ALM(asset and liability management) to manage market risks.

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.

Market Risk Management System
The front and back office departments are separated. We
have also established middle-office risk management sections to build a mutual checks and balances system.
Market Risk Control
The scale of risks involved in assets and liabilities (deposits,loans, securities) go through a broad ranging analysis —gap analysis, basis point value (BPV), simulation of interest
fluctuation, and Value at Risk (VaR) — in order to clarify thestate of risks and conduct asset allocation effectively andimplement risk control measures.
We engage in financial derivative transactions to meetthe diverse needs of our customers and hedge our own
risks arising from interest fluctuations. For the risks associated with financial derivatives, in addition to conducting
daily mark-to-market valuation and BPV analyses toaccurately grasp the size and nature of the risk, we also
manage risk appropriately by establishing limits according
to objectives.

System Risk
System risk is the risk of losses due to the breakdownof computer systems, erroneous computer operation,and inappropriate computer use. Measures to ensure
appropriate management of such risk is based on protection of information data and ensuring stable operation ofcomputer systems.
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 tosafety and hygiene at the workplace, and compliance risk
(legality of business, illegal behavior by any executives andemployees) are addressed through appropriate measures
after identification and evaluation using methods to gauge
risk scale and features, and the effect of risk reduction
measures is later assessed.

Operational Risk Management
Operational risk refers to the risk of losses arising from
irregular procedures or employee conduct in banking
operations, or inappropriate system operation or detrimental external events. The Bank divides such risk into fivecategories: 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.

22

improvement, or for preventing the recurrence of issues
that have caused a complaint. Our branch office staff are
informed of cases that have led to complaints, enablingthem to draw up recurrence prevention plans.

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

Ensuring strict confidentiality in the management ofcustomer information
We ensure strict confidentiality in our management ofcustomers’ personal data. We have drawn up detailed
in-house rules for the handling of customer information,practicing strict control of data access and office access aswell as the encryption of confidential information. In theseways, we protect our customers from the leakage of theirpersonal information to outside parties as a result of misconduct or human error. Providers of outsourced services
are also required to conform to the Bank’s strict customer
information protection policy, and we closely monitor theirperformance in this area.

Customer Protection
In line with our commitment to being a ‘Best Partner bank’,
we are working to ensure thorough protection for our customers, enabling them to do business with us in complete
confidence. Our efforts include ensuring that the detailsof financial products and services are always explainedcarefully to customers, and that we always listen attentively
to customer feedback. We are also strictly managing confidential customer information, ensuring that outsourced
service providers follow our customer confidentiality rules,
and preventing transactions involving a conflict of interest.
In line with this management approach, we havelaid down the Customer Protection Management Policy
and are working to ensure that all Bank employees, fromexecutives down, are completely familiar with the policy.
From the organizational standpoint, we have established
the Customer Protection Group within the Corporate Risk
Management Division as a central unit for the supervisionof all customer management measures.

Managing conflicts of interest
The diversification of the services provided by financial
institutions has given rise to possible conflicts of interest
between financial institutions and their customers. In
response to this situation we have drawn up a set ofrules for the management of conflicts of interest in whichtransactions that may lead to a conflict of interest between
the Joyo Bank Group and its customers are identified andproperly managed. In this way, we are working to prevent
damage to the interests of our customers.

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 adequatelly.
Officers in charge of each particular facet of the Bank’s
operations instruct and teach details and methods for
how to best explain these products to customers, andthe Corporate Risk Management Division works to further
improve the quality of these explanations.

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 theprotection and appropriate handling of personal data.

Privacy Policy
We work to build on the mutual trust we have with ourcustomers, the region, and our shareholders, stress theimportance of our social responsibility, and offer highquality financial services. For the protection of personaldata, we have established the following policy based on
our respect for all individuals, and will put all our efforts into
the protection of private information.

Listening attentively to customer feedback
Inquiries, requests, or complaints from customers areprocessed centrally by the Customer Counseling Officewithin the Customer Services Division, while the Bank unit
in charge of the particular business operation concerned
is charged with responsibility for drawing up plans for23

Policy for Protection of Personal Confidential Information
entrusted to an outside organization under an outsourcing arrangement, we require that protection of
personal information be contractually assured, andcarries out checks.

• Strict compliance with laws and regulations
We comply with all laws, ordinances and otherregulations regarding confidentiality of personal
information.
• Appropriate accessWe acquire personal information only by appropriate and legal methods, and only when necessary forbusiness operations. Personal information is nevergathered in an inappropriate way.

• Security management measures
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 it isnecessary for achievement of business objectives,and do not use such information for any otherpurpose.
In addition, information that is registeredwith credit-data organizations of which we are amember 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 thoroughcommitment 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 isPrivacy MarkIn October 2006, the Bank was awarded Japan Information Processing Development Corporation(JIPDEC)’s “Privacy Mark” certification. We were the first regional financial institution in the North
Kanto Region, to acquire this accreditation.
Based on this accreditation, the Bank meets the “requirements for management of personal
information protection” (JIS Q15001) laid down by Japanese Industrial Standards Committee andnow has in place mechanisms for appropriate protection of personal information.
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.

24

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Consolidated Balance Sheets

THE JOYO BANK, LTD. and Consolidated Subsidiaries

2010

2009

Thousands of
U.S. dollars (Note 2)
2010

AssetsCash and due from banks (Notes 3 and 25)
Call loans and bills purchased
Commercial paper and other debt purchased
Trading assets (Note 5)
Securities (Notes 6, 8 and 25)
Loans and bills discounted (Notes 7, 9, 11 and 25)
Foreign exchanges
Lease receivables and lease investment assets (Note 24)
Other assets
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¥ 173,240
22,91546,0093,766
2,151,554
4,808,134
2,708
29,00570,59595,961
7,476
21,702
22,875(39,201)(35)¥7,416,708¥ 179,030
26,72954,063
9,578
1,975,080
4,911,988
1,316
31,74270,50097,394
7,124
57,65428,552(36,422)(48)¥7,414,285$ 1,862,004
246,292
494,517
40,47823,125,051
51,678,148
29,113
311,753758,763
1,031,397
80,352233,258
245,863(421,343)(386)$79,715,265

Liabilities and net assets
Liabilities:
Deposits (Notes 8, 15 and 25)
Call money and bills sold (Notes 8 and 19)
Payables under securities lending transactions (Note 8)
Trading liabilities (Note 16)
Borrowed money (Notes 8, 10 and 25)
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 for land revaluation (Notes 3 and 14)
Negative goodwill
Acceptances and guarantees
Total liabilities¥6,685,607—
26,034371
119,490625
15,00018
93,531
37
4,840
22
1,458
102
7
1,991
0
13,984
2,607
22,875
6,988,606¥6,646,813
111,947
73,649270
80,885185
15,00014
57,282
—
4,219
742
1,333
102
8
1,623
0
14,0072,765
28,5527,039,404$71,857,343—
279,816
3,994
1,284,286
6,722
161,220196
1,005,278
406
52,025242
15,6671,106
76
21,407
8
150,303
28,025245,863
75,114,001

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

85,11358,574
261,752(26,845)
378,594
38,805(1,938)11,00047,86821
1,617
428,101¥7,416,708

85,11358,574254,154(26,804)
371,036(6,397)(1,868)
10,739
2,474
—
1,369
374,881¥7,414,285

914,800
629,557
2,813,337(288,535)
4,069,159
417,086(20,832)
118,235
514,489
230
17,3834,601,263$79,715,265

Millions of yen
March 31,

See accompanying notes to the consolidated financial statements.

25

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Consolidated Statements of Income

THE JOYO BANK, LTD. and Consolidated Subsidiaries

2010

2009

Thousands of
U.S. dollars (Note 2)
2010

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¥ 90,019
23,294
1,080
22,404669
3,566
22,553
163,587¥ 97,453
31,371
1,418
23,216580
3,914
37,862
195,817$ 967,540
250,370
11,608240,801
7,197
38,330242,402
1,758,252

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

9,563
1,003
1,592
6,793
4,637
73,81944,152
141,562
22,025

16,502
3,428
5,206
6,806
42,631
74,58943,772
192,937
2,879

102,787
10,782
17,11673,021
49,845
793,416
474,551
1,521,520
236,731

1,594
(96)
6,229

2,725
—
(5,177)

17,137(1,039)66,954

Minority interests in net income of consolidated subsidiaries
Net income

246¥ 14,051

153¥ 5,178

2,652$ 151,026

Net income per share (in yen and dollars)

¥

¥

$

Millions of yen
Years ended March 31,

Income taxes:
Current
Tax refunds
Deferred (Note 14)

See accompanying notes to the consolidated financial statements.

26

18.17

6.62

0.19

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

2010

2009

Thousands of
U.S. dollars (Note 2)
2010

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$ 914,800——$ 914,800

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$ 629,557——$ 629,557¥254,154¥255,255$2,731,665(6,183)
14,051
(8)
(260)
7,598
¥261,752(6,262)
5,178
(96)
79
(1,101)¥254,154(66,461)
151,026(90)(2,802)
81,672$2,813,337¥ (26,804)¥ (21,671)$ (288,098)

(71)
30
(40)
¥ (26,845)(5,602)468(5,133)¥ (26,804)

(763)
326
(437)
$ (288,535)¥371,036¥377,271$3,987,925(6,183)
14,051
(71)
21
(260)
7,558
¥378,594(6,262)
5,178(5,602)371
79(6,235)¥371,036(66,461)
151,026(763)
235(2,802)
81,234$4,069,159

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
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
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
Transfer from land revaluation excess
Total changes during the year
Balance at end of the current year

27

2010

2009

Thousands of
U.S. dollars (Note 2)
2010¥(6,397)¥ 43,833$ (68,757)

45,20245,202¥38,805(50,230)(50,230)¥ (6,397)

485,843
485,843$ 417,086¥(1,868)¥ (1,130)$ (20,077)

(70)
(70)
¥(1,938)

(737)
(737)
¥ (1,868)

(755)
(755)
$ (20,832)¥10,739¥ 10,819$ 115,432

260
260¥11,000(79)(79)¥ 10,739

2,802
2,802
$ 118,235¥ 2,474¥ 53,521$

45,39345,393¥47,868(51,047)(51,047)¥ 2,474

487,891
487,891$ 514,489

¥

¥

—

$

—

¥

—
—
—

$

230
230
230

$

14,7232,659
2,659
17,383

Millions of yen
Years ended March 31,

Valuation and translation adjustments
Unrealized (losses) 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 valuation and translation adjustments
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

—
21
21
¥21

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.

28

26,598¥1,369¥ 1,222

¥

247
247
1,617

147
147
¥ 1,369$¥374,881¥432,016$4,029,246(6,183)
14,051
(71)
21
(260)
45,66253,220¥428,101(6,262)
5,178(5,602)371
79(50,899)(57,135)¥374,881(66,461)
151,026(763)
235(2,802)490,781572,016$4,601,263

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

Millions of yen
2010
2009

Years ended March 31,

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 decrease in reserve for devaluation of investment securities
Net (decrease) 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 increase in reserve for other contingent losses
Net (decrease) increase in reserve for losses on interest refunded
Net increase in reserve for directors’ bonuses
Net increase in reserve for employees’ retirement benefits

Interest and dividend income
Interest expenses
Net losses related to securities transactions
Net losses on money held in trust
Foreign exchange losses, net
Losses on disposal of tangible fixed assets
Net decrease in trading assets
Net increase in trading liabilities
Net decrease in lease investment assets
Net decrease (increase) in loans and bills discounted
Net increase in deposits
Net decrease (increase) in negotiable certificates of deposit
Net increase in borrowed money excluding subordinated borrowings
Net increase in due from banks excluding cash equivalents
Net increase in call loans and others
Net increase in call money and bills soldNet decrease in payables under securities lending transactions
Net increase in foreign exchange (assets)
Net increase (decrease) in foreign exchange (liabilities)
Net increase (decrease) in due to trust accountInterest and dividends received
Interest paid
Others, net
Subtotal
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities:
Purchases of securities
Proceeds from sales of securities
Proceeds from redemption of securities
Increase in money held in trust
Decrease in money held in trust
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
Cash flows from financing activities:
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 (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year (Note 3)
See accompanying notes to the consolidated financial statements.

29

Thousands of
U.S. dollars (Note 2)2010¥ 22,025
6,206
81
(158)
2,779
(12)
(719)
124
0
367
(1)
37
620
(118,253)
12,159
9,562
—
4,288
429
5,812
101
2,737
103,853
117,254(78,460)
38,605(17,960)
11,868(111,947)(47,615)(1,392)440
3119,277(12,597)
11,78181,300(637)
80,662¥ 2,879
5,129
23
(158)
(2,457)
(0)
92
110
(58)
530
0
—
45
(132,976)
25,13733,92654
23,225689
16,48566484(276,771)
207,332
53,9499,440(2,953)(11,181)(50,735)(92,580)
(278)
(118)
(2)
133,648(24,271)(21,651)(102,943)(9,993)(112,937)$ 236,731
66,702880(1,698)29,874(132)(7,735)
1,341
8
3,953
(20)
406
6,673
(1,270,995)
130,686
102,779—
46,095
4,613
62,4701,091
29,4181,116,221
1,260,253(843,293)
414,929(193,039)
127,559(1,203,218)(511,775)(14,967)4,731
42
1,282,000(135,398)
126,628
873,819(6,849)866,969(487,758)
174,314
221,425——(3,943)48(2,256)(98,170)(530,475)
380,243
320,424(25,000)
28,500(9,386)190(224)
164,271(5,242,461)
1,873,543
2,379,891——(42,387)518(24,251)(1,055,146)(6,183)(0)(71)
21(6,232)(9)(23,750)
153,550¥129,800(6,262)(0)(5,602)371(11,493)(15)
39,825
113,725¥153,550(66,461)
(2)
(763)
235
(66,991)(100)(255,269)
1,650,374$1,395,105

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

1. Basis of Preparation
The accompanying consolidated financial statements of The Joyo Bank, Ltd. (the “Bank”) and consolidated
subsidiaries are prepared on the basis of accounting principles generally accepted in Japan, which are
different in certain respects as to the application 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 have been 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 forthe convenience of the reader, the U.S. dollar amounts represent a translation of the Japanese yenamounts at ¥93.04 = US$1.00, the exchange rate prevailing on March 31, 2010.

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 heldby 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 fromarbitrage between markets) are valued at market or fair value, 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

30

Son the balance sheet date.
Trading income or trading expenses include interest received or paid during the fiscal year. The
year-on-year valuation differences of securities and monetary claims are also recorded in theabove-mentioned accounts. As for the derivatives, assuming that the settlement will be made in cash, theyear-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 and investment 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 basicallycalculated by the moving-average cost method.) Other listed securities are stated at fair value based on themarket 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 stated at 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 fairvalue.

(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 acquired on or after April 1, 1998 of which depreciation is calculated by the straight-line
method. The estimated useful lives are as follows:
Buildings: 6~50 years
Other: 3~20 years
Depreciation of tangible fixed assets held by the consolidated subsidiaries is calculated principally by the
declining-balance method, based on the respective estimated useful lives of the assets.
Depreciation of intangible fixed assets is calculated using the straight-line method. Software for internal
use is depreciated using the straight-line method over its estimated useful life (mainly 5 years).

(f) Reserve for possible loan losses
The reserve for possible loan losses of the Bank is provided as detailed below, in accordance with theinternal rules for providing reserves for possible loan losses:

31

For claims to debtors who are legally bankrupt (as a result of bankruptcy, special liquidation, etc.) or who
are substantially bankrupt, a reserve is provided based on the amount of the claims, net of the amounts
expected to be collected by the disposal of collateral 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 isprovided based on the amount considered necessary based on an overall solvency assessment of theamount of claims net of the amounts expected to be collected 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 such assessments, 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 theactual historical rate of loan 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, theamounts of the claims deemed uncollectible in excess of the estimated value of the collateral or guarantees
have been written off in aggregate amounts of ¥48,463 million and ¥44,962 million as of March 31, 2010
and 2009, respectively.

(g) Reserve for devaluation of investment securities
A reserve for the devaluation of investment securities is provided at the amount deemed necessary to coverestimated possible losses on investments which the Bank and its consolidated subsidiaries may incur in the
future.

(h) Reserve for directors’ bonuses
Reserve for directors’ bonuses represents estimated cost of directors’ (including executive officers)
bonuses attributable to the fiscal year.

(i) Reserve for employees’ retirement benefits
Reserve for retirement benefits of the Bank and its subsidiaries is provided for the amount deemednecessary, based on estimated pension 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 average remaining service period of the eligible employees.
Unrealized actuarial losses are deferred and amortized using the straight-line method over a ten-year32period commencing with the following year, which is shorter than the average remaining service period of
the eligible employees.
Accounting Changes
The Bank and its consolidated subsidiaries have adopted the standard of “Partial Amendments to
Accounting Standard for Retirement Benefits (Part3)” (ASBJ Statement No.19, July 31, 2008) at the end of
the fiscal year ended March 31, 2010. However, as the discount rate was not impacted by this adoption, it
did not have an impact on the consolidated financial statements.

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

(k) Reserve for reimbursement of dormant deposits
Reserve for reimbursement of dormant deposits which were derecognized as liabilities under certain
conditions is provided for possible losses on the future claims.

(l) Reserve for frequent users services
Reserve for frequent users services, which is provided to meet future use of credits granted to credit cardcustomers, 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.

(m) Reserve for losses on interest refunded
One consolidated subsidiary provides a provision for losses on interest refunded in an amount deemednecessary based on estimated amounts to be refunded, taking into account historical records of interest
refunded on the portion of loans whose interest rates exceeded the maximum interest rate stipulated by theInterest Limitation Law.

(n) Reserve for contingent losses
The Bank makes reserve for possible losses on loans guaranteed by the credit guarantee corporations in
an amount deemed necessary based on estimated losses in the future, calculated using historical default
rates after exclusion of contingent losses covered by other reserves.

(o) Reserves under special laws
The reserve under the special laws is a reserve for contingent liabilities and provided for compensation forlosses from securities-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.

33

(p) Goodwill
Goodwill is amortized using the straight-line method over 20 years.

(q) Translation of foreign currencies
Foreign currency-denominated assets and liabilities of the Bank are translated into Japanese yen at therates prevailing at the balance sheet date. Foreign currency-denominated assets and liabilities held byconsolidated subsidiaries are translated into Japanese yen principally at the rates prevailing at therespective balance sheet dates.
All consolidated subsidiaries have a fiscal year end of March 31.

(r) 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 ordinary 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.” Income before income taxes and minority interests would have decreased by ¥206
million for the year ended March 31, 2010 and would have increased by ¥1,263 million for the year ended
March 31, 2009, upon application of Article 80 of the Guidance.

(s) Hedging
Hedging against interest rate changes
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 Accounting Standards 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 thechanges 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 suchhedges in fixing cash flows by verifying the correlation between the hedged items and the hedging
instruments.

34

Hedging against foreign exchange fluctuation risk
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, inaccordance 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 foreign exchange fluctuation risk on monetary assets and liabilities, the Bank engages incurrency swaps, foreign exchange swaps, and similar transactions. The effectiveness of these transactionsin the hedging of the foreign exchange risks 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 someassets and liabilities held by the Bank and its consolidated subsidiaries.

(t) 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.

(u) 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 were ¥25,771 million and ¥24,031 million as of March 31, 2010 and 2009, respectively.

(v) Earnings per share
The computation of earnings per share of common stock is based on the weighted average number ofshares outstanding during each year.

35

(w) 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 thetime deposits of certain consolidated subsidiaries.
Millions of yen
March 31,

2009

2010

Cash and due from banks¥173,240¥179,030

Deposits with banks other than the Bank of Japan(43,440)(25,479)

Cash and cash equivalents¥129,800¥153,550

4. Application of New Accounting Standards
Accounting Standard for Financial Instruments
The Bank and its consolidated subsidiaries have adopted the standard of “Accounting Standard for
Financial Instruments” (ASBJ Statement No. 10, revised March 10, 2008) and “Guidance on Disclosuresabout Fair Value of Financial Instruments” (ASBJ Guidance No.19, March 10, 2008) at the end of the fiscal
year ended March 31, 2010. (Please refer to “25. Financial instruments”)
As a result of this change, by comparison with the application of the previous accounting standard,“Ordinary income” and “Income before income taxes and minority interests” increased by ¥51 million,
respectively.

5. Trading Assets
Millions of yen
March 31,

2009

2010

Trading securities¥3,146¥2,1062

1

Trading-related financial derivatives

617

476

Other trading assets

ʊ

6,994

¥3,766¥9,578

Trading securities-related financial derivatives

Total

36

6. Securities
Millions of yen
March 31,

2009

2010

Japanese government bonds¥1,209,305¥ 788,617

Japanese local government bonds

386,679

397,326

Corporate bonds

374,973

400,381

Corporate stocks

182,826

145,653

Other securities

177,769

243,102¥2,151,554¥1,975,080

Total

Notes: 1. Securities include ¥31 million of investments in nonconsolidated subsidiaries as of March 31, 2009 while the Bank had
no nonconsolidated subsidiary as of March 31, 2010.
2. Corporate bonds include ¥19,925 million and ¥21,766 million of guarantee obligations for privately placed bonds (under
Article 2-3 of the Financial Instruments and Exchange Act) as of March 31, 2010 and 2009, 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 foreign exchanges bought without restrictions. The face value atMarch 31, 2010 and 2009 totaled ¥22,670 million and ¥33,744 million, respectively.

8. Pledged Assets
Assets pledged as collateral at March 31, 2010 and 2009 were as follows:
Millions of yen
March 31,

2009

2010

Pledged assets:
Securities¥226,878¥310,042

31,131

21,850ʊ

35,000

Payables under securities lending transactions

26,03473,649Borrowed money

49,70010,000Liabilities covered by pledged assets:
Deposits
Call money

In addition to the above, securities amounting to ¥100,880 million and ¥100,091 million at book value were
pledged as collateral in connection with bank transfer settlements and futures transactions as of March 31,
2010 and 2009, respectively.
One consolidated subsidiary had pledged its lease receivables amounting to ¥3,413 million and ¥5,000

37

million as collateral for borrowed money of ¥2,815 million and ¥4,235 million as of March 31, 2010 and 2009,
respectively.
Lease deposits as of March 31, 2010 and 2009 of ¥1,430 million and ¥1,432 million, respectively, havebeen included in “Other assets.” Initial margins on futures transactions as of March 31, 2010 and 2009 of¥160 million, respectively, have been included in “Other assets.”

9. Commitments and Contingent Liabilities
Overdraft facilities and line-of-credit contracts are agreements under which, subject to compliance with thecontractual 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 ¥1,369,249 million and ¥1,441,272 million at March 31, 2010 and 2009,
respectively. Of this amount, facilities/contracts which expire within one year or which are unconditionallycancelable at any time, totaled ¥862,086 million and ¥1,300,738 million at March 31, 2010 and 2009,
respectively.
Most of these agreements will expire without the clients’ having utilized the financial resources available
to them, and the amount of the non-executed financing will not necessarily impact on the Bank or its
consolidated subsidiaries’ future cash flows. Most of these 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 inview 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 dateon 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 maintain creditworthiness.

10. Borrowed Money
Borrowed money included subordinated debt of ¥35,000 million, at March 31, 2010 and 2009.
Borrowed money at March 2010 and 2009 consisted of the following:%

Millions of yen

Description

Due

Average interest
2009

2010

rate

Bills rediscounted

¥—

¥—

—

Other borrowings

119,490

80,885

1.00—

April 2010 February 2018

Notes:

1. Average interest rate represents the weight average interest rate based on the balances and rates at respective year-end.
2. The repayment schedule within five years on borrowed money at March 31, 2010 was as follows:

38

Millions of yen

Within 1 year

¥88,765

After 1 year through 2 years

20,875After 2 years through 3 years

490

After 3 years through 4 years

240

After 4 years through 5 years

30

11. Non-Performing Loans
In accordance with the disclosure requirements under the Rules for Bank Accounting in Japan, the balanceof loans and bills discounted at March 31, 2010 and 2009 included the following non-performing loans:

Millions of yen
March 31,

2009

2010

Loans in bankruptcy and dishonored bills¥5,617¥ 9,171

Delinquent loans

95,20496,420than 3 months

2,270

2,437

Restructured loans

19,372

16,474¥122,463¥124,504

Loans past due with respect to interest payments for more

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) towhich 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 3 months refers to loans with respect towhich repayment of principal or payment of interest are past due three months or more, excluding loans falling into thecategories of loans in bankruptcy and dishonored bills or delinquent loans. Restructured loans refers to loans to borrowers towhom financial support is given in the form of reduction in interest, waiver of repayment of the principal or payment of interest,
or debt forgiveness with the aim of corporate rehabilitation, excluding loans falling into loan categories mentioned above.
2. The above amounts are stated before the deduction of the reserve for possible loan losses.

3912. Bonds
Bonds at March 31, 2010 and 2009 consisted of the following:

Millions of yen
IssuerDescription%

Date of issue

The Joyo

1st

May 24,

Bank, Ltd.

Unsecured

2000

Collateral
2010

2009

¥10,000¥10,000

Due

Interest rate

2.02

—

May 24,2010

Straight
Bonds
The Joyo

2nd

May 24,

Bank, Ltd.

Unsecured

2000

5,000

5,000

2.64

—

May 22,2020

Straight
Bonds
Total

¥15,000¥15,000

The redemption schedule within five years on bonds at March 31, 2010 was as follows:
Millions of yen¥10,000

Within 1 year
After 1 year through 2 years—

After 2 years through 3 years—

After 3 years through 4 years—

After 4 years through 5 years—

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 andlump-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, 2010, 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.

40

(b) The following table sets forth the changes in the retirement benefit obligation, the plan assets and thefunded status of the Bank and its consolidated subsidiaries at March 31, 2010 and 2009:
Millions of yen
March 31,

2009

2010

Retirement benefit obligation¥(62,130)¥(61,515)

Fair value of plan assets

50,28542,343Funded status(11,844)(19,171)——

12,03521,327

467

565

658

2,721

5,499

6,940

¥(4,840)¥ (4,219)

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

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

(c) Cost for retirement benefits of the Bank and its consolidated subsidiaries included the following
components for the years ended March 31, 2010 and 2009:
Millions of yen
Years ended March 31,

2009

2010

Service cost

¥1,842¥1,907

Interest cost

1,059

1,044

Expected return on plan assets

(569)

(785)

98

98

2,815

1,419

¥5,246¥3,684

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

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

41

(d) The assumptions used in accounting for the defined benefit plans for the years ended March 31, 2010
and 2009 were as follows:
Years ended March 31,

2009

2010

Discount rate

2.0%

2.0%

Expected rate of return on plan assets

3.0%

3.0%

Straight-line method

Straight-line method

Amortization period of prior service cost

10 years

10 years

Amortization period of actuarial gain/loss

10 years

10 years

Periodical allocation of estimated retirement benefits

14. Deferred Tax Assets
Millions of yen
March 31,

2009

2010

Deferred tax assets:
Reserve for possible loan losses¥26,256¥27,868

Reserve for retirement benefits

9,156

8,320

Devaluation of securities

2,899

13,939Depreciation

4,142

3,996

Reserve for employee bonuses

1,012

978

Net operating loss carry forwards

ʊ455

Reserve for directors’ retirement benefitsʊ

297

Reserve for reimbursement of dormant deposits

588

537

Unrealized loss on available-for-sale securities

ʊ

6,279

Others13,796

13,093

Valuation allowance(7,368)(8,211)¥55,021¥67,556¥(23,487)¥—(9,495)(9,495)

(32)

(36)

(303)

(369)

(33,318)(9,902)¥21,702¥57,654

Total
Deferred tax liabilities:
Unrealized gain on available-for-sale securities
Retirement benefit trust
Reversal of reserve for possible loan losses after
elimination of intercompany balances
OthersTotal
Net deferred tax assets

The effective tax rate reflected in the consolidated statements of income for the year ended March 31, 201042

and 2009 differs from the statutory tax rate for the following reasons:

2009

2010

Statutory tax rate

40.32%

40.32%

ʊ(75.90)%(3.82)%(20.78)%ʊ(26.08)%Other(1.42)%(2.69)%

Effective tax rate

35.08%(85.13)%

Provision for accrued income taxes in previous terms
Valuation allowances
Dividends exempted for income tax purposes

15. Deposits
Millions of yen
March 31,

2009

2010

Current deposits¥3,731,088¥3,642,117

Time deposits

2,793,747

2,768,973

Negotiable certificates of deposit

20,90099,360

Others139,870

136,361

Total¥6,685,607¥6,646,813

16. Trading Liabilities
Millions of yen
March 31,

2009

2010

Trading securities–related financial derivatives¥—¥—

Trading-related financial derivatives

371

270

Total

¥371

¥270

17. Shareholders’ Equity
In accordance with the Banking Law of Japan, the Bank has provided a legal reserve by appropriation ofretained earnings, which is included in retained earnings. The Banking Law of Japan provides that an
amount equivalent to at least 20% of the amount to be disbursed as distributions of earnings be
appropriated to the legal reserve until the total of such reserve and the capital surplus equals 100% of thecommon stock.
The Companies Act of Japan (the “Act”), provides that an amount equal to 10% of the amount to be43

disbursed as distributions of capital surplus (other than the capital reserve) and retained earnings (otherthan the legal reserve) be transferred to the capital reserve and the legal reserve, respectively, until the sumof the capital reserve and the legal reserve equals 25% of the capital stock account. Such distributions canbe made at any time by resolution of the shareholders or by the Board of Directors if certain conditions aremet.
Under the Act, upon the issuance and sale of new shares of common stock, the entire amount of theproceeds is required to be accounted for as common stock, although a company may, by resolution of theBoard of Directors, account for an amount not exceeding one-half of the proceeds as capital surplus.

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

2009

2010

Revenue from trading securities

¥512

¥247

Revenue from trading-related financial derivatives

151

104

5

228

¥669

¥580

Other trading revenue
Total

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

2009

2010

Call money and bills sold¥57

¥1,651

Securities lending transactions

87

791

Borrowings

857

985

¥1,003¥3,428Total

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

2009

2010

Other ordinary income
Gain on disposal of tangible fixed assets
Gains on collection of loan assets

Reversal of reserve for possible loan losses
Total

44

¥20,324¥35,438

ʊ

47

2,228

2,357

ʊ

18

¥22,553¥37,86221. Other Expenses
Millions of yen
Years ended March 31,

2009

2010

¥429

¥ 736

81

23

Write-offs of claims

11,273

13,500

Write down of equity shares

1,936

6,187

472

478

Others29,961

22,848

Total¥44,152¥43,772

Losses on disposal of tangible fixed assets
Losses on impairment

Losses on sale of claims

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 year ended March 31, 2010 and 2009
can be broken down into the two categories of losses on land holdings in the amount of ¥80 million and ¥20
million, respectively, and losses on buildings in the amount of ¥0 million and ¥3 million, respectively.
The recoverable amounts used for the measurement of such impairment losses are net sales prices, which
are calculated on the basis of appraisal values after deduction of the estimated cost of disposal.

22. Accumulated Depreciation of Tangible Fixed Assets
Accumulated depreciation on tangible fixed assets amounted to ¥100,089 million and ¥103,618 million, as
of March 31, 2010 and 2009, respectively.

45

23. Segment Information(a) Business segment information
Segment information by type of business for the years ended March 31, 2010 and 2009 are summarized asfollows:
Millions of yen
Banking

Year ended March 31, 2010

Leasing

Other

Total

Eliminations

Consolidated

operations

Ordinary income:From external customers¥140,641¥15,905¥4,812¥161,359¥—¥161,359

From internal transactions

1,057

1,443

4,625

7,125

(7,125)—

Total

141,699

17,348

9,437

168,485(7,125)

161,359

Ordinary expenses

123,170

16,385

8,248

147,804(6,754)141,050

Ordinary income, net

18,528962

1,188

20,680(371)

20,308¥7,407,180¥42,981¥37,356¥7,487,518¥(70,810)¥7,416,708

5,354

55

307

5,717

488

6,206

Losses on impairment

81

—

—

81

—

81

Capital expenditures

5,996

33

170

6,200

—

6,200

AssetsDepreciation

Millions of yen
Banking
Leasing

Year ended March 31, 2009

Other

Total

Eliminations

Consolidated

operations

Ordinary income:From external customers¥ 172,093¥16,774¥ 4,525¥ 193,394¥—¥ 193,394

From internal transactions

845

1,753

5,231

7,830

(7,830)—Total

172,939

18,5289,756

201,224(7,830)

193,394

Ordinary expenses

171,501

18,2109,477

199,189(7,791)

191,398

Ordinary income, net¥ 1,437

¥ 317

¥ 279

¥ 2,034¥ (39)¥ 1,995¥7,404,663¥46,075¥36,298¥7,487,037¥(72,751)¥7,414,285

4,821

53

179

5,054

75

5,129

Losses on impairment

23

—

—

23

—

23

Capital expenditures

7,448

124

2,038

9,611

—

9,611

AssetsDepreciation

Notes: 1. Classification is made according to nature of businesses of consolidated entities. In addition, “other” includes guarantee
business.
2. Instead of the net sales and the operating income of a non-financial company, ordinary income in gross and net amountare presented.
3. The Bank and its consolidated subsidiaries have adopted the standard of “Accounting Standard for Financial

46

Instruments” (ASBJ Statement No. 10, revised March 10, 2008) and “Guidance on Disclosures about Fair Value of
Financial Instruments” (ASBJ Guidance No.19, March 10, 2008) at the end of the fiscal year ended March 31, 2010.
As a result of this change, by comparison with the application of the previous accounting standard, “Ordinary income”
and “Income before income taxes and minority interests” of banking operations increased by ¥51 million, respectively.

(b) Geographic segment information
Segment information by geographic area has not been disclosed since over 90% of the total consolidated
ordinary income and assets of the Bank and consolidated subsidiaries resides in Japan.

(c) Ordinary income from foreign operations
Segment information related to the Bank’s foreign operations for the years ended March 31, 2010 and 2009
have not been disclosed since ordinary income on international operations was less than 10% of the total
consolidated ordinary income and assets.

24. Leases(a) Finance leases
Finance lease transactions in which ownership of leased property is not transferred to the lessee areaccounted for as operating leases (outside of the scope of new lease accounting standards), as follows:
As lessee
Acquisition cost, aggregate depreciation expenses, and book value at March 31, 2010
Acquisition cost
Tangible fixed assets:¥15 million

Total:¥15 million

Accumulated Depreciation expenses
Tangible fixed assets:¥10 million

Total:¥10 million

Book value at term-end
Tangible fixed assets:¥5 million

Total:¥5 million

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

47

Lease payments required for finance leases
Within one year:¥1 million

Over one year:¥3 million

Total:¥5 million

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

Lease fees paid and depreciation expenses that would have been incurred under finance leases
Lease fees:¥4 million

Depreciation expenses:¥4 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 is zero.

(b) Operating leases
As lessee
Future lease payments under non-cancellable operating lease transactions
Within one year:¥37 million

Over one year:¥387 million

Total:¥425 million

As lessor
Future lease payments under non-cancellable operating lease transactions
Within one year:¥8 million

Over one year:¥29million

Total:¥38 million

No losses are recognized for the impairment of lease assets.

48

25. 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 and liabilities of which the values fluctuate with changes in interest rates, foreignexchange 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 ininterest rate related derivatives in connection with investments in securities and for hedging purposes.
b. Financial Instruments and Risks
The financial assets held by the Group consist primarily of securities and loans to domestic customers.
Loans are subject to credit risk which could cause financial losses to the Group from non-performance ofobligations by borrowers. With regard to securities, the Group is exposed to credit risk of issuers,interest-rate risk, and market price volatility risk.
The deposits include current deposits and savings deposits without maturities, and time deposits withmaturities. 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 toexecute payments at the due dates when the Group lost access to the financial markets. Although thefloating-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 andinterest-rate risks and to appropriately manage the Bank’s market risks. Moreover, we utilize derivatives
transactions for efficient ALM and hedging of individual transactions.
Derivatives transactions have market risk that losses could arise from market changes including those ininterest rates and exchange 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) andthe hedging instruments (e.g., interest rate swaps) are grouped by remaining period to assess theeffectiveness. As for hedging transactions to fix the cash flows, we examine interest-rate correlation
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 foreignexchange swaps as the hedging instruments and verify that we hold foreign currency positions of the those49

hedging instruments that match the hedged items including monetary claims and obligations denominatedin 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 the loss limits for trading transactions involving short-term purchases andsales of financial instruments.
c. Risk Management for Financial Instruments(a) 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 of risk. Credit Risk Management Group has been
segregated from the divisions under Business Headquarters to achieve rigorous credit review, andconducts 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 and Securities Divisionmonitors 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.
(b) 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 thebanking account, and applies and monitors the limits rigorously through the ALM. In order to control theinterest-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-pointvalue (“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 and50

foreign exchange swaps. In addition, the Group also enters into offsetting transactions in financial markets
on an individual or aggregate basis, in order to reverse out foreign exchange risk arising from foreignexchange transactions offered by customers. Additionally, the Group converts into yen an amountequivalent to monthly interest income denominated in foreign currencies every month, in order to mitigate
foreign exchange 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 arisingfrom 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 the General Budget Committee every half year.
Price-fluctuation risk is measured using VaR. The ALM Committee sets alarm points somewhat below therisk limits and monitors the points as well as the limits on a monthly basis. To prevent unrealized losses
from being accumulated, the Group monitors and manages 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 foreignexchange 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 andmanages credit exposures on a daily 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 the creditworthiness and outstanding transactions, just like for financing transactions, and manages
the credit exposures together with those 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) Management of Liquidity Risk in Funding
To manage liquidity risk under “Market and Liquidity Risk Management Rules,” the Group:•

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 and costs 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 a51

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.

(2) Disclosures Regarding Fair Value of Financial Instruments and Other Items
The table below sets forth fair values of financial instruments at March 31, 2010 except for those whose fairvalues are extremely difficult to determine (see (Note2)). In addition, those financial instruments which are
immaterial are not below listed.
Millions of yen
Consolidated balance
Fair value
March 31, 2010

Difference

sheet amount(1) Cash and due from banks¥173,240¥173,240¥ʊ

26,991

27,235

243

Available-for-sale securities

2,114,523

2,114,523

ʊ(3) Loans and bills discounted

4,808,134

ʊʊ(33,204)ʊʊ

4,774,930

4,828,102

53,171

Total assets

7,089,687

7,143,102

53,415(1) Deposit

6,664,706

6,670,705(5,999)(2) Negotiable certificates of deposit

20,90020,900ʊ(3) Borrowed money

119,490

119,757(267)

6,805,097

6,811,363(6,266)

instruments

1,232

1,232

ʊ

Transactions accounted for as hedging instruments

14,165

14,165

ʊ¥15,397¥15,397¥ʊ(2) Securities
Held-to-maturity debt securities

Reserve for possible loan losses㧔*1㧕

Total liabilities
Derivatives transactions㧔*2㧕
Transactions not accounted for as hedging

Total derivatives transactions(*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 anddebts that arose from derivatives transactions are presented on a net basis.

52

(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 fairvalue.
(2) Securities
Fair value of shares is determined by reference to quoted market prices on stock exchanges. Fair value ofbonds is determined by reference to quoted market prices or prices offered by financial institutions, orbased on the price best estimated. Fair value of investment trusts is determined by reference to their
publicly available net asset value per unit. Fair value of privately placed bonds guaranteed by the Bank isdetermined 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.
Fair value of Japanese Government Bonds (JGBs) with variable interest rates is calculated as areasonably estimated value which is calculated based on the discounted cash flow method or other pricing
methods using JGB yields and volatility of the swaptions as primary pricing variables.
We used a reasonably estimated value as the fair value of securitized products (e.g., collateralized loan
obligations), except those subject to impairment, of which external credit rating is not downgraded, of whichcollateral asset pools are not deteriorated, and which the Group intends to continue to hold. The reasonably
estimated price was calculated by the discounted cash flow method or other pricing methods using thedefault rate, recovery rate, pre-payment rate and discount rate as primary pricing variables.
Please see “26. 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 fair value 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 wereinterest rates which would be applied when similar loans were newly extended. Fair value of fixed-rateloans 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 arecomputed based on recoverable amounts estimated as the present value of future cash flows or thecollectible amounts from collaterals and guarantees. Then the fair value of those loans approximates theconsolidated balance sheet amount at the closing date minus the currently estimated losses, and istherefore deemed equal to the amounts.
Fair value of loans and bills discounted for which repayment terms are not set because of their attributes

53

(e.g., loans are limited to the amounts of assets pledged as collateral) is assumed to approximate theircarrying 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 consolidatedbalance 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 valueof 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) Borrowed money
We used as the fair value the present value of future cash flows calculated by borrowing period. The
discount rates used in the calculation were interest rate that would applied to new borrowings. Fair value ofborrowings for a short term (i.e., within one year) approximates the carrying value and is deemed equal tothe carrying value.

Derivatives Instruments
See “27. Derivatives”(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.
Millions of yen
March 31, 2010

Consolidated balance sheet amounts

Unlisted stocks (*1)(*2)¥6,354

Investments in partnership and others (*3)

3,685

Total

¥10,039(*1) Unlisted stocks are excluded from “Disclosures Regarding Fair Value of Financial Instruments and Other Items”
since no market price is available and their fair value is extremely difficult to determine.
(*2) Impairment losses on unlisted stocks were ¥19 million.
(*3) Out of investments in partnership 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.”

54

(Note 3) Redemption schedule of money claims and securities with stated maturities after the
consolidated balance sheet date is as follows:

Millions of yen
1 year or

1-3 years

3-5 years

5-7 years

7-10 years

Over 10

March 31, 2010

less

years

Cash and due from banks¥173,240

¥ʊ

¥ʊ

¥ʊ

¥ʊ

¥ʊ

8,421

11,370

6,842

358

ʊ

ʊ

bonds

ʊ

500

ʊ

ʊ

ʊ

ʊ

Municipal bonds

61

5

ʊ

ʊ

ʊ

ʊ

Corporate bonds

8,360

10,865

6,842

358

ʊ

ʊ

184,223

578,920

402,733

364,958

263,820

81,182bonds

99,000308,000

166,700

276,100

150,200

ʊ

Municipal bonds

31,560102,563

111,919

48,236

83,571

ʊCorporate bonds

33,451

107,360

98,886

26,702

26,03449,417

Foreign bonds

18,29759,70022,215

10,071

3,697

31,765

Other

1,913

1,295

3,012

3,847

317

ʊ

Loans and bills discounted㧔*㧕

1,506,091

842,790

811,324

326,628

383,450757,033

Total¥1,871,976¥1,433,081¥1,220,900¥691,944¥647,271¥838,216

Securities
Held-to-maturity debt
securities
Japanese government

Available-for-salesecurities with maturities
Japanese government(*) Legally bankrupt loans, substantially bankrupt loans and potentially bankrupt loans amounting to ¥98,551 million, andloans and bills discounted without maturities amounting to ¥82,263 million were excluded from the table above.

55

(Note 4) Redemption schedule of borrowed money and other interest-bearing liabilities after the
consolidated balance sheet date is as follows:

Millions of yen
1 year or

1-3 years

3-5 years

5-7 years

7-10 years

Over 10

March 31, 2010

less

years

Deposits㧔*㧕

¥5,936,543¥629,934¥94,053¥1,045¥3,130¥ʊ

deposit

20,900

ʊ

ʊ

ʊ

ʊ

ʊ

Borrowed money

88,76521,365

270

7,060

2,030

ʊ

¥6,046,209¥651,299¥94,323¥8,105¥5,160¥ʊ

Negotiable certificates of

Total(*) Demand deposits were included in “1 year or less.”

26. Securities Information
The information includes trading account securities and commercial paper in trading assets and trust
beneficiary rights in commercial paper and other debt purchased in addition to securities.

Year ended March 31, 2010(a) Trading Securities
Millions of yen
March 31, 2010

Unrealized gain recognized as income

Trading securities¥556

(b) Held-to-maturity debt securities
Millions of yen
Consolidated
Type
March 31, 2010
Securities withbalance sheet

Fair value

Difference

amountBonds:¥23,280¥23,581¥301

fair value exceeding

Japanese

consolidated balance

government bond

500

501

0

sheet amount

Municipal bonds

66

66

0

Corporate bonds

22,71423,014

300

484

484

0

Foreign bonds

ʊ

ʊ

ʊ

Other

484

484

0

Sub-total

23,76524,066

301

Bonds

3,711

3,653

(57)

Other:

Securities withfair value

Japanese

not exceeding

government bond

ʊ

ʊ

ʊ

consolidated balance

Municipal bonds

ʊ

ʊ

ʊ

sheet amountCorporate bond

3,711

3,653

(57)

Other:

5,463

5,409

(54)

ʊ

ʊ

ʊ

Other

5,463

5,409

(54)

Sub-total

9,174

9,062

(111)

¥32,939¥33,128¥189

Foreign bonds

Total

57

(c) Available-for-sale securities
Millions of yen
Consolidated
Acquisition
Type

Difference

balance sheet
cost

March 31, 2010

amountSecurities with

Stocks¥138,405¥90,579¥47,826

consolidated balance

Bonds

1,677,324

1,650,104

27,219sheet amountJapanese

exceeding acquisition

government bonds

967,842953,786

14,056cost

Municipal bonds

380,794372,3788,415

Corporate bonds

328,687

323,939

4,747

70,53868,3502,188

Foreign bonds

64,047

62,151

1,896

Other

6,490

6,198

291

Sub-total

1,886,268

1,809,034

77,234

Securities with

Stocks38,06745,900(7,833)

consolidated balance

Bonds

86,642

87,102

(460)

Other

sheet amount not

Japanese

exceeding acquisition

government bonds

60,962

61,173

(211)

cost

Municipal bonds

5,818

5,824

(5)

Corporate bonds

19,86020,104(243)

128,301

135,566(7,264)Foreign bonds

80,15083,222(3,071)

Other

48,151

52,344(4,192)Sub-total

253,011

268,569(15,558)¥2,139,279¥2,077,603¥61,676

Other

Total

(d) Held-to-maturity debt securities sold during the fiscal year
Millions of yen
Year ended March 31, 2010

Sales costs

Sales proceeds

Gains (losses) on sales

Japanese government bonds

¥ʊ

¥ʊ

¥ʊ

Municipal bonds

ʊ

ʊ

ʊ

Other

1,000

700

(300)

Total

¥1,000¥700¥(300)

58

(e) Available-for-sale securities sold during the fiscal year
Millions of yen
Year ended March 31, 2010

Sales proceeds

Gains on sales

Losses on sales

Stocks¥11,553¥1,782¥3,167

Bonds

144,348

2,384

25

bonds

51,407916

ʊMunicipal bonds

88,1381,427

ʊ

Corporate bonds

4,802

39

25

19,703433

3,251

19,519

394

3,251

184

39

ʊ

¥175,605¥4,600¥6,444

Japanese government

Other
Foreign bonds
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 a recovery to theacquisition price level, the securities are stated at market value on the consolidated balance sheets andthe difference between the market value and the acquisition price is posted as a loss (“impairment loss”).
Impairment losses for the fiscal year amounted to ¥2,977 million, comprising ¥1,917 million fromstocks and ¥1,060 million from bonds.
Pursuant to “Practical Guidelines for Accounting for Financial Instruments” (JICPA Accounting
Committee Report No. 14), the Bank recognized the impairment losses on listed equity shares whose
average market price over the one-month period immediately prior to the balance sheet date declined by
30% or more compared with acquisition cost, and other securities whose market price at thebalance-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, 2010.

59

(h) Unrealized gain on available-for-sale securities
March 31, 2010

Millions of yen

Unrealized (losses) gains:
Available-for-sale securities¥62,271

Other money held in trust—

Deferred tax assets (liabilities)(23,467)

Net unrealized gains on available-for-sale securities

38,803

Less minority interests(2)

Unrealized gains on available-for-sale securities¥38,805

Note: The total unrealized losses include an unrealized gain of ¥9 million on available-for-sale securities, which constitute the property ofrelated associations.

Year ended March 31, 2009(a) Securities held for trading purposes
March 31, 2009

Millions of yen

Carrying value¥9,100Holding gains charged to income59(b) Marketable debt securities held to maturity
Millions of yen

Book value

Unrealized gain andUnrealized gain

Unrealized loss

loss (net)(gross)(gross)Market value

March 31, 2009

Japanese government bonds

¥—

¥—

¥—

¥—

¥—

Japanese local government bonds

481

488

7

7

—

Corporate bonds

28,266

26,288(1,977)0

1,977

Others

8,763

8,398

(365)

0

365

Total

¥37,510¥35,175¥(2,335)¥8¥2,343

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

60

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

Cost

Unrealized gain andUnrealized gain

Unrealized loss

loss (net)(gross)(gross)Book value

March 31, 2009

Equity securities¥ 145,511¥ 141,934¥ (3,576)¥16,788¥20,364

783,247788,617

5,369

5,770

400

392,827

396,845

4,017

4,025

8

Corporate bonds

371,534

372,115

581

1,573

991

Others290,239

271,158(19,081)

1,454

20,536

Total¥1,983,360¥1,970,671¥(12,689)¥29,612¥42,301

Debt securities:
Japanesegovernment bonds
Japanese local
government bonds

Notes: 1. Figures posted on the consolidated balance sheets for equities and investment trusts (primarily Japanese), are calculated on
the basis of average market prices during the one-month period immediately prior to the balance-sheet date. Other securities
are calculated principally on the basis of the market price at term-end.
Formerly, the term-end market price of Japanese equities and Japanese investment trusts with market prices that fall within
the category of “available-for-sale securities” has been calculated on the basis of market prices on the balance-sheet date.
However, in view of the sharp daily fluctuations in Japanese stock prices and the likelihood of this situation continuing, we
decided, with effect from the reporting period, to apply the average price for the one-month period immediately prior to thebalance sheet date as the market prices for Japanese equities and investment trusts (within the category of “available-for-salesecurities”) that are held for medium-to-long-term investment purposes.
As a result of this change, by comparison with the application of the previous accounting standard, the value of “Securities”
decreased by ¥3,317 million, and “Unrealized losses (gains) on available-for-sale securities” by ¥1,558 million, while “Deferred
tax assets” increased by ¥941 million. “Other operating expenses” for the reporting period increased by ¥817 million, while“Income before income taxes and minority interests” decreased by ¥817 million.
2. For “available-for-sale securities” with market values, in cases where the market value has fallen substantially from theacquisition price and it is considered there is little likelihood of a recovery to the acquisition price level, said securities areshown on the balance sheets at market value and the difference between the market value and the acquisition price is posted
as a loss (hereinafter “impairment loss”).
Impairment losses for the reporting term amounted to ¥39,687 million, of which bonds accounted for ¥33,508 million andequities for ¥6,178 million.
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 at the balance-sheet date also declined by 30% or more compared with acquisition cost.

61

Additional information
Regarding the fair value of Japanese Government Bonds (JGBs) with variable interest rates, this has hitherto been stated in
the consolidated balance sheets calculated by reference to current market prices. Based on the Bank’s own judgment that thecurrent market prices cannot be regarded as the fair value, with effect from the reporting fiscal year the Bank has adopted a“theoretical price” calculation for the estimation of fair value.
As a result of this change, by comparison with the previous system in which the value was calculated using the current market
value, the value of “Securities” rose by ¥9,497 million, while “Deferred tax assets” declined by ¥3,829 million, and the net“Unrealized losses (gains) on available-for-sale securities” increased by ¥5,668 million.
The “theoretical price” used to estimate the value of variable-interest JGBs is calculated, in principle, by the Discounted Cash
Flow Method. The principal price decision variables are the JGBs yield and the implied volatility of swaptions.
With respect to credit investments in securitization products, we had previously applied as fair value the valuations obtained
from brokers and bid price providers based on our determination that such valuations constitute reasonably calculated pricesthat can be used as a proxy for market prices. Given the current situation in which the volume of actual transactions isextremely limited and there exists a considerable gap between the offers and bids of sellers and buyers, we determined thatvaluations obtained from brokers and bid price providers cannot be employed for the estimation of fair value amounts, andhave decided to adopt theoretical prices based on reasonable estimates made by our management as fair value.
As a result, “Securities” increased by ¥4,018 million, net “Unrealized losses (gains) on available-for-sale securities, net oftaxes” increased by ¥15 million, and “Deferred tax assets” declined by ¥10 million. In addition, “Other operating expenses”
decreased by ¥3,993 million, and “Income before income taxes” increased by ¥3,993 million.
The subject securities mainly consisted of collateralized loan obligations (other than those subject to impairment accounting)that the Bank intends to hold over a long period, of which previous credit ratings given by outside ratings agencies weremaintained and the collateral assets remained sound.
The book value amount was reasonably calculated based on the theoretical prices mentioned above. In deriving theoreticalprices based on the reasonable estimates made by our management (as mentioned above), we used the Discounted Cash
Flow Method. The price decision variables include default rates, recovery rates, pre-payment rates and discount rates.

(d) Marketable available-for-sale securities soldYear ended March 31, 2009

Millions of yen

Proceeds from sales of marketable available-for-salesecurities¥368,987

Gains

18,172Losses8,957

62

(e) Major components and balance sheet amounts of nonmarketable securities
Year ended March 31, 2009

Millions of yen

Non-marketable available-for-sale securities:
Unlisted equity securities¥3,718Investments in investment partnerships

1,834(f) Schedule of redemption of available-for-sale securities with maturity dates and debt securities
being held to maturity
Millions of yen
One to fiveOne year or lessFive to ten years

March 31, 2009

Over ten years

years

Debt securities:
Japanese government bonds¥ 68,505¥ 502,001¥218,111¥—

Japanese local government bonds

25,984160,006

211,335—

Corporate bonds

52,620237,242

56,85153,667

Others44,444103,219

33,437

81,439¥191,554¥1,002,469¥519,734¥135,106

Total(g) Money held in trust classified as available-for-sale securities
Not applicable as of March 31, 2009.

(h) Unrealized (loss) gain on available-for-sale securities
March 31, 2009

Millions of yen

Unrealized (losses) gains:
Available-for-sale securities¥(12,679)

Other money held in trust—

Deferred tax assets

6,279

Net unrealized gains on available-for-sale securities(6,400)Less minority interests(2)

Unrealized gains on available-for-sale securities¥ (6,397)

The total unrealized losses include an unrealized gain of ¥9 million on available-for-sale securities, whichconstitute the property of related association.

63

27. Derivatives
Year ended March 31, 2010
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 derivativetransactions, respectively, at the end of the consolidated balance sheet date, as well as determination offair value.
Contract amount does not represent itself market risk of derivative instruments.

(1) Interest-rate Derivatives
Millions of yen

March 31, 2010
Transactions listed on exchanges:
Interest-rate futures:
Sold
BoughtInterest-rate options:
Sold
BoughtOver-the-counter transactions:
Forward rate agreements:
Sold
BoughtInterest-rate swaps:
Receivable fixed / payable
floating
Receivable floating / payable
fixed
Receivable floating / payable
floating
Interest-rate options:
Sold
BoughtCaps:
Sold
BoughtSwaption:
Sold
BoughtOthers:Sold
BoughtTotal

Contract amountOver 1 year

Unrealized gain
(loss)

Fair value

¥ʊ
ʊ

¥ʊ
ʊ

¥ʊ
ʊ

¥ʊ
ʊ

ʊ
ʊ

ʊ
ʊ

ʊ
ʊ

ʊ
ʊ

ʊ
ʊ

ʊ
ʊ

ʊ
ʊ

ʊ
ʊ

98,48829,206580

580

98,48829,206

(334)

(334)

ʊ

ʊ

ʊ

ʊ

ʊ
ʊ

ʊ
ʊ

ʊ
ʊ

ʊ
ʊ

3,196
3,196

1,272
1,272

(2)
2

108
(53)

37,19037,190

3,870
3,870

(116)
116

37
116

ʊ
ʊ
¥ʊ

ʊ
ʊ
¥ʊ

ʊ
ʊ
¥245

ʊ
ʊ
¥455

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.

64

(2) Currency Derivatives
Millions of yen
Unrealized gainContract amountOver 1 year

Fair value

March 31, 2010

(loss)

Transactions listed on exchanges:
Currency futures:
Sold

¥ʊ

¥ʊ

¥ʊ

¥ʊ

Bought

ʊ

ʊ

ʊ

ʊ

Sold

ʊ

ʊ

ʊ

ʊ

Boughtʊʊʊʊ

837,344

709,133

956

956

Sold

5,079

1,198

357

357

Bought

3,523

267

(327)

(327)

Sold

6,700

1,309

(247)

(63)

Bought

6,700

1,309

247

141

Sold

ʊ

ʊ

ʊ

ʊ

Bought

ʊ

ʊ

ʊ

ʊ

¥ʊ

¥ʊ

¥986

¥1,063Currency 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, 2010.

65

(4) Bond Derivatives
Millions of yen
Unrealized gainContract amountOver 1 year

Fair value

March 31, 2010

(loss)

Transactions listed on exchanges:
Bond futures:
Sold

¥278

¥ʊ

¥2

¥2

Bought

ʊ

ʊ

ʊ

ʊ

Sold

ʊ

ʊ

ʊ

ʊ

Bought

ʊ

ʊ

ʊ

ʊ

Sold

ʊ

ʊ

ʊ

ʊ

Bought

ʊ

ʊ

ʊ

ʊ

Sold

ʊ

ʊ

ʊ

ʊ

Bought

ʊ

ʊ

ʊ

ʊ

¥ʊ

¥ʊ

¥2

¥2

Bond future options:Over-the-counter transactions:
Bond 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
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 option pricing models.

(5) Commodity Derivatives
Not applicable as of March 31, 2010.

(6) Credit Derivatives
Not applicable as of March 31, 2010.

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.

66

(1) Interest-rate Derivatives
Millions of yen
Method of hedge

Type

Hedged items

Contract

Over 1 year

Fair value

amounts
Deferred method

Interest rate swap

Interest bearing

Receivablefinancial assets

fixed / payable

and liabilities

floating

including loans,

Receivableavailable-for-salefloating /securities,

payable fixeddeposits andInterest rate futures

¥

ʊ

¥

¥

ʊ

60,00060,000(3,386)

negotiable

ʊ

ʊ

ʊ

Interest ratecertificates of

ʊ

ʊ

ʊ

options

deposit, etc.
ʊʊʊBorrowed money

19,0009,000

676

Receivable

Loans, Borrowed

53,50248,021(2,931)

floating /

money

Other
ExceptionalʊInterest rate swap

accrual method

Receivable

for interest rate

fixed / payableswap

floating

payable fixed
ʊʊʊ

Total

ʊʊʊ

ʊʊʊ

¥ (5,641)

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 otherrelevant exchanges. The fair value of over-the-counter traded derivative instruments is determined based on a discounted
cash flows model, an option pricing model or other models as appropriate.
3. The accrual method of hedge accounting, as specifically permitted for certain interest rate swaps, is valued with the valuation ofhedge items, so that the fair value is included in the fair value of Loans and Bills Discounted and other items (Ref: 31. Financial
Instruments (2) Disclosures Regarding the Fair Value of Financial Instruments and Other Items).

67

(2) Currency Derivatives
Millions of yen
Type

Method ofHedged items

Contract

hedgeOver 1 year

Fair value

amounts

Deferred

Currency swaps

ForeignmethodForward foreign

currency-denominatedexchangeloans, securities,

contracts

deposits and foreign

Otherexchanges, etc.

¥87,415¥ʊ

¥17,551

ʊ

ʊ

ʊ

ʊ

ʊ

ʊ

for

Currency swap

ʊ

ʊ

ʊ

forward foreign

Forward foreign

ʊ

ʊ

ʊ

exchangeexchange

contracts, etc.

contracts¥ʊ¥ʊ¥17,551

Treatment

ʊ

Total

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, 2010.

(4) Bond Derivatives
Not applicable as of March 31, 2010.

68

Year ended March 31, 2009(a) Transactions(1) The Bank conducts derivatives transactions related to fluctuations in interest rates, currency
exchanges and bond prices, which are classified into hedging and non-hedging purposes.
One of the Bank’s consolidated subsidiaries engages in interest-related derivative transactions forhedging purposes.
(2) Policies: The Bank enters into derivative transactions to: (1) meet customer needs for hedging of risks
involved in fluctuations in foreign exchanges and interest rates; (2) mitigate risks involved in the Bank’s
operations in the context of efficiently managing its overall assets and liabilities, and; (3) hedge
individual transactions of the Bank. For trading in derivatives for the purpose of increasing earnings
over a short-term period, the Bank has set certain position limits and loss-cut rules.
The above-mentioned consolidated subsidiary follows trading policies similar to those of the Bank.
(3) Purposes: The Bank conducts derivatives transactions in accordance with the above-mentioned
policies. The Bank employs hedge accounting in some of its derivatives transactions.
a. Methods of hedge accounting
The Bank has adopted ordinary treatment for deferred hedges and special treatment for interest-rate
swaps.
b. Policies and implementation of hedging transactions
The Bank uses hedging transactions to mitigate its exposure to interest rate risk, risk involving
fluctuations in foreign exchange rates and stock prices, and credit risk, in accordance with its internal
rules (Rules on Transactions under Hedge Accounting) based on the Practical Guidelines on
Accounting for Financial Instruments.
During the prior and current years, hedge accounting has been applied to the following financial
instruments and assets and liabilities hedged:
Hedging instruments: Interest-rate swaps, currency swaps and foreign exchange swaps
Assets and liabilities hedged: (Yen-denominated) Loans and bills discounted, deposits, andborrowed money (Foreign-currency denominated) Bonds and deposits
c. Assessment of hedging effectivenessThe effectiveness of hedging was assessed in accordance with Rules on Transactions under Hedge
Accounting. As for hedging against interest rate changes by means of offsetting fluctuations in fairvalue arising from changes in interest rates, the Bank assesses the hedge effectiveness bycorrelating a group of hedged items (i.e. loans) with hedging instruments (such as interest rate
swaps) classified by remaining maturity bucket. As for cash flow hedges, the Bank assesses theeffectiveness of such hedges in fixing cash flows by verifying the correlation between the hedged
items and hedging instruments.

69

As for hedging foreign exchange fluctuations, the Bank assesses the effectiveness of utilizing
currency and exchange swap transactions as hedging instruments through confirmation of the factthat there exists a sufficient balance of hedging instruments in the form of foreign exchanges,
corresponding to the hedged items in the form of monetary claims and obligations denominated inforeign currencies.
In addition, the Bank confirmed that its hedging methods for its special treatment of interest-rate
swaps met the required criteria.
(4) Nature of Risks: Derivative transactions involve market risk and credit risk. Market risk refers to the riskof losses from fluctuations in interest rates and currency exchanges, etc. Credit risk is the risk that aposition cannot be settled according to the original contract terms due to the bankruptcy or insolvencyof the counterparty.
(5) Risk Management System: The Board of Directors (the “Board”) is responsible for determining policies
on the basis of in-house regulations on risk management, taking due account of the maximum
transaction volumes, the maximum allowable loss amounts, and loss-cutting rules on derivativetransactions, which are reported to the Board on a regular basis. For credit risk management, thecurrent exposure method is applied for risk control, by setting credit lines by counterparty.
Regarding the organizational structure, the Bank clearly segregates back-office work from front-officework. Furthermore, the Bank has established middle-office sections to ensure that the system ofchecks and balances works effectively.
(6) Supplementary Explanation of Quantitative Information: The contract amounts presented are thenotional contract amounts or the principal for calculation purpose. Accordingly, they do not represent
the actual market risk exposure relating to all derivative positions.

70

(b) Interest-rate derivatives
Millions of yen
Contract amounts
March 31, 2009

Total

Market value

Unrealized gain
(loss)

Over 1 year

Transactions listed on exchanges:
Interest-rate futures:
Sold

¥—

¥—

¥—

¥—

Bought

—

—

—

—

Sold

—

—

—

—

Bought

—

—

—

—

Sold

—

—

—

—

Bought————Receivable fixed/payable floating

116,419

37,752

343

343

Receivable floating/payable fixed

116,419

37,752

(137)

(137)

—

—

—

—

Sold

—

—

—

—

Bought

—

—

—

—

Sold

3,734

2,946

(5)

115

Bought

3,734

2,946

5

(59)

Sold

40,700

3,770

(115)

87

Bought40,700

3,770

115

115

Sold

—

—

—

—

Bought

—

—

—

—

¥—

¥—

¥ 205

¥465

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

Interest-rate swaps:

Receivable floating/payable
floating
Interest-rate options:

Caps:

Swaption:

Others:

Total

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

712. Calculation of market value
The market value of transactions listed on exchanges has been calculated on the basis of the closing prices on the Tokyo
International Financial Exchange, etc. The market value of over-the-counter transactions has been calculated at their discounted
present value or by utilizing calculation models for options prices.

(c) Currency Derivatives
Millions of yen
Contract amounts
March 31, 2009

Total

Market value

Unrealized gain
(loss)

Over 1 year

Listed:Currency futures:
Sold

¥—

¥—

¥—

¥—

Bought

—

—

—

—

Sold

—

—

—

—

Bought————774,202635,443

1,188

1,188

Sold

6,367

1,805

576

576

Bought

6,581

1,739

(476)

(476)

Sold

3,161

1,918

(188)

(100)

Bought

3,161

1,918

189

154

Sold

—

—

—

—

Bought

—

—

—

—

¥—

¥—

¥1,287¥1,341

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. Derivatives which qualify as hedges have been excluded fromthis table.
2. Calculation of market valueMarket value is calculated at discounted present value, etc.

72

(d) Stock Derivatives
Not applicable as of March 31, 2009.

(e) Bond Derivatives
Millions of yen
Market value

Contract amounts
March 31, 2009

Total

Unrealized gain
(loss)

Over 1 year

Listed:Bond futures:
Sold

¥277

¥—

¥1

¥1

Bought

—

—

—

—

Sold

—

—

—

—

Bought

—

—

—

—

Sold

—

—

—

—

Bought

—

—

—

—

Sold

—

—

—

—

Bought

—

—

—

—

¥—

¥—

¥1

¥1

Bond future options:Over-the-counter transactions:
Bond options:

Others:

Total

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

(f) Commodity Derivatives

Not applicable as of March 31, 2009.

(g) Credit Derivatives

Not applicable as of March 31, 2009.

73

28. Stock Options(a) The Bank recorded stock option expenses in “General and administrative expenses” of ¥21 million in
the year ended March 31, 2010.

(b) Outline of stock options, size and changes(1) Outline of stock options
1st equity warrant

2nd equity warrant

Persons to whom stock options are granted

Directors of the Bank: 10

Executive officers of the Bank: 12

Type and number of shares (*)

Common shares: 56,698

Common shares: 41,546

Date of rights granted

August 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

From August 25, 2009 to August24, 2039

24, 2039(*) The table above presents the number of common shares converted from the number of stock options.

(2) Size and changes of stock options
a. Number of stock options
1st equity warrant

2nd equity warrant

ʊʊGranted56,69841,546

Forfeitedʊʊ

Vestedʊʊ

56,69841,546

ʊʊ

Vestedʊʊ

Exercisedʊʊ

Forfeitedʊʊ

Exercisableʊʊ

Non-vested
Previous fiscal year-end outstanding

Outstanding on March 31, 2010
VestedPrevious fiscal year-end outstanding74

b. Price information
Yen
1st equity warrant

2nd equity warrant

Exercise price

1

1

Average exercise pricĕ̆

Fair value at the grate date

417

439

(c) Valuation technique for fair value of stock options
Stock options granted in the fiscal year ended March 31, 2010 were valued using theBlack-Scholes option pricing model and the following principal parameters:
1st equity warrant

2nd equity warrant

Expected volatility (*1)

33.93㧑

38.25㧑

Average expected life (*2)

6 years

3 years¥8 per share¥8 per share

0.76㧑

0.36㧑

Expected dividends (*3)
Risk-free interest rate (*4)(*1) Expected volatility is calculated based on the actual stock prices at the following period corresponding to the average expected life.
1st equity warrant: From August 22, 2003 to August 21, 2009
2nd equity warrant: From August 22, 2006 to August 21, 2009(*2) The average tenure of the directors and the executive officers who retired in the past is used as the average expected life in theabove table.
(*3) Actual dividends on common stock for the year ended March 31, 2009.
(*4) Japanese government bond yield corresponding to the average expected life.

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

29. Related-Party Transactions
No material transactions occurred with related-party for the fiscal year ended March 31, 2010
and 2009, respectively.

7530. Per-share Data
Yen
March 31,

2009

2010

Net assets per share¥551.79¥483.21

Earnings per share-basic

18.17

6.62

Earnings per share-diluted

18.17

—

Note: Bases for calculation of earnings per share (basic and diluted) are as follows:
Millions of yen
March 31,

2009

2010

Earnings per share
Net income¥14,051¥ 5,178——

14,051

5,178

772,917

781,137

Adjustment to net income——

Increase in common shares (in thousands)

59—

Attributable to equity warrants

59

—

—

—

Earnings not available to common shareholders
Net income after deduction of the portion describedabove
Weighted average number of common shares for the
fiscal year (in thousands)
Diluted earnings per share

Equity warrants that have no dilutive effects on
earnings per share

76

77

Organization
The JOYO BANK, LTD.
Internal Administration Group
Corporate Audit DivisionCorporate Risk Management Division
Credit Risk Management Office
Legal and Compliance Office
General Meeting of Shareholders

Corporate Planning Division
Group Management Office

Board of Corporate Auditors

Publicity Office

Corporate Auditors

Tokyo Sub-Headquarters
Personnel Division

Board of Directors

Staff Counseling Office
Executive Secretariat
General Affairs Division

Executive Officer Committee

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

Head Office
Tokyo Business Division (Tokyo Main Office)148 Branches, 24 Sub-branches

Area Corporate Business Division
Government and Municipal Business DivisionMarket Business Group
Treasury and Securities DivisionMarkets and Business Administration Division
Securities Business OfficeInternational Business OfficeInternational Operations Office

As of June 25, 201078

Board of Directors and Corporate Auditors

ChairmanIsao Shibuya
President
Kunio Onizawa
Senior Managing Director
Yoshiyuki Miyanaga
Kazuyoshi Terakado

Managing Directors
Takao Tateno
Mikio Kawamata
Toru Hakata
Toshihisa Suzuki
Katsumi Tomita
Shigeru Ichimura
Directors
Toshihiko Kawamura (outside)
Ryuzaburo Kikuchi (outside)

Corporate Auditors
Kyohei Tomita (standing)
Yoshiaki Terakado (standing)
Akira Yasu
Sanenori Hitomi
Toshio Mizushima

As of June 29, 2010

Market Business Group and Overseas Office■ Head Office5-5, Minami-machi 2-chome, Mito,
Ibaraki 310-0021, Japan
Phone: 029-231-2151■ Market Operations
Managing Director
Toru Hakata■ Markets and Business
Administration Division
7-2, Yaesu 2-chome, Chuo-ku,
Tokyo 104-0028, Japan
Phone: 03-3273-1741a
General Manager
Jun Kawauchi
Advisory officer
Osato Aizawa• Operations Group (Tokyo)
Senior Manager
Hiroki Otaka■ International Business Office
5-5 Minami-machi 2-chome, Mito,
Ibaraki 310-0021, Japan
Phone: 029-300-2727
Chief Officer■ International Operations Office3-3, Shinhara 1-chome, Mito,
Ibaraki 310-0045, Japan
Phone: 029-255-6671
Telex: J23278 JOYOBANK3632105 JOYOBKSwift: JOYOJPJTGeneral Manager
Akihiko Hashimoto■ Treasury and Securities Division
7-2, Yaesu 2-chome, Chuo-ku,
Tokyo 104-0028, Japan
Phone: 03-3273-5245
General Manager
Fuminori Nakajima
Deputy General Manager
Masahide Takauchi
Yoshitsugu Toba
• Investment Group
Senior Manager
Mamoru Takasaki• Business Promotion GroupManager
Hiroshi Iijima

Masayuki Ogawa

79■ Shanghai Representative Office(Business Planning Division)
Room 1901, Shanghai International
Trade Centre, 2201 Yan An Road(West), Shanghai 200336 P.R. of China
Phone: 86-21-6209-0258
Chief Representative
Hitoshi Gotou
Deputy Chief Representative
Hisanori SonobeService Network

Miyagi Pref. (1 Branch)
Mito (Head Office, International Business Office,International Operations Office)Ibaraki Pref. (Head Office, 121 Branches,
22 Sub-Branches)
Fukushima Pref. (10 Branches)
Tochigi Pref. (Tochigi wholesale office
6 Branches, 1 Sub-Branch)

Overseas:
Shanghai Representative Office
As of June 25, 2010

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

Affiliated Companies■ The Joyo Computer Service Co., Ltd.
16-25, Nishihara 2-chome, Mito, Ibaraki
Established 1973, Capital Stock: ¥47.5
millionShare of Voting Rights: 5%
Sale of software and contract of calculation
businesses■ The Joyo Lease Co., Ltd.
4-12, Minami-machi 3-chome, Mito, Ibaraki
Established 1974, Capital Stock: ¥100 million
Share of Voting Rights: 5%
Leasing of machinery and equipment, claim
acquisition■ The Joyo Credit Guarantee Co., Ltd.
4-12, Minami-machi 3-chome, Mito, Ibaraki
Established 1978, Capital Stock: ¥30 million
Share of Voting Rights: 5%
Credit guarantee of housing loans from theBank■ The Joyo Credit Co., Ltd.
4-12, Minami-machi 3-chome, Mito, Ibaraki
Established 1982, Capital Stock: ¥100 million
Share of Voting Rights: 5%
Credit card services■ The Joyo Business Service Co., Ltd.
8-1, Sasano-machi 1-chome, Hitachinaka,IbarakiEstablished 1984, Capital Stock: ¥100 million
Share of Voting Rights: 100%
Agent in charge of administrative work for the
Bank■ The Joyo Industrial ResearchInstitute, Ltd.
5-18, Sannomaru 1-chome, Mito, Ibaraki
Established 1995, Capital Stock: ¥100 million
Share of Voting Rights: 5%
Consulting, investigation and research■ The Joyo Equipment Management
Co., Ltd.
5-5, Minami-machi 2-chome, Mito, Ibaraki
Established 1999, Capital Stock: ¥100 million
Share of Voting Rights: 100%
Maintenance and management of operational properties and equipment of the Bank

■ The Joyo Cash Service Co., Ltd.
3-3, Jonan 1-chome, Mito, Ibaraki
Established 1999, Capital Stock: ¥50 million
Share of Voting Rights: 100%
Management and maintenance of ATMs and
CDs■ The Joyo Securities Co., Ltd.
4-12, Minami-machi 3-chome, Mito, Ibaraki
Established 2007, Capital Stock: ¥3,000
millionShare of Voting Rights: 100%
Dealing of securities, mediation, commission
and substitution of trading of securities

As of March 31, 201080

Corporate Data

■ Date of Establishment

July 30, 1935

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

Head Office, Tokyo Business Division (Tokyo Main Office), and
148 Branches, 24 Sub-branches■ Overseas Network

1 Representative Office: Shanghai■ Number of Employees

3,442■ Stock Exchange Listing

Tokyo Stock Exchange■ Paid-in Capital¥85,113 million■ Number of Shares(as of March 31, 2010)

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

22,996■ Principal Shareholders

The 10 largest shareholders of the Bank and their respective shareholdings at March 31, 2010 were as follows:

2,167,515 thousand
822,231 thousand

Number of Shares
Held(Thousands)

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

37,992

Percentage of Total
Shares Outstanding
(%)

4.62%

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

37,973

4.61

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

36,922

4.49

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

28,003

3.40

Japan Trustee Services Bank, Ltd. (Trust Account 4G) ...................................................

22,367

2.72

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

17,0492.07

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

16,4482.00

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

16,146

1.96

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

13,877

1.68

The Gunma Bank, Ltd. ......................................................................................................................

10,465

1.27

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

237,24428.85%
As of March 31, 2010

For further information,please contact to:Markets and Business
Administration Division,
The Joyo Bank, Ltd.
7-2, Yaesu 2-chome,
Chuo-ku, Tokyo
104-0028, Japan81