ANNUAL REPORT 2017

Headquartered in Kyushu’s largest urban center, Fukuoka City (population: 1.57 million), Nishi-Nippon
Financial Holdings Group (the Group) comprises a parent company, eight consolidated subsidiaries and one
affiliate. While banking services are its primary focus, the Group also provides a diverse range of financial
services, including investing and lending operations, credit guarantees and credit card services, as well as credit
management and business consulting services.
Guided by its management philosophy, “Aiming high and motivated by pride in our services, we arecommitted to becoming a leading financial group through our ability to respond to change and to grow withour customers,” the Group’s core banking services provide community-oriented financial services that catermainly to individuals and small and medium-sized enterprises (SMEs) in its host region of Kyushu.

Consolidated Financial Highlights✦ Nishi-Nippon Financial Holdings, Inc.
and its consolidated subsidiaries Years ended 31st March, 2017
Millions of yen (Note 1)

Total income
Total expenses
Profit (loss) before income taxes
Profit (loss) attributable to owners of parent

2017¥145,938
113,516
32,422
22,214
Yen

Profit (loss) attributable to owners of parent per share¥142.24

Thousands of U.S. dollars (Note 2)

2017$1,300,816
1,011,824
288,992
198,004
U.S. dollars (Note 2)$1.267✦ Nishi-Nippon Financial Holdings, Inc.
and its consolidated subsidiaries As of 31st March, 2017
Millions of yen (Note 1)

Total assets
Deposits
Loans and bills discounted
Securities
Capital stock
Total net assets¥9,486,448
8,019,012
6,803,828
1,655,774
50,000511,678

Thousands of U.S. dollars (Note 2)$84,556,986
71,477,072
60,645,583
14,758,662
445,672
4,560,821

Notes: 1. In this report, Japanese yen figures are rounded down to the nearest million yen.
2. C onversion into U.S. dollars (solely for the convenience of readers outside Japan) has been made at the exchange rate of ¥112.19 to $1.

Contents
Message from the President
Board of Directors of Nishi-Nippon Financial Holdings Inc.
Organization Chart
Outline of Nishi-Nippon Financial Holdings Group
Outline of Medium-Term Business Plan
Providing Broader/Deeper Support for International Business
Financial Results
Toward a Sounder Financial Position
Outline of Banking Subsidiaries
Risk Management Systems
Financial Section
Organization Chart of Banking Subsidiaries

1
2
3
4
6
7
8
9
10
12
13
67

Message from the President
I am pleased to report on the business performance of NishiNippon Financial Holdings, Inc. (Nishi-Nippon FH) for the
fiscal year ended March 2017.
In October 2016, we completed the shift to a holding
company structure headed by Nishi-Nippon FH to establish
a new group management framework, with a view towardfurther strengthening intragroup bonds and collaborations
that will allow each Nishi-Nippon FH Group company
to show its unique characteristics and strengths as well as
adequately respond to various potential environmental
changes and risks. Under the new structure, we will further
enhance our collective strength as an integrated financialgroup catering to its host communities so that we can “makegreater contributions to regional economies” and “maximize
our Group’s corporate value.”
During the fiscal year ended 31st March, 2017, Japan’s
economy followed a moderate recovery path on the back of arecovery in exports and production as well as improvementsin the employment and income environments.
The economy in our host region of Kyushu is also
experiencing a moderate recovery, underpinned bygovernment subsidies supporting local tourism and brisk
inbound demands despite a temporary drop in production
following the 2016 Kumamoto earthquakes.
Amid these business conditions, our Group launched
its new Medium-Term Business Plan, “Leaping Forward
2020—Innovating Ideas for Our Clients—,” which will
guide us through the three-year period from April 2017 toMarch 2020.

The management environment surrounding financial
institutions is changing more rapidly and dramatically thanever before, and initiatives to change management havebecome pressing and critical issues in the banking sector.
Based on an understanding of this environment, the NishiNippon FH Group will work harder to become customers’
preferred regional financial group by focusing on expansionof its business foundations for a greater leap forward in an
attempt to enhance the Group’s collective financial strength.
We purposely chose the title “Leaping Forward” for our
new Medium-Term Business Plan in the hope that each andevery member of the Nishi-Nippon FH Group would cometogether to reach even greater heights so that our Group
could make a leap forward into the future hand-in-hand with
its customers and host communities. The Plan’s subtitle,“Innovating Ideas for Our Clients,” reflects the dedication of
all of our employees to innovate ideas for the benefit of ourcustomers and host communities.
As members of a comprehensive financial group rooted
in the region, both our staff and management will staycommitted to actively helping revitalize regional economy
through generously offering solutions that exceed customers’
expectations. Your continued support for, and cooperation in
our future endeavors would be greatly appreciated.
July 2017

Hiromichi Tanigawa
President
Nishi-Nippon Financial Holdings, Inc.

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 20171

Board of Directors of Nishi-Nippon Financial Holdings Inc.

ChairmanPresident

Deputy President

Isao Kubota

Hiromichi Tanigawa

Seiji Isoyama

ChairmanIsao Kubota

President

Hiromichi Tanigawa

Deputy President

Seiji Isoyama

Directors

Souichi Kawamoto
Kiyota Takata
Hiroyuki Irie
Shinya Hirota
Hideyuki Murakami
Hiroyuki Takeo

Directors (Audit and Supervisory Committee Members)

Masaru Ikeda
Yuji Tanaka (outside)
Hirohiko Okumura (outside)
Nobuko Takahashi (outside)(as of 30th June, 2017)2

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 2017

Organization Chart

Nishi-Nippon Financial Holdings, Inc.
General Shareholders’ Meeting
Audit and Supervisory
Committee

Board of Directors

Audit and Supervisory
Committee Members Office

Executive Committee

Group Strategy Planning
Division

Compliance & Risk
Management DivisionCorporate Planning
DivisionInternal Audit Division✦ Major Shareholders (Common Stock)
Name

Shares held (thousands)(%)

The Nishi-Nippon City Bank, Ltd.

23,613

13.14

Japan Trustee Services Bank, Ltd. (Trust Account)

19,151

10.66

Japan Trustee Services Bank, Ltd. (Trust Account No.4)

9,596

5.34

Japan Trustee Services Bank, Ltd. (Trust Account No.9)

6,965

3.87

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

4,922

2.74

Nippon Life Insurance Company

3,861

2.15

Meiji Yasuda Life Insurance Company

2,765

1.53

Japan Trustee Services Bank, Ltd. (Trust Account No.5)

2,458

1.36

Government of Norway

2,315

1.28

Mizuho Bank, Ltd.

2,300

1.28

Total

77,95043.40(as of 31st March, 2017)

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 20173

Outline of Nishi-Nippon Financial Holdings Group
Profile of the Company ( Joint Holding Company)✦ Name: Nishi-Nippon Financial Holdings, Inc.
▶ Location

1-1, Hakata-ekimae 3-chome, Hakata-ku, Fukuoka, Japan▶ Representatives

Chairman: Isao Kubota(Concurrently serving as Chairman of The Nishi-Nippon City Bank, Ltd.)
President: Hiromichi Tanigawa(Concurrently serving as President of The Nishi-Nippon City Bank, Ltd.)
Deputy President: Seiji Isoyama(Concurrently serving as Deputy President of The Nishi-Nippon City Bank, Ltd.)▶ Business

Management and operation of banks and other companies that Nishi-Nippon FH may have as
subsidiaries under the Banking Act and any all businesses incidental or related thereto.

▶ Capital

50 billion yen▶ Date of establishment

October 3, 2016

▶ Fiscal year end

March 31

▶ Stock exchangeTokyo Stock Exchange and Fukuoka Stock Exchange▶ Share-trading unit

100 shares

In October 2016, The Nishi-Nippon City Bank decided to shift to a holding company structure and establish a new groupmanagement framework as Nishi-Nippon Financial Holdings, Inc. (Nishi-Nippon FH), with a view to further strengthening
intra-group bonds/collaboration, appropriately responding to various environmental changes, and addressing potential risks, sothat each Group company can demonstrate its unique characteristics and strengths.
As a comprehensive financial group rooted in the region, the Group will aim to enhance its comprehensive financial strengths
and achieve “further contributions to the regional economy” and “maximization of the corporate value of the Group” under theholding company structure.

Major subsidiaries
Company name

Address

Main business activity

Established

Capital(Millions of yen)

NNFH’s share of
voting rights (%)

The Nishi-Nippon City Bank, Ltd.

3-1-1,Hakata-ekimae,
Hakata-ku, Fukuoka

Banking

December 1, 1944

85,745100

The Bank of Nagasaki, Ltd.

3-14, Sakaemachi,
Nagasaki

Banking

August 1, 1941

6,121

100

Nishi-Nippon Credit Guarantee Co.

3-1-1, Hakata-ekimae,
Hakata-ku, Fukuoka

Credit guarantee

April 24, 1984

50

100

Kyushu Servicer

2-5-19, Hakataekihigashi, Hakata-ku,
Fukuoka

Claims servicing

February 15, 2001

500

85

The Kyushu Card Co., Ltd.

4-3-18, Hakata-ekimae,
Hakata-ku, Fukuoka

Credit cards, credit
guarantee

July 3, 1980

100

82.1

Nishi-Nippon City Tokai Tokyo
Securities Co. , Ltd.

1-3-6, Hakata-ekimae,
Hakata-ku, Fukuoka

Financial instruments
exchange

September 30, 2009

3,000

60

NCB Research & Consulting Co., Ltd.

2-1, Kawabatamachi,
Hakata-ku, Fukuoka

Research studies,
management consultancy

December 5, 19862040
(as of 31st March, 2017)

4

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 2017

Group Management Philosophy
Aiming high and motivated by pride in our services, we are committed to becoming a leading financial group through our ability
to respond to change and to grow with our customers

Group Brand Slogan

Sincere Relationships, Best Solutions
Meaning behind Our Logo
Our logo uses the motif of the “Sun,” the energy which creates our future, and the vibrant image of “Wings.”
The radiating wings symbolize the infinite future. And the color gradation from light to dark orange expresses
the Nishi-Nippon Financial Holdings Group’s commitment to evolving and transforming itself toward thefuture.

Strengths as a “Comprehensive Financial Group”
The Nishi-Nippon FH Group has adopted a “parallel” structure whereby Nishi-Nippon FH serves as a “control tower”to direct
and guide each Group company whilst also assuming a birds-eye perspective in order to oversee them across the board, therebybuilding a management framework that allows this comprehensive financial group to best exploit its strengths.
Banking

The Nishi-Nippon City Bank, Ltd.
Holding company

Nishi-Nippon Financial
Holdings, Inc.

Information system service
NTT Data NCB Corporation

Banking

The Bank of Nagasaki, Ltd.
Credit cards, credit guarantee

The Kyushu Card Co., Ltd.
Financial instruments exchange

Nishi-Nippon City Tokai Tokyo Securities Co., Ltd.
Research studies, management consultancy

NCB Research & Consulting Co., Ltd.
Claims servicing

Kyushu Servicer
Credit guarantee

Nishi-Nippon Credit Guarantee Co.

- NTT Data NCB Corporation
is an equity-method affiliate.

Group Management Strategy
Under the holding company structure, we will promote two Group Management Strategies: “Development of comprehensive
financial services that exceed the expectations of customers and host communities (Realization of matrix management)” and“Advancement of a group management framework and risk management system (Realization of a monitoring model).”<Matrix management>

The holding company, from thestandpoint of meeting individual
customer needs, will develop strategies
that embrace the entire group.

Development of comprehensive financial services
that exceed the expectations of customers and hostcommunities (Realization of matrix management)
Advancement of a group management framework andrisk management system(Realization of a monitoring model)<Monitoring model>

The holding company will demonstrate
its oversight function over thesubsidiaries while continuously
monitoring their business execution.

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 20175

Outline of Medium-Term Business Plan
Guided by “Leaping Forward 2020—Innovating Ideas for Our Clients—,” which is the very first Medium-Term Business Plan for
the Nishi-Nippon FH Group, we will pursue the Four Basic Strategies of innovating our services, behaviors, human resources, andcorporate governance.

Concept
Financial institutions find themselves in an operating environment in which the pace andscale of change are unprecedented. Consequently, efforts to innovate management havebecome imperative key issues in the banking industry.
Against this backdrop, the Nishi-Nippon FH Group will seek to “enhance the Group’s
comprehensive financial strengths” toward its goal of becoming a “regional financial groupwith ultimate comprehensive strength while growing together with our customers.”

Group Management Philosophy
Aiming high and motivated by pridein our services, we are committed to
becoming a leading financial groupthrough our ability to respond to change
and to grow with our customers

Concept of the Medium-Term Business Plan
“Enhancement of the Group’s comprehensive
financial strengths” stage

Comprehensive
financial strengths of the Group• One of the best comprehensive financial
services in Japan• S pirit of developing local industries andpromoting local businesses (“Good DNA”)• Advanced products and servicesetc.

+

Expansion of solid foundations
for a greater leap forward
We will endeavor to raise the quality levels of our
products/services, achieve a best-mix channel, expand
the customer base for the entire Group, and empower
trustworthy human resources and organizations.

×
Innovation of the Group’s earnings structure

Operating environments
Opportunities• Progress on deregulation• Progress on FinTech etc.

Threats• Continuation of negativeinterest policy• Shrinking population,
aging population with aetc.
low birthrateEnhancement of the Group’s
comprehensive financial
strengths

With the Group working in concert, we will seek
to conduct qualitative improvement of the lending
portfolio, strengthen fee businesses, and carry out
drastic reforms of the cost structure.

Conventional initiatives

Framework
Group Management Philosophy“Aiming high and motivated by pride in our services, we are committed to becoming a leading financial group throughour ability to respond to change and to grow with our customers”
Medium-Term Business Plan

Leaping Forward 2020—Innovating Ideas for Our Clients—(for the three-year period April 2017–March 2020)

The Group’s strengths

Concept

Challenges for the Group

Solid customer base andrelationships of trust with customers“Enhancement of the Group’s comprehensive financial strengths” stage,
when we accelerate our drive to become customers’ preferred regional
financial group by focusing on expansion of our business foundations for agreater leap forward

Difficult earnings environment
owing to the negative interest policy

High consulting skills

6

Changing markets due to theshrinking and aging population
with a low birthrate

Spirit of regional industry
development and businesspromotion handed down from theformer entities

Basic Strategy 1

Enhancement of customer-oriented,
comprehensive financial services —Service innovation—

Advanced and diverse products/
services

Basic Strategy 2

Establishment of robust earnings structure—Behavioral innovation—

Ample real channels and highly
convenient digital channels

Basic Strategy 3

Empowerment of trustworthy human resources andorganizations —Human resources innovation—

Changing lifestyles and needs ofcustomers

Broad networks with central/overseas organizations

Basic Strategy 4

Advancement of group management—Corporate governance innovation—

Economic uncertainty both
domestically and abroad

Four Basic Strategies

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 2017

Intensifying competition against
other regional banks and newentrants from other industries
Remarkable progress in FinTech

Providing Broader/Deeper Support for International Business• In accordance with shrinking population in Japan, many Japanese companies are seeking opportunities overseas, but there arestill quite a few issues that need to be addressed. The Nishi-Nippon FH Group has been providing finely tuned support for
their international business activities to help companies deal with such issues.
• In March 2017, in response to the growing needs to expand into Southeast Asia, where a huge market has developed since theinauguration of the ASEAN Economic Community, Nishi-Nippon City Bank opened a representative office in Singapore.
• In order to foster greater support for Japanese SMEs in Asia in corporate banking account services, trade finance and capital
market advisory solutions, the Nishi-Nippon City Bank signed a memorandum of understanding(MOU) with DBS Bank, Southeast Asia’s largest bank in May 2017.
• In collaboration with international and domestic partner institutions, we will leverage our overseas
operations and further strengthen intra-group collaborations so as to provide broader/deeper
support for international business.

Nishi-Nippon CityBank

Multifaceted windows for international business support• International Business Support Office, International Business Div.
Support for international business provided by personnel with professional skills and know-how• World Business Square (WBS)
Total support for international business, including forex trading such as foreign remittance and letter of credit transactions• NCB Forex Super Direct, NCB Direct Forward Exchange Contracts
A broad range of forex transactions, including foreign remittance and application/inquiry on import letters of credit via the Internet

NCB Research &Consulting• International Consultation Office
Finely tuned support for overseas expansion offered by personnel with extensive international experience through collaboration withinternational partner financial institutions, lawyers, insurance companies, etc.
• “Door to Asia” (website and TV program)Detailed information provision• Asia Business Seminars
Sponsorship of seminars on international business

Kyushu Card

• A variety of credit cards
Support for all major cards, including VISA, MasterCard, JCB, AMEX, UnionPay, and Shinhan✦ Broad area coverage by our overseas bases and partner institutions(China)( Japan)JBIC
The Bank of Yokohama

Bank of China
Shanghai Representative Office
Shanghai Branch(South Korea)
Seoul Representative Office
Shinhan Bank

Hong Kong Representative OfficeHong Kong Representative Office(Thailand) Bangkok Bank
Bangkok Representative Office(Vietnam)
OCB / BNP Paribas

Nishi-Nippon City Bank’s overseas operations(4 in Asia)(Singapore) DBS Bank
Singapore Representative Office

Bank of Yokohama’s overseas operations(3 in Asia, 1 each in London and New York)

Partner foreign financial institutions(7 foreign banks)(Indonesia) Bank Resona Perdania(as of 30th June, 2017)✦ Major initiatives by Nishi-Nippon City Bank
Month/Year

Details

September 2016

Concluded Basic Agreement for Overseas BusinessSupport Services with The Bank of Yokohama

March 2017

Opened a representative office in Singapore

May 2017

Signed Memorandum of Understanding regarding
Business Tie-ups with DBS Bank, Southeast Asia’s
largest bank✦ Number of Nishi-Nippon City Bank customers receiving
overseas expansion support and overseas business support
550 customers
488 customers

2016/032017/03

Fiscal year

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 20177

Financial Results✦Enhancing Comprehensive Business Support

On a consolidated basis, total income amounted to ¥145,938
million ($1,300 million), primarily consisting of interestand dividend income as well as fees and commissions. Total
expenses came to ¥113,516 million ($1,011 million), mainlycomprising interest expenses and general and administrative
expenses. As a result, profit before income taxes was ¥32,422
million ($288 million) and profit attributable to owners ofparent was ¥22,214 million ($198 million).

We worked to address the start-up funding and consulting
needs of customers aiming to expand existing businesses ordevelop new businesses by providing financing or investing inbusiness development funds. We also provide support in theform of information on subsidies and financing systems, as wellas helping them to commercialize new technologies throughcollaborations with external institutions such as local universities,
public finance institutions, and regional public bodies.
We also provided assistance to customers looking tofurther grow their businesses by expanding sales channels
and/or investing in new business areas, including businessmatching, by holding business-matching sessions in Japanin conjunction with organizations such as regional publicbodies and other financial institutions as well as overseas
business-matching sessions in Shanghai and Hong Kong.
Other initiatives included providing support forcompanies looking to expand their business activities
overseas through collaborations with financial institutions
outside of Japan and external experts, and consulting services
to identify and find solutions to obstacles that might behindering the growth of customers’ businesses.

✦ Loan Balance and Deposit Balance
On a consolidated basis, total assets at the end of the fiscal
year period under review were ¥9,486.4 billion ($84 billion);
total liabilities were ¥8,974.7 billion ($79 billion); and net
assets stood at ¥511.6 billion ($4 billion).
The year-end balance of deposits, including certificatesof deposits, was ¥8,019.0 billion ($71 billion); the loanbalance at the end of the fiscal year was ¥6,803.8 billion ($60
billion); and the year-end balance of securities was ¥1,655.7
billion ($14 billion).

Balance of loans

Balance of loans to small and mediumsized enterprises, etc.

Balance of deposits/NCD.

The Nishi-Nippon City Bank, Ltd.

The Nishi-Nippon City Bank, Ltd.

The Nishi-Nippon City Bank, Ltd.

Total outstanding loans(¥ billion)
8,000.0

Total outstanding loans to SMEs, etc.
(¥ billion)
6,000.0

Total outstanding deposits/NCD(¥ billion)【＋5.8％】 【＋3.5％】
8,000.0
7,812.7【＋5.8％】
7,547.9304.2
7,130.9397.7
293.4
2,188.9
2,410.7
6,000.0
1,974.1

6,000.0【＋5.4％】
5,927.5【＋4.9％】
6,220.1

145.2
2,174.4

4,000.0

2,000.0【＋5.7％】
6,574.6

167.2

206.9

2,281.9

2,372.9

3,771.0

3,994.8【＋6.3％】
4,584.2

1,865.3

1,749.9

4,000.0

2,000.0
3,038.4

2,834.2

3,307.50

2015/03

2016/03

Consumer loans
Housing loans
Business loans

2017/03[ ] YoY change

2,000.0

4,863.3

4,961.3

2016/03

Individuals
SMEs

2017/03[ ] YoY change

2015/03

2016/03

Financial institutions and municipality
Enterprises
Retail customers

The Bank of Nagasaki, Ltd.

The Bank of Nagasaki, Ltd.

Total outstanding loans(¥ billion)
250.0【＋0.8％】

Total outstanding loans to SMEs, etc.
(¥ billion)
250.0

Total outstanding deposits/NCD(¥ billion)
300.0

228.7

150.0

13.2

137.5

【＋3.4％】【＋0.2％】
237.0
229.1
14.7

138.3

15.2

140.8

100.0

200.0

【＋1.1％】 【＋0.5％】 【＋2.6％】
204.2
199.0
197.9

150.0

126.6

130.1

77.9

76.0

80.9

0
Consumer loans
Housing loans
Business loans

2016/032017/03[ ] YoY change

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 2017

200.0

5.0
34.6

100.0

196.4

【＋6.6％】
251.8

17.4

[ ] YoY change【-2.3％】
246.1

36.9

16.5
40.4

197.4

189.0

50.0

71.3

68.8

68.5

0

2015/03【-4.9％】
236.2

2017/03

135.6

100.0

50.0

5,097.70

2015/03

The Bank of Nagasaki, Ltd.

200.0

8

【＋6.7％】
5,172.9

1,809.7

4,000.0

3,607.9
0【＋5.8％】
4,848.1

0

2015/03
Individuals
SMEs

2016/032017/03[ ] YoY change

2015/03

2016/03

Financial institutions and municipality
Enterprises
Retail customers

2017/03[ ] YoY changeToward a Sounder Financial Position
Pursuit of a sounder financial position is ranked as one of the Group’s key priorities.
Accordingly, we are strengthening our capital adequacy and reducing non-performing loans (NPLs).

✦NPL Ratio Improved by 0.16 Percentage
Points to 2.18% (On a Consolidated Basis)
The Group carries out write-offs and provision of reserves
for its NPLs according to strict standards, based on selfassessment of assets. As of 31st March, 2017, the Group’s
NPL balance (subject to mandatory disclosure of claims
under the Financial Reconstruction Law, consolidated basis)
decreased by ¥2.3 billion year-on-year to ¥150.2 billion. As aresult, the NPL ratio declined to 2.18%, compared to 2.34%
at the end of the previous fiscal year.
The coverage ratio for loans subject to mandatory
disclosure of claims under the Financial Reconstruction
Law, mainly through collateral and guarantees, are 82.77%
for The Nishi-Nippon City Bank, Ltd. and 90.68% for The

Bank of Nagasaki, Ltd. The coverage ratio for bankrupt andquasi-bankrupt assets remains at 100% for both The NishiNippon City Bank, Ltd. and The Bank of Nagasaki, Ltd.

✦Capital Ratio at 9.53% (On a Consolidated
Basis)*
The capital ratio as of 31st March, 2017, stood at 9.53% on aconsolidated basis, 9.30% for The Nishi-Nippon City Bank,
Ltd. and 8.65% for The Bank of Nagasaki, Ltd. These figures
are significantly higher than the minimum level of 4.0%
required of banks operating in Japan.
We will be implementing measures to further strengthen
our capital adequacy and raise the capital ratio.
* Minimum level required for banks operating in Japan: 4%

Balance of NPLs and ratio of loans subject to mandatory disclosure of claims under the Financial Reconstruction Law
Consolidated(¥ billion)
300.0

The Nishi-Nippon City Bank, Ltd.

2.34％

2.18％

240.0
180.0

152.5

(%)
2.50

(¥ billion)
300.0

2.00

240.0

1.50

180.0

The Bank of Nagasaki, Ltd.

2.29％
2.14％

150.2

143.5

141.7

(%)
2.50

(¥ billion)
10.0

2.00

8.0

1.50

6.0

120.0

30.7

34.4

1.00

120.0

30.5

34.2

1.00

4.0

60.0

106.3

97.4

0.50

60.0

98.7

90.1

0.50

2.0

18.3

00

0

17.3

0

0

0

15.4

2016/03

14.1

2017/03

2016/03

Substandard loans
Claims on potentially bankrupt borrowers
Bankrupt and quasi-bankrupt assets (unrecoverable claims)
Ratio of loans subject to mandatory disclosure of claims
under the Financial Reconstruction Law

(%)
2.50

2.37％
2.07％

2.00
1.50

5.4

4.9
1.00
4.5
0.8

2017/03

2016/03

4.2

0.50

0.6

0

2017/03

Claims on potentially bankrupt borrowers
Bankrupt and quasi-bankrupt assets (unrecoverable claims)
Ratio of loans subject to mandatory disclosure of claims
under the Financial Reconstruction Law

Substandard loans
Claims on potentially bankrupt borrowers
Bankrupt and quasi-bankrupt assets (unrecoverable claims)
Ratio of loans subject to mandatory disclosure of claims
under the Financial Reconstruction Law

Capital ratio
Consolidated(¥ billion)
7,000.05,600.0

The Nishi-Nippon City Bank, Ltd.

9.08％

9.53％

5,179.3
4,300.6

4,200.02,800.0
1,400.0
0

470.5

409.8

2016/032017/03

Risk-weighted assets, etc.
Shareholders’ equity
Capital ratio

(%)
10.00

(¥ billion)
7,000.0

8.00

5,600.0

6.00

4,200.0

4.00

2,800.0

2.00

1,400.0

0

0

9.02％

9.30％

4,988.0
4,143.3

450.3

385.6

2016/032017/03

Risk-weighted assets, etc.
Shareholder’s equity
Capital ratio

The Bank of Nagasaki, Ltd.
(%)
10.00

(¥ billion)
300.0

8.00

240.0

6.00

180.0

4.00

120.0

2.00

60.0

(%)
10.00

8.65％

0

0

8.65％
8.00
6.00

159.6

155.2

4.00
2.00

13.4

13.8

2016/032017/030

Risk-weighted assets, etc.
Shareholder’s equity
Capital ratio

Notes: 1. The following approaches are adopted to calculate risk-weighted assets, etc. Amount of credit risk-weighted assets
		 2017/03: Foundation Internal Ratings-Based (FIRB) approach for consolidated figures and The Nishi-Nippon City Bank, Ltd., Standardized Approach (SA)for The Bank of Nagasaki, Ltd.
		 2016/03: Standardized Approach (SA)		 Operational risk equivalent amounts: The Standardized Approach (TSA)
2. The capital ratio (consolidated) for the fiscal year ended 31st March 2016 is for the Group in which The Nishi-Nippon City Bank, Ltd. is a parent company.
Nishi-Nippon Financial Holdings Group ANNUAL REPORT 20179Outline of Banking Subsidiaries
As of 31st March, 2017, the Group has a nationwide network of 186 branches of The Nishi-Nippon City Bank, Ltd. (Head
Office, 164 branches and 21 sub-branches) and 23 branches of The Bank of Nagasaki, Ltd. (Head Office and 22 branches), andfour overseas representative offices of The Nishi-Nippon City Bank, Ltd., in Hong Kong, Seoul, Shanghai, and Singapore.

The Nishi-Nippon City Bank, Ltd.

▶ Business▶ Established▶ Headquarters▶ Number of Employees▶ Number of Domestic Offices▶ Number of Correspondent Banks

Banking
December 1, 1944
1-1, Hakata-ekimae 3-chome, Hakata-ku, Fukuoka 812-0011, Japan
3,492
186
122
(As of 31st March, 2017)

Board of Directors
ChairmanPresident
Deputy Presidents
Representative Executive Director
Executive Directors
Managing Directors

Directors (Audit and Supervisory Committee Member)

Isao KUBOTA
Hiromichi TANIGAWA
Seiji ISOYAMA
Souichi KAWAMOTO
Kiyota TAKATA
Shigeru URAYAMA
Hiroyuki IRIE
Shinya HIROTA
Hideyuki MURAKAMI
Hiroyuki TAKEO
Junichi SAKAGUCHI
Seiji INO
Michiaki URIU (outside)
Hiroshi FUJIOKA (outside)(As of 30th June, 2017)

Financial Highlights✦ The Nishi-Nippon City Bank, Ltd. Years ended 31st March, 2017 and 2016
Millions of yen (Note 1)

Total income
Total expenses
Income before income taxes
Net income

2017¥136,484
104,016
32,46725,177

Thousands of U.S. dollars (Note 2)

2016¥146,351
104,252
42,09830,0162017$1,216,549
927,148
289,400
224,420✦ The Nishi-Nippon City Bank, Ltd. As of 31st March, 2017 and 2016
Millions of yen (Note 1)

Total assets
Deposits
Loans and bills discounted
Securities
Capital stock
Total net assets

2017¥9,227,333
7,812,742
6,574,638
1,677,231
85,745479,981

2016¥8,831,638
7,547,963
6,220,199
1,835,516
85,745
460,104

Thousands of U.S. dollars (Note 2)

2017$82,247,376
69,638,493
58,602,713
14,949,921
764,2884,278,295

Notes: 1. In this report, Japanese yen figures are rounded down to the nearest million yen.
2. Conversion into U.S. dollars (solely for the convenience of readers outside Japan) has been made at the exchange rate of ¥112.19 to $1.

10Nishi-Nippon Financial Holdings Group ANNUAL REPORT 2017

The Bank of Nagasaki, Ltd.

▶ Business▶ Established▶ Headquarters▶ Number of Employees▶ Number of Domestic Offices

BankingNovember 11, 1912
3-14, Sakaemachi, Nagasaki 850-0875, Japan
250
23(As of 31st March, 2017)

Board of Directors and Audit and Supervisory Board Members
President
Managing Directors
Directors
Audit and Supervisory Board Members

Kazuo YAMAMOTO
Yutaka MATSUYAMA
Tetsuhisa MATSUMOTO
Tsunehiro NAKAO
Yasuyuki SHIGETOMI
Hideyuki MURAKAMI
Kouji NOZU
Hiromi UCHIO (outside)
Mitsuru KAWATANI (outside)(As of 30th June, 2017)

Financial Highlights✦ The Bank of Nagasaki, Ltd. Years ended 31st March, 2017 and 2016
Millions of yen (Note 1)

Total income
Total expenses
Income before income taxes
Net income

2017¥5,416
4,840
575
440

Thousands of U.S. dollars (Note 2)

2016¥5,412
4,888
524
441

2017
$48,276
43,144
5,132
3,926✦ The Bank of Nagasaki, Ltd. As of 31st March, 2017 and 2016
Millions of yen (Note 1)

Total assets
Deposits
Loans and bills discounted
Securities
Capital stock
Total net assets

2017¥273,033
246,127
237,047
3
6,121
14,259Thousands of U.S. dollars (Note 2)

2016¥267,694
251,842
229,181—
6,121
13,8472017$2,433,669
2,193,845
2,112,911
29
54,565
127,105

Notes: 1. In this report, Japanese yen figures are rounded down to the nearest million yen.
2. Conversion into U.S. dollars (solely for the convenience of readers outside Japan) has been made at the exchange rate of ¥112.19 to $1.

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 201711

Risk Management Systems
With accelerating liberalization and globalization of finance and advances in information and communication technology, therisks attendant on financial services are becoming ever more diverse and complex. Against that backdrop, the Group is making
concerted efforts to advance risk management, which is one of its key priority issues for management, by establishing a Basic
Policy on Risk Management to be observed by the entire Group, with the goals of building a sound management foundation andensuring stable revenue flow.

✦✦ Integrated Risk Management:

Integrated risk management refers to a series of practices designed
to keep abreast of the general picture of risks that are unique to theGroup’s structure but which each Group company could not be
expected to deal with individually, including those facing the entire
Group and those spreading within it, and to assess and manage suchrisks by comparing them against the Group’s management resilience(equity capital).

✦✦ Credit Risk Management:

Recognizing credit risk as the most important type of risk for theGroup, Nishi-Nippon FH established a Credit Risk Management
Policy under its Risk Management Regulations, thereby reinforcing
the credit risk management system.
The Group objectively and quantitatively monitors the risks
of individual borrowers and feeds any findings back to its credit
portfolio management, thereby managing the entire Group in an
integrated manner.

✦✦ Market Risk Management:

Nishi-Nippon FH established a Market Risk Management Policy
under its Risk Management Regulations to reinforce its market risk
management system.
The Group sets limits on market risks so as to enable adequate
management of such risks and undertakes them within the range of
those limits in order to achieve stable flow of revenue.

✦✦ Liquidity Risk Management:

Nishi-Nippon FH established a Liquidity Risk Management Policy
under its Risk Management Regulations in an effort to reinforce theliquidity risk management system.
In order to prevent tight finances, the Group maintains thesoundness of its assets so that it can ensure market liquidity andstabilize cash flows.

✦✦ Operational Risk Management:

Nishi-Nippon FH established an Operational Risk Management
Policy under its Risk Management Regulations, thereby
strengthening its operational risk management system.
Given that operational risks are so extensive, varied, and diversethat they concern every single operation and section and thus must
be avoided as far as possible in business management, the Group has
developed an organizational setup and system that properly manage
such risks, in order to prevent them from becoming actualized andto minimize their impacts should any such risks occur.

✦✦ Crisis Management:

As a basic policy for developing a system to ensure that theminimum operations necessary for maintaining the financial
system’s functions can continue without interruption in the event ofa large-scale disaster, IT system failure, or other contingency, NishiNippon FH established the Business Continuity Regulations. NishiNippon FH’s subsidiaries then formulated Business Continuity
Plans (BCPs) in accordance with this basic policy, and they work
to enhance effectiveness of the business continuity management
system by carrying out various types of drills.

✦✦ Status of Internal Control System Development:

In accordance with the Companies Act and the Ordinance for
Enforcement of the Companies Act, Nishi-Nippon FH passed
a resolution in a Board of Directors meeting on its basic policy
concerning development of a system for ensuring operational
adequacy (Basic Policy on the Development of the Internal Control
System), and it strives to develop the internal control system andenhance its effectiveness accordingly.

Internal Audit Division
Credit risk (Compliance & Risk Management Division)
Market risk (Compliance & Risk Management Division)
Liquidity risk (Compliance & Risk Management Division)
Board of Directors

Executive Committee

Audit and Supervisory
Committee

Operational risk (Compliance & Risk Management Division)
Compliance &Risk Management
Division

Administrative risk (Compliance & Risk Management Division)
System risk (Compliance & Risk Management Division)

Head Office
Divisions

Legal risk (Compliance & Risk Management Division)
Human error risk (Corporate Planning Division)
Tangible asset risk (Corporate Planning Division)
Reputational risk (Compliance & Risk Management Division)

Consolidated Subsidiaries and Affiliate

Nishi-Nippon FH established a Compliance & Risk Management Division to manage all matters concerning credit risk
management under one umbrella. This Division periodically monitors the status of risk management within the Group andissues directives for improvement as necessary, thereby ensuring that the risk management system is effective.

12

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 2017

Financial Section
Contents
Nishi-Nippon Financial Holdings, Inc.
Consolidated Balance Sheet
Consolidated Statement of Income
Consolidated Statement of Comprehensive Income
Consolidated Statement of Changes in Net Assets
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
Quarterly Information (Unaudited)

14
15
16
17
19
21
56

The Nishi-Nippon City Bank, Ltd.
Non-Consolidated Balance Sheet (Unaudited)
Non-Consolidated Statement of Income (Unaudited)
Non-Consolidated Statement of Changes in Net Assets (Unaudited)

57
58
59

The Bank of Nagasaki, Ltd.
Non-Consolidated Balance Sheet (Unaudited)
Non-Consolidated Statement of Income (Unaudited)
Non-Consolidated Statement of Changes in Net Assets (Unaudited)

61
62
63

Notes to Non-Consolidated Financial Statements (Unaudited)
Independent Auditor’s Report

65
66

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 201713

Consolidated Balance Sheet
Nishi-Nippon Financial Holdings, Inc. and Subsidiaries

31st March, 2017
Thousands ofAssets:Cash and due from banks (Notes 6 and 27)
Call loans and bills bought
Commercial paper and other debt purchased
Trading account assets (Notes 3 and 28)
Money held in trust (Note 29)
Securities (Notes 4, 6, 27 and 28)
Loans and bills discounted (Notes 5, 7 and 27)
Foreign exchange assets (Note 8)
Other assets (Notes 6, 9)
Tangible fixed assets (Notes 10 and 17)
Intangible fixed assets
Asset for retirement benefits (Note 31)
Deferred tax assets (Note 32)
Customers' liabilities for acceptances and guarantees
Reserve for possible loan losses (Note 27)
Reserve for devaluation of securities
Total assets
Liabilities and net assets:
Liabilities
Deposits (Notes 6, 11, and 27)
Call money and bills sold (Note 27)
Payables under repurchase agreements (Notes 6 and 27)
Guarantee deposits received under securities lending transactions (Note 6)
Borrowed money (Notes 6, 13 and 27)
Foreign exchange liabilities (Note 8)
Bonds (Notes 12 and 27)
Other liabilities (Note 14)
Liability for retirement benefits (Note 31)
Reserve for retirement benefits for directors and corporate auditors
Reserve for reimbursement of deposits
Reserve for other contingent losses
Reserve under the special laws
Deferred tax liabilities (Note 32)
Deferred tax liabilities on revaluation of premises (Note 17)
Acceptances and guarantees
Total liabilities
Net assets:
Capital stock (Note 15)
Capital surplus
Earned surplus
Treasury stock (Note 16)
Total shareholders' equity
Net unrealized gains on securities available for sale, net of taxes (Note 28)
Net deferred gains (losses) on hedging instruments, net of taxes
Revaluation of premises, net of taxes (Note 17)
Retirement benefits liability adjustments, net of taxes (Note 31)
Total accumulated other comprehensive income
Non-controlling interests
Total net assets (Note 38)
Total liabilities and net assets
See accompanying Notes to Consolidated Financial Statements.

14

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 2017

Millions of yen

U.S. dollars (Note 1)

2017

2017

¥807,097
128
33,606869
850
1,655,774
6,803,828
7,539
55,567
121,035
5,704
12,328952
26,123(44,339)(618)¥9,486,448$7,194,019
1,147
299,5457,749
7,576
14,758,662
60,645,583
67,207495,300
1,078,845
50,848109,8908,490
232,852(395,222)(5,511)$84,556,986¥8,019,012
59,924
69,174
18,714
630,66289
30,00091,616
811
248
2,420
1,497
7
9,210
15,256
26,123
8,974,769$71,477,072
534,134
616,583
166,8075,621,378
798
267,403
816,615
7,229
2,214
21,575
13,34863
82,097
135,988
232,852
79,996,165

50,000141,868
219,793(15,829)395,83162,122(384)
30,400(192)
91,94623,899511,678¥9,486,448

445,672
1,264,537
1,959,115(141,097)
3,528,228
553,725(3,424)
270,975(1,714)
819,561
213,0314,560,821$84,556,986

Consolidated Statement of Income
Nishi-Nippon Financial Holdings, Inc. and Subsidiaries

Year ended 31st March, 2017
Thousands ofIncome:Interest and dividend income:Interest on loans and discounts
Interest and dividends on securities
Other interest income (Note 18)
Fees and commissions
Trading income
Other operating income (Note 19)
Other income (Note 20)
Total income
Expenses:
Interest expenses:
Interest on deposits
Interest on call money and bills soldInterest on payables under repurchase agreements
Interest on borrowings
Other interest expenses (Note 21)
Fees and commissions
Other operating expenses (Note 22)
General and administrative expenses (Note 23)
Other expenses (Note 24)
Total expenses
Profit (loss) before income taxes
Income taxes (Note 32)
Current
Deferred
Total income taxes
Profit (loss)
Profit (loss) attributable to:Non-controlling interests
Owners of parent (Note 38)
See accompanying Notes to Consolidated Financial Statements.

Millions of yen

U.S. dollars (Note 1)

2017

2017

¥85,498
14,274
1,498
31,745
1,222
2,667
9,032
145,938$762,088
127,238
13,353282,958
10,894
23,77280,5101,300,816

3,718
382
659
405
1,162
10,9872,023
85,608
8,569
113,516
32,42233,142
3,406
5,881
3,609
10,35897,934
18,033763,071
76,386
1,011,824
288,992

9,979
(881)
9,098
23,323

88,955(7,853)
81,102
207,889

1,108¥22,2149,884$198,004

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 201715

Consolidated Statement of Comprehensive Income
Nishi-Nippon Financial Holdings, Inc. and Subsidiaries

Year ended 31st March, 2017
Thousands ofProfit (loss)
Other comprehensive income:Net unrealized gains on securities available for saleNet deferred gains (losses) on hedging instruments
Retirement benefits liability adjustments
Total other comprehensive income (Note 25)
Comprehensive income
Comprehensive income attributable to owners of parent
Comprehensive income attributable to non-controlling interests
See accompanying Notes to Consolidated Financial Statements.

16

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 2017

Millions of yen

U.S. dollars (Note 1)

2017

2017

¥23,323(1,033)626
5,830¥5,424¥28,747¥27,590¥1,156$207,889(9,212)
5,588
51,973$48,350$256,239$245,930$10,308

Consolidated Statement of Changes in Net Assets
Nishi-Nippon Financial Holdings, Inc. and Subsidiaries

Year ended 31st March, 2017
Thousands ofShareholders' equity
Capital stock (Note 15)
Balance at beginning of the year
Changes during the year
Changes due to share transfer
Total changes during the year
Balance at end of the year
Capital surplus
Balance at beginning of the year
Changes during the year
Changes due to share transfer
Sale of treasury stock
Retirement of treasury stock
Total changes during the year
Balance at end of the year
Earned surplus
Balance at beginning of the year
Changes during the year
Cash dividends paid (Note 39)
Profit (loss) attributable to owners of parent
Retirement of treasury stockReversal of revaluation of premises
Total changes during the year
Balance at end of the year
Treasury stock (Note 16)
Balance at beginning of the year
Changes during the year
Changes due to share transfer
Acquisition of treasury stock
Sale of treasury stock
Retirement of treasury stock
Total changes during the year
Balance at end of the year
Total shareholders' equity
Balance at beginning of the year
Changes during the year
Cash dividends paid (Note 39)
Profit (loss) attributable to owners of parent
Acquisition of treasury stock
Sale of treasury stockReversal of revaluation of premises
Total changes during the year
Balance at end of the year

Millions of yen

U.S. dollars (Note 1)

2017

2017

¥85,745$764,288(35,745)(35,745)¥50,000(318,616)(318,616)$445,672¥90,531$806,950

51,567(2)(228)
51,336¥141,868

459,642(22)(2,033)
457,586$1,264,537¥207,138$1,846,321(4,697)

12,654¥219,793(41,872)
198,004(44,286)949
112,794$1,959,115(¥4,189)($37,340)(15,821)(1,022)
6
5,196(11,640)(¥15,829)(141,025)(9,113)
61
46,320(103,757)($141,097)¥379,226$3,380,220(4,697)22,214(1,022)
4
106
16,605¥395,831(41,872)
198,004(9,113)39
949
148,007$3,528,228

22,214(4,968)106

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 201717

Consolidated Statement of Changes in Net Assets

Nishi-Nippon Financial Holdings, Inc. and Subsidiaries

Year ended 31st March, 2017
Thousands of

Accumulated other comprehensive income
Net unrealized gains on securities available for sale, net of taxes
Balance at beginning of the year
Changes during the year
Net changes in items other than shareholders' equity
Total changes during the year
Balance at end of the year
Net deferred gains (losses) on hedging instruments, net of taxes
Balance at beginning of the year
Changes during the year
Net changes in items other than shareholders' equity
Total changes during the year
Balance at end of the year
Revaluation of premises, net of taxes
Balance at beginning of the year
Changes during the year
Net changes in items other than shareholders' equity
Total changes during the year
Balance at end of the year
Retirement benefits liability adjustment
Balance at beginning of the year
Changes during the year
Net changes in items other than shareholders' equity
Total changes during the year
Balance at end of the year
Total accumulated other comprehensive income
Balance at beginning of the year
Changes during the year
Net changes in items other than shareholders' equity
Total changes during the year
Balance at end of the year
Non-controlling interests
Balance at beginning of the year
Changes during the year
Net changes in items other than shareholders' equity
Total changes during the year
Balance at end of the year
Total net assets
Balance at beginning of the year
Changes during the year
Cash dividends paid (Note 39)
Profit (loss) attributable to owners of parent
Acquisition of treasury stock
Sale of treasury stockReversal of revaluation of premises
Net changes in items other than shareholders' equity
Total changes during the year
Balance at end of the year
See accompanying Notes to Consolidated Financial Statements.

18

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 2017

Millions of yen

U.S. dollars (Note 1)

2017

2017

¥63,203$563,361(1,081)(1,081)¥62,122(9,636)(9,636)$553,725(¥1,011)($9,013)626
626(¥384)

5,588
5,588($3,424)¥30,507$271,925

(106)
(106)
¥30,400

(949)
(949)
$270,975(¥6,023)($53,688)

5,830
5,830
(¥192)

51,973
51,973($1,714)¥86,676$772,584

5,270
5,270
¥91,946

46,976
46,976$819,561¥21,927$195,454

1,971
1,971
¥23,899

17,576
17,576$213,031¥487,831$4,348,259(4,697)22,214(1,022)
4
106
7,242
23,847¥511,678(41,872)
198,004(9,113)39
949
64,553
212,561$4,560,821

Consolidated Statement of Cash Flows
Nishi-Nippon Financial Holdings, Inc. and Subsidiaries

Year ended 31st March, 2017
Thousands ofI. Cash flows from operating activities:
Profit (loss) before income taxes
Depreciation
Losses on impairment of fixed assets
Amortization of goodwill
Equity in gains of nonconsolidated subsidiaries and affiliate
Increase in reserve for possible loan losses
Increase in reserve for devaluation of securities
Increase in asset for retirement benefits
Decrease in liability for retirement benefits
Increase in reserve for retirement benefits for directors and corporate auditors
Increase in reserve for reimbursement of deposits
Decrease in reserve for other contingent losses
Income from lending activities
Funding costs
Gains on securities
Gains on money held in trust
Net foreign exchange gains
Losses on sale of tangible fixed assets
Net decrease in trading account assets
Net increase in loans and bills discounted
Net increase in deposits
Net increase in certificates of deposit
Net increase in borrowed money, exclusive of subordinated borrowings
Net decrease in due from banks, exclusive of central bank
Net increase in call loans
Net increase in call money
Net decrease in guarantee deposits received under securities lending transactions
Net decrease in foreign exchange assets
Net increase in foreign exchange liabilities
Interest and dividends received
Interest paid
OthersSubtotal
Income taxes paid
Net cash provided by operating activities

Millions of yen

U.S. dollars (Note 1)

2017

2017

¥32,422
6,615
974
189
(111)
2,623
0
(6,972)(3,534)30
246(0)(101,271)
6,327(4,608)(3)(1,293)468
414(351,874)
232,344
23,330124,392
1,107(1,236)
21,601(1,178)744
15104,052(6,766)
2,796
81,843(14,869)¥66,974$288,992
58,962
8,688
1,685
(991)
23,383
2(62,147)(31,506)
273
2,196
(1)
(902,680)
56,398(41,074)(29)(11,533)
4,174
3,691
(3,136,414)
2,070,992
207,954
1,108,763
9,869(11,017)
192,539(10,505)
6,634
137
927,463(60,315)
24,922
729,509(132,539)$596,970

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 201719

Consolidated Statement of Cash Flows

Nishi-Nippon Financial Holdings, Inc. and Subsidiaries

Year ended 31st March, 2017
Thousands ofⅡ.Cash flows from investing activities:
Payments for purchase of securities
Proceeds from sale of securities
Proceeds from redemption of securities
Payments for increase in money held in trust
Proceeds from decrease in money held in trust
Payments for purchase of tangible fixed assets
Proceeds from sale of tangible fixed assets
Payments for purchase of intangible fixed assets
Net cash provided by investing activities
Ⅲ.Cash flows from financing activities:
Redemption of subordinated bonds and bonds with stock subscription rights
Dividends paid
Dividends paid to non-controlling shareholders
Payments for acquisition of treasury stock
Proceeds from sale of treasury stock
Net cash used in financing activities
Ⅳ.Effects of changes in exchange rates on cash and cash equivalents
Ⅴ.Net increase in cash and cash equivalents
Ⅵ.Cash and cash equivalents at beginning of the year
Ⅶ.Cash and cash equivalents at end of the year (Note 37)
See accompanying Notes to Consolidated Financial Statements.

20

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 2017

Millions of yen

U.S. dollars (Note 1)

2017

2017

(¥206,745)
83,218282,300(450)
1,603(11,879)
88(1,417)¥146,717($1,842,813)
741,761
2,516,269(4,017)
14,290(105,886)
789(12,630)$1,307,762(18,800)(4,697)(684)(1,022)
4(¥25,199)(¥5)¥188,486¥615,274¥803,760(167,572)(41,869)(6,102)(9,113)39($224,618)($45)$1,680,068$5,484,214$7,164,283

Notes to Consolidated Financial Statements
Nishi-Nippon Financial Holdings, Inc. and Subsidiaries
1.

Basis of Presentation of

The accompanying consolidated financial statements of Nishi-Nippon Financial Holdings, Inc. (the "Company"),

Consolidated Financial

and its consolidated subsidiaries have been prepared in conformity with accounting principles generallyStatements

accepted in Japan, which are different in certain respects as to the application and disclosure requirements ofInternational Financial Reporting Standards, and are compiled from the consolidated financial statements
prepared by the Company as required by the Financial Instruments and Exchange Law of Japan.
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.
As the Company was established on 3rd October, 2016, the consolidated financial statements and the notes to theconsolidated financial statements do not include the information for the year ended 31st March, 2016.
Solely for the convenience of readers outside Japan, certain items in the original Japanese financial
statements have been reclassified for presentation.
As permitted by the Financial Instruments and Exchange Law, amounts of less than one million yen
have been omitted by the Company.
Consequently, the totals shown in the accompanying consolidated financial statements (both in yen and
U.S. dollars) do not necessarily agree with the sum of the individual amounts.
The amounts in U.S. dollars are included solely for the convenience of readers outside Japan. A rate of¥112.19= U.S.$ 1.00, the exchange rate on 31st March, 2017, has been used in translation.
In the consolidated financial statements, "－" is used to denote "nil" and "0" is used to denote rounding
down to zero.

2.

Summary of Significant
Accounting Policies(a) Scope of Consolidation
The consolidated financial statements include the accounts of the Company and its consolidated subsidiaries.
The number of consolidated and non-consolidated subsidiaries for the year ended 31st March, 2017is as follows:
2017ⅰ) Number of consolidated subsidiaries:

8ⅱ) Number of non-consolidated subsidiaries:

1ⅰ) The Company was established on 3rd October, 2016, as a sole parent company through the share transfer by
The Nishi-Nippon City Bank, Ltd. ("Nishi-Nippon City Bank"), the Bank of Nagasaki, Ltd. andNishi-Nippon Credit Guarantee Co. in which the three companies became the wholly-owned
subsidiaries of the Company. In addition, the Company acquired directly from Nishi-Nippon City Bank
the stocks of its consolidated subsidiaries upon the share transfer.
Accordingly, the above wholly-owned three subsidiaries and the consolidated subsidiaries of
Nishi-Nippon City Bank were included in scope of consolidation in 2017.
ⅱ) NCB Kyushu Rokujika Ouen Investment, Limited Partnership was excluded from consolidation
due to its insignificance in 2017.
(b) Application of Equity Method
The number of non-consolidated subsidiaries and affiliates, which are accounted for by the equity
method, for the year ended 31st March, 2017 is as follows:
2017ⅰ) Number of non-consolidated subsidiaries accounted for by0

the equity method:ⅱ) Number of affiliates accounted for by the equity method:1ⅲ) Number of non-consolidated subsidiaries not accounted

1

for by the equity method:ⅳ) Number of affiliates not accounted for by the equity method:0(c) Fiscal Years of Consolidated Subsidiaries
The closing dates of consolidated subsidiaries in 2017 are as follows:
2017

January 14 *1March 31

7

*A subsidiary with the closing date of January 14 is consolidated based on the financial statements at theprovisional closing of accounts performed as of 31st March. Other subsidiaries are consolidated based on
the financial statements at their respective closing dates.

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 201721

Notes to Consolidated Financial Statements(d) Trading Account Assets and Liabilities
Transactions that seek gains on short-term fluctuations and arbitrage in interest rates, currency prices,market prices of financial instruments (trading transactions) are recognized on a trade date basis.
They are recorded as trading assets or trading liabilities on the consolidated balance sheets and gains orlosses on these transactions are recorded in trading income or trading expenses on the consolidated
statements of income.
The Company's consolidated subsidiaries engaged in the banking business value securities,
monetary claims, etc. held for trading purpose at the market price prevailing at the balance sheet date.
Derivatives, such as futures and option transactions, are stated at the amountassuming that they were terminated or settled at the balance sheet date.
Trading income and expenses include interest income or expenses as well as changes in unrealized
gains or losses on securities, monetary claims and derivative financial products during the fiscal year.
(e) Securities
Securities held to maturity are carried at amortized cost using the straight-line method with cost determinedby the moving average method. Investments in non-consolidated subsidiaries not accounted for by the equity
method are valued at cost determined by the moving average method. In principle, securities available forsale are carried at fair value with cost of sales determined by the moving average method.
However, securities available for sale, for which it is extremely difficult to determine the fair value, arevalued at cost determined by the moving average method.
The difference between the acquisition cost and the carrying amount of securities available for sale,
representing unrealized gains and losses, is recognized as unrealized gains (losses) on securities available forsale, net of taxes, and included directly in net assets.
Securities held as components of individually managed money trusts whose principal objective isinvestments in securities are stated at fair value.
(f) Derivatives
Derivatives held or written are stated at fair value.
(g) Tangible Fixed Assets (excluding leased assets)
Tangible fixed assets of the Company and its consolidated subsidiaries engaged in the banking business are
depreciated by the declining-balance method; however, buildings (excluding facilities attached to buildings) acquired on
or after 1st April, 1998 are depreciated by the straight-line method. The useful lives for buildings and equipment are as follows:
Buildings:

3 to 60 years

Equipment:

2 to 20 years

Tangible fixed assets of other consolidated subsidiaries are depreciated mainly using the declining-balance method.
(h) Intangible Fixed Assets (excluding leased assets)
Intangible fixed assets are amortized using the straight-line method. Software for internal use is amortizedbased on the estimated useful life determined by the Company and its consolidated subsidiaries (5 years).
(i) Leased Assets
The tangible and intangible fixed assets capitalized under the finance lease transactions entered into on
and after 1st April, 2008 where ownership of leased assets is not transferred to lessees are depreciated by
the straight-line method over the lease term with their residual value of zero.
(j) Accounting Treatment for Deferred Assets
Deferred assets are charged to expenses when incurred.

22

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 2017

Notes to Consolidated Financial Statements(k) Reserve for Possible Loan Losses
Major consolidated subsidiaries record the reserve for possible loan losses as follows:
For loans to insolvent customers who are undergoing bankruptcy or special liquidation, etc. (hereinafter,"borrowers under bankruptcy proceedings") or who are in a similar financial condition although not yet inbankruptcy (hereinafter, "borrowers substantially in bankruptcy"), the reserve for possible loan losses isprovided at the full amount of the book value of such loans after deducting the amount of direct write-offs(as defined below), and excluding the amounts deemed collectible from sale of the collateral pledged andthe guarantees that are deemed recoverable.
For the unsecured and unguaranteed portion of loans to customers not presently in the above
circumstances, but with a high probability of becoming so (hereinafter "customers with high probability of
becoming insolvent"), the reserve for possible loan losses is provided at the amounts deemed necessary
after deduction of the estimated realizable value of collateral and guarantees based on the customer's
overall financial condition.
For other loans, the reserve for possible loan losses is provided at an amount based on the anticipatedloss rates calculated from the actual losses for a certain period.
Regarding each loan, the Credit Review Office, which is independent of the operating divisions,reviews the operating divisions' evaluation of each loan for collectibility based on self-assessment
standards.
For loans to borrowers under bankruptcy proceedings and borrowers substantially in bankruptcy thatare secured by collateral and guarantees, the unrecoverable portion of such loans is determined bysubtracting the estimated recoverable amounts from the disposal of the collateral and the amounts deemed
recoverable from the guarantors. The unrecoverable amount is written off directly against the value of theloan ("direct write-off"). The amount of such direct write-offs at 31st March, 2017 was¥5,130 million ($45,731thousand).
For loans to borrowers with a rescheduled or restructuring plan, which exceed a certain amount, thediscounted cash flow (DCF) method is applied to provide for doubtful accounts, if cash flows fromcollection of principal and receipts of interest can be reasonably estimated. Under the DCF method areserve for possible loan losses is provided at the difference between the cash flows discounted by theoriginal interest rate and the carrying value of the loan.
Other consolidated subsidiaries record a general reserve for possible loan losses by applying the historicalloan-loss ratio observed over specific periods, and record a specific reserve for certain loans at theestimated uncollectible amount based on assessment of each borrower’s ability to repay.
(l) Reserve for Devaluation of Securities
In order to provide for a loss on investments, the Company and its consolidated subsidiaries estimate the amount deemednecessary based on a review of financial position, etc. of the companies issuing securities or golf club membership.
(m) Reserve for Retirement Benefits for Directors and Corporate Auditors
Reserve for retirement benefits for directors and corporate auditors is provided at the amount that would be paid inaccordance with the internally established rule at the balance sheet date if they were retired on that date.
(n) Reserve for Reimbursement of Deposits
Reserve for reimbursement of deposits is provided for possible losses on the future claims for withdrawalof the deposits, which was derecognized, at an amount deemed necessary based on the estimates of theconsolidated subsidiaries engaged in the banking business.
(o) Reserve for Other Contingent Losses
Reserve for other contingent losses is provided for possible losses on loans under the shared
responsibility system with the Credit Guarantee Corporation as well as for possible losses resulting
from other contingencies not covered by the other reserves, at an amount deemed necessary based on
the estimates of the future possible payments by the Company and its consolidated subsidiaries.

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 201723

Notes to Consolidated Financial Statements(p) Reserve under the Special Laws
Reserve under the special laws is a legal reserve for financial instruments exchange, which is provided
for possible losses arising from the purchase or sale of securities or other securities-related trading
activities by the Company's consolidated subsidiaries in Japan at an amount estimated pursuant to Article 46,
Item 5 of the Financial Instruments and Exchange Law as well as Article 175 of the Cabinet Office
Ordinance relating to the financial instruments services.
(q) Accounting for Retirement Benefits
For the consolidated subsidiaries engaged in the banking business, the retirement benefit obligation for employees
is attributed to each period by the benefit formula method.
Actuarial gain/loss is amortized using the straight–line method mainly over a period of 10 years following
the year it arises, which is within the average remaining years of service of the current employees.
For other consolidated subsidiaries, liability for retirement benefits and retirement benefit expenses arecalculated using the simplified method, which assumes the retirement benefit obligation to be equal to thebenefits payable if all eligible employees voluntarily terminated their employment at fiscal year end.
(r) Foreign Currency Translation
Foreign currency-denominated assets and liabilities are translated into Japanese yen primarily at theexchange rate prevailing at the balance sheet date.
(s) Accounting for Leases
Finance lease transactions which were initially engaged by the domestic consolidated subsidiaries prior to 1st April, 2008
where there is no transfer of ownership are accounted for by the same method as applicable to ordinary
operating lease contracts.
(t) Hedge Accounting① Hedge accounting for interest rate risks
The consolidated subsidiaries engaged in the banking business apply the deferred method as hedge accounting
for interest rate risks of certain financial assets and liabilities by using the individual hedging, which directly matches
hedged items and hedging instruments.
With regard to hedging transactions to offset fluctuations in the fair value of fixed-rate bonds classified asavailable-for-sale securities, in accordance with operational rules concerning hedge accounting, hedged items
are distinguished by identical type of bonds and interest rate swaps are used as hedging instruments.
Since significant terms related to those hedged items and hedging instruments are nearly identical, such hedging
transactions are deemed highly effective in terms of evaluation of hedge effectiveness.
No evaluation is performed for hedge effectiveness of qualifying interest rate swaps accounted for by the
special treatment, as it is ascertained that the criteria for the special treatment are continually met.
② Hedge accounting for foreign exchange rate risk
The consolidated subsidiaries engaged in the banking business apply the deferred method as hedge
accounting for foreign exchange risks of various foreign currency-denominated financial assets andliabilities in accordance with the "Accounting and Auditing Treatment for Accounting for
Foreign Currency Transactions in Banking Industry" (JICPA Industry Audit Committee Report No. 25 of 29th July, 2002).
The consolidated subsidiaries treat foreign exchange swap transactions as hedging instruments for the purpose of thehedge of foreign currency-denominated financial assets and liabilities, and the subsidiaries test hedge
effectiveness by matching the foreign currency swap position as hedging instruments with the related
foreign currency-denominated financial assets and liabilities as hedged items.
③ Internal contract
For internal contracts, the consolidated subsidiaries engaged in the banking business manage the foreign currency swaps that aredesignated as hedging instruments in accordance with the strict criteria for external transactions stipulated in the JICPA Industry
Audit Committee Report No. 25. Therefore, the subsidiaries either recognizes gains or losses that arise from suchcurrency swaps as earnings or defers them, rather than eliminating them.

24

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 2017

Notes to Consolidated Financial Statements(u) Amortization of Goodwill
Goodwill is amortized using the straight-line method over five years.
(v) Cash and Cash Equivalents in the Consolidated Statement of Cash Flows
Cash and Cash Equivalents in the consolidated statement of cash flows are composed of cash and duefrom central bank.
(w) Accounting Treatment for Consumption Taxes
The tax excluded method is used as the accounting treatment for consumption taxes and local
consumption taxes for the Company and its domestic consolidated subsidiaries.
(x) Application of the Consolidated Tax Payment System
Effective from the year ended 31st March, 2017, the Company and some of its consolidated subsidiaries have adopted
the consolidated tax payment system, where the Company is designated as a parent company.
(Additional information)
The Company and its consolidated subsidiaries have adopted the “Revised Implementation Guidance on Recoverability of Deferred
Tax Assets” (ASBJ Guidance No. 26 of 28th March, 2016) from the fiscal year ended 31st March, 2017.

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 201725

Notes to Consolidated Financial Statements

3.

Trading Account Assets

Trading account assets at 31st March, 2017 consisted of the following:Thousands ofMillions of yen

U.S. dollars

2017

2017

¥869
–
¥869

Trading securities
Other trading assets
Total

4.

Securities$7,749–$7,749Securities at 31st March, 2017 consisted of the following:Thousands ofMillions of yen
2017Japanese government bonds
Japanese municipal bonds
Corporate bonds (including
government-guaranteed bonds)*
Stock**
Other securities***
Total

5.

Loans and Bills Discounted

U.S. dollars
2017¥596,276
114,840$5,314,883
1,023,623

484,892
129,149
330,615¥1,655,774

4,322,064
1,151,169
2,946,922$14,758,662*

Corporate bonds included bonds offered through private placement. The guarantee obligation of Nishi-Nippon City Bank forsuch private placement bonds at 31st March, 2017 was ¥4,266 million ($38,024 thousand).

**

Stock included stock of affiliates of ¥548 million ($4,887 thousand) at 31st March, 2017.

***

Other securities included investments in non-consolidated subsidiaries of ¥241million ($2,155 thousand)at 31st March, 2017.

Loans and bills discounted at 31st March, 2017 consisted of the following:Thousands ofBills discounted*
Loans on notes
Loans on deed
Overdraft
Total
*

26

Millions of yen

U.S. dollars

2017

2017

¥25,862
223,452
5,894,192
660,321¥6,803,828$230,519
1,991,730
52,537,590
5,885,743$60,645,583

Bills discounted are recorded as cash lending / borrowing transactions in accordance with the "Accounting
and Auditing Treatments for Application of Accounting Standard for Financial Instruments in Banking
Industry" (JICPA Industry Audit Committee Report No. 24). The consolidated subsidiaries engaged in the banking businesshave right to sell or collateralize such bills at its discretion. Total face value of commercial bills and bills of exchange acquired
through discounting amounted to ¥26,094 million ($232,590 thousand) at 31st March, 2017.

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 2017

Notes to Consolidated Financial Statements

Non-performing loans included in the loans at 31st March, 2017 consisted of the following:Thousands ofLoans to legally bankrupt entities**
Delinquent loans***
Loans past due for three months or more****Loans with altered lending conditions*****
Total

6.

Assets Pledged as
CollateralMillions of yen

U.S. dollars

2017

2017

¥1,778113,541936
33,360¥149,617$15,853
1,012,046
8,351
297,361$1,333,612**

Loans to legally bankrupt entities are loans on which interest is placed on a non-accrual status ("nonaccrual loans"), excluding loans written off, as principal or interest has not been paid for a substantial
period or for other reasons and there are no prospects for recovery or repayment of principal or interest,
and to which certain circumstances apply as stated in the Implementation Ordinances for the
Corporation Tax Law.

***

Delinquent loans are non-accrual loans other than (i) loans to legally bankrupt entities and (ii) loans forwhich interest payments have been rescheduled in order to assist the restructuring of these borrowers.

****

Loans past due for three months or more are loans for which principal or interest has not been
paid for a period of three months or more from the next business day of the last due date, andthat are not included in loans to legally bankrupt entities or delinquent loans.

*****

Loans with altered lending conditions are loans restructured to provide relief to borrowers, such as
reducing interest rates, rescheduling interest and principal payment, or waiving the claims, in order toassist the restructuring of these borrowers. Such loans exclude loans to legally bankrupt entities,
delinquent loans, and loans past due for three months or more.

Assets pledged as collateral by the Company and its consolidated subsidiaries at 31st March, 2017consisted of the following:

Assets pledged as collateral
Cash and due from banks
Securities
Total
Liabilities secured by the above assets
Deposits
Payables under repurchase agreements
Guarantee deposits received under securities
lending transactions
Borrowed money

Thousands ofMillions of yen

U.S. dollars

2017

2017

¥40
802,332¥802,372$356
7,151,547$7,151,904¥18,514
69,174$165,025
616,583

18,714
621,618

166,8075,540,762

Other than the items shown above, the following items were pledged as collateral for foreign exchange transactions
and/or as substitutes for initial margin on futures at 31st March, 2017:
Thousands ofCash and due from bankSecurities

Millions of yen

U.S. dollars

2017

2017

¥2
65,892$17587,330

Additionally, the following was included in other assets at 31st March, 2017:
Thousands ofCash collateral paid for financial instruments
Deposits included in other assets

Millions of yen

U.S. dollars

2017

2017

¥9,716
2,406$86,604
21,448

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 201727

Notes to Consolidated Financial Statements

7.

Contracts for Commitment
Lines of Credit

Contracts for commitment lines of credit related to overdraft agreements and loan credit facilities represent a
promise on a lending bank at a specified credit limit, to a customer upon request for funds, unless there is aviolation of the contractual conditions.
The aggregate amounts under commitment contracts not yet drawn down at 31st March, 2017 are as follows:
Thousands ofAggregate amount under commitment contracts not yet
drawn down
Of the above amount, those with original maturity of lessthan one year or cancellable at any time without penalty

Millions of yen

U.S. dollars

2017

2017

¥2,046,944$18,245,342

1,993,150

17,765,843

As many of these contracts expire without the right to extend the loans being exercised, the aggregate totalof the undrawn amount does not necessarily affect the future cash flows of the Company and its consolidated
subsidiaries. Many of these contracts have stipulations that allow the consolidated subsidiaries toturn down a loan request or reduce the amount of the credit line if there is a change in financial conditions, a needto secure their credit, or other similar reasons. In addition to obtaining necessary collateral (real estate, securities,etc.) at the time the contract is entered into, the consolidated subsidiaries assess the condition of thecustomer’s business operations, and analyze other information, based on internal procedures and standards.
If necessary, the contract is reviewed and revised, or additional steps are taken to secure the credit extended tothe customer.

8.

Foreign Exchange

Foreign exchange assets and liabilities at 31st March, 2017 consisted of the following:Thousands ofAssets:Foreign exchange bills bought
Foreign exchange bills receivable
Due from foreign banks (their accounts)
Due from foreign banks (our accounts)
Total
Liabilities:
Foreign exchange bills sold
Foreign exchange bills payable
Total

9.

Other Assets

Millions of yen

U.S. dollars

2017

2017

¥232
289
–
7,017
¥7,539$2,0702,582–
62,553$67,207

¥13
75
¥89

$122
676
$798

Other assets at 31st March, 2017 consisted of the following:Thousands ofDomestic exchange settlement account*
Accrued income
Prepaid expenses
Financial derivative products
Cash collateral paid for financial instruments
Other
Total
*

28

Millions of yen

U.S. dollars

2017

2017

¥12
6,538
70
6,609
9,716
32,621¥55,567

Domestic exchange settlement account represents unsettled debit balances arising from inter-bankdomestic exchange transfers.

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 2017

$113
58,276628
58,91286,604
290,766$495,300

Notes to Consolidated Financial Statements

10. Tangible Fixed Assets

Tangible fixed assets at 31st March, 2017 consisted of the following:Thousands ofLand
Buildings
Construction in progress
Leased assets
Other tangible fixed assets
Total

Millions of yen

U.S. dollars

2017

2017

¥75,828
29,897
3,058
191
12,059¥121,035$675,897
266,489
27,264
1,706
107,487$1,078,845* The amount of accumulated depreciation for tangible fixed assets at 31st March, 2017 was¥71,380 million ($636,242 thousand).
The accelerated depreciation entry amount for tangible fixed assets at 31st March, 2017 is as follows:
Thousands ofMillions of yen

U.S. dollars

2017

2017

¥7,440

11. Deposits$66,322

Deposits at 31st March, 2017 consisted of the following:Thousands ofMillions of yen

U.S. dollars

2017

Current deposits
Ordinary deposits
Deposits at noticeTime deposits
Negotiable certificates of deposit
Other deposits
Total

12. Bonds

2017¥358,781
4,113,424
15,1452,990,162
420,959
120,538¥8,019,012$3,197,982
36,664,809
134,997
26,652,667
3,752,200
1,074,415$71,477,072

Bonds at 31st March, 2017 consisted of the following:Thousands of

Bonds:
2.70% Japanese yen subordinated bonds due 2017
0.67% Japanese yen callable subordinated bonds due 2023
0.87% Japanese yen callable subordinated bonds due 2025
Total

13. Borrowed Money

Millions of yen

U.S. dollars

2017

2017

¥10,000
10,00010,000¥30,000$89,134
89,134
89,134$267,403

The weighted average interest rates on borrowed money at 31st March, 2017 is 0.07%.
The aggregate annual maturity amounts within five years of borrowed money
after 31st March, 2017 are as follows:
Thousands ofMillions of yen

Year ending 31st March
2018
2019
2020
2021
2022

¥36,381
50,77995,937447,263
131

U.S. dollars$324,283
452,618
855,133
3,986,662
1,176

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 201729

Notes to Consolidated Financial Statements

14. Other Liabilities

Other liabilities at 31st March, 2017 consisted of the following:

Domestic exchange settlement accountAccrued income taxes
Accrued expenses
Unearned income
Financial derivative products
Lease obligations
Cash collateral received for financial instruments
Asset retirement obligations
OthersTotal

15. Capital Stock

Thousands ofMillions of yen

U.S. dollars

2017

2017

¥36
2,879
8,620
2,777
6,739
226
546
849
68,940¥91,616$325
25,66376,83724,75660,072
2,020
4,866
7,572
614,499$816,615

Capital stock during the year ended 31st March, 2017 consisted of the following:
Common stock
Issued shares

1st April, 2016
Increase
Decrease*
31st March, 2017796,732,552–
617,135,597
179,596,955

Capital stock
Millions ofThousands ofyen

U.S. dollars¥85,745–(35,745)¥50,000$764,288–(318,616)$445,672* The decrease of 617,135,597 shares is due to retirement of treasury shares of 16,813,800
and a decrease resulting from the share transfer of 600,321,797.

16. Treasury Stock

Treasury stock during the year ended 31st March, 2017 consisted of the following:
Common stock
Number of shares

1st April, 2016
Increase*
Decrease*
31st March, 2017

11,734,569
28,742,222
16,835,565
23,641,226

Treasury stock
Millions ofThousands ofyen

U.S. dollars(¥4,189)(16,844)5,203(¥15,829)* The increase of 28,742,222 shares is due to an increase resulting from the share transfer of 23,529,205,
acquisition of treasury shares of 5,131,000 and purchase of fractional shares of 82,017.
The decrease of 16,835,565 shares is due to retirement of treasury shares of 16,813,800 andsale of fractional shares of 21,765.

30

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 2017($37,340)(150,139)
46,382($141,097)

Notes to Consolidated Financial Statements

17. Revaluation of Premises
Account

Based on the Law Concerning Land Revaluation (Law No. 34, promulgated on 31st March, 1998), the consolidated
subsidiaries engaged in the banking business have revalued land used for business purposes.
The deferred taxes on revaluation differences are presented in the account, "Deferred tax liabilities on revaluationof premises" in the liabilities of the consolidated balance sheet. The amount of revaluation differences, net of tax, ispresented as "Revaluation of premises, net of taxes" in net assets.
The excess of the aggregate market value of land for business use revalued in accordance with Article 10 of the
Law Concerning Land Revaluation over the book value after revaluation at 31st March, 2017 is as follows:
Thousands ofMillions of yen

U.S. dollars

2017

2017

¥14,774
18. Other Interest Income$131,691

Other interest income for the year ended 31st March, 2017 consisted of the following:Thousands ofInterest on call loans and bills boughtInterest on deposits with banks
OthersTotal

19. Other Operating Income

Millions of yen

U.S. dollars

2017

2017

$76
1,703
11,572$13,353

¥8
191
1,298
¥1,498Other operating income for the year ended 31st March, 2017 consisted of the following:Thousands ofGains on foreign exchange transactions
Gains on sale of bonds
OthersTotal

20. Other Income

Millions of yen

U.S. dollars

2017

2017

¥1,293693
679¥2,667$11,533
6,181
6,058$23,772

Other income for the year ended 31st March, 2017 consisted of the following:Thousands ofGains on sale of stock and other securities
Gains on money held in trust
Equity in earnings of affiliates
Gains on disposition of fixed assets
Recoveries of written-off claims
Rental income on land and buildings
Others
Total

Millions of yen

U.S. dollars

2017

2017

¥5,720
3
111
75
240
382
2,498
¥9,032$50,990
29
991
674
2,140
3,410
22,272$80,510

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 201731

Notes to Consolidated Financial Statements

21. Other Interest Expenses

Other interest expenses for the year ended 31st March, 2017 consisted of the following:Thousands of

Bonds
Securities lending transactions
OthersTotal

22. Other Operating Expenses

Millions of yen

U.S. dollars

2017

2017

¥531
27
603
¥1,162$4,734
241
5,383$10,358

Other operating expenses for the year ended 31st March, 2017 consisted of the following:Thousands ofLosses on sale of bonds
Losses on redemption of bonds
Losses on devaluation of bonds
Expenses for derivatives other than trading derivatives
Total

Millions of yen

U.S. dollars

2017

2017

¥1,249148
29596¥2,023$11,133
1,319
266
5,313
$18,033

23. General and Administrative General and administrative expenses for the year ended 31st March, 2017 consisted of the following:
ExpensesThousands ofSalaries and allowances
Employee retirement benefits
Retirement benefits for directors and corporate auditors
Depreciation
Rental expenses
Taxes
OthersTotal

24. Other Expenses

Millions of yen

U.S. dollars

2017

2017

¥32,685
3,079
45
6,615
3,548
5,321
34,313¥85,608$291,340
27,447402
58,962
31,62847,435
305,853$763,071

Other expenses for the year ended 31st March, 2017 consisted of the following:Thousands ofProvision for possible loan losses
Losses on write-offs of claims
Losses on sale of stock and other securities
Losses on devaluation of stock and othersecurities
Losses on money held in trust
Losses on disposition of tangible fixed assets
Impairment losses
Losses on sale of loans
Others
Total

32

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 2017

Millions of yen

U.S. dollars

2017

2017

¥ 2,5531,510
300$22,758
13,466
2,680

78
0
543
974
208
2,399
¥8,569

697
0
4,848
8,688
1,854
21,391$76,386

Notes to Consolidated Financial Statements

25. Other Comprehensive
IncomeReclassification adjustments and tax effects related to other comprehensive income
for the year ended 31st March, 2017 are as follows:
Thousands of

Net unrealized gains on securities available for sale:Amount arising during the year
Reclassification adjustments
Amount before tax effectTax effectNet unrealized gains on securities available for saleNet deferred gains (losses) on hedging instruments:
Amount arising during the year
Reclassification adjustments
Amount before tax effectTax effect
Net deferred gains (losses) on hedging instruments
Retirement benefits liability adjustments
Amount arising during the year
Reclassification adjustments
Amount before tax effectTax effect
Retirement benefits liability adjustments
Total other comprehensive income

Millions of yen

U.S. dollars

2017

2017

¥4,078(7,396)(3,318)2,284(¥1,033)$36,349(65,928)(29,578)
20,366($9,212)

¥40
861
902
(275)
¥626

$365
7,675
8,040
(2,451)$5,588¥6,0622,324
8,387(2,556)$54,041
20,722
74,763(22,789)¥5,830¥5,424$51,973$48,350

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 201733

Notes to Consolidated Financial Statements

26. Lease Transactions(1) Finance leases
Information on finance lease transactions which are accounted for as operating leases at 31st March, 2017is summarized as follows:

Thousands ofMillions of yen

U.S. dollars

2017

2017

Amounts equivalent to acquisition cost
Tangible fixed assets¥1,867$16,647
Total¥1,867$16,647
Amounts equivalent to accumulated depreciation
Tangible fixed assets$12,930¥1,450Total$12,930¥1,450
Amounts equivalent to carrying value
Tangible fixed assets$3,717¥417
Total$3,717¥417
Note: The amount equivalent to acquisition cost includes an interest element as the total future finance lease
payments are not significant to the balance of tangible fixed assets at the end of the year.

Future lease payments of finance leases which are accounted for as operating leases at 31st March, 2017 are as follows:
Thousands ofMillions of yen

U.S. dollars

2017

2017

Future finance lease payments
Due within one year$688
¥77
Due after one year
339
3,029
Total
¥417
$3,717
Note: The amount of the future finance lease payments at the end of the year includes an interest element as thetotal future finance lease payments are not significant to the balance of tangible fixed assets at the endof the year.
Total lease payments during the year and the amount equivalent to depreciation expenses for the year ended
31st March, 2017 are as follows:
Thousands ofMillions of yen

U.S. dollars

2017

2017

*

$688
688

¥77
77

Total lease payments during the year
The amount equivalent to depreciation expenses *The amount equivalent to depreciation expenses was calculated using the straight-line method with no residual
value over the lease term.

(2) Operating leases
Future lease payments required under operating leases that are non-cancelable at 31st March, 2017 are as follows:
Thousands ofFuture operating lease payments
Due within one year
Due after one year
Total

34

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 2017

Millions of yen

U.S. dollars

2017

2017

¥383
671
¥1,054$3,416
5,985$9,401

Notes to Consolidated Financial Statements

27. Financial Instruments(1) Matters related to status of financial instruments
1. Policies for financial instrument
Nishi-Nippon Financial Holdings, Inc. Group (the "Group") is engaged in the financial service business,with a primary focus on banking businesses such as deposits, loans, securities, and domestic and foreign
currency exchange businesses. The Group manages and raises funds, taking into account market
conditions and balancing duration. To conduct these businesses, the Company comprehends the risks
arising from all of its assets and liabilities, including off-balance-sheet transactions, through the proper
controls over these risks, and builds reasonable and effective portfolios. Thus the Company operates
a comprehensive asset and liability management (ALM) system with the aim of maximizing andstabilizing its profits.
In addition, some of the Company's consolidated subsidiaries are engaged in banking, credit card,credit guarantee services, credit management, restructuring support services, claims servicing
businesses and financial instruments and exchange services.
2.

Types of financial instruments and related risks
Loans, which comprise 70% of the Group's total assets, are primarily made to domestic corporations
and individuals and are exposed to credit risks resulting from non-performance of contracts. Should
the creditworthiness of major borrowers deteriorate, the value of collateral sharply decline, or otherunanticipated problems arise, it could cause an increase in the cost of credit such as an unexpected
write-off or rise in reserve for possible loan losses. Moreover, considering the relative weight of
the invested assets, the impact of any such problems could be substantial and could have a negative
effect on the financial position and performance of the Group.
Securities are mainly stocks, debt securities, and investment trusts and are exposed to the credit
risk of each issuer and the risk of interest rate fluctuation. Stocks that are marketable are exposed toprice volatility risks that a decline in their market prices cause impairment losses and valuation losseson the stocks. Debt securities are also subject to price volatility risks that an increase in the market
interest rates following economic recovery may cause valuation losses on the securities.
Borrowed money and bonds are exposed to liquidity risks that, if some problems arise in cash
management due to deterioration in financial positions at the Group, the Group is forced to raise funds
at higher interest rates than usual, market transactions are suspended as a result of market turmoil, or
it is forced to make transactions at a drastically unfavorable price than usual, it could impact future
operations of the Group.
Derivative transactions include interest rate swaps, forward exchange transactions, currency swaps,
and currency options. These derivatives are utilized primarily as hedging instruments to manage andmitigate the market risks of on-balance-sheet assets and liabilities. In addition, some of the derivativetransactions in trading operations are used for the purpose of making profits through short-term
fluctuations in the market rates, arbitrage transactions and others. Hedge transactions consist mainly ofinterest rate swaps as a hedge against interest rate fluctuation risks arising from loans with fixed interest
rates and callable time deposits, and forward exchange transactions and currency options as a hedge against
exchange rate fluctuation risks arising from foreign currency-denominated assets and liabilities. The Company
assesses the hedge effectiveness based on the difference between accumulated changes in cash flows ofhedged items and hedging instruments. However, no evaluation is performed for the hedge effectivenessof qualifying interest rate swaps accounted for by the special treatment under the Accounting Standard for
Financial Instruments, as it is ascertained that such derivatives continually meet the criteria for special
treatment. Risks related to these derivatives transactions include the market risk of a potential loss inthe fair value of financial instruments or portfolios resulting from fluctuations in interest rates, foreignexchange rates, stock prices and other factors as well as the credit risk of a potential loss in the value ofa transaction due to default by counterparties to the contracts.

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 201735

Notes to Consolidated Financial Statements

3.

Risk management system for financial instrument① Credit risk management
Recognizing the credit risk as our highest priority, the Group is working on strengthening controls overthe credit risk in accordance with the Group's credit risk management policy and credit policy.
The Group applies its strict standards to the screening of individual credit extension, and credit
that exceed certain thresholds are reviewed further by specialized staff in its Credit Supervision Division.
In this way, the Group is working to maintain the soundness of its assets.
Regarding its loan portfolios, the Group tries to diversify risks to ensure that there is no concentration
on any particular industrial sectors or customers, through its systems of credit risk quantification andportfolio management by sector based on the credit rating system.
In addition, in order to properly carry out write-offs and set provisions, the Group conducts self-assessmentsof its assets and uses an independent audit department to constantly monitor the status of the self-assessment
procedures and adequacy of write-offs and provisions.
② Market risk management
The Group clearly separates the department responsible for conducting market transactions (front office) fromthe department responsible for business administration (back office). Furthermore, the division which is
independent from the market divisions has been put in charge of risk management (middle office) to monitor
conditions of the market transactions and their compliance with the market risk-related regulations. The Groupthus has a system of mutual controls among offices.
In addition, the Group is working to achieve stable profits by improving its management methods
through a variety of techniques for measuring risks such as VaR (Value at Risk) and BPV (Basis Point Value)
methods, and by establishing a maximum acceptable level for market risks and controlling the risks within thecertain acceptable range.
(Quantitative information on market risks)
The measured quantity of market risks of the Group as a whole at 31st March, 2017 was¥31,581 million ($281,498 thousand).
Financial instruments of the consolidated subsidiaries engaged in the banking business which are subject tothe measurement include loans, deposits, securities and derivatives. The Group measures market risks using
historical VaR method with an observation period of five years, a confidence interval of 99% anda holding period of 6 months.
The Group performs backtesting, which compares VaR calculated by the model with actual
performance (gain or loss). Based on the results of the testing, we believe that the risk measurement
model which we use captures market risks with sufficient accuracy. However, since VaR measuresmarket risks at a certain probability which is statistically calculated, it is not always possible for themodel to capture market risks in situations where market conditions change drastically.
③ Liquidity risk management
The Group recognizes the liquidity risk as one of the most significant risks, because there are concern overpotential business failures and systemic risks when the liquidity risk rises.
The Group provide against the liquidity risks by ensuring an adequate reserve for outstanding claims anddeveloping a contingency plan that assumes various scenarios.
As for the day-to-day cash management of the Group, a system of mutual controls among divisions has been
put into place. As a part of this system, the divisions responsible for the Group's day-to-day cash management
raise and manage marketable funds, while the divisions responsible for managing the liquidity risk monitor theGroup's cash position. In this way, the Group maintains a fluid and stable cash position.
④ Risk management for derivative transactions
The Group's derivative transactions are entered into using operational rules prepared in accordance with theGroup's internal regulations. The rules stipulate the scope of derivative usage, authorization, responsibility,
procedure, credit line, loss-cut rule, and reporting system. Each business line is responsible for each relevant risk
management and for reporting to management, including the ALM Committee, on a monthly basis.

4.

Supplementary explanation of the estimated fair value of financial instruments
The fair value of financial instruments includes the value based on the market price as well as a reasonably
estimated value in case there is no market price. Because various assumptions are used in the estimation of thefair value, the fair value may vary when different assumptions are used.

36

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 2017

Notes to Consolidated Financial Statements(2) Estimated fair value of financial instruments
Carrying value of financial instruments in the consolidated balance sheet at 31st March, 2017 and their fair values and valuationdifferences are as follows. Non-listed stocks and others whose fair value is extremely difficult to be estimated are excluded
from the table below (refer to Note 2).
<At 31st March, 2017>
Millions of yen
Valuation
Carrying value

Assets:(1) Cash and due from banks(2) Securities:
Held-to-maturity securities
Available-for-sale securities(3) Loans and bills discounted
Reserve for possible loan losses*
Total assets
Liabilities:(1) Deposits(2) Call money and bills sold(3) Payables under repurchase agreements(4) Guarantee deposits received under securities
lending transactions(5) Borrowed money(6) Bonds
Total liabilities
Derivatives**
Hedge accounting not applied
Hedge accounting applied
Total derivatives

Fair value

differences－¥807,097¥807,097¥

69,1301,569,923
6,803,828(41,860)
6,761,967¥9,208,117

70,827
1,569,923

1,697－

6,878,601¥9,326,449

116,634¥118,331¥8,019,012
59,924
69,174¥8,019,719
59,924
69,174¥707－－

18,714
630,662
30,000¥8,827,488

18,714625,41130,156¥8,823,100－(5,251)
156(¥4,388)

¥273
(809)
(¥536)¥273(809)(¥536)¥¥－－－

Thousands of U.S. dollars
Valuation
Carrying value

Assets:(1) Cash and due from banks(2) Securities:
Held-to-maturity securities
Available-for-sale securities(3) Loans and bills discounted
Reserve for possible loan losses*
Total assets
Liabilities:(1) Deposits(2) Call money and bills sold(3) Payables under repurchase agreements(4) Guarantee deposits received under securities
lending transactions(5) Borrowed money(6) Bonds
Total liabilities
Derivatives**
Hedge accounting not applied
Hedge accounting applied
Total derivatives

Fair value

differences$7,194,019$7,194,019－

616,187
13,993,434
60,645,583(373,123)
60,272,460$82,076,101

631,313
13,993,434

15,126－61,312,074$83,130,841

1,039,613$1,054,740$71,477,072
534,134
616,583

71,483,375
534,134
616,583$6,302－－

166,8075,621,378
267,403$78,683,381

166,8075,574,569
268,794$78,644,264－(46,808)
1,390($39,116)$2,433(7,210)($4,777)$2,433(7,210)($4,777)

$ －
－
$ －

*

The general reserve for possible loan losses and the specific reserve for possible loan losses, whichcorrespond to loans and bills discounted, have been deducted.
** Derivative transactions recorded in Other assets and Other liabilities are presented in total.
The value of assets and liabilities arising from derivative transactions is shown at net value,
and with the amount in parentheses representing net liability position.

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 201737

Notes to Consolidated Financial Statements(Note 1) Methods for estimating the market value of financial instruments
Assets:(1) Cash and due from banks
Because the fair value of due from banks that does not have stated maturity approximates its carrying
value, the carrying value is treated as the fair value. The fair value of due from banks that has statedmaturity is based on the present value of the totals by maturity bucket discounted by the interest rate thatwould be applied if similar deposits were placed. As the fair value of due from banks with a short-term
original contractual maturity (one year or less) approximates its carrying value, its carrying value is treatedas the fair value.
(2) Securities
The fair value of stocks is based on their market price on the stock exchange, while the fair value of debt
securities is based on the Reference Prices (Yields) for OTC Bond Transactions published by the Japan
Securities Dealers Association, the price quoted by the correspondent financial institutions or the value
reasonably calculated by the Group. The fair value of investment trusts is based on the announced
reference price or the price quoted by the correspondent financial institutions. The fair value of foreign
securities is based on the price quoted by the correspondent financial institutions or the financial
information vendors.
The fair value of private placement bonds with the Company's own guarantee is based on the present
value of future cash flows discounted by the market interest rate adjusted for credit risk.
Notes concerning securities by each carrying purpose are presented in “28. Securities” of “Notes toConsolidated Financial Statements.”

38

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 2017

Notes to Consolidated Financial Statements(3) Loans and bills discountBecause loans and bills discounted with floating interest rates reflect market interest rates in a shortperiod of time, the fair value of such loans approximates their carrying value as long as the credit
standing of the borrower has not changed significantly since origination. Thus, the carrying value ofsuch loans is treated as the fair value. The fair value of loans and bills discounted with fixed interest
rates is based on the present value of the total amount of principal and interest categorized by the typeof loans, internal rating and term, discounted by the market interest rate adjusted for credit risk. Because
the fair value of loans with a short-term contractual maturity (one year or less) approximates their carrying
value, the carrying value is treated as the fair value.
Regarding loans to borrowers under bankruptcy proceedings, borrowers substantially inbankruptcy and customers with high probability of becoming insolvent, since the fair value of suchloans approximates their carrying value after deducting the reserve for possible loan losses, which is
calculated based on the present value of estimated future cash flows or the estimated amounts collectible
from the sale of collateral and guarantees, the carrying value is treated as the fair value.
With respect to loans and bills discounted that have no due date because of special attributes suchas limiting the borrowings to the amounts secured by collateral, because it is assumed that the fair value
approximates the carrying value from the estimated repayment period and interest rate conditions, thecarrying value is treated as the fair value.

Liabilities:(1) Deposits
For demand deposits, the amount which would be paid if its repayment were demanded on the consolidatedbalance sheet date (carrying value) is deemed to be the fair value. The fair value of time deposits is basedon the discounted present value of the future cash flows categorized by term. The discount rate is theinterest rate that would be applied when new deposits were taken. Because the fair value of those with ashort-term original contractual maturity (one year or less) approximates their carrying value, the carrying
value is treated as the fair value.
(2) Call money and bills sold, (3) Payables under repurchase agreements, and (4) Guarantee deposits received
under securities lending transactions
Since call money and bills sold, payables under repurchase agreements and guarantee deposits received
under securities lending transactions have short-term original contractual
maturity (one year or less) and their fair value approximates the carrying value, the carrying value is treatedas the fair value.
(5) Borrowed money
Because borrowed money with floating interest rates reflects market interest rates in a short period of time
and the credit standing of the Company and its consolidated subsidiaries has not changed significantly since
the borrowing, the fair value of such borrowed money is deemed to approximate the carrying value.
Therefore, the carrying value is treated as the fair value. The fair value of borrowed money with fixedinterest rates is based on the present value of the total amount of principal and interest of the borrowed
money categorized by term, discounted by the market interest rate adjusted for credit risk. Because thefair value of borrowed money with a short-term original contractual maturity (one year or less)approximates its carrying value, the carrying value is treated as the fair value.
(6) Bonds
The fair value of bonds is based on the Reference Price (Yields) for OTC Bond Transactions publishedby the Japan Securities Dealers Association or the price quoted by the securities company.
Derivative transactions:
Derivative transactions are presented in "30. Derivatives" of "Notes to Consolidated Financial Statements."

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 201739

Notes to Consolidated Financial Statements(Note 2) Financial instruments whose fair value is extremely difficult to be estimated are as stated below.
They are not included in "Assets: (2) Available-for-sale securities" presented in "Estimated fair valueof financial instruments."
Thousands ofMillions of yen

U.S. dollars

2017

2017

¥14,420$128,533
Non-listed stocks
20,5072,300
Investments in partnerships¥16,720$149,041
Total
Notes: 1. Because non-listed stocks have no market price and because it is extremely difficult toestimate their fair value, they are not subject to the fair value disclosure.
2. In the year ended 31st March, 2017, impairment losses of ¥78 million ($697 thousand) wererecorded for non-listed stocks.
3. Investments in partnerships whose fair value is extremely difficult to be estimatedbecause the partnership's assets are non-listed stocks, etc. are not subject to the fairvalue disclosure.
(Note 3) Repayment schedules for monetary claims and securities with stated maturity at 31st March, 2017.

<At 31st March, 2017>
Millions of yen
Due in1 year or lessDue from banks
Securities:
Held-to-maturity securities
Government bonds
Municipal bonds
Corporate bonds
Securities available for sale with maturity
Government bonds
Municipal bonds
Corporate bonds
OthersLoans and bills discounted
Total

Due from

Due from

Due from

Due from

Due after

1 year to 3 years 3 years to 5 years 5 years to 7 years 7 years to 10 years 10 years¥710,798

¥

—

¥

—

11,927
—
6,089
5,838
291,257
126,500
25,26789,26750,223
1,362,805¥2,376,788

26,906
10,0006,290
10,616494,506
282,700
21,730123,261
66,815
1,096,062¥1,617,475

15,00015,000——284,883
88,50011,444
120,028
64,911
959,112¥1,258,995

Due inDue from

Due from¥—

16,00016,000——
194,566
33,0008,605
96,74556,216
666,652¥877,219

¥

—

¥

—

—
—
—
—
138,439
18,00034,34130,12555,972776,223¥914,662————
16,571———
16,571
1,735,955¥1,752,526

Due from

Due after

Thousands of U.S. dollars
1 year or lessDue from

1 year to 3 years 3 years to 5 years 5 years to 7 years 7 years to 10 years 10 years$
Due from banks$6,335,664
—
$
—
$
—
$
—
$
—
Securities:
106,310
239,825——
142,615
Held-to-maturity securities
133,701—
89,134——
142,615
Government bonds
133,701
54,273————56,065
Municipal bonds———
52,036
94,625—
Corporate bonds
2,539,298 1,734,262 1,233,969
2,596,106
4,407,761
147,705
Securities available for sale with maturity
294,1432,519,832
788,840
1,127,551
160,442—Government bonds
102,005
76,700
193,689
225,217306,096
Municipal bonds—
1,069,864
862,334
1,098,687
795,676
268,521
Corporate bonds—
501,083
595,552
447,660
498,908
Others578,588
147,705
12,147,303
8,548,998 5,942,173 6,918,826 15,473,356
9,769,702
Loans and bills discounted$21,185,384 $14,417,288 $11,221,998 $7,819,050 $8,152,795 $15,621,062
Total
Note: Excluded from Loans and bills discounted are ¥114,623 million ($1,021,693 thousand) relating to those whose repayment
is not reasonably estimable because the debtors are borrowers under bankruptcy proceedings, borrowers substantiallyin bankruptcy, or customers with high probability of becoming insolvent and ¥92,391 million ($823,530 thousand)relating to those that do not have contractual maturity.

40

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 2017

Notes to Consolidated Financial Statements(Note 4) Repayment schedules for bonds, borrowed money and other interest-bearing debts at 31st March, 2017
<At 31st March, 2017>
Millions of yen
Due inDeposits
Call money and bills soldPayables under repurchase agreements
Guarantee deposits received under securities
lending transactions
Borrowed money
Bonds
Total

1 year or less

¥7,656,225
59,924
69,174Due from

Due from

Due from

Due from

1 year to 3 years 3 years to 5 years 5 years to 7 years 7 years to 10 years

Due after
10 years¥307,274¥44,694¥4,270¥6,545

–
–

–
–

–
–

–
–

–
–

–

–
–
–

–

–

18,71436,381
10,000¥7,850,420

146,716

447,395¥453,991¥492,090

Due inDue from

Due from––130
10,000¥14,401–

38
10,000¥16,583¥0¥0Thousands of U.S. dollars
1 year or less

Deposits$68,243,390 $2,738,878–
Call money and bills sold534,134–
Payables under repurchase agreements
616,583
Guarantee deposits received under securities–
lending transactions
166,807324,283
Borrowed money
1,307,752–
Bonds
89,134
Total$69,974,334 $4,046,631
Note: Demand deposits are included under "Due in 1 year or less."

28. Securities

Due from

Due from

Due after

1 year to 3 years 3 years to 5 years 5 years to 7 years 7 years to 10 years 10 years$398,384$38,067––––$58,345

$7

–
–
–

–
–

–

–

–

3,987,838

1,162
89,134$128,364

340
89,134$147,820–$4,386,223

–
–

$7

(1) Trading securities and commercial papers (including those included in "Trading account assets")Thousands ofHolding losses recognized in income

Millions of yen

U.S. dollars

2017

2017

(¥3)

($30)

(2) Held-to-maturity securities
1. Securities whose fair value exceeds their carrying value<At 31st March, 2017>
Millions of yen
Valuation
Fair value

Carrying value

Bonds:
Government bonds
Municipal bonds
Corporate bonds¥40,161
12,45816,51069,130¥41,421
12,663
16,74270,827¥1,259
205
231
1,697

¥69,130¥70,827¥1,697–

OthersTotal

differences––

Thousands of U.S. dollars
Valuation
Carrying value

Bonds:
Government bonds
Municipal bonds
Corporate bonds

Fair value$357,975
111,047
147,164
616,187$369,204
112,878
149,231631,313$11,228
1,830
2,066
15,126$616,187$631,313$15,126–

OthersTotal

differences––

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 201741

Notes to Consolidated Financial Statements

2. Securities whose carrying value exceeds their fair value<At 31st March, 2017>
None(3) Available-for-sale securities (including negotiable due from banks included in "Cash and due from banks")
1. Securities whose carrying value exceeds their acquisition cost
<At 31st March, 2017>
Millions of yen
Valuation
Carrying value

StocksBonds:
Government bonds
Municipal bonds
Corporate bonds
Others
Total

Acquisition costdifferences¥110,079¥48,309¥61,769

556,115
61,612
410,867
1,028,595
231,185¥1,369,859

551,340
61,377
406,913
1,019,632
212,272¥1,280,215

4,774
234
3,953
8,962
18,912¥89,644

Thousands of U.S. dollars
Valuation
Carrying value

StocksBonds:
Government bonds
Municipal bonds
Corporate bonds
Others
Total

Acquisition costdifferences$981,185$430,608$550,576

4,956,907
549,1813,662,244
9,168,333
2,060,659$12,210,178

4,914,349
547,087
3,627,005
9,088,442
1,892,083$11,411,134

42,557
2,093
35,23979,891
168,575$799,043

2. Securities whose acquisition cost exceeds their carrying value<At 31st March, 2017>
Millions of yen
Valuation
Carrying value

StocksBonds:
Government bonds
Municipal bonds
Corporate bonds
Others
Total

Acquisition cost

¥4,650¥5,819differences(¥1,169)–––

40,76957,514
98,284
97,129¥200,063

41,086
57,693
98,77998,505¥203,105

(317)
(178)
(495)
(1,376)(¥3,041)

Thousands of U.S. dollars
Valuation
Carrying value

StocksBonds:
Government bonds
Municipal bonds
Corporate bonds
OthersTotal

42

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 2017

Acquisition cost

$41,450$51,875

differences($10,424)–––

363,394
512,655
876,049
865,755$1,783,255

366,225514,244880,469
878,022$1,810,368(2,830)(1,589)(4,420)(12,267)($27,112)

Notes to Consolidated Financial Statements(4) Available-for-sale securities sold for the year ended 31st March, 2017 are as follows:<At 31st March, 2017>
Millions of yen
Proceeds
from sale

LossesGains

StocksBonds:
Government bonds
Municipal bonds
Corporate bonds¥2,737¥1,029(¥150)

–
–
–

–
–
–

–
–
–

Others28,421¥31,159

5,283¥6,312(1,249)(¥1,399)

Total

Thousands of U.S. dollars
Proceeds
from sale

Gains

LossesStocksBonds:
Government bonds
Municipal bonds
Corporate bonds$24,404$9,173($1,343)

Others––––

253,330$277,735

–
–
–
–

–
–
–
–

Total

47,091$56,264(11,133)($12,476)(5) Devaluation of securities
Securities other than trading securities (excluding securities whose fair value is extremely difficult to be
estimated) are devalued to the fair value, and the difference between the acquisition cost and the fair value istreated as the loss for the fiscal year ("devaluation"), if the fair value (primarily the closing market price at theconsolidated balance sheet date) has significantly deteriorated compared with the acquisition cost (including
amortized cost) unless it is deemed that there is a possibility of a recovery in the fair value. The amount ofdevaluation was ¥29 million ($266 thousand) for bonds for the year ended 31st March, 2017.
The criteria for determining whether the fair value of a security has "significantly deteriorated" are outlined asfollows:
1. The fair value is 50% or less of the acquisition cost, or
2. The fair value exceeds 50% but is 70% or less of the acquisition cost and the security meets certain conditions
such as the quated market price for a certain period in the past and financial conditions of the issuer.
(6) Unrealized gains/losses on securities available for sale
The components of the unrealized gains/losses on securities available for sale at 31st March, 2017 are as follows:<At 31st March, 2017>
Thousands ofMillions of yen

Revaluation difference
Deferred tax liability
Revaluation difference (before non-controlling interest
adjustment), net of taxes
Amount corresponding to non-controlling interests
Amount corresponding to the parent's share of net
unrealized gains on available-for-sale securities
owned by affiliates
Unrealized gains on securities available
for sale, net of taxes

U.S. dollars¥86,602(24,182)$771,922(215,545)

62,420(297)

556,377(2,647)––¥62,122$553,725

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 201743

Notes to Consolidated Financial Statements

29. Money Held in Trust

Money held in trust at 31st March, 2017 is as follows:
Thousands ofMillions of yen

U.S. dollars

2017

2017

Money held in trust for other purposes than investment
purposes and held-to-maturity purposes:
Acquisition Cost
Carrying value

¥850
850

$7,576
7,576–

Unrealized gains/losses–

30. Derivatives(1) Derivative transactions to which hedge accounting is not applied
Summarized below are the contract value or the notional principal and the fair value of the derivativetransactions at 31st March, 2017, to which hedge accounting is not applied. The amounts of the contract value are notnecessarily indicative of the actual market risk of derivative transactions.
1. Interest related transactions<At 31st March, 2017>
Millions of yen
Contract value
Type of transactions

Over-the-counter transactions:Interest rate swaps:
Receive-fixed and pay-floating
Receive-floating and pay-fixed
Total

UnrealizedOver one year

Total

¥44,627
44,627

Fair value

¥923
(667)
¥255

¥38,627
38,627––

gain (loss)

¥923
(667)
¥255

Thousands of U.S. dollars
Unrealized

Contract value
Total

Type of transactions

Over-the-counter transactions:Interest rate swaps:
Receive-fixed and pay-floating
Receive-floating and pay-fixed
Total
Notes:

Fair valueOver one year

$397,786
397,786–$344,305
344,305–$8,227(5,948)$2,278

1. The above transactions are marked to market and unrealized gains/losses are included in the
consolidated statement of income.
2. Calculation of fair value is based on the discounted cash flows and others.

44

gain (loss)

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 2017$8,227(5,948)$2,278

Notes to Consolidated Financial Statements

2. Currency related transactions<At 31st March, 2017>
Millions of yen
Contract value
Type of transactions

Over-the-counter transactions:
Currency swaps
Forward foreign:
Sell
Buy
Currency option:
Sell
Buy
Total

Total

UnrealizedOver one year

Fair value

gain (loss)¥93,938¥49,453

(¥18)

(¥18)

6,416
4,399

201
172

(122)
158

(122)
158

98,592
98,592–55,04055,040–(3,043)
3,043
¥17

(132)
929
¥814

Thousands of U.S. dollars
Contract value
Type of transactions

Over-the-counter transactions:
Currency swaps
Forward foreign:
Sell
Buy
Currency option:
Sell
Buy
Total
Notes:

Total

UnrealizedOver one year

Fair value

gain (loss)$837,320$440,800($164)($164)

57,195
39,212

1,797
1,540

(1,090)1,412(1,090)1,412

878,800
878,800–

490,596490,596–(27,128)
27,128$157(1,179)8,282$7,2601. The above transactions are marked to market and unrealized gains/losses are included in the
consolidated statement of income.
2. Calculation of fair value is based on the discounted cash flows and others.

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 201745

Notes to Consolidated Financial Statements(2) Derivative transactions to which hedge accounting is applied
Summarized below are the contract value or the notional principal and the fair value of the derivativetransactions at 31st March, 2017, to which hedge accounting is applied. The amounts of the contract
value are not necessarily indicative of the actual market risk of derivative transactions.
1. Interest related transactions<At 31st March, 2017>
Millions of yen
Hedge accounting

Contract value

methodType of transactions

Hedged item

Principle hedge

Interest rate swaps:

Available-for-accounting

Receive-floating and pay-fixedsale securities

Total

Over one year

¥16,267¥16,267–
203,020
5,000––
173,035––

Fair value(¥528)

methodSpecial treatment

Interest rate swaps:

Loans and bills

for interest rate

Receive-fixed and pay-floating

discounted,

swaps

Receive-floating and pay-fixedand deposits

Interest rate options

Total(Note 2)(¥528)

Thousands of U.S. dollars
Hedge accounting

Contract value

methodType of transactions

Hedged item

Principle hedge

Interest rate swaps:

Available-for-accounting

Receive-floating and pay-fixedsale securities

Total

Over one year

$145,000$145,000–
1,809,615
44,567––
1,542,340––

Fair value($4,708)

methodSpecial treatment

Interest rate swaps:

Loans and bills

for interest rate

Receive-fixed and pay-floating

discounted,

swaps

Receive-floating and pay-fixedand deposits

Interest rate options

Total
Notes:(Note 2)($4,708)

1. Calculation of fair value is based on the discounted cash flows and others.
2. Since the interest rate swaps, to which the special treatments are applied, are accounted for assynthetic products composed of loans and bills discounted and deposits, their fair value is includedin the fair value of the said loans and bills discounted and deposits which are disclosed in "Financial
Instruments (Note 27)". The balance of unamortized premium for interest rate options is¥2 million ($24 thousand).

46

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 2017

Notes to Consolidated Financial Statements

2. Currency related transactions<At 31st March, 2017>
Millions of yen
Contract value

Hedge accounting
methodType of transactions

Principle hedge
accounting method Forward foreign

Total

Hedged item

Securities
denominated in

Total

Over one year¥

¥44,245

foreign currencies－

Fair value－(¥284)－(¥284)

Thousands of U.S. dollars
Hedge accounting
methodContract value
Type of transactions

Principle hedge
accounting method Forward foreign

Total
Notes:

31. Employee Retirement
Benefits

Hedged item

Total

Securities
denominated in$394,377

foreign currencies

Over one year－$

Fair value－($2,534)－($2,534)

1. The deferred method is applied as hedge accounting in accordance primarily with
"Accounting and Auditing Treatment for Accounting for Foreign Currency Transactions
in Banking Industry" (JICPA Industry Audit Committee Report No. 25 of 29th July, 2002).
2. Calculation of fair value is based on the discounted cash flows and others.

(1) Description of the retirement benefit plans
The Company's domestic consolidated subsidiaries adopt funded or unfunded defined benefit plans
and/or the defined contribution plan to provide for employee retirement benefits.
Under the defined benefit corporate pension plans (all funded), lump-sum or annuity payments are made at
the amounts based on salaries and the length of service periods of the covered employees. Nishi-Nippon City Bank,a consolidated subsidiary, has established a retirement benefit trust for its defined benefit corporate pension plan.
Under the lump-sum payment plans (principally unfunded, however, some plans have a funded status as aresult of the establishment of a retirement benefit trust), retirement benefits are paid in the form of a lump sum
at the amounts based on salaries and the length of service periods of the covered employees.
The consolidated subsidiaries may also pay additional retirement benefits that are not subject to actuarial calculation.
As of 31st March, 2017, the lump-sum payment plans have been adopted by 6 consolidated subsidiaries.
The corporate pension fund plans have been adopted by 2 consolidated subsidiaries.
The defined contribution plan has been adopted by 1 consolidated subsidiary.
For the lump-sum payment plans that certain consolidated subsidiaries have adopted, liability for retirement
benefits and retirement benefit expenses are calculated using the simplified method which assumes the retirement
benefit obligation to be equal to the benefits payable if all the eligible employees voluntarily terminated theiremployment at fiscal year end.

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 201747

Notes to Consolidated Financial Statements(2) Defined benefit plans(a) Reconciliation between the balances of retirement benefit obligation at the beginning and end of the year forthe year ended 31st March, 2017
Thousands ofRetirement benefit obligation at beginning of the year
Service cost
Interest cost
Actuarial gain and loss
Retirement benefits paid
OthersRetirement benefit obligation at end of the year

Millions of yen

U.S. dollars

2017

2017

¥70,499
2,203
617
1,034
(3,995)$628,389
19,6375,499
9,217(35,616)¥70,357$627,128––(b) Reconciliation between the balances of plan assets at the beginning and end of the year for the year ended
31st March, 2017
Thousands ofPlan assets at beginning of the year
Expected return on plan assets
Actuarial gain and loss
Contributions by employer
Contributions by employees
Retirement benefits paid
OthersPlan assets at end of the year

Millions of yen

U.S. dollars

2017

2017

¥71,509
2,352
7,097
2,911
154
(2,150)$637,395
20,96963,25825,954
1,381(19,171)¥81,875$729,789––(c) Reconciliation between the balances of retirement benefit obligation and plan assets at the end of the year
and the amounts of the liability and asset for retirement benefits recognized in the consolidated balance sheet
at 31st March, 2017
Thousands ofMillions of yen
2017

Retirement benefit obligation (funded)
Fair value of plan assets
Retirement benefit obligation (unfunded)
Net liability (asset) for retirement benefits in the balance sheet¥69,955(81,875)(11,919)402(¥11,517)

U.S. dollars
2017$623,541(729,789)(106,247)
3,587($102,660)
Thousands ofLiability for retirement benefits
Asset for retirement benefits
Net liability (asset) for retirement benefits in the balance sheet

Millions of yen

U.S. dollars

2017

2017

¥811
(12,328)(¥11,517)$7,229(109,890)($102,660)(d) Components of retirement benefit expenses for the year ended 31st March, 2017
Thousands ofMillions of yen

U.S. dollars

2017

2017

Service cost
$18,252¥2,0475,499Interest cost
617
Expected return on plan assets(20,969)(2,352)
Amortization of unrecognized actuarial gain and loss
20,722
2,324
Others441
3,936
Retirement benefit expenses¥3,078$27,441
Notes: 1. Contributions by employees to corporate pension funds, etc. have been deducted from theservice cost.
2. Retirement benefit expenses of consolidated subsidiaries that have adopted the simplified
method are reported in total under “Service cost.”

48

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 2017

Notes to Consolidated Financial Statements(e) Items recorded in retirement benefits liability adjustments included in other comprehensive income (grossof income tax effects) for the year ended 31st March, 2017
Thousands ofActuarial gain and loss

Millions of yen

U.S. dollars

2017

2017

(¥8,387)($74,763)(f) Items recorded in retirement benefits liability adjustments included in accumulated other comprehensive
income (gross of income tax effects) at 31st March, 2017
Thousands ofMillions of yen

U.S. dollars

2017

2017

¥284

Unrecognized actuarial gain and loss

$2,535(g) Matters concerning plan assets
1) Percentages of each main category of the total plan asset at 31st March, 2017 are as follows:
2017

Bonds
StocksCash and deposits
Others
Total

28%
59%
1%
12%
100%

* Retirement benefit trusts established for the corporate pension plans accounted for 27% of the total
plan asset at 31st March, 2017. Retirement benefit trusts established for the lump-sum payment plansaccounted for 23% of the total plan asset at 31st March, 2017.
2) The expected long-term rate of return on plan assets has been estimated by taking into account thecurrent and expected allocation of the plan assets and the current and anticipated long-term rate of
return on diverse assets that constitute the plan assets.
(h) Assumptions for actuarial calculation
Major assumptions for actuarial calculation as of 31st March, 2017
20171) Discount rates:
2) Expected long-term rate of return on plan assets:
3) Expected rate of pay increase:0.893% (principally)
3.3% (principally)
3.71% (principally)(3) Defined contribution plans
Contributions of ¥0 million ($1thousand) have been made to the defined contribution plan by the consolidated
subsidiary for the year ended 31st March, 2017.

32. Income Taxes

The tax effect of temporary differences and tax loss carryforwards that give rise to the deferred tax assets andliabilities at 31st March, 2017 is as follows:
Thousands ofDeferred tax assets:
Reserve for possible loan losses
Liability for retirement benefits
Accumulated depreciation
Loss carryforwards for tax purposes
OthersSub-total
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Reserve fund for deferred income of
fixed assets
Unrealized losses on securities attributable topartition of corporation, net
Asset retirement obligations
Capital gain adjustments
Unrealized gains on securities available for sale, net
Total deferred tax liabilities
Net deferred tax assets (liabilities)

Millions of yen

U.S. dollars

2017

2017

¥13,944
339
1,831
289
8,291
24,696(7,610)17,086$124,291
3,027
16,323
2,584
73,908220,134(67,832)
152,302

(1)

(12)

(35)
(42)
(1,081)(24,182)(25,344)(¥8,257)

(319)
(381)
(9,644)(215,552)(225,910)($73,607)

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 201749

Notes to Consolidated Financial Statements

The reconciliation between the statutory tax rate and the effective tax rate reflected in the consolidated statement of income
for the year ended 31st March, 2017 is as follows:2017

Statutory tax rate
(Adjustments)
Items permanently not deductible for tax purposessuch as entertainment expenses
Non-taxable dividend income and others
Inhabitant tax on per capita basis
Capital gain adjustments
Increase in valuation allowance
Others
Effective tax rate

33. Business Combination

30.7 %
0.6
(0.6)
0.3
3.3
(6.7)
0.4
28.0 %<For the year ended 31st March, 2017>
Transactions under common control
1. Overview of business combination(1) Legal form of business combination
Establishment of a holding company by means of a joint share transfer(2) Name of the company after business combination
Sole parent company established through the share transfer: Nishi-Nippon Financial Holdings, Inc.
(3) Name and business outline of the combined companies
Wholly owned subsidiaries through the share transfer:
The Nishi-Nippon City Bank, Ltd. (Banking)
The Bank of Nagasaki, Ltd. (Banking)Nishi-Nippon Credit Guarantee Co. (Credit guarantee)(4) Date of business combination
3rd October, 2016(5) Other matters concerning the transaction overview
The Company was established to shift into a holding company structure and build a new groupmanagement framework, in order to further strengthen intragroup collaboration that would allow each of theGroup companies to exhibit its unique characteristics and strengths as well as to appropriately respond to any
environmental changes and address risks that might lie ahead.
2. Outline of accounting treatment for the transaction
This transaction was treated as a transaction under common control based on “Accounting Standard
for Business Combinations” (ASBJ Statement No. 21 of 13rd September, 2013).

50

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 2017

Notes to Consolidated Financial Statements

34. Asset Retirement
Obligations

Information on asset retirement obligations is as follows:
Asset retirement obligations that are recorded in the consolidated balance sheet(1) Outline of asset retirement obligations
The Company and its consolidated subsidiaries recognize asset retirement obligations for restoration obligations
resulting from real estate lease agreements such as those of the Group branch offices and commercial
fixed-term leasehold agreements. The Company and its consolidated subsidiaries also recognize asset retirement
obligations pertaining to obligations to remove hazardous substances used in some of their branch officesin accordance with the Ordinance on Prevention of Health Impairment due to Asbestos.
(2) Method for calculating the value of asset retirement obligations
An asset retirement obligation is calculated by first estimating the period of expected use of the asset, whichis the relevant building's depreciation period (principally 39 years), and then discounting the value of therelevant liability using the government bond's market rate (principally 2.304%) that matches said depreciation
period as the discount rate.
(3) Changes in total asset retirement obligations for the year ended 31st March, 2017
Thousands ofBalance at beginning of the year
Increase due to acquisition of tangible fixed assets
Adjustment for passage of time
Decrease due to fulfillment of asset retirement
obligation
Balance at end of the year

Millions of yen

U.S. dollars

2017

2017

¥843
33
13
40

$7,514
302
119
363

¥849

$7,572

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 201751

Notes to Consolidated Financial Statements

35. Business Segment
Information

Segment Information(1) Segment information summary
Financial information can be individually obtained for each of the Group's reportable segments.
This information is regularly reviewed by the board of directors in order to determine how to allocate businessresources and to evaluate business performance.
The Group consists of 8 consolidated subsidiaries and 1 affiliate. The Group is engaged in thefinancial services business, with a primary focus on the banking business.
Thus, while the Group is composed of business segments offering different financial services,
the Group's reportable segment is the "banking business" which Nishi-Nippon City Bank and
The Bank of Nagasaki are engaged in.
The "banking business" is a wide range of services including services for deposits, loans, securities
investment, domestic and foreign currency exchange, and other incidental services.
(2) Method for calculating the amount of ordinary income, profit or loss, assets, liabilities and other items
The accounting policies of reported business segments are the same as those described in "2. Summary of
Significant Accounting Policies". The segment income is reported on an ordinary income basis. In addition,internal ordinary income among segments is based on the same transaction terms as used in ordinarytransactions with third parties.
(3) Ordinary income, profit or loss, assets, liabilities and other items by reportable segments<In 2017>

Millions of yen
Reportable segment

Ordinary income
Ordinary income from third
party customers
Internal ordinary income
among segments
Total ordinary income
Segment profit
Segment assets
Segment liabilities
Other items
Depreciation
Interest and dividend income
Interest expenses
Increase in tangible andintangible fixed assets

Total

Adjustments

Consolidated¥11,722¥145,862¥–¥145,862

7,327
141,467
34,4099,449,568
8,979,476

12,696
24,419
11,774
498,696
48,67320,023
165,886
46,183
9,948,264
9,028,149(20,023)(20,023)(12,315)(461,816)(53,379)–
145,862
33,8689,486,448
8,974,769

6,385
99,150
6,984

229
8,957
80

6,615
108,107
7,064–(6,835)
(736)

6,615
101,271
6,327

13,042

254

13,296

0

13,296

Adjustments

Consolidated$$1,300,142

Banking

Other¥134,140

Thousands of U.S. dollars
Reportable segment
Banking

Ordinary income
Ordinary income from third
party customers
Internal ordinary income
among segments
Total ordinary income
Segment profit
Segment assets
Segment liabilities
Other items
Depreciation
Interest and dividend income
Interest expenses
Increase in tangible andintangible fixed assets

52

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 2017

Other

Total

$1,195,650$104,491 $1,300,142

65,311
1,260,962
306,703
84,228,256
80,038,115

113,167(178,478)–
178,478
217,659 1,478,621(178,478) 1,300,142
301,886
104,953
411,656(109,770)
4,445,107 88,673,363 (4,116,377) 84,556,986
433,849 80,471,964(475,798) 79,996,165–

56,914
883,769
62,251

2,047
79,841
714

58,962
963,61162,966–(60,931)(6,567)58,962902,680
56,398116,252

2,264

118,5170

118,517

Notes to Consolidated Financial Statements

Notes:

1. Ordinary income is presented instead of net sales.
2. The category of "other" includes business segments which are not reportable segments,
such as financial-related services for credit guarantee, credit card and financial
instruments exchange.
3. Adjustments for segment profit, segment assets, segment liabilities, interest anddividend income and interest expenses are primarily eliminations of internal transactions
among segments.

Related Information
Ordinary income by services:<In 2017>
Ordinary income from third
party customers

Millions of yen
Loan

Securities

Other

Total

¥90,529¥21,914¥33,418¥145,862

Thousands of U.S. dollars
Loan

Ordinary income from third$806,930
party customers
Note: Ordinary income is presented instead of net sales.

Securities

Other

Total

$195,335$297,876$1,300,142

Impairment Losses on Tangible Fixed Assets by Reportable Segments<In 2017>

Millions of yen
Reportable segment
Banking

Other

¥974

Impairment losses

–

Total

¥974

Thousands of U.S. dollars
Reportable segment
Banking

Impairment losses$8,688

Other

$

–

Total

$8,688

Amortization and Balance of Goodwill by Reportable Segments<In 2017>

Millions of yen
Reportable segment
Banking

Goodwill
Amortization of goodwill
Balance at end of the year

–
–

Other

Total

¥189
¥1,228¥189¥1,228

Thousands of U.S. dollars
Reportable segment
Banking

Goodwill
Amortization of goodwill
Balance at end of the year

$
$

–
–

Other

Total

$1,685$10,953$1,685$10,953

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 201753

Notes to Consolidated Financial Statements

36. Related Party Transactions
Related party transactions for the year ended 31st March, 2017 are as follows:
1.

There are no relevant transactions of the Company with related parties to report.

2.

Transactions of the Company's consolidated subsidiaries with related individuals, including shareholders and directors<In 2017>
Attribute

Name

Address

Commonstock

Business/
occupation

Company owned by

TakataKosan

Chuo-ku
Fukuoka¥4(million)

Real-estate

the Company's directors
and their close relatives

Ltd.

*

Equityownershipleasing

RelationshipTransactions

Company owned by close－

relatives of the Company's

Loan

director (Kiyota Takata)Transaction
amount―(million)

Account

Balance at
end of year
¥54
(million)Loans―(thousand)$483(thousand)Terms and conditions of the transactions are similar to those with unrelated parties.

37. Reconciliation of Cash andCash Equivalents

The reconciliation between "Cash and cash equivalents" in the consolidated statement of cash flows andeach account in the consolidated balance sheet is as follows:
Thousands ofMillions of yen

U.S. dollars

2017

2017

Cash and due from banks on the
consolidated balance sheet
Due from banks, exclusive of central bank
Cash and cash equivalents on the consolidated
statement of cash flows¥807,097(3,336)$7,194,019(29,736)¥803,760$7,164,283

en

U.S. dollars

2017

2017

38. Per Share Information¥3,127.67
142.24

Net assets per share at end of the year
Profit (loss) attributable to owners of parent per share*$27.878
1.267

Basis for net assets per share as of 31st March, 2017 is as follows:
Thousands ofMillions of yen
2017

Net assets
Items to be deducted from net assets
Non-controlling interests
Net assets attributable to common stock

54

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 2017

¥511,678
23,89923,899487,778

U.S. dollars
2017$4,560,821
213,031
213,031
4,347,790

Notes to Consolidated Financial Statements

Shares2017

Number of shares of common stock outstandingat end of the year

155,955,729

Basis for profit (loss) attributable to owners of parent per share for the year ended 31st March, 2017 is as follows:
Thousands of

Basic:
Profit (loss) attributable to owners of parent
Items not attributable to common stock
Profit (loss) attributable to owners of parent
available for shareholders of common stock

Millions of yen

U.S. dollars

2017

2017

¥22,214–$198,004–

22,214

198,004

Shares2017

Average number of shares of common stock
outstanding during the year**

156,171,533* Diluted profit (loss) attributable to owners of parent per share for the year ended 31st March, 2017 was not presented because
the Company and its consolidated subsidiaries had no dilutive shares during the year**Because the Company was established on 3rd October, 2016 through a joint share transfer, the average number of shares ofcommon stock outstanding during the year has been calculated for the period before the establishment of the Company,
from 1st April to 2nd October, 2016, by multiplying the average number of shares outstanding during the periodof Nishi-Nippon City Bank by its share transfer ratio, and for the period from 3rd October, 2016 to 31st March,2017 by using the Company’s average number of shares outstanding during the period.

39. Cash Dividends

Cash dividends paid during the year ended 31st March, 2017 are as follows:
The Company is a joint holding company that was established on 3rd October, 2016 through a joint share transfer. Accordingly,
the cash dividends were paid at the amounts approved at the meetings of shareholders and the Board of Directorsof the following wholly owned subsidiary.
Thousands of

Types
Resolution
June 29, 2016
Cash dividends (¥3.5 per share),Ordinary General Meetingfor common stock ofof Shareholders
Nishi-Nippon City Bank
November 8, 2016
Cash dividends (¥2.5 per share),Meeting of Board of Directors for common stock of
Nishi-Nippon City Bank

40. Subsequent Event

Millions of yen

U.S. dollars

Cut-off date

Effective date

¥2,747$24,485

31st March,
2016

30th June,
2016¥1,949$17,372 30th September,2016

9th December,
2016

The following appropriation of earned surplus for the year ended 31st March, 2017 was approved at theshareholders' meeting held on 29th June, 2017:
Thousands ofResolution
Types
June 29, 2017
Cash dividends (¥17.5 per share),Ordinary General Meeting for common stock of Nishi-Nipponof Shareholders
Financial Holding, Inc.

Millions of yen

U.S. dollars

Cut-off date

Effective date

¥3,142$28,006

31st March,
2017

30th June,
2017

The Company and its consolidated subsidiary, Nishi-Nippon City Bank, decided on 2nd June, 2017 to redeem the preferred
securities issued by an overseas special purpose company which is a consolidated subsidiary of Nishi-Nippon City Bank.
The outline of the preferred securities to be redeemed is as follows:
1. Issuing entity
Nishi-Nippon City Preferred Capital (Cayman) Limited
2. Type of securities issued
Yen-denominated non-cumulative perpetual preferred securities
3. Total amount to be redeemed
17 billions of yen
4. Planned redemption date
18th July, 2017
5. Reason for redemption
Arrival of the voluntary redemption date

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 201755

Quarterly Information (Unaudited)
Nishi-Nippon Financial Holdings, Inc. and Subsidiaries

Year ended 31st March, 2017
Millions of yen

Ordinary income
Profit (loss) before income taxes
Profit (loss) attributable to owners of parent

Third Quarter

Fourth Quarter

from 1st April, 2016

from 1st April, 2016

to 31st December, 2016

to 31st March, 2017¥110,701
30,784
21,765¥145,862
32,422
22,214

Yen

Profit (loss) attributable to owners of parent per share

Third Quarter

Fourth Quarter

from 1st April, 2016

from 1st April, 2016

to 31st December, 2016

to 31st March, 2017¥142.24¥139.30

Yen

Profit (loss) attributable to owners of parent per share

Third Quarter

Fourth Quarter

from 1st October, 2016

from 1st January, 2017

to 31st December, 2016

to 31st March, 2017¥36.05¥2.87

Thousands of U.S. dollars

Ordinary income
Profit (loss) before income taxes
Profit (loss) attributable to owners of parent

Third Quarter

Fourth Quarter

from 1st April, 2016

from 1st April, 2016

to 31st December, 2016

to 31st March, 2017

$1,300,142
288,992
198,004$986,734
274,396
194,004

U.S. dollars

Profit (loss) attributable to owners of parent per share

Third Quarter

Fourth Quarter

from 1st April, 2016

from 1st April, 2016

to 31st December, 2016

to 31st March, 2017

$1.24

$1.26

U.S. dollars

Profit (loss) attributable to owners of parent per share

Third Quarter

Fourth Quarter

from 1st October, 2016

from 1st January, 2017

to 31st December, 2016

to 31st March, 2017

$0.32

$0.02

Notes: The Company was established on October 3, 2016. Hence, quarterly information for the first and second quarters is notshown above.

56

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 2017

Non-Consolidated Balance Sheet (Unaudited)
The Nishi-Nippon City Bank, Ltd.

31st March, 2017 and 2016
Thousands ofMillions of yen
2017

Assets:Cash and due from banks
Call loans and bills bought
Trading account assets
Money held in trust
Securities
Loans and bills discounted
Foreign exchange assets
Other assets
Tangible fixed assets
Intangible fixed assets
Prepaid pension cost
Customers' liabilities for acceptances and guarantees
Reserve for possible loan losses
Reserve for devaluation of securities
Total assets
Liabilities and Net assets:
Liabilities
Deposits
Call money and bills soldPayables under repurchase agreements
Guarantee deposits received under securities lending transactions
Borrowed money
Foreign exchange liabilities
Bonds
Other liabilities
Reserve for employee retirement benefits
Reserve for reimbursement of deposits
Reserve for other contingent losses
Deferred tax liabilities
Deferred tax liabilities on revaluation of premises
Acceptances and guarantees
Total liabilities
Net assets:
Capital stock
Capital surplus
Capital reserve
Other capital surplus
Earned surplus
Legal reserve
Voluntary reserves
Unappropriated retained earnings
Treasury stock
Total shareholders' equity
Net unrealized gains on securities available for sale, net of taxes
Net deferred gains (losses) on hedging instruments, net of taxes
Revaluation of premises, net of taxes
Total valuation and translation adjustments
Total net assets
Total liabilities and net assets
See accompanying Notes to Non-Consolidated Financial Statements.

U.S. dollars
2016

2017

¥794,047
128
869
850
1,677,231
6,574,638
7,539
50,130116,778
4,508
15,233
22,868(36,990)(501)¥9,227,333¥605,350
129
1,283
1,999
1,835,516
6,220,199
8,284
38,814
109,648
5,798
14,14325,712(34,740)(500)¥8,831,638$7,077,701
1,147
7,749
7,576
14,949,921
58,602,713
67,207446,837
1,040,903
40,183
135,782
203,833(329,714)(4,466)$82,247,376¥7,812,742
49,924
69,174
18,714640,375
89
30,00068,560
2,670
2,386
1,427
13,43014,98622,868
8,747,351¥7,547,963
41,69165,806
19,892515,06174
48,80071,126
3,631
2,141
1,437
13,126
15,06725,712
8,371,534$69,638,493
445,000
616,583
166,8075,707,957
798
267,403611,11323,801
21,273
12,726
119,709
133,577
203,833
77,969,080

85,74585,745764,288

85,68485,684
230

763,740613211,04161
171,203
30,228(4,188)368,965
61,643(1,011)30,507
91,139460,104¥8,831,638

548
29
1,881,109––

382,536
67,429(384)
30,40097,445479,981¥9,227,333––

3,409,716
601,028(3,424)
270,975
868,579
4,278,295$82,247,376

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 201757

Non-Consolidated Statement of Income (Unaudited)
The Nishi-Nippon City Bank, Ltd.

Years ended 31st March, 2017 and 2016
Thousands ofMillions of yen

Income:Interest income:Interest on loans and discounts
Interest and dividends on securities
Other interest income
Fees and commissions
Trading income
Other operating income
Other income
Total income
Expenses:
Interest expenses:
Interest on deposits
Interest on call money and bills soldInterest on payables under repurchase agreements
Interest on borrowings
Other interest expenses
Fees and commissions
Other operating expenses
General and administrative expenses
Other expenses
Total expenses
Income before income taxes
Income taxes
Current
Deferred
Total income taxes
Net income
See accompanying Notes to Non-Consolidated Financial Statements.

58

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 2017

U.S. dollars
2016

2017

¥80,465
14,322
224
24,2971
2,000
15,173
136,484¥83,200
22,001
301
25,71024
2,311
12,801
146,351$717,220
127,666
2,004
216,572
10
17,827135,247
1,216,549

3,722
382
659
1,059
1,162
14,3092,022
74,143
6,554
104,016
32,467

4,546
557
267
1,054
1,207
13,024
1,915
72,826
8,851
104,252
42,09833,184
3,406
5,881
9,443
10,358
127,543
18,030660,875
58,424927,148
289,400

8,012
(722)
7,290
¥25,177

9,781
2,301
12,082¥30,016

71,423(6,443)64,980$224,420

2017

Non-Consolidated Statement of Changes in Net Assets (Unaudited)
The Nishi-Nippon City Bank, Ltd.

Years ended 31st March, 2017 and 2016
Thousands ofMillions of yen
2017

Shareholders' equity
Capital stock
Balance at beginning of the year
Changes during the year
Total changes during the year
Balance at end of the year
Capital surplus:
Capital reserve
Balance at beginning of the year
Changes during the year
Total changes during the year
Balance at end of the year
Other capital surplus
Balance at beginning of the year
Changes during the year
Sale of treasury stock
Retirement of treasury stock
Total changes during the year
Balance at end of the year
Total capital surplus
Balance at beginning of the year
Changes during the year
Sale of treasury stock
Retirement of treasury stock
Total changes during the year
Balance at end of the year
Earned surplus:
Legal reserve
Balance at beginning of the year
Changes during the year
Total changes during the year
Balance at end of the year
Other earned surplus:
Reserve for deferred capital gains
Balance at beginning of the year
Changes during the year
Transfer from reserve for deferred capital gains
Transfer to reserve for deferred capital gains
Total changes during the year
Balance at end of the year
Other voluntary reserves
Balance at beginning of the year
Changes during the year
Transfer to other voluntary reserves
Transfer from other voluntary reserves
Total changes during the year
Balance at end of the year
Unappropriated retained earnings
Balance at beginning of the year
Changes during the year
Cash dividends paid
Transfer from reserve for deferred capital gains
Transfer to other voluntary reserves
Transfer from other voluntary reserves
Net income
Retirement of treasury stockReversal of revaluation of premises
Total changes during the year
Balance at end of the year

U.S. dollars
2016

2017

¥85,745¥85,745$764,288–¥85,745－¥85,745$764,288¥85,684¥85,684$763,740–¥85,684－¥85,684$763,740

¥230

¥231

$2,055

(2)
(228)
(230)
¥
–

(0)
－
(0)
¥230

(22)
(2,033)(2,055)$ –¥85,914¥85,915$765,796

(2)
(228)
(230)
¥85,684(0)－(0)¥85,914(22)(2,033)(2,055)$763,740

¥61

¥61

$548

–
¥61

－
¥61

$548

¥3

¥3

$30

(0)
–
(0)
¥3

(0)
0
(0)
¥3

(1)
–
(1)
$29

¥171,200¥155,300$1,525,984

25,500(196,700)(171,200)¥–

15,900－15,900¥171,200

227,292(1,753,277)(1,525,984)$ –¥30,228¥21,126$269,441(10,703)
0(25,500)
196,700
25,177(4,968)106
180,813¥211,041(5,133)0(15,900)－
30,016－119
9,102¥30,228(95,400)
1(227,292)
1,753,277
224,420(44,286)949
1,611,667$1,881,109

–

–

–

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 201759

Non-Consolidated Statement of Changes in Net Assets (Unaudited)

The Nishi-Nippon City Bank, Ltd.

Years ended 31st March, 2017 and 2016
Thousands ofMillions of yen
2017

Total earned surplus
Balance at beginning of the year
Changes during the year
Cash dividends paid
Transfer to reserve for deferred capital gains
Net income
Retirement of treasury stockReversal of revaluation of premises
Total changes during the year
Balance at end of the year
Treasury stock
Balance at beginning of the year
Changes during the year
Acquisition of treasury stock
Sale of treasury stock
Retirement of treasury stock
Total changes during the year
Balance at end of the year
Total shareholders' equity
Balance at beginning of the year
Changes during the year
Cash dividends paid
Transfer to reserve for deferred capital gains
Net income
Acquisition of treasury stock
Sale of treasury stockReversal of revaluation of premises
Total changes during the year
Balance at end of the year
Valuation and translation adjustments
Net unrealized gains on securities available for sale, net of taxes
Balance at beginning of the year
Changes during the year
Net changes in items other than shareholders' equity
Total changes during the year
Balance at end of the year
Net deferred gains (losses) on hedging instruments, net of taxes
Balance at beginning of the year
Changes during the year
Net changes in items other than shareholders' equity
Total changes during the year
Balance at end of the year
Revaluation of premises, net of taxes
Balance at beginning of the year
Changes during the year
Net changes in items other than shareholders' equity
Total changes during the year
Balance at end of the year
Total valuation and translation adjustments
Balance at beginning of the year
Changes during the year
Net changes in items other than shareholders' equity
Total changes during the year
Balance at end of the year
Total net assets
Balance at beginning of the year
Changes during the year
Cash dividends paid
Transfer to reserve for deferred capital gains
Net income
Acquisition of treasury stock
Sale of treasury stockReversal of revaluation of premises
Net changes in items other than shareholders' equity
Total changes during the year
Balance at end of the year
See accompanying Notes to Non-Consolidated Financial Statements.

60

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 2017

U.S. dollars
2016¥201,493

2017$1,796,004

106
9,612
¥211,106030,016－
119
25,002¥201,493(95,400)–
224,420(44,286)
949
85,682$1,881,686(¥4,188)(¥2,128)($37,337)(1,014)
6
5,196
4,188
¥
–

(2,066)
6－(2,060)(¥4,188)(9,042)
59
46,32037,337$ –¥368,965¥346,023$3,288,752(10,703)(5,133)0¥30,016(2,066)
5
119
22,941¥368,965(95,400)–
25,177(1,014)4
106
13,570¥382,536–
224,420(9,042)37949
120,964$3,409,716¥61,643¥63,359$549,452

5,786
5,786
¥67,429(1,716)(1,716)¥61,643

51,57551,575$601,028(¥1,011)(¥763)($9,013)626
626(¥384)(247)(247)(¥1,011)

5,588
5,588
($3,424)¥30,507¥29,836$271,925

(106)
(106)
¥30,400

670
670¥30,507

(949)
(949)
$270,975¥91,139¥92,432$812,364

6,306
6,306
¥97,445(1,293)(1,293)¥91,139

56,21556,215$868,579¥460,104¥438,455$4,101,116(10,703)–
25,177(1,014)4
106
6,306
19,877¥479,981(5,133)030,016(2,066)
5
119(1,293)21,648¥460,104(95,400)–
224,420(9,042)37
949
56,215
177,179$4,278,295(10,703)–Non-Consolidated Balance Sheet (Unaudited)
The Bank of Nagasaki, Ltd.

31st March, 2017 and 2016
Thousands ofMillions of yen

Assets:Cash and due from banks
Securities
Loans and bills discounted
Other assets
Tangible fixed assets
Intangible fixed assets
Deferred tax assets
Customers' liabilities for acceptances and guarantees
Reserve for possible loan losses
Total assets
Liabilities
iand net assets:
Liabilities
Deposits
Call money and bills soldBorrowed money
Other liabilities
Reserve for employee retirement benefit
Reserve for retirement benefits for directors and corporate auditors
Reserve for reimbursement of deposits
Reserve for other contingent losses
Deferred tax liabilities on revaluation of premises
Acceptances and guarantees
Total liabilities
Net assets:
Capital stock
Capital surplus
Capital reserve
Other capital surplus
Earned surplus
Legal reserve
Unappropriated retained earnings
Total shareholders' equity
Revaluation of premises, net of taxes
Total valuation and translation adjustments
Total net assets
Total liabilities and net assets
See accompanying Notes to Non Consolidated Financial Statements.

U.S. dollars (Note 1)
2017

2017

2016

¥30,455
3
237,047
995
4,715
108
617
48
(957)
¥273,033¥32,998－
229,181
843
4,741
90
815
40
(1,017)¥267,694$271,461
29
2,112,911
8,870
42,026
970
5,506
429
(8,537)$2,433,669¥246,127
10,000
600
812
507
64
33
69
509
48
258,773¥251,842
－
－
716
589
46
32
60
518
40
253,847$2,193,845
89,134
5,348
7,240
4,527
574
302
622
4,538
429
2,306,563

6,121

6,121

54,565

2,000
2,463

2,000
2,463

17,826
21,962195
2,387
13,168
1,091
1,091
14,259¥273,033

190
1,959
12,735
1,112
1,112
13,847¥267,694

1,743
21,279117,377
9,727
9,727
127,105$2,433,669

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 201761

Non-Consolidated Statement of Income (Unaudited)
The Bank of Nagasaki, Ltd.

Years ended 31st March, 2017 and 2016
Thousands ofMillions of yen
2017

Income:Interest and dividend income:Interest on loans and discounts
Other interest income
Fees and commissions
Other income
Total income
Expenses:
Interest expenses:
Interest on deposits
Interest on call money and bills soldInterest on borrowings
Other interest expenses
Fees and commissions
General and administrative expenses
Other expenses
Total expenses
Income before income taxes
Income taxes
Current
Deferred
Total income taxes
Net income
See accompanying Notes to Non Consolidated Financial Statements.

62

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 2017

U.S. dollars (Note 1)
2017

2016

¥4,160
251
728
275
5,416

¥4,278
257
680
195
5,412

$37,081
2,238
6,496
2,459
48,276

240
–
–
2
1,175
3,367
54
4,840
575

327
1
48
2
954
3,437
114
4,888
524

2,144
–
–
24
10,47530,013486
43,144
5,132

(53)
188
135
¥440

35
46
82
¥441

(476)
1,681
1,205
$3,926

Non-Consolidated Statement of Changes in Net Assets (Unaudited)
The Bank of Nagasaki, Ltd.

Years ended 31st March, 2017 and 2016
Thousands ofMillions of yen
2017

Shareholders' equity
Capital stock
Balance at beginning of the year
Changes during the year
Issuance of new shares
Total changes during the year
Balance at end of the year
Capital surplus:
Capital reserve
Balance at beginning of the year
Changes during the year
Issuance of new shares
Total changes during the year
Balance at end of the year
Other capital surplus
Balance at beginning of the year
Changes during the year
Payment for fractional shares resulting from exercise of
the right to claim exchange for common stock
Total changes during the year
Balance at end of the year
Total capital surplus
Balance at beginning of the year
Changes during the year
Issuance of new shares
Payment for fractional shares resulting from exercise of
the right to claim exchange for common stock
Total changes during the year
Balance at end of the year
Earned surplus:
Legal reserve
Balance at beginning of the year
Changes during the year
Reserve of legal retained earnings
Total changes during the year
Balance at end of the year
Other earned surplus:
Unappropriated retained earnings
Balance at beginning of the year
Changes during the year
Reserve of legal retained earnings
Cash dividends paid
Net income
Reversal of revaluation of premises
Total changes during the year
Balance at end of the year
Total earned surplus
Balance at beginning of the year
Changes during the year
Cash dividends paid
Net income
Reversal of revaluation of premises
Total changes during the year
Balance at end of the year

U.S. dollars
2017

2016

¥6,121¥4,121$54,565––¥6,1212,000
2,000¥6,121––$54,565¥2,000¥–$17,826––¥2,0002,000
2,000¥2,000––$17,826¥2,463¥2,463$21,962––¥2,463(0)(0)¥2,463––$21,962¥4,463¥2,463$39,789

–

2,000

–

–
–
¥4,463(0)
1,999¥4,463––$39,789

¥190

¥185

$1,693

5
5
¥195

5

50

5
¥190

$1,743¥1,959¥1,527$17,468

(5)
(28)
440
20
427
¥2,387

(5)
(25)
441
21
432
¥1,959

(50)
(250)
3,926
184
3,810
$21,279¥2,149¥1,712$19,162

(28)
440
20
433
¥2,582

(25)
441
21
437
¥2,149

(250)
3,926
184
3,860
$23,02350

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 201763

Non-Consolidated Statement of Changes in Net Assets (Unaudited)

The Bank of Nagasaki, Ltd.

Years ended 31st March, 2017 and 2016
Thousands ofMillions of yen
2017

Total shareholders' equity
Balance at beginning of the year
Changes during the year
Issuance of new shares
Cash dividends paid
Net income
Reversal of revaluation of premises
Payment for fractional shares resulting from exercise of
the right to claim exchange for common stock
Total changes during the year
Balance at end of the year
Valuation and translation adjustments
Revaluation of premises, net of taxes
Balance at beginning of the year
Changes during the year
Net changes in items other than shareholders' equity
Total changes during the year
Balance at end of the year
Total valuation and translation adjustments
Balance at beginning of the year
Changes during the year
Net changes in items other than shareholders' equity
Total changes during the year
Balance at end of the year
Total net assets
Balance at beginning of the year
Changes during the year
Issuance of new shares
Cash dividends paid
Net income
Reversal of revaluation of premises
Payment for fractional shares resulting from exercise of
the right to claim exchange for common stock
Net changes in items other than shareholders' equity
Total changes during the year
Balance at end of the year
See accompanying Notes to Non-Consolidated Financial Statements.

64

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 2017

U.S. dollars
2016

2017

¥12,735¥8,297$113,516

–
(28)
440
20

4,000
(25)
441
21

–
(250)
3,926
184

–
433
¥13,168(0)
4,437¥12,735–
3,860$117,377¥1,112¥1,105$9,912(20)(20)¥1,091

6
6¥1,112(184)(184)$9,727¥1,112¥1,105$9,912(20)(20)¥1,091

6
6¥1,112(184)(184)$9,727¥13,847¥9,403$123,428

–
(28)
440
20

4,000
(25)
441
21

–
(250)
3,926
184

–
(20)
412
¥14,259

(0)
6
4,443
¥13,847

–
(184)
3,676
$127,105

Notes to Non-Consolidated Financial Statements (Unaudited)
The Nishi-Nippon City Bank, Ltd. and The Bank of Nagasaki, Ltd.
1.

31st March, 2017 and 2016

Basis of Presentation of

The accompanying non-consolidated financial statements of The Nishi-Nippon City Bank, Ltd. and The Bank ofFinancial Statements

Nagasaki, Ltd. (the Banks) have been prepared from the accounts maintained by the Banks in accordance with theprovisions set forth in the Japanese Corporation Law, the Banking Law, and accounting principles generally acceptedin Japan, which are different in certain respects as to the application and disclosure requirements of International
Financial Reporting Standard.

2.

Other Accounting Principles Accounting principles employed by the Banks in preparing the accompanying non-consolidated financial
and Practices Employed bystatements which have significant effects thereon, are explained in Note 2 of the Notes to Consolidated

the Banks

Financial Statements.

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 2017

65

66

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 2017

Organization Chart of Banking Subsidiaries
International Network of
The Nishi-Nippon City Bank, Ltd.

The Nishi-Nippon City Bank, Ltd.
Internal Audit Division

GeneralShareholders’ Meeting

Corporate Planning DivisionCorporate Risk Management Division
Compliance Risk Supervisory Division
IT Strategy Division

Directors(Audit and Supervisory
Committee Members)

Public Relations Division
Executive Secretariat
Human Resources DivisionCorporate Administration Division
Operations Planning & Management Division
Treasury & Portfolio Investment Division
Treasury & Securities Transaction Division
Branches
Credit Risk Management Division
Credit Supervision Division
Business Planning Division
Business Promotion Division
Retail Business DivisionInternational Business Division
Overseas Representative Offices
Hong Kong Rep.
Seoul Rep.
Shanghai Rep.
Singapore Rep.
Personal Loan Transaction DivisionCorporate Business Solution Division
Private Banking Division
Regional Relationship Management Division
Kita-Kyushu General Headquarters
Chikuho Regional Headquarters
Chikugo Regional Headquarters
Kyushu Regional Headquarters
Tokyo Headquarters

Audit and Supervisory
Committee Members’
OfficeBoard of Directors

Executive Committee(As of 30th June, 2017)

The Bank of Nagasaki, Ltd.

INTERNATIONAL BUSINESS DIVISION
3-6, Hakata-ekimae 1-chome, Hakata-ku,
Fukuoka 812-0011, Japan
Phone: +81-92-476-2481
SWIFT: NISIJPJTFKK
Fax: +81-92-476-2488
TREASURY & PORTFOLIO INVESTMENTDIVISION
11-8, Kyobashi 1-chome, Chuo-ku, Tokyo 104-0031,
Japan
Phone: +81-3-3561-9306
SWIFT: NISIJPJTFax: +81-3-3561-4365
TREASURY & SECURITIES TRANSACTIONDIVISION
3-6, Hakata-ekimae 1-chome, Hakata-ku,
Fukuoka 812-0011, Japan
Phone: +81-92-476-2540, +81-92-476-2484
SWIFT: NISIJPJT, NISIJPJTFKK
Fax: +81-92-441-6106
HONG KONG REPRESENTATIVE OFFICE
Suite 3112, Tower 6, The Gateway, Harbour City, 9
Canton Road, Tsim Sha Tsui, Kowloon, Hong Kong
Phone: +852-2526-2259
Fax: +852-2845-9264
SEOUL REPRESENTATIVE OFFICE
6th Fl, The Exchange Seoul Bldg., 21 Mugyo-ro, Chung-ku,
Seoul 04520, Republic of Korea
Phone: +82-2-755-0670
Fax: +82-2-756-2160

Audit and Supervisory Board Members
GeneralShareholders’ Meeting

Board of Directors
Executive Committee
Corporate Planning Division
Human Resources & Corporate
Administration Division
Business Management Division
Credit Supervision Division
Operations Planning &Management DivisionInternal Audit Division

SHANGHAI REPRESENTATIVE OFFICE
Room No. 2209 Shanghai International Trade Center,
2201 Yan-An Road (W.), Chang Ning District,
Shanghai, People’s Republic of China
Phone: +86-21-6219-0600
Fax: +86-21-6278-5940
SINGAPORE REPRESENTATIVE OFFICE
1 Marina Boulevard Unit#25-07
One Marina Boulevard, Singapore 018989
Phone: +65-6222-0115
Fax: +65-6222-0171(As of 30th June, 2017)

Nishi-Nippon Financial Holdings Group ANNUAL REPORT 201767

Nishi-Nippon Financial Holdings, Inc.

Annual Report 2017

1-1, Hakata-ekimae 3-chome, Hakata-ku,
Fukuoka, 812-0011, Japan
Phone: +81-92-476-2481

Printed in Japan