ANNUAL REPORT 2020

ブランドマーク

和文

英文

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Messagefrom thePresident
Organization
Chartof Banking Subsidiaries
I am pleased to report on the business performance of

The rapid spread of COVID-19 and the resultant sharp

Nishi-Nippon Financial Holdings, Inc. (NNFH) for the fiscal

slowdown of economicTheactivityin Japan andCity
the restof theNishi-Nippon
Bank,
Ltd.

International Network of

The Nishi-Nippon City Bank, Ltd.

Internal Audit Division

Generalyear ended
31st March
2020.
Shareholders’Meeting

Corporate Planning Divisionworld have inflicted extreme hardships upon us. On the

Corporate Risk Management Division

INTERNATIONAL
BUSINESS
flipside, regional financial
institutions have never
had a more

The operating environment in which regional financial

Compliance Risk Supervisory Division

DIVISION

Directors
Planning& Management
Division
institutions findthemselves remains severe,ITasa resultofvital role in fulfilling offers
support - financial
or otherwise
3-6,ofHakata-ekimae
1-chome,Hakata-ku,(Audit and Supervisory
Committee Members)

Public Relations Division

the recent hike in the consumption tax andExecutive
the prolonged
Secretariat

Fukuoka 812-0011, Japan- to local customers who
are mired in economic plight,

Auditrateand Supervisory
negative interest
policy by the Bank ofHuman
Japan.Resources Division

SWIFT:NISIJPJTFKK
which is in perfect accord
withwhat the current Medium-

Committee Members’
OfficePhone: +81-92-476-2481

Corporate Administration Division

Fax: +81-92-476-2488

Meanwhile, against the backdrop of the ever-declining
and & Management
TermDivision
Business Plan seeks to achieve, i.e., “contributing toOperations Planning
Treasury & Portfolio Investment Division& PORTFOLIO
the development of theTREASURY
host communityand customers.”

aging population, the low birth rate, and changes inTreasury & Securities Transaction Division

Contents
Message from the President ������������������������������������ 01
Profile of the Company (Joint Holding Company)/Organization Chart ������������������ 02

Board ofDirectors needs are increasingly
Branches
people’s lifestyles,
customer
Credit Risk Management Division

13-1, Nihonbashi 1-chome, Chuo-ku, Tokyoof the Group” - with thisat the forefront of their thoughts,

diversified and advanced, and we must address
such
Credit Supervision
Divisionneeds in a timely and accurate manner.
Executive Committee

103-0027, Japan

Business Planning Division

officers and employeesPhone:of the+81-3-6262-7957
Group will forge ahead with

Digital Strategy Division

Under these circumstances, the NNFH Group(theBusiness
Promotion Division
Retail Business Division

Board of Directors of Nishi-Nippon Financial Holdings Inc. ����������������������� 03
Outline of Nishi-Nippon Financial Holdings Group �������������������������� 04
Providing Broader/Deeper Support for International Business ��������������������� 05
Financial/Non-Financial Highlights ��������������������������������� 06
Medium-Term Business Plan ������������������������������������ 08

INVESTMENT DIVISION“Without regional development,
therewill be no
growth
4th Fl., Nittetsu
Nihonbashi
Bldg,“Group”) has kicked off a new Medium-Term Business

International Business Division

SWIFT: NISIJPJTvarious initiatives. It is Fax:
our sincere
wish that our concerted+81-3-3273-2255
efforts will bring vibrancy to our host community of Fukuoka

TREASURY & SECURITIESOverseas
Plan, “Leaping Forward 2023 - Creating Vibrancy
in theRepresentative Offices
and other areas in the TRANSACTION
Kyushu Region, andDIVISION
buoy theHong Kong Representative Office

3-6, Hakata-ekimae 1-chome, Hakata-ku,
Fukuoka 812-0011, Japan
Representative Office
Phone: +81-92-476-2540, +81-92-476-2484
oriented “One to One Solutions” via physical (“humanRegistered in Singapore Your continued support for and cooperation in our future
SWIFT: NISIJPJT, NISIJPJTFKK
Personal Loan Transaction Division
touch”) and digital contributions to the development of theendeavors would be sincerely
appreciated.
Fax: +81-92-441-6106

Region and Beyond -,” which aims to provide customernational
Shanghai Representative
Office economy as a whole.

Corporate Business Solution Division

host community and customers.

Private Banking Division
Regional Relationship Management Headquarters

Our Commitment to ESG and the SDGs ������������������������������� 22

Kita-Kyushu General Headquarters

Corporate Governance �������������������������������������� 28

Chikugo Regional Headquarters

Risk Management ���������������������������������������� 30

Tokyo Headquarters

HONG KONG REPRESENTATIVE
July 2020
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

Chikuho Regional Headquarters
Kyushu Regional Headquarters(As of 30th June, 2020)

Financial Section ����������������������������������������� 33
Outline of Banking Subsidiaries����������������������������������� 86
Organization Chart of Banking Subsidiaries ����������������������������� 89
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 ¥108.83 to $1.

SHANGHAI REPRESENTATIVEOFFICE

The Bank of Nagasaki, Ltd.

Room No. 2209 Shanghai International Trade
Center, 2201 Yan-An Road (West), Chang
Ning District,Shanghai, People’s Republic of
China
Phone: +86-21-6219-0600
Fax: +86-21-6278-5940

Audit and Supervisory Board Members
GeneralShareholders’ Meeting

Board of Directors
Executive Committee

Corporate Planning Division
Hiromichi Tanigawa
Human Resources & Corporate
President
Administration Division
Nishi-Nippon Financial Holdings, Inc.

REPRESENTATIVE OFFICEREGISTERED IN SINGAPORE
1 Marina Boulevard Unit#25-07
One Marina Boulevard, Singapore 018989
Phone: +65-6222-0115
Fax: +65-6222-0171

BusinessCity
Management
Division(Concurrently President of The Nishi-Nippon
Bank, Ltd.)
Credit Supervision Division
Operations Planning &Management DivisionInternal Audit Division(As of 30th June, 2020)

Nishi-Nippon
Financial
Holdings
GroupGroupANNUALREPORT
2020 2020
1
Nishi-Nippon
Financial
Holdings
ANNUALREPORT89

Profile of the Company (Joint Holding Company)

Board of Directors of Nishi-Nippon Financial Holdings Inc.

Name: Nishi-Nippon Financial Holdings, Inc.
Location

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

Business

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

Capital50 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

Credit Ratings

R&I: A (Stable)
JCR: A (Stable)(As of 30th June, 2020)

ChairmanPresident

Deputy President

Isao Kubota

Hiromichi Tanigawa

Souichi Kawamoto

Chairman ���������������������� Isao Kubota
President ���������������������� Hiromichi Tanigawa
Deputy President ������������������� Souichi Kawamoto

Organization Chart

Directors ����������������������� Kiyota Takata
Hideyuki Murakami
Directors (Audit and Supervisory Committee Members) ��� Kiyotaka Tomoike
Hirohiko Okumura (outside)
Nobuko Takahashi (outside)

Nishi-Nippon Financial Holdings, Inc.

Toshio Sakemi (outside)
General Shareholders’ Meeting(As of 30th June, 2020)* Directors/Audit and Supervisory Committee Members Hirohiko Okumura, Nobuko Takahashi, and Toshio Sakemi are Outside Directors as prescribed in Article 2 (xv) of theCompanies Act of Japan.

Nomination and Remuneration
Advisory Committee

Board of Directors

Audit and Supervisory
Committee
Audit and Supervisory
Committee Members Office

Major Shareholders (Common Stock)
Name
Executive Committee

Group Strategy Planning
Division

Compliance & Risk
Management DivisionCorporate Planning
Division

Japan Trustee Services Bank, Ltd. (Trust Account)

Internal Audit Division(As of 30th June, 2020)

Shares held (thousands) (Note 1)(%) (Note 2)

13,409

8.96

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

9,106

6.08

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

7,431

4.96

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

4,386

2.93

Nippon Life Insurance Company

3,861

2.58

Aso Corporation

3,140

2.09

Meiji Yasuda Life Insurance Company

2,765

1.84

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

2,736

1.82

JP MORGAN CHASE BANK 385151

2,656

1.77

The Nishi-Nippon City Bank Employee Shareholding Association

2,361

1.57

Total

51,856

34.66(As of 31st March, 2020)

Notes: 1. The figures are rounded down to the nearest thousand.
2. Shareholding ratio (excluding treasury Shares)

2

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2020

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 20203

Outline of Nishi-Nippon Financial Holdings Group

Providing Broader/Deeper Support for International BusinessGroup Management Philosophy

The Group supports local businesses by addressing their requirements for doing business in Asia andother parts of the world. To this end, the Group offers consulting services that go beyond the definitionof financial support, together with advanced products/services, through alliances with local partners
and specialists with experience in international business.

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

Multifaceted windows for international business support

Group Brand Slogan

Sincere Relationships, Best Solutions

Nishi-Nippon
City Bank

Meaning behind Our Logo
英文

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 darkorange expresses the Nishi-Nippon Financial Holdings Group’s commitment to evolving andtransforming itself toward the future.
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6mm• 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• International Consultation Office
Finely tuned support for overseas expansion offered by personnel with extensive international experience throughcollaboration with international partner financial institutions, lawyers, insurance companies, etc.
NCB Research &• “Door to Asia” (website)
Consulting
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

Strengths as a “Comprehensive Financial Group”
The Group has adopted a “parallel” structure whereby NNFH 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, thereby building amanagement framework that allows this comprehensive financial group to best exploit its strengths.
Banking
The Nishi-Nippon City Bank, Ltd.

Broad area coverage by our overseas bases and partner institutions

Information system service
NTT Data NCB Corporation

Bank of China

Banking
The Bank of Nagasaki, Ltd.
Credit cards, credit guarantee
The Kyushu Card Co., Ltd.

Holding company
Nishi-Nippon Financial Holdings, Inc.

Shinhan Bank
JBIC

Shanghai Representative Office

Payment Service
Japan Payment service CO., LTD.

The Bank of Yokohama

Shanghai Branch

Financial instruments exchange
Nishi-Nippon City Tokai Tokyo Securities Co., Ltd.

Hong Kong Representative Office

Research studies, management consultancy
NCB Research & Consulting Co., Ltd.

HKTDC

Hong Kong Representative OfficeClaims servicing
Kyushu Servicer

NTT Data NCB Corporation
is an equity-method affiliate.

Credit guarantee
Nishi-Nippon Credit Guarantee Co.

Japan Payment Services CO.,LTD. is a non-consolidated,
non-equity method subsidiary.
(As of 30th June, 2020)

TAITRA

Nishi-Nippon City Bank’s overseas operations..........................................3 in Asia

Bangkok Bank
Bangkok Representative OfficeOCB
BNP Paribas(7 foreign, JBIC, and Bank of Yokohama)Representative Office Registered in Singapore

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

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).”Partner financial institutions...................................9 institutions

Bank Resona Perdania

Partner institutions...................................2 institutions(As of 30th June, 2020)

Development of comprehensive financial services
that exceed the expectations of customers and host

Matrix management

communities (Realization of matrix management)

The holding company, from theMonitoring model
The holding company will demonstrate

standpoint of meeting individual

its oversight function over thecustomer needs, will develop strategies

subsidiaries while continuouslythat embrace the entire group.

* Nishi-Nippon City Bank concluded Basic Agreement for Overseas Business Support Services with The Bank of Yokohama in September 2016.

Advancement of a group management framework andrisk management systemmonitoring their business execution.

(Realization of a monitoring model)

4

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2020

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 20205

Financial/Non-Financial Highlights

Financial Highlights

Non-Financial Highlights

Ordinary income

Profit attributable to owners of parent% of net income(consolidated)(consolidated)(consolidated) not attributable to banking

Number of corporate customers

Two banks combined .........

¥28.7 billion
31st March,
2018

31st March,
2019

31st March,
2020¥20.2 billion
31st March,
2018

31st March,
2019

31st March,
2020

13.7%
31st March,
2018

31st March,
2019

31st March,
2020

Balance of loans

Balance and % of loans to SMEs

Balance of deposits/NCD(two banks combined)(two banks combined)(two banks combined)

Number of private customers

144

K

62K
Nishi-Nippon City Tokai Tokyo Securities ...... 3K
NCB Research &Consulting (membership) ................... 4K
Kyushu Card (member stores) ........

Two banks combined ...

4,034

K

891K
Nishi-Nippon City Tokai Tokyo Securities ...34K
Kyushu Card (membership) ........

(as of 31st March, 2020)(as of 31st March, 2020)

Number of main customers*

Number/amount of loans to support startups
and second startups (Nishi-Nippon City Bank)

Balance of loans to agriculture, forestry, andfisheries businesses (Nishi-Nippon City Bank)

20,966

4,252 cases / ¥158.3 billion¥56.7 billion

Utilization of funds*

Recipients of The Excellent
Executive Award*

Number/amount of SDGs Private Placement
Bonds underwritten (Nishi-Nippon City Bank)(Nishi-Nippon City Bank)* Borrowers of business loans whom webelieve use us as their main bank(deemed so based on transaction records)¥7,591.3 billion
31st March,
2018

31st March,
2019

31st March,
2020¥5,942.3 billion¥8,852.6 billion
78.3%
31st March,
2018

31st March,
2019

31st March,
2020

31st March,
2018

31st March,
2019

Management of client assets

Capital ratio

OHR(Group total)(consolidated)(consolidated)

31st March,2020(as of 31st March, 2020)(Nishi-Nippon City Bank)* NCB Kyushu Six-Order Industrialization
Support Fund, NCB Kyushu Revitalization
Fund, and QB Fund No. 1¥912.9 billion

9.36%

6

31st March,
2019

31st March,
2020

Nishi-Nippon Financial Holdings Group

31st March,
2018

ANNUAL REPORT 2020

31st March,
2019

31st March,2020(as of 31st March, 2020)* Granted by the Prize of Excellent Executive

69.8%
Total:

31st March,
2018(year ended 31st March, 2020)

31st March,
2018

31st March,
2019

31st March,
2020

59 cases(as of 31st March, 2020)

Total:

171 executives(as of 30th April, 2020)

Total:

216 cases / ¥21.5 billion(as of 31st March, 2020)

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 20207

Medium-Term Business Plan (for the three-year period April 2020 – March 2023)
Leaping Forward 2023 - Creating Vibrancy in the Region and Beyond What we mean by “Leaping Forward 2023 - Creating
Vibrancy in the Region and Beyond -”Group Management Philosophy

Value Creation Process- Vision/Goals of the Medium-Term Business Plan -Aiming high and motivated by pride in our services, we are committed to becoming a leading

We decided to retain the phrase “leaping forward” from thefinancial group through our ability to respond to change and to grow with our customers.

previous iteration as we sincerely hope to see the Group unite as
one to aggressively aim higher so that we can “leap forward” into

- Creating Vibrancy in the Region and Beyond -The subheading, “Creating Vibrancy in the Region and Beyond,”

and digital contributions to the development of the host community and customers.

indicates our determination to get the entire Group involved in the

Host community

Kyushu under the belief that, “Without regional development, there

Job creation

Corporate customers
Support forbusiness
startups
Solving
regional
issuesFukuoka and other areas in the Kyushu Region, the Group’s
main market, offer a number of favorable business opportunities,
including a strong economy and a series of large-scale urban
redevelopment projects.
Meanwhile, the operating environment in which financial institutions
find themselves is undergoing significant changes, including theincreasingly diversified and advanced customer issues and needs
against the backdrop of the ever-declining and aging population with alower birth rate, changes in people’s lifestyles, progress in digitalization,etc., and a prolonged low interest rate environment.

process of further invigorating the thriving economy in Fukuoka,
Creating greater Having young families (with or without children) settle down
vibrancy to
Fukuoka and other areas
Lively and vibrant city
Retailin the Kyushu Region
customers

Contributing
to the SDGs

Creation/revitalization of local industries

Management Environments

the future together with our customers and the host community.

The NNFH Group will provide customer-oriented “One to One Solutions” via physical (“human touch”)

Better corporate earnings

Higher income levels

More investments

Expanded consumption

Regional
development

Providing customer-oriented “One to One Solutions”
Human touchPartner companies(leasing, insurance, guarantee, systems)

Socialcontributions

DigitalBanking

Credit cards

Securities

Consultancy

will be no growth of the Group.”

External organizations

Open and innovative collaboration with partner companies and external organizations
Shareholders and investors

Group employees

Return to shareholders

HR development

Higher shareholder value

Greater job satisfaction

One to One Solutions
Providing products and services that perfectly match the needs
and problems of individual customers in order to enhancecustomer satisfaction (experience) and build long-lasting
business relationships

Ba sic St rat egi e s a nd P r ior ity Me a s ure s
Basic strategy

1. Demonstrating the Group’s collective strength with which to lead the regional development

NNFH’s priority SDGs
[Revitalizing the regional economy](1) Supporting business startups to create industries and jobs in the region
Priority measures(2) Showing leadership in regional development(3) Building a support structure to address regional issues(4) Social services designed to enhance regional appeals

Basic strategy

2. Providing customer-oriented “One to One Solutions”[Increasing customer satisfaction](1) Building a structure for providing customer-oriented solutions
Priority measures(2) Providing solutions to corporate customers(3) Providing solutions to retail customers

Basic strategy

3. Innovating resources for sustainable growth(1) Accelerating work reform(2) Strategically re-allocating management resources

Priority measures(3) Strengthening management of securities(4) Reinforcing forward-looking strategic investments

We will contribute to the further development of a thriving economy in
Fukuoka and other areas in the Kyushu Region by placing a greater focus
on startup support through the formation of new funds, etc., aggressively
increasing our involvement in regional development, and reinforcing
initiatives designed to resolve regional issues from the perspectives ofregional revitalization and the SDGs.

We will strive to increase customer satisfaction and offer inspiringexperiences to them by offering face-to-face services that exceed
expectations (“human touch”), while at the same time reaching out tomore customers via digital channels.

[Solid management foundation]
Given the trying earnings environment is expected to linger, we will
accelerate our drive to increase operational efficiency and reallocate
our resources to priority areas, while at the same time reinforcing
strategic investments in future opportunities.

(5) Developing HRs who challenge themselves and reforming the corporate culture

8

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2020

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 20209

Medium-Term Business Plan (for the three-year period April 2020 – March 2023)
Basic strategies

1. Demonstrating the Group’s collective strength with which to lead the regional development[Revitalizing the regional economy]

Guided by the belief that “Without regional development, there will be no growth of the Group,” we have remained committed
to developing and supporting local businesses and industries in the form of startup support and otherwise and tocontributing to the community.
In addition, we have laid out in the current Medium-Term Business Plan our commitment to contribute to the further
prosperity of Fukuoka and other areas in the Kyushu Region by reinforcing initiatives for startup support through theformation of new funds, aggressively increasing our involvement in regional development, and reinforcing initiatives designed
to resolve regional issues from the perspectives of regional revitalization and the SDGs.

2. Showing leadership in regional development
We will accelerate our efforts to “Creating Vibrancy in the Region and Beyond” by, for example, generating livelinessand vibrancy in the region through active involvement in urban re-development projects around the island.
Among such projects, we will actively participate by taking on a leading role in the two largest urban re-development
projects in Fukuoka City, “Tenjin Big Bang” and “Hakata Connected.”

1. Supporting business startups to create industries and jobs in the region
The Nishi-Nippon City Bank will fully tap into its enduring “DNA of developing SMEs” to actively contribute to the creationof industries and jobs in the region through further expansion of its funding and consulting services.
By expanding the investment function through the formation of new venture funds, we will support fundraising by venturebusinesses both in terms of loans and equities. Our all-encompassing consulting service menu allows us to offer “comprehensive
support” that covers the entire growth process of venture businesses from pre-foundation to post-start-up.

Issues and troubles for founders
When making a business plan

At the foundation

After starting up

Managerial knowledge in general(legal, labor, accounting, etc.)

Fundraising
Knowledge required for business management

Finding customers and sales channels
Fundraising
Recruitment

Accelerating efforts
for regional
development

Hakata Connected

Expansion of
Fukuoka Airport

Tenjin Big Bang

Former site of
Fukuoka City
vegetable/fruit market

Major urban
re-development
projects

Former site ofSpace World

Former site of
Kyushu University
in Hakozaki

THE NISHI-NIPPON CITY BANK

Accelerating its commitment toregional development by upgrading
its Regional RelationshipManagement Division of The NishiNippon City Bank to the Regional
Relationship Management
Headquarters.

Shindaiku-machi,
Nagasaki City

etc.

Boosting the startup support function
New

QB
Fund*
No. 2

New

NCB
VentureFund

Incubation
facility

Platform forcorporate
customers

Leasing

Loans tosupportstartups

Hakata Connected
Nishi-Nippon City Bank
Administrative HQ Bldg.

NCB
Startup Support
SalonsFunding function

The two largest urban re-development projects in Fukuoka City
Project area: Within a 500m radius of Hakata Station (approx. 80 ha)

Existing programs
QB
Fund*
No. 1

New

Nishi-Nippon City Bank
HQ Annex

Startupcounseling

Consulting service

Nishi-Nippon
City Bank
HQ Main Bldg.

Tenjin Big Bang
Project area:
Within a 500m radius of Tenjin
Intersection (approx. 80 ha)

Tenjin Business Center(provisional name)A chain of
re-development

Na
ka
su
St Ka
at wa
io
n bat
a

New

n
StatioTenjinHakataStation* Offering end-to-end support for universities’ technological seeds from the pre-foundation days to the growth phase

Number of startups supported

Approx.
10,000+30

Approx.
13,000%

The Nishi-Nippon City Bank is working on a chainof re-development, which includes rebuilding its HQ- A catalyst for Hakata Connected

E c o n o mi c e ff e c t

E c o n o mi c e ff ect¥260.0 billion
Knock-on effect/year ............ ¥500.0 billion
Total floor area ........................... x1.5 times
Jobs ........................................... x1.6 times¥290.0 billion
Knock-on effect/year ............ ¥850.0 billion
Total floor area .......................... x1.7 times
Jobs ........................................... x2.4 times

Source: Fukuoka City

Source: Fukuoka City

Construction investment .......

Previous Plan
10

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2020

This Plan

The Nishi-Nippon City Bank is involved in the “Tenjin
Business Center” (provisional name), the first project ofTenjin Big Bang, as the main bank of the project’s developer.

Construction investment .......

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 202011

Medium-Term Business Plan (for the three-year period April 2020 – March 2023)
Basic strategies

1. Demonstrating the Group’s collective strength with which to lead the regional development

Medium-Term Business Plan (for the three-year period April 2020 – March 2023)[Revitalizing the regional economy]

3. Building a support structure to address regional issues

Basic strategies

2. Providing customer-oriented “One to One Solutions”[Increasing customer satisfaction]

Against the backdrop of the ever-declining and aging population, the low birth rate, changes in people’s lifestyles, and therapid progress of digitalization, customer needs and values are increasingly diversified and advanced, and we must address

The Group collaborates with various organizations and enterprises to offer “comprehensive support” for solutions toregional issues, thus contributing to the revitalization of the regional economy.
We will create a high-value-added business model that meets regional needs (“regional trading firm” concept).

such needs by offering personalized financial and non-financial products and services (“One to One”).
During the period of the ongoing Medium-Term Business Plan, we will offer face-to-face services that exceed customers’
expectations with care and a human touch, while at the same time delivering these services to a greater number ofcustomers via digital channels, thus increasing customer satisfaction and offering them inspiring experiences.

Solving regional
issues throughLocal governments
collaboration
with otherUtilizing tourism
Reactivating
institutions/
resources
shopping streets
enterprises
IT firms
Major issues of
the region
Regional revitalization

1. Building a structure for providing customer-oriented solutions
Universities

ブランドマーク

和文

Creating
regional brands

Promotingmigration/settlement

Given the ongoing digitalization of banking and the resultant decline in customer traffic, we will expand contact with customers
by enhancing the functions of digital channels (PCs, smartphones, etc.), while at the same time strengthening our consulting
function (discovering customers’ issues and true needs and providing solutions) through physical channels (clerks, branches).

英文Distributors

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6mm

Manufacturers

Ad agencies

Roles of each channel in meeting diverse customer needs
Changes in the environment

Diversification of lifestyles / Progress in digitalization / Decline in visitors and ATM users

Customer needs

Warm and reliable persons to consult / Advanced expertise / Convenient, hassle-free, pleasant, comfortable
Consultancy only
humans can do

Making agriculture
a six industry

Press

Travel agencies“Good advisers for customers,” who, throughdialogues, get to know customers better toaddress their issues and true needs“Places specializing in consulting service,” where
technical and advanced solutions are offered

Believing that “Without regional development, there will be no growth of the Group,” we will engage in diverse initiatives
designed to achieve social contributions and the SDGs.

Strengthening
efforts to achieve
the SDGs

SDGs-related
products(SDGs private placement bonds)(Event for students fromlocal elementary schools)

Diverseavenues forsocialcontributions

Commending merits(The Excellent Executive
Award, The Asian Contribution
Award, The Asian Kids Award)
ブランドマーク

和文

Sending out information via TV, etc.
(“Machi-ga
Ski” (FBS), “Kokorozashi,
Jonetsu Kigyo” (RKB), “Hakken!
Kyushu Spirit” (KBC), etc.)

英文To contribute to the region as
we work to achieve the SDGs,
the special organization forthis task has been establishedwithin the NNFH.

Increasing efficiency in office work at
branch offices by accelerating work reform
HR development

Strengthening the branch
office support structure

Human
touch

Reshuffling positions across job categories
to allocate more persons to sales

Sharing info and developing data foundation

Digital channels (PCs, smartphones, and ATMs)
Increase customer contact by enhancing the convenience of digital channels
and their service menus, thus sending more customers to physical channels

Cultural/artistic activities(Music festival, etc.)

ANNUAL REPORT 2020(clerks, branches) (PCs, smartphones,
and ATMs)

Easy 24/7 access, completing transactions
promptly
Discovering customer needs to guide them tophysical channels

Improving both quality and quantity of dialogues with customers byincreasing work efficiency to save time and developing HRs

最小使用サイズ

最小使用サイズ

6mm

6mm

Expanding service menus for individualized app

Automating marketing

Nishi-Nippon Financial Holdings Group

Digitalchannels

Physical channels (clerks, branches)

Introducing a platform for corporate customers

12

Physicalchannels

Provision of customer-oriented “One to One Solutions”

4. Social services designed to enhance regional appeals

Finance literacy
education

Business that takes advantagesof digital technology

DigitalIncreasing efforts in the digital sphere
To strengthen efforts in the digital field, theDigital Strategy Division has been establishedwithin The Nishi-Nippon City Bank

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 202013

Medium-Term Business Plan (for the three-year period April 2020 – March 2023)
Basic strategies

2. Providing customer-oriented “One to One Solutions” [Increasing customer satisfaction]

2. Providing solutions to corporate customers

Physical channels

We offer “comprehensive support” for the diverse needs of corporate customers through concerted efforts of the Group.
Through collaboration with Group companies, partner companies, and external companies, we provide financial and nonfinancial services that meet diverse customer needs via both physical and digital channels.
For corporate customers, we will adjust our approaches to different customer segments to focus on identifying their issues
and needs, with branch offices and the Headquarters working as one to deliver solutions.

Strengthening the corporate solution business
Providing diverse fundraising methods

Comprehensive support for corporate customers

By enhancing our investment/lending functions through greater efforts toward structured finance and formation of new funds, we meet all
financing needs, including foundation, M&As, business succession, real estate development, making agriculture a six industry, etc.
Support for financing via loans and investment

Physicalchannels

Support for startups HR referrals

Support for efforts to achieve the SDGs / SDGs private placement bonds

Support for digitalization

Support for M&As / business succession

Support for settlement / cashless payment Support for international businessSupport for IPO

Foundation

Structured finance
Asset backed loans
Syndicated loans …etc.

M&As

Foundation

GrowthStabilization

Maturity

Approx. ¥2.0B
Investment function

Real estate development

Venture funds
Kyushu Revitalization Fund …etc.

Making agriculture a six industry

Acquisition, saving, and utilizationof customer information-Thorough understanding of customers

Startup
supportFundraising

Expanding sales
channels

Support for fundraisingTransaction lending / all-online
business loans

Digitalchannels
ブランドマーク

Recruitment

Higherproductivity

HR referrals

Overseasbusiness support

M&As

Mgt. info. service

Support for business matching

IPO

Business
succession

Support for M&As /Collaboration with M&A
matching sites

英文Banking

Partner companies
最小使用サイズ

最小使用サイズ

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6mm

Credit cards

Securities

Consultancy

External organizations

Open and innovative collaboration with partner companies and external organizations

FY2019…etc.

Efforts to support international business

More advantages forcorporate customers

Supporting customers’ efforts to increase productivity

Supporting customers in their efforts to achieve the SDGs byoffering SDGs private
No. of SDGs-related
placement bonds
products offeredand other products

Supporting digitalization
Supporting customers in promoting digitalization to increase
productivity
Supporting settlement /Cases of HR referrals
cashless payments
Approx. 200+
Offering full brand settlement(3-year total)
services to support
customers’ settlement/
cashless payments

DoubledApprox. 200

Prompt access tobusiness funds

model that takes ESG

Approx. 100

Eliminating labor
shortages“They send me the contact info of job
seekers from their partners who they think
meet our needs.”

ANNUAL REPORT 2020

Kyushu Card

Providing HR solutions
Catering to customers’
HR needs* Short for Environment,
Social, and GovernancePrevious plan

“They offer a wide array of solutions to meet
our needs as they arise, such as support forbusiness expansion, business succession,
M&As, IPO, overseas business, etc.”

Current plan

NCB Research & Consulting

Approx. 20
Previous plan

Current plan

Digital channels

Solutions to businessexpansion, succession, etc.

“The all-online business loan meets urgent
financing needs.”

Nishi-Nippon Financial Holdings Group- Building a feasibility study
into account“They support us in digitalizing operations,which is difficult to do on our own.”“I found the platform for corporate users
useful, as it covers a broad range of services
from banking to information provision.”

Kyushu Card

Supporting efforts to achieve the SDGs

the SDGs“At the NCB Startup Support Salon, I can get
one-stop solutions from business planning tofundraising. They now offer a venture fund in
the support menu, which is a plus.”

NCB Research & Consulting

Assisting customers in drawing up overseas strategies and establishing
their presence overseas by tapping into extensive networks
Offering settlement services for in-bound visitors

exclusive for ESG* andHigher productivity

FY2022

Prioritizing HR allocation in areas where advanced financing techniques are required, such as M&As and business succession- Developing loans

Solutions to concerns/
troubles at foundation

DoubledApprox. ¥4.0B

Business succession

Start: “Getting toknow customers”

和文

14

Revenue on corporate services

Lending function

Building a platform for corporate customers
Providing various one-stop financial/non-financial services by building a platform for corporate customers

Financial

Non-financial

Finance

Total financial services

Contents

Managerial information

Balance check
Bulk transfer, salary transfer
Electronic delivery
Transaction lending

Membership application
Application for credit/leasing
Corporate insurance simulation

Networking corporate sponsors
Business matching
Training/seminars

Subsidies, Fringe benefits
Managerial info
Introducing licensed professionals
HR referrals

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 202015

Medium-Term Business Plan (for the three-year period April 2020 – March 2023)
Basic strategies

2. Providing customer-oriented “One to One Solutions” [Increasing customer satisfaction]

3. Providing solutions to retail customers

Physical channels

Through concerted efforts of the Group, we offer “comprehensive support” to address various issues and needs that may
arise in each life stage of individual customers.
We provide financial and non-financial services that meet the diverse needs of customers, from the youth and thosebuilding assets to elderly and wealthy individuals, via both physical and digital channels.

Developing a system for providing solutions for wealthy individuals
Through collaboration among banks’ specialized units, Nishi-Nippon City Tokai Tokyo Securities, and external
specialists, we provide solutions that specifically meet customers’ individual needs.

Lifetime comprehensive support

Needs of wealthy
individuals
Physicalchannels

Quality asset building
Installment-type investment trust /Level premium insurance /Tsumitate NISA / iDeCo

Application-specificloan products
Housing loans /By-purpose loans

Preparedness for dementia
Dementia support trust /Guardianship support trust

Proposing advanced asset management
Succession of real estate and own
company’s shares
Inheritance, preparing a will …etc.

Preparedness for inheritance/gifting money
Trust products (trust as a substitute for a will, etc.)

Made-to-order investment products

Nishi-Nippon City Bank,

Bank of Nagasaki

Nishi-Nippon City Tokai
Tokyo Securities

Tax accountants, attorneys, etc.

Solutions that specifically address issues and concerns associated with inheritance
Providing diverse trust products that meet the needs to “gift,” “prepare,” “leave a bequest,” and “divide”

Start: “Getting toknow customers”

Youth / Building assets

Acquisition, saving, and utilizationof customer information-Thorough understanding of customers

Save

Transfer

Pay

Interpersonal transfer on The Nishi-Nippon City Bank’s app

DigitalchannelsBank Pay

ブランドマーク

和文

Retired
Borrow

Increase

Elderly/Wealthy individuals
Gift

PrepareConsumer loan online contract / In-app card loans

Investment trust and NISA account opening app service

Leave abequestBanking

最小使用サイズ

最小使用サイズ

6mm

6mm

Credit cards

Securities

Family monitoring
service on The NishiNippon City Bank’s app

Consultancy

Inheritance management

Annual installment gift trust

Will trust

Divide英文Partner companies

Trust as a substitute for a will

External organizations

Increased support for those building assets
By providing a consulting service for each life stage of individual customers, we offer total support from saving foruse in retirement to using loans.
Developing HRs specializing in consultation for individual
customers by reshuffling positions across job categories

Honing financial advisers’
expertiseOpen and innovative collaboration with partner companies and external organizations

Installment-type investment trust

Policyholders
100K

Building assets for
future life events“They show me how I can grow my financial
assets with small installments through NISA, etc.”“I find it convenient to be able to open an
investment trust account in the app without
having to see bank tellers.”

More advantages
for retailcustomers

Increased to¥1.15T

No. of contracts
1,000(3-year total)

Approx. 30K“We felt so reassured as the process was without a hitch
for an otherwise cumbersome inheritance procedures.”“Using trust products, I don’t have to worry about how
my assets should be managed upon my death or should
my mental faculties decline.”

Managing retirement allowances
for leisurely second life

A lifestyle of comfort
with a smartphone“I’ve never invested before, but they listened
to my stories carefully, which I found wasreassuring.”“They always come up with made-to-orderinvestment solutions for me.”“The Nishi-Nippon City Bank’s app offers plentyof information. They send me information on
financial instruments that exactly suit me.”“With this app, transferring money is easy andconvenient.”

Nishi-Nippon Financial Holdings Group

Approx. ¥1T

Trust businessSpecialist consultation easing
concerns over inheritance

Quick access toliving funds“With an in-app card loan service, I don’t
have to worry about urgent spending needs.”“Just by signing a consumer loan online
contract, I can apply for a loan without goingto bank tellers.”

16

Assets under management: Balance

ANNUAL REPORT 2020

FY2019Approx. 220

FY2022FY2019(As of 29th February, 2020)

Previous plan

FY2022Current plan

Digital channels
Expanding digital services for individual customers
We deliver financial/non-financial services that meet each life stage and lifestyle of customers by expanding thefunctions of the Nishi-Nippon City Bank’s app.

Financial services
Interpersonal transfer

Transfer/Pay-in

Card loans

Balance inquiry (Adding items)

Financialservices

Non-financial services
Content service, including lifestyle information

Non-financial
services

Family monitoring service

Delivering coupons

720,000 downloads (As of 30th June, 2020)

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 202017

Medium-Term Business Plan (for the three-year period April 2020 – March 2023)
Basic strategies

3. Innovating resources for sustainable growth[Solid management foundation]

While accelerating our drive to increase operational efficiency and reallocating our resources to priority areas, we will

2. Strategically re-allocating management resources

reinforce strategic investments in future opportunities.

We will accelerate our efforts for “work reform,” which include “work flow innovation,” “digital innovation,” and “resource
innovation.”
We will minimize in-house administrative work through a drastic review of operations and utilization of digital technology.
We will then reallocate surplus human resources thus freed to consulting and other more productive and specializedjobs.

Work flow innovation

We will comprehensively consolidate branches and review their functions by taking into account the size andcharacteristics of each market.
We will selectively allocate employees experienced in client asset management to retail outlets and corporate sales
specialists to branches focusing on corporate customers, so that teams equipped to cater to the specific needs of eachmarket can pursue sales opportunities by leveraging the unique characteristics of their branches.

Before Branches by typeOutside Sales

In-Store Service

HQ

Reviewing request for approval,
rating, and lending process (useof RPA)
Increasing work efficiency byintroducing sales support tools

Semi-self processing and“completed at the lobby”
processing by using tablets, app,
etc.
Reducing back-office operations
Concentrating office work to thecenterReviewing office work
(Promoting automation by EUC/
RPA, etc.)
Using groupware(increasing efficiency inresponding to inquiries at branch
offices, etc.)

Branches

Consolidating branches andreviewing their functions bytaking into account the size andcharacteristics of local markets

Large

for corporate
customers

Focusing on services tocorporate customers

for regional
sales

Focusing on broad services to corporate andindividual customers in the region

Aroundfor retailbusiness

Focusing on retail sales forretail customers

Around171

Around27(incl. 1 BinB)

During the period of this planaroundDigital innovation

Smallretail customer market

Large

Corporate market

1. Accelerating work reform

157

47

38

(incl. 15 BinB)

Promoting “paperless” operations and work efficiency enhancement by using cloud services and systemcoordination
Increasing efficiency in data analysis/use

Offering improved services
to customers

Branches
specialized inretailcustomers

Exclusively catering
to retail customers

AroundLightweight
branches

16

Small

Branches
maintaining
financing functionsin the region

Around26(excl. Head Office, Tokyo Branch, and Osaka Branch)

Resource innovation
Thorough implementation of the dual-division system (reallocating staff members at loan desks to outside sales
and other key positions)
Reviewing the configuration of branches according to market needs

By re-allocating about 100 out of some 450 employees whose humanpower has been freed as a result of the efforts toincrease efficiency of branches (introduction of BinB, lightweight branches, etc.) and operational efficiency at branch
offices and headquarters to digital, corporate solutions, and other areas, we will enhance convenience for customers,
provide optimal solutions, and boost the earning power of the Group.
Headcount is expected to decrease by about 350 by the end of this Medium-Term Business Plan as a result of thedifference between the number of retirees and new recruits (attrition).
Humanpower planning

About -350
(attrition)

KPIs

Volume of office work at
HQ and branches

Reduced by 300
human-minutes

Reducing processes
for outside sales/loan
processing to double
the amount of activity

Paper-related expenses

Reduced by
30%

Optimization / greater efficiency of HQand branch offices

Re-allocating personnel to priority fields

Freed humanpower

Re-allocated

About 450

About 100
Digital field

Greater efficiency
at branches

About 240
RPA Robotic Process Automation: Automated operations by software robots
EUC End User Computing: System building by operations divisions

18

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2020

Work reform at
branch offices

About 150

Corporate solutions field Market operation field

Work reform at
HQ

About 30

About 30

About 60

Increase the membership ofthe Digital Strategy Division
to 50

Increase the membership of
the Corporate Business
Solution Division to 80

Group companies (Bank of Nagasaki,
Kyushu Card, etc.)

About 10

Other focus fields

About 30

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 202019

Medium-Term Business Plan (for the three-year period April 2020 – March 2023)
Basic strategies

3. Innovating resources for sustainable growth[Solid management foundation]

3. Strengthening management of securities

5. Developing HRs who challenge themselves and reforming the corporate culture

We will boost our earning power by taking risk flexibly and proactively in respective markets and environments anddiversifying investments.

Profit and loss in the securities business (image)

Risk appetite framework
Distinguishing “risks that should be taken” from “risks
that shouldn’t be taken” to manage securities
proactively with risks and returns in mind

Higher earnings
by taking risks

Strengthening the investment team of the market division
Developing
specialists byloaning themto outsideorganizations

Allocating
more HRs

By working to “develop trustworthy human resources,” “enhance organizational resilience,” and “foster a corporate
culture that supports growth of its people,” we will promote the growth of individual employees and increase their job
satisfaction, thus developing people who can offer “services that exceed customers’ expectations.”

Develop trustworthy humanresources (development)

Enhancing organizational
resilience (staffing)

Enhancing training of the“mind,” the cornerstone of anenriched humanity

Assigning the right persons to
the right places

Supporting young employees’
upskilling

Earnings level
before taking
risks

Hiring midcareer
specialists

Developing management
executives
Developing specialists andstrategic HRs

Aggressively recruiting midcareer specialists
Shifting people to operations
with higher productivity

Fostering a corporate
culture that supports
growth of its people
Developing a corporate
culture that encourages selfimprovement
Expanding systems that
support people in taking onchallenges
Expanding programs designed
to promote diversity &inclusion
Promoting work style reform

FY2019FY2022

Promoting the growth of individual employees
and increasing their job satisfaction

4. Reinforcing forward-looking strategic investments
We will aggressively make strategic investments in systems that improve productivity and efficiency and maximize
customers’ convenience.
We will more than double the amount of system investments and quintuple the amount of strategic investments,
compared to those in the previous Medium-Term Business Plan.

5%
Strategic systems
investments

80%

5

20%

50%
Systems
investments

Nishi-Nippon Financial Holdings Group

50%

Offering “services that exceed customers’
expectations”

Strategic
systems
investments

times

Systems
investments

Other investments(equipment at
branches, etc.)

20

x

25%

Sustainable growth and increased corporate valueof the NNFH Group

Other investments(equipment at
branches, etc.)

ANNUAL REPORT 2020

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2020

21

Our Commitment to ESG and the SDGs
Cumulative
total underwritten

Working to Realize a Sustainable Community
The Group is committed to Environmental, Social, and Governance (ESG) criteria and the United Nations
Sustainable Development Goals (the SDGs) in the ways that a regional financial institution can be, inorder to simultaneously enhance our corporate value and realize a sustainable society.

Hand in Hand with Local Businesses and the Community

SDGs Private Placement Bonds
Nishi-Nippon City Bank handles SDGs Private Placement Bonds in support of its
customers’ endeavors to achieve the SDGs. Based on survey findings by a third-party
organization (Kyushu Economic Research Center), Nishi-Nippon City Bank grants an
SDGs Certificate to issuers of the bonds.

(First case underwritten in September 2006)* Compliance, regional contributions, environmental friendliness, etc.
A total of ¥2.05 billion in bonds underwritten for 10 cases as of 31st March, 2020

Environment Private
Placement Bonds

For companies who have received certification, etc. fromnational/local governments or otherwise for their eco-friendly
management

Supporting Business Startups
The Group started as a financial service catering exclusively to small- and medium-sized enterprises.
Tapping into our unbroken “DNA of developing SMEs,” we offer comprehensive support tailoredspecifically to fledgling businesses, thus creating industries and jobs in the region.

(First case underwritten in February 2008)

Support Extended to Startups and Second Startups*1: Number of Cases and Amount of Loans*2 by Nishi-Nippon City Bank
FY 2016

FY 2017

FY 2018

FY 2019

Cases

2,056

2,214

2,804

3,835

4,252

Total amount of loans(Billions of yen)

91.4

84.5

146.2

167.0

158.3

NCB Startup Support Salons
At the NCB Startup Support Salons in Fukuoka City and Kita-Kyushu City (opened in February 2016
and November 2017, respectively), Nishi-Nippon City Bank offers consulting services on everything to
do with starting a business, including support for pre-startup business plan formulation, financing at thetime of startup, post-startup management guidance/consultation, and organization of seminars. The
salons also provide entrepreneurs with opportunities to network with their peers.
At these salons, customers can avail themselves of in-depth consultations with consultants
specializing in startup support.

The Group makes capital commitments to a variety of funds for businesses in various stages, including
support for startups and new businesses, business growth, business succession, shift to “sixth-orderindustrialization,” and commercialization of business seeds, as well as improvement of management andsupport for business turnaround. The Group financially supports the growth of regional businesses bytapping into those funds.

NCB Kyushu
Revitalization
Fund

QB FundManaged by QB Capital, LLC, which wasestablished jointly with Kyushu TLO
Company, Limited, this fund is aimed atrevitalizing the regional economy in
Kyushu by creating new industries
through use of research outcomes fromuniversities in Kyushu.

Apr. 2013

Dec. 2015

Sep. 201310/¥3.38 billion

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2020

(As of 31st March,2020)“Kibo-no-Wa” Private
Placement Bonds in
Support of Children’s
Cafeterias

A total of ¥200 million in bonds underwritten for 2 cases as of 31st March, 2020

Donations are offeredunder the issuer’s
name or joint nameto operators of
makeshift eateries for
disadvantaged
childrenA total of ¥3.78 billion inbonds underwritten for
50 cases as of
31st March, 2020

Issuers: Ichiei Foods Co., Ltd., Heiwa Giken Co., Ltd.
Recipient: Fukuoka Food Bank Conference(Fukuoka Governor Ogawa at the center)

SDGs Private Placement Bonds (Donation-Type) Scheme

Issuers(Customers)

2. Issuing private
placement bonds

4. Certificate

5. Donations offered in joint nameswith the issuer

Sep. 2015

Feb. 2016

The Nishi-Nippon
City Bank, Ltd.

11/¥0.72 billion
1. Request asurvey3. Survey findings

SDGs Certificate

38/¥1.84 billion

Recipients(as of 31st March, 2020)

2230

startup consultants(First case underwritten in October 2018)

Established in First case invested in Cumulative total number/amount invested

Established to create new business
opportunities in Kyushu throughcollaboration among those in the primary, Jan. 2015
secondary, and tertiary industries, with theaim of creating added value.

By providing growth capital in various
NCB Kyushu
forms, this fund is aimed at supporting
Six-Order
local businesses contributing toIndustrialization revitalization of the local economy andSupport Fund creation of jobs.

7,308

visitors in total

A total of ¥10.62 billion in bonds underwritten for 111 cases as of 31st March, 2020

“Kyushu History” Private
Donations are offered under the issuer’s name or joint name to
Placement Bonds in Support of management bodies (municipal governments, etc.) of UNESCO
UNESCO World Heritage Sites World Heritage sites in Kyushu(First case underwritten in October 2019)

Forming Venture Funds to Support Startup Businesses

Descriptions

Donations are offered under the issuer’s name or joint name forthe purchase of books, sports gear, etc. for local schools(First case underwritten in March 2017)*1 Definition of “second startup”- Commencement of a new business by a successor, etc. to an existing company- Commencement of a new business by a manager, etc. who has transferred (handed over) an existing business- Restructuring of a company to make a drastic business turnaround (change of business)*2 Extended to businesses within five years of startup or second startup

Etc.

A total of ¥4.90 billion in bonds underwritten for 43 cases as of 31st March, 2020

“Tsunagu Kokoro” Private
Placement Bonds in Support ofLocal Community

Donation-Type Bonds

FY 2015(as of 31st March, 2020)

For companies who have received certification, etc. fromnational/local governments or otherwise for their CSR activities*

CSR
Private Placement Bonds

Initiatives for Creating Industries and Jobs in the Region

216 cases¥21.55 billion

Kyushu Economic
Research Center

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 202023

Environmental Initiatives

Partnership with the Local Community

Underwriting “Green Bonds” Issued by a Customer

Collaborating with Local Governments

In February 2020, Nishi-Nippon City Bank underwrote all of the “green bonds*” (5-year bonds; 200 million yen; External review

The Group has signed the comprehensive agreement on regional revitalization with 13 local

provider: Japan Credit Rating Agency, Ltd.) issued by West Holdings Corporation, which operates the solar power generation

governments and an individual agreement on solutions to issues each of the eight local governments

business nationwide. With this, Nishi-Nippon City Bank became the nation’s first regional bank to underwrite “green bonds”

has (the SDGs, internationalization, tourism promotion, etc.) as part of its commitment to regional

issued by way of a system for bank guaranteed private placement bonds.

revitalization.

* Debt instruments where proceeds are used exclusively to fund projects contributing to the resolution of global warming and other environmental problems. To
be issued in compliance with the Green Bond Principles of the International Capital Market Association (ICMA) and the Green Bond Guidelines of the Ministryof the Environment of Japan. Issuance is subject to eligibility review/evaluation by external institutions.

10 local universities to organize various programs that contribute to the regional development andGreen Bonds Underwriting Scheme by Way of SDGs Private Placement Bonds

the advancement of learning.

Issuing
SDGs Private Placement Bonds

West Holdings
Corporation(issuer)Green bonds

Collaborating with Universities
The Group has concluded the agreement on industry-university collaboration and cooperation with

Nishi-Nippon
City Bank

Multifaceted Programs Benefitting the Local Community

Granting funds

The Excellent Executive Award
Japan Credit Rating Agency, Ltd.
(review/assess eligibility)

Since January 1973, the Prize of Excellent Executive(Chairman: Isao Kubota) has commended excellent
executives who have made outstanding achievements inthe management and/or technology of SMEs in theInvesting in projects improving the environment

Kyushu region and Yamaguchi Prefecture, thus
contributing to the development of the regional economy.

Committed to Beautification of the
Local Environment

A total of 171 executives have been commended as of
30th April, 2020.

Employees of the Group regularly volunteer to clean up
the community environment. In August 2019, clerks of

The Asian Contribution Award / The
Asian Kids Award

Bank of Nagasaki cleaned up the area around theMeganebashi Bridge in Nagasaki City. In October 2019,clerks of Nishi-Nippon City Bank joined local residents to

Cleaning up the Meganebashi
Bridge, Nagasaki

Cleaning up the areaaround JR Hakata Station

clean up the area around JR Hakata Station.

In order to facilitate international mutual understanding,the Nishi-Nippon Foundation (Chairman: Isao Kubota) has
annually commended groups, individuals, elementary andjunior high schools, and regional groups of children who

Eco-Friendly Branches and ATMs

are working toward the development of Asian countries

We are renovating our branches to make them fully

and the international exchange between them. Those toequipped with eco-friendly features, such as solar power

be commended are picked from the Kyushu Region andgeneration, rainwater utilization, LED lighting, and energy-

Okinawa and Yamaguchi Prefectures, and the winners ofsaving air-conditioning (24 branches renovated as of 30th
April, 2020).

the awards either receive The Asian Contribution Award

NNFH Kita-Kyushu Bldg.

(held 21 times as of 31st March, 2020, since March 2000)

To save electric power, some ATMs do not operate
during certain blocks of time depending on the day of the

Ohashi Ekimae Branchor The Asian Kids Award (held 15 times as of 31st March ,2020, since March 2006).

week (7-8 and 18-23 on weekdays, 8-21 on weekends).

Lectures on economic matters
Nishi-Nippon City Bank has hosted this popular annual
talk by its Chairman Isao Kubota, to share the latest
financial and economic information that customers may
find useful in steering their businesses or developing abusiness outlook for the New Year. Since January 2008, a
total of 13 sessions have been held as of 31st March,
2020.

24

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2020

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 202025

Finance Literacy Education

Increasing Accessibility to Customers

In August 2007, Nishi-Nippon City Bank began organizing
a series of workshops on financial literacy designed tohelp young citizens to deepen their financial knowledge.
In August 2019, the 15th session was held at the
Fukuoka City Science Museum, where students from local
elementary schools enjoyed answering quizzes in aninteractive class.

Workshop on the SDGs

Barrier-Free Facilities
We promote universal design and barrier-free facilities atour branches for our valued customers.

Services Friendly to Persons with
Disabilities

Entrance with no steps (slope)

Nishi-Nippon City Bank and Bank of Nagasaki have

In October 2019, Nishi-Nippon City Bank organized theinstalled a total of 595 and 44 ATMs (including thoseworkshop on the SDGs, an idea-emergent workshop

outside branches) for visually-impaired persons,using Machi-1 Cards*, which it developed to educate

respectively, with at least one at every branch (as of 31st

people on the SDGs.

March, 2020). Customers are also welcome to ask our* Using the cards adorned with an SDGs logo, children come up with“ideas on an exciting, happy town” at the workshop.

staff to write/read for them.

Customers can write here while seatedMusic Festival
Nishi-Nippon City Bank and the Fukuoka Cultural

Priority ATM for visually-impaired persons

Foundation (Chairman: Isao Kubota) have co-hosted theyear-end since December 2014 to invite the audience forthe city to be more festive and alive with music (held 5times as of 31st March, 2020).

Promenade Concert
Nishi-Nippon City Bank and the Fukuoka Cultural
Foundation had co-hosted the promenade concert

We offer proactive programs to support balancing work and family life.
Childcare leave (until a child is up to 4 years of age)connected to Fukuoka play a special program for the

Short-hour shift (until a child finishes third grade in elementary school)

audience (held 409 times as of 31st March, 2020).

Etc.

As part of the projects to celebrate the 15th anniversary of
its foundation, Nishi-Nippon City Bank invited 10,000

Nishi-Nippon Financial Holdings Group

Expanding Programs for Good Work-Life Balancemonthly since January 1986. Musicians of all genres

Inviting 10,000 Junior High SchoolStudents to Disney Musical Lion King

26

Diversity & Inclusion

Networking support for female employees
Nishi-Nippon City Bank supports its female employees in networking at this opportunity to compare
notes with their role models and mingle with those from outside the industry.

junior high school students to Disney Musical Lion KingWorkshop for Female Leaders

under co-sponsorship with Shiki Theatre Company (three

Female business managers and leaders from localgroups of 10,000 students each have been invited as ofcompanies are invited to this workshop for networking

31st March, 2020).

and comparing notes with those from outside theBetween December 2019 and January 2020, a total of 10,000
students from junior high schools in Fukuoka City were invited to theLion King musical production to enhance the local culture.

industry. Four sessions have been organized so far.

ANNUAL REPORT 2020

The 4th session was held in November
2019, with 108 persons attending.

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 202027

Corporate Governance

Basic Approaches

Organizations of the Company

At the Group, enhancement of corporate governance is deemed to be a managerial issue of prime importance. Accordingly,
every possible effort is being made to “enhance the soundness and transparency of management,” “accelerate decisionmaking,” and “perform duties smoothly.”
By establishing an Audit and Supervisory Committee under NNFH, we not only enhance corporate governance, but we havealso built a system for prompt and efficient decision-making by delegating authority over performance of important duties. With
NNFH specializing in management oversight and Group companies focusing on the performance of day-to-day duties, we
maintain an advanced level of business administration for the Group.

General share holder’sMeeting
Audit and Supervisory
Committee

Audit and Supervisory Committee
Nomination and Remuneration
Advisory Committee

Board of Directors
Executive Committee

PDCA cycle for the Group’s business administration
Group strategies arereviewed

NNFH draws up
Group strategiesDO

A C T I ON

PLAN

NNFH monitors
the status of businessexecution by each company

C

HECK

Each Group company
conducts business according
to Group strategies

Group companies
PDCA Cycle for Group Business Administration
With NNFH (holding company) focusing on business administration and Group companies
concentrating on business execution, further advancement of the Group’s business administration is
aimed at.

28

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2020

Board of Directors
Comprised of nine directors (including four directors who are Audit and Supervisory Committee members, as of 30th June,2020), the Board of Directors of NNFH makes decisions about the performance of important duties concerning the Group’s
management and oversees the performance of the duties by directors.
NNFH has elected three independent outside directors (as of 30th June, 2020) in order to ensure that independent andobjective perspectives augment the highly effective management oversight function by the Board of Directors.
To adapt to rapid changes in the operating environment and clearly determine responsibilities of directors in attaining
business results for each fiscal year, the term of office for directors (excluding those who are Audit and Supervisory Committee
members) shall be one year, thus keeping the Board of Directors actively engaged.
In addition, by introducing the executive officer system, we have separated management decision-making and oversightfrom the administration of business operations in order to enhance the oversight function and promote rapid decision-making.
The Board of Directors meets once a month, in principle.

Comprised of four directors who are Audit and Supervisory Committee members (including three outside directors, as of 30th
June, 2020), the Audit and Supervisory Committee audits the performance of the duties by directors and compiles audit
reports. Audit and Supervisory Committee members shall, in accordance with an audit plan drawn up by the Audit andSupervisory Committee, attend important meetings, inspect important documents, and investigate the status of the operations
and the financial status of NNFH, in order to audit the performance of the duties by directors.
The Audit and Supervisory Committee is also partially responsible for overseeing directors by electing directors (excluding
those who are Audit and Supervisory Committee members) and stating opinions on the remunerations to directors.
The Audit and Supervisory Committee meets at least once every three months, in principle.

Executive Committee
Comprised of five directors (as of 30th June, 2020) appointed by a representative director and the president, the Executive
Committee deliberates on and makes decisions on important matters concerning management in accordance withmanagement policies or otherwise determined by the Board of Directors. One full-time Audit and Supervisory Committee
member is invited to the Executive Committee meeting to provide pertinent advice.
The Executive Committee meets whenever necessary.

Nomination and Remuneration Advisory Committee
NNFH has established the Nomination and Remuneration Advisory Committee, the majority of whose members are outside
directors, etc., with a view toward ensuring objectivity, timeliness, and transparency concerning the election and dismissal of arepresentative director and senior management members (directors holding responsible positions), assuring objectivity andtransparency concerning remunerations for directors and developing successors in a systematic manner.

Internal Audit Division
NNFH has established the Internal Audit Division, which conducts internal audits independent from all operations divisions. The
Internal Audit Division, in accordance with the Internal Audit Regulations, verifies and assesses the adequacy and effectivenessof internal control systems of the Group, including a compliance structure and a risk management structure, suggests
improvements to problems, etc. to audited divisions, and reports audit findings, etc. to the Board of Directors, Audit andSupervisory Committee (members), and the Executive Committee every month. By exchanging information with accounting
auditors, the division ensures that internal audits are conducted both objectively and efficiently.

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2020

29

Risk Management

Risk Appetite Framework (RAF)

Risk Management Systems

The Group has introduced a risk appetite framework (RAF), a tool for optimizing risks and returns through integrated
management of strategies and risk management, as a framework for business administration and risk management.
In drawing up a business plan (management plan and medium-term business plan), we verify management policies, earnings
plans, and risk capital allocation in an integrated manner based on the forecasts of risks, returns, and capital for the coming
three years.
We also monitor indicators on risk appetite periodically to follow up on the progress of the plans.

With accelerating liberalization and globalization of finance and advances in information and communication technology, the risks attendant

How RAF works

The Group’s approach

Returns

RORA =
Returns / Risk assets

Management policies

ROE =Returns / Shareholder equity- Net income- ROE, RORA
Etc.

- Internal/external
environments,
managerial issues- Management
strategies
Etc.

Integrated management

Integrated verification

Risks

Capital- Risk assets- Quantity of risks
Etc.

- Capital adequacy
ratio- Stress testing
Etc.

Earnings plans- Net income- ROE, RORA
Etc.

Risk capital
allocation planson financial services are becoming ever more diverse and complex. Against that backdrop, the Group is making concerted efforts toadvance risk management, which is one of its key priority issues for management, by establishing a Basic Policy on Risk Management to beobserved by the entire Group, with the goals of building a sound management foundation and ensuring stable revenue flow.

Integrated Risk Management:

We evaluate and manage risks by comprehensively identifying
potential risk situations that are inherent to a group organization
and, thus, are difficult for individual Group companies to deal
with, such as the statuses of risks in each category, and thelikelihood of them adversely affecting the Group, and thenassessing them against the Group’s financial resilience (equity
capital).

Credit Risk Management:

Recognizing credit risk as the most important type of risk for theGroup, NNFH established a Credit Risk Management Policy
under its Risk Management Regulations, thereby reinforcing thecredit 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.

Liquidity Risk Management:

NNFH 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
and stabilize cash flows.

Operational Risk Management:

NNFH 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, anddiverse that they concern every single operation and section andthus 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 and to minimize their impacts
should any such risks occur.

Crisis Management:

Market Risk Management:

NNFH 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 themwithin the range of those limits in order to achieve stable flow ofrevenue.

- Amount of capital
allocated, buffers- Capital adequacy
ratio, IRRBB
Etc.

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 eventof a large-scale disaster, IT system failure, or other contingency,
NNFH established the Business Continuity Regulations. NNFH’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 bycarrying out various types of drills.

Internal Audit Division
Credit risk (Compliance & Risk Management Division)
Market risk (Compliance & Risk Management Division)

Capital adequacy ratio =Core capital / Risk weighted assets

Liquidity risk (Compliance & Risk Management Division)
Board of Directors

Major indicators of risk appetite

Audit and Supervisory
Committee

Operational risk (Compliance & Risk Management Division)

Executive Committee
Compliance &Risk Management
Committee for AML/CFTDivision
Risk Management

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)

Risks andreturns

How much of what risks should be taken toachieve earnings targets
If returns commensurate with risks are generated

RORA: Indicates profitability commensurate withrisks

Returns andcapitalIf returns commensurate with capital are
generated

ROE: Indicates profitability commensurate withcapitalIf capital sufficiency is ensured under risk
scenarios or stress scenarios

Capital adequacy ratio: Indicates capitalsufficiency commensuratewith risks

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

Consolidated Subsidiaries and Affiliates

NNFH established a Compliance & Risk Management Division to manage all matters concerning risk management under one umbrella. This
Division periodically monitors the status of risk management within the Group and issues directives for improvement as necessary, thereby

Capital andrisks

ensuring that the risk management system is effective.

Commitment to Anti-Money Laundering (AML) Compliance
In order to reinforce its commitment to prevention of money laundering and financing of terrorism, which is being demanded on aninternational level, special organizations for this task were established within the Compliance & Risk Management Division of NNFH and theCompliance Risk Supervisory Division of The Nishi-Nippon City Bank, Ltd. on 1st August , 2018.

30

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2020

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 202031

Financial Section

Contents
Nishi-Nippon Financial Holdings, Inc. and Subsidiaries
Consolidated Balance Sheet ................................................................... 34
Consolidated Statement of Income ......................................................... 35
Consolidated Statement of Comprehensive Income ................................ 35
Consolidated Statement of Changes in Net Assets ................................. 36
Consolidated Statement of Cash Flows ................................................... 38
Notes to Consolidated Financial Statements ........................................... 39
Quarterly Information (Unaudited) ............................................................. 76
The Nishi-Nippon City Bank, Ltd.
Non-Consolidated Balance Sheet (Unaudited) ......................................... 77
Non-Consolidated Statement of Income (Unaudited) ................................ 78
Non-Consolidated Statement of Changes in Net Assets (Unaudited) ....... 79
The Bank of Nagasaki, Ltd.
Non-Consolidated Balance Sheet (Unaudited) ......................................... 81
Non-Consolidated Statement of Income (Unaudited) ............................... 82
Non-Consolidated Statement of Changes in Net Assets (Unaudited) ....... 83
Notes to Non-Consolidated Financial Statements (Unaudited) ..................... 84
Independent Auditor’s Report ...................................................................... 85

32

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2020

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 202033

Consolidated Balance Sheet

Consolidated Statement of Income

Nishi-Nippon Financial Holdings, Inc. and Subsidiaries

Nishi-Nippon Financial Holdings, Inc. and Subsidiaries

31st March, 2020 and 2019Year ended 31st March, 2020 and 2019
Thousands of
U.S. dollars (Note 1)

Millions of yen

2020

2019

2020

¥1,714,664¥1,474,517$15,755,436

Call loans and bills bought

1,189

471

10,930Commercial paper and other debt purchased

36,95637,436

339,580

Assets:Trading account assets (Notes 3 and 28)

1,385

1,166

12,732

Money held in trust (Note 29)

5,370

4,870

49,343

Securities (Notes 4, 6, 27 and 28)

1,297,874

1,372,367

11,925,707

Loans and bills discounted (Notes 5, 6, 7 and 27)

7,554,143

7,341,204

69,412,328

Foreign exchange assets (Note 8)

14,407

8,396

132,383

Other assets (Notes 6, 9)

88,91394,023816,989

Tangible fixed assets (Notes 10 and 17)

119,647

123,930

1,099,398

Intangible fixed assets

3,719

4,525

34,178Asset for retirement benefits (Note 31)

5,279

6,162

48,513

672

645

6,176

Deferred tax assets (Note 32)
Customers’ liabilities for acceptances and guarantees

20,24823,254

186,056

Reserve for possible loan losses (Note 27)(41,135)(43,343)(377,978)

Reserve for devaluation of securities
Total assets

(571)

(578)

(5,248)¥10,822,765¥10,449,051$99,446,529$81,145,344

Liabilities and net assets:
Liabilities:¥8,831,047¥8,508,767

Call money and bills sold (Notes 6 and 27)

Deposits (Notes 6, 11, and 27)

39,000109,084

358,357

Payables under repurchase agreements (Notes 6 and 27)

207,019

166,666

1,902,226

Guarantee deposits received under securities lending transactions (Note 6)

89,108145,718

818,782

Borrowed money (Notes 6, 13 and 27)

994,175

891,921

9,135,119

Foreign exchange liabilities (Note 8)
Bonds (Notes 12 and 27)
Borrowed money from trust account

118

172

1,086

10,00010,00091,886

835

—

7,680

Other liabilities (Note 14)

99,962

55,522

918,516

Liability for retirement benefits (Note 31)

3,708

2,864

34,073

247

246

2,273

Reserve for retirement benefits for directors and corporate auditors
Reserve for reimbursement of deposits

1,630

2,151

14,982

Reserve for other contingent losses

1,430

1,380

13,140Reserve under the special laws

10

10

99

Deferred tax liabilities (Note 32)

534

6,571

4,911

Deferred tax liabilities on revaluation of premises (Note 17)

14,93014,982

137,192

Acceptances and guarantees

20,24823,254

186,056

10,314,007

9,939,317

94,771,729

Total liabilities

2019¥82,692
14,2711,660
032,638
1,382
3,995
6,958
143,599¥84,400
16,7991,626—
32,631
1,433
1,285
5,621
143,799$759,835
131,138
15,255
0299,905
12,70336,71063,937
1,319,485

1,022
106
4,120

1,304
57
2,640

9,398
977
37,859382
769
948
12,373
1,684
82,308
10,734
114,451
29,148

250
708
1,113
11,786
3,378
81,002
7,503
109,744
34,054

3,511
7,073
8,711
113,700
15,476756,307
98,634
1,051,651
267,834

9,169
(398)
8,771
20,377

9,036
1,874
10,91023,14484,252(3,657)80,595
187,239154¥20,222244¥22,899

1,424$185,815

2020

Interest and dividend income:Interest on loans and discounts
Interest and dividends on securities
Other interest income (Note 18)
Trust fees
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 guarantee deposits received under securities lendingtransactions
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 37)
See accompanying Notes to Consolidated Financial Statements.

Consolidated Statement of Comprehensive Income
Nishi-Nippon Financial Holdings, Inc. and Subsidiaries
Year ended 31st March, 2020 and 2019

Net assets:
Capital stock (Note 15)

50,00050,000459,432

Capital surplus

129,477

132,510

1,189,720

Earned surplus

270,954

255,2292,489,704(9,868)(10,896)(90,677)

440,563

426,843

4,048,179

Net unrealized gains on securities available for sale, net of taxes (Note 28)

47,03257,200432,162

Net deferred gains (losses) on hedging instruments, net of taxes(1,841)(205)(16,921)Retirement benefits liability adjustments

Treasury stock (Note 16)
Total shareholders’ equity

Revaluation of premises, net of taxes (Note 17)29,94630,017275,168

Retirement benefits liability adjustments, net of taxes (Note 31)(14,486)(11,612)(133,109)

60,65075,400557,299

7,544

7,490

69,321

508,758

509,734

4,674,800¥10,822,765¥10,449,051$99,446,529

Total accumulated other comprehensive income
Non-controlling interests
Total net assets (Note 37)
Total liabilities and net assets
See accompanying Notes to Consolidated Financial Statements.

Nishi-Nippon Financial Holdings Group

2020
Income:Cash and due from banks (Notes 6 and 27)

34

Thousands of
U.S. dollars (Note 1)

Millions of yen

ANNUAL REPORT 2020

Thousands of
U.S. dollars (Note 1)

Millions of yen

2020

2019

2020

¥20,377¥23,144$187,239

Net unrealized gains on securities available for sale

(10,179)(22,268)(93,534)

Net deferred gains (losses) on hedging instruments(1,636)(171)(15,035)

Profit (loss)
Other comprehensive income:

Total other comprehensive income (Note 25)
Comprehensive income
Comprehensive income attributable to owners of parent
Comprehensive income attributable to non-controlling interests(2,873)(18,540)(26,403)(¥14,689)(¥40,980)($134,973)¥5,688(¥17,835)$52,265¥5,543(¥18,085)$50,941

¥144

¥250

$1,324

See accompanying Notes to Consolidated Financial Statements.

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 202035

Consolidated Statement of Changes in Net Assets

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

Nishi-Nippon Financial Holdings, Inc. and Subsidiaries

Year ended 31st March, 2020 and 2019Year ended 31st March, 2020 and 2019
Thousands of
U.S. dollars (Note 1)

Millions of yen

2019

2020

2020

Shareholders’ equity:

Thousands of
U.S. dollars (Note 1)

Millions of yen

2020

2019

2020

¥57,200¥79,474$525,596(10,168)(22,273)(93,434)

Accumulated other comprehensive income:Capital stock (Note 15)

Net unrealized gains on securities available for sale, net of taxes

Balance at beginning of the year

¥50,000¥50,000$459,432

Changes during the year

Balance at beginning of the year
Changes during the year

Total changes during the year
Balance at end of the year

—

—

—

¥50,000¥50,000$459,432

Capital surplus

Net changes in items other than shareholders’ equity
Total changes during the year
Balance at end of the year

Balance at beginning of the year

¥132,510¥134,791$1,217,589

(0)

0

(0)

Changes during the year
Retirement of treasury stock
Total changes during the year
Balance at end of the year

(3,032)(2,281)(27,868)(3,032)(2,281)(27,869)¥129,477¥132,510$1,189,720

Earned surplus(22,273)(93,434)¥57,200$432,162(¥205)(¥33)($1,886)

Net deferred gains (losses) on hedging instruments, net of taxes
Balance at beginning of the year

Sale of treasury stock(10,168)¥47,032

Changes during the year
Net changes in items other than shareholders’ equity
Total changes during the year
Balance at end of the year

(1,636)(171)(15,035)(1,636)(171)(15,035)(¥1,841)(¥205)($16,921)¥30,017¥30,058$275,820

(71)

(40)

(652)

Revaluation of premises, net of taxes

Balance at beginning of the year

¥255,229¥236,924$2,345,211

Changes during the year

Balance at beginning of the year
Changes during the year

Cash dividends paid (Note 38)(4,568)(4,635)(41,974)

Profit (loss) attributable to owners of parent

20,222

22,899185,815

71

40

652

Reversal of revaluation of premises
Total changes during the year
Balance at end of the year

Net changes in items other than shareholders’ equity
Total changes during the year
Balance at end of the year

15,72518,304144,493Retirement benefits liability adjustments¥270,954¥255,229$2,489,704

Balance at beginning of the year

Treasury stock (Note 16)

(71)

(40)

(652)

¥29,946¥30,017$275,168(¥11,612)¥6,927($106,705)

Changes during the year

Balance at beginning of the year(¥10,896)(¥10,668)($100,120)

Changes during the year

Net changes in items other than shareholders’ equity
Total changes during the year

Acquisition of treasury stock(2,005)(2,509)(18,429)

0

0

3

3,032

2,281

27,868

Balance at beginning of the year

1,027

(227)

9,442

Changes during the year(¥9,868)(¥10,896)($90,677)¥426,843¥411,048$3,922,112

Cash dividends paid (Note 38)(4,568)(4,635)(41,974)

Profit (loss) attributable to owners of parent

20,222

22,899185,815

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 end of the year

Changes during the year

(2,005)(2,509)(18,429)

Sale of treasury stock

0

0

2

Reversal of revaluation of premises

71

40

652

Total changes during the year
Balance at end of the year

13,71915,795126,066¥440,563¥426,843$4,048,179(18,540)(26,403)(18,540)(26,403)(¥14,486)(¥11,612)($133,109)¥75,400¥116,426$692,825(14,749)(41,026)(135,525)

Total accumulated other comprehensive income

Net changes in items other than shareholders’ equity
Total changes during the year

Balance at beginning of the year

(2,873)(2,873)

Balance at end of the year

(14,749)(41,026)(135,525)¥60,650¥75,400$557,299¥7,490¥7,420$68,831

53

70

489

53

70

489

¥7,544¥7,490$69,321¥509,734¥534,895$4,683,769

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 38)(4,568)(4,635)(41,974)

Profit (loss) attributable to owners of parent

20,222

22,899185,815

Acquisition of treasury stock(18,429)(2,005)(2,509)

Sale of treasury stock

0

0

2

Reversal of revaluation of premises

71

40

652

(14,695)(40,956)(135,035)(976)(25,160)(8,969)¥508,758¥509,734$4,674,800

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.

36

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2020

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 202037

Consolidated Statement of Cash Flows

Notes to Consolidated Financial Statements

Nishi-Nippon Financial Holdings, Inc. and Subsidiaries

Nishi-Nippon Financial Holdings, Inc. and Subsidiaries

Year ended 31st March, 2020 and 2019
Thousands of
U.S. dollars (Note 1)

Millions of yen. 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(Decrease) increase in reserve for possible loan losses
Decrease in reserve for devaluation of securities
Decrease in asset for retirement benefits
Increase in liability for retirement benefits
Increase in reserve for retirement benefits for directors and corporate
auditors
Decrease in reserve for reimbursement of deposits
Increase (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(Gains) losses on sale of tangible fixed assets
Net increase in trading account assets
Net increase in loans and bills discounted
Net increase in deposits
Net decrease in certificates of deposit
Net increase in borrowed money, exclusive of subordinated borrowings
Net increase in due from banks, exclusive of central bank
Net increase in call loans
Net (decrease) increase in call money
Net (decrease) increase in guarantee deposits received under securities
lending transactions
Net increase in foreign exchange assets
Net (decrease) increase in foreign exchange liabilities
Net increase in borrowed money from trust accountInterest and dividends received
Interest paid
OthersSubtotal
Income taxes paid
Net cash provided by operating activities

2020

2019

2020

¥29,148
5,692
1,046
283
(101)
(2,207)
(7)
882
843

¥34,054
5,669
98
283
(84)
384
(39)
19,4902,113$267,834
52,302
9,616
2,605
(935)
(20,286)
(68)
8,110
7,754

0
(521)
49
(98,624)
7,349(4,385)(12)(740)(1,478)(218)(212,938)
389,036(66,756)
102,253(526)(237)(29,731)

14
(387)
(28)
(102,827)
6,074(2,891)
(10)
(653)
258
(23)
(299,646)
225,860(62,387)
143,044(373)(1,915)
110,610

6(4,789)451(906,228)
67,532(40,300)(117)(6,801)(13,584)(2,011)(1,956,619)
3,574,721(613,406)
939,570(4,842)(2,185)(273,194)(56,610)(6,011)(53)
835
100,483(7,357)47,195
196,578(8,336)¥188,242

118,087(36)
58—
104,219(6,349)(32,920)
259,746(10,400)¥249,346(520,171)(55,234)
(495)
7,680
923,311(67,601)
433,663
1,806,289(76,598)$1,729,690. 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
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(¥402,810)
131,843
328,957(500)(3,425)
4,938(968)¥58,034(¥170,544)
113,604
229,525(2,020)(3,452)172(1,766)¥165,519($3,701,284)
1,211,462
3,022,670(4,594)(31,471)
45,380(8,903)$533,259. Cash flows from financing activities:
Redemption of subordinated bonds
Dividends paid
Dividends paid to non-controlling shareholders
Payments for acquisition of treasury stock
Proceeds from sale of treasury stock
Net cash used in financing activities¥—(4,567)(90)(2,005)0(¥6,663)(¥10,000)(4,635)(180)(2,509)0(¥17,325)$—(41,966)(834)(18,429)2($61,227)

¥6

¥10

$55

. Effects of changes in exchange rates on cash and cash equivalents¥239,619¥397,551$2,201,779. Cash and cash equivalents at beginning of the year

¥1,470,719¥1,073,168$13,513,914. Cash and cash equivalents at end of the year (Note 36)¥1,710,338¥1,470,719$15,715,693. Net increase in cash and cash equivalents

1. Basis of Presentation of Consolidated Financial Statements
The accompanying consolidated financial statements of Nishi-Nippon Financial Holdings, Inc. (the “Company”), and its consolidated
subsidiaries have been prepared in conformity with accounting principles generally accepted in Japan, which are different in certain respects
as to the application and disclosure requirements of International Financial Reporting Standards, and are compiled from the consolidated
financial statements prepared by the 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.
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 theCompany.
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 ¥108.83= U.S.$ 1.00, theexchange rate on 31st March, 2020, has been used in translation. The translation is not intended to imply that the assets and liabilities
which originated in yen have been or could be readily converted, realized or settled in U.S. dollars at the above or any other rate.
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(1) 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 years ended 31st March, 2020 and 2019 is as follows:
2020

2019

i) Number of consolidated subsidiaries:77ii) Number of non-consolidated subsidiaries:22(2) Application of Equity Method
The number of non-consolidated subsidiaries and affiliates, which are accounted for by the equity method, for the years ended 31st
March, 2020 and 2019 is as follows:
2020

2019

i) Number of non-consolidated subsidiaries accounted for by the equity method:00ii) Number of affiliates accounted for by the equity method:11iii) Number of non-consolidated subsidiaries not accounted for by the equity method:22iv) Number of affiliates not accounted for by the equity method:00(3) Fiscal Years of Consolidated Subsidiaries
The closing dates of consolidated subsidiaries are the same as the closing date for the consolidated financial statements.
(4) 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 or losses 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 theamount assuming 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.

See accompanying Notes to Consolidated Financial Statements.

38

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2020

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 202039

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

value of the loan (“direct write-off”). The amounts of such direct write-offs at 31st March, 2020 and 2019 were ¥9,517 million ($87,456(5) Securities
Securities held to maturity are carried at amortized cost using the straight-line method with cost determined by the moving averagemethod. Investments in non-consolidated subsidiaries not accounted for by the equity method are valued at cost determined by thethousand) and ¥5,813 million, respectively.
Other consolidated subsidiaries record a general reserve for possible loan losses by applying the historical loan-loss ratio observed

moving average method. In principle, securities available for sale are carried at fair value with cost of sales determined by the moving

over specific periods, and record a specific reserve for certain loans at the estimated uncollectible amount based on assessment of

average method. However, securities available for sale, for which it is extremely difficult to determine the fair value, are valued at costeach borrower’s ability to repay.

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 for sale, net of taxes, and included directly in net assets.
Securities held as components of individually managed money trusts whose principal objective is investments in securities are stated
at fair value.

(11) Reserve for Devaluation of Securities
In order to provide for a loss on investments, the Company and its consolidated subsidiaries estimate the amount deemed necessary
based on a review of financial position, etc. of the companies issuing securities or golf club membership.
(12) Reserve for Retirement Benefits for Directors and Corporate Auditors(6) Derivatives
Derivatives held or written are stated at fair value.
(7) 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 aredepreciated 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.
(8) Intangible Fixed Assets (excluding leased assets)
Intangible fixed assets are amortized using the straight-line method. Software for internal use is amortized based on the estimated usefullife determined by the Company and its consolidated subsidiaries (5 years).

Reserve for retirement benefits for directors and corporate auditors is provided at the amount that would be paid in accordance with
the internally established rule at the balance sheet date if they were retired on that date.
(13) Reserve for Reimbursement of Deposits
Reserve for reimbursement of deposits is provided for possible losses on the future claims for withdrawal of the deposits, which wasderecognized, at an amount deemed necessary based on the estimates of the consolidated subsidiaries engaged in the banking
business.
(14) 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.
(15) 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

(9) 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.
(10) 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 underbankruptcy proceedings”) or who are in a similar financial condition although not yet in bankruptcy (hereinafter, “borrowers substantiallyin bankruptcy”), the reserve for possible loan losses is provided at the full amount of the book value of such loans after deducting theamount 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 highprobability of becoming so (hereinafter “customers with high probability of becoming insolvent”), the reserve for possible loan losses isprovided at the amounts deemed necessary after deduction of the estimated realizable value of collateral and guarantees based on thecustomer’s overall financial condition.
For loans to borrowers with a rescheduled or restructuring plan, which exceed a certain amount, the discounted cash flow (DCF)

the purchase or sale of securities or other securities-related trading activities by the Company’s consolidated subsidiary engaged in the
securities business 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.
(16) Accounting for Retirement Benefits
For the consolidated subsidiaries engaged in the banking business, the retirement benefit obligation for employees is attributed to eachperiod 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 iswithin the average remaining years of service of the current employees.
For other consolidated subsidiaries, liability for retirement benefits and retirement benefit expenses are calculated using thesimplified method, which assumes the retirement benefit obligation to be equal to the benefits payable if all eligible employees voluntarily
terminated their employment at fiscal year end.
(17) Foreign Currency Translation
Foreign currency-denominated assets and liabilities are translated into Japanese yen primarily at the exchange rate prevailing at thebalance sheet date.

method is applied to provide for doubtful accounts, if cash flows from collection of principal and receipts of interest can be reasonably
estimated. Under the DCF method a reserve for possible loan losses is provided at the difference between the cash flows discounted
by the original interest rate and the carrying value of the loan.
For other loans, the reserve for possible loan losses is provided mainly at an anticipated amount of losses over the next one or(18) Accounting for Leases
Finance lease transactions which were initially engaged by the consolidated subsidiaries prior to 1st April, 2008 where there is notransfer of ownership are accounted for by the same method as applicable to ordinary operating lease contracts.

three years. The anticipated amount of losses was calculated by obtaining the loss rate based on the mean for a certain period of
actual loss rates calculated from actual losses for one or three years and then by making necessary adjustments in accordance with
future projections and other factors.
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 that are secured by collateral andguarantees, the unrecoverable portion of such loans is determined by subtracting the estimated recoverable amounts from the disposalof the collateral and the amounts deemed recoverable from the guarantors. The unrecoverable amount is written off directly against the40

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2020(19) Hedge Accountingi) Hedge accounting for interest rate risks
The consolidated subsidiaries engaged in the banking business apply the deferred method as hedge accounting for interest raterisks 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 as available-for-salesecurities, in accordance with operational rules concerning hedge accounting, hedged items are distinguished by identical type of

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 202041

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

bonds and interest rate swaps are used as hedging instruments. Since significant terms related to those hedged items and hedging“Accounting Standard for Fair Value Measurement” (ASBJ Statement No. 30 of 4th July, 2019)

instruments are nearly identical, such hedging transactions are deemed highly effective in terms of evaluation of hedge effectiveness.

“Implementation Guidance on Accounting Standard for Fair Value Measurement” (ASBJ Guidance No. 31 of 4th July, 2019)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.

“Accounting Standard for Financial Instruments” (ASBJ Statement No. 10 of 4th July, 2019)“Implementation Guidance on Disclosures about Fair Value of Financial Instruments” (ASBJ Guidance No. 19 of 31st March, 2020)ii) 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

Overview

risks of various foreign currency-denominated financial assets and liabilities in accordance with the “Accounting and Auditing

In order to increase comparability with provisions of international accounting standards, the “Accounting Standard for Fair Value

Treatment for Accounting for Foreign Currency Transactions in Banking Industry” (JICPA Industry Audit Committee Report No. 25 of

Measurement” and “Implementation Guidance on Accounting Standard for Fair Value Measurement” (hereinafter collectively, the “Fair29th July, 2002).

Value Measurement Accounting Standard, Etc.”) have been developed to serve as guidance, etc. on measurements of fair value.

The consolidated subsidiaries treat foreign exchange swap transactions as hedging instruments for the purpose of the hedge of
foreign currency-denominated financial assets and liabilities, and the subsidiaries test hedge effectiveness by matching the foreign

The Fair Value Measurement Accounting Standard, Etc. is applicable to the fair value of the following item:• Financial instruments as in the “Accounting Standard for Financial Instruments.”

currency swap position as hedging instruments with the related foreign currency-denominated financial assets and liabilities as

Also, the “Implementation Guidance on Disclosures about Fair Value of Financial Instruments” has been revised to include

hedged items.

notes on the breakdown of financial instruments by the level of their fair value, etc.

iii) Internal contract
For internal contracts, the consolidated subsidiaries engaged in the banking business manage the foreign currency swaps that are

Scheduled date of adoption

designated as hedging instruments in accordance with the strict criteria for external transactions stipulated in the JICPA Industry

The Company plans to adopt the above-mentioned accounting standard and implementation guidance from the beginning of the

Audit Committee Report No. 25. Therefore, the subsidiaries either recognizes gains or losses that arise from such currency swaps as

fiscal year ending 31st March, 2022.

earnings or defers them, rather than eliminating them.
Impact of the adoption of the accounting standard and implementation guidance
The Company is currently evaluating the effect of the adoption of this accounting standard and implementation guidance on its(20) Amortization of Goodwill
Goodwill is amortized using the straight-line method over five years.
(21) 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 due from central bank.

consolidated financial statements.
“Revised Accounting Standard for Accounting Policy Disclosures, Accounting Changes, and Error Corrections” (ASBJ Statement No. 24 of
31st March, 2020)
Overview(22) 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

The purpose of this accounting standard is to present a brief overview of the accounting principles and procedures that have been
adopted when the provisions of relevant accounting standards, etc. are not clearly specified.

and its consolidated subsidiaries.
Scheduled date of adoption(23) Application of the Consolidated Tax Payment System
The Company and some of its consolidated subsidiaries have adopted the consolidated tax payment system, where the Company isdesignated as a parent company.
(Accounting Standards Issued but Not Yet Effective)“Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29 of 31st March, 2020)“Implementation Guidance on Accounting Standard for Revenue Recognition” (ASBJ Guidance No. 30 of 31st March, 2020)
Overview
This is a comprehensive accounting standard for revenue recognition. Specifically, the accounting standard establishes thefollowing five-step model that will apply to revenue from customers:
Step 1: Identify the contract(s) with a customer.
Step 2: Identify the performance obligations in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performance obligations in the contract.
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.
Scheduled date of adoption
The Company plans to adopt the above-mentioned accounting standard and implementation guidance from the beginning of the
fiscal year ending 31st March, 2022.
Impact of the adoption of the accounting standard and implementation guidance
The Company is currently evaluating the effect of the adoption of this accounting standard and implementation guidance on its
consolidated financial statements.

The Company plans to adopt the above-mentioned accounting standard from the end of the fiscal year ending 31st March, 2021.
“Accounting Standard for Disclosure of Accounting Estimates” (ASBJ Statement No. 31 of 31st March, 2020)
Overview
The purpose of this accounting standard is to disclose information on the details of accounting estimates of the amounts reported
on the current fiscal year’s financial statements; said details include explications of items that have a risk of exercising significant
impact on financial statements of the following fiscal year, in order to facilitate the understanding of users of financial statements.
Scheduled date of adoption
The Company plans to adopt the above-mentioned accounting standard from the end of the fiscal year ending 31st March, 2021.
(Additional information)• Tax effect accounting for the transition from the Consolidated Taxation System to the Group tax Sharing System
In order to determine the amounts of deferred tax assets and deferred tax liabilities with respect to a transition to the Group Tax Sharing
System which was created in the “Act on Partial Revision of the Income Tax Act, Etc.” (Act No. 8 of 2020) and corresponding revisions
made to the Nonconsolidated Taxation System, the Company and some of its consolidated subsidiaries do not apply the provisions inparagraph (44) of the “Implementation Guidance on Tax Effect Accounting” (ASBJ Guidance No. 28 of 16th February, 2018), but dofollow the provisions in the Income Tax Act, Etc. before the revision pursuant to paragraph (3) of the “Practical Solution on the Treatment
of Tax Effect Accounting for the Transition from the Consolidated Taxation System to the Group Tax Sharing System” (ASBJ Practical
Solution No. 39 of 31st March, 2020)• Impact of the novel coronavirus disease <COVID-19>
It is assumed that the stagnation of economic activities brought on by the COVID-19 pandemic will linger into the next fiscal year ending
31st March, 2021, with a certain impact on credit risks on loans, etc.
Under this assumption, the Company and certain consolidated subsidiaries have revised the categorization of borrowers bycomprehensively taking into account recent business performance, the impact that COVID-19 may have on future businessperformance, etc. of specific borrowers, and as a result, posted reserve for possible loan losses amounting to 1,117 million yen

42

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2020($10,257 thousand) for these specific borrowers.

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 202043

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

Please note that the above assumption is uncertain, and so, should the situation surrounding the pandemic or its impact on

Non-performing loans included in the loans at 31st March, 2020 and 2019 consisted of the following:

economic activities change, the reserve for possible loan losses may increase or decrease in the consolidated financial statements for

2019

2020

3. Trading Account Assets
Trading account assets at 31st March, 2020 and 2019 consisted of the following:

Trading securities
Other trading assets
Total

2020

2019

2020

¥1,385¥1,166$12,732———¥1,385¥1,166$12,732

4. Securities

2020

Loans to legally bankrupt entities**¥4,283¥2,764$39,362

Delinquent loans***

97,045

109,808

891,713Loans past due for three months or more****

873

884

8,027

Loans with altered lending conditions*****

26,20026,471

240,748¥128,403¥139,928$1,179,851

Thousands of
U.S. dollars

Millions of yen

Thousands of
U.S. dollars

Millions of yen

the following fiscal year.

Total
**

Loans to legally bankrupt entities are loans on which interest is placed on a non-accrual status (“non- accrual loans”), excluding loans written off, as principal orinterest 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 for which interest payments have been rescheduled in order toassist 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 dayof the last due date, and that 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 to assist the restructuring of these borrowers. Such loans exclude loans to legally bankrupt entities, delinquent loans, andloans past due for three months or more.

Securities at 31st March, 2020 and 2019 consisted of the following:Thousands of
U.S. dollars

Millions of yen

6. Assets Pledged as Collateral

2020

2019

Japanese government bonds¥212,516¥381,450$1,952,741

Japanese municipal bonds

261,087

77,433

2,399,039

Corporate bonds (including government-guaranteed bonds)*

312,426

374,498

2,870,773

Stock**

107,457

132,421987,384

Assets pledged as collateral

Other securities***404,387

406,564

3,715,768

Cash and due from banks¥1,297,874¥1,372,367$11,925,707

2020

Assets pledged as collateral by the Company and its consolidated subsidiaries at 31st March, 2020 and 2019 consisted of the following:

2019

2020

2020

¥35

¥36

$329
7,803,301

Securities

849,233

929,308

Corporate bonds included bonds offered through private placement. The guarantee obligation of Nishi-Nippon City Bank for such private placement bonds at 31stLoans

915,137

781,585

8,408,875

March, 2020 and 2019 were ¥17,550 million ($161,260 thousand) and ¥11,951 million, respectively.
** Stock included stock of affiliates of ¥759 million ($6,978 thousand) and ¥748 million at 31st March, 2020 and 2019, respectively.
*** Other securities included investments in non-consolidated subsidiaries of ¥200 million ($1,842 thousand) and ¥206 million at 31st March, 2020 and 2019, respectively.

Total¥1,764,407¥1,710,931$16,212,506¥17,974¥18,814$165,161

Total*

5. Loans and Bills Discounted
Loans and bills discounted at 31st March, 2020 and 2019 consisted of the following:

Liabilities secured by the above assets
Deposits
Call money and bills sold

39,00038,200$358,357

Payables under repurchase agreements

207,019

166,666

1,902,226

Guarantee deposits received under securities lending transactions

89,108145,718

818,782

Borrowed money

988,684885,269

9,084,667

Thousands of
U.S. dollars

Millions of yen

2020

2019

2020

Other than the items shown above, the following items were pledged as collateral for foreign exchange transactions and/or as substitutes

Bills discounted*¥23,764¥27,617$218,362

for initial margin on futures at 31st March, 2020 and 2019:

Loans on notes

232,460

236,420

2,136,000

Loans on deed

6,548,871

6,331,97860,175,238

Overdraft

749,047

745,1886,882,727

Total¥7,554,143¥7,341,204$69,412,328*

Bills discounted are recorded as cash lending / borrowing transactions in accordance with the “Accounting and Auditing Treatments for Application of AccountingStandard for Financial Instruments in Banking Industry” (JICPA Industry Audit Committee Report No. 24). The consolidated subsidiaries engaged in the banking
business have 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 ¥24,249 million ($222,822 thousand) and ¥28,182 million at 31st March, 2020 and 2019, respectively.

ANNUAL REPORT 2020

2019

2020
Securities¥2,643¥2,6442020$24,289

Additionally, the following was included in other assets at 31st March, 2020 and 2019:
Thousands of
U.S. dollars

Millions of yen

Deposits included in other assets

Nishi-Nippon Financial Holdings Group

Thousands of
U.S. dollars

Millions of yen

Cash collateral paid for financial instruments

44

Thousands of
U.S. dollars

Millions of yen

2020

2019

2020

¥45,300¥45,827$416,252

2,295

2,267

21,096

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 202045

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

7. Contracts for Commitment Lines of Credit

10. Tangible Fixed Assets

Contracts for commitment lines of credit related to overdraft agreements and loan credit facilities represent a promise on a lending bank at a

Tangible fixed assets at 31st March, 2020 and 2019 consisted of the following:

specified credit limit, to a customer upon request for funds, unless there is a violation of the contractual conditions.
Thousands of
U.S. dollars

Millions of yen

Aggregate amount under commitment contracts not yet drawn down
Of the above amount, those with original maturity of less than one year or cancellable at any time
without penalty

2020

2019

2020

¥2,123,441¥1,935,369$19,511,543

2,053,257

1,900,535

Thousands of
U.S. dollars

Millions of yen

The aggregate amounts under commitment contracts not yet drawn down at 31st March, 2020 and 2019 are as follows:

18,866,648

As many of these contracts expire without the right to extend the loans being exercised, the aggregate total of the undrawn amount
does not necessarily affect the future cash flows of the Company and its consolidated subsidiaries. Many of these contracts havestipulations that allow the consolidated subsidiaries to turn down a loan request or reduce the amount of the credit line if there is a change
in financial conditions, a need to secure their credit, or other similar reasons. In addition to obtaining necessary collateral (real estate,

2020

2019

2020

Land

¥75,412¥75,549$692,934

Buildings

33,51235,406

307,935

Construction in progress

398

1,649

3,663

Leased assets

261

300

2,404

10,062

11,024

92,460¥119,647¥123,930$1,099,398

Other tangible fixed assets
Total* The amounts of accumulated depreciation for tangible fixed assets at 31st March, 2020 and 2019 were ¥65,722 million ($603,901 thousand) and ¥74,887, respectively.

The accelerated depreciation entry amounts for tangible fixed assets at 31st March, 2020 and 2019 are as follows:

securities, etc.) at the time the contract is entered into, the consolidated subsidiaries assess the condition of the customer’s businessThousands of
U.S. dollars

Millions of yen

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 to the customer.

2019

2020

¥7,142¥6,646

2020$61,072

8. Foreign Exchange
11. Deposits

Foreign exchange assets and liabilities at 31st March, 2020 and 2019 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2019

2020

Deposits at 31st March, 2020 and 2019 consisted of the following:

2020

Assets:Foreign exchange bills bought

¥485

¥564

$4,460Foreign exchange bills receivable

168

169

1,552

Due from foreign banks (their accounts)

—

—

—

Due from foreign banks (our accounts)

13,752

7,661

126,370¥14,407¥8,396$132,383

Total
Liabilities:
Foreign exchange bills sold

¥13

¥3

$122

Foreign exchange bills payable

104

168

964

¥118

¥172

$1,086

Total

Thousands of
U.S. dollars

Millions of yen

2019

2020

2020

Current deposits¥393,134¥385,520$3,612,369

Ordinary deposits

5,255,681

4,791,230

48,292,583

Deposits at notice

14,581

13,062

133,9862,684,690

2,779,485

24,668,663

Negotiable certificates of deposit

349,475

416,232

3,211,210

Other deposits

133,483

123,236

1,226,532¥8,831,047¥8,508,767$81,145,344

Time deposits

Total

12. Bonds
9. Other Assets

Bonds at 31st March, 2020 and 2019 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2019

2020
Domestic exchange settlement account*
Accrued income

2020

¥22

¥24

$202

6,179

6,585

56,778

227

114

2,089

Financial derivative products

5,014

5,046

46,074

Cash collateral paid for financial instruments

45,30045,827416,252

Other

32,16936,424

295,592¥88,913¥94,023$816,989

Prepaid expenses

Total

Thousands of
U.S. dollars

Millions of yen

Other assets at 31st March, 2020 and 2019 consisted of the following:
2020

2019

2020

¥10,000¥10,000$91,886¥10,000¥10,000$91,886

Bonds:
0.87% Japanese yen callable subordinated bonds due 2025
Total

* Domestic exchange settlement account represents unsettled debit balances arising from inter-bank domestic exchange transfers.

46

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2020

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 202047

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

13. Borrowed Money

16. Treasury Stock

The weighted average interest rates on borrowed money is 0.06% at 31st March, 2020.

Treasury stock during the year ended 31st March, 2020 consisted of the following:

The aggregate annual maturity amounts within five years of borrowed money after 31st March, 2020 are as follows:
Millions of yen

Common stockThousands of
U.S. dollars

Year ending 31st March

Treasury stock

Number of shares

Millions of yen

Thousands of
U.S. dollars

1st April, 2019

14,346,763(¥10,896)($100,120)(18,429)2021¥103,058$946,968

Increase*

2,689,162(2,005)2022

175,344

1,611,181

Decrease*

4,000,462

3,033

27,872

2023

375,306

3,448,557

31st March, 2020

13,035,479(¥9,868)($90,677)

2024

340,304

3,126,932

2025

119

1,098

* The increase of 2,689,162 shares is due to acquisition of treasury shares of 2,681,800 and purchase of fractional shares of 7,362.
The decrease of 4,000,446 shares is due to retirement of treasury shares of 4,000,000 and sale of fractional shares of 446.

Treasury stock during the year ended 31st March, 2019 consisted of the following:
Common stock

Treasury stock

Number of shares

Millions of yen

15,095,538(¥10,668)

Increase*

2,251,709(2,509)Decrease*

3,000,484

2,282

31st March, 2019

14,346,763(¥10,896)

14. Other Liabilities
1st April, 2018

Other liabilities at 31st March, 2020 and 2019 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2019

2020

2020

¥32

¥63

$301

Accrued income taxes

4,342

3,485

39,897

Accrued expenses

8,070

7,974

74,159Unearned income

2,548

2,361

23,420Financial derivative products

7,565

5,684

69,512

Lease obligations

264

304

2,434

Cash collateral received for financial instruments

310

364

2,848

Asset retirement obligations

804

778

7,389

Others76,02334,505698,552

Total¥99,962¥55,522$918,516

Domestic exchange settlement account* The increase of 2,251,709 shares is due to acquisition of treasury shares of 2,243,600 and purchase of fractional shares of 8,109.
The decrease of 3,000,484 shares is due to retirement of treasury shares of 3,000,000 and sale of fractional shares of 484.

17. Revaluation of Premises AccountBased 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 revaluation of premises” in theliabilities of the consolidated balance sheet. The amount of revaluation differences, net of tax, is presented as “Revaluation of premises, netof taxes” in net assets.
The differences at 31st March, 2020 and 2019 are not presented as the aggregate market value of land subject to revaluation exceeded
the book value after revaluation.

15. Capital Stock
Capital stock during the year ended 31st March, 2020 consisted of the following:
Common stock

1st April, 2019
Increase
Decrease*
31st March, 2020

18. Other Interest Income

Capital stock

Issued shares

Millions of yen

Thousands of
U.S. dollars

166,596,955¥50,000$459,432———

4,000,000——

162,596,955¥50,000$459,432* The decrease of 4,000,000 shares is due to retirement of treasury shares.

Other interest income for the years ended 31st March, 2020 and 2019 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2019

2020

2020
¥10

¥16

Interest on call loans and bills bought

$153

164

179

1,512

Others

1,478

1,437

13,588

Total¥1,660¥1,626$15,255

Interest on deposits with banks

Capital stock during the year ended 31st March, 2019 consisted of the following:

1st April, 2018
Increase
Decrease*
31st March, 2019
* The decrease of 3,000,000 shares is due to retirement of treasury shares.

48

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2020

Common stock

Capital stock

Issued shares

Millions of yen

169,596,955¥50,000——

3,000,000—

166,596,955¥50,000

19. Other Operating Income
Other operating income for the years ended 31st March, 2020 and 2019 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2019

2020

2020

Gains on foreign exchange transactions

¥740

¥653

$6,801

Gains on sale of bonds

2,936

141

26,982Others

318

490

2,925

Total

¥3,995¥1,285$36,710

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 202049

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

20. Other Income

24. Other Expenses

Other income for the years ended 31st March, 2020 and 2019 consisted of the following:

Other expenses for the years ended 31st March, 2020 and 2019 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2019

2020

Thousands of
U.S. dollars

Millions of yen

2020

2019

2020

2020

¥3,945¥3,770$36,257

Provision for possible loan losses¥3,843¥2,735$35,312

Gains on money held in trust

12

10

117

Losses on write-offs of claims

2,220

2,503

20,401Equity in earnings of affiliates

101

84

935

Losses on sale of stock and other securities

5

100

46

1,900

58

17,4661,735

19

15,948Recoveries of written-off claims

97

433

891

422

317

3,881

Rental income on land and buildings

412

403

3,791

Impairment losses

1,046

98

9,616

Others

487

860

4,478

Losses on sale of loans

8

300

73

Total

¥6,958¥5,621$63,937

Others

1,453

1,427

13,353

Total¥10,734¥7,503$98,634

Gains on sale of stock and other securities

Gains on disposition of fixed assets

Losses on devaluation of stock and other securities
Losses on disposition of tangible fixed assets

21. Other Interest Expenses
25. Other Comprehensive Income

Other interest expenses for the years ended 31st March, 2020 and 2019 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2019

2020

¥136

¥87

Bonds

2020

861

976

7,911

Total

¥948

¥1,113$8,711

22. Other Operating Expenses
Thousands of
U.S. dollars

2019

2020

2020

Losses on sale of bonds

¥100

¥783

$920

Losses on redemption of bonds

256

108

2,355

Losses on devaluation of bonds

—

7

—

1,327

2,477

12,200¥1,684¥3,378$15,476

23. General and Administrative Expenses
Thousands of
U.S. dollars

Millions of yen

2020

2019

2020

¥31,641¥32,111$290,746

1,454

(355)

13,364

50

48

465

Depreciation

5,692

5,669

52,302

Rental expenses

3,076

3,156

28,272

Taxes

5,549

5,491

50,995

Employee retirement benefits
Retirement benefits for directors and corporate auditors

50

Others34,84334,881

320,161

Total¥82,308¥81,002$756,307

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2020

2019

2020

Amount arising during the year(¥7,360)(¥24,050)($67,628)

Reclassification adjustments(6,558)(6,564)(60,261)

Amount before tax effect(13,918)(30,615)(127,890)

3,738

8,346

34,355(¥10,179)(¥22,268)($93,534)(¥3,218)(¥1,270)($29,575)

864

1,023

7,941

(2,354)(246)(21,633)

Net 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

718

75

6,598

(¥1,636)(¥171)($15,035)(¥5,596)(¥26,604)($51,422)

Retirement benefits liability adjustments
Amount arising during the year
Reclassification adjustments

1,461

(72)

13,432

Amount before tax effect(4,134)(26,676)(37,989)

1,260

8,136

11,586Retirement benefits liability adjustments(¥2,873)(¥18,540)($26,403)

Total other comprehensive income(¥14,689)(¥40,980)($134,973)

Tax effect

General and administrative expenses for the years ended 31st March, 2020 and 2019 consisted of the following:

Salaries and allowances

2020
Net unrealized gains on securities available for sale:Net unrealized gains on securities available for sale

Millions of yen

Thousands of
U.S. dollars

Millions of yen

Tax effect

Other operating expenses for the years ended 31st March, 2020 and 2019 consisted of the following:Total

follows:$800

OthersExpenses for derivatives other than trading derivatives

Reclassification adjustments and tax effects related to other comprehensive income for the years ended 31st March, 2020 and 2019 are as

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 202051

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

26. Lease Transactions

27. Financial Instruments(1) Finance leases(1) Matters related to status of financial instruments

Information on finance lease transactions which are accounted for as operating leases at 31st March, 2020 and 2019 is summarized asfollows:i)

Policies for financial instruments
Nishi-Nippon Financial Holdings, Inc. Group (the “Group”) is engaged in the financial service business, with a primary focus on

Thousands of
U.S. dollars

Millions of yen

2019

2020

2020

Total

proper controls over these risks, and builds reasonable and effective portfolios. Thus the Company operates a comprehensive asset¥1,867¥1,867$17,161¥1,867¥1,867$17,161

Total¥1,682¥1,605$15,457¥1,682¥1,605$15,457

Total

In addition, some of the Company’s consolidated subsidiaries are engaged in banking, credit card, credit guarantee services,ii) 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, theAmounts equivalent to carrying value
Tangible fixed assets

and liability management (ALM) system with the aim of maximizing and stabilizing its profits.
credit management, restructuring support services, claims servicing businesses and financial instruments and exchange services.

Amounts equivalent to accumulated depreciation
Tangible fixed assets

manages and raises funds, taking into account market conditions and balancing duration. To conduct these businesses, theCompany comprehends the risks arising from all of its assets and liabilities, including off-balance-sheet transactions, through theAmounts equivalent to acquisition cost
Tangible fixed assetsbanking businesses such as deposits, loans, securities, and domestic and foreign currency exchange businesses. The Group

¥185

¥262

$1,704

value of collateral sharply decline, or other unanticipated problems arise, it could cause an increase in the cost of credit such as an

¥185

¥262

$1,704

unexpected write-off or rise in reserve for possible loan losses. Moreover, considering the relative weight of the invested assets, theNote: 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, 2020 and 2019 are as follows:
Thousands of
U.S. dollars

Millions of yen

2019

2020

impact of any such problems could be substantial and could have a negative effect on the financial position and performance of theGroup.
Securities are mainly stocks, debt securities, and investment trusts and are exposed to the credit risk of each issuer and the riskof interest rate fluctuation. Stocks that are marketable are exposed to price volatility risks that a decline in their market prices cause
impairment losses and valuation losses on the stocks. Debt securities are also subject to price volatility risks that an increase in themarket 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 deterioration2020

in financial positions at the Group, the Group is forced to raise funds at higher interest rates than usual, market transactions are

Future finance lease payments
Due within one year

¥73

¥77

$674

suspended as a result of market turmoil, or it is forced to make transactions at a drastically unfavorable price than usual, it could

Due after one year

112

185

1,029

impact future operations of the Group.

¥185

¥262

$1,704Total

Note: The amount of the future finance lease payments at the end of the year 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.

Derivative transactions include interest rate swaps, forward exchange transactions, currency swaps, and currency options. These
derivatives are utilized primarily as hedging instruments to manage and mitigate the market risks of on-balance-sheet assets andliabilities. In addition, some of the derivative transactions in trading operations are used for the purpose of making profits throughshort-term fluctuations in the market rates, arbitrage transactions and others. Hedge transactions consist mainly of interest rate

Total lease payments during the year and the amount equivalent to depreciation expenses for the years ended 31st March, 2020 andswaps as a hedge against interest rate fluctuation risks arising from loans with fixed interest rates, and forward exchange transactions

2019 are as follows:

and currency options as a hedge against exchange rate fluctuation risks arising from foreign currency-denominated assets andThousands of
U.S. dollars

Millions of yen

2019

2020

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 effectiveness of qualifying interest rate
swaps accounted for by the special treatment under the Accounting Standard for Financial Instruments, as it is ascertained that such

2020

Total lease payments during the year

¥77

¥77

$709

derivatives continually meet the criteria for special treatment. Risks related to these derivatives transactions include the market risk of

The amount equivalent to depreciation expenses *

77

77

709

a potential loss in the fair value of financial instruments or portfolios resulting from fluctuations in interest rates, foreign exchange
rates, stock prices and other factors as well as the credit risk of a potential loss in the value of a transaction due to default by* The amount equivalent to depreciation expenses was calculated using the straight-line method with no residual value over the lease term.

counterparties to the contracts.
iii) Risk management system for financial instruments(2) Operating leases(a) Credit risk management

Future lease payments required under operating leases that are non-cancelable at 31st March, 2020 and 2019 are as follows:
Thousands of
U.S. dollars

Millions of yen

2019

2020

2020

Recognizing the credit risk as our highest priority, the Group is working on strengthening controls over the credit risk in accordancewith the Group’s credit risk management policy and credit policy.
The Group applies its strict standards to the screening of individual credit extension, and credits 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

Future operating lease payments
Due within one year

¥270

¥345

$2,482

Due after one year

435

264

4,000

¥705

Total

¥609

$6,483soundness of its assets.
Regarding its loan portfolios, the Group tries to diversify risks to ensure that there is no concentration on any particularindustrial sectors or customers, through its systems of credit risk quantification and portfolio management by sector based on thecredit rating system.
In addition, in order to properly carry out write-offs and set provisions, the Group conducts self-assessments of its assets anduses an independent audit department to constantly monitor the status of the self-assessment procedures and adequacy of writeoffs and provisions.

52

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2020

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 202053

Notes to Consolidated Financial Statements(b) Market risk management

Notes to Consolidated Financial Statements(2) Estimated fair value of financial instruments

The Group clearly separates the department responsible for conducting market transactions (front office) from the department

Carrying value of financial instruments in the consolidated balance sheets at 31st March, 2020 and 2019 and their fair values andresponsible for business administration (back office). Furthermore, the division which is independent from the market divisions has

valuation differences are as follows. Non-listed stocks and others whose fair value is extremely difficult to be estimated are excluded frombeen put in charge of risk management (middle office) to monitor conditions of the market transactions and their compliance withthe table below (refer to Note 2).

the market risk-related regulations. The Group thus 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<At 31st March, 2020>

techniques for measuring risks such as VaR (Value at Risk) and BPV(Basis Point Value) methods, and by establishing a maximum

Millions of yen

acceptable level for market risks and controlling the risks within the certain acceptable range.
(Quantitative information on market risks)
The measured quantity of market risks of the Group as a whole at 31st March, 2020 and 2019 were ¥30,369 million ($279,056
thousand) and ¥33,368 million, respectively.
Financial instruments of the consolidated subsidiaries engaged in the banking business which are subject to the measurement

Valuationdifferences

Carrying value

Fair value¥1,714,664¥1,714,664¥—

Assets:i) Cash and due from banksii) Securities:

include loans, deposits, securities and derivatives. The Group measures market risks using historical VaR method with an

Held-to-maturity securities

30,89031,391500

observation period of five years, a confidence interval of 99% and a holding period of 6 months.

Available-for-sale securities

1,250,168

1,250,168—iii) Loans and bills discounted

7,554,143

The Group performs backtesting, which compares VaR calculated by the model with actual performance (gain or loss). Basedon the results of the testing, we believe that the risk measurement model which we use captures market risks with sufficient

Reserve for possible loan losses*

accuracy. However, since VaR measures market risks at a certain probability which is statistically calculated, it is not always
possible for the model to capture market risks in situations where market conditions change drastically.
(c) Liquidity risk management
The Group recognizes the liquidity risk as one of the most significant risks, because there are concerns over potential businessfailures and systemic risks when the liquidity risk rises. The Group provides against the liquidity risks by ensuring an adequate
reserve for outstanding claims and developing 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 the Group’s cash position. In this way, the Group
maintains a fluid and stable cash position.

Total assets

The Group’s derivative transactions are entered into using operational rules prepared in accordance with the Group’s internal

7,611,837

97,343¥10,510,216¥10,608,060¥97,843¥8,831,047¥8,831,254¥206

Liabilities:i) Depositsii) Call money and bills sold

39,00039,000—iii) Payables under repurchase agreements

207,019

207,019—iv) Guarantee deposits received under securities lending transactions

89,108

89,108—v) Borrowed money

994,175

982,652(11,522)¥10,160,350¥10,149,033(¥11,316)¥—

Total liabilities
Derivatives**
Hedge accounting not applied(d) Risk management for derivative transactions(39,649)
7,514,494

Hedge accounting applied
Total derivatives

¥82

¥82

(2,631)(2,631)—(¥2,549)(¥2,549)¥—

regulations. The rules stipulate the scope of derivative usage, authorization, responsibility, procedure, credit line, loss-cut rule, andreporting system. Each business line is responsible for each relevant risk management and for reporting to management, including

Thousands of U.S. dollars

the ALM Committee, on a monthly basis.
iv) Supplementary explanation of the estimated fair value of financial instruments

Fair value$15,755,436$15,755,436$—

Held-to-maturity securities

283,840

288,440

4,599

Available-for-sale securities

11,487,347

11,487,347—

iii) Loans and bills discounted

69,412,328

Assets:

The fair value of financial instruments includes the value based on the market price as well as a reasonably estimated value in casei) Cash and due from banks

there is no market price. Because various assumptions are used in the estimation of the fair value, the fair value may vary whenii) Securities:

different assumptions are used.

Valuationdifferences

Carrying value

Reserve for possible loan losses*(364,325)
69,048,003

69,942,455

894,452$96,574,628$97,473,680$899,052$81,145,344$81,147,241$1,897358,357

358,357—

1,902,226

1,902,226—

818,782

818,782—v) Borrowed money

9,135,119

9,029,241(105,878)

Total liabilities$93,359,829$93,255,848($103,981)$—

Total assets
Liabilities:i) Depositsii) Call money and bills soldiii) Payables under repurchase agreementsiv) Guarantee deposits received under securities lending transactions

Derivatives**
Hedge accounting not applied
Hedge accounting applied
Total derivatives

$754

$754

(24,184)(24,184)—($23,429)($23,429)$—* The general reserve for possible loan losses and the specific reserve for possible loan losses, which correspond 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 isshown at net value, and with the amount in parentheses representing net liability position.

54

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2020

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 202055

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements<At 31st March, 2019>

With respect to loans and bills discounted that have no due date because of special attributes such as limiting the borrowings
to the amounts secured by collateral, because it is assumed that the fair value approximates the carrying value from the estimatedMillions of yen

repayment period and interest rate conditions, the carrying value is treated as the fair value.

Valuationdifferences

Carrying value

Fair value¥1,474,517¥1,474,517¥—

Held-to-maturity securities

48,26749,064796(carrying value) is deemed to be the fair value. The fair value of time deposits is based on the discounted present value of the future

Available-for-sale securities

1,306,469

1,306,469—

cash flows categorized by term. The discount rate is the interest rate that would be applied when new deposits were taken.

iii) Loans and bills discounted

7,341,204

Assets:Liabilities:i) Cash and due from banksii) Securities:i)

Deposits
For demand deposits, the amount which would be paid if its repayment were demanded on the consolidated balance sheet date

Reserve for possible loan losses*
Total assets

Because the fair value of those with a short-term original contractual maturity (one year or less) approximates their carrying value,
the carrying value is treated as the fair value.

(41,729)7,299,475

7,408,041

108,566¥10,128,730¥10,238,093¥109,362ii) Call money and bills sold, iii) Payables under repurchase agreements, and iv) Guarantee deposits received under securities lendingtransactions
Since call money and bills sold, payables under repurchase agreements and guarantee deposits received under securities lending

Liabilities:

transactions have short-term original contractual maturity (one year or less) and their fair value approximates the carrying value, the¥8,508,767¥8,509,043¥275ii) Call money and bills sold

109,084

109,084—iii) Payables under repurchase agreements

166,666

166,666—iv) Guarantee deposits received under securities lending transactions

145,718

145,718—v) Borrowed money

891,921885,759(6,162)

Total liabilities¥9,822,158¥9,816,272(¥5,886)

Hedge accounting not applied

¥51

¥51

¥—

borrowed money with a short-term original contractual maturity (one year or less) approximates its carrying value, the carrying

Hedge accounting applied

(478)

(478)

—

value is treated as the fair value.

(¥426)(¥426)¥—i) Deposits

Derivatives**

Because borrowed money with floating interest rates reflects market interest rates in a short period of time and the credit standingof the Company and its consolidated subsidiaries has not changed significantly since the borrowing, the fair value of suchborrowed money is deemed to approximate the carrying value. Therefore, the carrying value is treated as the fair value. The fairvalue of borrowed money with fixed interest rates is based on the present value of the total amount of principal and interest of theborrowed money categorized by term, discounted by the market interest rate adjusted for credit risk. Because the fair value of

Total derivatives* The general reserve for possible loan losses and the specific reserve for possible loan losses, which correspond 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 isshown at net value, and with the amount in parentheses representing net liability position.

(Note 1) Methods for estimating the market value of financial instruments
Assets:i)

carrying value is treated as the fair value.
v) Borrowed money

Derivative transactions:
Derivative transactions are presented in “30. Derivatives” of “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: ii) Available-for-sale securities” presented in “Estimated fair value of financial instruments.”

Because the fair value of due from banks that does not have stated maturity approximates its carrying value, the carrying value istreated as the fair value. The fair value of due from banks that has stated maturity is based on the present value of the totals by

Non-listed stocks

maturity bucket discounted by the interest rate that would be applied if similar deposits were placed. As the fair value of due from

Investments in partnerships

banks with a short-term original contractual maturity (one year or less) approximates its carrying value, its carrying value is treatedas the fair value.
ii) 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 basedon the announced reference price or the price quoted by the correspondent financial institutions. The fair value of foreign securities

Thousands of
U.S. dollars

Millions of yen

Cash and due from banks

Total

2020

2019

2020

¥13,766¥14,109$126,493

3,050

3,520

28,026¥16,816¥17,630$154,519

Notes: 1. Because non-listed stocks have no market price and because it is extremely difficult to estimate their fair value, they are not subject to the fairvalue disclosure.
2. In the years ended 31st March, 2020 and 2019, impairment losses of ¥285 million ($2,619 thousand) and ¥0 million were recorded for non-listed
stocks, respectively.
3. Investments in partnerships whose fair value is extremely difficult to be estimated because the partnership’s assets are non-listed stocks, etc. are
not subject to the fair value disclosure.

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 to Consolidated Financial
Statements.”iii) Loans and bills discountBecause loans and bills discounted with floating interest rates reflect market interest rates in a short period of time, the fair value ofsuch loans approximates their carrying value as long as the credit standing of the borrower has not changed significantly sinceorigination. Thus, the carrying value of such loans is treated as the fair value. The fair value of loans and bills discounted with fixedinterest rates is based on the present value of the total amount of principal and interest categorized by the type of loans, internalrating 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 in bankruptcy and customers with highprobability of becoming insolvent, since the fair value of such loans approximates their carrying value after deducting the reservefor 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.

56

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2020

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 202057

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements(Note 3) Repayment schedules for monetary claims and securities with stated maturity at 31st March, 2020 and 2019

<At 31st March, 2019>
Millions of yen<At 31st March, 2020>

Due in1 year or lessDue from
1 year to 3 years¥1,366,516

¥—

¥—

¥—

¥—

¥—

Held-to-maturity securities

17,597

15,00016,000———Government bonds

10,00015,00016,000———Millions of yen

Due from banks

Due in1 year or lessDue from
1 year to 3 years¥1,587,998¥—

Due from
Due from
Due from
3 years to 5 years 5 years to 7 years 7 years to 10 years

¥—

¥—

¥—

Due after
10 years¥—

Securities:

Due from banks

Due from
Due from
Due from
3 years to 5 years 5 years to 7 years 7 years to 10 years

Due after
10 years

Securities:

Held-to-maturity securities

15,00010,000

6,000

—

—

—

Municipal bonds

5,290

—

—

—

—

—

Government bonds

15,00010,000

6,000

—

—

—

Corporate bonds

2,307

—

—

—

—

—

Municipal bonds

—

—

—

—

—

—

282,051

288,349

212,054

194,394

148,980

42,265

Corporate bonds

—

—

—

—

—

—

Government bonds

185,700

88,50033,00018,00012,000—

Others

—

—

—

—

—

—

Municipal bonds

6,650

11,444

14,505

21,491

17,150—188,058

224,129

278,840

165,708

219,135

41,991

Corporate bonds

47,083

132,788

108,036

47,93929,757—75,50038,00026,000—40,000—

Others42,61855,61656,512

106,963

90,07342,265

Securities available for sale with maturity
Government bonds
Municipal bonds

5,784

9,965

49,25088,290105,462—

Corporate bonds

77,816

131,878

43,721

35,103

19,679—OthersLoans and bills discounted
Total

28,95844,286

159,868

42,31453,994

41,991

1,506,272

1,257,250

990,159

746,609828,5812,037,048¥3,297,330¥1,491,379¥1,274,999¥912,317¥1,047,717¥2,079,039

Securities available for sale with maturity

Loans and bills discounted
Total

1,510,930

1,170,414

1,000,781

707,904

778,678

1,969,763¥3,177,095¥1,473,763¥1,228,835¥902,298¥927,659¥2,012,029

Note: Excluded from Loans and bills discounted are ¥112,490 million relating to those whose repayment is not reasonably estimable because the debtors areborrowers under bankruptcy proceedings, borrowers substantially in bankruptcy, or customers with high probability of becoming insolvent and ¥90,241 million
relating to those that do not have contractual maturity.

(Note 4) Repayment schedules for bonds, borrowed money and other interest-bearing debts at 31st March, 2020 and 2019
Thousands of U.S. dollars
Due in1 year or lessDue from
1 year to 3 years$14,591,555

$—

$—

$—

$—

$—

Held-to-maturity securities

137,829

91,88655,131———

Deposits

Government bonds

137,829

91,88655,131———

Municipal bonds

—

—

—

—

—

—

Corporate bonds

—

—

—

—

—

—

Others

—

—

—

—

—

—

Guarantee deposits received under
securities lending transactions

89,108—Borrowed money

103,058

550,651——¥8,955,291¥788,816

Due in1 year or lessDue from
1 year to 3 years$78,260,642$2,188,410$567,430$59,230$69,630—

358,357

—

—

—

—

—

1,902,226

—

—

—

—

—

Due from banks

Due from
Due from
Due from
3 years to 5 years 5 years to 7 years 7 years to 10 years

Due after
10 years<At 31st March, 2020>
Millions of yen
Due in1 year or lessDue from
1 year to 3 years¥8,517,105¥238,164¥61,753¥6,446¥7,577—

Call money and bills sold

39,000

—

—

—

—

—

Payables under repurchase agreements

207,019

—

—

—

—

—

—

—

—

—

340,423

35

5

—

—

10,000——¥402,177¥16,481¥7,583—

Securities:

Securities available for sale with maturity

1,728,006

2,059,447

2,562,162

1,522,632

2,013,557

385,841

Government bonds

693,742

349,168

238,904—

367,545—

Bonds

Municipal bonds

53,14791,564

452,540

811,270969,053—

Total

Corporate bonds

715,030

1,211,785

401,743

322,553

180,824—

Others266,086

406,929

1,468,973

388,808

496,133

385,841

13,840,603

11,552,421

9,098,219

6,860,331

7,613,542

18,717,712$30,297,994$13,703,756$11,715,513$8,382,963$9,627,100$19,103,554

Loans and bills discounted
Total

Note: Excluded from Loans and bills discounted are ¥101,332 million ($931,103 thousand) relating to those whose repayment is not reasonably estimable because
the debtors are borrowers under bankruptcy proceedings, borrowers substantially in bankruptcy, or customers with high probability of becoming insolvent and¥86,889 million ($798,392 thousand) relating to those that do not have contractual maturity.

Due from
Due from
Due from
3 years to 5 years 5 years to 7 years 7 years to 10 years

Due after
10 yearsThousands of U.S. dollars

Deposits
Call money and bills soldPayables under repurchase agreements

Due from
Due from
Due from
3 years to 5 years 5 years to 7 years 7 years to 10 years

Due after
10 years

Guarantee deposits received under
securities lending transactions

818,782

—

—

—

—

—

Borrowed money

946,968

5,059,739

3,128,030

325

55

—

Bonds

—

—

—

91,886

—

—

Total

$82,286,976$7,248,150$3,695,461$151,442$69,685—

Note: Demand deposits are included under “Due in 1 year or less.”

58

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2020

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 202059

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements<At 31st March, 2019><At 31st March, 2019>
Millions of yen
Due in1 year or lessDue from
1 year to 3 years

Millions of yen

Due from
Due from
Due from
3 years to 5 years 5 years to 7 years 7 years to 10 years

Due after
10 years

Carrying value

Valuationdifferences

Fair value¥8,191,986¥252,957¥49,138¥6,683¥8,001¥0Call money and bills sold

109,084

—

—

—

—

—

Government bonds¥40,659¥41,421¥761

Payables under repurchase agreements

166,666

—

—

—

—

—

Municipal bonds

5,299

5,326

27

Corporate bonds

2,309

2,316

7

48,26749,064796

Others

—

—

—

Total

¥48,267¥49,064¥796

Deposits

Guarantee deposits received under
securities lending transactions

145,718

—

—

—

—

—

Borrowed money

36,180410,419445,210

100

10

—

Bonds

—

—

—

10,000

—

—

Total

¥8,649,636¥663,376¥494,348¥16,784¥8,012¥0Note: Demand deposits are included under “Due in 1 year or less.”

Bonds:

ii) Securities whose carrying value exceeds their fair value<At 31st March, 2020>
None

28. Securities<At 31st March, 2019>(1) Trading securities and commercial papers (including those included in “Trading account assets”)

2019

2020
Holding gains (losses) recognized in income

(¥1)

None

Thousands of
U.S. dollars

Millions of yen

2020
¥2

(3) Available-for-sale securities (including negotiable due from banks included in “Cash and due from banks”)
($9)

i)

Securities whose carrying value exceeds their acquisition cost
<At 31st March, 2020>
Millions of yen(2) Held-to-maturity securities
i)

Securities whose fair value exceeds their carrying value<At 31st March, 2020>

Carrying value

Valuationdifferences

Fair value

Bonds:
Government bonds
Municipal bonds¥76,698¥27,109¥49,589

Government bonds

156,409

155,029

1,379

Municipal bonds

32,56932,424145

Corporate bonds

275,333

273,092

2,241¥30,890¥31,391

¥500

—

—

—

464,311

460,545

3,765

Bonds:———

Others305,668

282,955

22,71230,89031,391500

Total¥846,678¥770,610¥76,068

Others

—

—

—

Total

¥30,890¥31,391¥500

Corporate bonds

Thousands of U.S. dollars
Carrying value

Valuationdifferences

Fair value$283,840

Government bonds$288,440

Thousands of U.S. dollars

StocksValuationdifferences

Carrying value

Acquisition cost$704,758$249,095$455,662
12,675

Bonds:
Government bonds

1,437,186

1,424,511$4,599Municipal bonds

299,269

297,932

1,336

Corporate bonds

2,529,938

2,509,346

20,592

4,266,394

4,231,790

34,604

Bonds:

60

Acquisition cost

StocksMillions of yen

Valuationdifferences

Carrying value

Municipal bonds

—

—

—

Corporate bonds

—

—

—

283,840

288,440

4,599

Others2,808,678

2,599,978208,699

Others

—

—

—

Total

$7,779,830$7,080,864$698,966

Total$283,840$288,440$4,599Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2020

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 202061

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements<At 31st March, 2019>(4) Available-for-sale securities sold for the years ended 31st March, 2020 and 2019 are as follows:<At 31st March, 2020>

Millions of yen
Carrying value

StocksAcquisition cost

Millions of yen

Valuationdifferences¥112,397¥44,125¥68,272

340,791

338,2122,579

Proceeds
from sale

StocksBonds:
Government bonds

Gains

Losses¥4,444¥3,945(¥5)

Bonds:

Municipal bonds

50,11849,869248

Government bonds

7,052

127

—

Corporate bonds

364,759

361,075

3,684

Municipal bonds

2,300

16

(0)

755,668

749,157

6,511

Corporate bonds

20,475252(4)29,828396(4)Others212,201

198,394

13,806

Total¥1,080,267¥991,676¥88,591

Others47,983

2,540

(96)

Total

¥82,256¥6,882(¥105)

ii) Securities whose acquisition cost exceeds their carrying value<At 31st March, 2020>

Thousands of U.S. dollars
Millions of yen
Valuationdifferences

Carrying value

Acquisition cost

¥16,991¥19,574(¥2,583)

Government bonds

25,21725,219(2)

Municipal bonds

228,518

229,149(631)

StocksBonds:

Proceeds
from sale

Gains

Losses$40,835$36,257($46)

Government bonds

64,805

1,170—

Municipal bonds

21,133

154(0)

Corporate bonds

188,141

2,316

(38)

274,081

3,641

(38)

StocksBonds:

37,09337,143(50)

290,828

291,511(683)

Others440,905

23,341(882)

Others

95,668100,416(4,748)

Total$755,822$63,239($967)

Total¥403,489¥411,503(¥8,014)

Corporate bonds<At 31st March, 2019>
Thousands of U.S. dollars

Millions of yen
Valuationdifferences

Carrying value

Acquisition cost

$156,133$179,867($23,734)

Government bonds

231,714

231,734(20)

Municipal bonds

2,099,770

2,105,568(5,798)

Corporate bonds

340,834

341,296(461)

2,672,319

2,678,599(6,279)StocksBonds:

Proceeds
from sale

Gains

Losses¥3,283¥3,364(¥100)

Government bonds

—

—

—

Municipal bonds

—

—

—

Corporate bonds

30

0

—

30

0

—

StocksBonds:

Others879,063922,693(43,629)

Others52,895

547

(784)

Total

$3,707,516$3,781,161($73,644)

Total¥56,208¥3,912(¥884)<At 31st March, 2019>(5) Devaluation of securities
Securities other than trading securities (excluding securities whose fair value is extremely difficult to be estimated) are devalued to the fairMillions of yen

StocksValuationdifferences

Carrying value

Acquisition cost

¥5,914¥7,391(¥1,477)———

22,01522,029(13)

Bonds:

value, and the difference between the acquisition cost and the fair value is treated as the loss for the fiscal year (“devaluation”), if the fairvalue (primarily the closing market price at the consolidated balance sheet date) has significantly deteriorated compared with theacquisition cost (including amortized cost) unless it is deemed that there is a possibility of a recovery in the fair value. The amount ofdevaluation was ¥1,450 million ($13,329 thousand), for stocks for the year ended 31st March, 2020.

Government bonds
Municipal bonds
Corporate bonds

7,429

7,432

(2)

29,44529,461(16)

The amount of devaluation was ¥27 million ($250 thousand), of which ¥19 million ($179 thousand) for stocks and ¥7 million ($71
thousand) for bonds, for the year ended 31st March, 2019.
The criteria for determining whether the fair value of a security has “significantly deteriorated” are outlined as follows:

Others190,841

195,967(5,125)

1. The fair value is 50% or less of the acquisition cost, or

Total¥226,201¥232,821(¥6,619)

2. The fair value exceeds 50% but is 70% or less of the acquisition cost and the security meets certain conditions such as the quoted
market price for a certain period in the past and financial conditions of the issuer.

62

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2020

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 202063

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements(6) Unrealized gains/losses on securities available for sale
The components of the unrealized gains/losses on securities available for sale at 31st March, 2020 and 2019 are as follows:

Thousands of U.S. dollars
Contract value<At 31st March, 2020>

Type of transactions
Millions of yen

Thousands of
U.S. dollars

Revaluation difference¥68,053$625,321

Deferred tax liability(20,352)(187,008)

Revaluation difference (before non-controlling interest adjustment), net of taxes

47,701

438,313(669)(6,151)——¥47,032$553,725

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

Total

Over one year

Fair value

Unrealized
gain (loss)

Over-the-counter transactions:Interest rate swaps:
Receive-fixed and pay-floating$293,719$293,719$7,740Receive-floating and pay-fixed

293,719

293,719(6,156)(6,156)——$1,584$1,584

Total$7,740Notes: 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.

<At 31st March, 2019>
Millions of yen<At 31st March, 2019>

Contract value
Millions of yen

Type of transactions

Total

Over one year

Fair value

Unrealized
gain (loss)

Revaluation difference¥81,971

Deferred tax liability(24,091)

Interest rate swaps:

Revaluation difference (before non-controlling interest adjustment), net of taxes

57,880Receive-fixed and pay-floating¥35,048¥32,463

¥963

¥963

(680)

Receive-floating and pay-fixed

35,04832,463

(776)

(776)

—

—

¥187

¥187

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

Over-the-counter transactions:

Total

—

Notes: 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.

¥57,200

Unrealized gains on securities available for sale, net of taxes

ii. Currency related transactions<At 31st March, 2020>

29. Money Held in Trust

Millions of yen

Money held in trust at 31st March, 2020 and 2019 are as follows:

Contract value
Thousands of
U.S. dollars

Millions of yen

2019

2020

Type of transactions

Total

Over one year

¥65,005¥24,066

(¥74)

(¥74)

Sell

7,509

225

(115)

(115)

Buy

5,076

130

99

99

Sell

75,276

46,641(2,365)23

Buy75,276

46,641

2,365

516

—

—

(¥90)

¥449

Currency swaps
Forward foreign:

purposes and held-to-maturity purposes:
Acquisition Cost

¥5,370¥4,870$49,343

Carrying value

5,370

4,870

49,343———

Unrealized gains/losses

Currency option:

Total

30. Derivatives(1) Derivative transactions to which hedge accounting is not appliedThousands of U.S. dollars

Summarized below are the contract value or the notional principal and the fair value of the derivative transactions at 31st March, 2020
Type of transactions

market risk of derivative transactions.

Over-the-counter transactions:Contract value
Total

Over one year

Fair value

Unrealized
gain (loss)

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

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2020

Over one year

Fair value

Unrealized
gain (loss)$221,134($687)($687)

Sell

69,0042,074(1,061)(1,061)

Buy

46,643

1,200

918

918

Forward foreign:
Millions of yen

Receive-fixed and pay-floating

Total$597,309

Currency swaps

Interest related transactions<At 31st March, 2020>

64

Contract valueand 2019, to which hedge accounting is not applied. The amounts of the contract value are not necessarily indicative of the actual

Type of transactions

Unrealized
gain (loss)

Over-the-counter transactions:2020

Money held in trust for other purposes than investmenti)

Fair value¥31,965¥31,965

¥842

¥842

31,96531,965

(670)

(670)

—

—

¥172

¥172

Currency option:
Sell

691,691

428,573(21,737)214

Buy691,691

428,573

21,737

4,746

—

—

($829)$4,131

Total

Notes: 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.

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 202065

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements<At 31st March, 2019><At 31st March, 2019>
Millions of yen

Millions of yen
Contract value
Type of transactions

Total

Over one year

Unrealized
gain (loss)

Fair value

Over-the-counter transactions:¥82,241

Currency swaps¥25,576(¥149)(¥149)

Forward foreign:
Sell

4,749

—

(28)

(28)

Buy

8,867

—

41

41

Sell

69,774

39,204(2,116)

207

Buy

69,774

39,204

2,116

357

—

—

(¥135)¥428

Contract value

Hedge accounting
methodType of transactions

Hedged item

Principle hedge
accounting method

Interest rate swaps:

Available-forsale securities

Special treatment forinterest rate swaps

Interest rate swaps:

Receive-floating and pay-fixed
Receive-floating and pay-fixed

Loans and bills
discounted,
and deposits

Total¥16,093¥13,873

165,336

157,836

—

—

—

—

Interest rate options
Total

Currency option:

Total

Notes: 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.

(¥299)(Note 2)(¥299)

Notes: 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 as synthetic products composed of loans and bills
discounted and deposits, their fair value is included in the fair value of the said loans and bills discounted and deposits which are disclosed in “Financial
Instruments (Note 27)”.

ii) Currency related transactions<At 31st March, 2020>(2) Derivative transactions to which hedge accounting is applied

Millions of yen

Summarized below are the contract value or the notional principal and the fair value of the derivative transactions at 31st March, 2020
and 2019, to which hedge accounting is applied. The amounts of the contract value are not necessarily indicative of the actual market
risk of derivative transactions.
i)Fair valueOver one year

Contract value

Hedge accounting
methodPrinciple hedge
accounting method

Interest related transactions

Fair value

Type of transactions

Hedged item

Total

Forward foreign

Securities denominated inforeign currencies¥18,745

¥—

¥10

—

—

¥10

Total

Over one year

<At 31st March, 2020>
Millions of yen
Hedge accounting
methodThousands of U.S. dollars

Contract value
Type of transactions

Hedged item

Principle hedge
accounting method

Interest rate swaps:

Available-forsale securities

Special treatment forinterest rate swaps

Interest rate swaps:

Receive-floating and pay-fixed
Receive-floating and pay-fixed

Loans and bills
discounted,
and deposits

TotalOver one year

¥33,502¥33,502

155,808

114,408

—

—

—

—

Fair value(¥2,642)

Total(Note 2)(¥2,642)

Contract value
Hedged item

Principle hedge
accounting method

Interest rate swaps:

Available-forsale securities

Special treatment forinterest rate swaps

Interest rate swaps:

Receive-floating and pay-fixed
Receive-floating and pay-fixedInterest rate options

Total

Loans and bills
discounted,
and deposits

Principle hedge
accounting method

Total

Over one year

Fair value

Type of transactions

Hedged item

Total

Over one year

Forward foreign

Securities denominated inforeign currencies$172,244

$—

$92

—

—

$92

Notes: 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.

<At 31st March, 2019>

Thousands of U.S. dollars

Type of transactions

Hedge accounting
methodTotal

Interest rate options

Hedge accounting
methodContract value

Millions of yen
Fair value$307,847$307,847($24,277)

1,431,664

1,051,254(Note 2)

—

—

—

—

Contract value

Hedge accounting
methodPrinciple hedge
accounting method

Hedged item

Total

Forward foreign

Securities denominated inforeign currencies¥49,145¥—(¥179)——(¥179)

Total($24,277)

Notes: 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 as synthetic products composed of loans and bills
discounted and deposits, their fair value is included in the fair value of the said loans and bills discounted and deposits which are disclosed in “Financial
Instruments (Note 27)”.

Fair value

Type of transactions

Over one year

Notes: 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.

31. Employee Retirement Benefits(1) Description of the retirement benefit plans
The Company’s consolidated subsidiaries adopt funded or unfunded defined benefit plans and/or the defined contribution plan toprovide for employee retirement benefits.
Under the defined benefit corporate pension plans (all funded), lump-sum or annuity payments are made at the amounts based onsalaries and the length of service periods of the covered employees. Nishi-Nippon City Bank, a consolidated subsidiary, has establisheda 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 a result of theestablishment of a retirement benefit trust), retirement benefits are paid in the form of a lump sum at the amounts based on salaries andthe length of service periods of the covered employees.

66

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2020

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 202067

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

The consolidated subsidiaries may also pay additional retirement benefits that are not subject to actuarial calculation.

iv) Components of retirement benefit expenses for the years ended 31st March, 2020 and 2019

As of 31st March, 2020, the lump-sum payment plans have been adopted by 6 consolidated subsidiaries. The corporate pension

Thousands of
U.S. dollars

Millions of yen

fund plans have been adopted by 2 consolidated subsidiaries. The defined contribution plan has been adopted by 1 consolidated

2019

2020

subsidiary.

2020

For the lump-sum payment plans that certain consolidated subsidiaries have adopted, liability for retirement benefits and retirement

Service cost

¥2,201¥1,919benefit expenses are calculated using the simplified method which assumes the retirement benefit obligation to be equal to the benefits

Interest cost

89

605

825

payable if all the eligible employees voluntarily terminated their employment at fiscal year end.

Expected return on plan assets(2,595)(3,096)(23,846)

Amortization of unrecognized actuarial gain and loss

1,461

(72)

13,432

296

287

2,724

¥1,454(¥356)$13,364(2) Defined benefit plansi)

OthersReconciliation between the balances of retirement benefit obligation at the beginning and end of the year for the years ended 31st
March, 2020 and 2019
Thousands of
U.S. dollars

Millions of yen

2020

2019

2020

¥75,580¥69,142$694,478

Service cost

2,349

2,068

21,586

Interest cost

89

605

825

1,315

7,544

12,089Retirement benefit obligation at beginning of the year

Actuarial gain and loss

(4,036)Retirement benefits paid

(37,094)———¥75,297¥75,580$691,885

OthersRetirement benefit obligation at end of the year

(3,782)Retirement benefit expenses$20,228

Notes: 1. Contributions by employees to corporate pension funds, etc. have been deducted from the service cost.
2. Retirement benefit expenses of consolidated subsidiaries that have adopted the simplified method are reported in total under “Service cost.”v) Items recorded in retirement benefits liability adjustments included in other comprehensive income (gross of income tax effects) for
the years ended 31st March, 2020 and 2019
Thousands of
U.S. dollars

Millions of yen

Actuarial gain and loss

2020

2019

2020

(¥4,134)(¥26,676)($37,989)vi) Items recorded in retirement benefits liability adjustments included in accumulated other comprehensive income (gross of income tax
effects) at 31st March, 2020 and 2019ii) Reconciliation between the balances of plan assets at the beginning and end of the year for the years ended 31st March, 2020 andThousands of
U.S. dollars

Millions of yen

Unrecognized actuarial gain and loss

2020

2019

2020

(¥20,851)(¥16,717)($191,599)

2020

2019

2020

Plan assets at beginning of the year

¥78,878¥94,044$724,782

Expected return on plan assets

2,595

3,096

23,846

Actuarial gain and loss

(4,280)(19,059)(39,333)

Contributions by employer

1,816

2,901

16,692

Bonds

30%

28%

Contributions by employees

147

149

1,357

Stocks53%

53%(2,287)(2,254)(21,020)

Cash and deposits

0%

1%

—

—

—

Others17%

19%¥76,869¥78,878$706,325

Total

100%

100%

Retirement benefits paid
OthersPlan assets at end of the yeariii) Reconciliation between the balances of retirement benefit obligation and plan assets at the end of the year and the amounts of theliability and asset for retirement benefits recognized in the consolidated balance sheets at 31st March, 2020 and 2019
Thousands of
U.S. dollars

Millions of yen

2020

2019

2020

Retirement benefit obligation (funded)¥74,815¥75,116$687,454

Fair value of plan assets(76,869)(78,878)(706,325)(2,053)(3,761)(18,870)

482

463

4,430

(¥1,571)(¥3,298)($14,439)

Retirement benefit obligation (unfunded)
Net liability (asset) for retirement benefits in the balance sheet

Thousands of
U.S. dollars

Millions of yen

2020

68

Thousands of
U.S. dollars

Millions of yen

2019

2019

vii) Matters concerning plan assets
1) Percentages of each main category of the total plan assets at 31st March, 2020 and 2019 are as follows:
2019

2020

* Retirement benefit trusts established for the corporate pension plans accounted for 24% and 23% of the total plan assets at 31st March, 2020 and 2019,respectively. Retirement benefit trusts established for the lump-sum payment plans accounted for 20% and 21% of the total plan assets at 31st March, 2020 and
2019, respectively.

2) The expected long-term rate of return on plan assets has been estimated by taking into account the current 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.
viii) Assumptions for actuarial calculation
Major assumptions for actuarial calculation as of 31st March, 2020 and 2019
2020

2019

1) Discount rates:

0.117% (principally)

0.117% (principally)

2) Expected long-term rate of return on plan assets:

3.30% (principally)

3.30% (principally)

3) Expected rate of pay increase:

3.04% (principally)

3.08% (principally)

2020(3) Defined contribution plans

Liability for retirement benefits¥3,708¥2,864$34,073

Asset for retirement benefits(5,279)(6,162)(48,513)

Contributions of ¥0 million ($1 thousand) and ¥0 million have been made to the defined contribution plan by the consolidated subsidiary

Net liability (asset) for retirement benefits in the balance sheet(¥1,571)(¥3,298)($14,439)

for the years ended 31st March, 2020 and 2019, respectively.

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2020

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 202069

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

32. Income Taxes

33. Asset Retirement Obligations

The tax effect of temporary differences and tax loss carryforwards that give rise to the deferred tax assets and liabilities at 31st March, 2020

Information on asset retirement obligations is as follows:

and 2019 are as follows:
Thousands of
U.S. dollars

Millions of yen

Asset retirement obligations that are recorded in the consolidated balance sheet(1) Outline of asset retirement obligations

2020

2019

2020

Reserve for possible loan losses¥14,272¥14,079$131,143

Liability for retirement benefits

7,479

6,790

68,726

Accumulated depreciation

2,067

2,086

18,996

133

121

1,229

8,947

7,954

82,211An asset retirement obligation is calculated by first estimating the period of expected use of the asset, which is the relevant building’s

Sub-total

32,90031,031

302,307

depreciation period (principally 39 years), and then discounting the value of the relevant liability using the government bond’s market rate

Valuation allowance(7,496)(7,979)(68,879)(principally 2.304%) that matches said depreciation period as the discount rate.

25,40323,051

233,427

The Company and its consolidated subsidiaries recognize asset retirement obligations for restoration obligations resulting from real

Deferred tax assets:

estate lease agreements such as those of the Group branch offices and commercial fixed-term leasehold agreements. The Company

Loss carryforwards for tax purposes
OthersTotal deferred tax assets

and its consolidated subsidiaries also recognize asset retirement obligations pertaining to obligations to remove hazardous substancesused in some of their branch offices in accordance with the Ordinance on Prevention of Health Impairment due to Asbestos.
(2) Method for calculating the value of asset retirement obligations(3) Changes in total asset retirement obligations for the years ended 31st March, 2020 and 2019

Deferred tax liabilities:(1)

Reserve fund for deferred income of fixed assets

(1)

(11)

(23)

(23)

(218)

(3,647)(3,647)(33,516)

Asset retirement obligations

(62)

(36)

(573)

Capital gain adjustments(1,081)(1,081)(9,942)

(94)

(91)

(871)

(20,352)(24,091)(187,008)

(2)

(3)

(20)

Total deferred tax liabilities(25,266)(28,978)(232,162)

Net deferred tax assets (liabilities)¥137(¥5,926)$1,265

Unrealized losses on securities attributable to partition of corporation, net
Gains on establishment of a retirement benefit trust

Share of retained earnings of affiliates accounted for by the equity method
Unrealized gains on securities available for sale, net
Others

The reconciliation between the statutory tax rate and the effective tax rate reflected in the consolidated statement of income for the year
2019
30.5%

Statutory tax rate
(Adjustments)
Items permanently not deductible for tax purposes such as entertainment expenses

0.7

Non-taxable dividend income and others(0.7)

Inhabitant tax on per capita basis

0.3

Increase in valuation allowance

0.9

Others0.3

Effective tax rate

32.0%

2019

2020

2020

¥778

¥785

$7,157

Increase due to acquisition of tangible fixed assets

102

5

938

Adjustment for passage of time

11

11

103

Decrease due to fulfillment of asset retirement obligation

88

23

810

¥804

¥778

$7,389Balance at beginning of the year

Balance at end of the year

34. Business Segment Information(1) Segment Informationi)

ended 31st March, 2019 is as follows:

Thousands of
U.S. dollars

Millions of yen

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 business resources and to evaluate business performance.
The Group consists of 7 consolidated subsidiaries and 1 affiliate. The Group is engaged in the financial 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 andforeign currency exchange, and other incidental services.

ii) 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

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, 2020 is not presented since the difference between those rates was not more than 5% of the statutory tax rate.

70

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2020

Policies”. The segment income is reported on an ordinary income basis. In addition, internal ordinary income among segments isbased on the same transaction terms as used in ordinary transactions with third parties.

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 202071

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statementsiii) Ordinary income, profit or loss, assets, liabilities and other items by reportable segments<In 2019><In 2020>

Millions of yen
Millions of yen
Reportable segment
Banking

Other

Total

Reportable segment
Banking
Adjustments

Consolidated

Ordinary income

Other

Total

Adjustments

Consolidated¥143,740

Ordinary income
Ordinary income from third party customers¥131,713¥12,027¥143,740¥—Internal ordinary income among segments

1,085

11,752

12,837(12,837)—

132,798

23,780156,578(12,837)

143,740

Ordinary income from third party customers¥129,080¥12,618¥141,698¥—¥141,698Internal ordinary income among segments

1,114

11,578

12,692(12,692)—

130,194

24,196

154,391(12,692)

141,698

Segment profit

29,810

10,152

39,962(5,549)34,412

23,402

10,63534,037(5,320)28,716

Segment assets

10,435,496

484,765

10,920,261(471,210)

10,449,051

Segment assets

10,809,840

487,068

11,296,908(474,143)

10,822,765

Segment liabilities

9,924,659

79,683

10,004,342(65,025)

9,939,317

Segment liabilities

10,300,831

80,144

10,380,976(66,968)

10,314,007

Other items

Depreciation

5,468

223

5,692

—

5,692

Interest and dividend income

Total ordinary income
Segment profit

Other items

Total ordinary income

5,464

204

5,669

—

5,669

100,650

7,976

108,626(5,799)102,827

Interest expenses

6,045

149

6,195

(120)

6,074

Increase in tangible and intangible fixed assets

5,008

210

5,218

—

5,218

Depreciation

Interest and dividend income

96,446

7,859

104,306(5,681)

98,624

Interest expenses

7,325

143

7,468

(118)

7,349

Increase in tangible and intangible fixed assets

4,133

260

4,394

—

4,394

Adjustments

Consolidated

Thousands of U.S. dollars
Reportable segment
Banking

Other

Total

Ordinary income

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 and dividend income and interest expenses are primarily eliminations ofinternal transactions among segments.

(2) Related Information

Ordinary income from third party customers$1,186,074$115,944$1,302,019$—$1,302,019

Internal ordinary income among segments

10,240106,390

116,630(116,630)—

1,196,314

222,334

1,418,649(116,630)

1,302,019

Segment profit

215,034

97,722

312,757(48,890)

263,866

Segment assets

99,327,761

4,475,499

103,803,260(4,356,730)

99,446,529

Segment liabilities

94,650,661

736,419

95,387,080(615,351)

94,771,729

Depreciation

50,2452,057

52,302—52,302

Interest and dividend income

886,211

72,219958,431(52,202)906,228

Interest expenses

67,3081,315

68,623(1,091)

67,532

Increase in tangible and intangible fixed assets

37,982

2,392

40,375—40,375

Total ordinary income

Ordinary income by services:<In 2020>
Millions of yen
Loan

Ordinary income from third party customers

Securities¥88,413

Other items¥22,549

Other

Total

¥30,735¥141,698

Thousands of U.S. dollars

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 and dividend income and interest expenses are primarily eliminations ofinternal transactions among segments.

Ordinary income from third party customers

Loan

Securities

Other$812,402$207,199$282,417

Loan

Securities

Total$1,302,019

Note: Ordinary income is presented instead of net sales.

<In 2019>
Millions of yen

Ordinary income from third party customers¥90,215¥22,155

Other

Total

¥31,369¥143,740

Note: Ordinary income is presented instead of net sales.

(3) Impairment Losses on Tangible Fixed Assets by Reportable Segments<In 2020>
Millions of yen
Reportable segment
Banking

Impairment losses

¥627

Other

Total

¥419

¥1,046

Thousands of U.S. dollars
Reportable segment
Banking

Impairment losses

72

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2020

$5,765

Other$3,851

Nishi-Nippon Financial Holdings Group

Total$9,616

ANNUAL REPORT 202073

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements<In 2019>

Basis for net assets per share as of 31st March, 2020 and 2019 are as follows:
Millions of yen
Reportable segment
Banking

Other

¥98

Impairment losses

Total

¥—

¥98

Net assets

2020

2019

¥508,758¥509,734$4,674,800

7,544

7,490

69,321

7,544

7,490

69,321

501,214502,243

4,605,478

Items to be deducted from net assets
Non-controlling interests(4) Amortization and Balance of Goodwill by Reportable Segments

Net assets attributable to common stock<In 2020>

Other

2020

SharesMillions of yen
Reportable segment
Banking

Thousands of
U.S. dollars

Millions of yen

Total

Number of shares of common stock outstanding at end of the year

2020

2019

149,561,476

152,250,192

Goodwill
Amortization of goodwill

¥—

¥283

¥283

Balance at end of the year

¥—

¥—

¥—

Basis for profit (loss) attributable to owners of parent per share for the years ended 31st March, 2020 and 2019 are as follows:
Thousands of
U.S. dollars

Millions of yen

Reportable segment
Banking

Other

Total

Profit (loss) attributable to owners of parent¥20,222¥22,899———

20,222

22,899185,815

Items not attributable to common stock

Amortization of goodwill$—$2,605$2,605

Balance at end of the year

$—

$—

$—

Profit (loss) attributable to owners of parent available for shareholders of common stock<In 2019>$185,815

SharesAverage number of shares of common stock outstanding during the year

2020

2019

151,678,187

153,903,301* Diluted profit (loss) attributable to owners of parent per share for the years ended 31st March, 2020 and 2019 was not presented because the Company and its
consolidated subsidiaries had no dilutive shares during the years.

Millions of yen
Other

2020

Basis:

Goodwill

Reportable segment
Banking

2019

2020

Thousands of U.S. dollars

Total

Goodwill
Amortization of goodwill

¥—

¥283

¥283

Balance at end of the year

¥—

¥661

¥661

38. Cash Dividends
Cash dividends paid during the years ended 31st March, 2020 and 2019 are as follows:<In 2020>

35. Related Party Transactions
There are no related party transactions to report for the years ended 31st March, 2020 and 2019.

36. Reconciliation of Cash and Cash Equivalents
The reconciliation between “Cash and cash equivalents” in the consolidated statement of cash flows and each account in the consolidatedbalance sheet is as follows:
Thousands of
U.S. dollars

Millions of yen

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

Types

Millions of yen

Thousands of
U.S. dollars

Cut-off date

Effective date

27th June, 2019
Ordinary General Meeting of Shareholders

Cash dividends(¥17.5 per share)¥2,664$24,485

31st March,2019

28th June,2019

6th November, 2019
Meeting of Board of Directors

Cash dividends(¥12.5 per share)¥1,903$17,488

30th September,2019

10th December,
2019

Resolution

2020

2019

2020

¥1,714,664¥1,474,517$15,755,436(4,325)(3,798)(39,743)¥1,710,338¥1,470,719$15,715,693<In 2019>
Types

Millions of yen

Cut-off date

Effective date

28th June, 2018
Ordinary General Meeting of Shareholders

Resolution

Cash dividends(¥17.5 per share)¥2,70431st March,2018

29th June,
2018

8th November, 2018
Meeting of Board of Directors

Cash dividends(¥12.5 per share)¥1,93130th September,
2018

10th December,
2018

39. Subsequent Event
The following appropriation of earned surplus for the year ended 31st March, 2020 was approved at the shareholders’ meeting held on

37. Per Share Information

26th June, 2020:
Yen

2020
Net assets per share at end of the year
Profit (loss) attributable to owners of parent per share*

74

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2020

U.S. dollars

2019

2020

¥3,351.22¥3,298.80$30.793133.32148.791.225

Resolution

26th June, 2020
Ordinary General Meeting of Shareholders

Types

Cash dividends(¥17.5 per share)

Millions of yen¥2,617

Thousands of
U.S. dollars$24,053

Cut-off date

Effective date

31st March,2020

29th June,
2020

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 202075

Quarterly Information (Unaudited)

Non-Consolidated Balance Sheet (Unaudited)

Nishi-Nippon Financial Holdings, Inc. and Subsidiaries

The Nishi-Nippon City Bank, Ltd.

Year ended 31st March, 2020

31st March, 2020 and 2019
Millions of yen

Ordinary income

Second Quarter

Third Quarter

Fourth Quarter

from 1st April, 2019
to 30th June, 2019from 1st April, 2019
to 30th September, 2019from 1st April, 2019
to 31st December, 2019from 1st April, 2019
to 31st March, 2020

¥34,518¥71,652¥105,775¥141,698

Profit (loss) before income taxes

7,598

15,214

21,82329,148

Profit (loss) attributable to owners of parent

5,198

11,175

15,335

20,222

2020

2019

2020

Cash and due from banks¥1,700,704¥1,458,178$15,627,164

Call loans and bills bought¥43,189

34,471$396,853

Trading account assets

1,385

1,166

12,732

Assets:Money held in trust
Yen

Profit (loss) attributable to owners of parent per share

5,370

4,870

49,343

Securities

1,287,828

1,365,544

11,833,394

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Loans and bills discounted

7,341,274

7,132,208

67,456,345

from 1st April, 2019
to 30th June, 2019from 1st April, 2019
to 30th September, 2019from 1st April, 2019
to 31st December, 2019from 1st April, 2019
to 31st March, 2020

Foreign exchange assets

14,407

8,396

132,383

Other assets

80,44786,827739,206

Tangible fixed assets

115,389

119,473

1,060,276¥34.14¥73.40¥100.86¥133.32

Yen
First Quarter
from 1st April, 2019
to 30th June, 2019

Profit (loss) attributable to owners of parent per share

Thousands of
U.S. dollars

Millions of yen

First Quarter¥34.14

Second Quarter
from 1st July, 2019
to 30th September, 2019

Third Quarter
from 1st October, 2019
to 31st December, 2019¥39.25¥27.43

Fourth Quarter
from 1st January, 2020
to 31st March, 2020

¥32.45Intangible fixed assets

3,077

3,266

28,278Prepaid pension cost

23,103

20,774

212,288

Customers’ liabilities for acceptances and guarantees

17,954

20,592

164,978

Reserve for possible loan losses(34,703)(36,564)(318,880)

Reserve for devaluation of securities
Total assets

(454)

(461)

(4,173)¥10,598,974¥10,218,746$97,390,192$79,385,710

Liabilities and Net assets:
Thousands of U.S. dollars

Ordinary income

Liabilities:

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Deposits¥8,639,546¥8,309,734

from 1st April, 2019
to 30th June, 2019from 1st April, 2019
to 30th September, 2019from 1st April, 2019
to 31st December, 2019from 1st April, 2019
to 31st March, 2020

Call money and bills sold

39,000109,084

358,357

Payables under repurchase agreements

207,019

166,666

1,902,226

Guarantee deposits received under securities lending transactions

89,108145,718

818,782

Borrowed money

988,441

885,101

9,082,435$317,180$658,386$971,934$1,302,019

Profit (loss) before income taxes

69,816

139,799

200,526

267,834

Profit (loss) attributable to owners of parent

47,770102,686

140,912

185,815

Foreign exchange liabilities
Bonds
Borrowed money from trust account

U.S. dollars

Profit (loss) attributable to owners of parent per share

7,680
663,436

Reserve for employee retirement benefits

224

216

2,060

Reserve for reimbursement of deposits

1,577

2,116

14,491

Reserve for other contingent losses

1,380

1,328

12,688Deferred tax liabilities

7,708

12,44370,827

Deferred tax liabilities on revaluation of premises

14,66014,712

134,708

Fourth Quarter

Other liabilities

from 1st April, 2019
to 30th June, 2019from 1st April, 2019
to 30th September, 2019from 1st April, 2019
to 31st December, 2019from 1st April, 2019
to 31st March, 2020

$1.22

U.S. dollars
First Quarter
from 1st April, 2019
to 30th June, 2019

Profit (loss) attributable to owners of parent per share—
32,083

Third Quarter

$0.92

$0.31

Second Quarter
from 1st July, 2019
to 30th September, 2019

$0.36

Third Quarter
from 1st October, 2019
to 31st December, 2019

$0.25

Fourth Quarter
from 1st January, 2020
to 31st March, 2020

$0.29

1,086
91,886

835

Second Quarter

$0.67

172
10,00072,201First Quarter

$0.31

118
10,000Acceptances and guarantees

17,954

20,592

164,978

10,089,776

9,709,971

92,711,356

85,74585,745787,885

85,68485,684

787,320

Legal reserve

61

61

565

Reserve for deferred capital gains

2

3

26

Unappropriated retained earnings

264,335

252,405

2,428,882

Total shareholders’ equity

435,829423,899

4,004,680

Net unrealized gains on securities available for sale, net of taxes

45,26355,063415,909

Net deferred gains (losses) on hedging instruments, net of taxes(1,841)(205)(16,921)

Revaluation of premises, net of taxes

29,94630,017275,168

73,36884,875674,155

Total liabilities
Net assets:
Capital stock
Capital surplus
Capital reserve
Earned surplus

Total valuation and translation adjustments
Total net assets
Total liabilities and net assets

509,197508,775

4,678,836¥10,598,974¥10,218,746$97,390,192

See accompanying Notes to Non-Consolidated Financial Statements.

76

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2020

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 202077

Non-Consolidated Statement of Income (Unaudited)

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

The Nishi-Nippon City Bank, Ltd.

The Nishi-Nippon City Bank, Ltd.

Years ended 31st March, 2020 and 2019Years ended 31st March, 2020 and 2019
Thousands of
U.S. dollars

Millions of yen

2019

2020

2020

Income:Thousands of
U.S. dollars

Millions of yen

2020

2019

2020

¥85,745¥85,745$787,885———¥85,745¥85,745$787,885¥85,684¥85,684$787,320

Shareholders’ equity

Interest income:Capital stock

Interest on loans and discounts¥78,352¥79,840$719,953

Balance at beginning of the year

Interest and dividends on securities

14,195

16,724130,434

Changes during the year

206

221

1,898

Other interest income
Trust fees
Fees and commissions
Trading income

0

—

0

25,29825,812

232,461

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

1

10

17

Other operating income

3,872

806

35,585

Balance at beginning of the year

Other income

5,915

4,882

54,357

Changes during the year

127,843

128,298

1,174,707

Total income

Capital reserve

Total changes during the year
Balance at end of the year

Expenses:———¥85,684¥85,684$787,320¥85,684¥85,684$787,320

Total capital surplus

Interest expenses:
Interest on deposits

1,149Interest on call money and bills sold

1,432

10,561

108

59

996

4,120

2,640

37,859Interest on borrowings

744

678

6,840

Interest on guarantee deposits received under securities lending transactions

382

250

3,511

Other interest expenses

948

1,113

8,711

15,961

15,401

146,663Interest on payables under repurchase agreements

Fees and commissions
Other operating expenses

1,684

3,377

15,476

General and administrative expenses

69,78468,756641,223

Other expenses

8,620

5,410

79,208

Total expenses

103,50399,121

951,053

Income before income taxes

24,34029,177

223,654

Income taxes
Current

7,414

7,445

68,127

Deferred

(469)

1,761

(4,317)

Total income taxes
Net income
See accompanying Notes to Non-Consolidated Financial Statements.

6,944

9,207

63,809¥17,395¥19,970$159,844

Balance at beginning of the year
Changes during the year
Total changes during the year
Balance at end of the year

—

—

—

¥85,684¥85,684$787,320

¥61

¥61

$565

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

—

—

—

¥61

¥61

$565

¥3

¥3

$27

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
Total changes during the year
Balance at end of the year

(0)

(0)

(1)

(0)

(0)

(1)

¥2

¥3

$26

¥252,405¥238,049$2,319,265(5,537)(5,654)(50,881)00

1

17,395

19,970159,844

Unappropriated retained earnings
Balance at beginning of the year
Changes during the year
Cash dividends paid
Transfer from reserve for deferred capital gains
Net income
Reversal of revaluation of premises
Total changes during the year
Balance at end of the year

78

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2020

71

40

652

11,92914,356109,616¥264,335¥252,405$2,428,882

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2020

79

The Nishi-Nippon City Bank, Ltd.

Non-Consolidated Balance Sheet (Unaudited)Years ended 31st March, 2020 and 2019

The Bank of Nagasaki, Ltd.

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

31st March, 2020 and 2019
Thousands of
U.S. dollars

Millions of yen

2020

2019

2020

¥252,470¥238,113$2,319,858

Total earned surplus
Balance at beginning of the year
Changes during the year
Cash dividends paid

(5,537)(5,654)(50,881)Net income

17,395

19,970159,844

71

40

652

11,92914,356109,615¥264,399¥252,470$2,429,474¥423,899¥409,543$3,895,064

Cash dividends paid

(5,537)(5,654)(50,881)Net income

17,395

19,970159,844

71

40

652

Reversal of revaluation of premises
Total changes during the year
Balance at end of the year
Total shareholders’ equity
Balance at beginning of the year
Changes during the year

Reversal of revaluation of premises
Total changes during the year
Balance at end of the year

11,92914,356109,615¥435,829¥423,899$4,004,680

Valuation and translation adjustments
Net unrealized gains on securities available for sale, net of taxes
Balance at beginning of the year

¥55,063¥77,057$505,958

Changes during the year
Net changes in items other than shareholders’ equity
Total changes during the year
Balance at end of the year

(9,799)(21,994)(90,048)(9,799)(21,994)(90,048)¥45,263¥55,063$415,909

Net deferred gains (losses) on hedging instruments, net of taxes
Balance at beginning of the year

Thousands of
U.S. dollars

Millions of yen

2020

2019

¥25,065¥33,8324,942

945,410250,072

246,791

2,297,829

831

1,091

7,638
43,191

2020

Assets:Cash and due from banks
Securities
Loans and bills discounted
Other assets$230,319

Tangible fixed assets

4,700

4,845

Intangible fixed assets

470

558

4,325

Deferred tax assets

316

389

2,910

Customers’ liabilities for acceptances and guarantees

14

28

132

(500)

(575)

(4,603)¥285,913¥286,972$2,627,154¥226,149¥235,483$2,078,009

42,00034,000385,922

Borrowed money

600

600

5,513

Other liabilities

1,235

876

11,355
1,835

Reserve for possible loan losses
Total assets
Liabilities and net assets:
Liabilities:
Deposits
Call money and bills soldReserve for employee retirement benefits

199

299

Reserve for retirement benefits for directors and corporate auditors

85

101

786

Reserve for reimbursement of deposits

53

34

490

Reserve for other contingent losses

49

52

451

Deferred tax liabilities on revaluation of premises

509

509

4,678

Acceptances and guarantees
Total liabilities(¥205)(¥33)($1,886)(1,636)(171)(15,035)

Capital stock(1,636)(171)(15,035)

Capital surplus(¥1,841)(¥205)($16,921)

14

28

132

270,897

271,9852,489,177

6,121

6,121

56,250Net assets:

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

¥30,017¥30,058$275,820

Capital reserve

2,000

2,000

18,377

Other capital surplus

2,463

2,463

22,640Earned surplus
Legal reserve

Changes during the year
Net changes in items other than shareholders’ equity
Total changes during the year
Balance at end of the year

(71)

(40)

(652)

Unappropriated retained earnings

(71)

(40)

(652)

Total shareholders’ equity¥29,946¥30,017$275,168

Balance at beginning of the year

Revaluation of premises, net of taxes
Total valuation and translation adjustments

Total valuation and translation adjustments¥84,875¥107,082$779,892

Total net assets
Total liabilities and net assets

Changes during the year
Net changes in items other than shareholders’ equity
Total changes during the year
Balance at end of the year

(11,507)(22,206)(105,736)(11,507)(22,206)(105,736)¥73,368¥84,875$674,155¥508,775¥516,625$4,674,957

210

205

1,935

3,122

3,102

28,687

13,91813,893

127,890

1,097

1,093

10,086

1,097

1,093

10,08615,016

14,986

137,977¥285,913¥286,972$2,627,154

See accompanying Notes to Non Consolidated Financial Statements.

Total net assets
Balance at beginning of the year
Changes during the year
Cash dividends paid

(5,537)(5,654)(50,881)Net income

17,395

19,970159,844

Reversal of revaluation of premises
Net changes in items other than shareholders’ equity
Total changes during the year
Balance at end of the year

71

40

652

(11,507)(22,206)(105,736)

422(7,849)3,879¥509,197¥508,775$4,678,836

See accompanying Notes to Non-Consolidated Financial Statements.

80

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Nishi-Nippon Financial Holdings GroupANNUAL REPORT 202081

Non-Consolidated Statement of Income (Unaudited)

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

The Bank of Nagasaki, Ltd.

The Bank of Nagasaki, Ltd.

Years ended 31st March, 2020 and 2019Years ended 31st March, 2020 and 2019
Thousands of
U.S. dollars

Millions of yen

2019

2020

2020

Income:Thousands of
U.S. dollars

Millions of yen

2020

2019

2020

¥6,121¥6,121$56,250

Shareholders’ equity
Capital stock

Interest and dividend income:Interest on loans and discounts¥3,685¥3,856$33,862

Other interest income

215

251

1,982

Fees and commissions

634

582

5,828

Other income

212

193

1,948

Total income

4,747

4,883

43,621

Balance at beginning of the year
Changes during the year
Total changes during the year
Balance at end of the year

—

—

—

¥6,121¥6,121$56,250¥2,000¥2,000$18,377

Capital surplus:
Capital reserve

Expenses:

Balance at beginning of the year

Interest expenses:
Interest on deposits

82

116

755

Interest on call money and bills sold

(3)

(4)

(31)

Interest on borrowings

0

0

0

Other interest expenses

2

2

22

1,110

1,036

10,203

Fees and commissions
Other operating expenses
General and administrative expenses

—

0

—

3,387

3,423

31,127

Changes during the year
Total changes during the year
Balance at end of the year
Balance at beginning of the year
Total changes during the year
Balance at end of the year

33

582

4,607

42,661

104

275

960

Changes during the year

(22)

(18)

(209)

Balance at end of the year

Balance at beginning of the year

Total income taxes
Net income
See accompanying Notes to Non Consolidated Financial Statements.

¥2,463$22,640———¥2,463¥2,463$22,640¥4,463¥4,463$41,017———¥4,463¥4,463$41,017

¥205

¥200

$1,889Reserve of legal retained earnings

5

5

45

Total changes during the year

5

Total changes during the year

Deferred¥2,463

Total capital surplus

63
4,642

Current—$18,377

Changes during the year

Total expenses
Income taxes—¥2,000

Other capital surplus

Other expenses
Income before income taxes—¥2,000

73

68

671

Earned surplus:

50

50

462

Legal reserve

¥54

¥225

$498

Balance at beginning of the year
Changes during the year

Balance at end of the year

5

45

¥210

¥205

$1,935¥3,102¥2,908$28,504

Other earned surplus:
Unappropriated retained earnings
Balance at beginning of the year
Changes during the year
Reserve of legal retained earnings

(5)

(5)

(45)

Cash dividends paid

(25)

(25)

(229)

Net income

54

225

498

Reversal of revaluation of premises

(4)

(2)

(40)

Total changes during the year

19

193

182

¥3,122¥3,102$28,687¥3,307¥3,109$30,394

Balance at end of the year
Total earned surplus
Balance at beginning of the year
Changes during the year
Cash dividends paid

(25)

(25)

(229)

Net income

54

225

498

Reversal of revaluation of premises

(4)

(2)

(40)

Total changes during the year

24

198

228

¥3,332¥3,307$30,622

Balance at end of the year

82

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2020

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 202083

Non-Consolidated Statement of Changes in Net Assets (Unaudited)
The Bank of Nagasaki, Ltd.
Years ended 31st March, 2020 and 2019

Thousands of
U.S. dollars

Millions of yen

2020

2019

2020

¥13,893¥13,694$127,661

Total shareholders’ equity
Balance at beginning of the year
Changes during the year
Cash dividends paid

(25)

(25)

(229)

Net income

54

225

498

Reversal of revaluation of premises

(4)

(2)

(40)

Total changes during the year

24

198

228

¥13,918¥13,893$127,890¥1,093¥1,091$10,046

4

2

40

4

2

40

¥1,097¥1,093$10,086¥1,093¥1,091$10,046

4

2

40

4

2

40

¥1,097¥1,093$10,086¥14,986¥14,786$137,708

Cash dividends paid

(25)

(25)

(229)

Net income

54

225

498

Reversal of revaluation of premises

(4)

(2)

(40)

Net changes in items other than shareholders’ equity

4

2

40

29

200

268

¥15,016¥14,986$137,977

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

Total changes during the year
Balance at end of the year
See accompanying Notes to Non-Consolidated Financial Statements.

Notes to Non-Consolidated Financial Statements (Unaudited)
The Nishi-Nippon City Bank, Ltd. and The Bank of Nagasaki, Ltd.
31st March, 2020 and 2019

1. Basis of Presentation of Financial Statements
The accompanying non-consolidated financial statements of The Nishi-Nippon City Bank, Ltd. and The Bank of Nagasaki, Ltd. (the Banks)
have been prepared from the accounts maintained by the Banks in accordance with the provisions set forth in the Japanese Corporation
Law, the Banking Law, and accounting principles generally accepted in Japan, which are different in certain respects as to the applicationand disclosure requirements of International Financial Reporting Standard.

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

84

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85

86

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Nishi-Nippon Financial Holdings GroupANNUAL REPORT 202087

Outline of Banking Subsidiaries

Organization Chart of Banking Subsidiaries

As of 31st March, 2020, the Group has a nationwide network of 175 branches of Nishi-Nippon City Bank, and 23 branches of Bank ofNagasaki, and 3 overseas representative offices of Nishi-Nippon City Bank, in Hong Kong, Shanghai, and Singapore.

The Nishi-Nippon City Bank, Ltd.

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

Business

Banking

Established

1st December, 1944

Headquarters

1-1, Hakata-ekimae 3-chome, Hakata-ku, Fukuoka 812-0011, Japan

Number of Employees

3,611

Number of Domestic Offices

175

Number of Correspondent Banks76

Parent Company

Nishi-Nippon Financial Holdings, Inc. (NNFH’s share of voting rights 100%)

Compliance Risk Supervisory Division
Directors(Audit and Supervisory
Committee Members)

IT Planning & Management Division
Public Relations Division
Executive Secretariat
Human Resources Division

Audit and Supervisory
Committee Members’
Office(As of 31st March, 2020)

Corporate Administration Division
Treasury & Portfolio Investment Division
Treasury & Securities Transaction Division

Board of Directors

Branches
Credit Risk Management Division

Board of Directors

Credit Supervision Division
Business Planning Division
Digital Strategy Division

Executive Committee

Business Promotion DivisionInternational Business Division
Overseas Representative Offices
Hong Kong Representative Office
Shanghai Representative Office
Representative Office
Registered in Singapore
Personal Loan Transaction DivisionCorporate Business Solution Division
Private Banking Division
Regional Relationship Management Headquarters
Kita-Kyushu General Headquarters
Chikuho Regional Headquarters
Chikugo Regional Headquarters
Kyushu Regional Headquarters
Tokyo Headquarters

Risk Management ���������������������������������������� 30

The Bank of Nagasaki, Ltd.
Banking

Outline Establishedof Banking Subsidiaries�����������������������������������
86
11th November, 1912
3-14, Sakaemachi, Nagasaki 850-8666, Japan

Number of Employees

219

Organization Chart of Banking Subsidiaries ����������������������������� 89

TREASURY & SECURITIESTRANSACTION DIVISION
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 REPRESENTATIVEOFFICE
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

Nishi-Nippon Financial Holdings, Inc. (NNFH’s share of voting rights 100%)SHANGHAI REPRESENTATIVEOFFICE

The Bank of Nagasaki, Ltd.

Room No. 2209 Shanghai International Trade
Center, 2201 Yan-An Road (West), Chang
Ning District,Shanghai, People’s Republic of
China
Phone: +86-21-6219-0600
Fax: +86-21-6278-5940

Audit and Supervisory Board Members
GeneralShareholders’ Meeting

Notes: 1. In this report, Japanese yen figures are rounded down to the nearest million yen.
Numberintoof U.S,
Domestic
Offices
23 Japan) has been made at the exchange rate of ¥108.83 to $1.
2. Conversion
dollars (solely
for the convenience of readers outside

Parent Company

4th Fl., Nittetsu Nihonbashi Bldg,
13-1, Nihonbashi 1-chome, Chuo-ku, Tokyo
103-0027, Japan
Phone: +81-3-6262-7957
SWIFT: NISIJPJTFax: +81-3-3273-2255(As of 30th June, 2020)

Financial Section ����������������������������������������� 33

Headquarters

TREASURY & PORTFOLIOINVESTMENT DIVISION

Retail Business Division*Directors/Audit and Supervisory Committee Members Michiaki Uriu and Hiroshi Fujioka are Outside Directors as prescribed in Article 2 (xv) of the Companies Act of Japan.

Business

3-6, Hakata-ekimae 1-chome, Hakata-ku,
Fukuoka 812-0011, Japan
Phone: +81-92-476-2481
SWIFT: NISIJPJTFKK
Fax: +81-92-476-2488

Operations Planning & Management Division

Contents

Message from the President ������������������������������������ 01
Chairman �������������������� Isao Kubota
Profileof the Company(Joint Holding Company)/OrganizationHiromichi
Chart ������������������
02
President��������������������
Tanigawa
Deputy Presidents ����������������� Souichi Kawamoto
Board of Directors of Nishi-Nippon Financial Holdings Inc. �����������������������
03
Kiyota Takata
Hiroyuki Irie
Representative
Executive
Director����������
Shigeru Urayama
Outlineof Nishi-Nippon
Financial
Holdings
Group ��������������������������
04
Executive Directors ���������������� Hideyuki Murakami
Takeo
Providing Broader/Deeper Support for International Business Hiroyuki���������������������
05
Managing Directors ���������������� Masaru Ikeda
Hideki Nakazuru
Financial/Non-Financial Highlights ���������������������������������
06
Takashige Honda
Kenichi Ozaki
Medium-Term Business Plan ������������������������������������
08
Kenji Morimoto
Directors (Audit
Committee
Members) � Seiji Ino
Our Commitment
toand
ESGSupervisory
and the SDGs
�������������������������������
22
Michiaki Uriu (outside)
Hiroshi Fujioka (outside)(As of 30th June,
Corporate Governance ��������������������������������������
28 2020)

INTERNATIONAL BUSINESSDIVISION

Board of Directors
Executive Committee(As of 31st March, 2020)

Corporate Planning Division
Human Resources & Corporate
Administration Division

Board of Directors and Audit and Supervisory Board Members

President �������������������� Ryutaro KaichiManaging Directors ���������������� Yutaka Matsuyama
Tetsuhisa Matsumoto
Naoshi Taguchi
Yasuyuki Shigetomi
Directors ��������������������� Hiroji MochidaToshihiro Takaki
Hideyuki Murakami
Audit and Supervisory Board Members �������� Kenji Miyata
Mitsuru Kawatani (outside)
Junichi Sakaguchi (outside)

Business Management Division
Credit Supervision Division
Operations Planning &Management Division

REPRESENTATIVE OFFICEREGISTERED IN SINGAPORE
1 Marina Boulevard Unit#25-07
One Marina Boulevard, Singapore 018989
Phone: +65-6222-0115
Fax: +65-6222-0171

Internal Audit Division(As of 30th June, 2020)(As of 30th June, 2020)*Audit and Supervisory Board Members Mitsuru Kawatani and Junichi Sakaguchi are Outside Audit and Supervisory Board Members as prescribed in Article 2 (xvi) of theCompanies Act of Japan.

88

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89

英文

最小使用サイズ

最小使用サイズ

6mm

6mm

1-1, Hakata-ekimae 3-chome, Hakata-ku,
Fukuoka, 812-0011, Japan
Phone: +81-92-461-1867

This brochure is printed on "Kininaru Kami" paper using vegetable oil ink.
"Kininaru Kami" is made from timber thinned from forests in Fukuoka andother parts of the Kyushu Region.

Printed in Japan