ANNUAL REPORT 2016
Year ended March 31, 2016

AN NUA L R E P O RT 2 0 1 6
CONTENTS
01 Consolidated Financial Highlights

14 Consolidated Financial Statements

02 Message from the President

46 Independent Auditors’ Report

06 Medium-Term Management Plan

47 Capital Management

08 Compliance

48 Organization, Group Network

09 Risk Management

49 Affiliates and Subsidiaries, Bank Data

13 Board of Directors and Corporate
Auditors

PROFILEThe Nanto Bank, Ltd. (the “Bank” or “Nanto Bank”) is based in Nara Prefecture, a region rich in tradition andculture dating back to its development as Japan’s first capital in the early 8th century. Since its establishment in
1934, Nanto Bank has achieved steady growth in partnership with its region and continues to maintain a sound financial structure. As of March 31, 2016, Nanto Bank had deposits of ¥4,719.3 billion, loans of ¥3,188.3 billion, andtotal assets of ¥5,505.6 billion.
Nanto Bank’s domestic network of 138 branches extends
beyond Nara Prefecture to the neighboring prefectures ofOsaka, Kyoto, Hyogo, Mie, Wakayama, and Tokyo. The Bankhas become a trusted institution in communities throughout
its region thanks to its commitment to regionally focusedservices designed to meet the needs of local customers.
Nanto Bank continues to make a positive contribution toregional economic development by providing a comprehensive range of financial services, including overseas services,and maintains representative offices in Hong Kong andShanghai.

OSAKA

KYOTO

HYOGO

TOKYO
MIE

CORPORATE PHILOSOPHY
1. Pursue sound and efficient management
2. Provide superior comprehensive financial services
3. Contribute to regional prosperity
4. Strive to become a highly reliable, friendly and attractive bank

NARA (NARA PREFECTURE)
WAKAYAMA

Consolidated Financial Highlights
Thousands of
U.S. dollars

Millions of yen

2016

2015

2014

2013

2012

2016

For the year:
Total income .............................................

¥

76,417¥

81,869¥82,717¥

88,875¥90,075$678,177

Total expenses ..........................................

61,58663,85762,923

77,661

78,843

546,556

Income before income taxes ....................

14,83118,012

19,794

11,214

11,231

131,620

Net income ...............................................

12,159

9,874

9,079

7,621

3,467

107,907

Total assets ...............................................

5,505,607

5,328,661

5,187,191

5,025,037

4,809,575

48,860,552

Loans and bills discounted .......................

3,188,341

3,079,175

2,972,159

2,898,844

2,785,671

28,295,536

Securities ..................................................

1,797,411

1,693,517

1,907,331

1,840,741

1,755,495

15,951,464

Deposits and negotiable certificatesof deposit ................................................

4,766,330

4,754,414

4,662,888

4,514,604

4,343,154

42,299,698

Total liabilities .........................................

5,253,894

5,077,342

4,966,542

4,809,291

4,597,334

46,626,677

Non-controlling interests .........................

—

7,935

7,336

6,658

25,971—

Total net assets .........................................

251,712251,318

220,648

215,745

212,241

2,233,865

Common stock .........................................

29,24929,24929,24929,24929,249259,575

At year-end:

Per share data:

Yen

U.S. dollars

Net income ...............................................

¥ 45.32¥ 36.81¥ 33.78¥ 28.01¥ 12.57$0.40

Stockholders’ equity ................................

937.66906.92794.95774.46675.42

8.32

Capital adequacy ratio (%) ......................

9.36

9.72

10.51

10.66

11.63

Note: U.S. dollar amounts are included solely for the convenience of readers and are calculated at the exchange rate of ¥112.68 to US$1.00, the rate prevailing on March 31, 2016.

Net Income

Total Assets(Billions of yen)(Billions of yen)
12.1

4,809.5

5,025.0

Total Net Assets
5,187.1

5,328.6

5,505.6(Billions of yen)

212.2

215.7

220.6

2012

2013

2014

251.3

251.7

2015

2016

9.8
9.0
7.6

3.4

2012

2013

2014

2015

2016

2012

2013

2014

2015

2016

1

Message
Message fromfrom thethe President
President
We would like to sincerely thank you for your support for the Nanto Bank.
The purpose of this Annual Report 2016 is to disclose our performance in fiscal 2015 (the year ended March 31, 2016), andour initiatives conducted during the fiscal year. We would appreciate it if you would read through the report.
Despite strong results for some domestic-demand based companies, the Japanese economy remained at a standstill due toa slowdown in the economies of China and other emerging countries as well as sluggish personal consumption.
In the regional economy centered around Nara Prefecture, while factors such as ongoing high level in numbers of tourists
had a positive impact on the regional economy, overall the situation fluctuated, as there were delays in improvements in theearnings environment in some industries.
It is also believed that conditions in the financial environment will become increasingly severe due to factors including adecline in investment yields stemming from intensified competition between financial institutions and the impact of the Bankof Japan’s negative interest rate policy.
Under these circumstances, we have entered the final year of the Bank’s medium-term management plan titled “Vitality
Creation Plan” (April 2014 to March 2017) that is based on the management vision of a “Vitality Creating Bank.” In order to cap
off this plan, the entire Group is fully making its efforts on five key strategies that include vitalizing the community and establishing a revenue base, while flexibly responding to changes in the environment.
In particular, “vitalizing the community” is the first pillar of our key strategies, and we aim to contribute to the sustainable
development of the regional economy and continue growing together with the local community going forward.
Our executives and employees are committed to dedicating our utmost efforts to realizing the management vision andachieving the medium-term management plan. We look forward to the continued understanding and support of all of our
stakeholders.

Creating Regional Vitality
Together with Customers
Our Economic and Financial Environment
In addition, the future outlook is characterized by uncertainty as there are concerns over how the Japanese economy
will be influenced in the future by the impact caused on the
global economy by the UK’s move to leave the EU.
It is also believed that conditions in the operating environment for financial institutions will become increasingly severe
due to factors including a decline in investment yields stemming from intensified competition between financial institutions and the impact of the Bank of Japan’s negative interest
rate policy.
Under these circumstances, we have entered the final yearof the three-year medium-term management plan titled“Vitality Creation Plan.” Based on five key strategies centered2

Despite strong results for some domestic-demand based com-on “vitalizing the community,” we have steadily pursued thepanies, the Japanese economy remained at a standstill due to a“enhancement of top-line margin,” “efficient operation,” andslowdown in the economies of China and other emerging“creating strong organization enabling self-fulfillment,” andcountries and sluggish personal consumption.

this fiscal year we will implement various measures as a year

In the regional economy centered around Nara Prefecture,

for capping off the plan. In addition, we will also flexibly

while factors such as ongoing high level in numbers of tourists

respond to changes in the environment, and promote “BPR,” in

had a positive impact on the regional economy, overall the sit-other words, reforms in all aspects including sales, administra-uation fluctuated as there were delays in improvements in thetion, and expenses in order to lead to further improvements inearnings environment in some industries.

corporate value.

Capping Off the Medium-Term Business Plan
Vitalizing the Community
Many issues are beginning to emerge in the regional econo-

while working together with external organizations. As wemy, such as an expected decline in the medium to long-termplan to implement this initiative during this fiscal year as

potential economic growth rate due to further changes inwell, we look forward to many customers applying.

social and economic structures including population decline,

Furthermore, we will support customers’ business cre-lower fertility and population aging leading to contraction ination and development of new businesses through thethe scale of the economy.
Under these circumstances, in joint efforts by the government and local municipalities to promote regional creation,

NANTO Commercialization Support Fund 80, which is afinancing program for business creation and new businessexpansion, and crowdfunding.

there are expectations towards financial institutions that sup-Since its foundation, we have endeavored to conduct busi-

port the regional economy to perform an advanced financial

ness closely rooted in the region as a bank that grows togeth-

function and be actively involved, and we have been promot-

er with the region. We believe that vitalization of the regionaling signing of cooperative agreements with local municipali-

economy is essential for growing together with customers

ties. As for regional economy vitalizing projects that include

and perpetual development as a regional financial institution.

support for business creation and promotion of transfers andBased on this stance, we will do our utmost together withpermanent citizenship in the region, we have been actively

customers and the local community in response to challenges

collaborating and coordinating with the projects based on ourin the region that arise from changes in social and economic

knowledge as a financial institution.

structures, and link such efforts to our growth.

The first investments of the Nara Prefecture Tourism
Revitalization Fund that was founded last year were made in
April of this year. Investments included the renovation of amerchant house in Nara City built 160 years ago that was
designated as a Nara City-designated cultural property into a
restaurant that also operates an adjoining guest house.
Through this fund, going forward we will work to vitalize
tourism using attractive local resources, and aim to stimulate
demand for accommodation within the prefecture andincrease tourism consumption.
In addition, during fiscal 2015, continuing from the previous fiscal year, we implemented the NANTO Success Road
business plan commercialization support project. This project
aims to contribute to the regional economy and society
through supporting customers that want to establish or develop new business, and eight plans have been selected thistime. Currently, our dedicated representatives are focusing
their support toward achieving prompt commercialization,

Properties invested in by the Nara Prefecture Tourism Revitalization
Fund

Establishing a Revenue Base
Under our medium-term management plan, we are working

clients.

to enhance deposits and customer assets and to strengthen

In Nara Prefecture, the Omiya Branch and Sakurai Branch

our financial investment capabilities in order to establish awere moved to temporary branches for branch rebuilding insolid earnings base.

September of last year and May of this year, respectively. We

Nara Prefecture has a fertile individual market, and we arewill work to further enhance our services including thecommitted to further deepening the relationships we havedevelopment of the branch network in order to provide evenfostered with our customers and implementing various mea-

more convenience to the local community.

sures to support the growth of the companies for corporate3

Message
Message fromfrom thethe President
President
Meanwhile, in Osaka Prefecture and other areas, we will

In order to meet the diversifying asset management needs

actively invest management resources with its basis on conti-

of individual customers, we have enhanced the product line-

nuity with branches in Nara Prefecture in order to expand ourup and, in terms of channels, we established the NANTO

transaction base with corporate and individual customers and

L-Plaza to facilitate consultations with customers on

expand our core area.

Saturdays and Sundays in addition to weekdays. We are also

Hatsushiba Branch was reopened in a new building as theworking to expand non-face-to-face channels including

second branch in Sakai City in December of last year, while

Internet banking with smartphones and other devices. In

the Izumi Branch was reopened in a new building in April ofaddition, employees with more specialized knowledge on

this year. With this, the number of branches in Osakafinance have been assigned to the FA Office to provide

Prefecture totaled 18, and through such efforts, we will

advanced asset management and consultation services.

expand relationships with customers in each region andimprove our presence in the Osaka area.

Furthermore, as a new initiative, we established an official
LINE@ account (a free call and mail application) in June of

Next, as major initiatives for each department, in the cor-last year and started distributing information on products andporate department, we will provide a wide range of solutions

events. We will work to strengthen new financial services byin line with the business stage including supports for busi-

actively adopting FinTech as well.

ness creation, overseas business, and business succession. In

In order to continue to meet the wide range of customer

addition, in September of last year, a new financing program

needs going forward, we will work to enhance products andentitled the NANTO Vitality Creation Support Fund was cre-services and diversify channels, while being a close partner

ated to proactively provide funds such as operating funds andfor the businesses and life stages of customers in order tocapital funds based on a so-called business feasibility assess-offer optimal solutions.

ment that appropriately assesses factors including the natureof the business, growth, and sustainability without overly
relying on collateral or guarantees.

Strengthening Human Resources and Organization
Human resources are the core element of corporate manage-

ment, and conducted revisions across the corporate planning

ment. As bank operations become more diverse and complex,

departments, sales departments, financial investment depart-

we realize that challenges that we need to face include devel-

ments, and operations departments.

opment of specialists, in other words, human resources

Going forward, we will aim to be an organization that

equipped with highly-specialized business knowledge, andconducts more rational, efficient, and functional operation

enhancement of organizational strength in order to effective-

management while striving to strengthen human resources.

ly utilize such human resources.
In order to improve motivation and fulfillment in work,and ensure that each and every employee can perform to100% of their ability, we will focus even more on enhancing
training systems and workplace environment improvements
in terms of both education at each workplace and improvements to prevent overtime work.
In April of this year, we introduced an Executive Officer
System in an effort to strengthen governance and acceleratebusiness execution by separating the decision making andsupervision function in management from the business execution function. In addition, in terms of organizational
improvements, we have gradually pursued the reorganizationof the headquarters organization since October of last year,
established new dedicated departments in order to strengthen
the compliance structure and adopt advanced risk manage-

4

Improving Productivity
While promoting our sales strategy to establish a revenue

to all employees that work outside the office in order tobase, we are also making strong efforts to improve operation

enhance the provision of various types of information to cus-

productivity.

tomers, while improving the efficiency of sales activities andWe are working on revising our branch roles and person-achieve paperless operations.

nel assignment in accordance with changing market charac-

We will continue our efforts to improve the productivity

teristics as necessary, and endeavoring to improve efficiency

of operations going forward in all aspects to utilize manage-of operations though the thorough simplification, centraliza-

ment resources in an effective and efficient manner.

tion, and mechanization of operations.
In addition, we have distributed tablet terminals that canconnect to internal bank information systems as a sales tool

Strengthening Internal Management Structure
As an important management task, we are implementing a

to installing greater awareness on compliance not only

variety of measures to realize “further enhancement of ouramong executive management but among bank employees ascompliance framework” and “incorporation of morewell, as we enhance the efforts to build a more effective com-advanced and enhanced risk management” as well.

pliance framework.

Compliance is fundamental for banks to faithfully carry

In terms of risk management, we will continue to sophisti-

out their social responsibilities and public missions, and suchcate and enhance various risk management while appropri-social needs are becoming increasingly important. In order toately controlling risks and returns.

earn the constant trust of our stakeholders, we are committed

In Partnership with the Local Community
The Bank has grown together with the local community up

services in order to make the relationships of trusts with

until now. Looking forward, as a “Vitality Creating Bank,”

stakeholders even stronger.

our executives and employees are committed to further

We look forward to your continued support.

improving corporate value by offering ever-better financial

President Takashi Hashimoto5

Medium-Term Management Plan
Medium-Term Management Plan “Vitality Creation Plan”
The Bank embraces a management vision for the period of 10
years up to 2024, its 90th anniversary, aiming to become abank which creates vitality in community and itself as“Vitality Creating Bank.” In order to fulfill this vision, theBank started its medium-term management plan called“Vitality Creation Plan” in April, 2014, that covers the three-year period from fiscal 2014 to fiscal 2016. This plan contains
five key strategies including “vitalizing the community,” firmly commit to realizing “enhancement of top-line margin,”“efficient operation,” and “creating strong organization
enabling self-fulfillment.”

Medium-Term Management Plan

Management vision to create“Vitality Creating Bank”
The Bank embraces a management vision for 10 years
up to its 90th anniversary, aiming to become a bankwhich creates vitality in community and itself as“Vitality Creating Bank.”
Development of regional strength in core areas* Core areas refers to local markets-Cultivation of relationships in existing areas-Further promotion of intense branch development incore strategic areas
Creation of earnings opportunities through pursuing scale
expansion, etc.
Development of a corporate culture with full of dreams
and pride

The 90th
anniversary(2024)

Medium-term management plan

“Vitality Creation Plan”
The 80th
anniversary(2014)

6

April 2014 to March 2017

Economic/financial environment

Earnings environment■ Falling birth rate in an aging society and declining population■ Decreasing business offices in Nara Prefecture■ Declining interest rate
■ Intensifying intrusion of competitor banks, etc.

■ Reduction of fund profit due to low interest rate
■ Fees and commission income flattening out, etc.

Corporate philosophy

Vitality Creation Plan(i) Pursue sound and efficient management(ii) Provide superior comprehensive financial services(iii) Contribute to regional prosperity(iv) Strive to become a highly reliable, friendly and attractive bankStrengthened financial
service provision
capabilities
Improvement in local communityand customer satisfaction(Local community and customer value)

Improvement in
employee satisfaction
Improvement in employee
motivation (Employee value)

Improvement in
profitability
Improvement inshareholder value■ Medium-term management plan “Vitality Creation Plan”■ April 2014 to March 2017 (three years)

2. Basic philosophy■ Aim to enhance top-line profit through practicing
customer-centricity and effective investment of funds.
■ Strive to realize management efficiency throughoptimum deployment of corporate resources.
■ Building up an organization enabling self-fulfillment
through human resource development and revitalization.

3. Numerical targets <fiscal 2016>

Medium-Term Management Plan

A positive cycle with stakeholders throughimprovement of NANTO brand

1. Name and term

■ Net income of ¥8.0 billion or above■ Balance of loans of ¥3,250.0 billion or above■ Balance of deposits of ¥5,000 billion or above

4. Key strategies
I. Vitalizing the community
II. Establishing a revenue baseIII. Strengthening human resources and organization
IV. Improving productivity
V. Strengthening internal management system<Key strategies>

I. Vitalizing the community
 im to vitalize regional economy through implementations such as creation and development of industries as well asAthrough cooperation with industries, governments, schools and finance.
Make effort in management improvement and business rehabilitation through utilizing consulting capabilities.

II. Establishing a revenue base evelop solid revenue base through cultivating relationship with customers in the existing areas.
DExpand core areas in the core strategic areas including Osaka Prefecture, through actively deploying corporate resources,
based on the continuity of branch presence.
Provide products and services depending on individual life stage of customers, at the right timing.
Strengthen fund investment in the market.

III. Strengthening human resources and organization
 adically review human resources development framework to strengthen marketing capabilities.
RDevelop organization with full of vitality by placing the right people in the right job along with adequate personnel management.
Reinforcing Group’s strength to enhance capabilities to provide comprehensive financial services.

IV. Improving productivityI mprove productivity through developing marketing framework geared to regional market characteristics.
Strive to streamline work processes and strengthen marketing capabilities through the review of work processes.

V. Strengthening internal management system einforce compliance framework in order to gain further trust from stakeholders.
REnhance and develop various risk management in consideration of risks/returns.

7Compliance
Compliance refers to strict observance of ethics and social

The Bank takes the following approach in order tonorms as well as laws, regulations, government ordinances

increase awareness of compliance and respond to legal risks.

and the bank’s regulations. This is essential for banks tofaithfully carry out their social responsibilities and public
missions.

Thorough Execution of Compliance

Compliance● In recognition of the public mission and social responsibilities that financial institutions need to perform, the Bank regards
compliance with laws and regulations as the most important management issue and has established a Charter of Corporate
Behavior which consists of Basic Policies and Code of Conduct for all officers and employees to follow to gain trust from all
stakeholders, including local communities, our customers and shareholders.
● To establish a basic framework for the compliance system, we have established our compliance regulations and rules fordisciplinary action and demonstrate fairness and transparency in the administration of disciplinary action as means of establishinga clear stance on compliance with laws and regulations.
● Deliberations and decisions in matters of compliance are the responsibility of the Compliance Committee, which is chaired by the
President and operates horizontally across the bank’s organization structure. Plans and supervision of compliance are carried out
in the Compliance & Risk Management Division.
● A Compliance Program consisting of concrete plans to achieve compliance is drawn up each year and undergoes appropriate
review.
● The Bank strives to properly operate a Compliance Hotline as part of its internal reporting system that was established to prevent
legal violations and misconduct before they occur, to discover them promptly if they occur and to rectify them immediately.
● To instill a compliance mindset throughout the Bank, we have compiled a Compliance Handbook, which serves as a guide forachieving compliance and has been distributed to all officers and employees, and regularly conduct seminars and other grouptraining at the workplaces of individual workgroups.
● The Bank has established a Regulations on Response to Antisocial Forces in order to take a resolute stand against anti-social
forces that pose a threat to the order and security of civil society and takes strong measures to intervene and block any attempt bysuch forces to create any relationship with the Bank.

8

Risk Management
In recent years, the management environment surrounding
financial institutions has changed drastically, and the risks
they face have become more diversified and complex.
The Bank regards risk management as one of its mostimportant management issues and aims to create an advanced

risk management system so that the Bank can maintainappropriate and sound management and provide reliable services to its customers.

Risk Management Coordination
risks by using the integrated risk management method,
intending to keep the amount of risks and its capital adequacy at appropriate levels in the light of its management vitality. Biannually, the Bank determines risk capital (risk based
amounts) for each category of risk within the scope of its
capital adequacy to limit the value of each risk (e.g. VaR) to
the amount of risk capital.
The situation of each risk is evaluated at a monthly ALM
Committee meeting which decides the appropriate level ofrisk control to implement, aiming at conducting more
effective and efficient risk and return management from theviewpoint of maintaining sound management and higher
profitability alongside effective utilization of capital.

Risk Management

To cope with the various risks that the Bank faces in its banking business, the Bank has established specified units foreach category of risk. The Bank also incorporates the Risk
Management Division responsible for risk management coordination in order to gain a precise understanding of thenature and extent of risks and take expeditious steps toward
their management.
Furthermore, the Bank defines its basic risk management
policies in risk management regulations and other requirements, including the Risk Management Coordination
Regulations, in an effort to appropriately manage the risks.
Moreover the Bank has adopted a policy of Risk
Management Coordination under which it quantifies various
Risk Management Structure
Board ofDirectors

Board ofCorporate Auditors

Managing Directors’Committee

Emergency Council(Warning Council)

ALM Committee(ALM Subcommittee)

Committees

Operational Risk Management Committee(Operational Risk Management Subcommittee)

Compliance Committee(Compliance Subcommittee)

Organization

Risk Management Structure

Compliance Structure

Supervising Division

Risk Management Division

Compliance Management Division

Risk Categories

Credit Risk(

Risk
Management
Division

Main Divisionin Charge) (Market Risk

)(

)(

Risk
Management
Division

Operational Risk
(Risk Management Division)

Liquidity Risk

)(

Risk
Management
Division

Administrative Risk
Operations Control
Division

Systems Risk

Legal Risk
ComplianceManagement
DivisionControl) (Operations
Division ) (Personnel Risk
Personnel
Division)(

ComplianceTangible Assets Risk
General Affairs
Division) (Reputational Risk
Corporate
Planning
Division) (Operation

Divisions of Headquarters/Branches/Consolidated Subsidiaries

Auditing

Internal Audit Division

)

(

)

ComplianceManagement Division

External Auditing

9

Risk Management• Managing Internal Capital 

Risk Management

Managing Internal Capital refers to the implementation of
measures to maintain a sufficient level of internal capital,
capital adequacy assessment and computation of the capital
adequacy ratio.
The Bank conducts a quarterly assessment of its internal
capital adequacy by analyzing factors that cause the capital
adequacy ratio to fluctuate.
We also use the integrated risk management method toquantify the various risks faced by the Bank, and we regularly compare the level of these risks with the Bank’s internal
capital so as to control each risk and carry out the assessments of our internal capital adequacy for each risk.

As for the capital adequacy assessment, the Bank positions itself to be able to review the allocation of its internal
capital, discuss necessary internal capital strategies and othernecessary actions through the monthly-held ALM Committee
meeting. We intend to maintain a sound management withthe help of appropriate risk control practices and increase
profitability through the effective utilization of our internal
capital by fully operating this internal capital management
structure.

• Managing Credit Risk 
To ensure the soundness of its assets, the Bank has established the Risk Management Division and Credit Analysis
Division as credit risk management departments that are separate and independent from business operations departments.
The Risk Management Division plans and supervises thecredit risk management structure within the Bank, conducts
credit portfolio analysis by segment and current status analysis by managing the levels of credit concentration on major
creditors for each industry and rating group, and strives tobuild a sound credit portfolio by measuring credit risks using
statistical calculation methods for future potential loss.
The Credit Analysis Division consists of the Credit
Analysis Group, which handles general screening and industry-specific screening; the Management Group, which intensively supervises borrowers whose business performance has
deteriorated; and the Business Vitalization Support Office,which was established to assist borrowers with businessrestructuring and recovery initiatives. Together these units
form a structure that supports flexible risk management tailored to the specific circumstances of each customer.
Our credit analysis and risk management measures
include rigorous self-assessment, credit rating which is consistent with the borrower classifications used in self-assessment and other methods with which the Bank objectively
recognizes and manages each customer’s credit capability. In
addition, we have a policy of setting an interest rate (Pricing)
to be applied to individual customers according to their rating-based creditworthiness. Through this, we take measures
to strengthen our credit risk management and increase profitability.
The Bank regularly and appropriately reviews transaction
terms and establishes credit limits for borrowers with debt
exceeding a certain amount, with a view to reducing credit
risk by conducting strict credit control.

• Managing Asset Appraisals 
Asset Appraisals are for the review of determine assets heldby financial institutions in order to the accurate status of theinstitution’s assets. It is an important method of credit risk
management and a preliminary procedure to appropriately
determine the amount of depreciation and allowances. Assetassessment conducted by the financial institution itself isreferred to as a self-assessment.
The Bank carries out an assessment of its assets in which
actual assessments are conducted by its operating branches inconformity with the Regulations on Self-Assessment of
Assets. Assessment results are then subjected to a rigorous
verification process in which the results are examined by theCredit Analysis Division and further audited by the Internal
Audit Division. According to the audit results, the Bank
determines appropriate amounts of depreciation and allowances. In this way, the Bank strives to perform appropriate
asset assessment practices and maintain and improve thesoundness of its assets.

• Managing Market Risk 
The Bank controls its market operations under a system ofreciprocal checks and balances based on a clear demarcation
between front office units, which implement transactions,and back office units, which carry out administrative processing. The middle office unit responsible for risk management
is the Risk Management Division, which develops risk management systems, checks compliance with risk management
regulations and other requirements and monitors the positions and profit performance of market units. The Risk

10

Management Division also carries out wide-ranging analyses
to quantify the risk levels of assets and liabilities, including
deposits, loans and securities. In its analyses, the divisionuses a variety of analytical techniques, including the value atrisk (VaR) and basis point value (BPV) methods and interest
rate fluctuation simulations. The results of this work are used
to provide timely reports to management.

Allowable risk limits are measured based on VaR anddetermined by the Bank’s ALM Committee biannually inconsideration of its capital status, market conditions andother factors. Market operation staff members make efforts togain profits while complying with these allowable risk limits.
Every month, the ALM Committee obtains actual risk andrevenue results from each market operation and discusses

appropriate ways to control risks and generate earnings efficiently by taking account of the market prospects and otherconditions. In addition, the Bank conducts stress tests byusing scenarios that capture the characteristics of market
environments and its portfolios in order to understand theimpact of extreme market fluctuations exceeding VaR projections, bracing up for contingency events.

• Managing Liquidity Risk 
management conditions. The ALM Committee is also
responsible for overall monitoring and management of cash
flow risk, including the monitoring of assets available for liquidation and the amount of funds that the Bank can procure.
The cash flow situation is classified into one of three levels according to financial situations: “regular phase,” “concern phase” and “crisis phase.” The Bank has developed
management systems that can be flexibly implemented ineach of these situations.

Risk Management

Liquidity risk, also known as fund-raising risk, is defined as
the risk of the Bank incurring a loss due to encountering an
obstacle in raising the required funds either because of a mismatch between the use and procurement of funds or unexpected outflow of funds or being forced to borrow at higher
interest rates than usual.
According to monthly fund management plans formulatedby the ALM Committee, the Financial Investment Division
closely manages the Bank’s cash flow position on a day-today basis, and the Risk Management Division monitors the• Managing Operational Risks Operational risk is the risk of the Bank incurring a loss due
to inadequate or failed processes of banking operations,activities of executives and employees (including part-timeand temporary and other similarly classified workers) or systems, as well as external events.
At the Bank, departments in charge of operational risks
apply the perspectives of specialists to the management ofadministrative risk, systems risk, legal risk, personnel risk,

tangible assets risk and reputational risk.
In addition, information about loss from operational accidents and results of potential risk analysis, etc. are collectively reported to the Operational Risk Management Committee,
which understands and manages each risk comprehensively.
This enables the Bank to preferentially deal with major risks
and minimize the effects of the risks.

• Managing Administrative Risk Administrative risk refers to the risk of incurring loss as aresult of neglecting accurate administrative processes alongside occurrences of accident or fraud.
The Bank reinforces the provisions of its administrative
regulations and requires strict staff compliance with the regulations to achieve customer confidence in its accurate andstrict administration. At the same time, the Bank aims toraise executives and employees administrative work standards by conducting regular training programs and temporary
office work guidance. In addition, the Bank intends to establish more accurate and efficient administrative operations byfacilitating the systemization and centralization of administrative processes.

• Managing System Risk 
System risk refers to failures or malfunctions of the computer system and loss incurred associated with inadequate systems, etc. Furthermore, system risk includes the risk of loss
from unauthorized use of computers.
The Bank incorporates a system which copes with unexpected system failures or network errors and swiftly resumes
operations. It is prepared for these events with stand-by
equipment for each of the existing equipment in the network
system and dual communication lines. Also, the Bank has
formulated a manual which directs necessary action as
defined by its contingency plan in the event of a large scaledisaster and has developed a decentralized data administration system and “back-up center”.
With a view to conducting strict control of customer dataand other confidential information, the Bank takes various
measures to prevent unauthorized use of the computer system or leakage of information. It addresses the provision ofsafer and more assured services by establishing security measures such as the formulation of handling regulations forclassified data, encryption of computer data and important
information, e.g., security codes, and others.

11

Risk Management• Managing Legal Risk 
The term “legal risk” refers to the risk of incurring loss ordamage arising from violation of obligations resulting fromnegligence concerning customers and inappropriate business
and/or market practices.

The Bank has attempted to avoid and mitigate legal risks
via legal examination by external experts, such as corporate
lawyers, and the Compliance Management Division.

• Managing Personnel Risk 

Risk Management

Personnel risk refers to the risk of loss and damages the
Bank suffers due to unfairness/unjustness in terms of personnel management concerning compensation, benefits, dismissal and acts of discrimination such as sexual harassment, etc.
The Bank recognizes that economic loss, loss in confidence, etc. due to the materialization of personnel risk canhave a major impact on the Bank’s management and business
operations and strives to minimize the risk through theappropriate management of such risk.

• Managing Tangible Assets Risk 
Tangible assets risk involves the risk of loss from impairment
or damage to tangible assets due to disaster or other unforeseeable events.
The Bank recognizes that economic loss, loss in confidence, etc. due to the materialization of tangible asset risk

can have a major impact on the Bank’s management andbusiness operations and strives to minimize the tangible
assets risk through the appropriate management of such risk.

• Managing Reputational Risk 
Reputational risk refers to the risk of loss or damage incurred
if an organization has fallen into discredit due to the deterioration of its reputation or through damaging rumors, etc.
The Bank recognizes that economic loss, loss in confidence, etc. due to the materialization of reputational risk canhave a major impact on the Bank’s management and business
operations and strives to minimize that risk through appropriate management. In the event of the spread of damaging
rumors about the Bank, the Bank will take appropriate andswift action to curtail them and revitalize its reputation.

Internal Audit Posture
For the enhancement and reinforcement of risk management,
it is necessary to verify the effective function of internal control and improve problems as needed.
The Internal Audit Division, an internal auditing organization, promotes risk management and strives to ensure thesoundness of management and the appropriateness of business by ascertaining the risk management situation at thedivision and branch level, evaluating and verifying that internal control is appropriately maintained and functioning effectively and providing advice as necessary.

Crisis Management Posture
Along with the above risk management, the Bank has formulated a Crisis Management Plan and a Crisis Management
Plan Response Manual for each type of crisis to respond suitably to the occurrence and materialization of crises related tobusiness operations, such as natural disasters including largescale earthquakes, systems malfunctions, or novel influenza
and other pandemics. In the event of a crisis, the Bank
responds, depending on the level of emergency of the crisis,by having the Emergency Council, Response Headquarters,
or other divisions gather information and engaging in cen-

12

tralized supervision and command, in an effort to minimize
the impact of the crisis on its operations.
In the meantime, the Bank, as an organization responsible
for social function maintenance, takes measures to continuously provide customer services, including improvement offacilities to continue its business operations in the event ofdisasters or other events, while striving to ensure the effectiveness of the crisis management posture and improve it
continuously, through measures including risk management
training provided every year.

Board of Directors and Corporate Auditors(As of July 1, 2016)

Takashi Hashimoto

ChairmanPresident(Representative Director)

Board of Directors and Corporate Auditors

Yasuo Ueno

Kohsaku Yoshida

Yoshihiko Kita

Senior Managing Director(Representative Director)

Managing Director(Representative Director)

Naoki Minowa

Toru Hagihara

Shigeyori Kawai

Managing Director

Managing Director

Managing Director(Business Planning & Promotion Headquarters)

ChairmanYasuo Ueno
President
Takashi Hashimoto
Senior Managing Director
Kohsaku Yoshida
Managing Director
Yoshihiko Kita
Naoki Minowa
Toru Hagihara
Shigeyori Kawai(Business Planning & Promotion Headquarters)
Directors And General Managers
Hiroshi Nakagawa
Matazaemon Kitamura

Managing Executive Officer
Kiyohide Sawamura(Osaka Regional Headquarters)
Executive Officer
Akira Kondo(Head Office)Keizo Nishikawa(Tokyo Branch)
Kazuomi Nakamuro(Personal Business Division)
Satoru Wada
(Credit Analysis Division)
Kazuya Yokotani(Corporate Planning Division)
Tomomi Onishi(Financial Investment Division)
Kozo Togawa(Osaka Chuo Office)Corporate Auditors
Masaaki Hashimoto
Takao Handa
Katsuhisa Yoshikawa
Masahiro Nakamura

Note:	Hiroshi Nakagawa and Matazaemon Kitamura are outside directors pursuant to Item 15, Article 2 of the Company Law and Katsuhisa Yoshikawa and Masahiro
Nakamura are outside corporate auditors pursuant to Item 16, Article 2 of the Company Law.

13

Consolidated Financial Statements
Consolidated Balance Sheets
The Nanto Bank, Ltd. and Consolidated Subsidiaries as of March 31, 2016 and 2015
Thousands of
U.S. dollars(Note 1)Millions of yen

Consolidated Financial Statements

2016

2015

2016

Assets:Cash and due from banks (Notes 14 and 16) .................................................
Debt purchased (Note 16) ..............................................................................
Trading account securities (Notes 16 and 17) ................................................
Money held in trust (Notes 16 and 17) ...........................................................
Securities (Notes 5, 7, 10, 16 and 17) ............................................................
Loans and bills discounted (Notes 6, 8 and 16) .............................................
Foreign exchanges (Note 6) ...........................................................................
Lease receivables and lease investment assets ...............................................
Other assets (Note 7) ......................................................................................
Tangible fixed assets (Note 9) ........................................................................
Buildings ....................................................................................................
Land ...........................................................................................................
Construction in progress ............................................................................
Other tangible fixed assets .........................................................................
Intangible fixed assets ....................................................................................
Software .....................................................................................................
Other intangible fixed assets (Note 7) ........................................................
Deferred tax assets (Note 21) .........................................................................
Customers’ liabilities for acceptances and guarantees ...................................
Reserve for possible loan losses (Note 16) ....................................................
Total assets .................................................................................................

¥ 410,198
3,527
362
22,0001,797,411
3,188,341
3,754
13,226
33,83440,566
11,401
25,359
304
3,500
4,697
4,145
552
1,314
10,191(23,818)¥5,505,607¥ 452,967
5,096
230
22,0001,693,517
3,079,175
5,918
13,85723,651
41,23011,72625,236
—
4,267
5,157
4,583
573
1,386
10,963(26,494)¥5,328,661$ 3,640,379
31,301
3,212
195,243
15,951,464
28,295,536
33,315
117,376
300,266
360,010
101,180
225,053
2,697
31,061
41,68436,785
4,898
11,66190,441(211,377)$48,860,552

Liabilities and net assets:
Liabilities:
Deposits (Notes 7 and 16) ..............................................................................
Negotiable certificates of deposit (Note 16) ...................................................
Payables under securities lending transactions (Notes 7 and 16) ...................
Borrowed money (Notes 7, 16 and 27) ..........................................................
Foreign exchanges .........................................................................................
Other liabilities (Note 27) ..............................................................................
Liability for retirement benefits (Note 19) .....................................................
Reserve for reimbursement of deposits ..........................................................
Reserve for contingent losses .........................................................................
Deferred tax liabilities (Note 21) ...................................................................
Acceptances and guarantees ...........................................................................
Total liabilities ...........................................................................................

4,719,323
47,007
233,648
189,724202
19,182
27,248
164
851
6,349
10,191¥5,253,894

4,691,065
63,349134,855
116,122399
34,877
14,753
131
946
9,878
10,963¥5,077,342

41,882,525
417,172
2,073,553
1,683,741
1,792
170,234
241,817
1,455
7,552
56,34590,441$46,626,677

Net assets (Note 3):
Common stock: Authorized 640,000 thousand shares
Issued 272,756 thousand shares in 2016 and 2015 ..............
Capital surplus ................................................................................................
Retained earnings ...........................................................................................
Less treasury stock: Issued 4,454 thousand shares in 2016
and 4,556 thousand shares in 2015 ...............................

29,24926,075
150,620

29,24918,813140,209259,575
231,407
1,336,705(1,864)(1,907)(16,542)

Total stockholders’ equity
Valuation difference on available-for-sale securities (Note 17) .....................
Deferred gains or losses on hedges (Note 18) ................................................
Accumulated adjustments for retirement benefits (Note 19) .........................
Total accumulated other comprehensive income .......................................
Stock acquisition rights ................................................................................
Non-controlling interests .............................................................................
Total net assets ...........................................................................................
Total liabilities and net assets ....................................................................

204,080
57,072(620)(8,956)47,496
136—
251,712¥5,505,607

186,365
58,818(668)(1,279)56,870146
7,935
251,318¥5,328,661

1,811,146
506,496(5,502)(79,481)421,5121,206—
2,233,865$48,860,552

See Notes to Consolidated Financial Statements.

14
14

Consolidated Statements of Income
The Nanto Bank, Ltd. and Consolidated Subsidiaries for the Years Ended March 31, 2016 and 2015
Thousands of
U.S. dollars(Note 1)Millions of yen

2015

2016

¥34,734
17,927714
17,804
1,092
4,143
76,417¥36,452
17,873508
18,375
4,729
3,930
81,869$308,253
159,096
6,336
158,004
9,691
36,767678,177

Expenses:
Interest expense:
Interest on deposits ....................................................................................
Interest on borrowings and rediscounts .....................................................
Interest on subordinated bonds ..................................................................
Other interest expense ................................................................................
Fees and commissions ....................................................................................
Other operating expenses ...............................................................................
General and administrative expenses .............................................................
Other expenses (Note 12) ...............................................................................
Total expenses ........................................................................................

2,405
1,085
—
303
8,834
1,483
45,1392,334
61,586

2,611
478
318
358
9,063
883
47,7232,420
63,857

21,343
9,629
—
2,689
78,39913,161
400,594
20,713
546,556

14,83118,012

131,620

898
1,469
2,367
12,463303¥12,159

1,130
6,421
7,552
10,459585¥ 9,874

7,969
13,03621,006110,605
2,689$107,907

Income before income taxes .............................................................................
Income taxes (Note 21):
Current ............................................................................................................
Deferred ..........................................................................................................
Total income taxes .................................................................................
Net income .........................................................................................................
Net income attributable to non-controlling interests ....................................
Net income attributable to owners of parent .................................................

U.S. dollars(Note 1)Yen

Per share of common stock (Note 25):
Net income - basic ........................................................................................
Net income - diluted .....................................................................................
Dividends .....................................................................................................

¥45.32
45.26
7.00

Consolidated Financial Statements

2016

Income:Interest income:Interest on loans and bills discounted ....................................................
Interest and dividends on securities .......................................................
Other interest income .............................................................................
Fees and commissions ..................................................................................
Other operating income ................................................................................
Other income (Note 11) ...............................................................................
Total income ..........................................................................................

¥36.81
36.76
7.00

$0.40
0.40
0.06

See Notes to Consolidated Financial Statements.

Consolidated Statements of Comprehensive Income
The Nanto Bank, Ltd. and Consolidated Subsidiaries for the Years Ended March 31, 2016 and 2015
Thousands of
U.S. dollars(Note 1)Millions of yen

Net income ..........................................................................................................
Other comprehensive income (Note 13):
Valuation difference on available-for-sale securities .....................................
Deferred gains or losses on hedges ................................................................
Adjustments for retirement benefits (Note 19) ...............................................
Total other comprehensive income ............................................................
Total comprehensive income for the year ...........................................................
Total comprehensive income attributable to:
Owners of parent ............................................................................................
Non-controlling interests ................................................................................
See Notes to Consolidated Financial Statements.

2016

2015

2016

¥12,463¥10,459$110,605(1,753)47(7,676)(9,382)¥ 3,080

19,24791
3,097
22,436¥32,895(15,557)
417(68,122)(83,262)$ 27,334¥ 2,784295¥32,295600$ 24,707
2,618

15
15

Consolidated Financial Statements
Consolidated Statements of Changes in Net Assets
The Nanto Bank, Ltd. and Consolidated Subsidiaries for the Years Ended March 31, 2016 and 2015

Number ofshares ofcommonstock(thousands)

Consolidated Financial Statements

Balance at April 1, 2014 ................... 272,756
Cumulative effects of changes inaccounting policies ........................
—
Restated balance at April 1, 2014 ...
—Cash dividends ...............................
—Net income attributable to ownersof parent .........................................
—
Purchase of treasury stock .............
—
Disposition of treasury stock .........
—
Transfer from retained earnings tocapital surplus ................................
—Net changes in the items other thanstockholders’ equity .......................
—
Balance at April 1, 2015 ................... 272,756
Cash dividends ...............................
—Net income attributable to ownersof parent .........................................
—
Purchase of treasury stock .............
—
Disposition of treasury stock .........
—
Transfer from retained earnings tocapital surplus ................................
—
Change in treasury shares of parent
arising from transactions with noncontrolling stockholders ................
—Net changes in the items other thanstockholders’ equity .......................
—
Balance at March 31, 2016 (Note 3) ... 272,756

Commonstock

Accumulated
adjustments
Stock
Nonforretirement acquisition controllingrightsinterests
benefits

Commonstock

Capitalsurplus¥29,249¥18,813 ¥132,594¥(1,918) ¥39,585¥(760) ¥(4,376)¥123¥7,336 ¥220,648—
29,249—18,813(377)
132,216—(1,918)—39,585—(760)—(4,376)

—
123

—
7,336

(377)
220,271——(1,877)

—

—

—

—

—

—

(1,877)

—
—
—

—
—
(3)

9,874
—
—

—
(11)
21

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

9,874
(11)
18

—

3

(3)

—

—

—

—

—

—

—

91
3,097
¥(668) ¥(1,279)
—
—

22
¥146
—

—
¥29,249—

Retainedearnings

Less
treasurystockMillions of yen
Valuationdifference
Deferredongains oravailablelosses on
for-salehedgessecurities———
19,232¥18,813 ¥140,209 ¥(1,907) ¥58,818—(1,743)
—
—

16
16

598
23,043¥7,935 ¥251,318—(1,743)

—
—
—

—
—
(5)

12,159
—
—

—
(8)
51

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

12,159
(8)
45

—

5

(5)

—

—

—

—

—

—

—

—

7,261

—

—

—

—

—

—

—

7,261

47
(7,676)¥(620) ¥(8,956)

(10)
¥136

—
¥29,249

Capitalsurplus——¥26,075 ¥150,620

Retainedearnings—(1,745)¥(1,864) ¥57,072(7,935) (17,320)— ¥251,712

Thousands of U.S. dollars (Note 1)
Valuationdifference
Deferred AccumulatedLess
on available- gains or
adjustments
Stock
Nontreasury
for-salelosses on for retirement acquisition controllingstock
securities
hedgesbenefits
rightsinterests Total net assets

Balance at April 1, 2015 ................... $259,575 $166,959 $1,244,311 $(16,924) $521,991 $(5,928) $(11,350)
Cash dividends ...............................
—(15,468)—————
Net income attributable to ownersof parent .........................................
—
107,907——————
Purchase of treasury stock .............
—
—
(70)
—
—
—
—
Disposition of treasury stock .........
(44)
—
452
—
—
—
Transfer from retained earnings tocapital surplus ................................
44
(44)
—
—
—
—
—
Change in treasury shares of parent
arising from transactions with non—controlling stockholders ................
64,439—————Net changes in the items other thanstockholders’ equity .......................
———(15,486)417 (68,122)—
Balance at March 31, 2016 (Note 3) .... $259,575 $231,407 $1,336,705 $(16,542) $506,496 $(5,502) $(79,481)
See Notes to Consolidated Financial Statements.

Total net
assets$1,295—$70,420 $2,230,369—(15,468)

—
—
—

—
—
—

107,907
(70)
399

—

—

—

—

—

64,439(88) (70,420)(153,709)$1,206— $2,233,865

Consolidated Statements of Cash Flows
The Nanto Bank, Ltd. and Consolidated Subsidiaries for the Years Ended March 31, 2016 and 2015
Thousands of
U.S. dollars(Note 1)Millions of yen

Cash flows from investing activities
Purchases of securities ...................................................................................
Proceeds from sales of securities ...................................................................
Proceeds from maturities of securities ...........................................................
Increase in money held in trust ......................................................................
Decrease in money held in trust .....................................................................
Purchase of tangible fixed assets ....................................................................
Proceeds from sales of tangible fixed assets ..................................................
Purchase of intangible fixed assets .................................................................
Other ...............................................................................................................
Net cash provided by (used in) investing activities ...................................
Cash flows from financing activities
Redemption of subordinated bonds ................................................................
Dividends paid ...............................................................................................
Dividends paid to non-controlling stockholders ............................................
Purchase of treasury stock ..............................................................................
Payments from changes in ownership interests in subsidiaries that do not
result in change in scope of consolidation .....................................................
Other ...............................................................................................................
Net cash used in financing activities ..........................................................
Effect of exchange rate changes on cash and cash equivalents ....................
Net increase (decrease) in cash and cash equivalents ....................................
Cash and cash equivalents at beginning of year ............................................
Cash and cash equivalents at end of year (Note 14) ......................................

2016

2015

2016

¥ 14,831
4,006—(2,676)
1,509
33
(94)
(53,376)
3,795(2,353)35
25,042(483)(109,166)
28,257(16,342)
73,602¥ 18,012
4,526
11
179
10
(19)
(251)
(54,835)
3,766(5,789)(304)(40,491)(162)(107,016)
105,708(14,182)
30,733$ 131,620
35,552—(23,748)
13,391292(834)(473,695)
33,679(20,882)310
222,239(4,286)(968,814)
250,772(145,030)
653,194

(343)
1,569
98,793
2,163
(197)
506
56,550(3,930)(25,912)
95,820(943)—
94,877(257)
313(6,745)(3,853)
202
892
60,990(5,061)
9,216(4,406)(1,426)
9(5,822)(3,044)
13,924
876,757
19,195(1,748)4,490
501,863(34,877)(229,960)
850,372(8,368)—842,003(528,866)
140,152
255,828(196)
160(2,179)1,200(1,281)(95)(135,277)(625,395)
671,475
234,290(5)310(1,930)493(1,534)(21)
277,682(4,693,521)
1,243,805
2,270,394(1,739)1,419(19,337)
10,649(11,368)(843)(1,200,541)—(1,745)(1)(8)(20,000)(1,878)(1)(11)—(15,486)
(8)
(70)

(967)
0
(2,722)
9(43,113)450,641¥407,527—
0(21,890)17249,986
200,655¥450,641(8,581)
0(24,156)79(382,614)
3,999,298$3,616,675

Consolidated Financial Statements

Cash flows from operating activities
Income before income taxes ...........................................................................
Depreciation ...................................................................................................
Loss on impairment of fixed assets ................................................................
Increase (decrease) in reserve for possible loan losses ..................................
Increase (decrease) in liability for retirement benefits ...................................
Increase (decrease) in reserve for reimbursement of deposits .......................
Increase (decrease) in reserve for contingent losses ......................................
Interest income ...............................................................................................
Interest expense ..............................................................................................
Loss (gain) on investment securities ..............................................................
Loss (gain) on money held in trust .................................................................
Foreign exchange losses (gains) .....................................................................
Losses (gains) on sales of fixed assets ...........................................................
Net decrease (increase) in loans and bills discounted ....................................
Net increase (decrease) in deposits ................................................................
Net increase (decrease) in negotiable certificates of deposit ..........................
Net increase (decrease) in borrowed money ..................................................
Net decrease (increase) in due from banks (excluding due fromthe Bank of Japan) ..........................................................................................
Net decrease (increase) in call loans and bills bought ...................................
Net increase (decrease) in payables under securities lending transactions ....
Net decrease (increase) in foreign exchange assets .......................................
Net increase (decrease) in foreign exchange liabilities ..................................
Net decrease (increase) in lease receivables and lease investment assets ......
Interest received ..............................................................................................
Interest paid ....................................................................................................
Other ...............................................................................................................
Subtotal ......................................................................................................
Income taxes paid ...........................................................................................
Income taxes refunded ...................................................................................
Net cash provided by (used in) operating activities ...................................

See Notes to Consolidated Financial Statements.

17
17

Consolidated Financial Statements
Notes to Consolidated Financial Statements
The Nanto Bank, Ltd. and Consolidated Subsidiaries
Years ended March 31, 2016 and 2015

Consolidated Financial Statements

1. BASIS OF PRESENTATION
The accompanying consolidated financial statements of The Nanto Bank,
Ltd. (the “Bank”) and its consolidated subsidiaries (together, the “Group”)
have been prepared in accordance with the provisions set forth in the Japanese Financial Instruments and Exchange Act and its related accounting
regulations and the Ordinance for Enforcement of the Banking Law and in
conformity with accounting principles generally accepted in Japan, which
are different in certain respects from the application and disclosure requirements of International Financial Reporting Standards.
The accompanying consolidated financial statements have been restructured and translated into English, with some expanded descriptions, fromthe consolidated financial statements of the Bank prepared in accordancewith Japanese GAAP and filed with the appropriate Local Finance Bureauof the Ministry of Finance as required by the Financial Instruments andExchange Act. Some supplemental information included in the statutory
Japanese language consolidated financial statements, but not required forfair presentation, is not presented in the accompanying consolidated financial statements.
As permitted by the Financial Instruments and Exchange Act of Japan,
amounts less than one million yen have been omitted. As a result, the totals
shown in the financial statements do not necessarily agree with the sum of
the individual amounts.
The translation of the Japanese yen amounts into U.S. dollar amounts is
included solely for the convenience of the readers outside Japan, using theprevailing exchange rate at March 31, 2016, which was ¥112.68 to
US$1.00. The translations should not be construed as representations that
the Japanese yen amounts have been, could have been or could in the future
be converted into U.S. dollars at this or any other rate of exchange.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa. Principles of consolidation
The accompanying consolidated financial statements include the accountsof the Bank and its ten subsidiaries at March 31, 2016 (ten in 2015). For the
fiscal year ended March 31, 2015, Nanto Asset Research Co., Ltd. resolved
its dissolution at the extraordinary stockholders’ meeting held on September 30, 2014 and its liquidation was completed on January 29, 2015.
The Bank has one (one in 2015) unconsolidated subsidiary, namely,
Nanto Sixth Industry Support Investment Limited Partnership. The unconsolidated subsidiary is excluded from the scope of consolidation because
the portion of its assets, net income (loss), retained earnings, accumulated
other comprehensive income and others that correspond to the Bank’s equity are immaterial to the extent that its exclusion from the scope of consolidation does not preclude reasonable judgment of the Group’s financial
position and results of operations.
The Bank has no affiliates over which it has the ability to exercise significant influence over operating and financial policies.
The Bank has one unconsolidated subsidiary (one in 2015) not accounted for by the equity method, namely, Nanto Sixth Industry Support Investment Limited Partnership, and one (0 in 2015) affiliate not accounted for by
the equity method, namely, Nara Prefecture Tourism Revitalization Investment Limited Partnership. The unconsolidated subsidiary and affiliate notaccounted for by the equity method are excluded from the scope of the equity method because its effect on the accompanying consolidated financial
statements is not significant in terms of the portion of its net income (loss),retained earnings, accumulated other comprehensive income, and others
which correspond to the Bank’s equity.
All consolidated subsidiaries have fiscal years ending on March 31.
All significant intercompany accounts, transactions and unrealized
profits on transactions are eliminated.

18
18

b. Cash and cash equivalents
In preparing the consolidated statements of cash flows, cash and cash
equivalents represents cash and due from the Bank of Japan.
c. Finance leases
As lessor:
Finance leases are accounted for in a manner similar to that used for ordinary sale transactions. Revenue from finance lease transactions and related
costs are recognized upon receipt of lease payments. Finance leases whichtransfer ownership of the lease assets to the lessee are recognized as leasereceivables, and all finance leases which do not transfer ownership of thelease assets to the lessee are recognized as lease investment assets.
As for finance leases which commenced before April 1, 2008 and do nottransfer ownership of the lease assets to the lessee, the appropriate bookvalue (net of accumulated depreciation and amortization) of tangible andintangible fixed assets as of March 31, 2008 was recorded as the beginningbalance of “Lease receivables and lease investment assets,” and the total
amount of interest equivalent for the remaining lease term after the adoption of the “Accounting Standard for Lease Transactions” (AccountingStandards Board of Japan (“ASBJ”) Statement No. 13, issued on March 30,2007) is allocated over the remaining lease term using the straight-line
method.
Differences between income before income taxes for the fiscal years
ended March 31, 2016 and 2015 and income before income taxes calculated as if the accounting treatment for the ordinary sale transactions had been
applied to the finance leases which do not transfer ownership of the leased
assets to the lessee are not material.
d. Securities
Trading securities are stated at fair value. Gains and losses realized on disposal and unrealized gains and losses from market value fluctuations arerecognized as gains or losses in the period of the disposal or the change.
Cost of sales for such securities is determined using the moving averagemethod. Held-to-maturity debt securities are stated at amortized cost on astraight-line method, cost of which is determined using the moving averagemethod. Available-for-sale securities with available fair values are stated atfair value in principle based on the market price as of the fiscal closing date.
Unrealized gains and losses on available-for-sale securities are reported,
net of applicable income taxes, as a separate component of accumulated
other comprehensive income. Available-for-sale securities for which it isextremely difficult to identify the fair value are stated at moving average
cost.
If the fair value of held-to-maturity debt securities or available-for-salesecurities declines significantly, the securities are stated at fair value, andthe difference between the fair value and the carrying amount is recognized
as a loss in the period of the decline. In such a case, the fair value will be
the carrying amount of the securities at the beginning of the next fiscal year.
Securities managed as trust assets in the individually managed money
held in trust primarily for securities management purposes are measured atfair value.
e. Derivatives and hedge accounting
Derivatives are measured at fair value.
To account for hedging transactions in connection with interest rate risk
arising from financial assets and liabilities, the Bank applies the deferredhedge accounting method stipulated in “Treatment for Accounting and Auditing of Application of Accounting Standard for Financial Instruments in
the Banking Industry” (JICPA Industry Audit Committee Report No. 24,
February 13, 2002). The Bank assesses the effectiveness of such hedges in
offsetting movement in the fair value from changes in interest rates by classifying the hedged items, such as loans and deposits, and the hedging instruments, such as interest rate swaps, by their maturity. Regarding cash

f. Tangible fixed assets (except for leased assets)
Depreciation of tangible fixed assets of the Bank is computed by the declining balance method, except for buildings (excluding building attachments
which are depreciated by the declining balance method) which are depreciated by the straight-line method. The estimated useful lives of major items
are as follows:
Buildings
6 to 50 years
Others3 to 20 years
Depreciation of the assets of the consolidated subsidiaries is computed
principally by the declining balance method over the estimated useful lifeof the asset.
g. Intangible fixed assets
Amortization of intangible fixed assets is computed by the straight-line
method. Acquisition costs of software to be used internally are capitalized
and amortized by the straight-line method primarily over a useful life of
five years.
h. Lease assets
Lease assets with respect to finance leases that do not transfer ownership of
tangible fixed assets and intangible fixed assets are depreciated or amortized using the straight-line method with the assumption that the term of thelease is the useful life. Residual values of leased assets are the guaranteedvalues determined in the lease contracts or zero for assets without suchguaranteed value.
i. Reserve for possible loan losses
The reserve for possible loan losses is provided according to predetermined
standards. For loans to insolvent customers who are undergoing bankruptcy
or other special liquidation (“bankrupt borrowers”) or who are in a similar
financial condition (“effectively bankrupt borrowers”), the reserve for possible loan losses is provided based on the amount of the claims net of theamount expected to be recovered from collateral and guarantees and net ofthe deducted amount mentioned below. For the unsecured and unguaranteed portions of loans to customers not presently in the above circumstances, but for whom there is a high probability of so becoming (“likely to
become bankrupt borrowers”), the reserve for possible loan losses is provided for the estimated unrecoverable amounts determined after an evaluation of the customer’s overall financial condition. For other loans, thereserve for possible loan losses is provided for based on the Bank’s actual
rate of loan losses in the past.
All the claims are assessed by the operating divisions based on the selfassessment criteria on asset quality, and the assessment results are auditedby the Asset Audit Division, which is independent from the operating divisions.
For claims against “bankrupt borrowers” and “effectively bankrupt borrowers,” the amount exceeding the estimated value of collateral and guarantees is deemed uncollectible and deducted directly from those claims. At
March 31, 2016 and 2015, the deducted amounts were ¥7,755 million($68,823 thousand) and ¥7,434 million, respectively. The reserve for possible loan losses of the consolidated subsidiaries is provided for generalclaims by the amount deemed necessary based on the historical loan-loss
ratio and for certain doubtful claims by the amount deemed uncollectible
based on an assessment of each claim.
j. Employee retirement benefits
In calculating projected benefit obligations, expected benefits are attributed
to each period by the benefit formula basis.
Prior service costs are recognized as profit or loss at the time of occurrence.
Actuarial gains and losses are amortized from the fiscal year following
the year in which the gains and losses are recognized by the straight-line
method over a fixed period (ten years), which is within the average remaining service years of the current employees.
Consolidated subsidiaries applied the simplified method where theamount to be required for voluntary termination at the fiscal year-end isrecorded as projected benefit obligations in the calculation of their liability
for retirement benefits and retirement benefit costs.

Consolidated Financial Statements

flow hedges, the Bank assesses the effectiveness by verifying the correlation of the hedged items with the hedging instruments.
A portion of the deferred hedge losses and gains that were previously
accounted for under the “macro hedge method,” which had been applied inorder to manage interest rate risk arising from large volume transactions inloans, deposits and other interest earning assets and interest bearing liabilities as a whole using derivatives pursuant to “Temporary Treatment for
Accounting and Auditing of Application of Accounting Standard for Financial Instruments in Banking Industry” (JICPA Industry Audit Committee
Report No. 15, February 15, 2000) is no longer subject to hedge accounting. The deferred hedge losses and gains are being charged to “Interest income” or “Interest expense” over a 15-year period (maximum) from March
31, 2004 according to their maturity and notional principal amount. The
total amount of deferred hedge loss under the “macro hedge method” was¥1 million ($8 thousand) in 2016 and ¥2 million in 2015.
In order to hedge risk arising from the volatility of exchange rates forsecurities (excluding bonds) denominated in foreign currencies, the Bank
applies fair value hedge accounting on the condition that the hedged securities are designated in advance and that sufficient on-balance (actual) or
off-balance (forward) liability exposure exists to cover the cost of thehedged securities denominated in the same foreign currency.

k. Reserve for reimbursement of deposits
A reserve for reimbursement of deposits which were derecognized as liabilities under certain conditions is provided for possible losses on the future
claims of withdrawal based on historical reimbursement experience.
l. Reserve for contingent losses
Providing for payment of the contribution to the Credit Guarantee Corporation, the Bank provides a reserve for contingent liabilities not covered byother reserves in an amount deemed necessary based on estimated losses in
the future.
m. Foreign currency translations
Foreign currency assets and liabilities are translated at fiscal year-end exchange rates.
n. Income taxes
Deferred income taxes are recorded to reflect the tax effects of temporary
differences between the carrying amounts of assets and liabilities for tax
and financial reporting purposes.
The asset and liability approach is used to recognize deferred tax assets
and liabilities for the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts for income tax purposes.
o. Recognition criteria for lease income and costs for finance leases
Lease income and costs are recognized at the time of receiving lease fees.
p. Consumption taxes
Transactions subject to national and local consumption taxes are recorded
at amounts exclusive of consumption taxes.

19
19

Consolidated Financial Statements

Consolidated Financial Statements

q. Changes in accounting policies
For the year 2015
The Bank and its consolidated domestic subsidiaries adopted Paragraph 35
of Retirement Benefits Standard and Paragraph 67 of the “Guidance on
Accounting Standard for Retirement Benefits” (ASBJ Guidance No. 25,
March 26, 2015, hereinafter, “Retirement Benefits Guidance”) from thecurrent fiscal year, and have changed the determination of projected benefit
obligations and current service costs. In addition, the Bank and its consolidated domestic subsidiaries have changed the method of attributing expected benefit to periods from a straight-line method to a benefit formula basis
and determining the discount rates from the method using a discount rate
which refers to the yields of bonds whose remaining maturities approximate the estimated average remaining service years of employees to themethod using a single-weighted average discount rate which reflects theestimated payment periods of retirement benefits and the amounts by therespective estimated payment periods.
In accordance with Paragraph 37 of Retirement Benefits Standard, theeffect of changing the determination of projected benefit obligations andcurrent service costs has been recognized in retained earnings at the beginning of the current fiscal year.
As a result of the application, liability for retirement benefits increasedby ¥584 million and retained earnings decreased by ¥377 million at the
beginning of the current fiscal year. In addition, income before income
taxes increased by ¥69 million in the current fiscal year.
The effects on segment information and per share information are explained in Note 23, “SEGMENT AND RELATED INFORMATION” andNote 25, “PER SHARE INFORMATION,” respectively.
For the year 2016
The Bank and its consolidated domestic subsidiaries adopted “Revised Accounting Standard for Business Combinations” (ASBJ Statement No. 21,
September 13, 2013 (hereinafter, “Statement No. 21”)), “Revised Accounting Standard for Consolidated Financial Statements” (ASBJ Statement No.
22, September 13, 2013 (hereinafter, “Statement No. 22”)) and “Revised
Accounting Standard for Business Divestitures” (ASBJ Statement No. 7,
September 13, 2013 (hereinafter, “Statement No. 7”)) (together, the “Business Combination Accounting Standards”), from the current fiscal year. As
a result, the Bank changed its accounting policies to recognize in capitalsurplus the differences arising from the changes in the Bank’s ownershipinterest of subsidiaries over which the Bank continues to maintain control
and to record acquisition related costs as expenses in the fiscal year inwhich the costs are incurred. In addition, the Bank changed its accounting
policy for the reallocation of acquisition costs due to the completion following provisional accounting to reflect such reallocation in the consolidated financial statements for the fiscal year in which the businesscombination took place. The Bank also changed the presentation of net income and the term “non-controlling interests” is used instead of “minority
interests.” Certain amounts in the prior year comparative information werereclassified to conform to such changes in the current year presentation.
In the consolidated statement of cash flows, cash flows from acquisition
or disposal of shares of subsidiaries with no changes in the scope of consolidation are included in “Cash flows from financing activities” and cash

20
20

flows from acquisition related costs for shares of subsidiaries with changes
in the scope of consolidation or costs related to acquisition or disposal ofshares of subsidiaries with no changes in the scope of consolidation are
included in “Cash flows from operating activities.”
With regard to the application of the Business Combination AccountingStandards, the Bank followed the provisional treatments in Paragraph 582(4) of Statement No. 21, Paragraph 44-5 (4) of Statement No. 22 and Paragraph 57-4 (4) of Statement No. 7 with application from the beginning of
the current fiscal year prospectively.
As a result, income before income taxes for the current fiscal year decreased by ¥7,268 million ($64,501 thousand) and capital surplus as of theend of the current fiscal year increased by ¥7,261 million ($64,439 thousand).
Capital surplus as of the end of the current fiscal year in the consolidated statement of changes in net assets increased by ¥7,261 million($64,439 thousand).
The effects on per share information are explained in Note 25, “PERSHARE INFORMATION.”
r. Unapplied accounting standards
For the year 2015
“Revised Accounting Standard for Business Combinations,” etc. (September 13, 2013)(1) Summary
The standards provide guidance for (1) the accounting for any changes in aparent’s ownership interest in a subsidiary when the parent retains control
over the subsidiary upon additional acquisition of shares in a subsidiary orother cases, (2) the corresponding accounting for acquisition-related costs,(3) the provisional accounting treatments, and (4) the presentation method
for net income and the change from minority interests to non-controllinginterests.
(2) Effective date
The Group is scheduled to apply the revised accounting standards, etc.
from the beginning of the fiscal year starting on April 1, 2015.
(3) Effects of application of the standards
The effects of this application have yet to be determined.
For the year 2016
“Revised Implementation Guidance on Recoverability of Deferred Tax Assets” (ASBJ Guidance No. 26, March 28, 2016, hereinafter, “Guidance No.
26”)(1) Summary
Following the framework in “Audit Treatment regarding the Judgment ofRecoverability of Deferred Tax Assets” (JICPA Auditing Committee Report No. 66), which prescribes a guidance for recoverability of deferred tax
assets, the implementation guidance changed its treatment as necessary.
(2) Effective date
The Group is scheduled to apply the revised implementation guidance fromthe beginning of the fiscal year starting on April 1, 2016.
(3) Effects of application of the guidance
The Group is currently evaluating the effects.

3. CHANGES IN NET ASSETS(1) Type and numbers of shares issued and treasury stock for the fiscal years ended March 31, 2016 and 2015 were as follows:(Thousands of shares)

Remarks

2016
April 1, 2015

Increase

Decrease

March 31, 2016

272,756——

272,756

Total .........................................
Treasury stock
Common stock .............................

272,756——

272,756

4,556

20

122

4,454

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

4,556

20

122

4,454

Notes 1 & 2

Notes: 1.	The increase in common stock of treasury stock of 20 thousand shares is due to the purchase of shares of less than one unit.
2.	The decrease in common stock of treasury stock of 122 thousand shares comprises a decrease of 121 thousand shares due to the execution of stock options and a decrease of 0
thousand shares due to sales of shares of less than one unit.
(Thousands of shares)

Remarks

2015

Shares issued
Common stock .............................
Total .........................................
Treasury stock
Common stock .............................
Total .........................................

April 1, 2014

Increase

Decrease

March 31, 2015

272,756
272,756————

272,756
272,756

4,581
4,581

26
26

52
52

4,556
4,556

Consolidated Financial Statements

Shares issued
Common stock .............................

Notes 1 & 2

Notes: 1.	The increase in common stock of treasury stock of 26 thousand shares is due to the purchase of shares of less than one unit.
2.	The decrease in common stock of treasury stock of 52 thousand shares is due to the execution of stock options.

(2) Matters concerning Stock Acquisition Rights
For the fiscal year ended March 31, 2016
Shares expected to be acquired upon exercise of stock acquisition rights
Number of sharesClassification
The Bank

Breakdown
Stock acquisitionrights granted as
stock options

April 1, 2015

Total

Increase

Decrease

March 31, 2016

Balance at end ofcurrent fiscal year
(Millions of yen)(Thousands of U.S.
dollars)

—

—

—

—

¥136

$1,206

—

—

—

—

¥136

$1,206

For the fiscal year ended March 31, 2015
Shares expected to be acquired upon exercise of stock acquisition rights
Number of sharesClassification
The Bank

Breakdown
Stock acquisitionrights granted as
stock options

April 1, 2014

Total

Increase

Decrease

March 31, 2015

Balance at end ofcurrent fiscal year
(Millions of yen)

—

—

—

—

¥146

—

—

—

—

¥146

(3) Information on dividends is as follows:(a) Dividends paid in the fiscal year ended March 31, 2016
Resolution

Annual stockholders’ meeting held on
June 26, 2015
Board of Directors’ meeting held on
November 13, 2015

Type of shares

Millions of yen (thousands of U.S. dollars), except per share amount
Aggregate amount of
Cash dividends
dividends
per share
Record date

Effective dateCommon stock¥804 ($7,135)¥3.00 ($0.02)

March 31, 2015

June 29, 2015

Common stock¥939 ($8,333)¥3.50 ($0.03)

September 30, 2015

December 7, 2015

Dividends paid in the fiscal year ended March 31, 2015
Resolution

Annual stockholders’ meeting held on
June 27, 2014
Board of Directors’ meeting held on
November 14, 2014

Type of shares

Millions of yen, except per share amount
Aggregate amount of
Cash dividends
dividends
per share
Record date

Effective dateCommon stock

¥804

¥3.00

March 31, 2014

June 30, 2014

Common stock¥1,072¥4.00

September 30, 2014

December 5, 201421
21

Consolidated Financial Statements(b) Dividends to be paid in the fiscal year ending March 31, 2017
Resolution

Annual stockholders’ meeting held on
June 29, 2016

Type of shares

Common stock

Millions of yen (thousands of U.S. dollars), except per share amount
Aggregate amount of
Source ofCash dividends
dividends
dividends
per share
Record date¥939 ($8,333)

Retainedearnings¥3.50 ($0.03)

March 31, 2016

Effective dateJune 30, 2016

Consolidated Financial Statements

4. STOCKHOLDERS’ EQUITY
Under the Banking Law of Japan and the Company Law, the entire amount of the issue price of shares is required to be accounted for as capital, although
the Bank may, by resolution of its Board of Directors, account for an amount not exceeding one half of the issue price of the new shares as additional
paid-in capital, which is included in capital surplus.
The Banking Law provides that an amount equal to at least 20% of cash dividends and other cash appropriations be appropriated and set aside as legal
earnings reserve until the total amount of legal earnings reserve and additional paid-in capital equals 100% of common stock. The total amount of legal
earnings reserve and additional paid-in capital of the Bank has reached 100% of common stock. Therefore, the Bank is not required to provide additional
legal earnings reserve.
The legal earnings reserve and additional paid-in capital may be used to eliminate or reduce a deficit by resolution of the stockholders’ meeting or
may be capitalized by resolution of the Board of Directors. On condition that the total amount of legal earnings reserve and additional paid-in capitalremains equal to or more than 100% of common stock, they are available for distribution by resolution of the stockholders’ meeting. Legal earnings
reserve is included in retained earnings in the accompanying financial statements.
The maximum amount that the Bank can distribute as dividends is calculated based on the nonconsolidated financial statements of the Bank inaccordance with the Company Law.
5. SHARES OR INVESTMENTS IN CAPITAL OF UNCONSOLIDATED SUBSIDIARIES AND AFFILIATES
Shares or investments in capital of unconsolidated subsidiaries and affiliates at March 31, 2016 and 2015 were as follows:
Thousands of
U.S. dollars

Millions of yen

2016

2015

¥12

Shares or investments in capital .........................................................................

2016

¥0

$106

6. NONPERFORMING LOANS
Nonperforming loans at March 31, 2016 and 2015 were as follows:
Thousands of
U.S. dollars

Millions of yen

Loans to bankrupt borrowers ..............................................................................
Past due loans .....................................................................................................
Past due loans (three months or more) ...............................................................
Restructured loans ..............................................................................................
Total ................................................................................................................

2016

2015

2016

¥ 1,457
62,239169
9,914¥73,781¥$ 12,930
552,351
1,499
87,983$654,783

894
63,465762
14,805¥79,928

Bills discounted are accounted for as financing transactions in accordance with “Treatment for Accounting and Auditing of Application of AccountingStandard for Financial Instruments in the Banking Industry” (JICPA Industry Audit Committee Report No. 24, February 13, 2002). This accounting treatment allows the Bank the right to sell or pledge them without restrictions. The total face value of commercial bills and purchased foreign exchange bills
obtained as a result of discounting was ¥20,050 million ($177,937 thousand) and ¥19,970 million at March 31, 2016 and 2015, respectively.
7. PLEDGED ASSETSAt March 31, 2016 and 2015, securities of ¥550,250 million ($4,883,297 thousand) and ¥445,629 million, respectively, were pledged as collateral for depositsof ¥61,136 million ($542,563 thousand) and ¥57,489 million, respectively, payables under securities lending transactions of ¥233,648 million ($2,073,553
thousand) and ¥134,855 million, respectively, and borrowed money of ¥181,342 million ($1,609,353 thousand) and ¥107,911 million, respectively.
Securities of ¥70,827 million ($628,567 thousand) and ¥79,326 million were pledged for transaction guarantees at March 31, 2016 and 2015, respectively.
Unexpired lease contract claims of ¥4,516 million ($40,078 thousand) and ¥4,980 million were pledged as collateral for borrowed money of ¥3,497 million($31,034 thousand) and ¥4,019 million at March 31, 2016 and 2015, respectively.
At March 31, 2016 and 2015, other assets included initial margins of futures markets of ¥122 million ($1,082 thousand) and nil, respectively, and security
deposits of ¥1,273 million ($11,297 thousand) and ¥1,248 million, respectively, and other intangible fixed assets included key money of ¥552 million ($4,898
thousand) and ¥573 million, respectively.
8. LOAN COMMITMENTS
Commitment line contracts on overdrafts and loans are agreements to lend to customers when they apply for borrowing up to a prescribed amount as longas there is no violation of any condition established in the contract. The amounts of unused commitments at March 31, 2016 and 2015 were ¥931,177 million($8,263,906 thousand) and ¥895,274 million, respectively, and the amount of unused commitments whose original contract terms were within one year or
unconditionally cancelable at any time at March 31, 2016 and 2015 were ¥907,347 million ($8,052,422 thousand) and ¥878,294 million, respectively.
Since many of these commitment line contracts are expected to expire without being drawn upon, the total amount of unused commitments does notnecessarily affect actual future cash flow.

22
22

Many of these commitments line contracts have clauses that allow the Group to reject the application from customers or reduce the contract amounts if
economic conditions change. In addition, the Group may request that customers pledge collateral such as premises and securities or take other necessary
measures such as scrutinizing customers’ financial positions and revising contracts when the need arises to secure claims.

10. GUARANTEESThe amount guaranteed by the Bank for privately placed bonds (stipulated by Article 2, Paragraph 3 of the Financial Instruments Exchange Act) included in“Bonds” of “Securities,” was ¥4,753 million ($42,181 thousand) and ¥2,933 million at March 31, 2016 and 2015, respectively.
11. OTHER INCOME
For the fiscal years ended March 31, 2016 and 2015, other income consisted of the following:Thousands of
U.S. dollars

Millions of yen

2016

Gains on sales of stocks and other securities ......................................................
Recovery of written off claims ...........................................................................
Gains on sales of fixed assets .............................................................................
Other ...................................................................................................................
Total ................................................................................................................

2015¥1,846
369
560
1,370
¥4,143

2016

Consolidated Financial Statements

9. TANGIBLE FIXED ASSETS
Accumulated depreciation of tangible fixed assets were ¥44,784 million ($397,444 thousand) and ¥45,612 million at March 31, 2016 and 2015, respectively. Accumulated capital gains directly offset against the acquisition cost of tangible fixed assets to obtain tax benefits were ¥718 million ($6,372 thousand) at March 31, 2016 and 2015.

$16,3823,274
4,969
12,158$36,776¥1,515
678
197
1,735
¥3,93012. OTHER EXPENSES
For the fiscal year ended March 31, 2016 and 2015, other expenses consisted of the following:Thousands of
U.S. dollars

Millions of yen

2016

Write-offs of loans ..............................................................................................
Provision for possible loan losses .......................................................................
Loss on impairment of fixed assets .....................................................................
Other ...................................................................................................................
Total ................................................................................................................

2015

¥ 933
362
—
1,038
¥2,3342016$ 8,280
3,212
—
9,220
$20,715¥1,176563
11669¥2,42013. OTHER COMPREHENSIVE INCOME
The components of other comprehensive income for the fiscal years ended March 31, 2016 and 2015 were as follows:
Thousands of
U.S. dollars

Millions of yen

Valuation difference on available-for-sale securities:
Gains (losses) incurred during the year ..........................................................
Reclassification adjustments to net income ....................................................
Amount before tax effect ...........................................................................
Tax effect ....................................................................................................
Valuation difference on available-for-sale securities .....................................
Deferred gains or losses on hedges .....................................................................
Losses incurred during the year .....................................................................
Reclassification adjustments to net income ....................................................
Amount before tax effect ...........................................................................
Tax effect ....................................................................................................
Deferred gains or losses on hedges ................................................................
Adjustments for retirement benefits:
Gains (losses) incurred during the year ..........................................................
Reclassification adjustments to net income ....................................................
Amount before tax effect ...........................................................................
Tax effect ....................................................................................................
Adjustments for retirement benefits ...............................................................
Total other comprehensive income .....................................................................

2016

2015

2016

¥ (1,068)(2,353)(3,421)
1,668(1,753)¥30,733(5,790)24,943(5,696)
19,247

(202)
302
100
(52)
47

(179)
360
181
(90)
91

(1,792)
2,680
887
(461)
417

(11,721)735(10,986)
3,309(7,676)¥ (9,382)

3,507
1,374
4,881
(1,784)
3,097¥22,436(104,020)
6,522(97,497)
29,366(68,122)$ (83,262)

$

9,478
(20,882)(30,360)
14,802(15,557)

23
23

Consolidated Financial Statements

14. STATEMENTS OF CASH FLOWS
The reconciliation between cash and due from banks in the consolidated balance sheets at March 31, 2016 and 2015 and cash and cash equivalents in the
consolidated statements of cash flows for the fiscal years then ended were as follows:
Thousands of
U.S. dollars

Millions of yen

Consolidated Financial Statements

Cash and due from banks on the consolidated balance sheets ...........................
Current deposits due from banks ........................................................................
Time deposits due from banks ............................................................................
Other due from banks .........................................................................................
Cash and cash equivalents on the consolidated statements of cash flows ..........

2016

2015

¥410,198(1,978)(615)(77)¥407,527¥452,967(1,648)(615)(63)¥450,641

2016$3,640,379(17,554)(5,457)(683)$3,616,675

15. LEASE TRANSACTIONS
Operating leases
As lessee:
Future minimum lease payments under operating leases which were not cancelable at March 31, 2016 and 2015 were as follows:
Thousands of
U.S. dollars

Millions of yen

Due within one year ............................................................................................
Due after one year ..............................................................................................
Total ................................................................................................................

2016

2015

2016

¥ 125
1,067
¥1,192¥ 126
1,125¥1,251$ 1,109
9,469$10,578

As lessor:
Future minimum lease payments under operating leases which were not cancelable at March 31, 2016 and 2015 were as follows:
Thousands of
U.S. dollars

Millions of yen

2016

Due within one year ............................................................................................
Due after one year ..............................................................................................
Total ................................................................................................................
16. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES
a. Matters relating to the status of financial instruments(1) Policy on financial instruments
The Group is composed of the Bank and ten consolidated subsidiaries andprovides financial services such as banking, securities, leasing and credit
guarantee businesses.
Its major banking business includes (i) the acceptance of deposits, lending services, bills discounting and remittance, and (ii) the guarantee ofdebt, acceptance of bills and other services related to the banking business.
The securities business includes underwriting and dealing in securities,
over-the-counter derivative transactions and other related services including security index future transactions in accordance with the Financial Instruments and Exchange Act.
The Bank, in addition to being a money lender and borrower in the interbank market to adjust surplus and deficit of funds, raises funds by loans
and bonds with consideration for the financial market conditions and thebalance of length.
The Bank conducts asset and liability management (ALM) and manages, identifying various types of risk exposures associated with the banking business, since the Bank holds financial assets and liabilities exposed tothe market risk associated with the fluctuation of interest rates. As part ofits risk management, the Bank utilizes derivative transactions such as interest rate swaps. The Bank also enters into derivative transactions for trading
purposes with certain position limits.
(2) Contents and risk of financial instruments
Financial assets held by the Group are composed mainly of loans to corporate and individual customers which are exposed to credit risk arising fromthe nonperformance of its customers. In addition, loan balances are significantly concentrated to Nara prefecture, where the head office of the Bank is

24
24

¥—
—
¥—

2015

¥1
—
¥1

2016

$—
—
$—

located. Accordingly, changes in the economic circumstances of the region
could have a great impact on the credit risk.
Securities consist principally of Japanese government bonds, Japanese
local government bonds, equity securities, foreign securities, investment
trusts that are classified as other securities (available-for-sale), privatebonds guaranteed by the Bank that are classified as held-to-maturity debt
securities and Japanese government bonds classified as trading purpose securities. These securities are exposed to the credit risk of issuers and themarket risk of fluctuation in interest rates and market prices. Since financial
assets denominated in foreign currencies are exposed to exchange rate risk,
currency related derivative transactions are used to balance the amount offunding and amount of operations for each currency to reduce the risk.
In the banking business, financial liabilities consist principally of deposits from retail clients in Japan and are exposed to interest rate risk. In
addition, foreign currency deposits are exposed to exchange rate risk. With
respect to borrowed money, the Group may be forced to raise funds underunfavorable conditions and, accordingly, become significantly exposed toliquidity risk if the fund raising capacity of the Group significantly declined
and led to the inability to repay under circumstances such as the significant
deterioration of the financial position of the Group. Furthermore, borrowed
money with floating interest rates is exposed to interest rate risk.
Derivative transactions include interest rate swaps for interest rate related transactions, currency swaps and forward foreign exchange transactions for currency related transactions, and bond future transactions andbond option transactions for bond related transactions. In addition, certain
credit derivatives are embedded in the financial instruments. The Bank utilizes those derivative transactions in order to hedge the position of the customers as well as to capture various risks associated with transactions withcustomers and control those risks properly. The Bank also uses derivatives
for trading purposes with certain position limits.

(3) Risk management system for financial instruments
Credit risk management
The Group has established a framework for credit control which includes
credit reviews for individual transactions, credit limits, credit information
management, internal credit ratings, guarantees and collateral and self-assessment in accordance with the Group’s “Rules on credit risk management” and “Rules on self-assessment of assets.” These credit controls are
performed by each branch and the Credit Analysis Division, and the independent Audit Department audits the status of credit risk controls and its
results. The status of credit risk controls is periodically evaluated and reported to the Managing Directors’ Committee and board meeting.
Credit risks associated with the issuers of securities are managed by the
Financial Investment Division and Risk Control Division. With respect tothe credit risks associated with the issuer of the securities and counterparty
risk associated with derivative transactions, related credit information andfair values of the securities are periodically checked to monitor those risks.
Market risk management(a) Interest rate risk
From the perspective of ALM, the Group manages market risk such as interest rate risk associated with assets and liabilities, including loans, deposits and securities comprehensively. The Group’s “Rules on Market Risk
Management” articulates that the Bank makes efforts to manage the market
sector effectively, taking risk and reward into account as well as avoiding
excessive risk taking by setting appropriate risk limits based on the Group’s
ability to take risk and identifying market risk properly.
The ALM Committee, the decision making entity for the managementof market risks, sets certain semiannual risk limits determined by VaRbased upon the Bank’s capital adequacy and market conditions. The Bank
pursues profit opportunities within the risk limits. The Risk Control Division assesses interest rate risk by VaR, reports to the ALM Committee on amonthly basis and properly monitors its operations. Other methodologies
such as BPV and the simulation of the interest rate fluctuation are also used
so that the Bank can capture and analyze risk from a broader point of view.
(b) Foreign currency risk
With regard to foreign currency risk associated with operations and procurement of financial instruments denominated in foreign currency, theGroup manages risk by balancing the amount of funding and amount ofoperations for each currency. In addition, as for foreign currency exchangetransactions for investment purposes, the Risk Control Division assesses
the foreign currency risk by VaR, reports to the ALM committee on amonthly basis and properly monitors its operations.
(c) Price fluctuation risk
With regard to investments in securities, the Group prepares its asset management plan semiannually and makes investment decisions at the ALM
Committee based upon expected returns and correlations between invest-

ment items and related market fluctuation risk. The Financial Investment
Division plays a part in investments for investment purposes, and the General Business Division plays a part in investments for the purpose of business alliances and capital affiliation. Continuous monitoring of market
conditions and restrictions on investments in riskier assets such as securitized instruments help to avoid unnecessary price fluctuation risk.
The Risk Control Division assesses the price fluctuation risk of equity
securities, etc. by VaR, reports monthly to the ALM Committee about compliance with risk limits and properly manages the risk.
(d) Derivative transactions
With respect to derivative transactions for hedging purposes, the Groupestablishes internal rules defining the authority and hedge policies which
are governed by the Risk Control Division. With respect to derivativetransactions for trading purposes, certain trading limits and loss limit rules
are set semiannually by the ALM Committee. The Risk Control Division,
which serves as the middle office, monitors compliance and calculates thetotal amount of risk. The Financial Investment Division, which serves as
the back office, checks each derivative transaction, marked-to-market
position, and evaluates the profit and loss from the transactions on a daily
basis. Combined with those functions, the related divisions check eachother so as not to exceed limits on loss.
The directors of the Bank are reported to from both the middle officeand the back office and monitor the risks associated with the Bank’s
portfolio as a whole, including loans, deposits and securities at the ALM
Committee.

Consolidated Financial Statements

The Bank applies the deferred hedge accounting method for derivativetransactions when used as hedging instruments. Interest rate swaps are usedas hedging instruments to avoid interest rate risks of hedged items such asloans with fixed interest rates and deposits with fixed interest rates. Deferred hedge accounting has been applied to derivatives used as hedging
instruments.
The Bank assesses the effectiveness of hedges in offsetting movementin the fair value from changes in interest rates by classifying the hedged
items such as deposits and loans and the hedging instruments such as interest rate swaps by their maturity. For cash flow hedges, the Bank assesses theeffectiveness by verifying the correlation between the hedged items and thehedging instruments. Transactions which do not meet the requirements ofhedge accounting and derivative transactions for trading purposes are exposed to interest rate risk, foreign currency risk, price fluctuation risk andcredit risk.

(e) Quantitative information relating to market risk
The Group manages the quantity of market risk for financial instruments
such as loans, deposits, securities and derivatives by VaR. To calculate
VaR, the historical method (confidence level of 99%, observation period
of 1,250 business days, holding period of 120 business days [holding
period for equity securities other than purely for investment purposes are
240 business days] and the correlation of risk categories are notconsidered.) is adopted.
At March 31, 2016, the Group’s total market risk (decrease inestimated economic value) was ¥53,513 million ($474,911 thousand)(¥27,083 million in 2015). In addition, the Group conducted back tests
comparing actual income with the VaR calculated by the model in order toconfirm the accuracy of the model. However, VaR is a statistical measureof market risk based on past fluctuations in the market and certain
probability of occurrence. It may not be possible to capture the risk if themarket fluctuates rapidly under extraordinary circumstances.
Management of liquidity risk associated with financing activities
The Financial Investment Division manages the Bank’s cash position based
upon the monthly funding plan designed by the ALM Committee, while theRisk Control Division monitors the situation. The ALM Committee manages financing risk comprehensively by understanding the amount of cash
for which the Bank can liquidate and also can raise from the market on aregular basis.
In addition, the Group categorizes its financing situation into “RegularPhase” “Concern Phase” and “Crisis Phase,” and prepares appropriate management structures for each phase so that the Group can take proper action
accordingly.
(4) Supplementary explanation on the fair value of financial instruments
The fair values of financial instruments comprise the values determinedbased on quoted market prices and values calculated on a reasonable basis
when no market price is available. Certain assumptions are used for the
calculation of such amounts, and, accordingly, the result of such calculations may vary if different assumptions are used.

25
25

Consolidated Financial Statements

b. Fair value of financial instruments
The table below summarizes the carrying amounts, fair values and differences of financial instruments as of March 31, 2016 and 2015.
Note that unlisted equity securities for which it is extremely difficult to identify the fair value and immaterial accounts are not included in the table (seeNote 2 below).
Millions of yen

2016

Consolidated Financial Statements

Cash and due from banks ...........................................................................
Debt purchased ...........................................................................................
Trading account securities
Trading securities ...................................................................................
Money held in trust ....................................................................................
Securities
Held-to-maturity debt securities ............................................................
Available-for-sale securities ..................................................................
Loans and bills discounted .........................................................................
Reserve for possible loan losses (*1) ....................................................
Total assets .................................................................................................
Deposits .....................................................................................................
Negotiable certificates of deposit ...............................................................
Payables under securities lending transactions ..........................................
Borrowed money ........................................................................................
Total liabilities ...........................................................................................
Derivative transactions (*2) .......................................................................
Hedge accounting not applied ...............................................................
Hedge accounting applied .....................................................................
Total derivative transactions .......................................................................

Carrying amount

Fair value¥ 410,198
3,527¥ 410,198
3,527

362
22,000362
22,000——4,753
1,790,864
3,188,341(23,291)
3,165,050¥5,396,755¥4,719,323
47,007
233,648
189,724¥5,189,703

4,795
1,790,864

42—

3,193,563¥5,425,310¥4,719,729
47,007
233,648
189,680¥5,190,065

28,512¥28,554
¥ 406
—
—
(44)
¥ 362

11,838(706)
11,131

11,838(706)
11,131

—
—
—

¥

¥

Difference

¥

¥

—
—

Millions of yen

2015

Cash and due from banks ...........................................................................
Debt purchased ...........................................................................................
Trading account securities
Trading securities ...................................................................................
Money held in trust ....................................................................................
Securities
Held-to-maturity debt securities ............................................................
Available-for-sale securities ..................................................................
Loans and bills discounted .........................................................................
Reserve for possible loan losses (*1) ....................................................
Total assets .................................................................................................
Deposits .....................................................................................................
Negotiable certificates of deposit ...............................................................
Payables under securities lending transactions ..........................................
Borrowed money ........................................................................................
Total liabilities ...........................................................................................
Derivative transactions (*2) .......................................................................
Hedge accounting not applied ...............................................................
Hedge accounting applied .....................................................................
Total derivative transactions .......................................................................

26
26

Carrying amount

Fair value¥ 452,967
5,096¥ 452,967
5,096

230
22,000230
22,000——2,933
1,688,677
3,079,175(26,006)
3,053,168¥5,225,075¥4,691,065
63,349134,855
116,122¥5,005,392

2,950
1,688,677

16—

3,071,533¥5,243,457¥4,691,579
63,349134,855
116,080¥5,005,864

18,365¥18,381
¥ 514
—
—
(41)
¥ 472

(11,978)(1,084)(13,063)(11,978)(1,084)(13,063)

—
—
—

¥

¥

Difference

¥

¥

—
—

Thousands of U.S. dollars

2016
Carrying amount

Total assets .................................................................................................
Deposits ......................................................................................................
Negotiable certificates of deposits .............................................................
Payables under securities lending transactions ..........................................
Borrowed money ........................................................................................
Total liabilities ...........................................................................................
Derivative transactions (*2) .......................................................................
Hedge accounting not applied ...............................................................
Hedge accounting applied .....................................................................
Total derivative transactions .......................................................................

Difference$ 3,640,379
31,301$ 3,640,379
31,301

3,212
195,243

3,212
195,243——

42,181
15,893,361
28,295,536(206,700)
28,088,835$47,894,524$41,882,525
417,172
2,073,553
1,683,741$46,057,002

42,554
15,893,361

372—

28,341,879$48,147,941$41,886,128
417,172
2,073,553
1,683,351$46,060,214

253,035$253,407$ 3,603——(390)$ 3,212

105,058(6,265)98,784

105,058(6,265)98,784

—
—
—

$

$

$

$

—
—
Consolidated Financial Statements

Cash and due from banks ...........................................................................
Debt purchased ...........................................................................................
Trading account securities
Trading securities ...................................................................................
Money held in trust ....................................................................................
Securities
Held-to-maturity debt securities ............................................................
Available-for-sale securities ..................................................................
Loans and bills discounted .........................................................................
Reserve for possible loan losses (*1) ....................................................

Fair value(*1) General reserve for possible loan losses and specific reserve for possible loan losses corresponding to loans are deducted.
(*2) Assets and liabilities arising from derivative transactions are presented on a net basis, and net liabilities are presented in parentheses.

(Note 1) Computation method for fair value of financial instruments
AssetsCash and due from banks:
With respect to due from banks without maturities, the carrying amount ispresented as the fair value as the fair value approximates the carrying
amount. With respect to due from banks with maturities, the fair value iscalculated for each category of maturity by discounting the cash flow at theinterest rate assumed if the same due from banks were newly executed.
Debt purchased:
The carrying amount is presented as the fair value as the residual maturity
is less than one year and the fair value approximates the carrying amount.
Trading account securities:
The fair value of securities held for trading purposes is determined based onquoted market prices or values calculated on a reasonable basis if no market
price is available.
Money held in trust:
The fair value of securities managed as trust assets in individually managed
money held in trust primarily for securities management purposes is determined based on the values presented by the trust bank. For additional information on money held in trust categorized by holding purposes, see Note
17, “SECURITIES AND MONEY HELD IN TRUST.”
Securities:
The fair value of equity securities is determined using the market price atthe exchanges. The fair value of debt securities is determined based onmarket prices or values calculated on a reasonable basis if no market priceis available. The fair value of listed investment trusts is determined using
the market price at the exchanges and the fair value of other investment
trusts is determined using standard prices published by the Investment
Trust Association, Japan or presented from the financial institutions withwhich they are transacted. The fair value of the private bonds guaranteed by
the Bank is calculated by discounting the aggregate value of principle andinterest at the interest rate assumed if the same bond were newly issued foreach category based on term, redemption method and guarantees. With respect to the private bonds guaranteed by the Bank issued by “bankrupt borrowers,” “effectively bankrupt borrowers” and “likely to become bankrupt
borrowers,” the amount of possible loan losses is computed based on thepresent value of estimated future cash flow or the recoverable amounts
from collateral and guarantees. Therefore, the fair value approximates the
carrying amount, net of reserve for possible loan losses, and such amount ispresented as the fair value.
For additional information on securities categorized by holding purposes, see Note 17, “SECURITIES AND MONEY HELD IN TRUST.”
Loans and bills discounted:
The fair value of loans with floating interest rates is presented using thecarrying amount as the fair value approximates the carrying amount, aslong as the credit situation of the borrowers does not vary significantly after
they execute the loans, since they reflect market interest rates due to theirshort-term nature. The fair value of loans with fixed rates is computed, by
discounting the aggregate value of principal and interest at the interest rate
assumed if the same loans were newly executed, for each category of typeof loans, internal ratings and maturities. As for the loans whose maturity isless than one year, the carrying amount is presented as the fair value as thefair value approximates the carrying amount.
With respect to receivables from “bankrupt borrowers,” “effectively
bankrupt borrowers” and “likely to become bankrupt borrowers,” theamount of possible loan losses is computed based on the present value ofthe estimated future cash flow or the recoverable amounts from collateraland guarantees. Therefore, the fair value approximates the carrying amount,net of reserve for possible loan losses, and this amount is presented as thefair value.
The fair value of loans without a predetermined repayment date due totheir lending amounts being limited within the values of the applicable collateral is presented using the carrying amount, as the fair value is deemed
to approximate the carrying amounts considering the estimated repayment
term and interest rates. The fair value of embedded derivative loans is presented using market prices at financial institutions.

27
27

Consolidated Financial Statements

Consolidated Financial Statements

Liabilities
Deposits and negotiable certificates of deposits:
With respect to on-demand deposits, the payment obligation due when demanded at the balance sheet date, which is the carrying amount, is deemed
to be the fair value. The fair value of time deposits is computed using thepresent value by discounting future cash flows for each category of a certain period. The interest rate to be applied when a new deposit is taken isused as the discount rate. For deposits whose residual maturity is less than
one year, the carrying amount is presented as the fair value as the fair value
approximates the carrying amount.
Payables under securities lending transactions:
The carrying amount is presented as the fair value as the residual maturity
is less than one year and the fair value approximates the carrying amount.

amount since the interest rate reflects the market interest rate due to theshort-term nature and the credit situation of the Group does not vary significantly after executing the borrowing. The fair value of borrowed moneywith fixed interest rate is computed, by discounting the aggregate value ofprincipal and interest (with respect to borrowed money accounted for by
the exceptional accounting method for interest rate swaps, the aggregate
value of principal and interest using the interest rate swap rate) at the interest rate assumed if the same borrowing were newly executed, for each category of type of maturities. As for the borrowed money whose maturity isless than one year, the carrying amount is presented as the fair value as thefair value approximates the carrying amount.
Derivative transactions
For derivative transactions, see Note 18, “DERIVATIVE TRANSACTIONS.”

Borrowed money:
The fair value of borrowed money with floating interest rates is presented
using the carrying amount as the fair value approximates the carrying(Note 2) The table below summarizes financial instruments whose fair value is extremely difficult to estimate: Note that these instruments are not includedin the above table regarding the fair value of financial instruments.
Carrying amountThousands of
U.S. dollars

Millions of yen

2016

2015

¥1,642151¥1,793

Unlisted equity securities (*1) (*2) ....................................................................
Investment in partnerships (*3) ..........................................................................
Total ....................................................................................................................

2016$14,572
1,340$15,912¥1,596309¥1,906(*1) The fair value of unlisted equity securities is not disclosed, since there is no market price and it is extremely difficult to estimate the fair value.
(*2)	The Bank recognized impairment loss of ¥0 million ($0 thousand) and ¥0 million on unlisted equity securities for the fiscal years ended March 31, 2016 and 2015, respectively.
(*3) The fair value of unlisted equity securities among the investment in partnerships is not disclosed since there is no market price and it is extremely difficult to estimate the fair value.

(Note 3) Redemption schedule of monetary claims and securities with maturities
Millions of yen

2016
Due within one
year or lessDue from banks ..............................................
Debt purchased ...............................................
Securities ........................................................
Held-to-maturity debt securities ................
Bonds .....................................................
Available-for-sale securities with
contractual maturities ................................
Japanese government bonds ..................
Japanese local government bonds .........
Corporate bonds ....................................
Other ......................................................
Loans and bills discounted (*) .......................
Total ...............................................................

28
28

Due after one
year throughthree years

Due after three
years throughfive years

Due after five
years throughseven years

Due after sevenyears through ten
years

Due after ten
years¥ 367,096
3,527
215,947
974
974

¥

—
—
256,871
2,274
2,274

¥

—
—
417,663
1,047
1,047

¥

—
—
228,692
457
457

¥

—
—
398,090——¥——
10,600——214,973
130,500
14,284
13,831
56,357872,086¥1,458,657

254,596
107,000
32,46821,90893,220471,337¥728,209

416,615
274,000
19,88730,534
92,194
310,197¥727,860

228,234
142,500
21,351
37,32927,054
239,659¥468,352

398,090
68,50095,67333,386200,530
314,304¥712,394

10,600——10,6000607,550¥618,151

Millions of yen

2015
Due within one
year or lessDue after three
years throughfive years

Due after five
years throughseven years

Due after sevenyears through ten
years

Due after ten
years¥ 407,444
5,096
240,438
789
789

¥

—
—
356,190
1,679
1,679

¥

—
—
341,955
422
422

¥

—
—
355,821
43
43

¥

—
—
219,300——¥——
15,000——239,648
96,00051,243
20,493
71,911
876,822¥1,529,802

354,511
184,500
20,907
26,735
122,368
411,536¥767,727

341,533
251,500
30,985
3,204
55,844
311,973¥653,929

355,778
230,000
31,9704,029
89,778204,255¥560,076

219,300
101,500
34,372
44,97438,454
285,866¥505,166

15,000———15,000590,847¥605,848

Due after sevenyears through ten
years

Due after ten
years

Consolidated Financial Statements

Due from banks ..............................................
Debt purchased ...............................................
Securities ........................................................
Held-to-maturity debt securities ................
Bonds .....................................................
Available-for-sale securities with
contractual maturities ................................
Japanese government bonds ..................
Japanese local government bonds .........
Corporate bonds ....................................
Other ......................................................
Loans and bills discounted (*) .......................
Total ...............................................................

Due after one
year throughthree years

Thousands of U.S. dollars

2016
Due after one
year throughthree years

Due after three
years throughfive years

Due after five
years throughseven years$ 3,257,862
31,301
1,916,462
8,643
8,643

$

—
—
2,279,650
20,181
20,181$——
3,706,629
9,291
9,291

$

—
—
2,029,570
4,055
4,055

$

—
—
3,532,925——$

1,907,818
1,158,146
126,766
122,745
500,150
7,739,492$12,945,127

2,259,460
949,591
288,143
194,426
827,298
4,182,969$6,462,628

3,697,328
2,431,664
176,490
270,979
818,1932,752,902$6,459,531

2,025,505
1,264,643
189,483
331,283
240,095
2,126,899$4,156,478

3,532,925
607,916
849,068
296,290
1,779,641
2,789,350$6,322,275

94,071——
94,0710
5,391,817$5,485,898

Due within one
year or lessDue from banks ..............................................
Debt purchased ...............................................
Securities ........................................................
Held-to-maturity debt securities ................
Bonds .....................................................
Available-for-sale securities with
contractual maturities ................................
Japanese government bonds ..................
Japanese local government bonds .........
Corporate bonds ....................................
Other ......................................................
Loans and bills discounted (*) .......................
Total ...............................................................

——
94,071——(*) Loans from “bankrupt,” “effectively bankrupt” and “likely to become bankrupt” borrowers, which are not expected to be repaid, and amounting to ¥63,415 million ($562,788 thousand)and ¥62,915 million at March 31, 2016 and 2015, respectively, are not included.
Loans whose payment term is not determined amounting to ¥309,789 million ($2,749,281 thousand) and ¥334,958 million at March 31, 2016 and 2015, respectively, are not included.

(Note 4) Redemption schedule of bonds payable, borrowed money and interest bearing liabilities
Millions of yen

2016

Deposits (*) ....................................................
Negotiable certificates of deposits .................
Payables under securities lending transactions ...
Borrowed money ............................................
Total ...............................................................

Due within one
year or lessDue after one
year throughthree years

Due after three
years throughfive years

Due after five
years throughseven years

Due after sevenyears through ten
years

Due after ten
years¥4,128,635
46,896
233,648
84,112¥4,493,291¥518,020
111—
24,100¥542,231¥ 72,667——
81,385¥154,052

¥—
—
—
60
¥60

¥—
—
—
67
¥67

¥—
—
—
—
¥—

Millions of yen

2015

Deposits (*) ....................................................
Negotiable certificates of deposits .................
Payables under securities lending transactions ...
Borrowed money ............................................
Total ...............................................................

Due within one
year or lessDue after one
year throughthree years

Due after three
years throughfive years

Due after five
years throughseven years

Due after sevenyears through ten
years

Due after ten
years¥4,102,219
63,349134,855
48,557¥4,348,981¥527,443——
41,785¥569,228¥61,402——25,780¥87,182

¥—
—
—
—
¥—

¥—
—
—
—
¥—

¥—
—
—
—
¥—

29
29

Consolidated Financial Statements

Thousands of U.S. dollars

2016

Consolidated Financial Statements

Deposits (*) ....................................................
Negotiable certificates of deposits .................
Payables under securities lending transactions ...
Borrowed money ............................................
Total ...............................................................

Due within one
year or lessDue after one
year throughthree years

Due after three
years throughfive years

Due after five
years throughseven years

Due after sevenyears through ten
years

Due after ten
years$36,640,353
416,187
2,073,553
746,467$39,876,561$4,597,266
985—
213,880$4,812,131$ 644,897——
722,266$1,367,163

$ —
—
—
532
$532

$ —
—
—
594
$594

$—
—
—
—
$—

(*) Demand deposits are included in “Due within one year or less.”

17. SECURITIES AND MONEY HELD IN TRUSTThe securities in this note include “Trading account securities” and beneficial trust interests under “Debt purchased,” in addition to “Securities” classified
on the consolidated balance sheets.
(1) Information on trading account securities and securities with available fair values at March 31, 2016 and 2015 was as follows:(a) Trading securities
Thousands of
U.S. dollars

Millions of yen

2016

2015

¥2

Amount of net unrealized gains (losses) included in the statements of income ....

2016

¥(0)

$17

(b) Held-to-maturity debt securities
Millions of yen

2016
Carrying amount

Fair value

Fair value exceeding carrying amount:
Corporate bonds .........................................................................................
Subtotal ......................................................................................................

Unrealized gains (losses)¥4,753¥4,753¥4,795¥4,795¥42¥42

Fair value not exceeding carrying amount:
Corporate bonds..........................................................................................
Subtotal ......................................................................................................
Total ...........................................................................................................

¥ —¥ —¥4,753¥ —¥ —¥4,795¥—¥—¥42

Millions of yen

2015
Carrying amount

Fair value

Fair value exceeding carrying amount:
Corporate bonds .........................................................................................
Subtotal ......................................................................................................

Unrealized gains (losses)¥2,903¥2,903¥2,921¥2,921¥18¥18

Fair value not exceeding carrying amount:
Corporate bonds..........................................................................................
Subtotal ......................................................................................................
Total ...........................................................................................................

¥ 30
¥ 30
¥2,933¥ 28¥ 28¥2,950

¥ (1)
¥ (1)
¥16

Thousands of U.S. dollars

2016

30
30

Carrying amount

Fair value

Fair value exceeding carrying amount:
Corporate bonds .........................................................................................
Subtotal ......................................................................................................

Unrealized gains (losses)$42,181$42,181$42,554$42,554$372$372

Fair value not exceeding carrying amount:
Corporate bonds..........................................................................................
Subtotal ......................................................................................................
Total ...........................................................................................................

$—$—$42,181$—$—$42,554

$ —
$ —
$372

(c) Available-for-sale securities
Millions of yen

2016

Carrying amount not exceeding acquisition cost:
Stocks .........................................................................................................
Bonds .........................................................................................................
Japanese government bonds ..................................................................
Japanese local government bonds ..........................................................
Japanese corporate bonds ......................................................................
Others .........................................................................................................
Foreign securities included ....................................................................
Subtotal ......................................................................................................
Total ...........................................................................................................

Acquisition cost¥

79,353
1,073,639
731,597
191,298
150,744534,694
473,054¥1,687,687¥

45,0591,041,369
710,647
183,624
147,097518,278
459,191¥1,604,707¥34,294
32,26920,9497,674
3,646
16,415
13,863¥82,979¥¥¥ (1,206)
(28)
(27)
(0)
(1)
(3,737)(1,034)¥ (4,972)¥78,006

8,815
15,443
14,83629
576
78,918
17,830¥ 103,177¥1,790,864

10,021
15,472
14,86430
577
82,655
18,865¥ 108,150¥1,712,857

Unrealized gains (losses)

Consolidated Financial Statements

Carrying amount exceeding acquisition cost:
Stocks .........................................................................................................
Bonds .........................................................................................................
Japanese government bonds ..................................................................
Japanese local government bonds ..........................................................
Japanese corporate bonds ......................................................................
Others .........................................................................................................
Foreign securities included ....................................................................
Subtotal ......................................................................................................

Carrying amountMillions of yen

2015

Carrying amount exceeding acquisition cost:
Stocks .........................................................................................................
Bonds .........................................................................................................
Japanese government bonds ..................................................................
Japanese local government bonds ..........................................................
Japanese corporate bonds ......................................................................
Others .........................................................................................................
Foreign securities included ....................................................................
Subtotal ......................................................................................................
Carrying amount not exceeding acquisition cost:
Stocks .........................................................................................................
Bonds .........................................................................................................
Japanese government bonds ..................................................................
Japanese local government bonds ..........................................................
Japanese corporate bonds ......................................................................
Others .........................................................................................................
Foreign securities included ....................................................................
Subtotal ......................................................................................................
Total ...........................................................................................................

Carrying amount

Acquisition cost¥

95,556
1,125,369
850,070
174,865
100,434
400,753384,803¥1,621,679¥

50,565
1,098,662
830,744
169,540
98,377
390,159
377,492¥1,539,388¥44,990
26,707
19,326
5,324
2,056
10,593
7,311¥82,291

¥

¥

¥

2,636
38,78337,583—
1,199
26,577
19,464¥ 67,997¥1,689,677

2,779
38,87837,677—
1,200
27,14720,000¥ 68,805¥1,608,193

Unrealized gains (losses)

(143)
(94)
(94)
—
(0)
(569)
(535)
¥ (807)¥81,4833131

Consolidated Financial Statements

Thousands of U.S. dollars

2016
Carrying amount

Consolidated Financial Statements

Carrying amount exceeding acquisition cost:
Stocks .........................................................................................................
Bonds .........................................................................................................
Japanese government bonds ..................................................................
Japanese local government bonds ..........................................................
Japanese corporate bonds ......................................................................
Others .........................................................................................................
Foreign securities included ....................................................................
Subtotal ......................................................................................................
Carrying amount not exceeding acquisition cost:
Stocks .........................................................................................................
Bonds .........................................................................................................
Japanese government bonds ..................................................................
Japanese local government bonds ..........................................................
Japanese corporate bonds ......................................................................
Others .........................................................................................................
Foreign securities included ....................................................................
Subtotal ......................................................................................................
Total ...........................................................................................................

Acquisition cost

Unrealized gains (losses)$

704,233
9,528,212
6,492,696
1,697,710
1,337,806
4,745,243
4,198,207$14,977,697$

399,884
9,241,826
6,306,771
1,629,605
1,305,440
4,599,556
4,075,177$14,241,276$304,348
286,377
185,915
68,10432,357
145,678
123,029$736,412$$$ (10,702)
(248)
(239)
(0)
(8)
(33,164)(9,176)$ (44,124)$692,279

78,230137,051
131,664257
5,111
700,372
158,235$ 915,663$15,893,361

88,933
137,309
131,913266
5,120
733,537
167,421$ 959,797$15,201,073(2) Held-to-maturity debt securities sold for the fiscal years ended March 31, 2016 and 2015
Not applicable.
(3) Available-for-sale securities sold for the fiscal years ended March 31, 2016 and 2015
Millions of yen

2016
Sales amount

¥

5,802
66,991
59,991
5,067
1,932
52,79552,795¥125,589

Stocks .........................................................................................................
Bonds .........................................................................................................
Japanese government bonds ..................................................................
Japanese local government bonds ..........................................................
Japanese corporate bonds ......................................................................
Others .........................................................................................................
Foreign securities included ....................................................................
Total ...........................................................................................................

Gains on sales¥1,706
470
450
2
17
494
494
¥2,670Losses on sales

¥158
0
—
0
0
—
—
¥159

Millions of yen

2015
Sales amount

Stocks .........................................................................................................
Bonds .........................................................................................................
Japanese government bonds ..................................................................
Japanese local government bonds ..........................................................
Japanese corporate bonds ......................................................................
Others .........................................................................................................
Foreign securities included ....................................................................
Total ...........................................................................................................

¥

2,618
309,823
286,518
8,892
14,413324,882
324,882¥637,324

Gains on sales¥1,401
2,096
2,012
38
45
2,438
2,438
¥5,936

Losses on sales

¥ —
0
—
0
0
145
145
¥146

Thousands of U.S. dollars

2016
Sales amount

Stocks .........................................................................................................
Bonds .........................................................................................................
Japanese government bonds ..................................................................
Japanese local government bonds ..........................................................
Japanese corporate bonds ......................................................................
Others .........................................................................................................
Foreign securities included ....................................................................
Total ...........................................................................................................

32
32

$

51,490594,524
532,401
44,96817,145468,539
468,539$1,114,563

Gains on sales

Losses on sales$15,140
4,171
3,993
17
150
4,384
4,384
$23,695$1,4020—00——$1,411

(4) Information on money held in trust at March 31, 2016 and 2015 was as follows:
Money held in trustThousands of
U.S. dollars

Millions of yen

Carrying amount (fair value) ..............................................................................
Amount of net unrealized gains (losses) included in the statements of income ..

2016

2015

2016

¥22,000
48¥22,000
18$195,243
425

Thousands of
U.S. dollars

Millions of yen

Valuation difference ............................................................................................
Deferred tax liabilities ........................................................................................
Amounts equivalent to difference on available-for-sale securities .....................
Non-controlling interests adjustment .................................................................
Valuation difference on available-for-sale securities ..........................................

2016

2015

2016

¥ 78,006(20,934)¥ 57,072—¥ 57,072¥ 81,483(22,602)¥ 58,881(63)¥ 58,818$ 692,279(185,782)$ 506,496—$ 506,496

Consolidated Financial Statements(5) The components of the valuation difference on available-for-sale securities recorded under net assets at March 31, 2016 and 2015 were as follows:(6) Securities reclassified for the fiscal years ended March 31, 2016 and 2015
Not applicable.
(7) Impairment loss on securities
In the event that the fair value of securities, except trading securities, with available fair values declines significantly compared with the acquisition cost andthe fair value is not expected to recover, such securities are stated at fair value and the difference between the fair value and the acquisition cost is recognized
as loss in the period of the decline (“impairment loss”). The fair value is regarded as “significantly declined” when (i) the fair value as of the end of the fiscal year declines by more than 50% of the acquisition cost or (ii) the fair value as of the end of the fiscal year declines by more than 30% but less than 50%of the acquisition cost, and is not expected to recover within one year. Impairment loss recognized on equity securities was ¥158 million ($1,402 thousand)for the fiscal year ended March 31, 2016. No impairment loss was recognized for the fiscal year ended March 31, 2015.
18. DERIVATIVE TRANSACTIONS(1) Derivative contracts to which hedge accounting is not appliedWith respect to derivatives to which hedge accounting is not applied, the contract amount or notional principal amount defined in the contract, fair value,
unrealized gains (losses) and calculation method of fair value by transaction type as of March 31, 2016 and 2015 were as follows:
Note that the contract amount does not represent the market risk exposure of the derivative transactions themselves.
(a) Interest rate related transactions
Millions of yen

2016
Category

Transaction typeInterest rate futures
Sold ..........................................................
Bought ......................................................
Interest rate options
Sold ..........................................................
Bought ......................................................
Over-the-counter Forward rate agreements
transactions
Sold ..........................................................
Bought ......................................................
Interest rate swaps
Receive fixed rate/pay floating rate ..........
Receive floating rate/pay fixed rate ..........
Receive floating rate/pay floating rate ......
Interest rate options
Sold ..........................................................
Bought ......................................................
Other
Sold ..........................................................
Bought ......................................................
Total ..................................................................................

Contract amount

Exchangetransactions

Contract amount due
after one year

Fair value

Unrealized gains (losses)

—
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

¥ 323
4,851
—

¥ 323
4,851
—

—
—

—
—

—
—

—
—

—
—
—

—
—
—

—
—
¥ (298)——¥ (298)

¥

¥

¥

9
(307)
—

¥

9
(307)
—

33
33

Consolidated Financial Statements

Millions of yen

2015
Category

Transaction type

Contract amount

Exchangetransactions
Consolidated Financial Statements

Interest rate futures
Sold ..........................................................
Bought ......................................................
Interest rate options
Sold ..........................................................
Bought ......................................................
Over-the-counter Forward rate agreements
transactions
Sold ..........................................................
Bought ......................................................
Interest rate swaps
Receive fixed rate/pay floating rate ..........
Receive floating rate/pay fixed rate ..........
Receive floating rate/pay floating rate ......
Interest rate options
Sold ..........................................................
Bought ......................................................
Other
Sold ..........................................................
Bought ......................................................
Total ........................................................................................

Contract amount due
after one year

Fair value

Unrealized gains (losses)

—
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

¥389
389
—

¥389
389
—

¥ 15
(14)
—

¥ 15
(14)
—

—
—

—
—

—
—

—
—

—
—
¥ —

—
—
¥ —

—
—
¥ 1

—
—
¥ 1

Thousands of U.S. dollars

2016
Category

Transaction typeInterest rate futures
Sold ..........................................................
Bought ......................................................
Interest rate options
Sold ..........................................................
Bought ......................................................
Over-the-counter Forward rate agreements
transactions
Sold ..........................................................
Bought ......................................................
Interest rate swaps
Receive fixed rate/pay floating rate ..........
Receive floating rate/pay fixed rate ..........
Receive floating rate/pay floating rate ......
Interest rate options
Sold ..........................................................
Bought ......................................................
Other
Sold ..........................................................
Bought ......................................................
Total ........................................................................................

Contract amount

Exchangetransactions

Contract amount due
after one year

Fair value

Unrealized gains (losses)

—
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

$ 2,866
43,051—$ 2,866
43,051—$ 79(2,724)—$79(2,724)
—

—
—

—
—

—
—

—
—

—
—
—

—
—
—

—
—
$(2,644)——$(2,644)$$

Notes: 1. The above transactions are measured at fair value, and unrealized gains (losses), except as in Note 3, are recognized in the consolidated statements of income.
2. The fair values of exchange transactions are based on the closing price at the Tokyo Financial Exchange Inc., etc.
		 The fair values of over-the-counter transactions are based on the discounted cash flow method, option pricing model, etc.
3. As of March 31, 2016, “Receive floating rate/pay fixed rate” of interest rate swaps includes the contract amount of ¥4,528 million ($40,184 thousand), fair value of ¥ (299)million ($(2,653) thousand), and unrealized gains (losses) of ¥ (299) million ($(2,653) thousand), for which the application of hedge accounting was cancelled since they havenot met the requirement of hedge accounting. Unrealized gains (losses) on “Receive floating rate/pay fixed rate” of ¥ (245) million ($(2,174) thousand) were deferred over thehedge period due to the cancellation.

34
34

(b) Currency related transactions
Millions of yen

2016
Category

Transaction type

Contract amountCurrency futures
Sold ..........................................................
Bought ......................................................
Currency options
Sold ..........................................................
Bought ......................................................
Over-the-counter Currency swaps ...........................................
transactions
Forward foreign exchange contracts
Sold ..........................................................
Bought ......................................................
Currency options
Sold ..........................................................
Bought ......................................................
Other
Sold ..........................................................
Bought ......................................................
Total ........................................................................................

Fair value

Unrealized gains (losses)

—
—

—
—

—
—

—
—

—
—
¥513,557——¥278,462——¥12,008——¥12,008

4,632
311

—
—

136
(8)

136
(8)

—
—

—
—

—
—

—
—

—
—
—

—
—
—

—
—
¥12,136——¥12,136

Fair value

Unrealized gains (losses)¥¥

Consolidated Financial Statements

Exchangetransactions

Contract amount due
after one year

Millions of yen

2015
Category

Transaction type

Contract amount

Exchangetransactions

Currency futures
Sold ..........................................................
Bought ......................................................
Currency options
Sold ..........................................................
Bought ......................................................
Over-the-counter Currency swaps ...........................................
transactions
Forward foreign exchange contracts
Sold ..........................................................
Bought ......................................................
Currency options
Sold ..........................................................
Bought ......................................................
Other
Sold ..........................................................
Bought ......................................................
Total ........................................................................................

Contract amount due
after one year

—
—

—
—

—
—

—
—

—
—
¥490,472——¥254,191——¥(11,679)——¥(11,679)

4,401
196

—
—

(302)
1

(302)
1

—
—

—
—

—
—

—
—

—
—
—

—
—
—

—
—
¥(11,980)——¥(11,980)¥¥

Thousands of U.S. dollars

2016
Category

Transaction type

Currency futures
Sold ..........................................................
Bought ......................................................
Currency options
Sold ..........................................................
Bought ......................................................
Over-the-counter Currency swaps ...........................................
transactions
Forward foreign exchange contracts
Sold ..........................................................
Bought ......................................................
Currency options
Sold ..........................................................
Bought ......................................................
Other
Sold ..........................................................
Bought ......................................................
Total ........................................................................................

Contract amount

Exchangetransactions

Contract amount due
after one year

Fair value

Unrealized gains (losses)

—
—

—
—

—
—

—
—

—
—
$4,557,658——$2,471,263——$106,567——$106,567

41,107
2,760

—
—

1,206
(70)

1,206
(70)

—
—

—
—

—
—

—
—

—
—
—

—
—
—

—
—
$107,703——$107,703$$

Notes: 1. The above transactions are measured at fair value, and unrealized gains (losses) are recognized in the consolidated statements of income.
2. The fair values are based on the discounted present value, etc.

3535

Consolidated Financial Statements(c) Stock related transactions
None(d) Bond related transactions
None
Consolidated Financial Statements(e) Commodity related transactions
None(f) Credit derivative transactions
None(2) Derivative contracts to which hedge accounting is appliedWith respect to derivatives to which hedge accounting is applied, the contract amount or notional principal amount defined in the contract, fair value andcalculation method of fair value by transaction type and by hedge accounting method as of March 31, 2016 and 2015 were as follows:
Note that the contract amount does not represent the market risk exposure of the derivative transactions themselves.
(a) Interest rate related transactions
Millions of yen

2016
Hedge accounting method

Transaction type

Major hedged items

Fundamental method

Interest rate swaps:
Receive fixed rate/pay
floating rate
Receive floating rate/pay
fixed rate

Interest bearing
assets and liabilities
such as loans anddeposits

Interest rate futures
Interest rate options
Other
Exceptional accounting Interest rate swaps—
method for interest rate
Receive fixed rate/pay
swaps
floating rate
Receive floating rate/pay
fixed rate
Total

Contract amountContract amount due after
one year

Fair value

—

—

—

¥16,246¥14,814¥(706)

—
—
—

—
—
—

—
—
—

—

—

—

—
—

—
¥(706)¥——¥

Millions of yen

2015
Hedge accounting method

Transaction type

Major hedged items

Fundamental method

Interest rate swaps:
Receive fixed rate/pay
floating rate
Receive floating rate/pay
fixed rate

Interest bearing
assets and liabilities
such as loans anddeposits

Interest rate futures
Interest rate options
Other
Exceptional accounting Interest rate swaps
Borrowed money
method for interest rate
Receive fixed rate/pay
swaps
floating rate
Receive floating rate/pay
fixed rate
Total

36
36

Contract amountContract amount due after
one year

Fair value

—

—

—

¥26,027¥22,864¥(1,084)

—
—
—

—
—
—

—
—
—

—

—

—

—
—

Note 3¥(1,084)

¥
¥

60
—

¥
¥

Thousands of U.S. dollars

2016Transaction type

Major hedged items

Fundamental method

Interest rate swaps:
Receive fixed rate/pay
floating rate
Receive floating rate/pay
fixed rate

Interest bearing
assets and liabilities
such as loans anddeposits

Interest rate futures
Interest rate options
Other
Exceptional accounting Interest rate swaps—
method for interest rate
Receive fixed rate/pay
swaps
floating rate
Receive floating rate/pay
fixed rate
Total

Contract amount

Fair value

—

—

—

$144,178$131,469$(6,265)

—
—
—

—
—
—

—
—
—

—

—

—

—
—

—
$(6,265)

$

—
—

$

Consolidated Financial Statements

Hedge accounting method

Contract amount due after
one year

Notes: 1. Gain/loss on the above contacts is deferred until maturity of the hedged items under the fundamental method in accordance with the “Treatment for Accounting and Auditing ofApplication of Accounting Standard for Financial Instruments in the Banking Industry” (JICPA Industry Audit Committee Report No. 24, February 13, 2002).
2. The fair values of exchange transactions are based on the closing price at the Tokyo Financial Exchange Inc., etc.
		 The fair values of over-the-counter transactions are based on the discounted cash flow method, option pricing model, etc.
3. For the fiscal year ended March 31, 2015, interest rate swaps accounted for by the exceptional accounting method are accounted for together with the borrowed money as ahedged item, and the fair values are described in the fair values of “Borrowed money” under Liabilities of Note 16, “FINANCIAL INSTRUMENTS AND RELATEDDISCLOSURES.”(b) Currency related transactions
None(c) Stock related transactions
None(d) Bond related transactions
None
19. PROJECTED BENEFIT OBLIGATIONS(1) Outline of employees’ retirement allowance
The Bank has a contributory defined benefit pension plan and a non-contributory unfunded lump-sum retirement allowance plan. The Bank has employer
retirement benefit trusts.
Ten consolidated subsidiaries have non-contributory unfunded lump-sum retirement allowance plans as defined benefit plans, and apply the simplified
method in the calculation of their liability for retirement benefits and retirement benefit costs.
(2) Defined benefit plans(a) Movement in projected benefit obligations
Thousands of
U.S. dollars

Millions of yen

Balance at the beginning of the fiscal year .........................................................
Cumulative effects of changes in accounting policies ...................................
Restated balance .................................................................................................
Service cost ...................................................................................................
Interest cost ....................................................................................................
Actuarial loss (gain) .......................................................................................
Benefits paid ...................................................................................................
Balance at the end of the fiscal year ...................................................................
Note:

2016

2015

2016

¥55,877—
55,877
1,652
871
9,599
(2,585)¥65,416¥55,146584
55,731
1,654
869
48(2,427)¥55,877$495,891—
495,891
14,6607,729
85,188(22,941)$580,546

Plans based on the simplified method have been included in the above.

37
37

Consolidated Financial Statements(b) Movements in plan assets
Thousands of
U.S. dollars

Millions of yen

Consolidated Financial Statements

Balance at the beginning of the fiscal year .........................................................
Expected return on plan assets .......................................................................
Actuarial gain (loss) .......................................................................................
Contributions paid by the employer ...............................................................
Benefits paid ...................................................................................................
Balance at the end of the fiscal year ...................................................................
Note:

2016

2015

2016

¥41,124775(2,122)
10(1,620)¥38,167¥36,107
626
3,556
2,380
(1,546)¥41,124$364,962
6,877(18,832)
88(14,376)$338,720

Plans based on the simplified method have been included in the above.

(c) Reconciliation from projected benefit obligations and plan assets to liability (asset) for retirement benefits
Thousands of
U.S. dollars

Millions of yen

Funded projected benefit obligations
Plan assets
Unfunded projected benefit obligations
Net liability (asset) for retirement benefits recorded on the consolidatedbalance sheet
Liability for retirement benefits
Asset for retirement benefits
Net liability (asset) for retirement benefits recorded on the consolidatedbalance sheet
Note:

2016

2015

2016

¥54,422(38,167)
16,254
10,994¥45,669(41,124)
4,544
10,208$482,978(338,720)
144,249
97,568¥27,248¥14,753$241,817¥27,248—¥14,753—$241,817—¥27,248¥14,753$241,817

Plans based on the simplified method have been included in the above.

(d) Retirement benefit costs
Thousands of
U.S. dollars

Millions of yen

2016

Note:

2015

¥1,652
871
(775)
735
¥2,484Service cost
Interest cost
Expected return on plan assets
Net actuarial loss amortization
Total retirement benefit costs¥1,654
869
(626)
1,374
¥3,272

2016$14,660
7,729(6,877)
6,522$22,044

Retirement benefit costs of consolidated subsidiaries which have applied the simplified method are included in “Service cost.”(e) Adjustments for retirement benefits
The components of adjustments for retirement benefits (before tax effect) were as follows:
Thousands of
U.S. dollars

Millions of yen

2016

Actuarial gain (loss)
Total

2015

¥(10,986)¥(10,986)¥4,881¥4,881

2016$(97,497)$(97,497)(f) Accumulated adjustments for retirement benefits
The components of accumulated adjustments for retirement benefits (before tax effect) were as follows:
Thousands of
U.S. dollars

Millions of yen

Unrecognized actuarial gain (loss)
Total

38
38

2016

2015

2016

¥(12,879)¥(12,879)¥(1,893)¥(1,893)$(114,297)$(114,297)

(g) Plan assets
1) Plan assets comprise:
2016

2015

19.5%
36.1%
3.7%
30.9%
9.8%
100%

Note:	Total plan assets include retirement benefit trusts which were set up for a corporate pension fund plan (0.2% and 5.9% of total plan assets at March 31, 2016 and 2015,
respectively).

2) Long-term expected rate of return
Current and target asset allocations and historical and expected returns on various categories of plan assets have been considered in determining the longterm expected rate of return.
(h) Actuarial assumptions
The principal actuarial assumptions for the fiscal years ended March 31, 2016 and 2015 were as follows:
2016

2015

0.70%
2.00%
3.90%

Discount rate .................................................................................................................................................
Long-term expected rate of return ................................................................................................................
Estimated rate of increase in salary ..............................................................................................................

Consolidated Financial Statements

19.1%
33.4%
2.9%
34.3%
10.3%
100%

Bonds ............................................................................................................................................................
Stocks ...........................................................................................................................................................
Cash and deposits .........................................................................................................................................
Life insurance general accounts ...................................................................................................................
Other .............................................................................................................................................................
Total ..............................................................................................................................................................

1.57%
2.00%
3.90%

20. STOCK OPTIONS(a) Items and amounts expensed related to stock options were as follows:
Thousands of
U.S. dollars

Millions of yen

2016

2015

¥35

General and administrative expenses ..................................................................

2016

$310

¥41

(b) Stock options outstanding at March 31, 2016 were as follows:a. Outline of stock options
Beneficiaries qualifying for stock option rights are entitled to acquire common stock upon the exercise of their rights. The following table summarizes thenumber of shares upon exercise of the stock option rights granted by the Bank outstanding at March 31, 2016:
Stock
options

Persons
grantedNumber ofoptions granted

Date of
grant

Exercise
price

ExerciseperiodVesting
conditions

Target ofservice period

2010
Stock Options
2011
Stock Options
2012
Stock Options
2013
Stock Options
2014
Stock Options

15 directorsof the Bank
14 directorsof the Bank
15 directorsof the Bank
15 directorsof the Bank
14 directors(excluding
outsidedirectors)of the Bank
13 directors(excluding
outsidedirectors)of the Bank

Common stock
94,400 shares
Common stock
109,400 shares
Common stock
136,200 shares
Common stock
119,500 shares
Common stock
99,700 shares

July 29, 2010¥1($0.00)¥1($0.00)¥1($0.00)¥1($0.00)¥1($0.00)From July 30, 2010
to July 29, 2040
From July 30, 2011
to July 29, 2041
From July 28, 2012
to July 27, 2042
From July 27, 2013
to July 26, 2043
From July 26, 2014
to July 25, 2044

Not definedNot definedNot definedNot definedNot definedNot definedNot definedNot definedNot definedNot defined

Common stock
84,000 shares

July 24, 2015

¥1($0.00)From July 25, 2015
to July 24, 2045

Not definedNot defined2015
Stock Options

July 29, 2011
July 27, 2012
July 26, 2013
July 25, 201439
39

Consolidated Financial Statementsb. Stock option activity:
1) Number of stock options
Number of shares

2010
2011
2012
2013
2014
2015
Stock Options Stock Options Stock Options Stock Options Stock Options Stock Options

Consolidated Financial Statements

Non-vested
March 31, 2015 –Outstanding ..................................................
Granted .....................................................................................
Forfeited ...................................................................................
Vested .......................................................................................
March 31, 2016 –Outstanding .................................................
VestedMarch 31, 2015 –Outstanding ..................................................
Vested .......................................................................................
Exercised ..................................................................................
Forfeited ...................................................................................
March 31, 2016 –Outstanding ..................................................

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

24,925——24,925——84,0001,300
63,00019,70054,100—18,100—36,00071,100—24,400—46,70092,400—29,000—63,400100,600—
25,600—75,00074,77524,92524,700—75,000—63,000——63,0002) Price information
Yen

U.S. dollars

2010
2011
2012
2013
2014
2015
Stock Options Stock Options Stock Options Stock Options Stock Options Stock Options

Exercise price ........................................ ¥ 1
Average stock price at exercise date ...... 434
Fair value price at grant date ................. 441

¥ 1
434
386

¥ 1
434
303

¥ 1
434
372

¥ 1
434
401

¥

1
—
397

2010
2011
2012
2013
2014
2015
Stock Options Stock Options Stock Options Stock Options Stock Options Stock Options

$0.00
3.85
3.91

$0.00
3.85
3.42

$0.00
3.85
2.68

$0.00
3.85
3.30

$0.00
3.85
3.55

$0.00
—
3.52

(c) Assumptions used to measure the fair value of stock options
The assumptions used to measure the fair value of the stock options granted in the fiscal year ended March 31, 2016 were as follows:
1) The Black-Scholes option pricing model was used as a measurement method.
2) Assumptions used for the Black-Scholes option pricing model:
1.	Volatility of stock price: 26.64%, calculated using the market price of the Bank’s stock from January 2011 to July 2015.
2.	Estimated remaining outstanding period: 4.5 years, which was the average remaining tenure of directors at the date of issue, determined by theaverage time from appointment to retirement and time from appointment to the date of issue.
3. Estimated dividend: ¥6 per share, which was calculated based on the actual amount of dividends for the fiscal year ended March 31, 2015.
4. Risk-free interest rate: 0.09%, determined using the yield of national bonds equivalent to the estimated remaining outstanding period.
(d) Estimation method for the total number of vested stock option rights
The total number of stock option rights issued is deemed to reflect the actual number of stock option rights expired due to difficulties in estimating reasonably the number of stock option rights that will expire in the future.

40
40

21. INCOME TAXESThe Group is subject to a number of taxes based on the income such as corporation tax, inhabitant tax and enterprise tax, which, in the aggregate, indicate
a statutory tax rate in Japan of approximately 32.8 % and 35.4% for the fiscal years ended March 31, 2016 and 2015, respectively.
Significant components of deferred tax assets and liabilities as of March 31, 2016 and 2015 were as follows:
Thousands of
U.S. dollars

Millions of yen

Note:

2016

2015

2016

¥ 7,825
8,340
759
1,031
1,304
3,708
68
273
1,915
25,227(9,251)
15,976¥8,461
5,540
814
3,713
1,605
4,140
97
326
2,088
26,787(12,631)
14,156$ 69,444
74,014
6,735
9,149
11,57232,907603
2,422
16,995
223,881(82,099)
141,782(20,934)(78)(21,012)¥ (5,035)(22,602)(45)(22,647)¥(8,491)(185,782)(692)(186,474)$ (44,684)

Consolidated Financial Statements

Deferred tax assets:
Excess bad debt expense ................................................................................
Liability for retirement benefits .....................................................................
Depreciation ...................................................................................................
Write-down of land ........................................................................................
Loss on impairment of fixed assets ................................................................
Valuation loss on securities ............................................................................
Tax loss carryforwards ...................................................................................
Net deferred loss on hedging instruments ......................................................
Other ...............................................................................................................
Subtotal deferred tax assets:
Valuation allowance ............................................................................................
Total deferred tax assets ...................................................................................
Deferred tax liabilities:
Valuation difference on available-for-sale securities .....................................
Other ...............................................................................................................
Total deferred tax liabilities .............................................................................
Net deferred tax assets (liabilities) ..................................................................

Net deferred tax assets (liabilities) as of March 31, 2016 and 2015 are included in the following accounts in the consolidated balance sheets:
Thousands of
U.S. dollars

Millions of yen

Deferred tax assets ..............................................................................................
Deferred tax liabilities ........................................................................................

2016

2015

2016

¥ 1,314
6,349¥ 1,386
9,878$11,661
56,345

The following table summarizes the significant differences between the statutory tax rate and the effective tax rate for financial statement purposes for the
fiscal years ended March 31, 2016 and 2015:
Statutory tax rate ...........................................................................................................................................
Valuation allowance ................................................................................................................................
Non-deductible expenses ..........................................................................................................................
Non-taxable income .................................................................................................................................
Adjustment of deferred tax assets for enacted changes in tax laws and rates ..........................................
Other .........................................................................................................................................................
Effective tax rate ...........................................................................................................................................

2016

2015

32.8%
(20.0)%
0.4%(0.7)%
3.4%
0.1%
15.9%

35.4%
1.3%
0.3%
(2.6)%
6.4%
1.0%
41.9%

For the year 2015
The “Act for Partial Amendment of the Income Tax Act, etc.” (Act No. 9 of 2015) was promulgated on March 31, 2015, and as a result, income tax rate, etc.
was reduced effective for the fiscal years beginning on or after April 1, 2015. As a result, the effective statutory tax rate used to measure the Group’s deferred
tax assets and liabilities was changed from 35.4% to 32.8% for the temporary differences expected to be realized or settled for the fiscal year beginning April
1, 2015, and to 32.0% for the fiscal years beginning on or after April 1, 2016. The effect of the change in the effective statutory tax rate as of and for the
fiscal year ended March 31, 2015 was to decrease deferred tax assets, deferred tax liabilities, deferred gains or losses on hedges, and accumulated adjustments for retirement benefits by ¥42 million, ¥1,187 million, ¥25 million and ¥56 million, respectively, and increase valuation difference on available-forsale securities and deferred income taxes by ¥2,392 million and ¥1,166 million, respectively, from the amounts that would have been reported without thechange.
For the year 2016
The “Act for Partial Amendment of the Income Tax Act, etc.” (Act No. 15 of 2016) and “Act for Partial Amendment of the Local Tax Act, etc.” (Act No. 13
of 2016) were enacted at the Diet on March 29, 2016, and as a result, income tax rate, etc. was reduced effective for the fiscal years beginning on or after
April 1, 2016. As a result, the effective statutory tax rate used to measure the Group’s deferred tax assets and liabilities was changed from 32.0% to 30.6%
for the temporary differences expected to be realized or settled for the fiscal years beginning on April 1, 2016 and 2017, and to 30.4% for the fiscal years
beginning on or after April 1, 2018. The effect of the change in the effective statutory tax rate as of and for the fiscal year ended March 31, 2016 was todecrease deferred tax assets, deferred tax liabilities, deferred gains or losses on hedges, and accumulated adjustments for retirement benefits by ¥6 million($53 thousand), ¥376 million ($3,336 thousand), ¥12 million ($106 thousand) and ¥197 million ($1,748 thousand), respectively, and increase valuation difference on available-for-sale securities and deferred income taxes by ¥1,095 million ($9,717 thousand) and ¥515 million ($4,570 thousand), respectively,from the amounts that would have been reported without the change.

41
41

Consolidated Financial Statements

22. BUSINESS COMBINATIONS
For the year 2015
Not applicable.

Consolidated Financial Statements

For the year 2016
Transactions under Common Control
Additional Acquisition of Subsidiaries’ Shares(1) Overview of the transactions
a. Company names and business descriptions subject to the business combination
Company Names Subject to the Business Combination
Nanto Credit Guarantee Co., Ltd.
Nanto Lease Co., Ltd.
Nanto Computer Service Co., Ltd.
Nanto Investment Management Co., Ltd.
Nanto DC Card Co., Ltd.
Nanto Card Services Co., Ltd.

Business Descriptions
Other (Credit guarantee)
Leasing
Other (Computer software development and services)
Other (Investment advisory services)
Other (Credit card business)
Other (Credit card business)b. Effective date of the business combination
September 30, 2015c. Legal form of the business combination
The transactions were classified as share acquisitions from non-controlling stockholders.
d. Company names following the business combination
The companies’ names have not been changed following the business combination.
e. Other matters
The Bank raised the ownership ratio of its subsidiaries to 100% through acquiring their shares held by non-controlling stockholders for the purposes ofencouraging to “strengthen the Group’s capabilities”, which is placed as one of key strategies of the Bank’s medium-term management plan called “Vitality
Creation Plan” that covers the three-year period from April 2014 to March 2017.
(2) Overview of accounting procedures implemented
The transactions were accounted for as transactions with non-controlling stockholders, which are classified as transactions under common control, based on
the “Revised Accounting Standard for Business Combinations” (ASBJ Statement No. 21, September 13, 2013) and the “Revised Guidance on AccountingStandard for Business Combinations and Accounting Standard for Business Divestitures” (ASBJ Guidance No. 10, September 13, 2013).
(3) Additional acquisition of shares in subsidiaries
Acquisition cost and consideration paid

Consideration paid for acquisition: Cash and due from banks ...............................................................
Acquisition cost .......................................................................................................................................

Millions of yen

¥ 967
¥ 967

Thousands of
U.S. dollars$ 8,581$ 8,581(4) Changes in the portion held by the Bank in connection with the transactions with non-controlling interests
a. Main reasons for changes in capital surplus
Additional acquisition of subsidiaries’ sharesb. Increase in capital surplus due to transactions with non-controlling interests¥7,261 million ($64,439 thousand)
23. SEGMENT AND RELATED INFORMATION(1) Overview of the reportable segments
The Bank’s reportable segments are determined on the basis that separate financial information for such segments is available and examined periodically by
the Board of Directors to make decisions regarding the allocation of management resources and assess the business performances of such segments within
the Group. The Group’s main operations are banking services. The Bank also provides securities services and operates credit guarantee business and leasing
and credit card businesses. The Group has divided its business operations into the two reportable segments of “Banking and Securities” and “Leasing.”
Banking and Securities includes banking and the securities business, and Leasing includes leasing.
(2) Basis of measurement for reported segment profit (loss), segment assets, segment liabilities and other material items
The accounting method used for reportable business segments is presented in accordance with Note 2, “SUMMARY OF SIGNIFICANT ACCOUNTINGPOLICIES.” The reportable segment profit figures are based on operating profit. Income arising from intersegment transactions is based on arm’s length
prices.

4242

(3) Information about reported segment profit (loss), segment assets, segment liabilities and other material items
Segment information for the fiscal years ended March 31, 2016 and 2015 is summarized as follows:
Millions of yen

2016
Reportable segments
Banking and
Securities

Ordinary income:Outside customers ......................................
Intersegment income ...................................
Total ........................................................
Segment profit .................................................
Segment assets ................................................
Segment liabilities ...........................................
Other item:
Depreciation ...............................................
Interest income ...........................................
Interest expense ..........................................
Extraordinary gain ......................................
Extraordinary loss .......................................
Tax expense ................................................
Increase in tangible
and intangible fixed assets ..........................

¥

Leasing

68,256304
68,56013,101
5,494,616
5,244,740¥ 5,633
936
6,569
189
21,912
19,0083,725
53,424
3,796
560
76
1,878
3,239

Total

¥

Other

Total

¥

75,784
3,458
79,243
14,3595,534,093
5,272,398

Adjustment¥

72(3,458)(3,386)(11)(28,485)(18,503)

Consolidated

73,8901,240
75,13013,2905,516,528
5,263,749¥ 1,894
2,217
4,112
1,068
17,564
8,649

¥

156
2
137
51
0
78

3,881
53,427
3,934
612
76
1,957

85
46
15
645
0
351

3,967
53,473
3,949
1,257
77
2,308

39
(97)
(154)
(696)
—
59

4,006
53,376
3,795
560
77
2,367

192

3,431

83

3,515

(54)

3,461

Consolidated Financial Statements

As described in Note 2 (q), “SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Changes in accounting policies,” effective from the fiscal
year ended March 31, 2015, with respect to the application of Retirement Benefits Standard and Retirement Benefits Guidance, the Group has applied theParagraph 35 of Retirement Benefits Standard and Paragraph 67 of Retirement Benefits Guidance. Accordingly, the Group has revised the methods used to
calculate projected benefit obligations and service cost and has also revised those of the business segments in the same manner.
As a result, segment profit in the “Banking and Securities” for the fiscal year ended March 31, 2015 increased by ¥69 million and segment liabilities inthe “Banking and Securities” at the beginning of the fiscal year ended March 31, 2015 increased by ¥584 million , from the amounts that would have beenreported without the change.

75,856—75,856
14,347
5,505,607
5,253,894

Notes: 1.	Ordinary income (“Total income” less extraordinary gain included in “Other income” in the consolidated statements of income) is presented in place of net sales of operatingcompanies of other industry groups.
2. 	“Other” includes business segments which are not included in the reportable segments and comprises credit guarantees, real estate leasing and management, softwaredevelopment and credit cards.
3. Adjustments are as below:		 (1) Adjustment of ordinary income for outside customers of ¥72 million is mainly the recovery of written off claims included in “other.”		 (2) Adjustment of segment profit of negative ¥11 million is the elimination of intersegment transactions.
		 (3) Adjustment of segment assets of negative ¥28,485 million is the elimination of intersegment transactions.
		 (4) Adjustment of segment liabilities of negative ¥18,503 million is the elimination of intersegment transactions and the adjustment of liability for retirement benefits.
		 (5) Adjustment of depreciation of ¥39 million is the elimination of intersegment transactions.
		 (6) Adjustment of interest income of negative ¥97 million is the elimination of intersegment transactions.
		 (7) Adjustment of interest expense of negative ¥154 million is the elimination of intersegment transactions.
		 (8) Adjustment of extraordinary gain of negative ¥696 million is the elimination of intersegment transactions.
		 (9) Adjustment of tax expense of ¥59 million is the elimination of intersegment transactions.
		 (10) Adjustment of increase in tangible and intangible fixed assets of negative ¥54 million is the elimination of intersegment transactions.
4.	Segment profit is reconciled to ordinary profit, which represents ordinary income less ordinary expenses. Ordinary expenses represent “Total expenses” less extraordinary loss
included in “Other expenses” in the consolidated statements of income. Therefore, consolidated segment profit, which shows ordinary profit, is reconciled to “Income before
income taxes” through the addition/deduction of extraordinary gain/loss, net.

43
43

Consolidated Financial Statements

Millions of yen

2015
Reportable segments
Banking and
Securities

Consolidated Financial Statements

Ordinary income:Outside customers ......................................
Intersegment income ...................................
Total ........................................................
Segment profit .................................................
Segment assets ................................................
Segment liabilities ...........................................
Other item:
Depreciation ...............................................
Interest income ...........................................
Interest expense ..........................................
Extraordinary gain ......................................
Extraordinary loss .......................................
Tax expense ................................................
Increase in tangible
and intangible fixed assets ..........................

¥

Leasing

Total

73,453338
73,792
16,3795,317,675
5,076,096¥ 6,238
849
7,087
332
21,856
18,883

4,158
54,892
3,764
279
45
6,861
3,371

¥

Other

Total

¥

81,5743,435
85,00917,912
5,356,845
5,103,611

Adjustment¥

98(3,435)(3,337)(52)(28,184)(26,268)

Consolidated

79,692
1,187
80,88016,711
5,339,531
5,094,979¥ 1,881
2,247
4,128
1,201
17,314
8,631¥

81,672—
81,672
17,8605,328,661
5,077,342

212
1
171
—
0
219

4,370
54,893
3,935
279
45
7,080

86
53
11
—
0
486

4,457
54,947
3,947
279
46
7,566

69
(111)
(180)
(82)
—
(14)

4,526
54,835
3,766
197
46
7,552

7

3,379

48

3,427

37

3,464

Notes: 1.	Ordinary income (“Total income” less extraordinary gain included in “Other income” in the consolidated statements of income) is presented in place of net sales of operatingcompanies of other industry groups.
2. 	“Other” includes business segments which are not included in the reportable segments and comprises credit guarantees, real estate leasing and management, softwaredevelopment and credit cards.
3. Adjustments are as below:		 (1) Adjustment of ordinary income for outside customers of ¥98 million is mainly the recovery of written off claims included in “other.”		 (2) Adjustment of segment profit of negative ¥52 million is the elimination of intersegment transactions.
		 (3) Adjustment of segment assets of negative ¥28,184 million is the elimination of intersegment transactions.
		 (4) Adjustment of segment liabilities of negative ¥26,268 million is the elimination of intersegment transactions and the adjustment of liability for retirement benefits.
		 (5) Adjustment of depreciation of ¥69 million is the elimination of intersegment transactions.
		 (6) Adjustment of interest income of negative ¥111 million is the elimination of intersegment transactions.
		 (7) Adjustment of interest expense of negative ¥180 million is the elimination of intersegment transactions.
		 (8) Adjustment of extraordinary gain of negative ¥82 million is the elimination of intersegment transactions.
		 (9) Adjustment of tax expense of negative ¥14 million is the elimination of intersegment transactions.
		 (10) Adjustment of increase in tangible and intangible fixed assets of ¥37 million is the elimination of intersegment transactions.
4.	Segment profit is reconciled to ordinary profit, which represents ordinary income less ordinary expenses. Ordinary expenses represent “Total expenses” less extraordinary loss
included in “Other expenses” in the consolidated statements of income. Therefore, consolidated segment profit, which shows ordinary profit, is reconciled to “Income before
income taxes” through the addition/deduction of extraordinary gain/loss, net.

44
44

Thousands of U.S. dollars

2016
Reportable segments
Banking and
Securities

Increase in tangible
and intangible fixed assets ..........................

28,745

Leasing

Total

Other

655,750
11,004
666,755
117,944
48,957,472
46,714,137$ 16,808
19,67536,492
9,478
155,875
76,757

1,384
17
1,215
452
0
692

34,442474,148
34,9135,431
674
17,367

754
408
133
5,724
0
3,115

35,205474,556
35,046
11,155683
20,482346(860)(1,366)(6,176)—523

35,552473,695
33,6794,969
683
21,006

1,703

30,449736

31,194(479)

30,715$ 49,991
8,306
58,297
1,677
194,462
168,690

$

Total

$

Adjustment

672,559
30,688703,257
127,431
49,113,356
46,790,894

Consolidated$

638 $ 673,198(30,688)—(30,049)
673,198(97)
127,325(252,795) 48,860,552(164,208) 46,626,677

Consolidated Financial Statements

Ordinary income:Outside customers ...................................... $ 605,750
Intersegment income ...................................
2,697
Total ........................................................
608,448
Segment profit .................................................
116,267
Segment assets ................................................ 48,763,010
Segment liabilities ........................................... 46,545,438
Other item:
Depreciation ...............................................
33,058474,121
Interest income ...........................................
Interest expense ..........................................
33,688Extraordinary gain ......................................
4,969
Extraordinary loss .......................................
674
Tax expense ................................................
16,666

Notes: 1.	Ordinary income (“Total income” less extraordinary gain included in “Other income” in the consolidated statements of income) is presented in place of net sales of operatingcompanies of other industry groups.
2. 	“Other” includes business segments which are not included in the reportable segments and comprises credit guarantees, real estate leasing and management, softwaredevelopment and credit cards.
3. Adjustments are as below:		 (1) Adjustment of ordinary income for outside customers of $638 thousand is mainly the recovery of written off claims included in “other.”		 (2) Adjustment of segment profit of negative $97 thousand is the elimination of intersegment transactions.
		 (3) Adjustment of segment assets of negative $252,795 thousand is the elimination of intersegment transactions.
		 (4) Adjustment of segment liabilities of negative $164,208 thousand is the elimination of intersegment transactions and the adjustment of liability for retirement benefits.
		 (5) Adjustment of depreciation of $346 thousand is the elimination of intersegment transactions.
		 (6) Adjustment of interest income of negative $860 thousand is the elimination of intersegment transactions.
		 (7) Adjustment of interest expense of negative $1,366 thousand is the elimination of intersegment transactions.
		 (8) Adjustment of extraordinary gain of negative $6,176 thousand is the elimination of intersegment transactions.
		 (9) Adjustment of tax expense of $523 thousand is the elimination of intersegment transactions.
		 (10) Adjustment of increase in tangible and intangible fixed assets of negative $479 thousand is the elimination of intersegment transactions.
4.	Segment profit is reconciled to ordinary profit, which represents ordinary income less ordinary expenses. Ordinary expenses represent “Total expenses” less extraordinary loss
included in “Other expenses” in the consolidated statements of income. Therefore, consolidated segment profit, which shows ordinary profit, is reconciled to “Income before
income taxes” through the addition/deduction of extraordinary gain/loss, net.

(4) Information about services
Millions of yen

2016

Ordinary income from outside customers ......

Banking

Securities andinvestments¥34,788¥20,645

Leasing¥5,633

OthersTotal¥14,788¥75,856

Millions of yen

2015

Ordinary income from outside customers ......

Banking

Securities andinvestments¥36,486¥24,114

Leasing¥6,238OthersTotal¥14,832¥81,672

Thousands of U.S. dollars

2016

Ordinary income from outside customers ......

Banking

Securities andinvestments

Leasing

OthersTotal$308,732$183,217$49,991$131,238$673,198

Note: Ordinary income (“Total income” less extraordinary gain) is presented in place of net sales of operating companies of other industry groups.

(5) Information about geographic areasa. Ordinary income
The ratio of ordinary income from outside customers within Japan to the total ordinary income in the consolidated statements of income exceeded 90% forboth fiscal years ended March 31, 2016 and 2015; therefore, no information about geographic areas is required to be disclosed.

45
45

Consolidated Financial Statements

b. Tangible fixed assets
The ratio of tangible fixed assets located in Japan to the total tangible fixed assets in the consolidated balance sheets exceeded 90% for both fiscal years
ended March 31, 2016 and 2015; therefore, no information about geographic areas is required to be disclosed.

Consolidated Financial Statements(6) Information about major customers
Ordinary income from a specific customer exceeding 10% of the total consolidated ordinary income did not exist for either fiscal year ended March 31, 2016or 2015. Therefore, information about major customers is not required to be disclosed.
(7) Information on loss on impairment of fixed assets for each reportable segment
There is no loss on impairment of fixed assets for the fiscal year ended March 31, 2016.
Millions of yen

2015
Reportable segments
Banking and
Securities

Loss on impairment ........................................

Leasing

¥11

Total

—

Others

¥11

Total

—

¥11

(8) Information on amortization of goodwill and its remaining balance for each reportable segment
There is no information to be reported on amortization of goodwill and its remaining balance.
(9) Information on gain on negative goodwill for each reportable segment
There is no information to be reported on gain on negative goodwill.
24. RELATED PARTY TRANSACTIONS
For the fiscal year ended March 31, 2016, related party transactions were as follows:
Relationshipwith the Bank

Name

Relatives ofofficers of theBank

AtsutoHashimotoPaid-in
Votingcapital BusinessrightsLocation (millions
line
ownershipof yen)(%)—

A company inwhich majority
voting rights Nikken
City
are held byBlast Kogyo Daito
Osaka
relatives ofCo., Ltd. *3
officers of theBank—

Publicofficer

—

10

Metal
processing—

Relationship ofrelated parties

Details oftransactions

Eldest son of
Masaaki Hashimoto Lending of money*2(Corporate Auditor) Interest receivable
Loans

Loans

Lending of money
Interest receivable

Transaction
amount(millions ofyen)

Year-end
Year-end
Transaction
Accounting balancebalanceamounttitle(millions of (thousands of(thousands ofyen)
U.S. dollars)
U.S. dollars)

20
0

177
0

Loans
—

19
—

168
—

90
1

798
8

Loans
—

145
—

1,286
—

Policies regarding and terms and conditions of the transactions
Notes: 1. Terms and conditions of loans are determined on an arm’s length basis.
2. Real estate is accepted as collateral for loan transactions.
3. Relatives of Naoki Minowa (Managing Director of the Bank) have 62.5% of voting rights of this company directly.
4. Hiroki Matsuoka retired from the position of Director of the Bank on June 26, 2015. The Bank has loans to his son-in-law, Tetsuya Matsubara, in the amount of ¥28 million($248 thousand) as of that day.

For the fiscal year ended March 31, 2015, related party transactions were as follows:
Relationshipwith the Bank

Relatives ofofficers of the
Bank

Name

Paid-in
Votingcapital BusinessrightsLocation (millions
line
ownershipof yen)(%)

TetsuyaMatsubara——

Publicofficer—

Shigeichi
Kawai

—

—

Forestry

—

10

Metal
processing—

A company inwhich majority
voting rights Nikken
are held byBlast Kogyo Daito City
Osaka
relatives ofCo., Ltd. *4
officers of theBank

Relationship ofrelated parties

Details oftransactions

Son-in-law of Hiroki
Matsuoka
Lending of money*2(Senior Managing Interest receivable
Director)
Loans
Father of
Repayments of
Shigeyori Kawai loans *3(Director)
Interest receivable
Loans

Loans

Lending of money
Interest receivable

Year-end
Transaction
amount Accounting balance
title(millions of(millions of
yen)
yen)
—
0

Loans
—

28
—

244
1

—
—

—
—

—
0

Loans
—

89
—

Policies regarding and terms and conditions of the transactions
Notes: 1. Terms and conditions of loans are determined on an arm’s length basis.
2. Real estate is accepted as collateral for loan transactions.
3. Lump-sum repayments were made on December 17, 2014.
4. Relatives of Naoki Minowa (Corporate Auditor of the Bank) have 62.5% of voting rights of this company directly.

46
46

25. PER SHARE INFORMATION
Net assets per share at March 31, 2016 and 2015 and net income per share for the fiscal years then ended were as follows:
Yen

2015

2016

¥937.66
45.32
45.26

¥906.92
36.81
36.76

$8.32
0.40
0.40

Basic information in computing the above per share data was as follows:
Thousands of
U.S. dollars

Millions of yen(Net assets per share)
Net assets ............................................................................................................
Amounts to be deducted from net assets: ...........................................................
Stock acquisition rights ..................................................................................
Non-controlling interests ................................................................................
Net assets attributed to common stock ...............................................................
Outstanding number of shares of common stock at end of year
(unit: thousand shares) ......................................................................................
(Basic and diluted net income per share)
Net income attributable to owners of parent .......................................................
Net income attributable to common stockholders of parent ...............................
Average outstanding number of shares during the year
(unit: thousands of shares) ................................................................................
Adjustment to net income attributable to owners of parent ................................
Increase in number of shares of common stock: ................................................
Stock acquisition rights ..................................................................................
Convertible securities not diluting net income per share ....................................

2016

2015

¥251,712
136
(136)
(—)
251,576¥251,318
8,082
(146)
(7,935)
243,236$2,233,865
1,206(1,206)(—)
2,232,658

268,301

268,200—¥ 12,159
12,159¥268,282
—
366
(366)
—

2016

9,874
9,874

$ 107,907
107,907268,201
—
382
(382)
—

—
—
—
—
—

Consolidated Financial Statements

Net assets per share ............................................................................................
Net income per share - basic ..............................................................................
Net income per share - diluted ............................................................................

U.S. dollars

2016

For the year 2015
As described in Note 2 (q), “SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Changes in accounting policies,” effective from the fiscal year
ended March 31, 2015, with respect to the application of Retirement Benefits Standard and Retirement Benefits Guidance, the Group has applied Paragraph
35 of Retirement Benefits Standard and Paragraph 67 of Retirement Benefits Guidance in accordance with Paragraph 37 of Retirement Benefits Standard.
As a result, net assets per share decreased by ¥1.40 at the beginning of the fiscal year ended March 31, 2015 while basic and diluted net income per share
increased by ¥0.17 for the fiscal year ended March 31, 2015.
For the year 2016
As described in Note 2 (q), “SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Changes in accounting policies,” effective from the fiscal year
ended March 31, 2016, with respect to the application of the Business Combination Accounting Standards, the Group has applied the provisional treatments
in Paragraph 58-2(4) of Statement No. 21, Paragraph 44-5 (4) of Statement No.22 and Paragraph 57-4 (4) of Statement No.7.
As a result, basic and diluted net income per share decreased by ¥27.06 ($0.24) and ¥27.02 ($0.23), respectively, for the fiscal year ended March 31,
2016.
There were no effects on net assets per share.
26. SUBSEQUENT EVENTSFor the year 2015
Not applicable.
For the year 2016
The Bank resolved to submit a proposal of a reverse stock split at the annual stockholders’ meeting held on June 29, 2016, at the meeting of the Board of
Directors held on May 16, 2016, and this proposal was approved at the stockholders’ meeting. The details of the reverse stock split were as follows:a. Purpose of the reverse stock split
The Japanese stock exchanges are making efforts to unify a share trading unit of common stock of domestic listed companies into 100 shares for improving
the investors’ convenience and the deadline for transferring to a 100-share unit has been decided to be October 1, 2018.
Taking such efforts into consideration, the Bank resolved to change the share trading unit from 1,000 shares to 100 shares at the meeting of the Board of
Directors held on May 16, 2016.
In addition, following this change, the Bank will implement a one-for-ten reverse stock split to maintain the price per share trading unit at the levelconsidered to be desirable by the Japanese stock exchanges, namely, ¥50,000 or more but less than ¥500,000, and to have existing stockholders hold theBank’s shares stably and not to change the number of voting rights.

47
47

Consolidated Financial Statementsb. Ratio and time of the reverse stock split
Effective October 1, 2016, the shares held by stockholders registered or recorded in the final stockholders registry on September 30, 2016 will be consolidated at the rate of one share for ten shares.

Consolidated Financial Statements

c. Decrease in number of shares due to the reverse stock split
Total number of issued shares before the reverse stock split (as of March 31, 2016) ..................................
Decrease in number of shares due to the reverse stock split ........................................................................
Total number of issued shares after the reverse stock split ...........................................................................

272,756,564 shares
245,480,908 shares
27,275,656 shares

Note: “Decrease in number of shares due to the reverse stock split” and “Total number of issued shares after the reverse stock split” are theoretical values computed based on total number
of issued shares before the reverse stock split and the ratio of the reverse stock split.

d. Effects on per share information
Net assets per share at March 31, 2016 and 2015 and net income per share for the fiscal years then ended, which are computed assuming the reverse stock
split was implemented on April 1, 2014, were as follows:yen

Net assets per share ............................................................................................
Net income per share - basic ..............................................................................
Net income per share - diluted ............................................................................

U.S. dollars

2016

2015

¥9,376.62
453.22452.60¥9,069.20
368.15367.63

2016$83.21
4.02
4.01

27. BORROWED MONEY, BONDS PAYABLE AND LEASE OBLIGATIONS
a. The details of borrowed money as of March 31, 2016 and 2015 were as follows:
Thousands of
U.S. dollars

Millions of yen

Borrowed money
Due from April 2016 through May 2025
Average interest rate: 0.25% p.a. ....................................................................

2016

2015

2016

¥189,724¥116,122$1,683,741

Millions of yen

Thousands of
U.S. dollars¥84,112
2,355
21,74580,955430
127¥189,724$746,467
20,899
192,980
718,450
3,816
1,127$1,683,741

Millions of yen

Thousands of
U.S. dollars

Annual maturities of borrowed money as of March 31, 2016 were as follows:2017 .........................................................................................................................................................
2018 .........................................................................................................................................................
2019 .........................................................................................................................................................
2020 .........................................................................................................................................................
2021 .........................................................................................................................................................
2022 and thereafter ..................................................................................................................................
Total .........................................................................................................................................................
b. The details of bonds payable as of March 31, 2016 and 2015 were as follows:
Not applicable.
c. Lease obligations
Lease obligations are included in “Other liabilities” in the accompanying consolidated balance sheets.
Annual maturities of lease obligation as of March 31, 2016 were as follows:2017 .........................................................................................................................................................
Total .........................................................................................................................................................

¥0
¥0

$0
$0

Average interest rates are omitted since the interest equivalent amount included in total lease charges is allocated over the related period using the straightline method.
d. Other
The Group has not issued commercial paper by way of promissory notes for funding for operating activities.

48
48

Independent Auditors’ Report

Independent Auditors’ Report49
49

Capital Management
Consolidated Capital Adequacy Ratio
As of March 31, 2016 and 2015
Millions of yen(1) Capital adequacy ratio ((2)/(3)) ..............................................................................................................
(2) Capital .....................................................................................................................................................
(3) Risk-weighted assets ...............................................................................................................................
(4) Requisite capital ......................................................................................................................................

2016

2015

9.36%
¥ 206,945
2,209,741
88,3899.72%¥ 204,318
2,101,774
84,070Note: The capital adequacy ratio was calculated on the basis of the formula provided by the Ministry of Finance under Provision 14, Clause 2 of the Banking Law.

Capital Management

Nonconsolidated Capital Adequacy Ratio
As of March 31, 2016 and 2015
Millions of yen(1) Capital adequacy ratio ((2)/(3)) ..............................................................................................................
(2) Capital .....................................................................................................................................................
(3) Risk-weighted assets ...............................................................................................................................
(4) Requisite capital ......................................................................................................................................

2016

2015

9.11%
¥ 198,913
2,181,192
87,2479.29%¥ 193,405
2,080,814
83,232

Note: The capital adequacy ratio was calculated on the basis of the formula provided by the Ministry of Finance under Provision 14, Clause 2 of the Banking Law.

50
50

Organization, Group Network(As of July 1, 2016)

ORGANIZATIONSTOCKHOLDERS’ MEETINGHEADQUARTERS
General Secretariat

BOARD OF DIRECTORS

Corporate Planning Division

President
Senior Managing Directors
Managing Directors
Directors

Business Planning& Promotion Headquarters

Chairman

Risk Management Division
General Business DivisionCorporate Business Division
Personal Business Division
Public Institutions & Regional Vitality Creation Division• DOMESTIC
OFFICES

Osaka Regional Headquarter
Credit Analysis Division

Organization, Group Network

Compliance Management Division

MANAGING DIRECTORS’COMMITTEE

Financial Investment Division

BOARD OF CORPORATE AUDITORS

Operations Control Division
Operations DivisionInternal Audit DivisionCorporate Auditors

Personnel DivisionCorporate Auditors’ Office

General Affairs Division

NANTO BANK GROUP(As of July 1, 2016)
The Nanto Group, which consists of the Nanto Bank and its 10 consolidated subsidiaries, offers financial
services related to credit guarantees and leasing as well as its primary business, banking services.

THE NANTO BANK, LTD.

BankingHead Office and 109 Branches
25 Sub-branches
3 Agencies (Nanto Bank Agency Co., Ltd.’s business offices)
2 Representative Offices (Hong Kong and Shanghai)

Credit Guarantees

Nanto Credit Guarantee Co., Ltd.

Leasing

Nanto Lease Co., Ltd.

Computer Software
Development andServices

Nanto Computer Service Co., Ltd.

Credit Card Business

Nanto DC Card Co., Ltd.
Nanto Card Services Co., Ltd.

Other Operations

Nanto Estate Co., Ltd.
Nanto Business Service Co., Ltd.
Nanto Investment Management Co., Ltd.
Nanto Staff Service Co., Ltd.
Nangin Agency Co., Ltd.

Companies indicated with a pink square are consolidated subsidiaries.

51
51

Affiliates and Subsidiaries, Bank Data

(As of July 1, 2016)

Outline of Consolidated Subsidiaries
Indirect
Direct holdings holdings through
Capital(millions of yen) of the Bank (%) subsidiaries (%) Business line

Affiliates and Subsidiaries, Bank Data

Subsidiaries

Address

Established

Nanto Estate Co., Ltd.

16, Hashimoto-cho
Nara City, Nara, Japan

November 8,
1969

¥30

100%

—

Leasing and managementof real estate

Nanto Business Service
Co., Ltd.

93-2, Minami-Kyobate-cho
1-chome, Nara City, Nara, Japan

June 1,
1984

10

100

—

Centralized processing ofclerical operations for the Bank

Nanto Credit
Guarantee Co., Ltd.

1-1, Shimo-Sanjo-cho Nara City,
Nara, Japan

October 9,
1984

10

100

—

Credit guarantee

Nanto Lease Co., Ltd.

52-1, Omori-cho Nara City,
Nara, Japan

December 22,
1984

50

100

—

Leasing

Nanto Computer Service
Co., Ltd.

93-2, Minami-Kyobate-cho
1-chome, Nara City, Nara, Japan

July 1,
1986

10

100

—

Computer softwaredevelopment and services

Nanto Investment
Management Co., Ltd.

297-2, Omiya-cho 4-chome Nara
City, Nara, Japan

November 21,
1986

120

100

—

Investment advisory
services

Nanto DC Card Co., Ltd.

61-7, Higashi-Ikoma
October 12,
1-chome, Ikoma City, Nara, Japan 1990

50

100

—

Credit card business

Nanto Card Services
Co., Ltd.

61-7, Higashi-Ikoma
December 10,
1-chome, Ikoma City, Nara, Japan 1990

50

100

—

Credit card business

Nanto Staff Service
Co., Ltd.

297-2, Omiya-cho 4-chome Nara
City, Nara, Japan

March 18,
1991

20

100

—

Dispatch of temporary staff

Nangin Agency Co., Ltd.

297-2, Omiya-cho 4-chome Nara
City, Nara, Japan

October 6,
2009

50

100

—

Bank agency services

HEAD OFFICECORPORATE DATA (As of March 31, 2016)16, Hashimoto-cho
Nara City, Nara 630-8677, Japan
Phone: (0742) 22-1131
URL: http://www.nantobank.co.jp/

Authorized shares:
Outstanding shares:
Stated capital:
Number of stockholders:Date of incorporation:
Domestic network:
Overseas network:
Number of employees:
Ordinary stockholders’ meeting:Stock listings:

HONG KONG REPRESENTATIVE OFFICEROOM 1709,
17/F, HUTCHISON HOUSE,
10 HARCOURT ROAD,
HONG KONG
Phone: 852-2868-9932

SHANGHAI REPRESENTATIVE OFFICE
16F, Hang Seng Bank Tower, 1000 Lujiazui Ring Road,
Pudong New Area, Shanghai, China
Phone: 86-21-6841-2771

640,000,000
272,756 thousand
29,249 million
10,244
June 1934
138 offices
2 representative offices
2,669
June 29, 2016
Tokyo Stock Exchange

MAJOR STOCKHOLDERS (As of March 31, 2016)
Nippon Life Insurance Co.
Japan Trustee Services Bank, Ltd.
(trust account)
Meiji Yasuda Life Insurance Co.

(standing proxy: Trust & Custody Services Bank, Ltd.)The Nanto Bank Employees’ Stockholders Association
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Sumitomo Life Insurance Co.

(standing proxy: Japan Trustee Services Bank, Ltd.)DMG MORI Co., Ltd.
Japan Trustee Services Bank, Ltd(trust account 9)
Kitamura Forestry Co., Ltd.
DAIWA GAS Co., Ltd
Total

52
52

Number of shares(thousands)

Percentage(%)

10,531

3.86

9,682

3.54

8,430
7,761
7,083

3.09
2.84
2.59

6,620
4,766

2.42
1.74

4,749
4,183
4,019
67,826

1.74
1.53
1.47
24.86

THE NANTO BANK, LTD.
16, Hashimoto-cho, Nara City, Nara 630-8677, Japan
Phone: (0742)22-1131