ANNUAL REPORT 2014
Year ended March 31, 2014

AN NUA L R E P O RT 2 0 1 4
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, 2014, Nanto Bank had deposits of ¥4,585.3 billion, loans of ¥2,972.1 billion, andtotal assets of ¥5,187.1 billion.
Nanto Bank’s domestic network of 136 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

2014

2013

2012

2011

2010

2014

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

¥

82,717¥

88,875¥90,075¥92,751¥

95,942$803,701

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

62,923

77,661

78,84378,711

83,145611,377

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

19,794

11,214

11,231

14,03912,796

192,324

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

9,079

7,621

3,467

6,584

7,293

88,214

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

5,187,191

5,025,037

4,809,575

4,608,561

4,568,768

50,400,223

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

2,972,159

2,898,844

2,785,671

2,709,612

2,730,540

28,878,342

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

1,907,331

1,840,741

1,755,495

1,668,948

1,560,110

18,532,170

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

4,662,888

4,514,604

4,343,154

4,181,096

4,117,975

45,305,946

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

4,966,542

4,809,291

4,597,334

4,401,386

4,361,672

48,256,335

Minority interests .....................................

7,336

6,658

25,971

25,125

24,621

71,278

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

220,648

215,745

212,241

207,175

207,095

2,143,878

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

29,24929,24929,24929,24929,249284,191

At year-end:

Per share data:

Yen

U.S. dollars

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

¥ 33.78¥ 28.01¥ 12.57¥ 23.88¥ 26.45$0.32

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

794.95774.46675.42660.24661.81

7.72

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

10.51

10.66

11.63

11.74

12.12

Note: U.S. dollar amounts are included solely for the convenience of readers and are calculated at the exchange rate of ¥102.92 to US$1.00, the rate prevailing on March 31, 2014.

Net Income

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

9.0

4,568.7

4,608.5

2014

2010

2011

Total Net Assets(Billions of yen)
4,809.5

5,025.0

5,187.1
207.1

212.2

215.7

220.6

207.0

2010

2011

2012

2013

2014

7.6

7.2
6.5

3.4

2010

2011

2012

2013

2012

2013

2014

1

Message
Message fromfrom thethe President
President
We would like to sincerely thank you for your support for the Nanto Bank.
We are pleased to announce that on June 1, 2014, the Bank celebrated the 80th anniversary of its bank’s founding. We are deeply grateful for the support we have received from the community, our shareholders and our customers over the years.
The purpose of this Annual Report 2014 is to disclose our performance in fiscal 2013 (the year ended March 31, 2014), and our initiatives
conducted during the fiscal year. We would appreciate it if you would read through the report.
The Japanese economy continued in gradual recovery trend overall during the fiscal year under review, with the effects of “Abenomics”
and other factors driving the recovery in corporate performance as well as consumer spending. The end of the previous year saw a surge indemand ahead of the consumption-tax hike that took effect in April; although we saw some signs of a rebound from this demand as weentered the current fiscal year, the gradual recovery trend in the economy continues.
In the regional economy centered on Nara Prefecture, the business climate is improving and the recovery trend is observed in consumer
spending.
Under these circumstances, we have created a 10-year management vision that will run until our 90th anniversary as “Vitality Creating
Bank.”. We have started a new medium-term management plan titled “Vitality Creation Plan” (April 2014 to March 2017), with the aim tobecome a bank which creates vitality for our region and our bank. We are committed to vitalizing our region, while creating revenue opportunities through expanding our scale by the strengthening of our deposits, loan portfolios, and other assets.
As we marked the 80th anniversary of our founding, our executives and employees are further united in our commitment and we will devote
full efforts on continuing to meet the expectations of our stakeholders as “Vitality Creating Bank,” by offering ever-better financial services.
We look forward to the continued understanding and support of all our stakeholders.

Aiming to Be a Bank Creating Vitality of the Region- Building a Bright Future with the Community On Our 80th Anniversary
We are pleased to announce that the Bank celebrated the 80th
anniversary of its founding in this June. We owe this accomplishment to the steadfast support that the community, ourshareholders, and our customers have given us over theyears, and we are deeply grateful for that.
The Nanto Bank was founded in June 1, 1934 through themerger of four banks: the Rokuju-hachi Bank, the Yoshino
Bank, the Yagi Bank, and the Gose Bank. Since our founding, we have worked closely with the local community inorder to fulfill our role as a leading local bank for long years.
We are profoundly grateful to the trust our customers haveplaced in us; this trust has enabled us to maintain a high local
share of both in deposits and loans.
To commemorate our 80th anniversary, we have designated “Building a Bright Future with the Community” as ourcatch-phrase for the year. This catch-phrase represents ourstrong passion for the region over our long history, as well as
our determination for the future.
Our executives and employees are all united in their fullcommitment to continuing our community-rooted activities,
and developing and promoting the region where our bankoperates.

2

Our Economic and Financial Environment
The Japanese economy continued in gradual recovery
trend overall during the fiscal year under review, withthe effects of “Abenomics” and other factors driving therecovery in corporate performance as well as consumer
spending. The end of the previous year saw a surge indemand ahead of the consumption-tax hike that tookeffect in April; although we saw some signs of a reboundfrom this demand as we entered the current fiscal year,
the gradual recovery trend in the economy continues.
In the regional economy centered on Nara Prefecture,
the business climate is improving and the recovery trend

is observed in consumer spending.
Meanwhile, the business environment surrounding
financial institutions is undergoing massive change,
including shrinking population, aging society and progress of globalization. At the same time, competition
among financial institutions is heating up, including
competition from other industries. Under these circumstances, one of our challenges is creating a fuller line ofproducts and services that meet a broad range of customer needs.

New Medium-Term Management Plan: “Vitality Creation Plan”
Amid these conditions, we have defined a management

investment; efficient management through appropriate invest-

vision for the decade leading to our 90th anniversary, as

ment of corporate resources; and creating an organization“Vitality Creating Bank.” Under this vision, we aim tothat enables self-realization by developing and vitalizing

become a bank committed to creating vitality in both ourhuman resources. Building on these principles, the plan laysbank and the region in which we operate.

out five key strategies and we will make strong efforts on

The new medium-term management plan, “Vitality

these strategies: vitalizing the community; establishing a rev-

Creation Plan,” which we started in April of this year, isenue base; strengthening human resources and organization;

based on the following core principles: increasing top-line

improving productivity; and strengthening internal manage-

earnings through customer-centric action and effective capital

ment structure.

Vitalizing the Community
We believe that vitalizing the regional economy is essential

industry, the government, school, and finance to link up thefor growing together with our customers, and maintaining

challenges and needs of local public institutions with thesustainable growth as a regional financial institution.

technical capabilities and expertise of the private sector. By

Based on this belief, we are committed to ascertaining ouradding these new roles, the Public Institutions & Regionalcustomers’ challenges and needs, and vitalizing the regional

Vitality Creation Division is working to boost regional

economy by offering accurate solutions and leveraging our

growth and development even further as a core organization

consulting function to create and develop industries, improvefor planning and promoting the vitalization of tourism andmanagement, revitalize businesses and so on.

other local industries.

Upon the start of our medium-term management plan, we

In addition to the traditional roles of a bank, we are com-reorganized our Public Institutions Division into the Publicmitted to fulfilling our corporate social responsibility (CSR)

Institutions & Regional Vitality Creation Division. This new

through such activities as environment protection activities

division maintains the Public Institutions Division’s tradi-and social contribution activities. We will meet this responsi-

tional mission of promoting business with local public insti-

bility by leveraging our corporate resources to work on

tutions, and adds several new roles, such as creating anddeveloping the local community and regional economy.

developing industries, and building partnerships between

3Message
Message fromfrom thethe President
President
Establishing a Revenue Base
Nara Prefecture has a fertile individual market. Amid theseIn order to meet the increasingly diverse needs of ourcircumstances, we are committed to expanding our loanbusiness customers, we have established dedicated sections

share by further strengthening customer relations by the trustat our headquarters, including the Value Creation Division

we have cultivated and expanding personal banking with aand the Corporate Finance Support Office in our Credit

focus on customer assets and individual loans, while also fur-Analysis Division. These sections work hand-in-hand withther strengthening the promotion of business loans.

our branches to offer a wide range of solutions (solution-ori-

Meanwhile, in Osaka Prefecture and others, identified as

ented marketing) to our customers, including support for

an important strategic area, in Wakayama Prefecture, in June

expanding overseas and business succession, as well as sup-of last year, we increased the number of branches in

port for improving management.

Wakayama City to two, namely the Wakayama Branch andAlso, to support our individual customers, we havethe Wakayama-Kita Sub-branch. Additionally, in December

enhanced services including Internet banking and a broaderof last year we opened the newly constructed Tezukayama

product lineup. We have also created the NANTO L-Plaza,

Branch, and on the same month, we re-opened Daito Branch

FA offices, and other services to give our individual custom-

to include a street-facing entrance. We will continue toers more sophisticated, specialized asset-management andexpand our core area by further filling our dense network of

consulting services.

branches based on ensuring continuity with Nara Prefecture,

We will continue to be actively committed to meeting ourand promote enhancement of our loans, deposits, and cus-

customers’ needs by expanding our lineup of products andtomer assets.

services, and diversifying our channels.

Strengthening Human Resources and Organization
Of our corporate resources, human resources are the core ele-

(Human Resource Vitality Creation Group). The group’s mis-ment of corporate management and the driver of all our oper-

sion is to expand on education and training to support theations.
As the regional economic climate surrounding the Bank
continues its change, we have been identifying the develop-

We will continue to work to further develop the capabili-ment of our human resources as one of our key challenges,

ties of our employees to enable our bank to provide our cus-

and we have carried out various initiatives.

tomers with more sophisticated financial services with higher

In April this year, we established a team in our Human
Resources Division dedicated to developing human resources4

acquisition of expertise, enhance judgment capabilities, andothers of employees.

added value.

Improving Productivity
While we strongly advance initiatives to enhance our busi-

We are promoting building of new branches and relocat-

ness strategy, such as establishing a revenue base, we are also

ing existing ones to keep pace with changes in the market, as

working on revising our branch roles and personnel assign-

we expand existing area while improving both customer con-ments in accordance with market characteristics, in order tovenience and efficiency.

become more cost-competitive and strengthen our manage-

We are also working to consolidate and streamline ourment structure. In fiscal 2013, we converted seven branches

operations by such means as revising our operating process-into sub-branches, and three branches into individual-specifices, in order to enhance our operational capabilities by reduc-branches.

ing administrative overhead.

Strengthening Internal Management Structure
As an important management issues, we are implementing amitted to installing greater on compliance not only among

variety of measures to overcome “further enhancement of our

executive management but among bank employees as well,compliance framework” and “incorporation of more

as we enhance the efforts to build a more effective compli-

advanced and enhanced risk management” as well.

ance framework.

Compliance is fundamental for banks to faithfully carry

In terms of risk management, we will continue to advanceout their social responsibilities and public missions. In orderand enhance various risk management while appropriately

to earn even greater trust from our stakeholders, we are com-controlling risks and returns.

In Partnership with the Local Community
We will continue to work closely with our local community,

Through these efforts, our executives and employees areoffering products and services that adequately meet our cus-

united for an aim to become “Vitality Creating Bank” which

tomers’ needs, and offering a wide range of accurate andcan contribute to regional development.

swift support.

We look forward to your continued support.

President Yasuo Ueno

5

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” that covers the three-year period fromfiscal 2014 to fiscal 2016. This plan contains five key strategies including “vitalizing the community,” firmly commit torealizing “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 theCompliance & Risk Management Division responsible forrisk management coordination in order to gain a precise
understanding of the nature 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

Compliance & Risk Management Division

Compliance & Risk
Management Division

Risk Categories

Credit Risk(

CreditAnalysis
Division

Main Divisionin Charge) (Market Risk)()(

Compliance &Risk Management
Division

Operational Risk
(Compliance & Risk Management Division)

Liquidity Risk)(

Compliance &Risk Management
Division

Administrative Risk
Operations Control
Division

Systems Risk

Legal Risk
Compliance &Personnel Risk

Tangible Assets Risk

Compliance
Reputational Risk

Personnel
General Affairs General Planning
Control
Risk Management) (Operations
Division ) ( Division ) ( Division ) ( Division ) ( Division )Operation

Divisions of Headquarters/Branches/Consolidated Subsidiaries

Auditing

Internal Audit Division(

Compliance &Risk Management
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 and Tier I 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 continuing soundness of its assets, the Bank
manages credit risk under a credit screening structure that
operates independently of its marketing operations.
We have established the Credit Analysis Division as a risk
management body that is responsible for examining the credit standing of customers, loan screening and the managementof claims.
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 Corporate Finance 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-assess-ment and other methods with which the Bank subjectively
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.
For the management of overall loan portfolios, the Bankhas worked on a more efficient assessment support system byusing several systems, including segment analysis, e.g.
industry-based or rating group-based analysis, a real estatecollateral evaluation system, designed to refine the quantified
collateral evaluation of credit risk which calculates possible
losses in future by using statistical methods, etc.

• 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 Compliance & Risk Management Division, which

10

develops risk management systems, checks compliance withrisk management regulations and other requirements andmonitors the positions and profit performance of market
units. The Compliance & Risk Management Division also
carries out wide-ranging analyses to quantify the risk levelsof assets and liabilities, including deposits, loans and securi-ties. In its analyses, the division uses a variety of analyticaltechniques, including the value at risk (VaR) and basis pointvalue (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.

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 Securities and International
Division closely manages the Bank’s cash flow position on a
day-to-day basis, and the Compliance & Risk Management

Division monitors the management conditions. The ALM
Committee is also responsible for overall monitoring andmanagement of cash flow risk, including the monitoring ofassets available for liquidation and the amount of funds thatthe 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• Managing Liquidity Risk • 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 & Risk 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, 2014)

Yasuo Ueno

Chairman(Representative Director)

President(Representative Director)

Board of Directors and Corporate Auditors

Hiromune Nishiguchi

Yasuo Shimakawa

Masaaki Hashimoto

Hiroki Matsuoka

Deputy President(Representative Director)

Senior Managing Director

Senior Managing Director

Takashi Hashimoto

Kohsaku Yoshida

Yoshihiko Kita

Senior Managing Director

Managing Director(Osaka Regional Headquarter and Osaka Chuo Office)Managing Director(Internal Audit Division)

Chairman
Hiromune Nishiguchi
President
Yasuo Ueno
Deputy President
Yasuo Shimakawa
Senior Managing Director
Masaaki Hashimoto
Hiroki Matsuoka
Takashi Hashimoto
Managing Director
Kohsaku Yoshida(Osaka Regional Headquarter and Osaka Chuo Office)Yoshihiko Kita
(Internal Audit Division)

Directors And General Managers
Toru Hagihara(Tokyo branch and Tokyo Liaison Office)Shigeyori Kawai(Value Creation Division)
Takao Handa(Personnel Division)
Nobuo Shibata(Operations Control Division)
Akira Kondo(Head Office)Keizo Nishikawa(Credit Analysis Division)
Hiroyuki Sakai

Corporate Auditors
Taro Hayama
Naoki Minowa
Mitsuhiko Noguchi
Yasushi Marumori

Note:	Hiroyuki Sakai is outside director pursuant to Item 15, Article 2 of the Company Law and Mitsuhiko
Noguchi and Yasushi Marumori are outside corporate auditors pursuant to Item 16, Article 2 of theCompany Law.

13

Consolidated Financial Statements
Consolidated Balance Sheets
The Nanto Bank, Ltd. and Consolidated Subsidiaries as of March 31, 2014 and 2013
Thousands of
U.S. dollars(Note 1)Millions of yen

Consolidated Financial Statements

2014

2013

2014

Assets:Cash and due from banks (Notes 13 and 15) .................................................
Call loans and bills bought (Note 15) ............................................................
Debt purchased (Note 15) ..............................................................................
Trading account securities (Notes 15 and 16) ................................................
Money held in trust (Notes 15 and 16) ...........................................................
Securities (Notes 6, 9, 15 and 16)...................................................................
Loans and bills discounted (Notes 5, 7 and 15) ............................................
Foreign exchanges (Note 5) ...........................................................................
Lease receivables and lease investment assets ...............................................
Other assets (Note 6) ......................................................................................
Tangible fixed assets (Note 8) ........................................................................
Buildings ....................................................................................................
Land ...........................................................................................................
Construction in progress.............................................................................
Other tangible fixed assets .........................................................................
Intangible fixed assets ....................................................................................
Software .....................................................................................................
Other intangible fixed assets (Note 6) ........................................................
Deferred tax assets (Note 20) .........................................................................
Customers’ liabilities for acceptances and guarantees ...................................
Reserve for possible loan losses (Note 15).....................................................
Total assets .................................................................................................

¥ 202,724
895
4,515
213
22,0001,907,331
2,972,159
2,064
14,90522,274
41,902
11,93924,188
187
5,586
5,748
5,174
573
5,294
11,477(26,314)¥5,187,191¥ 175,662
430
4,279
322
21,0001,840,741
2,898,844
4,023
14,377
20,74640,291
11,19324,204
327
4,564
6,066
5,304
762
13,01813,591(28,358)¥5,025,037$ 1,969,724
8,696
43,8692,069
213,758
18,532,170
28,878,342
20,054
144,821
216,420
407,131
116,002
235,017
1,816
54,27555,84950,272
5,567
51,438111,513(255,674)$50,400,223

Liabilities and net assets:
Liabilities:
Deposits (Notes 6 and 15) ..............................................................................
Negotiable certificates of deposit (Note 15)....................................................
Payables under securities lending transactions (Notes 6 and 15) ...................
Borrowed money (Notes 6, 15 and 25)...........................................................
Foreign exchanges .........................................................................................
Bonds payable (Notes 15 and 25)...................................................................
Other liabilities (Note 25)..............................................................................
Reserve for employee retirement benefits (Note 18)......................................
Liability for retirement benefits (Note 18)......................................................
Reserve for reimbursement of deposits ..........................................................
Reserve for contingent losses..........................................................................
Acceptances and guarantees............................................................................
Total liabilities ...........................................................................................

4,585,357
77,531
141,600
85,388197
20,00024,602—
19,039150
1,198
11,477¥4,966,542

4,418,137
96,467138,235
81,100140
20,00027,25812,669—165
1,526
13,591¥4,809,291

44,552,633
753,313
1,375,825
829,654
1,914
194,325
239,040—
184,988
1,457
11,640111,513$48,256,335

29,24918,813
132,594

29,24918,813
126,387

284,191
182,792
1,288,321(1,918)(2,480)(18,635)

178,739
39,585(760)(4,376)34,448
123
7,336
220,648¥5,187,191

171,970
37,947(931)—
37,016100
6,658
215,745¥5,025,037

1,736,678
384,619(7,384)(42,518)
334,706
1,195
71,2782,143,878$50,400,223

Net assets (Note 3):
Common stock: Authorized 640,000 thousand shares
Issued 272,756 thousand shares in 2014
and 275,756 thousand shares in 2013 ................................
Capital surplus ................................................................................................
Retained earnings ...........................................................................................
Less treasury stock: Issued 4,581 thousand shares in 2014
and 5,909 thousand shares in 2013 ...............................
Total stockholders’ equity
Valuation difference on available-for-sale securities (Note 16) .....................
Net deferred gains or losses on hedges ..........................................................
Accumulated adjustments for retirement benefits (Note 18) .........................
Total accumulated other comprehensive income........................................
Stock acquisition rights ................................................................................
Minority interests .........................................................................................
Total net assets ...........................................................................................
Total liabilities and net assets.....................................................................
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, 2014 and 2013
Thousands of
U.S. dollars(Note 1)Millions of yen

2013

2014

¥38,463
17,362373
17,766
3,804
4,946
82,717¥41,086
17,538369
18,447
6,995
4,438
88,875$373,717
168,694
3,624
172,619
36,96048,056
803,701

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 11) ...............................................................................
Total expenses.........................................................................................

3,165
371
344
388
8,835
820
46,993
2,003
62,923

3,414
434
344
462
9,380
3,187
50,40810,03077,66130,752
3,604
3,342
3,769
85,843
7,967
456,597
19,461
611,377

19,794

11,214

192,324

1,024
8,998
10,0239,770
691¥ 9,079

386
2,150
2,536
8,677
1,056
¥ 7,621

9,949
87,427
97,386
94,9286,713$ 88,214

Income before income taxes and minority interests ......................................
Income taxes (Note 20):
Current ............................................................................................................
Deferred ..........................................................................................................
Total income taxes..................................................................................
Net income before minority interests...............................................................
Minority interests .............................................................................................
Net income..........................................................................................................

U.S. dollars(Note 1)Yen

Per share of common stock (Note 23):
Net income - basic ..........................................................................................
Net income - diluted .......................................................................................
Dividends .......................................................................................................

¥33.7833.74
6.00

Consolidated Financial Statements

2014

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 10)..................................................................................
Total income...........................................................................................

¥28.01
27.99
6.00

$0.32
0.32
0.05

See Notes to Consolidated Financial Statements.

Consolidated Statements of Comprehensive Income
The Nanto Bank, Ltd. and Consolidated Subsidiaries for the Years Ended March 31, 2014 and 2013
Thousands of
U.S. dollars(Note 1)Millions of yen

Net income before minority interests .................................................................
Other comprehensive income (Note 12):Valuation difference on available-for-sale securities .....................................
Net deferred gains or losses on hedges...........................................................
Total other comprehensive income.............................................................
Total comprehensive income for the year............................................................
Total comprehensive income attributable to:
Owners of the parent.......................................................................................
Minority interests............................................................................................

2014

2013

2014

¥ 9,770¥ 8,677$ 94,928

1,626
170
1,797
¥11,568

18,857(80)
18,777¥27,455

15,798
1,651
17,460$112,397¥10,888680¥26,431
1,023$105,790
6,607

See Notes to Consolidated Financial Statements.

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, 2014 and 2013

Number ofshares ofcommonstock(thousands)

Commonstock

Consolidated Financial Statements

Balance at April 1, 2012.................... 281,756 ¥29,249
Cash dividends ...............................
——Net income .....................................
——
Purchase of treasury stock..............
——
Disposition of treasury stock .........
——
Retirement of treasury stock...........
(6,000)—Transfer from retained earnings tocapital surplus ................................
——Net changes in the items other thanstockholders’ equity .......................
——
Balance at April 1, 2013 ................... 275,756 ¥29,249
Cash dividends ...............................
——Net income .....................................
——
Purchase of treasury stock .............
——
Disposition of treasury stock .........
——
Retirement of treasury stock ..........
(3,000)—Transfer from retained earnings tocapital surplus ................................
——Net changes in the items other thanstockholders’ equity .......................
——
Balance at March 31, 2014 (Note 3) ... 272,756 ¥29,249

Commonstock

CapitalsurplusCapitalsurplusRetainedearnings

Less
treasurystockMillions of yen
ValuationNet
differenceondeferred
gains oravailablelosses on
for-salesecurities
hedges¥18,829 ¥122,907 ¥(2,987) ¥19,057—(1,636)
—
—
—
7,621
—
—
—
—
(2,019)—(1)—
7—(2,519)
—
2,519
—
2,504

(2,504)——¥18,813 ¥126,387¥(850)
—
—
—
—
—

—
—
—
—
—
—

¥ 64
—
—
—
—
—

—

—

—

—

—
18,890¥(2,480) ¥37,947(80)¥(931)

—
—

36
¥100

—

16
16

Minority
interests

Total net
assets¥25,971 ¥212,241—(1,636)—
7,621—(2,019)
—
6
—
—
—

—

(19,313)(466)¥ 6,658 ¥215,745

—
—
—
(2)
(1,256)(1,614)
9,079
—
—
—

—
—
(717)
24
1,256

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

(1,614)
9,079
(717)
21
—

1,258

(1,258)

—

—

—

—

—

—

—

170 ¥(4,376)¥(760) ¥(4,376)

22
¥123

—
—
¥18,813 ¥132,594

Retainedearnings—
1,637¥(1,918) ¥39,585

Thousands of U.S. dollars (Note 1)
ValuationNet
difference
deferred AccumulatedLess
on available- gains or
adjustments
Stocktreasury
for-salelosses on for retirement acquisitionstock
securities
hedgesrightsbenefits

Balance at April 1, 2013 ................... $284,191 $182,792 $1,228,012 $(24,096) $368,703
Cash dividends ...............................
(15,682)————
Net income .....................................
88,214—————(6,966)—
Purchase of treasury stock .............
——
Disposition of treasury stock .........
—
233
—
—
(19)
— (12,203)
Retirement of treasury stock ..........
—
12,203—
Transfer from retained earnings to—
12,223
capital surplus ................................
(12,223)——
Net changes in the items other thanstockholders’ equity .......................
——
15,905——
Balance at March 31, 2014 (Note 3) .... $284,191 $182,792 $1,288,321 $(18,635) $384,619
See Notes to Consolidated Financial Statements.

Accumulated
adjustments
Stock
for
retirement acquisitionrightsbenefits$(9,045)
—
—
—
—
—

—
—
—
—
—
—

$ 971
—
—
—
—
—

—

—

—

1,651 (42,518)$(7,384) $(42,518)

213$1,195678(1,866)¥ 7,336 ¥220,648

Minority
interests

Total net assets$64,691 $2,096,239—(15,682)—
88,214—(6,966)
—
204
—
—
—

—

6,587
(18,130)$71,278 $2,143,878

Consolidated Statements of Cash Flows
The Nanto Bank, Ltd. and Consolidated Subsidiaries for the Years Ended March 31, 2014 and 2013
Thousands of
U.S. dollars(Note 1)Millions of yen

2013

2014

¥ 19,794
4,462
15(2,043)(12,669)
12,264(14)(328)(56,199)
4,270(4,530)(239)(21,808)63(1,580)(73,314)167,220(18,936)
(700)
4,287
1,958
56
3,365
(748)
65,061(4,341)(3,493)81,870(868)
2981,031¥ 11,214
5,859
648
(173)
461
—
33
(106)
(58,994)
4,654(2,692)(550)(23,686)
55
21,364(113,173)
140,727
30,722
11,445
17,317(2,712)(8)
33,968330
65,015(5,749)3,124
139,097(298)
268
139,067$ 192,324
43,354
145(19,850)(123,095)
119,160(136)(3,186)(546,045)
41,488(44,014)(2,322)(211,892)
612(15,351)(712,339)
1,624,757(183,987)(6,801)
41,65319,024544
32,695(7,267)632,151(42,178)(33,938)
795,472(8,433)281
787,320

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 used in investing activities ..........................................................

(604,320)
393,198
164,360(1,022)261(3,934)91(1,788)(75)(53,228)(812,346)
677,208
84,888(2)
4,552(2,380)28(1,474)(2)(49,527)(5,871,745)
3,820,423
1,596,968(9,930)2,535(38,223)884(17,372)(728)(517,178)

Cash flows from financing activities
Repayment to minority stockholders .............................................................
Dividends paid ...............................................................................................
Dividends paid by subsidiaries to minority stockholders ...............................
Purchase of treasury stock ..............................................................................
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 13) ......................................

—(1,614)(1)(717)
0(2,333)
11
25,481
175,173¥200,655(20,000)(1,637)(337)(2,019)0(23,993)20
65,566109,606¥175,173—(15,682)(9)(6,966)0(22,668)106
247,580
1,702,030$1,949,621

Consolidated Financial Statements

2014

Cash flows from operating activities
Income before income taxes and minority interests .......................................
Depreciation ...................................................................................................
Loss on impairment of fixed assets ................................................................
Increase (decrease) in reserve for possible loan losses ..................................
Increase (decrease) in reserve for retirement benefits ....................................
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 disposal of fixed assets ......................................................
Net decrease (increase) in due from banks ....................................................
Net decrease (increase) in loans and bills discounted ....................................
Net increase (decrease) in deposits ................................................................
Net increase (decrease) in negotiable certificates of deposit ..........................
Net decrease (increase) in call loans and bills bought ...................................
Net increase (decrease) in borrowed money ..................................................
Net decrease (increase) in foreign exchange assets .......................................
Net increase (decrease) in foreign exchange liabilities ..................................
Net increase (decrease) in payables under securities lending transactions ....
Net decrease (increase) in lease receivables and lease investment assets ......
Interest received ..............................................................................................
Interest paid ....................................................................................................
Other ...............................................................................................................
Subtotal ......................................................................................................
Income taxes paid ...........................................................................................
Income taxes refund .......................................................................................
Net cash provided by 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, 2014 and 2013

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,from the consolidated financial statements of the Bank prepared in accordance with Japanese GAAP and filed with the appropriate Local Finance
Bureau of the Ministry of Finance as required by the Financial Instruments and Exchange Act. Some supplemental information included in thestatutory Japanese language consolidated financial statements, but not required for fair 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 thesum 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
the prevailing exchange rate at March 31, 2014, which was ¥102.92 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 all its eleven (eleven in 2013) subsidiaries at March 31,
2014. The Bank has no affiliates over which it has the ability to exercise
significant influence over operating and financial policies.
All consolidated subsidiaries have fiscal years ending on March 31.
All significant intercompany accounts, transactions and unrealized
profits on transactions are eliminated.
b. Cash and cash equivalents
In preparing the consolidated statements of cash flows, cash and cash
equivalents represents cash and deposits with 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
not transfer ownership of the lease assets to the lessee, the appropriate
book value (net of accumulated depreciation and amortization) of tangible
and intangible fixed assets as of March 31, 2008 was recorded as the beginning balance of “Lease receivables and lease investment assets,” andthe total amount of interest equivalent for the remaining lease term after
the adoption of “the Accounting Standard for Lease Transactions” (Accounting Standards Board of Japan (“ASBJ”) Statement No. 13, issued on
March 30, 2007) is allocated over the remaining lease term using thestraight-line method.

18
18

Differences between income before income taxes and minority interests for the fiscal years ended March 31, 2014 and 2013 and income before income taxes and minority interests calculated as if the accounting
treatment for the ordinary sale transactions had been applied to the financeleases 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 average method. Available-for-sale securities with available fair values arestated at fair 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 ofaccumulated other comprehensive income. Available-for-sale securities forwhich it is extremely 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, such 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
at fair value.
e. Derivatives and hedge accounting
Derivatives are measured at fair value.
To account for hedging transactions in connection with interest raterisk arising from financial assets and liabilities, the Bank applies the deferred hedge 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). 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 deposits and loans, and the hedging instruments,
such as interest rate swaps, by their maturity. Regarding cash flow hedges,
the Bank assesses the effectiveness by verifying the correlation of thehedged 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 appliedin order to manage interest rate risk arising from large volume transactions
in loans, 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) is no longer subject to hedge accounting. The deferredhedge 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 ofdeferred hedge loss under the “macro hedge method” was ¥3 million ($29
thousand) in 2014 and ¥4 million in 2013.
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.

Changes in accounting policies<Changes in accounting policies based on justified reasons other than revisions of accounting standards or amendments of respective laws or regulations that are not distinguishable from changes in accounting estimates>
Depreciation of tangible fixed assets (except for leased assets) of the Bank
had been previously computed by the declining balance method. Effectivefrom the year ended March 31, 2013, however, the Bank changed the depreciation method for buildings, excluding building attachments, from thedeclining balance method to the straight-line method.
This change was made because management determined that thestraight-line method by which the depreciation charge is allocated equally
over the useful life reflects the actual use profit or loss more appropriately
than the declining balance method since the buildings are being used for along-term period. Management studied the depreciation method for buildings considered to increase in materiality after the fiscal year ended March
31, 2013, following the preparation of capital investment plans that include the establishment of new branches, expansion and improvement andthe Bank’s endeavoring to enhance customer satisfaction and strengthen
profitability through the development of community-based operations pursuant to the mid-term management plan “Best Value NANTO”, whichstarted from April 2011, and working to establish operational bases centering on business loan transactions by expanding the branch network as apart of the plan.
The effect of this change on the consolidated financial statements has
been immaterial.
<Changes in accounting policies with amendments of respective laws or
regulations that are not distinguishable from changes in accounting estimates>
From the year ended March 31, 2013, in accordance with the amendment
in the Corporate Tax Law, the Bank and its domestic subsidiaries havechanged the depreciation method for tangible fixed assets, except forbuildings (excluding building attachments) and leased assets. Assets acquired on or after April 1, 2012 are depreciated using the method prescribed in the amended Corporate Tax Law.
The effect of this change on the consolidated financial statements has
been immaterial.
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 ownershipof tangible fixed assets and intangible fixed assets are depreciated or am-

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 undergoingbankruptcy or other special liquidation (“bankrupt borrowers”) or who arein a similar financial condition (“effectively bankrupt borrowers”), the reserve for possible loan losses is provided based on the amount of theclaims net of the amount expected to be recovered from collateral andguarantees and net of the deducted amount mentioned below. For the unsecured and unguaranteed portions of loans to customers not presently inthe 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, the reserve 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
self-assessment criteria on asset quality, and the assessment results are audited by 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 andguarantees is deemed uncollectible and deducted directly from thoseclaims. At March 31, 2014 and 2013, the deducted amounts were ¥10,508
million ($102,098 thousand) and ¥17,082 million, respectively. The reserve for possible loan losses of the consolidated subsidiaries is provided
for general claims 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.

Consolidated Financial Statements

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:
6 to 50 years
Buildings
Others3 to 20 years
Depreciation of the assets of the consolidated subsidiaries is principally provided on the declining balance method over the estimated useful lifeof the asset.

ortized using the straight-line method with the assumption that the term of
the lease is the useful life. Residual values of leased assets are the guaranteed values determined in the lease contracts or zero for assets without
such guaranteed value.

j. Employee retirement benefits
The projected benefit obligations are attributed to each period by thestraight-line method.
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 simplified method where the amountto be required for voluntary termination at the fiscal year-end is recorded
as projected benefit obligations in the calculation of their liability for retirement benefits and retirement benefit expenses.
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 coveredby other 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.

19
19

Consolidated Financial Statements

Consolidated Financial Statements

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.
q. Changes in accounting policies
Effective from the year ended March 31, 2014, the Group has applied the“Accounting Standard for Retirement Benefits” (ASBJ Statement No. 26,
May 17, 2012, hereinafter, “Retirement Benefits Standard”) and “Guidance on Accounting Standard for Retirement Benefits” (ASBJ Guidance
No. 25, May 17, 2012, hereinafter, “Retirement Benefits Guidance”) except the article 35 of Retirement Benefits Standard and the article 67 of
Retirement Benefits Guidance. Due to this application, actuarial gains andlosses and past service costs that are yet to be recognized have been recognized and the difference between retirement benefit obligations and plan
assets has been recognized as a liability for retirement benefits.
In accordance with the article 37 of Retirement Benefits Standard, actuarial gains and losses and past service costs that are yet to be recognized,

after adjusting for tax effects, have been recognized in accumulated adjustments for retirement benefits under accumulated other comprehensive
income.
As a result of the application, a liability for retirement benefits in theamount of ¥19,039 million ($184,988 thousand) has been recognized, andaccumulated other comprehensive income has decreased by ¥4,376 million ($42,518 thousand) at the end of the current fiscal year.
The effects of this change on net assets per share are described in Note
23, “PER SHARE INFORMATION.”
r. Unapplied accounting standards“Accounting Standard for Retirement Benefits” (ASBJ Statement No. 26,
May 17, 2012)“Guidance on Accounting Standard for Retirement Benefits” (ASBJ Guidance No. 25, May 17, 2012)(1) Summary
The standards provide guidance for the accounting for actuarial gains andlosses and prior service costs that are yet to be recognized, the calculation
methods for retirement benefit obligations and service costs, and the enhancement of disclosures thereof, in consideration of the improvements tofinancial reporting and international trends.
(2) Effective dates
The Group is scheduled to apply the revised calculation methods for retirement benefit obligations and service costs from the beginning of the
fiscal year starting on April 1, 2014.
(3) Effect of application of the standard
As a result of this application, the beginning balance of retained earnings
for the fiscal year starting on April 1, 2014 will decrease by ¥377 million($3,663 thousand).

3. CHANGES IN NET ASSETS(1) Type and numbers of shares issued and treasury stock for the fiscal years ended March 31, 2014 and 2013 were as follows:(Thousands of shares)

Remarks

2014

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

April 1, 2013

Increase

Decrease

March 31, 2014

275,756—

3,000

272,756

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

275,756—

3,000

272,756

5,909

1,729

3,057

4,581

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

5,909

1,729

3,057

4,581

Note 1

Notes 2 & 3

Notes: 1.	The decrease in common stock of 3,000 thousand shares issued is due to the retirement of treasury stock.
2.	The increase in common stock of treasury stock of 1,729 thousand shares comprises an increase of 1,698 thousand shares due to the purchase of treasury stock based on a
resolution of the Board of Directors’ meeting and an increase of 31 thousand shares due to the purchase of shares of less than one unit.
3.	The decrease in common stock of treasury stock of 3,057 thousand shares comprises a decrease of 3,000 shares due to the retirement of treasury stock, a decrease of 56 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

2013

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

April 1, 2012

Increase

Decrease

March 31, 2013

281,756
281,756

—
—

6,000
6,000

275,756
275,756

Note 1

6,072
6,072

5,852
5,852

6,015
6,015

5,909
5,909

Notes 2 & 3

Notes: 1.	The decrease in common stock of 6,000 thousand shares issued is due to the retirement of treasury stock.
2.	The increase in common stock of treasury stock of 5,852 thousand shares comprises an increase of 5,837 thousand shares due to the purchase of treasury stock based on a
resolution of the Board of Directors’ meeting and an increase of 15 thousand shares due to the purchase of shares of less than one unit.
3.	The decrease in common stock of treasury stock of 6,015 thousand shares comprises a decrease of 6,000 shares due to the retirement of treasury stock, a decrease of 13 thousand
shares due to the execution of stock options and a decrease of 2 thousand shares due to sales of shares of less than one unit.

20
20

(2) Matters concerning Stock Acquisition Rights
For the year ended March 31, 2014
Shares expected to be acquired upon exercise of stock acquisition rights
Number of sharesClassification

April 1, 2013

Total

Increase

Decrease

March 31, 2014

(Thousands of U.S.
dollars)

—

—

—

—

¥123

$1,195

—

—

—

—

¥123

$1,195For the year ended March 31, 2013
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, 2012

Total

Increase

Decrease

March 31, 2013

Balance at end ofcurrent fiscal year
(Millions of yen)

—

—

—

—

¥100

—

—

—

—

¥100

Consolidated Financial Statements

The Bank

Breakdown
Stock acquisitionrights granted as
stock options

Balance at end ofcurrent fiscal year
(Millions of yen)(3) Information on dividends is as follows:(a) Dividends paid in the fiscal year ended March 31, 2014
Resolution

Annual shareholders’ meeting held on
June 27, 2013
Board of Directors’ meeting held on
November 11, 2013

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¥809 ($7,860)¥3.00 ($0.02)

March 31, 2013

June 28, 2013

Common stock¥804 ($7,811)¥3.00 ($0.02)

September 30, 2013

December 9, 2013

Dividends paid in the fiscal year ended March 31, 2013
Resolution

Annual shareholders’ meeting held on
June 28, 2012
Board of Directors’ meeting held on
November 12, 2012

Type of shares

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

Effective dateCommon stock

¥827

¥3.00

March 31, 2012

June 29, 2012

Common stock

¥809

¥3.00

September 30, 2012

December 7, 2012

Millions of yen, except per share amount
Source ofCash dividends
dividends
per share
Record date

Effective date(b) Dividends to be paid in the fiscal year ending March 31, 2015
Resolution

Annual shareholders’ meeting held on
June 27, 2014

Type of shares

Common stock

Aggregate amount ofdividends¥804 ($7,811)

Retainedearnings¥3.00 ($0.02)

March 31, 2014

June 30, 2014

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.

21
21

Consolidated Financial Statements

5. NONPERFORMING LOANS
Nonperforming loans at March 31, 2014 and 2013 were as follows:
Thousands of
U.S. dollars

Millions of yen

Consolidated Financial Statements

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

2014

2013

2014

¥ 1,078
67,766304
14,242¥83,391¥ 1,442
72,555712
14,750¥89,461$ 10,474
658,433
2,953
138,379$810,250

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). 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 ¥19,132 million ($185,891 thousand) and ¥21,839 million at March 31, 2014 and 2013, respectively.
6. PLEDGED ASSETSAt March 31, 2014 and 2013, securities of ¥452,101 million ($4,392,741 thousand) and ¥450,658 million, respectively, were pledged as collateral for deposits, and deposits of ¥68,192 million ($662,572 thousand) and ¥64,240 million, respectively, payables under securities lending transactions of ¥141,600
million ($1,375,825 thousand) and ¥138,235 million, respectively, and borrowed money of ¥77,731 million ($755,256 thousand) and ¥74,083 million, respectively.
Securities of ¥74,371 million ($722,609 thousand) and ¥74,532 million were pledged for transaction guarantees at March 31, 2014 and 2013, respectively.
Unexpired lease contract claims of ¥5,610 million ($54,508 thousand) and ¥5,238 million were pledged as collateral for borrowed money of ¥4,350
million ($42,265 thousand) and ¥4,266 million at March 31, 2014 and 2013, respectively.
At March 31, 2014 and 2013, other assets included security deposits of ¥1,308 million ($12,708 thousand) and ¥1,465 million, respectively, and otherintangible fixed assets included key money of ¥573 million ($5,567 thousand) and ¥574 million, respectively.
7. 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, 2014 and 2013 were ¥868,462 million ($8,438,223 thousand) and ¥888,911 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, 2014 and 2013 were ¥850,512 million ($8,263,816 thousand) and ¥871,842 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.
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.
8. TANGIBLE FIXED ASSETS
Accumulated depreciation of tangible fixed assets was ¥46,323 million ($450,087 thousand) and ¥45,476 million at March 31, 2014 and 2013, respectively. Accumulated capital gains directly offset against the acquisition cost of tangible fixed assets to obtain tax benefits were ¥718 million ($6,976 thousand)at March 31, 2014 and 2013.
9. GUARANTEESThe amount guaranteed by the Bank for privately placed bonds (stipulated by Article 2-3 of the Financial Instruments Exchange Act) included in “Bonds”
of “Securities,” was ¥2,876 million ($27,944 thousand) and ¥3,831 million at March 31, 2014 and 2013, respectively.
10. OTHER INCOME
For the fiscal years ended March 31, 2014 and 2013, other income consisted of the following:Thousands of
U.S. dollars

Millions of yen

2014

Gains on sales of stocks and other securities ......................................................
Reversal of reserve for possible loan losses .......................................................
Recovery of written off claims ...........................................................................
Other ...................................................................................................................
Total ................................................................................................................

22
22¥1,831
294
1,611
1,208
¥4,9462013¥1,588
—
1,081
1,767
¥4,438

2014$17,790
2,856
15,652
11,737$48,05611. OTHER EXPENSES(1) For the fiscal years ended March 31, 2014 and 2013, other expenses consisted of the following:Thousands of
U.S. dollars

Millions of yen

2014

2013

2014

¥ 1,309
1,956
1,657
3,539
648
919
¥10,030$ 1,651
11,795
514
—
145
5,324
$19,461(2) (Impairment loss on fixed assets)
The Group reviews its long-lived assets for impairment by grouping its assets based on the unit of a branch, which individually and continuously identifies
profit and loss, and based on individual assets unit for idle assets. Headquarters, administration centers, training centers, etc. are treated as common assets
since they contribute to the generation of future cash flows from multiple assets or asset groups. Primarily, each consolidated subsidiary is treated as one
asset group. The recoverable amount is measured principally at its net realizable value, which is determined by appraisal values based on real estate appraisal standards, less the expected disposal cost.

Consolidated Financial Statements

¥ 170
1,214
53
—
15
548
¥2,003

Loss on devaluation of stocks and other securities ............................................
Write-offs of loans .............................................................................................
Loss on sales of stocks and other securities ......................................................
Provision for possible loan losses ......................................................................
Impairment loss on fixed assets .........................................................................
Other ..................................................................................................................
Total ..........................................................................................................

For the year ended March 31, 2014, the Group recognized impairment loss on the following asset groups:
Area

In Nara Pref.
Out of Nara Pref.
Total

Purpose of use

1 branch
1 idle asset

Type

Millions of yen

¥ 1
14
¥15

Buildings
Land and buildings

Thousands of
U.S. dollars

$ 9
136
$145

For the above fixed assets, the carrying amounts were reduced to the recoverable amount due to the continuous decrease in real estate values andchanges in use. As a result, the Group recognized impairment loss of ¥15 million ($145 thousand) under “Other expenses.”
For the year ended March 31, 2013, the Group recognized impairment loss on the following asset groups:
Area

In Nara Pref.
Out of Nara Pref.
In Nara Pref.
Total

Purpose of use

2 idle assets
1 idle asset
1 dormitory

Type

Millions of yen

Land, etc.
Land and buildings
Buildings

¥452
27
167
¥648

For the above fixed assets, the carrying amounts were reduced to the recoverable amount due to the continuous decrease in real estate values andchanges in use. As a result, the Group recognized impairment loss of ¥648 million under “Other expenses.”
12. OTHER COMPREHENSIVE INCOME
The components of other comprehensive income for the years ended March 31, 2014 and 2013 were as follows:
Thousands of
U.S. dollars

Millions of yen

2014

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

2013

2014

¥7,122(4,530)
2,591
(965)
1,626

¥30,519(2,692)
27,826(8,968)18,857$69,199(44,014)
25,174(9,376)
15,798

(55)
385
329
(158)
170
¥1,797

(579)
449
(129)
49
(80)
¥18,777

(534)
3,740
3,196
(1,535)
1,651$17,460

23
23

Consolidated Financial Statements

13. STATEMENTS OF CASH FLOWS
The reconciliation between cash and due from banks in the consolidated balance sheets at March 31, 2014 and 2013 and cash and cash equivalents in the
consolidated statements of cash flows for the years then ended were as follows:
Thousands of
U.S. dollars

Millions of yen

Consolidated Financial Statements

2014

2013

Cash and due from banks on the consolidated balance sheets ...........................
Time deposits due from banks.............................................................................
Other due from banks..........................................................................................

¥202,724(315)(1,754)¥175,662
(315)
(173)

$1,969,724(3,060)(17,042)2014

Cash and cash equivalents on the consolidated statements of cash flows...........

¥200,655¥175,173$1,949,621

14. LEASE TRANSACTIONS
Operating leases
As lessee:
Future minimum lease payments under operating leases which were notcancelable at March 31, 2014 and 2013 were as follows:
Thousands of
U.S. dollars

Millions of yen

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

2014

2013

2014

¥ 116
1,110
¥1,227¥ 113
1,143¥1,257$ 1,127
10,785$11,921

As lessor:
Future minimum lease payments under operating leases which were notcancelable at March 31, 2014 and 2013 were as follows:
Thousands of
U.S. dollars

Millions of yen

2014

Due within one year ............................................................................................
Due after one year ..............................................................................................
Total ................................................................................................................
15. 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 eleven consolidated subsidiaries
and provides financial services such as banking, securities, leasing andcredit guarantee businesses.
Its major banking business includes (i) the acceptance of deposits,
lending services, bills discounting and remittance, and (ii) the guaranteeof debt, 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 exposedto the market risk associated with the fluctuation of interest rates. As partof its 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 arisingfrom the nonperformance of its customers. In addition, loan balances are
significantly concentrated to Nara prefecture, where the head office of the

24
24

¥3
1
¥5

2013

¥3
5
¥9

2014

$29
9
$48

Bank is 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 raterisk, currency related derivative transactions are used to balance theamount of 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 and bonds payable, the Group may be forced
to raise funds under unfavorable conditions and, accordingly, become significantly exposed to liquidity risk if the fund raising capacity of theGroup 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 forbond 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 with customers and control thoserisks properly. The Bank also uses derivatives for trading purposes with

(3) Risk management system for financial instruments
Credit risk management
The Group has established a framework for credit control which includes
credit review by individual transaction, credit limit, credit information
management, internal credit rating, 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
Securities & International Division and Compliance & Risk Management
Division. With respect to the credit risks associated with the issuer of the
securities and counterparty risk associated with derivative transactions, related credit information and fair values of the securities are periodicallychecked 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 themarket 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 Compliance & Risk
Management Division assesses interest rate risk by VaR, reports to the
ALM Committee on a monthly 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 Compliance & Risk Management Division assesses the foreign currency risk by VaR, reports to the
ALM committee on a monthly 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 investment items and related market fluctuation risk. The Securities & International Division plays a part in investments for investment purposes, and
the General Business Division plays a part in investments for the purposeof business alliances and capital affiliation. Continuous monitoring ofmarket conditions and restrictions on investments in riskier assets such as
securitized instruments help to avoid unnecessary price fluctuation risk.
The Compliance & Risk Management 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 therisk.
(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 Compliance & Risk Management Division. With
respect to derivative transactions for trading purposes, certain trading
limits and loss limit rules are set semiannually by the ALM Committee.
The Compliance & Risk Management Division, which serves as the
middle office, monitors compliance and calculates the total amount of
risk. The Securities & International Division, which serves as the backoffice, checks each derivative transaction, marked-to-market position, andevaluates the profit and loss from the transactions on a daily basis.
Combined with those functions, the related divisions check each other 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

certain position limits.
The Bank applies the deferred hedge accounting method for derivativetransactions when used as hedging instruments. Interest rate swaps areused as hedging instruments to avoid interest rate risks of hedged items
such as loans 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 the effectiveness by verifying the correlation between the hedged items
and the hedging instruments. Transactions which do not meet the requirements of hedge accounting and derivative transactions for trading purposes
are exposed to interest rate risk, foreign currency risk, price fluctuation
risk and credit 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 shares other than purely for investment purposes are 240
business days] and the correlation of risk categories are not considered.) is
adopted.
At March 31, 2014, the Group’s total market risk (decrease inestimated economic value) was ¥43,999 million ($427,506 thousand)(¥55,850 million in 2013). In addition, the Group conducted back tests tocompare actual income with the VaR calculated by the model. According
to the back tests conducted in 2013, the measurement model captured thequantity of market risk with sufficient accuracy. However, VaR is astatistical measure of market risk based on past fluctuations in the market
and certain probability of occurrence. It may not be possible to capture therisk if the market fluctuates rapidly under extraordinary circumstances.
Management of liquidity risk associated with financing activities
The Securities & International Division manages the Bank’s cash position
based upon the monthly funding plan designed by the ALM Committee,
while the Compliance & Risk Management Division monitors the situation. The ALM Committee manages financing risk comprehensively by
understanding the amount of cash for which the Bank can liquidate andalso can raise from the market on a regular 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, 2014 and 2013.
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

2014

Consolidated Financial Statements

Cash and due from banks ...........................................................................
Call loans and bills bought .........................................................................
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 ........................................................................................
Bonds payable ............................................................................................
Total liabilities ...........................................................................................
Derivative transactions (*2) .......................................................................
Hedge accounting not applied ...............................................................
Hedge accounting applied .....................................................................
Total derivative transactions

Carrying amount

Fair value¥ 202,724
895
4,515

¥ 202,724
895
4,515

213
22,000213
22,000——2,876
1,902,635
2,972,159(25,782)
2,946,376¥5,082,238¥4,585,357
77,531
141,600
85,38820,000¥4,909,877

2,901
1,902,635

24—

2,964,305¥5,100,191¥4,586,277
77,531
141,600
85,362
20,240¥4,911,012

17,928¥17,953
¥ 919
—
—
(25)
240
¥ 1,134(2,161)(1,270)(3,432)(2,161)(1,270)(3,432)

—
—
—

¥

¥

Difference

¥

¥

—
—
—

Millions of yen

2013

Cash and due from banks ...........................................................................
Call loans and bills bought .........................................................................
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 ........................................................................................
Bonds payable ............................................................................................
Total liabilities ...........................................................................................
Derivative transactions (*2) .......................................................................
Hedge accounting not applied ...............................................................
Hedge accounting applied .....................................................................
Total derivative transactions .......................................................................

26
26

Carrying amount

Fair value¥ 175,662
430
4,279

¥ 175,662
430
4,279

322
21,000322
21,000——4,031
1,833,939
2,898,844(27,896)
2,870,948¥4,910,614¥4,418,137
96,467138,235
81,10020,000¥4,753,940

4,056
1,833,939

24—

2,888,782¥4,928,472¥4,419,757
96,467138,235
81,09920,436¥4,755,995

17,834¥17,858¥ 1,620——(1)436¥ 2,055(3,900)(1,609)(5,510)(3,900)(1,609)(5,510)

—
—
—

¥

¥

Difference

¥

¥

—
—
—

Thousands of U.S. dollars

2014
Carrying amount

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

Difference$ 1,969,724
8,696
43,869$ 1,969,724
8,696
43,8692,069
213,758

2,069
213,758——

27,944
18,486,542
28,878,342(250,505)
28,627,827$49,380,470$44,552,633
753,313
1,375,825
829,654
194,325$47,705,761

28,18618,486,542

233—

28,802,030$49,554,906$44,561,572
753,313
1,375,825
829,401
196,657$47,716,789

174,193$174,436$ 8,929
—
—
(242)
2,331
$ 11,018(20,996)(12,339)(33,346)(20,996)(12,339)(33,346)

—
—
—

$

$

$

$

—
—
—
Consolidated Financial Statements

Cash and due from banks ...........................................................................
Call loans and bills bought .........................................................................
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
the interest rate assumed if the same due from banks were newly executed.
Call loans and bills bought:
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.
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 basedon quoted market prices or values calculated on a reasonable basis if nomarket 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 isdetermined based on the values presented by the trust bank. For additional
information on money held in trust categorized by holding purposes, seeNote 16, “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 guaranteedby the Bank is calculated by discounting the aggregate value of principle
and interest at the interest rate assumed if the same bond were newly issued for each 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 becomebankrupt borrowers,” the possible amounts of loan loss are computed
based on the present 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, andsuch amount is presented as the fair value.
For the previous fiscal year, with regard to floating rate Japanese government bonds held as “securities,” the market value is unlikely to indicate
the fair value due to the extraordinary limited trading of such bonds. Suchbonds have been carried at their reasonably estimated amounts at the previous fiscal year end. As a result, “Japanese Government Bonds” included
in “Securities” and “Valuation difference on available-for-sale securities”
increased by ¥1,398 million and ¥903 million and “Deferred tax assets”
decreased by ¥494 million at March 31, 2013, compared with the resultthat would have been reported using the market price.
Reasonably estimated amounts of floating-rate Japanese government
bonds consist of the net value of discounted cash flow adjusting convexity
from the floating-rate Japanese government bonds and the net value of
discounted cash flow of zero-floor options calculated by the Black-Sholes
option pricing model. The main variables of pricing decision for the above
calculations are the Japanese government bond spot rate as the marketyield and the yen swaption volatility as the forward rate volatility. The
theoretical prices of parties of each series of floating-rate Japanese government bonds are determined from the quotes of venders and verified for2727

Consolidated Financial Statements

their adequacy by the Bank.
For this fiscal year, the market price of floating-rate Japanese government bonds is presented as the carrying amount as it is appropriate to consider that the market prices of all of them as being equal to their fair values.
For additional information on securities categorized by holding purposes, see Note 16, “SECURITIES AND MONEY HELD IN TRUST.”
Consolidated Financial Statements

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 totheir short-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 oftype of loans, internal ratings and maturities. As for the loans whose maturity is less than one year, the carrying amount is presented as the fair value
as the fair value approximates the carrying amount.
With respect to receivables from “bankrupt borrowers,” “effectively
bankrupt borrowers” and “likely to become bankrupt borrowers,” the possible amounts of loan losses are 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 such amount is presented as the fair 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 isdeemed to approximate the carrying amounts considering the estimatedrepayment term and interest rates. The fair value of embedded derivativeloans is presented using market prices at financial institutions.

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.
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
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 money with fixed interest rate is computed, by discounting the aggregate valueof principal and interest (with respect to borrowed money accounted forby the special treatment of 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 oftype of maturities. As for the borrowed money whose maturity is less than
one year, the carrying amount is presented as the fair value as the fair value approximates the carrying amount.
Bonds payable:
Bonds issued by the Bank are all unsecured and subordinated bonds. The
fair value of such bonds is determined using the market price.
Derivative transactions
For derivative transactions, see Note 17, “DERIVATIVE TRANSACTIONS.”(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

2014

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

¥1,493325¥1,8182013¥2,356413¥2,7702014$14,506
3,157$17,664(*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)	No impairment loss was recognized for the year ended March 31, 2014. The Bank recognized loss on impairment of ¥0 million on unlisted equity securities for the year ended March
31, 2013.
(*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.

28
28

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

2014
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¥ 156,777
895
4,515
229,838
370
370

¥

—
—
—
476,931
1,161
1,161

¥

—
—
—
229,342
1,048
1,048

¥

—
—
—
527,943
297
297

¥

—
—
—
273,642
—
—

¥

—
—
—
27,000——229,468
135,300
11,506
21,827
60,835
837,608¥1,229,634

475,770
267,500
63,63644,625100,008
384,621¥861,552

228,293
126,000
36,63911,90853,746
310,636¥539,978527,646
406,700
31,9892,107
86,849
182,811¥710,755

273,642
177,000
47,194
46,3893,058
267,101¥540,744

27,0007,000——
20,000581,525¥608,525

Due after sevenyears through ten
years

Due after ten
years

Consolidated Financial Statements

Due from banks ..............................................
Call loans and bills bought .............................
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

Millions of yen

2013
Due within one
year or lessDue from banks ..............................................
Call loans and bills bought .............................
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

Due after three
years throughfive years

Due after five
years throughseven years¥ 133,036
430
4,279
155,503
987
987

¥

—
—
—
425,806
1,275
1,275

¥

—
—
—
292,186
1,489
1,489

¥

—
—
—
339,202
279
279

¥

—
—
—
428,101
—
—

¥

—
—
—
60,000——154,516
90,0008,729
11,40044,386895,960¥1,189,210

424,530
153,600
66,62760,393
143,909371,881¥797,687

290,697
184,000
29,54265,322
11,832
256,541¥548,728

338,922279,600
43,744
7,504
8,073
189,654¥528,856

428,101
282,000
41,34850,75354,000239,961¥668,063

60,00030,000——30,000553,014¥613,014

Due after sevenyears through ten
years

Due after ten
years

Thousands of U.S. dollars

2014
Due after one
year throughthree years

Due after three
years throughfive years

Due after five
years throughseven years$ 1,523,289
8,696
43,8692,233,171
3,595
3,595

$

—
—
—
4,633,997
11,28011,280$———2,228,352
10,182
10,182$———
5,129,644
2,885
2,885

$

—
—
—
2,658,783——$

2,229,576
1,314,613
111,795
212,077
591,090
8,138,437$11,947,473

4,622,716
2,599,106
618,305
433,589
971,706
3,737,087$8,371,084

2,218,159
1,224,251355,994
115,701
522,211
3,018,227$5,246,579

5,126,758
3,951,612
310,814
20,472
843,849
1,776,243$6,905,897

2,658,783
1,719,782
458,550
450,728
29,712
2,595,229$5,254,022

262,339
68,013——
194,3255,650,262$5,912,602

Due within one
year or lessDue from banks ..............................................
Call loans and bills bought .............................
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 ...............................................................

———
262,339——(*) Loans from “bankrupt,” “effectively bankrupt” and “likely to become bankrupt” borrowers, which are not expected to be repaid and amounting to ¥78,122 million ($759,055 thousand)and ¥89,660 million at March 31, 2014 and 2013, respectively, are not included.
Loans whose payment term is not determined amounting to ¥339,359 million ($3,297,308 thousand) and ¥318,320 million at March 31, 2014 and 2013, respectively, are not included.

2929

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

2014

Consolidated Financial Statements

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

Due within one
year or lessDue after one
year throughthree years

Due after three
years throughfive years¥3,976,761
77,531
141,600
38,056—¥4,233,949¥559,751——
42,311—¥602,063¥48,844——
5,020—¥53,864Due after five
years throughseven years

Due after sevenyears through ten
years

Due after ten
years

—
—
—
—
20,000¥20,000

¥—
—
—
—
—
¥—

¥—
—
—
—
—
¥—

Due after five
years throughseven years

Due after sevenyears through ten
years

Due after ten
years

¥—
—
—
—
—
¥—

¥—
—
—
—
—
¥—

Due after sevenyears through ten
years

Due after ten
years

$—
—
—
—
—
$—

$—
—
—
—
—
$—

¥

Millions of yen

2013

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

Due within one
year or lessDue after one
year throughthree years

Due after three
years throughfive years¥3,726,752
96,467138,235
76,809—¥4,038,264¥597,142
—
—
3,316
—
¥600,459¥94,241——975—¥95,216¥————
20,000¥20,000

Thousands of U.S. dollars

2014

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

Due within one
year or lessDue after one
year throughthree years

Due after three
years throughfive years$38,639,341
753,313
1,375,825
369,762—$41,138,253$5,438,699——
411,105—$5,849,815$474,582——
48,775—$523,357

Due after five
years throughseven years

$

—
—
—
—
194,325$ 194,325(*) Demand deposits are included in “Due within one year or less.”

16. 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, 2014 and 2013 was as follows:(a) Trading securities
Thousands of
U.S. dollars

Millions of yen

2014

2013

¥0

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

2014

$0

¥0

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

2014

30
30

Carrying amount

Fair value

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

Unrealized gains (losses)¥2,826¥2,826¥2,854¥2,854¥28¥28

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

¥ 50
¥ 50
¥2,876¥ 46¥ 46¥2,901

¥ (3)
¥ (3)
¥24

Millions of yen

2013
Fair value

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

Unrealized gains (losses)¥3,713¥3,713¥3,739¥3,739¥26¥26

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

¥ 318
¥ 318
¥4,031¥ 316¥ 316¥4,056

¥ (1)
¥ (1)
¥24

Thousands of U.S. dollars

2014
Carrying amount

Fair value

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

Unrealized gains (losses)$27,458$27,458$27,730$27,730$272$272

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

$ 485
$ 485
$27,944

$ 446
$ 446
$28,186$ (29)$ (29)$233

Consolidated Financial Statements

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

2014

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¥

73,2481,319,769
1,020,833
190,130
108,805
233,194
214,866¥1,626,212¥

44,972
1,292,695
1,000,563
184,395
107,736
227,587
211,399¥1,565,255¥28,276
27,074
20,270
5,735
1,069
5,606
3,467
¥60,957

¥

¥

¥

8,108
156,131
129,665
7,077
19,387113,182
112,099¥ 277,422¥1,903,635

8,545
156,486
129,997
7,090
19,397
116,807
115,718¥ 281,839¥1,847,094

Unrealized gains (losses)

(437)
(354)
(331)
(12)
(9)
(3,624)(3,619)¥ (4,417)¥56,5403131

Consolidated Financial Statements

Millions of yen

2013

Consolidated Financial Statements

Carrying amount

Acquisition cost¥

69,591
1,379,136
1,018,770
193,292
167,073
193,584
180,820¥1,642,312¥

45,6101,347,173
995,912
185,855
165,404
186,790
178,086¥1,579,574¥23,980
31,96222,857
7,436
1,668
6,794
2,733
¥62,737¥¥¥ (1,037)
(278)
(206)
(5)
(65)
(7,473)(7,462)¥ (8,789)¥53,948

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 ...........................................................................................................

9,533
70,51834,711
5,113
30,694
111,574
111,392¥ 191,627¥1,833,939

10,57070,79634,9185,118
30,759119,048
118,854¥ 200,416¥1,779,991

Unrealized gains (losses)

Thousands of U.S. dollars

2014
Carrying amount

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)$

711,698
12,823,251
9,918,703
1,847,357
1,057,180
2,265,779
2,087,699$15,800,738$

436,960
12,560,192
9,721,754
1,791,634
1,046,793
2,211,300
2,054,012$15,208,462$274,737
263,058
196,949
55,722
10,38654,46933,686$592,275$$$ (4,246)(3,439)(3,216)(116)(87)(35,211)(35,163)$ (42,916)$549,358

78,7791,517,013
1,259,862
68,762
188,369
1,099,708
1,089,185$ 2,695,511$18,496,259

83,025
1,520,462
1,263,087
68,888
188,466
1,134,930
1,124,349$ 2,738,427$17,946,890(2) Held-to-maturity debt securities sold for the years ended March 31, 2014 and 2013
Not applicable.
(3) Available-for-sale securities sold for the years ended March 31, 2014 and 2013
Millions of yen

2014
Sales amount

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

32
32

¥

6,033
327,436
228,859
15,01083,56750,52149,884¥383,992

Gains on sales¥1,628
3,172
2,691
244
236
667
465
¥5,468Losses on sales

¥ 53
338
251
0
86
374
374
¥766

Millions of yen

2013
Sales amount

Losses on sales¥1,379
6,033
5,206
681
145
1,137
1,012
¥8,550¥1,657
2,785
2,784
0
0
105
105
¥4,548¥9,496
607,746
569,005
28,373
10,367
49,10347,123¥666,347

Thousands of U.S. dollars

2014
Sales amount

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

$

58,6183,181,461
2,223,659
145,841
811,960
490,876484,687$3,730,975

Gains on sales

Losses on sales$15,818
30,82026,146
2,370
2,293
6,480
4,518
$53,128

$ 514
3,284
2,438
0
835
3,633
3,633
$7,442

Consolidated Financial Statements

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

Gains on sales(4) Information on money held in trust at March 31, 2014 and 2013 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 ..

2014

2013

2014

¥22,000
66¥21,000
320$213,758
641(5) The components of the valuation difference on available-for-sale securities recorded under net assets at March 31, 2014 and 2013 were as follows:
Thousands of
U.S. dollars

Millions of yen

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

2014

2013

2014

¥ 56,540(16,905)¥ 39,634(49)¥ 39,585¥ 53,948(15,940)¥ 38,007(60)¥ 37,947$ 549,358(164,253)$ 385,095(476)$ 384,619(6) Securities reclassified for the years ended March 31, 2014 and 2013
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
and the 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 fiscal
year end 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 ¥170 million ($1,651
thousand) and ¥1,309 million for the fiscal years ended March 31, 2014 and 2013, respectively.

33
33

Consolidated Financial Statements

17. 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, 2014 and 2013 were as follows:
Note that the contract amount does not represent the market risk exposure of the derivative transactions themselves.
Consolidated Financial Statements(a) Interest rate related transactions
Millions of yen

2014
Category

Transaction type

Contract amountInterest rate swaps
Receive fixed rate/pay floating rate ....
Receive floating rate/pay fixed rate ....
Total ..................................................................................

Over-the-countertransactions

Contract amount due
after one year

¥454
454
¥ —

Fair value

¥454
454
¥ —

¥ 23
(21)
¥ 2

Unrealized gains (losses)

¥ 23
(21)
¥ 2

Millions of yen

2013
Category

Transaction type

Contract amountInterest rate swaps
Receive fixed rate/pay floating rate ....
Receive floating rate/pay fixed rate ....
Total ..................................................................................

Over-the-countertransactions

Contract amount due
after one year

¥520
520
¥ —

Fair value

¥520
520
¥ —

¥32
(29)
¥3

Unrealized gains (losses)

¥32
(29)
¥3

Thousands of U.S. dollars

2014
Category

Transaction type

Contract amountContract amount due
after one year

$4,4114,411$ —$4,411
4,411$ —Interest rate swaps
Receive fixed rate/pay floating rate ....
Receive floating rate/pay fixed rate ....
Total ..................................................................................

Over-the-countertransactions

Fair value

$ 223
(204)
$ 19

Unrealized gains (losses)

$ 223
(204)
$ 19

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 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.

(b) Currency related transactions
Millions of yen

2014
Category

Transaction type

Contract amountContract amount due
after one year

Fair value

Unrealized gains (losses)¥301,312¥178,699¥(2,085)¥(2,085)

3,352
1,158
¥
—

—
—
—

(79)
0
¥(2,164)(79)
0¥(2,164)

Contract amountContract amount due
after one year

Fair value

Unrealized gains (losses)¥205,974¥127,544¥(3,777)¥(3,777)

2,877
2,613
¥
—

—
—
—

(132)
5
¥(3,903)(132)
5¥(3,903)

Currency swaps .....................................
Forward foreign exchange contracts
Sold ....................................................
Bought ................................................
Total ..................................................................................

Over-the-countertransactions¥

Millions of yen

2013
Category

Transaction type

Currency swaps .....................................
Forward foreign exchange contracts
Sold ....................................................
Bought ................................................
Total ..................................................................................

Over-the-countertransactions¥

Thousands of U.S. dollars

2014
Category

Transaction type

Currency swaps .....................................
Forward foreign exchange contracts
Sold ....................................................
Bought ................................................
Total ..................................................................................

Over-the-countertransactions

Contract amountContract amount due
after one year

Fair value

Unrealized gains (losses)$2,927,633$1,736,290$(20,258)$(20,258)

32,568
11,251
—

—
—
—

(767)
0
$(21,026)(767)
0$(21,026)$$

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.

3434

(c) Stock related transactions
None(d) Bond 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, 2014 and 2013 were as follows:
Note that the contract amount does not represent the market risk exposure of the derivative transactions themselves.

Consolidated Financial Statements(e) Commodity related transactions
None(a) Interest rate related transactions
Millions of yen

2014
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

Contract amountContract amount due after
one year

Fair value

—

—

—

¥28,545¥28,230¥(1,270)

—
—
—

—
—
—

—
—
—

—

—

—

180
—

Note 3¥(1,270)

¥
¥

265
—

¥
¥

Millions of yen

2013
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

Contract amountContract amount due after
one year

Fair value

—

—

—

¥41,457¥31,212¥(1,609)

—
—
—

—
—
—

—
—
—

—

—

—

525
—

Note 3¥(1,609)

¥
¥

645
—

¥
¥

35
35

Consolidated Financial Statements

Thousands of U.S. dollars

2014

Consolidated Financial Statements

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

Contract amountContract amount due after
one year

Fair value

—

—

—

$277,351$274,290$(12,339)

—
—
—

—
—
—

—
—
—

—

—

—

$ 2,574$—$ 1,748$—

Note 3$(12,339)

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).
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. Interest rate swaps accounted for by the exceptional accounting method are accounted for together with the borrowed money as a hedged item, and the fair values are describedin the fair values of “Borrowed money” under Liabilities of Note 15, “FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES.”(b) Currency related transactions
None(c) Stock related transactions
None(d) Bond related transactions
None
18. RETIREMENT BENEFIT OBLIGATIONS
For the year ended March 31, 2014
(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.
Eleven 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 retirement benefit obligations
Millions of yen

Balance at April 1, 2013 .....................................................................................
Service cost ...................................................................................................
Interest cost ....................................................................................................
Actuarial loss (gain) .......................................................................................
Benefits paid....................................................................................................
Balance at March 31, 2014 .................................................................................
Note:

36
36

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

Thousands of
U.S. dollars

2014

2014

¥49,656
1,671
987
5,352
(2,520)¥55,146$482,471
16,235
9,589
52,001(24,485)$535,814

(b) Movements in plan assets
Millions of yen

Note:

2014

2014

¥32,901
560
1,822
2,406
(1,583)¥36,107$319,675
5,441
17,70323,377(15,380)$350,825

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

(c) Reconciliation from retirement benefit obligations and plan assets to liability (asset) for retirement benefits
Millions of yen

Thousands of
U.S. dollars

2014

2014

Unfunded retirement benefit obligations
Net liability (asset) for retirement benefits at March 31, 2014

¥44,153(36,107)
8,045
10,993¥19,039$429,003(350,825)
78,167
106,811$184,988

Liability for retirement benefits
Asset for retirement benefits
Net liability (asset) for retirement benefits at March 31, 2014

¥19,039—¥19,039$184,988—$184,988

Millions of yen

Thousands of
U.S. dollars

2014

2014

Funded retirement benefit obligations
Plan assets

Note:

Consolidated Financial Statements

Balance at April 1, 2013......................................................................................
Expected return on plan assets........................................................................
Actuarial gain (loss)........................................................................................
Contributions paid by the employer................................................................
Benefits paid....................................................................................................
Balance at March 31, 2014..................................................................................

Thousands of
U.S. dollars

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

(d) Retirement benefit costs

Service cost
Interest cost
Expected return on plan assets
Net actuarial loss amortization
Total retirement benefit costs for the fiscal year ended March 31, 2014
Note:

¥1,671
987
(560)
840
¥2,938$16,235
9,589(5,441)
8,161$28,546

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

Unrecognized actuarial gain (loss)
Total balance at March 31, 2014

Thousands of
U.S. dollars

2014

2014

¥(6,775)¥(6,775)$(65,827)$(65,827)(f) Plan assets
1) Plan assets comprise:
2014

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

17.5%
30.5%
1.5%
27.7%
22.8%
100%

Total plan assets include retirement benefit trusts which were set up for a corporate pension fund plan (18.5% of total plan assets).

2) Long-term expected rate of return
Current and target asset allocations, historical and expected returns on various categories of plan assets have been considered in determining the long-term
expected rate of return.

37
37

Consolidated Financial Statements(g) Actuarial assumptions
The principal actuarial assumptions at March 31, 2014 were as follows:
2014

Discount rate .................................................................................................................................................
Long-term expected rate of return ................................................................................................................

1.27%
2.00%

Consolidated Financial Statements

For the year ended March 31, 2013
(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 benefits trusts.
Eleven consolidated subsidiaries have non-contributory unfunded lump-sum retirement allowance plans.
(2) Information about retirement benefit obligations
Millions of yen

2013

Retirement benefit obligations ............................................................................
Plan assets ...........................................................................................................
Unfunded retirement benefit obligations ............................................................
Unrecognized actuarial differences ....................................................................
Prepaid pension costs .........................................................................................
Reserve for employee retirement benefits...........................................................
Note:¥(49,656)
32,901(16,754)
4,085(12,669)—¥(12,669)

Consolidated subsidiaries have adopted the simplified method in calculating retirement benefit obligations.

(3) Information relating to retirement benefit costs
Millions of yen

2013

Service cost..........................................................................................................
Interest cost on projected benefit obligations......................................................
Expected return on plan assets............................................................................
Amortization of actuarial differences..................................................................
Other....................................................................................................................
Total.................................................................................................................
Note:¥1,684
980
(477)
1,867
—
¥4,054Retirement benefit costs of consolidated subsidiaries which have adopted the simplified method are included in “Service cost.”(4) Principal assumptions used in determining retirement benefit obligations and pension costs(a) Discount rate: 2.0%(b) Expected rate of return on plan assets: 2.0%(c) Inter-period allocation method for estimated retirement benefits: straight-line method over the period(d) Amortization of past service costs: Full amounts are charged to income when incurred.
(e) Amortization of actuarial differences: 10 years (Actuarial differences are charged to income from the following year in the amount allocated by thestraight-line method over a definite period within the employees’ average number of service years when incurred.)
19. STOCK OPTIONS(a) Items and amounts expensed related to stock options were as follows:
Thousands of
U.S. dollars

Millions of yen

2014

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

38
38

2013

¥43

2014

¥41

$417

(b) Stock options outstanding at March 31, 2014 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 the number of shares upon exercise of the stock option rights granted by the Bank outstanding at March 31, 2014:
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

15 directorsof the Bank
14 directorsof the Bank
15 directorsof the Bank
15 directorsof the Bank

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

July 29, 2010¥1($0.01)¥1($0.01)¥1($0.01)¥1($0.01)

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

Not definedNot definedNot definedNot definedNot definedNot definedNot definedNot defined

July 29, 2011
July 27, 2012
July 26, 2013

b. Stock option activity:
1) Number of stock options
Number of shares

2010
Stock Options

2011
Stock Options

2012
Stock Options

2013
Stock Options

—
—
—
—
—

—
—
—
—
—

34,050——34,050——
119,500—
89,62529,87569,000—14,900—54,100102,000—
18,900—83,100102,150
34,05022,500—113,700—
89,625——89,625

Non-vested
March 31, 2013 – Outstanding .................................................
Granted .....................................................................................
Forfeited ...................................................................................
Vested .......................................................................................
March 31, 2014 – Outstanding .................................................
VestedMarch 31, 2013 – Outstanding .................................................
Vested .......................................................................................
Exercised ..................................................................................
Forfeited ...................................................................................
March 31, 2014 – Outstanding .................................................

Consolidated Financial Statements

Stockoptions2) Price information
Yen

U.S. dollars

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

Exercise price ........................................
Average stock price at exercise date ......
Fair value price at grant date .................

¥

1
405
441

¥

1
405
386

¥

1
405
303

¥

1
—
372

2010
2011
2012
2012
Stock Options Stock Options Stock Options Stock Options

$0.00
3.93
4.28

$0.00
3.93
3.75

$0.00
3.93
2.94

$0.00
—
3.61

(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 year ended March 31, 2014 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: 28.02%, calculated using the market price of the Bank’s stock from October 2010 to July 2013.
2.	Estimated remaining outstanding period: 2.8 years, which was the average remaining tenure of the Board of Directors at the date of issue, determinedby the average 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, 2013.
4. Risk-free interest rate: 0.14%, 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.

3939

Consolidated Financial Statements

20. 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 38.2 % for the years ended March 31, 2014 and 2013.
Significant components of deferred tax assets and liabilities as of March 31, 2014 and 2013 were as follows:
Thousands of
U.S. dollars

Millions of yen

Consolidated Financial Statements

Deferred tax assets:
Excess bad debt expense ................................................................................
Retirement benefits .........................................................................................
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 .....................................................................................

2014

2013

2014

¥ 9,813
—
9,087
916
4,107
1,772
4,689
2,636
416
2,513
35,953(13,706)
22,246¥13,344
7,031
—
954
4,107
1,832
4,914
5,016
575
2,952
40,728(11,716)
29,011$ 95,345—
88,291
8,900
39,904
17,21745,55925,612
4,041
24,417349,329(133,171)
216,148(16,905)(46)(16,952)¥ 5,294(15,940)(52)(15,993)¥13,018(164,253)(446)(164,710)$ 51,438

The following table summarizes the significant differences between the statutory tax rate and the effective tax rate for financial statement purposes for theyears ended March 31, 2014 and 2013:
Statutory tax rate ...........................................................................................................................................
Valuation allowance .................................................................................................................................
Expense not qualifying for deduction ......................................................................................................
Non-taxable dividend income ..................................................................................................................
Tax rate difference for Special Purpose Company ...................................................................................
Adjustment of deferred tax assets for enacted changes in tax laws and rates ..........................................
Difference between current tax rate and future tax rate to be applied for elimination of temporary differences ....
Other .........................................................................................................................................................
Effective tax rate ...........................................................................................................................................

2014

2013

38.2%
10.8%
0.3%
(2.0)%
—
2.6%
—
0.7%
50.6%

38.2%
(17.5)%
0.6%(2.6)%(0.7)%
—
3.4%
1.2%
22.6%

The “Act for Partial Amendment of the Income Tax Act, etc.” (Act No. 10 of 2014) was promulgated on March 31, 2014 and, as a result, the Group is nolonger subject to the Special Reconstruction Corporation Tax effective for years beginning on or after April 1, 2014. As a result, the effective statutory tax
rate used to measure the Group’s deferred tax assets and liabilities was changed from 38.2% to 35.4% for the temporary differences expected to be realized or settled for the year beginning April 1, 2014. The effect of the change in the effective statutory tax rate as of and for the year ended March 31, 2014
was to decrease deferred tax assets by ¥556 million ($5,402 thousand) and increase net deferred gains or losses on hedges and income taxes–deferred by¥32 million ($310 thousand) and ¥524 million ($5,091 thousand), respectively, from the amounts that would have been reported without the change.
21. 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 periodicallyby 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 businessand 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 “SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.” The reportable segment profit figures are based on operating profit. Income arising from intersegment transactions is based on arm’s length prices.

40
40

(3) Information about reported segment profit (loss), segment assets, segment liabilities and other material items
Segment information for the years ended March 31, 2014 and 2013 is summarized as follows:
Millions of yen

2014
Reportable segments

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

74,242376
74,61918,223
5,174,955
4,960,225¥ 6,129
1,028
7,158
163
24,095
21,243

3,989
56,264
4,264
0
79
9,316
5,451

Total

¥

Other

Total

¥

82,265
3,848
86,113
19,887
5,216,175
4,990,470

Adjustment¥

451(3,848)(3,397)(13)(28,983)(23,928)

Consolidated

80,372
1,405
81,777
18,386
5,199,050
4,981,469¥ 1,893
2,443
4,336
1,500
17,124
9,001¥

82,716—82,716
19,873
5,187,191
4,966,542

293
1
191
—
0
60

4,282
56,266
4,455
0
79
9,377

74
62
13
—
—
646

4,357
56,3284,469
079
10,024

104
(129)
(199)
—
—
(0)

4,462
56,1994,270
079
10,023

290

5,742

203

5,945

(221)

5,723

Consolidated Financial Statements

Banking and
Securities

Notes: 1.	Ordinary income (“Total income” less extraordinary gain) is presented in place of net sales of operating companies 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 ¥451 million is mainly the recovery of written off claims included in “other.”		 (2) Adjustment of segment profit of negative ¥13 million is the elimination of intersegment transactions.
		 (3) Adjustment of segment assets of negative ¥28,983 million is the elimination of intersegment transactions.
		 (4) Adjustment of segment liabilities of negative ¥23,928 million is the elimination of intersegment transactions and the adjustment of liability for retirement benefits.
		 (5) Adjustment of depreciation of ¥104 million is the elimination of intersegment transactions.
		 (6) Adjustment of interest income of negative ¥129 million is the elimination of intersegment transactions.
		 (7) Adjustment of interest expense of negative ¥199 million is the elimination of intersegment transactions.
		 (8) Adjustment of tax expense of negative ¥0 million is the elimination of intersegment transactions.
		 (9) Adjustment of increase in tangible and intangible fixed assets of negative ¥221 million is the elimination of intersegment transactions.
4. Segment profit is reconciled to income before income taxes and minority interests in the consolidated statements of income.
Millions of yen

2013
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

79,685457
80,143
9,899
5,015,857
4,809,469¥ 6,754
1,166
7,920
250
22,102
19,3485,241
59,058
4,852
—
493
1,858
3,750

Total

¥

Other

Total

¥

88,541
4,482
93,023
11,7795,054,035
4,837,620

Adjustment¥

334(4,482)(4,147)
141(28,997)(28,328)

Consolidated

86,4401,623
88,063
10,1505,037,960
4,828,817¥ 2,101
2,858
4,959
1,629
16,0758,802¥

88,875—88,875
11,921
5,025,037
4,809,291

313
1
214
—
0
105

5,555
59,059
5,067
—
494
1,964

76
303
17
—
212
500

5,631
59,363
5,084
—
706
2,464

228
(369)
(429)
—
—
71

5,859
58,994
4,654
—
706
2,536

422

4,173

60

4,233

(378)

3,854

Notes: 1.	Ordinary income (“Total income” less extraordinary gain) is presented in place of net sales of operating companies 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 ¥334 million is mainly the recovery of written off claims included in “other.”		 (2) Adjustment of segment profit of ¥141 million is the elimination of intersegment transactions.
		 (3) Adjustment of segment assets of negative ¥28,997 million is the elimination of intersegment transactions.
		 (4) Adjustment of segment liabilities of negative ¥28,328 million is the elimination of intersegment transactions.
		 (5) Adjustment of depreciation of ¥228 million is the elimination of intersegment transactions.
		 (6) Adjustment of interest income of negative ¥369 million is the elimination of intersegment transactions.
		 (7) Adjustment of interest expense of negative ¥429 million is the elimination of intersegment transactions.
		 (8) Adjustment of tax expense of ¥71 million is the elimination of intersegment transactions.
		 (9) Adjustment of increase in tangible and intangible fixed assets of negative ¥378 million is the elimination of intersegment transactions.
4. Segment profit is reconciled to income before income taxes and minority interests in the consolidated statements of income.

41
41

Consolidated Financial Statements

Thousands of U.S. dollars

2014
Reportable segments
Banking and
Securities

Consolidated Financial Statements

Ordinary income:Outside customers ...................................... $ 721,356Intersegment income ...................................
3,653
Total ........................................................
725,019
Segment profit .................................................
177,059
Segment assets ................................................ 50,281,335
Segment liabilities ........................................... 48,194,957
Other item
Depreciation ...............................................
38,758546,677
Interest income ...........................................
Interest expense ..........................................
41,430Extraordinary gain ......................................
0
Extraordinary loss .......................................
767
Tax expense ................................................
90,516
Increase in tangible
and intangible fixed assets ..........................

52,963

Leasing

Total

Other

780,917
13,651
794,568
178,643
50,515,448
48,401,369$ 18,392
23,73642,12914,574
166,381
87,456

2,846
9
1,855
—
0
582

41,605546,696
43,286
0
767
91,109

719
602
126
—
—
6,276

42,333547,298
43,4220
767
97,3961,010(1,253)(1,933)——(0)43,354
546,045
41,4880767
97,3862,817

55,7901,972

57,763(2,147)55,606$ 59,551
9,988
69,5491,583
234,113
206,403

$

Total

$

Adjustment

799,310
37,388
836,698
193,227
50,681,840
48,488,826

Consolidated$

4,382 $ 803,692(37,388)—(33,006)
803,692(126)
193,091(281,607) 50,400,223(232,491) 48,256,335

Notes: 1.	Ordinary income (“Total income” less extraordinary gain) is presented in place of net sales of operating companies 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 $4,382 thousand is mainly the recovery of written off claims included in “other.”		 (2) Adjustment of segment profit of negative $126 thousand is the elimination of intersegment transactions.
		 (3) Adjustment of segment assets of negative $281,607 thousand is the elimination of intersegment transactions.
		 (4) Adjustment of segment liabilities of negative $232,491 thousand is the elimination of intersegment transactions and the adjustment of liability for retirement benefits.
		 (5) Adjustment of depreciation of $1,010 thousand is the elimination of intersegment transactions.
		 (6) Adjustment of interest income of negative $1,253 thousand is the elimination of intersegment transactions.
		 (7) Adjustment of interest expense of negative $1,933 thousand is the elimination of intersegment transactions.
		 (8) Adjustment of tax expense of negative $0 thousand is the elimination of intersegment transactions.
		 (9) Adjustment of increase in tangible and intangible fixed assets of negative $2,147 thousand is the elimination of intersegment transactions.
4. Segment profit is reconciled to income before income taxes and minority interests in the consolidated statements of income.

(4) Information about services
Millions of yen

2014

Ordinary income from outside customers ......

Banking

Securities andinvestments¥38,506¥22,873

Leasing¥6,129OthersTotal¥15,206¥82,716

Millions of yen

2013

Ordinary income from outside customers ......

Banking

Securities andinvestments¥41,116¥26,423

Leasing¥6,754

OthersTotal¥14,582¥88,875

Thousands of U.S. dollars

2014

Ordinary income from outside customers ......

Banking

Securities andinvestments

Leasing

OthersTotal$374,135$222,240$59,551$147,745$803,692

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%
for both fiscal years ended March 31, 2014 and 2013; therefore, no information about geographic areas is required to be disclosed.
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, 2014 and 2013; therefore, no information about geographic areas is required to be disclosed.

4242

(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,
2014 or 2013. Therefore, information about major customers is not required to be disclosed.
(7) Information on impairment of fixed assets for each reportable segment
Millions of yen

Banking and
Securities

Leasing¥15

Impairment .....................................................

Total

—

Others

¥15

Total

—

¥15

Millions of yen

2013
Reportable segments
Banking and
Securities

Impairment .....................................................

Leasing

¥480

Total

—

Others (Note)

¥480

Total

¥167

Consolidated Financial Statements

2014
Reportable segments¥648

Thousands of U.S. dollars

2014
Reportable segments
Banking and
Securities

Impairment .....................................................

Leasing

$145

Total

—

Others

$145

Total

—

$145

Note: “Others” represents the amounts related to the real estate leasing and management business.

(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.
22. RELATED PARTY TRANSACTIONS
For the year ended March 31, 2014, related party transactions were as follows:
Relationshipwith the Bank

Relatives of adirector 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
Daito City
are held byBlast Kogyo
Osakarelatives of a Co., Ltd. *4
director of theBank

Relationship ofrelated parties

Details oftransactions

Son-in-law ofHiroki Matsuoka Lending of money*2(Executive Director) Interest receivable
Loans
Father of
Shigeyori Kawai Lending of money *2(Director)
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)

—
0

—
0

Loans
—

29
—

281
—

—
3

—
29

Loans*3
—

244
—

2,370
—

80
1

777
9

Loans
—

112
—

1,088
—

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. The Bank provided reserve for possible loan losses amounting to ¥86 million ($835 thousand).
4. Relatives of Naoki Minowa (Director of the Bank) have 62.5% of voting rights of this company directly.
5. Yasuo Horiuchi retired from the position of Corporate Auditor of the Bank on June 27, 2013. The Bank has loans to his second son, Takashi Horiuchi, in the amount of ¥17
million ($165 thousand) as of that day.

43
43

Consolidated Financial Statements

For the year ended March 31, 2013, related party transactions were as follows:
Relationshipwith the Bank

Consolidated Financial Statements

Relatives of adirector of theBank

Paid-in
Votingcapital Businessrights(millionsline
ownershipof yen)(%)

Name

Location

TetsuyaMatsubara——

Publicofficer—

TakashiHoriuchi——

Officeworker

—

10

Metal
processing—

A company inwhich majority
voting rights Nikken
are held byBlast Kogyo Daito City
Osaka
relatives of a Co., Ltd. *3
director of theBank

Relationship ofrelated parties

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

Details oftransactions

Son-in-law ofHiroki Matsuoka Lending of money*2(Executive Director) Interest receivable
Loans
Second son of
Yasuo Horiuchi
Lending of money *2(Corporate Auditor) Interest receivable
Loans

Loans

Lending of money
Interest receivable

30
0

Loans
—

29
—

—
0

Loans*3
—

17
—

50
1

Loans
—

109
—

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 (Director of the Bank) have 50.6% of voting rights of this company directly.

23. PER SHARE INFORMATION
Net assets per share at March 31, 2014 and 2013 and net income per share for the years then ended were as follows:Yen

Net assets per share ............................................................................................
Net income per share - basic ..............................................................................
Diluted net income per share ..............................................................................

U.S. dollars

2014

2013

2014

¥794.95
33.78
33.74

¥774.46
28.01
27.99

$7.72
0.32
0.32

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...................................................................................
Minority interests ...........................................................................................
Net assets attributed to common stock ...............................................................
Outstanding number of shares of common stock at end of year
(unit: thousand shares) ......................................................................................
(Net income per share and diluted net income per share)
Net income ..........................................................................................................
Net income attributed to common stock .............................................................
Average outstanding number of shares during the year
(unit: thousands of shares) ................................................................................
Adjustment to net income ...................................................................................
Increase in number of shares of common stock .................................................
Stock acquisition rights ..................................................................................
Convertible securities not diluting net income per share ....................................

2014

2013

¥220,648
7,460
(123)
(7,336)
213,188¥215,745
6,758
(100)
(6,658)208,987$2,143,878
72,483(1,195)(71,278)
2,071,395

268,175

269,847

—

¥

¥

9,079
9,079
268,779
—
325
(325)
—

7,621
7,621
271,994
—
248
(248)
—

2014

$

88,21488,214—————

As described in Note 2 (q), “SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Changes in accounting policies,” effective from the year ended March 31, 2014, the Group has applied Retirement Benefits Standard and Retirement Benefits Guidance except the article 35 of Retirement Benefits
Standard and the article 67 of Retirement Benefits Guidance, in accordance with the article 37 of Retirement Benefits Standard.
As a result, net assets per share have decreased by ¥16.32 ($0.15) at March 31, 2014.
24. SUBSEQUENT EVENTS
Not applicable.

44
44

25. BORROWED MONEY, BONDS PAYABLE AND LEASE OBLIGATIONS
a. The details of borrowed money as of March 31, 2014 and 2013 were as follows:
Thousands of
U.S. dollars

Millions of yen

2014

2013

2014

¥85,388¥81,100$829,654

Millions of yen

Thousands of
U.S. dollars¥38,056
1,591
40,7201,865
3,155¥85,388$369,762
15,458395,647
18,12030,654$829,654

Annual maturities of borrowed money as of March 31, 2014 were as follows:
2015 .........................................................................................................................................................
2016 .........................................................................................................................................................
2017 .........................................................................................................................................................
2018 .........................................................................................................................................................
2019 .........................................................................................................................................................
Total .........................................................................................................................................................

Consolidated Financial Statements

Borrowed money
Due from April 2014 through October 2018
Average interest rate: 0.17% p.a. ....................................................................

b. The details of bonds payable as of March 31, 2014 and 2013 were as follows:
Thousands of
U.S. dollars

Millions of yen

Issuer:The Bank
Name of issue:	The Nanto Bank, Ltd. 2nd unsecured callable bonds(subordinated)
Issued on:
March 4, 2010
March 4, 2020
Due on:Interest rate: 1.72% from March 5, 2010 through March 4, 2015
6 m/s Euro Yen Libor+2.45% p.a. after March 4, 2015

2014

2013

2014

¥20,000¥20,000$194,325

Millions of yen

Thousands of
U.S. dollars

No repayment is scheduled within 5 years after March 31, 2014.
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, 2014 were as follows:
2015 .........................................................................................................................................................
2016 .........................................................................................................................................................
Total .........................................................................................................................................................

¥0
0
¥1

$0
0
$9

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.

45
45

Independent Auditors’ Report

Independent Auditors’ Report46
46

Capital Management
Consolidated Capital Adequacy Ratio
As of March 31, 2014
Millions of yen

2014(1) Capital adequacy ratio ((2)/(3)) ..............................................................................................................
(2) Capital .....................................................................................................................................................
(3) Risk-weighted assets ...............................................................................................................................
(4) Requisite capital ......................................................................................................................................

10.51%¥ 216,468
2,059,263
82,370Note: 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.

As of March 31, 2014
Millions of yen

2014(1) Capital adequacy ratio ((2)/(3)) ..............................................................................................................
(2) Capital .....................................................................................................................................................
(3) Risk-weighted assets ...............................................................................................................................
(4) Requisite capital ......................................................................................................................................

Capital Management

Nonconsolidated Capital Adequacy Ratio

10.03%¥ 204,782
2,039,819
81,592

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.

47
47

Organization, Group Network(As of July 1, 2014)

ORGANIZATIONSTOCKHOLDERS’ MEETINGHEADQUARTERS
General Secretariat

BOARD OF DIRECTORS

General Planning Division

Organization, Group Network

Compliance & Risk Management Division

MANAGING DIRECTORS’COMMITTEE

General Business Division
Individual Sales Division

Chairman

Public Institutions & Regional Vitality Creation Division

President

Value Creation Division

Deputy President

Credit Analysis Division

Senior Managing Directors

Securities & International Division

Managing Directors

Operations Control Division

Directors

Operations Division

BOARD OF CORPORATE AUDITORS• DOMESTIC
OFFICESInternal Audit Division
Personnel Division
General Affairs Division

Standing Corporate Auditor

Regional Headquarters

Corporate Auditors

Tokyo Liaison Office

Corporate Auditors’ Office

NANTO BANK GROUP(As of July 1, 2014)
The Nanto Group, which consists of the Nanto Bank and its 11 consolidated subsidiaries, offers financial
services related to securities, credit guarantees and leasing as well as its primary business, banking services.

THE NANTO BANK, LTD.

BankingHead Office and 108 Branches
25 Sub-branches
2 Agencies (Nanto Bank Agency Co., Ltd.’s business offices)
2 Representative Offices (Hong Kong and Shanghai)

Securities

Securities & International Division

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 Staff Service Co., Ltd.
Nanto Asset Research Co., Ltd.
Nangin Agency Co., Ltd.
Nanto Investment Management Co., Ltd.

Companies indicated with a pink square are consolidated subsidiaries.

48
48

Affiliates and Subsidiaries, Bank Data
(As of July 1, 2014)

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

Address

Established

Nanto Credit
Guarantee Co., Ltd.

2-1, Saidaiji-Kunimi-cho
1-chome Nara City, Nara, Japan

October 9,
1984

¥10

3%

69%

Credit guarantee

Nanto Lease Co., Ltd.

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

December 22,
1984

50

5

65

Leasing

Nanto Computer Service
Co., Ltd.

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

July 1,
1986

10

5

69

Computer softwaredevelopment and services

Nanto DC Card Co., Ltd.

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

50

5

71

Credit card business

Nanto Card Services
Co., Ltd.

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

50

5

71

Credit card business

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 Staff Service
Co., Ltd.

2-1, Omiya-cho 6-chome Nara
City, Nara, Japan

March 18,
1991

20

100

—

Dispatch of temporary staff

Nanto Asset ResearchCo., Ltd. (*1)

211-9, Minami Koriyama-cho,July 4,
Yamato Koriyama City, Nara, Japan 2005

20

100

—

Research and appraisal ofreal estateNangin Agency Co., Ltd.

2-1, Omiya-cho 6-chome Nara
City, Nara, Japan

October 6,
2009

50

100

—

Bank agency services

Nanto Investment
Management Co., Ltd.

2-1, Omiya-cho 6-chome Nara
City, Nara, Japan

November 21,
1986

120

5

68

Investment advisory
services

HEAD OFFICECORPORATE DATASECURITIES & INTERNATIONAL DIVISION

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

16, Hashimoto-cho
Nara City, Nara 630-8677, Japan
Phone: (0742) 22-1131
URL: http://www.nantobank.co.jp/
16, Hashimoto-cho
Nara City, Nara 630-8677, Japan
Phone: (0742) 27-1546
Fax: (0742) 26-1734
SWIFT address: NANT JP JT
E-mail address: skb-gaitame@nantobank.co.jp

640,000,000
275,756 thousand
29,249 million
10,789June 1934
134 offices
2 representative offices
2,733
June 27, 2014
Tokyo Stock Exchange

MAJOR STOCKHOLDERS (As of March 31, 2014)

HONG KONG REPRESENTATIVE OFFICEROOM 2104-2105,
21/F, HUTCHISON HOUSE,
10 HARCOURT ROAD,
HONG KONG
Phone: 852-2868-9932

The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Japan Trustee Services Bank, Ltd.
Nippon Life Insurance Co.
Meiji Yasuda Life Insurance Co.

SHANGHAI REPRESENTATIVE OFFICEThe Nanto Bank Employees’ Shareholders Association
Sumitomo Life Insurance Co.

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

Affiliates and Subsidiaries, Bank Data

Subsidiaries(standing proxy: Trust & Custody Services Bank, Ltd.)(standing proxy: Japan Trustee Services Bank, Ltd.)

Mori Seiki Co., Ltd.
Kitamura Forestry Co., Ltd.
The Shiga Bank, Ltd.

(standing proxy: Trust & Custody Services Bank, Ltd.)The Master Trust Bank of Japan, Ltd.
Total

Number of shares(thousands)

Percentage(%)

10,283
9,609
8,531

3.77
3.52
3.12

8,430
8,065

3.09
2.95

5,420
4,766
4,063

1.98
1.74
1.48

3,336
3,271
65,776

1.22
1.19
24.11

49
49

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