Nanto Report
Year ended March 2020

CONTENTS
Preface

On the Occasion of IssuingThis 1st Integrated
Nanto Report

2 What is Nanto Bank?

2 Nanto Bank Introduction

4 Our Goals

4 Message from the President
8 Value Creation Process
In our desire to deepen our stakeholders’ understanding of the Nanto
Bank Group’s business strategies and the future it envisions, we haveissued this new publication, the Nanto Report, which replaces ourprevious disclosure magazine.
In today’s severe business environment with its decreasing
working-age population and rapid technological progress, themeaning of the Nanto Bank Group’s existence is being asked.
We consider it one of our important responsibilities to ourstakeholders to explore this new reality and specify our vision for
the Bank’s future, which is based on our Group’s strengths andapproaches to solving social issues, and the path we have determined
to realize it.
We also intend to use this report as an important tool forcommunication between our employees and executives, in whom the
Nanto Bank Group’s value is rooted.
July 2020

Editorial policy
Conceived to deepen understanding of the strategies
employed by the Nanto Bank Group to create sustainablevalue for the medium-to-long term, this integrated reporthas been edited with reference to the “International
Integrated Reporting Framework” established by theInternational Integrated Reporting Council (IIRC).
This year’s report provides brief explanations,centered on non-financial concerns, of the management
issues and concrete countermeasures laid out in our new
Management Plan, “Nanto Mission and Objectives for the
Next 10 Years.” announced in December 2019.
To compile the report, public relations personnel
conducted interviews as representatives of our stakeholders
concerning the factors influencing the Nanto Bank Group’s
operations, risks and opportunities, and its approaches tocreating value for stakeholders.
Please note that this report contains concise
summaries of information of particular importance tovalue creation by the Nanto Bank Group. For detailed
financial information, please refer to the publication 2020
DISCLOSURE Nanto Bank Report.

President(Representative Director)

Director and Managing Executive Officer

Director

Auditor (full-time)

Satoshi IshidaKazuya Yokotani

Matazaemon Kitamura

Naoki Minowa

Senior Managing Executive Officer

Director and Managing Executive Officer
Business Promotion Headquarters

Director

Auditor (full-time)

Hidetaka Matsuzaka

Takao Handa

Satoru Wada

Director

AuditorShuhei Aoki

Takatoshi Kurahashi

Vice President (Representative Director)(Representative Director)

Keizo Nishikawa
Director and Managing Executive Officer

Kazuomi Nakamuro

AuditorMotoi Mitsuishi

Basis for creationand presentation

10 Business Environment

10 Challenges Facing Nara Prefecture
14 A Prefecture Where People Gather
		 (Come, Work and Live)

16 Business Strategies

28 Supporting Functions

28 Risk Management
30 Corporate Governance
32 Executive Officers

34 Corporate Data
34 Corporate Data
35 Stock Information

36 Consolidated Financial Statements
16 Implementing the Nanto Method
18 Cost and Resources Optimization

20 Business Execution

36 Consolidated Financial Statements
72 Independent Auditors’ Report
73 Capital Management
Navigating the Nanto Report

Icons representing the eight content categories advocated by theInternational Integrated Reporting Framework established by theInternational Integrated Reporting Council (IIRC) guide the reader’s
way to deeper insight into the Nanto Bank Group.
Organizational overview and external environment
A look at the operating environment

GovernanceHow does the governance structure ensure short-, medium- andlong-term value creation?

Business model

20 IT Strategy
22 Human Resources Strategy
26 “Advancing Toward Our Goals”: The Nanto
		 Bank Group’s Diverse Human Resources +		 Nanto Bank in Numbers

What is the business model, and how resilient is it?

Risks and opportunities

The real risks and opportunities affecting our ability to create value inthe short, medium and long term, and ways of dealing with them.

Strategies and resources allocation
What are our goals, and how do we plan to reach them?

Performance

To what extent have the Bank’s strategic objectives beenachieved, and what is their effect on capital?

Outlook

Challenges and uncertainties for executing strategies, and theirimpact on the business model and future performance

Basis for creation and presentation

How were the contents of the Report quantified and evaluated,and how were they selected?

Range of coverage

Precautions concerning future predictions

The Report presents key information about the Nanto Bank Group’s management strategies, business model,
business conditions, stakeholders, primary risks and opportunities, performance and outlook, and governance.

This report contains forecasts and statements concerning thefuture prospects for the Nanto Bank Group’s business strategies
and financial condition. These forecasts and statements involverisks and uncertainties stemming from their dependence on
future events. Please be aware that the actual results may differ
materially from those foreseen by the Nanto Bank Group.

Period of coverage

Date issued

April 1, 2019 ~ March 31, 2020

July 2020

Nanto Report 2020, the integrated report of Nanto Bank

1

About Nanto Bank

Introducing Nanto Bank

Deposits(Unit: ¥100 million)¥ 5,042.1 billion

5,500

4,826.9

4,917.5

FY2018FY2019FY2020(Unit: ¥100 million)

3,000

3,405.2

0FY2018FY2019Personal loans

FY2020(Unit: ¥100 million)

1,800¥ 1,780.6 billion

2,500

2,000

1,675.5
1,500

900

1,000

600

500

300

FY2018FY2019

Nanto Report 2020, the integrated report of Nanto BankFY2020¥ 1,075.7 billion

1,500

1,200

1,728.1(Enter the balance at the end of each period)

2

3,340.8

3,000

Business loans

0¥ 3,477.1 billion

4,000

3,500

4,500

0

(Unit: ¥100 million)

4,500

6,000

5,000

Loans

0

1,053.7

1,070.8

FY2018FY2019FY2020Performance

Nanto Bank Profile (as of March 31, 2020)

Organizational overview
and external environment

June 1, 1934
Nanto Bank Co., Ltd. was established through a merger of Sixty-

Established:

June 1, 1934

Headquarters:

16 Hashimoto-cho, Nara, Japan

Bank, Ltd.

Capitalization:¥37,924.15 million

Today, Nanto Bank offers comprehensive financial services including

Homepage:https://www.nantobank.co.jp/

leasing, trust banking, securities and consulting as the Nanto

eight Bank Co., Ltd., Yoshino Bank, Ltd., Yagi Bank, Ltd., and Gosho

Bank Group and conducts the banking business (deposits, loans,exchange, etc.), with Nara Prefecture and the surrounding region as
its primary base of operations.
As of end March 2020, the Bank’s deposits amounted to ¥5 trillion, asum that positions it in 20th place among Japan’s 64 regional banks.
Its share of deposits and loans in Nara Prefecture is nearly 50%.

Shares held in Nara prefecture
Deposits

Loans

Credit unions

Trust banks

Credit unions

Trust banks

17.9%

2.6%

20.4%

0.0%

Local banks

Local banks

3.8%

9.3%

Nanto Bank

Nanto BankCity banks

26.3%

49.1%

City banks

20.4%

49.7%

(As of end March 2020: Covering Banks/prefectural credit unions <excluding Japan Post Bank, agricultural cooperatives, etc.>)

Regional* deposit balance and ratio by prefecture

Regional* loan balance and ratio by prefecture

Wakayama Prefecture

Mie Prefecture

3.57%¥179.4 billion

1.48%¥744 billion

Wakayama Prefecture

Mie Prefecture

3.37%¥101.5 billion

0.71%¥21.5 billion

Kyoto Prefecture

Kyoto Prefecture

7.06%¥354.3 billion

9.16%¥275.6 billion
Osaka/
Hyogo prefectures

Osaka/
Hyogo prefectures

6.38%¥320.2 billion

29.16%¥877.5 billion
Nara Prefecture

81.4%¥4,086.2 billion

Nara Prefecture

57.5%¥1,732.8 billion*Definition of the Nanto Bank region
The Nanto Bank has expanded its base of operations to include six prefectures, Nara, Osaka, Hyogo, Kyoto, Wakayama, and Mie prefectures, as its local business region.
References to our region are to this region, to whose people and economy we have been providing close, active support for many years.

Nanto Report 2020, the integrated report of Nanto Bank

3

Future Image

Message from the President

Seeking to become the leader in regional revitalization

President (Representative Director)

Takashi Hashimoto

Currently, financial institutions are required to rethink their business models to realize sustainable management in today’s
rapidly changing operating environment. We, Nanto Bank retains its appeal as a trusted institution that has earned
community respect through its dedication to regional development. A creator of revitalization strategies, it continues toplay an indispensable role in the development of its home region.
In December 2019, the Nanto Bank Group introduced “Nanto Mission and Objectives for the Next 10 Years,” a new
Long-term Management Plan aimed at forwarding regional development through adept implementation of sophisticatedfinancial intermediation and consulting functions.
The purpose of this integrated report is to share our goals and show our determination to achieve them with ourshareholders, customers and other stakeholders.
“Nanto Mission and Objectives for the Next 10 Years”

Nanto Mission
Regional
development

Fostering
revitalization
experts

Enhancingprofitability

6 key strategies
Business strategy

Basic strategy

Deep cultivation
strategy

Channel strategy

for individual
customers

Customer approachenhancement
strategy

Commercialization
strategy

for regional
issue solution

HR strategy

Market management
strategy

5-year midterm goals

10-year targets

Return to profitabilityof customer services

Nara prefecture GDP
Increase of approx.
¥350 billion

OHR*1
Up to 70%
ROA
Over 0.25%
Qualified revitalization
personnel*2

1,000

Newly qualified
administrative
personnel*3

350

ROA
Over 0.35%*1 Ratio of expenses to profit after deducting gains and losses on government and other bonds from the total profit from the following: Profit from interest on deposits, loans and securities (net income);
profit from fees and commissions (service transaction income); and other business profit (balance of income from other businesses)*2 Applied information engineering, SME diagnostics, real estate brokerage, FPI grade 1, bookkeeping grade 2, other equivalent or higher certification*3 Human resources application information facilitating management decisions with regional customers

4

Nanto Report 2020, the integrated report of Nanto Bank

Organizational overview
and external environment

Nanto Mission Future objectives
Background to the “Nanto Mission and Objectives for
the Next 10 Years” Management Plan
Since implementing the “Revitalization Plan,” our 10-year
Management Plan, in 2014, we have worked to strengthen ouroperations and reduce personnel expenses and equipment
costs. We found it difficult to generate stable profits solely with abusiness model centered on deposits and loans, however, while
operating in an environment characterized by the introductionof negative interest rates and the successive entry into thefinancial industry of companies from other sectors.
Development of our regional economy is essential tosustaining and improving Nanto Bank’s profitability. There canbe no development of Nanto Bank without development of Naraprefecture, our base of operations. We will ensure that Nanto
Bank takes the initiative in solving regional economic issues
and contributing to regional development in an effort to improve
Nara prefecture’s GDP.
Determined to realize sustainable management, weformulated a new Long-term Management Plan, “The Nanto
Mission and Objectives for the Next 10 Years,” in December
2019 on the basis of our traditional “Vitality Creation Bank”
Management Vision. The Plan identifies the Nanto Mission ascomprising three strategies: Regional Development, Cultivationof Human Resources for Revitalization and Enhanced
Profitability.

Future image
The Nanto Bank Group aims to become the leading group inregional revitalization efforts within 10 years. As such, we will
dedicate ourselves to eliminating and resolving the anxieties
and concerns of our regional customers as if they were our own
personal issues.
Notjust asserting to be the leader in regional revitalization,
we have set our concrete target to increase Nara prefecture’s
GDP by 10% over the coming decade.
Achieving this target will not be easy. The prefecture’s
GDP has decreased by 3.5% over the past 10 years as the
local economy has shrunk due to such factors as a decreasing
working-age population and a sluggish tourism business. We
have exhibited powerful determination, however, by adopting
the development of Nara prefecture as our mission as aregional bank.
We believe that this will lead to proactive solution of thechallenges facing the creation of a sustainable regional society.
It will also contribute to realization of the SDGs.

GovernanceBusiness model

Risks andopportunities

Strategies andresources allocation

Outlook

Need for “Non-consecutive”
management approaches
President’s crisis awarenessThe ongoing evolution of digital technologies and other dramaticchanges in our business environment have convinced me, as I
mentioned earlier, that we cannot meet our customers’ futureneeds if we adhere to conventional banking practices alone.
Besides the entrance of companies into different industrial
sectors, the emergence in the business world of a young
generation who grew up in an environment of smartphones andtablets and for whom Internet use comes naturally has greatly
expanded customers’ options when choosing financial services.
We have sought to improve our ability to adapt to thesechanges in our business environment and to provide services
that meet our customers’ needs. Looking ahead to the Nanto
Bank a decade from now, however, I realized anew that it is not
improvements based on precedent that we require, but rather
the abandonment of precedents and established concepts
accompanied by the adoption of innovative reforms throughwhat I call “non-consecutive” thinking.

Reflections on the following of precedents
Inviting external personnel to the management teamIn the past, Nanto Bank executives have been appointed
from among its regular personnel on the basis of seniority or
meritorious performance. Relying on the perspectives of regularpersonnel alone, however, makes it difficult to respond tochanges in today’s fast-changing business environment and toaccelerate reforms. With this in mind, we have recently invited
Satoshi Ishida of the Industrial Revitalization Corporation ofJapan and the Japanese Financial Services Agency to join us
as an outside human resource in the position of Vice President,
where he has already demonstrated impressive capabilities.
During the year or so since his arrival, we have seen
gradual changes, as the Bank’s officers and employees,
including its executive officers, have come to recognize theneed to avoid entrapment in Nanto Bank’s precedents andconventional thinking. We have also invited outside personnel
to join our Group companies Nanto Consulting and Nanto
Mahoroba Securities for the first time. Even if this results in a “haloeffect,” I consider it essential that innovations of this type occur.
Branch network reorganization
Nanto Bank has traditionally assumed that a large numberof customers would come to its branch offices, and thatenhancement of the branch network would exert the greatest
possible impact on performance.
Today, however, the number of customers visiting the

Nanto Report 2020, the integrated report of Nanto Bank

5

Future Image

Message from the President

Seeking to become the leader in regional revitalization

branches has dropped off significantly. Considering the resulting
reduced need for service counters and personnel to serve asbank tellers, we have restructured our 30-branch office network.
This branch office network reorganization was
unprecedented in terms of both scale and speed, requiring justthree months, but it was conducted in response to our crisis
awareness, which convinced us that Nanto Bank’s future isinconceivable unless we can respond quickly to changes incustomer needs.
At the same time, we not only sent DMs to all thecustomers of the branches subject to reorganization, but wealso established contact points for inquiries at Headquarters
to facilitate our ability to respond as promptly and politely as
possible to customer inquiries to avoid inconveniencing them.
Measures such as deploying mobile ATM vehicles inmountainous areas and forming a tie-up with Japan Post Co., Ltd.
enabled us to obtain maximum understanding and cooperationfrom our customers and other stakeholders, moreover, and tocomplete the reorganization with no serious problems.
Alliance with Japan Post
We gave careful consideration to measures for maximizing
customer convenience during the branch office reorganization.
One of these was establishment of shared service counters incollaboration with Japan Post. In this first initiative of its kind in
the industry, we set up shared counters and Nanto Bank ATMs
in post offices in areas which lacked Nanto Bank branches toenable customers to make name and address changes, update
their passbooks and conduct other such normal banking
procedures. This has enabled these post offices to conduct thesame procedures as Nanto Bank service counters.
No such collaboration with competing post offices would
have been conceivable if we had stuck to our conventional
business practices.

Value to be preserved through “non-consecutive”
management
Customers
Despite our belief in the importance of “non-consecutiveness,”
we realize that regional banks are founded on relationships oftrust formed with our customers from the past, and we continue
to serve our customers with the “customer first” spirit they
associate with Nanto Bank.
In the face of the ongoing coronavirus pandemic, Nanto
Bank, as an indispensable social infrastructure, is cooperatingwith local governments’ efforts to prevent serious impacts oncustomers’ cash flows.
In addition to employing various loan instruments to meetcustomers’ financial needs, we have also responded swiftly

6

Nanto Report 2020, the integrated report of Nanto Bankand flexibly to changing conditions with respect to individual
customers’ situations by such means as deferring repayment of
the principal and interest on existing debt.
Our interactions with large numbers of customers
in providing this cash flow support has deepened ourunderstanding of their concerns, which has led in turn torenewed awareness of our responsibilities as a provider offinancial services.
Employees
Nanto Bank recognizes its employees as invaluable assets.
Even during the coronavirus crisis, they have been playing aleading role in providing financial services, motivated by a strong
will to respond to customer inquiries speedily and appropriately.
I want to see Nanto Bank employees develop into
“Omoshiroi” (unique) human resources. To this end, ourManagement Plan includes creating interesting humanresources among its goals. Such human resources Nanto
Bank envisions are people with whom customers choose towork because they consider them unique. I am convinced that
nurturing increasing numbers of such human resources will
increase the value of the Nanto Bank Group.
In the past, we supported our customers by working as
something like stagehands, but going forward, our employees
will uncover issues our customers have not noticed, and take theinitiative to resolve them. I want to see them take a place of honor
on the front lines and provide our customers with guidance.
Working at Nanto Bank equips employees with skills andknow-how they can use in corporate management and regional
development, thus preparing them to play active roles in every
aspect of regional life. It is precisely this kind of corporate culture,
overflowing with dreams and pride, that we seek to create.

Steps toward achieving goals set
10 years in advanceAn Action Plan for approaching goals
The new Action Plan introduced on May 29 this year includes
a variety of ideas Nanto Bank has never considered before. It
presents an image of the Bank as it will appear 10 years in the
future, and of the actions required to achieve it.
Our business operations will not be directed merely toward
producing large volumes of numbers, but will be aimed insteadat developing new profit sources by actually developing close
relations with customers and generating a problem-solving style.
We will also undertake a radical review of our branch office andHeadquarters operations aimed at achieving an overwhelming
improvement in productivity.

Organizational overview
and external environment

In order to realize a “restoration of profitability of customer
services” within 5 years, the Action Plan calls for establishingthe “Nanto Method” to increase income as well as for reducing
expenditures by optimizing costs and resources through suchmeans as branch network reorganization and office work reform.
The Nanto Method is a system/structure for securing
revenue by establishing close relationships with customers
and solving their long-term challenges systematically andcontinuously. Customers’ long-term challenges include market
shrinkage due to such structural social problems as thedecreasing working-age population, the aging of corporate
owners, and anxieties concerning living expenses in retirement.
Nanto Bank’s solutions focus on three factors: Productivity
Enhancement, Business Succession and Asset Formation.
At the same time, motivated by the coronavirus pandemic,
we will move to construct a management base that can respondpromptly and flexibly to all kinds of risks and regulations byenhancing our risk management and compliance systems.
We are discussing how the ways in which social andfinancial services will be like in the coming five or ten years. I
had believed this to be a question for the future, but we now
realize the changes will come sooner than expected.
It has been reported, for example, that remote work,
formerly considered difficult, has been normalized under the
influence of the pandemic, and that the penetration rate of
cashless payments has increased. The evolution of digitaltechnologies and changes in our values are creating majordifferences that extend into the very core of our lives, including
the places where we live and work. Under these circumstances,it seems self-evident that we should elaborate a visionunbounded by the conventional banking framework.

Vision extending beyond the banking sector
From another perspective, the banking industry can be seen
to be a platform business that earns money by permitting
customers to use the highly reliable financial infrastructure it has
accumulated over many years.
Having constructed a banking service system over theyears, Nanto Bank would now like to create a regional platformthat can provide the value required by customers and local
governments who share a desire to develop our region.
Among the innovations we can expect to emerge fromthe pandemic is an accelerating flow of people from centralized
Tokyo to rural areas, and a resulting enhancement of Nara’s
reputation. Located in the vicinity of Osaka and Kyoto, Nara has
a well-maintained infrastructure, relative freedom from disasters,
and a rich cultural and historical heritage. I would like to takeadvantage of this high potential for residence and tourism, andGovernanceBusiness model

Risks andopportunities

Strategies andresources allocation

Outlookcreate a mechanism for regional development through factors
such as increases in population, tourism and business activity
under the leadership of Nanto Bank.
To this end, besides pursuing human resources
development, we must employ today’s quickly evolving digitaltechnologies to promote a digital transformation capable ofproviding services that fulfill our customers’ needs. We arealso contemplating construction of IT architecture designed tobenefit both our customers and the Bank itself by considering
the ideals of our region as a basis for formulating a roadmap foroverall optimization, rather that starting with the most suitable
attributes from the Bank’s perspective.
Also in connection with regional development, I wantto pursue efforts outside the conventional bank parameters
by seeking the cooperation of various industries and starting
businesses on our own. This will require our employees at alllevels to break out of their shells, think for themselves, and act
on their own initiative.

To our stakeholders
This integrated report was created to share the Nanto Bank
Group’s commitment to its newly announced Management
Plan with all our stakeholders. In it, we reiterate a story ofvalue creation in which supporting our local communities andcustomers and helping them solve their problems will eventuallylead to growth of our Group.
In closing, I wish to express our gratitude for your continued
understanding and support for the Nanto Bank Group.

Nanto Report 2020, the integrated report of Nanto Bank

7

Future Image

Value Creation Process

Peoplecome

Peoplework

Business activities

Management capital

Customer base
•Information-gathering strengths achieved through relationships
with customers•Affording trust and peace of mind earned through many years
of providing financial services(Approximately 50% share of transactions in Nara prefecture)

Human resources•Human resources who respond proactively to change,
think and act independently•“Omoshiroi” (unique) human resources who contribute toregional growth and Nanto Bank’s profitability

Nanto Mission
Cultivation of who createvitality human resources

Regional development[Business strategy]

P.10 - P.17
Deep cultivation strategy/
Sophistication strategy

Commercialization
strategy

Nanto Method formulation

Initiatives for regional
issue solution
Tourism

Business creation

Productivity enhancement
Business succession
Asset formation

Channel strategy P.18 - P.21

Cost and resources optimization
Branch network reorganization
IT optimization

Office work reform

Governance

P.28 - P.33

*1 Ratio of expenses to profit after deducting gains and losses on government and other bonds from the total profit from the following: Profit from interest on deposits, loans and securities (net income);
profit from fees and commissions (service transaction income); and other business profit (balance of income from other businesses)*2 Applied information engineering, SME diagnostics, real estate brokerage, FPI grade 1, bookkeeping grade 2, other equivalent or higher certification*3 Human resources application information facilitating management decisions with regional customers

8

Nanto Report 2020, the integrated report of Nanto Bank

Business model

Values we provide to stakeholders as a“vitality creation bank”

Strategies andresources allocation

Goals for achievementin 10 years

Customers
Providing professional management personnel
Eliminating the root causes of problems
Offering optimal financial products and services

Nara Prefecture GDP

Local community

Increase of approx.
¥350 billion

Participation as leader in regional development incollaboration with local governments andlocal businesses
Active urban development and business creation

Employees
A corporate culture inspiring dreams and pride
Provision of opportunities for activities outside
conventional bank parameters
Assuring safe, healthy workplaces

Shareholders

Management
personnel cultivation*3

350

High market rating
Continuing stable dividends

SDG policy
Solving regional
issues proactively toachieve a sustainablelocal society andrealize the Nanto
MissionPeoplelive

ROA

0.35% or above
Presenting the activities implemented to achieve
the Bank’s goals.
The city built on the ground represents thecommunity, while the soil represents Nanto
Bank.

Mid-term targets(5-year)
Return to profitability ofcustomer services

Enhancing the profitability of the
Nanto Bank Group[Basic strategy] P.22 - P.27

OHR*1 improvement

Human resources strategy

Cultivation of “Omoshiroi” (unique) humanresources to implement planning

ROA improvement
Market management strategy

Securing stable earnings over the medium
to long term

Increased number ofqualified vitality creation
personnel*2

Quick, timely strategic trajectory correction

Nanto Bank will employ its management basecomprising customers and employees toimplement the Nanto Mission through regional
development, while cultivating human resources
who create vitality to enhance the profitability of
the Nanto Bank Group. It will provide leadershipto achieve its 5-year goals of profitablecustomer services, enhanced OHR (overall
human rating), improved ROA, and increased
number of qualified regional revitalization
personnel.
By implementing the Nanto Mission andpursuing efforts to achieve our goals, Nanto
Bank will nourish the tree in the center of thepicture on this page and the fruit it will bear.
This “fruit” is the value we offer stakeholders as
we develop Nanto Bank’s business region as aregion to which “people come,” “people work”
and “people live.”
The rainbow in the sky above represents Nanto
Bank’s cycle of value creation. Rotating thiscycle reveals the goals set for 10 years in
the future, which include increasing the GDP
of Nara prefecture by some ¥350 billion, thenumber of administrative personnel cultivatedby 350, and our ROA by at least 0.35%.
Nanto Report 2020, the integrated report of Nanto Bank

9

Business Environment

Challenges Facing Nara Prefecture

In the short term, we will provide full support for customers sufferingdamage from the coronavirus pandemic, while moving in the medium
and long term to construct and steadily implement structures andmechanisms leading to local reactivation and regional revitalization.
At a time when Nanto Bank is implementing the Nanto Mission, its Management Plan, we welcomed President Shinzo
Koyama of the Nara Prefecture Chamber of Commerce and Industry to discuss the current situation and future outlook of
Nara Prefecture, and the role Nanto Bank should play in confronting the pandemic and future prefectural development,with Nanto Bank executive officers Kazuya Yokotani and Satoru Wada.

Director and Managing Executive Officer
Business Promotion Headquarters

Nara Chamber of Commerce
President

Director and Managing Executive Officer

Satoru Wada

Shinzo Koyama(Director, Regional Business Creation/
Market Operations Department)(Director, Business Promotion Headquarters)

Anticipating the growth potential of
Nara prefecture, where infrastructuredevelopment is progressing
President Koyama: Since Nara Prefecture have a limited
number of businesses comprising mainly small companies,
I have always considered sustainable development to beunlikely until this problem was overcome. On the other hand,
the government has been making active efforts to attract
businesses considering a high rate of local residents working
outside the prefecture. The expressway network connecting uswith Osaka and Nagoya is well developed, and the number ofcompanies locating here in 2019 was 32, the eighth highest inJapan and second highest among the seven prefectures in the
Kinki region, including Fukui prefecture. The Nara Prefecture
Chamber of Commerce and Industry has pursued efforts to

10

Nanto Report 2020, the integrated report of Nanto Bank

Kazuya Yokotani

develop roads and railroads for many years, moreover, withthe cooperation of local governments. Not only have the longpending decision to commercialize the Yamato-Kita Road beenreached as part of a project aimed at completing the Kyonawa
Expressway and its branches, but construction of a Nara
Station near Nara City on the Linear Chuo Shinkansen, which
will be the world’s fastest bullet train has been approved.
Development has been hindered in the past by a lackof sufficient physical infrastructure, but I believe the recent
advances in the development of our highway and railroad
systems have expanded business opportunities in Nara
Prefecture. The tourism industry is in an especially difficult
situation due to the pandemic, but in the mid- to long-term,
we think we can break the mold of “day trip sightseeing” andattract more tours that include hotel accommodations.
Another issue I see is that businesses in Nara tend to beOrganizational overview
and external environment

GovernanceBusiness model

Risks andopportunities

Strategies andresources allocation

independent and firmly established by themselves, and they
make little effort to cooperate and help each other. It seems tome that this has hindered our response to the coronavirus. We
need more comprehensive action, and Nanto Bank, with its
deep understanding of our local business community, can playa role in this point.

Dedication to solving the issues facing
customers in accordance with the “Nanto
Mission”
President Koyama: The idea of introducing proactive solutions
to individual and regional issues, and boosting GDP isappealing, but our individual business operators seem to be far
from doing that.
Wada: We’re working hard to provide financial support. As
you know, Nara prefecture has incurred serious damage,especially to its tourism industry, due to its prevalence of small
and medium-sized businesses, and we’re responding quickly toprovide support.
President Koyama: Speaking of financial support, financial
institutions in Nara prefecture have acted promptly withrequests from the Prefecture. The local economy finds itself in
unprecedented circumstances today, however, and the future isdifficult to predict. Regardless of their size, our businesses facechallenges such as securing jobs, maintaining employment,
and obtaining finance, with the prospect of being forced toclose or go bankrupt. The national and local governments haveannounced various support measures to offset this challenge,
but the adverse effects of the pandemic are expected tocontinue for years to come. This is why we need Nanto Bank
to maintain a close relationship with the community as a local
bank. Our businesses want to see the Bank’s consulting
function strengthened.
In 2015, the Nara Chamber of Commerce wascommissioned by the Japanese government to open the Nara
Prefecture Business Succession Support Center, and we arereinforcing our activities to facilitate succession by passing
companies’ valuable businesses and technologies on to a newgeneration. Although these activities are achieving positive
results year-by-year, I’m afraid that some companies will close
their business due to this pandemic. I would like to see Nanto
Bank, having ample opportunities to communicate closely withour business community, to employ its proposal capabilities
to find solutions to business succession as well as to cash
management issues.
Wada: Increased number of opportunities for Nanto Bank’s
personnel to deepen communication with customers gives us
to perceive the true nature of the challenges facing them. Thishas motivated our Group members to work together to tackle

issues other than cash flow.
President Koyama: With this opportunity, I have read toNanto Bank’s Management Plan again, and ander-stood.
The Nanto Method, a system and structure for getting closely
acquainted with customers and solving their chronic problems
systematically as they arise to help ensure their profitability. In
fact, we’re watching for Nanto Bank to engage in these efforts.
We hope you’ll do everything you can to solve the problems
facing our business community.
Wada: The ongoing problems that Nanto Bank is called on
to tackle include market shrinkage due to contraction of theworking-age population, which is a structural social problem,the aging of corporate owners, and people’s anxieties about
meeting living expenses in retirement. At Nanto Bank, we’re
responding to these issues by getting to know our customers
and solving the problems facing individuals with a focus on
three factors: productivity enhancement; business succession;and asset formation.
We intend to continue enhancing these efforts to create
linkage between solutions to problems and profits. Whenit comes to productivity enhancement, for example, theNanto Bank Group as a whole is working on IT support andoutsourcing of peripheral operations. In the area of businesssuccession, we’re supporting smooth business succession
to enhance corporate value and encouraging successor
development efforts to protect businesses, activities that willin turn contribute to Nanto Bank’s own profitability. In theasset formation segment, we’re creating points of contact forcustomers by employing digital channels; providing long-term,
fully funded, diversified investments; and communicating theneed for retirement funding. For customers who are thinking
of stable asset succession by their heirs, we are expanding
face-to-face customer consulting opportunities and providing
appropriate products to solve customers’ issues and secure
profits.
The coronavirus pandemic has enabled Nanto Bank

Nanto Report 2020, the integrated report of Nanto Bank

11

Business Environment

Challenges Facing Nara Prefecture

to learn more about the worries of many of our customers,
including new customers. We want to deepen our acquaintancewith customers further through our funding support activities,
while accelerating our efforts to implement the Nanto Method.
President Koyama: As I understand it, the Nanto Method
begins with becoming more closely acquainted with customers.
Wada: That’s right. And to be honest, I regret not doing so
earlier. We didn’t know them as well as we thought. We havedetermined to work more closely with our customers from nowon.

We focus on developing Nara prefecture
free from the restrictions of conventionalbanking practices.
Yokotani: I’d like to say a few words here about regional
revitalization. The coronavirus pandemic has given me ample
opportunity to consider what we should do to revitalize ourregion. Nara’s tourism industry, which has prospered due toan influx of visitors in recent years, may not be able to expect
the same levels of foreign tourists to Japan as in the past. On
the other hand, the results of a survey of tourist activity in fiscal
2018 published by Nara Prefecture showed that 87% of tourism
consumption was by domestic tourists. We want to stimulatedomestic demand by branding local products and publicizingthem domestically and internationally, while also communicating
the appeal of our historical assets, without overreliance on
inbound travel. We often hear Japanese people say they haven’t
visited Nara since their school trip. But Nara has lost nothingof its rich potential. Nanto Bank will play a central role in its
recovery efforts by working with the tourism industry to create amechanism for changing from day-trip tourism to tourism withaccommodations.
In this connection, we are also participating in a traditional
Japanese-style house restoration and utilization project. The
City of Nara signed a cooperation agreement with NOTE Nara,

12

Nanto Report 2020, the integrated report of Nanto Bankan organization that engages in renovation of old traditionalbuildings, and worked on renovation of an old sake brewery
and residential hotel. In September of last year, we invested in
the Nara Kominka Machizukuri Fund and contributed to the firstproject of this fund, the revival of a soy sauce brewing company
founded in the Edo period. Plans are under way to resurrect thissoy sauce factory as a high-end tourist accommodation facility.
Also outside the bounds of conventional banking practices,
we are considering establishment of a regional revitalization
business company in our desire to serve as the regionalflagship by maximizing the use of Nara's tourism resources andrevitalizing the regional economy. We’re thinking of converting
a number of empty offices whose staff were relocated during
our branch network reorganization for use in this new businessin accordance with the concept of contributing to regional
development in collaboration with local governments and local
businesses. Our aim is to change the character of the Nanto
Bank branches to help attract an influx of child-rearing young
adults to Nara prefecture, promote social advancement of
women, and maintain our local population and consumption
levels.
President Koyama: The reconstruction of your bank branches
will provide the region with new hubs. If the Chamber ofCommerce and Industry is able to cooperate with these efforts,
I would be happy to help. I find it heartening that the two of you
are looking to do this, even in these trying times. You have also
set a goal of increasing GDP in Nara Prefecture by ¥350 billion
in 10 years. How do you expect to realize this increase?
Yokotani: Population growth is the key to increasing GDP. It will
be important to increase the number of people who come toNara, the number of people who work here, and the number ofpeople who live here.
President Koyama: Our local businesses also need to give
their best to these efforts. If we are to raise the GDP, increasing
the population will be essential, so stimulating population
growth should be our top priority. Achieving this will not be easy,
even for Nanto Bank. Our regional cities and prefectures must
work together to create residential appeal.
Yokotani: We want to continue strengthening our cooperation
with the prefectural and other local governments as well as with
regional residents. We’ll also take the initiative in disseminating
local government policies among regional businesses andplay a leadership role in attracting companies to our region.
Among our efforts to promote new business establishment andcreate employment, we plan to expand our incubation function
to support entrepreneurs and provide leadership to support
company foundation in collaboration with businesses anduniversities in the prefecture. These activities reflect our belief
that redressing the concentration of companies and populationin the metropolitan area will enhance the attractiveness of Nara

Organizational overview
and external environment

GovernanceBusiness model

Risks andopportunities

Strategies andresources allocation

is important to change the character of the Bank as a whole.
Human resources of the kind you seek are necessary for Nara
Prefecture.

Providing leadership in regional
revitalization to determine the Nara
Prefecture of the future

Prefecture, which borders on Osaka, and contribute to its GDP.
Wada: Another result of the pandemic is that many companies
have introduced remote work. This is an extremely efficient
way of working, and one that has the advantages of eliminating
commuting and giving workers a great deal more freedom. If
remote work leads to a working style that enables more womento participate in the economy, it will contribute to the region’s
GDP by creating more employment opportunities for women in
Nara prefecture, where the ratio of housewives is quite high.
President Koyama: Active participation by women inbusiness is an important issue for the Chamber of Commerce.
Besides that, I sense a change in Nanto Bank, where a newinterest in taking on unprecedented challenges has emerged.
The reorganization of your branch network is a particularly
drastic measure we have never seen before. Creation of“unique” human resources, another initiative included in yourManagement Plan, targets human resources development. It

President Koyama: In the short term, I ask that you provide
ample support for businesses facing cash flow challenges.
This means fully exercising your role as a regional bank inthese difficult times. I would also like to see you provide
comprehensive services related to such aspects of finance as
customer asset management, which should include offering
financial products that never existed before, and that makethem feel happy to do business with Nanto Bank. In themedium to long term, moreover, I would like you to do all you
can to become a navigator who arrives at a vision by depicting
not only the future image of the Bank, but also the future imageof Nara prefecture, including its citizens and the companies
located here.
Wada: We’ll provide full support for customers who are anxious
about the impact of the pandemic. We’ll then implement the
Nanto Method at an early stage and work hard to solve theproblems faced by our customers and local communities.
Yokotani: It won’t be possible to achieve an increase in
the prefecture’s GDP overnight, but we’re determined todemonstrate leadership by steadily introducing systems
and mechanisms that lead to local reactivation and regional
revitalization.

Nanto Report 2020, the integrated report of Nanto Bank

13

Business Environment

A Prefecture Where People Gather (Come, Work and Live)

Nara is a place where people come for various reasons and stay to work and live.
Nara prefecture, a region with the Nanto Bank Group at the Area: 3,690.94 km2
Population: Approx. 1.32 million
center of business, has a long history as a gathering place
Population density: 360 people/km2
for people.
Prefectural tree: Japanese cedar
In the current coronavirus era, expectations for its immense Prefectural flower: Nara double cherry
blossompotential are growing.
Prefectural bird: Japanese robin
As the birthplace of Japanese cultural history, Nara is still
Prefectural office location: Nara
Old regional name: Yamato
home to many such splendid cultural heritage sites as
Horyuji Temple, Yakushiji Temple, Kofukuji Temple andTodaiji Temple. Said to have marked the end of the Silk Road,
Nara is a repository of cultures from around the world thatprospered here mainly through its temples and shrines.
The Nara Magistrate's Office, established during the Edo period
under the direct control of the Shogunate, led the town’s development
into a center of commerce and industry.
Since the Meiji era, the railroad has connected Nara with Osaka and Kyoto,making the city with its abundance of shrines and temples a prosperous tourist destination.
In recent years, transportation between Osaka/Kyoto and Nara has become even more convenient,leading to Nara’s remarkable development as a bedroom community.

14

Horyuji Temple

Yakushiji Temple

Kofukuji Temple

Todaiji Temple

Nanto Report 2020, the integrated report of Nanto Bank

Organizational overview
and external environment

Risks andopportunities

People comeWorld-class tourist destination
The many historical buildings in Nara provide ample tourism
resources.
Although not a flashy town, Nara offers visitors an
opportunity to relax in an environment defined by an old Japanese
townscape and historic buildings. Besides the many centuriesold buildings that remain here, Nara is home to large numbers ofrestaurants and general stores occupying old folk houses. This
creates an atmosphere no other tourist destination can match.
The economic effect of these historical assets is insufficient,however, since Nara has the lowest number of overnight guests inJapan. With the number of foreign tourists declining sharply due
to the impact of the pandemic, the proportion of foreigners amongits visitors is painfully low at about 13%. It is essential that we findways of stimulating domestic demand.

National Treasures and Important Cultural Properties
2,804
items

Tokyo 281
Kyoto

2,187 items

234

1,327 items

Nara 203Shiga

823 items

56

Osaka 62
Hyogo 21
Wakayama 36

0Nationwide

3rd plac

677 items
468 items

National Treasures
Important Cultural
Properties (including
National Treasures)

393 items
500

1,000

1,500

2,000

2,500

3,000

Source: Agency for Cultural Affairs, “Numbers of designated National Treasures andImportant Cultural Properties by prefecture”

People work
(item)

National ratio(right scale)

30

34
27

26 26
22

22

3.36

21

23

0

2.48
1.58
1.211.43

8.0

34

32

6.0

25

25

2.30
10

10.0

38 items

Number of locations

40

20

(%)

Number of locations

50

3.06

3.32

3.26

2.40
1.85
1.32 1.37

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

4.0

National ratio

In ancient times, Nara was a thriving hub of industries such as armorand sword-making and ink and medicine production. Also of note,the many shrines and temples such as Nanto Shichidaiji Temple
fostered the craft of Nara bleaching for use in making costumes
for monks and priests, which became immensely popular after thecraftsmen became purveyors to the Shogunate in the early Edo
period. It is said, however, that the emergence of guilds that refusedentry to outsiders stifled opportunities for technological progress.
Today, Nara prefecture is engaged in active efforts to attract
businesses, and the number of new business locations here was 32
in FY2019, the eighth most in Japan and second most among theseven prefectures in the Kinki region, including Fukui prefecture.
With the dissemination of teleworking and other newworkstyles today, it is expected that many people employed outside
their home prefectures will return to their hometowns, and that fulltime housewives will return to the work force.

Number of factory and research laboratory locations

Number of locations

History as a prosperous
commercial and industrial town

2.0
0.0

Source: “Factory Location Trend Survey,” Ministry of Economy, Trade and Industry

People live
50
40

2nd place

28.8%

30
20

0

Nara

10
Wakayama
Tottori
Shimane
Okayama
Hiroshima
Yamaguchi
Tokushima
KagawaEhime
Kochi
Fukuoka
Saga
Nagasaki
Kumamoto
Oita
MiyazakiKagoshima
Okinawa

The Nara Basin is located in northwestern Nara Prefecture. Its
close proximity to Osaka has attracted housing development,
making it a high-appeal bedroom community for Osaka andKyoto.
New towns have also been developed in the hills
surrounding the basin (including the towns of Keihanna Hills,
Akajin Hills, Yada Hills and Mami Hills).
If proximity to work is no longer necessary for residence inthe new normal era, Nara prefecture’s abundant historical, culturaland natural heritage; its relative freedom from earthquakes andother disasters; and its stable, temperate weather, promise to
make it even more attractive as place to live.

Employment rate of people from outside the prefecture(2015)

Hokkaido
Aomori
Iwate
Miyagi
Akita
Yamagata
Fukushima
IbarakiTochigi
Gunma
Saitama
Chiba
Tokyo
Kanagawa
NiigataToyamaIshiskawa
Fukui
Yamanashi
NaganoGifu
Shizuoka
Aichi
Mie
Shiga
Kyoto
Osaka
Hyogo

Development as a bedroom
community

Source: “2015 Census,” Statistics Bureau, Ministry of Internal Affairs and Communications

Nanto Report 2020, the integrated report of Nanto Bank

15

Business Strategies

Implementing the Nanto Method

Determination to pursue solutions until the root cause ofproblems is resolved, beginning with the perennial problems
facing our region and customers, while ensuring Nanto
Bank’s profitability
If Nanto Bank, which enjoys a majority share of the prefecture’s banking business, is to grow with the region, it will first benecessary to solve customer problems stemming from regional structural issues.
The Nanto Method is an approach to optimal team and system formation that employs human resources to solve
customers’ challenges with a focus on enhancing productivity, facilitating business succession, and supporting asset
formation.
By resolving the issues facing its customers, the Nanto Bank Group will contribute to regional development and customer
prosperity, and spearhead the movement to enhanced profitability for Nanto Bank.

Customer base
Regional structural issues:
Decrease in the working-age population

Customer issues[Changes in the working-age population of Nara Prefecture](10,000
people)

50

74.63

70.28

65.41

ShrinkingmarketWorkershortage

0

2020

2025

2030

Source: National Institute of Population and Social Security Research[Ratios of working-age and elderly population in Nara Prefecture]

Aging corporate
ownersElderly
population

Working-age
population

1.78

1.67

1.55

2020

2025

2030

Source: National Institute of Population and Social Security Research

16

Nanto Report 2020, the integrated report of Nanto Bank

Anxietyconcerning living
expensesin retirement

Organizational overview Business model Strategies andand external environment
resources allocation

Nanto Bank Group’s
problem-solving
capabilities

Cultivation of humanresources who createvitality

Human resources
Nanto Bank

Asset management/
succession office
Trust/consulting officeBusiness evaluation
team
Medical/nursing teamGroup
companies

Nanto Consulting
Nanto Mahoroba
Securities

Nanto Lease
Nanto Card Services(?)

External
specialists

Tax accountants/
Partners
accountants/attorneys

Implementation of the Nanto Method

Future image
Regional andcustomer development

Business
succession

Asset formation

Deep knowledge of customers

Productivity
enhancement

Issuesrecognizedby customers

Issuescustomers
fail to recognize

Pursuing problem
solutions until theroot cause
is eliminatedResolving issues facing individual customers

The Nanto Bank Group aims to provide appropriate solutions byfocusing on the root cause of issues facing individual customers
after acquiring deep knowledge of each customer.

UP
Enhancing the
Nanto Bank
Group’s profitability

UP

Nanto Report 2020, the integrated report of Nanto Bank

17

Business Strategies

Cost and Resources Optimization

Seeking to achieve the goals of the Nanto Mission by
optimizing our branch offices, products and Headquarters
operations
We will work to improve productivity by optimizing costs and resources in three aspects of our business to achieve
profitability in our customer services within five years.

Director and Managing Executive Officer

Kazuomi Nakamuro(Director, Credit Analysis/Operations divisions)

Branch function optimization•Branch network reorganization•Office operations reform

Product optimization•Eliminating products involving large
administrative burdens and high costs

Headquarters operations
optimization•20% reduction in Headquarters operations

Optimization of branch functions throughbranch network reorganization and office
operations reform
The first of our optimization strategies, branch function
optimization, involves two approaches starting with branch
network reorganization. Today’s banking business is undergoinga major transformation due to a decline in the number ofcustomers visiting banks’ branch offices and the rise ofInternet banking, which has been further accelerated by thecoronavirus pandemic. In this environment, the basic idea

18

Nanto Report 2020, the integrated report of Nanto Bankof branch network reorganization is to improve our ability toprovide customer services. Customer lifestyles and the financial
services they require have changed dramatically in recent years
with the increase in two-income households, proliferation of
convenience store ATMs, and evolution of digital technologies.
In the midst of these changes, the roles played by conventionalbank service counters and ATMs that perform only banking
operations have changed significantly, leading to a long-term
decline in the number of customers visiting the service counters.
Nanto Bank is responding by reorganizing its branch officesthat are located in close proximity to each other in the same
areas, concentrating personnel at its core business offices, andimproving its consulting capabilities to strengthen its ability toprovide customer services.
Announced in November 2019, the branch office network
reorganization was completed on June 1, 2020, with theestablishment of 30 combined branches, 4 branches with
reduced working hours, and 4 branches operating on alternate
days. This reduced the number of the Bank’s business bases
from 138 before the reorganization to 108 afterwards. To avoid
inconveniencing our customers to the greatest extent possible
with this reorganization, we developed joint branches employing
a “branch-in-branch” method that eliminates the need forcustomer procedures and adopted shared service countersin collaboration with Japan Post. This use of shared service
counters is particularly remarkable as the first by any bank. We
also installed and deployed mobile ATM vehicles and installedtablets employing a system developed by ATM Japan, Ltd. inpost offices in regions with no nearby Nanto Bank branch. It
is now possible for customers to use these facilities to change
their names and addresses, and reissue their passbooks. In
fact, the installation of Nanto Bank ATMs in post offices has
enabled customers to conduct transactions previously possible
only at bank counters.
This year, we will continue to monitor performance by
our reorganized branches and, while closely observing theimpact of the coronavirus pandemic on our region, consider
further reorganization of the branch network. Since Nanto Bank
branches are all relatively well located, we hope to employ the
restructured branches as bases for regional revitalization incooperation with local governments and industries.
Another approach of the branch function optimization:
office operations reform.
At a time when the complexity of our conventional work
procedures has become a pressing issue, Nanto Bank isGovernanceactively promoting digitalization of its regional branch offices
by implementing the use of tablets and other paperless office
work measures to support procedures such as investment trust
and life insurance applications with the aim of transforming ourbranches into next-generation offices. The heavy burden of
administration duties, such as the operation of SBT terminals*
and other equipment and the handling of cash and vouchers,
limits the ability of branch office staff to concentrate on resolving
issues that our customers are facing, and customers also are
required to spend time filling out and signing various types of
documents.
To solve these problems, we are introducing three office
work innovations: paperless, cashless and backless. These will
be accompanied by a variety of administrative reforms, suchas the elimination of SBT terminals. We have set the goals of
reducing branch office work by approximately 50%, introducing
quick counters and reception navigation to facilitate semi-selfservice counters, and centralization of back offices. In June
2020, meanwhile, we began transitioning from paper-based
to digital operation of various notification procedures such asaddress changes, thus eliminating the need for customers
to fill out documents and shortening our staff’s processing
times to improve convenience for customers and reduce theadministrative burden on the Bank’s personnel.
We are working at the same time to reduce the need forface-to-face transactions and accelerate the transition to nextgeneration branch offices.
Promoting these three office work innovation will reduce
the administrative burden and create an environment thatenables our staff to focus on cultivating deeper customer
relationships.

Product optimization
Product optimization, our second optimization strategy, isanother important initiative that will impact the future of Nanto

Time-consuming
office work

SBT terminals

Servicecounters
ATMs
As of end March 2020
Introduced into 26 branches

Low counter

As of end March 2020
Introduced into 4 branches
High counter

Account
opening

Deposits andwithdrawals

We are deploying these three optimization strategies to improve
productivity and realize the Nanto Mission. The use of AI andother digital technologies is, of course, central to promoting
these measures, but we remain fully aware that the Bank iscomposed of employees. Our executives and employees
will work together with the shared goal of achieving ourManagement Plan, with the significance of providing optimal
customer services always in mind.
*SBT: “Super banking terminals” employed in such locations as financial institution
service counters and back offices

STEP I

Receptionnavigation

Low
counter

Our third optimization strategy is Headquarters operations
optimization.
This important strategy involves allocating personnel
to growth areas in order to maintain and expand profits withlimited expenditure of resources. Since reducing the volume ofwork assigned to Headquarters staff is key to its realization, we
have set the goal of reducing our Headquarters work volume by
20% this year. This will involve revealing the operations targetedby the Planning, Operations Concentration, and Internal Audit
divisions at Headquarters; eliminating unnecessary operations;
reducing the number of operations that cannot be eliminatedand acting to advance efficiency and standardization using tools
such as RPA; and centralizing or, in many cases, outsourcing
the remaining operations.

Bavk officeCentralization

Notification
As of end March 2020
Introduced into 1 branch

FY2020 Action Plan
40 branches
Additional
introductions

Expansion
to all branches
New ordinary
deposit accounts
Openings/
notifications

Consolidated
area branches
1~2 branches
Trialintroduction

STEP II(2nd quarter
FY2021 to 2022)

Processing andsupport system maintenance

Back office

Headquarters operations optimization(FY 2018-1st quarter 2021)
High counter

Strategies andresources allocation

Bank. In the past, we directed efforts toward expanding our
product lineup to meet customers’ diversifying needs. Today,
however, ongoing changes in customer desires and lifecycles
have made many of the remaining conventional services andproducts obsolete. Reducing the number of these products
is extremely important to cutting administrative costs andfuture system costs. We plan to give close consideration todiversifying customer needs in order to identify and eliminate
outmoded products and services.

Office work standardization/
centralized office work optimization
at Headquarters

Beforeimplementation

Business model

After eliminationof SBT terminals
Lot scanner

Back office

Receptionnavigation

Service counters
ATMs

Low
counter

Merits
Waiting time reduction
Cus- (processing time reduction)
tomers No bankbook/transaction slip required
Input error prevention

Nanto Totalization burden reduction
Bank Labor cost reduction

Nanto Report 2020, the integrated report of Nanto Bank

19

Executive Capabilities

IT Strategy

Overcoming the 2025 Digital Cliff by promoting a digitaltransformation originating with our customers
Nanto Bank will review its current complicated IT systems, and construct new architecture in pursuit of a new IT strategy
that meets customers’ needs for optimized services.

Environment surrounding the financial
systemToday’s business scene requires creation of a new businessmodel that employs new digital technologies that permit flexible
change. In Japan’s industrial sector as a whole, however,
the aging IT systems currently in place are deteriorating in
efficacy as they become increasingly complicated and blackboxed due to excessive customization. Failure to resolve theseissues would make it impossible to change business models
swiftly and flexibly in response to market changes, leading toeconomic losses of up to ¥12 trillion a year by industry at large
in the years after 2025. Referred to collectively as the “2025
Digital Cliff,” these losses are expected to amount to three times
current losses.
In the financial industry as well, the system structure
has become increasingly complex due to repeated partial
optimization in various business segments without considering
IT optimization in the organization as a whole. With thepassage of time, human resources capable of meeting complex
design challenges have been lost due to such changes as theretirement of system experts and termination of system support
programs. This trend, which has turned existing IT systems into
black boxes whose operation no one can fathom, continues toadvance.

As the existing IT systems become increasingly
incomprehensible, organizations’ dependence on IT vendors
has increased, and unit prices for development by a diminishingnumber of experts have risen. We can anticipate further
increases in IT costs. These increases will put pressure on
financial firms’ strategic investment capacity, leading to a
decline in competitiveness. This is precisely what triggered
the emergence of 2025 Digital Cliff fears. Solving these issues
will require implementing measures based on the two axes ofcurtailing existing IT costs and deploying IT to increase profits.

Nanto Bank’s challenges and vision
We are currently operating in this environment as a passive IT
organization with a complicated black-boxed IT system. This
makes cost-effectiveness difficult to assess and leaves our
systems only partially optimized. Besides the insufficiency of IT
system management, the system configurations themselves
have become black-boxed, making them complicated,
oversized structures that are vulnerable to changes. Even ourmanagement still takes a passive attitude toward responding
to requests from sales and related departments. In the areaof development, meanwhile, reliance on IT partner vendors
has created major challenges to fostering human resources
equipped with system development skills. Faced with thisEfforts by regional banks to reduce existing IT costs while making effective use of IT

Declining profitability in a difficult external environment

Need to reduce existing IT costs and increase
profits through use of IT
Reduction ofcurrent IT costs

Continuation of themonetary easing policy

Use of IT to
increase profitability
Strategic
investment
portionDeclining population,
falling birthrate andaging population
Intensified competition
among regional
financial institutions

20

Nanto Report 2020, the integrated report of Nanto Bank

Profits Costs

Profits Costs

Profits Costs

Business modelsituation, we now envision pursuing a future of promoting
waste-free IT investment from our customers’ perspective. A
dramatic change of this kind in their customer behavior will force
IT providers to take the initiative in constructing IT systems thatcan be adapted easily to changes. We will implement businessreforms that adopt IT systems incorporating best practices thatfacilitate clear evaluation of cost-effectiveness, and conduct
investment from a long-term perspective with overall system
optimization in mind.
It is important when constructing new architecture toconsider whether to use complicated, heavy, partially modified
existing IT systems as is, or to incorporate new technologies
while making decisions on what to discard in consideration of
departures from precedent.
Nanto Bank will provide clear IT system managementthat can visualize system configurations and realize new
configurations capable of responding flexibly to changes. In ourorganizational management as well, we will cultivate a corporate
culture that supports Nanto Bank’s competitiveness and fostera climate that changes autonomously with the times. We will
review our dependence on IT partners and vendors, moreover,
and accumulate IT skills that allow Nanto Bank to conduct
independent planning with the aim of constructing systems
that enable the Bank’s personnel to conduct continuous
development.

Strategies andresources allocation

An IT system strategy conceived toachieve the desired vision
Nanto Bank will proactively promote digital transformation
to evade the 2025 Digital Cliff and to realize the Nanto Mission
and our goals for achievement within 10 years. Our Customer
Approach Enhancement Strategy, for example, requires anaccurate grasp of changes in customer behavior in order torealize services that meet customer needs. Even greater use ofdata is important to this. To this end, we consider it essential tobuild a foundation that enables integrated data management
and redefinition of data flows.
Since Nanto Bank’s systems do not yet provide centralized
data management, its data is scattered through various
individual systems. This leads to waste by requiring storage ofthe same data on multiple systems. Each time a new system
is linked in or a new function added, it becomes necessary to
conduct a large-scale impact survey, which makes the system
as a whole inefficient. Analyzing and identifying customer needsin this piecemeal manner leaves us unable to obtain a full graspof customers’ real needs from our data.
We believe that one solution to these problems is toconstruct a hub to centralize this scattered data and manage
and manipulate it to suit our basic considerations concerning
IT investment and the future image of our IT systems. Data
movement can then be visualized and aggregated, limiting thescope of impacts stemming from introduction of new systems
and realizing simplified collaboration by facilitating speedy,
flexible IT policy decisions.
Without hesitating to discard our current IT systems, wewill construct new Nanto Bank IT architecture to optimize ouroverall systems. This will give us a unique position as a regionalbank among today’s rapidly changing industrial and financial
firms, and enable us to provide enhanced services that give ourcustomers full satisfaction.

Nanto Report 2020, the integrated report of Nanto Bank

21

Executive Capabilities

Human Resources Strategy

Guided by the concept of cultivating “unique humanresources,” we will pursue a new human resources strategy
in an effort to realize our mission.
Nanto Bank’s new Management Plan is aimed at realizing regional development, cultivating human resources whocreate vitality and improving profitability. The Plan promotes a distinctive human resources strategy that attaches special
importance to diversity. By discovering and training talented human resources who receives with great appreciation by
our stakeholders, we will realize the vision of Nanto Bank 10 years in the future projected in the Plan.

Discovering and training “unique humanresources”
With realizing the Nanto Mission as its goal, Nanto Bank is
promoting a new human resources strategy designed toachieve regional development, cultivation of human resources
who create vitality, and improved profitability. I wish to illuminate
here the concept reflected in our short-, medium-, and longterm human resources development plans to achieve our goals
for achievement in the decade to come. This core concept is to
discover and train “unique human resources”.
What do we mean by “unique human resources”? This is
keyword selected to give others the idea that our employees
are interesting. In fact, most of us probably do not think manyof the people we meet are unique. When we are interested inother people, they tend to be people who have something welack, or who think more deeply about something than we do.
In promoting our new Management Plan, we defined theterm “unique human resources” as the core concept of ourhuman resources strategy desiring to ensure that our customers
and other stakeholders find it interesting to do business withpeople at Nanto Bank. It is also based on a realization thatthe presence of many such employees will help to ensurethat Nanto Bank never loses its value. In other words, it isessential to our HR strategy that our stakeholders consider our
employees unique.

Vice President (Representative Director)

Satoshi Ishida

Personnel sought by Nanto Bank
“unique human resources”

Personnel who do not stop at finding and pointing out problems,
but who take the initiative to solve them“unique human resources” cultivation process

Basic actions

toDetermine
your purpose.

Repeat the basic actions fromwith their increasing levels of difficulty:

Deepen yourawareness ofthe problem.

Contemplate
the rootcause.

Continue to investigate problems andtheir causes until arriving at the root cause.

22

Nanto Report 2020, the integrated report of Nanto Bank

Considervarioussolutions.

Implementa solution.

Human
power
Creative
power
Conceptual
power

UniquehumanresourcesGovernanceInitiatives for FY2020: Cultivating problem
awareness and training appraisers<Problem awareness>
Our first approach in this initial year of the Plan is to determine
the extent of our employees’ awareness of customer problems.
To begin with, simply having a clear opinion concerning aproblem indicates some degree of awareness. Starting withthis awareness and thinking deeply about solutions leads toestablishment of a firm opinion. People who do this will also be
perceived by others as having a policy comprising their own
opinions.
Every person has a unique personality, of course, but
Nanto Bank seeks to gather employees with their own ideas
and policies. If their thinking is recognized as highly diverse,they will come to be considered as an unique group.
There is a tendency toward homogeneity withinorganizations, however, because everyone is usually evaluatedby certain rules determined by the organization. I believe that
this homogeneity weakens organizations.
Since every person has a completely different personality,
it is natural that each should have different ideas. I personallythink it impossible for every stakeholder to find myself uniuqe.
I believe that gathering many employees with a variety ofideas will lead to organizational strength.

<Conducting appraisal training to ensure appropriate
evaluation>
The second approach is “personnel evaluation for practiceof basic actions,” or “appraisal training to ensure proper
evaluation.” Evaluation of personnel is extremely important.
As employees advance in an organization, it becomes
impossible for them to move on to the next step without being
evaluated by others. From the perspective of the homogeneity
mentioned above, employees who are equipped with apparently
heterogeneous thinking, even if correct, tend to receive a low
evaliation.

Business model

Strategies andresources allocation

In such cases, it is essential that the evaluator determine
whether or not the employee’s distinctive way of thinking willcontribute to the Bank’s future and make a proper evaluation.
The needs of 30 years ago may be quite different fromtoday’s needs, for example, or from those of 10 or 20 years in
the future. It seems clear that the axis of personnel evaluations
should be changed from time to time. To begin with, howshould we evaluate heterogeneity? Knowing that heterogeneity
will determine the future of Nanto Bank, we must learn toaccept heterogeneity, evaluate it and nurture it. This is why
appraiser training is so important.

<Cultivation of problem awareness through discussion>
The third approach involves conducting one-on-one discussions
aimed at getting to know each employee or group discussions
aimed at strengthening the members’ thinking ability.
This activity is based on realization of the importance offostering problem awareness through discussion, forming one’s
own opinions, and communicating these opinions to others.
One important question to ask in the discussions is, “Why areyou engaged in your current business?”
The answer is, “To improve Nanto Bank.” But in fact,
simply to improve the Bank may be too narrow. “I want toimprove the world” would also be a good answer.
Since seeking to achieve this broader goal would result ina loss of cohesion, however, the first step should be to improve
Nanto Bank.
The reason sectionalism occurs so commonly inconventional organizations is that they have been seeking
to optimize their various sections independently. Even whenemployees are trying to improve the Bank as a whole,
the process can easily be influenced by such factors as
departmental customs, the likes and dislikes of executive
officers, and the employees’ own preferences and self-interest.
It is from this that sectionalism is born.
In order to avoid falling into this trap, I urge all our
employees to acquire awareness through discussions of what
they are accomplishing in their job.

Nanto Report 2020, the integrated report of Nanto Bank

23

Executive Capabilities

Human Resources Strategy

Mid-term initiatives/Early developmentof human resources equipped with amanagement perspective<1,000 employees with certifications participating invitality>
Our mid-term goals for the 5th year of the Plan provide concrete
numbers in the form of indications such as “1,000 recipients ofcertifications related to creation.” Certifications are not uniqueto Nanto Bank. Many are official certifications issued by externalorganizations or agencies.
The purpose of acquiring official certifications is totransform employees into human resources that are highly
valued both inside and outside the Nanto Bank community.
Creation of unique human resources also requires that objective
external evaluations be conducted to determine whether
candidates have acquired the requisite knowledge of therelevant materials to qualify for certification. Some may criticize
the process as placing too much weight on “book knowledge,”
but we consider certification meaningful because it raises therecipients’ value.

<Management candidate development/Early
promotion of executives and officers>
We are also contemplating mid-term goals of “cultivating
management personnel candidates” and “gradually accelerating
the appointment of executives and officers.” The objective of
these plans, currently in the formulation stage, is to anticipate
what these human resources can contribute to Nanto Bank’s
sustainable growth.
If an employee becomes an officer under the existingorganizational structure, in which an assistant manager
becomes a branch manager and a branch manager becomesa division manager, it is questionable whether such employee
is a qualified officer. We need to reconsider the responsibilities
of officers and the qualities they should bring to the job. No
one can broaden their field of view, heighten their perspective,
and learn strategic thinking overnight. This is why we want toimplement early officer development.
Candidate selection is obviously essential, but the numberof qualified candidates may be limited if they are selected using
a conventional, highly homogeneous evaluation process. We
want all our employees to know that the door is open. This
expression may seem somewhat emotional, but we welcome
anyone who is motivated, interested in changing the Bank andcapable of planning the changes. It is likely that people whohave been highly rated thus far in their careers will be the focus
of consideration, of course, but those who are not selected will
now have a chance at promotion as well.

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Nanto Report 2020, the integrated report of Nanto Bank

<Human resources development and organizational
reform through assignments and transfers>
In our efforts to increase motivation by cultivating unique humanresources, we intend to establish an Unique Human Resources
Development Office in the Human Resources and General
Affairs divisions, whose members’ duties will center on meeting
all the employees involved and planning discussions among
them. In our awareness that enhancing our employees’ value
will broaden our horizons, we will expand our activities aimed atdeveloping interesting human resources.
Not every career follows the same path. From theperspective of broadening employees’ fields of view andelevating their viewpoints, the banking business encompasses
a variety of jobs other than deposits and loans. Those whowish to embark on a career path leading to management in
the future require experience in various operations. Rather thanfostering only generalists, however, we consider it essential foreach employee to have a specialty, such that those who are not
adept at sales may be excellent planners, for example.
Career path development at Nanto Bank is oriented
toward development of human resources with confidence intheir abilities in accordance with their individual strengths.
We have been moving forward with these changes inpersonnel development since last year. In one example, wegather mainly employees with little experience in planning in
the Headquarters department responsible for planning. Whenthe employees complete their training here and return to theircustomary positions, they find that the scenery has a new look.
The corporate value of Nanto Bank as a whole will also havegrown in this process. When diversification of a homogeneousorganization advances little by little, its members have noproblem understanding each other's feelings.
Conflicts of interest are inevitable within an organization.
Governance is impossible, for example, if the Credit Analysis
Division is working hand in hand with the sales personnels.
However, If both parties understand what the other is thinking,what their aims are, and what they are working toward, theorganization can operate smoothly.

Long-term goals — human resources
with heterogenous ideas building our
future<Cultivating 350 management personnel>
To begin with, it is important to understand the fundamental
premise that management personnel are not limited to those
employed by Nanto Bank. Management personnel areobjectively recognized by various stakeholders. In the businessworld, our standing begins to rise when we receive positiveGovernanceevaluations from our personnel department as well as from
customers and others outside our own organization. In otherwords, I think that management personnel have a will of theirown, and that they are in positions of leadership because thestrength of their convictions is recognized by stakeholders.
This is precisely the same thing as the unique humanresources discussed above. It is also in line with our 10-year
goal of cultivating 350 management personnel in the Bank,
moreover, and becoming an organization with a perpetually
renewed deep pool of such personnel on board.

<Changing business models and unique ideas>
In our current environment, banking’s business model itself
is being questioned. It is a fact that the conventional banking
activities we have pursued are no longer generating profits. This
will require the banking industry to seek new revenue sources
while making use of the legacy it has cultivated in the past.
We have a pressing need for human resources who cangenerate unique ideas. I am convinced, moreover, that without adeep pool of people whose thinking is out of the ordinary, there
will be no future for the Nanto Bank Group in 10 or 20 years.
We need to change our mindset. It is said that the people in theworld who generate reforms are eccentric in accordance with
their heterogeneity and their perspectives. Reform can proceed
only when there are people with unusual ideas, and when an
organization capable of accepting these ideas is established.
From the customer's perspective, on the other hand,banks should be safe and secure. Nanto Bank will continue
to meet these expectations, of course, but we believe thedefinitions of safety and security customers expect from theirbanks will change in the future. The time may come whensafety and security do not summarize the added value offeredby banks. We clearly need personnel who can maintain a graspof our customers’ true needs in the future.
Customers’ demands are changing dramatically. The
things customers in their 40s and 70s are looking for are quite
different, and young people who are in their teens and 20s
today will be in their 40s and 50s in 30 years.
It is important to stop to reconsider what customers wantfrom a bank from time to time. It is possible that the added
value offered by banks and the reasons why customers engage
in transactions with banks will change dramatically in the future,
and we need human resources who can consider our value toserve them.

Business model

Strategies andresources allocation<Efficient organizational management andcommunication>
In the future, business activities such as consulting may
become mainstays of our business. This raises the questionof what form our organization should take at that time. Somesay that project units are more effective and efficient than theconventional business structure comprising a headquarters andbranches. Organizations that can fully leverage the abilities of
their newly trained personnel will of change to the conditions of
the day.
There may very well be differences in awareness between
management and regular employees concerning the strategies
and ideas described here. We would like to have the Unique
Human Resources Development Office take on the task offilling this gap. I myself am in charge of some Headquarters
departments, but I place great importance on dialogue with
their staff and make a point of spending time in dialogue.
We believe that deepening communication is the key
to aligning employees’ awareness of policies and strategies.
At the same time, top-down management also plays a vitalrole in promoting reform. Placing value on various forms ofcommunication, I am determined to ensure that the Nanto Bank
Group realizes our vision 10 years in the future.

Nanto Report 2020, the integrated report of Nanto Bank

25

Executive Capabilities

Pursuing Our Goals: Nanto Bank Group’s Diverse Human Resources + Nanto Bank in Numbers

Agenda for Nanto Bank’s pursuit of future greatness
Nanto Bank will challenge increasingly large goals as a Group in the future.
To achieve the Nanto Mission, each of us will seek to become unique “interesting” employee our customers need.
This will prepare us for efforts to develop the region, and to put smiles on growing numbers of faces.

Founding*1

Seeking theappreciation of thepeople of Nara

Disseminatingknowledge of
Nara’s attractions
worldwide!

141s

Becoming theregion’s leading
consultant

anniversary*1	Establishment of the The
Sixty-Eighth Bank, Ltd.

Platinum Kurumin
certification
Awarded by the Ministryof Health, Labour andWelfareContributing
to regional
development
through ourchildren’s growth

Desseminating theworld of Nara’s
traditional crafts
and events

Contributing
to customers
decisionmaking for theirsustainablegrowthNo. ofemployees

Making Nara aplace people
enjoy visitingfor pleasure

Becoming an
influential mentor

2,482

Average age

Keeping the statusof a bedroom
community people
love to comehome to26

Nanto Report 2020, the integrated report of Nanto Bank

39
6

and

years
months

Revitalization of
temple and shrine
surroundings

Founding

Giving knowledge
and know-how
acquired throughwork back to thecommunity86thanniversaryStrategies andresources allocation

Performance

Outlook

Processes•Every Nanto Bank employee is responsible for providing leadership.
Nanto Bank embodies a traditional character created by unifying the contributions of every executive and employee. The words and actions of every
individual contribute to the image of Nanto Bank our stakeholders will evaluate. Each of us must represent the Bank with self-awareness and pride.

•Every employee becomes a customer advisor.
Nanto Bank is active as a regional financial institution inspired by a social mission. In order to develop the region, all employees must provide customers
with kindhearted but firm advice. To this end, we all must work to improve ourselves and earn our customers’ trust as consultants.

(March 31, 2020)

Employees
under 30

Breaking throughbarriers andrecreating Nara as
the most appealing
prefecture in Japan

25%

Average yearsof service

Creating a town
where young people
gather

17
1

and

years
month

Proportion of
women among
executives withthe rank ofmanager or above

14%

Commitment tocustomers byseeking to makeNara Japan’s
happiest prefecture

Becoming arevitalizedbank that puts
smiles on faces
regionwide

Making Nanto
Bank a place
to meet uniquepeopleNo. of bases(As of June 1, 2020)

Desire to develop
the region throughintegrated efforts byindustry, academia
and government witha focus on tourism

Becoming aperson with whom
customers feel
free to consult likea family member

108

Ratio of family
support leaveavailability tomales*2
Encouraging
customers to use
employees’ personalnames instead of“Nanto-san”

100%*2	A system promoting maleparticipation in childcare

Realizing thehidden desires
behind customer
needs

Excellent HealthManagement
Corporation 2020
AwardedPutting smiles
on facesregionwide

Nanto Report 2020, the integrated report of Nanto Bank

27

Strong Support Functions

Risk Management

Strengthening both defensive and aggressive governance,
implementing responses/support for coronavirus pandemic
victims, and supporting regional communities and customers
By strengthening governance to construct a new risk management system, we are seeking to realize the Nanto Mission’s
goals of achieving regional development and enhanced profitability.

Living with the coronavirus

Defensive governance<Impact of the coronavirus pandemic and Nanto Bank’s response>

A priority on the health and safety of our customers
and personnel
As a financial institution, we are responsible for continuing toprovide financial services as essential infrastructure required tomaintain social functions. We are fulfilling this role in accordancewith our policy of prioritizing the health and safety of ourcustomers, employees and executives, even in the present
circumstances in which a nationwide emergency declaration
has been issued due to the coronavirus pandemic. Our efforts
to this end include continuing to provide financial services while
implementing measures to prevent the spread of the disease. We
have introduced alternative work and staggered work systems
to reduce the risk of infection during commuting and at work,
moreover, while also conducting telework using tablets and mobile
phones in response to inquiries and requests from customers.

Supporting the local economy
Industries ranging widely from tourism to manufacturing and retailhave seen profits fall due to the coronavirus pandemic, here in
Nara prefecture, the business base of Nanto Bank, as elsewhere.
Many of the Bank’s individual customers have also been forced
to change their lifestyles as their incomes have declined.
Nanto Bank has responded by installing special consultationand telephone consultation desks to facilitate prompt, polite service
to financially impacted customers and to provide repayment andcash flow consultations every day, even on holidays. We also
access such financing systems as the Emergency Coronavirus
Response Fund to support customers’ cash flows.

Nanto Bank’s risk management system
The business environment in which financial
institutions operate has changed dramaticallyin recent years, and the risks they face havebecome increasingly diverse and complex.
Nanto Bank is working under these
conditions to enhance risk management in orderto maintain sound, appropriate management andensure customers’ ability to conduct businesswith confidence.

Integrated risk management system
Nanto Bank has strengthened its risk management
system by assigning responsibility for each of thevarious risks it faces in conducting its banking
business to an appropriate department. It has
also established a Risk Management Division,
moreover, as a body that integrates the risks
faced by the Bank to determine the location and28

Nanto Report 2020, the integrated report of Nanto Bank

With the impact on the economy expected to continue into the
future, Nanto Bank recognizes the importance of finding a “livingwith coronavirus” business model.
The Bank has also introduced a self-assessment programfor customers who are suffering from temporary declines insales due to the pandemic. New rules introduced under thisprogram protect customers from demotion to a lower debt
classification after a thorough interview process has been
conducted to verify their past sales records and post-pandemic
business plans.
Through such measures, we will continue to provide
smooth financial support for our customers and to maintainthe financial health of Nanto Bank. In preparation for a possible
recession, we anticipate suffering ¥8.5 billion in preventive
credit-related costs during fiscal years 2019 and 2020. To help
maintain stable earnings in the financial markets, meanwhile, we
are implementing changes to a more flexible investment styleand portfolio restructuring to improve our asset liquidity.
On the sales front, we will continue to engage in direct
dialogue with customers aimed at solving their management
issues together, while observing measures to prevent the
spread of the coronavirus.
At the same time, we are promoting a digital transformation
by introducing quick counters and reception navigation
facilities that enable customers to conduct transactions
efficiently without conducting complicated procedures suchas filling out documents at branch office service counters. This
reduces processing times and decreases congestion at ourbranches, thus helping to prevent transmission of the virus bymagnitude of the risks accurately, appraise themand implement prompt responses.
Based on the idea of “integrated risk
management,” under which every risk isquantified on a uniform scale and the amount ofrisk is controlled to an appropriate level of capitalwith reference to its management strength, we
determine the level of risk capital (amount ofequity distribution) every half year and control it tomaintain each risk quantity (such as VaR) within
the range of risk capital.
Efficient, effective risk/return management
is assured by evaluating the status of eachrisk factor at monthly meetings of the ALM
Committee and implementing systems forappropriate control from the perspective ofensuring sound management, improving
profitability, and making effective use of capital.

Credit risk
management

Operational risk
management

Integrated risk management system
Market risk
management

Liquidity risk
management

Administrative risk management(Thorough, accurate office work)

System risk management(Response to system failures/prevention of unauthorized use)

Legal risk management(Observance of legal compliance)

Human risk management(Response to personnel and labor problems)

Tangible asset risk management(Response to impairment of tangible assets)

Rumor risk management(Response to false assertions circulating in the market
and among customers)

Risks andopportunities

implementing the “3C’s” avoidance: crowded places, closecontact settings, and confined, enclosed spaces.
Natural disaster response planning is another concern for
Nara prefecture, in the vicinity of which a major Nankai Troughearthquake is predicted with a probability of 70 to 80 percent
within the next 30 years, and where flooding and landslides causedby typhoons and heavy rains threaten with greater frequency every
year due to climate change. We continue to review and fortify ourcrisis management plans and manuals in an effort to establish amore robust BCP (business continuity system).

Aggressive governance

Governancecredit risk management systems.
By realizing business management with a greater emphasis
on risks and returns than ever before, FIRB makes it possible
to secure sufficient lending capacity, backed by a generous
capital adequacy ratio, to support regional development
through financial intermediation functions. Both “acquiring deep
knowledge of customers,” an important process in the deepcultivation and sophistication strategies implemented under the
Action Plan formulated in accordance with the Nanto Method
to realize the objectives of the new Management Plan, and"enhancement of actual conditions," an objective of FIRB, arerecognized as completely consistent measures.

Compliance risk initiatives

Future image
Nanto Bank continues to pursue ongoing efforts to improveits credit rating and self-assessment systems with the aims ofstrengthening its credit risk management systems and building
a sound and appropriate credit portfolio. Besides realizing the
Nanto Mission’s goals of regional development and enhanced
profitability, our new Management Plan calls for enhancing
our integrated risk management system, including credit risk
management. By boosting profitability through appropriate
risk-taking, we will maintain sufficient capital in terms of both
quality and quantity. Seeking to further strengthen our regional
financial intermediary function, meanwhile, we are proceedingwith a transition to the basic internal rating method (FIRB)
for calculating our capital adequacy ratio to assure positive
coexistence and co-prosperity with the local community.

Although the compliance system has been defined as the mostimportant issue for management in the past, it has so far served
merely as a superficial check on violations of law, a reactive
response to individual issues that arise, and a partial response
centered on departmental management, all of which are distinct
from management issues.
The internal control system we should seek is one thatfacilitates formulation of a business model and management
strategy in consideration of the kinds of compliance risk
expected to emerge, and that confirms that the content isshared among all our executives and employees.

Management initiatives to reinforce governance
From the perspective of ensuring stable operation of the
FIRB system, there are three lines of defense in place under thesupervision of the management team: the (1) branch offices/
Credit Analysis Division, (2) Risk Management Division and (3)Internal Audit Division. These bodies constitute a system thatfacilitates ongoing autonomous improvement by imposing
controls on each other. We will secure stable profits and soundfuture operations by conducting repeated organizational
discussions led by management, while working to reinforce our
Crisis management preparation
Nanto Bank has implemented various
measures, beginning with preparation of a crisis
management plan and a crisis management
plan response manual for each type of crisis, tominimize the impact of various crises associatedwith the spread of infectious diseases such as
the new coronavirus, natural disasters suchas large-scale earthquakes, and businessrelated calamities such as system failures. In
the event of a crisis, the Emergency Measures
Meeting, the Measures Headquarters and otherbodies will move quickly to gather informationaccording to the crisis level and to determine
optimal responses and minimize the impact on
business by providing centralized instructions for
implementing them.

Senior Managing Executive Officer (Representative Director)

Keizo Nishikawa (Director, Risk Management Department)

We are also taking steps to assure ourability to continue providing services to ourcustomers, thus fulfilling our social responsibility
through such means as enhancing our facilities
to enable continued operation, even in the faceof a disaster. We conduct training and implement
continuous improvements to ensure theeffectiveness of our crisis management systems.

Internal audit system
Enhancing and reinforcing risk management
requires that effective functioning of the PDCA
cycle supporting autonomous improvement
be secured, while the various branch offices
and departments responsible for individual
risks and the Risk Management Divisioncheck and balance each other.
Our efforts to ensure the soundnessof management and the appropriatenessof our business procedures begin with theInternal Audit Division, which grasps the risk
occurrence status of each business, verifies
the performance of the PDCA cycle functions,and recommends improvements as necessary
to enhance and strengthen risk management.

Nanto Report 2020, the integrated report of Nanto Bank

29

Strong Support Functions

Corporate Governance

The Nanto brandAn unseen but vitally important asset
Each of us does what is right for society,and clarifies the thinking that guides our actions.
Doing these things builds trust in the Bank. This is how we earn trust through our daily decisions and actions.

Basic idea

financial infrastructure supported by community trust accumulated
through long-term stable management in our region. As we takeon the the formidable challenge of engendering new strategies,
we must consider a wide range of possible strategies andimplementation methods from various perspectives.
We took a significant step in this direction last year with
the invitation of Satoshi Ishida to serve as Deputy President. We
followed up this year with the election of Hidetaka Matsuzaka,
an outside director with experience in managing a nonfinancial business firm, and Shuhei Aoki, an expert on financial
administration and international affairs. We also reappointed
Matazaemon Kitamura as a representative of the local businessworld. We believe that these moves have created a diversified
Board of Directors with a variety of expertise appropriate to Nanto
Bank’s future goals. Going forward, we will review the operationof the Board of Directors further, including considerationof establishing a voluntary Nomination and Compensation
Committee with outside directors as its primary members.
Nanto Bank’s governance structure includes the Audit
and Supervisory Board, whose activities are crucial to its
enhancement of governance. This board is directing efforts
toward reinforcing cooperation with the accounting auditor andthe Internal Audit Division by working to deepen the Bank’s
three-way auditing system.

In implementing the Nanto Mission:
Pursuing regional development
Cultivating personnel who creates vitality
Enhancing profitability
We will bring vitality to the region and our customers with theintention of becoming the “Leading group in vitality creation” by
2030.
To implement the Nanto Mission and achieve our goals,
we will further enhance management transparency and fairness,and respond flexibly to the opinions of stakeholders andchanges in the business environment by making swift, timely
corrections. We will work to construct a governance structurethat facilitates these efforts. And we will follow our management
philosophy to revitalize Nanto Bank and its business arena,
guided by our 10-year Management Vision, as we prepare tocelebrate the 90th anniversary of our foundation as a "regional
revitalization bank” in 2024.

Initiatives to strengthen corporate governanceTo achieve the goals of the Nanto Mission and become an
indispensable force for regional development, we must seek tomaximize the value we provide our stakeholders in a constant pursuitof the best, a pursuit we consider to be the basis for governance.
Faced with unprecedented conditions today, we must
respond to changes in the surrounding environment by
establishing new sources of earnings outside the traditionalbanking field, while retaining our role as a vital part of the regional

Certain issues such as the appointment of female directors
and formulation of succession plans remain to be resolved, but we
continue working to strengthen governance by initiating and activating
discussions by the Board of Directors from a higher perspective.

Corporate Governance System
General Meeting of Shareholders

Appointment/
dismissal

Appointment/dismissal

Audit

Board of Directors (9 directors, including 3 outside directors)
Appointment/dismissal/supervision

Opinion exchange meeting

Representative Director
Management meeting(Deliberation of important matters by directors)(excluding outside directors)

Evaluation

Direction

Various committees

Supervision

Report

ALM Committee Compliance Committee
Internal
audit

Headquarters
Accounting
auditIntermediate holding company

Branch office

Consolidated subsidiary
Cooperation
Report/collaboration
Appointment/dismissal/non-reappointment/ judgement of accounting audit

30

Advisory Board
AdviceNanto Report 2020, the integrated report of Nanto BankInternal Audit Division

Accounting auditor

Consideration

Cooperation

ReportSupport

Audit and Supervisory
Board Secretariat

ReportAudit and Supervisory Board

Report(4 auditors, including 2 outside auditors)

Appointment/dismissalGovernance

Message

Nanto Bank’s efforts tosolve regional issues
The role of regional financial institutions in thecoronavirus pandemic

With the advent of the coronavirus pandemic, the government
declared a national emergency. Economic activities have been
severely constrained as a result, corporate performances
have rapidly destabilized, and customers in Nanto Bank’s
operating region have suffered devastating impacts. Nanto
Bank has moved quickly to provided solid support, especiallyfor struggling small and medium-sized enterprises, efforts whichhave been highly appreciated. With the possibility of second
and third waves of the disease threatening, however, futurechallenges await us, making it imperative that we create newmechanisms with the region’s new normal taken into account.
To this end, Nanto Bank will not only provide financial support
as a regional bank, but it will also play a leadership role as aregional business operator in motivating the community andleading the way to a resurgence of lively towns and businesses.
My family have been involved in forestry management
for generations, and I look forward to working to protect ourabundant nature, which is one of the SDG targets, while atthe same time stimulating business growth. I was honestly
surprised that only one private company committed itself toregional development in its management plan for the period
beginning in April, but I am profoundly aware of Nanto Bank’s
preparedness to do so, and strongly enthusiastic about seeking
to achieve it.

Changes in Nanto Bank

Since my appointment as an outside director in 2016, I haveobserved changes in Nanto Bank with each passing year.
We have been proactive in implementing changes, as seenin our decision to reorganize the branches and move towarda business structure that emphasizes consulting. In fiscal
2017, moreover, a questionnaire was introduced to evaluate
the efficacy of the Board of Directors in order to enhance its
effectiveness. This monitoring of the Board of Directors is a

Outside Directors

Matazaemon Kitamura
positive change that is being deployed in the Board of Directors
for the next fiscal year. I use the results of the effectivenessquestionnaire myself to point out areas in which we can improvefrom an objective perspective.
Proposals regarding important management or businessstrategies are submitted to the Board of Directors at appropriate
times. After the executives have elucidated the purposes ofthe strategies, it is apparent that the accuracy of the various
information considered necessary and sufficient for deliberations(financial and market information as well as information on
the domestic and overseas financial environment, etc.) has
gradually increased.

Future of Nanto Bank’s Corporate Governance
SystemCustomer needs are diversifying in every field today, andbusiness operators must respond sincerely with high regard forcompliance to ensure formation of a highly desirable society. Asa regional business leader, Nanto Bank has the responsibilityof serving as a model for its customers by working to observecompliance and strengthen governance. The Bank is currently
considering establishment of independent committees, such as
voluntary nomination and compensation committees, but frommy position as an outside director, I am also considering waysof optimizing operations and contributing actively to reinforcing
good governance. As for the Management Plan introduced in
April, moreover, we consider it necessary to conduct objective,
diversified examinations and discussions from a medium- tolong-term perspective while monitoring the implementation
status of the Plan.

Strengthening the functions of
the Audit and Supervisory Board
Nanto Bank, whose operations are overseen by its Audit andSupervisory Board, recognizes that strengthening this bodyis an important issue for governance from the standpointof ensuring the fairness and transparency of the Board of
Directors’ decision-making process. At present, the systemcomprises two full-time corporate auditors and two outside
corporate auditors, one from a megabank and the other abusiness firm manager. We full-time auditors attend not only the
Board of Directors’ Meetings of Nanto Bank and other Group
companies, but also other important business management,
ALM Committee and Compliance Committee meetings, atwhich we seek to grasp the status of business execution andcontribute opinions on the basis of our expertise in the banking
business. We share the information acquired in this way withother auditors, especially the outside auditors.
The Audit and Supervisory Board works closely with theaccounting auditor and the Internal Audit Department, taking
into account the differences in the roles they play, from theperspective of “three-way” auditing and conducts efficientand effective audits. We gather many suggestions from theaccounting auditor at “three--way” auditing meetings held twice

Auditor (full-time)

Auditor (full-time)

Naoki Minowa

Takao Handa

a year, an approach that proves highly effective in improving
the effectiveness of optimizing the audits conducted by the
corporate auditors.
We also hold opinion-exchange meetings to share mutualawareness and challenges with three company presidents twicea year.
In the future, we plan to verify the action status of eachmeasure in the Action Plan based on the current Management
Plan from the standpoint of the Audit & Supervisory Board. We
are also in discussions with the Accounting Auditor regarding
KAM, which will be introduced from FY2020 in preparation fororganizing a response policy.

Nanto Report 2020, the integrated report of Nanto Bank

31

Support Capabilities

Executive Officers

Corporate Governance

9

5

8

3

7

1

Director
1 President(Representative Director)

Takashi Hashimoto

Shares owned: 5,703

4 Director

Managing Executive Officer

2 Director

Vice President(Representative Director)

Satoshi Ishida

Shares owned: 602

Kazuomi Nakamuro

Shares owned: 3,424

5 Director

Managing Executive Officer

3 Director

Senior Managing Executive
Officer (Representative
Director)

Keizo Nishikawa

Shares owned: 4,710

Kazuya Yokotani

Shares owned: 2,705

6 Director

Managing Executive Officer
Director, Business
Promotion Headquarters

Satoru Wada

Shares owned: 4,005

7 Director

32

Matazaemon Kitamura

8 Director

Hidetaka Matsuzaka 9 Director

Shuhei Aoki

Shares owned: 4,702

Shares owned: 0

Shares owned: 0(Notable concurrent position)(Notable concurrent positions)(Notable concurrent position)

President, Kitamura Forestry Co., Ltd.

Chairman, Aussie Capital Co., Ltd.
Advisor, Osaka Gas Co., Ltd.

Contracted Executive Strategist, Hitachi, Ltd.

Nanto Report 2020, the integrated report of Nanto Bank

Governance(As of June 26, 2020)

2

10

4

11

6

12

13

Auditors
10 Auditor (full-time)

Naoki Minowa

Shares owned: 11,188

11 Auditor (full-time)
Shares owned: 5,055

Takao Handa

Takahisa Kurahashi

12 Auditor
Shares owned: 461(Notable concurrent positions)

Director, Kintetsu Group Holdings Co., Ltd.
President, Kintetsu Real Estate Co., Ltd.

13 Auditor

Motoi Mitsuishi

Shares owned: 0(Notable concurrent positions)

Vice President, Mitsubishi UFJ Research & Consulting Co., Ltd.

(Note)	Directors Matazaemon Kitamura, Hidetaka Matsuzaka and Shuhei Aoki are outside directors as described in Article 2, Item 15 of the Companies Act, and corporate
auditors Takatoshi Kurahashi and Motoi Mitsuishi are outside auditors as described in Article 2, Item 16 of the Companies Act.
	All outside directors and outside corporate auditors meet the “Independence Criteria” established by Nanto Bank, and all are registered as independent officers with
the Tokyo Stock Exchange, Inc.

Nanto Report 2020, the integrated report of Nanto Bank

33

Corporate Data

Corporate Data (As of March 31, 2020)
Company profile
Name:

The Nanto Bank, Ltd.

Founded:June 1, 1934

Head Office:16, Hashimoto-cho, Nara City, Nara, Japan

Capital:37,924.15 million yen

Total assets:

5,653.8 billion yen

Deposit balance:

5,042.1 billion yen

Loan balance:

3,477.1 billion yen

Domestic offices:

140 (92 in Nara Prefecture, including Internet branches, and 48 in other locations)
Overseas representative offices: 2 (1 each in Hong Kong and Shanghai)

Employees:

2,482

Capital adequacy ratio: 9.06% (non-consolidated);
9.39% (consolidated)
URL:

https://www.nantobank.co.jp

Overview of consolidated subsidiaries’ business operations
Company name and location
Nanto Management Service Co., Ltd.
297-2, Omiya-cho 4-chome, Nara City, Nara, Japan

Nanto Business Service Co., Ltd.
93-2, Minami-Kyobate-cho 1-chome, Nara City,
Nara, Japan

Nanto Credit Guarantee Co., Ltd.
297-2, Omiya-cho 4-chome, Nara City, Nara, Japan

Nanto Lease Co., Ltd.
52-1, Omori-cho, Nara City, Nara, Japan

Nanto Computer Service Co., Ltd.
93-2, Minami-Kyobate-cho 1-chome, Nara City,
Nara, Japan

Nanto Investment Advisors Co., Ltd.
297-2, Omiya-cho 4-chome, Nara City, Nara, Japan

Nanto DC Card Co., Ltd.
61-7, Higashi Ikoma 1-chome, Ikoma City, Nara,Japan

Nanto Card Service Co., Ltd.
61-7, Higashi Ikoma 1-chome, Ikoma City, Nara,Japan

Nanto Consulting Co., Ltd.
16, Hashimoto-cho, Nara City, Nara, Japan

Nangin Agency Co., Ltd.
93-2, Minami-Kyobate-cho 1-chome, Nara City,
Nara, Japan

Nanto Challenged Co., Ltd.
93-2, Minami-Kyobate-cho 1-chome, Nara City,
Nara, Japan

Nanto Mahoroba Securities Co., Ltd.
1-56, Saidaiji-Higashi-machi 2-chome, Nara City,
Nara, Japan

Main content of work
Services offered by Nanto Management include management of subsidiaries, management and leasing of commercial realestate, outsourcing, and employee placement services.
Besides conducting centralized monitoring of Nanto Bank’s ATMs to support improvement of customer services, Nanto
Business Service provides restructuring/optimization of such routine operations as cash counting/sorting and DM mailingto optimize the efficiency of Nanto Bank operations.
Nanto Credit Guarantee’s business centers on provision of guarantee services for consumer loans, including Nanto Bank
mortgages, and support for customers' loan use.
Nanto Lease ccontributes to the development of regional business and industry by supporting the introduction of
movables ranging from OA equipment to large industrial equipment and automobiles in order to meet the diverse needs ofcustomers.
Established to support customers’ efforts to optimize their office procedures and IT environments, Nanto Computer Service
provides computer system development and sales, consultations on computer introduction and use, and outsourcing ofvarious calculation tasks.
Nanto Investment Advisors applies extensive expertise in gathering wide-ranging general information and specialized
knowledge to help customers manage funds efficiently in the securities markets.
As a member of the DC Group, Nanto DC Card meets customers’ diverse needs in the credit card business. It also
guarantees consumer loans (credit card loans) extended by Nanto Bank.
A member of the VJA group, Nanto Card Service engages in the credit card business, centered on the Nanto Cotoca, andprovides guarantees for consumer loans extended by Nanto Bank.
As specialists in various areas of management, Nanto Consulting proposes solutions through consulting and businessmatching operations.
As a third business in an office shared with a Nanto Bank branch office and sub-branch, Nangin Agency operates afinancial services agency business for regional customers.*
A company that engages actively in finding employment for people with disabilities, Nanto Challenged has acquired special
certification of a special subsidiary to centralizing and professionalizing routine office work, such as supply managementand dispatching, to support business efficiency.
Nanto Mahoroba Securities leverages know-how cultivated over a long history in the securities business, supported by its
access to the Group’s regional management base, to contribute to customers’ asset formation through provision of highquality securities services.

*The Kido agency was converted to a branch office of Nanto Bank in April of this year as part of our branch network reorganization, and is now conducting joint operation. There is currently no independent agency in the Nanto Bank Group.

34

Nanto Report 2020, the integrated report of Nanto Bank

Performance

Stock situation
Total shares issued:

Stock distribution by owner category
33,025 thousand

Government and local public bodies

Financial institutions*1

0.03%
10 thousand shares

Number of shareholders: 14,870

Organizational overview
and external environment

37.92%
12,524 thousand shares

Individuals/others*2

28.60%
9,446 thousand shares

Financial productbrokerages

1.15%
378 thousand shares

Foreigners

Other domestic corporations

13.39%
4,420 thousand shares

18.91%
6,244 thousand shares*1 Total of banks, trust banks, life insurance companies, non-life insurance companies, others.
*2 Includes 418 thousand treasury shares

Total shareholder return (TSR)

Major shareholders (top 10)
Ratio of number
Number ofof shares owned
shares owned
to total number of(unit: 1,000)*3
shares issued (%)*4Name
The Master Trust Bank of Japan, Ltd.
(trust account)
Japan Trustee Services Bank, Ltd.
(trust account)

2,002

6.14

1,475

4.52

Japan Trustee Services Bank, Ltd.
(trust account 9)

1,115

3.42

Nippon Life Insurance Company

1,053

3.22

Meiji Yasuda Life Insurance Company

1,043

3.19

Nanto Bank Employee Stock Ownership
Association

842

2.58

Japan Trustee Services Bank, Ltd.
(trust account 5)

666

2.04

Sumitomo Life Insurance Company

662

2.03

Mitsubishi UFJ Bank, Ltd.

508

1.55

JP MORGAN CHASE BANK 385151

502

1.54

Mar.
2016

Mar.
2017

Mar.
2018

Mar.
2019

Mar.
2020

Nanto Bank

75.0

101.0

73.8

56.6

62.3

TOPIX
(including dividend)

89.1

102.2

118.5

112.5

101.8

Dividends per share / Dividend payout ratio
Mar.
2016

Mar.
2017

Mar.
2018

Mar.
2019

Mar.
2020

Dividends per
share*5 (yen)

70.00

70.00

70.00

80.00*680.00

Payout ratio (%)

16.04

15.50

17.18

23.40

78.47

(Note) *5	As of October 1, 2016, 10 shares have been consolidated into one share.
Dividends per share for the years ended March 31, 2016 and 2017,
were calculated assuming that share consolidation was conducted at the
beginning of the fiscal year ended March 31, 2016.
*6	10.00 yen of the 80.00 yen per share dividend for the year ending March
31, 2019 was a 140th anniversary commemorative dividend.

(Note) *3 The number of shares owned is rounded down to the nearest thousand.
*4	The ratio of the number of shares owned is calculated by deducting treasury stocks (418 thousand
shares) and is rounded down to two decimal places.

Stock price transitions
(JPY)
6,000

4,000

2,000

0
2010/4

2011/3

2012/3

2013/3

2014/3

2015/3

2016/32017/3

2018/3

2019/32020/3

Nanto Report 2020, the integrated report of Nanto Bank

35

Financial Data

Consolidated Financial Statements• Consolidated Balance Sheets
The Nanto Bank, Ltd. and Consolidated Subsidiaries as of March 31, 2020 and 2019
Thousands of
U.S. dollars(Note 1)Millions of yen

2020

2019

2020

Assets:Cash and due from banks (Notes 18 and 20)..................................................
¥
693,798
Call loans and bills bought (Note 20)...............................................................		
—Debt purchased (Note 20)...............................................................................		
2,412
Money held in trust (Notes 20 and 21).............................................................		
39,470
Securities (Notes 5, 7, 10, 20 and 21).............................................................		 1,340,346
Loans and bills discounted (Notes 6, 8 and 20)...............................................		 3,457,276
Foreign exchanges (Note 6)............................................................................		
1,114
Lease receivables and lease investment assets...............................................		
25,072Other assets (Note 7)......................................................................................		
67,424
Tangible fixed assets (Note 9).........................................................................		
39,183
Buildings.....................................................................................................		
11,485Land...........................................................................................................		
24,596
Construction in progress.............................................................................		
1
Other tangible fixed assets..........................................................................		
3,099
Intangible fixed assets.....................................................................................		
6,413
Software.....................................................................................................		
5,961
Other intangible fixed assets (Note 7)..........................................................		
451
Deferred tax assets (Note 25)..........................................................................		
12,611
Customers’ liabilities for acceptances and guarantees....................................		
6,615
Reserve for possible loan losses (Note 20)......................................................		 (20,810)
Total assets................................................................................................
¥ 5,670,929¥
830,696
		
388
		
3,514
		
34,070		 1,432,780
		 3,392,321
		
1,891
		
19,838
		
46,225
		
41,183
		
12,405
		
25,351
		
—
		
3,426
		
5,474
		
4,981
		
493
		
1,311
		
7,556
		 (18,382)¥ 5,798,870$ 6,375,062
		—		
22,163
		 362,675
		12,315,960
		31,767,674
		
10,236
		 230,377
		 619,535
		 360,038
		 105,531
		 226,003
		
9
		
28,475
		
58,926
		
54,773
		
4,144
		 115,877
		60,782
		 (191,215)$ 52,108,141

Liabilities and net assets:
Liabilities:
Deposits (Notes 7 and 20)..............................................................................
¥ 5,029,759
Negotiable certificates of deposit (Note 20).....................................................		
7,370
Call money and bills sold (Note 20).................................................................		
5,441
Payables under repurchase agreements (Notes 7 and 20)..............................		
42,475
Payables under securities lending transactions (Notes 7 and 20).....................		 135,144
Borrowed money (Notes 7, 20 and 31)...........................................................		 135,538
Foreign exchanges..........................................................................................		
155
Borrowed money from trust account...............................................................		
6,763
Other liabilities (Note 31).................................................................................		
33,432
Liability for retirement benefits (Note 23)..........................................................		
11,842
Reserve for reimbursement of deposits...........................................................		
216
Reserve for contingent losses.........................................................................		
1,101
Reserve under special laws.............................................................................		
3
Deferred tax liabilities (Note 25).......................................................................		
15
6,615
Acceptances and guarantees.........................................................................		
Total liabilities..............................................................................................
¥ 5,415,875¥ 4,904,027
		21,622		—		
42,601
		 279,580
		 210,648
		
260
		
6,446
		
19,665
		
11,152
		
238
		
853
		
3
		
4,360
		
7,556
¥ 5,509,018$ 46,216,659
		67,720		
49,995
		 390,287
		 1,241,789
		 1,245,410
		
1,424
		
62,142
		 307,194
		 108,811
		
1,984
		
10,116
		
27
		
137
		
60,782$ 49,764,541

Net assets (Note 3):
Common stock: Authorized 64,000 thousand shares in 2020 and 2019¥37,924		Issued 33,025 thousand shares in 2020 and 2019................
Capital surplus................................................................................................		
34,749Retained earnings...........................................................................................		 181,640
Less treasury stock: Issued 418 thousand shares in 2020		
(1,745)		and 425 thousand shares in 2019...................................
Total stockholders’ equity............................................................................		 252,569
Valuation difference on available-for-sale securities (Note 21)..........................		
3,357
Deferred gains or losses on hedges (Note 22).................................................		
(162)
Accumulated adjustments for retirement benefits (Note 23).............................		
(798)
Total accumulated other comprehensive income.......................................		
2,395
Stock acquisition rights................................................................................		
88
Total net assets...........................................................................................		 255,053
Total liabilities and net assets......................................................................
¥ 5,670,929
See Notes to Consolidated Financial Statements.

36

Nanto Report 2020, the integrated report of Nanto Bank¥

37,924$348,470

		
34,749
		 181,077

		 319,296
		 1,669,025

				

(1,776)

		 251,974
		38,687
		
(210)
		
(698)
		
37,778		98
		 289,852¥ 5,798,870(16,034)

		 2,320,766
		
30,846
		
(1,488)
		
(7,332)
		
22,006
		808
		 2,343,590$ 52,108,141

• Consolidated Statements of Income
The Nanto Bank, Ltd. and Consolidated Subsidiaries for the Years Ended March 31, 2020 and 2019
Thousands of
U.S. dollars(Note 1)Millions of yen

2020

2019

2020

Income:Interest income:Interest on loans and bills discounted..........................................................
¥
Interest and dividends on securities.............................................................		
Other interest income..................................................................................		
Trust fees........................................................................................................		
Fees and commissions...................................................................................		
Other operating income (Note 11)...................................................................		
Other income (Note 12)...................................................................................		
Total income...........................................................................................		

30,15913,482514
13
20,6438,071
8,200
81,087

¥
		
		
		
		
		
		
		

30,485
13,654541
29
19,214
7,851
14,63786,414

$
		
		
		
		
		
		
		

Expenses:
Interest expense:
Interest on deposits....................................................................................		
Interest on borrowings and rediscounts......................................................		
Interest on payables under securities lending transactions..........................		
Other interest expense................................................................................		
Fees and commissions...................................................................................		
Other operating expenses (Note 13)................................................................		
General and administrative expenses (Note 14)...............................................		
Other expenses (Note 15)...............................................................................		
Total expenses........................................................................................		

541
768
422
1,380
10,736
4,112
42,98014,27075,215

		
		
		
		
		
		
		
		
		

640
622
947
1,719
10,0579,720
41,618
5,619
70,947

		
4,971
		
7,056
		
3,877
		
12,680		
98,649		
37,783
		 394,927
		 131,121
		 691,123

5,872

		

15,467

		

53,955

4,148(1,455)
2,692
3,179
3,179

		
		
		
		
¥

2,570
1,723
4,293
11,174
11,174

		
		
		
		
$

38,114(13,369)
24,73529,21029,210

Income before income taxes.............................................................................		
Income taxes (Note 25):
Current...........................................................................................................		
Deferred..........................................................................................................		
Total income taxes......................................................................................		
Net income.........................................................................................................		
Net income attributable to owners of parent...................................................
¥

U.S. dollars(Note 1)Yen

Per share of common stock (Note 29):¥
Net income - basic..........................................................................................		
Net income - diluted.......................................................................................		
Dividends........................................................................................................

97.52
97.43
80.00

277,120
123,8814,722
119
189,681
74,161
75,346745,079¥				

342.79342.47
80.00

$
		
		

0.89
0.89
0.73

See Notes to Consolidated Financial Statements.

• Consolidated Statements of Comprehensive Income
The Nanto Bank, Ltd. and Consolidated Subsidiaries for the Years Ended March 31, 2020 and 2019
Thousands of
U.S. dollars(Note 1)Millions of yen

2020

Net income..........................................................................................................
¥
Other comprehensive income (loss) (Note 17):
Valuation difference on available-for-sale securities.........................................		
Deferred gains (losses) on hedges..................................................................		
Adjustments for retirement benefits (Note 23)..................................................		
Total other comprehensive income (loss).....................................................		
Total comprehensive income for the year.............................................................		

2019

2020

3,179

¥

11,174(35,330)47(100)(35,382)(32,203)

		
		
		
		
		

(6,641)
71
3,507(3,061)
8,112

		 (324,634)
		
431
		
(918)
		 (325,112)
		 (295,901)

8,112

		 (295,901)$

29,210		
Total comprehensive income attributable to:
Owners of parent............................................................................................		

(32,203)		

See Notes to Consolidated Financial Statements.

Nanto Report 2020, the integrated report of Nanto Bank

37

Financial Data

Consolidated Financial Statements• Consolidated Statements of Changes in Net Assets
The Nanto Bank, Ltd. and Consolidated Subsidiaries for the Years Ended March 31, 2020 and 2019
Millions of yen
Number ofshares ofcommonstock(thousands)

Commonstock

CapitalsurplusRetainedearnings

Balance at April 1, 2018......................... 		 33,025¥ 37,924¥ 34,749¥ 172,353

Valuationdifferenceonavailablefor-salesecurities

Less treasurystock(1,812) ¥ 45,328¥

Deferred
gains orlosses on
hedge¥

Accumulated
adjustments
for retirement
benefits(282) ¥

Stockacquisitionrights(4,206) ¥Total net
assets113¥ 284,169

Changes in items during period
Cash dividends...................................

		Net income attributable to ownersof parent.............................................

(2,444)

		 11,174

Purchase of treasury stock.................
Disposition of treasury stock...............

		

(5)

Transfer from retained earnings tocapital surplus.....................................

		

5 		

		

		 11,174
		

(4)

		

(4)

		

39

		

33

		

—

(5)

Net changes in items other thanstockholders’ equity.............................
Total changes in items during period........

		

Balance at April 1, 2019......................... 		 33,025¥ 37,924

— 		

— 		

¥ 34,749

8,723 		

¥ 181,077(2,444)¥

		

(6,641) 		

35 		

(6,641) 		

(1,776) ¥ 38,687

¥

71 		

3,507 		

(14) 		

(3,076)71 		

3,507 		

(14) 		

5,682

(210) ¥

(698) ¥

98

¥ 289,852

Changes in items during period
Cash dividends..................................

		(2,608)		

(2,608)Net income attributable to ownersof parent............................................

		

3,179

		

3,179

Purchase of treasury stock................
Disposition of treasury stock.............

		

(8)

Transfer from retained earnings tocapital surplus...................................

		

8 		

		

(5)

		

(5)

		

36

		

28

		

—

(8)

Net changes in items other thanstockholders’ equity............................

		 (35,330) 		

Total changes in items during period......

		

Balance at March 31, 2020 (Note 3)...... 		 33,025¥ 37,924

— 		

— 		

¥ 34,749

563 		

¥ 181,640

¥

47 		

31 		 (35,330) 		
(1,745) ¥

3,357

¥

(100) 		

(10) 		 (35,393)

47 		(100) 		

(10) 		 (34,798)(162) ¥

(798) ¥

88

¥ 255,053

Thousands of U.S. dollars (Note 1)

Commonstock

Balance at April 1, 2019......................... $Capitalsurplus348,470 $Retainedearnings

Valuationdifference
on availablefor-salesecurities

Less treasurystock

319,296 $ 1,663,851 $(16,319) $355,481 $Deferred
gains orlosses on
hedge

Accumulated
adjustments
for retirement
benefits(1,929) $(6,413) $StockacquisitionrightsTotal net
assets900 $ 2,663,346

Changes in items during period
Cash dividends..................................

		(23,964)

		

(23,963)

Net income attributable to ownersof parent............................................

		

29,210		

29,210Purchase of treasury stock................
Disposition of treasury stock.............

		

(73)

Transfer from retained earnings tocapital surplus...................................

		

73 		

		

(45)

		

(45)

		

330

		

257

(91) 		

(325,213)(91) 		

(319,746)(73)

Net changes in items other thanstockholders’ equity............................

See Notes to Consolidated Financial Statements.

38

Nanto Report 2020, the integrated report of Nanto Bank

(324,634) 		

5,173 		284 		

(324,634) 		

431 		

(918) 		319,296 $ 1,669,025 $(16,034) $30,846 $(1,488) $(7,332) $		

Total changes in items during period......
Balance at March 31, 2020 (Note 3)...... $		

348,470 $431 		

(918) 		808 $ 2,343,590

• Consolidated Statements of Cash Flows
The Nanto Bank, Ltd. and Consolidated Subsidiaries for the Years Ended March 31, 2020 and 2019
Thousands of
U.S. dollars(Note 1)Millions of yen

2020

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

2019

2020

¥
		
		
		
		
		
		
		
		
		
		

15,467
3,582
41
(12)
(14)
(1,430)(5,796)(6)(13)(44,680)
3,930(4,475)190(5,492)
26(61,601)
86,536
2,666
2,241
(68)
(429)
(32,629)(65,669)315
9(3,877)
3,596
46,124(4,152)(20,319)(85,941)(3,038)(88,979)$
53,955
		
34,806
		
16,741		—		—		
22,310
		
5,016
		
(202)
		
2,269
		 (405,752)
		28,613
		 (61,940)
		
468
		
58,412
		
1,313
		 (596,848)
		 1,155,306
		 (130,956)
		 (690,158)
		
(8,563)
		
13,681
		
48,837
		(1,327,161)
		
7,139
		
(955)
		 (48,828)
		
2,903
		 418,708
		 (30,607)
		
51,309		(1,380,134)
		 (28,383)
		(1,408,517)

Cash flows from investing activities
Purchases of securities...............................................................................		 (643,774)
Proceeds from sales of securities................................................................		 473,942
Proceeds from maturities of securities.........................................................		 197,465
Increase in money held in trust....................................................................		
(5,652)
Decrease in money held in trust..................................................................		
200
Purchase of tangible fixed assets................................................................		
(1,395)
Proceeds from sales of tangible fixed assets...............................................		
143
Purchase of intangible fixed assets..............................................................		
(2,770)Purchase of shares of a subsidiary resulting in change in scope of consolidation.....		
—Payments for asset retirement obligations...................................................		
(75)(7)
Other..........................................................................................................		
Net cash provided by investing activities.........................................................		
18,075

		
		
		
		
		
		
		
		
		
		
		
		

(755,331)
749,645
112,443(247)
407(1,770)97(2,450)
(867)
—
(79)
101,846		(5,915,409)
		 4,354,883
		 1,814,435
		 (51,934)		
1,837
		 (12,818)
		
1,313
		 (25,452)
		
—
		
(689)
		
(64)
		 166,084

Cash flows from financing activities		
Dividends paid............................................................................................		
(2,607)Purchase of treasury stock..........................................................................		
(5)
0
Other..........................................................................................................		
Net cash used in financing activities........................................................		
(2,612)
Effect of exchange rate changes on cash and cash equivalents...................		
(2)
Net increase (decrease) in cash and cash equivalents..................................		 (137,829)
Cash and cash equivalents at beginning of year............................................		 829,194
Cash and cash equivalents at end of year (Note 17)......................................
¥
691,364				
(2,442)
		
(4)
		
0
		
(2,447)
		
4
		
10,424
		 818,769¥
829,194		 (23,954)
		
(45)
		
0
		 (24,000)		
(18)		(1,266,461)
		 7,619,167$ 6,352,696

5,872
3,788
1,822
—
—
2,428
546
(22)
247
(44,158)
3,114(6,741)
51
6,357
143
(64,955)
125,732(14,252)(75,110)
(932)
1,489
5,315
(144,435)
777(104)(5,314)316
45,568(3,331)
5,584(150,200)(3,089)(153,289)

See Notes to Consolidated Financial Statements.

Nanto Report 2020, the integrated report of Nanto Bank

39

Financial Data

Consolidated Financial Statements

Notes to Consolidated Financial Statements
The Nanto Bank, Ltd. and Consolidated Subsidiaries
Years Ended March 31, 2020 and 2019
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 theapplication and disclosure requirements of International Financial
Reporting Standards.
The accompanying consolidated financial statements havebeen 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 theappropriate Local Finance Bureau of the Ministry of Finance as requiredby the Financial Instruments and Exchange Act. Some supplemental
information included in the statutory Japanese language consolidated
financial statements, but not required for fair presentation, is notpresented in the accompanying consolidated financial statements.
As permitted by the Financial Instruments and Exchange Act ofJapan, amounts less than one million yen have been omitted. As aresult, the totals shown in the financial statements do not necessarily
agree with the sum of the individual amounts.
The translation of the Japanese yen amounts into U.S. dollar
amounts is included solely for the convenience of readers outside
Japan, using the prevailing exchange rate at March 31, 2020, whichwas ¥108.83 to US$1.00. The translations should not be construed as
representations that the Japanese yen amounts have been, could havebeen 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 theaccounts of the Bank and its twelve subsidiaries at March 31, 2020.
The Bank had two (two in 2019) unconsolidated subsidiaries,
Nanto Sixth Industry Support Investment Limited Partnership and Nanto
Regional Vitality Creation Support Investment Limited Partnership.
The unconsolidated subsidiaries were excluded from the scope of
consolidation because the portion of their assets, net income (loss),retained earnings, accumulated other comprehensive income andothers that correspond to the Bank’s equity were immaterial to theextent that their exclusion from the scope of consolidation did notpreclude reasonable judgment of the Group’s financial position andresults of operations.
The Bank had no affiliates over which it had the ability to exercise
significant influence over operating and financial policies.
The Bank had two (two in 2019) unconsolidated subsidiaries notaccounted for by the equity method, Nanto Sixth Industry Support
Investment Limited Partnership and Nanto Regional Vitality Creation
Support Investment Limited Partnership, and one (one in 2019) affiliate
not accounted for by the equity method, Nara Prefecture Tourism
Revitalization Investment Limited Partnership. The unconsolidated
subsidiaries and affiliate not accounted for by the equity method
were excluded from the scope of the equity method because theeffect on the accompanying consolidated financial statements was
not significant in terms of the portion of net income (loss), retained
earnings, accumulated other comprehensive income, and others whichcorrespond to the Bank’s equity.
Potager Co., Ltd., of which the Bank owns between 20% and 50%of the voting rights (execution rights), was not recognized as an affiliate
for the year ended March 31, 2020 because it is held by the Bank’s
unconsolidated subsidiary for the purpose of incubating the investee
and not for the purpose of controlling the entity.

40

Nanto Report 2020, the integrated report of Nanto BankAll 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 due from the Bank of Japan.
c. Finance leases
As lessor:
Finance leases are accounted for in a manner similar to that used forordinary sale transactions. Revenue from finance lease transactions
and related costs are recognized upon receipt of the lease payments.
Finance leases which transfer ownership of the lease assets to thelessee are recognized as lease receivables, and all finance leases
which do not transfer ownership of the lease assets to the lessee arerecognized as lease investment assets.
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) intangible and intangible fixed assets as of March 31, 2008 was recorded
as the beginning balance of “Lease receivables and lease investment
assets,” and the total amount of interest equivalent for the remaining
lease term after the adoption of the “Accounting Standard for Lease
Transactions” (Accounting Standards Board of Japan (“ASBJ”)
Statement No. 13, issued on March 30, 2007) has been allocated over
the remaining lease term using the straightline method.
For the fiscal years ended March 31, 2020 and 2019, differences
between income before income taxes and income before income taxes
calculated as if the accounting treatment for ordinary sale transactions
had been applied to the finance leases which do not transfer ownershipof the leased assets to the lessee were 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
are recognized as gains and losses in the period of the disposal or
the change. Cost of sales for such securities is determined using themoving average method. Held-to-maturity debt securities are stated atamortized cost on a straight-line method, cost of which is determinedusing the moving average method. Stocks of unconsolidated
subsidiaries and affiliates not accounted for by the equity method arestated at cost using the moving average method. Available-for-salesecurities with available fair values are stated at fair value in principle
based on the market price as of the fiscal year-end date. Unrealized
gains and losses on available-for-sale securities are reported, net of
applicable income taxes, as a separate component of accumulated
other comprehensive income. Available-for-sale securities for which
it is extremely difficult to determine the fair value are stated at moving
average cost.
If the fair value of held-to-maturity debt securities or availablefor-sale securities declines significantly, the securities are stated at fairvalue, and the difference between the fair value and the carrying amountis recognized as a loss in the period of the decline. In such a case, thefair value will be the carrying amount of the securities at the beginningof the next fiscal year.
Securities managed as trust assets in the individually managed
money held in trust primarily for securities management purposes aremeasured at fair value.
e. Derivatives and hedge accounting
Derivatives are measured at fair value.
To account for hedging transactions in connection with interest
rate risk arising from financial assets and liabilities, the Bank applies

the 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, February 13, 2002). The Bank assesses theeffectiveness of such hedges in offsetting movement in the fair value
from changes in interest rates by classifying the hedged items, such asloans and deposits, and the hedging instruments, such as interest rate
swaps, by their maturity. The Bank assesses the effectiveness of cash
flow hedges by verifying the correlation between the hedged items andthe hedging instruments.
In order to hedge risk arising from the volatility of exchange rates
for available-for-sale securities (excluding bonds) denominated in foreign
currencies, the Bank applies fair value hedge accounting with thecondition that the hedged available-for-sale securities are designated inadvance and that sufficient on-balance (actual) or off-balance (forward)
liability exposure exists to cover the cost of the hedged securities
denominated in the same foreign currency.
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 facilities
attached to buildings and structures acquired on or before March 31,
2016, which are depreciated by the declining balance method) which
are depreciated by the straight-line method. The estimated useful livesof major items are as follows:
Buildings
6 to 50 years
Others3 to 20 years
Depreciation of the assets of the consolidated subsidiaries
is computed principally by the declining balance method over theestimated useful life of the asset.
g. Intangible fixed assets (except for leased assets)
Amortization of intangible fixed assets is computed by the straight-line
method. Acquisition costs of software to be used internally arecapitalized and amortized by the straight-line method primarily over auseful life of five years.
h. Lease assets
Lease assets with respect to finance leases that do not transfer
ownership of tangible fixed assets and intangible fixed assets are
depreciated or amortized using the straight-line method with theassumption that the term of the lease is the useful life. The residual
value of lease assets is the value guaranteed in the lease contract orzero for assets without such guaranteed value.
i. Reserve for possible loan losses
A reserve for possible loan losses is provided according topredetermined standards.
For loans to insolvent customers who are undergoing bankruptcy
or other special liquidation (“bankrupt borrowers”) or who are in a similar
financial condition (“effectively bankrupt borrowers”), the reserve forpossible loan losses is provided based on the amount of the claims netof the amount expected to be recovered from collateral and guarantees
and net of the deducted amount mentioned below. For the unsecured
and unguaranteed portions of loans to customers not presently in theabove circumstances but for whom there is a high probability of so
becoming (“likely to become bankrupt borrowers”), the Bank deducts
the estimated future cash flows and the amount expected to be
recovered from collateral and guarantees from the loan amount and ofthat remainder reports the amount that it recognizes to be necessary
after comprehensively judging the customer’s ability to pay.
For loans pertaining to customers other than the above, the Bank
reports mainly the anticipated loss for the next one or three years. The
anticipated loss is calculated using the loss rate based on the averagevalue in a fixed past period of the loan loss ratio with the actual loan
loss of one or three years as its foundation with necessary adjustments
such as future prospects, etc.
All claims are assessed by the operating divisions based on the

self-assessment criteria for asset quality, and the assessment results
are audited by the Asset Audit Division, which is independent from theoperating divisions.
For claims against “bankrupt borrowers” and “effectively bankrupt
borrowers,” the amount exceeding the estimated value of collateraland guarantees is deemed uncollectible and is deducted directly fromthose claims in principle. At March 31, 2020 and 2019, the deductedamounts were ¥9,053 million ($83,184 thousand) and ¥7,237 million,
respectively. The reserve for possible loan losses of the consolidated
subsidiaries is provided for general claims by the amount deemednecessary based on the historical loan-loss ratio and for certain doubtful
claims by the amount deemed uncollectible based on an assessment ofeach claim.
j. Employee retirement benefits
In calculating projected benefit obligations, expected benefits are
attributed to each period by the benefit formula basis.
Prior service costs are recognized as profit or loss at the time ofoccurrence.
Actuarial gains and losses are amortized from the fiscal year
following the year in which the gains and losses are recognized by thestraight-line method over a fixed period (ten years) within the averageremaining service years of the current employees.
Consolidated subsidiaries applied the simplified method where theamount to be required for voluntary termination at the fiscal year-end isrecorded as projected benefit obligations in the calculation of the liability
for retirement benefits and retirement benefit costs.
k. Reserve for reimbursement of deposits
A reserve for the reimbursement of deposits which were derecognized
as liabilities under certain conditions is provided for possible losses
on future claims of withdrawal based on historical reimbursement
experience.
l. Reserve for contingent losses
To pay its contribution to the Credit Guarantee Corporation, the Bank
provides a reserve for contingent liabilities not covered by other reserves
in an amount deemed necessary based on estimated future losses.
m. Reserve under special laws
Reserve under the special laws represents Financial Instruments
Transaction Liability Reserve prescribed in Article 46-5, Paragraph 1of the Financial Instruments Exchange Act. The amount is recorded
as determined by the consolidated subsidiaries in accordance withthe provisions of Article 175 of the Cabinet Office Order on Financial
Instruments Business, etc., in order to provide for losses arising fromsecurity related accidents.
n. Foreign currency translations
Foreign currency assets and liabilities are translated at fiscal year-end
exchange rates.
o. Income taxes
Deferred income taxes are recorded to reflect the tax effects of
temporary differences between the carrying amounts of assets andliabilities 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 andliabilities for financial reporting purposes and the amounts for income
tax purposes.
p. Recognition criteria for lease income and costs for finance leases
Lease income and costs are recognized at the time of receiving lease fees.

Nanto Report 2020, the integrated report of Nanto Bank

41

Financial Data

Consolidated Financial Statements

q. Consumption taxes
Transactions subject to national and local consumption taxes arerecorded at amounts exclusive of the consumption taxes.
r. Standards and guidance not yet adopted
For the year ended March 31, 2020
The following standard and guidance were issued but not yet adopted.
“Accounting Standard for Revenue Recognition” (ASBJ Statement
No. 29, March 31, 2020)“Implementation Guidance on Accounting Standard for Revenue
Recognition” (ASBJ Guidance No. 30, March 31, 2020)(1) Overview
The above standard and guidance provide comprehensive principles forrevenue recognition. Under the standard and guidance, revenue isrecognized by applying the following five steps:
Step 1: Identify the contract(s) with customers.
Step 2: Identify the performance obligations in the contract.
Step 3: Determine the transaction price.
Step 4: A llocate the transaction price to the performanceobligations in the contract.
Step 5: R ecognize revenue when (or as) the entity satisfies a
performance obligation.
(2) Effective date
The Group is scheduled to apply the accounting standard and its
guidance from the beginning of the fiscal year ending March 31, 2022.
(3) Effects of the application of the standards
The Bank and its consolidated domestic subsidiaries are currently in theprocess of determining the effects of these new standards on the
consolidated financial statements.
“Accounting Standards for Fair Value Measurement” (ASBJ
Statement No. 30, July 4, 2019)“Implementation Guidance on Accounting Standard for Fair Value
Measurement” (ASBJ Guidance No. 31, July 4, 2019)“Accounting Standard for Measurement of Inventories” (ASBJ
Statement No. 9, July 4, 2019)“Accounting Standard for Financial Instruments” (ASBJ Statement
No. 10, July 4, 2019)“Implementation Guidance on Disclosures about Fair Value of
Financial Instruments” (ASBJ Guidance No. 19, March 31, 2020)(1) Overview
In order to improve comparability with the provisions in international
accounting standards, the “Accounting Standards for Fair Value
Measurement” and “Implementation Guidance on Accounting Standard
for Fair Value Measurement” (“fair value measurement accounting

standards, etc.”) were developed, and guides, etc., concerning
the method of measuring fair value were stipulated. The fair value
measurement accounting standards, etc., are applied to the fair value ofthe following items.
• Financial instruments in the “Accounting Standard for Financial
Instruments”• Inventories held for trading purposes in the “Accounting Standard
for Measurement of Inventories”
Furthermore, the “Implementation Guidance on Disclosures about
Fair Value of Financial Instruments” was revised, and notes on the
breakdown, etc., for each level of the fair value of financial instruments
were stipulated.
(2) Effective date
The Group is scheduled to apply the standards and guidance from the
beginning of the fiscal year ending March 31, 2022.
(3) Effects of the application of the standards
The Bank and its consolidated domestic subsidiaries are currently inthe process of determining the effects of these new standards on the
consolidated financial statements.
“Accounting Standard for Disclosure of Accounting Estimates”(ASBJ Statement No. 31, March 31, 2020)(1) Overview
The purpose of this accounting standard is to disclose information that
contributes to the understanding of the users of the financial statements
regarding the content of the amounts reported in the financial
statements for the current fiscal year based on accounting estimates,
which are accounting estimates in items for which there is risk that they
will have a material effect on the financial statements for the following
fiscal year.
(2) Effective date
The Group plans to apply the standard from the end of the fiscal year
ending March 31, 2021.
s. Additional information
The economic impact of COVID-19 is likely to continue forapproximately one year, and the Bank is assuming that there will be aneffect on the credit risk of the loans and bills discounted, etc., of theBank. The Bank is determining the category of borrowers and reporting
the reserve for possible loan losses based on the information available
at the present time. However, the assumption is uncertain, and if thesituation due to COVID-19 or its effect on the economy changes, there
is a possibility that this will have an effect on business performance inthe following consolidated fiscal year and onwards.

3. CHANGES IN NET ASSETS(1) Type and numbers of shares issued and treasury stock for the fiscal years ended March 31, 2020 and 2019 were as follows:(Thousands of shares)

April 1, 2019
Shares issued
Common stock......................................
Total...................................................
Treasury stock
Common stock......................................
Total...................................................

2020
Decrease

Increase

42

Nanto Report 2020, the integrated report of Nanto Bank

March 31, 2020

33,02533,025————33,02533,025

425
425

2
2

8
8

418
418

Notes: 1. The increase of 2 thousand shares in common stock of treasury stock was due to the purchase of shares of less than one unit.
2. The decrease of 8 thousand shares in common stock of treasury stock was due to the execution of stock options.

Remarks

Notes 1 & 2(Thousands of shares)

April 1, 2018
Shares issued
Common stock......................................
Total...................................................
Treasury stock
Common stock......................................
Total...................................................

2019
Decrease

Increase

Remarks

March 31, 201933,02533,025————33,02533,025

433
433

1
1

9
9

425
425

Notes 1 & 2

Notes: 1.	The increase of 1 thousand shares in common stock of treasury stock was due to the purchase of shares of less than one unit.
2. The decrease of 9 thousand shares in common stock of treasury stock was due to the execution of stock options.

(2) Matters concerning stock acquisition rights
For the fiscal year ended March 31, 2020
Shares expected to be acquired upon exercise of stock acquisition rights
March 31, 2020

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

Number of sharesClassification

Breakdown

The Bank

Stock acquisitionrights granted as
stock options

April 1, 2019

Increase

Decrease

—

—

—

—

¥88

$808

—

—

—

—

¥88

$808

Shares expected to be acquired upon exercise of stock acquisition rights
March 31, 2019

Balance at end ofcurrent fiscal year
(Millions of yen)Total
For the fiscal year ended March 31, 2019

Number of sharesClassification

Breakdown

The Bank

Stock acquisitionrights granted as
stock options

April 1, 2018

Total

Increase

Decrease

—

—

—

—

¥98

—

—

—

—

¥98

(3) Information on dividends is as follows:(a) Dividends paid in the fiscal year ended March 31, 2020
Millions of yen (thousands of U.S. dollars), except per share amounts (yen (U.S. dollars))
Resolution

Annual stockholders’ meeting held on
June 27, 2019
Board of Directors’ meeting held on
November 8, 2019

Type of shares

Aggregate amount ofdividends

Cash dividends per
share

Record dateCommon stock¥1,303 ($11,972)¥40.00 ($0.36)

March 31, 2019

June 28, 2019

Common stock¥1,304 ($11,981)¥40.00 ($0.36)

September 30,
2019

December 5, 2019

Effective date(b) Dividends paid in the fiscal year ended March 31, 2019
Millions of yen, except per share amounts (yen)Resolution

Annual stockholders’ meeting held on
June 28, 2018
Board of Directors’ meeting held on
November 9, 2018

Type of shares

Aggregate amount ofdividends

Cash dividends per
share

Common stock¥1,140¥35.00March 31, 2018

June 29, 2018

Common stock¥1,303¥40.00

September 30,
2018

December 5, 2018

Record date

Effective date(c) Dividends to be paid in the fiscal year ending March 31, 2021
Millions of yen (thousands of U.S. dollars), except per share amounts (yen (U.S. dollars))
Resolution

Annual stockholders’ meeting held on
June 26, 2020

Aggregate amount ofdividends

Source ofdividends

Cash dividends per
share

Common stock ¥1,304 ($11,981)

Retainedearnings¥40.00 ($0.36) March 31, 2020 June 29, 2020

Type of shares

Record date

Effective date

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 asadditional 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

Nanto Report 2020, the integrated report of Nanto Bank

43

Financial Data

Consolidated Financial Statements

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’ meetingor may be capitalized by resolution of the Board of Directors. On condition that the total amount of legal earnings reserve and additional paid-in capitalremains equal to or more than 100% of common stock, they are available for distribution by resolution of the stockholders’ meeting. Legal earnings
reserve is included in retained earnings in the accompanying financial statements.
The maximum amount that the Bank can distribute as dividends is calculated based on the nonconsolidated financial statements of the Bank inaccordance with the Company Law.
5. SHARES OR INVESTMENTS IN CAPITAL OF UNCONSOLIDATED SUBSIDIARIES AND AFFILIATES
Shares or investments in capital of unconsolidated subsidiaries and affiliates at March 31, 2020 and 2019 were as follows:
Thousands of
U.S. dollars

Millions of yen

2020

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

¥

2019

282

¥

2020

163

$

2,591

6. NONPERFORMING LOANS
Nonperforming loans at March 31, 2020 and 2019 were as follows:
Thousands of
U.S. dollars

Millions of yen

2020

Loans to bankrupt borrowers..................................................................................... ¥Past due loans........................................................................................................... 		
Past due loans (three months or more)...................................................................... 		
Restructured loans.................................................................................................... 		
Total....................................................................................................................... ¥2,571
44,249494
4,333
51,648

2019

¥
		
		
		
¥

1,419
43,042571
8,921
53,954

2020

$
		
		
		
$

23,624
406,588
4,539
39,814
474,575

Bills discounted are accounted for as financing transactions in accordance with “Treatment for Accounting and Auditing of Application of AccountingStandard for Financial Instruments in the Banking Industry” (JICPA Industry Audit Committee Report No. 24, February 13, 2002). This accounting
treatment gives the Bank the right to sell or pledge such bills without restrictions. The total face value of commercial bills and purchased foreign exchangebills obtained as a result of discounting was ¥16,378 million ($150,491 thousand) and ¥23,366 million at March 31, 2020 and 2019, respectively.
 egarding loan participation, based on the “Accounting Treatment and Presentation of Loan Participation” (JICPA Accounting System Committee
R
Report No. 3, November 28, 2014), of the participating principal amount accounted for as loans and bills discounted with respect to the original
debtor, the amount recorded in the consolidated balance sheets is as follows.
¥3,105 million ($28,530 thousand) and ¥2,501 million at March31. 2020 and 2019, respectively.
7. PLEDGED ASSETSAt March 31, 2020 and 2019, securities of ¥477,613 million ($4,388,615 thousand) and ¥643,515 million, respectively, and other assets of ¥1,979
million ($18,184 thousand) and ¥1,978 million, respectively, were pledged as collateral for deposits of ¥32,755 million ($300,973 thousand) and¥37,496 million, respectively, call money and bills sold of ¥5,441 million ($49,995 thousand) and none, respectively, payables under repurchaseagreements of ¥42,475 million ($390,287 thousand) and ¥42,601 million, respectively, payables under securities lending transactions of ¥135,144
million ($1,241,789 thousand) and ¥279,580 million, respectively, and borrowed money of ¥127,975 million ($1,175,916 thousand) and ¥202,520
million, respectively.
Securities of ¥210 million ($1,929 thousand) and ¥92 million and other assets of ¥20,018 million ($183,938 thousand) and ¥20,034 million were
pledged for transaction guarantees at March 31, 2020 and 2019, respectively.
Unexpired lease contract claims of ¥3,846 million ($35,339 thousand) and ¥3,984 million were pledged as collateral for borrowed money of¥3,086 million ($28,356 thousand) and ¥2,897 million at March 31, 2020 and 2019, respectively.
At March 31, 2020 and 2019, other assets included initial margins of futures markets of ¥168 million ($1,543 thousand) and ¥192 million,
respectively, and security deposits of ¥1,049 million ($9,638 thousand) and ¥1,145 million, respectively, and other intangible fixed assets included key
money of ¥451 million ($4,144 thousand) and ¥493 million, respectively.
8. LOAN COMMITMENTS
Commitment line contracts on overdrafts and loans are agreements to lend to customers when they apply for borrowing up to a prescribed amountas long as there is no violation of any condition established in the contract. The amounts of unused commitments at March 31, 2020 and 2019were ¥978,728 million ($8,993,182 thousand) and ¥967,303 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, 2020 and 2019 was ¥901,064 million ($8,279,555 thousand) and¥916,872 million, respectively.
Since many of these commitment line contracts are expected to expire without being drawn upon, the total amount of unused commitments
does not necessarily 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 real estate and securities or takeother necessary measures such as scrutinizing customers’ financial positions and revising contracts when the need to secure claims arises.
9. TANGIBLE FIXED ASSETS
Accumulated depreciation of tangible fixed assets was ¥45,231 million ($415,611 thousand) and ¥44,892 million at March 31, 2020 and 2019,respectively. Accumulated capital gains directly offset against the acquisition cost of tangible fixed assets to obtain tax benefits were ¥783 million ($7,194
thousand) and ¥783 million at March 31, 2020 and 2019, respectively. For the years ended March 31, 2020 and 2019, the capital gain offset fromacquisition costs was nil.

44

Nanto Report 2020, the integrated report of Nanto Bank

10. GUARANTEESThe amount guaranteed by the Bank for privately placed bonds (stipulated by Article 2, Paragraph 3 of the Financial Instruments Exchange Act)
included in “Bonds” of “Securities” was ¥27,676 million ($254,304 thousand) and ¥20,722 million at March 31, 2020 and 2019, respectively.
11. OTHER OPERATING INCOME
For the fiscal years ended March 31, 2020 and 2019, other operating income consisted of the following:Thousands of
U.S. dollars

Millions of yen

2020

Gains on sales of bonds............................................................................................ ¥Other......................................................................................................................... 		
Total....................................................................................................................... ¥

2019

7,506
565
8,071

¥
		
¥

2020

7,550
301
7,851

$
		
$

68,9695,191
74,161

12. OTHER INCOME
For the fiscal years ended March 31, 2020 and 2019, other income consisted of the following:Thousands of
U.S. dollars

Millions of yen

2020

Gains on sales of stocks and other securities............................................................. ¥Reversal of allowance for loan losses......................................................................... 		
Recovery of written-off claims.................................................................................... 		
Gain on revision of retirement benefit plan.................................................................. 		
Other......................................................................................................................... 		
Total....................................................................................................................... ¥

2019

6,750
—
356
—
1,094
8,200

¥
		
		
		
		
¥

2020

8,379
—
407
4,784
1,067
14,637

$
		
		
		
		
$

62,023—3,271—
10,05275,346

13. OTHER OPERATING EXPENSES
For the fiscal years ended March 31, 2020 and 2019, other operating expenses consisted of the following:Thousands of
U.S. dollars

Millions of yen

2020

Losses on sales of bonds.......................................................................................... ¥Losses on redemption of bonds................................................................................ 		
Other......................................................................................................................... 		
Total....................................................................................................................... ¥

2019

3,220
—
892
4,112

¥
		
		
¥

2020

5,625
2,892
1,203
9,720

$
		
		
$

29,587—
8,196
37,783

14. GENERAL AND ADMINISTRATIVE EXPENSES
For the fiscal years ended March 31, 2020 and 2019, general and administrative expenses consisted of the following:Thousands of
U.S. dollars

Millions of yen

2020

Salaries and allowances............................................................................................. ¥Retirement benefit costs............................................................................................ 		
Other......................................................................................................................... 		
Total....................................................................................................................... ¥2019

20,3801,809
20,791
42,980

¥
		
		
¥

2020

19,832
1,638
20,14841,618$				
$187,264
16,622
191,041
394,927

15. OTHER EXPENSES
For the fiscal years ended March 31, 2020 and 2019, other expenses consisted of the following:Thousands of
U.S. dollars

Millions of yen

2020

Write-offs of loans...................................................................................................... ¥Provision for possible loan losses............................................................................... 		
Losses on sales of stocks and other securities.......................................................... 		
Other......................................................................................................................... 		
Total....................................................................................................................... ¥

3,683
3,185
3,167
4,235
14,270

2019

¥
		
		
		
¥

2020

1,036
597
2,589
1,397
5,619

$
		
		
		
$

33,841
29,265
29,10038,913
131,121

16. IMPAIRMENT LOSSESThe Group reports impairment losses for the following asset groups.
Current consolidated fiscal year (from April 1, 2019 to March 31, 2020)
RegionPrinciple use

Type

Inside Nara Prefecture
Outside Nara Prefecture

25 business stores, etc.
10 business stores, etc.
Total

Land and buildings, etc.
Land and buildings, etc.

Impairment loss
(Millions of yen)

Impairment loss
(Thousands of U.S. dollars)

1,172
649
1,822

10,7695,963
16,741

Regarding the fixed assets above, due to the decline in operating cash flows and the reorganization of the store network, the Bank reduced thecarrying amount to the recoverable amount and reported the decrease as an impairment loss (¥1,822 million).
The Bank uses the grouping method of area and business store units because it continuously determines income and expenditure for each area

Nanto Report 2020, the integrated report of Nanto Bank

45

Financial Data

Consolidated Financial Statements

and for each business store. For idle assets, the grouping is carried out using each asset as the unit. Furthermore, the head office, Administrative
Center, Training Center, etc. are assets that contribute to the generation of the future cash flows of multiple assets and asset groups, so they are
deemed to be corporate assets. Each subsidiary uses the grouping with each respective company as the unit.
The calculation of the recoverable amount uses the fair value less costs to sell or the value in use, whichever is higher. The fair value is calculated
based on Real Estate Appraisal Standards, etc., and the value in use is computed by discounting future cash flows by 1.9%.
Previous consolidated fiscal year (from April 1, 2018 to March 31, 2019)
RegionPrinciple use

Type

Inside Nara Prefecture
Outside Nara Prefecture

1 business stores, etc.
1 business stores, etc.
Total

Land
Land and buildings, etc.

Impairment loss (Millions of yen)

32
9
41

Regarding the fixed assets above, due to the decline of operating cash flows, the Bank reduced the carrying amount to the recoverable amount andreported the decrease as an impairment loss (¥41 million).
The Bank uses the grouping method of business store units because the stores, etc., continuously determine income and expenditureindividually. For idle assets, the grouping is carried out using each asset as the unit. Furthermore, the head office, Administrative Center, Training
Center, etc. are assets that contribute to the generation of the future cash flows of multiple assets and asset groups, so they are deemed to becorporate assets. Each subsidiary uses the grouping with each respective company as the unit.
In principle, the calculation of the recoverable amount uses the fair value less costs to sell, and the fair value is calculated based on Real EstateAppraisal Standards, etc.
17. OTHER COMPREHENSIVE INCOME (LOSS)
The components of other comprehensive income (loss) for the fiscal years ended March 31, 2020 and 2019 were as follows:
Thousands of
U.S. dollars

Millions of yen

2020

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

2019

2020

(45,749)(3,747)(49,497)
14,167(35,330)

¥
		
		
		
		

(1,653)(7,714)(9,368)2,727(6,641)

$
		
		
		
		

(420,371)(34,429)(454,810)
130,175(324,634)

(28)
96
68
(20)
47

		
		
		
		
		

(29)
132
103
(31)
71

		
		
		
		
		

(257)
882
624
(183)
431

(325)
181
(143)
43
(100)
(35,382)

		
		
		
		
		
¥

200
4,839
5,039
(1,532)
3,507(3,061)

		
		
		
		
		
$

(2,986)
1,663(1,313)395(918)(325,112)

18. STATEMENTS OF CASH FLOWS
The reconciliation between cash and due from banks in the consolidated balance sheets at March 31, 2020 and 2019 and cash and cash equivalentsin the consolidated statements of cash flows for the fiscal years then ended was as follows:
Thousands of
U.S. dollars

Millions of yen

2020

Cash and due from banks on the consolidated balance sheets.................................. ¥Current deposits due from banks............................................................................... 		
Time deposits due from banks................................................................................... 		
Other due from banks................................................................................................ 		
Cash and cash equivalents on the consolidated statements of cash flows................. ¥693,798(1,251)(600)(582)
691,364

2019

¥
		
		
		
¥

830,696
(464)
(600)
(437)
829,1942020$ 6,375,062
		(11,494)		
(5,513)
		(5,347)$ 6,352,696

Major components of assets and liabilities of a company which has become a consolidated subsidiary due to acquisition of shares
Current consolidated fiscal year (from April 1, 2019 to March 31, 2020)
No applicable matters.
Previous consolidated fiscal year (from April 1, 2018 to March 31, 2019)46

Nanto Report 2020, the integrated report of Nanto Bank

Major components of assets and liabilities of a company which has become a consolidated subsidiary due to the acquisition of shares in the year
ended March 31, 2019: The major components of the assets and liabilities of NARA SECURITIES CO., LTD. (currently Nanto Mahoroba Securities Co.,
Ltd.), which was newly consolidated through a share acquisition, at the inception of consolidation and the relationship between the acquisition cost of
the shares and the payment for the acquisition of shares were as follows:
Millions of yen

Assets....................................................................................................................... ¥Liabilities.................................................................................................................... 		
Negative goodwill...................................................................................................... 		
Acquisition cost of shares...................................................................................... 		
Acquisition cost of shares before control was obtained.......................................... 		
Gain on step acquisitions....................................................................................... 		
Cash and cash equivalents........................................................................................ 		
Net payment for acquisition................................................................................... ¥1,984(1,071)
(14)
898
(10)
(12)
(8)
867

19. LEASE TRANSACTIONS
Operating leases
As lessee:
Future minimum lease payments under operating leases which were not cancelable at March 31, 2020 and 2019 were as follows:
Thousands of
U.S. dollars

Millions of yen

2020

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

2019

87
845
932

¥
		
¥

2020

79
801
880

$
		
$

799
7,764
8,563

As lessor:
There were no applicable matters to be noted regarding future minimum lease payments under operating leases which were not cancelable at March
31, 2020 and 2019.

20. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES
a. Matters related to the status of financial instruments(1) Policy on financial instruments
The Group is composed of the Bank and its ten consolidated
subsidiaries and provides financial services such as banking, securities,
leasing and credit guarantee businesses.
The Group’s major banking business includes (i) the acceptanceof deposits, lending services, bills discounting and remittance and (ii)the guarantee of 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 andother related services, including security index future transactions inaccordance with the Financial Instruments and Exchange Act.
The Bank, in addition to being a money lender and borrower in
the interbank market to adjust its surplus and deficit of funds, raises
funds by loans and bonds with consideration for the financial market
conditions.
The Bank conducts asset and liability management (ALM),
identifying various types of risk exposures associated with the banking
business as the Bank holds financial assets and liabilities exposed tothe market risk associated with fluctuation in interest rates. As part ofits risk management, the Bank utilizes derivative transactions such as
interest rate swaps. The Bank also enters into derivative transactions for
trading purposes with certain position limits.
(2) Contents and risk of financial instruments
Financial assets held by the Group are composed mainly of loans tocorporate and individual customers that are exposed to credit risk
arising from customer nonperformance. In addition, loan balances
are significantly concentrated in Nara prefecture, where the head
office of the 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-forsale), private bonds guaranteed by the Bank that are classified as heldto-maturity debt securities and Japanese government bonds classified

as trading purpose securities. These securities are exposed to the credit
risk of issuers and the market risk of fluctuation in interest rates andmarket prices. Since financial assets denominated in foreign currencies
are exposed to exchange rate risk, currency related derivativetransactions are used to balance the amount of funding and amount ofoperations for each currency to reduce the risk.
In the banking business, financial liabilities consist principally of
deposits from retail clients in Japan and are exposed to interest raterisk. In addition, foreign currency deposits are exposed to exchange
rate risk. With respect to borrowed money, 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 undercircumstances such as the significant deterioration of the financial
position of the Group. Furthermore, borrowed money with floatinginterest rates is exposed to interest rate risk.
Derivative transactions include interest rate swaps for interest
rate related transactions, currency swaps and forward foreignexchange transactions for currency related transactions, and bondfuture transactions and bond option transactions for bond relatedtransactions. In addition, certain credit derivatives are embedded in thefinancial 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
those risks properly. The Bank also uses derivatives for trading
purposes with certain position limits.
The Bank applies the deferred hedge accounting method forderivative transactions when used as hedging instruments. Interest
rate swaps are used as hedging instruments to avoid interest rate risksof hedged items such as loans 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
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. For cash flow
hedges, the Bank assesses the effectiveness by verifying the correlation
between the hedged items and the hedging instruments. Transactions

Nanto Report 2020, the integrated report of Nanto Bank

47

Financial Data

Consolidated Financial Statements

which do not meet the requirements of hedge accounting and derivativetransactions for trading purposes are exposed to interest rate risk,
foreign currency risk, price fluctuation risk and credit risk.
(3) Risk management system for financial instruments
Credit risk management
The Group has established a framework for credit control which
includes credit reviews for individual transactions, credit limits, credit
information management, internal credit ratings, guarantees andcollateral 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. The independent Audit Department audits the statusof credit risk controls and its results. The status of credit risk controls
is periodically evaluated and reported to the Management Directors’Committee and board meeting.
Credit risks associated with the issuers of securities are managed
by the Financial Investment Division and 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” stipulates that the Bank makes efforts to manage
the market sector effectively, taking risk and reward into account as well
as avoiding excessive risk taking by setting appropriate risk limits basedon the Group’s ability to take risk and identifying market risk properly.
The ALM Committee, the decision making entity for the
management of market risks, sets certain semiannual risk limits
determined by VaR based upon the Bank’s capital adequacy andmarket conditions. The Bank pursues profit opportunities within therisk limits. The Risk Management Division assesses interest rate risk by
VaR, reports to the ALM Committee on a monthly basis and properly
monitors its operations.
In addition to the VaR methodology, it utilizes a combination of
the BPV (basis point value) methodology, simulations of interest rate
fluctuations, and EVE (the decrease in economic value with respect toan interest rate shock), etc., to identify and analyze risk from a broader
point of view.
(b) Foreign currency risk
With regard to foreign currency risk associated with operations andprocurement of financial instruments denominated in foreign currency,
the Group manages risk by balancing the amount of funding andamount of operations for each currency. In addition, as for foreign
currency exchange transactions for investment purposes, the 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
Solution Business Division plays a part in investments for investment
purposes, and the Corporate Business Division plays a part ininvestments for the purpose of business alliances and capital affiliation.
Continuous monitoring of market conditions and restrictions on
investments in riskier assets such as securitized instruments help toavoid unnecessary price fluctuation risk.
The Risk Management Division assesses the price fluctuation riskof equity securities, etc., by VaR, reports monthly to the ALM Committee

48

Nanto Report 2020, the integrated report of Nanto Bank

about compliance with risk limits and properly manages the risk.
(d) Derivative transactions
With respect to derivative transactions for hedging purposes, the Groupestablishes internal rules defining the authority and hedge policies which
are governed by the Risk Management Division. With respect toderivative transactions for trading purposes, certain trading limits andloss limit rules are set semiannually by the ALM Committee. The Risk
Management Division, which serves as the middle office, monitors
compliance and calculates the total amount of risk. The Financial
Investment Division, which serves as the back office, checks each
derivative transaction, marked-to-market position, and evaluates the
profit and loss from the transactions on a daily basis. In addition to
those functions, the related divisions check each other so as not toexceed limits on loss.
The directors of the Bank are reported to from both the middle
office and the back office and monitor the risks associated with theBank’s portfolio as a whole, including loans, deposits and securities at
the ALM Committee.
(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 Group has adopted the historical method (confidence level of
99%, observation period of 1,250 business days, holding period of 120
business days [holding period for equity securities other than purely forinvestment purposes are 240 business days] and the correlation of risk
categories are not considered.).
At March 31, 2020, the Group’s total market risk (decrease inestimated economic value) was ¥52,531 million ($482,688 thousand)(¥43,069 million in 2019). In addition, the Group conducted backtests comparing actual income with the VaR calculated by the model.
However, VaR is a statistical measure of market risk based on past
fluctuations in the market and certain probability of occurrence. It may
not be possible to capture the risk if the market fluctuates rapidly under
extraordinary circumstances.
Management of liquidity risk associated with financing activities
The Financial Investment Division manages the Bank’s cash position
based upon the monthly funding plan designed by the ALM Committee,
while the 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 and also can raisefrom the market on a regular basis.
In addition, the Group categorizes its financing situation into
“Regular Phase”, “Concern Phase” and “Crisis Phase” and preparesappropriate 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 values based onquoted market prices and values calculated on a reasonable basis
when no market price is available. Certain assumptions are used forthe calculation of such amounts, and, accordingly, the result of suchcalculations may vary if different assumptions are used.

b. Fair value of financial instruments
The table below summarizes the carrying amounts, fair values and differences between the carrying amounts and fair values of financial instruments asof March 31, 2020 and 2019. 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 (see Note 2 below).
Millions of yen

2020
Carrying amount

Cash and due from banks.................................................................................... ¥Call loans and bills bought.................................................................................... 		
Debt purchased.................................................................................................... 		
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.......................................................................... 		
Call money and bills sold...................................................................................... 		
Payables under repurchase agreements............................................................... 		
Payables under securities lending transactions..................................................... 		
Borrowed money.................................................................................................. 		
Total liabilities........................................................................................................ ¥Derivative transactions (*2)
Hedge accounting not applied.......................................................................... 		
Hedge accounting applied................................................................................ 		
Total derivative transactions.................................................................................. ¥693,798—
2,412
39,470Fair value

¥
		
		
		

Difference

693,798—
2,412
39,470

¥
		
		
		

—
—
—
—

27,6761,300,902
3,457,276(20,396)
3,436,880
5,501,140
5,029,759
7,370
5,441
42,475
135,144
135,538
5,355,729

		27,736
		 1,300,902

		
		

59
—

		
¥
¥
		
		
		
		
		
¥

3,448,083
5,512,404
5,029,768
7,370
5,441
42,475
135,144
135,513
5,355,713

		
¥
¥
		
		
		
		
		
¥

11,203
11,263
8
—
—
—
—
(24)
(16)

410
(172)
237

		
		
¥

410
(172)
237

		
		
¥

—
—
—

Millions of yen

2019
Carrying amount

Cash and due from banks.................................................................................... ¥Call loans and bills bought.................................................................................... 		
Debt purchased.................................................................................................... 		
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.......................................................................... 		
Call money and bills sold...................................................................................... 		
Payables under repurchase agreements............................................................... 		
Payables under securities lending transactions..................................................... 		
Borrowed money.................................................................................................. 		
Total liabilities........................................................................................................ ¥Derivative transactions (*2)
Hedge accounting not applied.......................................................................... 		
Hedge accounting applied................................................................................ 		
Total derivative transactions.................................................................................. ¥830,696
388
3,514
34,070Fair value

¥
		
		
		

Difference

830,696
388
3,514
34,070

¥
		
		
		

—
—
—
—

20,722
1,404,641
3,392,321(17,953)
3,374,368
5,668,401
4,904,027
21,622—42,601
279,580
210,6485,458,480

		
20,796
		 1,404,641

		
		

74
—

		
¥
¥
		
		
		
		
		
¥

3,388,671
5,682,778
4,904,055
21,622—42,601
279,580
210,540
5,458,400

		
¥
¥
		
		
		
		
		
¥

14,302
14,376
28
—
—
—
—
(108)
(80)

233
(221)
12

		
		
¥

233
(221)
12

		
		
¥

—
—
—

Nanto Report 2020, the integrated report of Nanto Bank

49

Financial Data

Consolidated Financial Statements

Thousands of U.S. dollars

2020
Carrying amount

Cash and due from banks.................................................................................... $ 6,375,062
Call loans and bills bought.................................................................................... 		
—Debt purchased.................................................................................................... 		
22,163
Money held in trust............................................................................................... 		
362,675
Securities
Held-to-maturity debt securities........................................................................ 		
254,304
Available-for-sale securities............................................................................... 		 11,953,523
Loans and bills discounted................................................................................... 		 31,767,674
Reserve for possible loan losses (*1)................................................................. 		 (187,411)
		 31,580,262
Total assets.......................................................................................................... $ 50,548,010
Deposits............................................................................................................... $ 46,216,659
Negotiable certificates of deposit.......................................................................... 		
67,720Call money and bills sold...................................................................................... 		
49,995
Payables under repurchase agreements............................................................... 		
390,287
Payables under securities lending transactions..................................................... 		 1,241,789
Borrowed money.................................................................................................. 		 1,245,410
Total liabilities........................................................................................................ $ 49,211,880
Derivative transactions (*2)
Hedge accounting not applied.......................................................................... 		
3,767(1,580)Hedge accounting applied................................................................................ 		
Total derivative transactions.................................................................................. $2,177

Fair value

Difference$ 6,375,062
		—		
22,163
		362,675

$
		
		
		

—
—
—
—

		
254,856
		 11,953,523

		
		

542
—

		 31,683,203$ 50,651,511$ 46,216,741
		
67,720		
49,995
		
390,287		 1,241,789
		 1,245,180$ 49,211,733

		
$
$
		
		
		
		
		
$

102,940
103,491
73
—
—
—
—
(220)
(147)

		
		
$

		
		
$

—
—
—

3,767
(1,580)2,177(*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 amountis presented as the fair value as the fair value approximates the carrying
amount. With respect to due from banks with maturities, the fair value
is calculated for each category of maturity by discounting the cash flowat the interest rate assumed if the same due from banks were newly
executed.
Call loans and bills bought and 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.
Money held in trust:
The fair value of securities managed as trust assets in individually
managed money held in trust primarily for securities management
purposes is determined based on the values presented by the trustbank. For additional information on money held in trust categorized byholding purposes, see Note 20, “SECURITIES AND MONEY HELD IN
TRUST.”
Securities:
The fair value of equity securities is determined using the market
price on exchanges. The fair value of debt securities is determinedbased on market price or value calculated on a reasonable basis if nomarket price is available. The fair value of listed investment trusts isdetermined using the market price on exchanges and the fair value ofother investment trusts is determined using standard prices publishedby the Investment Trust Association, Japan or presented from thefinancial institutions with which they are transacted. The fair value of theprivate bonds guaranteed by the Bank is calculated by discounting theaggregate 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 become bankrupt borrowers,” the50

Nanto Report 2020, the integrated report of Nanto Bank

amount of possible loan losses is computed based on the present
value of estimated future cash flows or the recoverable amounts fromcollateral and guarantees. Therefore, the fair value approximates the
carrying amount, net of reserve for possible loan losses, and suchamount is presented as the fair value.
For additional information on securities categorized by the
purposes for which they are held, see Note 20, “SECURITIES AND
MONEY HELD IN TRUST.”
Loans and bills discounted:
The fair value of loans with floating interest rates is presented using thecarrying amount as the fair value approximates the carrying amount, aslong as the credit situation of the borrower does not vary significantly
after the loan is executed, since they reflect market interest rates dueto their short-term nature. The fair value of loans with fixed rates iscomputed by discounting the aggregate value of principal and interestat the interest rate assumed if the same loans were newly executed foreach type of loan, internal rating and maturity. As for the loans whosematurity is less than one year, the carrying amount is presented as thefair 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,” theamount of possible loan losses is computed based on the estimatedfuture cash flow or the recoverable amounts from collateral andguarantees. Therefore, the fair value approximates the carrying amount,net of reserve for possible loan losses, and this amount is presented as
the fair value.
The fair value of loans without a predetermined repayment
date due to the lending amount being limited within the value of theapplicable collateral is presented using the carrying amount as the fairvalue is deemed to approximate the carrying amount considering theestimated repayment term and interest rate. The fair value of embedded
derivative loans 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, isdeemed to be the fair value. The fair value of time deposits is computed
using the present value by discounting future cash flows for eachcategory of a certain period. The interest rate to be applied when a
new deposit is taken is used 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.
Call money and bills sold and payables under securities lendingtransactions:
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 ispresented using the carrying amount as the fair value approximates the
carrying amount since the interest rate reflects the market interest rate
due to the short-term nature and the credit situation of the Group does
not vary significantly after executing the borrowing. The fair value ofborrowed money with fixed interest rates is computed, by discounting
the aggregate value of principal and interest at the interest rate
assumed if the same borrowing were newly executed, for each categoryof type of maturities. As for the borrowed money whose maturity is lessthan one year, the carrying amount is presented as the fair value as thefair value approximates the carrying amount.
Derivative transactions
For derivative transactions, see Note 21, “DERIVATIVE
TRANSACTIONS.”

Payables under repurchase agreements:
The carrying amount is presented as the fair value as the fair value isdeemed to approximate the carrying amount since the interest rate is
the floating interest rate which reflects the market interest rate due tothe short-term nature.

(Note 2) The table below summarizes financial instruments whose fair value is extremely difficult to estimate. Note that these instruments are notincluded in the above table regarding the fair value of financial instruments.
Carrying amountThousands of
U.S. dollars

Millions of yen

2020

Unlisted equity securities (*1) (*2)............................................................................... ¥Bonds denominated in foreign currencies (*1)............................................................ 		
Investment in partnerships (*3)................................................................................... 		
Total....................................................................................................................... ¥

2019

1,690
1,088
8,988
11,767

¥
		
		
¥

2020

1,639
—
5,776
7,415

$
		
		
$

15,528
9,997
82,587108,122(*1) The fair value of unlisted equity securities and bonds denominated in foreign currencies is not disclosed, since there were no market prices and it was extremely difficult to estimate the fair values.
(*2) No impairment loss was recognized for either the fiscal year ended March 31, 2020 or 2019.
(*3) The fair value of unlisted equity securities among investment in partnerships is not disclosed since there were no market prices and it was extremely difficult to estimate the fair values.

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

2020
Due within one
year or lessDue after one
year throughthree years

Due from banks....................................................... ¥ 693,798 ¥Call loans and bills bought.......................................		
— 		Debt purchased.......................................................		
2,412 		Securities................................................................		 143,151 		
Held-to-maturity debt securities...........................		
5,129 		Bonds..............................................................		
5,129 		Available-for-sale securities with contractual
		 138,021 		
maturities.............................................................
Japanese government bonds...........................		
57,500 		
Japanese local government bonds..................		
15,123 		
Corporate bonds.............................................		
29,310 		
Other...............................................................		
36,088 		
Loans and bills discounted (*)..................................		 448,640 		
Total ........................................................................ ¥ 1,288,003 ¥———122,343
12,612
12,612

Due after three
years throughfive years

¥
		
		
		
		
		

—
—
—
113,255
8,354
8,354

Due after five
years throughseven years

¥
		
		
		
		
		

109,730 		

104,900 		

44,00022,411
38,296
5,023
644,659
767,00254,50024,597
14,425
11,377
519,682
632,938

		
		
		
		
		
¥

		
		
		
		
		
¥

—
—
—
7,963
1,579
1,579

Due after sevenyears through ten
years

¥
		
		
		
		
		

6,383 		
—
4,544
404
1,434
356,700
364,663

		
		
		
		
		
¥

—
—
—
179,072——

Due after ten
years

¥
		
		
		
		
		

—
—
—
191,618——

179,072 		

191,618

5,000 		
—104,157 		
3,088
7,700 		 147,788
62,215 		
40,741
331,142 		 814,900
510,214 ¥ 1,006,518

Nanto Report 2020, the integrated report of Nanto Bank

51

Financial Data

Consolidated Financial Statements

Millions of yen

2019
Due within one
year or lessDue after one
year throughthree years

Due from banks....................................................... ¥ 781,424 ¥Call loans and bills bought.......................................		
388 		
Debt purchased.......................................................		
3,514 		Securities................................................................		 167,399 		
Held-to-maturity debt securities...........................		
3,640 		Bonds..............................................................		
3,640 		Available-for-sale securities with contractual
		 163,759 		maturities.............................................................
Japanese government bonds...........................		 153,500 		
Japanese local government bonds..................		
5,695 		Corporate bonds.............................................		
2,564 		Other...............................................................		
2,000 		Loans and bills discounted (*)..................................		 470,631 		
Total ........................................................................ ¥ 1,423,359 ¥———
196,765
7,995
7,995

Due after three
years throughfive years

¥
		
		
		
		
		

—
—
—
113,434
7,331
7,331

Due after five
years throughseven years

¥
		
		
		
		
		

—
—
—
53,1861,755
1,755

Due after sevenyears through ten
years

¥
		
		
		
		
		

—
—
—
126,299——

Due after ten
years

¥
		
		
		
		
		

—
—
—
212,950——
212,950

188,770 		

106,102 		

51,430 		

126,299 		

89,000 		
33,029 		
31,740 		
35,000 		
596,729 		
793,494 ¥27,000 		
26,650 		
43,794 		
8,657 		529,312 		
642,746 ¥40,000 		
6,304 		5,126 		— 		358,355 		
411,541 ¥— 		
—40,577 		
3,529
6,200 		 109,459
79,521 		
99,961
313,778 		 787,740
440,077 ¥ 1,000,691

Thousands of U.S. dollars

2020
Due within one
year or lessDue after one
year throughthree years

Due after three
years throughfive years

Due after five
years throughseven years

Due after sevenyears through ten
years

Due after ten
years

Due from banks....................................................... $ 6,375,062 $
— $
— $
— $
— $
—
Call loans and bills bought.......................................		
— 		
— 		
— 		
— 		
— 		
—
Debt purchased.......................................................		
22,163 		
— 		
— 		
— 		
— 		
—
Securities................................................................		 1,315,363 		 1,124,166 		 1,040,659 		
73,169 		 1,645,428 		 1,760,709
Held-to-maturity debt securities...........................		
47,128 		
115,887 		
76,761 		
14,508 		— 		—
Bonds..............................................................		
47,128 		
115,887 		
76,761 		
14,508 		— 		—
Available-for-sale securities with contractual
		 1,268,225 		 1,008,269 		
963,888 		
58,651 		 1,645,428 		 1,760,709
maturities.............................................................
Japanese government bonds...........................		
528,346 		
404,300 		
500,781 		— 		
45,943 		
—Japanese local government bonds..................		
138,959 		
205,926 		
226,013 		
41,753 		
957,061 		
28,374
Corporate bonds.............................................		
269,319 		
351,888 		
132,546 		
3,712 		70,752 		 1,357,971
Other...............................................................		
331,599 		
46,154 		
104,539 		
13,176 		
571,671 		
374,354
Loans and bills discounted (*)..................................		 4,122,392 		 5,923,541 		 4,775,172 		 3,277,588 		 3,042,745 		 7,487,825
Total ........................................................................ $ 11,834,999 $ 7,047,707 $ 5,815,841 $ 3,350,758 $ 4,688,174 $ 9,248,534(*)	Loans from “bankrupt,” “effectively bankrupt” and “likely to become bankrupt” borrowers, which are not expected to be repaid, amounting to ¥37,421 million ($343,848 thousand) and ¥35,530
million at March 31, 2020 and 2019, respectively, are not included.
Loans whose payment terms were not determined amounting to ¥304,129 million ($2,794,532 thousand) and ¥300,243 million at March 31, 2020 and 2019, respectively, are not included.

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

2020
Due within one
year or less

Deposits (*).............................................................. ¥ 4,576,383
Negotiable certificates of deposits...........................		
7,370
Call money and bills sold.........................................		
5,441
Payables under repurchase agreements..................		
14,146
Payables under securities lending transactions........		 135,144
71,103
Borrowed money.....................................................		
Total........................................................................ ¥ 4,809,589

52

Nanto Report 2020, the integrated report of Nanto Bank

Due after one
year throughthree years

¥
		
		
		
		
		
¥

412,539——
28,328—63,385504,253

Due after three
years throughfive years

¥
		
		
		
		
		
¥

40,837————973
41,810Due after five
years throughseven years

¥
		
		
		
		
		
¥

—
—
—
—
—
76
76

Due after sevenyears through ten
years

¥
		
		
		
		
		
¥

—
—
—
—
—
—
—

Due after ten
years

¥
		
		
		
		
		
¥

—
—
—
—
—
—
—

Millions of yen

2019
Due within one
year or less

Deposits (*).............................................................. ¥ 4,404,753
Negotiable certificates of deposits...........................		
21,622
Call money and bills sold.........................................		
—Payables under repurchase agreements..................		
13,710
Payables under securities lending transactions........		 279,580
35,610Borrowed money.....................................................		
Total........................................................................ ¥ 4,755,276

Due after one
year throughthree years

¥
		
		
		
		
		
¥

469,164——
28,890—78,927576,982

Due after three
years throughfive years

¥
		
		
		
		
		
¥

30,110————96,073
126,183

Due after five
years throughseven years

¥
		
		
		
		
		
¥

—
—
—
—
—
37
37

Due after sevenyears through ten
years

¥
		
		
		
		
		
¥

—
—
—
—
—
—
—

Due after ten
years

¥
		
		
		
		
		
¥

—
—
—
—
—
—
—

Thousands of U.S. dollars

2020
Due within one
year or lessDue after one
year throughthree years

Deposits (*).............................................................. $ 42,050,748 $Negotiable certificates of deposits...........................		
67,720 		Call money and bills sold.........................................		
49,995 		
Payables under repurchase agreements..................		
129,982 		
Payables under securities lending transactions........		 1,241,789 		
653,340 		
Borrowed money.....................................................		
Total........................................................................ $ 44,193,595 $Due after three
years throughfive years

3,790,673 $
— 		
— 		
260,295 		— 		
582,422 		
4,633,400 $Due after five
years throughseven years

375,236 $
— 		
— 		
— 		
— 		
8,940 		384,177 $Due after sevenyears through ten
years

— $
— 		
— 		
— 		
— 		
698 		
698 $Due after ten
years

— $
— 		
— 		
— 		
— 		
— 		
— $

—
—
—
—
—
—
—

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

21. 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, 2020 and 2019 was as follows:(a) Trading securities
Not applicable for the years ended March 31, 2020 and 2019(b) Held-to-maturity debt securities
Millions of yen

2020
Carrying amount

Fair value

Unrealized gains (losses)

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

¥¥

25,26825,268¥¥25,34325,343¥¥74
74

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

¥
¥
¥

2,408
2,408
27,676

¥
¥
¥

2,392
2,392
27,736

¥
¥
¥

(15)
(15)
59

Millions of yen

2019
Carrying amount

Fair value

Unrealized gains (losses)

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

¥¥

19,02819,028¥¥

19,103
19,103¥¥75
75

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

¥
¥
¥

1,694
1,694
20,722

¥
¥
¥

1,692
1,692
20,796

¥
¥
¥

(1)
(1)
74

Nanto Report 2020, the integrated report of Nanto Bank

53

Financial Data

Consolidated Financial Statements

Thousands of U.S. dollars

2020
Carrying amount

Fair value

Unrealized gains (losses)

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

$$

232,178
232,178$$

232,867
232,867

$
$

679
679

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

$$$

22,12622,126254,304$$$

21,97921,979254,856

$
$
$

(137)
(137)
542

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

2020
Carrying amount

Acquisition cost

Carrying amount exceeding acquisition cost:
Stocks............................................................................................
¥
50,294
Bonds............................................................................................		467,090
Japanese government bonds.....................................................		164,170
Japanese local government bonds.............................................		109,391
Japanese corporate bonds.........................................................		193,528
Others............................................................................................		232,377
Foreign securities included..........................................................		108,771
Subtotal..........................................................................................
¥
749,762

Unrealized gains (losses)¥
26,240		460,897
		161,253
		107,953
		191,690
		227,605
		105,648¥
714,743¥
24,053
		 6,193
		 2,916
		 1,437
		 1,838
		 4,772
		 3,123¥
35,019Carrying amount not exceeding acquisition cost:
Stocks............................................................................................
¥
10,387
Bonds............................................................................................		111,972
Japanese government bonds.....................................................		
—Japanese local government bonds.............................................		 65,722
Japanese corporate bonds.........................................................		 46,250
Others............................................................................................		428,779
Foreign securities included..........................................................		 66,596
Subtotal..........................................................................................
¥
551,139
Total ...............................................................................................
¥ 1,300,902¥
11,894
		112,577
		—		 65,987
		 46,589
		459,187
		 72,962¥
583,659¥ 1,298,402¥(1,507)
		 (604)		—		 (265)		 (339)
		(30,407)
		 (6,366)¥(32,519)¥
2,499

Millions of yen

2019

54

Carrying amount

Acquisition cost

Carrying amount exceeding acquisition cost:
Stocks............................................................................................
¥
91,044
Bonds............................................................................................		634,334
Japanese government bonds.....................................................		315,130
Japanese local government bonds.............................................		117,925
Japanese corporate bonds.........................................................		201,278
Others............................................................................................		462,349
Foreign securities included..........................................................		191,611
Subtotal..........................................................................................
¥ 1,187,728¥
47,780		623,759
		309,636
		115,718
		198,404
		454,282
		187,511¥ 1,125,823¥
43,263
		 10,574
		 5,493
		 2,206
		 2,874
		 8,066
		 4,099¥
61,905Carrying amount not exceeding acquisition cost:
Stocks............................................................................................
¥
9,379
Bonds............................................................................................		
929
Japanese government bonds.....................................................		
—Japanese local government bonds.............................................		
70
Japanese corporate bonds.........................................................		
859
Others............................................................................................		206,604
Foreign securities included..........................................................		 55,296
Subtotal..........................................................................................
¥
216,913
Total ...............................................................................................
¥ 1,404,641¥
10,231
		
929
		
—
		
70
		
859
		215,659
		 56,661¥
226,821¥ 1,352,644

¥
(852)
		
(0)
		
—
		
—
		
(0)
		 (9,055)
		 (1,364)¥(9,908)¥51,997

Nanto Report 2020, the integrated report of Nanto Bank

Unrealized gains (losses)

Thousands of U.S. dollars

2020
Carrying amount

Acquisition cost

Carrying amount exceeding acquisition cost:
Stocks............................................................................................
$
462,133
Bonds............................................................................................		4,291,923
Japanese government bonds.....................................................		1,508,499
Japanese local government bonds.............................................		1,005,154
Japanese corporate bonds.........................................................		1,778,259
Others............................................................................................		2,135,229
Foreign securities included..........................................................		999,457
Subtotal..........................................................................................
$ 6,889,295

Unrealized gains (losses)$
241,109
		4,235,017
		1,481,696
		991,941
		1,761,370
		2,091,381
		970,761$ 6,567,518$
221,014
		 56,905
		 26,794
		 13,204
		 16,888
		 43,848
		 28,696$
321,777

Carrying amount not exceeding acquisition cost:
Stocks............................................................................................
$
95,442
Bonds............................................................................................		1,028,870
Japanese government bonds.....................................................		
—Japanese local government bonds.............................................		603,895
Japanese corporate bonds.........................................................		424,974
Others............................................................................................		3,939,897
Foreign securities included..........................................................		611,926
Subtotal..........................................................................................
$ 5,064,219
Total ...............................................................................................
$ 11,953,523$
109,289
		1,034,429
		—		606,330
		428,089
		4,219,305
		670,421$ 5,363,034$ 11,930,552$(13,847)		 (5,549)		—		 (2,434)
		 (3,114)
		(279,399)
		(58,494)$(298,805)$
22,962The securities loaned under unsecured securities lending transactions are included in Japanese government bonds under “Securities” in the amount of¥39,567 million ($363,567 thousand) and ¥30,683 at March 31, 2020 and 2019, respectively.
(2) Held-to-maturity debt securities sold for the fiscal years ended March 31, 2020 and 2019
Millions of yen

2020
Sales amount

Bonds............................................................................................
¥
Japanese corporate bonds.........................................................		
Total ...............................................................................................
¥

107
107
107

Gains on sales

¥
		
¥

0
0
0

Losses on sales

¥
		
¥

—
—
—

Millions of yen

2019
Sales amount

Bonds............................................................................................
¥
Japanese corporate bonds.........................................................		
Total ...............................................................................................
¥

50
50
50

Gains on sales

¥
		
¥

0
0
0

Losses on sales

¥
		
¥

—
—
—

Thousands of U.S. dollars

2020
Sales amount

Bonds............................................................................................
$
Japanese corporate bonds.........................................................		
Total ...............................................................................................
$

983
983
983

Gains on sales

$
		
$

0
0
0

Losses on sales

$
		
$

—
—
—

(Reason for sale) Sales of Japanese corporate bonds comprise retirement by purchase of private bonds.
(3) Available-for-sale securities sold for the fiscal years ended March 31, 2020 and 2019
Millions of yen

2020
Sales amount

Gains on sales

Losses on sales

Stocks............................................................................................
¥
26,126
Bonds............................................................................................		 71,936
Japanese government bonds.....................................................		 71,559
Japanese local government bonds.............................................		
179
Japanese corporate bonds.........................................................		
196
Others............................................................................................		200,975
Foreign securities included..........................................................		147,661
Total ...............................................................................................
¥
299,038

¥
6,319
		
174
		
174
		
—
		
0
		 7,762
		 5,025¥
14,256

¥
1,961
		
0
		
—
		
0
		
0
		 4,427
		
265
¥
6,388

Nanto Report 2020, the integrated report of Nanto Bank

55

Financial Data

Consolidated Financial Statements

Millions of yen

2019
Sales amount

Gains on sales

Losses on sales

Stocks............................................................................................
¥
18,088
Bonds............................................................................................		246,249
Japanese government bonds.....................................................		154,797
Japanese local government bonds.............................................		 71,004
Japanese corporate bonds.........................................................		 20,447
Others............................................................................................		314,626
Foreign securities included..........................................................		283,325
Total ...............................................................................................
¥
578,964¥
6,402
		 4,807
		 2,355
		 1,986
		465
		 4,719
		 4,077¥
15,929

¥
1,177
		
18
		
16
		
0
		
1
		 7,019
		 5,889¥
8,214

Thousands of U.S. dollars

2020
Sales amount

Gains on sales

Losses on sales

Stocks............................................................................................
$
240,062
Bonds............................................................................................		660,994
Japanese government bonds.....................................................		657,530
Japanese local government bonds.............................................		 1,644
Japanese corporate bonds.........................................................		 1,800
Others............................................................................................		1,846,687
Foreign securities included..........................................................		1,356,804
Total ...............................................................................................
$ 2,747,753$
58,063
		 1,598
		 1,598		—		0		 71,322
		 46,172$
130,993$
18,018
		
0
		
—
		
0
		
0
		 40,678
		 2,434$
58,697(4) Information on money held in trust at March 31, 2020 and 2019 was as follows:
Money held in trust for trading purposes
Thousands of
U.S. dollars

Millions of yen

2020

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

2019

38,00071¥
		

33,000
21

2020

$
		

349,168
652

Other money held in trust for purposes other than investment or holding to maturity
Thousands of
U.S. dollars

Millions of yen

2020

Carrying amount........................................................................................................ ¥Acquisition cost......................................................................................................... 		
Difference.................................................................................................................. 		
Unrealized gain...................................................................................................... 		
Unrealized loss....................................................................................................... 		

2019

1,470
1,470
—
—
—

¥
		
		
		
		

1,070
1,070
—
—
—

2020

$
		
		
		
		

13,507
13,507———

The principal amount in trust with contracts to compensate losses on the principal was as follows:
Thousands of
U.S. dollars

Millions of yen

2020

Money in trust............................................................................................................

¥

2019

6,763

¥

6,446

2020

$

62,142(5) The components of the valuation difference on available-for-sale securities recorded under net assets at March 31, 2020 and 2019 wereas follows:
Thousands of
U.S. dollars

Millions of yen

2020

Valuation difference.................................................................................................... ¥Deferred tax assets or deferred tax liabilities............................................................... 		
Amounts equivalent to difference on available-for-sale securities................................ ¥Noncontrolling interests adjustment........................................................................... 		
Valuation difference on available-for-sale securities.................................................... ¥(6) Securities reclassified for the fiscal years ended March 31, 2020 and 2019
Not applicable.

56

Nanto Report 2020, the integrated report of Nanto Bank

2,499
857
3,357
—
3,357

2019

¥
		
¥
		
¥

51,997(13,309)38,687—
38,687

2020

$
		
$
		
$

22,962
7,874
30,846—30,846

(7) Impairment loss on securities
In the event that the fair value of securities, except trading securities, with available fair values declines significantly from the acquisition cost and the fairvalue is not expected to recover, such securities are stated at fair value and the difference between the fair value and the acquisition cost is recognized
as loss in the period of the decline (“impairment loss”). The fair value is regarded as “significantly declined” when (i) the fair value as of the end of the
fiscal year has declined by more than 50% of the acquisition cost or (ii) the fair value as of the end of the fiscal year has declined by more than 30% but
less than 50% of the acquisition cost and is not expected to recover within one year. The Bank recognized impairment loss of ¥1,126 million ($10,346
thousand) on stocks for the fiscal year ended March 31, 2020. The Bank recognized impairment loss of ¥335 million on stocks for the fiscal year ended
March 31, 2019.
22. 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, fairvalue, unrealized gains (losses) and the method used to calculate fair value by transaction type as of March 31, 2020 and 2019 were as follows.
Note that the contract amount does not represent the market risk exposure of the derivative transactions themselves.
(a) Interest rate related transactions
Millions of yen

2020

Category

Transaction type
Contract amountInterest rate futures
Exchange
Sold.................................................................		
—transactions
Bought............................................................		
—Interest rate options
Sold.................................................................		
—Bought............................................................		
—Over-the-counter Forward rate agreements
Sold.................................................................		
—transactions
Bought............................................................		
—Interest rate swaps
Receive fixed rate/pay floating rate..................
¥
9,123
Receive floating rate/pay fixed rate..................		 10,426
Receive floating rate/pay floating rate...............		
—Interest rate options
Sold.................................................................		
—Bought............................................................		
—Other
Sold.................................................................		
——Bought............................................................		
Total .................................................................................................
¥—

Contract amount due
after one year

Unrealized gains(losses)

Fair value

		
		

—
—

		
		

—
—

		
		

—
—

		
		

—
—

		
		

—
—

		
		

—
—

		
		

—
—

		
		

—
—

		
		

—
—

¥
9,123
		 10,426
		
—

¥
		
		

127
¥
(96) 		
— 		

127
(96)
—

		
		

—
—

		
		

—
—

		
		

—
—

		
		
¥

—
—
—

		
		
¥

—
—
30

		
		
¥

—
—
30

Millions of yen

2019

Category

Transaction type
Contract amountInterest rate futures
Exchange
Sold.................................................................		
—transactions
Bought............................................................		
—Interest rate options
Sold.................................................................		
—Bought............................................................		
—Over-the-counter Forward rate agreements
Sold.................................................................		
—transactions
Bought............................................................		
—Interest rate swaps
Receive fixed rate/pay floating rate..................
¥
2,182
Receive floating rate/pay fixed rate..................		 5,040
Receive floating rate/pay floating rate...............		
—Interest rate options
Sold.................................................................		
—Bought............................................................		
—Other
Sold.................................................................		
——Bought............................................................		
Total .................................................................................................
¥—

Contract amount due
after one year

Unrealized gains(losses)

Fair value

		
		

—
—

		
		

—
—

		
		

—
—

		
		

—
—

		
		

—
—

		
		

—
—

		
		

—
—

		
		

—
—

		
		

—
—

¥
		
		

2,182
3,880
—

¥
		
		

77
¥
(114) 		
— 		

77
(114)
—

		
		

—
—

		
		

—
—

		
		

—
—

		
		
¥

—
—
—

		
		
¥

— 		
— 		
(36)
¥

—
—
(36)

Nanto Report 2020, the integrated report of Nanto Bank

57

Financial Data

Consolidated Financial Statements

Thousands of U.S. dollars

2020

Category

Transaction type
Contract amountInterest rate futures
Exchange
Sold.................................................................		
—transactions
Bought............................................................		
—Interest rate options
Sold.................................................................		
—Bought............................................................		
—Over-the-counter Forward rate agreements
Sold.................................................................		
—transactions
Bought............................................................		
—Interest rate swaps
Receive fixed rate/pay floating rate..................
$
83,827
Receive floating rate/pay fixed rate..................		 95,800
Receive floating rate/pay floating rate...............		
—Interest rate options
Sold.................................................................		
—Bought............................................................		
—Other
Sold.................................................................		
——Bought............................................................		
Total .................................................................................................
$—

Contract amount due
after one year

Unrealized gains(losses)

Fair value

		
		

—
—

		
		

—
—

		
		

—
—

		
		

—
—

		
		

—
—

		
		

—
—

		
		

—
—

		
		

—
—

		
		

—
—

$
83,827
		 95,800
		
—

$
		
		

1,166
$
(882) 		
— 		

1,166
(882)
—

		
		

—
—

		
		

—
—

		
		

—
—

		
		
$

—
—
—

		
		
$

—
—
275

		
		
$

—
—
275

Notes: 1. The above transactions are measured at fair value, and unrealized gains (losses), except as in Note 3, are recognized in the consolidated statements of income.
2. The fair values of exchange transactions are based on the closing prices on the Tokyo Financial Exchange Inc., etc.
		 The fair values of over-the-counter transactions are based on the discounted cash flow method, option pricing model, etc.
3.	As of March 31, 2020 and 2019, “Receive floating rate/pay fixed rate” of interest rate swaps included the contract amount of ¥1,303 million ($11,972 thousand) and ¥2,858 million, fair value of¥(46) million ($(422) thousand) and ¥(86) million and unrealized gains (losses) of ¥(46) million ($(422) thousand) and ¥(86) million, respectively, for which the application of hedge accounting wascancelled since the requirements for hedge accounting were not met. Unrealized gains (losses) on “Receive floating rate/pay fixed rate” of ¥(71) million ($(652) thousand) and ¥(100) million atMarch 31, 2020 and 2019, respectively, were deferred over the hedge period due to the cancellation.

(b) Currency related transactions
Millions of yen

2020

Category

Transaction type
Contract amountCurrency futures
Exchange
Sold.................................................................		
—transactions
Bought............................................................		
—Currency options
Sold.................................................................		
—Bought............................................................		
—¥ 444,048
Over-the-counter Currency swaps..................................................
Forward foreign exchange contracts
transactions
Sold.................................................................		 20,702
Bought............................................................		 24,994
Currency options
Sold.................................................................		
—Bought............................................................		
—Other
Sold.................................................................		
——Bought............................................................		
Total .................................................................................................
¥—

58

Nanto Report 2020, the integrated report of Nanto Bank

Contract amount due
after one year				

Unrealized gains(losses)

Fair value

—
—

		
		

—
—

		
		

—
—

		
—
		
—
¥ 337,581

		
		
¥

—
—
263

		
		
¥

—
—
263

		
		

9,576
7,889

		
		

(472) 		588 		

(472)
588

		
		

—
—

		
		

—
—

		
		

—
—

		
		
¥

—
—
—

		
		
¥

—
—
379

		
		
¥

—
—
379

Millions of yen

2019

Category

Transaction type
Contract amountCurrency futures
Exchange
Sold.................................................................		
—transactions
Bought............................................................		
—Currency options
Sold.................................................................		
—Bought............................................................		
—¥ 429,749
Over-the-counter Currency swaps..................................................
Forward foreign exchange contracts
transactions
Sold.................................................................		 8,084
Bought............................................................		 1,897
Currency options
Sold.................................................................		
—Bought............................................................		
—Other
Sold.................................................................		
——Bought............................................................		
Total .................................................................................................
¥—

Contract amount due
after one year				

Unrealized gains(losses)

Fair value

—
—

		
		

—
—

		
		

—
—

		
—
		
—
¥ 292,038

		
		
¥

—
—
295

		
		
¥

—
—
295

		
		

566
—

		
		

(44) 		
19 		

(44)
19

		
		

—
—

		
		

—
—

		
		

—
—

		
		
¥

—
—
—

		
		
¥

—
—
270

		
		
¥

—
—
270

Thousands of U.S. dollars

2020

Category

Transaction type
Contract amountCurrency futures
Exchange
Sold.................................................................		
—transactions
Bought............................................................		
—Currency options
Sold.................................................................		
—Bought............................................................		
—$ 4,080,198
Over-the-counter Currency swaps..................................................
Forward foreign exchange contracts
transactions
Sold.................................................................		190,223
Bought............................................................		229,660
Currency options
Sold.................................................................		
—Bought............................................................		
—Other
Sold.................................................................		
——Bought............................................................		
Total .................................................................................................
$—

Contract amount due
after one year				

Unrealized gains(losses)

Fair value

—
—

		
		

—
—

		
		

—
—

		
—
		
—
$ 3,101,911

		
		
$

—
—
2,416

		
		
$

—
—
2,416

		 87,990
		 72,489

		 (4,337) 		 (4,337)
		 5,402 		 5,402

		
		

—
—

		
		

—
—

		
		

—
—

		
		
$

—
—
—

		
		
$

—
—
3,482

		
		
$

—
—
3,482

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.

(c) Stock related transactions
None(d) Bond related transactions
None(e) Commodity related transactions
None(f) Credit derivative transactions
None

Nanto Report 2020, the integrated report of Nanto Bank

59

Financial Data

Consolidated Financial Statements(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
and the method used to calculate fair value by transaction type and by hedge accounting method as of March 31, 2020 and 2019 were as follows. Notethat the contract amount does not represent the market risk exposure of the derivative transactions themselves.
(a) Interest rate related transactions
Millions of yen

2020

Hedge accounting method
Fundamental method

Exceptional accounting
method for interest rate
swaps
Total

Transaction typeInterest rate swaps:
Receive fixed rate/pay
floating rate
Receive floating rate/pay
fixed rate
Interest rate futures
Interest rate options
Other
Interest rate swaps
Receive fixed rate/pay
floating rate
Receive floating rate/pay
fixed rate

Major hedged items
Interest bearing
assets and liabilities
such as loans anddeposits

Contract amount

		
¥

—
4,807

Contract amount due
after one year

		
¥

—
4,218

Fair value

		

—

¥

(172)

		
		
		

—
—
—

		
		
		

—
—
—

		
		
		

—
—
—

		

—

		

—

		

—

		

—

		

—

		

—

¥

—

¥

—

¥

(172)

—

—

Millions of yen

2019

Hedge accounting method
Fundamental method

Exceptional accounting
method for interest rate
swaps
Total

Transaction typeInterest rate swaps:
Receive fixed rate/pay
floating rate
Receive floating rate/pay
fixed rate
Interest rate futures
Interest rate options
Other
Interest rate swaps
Receive fixed rate/pay
floating rate
Receive floating rate/pay
fixed rate

Major hedged items
Interest bearing
assets and liabilities
such as loans anddeposits

Contract amount

		
¥

—
5,505

Contract amount due
after one year

		
¥

—
5,072

Fair value

		

—

¥

(221)

		
		
		

—
—
—

		
		
		

—
—
—

		
		
		

—
—
—

		

—

		

—

		

—

		

—

		

—

		

—

¥

—

¥

—

¥

(221)

—

—

Thousands of U.S. dollars

2020

Hedge accounting method
Fundamental method

Exceptional accounting
method for interest rate
swaps
Total

Transaction typeInterest rate swaps:
Receive fixed rate/pay
floating rate
Receive floating rate/pay
fixed rate
Interest rate futures
Interest rate options
Other
Interest rate swaps
Receive fixed rate/pay
floating rate
Receive floating rate/pay
fixed rate

Major hedged items
Interest bearing
assets and liabilities
such as loans anddeposits

Contract amount		$—
44,169Contract amount due
after one year		$—38,757

Fair value		$—(1,580)

		
		
		

—
—
—

		
		
		

—
—
—

		
		
		

—
—
—

		

—

		

—

		

—

		

—

		

—

		

$

—

$

—

$

—

—

—
(1,580)Notes: 1.	Gain/loss on the above contracts is deferred until maturity of the hedged items under the fundamental method in accordance with the “Treatment for Accounting and Auditing of Application of
Accounting Standard for Financial Instruments in the Banking Industry” (JICPA Industry Audit Committee Report No. 24, February 13, 2002).
2. The fair values of exchange transactions are based on the closing prices on 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.

60

Nanto Report 2020, the integrated report of Nanto Bank(b) Currency related transactions
None(c) Stock related transactions
None(d) Bond related transactions
None
23. PROJECTED BENEFIT OBLIGATIONS(1) Outline of employees’ retirement allowance
The Bank provides a non-contributory unfunded lump-sum retirement allowance plan, a funded defined benefit pension plan, and a funded defined
contribution pension plan for employees.
On April 1, 2018, the Bank transferred its defined benefit pension plans to risk sharing pension plans and defined contribution pension plansclassified as a defined contribution plan provided in Paragraph 4 of “Accounting Standard for Retirement Benefits” (ASBJ Statement No. 26, December
16, 2016). In addition, a plan similar to a cash balance plan has been introduced to some of the employees subject to the risk sharing pension plans.
In addition to the amounts that are equivalent to standard contributions, the Bank makes contributions to risk sharing pension plans that arecommensurate with risks as prescribed in the plan terms. Benefits from the risk sharing pension plans increase or decrease each fiscal year based on
the assets of the pension plan.
Under the plan similar to a cash balance plan, a virtual individual account balance corresponding to the funded amounts and source of pension
funds will be set up for each participant, and after retirement, interest principally based on market interest rate trends will be credited to the balance.
Twelve consolidated subsidiaries have non-contributory unfunded lump-sum retirement allowance plans as defined benefit plans and apply thesimplified method in the calculation of their liability for retirement benefits and retirement benefit costs using the method in which the necessary amounts
to be paid for retirement benefits on a voluntary basis is regarded as the retirement benefit obligations.
Certain consolidated subsidiaries participate in the Smaller Enterprise Retirement Allowance Mutual Aid Scheme (the “SERAMA Scheme”).
(2) Defined benefit plans(a) Movement in projected benefit obligations
Thousands of
U.S. dollars

Millions of yen

2020

Balance at the beginning of the fiscal year................................................................. ¥Effects from transition to risk sharing pension plans............................................... 		
Balance at the beginning of the fiscal year reflecting transition to risk sharing pension plans.......		
Service cost........................................................................................................... 		
Interest cost........................................................................................................... 		
Actuarial (gain) loss................................................................................................ 		
Benefits paid.......................................................................................................... 		
Past service cost................................................................................................... 		
Increase due to new consolidation......................................................................... 		
Balance at the end of the fiscal year........................................................................... ¥2019

11,324—
11,324
671
77
325
(603)
232
—
12,028

¥
		
		
		
		
		
		
		
		
¥

2020

65,008(53,679)
11,329
719
75
(200)
(652)
—
52
11,324

$
		
		
		
		
		
		
		
		
$

104,052—
104,052
6,165
707
2,986
(5,540)2,131—
110,520

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

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

Millions of yen

2020

Balance at the beginning of the fiscal year................................................................. ¥Effects from transition to risk sharing pension plans............................................... 		
Transfer to the funded assets under the SERAMA Scheme.................................... 		
Balance at the beginning of the fiscal year reflecting transition		
to risk sharing pension plans......................................................................................
Expected return on plan assets.................................................................................. 		
Actuarial gain (loss).................................................................................................... 		
Contributions paid by the employer........................................................................... 		
Benefits paid.............................................................................................................. 		
Balance at the end of the fiscal year........................................................................... ¥

2019

2020

—
—
—

¥
		
		

43,072(42,913)
(158)

$
		
		

—
—
—

—

		

—

		

—

—
—
—
—
—

		
		
		
		
¥

—
—
—
—
—

		
		
		
		
$

—
—
—
—
—

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

Nanto Report 2020, the integrated report of Nanto Bank

61

Financial Data

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

Millions of yen

2020

2019

2020

Funded projected benefit obligations......................................................................... ¥Plan assets................................................................................................................ 		
Funded assets under the SERAMA Scheme.............................................................. 		
		
Unfunded projected benefit obligations...................................................................... 		
Net liability for retirement benefits recorded on the consolidated balance sheet.......... ¥

380
—
(185)
195
11,647
11,842

¥
		
		
		
		
¥

342
—
(171)
170
10,981
11,152

$
		
		
		
		
$

3,491
—
(1,699)1,791
107,020
108,811

Liability for retirement benefits.................................................................................... ¥Asset for retirement benefits...................................................................................... 		
Net liability for retirement benefits recorded on the consolidated balance sheet.......... ¥11,842—
11,842¥
		¥

11,152—
11,152$
		
$108,811—
108,812

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

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

Millions of yen

2020

Service cost............................................................................................................... ¥Interest cost............................................................................................................... 		
Expected return on plan assets.................................................................................. 		
Net actuarial loss amortization................................................................................... 		
Amortization of past service cost............................................................................... 		
Total retirement benefit costs..................................................................................... ¥

2019

671
77
—
181
232
1,163

¥
		
		
		
		
¥

719
75
—
222
—
1,017

2020

$
		
		
		
		
$

6,165
707
—
1,663
2,131
10,686

Note: Retirement benefit costs of consolidated subsidiaries which have applied the simplified method are included in “Service cost.”
	In the year ended March 31, 2019, the Bank recorded other income of ¥4,784 million following the transfer of defined benefit pension plans to risk sharing pension plans and defined contribution
pension plans.

(e) Adjustments for retirement benefits
The components of adjustments for retirement benefits (before tax effect) were as follows:
Thousands of
U.S. dollars

Millions of yen

2020

Actuarial gain (loss)....................................................................................................
Total..........................................................................................................................

¥
¥

2019

(143)
(143)

¥
¥

5,039
5,039

2020

$
$

(1,313)(1,313)

Note:	The above actuarial gain (loss) at March 31, 2019 includes reclassification adjustments of ¥4,616 million following the transition to risk sharing pension plans and defined contribution pension
plans.

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

Millions of yen

2020

Unrecognized actuarial gain (loss)..............................................................................
Total..........................................................................................................................

¥¥(1,147)(1,147)2019¥¥(1,003)(1,003)2020$$(10,539)(10,539)(g) Actuarial assumptions
The principal actuarial assumptions for the fiscal years ended March 31, 2020 and 2019 were as follows:
Discount rate.............................................................................................................................................
Long-term expected rate of return.............................................................................................................
Estimated rate of increase in salary............................................................................................................

2020

2019

0.70%
—%
2.50%

0.70%
—%
3.90%

(3) Defined contribution plans(a) Retirement benefit costs for defined contribution plans
The Bank’s required contributions to the defined contribution plans were ¥629 million in the previous consolidated fiscal year and ¥648 million ($5,954
thousand) in the current consolidated fiscal year.
(b) The amounts equivalent to contributions commensurate with risks
The contributions that are commensurate with risks required to be contributed from the next consolidated fiscal year onwards are ¥1,465 million($13,461 thousand), and the number of years remaining for contributions equivalent to the contributions that are commensurate with risks is nine anda half years.

62

Nanto Report 2020, the integrated report of Nanto Bank(c) Other matters
The total amounts equivalent to special contributions included in the contributions prescribed in the agreement at the transition to a risk sharing
pension plan was ¥1,364 million, and the amounts equivalent to special contributions of ¥467 million ($4,291 thousand) at March 31, 2020 wasrecorded under other liabilities.
The number of years remaining for contributions equivalent to special contributions is one year.
24. STOCK OPTIONS(a) Items and amounts expensed related to stock options
Thousands of
U.S. dollars

Millions of yen

2020

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

¥

2019

18

¥

2020

19

$

165

(b) Stock options outstanding at March 31, 2020
a. Outline of stock options
Beneficiaries qualifying for stock option rights are entitled to acquire shares of common stock upon the exercise of their rights. The following tablesummarizes the number of shares upon exercise of the stock option rights granted by the Bank outstanding at March 31, 2020:

Stock options

Persons granted

Number ofoptions granted(Note)

2010
Stock Options

15 directorsof the Bank

2011
Stock Options

Date of
grant

Exercise
price

ExerciseperiodVesting
conditions

Target ofservice period

Common stock
9,440 shares

July 29, 2010¥1($0.00)From July 30, 2010
to July 29, 2040

Not definedNot defined

14 directorsof the Bank

Common stock
10,940 shares

July 29, 2011¥1($0.00)From July 30, 2011
to July 29, 2041

Not definedNot defined2012
Stock Options

15 directorsof the Bank

Common stock
13,620 shares

July 27, 2012¥1($0.00)From July 28, 2012
to July 27, 2042

Not definedNot defined2013
Stock Options

15 directorsof the Bank

Common stock
11,950 shares

July 26, 2013¥1($0.00)From July 27, 2013
to July 26, 2043

Not definedNot defined2014
Stock Options

14 directors(excluding
outside directors)of the Bank

Common stock
9,970 shares

July 25, 2014¥1($0.00)From July 26, 2014
to July 25, 2044

Not definedNot defined2015
Stock Options

13 directors(excluding
outside directors)of the Bank

Common stock
8,400 shares

July 24, 2015

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

Not definedNot defined2016
Stock Options

7 directors(excluding
outside directors)of the Bank

Common stock
6,560 shares

July 29, 2016¥1($0.00)From July 30, 2016
to July 29, 2046

Not definedNot defined2017
Stock Options

7 directors(excluding
outside directors)of the Bank

Common stock
6,910 shares

July 28, 2017¥1($0.00)From July 29, 2017
to July 28, 2047

Not definedNot defined2018
Stock Options

7 directors(excluding
outside directors)of the Bank

Common stock
7,800 shares

July 27, 2018¥1($0.00)From July 28, 2018
to July 27, 2048

Not definedNot defined2019
Stock Options

6 directors(excluding
outside directors)of the Bank

Common stock
10,170 shares

July 26, 2019¥1($0.00)From July 27, 2019
to July 26, 2049

Not definedNot definedNote: The number of stock options has been converted to the number of shares after the one-for-ten reverse stock split implemented on October 1, 2016.

Nanto Report 2020, the integrated report of Nanto Bank

63

Financial Data

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

2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Stock Options Stock Options Stock Options Stock Options Stock Options Stock Options Stock Options Stock Options Stock Options Stock Options

Nonvested
March 31, 2019 – Outstanding......
Granted....................................
Forfeited...................................
Vested......................................
March 31, 2020 – Outstanding......
VestedMarch 31, 2019 – Outstanding......
Vested......................................
Exercised.................................
Forfeited...................................
March 31, 2020 – Outstanding......

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

1,720
—
—
1,720
—

—
10,170
—
7,627
2,543

1,520
—
—
—
1,520

1,950
—
—
—
1,950

3,000
—
710
—
2,290

2,660
—
630
—
2,030

2,380
—
540
—
1,840

3,310
—
1,280
—
2,030

3,970
—
1,540
—
2,430

5,080
—
1,830
—
3,250

5,160
1,720
2,300
—
4,580

—
7,627
—
—
7,627

Note: The number of stock options has been converted to the number of shares after the one-for-ten reverse stock split implemented on October 1, 2016.

2) Price information
Yen

2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Stock Options Stock Options Stock Options Stock Options Stock Options Stock Options Stock Options Stock Options Stock Options Stock Options

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

1 ¥
— 		
4,410 		1 ¥— 		3,860 		1 ¥2,338 		3,030 		1 ¥2,338 		3,720 		1 ¥2,338 		4,010 		1 ¥2,338 		3,970 		1 ¥2,338 		3,660 		1 ¥2,338 		2,861 		1 ¥2,338 		2,663 		

1
—
1,787

U.S. dollars

2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Stock Options Stock Options Stock Options Stock Options Stock Options Stock Options Stock Options Stock Options Stock Options Stock Options

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

0.00 $— 		40.52 		0.00 $— 		35.46 		0.00 $
21.48 		27.84 		0.00 $
21.48 		34.18 		0.00 $
21.48 		36.84 		0.00 $
21.48 		36.47 		0.00 $
21.48 		33.63 		0.00 $
21.48 		26.28 		0.00 $
21.48 		24.46 		

0.00
—
16.42

Note: “Average stock price at exercise date” and “Fair value price at grant date” have been calculated after the one-for-ten reverse stock split implemented on October 1, 2016.

(c) Assumptions used to measure the fair value of stock options
The assumptions used to measure the fair value of 2019 Stock Options granted in the fiscal year ended March 31, 2020 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: 27.26% calculated using the market price of the Bank’s stock from December 2009 to July 2019.
2.	Estimated remaining outstanding period: 9.6 years, which was the average remaining tenure of directors at the date of issue, determined by
the average time from appointment to retirement and from appointment to the date of issue.
3. Estimated dividend: ¥70 per share, which was calculated based on the actual amount of dividends for the fiscal year ended March 31, 2019.
4. Risk-free interest rate: (0.17) %, 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.

64

Nanto Report 2020, the integrated report of Nanto Bank

25. INCOME TAXESThe Group is subject to a number of taxes based on income, including corporation tax, inhabitants tax and enterprise tax, which, in the aggregate,
indicate a statutory tax rate in Japan of approximately 30.4 % for the fiscal years ended March 31, 2020 and 2019.
(1) Significant components of deferred tax assets and liabilities as of March 31, 2020 and 2019 were as follows:
Thousands of
U.S. dollars

Millions of yen

2020

Deferred tax assets:
Excess reserve for possible loan losses.................................................................. ¥Liability for retirement benefits................................................................................ 		
Depreciation.......................................................................................................... 		
Write-down of land................................................................................................ 		
Loss on impairment of fixed assets........................................................................ 		
Valuation loss on securities.................................................................................... 		
Valuation difference on available-for-sale securities................................................. 		
Tax loss carryforwards........................................................................................... 		
Net deferred loss on hedging instruments.............................................................. 		
Other..................................................................................................................... 		
Subtotal deferred tax assets:.................................................................................. 		
Valuation allowance pertaining to the tax loss carryforwards (Note 3)..................... 		
Valuation allowance pertaining to the total of the deductible temporary		difference, etc........................................................................................................
Subtotal valuation allowance (Note 2)......................................................................... 		
Total deferred tax assets......................................................................................... 		
Deferred tax liabilities:.............................................................................................
Valuation difference on available-for-sale securities................................................. 		
Other..................................................................................................................... 		
Total deferred tax liabilities:.................................................................................... 		
Net deferred tax liabilities (Note 1)......................................................................... ¥

2019

2020

7,020
3,609
812
872
1,644
2,792
857
296
71
2,577
20,554
(293)

¥
		
		
		
		
		
		
		
		
		
		
		

5,892
3,398
819
872
1,258
2,967
—
133
91
1,937
17,371
(133)

$
		
		
		
		
		
		
		
		
		
		
		

64,50433,161
7,461
8,012
15,10625,654
7,874
2,719
652
23,679188,863(2,692)(7,595)

		(6,908)

		

(69,787)(7,889)12,664				

(7,042)
10,329				

(72,489)
116,364

—
(68)
(68)
12,596						
¥(13,309)(69)(13,378)(3,049)

		
		
		
$

—
(624)
(624)
115,740

Note 1: Net deferred tax assets (liabilities) as of March 31, 2020 and 2019 are included in the following accounts in the consolidated balance sheets:
Thousands of
U.S. dollars

Millions of yen

2020

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

12,611
15

2019

¥
		

2020

1,311
4,360

$
		

115,877
137

Note 2: The valuation allowance increased by ¥847 million ($7,782 thousands) in the current fiscal year. The major reasons for this increase were the increase in the valuation allowance pertaining to thereserve for possible loan losses by ¥301 million ($2,765 thousands) and the increase in the valuation allowance concerning impairment loss by ¥405 million ($3,721 thousands).
Note 3: Amount of tax loss carryforwards and their deferred tax assets by the carryforward periods

Current consolidated fiscal year (March 31, 2020)
Millions of yen

One year or lessTax loss carryforwards (*)¥
Valuation allowance		Deferred tax assets		After one year
After two years
After three years
through two years through three years through four years

—
¥
— 		
— 		

—
—
—

¥
		
		

—
—
—

¥
		
		

2
—
2

After four years
through five years

¥
		
		

—
—
—

After five years

¥
		
		

293
¥
(293) 		
— 		

Total

296
(293)
2

(*) The tax loss carryforwards are the amounts multiplied by the statutory effective tax rate.

Previous consolidated fiscal year (March 31, 2019)
Millions of yen

One year or lessTax loss carryforwards (*)¥
Valuation allowance		Deferred tax assets		After one year
After two years
After three years
through two years through three years through four years

—
¥
— 		
— 		

—
—
—

¥
		
		

3
(3)
—

¥
		
		

3
(3)
—

After four years
through five years

¥
		
		

5
(5)
—

After five years

¥
		
		

121
¥
(121) 		
0 		

Total

133
(133)
0

(*) The tax loss carryforwards are the amounts multiplied by the statutory effective tax rate.

Current consolidated fiscal year (March 31, 2020)
Thousands of U.S. dollars

One year or lessTax loss carryforwards (*)$
Valuation allowance		Deferred tax assets		After one year
After two years
After three years
through two years through three years through four years

—
$
— 		
— 		

—
—
—

$
		
		

—
—
—

$
		
		

18
—
18

After four years
through five years

$
		
		

—
—
—

After five years

$
		
		

2,692
$
(2,692) 		
— 		

Total

2,719
(2,692)18(*) The tax loss carryforwards are the amounts multiplied by the statutory effective tax rate.

Nanto Report 2020, the integrated report of Nanto Bank

65

Financial Data

Consolidated Financial Statements(2) The following table summarizes the significant differences between the statutory tax rate and the effective tax rate for financial statement purposes
for the fiscal years ended March 31, 2020 and 2019:
Statutory tax rate.......................................................................................................................................
Valuation allowance................................................................................................................................
Non-deductible expenses......................................................................................................................
Non-taxable income...............................................................................................................................
Inhabitants tax on per capita basis, etc..................................................................................................
Other.....................................................................................................................................................
Effective tax rate........................................................................................................................................

2020

2019

30.4%
14.4%
0.8%
(2.4)%
1.3%
1.2%
45.8%

30.4%
(2.7)%
0.3%(1.0)%
0.5%
0.2%
27.7%

26. BUSINESS COMBINATIONSBusiness combinations under common cotrol, etc.
(Company split)
At the Board of Directors’ meeting held on June 17, 2019, the Bank resolved to succeed a part of its subsidiary management operations to Nanto
Estate Co., Ltd. (now “Nanto Management Service Co., Ltd.”), a wholly owned subsidiary of the Bank, by absorption-type company split, subject
to approval from the relevant authorities and concluded the absorption-type split agreement on the same date. As a consequence of this, the Bank
effected the company split on September 2, 2019.
(1) Outline of the transaction1) Name of the business subject to the company split and the content of that business
Name of the business: subsidiary management operations of the Bank
Content of the business: guidance, support and control operations pertaining to the operation of the subsidiaries
2) Date of business combination
September 2, 20193) Legal form of the business combination
An absorption-type split in which the Bank became the company splitting in the absorption-type split and Nanto Estate Co., Ltd. (a consolidated
subsidiary of the Bank) became the company succeeding in the absorption-type split
4) Name of the company after the business combination
Nanto Estate Co., Ltd.
Note that the trade name of this company was changed to “Nanto Management Service Co., Ltd.” on September 2, 2019.
5) Other matters concerning the outline of the transaction
The Bank carried out the transaction for the purpose of increasing the efficiency of the financial services provided by the whole Group and contributing
to the development of the local community and economy by converting Nanto Estate Co., Ltd. (now Nanto Management Service Co., Ltd.) into anintermediate holding company and centralizing management guidance operations such as the support for formulating the business plans and common
operations of its subsidiaries (shared services) in the intermediate holding company.
(2) Outline of the implemented accounting treatment
The Bank treated the transaction as a business combination under common control based on the “Accounting Standard for Business Combinations”
and the “Implementation Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures.”
27. SEGMENT AND RELATED INFORMATION(1) Overview of the reportable segments
The Bank’s reportable segments are determined on the basis that separate financial information for such segments is available and examined
periodically by the Board of Directors to make decisions regarding the allocation of management resources and assess the business performance ofthe segments within the Group. The Group’s main operations are banking services. The Bank also provides securities services and operates credit
guarantee services, leasing services and credit card services. The Group has divided its business operations into the two reportable segments of“Banking” and “Leasing.”
From the year ended March 31, 2019, the name of the reportable segment “Banking and Securities” has been changed to “Banking.” Thischange only concerns the segment name and has no effect on segment information.
(2) Basis of measurement for reported segment profit (loss), segment assets, segment liabilities and other material items
The accounting methods used for reportable business segments are presented in accordance with Note 2, “SUMMARY OF SIGNIFICANTACCOUNTING POLICIES.” The reportable segment profit figures are based on operating profit. Income arising from intersegment transactions isbased on arm’s length prices.

66

Nanto Report 2020, the integrated report of Nanto Bank(3) Information about reportable segment profit (loss), segment assets, segment liabilities and other material items
Segment information for the fiscal years ended March 31, 2020 and 2019 is summarized as follows:
Millions of yen

2020
Reportable segments
Banking

Leasing

Ordinary income:Outside customers.......................................... ¥ 70,972 ¥Intersegment income....................................... 		
1,103 		Total............................................................. 		 72,075 		
Segment profit..................................................... 		
7,446 		Segment assets................................................... 		5,653,885 		
Segment liabilities................................................ 		5,409,452 		
Others:Depreciation.................................................... 		
3,485 		Interest income................................................ 		 44,681 		Interest expense.............................................. 		
3,129 		Extraordinary gain............................................ 		
21 		
Extraordinary loss............................................ 		
1,862 		Tax expense.................................................... 		
2,282 		4,121 		Increase in tangible and intangible fixed assets....... 		

Total

Other

7,266 ¥ 78,238 ¥873 		
1,976 		8,139 		 80,215 		
220 		
7,666 		37,711 		5,691,597 		
33,246 		5,442,698 		
122 		
5 		
85 		
— 		
0 		
69 		
57 		

3,608 		44,687 		
3,214 		21 		1,862 		2,351 		4,179 		TotalAdjustment

Consolidated

2,757 ¥ 80,996 ¥70 ¥ 81,066
2,112 		4,089 		 (4,089) 		
—4,869 		 85,085 		 (4,018) 		 81,066
661 		
8,328 		(494) 		7,83329,906 		5,721,504 		 (50,574) 		5,670,929
11,509 		5,454,208 		 (38,333) 		5,415,875
134 		
39 		
7 		
— 		
121 		
341 		
67 		3,742 		44,727 		
3,222 		21 		1,983 		2,692 		4,246 		46 		(568) 		(107) 		— 		(0) 		
(0) 		
(80) 		

3,78844,158
3,114
21
1,982
2,692
4,166

Notes: 1.	Ordinary income (“Total income” less extraordinary gain included in “Other income” in the consolidated statements of income) is presented in place of net sales of operating companies of otherindustry groups.
2.	“Other” includes business segments which are not included in the reportable segments and comprises credit guarantees, real estate leasing and management, software development, credit
cards and securities.
3. Adjustments are as below:		 (1) Adjustment of ordinary income for outside customers of ¥70 million is mainly the recovery of written-off claims included in “Others.”		 (2) Adjustment of segment profit of negative ¥494 million is the elimination of intersegment transactions.
		 (3) Adjustment of segment assets of negative ¥50,574 million is the elimination of intersegment transactions.
		 (4) Adjustment of segment liabilities of negative ¥38,333 million is the elimination of intersegment transactions and the adjustment of liability for retirement benefits.
		 (5) Adjustment of depreciation of ¥46 million is the elimination of intersegment transactions.
		 (6) Adjustment of interest income of negative ¥568 million is the elimination of intersegment transactions.
		 (7) Adjustment of interest expense of negative ¥107 million is the elimination of intersegment transactions.
		 (8) Adjustment of extraordinary loss of ¥0 million is the elimination of intersegment transactions.
		 (9) Adjustment of tax expense of ¥0 million is the elimination of intersegment transactions.
		 (10) Adjustment of increase in tangible and intangible fixed assets of negative ¥80 million is the elimination of intersegment transactions.
4.	Segment profit is reconciled to ordinary profit, which represents ordinary income less ordinary expenses. Ordinary expenses represent “Total expenses” less extraordinary loss included in “Other
expenses” in the consolidated statements of income. Therefore, consolidated segment profit, which shows ordinary profit, is reconciled to “Income before income taxes” through the addition/
deduction of extraordinary gain/loss, net.
Millions of yen

2019
Reportable segments
Banking

Ordinary income:Outside customers.......................................... ¥ 72,539 ¥Intersegment income....................................... 		
1,048 		Total............................................................. 		 73,587 		Segment profit..................................................... 		 10,258 		
Segment assets................................................... 		5,782,222 		Segment liabilities................................................ 		5,503,239 		
Others:Depreciation.................................................... 		
3,238 		Interest income................................................ 		 45,149 		
Interest expense.............................................. 		
3,939 		Extraordinary gain............................................ 		
4,806 		Extraordinary loss............................................ 		
70 		
Tax expense.................................................... 		
3,850 		3,884 		Increase in tangible and intangible fixed assets....... 		

Leasing

Total

6,525 ¥ 79,065 ¥
857 		
1,905 		7,382 		 80,970 		
270 		 10,529 		
31,713 		5,813,935 		
27,294 		5,530,534 		
128 		
4 		
89 		
— 		
0 		
73 		
135 		

3,366 		45,153 		
4,028 		4,806 		70 		3,924 		4,019 		

Other

Total

Adjustment

Consolidated

2,429 ¥ 81,495 ¥86 ¥ 81,581
2,093 		3,998 		(3,998) 		
—4,522 		 85,493 		
(3,911) 		 81,581
729 		 11,259 		(535) 		 10,723
24,231 		5,838,167 		 (39,296) 		5,798,870
11,119 		5,541,653 		 (32,635) 		5,509,018
125 		
39 		
8 		
— 		
18 		
354 		
230 		

3,492 		45,193 		
4,036 		4,806 		89 		4,278 		4,250 		89 		(512) 		(106) 		
27 		
— 		
14 		
(29) 		

3,58244,680
3,930
4,833
89
4,293
4,220

Notes: 1.	Ordinary income (“Total income” less extraordinary gain included in “Other income” in the consolidated statements of income) is presented in place of net sales of operating companies of otherindustry groups.
2.	“Other” includes business segments which are not included in the reportable segments and comprises credit guarantees, real estate leasing and management, software development, credit
cards and securities.
3. Adjustments are as below:		 (1) Adjustment of ordinary income for outside customers of ¥86 million is mainly the recovery of written-off claims included in “Others.”		 (2) Adjustment of segment profit of negative ¥535 million is the elimination of intersegment transactions.
		 (3) Adjustment of segment assets of negative ¥39,296 million is the elimination of intersegment transactions.
		 (4) Adjustment of segment liabilities of negative ¥32,635 million is the elimination of intersegment transactions and the adjustment of liability for retirement benefits.
		 (5) Adjustment of depreciation of ¥89 million is the elimination of intersegment transactions.
		 (6) Adjustment of interest income of negative ¥512 million is the elimination of intersegment transactions.
		 (7) Adjustment of interest expense of negative ¥106 million is the elimination of intersegment transactions.
		 (8) Adjustment of extraordinary gain of ¥27 million is due to a business combination by acquisition.
		 (9) Adjustment of tax expense of ¥14 million is the elimination of intersegment transactions.
		 (10) Adjustment of increase in tangible and intangible fixed assets of negative ¥29 million is the elimination of intersegment transactions.
4.	Segment profit is reconciled to ordinary profit, which represents ordinary income less ordinary expenses. Ordinary expenses represent “Total expenses” less extraordinary loss included in “Other
expenses” in the consolidated statements of income. Therefore, consolidated segment profit, which shows ordinary profit, is reconciled to “Income before income taxes” through the addition/
deduction of extraordinary gain/loss, net.

Nanto Report 2020, the integrated report of Nanto Bank

67

Financial Data

Consolidated Financial Statements

Thousands of U.S. dollars

2020
Reportable segments
Banking

Leasing

Total

Other

Total

Adjustment

Consolidated

Ordinary income:Outside customers.......................................... $ 652,136 $ 66,764 $ 718,901 $ 25,333 $ 744,243 $643 $ 744,886
Intersegment income....................................... 		 10,135 		
8,021 		 18,156 		 19,406 		 37,572 		 (37,572) 		
—Total............................................................. 		 662,271 		 74,786 		 737,066 		 44,739 		 781,815 		 (36,919) 		 744,886
Segment profit..................................................... 		 68,418 		
2,021 		 70,440 		
6,073 		 76,523 		 (4,539) 		 71,974
Segment assets................................................... 		51,951,529 		 346,512 		52,298,052 		 274,795 52,572,856 		 (464,706) 		52,108,141
Segment liabilities................................................ 		49,705,522 		 305,485 		50,011,007 		 105,752 50,116,769 		 (352,228) 		49,764,541
Others:Depreciation.................................................... 		 32,022 		
1,121 		 33,152 		
1,231 		 34,383 		
422 		 34,806
Interest income................................................ 		 410,557 		
45 		 410,612 		
358 		 410,980 		 (5,219) 		 405,752
Interest expense.............................................. 		 28,751 		
781 		 29,532 		
64 		 29,605 		(983) 		 28,613
Extraordinary gain............................................ 		
192 		
— 		192 		
— 		192 		
— 		
192
Extraordinary loss............................................ 		 17,109 		
0 		 17,109 		
1,111 		 18,221 		(0) 		 18,211
Tax expense.................................................... 		 20,968 		
634 		 21,602 		
3,133 		 24,735 		(0) 		 24,735
Increase in tangible
		 37,866 		
523 		 38,399 		
615 		 39,014 		(735) 		 38,279
and intangible fixed assets...............................
Notes: 1.	Ordinary income (“Total income” less extraordinary gain included in “Other income” in the consolidated statements of income) is presented in place of net sales of operating companies of otherindustry groups.
2.	“Other” includes business segments which are not included in the reportable segments and comprises credit guarantees, real estate leasing and management, software development, credit
cards and securities.
3. Adjustments are as below:		 (1) Adjustment of ordinary income for outside customers of $643 thousand is mainly the recovery of written-off claims included in “Others.”		 (2) Adjustment of segment profit of negative $4,539 thousand is the elimination of intersegment transactions.
		 (3) Adjustment of segment assets of negative $464,706 thousand is the elimination of intersegment transactions.
		 (4) Adjustment of segment liabilities of negative $352,228 thousand million is the elimination of intersegment transactions and the adjustment of liability for retirement benefits.
		 (5) Adjustment of depreciation of $422 thousand is the elimination of intersegment transactions.
		 (6) Adjustment of interest income of negative $5,219 thousand is the elimination of intersegment transactions.
		 (7) Adjustment of interest expense of negative $983 thousand is the elimination of intersegment transactions.
		 (8) Adjustment of extraordinary loss of $0 thousand is the elimination of intersegment transactions.
		 (9) Adjustment of tax expense of $0 thousand is the elimination of intersegment transactions.
		 (10) Adjustment of increase in tangible and intangible fixed assets of negative $735 thousand is the elimination of intersegment transactions.
4.	Segment profit is reconciled to ordinary profit, which represents ordinary income less ordinary expenses. Ordinary expenses represent “Total expenses” less extraordinary loss included in “Other
expenses” in the consolidated statements of income. Therefore, consolidated segment profit, which shows ordinary profit, is reconciled to “Income before income taxes” through the addition/
deduction of extraordinary gain/loss, net.

(4) Information about services
Millions of yen

2020
Lending

Ordinary income from outside customers................

¥

30,242

Securities andinvestments¥

28,405

Leasing

¥

7,266

Other

¥

15,152

Total¥

81,066

Millions of yen

2019
Lending

Ordinary income from outside customers................

¥

30,582

Securities andinvestments¥

30,096

Leasing

¥

6,525

Other

¥

14,376

Total¥

81,581Thousands of U.S. dollars

2020
Lending

Ordinary income from outside customers................

$

277,882

Securities andinvestments$

261,003

Leasing$

66,764

Other$

139,226

Total$

744,886

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, 2020 and 2019; therefore, no information about geographic areas is required to be disclosed.

68

Nanto Report 2020, the integrated report of Nanto Bank

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, 2020 and 2019; therefore, no information about geographic areas is required to be disclosed.
(6) Information about major customers
There was no ordinary income from a specific customer exceeding 10% of the total consolidated ordinary income for either the fiscal year ended
March 31, 2020 or 2019. Therefore, information about major customers is not required to be disclosed.
(7) Information on impairment loss on fixed assets for each reportable segment
Millions of yen

2020
Reportable segments
Banking

Impairment loss............................................................

¥

Leasing

1,730

¥

Other

—

¥

Total

92

¥

—

¥

845

$

1,822

Millions of yen

2019
Reportable segments
Banking

Impairment loss............................................................

¥

Leasing

41

¥

Other

—

¥

Total

41

Thousands of U.S. dollars

2020
Reportable segments
Banking

Impairment loss............................................................

$

15,896

Leasing

$

Other

—

$

Total

16,741

Note: “Other” comprises real estate leasing and management.

(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
Information on gain on negative goodwill is omitted for the year ended March 31, 2019 as it is considered immaterial.
There is no information to be reported on gain on negative goodwill for the year ended March 31, 2020.
28. RELATED PARTY TRANSACTIONS
For the fiscal year ended March 31, 2020, related party transactions were as follows:
Relationshipwith the Bank

Relatives ofofficers of the
Bank

Name

Location

VotingPaid-inOccuparights
capitaltion/
ownership(millions
Business(%)
of yen)Kohei Ueno——

Officeworker—Masato Ibi——

Officeworker—KazuyukiHashimoto——Publicofficer—

32

Forestry

Direct
1.28

10

Metal
processing—

A company inKitamura
Osaka City
which a majority Forestry Co.,Osaka
of voting rights Ltd.*3
are held by
NIKKEN
relatives of
Daito City
BLAST CO.,
officers of the
Osaka
LTD. *4
Bank

Relationship ofrelated parties
Second son of Yasuo
Ueno(Director &Chairmanof the Bank)
Loans
Son-in-law ofSatoru Wada
(Executive Officer)
Loans
Younger brother ofMasashi Hashimoto(Executive Officer)
Loans

Details oftransactions

Transaction Transaction
Year-end
Year-end
amountamountAccounting balancebalance(millions of (thousands of
title(millions of (thousands ofyen)
U.S. dollars)
yen)
U.S. dollars)

Lending of money*2
Interest receivable

—
0

—
0

Loans
—

21
—

192
—

Lending of money*2
Interest receivable

—
0

—
0

Loans
—

25
—

229
—

Lending of money*2
Interest receivable

—
0

—
0

Loans
—

12
—

110
—

Loans

Lending of money
Interest receivable

200
2

1,837
18

Loans
—

200
—

1,837
—

Loans

Lending of money
Interest receivable

—
0

—
0

Loans
—

46
—

422
—

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. Matazaemon Kitamura (Director of the Bank) and his relatives owned 6% and 94% of the voting rights, respectively, of this company directly.
4. Relatives of Naoki Minowa (Corporate Auditor of the Bank) owned 62.5% of the voting rights of this company directly.
5.	Mr. Masaaki Hashimoto resigned as a Corporate Auditor of the Bank on June 27, 2019. The loans and bills discounted for his eldest son, Mr. Atsuto Hashimoto, were ¥17 million as of that day.

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69

Financial Data

Consolidated Financial Statements

For the fiscal year ended March 31, 2019, related party transactions were as follows:
Relationshipwith the Bank

Relatives ofofficers of the
Bank

Name

Location

VotingPaid-inOccuparights
capitaltion/
ownership(millions
Business(%)
of yen)Kohei Ueno——

Officeworker—AtsutoHashimoto——Publicofficer—

Masato Ibi——

Officeworker

—

10

Metal
processing—

32

Forestry

Direct1.28

A company in
NIKKEN
Daito City
which a majority BLAST CO.,Osaka
of voting rights LTD. *3
are held byKitamura
relatives ofOsaka City
Forestry Co.,
officers of the
Osaka
Ltd.*4Bank

Relationship ofrelated parties
Second son of
Yasuo Ueno
(Director &Chairmanof the Bank)
Loans
Eldest son of
Masaaki Hashimoto(Corporate Auditor)
Loans
Son-in-law ofSatoru Wada
(Executive Officer)
Loans

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

Details oftransactions

Lending of money*2
Interest receivable

—
0

Loans
—

21
—

Lending of money*2
Interest receivable

—
0

Loans
—

17
—

Lending of money*2
Interest receivable

—
0

Loans
—

25
—

Loans

Lending of money
Interest receivable

—
0

Loans
—

36
—

Loans

Lending of money
Interest receivable

200
2

Loans
—

200
—

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 (Senior Managing Executive Officer of the Bank) owned 62.5% of the voting rights of this company directly.
4. Matazaemon Kitamura (Director of the Bank) and his relatives owned 6% and 94% of the voting rights, respectively, of this company directly.

29. PER SHARE INFORMATION
Net assets per share at March 31, 2020 and 2019 and net income per share for the fiscal years then ended were as follows:
Yen

2020

Net assets per share.................................................................................................. ¥Net income per share – basic.................................................................................... 		
Net income per share – diluted.................................................................................. 		

U.S. dollars

20197,819.42
97.52
97.43

¥
		
		

8,888.16
342.79342.47

2020

$
		
		

71.84
0.89
0.89

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

Millions of yen

2020(Net assets per share)
Net assets................................................................................................................. ¥Amounts to be deducted from net assets:................................................................. 		
Stock acquisition rights.......................................................................................... 		
Net assets attributed to common stock..................................................................... 		
Outstanding number of shares of common stock at end of year		(unit: thousands of shares).......................................................................................
(Basic and diluted net income per share)
Net income attributable to owners of parent.............................................................. ¥Net income attributable to common stockholders of parent....................................... 		
Average outstanding number of shares during the year (unit: thousands of shares).... 		
Adjustment to net income attributable to owners of parent........................................ 		
Increase in number of shares of common stock: (unit: thousands of shares).............. 		
Stock acquisition rights (unit: thousands of shares)................................................ 		
Convertible securities not diluting net income per share............................................. 		

70

Nanto Report 2020, the integrated report of Nanto Bank

2019

2020

255,053
88(88)
254,965

¥
		
		
		

289,852
98(98)
289,753$ 2,354,407
		
812
		
(812)
		 2,353,595

32,606

		32,599

		

—

3,179
3,179
32,605
—
29
(29)
—

¥
		
		
		
		
		
		

11,174
11,17432,598
—
29
(29)
—

$
		
		
		
		
		
		

29,34529,345—————

30. SUBSEQUENT EVENTSIn the Board of Directors’ meeting held on September 17, 2020, the Bank passed a resolution for the establishment of Nanto Capital Partners Co.,
Ltd., a wholly owned subsidiary of the Bank, and established this new subsidiary as of October 1, 2020, as follows.
1. Purpose
In order to deliver optimum and sophisticated services by promptly meeting the increasingly diverse needs of customers, the Group is working on the
consolidation of consulting-oriented sales run by the entire group.
The purpose of this new subsidiary is to handle venture company development and business succession, resolve of management issues andsupport operating companies that contribute to regional revitalization, by forming and managing funds in order to provide capital to its customers.
2. Overview of the subsidiary(1) Trade name

Nanto Capital Partners Co., Ltd.

(2) Head office address

16 Hashimoto-cho, Nara City, Nara Prefecture (inside the Nanto Bank head office )(3) Representative

Representative Director and President Atsuyuki Sakai(4) Business

Investment business(5) Date of incorporation

October 1, 2020

(6) Paid-in capital¥100 million ($918 thousand)(7) Stockholder

The Nanto Bank, Ltd. (wholly owned subsidiary)

31. BORROWED MONEY AND LEASE OBLIGATIONS
a. The details of borrowed money as of March 31, 2020 and 2019 were as follows:
Thousands of
U.S. dollars

Millions of yen

2020

Borrowed money
Due from April 2020 through Nov. 2026
Average interest rate: 0.42% p.a............................................................................

¥

135,538

2019

¥

2020

210,648$

1,245,410

Annual maturities of borrowed money as of March 31, 2020 were as follows:
Thousands of
U.S. dollars

Millions of yen

2021.......................................................................................................................................................... ¥2022.......................................................................................................................................................... 		
2023.......................................................................................................................................................... 		
2024.......................................................................................................................................................... 		
2025.......................................................................................................................................................... 		
2026 and thereafter................................................................................................................................... 		
Total.......................................................................................................................................................... ¥71,103
2,072
61,312709
264
78
135,538$
653,340
		
19,038
		
563,374
		
6,514
		
2,425
		
716
$ 1,245,410

b. Lease obligations
Lease obligations are included in “Other liabilities” in the accompanying consolidated balance sheets.
Annual maturities of lease obligation as of March 31, 2020 were as follows:
Thousands of
U.S. dollars

Millions of yen

2021.......................................................................................................................................................... ¥2022 and thereafter................................................................................................................................... 		
Total.......................................................................................................................................................... ¥

0
—
0

$
		
$

0
—
0

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

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71

Financial Data

Independent Auditors’ Report

72

Nanto Report 2020, the integrated report of Nanto Bank

Nanto Report 2020, the integrated report of Nanto Bank

73

Financial Data

Independent Auditors’ Report

74

Nanto Report 2020, the integrated report of Nanto Bank

Financial Data

Capital Management• Consolidated Capital Adequacy Ratio
As of March 31, 2020 and 2019
Millions of yen

2020

2019

(1) Capital adequacy ratio ((2)/(3))..................................................................................................................		
9.39%(2) Capital..................................................................................................................................................... ¥254,319(3) Risk-weighted assets...............................................................................................................................		 2,706,983(4) Requisite capital.......................................................................................................................................		
108,279		
9.75%¥
255,264
		 2,616,951
		
104,678

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.

• Nonconsolidated Capital Adequacy Ratio
As of March 31, 2020 and 2019
Millions of yen

2020(1) Capital adequacy ratio ((2)/(3))..................................................................................................................		
9.06%(2) Capital..................................................................................................................................................... ¥243,278(3) Risk-weighted assets...............................................................................................................................		 2,682,686(4) Requisite capital.......................................................................................................................................		
107,307

2019

		
9.40%
¥
243,955
		 2,592,780
		
103,711

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.

Nanto Report 2020, the integrated report of Nanto Bank75

B-(3)-080031

This publication uses Yoshino 3.9 paper, which supports the use of thinned trees in the Yoshino region of Nara Prefecture,contributing to increased CO2 absorption by the forests in the region.
Nanto Bank is a supporter of the “Kizukai Movement” organized to promote use of wood from Japan’s domestic forests.
Issued: December 2020
Nanto Bank, Ltd. Corporate Planning Department
16, Hashimoto-cho, Nara City, Nara Prefecture 630-8677, Japan
Tel.: +81-742-27-1599