Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019

1. BASIS OF PRESENTATION

2. SIGNIFICANT ACCOUNTING POLICIESYamaguchi Financial Group, Inc. (“YMFG”) is a holding
company for The Yamaguchi Bank, Ltd. (“Yamaguchi
Bank”), Momiji Bank, Ltd. (“Momiji Bank”), The Kitakyushu
Bank, Ltd. (“Kitakyushu Bank”) and other subsidiaries.
YMFG and its consolidated subsidiaries (“the Group”)
maintain their accounts and records in accordance withthe provisions set forth in the Financial Instruments andExchange Law and its related accounting regulation andin conformity with accounting principles and practices
generally accepted in Japan (“Japanese GAAP”). Japanese
GAAP are different in certain respects as to applicationand disclosure requirements of International Financial
Reporting Standards.
The accompanying consolidated financial statements
are a translation of the audited consolidated financial
statements of YMFG which were prepared in accordancewith Japanese GAAP and were filed with the appropriate
Local Finance Bureau of the Ministry of Finance as requiredby the Financial Instruments and Exchange Law.
In preparing the accompanying consolidated financial
statements, certain restructuring and reclassifications havebeen made in the consolidated financial statements issued
domestically in order to present them in a form which ismore familiar to readers outside Japan.
The consolidated financial statements are stated inJapanese yen. The translations of the Japanese yenamounts into U.S. dollars are included solely for theconvenience of readers, using the prevailing exchange rate
at March 31, 2020, which was ¥108.83 to U.S.$1.00. Suchtranslations 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.

Consolidation and equity method(1) Scope of consolidation
Japanese accounting standards on consolidated
financial statements require a company to consolidate
any subsidiaries of which the company substantiallycontrols the operations, even if it is not a majority
owned subsidiary. Control is defined as the power togovern the decision-making body of an enterprise.
(i) 17 consolidated subsidiaries at March 31, 2020
and 2019.
The names of the main consolidated subsidiaries
are listed on page 1.
The scope of consolidation includes YM Career
Inc. due to its establishment in the fiscal year
ended March 31, 2020.
In addition, Kitakyushu Economics Institute, Inc.,
formerly a consolidated subsidiary, was excluded
from the scope of consolidation in the fiscal year
ended March 31, 2020 due to the merger between
Kitakyushu Economics Institute, Inc. and YMFG
Zone Planning Co., Ltd. (an absorption-type merger
in which YMFG Zone Planning Co., Ltd. was thesurviving company).
The scope of consolidation includes DATA QVIC
Inc. due to its establishment in the fiscal year
ended March 31, 2019.
(ii) One unconsolidated subsidiary at March 31, 2020
and 2019.
Name of major subsidiary:
Maple Funding Corporation
The unconsolidated subsidiary is excluded fromthe scope of consolidation because its total assets,ordinary income, net income (in proportion toownership), retained earnings (in proportion toownership) and accumulated other comprehensive
income are so immaterial that they do not hinder arational judgment of YMFG’s consolidated financial
position and results of operations when excluded
from the scope of consolidation.

(2) Application of the equity method
Japanese accounting standards also require any
unconsolidated subsidiaries and affiliates with financial
and operating policies over which YMFG is able to25

YMFG Annual Report 2020

exercise material influence to be accounted for by theequity method.
(i) No unconsolidated subsidiary was accounted for by
the equity method at March 31, 2020 and 2019.
(ii) As at March 31, 2020 and 2019, two affiliates
were accounted for by the equity method.
Affiliates as at March 31, 2020 and 2019 wereas follows:
YM Saison Co., Ltd.
Momiji Card Co., Ltd.
(iii) As at March 31, 2020 and 2019, one
unconsolidated subsidiary was not accounted forby the equity method.
Name of major subsidiary:
Maple Funding Corporation
The unconsolidated subsidiary is also excluded
from the scope of application of equity method
because its net income (in proportion toownership), retained earnings (in proportion toownership) and accumulated other comprehensive
income (in proportion to ownership) are so
immaterial that they do not hinder a rational
judgment of YMFG’s consolidated financial position
and results of operations when excluded from thescope of equity method.
(iv) There were no affiliates that were not accounted
for by the equity method as at March 31, 2020
and 2019.

(3) The balance sheet dates of consolidated
subsidiaries
The balance sheet date of all of the consolidated
subsidiaries is March 31 every year.

(4) Accounting Policies
Trading assets, trading liabilities andtransactions for trading purposes
The valuation method of “Trading assets” and “Trading
liabilities” is as follows:
Balances incurred by transactions of which the purpose
is to earn a profit by taking advantage of short-term
fluctuations in a market or discrepancies in different
markets of interest rates, currency exchange rates, shareprices or other indices (hereinafter referred to as “trading
purposes”) are included in “Trading assets” or “Trading
liabilities” in the consolidated balance sheets as of thedate on which the transactions have been contracted.

The income or losses on these transactions are recorded
as “Trading income” and “Trading expenses” in the
consolidated statement of income.
Trading assets and trading liabilities are valued, in thecase of securities and commercial paper, at the market
value as of the date of the balance sheet and, in the caseof derivatives, including swaps, futures and options, at theamount due if the transactions were to be settled as of thedate of the balance sheet. “Trading income” and “Trading
expenses” include interest income and interest expense,
respectively, and gains and losses, respectively, resulting
from the valuation of securities, commercial paper,
derivatives, etc., which are included in “Trading assets” or“Trading liabilities.”

Securities
With regard to the valuation of securities, held-to-maturity
debt securities are stated at amortized cost (straight-line
method) using the moving-average method. Investments
in unconsolidated subsidiaries that are not accounted forby the equity method are stated at cost determined by themoving-average method. Available-for-sale securities are in
general stated at fair value (cost of sale calculated primarily
according to the moving-average method) indicatedaccording to market price at the consolidated balance
sheet date (for equity securities, the average market priceduring the one-month period ending on the consolidatedbalance sheet date). Available-for-sale securities having noreadily available market value are valued at cost using themoving-average method.
Unrealized gains (losses) on available-for-sale securities
are reported as a component of net assets.
Impairment loss is recognized if the value of securities isdeclined significantly and such decline is considered otherthan temporal.

Money in trust
Trust assets within money held in trust are valued using themarket value method.

Derivatives
Derivatives other than those for which exceptional
accounting treatment is applied are stated at fair value.

YMFG Annual Report 202026

Method of hedge accounting
The subsidiaries that conduct banking business (“theBanks”) apply deferred hedge accounting in accordancewith “Treatments of Accounting and Audit on Applicationof Accounting Standard for Financial Instruments in
Banking Industry” (The Japanese Institute of Certified
Public Accountants (“JICPA”) Industry Audit Committee
Report No. 24, February 13, 2002). As for the hedge
to offset market fluctuation, the Banks assess theeffectiveness of the hedge by grouping the hedged items
such as deposits and loans and the hedging instruments
such as interest rate swaps by their maturity.
Also, the Banks apply deferred hedge accounting tohedge foreign exchange risks associated with various
foreign currency denominated monetary assets andliabilities as stipulated in “Treatment of Accounting and
Auditing Concerning Accounting for Foreign Currency
Transactions in Banking Industry” (JICPA Industry
Audit Committee Report No. 25, July 29, 2002). The
effectiveness of the currency swap transactions, exchange
swap transactions and similar transactions hedging theforeign exchange risks of monetary assets and liabilities
denominated in foreign currencies is assessed based oncomparison of the foreign currency position of the hedged
monetary assets and liabilities and the hedging instruments.
The Banks apply an exceptional accounting treatment,
as permitted if certain conditions are met, for certain
interest rate swaps utilized as hedging instrument. In thattreatment, the interest swap contracts are not recorded atfair values but the net interest to be paid or received under
the contracts is added or deducted to the interest arisingfrom their related hedged assets or liabilities.

Allowance for loan losses
The Banks provide allowance for loan losses according to
the following write-off and provisioning standards.
For loans to borrowers who are legally bankrupt (dueto bankruptcy, composition, suspension of transactions
with banks by the rules of clearinghouses, etc.) or
substantially bankrupt, an allowance is provided in
the amount of loans, net of amounts expected to becollected through disposition of collateral or throughexecution of guarantees.

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YMFG Annual Report 2020

For loans to borrowers in danger of bankruptcy,
an allowance is provided in the amount considered
uncollectible based on the amount of loans, net of amounts
expected to be collected through disposition of collateral or
through execution of guarantees, and other sources.
Loans to normal borrowers and borrowers requiringcaution are classified into certain groups, and expected
losses are estimated for the upcoming one or three-year
periods. Expected loss amounts are calculated by using
average values for actual rates of losses from bad debts
and default probabilities during a specific period in thepast, based on actual amounts of bad debt or bankruptcy
over a one or three-year period, and adjusted as necessary
for future forecasts.
Each branch as well as the credit supervision
department evaluates all loans in accordance with the selfassessment rule.
Other consolidated subsidiaries provide an allowance foran amount calculated using the rate of collection losses in thepast for loans of normal borrowers in addition to amounts
estimated based on collectability analysis for borrowers indanger of bankruptcy and certain other borrowers.

Tangible fixed assets (excluding lease assets)
Depreciation of tangible fixed assets of YMFG and its
consolidated subsidiaries that conduct banking business arecomputed by using the declining-balance method except
for buildings (excluding fixtures) acquired after April 1, 1998
and fixtures and buildings acquired after April 1, 2016,
which are depreciated using the straight-line method.
The estimated useful lives of the assets are primarily
as follows:
Buildings: 7 to 50 years
Others: 2 to 15 years
Other consolidated subsidiaries depreciate their tangible
fixed assets using mainly the declining-balance method
over the useful lives of the respective assets provided by
the Corporation Tax Act in Japan.

Intangible fixed assets (excluding lease assets)
Amortization of intangible fixed assets is computed byusing the straight-line method. Software costs for internal
uses are amortized over the estimated useful life (5 years).

Lease assets

Provision for directors’ retirement benefits

Lease assets included within tangible and intangible fixed
assets related to finance lease transactions that do nottransfer ownership are depreciated over the lease termusing the straight-line method. For lease assets with aguaranteed residual value stated in their lease agreements,
the residual value is set at the guaranteed amount.
Otherwise, the residual value is assumed to be zero.

The provision for directors’ retirement benefits forconsolidated subsidiaries outside the banking businessis provided for the estimated amount corresponding to
accrued retirement benefit payments to directors as of theend of the fiscal year.

Income taxes
Income taxes comprise corporate, enterprise and inhabitanttaxes. The Group recognizes tax effects of temporary
differences between the financial statement basis and thetax basis of assets and liabilities. The asset and liability
approach is used to recognize deferred tax assets andliabilities for the expected future tax consequences of
temporary differences.

Foreign currency translation
Foreign currency assets and liabilities and the accounts ofoverseas branches of YMFG and consolidated subsidiaries
are translated into yen at the rates prevailing at theconsolidated balance sheet date.

Provision for bonuses
Provision for bonuses is provided for payment of bonuses
to employees, in the amount of estimated bonuses that are
attributable to the fiscal year.

Method of accounting for retirement benefits
When calculating retirement benefit obligations, thebenefit formula method is used for attributing expected
retirement benefits to the year-end. Actuarial gains orlosses are amortized on a straight-line basis over certain
years (10-11 years) within the employees’ averageremaining service period commencing from the next fiscal
year of incurrence.
Some consolidated subsidiaries employ the simplified
method for calculating retirement benefit obligations
and periodic benefit costs, stating retirement benefit
obligations at the amounts required as if all employees
voluntarily terminate their employment as of the year-end.

Provision for directors’ stock benefits
The provision for directors’ stock benefits is determinedaccording to the directors’ stock benefit regulations for
YMFG and its subsidiaries (banks within YMFG (Yamaguchi
Bank, Momiji Bank and Kitakyushu Bank) and YM
Securities; the same shall apply hereafter) in preparation
for the payment of stock benefits to directors (excluding
directors who are members of the Audit and Supervisory
Committee, part-time directors and outside directors ) and
executive officers (hereinafter, “Subject Directors, etc.”)
based on expected stock benefit obligations as of March
31, 2020.

Provision for loss on interest repayment
Provision for loss on interest repayment is provided forpossible losses on reimbursements of excess interest
payments and loan losses related to consumer finance loans
extended at interest rates in excess of the maximum interest
rate prescribed in the Interest Rate Restriction Law.
In accordance with “Audit Guidelines on Consumer
Finance Companies’ Provisions for Possible Losses on
Reimbursements of Excess Interest Payments,” issued by
JICPA in 2012, the amount of such provision is rationallyestimated and booked based on actual historical repayment
claims by debtors.

Provision for reimbursement of deposits
Provision for reimbursement of deposits is provided for inorder to meet depositor requests for reimbursement on
deposits already derecognized as liabilities, in an amountdeemed necessary by estimating the losses corresponding
to the expected requests for reimbursements in the future.

YMFG Annual Report 202028

Provision for customer point services

Standards and guidance not yet adopted

Provision for customer point services is provided inconjunction with a point system to promote credit carduse. The provision is recorded for the expected cost to be
incurred when credit card members use points they havereceived as of the balance sheet date.

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 for revenue recognition. Under the standard andguidance, revenue is recognized by applying following 5
steps:
Step 1: Identify contract(s) with customers.
Step 2: Identify the performance obligations in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performanceobligation in the contract.
Step 5; Recognize revenue when (or as) the entity
satisfies a performance obligation.
(2) Effective date
Effective from the beginning of the fiscal year ending
March 31, 2022.
(3) Effects of the application of the standards
The Company and its consolidated domestic subsidiaries
are currently in the process of determining the effectsof these new standards on the consolidated financial
statements.
- “Accounting Standard for Management 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 enhance comparability with internationallyrecognized accounting standards, “Accounting Standard
for Fair Value Measurement” and “Implementation
Guidance on Accounting Standard for Fair Value
Measurement” (together, hereinafter referred to as “Fair
Value Accounting Standards”) were developed andguidance on methods measuring fair value was issued. Fair
Value Accounting Standards are applicable to the fair value
measurement of the following items:

Reserves under special laws
Reserves under special laws consist of the financial
instruments transaction responsibility reserve posted by
YM Securities Co., Ltd., which were calculated according
to the specified formula of Article 46-5 of the Financial
Instruments and Exchange Act and Article 175 of the
Cabinet Office Order Related to the Financial Instruments
Business, to prepare for future eventual losses originatingfrom incidents relating to the purchase and sale ofsecurities or other transactions.

Amounts per share of common stock
Computations of net income per share of common stock
are based on the weighted-average number of shares
outstanding during each year.
Cash dividends per share represent the cash dividends
declared as applicable to each year.

Amortization of goodwill
Goodwill is amortized mainly over a 10-year period using
the straight-line method.

Consumption taxes
YMFG and its consolidated subsidiaries employ thetax exclusion method for consumption tax and local
consumption taxes, meaning that transaction amounts
and consumption tax amounts are treated separately foraccounting purposes.
However, non-deductible consumption taxes forpurchase of property, plant and equipment are recognized
as expenses for the year of the purchase.

Adoption of consolidated tax payment system
YMFG and certain of its consolidated subsidiaries adopted
the consolidated tax payment system as provided under the
Corporation Tax Act.

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YMFG Annual Report 2020

-Financial instruments in “Accounting Standard for
Financial Instruments”; and-Inventories held for trading purposes in “AccountingStandard for Measurement of Inventories.” and, under the“revised Implementation Guidance on Disclosures about
Fair Value of Financial Instruments,” with notes outlining
details of fair value of financial instruments for each level.
(2) Effective date
Fair Value Accounting Standards and guidance will beeffective from the beginning of the consolidated fiscal year
ending March 31, 2022.
(3) Effects of the application of the standards
The Company and its consolidated domestic subsidiaries are
currently in the process of determining the effects of these
new standards on the consolidated financial statements.
- “Accounting Standard for Accounting Policy Disclosures,
Accounting Changes and Error Corrections” (ASBJ
Statement No. 24, March 31, 2020)(1) Overview
The objective is to provide an overview of principles
for accounting treatment and procedures in the eventthese subjects are not clearly determined under related
accounting standards.
(2) Effective date
Effective from the beginning of the fiscal year ending
March 31, 2021.
- “Accounting Standard for Disclosure of Accounting
Estimates” (ASBJ Statement No. 31, March 31, 2020)(1) Overview
The objective is to disclose information that will contributeto the understanding by users of financial statements withregard to amounts stated in the financial statements forthe current fiscal year that involve accounting estimates
whose details present the risk of materially affecting
financial statements for the following fiscal year.
(2) Effective date
Effective from the beginning of the fiscal year ending
March 31, 2021.

Additional Information(ESOP Trust)
To enhance its welfare benefits, YMFG has introduced the
ESOP Trust for Group employees (hereinafter, “Employees”)
1. ESOP Trust for Employees introduced in March 2017
(1) Overview of Transactions
Of those Employees enrolled in YMFG’s ESOP, YMFG has
established the trust for those beneficiaries satisfying
certain conditions. This trust acquired as a lump sum
certain number of shares of YMFG corresponding to thenumber expected to be acquired by YMFG’s ESOP over the
five-year period beginning in March 2017. Thereafter, thetrust will sell YMFG’s shares to YMFG’s ESOP each monthon a specific date.
(2) Company Shares Residing in the Trust
YMFG’s shares residing in the trust are recorded in treasury
stock in the net assets section based on the book value ofthe trust (excluding ancillary expenses).
The book value and the number of shares of thistreasury stock amounted to ¥588 million ($5 million) and
456 thousand shares on March 31, 2020 and ¥1,274
million and 990 thousand shares on March 31, 2019.
(3) Book Value of Borrowings Recorded by Applying theGross Price Method
The book value of borrowings recorded by applying thegross price method was ¥929 million ($9 million) on March
31, 2020 and ¥1,321 million on March 31, 2019.
(Board Benefit Trust (BBT))YMFG has introduced a Board Benefit Trust (“BBT”) to raiseawareness among Subject Directors,etc. of YMFG and its
subsidiaries (banks within the Group (Yamaguchi Bank,
Momiji Bank and Kitakyushu Bank) and YM Securities; thefollowing shall apply hereinafter) toward raising operating
performance at YMFG over the medium to long term andcontributing to increases in corporate value.
(1) Overview of Transactions
Via the trust, YMFG acquires YMFG’s common sharesusing funds provided by YMFG. YMFG’s share and cash
equivalent to fair value of YMFG’s stock measured at thetime of retirement are granted to be distributed via the trust
to Subject Directors,etc. according to Subject Directors,etc.’
positions, and the level of achievement of operating
performance in accordance with directors’ stock benefit

YMFG Annual Report 202030

regulations established by YMFG and its subsidiaries.
(2) Company Shares Residing in the Trust
YMFG’s shares residing in the trust are recorded as treasury
stock in the net assets section based on the book value ofthe trust (excluding ancillary expenses).
The book value and the number of shares of this treasury
stock amounted to ¥878 million ($8 million) and 1,005
thousand shares on March 31, 2020 and ¥558 million and
578 thousand shares on March 31, 2019.
(Treatment Related to the Application of Tax EffectAccounting for the Transition from the Consolidated
Taxation System to the Group Tax Sharing System)
With regard to matters related to the transition to thegroup tax sharing system established by the “Act for thePartial Amendment of the Income Tax Act” (Act No. 8 of2020) and the revision of the single tax payment system
to coincide with the transition to the group tax sharing
system, YMFG and certain consolidated subsidiaries basetheir amounts of deferred tax assets and deferred tax
liabilities on tax law prior to revision without applying
No. 44 of the “Implementation Guidance on Tax EffectAccounting” (ASBJ Guidance No. 28, February 16,2018), in accordance with treatment under Paragraph 3of the “Practical Solution on the Treatment of Tax EffectAccounting for the Transition from the Consolidated
Taxation System to the Group Tax Sharing System” (PITF
No. 39, March 31, 2020).
(Impact of the COVID-19 Pandemic)
The spread of the novel coronavirus disease (COVID-19)
is expected to continue affecting the economy for sometime. The Group is working to understand the conditionsof individual borrowers in a timely and appropriate mannerand provide various types of support to help customers
with cash flow and other aspects of business continuity.
Based on such situations, calculations of allowance for
doubtful accounts assumed that the impact on loans andother credit costs would be limited.
However, these assumptions include uncertainties. If
the COVID-19 pandemic were to continue for a prolonged
period of time or to grow more serious rather thansubsiding, the operating environment could deteriorate
further. As a result, allowance for doubtful accounts could
be materially affected in upcoming fiscal years.

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YMFG Annual Report 2020

3. CONSOLIDATED STATEMENTS OF CASHFLOWS AND CASH EQUIVALENTS
1. In preparing the consolidated statements of cash flows,
the Group considers cash and due from THE BANK OF
JAPAN as cash and cash equivalents.
The reconciliation of cash and due from banks in the
consolidated balance sheets and cash and cash equivalentsin the consolidated statements of cash flows at March 31,
2020 and 2019 were as follows:

Cash and due from banks
Time deposits in other banks
Other
Cash and cash equivalents

Millions of yen
2020
2019
¥971,777 ¥1,043,994(15,873)(16,602)(11,120)(11,834)¥944,784 ¥1,015,558

Thousands of
U.S. dollars
2020$8,929,312(145,851)(102,178)$8,681,283

2. Details of important non-funding transactions
Details of important non-funding transactions throughthe exercise of share options to shares that took place
during the fiscal year ended March 31, 2020 and 2019were as follows:

Decrease in capital surplus
by exercise of share options
to shares
Decrease in treasury sharesby exercise of share options
to shares
Decrease in bonds with
subscription rights to sharesby exercise of share options
to shares

Millions of yen
2020
2019
¥—
¥ (2,625)

Thousands of
U.S. dollars
2020
$—

—

27,421—¥—¥24,796—

4. FINANCIAL INSTRUMENTS
Items pertaining to the status offinancial instruments(1) Policies on financial instruments
YMFG provides community-based integrated financial
services centered on the banking, securities and credit cardbusinesses. Accordingly, the Group is subject to a variety
of risks, including credit risk, market risk and liquidity
risk. Due to changes in economic, social and financial
conditions, these risks have grown more diverse andcomplex. Under these conditions, the Group considers
strengthening its risk management structure as a priority
issue. To maintain and enhance the soundness of its
operations, YMFG has created groupwide risk management

regulations, which clarify the Group’s fundamental stanceon risk management.

(2) Content and risks of financial instruments
Of financial assets held by the Group, principally loans andbills discounted extended to business partners are subject
to the credit risk from breach of contract. The Group holds
securities, principally debt securities, equity securities andinvestment trusts, for trading purposes, for holding tomaturity, for purely investment purposes or to promote
positive business relations. These securities are subject toissuer credit risk, interest rate fluctuation risk and market
price fluctuation risk.
The Group’s financial liabilities center on deposits
and negotiable certificates of deposit, and call moneythat it raises in the market. However, the Group is
subject to the liquidity risk of becoming unable tosecure necessary funding. The Group is also subject tointerest rate risk arising from fluctuations in financial andeconomic conditions.
The Group employs derivative transactions to hedge
underlying market risks on its assets and liabilities. The
Group also provides derivatives as financial products tomeet customers’ needs. Interest-related and securitiesrelated derivative transactions are employed to limit the
impact on income of future interest rate fluctuations andprice fluctuations for loans and bills discounted, deposits,
securities and other instruments bearing long-term interest
at fixed rates. Currency-related derivative transactions areused primarily to avoid fluctuations in income stemmingfrom future exchange rate fluctuations, stabilize funding
denominated in foreign currencies, as well as offered as
products to clients. With regard to transactions to secure
income through changes in market rates, which areconducted on a limited basis, the Group has establishedstringent standards that include risk limits and loss limits.
As market risk factors, interest rate related andsecurities-related derivative transactions are subject tothe risk of fluctuations in interest rates and prices, andcurrency-related derivative transactions are subject toexchange rate fluctuations. For transactions that are
not conducted on exchanges, the Group is subject tocredit risk, the risk of loss in the event a counterparty
becomes unable to fulfill its contractual obligations due todeteriorating financial conditions.
With regard to use of hedge accounting, the Groupapplies deferred hedge accounting after it ensured inadvance that the established conditions are satisfied. As forhedging methods, the Group employs the portfolio hedge
where certain group of assets with similar risk is identified
and such risk is hedged comprehensively. In addition, forcertain interest swap contracts, exceptional accounting
treatment are applied.

(3) Risk management structure related tofinancial instruments(i) Management of credit risk
Through the appropriate operation of a credit rating
system, the Group endeavors to determine the financial
conditions of business partners and accurately evaluate
their credit risk. The Group has enhanced the precisionof its credit evaluations, reviewing business partner credit
ratings swiftly and appropriately for each financial period
and each time their credit conditions change.
The Group conducts self assessments according tostringent standards that are consistent throughout theGroup. The Group performs write-off and provisions
based on the results of its self assessments. The Group’s
authentication departments verify the content of such self
assessments. Independence is maintained through internal
audits conducted by audit departments. In addition,
the Group undergoes external audits conducted by its
independent external auditors.
With regard to the screening of individual transactions,
the Group employs a screening system suited to eachsubsidiary bank’s size of the business and characteristics
to conduct detailed screenings that take individual sector
and regional characteristics into consideration. In terms of
portfolio management, the Group strives to enhance its
risk management by first measuring credit risk, and thenmanaging risk by category, sector and geographic area.
Risk management departments periodically obtain
credit information and fair value as a part of managing
credit risks on securities issuers and counterparty risks onderivative transactions.
(ii) Management of market risk
Qualitative information on the management of market risk
The Group has formulated a market risk management
process that identifies and quantitatively measures market
risks. An asset-liability management (ALM) system is
employed to control market risk within allowable limits,and the Group ALM Committee is periodically held torespond to such risks.
YMFG periodically evaluates market risk conditions andverifies the appropriateness of risk controls.

YMFG Annual Report 202032

Quantitative information on the management of market risk
The market risk (estimated loss amount) of the loans,securities, deposits and derivatives transactions of Yamaguchi
Bank, Momiji Bank and Kitakyushu Bank of the Group arecalculated according to value at risk (VaR). Furthermore, thecovariance method is used to calculate VaR.
As of March 31, 2020, the market risk (estimated loss
amount) of Yamaguchi Bank was ¥41,387 million ($380
million), the market risk (estimated loss amount) of Momiji
Bank was ¥14,658 million ($135 million) and the market
risk (estimated loss amount) of Kitakyushu Bank was¥17,198 million ($158 million). Also, as of March 31, 2019,the market risk (estimated loss amount) of Yamaguchi
Bank was ¥62,679 million, the market risk (estimated loss
amount) of Momiji Bank was ¥15,373 million and themarket risk (estimated loss amount) of Kitakyushu Bankwas ¥21,883 million.
Assumptions used in calculating VaR include a holding
period of three months (however, one year for a holding
period for shares held for the purpose of strategic
investment), a confidence interval of 99.9% and an
observation period of five years.
Yamaguchi Bank, Momiji Bank and Kitakyushu Bank
conduct back-testing to compare the VaR calculated by
the model with the actual losses. However, because of
relatively large fluctuations in Japanese stock and foreignexchange market prices, instances arose in which they wereunable to capture the risk on Japanese stocks and foreign
bond funds. Consequently, from fiscal 2016, to determine
the amount of risk on Japanese stocks and foreign bondfunds, VaR is measured for observation periods of both one
year and five years, and the larger number is taken as therisk amount. As of March 31, 2020, the VaR observation
period was five years for both Japanese stocks and foreign
bond funds.
However, as the practice of measuring market risk
amount with a set risk probability calculated on the basisof historical market fluctuations remains unchanged evenafter revising the measurement method to appropriately
capture the market risk amount, in some cases it is notpossible to capture market risk in the event of suddenchanges in the market environment outside the normally
expected scope.
(iii) Management of liquidity risk related to fundraising
The majority of funds is raised through deposits, whichconstitute a stable base for procuring funds. The Groupmanages funds on the basis of elaborate forecasts,

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YMFG Annual Report 2020

confirming cash flows primarily through the managementof financial balances using short-term financial markets.
For cash flow management, the Group strives tomanage the liquidity risk by ensuring stability, preparing forunexpected events, and maintaining highly liquid assets.

(4) Supplementary explanation of items
pertaining to the fair value of financial
instruments
The fair values of some financial instruments are basedon market prices. The fair values of other instruments, forwhich market prices are not readily available, are basedon rational calculation. However, as assumptions are usedin these calculations, different assumptions can yield
different values.

Items pertaining to the fair value of financial
instruments
The table below indicates the consolidated balance sheet
amounts of financial instruments, as well as their fair values
and the differences between the two. Line items with little
significance to balance sheet amounts have been omitted.
Unlisted equity securities and other instruments for which
fair value is not easily determinable are not included in thetable below. (Refer to (Note 2).)Millions of yen
2020
Consolidatedbalance sheet Fair value Difference
amount(i) Cash and due from banks¥ 971,777 ¥ 971,777¥—(ii) Call loans and bills purchased
1,088
1,088
—
(iii) Money held in trust
48,412
48,412—(iv) Securities
13,36013,528168
Held-to-maturity debt
securities
Available-for-sale securities
1,482,995
1,482,995—(v) Loans and bills discounted
7,652,626
Allowance for loan losses (* 1)(62,316)
7,590,310
7,705,683
115,373
Total assets¥10,107,942 ¥10,223,483¥115,541(i) Deposits¥ 9,525,935 ¥ 9,526,272¥
337(ii) Payables under securities
161,466
161,466—
lending transactions
Total liabilities¥ 9,687,401 ¥ 9,687,738¥
337
Derivative transactions (* 2)(31) ¥(31) ¥—
Hedge accounting not applied ¥Hedge accounting applied(16,330)(16,330)—
Total derivative transactions¥(16,361) ¥(16,361) ¥—Millions of yen
2019
Consolidatedbalance sheet Fair value Difference
amount¥1,043,994 ¥1,043,994¥—(i) Cash and due from banks(ii) Call loans and bills purchased
39,042
39,042—(iii) Money held in trust
30,56530,565—(iv) Securities
Held-to-maturity debt
8,273
8,438
165
securities
Available-for-sale securities
1,374,849
1,374,849—(v) Loans and bills discounted
7,408,387
Allowance for loan losses (* 1)(53,983)
7,354,404
7,450,478
96,074
Total assets¥9,851,127 ¥9,947,366¥96,239(i) Deposits¥9,230,773 ¥9,231,171¥ 398(iii) Call money and bills sold
133,466
133,466—
Total liabilities¥9,364,239 ¥9,364,637¥ 398
Derivative transactions (* 2)
1,577 ¥
1,577¥—
Hedge accounting not applied ¥Hedge accounting applied(2,115)(2,115)—
Total derivative transactions¥(538) ¥
(538)¥—

Thousands of U.S. dollars
2020
Consolidatedbalance sheet Fair value Difference
amount$ 8,929,312 $ 8,929,312 $—(i) Cash and due from banks(ii) Call loans and bills purchased
9,997
9,997
—
(iii) Money held in trust
444,841444,841—(iv) Securities
Held-to-maturity debt
122,760
124,304
1,544
securities
Available-for-sale securities 13,626,711 13,626,711—(v) Loans and bills discounted
70,317,247
Allowance for loan losses (* 1)(572,599)
69,744,648 70,804,769 1,060,121
Total assets$92,878,269 $93,939,934 $1,061,665(i) Deposits$87,530,414 $87,533,511 $
3,097(ii) Payables under securities
1,483,653
1,483,653—
lending transactions
Total liabilities$89,014,067 $89,017,164 $3,097
Derivative transactions (* 2)(285) $
(285) $—
Hedge accounting not applied $Hedge accounting applied(150,051)(150,051)—
Total derivative transactions$ (150,336) $ (150,336) $—(* 1) The general allowance for loan losses and specific allowance for loan losses are deducted.
(* 2) The amount collectively represents derivative transactions that are recorded as trading
assets and liabilities, and other assets and liabilities. This indicates the net amount ofrights and obligations under derivative transactions. Parentheses, ( ), indicate that the net
amount is negative.

(Note 1) Methods of calculating the fair value of financial
instruments(1) Assets(i) Cash and due from banks
As the settlement term of these instruments is short(within one year) and their fair values and book values areapproximately the same, their book values are taken as
their fair values.
(ii) Call loans and bills purchased
As the settlement term of these instruments is short(within one year) and their fair values and book values areapproximately the same, their book values are taken as
their fair values.
(iii) Money held in trust
As for the securities held as trusted assets in money held in
trust established independently for the purpose of investing
mainly in the securities, the value on stock exchanges istaken as fair value for the equity securities, and either thevalue on exchanges or a price indicated by other financial
institutions dealing with the specific instruments is taken asfair value.
Additional information related to money held in trust by
the purpose of holding are described in the note entitled“Money held in trust.”(iv) Securities
For equity securities, fair value is determined by stock
exchange prices; the fair value of debt securities isdetermined by exchange prices or prices received frominformation vendors. Fair values of investment trusts are
determined by exchange prices or standard prices disclosed
by investment trust management companies.
The fair value of private placement bonds guaranteedby Yamaguchi Bank and Momiji Bank is determined foreach internal rating category and period by discounting
the total amount of interest and principal to their present
value, using as the discount rate the risk-free rate plus thecredit cost determined for each internal rating category.
However, fair value of bonds of legally bankrupt debtors,
substantially bankrupt debtors and debtors in dangerof bankruptcy is determined by deducting the expectedamount of loss on the bond by using the same method
applied to loans from the bond’s face value.
(v) Loans and bills discounted
For loans and bills discounted with floating interest rates,
as in the short term their values reflect market interest
rates, unless the credit status of the obligor has changed
significantly since the loans were extended, their fair value
is similar to their book value, so their book value is taken as
their fair value.
For loans and bills discounted bearing fixed interest
rates, fair value is determined for each internal rating
category and period by discounting the total amountof interest and principal to their present value, using as

YMFG Annual Report 202034

the discount rate the risk-free rate for operating loans
and bills discounted plus the credit cost for each internalrating category. For consumer loans and bills discounted,
fair value is determined by discounting the total amountof interest and principal to their present value using theassumed interest rate on new loans of the same type. For
instruments having a short settlement period (within oneyear), as their fair values and book values are approximately
the same, their book value is taken as their fair value.
With regard to loans to legally bankrupt obligors,
substantially bankrupt obligors or obligors who are indanger of bankruptcy, the estimated collectible amountis based on either the present value of estimated future
cash flows or the expected amounts recoverable fromthe disposal of collateral and/or under guarantees. As
the fair value is essentially equivalent to the amount after
deducting the allowance for possible loan losses from thebook value as of the consolidated balance sheet date, thisamount is taken as fair value.
For loans that have no specific repayment period, as thefair value is assumed to be equivalent with the book value
according to the expected payment dates and interest
rates, book value is taken as the fair value.
(2) Liabilities(i) Deposits
The fair value of demand deposits is determined as
the payment amount if payment were required on the
consolidated balance sheet date (book value). The fairvalue of time deposits is determined by discounting future
cash flows to their present value by certain time periods.
The discount rate employed is the interest rate required for
newly accepted deposits. For deposits having a short period(within one year), as their fair values and book values areapproximately the same, their book value is taken as theirfair value.

35

YMFG Annual Report 2020(ii) Payables under security lending transactions and (iii) Callmoney and bills soldAs the contract period is short (within one year) and themarket value is similar to the book value, the book value istaken as the market value.
(3) Derivative transactions
The fair value of derivative transactions, comprisinginterest-rate-related transactions (such as interest rate
futures, interest rate options and interest rate swaps)
currency-related transactions (such as currency futures,
currency options and currency swaps), bond-relatedtransactions (such as bond futures and bond options) istaken as their value on exchanges, discounted present
value or price as calculated using option pricing models.
Interest rates swaps that employ exceptional accounting
treatment are accounted for as part of the loans and bills
discounted that are hedged. Therefore, their fair value isincluded in the fair value of loans and bills discounted.
(Note 2) The consolidated balance sheet amounts offinancial instruments for which market prices are notreadily available
Financial instruments for which market prices are notreadily available are not included in “Assets (4) Availablefor-sale securities.”

Category(1) Unlisted equity securities(*1, *2)(2) Investments in partnerships,
etc. (*3)
Total

Thousands ofMillions of yen
U.S. dollars
2020
2019
2020
Consolidated balance sheet amount¥ 6,933¥ 6,918$ 63,705
9,459

7,974

86,925¥16,392¥14,892$150,630(*1) As unlisted equity securities have no market prices and their fair value is not readily
available, they are not included in the scope of fair value disclosures.
(*2) During the fiscal year ended March 31, 2020 and 2019, impairment losses of ¥47 million($432 thousand) and ¥7 million were recorded on unlisted equity securities.
(*3) Of investments in partnerships, those partnership assets comprising unlisted equity
securities, which have no readily available fair value, are not included in the scope of fairvalue disclosure.

(Note 3) Expected maturity amount of monetary claims andsecurities with maturities after the consolidated balance
sheet dateMillions of yen
2019More than More than More thanWithinone year three years five years More than
one year and within and within and within seven years
three years five years seven years¥ 875,998 ¥
— ¥
— ¥
— ¥
—

(1) Due frombanks(2) Call loans
1,088
—
—
—
—
and bills
purchased(3) Money held
48,412————in trust(4) Securities
65,968161,330
166,133
174,273
627,818
Held-to700
1,763
5,751
1,749
3,400
maturity debt
securities
Local
—
200
1,700
800
2,200
government
bond
Corporate
700
1,563
4,051
949
1,200
bond
Available-for65,268
159,567
160,382
172,524
624,418
sale securities
with maturities
Japanese
9,000
42,00023,10021,500234,600
government
bond
Local
6,725
22,15822,057
26,974
131,548
government
bond
Corporate
35,38573,29059,27386,13680,112bond
Others14,15822,11955,952
37,914
178,158(5) Loans and 1,693,152 1,047,647 1,065,149
856,915 2,989,763
bills discounted
(*)
Total
¥2,684,618 ¥1,208,977 ¥1,231,282 ¥1,031,188 ¥3,617,581

Millions of yen
2019More than More than More thanWithinone year three years five years More than
one year and within and within and within seven years
three years five years seven years¥ 942,716 ¥
— ¥
— ¥
— ¥
—

(1) Due frombanks(2) Call loans
39,042——and bills
purchased(3) Securities
144,598
224,574
134,442
Held-to326
909
2,158
maturity debt
securities
Local
—
100
700
government
bond
Corporate
326
809
1,458
bond
Available-for144,272
223,665
132,284
sale securities
with maturities
Japanese
57,00088,000
6,500
government
bond
Local
15,5089,826
9,424
government
bond
Corporate
56,48994,96347,462bond
Others15,27530,876
68,898(4) Loans and 1,721,944
991,035
962,930bills discounted
(*)
Total
¥2,848,300 ¥1,215,609 ¥1,097,371——

187,809
2,283

411,065
2,600

900

1,400

1,383

1,200

185,526

408,465

39,60058,25010,96570,77565,793

160,390

69,168
119,050
809,990 2,922,490¥997,799 ¥3,333,555

YMFG Annual Report 202036

Thousands of U.S. dollars
2020
More than More than More thanWithinone year three years five years More than
one year and within and within and within seven years
three years five years seven years$ 8,049,233 $
— $
— $
— $
—

(1) Due frombanks(2) Call loans
9,997
—
—
—
—
and bills
purchased(3) Money held
444,841————in trust(4) Securities
606,157 1,482,405 1,526,537 1,601,341 5,768,815
Held-to6,432
16,20052,844
16,071
31,241maturity debt
securities
Local
—
1,838
15,621
7,351
20,215government
bond
Corporate
6,432
14,36237,2238,720
11,026bond
Available-for599,725 1,466,205 1,473,693 1,585,270 5,737,574
sale securities
with maturities
Japanese
82,698385,923
212,258
197,556 2,155,656
government
bond
Local
61,794
203,602202,674
247,854 1,208,748
government
bond
Corporate
325,140
673,436544,638
791,473
736,121bond
Others130,093203,244514,123
348,387 1,637,049(5) Loans and 15,557,769 9,626,454 9,787,274 7,873,886 27,471,855
bills discounted
(*)
Total
$24,667,997 $11,108,859 $11,313,811 $9,475,227 $33,240,670(*) Loans and bills discounted for which no period is specified are included in “within one year.”(Note 4) Estimated repayment amounts of deposits,
negotiable certificates of deposit and other interest-bearing
liabilities to be repaid after the consolidated balance sheet dateMillions of yen
2020
More than More thanThree
Withinone year two years
or
one year and within and within years
more
two years three years¥8,410,285 ¥438,092 ¥129,083¥29,100
Deposits (*)
Negotiable certificates
510,864
8,481
30—
of deposit
Payables under securities
161,466———
lending transactions
Total¥9,082,615 ¥446,573 ¥129,113¥29,100

Millions of yen
2019More than More thanThree
Withinone year two years
or
one year and within and within years
more
two years three years¥8,076,897 ¥614,162 ¥158,059¥28,760
Deposits (*)
Negotiable certificates352,360535——
of deposit
Call money and bills sold
133,466———
Total¥8,562,723 ¥614,697 ¥158,059¥28,760

37

YMFG Annual Report 2020

Thousands of U.S. dollars
2020
More than More thanThree
Withinone year two years
years orone year and within and within
more
two years three years$77,279,105 $4,025,471 $1,186,098$267,388
Deposits (*)
Negotiable certificates
4,694,147
77,929276—
of deposit
Payables under securities 1,483,653———
lending transactions
Total$83,456,905 $4,103,400 $1,186,374$267,388(*) Within deposits, demand deposits are included in “within one year.”

5. SECURITIESSecurities held at March 31, 2020 include shares of
unconsolidated subsidiaries and affiliates amounting to ¥27
million ($248 thousand) and investments of ¥1 million ($ 9thousand). Corresponding figures at March 31, 2019, were
¥27 million and ¥1 million.
The amount of guarantee obligations for private
placement bonds (Financial Instruments and Exchange
Law, Article 2, Item 3), out of bonds included insecurities, amounted to ¥11,376 million ($105 million)and ¥8,751 million as of March 31, 2020 and March 31,
2019 respectively.
Bonds included in securities also include securities
lent through unsecured loan agreements (bond lendingtransactions) of ¥5,010 million, at March 31, 2019.

6. FAIR VALUE INFORMATION
Securities
The following tables summarize book values, fair value andacquisition cost of securities with available fair values as ofMarch 31, 2020 and 2019:(a) Trading securities
Amount of unrealized gain (loss) on trading securities
included in the consolidated statement of income— ¥(3) million ($28 thousand) and ¥2 million as at
March 31, 2020 and 2019, respectively.

(c) Available-for-sale securities(b) Held-to-maturity debt securities:
Type
Local
government
bonds
Corporate
bonds
Subtotal
Securities with fairLocalvalue not exceeding government
book value
bonds
Corporate
bonds
Subtotal
Total
Securities with fairvalue exceeding
book value

Type
Local
government
bonds
Corporate
bonds
Subtotal
Securities with fairLocalvalue not exceeding government
book value
bonds
Corporate
bonds
Subtotal
Total
Securities with fairvalue exceeding
book value

Millions of yen
2020
Book value Fair value Difference¥ 2,900 ¥ 2,947
¥ 47

8,225

8,349

124

11,1252,000

11,296
1,997

171
(3)

235

235

(0)

2,235
¥13,360

2,232¥13,528(3)¥168

Millions of yen
2019Book value Fair value Difference¥3,000¥3,061
¥ 61

5,144

5,248

104

8,144
100

8,309
100

165
—

29

29

(0)

129
¥8,273129¥8,438(0)¥165

Securities with book Sharesvalue exceeding
Japaneseacquisition costgovernment
bonds
Local
94,33894,077government
bonds
Corporate
242,770
240,383
bonds
Others
213,118
198,674
Subtotal
669,061
611,119
Securities with book Shares
11,832
15,250value not exceeding Japanese
293,589
300,872
acquisition costgovernment
bonds
Local
115,538
116,161
government
bonds
Corporate
94,33994,726bonds
Others298,636
330,612Subtotal
813,934
857,621
Total¥1,482,995 ¥1,468,740

Type

Thousands of U.S. dollars
2020
Book value Fair value Difference$ 26,647 $ 27,079
$ 432

Type
Local
government
bonds
Corporate
75,57776,716bonds
Subtotal
102,224 103,795
Securities with fair
Local
18,377
18,350value not exceeding government
book value
bonds
Corporate
2,159
2,159
bonds
Subtotal
20,536
20,509Total$122,760 $124,304
Securities with fairvalue exceeding
book value

Type

1,139
1,571
(27)

(0)
(27)
$1,544

Millions of yen
2020
Acquisition
Book value
Differencecost¥ 75,378 ¥ 34,954¥ 40,424
43,45743,031
426
261
2,387
14,44457,942(3,418)(7,283)(623)(387)(31,976)(43,687)¥ 14,255

Millions of yen
2019
Acquisition
Book value
Differencecost¥ 121,610¥ 48,812¥ 72,798
194,549
193,355
1,194

Securities with book Sharesvalue exceeding
Japaneseacquisition costgovernment
bonds
Local
112,188
111,315
government
bonds
Corporate
415,824410,561bonds
Others143,228
141,486
Subtotal
987,399905,529
Securities with book Shares
5,688
6,450
value not exceeding Japanese
60,84561,525acquisition costgovernment
bonds
Local
5,628
5,629
government
bonds
Corporate
16,145
16,179bonds
Others299,143314,311
Subtotal
387,449
404,094
Total¥1,374,848 ¥1,309,623

873
5,263
1,742
81,870
(762)
(680)
(1)
(34)
(15,168)(16,645)¥ 65,225

YMFG Annual Report 2020

38

Type

Thousands of U.S. dollars
2020
Acquisition
Book value
Differencecost$ 692,622 $ 321,180 $ 371,442
399,311395,396
3,915

Securities with book Sharesvalue exceeding
Japaneseacquisition costgovernment
bonds
Local
866,838
864,440government
bonds
Corporate
2,230,727 2,208,794
bonds
Others1,958,256 1,825,554
Subtotal
6,147,754 5,615,364
Securities with book Shares
108,720140,127
value not exceeding Japanese
2,697,684 2,764,605
acquisition costgovernment
bonds
Local
1,061,637 1,067,362
government
bonds
Corporate
866,847
870,403bonds
Others2,744,050 3,037,876
Subtotal
7,478,938 7,880,373
Total$13,626,692 $13,495,737

2,398
21,933
132,702532,390(31,407)(66,921)(f) Securities for which purpose of holding changed
There were no securities for which the purpose of holding
changed at March 31, 2020 and 2019.

(5,725)

Impairment losses on securities(3,556)(293,826)(401,435)$ 130,955(d) Held-to-maturity debt securities sold during the fiscal year
There were no held-to-maturity securities sold during
the fiscal year ended March 31, 2020 and 2019.
(e) Available-for-sale securities sold during the fiscal year

39

SharesJapanese government bonds
Local government bonds
Corporate bonds
Others
Total

Millions of yen
2020
Sale
Total gain Total loss
amounton saleon sale¥ 14,689¥10,229¥ 64
1,253,003
6,494
1,453
6,840
59
—
92,8101,263
101,256,723
16,3926,260¥2,624,065¥34,437¥7,787

SharesJapanese government bonds
Local government bonds
Corporate bonds
Others
Total

Millions of yen
2019
Sale
Total gain Total loss
amounton saleon sale¥9,519¥ 6,543¥ 367
1,233,253
2,763
1,368
1,656
—
2
282,929
6,018
166
808,359
7,320
4,063¥2,335,716¥22,644¥5,966YMFG Annual Report 2020

SharesJapanese government bonds
Local government bonds
Corporate bonds
Others
Total

Thousands of U.S. dollars
2020
Sale
Total gain Total loss
amounton saleon sale$ 134,972$ 93,991$ 588
11,513,397
59,671
13,35162,850542—
852,798
11,60592
11,547,579
150,620
57,521$24,111,596$316,429$71,552

Regarding securities (excluding those for which market
prices are not readily available) other than trading securities,
if their market values have fallen substantially below theiracquisition price and are not expected to recover to theacquisition price, such market values are recorded as
the consolidated balance sheet amounts. The valuationdifference is recorded as a loss for the fiscal year in whichsuch difference is realized (hereinafter, “impairment losses”).
During the fiscal year ended March 31, 2020, impairment
losses were ¥771 million ($7,084 thousand) on equity
securities and during the fiscal year ended March 31, 2019,
impairment losses totaled ¥27 million on equity securities.
The basis for determining whether the market value has
fallen significantly is as follows.
If the market value of the securities in general has
fallen by 30% or more compared with the acquisition
cost, the value of the securities is determined to have“fallen significantly.” However in the case of shares andequivalent securities, if their market value has fallen
by 30% or more but less than 50% of the acquisition
cost, the determination of whether the value has “fallen
significantly” takes into consideration other factors suchas the issuing company’s credit risk (independent debtor
classification, external ratings, etc.) and previous percentage
decreases over a specific period of time in the past.

Money held in trust
Information on money held in trust as of March 31, 2020
and 2019 was as follows:(a) Money held in trust classified as trading purposes

Money held in trust classified as
trading purposes

Money held in trust classified as
trading purposes

Money held in trust classified as
trading purposes

Millions of yen
2020
Unrealized gains
Consolidated(losses) included
balance sheet
in profit (loss) for
amountthe fiscal year
¥4,714¥—

Millions of yen
2019
Unrealized gains
Consolidated(losses) included
balance sheet
in profit (loss) for
amountthe fiscal year
¥4,730¥—Thousands of U.S. dollars
2020
Unrealized gains
Consolidated(losses) included
balance sheet
in profit (loss) for
amountthe fiscal year
$43,315$—(b) Money held in trust classified as held-to-maturity
There are no corresponding transactions as at March
31, 2020 and 2019.
(c) Available-for-sale money held in trust

Available-for-sale money heldin trust

Available-for-sale money heldin trust

Millions of yen
2020
Consolidated
Unrealized
Acquisition
balance sheet
gains
cost
amount(losses)¥43,698¥44,695¥(997)

Millions of yen
2019
Consolidated
Unrealized
Acquisition
balance sheet
gains
cost
amount(losses)¥25,835¥25,821¥14

Available-for-sale money heldin trust

Thousands of U.S. dollars
2020
Consolidated
Unrealized
Acquisition
balance sheet
gains
cost
amount(losses)$401,526 $410,686$(9,160)

Unrealized gains (losses) on available-for-salesecurities
Information on unrealized gains (losses) on available-forsale securities and available-for-sale money held in trust
was as follows:
Millions of yen
2020
2019
¥13,501 ¥65,286
14,49865,271(997)
15

Net unrealized gains
Available-for-sale securities
Available-for-sale money heldin trust
Deferred tax liabilities
Unrealized gains on availablefor-sale securities before
following adjustment
Equivalent to non-controllinginterests
YMFG’s interest in net
unrealized gains on valuationof available-for-sale securities
held by affiliates accounted forby the equity method
Unrealized gains on availablefor-sale securities

Thousands of
U.S. dollars
2020$124,056
133,217(9,161)

3,821
9,680

19,57645,71035,11088,946

(9)

(0)

(83)

—

—

—

¥ 9,689¥45,710$ 89,029

Valuation differences on investments in partnerships,
etc., of ¥244 million ($2,242 thousand) at March 31, 2020and ¥44 million at March 31, 2019, for which market
values are extremely difficult to determine, are recorded inavailable-for-sale securities of net unrealized gains in thelist above.

Derivatives(1) Derivative transactions at March 31, 2020 and 2019, towhich hedge accounting is not applied(a) Interest-rate-related:
Millions of yen
2020
Type
Over-the-counter:
Interest rate swaps:
Receivable fixed,
payable floating
Receivable floating,payable fixed
Total

Contract
amounts

Over oneyear

Fair value

Realized
gains(losses)¥22,108¥20,751

¥ 561

¥ 561

22,10920,752

(352)

(352)

¥

¥

¥ 209

¥ 209

—

—

YMFG Annual Report 202040

Millions of yen
2019
Type
Over-the-counter:
Interest rate swaps:
Receivable fixed,
payable floating
Receivable floating,payable fixed
Total

Realized
gains(losses)

Contract
amounts

Over oneyear

Fair value¥21,570¥18,642

¥ 454

¥ 454

21,57018,643

(308)

(308)

—

¥ 146

¥ 146

¥

—

¥

Thousands of U.S. dollars
2020
Type
Over-the-counter:
Interest rate swaps:
Receivable fixed,
payable floating
Receivable floating,payable fixed
Total

Contract
amounts

Over oneyear

Fair value

Realized
gains(losses)$203,143 $190,674$ 5,155$ 5,155

203,152(3,234)(3,234)$ 1,921$ 1,921$

190,683— $—(b) Currency-related:Thousands of U.S. dollars
2020

Type
Over-the-counter:
Currency swaps
Foreign exchange
forward contracts:
Sold
BoughtCurrency options
Sold
BoughtTotal

Contract
amounts

Over oneyear

Fair value

Realized
gains(losses)$2,594,027$954,020$(14,546)$ (3,611)

1,178,857
1,258,780

359,809332,197(21,906)
34,127(21,906)
34,1271,226,381
1,226,381$—

905,642905,642$—(27,015)
27,134$ (2,206)

5,568
6,836
$ 21,014(c) Stock-related:
There were no stock-related transactions as at March 31,
2020 and 2019.
(d) Bond-related:
There were no bond-related transactions as at March
31, 2020.

Millions of yen
2020

Type
Over-the-counter:
Currency swaps
Foreign exchange
forward contracts:
Sold
BoughtCurrency options
Sold
BoughtTotal

Contract
amounts

Over oneyear¥282,308 ¥103,826

128,295
136,993

Fair value¥(1,583)

Realized
gains(losses)¥ (393)39,15836,153(2,384)
3,714(2,384)
3,714

133,467
98,561
133,467
98,561¥— ¥—(5,020)5,034¥ (239)606744¥ 2,287

Millions of yen
2019

Type
Over-the-counter:
Currency swaps
Foreign exchange
forward contracts:
Sold
BoughtCurrency options
Sold
BoughtTotal

41

YMFG Annual Report 2020

Contract
amounts

Over oneyear¥379,563 ¥104,863

Fair value239¥ (945)

14,91914,373

1,014
177

1,014
177

122,01285,952122,01285,952¥— ¥—(4,316)
4,319¥ 1,433

1,246
54¥1,54692,353160,858¥

Realized
gains(losses)Millions of yen
2019

Type
Listed:Bond futures
Sold
Total

Contract
amounts

Over oneyear

Fair value

¥765
¥ —

¥—
¥—

¥(1)
¥(1)

Realized
gains(losses)

¥(1)
¥(1)

(e) Commodity-related:
There were no commodity-related transactions as at March
31, 2020 and 2019.
(f) Credit-derivatives:
There were no credit related transactions as at March 31,
2020 and 2019.

(2) Derivative transactions as at March 31, 2020 and 2019,
to which hedge accounting is applied(a) Interest-rate-related:
Millions of yen
2020
Contract Over one
Fair value
amountsyear

Type
Principal accounting procedure:Interest rate swaps
Receive floating, payable fixed¥225,994 ¥225,994
Interest rate swaps employing
exceptional accounting treatment:Interest rate swaps
Receive floating, payable fixed
168
108
Total
¥
— ¥
—

(b) Currency-related:

Type
Principal accounting procedure:
Currency swaps
Total¥(14,933)*¥(14,933)

Type
Principal accounting procedure:
Currency swaps
Total

Millions of yen
2019
Contract Over one
Fair value
amountsyear

Type
Principal accounting procedure:Interest rate swaps
Receive floating, payable fixed¥127,166 ¥120,000
Interest rate swaps employing
exceptional accounting treatment:Interest rate swaps
Receive floating, payable fixed
382
288
Total
¥
— ¥
—

¥(1,910)*¥(1,910)

Thousands of U.S. dollars
2020
Contract Over one
Fair value
amountsyear

Type
Principal accounting procedure:Interest rate swaps
Receive floating, payable fixed$2,076,578 $2,076,578
Interest rate swaps employing
exceptional accounting treatment:Interest rate swaps
Receive floating, payable fixed
1,544
992
Total
$
— $
—

$(137,214)*$(137,214)(*) Of interest rate swaps employing exceptional accounting treatment, as these instruments
are accounted for together with the hedged loans and bills discounted and borrowings,
their fair value is included in the fair value of said loans and bills discounted within“Financial instruments.”

Type
Principal accounting procedure:
Currency swaps
Total

Millions of yen
2020
Contract Over one
Fair value
amounts
year¥133,852¥—¥22,602¥—¥(1,397)¥(1,397)

Millions of yen
2019
Contract Over one
Fair value
amounts
year¥20,994¥—¥4,900¥ —¥(205)¥(205)

Thousands of U.S. dollars
2020
Contract Over one
Fair value
amounts
year$1,229,918$—$207,682$—$(12,837)$(12,837)(c) Stock-related:
There were no stock-related transactions at March 31,
2020 and 2019.
(d) Bond-related:
There were no bond-related transactions at March 31,
2020 and 2019.

7. LOANS AND BILLS DISCOUNTED
Loans at March 31, 2020 and 2019 include “Risk-Managed
Loan Amounts” as follows:(1) Loans to borrowers in bankruptcy amounting to¥16,372 million ($150 million) and ¥14,168 million
denote loans subject to Article 96-1-3 and 96-1-4 of“Order for Enforcement of the Corporation Tax Act”
(Cabinet Order No. 97 of 1965) on which interest
accrual has stopped as there is doubt about thecollectability of either principal or interest because they
have been contractually past due for a considerable
period of time or for other reasons.

YMFG Annual Report 202042

(2) Other delinquent loans amounting to ¥71,435 million($656 million) and ¥65,253 million denote loans
on which the Banks have stopped accruing interest
excluding loans to borrowers in bankruptcy and loans
on which interest payments are deferred in order topromote recovery of borrowers in economic difficulty.
(3) Loans past due for three months or more amounting
to ¥767 million ($7 million) and ¥1,192 million denoteloans where payment of interest or principal has been
delayed for three months or more excluding loans toborrowers in bankruptcy and other delinquent loans.
(4) Restructured loans amounting to ¥9,931 million($92 million) and ¥12,203 million denote loans toborrowers for which the repayment terms have been
modified to more favorable terms including reductionof interest rate, deferral of interest payments, extensionof principal payments and debt forgiveness withthe objective of promoting recovery of borrowers ineconomic difficulty excluding loans to borrowers inbankruptcy, other delinquent loans, and past-due loans.
(5) The total of loans to borrowers in bankruptcy, otherdelinquent loans, past-due loans, and restructuredloans amounted to ¥98,505 million ($905 million) and¥92,816 million.
The loan amounts disclosed from (1) to (5) above areamounts before deducting an allowance for loan losses.

Commercial bills
Bills discounted are accounted for as financing transactionsin accordance with the Industry Audit Committee Report
No. 24, February 13, 2002, of the JICPA, although theBanks have the right to sell or pledge them without
restrictions. The total face value of commercial bills andpurchased foreign exchange bills obtained as a result of
discounting was ¥32,049 million ($294 million) at March
31, 2020 and ¥41,462 million at March 31, 2019.

Loan Participation
Based on “Accounting Treatment and Presentation ofLoan Participation,” (Japanese Institute of Certified Public
Accountants Accounting System Committee Report No.
3, November 28, 2014), the consolidated balance sheet
amount of loan participation agreements in which theBanks have acquired the economic benefits and risks of
the underlying loans from the original lender was ¥2,694
million ($25 million) at March 31, 2020 and ¥7,015 million
at March 31, 2019.

43

YMFG Annual Report 2020

8. COMMITMENT LINES
Loan agreements and commitment line agreements
relating to loans are agreements that oblige theconsolidated subsidiaries to lend funds up to a certain limit
agreed in advance. The consolidated subsidiaries makethe loans upon the request of an obligor to draw down
funds under such loan agreements as long as there is nobreach of the various terms and conditions stipulated in therelevant loan agreement. The unused commitment balance
relating to these loan agreements amounted to ¥907,251
million ($8,336 million) at March 31, 2020 and ¥920,674
million at March 31, 2019. Of this amount, ¥751,011
million ($6,901million) at March 31, 2020, and ¥776,530
million at March 31, 2019, relates to loans for which theterm of the agreement is one year or less, or unconditional
cancellation of the agreement is allowed at any time.
In many cases the term of the agreement runs its course
without the loan ever being drawn down. Therefore,
the unused loan commitment will not necessarily affectfuture cash flows. Conditions are included in certain loan
agreements that allow the consolidated subsidiaries either
to decline the request for a loan draw-down or to reduce
the agreed limit amount when there is due cause to doso, such as when there is a change in financial condition
or when it is necessary to protect the consolidated
subsidiaries’ credit. Consolidated subsidiaries take various
measures to protect their credit. Such measures include
having the obligor pledge collateral to the consolidated
subsidiaries in the form of real estate, securities, etc., atentering into a loan agreement or in accordance with theconsolidated subsidiaries’ established internal proceduresfor confirming the obligor’s financial condition, etc., atregular intervals.

9. PLEDGED ASSETS

11. ADVANCED DEPRECIATION AMOUNTOF TANGIBLE FIXED ASSETSAt March 31, 2020 and 2019, the following assets were
pledged as collateral for certain liabilities of the Banks.

Cash and due from banks
Securities

Millions of yen
2020
2019
¥
14 ¥
14
373,158
272,155

Thousands of
U.S. dollars
2020
$
129
3,428,816

The collateral was pledged to secure the following:

Deposits
Call money
Payables under securities
lending transactions

Millions of yen
2020
2019
¥ 42,258¥28,693
21,222—
161,466
67,711Thousands of
U.S. dollars
2020$ 388,294
195,001
1,483,653

12. IMPAIRMENT LOSSES
During the fiscal year ended March 31, 2020 and 2019,
impairment losses were recorded on the following assets.
Location

In addition, securities not included in the aboveschedules were pledged as collateral for operatingtransactions, such as foreign exchange contracts andforward exchange contracts. These securities amounted
to ¥6,223 million ($57 million) at March 31, 2020 andsecurities amounted to ¥9,045 million at March 31, 2019.
Also, other assets included security deposits, collateralpledged for transactions involving public funds, collateralpledged for financial instruments, collateral pledged forexchange settlements, the financial futures margin andmargin on bond futures transactions, as indicated below.

Deposits
Collateral pledged fortransactions involving
public funds
Collateral pledged forfinancial instruments
Collateral pledged forexchange settlements
Financial futures margin
Margin on bondfutures transactions

At March 31, 2020 and 2019, accumulated advanced
depreciation amount of tangible fixed assets were ¥8,175
million ($75 million) and ¥8,178 million. There were nosuch advance depreciation expenses in fiscal year ended
March 31, 2020 and 2019.

Millions of yen
2020
2019
¥ 2,552¥ 2,858
1,199
1,188

Thousands of
U.S. dollars
2020$ 23,449
11,01730,587

6,267

281,053

75,60070,000694,661

10
1,000

10
—

92
9,189

10. ACCUMULATED DEPRECIATION
Accumulated depreciation of tangible assets was ¥78,245
million ($719 million) at March 31, 2020, and ¥76,231
million at March 31, 2019.

PrimaryuseTypeWithinAssets for Land,
Yamaguchi leasebuildings,
Prefecture
movableproperty
WithinBusiness- Movable
Hiroshima use assets property
Prefecture
WithinBusiness- Buildings,
Fukuokause assets movable
Prefecture
property
WithinIdle assets Land,
Ehime
for salebuildings
Prefecture
Within Tokyo Business- Buildings,
Metropolitan use assets movable
property
Other
Business- Buildings,
use assets movable
property
Total

Impairment loss
Thousands ofMillions of yen
U.S. dollars
2020
2019
2020
¥ —
¥11
$
—

¥ —

¥0

$

—

¥ 12

¥2

$ 110

¥ 93

¥—

$ 864

¥ 28

¥—

$ 257

¥ 11

¥—

$

¥144

¥14

$1,32392

YMFG and its consolidated subsidiaries that engage in thebanking and securities business group their business-use
assets into the smallest units possible from the standpoint ofmanagement accounting, which is the branch. Idle assets are,in principle, grouped as units of individual assets. In addition,
corporate headquarters, administrative centers, training
facilities, company housing and dormitories are considered
corporate assets, as these are related to all the consolidated
subsidiaries which are engaged in the banking businesses.
Consolidated subsidiaries that do not engage in thebanking and securities business group their assets, inprinciple, on an individual company basis.
In the fiscal year ended March 31, 2020 and 2019, thebook values of the business-use and idle assets, which were

YMFG Annual Report 202044

determined not to create sufficient operating cash flow
are reduced to their recoverable values, and recognized
the reduction of ¥144 million ($1,323 thousand) and ¥14
million as impairment losses. This amount includes landof ¥88 million ($817 thousand), buildings of ¥46 million($414 thousand) and movable property of ¥10 million ($92
thousand) in fiscal year ended March 31, 2020, and land of¥6 million, buildings of ¥5 million and movable property of¥3 million in fiscal year ended March 31, 2019.
The recoverable amount used to estimate theimpairment loss for the fiscal year ended March 31, 2020
and 2019, is the net selling price, which is calculated bydeducting the expected disposal cost from the expected
disposal value.

Payment schedule of borrowed money as of March 31,
2020 is as follows:
Millions of yen¥ 9,232
5,917
4,215
2,890
1,457
4,288
¥27,999

Thousands of
U.S. dollars$ 84,830
54,36938,73026,555
13,38839,401$257,273

14. PROVISION FOR EMPLOYEERETIREMENT BENEFITS
Overview of severance payments and pension plans
YMFG and some consolidated subsidiaries employ funded
and unfunded defined benefit and defined contributionplans as employee retirement benefits.
Defined benefit plans include defined benefit corporate
pension plans and lump-sum retirement plans. Also, someare established as retirement benefit trusts.
Some consolidated subsidiaries employ the simplified
method for calculating retirement benefit obligations.

45

YMFG Annual Report 2020

Retirement benefit obligations at
the beginning of the fiscal year
Service cost
Interest cost
Actuarial differences
Retirement benefit payments
OthersRetirement benefit obligations
at the end of the fiscal year

Millions of yen
2020
2019
¥60,535¥59,819
1,784
99
2,257
(2,995)(4)¥61,676

1,728
152
1,895
(3,061)
2¥60,535

Thousands of
U.S. dollars
2020$556,225
16,393910
20,739(27,520)(28)$566,719(2) Reconciliation of plan asset balances at the
beginning and the end of the fiscal year ended
March 31, 2020 and 201913. BORROWED MONEY

2020
2021
2022
2023
2024
Thereafter
Total

Defined benefit plans(1) Reconciliation of retirement benefit obligation
balances at the beginning and the end of the
fiscal year ended March 31, 2020 and 2019

Balance of plan assets at the
beginning of the fiscal year
Expected return on plan assets
Actuarial differences
Contribution from employer
Retirement benefit payments
OthersBalance of plan assets at theend of the fiscal year

Millions of yen
2020
2019
¥96,302 ¥102,726

Thousands of
U.S. dollars
2020$884,894

2,137
2,033
(4,561)(8,680)759
2,125(2,150)(2,203)301
301¥92,788 ¥ 96,302

19,636(41,909)
6,974(19,756)
2,757$852,596(3) Reconciliation of the balances of retirement
benefit obligations and plan assets at the end of
the fiscal year ended March 31, 2020 and 2019,
and the carrying amounts of net defined benefit
liability and net defined benefit asset

Retirement benefit obligationsof funded plans
Plan assets
Retirement benefit obligationsof unfunded plans
Net carrying amount of
obligations and assets

Millions of yen
2020
2019
¥ 61,588 ¥ 60,449

Thousands of
U.S. dollars
2020$ 565,910(92,788)(31,200)
88(96,303)(35,854)85(852,596)(286,686)
809¥(31,112)¥(35,769)$(285,877)

Net retirement benefit liability
Net retirement benefit asset
Net carrying amount of
obligations and assets

Millions of yen
2020
2019
¥ 3,930 ¥ 2,906(35,042)(38,675)¥(31,112) ¥(35,769)

Thousands of
U.S. dollars
2020$ 36,111(321,988)$(285,877)(4) Retirement benefit costs and their breakdowns
Thousands ofMillions of yen
U.S. dollars
2020
2019
2020
¥ 1,784¥ 1,728$ 16,393
99
152
910(2,137)(2,033)(19,636)(418)
25(3,841)7180643¥ (601)¥ (48)$ (5,531)(7) Plan assets(i) Percentages of major asset categories to total plan assets
are as follows.
2020
30%
47%
23%
100%

Bonds
SharesOthers
Total

2019
29%
49%
22%
100%

(Note) Plan assets include 45% of corporate pension plans established as retirement benefit
trusts at the end of the fiscal year ended March 31, 2020, and 45% at March 31, 2019.

(5) Remeasurements of defined benefit plans(ii) Method of establishing expected long-term return onplan assets(Corporate pensions)
Based on the weighted average rate according to the policy
asset mix (medium- to long term portfolio) of the expected
rate of return for individual investment fiduciary institutions,net of investment cost
(Retirement benefit trusts)
Past dividend performance is converted to yield.

Items posted as remeasurements of defined benefit plans(before tax-effect exclusions) break down as follows.

(8) Basis of actuarial calculation

Service cost*
Interest cost
Expected return on plan assets
Recognized actuarial loss
OthersRetirement benefit costs on
defined benefit plans* Excludes employee contribution portion of defined benefit corporate pensions

Actuarial gain (loss)
Total

Thousands ofMillions of yen
U.S. dollars
2020
2019
2020
¥(7,235) ¥(10,550)$(26,721)¥(7,235) ¥(10,550)$(26,721)(6) Cumulative remeasurements of defined
benefit plans
Items posted as cumulative remeasurements of defined
benefit plans (before tax-effect exclusions) break down
as follows.

Unrecognized actuarial gain
(loss)
Total

Millions of yen
2020
2019
¥2,908¥(4,328)¥2,908¥(4,328)

Thousands of
U.S. dollars
2020$(26,721)

The basis of actuarial calculations as of March 31, 2020
and 2019
Discount rate

2020
2019
0.00%—0.51% 0.00%—0.77%

Expected long-term rate of returnon plan assets

1.50%—2.60% 1.20%—2.60%

Expected rate of salary increase

0.63%—3.84% 0.65%—4.26%

Defined contribution plans
The required contribution to the consolidated subsidiaries’
defined contribution plans at the end of the fiscal year
ended March 31, 2020 and 2019 were ¥279 million ($3million) and ¥282 million, respectively.

$(26,721)

YMFG Annual Report 202046

15. REVALUATION RESERVE FOR LAND
Pursuant to the Law concerning Revaluation of Land
(Law No. 34, promulgated March 31, 1998, the “Law”),
YMFG revalued certain land used for banking operations
by consolidated subsidiaries. The tax-equivalent portion ofthis revaluation amount was recorded in liabilities under“deferred tax liabilities for revaluation reserve for land,”and the reminder under net assets as “revaluation reserve
for land.”
Revaluation date: March 31, 1998
Item 3, Article 3, of the Law establishes the evaluation
method as that prescribed by Article 2-4 of the Order for
Enforcement of Law on Revaluation of Land (Enforcement
Order No. 119, promulgated March 31, 1998), and theamount of land tax is calculated on the basis of the land
tax amount specified under Article 16 of the Land-holding
Tax Act, adjusted rationally in accordance with the basis of
calculation announced officially by the Director General of
the National Tax Administration Agency.
Total difference between market value of land forbusiness use revalued in accordance with Article 10 of the
Law and the total post-revaluation book value of land at
March 31, 2020 and 2019 were ¥18,369 million ($169
million) and ¥20,113 million, respectively.

16. CONTINGENT LIABILITIES —ACCEPTANCES AND GUARANTEESAll contingent liabilities, including letters of credit,
acceptances and guarantees are reflected in acceptancesand guarantees. As a contra account, customers’
liabilities for acceptances and guarantees are shownon the asset side, which represent the Banks’ right ofindemnity from customers.

17. OTHER INCOME
Other income included the gains on sale of stock of¥13,840 million ($127 million), income from investment
partnership of ¥1,574 million ($14 million) and gains on

47

YMFG Annual Report 2020

investment in money held in trust of ¥984 million ($9million) for the fiscal year ended March 31, 2020 and thegains on sale of stock of ¥9,684 million, income frominvestment partnership of ¥922 million and gains on
investment in money held in trust of ¥4 million for the
fiscal year ended March 31, 2019.

18. GENERAL AND ADMINISTRATIVE
EXPENSES
Items included operating expenses for the year ended
March 31, 2020 and 2019 were as follows:

Salary and allowance
Depreciation

Millions of yen
2020
2019
¥31,328¥31,302¥ 6,142¥ 6,472

Thousands of
U.S. dollars
2020$287,862$ 56,437

19. OTHER EXPENSES
Items included other expenses for the year ended March
31, 2020 and 2019 were as follows:

Loss on sale of stock
Losses on devaluation ofstocks and other securities
Loss on investment in money
held in trust

Millions of yen
2020
2019
¥4,408¥2,408
¥ 818
¥ 33
¥

16

¥ 821

Thousands of
U.S. dollars
2020$40,504$ 7,516$147

20. LEASE TRANSACTIONS
1. Finance lease transactions
Finance lease transactions that do not transfer ownership(i) Content of lease assets
Tangible fixed assets
Mainly vehicles and office equipment
Intangible fixed assets
Software(ii) Depreciation method for lease assets
As described in “Lease assets under” (5) Accounting
Policies, in “2. SIGNIFICANT ACCOUNTING POLICIES.”

2. Operating leases
Future minimum lease payments at March 31, 2020 and2019 were as follows:
Borrower

Within one year
More than one year
Total minimum lease payments

Millions of yen
2020
2019
¥123
¥111
726
827
¥849
¥938

Thousands of
U.S. dollars
2020$1,1306,671$7,801Millions of yen
2020
2019
¥1
¥—
7
—
¥8
¥—

Thousands of
U.S. dollars
2020
$ 9
64
$73

2. Significant differences between the statutory effective
tax rate and the actual income tax rate after applicationof deferred income tax accounting for the year ended
March 31, 2020 and 2019 were omitted, as thedifference between the effective statutory tax rate andthe actual tax rate after application of deferred income
tax accounting were 5% or less of the effective statutory
tax rate.

LenderWithin one year
More than one year
Total minimum lease payments

21. INCOME TAXES
1. Significant components of the deferred tax assets andliabilities as of March 31, 2020 and 2019 were as follows:
Millions of yen
2020
2019
Deferred tax assets:
Allowance for loan losses
Deferred gains or losses
on hedges
Net defined benefit liability
Provision for bonuses
Unrealized gains onavailable-for-sale securities
Depreciation
Net operating losses
carryforwards
Losses on devaluation of
securities
Other
Deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Unrealized gains onavailable-for-sale securities
Securities contributed toretirement benefit trusts
Net defined benefit asset
Other
Total deferred tax liabilities
Net deferred tax assets(liabilities)

Thousands of
U.S. dollars
2020¥17,174
4,672¥14,639560$157,806
42,929

1,474
867
664

433
844
—

13,544
7,967
6,101

642
511

699
296

5,899
4,695

505

668

4,640

2,376
28,885(1,501)
27,384

2,306
20,445(1,479)18,966

21,832
265,413(13,792)
251,621(4,486)(19,576)(41,220)(3,045)(3,067)(1,185)(129)(1,352)(9,012)¥18,372(766)(1,361)(24,770)¥ (5,804)(27,979)(12,414)(82,798)$168,823

22. NET ASSETS
Under the Companies Act of Japan (“the Act”), the entire
amount paid for new shares is in principle required to be
designated as common stock. However, a company may,by a resolution of the Board of Directors, designate an
amount not exceeding one-half of the price of the newshares as additional paid-in capital, which is included incapital surplus.
Under the Act, in cases where dividend distribution of
surplus is made, the smaller of an amount equal to 10%of the dividend or the excess, if any, of 25% of common
stock over the total of additional paid-in capital and legal
earnings reserve must be set aside as additional paid-in
capital or legal earnings reserve. Legal earnings reserve
is included in retained earnings in the accompanying
Consolidated Balance Sheets.
Under the Act, legal earnings reserve and additional
paid-in capital may be used to eliminate or reduce a
deficit, or may be capitalized, by a resolution of theshareholders’ meeting.
Under the Act, additional paid-in capital and legal
earnings reserve may not be distributed as dividends,
however all of these may be transferred to other capitalsurplus and retained earnings, respectively, which arepotentially available for dividends.
The maximum amount that YMFG can distribute as
dividends is calculated based on the Non-Consolidated
Financial Statements of YMFG in accordance with the Act.
At the annual shareholders’ meeting, held on June 25,
2020, the shareholders approved cash dividends amounting
to ¥3,063 million ($28 million). Such appropriations havenot been accrued in the Consolidated Financial Statements

YMFG Annual Report 202048

as of March 31, 2020 and to be recognized in the period inwhich they are approved by the shareholders.
At the annual shareholders’ meeting, held on June25, 2019, the shareholders approved cash dividends
amounting to ¥2,807 million. Such appropriations have notbeen accrued in the Consolidated Financial Statements asof March 31, 2019 and to be recognized in the period inwhich they are approved by the shareholders.

23. CHANGES IN NET ASSETS
1. Type and number of shares issued and treasury shareswere as follows:
Number of shares (in thousand)March 31,
March 31,
Increase Decrease
2019
2020
Shares issued
Common stock
Total
Treasury stock
Common stock*1, *2, *3
Total

264,353
264,353————

264,353
264,353

10,74910,749

445
445

635
635

10,55910,559*1 The increase in the number of treasury stock is due to additional increase of Board Benefit
Trust (BBT) of 443 thousand shares, and purchases of shares constituting less than one
trading unit, totaling 1 thousand shares.
The decrease of treasury stock included the sale of 533 thousand shares from the ESOP
Trust for Group employees to the YMFG stock ownership plan, the 85 thousand shares forthe exercise of share options, 16 thousand shares due to the exercise of rights of the Board
Benefit Trust (BBT) and purchases of shares constituting less than one trading unit, whichamounted to 0 thousand shares.
*2 Treasury stock as of beginning and ending of fiscal year ended March 31, 2020 include 990
thousand shares and 456 thousand shares held by the ESOP Trust for employee shareholders.
*3 Treasury stock as of beginning and ending of fiscal year ended March 31, 2020 include
578 thousand shares and 1,005 thousand shares held by the Board Benefit Trust (BBT).

Number of shares (in thousand)March 31,
March 31,
Increase Decrease
2018
2019
Shares issued
Common stock
Total
Treasury stock
Common stock*1, *2, *3
Total

264,353
264,353————

264,353
264,353

17,853
17,853

14,653
14,65321,756
21,756

10,75010,750*1 The increase in the number of treasury stock is due to market purchases of 14,644
thousand shares, and purchases of shares constituting less than one trading unit, totaling
8 thousand shares.
The decrease of treasury stock included 21,184 thousand shares stemming from theexercise of convertible bond-type share options to shares denominated in euros and
US dollars that matured in 2018, the sale of 332 thousand shares from the ESOP Trustfor Group employees to the YMFG stock ownership plan, the 167 thousand sharesfor the exercise of share options, 52 thousand shares due to the exercise of rights of
the Board Benefit Trust (BBT), the sale of 17 thousand shares to the parent company
of a consolidated subsidiary and an equity-method affiliate and purchases of sharesconstituting less than one trading unit, which amounted to 0 thousand shares.
*2 Treasury stock as of beginning and ending of fiscal year ended March 31, 2019 include 1,323
thousand shares and 990 thousand shares held by the ESOP Trust for employee shareholders.
*3 Treasury stock as of beginning and ending of fiscal year ended March 31, 2019 include
631 thousand shares and 578 thousand shares held by the Board Benefit Trust (BBT).

2. Stock options
Stock options at March 31, 2020 and 2019 were ¥127
million ($1 million) and ¥209 million, respectively.
3. Information on dividends is as follows:(a) Dividends paid in the fiscal year ended March 31, 2020
and 2019.

Type of shares
Resolved at the boardof directors meetingon May 11, 2019
Common stock
Resolved at the boardof directors meeting on
November 7, 2019
Common stock

Aggregate
amount ofdividends(Millionsof yen)Cashdividends
per share(Yen)

Recorddate

Effective
date¥2,807*1¥11.00 Mar. 31, Jun. 26,
2019
2019

¥3,063*2¥12.00 Sep. 30, Dec. 10,
2019
2019

*1 The total amount of dividend on common stock includes ¥17 million in dividends to ESOP
Trust for employee shareholders and Board Benefit Trust (BBT).
*2 The total amount of dividend on common stock includes ¥15 million in dividends to ESOP
Trust for employee shareholders and Board Benefit Trust (BBT).

Type of shares
Resolved at the boardof directors meetingon May 11, 2018
Common stock
Resolved at the boardof directors meeting on
November 9, 2018
Common stock

Aggregate
amount ofdividends(Millionsof yen)Cashdividends
per share(Yen)

Recorddate

Effective
date¥2,488*1¥10.00 Mar. 31,
2018

Jun. 27,2018¥2,751*2¥11.00 Sep. 30,
2018

Dec. 10,2018*1 The total amount of dividend on common stock includes ¥20 million in dividends to ESOP
Trust for employee shareholders and Board Benefit Trust (BBT).
*2 The total amount of dividend on common stock includes ¥19 million in dividends to ESOP
Trust for employee shareholders and Board Benefit Trust (BBT).

Type of shares
Resolved at the boardof directors meetingon May 11, 2019
Common stock
Resolved at the boardof directors meeting on
November 7, 2019
Common stock

AggregateCashamount ofdividends
dividends
per share(Thousands of(U.S. dollars)
U.S. dollars)

Recorddate

Effective
date$25,792*1$0.10 Mar. 31, Jun. 26,
2019
2019

$28,145*2$0.11 Sep. 30, Dec. 10,
2019
2019

*1 The total amount of dividend on common stock includes $156 thousand in dividends to
ESOP Trust for employee shareholders and Board Benefit Trust (BBT).
*2 The total amount of dividend on common stock includes $138 thousand in dividends to
ESOP Trust for employee shareholders and Board Benefit Trust (BBT).

49

YMFG Annual Report 2020

(b) Dividends to be paid in the fiscal year ending March 31,
2020 and 2019 are as follows:

Type of shares
Common stock(Millions of yen, except per share amount)
AggregateCashamount of Source
dividends Record
Effective
dividendsof
per share
datedate(Millions of dividends
(Yen)
yen)
¥3,063* Retained
earnings¥12.00 Mar. 31,
2020

Jun. 26,
2020* The total amount of dividend on common stock includes ¥18 million in dividends to ESOP
Trust and for employee shareholders and Board Benefit Trust (BBT).

(Millions of yen, except per share amount)
AggregateCashamount of Source
dividends Record
Effective
dividendsof
per share
datedate(Millions of dividends
(Yen)
yen)

Type of shares
Resolved at theboard of directors
meeting on
May 10, 2019
¥2,807*
Common stock

24. STOCK OPTIONS
At a Board of Directors meeting, resolutions were passedwith regard to subscription requirements for the allotmentof stock options as compensation to directors of YMFG’s
banking subsidiaries, Yamaguchi Bank, Momiji Bank andKitakyushu Bank. The details of these resolutions aredescribed below.
1. Recording of expenses related to stock options and thename of line items.
There were no expenses in the fiscal year ended March 31,
2020 and 2019.
2. The contents of the stock options are outlined as below.
Category and number of
persons to be granted
stock options

Retainedearnings¥11.00 Mar. 31,
2019

Jun. 26,
2019* The total amount of dividend on common stock includes ¥17 million in dividends to ESOP
Trust and for employee shareholders and Board Benefit Trust (BBT).

(Thousands of U.S. dollars, except per share amount)
Aggregate
amount ofCashdividends
Source dividends
RecordEffective(Thouofper sharedatedatesands of dividends (U.S. dolU.S. dollars)
lars)Type of shares
Resolved at theboard of directors
meeting on
May 15, 2020
Common stock$28,145* Retained
earnings$0.11 Mar. 31,
2020

Jun. 26,
2020* The total amount of dividend on common stock includes $165 thousand in dividends to
ESOP Trust and for employee shareholders and Board Benefit Trust (BBT).

Number of stock options
by class of stock*2016
27 directors (excluding directors who
are members of the Audit and Supervisory Committee, part-time directors andoutside directors) of YMFG’s subsidiaries, Yamaguchi Bank, Momiji Bank andKitakyushu Bank.
122,000 shares of YMFG’s common
stock

Grant dateAugust 25, 2015

Vesting conditions

No vesting conditions set

Target length of service
periodNo target length of service period set

Period for exercise of rights August 26, 2015—August 25, 2045

Category and number of
persons to be granted
stock options

2015
27 directors (excluding outside directors)of YMFG’s subsidiaries, Yamaguchi Bank,
Momiji Bank and Kitakyushu Bank.

Number of stock options
by class of stock*

182,900 shares of YMFG’s common
stock

Grant dateJuly 29, 2014

Vesting conditions

No vesting conditions set

Target length of service
periodNo target length of service period set

Period for exercise of rights July 30, 2014—July 29, 2044

YMFG Annual Report 2020

50

Category and number of
persons to be granted
stock options

2014
27 directors (excluding outside directors)of YMFG’s subsidiaries, Yamaguchi Bank,
Momiji Bank and Kitakyushu Bank.

Number of stock options
by class of stock*

225,100 shares of YMFG’s common
stock

Grant dateJuly 23, 2013

Vesting conditions

No vesting conditions set

Target length of service
periodNo target length of service period set

Period for exercise of rights July 24, 2013—July 23, 2043

Category and number of
persons to be granted
stock options

2013
27 directors (excluding outside directors)of YMFG’s subsidiaries, Yamaguchi Bank,
Momiji Bank and Kitakyushu Bank.

Number of stock options
by class of stock*294,900 shares of YMFG’s common
stock

Grant dateJuly 30, 2012

Vesting conditions

No vesting conditions set

Target length of service
periodNo target length of service period set

Period for exercise of rights July 31, 2012—July 30, 2042

Category and number of
persons to be granted
stock options

2012
27 directors (excluding outside directors)of YMFG’s subsidiaries, Yamaguchi Bank,
Momiji Bank and Kitakyushu Bank.

Number of stock options
by class of stock*

192,600 shares of YMFG’s common
stock

Grant date

October 31, 2011

Vesting conditions

No vesting conditions set

Target length of service
periodNo target length of service period set

Period for exercise of rights November 1, 2011—October 31, 2041
Note: Stated as the equivalent number of shares.

From the fiscal year ended March 31, 2016, the issuanceof stock options to directors of the YMFG subsidiaries
Yamaguchi Bank, Momiji Bank and Kitakyushu Bank
(excluding directors who are Audit and Supervisory
Committee members, part-time directors and outside
directors) was discontinued.

3. The summary of stock option activity is as indicated below.
(a) Number of stock options
2016
Prior to vesting
As of the endof the previous
consolidated
fiscal year
GrantedExpired
VestedRights not yet
determined
After vesting
As of the endof the previous
consolidated
fiscal year
Rights determined
Rights exercised
ExpiryAmountunexercised

2015

2014

2013

2012

—

—

—

—

—

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

52,60060,00041,30036,70018,700—17,600—35,000—20,700—39,300—19,400—21,900—16,500—20,200—10,900
—
7,800

2016
¥
1
759

2015
¥
1
759

Yen
2014
¥ 1
759

2013
¥ 1
759

2012
¥ 1
759

1,377

1,015

973

619

660

(b) Price information
Exercise price
Average share priceat time of exercise
Fair value on dategranted

4. Method for estimating the number of rights determined
for stock options
Due to the difficulty of rationally estimating the future
number of rights that will expire, in general a method is
employed that reflects only the number of rights that haveactually expired.

25. INVESTMENT AND RENTAL PROPERTYThis note is omitted, as the total amount of investment andrental property is immaterial.

51

YMFG Annual Report 2020

26. CONSOLIDATED STATEMENTS OFCOMPREHENSIVE INCOME

28. RELATED PARTY TRANSACTIONS

Amounts of reclassification adjustments and tax effectamounts related to other comprehensive income in the
consolidated fiscal year ended March 31, 2020 and 2019were as follows.
Millions of Yen
2020
2019
Unrealized gains (losses) on
available- for-sale securities
Amount generated during
the year
Reclassification adjustments
Before tax effect adjustment
Tax effect amount
Unrealized gains (losses) on
available-for-sale securities
Deferred gains (losses)on hedges
Amount generated during
the year
Reclassification adjustments
Before tax effect adjustment
Tax effect amountDeferred gains (losses)on hedges
Remeasurements of defined
benefit plans
Amount generated during
the year
Reclassification adjustments
Before adjustment for
tax effects
Tax effect amountRemeasurements of defined
benefit plans
Total other comprehensive
incomeThousands of
U.S. dollars
2020¥(25,811)¥ (3,090)$(237,168)(25,959)(51,770)
15,739(36,031)(17,133)(20,224)
5,992(14,232)(238,528)(475,696)
144,629(331,067)(14,259)(2,547)(131,021)

760(13,499)
4,112(9,387)963(1,584)482(1,102)

6,983(124,038)
37,784(86,254)(6,818)(10,575)(62,648)(418)(7,236)25(10,550)(3,841)(66,489)

2,205(5,031)

3,210(7,340)20,253(46,236)¥(50,449)¥(22,674)$(463,557)

27. SEGMENT INFORMATIONBusiness segment information is not presented, as theGroup’s business is predominantly consisted of the banking
business, and the securities brokerage, credit card, leasing,consulting and other businesses conducted by the Group
collectively is limited.
Geographic segment information is not presented, as
domestic income of the Bank and consolidated subsidiaries
and their consolidated assets located substantially in Japan
represent more than 90% of the Group’s consolidated
income and assets.
Overseas sales information is not presented, as overseas
sales are less than 10% of the Group’s consolidated income.

Details of the transactions between the consolidated
subsidiaries of YMFG submitting the consolidated financial
statements and related parties are as follows:
Executives and major shareholders of YMFG submitting theconsolidated financial statements (only for individuals), etc.
For the year ended March 31, 2020
Category:
Executive
Name:
Kazuo Tsukuda
Occupation or title:
Director and Audit andSupervisory Committee
Member of YMFG
Relationship with related party: Lender of funds
Content of transaction:
Lending of funds*
Transaction amount:¥223 million ($2 million)(average balance)
Account name:Loan
Year-end balance:¥223 million ($2 million)* Conditions for this transaction and for method of deciding this transaction conditions were
the same as general transactions.

For the year ended March 31, 2019
Category:
Executive
Name:
Kazuo Tsukuda
Occupation or title:
Director and Audit andSupervisory Committee
Member of YMFG
Relationship with related party: Lender of funds
Content of transaction:
Lending of funds*
Transaction amount:¥223 million (averagebalance)
Account name:Loan
Year-end balance:¥223 million* Conditions for this transaction and for method of deciding this transaction conditions were
the same as general transactions.

YMFG Annual Report 202052

29. PER SHARE DATA

Diluted net income per share is calculated based on
the following:
Yen

2020
2019
Net assets per share¥2,458.73 ¥2,580.74
Net income per share
100.0794.65
Net income per share (diluted) ¥ 93.86 ¥ 83.27

U.S. dollars
2020$22.590.92$ 0.86

Net assets per share are calculated based on the following:

Net assets
Amounts excluded fromnet assets
Stock options
Non-controling interests
Net assets attributable tocommon stock at the fiscal
year-end
Number of common stock at
the fiscal year-end used forthe calculation of net assets
per share (in thousands)*

Thousands of
U.S. dollars
2020$5,791,096$ 57,273

127
6,106
624,012209
6,264
654,485

1,167
56,106
5,733,823

253,794

253,603—

Thousands of
U.S. dollars
2020$3,657

398

462

3,657

21,00338,980—20,852150—

38,719
260
—

—
—
—

* Shares of YMFG held by the ESOP trust and the Board Benefit Trust (BBT) are shown on thebalance sheets as treasury stock, so are not included in the above average shares of common
stock during the year. The average number of shares was 1,487 thousand in the fiscal year
ended March 31, 2020 and 1,734 thousand in the fiscal year ended March 31, 2019.

30. SUBSEQUENT EVENTS* Shares of YMFG held by the ESOP trust and the Board Benefit Trust (BBT) are shown on thebalance sheets as treasury stock, so are not included in the above number of common stockat the fiscal year-end used for the calculation of net assets per share. This number of shares
held by the ESOP and the Board Benefit Trust (BBT) was 1,568 thousand as of March 31,
2019, and 1,461 thousand as of March 31, 2020.

For the year ended March 31, 2020
There were no significant subsequent events. Dividends
were made in June 2020. Please refer to “22. NET ASSETS.”

Net income per share is calculated based on the following:

For the year ended March 31, 2019
There were no significant subsequent events. Dividends
were made in June 2019. Please refer to “22. NET ASSETS.”

Net income attributable toowners of the parent
Amount not attributable tocommon shareholders
Net income attributable toowners of the parent forcommon stock
Average shares of common
stock during the year*(in thousands)

53

Millions of yen
except number ofshares2020
2019¥630,245 ¥660,958¥ 6,233 ¥ 6,473

Net income adjustment
attributable to owners of
the parent
Interest expenses(excluding tax amount)
Increase of shares ofcommon stock
Bonds with warrant
Warrant
Dilutive shares not including
calculation due to no
dilutive effectMillions of yen
except number ofshares
2020
2019
¥ 398
¥ 462

YMFG Annual Report 2020

Millions of yen
except number ofshares2020
2019¥ 25,391 ¥ 23,149

Thousands of
U.S. dollars
2020$233,309———

25,391

23,149233,309

253,747

244,575—