Annual Report2014Profile
Musashino Bank is the only regional bank whose operationalbase consists of Saitama Prefecture. The prefecture lies
immediately to the north of Tokyo, and many of its residents
commute to work in the capital. Currently, 7.22 million(estimated) people live in Saitama, making it the country’s
fifth most populous prefecture after Tokyo, Kanagawa, Osaka,

and Aichi, and the population is still climbing.
Since its establishment in 1952, Musashino Bank has been
one of Saitama Prefecture’s core financial institutions, andhas played a major role in supporting the development of theregional economy and local industries for six decades.

Corporate Philosophy“Working in harmony with the local community it serves”“Maintaining a deep respect toward customers”

To contribute to the prosperity of the local community and to secure

To engage in bold management that anticipates change while provid-

growth and development in partnership with the region.

ing the highest quality services throughout the organization as a whole.

Bank Data (nonconsolidated basis, as of March 31, 2014)

Subsidiaries and Affiliated Companies

Head office:Home page:
Security code:
Established:
Networks:

NameLine of Business

The Bugin General Lease
Co., Ltd.

Leasing services

The Bugin Guarantee
Co., Ltd.

Loan guarantees for individuals(As of September 30, 2014)

10-8, Sakuragi-cho 1-chome, Omiya-ku, Saitama
http://www.musashinobank.co.jp/ (Japanese only)
8336 (First section of the Tokyo Stock Exchange)
March 6, 1952
Number of branches: 95 (Saitama Prefecture: 92 [of which
1 is a sub-branch], outside Saitama Prefecture: 3)
Number of mortgage loan centers: 9
Number of office: 1
2,263¥4,063.1 billion¥3,788.7 billion¥3,078.6 billion¥45.7 billion

Employees:
Total assets:
Deposits:
Loans:
Common stock:
Number of correspondent
198
arrangements:
Issued common stock:33,805 thousand shares

The Musashino Card Co., Credit card business ( JCB, VISA),
Ltd.
loans and loan guarantees related tocard services
The Bugin System Service Development, sale and maintenanceCo., Ltd.
of computer systems
The Bugin Economic
Research Institute Co.,Ltd.

Research into the regional economy,
consultation, information services,and holding of seminars

The Bugin Capital Co.,Ltd.

Management support for venturebusinesses

Head Office

SaitamaPrefecture

IbarakiPrefecture

Tokyo
Kanagawa
Prefecture

Contents

1
Consolidated Financial Highlights
2
Message from the President5	Long-term Vision/Medium-Term Management Plan
6
Corporate Governance7
Risk Management

8Compliance9	Appealing Business Foundation(Saitama Prefecture)
10	Corporate Social Responsibility (Main Initiatives)
16 Consolidated Balance Sheets

Chiba
Prefecture

17	Consolidated Statements ofIncome and Comprehensive Income
18	Consolidated Statements of Changes in Net Assets
20	Consolidated Statements of Cash Flows
21 DirectoryConsolidated Financial Highlights
The Musashino Bank, Ltd. and Consolidated Subsidiaries Years Ended March 31, 2014 and 2013

Thousands of
U.S. Dollars(Notes 1 and 2)
2014

Millions of Yen (Note 1)
2014
2013

At Year-end
Total Assets............................................................................................
Deposits including negotiable deposit....................................................
Loans and Bills Discounted....................................................................
Trading Account Securities and Investment Securities............................
Total Net Assets.....................................................................................
Capital Ratio (based on domestic standards) (%)...................................
For the Year
Total Income.........................................................................................
Total Expenses.......................................................................................
Income before Income Taxes..................................................................
Net Income............................................................................................

¥4,079,797
3,780,337
3,066,023
772,397
202,766
11.22¥3,929,343
3,649,510
2,950,897
722,478
194,654
10.76$39,640,477
36,730,835
29,790,352
7,504,838
1,970,132¥¥$   747,373
565,057
182,315
100,228

76,91958,15518,763
10,31577,68059,067
18,612
11,142

Notes 1 . In this annual report, Japanese yen (in millions) and U.S. dollars (in thousands) are indicated with fractions omitted.
2. U.S. dollar figures have been translated at the rate ¥102.92 to U.S.$1, the prevailing market rate as of March 31, 2014.

Total income

Total expenses

Net income(¥ million)(¥ million)(¥ million)

81,93878,96877,68076,919

11,142
67,37259,562

9,621
59,067

10,31558,1557,443

FY2010 FY2011 FY2012 FY2013

FY2010 FY2011 FY2012 FY2013

FY2010 FY2011 FY2012 FY2013

Forward-Looking Statements: This annual report contains forward-looking statements regarding the Bank’s financial condition and results ofoperations. These forward-looking statements, which include the Bank’s views and assumptions with respect to future events, involve certain
risks and uncertainties. Actual results may differ from forecasts due to changes in economic conditions and other factors.
1Message from the Presidentof 2020. With Olympic events scheduled to be heldat three venues in Saitama, the prefecture is facing abright future that holds much promise.
Initiatives in First Year of Medium-Term
Management Plan

Kikuo Kato
President

Economic Trends
Looking back over fiscal 2013, the fiscal year ended
March 31, 2013, in the first half, exports recoveredas the Japanese economy witnessed the correction in
the yen’s high value and rising stock prices stemmingfrom financial and economic stimulus measures.
In the second half, the economy continued on amodest recovery track buoyed by the psychologicalsupport of last-minute demand before the consumption tax increase and the decision to host the Tokyo
Olympics and Paralympics, as well as increased
consumer spending and home investment.
The economy of Saitama Prefecture, just like
Japan’s economy, saw consumer spending and home
investment recover and the prefecture’s corporate
earnings rebound. At the same time, demand forcapital investment is expected to expand.
Saitama Prefecture is centrally located to the massive Tokyo metropolitan area market and a variety
of industries are gathered here. The Metropolitan
Inter-City Expressway is scheduled to be open to
traffic through the entire prefecture in 2014, thus
assuring an even better transportation network.
Further, Tokyo was selected for the first time in
56 years as the city to host the Summer Olympics
2

Under these circumstances, the Bank formulated
its long-term vision for turning it into “the region’s
number one bank” (a Value-making Bank) thatcreates new value in Saitama.
The Bank has divided the period for achieving this vision into three phases and started
the medium-term management plan “MVP(Musashino Value-making Plan) 1/3,” the firstphase, in April 2013. Under this plan, we havetaken various measures focused on growth andcreation strategies in order to build the number
one bank in the region.
Initiatives for fiscal 2013, the first year of theplan, for growth strategies we established the“Hoken Plaza/Saitama Shintoshin (Insurance
Plaza/Saitama New Urban Center),” the Bank’s
first new type of branch. Also, in April 2014, weenhanced our branch network by establishing our
95th branch in Higashimurayama City, whichshares a border with the southern part of Saitama,and to which we have a deep geographic andeconomic connection.
For individual customers, we began offering the“Musashino Support Loan for residences for elderly
people with service” that can be used to finance theconstruction of Elderly housing with supportive
services, the Reverse Mortgage Loan, which helps
seniors achieve a fulfilling second life, Kirarie, theMusashino Free Loan for Women, and the NISA
tax-free small investment account. For corporate
customers, we meet their financing needs and have
expanded our consulting functions by setting up an
Information Center that provides valuable information to them. In growth fields, we have aggressively
promoted activities for relevant businesses throughour dedicated team of experts. To further strengthen
our support for entry into overseas markets, weformed a business alliance with Nippon Export andInvestment Insurance (NEXI) and local banks, joined
the Fastpass System that provides integrated support
for overseas business expansion by introducing
customers to domestic and overseas aid organizations.
As for our creation strategies, we concluded theAgreement on Comprehensive Partnership with
Saitama Prefecture in 16 fields that includes thepromotion of industry and small- and medium-size
enterprises. This marked the first time that a privatesector enterprise had participated in joint research ofpolicy issues with prefectural and municipal officials
as a partner business based on this agreement. We
conducted joint public- and private-sector research
and we plan to make efforts to commercialize ourresearch results.
Year ended March 31, 2014
Deposits and assets in custody
As a result of efforts to expand our communitybased business foundation and promotecomprehensive transactions, deposits, etc.* in fiscal
2013 increased ¥128.3 billion compared with theprevious fiscal year to ¥3,788.7 billion. Assets incustody rose ¥34.1 billion year on year to ¥637.8
billion due to favorable sales of investment trusts.
* Deposits, etc. means deposits including CDs.

Loans and bills discounted(¥ billion)

2,785

2,856

2,950

3,066

Loans
Loans outstanding increased ¥116.0 billion to¥3,786.0 billion owing mainly to active efforts to
respond to the needs of small- and medium-sizedenterprises (SMEs) within the prefecture. This
marks the first time since the Bank’s foundingthat loans outstanding exceeded the ¥3 trillion
figures. In addition, the number of companies
that have received loans from the Bank returnedto the 20,000 mark, the number prior to Lehman
Brothers’ collapse.
Earnings
The Bank’s capital profits, which shows its earning
capacity in the banking business decreased by ¥2.8
billion to ¥15.9 billion due to a decrease in net
interest income amid low interest rates, despite anincrease in fees and commissions mainly attributable to higher assets in custody fees. Recurringincome decreased by ¥400 million to ¥16.7 billion,
despite an improvement in stock-related losses(balance of stocks in three accounts). Net income
declined by ¥700 million to ¥9.7 billion.
On a consolidated basis, recurring income
decreased by ¥100 million to ¥18.8 billion, while net
income declined by ¥800 million to ¥10.3 billion.

Deposits including negotiable deposit

Net business income (Non-consolidated)(¥ billion)(¥ million)

3,437

3,539

3,649

3,780

20,547

19,336

18,853
15,989FY2010 FY2011 FY2012 FY2013

FY2010 FY2011 FY2012 FY2013

FY2010 FY2011 FY2012 FY2013

3

Capital ratio

For the Future of Saitama Prefecture

The Bank’s capital ratio (Basel III, domestic
standard) for fiscal 2013 rose 0.46 of a percentage
point year on year to 10.91% on a nonconsolidated
basis due to the issue of subordinated bonds inDecember 2013. The Bank continued to maintainhighly sound financial health with a capital ratio of
11.22% on a consolidated basis.

Amid major changes in the business environment
surrounding the Bank, competition with otherbanks and businesses is expected to intensify.
However, fiscal 2014 is an important year forachieving the goals of the medium-term management plan and we will implement measures thatprecisely and swiftly meet the needs of customers
including for the facilitation of financing.
Through these efforts, we will establish acompetitive business structure and all officer andemployees will continue to work to the utmost to
become “the region’s number one bank” (a Valuemaking Bank) that creates new value in Saitama.
As we work toward achieving our established goals,
we kindly request your continued support andunderstanding.

Return of profits to shareholders
Over the 44 years since its listing on the Tokyo
Stock Exchange in 1969, the Bank has continuously paid out stable dividends, despite majorchanges in all aspects of the surrounding environment. In the fiscal year ended March 31, 2014,
we decided to pay an year-end dividend of ¥40
per share (an annual dividend of ¥75 per share)in order to repay the constant support we receivefrom all of our shareholders.
The shareholders return ratio in fiscal 2013 was
25.7%.

Capital ratio

Dividend payout ratio(%)(¥ million)

10.79

10.88

10.76

10.67

10.59

10.45

11.22

31.4%
25.2%
2,869
835
2,033

FY2010 FY2011 FY2012

FY2013(Basel III, Domestic Standard)ratio (Non-consolidated)— Capital— Capital ratio (Consolidated)

Minimum level required for banks operatingin Japan: 44President

39.1%

10.91

4

Kikuo Kato

2,371

3,303
946

25.7%
2,514

2,357

FY2010 FY2011 FY2012 FY2013
Shareholder return ratio—■ Dividend amount■ Amount of purchased treasury stock

FY2010 FY2011 FY2012 FY2013
Dividend
payout ratio (%)

27.74

25.27

22.46

25.79

An annualdividend (Yen)

60

70

70

75

Long-term Vision/Medium-term Management Plan
The Bank formulated a long-term vision aiming 10 years into the future of becoming the region’s number
one bank that creates new value in Saitama. To achieve this vision, the Bank started the medium-term
management plan “MVP 1/3,” in April 2013, built a stable operating base and branch network, andstrengthened its management structure.

Long-term Vision “MVP (Musashino Value-making Plan)”
The region’s number one bank that creates new value in Saitama~ Value-making Bank ~Playing a leading role in Saitama’s development by producing new value in Saitama andgrowing on its own initiative by meeting customer expectations

Reason for
Existence

To contribute to Saitama’s growth and to support its future, not only in its role as a leader ofcommunity-based finance, but by also playing a leading role in the creation of new local initiatives

Basic Policy: Build the Bank to be number one in the region in two business domains that lead to Saitama’s growth
GrowthDomainImprove financial intermediary functions and support local
growth as a local financial institution

Creation
DomainCreate new local industries and business models by ourselves
and stimulate local growth

Medium-term management plan “MVP 1/3”: April 2013 – March 2016
Completion of phase one (period for enhancing readiness) to become thenumber one bank in the region that contributes to the growth of Saitama Prefecture
Three-Year
Goal

GrowthDomainAs a local financial institution, build a foundation
capable of sustaining our growth strategy into the
future by reinforcing sales channels and humanresources, and allocating business resources

Creation
DomainMaintain readiness so that we can plan and achieve by
ourselves a framework for commercialization including
new local industries and business models

Overall Target
Shift in employee awareness andperformance and use of business resources

Three pillars for achieving our growth strategy

Initiate creation strategy

Sales strategy
Intensify sales coverage with focus on branches and expand area
Increase contact with customers with focus on people andstrengthen problem resolution capabilities
Carry out measures focusing on non-face-to-face banking
channels

Conceive and promote commercialization
including local industries, business models, etc.

Human resource strategy
Build and put into effect human resource portfolio plan
Restructure human resource training

Strengthen management readiness in suchareas as compliance and customer protection

••
•
••
••

Build infrastructure
Review business processes
Focus investments on systems that generate revenue•

Strengthen business
management readinessWidelypromote theMusashino
brand

Strengthen Group strategy
Provide a variety of solutions and services thatleverage the Group’ s collective strength

Target figures

Item

Fiscal 2015 target

Balance of deposits (year-end)*Includes balance of assets in custody
Balance of loans (year-end)
Net income
Core OHR
Capital ratio (Basel II Standard at the time of announcement for Management Plan)¥5,000.0 billion¥3,500.0 billion¥10.0 billion
Less than 68%
10% or more

5

Corporate Governance
Basic StanceMusashino Bank recognizes that upgrading andexpanding its corporate governance capabilities are
key priorities of management. In addition to adhering
strictly to a policy of compliance with statutory andregulatory requirements as well as in-house rules
and regulations, every effort is made to ensure thatthe Board of Directors and the Board of Corporate
Auditors stringently monitor directors in the executionof their duties.
One outside director (elected June 2013) and threeoutside auditors who pose no threat of conflicts ofinterest with shareholders monitor and audit directors
in the execution of their duties. They also take part inmeetings of the Board of Directors where they are able
to voice their opinions and offer advice on management
proactively from a broad, independent and neutral perspective. This ensures that the management monitoring
function is both objective and impartial.

Also, the Bank has adopted an executive officer
system in order to reduce the number of directors andto ensure a speedier decision-making process. Directors
delegate authority to executive officers, who are charged
with the responsibility of swiftly and efficiently carrying out their duties as leaders of the Bank’s mainstay
divisions.

Corporate Governance Structure
The Board of Directors is positioned as the ultimate
decision-making body of the Bank. While strictly
adhering to the Bank’s variety of in-house rules andregulations, the introduction of an executive officer
system allows the Bank to separate and clarify the management and business execution functions. A structure
has therefore been put in place to allow directors andexecutive officers to go about their assigned duties andresponsibilities.
Musashino Bank’s management decision-making,business execution and oversight structure is presented
as follows.

Corporate Governance Structure
General meeting of shareholders
Assignment

Assignment
Audit

Board of directors

Board of corporate auditors

Directors

Supervision

Auditors

Discussion

Business execution functions
Executive committee

Discussion

reportAssignment

Indication/
Verification

Audit
Compliance committee

Accounting auditors

Executive officers

Head office/Branches

6

Audit

AdviceAuditing division

Law officeLicensed tax accountants

Risk Management
Risk Management Policy
The risks associated with banking operations are
becoming increasingly varied and complex. In orderto ensure that the manner in which it manages its
business is both sound and pertinent, Musashino Bank
has formulated a set of internal management policies
that take into consideration the Bank’s strategic targets.
Guided by these policies, the Bank works diligently to
manage risk.
In specific terms, the Bank classifies all pertinent risks
according to their nature and attributes. Classifications
comprise (1) comprehensive risks; (2) credit risks; (3)market risks; (4) liquidity risks; and (5) operationalrisks (including administrative and system risks). These
individual risks are then managed according to their
particular characteristics and requirements.

Management Structure by Type of Risk
(1) Comprehensive Risk Management
In order to appropriately manage the wide variety ofrisks on a comprehensive basis, the Bank has established
the Comprehensive Risk Management Department
and is working to develop and improve its management
structure. The Comprehensive Risk Management
Department puts in place rules and criteria for determining the scope of comprehensive risk management,
management methods, evaluation of new products
and operations as well as the level of acceptable risk
after taking into consideration management strategies,
management capacity as well as business scale andcharacteristics. Based on these rules and criteria the
ALM (Asset Liability Management) and other appropriate committees monitor and control risks. The resultsof these activities are reported to the Board of Directors
and other relevant bodies on a regular basis.

(2) Credit Risk Management
Musashino Bank has historically taken steps to maintainthe independence of the Credit Screening Division andto build a stringent screening and management structure
in order to maintain and strengthen the soundness of its
assets. At the same time, the Bank has adopted a ranking
system and endeavored to upgrade and expand its credit
risk management capabilities as a part of efforts toestablish objective decisions and lending policies on an
individual transaction counterparty basis.

(3) Market Risk Management
Musashino Bank has established the Market Risk
Management Department in order to appropriately
manage market risks. Relevant steps are taken to ensure
the independence of the Department from the Market
Management Department and Business Promotion
Division and to establish and develop a structure that is
capable of harnessing the checks-and-balances function.

At the same time, the ALM and Credit Portfolio
Management committees deliberate as and when required.

(4) Liquidity Risk Management
Musashino Bank has established the Liquidity Risk
Management and Cash Management departments in order
to appropriately manage liquidity risk. While ensuring
the independence of the Liquidity Risk Management
Department from the Cash Management Department,
Market Management Department and Business Promotion
Division, every effort is made to establish and develop
a structure that is capable of harnessing the checks-andbalances function. At the same time, the ALM Committee
deliberates as and when required.

(5) Operational Risk Management
Musashino Bank confronts broad and varied operationalrisks. In addition to classifying risks as (i) administrativerisk, (ii) systems risk, and (iii) other operational risks (a.
legal risk, b. human risk, c. tangible asset risk, and d.
reputation risk), putting in place rules on an individual
risk basis and promoting the management of each riskby the appropriate management department, the Bank
has established the Operational Risk Management
Department to undertake the management ofoperational risks on a comprehensive basis. The Bank
also pushes forward measures aimed at establishingand developing a management structure that is capableof harnessing the checks-and-balances function withrespect to each business division. Moreover, theOperational Risk Management Committee deliberates
on issues as and when required.

Crisis Management / BCP Structure
Because bank services such as deposits and foreignexchange are services that are highly beneficial to society
and the public, banks are strongly called on to ensurebusiness continuity as a social responsibility they must
fulfill, and this is recognizes as an important management
issues. As a regional financial institution with its operational base in Saitama Prefecture, Musashino Bank has
established a Business Continuity Plan (BCP) as part of its
contingency planning to ensure operations will continue
in the case of events that are likely to have a major impact
on business, such as large-scale earthquakes, system faults
and pandemic influenza. The Bank has compiled manuals
that establish concrete codes of behavior and countermeasures, and is working to ensure that all employees arethoroughly familiar with business continuity management
measures to apply during emergencies. During the
fiscal 2013 (year ended March 2014), the Bank carriedout drills to train its employees in how to deal withemergencies such as large-scale earthquakes and damage
to account-related systems. Systematic training like thisenables it to improve its BCP by enhancing its effectiveness and rectifying problems that emerge during drills.
7Compliance
Compliance Frame Work
The social and public mission of the banking businessmakes high demands for operations based on fair
and transparent corporate activities in compliancewith laws, regulations, and social norms and inaccordance with the principles of self-discipline andself-responsibility. Accordingly, the Bank considers thethorough compliance of its directors and employees inbusiness operations to be a top priority, and to this end
management is actively involved in the fulfillment of
the Bank’s social and public mission as the Bank works
to strengthen its compliance framework through steps
such as system improvements and the establishment ofteaching methods.
In the future the Bank will further strengthen
its corporate activities based on a strong sense of
ethics and integrity and its management approach inaccordance with principles of self-responsibility as it
further strengthens the compliance framework so thatthe Bank’s daily business activities and actions ensurecompliance with laws, regulations, and social norms.

Basic compliance policy
Musashino Bank’s basic compliance policy entails that
officers and employees go about their daily duties inaccordance with the Bank’s two fundamental management guidelines, namely its corporate philosophy and
Code of Behavior.
Under its unwavering corporate philosophy, theBank strives to work in harmony with the local community it serves while maintaining a deep respect toward
customers. As a local bank in Saitama Prefecture, we
continue contribute to the local community and society.
Furthermore, the Code of Behavior is founded on “thepublic mission of the bank” and stipulates “provision ofhigh quality financial services,” “compliance with laws,
regulations, rules, etc.,” “open business management
through communication with society,” “respecting thepersonalities of the employees,” “tackling environmental
problems,” “tackling social contribution activities,” and“resolute responses to anti-social forces” and directors
and employees go about their daily duties guided bythese basic policies.

Compliance management structure
The Legal Affairs Office of the Risk Management
Division serves as the compliance management department for the Bank. This Office undertakes the uniform
management of all legal issues relating to compliancewhile providing instructions based on investigation andresearch. At the same time, the Office coordinates with
officers responsible for legal compliance appointed to allbranches while working to strengthen the compliancestructure.
Regular meetings are held with the officers
8

responsible for legal compliance appointed to eachbranch in order to improve the level of compliancethrough the sharing of information and training andalso, meetings are held each month with the officers
responsible for legal compliance in the head officeand each department. These meetings serve as aforum to deliberate on compliance issues and to share
information.
In addition to the aforementioned, periodic
compliance checks are undertaken at each branch by
the officers responsible for legal compliance. In thismanner, the Bank has put in place a mechanism that is
capable of grasping the status of daily compliance management. Furthermore, Musashino Bank has established
the Compliance Committee with the president of thebank serving as the chairperson, which serves as theorganization that checks the status of compliance on
a Bank-wide basis while considering any and all otherimportant matters through regularly held meetings.
In addition, the committee evaluates and checks
on the progress and implementation status of the“Compliance Program” approved by the Board of
Directors.

Compliance manualTo ensure the compliance of its officers and employees,
the Bank has distributed a compliance manual that has
been approved by the board of directors to all of its
officers and employees and is working to ensure that all
staff members are fully aware of its contents.
The compliance manual contains sections on the
Bank’s corporate philosophy, code of behavior, andbasic policies. It contains a section on compliancestandards that stipulates the matters officers andemployees should comply with, a section on thecompliance framework that provides an explanation onvarious structures at the Bank including education andverification structures, a section on laws and regulations
that require directors’ and employees’ compliance whichcontains an explanation on the laws and regulations
that bank employees are required to be knowledgeableof, and a pick-up compliance section that provides amore detailed explanation on matters that should beprioritized in the conduct of daily work. The compliance manual serves as a standard for making decisions
and taking actions in everyday business activities.

Elimination of anti-social forces
The Bank has stipulated the elimination of anti-social
forces as a basic policy and is working toward blocking
all relationships with anti-social forces. Furthermore,in accordance with the basic policy we have establisheda manual which stipulates our specific initiatives forblocking relationships with anti-social forces, and weare endeavoring to educate the bank employees about
this issue through training and other measures.

Appealing Business Foundation (Saitama Prefecture)
1. Favorable Climate and Topography

3. Advanced Traffic Network

Saitama Prefecture covers 3,798 square kilometers
and accounts for around 1% of Japan’s land area,
ranking 39th out of 47 prefectures in size. The areaof prefectural land covered by mountains is less than
the national average, while the area of lowlands andtableland is greater. Rivers account for 3.90% of theprefecture’s area, the highest figure in the country.
Although summers are hot and humid, and dry
winds often blow in winter, it is very comfortable tolive in because it has more clear days annually thananywhere else in Japan, and has few natural disasters.

1) Advanced Road Traffic Network

Dimensions
103km from east to west, 52km from north to south
Prefectural land area (October 2010)
3,798 square meters
Total population (May 2010)
7,231,975 people
Total number of households (May 2010)
2,929,749 households
Average age (May 2010)43.6 years old
Nominal prefectural aggregate production (FY2010)¥20,108.3 billion
Per capita income of prefectural residents (FY2010)¥2.78 million
Climate (Kumagaya Meteorological Office averages for FY2012)
Average temperature: 15.1°C
Average precipitation: 1,079.0 mm

2. The Huge Tokyo Area Market andContinuing Population Growth
Saitama Prefecture, which is Musashino Bank’s mainarea of operations, borders Tokyo and six prefectures.
The Prefecture is located in the heart of the huge market comprising the Tokyo metropolitan area, in which
lives one-third of the population of Japan (approximately 40 million people). While urbanization andindustrialization are progressing in Saitama Prefecture
due to the great convenience gained from being next toTokyo, the population has grown consistently thanks
to an abundance of nature and a comfortable living
environment. (An estimated population of 7.22 million
people as of April 2014)

Saitama is also well-positioned as a transportation hub,with the Kan’etsu, Tohoku, and Joban expressways
traversing north to south and the Tokyo Gaikan
Expressway and the Metropolitan Inter-City (Ken-O)
Expressway traversing east to west.

2) A High-Quality Railway Network
With our head office based in Omiya, the Bank is
directly connected to major cities via the Tohoku,
Akita, Yamagata, Joetsu, and Nagano Shinkansen (bullet train) network. Note that the Hokuriku Shinkansen
is scheduled to commence operations in 2015.

4. Collection of diverse manufacturing industries
1) Diverse Manufacturing Industries
Saitama has a diversity of local industries with theautomotive-related industry at its core.
(e.g., molds and castings in Kawaguchi City, opticalequipment in Saitama City, etc.)

2) Aggressive Development by Attracting
Companies to Saitama Prefecture
Saitama is aggressively encouraging companies toestablish operations within the prefecture as part of its
efforts to promote industry there. From the fiscal 2013
we have been promoting the “Chancemaker Saitama
Strategy III” and with respect to the goal of attracting
150 additional companies to Saitama we have attracted
an additional 82 companies in one year.

5. Concentration of Universities and ResearchInstitutes
More than 250 research institutes and 61 college
campuses are located in Saitama Prefecture. The Bank
has formed alliances with seven universities as part ofits commitment to meeting customer needs in areas
such as research and development and management
issue resolution through cooperation with industry andacademia.

9

Corporate Social Responsibility (Main Initiatives)
Contributing to the Local Economy
Deposits* from region

Loans to region

In response to the lifestyles of our regions’ customers,
the Bank is enhancing its products and services so that
customers can use them with peace of mind. As a resultof these efforts, the total balance of deposits (including
negotiable deposit) as of March 31, 2014 increased¥128.3 billion, or 3.5%, year on year, to ¥3,788.7 billion. Deposits* from region increased ¥52.7 billion to¥3,667.9 billion yen. The ratio of deposits* from region
continued to be high, at 99.26%.
Accordingly, the Bank’s share of deposits* within theprefecture as of March 31, 2014, declined 0.15 of apercentage point to 13.61%.

In addition, total balance of loans as of March 31,
2014 climbed ¥116.0 billion, or 3.9%, year on year to¥3,078.6 billion. Loans to region rose ¥61.7 billion to¥2,676.4 billion, maintain a high loan to region ratioof 86.94%. The Bank’s share of loans in the prefecture
improved 0.09 of a percentage point to 18.47%.

*Deposits exclude negotiable deposit.

Deposits from region

Loans to region(¥ billion)
4,000
3,402.9

3,497.6

3,615.2

3,667.9(¥ billion)
3,000
2,500

2,526.1

2,573.8

2,614.7

2,676.4

FY2010FY2011FY2012FY2013

3,000
2,000
2,000

1,500
1,000

1,000
500
0

FY2010FY2011FY2012FY2013

Share of Deposits within Prefecture

Share of Loans within Prefecture
(%)
20.00

(%)
16.00

14.00

13.79

13.71

13.76

13.61

FY2010FY2011FY2012FY2013

Source:and Statistics Department, Bank of Japan
BalanceResearchratio by depositors
Other 2.67%
Corporate deposits
21.75%

10

18.33

18.43

18.38

18.47

FY2010FY2011FY2012FY2013

18.00

16.00

12.00

10.00

0

14.00

Source:Researchand Statistics Department, Bank of Japan
Loan ratioof SMEs
Other
22.89%

Individual deposits
75.58%

Loan ratio of SMEs
77.11%

Providing SME Management Assistance
Towards a sounder financial position

Status of Development of Assistance Systems

The pursuit of a sounder financial position is ranked
as one of the Bank’s key priorities. Therefore, we arestrengthening our capital adequacy and reducing nonperforming loans (NPL).
Moreover the Bank has maintained a consolidated
and non-consolidated capital adequacy ratio (Basel III
domestic standard) of 11.22% and 10.91% respectively,
so we have continued to maintain a very soundfinancial position. The Bank’s non-performing loan
ratio based on standards, established by the Financial
Reconstruction Act, declined by 0.20 of a percentage
point to 2.30%.

The Bank provides solutions for general management
issues that customers face during growth stages,
undertaking finely tuned responses by leveraging its
consulting functions and collaborating with outside
institutions as needed.

(¥ billion)
100.0

Growth stages

Operation/
Management Business revitalization/ Business continuity/
GrowthNew Business
improvement Business conversion Business liquidation

(%)
5.0

11.3
44.7
2.5

Requests/
questionsMusashino Bank
Inquiry contact

4.0

80.0

40.0

Customers

Solution/
response

Non-performing loans

60.0Management Assistance System

10.2
43.9

3.0

2.3

2.0

••

BranchesMortgage Loan Center
Loan Repayment Support Center

Customer Service Promotion Office
20.0

0

18.7

17.1

FY2012FY2013

1.0

ReportDiscussion0■ Bankrupt and quasi-bankrupt assets (unrecoverable claims) (scale on left side)■ Claims on potentially bankrupt borrowers (scale on left side)■ Substandard loans (scale on left side)● Ratio of loans subject to mandatory disclosure of claims under the
Financial Reconstruction Law (scale on right side)

Head office
Promoting Committee
for Corporate Rehabilitation
ReportDiscussion

Board of directors
Collaboration

Outside consulting companies
and specialists
Public agencies

Economic andindustrialorganizations

Research
institutes

Educational
institutes

Government
financial
institutions

Overseas financial
institutions

11

Initiative related to SME Management Assistance
The Bank provides a wide array of solutions regarding thevarious business stages of client companies while maintaining
systems that meet the needs of clients.
• Diversify Financing Methods
In collaboration with Saitama Prefecture, various municipalities and credit guarantee companies, the Bank diversifies
its financing methods by enhancing government-directedcredit service lineups to meet the needs of client companies
and by handling private placement bonds.
• Financing Methods That Ascertain Corporate Value
The Bank of Japan established a new financing system inAugust 2011 in order to strengthen financing methods thatsuit different types of businesses. In response, the Bank has
established and is aggressively promoting the ABL Fund,which is worth a total of ¥10.0 billion.
• S trengthen Business Matching and Other Measures
The Bank maintains systems to meet a variety of needs inareas including market channel expansion and technology
partnerships by aggressively promoting large-scale business
conferences and business matching activities.
•A ssisting Companies with Foreign Direct Investment (FDI)
The Bank established the Global Business Advisory Officewithin the International and Treasury Division in an effort
to bolster its support for the overseas expansion of its clientcompanies. The bank is currently assisting approximately
50 FDI projects, primarily in ASEAN countries such as
Thailand, Vietnam, and Indonesia.
	 Furthermore, in April 2014 we sent one trainee toKasikornBank in Thailand to locally and directly handle
consultations from companies that have already enteredThailand. In addition to Thailand, we have formed business alliances with leading regional banks in Indonesia,
India, the Philippines, and Vietnam, and we are providing
various forms of assistance including opening accounts andproviding local information. In addition, we are utilizing
government measures to actively help our clients enter
overseas markets and develop their businesses overseas.
Overseas market
entry support
Overseas
expansion• Formed business alliance with Nippon Export and Investment
Insurance (NEXI) *1• Overseas expansion support utilizing overseas development
aid from Japan International Cooperation Agency (JICA)

Export(sales channel expansion)• Fastpass System that provides integrated support foroverseas business expansion

FDI
Initial support• Information dissemination• Various advice
Subsequent support• Deposits/Loans• Japan Bank for International Cooperation (JBIC) local bankcollaboration scheme: Collaboration with local banks(Thailand, Indonesia, India, and Vietnam)
Dispatch bank employees to collaborating banks (Thailand)• Appeal for a global mind (overseas observation and study)• Strengthen alliances with other banks and companies

China
Chinese yuan settlement service
Alliance with Bank of Tokyo-Mitsubishi UFJ, Ltd.

Vietnam
Vietcom Bank

Philippines
Metropolitan Bank andTrust Company

India
State Bank of India

ThailandKasikorn Bank

12

Indonesia
PT Bank Negara Indonesia• Business Assistance Involving Collaboration with Outside
Organizations
We actively support SMEs’ efforts to develop new products
and create new markets by utilizing “Assistance subsidies for
prototype development, etc. by manufacturing SMEs andsmall-scale enterprises” and other programs administeredby the Ministry of Economy, Trade and Industry and othergovernment agencies.
• Support for Management Improvement and Corporate
Rehabilitation
To provide specialized support to client companies thatare further strengthening efforts to facilitate financing
with the aim of management improvement and corporate
rehabilitation, we established the Corporate Management
Support Office in the Credit Division. In conjunction withindividual bank branches, this new division offers help withadvice on management analytics and improvement policies
and support for compiling business improvement plans.
Further, we assist in corporate rehabilitation and management improvement based on the circumstances of eachindividual client company in collaboration with outside
consulting companies and specialists.
	 In addition, the Bank meets various needs that include
business succession and changes in business activities as wellas providing solutions that include M&As and developing
support for changes in business activities when necessary.
Based on its across-the-board assistance systems, includingGroup companies, the Bank provides optimal support
in such areas as management improvement, corporate
rehabilitation and changes in business activities.

Initiative related to Revitalization of theRegionInitiatives for Growth Fields
The Bank addresses financing needs related to growth fields
in a timely manner. The government-directed credit service,
Musashino Growth Platform Strengthening Fund, commenced in September 2010 and as of March 31, 2014 hasreached 849 loans worth ¥45.5 billion.

Initiatives for New Growth Fields
Musashino Bank is strengthening its initiatives for the new
growth fields which are sometimes called the New 3Ks:
Kenko (health including medical and nursing care), Kankyo(the environment), and Kanko (tourism).
• Activities in the Kenko (Health including Medical andNursing Care) FieldIn light of Saitama Prefecture’s rapidly aging population,
large-scale development of medical and nursing facilities
is taking place, so the Bank meets a variety of needs that
go beyond financing needs to include providing matching
services for medical institutions and nursing facilities.

• Activities in the Kankyo (Environment) FieldIn 2012, the Bank began handling the Musashino Solar
Power Generation Business Assistance Loan to support
businesses entering the solar power field by utilizing renewable energy feed-in tariffs. In addition, we held solar power
generation seminars in concert with Bugin* Economic
Research Institute, Ltd. (a Group company think tank) inorder to help improve knowledge and knowhow regarding
power generation businesses.
*Bugin is a short way of reading the characters for Musashino Bank

• Activities in the Kanko (Tourism) FieldWe are working on revitalizing tourism in Saitama throughindustry-academia collaboration with Rikkyo University
and other measures.

Partnership between Saitama Prefecture and the Musashino Bank
Purpose of partnership
Through close partnership and cooperation between the Musashino Bank andSaitama Prefecture, the resources of both sides are being effectively used to“improve services of prefectural residents” and for “local revitalization.”

Musashino Bank
Long-term Vision
the medium-term management
plan “MVP 1/3”
The region’s number one
bank that creates new value in
Saitama[Saitama Pref.]
The Saitama Five Year Plan
Our Commitment: Security,
Growth, Self-reliance
Strengtheningof alliance• Strengthening of thepartnership with the local
government

Three important projects•T he Saitama Eco-Town Project• The Saitama Project for
Healthy Longevity• The Saitama Womenomics
Project

Activities in the Agricultural Field
The Bugin Agricultural Management Course has been held
five times to date, with over 700 farmers participating. We
also actively engage in business matching initiatives in order
to expand sales channels. In November 2013, we held theSaitama Origin! Delicious Food Fair, which attracted over
18,000 visitors.

Saitama Origin! Delicious Food Fair

Activities to Further Revitalize the Region
Establishment of the Community Value
Creation OfficeIn April 2013 we newly established the Community Value
Creation Office in the Local Community Support Division.
The Community Value Creation Office launches a variety ofbusinesses together with people in the regional community
with the aim of contributing to the further revitalization ofthis region.

Conclusion of a Comprehensive Partnership
Agreement with Saitama Prefecture
In October 2013 we became the first financial institution
in the prefecture to conclude a Comprehensive Partnership
Agreement with Saitama Prefecture. The agreement has theobjectives of collaborating and working together to improve
services to the people of the prefecture and revitalize theregion. There are 16 areas of collaboration, for example
including promotion of industry and tourism, employment
promotion, assistance for childcare, communicating theattractiveness of Saitama, next-generation human resources
development, and environmental protection.

Improve services of prefectural residents

Local revitalization

Expansion of our Product Lineup Tailored to
the Life Stages of Individual Customers
Regarding new products and services for individual customers, in June 2013 we commenced handling the For Your
Future dedicated account that makes lump-sum donations
to education funds. Thanks to your support we havereceived many inquiries about this product and have opened
approximately 400 of these accounts worth a total of ¥2.9
billion to date.
Furthermore, in June 2014 we commenced handling theMusashino Inheritance Fixed-Term Deposit which manages
assets received through inheritance with a special interest
rate. We have received many consultations and inquiries fromour customers about this product as well and the number ofthese accounts is currently increasing.
The Reverse Mortgage supports thesecond life of seniors and in September
2013 we commenced handling it
in financial institutions within theprefecture for the first time. In addition,
we are differentiating ourselves fromother banks, for example by selling the
product called Kirarie, the Musashino
Free Loan for Women in response to
the needs such as beauty treatments
Musashino
and childbirth.
Reverse Mortgage

Contributing to the Local Community
Building People-friendly Branches
We are enhancing our branch facilities and making them barrier-freeso that our customers can use thebranches with greater peace of mind
and greater comfort. We are alsooffering hearing devices, simple writing devices, communication boards
and other tools at our counters sothat our customers can conduct theirtransactions and procedures in the
branches with peace of mind.

Communication Board
in Chinese
13

Contributing to Local Social Welfare
Our initiatives include the training of “Dementia
Supporters”* in cooperation with the Saitama Prefecture
government and local community-building by assisting
people with dementia and their families.
In May 2012, we established the Musashino Volunteer
Club as part of a project to commemorate the 60th
anniversary of the Bank’s founding. Volunteer activities havebeen carried out in the areas of social welfare, environmental
protection, and financial education. We are also actively
installing social contribution-type vending machines inthe branches, and donating some of the sales revenue fromthe machines to organizations that are engaged in social
contribution activities.

Support for Financial Education
To support the financial education of the next generation
who are the bearers of the future, the Bank actively conducts
study tours of the Bank and onsite learning for children.
Moreover, the Bank has taken steps to foster awareness aboutbanking work by endowing a university chair, offering internships aimed at university students and high school students
in Saitama Prefecture, and through other initiatives. The
Bank actively
supports thecultivation of
their view ofoccupation.

Measures to Protect our Irreplaceable
Natural Environment
Concern for the Environment
In order to pass on the irreplaceable lush green natural beautyof Saitama Prefecture to the next generation, the Bank hasoffered environment-related products and been actively
involved in programs to protect and create environments. We
are engaged in environmentally-friendly construction of new
branches and renovations of existing branches, for example
by introducing LED lighting and wall greening. The New
Operations Center obtained the banking industry’s first Japan
Habitat Evaluation and Certification Program (JHEP) certification (certification rank: A), a certification program that
evaluates businesses that have enhanced their biodiversity,from the Ecosystem Conservation Society-Japan.
In addition, the entire bank is implementing power-saving
measures including implementing Cool Biz and Warm Biz,
setting the temperatures in the workspaces, reducing thenumber of times lights are turned on, restricting the use ofcopiers, and other measures.

Financial education volunteer at“Child•Dream•Future Festival”

Promoting Local Arts and Sports
To promote local culture and the arts, the Musashino Bankhas been holding concerts by professional violinists in musicrooms and other locations at elementary schools since fiscal
2009. By June 2014 approximately 2,200 children from 20
schools had attended these concerts.
To promote sports, Musashino Bank executed a top
partner agreement with J-League (a Japanese soccer league)
club OMIYA ARDIJA and sponsored the Musashino Bank
Presents Match and also organized a soccer class for local
elementary school students in cooperation with the coachesof OMIYA ARDIJA. Furthermore, we have held BaseballClasses for which we invite former players from the Seibu
Lions to be the coaches and invite the local boys’ baseballteams to attend.

Greening of the Musashi-Urawa Branch

Cooperating in Saitama Prefecture Greening
Projects
Every year, Musashino Bank donates to the Saitama Green
Trust Fund, which was established to appropriate funds tobankroll expense required to protect the prefecture’s richnatural and precious historic environment. Donations thus
far have totaled ¥104.55 million.
Furthermore, The Musashino Green Fund, a charitable
trust, has donated a total of ¥3 million to 21 organizations infiscal 2014 and thus, has been actively involved in programs
to protect and create natural environments of Saitama
Prefecture.

Environmental Education for Employees (theonly environmental program of a regional bank)With the support of the Ecosystem Conservation Society –Saitama, Musashino Bank opened a College in fiscal 2008.
The College provides an educational forum that strives toenhance natural environment conservation and ecosystem
protection knowledge.

14

If employees complete the courses at this college they
can obtain the qualification “Ecosystem Protection Grade 2
Instructor” and 80 people from the Bank held this qualification as of April 30, 2014.

bank employees to participate in areas such as responding
to consultations from customers. We have established the
Bank Employees Promotion System so that employees witha specified contract period such as temporary employees canbe promoted to regular salaried bank employees if they satisfy
certain conditions. We are taking the approach of promoting
temporary employees working in the bank to regular salariedbank employees in order to fairly evaluate the motivation andability of not only the regular salaried bank employees but
also the temporary employees.
In addition we are hiring outside human resources andencouraging their promotion to a variety of fields in which
they can utilize the specialized knowledge and skills that theyacquired in their previous jobs.

Disinfecting of alien plants at the Mitsumata-numa
Biotope

Measures to Train Human Resources
who Can Contribute to the Developmentof the Region
Focusing on Human Resources Development
The Musashino Bank understands its “human resources
strategy” to be one of its important measures, so it is actively
working on human resources development. Through the
MVP Academy seminar course for bank employee development, the Bugin Business School for the career formationof the bank employees, e-Learning, and other measures, weare enhancing human resources development and humanresources utilization. Furthermore, we are building a workplace in which diverse human resources can be successful. For
example, we are actively promoting women to management
positions, and through the introduction of the Senior Staff
System, we actively promoting everyone from young bank
employees to veteran bank employees, regardless of theirgender, to a variety of posts.

Building a Workplace in which Diverse Human
Resources can be Successful
We are building a workplace in which diverse humanresources can be successful. For example, we are actively
promoting everyone from young bank employees to veteranbank employees, regardless of their gender, to a variety ofposts.
Specifically, Musashino Bank is actively promoting initiatives aimed at creating workplaces in which women can playa major role, and in June 2013 a woman officer took up a
position as an outside director.
We are also designing career visions and career paths
for women and actively promoting women to accountexecutive positions and specialized operations. The numberof women in management posts and junior management
posts is steadily increasing and we intend to further increase
this number by 50% during the three years of the current
medium-term management plan.
In addition, for bank employees that have reachedretirement age we have introduced the Career Master Staff
System that reemploys them up until the age of 65. They
utilize their valuable experience and knowledge as veteranHelping Employees to Achieve a Balance
between Work and Family Life
The Bank is working to enhance systems to enable all
employees to balance their work and family life (work-lifebalance), with the goal of building a workplace where they
can actively work for many years.
One of these initiatives is the establishment of the Bugin
Return System that allows former company employees who
had left due to family circumstances to be reemployed.
Regarding childbirth and childcare, we have established aChildcare Leave System and a Short-term Work System thatboth exceed the requirements under the law. In addition,
we have introduced a system under which an employee cango home without working overtime upon their request inadvance. We also implement the Return-to-Work Assistance
Program which provides information to employees during
their childcare leave period to help their personal development and conducts interviews with the employees before
their return to the workplace to facilitate a smooth return.
The other systems we have introduced to assist employees
to maintain a balance between work and family life include
the Nursing Leave System and Nursing Short-term Work
System that assist employees to care for their families.

15

Consolidated Balance Sheets
The Musashino Bank, Ltd. and Consolidated Subsidiaries As of March 31, 2014 and 2013

Millions of Yen
2014
2013

AssetsCash and due from banks.......................................................................
Call loans...............................................................................................
Commercial paper and other debt purchased.........................................
Trading account securities......................................................................
Money held in trust................................................................................
Investment securities..............................................................................
Loans and bills discounted.....................................................................
Foreign exchanges..................................................................................
Lease receivables and lease investment assets...........................................
Other assets............................................................................................
Tangible fixed assets...............................................................................
Intangible fixed assets.............................................................................
Net defined benefit asset........................................................................
Deferred income taxes assets...................................................................
Customers’ liabilities for acceptances and guarantees..............................
Reserve for possible loan losses...............................................................
Total assets..............................................................................

¥ 150,996
10,000
5,959
32
1,500
772,365
3,066,023
3,320
16,31919,91737,049
2,902
1,164
1,658
8,566
(17,977)¥4,079,797¥ 178,775
—
1,545
282
1,495
722,195
2,950,897
2,545
15,231
23,44236,329
3,300
—
3,588
9,294
(19,582)¥3,929,343$ 1,467,121
97,162
57,907
312
14,574
7,504,525
29,790,352
32,262
158,564
193,524
359,987
28,198
11,316
16,11083,230(174,675)$39,640,477

Liabilities
Deposits.................................................................................................
Call money and bills sold.......................................................................
Borrowed money....................................................................................
Foreign exchanges..................................................................................
Bonds.....................................................................................................
Other liabilities......................................................................................
Reserve for employees’ bonuses..............................................................
Reserve for directors’ bonuses.................................................................
Reserve for employees’ retirement benefits.............................................
Net defined benefit liability....................................................................
Reserve for loss on interest refunded.......................................................
Reserve for reimbursement of dormant deposits.....................................
Reserve for point loyalty programs.........................................................
Reserve for contingent losses..................................................................
Deferred income taxes liabilities.............................................................
Deferred income taxes liability on land revaluation................................
Acceptances and guarantees....................................................................
Total liabilities.........................................................................

¥3,780,337
926
24,954177
25,00024,026
1,218
10
—
5,211
89
384
63
612
543
4,910
8,566
¥3,877,031¥3,649,510
940
25,796114
10,00026,148
1,228
13
5,545
—
108
278
60
709
—
4,937
9,294
¥3,734,688$36,730,835
9,000
242,461
1,722
242,907
233,450
11,840104—
50,639
865
3,731
617
5,947
5,277
47,713
83,230$37,670,345¥¥   45,743
38,351
81,735(816)
165,013
18,202(1,423)
7,653—
24,431
37
5,172
194,654¥3,929,343$   444,461
372,631
870,424(7,960)1,679,555
179,362(9,707)73,875(8,979)234,551559
55,465
1,970,132$39,640,477

Net assets
Common stock......................................................................................
Capital surplus.......................................................................................
Retained earnings...................................................................................
Treasury stock........................................................................................
Total shareholders’ equity.........................................................
Unrealized gain on available-for-sale securities........................................
Deferred loss under hedge accounting....................................................
Land revaluation excess..........................................................................
Remeasurements of defined benefit plans...............................................
Total accumulated other comprehensive income......................
Share warrant.........................................................................................
Minority interests...................................................................................
Total net assets........................................................................
Total liabilities and net assets..................................................

45,74338,351
89,584(819)
172,859
18,460
(999)
7,603
(924)
24,14057
5,708
202,766¥4,079,797* U.S. dollar figures have been translated at the rate ¥102.92 to U.S.$1, the prevailing market rate as of March 31, 2014.
16

Thousands of
U.S. Dollars*
2014Consolidated Statements of Income and Comprehensive Income
The Musashino Bank, Ltd. and Consolidated Subsidiaries For the Years Ended March 31, 2014 and 2013

Consolidated Statements of Income
IncomeInterest income:Interest on loans and discounts..........................................................
Interest and dividends on securities....................................................
Other interest income........................................................................
Fees and commissions............................................................................
Other operating income.........................................................................
Other income.........................................................................................
Total income............................................................................
Expenses
Interest expenses:
Interest on deposits............................................................................
Interest on borrowings and rediscounts..............................................
Other interest expenses......................................................................
Fees and commissions............................................................................
Other operating expenses.......................................................................
General and administrative expenses......................................................
Other expenses.......................................................................................
Total expenses..........................................................................
Income before income taxes...................................................................
Income taxes
Current..................................................................................................
Deferred.................................................................................................
Minority interests..................................................................................
Net income for year...............................................................................
Net income per share (yen and dollars)..................................................

Millions of Yen
2014
2013

Thousands of
U.S. Dollars*
2014¥42,215¥45,454$410,180

7,724

7,175

75,048

258

228

2,509

10,765

9,940

104,600

3,246

4,159

31,544

12,70910,722

123,489

76,91977,680747,373

1,997

2,337

19,405

256

321

2,494

1,027

1,167

9,978

4,482

4,411

43,555

1,536

1,253

14,92838,44538,065373,552

10,40911,510101,141

58,15559,067565,057

18,763

18,612

182,315

5,529

6,463

53,7242,416

719

23,481

7,946

7,182

77,206

502

287

4,880

¥10,315¥11,142$100,228¥307.66¥330.11$2.98* U.S. dollar figures have been translated at the rate ¥102.92 to U.S.$1, the prevailing market rate as of March 31, 2014.

Consolidated Statements of Comprehensive Income
Income before minority interests............................................................
Other comprehensive income:Net unrealized losses on securities......................................................
Unrealized gains on hedging derivatives.............................................
Total other comprehensive income....................................................
Comprehensive income..........................................................................
Comprehensive income attributable to:Shareholders of the Company............................................................
Minority interests..............................................................................

Millions of Yen
2014
2013

Thousands of
U.S. Dollars*
2014¥10,817¥11,430$105,109

295

8,556

2,869

424

(14)

4,124

719

8,541

6,994

¥11,537¥19,971$112,103¥10,997¥19,646$106,859

539

325

5,244

* U.S. dollar figures have been translated at the rate ¥102.92 to U.S.$1, the prevailing market rate as of March 31, 2014.

17

Consolidated Statements of Changes in Net Assets
The Musashino Bank, Ltd. and Consolidated Subsidiaries For the Years Ended March 31, 2014 and 2013
Millions of yen
Shareholders’ equity

Balance as of March 31, 2012...........................................
Changes during the accounting period:
Cash dividends..............................................................
Net income...................................................................
Purchases of treasury stock............................................
Disposition of treasury stock.........................................
Cancellation of shares...................................................
Write-off from land revaluation excess..........................
Transfer to capital surplus from retained earnings.........
Net changes in items other than shareholders’ equity....
Total changes during the accounting period..................
Balance as of March 31, 2013...........................................
Changes during the accounting period:
Cash dividends..............................................................
Net income...................................................................
Purchases of treasury stock............................................
Disposition of treasury stock.........................................
Cancellation of shares...................................................
Write-off from land revaluation excess..........................
Transfer to capital surplus from retained earnings.........
Net changes in items other than shareholders’ equity....
Total changes during the accounting period..................
Balance as of March 31, 2014...........................................

Commonstock

CapitalsurplusRetainedearnings

Treasury
stock

Total
shareholders’ equity¥45,743¥38,351¥73,996¥ (905)¥157,186

(950)
9
1,030

(2,371)
11,142
(950)
7
—
—
—

88
(816)

7,827
165,013(11)
8—(2,514)
10,315
(11)
6
—
49
—

(2)
¥ (819)7,846¥172,859(2,371)
11,142(1)(1,030)—45,743

1,031—(1,031)—38,351

7,738
81,735(2,514)
10,315(2)——¥45,743

2

49
(2)

—
¥38,351

7,848¥89,584

Millions of yen
Accumulated other comprehensive income
Unrealized
Deferredgain onloss underavailable-for-salehedge
securities
accounting

Balance as of March 31, 2012........................................... ¥ 9,683
Changes during the accounting period:
Cash dividends..............................................................
Net income...................................................................
Purchases of treasury stock............................................
Disposition of treasury stock.........................................
Cancellation of shares...................................................
Write-off from land revaluation excess..........................
Transfer to capital surplus from retained earnings.........
8,518
Net changes in items other than shareholders’ equity....
Total changes during the accounting period..................
8,518
Balance as of March 31, 2013........................................... 18,202
Changes during the accounting period:
Cash dividends..............................................................
Net income...................................................................
Purchases of treasury stock............................................
Disposition of treasury stock.........................................
Cancellation of shares...................................................
Write-off from land revaluation excess..........................
Transfer to capital surplus from retained earnings.........
257
Net changes in items other than shareholders’ equity....
Total changes during the accounting period..................
257
Balance as of March 31, 2014........................................... ¥18,460

18¥(1,408)

Accumulated
Land
Remeasurements
otherrevaluationof defined comprehensive
excessbenefit plansincome¥7,653¥ —¥15,927

Share
warrant

Minority
interests

Total net
assets¥19¥4,850¥177,984(2,371)
11,142
(950)
7
—

(14)
(14)
(1,423)

—
—
7,653

—
—
—

8,503
8,503
24,431

17
17
37

322
322
5,172

8,843
16,670
194,654(2,514)
10,315
(11)
6
49

424
424
¥ (999)(49)(49)¥7,603(924)(924)¥(924)(291)(291)¥24,140

20
20
¥57

536
536
¥5,708264
8,111¥202,766

Thousands of U.S. Dollars*
Shareholders’ equity

Balance as of March 31, 2013...........................................
Changes during the accounting period:
Cash dividends..............................................................
Net income...................................................................
Purchases of treasury stock............................................
Disposition of treasury stock.........................................
Cancellation of shares...................................................
Write-off from land revaluation excess..........................
Transfer to capital surplus from retained earnings.........
Net changes in items other than shareholders’ equity....
Total changes during the accounting period..................
Balance as of March 31, 2014...........................................

Commonstock

CapitalsurplusRetainedearnings

Treasury
stock

Total
shareholders’ equity$444,461$372,631$794,165$(7,937)$1,603,319

(109)
86
—

(24,432)
100,228
(109)
66
—
483
—

(23)
$(7,960)

76,235$1,679,555(24,432)
100,228(20)——$444,461

20

483
(20)

—
$372,631

76,258$870,424

Thousands of U.S. Dollars*
Accumulated other comprehensive income
Unrealized
Deferredgain onloss underavailable-for-salehedge
securities
accounting

Balance as of March 31, 2013........................................... $176,856
Changes during the accounting period:
Cash dividends..............................................................
Net income...................................................................
Purchases of treasury stock............................................
Disposition of treasury stock.........................................
Cancellation of shares...................................................
Write-off from land revaluation excess..........................
Transfer to capital surplus from retained earnings.........
2,506
Net changes in items other than shareholders’ equity....
Total changes during the accounting period..................
2,506
Balance as of March 31, 2014........................................... $179,362$(13,832)

Accumulated
Land
Remeasurements
otherrevaluationof defined comprehensive
excessbenefit plansincomeShare
warrant

Minority
interests

Total net
assets$74,358$361$50,257$1,891,322$—$237,383(24,432)
100,228
(109)
66
483
4,124
4,124
$ (9,707)

(483)
(483)
$73,875(8,979)(8,979)$(8,979)(2,831)(2,831)$234,551

197
197
$559

5,208
5,208
$55,465

2,574
78,809$1,970,132* U.S. dollar figures have been translated at the rate ¥102.92 to U.S.$1, the prevailing market rate as of March 31, 2014.

19

Consolidated Statements of Cash Flows
The Musashino Bank, Ltd. and Consolidated Subsidiaries For the Years Ended March 31, 2014 and 2013

Millions of Yen
2014
2013

Cash flows from operating activities
Income before income taxes...................................................................
Depreciation..........................................................................................
Impairment losses...................................................................................
Amortization of goodwill.......................................................................
Decrease in reserve for possible loan losses..............................................
Increase (decrease) in reserve for employees’ bonuses..............................
Decrease in reserve for directors’ bonuses...............................................
Decrease in reserve for employees’ retirement benefits............................
Decrease (increase) in net defined benefit asset.......................................
Increase (decrease) in net defined benefit liability...................................
Increase (decrease) in reserve for loss on interest refunded......................
Increase (decrease) in reserve for reimbursement of dormant deposits.....
Increase (decrease) in reserve for point loyalty programs.........................
Increase (decrease) in reserve for contingent losses..................................
Interest income......................................................................................
Interest expenses.....................................................................................
Loss (gain) on investment securities........................................................
Loss (gain) on money held in trust.........................................................
Foreign exchanges gain...........................................................................
Loss (gain) on disposition of fixed assets.................................................
Net (increase) decrease in trading account securities...............................
Net decrease (increase) in loans and bills discounted..............................
Net increase (decrease) in deposits..........................................................
Net increase (decrease) in negotiable certificate of deposits.....................
Net increase (decrease) in borrowed money (excluding subordinated loans)....
Net decrease (increase) in due from banks (excluding due from the Bank of Japan)....
Net decrease (increase) in call loans and others.......................................
Net increase (decrease) in call money.....................................................
Net decrease (increase) in foreign exchange, assets..................................
Net increase (decrease) in foreign exchange, liabilities............................
Interest received.....................................................................................
Interest paid...........................................................................................
Other, net..............................................................................................
Subtotal...................................................................................
Income taxes paid...................................................................................
Net cash provided by (used in) operating activities.................
Cash flows from investing activities
Purchases of securities............................................................................
Proceeds from sales of securities.............................................................
Proceeds from maturities of securities.....................................................
Increase in money held in trust..............................................................
Decrease in money held in trust.............................................................
Purchases of tangible fixed assets............................................................
Proceeds from tangible fixed assets.........................................................
Purchases of intangible fixed assets.........................................................
Payments for execution of asset retirement obligations...........................
Net cash provided by (used in) investing activities..................
Cash flows from financing activities
Borrowing of subordinated loans............................................................
Repayment of subordinated loans...........................................................
Issuance of subordinated bonds..............................................................
Cash dividends paid...............................................................................
Cash dividends paid to minority shareholders........................................
Purchase of treasury stock.......................................................................
Proceeds from sales of treasury stock......................................................
Net cash provided by (used in) financing activities..................
Net increase (decrease) in cash and cash equivalents.............................
Cash and cash equivalents at beginning of year.....................................
Cash and cash equivalents at end of year...............................................

¥ 18,763
2,674
58
18
(1,605)
(9)
(2)
—
345
102
(19)
105
2
(97)
(50,198)
3,280(1,453)
(13)
(312)
35
250
(115,125)
62,996
67,830(842)
15,054(14,414)
(14)
(774)
62
52,448(3,787)(3,191)
32,167(7,420)24,747¥ 18,612
2,608
239
18
(1,009)
1
(1)
(3)
—
—
27
42
(10)
(81)
(52,858)
3,826
(954)
0
(420)
57
(79)
(94,598)
114,824(4,848)(623)(40,080)
30,781(1,712)(252)(20)
54,682(4,464)(2,653)21,048(5,320)15,728$ 182,315
25,985567
175(15,596)
(95)
(24)
—
3,353
993
(190)
1,024
28
(946)
(487,739)
31,878(14,126)(132)(3,035)346
2,436(1,118,591)
612,094
659,055(8,183)
146,273(140,056)(138)(7,526)
609
509,599(36,799)(31,008)
312,548(72,095)
240,452(319,008)
193,026
79,001(4)—(2,402)
115
(656)
(20)
(49,949)(316,265)
263,541
80,273—0(2,798)5(1,237)(3)
23,515(3,099,575)
1,875,497
767,599(43)—(23,338)
1,117(6,380)(202)(485,325)——
15,000(2,514)(3)(11)
6
12,477(12,725)
138,187¥125,462

2,500(5,000)—(2,371)(3)(950)
7(5,818)33,425
104,762¥138,187——
145,744(24,432)
(35)
(109)
66
121,232(123,640)
1,342,666$1,219,026* U.S. dollar figures have been translated at the rate ¥102.92 to U.S.$1, the prevailing market rate as of March 31, 2014.
20

Thousands of
U.S. Dollars*
2014Directory
Organization Chart (as of July 1, 2014)
General Meeting of Shareholders

General Planning and Management Division
Strategic Planning OfficeFinancial Affairs Office
Tokyo Office
Risk Management Division
Legal Affairs Office
Personnel Division
Secretariat
Local Community Support Division
Industrial Research OfficeCommunity Value Creation OfficePublic Funds Management OfficeBusiness Promotion Division
Mortgage Loan Center Management OfficeBusiness Planning Division
Customer Service Promotion Office
Credit DivisionCorporate Management Support Office
Credit Planning DivisionInternational and Treasury Division
Global Business Advisory Office
General Affairs Division
Administration Division
Systems Management Office
Operation Services Division
Auditing DivisionCorporate Auditors
Board ofCorporate Auditors
Board of Directors
Executive Committee
President*
Senior Managing Director*
Managing Directors
Director (outside)* and Representative Director

Board of Directors, Corporate Auditors and Executive Officers (as of July 1, 2014)
President
Kikuo Kato
Senior Managing Director
Hideo Machida

Managing Directors
Motonobu Nakamura
Kenichiro Inaba
Koichi Akagi
Kazuya Koyama
Kazumasa Nagahori

Corporate Auditors
Hidemi Shimizu (standing)
Makoto Ishikawa (standing)Shozo Nishijima (outside)
Atsumu Kuroishi (outside)
Tomio Kezuka (outside)

Managing Executive Officer
Minoru Watanabe
Hiromasa Miyazaki

DirectorEmi Ishida (outside)

Executive Officers
Takeshi Sekiya
Yuichi Tanaka
Yoshiro Kenmochi
Masahiro Saito
Takafumi Hoshina
Toshiyuki Shirai
Kenji Sakamoto

Investor Information (as of March 31, 2014)
Common Stock
Authorized:
Issued:Number of shareholders:Number of Shares Held by Type of Shareholders
80,000 thousand shares
33,805 thousand shares
13,082Financial Institutions
39.37%

Major Shareholders
Name

Number ofsharesJapan Trustee Services Bank, Ltd. (trust account)
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Japan Trustee Services Bank, Ltd. (trust account 4)
The Chase Manhattan Bank, N.A. London Secs Lending
Omnibus Account (Standing proxy: Mizuho Corporate
Bank, Ltd. Custody & Proxy Dept.)
Musashino Bank Industries Employees’ Stockholding Association
Meiji Yasuda Life Insurance Company
Sumitomo Life Insurance Company
The Master Trust Bank of Japan, Ltd. (trust account)
BNP PARIBAS SERVICES LUXEMBOURG/JADEC/ABERDEENGLOBAL CLIENT ASSETS (Standing proxy: The Hongkong andShanghai Banking Corporation Limited Tokyo Branch)
CBNY DFA INTL SMALL CAP VALUE PORTFOLIO(Standing proxy: Citibank Japan Ltd.)2,517,600
1,218,987
1,210,200

Shares held asa percentage of
total outstanding
shares (%)
7.44
3.60
3.57

894,1102.64

819,268
735,858
702,900
702,800

2.42
2.17
2.07
2.07

585,100

1.73

540,700

1.59* The above figures have been rounded to the second decimal place.

Other corporations
25.97%

Foreign companies
and others
16.81%

Individuals and others
16.71%

Financial instruments
business operators
1.14%

Notes: 1. Some treasury stock is contained in “Individuals andothers.”2. “Other corporations” includes a unit of 14 shares under
the name of Japan Securities Depository Center, Inc.

21

10-8, Sakuragi-cho 1-chome, Omiya-ku,
Saitama 330-0854
Phone: +81-48-641-6111