Annual Report2017Profile
Musashino Bank is the only regional bank whose operationalbase consists of Saitama Prefecture in the Tokyo metropolitan
area. The prefecture lies immediately to the north of Tokyo,
and many of its residents commute to work in the capital.
Currently, 7.3 million (estimated) people live in Saitama,
making it the country’s fifth most populous prefecture after

Tokyo, Kanagawa, Osaka, and Aichi, and the population isstill climbing. Since its establishment in 1952, Musashino
Bank has been one of Saitama Prefecture’s core financial
institutions, and has played a major role in supporting thedevelopment of the regional economy and local industries forover six decades.

Corporate Philosophy“Working in harmony with the local community it serves”

To contribute to the prosperity of the local community and to secure growth and development in partnership with the region.

“Maintaining a deep respect toward customers”

To engage in bold management that anticipates change while providing the highest quality services throughout the organization
as a whole.

Bank Data (non-consolidated basis, as of March 31, 2017)

Subsidiaries and Affiliated Companies

Head Office:Home page:
Established:
Networks:

Name
The Bugin General Lease
Co., Ltd.
The Bugin Guarantee
Co., Ltd.
The Musashino Card
Co., Ltd.

(As of September 30, 2017)

Number ofmortgage loan centers:
Employees:
Total assets:
Deposits:
Loans:
Common stock:
Capital adequacy ratio:
Number of correspondent
arrangements:
Issued common stock:

10-8, Sakuragi-cho 1-chome, Omiya-ku, Saitama
http://www.musashinobank.co.jp (Japanese only)
March 6, 1952
Number of branches: 97 (Saitama Prefecture: 93 [of which
2 are sub-branches], outside Saitama Prefecture: 4)Line of Business
General leases, installment-payment
services, auto leasing services
Loan guarantees for individuals

Credit card business (JCB, VISA),
loans and loan guarantees related tocard services
The Bugin System Service Development, sale and maintenanceCo., Ltd.
of computer systems
The Bugin Economic
Research into the regional economy,
Research Instituteconsultation, information services,Co., Ltd.
and holding of seminars
The Bugin Capital Co.,Management support for ventureLtd.
businesses
The Musashino Harmony Outsourcing of operational businessCo., Ltd.

92,232¥4,494.0 billion¥4,140.6 billion¥3,425.3 billion¥45.7 billion
9.20%
156
33,805 thousand shares

Head OfficeTochigi
Prefecture

Gunma
Prefecture
NaganoPrefecture

Yamanashi
Prefecture

SaitamaPrefecture
Tokyo
Kanagawa
Prefecture

Contents

1 Consolidated Financial Highlights
2 Message from the President
5	Operational Base of Saitama Prefecture6	Contributing to the Local Economy
7 Long-term Vision/Medium-term Management Plan
8 Chiba-Musashino Alliance
9 Providing SME Management Assistance10	Nurturing Growth Fields/
Measures and Support for Regional Revitalization

IbarakiPrefecture

Chiba
Prefecture

11 Corporate Social Responsibility
12	Corporate Governance13 Risk Management
14 Compliance
15 Consolidated Balance Sheets
17 Consolidated Statements of Income and Comprehensive Income
18 Consolidated Statements of Changes in Equity
20 Consolidated Statements of Cash Flows21	DirectoryConsolidated Financial Highlights
The Musashino Bank, Ltd. and Consolidated Subsidiaries Years Ended March 31, 2017 and 2016

Thousands of
U.S. Dollars(Notes 1 and 2)
2017

Millions of Yen (Note 1)
2017
2016

At Year-end
Total Assets............................................................................................
Deposits including Negotiable Certificates of Deposit............................
Loans and Bills Discounted....................................................................
Trading Account Securities and Securities...............................................
Total Net Assets......................................................................................
Capital Adequacy Ratio (based on domestic standards) (%)...................

¥4,507,139
4,127,056
3,412,133
782,505
233,974
9.46¥4,328,909
4,000,861
3,319,167
765,159
229,078
10.09$40,174,160
36,786,308
30,413,878
6,794,819
2,085,516

For the Year
Ordinary Income...................................................................................
Ordinary Expenses.................................................................................
Profit before Income Taxes.....................................................................
Profit attributable to owners of parent....................................................

¥   70,903
58,015
12,881
9,762¥   74,334
55,561
20,095
12,563$   631,990
517,114
114,81487,013

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 ¥112.19 to U.S.$1, the prevailing market rate as of March 31, 2017.

Ordinary income

Ordinary expenses

Profit attributable to owners of parent(¥ million)(¥ million)(¥ million)

76,91558,05776,07774,334FY2014FY2015

12,56356,532FY2016

10,31555,56170,903

FY2013

14,46758,015FY2013

FY2014FY2015FY2016FY20139,762

FY2014FY2015FY2016

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 President

Continuing to Work Together with
People in the Region

Kikuo Kato
President

The Prefectural Economy
We anticipate the further invigoration of Saitama Prefecture’s
economy with investments ahead of the Tokyo Olympic andParalympic Games in 2020. Public investment and private
capital investment projects in Saitama Prefecture are being
progressively implemented in line with the development oftransportation infrastructure such as the Metropolitan InterCity Expressway (Ken-O-do).

2

Initiatives for Medium-term Management Plan
“MVP 2/3 (Two-Thirds)”
In April 2016, we have started the Bank’s medium-term
management plan “MVP (Musashino Value-making Plan)
2/3 (Two-Thirds),” the second phase of its efforts to realize its
long-term vision for turning itself into “the region’s number
one bank that creates new value in Saitama.” Based on thisplan, the Bank has engaged in a range of initiatives to realize
its growth strategy and regional revitalization centered onproviding optimal solutions to customers.

In January 2017, we opened the Oji Office and the
Shibuya Office in order to further enhance our branch network. Also, in June 2017, we opened “Your Lounge Urawa,”
in the Urawa Station West Exit area. This is our first nextgeneration model branch focused on individual customers.
In addition to enhancing consulting functions such as freeconsultations by attorneys and tax accountants, we are promoting the creation of branches modeled on unprecedented
concepts such as collaboration with adjacent cafes.
For individual customers, we began offering a home loan
with cancer insurance to help customers design high-quality
life plans that provide them with a sense of security, while
we also worked to enhance our lineup of investment trusts
and other products to help people build up assets over the
medium- to long-term.
We also enhanced our services, such as those related toinheritance and real estate trusts, for which needs continue togrow.
For corporate customers, we focused efforts on evaluating
the business viability of SMEs based on accurately assessing
their business scope and growth prospects and extending
finance where possible not to easily relying on loan collateralor guarantees. We are steadily expanding our businessachievements.
We also started offering the “Musashino Business Start-Up
Support Loan” and the “Musashino Business Start-Up
Support Service Pack” to support customers who haverecently started a business. We are also working to provide
optimal solutions depending on the customer’s growth stage,

Deposits including negotiable deposits(non-consolidated)

Assets in custody(non-consolidated)(¥ billion)(¥ billion)

such as business matching and M&A.
In addition, we began offering the “Musashino Bank
Application” smartphone app which provides a variety offunctions, and we are working with companies that are carrying out cutting-edge initiatives to create new services utilizing
FinTech.
In order to help revitalize the region, we have strengthened
collaboration with local governments to solve regional issues,
and are focusing on supporting PFI projects implemented by
local governments such as updating public infrastructure andfacilities.
In addition, in May 2017 the Musashino Bank Group’s
think tank the Bugin Economic Research Institute and the
Kasukabe Future Life Laboratory began joint research effort,
which is rare in Japan, and we proactively hold seminars
and other events in partnership with local governments in
Saitama Prefecture.
Under the Chiba-Musashino Alliance, the comprehensive
alliance we entered into with Chiba Bank in March 2016,
we have launched a variety of new operations in the asset
management business, the inheritance-related business, theinternational business, and other areas.
In April 2017, we established Chiba-Musashino AllianceCo., Ltd., a jointly-owned company, to examine the alliance’s
overall policy and medium- to long-term strategies. Goingforward, we will continue to make the alliance more effective,
and provide prompt high-value-added services to customers
in the region.

Loans(non-consolidated)(¥ billion)

3,333.1

712.2

4,012.3

682.9

3,939.7

3,223.2

637.8

3,788.7

FY2013

FY2014FY2015

3,425.3743.7

4,140.6

FY2016FY2013

3,078.6

FY2014FY2015FY2016FY2013

FY2014FY2015FY20163

Financial Results Fiscal 2016 (non-consolidated)

The environment surrounding financial institutions likeMusashino Bank is undergoing significant changes, including
the continual launch of new financial services that have notexisted before using FinTech.
Furthermore, the responsibilities and roles required offinancial institutions, such as a commitment to customeroriented business operations (fiduciary duty) and enhanced
financial intermediary capabilities, continue to become
increasingly important.
Going forward, in order to meet the expectationsof people in the region, the directors and employees ofMusashino Bank will remain fully committed to their work
based on the corporate philosophy of “Working in harmony
with the local community it serves” and “Maintaining a deep
respect toward customers” which has been in place since the
Bank was founded.
In closing, we kindly request your continued support andunderstanding.

As of March 31, 2017, deposits, etc. were ¥4,140.6 billion,a year-on-year increase of ¥128.2 billion. Assets in custody,
such as investment trusts and insurance products, were¥743.7 billion, a year-on-year increase of ¥31.4 billion. Loansoutstanding increased ¥92.1 billion year on year to ¥3,425.3
billion.
Profit attributable to owners of parent fell ¥2.2 billion year
on year, due to the fact that market interest rates remained
low due to negative interest rates, along with other factors.
Still, this figure was ¥9.0 billion, and higher than our initial
forecast, attributable to the increase in fees and commissions
centered on solutions for corporate customers, as well as cost
reductions and other factors.

Continuing to Work Together with
People in the Region
In April, 2017, Musashino Bank celebrated its 65th anniversary. In reaching this milestone, I would like to express mythanks to our shareholders and business partners for theirsupport and loyalty over the years.

Profit attributable to owners of parent/
Net income

President

Dividend payout ratio and annual dividend

5-year average of consolidated ROE

FY2013 FY2014 FY2015 FY2016(¥ billion)

14.4
12.5
10.3

Kikuo Kato

9.7

10.7

11.2
9.7

Dividend
payout ratio (%)

25.7

24.8

26.7

29.7

Annualdividend (Yen)

75

80

90

80

5.7%

5.9%

FY2014FY2015

4.9%

9.0

5.6%

Shareholders return ratio
FY2013 FY2014 FY2015 FY2016
Shareholders
return ratio (%)

FY2013

FY2014

Consolidated
Non-consolidated

4

FY2015FY2016

25.7

24.8

26.7

29.7

FY2013

Consolidated
Non-consolidated

FY2016

Operational Base of Saitama Prefecture
Features and Attractiveness of Saitama Prefecture
Saitama Prefecture, the Bank’s operating base, has a vibrant economy. The prefecture is blessed with a favorable climate andtopography, has a well-developed transportation infrastructure, including expressway and railway networks, and has a highly
concentrated population and industry.

Well-developed Expressway and
Railway Networks
Saitama Prefecture is located in the heart of the Tokyo metropolitan area, which is home to one-third of Japan’s population (approximately 40 million people), and the prefecture
has a well-developed network of expressways and railways.
The Kanetsu, Tohoku, and Joban expressways run northto south through the prefecture, while the Metropolitan
Inter-City Expressway (Ken-O-do) and the Tokyo Gaikan
Expressway run east to west. The Ken-O-do provides accessto the Tomei and Chuo Expressways, and also connects with
the Higashi-Kanto Expressway, which extends to Narita
International Airport, east Japan’s gateway to the sky. This has
attracted logistics and production bases to the prefecture. As
for railways, Saitama Prefecture is directly connected to bothTokyo and other key cities via the Hokkaido, Tohoku, Akita,
Yamagata, Joetsu and Hokuriku Shinkansen (bullet trains),
which originate in Omiya.
Ken-O-do Kawajima
Interchange area
©Omiya National
Highway Office, Kanto
Regional Development
Bureau, Ministry of Land,
Infrastructure, Transport
and Tourism

A Favorable Climate and Topography
Located on the borders of Tokyo and six prefectures, Saitama
Prefecture is an inland prefecture on the Kanto Plain, and allparts are less than 100 km from central Tokyo.
Saitama Prefecture covers 3,798 square kilometers andaccounts for around 1% of Japan’s land area. The area of prefectural land covered by mountains is less than the national
average, while the area of lowlands and tableland is greater.
Rivers account for 3.90% of the prefecture’s area, the highest
figure for a prefecture in the country.
It is very comfortable to live in because it has more clear
days annually than anywhere else in Japan, and has few
natural disasters.

Fifth Largest Prefecture by Population
The population of Saitama Prefecture is 7.30 million (estimated population as of June 1, 2017), the highest level ever.
It has the fifth largest prefectural population in Japan.

Fifth Largest Economy in Japan
Total production in Saitama Prefecture is about ¥20 trillion,
making its prefectural economy the fifth largest in Japan.
Also, over the past 10 years, the increase in Saitama’s total
production has been the second greatest in Japan, as theprefecture’s economy continues to grow.

Collection of Diverse Manufacturing
Industries

An expressway and railway networkthat reaches all over Japan

Saitama Prefecture has a diverse range of local industries
centered on the automotive-related industry. With the prefecture’s strong transportation infrastructure, including the
Ken-O-do, the relatively small number of natural disasters,
as well as inexpensive land prices despite being adjacent tocentral Tokyo, over the 10 years from 2007 to 2016 there wasa net influx of 927* companies to the prefecture, the highest
number in the country.

Expressway
Railway (Shinkansen)* Based on Teikoku Databank Survey

NaritaInternational Airport
Tokyo
International Airport(Haneda)5

Contributing to the Local Economy
Deposits from the Region

Loans to the Region

As of March 31, 2017, deposits from the region increased¥94.5 billion year on year to ¥3,916.9 billion. The ratio of
deposits from the region continued to be high, at 99.12% of
the total balance of deposits.
The Bank’s share of deposits within the prefecture as ofMarch 31, 2017 declined to 13.46%.

Loans to the region as of March 31, 2017 rose ¥81.6 billion
to ¥2,947.1 billion, thereby maintaining a high loan-toregion ratio of 86.04%. The Bank’s share of loans in theprefecture improved to 18.92%.

Assets in Custody from the Region
As of March 31, 2017, assets in custody from the region
increased ¥31.2 billion year on year to ¥743.0 billion. The
breakdown comprises investment trusts of ¥153.8 billion,
life insurance of ¥512.0 billion, and government bonds andother assets of ¥77.2 billion.
* Investment trust figures are market value; life insurance figures are total sales.

Towards a Sounder Financial Position
The Bank is strengthening its capital adequacy and reducing
non-performing loans. The Bank has maintained a consolidated and non-consolidated capital adequacy ratio (Basel III
domestic standard) of 9.46% and 9.20%, respectively, so wehave continued to maintain a very sound financial position.
The Bank’s non-performing loan ratio based on standards
established by the Financial Reconstruction Act, declined by
0.21 of a percentage point to 1.81%.

Deposits from region/Ratio of deposits from region

Loans to region/Ratio of loans to region

Non-consolidated(¥ billion)

Non-consolidated(¥ billion)

99.26%

99.34%

99.31%

3,811.1

3,822.4

99.12%
3,916.9

3,667.9

FY201386.94%

2,676.4

FY2014FY2015FY2016

Deposits from region
Ratio of deposits from region

FY201386.19%
2,778.3

FY201485.97%
2,865.5

FY201586.04%
2,947.1

FY2016Loans to region
Ratio of loans to region

Assets in custody from region

Non-performing loans

Non-consolidated(¥ billion)

Non-consolidated(¥ billion)

743.0
711.8
679.8
637.3

FY2013

FY2014FY2015FY2016

10.2

10.1

43.9

43.8

2.30%

2.21%

2.02%

17.1

17.8

14.9

12.8

FY2013

FY2014FY2015FY2016

10.1
42.9

11.4
38.3
1.81%

Bankrupt and quasi-bankrupt assets (unrecoverable claims)
Claims on potentially bankrupt borrowers
Substandard loans
Ratio of loans subject to mandatory disclosure ofclaims under the Financial Reconstruction Law* “Region” refers to Saitama Prefecture and the areas bordering the prefecture which are a part of the economic and local-living sphere(the Kumegawa Branch, Itabashi Branch, and Goka Branch sales areas).
6

Long-term Vision/Medium-term Management Plan
In April 2016, the Bank started its medium-term management plan “MVP (Musashino Value-making Plan) 2/3 (Two-Thirds),”
the second phase of its efforts to realize its long-term vision for turning itself into “the region’s number one bank (The Valuemaking Bank) that creates new value in Saitama,” and has been working to further expand its contact with customers and provide
optimal solutions.

Long-term Vision: “MVP (Musashino Value-making Plan)”

The number one bank in the region that creates value in Saitama~ The Value-making Bank ~By creating value in Saitama, lead the economic development of Saitama,
and also grow ourselves by responding to the expectations of our customers

Phase 1
Previous medium-term
management plan

Phase 2Medium-term management plan
“MVP 2/3 (Two-Thirds)”(April 2016–March 2019)“MVP 1/3 (One-Third)”(April 2013–March 2016)

Enhance readiness to become
the number one bank in the region

Establish our reputation as thenumber one bank in the region

Phase 3
Next medium-term
management plan
(April 2019 onwards)

Maintain our overwhelming position
as the number one bank in the region

Medium-term management plan “MVP 2/3 (Two-Thirds)” Plan period: April 2016–March 2019
Plan vision

Become the bank which is the most familiar with the region and its customers
The bank that people will choose first to approach and consult when seeking answers to financial problems

Basic Policy■ To provide solutions that meet the needs of our customers■ Conduct the allocation of optimal management resources in order to support the economic development of regional communities

Basic Strategy
Increase contact with customers

Sales strategy

Human resources
strategy

Infrastructurebuilding

Provide optimal solutions
Rise to the challenge of entering new fields

Strengthen
Strengthen Groupsecurities investment
strategies

Fuse creation strategies and growth strategies
Strengthen management oversight systems
Improve brand, customer satisfaction and CSR

7

Chiba-Musashino Alliance
The Chiba-Musashino Alliance, a comprehensive alliance with Chiba Bank signed in March 2016, is a “new model for regionalbank alliances” that aims to improve customer convenience and further contribute to the development of the region, while allowing each bank to remain independent.

Creation of a new model for regional banks’ alliances

Minimal overlap of branches

Regional banks rooted ineach region

Share business issues
characteristic of Tokyo
Metropolitan area

Best partner as regards smoothly advancing the alliance

Both banks to maintain independent management

Key Initiatives of the Chiba-Musashino Alliance
2016

March
June
July
AugustOctober

2017

November
DecemberFebruary
April
May
AugustSigned Chiba-Musashino Alliance
Began cooperation with syndicated loans, etc.
Launched the lease intermediary businessStarted collaboration in the asset management business (September—origination of dedicated fund, execution of
joint campaign)
Began offering the CSR privately-placed bond Mirai no Chikara
Began mutual introductions of business partners and business matching
Established and started using the Chiba-Musashino Alliance logo
Started collaboration on international business
Established the Chiba-Musashino Partner Fund
Started collaboration in personnel development (joint training sessions)
Established Chiba-Musashino Alliance Co., Ltd.
Started collaboration in the inheritance-related business
Began collaboration in insurance call center operations
Started collaboration in the financial instruments intermediary business

Establishment of Jointly-Owned Company Chiba-Musashino Alliance Co., Ltd.
In April 2017, Chiba-Musashino Alliance Co., Ltd. was established through a 50/50 stake by both banks. This new company will
study the overall policies and specific strategies for the alliance, as well as cross-organizational initiatives, and will aim to further
strengthen the alliance.

50% ownership

50% ownership

Chiba-Musashino Alliance Co., Ltd.
Chiba-Musashino Alliance Steering Committee
Study overall policies and strategies,
as well as cross-organizational initiatives

8

Providing SME Management Assistance
Support for Start-Ups and New Entries
The Bank recognizes that for the sustained development of
the regional economy it is indispensable for start-ups and new
entries to be done actively and continuously. Consequently,
we are working with a “support team for start-ups and new
entries” in Head Office and with branches to strengthen ourefforts in this area.
In order to support entrepreneurs and those people
preparing start-ups, in December 2016 we began offering
the “Musashino Business Start-Up Support Loan” and the“Musashino Business Start-Up Support Service Pack.”

Business Evaluation
The Bank does not rely excessively on financial data, collateraland guarantees—it is strengthening its loans that prioritize
the carrying out of business evaluation, including the businessdetails and growth possibilities of each individual company.
Loans based on business evaluation have increased to approximately 16% of our total lending (as of March 2017).
The execution amount of loan products utilizing the business evaluation scheme has increased significantly, and suchloan products are widely used by our client companies.
Annual execution amount of lending products utilizing
the business evaluation scheme(¥ billion)

45.7

24.2

4.1
March 2015

March 2016

March 2017

Offering a Variety of Financing Methods
The Bank has focused on offering a variety of financing
methods, including syndicated loans to diversify procurement
methods and implement financial rationalization when acooperative financing group has been formed by a number offinancial institutions, project financing that provides funding
after focusing on the cash flow of a business, private placement bonds that result in improving the corporate image ofa company conducting fund procurement, and Asset-Based
Lending (ABL) that makes use of the customer’s productinventory, accounts receivable or suchlike.

Strengthening Solution Sales
In order to further strengthen solution-based sales, the Bankis working together with client companies and management
to solve various problems and issues while also drawing on thefunctional capabilities of Group companies.

Solutions Marketing OfficeInformation-based sales

Business matching

Business financing

M&As

Founding businesses and new businesses

Pensions

TrustsDevelopment/area planning
Private banking

Musashino Bank Group companies
LeasesCredit cards

Loan guarantees

Think tanks

Systems

Venture capital

Support for Overseas Expansion
We are also proactively assisting our corporate customers to
expand business overseas. As of the end of June 2017, we
had offered support in approximately 34 cases of companies
expanding overseas, mainly to such ASEAN countries as
Thailand, Vietnam, and the Philippines.
Furthermore, we assigned employees to the Singapore representative office of the Chiba Bank, the KASIKORNBANK
in Thailand and to the Hong Kong branch of the Hachijuni
Bank (a regional bank mainly based in Nagano Prefecture),
to locally and directly handle consultations from companies
that have already started doing business in these countries.
Through participation in the regional bank alliance scheme of
the Japan Bank for International Cooperation, we have formed
business alliances with leading regional banks in Indonesia,
India, the Philippines, Vietnam, and the Mexico State
Government and others, providing various forms of assistance,
including opening accounts and providing local information.
In addition, we are utilizing government measures toactively support our clients in entering overseas markets anddeveloping their businesses overseas.

M&A Support
We utilize M&A to help local companies carry out smoothbusiness succession, and to contribute to maintaining
regional employment.

Support for Changing Business Sectors
Drawing on bank-wide assistance resources, including Group
companies, the Bank provides optimal support for management improvement and revitalization and helps companies
change their business sectors.
9

Nurturing Growth Fields/Measures and Support for Regional Revitalization
Nurturing Growth Fields
Turning the Possibilities for
the Metropolitan Inter-City Expressway(Ken-O-Do) into Regional Growth
We are actively involved in development projects in progressalong the Metropolitan Inter-City Expressway (Ken-O-Do),and are striving to provide a wide array of solutions that tap thecomprehensive strengths of the Musashino Bank Group.
Specific Examples of Initiatives
In March 2017, the Musashino Bank Group’s think tank, the Bugin
Economic Research Institute, and Chiba Bank’s think tank, theChibagin Research Institute, jointly held a symposium called“Examining the Future of Chiba and Saitama Connected by theMetropolitan Inter-City Expressway.” In addition to discussing
the development trends and ripple effects in surrounding areas,
the event’s mixer created opportunities for business matching
between companies in Saitama Prefecture and Chiba Prefecture.

Activities in the Medical and Welfare Field
Saitama Prefecture is rapidly aging in the lead up to 2025, whenbaby boomers will be aged 75 and above. With medical and welfare facilities projected to develop further going forward, the Bank
has positioned the medical and welfare field as a growth area in
Saitama Prefecture, and our loan balance has grown significantly
as we have been actively working in this area for over a decade.
Balance of loans in the medical and nursing care fields,
and in the welfare field(¥ billion)

92.6
74.0
9.7

26.3

64.3

66.3

105.6
37.7

67.9

117.9
45.9

72.0

Measures and Support for
Regional Revitalization
Promotion Structure
The Bank is establishing the “Team for Promoting Towns,
People and Job Revitalization” at the head office in orderto formulate and support the promotion of the Regional
Comprehensive Strategy being undertaken by local government organizations involved with the government’s “comprehensive strategy for towns, people, and job revitalization.”
The Bank is also assigning all branch managers to be “theperson in charge of promoting Regional Revitalization,” andbuilding a structure for promoting Regional Revitalization
throughout the Bank.
As a regional financial institution, the Bank recognizes
these initiatives for Regional Community Revitalization
to be one of the most important tasks, and supports theimplementation of the Regional Comprehensive Strategy.
Consequently, we are one participant in regional creation andare continuing to proactively collaborate with private-sector
companies, NPOs, educational institutions and other bodies
based on the relevant administrative policies to solve a varietyof regional issues and to create regional value.

Alliances and Partnerships with
Local Government Organizations, etc.
The Bank promotes alliances and partnerships with local
governments through comprehensive agreements with themand other bodies for regional revitalization and enhancementof citizen services.
Prefectures

Saitama Prefecture (October 2013)

DesignatedMunicipalities

Saitama City (January 2016)

Municipalities

Tsurugashima City (December 2014)
Toda City (April 2016)
Yokoze Town (June 2016)
Gyoda City (July 2016)
Kumagaya City (September 2016)
Kasukabe City (December 2016)
Konosu City (June 2017)

March 2014 March 2015 March 2016 March 2017
Welfare Field
Medical Field

Initiatives in the Manufacturing Field
We actively support the core businesses of manufacturing companies in order to enhance their competitiveness and differentiatethemselves from their peers. We hold seminars and perform
inspection visits to support technological innovation and productivity improvements on an ongoing basis, including lectures byexperts and introductions of examples of advanced companies.

Supporting Excellent Technologies and Products
We support the core businesses that utilize public schemes
such as “standardization systems that create new markets” and“intellectual property” that evaluate the superior technologies
and products of client companies, and make them visible.
10

Initiatives for PPP and PFI
Against the backdrop of a declining population, we are also
working to improve public services that utilize PPP and
PFI schemes, and to support the creation of private-sectorbusiness opportunities, for the matters with which local
government organizations are involved, including theimprovement of community services, and the maintenanceand administration of public facilities.

Corporate Social Responsibility
Consideration for Biodiversity
The Bank strives to consider biodiversity and other environmental factors into consideration in the construction of its
branches and offices. For offices where administrative work
is concentrated, we plant native plant species formerly foundin the region around the buildings. Through such efforts, webecame the first in the banking industry to receive JHEP certification from the Ecosystem Conservation Society – Japan.

“Musashino CSR Private-Placement Bond
’Mirai no Chikara’”
We are offering the “Musashino CSR Private-Placement
Bond ‘Mirai no Chikara’” which, together with othercompanies, supports the development of children who will be
responsible for the region’s future.
We contribute to the further revitalization of the region by
donating goods (books, musical instruments, sports goods,etc.), equivalent to a certain percentage of the amount ofbonds issued, to the school or other organization designatedby the issuing company.

JHEP certificate

Native plant species formerly found in the region

New Company—Musashino Harmony Co., Ltd.
We established Musashino Harmony Co., Ltd. with theaim of expanding working opportunities for people withdisabilities. The company began operations in June 2017.
Going forward, we plan to increase employment in accordance with the expansion of business, and aim to acquire“special subsidiary” certification, which would make us thefirst financial institution in Saitama Prefecture to obtain suchcertification.

Helping with Finance Education
We actively provide opportunities for children to learn about
the role of money and the banking business by providing aworkplace experience for study and by holding finance classes
at local events.

Training Dementia Supporters
As a Saitama Prefecture “dementia supporting enterprise,”
we are working to train “dementia supporters,” as we move
forward with town planning to support people with dementia
and their families.
At the end of June 2017, approximately 2,450 executives
and employees have become dementia supporters.

Work experience at Musashino Bank—Aiming to be Japan’s Best Bank Staff(Held every year in August)11

Corporate Governance
Basic StanceMusashino Bank recognizes that upgrading and expanding
its corporate governance capabilities are key priorities ofmanagement. In addition to adhering strictly to a policyof compliance with statutory and regulatory requirements
as well as in-house rules and regulations, every effort ismade to ensure that the Board of Directors and the Boardof Corporate Auditors stringently monitor directors in theexecution of their duties.
Two outside directors and three outside auditors who
pose no threat of conflicts of interest with shareholders havebeen elected, and they monitor and audit directors in theexecution of their duties. They also take part in meetingsof the Board of Directors where they are able to proactively
voice their opinions and offer advice on management from a
broad, independent and neutral perspective. This ensures thatthe management monitoring function is both objective andimpartial.

Also, the Bank has adopted an executive officer system
in order to reduce the number of directors and to ensure
a speedier decision-making process. Directors delegate
authority to executive officers, who are charged with the
responsibility of swiftly and efficiently carrying out theirduties 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 adheringto the Bank’s variety of in-house rules and regulations, theintroduction of an executive officer system allows the Bank toseparate and clarify the management and business executionfunctions. A structure has therefore been put in place to allow
directors and executive officers to go about their assigned
duties and responsibilities.
Musashino Bank’s management decision-making, businessexecution and oversight structure is presented as follows.

Corporate Governance Structure (As of March 31, 2017)

General Meeting of Shareholders
Assignment

Assignment
Audit

Board of Directors
Directors

Supervision

Board of Corporate Auditors
Auditors

Discussion
Discussion

ReportAssignment

Business execution functions
Executive Committee

Indication/
Verification

Audit
Compliance Committee

Accounting auditors

Executive officers

Head office/Branches

12

Audit

AdviceAuditing Division

Law officeLicensed tax accountants

Risk Management
Risk Management Policy
As the risks associated with banking operations become
increasingly varied and complex, the Bank has formulated
a set of internal management policies that take into consideration the Bank’s strategic targets, in order to ensure thatthe manner in which it manages its business is both soundand pertinent. 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) operational risks (including
administrative and system risks). These individual risks arethen managed according to their particular characteristics andrequirements.

Management Structure by Type of Risk
(1) Comprehensive Risk Management
In order to appropriately manage the wide variety of risks
on a comprehensive basis, the Bank has established theComprehensive Risk Management Department and is working to develop and improve its management structure. The
Comprehensive Risk Management Department puts in placerules 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 and characteristics.
Based on these rules and criteria the ALM (Asset Liability
Management) and other appropriate committees monitor andcontrol risks. The results of these activities are reported to theBoard of Directors and other relevant bodies on a regular basis.

(2) Credit Risk Management
Musashino Bank has historically taken steps to maintain the
independence of the Credit Screening Division and to build
a stringent screening and management structure in orderto maintain and strengthen the soundness of its assets. At
the same time, the Bank has adopted a ranking system andendeavored to upgrade and expand its credit risk management capabilities as a part of its efforts to establish 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 thechecks-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 toappropriately 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 thatis capable of harnessing the checks-and-balances function. At
the same time, the ALM Committee deliberates as and whenrequired.

(5) Operational Risk Management
Musashino Bank confronts broad and varied operationalrisks. In addition to classifying risks as (i) administrative risk,(ii) systems risk, and (iii) other operational risks (a. legalrisk, b. human risk, c. tangible asset risk, and d. reputationrisk), putting in place rules on an individual risk basis andpromoting the management of each risk by the appropriate
management department, the Bank has established the
Operational Risk Management Department to undertake themanagement of operational risks on a comprehensive basis.
The Bank also pushes forward measures aimed at establishingand developing a management structure that is capable ofharnessing the checks-and-balances function with respect
to each business division. Moreover, the Operational Risk
Management Committee deliberates on issues as and whenrequired.

Crisis Management/BCP Framework
To ensure business continuity in the event of a major earthquake or a system failure, the Bank has established a BusinessContinuity Plan (BCP) and prepared related manuals forhandling all situations. We make sure that all bank employees
understand the business continuity system in the event ofan emergency. Moreover, the Bank holds periodic drills toincrease the effectiveness and level of sophistication of the
BCP.

Building a Cyber Security Management
Framework
In February 2017, we established the “Cyber Security
Management Subcommittee” as a CSIRT* within the bank,with the aim of ensuring a highly-effective cyber security
framework.
*CSIRT: Computer Security Incident Response TeamA general term for teams responsible for cyber security management within an organization. At the Bank, the “Cyber Security
Management Subcommittee” and its secretariat are CSIRTs.

13

Compliance
Compliance Framework
The social and public mission of the banking business makes
high demands for operations based on fair and transparent
corporate activities in compliance with laws, regulations,and social norms and in accordance with the principles ofself-discipline and self-responsibility. Accordingly, the Bank
considers the thorough compliance of its directors andemployees in business operations to be a top priority, and to
this end management is actively involved in the fulfillmentof the Bank’s social and public mission as the Bank works
to strengthen its compliance framework through steps suchas system improvements and the establishment of teaching
methods.
In the future the Bank will further strengthen its corporate
activities based on a strong sense of ethics and integrity andits management approach in accordance with principles ofself-responsibility as it further strengthens the complianceframework so that the Bank’s daily business activities andactions ensure compliance with laws, regulations, and social
norms.

Compliance ManualMusashino Bank’s basic compliance policy entails that officers
and employees go about their daily duties in accordance with
the Bank’s two fundamental management guidelines, namely
its Corporate Philosophy and Code of Behavior.
Under its unwavering Corporate Philosophy, the Bank
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 tocontribute to the local community and society. Furthermore,
the Code of Behavior is founded on “the public mission of
the bank” and stipulates “provision of high quality financial
services,” “compliance with laws, regulations, rules, etc.,”“open business management through communication withsociety,” “respecting the personalities of employees,” “tacklingenvironmental problems,” “tackling social contribution
activities,” and “resolute responses to anti-social forces,” anddirectors and employees go about their daily duties guided bythese basic policies.

To ensure the compliance of its officers and employees, theBank has distributed a compliance manual that has been
approved by the Board of Directors to all of its officers andemployees 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, and basic policies.
It contains a section on compliance standards that stipulates
the matters officers and employees should comply with, asection on the compliance framework that provides an explanation on various structures at the Bank including educationand verification structures, a section on laws and regulations
that require directors’ and employees’ compliance, and whichcontains an explanation of the laws and regulations that bank
employees are required to be knowledgeable of, and a pick-up
compliance section that provides a more detailed explanationof the matters that should be prioritized in the conduct ofdaily work. The compliance manual serves as a standard formaking decisions and taking actions in everyday businessactivities.

Compliance Management Structure

Elimination of Anti-Social Forces

The Legal Affairs Office of the Risk Management Division
serves as the compliance management department for the
Bank. This Office undertakes the uniform managementof all legal issues relating to compliance while providing
instructions based on investigation and research. At the sametime, the Office coordinates with officers responsible forlegal compliance appointed to all branches while working
to strengthen the compliance structure. Regular meetings
are held with the officers responsible for legal complianceappointed to each branch in order to improve the level of

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 accordancewith the basic policy, we have established a manual which
stipulates our specific initiatives for blocking relationships
with anti-social forces, and we are endeavoring to educate thebank employees about this issue through training and othermeasures.

Basic Compliance Policy

14

compliance through the sharing of information and training
and also, meetings are held each month with the officers
responsible for legal compliance in the head office and eachdepartment. These meetings serve as a forum to deliberate oncompliance issues and to share information.
In addition to the aforementioned, periodic compliancechecks are undertaken at each branch by the officers responsible for legal compliance. In this manner, the Bank has put
in place a mechanism that is capable of grasping the status ofdaily compliance management.
Furthermore, Musashino Bank has established theCompliance Committee with the president of the bank serving as the chairperson, which serves as the organization thatchecks the status of compliance on a Bank-wide basis whileconsidering any and all other important matters throughregular meetings. In addition, the committee evaluates andchecks on the progress and implementation status of the“Compliance Program” approved by the Board of Directors.

Consolidated Balance Sheets
The Musashino Bank, Ltd. and Consolidated Subsidiaries As of March 31, 2017 and 2016

Thousands of
U.S. Dollars*
2017

Millions of Yen
2017
2016

AssetsCash and due from banks����������������������������������������������������������������������
Monetary claims bought������������������������������������������������������������������������
Trading account securities���������������������������������������������������������������������
Money held in trust�������������������������������������������������������������������������������
Securities�����������������������������������������������������������������������������������������������
Loans and bills discounted��������������������������������������������������������������������
Foreign exchanges���������������������������������������������������������������������������������
Lease receivables and investment assets��������������������������������������������������
Other assets�������������������������������������������������������������������������������������������
Tangible fixed assets������������������������������������������������������������������������������
Buildings, net�����������������������������������������������������������������������������������
Land�������������������������������������������������������������������������������������������������
Construction in progress�������������������������������������������������������������������
Other tangible fixed assets����������������������������������������������������������������
Intangible fixed assets����������������������������������������������������������������������������
Software��������������������������������������������������������������������������������������������
Other intangible fixed assets�������������������������������������������������������������
Net defined benefit asset�����������������������������������������������������������������������
Deferred tax assets���������������������������������������������������������������������������������
Customers’ liabilities for acceptances and guarantees�����������������������������
Allowance for loan losses�����������������������������������������������������������������������
Total assets..............................................................................

¥  211,372¥  149,402$ 1,884,054

8,626

11,55376,887

621

495

5,535

1,500

1,490

13,370781,884

764,664

6,969,284

3,412,133

3,319,167

30,413,878

3,858

2,315

34,38819,18919,125

171,040

29,46721,071

262,653

37,39837,584

333,345

10,126

10,33290,25825,30025,146

225,510

133

—

1,185

1,836

2,105

16,365

3,050

3,176

27,186

2,875

2,997

25,626

175

178

1,560

5,843

5,173

52,081

1,050

1,233

9,359

6,516

7,730

58,080(15,375)(15,273)(137,044)¥4,507,139¥4,328,909$40,174,160

15

Thousands of
U.S. Dollars*
2017

Millions of Yen
2017
2016

Liabilities
Deposits������������������������������������������������������������������������������������������������
Negotiable certificates of deposit�����������������������������������������������������������
Call money and bills sold����������������������������������������������������������������������
Payables under securities lending transactions���������������������������������������
Borrowed money�����������������������������������������������������������������������������������
Foreign exchanges���������������������������������������������������������������������������������
Bonds payable���������������������������������������������������������������������������������������
Other liabilities�������������������������������������������������������������������������������������
Provision for bonuses����������������������������������������������������������������������������
Provision for directors’ bonuses�������������������������������������������������������������
Net defined benefit liability�������������������������������������������������������������������
Provision for loss on interest repayment������������������������������������������������
Provision for reimbursement of deposits������������������������������������������������
Provision for point card certificates�������������������������������������������������������
Provision for contingent loss�����������������������������������������������������������������
Provision for share-based compensation������������������������������������������������
Deferred tax liabilities���������������������������������������������������������������������������
Deferred tax liabilities for land revaluation��������������������������������������������
Acceptances and guarantees�������������������������������������������������������������������
Total liabilities������������������������������������������������������������������������
Net assets
Capital stock�����������������������������������������������������������������������������������������
Capital surplus��������������������������������������������������������������������������������������
Retained earnings����������������������������������������������������������������������������������
Treasury shares��������������������������������������������������������������������������������������
Total shareholders’ equity.........................................................
Valuation difference on available-for-sale securities�������������������������������
Deferred gains or losses on hedges���������������������������������������������������������
Revaluation reserve for land������������������������������������������������������������������
Remeasurements of defined benefit plans...............................................
Total accumulated other comprehensive income......................
Subscription rights to shares...................................................................
Non-controlling interests.......................................................................
Total net assets........................................................................
Total liabilities and net assets..................................................

¥3,938,291¥3,845,034$35,103,761

188,765

155,827

1,682,547

24,706—220,216

46,434

7,257

413,887

17,152

18,494

152,884

162

336

1,444

15,00025,000133,70220,71023,490184,598

1,251

1,253

11,151

10

10

89

4,120

4,363

36,723

42

57

374

754

539

6,721

76

68

677

311

412

2,772

14

—

125

4,616

5,727

41,144

4,227

4,227

37,677

6,516

7,730

58,080¥4,273,164¥4,099,830$38,088,635¥   45,743¥   45,743$   407,728

38,29038,351

341,296

120,667

113,922

1,075,559

(907)

(804)

(8,084)

203,793

197,213

1,816,499

24,813

27,116

221,169(1,399)(2,056)(12,470)

8,286

8,286

73,857(1,831)(2,712)(16,321)29,86930,633

266,236

80

74

713

230

1,157

2,050

233,974

229,0782,085,516¥4,507,139¥4,328,909$40,174,160* U.S. dollar figures have been translated at the rate ¥112.19 to U.S.$1, the prevailing market rate as of March 31, 2017.

16

Consolidated Statements of Income and Comprehensive Income
The Musashino Bank, Ltd. and Consolidated Subsidiaries For the Years Ended March 31, 2017 and 2016

Consolidated Statements of Income

Millions of Yen
2017
2016

Ordinary income���������������������������������������������������������������������������������
Interest income�������������������������������������������������������������������������������������
Interest on loans and discounts���������������������������������������������������������
Interest and dividends on securities���������������������������������������������������
Interest on call loans and bills bought�����������������������������������������������
Interest on deposits with banks���������������������������������������������������������
Other interest income�����������������������������������������������������������������������
Fees and commissions���������������������������������������������������������������������������
Other ordinary income��������������������������������������������������������������������������
Other income����������������������������������������������������������������������������������������
Recoveries of written off claims���������������������������������������������������������
Other������������������������������������������������������������������������������������������������
Ordinary expenses................................................................................
Interest expenses������������������������������������������������������������������������������������
Interest on deposits���������������������������������������������������������������������������
Interest on negotiable certificates of deposit��������������������������������������
Interest on call money and bills sold�������������������������������������������������
Interest on payables under securities lending transactions�����������������
Interest on borrowings and rediscounts���������������������������������������������
Interest on bonds������������������������������������������������������������������������������
Other interest expenses���������������������������������������������������������������������
Fees and commissions payments������������������������������������������������������������
Other ordinary expenses������������������������������������������������������������������������
General and administrative expenses�����������������������������������������������������
Other expenses��������������������������������������������������������������������������������������
Provision of allowance for loan losses������������������������������������������������
Other������������������������������������������������������������������������������������������������
Ordinary profit.....................................................................................
Extraordinary income��������������������������������������������������������������������������
Gain on disposal of non-current assets����������������������������������������������
Gain on revision of retirement benefit plan���������������������������������������
Extraordinary losses����������������������������������������������������������������������������
Loss on disposal of non-current assets�����������������������������������������������
Other������������������������������������������������������������������������������������������������
Profit before income taxes�������������������������������������������������������������������
Income taxes—current��������������������������������������������������������������������������
Income taxes—deferred�������������������������������������������������������������������������
Total income taxes�������������������������������������������������������������������
Profit����������������������������������������������������������������������������������������������������
Profit (loss) attributable to non-controlling interests������������������������
Profit attributable to owners of parent�����������������������������������������������

¥70,903
43,33135,496
7,600
(15)
0
249
12,826
1,487
13,257
1,022
12,23458,015
2,132
830
45
218
143
123
133
636
3,874
851
36,851
14,306
4,239
10,066
12,887———6
5
1
12,881
3,571
(354)
3,216
9,664
(98)
¥ 9,762¥74,334
46,506
38,416
7,776
43
17
252
12,4782,497
12,851457
12,39355,561
2,921
1,660
140
5
22
161
221
706
3,926
1,337
36,206
11,1691,495
9,674
18,772
1,345
0
1,345
23
23
—
20,095
5,332
2,103
7,436
12,65894¥12,563

Thousands of
U.S. Dollars*
2017$631,990
386,229
316,392
67,742
(134)
0
2,219
114,324
13,254
118,166
9,110
109,047
517,114
19,003
7,398
401
1,943
1,275
1,096
1,185
5,669
34,531
7,585
328,470
127,516
37,78489,723
114,868
—
—
—
53
45
9
114,81431,830(3,155)28,666
86,140(874)$ 87,013* U.S. dollar figures have been translated at the rate ¥112.19 to U.S.$1, the prevailing market rate as of March 31, 2017.

Consolidated Statements of Comprehensive Income
Profit�����������������������������������������������������������������������������������������������������
Other comprehensive income����������������������������������������������������������������
Valuation difference on available-for-sale securities���������������������������
Deferred gains or losses on hedges����������������������������������������������������
Revaluation reserve for land��������������������������������������������������������������
Remeasurements of defined benefit plans, net of tax�������������������������
Comprehensive income�������������������������������������������������������������������������
Comprehensive income attributable to:Comprehensive income attributable to owners of parent������������������
Comprehensive income attributable to non-controlling interests������

Millions of Yen
2017
2016

Thousands of
U.S. Dollars*
2017¥ 9,664(762)(2,301)657—
881¥ 8,902¥ 12,658(10,287)(5,857)(866)
222(3,785)¥ 2,371$ 86,140(6,792)(20,510)
5,856
—
7,853
$ 79,348¥ 8,998(96)¥ 2,275
96$ 80,203(856)* U.S. dollar figures have been translated at the rate ¥112.19 to U.S.$1, the prevailing market rate as of March 31, 2017.
17

Consolidated Statements of Changes in Equity
The Musashino Bank, Ltd. and Consolidated Subsidiaries For the Years Ended March 31, 2017 and 2016
Millions of yen
Shareholders’ equity

Balance as of April 1, 2015................................................
Changes of items during period:
Dividends of surplus����������������������������������������������������
Profit attributable to owners of parent�������������������������
Purchase of treasury shares�������������������������������������������
Disposal of treasury shares��������������������������������������������
Transfer to capital surplus from retained earnings��������
Purchase of share of consolidated subsidiaries treasury stock���Net changes of items other than shareholders’ equity���Total changes of items during period���������������������������
Balance as of March 31, 2016...........................................
Changes of items during period:
Dividends of surplus����������������������������������������������������
Profit attributable to owners of parent�������������������������
Purchase of treasury shares�������������������������������������������
Disposal of treasury shares��������������������������������������������
Transfer to capital surplus from retained earnings��������
Purchase of share of consolidated subsidiaries treasury stock���Net changes of items other than shareholders’ equity���Total changes of items during period���������������������������
Balance as of March 31, 2017...........................................

Capitalstock

CapitalsurplusRetainedearnings

TreasurysharesTotalshareholders’ equity¥45,743¥38,351¥104,042¥(802)¥187,334(2,682)(2,682)

12,563

12,563
(11)

(0)

(11)

9

0

8

(0)

—

—

—

—

—

9,880

(1)

9,878

45,74338,351

113,922(804)

197,213(3,018)(3,018)

9,762

9,762
(104)

0

(104)

0

—

0

—

—

(60)

(60)

—

(60)

6,744

(103)

6,580

¥45,743¥38,290¥120,667¥(907)¥203,793

Millions of yen
Accumulated other comprehensive income

18

Valuationdifference on
available-for-salesecurities

Deferred
gains orlosses onhedgesBalance as of April 1, 2015................................................ ¥32,976
Changes of items during period:
Dividends of surplus����������������������������������������������������
Profit attributable to owners of parent�������������������������
Purchase of treasury shares�������������������������������������������
Disposal of treasury shares��������������������������������������������
Transfer to capital surplus from retained earnings��������
Purchase of share of consolidated subsidiaries treasury stock���Net changes of items other than shareholders’ equity���(5,859)Total changes of items during period���������������������������
(5,859)Balance as of March 31, 2016........................................... 27,116
Changes of items during period:
Dividends of surplus����������������������������������������������������
Profit attributable to owners of parent�������������������������
Purchase of treasury shares�������������������������������������������
Disposal of treasury shares��������������������������������������������
Transfer to capital surplus from retained earnings��������
Purchase of share of consolidated subsidiaries treasury stock���Net changes of items other than shareholders’ equity��� (2,303)
Total changes of items during period��������������������������� (2,303)
Balance as of March 31, 2017........................................... ¥24,813¥(1,190)

Total accuRevaluation Remeasurements mulated other Subscription
Nonreserve forof defined comprehensive rights tocontrolling
land
benefit plansincomesharesinterests¥8,064¥ 1,073¥ 40,922¥58¥1,061

Total net
assets¥229,377(2,682)
12,563
(11)
8
—
—

(866)

222

(3,785)(10,288)

16

95

(866)

222

(3,785)(10,288)

16

95(10,177)(298)(2,056)

8,286(2,712)

30,633

74

1,157

229,078(3,018)
9,762
(104)
0
—
(60)

657

—

881

(764)

6

(926)

(1,684)

657

—

881

(764)

6

(926)

4,895

¥(1,399)¥8,286¥(1,831)¥ 29,869¥80¥  230¥233,974

Thousands of U.S. Dollars*
Shareholders’ equity

Balance as of March 31, 2016������������������������������������������
Changes of items during period:
Dividends of surplus����������������������������������������������������
Profit attributable to owners of parent�������������������������
Purchase of treasury shares�������������������������������������������
Disposal of treasury shares��������������������������������������������
Transfer to capital surplus from retained earnings��������
Purchase of share of consolidated subsidiaries treasury stock���Net changes of items other than shareholders’ equity���Total changes of items during period���������������������������
Balance as of March 31, 2017...........................................

Capitalstock

CapitalsurplusRetainedearnings

TreasurysharesTotalshareholders’ equity$407,728$341,840$1,015,438$(7,166)$1,757,848(26,901)(26,901)

87,01387,013
(927)

0

(927)

0

—

0

—

—

(535)

(535)

—

(535)

60,112(918)

58,651$407,728$341,296$1,075,559$(8,084)$1,816,499

Thousands of U.S. Dollars*
Accumulated other comprehensive income
Valuationdifference on
available-for-salesecurities

Deferred
gains orlosses onhedgesBalance as of March 31, 2016������������������������������������������ $241,697 $(18,326)
Changes of items during period:
Dividends of surplus����������������������������������������������������
Profit attributable to owners of parent�������������������������
Purchase of treasury shares�������������������������������������������
Disposal of treasury shares��������������������������������������������
Transfer to capital surplus from retained earnings��������
Purchase of share of consolidated subsidiaries treasury stock���Net changes of items other than shareholders’ equity��� (20,528)
5,856
Total changes of items during period��������������������������� (20,528)
5,856
Balance as of March 31, 2017........................................... $221,169 $(12,470)

Total accuRevaluation Remeasurements mulated other Subscription
Nonreserve forof defined comprehensive rights tocontrolling
land
benefit plansincomesharesinterests

Total net
assets$73,857$2,041,875$(24,173)$273,046$660$10,313(26,901)
87,013
(927)
0
—
(535)
—

7,853

(6,810)53(8,254)(15,010)—

7,853(6,810)53(8,254)

43,631$73,857$(16,321)$266,236$713$ 2,050$2,085,516* U.S. dollar figures have been translated at the rate ¥112.19 to U.S.$1, the prevailing market rate as of March 31, 2017.

19

Consolidated Statements of Cash Flows
The Musashino Bank, Ltd. and Consolidated Subsidiaries For the Years Ended March 31, 2017 and 2016

Millions of Yen
2017
2016

Cash flows from operating activities
Profit before income taxes���������������������������������������������������������������������
Depreciation�����������������������������������������������������������������������������������������
Share of (profit) loss of entities accounted for using equity method�������
Increase (decrease) in allowance for loan losses��������������������������������������
Increase (decrease) in provision for bonuses�������������������������������������������
Increase (decrease) in provision for directors’ bonuses���������������������������
Decrease (increase) in net defined benefit asset��������������������������������������
Increase (decrease) in net defined benefit liability����������������������������������
Increase (decrease) in provision for loss on interest repayment���������������
Increase (decrease) in provision for reimbursement of deposits��������������
Increase (decrease) in provision for point card certificates����������������������
Increase (decrease) in provision for contingent loss��������������������������������
Increase (decrease) in provision for share-based compensation���������������
Gain on fund management�������������������������������������������������������������������
Financing expenses��������������������������������������������������������������������������������
Loss (gain) related to securities��������������������������������������������������������������
Loss (gain) on money held in trust��������������������������������������������������������
Foreign exchange losses (gains)��������������������������������������������������������������
Loss (gain) on disposal of non-current assets�����������������������������������������
Net decrease (increase) in trading account securities������������������������������
Net decrease (increase) in loans and bills discounted�����������������������������
Net increase (decrease) in deposit����������������������������������������������������������
Net increase (decrease) in negotiable certificates of deposit��������������������
Net increase (decrease) in payables under securities lending transactions���Net increase (decrease) in borrowed money (excluding subordinated borrowings)���
Net decrease (increase) in deposit (excluding deposit paid to Bank of Japan)��������������
Net decrease (increase) in call loans�������������������������������������������������������
Net increase (decrease) in call money����������������������������������������������������
Net decrease (increase) in foreign exchanges—assets������������������������������
Net increase (decrease) in foreign exchanges—liabilities������������������������
Proceeds from fund management����������������������������������������������������������
Payments for finance�����������������������������������������������������������������������������
Other, net���������������������������������������������������������������������������������������������
Subtotal����������������������������������������������������������������������������������
Income taxes paid����������������������������������������������������������������������������������
Net cash provided by (used in) operating activities����������������Cash flows from investing activities
Purchase of securities�����������������������������������������������������������������������������
Proceeds from sales of securities������������������������������������������������������������
Proceeds from redemption of securities�������������������������������������������������
Increase in money held in trust�������������������������������������������������������������
Decrease in money held in trust������������������������������������������������������������
Purchase of tangible fixed assets�������������������������������������������������������������
Proceeds from sales of property, plant and equipment���������������������������
Purchase of intangible assets������������������������������������������������������������������
Payments for asset retirement obligations����������������������������������������������
Net cash provided by (used in) investing activities�����������������Cash flows from financing activities
Decrease in subordinated borrowings����������������������������������������������������
Redemption of subordinated bonds�������������������������������������������������������Cash dividends paid������������������������������������������������������������������������������
Dividends paid to non-controlling interests�������������������������������������������
Purchase of treasury shares��������������������������������������������������������������������
Purchase of treasury shares of subsidiaries����������������������������������������������
Proceeds from sales of treasury shares����������������������������������������������������
Net cash provided by (used in) financing activities����������������
Net increase (decrease) in cash and cash equivalents�������������������������Cash and cash equivalents at beginning of period�����������������������������Cash and cash equivalents at end of period����������������������������������������

¥ 12,881
2,617
(28)
101
(1)
(0)
(356)
(252)
(14)
214
7
(101)
14
(43,331)
2,132
(985)
(1)
114
5
(126)
(92,966)
93,25632,93839,177
1,157
24
2,926
24,706(1,543)(174)
44,157(2,417)(1,602)
112,532(5,091)
107,440¥ 20,095
2,634
—
(648)
24
(0)
(416)
(1,769)
(28)
64
0
(123)
—
(46,506)
2,921(1,673)
7
3,563
22
(357)
(108,561)
13,65856,9197,257
907
21,913
5,060
—
(310)
(6)
47,318(3,048)(3,798)15,120(5,901)
9,219$   114,814
23,326
(250)
900
(9)
(0)
(3,173)(2,246)
(125)
1,907
62
(900)
125
(386,229)
19,003(8,780)
(9)
1,016
45
(1,123)(828,648)
831,233
293,591349,202
10,313
214
26,081
220,216(13,753)(1,551)
393,591(21,544)(14,279)
1,003,048(45,378)
957,661(171,083)
30,192
114,236(9)—(1,214)—(1,040)(13)(28,933)(226,673)
89,658108,437—
0(1,918)0(1,379)(17)(31,892)(1,524,940)
269,115
1,018,237(80)—(10,821)—(9,270)(116)(257,893)(2,500)(10,000)(3,018)
(0)
(104)
(890)
0
(16,513)61,994
148,831¥ 210,826——(2,682)
(0)
(11)
—
—
(2,694)(25,368)
174,200¥ 148,831(22,284)(89,135)(26,901)(0)(927)(7,933)0(147,188)
552,580
1,326,598$ 1,879,187* U.S. dollar figures have been translated at the rate ¥112.19 to U.S.$1, the prevailing market rate as of March 31, 2017.
20

Thousands of
U.S. Dollars*
2017

Directory
Organization Chart (as of July 1, 2017)
General Meeting of Shareholders
Corporate Auditors

Board of Corporate Auditors

OutsideCorporate Auditor

Board of Directors* and Representative Director

Executive Committee
President*

Vice President*

Senior Managing Director*
Managing Directors
Director (outside)

General Planning and Management Division
Strategic Planning Office
Chiba-Musashino Alliance Management OfficeFinancial Affairs Office
Tokyo Office
Risk Management Division
Legal Affairs Office
Customer Service Promotion Office
Personnel Division
Secretariat
Career Development Office
Health Support Office
Human Resources Activities Promotion Office
Local Community Support Division
Public Funds Management OfficeCommunity Value Creation Office
Solutions Marketing OfficeBusiness Management Division
Business Planning Office
Assets in Custody Promotion Office
FinTech Promotion Office
Credit DivisionCorporate Management Support OfficeInternational and Treasury Division
Global Business Advisory Office
General Affairs Division
Administration Division
Systems Management Office
Operation Services Division
Auditing Division

Board of Directors, Corporate Auditors and Executive Officers (as of July 1, 2017)
President

Senior Managing Directors

Directors

Corporate Auditors

Executive Officers

Kikuo Kato

Koichi Akagi
Kazumasa Nagahori

Emi Ishida (outside)
Takeshi Higuchi (outside)

Makoto Ishikawa (standing)
Yoshio Kenmochi (standing)Atsumu Kuroishi (outside)
Tomio Kezuka (outside)
Kenji Tamura (outside)

Kenji Sakamoto
Isamu Takeuchi
Ritsu Kumagai
Masaharu Saito
Ken Otomo
Ichiro Noda
Tsutomu Kainuma
Tadashi Uehara

Vice President

Hideo Machida

Managing Directors

Kazuya Koyama
Toshiyuki Shirai
Susumu Kurosawa

Senior Managing Executive Officer

Yuichi Tanaka

Investor Information (as of March 31, 2017)
Number of Shares Held by Type of Shareholders

 uthorized: 80,000 thousand shares
A
Issued:33,805 thousand shares
Number of Shareholders: 11,566
Common Stock

Financial institutions
42.87%

Major Shareholders
NameJapan Trustee Services Bank, Ltd. (trust account)
Japan Trustee Services Bank, Ltd. (trust account 4)
The Bank of Chiba, Ltd.
The Master Trust Bank of Japan, Ltd. (trust account)
Meiji Yasuda Life Insurance Company
Musashino Bank Industries Employees’ Stockholding Association
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Sumitomo Life Insurance Company
CBNY DFA INTL SMALL CAP VALUE PORTFOLIO(Standing proxy: Citibank Japan Ltd.)
Japan Trustee Services Bank, Ltd. (trust account 9)

Shares held asa percentage of
total outstanding
shares (%)
2,693,000
7.96
1,229,000
3.63
925,000
2.73
913,300
2.70
735,858
2.17
735,615
2.17
727,587
2.15
702,900
2.07

Other corporations
24.63%

Number ofshares688,300

2.03

648,600

1.91

Foreign companies
and others
16.64%
Individuals and others
14.60%

Financial instruments
business operators
1.26%

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

* Shareholding percentages are rounded down to two decimal places.

2110-8, Sakuragi-cho 1-chome, Omiya-ku,
Saitama 330-0854
Phone: +81-48-641-6111

Brand Message

The Musashino Bank’s brand message is “More for You.”
The Bank personnel always ask themselves“What can I do for everyone?” and“What kind of service do I want to give everyone?”“Everyone” includes the Bank’s customers,
the members of local communities, our shareholders,and friends of the Bank, together with their families.
Accordingly, the Musashino Bank aspires to provide
everyone with better services and to contribute to
our local communities.